UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December~~ March 31, ~~2010~~2011

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

Commission File Number 1-33273

ANIMAL ~~H EALTH~~ HEALTH INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)

Delaware		71-0982698
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

7 Village Circle, Suite 200 Westlake, Texas		76262
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (817) 859-3000

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ¨ o Accelerated Filer ¨ o Non-Accelerated Filer ¨ o Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ o No x

As of ~~January 28~~April 29, 2011, 24,~~329~~330,~~670~~357 shares of the registrant’s common stock were outstanding.

Table of Contents

ANIMAL HEALTH INTERNATIONAL, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~DECEMBER~~ MARCH 31, ~~2010~~2011

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)	2	2
Consolidated Balance Sheets	2	2
Consolidated Statements of Operations	3	3
Consolidated Statements of Comprehensive Income	4	4
Consolidated Statements of Cash Flows	5	5
Notes to Consolidated Financial Statements	6	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	13	13
Item 3. Quantitative and Qualitative Disclosures About Market Risk	18	18
Item 4. Controls and Procedures	18	18
PART II. OTHER INFORMATION	19	19
Item 1. Legal Proceedings	19	19
Item 1A. Risk Factors	19	19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	20	19
Item 3. Defaults Upon Senior Securities	20	19
Item 4. (Removed and Reserved)	20	19
Item 5. Other Information	20	19
Item 6. Exhibits	20	19
Signature	21	20
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION

Table of Contents

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Financial Statements

ANIMAL HEALTH INTERNATIONAL, INC.

Consolidated Balance Sheets

(In thousands, excluding share information)

(Unaudited)

	December 31, 2010				June 30, 2010
	March 31, 2011			June 30, 2010
Assets
Current assets :
Cash and cash equivalents	$	1,~~736~~875		$	$2,243	~~2,243~~
Accounts receivable, net	92,127	~~92,924~~		77,954		~~77,954~~
Current portion of notes receivable	134	~~185~~		189		~~189~~
Income tax receivable	—	—		656		~~656~~
Merchandise inventories, net	118,104	~~109,908~~		99,545		~~99,545~~
Deferred income taxes	1,947	~~1,582~~		1,852		~~1,852~~
Prepaid expenses	2,291	~~2,642~~		2,400		~~2,400~~
Total current assets	216,478	~~208,977~~		184,839		~~184,839~~
Noncurrent assets :
Notes receivable, net of current portion	—	—		77		77
Property, plant, and equipment, net	14,043	~~14,411~~		14,657		~~14,657~~
Goodwill	64,334	~~64,294~~		62,245		~~62,245~~
Customer relationships	22,129	~~22,982~~		24,616		~~24,616~~
Noncompete agreements	1,554	~~1,822~~		2,360		~~2,360~~
Trademarks and trade names	33,275	~~33,275~~		33,170		~~33,170~~
Debt issue costs and other assets, net of accumulated amortization of $3,270 and $3,030, respectively		4,570				2,967
Debt issue costs and other assets, net of accumulated amortization of $3,376 and $3,030, respectively	4,335			2,967
Total assets	$	~~350~~356,~~331~~148		$	$324,931	~~324,931~~
Liabilities and Stockholders’ Equity
Current liabilities :
Accounts payable	$	99105,~~437~~714		$	$94,705	~~94,705~~
Accrued liabilities	12,482	~~13,809~~		9,891		~~9,891~~
Current portion of long-term debt	432	~~433~~		129,339		~~129,339~~
Total current liabilities	118,628	~~113,679~~		233,935		~~233,935~~
Noncurrent liabilities :
Long-term debt, net of current portion	145,351	~~144,600~~		—		—
Deferred lease incentives	897	~~980~~		1,092		~~1,092~~
Deferred income taxes	21,918	~~22,544~~		23,440		~~23,440~~
Total liabilities	286,794	~~281,803~~		258,467		~~258,467~~
Commitments and contingencies (note 12)
Commitments and contingencies (note 13)
Stockholders’ equity :
Preferred stock, par value $0.01 per share. Authorized 10,000,000 shares, issued and outstanding 0 shares	—	—		—		—
Common stock, par value $0.01 per share. Authorized 90,000,000 shares, issued and outstanding 24,329,670 shares		243				243
Common stock, par value $0.01 per share. Authorized 90,000,000 shares, issued and outstanding 24,329,857 and 24,329,670 shares, respectively	243			243
Additional paid-in capital	134,239	~~134,021~~		133,585		~~133,585~~
Accumulated deficit	(65,597	~~(66,059~~	)	(67,402		~~(67,402~~)	)
Accumulated other comprehensive income	469	~~323~~		38		38
Total stockholders’ equity	69,354	~~68,528~~		66,464		~~66,464~~
Total liabilities and stockholders’ equity	$	~~350~~356,~~331~~148		$	$324,931	~~324,931~~

See accompanying Notes to Unaudited Consolidated Financial Statements.

Table of Contents

ANIMAL HEALTH INTERNATIONAL, INC.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended December 31,								Six Months Ended December 31,
	Three Months Ended March 31,						Nine Months Ended March 31,
	2010				2009				2010				2009
	2011			2010			2011			2010
Net sales	$	~~198~~181,~~220~~049		$	$165,126	~~170,487~~	$	555,744	$	~~374,695~~$	496,942		$	~~331,816~~
Costs and expenses:
Direct cost of products sold (excludes depreciation and amortization)	149,985	~~165,745~~		137,773		~~141,071~~	464,815			~~314~~414,~~830~~227				~~276,454~~
Salaries, wages, commissions, and related benefits	14,635	~~13,886~~		12,817		~~12,722~~	41,949			2738,~~314~~378				~~25,561~~
Selling, general, and administrative	11,724	~~10,907~~		9,771		~~10,818~~	34,005			2230,~~281~~538				~~20,767~~
Depreciation and amortization	2,131	~~2,006~~		2,005		~~2,022~~	6,074			36,~~943~~005				~~4,000~~
Operating income	2,574	~~5,676~~		2,760		~~3,854~~	8,901			67,~~327~~794				~~5,034~~
Other income (expense):
Other income	199	~~167~~		133		~~166~~	507			~~308~~433				~~300~~
Interest expense	(2,523	~~(2,176~~	)	(2,714		~~(2,068~~)	)(6,280		)	(37,~~757~~293	)	)		~~(4,579~~	)
Income before income taxes	250	~~3,667~~		179		~~1,952~~	3,128			~~2,878~~934				~~755~~
Income tax expense		(1,809	)			(734	)			(1,535	)			(284	)
Income tax benefit (expense)	212			(59		)	(1,323		)	(343		)
Net income	$	~~1,858~~462		$	$120	~~1,218~~	$	1,805	$	~~1,343~~$	591		$	~~471~~
Earnings per common share:
Basic	$	0.0702		$	$0.00	~~0.05~~	$	0.07	$	~~0.05~~$	0.02		$	~~0.02~~
Diluted	$	0.0702		$	$0.00	~~0.05~~	$	0.07	$	~~0.05~~$	0.02		$	~~0.02~~
Weighted average shares outstanding:
Basic	24,794	~~24,794~~		24,691		~~24,691~~	24,794			24,~~794~~691				~~24,691~~
Diluted	25,628	~~25,396~~		24,789		~~24,691~~	25,447			2524,~~284~~797				~~24,691~~

See accompanying Notes to Unaudited Consolidated Financial Statements.

~~ANIMAL~~Table ~~HEALTH~~of ~~INTERNATIONAL, INC.~~Contents

~~Consolidated~~ANIMAL ~~Statements~~HEALTH ~~of Comprehensive Income~~INTERNATIONAL, INC.

~~(In~~Consolidated ~~thousands)~~Statements of Comprehensive Income

(~~Unaudited~~In thousands)

	Three months ended December 31,				Six months ended December 31,
	2010		2009		2010		2009
Net income	$	1,858	$	1,218	$	1,343	$	471
Other comprehensive income:
Unrealized gain on derivative instruments, net of tax		—		993		—		1,336
Foreign currency translation adjustment		172		325		285		1,016
Total comprehensive income	$	2,030	$	2,536	$	1,628	$	2,823

(Unaudited)

See accompanying Notes to Unaudited Consolidated Financial Statements.

	Three months ended March 31,				Nine months ended March 31,
	2011		2010		2011		2010
Net income	$	462	$	120	$	1,805	$	591

Other comprehensive income:
Unrealized gain on derivative instruments, net of tax	—		621		—		1,957
Foreign currency translation adjustment	146		663		431		1,679

Total comprehensive income	$	608	$	1,404	$	2,236	$	4,227

4See accompanying Notes to Unaudited Consolidated Financial Statements.

~~Table of Contents~~4

~~ANIMAL~~Table ~~HEALTH~~of ~~INTERNATIONAL, INC.~~Contents

~~Consolidated~~ANIMAL ~~Statements~~HEALTH ~~of Cash Flows~~INTERNATIONAL, INC.

~~(In~~Consolidated ~~thousands)~~Statements of Cash Flows

(~~Unaudited~~In thousands)

	Six Months Ended
	December 31,
	2010			2009
Cash flows from operating activities :
Net income	$	1,343		$	471
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		3,876			4,000
Amortization of debt issue costs		429			520
Amortization of loss on settlement of interest rate swap agreements		—			620
Amortization of original issue discount		18			—
Bad debt expense		876			203
Stock compensation expense		436			245
Gain on sale of equipment		(42	)		(15	)
Deferred income taxes		(626	)		221
Changes in operating assets and liabilities (working capital):
Accounts receivable		(16,644	)		(8,792	)
Merchandise inventories		(11,268	)		(12,139	)
Income taxes receivable/payable		655			(152	)
Prepaid expenses		(255	)		604
Accounts payable		5,364			7,470
Accrued liabilities and other		1,915			(633	)
Net cash used in operating activities		(13,923	)		(7,377	)
Cash flows from investing activities:
Purchase of property, plant, and equipment		(1,319	)		(1,229	)
Purchase of other assets		(119	)		(221	)
Purchase of customer relationships and trade names		(175	)		—
Proceeds from sale of equipment		65			103
Net changes in notes receivable		93			76
Net cash used in investing activities		(1,455	)		(1,271	)
Cash flows from financing activities:
Repayment of long-term debt		(40,931	)		(2,874	)
Settlement of terminated interest rate swap agreements		—			(3,348	)
Net borrowings under revolving credit facilities		14,345			17,308
Net borrowings of long-term debt		40,704			—
Debt issue costs		(572	)		(63	)
Change in overdraft balances		1,273			(2,915	)
Net cash provided by financing activities		14,819			8,108
Effect of exchange rate changes on cash and cash equivalents		52			(124	)
Net decrease in cash and cash equivalents		(507	)		(664	)
Cash and cash equivalents, beginning of period		2,243			2,749
Cash and cash equivalents, end of period	$	1,736		$	2,085

(Unaudited)

See accompanying Notes to Unaudited Consolidated Financial Statements.

	Nine Months Ended March 31,
	2011			2010
Cash flows from operating activities :
Net income	$	1,805		$	591
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	5,963			6,005
Amortization of debt issue costs	535			766
Amortization of loss on settlement of interest rate swap agreements	—			1,241
Amortization of original issue discount	50			—
Bad debt expense	1,138			356
Stock compensation expense	653			459
Gain on sale of equipment	(52		)	(38		)
Deferred income taxes	(1,617		)	1,599
Changes in operating assets and liabilities (working capital):
Accounts receivable	(16,110		)	(13,361		)
Merchandise inventories	(19,751		)	(12,487		)
Income taxes receivable/payable	805			(2,100		)
Prepaid expenses	93			202
Accounts payable	14,319			5,589
Accrued liabilities and other	2,290			(2,443		)

Net cash used in operating activities	(9,879		)	(13,621		)

Cash flows from investing activities:
Purchase of property, plant, and equipment	(1,984		)	(1,690		)
Purchase of other assets	(192		)	(457		)
Purchase price adjustments	(2,089		)	(1,911		)
Purchase of customer relationships and trade names	(175		)	—
Proceeds from sale of equipment	82			153
Net changes in notes receivable	144			400

Net cash used in investing activities	(4,214		)	(3,505		)

Cash flows from financing activities:
Repayment of long-term debt	(41,040		)	(2,988		)
Settlement of terminated interest rate swap agreements	—			(3,348		)
Net borrowings under revolving credit facilities	14,957			26,485
Net borrowings of long-term debt	40,919			—
Debt issue costs	(591		)	(63		)
Proceeds from exercise of stock options	1			—
Change in overdraft balances	(482		)	(3,731		)

Net cash provided by financing activities	13,764			16,355

Effect of exchange rate changes on cash and cash equivalents	(39		)	(240		)

Net decrease in cash and cash equivalents	(368		)	(1,011		)

Cash and cash equivalents, beginning of period	2,243			2,749

Cash and cash equivalents, end of period	$	1,875		$	1,738

5See accompanying Notes to Unaudited Consolidated Financial Statements.

~~Table of Contents~~5

~~ANIMAL~~Table ~~HEALTH~~of ~~INTERNATIONAL, INC.~~Contents

~~Notes~~ANIMAL ~~to consolidated~~HEALTH ~~financial statements~~INTERNATIONAL, INC.

~~(Dollars~~Notes into consolidated ~~thousands,~~financial ~~except share and per share data)~~statements

(~~Unaudited~~Dollars in thousands, except share and per share data)

(1Unaudited) ~~Organization~~

~~Animal Health International, Inc.~~ (~~AHII~~1), formerly known as Walco International Holdings, Inc., was incorporated in Delaware in May 2005. Through its wholly-owned subsidiaries, Walco International, Inc. and Kane Veterinary Supplies, Ltd. (Kane) (note 3, collectively, with AHII, the Company), the Company’s primary business activity is the sale and distribution of animal health products, supplies, services and technology through operating divisions located throughout the United States, Canada and Taiwan. Organization

Animal Health International, Inc. (2AHII), ~~Summary~~formerly known as Walco International Holdings, Inc., was incorporated in Delaware in May 2005. Through its wholly-owned subsidiaries, Walco International, Inc. and Kane Veterinary Supplies, Ltd. (Kane) (note 4, collectively, with AHII, the Company), the Company’s primary business activity is the sale and distribution of ~~significant~~animal ~~accounting~~health ~~policies~~products, supplies, services and technology through operating divisions located throughout the United States and Canada.

(a2) Summary ~~Basis~~ of ~~consolidation~~significant accounting policies

~~The accompanying unaudited~~(a) ~~consolidated~~Basis ~~financial statements include the accounts~~ of ~~the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in~~ consolidation.

InThe ~~the opinion of management, the~~ accompanying unaudited consolidated financial statements include ~~all adjustments necessary to present fairly, in all material respects,~~ the ~~results~~accounts of the Company ~~for~~and ~~the~~its ~~periods~~wholly-owned ~~presented~~subsidiaries. ~~These consolidated~~All ~~financial~~intercompany ~~statements~~balances ~~have been prepared by the Company pursuant to the rules~~ and ~~regulations~~transactions of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been ~~condensed~~eliminated ~~or omitted pursuant to such rules and regulations. These consolidated financial statements should be read~~ in conjunction with the consolidated financial statements and accompanying notes included in the Company’s audited financial statements for the year ended June 30, 2010 in the Company’s Annual Report on Form 10-Kconsolidation. ~~The results of operations for the three and six months ended December 31, 2010 are not necessarily indicative of results to be expected for the entire fiscal year.~~

~~(b)~~In ~~Rebates~~the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary to present fairly, in all material respects, the results of the Company for the periods presented. These consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s audited financial statements for the year ended June 30, 2010 in the Company’s Annual Report on Form 10-K. The results of operations for the three and nine months ended March 31, 2011 are not necessarily indicative of results to be expected for the entire fiscal year.

Inventory rebates are recognized when estimable and probable and include inventory purchase rebates and sales-related rebates. Inventory purchase rebates are capitalized into inventory while sales-related rebates are recorded as a reduction of direct cost of products sold.(b) Rebates

~~(c)~~Inventory ~~Stock~~rebates ~~compensation~~are recognized when estimable and probable and include inventory purchase rebates and sales-related rebates. Inventory purchase rebates are capitalized into inventory while sales-related rebates are recorded as a reduction of direct cost of products sold.

~~In January 2007, the Company reserved 2,500,000 shares of its common stock for the issuance of awards under the 2007~~ (c) Stock Option and Incentive Plan. In November 2009, the Company amended and restated the 2007 Stock Option and Incentive Plan, and reserved an additional 1,100,000 shares of its common stock for the issuance of awards.compensation

~~Options~~In ~~granted under the~~ January 2007 ~~Stock Option and Incentive Plan vest over a four-year period and carry a ten-year term. The options issued are incentive stock options~~, ~~which are not performance-based and vest with continued employment. Unexercised options may be forfeited in~~ the ~~event~~Company ofreserved ~~termination of employment. Options to purchase 644~~2,~~371~~500,000 shares ~~have vested and have a weighted average exercise price~~ of ~~$5.40~~its ~~and~~common astock ~~weighted~~for ~~average~~the ~~remaining~~issuance ~~contract term~~ of ~~7.5~~awards ~~years,~~under ~~but~~the no2007 ~~options~~Stock ~~were~~Option ~~exercised~~and asIncentive ~~of December 31, 2010~~Plan. ~~Compensation~~ In ~~expense related to these options totaled $123 and $105 for the three months ended December 31, 2010 and~~ November 2009, ~~respectively,~~the ~~and~~Company ~~$246~~amended and ~~$215~~restated ~~for~~ the ~~six~~2007 ~~months~~Stock ~~ended~~Option ~~December 31, 2010~~ and ~~2009,~~Incentive ~~respectively. The Company issued 250~~Plan,~~000~~ and ~~838,875~~reserved ~~restricted~~an ~~stock~~additional ~~units to certain employees in December 2010 and 2009~~1, ~~respectively. These units vest over a four-year period~~100,000 ~~have an indefinite life, and convert to~~ shares of its common stock ~~upon~~for ~~certain~~the ~~triggering events. The units issued in 2010 carried a fair value of $1.97 upon their~~ issuance ~~while the units issued in 2009 carried a fair value~~ of $2awards.15 upon their issuance, and the expense related to these units totaled $99 and $30 for the three months ended December 31, 2010 and 2009, respectively, and $190 and $30 for the six months ended December 31, 2010 and 2009, respectively.

AsOptions ofgranted ~~December~~under ~~31,~~the ~~2010,~~amended ~~the~~and ~~Company~~restated ~~has~~2007 ~~granted~~Stock ~~470,883~~Option ~~deferred~~and Incentive Plan vest over a four-year period and carry a ten-year term. The options issued are incentive stock ~~units~~options, towhich ~~non~~are not performance-~~employee~~based ~~members~~and ofvest with continued employment. Unexercised options may be forfeited in the ~~Board~~event of ~~Directors~~termination of employment. ~~Because~~ ~~the~~Options ~~holders~~to ofpurchase ~~the~~664,696 ~~deferred~~shares ~~stock~~have ~~units~~vested and have a ~~contractual~~weighted ~~participation~~average ~~right~~exercise toprice ~~share~~of in$5.58 ~~current~~and ~~earnings,~~a weighted average remaining contract term of 7.2 years. During the ~~deferred~~three ~~stock~~months ~~units~~ended ~~are~~March 31, ~~included~~2011, inoptions ~~basic~~to ~~weighted~~acquire ~~average~~187 shares ~~outstanding~~of our common stock were exercised. ~~After~~ Compensation ~~accounting~~expense related to incentive stock options totaled $101 and $123 for the 1three months ended March 31,~~088~~ 2011 and 2010, respectively, and $347 and $338 for the nine months ended March 31, 2011 and 2010, respectively. The Company issued 250,000 and 838,875 restricted stock units ~~granted~~ to certain employees in December 2010 and 2009, ~~the~~respectively. These ~~464~~units vest over a four-year period,~~117~~ ~~deferred~~have an indefinite life, and convert to shares of common stock upon certain triggering events. The units ~~granted~~issued toin ~~non-employee members~~2010 carried a fair value of $1.97 upon their issuance while the ~~Board~~units ofissued ~~Directors~~in ~~that~~2009 ~~have~~carried ~~not~~a ~~been~~fair ~~forfeited~~value of $2.15 upon their issuance, and the ~~1,321,487~~expense ~~stock~~related ~~options~~to ~~issued~~these tounits ~~employees~~totaled ~~that~~$116 ~~have~~and ~~not~~$91 ~~been~~for ~~forfeited~~the orthree ~~surrendered~~months ended March 31, ~~there~~2011 ~~were~~and ~~725~~2010,~~521~~ ~~shares~~respectively, ofand ~~common~~$306 ~~stock~~and ~~reserved~~$121 for ~~future~~the ~~issuance at~~nine ~~December~~months ended March 31, 2011 and 2010, respectively.

6As of March 31, 2011, the Company has granted 470,883 deferred stock units to non-employee members of the Board of Directors. Because the holders of the deferred stock units have a contractual participation right to share in current earnings, the deferred stock units are included in basic weighted average shares outstanding. After accounting for the 1,088,875 restricted stock units granted to employees, the 464,117 deferred stock units granted to non-employee members of the Board of Directors that have not been forfeited, and the 1,319,362 stock options issued to employees that have not been forfeited or surrendered, there were 727,646 shares of common stock reserved for future issuance under the Company’s amended and restated 2007 Stock Option and Incentive Plan at March 31, 2011.

The Company uses the Black-Scholes formula to estimate the value of stock options granted to employees and expects to continue to use this option valuation model. The Company includes a forfeiture estimate in the amount of compensation expense being recognized. The forfeiture estimate is based on historical employee turnover rates. The estimated fair value of the options is amortized to expense on a straight-line basis over the four-year vesting period.6

~~The~~Table ~~following weighted average assumptions were used for the option grants: risk-free interest rate~~ of 4.75% on the initial 749,300 shares, 4.45% on the subsequent 9,500 shares, 3.25% on the 750,000 shares issued in November 2007, 0.32% on the 750,000 shares issued in November 2008, and 0.05% on the 411,125 shares issued in December 2009, dividend yield of 0% for all shares, annual volatility factor of the expected market price of the Company’s common stock of 31.0% for the initial 749,300 shares and subsequent 9,500 shares, 30.9% for the 750,000 shares issued in November 2007, 29.4% for the 750,000 shares issues in November 2008, and 34.0% for the 411,125 shares issued in December 2009, an estimated forfeiture rate of 8.4%, and an expected life of the options of 6.25 years. The risk-free interest rate was determined based on a yield curve of U.S. Treasury rates ranging from five to seven years. Expected volatility was established based on historical volatility of the stock prices of the Company and of other companies in industries similar to the Company. Based on these assumptions, the 2007 options were valued at $4.49 per share for the initial 749,300 shares and $5.43 per share for the subsequent 9,500 shares, $4.28 per share for the 750,000 shares issued in November 2007, $0.70 per share for the 750,000 shares issued in November 2008, and $0.88 per share for the 411,125 shares issued in December 2009. Compensation expense for these options and restricted stock units for each year ended June 30 over each four-year vesting period totals $859 in 2011, $711 in 2012, $573 in 2013, and $282 in 2014. The weighted average remaining contract term for the options was 7.9 and 8.9 years at December 31, 2010 and 2009, respectively.Contents

AThe ~~summary~~Company uses the Black-Scholes formula to estimate the value of stock options granted to employees and expects to continue to use this option ~~activity~~valuation model. The Company includes a forfeiture estimate in the amount of compensation expense being recognized. The forfeiture estimate is asbased ~~follows:~~ on historical employee turnover rates. The estimated fair value of the options is amortized to expense on a straight-line basis over the four-year vesting period.

	Options			Weighted Average Exercise Prices		Weighted Average Fair Value at Grant Date
Balance at July 1, 2010		1,340,175		$	4.28		1.52
Granted		—			—		—
Exercised		—			—		—
Forfeited		(18,688	)		5.06		1.84
Balance at December 31, 2010		1,321,487		$	4.27	$	1.52

The following weighted average assumptions were used for the option grants: risk-free interest rate of 4.75% on the initial 749,300 shares, 4.45% on the subsequent 9,500 shares, 3.25% on the 750,000 shares issued in November 2007, 0.32% on the 750,000 shares issued in November 2008, and 0.05% on the 411,125 shares issued in December 2009, dividend yield of 0% for all shares, annual volatility factor of the expected market price of the Company’s common stock of 31.0% for the initial 749,300 shares and subsequent 9,500 shares, 30.9% for the 750,000 shares issued in November 2007, 29.4% for the 750,000 shares issues in November 2008, and 34.0% for the 411,125 shares issued in December 2009, an estimated forfeiture rate of 8.4%, and an expected life of the options of 6.25 years. The risk-free interest rate was determined based on a yield curve of U.S. Treasury rates ranging from five to seven years. Expected volatility was established based on historical volatility of the stock prices of the Company and of other companies in industries similar to the Company. Based on these assumptions, the 2007 options were valued at $4.49 per share for the initial 749,300 shares and $5.43 per share for the subsequent 9,500 shares, $4.28 per share for the 750,000 shares issued in November 2007, $0.70 per share for the 750,000 shares issued in November 2008, and $0.88 per share for the 411,125 shares issued in December 2009. Compensation expense for these options and restricted stock units for each year ended June 30 over each four-year vesting period totals $859 in 2011, $711 in 2012, $573 in 2013, and $282 in 2014. The weighted average remaining contract term for the options was 7.6 and 8.6 years at March 31, 2011 and 2010, respectively.

~~Intrinsic~~A ~~value~~summary ~~for~~of stock ~~options~~option activity is ~~defined~~ as ~~the difference between the current market value and the exercise price. The aggregate intrinsic value for these stock options was $449 at December 31, 2010, and $66 at June 30, 2010.~~follows:

(d) Earnings per share

	Options		Weighted Average Exercise Prices		Weighted Average Fair Value at Grant Date
Balance at July 1, 2010	1,340,175		$	4.28	1.52
Granted	—		—		—
Exercised	(187	)	2.44		0.76
Forfeited	(20,813	)	5.42		1.99

Balance at March 31, 2011	1,319,175		$	4.27	$	1.52

~~Earnings~~Intrinsic ~~per~~value ~~share~~for ~~reflects application of the two class method. All classes of common~~ stock ~~participate~~options ~~pro rata in dividends. Therefore, the two class method of calculating earnings per share has been applied. Basic earnings per share~~ is ~~computed~~defined byas ~~dividing net income by~~ the ~~weighted~~difference ~~average~~between ~~number of common shares outstanding for~~ the ~~reporting~~current ~~period.~~market ~~Diluted~~value ~~earnings~~and ~~per share reflects~~ the ~~potential~~exercise ~~dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock~~price. ~~For~~The ~~the~~aggregate ~~calculation~~intrinsic ofvalue ~~diluted~~for ~~earnings~~these ~~per share, the basic weighted average number of shares is increased by the dilutive effect of~~ stock options ~~and~~was ~~restricted~~$1,841 ~~stock~~at ~~units~~March 31, ~~determined~~2011, ~~using the treasury stock method. The components of basic~~ and ~~diluted~~$66 ~~earnings~~at ~~per share are as follows (in thousands~~June 30, ~~except per share amounts):~~2010.

	Three Months Ended December 31,						Six Months Ended December 31,
	2010			2009			2010			2009
Net income		$	1,858		$	1,218		$	1,343		$	471
Basic weighted average shares outstanding			24,794			24,691			24,794			24,691
Dilutive effect of stock options and restricted stock			602			—			490			—
Diluted weighted average shares outstanding			25,396			24,691			25,284			24,691
Basic earnings per share		$	0.07		$	0.05		$	0.05		$	0.02
Diluted earnings per share		$	0.07		$	0.05		$	0.05		$	0.02

(d) Earnings per share

7Earnings per share reflects application of the two class method. All classes of common stock participate pro rata in dividends. Therefore, the two class method of calculating earnings per share has been applied. Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and restricted stock units determined using the treasury stock method. The components of basic and diluted earnings per share are as follows (in thousands, except per share amounts):

Table of Contents

	Three Months Ended March 31,				Nine Months Ended March 31,
	2011		2010		2011		2010
Net income	$	462	$	120	$	1,805	$	591

Basic weighted average shares outstanding	24,794		24,691		24,794		24,691
Dilutive effect of stock options and restricted stock	834		98		653		106

Diluted weighted average shares outstanding	25,628		24,789		25,447		24,797

Basic earnings per share	$	0.02	$	0.00	$	0.07	$	0.02

Diluted earnings per share	$	0.02	$	0.00	$	0.07	$	0.02

~~For the three and six months ended December 31, 2009, all common stock equivalents were excluded from diluted earnings per share as the results were anti-dilutive.~~7

~~(e)~~Table ~~Effect~~ of ~~recently issued accounting pronouncements~~Contents

~~The~~(e) Effect ~~Company’s~~of ~~management~~recently ~~has~~issued ~~evaluated recent~~ accounting pronouncements~~, and their adoption has not had or is not expected to have a material impact upon the Company’s consolidated financial statements.~~

~~(3)~~The ~~Acquisitions~~Company’s management has evaluated recent accounting pronouncements, and their adoption has not had or is not expected to have a material impact upon the Company’s consolidated financial statements.

~~In October 2007, the Company acquired all of the outstanding stock of Kane for $22,184 in cash~~ (~~plus $1,017 in direct acquisition costs~~3)~~. Kane is based in Edmonton, Canada, and is a leading distributor of animal health products in both the production and companion animal markets. During the quarters ended December 31, 2009,~~ ~~and~~Merger 2008, certain performance targets were met, and the Company paid $1,911 and $2,825, respectively, to certain selling stockholders. During the quarter ended December 31, 2010, certain performance targets were met, and in January of 2011, the Company paid $2,011 to certain selling stockholders. These purchase price adjustments were accounted for as goodwill in the quarter earned.Agreement

~~The~~In March 2011, the Company’s ~~acquisitions~~announced ~~serve~~that toit ~~further~~had ~~the~~entered ~~Company’s~~into ~~strategy~~an toAgreement ~~access~~and ~~additional~~Plan ~~product~~of ~~lines~~Merger (Merger Agreement) with Lextron, Inc., ~~sales~~a ~~representatives~~Colorado corporation (Parent), ~~customer~~and ~~opportunities~~Buffalo Acquisition, Inc., ~~manufacturer~~a ~~relationships~~Delaware corporation and ~~sales~~a ~~territories. The~~wholly-owned ~~results~~subsidiary of ~~operations~~Parent of(Merger ~~Kane~~Sub). ~~were~~Subject ~~included~~to inthe terms of the ~~Company’s~~Merger ~~consolidated~~Agreement, ~~results~~Merger ofSub ~~operations~~will ~~beginning~~merge with and into the ~~date~~Company with the Company being the surviving entity and continuing as a wholly-owned subsidiary of ~~acquisition~~Parent (the Merger).

Subject to the terms of the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of the Company’s common stock (4other than shares owned by the Company, its subsidiaries, Parent or Merger Sub and shares owned by stockholders who have perfected and not withdrawn a demand for appraisal rights under Delaware law) ~~Accounts~~will ~~receivable~~be converted into the right to receive cash, ~~net~~without interest, in an amount equal to $4.25 per share. The Merger Agreement and the transactions contemplated by the Merger Agreement were approved by the Company’s Board of Directors.

	December 31, 2010			June 30, 2010
Trade accounts receivable	$	85,179		$	71,725
Vendor rebate receivables		8,383			6,305
Other receivables		168			507
		93,730			78,537
Less allowance for doubtful accounts		(806	)		(583	)
Accounts receivable, net	$	92,924		$	77,954

The vesting conditions of all outstanding stock options, restricted stock units, and deferred stock units will be fully accelerated immediately prior to the closing, pursuant to the terms of the award agreements under which such awards were originally issued. Each outstanding stock option will be cancelled at the effective time of the Merger in exchange for the payment of an amount in cash equal to the product of (x) the number of shares of the Company’s common stock subject to such stock option and (y) the excess, if any, of $4.25 over the per share exercise price of such stock option, less any applicable federal or state withholding tax. Each outstanding restricted stock unit and deferred stock unit will be cancelled at the effective time of the Merger in exchange for the payment of an amount in cash equal to the product of (x) the number of shares of the Company’s common stock subject to such restricted stock unit award or deferred stock unit award and (y) the excess, if any, of $4.25 over the per share exercise or purchase price, if any, of such restricted stock unit award or deferred stock unit award, less any applicable federal or state withholding tax.

The completion of the Merger is subject to various customary closing conditions, such as obtaining the approval of the Company’s stockholders and expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (5Hart-Scott-Rodino). ~~Property~~On April 26, ~~plant~~2011, ~~and~~the ~~equipment~~Company announced that the Hart-Scott-Rodino waiting period had expired. On May 9, ~~net~~2011, the Company filed a definitive proxy statement with the Securities and Exchange Commission and mailed it to the Company’s stockholders. The proposed merger is expected to close in the second calendar quarter of 2011.

	December 31, 2010			June 30, 2010
Land	$	3,461		$	3,461
Buildings and improvements		4,439			4,434
Leasehold improvements		3,308			3,892
Construction in progress		126			135
Equipment:
Warehouse		2,569			2,479
Automotive		7,256			6,800
Office/software		6,404			6,142
		27,563			27,343
Less accumulated depreciation		(13,152	)		(12,686	)
Property, plant, and equipment, net	$	14,411		$	14,657

(4) Acquisitions

~~Depreciation~~In ~~expense~~October 2007, ~~was~~the Company acquired all of the outstanding stock of Kane for $~~884~~22,184 ~~and~~in cash (plus $~~901~~1,017 ~~for~~in direct acquisition costs). Kane is based in Edmonton, Canada, and is a leading distributor of animal health products in both the ~~three~~production ~~months~~and companion animal markets. During the quarters ended December 31, ~~2010~~ 2009 and ~~2009~~2008, ~~respectively~~certain performance targets were met, and the Company paid $1,~~701~~911 and $12,~~759~~825, ~~for~~respectively, ~~the~~to ~~six~~certain ~~months~~selling stockholders. During the quarter ended December 31, 2010, certain performance targets were met, and ~~2009~~in January of 2011, ~~respectively~~the Company paid $2,011 to certain selling stockholders and $78 to a consulting firm involved in the initial negotiations with the selling stockholders. These purchase price adjustments were accounted for as goodwill in the quarter earned.

8The Company’s acquisitions serve to further the Company’s strategy to access additional product lines, sales representatives, customer opportunities, manufacturer relationships and sales territories. The results of operations of Kane were included in the Company’s consolidated results of operations beginning with the date of acquisition.

~~Table~~(5) Accounts ofreceivable, ~~Contents~~net

(6) Goodwill and other intangible assets

	March 31, 2011			June 30, 2010
Trade accounts receivable	$	87,140		$	71,725
Vendor rebate receivables	5,329			6,305
Other receivables	442			507

	92,911			78,537
Less allowance for doubtful accounts	(784		)	(583		)

Accounts receivable, net	$	92,127		$	77,954

	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
December 31, 2010 :
Goodwill	Indefinite	$	64,294	$	—		$	64,294
Customer relationships	12 years		40,648		(17,666	)		22,982
Noncompete agreements	2-5 years		6,245		(4,423	)		1,822
Trademarks and trade names	Indefinite		33,275		—			33,275
		$	144,462	$	(22,089	)	$	122,373
June 30, 2010 :
Goodwill	Indefinite	$	62,245	$	—		$	62,245
Customer relationships	12 years		40,578		(15,962	)		24,616
Noncompete agreements	2-5 years		6,245		(3,885	)		2,360
Trademarks and trade names	Indefinite		33,170		—			33,170
		$	142,238	$	(19,847	)	$	122,391

(6) Property, plant, and equipment, net

In September 2010, the Company purchased $105 of trade names and $70 of customer relationships from a former competitor. Amortization expense related to intangible assets totaled $1,122 and $1,121 for the three months ended December 31, 2010 and 2009, respectively, and $2,242 and $2,241 for the six months ended December 31, 2010 and 2009, respectively. Based on the current estimated useful lives assigned to intangibles assets, amortization expense for fiscal 2011, 2012, 2013, 2014, and 2015 is projected to total $4,486, $4,235, $3,872, $3,412, and $3,412, respectively.

	March 31, 2011			June 30, 2010
Land	$	3,461		$	3,461
Buildings and improvements	4,439			4,434
Leasehold improvements	3,309			3,892
Construction in progress	86			135
Equipment:
Warehouse	2,667			2,479
Automotive	7,263			6,800
Office/software	6,553			6,142

	27,778			27,343
Less accumulated depreciation	(13,735		)	(12,686		)

Property, plant, and equipment, net	$	14,043		$	14,657

~~The~~Depreciation ~~Company~~expense ~~reviews~~was ~~its~~$1,010 ~~goodwill~~ and ~~other~~$885 ~~nonamortizing intangible assets~~ for ~~impairment annually at~~ the ~~close~~three ofmonths ~~the~~ended ~~fiscal~~March 31, ~~year~~2011 orand ~~more frequently if indicators of impairment exist. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include~~2010, ~~among others: a significant decline in the Company’s expected future cash flows; a sustained~~respectively, ~~significant decline in the Company’s stock price~~ and ~~market~~$2,711 ~~capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition;~~ and ~~slower~~$2,644 ~~growth~~for ~~rates. Any adverse change in these factors could have a significant impact on~~ the ~~recoverability~~nine ofmonths ~~the~~ended ~~Company’s~~March 31, ~~goodwill~~2011 and ~~other~~2010, ~~nonamortizing intangible assets and could have a material impact on the Company’s consolidated financial statements~~respectively.

The Company’s stock price and market capitalization have improved in the past six months, and the Company has experienced improvements in growth rates in the past six months. As a result, the Company concluded no indicators had emerged to warrant impairment testing as of December 31, 2010. The Company will perform its annual impairment test at June 30, 2011.8

~~(7)~~Table ~~Long-term~~of ~~debt~~Contents

	December 31, 2010			June 30, 2010
Credit agreement—Revolving credit facility	$	102,858		$	88,512
Credit agreement—Term Note		42,172			40,820
Other		3			7
		145,033			129,339
Less current portion		(433	)		(129,339	)
	$	144,600		$	—

(7) Goodwill and other intangible assets

	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
March 31, 2011 :
Goodwill	Indefinite	$	64,334	$	—		$	64,334
Customer relationships	12 years	40,648		(18,519		)	22,129
Noncompete agreements	2-5 years	6,245		(4,691		)	1,554
Trademarks and trade names	Indefinite	33,275		—			33,275

		$	144,502	$	(23,210	)	$	121,292

June 30, 2010 :
Goodwill	Indefinite	$	62,245	$	—		$	62,245
Customer relationships	12 years	40,578		(15,962		)	24,616
Noncompete agreements	2-5 years	6,245		(3,885		)	2,360
Trademarks and trade names	Indefinite	33,170		—			33,170

		$	142,238	$	(19,847	)	$	122,391

~~Effective~~In ~~November 10,~~ September 2010, the Company ~~amended~~purchased ~~and~~$105 ~~extended the maturity~~ of ~~its~~trade ~~revolving~~names ~~credit facility (Revolver)~~ and ~~replaced~~$70 ~~its~~of ~~first~~customer ~~lien~~relationships ~~term~~from ~~loan~~a ~~(Term~~former ~~Note)~~competitor. ~~The~~ Amortization ~~amended~~expense ~~Revolver~~related ~~is a $130,000 facility, with an option held by us~~ to ~~increase~~intangible ~~the~~assets ~~amount~~totaled ~~of the amended Revolver to~~ $~~175~~1,~~000. It~~121 ~~matures~~and ~~on August 10~~$1,120 ~~2015. The~~for ~~outstanding borrowings under~~ the ~~amended~~three ~~Revolver~~months ~~bear~~ended ~~interest~~March 31, at2011 ~~rates based upon the Company’s Leverage Ratio as defined in the amended Revolver with LIBOR-based rates ranging from LIBOR~~ and ~~CDOR~~2010, ~~Rate~~respectively, ~~plus 2.25% to LIBOR~~ and ~~CDOR Rate plus~~ $3~~.00%~~,363 and ~~with~~$3,361 ~~Prime-based~~for ~~rates~~the ~~ranging~~nine ~~from~~months ~~U.S.~~ended ~~Prime~~March 31, ~~and~~2011 ~~Canadian Prime Rate plus 0.00% to U.S. Prime~~ and ~~Canadian~~2010, ~~Prime Rate plus 0~~respectively.~~50%.~~ ~~Borrowings~~Based ~~are collateralized by a first priority interest in and lien~~ on the ~~Company’s~~current ~~accounts~~estimated ~~receivable~~useful ~~and~~lives ~~inventories.~~assigned Asto ofintangibles ~~December 31~~assets, ~~2010,~~amortization ~~the~~expense ~~interest rates~~ for ~~the~~fiscal ~~Revolver~~2011, ~~ranged~~2012, ~~from~~2013, ~~3.27% to 3.75%. Additionally~~2014, ~~the~~and ~~Company~~ 2015 is ~~required~~projected to ~~pay~~total a$4,486, ~~commitment fee on the daily unused amount of the Revolver at a per annum rate of 0.50%. At December 31~~$4,235, ~~2010~~$3,872, ~~the Company’s availability under the Revolver totaled~~ $303,~~053~~412, ~~including~~and $43,~~745~~412, ~~of cash actually received but not yet applied to the Revolver~~respectively.

The ~~new~~Company ~~first~~reviews ~~lien~~its ~~term~~goodwill ~~loan~~and ~~(New~~other ~~Term~~nonamortizing ~~Note)~~intangible ~~has~~assets afor ~~face~~impairment ~~amount~~annually ofat ~~$43,000~~the ~~and~~close ~~matures~~of onthe ~~November~~fiscal ~~10,~~year ~~2015. It~~or ~~bears~~more ~~interest~~frequently atif anindicators ~~annual~~of ~~rate~~impairment ~~equal to 14~~exist.~~25%~~ ~~payable~~A assignificant ~~follows:~~amount ~~(i)~~of ~~12.25%~~judgment ~~per~~is ~~annum~~involved in ~~cash~~determining inif ~~arrears,~~an ~~and~~indicator ~~(ii)~~of 2impairment has occurred.~~00%~~ ~~added~~Such ~~automatically~~indicators tomay ~~the~~include, ~~unpaid~~among ~~principal~~others: ~~amount. It~~a ~~was~~significant ~~issued~~decline ~~with~~in anthe ~~original~~Company’s ~~issue~~expected ~~discount~~future ofcash ~~2.00%~~flows; ofa ~~the~~sustained, ~~face~~significant ~~amount~~decline ofin the ~~note. At~~Company’s ~~December~~stock ~~31,~~price ~~2010,~~and ~~the~~market ~~remaining~~capitalization; ~~balance~~a ofsignificant ~~the~~adverse ~~original~~change ~~issue~~in ~~discount~~legal ~~was~~factors ~~$842,~~or ~~which~~in isthe ~~being~~business ~~amortized~~climate; ~~utilizing~~unanticipated ~~the~~competition; ~~effective~~and ~~interest~~slower ~~method~~growth ~~over~~rates. ~~the~~Any ~~term~~adverse ofchange ~~the~~in ~~debt.~~these ~~Borrowings~~factors ~~are~~could ~~collateralized~~have by a ~~first~~significant ~~priority~~impact ~~interest~~on inthe ~~and~~recoverability ~~lien~~of onthe ~~all~~Company’s ~~real~~goodwill ~~estate,~~and ~~fixed~~other nonamortizing intangible assets, and ~~intellectual~~could ~~property~~have ofa material impact on the Company’s consolidated financial statements.

The ~~new~~Company’s ~~credit~~stock ~~agreements~~price ~~contain~~and ~~certain~~market ~~covenants~~capitalization ~~that,~~have ~~among~~improved ~~other~~in ~~things,~~the ~~restrict~~past ~~our~~nine ~~ability to incur additional indebtedness~~months, ~~make~~and ~~certain~~the ~~payments,~~Company ~~sell~~has ~~assets,~~experienced ~~enter~~improvements ~~into~~in ~~certain~~growth ~~transactions~~rates ~~with~~in ~~affiliates~~the ~~and~~past ~~create~~nine ~~liens~~months. ~~Moreover,~~As ~~certain~~a ofresult, ~~these~~the ~~agreements~~Company ~~require~~concluded usno toindicators ~~maintain~~had ~~specified~~emerged ~~financial ratios. The most restrictive covenant relates~~ to ~~the~~warrant ~~creation~~impairment ortesting ~~assumption~~as of ~~additional~~March 31, ~~indebtedness~~2011. The Company ~~was~~will inperform ~~compliance~~its ~~with~~annual ~~all~~impairment ~~financial~~test ~~covenants~~ at ~~December~~June 3130, ~~2010~~2011.

~~As a result of this refinancing, the Company wrote~~(8) Long-off remaining unamortized debt issue costs related to the Term Note totaling $35 during the second fiscal quarter of 2011. Debt issue costs of $2,087 resulting from this refinancing were capitalized and are being amortized over the remaining term ~~of the Revolver utilizing the straight-line method, which approximates the effective interest method, and over the remaining term of the New Term Note utilizing the effective interest method.~~ debt

The Company has utilized cash flow hedge accounting and used derivative financial instruments to effectively convert a portion of its variable-rate debt to fixed-rate debt. In order to reduce cash interest expense over the last three quarters of fiscal 2010, the Company elected to terminate both of its interest rate swap agreements as of September 30, 2009 and paid the respective liabilities in October 2009.

	March 31, 2011			June 30, 2010
Credit agreement—Revolving credit facility	$	103,469		$	88,512
Credit agreement—Term Note	42,312			40,820
Other	2			7

	145,783			129,339
Less current portion	(432		)	(129,339		)

	$	145,351		$	—

The Company had a $43,000 notional value swap transaction with a financial institution effective April 18, 2007. The Company received a floating rate based on LIBOR and paid a fixed rate of 4.95%. The swap agreement had an original termination date of June 28, 2010. On September 30, 2009, the Company terminated the swap agreement, and the fair value of this swap was a net liability of $1,511 on that date. The Company had a $52,000 notional value swap transaction with a financial institution effective April 18, 2007. The Company received a floating rate based on LIBOR and paid a fixed rate of 4.95%. The swap agreement had an original termination date of May 7, 2010. On September 30, 2009, the Company terminated the swap agreement, and the fair value of this swap was a net liability of $1,837 on that date.9

~~Swap~~Table ~~agreement fair values were recorded on the consolidated balance sheet as a component~~ of current portion of long-term debt. The fair values of the interest rate swap agreements were estimated based on current settlement prices and quoted market prices of comparable contracts. The Company calculated no ineffectiveness on both interest rate swap agreements at their termination on September 30, 2009. At June 30, 2010, all unrealized losses previously recorded on the consolidated balance sheet as accumulated other comprehensive income (loss) had been amortized to interest expense over the remaining terms of the original swap agreements.Contents

~~The~~Effective ~~net~~November 10, ~~receipts~~2010, orthe ~~payments~~Company ~~from~~amended and extended the ~~interest~~maturity ~~rate~~of ~~swap~~its ~~agreements~~revolving ~~were~~credit ~~recorded~~facility in(Revolver) ~~interest~~and ~~expense~~replaced its first lien term loan (Term Note). The amended Revolver is a $130,000 facility, with an ~~During~~option ~~the~~held ~~three~~by ~~and~~us ~~six~~to ~~months~~increase ~~ended~~the ~~December~~amount 31of the amended Revolver to $175,000. It ~~2009~~matures on August 10, ~~changes~~2015. The inoutstanding borrowings under the ~~fair~~amended ~~value~~Revolver ofbear interest ~~rate~~at ~~swap~~rates ~~agreements~~based ~~totaled~~upon ~~$1,655~~the ~~($993~~Company’s ~~net~~Leverage ofRatio ~~tax)~~as defined in the amended Revolver with LIBOR-based rates ranging from LIBOR and $CDOR Rate plus 2~~,227~~.25% ~~($1,336~~to ~~net~~LIBOR ofand ~~tax)~~CDOR Rate plus 3.00%, ~~respectively~~and with Prime-based rates ranging from U. ~~The~~S. ~~Company~~Prime ~~reclassified $~~and Canadian Prime Rate plus 0.00% to U.S. Prime and $1Canadian Prime Rate plus 0.50%. Borrowings are collateralized by a first priority interest in and lien on the Company’s accounts receivable and inventories. As of March 31,~~047~~ 2011, the interest rates for the Revolver ranged from ~~accumulated~~3.26% ~~other~~to ~~comprehensive~~3.75%. Additionally, ~~income~~the Company is required to ~~interest~~pay ~~expense~~a ~~during~~commitment fee on the ~~three~~daily ~~and~~unused ~~six~~amount ~~months~~of ~~ended~~the ~~December~~Revolver at a per annum rate of 0.50%. At March 31, ~~2009~~2011, ~~respectively~~the Company’s availability under the Revolver totaled $29,428, including $4,865 of cash actually received but not yet applied to the Revolver.

The new first lien term loan (New Term Note) has a face amount of $43,000 and matures on November 10 , 2015. It bears interest at an annual rate equal to 14.25% payable as follows: (i) 12.25% per annum in cash in arrears, and (ii) 2.00% added automatically to the unpaid principal amount. It was issued with an original issue discount of 2.00% of the face amount of the note. At March 31, 2011, the remaining balance of the original issue discount was $810, which is being amortized utilizing the effective interest method over the term of the debt. Borrowings are collateralized by a first priority interest in and lien on all real estate, fixed assets, and intellectual property of the Company.

~~(8)~~The ~~Financial~~new ~~instruments~~credit agreements contain certain covenants that, among other things, restrict our ability to incur additional indebtedness, make certain payments, sell assets, enter into certain transactions with affiliates and create liens. Moreover, certain of these agreements require us to maintain specified financial ratios. The most restrictive covenant relates to the creation or assumption of additional indebtedness. The Company was in compliance with all financial covenants at March 31, 2011.

~~Fair~~As ~~value~~a isresult ~~measured~~of ~~using~~this arefinancing, ~~framework~~the ~~that~~Company ~~provides~~wrote-off aremaining ~~fair~~unamortized ~~value~~debt ~~hierarchy~~issue ~~that~~costs ~~prioritizes~~related ~~inputs~~ to ~~valuation~~the ~~techniques~~Term ~~based~~Note ontotaling ~~observable~~$35 ~~and~~during ~~unobservable data and categorizes~~ the ~~inputs~~second ~~into~~fiscal ~~three~~quarter ~~levels:~~of 2011. ~~Level~~Debt 1issue –costs ~~Unadjusted~~of ~~quoted prices in active markets for identical assets or liabilities~~$2,106 ~~Level~~resulting 2from –this ~~Significant~~refinancing ~~observable~~were ~~pricing~~capitalized ~~inputs~~and ~~other than quoted prices included within Level 1 that~~ are ~~either~~being ~~directly~~amortized orover ~~indirectly~~the ~~observable~~remaining asterm of the ~~reporting~~Revolver ~~date~~utilizing ~~(essentially,~~the ~~this~~straight-line ~~represents~~method, ~~inputs~~which ~~that~~approximates ~~are~~the ~~derived~~effective ~~principally~~interest ~~from or corroborated by observable market data)~~method, and ~~Level~~over 3the –remaining ~~Generally~~term ~~unobservable~~of ~~inputs, which are developed based on~~ the ~~best~~New ~~information~~Term ~~available~~Note ~~and~~utilizing ~~may include~~ the ~~Company’s~~effective ~~own~~interest ~~internal data~~method. ~~Observable data should be used when available.~~

The ~~following~~Company ~~table~~has ~~presents~~utilized cash flow hedge accounting and used derivative financial instruments to effectively convert a portion of its variable-rate debt to fixed-rate debt. In order to reduce cash interest expense over the last three quarters of fiscal 2010, the Company’s ~~financial~~elected ~~assets~~to ~~and~~terminate ~~liabilities~~both ~~measured~~of its interest rate swap agreements as of ~~December 31~~September 30, ~~2010:~~2009 and paid the respective liabilities in October 2009.

			Fair Value
	December 31, 2010		Level 1		Level 2		Level 3
Financial assets at cost :
Current portion of notes receivable	$	185
Notes receivable, net of current portion		—
Total	$	185
Financial assets at fair value :
Cash and cash equivalents		1,736		1,736		—		—
Total	$	1,736	$	1,736	$	—	$	—
Financial liabilities carried at historical proceeds :
Current portion of long-term debt	$	433
Long-term debt, net of current portion		144,600
Total	$	145,033

Swap agreement fair values were recorded on the consolidated balance sheet as a component of current portion of long-term debt. The ~~following~~fair ~~table~~values ~~presents~~of the ~~Company’s~~interest ~~financial~~rate ~~assets~~swap agreements were estimated based on current settlement prices and ~~liabilities~~quoted ~~measured~~market asprices of ~~June~~comparable contracts. The Company calculated no ineffectiveness on both interest rate swap agreements at their termination on September 30, 2009. At June 30, 2010:, all unrealized losses previously recorded on the consolidated balance sheet as accumulated other comprehensive income (loss) had been amortized to interest expense.

			Fair Value
	June 30, 2010		Level 1		Level 2		Level 3
Financial assets at cost :
Current portion of notes receivable	$	189
Notes receivable, net of current portion		77
Total	$	266
Financial assets at fair value :
Cash and cash equivalents	$	2,243	$	2,243	$	—	$	—
Total	$	2,243	$	2,243	$	—	$	—
Financial liabilities carried at historical proceeds :
Current portion of long-term debt	$	129,339
Long-term debt, net of current portion		—
Total	$	129,339

The net receipts or payments from the interest rate swap agreements were recorded in interest expense. During the three and nine months ended March 31, 2010, changes in the fair value of interest rate swap agreements totaled $1,035 ($621 net of tax) and $3,262 ($1,957 net of tax), respectively. The Company reclassified $0 and $1,047 from accumulated other comprehensive income to interest expense during the three and nine months ended March 31, 2010, respectively.

~~(9) Preferred stock~~10

AsTable of December 31, 2010, the Company had one class of undesignated preferred stock authorized with no shares issued or outstanding. The Board of Directors of the Company may designate and issue preferred stock in one or more series. The Board of Directors can fix the rights, preferences and privileges of the shares of each series and any of its qualifications, limitations or restrictions.Contents

11(9) Financial instruments

Fair value is measured using a framework that provides a fair value hierarchy that prioritizes inputs to valuation techniques based on observable and unobservable data and categorizes the inputs into three levels: Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities, Level 2 — Significant observable pricing inputs other than quoted prices included within Level 1 that are either directly or indirectly observable as of the reporting date (10essentially, this represents inputs that are derived principally from or corroborated by observable market data), ~~Related-party~~and ~~transactions~~Level 3 — Generally unobservable inputs, which are developed based on the best information available and may include the Company’s own internal data. Observable data should be used when available.

The ~~Company~~following ~~has~~table ~~property~~presents ~~lease~~the ~~agreements with certain employees. The~~ Company’s ~~incurred~~financial ~~related~~assets ~~rent expense of $9~~ and ~~$92~~liabilities ~~for~~measured ~~the~~as ~~three~~of ~~months ended December~~March 31, 2010 and 2009, respectively, and $18 and $185 for the six months ended December 31, 2010 and 2009, respectively. There are no future obligations outstanding at December 31, 2010, with respect to such leases.2011:

(11) Income taxes

	March 31,		Fair Value
	2011		Level 1		Level 2		Level 3
Financial assets at cost :
Current portion of notes receivable	$	134
Notes receivable, net of current portion	—
Total	$	134

Financial assets at fair value :
Cash and cash equivalents	1,875		1,875		—		—
Total	$	1,875	$	1,875	$	—	$	—

Financial liabilities carried at historical proceeds :
Current portion of long-term debt	$	432
Long-term debt, net of current portion	145,351
Total	$	145,783

~~Excluding~~The ~~the~~following ~~impact~~table ofpresents ~~permanent differences related to incentive stock options, amortization, meals and other,~~ the Company’s ~~effective~~financial ~~tax~~assets ~~rate was 44.9%~~ and ~~34.0%~~liabilities ~~for~~measured the three months ended December 31, 2010 and 2009, respectively, and 42.7% and 24.5% for the six months ended December 31, 2010 and 2009, respectively. The increase in the effective tax rate in the three months and six months ended December 31, 2010, as compared to the same periods in the prior year was attributable to higher income subject to U.S. Federal income tax, which carries a higher tax rate than income subject to Canadian income taxes, and the recognition of ~~an additional tax expense during the quarter ended December 31, 2010, resulting from the completion of the Company’s tax returns for the year ended~~ June 30, 2010. Excluding the impact of this additional tax expense and permanent differences, the Company’s effective tax rate was 34.5% and 34.0% for the three months ended December 31, 2010 and 2009, respectively, and 31.0% and 24.5% for the six months ended December 31, 2010 and 2009, respectively.:

At December 31, 2010, there were no material unrecognized tax benefits. In addition, there were no accruals for the payment of interest and penalties related to income tax liabilities at December 31, 2010. The Company recognizes potential interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2010, the Company has open tax years for Federal purposes back to June 2007. For state purposes, the open years typically date back to June 2007, although some states remain open back to June 2006.

	June 30,		Fair Value
	2010		Level 1		Level 2		Level 3
Financial assets at cost :
Current portion of notes receivable	$	189
Notes receivable, net of current portion and discount	77
Total	$	266

Financial assets at fair value :
Cash and cash equivalents	$	2,243	$	2,243	$	—	$	—
Total	$	2,243	$	2,243	$	—	$	—

Financial liabilities carried at historical proceeds :
Current portion of long-term debt	$	129,339
Long-term debt, net of current portion	—
Total	$	129,339

(1210) Preferred ~~Commitments and contingencies~~stock

~~The~~As ~~Company~~of isMarch 31, ~~involved~~2011, inthe ~~various~~Company ~~matters~~had one class of ~~litigation~~undesignated ~~arising~~preferred instock ~~the~~authorized ~~normal~~with ~~course~~no ofshares ~~business~~issued or outstanding. ~~Although~~ The Board of Directors of the ~~ultimate~~Company ~~liability~~may ~~from~~designate ~~existing~~and issue preferred stock in one or ~~potential~~more ~~claims~~series. ~~cannot~~The beBoard ~~ascertained,~~of ~~management~~Directors ~~does~~can ~~not~~fix ~~anticipate~~the ~~that~~rights, ~~any~~preferences ~~related~~and ~~outcomes~~privileges ~~would~~of ~~have~~the ashares ~~materially~~of ~~adverse~~each ~~effect~~series onand ~~the~~any ~~Company’s~~of ~~financial~~its ~~position~~qualifications, ~~operating~~limitations ~~results~~ or ~~cash flows~~restrictions.

~~(13) Geographic locations~~11

~~The~~Table ~~Company operates in a single business segment that includes the distribution~~ of ~~products and delivery of consultative services within the animal health industry. The following table presents the Company’s net sales and long-lived assets in different geographic locations:~~Contents

	Three Months Ended December 31,						Six Months Ended December 31,
	2010			2009			2010			2009
Net sales:
United States		$	178,645		$	153,851		$	338,586		$	301,666
Canada			19,464			16,532			35,862			29,879
Other foreign countries			111			104			247			271
Total		$	198,220		$	170,487		$	374,695		$	331,816
Long-lived assets:
United States								$	127,804		$	131,443
Canada									13,550			12,105
Other foreign countries									—			—
Total								$	141,354		$	143,548

(11) Related-party transactions

12The Company has property lease agreements with certain employees. The Company incurred related rent expense of $9 and $9 for the three months ended March 31, 2011 and 2010, respectively, and $27 and $194 for the nine months ended March 31, 2011 and 2010, respectively. There are no future obligations outstanding at March 31, 2011, with respect to such leases.

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~ (~~Dollars~~12) inIncome ~~thousands, except share and per share data)~~taxes

~~Forward~~Excluding ~~Looking~~the ~~Statements~~impact of permanent differences related to incentive stock options, amortization, meals and other, the Company’s effective tax rate was a benefit of 36.4% for the three months ended March 31, 2011, and an expense of 14.6% for the three months ended March 31, 2010. The change in the quarterly effective tax rate was attributable to an increased proportion of pre-tax loss from the U.S. that is taxed at a higher rate than Canadian pre-tax income. Excluding the impact of permanent differences related to incentive stock options, amortization, meals and other, the Company’s effective tax rate was an expense of 31.6% and 22.0% for the nine months ended March 31, 2011, and 2010, respectively. The increase in the year-to-date effective tax rate was attributable to the recognition of an additional tax expense during the quarter ended December 31, 2010, resulting from the completion of the Company’s tax returns for the year ended June 30, 2010. Excluding the impact of this additional tax expense and permanent differences, the Company’s effective tax rate was 21.6% and 22.0% for the nine months ended March 31, 2011 and 2010, respectively.

~~This~~At ~~Quarterly Report on Form~~March ~~10-Q (Form 10-Q) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933~~31, ~~as amended~~2011, ~~and~~there ~~Section 21E~~were ofno ~~the~~material ~~Securities~~unrecognized ~~Exchange~~tax ~~Act of 1934, as amended~~benefits. In ~~particular~~addition, ~~statements~~there ~~contained~~were inno ~~the~~accruals ~~Form 10-Q,~~for ~~including but not limited to, statements regarding~~ the ~~Company’s~~payment ~~future results~~ of ~~operations~~interest and ~~financial~~penalties ~~position,~~related ~~business~~to ~~strategy~~income ~~and~~tax ~~plan~~liabilities ~~prospects,~~at ~~projected revenue or costs and objectives of management for future operations~~March 31, ~~are forward-looking statements~~2011. ~~These~~The ~~statements relate to the~~ Company’s ~~future~~recognizes plans, objectives, expectations and intentions and may be identified by words such as “may,” “will,” “should,” “expects,” “plans,” “anticipate,” “intends,” “target,” “projects,” “contemplates,” “believe,” “estimates,” “predicts,” “potential,” ~~and~~interest ~~“continue,” or the negative of these terms or other similar words. These statements are only predictions. We have based these forward looking statements largely on our current expectations~~ and ~~projections~~penalties ~~about~~related ~~future~~to ~~events~~unrecognized ~~and~~tax ~~financial~~benefits ~~trends~~in ~~that~~income wetax ~~believe may affect our business, results of operations and financial condition~~expense. ~~The~~As ~~outcome~~ of ~~the events described in these forward looking statements is subject to risks~~March 31, ~~uncertainties and other factors described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations~~2011,~~” elsewhere~~ inthe ~~this~~Company ~~Quarterly~~has ~~Report~~open ontax ~~Form 10-Q~~years ~~and in our Annual Report on Form 10-K~~ for ~~the~~Federal ~~year~~purposes ~~ended~~back to June ~~30, 2010~~2008. ~~Accordingly,~~For ~~you~~state should not rely upon forward looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward looking statements will be achieved or occurpurposes, ~~and actual results could differ materially from those projected in~~ the ~~forward~~open ~~looking~~years ~~statements.~~typically ~~The forward looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the~~ date onback ~~which the statements are made. We undertake no obligation~~ to ~~update~~June 2008, ~~any~~although ~~forward~~some ~~looking~~states ~~statement~~remain toopen ~~reflect~~back ~~events or circumstances after the date on which the statement is made or~~ to ~~reflect the occurrence of unanticipated events~~June 2007.

~~Overview~~(13) Commitments and contingencies

The Company, ~~through~~is ~~its~~involved ~~operating~~in ~~subsidiaries,~~various ~~sells~~matters ~~more~~of ~~than~~litigation ~~40,000~~arising ~~products sourced from over 1,500 manufacturers to over 71,000 customers, as well as provides consultative services to customers~~ in the ~~highly~~normal ~~fragmented~~course ~~animal~~of ~~health products industry~~business. Although ~~Products~~ the ~~Company~~ultimate ~~distributes~~liability ~~include~~from ~~pharmaceuticals,~~existing ~~vaccines,~~or ~~parasiticides,~~potential ~~diagnostics,~~claims ~~capital~~cannot ~~equipment,~~be ~~sanitizers~~ascertained, ~~devices,~~management ~~supplies,~~does ~~pet~~not ~~foods~~anticipate ~~and~~that ~~dairy~~any ~~lagoon~~related ~~treatment~~outcomes ~~systems.~~would ~~The~~have ~~Company’s~~a ~~principal~~materially ~~customers~~adverse ~~are~~effect ~~veterinarians,~~on ~~production~~the ~~animal operators and animal health product retailers. The~~ Company’s ~~strategy~~financial ~~is to become the leading worldwide provider of animal health products and services in the production animal and companion animal health products markets through (i) organic growth~~position, ~~(ii) expansion~~operating ofresults ~~its~~or ~~sales~~cash ~~of proprietary products, (iii) improved operational efficiencies, and (iv) select acquisitions~~flows.

~~Key~~(14) Geographic ~~factors and trends that have affected and the Company believes will continue to affect its operating results include:~~locations

·The ~~Fluctuations~~Company operates in ~~commodity~~a ~~prices;~~single business segment that includes the distribution of products and delivery of consultative services within the animal health industry. The following table presents the Company’s net sales and long-lived assets in different geographic locations:

· Overall growth in the dairy industry;

	Three Months Ended March 31,				Nine Months Ended March 31,
	2011		2010		2011		2010
Net sales:
United States	$	159,668	$	146,037	$	498,254	$	447,703
Canada	21,320		18,985		57,182		48,864
Other foreign countries	61		104		308		375
Total	$	181,049	$	165,126	$	555,744	$	496,942
Long-lived assets:
United States					$	126,230	$	130,058
Canada					13,440		11,969
Other foreign countries					—		—
Total					$	139,670	$	142,027

~~· Growth in the beef industry;~~12

·Table ~~Consolidation~~of ~~by the Company's customers in the dairy industry;~~Contents

·Item ~~Increased~~2. ~~focus~~Management’s onDiscussion ~~companion~~and ~~animal~~Analysis ~~customers;~~of Financial Condition and Results of Operations (Dollars in thousands, except share and per share data)

·Forward ~~Changes~~Looking ~~in customer preferences.~~Statements

~~The~~This ~~Company~~Quarterly ~~generates~~Report ~~revenue~~on ~~from~~Form 10-Q ~~customers~~(Form 10-Q) incontains ~~three~~“forward-looking ~~ways.~~statements” ~~Approximately~~within ~~98%~~the meaning of Section 27A of the ~~Company’s~~Securities ~~revenue~~Act isof ~~generated~~1933, ~~through~~as ~~“buy/sell”~~amended, ~~transactions.~~and ~~The~~Section 21E ~~remainder~~of ~~comes~~the ~~from~~Securities ~~consignment~~Exchange ~~and~~Act ~~agency~~of ~~transactions~~1934, as amended. In particular, statements contained in the ~~“buy/sell”~~Form 10-Q, ~~transactions~~including but not limited to, statements regarding the Company’s ~~takes~~future ~~title~~results toof ~~the~~operations ~~inventory~~and ~~from~~financial ~~its~~position, ~~manufacturers.~~business ~~The~~strategy ~~Company~~and ~~sells~~plan ~~products~~prospects, toprojected ~~customers~~revenue or costs and ~~invoices~~objectives ~~them.~~of ~~“Buy/sell”~~management ~~transactions~~for future operations, are ~~advantageous~~forward-looking statements. These statements relate to the Company’s ~~over~~future ~~other~~plans, ~~sales~~objectives, ~~methods~~expectations ~~because~~and ~~the~~intentions ~~Company~~and ~~takes~~may ~~title~~be toidentified ~~the~~by ~~inventory~~words such as “may,” “will,” “should,” “expects,” “plans,” “anticipate,” “intends,” “target,” “projects,” “contemplates,” “believe,” “estimates,” “predicts,” “potential,” and is“continue,” ~~able~~or tothe ~~promote~~negative of these ~~products~~terms or other similar words. These statements are only predictions. We have based these forward looking statements largely on ~~behalf~~our ofcurrent ~~manufacturers~~expectations and ~~effectively~~projections ~~manage~~about ~~the~~future ~~pricing~~events and ~~distribution~~financial trends that we believe may affect our business, results of ~~these~~operations ~~products~~and financial condition. ~~For~~The ~~consignment~~outcome ~~sales,~~of the ~~Company~~events ~~does~~described ~~not~~in ~~take~~these ~~title~~forward tolooking ~~the~~statements ~~product~~is subject to risks, ~~but~~uncertainties itand ~~does~~other ~~stock~~factors described in “Management’s Discussion and ~~ship~~Analysis ~~product~~of toFinancial Condition and ~~invoice~~Results of Operations,” elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the ~~customer.~~year ~~For~~ended ~~agency~~June 30, ~~sales~~2010. Accordingly, ~~the~~you ~~Company~~should ~~transmits~~not ~~orders~~rely ~~from~~upon ~~its~~forward ~~customers~~looking tostatements ~~its~~as ~~manufacturers~~predictions of future events. ~~The~~We ~~manufacturer~~cannot ~~ships~~assure you that the ~~product~~events ~~directly~~and tocircumstances reflected in the ~~Company’s~~forward ~~customers~~looking ~~and~~statements ~~compensates~~will ~~the~~be ~~Company~~achieved ~~with~~or aoccur, ~~commission~~and ~~payment~~actual ~~for~~results ~~handling~~could ~~the~~differ ~~order~~materially from ~~the~~those ~~customer~~projected ~~and~~in ~~providing~~the ~~customer~~forward ~~service~~looking statements. ~~Manufacturers~~The ~~may~~forward ~~occasionally~~looking ~~switch~~statements ~~between~~made in this Quarterly Report on Form 10-Q relate only to events as of the ~~“buy/sell”~~date ~~and~~on ~~agency~~which ~~methods~~the ~~for~~statements ~~particular~~are ~~products~~made. ~~Currently~~We ~~and~~undertake ~~for~~no ~~the~~obligation ~~past~~to ~~three~~update ~~fiscal~~any ~~years,~~forward ~~only~~looking ~~one~~statement ~~product~~to ~~with~~reflect ~~material~~events ~~sales~~or ~~has~~circumstances ~~been~~after ~~treated~~the asdate aon ~~consignment~~which ~~sale~~the statement is made or to reflect the occurrence of unanticipated events.

~~For more information on the Company’s business, see the Company’s Annual Report on Form 10-K.~~Overview

13The Company, through its operating subsidiaries, sells more than 40,000 products sourced from over 1,500 manufacturers to over 71,000 customers, as well as provides consultative services to customers in the highly fragmented animal health products industry. Products the Company distributes include pharmaceuticals, vaccines, parasiticides, diagnostics, capital equipment, sanitizers, devices, supplies, pet foods and dairy lagoon treatment systems. The Company’s principal customers are veterinarians, production animal operators and animal health product retailers. The Company’s strategy is to become the leading worldwide provider of animal health products and services in the production animal and companion animal health products markets through (i) organic growth, (ii) expansion of its sales of proprietary products, (iii) improved operational efficiencies, and (iv) select acquisitions.

~~Table~~Key offactors ~~Contents~~and trends that have affected and the Company believes will continue to affect its operating results include:

~~Results~~· Fluctuations ofin ~~Operations~~commodity prices;

~~The~~· Overall ~~following~~growth ~~table summarizes the historical results of operations for the three and six months ended December 31, 2010 and 2009,~~ in ~~dollars and as a percentage of net sales. The Company’s gross profit may not be comparable to other entities, since some entities include all of~~ the ~~costs~~dairy related to their distribution network in cost of goods sold and others, like us, report non-direct costs instead in selling, general, and administrative expenses, and salaries, wages, commissions, and related benefits.industry;

~~Summary~~· Growth ~~consolidated~~in ~~results~~the ofbeef ~~operations table~~industry;

	Three Months Ended December 31,						Six Months Ended December 31,
(in thousands, except number of representatives)	2010			2009			2010			2009
Net sales	$	198,220		$	170,487		$	374,695		$	331,816
Direct cost of products sold (excludes depreciation and amortization)		165,745			141,071			314,830			276,454
Gross profit		32,475			29,416			59,865			55,362
Selling, general, and administrative expenses (includes salary, wages, commission, and related benefits)		24,793			23,540			49,595			46,328
Depreciation and amortization		2,006			2,022			3,943			4,000
Operating income		5,676			3,854			6,327			5,034
Other income (expense):
Interest expense		(2,176	)		(2,068	)		(3,757	)		(4,579	)
Other income		167			166			308			300
Income before income taxes		3,667			1,952			2,878			755
Income tax expense		(1,809	)		(734	)		(1,535	)		(284	)
Net income	$	1,858		$	1,218		$	1,343		$	471
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Direct cost of products sold (excludes depreciation and amortization)		83.6	%		82.7	%		84.0	%		83.3	%
Gross profit		16.4	%		17.3	%		16.0	%		16.7	%
Selling, general, and administrative expenses (includes salary, wages, commission, and related benefits)		12.5	%		13.8	%		13.2	%		14.0	%
Depreciation and amortization		1.1	%		1.2	%		1.1	%		1.2	%
Operating income		2.8	%		2.3	%		1.7	%		1.5	%
Other income (expense)
Interest expense		(1.1	)%		(1.3	)%		(1.0	)%		(1.4	)%
Other income		0.1	%		0.1	%		0.1	%		0.1	%
Income before income taxes		1.8	%		1.1	%		0.8	%		0.2	%
Income tax expense		(0.9	)%		(0.4	)%		(0.4	)%		(0.1	)%
Net income		0.9	%		0.7	%		0.4	%		0.1	%
Other data:
Field sales representatives		232			216			232			216

· Consolidation by the Company’s customers in the dairy industry;

14· Increased focus on companion animal customers; and

~~Three~~· Changes ~~months~~in ~~ended~~customer ~~December 31, 2010 compared to three months ended December 31, 2009~~preferences.

~~Net~~The ~~sales. Net~~Company ~~sales~~generates ~~increased~~revenue ~~$27,733,~~from orcustomers 16in three ways.~~3%,~~ toApproximately ~~$198,220~~98% ~~for~~of the ~~three~~Company’s ~~months~~revenue ~~ended~~is ~~December 31,~~generated ~~2010,~~through “buy/sell” transactions. The remainder comes from ~~$170,487~~consignment ~~for~~and ~~the~~agency ~~three~~transactions. ~~months~~In ~~ended~~the ~~December 31~~“buy/sell” transactions, ~~2009~~the Company takes title to the inventory from its manufacturers. The ~~increase~~Company insells ~~net~~products to customers and invoices them. “Buy/sell” transactions are advantageous to the Company over other sales ~~was~~methods ~~primarily~~because ~~attributable~~the Company takes title to ~~improving~~the ~~economics~~inventory inand ~~production~~is ~~animal~~able ~~markets~~to aspromote ~~well~~these asproducts ~~continued~~on ~~growth~~behalf inof ~~veterinary~~manufacturers ~~business.~~and ~~The~~effectively ~~number~~manage the pricing and distribution of ~~field~~these products. For consignment sales, ~~representatives~~the ~~increased~~Company todoes ~~232~~not astake oftitle ~~December 31~~to the product, ~~2010~~but it does stock and ship product to and invoice the customer. For agency sales, the Company transmits orders from ~~216~~its ascustomers ofto ~~December~~its ~~31,~~manufacturers. ~~2009,~~The ~~primarily~~manufacturer asships the product directly to the Company’s customers and compensates the Company with a ~~result~~commission ofpayment for handling the ~~addition~~order offrom 12the ~~sales~~customer ~~representatives~~and ~~serving~~providing ~~new~~customer ~~territories~~service. inManufacturers may occasionally switch between the ~~veterinary~~“buy/sell” ~~market~~and agency methods for particular products. Currently and for the past three fiscal years, only one product with material sales has been treated as a consignment sale.

~~Gross~~For ~~profit. Gross~~more ~~profit~~information ~~increased~~on ~~$3,059, or 10.4%, to $32,475 for~~ the ~~three~~Company’s ~~months ended December 31~~business, ~~2010,~~see ~~from $29,416 for~~ the ~~three~~Company’s ~~months~~Annual ~~ended~~Report ~~December 31,~~on ~~2009. Gross profit as a percentage of sales was 16.4% for the three months ended December~~Form ~~31, 2010, compared to 17~~10-K.3% for the three months ended December 31, 2009. The increase in gross profit resulted from higher sales volume, partially offset by an unfavorable shift in mix to lower margin products and a special promotional manufacturer rebate earned in the prior year totaling $477.

Selling, general, and administrative expenses. Selling, general, and administrative expenses increased $1,253, or 5.3%, to $24,793 for the three months ended December 31, 2010, from $23,540 for the three months ended December 31, 2009. The increase was primarily the result of an increase in variable selling and distribution expenses driven by higher sales volume. The fixed nature of certain expenses such as salaries, rent, and computer related costs drove a decrease in selling, general and administrative expenses as a percent of sales from 13~~.8% for the three months ended December 31, 2009, to 12.5% for the three months ended December 31, 2010.~~

~~Depreciation~~Table and amortization. Depreciation and amortization decreased slightly, from $2,022 for the three months ended December 31, 2009, to $2,006 for the three months ended December 31, 2010. The decrease resulted primarily from lower depreciation of ~~fixed assets driven by certain assets reaching the conclusion of their useful lives.~~Contents

~~Other~~Results expenses. Other expenses increased $107, or 5.6%, to $2,009 for the three months ended December 31, 2010, from $1,902 for the three months ended December 31, 2009. The increase in other expenses was due to an increase in interest expense of $108 to $2,176 in the three months ended December 31, 2010, as compared to $2,068 in the three months ended December 31, 2009. This increase was due to a higher interest rate on the New Term Note than in the prior year.Operations

~~Income~~The ~~tax~~following ~~expense.~~table ~~Income~~summarizes ~~tax expense increased $1,075, or 146.5%, to $1,809 for~~ the ~~three~~historical ~~months~~results ~~ended~~of ~~December 31,~~operations ~~2010, from $734~~ for the three ~~months ended December 31, 2009. Excluding the impact of permanent differences related to incentive stock options, amortization, meals~~ and ~~other,~~nine ~~the Company’s effective tax rate was 45.0% and 34.0% for the three~~ months ended ~~December~~March 31, ~~2010~~2011 and ~~2009~~2010, ~~respectively. The increase~~ in ~~the~~dollars ~~effective~~and ~~tax rate in the three months ended December 31, 2010,~~ as ~~compared~~a topercentage ~~the~~of ~~same~~net ~~period~~sales. inThe ~~the~~Company’s ~~prior~~gross ~~year~~profit ~~was~~may ~~attributable~~not tobe ~~higher~~comparable ~~income subject~~ to ~~U.S.~~other ~~Federal income tax~~entities, ~~which~~since ~~carries~~some aentities ~~higher~~include ~~tax~~all ~~rate~~of ~~than~~the ~~income~~costs ~~subject~~related to ~~Canadian~~their ~~income~~distribution ~~taxes,~~network ~~and~~in ~~the~~cost ~~recognition~~ of angoods ~~additional~~sold ~~tax~~and ~~expense~~others, ~~during~~like ~~the quarter ended December 31~~us, ~~2010,~~report ~~resulting~~non-direct ~~from~~costs ~~the~~instead ~~completion~~in ofselling, ~~the Company’s tax returns for the year ended June 30~~general, ~~2010. Excluding the impact of this additional tax expense~~ and ~~permanent~~administrative ~~differences~~expenses, ~~the Company’s effective tax rate was 34.5%~~ and ~~34.0%~~salaries, ~~for~~wages, ~~the three months ended December 31~~commissions, ~~2010~~ and ~~2009,~~related ~~respectively~~benefits.

~~Six~~Summary ~~months~~consolidated ~~ended~~results ~~December 31,~~of ~~2010~~operations ~~compared to six months ended December 31, 2009~~table

Net sales. Net sales increased $42,879, or 12.9%, to $374,695 for the six months ended December 31, 2010, from $331,816 for the six months ended December 31, 2009. The increase in net sales was primarily attributable to improving economics in production animal markets as well as continued growth in veterinary business. The number of field sales representatives increased to 232 as of December 31, 2010, from 216 as of December 31, 2009, primarily as a result of the addition of 12 sales representatives serving new territories in the veterinary market.

	Three Months Ended March 31,						Nine Months Ended March 31,
(in thousands, except number of representatives)	2011			2010			2011			2010
Net sales	$	181,049		$	165,126		$	555,744		$	496,942
Direct cost of products sold (excludes depreciation and amortization)	149,985			137,773			464,815			414,227

Gross profit	31,064			27,353			90,929			82,715

Selling, general, and administrative expenses (includes salary, wages, commission, and related benefits)	26,359			22,588			75,954			68,916
Depreciation and amortization	2,131			2,005			6,074			6,005

Operating income	2,574			2,760			8,901			7,794
Other income (expense):
Interest expense	(2,523		)	(2,714		)	(6,280		)	(7,293		)
Other income	199			133			507			433

Income before income taxes	250			179			3,128			934
Income tax benefit (expense)	212			(59		)	(1,323		)	(343		)

Net income	$	462		$	120		$	1,805		$	591

Net sales	100.0		%	100.0		%	100.0		%	100.0		%
Direct cost of products sold (excludes depreciation and amortization)	82.8		%	83.4		%	83.6		%	83.4		%

Gross profit	17.2		%	16.6		%	16.4		%	16.6		%

Selling, general, and administrative expenses (includes salary, wages, commission, and related benefits)	14.6		%	13.7		%	13.7		%	13.8		%
Depreciation and amortization	1.2		%	1.2		%	1.1		%	1.2		%

Operating income	1.4		%	1.7		%	1.6		%	1.6		%
Other income (expense)
Interest expense	(1.3		)%	(1.7		)%	(1.1		)%	(1.5		)%
Other income	0.1		%	0.1		%	0.1		%	0.1		%

Income before income taxes	0.2		%	0.1		%	0.6		%	0.2		%
Income tax benefit (expense)	0.1		%	0.0		%	(0.3		)%	(0.1		)%

Net income	0.3		%	0.1		%	0.3		%	0.1		%

Other data:
Field sales representatives	225			217			225			217

Gross profit. Gross profit increased $4,503, or 8.1%, to $59,865 for the six months ended December 31, 2010, from $55,362 for the six months ended December 31, 2009. Gross profit as a percentage of sales was 16.0% for the six months ended December 31, 2010, compared to 16.7% for the six months ended December 31, 2009. The increase in gross profit resulted from higher sales volume, partially offset by an unfavorable shift in mix to lower margin products and a special promotional manufacturer rebate earned in the prior year totaling $477.14

~~Selling,~~Table general, and administrative expenses. Selling, general, and administrative expenses increased $3,267, or 7.1%, to $49,595 for the six months ended December 31, 2010, from $46,328 for the six months ended December 31, 2009. The increase was primarily the result of an increase in variable selling and distribution expenses driven by higher sales volume. The fixed nature of certain expenses such as salaries, rent, and computer related costs drove a decrease in selling, general and administrative expenses as a percent of sales from 14.0% for the six months ended December 31, 2009, to 13.2% for the six months ended December 31, 2010.Contents

~~Depreciation~~Three ~~and amortization. Depreciation and amortization decreased slightly, from $4,000 for the six~~ months ended ~~December~~March 31, ~~2009,~~2011 compared to ~~$3,943~~three ~~for the six~~ months ended ~~December~~March 31, 2010~~. The decrease resulted primarily from lower depreciation of fixed assets driven by certain assets reaching the conclusion of their useful lives.~~

Net sales. Net sales increased $15,923, or 9.6%, to $181,049 for the three months ended March 31, 2011, from $165,126 for the three months ended March 31, 2010. The increase in net sales was primarily attributable to improving economics in production animal markets as well as continued growth in veterinary business. The improved economics in production animal markets were driven by higher live cattle and milk prices, partially offset by increased commodity costs. Growth in the veterinary business was attributable to the addition of sales representatives serving new territories in the veterinary market and the addition of new customers from a competitor who filed for bankruptcy. Sales attributable to the addition of new customers totaled $21,128 with sales attributable to existing customers declining by $5,205. The number of field sales representatives increased to 225 as of March 31, 2011, from 217 as of March 31, 2010, primarily as a result of the addition of sales representatives serving new territories in the veterinary market.

~~Other~~Gross ~~expenses~~profit. Gross ~~Other~~profit ~~expenses~~increased ~~decreased~~ $~~830~~3,711, or 1913.46%, to $331,~~449~~064 for the ~~six~~three months ended ~~December~~March 31, ~~2010~~2011, from $427,~~279~~353 for the ~~six~~three months ended ~~December~~March 31, ~~2009~~2010. ~~The~~Gross ~~decrease~~profit inas ~~other expenses was primarily due to~~ a ~~decrease~~percentage ~~in interest expense~~ of ~~$822~~sales ~~from~~was ~~$4,579~~17.2% infor the ~~six~~three months ended ~~December~~ March 31, ~~2009~~2011, compared to ~~$3,757~~16.6% infor the ~~six~~three months ended ~~December~~March 31, 2010. ~~This~~The ~~decrease~~increase ~~was~~in ~~due~~gross toprofit ~~lower~~resulted ~~interest~~from ~~rates~~higher ~~than~~sales involume ~~the~~combined ~~prior~~with ~~year as~~ a ~~result~~favorable ofshift ~~the~~in ~~unwinding~~mix ofto ~~the interest rate swap agreements as of September 30, 2009, partially offset by a~~ higher ~~interest~~margin ~~rate on the New Term Note than in the prior year~~products.

~~Income~~Selling, ~~tax~~general, ~~expense~~and administrative expenses. ~~Income~~Selling, ~~tax~~general, ~~expense~~and administrative expenses increased $13,~~251~~771, or ~~440~~16.57%, to $126,~~535~~359 for the ~~six~~three months ended ~~December~~March 31, ~~2010~~2011, from $~~284~~22,588 for the ~~six~~three months ended ~~December~~March 31, ~~2009~~2010. ~~Excluding~~The ~~the~~increase ~~impact~~was ofprimarily ~~permanent~~the ~~differences~~result ~~related~~of toan ~~incentive~~increase ~~stock~~in ~~options,~~variable ~~amortization,~~selling ~~meals~~ and ~~other,~~distribution ~~the~~expenses ~~Company’s~~driven ~~effective~~by ~~tax~~higher ~~rate~~sales ~~was~~volume ~~42.7%~~combined ~~and~~with ~~24.5%~~$1,012 ~~for~~in ~~the~~costs ~~six~~related ~~months~~to ~~ended~~the ~~December~~proposed ~~31,~~merger ~~2010~~with ~~and 2009~~Lextron, ~~respectively~~ Inc. Excluding ~~The increase in~~ the ~~effective~~costs ~~tax~~related ~~rate~~to in the ~~six~~proposed ~~months~~merger ~~ended~~with ~~December~~Lextron, 31Inc., ~~2010~~selling, asgeneral ~~compared~~and toadministrative ~~the~~expenses ~~same~~as ~~periods~~a inpercent ~~the~~of ~~prior~~sales ~~year~~increased ~~was~~slightly ~~attributable~~from ~~to higher income subject to U~~13.S.7% ~~Federal~~for ~~income tax, which carries a higher tax rate than income subject to Canadian income taxes, and~~ the ~~recognition~~three ofmonths ~~an additional tax expense during the quarter~~ ended ~~December~~ March 31, 2010, ~~resulting~~to ~~from~~14.0% ~~the completion of the Company’s tax returns~~ for the ~~year~~three months ended ~~June 30~~March 31, ~~2010. Excluding the impact of this additional tax expense and permanent differences~~2011, ~~the~~primarily ~~Company’s~~due ~~effective~~to ~~tax~~higher ~~rate~~compensation ~~was~~to ~~31.0%~~sales ~~and~~representatives ~~24.5%~~as ~~for~~a ~~the~~result ~~six~~of ~~months~~higher ~~ended~~gross ~~December~~profit ~~31,~~as ~~2010~~a ~~and~~percentage ~~2009,~~of ~~respectively~~sales.

~~Liquidity~~Depreciation and ~~Capital~~amortization. ~~Resources~~Depreciation and amortization increased $126, or 6.3%, to $2,131 for the three months ended March 31, 2011, from $2,005 for the three months ended March 31, 2010. The increase resulted primarily from depreciation related to current year capital expenditures.

~~The~~Other ~~Company’s~~expenses. ~~primary~~Other ~~sources~~expenses ofdecreased ~~liquidity~~$256, ~~are~~or ~~cash~~10.0%, ~~flows~~to ~~generated~~$2,324 ~~from~~for ~~operations~~the ~~and~~three ~~borrowings~~months ~~under~~ended March 31, 2011, from $2,581 for the ~~Company’s~~three ~~revolving~~months ~~credit~~ended ~~facility~~March 31, 2010. ~~Funds~~The ~~are~~decrease ~~expended~~in other expenses was due to ~~provide~~a ~~working~~decrease ~~capital~~in ~~that~~interest ~~enables~~expense ~~the~~of ~~Company~~$191 to ~~maintain~~$2,324 ~~adequate~~in ~~inventory~~the ~~levels~~three months ended March 31, 2011, as compared to ~~promptly~~$2,581 ~~fulfill~~in ~~customer~~the ~~needs~~three ~~and~~months ~~expand~~ended ~~operations~~March 31, 2010. ~~The~~This ~~Company~~decrease ~~expects~~was ~~its~~due ~~capital~~to ~~resources~~non-recurring, tonon-cash becharges ~~sufficient~~in tothe ~~meet~~prior ~~anticipated~~year ~~cash~~of ~~needs~~$621for ~~for~~the atunamortized ~~least~~cost associated with the ~~next~~unwinding ~~twelve~~of ~~months,~~swap agreements and it$428 ~~expects~~for ~~cash~~foreign ~~flows~~currency ~~from~~exchange ~~operations~~due to bethe ~~sufficient~~early toretirement ~~reduce~~of ~~outstanding~~debt ~~borrowings~~in ~~under~~Canada, both partially offset by a higher interest rate on the ~~Company’s~~New ~~revolving~~Term ~~credit~~Note ~~agreement~~than in the prior year.

~~Operating~~Income ~~activities~~tax expense. ~~For~~ ~~the~~Income ~~six~~tax ~~months~~expense ~~ended~~decreased ~~December 31, 2010, net cash used in operating activities was~~ $~~13,923,~~271 ~~and was attributable~~ to ana ~~increase~~tax inbenefit ~~working capital~~ of $~~20,233~~212 ~~and~~for athe ~~change~~three inmonths ~~deferred~~ended ~~income taxes of $626~~March 31, ~~both partially offset by $1~~2011,~~343~~ offrom ~~net~~a ~~income and~~ $~~5,593~~59 oftax ~~non-cash~~expense ~~costs. The~~for ~~change~~the inthree ~~working~~months ~~capital~~ended ~~included an increase in accounts receivable of $16~~March 31,~~644,~~ an2010. ~~increase~~Excluding inthe ~~inventories~~impact of ~~$11,268,~~permanent ~~and~~differences anrelated ~~increase~~to inincentive ~~prepaid~~stock ~~expenses of $255~~options, ~~all partially offset by an increase in accounts payable of $5~~amortization,~~364,~~ anmeals ~~increase in accrued liabilities~~ and other ~~of $1~~,~~915,~~ ~~and~~the aCompany’s ~~net~~effective ~~increase~~tax inrate ~~income~~was ~~tax~~a ~~payables~~benefit of ~~$655~~36.4% ~~The~~for ~~increase~~the inthree ~~accounts~~months ~~receivable~~ended ~~resulted~~March 31, ~~from~~2011, ~~strong~~and ~~sales~~an atexpense ~~the close~~ of ~~the~~14.6% ~~quarter~~for ~~that subsequently converted to cash early in~~ the ~~third~~three ~~quarter~~months ofended ~~fiscal~~March 31, ~~2011~~2010. The ~~increase~~change in ~~inventories was due to a rise in inventory purchases in support of~~ the ~~anticipated~~quarterly ~~higher~~effective ~~sales~~tax ~~volumes~~rate ~~than the Company~~ was ~~experiencing~~attributable ~~at the close of fiscal 2010. The increase in prepaid expenses was due~~ to ~~payments~~an ~~for~~increased ~~general~~proportion ~~insurance~~of ~~premiums~~pre-tax ~~and~~loss ~~software~~from ~~licenses. The increase in inventories drove~~ the ~~increase in accounts payable~~U. ~~The~~S. ~~increase~~that inis ~~accrued~~taxed ~~liabilities~~at ~~and other resulted primarily from~~ a ~~$1,491~~higher ~~increase~~rate inthan ~~customer~~Canadian ~~deposits. The net increase in income~~ pre-tax ~~payables results from increased~~ income ~~tax liabilities driven by increased profitability~~. ~~The non-cash costs included $3,876 of depreciation and amortization, $876 of bad debt expense, $429 of debt issue cost amortization, and $436 of stock-based compensation expenses.~~

~~For~~Nine ~~the six~~ months ended ~~December~~ March 31, ~~2009,~~2011 ~~net~~compared ~~cash used in operating activities was $7,377, and was attributable~~ to anNine ~~increase~~months inended ~~working capital of $13,642, partially offset by $471 in net income,~~March $531,~~573~~ of non-cash costs, and a $221 change in deferred income taxes. The non-cash costs included $4,000 of depreciation and amortization, $520 of debt issue cost amortization, $620 of amortization of loss on settlement of interest rate swap agreements, $203 of bad debt expense, and $245 of stock-based compensation expenses. The change in working capital included an increase in accounts receivable of $8,792 and an increase in inventory of $12,139, both partially offset by an increase in accounts payable of $7,470. The increase in accounts receivable resulted from strong sales at the close of the quarter that converted to cash early in the third quarter of fiscal 2010. The increase in inventories was due to inventory purchases near the close of the quarter in advance of manufacturer price increases. This increase in inventories drove the increase in accounts payable.

~~Investing~~Net ~~activities~~sales. ~~For~~ Net sales increased $58,802, or 11.8%, to $555,744 for the ~~six~~nine months ended ~~December~~March 31, 2011, from $496,942 for the nine months ended March 31, 2010,. The increase in net ~~cash~~sales ~~used~~was primarily attributable to improving economics in ~~investing~~production ~~activities~~animal ~~was~~markets ~~$1,455~~as well as continued growth in veterinary business. The improved economics in production animal markets were driven by higher live cattle and milk prices, partially offset by increased commodity costs. Growth in the veterinary business was ~~primarily~~attributable to the addition of sales representatives serving new territories in the veterinary market and the addition of new customers from a competitor who filed for bankruptcy. Sales attributable to the addition of new customers totaled $143,~~319~~537 with sales attributable to existing customers increasing by $15,265. The number of ~~purchases~~field sales representatives increased to 225 as of ~~property~~March 31, ~~plant~~2011, ~~and~~from ~~equipment~~217 ~~and~~as ~~$175~~of March 31, 2010, primarily as a result of ~~purchases~~the addition of ~~customer~~sales ~~relationships~~representatives ~~and~~serving ~~trade~~new ~~names~~territories ~~from~~in athe ~~former~~veterinary ~~competitor~~market.

~~For~~Gross profit. Gross profit increased $8,214, or 9.9%, to $90,929 for the ~~six~~nine months ended ~~December~~ March 31, ~~2009~~2011, ~~net~~from ~~cash~~$82,715 ~~used~~for inthe ~~investing~~nine ~~activities~~months ~~was~~ended $1March 31,~~271,~~ ~~and~~2010. Gross profit as a percentage of sales was ~~primarily~~16.4% ~~attributable~~for tothe $1nine months ended March 31,~~229~~ of2011, ~~purchases~~compared ofto ~~property~~16.6% for the nine months ended March 31, ~~plant~~2010. The increase in gross profit resulted from higher sales volume, partially offset by an unfavorable shift in mix to lower margin products during the first six months of fiscal 2011 and ~~equipment~~a special promotional manufacturer rebate earned in the prior year totaling $477.

~~Financing~~Selling, ~~activities~~general, and administrative expenses. ~~For~~ Selling, general, and administrative expenses increased $7,038, or 10.2%, to $75,954 for the ~~six~~nine months ended ~~December~~March 31, 2011, from $68,916 for the nine months ended March 31, 2010,. ~~net~~The ~~cash~~increase ~~provided~~was primarily the result of an increase in variable selling and distribution expenses driven by ~~financing~~higher ~~activities~~sales ~~was~~volume combined with $141,~~819,~~012 ~~and~~in ~~was~~costs ~~attributable~~related to ~~net~~the ~~borrowings~~proposed ~~from~~merger ~~revolving~~with ~~credit~~Lextron, Inc. The ~~facilities~~fixed ~~totaling~~nature ~~$14~~of certain expenses such as salaries,~~345~~ rent, and acomputer ~~favorable~~related ~~change~~costs indrove ~~overdraft~~a ~~balances~~slight ofdecrease $1in selling,~~273,~~ ~~both~~general ~~partially~~and ~~offset~~administrative byexpenses ~~debt~~as ~~issue~~a ~~costs~~percent of ~~$572~~sales ~~and~~from ~~net~~13.8% ~~payments~~for ~~related~~the nine months ended March 31, 2010, to ~~the~~13.7% ~~refinancing~~for ofthe ~~term~~nine ~~notes~~months ~~totaling~~ended ~~$227~~March 31, 2011.

~~For~~Depreciation ~~the~~and ~~six~~amortization. ~~months~~Depreciation ~~ended~~and ~~December~~amortization ~~31,~~increased ~~2009~~$69, ~~net~~or ~~cash~~1.1%, ~~provided~~from ~~by financing activities was~~ $86,~~108,~~005 ~~and~~for ~~was primarily attributable to net borrowings on~~ the ~~revolving~~nine ~~credit~~months ~~facility~~ended ~~totaling~~March 31, ~~$17~~2010,~~308,~~ ~~partially~~to ~~offset by an unfavorable change in overdraft balances of~~ $26,~~915,~~074 ~~principal~~for ~~payments~~the onnine ~~other~~months ~~debt~~ended ~~totaling $2~~March 31,~~874,~~ ~~and~~2011. ~~the~~The ~~settlement~~increase ofresulted ~~liabilities~~primarily from depreciation related to ~~terminated~~current ~~interest~~year ~~rate~~capital ~~swap agreements totaling $3,348~~expenditures.

1615

~~Capital~~Table ~~resources. Effective November 10, 2010, the Company amended and extended the maturity~~ of its revolving credit facility (Revolver) and replaced its first lien term loan (Term Note). The amended Revolver is a $130,000 facility, with an option held by us to increase the amount of the amended Revolver to $175,000. It matures on August 10, 2015. The outstanding borrowings under the amended Revolver bear interest at rates based upon the Company’s Leverage Ratio as defined in the amended Revolver with LIBOR-based rates ranging from LIBOR and CDOR Rate plus 2.25% to LIBOR and CDOR Rate plus 3.00%, and with Prime-based rates ranging from U.S. Prime and Canadian Prime Rate plus 0.00% to U.S. Prime and Canadian Prime Rate plus 0.50%. Borrowings are collateralized by a first priority interest in and lien on the Company’s accounts receivable and inventories. As of December 31, 2010, the interest rates for the Revolver ranged from 3.27% to 3.75%. Additionally, the Company is required to pay a commitment fee on the daily unused amount of the Revolver at a per annum rate of 0.50%. At December 31, 2010, the Company’s availability under the Revolver totaled $30,053, including $4,745 of cash actually received but not yet applied to the Revolver.Contents

~~The~~Other ~~new~~expenses. ~~first~~Other ~~lien~~expenses ~~term~~decreased ~~loan~~$1,087, ~~(New~~or ~~Term~~15.8%, ~~Note)~~to ~~has~~$5,773 afor ~~face~~the ~~amount~~nine ofmonths ended March 31, 2011, from $436,~~000~~860 ~~and~~for ~~matures~~the onnine ~~November~~months 10ended March 31, ~~2015~~2010. It ~~bears~~The ~~interest~~decrease atin another ~~annual~~expenses ~~rate~~was ~~equal~~primarily due to ~~14.25%~~a ~~payable~~decrease asin ~~follows:~~interest ~~(i)~~expense ~~12.25%~~of ~~per~~$1,013 ~~annum~~from in$7,293 ~~cash~~ in ~~arrears,~~the ~~and~~nine ~~(ii)~~months ~~2.00%~~ended ~~added~~March 31, ~~automatically~~2010, to ~~the~~$6,280 ~~unpaid~~in ~~principal~~the ~~amount. It~~nine ~~was~~months ~~issued~~ended ~~with~~March 31, an2011. ~~original~~This ~~issue~~decrease ~~discount~~was ofdue ~~2.00%~~to oflower ~~the~~interest ~~face~~rates ~~amount~~than ofin the ~~note. At~~prior ~~December~~year ~~31,~~as ~~2010,~~a ~~the~~result ~~remaining balance~~ of the ~~original~~unwinding ~~issue~~of ~~discount was $842, which is being amortized utilizing~~ the ~~effective~~ interest ~~method~~rate ~~over~~swap ~~the~~agreements ~~term~~as of ~~the~~September 30, ~~debt.~~2009, ~~Borrowings~~partially ~~are~~offset ~~collateralized~~ by a ~~first~~higher ~~priority~~ interest inrate ~~and lien~~ on ~~all~~the ~~real~~New ~~estate,~~Term ~~fixed~~Note ~~assets,~~than ~~and~~in ~~intellectual property of~~ the ~~Company~~prior year.

~~The~~Income ~~new~~tax ~~credit~~expense. ~~agreements~~Income ~~contain~~tax ~~certain~~expense ~~covenants~~increased ~~that~~$980 to $1,323 ~~among~~for ~~other~~the ~~things~~nine months ended March 31, ~~restrict~~2011, ~~our~~from ~~ability~~$343 tofor ~~incur~~the ~~additional~~nine ~~indebtedness~~months ended March 31, ~~make~~2010. ~~certain~~Excluding ~~payments~~the impact of permanent differences related to incentive stock options, ~~sell~~amortization, ~~assets~~meals and other, ~~enter~~the ~~into~~Company’s ~~certain~~effective ~~transactions~~tax ~~with~~rate ~~affiliates~~was ~~and~~an ~~create~~expense ~~liens~~of 31.6% ~~Moreover,~~and ~~certain~~22.0% offor ~~these~~the ~~agreements~~nine ~~require~~months usended toMarch 31, ~~maintain~~2011, ~~specified~~and ~~financial~~2010, ~~ratios~~respectively. The ~~most~~increase ~~restrictive~~in ~~covenant~~the ~~relates~~year-to-date effective tax rate was attributable to the ~~creation~~recognition orof ~~assumption~~an additional tax expense during the quarter ended December 31, 2010, resulting from the completion of ~~additional~~the ~~indebtedness~~Company’s tax returns for the year ended June 30, 2010. Excluding ~~The~~the impact of this additional tax expense and permanent differences, the Company’s effective tax rate was in21.6% ~~compliance~~and ~~with~~22.0% ~~all~~for ~~financial~~the ~~covenants~~nine atmonths ~~December~~ended March 31, 2011 and 2010, respectively.

AsLiquidity a result of this refinancing, the Company wrote-off remaining unamortized debt issue costs related to the Term Note totaling $35 during the second fiscal quarter of 2011. Debt issue costs of $2,087 resulting from this refinancing were capitalized and ~~are~~Capital being amortized over the remaining term of the Revolver utilizing the straight-line method, which approximates the effective interest method, and over the remaining term of the New Term Note utilizing the effective interest method. Resources

The Company’s ~~has~~primary ~~utilized~~sources of liquidity are cash ~~flow~~flows ~~hedge~~generated ~~accounting~~from operations and ~~used~~borrowings ~~derivative~~under ~~financial~~the ~~instruments~~Company’s toRevolver. ~~effectively~~Funds ~~convert~~are aexpended ~~portion~~to ofprovide ~~its~~working ~~variable-rate~~capital ~~debt~~that enables the Company to ~~fixed-rate~~maintain ~~debt.~~adequate Ininventory ~~order~~levels to ~~reduce~~promptly ~~cash~~fulfill ~~interest~~customer ~~expense~~needs ~~over~~and ~~the~~expand ~~last~~operations. ~~three~~The ~~quarters~~Company ofexpects ~~fiscal~~its ~~2010,~~capital ~~the~~resources ~~Company~~to ~~elected~~be sufficient to ~~terminate~~meet ~~both~~anticipated ofcash ~~its~~needs ~~interest~~for ~~rate~~at ~~swap~~least ~~agreements~~the asnext oftwelve ~~September 30~~months, ~~2009~~ and ~~paid~~it ~~the~~expects ~~respective~~cash ~~liabilities~~flows infrom ~~October~~operations ~~2009~~to be sufficient to reduce outstanding borrowings under the Company’s Revolver.

~~The~~Operating ~~Company~~activities. For ~~had~~the anine months ended March 31, 2011, net cash used in operating activities was $439,~~000~~879, ~~notional~~and ~~value~~was ~~swap~~attributable ~~transaction~~to ~~with~~an aincrease ~~financial~~in ~~institution~~working ~~effective~~capital ~~April~~of $18,354 ~~2007.~~and ~~The~~a ~~Company~~change ~~received~~in adeferred ~~floating~~income ~~rate~~taxes ~~based~~of on$1,617, ~~LIBOR~~both ~~and~~partially ~~paid~~offset aby ~~fixed~~$1,805 ~~rate~~of net income and $8,287 of ~~4.95%.~~non-cash costs. The ~~swap~~change ~~agreement~~in ~~had~~working capital included an ~~original~~increase ~~termination~~in ~~date~~accounts receivable of ~~June 28~~$16,110 ~~2010.~~and Onan ~~September~~increase ~~30,~~in ~~2009~~inventories of $19,751, ~~the~~all ~~Company~~partially ~~terminated~~offset ~~the~~by ~~swap~~an ~~agreement~~increase in accounts payable of $14,319, ~~and~~an ~~the~~increase ~~fair~~in ~~value~~accrued ofliabilities ~~this~~and ~~swap~~other ~~was~~of $2,291, and a net ~~liability~~increase in income taxes payable of $~~1,511~~805. onThe increase in accounts receivable resulted from strong sales at the close of the quarter that ~~date~~subsequently converted to cash early in the fourth quarter of fiscal 2011. The ~~Company~~increase ~~had~~in ainventories ~~$52,000~~was ~~notional~~due ~~value~~to ~~swap~~a ~~transaction~~rise ~~with~~in ainventory ~~financial~~purchases ~~institution~~in ~~effective~~anticipation ~~April~~of ~~18,~~higher ~~2007.~~spring sales volume. The ~~Company~~increase ~~received~~in ainventories ~~floating~~drove ~~rate~~the ~~based~~increase onin ~~LIBOR~~accounts payable. The increase in accrued liabilities and ~~paid~~other resulted from a ~~fixed~~$2,364 ~~rate~~increase ofin 4customer deposits.~~95%.~~ The ~~swap~~net ~~agreement~~increase ~~had~~in anincome ~~original~~taxes ~~termination~~payable ~~date~~results offrom ~~May~~increased 7,income ~~2010~~tax liabilities from increased profitability. OnThe ~~September~~non-cash ~~30,~~costs ~~2009~~included $5,963 ~~the~~of ~~Company~~depreciation ~~terminated~~and ~~the~~amortization, ~~swap agreement~~$1,138 ~~and~~of ~~the~~bad ~~fair~~debt ~~value~~expense, $653 of ~~this~~stock-based ~~swap~~compensation ~~was~~expenses, aand ~~net~~$535 ~~liability~~ of ~~$1,837~~debt onissue ~~that~~cost ~~date~~amortization.

~~Swap~~For ~~agreement~~the ~~fair~~nine ~~values~~months ~~were~~ended ~~recorded~~March 31, on2010, ~~the~~net ~~consolidated~~cash ~~balance~~used ~~sheet~~for asoperating aactivities ~~component~~was of$13,621, ~~current~~and ~~portion~~was attributable to $591 in net income, $8,789 of ~~long~~non-~~term~~cash ~~debt~~costs, and a $1,599 change in deferred income taxes, all offset by an increase in working capital of $24,600. The ~~fair~~non-cash ~~values~~costs included $6,005 of ~~the~~depreciation ~~interest~~and ~~rate~~amortization, ~~swap~~$766 ~~agreements~~of ~~were~~debt ~~estimated~~issue ~~based~~cost onamortization, ~~current~~$1,241 of amortization of loss on settlement ~~prices~~of ~~and~~interest ~~quoted~~rate ~~market~~swap ~~prices~~agreements, $356 of ~~comparable~~bad ~~contracts~~debt expense, and $459 of stock-based compensation expenses. The ~~Company~~change ~~calculated~~in noworking ~~ineffectiveness~~capital onincluded ~~both~~an ~~interest~~increase ~~rate~~in ~~swap~~accounts ~~agreements~~receivable atof ~~their~~$13,361, ~~termination~~an onincrease ~~September~~in 30inventories of $12,487, ~~2009.~~an Atincrease ~~June~~in 30income taxes receivable of $2,100, ~~2010~~and a decrease in accrued liabilities and other of $2,443, all ~~unrealized~~partially ~~losses~~offset ~~previously~~by ~~recorded~~an onincrease in accounts payable of $5,589. The increase in accounts receivable resulted from strong sales at the ~~consolidated~~close ~~balance~~of ~~sheet~~the asthird ~~accumulated~~quarter ~~other~~that ~~comprehensive~~converted ~~income~~to ~~(loss)~~cash ~~had~~early ~~been~~in ~~amortized~~the fourth quarter. The increase in inventories was due to ~~interest~~a ~~expense~~rise ~~over~~in inventory purchases near the ~~remaining~~close ~~terms~~of the quarter in anticipation of higher spring sales volume. The increase in inventories drove the ~~original~~increase in accounts payable. The increase in income taxes receivable was due to the finalization of tax returns yielding a $1,792 tax refund received in April ~~swap~~2010. The ~~agreements~~decrease in accrued liabilities and other resulted primarily from payments of liabilities related to accrued non-recurring settlement and legal costs.

~~The~~Investing ~~net~~activities. For ~~receipts~~the ornine ~~payments~~months ~~from~~ended ~~the~~March 31, ~~interest~~2011, ~~rate~~net ~~swap~~cash ~~agreements~~used ~~were recorded~~ in ~~interest~~investing ~~expense. During~~activities ~~the~~was ~~three~~$4,214 and ~~six~~was ~~months~~primarily ~~ended~~attributable ~~December~~to 31$2,011 ~~2009,~~in ~~changes~~cash inpayments ~~the~~to ~~fair~~certain ~~value~~selling stockholders of ~~interest~~Kane ~~rate~~for ~~swap~~the ~~agreements~~achievement ~~totaled~~of certain purchase agreement performance targets, $1,~~655~~984 ~~($993~~of ~~net~~purchases of ~~tax)~~property, plant and $2equipment,~~227~~ ($~~1,336~~192 ~~net~~ of ~~tax),~~purchases ~~respectively. The~~of ~~Company~~other ~~reclassified $0~~assets, and $~~1,047~~175 ~~from~~of ~~accumulated~~purchases ~~other~~of ~~comprehensive~~customer ~~income~~relationships toand ~~interest~~trade ~~expense~~names ~~during~~from ~~the~~a ~~three~~former ~~and~~competitor, ~~six~~all ~~months~~partially ~~ended~~offset ~~December~~by ~~31,~~a ~~2009,~~$144 ~~respectively~~decrease in notes receivable.

For the nine months ended March ~~Contractual~~31, ~~Obligations~~2010, net cash used in investing activities was $3,505, and was primarily attributable to $1,911 in cash payments to certain selling stockholders of Kane for the achievement of certain purchase agreement performance targets, $1,690 of property, plant, and equipment purchases, and $457 of purchases of other assets, all partially offset by a $400 decrease in notes receivable.

AsFinancing ofactivities. For ~~December~~the nine months ended March 31, ~~2010~~2011, ~~there~~net ~~were~~cash noprovided ~~material~~by ~~changes~~financing inactivities ~~the~~was ~~Company’s~~$13,764, ~~contractual~~and ~~obligations~~was asattributable ~~disclosed~~to net borrowings from revolving credit facilities totaling $14,957, partially offset by debt issue costs of $591, an unfavorable change in overdraft balances of $482, and net payments related to the ~~Company’s~~refinancing ~~Annual~~of ~~Report~~term onnotes ~~Form~~totaling ~~10-K~~$121.

17For the nine months ended March 31, 2010, net cash provided by financing activities was $16,355, and was primarily attributable to net borrowings on the revolving credit facility totaling $26,485, partially offset by an unfavorable change in overdraft balances of $3,731, principal payments on other debt totaling $2,988, and the settlement of liabilities related to terminated interest rate swap agreements totaling $3,348.

~~Off-Balance Sheet Arrangements~~16

AsTable of December 31, 2010, the Company did not have any off-balance sheet arrangements other than the operating lease commitments in the contractual obligations table as disclosed in the Company’s Annual Report on Form 10-K.Contents

~~Recent~~Capital ~~Accounting~~resources. Effective ~~Pronouncements~~November 10, 2010, the Company amended and extended the maturity of the Revolver and replaced its Term Note. The amended Revolver is a $130,000 facility, with an option held by us to increase the amount of the amended Revolver to $175,000. It matures on August 10, 2015. The outstanding borrowings under the amended Revolver bear interest at rates based upon the Company’s Leverage Ratio as defined in the amended Revolver with LIBOR-based rates ranging from LIBOR and CDOR Rate plus 2.25% to LIBOR and CDOR Rate plus 3.00%, and with Prime-based rates ranging from U.S. Prime and Canadian Prime Rate plus 0.00% to U.S. Prime and Canadian Prime Rate plus 0.50%. Borrowings are collateralized by a first priority interest in and lien on the Company’s accounts receivable and inventories. As of March 31, 2011, the interest rates for the Revolver ranged from 3.26% to 3.75%. Additionally, the Company is required to pay a commitment fee on the daily unused amount of the Revolver at a per annum rate of 0.50%. At March 31, 2011, the Company’s availability under the Revolver totaled $29,428, including $4,865 of cash actually received but not yet applied to the Revolver.

The ~~Company’s~~New ~~management~~Term Note has ~~evaluated~~a ~~recent~~face ~~accounting~~amount ~~pronouncements~~of $43,000 and ~~their~~matures ~~adoption~~on ~~has~~November 10, ~~not~~2015. It ~~had~~bears orinterest isat ~~not~~an ~~expected~~annual rate equal to ~~have~~14.25% apayable ~~material~~as ~~impact~~follows: ~~upon~~(i) 12.25% per annum in cash in arrears, and (ii) 2.00% added automatically to the ~~Company’s~~unpaid ~~consolidated~~principal ~~financial~~amount. It ~~statements~~was issued with an original issue discount of 2.00% of the face amount of the note. At March 31, 2011, the remaining balance of the original issue discount was $810, which is being amortized utilizing the effective interest method over the term of the debt. Borrowings are collateralized by a first priority interest in and lien on all real estate, fixed assets, and intellectual property of the Company.

~~Item~~The 3.new ~~Quantitative~~credit agreements contain certain covenants that, among other things, restrict our ability to incur additional indebtedness, make certain payments, sell assets, enter into certain transactions with affiliates and ~~Qualitative~~create ~~Disclosures~~liens. ~~About~~Moreover, ~~Market~~certain ~~Risk~~of these agreements require us to maintain specified financial ratios. The most restrictive covenant relates to the creation or assumption of additional indebtedness. The Company was in compliance with all financial covenants at March 31, 2011.

~~Exposure~~As a result of this refinancing, the Company wrote-off remaining unamortized debt issue costs related to ~~Interest~~the ~~Rates~~Term Note totaling $35 during the second fiscal quarter of 2011. Debt issue costs of $2,106 resulting from this refinancing were capitalized and are being amortized over the remaining term of the Revolver utilizing the straight-line method, which approximates the effective interest method, and over the remaining term of the New Term Note utilizing the effective interest method.

The Company ishas ~~exposed~~utilized tocash ~~certain~~flow ~~market~~hedge ~~risks~~accounting ~~arising~~and ~~from transactions that are entered into in the normal course of business. As part of the Company’s financial risk management program, it has~~ used ~~certain~~ derivative financial instruments to ~~manage~~effectively ~~these~~convert ~~risks.~~a ~~The~~portion ~~Company~~of ~~does~~its ~~not~~variable-rate ~~engage~~debt into ~~financial~~fixed-rate ~~transactions for speculative purposes and therefore holds no derivative instruments for trading purposes~~debt. ~~The~~In ~~Company’s~~order ~~exposure~~ to ~~market~~reduce ~~risk~~cash ~~for changes in~~ interest ~~rates~~expense ~~relates~~over ~~to variable interest rates on borrowings under~~ the ~~Company’s~~last ~~credit~~three ~~agreements.~~quarters Atof ~~December 31,~~fiscal 2010, ~~$102.9 million of~~ the Company’s ~~debt~~elected ~~remained subject~~ to ~~market~~terminate ~~risk~~both for changes in interest rates. If the weighted average interest rate on the Company’s remaining variable rate indebtedness rose 40 basis points (a 10.0% change from the calculated weighted average interest rate as of ~~December 31, 2010), assuming no change in the Company’s outstanding balance under~~ its ~~revolving credit facility and Term Note, the Company’s annualized income before taxes and cash flows from operating activities would decline by approximately $0.4 million. If the weighted average~~ interest rate onswap ~~the~~agreements ~~Company’s remaining variable rate indebtedness decreased 40 basis points (a 10.0% change from the calculated weighted average interest rate~~ as of ~~December~~September 3130, ~~2010),~~2009 ~~assuming no change in the Company’s outstanding balance under its revolving credit facility~~ and ~~Term~~paid ~~Note,~~ the ~~Company’s~~respective ~~annualized~~liabilities ~~income~~in ~~before taxes and cash flows from operating activities would increase by approximately $0~~October 2009.~~4 million.~~

~~Exposure~~The toCompany ~~Exchange~~had ~~Rates~~a $43,000 notional value swap transaction with a financial institution effective April 18, 2007. The Company received a floating rate based on LIBOR and paid a fixed rate of 4.95%. The swap agreement had an original termination date of June 28, 2010. On September 30, 2009, the Company terminated the swap agreement, and the fair value of this swap was a net liability of $1,511 on that date. The Company had a $52,000 notional value swap transaction with a financial institution effective April 18, 2007. The Company received a floating rate based on LIBOR and paid a fixed rate of 4.95%. The swap agreement had an original termination date of May 7, 2010. On September 30, 2009, the Company terminated the swap agreement, and the fair value of this swap was a net liability of $1,837 on that date.

~~AHII's subsidiaries~~Swap ~~are~~agreement ~~located~~fair invalues ~~Canada~~were ~~and~~recorded ~~Taiwan.~~on ~~Due~~the toconsolidated ~~the~~balance ~~relative~~sheet ~~low~~as ~~volume~~a component of ~~payments~~current ~~made~~portion byof ~~AHII~~long-term ~~through~~debt. ~~these~~The ~~subsidiaries,~~fair values of the ~~Company~~interest ~~does~~rate ~~not~~swap ~~believe~~agreements ~~that~~were itestimated ~~has~~based ~~significant~~on ~~exposure~~current tosettlement ~~foreign~~prices ~~currency~~and ~~exchange~~quoted ~~risks~~market prices of comparable contracts. The Company ~~currently~~calculated ~~does~~no ~~not~~ineffectiveness ~~use~~on ~~derivative~~both ~~financial~~interest ~~instruments~~rate toswap ~~mitigate~~agreements ~~foreign~~at ~~currency~~their ~~exchange~~termination ~~risks.~~on ~~The~~September 30, ~~Company~~2009. ~~continues~~At toJune 30, ~~review~~2010, ~~this~~all ~~issue~~unrealized ~~and~~losses ~~may~~previously ~~consider~~recorded ~~hedging~~on ~~certain~~the ~~foreign~~consolidated ~~exchange~~balance ~~risks~~sheet ~~through~~as ~~the~~accumulated ~~use~~other ofcomprehensive ~~currency~~income ~~futures~~(loss) orhad ~~options~~been inamortized ~~future~~to ~~years~~interest expense.

~~Item~~The 4net receipts or payments from the interest rate swap agreements were recorded in interest expense. During ~~Controls~~the three and ~~Procedures~~nine months ended March 31, 2010, changes in the fair value of interest rate swap agreements totaled $1,035 ($621 net of tax) and $3,262 ($1,957 net of tax), respectively. The Company reclassified $0 and $1,047 from accumulated other comprehensive income to interest expense during the three and nine months ended March 31, 2010, respectively.

~~Our~~Contractual management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, maintained our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2010, and concluded that, as of that date, the Company’s disclosure controls and procedures were effective at a reasonable assurance level.Obligations

InAs ~~connection~~of ~~with~~March 31, ~~the~~2011, ~~evaluation~~there ~~described~~were ~~above,~~ no ~~change~~material changes in ~~our~~the ~~internal~~Company’s ~~control~~contractual ~~over~~obligations ~~financial reporting (~~as ~~defined~~disclosed in ~~Rules 13a-15(f) and 15d-15(f) under~~ the ~~Exchange~~Company’s ~~Act)~~Annual ~~has~~Report ~~been~~on ~~identified during the quarter ended December 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting~~Form 10-K.

1817

Table of Contents

~~PART II. OTHER~~Off-Balance ~~INFORMATION~~Sheet Arrangements

~~Item~~As 1.of ~~Legal~~March 31, ~~Proceedings~~2011, the Company did not have any off-balance sheet arrangements other than the operating lease commitments in the contractual obligations table as disclosed in the Company’s Annual Report on Form 10-K.

~~From~~Recent ~~time~~Accounting to time, we are a party to legal proceedings and claims arising in the ordinary course of business. We are not currently aware of any such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.Pronouncements

~~Item~~The ~~1A.~~Company’s ~~Risk~~management ~~Factors~~has evaluated recent accounting pronouncements, and their adoption has not had or is not expected to have a material impact upon the Company’s consolidated financial statements.

~~Not~~Item ~~Applicable~~3. Quantitative and Qualitative Disclosures About Market Risk

~~Item~~Exposure 2.to ~~Unregistered~~Interest ~~Sales of Equity Securities and Use of Proceeds~~Rates

~~Not~~The ~~Applicable~~Company is exposed to certain market risks arising from transactions that are entered into in the normal course of business. As part of the Company’s financial risk management program, it has used certain derivative financial instruments to manage these risks. The Company does not engage in financial transactions for speculative purposes and therefore holds no derivative instruments for trading purposes. The Company’s exposure to market risk for changes in interest rates relates to variable interest rates on borrowings under the Company’s credit agreements. At March 31, 2011, $103.5 million of the Company’s debt remained subject to market risk for changes in interest rates. If the weighted average interest rate on the Company’s remaining variable rate indebtedness rose 38 basis points (a 10.0% change from the calculated weighted average interest rate as of March 31, 2011), assuming no change in the Company’s outstanding balance under its revolving credit facility and Term Note, the Company’s annualized income before taxes and cash flows from operating activities would decline by approximately $0.4 million. If the weighted average interest rate on the Company’s remaining variable rate indebtedness decreased 38 basis points (a 10.0% change from the calculated weighted average interest rate as of March 31, 2011), assuming no change in the Company’s outstanding balance under its revolving credit facility and Term Note, the Company’s annualized income before taxes and cash flows from operating activities would increase by approximately $0.4 million.

~~Item~~Exposure 3.to ~~Defaults~~Exchange ~~Upon Senior Securities~~Rates

~~None~~AHII’s wholly-owned subsidiary, Kane, is located in Canada. Due to the relative low volume of payments made by AHII through Kane, the Company does not believe that it has significant exposure to foreign currency exchange risks. The Company currently does not use derivative financial instruments to mitigate foreign currency exchange risks. The Company continues to review this issue and may consider hedging certain foreign exchange risks through the use of currency futures or options in future years.

Item 4. ~~(Removed~~Controls and ~~Reserved)~~Procedures

~~None~~Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, maintained our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2011, and concluded that, as of that date, the Company’s disclosure controls and procedures were effective at a reasonable assurance level.

~~Item~~In 5.connection ~~Other~~with ~~Information~~the evaluation described above, no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) has been identified during the quarter ended March 31, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The Company held its 2010 Annual Meeting of Stockholders on December 2, 2010. On the record date, 24,329,670 shares of our common stock were entitled to vote. At the meeting, 14,669,609 shares were represented in person or by proxy. 18

~~The~~Table ~~only proposal was to elect three Class I members to the Board~~ of ~~Directors as directors whose term will expire in 2013. The following individuals were elected as Class I directors:~~Contents

Name	Votes For	Votes Withheld
James C. Robison	14,621,825	47,784
E. Thomas Corcoran	14,620,398	49,211
Michael Eisenson	14,538,871	130,738

PART II. OTHER INFORMATION

Item 6 1. Legal ~~Exhibits~~Proceedings

Number		Description
31.1		Rule 13a-14(a)/15d-14(a) Certification, executed by James C. Robison, Chairman, President and Chief Executive Officer.
31.2		Rule 13a-14(a)/15d-14(a) Certification, executed by William F. Lacey, Senior Vice President and Chief Financial Officer.
32.1*		Section 1350 Certifications, executed by James C. Robison, Chairman, President and Chief Executive Officer, and William F. Lacey, Senior Vice President and Chief Financial Officer.

From time to time, we are a party to legal proceedings and claims arising in the ordinary course of business. We are not currently aware of any such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.

*Item ~~This~~1A. ~~certification~~Risk shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, or otherwise subject to the liability of that Section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.Factors

19Item 1A of the Company’s Annual Report on Form 10-K presented risk factors that may impact the Company’s future results. On March 14, 2011, the Company entered into a definitive merger agreement under which a subsidiary of Lextron, Inc. will merge with and into the Company with the Company being the surviving entity and continuing as a wholly-owned subsidiary of Lextron, Inc. Upon the completion of the merger, all of the outstanding common shares of the Company will be converted into the right to receive $4.25 for each share. Due to the proposed merger transaction, the risk factors are amended and supplemented by the following:

~~Table~~If ofour ~~Contents~~proposed merger is not completed, our business and stock price may be adversely affected.

In March ~~SIGNATURE~~2011, the Company entered into a definitive merger agreement under which a subsidiary of Lextron, Inc. will merge with and into the Company with the Company being the surviving entity and continuing as a wholly-owned subsidiary of Lextron, Inc. The merger is subject to a number of contingencies, including approval by our stockholders, the absence of any order, injunction or decree prohibiting the consummation of the merger and other customary closing conditions, each of which must either be satisfied or waived prior to the closing. If the merger is not completed or the completion is substantially delayed, we could be subject to a number of risks that may adversely affect our business and stock price, including:

~~Pursuant~~· Our stock price may fluctuate prior to completion of the ~~requirements~~merger due to market assessments regarding the expected timing of the ~~Securities~~merger ~~Exchange~~and ~~Act~~risks relating to the completion of ~~1934~~the merger, and if the ~~registrant~~merger ~~has~~is ~~caused~~not ~~this~~completed, ~~report~~our tostock beprice ~~signed~~may ondecline ~~its~~significantly, ~~behalf~~since bythe current trading price reflects a market assumption that the ~~undersigned~~merger ~~thereunto~~will ~~duly~~be ~~authorized.~~completed;

		Animal Health International, Inc. (Registrant)
Date: February 8, 2011		/s/ William F. Lacey
		William F. Lacey
		Senior Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

· We could lose important personnel as a result of the departure of employees who decide to pursue other opportunities in light of the proposed merger;

· We have and will continue to incur significant expenses related to the merger prior to its closing, including fees paid to an investment bank for a fairness opinion for the merger, legal fees and accounting fees, which must be paid even if the merger is not completed;

· Depending on the circumstances, we may be obligated to pay Lextron, Inc. a termination fee of $5.0 million; and

· We may experience the additional impacts described in the risk factors below.

Our proposed merger may adversely affect our results of operations.

In response to our pending merger, our customers or the manufacturers of the products we distribute may elect to switch to other distributors due to, among other things, competitive issues and uncertainty about the direction of our product offerings following the merger and our willingness to support existing product offerings. Uncertainty surrounding the proposed merger also may have an adverse effect on employee morale and retention. In addition, focus on the merger and related matters have resulted in, and may continue to result in, the diversion of management attention and resources. To the extent that there is uncertainty about the closing of the merger, or if the merger does not close, our business may be harmed to the extent that customers, manufacturers or others believe that we cannot effectively compete in the marketplace without the merger or there is customer and employee uncertainty surrounding the future direction of our product offerings and strategy on a stand-alone basis. Finally, the merger agreement imposes restrictions on our ability to conduct our business prior to the completion of the merger. Each of these potential impacts, and others, may leave us unable to respond effectively to competitive pressures, industry developments and future opportunities or may otherwise harm our results of operations going forward.

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If our proposed merger is not completed, we will have incurred substantial expenses without realizing the expected benefits.

We have incurred substantial expenses in connection with our proposed merger. The completion of the merger depends on the satisfaction of specified conditions. We cannot guarantee that these conditions will be met. If the merger is not completed, these expenses could have a material adverse impact on our financial condition because we would not have realized the expected benefits of the merger.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not Applicable.

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

None.

Item 5. Other Information

None.

Item 6. Exhibits

Number		Description

10.1*		Livestock Products Agreement entered into on December 11, 2008 and effective as of January 1, 2009 by and between Pfizer Inc. and Walco International, Inc.

10.2*		Livestock Products Agreement entered into on March 9, 2010 and effective as of January 1, 2010 by and between Pfizer Inc. and Walco International, Inc.

10.3		Amended and Restated Credit Agreement, dated September 2006, by and among Animal Health International, Inc., each of the credit parties party thereto, each of the financial institutions party thereto, JPMorgan Chase Bank, N.A., as administrative agent for the Lenders and General Electric Capital Corporation as documentation agent for the lenders.

10.4		Second Amended and Restated Credit Agreement, dated October 2007, by and among Walco International, Inc., each of the credit parties party thereto, each of the financial institutions party thereto, JPMorgan Chase Bank, N.A., as administrative agent for the Lenders and General Electric Capital Corporation as documentation agent for the lenders.

10.5		First Amendment to the Second Amended and Restated Credit Agreement, dated May 5, 2009, by and among Walco International, Inc., Kane Veterinary Supplies, Ltd., and each of the credit parties party thereto, each of the financial institutions party thereto, JPMorgan Chase Bank, N.A., as administrative agent for the U.S. lenders, JPMorgan Chase Bank, N.A. Toronto Branch, as administrative agent for the Canadian lenders, and U.S. Bank National Association as documentation agent for the lenders.

10.6		Term Loan Agreement, dated September 2006, by and among Animal Health International, Inc., each of the credit parties party thereto and Wilmington Trust, as administrative agent for the lenders.

10.7		Term Loan Agreement, dated August 10, 2007, by and among Animal Health International, Inc., each of the credit parties party thereto and Wells Fargo Bank, National Association, as administrative agent for the lenders.

10.8		Non-Compete Agreement between Walco International, Inc. and Kathy Hassenpflug dated as of March 10, 2000.

10.9		Second Amendment to Second Amended and Restated Credit Agreement, dated November 10, 2010, by and among Walco International, Inc., Kane Veterinary Supplies Ltd., each of the credit parties party thereto, each of the financial institutions party thereto, JPMorgan Chase Bank, N.A., as administrative agent for the lenders, and JPMorgan Chase Bank, N.A., Toronto Branch as the Canadian administrative agent for the lenders.

10.10		Term Loan Credit Agreement, dated November 10, 2010, by and among Walco International, Inc., each of the credit parties party thereto and JPMorgan Chase Bank, N.A., as administrative agent for the lenders.

10.11*		Livestock Products Agreement entered into on April 3, 2008, and effective as of December 22, 2007, by and between Pfizer Inc. and Walco International, Inc.

31.1		Rule 13a-14(a)/15d-14(a) Certification, executed by James C. Robison, Chairman, President and Chief Executive Officer.

31.2		Rule 13a-14(a)/15d-14(a) Certification, executed by William F. Lacey, Senior Vice President and Chief Financial Officer.

32.1**		Section 1350 Certifications, executed by James C. Robison, Chairman, President and Chief Executive Officer, and William F. Lacey, Senior Vice President and Chief Financial Officer.

*	Portions of Exhibits 10.1, 10.2 and 10.11 have been redacted pursuant to a request for confidential treatment, and the redacted portions have been separately filed with the Securities and Exchange Commission.
**	This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, or otherwise subject to the liability of that Section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

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SIGNATURE

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

	Animal Health International, Inc. (Registrant)

Date: May 16, 2011	/s/ William F. Lacey
	William F. Lacey
	Senior Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

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