10-K

UNITED STATES SECURITIES AND
EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended September 30, 2013
	Commission file number 000-51468
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ________ to ________

MWI VETERINARY SUPPLY, INC.

(Exact name of registrant as specified in its Charter)

Delaware	02‑0620757
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
3041 W Pasadena Dr
Boise, ID	83705
(Address of Principal Executive Offices)	(Zip Code)

	(208) 955-8930
(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE SECURITIES EXCHANGE ACT OF 1934:

Title of each class	Name of each exchange on which registered
Common Stock, $0.01 par value	The Nasdaq Stock Market, LLC

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes xNo

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes Nox

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, as amended (the “Act”) 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 xNo

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 (§229.405 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 xNo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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

Large Accelerated Filer   x	Accelerated Filer  	Non-Accelerated Filer  	Smaller Reporting Company  
		(Do not check if a smaller reporting  company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). Yes Nox

As of March 31, 2013 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $1,609,000,000.  Shares of common stock held by each executive officer and director and by each person who owns 10% or more of our outstanding common stock have been excluded since such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of November 15, 2013 was 12,851,474.

Documents Incorporated by Reference

Listed hereunder are the documents, any portions of which are incorporated by reference and the Parts of this Form 10‑K into which such portions are incorporated:

1.The registrant’s definitive proxy statement for use in connection with the Annual Meeting of Stockholders to be held on or about February 12, 2014 to be filed within 120 days after the registrant’s fiscal year ended September 30, 2013, portions of which are incorporated by reference into Part III of this Form 10-K.

MWI VETERINARY SUPPLY, INC.
FORM 10-K
TABLE OF CONTENTS

Item		Page
PART I
	Cautionary Statement	1
1.	Business	2
1A.	Risk Factors	14
1B.	Unresolved Staff Comments	26
2.	Properties	26
3.	Legal Proceedings	27
4.	Mine Safety Disclosures	27
PART II
5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
6.	Selected Financial Data	30
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
7A.	Quantitative and Qualitative Disclosures About Market Risk	41
8.	Financial Statements and Supplementary Data	43
9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	66
9A.	Controls and Procedures	66
9B.	Other Information	68
PART III
10.	Directors, Executive Officers and Corporate Governance of the Registrant	68
11.	Executive Compensation	68
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	68
13.	Certain Relationships, Related Transactions and Director Independence	69
14.	Principal Accountant Fees and Services	69
PART IV
15.	Exhibits and Financial Statement Schedules	69
SIGNATURES		70

PART I

Cautionary Statement for Purposes of “Safe Harbor Provisions” of the Private Securities Litigation Reform Act of 1995

This annual report on Form 10-K contains forward‑looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our beliefs and expectations, are forward‑looking statements. Forward‑looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar expressions. These statements include, among others, statements regarding our expected business outlook, anticipated financial and operating results, our business strategy and means to implement our strategy, our objectives, the amount and timing of capital expenditures, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs and sources of liquidity.

Forward‑looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to the forward‑looking statements include, among others, assumptions regarding demand for our products, the expansion of product offerings geographically or through new applications, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward‑looking statements also involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward‑looking statement. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following:

· the impact of vendor consolidation on our business;

· changes in or availability of vendor contracts or rebate programs;

· vendor rebates based upon attaining certain growth goals;

· transitional challenges associated with acquisitions, including the failure to retain customers and the disproportionate demands on management resources to integrate acquired businesses;

· financial risks associated with acquisitions and investments;

· changes in the way vendors introduce/deliver products to market;

· seasonality;

· competition;

· possible changes in the use of feed additives (antibiotics, growth promotants) used in production animal products due to trade restrictions, animal welfare and/or government regulations;

· an outbreak of foodborne diseases in production animal products;

· inability to ship products to the customer as a result of technological or shipping disruptions;

· the recall of a significant product by one of our vendors;

· risks associated with our international operations;

· an outbreak of infectious disease in animals;

· extended shortage or backorder of a significant product by one of our vendors;

· the impact of tightening credit standards and/or access to credit on behalf of our customers and suppliers;

· a disruption caused by adverse weather (i.e. drought) or other natural conditions or disasters;

· exclusivity requirements with certain vendors that may prohibit us from distributing competing products manufactured by other vendors or margin reductions if we become a non-exclusive distributor;

· the impact of general economic trends on our business;

· our intellectual property rights may be inadequate to protect our business;

· the timing and effectiveness of marketing programs or price changes offered by our vendors;

· the timing of the introduction of new products and services by our vendors;

· unforeseen litigation;

· the ability to borrow on our revolving credit facility, extend the terms of our revolving credit facility or obtain alternative financing on favorable terms or at all; and

· risks from potential increases in variable interest rates.

1

Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission (“SEC”), we are under no obligation to publicly update or revise any forward‑looking statements, whether as a result of any new information, future events or otherwise. You should not place undue reliance on our forward-looking statements.  Although we believe that the expectations reflected in the forward‑looking statements are reasonable, we cannot guarantee future results or performance.

Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of MWI Veterinary Supply, Inc.

Item 1.Business.

General

Our business commenced operations as part of a veterinary practice in 1976 and was incorporated as MWI Drug Supply, Inc., an Idaho corporation, in 1980. MWI Drug Supply, Inc. was acquired by Agri Beef Co. (“Agri Beef”) in 1981. MWI Veterinary Supply Co. (“MWI Co.”) was incorporated as an independent subsidiary of Agri Beef in September 1994. Effective June 18, 2002, MWI Holdings, Inc. was formed by Bruckmann, Rosser, Sherrill & Co. II, L.P. for the sole purpose of acquiring all of the outstanding stock of MWI Co. from Agri Beef. As a result of this transaction, MWI Co. became a wholly‑owned subsidiary of MWI Holdings, Inc. On April 21, 2005, we changed our name from MWI Holdings, Inc. to MWI Veterinary Supply, Inc.  References in this report to “we,” “us,” “our,” and “MWI” refer to MWI Veterinary Supply, Inc. unless otherwise indicated.  Unless otherwise indicated, all statistical information provided about our business in this report is as of September 30, 2013.

We are a leading distributor of animal health products to veterinarians across the United States and the United Kingdom. Our growth has primarily been from internal growth initiatives and, to a lesser extent, selective acquisitions, including the following transactions. 

· In February 2010, we acquired the outstanding share capital of Centaur Services Limited (“Centaur”).  Based in Castle Cary, England, Centaur is a supplier of animal health products to veterinarians in the United Kingdom. 

· In March 2011, we acquired substantially all of the assets of Nelson Laboratories Limited Partnership (“Nelson”), a distributor of animal health products to over 1,100 veterinary practices, primarily in the Midwestern United States.  

· In October 2011, we acquired substantially all of the assets of Micro Beef Technologies, Ltd. (“Micro”), a value-added distributor to the production animal market, including the distribution of micro feed ingredients, pharmaceuticals, vaccines, parasiticides, supplies, and other animal health products.  In addition, as a result of the Micro transaction, we now offer proprietary, computerized management systems for the production animal market.

· In December 2012, we purchased substantially all of the assets of Prescription Containers, Inc. (“PCI Animal Health”), a distributor of companion animal health products primarily to veterinary practices, primarily in the Northeastern United States.

· On November 1, 2013, we acquired substantially all of the assets of IVESCO Holdings, LLC (“IVESCO”),  a value-added distributor of animal health and related products to veterinarians, food animal producers and dealers in the United States.

2

Products we sell include pharmaceuticals, vaccines, parasiticides, diagnostics, micro feed ingredients, supplies, specialty products, veterinary pet food, capital equipment and nutritional products. We market these products to customers in both the companion animal and production animal markets. As of September 30, 2013, we had a sales force of 500 people covering the United States and a sales force of 27 people in the United Kingdom. We also offer our customers a variety of value‑added services, including our e-commerce platform, technology management systems, pharmacy fulfillment, inventory management system, equipment procurement consultation, special order fulfillment, educational seminars and pet cremation, which we believe closely integrates us with our customers’ day-to-day operations and provides them with meaningful incentives to continue ordering from us.

We estimate that approximately 59% of our total revenues in the United States have been generated from sales to the companion animal market and 41% from sales to the production animal market.  Including the gross billings from agency commissions which are excluded from our total revenues in order to comply with generally accepted accounting principles, we estimate that in the United States approximately 64% of our total revenues have been generated from sales to the companion animal market and 36% from sales to the production animal market.  In the United Kingdom, we estimate that approximately two-thirds of our total revenues have been generated from sales to the companion animal market and one-third from sales to the production animal market.   

Geographic Information

Revenues and long-lived assets by geographic region are as follows (in thousands):

	2013		2012		2011
Revenues for the fiscal years ended September 30
United States	$	2,032,260	$	1,776,414	$	1,304,794
International (United Kingdom)		315,225		298,732		260,546
Total	$	2,347,485	$	2,075,146	$	1,565,340
Long-lived assets as of September 30
United States	$	32,881	$	29,001	$	18,953
International (United Kingdom)		6,302		6,783		6,256
Total	$	39,183	$	35,784	$	25,209

Industry Overview

According to Sundale Research (“Sundale”), animal health product sales in the United States for calendar year 2012 were approximately $8.3 billion based on prices at the manufacturers’ level. The market for animal health products in the United States is a mix of products sold for companion and production animals. Companion animals include dogs, cats, horses and other pets, while production animals include cattle, swine, poultry and other food-producing animals. Sundale estimates that companion animal products accounted for 57% of the total market for animal health products in the United States in calendar year 2012.  According to the GfK Vetrak UK market survey in October 2013 that compiles revenue statistics, animal health product sales in the United Kingdom for our fiscal year ended September 30, 2013 was approximately £817 million. 

Historically, the growth in the companion animal market has been due to the increasing number of households with companion animals, an aging pet population, increased expenditures on animal health and preventative care, advancements in animal health products and extensive marketing programs sponsored by companion animal nutrition and pharmaceutical companies. Product sales in the production animal market are impacted by volatility in commodity prices such as milk, grains, livestock and poultry, changes in weather patterns (e.g. droughts or seasons of higher precipitation that determine how long cattle will graze and consequently the number of days an animal is on feed during a finishing phase) or a change in the general economy, which can shift the number of animals treated, the timing of when animals are treated, to what extent they are treated and which products they are treated with.  We support production animal veterinarians with a broad range of products and value-added services. Historically, sales in this market have been largely driven by spending on animal health products to improve productivity, weight gain

3

and disease prevention, as well as a growing focus on food safety.  We believe that these growth factors have been mitigated by the downward influence of generic drugs on pricing.

Veterinarians are one of the primary purchasers of animal health products, particularly in the companion animal market. As of December 31, 2012, according to the American Veterinary Medical Association, or AVMA, there were more than 64,000 veterinarians in private practice nationwide. According to the statistics from the Royal College of Veterinary Surgeons, there are approximately 17,000 veterinarians in private practice in the United Kingdom, with a total of approximately 5,000 veterinary outlets.  We believe that distributors play a vital role for veterinary practices by providing access to a broad selection of products through a single channel and helping them efficiently manage their inventory levels. Distributors also offer vendors substantial value by providing cost-effective access to a highly fragmented and geographically diverse customer base.   

Competitive Strengths

We believe that our strengths include:

· Leading Distributor to Veterinarians. While most of our products are available from several sources and our customers typically have relationships with several distributors, we have achieved this position primarily through internal growth. We believe that our broad product offering, competitive pricing, superior customer service, rapid product fulfillment and value‑added services provide meaningful incentives for our customers to continue ordering from us.  Our value-added services include our e-commerce platform, technology and information systems and pharmacy fulfillment programs.  Our pharmacies provide an efficient way for our customers to order prescription products in a cost effective, efficient manner while ensuring that they adhere to the strict regulations for these products.

· Leading Sales and Marketing Franchise. Our sales representatives in the United States educate customers on new veterinary products, assist in product selection and purchasing, and offer inventory management solutions. We also publish detailed product catalogs and monthly magazines, which are often utilized by our customers as reference tools. While salespeople and printed materials are vital to our marketing strategy, we also provide on-line ordering, valuable business information and value-added services through our Internet sites, www.mwivet.com and www.centaurweb.co.uk.

· Strong, Established Relationships with Veterinarians and Vendors. Our ability to serve as a single source for most of our customers’ animal health product needs has enabled us to develop strong and long-term customer relationships. For more than seventeen years we have maintained distribution arrangements with Banfield, The Pet Hospital (“Banfield”), the nation’s largest private veterinary practice, and with our non-controlled affiliate, Feeders’ Advantage, L.L.C. (“Feeders’ Advantage”), a related party and a buying group composed of several of the largest cattle feeders in the United States. Since we currently do not manufacture the vast majority of the products we sell, we are dependent on our vendors for the supply of our products. While our vendors often have relationships with multiple distributors, we have long-term relationships with many of our key vendors including Boehringer Ingelheim, Elanco, IDEXX Laboratories, Merck, Merial, Vedco and Zoetis.

· Recurring Revenue Product Base. Over 97% of our product sales were from consumable medicines and supplies commonly required by veterinarians in their practice. Historically, this aspect of our business has resulted in a recurring stream of revenues.

· Sophisticated Technology and Information Systems. We continue to invest in our technology and information systems, which we believe has created a competitive advantage when delivering quality service to our customers.  Our e-commerce platform offers enhanced online ordering capabilities for veterinarians.  This platform provides many features for our customers with enhanced security.  Our advanced computerized technology management systems offer our production animal customers the ability to more efficiently and effectively manage their animals and their operations.  This includes comprehensive information collection and management decision making in the areas of health, nutrition, information and animal management. These precision management tools help implement 4     traceability and food safety regimens while optimizing performance and the use of the consumable products we distribute.

· Experienced Management Team. We have a strong and experienced senior management team with substantial animal health industry expertise. The members of our senior management team have been with us for an average of over fifteen years, and each member has demonstrated a commitment and capability to deliver growth in revenues and profitability.

Business Strategy

Our mission is to be the best resource to the veterinary profession by delivering superior value, efficiency and innovation. Our strategy to achieve our mission is outlined below.

Increase Sales to Existing Customers. We believe that veterinary practices typically purchase animal health products from multiple distributors in the United States. For our fiscal year ended September 30, 2013, our average annual product sales per veterinary practice served in the United States was approximately $56,000.  We intend to increase our share of these purchases by utilizing our proprietary customer database to focus our marketing efforts, expanding our sales force, selectively adding products to our portfolio and increasing and expanding the value-added services we provide to our customers. By increasing the dollar value of purchases made by each customer as well as their average order size, we intend to increase our profitability. Competition for hiring sales representatives who have existing customer relationships is intense and we focus on retaining valued members of our staff who have demonstrated the skills needed to successfully market our products and services. If we fail to hire or retain a sufficient number of qualified sales professionals, it could adversely impact our business.  Veterinary practices typically purchase the majority of their animal health products from one wholesaler in the United Kingdom. 

Expand Business Assistance Services for Veterinarians. We intend to enhance our customer relationships by expanding our business assistance services for veterinarians. These value-added services include, among others, our e-commerce platform, technology management systems, pharmacy fulfillment, inventory management system, equipment procurement consultation, special order fulfillment, educational seminars and pet cremation.

Increase the Total Number of Customers. We intend to add new customers by increasing the number and productivity of our sales representatives, selectively acquiring other animal health distributors and expanding distribution centers. We believe the greatest opportunities to add new customers are in the Northeastern, Midwestern and Southeastern regions of the United States and abroad.

Continuously Seek to Improve Operations. We continuously evaluate opportunities to increase sales, lower costs and realize operating efficiencies. Current initiatives include investments in our technology and distribution center infrastructure. We also plan to pursue alternative product sourcing strategies and have a private label program on selected products to reduce our procurement costs and increase our profitability, while maintaining strong relationships with key vendors.

Make Selective Acquisitions. The United States market for animal health products distribution is highly fragmented, with numerous national, regional and local distributors. Many of these companies are small, privately-held businesses, some of which may represent attractive acquisition candidates.  We also believe there are acquisition opportunities outside of the United States and we intend to seek out those companies that would be a strategic fit for us.

Products

During fiscal year 2013 in the United States, we sold more than 41,000 products, of which over 19,000 are stocked in our distribution centers, sourced from over 700 vendors. During fiscal year 2013 in the United Kingdom, we sold approximately 22,000 products, of which nearly 12,000 are stocked in our distribution center, sourced from approximately 400 vendors.  For our fiscal year ended September 30, 2013, our product revenues in the United States were comprised of approximately 34% pharmaceutical products, 15% vaccine products, 13% parasiticide products, 9% micro feed ingredients, 8% diagnostic products, 3% capital equipment products and 18% of other supplies. In addition, we sell over 800 products in the United States under agency agreements with our vendors.

5

Under an agency agreement, we typically solicit orders and provide customer service for a commission, while the vendor stocks and ships the products. Including gross billings from agency contracts, for our fiscal year ended September 30, 2013, our product revenues in the United States were comprised of approximately 31% pharmaceutical products, 13% vaccine products, 21% parasiticide products, 8% micro feed ingredients, 7% diagnostic products, 2% capital equipment products and 18% of other supplies.  We also have available on special order approximately 18,000 products in the United States that we do not normally stock in our warehouses. We continually seek to update and improve the range of products we offer to address our customer requirements.  For our fiscal year ended September 30, 2013, our product revenues in the United Kingdom were comprised of approximately 75% pharmaceuticals (which include vaccines and parasiticides), 20% pet foods and 5% other consumable supplies. 

Pharmaceuticals, Vaccines, Parasiticides and Micro Feed Ingredients

We offer our customers a variety of pharmaceuticals, vaccines, parasiticides and micro feed ingredients. Our pharmaceutical products typically include anesthetics, analgesics, antibiotics, ophthalmics and hormones. Our vaccine products are primarily comprised of small animal, equine and production animal biologicals. Our parasiticides are used for control of fleas, ticks, flies, mosquitoes and internal parasites.  Micro feed ingredients are feed grade products such as pharmaceuticals, vitamins, minerals and other nutritional products that are used to optimize the health and performance of production animals.

Diagnostics, Capital Equipment and Supplies

We offer a wide range of diagnostics, capital equipment and supplies to veterinarians. Diagnostic sales typically include consumable in-clinic tests for detecting heartworm, lyme, feline leukemia and parvovirus, as well as consumable products for measuring blood chemistry, electrolyte balance and cell counts. Our capital equipment sales include anesthesia machines, surgical monitors, diagnostic equipment, dental machines, cages, lights and x-ray machines. We employ a team of capital equipment specialists to analyze the latest technologies and recommend equipment that meets our customers’ specific needs. Our sales of supplies include syringes, instruments, bandages, IV products, surgical consumables, grooming materials and other small equipment items used by veterinary practices.

Veterinary Pet Food and Nutritional Products

We offer our customers a broad selection of veterinary pet foods and nutritional products. We consider veterinary pet food to consist of two categories: foods for specialty diets and premium pet foods. Specialty diets are recommended by veterinarians to address specific medical and nutritional needs. Premium pet foods are recommended by veterinarians to promote optimal nutrition in healthy animals. Pet foods are typically sold under agency agreements. Nutritional products include dietary supplements, vitamins, dental chews and specialty treats which either help address specific medical conditions or are compatible with recommended nutritional guidelines.

Value‑Added Services

We offer our customers a variety of value‑added services, which we believe closely integrate us with our customers’ day-to-day operations and provide them with meaningful incentives to continue ordering from us. These services include the following:

6

Service	Description
E‑commerce platform	On‑line ordering system that provides information to veterinary practices on products, vendor programs and purchasing history
Pharmacy fulfillment	Shipment of prescription production and companion animal health products to end‑users in the United States on behalf of veterinarians from our six licensed pharmacies located in Amarillo, Texas; Edwardsville, Kansas; Elizabethtown, Pennsylvania; Whitestown, Indiana; Nampa, Idaho; and Shakopee, Minnesota and a licensed veterinary food-animal drug retailer in Visalia, California
Inventory management system	Flexible system that facilitates counting, maintaining and ordering inventory in veterinary practices
Technology management systems	Comprehensive feed, health, information and production management systems including micro ingredient machines, health management systems and age and source verification
Equipment procurement consultation	Consultation and demonstrations provided by our dedicated capital equipment specialists in the United States
Special order fulfillment	Procurement and shipment of approximately 18,000 unique products in the United States that we do not normally stock in our warehouses
Educational seminars	Seminars for our customers covering business and medical topics, frequently sponsored in conjunction with our vendors
Pet cremation	Facility in Idaho that serves veterinary practices and their clients by providing cremation services

Customers

As of September 30, 2013, we served a vast majority of the veterinary practices and producers located throughout the United States and approximately one-third of the veterinary practices in the United Kingdom. These veterinary practices are typically small, privately-held businesses that we believe place at least one order per week to avoid storing and managing large volumes of supplies. We believe that these veterinary practices usually purchase animal health products from multiple distributors. We seek to be the principal provider of animal health products to our customer base. 

We maintain a diverse and stable customer base. Independent veterinary practices have historically accounted for approximately 87% of our product sales. Also, for more than seventeen years, we have maintained distribution arrangements with Banfield, the nation’s largest private veterinary practice with over 800 veterinary hospitals, and our non-controlled affiliate, Feeders’ Advantage, a buying group composed of several of the largest cattle feeders in the United States. We typically do not enter into long-term contracts with our independent veterinary customers.

We are a party to three written agreements with Banfield, an Agreement for Product Purchases, an Agreement for Logistics Services and an Agreement for Home Delivery Logistics Services.  The Agreement for Product Purchases and Agreement for Logistic Services are effective through November 30, 2014. The Agreement for Home Delivery Logistics Services has an initial term extending through March 15, 2014.  Each Banfield agreement automatically renews annually unless terminated by either party. The agreements can be terminated by either party during the term with or without cause upon 150 days prior written notice. These contracts provide that we will be the supplier of logistics to Banfield, and these agreements govern the pricing, shipping and other terms and conditions under which we sell our products and provide logistics to Banfield.

7

Sales and Marketing

Our sales and marketing strategies are designed to establish and maintain strong customer relationships through personal visits by field sales representatives, frequent telesales contact and direct marketing, emphasizing our broad product lines, competitive pricing, efficient ordering capabilities, high levels of customer support and service and other value‑added services. The key elements of our sales and marketing strategy are:

Field Sales Representatives: Our sales force in the United States is a key component of our value-added approach.  Due to the fragmented nature of the animal health products market, we believe that a large sales force is vital to effectively support existing customers and target potential customers. As of September 30, 2013, we had 324 field sales personnel throughout the United States. Our field sales representatives educate customers on new veterinary products, assist in product selection and purchasing and offer inventory management solutions. Once a field sales representative has established a relationship with a customer, the field sales representative encourages the customer to use our telesales representatives and online ordering capabilities for day-to-day customer needs. Field sales representatives work under the supervision of regional sales managers within an assigned sales territory to ensure effective communication and timely sales calls with customers. Our field sales representatives complement our telesales and direct marketing efforts and enable us to better market, service and support the sale of our products and services. Our field sales representatives are employees of our Company and are compensated with a combination of salaries and commissions.  The sales staff for Centaur does not actively promote products to the veterinarians, but rather sells products and maximizes the logistics services that Centaur provides. 

Telesales: We support our field sales representatives and direct marketing efforts with telesales representatives in nine call centers covering the United States. As of September 30, 2013, we had 176 telesales representatives in the United States. Telesales representatives work as partners with our field sales representatives, providing a dual coverage approach for individual customers. Telesales representatives process orders and generate new sales through frequent and direct contact with customers. Telesales representatives are responsible for assisting customers with ordering, purchasing decisions and general questions. Telesales representatives utilize our customized order entry system to process customer orders, access pricing, availability and promotional information about products, and research customer preferences and order history. Our call centers are connected by our telecommunications system which enables them to operate as one virtual call center.

Direct Marketing: We market to existing and potential customers by distributing product catalogs and monthly magazines. We publish a small animal catalog, a livestock catalog and an equine catalog. These catalogs include detailed descriptions and specifications of our products and are often used as a reference tool by our customers and sales force. We also promote our products and services in our monthly magazine, Messenger, which our field sales representatives use as a tool to educate customers on product and vendor programs. Additional marketing tools that we utilize include specialty catalogs, customer loyalty programs, specific product and vendor programs, flyers, faxes, emails and other promotional materials. For the fiscal year ended September 30, 2013, we distributed over 1 million pieces of direct marketing materials to existing and potential customers.  We also participate in international, national and regional trade shows to extend our customer reach and enhance customer interaction.

E-Commerce Platform: We provide on-line ordering, valuable business information and value-added services to veterinarians via our primary Internet site in the United States, www.mwivet.com, our Internet site in the United Kingdom, www.centaurweb.co.uk, and customized Internet sites that we maintain for two of our largest customers, Banfield and Feeders’ Advantage. Customers can use our Internet sites to order products, learn more about product and vendor programs, print forms needed for their veterinary practice, review their historical purchases and manage their inventory.  For our fiscal years ended September 30, 2013, 2012 and 2011, approximately 43%, 39% and 36%, respectively, of our product sales in the United States, excluding revenues related to Micro, were generated through orders placed over the Internet.  In the United Kingdom, over 96% of our orders are placed electronically.

Product Sourcing

We currently do not manufacture the vast majority of our products and are dependent on vendors for our supply of products. We believe that effective purchasing is a key factor in maintaining our position as a leading provider of

8

animal health products. We regularly assess our purchasing needs and our vendors’ product offerings and prices to obtain products at favorable prices. While we purchase products from many vendors and there is generally more than one vendor for most animal health product categories, our concentration of aggregate purchases with key vendors is significant. In the United States, our ten largest vendors accounted for approximately 70% of our revenues for the fiscal year ended September 30, 2013 and 71% of our revenues for each of the fiscal years ended September 30, 2012 and 2011. Zoetis supplied products that accounted for approximately 20% of our revenues for our fiscal years ended September 30, 2013 and 2012 and 24% of our revenues for our fiscal year ended September 30, 2011.  Of the Zoetis supplied products, production animal products under a livestock products agreement accounted for approximately 10%, 11% and 13% of our revenues for our fiscal years ended September 30, 2013, 2012 and 2011, respectively. Merck (formerly known as Intervet/Schering-Plough), supplied products that accounted for approximately 14%, 15% and 11% of our revenues for our fiscal years ended September 30, 2013, 2012 and 2011, respectively.  Merial Limited (“Merial”), a subsidiary of Sanofi-Aventis, supplies the majority of their products to us under an agency relationship.  Commission revenue generated from Merial products accounted for approximately 50%, 52% and 47% of total commission revenues for our fiscal years ended September 30, 2013, 2012 and 2011, respectively.

There are two major types of transactions that can affect the flow of our products from our vendors, through us, to our customers. The method of selling products to veterinarians is dictated by our vendors. Traditional “buy/sell” transactions, which account for the vast majority of our business, involve the direct purchase of products by us from vendors, which we manage and typically store in our warehouses. A customer places an order with us, and the order is then picked, packed, shipped and invoiced by us to our customer, followed by payment from our customer to us.

We also sell certain product lines to our customers under agency agreements with some of our vendors. Under this model, when we receive orders for products from the customer, we transmit the order to the vendor who then picks, packs and ships the products direct to our customers. In some cases our vendor invoices and collects payment from our customer, while in other cases we invoice and collect payment from our customer. We receive a commission payment for soliciting the order and for providing other customer service activities. Our operating expenses associated with agency sales transactions are lower than in traditional “buy/sell” transactions.

We have written agreements with approximately 40 of our vendors. Our vendor agreements are typically terminable by either party without cause on short notice.

Animal health product vendors may implement sales promotions or price changes for products distributed to veterinarians that can affect the period in which we recognize revenues. In addition, at the time we negotiate vendor agreements for the upcoming year, our vendors typically establish sales growth goals for us to meet in order to receive performance rebates or may reduce or eliminate rebate opportunities. These growth goals may be based on quarterly, semi-annual or annual targets.

Product returns from our customers and to our vendors occur in the ordinary course of business. We extend our customers the same return of goods policies as are extended to us by our vendors. We do not believe that our operations will be adversely impacted due to the return of products.

Distribution

As of September 30, 2013, we distributed our products from thirteen strategically located distribution centers throughout the United States and one in the United Kingdom.  During our fiscal year 2013, we moved into a new distribution center in Shakopee, Minnesota. During our fiscal year 2012, we completed the move of our distribution center near Harrisburg, Pennsylvania to a larger facility in Elizabethtown, Pennsylvania. 

We maintain inventory levels in our warehouses appropriate to satisfy customer demand for prompt delivery and fulfillment of their product orders. Inventory levels are managed on a daily basis through our information systems. In order to meet the rapid delivery requirements of our customers, we offer next-day delivery service on most of the products we stock in our warehouses. We estimate that during the fiscal year ended September 30, 2013, we shipped same day from our warehouses approximately 99% of the dollar value of orders placed by our customers. We currently ship the majority of our orders in the United States through United Parcel Service, Inc. (“UPS”) with the balance of our orders being shipped by our own delivery trucks, local carriers, regional carriers and other national carriers.  Products shipped out of the Centaur and Micro facilities are primarily shipped by our own delivery trucks.

9

Competition

The distribution and manufacture of animal health products is highly competitive. We compete with numerous vendors and distributors based on customer relationships, service and delivery, product selection, price and e-commerce capabilities. Manufacturers have also invested heavily in the animal health industry by developing direct sales capabilities, which has intensified competition.  Most of our products are available from several sources, including other distributors and vendors, and our customers tend to have relationships with several distributors. In addition, our competitors could obtain exclusive rights to distribute certain products, eliminating our ability to distribute those products. Consolidation in the veterinary distribution business could result in existing competitors increasing their market share, which could give them greater pricing power, decrease our revenues and profitability, and increase the competition for customers. Our primary competitors in the United States include the following:

· Animal Health International, Inc.;

· Henry Schein Animal Health;

· Midwest Veterinary Supply;

· Patterson Veterinary;

· other national, regional, local and specialty distributors; and

· manufacturers with direct sales capabilities.

The role of the animal health product distributor has changed dramatically during the last decade. Successful distributors are increasingly providing value‑added services in addition to the products they have traditionally provided. We believe that to remain competitive we must continue to add value to the distribution channel, while removing unnecessary costs associated with product movement.

Seasonality in Operating Results

Our quarterly sales and operating results have varied significantly in the past, and will likely continue to do so in the future. Historically, our total revenues have typically been higher during the spring and fall months due to increased sales of production animal products. The sales of production animal products can vary due to changes in commodity prices and weather patterns (e.g. droughts or seasons of higher precipitation that determine how long cattle will graze and consequently the number of days an animal is on feed during a finishing phase) which may also affect seasonality.  Product use cycles for production animal products are directly related to medical procedures performed by veterinarians on production animals during the spring and fall months. These buying patterns can also be affected by vendors’ and distributors’ marketing programs or price increase announcements, which can cause veterinarians to purchase production animal health products earlier than those products are needed. This kind of early purchasing may reduce our sales in the months these purchases would have otherwise been made. See “Risk Factors — Our quarterly operating results may fluctuate significantly, and these fluctuations may cause our stock price to fall.” Additionally, while we accrue rebates as they are earned, our rebates have historically been highest during the quarter ended December 31, since some of our vendors’ rebate programs were designed to include targets to be achieved near the end of the calendar year. This trend has slowed some in recent years due to certain changes in vendor contracts but it still remains our largest quarter for vendor rebates.

Intellectual Property

We have registered with the United States Patent and Trademark Office the marks “MWI,” “MWI Design,” “MWIVET.com,” “VETONE,” “PROXYRx” and “ANIMAL Rx PHARMACY,” among others.  We believe that the MWI mark is well recognized in the animal health products industry and by veterinarians and is therefore a valuable asset of ours.

Our success depends in part on our ability to protect our intellectual property rights. There are always risks that third parties may claim we are infringing upon their intellectual property rights and we could be prevented from selling our products, or suffer significant litigation or licensing expenses as a result of these claims. See “Risk Factors – If third parties claim that we infringe upon their intellectual property rights, our financial results could be adversely affected.” In addition, third parties may infringe upon or design around our intellectual property rights, and we may expend significant resources enforcing our rights or suffer competitive injury with adverse effects on

10

our business and results of operations. See “Risk Factors – Our intellectual property rights may be inadequate to protect our business.”

Employees

As of September 30, 2013, we had 1,500 employees across the United States and 232 employees in the United Kingdom. We have not experienced a shortage of qualified personnel in the past, and believe that we will be able to attract such employees in the future. None of our employees are a party to a collective bargaining agreement, and we consider our relations with our employees to be good.

Website

Our website address is www.mwivet.com and can be used to access free of charge, through the investor relations category, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with or furnish it to the SEC.  The information on our website is not incorporated as a part of this annual report.  The public can also obtain copies of these reports by visiting the SEC’s Public Reference Room at 100 F Street NE, Washington DC 20549, or by calling the SEC at 1-800-SEC-0330, or by accessing the SEC’s website at www.sec.gov.

Governmental Regulation

Certain of our businesses involve the distribution of pharmaceuticals, and in this regard we are subject to various local, state, federal and foreign governmental laws and regulations applicable to the distribution of pharmaceuticals.  Our vendors of pharmaceuticals, vaccines, parasiticides and certain controlled substances are typically regulated by federal agencies, such as the Food and Drug Administration (“FDA”), the United States Department of Agriculture (“USDA”), the Environmental Protection Agency (“EPA”), and the Drug Enforcement Agency (“DEA”), as well as most similar state agencies. Therefore, we are subject, either directly or indirectly, to regulation by the same agencies. Most states and the DEA require us to be registered or otherwise keep a current permit or license to handle controlled substances. Manufacturers of vaccines are required by the USDA to comply with various storage and shipping criteria and requirements for vaccines. To the extent we distribute such products, we must comply with the same requirements, including, without limitation, the storage and shipping requirements for vaccines.

Most state boards of pharmacy require us to be licensed in their respective states for the sale of pharmaceutical products and medical devices within their jurisdictions. As a distributor of prescription pharmaceutical products, we are subject to the Prescription Drug Marketing Act (“PDMA”). The PDMA provides governance and authority to the states to provide minimum standards, terms and conditions for the licensing by state licensing authorities of persons who “engage” in wholesale distribution (as defined by each state regulatory agency) in interstate commerce of prescription drugs. With this authority, states require site-specific registrations for the parties that engage in the selling and/or physical distribution of pharmaceutical products into their state in the form of out-of-state registrations. The federal pedigree regulations of the FDA under the PDMA require tracking human labeled prescription products through the entire distribution chain and are applicable to distributors that do not have a written agreement with the manufacturer granting the wholesale distributor status as an “Authorized Distributor of Record.” Selling and/or distributing products without the appropriate registrations may subject us to fines, penalties, misdemeanor or felony convictions, and/or seizure of the products involved. We have a Manager of Regulatory Compliance and have engaged outside consultants as needed to assist us in meeting and complying with the various state and federal licensure requirements to which we are subject.

In order to supply pharmaceutical products in the United Kingdom, we must comply with the requirements of the applicable regulatory bodies. The Veterinary Medicines Directorate regulates the use of veterinary products and the Medicines Healthcare Products Regulatory Authority regulates the use of human medicinal products within the United Kingdom.

Our pet cremation business is subject to state and local zoning laws, and we are required to maintain permits for the construction and operation of an animal incineration device. We are also required to have an air pollution permit in connection with the operation of our pet cremation business.

11

Some states (as well as certain cities and counties) require us to collect sales taxes/use taxes on certain types of animal products. We are also subject to laws governing our relationship with employees, including minimum wage requirements, overtime, working conditions and citizenship requirements. In addition, we are subject to additional regulations regarding our hiring practices because several federal, state and local governmental agencies are our customers.

Environmental Considerations

We do not currently manufacture or alter in any way the composition of the vast majority of the products that we distribute. All products are distributed in compliance with the relevant rules and regulations as approved by various state and federal agencies.

Executive Officers of the Registrant

The following table sets forth the names, ages and titles, as well as a brief account of the business experience of each person who was an executive officer of the Company as of the date of the filing:

The following table sets forth the names, ages and titles, as well as a brief account of the business experience, of each person who was an executive officer of the Company as of the date of the filing:
Name	Age	Title
James F. Cleary, Jr.	50	Board Director, President and Chief Executive Officer
Mary Patricia B. Thompson	50	Senior Vice President of Finance and Administration, Chief Financial Officer
Jeffrey J. Danielson	53	Vice President of Sales
John J. Francis	60	Vice President and General Manager of the Specialty Resources Group
Bryan P. Mooney	45	Vice President of Operations
Kevin W. Price	45	Vice President of Inventory Management
John R. Ryan Alden J. Sutherland Jeremy C. Ouchley	44 50 37	Vice President of Marketing Vice President and Chief Information Officer Vice President and General Counsel

James F. Cleary, Jr. has served as President since March 2000 and Chief Executive Officer since June 2002. Mr. Cleary has also been a member of the board of directors since June 2002. He joined MWI in January 1998 as Director of National Accounts and was promoted to Vice President of Demand Generation in 1999. Mr. Cleary was Vice President of Agri Beef, MWI’s former parent, from 1996 to 1998. From 1990 to 1996, Mr. Cleary was employed in management positions with Morrison Knudsen Corporation and its affiliate MK Rail Corporation. Mr. Cleary graduated from Dartmouth College in 1985 with a Bachelor of Arts in Economics and received his Masters of Business Administration from Harvard Business School in 1990. Mr. Cleary is also a member of the Board of Managers of Feeders’ Advantage, L.L.C.

Mary Patricia B. Thompson, CPA has served as Senior Vice President of Finance and Administration, Chief Financial Officer since August 2006, with oversight of finance, regulatory compliance, inventory management, information technology, and human resources.  Prior to August 2006, Ms. Thompson had been the Vice President, Secretary and Chief Financial Officer since June 2002. Ms. Thompson joined Agri Beef in 1989 as the Feedlot and Commodity Division Controller. In September 1991, Ms. Thompson was promoted to Controller of MWI Co., then a wholly-owned subsidiary of Agri Beef. Prior to joining Agri Beef, Ms. Thompson worked for Arthur Andersen LLP from 1985 to 1989, where she provided auditing and accounting services. Ms. Thompson graduated from the University of Idaho in 1985, summa cum laude, with a Bachelor of Science in Accounting. Ms. Thompson is a licensed Certified Public Accountant in the state of Idaho. Ms. Thompson is a member of the board of directors and past-president of the American Veterinary Distributors Association.  Ms. Thompson is also a member of the University of Idaho College of Business and Economics Advisory Board.

Jeffrey J. Danielson has served as Vice President of Sales since 2001. Mr. Danielson joined MWI in 1985 as an Outside Sales Representative, serving the state of Washington. From 1989 to 1991, Mr. Danielson served as

12

Assistant Sales Manager and from 1991 to 2001 served as National Sales Manager. Mr. Danielson graduated from Colorado State University in 1983 with a Bachelor of Science in Agricultural Business.

John J. Francis has served as Vice President and General Manager of the Specialty Resources Group since September 2006.  Prior to joining MWI, Mr. Francis worked for Webster Veterinary Supply as the Vice President of Sales from April 2004 to September 2006.  Mr. Francis was the Key Account Manager of Excel, a division of Cargill, Inc., from June 2002 to April 2004 and was the Vice President of Sales for Future Beef based in Parker, Colorado, from May 2000 to May 2002. From 1990 until 2000, Mr. Francis served as General Manager and then President of MWI Co. Mr. Francis graduated from Michigan State University in 1975 with a Bachelor of Science in Animal Husbandry and holds a Master of Science in Animal Science obtained in 1977 from the University of Illinois.  Mr. Francis is a member of the board of directors of Vedco, Inc.

Bryan P. Mooney has served as Vice President of Operations since May 2005. Mr. Mooney joined MWI in January 1994 as the Operations Manager of our Denver, Colorado distribution operation and served in that capacity until May 1998. From May 1998 until February 2005, Mr. Mooney served as Manager of Transportation and Logistics and from January 2005 until May 2005 as the Western Regional Operations Manager. Mr. Mooney graduated from the University of Wyoming in 1991 with a Bachelor of Science in Agricultural Business.

Kevin W. Price has served as Vice President of Inventory Management since October 1, 2011. From 2003 to 2011, Mr. Price served as Purchasing Manager.  In 1998, Mr. Price was promoted to Food Animal Product Manager.  Mr. Price joined MWI in April 1989 in our Nampa distribution center. Mr. Price graduated from Northwest Nazarene University in 2010 with a Bachelor of Science in Business Administration.  In 2007, Mr. Price filed for bankruptcy under Chapter 13 of the United States Bankruptcy Code, and Mr. Price has informed the Company that he is performing his obligations in full under the plan.  Mr. Price has also informed the Company that he intends to make additional payments outside of the plan so that his legitimate creditors will be paid in full when all payments are completed.

John R. Ryan has served as Vice President of Marketing since 2000. Mr. Ryan joined MWI in June 1995 as an Outside Sales Representative and served in such capacity until June 2000. Prior to joining MWI, Mr. Ryan worked for the Virbac Corporation (a companion animal pharmaceutical company) as a Territory Manager from 1993 to 1995. Mr. Ryan graduated from the University of California, Davis in 1993 with a Bachelor of Science in Animal Physiology.

Alden J. Sutherland joined MWI in January 2012 and has served as Vice President and Chief Information Officer since April 1, 2012.  Prior to joining MWI, he served as President of Exploridor since January 2011.  Prior to Exploridor, he served as President of Pristine Pools and Spas from 2010 to 2011.  He served as Chief Information Officer at Jostens, Inc. in Minneapolis, Minnesota from 2006 to 2010.  From 2000 to 2006, he served as Chief Information Officer at Entegris, Inc.  From 1987 to 2000, he held various leadership and I.T. positions for Novartis in its former Seed and Crop Protection Divisions, including Director of I.T. in the United States, Head of I.T., Finance and Planning for the Asia Pacific Region, Head of Finance, I.T. and Operations for the Eastern Europe and Former Soviet Union Region and Controller for Europe and Latin America.  Mr. Sutherland graduated from Boise State University in 1988 with a Bachelor of Business Administration.

Jeremy C. Ouchley joined MWI in October 2013 as Vice President and General Counsel.  Prior to joining MWI, he served as Business Unit Counsel for McKesson Corporation from December 2010 to September 2013. From March 2007 to December 2010, he served as Associate General Counsel – Business Development of US Oncology, Inc., and as Senior Counsel from February 2006 to March 2007.  Previously, Mr. Ouchley practiced corporate and securities law with Baker Botts LLP from September 2002 to February 2006. Mr. Ouchley received his JD from the University of Texas School of Law in 2002, with honors, and received his Bachelors of Business Administration, summa cum laude, from the University of Louisiana at Monroe in 1998.

13

Item 1A.Risk Factors.

In addition to the factors discussed elsewhere in this Form 10‑K, the following are important factors which could cause actual results or events to differ materially from those contained in any forward-looking statements made by or on behalf of the Company.

Our operating results may fluctuate due to factors outside of management’s control.

Our future revenues and results of operations may significantly fluctuate due to a combination of factors, many of which are outside of management’s control. The most notable of these factors include:

· the impact of vendor consolidation on our business;

· changes in or availability of vendor contracts or rebate programs;

· vendor rebates based upon attaining certain growth goals;

· transitional challenges associated with acquisitions, including the failure to retain customers and the disproportionate demands on management resources to integrate acquired businesses;

· financial risks associated with acquisitions and investments;

· changes in the way vendors introduce/deliver products to market;

· seasonality;

· competition;

· possible changes in the use of feed additives (antibiotics, growth promotants) used in production animal products due to trade restrictions, animal welfare and/or government regulations;

· an outbreak of foodborne diseases in production animal products;

· inability to ship products to the customer as a result of technological or shipping disruptions;

· the recall of a significant product by one of our vendors;

· risks associated with our international operations;

· an outbreak of infectious disease in animals;

· extended shortage or backorder of a significant product by one of our vendors;

· the impact of tightening credit standards and/or access to credit on behalf of our customers and suppliers;

· a disruption caused by adverse weather (i.e. drought) or other natural conditions or disasters;

· exclusivity requirements with certain vendors that may prohibit us from distributing competing products manufactured by other vendors or margin reductions if we become a non-exclusive distributor;

· the impact of general economic trends on our business;

· our intellectual property rights may be inadequate to protect our business;

· the timing and effectiveness of marketing programs or price changes offered by our vendors;

· the timing of the introduction of new products and services by our vendors;

· unforeseen litigation;

· the ability to borrow on our revolving credit facility, extend the terms of our revolving credit facility or obtain alternative financing on favorable terms or at all; and

· risks from potential increases in variable interest rates.

These factors could adversely impact our results of operations and financial condition. We may be unable to reduce operating expenses quickly enough to offset any unexpected shortfall in revenues or gross profit. If we have a shortfall in revenues or gross profit without a corresponding reduction to expenses, operating results may suffer. Our operating results for any particular fiscal year or quarter may not be indicative of future operating results. You should not rely on year-to-year or quarter-to-quarter comparisons of results of operations as an indication of our future performance.

14

The loss of one or more of our key vendors, a material reduction in their supply of products to us or material changes in the terms we obtain from them could have a material adverse effect on our business.

We currently do not manufacture the vast majority of our products and are dependent on our vendors for our supply of products.  We maintain written agreements with many of our vendors, but most agreements are terminable by either party without cause on short notice.  Our ten largest vendors accounted for approximately 70% of our revenues for the fiscal year ended September 30, 2013 and 71% of our revenues for each of the fiscal years ended September 30, 2012 and 2011. Zoetis supplied products that accounted for approximately 20% of our revenues for our fiscal years ended September 30, 2013 and 2012 and 24% of our revenues for our fiscal year ended September 30, 2011. Of the Zoetis supplied products, production animal products under a livestock agreement accounted for approximately 10%, 11% and 13% of our revenues for our fiscal years ended September 30, 2013, 2012 and 2011, respectively.  Merck, formerly known as Intervet/Schering-Plough, supplied products that accounted for approximately 14%, 15% and 11% of our revenues for our fiscal years ended September 30, 2013, 2012 and 2011, respectively.  Merial, a subsidiary of Sanofi-Aventis, supplies the majority of their products under an agency relationship.  Commission revenue generated from Merial products accounted for approximately 50%, 52% and 47% of total commission revenues for our fiscal years ended September 30, 2013, 2012 and 2011, respectively.

Our ability to sustain our gross profits is dependent in part upon our ability to obtain favorable terms and access to new and existing products from our vendors. These terms may be subject to changes from time to time by vendors, such as changing from a “buy/sell” to an agency relationship, or from an agency to a “buy/sell” relationship, either of which could adversely affect our revenues and operating income.

Vendors may also choose to change the method in which products are taken to market.  For example, a vendor may change our relationship from a complete distribution provider, including logistics and sales support, to only a logistics provider or only a sales support provider.  A reduction in our role as a value-added service provider would result in reduced margins on product sales, which could have a material adverse effect on our business.

Our vendors may decide to compete with us by pursuing or increasing their efforts in direct marketing and sales of their products. These vendors could sell their products at lower prices and maintain a higher gross margin on their product sales than we can. In this event, veterinarians or animal owners may elect to purchase animal health products directly from these vendors.  Increased competition from any vendor of animal health products could significantly reduce our market share and adversely impact our financial results.

An adverse change in vendor rebates could negatively affect our business.

The terms on which we purchase or sell products from many vendors of animal health products may entitle us to receive a rebate based on the attainment of certain growth goals. Vendors may adversely change the terms of or eliminate some or all of these rebate programs at any time without notice. Because the amount of rebates we earn is directly related to the attainment of pre-determined sales growth goals, and because the nature of the rebate programs and the amount of rebates available are determined by the vendors, there can be no assurance as to the amount of rebates that we will earn in any given year. Changes to or elimination of any rebate program initiated by our vendors may have a material effect on our gross profit and our operating results in any given quarter or year. Vendors may reduce or eliminate rebates offered under their programs, interpret the terms of their rebate programs in a way that is adverse to us or increase the growth goals or other conditions we must meet to earn rebates to levels that we cannot achieve. Additionally, factors outside of our control, such as customer preferences or vendor supply issues, can have a material impact on our ability to achieve the growth goals established by our vendors, which may reduce the amount of rebates we receive. The occurrence of any of these events could have an adverse impact on our results of operations.

Consolidation among our vendors could be harmful to our business.

Vendor consolidation continues in the animal health industry, which is a trend that could harm our business.  For example, in 2009, Pfizer acquired Wyeth, including Fort Dodge, a division of Wyeth.  At the time of the acquisition, Pfizer and Fort Dodge were two of our largest vendors measured by revenues.  In 2013, Pfizer completed the spin off its animal health business as Zoetis, which is now our largest vendor, measured by revenues. 

15

As vendors consolidate, they may use their increased market share as leverage to negotiate terms, such as pricing, that are materially less favorable than our current terms.  In addition, consolidated vendors may be more likely to sell directly to animal health customers. If vendors have difficulty integrating consolidated operations, product supply to us could be disrupted.  The occurrence of any of these events could materially adversely affect our net sales and profitability. There is also a possibility of product disruption as these companies integrate their operations which could adversely impact our financial results.  Further consolidation could result in our vendors further increasing their market share, which could give vendors greater pricing power and make it easier for such vendors to sell their products directly to animal health customers, both of which could decrease our net sales and profitability.

Difficulties with the integration of acquisitions or the improvement of the performance of acquired companies may impose substantial costs and delays and cause other unanticipated problems for us.

In connection with our growth strategy, we from time to time acquire other businesses that we believe will expand or complement our existing businesses and operations.  For example, on November 1, 2013, we acquired substantially all of the assets of IVESCO, a distributor of animal health and related products with eleven shipping locations across the United States.  Acquisitions involve a number of risks relating to our ability to integrate an acquired business into our existing operations. The process of integrating or improving the performance of the operations of an acquired business, particularly its personnel, could cause interruptions to our business. Some of the risks we face include:

· the need to spend substantial operational and financial resources in integrating new businesses, technologies and products, and difficulties management may encounter in integrating or improving the performance of the operations, personnel or systems of the acquired business;

· the need to spend a disproportionate amount of management resources on new acquisitions, potentially distracting management from other key business activities;

· difficulties integrating the information technology systems of the businesses we acquire;

· retention of key personnel, customers and vendors of the acquired business;

· damage to relationships with customers, resulting in loss of customers;

· regulatory issues with acquired operations or assets;

· impairments of goodwill and other intangible assets; and

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

If we are unable to successfully integrate the operations of an acquired business into our operations, we could be required to undertake unanticipated changes. These changes could have a material adverse effect on our business.

In addition, it may be difficult to manage rapid growth from our acquired companies in the future, and the future success of our acquisitions depends on our ability to implement and/or maintain:

· sales and marketing programs

· customer service levels;

· current and new product and service lines and vendor relationships;

· technological support which equals or exceeds our competitors’;

· recruitment and training of new personnel; and

· operational and financial control systems.

If we are not able to manage our rapid growth from our acquisitions, there is a risk our customer service quality could deteriorate which may in turn lead to decreased sales or profitability. Also, due to acquisitions the cost of our operations could increase faster than growth in our revenues, negatively impacting our profitability.

16

Our quarterly operating results may fluctuate significantly, and these fluctuations may cause our stock price to fall. 

Our quarterly revenues and operating results have varied significantly in the past, and may continue to do so in the future.  Reasons for this seasonal variability include:

· higher vendor rebates during the quarter ending December 31, as a result of rebate programs designed around full calendar year targets;

· seasonal buying patterns of veterinarians for production animal products for medical procedures performed during the spring and fall months;

· vendor and distributor marketing program and price increase announcements, which can lead to advance purchases of products by veterinarians, resulting in lower sales in later periods;

· volatility in commodity prices (e.g., milk, grains, livestock and poultry) and weather patterns (e.g., droughts or seasons of higher precipitation), which impact the timing of animal treatment patterns, and, consequently, our revenues; and

· changes in the general economy impacting production animal markets.

We believe period-to-period comparisons of our results of operations are not necessarily meaningful as our future revenue and results of operations may vary substantially. It is also possible that in future quarters our results of operations will be below the expectations of securities analysts and investors. In either case, the price of our common stock could decline, possibly materially.

Our market is highly competitive. Failure to compete successfully could have a material adverse effect on our business, financial condition and results of operations.

The market for veterinary distribution services is highly competitive, continually evolving and subject to technological change. We compete with numerous vendors and distributors based on customer relationships, service and delivery, product selection, price and e-commerce capabilities.  Our primary competitors in the United States include the following:

· Animal Health International, Inc;

· Henry Schein Animal Health;

· Midwest Veterinary Supply;

· Patterson Veterinary;

· other national, regional, local and specialty distributors; and

· manufacturers with direct sales capabilities.

Some of our competitors may have more customers, stronger brand recognition or greater financial, technological and other resources than we do. Most of our products are available from several sources, including other distributors and vendors, and our customers typically have relationships with several distributors and vendors. Many of our competitors have comparable product lines, technical expertise or distribution strategies that directly compete with us and some of our competitors own veterinary practice management software, which they can offer to customers. Our competitors could obtain exclusive rights to distribute certain products, eliminating our ability to distribute those products. The entry of new or additional animal health distributors could also have a material adverse effect on our ability to compete. If we do not compete successfully against these organizations, it could have a material and adverse effect on our business, financial condition and results of operations.

We only have one distribution center in the United Kingdom and any catastrophic event could materially impact our results.

We conduct all of our fulfillment operations in the United Kingdom from our distribution center in Castle Cary, England. This facility contains all of our product inventory in that country. A natural disaster or other catastrophic event, such as a fire, break-in, server or systems failure, terrorist attack, or other comparable event at this facility

17

would cause interruptions or delays in our business and loss of inventory and could render us unable to process or fulfill customer orders in a timely manner, or at all. Further, we have a limited disaster recovery plan, and our business interruption insurance may not adequately compensate us for losses that may occur, including with respect to any lost profits for any period in which the business is not able to operate.  If our operations at our UK facility were interrupted, our business, financial condition, and operating results would be harmed.

Consolidation ofveterinary practices and the formation of buying groups may decrease our revenues and profitability.

Consolidation of the many small, privately-held veterinary practices and the formation of buying groups by veterinarians could lead to our customers having increased purchasing leverage and the ability to negotiate lower product costs. This could reduce our operating margins and negatively impact our revenues and profitability. Any of these developments could result in increased marketing expenses and have a material adverse effect on our business, financial condition and results of operations.

Increases in over-the-counter sales of animal health products or sales of products from non-veterinarian sources could adversely affect our business.

We sell our products primarily to veterinarians.  For this reason, we rely on animal owners who purchase their animal health products directly from veterinarians, which we refer to as the ethical channel.  Animal health products are becoming increasingly available to consumers at competitive prices from sources other than the ethical channel, including:

· human health product pharmacies;

· internet pharmacies; and

· big-box retailers such as Walmart, Target and Costco.

Any increased competition from non-ethical channels could significantly reduce our market share and adversely impact our financial results.

Demand from customers in the production animal market may be affected by a decrease in the sale and consumption of protein products due to increased consumer concern with health and animal welfare, loss of export markets, international trade restrictions and/or governmental regulations, or an outbreak of foodborne disease.

Recently, there has been consumer concern and consumer activism with respect to the use of antibiotics and growth promotants in animal feed as well as the consumption of protein (defined as beef, dairy, swine or poultry) products generally. In addition, recent heightened concern over production animal welfare has resulted in a growth promotant product we sell being removed from the market. A sustained campaign of negative press resulting from media or consumer advocacy groups, industry litigation, loss of export markets or other factors could adversely affect the public’s perception of the industry as a whole, lead to reluctance by customers to buy protein or other products.  The resulting negative impact on the production animal market can strongly affect demand for the products we distribute.  Continued concern over the impact of growth promotants on animal welfare could result in further removal from the market of products in that category, adversely impacting our sales. In addition, heightened consumer concern over the use of antibiotics and growth promotants in animal feed could result in increased government regulation in response to that concern.  Finally, an outbreak of foodborne disease could reduce consumer demand for animal products, harm export markets for such products and lead to increased government regulation of the industry. Any such event may affect the growth of the production animal market and lead to a decrease in the sales of the products we distribute which could have a material adverse effect on our business, financial condition and results of operations.

18

Risks associated with our international operations.

We own Centaur, an animal health distributor based in the United Kingdom.  In addition, we may expand our international operations into other countries. International operations are subject to risks that may materially adversely affect our business, results of operations and financial condition.  The risks that our international operations are subject to include, among other things:

· difficulties and costs relating to staffing and managing foreign operations;

· difficulties in establishing channels of distribution;

· fluctuations in the value of foreign currencies;

· repatriation of cash from our foreign operations to the United States;

· regulatory requirements;

· foreign countries may impose additional withholding taxes or otherwise tax our foreign income;

· separate operating and financial systems;

· disaster recovery;

· unexpected difficulties in importing or exporting our products;

· imposition of import/export duties, quotas, sanctions or penalties;

· liability related to the defined benefit plan; and

· unexpected regulatory, economic and political changes in foreign markets.

Our business in the United Kingdom relies on a smaller number of relatively large customers than our business in the United States, and any default in payment by one or more of these significant customers there could adversely impact our results of operations and financial condition.

Our wholly owned subsidiary, Centaur, a distributor of animal health products to veterinarians in the United Kingdom, relies on a smaller number of relatively large customers than does our business in the United States.  Centaur’s customers in the aggregate account for 14.5% and 18.1% of our consolidated accounts receivable balance as of September 30, 2013 and December 31, 2012, respectively and one significant customer of Centaur in particular accounts for 2.6% and 7.6% of our consolidated accounts receivable balance as of September 30, 2013 and December 31, 2012, respectively.  Like all of our customers, we continually assess these customers’ ability to pay us and adjust our allowance for doubtful accounts as necessary.  However, if any of the significant customers of Centaur were to become insolvent or otherwise are unable or unwilling to make timely payments to us for any reason, our business in the United Kingdom will be harmed, and our results of operations and financial condition will be adversely affected.

We rely substantially on third-party vendors, and the loss of products or delays in product availability from one or more third-party vendors could substantially harm our business.

We must contract for the supply of current and future products of appropriate quantity, quality and cost. These products must be available on a timely basis and be in compliance with any regulatory requirements. Failure to do so could substantially harm our business.

We often purchase products from our vendors under agreements that typically have a term of one year and can be terminated on short notice. Our vendors may not meet their obligations under these agreements. Risks of relying on vendors include:

· If an existing agreement expires or a certain product line is discontinued or recalled, then we would not be able to continue to offer our customers the same breadth of products and our sales and operating results would likely suffer unless we are able to find an alternate supply of a similar product.

· If market demand for our products increases suddenly, our current vendors might not be able to fulfill our commercial needs, which would require us to seek new manufacturing arrangements or find new sources of supply, and may result in substantial delays in meeting market demand. If we consistently generate more demand for a product than a given vendor is capable of handling, it could lead to large backorders and potentially lost sales to competitive products that are more readily available.

19

· We may not be able to control or adequately monitor the quality of products we receive from our vendors. Poor quality products could damage our reputation with our customers.

· Some of our third party vendors are subject to ongoing periodic unannounced inspection by regulatory authorities, including the FDA, the USDA, the EPA and the DEA, as well as other federal and state agencies for compliance with strictly enforced regulations. We do not have control over our vendors’ compliance with these regulations and standards. Violations could potentially lead to interruptions in supply that could lead to lost sales to competitive products that are more readily available.

· If a vendor is unable to obtain the necessary credit to manage their business, they may not be able to deliver their products to us.

Potential problems with vendors such as those described above could substantially decrease sales of our products, lead to higher costs and damage our reputation with our customers.

We rely upon third parties to ship products to our customers and interruptions in their operations could harm our business, financial condition and results of operations.

We use UPS as our primary delivery service for our air and ground domestic shipments of products to our customers. If there were any significant service interruptions, there can be no assurance that we could engage alternative service providers to deliver these products in either a timely or cost-efficient manner, particularly in rural areas where many of our customers are located. Any labor disputes, slowdowns, transportation disruptions or other adverse conditions in the transportation industry experienced by UPS could impair or disrupt our ability to deliver our products to our customers on a timely basis, and could have a material adverse effect upon our customer relationships, business, financial condition and results of operations. In addition, rising fuel costs may result in continued increases in shipping costs charged by UPS, or other delivery service providers, and could have an adverse effect on our financial condition and results of operations.

The loss of one or more significant customers could adversely affect our profitability.

Our two largest customers, Banfield and Feeders’ Advantage (a related party), accounted for approximately 6% and 3%, respectively, of our product sales for our fiscal year ended September 30, 2013, 6% and 3%, respectively, of our product sales for our fiscal year ended September 30, 2012 and 6% and 4%, respectively, of our product sales for our fiscal year ended September 30, 2011. Our ten largest customers, excluding Banfield and Feeders’ Advantage, accounted for approximately 7%, 6% and 3% of our product sales for our fiscal years ended September 30, 2013, 2012 and 2011, respectively. Our business and results of operations could be adversely affected if the business of these customers was lost. We cannot guarantee that we will maintain or improve our relationships with these customers or that we will continue to supply these customers at current levels. Banfield, Feeders’ Advantage and other customers may seek to purchase some of the products that we currently sell directly from the vendors or from one or more of our competitors. Furthermore, our customers are not required to purchase any minimum amount of products from us. The loss of Banfield or Feeders’ Advantage or deterioration in our relations with either of them could significantly affect our financial condition and results of operations. Additionally, deterioration in the financial condition of one or more of our customers could have a material adverse effect on our results of operations.

Our acquired technology or developed technology may not be successful in maintaining existing customers or gaining new customers or the technology may fail to produce its intended results.

The process of acquiring or developing new technology products and solutions is inherently complex and uncertain. It requires accurate anticipation of customers’ changing needs and emerging technological trends. We must make long-term investments and commit significant resources before knowing whether these investments will eventually result in products or services that achieve customer acceptance and generate the revenues required to provide desired returns. If we fail to accurately anticipate and meet our customers’ needs through the development of new products and technologies and service offerings or if we fail to adequately protect our intellectual property rights or if our new products are not widely accepted or if our current or future products fail to meet applicable worldwide regulatory requirements, we could lose market share and customers to our competitors and that could

20

materially adversely affect our results of operations and financial condition.  Additionally, if technology investments do not achieve the intended results we may write-off the investments, and we face the risk of claims from system users that the systems failed to produce the intended result and/or that the systems caused negative performance of the customer’s animals or overall operation of the customer’s business.  Any such claims, even those without merit, could be expensive and time consuming to defend, cause us to lose a customer and the associated revenue, divert management’s attention and resources or require us to pay damages.

If we fail to comply with or become subject to more onerous government regulations governing our industry, our business could be adversely affected.

The veterinary distribution industry is subject to changing political and regulatory influences. Both state and federal government agencies regulate the distribution of certain animal health products and we are subject to regulation, either directly or indirectly, by the FDA, the USDA, the EPA, the DEA and comparable state agencies. As a distributor of prescription pharmaceutical products, we are also subject to the PDMA, which provides for minimum standards, terms and conditions to be maintained for licensing as a distributor, including strict drug pedigree requirements for human labeled prescription products.  If we are unable to maintain or achieve compliance with these laws and regulations, we could be subject to substantial fines or other restrictions on our ability to provide competitive distribution services, which could have an adverse impact on our financial condition.

Our vendors are subject to regulation by the FDA, the USDA, the EPA, the DEA, and the PDMA, as well as other federal and state agencies, and material changes to the applicable regulations could affect our vendors’ ability to manufacture certain products, which could adversely impact our product supply. In addition, some of our customers may rely, in part, on farm and agricultural subsidy programs. Changes in the regulatory positions that impact the availability of funding for such programs could have an adverse impact on our customers’ financial positions, which could lead to decreased sales.

We cannot assure you that existing laws and regulations will not be revised or that new, more restrictive laws will not be adopted or become applicable to us or the products that we distribute or dispense.  We cannot assure you that the vendors of products that may become subject to more stringent laws will not try to recover any or all increased costs of compliance from us by increasing the prices at which we purchase products from them, or that we will be able to recover any such increased prices from our customers. We also cannot assure you that our business and financial condition will not be materially and adversely affected by future changes in applicable laws and regulations.

Loss of key management or sales representatives could harm our business.

Our future success depends to a significant extent on the skills, experience and efforts of management, including our President and Chief Executive Officer, Mr. James F. Cleary, Jr. While we have not experienced problems in the past attracting and maintaining members of our management team, the loss of any or all of these individuals could adversely impact our business. We do not carry key-man life insurance on any member of management. In addition, we do not have employment agreements with key members of our senior management team. We must continue to develop and retain a core group of individuals if we are to realize our goal of continued expansion and growth. We cannot assure you that we will be able to do so in the future.

Also, due to the specialized nature of our products and services, generally only highly qualified and trained sales representatives have the necessary skills to market our products and provide our services. These individuals develop relationships with our customers that could be damaged if these employees are not retained. We face intense competition for the hiring of these professionals, and many professionals in the field that may otherwise be attractive candidates for us to hire may be bound by non-competition agreements with our competitors. Any failure on our part to hire, train and retain a sufficient number of qualified professionals would damage our business. We do not generally enter into agreements that contain non-competition provisions with our employees, other than with members of our senior management team, former owners of acquired companies and certain other employees.

21

Failure of, or security problems with, our information systems could damage our business. 

Our information systems are dependent on third party software, global communications providers, telephone systems and other aspects of technology and Internet infrastructure that are susceptible to failure. Though we have implemented security measures and some redundant systems, our customer satisfaction and our business could be harmed if we or our vendors experience any system delays, failures, loss of data, power outages, computer viruses, break-ins, unauthorized access by competitors or similar disruptions. Although we have safeguards for emergencies, including, without limitation, sophisticated back-up systems, the occurrence of a major catastrophic event or other system failure at any of our distribution facilities could interrupt data processing or result in the loss of stored data. This may result in the loss of customers or a reduction in demand for our services. Only some of our systems are fully redundant and although we do carry business interruption insurance, it may not be sufficient to compensate us for losses that may occur as a result of system failures. If a disruption occurs, our profitability and results of operations may suffer.

The outbreak of an infectious disease within either the production animal or companion animal population could have a significant adverse effect on our business and our results of operations.

An outbreak of disease affecting animals, such as foot-and-mouth disease, various forms of influenza or bovine spongiform encephalopathy, commonly referred to as “mad cow disease,” could result in the widespread destruction of affected animals and consequently result in a reduction in demand for animal health products. In addition, outbreaks of these or other diseases or concerns of such diseases could create adverse publicity that may have a material adverse effect on consumer demand for meat, dairy and poultry products, and, as a result, on our customers’ demand for the products we distribute. The outbreak of a disease among the companion animal population which could cause a reduction in the demand for companion animals could also adversely affect our business. Although we have not been adversely impacted by the outbreak of a disease in the past, there can be no assurance that a future outbreak of an infectious disease will not have an adverse effect on our business.

Our business may be directly and indirectly affected by the recent drought that could reduce demand for the products we distribute.

Poor or unusual weather conditions, in particular the recent drought in the Midwestern United States, can significantly affect the purchasing decisions of our customers, particularly customers in the production animal market.  The timing and quantity of rainfall are two of the most important factors in agricultural production. Drought can affect the availability and price of feed for livestock.  Faced with a reduction in readily available feed or an increase in costs for such feed, our customers may decide to further reduce herd size, which would ultimately decrease the demand for the products we distribute, including micro feed ingredients, animal health products, dairy sanitation solutions, as well as the development and implementation of proprietary computerized systems for feed, health, information and production animal management.

We may lose access to products as a result of vendor exclusivity requirements, which could cause a loss of market share and business.

We may not be able to establish or maintain relationships with key vendors in the animal health industry if we have established relationships with competitors of these key vendors. Although we have written agreements with many of our vendors, most are terminable without cause on short notice. Upon expiration, we may not be able to renew our existing agreements on favorable terms, or at all. 

In addition, vendors may require us to distribute their products on an exclusive basis, which would cause us to forego distributing competing products that may also be profitable, including generic products that may gain increased market share.  In this situation we are often forced to project future sales of competing products so that we can elect to distribute the product that we believe will be more profitable.  Our projections may not be correct, and we may be contractually prohibited from distributing products that gain market share, including generic products, at the expense of the products that we distribute.  Competitors of ours could also obtain exclusive rights to market particular products, which we would be unable to market. If we lose the right to distribute products under such

22

agreements, or are required to exclusively distribute certain products at the expense of others that may be more profitable, we may lose access to certain products and lose a competitive advantage. Potential competitors could sell products from vendors that we fail to continue with and erode our market share.  Additionally, if we have a reduction in our gross margin as a result of switching from an exclusive distributor to a non-exclusive distributor, the gross margin generated from the additional products that we are able to sell may not be enough to offset the decrease.

Our financial results could be adversely affected by foreign exchange fluctuations.

We operate in both the United States and the United Kingdom, but report revenues, costs and earnings in U.S. dollars. Exchange rates between the U.S. dollar and the British pound sterling are likely to fluctuate from period to period. Because our financial results are reported in U.S. dollars, we are subject to the risk of translation losses for reporting purposes. If we continue to expand our international operations, we will conduct more transactions in currencies other than the U.S. dollar. To the extent that foreign revenue and expense transactions are not denominated in the local currency, we are also subject to the risk of transaction losses. Given the volatility of exchange rates, there is no assurance that we will be able to effectively manage currency transaction and/or translation risks. We have not entered into derivative instruments to offset the impact of foreign exchange fluctuations. Fluctuations in foreign currency exchange rates could have a material adverse effect on our results of operations and financial condition.

An economic downturn could materially adversely affect our business.

Our business may be materially adversely affected by negative trends in the general economy that could reduce consumer discretionary spending on animal health products and reduce or eliminate sources of credit available to our customers. Levels of consumer spending deteriorated during the economic recession in the United States and may not increase for the foreseeable future.  Some of the factors that could influence the levels of consumer spending include continuing increases in fuel and other energy costs, conditions in the residential real estate and mortgage markets, unemployment levels, healthcare costs, access to credit, consumer confidence and other macroeconomic factors affecting consumer spending behavior.  In addition, volatility in commodity prices such as milk, grains, livestock and poultry, changes in weather patterns (e.g., droughts or seasons of higher precipitation that determine how long cattle will graze) and changes in the general economy may adversely impact the amount spent by animal owners in the production animal market.  Such volatility and/or tightening of credit available to our customers could further deteriorate the financial condition of our customers, and may ultimately lead our customers to reduce their working capital available to purchase our products. 

Our business ultimately depends on the ability and willingness of animal owners to pay for our products. This dependence could make us more vulnerable to any reduction in consumer confidence or disposable income than companies in other industries that are less reliant on consumer spending, such as the human health care industry, in which a large portion of payments are made by insurance programs.  Additionally, any cost-cutting measures taken to offset the effects of an economic downturn could materially impact our ability to generate future revenue growth.  For all of these reasons, an economic downturn could materially affect our business.

If third parties claim that we infringe upon their intellectual property rights, our financial results could be adversely affected. 

We face the risk of claims that we have infringed third parties’ intellectual property rights, including trademarks, trade names, and patents. Third parties may claim that our proprietary branded products infringe their trademarks and/or trade names; that our consultative services infringe a patented machine, process, or business method; and/or that our products infringe such third parties’ patented animal health products.  We have not conducted an independent review of trademarks or patents issued to third parties. The large number of trademarks and patents, the rapid rate of new trademark and patent issuances, the complexities of the technology involved in patents and uncertainty of litigation increase the risk of business assets and management’s attention being diverted to intellectual property litigation.

23

Any claims of patent or other intellectual property infringement, even those without merit, could:

· be expensive and time consuming to defend;

· cause us to cease making, licensing or using products or services that incorporate the challenged intellectual property;

· require us to redesign, reengineer, or rebrand our products or packaging, if feasible;

· divert management’s attention and resources; or

· require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.

Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against us could result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products, any of which could have a negative impact on our financial results and harm our future prospects.

Our intellectual property rights may be inadequate to protect our business. 

We attempt to protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements and third-party nondisclosure and assignment agreements. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business.

We rely on our trademarks, trade names, service marks and brand names to distinguish our proprietary branded products and services from the products and services of our competitors, and have registered or applied to register many of these trademarks and servicemarks. We cannot assure you that our trademark and servicemark applications will be approved. Third parties may also oppose our trademark and servicemark applications, or otherwise challenge our use of the trademarks and servicemarks. In the event that our marks are successfully challenged, we could be forced to rebrand our proprietary branded products and services, which could result in loss of brand recognition, and could require us to devote resources to advertise and market new brands. Further, we cannot assure you that competitors will not infringe upon our marks, or that we will have adequate resources to enforce our marks.

The pursuit and assertion of patent rights involve complex legal and factual determinations and, therefore, are characterized by some uncertainty.  In addition, the laws governing patentability and the scope of patent coverage continue to evolve.  As a result, we cannot assure you patents will be issued from any of our patent applications.  The scope of any of our patents, if issued, may not be sufficiently broad to offer meaningful protection. In addition, our patents, if they are issued, may be successfully challenged, invalidated, circumvented or rendered unenforceable so that our patent rights might not create an effective competitive barrier for certain of our niche products. Further, we cannot assure you that competitors will not infringe upon our patents, or that we will have adequate resources to enforce our patents.

We also rely on unpatented proprietary technology. It is possible that others will independently develop the same or similar technology or otherwise obtain access to our unpatented technology. To protect our trade secrets and other proprietary information, we require employees, consultants, advisors and collaborators to enter into confidentiality agreements. We cannot assure you that these agreements will provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information.  Our inability to maintain the proprietary nature of our technologies for any reason could have a material adverse effect on our business.

If our proprietary branded products infringe on the intellectual property rights of others, we may be required to indemnify our customers for any damages they suffer. 

Third parties may assert infringement claims against our customers. These claims may require us to initiate or defend protracted and costly litigation on behalf of our customers, regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages on behalf of our customers or may be required to obtain

24

licenses for the products they use. If we cannot obtain all necessary licenses on commercially reasonable terms, our customers may be forced to stop using our products.

We may be subject to product liability and other claims in the ordinary course of business.

Our business involves a risk of product liability and other claims in the ordinary course of business, such as claims arising from shipping mislabeled or outdated product, product recalls or disputes among competing vendors. We maintain general liability insurance with customary policy limits, and in many cases we have indemnification rights against product-related claims from the manufacturers of the products we distribute. We do not maintain a separate product liability insurance policy because we do not currently manufacture the vast majority of the products that we sell. Our ability to recover under insurance or indemnification arrangements is subject to the financial viability of the insurers and manufacturers. We cannot assure you that our insurance coverage or the manufacturers’ indemnity will be available or sufficient in any future cases brought against us.

Any inability of our customers to pay us for our products and services due to their deteriorating financial condition or otherwise may adversely affect our results of operations and financial condition.

We generally extend some level of credit to our customers without requiring collateral, which exposes us to credit risk.  For example, milk price declines in the dairy market could have a significant impact on dairy farmers, which would create cash-flow challenges for these farmers and, in turn, impact the time it takes for us to collect on outstanding accounts receivable from these customers.  If customers’ cash flow or operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain other sources of credit, they may not be able to pay or may delay payment to us, or in some cases may return products to us. The financial difficulties of a customer could cause us to curtail business with that customer or the customer to reduce its business with us and cancel orders.  Any inability of current and/or potential customers to pay us for our products and/or services due to their deteriorating financial condition or otherwise may adversely affect our results of operations and financial condition.

We may not be able to raise needed capital in the future on favorable terms or at all.

We expect that our existing sources of cash, together with any funds generated from operations, will be sufficient to meet our anticipated capital needs for at least the next twelve months. However, we may require additional capital to finance our growth strategies or other activities in the future. Our capital requirements will depend on many factors, including the costs associated with our growth and expansion. Additional financing may not be available when needed and, if such financing is available, it may not be available on terms favorable to us. Our failure to raise capital when needed could have an adverse effect on our business, financial condition and results of operations.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. 

Any borrowings on the revolving credit facility will be at variable rates of interest and expose us to interest rate risk based on market rates. If interest rates increase, our debt service obligations on any future variable rate indebtedness that we may incur on our revolving credit facility would increase even if the amount borrowed remained the same, and our net income and cash available for servicing our indebtedness would decrease. Our variable rate debt as of September 30, 2013 was $18.8 million (comprised of revolving credit facilities).  Following the closing of our acquisition of substantially all of the assets of IVESCO on November 1, 2013, our variable rate debt increased by approximately $78.7 million. Our interest expense for fiscal year 2013 was approximately $0.7 million and was approximately $0.9 million for fiscal year 2012. A 1% increase in the average interest rate would not have a material impact on our operations assuming our current level of debt.  However, if we had to borrow additional funds to operate our business, the change in interest rates could affect our operations.   See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

25

Item 1B.Unresolved Staff Comments.

None.

Item 2.Properties.

The table below provides a summary of the Company’s principal facilities as of September 30, 2013:

Location (1)	Total Square Feet (2)	Own or Lease	Principal Function (3) (4)
Boise, Idaho	62,000	Own	Headquarters and call center
Edwardsville, Kansas	135,000	Lease	Distribution center and pharmacy
Shakopee, Minnesota	126,000	Lease	Distribution center and pharmacy
Elizabethtown, Pennsylvania	111,000	Lease	Distribution center and pharmacy
Castle Cary, England	84,000	Own	Centaur office, call center and distribution center
Visalia, California	81,000	Lease	Distribution center and veterinary food-animal drug retailer
Denver, Colorado	75,000	Lease	Distribution center and call center
Grand Prairie, Texas	70,000	Lease	Distribution center, call center and pharmacy
Whitestown, Indiana	70,000	Lease	Distribution center and pharmacy
Orlando, Florida	42,000	Lease	Distribution center
Atlanta, Georgia	41,000	Lease	Distribution center
Amarillo, Texas	40,000	Own	Distribution center and pharmacy
Nampa, Idaho	36,000	Lease	Distribution center and pharmacy
Fife, Washington	30,000	Lease	Distribution center
Amarillo, Texas	26,000	Lease	Micro office
Glendale, Arizona	20,000	Lease	Distribution center
Sturbridge, Massachusetts	16,000	Lease	Securos office and call center
(1)  In November 2013 we entered into a new lease agreement to open a new distribution center in Shawnee, Kansas with 107,000 square feet.
(2)  Rounded to the nearest thousand square feet.
(3)  We also operate out of a number of shipping depots in the United States and United Kingdom but maintain little to no inventory at these locations.
(4)  As a result of the acquisition of IVESCO on November 1, 2013, we now have facilities in Delmar, Delaware; Gainesville, Georgia; Harrisonburg, Virginia; Hereford, Texas; Iowa Falls, Iowa; Jacksonville, FL; Mankato, Minnesota; Mauston, Wisconsin; Nacogdoches, Texas; Springdale, Arkansas; and Warsaw, North Carolina.

26

Item 3.Legal Proceedings.

From time to time, in the normal course of business, we may become a party to legal proceedings that may have an adverse effect on our financial position, results of operations and cash flows. Management presently believes that the ultimate outcome of these proceedings will not have a material adverse effect on our financial positions, cash flows or overall trends in results of operations. However, litigation is subject to inherent uncertainties, and unfavorable outcomes could occur. An unfavorable outcome could include the payment of monetary damages or, in cases for which injunctive relief is sought, aninjunction prohibiting us from selling one or more products or taking certain other actions. Were an unfavorable outcome to occur, our business or results of operations could be materially harmed.

We are not currently a party to any material pending legal proceedings and are not aware of any claims that could have a material adverse effect on our financial position, results of operations or cash flows.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock has been quoted on the Nasdaq under the symbol “MWIV” since August 3, 2005. Prior to that date there was no public market for our common stock. The following table sets forth, for the two most recent fiscal years, the high and low sales prices of our common stock, reported by the Nasdaq Global Select Market.

	Common Stock Price
	High		Low
Fiscal Year Ended September 30, 2012
First Quarter	$	77.39	$	61.01
Second Quarter	$	91.38	$	64.08
Third Quarter	$	103.50	$	84.00
Fourth Quarter	$	109.99	$	86.09
Fiscal Year Ended September 30, 2013
First Quarter	$	119.05	$	101.00
Second Quarter	$	137.18	$	110.01
Third Quarter	$	134.87	$	114.60
Fourth Quarter	$	156.51	$	116.81

At the close of business on November 15, 2013, we had 12,851,474 shares of common stock issued and outstanding.  As of that date, there were 645 registered holders of record.  This does not reflect beneficial stockholders who hold their stock in nominee or “street” name through brokerage firms.

We have not paid or declared any dividends on our common stock and do not anticipate paying any dividends on our common stock in the foreseeable future. We intend to retain future earnings to finance the ongoing operations and growth of our business. Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on conditions at that time, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.  The information contained under the heading “Equity Compensation Plan Information” in Item 12 of this Form 10-K is incorporated herein by reference.

27

The table below provides information concerning our repurchase of shares of our common stock during the fourth quarter ended September 30, 2013.

Issuer Purchases of Equity Securities
					Total Number of	Maximum Number (or
	Total				Shares Purchased	Approximate Dollar
	Number		Average		as Part of Publicly	Value) of Shares that May
	of Shares		Price Paid		Announced Plans	Yet Be Purchased Under
Period	Purchased		per Share		or Programs	the Plans or Programs
July 1 to July 31, 2013	40	(1)	$	132.60	—	—
August 1 to August 31, 2013	484	(1)	$	148.92	—	—
September 1 to September 30, 2013	10,963	(1)	$	150.76	—	—
Total	11,487		$	150.62	—	—
(1) These shares were withheld upon the vesting of employee stock grants in connection with payment
of required withholding taxes.

28

The graph below compares the cumulative total stockholder return on $100 invested at the market close on September 30, 2008 through and including September 30, 2013, with the cumulative total return of the same time period on the same amount invested in the Russell 2000 Index, the Standard and Poor’s SmallCap 600 Index and a Peer Group Index, consisting of nine companies that compete or operate in a comparable industry as MWI. The chart below the graph sets forth the actual numbers depicted on the graph.

	9/30/2008	9/30/2009	9/30/2010	9/30/2011	9/30/2012	9/30/2013
MWI Veterinary Supply, Inc.	$ 100.00	$ 101.68	$ 146.91	$ 175.16	$ 271.52	$ 380.15
S&P SmallCap 600 Index	100.00	88.01	99.41	98.53	129.75	168.50
Russell 2000 Index	100.00	88.92	99.49	94.79	123.23	158.01
Peer Group(1)	100.00	101.00	107.91	121.90	165.79	202.37

(1) Peer Group consists of Abaxis, Inc. (ABAX), Henry Schein Inc. (HSIC), Heska Corporation (HSKA), IDEXX Laboratories Inc. (IDXX), Owens & Minor Inc. (OMI), Patterson Companies Inc. (PDCO), PetMed Express Inc. (PETS), Tractor Supply Company (TSCO) and VCA Antech Inc. (WOOF).

29

Item 6.Selected Financial Data.

The selected consolidated financial data below represent portions of our financial statements and are not complete.  You should read this information together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes to these statements included in this annual report.  Historical results are not necessarily indicative of future performance.

	Year Ended September 30,
	2013		2012		2011		2010		2009
		(In  thousands, except per share data)
Revenues:
Product sales	$	2,260,279	$	1,996,294	$	1,489,500	$	1,169,545	$	880,703
Product sales to related party		68,355		61,873		55,185		43,017		46,406
Commissions		18,851		16,979		20,655		16,780		14,223
Total revenues		2,347,485		2,075,146		1,565,340		1,229,342		941,332
Cost of product sales		2,043,147		1,808,230		1,359,755		1,064,339		806,677
Gross profit		304,338		266,916		205,585		165,003		134,655
Selling, general and administrative expenses		193,999		172,104		130,656		105,793		90,827
Depreciation and amortization		10,016		9,045		6,263		4,992		3,365
Operating income		100,323		85,767		68,666		54,218		40,463
Other income (expense):
Interest expense		(714)		(926)		(741)		(539)		(242)
Earnings of equity method investees		337		318		268		220		230
Other		735		781		507		427		540
Total other income (expense)		358		173		34		108		528
Income before taxes		100,681		85,940		68,700		54,326		40,991
Income tax expense		(37,832)		(32,463)		(26,120)		(20,886)		(16,086)
Net income	$	62,849	$	53,477	$	42,580	$	33,440	$	24,905
Earnings per common share:
Basic	$	4.96	$	4.24	$	3.42	$	2.73	$	2.06
Diluted	$	4.95	$	4.23	$	3.40	$	2.70	$	2.02
Weighted average common shares outstanding:
Basic		12,675		12,616		12,464		12,241		12,088
Diluted		12,709		12,647		12,513		12,395		12,306

	As of September 30,
	2013		2012		2011		2010		2009
	(In thousands)
Cash	$	953	$	514	$	606	$	911	$	14,302
Total assets		802,555		696,383		504,219		467,932		337,919
Total debt		18,920		48,522		4,170		14,724		97
Total stockholders’ equity		426,319		359,302		292,810		246,787		207,927

30

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

All dollar and sterling pound amounts are presented in thousands, except for per share amounts.

Overview

We are a leading distributor of animal health products to veterinarians in the United States and the United Kingdom. We sell our products primarily to veterinarians in both the companion and production animal markets. Our growth has primarily been from internal growth initiatives and, to a lesser extent, selective acquisitions. 

We estimate that in the United States approximately 59% of our total revenues have been generated from sales to the companion animal market and 41% from sales to the production animal market.  Including the gross billings from agency commissions which are excluded from our total revenues in order to comply with generally accepted accounting principles, we estimate that in the United States approximately 64% of our total revenues have been generated from sales to the companion animal market and 36% from sales to the production animal market.  We estimate that approximately two-thirds of our total revenues have been generated from sales to the companion animal market and one-third from sales to the production animal market in the United Kingdom. The state of the overall economy in both the United States and United Kingdom and consumer spending have impacted both the companion animal and production animal markets, with tightening credit markets, volatile commodity prices in milk, grains, livestock and poultry, and changes in weather patterns (e.g. droughts or seasons of higher precipitation) also affecting demand in the production animal market.  Both the companion animal and production animal markets have been integral to our financial results and we intend to continue supporting both markets.

We believe that the companion animal market in both the United States and United Kingdom has slowed as a result of a decrease in consumer spending but has shown signs of a recovery in 2012 and 2013.  Historically, growth in the companion animal market has been due to the increasing number of households with companion animals, increased expenditures on animal health and preventative care, an aging pet population, advancements in pharmaceuticals and diagnostic testing and extensive marketing programs sponsored by companion animal nutrition and pharmaceutical companies. While the average order size for companion animal health products is often smaller than production animal health products, companion animal health products typically have higher margins. We intend to continue to penetrate this market through internal growth initiatives and selective acquisitions.  We believe that some of our customers in this market have experienced liquidity issues as a result of the tightening credit markets. 

Product sales in the production animal market in both the United States and United Kingdom are impacted by volatility in commodity prices such as milk, grains, livestock and poultry, changes in weather patterns (e.g. droughts or seasons of higher precipitation that determine how long cattle will graze and consequently the number of days an animal is on feed during a finishing phase) or a change in the general economy, which can shift the number of animals treated, the timing of when animals are treated, to what extent they are treated and which products they are treated with.  This could also create cash-flow challenges for these customers and in turn, could impact the time it takes for us to collect our outstanding accounts receivable from these customers as well as affect the overall collectability of these accounts.  However, we still believe that it is important to our business to service this market and we intend to continue to support production animal veterinarians with a broad range of products and value‑added services. Historically, sales in this market have been largely driven by spending on animal health products to improve productivity, weight gain and disease prevention, as well as a growing focus on food safety.

We generally extend some level of credit to our customers without requiring collateral, which exposes us to credit risk.  If our customers’ cash flow or operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain other sources of credit, they may not be able to pay or may delay payment to us, or in some cases may return products to us.In the United Kingdom, we rely on a smaller number of relatively larger customers than does our business in the United States.  These customers in the aggregate accounted for 14.5% and 18.1% of our consolidated accounts receivable balance as of September 30, 2013 and December 30, 2012, respectively, and one significant customer accounted for 2.6% and 7.6% of our consolidated accounts receivable balance as of September 30, 2013 and December 31, 2012, respectively.We continually assess our customers’ ability to pay us and adjust our allowance for doubtful accounts, as necessary. 

We sell products that we source from our vendors to our customers through either a “buy/sell” transaction or an agency relationship with our vendors. In a “buy/sell” transaction, we purchase or take inventory of products from our vendors. When a customer places an order with us, we pick, pack, ship and invoice the customer for the order.

31

We record sales from “buy/sell” transactions, which account for the vast majority of our business, as revenues in conformity with generally accepted accounting principles in the United States. In an agency relationship, we generally do not purchase and take inventory of products from our vendors. When we receive an order from our customer, we transmit the order to our vendor, who picks, packs and ships the order to our customer. In some cases, our vendor invoices and collects payment from our customer, while in other cases we invoice and collect payment from our customer on behalf of our vendor. We receive a commission payment for soliciting the order from our customer and for providing other customer service activities. The aggregate revenues we receive in agency transactions constitute the “commissions” line item on our consolidated statements of income and are recorded in conformity with accounting principles generally accepted in the United States. Our vendors determine the method we use to sell our products. Historically, vendors have occasionally switched between the “buy/sell” and agency models for particular products in response to market conditions related to that particular product. A switch between models can impact our revenues and our operating income. We cannot know in advance when a vendor will switch between the “buy/sell” and agency models or what impact, if any, such a change may have. A switch can occur even with vendors with whom we have written agreements, because most of our agreements with vendors have relatively short terms and are terminable with or without cause on short notice, normally 30 to 90 days. The impact of any individual change from a “buy/sell” to an agency model depends on the costs and expenses associated with a particular product, and can have either a positive or a negative effect on our profitability.

We typically renegotiate vendor contracts annually.  These vendor contracts may include terms defining margins, rebates, commissions, exclusivity requirements and the manner in which we go to market.  For example, vendors could require us to distribute their products on an exclusive basis, which could cause us to forego distributing competing products which may also be profitable.  Conversely, competitors could obtain exclusive rights to market particular products, which we would be unable to market.  If we lose the right to distribute products under such exclusive agreements, we may lose access to certain products and lose a competitive advantage.  Exclusivity agreements could allow potential competitors to sell products that we cannot offer and erode our market share.  In addition, vendors have the ability to expand the distributors that they use which could have a material adverse effect on our business. 

Some of our current and future vendors may decide to compete with us in the future by pursuing or increasing their efforts in direct marketing and sales of their products. These vendors could sell their products at lower prices and maintain a higher gross margin on their product sales than we can. In this event, veterinarians or animal owners may elect to purchase animal health products directly from these vendors. 

Many of our vendors’ rebate programs are based on a calendar year.  Historically, the three months ended December 31 has been our most significant quarter for recognition of rebates.  Vendor rebates based on sales are classified in our accompanying consolidated statements of income as a reduction to cost of product sales at the time the sales performance measures are achieved. Purchase rebates are measured against inventory purchases from the vendors and are a reduction of inventory until the product is sold. When the inventory is sold, purchase rebates are recognized as a reduction to cost of product sales.

Total Revenues. Our total revenues increased from $941,332 for our fiscal year ended September 30, 2009 to $2,347,485 for our fiscal year ended September 30, 2013. Our revenue growth has been driven primarily from internal growth and, to a lesser extent, selective acquisitions and our ability to offer a broad product selection at competitive prices with high levels of customer service and support and an expansion in the number of veterinary practices to which we distribute products. We have continually added new vendor relationships to expand our product offering and field sales representatives to increase our customer reach, principally in the Southeast, Northeast and Midwest regions of the United States.

Operating Expenses. Our selling, general and administrative expenses increased from $90,827 for our fiscal year ended September 30, 2009 to $193,999 for our fiscal year ended September 30, 2013. Selling, general and administrative expenses consist mainly of compensation and benefits, warehouse operating supplies, occupancy and location expenses and other general corporate expenses. Our selling, general and administrative expenses as a percentage of total revenues were 9.6% for our fiscal year ended September 30, 2009, compared to 8.3% for the same period in 2013.

Acquisitions. In February 2010, we acquired all of the share capital of Centaur.  Based in Castle Cary, England, Centaur is a distributor of animal health products to veterinarians in the United Kingdom.

32

In March 2011, we acquired substantially all of the assets of Nelson.  Nelson was a distributor of animal health products to over 1,100 veterinary practices, primarily in the Midwestern United States.  This acquisition allows us to better serve our customers in this region of the United States. 

On October 31, 2011, we acquired substantially all of the assets of Micro,  a value-added distributor to the production animal market, including the distribution of micro feed ingredients, pharmaceuticals, vaccines, parasiticides, supplies and other animal health products. In addition, as a result of the Micro transaction, we now offer proprietary, computerized management systems for the production animal market.

On December 31, 2012, we acquired substantially all of the assets of PCI Animal Health. PCI Animal Health was a distributor of companion animal health products to veterinary practices, primarily in the Northeastern United States.

On November 1, 2013, we acquired substantially all of the assets of IVESCO, a value-added distributor of animal health and related products to veterinarians, food animal producers and dealers in the United States.

33

Results of Operations

The following tables summarize our historical results of operations for our fiscal years ended September 30, 2013, 2012 and 2011.

	Year Ended September 30,
		2013	%		2012	%		2011	%
		(In  thousands, except per share data)
Revenues:
Product sales	$	2,260,279	96.3%	$	1,996,294	96.2%	$	1,489,500	95.2%
Product sales to related party		68,355	2.9%		61,873	3.0%		55,185	3.5%
Commissions		18,851	0.8%		16,979	0.8%		20,655	1.3%
Total revenues		2,347,485	100.0%		2,075,146	100.0%		1,565,340	100.0%
Cost of product sales		2,043,147	87.0%		1,808,230	87.1%		1,359,755	86.9%
Gross profit		304,338	13.0%		266,916	12.9%		205,585	13.1%
Selling, general and administrative expenses		193,999	8.3%		172,104	8.3%		130,656	8.3%
Depreciation and amortization		10,016	0.4%		9,045	0.4%		6,263	0.4%
Operating income		100,323	4.3%		85,767	4.2%		68,666	4.4%
Other income (expense):
Interest expense		(714)	0.0%		(926)	0.0%		(741)	0.0%
Earnings of equity method investees		337	0.0%		318	0.0%		268	0.0%
Other		735	0.0%		781	0.0%		507	0.0%
Total other income (expense)		358	0.0%		173	0.0%		34	0.0%
Income before taxes		100,681	4.3%		85,940	4.2%		68,700	4.4%
Income tax expense		(37,832)	-1.6%		(32,463)	-1.6%		(26,120)	-1.7%
Net income	$	62,849	2.7%	$	53,477	2.6%	$	42,580	2.7%
Earnings per common share:
Basic	$	4.96		$	4.24		$	3.42
Diluted	$	4.95		$	4.23		$	3.40
Weighted average common shares
outstanding:
Basic		12,675			12,616			12,464
Diluted		12,709			12,647			12,513

Fiscal 2013 Compared to Fiscal 2012

Total Revenues.  Total revenues increased 13.1% to $2,347,485 for the fiscal year ended September 30, 2013, from $2,075,146 for the fiscal year ended September 30, 2012.  Revenue growth in the United States was 14.4% for the fiscal year ended September 30, 2013 as compared to the fiscal year ended September 30, 2012.  Revenues increased 6.6% in the United Kingdom, but were reduced by 1.0% related to foreign currency translation for the fiscal year ended September 30, 2013, compared to the fiscal year ended September 30, 2012. 

Growth in flea, tick and heartworm products represented approximately 2.3% of the revenue growth the United States in 2013. Revenue growth in the United States also benefited from new diagnostic lines, which represented approximately 1.7% of the growth.  Additional new customers from the acquisition of PCI Animal Health business represented approximately 0.3% of the growth in the United States, and the growth from existing overlap customers

34

was approximately 0.9% of the growth. Finally, fiscal 2013 benefitted from a full year of ownership of Micro, compared to eleven months in the prior year, which accounted for approximately 1.6% of the growth in revenues. Product sales to related parties increased by 10.5% to $68,355 for the fiscal year ended September 30, 2013, from $61,873 for the fiscal year ended September 30, 2012.  Commissions increased 11.0% to $18,851 for the fiscal year ended September 30, 2013, from $16,979 for the fiscal year ended September 30, 2012. 

Gross Profit.  Gross profit increased by 14.0% to $304,338 for the fiscal year ended September 30, 2013, from $266,916 for the fiscal year ended September 30, 2012.  Gross profit as a percentage of total revenues improved to 13.0% for the fiscal year ended September 30, 2013 from 12.9% for the fiscal year ended September 30, 2012.  This increase was due primarily to an improvement in vendor rebates as a percentage of total revenues, offset in part by a decrease in product margin.  Vendor rebates for the fiscal year ended September 30, 2013 increased by approximately $9,919 compared to the fiscal year ended September 30, 2012 primarily due to the timing of manufacturer rebate programs and growth in revenues. 

Selling, General and Administrative (“SG&A”).  SG&A expenses increased 12.7% to $193,999 for the fiscal year ended September 30, 2013, from $172,104 for the fiscal year ended September 30, 2012.  The increase in SG&A expenses was primarily due to an increase in compensation and benefit costs. We incurred approximately $1,424 of acquisition-related costs in connection with the acquisition of the IVESCO business.  SG&A expenses as a percentage of total revenues were consistent at 8.3% for each of the fiscal years ended September 30, 2013 and 2012.

Depreciation and Amortization. Depreciation and amortization increased 10.7% to $10,016 for the fiscal year ended September 30, 2013, from $9,045 for the fiscal year ended September 30, 2012.  The increase was primarily due to amortization for assets acquired from PCI Animal Health. 

Fiscal 2012 Compared to Fiscal 2011

Total Revenues. Total revenues increased $509,806, or 32.6%, to $2,075,146 for the fiscal year ended September 30, 2012 from $1,565,340 for the fiscal year ended September 30, 2011. Excluding the impact of the acquisition of Micro, revenue growth in the United States was 17.3% for the fiscal year ended September 30, 2012 as compared to the fiscal year ended September 30, 2011.  Revenues from the acquisition of Micro, which was acquired on October 31, 2011, were $246.6 million for the fiscal year ended September 30, 2012.  Revenue growth in the United Kingdom was 14.7% for the fiscal year ended September 30, 2012 as compared to the fiscal year ended September 30, 2011, consisting of 16.8% organic growth and a decline of 2.1% related to foreign currency exchange.  Excluding the impact of Micro, the growth in revenues in the United States came primarily from increased business as a result of the growth from our e-commerce platform, the addition of new flea, tick and heartworm products, the addition of sales representatives over the past twelve months and the acquisition of Nelson. Excluding the impact of Micro, revenues in the United States attributable to new customers represented approximately 36% of the growth in total revenues during the fiscal year ended September 30, 2012. Excluding the impact of Micro, revenues in the United States attributable to existing customers represented approximately 64% of the growth in total revenues during the fiscal year ended September 30, 2012. For the purpose of calculating growth rates of new and existing customer revenue, we have defined a new customer as a customer that did not purchase product from us in the corresponding fiscal quarter of the prior year, with the remaining customer base being considered an existing customer.  Revenues from new customers for each fiscal quarter are summed to arrive at the estimated year-to-date revenue for new customers. 

Commission revenues decreased $3,676, or 17.8%, to $16,979 for the fiscal year ended September 30, 2012 from $20,655 for the fiscal year ended September 30, 2011.  The decrease of commission revenues was due to the loss of a pet food line that we represented for most of fiscal year 2011 that we did not represent in fiscal year 2012 and a shift in commissions to buy-sell revenues for certain parasiticides.  Gross agency billings decreased by $38,681, or 10.4%, to $332,343 for the fiscal year ended September 30, 2012 from $371,024 for the fiscal year ended September 30, 2011.  Additionally, the decrease in commissions was due to an incentive that we earned from one of our vendors during fiscal year 2011 that was earned at a substantially lower level in the fiscal year ended September 30, 2012.

Gross Profit. Gross profit increased $61,331, or 29.8%, to $266,916 for the fiscal year ended September 30, 2012 from $205,585 for the fiscal year ended September 30, 2011. The change in gross profit is primarily a result of increased total revenues as discussed above.  Gross profit as a percentage of total revenues was 12.9% and 13.1%

35

for the fiscal years ended September 30, 2012 and 2011, respectively.  Gross profit as a percentage of total revenues decreased due to the reduction in commissions, lower product margins and lower vendor rebates as a percentage of revenues, partially offset by improved freight as a percentage of total revenues.  Vendor rebates increased by $1,330 for the fiscal year ended September 30, 2012 as compared to the fiscal year ended September 30, 2011.  This increase in vendor rebates was primarily due to revenue growth achieved during the fiscal year. 

Selling, General and Administrative Expenses (“SG&A”). SG&A increased $41,448, or 31.7%, to $172,104 for the fiscal year ended September 30, 2012 from $130,656 for the fiscal year ended September 30, 2011. SG&A as a percentage of revenue was 8.3% for the each of the fiscal years ended September 30, 2012 and 2011.  The increase in SG&A expenses was primarily due to the addition of Micro and the added support for our revenue growth.  Additionally, stock based compensation expense increased $2,182, of which $1,278 was related to accelerated vesting on restricted stock awards granted during the quarter ended September 30, 2012 that did not occur in the same period of the prior fiscal year.

Depreciation and Amortization. Depreciation and amortization expense increased $2,782, or 44.4%, to $9,045 for the fiscal year ended September 30, 2012 from $6,263 for the fiscal year ended September 30, 2011. The increase was primarily due to the increase in fixed assets and intangibles as a result of the acquisition of Micro.

Seasonality in Operating Results

Our quarterly sales and operating results have varied significantly in the past, and will likely continue to do so in the future. Historically, our total revenues have typically been higher during the spring and fall months due to increased sales of production animal products. The sales of production animal products can vary due to changes in commodity prices and weather patterns (e.g. droughts or seasons of higher precipitation that determine how long cattle will graze and consequently the number of days an animal is on feed during a finishing phase) which may also affect seasonality.  Product use cycles for production animal products are directly related to medical procedures performed by veterinarians on production animals during the spring and fall months. These buying patterns can also be affected by vendors’ and distributors’ marketing programs or price increase announcements, which can cause veterinarians to purchase production animal health products earlier than those products are needed. This kind of early purchasing may reduce our sales in the months these purchases would have otherwise been made. See “Risk Factors — Our quarterly operating results may fluctuate significantly, and these fluctuations may cause our stock price to fall.” Additionally, while we accrue rebates as they are earned, our rebates have historically been highest during the quarter ended December 31, since some of our vendors’ rebate programs were designed to include targets to be achieved near the end of the calendar year.  This trend has slowed some in recent years due to certain changes in vendor contracts but it still remains our largest quarter for vendor rebates.  

Our companion animal products tend to have a different product use cycle that minimally overlaps with that of production animal products. In the companion animal market, sales of flea, tick and mosquito products are highest during the spring and summer months. The differing product use cycles of companion animal products partially offsets the seasonality we typically experience due to our sales of production animal products.

For the reasons and factors discussed above our quarterly operating results may fluctuate significantly. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year and our sales for any particular future period may decrease. In the future, operating results may fall below the expectations of securities analysts and investors. If this occurs, the price of our stock would likely decrease.

Liquidity and Capital Resources

Our principal sources of liquidity are cash flows generated from operations and borrowings on our credit facilities. We use capital primarily to fund day-to-day operations and to maintain sufficient inventory levels in order to promptly fulfill customer orders and to expand our operations and sales growth. We believe our capital resources, including our ability to borrow funds from our credit facilities, will be sufficient to meet our anticipated cash needs for at least the next twelve months. 

We generally extend some level of credit to our customers without requiring collateral, which exposes us to credit risk. If customers’ cash flow or operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain other sources of credit, they may not be able to pay or may delay payment to us, or in some cases may return products to us. Any inability of current and/or potential customers to pay us for our products

36

and/or services due to their deteriorating financial condition or otherwise may adversely affect our results of operations and financial condition. Volatility in commodity prices, such as milk, grains, livestock and poultry, and deteriorating economic conditions can have a significant impact on the financial results of our customers. In the United Kingdom, we rely on a smaller number of relatively larger customers than does our business in the United States.  These customers in the aggregate accounted for 14.5% and 18.1% of our consolidated accounts receivable balance as of September 30, 2013 and December 31, 2012, respectively, and one significant customer accounted for 2.6% and 7.6% of our consolidated accounts receivable balance as of September 30, 2013 and December 31, 2012, respectively. We continually assess our customers’ ability to pay us and adjust our allowance for doubtful accounts, as necessary.

Capital Resources.  MWI Co. as borrower,is party to a Credit Agreement dated December 13, 2006, as amended (the “Credit Agreement”), by and among MWI Co., MWI, and Memorial Pet Care, Inc. and Bank of America, N.A. and Wells Fargo Bank, N.A. as lenders (collectively, the “Lenders”).  The Credit Agreement allows for an aggregate revolving commitment of the Lenders of $150,000 and a maturity date of November 1, 2016.  Under the Credit Agreement, the margin on variable interest rate borrowings ranges from 0.95% to 1.50%.  The commitment fee under the Credit Agreement ranges from 0.15% to 0.25% depending on the funded debt to EBITDA ratio.  The variable interest rate is equal to the Daily LIBOR Floating Rate or the LIBOR 1-month, 2-month, 3-month or 6-month fixed rate (at MWI Co.’s option) plus the margin.  The facility contains financial covenants, including a fixed charge ratio and a funded debt to EBITDA calculation.  We were in compliance with all of the covenants as of September 30, 2013 and 2012.  Our outstanding balance on the Credit Agreement at September 30, 2013 was $16,300, and the interest rate was 1.06% as of September 30, 2013. 

On March 15, 2013, Centaur entered into a First Amendment (the “Amendment”) to the unsecured revolving line of credit facility (the “Sterling Revolving Credit Facility”) dated November 5, 2010 with Wells Fargo Bank, N.A. London Branch.  The Amendment increases the maximum loan amount of the Sterling Revolving Credit Facility to £20,000, an increase of £7,500, and extends the term of the facility to November 1, 2016. Interest is based on LIBOR for the applicable interest period plus an applicable margin of 0.95% to 1.50%, and the commitment fee ranges from 0.15% to 0.25%, depending on our funded debt to EBITDA ratio.  The facility contains a financial covenant requiring Centaur to maintain a minimum tangible net worth of £5,000.  As of September 30, 2013 and 2012, Centaur was in compliance with the covenant. Our outstanding balance on the Sterling Revolving Credit Facility at September 30, 2013 was £1,550, or $2,501 using the exchange rate on September 30, 2013.  The interest rate for the Sterling Revolving Credit Facility was 1.44% as of September 30, 2013. 

Also on March 15, 2013, Centaur entered into an uncommitted overdraft facility (the “Overdraft Facility”) with Wells Fargo. The Overdraft Facility allows Centaur to borrow an additional £10,000 to fund short term normal trading cycle fluctuations. The Overdraft Facility will expire on November 1, 2016.  Interest on the borrowing under the Overdraft Facility is the same as the terms under the Amendment.

Operating Activities.  For the fiscal year ended September 30, 2013, cash provided by operations was $57,449 and was primarily attributable to net income of $62,849 and an increase in accounts payable of $63,403. This amount was partially offset by an increase in receivables of $15,173 and an increase in inventories of $72,864. The increase in net income is a result of the factors discussed above in “Results of Operations.”  The increase in receivables was primarily due to the revenue growth during the fiscal year. The increases in inventories and accounts payable were primarily due to strategic inventory purchases made during the fiscal year ended September 30, 2013.

For fiscal year ended September 30, 2012, cash provided by operating activities was $14,238, and was primarily attributable to net income of $53,477 and an increase in accounts payable of $50,018.  This amount was partially offset by an increase in receivables of $48,879 and an increase in inventories of $52,831.  The increase in net income is a result of the factors discussed above in “Results of Operations.”  The increase in receivables was primarily due to the revenue growth during the fiscal year.  The increases in inventories and accounts payable were primarily due to strategic inventory purchases made during the fiscal year ended September 30, 2012 to accommodate our revenue growth and the redistribution of products from our distribution center in Kansas City to the rest of our distribution centers.

For fiscal year ended September 30, 2011, cash provided by operating activities was $32,428, and was primarily attributable to net income of $42,580 and a decrease in inventory of $8,553.  This amount was partially

37

offset by an increase in receivables of $23,021 and a decrease in accounts payable of $5,150.  The increase in net income is a result of the factors discussed above in “Results of Operations.”  The increase in receivables was primarily due to the revenue growth during the fiscal year.  The decreases in inventories and accounts payable were primarily due to the a decrease during the fiscal year ended September 30, 2011 to a more normalized level after we had made large purchases near the end of the fiscal year ended September 30, 2010 to accommodate the additional orders from new customers when their primary supplier was no longer able to meet their needs.

Investing Activities.For the fiscal year ended September 30, 2013, net cash used in investing activities was $28,128.  We paid $17,107, in cash, after consideration of post-closing adjustments’ for the acquisition of substantially all of the assets of PCI Animal Health.  Additionally, we paid for capital expenditures of $10,780 which primarily related to technology and equipment purchases, in addition to equipment purchased for our move into a new distribution center in Shakopee, Minnesota. 

For fiscal year ended September 30, 2012, net cash used in investing activities was $59,865.  We paid $51,718 for the acquisition of Micro, which closed on October 31, 2011.  We paid for capital expenditures of $7,597 which primarily related to information technology and our new distribution center in Harrisburg, Pennsylvania.   

For fiscal year ended September 30, 2011, net cash used in investing activities was $25,509.  We paid $7,000 for the acquisition of Nelson.  We paid for capital expenditures of $12,516 which primarily related to an office building purchased in Boise, Idaho for our headquarters, equipment for our new distribution centers in Visalia, California and Harrisburg, Pennsylvania to accommodate the growth needs in those regions and other distribution center technology.  Additionally, we made an investment in Cubex LLC, a technology based inventory management business, of $4,000. 

Financing Activities.  For the fiscal year ended September 30, 2013, net cash used in financing activities was $29,107, which was primarily due to net payments of $29,022 on our revolving credit facilities.  Our revolving credit facilities are used to fund strategic acquisitions, capital expenditures and meet our working capital requirements. 

For fiscal year ended September 30, 2012, net cash provided by financing activities was $45,399, and was primarily attributable to the net borrowings on our credit facilities of $44,885.

For fiscal year ended September 30, 2011, net cash used in financing activities was $7,291, and was primarily attributable to the net payments on our credit facilities of $7,188.  Additionally, we paid $3,327 in debt payments for the note payable related to the Centaur acquisition, the term note for Centaur and capital lease obligations.  This was largely offset by the excess tax benefit of exercise of common stock options of $2,714.

Off Balance Sheet Arrangements. At September 30, 2013, we had no significant investments that were accounted for under the equity method in accordance with accounting principles generally accepted in the United States except for Feeders Advantage. Feeders Advantage has no liabilities associated with it that were guaranteed by or that would be considered material to us. Accordingly, we do not have any off balance sheet arrangements.

38

Contractual Obligations

Contractual Obligations. Our contractual obligations at September 30, 2013 mature as follows (in thousands):

	Payments Due by Period
	Total		1 Year or less		2-3 Years		4-5 Years		More than 5 Years
Revolving credit facilities (1)	$	18,801	$	-	$	-	$	18,801	$	-
Operating lease commitments		34,451		5,160		9,175		8,543		11,573
Capital lease commitments		119		103		16		-		-
Interest on revolving credit
facilities (2)		1,441		454		908		79		-
Other long-term obligations (3)		2,220		602		176		17		1,425
Total contractual obligations	$	57,032	$	6,319	$	10,275	$	27,440	$	12,998

(1)For the purposes of the Contractual Obligations table above the revolving credit facilities is assumed to be paid at the respective credit facility’s termination date.  For financial statement purposes the revolving credit facilities are classified as a current liability. Due to the borrowings incurred as a result of the IVESCO acquisition, our balance on our revolving credit facilities as of November 1, 2013 increased by approximately $78.7 million.

(2)For debt instruments with variable interest rates and unused commitment fees, interest has been calculated for all future periods using the rates in effect at September 30, 2013. 

(3)Other long-term obligations include contracts primarily related to the pension liability of $1,425 which was assumed to be paid out beyond year five.

Guarantees. We provide guarantees, indemnifications and assurances to others in the ordinary course of our business. We have evaluated our agreements that contain guarantees and indemnification clauses in accordance with the guidance of financial accounting rules.

We enter into a wide range of indemnification arrangements in the ordinary course of business. These include tort indemnities, tax indemnities, indemnities against third party claims arising out of arrangements to provide services to us, indemnities in merger and acquisition agreements and indemnities in agreements related to the sale of our securities. Also, our governance documents and the governance documents of all of our subsidiaries provide for the indemnification of individuals made party to any suit or proceeding by reason of the fact that the individual was acting as an officer, director or agent of the relevant company or as a fiduciary of a company-sponsored welfare benefit plan. We also provide guarantees and indemnifications for the benefit of our wholly-owned subsidiaries for the satisfaction of performance obligations, including certain lease obligations. We are not aware of any material liabilities arising from these indemnification arrangements.

39

Inflation

Most of our operating expenses are inflation-sensitive, with inflation generally producing increased costs of operations.  During the past three years, the most significant effects of inflation have been on employee wages, costs of products and fuel-intensive costs including freight, packing supplies and travel.  We manage the effects of inflation by controlling increases in compensation expense, renegotiating freight carrier contracts and utilizing a central source for warehouse shipping supplies.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to allowance for doubtful accounts, customer incentives, vendor rebates, inventories, goodwill and intangible assets, income taxes and contingencies. We base our estimates on historical experience and on various other assumptions and factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We, based on our ongoing review, will make adjustments to our judgments and estimates where facts and circumstances dictate. Historically, actual results have not significantly deviated from those determined using the estimates described above.

We believe the following critical accounting policies are important to understand our financial condition and results of operations and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Revenue Recognition

We sell products that we source from vendors to our customers through either a “buy/sell” transaction or an agency relationship with our vendors. In a “buy/sell” transaction, we purchase and take inventory of products from the vendor. When a customer places an order with us, we pick, pack, ship and invoice the customer for the order. We recognize revenue from “buy/sell” transactions as product sales when the product is delivered to the customer. We accept product returns from our customers. We estimate sales returns based on historical experience, and returns are recognized as a reduction of product sales. Product returns have not been significant to our financial statements. In an agency relationship, we generally do not purchase and take inventory of products from our vendors. We receive an order from a customer, then transmit the order to the vendor, who picks, packs and ships the order to the customer. In some cases, the vendor invoices and collects payment from the customer, while in other cases we invoice and collect payment from the customer on behalf of the vendor. We receive a commission payment for soliciting the order from the customer and for providing other customer service activities. Commissions are recognized when the services upon which the commissions are based are complete.

Vendor Rebates

Vendor rebates are recorded based on the terms of the contracts with each vendor. We may receive quarterly, semi-annual and annual performance‑based rebates from third-party vendors based upon attainment of certain sales and/or purchase goals. Sales rebates are classified in our accompanying consolidated statements of income as a reduction to cost of product sales at the time the sales performance measures are achieved. Purchase rebates are measured against inventory purchases from the vendors and are a reduction of inventory until the product is sold. When the inventory is sold, purchase rebates are recognized as a reduction to cost of product sales.

Historically, actual results have not significantly deviated from those determined using the estimates described above. We expect that our estimates in the future will continue to be reasonable as our rebates are based on specific vendor program goals and are principally recorded upon achievement of sales or purchase performance measures. Vendors may change or eliminate rebate programs from year to year.

Customer Incentives

Customer incentives are accrued based on the terms of the contracts with each customer. These incentive programs provide that the customer receives an incentive based on their product purchases or attainment of

40

performance goals. Incentives are estimated based on the specific terms in each agreement, historical experience and product growth rates.  The incentives are recognized as a reduction of product sales.

Goodwill and Intangible Assets

We assess the potential impairment of goodwill and amortizing and non-amortizing intangible assets annually and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that we consider important and may trigger an interim impairment review include:

· significant underperformance relative to expected historical or projected future operating results;

· significant changes in the manner of our use of acquired assets or the strategy of our overall business; and

· significant negative industry or economic trends.

If we determine through the impairment review process that goodwill or amortizing or non-amortizing intangible assets are impaired, an impairment charge is recognized in our consolidated statement of income.

Goodwill and amortizing and non-amortizing intangible assets were evaluated for impairment in our fourth quarter of 2013 and we determined that the recorded amount was not impaired. The fair value calculations used for these tests require us to make assumptions about items that are inherently uncertain. Assumptions related to future market demand, market prices and product costs could vary from actual results, and the impact of such variations could be material. Factors that could affect the assumptions include changes in economic conditions, changes in government regulations, success in marketing products and competitive conditions in our industry. The factors that most significantly affect the fair value calculation are market multiples and estimates of future cash flows. Fair value was determined using both an income approach and a market approach.

Recently Issued and New Accounting Pronouncements

In January 2013, the FASB issued Accounting Standards Update (“ASU”) No. 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which includes bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending arrangements that are either offset on the balance sheet or subject to an enforceable master netting arrangement or similar agreement.  This guidance is effective for our fiscal year beginning October 1, 2013.  We do not believe that the adoption of this guidance will have a material impact on our consolidated financial statements.

In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which provides additional disclosure requirements for items reclassified out of AOCI.  This guidance is effective for our fiscal year beginning October 1, 2013.  We do not believe that the adoption of this guidance will have a material impact on our consolidated financial statements.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks primarily from changes in interest rates, in particular, the Daily LIBOR Floating Rate, and foreign currency translation risk. We do not engage in financial transactions for trading or speculative purposes.  We do not hedge the translation of foreign currency profits into U.S. dollars.  We continually evaluate our foreign currency exchange rate risk and the different options available for managing such risk.

We are exposed to foreign currency risk due to our U.K. subsidiary Centaur.  A hypothetical 10% change in the value of the U.S. dollar in relation to the British Pound, which is the Company’s most significant foreign currency exposure, would have changed fiscal year 2013 net sales by approximately $32,000. This amount is not indicative of the hypothetical net earnings impact due to the partially offsetting impact of the currency exchange movements on cost of sales and operating expenses.

The interest payable on our revolving credit facilities is based on variable interest rates and is affected by changes in market interest rates. The outstanding balance on the revolving credit facility in the United States as of September 30, 2013 was $16,300.  The outstanding balance on the revolving credit facility in the United Kingdom as of September 30, 2013 was $2,501   If there had been a combined balance on the revolving credit facilities of $198,000, which is the approximate maximum available amount on the facilities based on the foreign currency rates

41

as of September 30, 2013, a change of 10% from the interest rates as of September 30, 2013 would have changed interest by $229 for fiscal year 2013.

42

Item 8.Financial Statements and Supplementary Data.

MWI Veterinary Supply, Inc.
Index to Consolidated Financial Statements

	Page Number
Report of Independent Registered Public Accounting Firm	44
Consolidated Statements of Income for the years ended September 30, 2013, 2012 and 2011	45
Consolidated Statements of Comprehensive Income for the years ended September 30, 2013, 2012 and 2011	46
Consolidated Balance Sheets as of September 30, 2013 and 2012	47
Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2013, 2012 and 2011	48
Consolidated Statements of Cash Flows for the years ended September 30, 2013, 2012 and 2011	49
Notes to Consolidated Financial Statements	50

43

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
MWI Veterinary Supply, Inc.
Boise, Idaho

We have audited the accompanying consolidated balance sheets of MWI Veterinary Supply, Inc. and subsidiaries (the “Company”) as of September 30, 2013 and 2012, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended September 30, 2013.  Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2).  These financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of MWI Veterinary Supply, Inc. and subsidiaries as of September 30, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2013, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of September 30, 2013, based on the criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 27, 2013 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Boise, Idaho

November 27, 2013

44

MWI VETERINARY SUPPLY, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended September 30, 2013, 2012 and 2011
Dollars and shares in thousands, except per share amounts
	2013		2012		2011
Revenues:
Product sales	$	2,260,279	$	1,996,294	$	1,489,500
Product sales to related party		68,355		61,873		55,185
Commissions		18,851		16,979		20,655
Total revenues		2,347,485		2,075,146		1,565,340
Cost of product sales		2,043,147		1,808,230		1,359,755
Gross profit		304,338		266,916		205,585
Selling, general and administrative expenses		193,999		172,104		130,656
Depreciation and amortization		10,016		9,045		6,263
Operating income		100,323		85,767		68,666
Other income (expense):
Interest expense		(714)		(926)		(741)
Earnings of equity method investees		337		318		268
Other		735		781		507
Total other income (expense), net		358		173		34
Income before taxes		100,681		85,940		68,700
Income tax expense		(37,832)		(32,463)		(26,120)
Net income	$	62,849	$	53,477	$	42,580
Earnings per common share:
Basic	$	4.96	$	4.24	$	3.42
Diluted	$	4.95	$	4.23	$	3.40
Weighted average common shares outstanding:
Basic		12,675		12,616		12,464
Diluted		12,709		12,647		12,513
See notes to consolidated financial statements

45

MWI VETERINARY SUPPLY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended September 30, 2013, 2012 and 2011
Dollars in thousands
	2013		2012		2011
Net income	$	62,849	$	53,477	$	42,580
Other comprehensive income (loss)
Foreign currency translation		237		1,877		(663)
Actuarial gain on unfunded pension liability, net of tax of $48, $145, and $67, respectively		139		228		21
Total comprehensive income	$	63,225	$	55,582	$	41,938
See notes to consolidated financial statements

46

MWI VETERINARY SUPPLY, INC.
CONSOLIDATED BALANCE SHEETS
As of September 30, 2013 and 2012
Dollars and shares in thousands, except per share amounts
		2013		2012
Assets
Current Assets:
Cash and cash equivalents	$	953	$	514
Receivables, net		307,445		288,922
Inventories		326,093		251,375
Prepaid expenses and other current assets		6,004		10,094
Deferred income taxes		2,327		1,580
Total current assets		642,822		552,485
Property and equipment, net		39,183		35,784
Goodwill		71,150		61,841
Intangibles, net		40,490		38,706
Other assets, net		8,910		7,567
Total assets	$	802,555	$	696,383
Liabilities and Stockholders’ Equity
Current Liabilities:
Credit facilities	$	18,801	$	48,080
Accounts payable		324,057		258,741
Accrued expenses and other current liabilities		21,816		19,952
Current portion of capital lease obligations		103		337
Total current liabilities		364,777		327,110
Deferred income taxes		9,321		7,180
Long-term portion of capital lease obligations		16		104
Other long-term liabilities		2,122		2,687
Commitments and contingencies
Stockholders’ Equity
Common stock $0.01 par value, 40,000 authorized; 12,848 and
12,792 shares issued and outstanding, respectively		128		128
Additional paid in capital		148,459		144,667
Retained earnings		275,814		212,965
Accumulated other comprehensive income		1,918		1,542
Total stockholders’ equity		426,319		359,302
Total liabilities and stockholders’ equity	$	802,555	$	696,383
See notes to consolidated financial statements

47

MWI VETERINARY SUPPLY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Years Ended September 30, 2013, 2012 and 2011
Dollars and shares in thousands
	Shares of			Additional		Accum.
	Common	Common		Paid In		Other Comp.		Retained
	Stock	Stock		Capital		Inc/(Loss)		Earnings		Total
Balance at October 1, 2010	12,457	$	125	$	129,675	$	79	$	116,908	$	246,787
Net income	—		—		—		—		42,580		42,580
Issuance of common stock	6		—		412		—		—		412
Exercises of common stock options	102		1		97		—		—		98
Tax benefit of common stock exercises	—		—		2,714		—		—		2,714
Issuance of stock awards, net of forfeitures	53		—		861		—		—		861
Foreign currency translation	—		—		—		(663)		—		(663)
Actuarial gain on unfunded pension liability adjustment	—		—		—		21		—		21
Balance at September 30, 2011	12,618		126		133,759		(563)		159,488		292,810
Net income	—		—		—		—		53,477		53,477
Issuance of common stock	7		—		562		—		—		562
Issuance of common stock for purchase
of Micro	94		1		7,158		—		—		7,159
Exercises of common stock options	15		—		154		—		—		154
Tax benefit of common stock exercises	—		—		895		—		—		895
Issuance of stock awards, net of forfeitures	58		1		2,139		—		—		2,140
Foreign currency translation	—		—		—		1,877		—		1,877
Actuarial gain on unfunded pension liability adjustment	—		—		—		228		—		228
Balance at September 30, 2012	12,792		128		144,667		1,542		212,965		359,302
Net income	—		—		—		—		62,849		62,849
Issuance of common stock	5		—		651		—		—		651
Exercises of common stock options	6		—		108		—		—		108
Tax benefit of common stock exercises	—		—		1,323		—		—		1,323
Issuance of stock awards, net of forfeitures	45		—		1,710		—		—		1,710
Foreign currency translation	—		—		—		237		—		237
Actuarial gain on unfunded pension liability adjustment	—		—		—		139		—		139
Balance at September 30, 2013	12,848	$	128	$	148,459	$	1,918	$	275,814	$	426,319
See notes to consolidated financial statements

48

MWI VETERINARY SUPPLY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 2013, 2012 and 2011
Dollars in thousands
	2013		2012		2011
Cash Flows From Operating Activities:
Net income	$	62,849	$	53,477	$	42,580
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		10,038		9,062		6,284
Amortization of debt issuance costs		38		41		65
Stock-based compensation		3,553		2,157		831
Deferred income taxes		1,410		1,182		597
Earnings of equity method investees		(337)		(318)		(268)
Excess tax benefit of exercise of common stock options
and restricted stock vesting		(1,323)		(895)		(2,714)
Loss on disposal of property and equipment		111		32		-
Other		(280)		(206)		(76)
Changes in operating assets and liabilities (net of effects of business acquisitions):
Receivables		(15,173)		(48,879)		(23,021)
Inventories		(72,864)		(52,831)		8,553
Prepaid expenses and other assets		3,135		(1,118)		3,398
Accounts payable		63,403		50,018		(5,150)
Accrued expenses		2,889		2,516		1,349
Net cash provided by operating activities		57,449		14,238		32,428
Cash Flows From Investing Activities:
Business acquisitions, net of cash acquired		(17,107)		(51,718)		(9,000)
Purchases of property and equipment		(10,780)		(7,597)		(12,516)
Proceeds from sales of property and equipment		189		96		-
Other		(430)		(646)		(3,993)
Net cash used in investing activities		(28,128)		(59,865)		(25,509)
Cash Flows From Financing Activities:
Borrowings on credit facilities		673,249		539,071		249,978
Payments on credit facilities		(702,271)		(494,186)		(257,166)
Proceeds from issuance of common stock		651		562		412
Proceeds from exercise of common stock options		108		154		98
Excess tax benefit of exercise of common stock options
and restricted stock vesting		1,323		895		2,714
Tax withholdings on net settlements of share-based awards		(1,855)		-		-
Debt issuance costs		-		(111)		-
Payment on long-term debt and capital lease obligations		(312)		(986)		(3,327)
Net cash (used in)/provided by financing activities		(29,107)		45,399		(7,291)
Effect of exchange rate on Cash and Cash Equivalents		225		136		67
Net Increase (Decrease) in Cashand Cash Equivalents		439		(92)		(305)
Cash and Cash Equivalents at Beginning of Period		514		606		911
Cash and Cash Equivalents at End of Period	$	953	$	514	$	606
See notes to consolidated financial statements

49

MWI VETERINARY SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollars and sterling pounds in thousands, except share and per share data

1. Business Description and Basis of Presentation

      MWI Veterinary Supply, Inc. is a leading distributor of animal health products to veterinarians in the United States and United Kingdom. We sell our products primarily to veterinarians in both the companion and production animal markets. As of September 30, 2013, we operatedthirteen distribution centers located across the United States and one distribution center in the United Kingdom. 

2. Summary of Significant Accounting Policies

Principles of Consolidation — The accompanying consolidated financial statements consist of MWI Veterinary Supply, Inc. and its wholly-owned subsidiaries, collectively referred to herein as “MWI” or the “Company.” All intercompany transactions have been eliminated.  We use the equity method of accounting for our investments in entities in which we have significant influence; generally this represents an ownership interest between 20% and 50%. Our share of income or loss from these investments is reported as increases or decreases in the respective investment with a corresponding amount reported as other income/(expense).

Basis of Accounting and Use of Estimates — The accompanying consolidated financial statements have been prepared on the accrual basis of accounting using accounting principles generally accepted in the United States. In preparing financial information, we use certain estimates and assumptions that may affect the reported amounts and disclosures. Some of these estimates require difficult, subjective and complex judgments about matters that are inherently uncertain. As a result, actual results could differ from these estimates. Estimates are used when accounting for allowance for doubtful accounts, customer incentives, vendor rebates, inventories, goodwill and intangible assets, income taxes and contingencies. The estimates of fair value of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date and reported amounts of revenue and expenses for the periods are based on assumptions that we believe to be reasonable.

Segment Information — We are a distributor of animal health products to veterinarians. Our financial results are disclosed as one reportable segment.  We identified two operating segments based on geographic areas but aggregate based on applicable accounting standards.  We determined that the two operating segments have similar operating margins and are expected to maintain this similarity into the future.  Additionally, our products, customers, operations, delivery to market and regulatory environments are all similar in nature.

Foreign Currency Translation — For our international operations, local currencies have been determined to be the functional currencies.  We translate functional currency assets and liabilities to their U.S. dollar equivalents at rates in effect at the balance sheet date and record these translation adjustments in Stockholders’ Equity – Accumulated Other Comprehensive Income/(Loss).  We translate functional currency statement of income amounts to their U.S. dollar equivalents at average rates for the period.

Other Comprehensive Income — Comprehensive income includes cumulative foreign currency translation adjustments and actuarial adjustments on pension valuation. At September 30, 2013, accumulated other comprehensive income is comprised of actuarial adjustments, net of tax, of ($66), and foreign currency translation adjustments of $1,984.

Revenue Recognition —  We sell products we source from vendors to our customers through either a “buy/sell” transaction or an agency relationship with our vendors. In a “buy/sell” transaction, we purchase or take inventory of

50

products from the vendor. When a customer places an order with us, we pick, pack, ship and invoice the customer for the order. We recognize revenue from “buy/sell” transactions as product sales when the product is delivered to the customer. We accept product returns from our customers. We estimate returns based on historical experience and recognize these estimated returns as a reduction of product sales. Product returns have not been significant to our financial statements. We record revenues net of sales tax.  In an agency relationship, we generally do not purchase and take inventory of products from vendors. We receive an order from a customer, then transmit the order to the vendor, who picks, packs and ships the order to the customer. In some cases, the vendor invoices and collects payment from the customer, while in other cases we invoice and collect payment from the customer on behalf of the vendor. We receive a commission payment for soliciting the order from the customer and for providing other customer service activities. Commissions are recognized when the services upon which the commissions are based are complete. Gross billings from agency contracts were $349,006,  $332,343 and $371,024 for the years ended September 30, 2013, 2012 and 2011, respectively, and generated commission revenue of $18,851,  $16,979 and $20,655 for the years ended September 30, 2013, 2012 and 2011, respectively.

Cost of Product Sales and Vendor Rebates — Cost of product sales consist of our inventory product cost, including shipping costs to and from our distribution centers. Costs of fulfillment are included in selling, general and administrative costs. Vendor rebates are recorded based on the terms of the contracts or programs with each vendor. We receive quarterly, semi-annual and annual performance-based rebates from third-party vendors based upon attainment of certain sales and/or purchase goals. Sales rebates are classified in the accompanying consolidated statements of income as a reduction to cost of product sales at the time the sales performance measures are achieved. Purchase rebates are measured against inventory purchases from the vendors and are classified as a reduction of inventory until the product is sold. When the inventory is sold and purchase measures are achieved, purchase rebates are recognized as a reduction to cost of product sales.

Historically, actual results have not significantly deviated from those determined using the estimates described above. We expect that our estimates in the future will continue to be reasonable as our rebates are based on specific vendor program goals and are principally recorded upon achievement of sales or purchase performance measures. Vendors may change or eliminate rebate programs from year to year.

Customer Incentives — Customer incentives are accrued based on the terms of the contracts with each customer. These incentive programs provide that the customer receive an incentive based on their product purchases or attainment of performance goals. Incentives are estimated based on the specific terms in each agreement, historical experience and product growth rates.  Incentives are recognized as a reduction to product sales.

Cash and Cash Equivalents— Cash equivalents consist of highly liquid investments with a maturity of three months or less from the date of purchase. Our banking arrangements allow us to fund outstanding checks when presented to the financial institution for payment.

Inventories — Inventories, consisting of pharmaceuticals, vaccines, parasiticides, diagnostics, micro feed ingredients, capital equipment and technology, supplies and nutritional products, are stated at the lower of cost (on a moving-average basis) or market.

Property and Equipment — Property and equipment are stated at cost and depreciation is computed using the straight-line method over the estimated useful lives, which include the shorter of useful life or lease term for leasehold improvements, of the related assets as follows:

Buildings	25 to 35 years
Machinery, furniture and equipment	3 to 15 years
Computer equipment	3 to 7 years
Leasehold improvements	1 to 10 years

The cost and accumulated depreciation of items sold or retired are removed from the property accounts and any resulting gain or loss is reflected in net income. Repairs and maintenance are expensed as incurred and improvements are capitalized.

51

We periodically review long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. No impairments were identified during the fiscal years ended September 30, 2013, 2012 and 2011.

Goodwill and Intangible Assets — We recognize the excess purchase price over the fair value of net assets acquired and liabilities assumed in a business combination as goodwill on the consolidated balance sheet. We perform an annual impairment test on goodwill as of September 30th each year.  We calculate the fair value of each reporting unit using both an income approach and a market approach,  and compare the fair value to its book value.  We have concluded that there was no impairment during the fiscal years ended September 30, 2013, 2012 and 2011. Impairment tests will continue to be performed at least annually and more frequently if circumstances indicate a possible impairment. 

Identifiable intangible assets primarily include customer relationships, trademarks and patents, technology and covenants not to compete and are amortized, as necessary, over their useful lives or contractual term which range from 1-20 years.  We review both indefinite-lived and definite-lived identifiable intangible assets at least annually for impairment or when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  No impairments were identified during the fiscal years ended September 30, 2013, 2012 and 2011.

Other Assets — Included in other assets are our equity method investments and investments in entities accounted for under the cost method of accounting, which includes an investment in Cubex of $4,000. We periodically evaluate these investments for other-than-temporary impairment using both qualitative and quantitative criteria, or when indicators of impairment are noted. In the event an investment is deemed to be other-than-temporarily impaired, we would recognize the loss component in the consolidated statements of income.  Other assets also consist of debt issuance costs that are being amortized over the term of the related debt.

Earnings Per Common Share — Basic earnings per common share is calculated based on the weighted-average number of outstanding common shares during the applicable period. Diluted earnings per common share is based on the weighted-average number of outstanding common shares plus the weighted-average number of potential outstanding common shares. Potential common shares that would increase earnings per share amounts are antidilutive and are, therefore, excluded from the earnings per common share computations. Earnings per common share is computed separately for each period presented.

Income Taxes — Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized to provide for temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred taxes are measured using enacted tax rates in effect during the years in which the temporary differences are expected to reverse.

Concentrations of Risk — Our financial instruments that are exposed to concentrations of credit risk consist primarily of our receivables. Our customers are geographically dispersed throughout the United States and United Kingdom. In the United Kingdom, we rely on a smaller number of relatively larger customers than does our business in the United States.  These customers in the aggregate accounted for  14.5% and 18.1% of our consolidated accounts receivable balance as of September 30, 2013 and December 31, 2012, respectively, and one significant customer accounted for 2.6% and 7.6% of our consolidated accounts receivable balance as of September 30, 2013 and December 31, 2012, respectively. We routinely assess the financial strength of our customers and review their credit history before extending credit. In addition, we establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

Advertising — Advertising costs are expensed when incurred and are included as part of selling, general and administrative expenses. Advertising costs were $1,165,  $1,203 and $723 in fiscal years 2013, 2012 and 2011, respectively.

Recently Issued and New Accounting Pronouncements —In January 2013, the FASB issued Accounting Standards Update (“ASU”) No. 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which includes bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending arrangements that are either offset on the balance sheet

52

or subject to an enforceable master netting arrangement or similar agreement.  This guidance is effective for our fiscal year beginning October 1, 2013.  We do not believe that the adoption of this guidance will have a material impact on our consolidated financial statements.

In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which provides additional disclosure requirements for items reclassified out of accumulated other comprehensive income.  This guidance is effective for our fiscal year beginning October 1, 2013.  We do not believe that the adoption of this guidance will have a material impact on our consolidated financial statements.

3. Business Acquisitions

On March 21, 2011, MWI Co. purchased substantially all of the assets of Nelson Laboratories Limited Partnership (“Nelson”) for $7,000 in cash. Nelson was a distributor of animal health products to over 1,100 veterinary practices, primarily in the Midwestern United States. This acquisition allows us to better serve our customers in this region. An intangible asset representing customer relationships acquired in the acquisition has an estimated useful life of 10 years. The amount recorded in goodwill is deductible for tax purposes over 15 years.

On October 31, 2011, MWI Co. purchased substantially all of the assets of Micro Beef Technologies, Ltd. (“Micro”) for $60,878, including $53,400 in cash and 94,359 shares of common stock valued at $7,158, which is the fair value of the common stock as of the date of acquisition and a working capital adjustment of $320. The $53,400 paid in cash as consideration of Micro was funded with borrowings under our Credit Agreement (as defined in Note 7) as then in effect. Micro is a value-added distributor to the production animal market, including the distribution of micro feed ingredients, pharmaceuticals, vaccines, parasiticides, supplies and other animal health products. Micro also is a leading innovator of proprietary, computerized management systems for the production animal market. We incurred $1,104 of direct acquisition-related and integration expenses.  The intangible assets acquired in the acquisition include technology, customer relationships, trade name and covenant not to compete. The useful life of the amortizing intangible assets ranges from 5 years to 17 years. Trade name is a non-amortizing intangible asset. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill recorded as part of the acquisition of Micro includes the expected synergies that we believed would result from this acquisition.  The amount recorded in goodwill is deductible for tax purposes over 15 years. The fair values assigned to the tangible and intangible assets acquired and liabilities assumed are based on management's estimates and assumptions as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.

On December 31, 2012, MWI Co. purchased substantially all of the assets of Prescription Containers, Inc. (“PCI Animal Health”), for a net purchase price of $17,107, after consideration of post-closing adjustments.  PCI Animal Health was a distributor of companion animal health products to veterinary practices, primarily in the Northeastern United States.  The intangible asset acquired in the acquisition is for customer relationships and has a useful life of 10 years.  The amount recorded in goodwill is expected to be deductible for tax purposes over 15 years. The fair values assigned to the tangible and intangible assets acquired and liabilities assumed are based on management's estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. We adjusted those valuations during the nine months ended September 30, 2013 as a result of further review of these estimates and assumptions. The fair value assigned to the purchased intangible related to customer relationships decreased by $1,190 with a corresponding adjustment to the carrying value of goodwill. The related impact on amortization recognized from that date is insignificant to the consolidated statements of income.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of each acquisition, which may be adjusted during the measurement period as defined in Accounting Standards Codification (“ASC”) 805. These purchase price allocations are based on a combination of valuations and analyses.

53

	2013		2012		2011
Cash	$	-	$	1	$	-
Receivables		3,585		22,374		4,041
Inventories		1,928		27,701		3,594
Other current assets		-		105		-
Property and equipment		-		8,882		1,900
Investments		-		199		-
Goodwill		9,327		12,473		1,823
Intangibles		4,780		15,760		140
Total assets acquired		19,620		87,495		11,498
Accounts payable		2,513		25,026		4,498
Accrued expenses		-		1,591		-
Other liabilities				-		-
Total liabilities assumed		2,513		26,617		4,498
Net assets acquired	$	17,107	$	60,878	$	7,000

The following table presents information for Micro that is included in our consolidated statements of income from the acquisition date of October 31, 2011 through the fiscal year ended September 30, 2012:

Micro's operations included in MWI's results
		Fiscal year ended September 30, 2012
Revenues	$	246,624
Net Income	$	4,089

The following table presents supplemental pro forma information for the Company as if the acquisition of Micro had occurred on October 1, 2010 for the periods ended September 30, 2012 and 2011 (unaudited):

	Unaudited Pro Forma Consolidated Results
	Fiscal year ended September 30,
	2012		2011
Revenues	$	2,097,076	$	1,793,672
Net Income	$	53,571	$	45,769

The unaudited pro forma consolidated results are not necessarily indicative of what our consolidated results of operations would have been had we completed the acquisition on October 1, 2010.  Additionally, the unaudited pro forma consolidated results do not purport to project the future results of operations of the combined company.

54

4. Receivables

Receivables consist of the following at September 30:

	2013		2012
Trade	$	282,923	$	271,199
Vendor rebates and programs		26,983		20,469
		309,906		291,668
Allowance for doubtful accounts		(2,461)		(2,746)
	$	307,445	$	288,922

5. Property and Equipment

Property and equipment consists of the following at September 30:

	2013		2012
Land	$	1,932	$	1,952
Building and leasehold improvements		14,914		14,420
Machinery, furniture and equipment		38,032		33,075
Computer equipment		9,868		8,276
Construction in progress		4,328		1,773
		69,074		59,496
Accumulated depreciation and amortization		(29,891)		(23,712)
	$	39,183	$	35,784

We recorded depreciation expense of $6,974,  $6,210 and $4,501 for the years ended September 30, 2013, 2012 and 2011, respectively.

6. Goodwill and Intangibles

The changes in the carrying value of goodwill for the fiscal years ended September 30, are as follows:

	2013		2012
Goodwill - Beginning of year	$	61,841	$	49,041
Acquisition activity		9,327		12,473
Foreign exchange translation		(18)		327
Goodwill - End of year	$	71,150	$	61,841

55

Intangible assets consist of the following as of September 30:

	Useful Lives	2013		2012
Amortizing:
Customer relationships	9 - 20 years	$	35,797	$	31,045
Covenants not to compete	1 - 5 years		450		710
Technology	11 years		5,830		5,830
Other	3 - 5 years		1,126		1,084
			43,203		38,669
Accumulated amortization			(10,388)		(7,640)
			32,815		31,029
Non-Amortizing:
Trade names and patents			7,675		7,677
		$	40,490	$	38,706

We recorded amortization expense of $3,064,  $2,852 and $1,783 for the years ended September 30, 2013, 2012 and 2011, respectively.  Estimated amortization expense related to intangible assets as of September 30, 2013 is as follows:

	Amount
2014	$	3,102
2015		2,799
2016		2,669
2017		2,596
2018		2,578
Thereafter		19,071
	$	32,815

7. Debt

	2013		2012
Revolving credit facility, 1.06% as of September 30, 2013	$	16,300	$	39,500
Sterling revolving credit facility, 1.44% as of September 30, 2013		2,501		8,580
Capital lease obligations (1)		119		441
Total debt and capital lease obligations		18,920		48,521
Less: Long-term portion of capital lease obligations		(16)		(104)
Total debt and capital lease obligations included in current liabilities	$	18,904	$	48,417
(1) The capital lease obligations have varying maturity dates.

Revolving Credit Facility — MWI Co. as borrower, is party to a Credit Agreement dated December 13, 2006, as amended (the “Credit Agreement”), by and among MWI Co., MWI, and Memorial Pet Care, Inc. and Bank of America, N.A. and Wells Fargo Bank, N.A. as lenders (collectively, the “Lenders”).  The Credit Agreement allows for an aggregate revolving commitment of the Lenders of $150,000 and a maturity date of November 1, 2016.  Under the Credit Agreement, the margin on variable interest rate borrowings ranges from 0.95% to 1.50%.  The commitment fee under the Credit Agreement ranges from 0.15% to 0.25% depending on the funded debt to EBITDA

56

ratio.  The variable interest rate is equal to the Daily LIBOR Floating Rate or the LIBOR 1-month, 2-month, 3-month or 6-month fixed rate (at MWI Co.’s option) plus the margin.  The Credit Agreement contains financial covenants, including a fixed charge ratio and a funded debt to EBITDA ratio.  We were in compliance with all of the covenants as of September 30, 2013 and 2012. 

Sterling Revolving Credit Facility— On March 15, 2013, Centaur entered into a First Amendment (the “Amendment”) to the unsecured revolving line of credit facility (the “Sterling Revolving Credit Facility”) dated November 5, 2010 with Wells Fargo Bank, N.A. London Branch.  The Amendment increases the maximum loan amount of the Sterling Revolving Credit Facility to £20,000, an increase of £7,500, and extends the term of the facility to November 1, 2016. Interest is based on LIBOR for the applicable interest period plus an applicable margin of 0.95% to 1.50%, and the commitment fee ranges from 0.15% to 0.25%, depending on our funded debt to EBITDA ratio.  The facility contains a financial covenant requiring Centaur to maintain a minimum tangible net worth of £5,000.  As of September 30, 2013 and 2012, Centaur was in compliance with the covenant. Our outstanding balance on the Sterling Revolving Credit Facility at September 30, 2013 was £1,550, or $2,501 using the exchange rate on September 30, 2013.  The interest rate for the Sterling Revolving Credit Facility was 1.44% as of September 30, 2013. 

Also on March 15, 2013, Centaur entered into an uncommitted overdraft facility (the “Overdraft Facility”) with Wells Fargo. The Overdraft Facility allows Centaur to borrow an additional £10,000 to fund short term normal trading cycle fluctuations. The Overdraft Facility will expire on November 1, 2016.  Interest on the borrowing under the Overdraft Facility is the same as the terms under the Amendment.

8. Common Stock and Stock-Based Awards

2002 Stock Plan

We had a 2002 Stock Plan (the “2002 Plan”) to provide our directors, executives and other key employees with additional incentives by allowing them to acquire an ownership interest in us and, as a result, encouraging them to contribute to our success. All options that were granted under this plan have been exercised and there are no additional shares available for issuance under the 2002 Plan.   

2005 Stock Plan

We have a 2005 Stock-Based Award and Incentive Compensation Plan (the “2005 Plan”), under which we may offer restricted shares of our common stock and grant options to purchase shares of our common stock to selected employees and non-employee directors. The purpose of the 2005 Plan is to promote our long-term financial success by attracting, retaining and rewarding eligible participants. At September 30, 2013 and 2012 we had 815,260 and 865,917 shares, respectively, of our common stock available for issuance under the 2005 Plan. 

The 2005 Plan permits us to grant stock options (both incentive stock options and non‑qualified stock options), restricted stock and deferred stock. The compensation committee will determine the number and type of stock-based awards to each participant, the exercise price of each award, the duration of the award (not to exceed ten years), vesting provisions and all other terms and conditions of such award in individual award agreements. The 2005 Plan provides for the cancellation of all unvested awards upon termination of employment with us, unless determined otherwise by the compensation committee at the time awards are granted.

57

A summary of common stock options activity under the 2002 and 2005 Plans is as follows:

	2013			2012				2011
		Weighted				Weighted				Weighted
	Number	average		Number		average		Number		average
	of	exercise		of		exercise		of		exercise
	Shares	price		Shares		price		Shares		price
Outstanding at beginning of year	22,360	$	17.53		37,385	$	14.73		139,550	$	4.65
Exercised	(6,186)		17.43		(14,769)		10.44		(102,128)		0.96
Cancelled or expired	(136)		17.00		(256)		17.00		(37)		17.00
Outstanding at end of year	16,038	$	17.58		22,360	$	17.53		37,385	$	14.73
Exercisable at end of year	16,038	$	17.58		22,360	$	17.53		37,385	$	14.73

	Outstanding and exercisable options
			Weighted
			average
			remaining	Weighted
			contractual	average
		Number of	life	exercise
Range of exercise prices		Shares	(in years)	price
$17.00 - $19.99		14,248	1.8	$	17.00
$20.00 - $22.60		1,790	2.0	$	22.17

The intrinsic value of the shares outstanding and exercisable was $2,114 as of September 30, 2013 and $1,993 as of September 30, 2012.The total intrinsic value of options exercised during the years ended September 30, 2013, 2012 and 2011 was $644, $1,105, and $6,548, respectively.

A summary of restricted stock awards activity under the 2005 Plan is as follows:

	2013			2012				2011
		Weighted				Weighted				Weighted
	Number	average		Number		average		Number		average
	of	grant date		of		grant date		of		grant date
	Shares	fair value		Shares		fair value		Shares		fair value
Nonvested at beginning of year	129,396	$	69.94		105,540	$	61.69		70,584	$	49.33
Granted	70,575		145.65		74,848		101.97		63,900		71.14
Vested	(44,547)		144.52		(48,072)		102.09		(25,934)		52.46
Forfeitures	(13,180)		80.96		(2,920)		63.49		(3,010)		51.92
Nonvested at end of year	142,244	$	83.13		129,396	$	69.94		105,540	$	61.69

As of September 30, 2013, total unrecognized stock based compensation expense related to nonvested awards was approximately $15,911 before income taxes, which is expected to be recognized over the remaining term of the awards which range from 1 to 5 years.  During the fiscal years ended September 30, 2013 and 2012, we recognized $3,553 and $3,569, respectively, in compensation expense related to common stock awards.  The total fair value of shares vested during the years ended September 30, 2013, 2012, and 2011, was $6,438, $4,908, and $1,800, respectively.

58

2008 Employee Stock Purchase Plan

The 2008 Employee Stock Purchase Plan (the “ESPP”) allows substantially all employees to purchase shares of our common stock at 95% of the fair market value on the date of purchase.  The purchase date is the last trading date of the purchase period, which begins in March, June, September and December.  Employees accumulate amounts through payroll deductions during the purchase period of between 1% and 10% but no more than $20 annually.  An employee is allowed to purchase a maximum of 200 shares per purchase period.  We issued 5,396 and 6,859 shares of our common stock under the ESPP during fiscal years ended September 30, 2013 and 2012, respectively.

9. Computation of Earnings per Common Share (In thousands, except per share data)

	2013				2012				2011
	Basic		Diluted		Basic		Diluted		Basic		Diluted
Net income	$	62,849	$	62,849	$	53,477	$	53,477	$	42,580	$	42,580
Weighted average common
shares outstanding		12,675		12,675		12,616		12,616		12,464		12,464
Effect of diluted securities
Stock options and restricted stock				34				31				49
Weighted average shares
outstanding				12,709				12,647				12,513
Earnings per share	$	4.96	$	4.95	$	4.24	$	4.23	$	3.42	$	3.40

There was no impact from anti-dilutive shares in fiscal years ended September 30, 2013, 2012 or 2011. 

10. Income Taxes

Income before taxes is as follows:

	2013		2012		2011
Income before taxes
United States	$	96,915	$	81,482	$	65,271
Foreign		3,766		4,458		3,429
Total income before taxes	$	100,681	$	85,940	$	68,700

59

The components of income tax expense consist of the following:

	2013		2012		2011
United States
Current payable
Federal	$	30,200	$	25,535	$	20,741
State		4,952		4,494		3,696
Deferred
Federal		1,652		1,308		628
State		253		220		120
Total U.S. tax expense		37,057		31,557		25,185
International
Current payable		1,275		1,252		1,109
Deferred		(500)		(346)		(174)
Total international tax expense		775		906		935
Total income tax expense	$	37,832	$	32,463	$	26,120

Our deferred tax assets and liabilities consist of the following at September 30:

	2013		2012
Deferred tax assets:
Allowance for doubtful accounts	$	866	$	958
Inventories		658		521
Lease expense		544		394
Employee benefits		334		439
Acquisition-related costs		444		-
Other		164		368
Total deferred tax assets		3,010		2,680
Deferred tax liabilities:
Investments		(786)		-
Property and equipment		(8,876)		(7,684)
Prepaid expenses		(227)		(395)
Other		(115)		(201)
Total deferred tax liabilities		(10,004)		(8,280)
Net deferred liabilities	$	(6,994)	$	(5,600)

Other deferred tax assets totaling $711 and $770 as of September 30, 2013 and 2012, respectively, arising from the Company’s foreign subsidiary, are subject to full valuation allowance.

Income tax expense differed from income taxes at the U.S. federal statutory tax rate for all periods presented as follows:

	2013	2012	2011
Taxes computed at statutory rate	35.0%	35.0%	35.0%
State income taxes (net of federal income tax benefit)	3.4	3.6	3.7
Foreign	(0.9)	(1.1)	(0.9)
Other	0.1	0.3	0.2
	37.6%	37.8%	38.0%

60

In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations.  As of September 30, 2013, the Company has not made a provision for U.S. income or additional foreign withholding taxes on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration.  Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances.  It is not practicable to estimate the amount of deferred tax liability related to investments in foreign subsidiaries because of the complexities of the hypothetical calculation.

A reconciliation of the unrecognized tax benefits is as follows:

	2013		2012		2011
Unrecognized tax benefits – Beginning of year	$	-	$	23	$	198
Gross increases related to prior period tax positions		-		-		-
Gross decreases related to prior period tax positions		-		(8)		(175)
Gross increases related to current period tax positions		-		-		-
Settlements		-		(15)		-
Unrecognized tax benefits – End of year	$	-	$	-	$	23

For the fiscal years ended September 30, 2013, 2012 and 2011, the amount included in our income tax expense for tax-related interest and penalties was not significant.  Of the $23 unrecognized tax benefits as of September 30, 2011, $15 would have impacted our effective rate, if recognized. We expect no material changes to our unrecognized tax benefits during the next fiscal year.  Our policy for classifying interest and penalties associated with unrecognized tax benefits is to include such items in income tax expense.

We filed Form 3115 Application of Change in Accounting Method with the Internal Revenue Service (“IRS”) during the fiscal year ended September 30, 2008.  We filed an advance consent request for a non-automatic account method change for tax purposes for which we received approval during fiscal year 2011.  Resolution decreased the liability for unrecognized tax benefits by approximately $175.

We completed an examination by the IRS for the fiscal years ended September 30, 2010 and 2009.  With few exceptions, we are no longer subject to income tax examination for years before 2008 in the U.S. and 2008 in significant state and local jurisdictions.  We are no longer subject to income tax examinations for years before 2011 in significant foreign jurisdictions.

11. Statements of Cash Flows — Supplemental and Noncash Disclosures

	2013		2012		2011
Supplemental Disclosures
Cash paid for interest	$	620	$	788	$	505
Cash paid for income taxes		34,045		31,025		21,302
Noncash Investing and Financing Activities
Issuance of restricted common stock for asset acquisition		-		7,158		-
Capital lease asset additions and related obligations		-		165		455
Equipment acquisitions financed with accounts payable		265		192		124

12. Commitments and Contingencies

From time to time, in the normal course of business, we may become a party to legal proceedings that may have an adverse effect on our financial position, results of operations and cash flow.  At September 30, 2013, we

61

were not a party to any material pending legal proceedings and were not aware of any claims that could have a material adverse effect on our financial position, results of operations or cash flows.

We have operating leases for office and distribution center space and equipment for varying periods. We also lease some of our vehicles in the United Kingdom under capital leases.  Certain leases have renewal options and require contingent payments for increases, including executory costs, property taxes, insurance and certain other costs in excess of a base year amount. Total rent expense for the years ended September 30, 2013, 2012 and 2011 were $6,301,  $5,382 and $4,259, respectively.

The aggregate future noncancelable minimum rental payments on operating leases and capital leases at September 30, 2013 are as follows:

	Lease Obligations
Fiscal Year	Operating Leases		Capital Leases
2014	$	5,160	$	103
2015		4,634		16
2016		4,541
2017		4,317
2018		4,226
Thereafter		11,573
Total future minimum obligations	$	34,451	$	119

13. Related Party Transactions

MWI Co., our subsidiary, holds a 50% membership interest in Feeders’ Advantage that is accounted for as an investment using the equity method. Sales of products to Feeders’ Advantage, which are at our cost, were $68,355,  $61,873 and $55,185 for the fiscal years ended September 30, 2013, 2012 and 2011, respectively. MWI Co. charged Feeders’ Advantage for certain operating and administrative services of $1,079,  $1,008 and $919 for the fiscal years ended September 30, 2013, 2012 and 2011, respectively. Our President and Chief Executive Officer and a member of our board of directors are each members of the board of managers of Feeders’ Advantage.

MWI Co. allows Feeders’ Advantage to use its cash management system to finance its day-to-day operations. At any given time, the outstanding position used in the cash management system may be a receivable or payable depending on the cash activity.  A receivable balance bears interest at the prime rate. The interest due on the outstanding receivable is calculated and charged to Feeders’ Advantage on the last day of each month. Conversely, to the extent MWI Co. has a payable balance due to Feeders’ Advantage, the payable balance accrues interest in favor of Feeders’ Advantage at the average federal funds rates in effect for that month.  As of September 30, 2013 MWI Co. had a payable balance to Feeders’ Advantage of $777.  As of September 30, 2012 MWI Co. had a receivable balance from Feeders' Advantage of $62. 

14. Employee Benefit Plans

We have a multi-employer defined contribution profit sharing plan with a 401(k) arrangement for employees in the United States.  To become eligible for the profit sharing portion of the plan, an employee must complete two years of service and attain the age of twenty-one. Participation is automatic beginning the following January or July. To become eligible for the 401(k) portion of the plan, the employee must complete three-months of service and attain the age of twenty-one.

Both portions of the plan allow for employer contributions. We are required to match 50% of the employee’s contribution to the 401(k) portion of the plan up to 6% of the employee’s salary. Our matching contributions for the 401(k) portion of the plan were $2,122,  $1,871 and $1,464 for the fiscal years ended September 30, 2013, 2012 and 2011, respectively. Employee’s contributions are fully vested immediately while employer contributions vest over a five-year period.

62

Contributions to the profit sharing portion of the Plans are discretionary, ranging from 0% to 3%, and are approved by our board of directors. Total profit sharing expense for the fiscal years ended September 30, 2013, 2012 and 2011 were $1,997,  $1,847 and $1,516, respectively. Employer contributions are fully vested immediately.

Centaur sponsors a defined contribution plan for all other staff not participating in the defined benefit plan described below. The contributions made by the employer over the period are detailed below. Contributions are currently payable at a minimum of 3% up to a maximum of 6% of eligible pay if matched by employee.  The matching contribution for the plan was $257,  $250 and $269 for the fiscal years ended September 30, 2013, 2012 and 2011, respectively.

Centaur operates a defined benefit pension plan which provides benefits based on pensionable pay and is closed to future benefit accrual.

The fair value of plan assets, benefit obligation and funded status of the defined benefit plan as of September 30 is as follows:

	2013		2012		2011
Fair value of plan assets	$	5,242	$	5,329	$	4,760
Benefit obligation		(6,667)		(7,228)		(7,031)
Unfunded pension liability	$	(1,425)	$	(1,899)	$	(2,271)

The unfunded pension liability is recognized as other long-term liabilities in the Consolidated Balance Sheets.  Net periodic benefit expense for the fiscal year ended September 30 consisted of the following:

	2013		2012		2011
Interest cost	$	195	$	219	$	255
Expected return on plan assets		(252)		(249)		(205)
Net periodic (benefit)/cost		(57)		(30)		50
Other changes recognized in other comprehensive income
Actuarial gain		(187)		(373)		(88)
Total recognized in net periodic benefit costs and
other comprehensive income	$	(244)	$	(403)	$	(38)
Total gain recognized in other comprehensive income, net of tax	$	(139)	$	(228)	$	(21)

The estimated net actuarial gain that will be amortized from accumulated other comprehensive income into net periodic benefit costs during fiscal year 2014 is not significant.  The following table provides the weighted-average actuarial assumptions:

	2013	2012
Assumptions used to determine benefit obligations
Discount rate	3.6%	3.0%
Rate of compensation increase (1)	N/A	N/A
	2013	2012	2011
Assumptions used to determine net periodic benefit cost
Discount rate	3.0%	3.1%	3.6%
Expected return on plan assets	5.0%	5.2%	4.3%
Rate of compensation increase (1)	N/A	N/A	N/A
(1) There is no assumed rate of compensation increase as there have been no current active members since April 2006.

63

The following table sets forth, by level within the fair value hierarchy, as discussed in Note 15, Fair Value of Financial Instruments, the assets of the plan, by major asset category, at fair value as of September 30:

	2013				2012
	Market		Asset	Fair Value	Market		Asset	Fair Value
Asset Class	Value		Allocation	Level	Value		Allocation	Level
Equities	$	2,062	39%	2	$	1,793	34%	2
Corporate bonds		979	19%	2		1,275	24%	2
UK Government bonds		-	0%	2		485	9%	2
Cash		82	2%	1		218	4%	1
Other assets		2,119	40%	2		1,558	29%	2
Total	$	5,242	100%		$	5,329	100%

15. Fair Value of Financial Instruments

Current fair value accounting guidance includes a hierarchy that is intended to increase consistency and comparability in fair value measurements and disclosures.  This hierarchy prioritizes inputs to valuation techniques based on observable and unobservable data.  The guidance categorizes these inputs used in measuring fair value into three levels which include the following:

· Level 1 – observable inputs such as quoted prices in active markets;

· Level 2 – inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and

· Level 3 – unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

As of September 30, 2013 and 2012, financial instruments include cash and cash equivalents, receivables and accounts payable, and the fair values approximate book values due to their short maturities. 

Our revolving credit facilities in the United States and in the United Kingdom were amended in the recent past and are based on market conditions such as LIBOR.  Because these credit facilities include interest rates based on current market conditions (Level 1 inputs), we believe that the estimated fair value of our debt was materially the same as our carrying value.

16. Geographic Information

Revenues and long-lived assets by geographic region are as follows:

	2013		2012		2011
Revenues for the fiscal years ended September 30
United States	$	2,032,260	$	1,776,414	$	1,304,794
International		315,225		298,732		260,546
Total	$	2,347,485	$	2,075,146	$	1,565,340
Long-lived assets as of September 30
United States	$	32,881	$	29,001	$	18,953
International		6,302		6,783		6,256
Total	$	39,183	$	35,784	$	25,209

64

17. Quarterly Financial Data (Unaudited)

	Three-Months Ended
	Dec. 31,		Mar. 31,		June 30,		Sept. 30,		Year (1)
		(Dollars and shares in thousands, except per share data)
Fiscal Year 2013
Total revenues	$	572,848	$	563,114	$	606,443	$	605,080	$	2,347,485
Gross profit		76,929		74,679		77,511		75,219		304,338
Operating income		27,077		24,238		26,534		22,473		100,323
Net income		16,751		15,100		16,781		14,216		62,849
Earnings per common share — basic	$	1.32	$	1.19	$	1.32	$	1.12	$	4.96
Earnings per common share — diluted	$	1.32	$	1.19	$	1.32	$	1.12	$	4.95
Weighted average common shares
outstanding:
Basic		12,665		12,674		12,679		12,683		12,675
Diluted		12,695		12,709		12,713		12,721		12,709
Fiscal Year 2012
Total revenues	$	461,901	$	507,170	$	554,669	$	551,406	$	2,075,146
Gross profit		62,514		66,618		69,519		68,265		266,916
Operating income		21,415		21,411		23,287		19,654		85,767
Net income		13,196		13,178		14,503		12,600		53,477
Earnings per common share — basic	$	1.05	$	1.04	$	1.15	$	0.99	$	4.24
Earnings per common share — diluted	$	1.05	$	1.04	$	1.15	$	0.99	$	4.23
Weighted average common shares
outstanding:
Basic		12,581		12,619		12,628		12,636		12,616
Diluted		12,605		12,648		12,662		12,672		12,647
(1) The sums of the quarterly amounts may not agree to the year-to-date amount as a result of rounding.

18. Subsequent Event

On November 1, 2013, subsequent to our fiscal year end, we acquired substantially all of the assets of IVESCO Holdings, LLC (“IVESCO”)  for an enterprise value of approximately $67.5 million, plus a closing  net working capital adjustment of approximately $11.2 million. This transaction is subject to a final post-closing working capital adjustment. The cash purchase price was funded with borrowings by the Company under its existing Credit Agreement. IVESCO engaged in the distribution and sale of animal health and related productsand service, logistics and technical support relating to such distribution and sale of animal health and related products.

As the initial accounting for the business combination was not complete at the time the financial statements were issued, the purchase price allocation and pro-forma income statement disclosures have not been disclosed.

65

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None

Item 9A.Controls and Procedures.

Our management, including the Chief Executive Officer and the Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a‑15(e) of the Securities Exchange Act of 1934) as of September 30, 2013. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our Company’s disclosure controls and procedures, including the accumulation and communication of disclosures to the Company’s Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure, are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission‘s rules and forms.

Management’s annual report on internal control over financial reporting and the attestation report of our independent registered public accounting firm are set forth below on this Annual Report on Form 10-K.

There were no changes in our internal controls over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

Management’s Report on Internal Control over Financial Reporting

The management of MWI Veterinary Supply, Inc. and its subsidiaries (the “Company”) is responsible for establishing and maintaining effective internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f)).

There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2013. This assessment was based on criteria for effective internal control over financial reporting described in “Internal Control – Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of September 30, 2013, internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles.

The effectiveness of the Company’s internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Their report is included herein.

66

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
MWI Veterinary Supply, Inc.
Boise, Idaho

We have audited the internal control over financial reporting of MWI Veterinary Supply, Inc. and subsidiaries (the "Company") as of September 30, 2013, based on criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.  Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.  Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.  Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2013, based on the criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended September 30, 2013 of the Company and our report dated November 27, 2013 expressed an unqualified opinion on those financial statements and financial statement schedule. 

/s/ DELOITTE & TOUCHE LLP

Boise, Idaho

November 27, 2013

67

Item 9B.Other Information.

None.

PART III

Item 10.Directors, Executive Officers and Corporate Governance of the Registrant.

The information regarding directors and nominees for directors of the Company, including identification of the audit committee and audit committee financial expert, is presented under the headings “Corporate Governance—Committees of the Board of Directors,” and “Election of Directors—Nominees For Directors” in the Company’s definitive proxy statement for use in connection with the 2013 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed within 120 days after the end of the Company’s fiscal year ended September 30, 2013. The information contained under these headings is incorporated herein by reference. Information regarding the executive officers of the Company is included in this Annual Report on Form 10‑K under Item 1 of Part I as permitted by Instruction 3 to Item 401(b) of Regulation S-K.

The Company has adopted a code of conduct that applies to its Chief Executive Officer and Chief Financial Officer. This code of conduct is available on the Company’s Web site at www.mwivet.com. If the Company makes any amendments to this code other than technical, administrative or other non-substantive amendments, or grants any waivers, including implicit waivers, from a provision of this code to the Company’s Chief Executive Officer or Chief Financial Officer, the Company will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a report on Form 8‑K filed with the SEC.

Item 11.Executive Compensation.

Information concerning executive compensation is presented under the headings “Executive Compensation” and “Compensation Committee Report” in the Proxy Statement.  The information contained under these headings is incorporated herein by reference.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information with respect to security ownership of certain beneficial owners and management is set forth under the heading “Security Ownership of Certain Beneficial Owners and Directors and Officers” in the Proxy Statement. The information contained under these headings is incorporated herein by reference.

Equity Compensation Plan Information

The following table provides information as of September 30, 2013 about the common stock that may be issued under all of our existing equity compensation plans, including the 2002 Stock Plan and 2005 Stock-Based Incentive Compensation Plans. Both of these plans have been approved by our stockholders.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		16,038		$ 17.58		815,260
Equity compensation plans not approved by security holders		—		—		—
Total		16,038		$ 17.58		815,260

68

Item 13.Certain Relationships, Related Transactions and Director Independence.

Information concerning related transactions and director independence is presented under the heading “Certain Relationships, Related Transactions and Director Independence” in the Proxy Statement. The information contained under this heading is incorporated herein by reference.

Item 14.Principal Accountant Fees and Services.

Information concerning principal accountant fees and services is presented under the heading “Ratification of Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement. The information contained under this heading is incorporated herein by reference.

PART IV

Item 15.Exhibits and Financial Statement Schedules.

(a)The following documents are filed as part of this report:

1)Consolidated Financial Statements: See Index to Consolidated Financial Statements at Item 8 on page 43 of this report.

2)Financial Statement Schedule: Schedule II—Consolidated Valuation and Qualifying Accounts

3)Exhibits are incorporated herein by reference or are filed with this report as set forth in the Index to Exhibits on pages 71 through 73 hereof

MWI VETERINARY SUPPLY, INC.
SCHEDULE II—CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(Amounts in thousands)

	Balance at Beginning of Period		Charged (Credited) to Costs and Expense		Deductions/Write-offs		Balance at End of Period
Allowance for Doubtful Accounts:
Year ended September 30, 2011	$	2,570	$	437	$	(428)	$	2,579
Year ended September 30, 2012		2,579		661		(494)		2,746
Year ended September 30, 2013		2,746		449		(734)		2,461

69

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.3
	Mwi Veterinary Supply, Inc.
	By: /s/ MaryPatricia B. Thompson
	Mary Patricia B. Thompson
	(Senior Vice President of Finance and Administration, Chief Financial Officer)
Date: November 27, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of November 27, 2013.

/s/ James F. Cleary, Jr.	/s/ Mary Patricia B. Thompson
James F. Cleary, Jr. Director, President and Chief Executive Officer (Principal Executive Officer)	Mary Patricia B. Thompson Senior Vice President of Finance and Administration, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
/s/ Keith E. Alessi	/s/ Bruce C. Bruckmann
Keith E. Alessi (Director)	Bruce C. Bruckmann (Director)
/s/ John F. McNamara	/s/ A. Craig Olson
John F. McNamara (Director)	A. Craig Olson (Director)
/s/ Robert N. Rebholtz	/s/ William J. Robison
Robert N. Rebholtz (Director)	William J. Robison (Director)

70

Index to Exhibits

Filed with the Annual Report
on Form 10‑K for the
Year Ended September 30, 2013

Number		Description
2.1		Asset Purchase Agreement dated September 20, 2011 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co. and Micro Beef Technologies, Ltd., incorporated herein by reference to Exhibit 2.2 of the Company’s Annual Report on Form 10-K, filed November 28, 2011.
2.2		Asset Purchase Agreement dated August 28, 2013 by and among IVESCO Holdings LLC, AHN International LLC and MWI Veterinary Supply Co.
3.1		Form of Amended and Restated Certificate of Incorporation of MWI Veterinary Supply, Inc., incorporated herein by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q, filed August 1, 2007.
3.2		Form of Amended and Restated Bylaws of MWI Veterinary Supply, Inc., incorporated herein by reference to Exhibit 3.2 of the Company’s Quarterly Report on Form 10-Q, filed August 1, 2007.
4.1		Form of MWI Veterinary Supply, Inc. common stock certificate, incorporated herein by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S‑1 (Reg No. 333‑124264).
4.2		Registration Rights Agreement dated as of June 18, 2002 by and between MWI Holdings, Inc., Bruckmann, Rosser, Sherrill & Co. II, L.P., Agri Beef Co. and the other parties thereto, incorporated herein by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S‑1 (Reg No. 333‑124264).
4.3		Executive Stock Agreement dated as of June 18, 2002 by and among MWI Veterinary Supply Co., MWI Holdings, Inc. and James Cleary, incorporated herein by reference to Exhibit 4.4 of the Company’s Registration Statement on Form S‑1 (Reg No. 333‑124264).*
4.4		Executive Stock Agreement dated as of June 18, 2002 by and among MWI Veterinary Supply Co., MWI Holdings, Inc. and Jeff Danielson, incorporated herein by reference to Exhibit 4.5 of the Company’s Registration Statement on Form S‑1 (Reg No. 333‑124264).*
4.5		Executive Stock Agreement dated as of June 18, 2002 by and among MWI Veterinary Supply Co., MWI Holdings, Inc. and James Hay, incorporated herein by reference to Exhibit 4.6 of the Company’s Registration Statement on Form S‑1 (Reg No. 333‑124264).*
4.6		Executive Stock Agreement dated as of June 18, 2002 by and among MWI Veterinary Supply Co., MWI Holdings, Inc. and Mary Pat Thompson, incorporated herein by reference to Exhibit 4.8 of the Company’s Registration Statement on Form S‑1 (Reg No. 333‑124264).*
4.7		First Amendment to Executive Stock Agreement dated as of May 6, 2005 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co. and James F. Cleary, Jr., incorporated herein by reference to Exhibit 4.9 of the Company’s Registration Statement on Form S‑1 (Reg No. 333‑124264).*
4.8		First Amendment to Executive Stock Agreement dated as of May 5, 2005 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co. and Jeffrey J. Danielson, incorporated herein by reference to Exhibit 4.10 of the Company’s Registration Statement on Form S‑1 (Reg No. 333‑124264).*
4.9		First Amendment to Executive Stock Agreement dated as of May 6, 2005 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co. and James S. Hay, incorporated herein by reference to Exhibit 4.11 of the Company’s Registration Statement on Form S‑1 (Reg No. 333‑124264).*
4.10	First Amendment to Executive Stock Agreement dated as of May 6, 2005 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co. and Mary Patricia B. Thompson, incorporated herein by reference to Exhibit 4.13 of the Company’s Registration Statement on Form S‑1 (Reg No. 333‑124264).*

71

10.1	2002 Stock Option Plan, incorporated herein by reference to Exhibit 10.11 of the Company’s Registration Statement on Form S‑1 (Reg No. 333‑124264).*
10.2	MWI Veterinary Supply, Inc. 2005 Stock-Based Incentive Compensation Plan, adopted July 27, 2005, as Amended and Restated, effective July 24, 2006, incorporated herein by reference to Exhibit 10.21 of the Company’s Current Report on Form 8-K, filed February 8, 2007.*
10.3	Form of Option Letter, incorporated herein by reference to Exhibit 10.22 of the Company’s Registration Statement on Form S‑1 (Reg No. 333‑124264).
10.4	Credit Agreement dated as of December 13, 2006 by and between MWI Veterinary Supply Co., as Borrower, MWI Veterinary Supply, Inc. and Memorial Pet Care, Inc. as Guarantors, Bank of America, N.A. and Wells Fargo Bank, N.A., as Lenders, incorporated herein by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q, filed February 5, 2007.
10.5	2012 Livestock Products Distribution Agreement between MWI Veterinary Supply, Inc. and Pfizer, Inc. effective as of January 1, 2012, incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q, filed May 3, 2012. †
10.6	2012 Pfizer Premier Equine Products Distribution Agreement between MWI Veterinary Supply, Inc. and Pfizer, Inc. effective as of January 1, 2012, incorporated herein by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q, filed May 3, 2012. †
10.7	MWI Veterinary Supply, Inc. 2008 Employee Stock Purchase Plan, incorporated herein by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q, filed May 1, 2008.
10.8	License Agreement dated and effective July 1, 2008 between MWI Veterinary Supply Co. and American Animal Hospital Association, incorporated herein by reference to Exhibit 10.14 of the Company’s Annual Report on Form 10-K, filed November 24, 2008. †
10.9	Sponsorship Letter Agreement dated June 30, 2008 between American Animal Hospital Association and MWI Veterinary Supply Co, incorporated herein by reference to Exhibit 10.15 of the Company’s Annual Report on Form 10-K, filed November 24, 2008.
10.10	First Amendment to Credit Agreement dated February 8, 2010 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co., Memorial Pet Care, Inc., Bank of America, N.A. and Wells Fargo Bank, N.A., incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed February 12, 2010.
10.11	Second Amendment to Credit Agreement dated August 10, 2010 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co., Memorial Pet Care, Inc., Bank of America, N.A. and Wells Fargo Bank, N.A., incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed August 13, 2010.
10.12	Third Amendment to Credit Agreement dated November 1, 2011 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co., Memorial Pet Care, Inc., Bank of America, N.A. and Wells Fargo Bank, N.A., incorporated herein by reference to Exhibit 10.17 of the Company’s Annual Report on Form 10-K, filed November 28, 2011.
10.13	Fourth Amendment to Credit Agreement by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co., Memorial Pet Care, Inc., Bank of America, N.A. and Wells Fargo Bank, N.A. dated March 15, 2013, incorporated herein by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, filed March 20, 2013.
10.14	Non-competition and Confidential Information Agreement dated September 20, 2011, by and between MWI Veterinary Supply Co. and William C. Pratt, incorporated herein by reference to Exhibit 10.18 of the Company’s Annual Report on Form 10-K, filed November 28, 2011.
10.15	Non-competition and Confidential Information Agreement dated September 20, 2011, by and between MWI Veterinary Supply Co. and Mark Shaw, incorporated herein by reference to Exhibit 10.19 of the Company’s Annual Report on Form 10-K, filed November 28, 2011.

72

10.16	Sterling Revolving Credit Facility dated November 5, 2010 by and among Centaur Services Limited and Wells Fargo Bank, N.A., incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed November 10, 2010.
10.17	First Amendment to the Sterling Revolving Credit Facility between Centaur Services Limited and Wells Fargo, N.A., London Branch dated March 15, 2013, incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed March 20, 2013.
10.18	Amended and Restated Continuing Guaranty of MWI Veterinary Supply Co. dated March 15, 2013, incorporated herein by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, filed March 20, 2013.
10.19	Overdraft Facility between Centaur Services Limited and Wells Fargo, N.A., London Branch dated March 15, 2013, incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, filed March 20, 2013.
10.20	Non-Disclosure and Non-Competition Agreement dated as of September 10, 2006 by and among MWI Veterinary Supply Co. and John Francis, incorporated herein by reference to Exhibit 4.1 of the Company’s Quarterly Report on Form 10-Q, filed May 6, 2010.*
10.21	Non-Disclosure and Non-Competition Agreement dated as of August 26, 2011 by and among MWI Veterinary Supply Co. and Kevin W. Price, incorporated herein by reference to Exhibit 10.24 of the Company’s Annual Report on Form 10-K, filed November 28, 2011.*
10.22	MWI Veterinary Supply, Inc. Annual Incentive Bonus Plan, incorporated herein by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q, filed May 2, 2013.*
10.23	Non-Exclusive Distributor Agreement by and between MWI Veterinary Supply Co. and ABAXIS, Inc. effective as of January 1, 2013, incorporated by reference to Exhibit 10.27 of the Company’s Annual Report on Form 10-K, filed November 27, 2012.
10.24	Letter Agreement by and between MWI Veterinary Supply Co. and ABAXIS, Inc. dated as of September 28, 2012, incorporated by reference to Exhibit 10.28 of the Company’s Annual Report on Form 10-K, filed November 27, 2012. †
10.25	IDEXX Distribution Agreement by and between IDEXX Distribution, Inc. on behalf of itself, IDEXX Laboratories, Inc., and entities controlled by or under common control with IDEXX Laboratories, Inc. and MWI Veterinary Supply Co. effective as of January 1, 2013, incorporated by reference to Exhibit 10.29 of the Company’s Annual Report on Form 10-K, filed November 27, 2012. †
10.26	Non-Disclosure and Non-Competition Agreement dated as of September 12, 2011 by and among MWI Veterinary Supply Co. and Alden J. Sutherland, incorporated by reference to Exhibit 10.30 of the Company’s Annual Report on Form 10-K, filed November 27, 2012.*
10.27	Non-Disclosure and Non-Competition Agreement dated as of October 7, 2013 by and among MWI Veterinary Supply Co. and Jeremy Ouchley.*
21.1	Subsidiaries of MWI Veterinary Supply, Inc.
23	Consent of Deloitte & Touche LLP
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*Identifies management contracts or compensatory plans or arrangements required to be filed as an exhibit hereto.

†Certain portions of the exhibit have been omitted pursuant to a confidential treatment request submitted to and approved by the SEC.

73

EX-10.27

EXHIBIT 10.27

MWI VETERINARY SUPPLY CO.

KEY EMPLOYEE Nondisclosure AND nonCOMPETITION AGREEMENT

This Key Employee Nondisclosure and Noncompetition Agreement (“Agreement”) is made by and between Jeremy Ouchley (“Employee”) and MWI Veterinary Supply Co., an Idaho corporation (the "Company"), in connection with the inception of Employee’s employment with the Company (as described further in the offer letter dated August 30, 2013).  Employee and the Company agree as follows:

fAIR COMPETITION COVENANTS

Acknowledgements.  Employee acknowledges and agrees that in the course of his employment with the Company, Employee, by reason of the Company's investment of time, money, trust, exposure to the public, or exposure to technologies, intellectual property, business plans, business processes and methods of operation, customers, vendors or other business relationships during the course of employment, will gain a high level of inside knowledge, influence, credibility, notoriety, fame, reputation or public persona as a representative or spokesperson of the Company, and as a result, will have the ability to harm or threaten the Company's and/or its affiliates’ legitimate business interests, including without limitation its goodwill, technologies, intellectual property, and other Confidential Information.  In consideration of the foregoing, Employee’s employment with the Company and resulting compensation, and other good and valuable consideration, Employee agrees to the restrictions set forth in this Agreement.

Nondisclosure Covenant. Employee agrees that Employee will not, directly or indirectly, during the term of Employee’s employment with the Company or at any time thereafter, without the prior express written consent of the Company, use or divulge, disclose or make available or accessible any Confidential Information to any person or entity (other than when required to do so in good faith to perform Employee’s duties and responsibilities on behalf of the Company during the term of Employee’s employment with the Company, or when required to do so by a lawful order of a court of competent jurisdiction, any governmental authority or agency, or any recognized subpoena power). In the event that Employee becomes legally compelled (by oral questions, interrogatories, request for information or documents, subpoena, criminal or civil investigative demand or similar process) to disclose any Confidential Information, then prior to such disclosure, Employee will provide the Company with prompt written notice so that the Company may seek (with Employee’s cooperation) a protective order or other appropriate remedy and/or waive compliance with the provisions of this paragraph.  In the event that such protective order or other remedy is not obtained, then Employee will furnish only that portion of the Confidential Information which he is advised by counsel is legally required, and will cooperate with the Company in the Company’s efforts to obtain reliable assurance that confidential treatment will be accorded to the Confidential Information.  Employee shall also proffer to the Company, no later than the effective date of any termination of Employee’s employment with the Company for any reason or upon the earlier request of the Company, and without retaining any copies, notes or excerpts thereof, all memoranda, computer disks or other media, computer programs, diaries, notes, records, data, customer or client lists, marketing plans and strategies, and any other documents consisting of or containing Confidential Information, as well as all other property belonging to the Company or its affiliates, in each case, that are in Employee’s actual or constructive possession or which are subject to Employee’s control at such time.The obligations contained in this paragraph are in addition to, and not in lieu of, any obligations to which Employee may be subject under the Idaho Rules of Professional Conduct or similar rules governing lawyers in any applicable jurisdiction.

Noncompetition Covenant

.  Employee agrees that Employee will not, directly or indirectly, during the Noncompete Period, within the United States, solicit, sell or render any services or products in a Competitive Business, including, but not limited to, as a proprietor, member, partner, investor, shareholder, director, officer, employee, consultant, or independent contractor.  Nothing herein shall prohibit Employee from being a passive investor of not more than 5% of the outstanding stock of any class of capital stock of a corporation which is publicly traded, so long as Employee has no active participation in the business of such corporation.

Nonsolicitation Covenant

.  During the Noncompete Period, Employee shall not, directly or indirectly, (i) solicit, induce, or attempt to solicit or induce, any Protected Customer to terminate or reduce any relationship with the Company or any affiliate, or in any way interfere with the relationship between the Company or any affiliate and any Protected Customer,  (ii) solicit, induce, or attempt to solicit or induce, any employee or independent contractor of the Company or any affiliate to terminate or reduce any relationship with the Company or such affiliate, or in any way interfere with the relationship between the Company or any affiliate and any employee or independent contractor thereof, (iii) hire or attempt to hire any person who is an employee or independent contractor of the Company or any affiliate, or was such an employee or independent contractor within six (6) months prior to such hiring or attempt to hire,or (iv) induce or attempt to induce any supplier, manufacturer’s representative, vendor, licensee, licensor, franchisee or other business relation of the Company or any affiliate to terminate or reduce any relationship with the Company or such affiliate, or in any way interfere with the relationship between any such supplier, manufacturer’s representative, vendor, licensee, licensor, franchisee or other business relation and the Company or any affiliate. 

Nondisparagement Covenant

.  During and after the term of Employee’s employment with the Company, Employee shall not directly or indirectly, in any forum or through any medium of communication, make statements injurious to the business reputation or good will of the Company or any of the members of its board, its officers or employees.

Ownership of Property.  Employee acknowledges that all Work Product belongs to the Company or any affiliate of the Company designated by the Company, and Employee hereby assigns, all Work Product to the Company or such affiliate of the Company.  Any copyrightable work prepared in whole or in part by Employee in the course of Employee’s work for the Company or any affiliate shall be deemed a “work made for hire” under the copyright laws, and the Company or such affiliate of the Company shall own all rights therein.  To the extent that any such copyrightable work is not a “work made for hire,” Employee hereby assigns and agrees to assign to the Company or such affiliate of the Company all right, title, and interest, including without limitation, copyright in and to such copyrightable work.  Employee shall promptly disclose such Work Product and copyrightable work to the Company and perform all actions reasonably requested by the Company (whether during or after the term of employment) to establish and confirm the ownership of the Company or such affiliate of the Company (including, without limitation, assignments, consents, powers of attorney and other instruments).

Breach of Covenants

.  If, at the time of enforcement of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area.  The parties hereto agree that the Company will suffer irreparable harm in the event of a breach of this Agreement, and money damages would not be an adequate remedy for any breach of this Agreement.  Therefore, in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns will, in addition to other rights and remedies, be entitled to specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security), in addition to all reasonable attorneys’ fees and costs incurred by the Company or its successors or assigns in enforcing its rights under this Agreement.  In addition, in the event of an alleged breach or violation by Employee of any obligation in the above paragraphs labeled “Noncompetition Covenant” and/or “Nonsolicitation Covenant” of this Agreement, the Noncompete Period shall be tolled until such breach or violation has been duly cured.  Employee agrees that the restrictions contained in this Agreement are reasonable, and that any claims that Employee may have against the Company, whether under this Agreement or otherwise, shall not constitute a defense to enforcement of the restrictions contained in this Agreement, except as expressly provided herein.

Noncompetition Payment.

 If Employee’s employment with the Company is terminated, other than (i) by the Company for Cause, or (ii) pursuant to a voluntary termination by Employee which is not within 90 days following a Good Reason Event, as a condition to Employee being obligated to comply with the obligations contained in the paragraph above labeled “Noncompetition Covenant,” the Company shall continue to pay Employee at a rate equal to Employee’s base salary at the time of such termination for the duration of the Noncompete Period, provided that such payments shall be made pursuant to the Company’s normal payroll practices and shall be subject to any required or authorized withholding and declarations.  Notwithstanding the foregoing, the Company shall not be obligated to make the noncompetition payments described in this paragraphif the Company gives Employee written notice, within 15 days after the date of the termination of employment (in the event the Company elects to waive all of the Noncompete Period) or at least 15 days prior to the effectiveness of such waiver (in the event the Company elects to waive less than all of the Noncompete Period), that the

Company has elected to waive the provisions contained in the paragraph hereof labeled “Noncompetition Covenant”for all or part of the Noncompete Period and thus not pay the noncompetition payment described above for such period of waiver.Notwithstanding the foregoing, the Employee agrees that the payments described in this paragraph are provided solely in consideration of Employee’s compliance with the obligations contained in the paragraph hereof labeled “Noncompetition Covenant,” such that in the event Employee breaches any of the obligations contained in that paragraph, or any obligations contained in that paragraph are deemed unenforceable as written (in whole or in part) for any reason, any obligation of the Company to make any further payments described in this paragraph will automatically and immediately cease, and Employee must repay Company for any such payments previously made to Employee under this paragraph.  For the avoidance of doubt, nothing in this paragraph affects the Employee’s obligations under any paragraph of this Agreement other than the paragraph labeled “Noncompetition Covenant,” and Employee must comply with all provisions of such paragraphs of this Agreement regardless of whether the Company elects to make the payments described in this paragraph. 

Definitions.

“Cause”

 means (i) the continued failure by Employee to perform his duties as reasonably directed by the Employee’s supervisor of the Company, which such failure continues for ten (10) days after written notice of such failure provided to Employee, (ii) willful misconduct by Employee in the performance of Employee’s duties, (iii) gross negligence by Employee in the performance of Employee’s duties that materially harms the Company, (iv) Employee’s commission of a felony or other offense involving dishonesty or moral turpitude, or (v) any breach by Employee of Employee’s obligations set forth in this Agreement.

“Competitive Business” means any person or entity engaged in (i) the sale, marketing, distribution, warehousing, manufacturing, fabrication or shipping of animal health products or services, or (ii) any other business that the Company conducts (or has specific plans to conduct) as of the date the employment of Employee is terminated.

“Confidential Information”

means all information respecting the business and activities of the Company or any affiliate of the Company,  and includes, but is not limited to, any information relating to organizational structure, personnel data, marketing philosophy and objectives, project plans, business strategies, business initiatives, trade secrets, system design, methodologies, processes, competitive advantages and disadvantages, financial information and results, audit reports and materials, marketing strategies, business plans, systems, operations, technology, existing or potential customer lists and addresses and other customer information,  vendor information, product development, advertising or sales programs, and any other information which would give the Company or any affiliate an opportunity to obtain an advantage over its competitors or which the Company or any affiliate is ethically or legally obligated to protect from unauthorized disclosure or use.  Confidential Information shall not include (i) such information that is lawfully available to the Employee from a source other than the Company, or (ii) such information that becomes generally known to and available for use by the public other than as a result of Employee’s acts or omissions in violation of this Agreement or any other obligation.

“Good Reason Event”

means, without Employee’s consent, (i) relocation by Company of Employee’s principal place of work outside of Idaho, or (ii) a material reduction by the Company of Employee’s employment responsibilities or compensation.

“Noncompete Period” means the term of Employee’s employment with the Company and for one year following the termination (for any reason) of Employee’s employment with the Company.

“Protected Customer” meansany customer or client of the Company or any affiliate with whom Employee had contact, for whom Employee had oversight responsibilities, or about whom Employee obtained Confidential Information during Employee’s employment with the Company.

“Work Product”

meansall discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to the Company’s or any affiliate’s actual or anticipated business, research

and development, or existing or future products or services and that are conceived, developed, contributed to, made, or reduced to practice by Employee (either solely or jointly with others) while employed by the Company (including any of the foregoing that constitutes Confidential Information).

Not An Employment Contract

.  Employee agrees that this Agreement is not an employment contract for any particular term and that Employee has the right to resign and the Company has the right to terminate Employee’s employment at will, at any time, for any or no reason, with or without Cause. 

Interpretation

Governing Law and Amendments.  The laws of the State of Idaho shall govern the interpretation and enforcement of this Agreement, without regard to conflicts of law principles

.  This Agreement may be amended, and any term of this Agreement may be waived, only by a written agreement signed by Employee and the President of the Company.  Nothing in this Agreement shall be construed to restrict the Employee’s ability to practice law beyond the scope of restriction permissible under the Idaho Rules of Professional Conduct or similar rules governing lawyers in any applicable jurisdiction.

Nonwaiver of Remedies

 The failure or neglect of a party to enforce any remedy available by reason of the failure of another party to observe or perform a term or condition set forth in this Agreement shall not constitute a waiver of the term or condition.  A waiver by a party (i) shall not affect any term or condition other than the ones specified in the waiver, (ii) shall waive a specified term or condition only for the time and in the manner specifically stated in the waiver, and (iii) shall waive a specified term or condition only for the parties expressly named in the waiver and no other parties.

Entire Agreement

.  This Agreement constitutes the full and entire understanding and agreement between the parties regarding the subject matter of this Agreement.

Severability.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

Successors and Assigns.  This Agreement may be assigned by the Company, but shall not be assignable by Employee.  Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Employee, the Company and their respective permitted successors and assigns.

EMPLOYEE

Dated:  October 7, 2013/s/ Jeremy Ouchley
Jeremy Ouchley,  Vice President & General Counsel

MWI VETERINARY SUPPLY CO.

Dated: October 7,  2013/s/ Jim Cleary

                                                                                    By: Jim Cleary, President & CEO

EX-2.2

EXHIBIT 2.2

ASSET PURCHASE AGREEMENT

among

IVESCO HOLDINGS LLC,

AHN INTERNATIONAL LLC

and

MWI VETERINARY SUPPLY CO.

dated as of
August 28, 2013

Table of Contents

		Page
ARTICLE I	DEFINITIONS	1
ARTICLE II	PURCHASE AND SALE	13
Section 2.01.	Purchase and Sale of Assets	13
Section 2.02.	Excluded Assets	14
Section 2.03.	Assumed Liabilities	15
Section 2.04.	Excluded Liabilities	16
Section 2.05.	Purchase Price	18
Section 2.06.	Purchase Price Adjustment	19
Section 2.07.	Withholding Tax	22
Section 2.08.	Third Party Consents	22
Section 2.09.	Prorated Items	23
Section 2.10.	Payments Post-Closing	23
Section 2.11.	Possession	23
Section 2.12.	Conveyance of Title	24
ARTICLE III	CLOSING	24
Section 3.01.	Closing	24
Section 3.02.	Closing Deliverables	24
ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF SELLER	26
Section 4.01.	Organization and Qualification of Seller	26
Section 4.02.	Authority of Seller	26
Section 4.03.	Ownership	27
Section 4.04.	No Conflicts; Consents	27
Section 4.05.	Financial Statements	28
Section 4.06.	Undisclosed Liabilities	28
Section 4.07.	Absence of Certain Changes, Events and Conditions	28
Section 4.08.	Material Contracts	30
Section 4.09.	Title to Purchased Assets	32
Section 4.10.	Condition and Sufficiency of Assets	33
Section 4.11.	Real Property	33
Section 4.12.	Intellectual Property	34
Section 4.13.	Inventory	35
Section 4.14.	Accounts Receivable	36
Section 4.15.	Customers and Suppliers	36
Section 4.16.	Insurance	36
Section 4.17.	Legal Proceedings; Governmental Orders	37

-1-

Table of Contents

(continued)

		Page
Section 4.18.	Compliance With Laws; Permits	37
Section 4.19.	Environmental Matters	39
Section 4.20.	Employees and Employment Matters	40
Section 4.21.	Taxes	41
Section 4.22.	Affiliate Transactions	42
Section 4.23.	Brokers	42
Section 4.24.	Products	42
Section 4.25.	Certain Business Practices	43
Section 4.26.	Exclusivity of Representations; Disclaimer	43
Section 4.27.	Representations and Warranties Are Independent of Due
	Diligence	43
ARTICLE V	REPRESENTATIONS AND WARRANTIES OF BUYER	43
Section 5.01.	Organization of Buyer	43
Section 5.02.	Authority of Buyer	44
Section 5.03.	No Conflicts; Consents	44
Section 5.04.	Brokers	44
Section 5.05.	Sufficiency of Funds	44
Section 5.06.	Legal Proceedings	44
ARTICLE VI	COVENANTS	45
Section 6.01.	Conduct of Business Prior to the Closing	45
Section 6.02.	Access to Information	46
Section 6.03.	No Solicitation of Other Bids	46
Section 6.04.	Notice of Certain Events	47
Section 6.05.	Employees and Employee Benefits	48
Section 6.06.	Noncompetition And Confidential Information Agreements and	50
	other Restrictive Covenants
Section 6.07.	Governmental Approvals and Consents	52
Section 6.08.	Books and Records	54
Section 6.09.	Closing Conditions	55
Section 6.10.	Public Announcements	55
Section 6.11.	Bulk Sales Laws	55
Section 6.12.	Termination of Certain Agreements	55
Section 6.13.	Further Assurances	55
Section 6.14.	Insurance Matters	55
Section 6.15.	Landlord Estoppel Certificates	56
ARTICLE VII	CONDITIONS TO CLOSING	56

-2-

Table of Contents

(continued)

		Page
Section 7.01.	Conditions to Obligations of All Parties	56
Section 7.02.	Conditions to Obligations of Buyer	56
Section 7.03.	Conditions to Obligations of Seller	58
ARTICLE VIII	INDEMNIFICATION	59
Section 8.01.	Survival	59
Section 8.02.	Indemnification By Seller	60
Section 8.03.	Indemnification By Buyer	60
Section 8.04.	Certain Limitations	60
Section 8.05.	Indemnification Procedures	62
Section 8.06.	Recoupment	64
Section 8.07.	Tax Treatment of Indemnification Payments	65
Section 8.08.	Effect of Investigation	65
Section 8.09.	Exclusive Remedies	65
Section 8.10.	Exception for Fraud and Willful Misconduct	66
Section 8.11.	No Remote, Speculative of Punitive Damages	66
Section 8.12.	Tax Benefits	66
ARTICLE IX	TERMINATION	66
Section 9.01.	Termination	66
Section 9.02.	Effect of Termination	67
ARTICLE X	TAX MATTERS	68
Section 10.01.	Allocation of Purchase Price	68
Section 10.02.	Transfer Taxes	68
Section 10.03.	Allocation of Certain Taxes	68
Section 10.04.	Cooperation on Tax Matters	69
ARTICLE XI	MISCELLANEOUS	69
Section 11.01.	Expenses	69
Section 11.02.	Notices	69
Section 11.03.	Interpretation	70
Section 11.04.	Headings	70
Section 11.05.	Severability	70
Section 11.06.	Entire Agreement	71
Section 11.07.	Successors and Assigns	71
Section 11.08.	No Third-Party Beneficiaries	71
Section 11.09.	Amendment and Modification; Waiver	71
Section 11.10.	Governing Law; Submission to Jurisdiction; Waiver of Jury Trial	71
Section 11.11.	Specific Performance	72
Section 11.12.	Counterparts	72

-3-

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this “Agreement”), dated as of August 28, 2013, is entered into among IVESCO HOLDINGS LLC, a Delaware limited liability company  (“Seller”), ahn international llc, a Delaware limited liability company (“AHN”) and MWI Veterinary Supply Co., an Idaho corporation (“Buyer”).

RECITALS:

WHEREAS, Seller is engaged in (a) the distribution and sale of animal health products, including pharmaceuticals, vaccines, nutritionals, equipment and insecticides to veterinary clinics, dealer retail stores, livestock operations, poultry and swine integrators and feed ingredient customers, and (b) service, logistics and technical support relating to such distribution and sale of animal health products (the “Business”);

WHEREAS, Seller wishes to sell and assign to Buyer, and Buyer wishes to purchase and assume from Seller, substantially all the assets and certain specified liabilities of the Business, subject to the terms and conditions set forth herein;

WHEREAS, the boards of directors or managers of Seller and AHN (or other similar governing bodies) have declared the advisability of this Agreement and approved and adopted this Agreement;

WHEREAS, the board of directors of Buyer has declared the advisability of this Agreement and approved and adopted this Agreement; and

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

Definitions

The following terms have the meanings specified or referred to in this ARTICLE I:

“Acquisition Proposal” has the meaning set forth in Section 6.03(a).

“Action” means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.

“Actual Indebtedness” has the meaning set forth in Section 2.06(b).

“Actual Working Capital” has the meaning set forth in Section 2.06(b).

“Acquired Real Property” has the meaning set forth in Section 2.01(f).

“Affiliate” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Agreement” has the meaning set forth in the preamble, as amended from time to time in writing executed by AHN, Seller and Buyer.

“AHN” shall have the meaning set forth in the Preamble.

“AHN Holdings” means AHN Holdings LLC, a Delaware limited liability company.

“Allocation” has the meaning set forth in Section 10.01.

“Assigned Contracts” has the meaning set forth in Section 2.01(c).

“Assignment and Assumption Agreement” has the meaning set forth in Section 3.02(a)(iii).

“Assignment and Assumption of Lease” has the meaning set forth in Section3.02(a)(vi).

“Assumed Liabilities” has the meaning set forth in Section 2.03.

“Audited Financial Statements” has the meaning set forth in Section 4.05.

“Balance Sheet” has the meaning set forth in Section 4.05.

“Balance Sheet Date” has the meaning set forth in Section 4.05.

“Benefit Plan” has the meaning set forth in Section4.20(e).

“Bill of Sale” has the meaning set forth in Section3.02(a)(ii).

“Books and Records” has the meaning set forth in Section 2.01(k).

“Bulk Sales Liabilities”has the meaning set forth in Section 2.03(f).

“Business” has the meaning set forth in the recitals.

“Business Day” means any day except Saturday, Sunday or any other day on which commercial banks located in the State of New York are authorized or required by Law to be closed for business.

-2-

“Buyer” has the meaning set forth in the preamble.

“Buyer Closing Certificate” has the meaning set forth in Section 7.03(f).

“Buyer Fundamental Reps” has the meaning set forth in Section 8.04(c).

“Buyer Indemnitees” has the meaning set forth in Section 8.02.

“Buyer Related Actions” has the meaning set forth in Section 4.17(a).

“Buyer Spending Account”has the meaning set forth in Section 6.05(e).

“Buyer’s Accountants” means Deloitte & Touche LLP.

“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.

“Chosen Court” has the meaning set forth in Section 11.10(b).

“Closing” has the meaning set forth in Section 3.01.

“Closing Date” has the meaning set forth in Section 3.01.

“Closing Date Escrow Amount”means the sum of the General Escrow Amount and the Employee/Consultant Escrow Amount.

“Closing Date Purchase Price” has the meaning set forth in Section 2.05(b).

“Closing Working Capital” means: (a) Current Assets, less (b) Current Liabilities, determined as of the open of business on the Closing Date.

“Closing Date Statement” has the meaning set forth in Section 2.06(b).

“COBRA” has the meaning set forth in Section 2.04(h).

“Code” means the Internal Revenue Code of 1986, as amended.

“Communication Addresses” means all telephone numbers, facsimile numbers, internet addresses, internet domain names, internet domain name registrations, log-in identifications, user identifications, screen names and on-line service identifications relating to Seller.

“Contracts” means all contracts, leases, deeds, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures and all other agreements, commitments and legally binding arrangements, whether written or oral.

“Covered Assets and Persons”has the meaning set forth in Section 6.14.

-3-

“Current Assets” means the current assets of the Business included in the line items set forth on Section 2.06 of the Disclosure Schedules and only to the extent such assets are Purchased Assets pursuant to the terms of this Agreement, which for the avoidance of doubt shall not include cash or cash equivalents, Taxes orExcluded Assets; provided, however, that only Inventory that is able to be physically counted at Closing will be considered in the calculation of Current Assets for purposes of this Agreement.

“Current Liabilities” means the current Liabilities of the Business included in the line items set forth on Section 2.06 of the Disclosure Schedules and only to the extent such Liabilities are Assumed Liabilities pursuant to the terms of this Agreement, which for the avoidance of doubt shall not include Taxes. For the avoidance of doubt, “Current Liabilities” shall not include any Repaid Indebtedness actually paid in full at Closing.

“Deed” has the meaning set forth in Section 2.12(a).

“De Minimis” has the meaning set forth in Section 8.04(a).

“Direct Claim” has the meaning set forth in Section 8.05(c).

“Directed Payment” means three hundred thousand dollars ($300,000).

“Disclosure Schedules” means the Disclosure Schedules delivered by Seller and Buyer concurrently with the execution and delivery of this Agreement.

“Disclosure Schedules Supplement Acceptance”has the meaning set forth in Section 6.04(b).

“Disputed Amounts” has the meaning set forth in Section 2.06(d)(iii).

“Dollars or $” means the lawful currency of the United States.

“Employee/Consultant Escrow Agreement” means the Escrow Agreement among Buyer, Seller and the Escrow Agent, to be executed and delivered at the Closing to govern the Employee/Consultant Escrow Fund, in a form to be agreed upon by Buyer and Seller.  

“Employee/Consultant Escrow Amount” means seven hundred seventy thousand five hundred dollars ($770,500).

“Employee/Consultant Escrow Fund” means the Employee/Consultant Escrow Amount in a segregated account established and maintained at the Escrow Agent pursuant to the Employee/Consultant Escrow Agreement to be available to satisfy obligations of Seller to reimburse Buyer for payments to employees or consultants, or to fund such payments directly in accordance with the Employee/Consultant Letter Agreement, after Closing pursuant to the Employee/Consultant Letter Agreement.

“Employee/Consultant Letter Agreement” means that certain Employee/Consultant Letter Agreement, dated the date hereof, between Buyer and Seller,

-4-

governing the terms of Seller’s obligations to reimburse Buyer for certain payments to employees or consultants of Buyer after Closing.

“Encumbrance” means any charge, claim, community property interest, pledge, condition, equitable interest, lien (statutory or other), option, security interest, mortgage, easement, encroachment, right of way, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership, or any requirement to pay any past, present or future royalty payments.

“Environmental Claim” means any Action, Governmental Order, lien, fine, penalty, or, as to each, any settlement or judgment arising therefrom, by or from any Person alleging Liability of whatever kind or nature (including Liability or responsibility for the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from: (a) the presence, Release or Management of, or exposure to, any Hazardous Materials; or (b) any actual or alleged non-compliance with any Environmental Law or term or condition of any Environmental Permit.

“Environmental Law” means any applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the Management of any Hazardous Materials.

“Environmental Permit” means any Permit, required under or issued, granted, authorized by or made pursuant to Environmental Law.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

“ERISA Affiliate” means any corporation or trade or business (whether or not incorporated) which is treated with Seller as a single employer within the meaning of Section 414 of the Code.

“Escrow Agent” means JPMorgan Chase Bank, N.A.

“Estimated Closing Adjustment Amount” means the positive or negative number equal to the sum of: (a) the positive or negative number representing the result of Target Working Capital minus the Estimated Working Capital and (b) Estimated Indebtedness.

“Estimated Closing Date Statement” has the meaning set forth in Section2.06(a).

“Estimated Indebtedness” has the meaning set forth in Section 2.06(a).

“Estimated Working Capital” has the meaning set forth in Section 2.06(a).

-5-

“Excluded Assets” has the meaning set forth in Section 2.02.

“Excluded Contracts” has the meaning set forth in Section 2.02(c).

“Excluded Liabilities” has the meaning set forth in Section 2.04.

“FDA” has the meaning set forth in Section 2.04(g).

“Final Closing Adjustment Amount” means the positive or negative number equal to the sum of: (a) the positive or negative number representing the result of the Estimated Working Capital minus the Final Working Capital and (b) the positive or negative number representing the result of theFinal Indebtedness minus the Estimated Indebtedness.

“Final Indebtedness” shall mean the amount calculated and determined in accordance with Section 2.06(d)(ii) or Section 2.06(d)(iii).

“Final Working Capital”shall mean the amount calculated and determined in accordance with Section 2.06(d)(ii) or Section 2.06(d)(iii).

“Financial Statements” has the meaning set forth in Section 4.05.

“FIRPTA Certificate” has the meaning set forth in Section 7.02(l).

“GAAP” means United States generally accepted accounting principles.

“General Escrow Agreement” means the Escrow Agreement among Buyer, Seller and the Escrow Agent, to be executed and delivered at the Closing to govern the General Escrow Fund, substantially in the form attached hereto as Exhibit A.  

“General Escrow Amount” means five million dollars ($5,000,000).

“General Escrow Fund” means the General Escrow Amountin a segregated account established and maintained at the Escrow Agent pursuant to the General Escrow Agreement to be available to satisfy (i) obligations of Seller in respect of any post-Closing adjustments pursuant to Section 2.06(d), and (ii) claims made by Buyer or any other Buyer Indemnitee against Seller pursuant to ARTICLE VIII.

“Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.

“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

-6-

“Hazardous Materials” means: (a) any material, substance, containment, pollutant, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation and polychlorinated biphenyls.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“Indebtedness” means all principal, interest, premiums or other obligations of Seller and its subsidiaries, to the extent assumed by Buyer, related to, without duplication, (a) all indebtedness for borrowed money, (b) all obligations for the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business and consistent with past practice), (c) all obligations evidenced by notes, bonds, debentures or other similar instruments, and the amount of all checks drawn in excess of account balances, (d) all indebtedness created or arising under a conditional sale or other title retention agreement with respect to acquired property, (e) all obligations as lessee or lessees under leases that have been or should be, in accordance with GAAP, recorded as capital leases, (f) all obligations, contingent or otherwise, under acceptance, letter of credit or similar facilities, (g) all obligations owing pursuant to factoring agreements for accounts receivable and all obligations under swap or derivative agreements, (h) all Indebtedness of the type referred to in clauses (a) through (g) above guaranteed directly or indirectly in any manner by Seller or its subsidiaries, (i) all Indebtedness of the type referred to in clauses (a) through (g) above that is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien on property (including accounts and contract rights) owned by Seller or its Subsidiaries, even though such person has not assumed, become liable for or guaranteed the payment of such Indebtedness, and (j) all accrued but unpaid interest (or interest equivalent) to the date of determination, and all prepayment premiums or penalties, related to any items of the type referred to in clauses (a) through (j) above.

“Indemnification Cap”has the meaning set forth in Section 8.04(b).

“Indemnified Party” has the meaning set forth in Section 8.05.

“Indemnifying Party” has the meaning set forth in Section 8.05.

“Independent Accountants” has the meaning set forth in Section 2.06(d)(iii).

“Insurance Policies” has the meaning set forth in Section 4.16.

“Intellectual Property” means all of the following and similar intangible property and related proprietary rights, interests and protections, however arising, pursuant to the Laws of any jurisdiction throughout the world: (a) trademarks, service marks, trade names, brand names, logos, trade dress and other indicia of source of goods and services, whether registered, unregistered or arising by Law, and all registrations, renewals and applications for registration of such trademarks, including intent-to-use applications, and all associated business goodwill; (b)

-7-

internet domain name registrations; (c) original works of authorship in any medium of expression, whether or not published, all copyrights (whether registered, unregistered or arising by Law) and mask works, all registrations and applications for registration of such copyrights and mask works, all issuances, extensions and renewals of such registrations and applications, and all moral rights or rights of attribution arising in any of the foregoing; (d) confidential or proprietary information, formulas, designs, devices, technology, know-how, research and development, inventions, methods, processes, compositions and other trade secrets, whether or not patentable; (e) rights arising in computer software, whether in source code or object code format, including application software, software languages, firmware, middleware, routines, scripts, tools, compilers, databases and documentation; (f) rights of privacy, publicity and personality; and (g) patented and patentable designs and inventions, all design, plant and utility patents, letters patent, utility models, pending patent applications and provisional applications and all issuances, divisions, continuations, continuations-in-part, reissues, extensions, reexaminations and renewals of such patents and applications.

“Intellectual Property Assets” means all Intellectual Property that is owned by Seller.

“Intellectual Property Assignments” has the meaning set forth in Section3.02(a)(iv).  

“Intellectual Property Licenses” means all licenses, sublicenses and other agreements by or through which other Persons, including Seller’s Affiliates, grant Seller exclusive or non-exclusive rights or interests in or to any Intellectual Property that is used in or necessary for the conduct of the Business as currently conducted.

“Intellectual Property Registrations” means all Intellectual Property Assets that are subject to any issuance, registration, application or other filing by, to or with any Governmental Authority or authorized private registrar in any jurisdiction, including registered trademarks, domain names and copyrights, issued and reissued patents and pending applications for any of the foregoing, effected by Seller.

“Interim Balance Sheet” has the meaning set forth in Section 4.05.

“Interim Balance Sheet Date” has the meaning set forth in Section 4.05.

“Interim Financial Statements” has the meaning set forth in Section 4.05.

“Inventory” has the meaning set forth in Section 2.01(b).

“IRS” has the meaning set forth in Section 4.20(g).

“Knowledge of Seller or Seller’s Knowledge” or any other similar knowledge qualification, means the knowledge of the following officers of Seller, after reasonable inquiry: Robert DiMarzo, Randolph Ingram,  Richard Burton, Gerald Monnot, Tony Corbett and Paul McLellan.

-8-

“Law” means any statute, law, ordinance, regulation, rule, directive, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.

“Leased Real Property” has the meaning set forth in Section 4.11(b).

“Leases” has the meaning set forth in Section 4.11(b).

“Legitimate Business Interests” has the meaning set forth in Section 6.06.

“Liabilities” means liabilities, obligations or commitments of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise.

“Losses” means losses, damages, Liabilities, deficiencies, Actions, judgments, interest, awards, penalties, fines, costs or expenses of whatever kind, including reasonable attorneys’ fees and the cost of enforcing any right to indemnification hereunder and the cost of pursuing any insurance providers; provided, however, that “Losses” shall not includespeculative, remoteor punitive damages, except in the case of fraud or to the extent actually awarded to a Governmental Authority or other third party.

“Management” means management, manufacture, use, containment, distribution, packaging, labeling, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation.

“Material Adverse Effect” means any event, occurrence, fact, condition or change that is, or could reasonably be expected to become, individually or in the aggregate, materially adverse to (a) the business, results of operations, condition (financial or otherwise) or assets of the Business, or (b) the ability of Seller to consummatethe transactions contemplated hereby on a timely basis. However, “Material Adverse Effect” shall not include any event, occurrence, fact, condition, or change arising out of, resulting from or attributable to: (i) any changes in economic and political conditions or the securities, banking, currency, capital or financial markets in general; (ii) changes,conditions or effects that generally affect the industries in which the Business operates;   (iii) conditions caused by acts of terrorism, war (whether or not declared) or other armed hostilities, or any escalation or worsening thereof, whether or not occurring or commenced before or after the date of this Agreement; (iv) the negotiation, public announcement,execution or performance of this Agreement or the transactions contemplated by this Agreementthat results in the loss of a Material Customer or Material Supplier of the Seller; (v) any failure by Seller, for any period ending on or after the Balance Sheet Date, to meet financial projections or forecasts or earnings predictions provided to Buyer or its representatives or contained in any presentation made by Seller or its Representatives to Buyer or its Representatives (provided, that the underlying causes of such failures (subject to the other provisions of this definition) shall not be excluded); or (vi) any action of Buyer or any of its Affiliates that results in a loss of a Material Customer or Material Supplier of the Seller; (vii)  changes in any Laws affecting the Business; or (viii) any decision by any Transferred Employee not to accept employment with Buyer as of or after the Closing Date;provided, however, that any event, occurrence, fact, condition or change described in the foregoing clauses (i), (ii) and

-9-

(vii) above may constitute or give rise to a Material Adverse Effect to the extent that such event, occurrence, fact, condition or change has a disproportionate impact on Seller or the Business, each, taken as a whole, relative to other Persons operating in the industries in which the Business is operated.

“Material Contracts” has the meaning set forth in Section 4.08(a).

“Material Customers” has the meaning set forth in Section 4.15(a).

“Material Suppliers” has the meaning set forth in Section 4.15(b).

“Multiemployer Plan” has the meaning set forth in Section 4.20(f).

“Outstanding Receivable” has the meaning set forth in Section 2.06(c).

“Owned Real Property” has the meaning set forth in Section 4.11(a).

“Pay-off Letters” has the meaning set forth in Section 3.02(a)(xii).  

“Pension Plan” has the meaning set forth in Section 4.20(g).

“Permits” means all permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained, or required to be obtained, from Governmental Authorities.

“Permitted Encumbrances” has the meaning set forth in Section 4.09.

“Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

“Personal Property Leases” has the meaning set forth in Section 2.01(e).

“Pharmaceutical Products” means (i) articles recognized in the official United States Pharmacopoeia, official Homoeopathic Pharmacopoeia of the United States, or official National Formulary, or any supplement to any of them; (ii) articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals; (iii) articles (other than food) intended to affect the structure or any function of the body of man or other animals; (iv) articles classified as a “drug” or “device” under the United States Food, Drug, and Cosmetic Act, 21 U.S.C. § 301, etc., and the regulations promulgated pursuant to such Act; (v) articles classified as a “drug,” “device,” or similar such terms under applicable state or local statutes, ordinances, rules and regulations governing pharmacists or pharmacies, and (vi) articles that are dispensed or delivered for administration to or use by a patient or other individual entitled to receive the article pursuant to a prescription issued by a physician, dentist, veterinarian, scientific investigator or other person who has a license to issue such a prescription.

-10-

“Post-Closing Tax Period” means any taxable period beginning after the Closing Date and, with respect to any Straddle Period, the portion of such Straddle Period beginning after the Closing Date.

“Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and, with respect to any Straddle Period, the portion of such Straddle Period ending on and including the Closing Date.

“Product Replacement Obligations” has the meaning set forth in Section 2.03(h).

“Purchase Consideration” has the meaning set forth in Section 10.01.

“Purchase Price” has the meaning set forth in Section 2.05.

“Purchased Assets” has the meaning set forth in Section 2.01.

“Real Property” has the meaning set forth in Section 2.01(f).  

“Receivables” mean all accounts or notes receivable, work in progress (unbilled services rendered prior to Closing), promissory notes, amounts due under sales contracts, rebates and incentives, employee receivables under any employee notes or obligations (other than salaries and benefits accrued in the ordinary course of business) and any security, claim, remedy or other right related to the foregoing and any other amounts owed to Seller at Closing and arising in the ordinary course of business. 

“Release” means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including, without limitation, ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).

“Related Party” has the meaning set forth in Section 4.22. 

“Repaid Indebtedness”has the meaning set forth in Section 3.02(a)(xii).

“Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

“Resolution Period” has the meaning set forth in Section 2.06(d)(ii).

“Restricted Parties” has the meaning set forth in Section 6.06.

“Review Period” has the meaning set forth in Section 2.06(d)(i).

“Sales Taxes” means sales or use Taxes.

“Seller” has the meaning set forth in the preamble.

-11-

“Seller Closing Certificate” has the meaning set forth in Section 7.02(i).

“Seller Fundamental Reps” has the meaning set forth in Section 8.04(a).

“Seller Indemnitees” has the meaning set forth in Section 8.03.

“Seller Spending Account”has the meaning set forth in Section 6.05(e).

“Seller’s Accountants” means Ernst & Young LLP.

“Statement of Objections” has the meaning set forth in Section 2.06(d)(ii).

“Straddle Period” means any taxable period that begins before and ends after the Closing Date.

“Tangible Personal Property” has the meaning set forth in Section 2.01(e).

“Target Working Capital” means $58,651,000, which has been calculated in accordance with the schedule attached as Section 2.06 of the Disclosure Schedules.

“Taxes” means all (i) federal, state, local, non-U.S. and other income, gross receipts, sales, use, production, ad valorem, transfer, documentary, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties, and (ii) any Liability for any amount described in clause (i) of any Person as a transferee or successor, by contract, by operation of Law or otherwise or under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or non-U.S. Law).

“Tax Return” means any return, declaration, report, claim for refund, information return or statement or other document relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Third Party Claim” has the meaning set forth in Section 8.05(a).

“Transaction Documents” means this Agreement, the GeneralEscrow Agreement, the Employee/Consultant Escrow Agreement, the Bill of Sale, the Assignment and Assumption Agreement, Intellectual Property Assignments, the Employee/Consultant Letter Agreement, Deeds, Assignment and Assumption of Leases and the other agreements, certificates, instruments and documents required to be delivered on the date hereof or at the Closing.

“Transferred Employees” has the meaning set forth in Section 6.05(a).

“Undisputed Amounts” has the meaning set forth in Section 2.06(d)(iii).

-12-

“WARN Act” means the federal Worker Adjustment and Retraining Notification Act of 1988, and similar state, local and foreign laws related to plant closings, relocations, mass layoffs and employment losses.

“WARN Act Liabilities” has the meaning set forth in Section 2.03(c).

ARTICLE II

Purchase and Sale

Purchase and Sale of Assets. Subject to the terms and conditions set forth herein, at the Closing, Seller shall sell, assign, transfer, convey and deliver, and Seller shall cause its Affiliates to sell, assign, transfer and convey and deliver, to Buyer, and Buyer shall purchase from Seller, free and clear of any Encumbrances other than Permitted Encumbrances, all of Seller’s right, title and interest in, to and under all of the assets, properties and rights of every kind and nature, whether real, personal or mixed, tangible or intangible (including goodwill), wherever located and whether now existing or hereafter acquired and whether or not reflected on the books and records of Seller (other than the Excluded Assets), which relate to, or are used or held for use in connection with, the Business (collectively, the “Purchased Assets”), including, without limitation, the following:

all Receivables;

all inventory, finished goods, raw materials, work in progress, packaging, supplies, parts, all Pharmaceutical Products, and all other operating supplies and other inventories  (“Inventory”);

all Contracts related to Seller and the Business, including Intellectual Property Licenses, and including those set forth on Section 2.01(c) of the Disclosure Schedules (the “Assigned Contracts”);

all Intellectual Property Assets;

all tangible personal property owned by or leased to Seller including without limitation, furniture, fixtures, equipment, machinery, tools, vehicles, office equipment, trade fixtures, computer equipment, computer systems, furnishings, machinery, tenant improvements, security equipment, communications equipment, equipment operation manuals, if any (the “Tangible Personal Property”), including but not limited to those items listed on Section 2.01(e) of the Disclosure Schedules, with all equipment and other personal property leases for such Tangible Personal Property (“Personal Property Leases”);

all Owned Real Property and all leasehold interests in the Leased Real Property (collectively, the “Real Property”), together with the building, fixtures and other improvements located on such Real Property, set forth on Section 2.01(f) of the Disclosure Schedules (the “Acquired Real Property”);

all Permits, including Environmental Permits, which are held by Seller and required for the conduct of the Business as currently conducted or for the ownership and use of

-13-

the Purchased Assets, including, without limitation, those listed on Section 4.18(b) and Section 4.19(b) of the Disclosure Schedules, to the extent transfer is permitted by Law or the terms thereof;

all rights to any Actions of any nature available to or being pursued by Seller to the extent related to thePurchased Assets or the Assumed Liabilities, whether arising by way of counterclaim or otherwise, including without limitation the right to sue for past, present and future infringement of any Intellectual Property Assets;

all prepaid expenses, credits, advance payments, claims, security, refunds, rights of recovery, rights of set-off, rights of recoupment, deposits (including any cash deposits), charges, sums and fees, excluding any of the foregoing related to or constituting Taxes or Tax refunds or credits;

all of Seller’s rights under warranties, guaranties, indemnities and all similar rights against third parties to the extent related to any Purchased Assets;

originals, or where not available, copies, of all books and records relating to the Business, including, but not limited to, books of account, ledgers and general, financial and accounting records, machinery and equipment maintenance files, Communication Addresses, customer lists, customer purchasing histories, price lists, distribution lists, supplier lists, production data, quality control records and procedures, customer complaints and inquiry files, research and development files, records and data (including all correspondence with any Governmental Authority), sales material and records (including pricing history, total sales, terms and conditions of sale, sales and pricing policies and practices), strategic plans, internal financial statements, marketing and promotional surveys, material and research and intellectual property files relating to the Intellectual Property Assets and the Intellectual Property Licenses, and personnel files for Transferred Employees  (the “Books and Records”), but excluding Books and Records related solely to Taxes of Seller and other Books and Records which Seller is required by applicable Laws to retain;

all goodwill and the going concern value of the Business; and

all rights of Seller arising under or relating to the obligations to the extent expressly assumed by Buyer at Closing pursuant to Section 2.03.

Excluded Assets. Notwithstanding the foregoing, the Purchased Assets shall not includethe following assets (collectively, the “Excluded Assets”):

all cash and cash equivalents of Seller (other than cash related to customer deposits);

the seals, organizational documents, minute books, Tax Returns or other records having to do with the formation or organization of Seller,  the Taxes of Seller, the other Excluded Assets or Excluded Liabilities, or which Seller is required by applicable Laws to retain (including without limitation personnel, Tax and other books and records);

-14-

Contractsset forth on Section 2.02(c) of the Disclosure Schedules and Contracts that are not Assigned Contracts (the “Excluded Contracts”);

the assets, properties and rights specifically set forth on Section 2.02(d) of the Disclosure Schedules;

all Benefit Plans and all rights in connection with any assets, including all insurance policies, relating to the Benefit Plans;

all claims for refunds of Taxes or Tax credits and other governmental charges of whatever nature to which Seller may be entitled with respect to any pre-Closing period or partial period (including without limitation any Pre-Closing Tax Period or Straddle Period);

all Insurance Policies and rights thereunder;  and

the rights which accrue or will accrue to Seller under this Agreement and the other Transaction Documents or relating to the Excluded Assets.

Buyer shall cooperate with Seller in any actions taken by Seller to recover any Excluded Assets, provided that any reasonable out-of-pocket expenses incurred by Buyer in such cooperation shall be reimbursed by Seller to Buyer.

Assumed Liabilities. Subject to the terms and conditions set forth herein, Buyer shall assume and shall pay, perform and discharge the following Liabilities of Seller (collectively, the “Assumed Liabilities”), and no other Liabilities:

the Liabilities of Seller that are classified under the “accounts payable,”“goods received not invoiced,” “sales return reserve,” “credit card processing fees,” “customer rebate fees,” “other” and “agency” line items of the Interim Balance Sheet (except as such line items are modified on Section 2.03(a) of the Disclosure Schedules), without duplication, (i) as of the Interim Balance Sheet Date and (ii) as of the Closing Date that arose in the ordinary course of business consistent with past practice since the Interim Balance Sheet Date and that consistent with past practice would be have been categorized under such line items had the Interim Balance Sheet Date been the Closing Date;

all Liabilities in respect of the Assigned Contracts,the Personal Property Leases and the Leases included in the Acquired Real Property but only to the extent that such Liabilities thereunder are required to be performed after the Closing Date, were incurred in the ordinary course of business and do not relate to any failure to perform, improper performance, warranty or other breach, default or violation by Seller on or prior to the Closing; provided that the payments, installment payments, monthly payments and other Liabilities related to Personal Property Leases, the Leases included in the Acquired Real Property and the Assigned Contracts shall be paid current by Seller up to and including Closing or included by Seller in the calculation of the Final Working Capital;  

any liability imposed upon Seller or Buyer or any of their respective Affiliates under the WARN Act related to (i) any termination of employees of Seller at the

-15-

Closing who do not become Transferred Employees, (ii) any failure of Buyer to offer employment to any employee of Seller, and (iii) any Transferred Employees terminated by Buyer subsequent to the Closing (together, “WARN Act Liabilities”);

all Liabilities of Seller included in the calculation of the Final Working Capital or any Final Closing Adjustment Amount (excluding Repaid Indebtedness);

all Liabilities and obligations arising as result of theownership, operation and use of the Purchased Assets by Buyer from and after the Closing Date;

all Liabilities, except for Liabilities for Taxes and Excluded Liabilities and Liabilities having their origin in Taxes or Excluded Liabilities, arising out of the failure of Seller to comply with the requirements and provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction (“Bulk Sales Liabilities”);  

all Liabilities in respect of Permitted Encumbrances; and

all “repair and replacement” or similar warranty obligations of Seller or the Business related to products manufactured or sold by Seller prior to the Closing Date (“ProductReplacement Obligations”).

Except for the Assumed Liabilities, Buyer is not assuming, shall not assume, and shall not be deemed to have assumed, any Liability of Seller or the Business at Closing.  If a Liability is not identified in this Section 2.03, then the Liability shall not be assumed by Buyer, and shall be retained by, and be the sole and exclusive obligation of, Seller following Closing.  No party hereto intends that the assumption by Buyer of the Assumed Liabilities shall in any way enlarge the rights of any third parties relating thereto.

Excluded Liabilities. Notwithstanding the provisions of Section 2.03 or any other provision in this Agreement to the contrary, Buyer shall not assume and shall not be responsible to pay, perform or discharge any Liabilities of Seller or any of its Affiliates of any kind or nature whatsoever other than the Assumed Liabilities (the “Excluded Liabilities”). Seller shall, and shall cause each of its Affiliates to, pay and satisfy in due course all Excluded Liabilities which they are obligated to pay and satisfy.  Without limiting the generality of the foregoing, the Excluded Liabilities shall include, but not be limited to, the following:

Any Liabilities of Seller or AHN arising or incurred in connection with the negotiation, preparation, investigation and performance of this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby, including, without limitation, fees and expenses of counsel, accountants, consultants, advisers and others.

Any Liability for (i) Taxes of Seller (or any Affiliate of Seller); (ii) Taxes relating to the Business, the Purchased Assets or the Assumed Liabilities for any Pre-Closing Tax Period other than Taxes included in the calculation of Final Working Capital, if any; (iii) Taxes that arise out of the consummation of the transactions contemplated under this Agreement; or (iv) Taxes that are the responsibility of Seller pursuant to Sections 10.02 and 10.03.

-16-

Any Liabilities relating to or arising out of the Excluded Assets (including any Taxes arising from or in connection with any Excluded Assetand any outstanding checks).

Any Liabilities in respect of any Action arising out of, relating to or otherwise in respect of the operation of the Business or the Purchased Assets to the extent such Action relates to such operation on or prior to the Closing Date, including the Action described on Section 2.04(d) of the Disclosure Schedules.

Any product Liability or similar claim for injury to a Person or property which arises out of or is based upon any express or implied representation, warranty, agreement or guaranty made by Seller, or by reason of the improper performance or malfunctioning of a product, improper design or manufacture, failure to adequately package, label or warn of hazards or other related product defects of any products at any time manufactured or sold or any service performed by Seller.

Any recall, design defect or similar claims of any products manufactured, sold or distributed or any service performed by Seller, other than Product Replacement Obligations.

Any Liabilities arising out of, in respect of or in connection with the failure by Seller or any of its Affiliates to comply with any Law, Permit or Governmental Order.  Without limiting the foregoing, Seller shall be responsible for any Liabilities arising from or related to the failure to properly comply, with respect to products sold by Seller prior to the Closing Date, with (i) any federal, state, or local Law, Permit or Governmental Order of the U.S. Food and Drug Administration (“FDA”) or relating to Pharmaceutical Products and (ii) the duty to exercise the requisite care, skill and knowledge in purchasing, storing, selling, and distributing Pharmaceutical Products.Buyer acknowledges that all such compliance obligations based on operations of Buyer from and after the Closing shall be the obligation of Buyer, and Seller shall have no obligation to satisfy or indemnify Buyer for or in respect of any Liabilities of Buyer arising from and after the Closing.

Any Liabilities of Seller or its Affiliates with respect to employment, termination of employment, compensation or employee benefits of any nature (including, but not limited to the benefits to be provided under the Benefit Plans) owed to any current or former employee, officer, director or independent contractor of Seller or its Affiliates (or the beneficiary of any current or former employee, officer, director or independent contractor of Seller or its Affiliates) whether or not such current or former employee, officer, director or independent contractor becomes a Transferred Employee or other service provider to Buyer or its Affiliates, that arises out of or relates to the employment or other relationship between Seller or its Affiliates and any such current or former employee, officer, director or independent contractor of Seller or its Affiliates or the termination of such relationship.  Without limiting the foregoing, Seller shall be responsible for the payment of any severance payment or benefits (including, without limitation, coverage under the Consolidated Omnibus Budget Reconciliation Act, of 1985 as amended (“COBRA”) and similar state law) that become due to any current or former employee, officer, director or independent contractor of Seller or its Affiliates as a result of the termination of employment or service of such current or former employee, officer, director or independent contractor by such individual or by Seller or its Affiliates, including any such

-17-

termination that occurs upon Closing (excluding as to any of the foregoing who becomes a Transferred Employee), and, in the case of any employee, officer, director or independent contractor of Seller or its Affiliates who does not become a Transferred Employee or other service provider to Buyer or its Affiliates at Closing, such termination that occurs after Closing.  Buyer and its Affiliates shall not be obligated to continue or assume any employee benefit plan or program of Seller or its Affiliates (including, but not limited to the Benefit Plans) or be responsible for any obligation or Liability thereunder. For the avoidance of doubt, all Liability incurred by Buyer or its Affiliates in connection with providing continued medical, dental, vision, prescription drug or other benefits under COBRA or similar law (in excess of employee premiums collected by Buyer or its Affiliates) for any current or former employee, officer, director or independent contractor of Seller or its Affiliates (or the beneficiary or dependent of such individual), whether terminated prior to Closing or terminated upon or after Closing (other than a Transferred Employee) shall constitute an Excluded Liability (regardless of any requirement under Applicable Law which may impute such Liability to Buyer).

All Bulk Sales Liabilities having their origin in Taxes or Excluded Liabilities.

Any Liabilities of Seller for transaction bonuses, change in control payments or other similar payments (and the employer portion of any Taxes relating thereto)due or triggered as a result of the execution of this Agreement or the consummation of the transactions contemplated hereby. 

Any Environmental Claims or Liabilities under Environmental Laws or with respect to the presence, Release, Management of or exposure to Hazardous Materials arising out of or relating to facts, circumstances or conditions first existing or occurring on or prior to the Closing or otherwise, in each casearising out of any actions or omissions of Seller.

Any Liabilities which constitute intercompany payables owing to Affiliates of Seller.

Any Liabilities of the Business relating to or arising from unfulfilled commitments, quotations, purchase orders, customer orders or work orders thatdo not constitute part of thePurchased Assets issued by the Business’ customers to Seller on or before the Closing.

Any Liabilities to indemnify, reimburse or advance amounts to any present or former officer, director, employee or agent of Seller or its Affiliates (including with respect to any breach of fiduciary obligations by same), except for indemnification of same pursuant to Section 8.03 as Seller Indemnitees.

Any Liabilities under the Excluded Contracts or any other Contracts, including Intellectual Property Licenses,to the extent such Liabilities arise out of or relate to a breach by Seller of such Contracts prior to Closing unless Liabilities for such breaches are included by Seller in the calculation of the Final Working Capital.

Any Liabilities associated withIndebtedness of Seller.

-18-

Any Liabilities of Seller to its equity security holders respecting dividends, distributions in liquidation, redemptions of shares, option payments or otherwise.

Any Liabilities for deductibles, co-payments, premiums or other payments under or relating to Insurance Policies.

Purchase Price. The aggregate purchase price for the Purchased Assets shall be $67,500,000 in immediately available funds (the “Purchase Price”), subject to adjustment pursuant to this Section 2.05 and Section 2.06 hereof, plus the assumption of the Assumed Liabilities. The Purchase Price shall be paid at Closing as follows:

Buyer shall pay, or cause to be paid, on behalf of Seller by wire transfer of immediately available funds an amount equal to the Repaid Indebtedness to the accounts designated in writing by Seller to Buyer no later than two (2) Business Days prior to the Closing Date and pursuant to the Pay-off Letters;

Buyer shall pay, or cause to be paid, the Purchase Price, minus  (x) the Closing Date Escrow Amount, minus  (y) the Estimated Closing Adjustment Amount (understanding that the Estimated Closing Adjustment Amount may be a negative number, in which case the absolute value of such number would be added to the Purchase Price), and minus (z) the Directed Payment (such resulting amount, the “Closing Date Purchase Price”) by wire transfer of immediately available funds to an account designated in writing by Seller to Buyer no later than two (2) Business Days prior to the Closing Date;

Buyer shall deposit, or cause to be deposited, the Closing Date Escrow Amount by wire transfer of immediately available funds into the accounts designated by the Escrow Agent, which amounts shall be held and distributed in accordance with the terms hereof, the GeneralEscrow Agreement and the Employee/Consultant Escrow Agreement, as applicable; and

Buyer shall pay, or cause to be paid, on behalf of Seller by wire transfer of immediately available funds an amount equal to the Directed Payment, subject to applicable tax and other required withholdings, to the account designated in writing by Seller to Buyer no later than two (2) Business Days prior to the Closing Date.

Purchase Price Adjustment.

Determination of Closing Adjustment. No later than two (2) Business Days prior to the Closing, Seller shall provide Buyer with a certificate executed by the Chief Financial Officer of Seller (the “Estimated Closing Date Statement”) setting forth in reasonable detail (i) a good faith estimate of Closing Working Capital (“Estimated Working Capital”) (prepared in accordance with the schedule attached as Section 2.06(a) of the Disclosure Schedules), (ii) a good faith estimate of the aggregate amount of all Indebtedness of Seller as of the open of business on the Closing Date (“Estimated Indebtedness”), and (iii) the calculation of the Estimated Closing Adjustment Amount, together with such schedules and data with respect to the determination thereof as may be appropriate to support the calculations therein.  The Estimated Closing Date Statement shall be prepared in accordance with GAAP applied using the same accounting methods, practices, principles, policies and procedures, with

-19-

consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Audited Financial Statements for the most recent fiscal year end, subject only to the modifications and limitations set forth on Section 2.06(a) of the Disclosure Schedules.  Buyer and its Representatives shall have an opportunity to review and reasonably comment on the Estimated Closing Date Statement delivered by Seller, which shall be subject to Buyer’s reasonable approval.

Post-Closing Determination of Closing Date Statement.Within one hundred twenty(120) days after the Closing Date, Buyer shall prepare and deliver to Seller a written statement (the “Closing Date Statement”) setting forth Buyer’s good faith calculations of (i) Closing Working Capital (“Actual Working Capital”), (ii) the aggregate amount of all Indebtedness of Seller as of the open of business on the Closing Date(prior to giving effect to the Closing)  (“Actual Indebtedness”)and (iii) the calculation of the Final Closing Adjustment Amount, together with such schedules and data with respect to the determination thereof as may be appropriate to support the calculations set forth therein.  The Closing Date Statement shall be prepared in accordance with GAAP applied using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Audited Financial Statements for the most recent fiscal year end, subject only to the modifications and limitations set forth in this Section 2.06 and on Section 2.06(b) of the Disclosure Schedules.

Outstanding Receivables.  Solely for purposes of preparing and finalizing the Closing Date Statement (and the computation of Actual Working Capital included therein), in the event any Receivable outstanding at Closing for which there was a reserve set forth on the Estimated Closing Date Statement was actually collected prior to the delivery of the Closing Date Statement, then the amount of such reserve shall dollar for dollar be decreased by the amount actually collected and, to the extent any Receivable (or any portion thereof) outstanding at Closing was not collected in accordance with its payment terms prior to the delivery of the Closing Date Statement, then such uncollected amount of such Receivable (each an “Outstanding Receivable”) shall dollar for dollar be included in the reserves set forth on the Closing Date Statement and in the calculation of Actual Working Capital to the extent not previously included in the reserves set forth on the Estimated Closing Date Statement.  Any Outstanding Receivable collected within 60 days after delivery of the Closing Date Statement by Buyer, to the extent Buyer has received payment for such Outstanding Receivable, shall be immediately paid to Seller, net of any costs of collection. Following Closing, (i) Seller will assist Buyer in the collection of the Receivables in the manner and to the extent that Buyer shall reasonably request, all at the expense of Buyer; however, Seller shall not be required to commence any Action against any Receivables payor, and (ii) Buyer will use commercially reasonable efforts to collect the Receivables.

Examination and Review.

Examination. After receipt of the Closing Date Statement, Seller shall have thirty (30) days (the “Review Period”) to review the Closing Date Statement. During the Review Period, Seller and Seller’s Accountants shall have reasonable access to the relevant books and records of Buyer, the personnel of, and work papers prepared by, Buyer and/or Buyer’s Accountants to the extent that they relate to the Closing Date Statement and to such

-20-

historical financial information (to the extent in Buyer’s possession) relating to the Closing Date Statement as Seller may reasonably request for the purpose of reviewing the Closing Date Statement and to prepare a Statement of Objections (defined below), provided, that such access shall be in a manner that does not interfere with the normal business operations of Buyer.

Objection. On or prior to the last day of the Review Period, Seller may object to the Closing Date Statement by delivering to Buyer a written statement setting forth those items that Seller disputes (the “Statement of Objections”). The Statement of Objection shall (i) specify in reasonable detail the nature of any disagreement so asserted, and include all supporting schedules, analyses, working papers and other documentation, (ii) include only disagreements based on mathematical errors or the components of the Closing Date Statement not being calculated in accordance with this Section 2.06, and (iii) specify the line item or items in the Closing Date Statement with which Seller disagrees and the amount of each such line item or items as calculated by Seller.  Seller shall be deemed to have agreed with all items and amounts included in the Closing Date Statement delivered pursuant to Section 2.06(b) except such items that are specifically disputed in the Statement of Objections.  If Seller fails to deliver the Statement of Objections before the expiration of the Review Period, the Closing Date Statement and the Actual Working Capital and Actual Indebtedness reflected in the Closing Date Statement shall be deemed to have been accepted by Seller and shall be deemed the “Final Working Capital” and “Final Indebtedness” and shall be final and binding. If Seller delivers the Statement of Objections before the expiration of the Review Period, Buyer and Seller shall negotiate in good faith to resolve such objections within thirty (30) days after the delivery of the Statement of Objections (the “Resolution Period”), and, if the same are so resolved within the Resolution Period, the Closing Date Statement and the Actual Working Capital and Actual Indebtedness with such changes as may have been previously agreed in writing by Buyer and Seller, shall be deemed the “Final Working Capital” and “Final Indebtedness” and shall be final and binding.

Resolution of Disputes. If Seller and Buyer fail to reach an agreement with respect to all of the matters set forth in the Statement of Objections before expiration of the Resolution Period, then any amounts remaining in dispute (“Disputed Amounts” and any amounts not so disputed, the “Undisputed Amounts”) shall be submitted for resolution toGrant Thornton LLP or, ifGrant Thornton LLP is unable to serve, Buyer and Seller shall appoint by mutual agreement another impartial nationally recognized firm of independent certified public accountants (the “Independent Accountants”) who, acting as experts and not arbitrators, shall resolve the Disputed Amounts only and make any adjustments to the Actual Working Capital and Actual Indebtedness. The parties hereto agree that all adjustments shall be made without regard to materiality. The Independent Accountants shall only decide the specific items under dispute by the parties and their decision for each Disputed Amount must be within the range of values assigned to each such item in the Closing Date Statement and the Statement of Objections, respectively.  The Independent Accountants shall review such submissions from Buyer and Seller and base its determination solely on such submissions.  The Independent Accountants shall make a determination as soon as practicable within thirty (30) days (or such other time as the parties hereto shall agree in writing) after their engagement.  The decision of the Independent Accountants shall be deemed final and binding upon the parties and enforceable by any court of competent jurisdiction and the Independent

-21-

Accountants’ final calculation of (i) Actual Working Capital shall be deemed the “Final Working Capital” and (ii) Actual Indebtedness shall be deemed the “Final Indebtedness.”

Fees of the Independent Accountants. Seller shall pay a portion of the fees and expenses of the Independent Accountants equal to 100% multiplied by a fraction, the numerator of which is the amount of Disputed Amounts submitted to the Independent Accountants that are resolved in favor of Buyer (that being the difference between the Independent Accountants’ determination and Seller’s determination) and the denominator of which is the total amount of Disputed Amounts submitted to the Independent Accountants. Buyer shall pay that portion of the fees and expenses of the Independent Accountants that Seller is not required to pay hereunder.

Post-Closing Adjustment.

Following the determination of the components of the Closing Date Statement,if the Final Closing Adjustment Amount as calculated in accordance with this Section 2.06is negative,  then Buyer shall pay the absolute value of the Final Closing Adjustment Amount in cash to Seller.

Following the determination of the components of the Closing Date Statement,if the Final Closing Adjustment Amountas calculated in accordance with thisSection 2.06 is positive,then Buyer shall be entitled to receive a payment in cash out of the then available funds in the GeneralEscrow Fund in an amount equal to the absolute value of the Final Closing Adjustment Amount, and Buyer and Seller shall deliver a joint direction instructing the Escrow Agent to make such payment to Buyer.  

All payments pursuant to this Section 2.06(e)  shall be made by wire transfer of immediately available funds to an account designated in advance by Seller or Buyer, as applicable, and shall be made on or prior to the fifth (5th) Business Day following: (A) the 30-day period following Buyer’s delivery of the Closing Date Statement pursuant to Section2.06(b) if Seller does not timely dispute such amounts pursuant to Section 2.06(d)(i); (B) the date of Seller’s and Buyer’s mutual determination of Final Closing Adjustment Amount in the event Seller timely disputes such amounts pursuant to Section 2.06(d)(i) and Seller’s and Buyer’s differences are resolved without the engagement of an Independent Accountant pursuant to Section2.06(c)(ii); and (C) the date of the Independent Accountant’s determination of Final Closing Adjustment Amount pursuant to Section2.06(d)(iii) in the event Seller timely disputes such amounts pursuant to Section 2.06(d)(i) and Seller and Buyer are unable to resolve their differences pursuant to Section 2.06(d)(ii).

The amount of any Final Closing Adjustment Amount, as the case may be, shall bear interest from and including the Closing Date to but excluding the date of payment at a rate per annum equal to the rate of interest published by The Wall Street Journal as the “prime rate” at large U.S. money center banks on the Closing Date, calculated on the basis of a 365 day year and the actual number of days elapsed, without compounding.

-22-

Adjustments for Tax Purposes. Any payments made pursuant to Section2.06 shall be treated as an adjustment to the Purchase Price by the parties for all Tax purposes, unless otherwise required by Law.

Withholding Tax. Buyer shall be entitled to deduct and withhold from the Purchase Price all Taxes that Buyer may be required to deduct and withhold under any provision of Tax Law. All such withheld amounts shall be treated as delivered to Seller hereunder.

Third Party Consents. To the extent that Seller’s rights under any Contract or Permit constituting a Purchased Asset, or any other Purchased Asset, may not be assigned to Buyer without the consent of another Person which has not been obtained, this Agreement shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or be unlawful, and Seller shall use its commercially reasonable efforts to obtain any such required consent(s) as promptly as possible; provided, that, except to the extent that the condition precedent set forth in Section 7.02(c) relating to the foregoing shall not be satisfied or waived, the Closing shall occur. Following the Closing, the Parties shall have a continuing obligation to use their commercially reasonable efforts to obtain such consents and, in the event such consents are not obtainable, to cooperate with each other in any reasonable and lawful arrangements designed to provide to Buyer the economic rights, benefits, liabilities and obligations of use of such Contract or Permit; provided, that Buyer shall pay, satisfy and discharge the corresponding liabilities and obligations of the Seller under the non-assignable Contract or Permit for the enjoyment of such economic rights and benefits. Notwithstanding the foregoing, neither Seller nor any of its Affiliates shall be required to commence any litigation or offer or grant any accommodation (financial or otherwise) to any third party to obtain such authorizations, approvals, consents, negative clearances or waivers. Upon obtaining the requisite authorizations, approvals, consents, negative clearances or waivers, Seller shall promptly convey, transfer, assign and deliver, or cause to be conveyed, transferred, assigned and delivered, such Contract or Permit hereunder. To the extent Buyer has received the benefit of any Contract or Permit pursuant to this Section 2.08, no representation, warranty or covenant of Seller contained herein shall be breached or deemed breached as a result of (i) the failure to obtain any consent relating to such Contract or Permitthat was disclosed as requiredin Section 4.04 of the Disclosure Schedules (including without limitation the termination of any Contract or Permit as a result thereof), or (ii) any Action commenced or threatened by any Person arising out of or relating to the failure to obtain any such consent.Notwithstanding any provision in this Section 2.08 to the contrary, Buyer shall not be deemed to have waived its rights under Section 7.02(c) hereof unless and until Buyer either provides written waivers thereof or elects to proceed to consummate the transactions contemplated by this Agreement at Closing. Notwithstanding the foregoing, to the extent Buyer has received the benefit of any Contract or Permit pursuant to this Section 2.08,  there shall be no adjustment or reduction in the Purchase Price for or in respect of any Contract or Permit constituting a Purchased Asset which is not assigned to Buyer.

Prorated Items.  The following items shall be prorated as of Closing: (i) personal property lease payments; (ii) property Taxes, rent, utility charges, and other similar administrative obligations and prepaid benefits; (iii) insurance premiums for insurance

-23-

purchased by Seller and retained by Buyer, if any; and (iv) interest and reserves on Encumbrances and obligations, if any, expressly assumed in writing by Buyer.

Payments Post-Closing.

If, following the Closing Date, Seller receives any payment or other proceeds which relate to an obligation or right that arose on or after the Closing Date with respect to any of the Purchased Assets or Assumed Contracts, Seller shall promptly remit to Buyer such payments.

If, following the Closing Date, Buyer receives any payment or other proceeds which relate to any of the Excluded Assets, Buyer shall promptly remit to Seller such payments.

Possession.  Seller shall deliver actual or constructivepossession of the Purchased Assets to Buyer as of theClosing.

Conveyance of Title.  

Real Property.  Title to the real property described in Section2.01(f)of the Disclosure Schedules shall be conveyed by a  deed in the form and substance to the deed by which such real property was originally conveyed to Seller (each, a “Deed”).  Title to the Real Property shall be marketable and insurable and shall be free and clear of all Encumbrances, other than Permitted Encumbrances and those listed on Section 4.11(a)(i) of the Disclosure Schedules.

Other Assets.  Title to the Purchased Assets shall be conveyed by Bills of Sale, motor vehicle titles, assignments, and other instruments of transfer as described in  Section 3.02(a).  Unless expressly stated otherwise, title to the Purchased Assets (i) shall be conveyed free and clear of all Encumbrances, other than Permitted Encumbrances, and (ii) shall be conveyed with only the warranties expressly set forth in this Agreement.

ARTICLE III

Closing

Closing. Subject to the terms and conditions of this Agreement, the consummation of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Dechert LLP, Cira Centre, 2929 Arch Street, Philadelphia, PA, 19104, at 9:00 a.m., Eastern Time, on the second Business Day after all of the conditions to Closing set forth in ARTICLE VII are either satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing Date), or at such other time, date or place as Seller and Buyer may mutually agree upon in writing. The date on which the Closing is to occur is herein referred to as the “Closing Date.”

Closing Deliverables.

At the Closing, Seller shall deliver the following:

-24-

to Buyer, the GeneralEscrow Agreement and the Employee/Consultant Escrow Agreement, each duly executed by Seller;

to Buyer, a bill of sale in the form of Exhibit B hereto (the “Bill of Sale”) and duly executed by Seller, transferring the Tangible Personal Property included in the Purchased Assets to Buyer;

to Buyer, an assignment and assumption agreement in the form of Exhibit C hereto (the “Assignment and Assumption Agreement”) and duly executed by Seller, effecting the assignment to and assumption by Buyer of the Purchased Assets and the Assumed Liabilities;

to Buyer,assignments in the form of Exhibit D hereto (the “Intellectual Property Assignments”) and duly executed by Seller, transferring all of Seller’s right, title and interest in and to the Intellectual Property Assets and the Intellectual Property Licenses to Buyer, provided that, with respect to domain name registrations included in the Intellectual Property Assets, Seller shall, at or immediately following the Closing, take such steps as Buyer may reasonably request, at Buyer’s expense,to convey and transfer such domain name registrations to Buyer’s designated account, including assenting to any electronic request to transfer such domain name registrations as Buyer or Buyer’s agent may initiate;

to Buyer,with respect to each parcel of Owned Real Property, a Deed duly executed and notarized by Seller;

to Buyer, with respect to each Lease, an Assignment and Assumption of Lease in form and substance reasonably satisfactory to Buyer (each, an “Assignment and Assumption of Lease”) and duly executed by Seller;

to Buyer, with respect to each parcel of Owned Real Property and each Lease, all keys, combinations, passwords, and codes to all locks, security devices and entrance doors and copies of all plans and specifications, certificates of occupancy, permits, variances, approvals and site plans;

to Buyer, Seller Closing Certificate;

to Buyer, the FIRPTA Certificate;

to Buyer, a notarized written statement of Seller dated the same date as this Agreement satisfying the “good faith” requirement of Iowa Code Section 421.28 and Iowa Rule 701-12.14;

to Buyer, the certificates of the Secretary or Assistant Secretary of Seller required by Section 7.02(k) and Section 7.02(l);

to Buyer, pay-off letters for all Indebtedness to be repaid in full at Closing which shall acknowledge the aggregate principal amount and all accrued, but unpaid interest, in form and substance reasonably acceptable to Buyer (such letters, collectively, the

-25-

“Pay-off Letters” andthe aggregate of such Indebtedness set forth in the Pay-off Letters, the “Repaid Indebtedness”);

to Buyer, the written consents and releases described in Section 7.02(c);

to Buyer, any approvals, waivers, and consents from each Governmental Authority, necessary for consummation in all material respects of the transactions contemplated herein;

to Buyer, the Employee/Consultant Letter Agreement duly executed by Seller;

to the Escrow Agent, the GeneralEscrow Agreement and the Employee/Consultant Escrow Agreement,  each duly executed by Seller.

At the Closing, Buyer shall deliver the following:

to Seller, the Closing Date Purchase Price;

to Seller, the GeneralEscrow Agreement and the Employee/Consultant Escrow Agreement, each duly executed by Buyer;

to Seller, the Assignment and Assumption Agreement duly executed by Buyer;

to Seller, with respect to each Lease, an Assignment and Assumption of Lease duly executed by Buyer;

to Seller, Buyer Closing Certificate;

to Seller, the certificates of the Secretary or Assistant Secretary of Buyer required by Section 7.03(g) and Section 7.03(h);

to Seller, the Employee/Consultant Letter Agreement duly executed by Buyer;

to the holders of Repaid Indebtedness, the respective amounts of Indebtedness to be paid in accordance with the Pay-off Letters; and

to the Escrow Agent, the Closing Date Escrow Amount, and the GeneralEscrow Agreement and the Employee/Consultant Escrow Agreement, each duly executed by Buyer.

At the Closing, Buyer and Seller shall co-execute any documents reasonably necessaryto effect the assignment of the Intellectual Property, and Buyer shall record such documents and make such filings as appropriate at its expense.  

-26-

ARTICLE IV

Representations and warranties of seller

Except as set forth in the correspondingly numbered Section of the Disclosure Schedules, Seller represents and warrants to Buyer as follows:

Organization and Qualification of Seller. Seller is a limited liability company duly organized, validly existing, and in good standing under the Laws of the State of Delaware and has all requisite limited liability company power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on the Business as currently conducted. Section 4.01 of the Disclosure Schedules sets forth each jurisdiction in which Seller is licensed or qualified to do business as a foreign entity, and Seller is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the ownership of the Purchased Assets or the operation of the Business as currently conducted makes such licensing or qualification necessary,  except where such failure has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Authority of Seller. Seller has all requisite limited liability company power and authority to enter into this Agreement and the other Transaction Documents to which Seller is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Seller of this Agreement and any other Transaction Document to which Seller is a party, the performance by Seller of its obligations hereunder and thereunder and the consummation by Seller of the transactions contemplated hereby and thereby have been duly authorized by all requisite limited liability company action on the part of Seller. This Agreement has been duly executed and delivered by Seller, and (assuming due authorization, execution and delivery by Buyer) this Agreement constitutes a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms. When each other Transaction Document to which Seller is or will be a party has been duly executed and delivered by Seller (assuming due authorization, execution and delivery by each other party thereto), such Transaction Document will constitute a legal and binding obligation of Seller enforceable against it in accordance with its terms.  There is no restriction in any organizational document or any document governing Indebtedness of Seller (excluding the Repaid Indebtedness) or, subject to the provisions of Section 2.08 hereof, any other Material Contract limiting the right or power of Seller to sell the Purchased Assets.

Ownership.  The equity securities owned by AHN represent all of the issued and outstanding equity securities of Seller, and all of such outstanding equity securities are duly authorized, validly issued, fully paid and non-assessable.  The equity securities of AHN owned by AHN Holdings represent all of the issued and outstanding equity securities of AHN, and all of such outstanding equity securities are duly authorized, validly issued, fully paid and non-assessable.

No Conflicts; Consents. The execution, delivery and performance by Seller of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a)

-27-

conflict with or result in a violation or breach of, or default under, any provision of the certificate of formation or other organizational documents of Seller; (b) subject to compliance with the HSR Act, conflict with or result in a material violation or breach of any provision of any Law or Governmental Order applicable to Seller, the Business or the Purchased Assets; (c) except as set forth in Section 4.04 of the Disclosure Schedules, require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, modify or cancel any Material Contract or Material Permit to which Seller is a party or by which Seller or the Business is bound or to which any of the Purchased Assets are subject (including any Assigned Contract); or (d) result in the creation or imposition of any Encumbrance other than Permitted Encumbrances on the Purchased Assets. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority or any other person is required by or with respect to Seller in connection with the execution and delivery of this Agreement or any of the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, except for such filings as may be required under the HSR Act or where the failure to obtain or make any such consent, approval, Permit, Governmental Order, declaration or filing, or to give such notice, could not reasonably be expected to prevent the consummation of the transaction or result in any material Loss or any material impediment to the operation of the Business by Buyer after the Closing Date.

Financial Statements. Complete copies of the audited financial statements consisting of consolidated balance sheets, statements of net income, members’ equity and cash flows of Seller as of December 31 in each of the years 2010, 2011 and 2012 (the “Audited Financial Statements”), and unaudited financial statements consisting of consolidated balance sheets, statements of net income, members’ equity and cash flows of Seller as of June 30, 2013 (the “Interim Financial Statements” and together with the Audited Financial Statements, the “Financial Statements”) are included in Section 4.05 of the Disclosure Schedules. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments (the effect of which will not be materially adverse) and the absence of notes (that, if presented, would not differ materially from those presented in the Audited Financial Statements). The Financial Statements are basedon the Books and Records, and fairly present in all material respects the financial condition of Seller as of the respective dates they were prepared and the results of the operations and financial position of Seller for the periods indicated. The audited consolidated balance sheet of Seller as of December 31, 2012 is referred to herein as the “Balance Sheet” and the date thereof as the “Balance Sheet Date” and the consolidated balance sheet of the Business as of June 30, 2013 is referred to herein as the “Interim Balance Sheet” and the date thereof as the “Interim Balance Sheet Date.” Seller maintains a standard system of accounting established and administered in accordance with GAAP.  The books of accounts and accounting records of the Business are complete and correct in all material respects, and there have been no material transactions involving Seller which properly should have been set forth in such books of accounts and accounting records and which have not been accurately so set forth.

-28-

Undisclosed Liabilities. Seller has no Liabilities with respect to the Business, except (a) those which are reflected or reserved against, in the Balance Sheet as of the Balance Sheet Date, (b) those which have been incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date, (c) other Liabilities that are not, individually or in the aggregate, material in amount or significance, and (d) except as set forth in Section 4.06 of the Disclosure Schedules.

Absence of Certain Changes, Events and Conditions. Since the Balance Sheet Date, except as set forth in Section 4.07 of the Disclosure Schedules, there has not been any:

event, occurrence or development that has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

material change in any method of accounting or accounting practice for the Business, except as required by GAAP or as disclosed in the notes to the Financial Statements;

material change in cash management practices and policies, practices and procedures with respect to collection of Receivables, establishment of reserves for uncollectible Receivables, accrual of Receivables, inventory control, prepayment of expenses, payment of trade accounts payable, accrual of other expenses, deferral of revenue and acceptance of customer deposits;

failure to make commercially reasonable efforts to preserve and protect the goodwill of Seller and its relationships with clients, customers, suppliers, referral sources and other persons having material business relationships with the Business;

entry into any Contract that would constitute a Material Contract, including any renewal or substitution, other than in the ordinary course of businessconsistent with past practices;

incurrence, assumption or guarantee of any Indebtedness (excluding any Repaid Indebtedness) in excess of $25,000 except unsecured current obligations and Liabilities incurred in the ordinary course of business consistent with past practice;

transfer, assignment, sale or other disposition of any of the Purchased Assets shown or reflected in the Balance Sheet, except for the sale of Inventory in the ordinary course of business and dispositions of obsolete items and items of below standard quality;

cancellation of any debts or claims or amendment, termination or waiver of any rights constituting Purchased Assets, other than in the ordinary course of business consistent with past practices;

transfer, assignment or grant of any license, waiver, covenant not to sue, sublicense or other permission under any rights under or with respect to any Intellectual Property Assets or Intellectual Property Licenses included in the Purchased Assets, or any abandonment,

-29-

cancellation, expiration, or non-renewal of any Intellectual Property Registrations included in the Purchased Assets, other than in the ordinary course of business consistent with past practices;

material damage, destruction or loss, or any material interruption in use, of anyPurchased Assets, whether or not covered by insurance;

acceleration, termination, material modification to or cancellation of anyAssigned Contract or Permit included in the Purchased Assets;

material capital expenditures which would constitute an Assumed Liability;

imposition of any Encumbrance (excluding Permitted Encumbrances or Encumbrances with respect to Repaid Indebtedness) upon any of the Purchased Assets;

grant of any bonuses, whether monetary or otherwise, or any general wage or salary increases in respect of any current or former employees, directors, officers or independent contractors of Seller, other than as provided for in any written agreements or consistent with past practice in the ordinary course of business or retention payments to officers or employees that have been agreed upon by Buyer in writing, or other material change in the terms of employment or other service relationship for any employee, officer, director or independent contractorof Seller;

entry into, termination of, adoption of or amendment to, in any material respect, any employment, bonus, profit-sharing initiative, change in control or severance agreement, contract, or commitment or any other Benefit Plan or collective bargaining agreement, except amendments to any Benefit Plan as required by Laworretention payments to officers or employees in amounts and to employees that have been agreed upon by Buyer in writing;

loan to, or entry into any other transaction with, any employees of Seller, other than compensation arrangements in the ordinary course of business consistent with past practices;

adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law;

purchase, lease or other acquisition of the right to own, use or lease any property or assets in connection with the Business for an amount in excess of $100,000, individually (in the case of a lease, per annum) or $200,000 in the aggregate (in the case of a lease, for the entire term of the lease, not including any option term), except for purchases of Inventory or supplies in the ordinary course of business consistent with past practice;

removal of any Purchased Assets used in the operation of the Business from the respective Real Property location except in the ordinary course of business consistent with past practices; or

-30-

any Contract to do any of the foregoing.

Material Contracts.

Section 4.08(a) of the Disclosure Schedules lists each of the following Contracts (x) by which any of the Purchased Assets are bound or affected or (y) to which Seller is a party or by which it is bound in connection with the Business or the Purchased Assets, including any Personal Property Leases (such Contracts, together with all Contracts concerning the occupancy, management or operation of any Real Property (including without limitation, brokerage contracts) listed or otherwise disclosed in Section 4.11(a) of the Disclosure Schedules and all Contracts relating to Intellectual Property, being “Material Contracts”):

all Contracts involving aggregate consideration in excess of  $50,000 and which, in each case, cannot be cancelled without penalty or without more than 30 days’ notice;

all Contracts that require Seller to purchase or sell a stated portion of the requirements or outputs of the Business or that contain “take or pay” provisions;

all Contracts that provide for the indemnification of any Person or the assumption of any Tax, environmental or other Liability of any other Person, other than customary warranties contained in Contracts of Seller for the sale of products and services;

all Contracts that relate to the acquisition or disposition of any business, a material amount of stock or assets of any other Person or any real property (whether by merger, sale of stock, sale of assets or otherwise), other than the purchase of Inventory in the ordinary course of business;

all broker, distributor, vendor, dealer, manufacturer’s representative, franchise, agency, sales promotion, market research, marketing consulting and advertising Contracts involving aggregate consideration in excess of $50,000 and which, in each case, cannot be cancelled without penalty or without more than 30 days’ notice;

all employment agreements and Contracts with independent contractors or consultants (or similar arrangements) and which cannot be terminated without material penalty or without more than 30 days’ notice;

except for Contracts relating to trade receivables, all Contracts relating to Repaid Indebtedness;

all Contracts with any Governmental Authority;

all Contracts that limit or purport to limit the ability of Seller to compete in any line of business or with any Person or in any geographic area or during any period of time;

all joint venture, partnership or similar Contracts;

-31-

all Contracts for the sale of any of the Purchased Assets or for the grant to any Person of any option, right of first refusal or preferential or similar right to purchase any of the Purchased Assets;

all powers of attorney with respect to the Business or any Purchased Asset;

all collective bargaining agreements or Contracts with any labor organization, union or association;

(A) all Contracts by which Seller grants to any Person a license, waiver, covenant not to sue, sublicense or other permission under any rights under or with respect to any Intellectual Property Assets or Intellectual Property Licenses; and (B) all Intellectual Property Licenses, other than standard desktop or similar, generally available commercial software licensed to Seller on nondiscriminatory terms that are licensed for less than $25,000 in annual license fees; and

all other Contracts that are material to the Purchased Assets or the operation of the Business and not previously disclosed pursuant to this Section 4.08.

Each Material Contract is valid and binding on Seller in accordance with its terms and is in full force and effect as against Seller.  None of Seller or, to Seller’s Knowledge, any other party thereto is in material breach of or material default under (or is alleged to be in breach of or default under), or has provided or received any notice of any intention to terminate, any Material Contract. No event or circumstance has occurred that, with notice or lapse of time or both, would constitute a materialevent of default under any Material Contract or result in a termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder. Complete and correct copies of each Material Contract (including all modifications, amendments and supplements thereto and waivers thereunder) have been made available to Buyer. There are no material disputes pending or, to the Knowledge of Seller, threatened under any Material Contract included in the Purchased Assets.

Title to Purchased Assets. Except as set forth on Section 4.09 of the Disclosure Schedules, Seller has good and transferabletitle to, or a transferableleasehold interest in, all of the Purchased Assets, except as to any Permits of Seller which are not transferrable or assignable (as to which Permits Buyer may be required to make independent application therefor) and subject to obtaining required consents to, and giving required notices for, the transfer or assignment of the Purchased Assets.  All such Purchased Assets (including leasehold interests, but no representations and warranties are made by Seller with respect to the underlying property or assets which are the subject of leasehold interests) are free and clear of Encumbrances except for the following (collectively referred to as “Permitted Encumbrances”):

those items set forth in Section 4.09 of the Disclosure Schedules;

liens for Taxes not yet due and payable;

-32-

mechanics’, carriers’, workmen’s, repairmen’s or other like liens arising or incurred in the ordinary course of business consistent with past practice or amounts that are not delinquent and which are not, individually or in the aggregate, material to the Business or the Purchased Assets;

easements, rights of way, zoning ordinances and other similar encumbrances affecting Real Property which are not, individually or in the aggregate, material to the Business or the Purchased Assets, which do not prohibit or interfere with the current operation of any Real Property and which do not render title to any Real Property unmarketable;

other than with respect to Owned Real Property, liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business consistent with past practice which are not, individually or in the aggregate, material to the Business or the Purchased Assets;  

liens of landlords and lessors under Leases included in the Acquired Real Property; or

minor imperfections of title, none of which, individually or in the aggregate, detract in any material respect from the value or interfere in any material respect with the present use of any of Seller’s properties.

Condition and Sufficiency of Assets. Except as set forth in Section 4.10 of the Disclosure Schedules, the buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property included in the Purchased Assets are structurally sound, are in good operating condition and repair, and are adequate for the uses to which they are being put, and none of such buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost.  In the reasonable judgment of management of Seller,the Purchased Assets are sufficient for the continued conduct of the Business after the Closing in substantially the same manner as conducted prior to the Closing and constitute all of the rights, property and assets necessary to conduct the Business as currently conducted, except as to the Excluded Assets and any Permits of Seller which are not transferrable or assignable (as to which Permits Buyer may be required to make independent application therefor) and subject to obtaining required consents to, and giving required notices for, the transfer or assignment of the Purchased Assets. 

Real Property.

Section 4.11(a) of the Disclosure Schedules sets forth each parcel of real property owned by Seller and used in the conduct of the Business as currently conducted (the foregoing, together with all buildings, fixtures, structures and improvements situated thereon and all easements, rights-of-way and other rights and privileges appurtenant thereto, being herein collectively, the “Owned Real Property”), including with respect to each property, the address location and use. Seller has delivered to Buyer copies of the deeds and other instruments by which Seller acquired such parcel of Owned Real Property, and copies of all title insurance

-33-

policies, opinions, abstracts and surveys in the possession of Seller with respect to such parcel. With respect to each parcel of Owned Real Property:

Seller has marketable and insurable fee simple title, free and clear of all Encumbrances, except (A) Permitted Encumbrances and (B) those Encumbrances set forth in Section 4.11(a)(i) of the Disclosure Schedules;

except as set forth in Section 4.11(a)(ii) of the Disclosure Schedules, Seller has not leased or otherwise granted to any Person the right to use or occupy such Owned Real Property or any portion thereof; and

none of Seller or, to the Knowledge of Seller, any other party has created or granted any unrecorded outstanding options, rights of first offer or rights of first refusal to purchase such Owned Real Property or any portion thereof or interest therein.

Section 4.11(b) of the Disclosure Schedules sets forth each parcel of real property leased by Seller and used in the conduct of the Business as currently conducted (the foregoing, together with all rights, title and interest of Seller in and to leasehold improvements relating thereto, including, but not limited to, security deposits, reserves or prepaid rents paid in connection therewith, being herein collectively, the “Leased Real Property”), and a true and complete list of all leases, subleases, licenses, concessions and other agreements (whether written or oral), including all amendments, extensions renewals, guaranties and other agreements with respect thereto, pursuant to which Seller holds any Leased Real Property (collectively, the “Leases”). Seller has delivered to Buyer a true and complete copy of each Lease. With respect to each Lease, except as set forth in Section 4.11(b) of the Disclosure Schedules:

such Lease is valid, binding, enforceable and in full force and effect as against Seller and, to the Knowledge of Seller, against the lessor, and Seller enjoys, in all material respects, peaceful and undisturbed possessionof the Leased Real Property;

Seller is not in material breach or default under such Lease, and no event has occurred or circumstance exists which, with the delivery of notice, passage of time or both, would constitute such a material breach or default, and Seller has paid all rent due and payable under such Lease;

Seller has not received nor given any notice of any default or event that with notice or lapse of time, or both, would constitute a material default by Seller under any of the Leases and, to the Knowledge of Seller, no other party is in material default thereof, and no party to any Lease has exercised any termination rights with respect thereto;

Seller has not subleased, assigned or otherwise granted to any Person the right to use or occupy such Leased Real Property or any portion thereof; and

Seller has not pledged, mortgaged or otherwise granted an Encumbrance on its leasehold interest in any Leased Real Property, except pursuant to any Repaid Indebtedness.

-34-

Seller has not received any written notice of (i) material violations of building codes and/or zoning ordinances or other governmental or regulatory Laws affecting the Real Property, (ii) existing, pending or threatened condemnation proceedings affecting the Real Property, or (iii) existing, pending or threatened zoning, building code or other moratorium proceedings, or similar matters which could reasonably be expected to materially and adversely affect the ability to operate the Real Property as currently operated. Neither the whole nor any material portion of any Real Property has been damaged or destroyed by fire or other casualtythat has not been repaired or restored in all material respects to its original condition or otherwise remedied.

Intellectual Property.

Section 4.12(a) of the Disclosure Schedules lists all (i) Intellectual Property Registrations, setting forth as to each such item, as applicable, the item or title, the application, registration or issuance number, the owner, the date of application, registration or issuance, and the jurisdiction in which such item is registered, issued or pending, and any deadlines for renewals, maintenance filings, or other required filings that must be taken within the ninety (90) days of the Closing Date and (ii) Intellectual Property Assets that are not registered or the subject of a pending application for registration or issuance but that are material to the operation of the Business. All required filings and fees related to the Intellectual Property Registrations have been timely filed with and paid to, in all material respects,the relevant Governmental Authorities and authorized registrars, and all Intellectual Property Registrations are otherwise in good standing in all material respects.

Except as set forth in Section 4.12(b) of the Disclosure Schedules, the Intellectual Property Registrations are, to the Knowledge of Seller, enforceable.  The Intellectual Property Registrations are held of record in the name of Seller, and, (i) to the Knowledge of Seller, are not the subject of any claim, written demand or proceeding alleging that any such item is invalid or unenforceable, or questioning Seller’s ownership thereof, including any reexamination, interference, cancellation, opposition or similar proceeding before any Governmental Authority; and (ii) Seller does not have Knowledge of any basis for any such claim or proceeding.

Seller owns exclusively all right, title and interest in and to the Intellectual Property Assets, free and clear of Encumbrances (other than Permitted Encumbrances).

Except as set forth in Section 4.12(d) of the Disclosure Schedules, (i) none of Seller or, to the Knowledge of Seller, any employee, director or officer of Seller has been a member of, or has engaged or otherwise participated in the activities of any industry standards-setting organization; (ii) none of the Intellectual Property Assets was developed, in whole or in part, pursuant to any grant or other funding from a Governmental Authority, college, university or similar institution; and (iii) to the Knowledge of Seller, none of the Intellectual Property Assets was developed using, or comprises or incorporates, any computer software subject to any open source or similar license.

Except for “off-the-shelf” software, the Intellectual Property Assets and Intellectual Property Licenses included in the Purchased Assets constitute all of the material

-35-

Intellectual Property used in the conduct of the Business as currently conducted by Seller, and there are no other items of Intellectual Property that are material to the operation of such business.  The Intellectual Property Assets and Intellectual Property Licenses as currently or formerly owned, licensed or used by Seller or proposed to be used by Buyer, and the products, services, and conduct of the Business as currently and formerly conducted by Seller and proposed to be conducted by Buyer have not, do not and will not infringe, dilute, violate or misappropriate in any material respect the Intellectual Property of any Person. Seller has not received any written communication, and no Action against Seller has been instituted, settled or, to Seller’s Knowledge, threatened that alleges any such infringement, dilution, violation or misappropriation, and none of the Intellectual Property Assets are subject to any outstanding Governmental Order that materially restricts Company’s ability to use any Intellectual Property Assets.  To the Knowledge of Seller, no Person has infringed, diluted, violated or misappropriated, or is infringing, violating or misappropriating, any Intellectual Property Assets.

In the reasonable judgment of management of Seller, Seller has taken commercially reasonable and appropriate steps to protect its Intellectual Property Assets.  To Seller’s Knowledge, there has been no unauthorized use, dissemination or distribution of any Seller trade secrets or confidential and proprietary information.

Inventory. All Inventory, whether or not reflected in the Balance Sheet, consists of a quality and quantity usable and salable in the ordinary course of business consistent with past practice, except for obsolete, damaged, defective or slow-moving items that have been written off or written down to fair market value or for which adequate reserves have been established.All Inventory is owned by Seller free and clear of all Encumbrances (excluding Permitted Encumbrances or Encumbrances with respect to Repaid Indebtedness).The quantities of each item of Inventory (whether raw materials, work-in-process or finished goods) are, in the reasonable judgment of management of Seller, not excessive but are reasonable in the present circumstances of Seller.

Accounts Receivable. The Receivables represent bona fide claims that have arisen from in the ordinary course of business.  The amounts charged for Inventory, goods and services have been determined and statements rendered in accordance with applicable laws, regulations and contracts binding upon Seller.  The payment of the Receivables is not contingent upon the fulfillment of any Contract, past or future of Seller, other than the Contract giving rise to such Receivable.The Receivables are collectible in the ordinary course of business within ninety (90) days of the creation of each Receivable, subject only to contractual allowances,  bad debt reserves established by Seller and bad debt adjustments consistent with industry standards. 

Customers and Suppliers.

Section 4.15(a) of the Disclosure Schedules sets forth with respect to the Business (i) each customer who has paid consideration to Seller in an amount in excess of $50,000 for goods or services rendered for each of the two most recent fiscal years (collectively, the “Material Customers”); and (ii) the amount of consideration paid by each Material Customer during such periods. Seller has not received, prior to any announcement or notification by the parties of this Agreement or the transactions contemplated hereunder, any written notice

-36-

that any of the Material Customers has ceased, or intends to cease after the Closing, to use the goods or services of the Business or to otherwise terminate or materially reduce its relationship with the Business.

Section 4.15(b) of the Disclosure Schedules sets forth with respect to the Business (i) each supplier to whom Seller has paid more than $50,000 for goods or services (excluding rental, lease and license payments) rendered for each of the two most recent fiscal years (collectively, the “Material Suppliers”); and (ii) the amount of purchases from each Material Supplier during such periods. Seller has not received, prior to any announcement or notification by the parties of this Agreement or the transactions contemplated hereunder, any written notice that any of the Material Suppliers has ceased, or intends to cease, to supply goods or services to the Business or to otherwise terminate or materially reduce its relationship with the Business.

Insurance. Section 4.16 of the Disclosure Schedules sets forth (a) a true and complete listof all current material policies or binders of fire, liability, product liability, umbrella liability, real and personal property, workers’ compensation, vehicular, fiduciary liability and other casualty and property insurance maintained by Seller or its Affiliates and relating to the Business, the Purchased Assets or the Assumed Liabilities (collectively, the “Insurance Policies”); and (b) with respect to the Business, the Purchased Assets or the Assumed Liabilities, a listof all pending claims and the claims history for Seller under such Insurance Policies since January 1, 2010.  Except as set forth on Section 4.16 of the Disclosure Schedules,there are no claims related to the Business, the Purchased Assets or the Assumed Liabilities pending under any such Insurance Policies as to which coverage has been questioned, denied or disputed or in respect of which there is an outstanding reservation of rights.  Neither Seller nor any of its Affiliates has received any written notice of cancellation of, premium increase with respect to, or alteration of coverage under, any of such Insurance Policies. All premiums due on such Insurance Policies have either been paid or, if not yet due, accrued. All such Insurance Policies (a) are in full force and effect and enforceable in accordance with their terms; and (b) have not been subject to any lapse in coverage. None of Seller or any of its Affiliates is in default under, or has otherwise failed to comply with, in any material respect, any provision contained in any such Insurance Policy.

-37-

Legal Proceedings; Governmental Orders.

Except as set forth in Section 4.17(a) of the Disclosure Schedules, there are no Actions pending or, to Seller’s Knowledge, threatened against or by Seller (a) relating to or affecting the Business, the Purchased Assets or the Assumed Liabilities which, if adversely determined against Seller, would result in any material Loss to the Business; or (b) that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement;  provided however, that no representation or warrantyis made by Seller with respect toActions(the following Actions being herein referred to as “Buyer Related Actions”) commenced or threatened after the date hereof challenging or seeking to prevent the commencement of the transactions contemplated by this Agreement (including without limitation under the HSR Act or any other antitrust or similar Law).

Except as set forth in Section 4.17(b) of the Disclosure Schedules, and except for Buyer Related Actions, there are no outstanding Governmental Orders against Seller and no unsatisfied judgments, penalties or awards against, relating to or affecting the Business. Seller is in compliance in all material respects with the terms of each Governmental Order set forth in Section 4.17(b) of the Disclosure Schedules.

Compliance With Laws; Permits.

General. Except as set forth in Section 4.18(a) of the Disclosure Schedules, since January 1, 2011, Seller has complied and is now complying in all material respects with all Laws applicable to the conduct of the Business, including those of the FDA, as currently conducted or the ownership and use of the Purchased Assets.

Permits.  All Permits required for Seller to conduct the Business as currently conducted or for the current ownership and use of the Purchased Assets have been obtained by Seller, except where the failure to obtain such Permits could reasonably be expected to result in any material Loss or any material impediment to the operation of the Business by Buyer after the Closing Date (“Material Permits”),and are valid and in full force and effect. All material fees and charges with respect to such Material Permits as of the date hereof have been paid in full. Section 4.18(b) of the Disclosure Schedules lists all current Material Permits issued to Seller which are related to the conduct of the Business as currently conducted or the current ownership and use of the Purchased Assets, including the names of the Material Permits and their respective dates of issuance and expiration.  To Seller’s Knowledge, no event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any Permit set forth in Section 4.18(b) of the Disclosure Schedules.

FDA.  Except as set forth on Section 4.18(c) of the Disclosure Schedules, to Seller’s Knowledge, the manufacture of the products of the Business is being, and has at all times since January 1, 2011 been, conducted in compliance in all material respects with all applicable Laws, including the FDA’s Good Manufacturing Practice regulations.  Since January 1, 2011, neither Seller nor any Subsidiary has received from the FDA any written notice of inspectional observations or warning letters or any other correspondence alleging or describing

-38-

material potential or actual violations of applicable Law from any Governmental Authority, including the FDA.

Pharmaceutical Products.

Registration.  Seller is currently registered and in good standing as a distributor of Pharmaceutical Products with the applicable boards of pharmacy,  except where the failure to be in compliance would result in any material Loss to the Business.  Attached as Section 4.18(d)(i) of the Disclosure Schedules are all Material Permits, registrations, and licenses of Seller necessary for Seller to conduct the Business to be a distributor of Pharmaceutical Products, in the manner in which it has been conducted in the twelve (12) months prior to Closing.  Since January 1, 2011, except as set forth in Section 4.18(d)(i) of the Disclosure Schedules, no application for registration of Seller with the applicable boards of pharmacy has been denied or withdrawn, and no registration of Seller once issued has been suspended, revoked, terminated or transferred.

Distribution of Pharmaceutical Products.  Except as set forth in Section 4.18(d)(ii) of the Disclosure Schedules, since January 1, 2011, Seller has distributed, packaged, labeled, stored and dispensed prescription products under the direction of a veterinarian, where required pursuant to any Applicable Law pertaining to manufacturing, distributing, transporting, labeling, packaging, dispensing, using, reporting, storing, disposing, importing, exporting, brokering or trading of prescription products and where the failure to be in compliance would have a Material Adverse Effect.  Except as set forth in Section 4.18(d)(ii) of the Disclosure Schedules, Seller is in compliance in all material respects with all applicable Law pertaining to manufacturing, distributing, transporting, labeling, packaging, dispensing, using, reporting, storing, disposing, importing, exporting, brokering or trading of prescription products where the foregoing in under the control of Seller.

Pharmaceutical Handling.  Except as set forth in Section 4.18(d)(iii) of the Disclosure Schedules, since January 1, 2011, to Seller’s Knowledge and to the extent under the control of Seller, Seller has not causedits Pharmaceutical Products to be manufactured, distributed, transported, labeled, packaged, dispensed, used, stored, disposed, imported, exported, brokered or traded in, about, to or from Seller, including as to record keeping requirements, except in compliance in all material respects with applicable Law.

No Claims, Notices, Investigation or Violations.  Except as set forth in Section 4.18(d)(iv) of the Disclosure Schedules,  since January 1, 2011,  Seller has not receivedfrom any Governmental Authority any written request for information, notice of claim, demand letter or other notification, notice or information, and to Seller’s Knowledge no Governmental Authority has initiated any Action against Seller, as to any matter that would be required to be disclosed pursuant to Sections 4.18(a)(i) through (iii).

Environmental Matters.

The operations of Seller with respect to the Business and the Purchased Assets are currently and since January 1, 2011 have been in compliance in all material respects with all Environmental Laws. Seller has not received from any Person, with respect to the

-39-

Business or the Purchased Assets, any written Environmental Claim, written or otherwise unequivocal notice of Environmental Claim or written request for information pursuant to Environmental Law, which, in each case, if adversely determined would reasonably be expected to result in a material Loss and either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the Closing Date.

Seller is conducting the Business in material compliance with all Environmental Permits which are materially necessary for the conduct of the Business as currently conducted or the ownership, lease, operation or use of the Purchased Assets (each of which is disclosed in Section 4.19(b) of the Disclosure Schedules) and all such material Environmental Permits are in full force and effect.  To the Knowledge of Seller, no event has occurred and no condition or circumstance exists in connection with Hazardous Materials or Environmental Law that would reasonably be expected to prevent or impede, after the Closing Date, the conduct of the Business as currently conducted or the ownership, operation or use of the Purchased Assetsas currently owned, operated or used by Seller. 

Except as disclosed in Section 4.19(b) of the Disclosure Schedules, therehas been no material Release of Hazardous Materials by Seller which has not been remedied by Seller or, to the Knowledge of Seller, by any Person with respect to the Business or the Purchased Assets or on, at, to or from any real property currently or formerly owned, leased or operated by Seller in connection with the Business in material violation of applicable Environmental Laws or that would require material investigation, remediation or other response action under Environmental Laws.

None of the Acquired Real Property, nor to the Knowledge of Seller, any facility or location used by Seller or any predecessors in connection with the Business or Purchased Assets for the off-site treatment, storage or disposal of Hazardous Materials has been placed or, to the Knowledge of Seller, proposed for placement on the National Priorities List (or CERCLIS) under CERCLA, or any similar state list, and Seller has not received any Environmental Claim or notice regarding potential material Liabilities with respect to such off-site Hazardous Materials treatment, storage, or disposal facilities or locations.

Seller has not retained or assumed, by contract, or to the Knowledge of Seller by operation of Law, any material Liabilities or obligations of third parties under Environmental Law, except for customary indemnity or similar agreements or obligations under Leases and Contracts for Indebtedness.

Seller has provided or otherwise made available to Buyer: (i) any and all environmental reports, studies, audits, records, sampling data, site assessments, risk assessments and other similar documents with respect to the Business or the Purchased Assets or any real property currently or formerly owned, leased or operated by Seller in connection with the Business which are in the possession or control of Seller related to compliance with Environmental Laws, Environmental Claims or the Release of Hazardous Materials; and (ii) any budgets for anticipated capital expenditures in material amounts required to bring the Business in compliance in all material respects with applicable Environmental Laws (including, without limitation, with respect to costs of remediation, pollution control equipment and operational

-40-

changes), including those Environmental Laws that have been enacted or promulgated, but for which the deadline for compliance has not yet occurred.

Employees and Employment Matters.

Section 4.20(a) of the Disclosure Schedules contains a substantially complete and accurate list of all current employees of Seller, which sets forth each such employee’s (i) name, (ii) exempt/non-exempt status, (iii) the existence of all written employment agreements, if any, (iv) title and position, (v) date of hire, (vi) current rate of compensation, including any bonus potential, if applicable, together with a statement of the full amount of all remuneration paid to each such employee during the 12-month period ending on December 31, 2012, and (vii) amount of accrued vacation and sick leave pay, if any.

Seller is not a party to, or bound by, any collective bargaining or other Contract with a labor union or labor organization, and there are no labor organizations representing, purporting to represent or, to Seller’s Knowledge, attempting to represent any employee of Seller. There is not currently, there has not beensince January 1, 2010, nor is there or has there been since January 1, 2010 any threat of, any mass or collective employee or labor strike, slowdown, work stoppage, lockout, concerted refusal to work overtime or other similar labor activity or dispute, or material unfair labor practice charge, complaint, grievance or other proceedings or litigation, with respect to or affecting Seller or any of Seller’s employees.

Copies of all current written employment agreements, consulting agreements and independent contractor agreements or arrangements have been provided to Buyer.

Except as disclosed in Section 4.20(d) of the Disclosure Schedules, thereare no Actions against Seller pending, or to Seller’s Knowledge, threatened to be brought or filed, by or with any Governmental Authority in connection with the employment or engagement of any current or former employee, consultant or independent contractor of the Business, including, without limitation, any material claim relating to unfair labor practices, employment discrimination, harassment, retaliation, equal pay, misclassification or any other employment-related matter arising under applicable Laws.

Section 4.20(e) of the Disclosure Schedules sets forth a list of each (i) “employee benefit plan,” as defined in Section 3(3) of ERISA and (ii) all other pension, retirement, supplemental retirement, deferred compensation, excess benefit, profit sharing, bonus, incentive, stock purchase, stock ownership, stock option, stock appreciation right, profits interest, employment, severance, salary continuation, termination, change-of-control, health, life, disability, group insurance, vacation, holiday and fringe benefit plan, program, contract, or arrangement (whether written or unwritten, qualified or nonqualified, funded or unfunded and including any that have been frozen) currently maintained, currently contributed to, or currently required to be contributed to, by Seller or any ERISA Affiliate for the benefit of any current or former employee, director, officer or independent contractor of Seller or under which Seller or any ERISA Affiliate has any actual or contingent  Liability (each, a “Benefit Plan” and, together, the “Benefit Plans”).  None of the Benefit Plans are maintained, contributed to orrequired to be contributed to outside the United States.

-41-

None of the Benefit Plans are (i) multiemployer plans, as described in Section 3(37) of ERISA (a “Multiemployer Plan”) or (ii) subject to Title IV or Sections 302 or 303 of ERISA or Sections 412 or 430 of the Code. Neither Seller nor any ERISA Affiliate is currently required to contribute to any Multiemployer Plan and neither Seller nor any ERISA Affiliate has any liability (contingent or otherwise) relating to the withdrawal or partial withdrawal from a Multiemployer Plan.

The Benefit Plans which are “employee pension benefit plans” within the meaning of Section 3(2) of ERISA and which are intended to meet the qualification requirements of Section 401(a) of the Code (each, a “Pension Plan”) have received determination letters from the Internal Revenue Service (“IRS”) to the effect that such plans are qualified and exempt from federal income Taxes under Sections 401(a) and 501(a) of the Code, respectively, and nothing has occurred that would reasonably be expected to adversely affect the qualification of such Benefit Plan.

Taxes. Except as set forth in Section 4.21 of the Disclosure Schedules:

All material Tax Returns filed or required to be filed by AHN Holdings, AHN and Seller have been timely filed. All such Tax Returns are true, complete and correct in all material respects. All Taxes due and owing by AHN Holdings, AHN and Seller (whether or not shown on any Tax Return) have been timely paid.

AHN Holdings, AHN and Seller have withheld or collected and paid all Taxes required to have been withheld, collected and paid in connection with amounts paid or owing to any Employee, independent contractor, creditor, shareholder or other party or received from any customer or any other party, and complied in all materialrespects with all information reporting and backup withholding provisions of applicable Law.

No extensions or waivers of statutes of limitations or of time within which to file any Tax Return (except with respect to such Tax Returns that have since been filed) have been given or requested with respect to any Taxes of AHN Holdings, AHN or Seller.

None of AHN Holdings, AHN or Seller have waived or requested to waive any statute of limitations with respect to, or any extension of a period for the assessment of, any Taxes.

Solely for federal and state income Tax purposes, (i) AHN Holdings is treated as a partnership for U.S. federal and state income tax purposes, (ii) AHN is treated as an entity disregarded from AHN Holdings (which is the direct and sole owner of AHN), and (iii) Seller is treated as an entity disregarded from AHN (which is the direct and sole owner of Seller).  None of AHN Holdings, AHN or Seller is not, nor have ever been, treated as a corporation or association for federal or state income Tax purposes either as a result of an election made pursuant to Treasury Regulation Section 301.7701-3, pursuant to Section 7704(a) of the Code or for any other reason.  Seller is a “United States person” within the meaning of Section 7701(a)(30) of the Code.

There are no Encumbrances for Taxes upon any of the Purchased Assets nor is any Governmental Authority in the process of imposing any Encumbrances for Taxes on

-42-

any of the Purchased Assets (other than for Taxes for the current year which are not due and payable).

No transaction contemplated by this Agreement is subject to withholding under any provision of Law (including Section 1445 of the Code).

No payment made or to be made or benefit provided or to be provided by Seller, AHN Holdings, AHN or their respective Affiliates or is an excess parachute payment within the meaning of Section 280G of the Code.

No Purchased Asset is an equity interest of any other Person (including an equity interest in a partnership, limited liability company, joint venture or any similar business organization).

For purposes of this Section 4.21, all references to AHN Holdings, AHN and Seller shall be deemed to include any Person that was merged with or was liquidated into AHN Holdings, AHN or Seller, as applicable, prior to the time of the Closing.

Affiliate Transactions.  Except as set forth on Section 4.22 of the Disclosure Schedules, no (x) officer, director, employee or Affiliate of Seller or (y) to Seller’s Knowledge, any individual related by blood, marriage or adoption to any such employee, officer or director (each such person or entity, a “Related Party”) is, or has been within the two (2) years preceding the date of this Agreement, a party to any Assigned Contract, nor does any such Related Party have any interest in any property used by Seller with respect to the Business.  To the Knowledge of Seller, no Related Party has a direct or indirect ownership in any firm or corporation with which Seller has a business relationship or any firm or corporation which competes with Seller or Buyer.

Brokers.Except for the fees and expenses payable by Seller to Piper Jaffray & Co., nobroker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Seller.

Products.  Except as disclosed on Section 4.24 of the Disclosure Schedules, during the past five years, there have been no product liability Actions involving Seller or the Business or relating to products or services manufactured, distributed, sold or provided by Seller. To Seller’s Knowledge, no such Action has been threatened which, if adversely determined against Seller, would result in any material Loss to the Business.  Section 4.24 of the Disclosure Schedules contains a true and correct list of all products sold by Seller that to Seller’s Knowledge have been the subject of a product recall requested by the FDA or any other Governmental Authority, and there have been no voluntary or involuntary recalls relating to the products sold by the Business since January 1, 2010.  

Certain Business Practices.  None of Seller or, to Seller’s Knowledge, any officer, director, employee or Affiliate of Sellerhas directly or indirectly: (a) made any unlawful contribution, gift, bribe, payoff, influence payment, kickback or other similar payment to any Person, private or public, regardless of form, whether in money, property or services, or

-43-

(b) established or maintained any fund or asset that has not been recorded in its books and records.

Exclusivity of Representations; Disclaimer. The representations and warranties made by Seller in this Article IV are the exclusive representations and warranties made by Seller with respect to Seller, the Business, the Purchased Assets, the Assumed Liabilities, the transactions contemplated hereby or by the other Transaction Documents, and Seller hereby disclaims any other express or implied representations or warranties with respect to any of the foregoing. Except as expressly set forth herein, Seller makes no warranty of merchantability, suitability, fitness for a particular purpose or quality with respect to any of the Purchased Assets or as to the condition or workmanship thereof or the absence of any defects therein, whether latent or patent. Seller is not, directly or indirectly, making any representations or warranties regarding any pro-forma financial information, financial projections or other forward-looking statements with respect to Seller, the Business, the Purchased Assets or the Assumed Liabilities.

Representations and Warranties Are Independent of Due Diligence.  Buyer is not and will not be required to undertake any independent due diligence investigation to determine the truth, accuracy and completeness of the representations, warranties and covenants made by Seller in this Agreement.  Seller’s representations, warranties and covenants made to Buyer in this Agreement are independent of any due diligence investigation done by Buyer.  Buyer’s due diligence investigation, if any, (i) does not terminate, reduce, mitigate or otherwise diminish Seller’s responsibility to fully and fairly make all representations, warranties and covenants and disclose all required information, (ii) does not impute or attribute to Buyer by implication or otherwise information that did or should have been discovered in Buyer’s due diligence investigation, (iii) shall not be deemed to ascribe any knowledge to Buyer different from, or in addition to, the representations and warranties made by Seller to Buyer in this Agreement, and (iv) shall not be deemed to reduce, effect, or eliminate Buyer’s complete reliance upon the representations and warranties set forth in this Agreement.

ARTICLE V

Representations and warranties of buyer

Buyer represents and warrants to Seller as follows:

Organization of Buyer. Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the State of Idaho.

Authority of Buyer. Buyer has full corporate power and authority to enter into this Agreement and the other Transaction Documents to which it is a party, to carry out its respective obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Buyer of this Agreement and any other Transaction Document to which they are a party, the performance by Buyer of its respective obligations hereunder and thereunder and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Buyer.This Agreement has been duly executed and delivered by

-44-

Buyer, and (assuming due authorization, execution and delivery by the other parties hereto) this Agreement constitutes a legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms. When each other Transaction Document to which Buyer is or will be a party have been duly executed and delivered by Buyer (assuming due authorization, execution and delivery by each other party thereto), such Transaction Document will constitute a legal and binding obligation of Buyer, enforceable against it in accordance with its terms.

No Conflicts; Consents. The execution, delivery and performance by Buyer of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) conflict with or result in a violation or breach of, or default under, any provision of the certificate of incorporation, by-laws or other organizational documents of Buyer; (b) conflict with or result in a violation or breach of any provision of any Law or Governmental Order applicable to Buyer; or (c) require the consent, notice or other action by any Person under any Contract to which Buyer is a party. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority or other Person is required by or with respect to Buyer in connection with the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, except for such filings as may be required under the HSR Act and such consents, approvals, Permits, Governmental Orders, declarations, filings or notices which, in the aggregate, would not have a material adverse effect.

Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Buyer.

Sufficiency of Funds. As ofimmediately prior to the Closing, Buyer will have sufficient cash on hand or other sources of immediately available funds to enable it to make payment of the Purchase Price and consummate the transactions contemplated by this Agreement. Buyer acknowledges that its obligations under this Agreement are not conditioned upon or subject to obtaining funds or financing necessary to consummate the transactions hereunder.

Legal Proceedings. There are no Actions pending or, to Buyer’s knowledge, threatened against or by Buyer or any Affiliate of Buyer that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. No event has occurred or circumstances exist that may give rise or serve as a basis for any such Action.

ARTICLE VI

Covenants

Conduct of Business Prior to the Closing. From the date hereof until the Closing, except as otherwise provided in this Agreement or consented to in writing by Buyer (which consent shall not be unreasonably withheld or delayed), Seller shall (x) conduct the Business in the ordinary course of business consistent with past practice; and (y) use

-45-

commercially reasonable efforts to maintain and preserve intact its current Business organization, operations and franchise and to preserve the rights, franchises, goodwill and relationships of Seller’s employees, customers, lenders, suppliers, regulators and others having relationships with the Business, including but not limited to maintaining sufficient Inventory to fill customer orders. Without limiting the foregoing, from the date hereof until the Closing Date, Seller shall:

use reasonable ordinary course commercial efforts to preserve and maintain all Permits required for the conduct of the Business as currently conducted or the ownership and use of the Purchased Assets;

pay the debts, Taxes and other obligations of the Business when due;

file allTax Returns, and otherwise conduct all Tax-related matters, consistent with past practice and in accordance with applicable Law;

not make, change or revoke any Tax election;

use reasonable ordinary course commercial efforts tocontinue to collect Receivables in a manner substantially consistent with past practice, without discounting such Receivables;

maintain the properties and assets included in the Purchased Assets in substantially the same condition as they were on the date of this Agreement, subject to reasonable wear and tear;

use reasonable ordinary course commercial efforts to maintain without material adverse modification all Insurance Policies, except as required by applicable Law;

defend and protectin the ordinary course of businessthe properties and assets included in the Purchased Assets from infringement or usurpation;

perform all of its obligations under all Assigned Contracts in the ordinary course of business substantially consistent with past practice;

maintain the Books and Records in all material respects in the ordinary course of business substantially consistent with past practice;

comply in all material respects with all Laws applicable to the conduct of the Business or the ownership and use of the Purchased Assets;

not grant any increase in compensation or benefits, or make any award or grant under any Benefit Plan, to any current or former director, consultant, officer or employee of Seller, except for increases in compensation to employees of Seller other than directors or officers as may be required under existing agreements (as in effect on the date hereof) set forth in Section 4.20(a) or Section 4.20(c) of the Disclosure Schedules to retain officers or employees,  or hire any new employee (other than to fill a vacancy or replace a terminated employee); and

-46-

not take or permit any action that would cause any of the changes, events or conditions described in Section 4.07 to occur.

Access to Information. From the date hereof until the Closing, Seller shall (a) afford Buyer and its Representatives full and free access to and the right to inspect all of the Real Property, properties, assets, premises, Books and Records, Contracts and other documents and datarelated to the Business, including Tax Returns related to the Purchased Assets or the Business andfor the purpose of conducting environmental due diligence; (b) furnish Buyer and its Representatives with such financial, operating and other data and information related to the Business as Buyer or any of its Representatives may reasonably request provided that the foregoing is prepared by Seller in the ordinary course of business substantially consistent with past practice; and (c) instruct the Representatives of Seller to cooperate with Buyer in its investigation of the Business subject to the terms and conditions of this Agreement. Notwithstanding the foregoing sentence of this Section 6.02, Seller shall not be required to provide or authorize the provision of requested material to the extent it includes customer-specific data or competitively-sensitive information relating to areas of the business of Seller in which Buyer competes against Seller or to the extent the provision of such material is otherwise prohibited by applicable Laws.  Any investigation pursuant to this Section 6.02 shall be conducted in such manner as not to interfere unreasonably with the conduct of the Business. No investigation by Buyer or other information received by Buyer shall operate as a waiver or otherwise affect any representation, warranty or agreement given or made by Seller in this Agreement or any ancillary agreement hereto.

No Solicitation of Other Bids.

Prior to any termination of this Agreement in accordance with Section 9.01, Seller shall not, and shall not authorize or permit any of its Affiliates or any of its or their Representatives to, directly or indirectly, (i) encourage, solicit, initiate, facilitate or continue inquiries regarding an Acquisition Proposal; (ii) enter into discussions or negotiations with, or provide any information to, any Person concerning a possible Acquisition Proposal; or (iii) enter into any agreements or other instruments (whether or not binding) regarding an Acquisition Proposal. Seller shall immediately cease and cause to be terminated, and shall cause its Affiliates and all of its and their Representatives to immediately cease and cause to be terminated, all existing discussions or negotiations with any Persons conducted heretofore with respect to, or that could lead to, an Acquisition Proposal. For purposes hereof, “Acquisition Proposal” means any inquiry, proposal or offer from any Person (other than Buyer or any of its Affiliates) relating to the direct or indirect disposition, whether by sale, merger or otherwise, of all or any portion of the Business or the Purchased Assets.

In addition to the other obligations under this Section 6.03, Seller shall promptly (and in any event within three (3) Business Days after receipt thereof by Seller or its Representatives) advise Buyer orally and in writing of any Acquisition Proposal, any request for information with respect to any Acquisition Proposal, or any inquiry with respect to or which could reasonably be expected to result in an Acquisition Proposal, the material terms and conditions of such request, Acquisition Proposal or inquiry, and the identity of the Person making the same.

-47-

Seller agrees that the rights and remedies for noncompliance with this Section 6.03 shall include having such provision specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to Buyer and that money damages would not provide an adequate remedy to Buyer.

Notice of Certain Events.

From the date hereof until the Closing, Seller and Buyer shall use commercially reasonable efforts to promptly notify the other in writing of:

any fact, circumstance, event or action the existence, occurrence or taking of which (A) has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (B) has resulted in, or could reasonably be expected to result in, any representation or warranty made by Seller or Buyer, as applicable, hereunder not being true and correct or (C) has resulted in, or could reasonably be expected to result in, the failure of any of the conditions set forth in Section 7.02 or Section 7.03 to be satisfied;

any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement; and

any Actions commenced or, to Seller’s Knowledge, threatened against, relating to or involving or otherwise affecting the Business, the Purchased Assets or the Assumed Liabilities that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 4.17 or Section 5.06 or that relates to the consummation of the transactions contemplated by this Agreement.

Any receipt of information pursuant to this Section 6.04 shall not operate as a waiver or otherwise affect any representation, warranty or agreement given or made by Seller or Buyer in this Agreement (including Section 8.02,  Section 8.03,  Section 9.01(b) and Section 9.01(c)) and shall not be deemed to amend or supplement the Disclosure Schedules.  Notwithstanding the foregoing, prior to the Closing, Seller shall use reasonable commercial efforts to supplement, modify or update the Disclosure Schedules but only to the extent relating to facts, events or circumstances arising out of developments after the date of this Agreement, and at the time of the delivery of such supplement, Seller will advise Buyer in writing, based on Seller’s reasonable judgment, whether the condition set forth in Section 7.02(a) is still able to be satisfied.  No such supplement, modification or update shall prohibit, limit or otherwise affect Buyer’s right to indemnification hereunder, be taken into account in determining whether the condition set forth in Section 7.02(a) is satisfied or deemed to prevent or cure a breach of any representation, warranty, covenant or agreement hereunder with respect to the information disclosed in such supplement, modification or update. However, if Buyer has the right to terminate this Agreement in accordance with Section 9.01(b)(i) based on any such supplement, modification or update of the Disclosure Schedules but does not do so, then any breach of any

-48-

representation, warranty, covenant or agreement hereunder based on such information shall be deemed to have been waived by Buyer (a “Disclosure Schedules Supplement Acceptance”). 

Employees and Employee Benefits.

Commencing on the Closing Date, Buyer will offer employment, on an “at will” basis, to the employees of Seller listed on Section 6.05 of the Disclosure Schedules who remain employed by Seller as of immediately prior to Closing.Seller shall, at the request of Buyer in Buyer’s sole discretion, amend Section 6.05 of the Disclosure Schedules to add any employees hired by Seller prior to Closing but following the date hereof.  All employees of Seller who accept such offer of employment are hereinafter referred to as the “Transferred Employees.”  Buyer will have no obligation to any current or former employee of Seller not listed on Section 6.05 of the Disclosure Schedule or any employee of Seller listed on Section 6.05 of the Disclosure Schedule who does not become a Transferred Employee, including but not limited to any obligation to pay severance, vacation or any other amounts. 

Each Transferred Employee’s active participation in the Benefit Plans that are (i) health, medical, dental, vision and/or prescription drug plans shall cease on the last day of the month in which the Closing occurs and (ii) “employee welfare benefit plans” (within the meaning of Section 3(1) of ERISA) that are not described in clause (i) (e.g., life insurance, AD&D and disability plans) shall cease as of the Closing.  In the event that, following receipt of his or her final paycheck from Seller, a Transferred Employee has not contributed the full premium for coverage under any plan described in clause (i) above for the month in which the Closing occurs, Buyer will collect the unpaid premium from such Transferred Employee and remit such amount to Seller promptly upon collection; provided, however, that Seller shall use its best efforts to collect all premiums for such plans for such month from all Transferred Employees on or prior to their receipt of their last paycheck from Seller.   For the avoidance of doubt, (i) Seller and the Benefit Plans which are health, medical, dental, vision and/or prescription drug plans shall retain Liability for all claims incurred by the current and former employees of Seller (including the Transferred Employees) and their dependents prior to the first day of the month following the month in which the Closing occurs and (ii) Seller and the Benefit Plans that are “employee welfare benefit plans” (within the meaning of Section 3(1) of ERISA) that are not described in clause (i) (e.g., life insurance, AD&D and disability plans) shall retain Liability for all claims incurred by the current and former employees of Seller (including the Transferred Employees) and their dependents prior to the Closing, in each case, regardless of when a claim is submitted.  All Liabilities described in the preceding sentence shall be treated as an Excluded Liability for all purposes of this Agreement.  A claim shall be deemed incurred (i) on the date of the occurrence of death or dismemberment in the case of claims under life insurance and accidental death and dismemberment plans, (ii) on the date of the occurrence of the injury or illness in the case of claims under disability plans and (iii) on the date on which the service or treatment is provided in the case of claims under medical, hospital, dental and similar plans.

Each Transferred Employee shall be given service credit for purposes of (i) eligibility and coverage under Buyer’s group health plan and paid time off program and (ii) vesting (but not eligibility to participate in) the MWI Veterinary Supply, Inc. 401(k) & Profit

-49-

Sharing Plan, in each case, for his or her period of service with Seller and its predecessors prior to the Closing (to the extent recognized under a comparable Benefit Plan prior to Closing).

Nothing contained in this Agreement shall confer upon any Transferred Employee any right with respect to employment by Buyer or its Affiliates, nor shall anything herein interfere with the right of Buyer or its Affiliates, following any employment of any Transferred Employee, to terminate the employment of any such Transferred Employee at any time, with or without cause, or restrict Buyer or its Affiliates in the exercise of their independent business judgment in modifying any of the terms and conditions of the employment of any such Transferred Employee.  The provisions of this Agreement, including Section 6.05, are for the benefit of the parties to this Agreement only and shall not be construed to grant any rights, as a third party beneficiary or otherwise, to any person who is not a party to this Agreement, nor shall any provision of this Agreement be deemed to be the adoption of, or an amendment to, any employee benefit plan, as that term is defined in Section 3(3) of ERISA, or otherwise limit the right of the Buyer to amend, modify or terminate and such employee benefit plan.

As of the Closing, Buyer shall cause each Transferred Employee to be credited under Buyer’s health care flexible spending account plan, if any, and dependent care spending account plan, if any (each, a “Buyer Spending Account”) with an amount available for reimbursement between the Closing and the end of the calendar year in which the Closing occurs equal to the amounts available for reimbursement for such period under Seller’s spending account plans of corresponding type (each, a “Seller Spending Account”) with respect to such Transferred Employee immediately prior to the Closing.  Buyer shall give effect under the Buyer Spending Accounts to elections made by the Transferred Employees with respect to the corresponding Seller Spending Accounts in respect of the calendar year in which the Closing occurs, subject to the terms and conditions then applicable to the Buyer Spending Accounts (including dollar limitations in effect for the year).  If the amounts contributed (by salary reduction or otherwise) by a Transferred Employee under a Seller Spending Account arrangement for the portion of the calendar year ending on the Closing exceed the sum of the claims under such Seller Spending Account already reimbursed to the Transferred Employee or claimed for reimbursement by the Transferred Employee in respect of the calendar year in which the Closing occurs, Seller shall transfer to Buyer on the Closing Date an amount equal to the lesser of (i) such excess or (ii) the excess of the dollar limitation for the year applicable to the corresponding Buyer Spending Account over the sum of the claims reimbursed to or claimed for reimbursement by the Transferred Employee.  If the sum of the claims reimbursed to or claimed for reimbursement by the Transferred Employee under such Seller Spending Account in respect of the calendar year in which the Closing occurs exceeds the amount contributed to such Seller Spending Account as of the Closing, Buyer shall transfer to Seller on the Closing Date an amount equal to the lesser of (i) such excess or (ii) the excess of the dollar limitation for the year applicable to the corresponding Buyer Spending Account over the amount contributed by such Transferred Employee to such Seller Spending Account prior to Closing.

Noncompetition and Confidential Information Agreements and other Restrictive Covenants.  Seller andAHN (the  “Restricted Parties”) acknowledge that Buyer, in purchasing the Purchased Assets and assuming the Assumed Liabilities, has legitimate business interests in preserving and protecting Seller’s (i) confidential information included in and relating to the Purchased Assets; (ii) goodwill, technologies, Intellectual Property, business

-50-

plans, proprietary business processes, and proprietary methods of operation, vendors and vendor contacts, financial and marketing information, and Trade Secrets, as defined in the Uniform Trade Secrets Act,  included in and relating to the Purchased Assets; (iii) customers, customer lists, customer contacts and referral sourcesincluded in and relating to the Purchased Assets;  and (iv) relationships with the customers of the Business and the employees who will become Transferred Employees (collectively referred to herein as “Legitimate Business Interests”).  The Restricted Parties agree that Buyer is entitled to a period of time to benefit from the purchase and that the Restricted Parties should be restricted from competing with Buyer or benefiting from the proprietary information and goodwill purchased by Buyer, as hereinafter provided.  Based on the first three sentences of this Section 6.06 and for the purpose of protecting Buyer’s Legitimate Business Interests:

Confidentiality.From and after the date hereof, each of the Restricted Parties shall, and shall cause their respective Affiliates and Representatives to, hold in confidence any and all information, whether written or oral, concerning the Business,the Purchased Assets or the Assumed Liabilities, except to the extent that the disclosing party can show that such information (a) is generally available to and known by the public through no fault of any of the Restricted Parties, any of their Affiliates or their respective Representatives; (b) is lawfully acquired by the Restricted Parties, any of their respective Affiliates or Representatives from and after the date hereof from sources which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation; or (c) is disclosed by the Restricted Parties based on any requirement of Law, in connection with any dispute under this Agreement or the other Transaction Documents, or is necessary for the Restricted Parties to defend any claim or liability asserted against the Restricted Parties or sought to be imposed upon the Restricted Parties (including without limitation in connection with any Tax or other governmental audit, assessment, proceeding or investigation). If any of the Restricted Parties or any of their respective Affiliates or Representatives are compelled to disclose any information by judicial or administrative process or by other requirements of Law, such disclosing party shall promptly notify Buyer in writing (and, where possible, in advance) and shall disclose only that portion of such information which he, she or it is advised by its counsel in writing is legally required to be disclosed, provided that each of the Restricted Parties shall use commercially reasonable efforts(at the expense of Buyer) to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information and shall cooperate (at the expense of Buyer) with Buyer in any attempt by Buyer to oppose any such disclosure.

Non-Competition.  For the purpose of protecting Buyer’s Legitimate Business Interests, for a period of five (5) years following the date hereof, within the United States, each of the Restricted Parties agrees not to Compete with Buyer.  “Compete” means to directly or indirectly solicit, sell or render any services or products in a Competitive Business including, but not limited to, as a proprietor, member, partner, investor, shareholder, director, officer, employee, consultant, or independent contractor.  “Competitive Business” means to engage in the business of (i) the distribution and sale of animal health products, including pharmaceuticals, vaccines, nutritionals, equipment and insecticides to veterinary clinics, dealer retail stores, livestock operations, poultry and swine integrators or feed ingredient customers, (ii) service, logistics and technical support relating to such distribution and sale of animal health products and (iii) any other business carried on by Seller in the twelve (12) months preceding the

-51-

Closing Date.  Notwithstanding anything herein to the contrary, the passive investment in, and becoming a shareholder of, a publicly traded company engaged in a Competitive Business, including Buyer, shall not constitute a violation of the provisions of this Section 6.06(b);  provided that such interest is no greater than 1% of the publicly traded company.

Non-Solicitation Covenants.

For the purpose of protecting Buyer’s Legitimate Business Interests, for a period of five (5) years following the date hereof, the Restricted Parties shall not directly or indirectly solicit any customer, client, supplier, or manufacturer’s representative of Buyer, for the purpose of (x) establishing a relationship for any business or services in a Competitive Business, (y) causing any client, customer, supplier, or manufacturer’s representative to terminate or reduce any relationship with Buyer, or  (z) interfering with the relationship between Buyer and any of Buyer’s customers, clients, employees, independent contractors, suppliers, or manufacturer’s representatives in the Competitive Business.

For the purpose of protecting Buyer’s Legitimate Business Interests, for a period of five (5) years following date hereof, the Restricted Parties shall not directly or indirectly hire, employ or attempt to hire or employ a Protected Person.  A “Protected Person” is any person who is as of the date hereof or was within the six months prior to the date hereof, an employee of Seller who is designated, pursuant to Section 6.05(a), as a Transferred Employee.  Notwithstanding anything herein to the contrary, a general advertisement, posting or a similar form of generalized solicitation that leads to the hiring or employment of a Protected Person shall not constitute a violation of the provisions of this Section 6.06, so long as such general advertisement is not directly or indirectly related to a Competitive Business or targeted to any one or more Protected Persons.

Non-Interference Covenant.  For a period of five (5) years following the date hereof, the Restricted Parties shall not, whether on their own behalf or on behalf of a third party, directly or indirectly induce or attempt to induce any customer, contractor or vendor of Buyer to terminate or reduce the customer’s, contractor’s or vendor’s relationship with Buyer or otherwise attempt to harm, obstruct, or otherwise hinder Buyer’s relationship with any such customer, contractor or vendor. 

Non-Disparagement Covenant.  For a period of five (5) years following the date hereof, the Restricted Parties will not directly or indirectly make any statements, in any forum or through any medium of communication, injurious to the business reputation or goodwill of the Business or Buyer; however, the foregoing shall not restrict any pleadings by the Restricted Parties in any dispute under this Agreement or the Transaction Documents.  Nothing in this provision shall prevent any of the Restricted Parties from giving truthful Confidential Information at any time to the extent required by subpoena or other legal process, provided that the Restricted Parties must comply with all obligations set forth in subsection (a) of this Section 6.06.

Tolling of Restrictive Periods.  Buyer and Restricted Parties agree and intend that the Restricted Parties’ obligations under subsections (b) through (e) of this Section 6.06 shall be tolled during any period that the Restricted Parties are in breach of any of the

-52-

obligations under any such subsection, so that Buyer is provided the full benefit of the restrictive periods set forth herein.

If any of the Restricted Parties breach, or threaten to commit a breach of, any of the provisions of this Section 6.06, Buyer shall have the following rights and remedies, each of which rights and remedies shall be independent of the others and severally enforceable, and each of which is in addition to, and not in lieu of, any other rights and remedies available to Buyer under law or in equity:

the right and remedy to have such provision specifically enforced by any court having jurisdiction, it being acknowledged and agreed that any such breach or threatened breach willcause irreparable injury to Buyer and that money damages willnot provide an adequate remedy to Buyer; and

the right and remedy to recover from Seller all monetary damages suffered by Buyer as the result of any acts or omissions constituting a breach of this Section 6.06, as well as reasonable attorneys’ fees and costs incurred by Buyer in enforcing its rights under this Section 6.06, without regard to the limitations set forth in subsections (a) and (b) of Section 8.04.

The Restricted Parties agree that the restrictions set forth in this Section 6.06 are reasonable and necessary to protect the Legitimate Business Interests and that Buyer would not have entered into this Agreement without the benefit of the restrictions set forth in this Section 6.06.  In the event that any covenant contained in this Section 6.06 should ever be adjudicated to exceed the time, geographic, product or service or other limitations permitted by applicable Law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service or other limitations permitted by applicable Law. The covenants contained in this Section 6.06 and each provision hereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenant or provision in any other jurisdiction.  The Restricted Parties agree that any claims any Restricted Party may have against Buyer, whether under this Agreement or otherwise, will not be a defense to enforcement of the restrictions set forth in this Section 6.06.

Governmental Approvals and Consents.

Each party hereto shall, as promptly as possible, (i) make, or cause or be made, all filings and submissions (including those under the HSR Act) required under any Law applicable to such party or any of its Affiliates; and (ii) use commercially reasonable efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from all Governmental Authorities that may be or become necessary for its execution and delivery of this Agreement and the performance of its obligations pursuant to this Agreement and the other Transaction Documents. In the case of the HSR Act, the parties agree to cause to be made all appropriate filings no later than five (5) Business Days following the date of this Agreement. 

-53-

Each party shall cooperate fully with the other party and its Affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. The parties hereto shall not willfully take any action that will have the effect of delaying, impairing or impeding the receipt of any required consents, authorizations, orders and approvals.

Seller and Buyer shall use commercially reasonable efforts to give all notices to, and obtain all consents from, all third parties that are described in Section 4.04 of the Disclosure Schedules.

Without limiting the generality of the parties’ undertakings pursuant to subsections (a) and (b) above, subject to the provisions of Section 9.01, each of the parties hereto shall use all commercially reasonable efforts to:

timely respond to any inquiries by any Governmental Authority regarding antitrust or other matters with respect to the transactions contemplated by this Agreement or any other Transaction Document; and

avoid the imposition of any order or the taking of any action that would restrain, alter or enjoin the transactions contemplated by this Agreement or any other Transaction Document.

All analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals made by or on behalf of either party before any Governmental Authority or the staff or regulators of any Governmental Authority, in connection with the transactions contemplated hereunder (but, for the avoidance of doubt, not including any interactions between Seller or Buyer with Governmental Authorities in the ordinary course of business, any disclosure which is not permitted by Law or any disclosure containing confidential information) shall be disclosed to the other party hereunder in advance of any filing, submission or attendance, it being the intent that the parties will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any such analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals. Notwithstanding the foregoing sentence of this Section 6.07(d), Seller shall not be required to provide or authorize the provision of requested material to the extent it includes competitively-sensitive information relating to areas of the business of Seller in which Buyer competes against Seller or to the extent the provision of such material is otherwise prohibited by applicable Laws.  Each party shall give notice to the other party with respect to any meeting, discussion, appearance or contact with any Governmental Authority or the staff or regulators of any Governmental Authority, with such notice being sufficient to provide the other party with the opportunity to attend and participate in such meeting, discussion, appearance or contact.

Notwithstanding the foregoing, nothing in this Section 6.07 shall require, or be construed to require, Buyer or any of its Affiliates to agree to (i) comply with a Request for Additional Information and Documentary Material issued by the Federal Trade Commission or the Department of Justice or any subpoena, Civil Investigation Demand or other request for information from any Governmental Authority; (ii) sell, hold, license, divest, discontinue or limit, before or after the Closing Date, any assets, businesses or interests of Buyer or any of its

-54-

Affiliates, including for the avoidance of doubt, the Purchased Assets; (iii) any conditions relating to, or changes or restrictions in, the operations of any such assets, businesses or interests which, in either case, could reasonably be expected to result in a Material Adverse Effect or materially and adversely impact the economic or business benefits to Buyer of the transactions contemplated by this Agreement and the other Transaction Documents; or (iv) any material modification or waiver of the terms and conditions of this Agreement. 

Notwithstanding anything to the contrary contained in this Agreement, neither of Seller nor Buyer shall be obligated to defend any action or proceeding instituted (or threatened to be instituted) challenging the transaction contemplated by this Agreement as violative of any antitrust or competition law, or if any decree, judgment, injunction or other order is entered, enforced or attempted to be entered or enforced by a court or other Governmental Authority, which decree, judgment, injunction or other order would make the transactions contemplated by this Agreement illegal or would otherwise prohibit, prevent, restrict, impair or delay consummation of the transactions contemplated hereby, and neither Seller nor Buyer is required to take any action to contest or resist or any such action or proceeding or to have vacated, lifted, reversed or overturned any such decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the transactions contemplated by the Agreement or to have such decree, judgment, injunction or other order repealed, rescinded or made inapplicable so as to permit consummation of the transaction contemplated by this Agreement.

Books and Records.

In order to facilitate the resolution of any claims made against or incurred by Seller prior to the Closing, or for any other reasonable purpose, for a period of seven years after the Closing, Buyer shall:

retain the Books and Records (including personnel files) relating to periods prior to the Closing in a manner reasonably consistent with the prior practices of Seller; and

upon reasonable notice, afford Seller and Seller’s Representatives reasonable access (including the right to make, at Seller’s expense, photocopies), and subject to reasonable confidentiality safeguards, during normal business hours, to such Books and Records.

Notwithstanding any other provisions hereof, the obligations of Buyer contained in this Section 6.08 shall be binding upon the successors and assigns of Buyer. In the event Buyer or any of its successors or assigns (i) consolidates with or merges into any other Person or (ii) transfers all or substantially all of its properties or assets to any Person, then, and in each case, proper provision shall be made so that the successors and assigns of Buyer honor the obligations set forth in this Section 6.08.

Buyer shall not be obligated to provide Seller with access to any Books and Records (including personnel files) pursuant to this Section 6.08 where such access would violate any Law.

-55-

Closing Conditions.  Each party hereto shall use commercially reasonable efforts to take such actions as are necessary to expeditiously satisfy, to the extent within its control,the closing conditions set forth in ARTICLE VII hereof.

Public Announcements. Unless otherwise required by applicable Law or stock exchange requirements, no party to this Agreement shall make any public announcements in respect of this Agreement or the transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the other party (which consent shall not be unreasonably withheld or delayed), and the parties shall cooperate as to the timing and contents of any such announcement; provided that Buyer and Seller hereby agree that notwithstanding this Section 6.10, Buyer shall issue a press release and shall make all appropriate filings under state and federal securities laws with respect to this Agreement and the consummation of the transactions contemplated hereby, with such press release to be in form and substance reasonably acceptable to Seller (such acceptance not be unreasonably withheld or delayed).

Bulk Sales Laws. The parties hereby waive compliance with the provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Purchased Assets to Buyer; however, it being understood and agreed that any failure by any Party to comply with any so-called “bulk transfer laws” of any jurisdiction shall in no way derogate from any responsibility of the Seller under ARTICLE VIII hereof.

Termination of Certain Agreements. Seller shall terminate, or cause to be terminated, and obtain any consents or releases required to terminate, as of Closing, the agreements listed on Section 6.12 of the Disclosure Schedules without any liability to the Buyer from and after the Closing.

Further Assurances. Following the Closing, each of the parties hereto shall, and shall cause their respective Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement and the other Transaction Documents.

Insurance Matters. Buyer acknowledges and agrees that coverage of the Business and the Purchased Assets (the “Covered Assets and Persons”) under all current or previous insurance policies maintained by Seller and its Affiliates, shall with respect to the operation of the Business and the Purchased Assets after the Closing Date cease as of the Closing Date and the Covered Assets and Persons will be removed from such policies as of such date except with respect to claims arising out of occurrences on or prior to the Closing Date.

Landlord Estoppel Certificates.  Seller shall use commercially reasonable efforts to deliver to Buyer on or prior to Closing a landlord estoppel certificate in form and substance reasonably acceptable to Buyer from each landlord under a Lease.

-56-

ARTICLE VII

Conditions to closing

Conditions to Obligations of All Parties. The obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions:

The filings of Buyer and Seller pursuant to the HSR Act, if any, shall have been made and the applicable waiting period and any extensions thereof shall have expired or been terminated.

No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Governmental Order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal, otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof.

Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Buyer’s waiver, at or prior to the Closing, of each of the following conditions:

Other than the representations and warranties of Seller contained in Section 4.01 (Organization and Qualification of Seller), Section 4.02 (Authority of Seller),  Section 4.22 (Affiliate Transactions) and Section 4.23 (Brokers), the representations and warranties of Seller contained in this Agreement, the other Transaction Documents and any certificate or other writing delivered pursuant hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect) on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects). The representations and warranties of Seller contained in Section 4.01 (Organization and Qualification of Seller), Section 4.02 (Authority of Seller)Section 4.22 (Affiliate Transactions) shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects).

Seller shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing Date; provided, that, with respect to agreements, covenants and conditions that are qualified by materiality, Seller shall have performed such agreements, covenants and conditions, as so qualified, in all respects.

-57-

All consents, authorizations and approvals with respect to the Assigned Contracts, Personal Property Leases, Environmental Permits (to the extent assignable) and Intellectual Property Licenses which are listed in Section 7.02(c) of the Disclosure Schedules (the “Material Consents”), in each case, in form and substance reasonably satisfactory to Buyer, shall have been received, and no such consent, authorization, order and approval shall have been revoked.

No injunction or restraining order shall have been issued by any Governmental Authority, and be in effect, which restrains or prohibits any transaction contemplated hereby.

From the date of this Agreement, there shall not have occurred any Material Adverse Effect, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, could reasonably be expected to result in a Material Adverse Effect.

Seller shall have delivered to Buyer duly executed counterparts to the Transaction Documents (other than this Agreement) and such other documents and deliveries set forth in Section 3.02(a), including instructions to the Escrow Agent.

Buyer shall have received (at Buyer’s expense) an owner’s title insurance policy with respect to each Owned Real Property, issued by a nationally recognized title insurance company acceptable to Buyer, written as of the Closing Date, insuring Buyer in such amounts and together with such endorsements, and otherwise in such form, as Buyer shall require. Such title insurance policy shall insure fee simple title to each Owned Real Property, free and clear of all Encumbrances other than Permitted Encumbrances and those listed on Section 4.11(a)(i) of the Disclosure Schedules. Buyer shall have received (at Buyer’s expense) an appropriately certified ALTA/ACSM Land Title Survey prepared by a surveyor licensed in the jurisdiction where the Owned Real Property is located showing no Encumbrances other than the Permitted Encumbrances and those listed on Section 4.11(a)(i) of the Disclosure Schedules, and otherwise in form and substance satisfactory to Buyer and the title insurance company, for each of the Owned Real Properties.

All Encumbrances relating to the Purchased Assets shall have been released in full, other than Permitted Encumbrances, and Seller shall have delivered to Buyer written evidence, in form satisfactory to Buyer in its sole discretion, of the release of such Encumbrances, including executed the executed Pay-off Letters.

Seller shall have delivered a certificate, dated the Closing Date and signed by a duly authorized officer of Seller, that each of the conditions set forth in Section 7.02(a) and Section 7.02(b) have been satisfied (the “Seller Closing Certificate”).

Seller shall have delivered a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Seller certifying that attached thereto are true and complete copies of all (x) resolutions adopted by the board of directors or managers of Seller and (y) consents of the members, in each case authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions

-58-

contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby.

Seller shall have delivered a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Seller certifying the names and signatures of the officers of Seller authorized to sign this Agreement, the Transaction Documents and the other documents to be delivered hereunder and thereunder.

Seller shall have delivered a certificate pursuant to Treasury Regulation Section 1.1445-2(b) (the “FIRPTA Certificate”) that Seller is not a foreign person within the meaning of Section 1445 of the Code duly executed by Seller.

Seller shall have delivered a notarized written statement of Seller dated the same date as this Agreement satisfying the “good faith” requirement of Iowa Code Section 421.28 and Iowa Rule 701-12.14.

Conditions to Obligations of Seller. The obligations of Seller to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Seller’s waiver, at or prior to the Closing, of each of the following conditions:

Other than the representations and warranties of Buyer contained in Section 5.01 (Organization of Buyer), Section 5.02 (Authority of Buyer) and Section 5.04 (Brokers), the representations and warranties of Buyer contained in this Agreement, the other Transaction Documents and any certificate or other writing delivered pursuant hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect) on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects). The representations and warranties of Buyer contained in Section 5.01 (Organization of Buyer), Section 5.02 (Authority of Buyer) and Section 5.04 (Brokers) shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date.

Buyer shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing Date; provided, that with respect to agreements, covenants and conditions that are qualified by materiality, Buyer shall have performed such agreements, covenants and conditions, as so qualified, in all respects.

No injunction or restraining order shall have been issued by any Governmental Authority, and be in effect, which restrains or prohibits any material transaction contemplated hereby.

-59-

Buyer shall have delivered to Seller duly executed counterparts to the Transaction Documents (other than this Agreement) and such other documents and deliveries set forth in Section 3.02(b), including instructions to the Escrow Agent.

Buyer shall have delivered the Closing DatePurchase Price to Sellerpursuant to Section 3.02(b)(i),  and the Closing Date Escrow Amountto the Escrow Agent pursuant to Section 3.02(b)(viii).

Seller shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of Buyer, that each of the conditions set forth in Section 7.03(a) and Section 7.03(b) have been satisfied (the “Buyer Closing Certificate”).

Seller shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying that attached thereto are true and complete copies of all resolutions adopted by the board of directors of Buyer authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby.

Seller shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying the names and signatures of the officers of Buyer authorized to sign this Agreement, the Transaction Documents and the other documents to be delivered hereunder and thereunder.

ARTICLE VIII

Indemnification

Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties contained herein shall survive the Closing and shall remain in full force and effect until the date that is eighteen (18) months from the Closing Date; provided, that the representations and warranties in Section 4.01 (Organization and Qualification of Seller), Section 4.02 (Authority of Seller), Section 4.09 (Title to Purchased Assets), Section 4.22 (Affiliate Transactions), Section 4.23 (Brokers), Section 5.01 (Organization of Buyer), Section 5.02 (Authority of Buyer)and Section 5.04 (Brokers) shall survive indefinitely; the representations and warranties in Section 4.05 (Financial Statements) shall survive twelve (12) months; the representations and warranties in Section 4.19 (Environmental Matters) shall survive for thirty-six (36) months; and the representations and warranties in Section 4.20 (Employees and Employment Matters) and Section 4.21 (Taxes) shall survive for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof) plus sixty (60) days.  All covenants and agreements of the parties contained herein shall survive the Closing indefinitely or for the period explicitly specified therein.  Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival

-60-

period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.

Indemnification By Seller. Subject to the other terms and conditions of this ARTICLE VIII, Sellershall indemnify and defend Buyer and its Affiliates and their respective Representatives (collectively, the “Buyer Indemnitees”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, the Buyer Indemnitees based upon, arising out of, with respect to or by reason of:

any inaccuracy in or breach of any of the representations or warranties of Seller contained in this Agreement, the other Transaction Documents or in any certificate or instrument delivered by or on behalf of Seller pursuant to this Agreement, as of the date such representation or warranty was made or as if such representation or warranty was made on and as of the Closing Date (except for representations and warranties that expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such specified date, and subject to any Disclosure Schedules Supplement Acceptance);

any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Seller or AHNpursuant to this Agreement, the other Transaction Documents or any certificate or instrument delivered by or on behalf of Seller pursuant to this Agreement;or

any Excluded Asset or any Excluded Liability.

Indemnification By Buyer. Subject to the other terms and conditions of this ARTICLE VIII, Buyer shall indemnify and defend Seller and its Affiliates and their respective Representatives (collectively, the “Seller Indemnitees”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, Seller Indemnitees based upon, arising out of, with respect to or by reason of:

any inaccuracy in or breach of any of the representations or warranties of Buyer contained in this Agreement or in any certificate or instrument delivered by or on behalf of Buyer pursuant to this Agreement, as of the date such representation or warranty was made or as if such representation or warranty was made on and as of the Closing Date (except for representations and warranties that expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such specified date);

any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Buyer pursuant to this Agreement;

any Assumed Liability; and

any Liability or Third Party Claim to the extent resulting from, arising out of or related tothe Business as conducted by Buyer from and after the Closing.

Certain Limitations. The indemnification provided for in Section 8.02 and Section 8.03 shall be subject to the following limitations:

-61-

Seller shall not be liable to the Buyer Indemnitees for indemnification under Section 8.02(a) (other than with respect to a claim for indemnification based upon, arising out of, with respect to or by reason of any inaccuracy in or breach of any representation or warranty in Section 4.01 (Organization and Qualification of Seller), Section 4.02 (Authority of Seller),  Section 4.09 (Title to Purchased Assets) and Section 4.23  (Brokers)(the “Seller Fundamental Reps”) or fraud)), until the aggregate amount of all Losses in respect of indemnification under Section 8.02(a)(other than those based upon, arising out of, with respect to or by reason of the Seller Fundamental Reps)  exceeds $250,000 (the “Deductible”) (at which point Seller will be obligated to indemnify the Buyer Indemnitees solely for such indemnifiable Losses in excess of the Deductible); provided,  however, that Seller shall not be liable to the Buyer Indemnitees for indemnification under Section 8.02(a) (other than with respect to the Seller Fundamental Reps or fraud) with respect to individual Losses or several related Losses of $25,000 (the “De Minimis”) or less each, and such Losses shall not be counted toward the Deductible or the Indemnification Cap.Losses for which indemnification is sought under Section 8.02(a) shall not be counted toward the Deductible or the Indemnification Cap if indemnification by Seller may be sought for such Losses under Sections 8.02(b) or 8.02(c) or payment by Seller or AHN may be sought under Article X.

Seller shall not be liable to the Buyer Indemnitees for indemnification under Section 8.02(a)(other than with respect to a claim for indemnification based upon, arising out of, with respect to or by reason of any inaccuracy in or breach of any Seller Fundamental Reps or fraud) in excess ofthe then-remaining amount of the GeneralEscrow Fund (the “Indemnification Cap”), which shall be the sole and exclusive source for recovery in respect of such indemnification claims.

Buyer shall not be liable to the Seller Indemnitees for indemnification under Section 8.03(a) (other than with respect to a claim for indemnification based upon, arising out of, with respect to or by reason of any inaccuracy in or breach of any representation or warranty in Section 5.01 (Organization of Buyer), Section 5.02 (Authority of Buyer) and Section 5.04 (Brokers) (the “Buyer Fundamental Reps”) or fraud) until the aggregate amount of all Losses in respect of indemnification under Section 8.03(a) exceeds $250,000, at which point Buyer will be obligated to indemnify the Seller Indemnitees solely for such indemnifiable Losses in excess of $250,000.

Buyer shall not be liable to the Seller Indemnitees for indemnification under Section 8.03(a)(other than with respect to a claim for indemnification based upon, arising out of, with respect to or by reason of any inaccuracy in or breach of any Buyer Fundamental Rep or fraud) in excess of an amount equal to the General Escrow Amount.

For purposes of this ARTICLE VIII, any inaccuracy in or breach of any representation or warranty shall be determined and any damages related thereto shall be calculated without regard to any materiality, Material Adverse Effect or other similar qualification contained in or otherwise applicable to such representation or warranty.

Neither of Buyer or Seller shall have any obligation to indemnify the other from and against any indemnifiable Losses arising out of the breach of any of the representations

-62-

or warranties made herein unless the Indemnified Party (as defined below) makes a written claim for the breach that gives rise to such indemnifiable Losses within the applicable survival period.

To the extent that a portion of any indemnifiable Loss is included as a Liability in the calculation of the Closing Working Capital, then the amount included as a Liability will be subtracted from the total indemnifiable Losses payable. For the avoidance of doubt, Seller shall not be obligated to indemnify Buyer Indemnitees for any Loss to the extent such Loss consists of liabilities that were included in the determination of Closing Working Capital.

Each Indemnified Party shall be obligated in connection with any claim for indemnification under this ARTICLE VIII to use all commercially reasonable efforts to mitigate Losses upon and after having become aware of any event which could reasonably be expected to give rise to any such Losses, provided, that such mitigation is not detrimental in any material respect to such Indemnified Party and does not disrupt in any material respect the ongoing business operations of the Indemnified Party.  For the avoidance of doubt, any costs of the Indemnified Party incurred in connection with any mitigation undertaken pursuant to this Section 8.04shall be deemed “Losses” of the Indemnified Party and such efforts to mitigate shall not include an obligation to litigate or initiate any Action or pursue any insurance or indemnification and, if mitigation first requires expenditure of funds, then the Indemnified Party shall have no obligation to seek such mitigation unless the Indemnifying Party advances such funds.

Payments by an Indemnifying Party pursuant to Section 8.02 or Section 8.03 in respect of any Loss shall be net of any amounts actually recovered by the Indemnified Party under applicable insurance policies (provided that, for purposes of this Section 8.04(i),  “Losses” shall include any cost associated with pursuing insurance proceeds, policies and/or providers, including any deductible or co-pay, out-of-pocket costs and any increase in premium payable by such Indemnified Party or any retroactive adjustment under any such insurance) (“Recovery Costs”); provided that no Indemnified Party shall be subject to any obligation to pursue litigation to recover in respect of any Loss from any insurer or other third party under any insurance policy, other Contract or otherwise. Subject to the foregoing sentence, to the extent that such insurance proceeds are received after payment has been made by the Indemnifying Party to the Indemnified Party (but within the same year such payment was made by the Indemnifying Party), the Indemnified Party shall promptly reimburse the Indemnifying Party for any payment made in connection with providing such indemnification payment up to the amount received by the Indemnified Party under such insurance (net of Recovery Costs).  Seller hereby waives any and all rights of subrogation with respect to the rights Buyer Indemnified Party has or would otherwise have in respect of any claim against any insurer or other third party.  For the avoidance of doubt, no indemnification payment hereunder shall be conditioned, withheld or delayed as a result of Buyer Indemnified Party not having sought, realized or received any insurance proceeds.

Indemnification Procedures. The party making a claim under this ARTICLE VIII is referred to as the “Indemnified Party,” and the party against whom such claims are asserted under this ARTICLE VIII is referred to as the “Indemnifying Party.”

-63-

Third Party Claims. If any Indemnified Party receives notice of the assertion or commencement of any Action made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a Representative of the foregoing (a “Third Party Claim”) against such Indemnified Party with respect to which the Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnified Party shall give the Indemnifying Party reasonably prompt written notice thereof, but in any event not later than thirty(30) calendar days after receipt of such notice of such Third Party Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such notice by the Indemnified Party shall describe the Third Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably ascertainable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have the right to participate in, or by giving written notice to the Indemnified Party, to assume the defense of any Third Party Claim at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate in good faith in such defense; provided, that if the Indemnifying Party is Seller, such Indemnifying Party shall not have the right to defend or direct the defense of any such Third Party Claim that (x) is asserted directly by or on behalf of a Person that is a supplier or customer of the Business, (y) seeks an injunction or other equitable relief against the Indemnified Party or (z) relates to Taxes sought to be imposed on Buyer. In the event that the Indemnifying Party assumes the defense of any Third Party Claim, subject to Section 8.05(b), it shall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third Party Claim in the name and on behalf of the Indemnified Party. The Indemnified Party shall have the right to participate in the defense of any Third Party Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. The fees and disbursements of such counsel shall be at the expense of the Indemnified Party, provided, that if in the reasonable opinion of counsel to the Indemnified Party, (A) there are legal defenses available to an Indemnified Party that are different from or additional to those available to the Indemnifying Party; or (B) there exists a conflict of interest between the Indemnifying Party and the Indemnified Party that cannot be waived, the Indemnifying Party shall be liable for the reasonable fees and expenses of counsel to the Indemnified Party in each jurisdiction for which the Indemnified Party determines counsel is required. If the Indemnifying Party elects not to compromise or defend such Third Party Claim, fails to promptly notify the Indemnified Party in writing of its election to defend as provided in this Agreement, or fails to diligently prosecute the defense of such Third Party Claim, the Indemnified Party may, subject to Section 8.05(b), pay, compromise, defend such Third Party Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third Party Claim. Seller and Buyer shall cooperate with each other in all reasonable respects in connection with the defense of any Third Party Claim, including making available (subject to the provisions of Section 6.06) records, information, witnesses and testimony relating to such Third Party Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third Party Claim.

Settlement of Third Party Claims. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Third Party

-64-

Claim without the prior written consent of the Indemnified Party, except as provided in this Section 8.05(b).  If a firm offer is made to settle a Third Party Claim without leading to Liability or the creation of a financial or other obligation on the part of the Indemnified Party and provides, in customary form, for the unconditional release of each Indemnified Party from all Liabilities and obligations in connection with such Third Party Claim and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to that effect to the Indemnified Party. If the Indemnified Party fails to consent to such firm offer within ten (10) days after its receipt of such notice, the Indemnified Party may continue to contest or defend such Third Party Claim and in such event, the maximum Liability of the Indemnifying Party as to such Third Party Claim shall not exceed the amount of such settlement offer. If the Indemnified Party fails to consent to such firm offer and also fails to assume defense of such Third Party Claim, the Indemnifying Party may settle the Third Party Claim upon the terms set forth in such firm offer to settle such Third Party Claim. If the Indemnified Party has assumed the defense pursuant to Section 8.05(a), it shall not agree to any settlement or admission of liability without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed).

Direct Claims. Any Action by an Indemnified Party on account of a Loss which does not result from a Third Party Claim (a “Direct Claim”) shall be asserted by the Indemnified Party giving the Indemnifying Party reasonably prompt written notice thereof, but in any event not later than thirty (30) days after the Indemnified Party becomes aware of such Direct Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have thirty (30) days after its receipt of such notice to respond in writing to such Direct Claim. The Indemnified Party shall allow the Indemnifying Party and its professional advisors to investigate the matter or circumstance alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim and the Indemnified Party shall assist the Indemnifying Party’s investigation by giving such information and assistance (including access to the Indemnified Party’s premises and personnel and the right to examine and copy any accounts, documents or records) as the Indemnifying Party or any of its professional advisors may reasonably request. If the Indemnifying Party does not so respond within such 30 day period, the Indemnifying Party shall be deemed to have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.

Recoupment.

Once a Loss is agreed to by the Indemnifying Party or finally adjudicated to be payable pursuant to this ARTICLE VIII, the Indemnifying Party shall, subject to the Indemnification Cap, if applicable, satisfy its obligations within fifteen (15) Business Days of such final, non-appealable adjudication by wire transfer of immediately available funds, or (x) to the extent there are sufficient funds available in the GeneralEscrow Account and (y) the

-65-

Indemnifying Party is Seller, by Seller and Buyer issuing joint written instructions to the Escrow Agent directing the release of such amounts to Buyer.  The parties hereto agree that should an Indemnifying Party not make full payment of any such obligations within fifteen (15) Business Day period, any amount payable shall accrue interest from and including the date of agreement of the Indemnifying Party or final, non-appealable adjudication to but excluding the date of payment at a rate per annum equal to the rate of interest published by The Wall Street Journal as the “prime rate” at large U.S. money center banks on the Closing Date, calculated on the basis of a 365 day year and the actual number of days elapsed, without compounding.

From and after the Closing, subject to the provisions of this ARTICLE VIII, any indemnification to which Buyer is entitled under this Agreement as a result of any Loss (other than any Loss in respect of a breach of a Seller Fundamental Rep and other than any Loss resulting from fraud) shall be satisfied solely and exclusively by (1) first recouping all of such Loss from the then-remaining amount of the GeneralEscrow Fund by Buyer in accordance with the terms of the GeneralEscrow Agreement and (2)second, to the extent the GeneralEscrow Fund is insufficient to satisfy such Losswith respect to claims other than under Section 8.02(a),and recouping the remainder of such Loss from Seller directly.  Funds will be released from the GeneralEscrow Fund and the Employee/Consultant Escrow Fund in accordance with the terms of the GeneralEscrow Agreement and the Employee/Consultant Escrow Agreement, respectively.

Tax Treatment of Indemnification Payments. All indemnification payments made under this Agreement shall be treated by the parties as an adjustment to the Purchase Price for Tax purposes, unless otherwise required by Law.

Effect of Investigation. The representations, warranties and covenants of the Indemnifying Party, and the Indemnified Party’s right to indemnification with respect thereto, shall not be affected or deemed waived by reason of any investigation made by or on behalf of the Indemnified Party (including by any of its Representatives) or by reason of the fact that the Indemnified Party or any of its Representatives knew or should have known that any such representation or warranty is, was or might be inaccurate or by reason of the Indemnified Party’s waiver of any condition set forth in Section 7.02 or Section 7.03, as the case may be.

Exclusive Remedies. Other than with respect to Section 6.03,  Section 6.06 and Section 11.11, the parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims (other than claims arising from fraud, criminal activity or willful misconduct on the part of a party hereto in connection with the transactions contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this ARTICLE VIII. In furtherance of the foregoing, each party hereby waives, to the fullest extent permitted under Law, any and all rights, claims and causes of action for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement it may have against the other parties hereto and their Affiliates and each of their respective Representatives arising under or based upon any Law, except pursuant to the indemnification provisions set forth in this ARTICLE VIII or Sections 6.03, 6.06 and11.11.  Nothing in this Section 8.09 shall limit any Person’s right to seek and obtain any

-66-

equitable relief to which any Person shall be entitled or to seek any remedy on account of any Person’s fraudulent, criminal or intentional misconduct.

Exception for Fraud and Willful Misconduct.  Notwithstanding anything herein to the contrary, in no event shall any limitation or condition provided in this ARTICLE VIII apply to any Loss suffered or incurred by (a) Buyer as a result of, or arising out of, the fraud or willful misconduct of Seller or (b) Seller as a result of, or arising out of, the fraud or willful misconduct of Buyer.

Section 8.11.No Remote, Speculative or Punitive Damages. No party shall be liable, and no claim for breach of representation or warranty or for indemnification or any other claim, may in any event be asserted under this Article VIII or otherwise arising under this Agreement, or any other documents entered into in connection herewith, for any speculative, remoteor punitive damages (except to the extentspeculative, remote or punitive damages are awarded to a third party).

Section 8.12. Tax Benefits. The amount of any Losses suffered by a party will be reduced by the amountof Tax benefit (net of all expenses and Taxes incurred in obtaining such recovery or benefit) such party has actually received with respect to a Loss. For purposes of the foregoing, the phrase any “Tax benefit” to Buyer will consist solely of those Tax benefits actually realized by Buyer as determined solely by Buyer during the Tax year payment is received from the Indemnifying Party for such Loss.

ARTICLE IX

Termination

Termination. This Agreement may be terminated at any time prior to the Closing:

by the mutual written consent of Seller and Buyer;

by Buyer by written notice to Seller if:

Buyer is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Seller pursuant to this Agreement that would give rise to the failure of any of the conditions specified in ARTICLE VII and such breach, inaccuracy or failure has not been cured by Seller within ten (10) days of Seller’s receipt of written notice of such breach from Buyer;

any of the conditions set forth in Section 7.01 or Section 7.02 shall not have been fulfilled byNovember 16, 2013, unless such failure shall be due to the failure of Buyer to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing;

upon receipt of a Request for Additional Information and Documentary Material issued by the Federal Trade Commission or the Department of Justice or

-67-

any subpoena, Civil Investigation Demand or other request for information from any Governmental Authority;

by Seller by written notice to Buyer if:

Seller is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Buyer pursuant to this Agreement that would give rise to the failure of any of the conditions specified in ARTICLE VII and such breach, inaccuracy or failure has not been cured by Buyer within ten (10) days of Buyer’s receipt of written notice of such breach from Seller; or

any of the conditions set forth in Section 7.01 or Section 7.03 shall not have been fulfilled byNovember 16, 2013, unless such failure shall be due to the failure of Seller to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing; or

if Buyer has not delivered the Purchase Price as provided in ARTICLE II on or before the second Business Day after all of the conditions to Closing set forth in ARTICLE VII are either satisfied or waived, or on or before such other date as Seller and Buyer may mutually agree upon in writing, provided that Seller shall be required to deliver written notice to Buyer stating that it is seeking to terminate the Agreement pursuant to Section 9.02(b); or

by Buyer or Seller in the event that (i) there shall be any Law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited or (ii) any Governmental Authority shall have issued a Governmental Order restraining or enjoining the transactions contemplated by this Agreement, and such Governmental Order shall have become final and non-appealable.

Effect of Termination.

In the event of termination of this Agreement in accordance with this Agreement, this Agreement shall forthwith become void and there shall be no Liability on the part of any party hereto except:

as set forth in this ARTICLE IX and ARTICLE XI hereof; and

that nothing herein shall relieve any party hereto from Liability for any breach of any provision hereof.

If the Agreement is terminated as provided in Section 9.01, Buyer and Seller shall use commercially reasonable efforts to cause, to the extent practicable, all filings applications and other submissions made pursuant to this Agreement to be withdrawn from the Governmental Authority or other Person to which they were made.

-68-

ARTICLE X

TAX MATTERS

Allocation of Purchase Price. AHN, Seller and Buyer agree to allocate the Purchase Price (as adjusted pursuant to the terms of this Agreement), plus the Assumed Liabilities and all other items required to be treated as consideration for federal income Tax purposes (the “Purchase Consideration”) among the Purchased Assets and the applicable covenants described in Section 6.06 in accordance with the principles of Section 1060 of the Code (the “Allocation”).  Before the first anniversary of Closing, Buyer shall deliver to Seller a proposed Allocation.If Seller does not object to the proposed Allocation in writing within thirty (30) days of such delivery, the proposed Allocation shall become the final Allocation.  Seller shall be allowed, within thirty (30) days following delivery by Buyer to Seller of the proposed Allocation, to provide reasonable comments on the proposed Allocation to Buyer, and Buyer shall reasonably consider such comments prior to reaching a final Allocation. AHN, Seller and Buyer agree to report, pursuant to Section 1060 of the Code and the Treasury Regulations promulgated thereunder or any other similar provision of state, local or non-U.S. Law, as and when required, any agreed final Allocation of the Purchase Consideration in a manner consistent with such final Allocation in the preparation and filing of all Tax Returns (including IRS Form 8594).  If the parties cannot agree on the Allocation, each party hereto shall use its own allocation, as each such party shall deem appropriate.

Transfer Taxes. All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred solely as a result of the transfer of assets pursuant to this Agreement and the other Transaction Documents (including any real property transfer Tax and any other similar Tax) shall be borne and paid 50% by Seller and 50% by Buyer when due. Seller and Buyer shall timely file any Tax Return or other document with respect to such Taxes or fees (and Seller and Buyer shall cooperate with respect thereto as necessary); the cost of such filings to be borne and paid 50% by Seller and 50% by Buyer.

Allocation of Certain Taxes. In the case of any Straddle Period, (i) any real property, personal property, ad valorem and similar Taxes allocable to the portion of such Straddle Period ending with the end of the day on the Closing Date shall be equal to the amount of such Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that is in the Pre-Closing Tax Period and the denominator of which is the number of days in the entire Straddle Period, and shall be an Excluded Liability and (ii) any real property, personal property, ad valorem and similar Taxes for the portion of such Straddle Period beginning after the Closing Date shall be equal to the amount of such Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that is in the Post-Closing Tax Period and the denominator of which is the number of days in the entire Straddle Period, and shall be an Assumed Liability. The party that has the primary obligation to do so under applicable Law shall file any Tax Return that is required to be filed in respect of Taxes described in this Section 10.04 and that party shall pay the Taxes shown on such Tax Return. To the extent any such Taxes paid by Buyer (or any refund of Taxes received by Buyer) are allocable to the Pre-Closing Tax Period, or any such Taxes paid by Seller (or any refund of Taxes received by

-69-

Seller) are allocable to the Post-Closing Tax Period, Buyer or Seller (as applicable) shall pay to the other party such proportionate amount promptly after the payment of such Taxes (or the receipt of any such refund). To the extent Buyer receives any refunds with respect to any Taxes arising in a Pre-Closing Tax Period, Buyer shall pay such refunds to Seller net of any amounts owed to Buyer under this Agreement.

Cooperation on Tax Matters. Each of Buyer, Seller and AHN (and each of their respective Affiliates) agree to provide each other with such information and assistance as is reasonably necessary, including access to records, Tax Returns and personnel, for the preparation of any Tax Returns or for the defense of any Tax claim or assessment, whether in connection with a Tax audit, examination or otherwise.

ARTICLE XI

MISCELLANEOUS

Expenses.  Except as otherwise expressly provided herein, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred.

Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 11.02):

If to Seller:	IVESCO Holdings LLC c/o Altpoint Capital Partners LLC 712 Fifth Avenue, 50th Floor New York, New York 10019 Attention: Derek Pease Facsimile:(646) 805-3474 E-mail: derek.pease@altpointcapital.com
with a copy to:	Pepper Hamilton LLP 620 Eighth Avenue, 37th Floor New York, New York 10018-1405 Attention: Ronald R. Jewell Facsimile:(800) 810-3921 E-mail:             jewellr@pepperlaw.com
If to Buyer:	MWI Veterinary Supply 3041 W. Pasadena Dr. Boise, ID 83705 Facsimile:  208-955-8999 Email:  JCleary@mwivet.com Attention:  James F. Cleary, Jr.
with a copy to:	Dechert LLP Cira Center 2929 Arch Street Philadelphia, PA  19104-2808 Facsimile:215-994-2222 E-mail: Stephen.Leitzell@dechert.com Attention:Stephen M. Leitzell, Esq.

-70-

Interpretation. For purposes of this Agreement, (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Articles, Sections, Disclosure Schedules and Exhibits mean the Articles and Sections of, and Disclosure Schedules and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Disclosure Schedules and Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.

Headings.The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties

-71-

as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

Entire Agreement. This Agreement and the other Transaction Documents constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and those in the other Transaction Documents, the Exhibits and Disclosure Schedules (other than an exception expressly set forth as such in the Disclosure Schedules), the statements in the body of this Agreement will control.

Successors and Assigns. Subject to any express provisions in this Agreement regarding restrictions on transfers or assignments, this Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, assigns, heirs and personal representatives. Buyer has the right, in Buyer’s sole discretion, to assign all or part of Buyer’s rights and obligations set forth in this Agreement, including Buyer’s right to purchase and own the Real Property. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. No assignment shall relieve the assigning party of any of its obligations hereunder.

No Third-Party Beneficiaries. Except as provided in ARTICLE VIII, this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

This Agreement and any claim, controversy or disputes arising out of or relating to this Agreement (whether for breach of contract, tortious conduct or otherwise) shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of

-72-

New Yorkor any other jurisdiction) that would cause the application of Laws of any jurisdiction other than those of the State of New York.

ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE OF NEW YORK IN EACH CASE LOCATED IN THE UNITED STATES DISTRICT FOR THE SOUTHERN DISTRICT OF NEW YORK (EACH A “CHOSEN COURT”), AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCHCHOSEN COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING, SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH CHOSENCOURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH CHOSENCOURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.10(c).

Specific Performance. Subjectto Section 9.02(b), the parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.

Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or

-73-

other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

[SIGNATURE PAGE FOLLOWS]

-74-

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

SELLER:

IVESCO Holdings LLC

By: /s/ Robert W. DiMarzo

Name:Robert W. DiMarzo

Title: Executive Chairman

AHN:

AHN International LLC

By:/s/ Brett Pertuz

Name: Brett Pertuz

Title: Authorized Representative

BUYER:

MWI Veterinary Supply Co.

By:/s/ James F. Cleary, Jr.

Name: James F. Cleary, Jr.

Title: President and Chief Executive Officer

[Signature Page to Asset Purchase Agreement]

-1-

EX-21.1

EXHIBIT 21.1

MWI Veterinary Supply, Inc.

Subsidiaries of the Registrant

Name	Jurisdiction of Incorporation/Organization
MWI Veterinary Supply Co.	Idaho
Memorial Pet Care, Inc.	Idaho
Securos Europe, GmbH	Germany
Centaur Services Limited	United Kingdom
MWI Supply (UK Holdings) Limited	United Kingdom
MWI Supply (UK) Limited	United Kingdom
MWI Supply (UK Acquisition) Limited	United Kingdom
Labpak Limited	United Kingdom
Somervet Limited	United Kingdom

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-127879, 333-127880, and 333-149275 on Form S-8 of our reports dated November 27, 2013, relating to the consolidated financial statements and financial statement schedule of MWI Veterinary Supply, Inc. and the effectiveness of MWI Veterinary Supply, Inc.’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of MWI Veterinary Supply, Inc. for the year ended September 30, 2013.

/s/ DELOITTE & TOUCHE LLP

Boise, Idaho

November 27, 2013

EX-31.1

EXHIBIT 31.1

MWI VETERINARY SUPPLY, INC.

CERTIFICATIONS PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, James F. Cleary, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of MWI Veterinary Supply, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 27, 2013	/s/ James F. Cleary, Jr.
	James F. Cleary, Jr. President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

MWI VETERINARY SUPPLY, INC.

CERTIFICATIONS PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Mary Patricia B. Thompson, certify that:

1. I have reviewed this annual report on Form 10-K of MWI Veterinary Supply, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 27, 2013	/s/ Mary Patricia B. Thompson
	Mary Patricia B. Thompson Senior Vice President of Finance and Administration and Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of MWI Veterinary Supply, Inc. (the “Company”) for the period ended September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, James F. Cleary, Jr., President and Chief Executive Officer of the Company, and Mary Patricia B. Thompson, Senior Vice President of Finance and Administration, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

November 27, 2013

/s/ James F. Cleary, Jr.

James F. Cleary, Jr.

President and Chief Executive Officer

/s/ Mary Patricia B. Thompson

Mary Patricia B. Thompson

Senior Vice President of Finance and Administration,

Chief Financial Officer

XML

Benefit Plans (Schedule of Net Benefit Costs) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Employee Benefit Plans [Abstract]
Interest Cost	$ 195	$ 219	$ 255
Expected Return on Plan Assets	(252)	(249)	(205)
Net periodic (benefit)/cost	(57)	(30)	50
Other Changes Recognized In Other Comprehensive Income [Abstract]
Actuarial gain	(187)	(373)	(88)
Total recognized in net periodic benefit costs and other comprehensive income	(244)	(403)	(38)
Total gain recognized in other comprehensive income, net of tax	$ (139)	$ (228)	$ (21)

XML

Benefit Plans (Plan Assets) (Details) (USD $) In Thousands, unless otherwise specified				12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2013 Equities [Member]	Sep. 30, 2012 Equities [Member]	Sep. 30, 2013 Corporate Bonds [Member]	Sep. 30, 2012 Corporate Bonds [Member]	Sep. 30, 2013 UK Government Bonds [Member]	Sep. 30, 2012 UK Government Bonds [Member]	Sep. 30, 2013 Cash [Member]	Sep. 30, 2012 Cash [Member]	Sep. 30, 2013 Other Plan Assets [Member]	Sep. 30, 2012 Other Plan Assets [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	$ 5,242	$ 5,329	$ 4,760	$ 2,062	$ 1,793	$ 979	$ 1,275		$ 485	$ 82	$ 218	$ 2,119	$ 1,558
Actual Plan Asset Allocations	100.00%	100.00%		39.00%	34.00%	19.00%	24.00%	0.00%	9.00%	2.00%	4.00%	40.00%	29.00%
Fair Value Measurement Level				2	2	2	2	2	2	1	1	2	2

XML

Computation of Earnings per Share

12 Months Ended

Sep. 30, 2013

Computation Of Earnings Per Common Share [Abstract]

Computation Of Earnings Per Common Share

9. Computation of Earnings per Common Share (In thousands, except per share data)

	2013				2012				2011
	Basic		Diluted		Basic		Diluted		Basic		Diluted
Net income	$	62,849	$	62,849	$	53,477	$	53,477	$	42,580	$	42,580
Weighted average common
shares outstanding		12,675		12,675		12,616		12,616		12,464		12,464
Effect of diluted securities
Stock options and restricted stock				34				31				49
Weighted average shares
outstanding				12,709				12,647				12,513
Earnings per share	$	4.96	$	4.95	$	4.24	$	4.23	$	3.42	$	3.40

There was no impact from anti-dilutive shares in fiscal years ended September 30, 2013, 2012 or 2011. 

XML

Receivables (Details) (USD $) In Thousands, unless otherwise specified							3 Months Ended	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 Trade Accounts Receivable [Member]	Sep. 30, 2012 Trade Accounts Receivable [Member]	Sep. 30, 2013 Vendor Rebates and Programs [Member]	Sep. 30, 2012 Vendor Rebates and Programs [Member]	Dec. 31, 2012 Accounts Receivable [Member] Customer Concentration Risk [Member]	Sep. 30, 2013 Accounts Receivable [Member] Customer Concentration Risk [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Receivables, gross	$ 309,906	$ 291,668	$ 282,923	$ 271,199	$ 26,983	$ 20,469
Allowance for doubtful accounts	(2,461)	(2,746)
Receivables, net	$ 307,445	$ 288,922
Customer Concentration Risk							7.60%	2.60%

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Statement of Comprehensive Income [Abstract]
Actuarial gain on unfunded pension liability, tax provision	$ 48	$ 145	$ 67

XML

Summary of Significant Accounting Policies

12 Months Ended

Sep. 30, 2013

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Principles of Consolidation — The accompanying consolidated financial statements consist of MWI Veterinary Supply, Inc. and its wholly-owned subsidiaries, collectively referred to herein as “MWI” or the “Company.” All intercompany transactions have been eliminated.  We use the equity method of accounting for our investments in entities in which we have significant influence; generally this represents an ownership interest between 20% and 50%. Our share of income or loss from these investments is reported as increases or decreases in the respective investment with a corresponding amount reported as other income/(expense).

Basis of Accounting and Use of Estimates — The accompanying consolidated financial statements have been prepared on the accrual basis of accounting using accounting principles generally accepted in the United States. In preparing financial information, we use certain estimates and assumptions that may affect the reported amounts and disclosures. Some of these estimates require difficult, subjective and complex judgments about matters that are inherently uncertain. As a result, actual results could differ from these estimates. Estimates are used when accounting for allowance for doubtful accounts, customer incentives, vendor rebates, inventories, goodwill and intangible assets, income taxes and contingencies. The estimates of fair value of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date and reported amounts of revenue and expenses for the periods are based on assumptions that we believe to be reasonable.

Segment Information — We are a distributor of animal health products to veterinarians. Our financial results are disclosed as one reportable segment.  We identified two operating segments based on geographic areas but aggregate based on applicable accounting standards.  We determined that the two operating segments have similar operating margins and are expected to maintain this similarity into the future.  Additionally, our products, customers, operations, delivery to market and regulatory environments are all similar in nature.

Foreign Currency Translation — For our international operations, local currencies have been determined to be the functional currencies.  We translate functional currency assets and liabilities to their U.S. dollar equivalents at rates in effect at the balance sheet date and record these translation adjustments in Stockholders’ Equity – Accumulated Other Comprehensive Income/(Loss).  We translate functional currency statement of income amounts to their U.S. dollar equivalents at average rates for the period.

Other Comprehensive Income — Comprehensive income includes cumulative foreign currency translation adjustments and actuarial adjustments on pension valuation. At September 30, 2013, accumulated other comprehensive income is comprised of actuarial adjustments, net of tax, of ($66), and foreign currency translation adjustments of $1,984.

Revenue Recognition —  We sell products we source from vendors to our customers through either a “buy/sell” transaction or an agency relationship with our vendors. In a “buy/sell” transaction, we purchase or take inventory of products from the vendor. When a customer places an order with us, we pick, pack, ship and invoice the customer for the order. We recognize revenue from “buy/sell” transactions as product sales when the product is delivered to the customer. We accept product returns from our customers. We estimate returns based on historical experience and recognize these estimated returns as a reduction of product sales. Product returns have not been significant to our financial statements. We record revenues net of sales tax.  In an agency relationship, we generally do not purchase and take inventory of products from vendors. We receive an order from a customer, then transmit the order to the vendor, who picks, packs and ships the order to the customer. In some cases, the vendor invoices and collects payment from the customer, while in other cases we invoice and collect payment from the customer on behalf of the vendor. We receive a commission payment for soliciting the order from the customer and for providing other customer service activities. Commissions are recognized when the services upon which the commissions are based are complete. Gross billings from agency contracts were $349,006,  $332,343 and $371,024 for the years ended September 30, 2013, 2012 and 2011, respectively, and generated commission revenue of $18,851,  $16,979 and $20,655 for the years ended September 30, 2013, 2012 and 2011, respectively.

Cost of Product Sales and Vendor Rebates — Cost of product sales consist of our inventory product cost, including shipping costs to and from our distribution centers. Costs of fulfillment are included in selling, general and administrative costs. Vendor rebates are recorded based on the terms of the contracts or programs with each vendor. We receive quarterly, semi-annual and annual performance-based rebates from third-party vendors based upon attainment of certain sales and/or purchase goals. Sales rebates are classified in the accompanying consolidated statements of income as a reduction to cost of product sales at the time the sales performance measures are achieved. Purchase rebates are measured against inventory purchases from the vendors and are classified as a reduction of inventory until the product is sold. When the inventory is sold and purchase measures are achieved, purchase rebates are recognized as a reduction to cost of product sales.

Historically, actual results have not significantly deviated from those determined using the estimates described above. We expect that our estimates in the future will continue to be reasonable as our rebates are based on specific vendor program goals and are principally recorded upon achievement of sales or purchase performance measures. Vendors may change or eliminate rebate programs from year to year.

Customer Incentives — Customer incentives are accrued based on the terms of the contracts with each customer. These incentive programs provide that the customer receive an incentive based on their product purchases or attainment of performance goals. Incentives are estimated based on the specific terms in each agreement, historical experience and product growth rates.  Incentives are recognized as a reduction to product sales.

Cash and Cash Equivalents— Cash equivalents consist of highly liquid investments with a maturity of three months or less from the date of purchase. Our banking arrangements allow us to fund outstanding checks when presented to the financial institution for payment.

Inventories — Inventories, consisting of pharmaceuticals, vaccines, parasiticides, diagnostics, micro feed ingredients, capital equipment and technology, supplies and nutritional products, are stated at the lower of cost (on a moving-average basis) or market.

Property and Equipment — Property and equipment are stated at cost and depreciation is computed using the straight-line method over the estimated useful lives, which include the shorter of useful life or lease term for leasehold improvements, of the related assets as follows:

Buildings	25 to 35 years
Machinery, furniture and equipment	3 to 15 years
Computer equipment	3 to 7 years
Leasehold improvements	1 to 10 years

The cost and accumulated depreciation of items sold or retired are removed from the property accounts and any resulting gain or loss is reflected in net income. Repairs and maintenance are expensed as incurred and improvements are capitalized.

We periodically review long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. No impairments were identified during the fiscal years ended September 30, 2013, 2012 and 2011.

Goodwill and Intangible Assets — We recognize the excess purchase price over the fair value of net assets acquired and liabilities assumed in a business combination as goodwill on the consolidated balance sheet. We perform an annual impairment test on goodwill as of September 30th each year.  We calculate the fair value of each reporting unit using both an income approach and a market approach,  and compare the fair value to its book value.  We have concluded that there was no impairment during the fiscal years ended September 30, 2013, 2012 and 2011. Impairment tests will continue to be performed at least annually and more frequently if circumstances indicate a possible impairment. 

Identifiable intangible assets primarily include customer relationships, trademarks and patents, technology and covenants not to compete and are amortized, as necessary, over their useful lives or contractual term which range from 1-20 years.  We review both indefinite-lived and definite-lived identifiable intangible assets at least annually for impairment or when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  No impairments were identified during the fiscal years ended September 30, 2013, 2012 and 2011.

Other Assets — Included in other assets are our equity method investments and investments in entities accounted for under the cost method of accounting, which includes an investment in Cubex of $4,000. We periodically evaluate these investments for other-than-temporary impairment using both qualitative and quantitative criteria, or when indicators of impairment are noted. In the event an investment is deemed to be other-than-temporarily impaired, we would recognize the loss component in the consolidated statements of income.  Other assets also consist of debt issuance costs that are being amortized over the term of the related debt.

Earnings Per Common Share — Basic earnings per common share is calculated based on the weighted-average number of outstanding common shares during the applicable period. Diluted earnings per common share is based on the weighted-average number of outstanding common shares plus the weighted-average number of potential outstanding common shares. Potential common shares that would increase earnings per share amounts are antidilutive and are, therefore, excluded from the earnings per common share computations. Earnings per common share is computed separately for each period presented.

Income Taxes — Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized to provide for temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred taxes are measured using enacted tax rates in effect during the years in which the temporary differences are expected to reverse.

Concentrations of Risk — Our financial instruments that are exposed to concentrations of credit risk consist primarily of our receivables. Our customers are geographically dispersed throughout the United States and United Kingdom. In the United Kingdom, we rely on a smaller number of relatively larger customers than does our business in the United States.  These customers in the aggregate accounted for  14.5% and 18.1% of our consolidated accounts receivable balance as of September 30, 2013 and December 31, 2012, respectively, and one significant customer accounted for 2.6% and 7.6% of our consolidated accounts receivable balance as of September 30, 2013 and December 31, 2012, respectively. We routinely assess the financial strength of our customers and review their credit history before extending credit. In addition, we establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

Advertising — Advertising costs are expensed when incurred and are included as part of selling, general and administrative expenses. Advertising costs were $1,165,  $1,203 and $723 in fiscal years 2013, 2012 and 2011, respectively.

Recently Issued and New Accounting Pronouncements —In January 2013, the FASB issued Accounting Standards Update (“ASU”) No. 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which includes bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending arrangements that are either offset on the balance sheet or subject to an enforceable master netting arrangement or similar agreement.  This guidance is effective for our fiscal year beginning October 1, 2013.  We do not believe that the adoption of this guidance will have a material impact on our consolidated financial statements.

In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which provides additional disclosure requirements for items reclassified out of accumulated other comprehensive income.  This guidance is effective for our fiscal year beginning October 1, 2013.  We do not believe that the adoption of this guidance will have a material impact on our consolidated financial statements.

XML

Geographic Information

12 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Geographic Information

16. Geographic Information

Revenues and long-lived assets by geographic region are as follows:

	2013		2012		2011
Revenues for the fiscal years ended September 30
United States	$	2,032,260	$	1,776,414	$	1,304,794
International		315,225		298,732		260,546
Total	$	2,347,485	$	2,075,146	$	1,565,340
Long-lived assets as of September 30
United States	$	32,881	$	29,001	$	18,953
International		6,302		6,783		6,256
Total	$	39,183	$	35,784	$	25,209

XML

Income Taxes (Schedule of Components of Income Tax Expense (Benefit)) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Income Taxes [Abstract]
Current Federal Tax Expense (Benefit)	$ 30,200	$ 25,535	$ 20,741
Current State and Local Tax Expense (Benefit)	4,952	4,494	3,696
Deferred Federal Income Tax Expense (Benefit)	1,652	1,308	628
Deferred State and Local Income Tax Expense (Benefit)	253	220	120
Federal, State, and Local Income Tax Expense (Benefit), Continuing Operations	37,057	31,557	25,185
Current Foreign Tax Expense (Benefit)	1,275	1,252	1,109
Deferred Foreign Income Tax Expense (Benefit)	(500)	(346)	(174)
Foreign Income Tax Expense (Benefit), Continuing Operations, Total	775	906	935
Total Income Tax Expense (Benefit)	$ 37,832	$ 32,463	$ 26,120

XML

Intangibles (Schedule Of Intangible Assets) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	$ 43,203	$ 38,669
Accumulated Amortization	(10,388)	(7,640)
Finite-Lived Intangible Assets, Net, Total	32,815	31,029
Indefinite-Lived Intangible Assets (Excluding Goodwill)	7,675	7,677
Intangible Assets, Net	40,490	38,706
Customer Relationships [Member]
Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	35,797	31,045
Noncompete Agreements [Member]
Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	450	710
Technology [Member]
Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	5,830	5,830
Finite-Lived Intangible Assets, Useful Life	11 years
Other Intangible Assets [Member]
Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	$ 1,126	$ 1,084
Minimum [Member] | Customer Relationships [Member]
Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Useful Life	9 years
Minimum [Member] | Noncompete Agreements [Member]
Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Useful Life	1 year
Minimum [Member] | Other Intangible Assets [Member]
Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Useful Life	3 years
Maximum [Member] | Customer Relationships [Member]
Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Useful Life	20 years
Maximum [Member] | Noncompete Agreements [Member]
Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Useful Life	5 years
Maximum [Member] | Other Intangible Assets [Member]
Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Useful Life	5 years

XML

Income Taxes

12 Months Ended

Sep. 30, 2013

Income Taxes [Abstract]

Income Taxes

10. Income Taxes

Income before taxes is as follows:

	2013		2012		2011
Income before taxes
United States	$	96,915	$	81,482	$	65,271
Foreign		3,766		4,458		3,429
Total income before taxes	$	100,681	$	85,940	$	68,700

The components of income tax expense consist of the following:

	2013		2012		2011
United States
Current payable
Federal	$	30,200	$	25,535	$	20,741
State		4,952		4,494		3,696
Deferred
Federal		1,652		1,308		628
State		253		220		120
Total U.S. tax expense		37,057		31,557		25,185
International
Current payable		1,275		1,252		1,109
Deferred		(500)		(346)		(174)
Total international tax expense		775		906		935
Total income tax expense	$	37,832	$	32,463	$	26,120

Our deferred tax assets and liabilities consist of the following at September 30:

	2013		2012
Deferred tax assets:
Allowance for doubtful accounts	$	866	$	958
Inventories		658		521
Lease expense		544		394
Employee benefits		334		439
Acquisition-related costs		444		-
Other		164		368
Total deferred tax assets		3,010		2,680
Deferred tax liabilities:
Investments		(786)		-
Property and equipment		(8,876)		(7,684)
Prepaid expenses		(227)		(395)
Other		(115)		(201)
Total deferred tax liabilities		(10,004)		(8,280)
Net deferred liabilities	$	(6,994)	$	(5,600)

Other deferred tax assets totaling $711 and $770 as of September 30, 2013 and 2012, respectively, arising from the Company’s foreign subsidiary, are subject to full valuation allowance.

Income tax expense differed from income taxes at the U.S. federal statutory tax rate for all periods presented as follows:

	2013	2012	2011
Taxes computed at statutory rate	35.0%	35.0%	35.0%
State income taxes (net of federal income tax benefit)	3.4	3.6	3.7
Foreign	(0.9)	(1.1)	(0.9)
Other	0.1	0.3	0.2
	37.6%	37.8%	38.0%

In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations.  As of September 30, 2013, the Company has not made a provision for U.S. income or additional foreign withholding taxes on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration.  Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances.  It is not practicable to estimate the amount of deferred tax liability related to investments in foreign subsidiaries because of the complexities of the hypothetical calculation.

A reconciliation of the unrecognized tax benefits is as follows:

	2013		2012		2011
Unrecognized tax benefits – Beginning of year	$	-	$	23	$	198
Gross increases related to prior period tax positions		-		-		-
Gross decreases related to prior period tax positions		-		(8)		(175)
Gross increases related to current period tax positions		-		-		-
Settlements		-		(15)		-
Unrecognized tax benefits – End of year	$	-	$	-	$	23

For the fiscal years ended September 30, 2013, 2012 and 2011, the amount included in our income tax expense for tax-related interest and penalties was not significant.  Of the $23 unrecognized tax benefits as of September 30, 2011, $15 would have impacted our effective rate, if recognized. We expect no material changes to our unrecognized tax benefits during the next fiscal year.  Our policy for classifying interest and penalties associated with unrecognized tax benefits is to include such items in income tax expense.

We filed Form 3115 Application of Change in Accounting Method with the Internal Revenue Service (“IRS”) during the fiscal year ended September 30, 2008.  We filed an advance consent request for a non-automatic account method change for tax purposes for which we received approval during fiscal year 2011.  Resolution decreased the liability for unrecognized tax benefits by approximately $175.

We completed an examination by the IRS for the fiscal years ended September 30, 2010 and 2009.  With few exceptions, we are no longer subject to income tax examination for years before 2008 in the U.S. and 2008 in significant state and local jurisdictions.  We are no longer subject to income tax examinations for years before 2011 in significant foreign jurisdictions.

XML

Summary of Significant Accounting Policies (Advertising) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Summary of Significant Accounting Policies [Abstract]
Advertising Expense	$ 1,165	$ 1,203	$ 723

XML

Quarterly Financial Data Schedule of Quarterly Financial Information) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Quarterly Financial Data [Abstract]
Revenues	$ 605,080	$ 606,443	$ 563,114	$ 572,848	$ 551,406	$ 554,669	$ 507,170	$ 461,901	$ 2,347,485	$ 2,075,146	$ 1,565,340
Gross profit	75,219	77,511	74,679	76,929	68,265	69,519	66,618	62,514	304,338	266,916	205,585
Operating Income Loss	22,473	26,534	24,238	27,077	19,654	23,287	21,411	21,415	100,323	85,767	68,666
Net income	$ 14,216	$ 16,781	$ 15,100	$ 16,751	$ 12,600	$ 14,503	$ 13,178	$ 13,196	$ 62,849	$ 53,477	$ 42,580
Basic EPS	$ 1.12	$ 1.32	$ 1.19	$ 1.32	$ 0.99	$ 1.15	$ 1.04	$ 1.05	$ 4.96	$ 4.24	$ 3.42
Diluted EPS	$ 1.12	$ 1.32	$ 1.19	$ 1.32	$ 0.99	$ 1.15	$ 1.04	$ 1.05	$ 4.95	$ 4.23	$ 3.40
Weighted average common shares outstanding:
Weighted Average Number of Shares Outstanding, Basic	12,683	12,679	12,674	12,665	12,636	12,628	12,619	12,581	12,675	12,616	12,464
Weighted Average Number of Shares Outstanding, Diluted	12,721	12,713	12,709	12,695	12,672	12,662	12,648	12,605	12,709	12,647	12,513

XML

Intangibles (Schedule of Expected Amortization Expense) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Goodwill and Intangibles [Abstract]
Year One (2014)	$ 3,102
Year Two (2015)	2,799
Year Three (2016)	2,669
Year Four (2017)	2,596
Year Five (2018)	2,578
Thereafter	19,071
Finite-Lived Intangible Assets, Net, Total	32,815	31,029
Amortization of Intangible Assets	$ 3,064	$ 2,852	$ 1,783

XML

Employee Benefit Plans (Tables)

12 Months Ended

Sep. 30, 2013

Employee Benefit Plans [Abstract]

Schedule of Net Funded Status

	2013		2012		2011
Fair value of plan assets	$	5,242	$	5,329	$	4,760
Benefit obligation		(6,667)		(7,228)		(7,031)
Unfunded pension liability	$	(1,425)	$	(1,899)	$	(2,271)

Schedule of Net Benefit Costs

	2013		2012		2011
Interest cost	$	195	$	219	$	255
Expected return on plan assets		(252)		(249)		(205)
Net periodic (benefit)/cost		(57)		(30)		50
Other changes recognized in other comprehensive income
Actuarial gain		(187)		(373)		(88)
Total recognized in net periodic benefit costs and
other comprehensive income	$	(244)	$	(403)	$	(38)
Total gain recognized in other comprehensive income, net of tax	$	(139)	$	(228)	$	(21)

Schedule of Weighted-Average Actuarial Assumptions

	2013	2012
Assumptions used to determine benefit obligations
Discount rate	3.6%	3.0%
Rate of compensation increase (1)	N/A	N/A
	2013	2012	2011
Assumptions used to determine net periodic benefit cost
Discount rate	3.0%	3.1%	3.6%
Expected return on plan assets	5.0%	5.2%	4.3%
Rate of compensation increase (1)	N/A	N/A	N/A
(1) There is no assumed rate of compensation increase as there have been no current active members since April 2006.

Schedule of Allocation of Plan Assets

	2013				2012
	Market		Asset	Fair Value	Market		Asset	Fair Value
Asset Class	Value		Allocation	Level	Value		Allocation	Level
Equities	$	2,062	39%	2	$	1,793	34%	2
Corporate bonds		979	19%	2		1,275	24%	2
UK Government bonds		-	0%	2		485	9%	2
Cash		82	2%	1		218	4%	1
Other assets		2,119	40%	2		1,558	29%	2
Total	$	5,242	100%		$	5,329	100%

XML

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Sep. 30, 2013

Summary of Significant Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation — The accompanying consolidated financial statements consist of MWI Veterinary Supply, Inc. and its wholly-owned subsidiaries, collectively referred to herein as “MWI” or the “Company.” All intercompany transactions have been eliminated.  We use the equity method of accounting for our investments in entities in which we have significant influence; generally this represents an ownership interest between 20% and 50%. Our share of income or loss from these investments is reported as increases or decreases in the respective investment with a corresponding amount reported as other income/(expense).

Basis of Accounting and Use of Estimates

Basis of Accounting and Use of Estimates — The accompanying consolidated financial statements have been prepared on the accrual basis of accounting using accounting principles generally accepted in the United States. In preparing financial information, we use certain estimates and assumptions that may affect the reported amounts and disclosures. Some of these estimates require difficult, subjective and complex judgments about matters that are inherently uncertain. As a result, actual results could differ from these estimates. Estimates are used when accounting for allowance for doubtful accounts, customer incentives, vendor rebates, inventories, goodwill and intangible assets, income taxes and contingencies. The estimates of fair value of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date and reported amounts of revenue and expenses for the periods are based on assumptions that we believe to be reasonable.

Segment Information

Segment Information — We are a distributor of animal health products to veterinarians. Our financial results are disclosed as one reportable segment.  We identified two operating segments based on geographic areas but aggregate based on applicable accounting standards.  We determined that the two operating segments have similar operating margins and are expected to maintain this similarity into the future.  Additionally, our products, customers, operations, delivery to market and regulatory environments are all similar in nature.

Foreign Currency Translation

Foreign Currency Translation — For our international operations, local currencies have been determined to be the functional currencies.  We translate functional currency assets and liabilities to their U.S. dollar equivalents at rates in effect at the balance sheet date and record these translation adjustments in Stockholders’ Equity – Accumulated Other Comprehensive Income/(Loss).  We translate functional currency statement of income amounts to their U.S. dollar equivalents at average rates for the period.

Other Comprehensive Income

Other Comprehensive Income — Comprehensive income includes cumulative foreign currency translation adjustments and actuarial adjustments on pension valuation. At September 30, 2013, accumulated other comprehensive income is comprised of actuarial adjustments, net of tax, of ($66), and foreign currency translation adjustments of $1,984.

Revenue Recognition

Revenue Recognition —  We sell products we source from vendors to our customers through either a “buy/sell” transaction or an agency relationship with our vendors. In a “buy/sell” transaction, we purchase or take inventory of products from the vendor. When a customer places an order with us, we pick, pack, ship and invoice the customer for the order. We recognize revenue from “buy/sell” transactions as product sales when the product is delivered to the customer. We accept product returns from our customers. We estimate returns based on historical experience and recognize these estimated returns as a reduction of product sales. Product returns have not been significant to our financial statements. We record revenues net of sales tax.  In an agency relationship, we generally do not purchase and take inventory of products from vendors. We receive an order from a customer, then transmit the order to the vendor, who picks, packs and ships the order to the customer. In some cases, the vendor invoices and collects payment from the customer, while in other cases we invoice and collect payment from the customer on behalf of the vendor. We receive a commission payment for soliciting the order from the customer and for providing other customer service activities. Commissions are recognized when the services upon which the commissions are based are complete. Gross billings from agency contracts were $349,006,  $332,343 and $371,024 for the years ended September 30, 2013, 2012 and 2011, respectively, and generated commission revenue of $18,851,  $16,979 and $20,655 for the years ended September 30, 2013, 2012 and 2011, respectively.

Cost of Product Sales and Vendor Rebates

Cost of Product Sales and Vendor Rebates — Cost of product sales consist of our inventory product cost, including shipping costs to and from our distribution centers. Costs of fulfillment are included in selling, general and administrative costs. Vendor rebates are recorded based on the terms of the contracts or programs with each vendor. We receive quarterly, semi-annual and annual performance-based rebates from third-party vendors based upon attainment of certain sales and/or purchase goals. Sales rebates are classified in the accompanying consolidated statements of income as a reduction to cost of product sales at the time the sales performance measures are achieved. Purchase rebates are measured against inventory purchases from the vendors and are classified as a reduction of inventory until the product is sold. When the inventory is sold and purchase measures are achieved, purchase rebates are recognized as a reduction to cost of product sales.

Historically, actual results have not significantly deviated from those determined using the estimates described above. We expect that our estimates in the future will continue to be reasonable as our rebates are based on specific vendor program goals and are principally recorded upon achievement of sales or purchase performance measures. Vendors may change or eliminate rebate programs from year to year.

Customer Incentives

Customer Incentives — Customer incentives are accrued based on the terms of the contracts with each customer. These incentive programs provide that the customer receive an incentive based on their product purchases or attainment of performance goals. Incentives are estimated based on the specific terms in each agreement, historical experience and product growth rates.  Incentives are recognized as a reduction to product sales.

Cash and Cash Equivalents

Cash and Cash Equivalents— Cash equivalents consist of highly liquid investments with a maturity of three months or less from the date of purchase. Our banking arrangements allow us to fund outstanding checks when presented to the financial institution for payment.

Inventories

Inventories — Inventories, consisting of pharmaceuticals, vaccines, parasiticides, diagnostics, micro feed ingredients, capital equipment and technology, supplies and nutritional products, are stated at the lower of cost (on a moving-average basis) or market.

Property and Equipment

Property and Equipment — Property and equipment are stated at cost and depreciation is computed using the straight-line method over the estimated useful lives, which include the shorter of useful life or lease term for leasehold improvements, of the related assets as follows:

Buildings	25 to 35 years
Machinery, furniture and equipment	3 to 15 years
Computer equipment	3 to 7 years
Leasehold improvements	1 to 10 years

The cost and accumulated depreciation of items sold or retired are removed from the property accounts and any resulting gain or loss is reflected in net income. Repairs and maintenance are expensed as incurred and improvements are capitalized.

We periodically review long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. No impairments were identified during the fiscal years ended September 30, 2013, 2012 and 2011.

Goodwill and Intangible Assets

Goodwill and Intangible Assets — We recognize the excess purchase price over the fair value of net assets acquired and liabilities assumed in a business combination as goodwill on the consolidated balance sheet. We perform an annual impairment test on goodwill as of September 30th each year.  We calculate the fair value of each reporting unit using both an income approach and a market approach,  and compare the fair value to its book value.  We have concluded that there was no impairment during the fiscal years ended September 30, 2013, 2012 and 2011. Impairment tests will continue to be performed at least annually and more frequently if circumstances indicate a possible impairment. 

Identifiable intangible assets primarily include customer relationships, trademarks and patents, technology and covenants not to compete and are amortized, as necessary, over their useful lives or contractual term which range from 1-20 years.  We review both indefinite-lived and definite-lived identifiable intangible assets at least annually for impairment or when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  No impairments were identified during the fiscal years ended September 30, 2013, 2012 and 2011.

Other Assets

Other Assets — Included in other assets are our equity method investments and investments in entities accounted for under the cost method of accounting, which includes an investment in Cubex of $4,000. We periodically evaluate these investments for other-than-temporary impairment using both qualitative and quantitative criteria, or when indicators of impairment are noted. In the event an investment is deemed to be other-than-temporarily impaired, we would recognize the loss component in the consolidated statements of income.  Other assets also consist of debt issuance costs that are being amortized over the term of the related debt.

Earnings Per Common Share

Earnings Per Common Share — Basic earnings per common share is calculated based on the weighted-average number of outstanding common shares during the applicable period. Diluted earnings per common share is based on the weighted-average number of outstanding common shares plus the weighted-average number of potential outstanding common shares. Potential common shares that would increase earnings per share amounts are antidilutive and are, therefore, excluded from the earnings per common share computations. Earnings per common share is computed separately for each period presented.

Income Taxes

Income Taxes — Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized to provide for temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred taxes are measured using enacted tax rates in effect during the years in which the temporary differences are expected to reverse.

Concentrations of Risk

Concentrations of Risk — Our financial instruments that are exposed to concentrations of credit risk consist primarily of our receivables. Our customers are geographically dispersed throughout the United States and United Kingdom. In the United Kingdom, we rely on a smaller number of relatively larger customers than does our business in the United States.  These customers in the aggregate accounted for  14.5% and 18.1% of our consolidated accounts receivable balance as of September 30, 2013 and December 31, 2012, respectively, and one significant customer accounted for 2.6% and 7.6% of our consolidated accounts receivable balance as of September 30, 2013 and December 31, 2012, respectively. We routinely assess the financial strength of our customers and review their credit history before extending credit. In addition, we establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

Advertising

Advertising — Advertising costs are expensed when incurred and are included as part of selling, general and administrative expenses. Advertising costs were $1,165,  $1,203 and $723 in fiscal years 2013, 2012 and 2011, respectively.

XML

Subsequent Event

12 Months Ended

Sep. 30, 2013

Subsequent Events [Abstract]

Subsequent Event

18. Subsequent Event

On November 1, 2013, subsequent to our fiscal year end, we acquired substantially all of the assets of IVESCO Holdings, LLC (“IVESCO”)  for an enterprise value of approximately $67.5 million, plus a closing  net working capital adjustment of approximately $11.2 million. This transaction is subject to a final post-closing working capital adjustment. The cash purchase price was funded with borrowings by the Company under its existing Credit Agreement. IVESCO engaged in the distribution and sale of animal health and related productsand service, logistics and technical support relating to such distribution and sale of animal health and related products.

As the initial accounting for the business combination was not complete at the time the financial statements were issued, the purchase price allocation and pro-forma income statement disclosures have not been disclosed.

XML

Summary of Significant Accounting Policies (Other Assets) (Details) (Cubex [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2013
Cubex [Member]
Schedule of Cost-method Investments [Line Items]
Cost Method Investments	$ 4,000

XML

Common Stock and Stock-Based Awards (Tables)

12 Months Ended

Sep. 30, 2013

Common Stock and Stock-Based Awards [Abstract]

Stock Options Activity

	2013			2012				2011
		Weighted				Weighted				Weighted
	Number	average		Number		average		Number		average
	of	exercise		of		exercise		of		exercise
	Shares	price		Shares		price		Shares		price
Outstanding at beginning of year	22,360	$	17.53		37,385	$	14.73		139,550	$	4.65
Exercised	(6,186)		17.43		(14,769)		10.44		(102,128)		0.96
Cancelled or expired	(136)		17.00		(256)		17.00		(37)		17.00
Outstanding at end of year	16,038	$	17.58		22,360	$	17.53		37,385	$	14.73
Exercisable at end of year	16,038	$	17.58		22,360	$	17.53		37,385	$	14.73

Stock Options, by Exercise Price Range

	Outstanding and exercisable options
			Weighted
			average
			remaining	Weighted
			contractual	average
		Number of	life	exercise
Range of exercise prices		Shares	(in years)	price
$17.00 - $19.99		14,248	1.8	$	17.00
$20.00 - $22.60		1,790	2.0	$	22.17

Schedule of Nonvested Share Activity

	2013			2012				2011
		Weighted				Weighted				Weighted
	Number	average		Number		average		Number		average
	of	grant date		of		grant date		of		grant date
	Shares	fair value		Shares		fair value		Shares		fair value
Nonvested at beginning of year	129,396	$	69.94		105,540	$	61.69		70,584	$	49.33
Granted	70,575		145.65		74,848		101.97		63,900		71.14
Vested	(44,547)		144.52		(48,072)		102.09		(25,934)		52.46
Forfeitures	(13,180)		80.96		(2,920)		63.49		(3,010)		51.92
Nonvested at end of year	142,244	$	83.13		129,396	$	69.94		105,540	$	61.69

XML

Quarterly Financial Data (Table)

12 Months Ended

Sep. 30, 2013

Quarterly Financial Data [Abstract]

Schedule of Quarterly Financial Information

	Three-Months Ended
	Dec. 31,		Mar. 31,		June 30,		Sept. 30,		Year (1)
		(Dollars and shares in thousands, except per share data)
Fiscal Year 2013
Total revenues	$	572,848	$	563,114	$	606,443	$	605,080	$	2,347,485
Gross profit		76,929		74,679		77,511		75,219		304,338
Operating income		27,077		24,238		26,534		22,473		100,323
Net income		16,751		15,100		16,781		14,216		62,849
Earnings per common share — basic	$	1.32	$	1.19	$	1.32	$	1.12	$	4.96
Earnings per common share — diluted	$	1.32	$	1.19	$	1.32	$	1.12	$	4.95
Weighted average common shares
outstanding:
Basic		12,665		12,674		12,679		12,683		12,675
Diluted		12,695		12,709		12,713		12,721		12,709
Fiscal Year 2012
Total revenues	$	461,901	$	507,170	$	554,669	$	551,406	$	2,075,146
Gross profit		62,514		66,618		69,519		68,265		266,916
Operating income		21,415		21,411		23,287		19,654		85,767
Net income		13,196		13,178		14,503		12,600		53,477
Earnings per common share — basic	$	1.05	$	1.04	$	1.15	$	0.99	$	4.24
Earnings per common share — diluted	$	1.05	$	1.04	$	1.15	$	0.99	$	4.23
Weighted average common shares
outstanding:
Basic		12,581		12,619		12,628		12,636		12,616
Diluted		12,605		12,648		12,662		12,672		12,647
(1) The sums of the quarterly amounts may not agree to the year-to-date amount as a result of rounding.

XML

Acquisitions (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Sep. 30, 2011 Nelson Laboratories [Member] store	Sep. 30, 2012 Micro Beef Technologies [Member]	Sep. 30, 2013 Prescription Containers, Inc. [Member]	Sep. 30, 2012 Minimum [Member] Micro Beef Technologies [Member]	Sep. 30, 2012 Maximum [Member] Micro Beef Technologies [Member]
Business Acquisition [Line Items]
Business Acquisition, Date of Acquisition Agreement	Mar. 21, 2011	Oct. 31, 2011	Dec. 31, 2012
Business Acquisition, Cost of Acquired Entity, Purchase Price		$ 60,878	$ 17,107
Business Acquisition, Cost of Acquired Entity, Cash Paid	7,000	53,400
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustment, Consideration Transferred		320
Business Acquisition, Cost of Acquired Entity, Transaction Costs		1,104
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares		94,359
Business Acquisition, Cost of Acquired Entity, Equity Interests Issued and Issuable		7,158
Business Acquisition, Places in Acquiree Distribution Network	1,100
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	10 years		10 years	5 years	17 years
Business Acquisition, Goodwill, Expected Tax Deductible, Period	15 years	15 years	15 years
Finite-Lived Intangible Assets, Purchase Accounting Adjustments			$ 1,190

XML

Property and Equipment (Table)

12 Months Ended

Sep. 30, 2013

Property And Equipment [Abstract]

Property And Equipment

	2013		2012
Land	$	1,932	$	1,952
Building and leasehold improvements		14,914		14,420
Machinery, furniture and equipment		38,032		33,075
Computer equipment		9,868		8,276
Construction in progress		4,328		1,773
		69,074		59,496
Accumulated depreciation and amortization		(29,891)		(23,712)
	$	39,183	$	35,784

XML

Earnings Per Common Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Computation Of Earnings Per Common Share [Abstract]
Net income	$ 14,216	$ 16,781	$ 15,100	$ 16,751	$ 12,600	$ 14,503	$ 13,178	$ 13,196	$ 62,849	$ 53,477	$ 42,580
Weighted Average Number of Shares Outstanding, Basic	12,683	12,679	12,674	12,665	12,636	12,628	12,619	12,581	12,675	12,616	12,464
Weighted Average Number Diluted Shares Outstanding Adjustment									34	31	49
Weighted Average Number of Shares Outstanding, Diluted, Total	12,721	12,713	12,709	12,695	12,672	12,662	12,648	12,605	12,709	12,647	12,513
Basic EPS	$ 1.12	$ 1.32	$ 1.19	$ 1.32	$ 0.99	$ 1.15	$ 1.04	$ 1.05	$ 4.96	$ 4.24	$ 3.42
Diluted EPS	$ 1.12	$ 1.32	$ 1.19	$ 1.32	$ 0.99	$ 1.15	$ 1.04	$ 1.05	$ 4.95	$ 4.23	$ 3.40
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount									0	0	0

XML

Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Commitments and Contingencies [Abstract]
Rent Expense	$ 6,301	$ 5,382	$ 4,259
Operating Lease Obligations [Abstract]
Future Minimum Payments (2014)	5,160
Future Minimum Payments (2015)	4,634
Future Minimum Payments (2016)	4,541
Future Minimum Payments (2017)	4,317
Future Minimum Payments (2018)	4,226
Future Minimum Payments (Thereafter)	11,573
Future Minimum Payments, Total	34,451
Capital Lease Obligations [Abstract]
Future Minimum Payments (2014)	103
Future Minimum Payments (2015)	16
Future Minimum Payments Due, Total	$ 119

XML

Common Stock and Stock-Based Awards (Schedule of Nonvested Share Activity) (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Common Stock and Stock-Based Awards [Abstract]
Nonvested at beginning of year	129,396	105,540	70,584
Granted	70,575	74,848	63,900
Vested	(44,547)	(48,072)	(25,934)
Forfeitures	(13,180)	(2,920)	(3,010)
Nonvested at end of year	142,244	129,396	105,540
Weighted average grant date fair value, Nonvested at beginning of year	$ 69.94	$ 61.69	$ 49.33
Weighted average grant date fair value, Granted	$ 145.65	$ 101.97	$ 71.14
Weighted average grant date fair value, Vested	$ 144.52	$ 102.09	$ 52.46
Weighted average grant date fair value, Forfeitures	$ 80.96	$ 63.49	$ 51.92
Weighted average grant date fair value, Nonvested at end of year	$ 83.13	$ 69.94	$ 61.69

XML

Summary of Significant Accounting Policies (Other Comprehensive Income) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013
Summary of Significant Accounting Policies [Abstract]
Accumulated Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Net of Tax	$ (66)
Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax	$ 1,984

XML

Income Taxes (Schedule of Effective Income Tax Rate Reconciliation) (Details)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Income Taxes [Abstract]
Taxes computed at statutory rate	35.00%	35.00%	35.00%
State income taxes (net of federal income tax benefit)	3.40%	3.60%	3.70%
Foreign	(0.90%)	(1.10%)	(0.90%)
Other	0.10%	0.30%	0.20%
Effective Income Tax Rate, Total	37.60%	37.80%	38.00%

XML

Quarterly Financial Data

12 Months Ended

Sep. 30, 2013

Quarterly Financial Data [Abstract]

Quarterly Financial Data

17. Quarterly Financial Data (Unaudited)

	Three-Months Ended
	Dec. 31,		Mar. 31,		June 30,		Sept. 30,		Year (1)
		(Dollars and shares in thousands, except per share data)
Fiscal Year 2013
Total revenues	$	572,848	$	563,114	$	606,443	$	605,080	$	2,347,485
Gross profit		76,929		74,679		77,511		75,219		304,338
Operating income		27,077		24,238		26,534		22,473		100,323
Net income		16,751		15,100		16,781		14,216		62,849
Earnings per common share — basic	$	1.32	$	1.19	$	1.32	$	1.12	$	4.96
Earnings per common share — diluted	$	1.32	$	1.19	$	1.32	$	1.12	$	4.95
Weighted average common shares
outstanding:
Basic		12,665		12,674		12,679		12,683		12,675
Diluted		12,695		12,709		12,713		12,721		12,709
Fiscal Year 2012
Total revenues	$	461,901	$	507,170	$	554,669	$	551,406	$	2,075,146
Gross profit		62,514		66,618		69,519		68,265		266,916
Operating income		21,415		21,411		23,287		19,654		85,767
Net income		13,196		13,178		14,503		12,600		53,477
Earnings per common share — basic	$	1.05	$	1.04	$	1.15	$	0.99	$	4.24
Earnings per common share — diluted	$	1.05	$	1.04	$	1.15	$	0.99	$	4.23
Weighted average common shares
outstanding:
Basic		12,581		12,619		12,628		12,636		12,616
Diluted		12,605		12,648		12,662		12,672		12,647
(1) The sums of the quarterly amounts may not agree to the year-to-date amount as a result of rounding.

XML

Statement of Financial Position (Parentheticals) (USD $)	Sep. 30, 2013	Sep. 30, 2012
Statement Of Financial Position [Abstract]
Common Stock Par Value	$ 0.01	$ 0.01
Common Stock shares authorized	40,000,000	40,000,000
Common Stock, Shares Issued	12,848,000	12,792,000
Common Stock Shares Outstanding	12,848,000	12,792,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Cash Flows From Operating Activities:
Net income	$ 62,849	$ 53,477	$ 42,580
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	10,038	9,062	6,284
Amortization of debt issuance costs	38	41	65
Stock-based compensation	3,553	2,157	831
Deferred income taxes	1,410	1,182	597
Earnings of equity method investees	(337)	(318)	(268)
Excess tax benefit of exercise of common stock options and restricted stock vesting	(1,323)	(895)	(2,714)
Loss on disposal of property and equipment	111	32
Other	(280)	(206)	(76)
Changes in operating assets and liabilities (net of effects of business acquisitions):
Receivables	(15,173)	(48,879)	(23,021)
Inventories	(72,864)	(52,831)	8,553
Prepaid expenses and other assets	3,135	(1,118)	3,398
Accounts payable	63,403	50,018	(5,150)
Accrued expenses	2,889	2,516	1,349
Net cash provided by operating activities	57,449	14,238	32,428
Cash Flows From Investing Activities:
Business acquisitions, net of cash acquired	(17,107)	(51,718)	(9,000)
Purchases of property and equipment	(10,780)	(7,597)	(12,516)
Proceeds from sales of property and equipment	189	96
Other	(430)	(646)	(3,993)
Net cash used in investing activities	(28,128)	(59,865)	(25,509)
Cash Flows From Financing Activities:
Borrowings on credit facilities	673,249	539,071	249,978
Payments on credit facilities	(702,271)	(494,186)	(257,166)
Proceeds from issuance of common stock	651	562	412
Proceeds from exercise of stock options	108	154	98
Excess tax benefit of exercise of common stock options and restricted stock vesting	1,323	895	2,714
Tax withholdings on net settlements of share-based awards	(1,855)
Debt issuance costs		(111)
Payment on long-term debt and capital lease obligations	(312)	(986)	(3,327)
Net cash (used in)/provided by financing activities	(29,107)	45,399	(7,291)
Effect of Exchange Rate on Cash and Cash Equivalents	225	136	67
Net Increase (Decrease) in Cash and Cash Equivalents	439	(92)	(305)
Cash and Cash Equivalents at Beginning of Period	514	606	911
Cash and Cash Equivalents at End of Period	$ 953	$ 514	$ 606

XML

Business Acquisition

12 Months Ended

Sep. 30, 2013

Business Acquisitions [Abstract]

Business Acquisitions

3. Business Acquisitions

On March 21, 2011, MWI Co. purchased substantially all of the assets of Nelson Laboratories Limited Partnership (“Nelson”) for $7,000 in cash. Nelson was a distributor of animal health products to over 1,100 veterinary practices, primarily in the Midwestern United States. This acquisition allows us to better serve our customers in this region. An intangible asset representing customer relationships acquired in the acquisition has an estimated useful life of 10 years. The amount recorded in goodwill is deductible for tax purposes over 15 years.

On October 31, 2011, MWI Co. purchased substantially all of the assets of Micro Beef Technologies, Ltd. (“Micro”) for $60,878, including $53,400 in cash and 94,359 shares of common stock valued at $7,158, which is the fair value of the common stock as of the date of acquisition and a working capital adjustment of $320. The $53,400 paid in cash as consideration of Micro was funded with borrowings under our Credit Agreement (as defined in Note 7) as then in effect. Micro is a value-added distributor to the production animal market, including the distribution of micro feed ingredients, pharmaceuticals, vaccines, parasiticides, supplies and other animal health products. Micro also is a leading innovator of proprietary, computerized management systems for the production animal market. We incurred $1,104 of direct acquisition-related and integration expenses.  The intangible assets acquired in the acquisition include technology, customer relationships, trade name and covenant not to compete. The useful life of the amortizing intangible assets ranges from 5 years to 17 years. Trade name is a non-amortizing intangible asset. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill recorded as part of the acquisition of Micro includes the expected synergies that we believed would result from this acquisition.  The amount recorded in goodwill is deductible for tax purposes over 15 years. The fair values assigned to the tangible and intangible assets acquired and liabilities assumed are based on management's estimates and assumptions as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.

On December 31, 2012, MWI Co. purchased substantially all of the assets of Prescription Containers, Inc. (“PCI Animal Health”), for a net purchase price of $17,107, after consideration of post-closing adjustments.  PCI Animal Health was a distributor of companion animal health products to veterinary practices, primarily in the Northeastern United States.  The intangible asset acquired in the acquisition is for customer relationships and has a useful life of 10 years.  The amount recorded in goodwill is expected to be deductible for tax purposes over 15 years. The fair values assigned to the tangible and intangible assets acquired and liabilities assumed are based on management's estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. We adjusted those valuations during the nine months ended September 30, 2013 as a result of further review of these estimates and assumptions. The fair value assigned to the purchased intangible related to customer relationships decreased by $1,190 with a corresponding adjustment to the carrying value of goodwill. The related impact on amortization recognized from that date is insignificant to the consolidated statements of income.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of each acquisition, which may be adjusted during the measurement period as defined in Accounting Standards Codification (“ASC”) 805. These purchase price allocations are based on a combination of valuations and analyses.

	2013		2012		2011
Cash	$	-	$	1	$	-
Receivables		3,585		22,374		4,041
Inventories		1,928		27,701		3,594
Other current assets		-		105		-
Property and equipment		-		8,882		1,900
Investments		-		199		-
Goodwill		9,327		12,473		1,823
Intangibles		4,780		15,760		140
Total assets acquired		19,620		87,495		11,498
Accounts payable		2,513		25,026		4,498
Accrued expenses		-		1,591		-
Other liabilities				-		-
Total liabilities assumed		2,513		26,617		4,498
Net assets acquired	$	17,107	$	60,878	$	7,000

The following table presents information for Micro that is included in our consolidated statements of income from the acquisition date of October 31, 2011 through the fiscal year ended September 30, 2012:

Micro's operations included in MWI's results
		Fiscal year ended September 30, 2012
Revenues	$	246,624
Net Income	$	4,089

The following table presents supplemental pro forma information for the Company as if the acquisition of Micro had occurred on October 1, 2010 for the periods ended September 30, 2012 and 2011 (unaudited):

	Unaudited Pro Forma Consolidated Results
	Fiscal year ended September 30,
	2012		2011
Revenues	$	2,097,076	$	1,793,672
Net Income	$	53,571	$	45,769

The unaudited pro forma consolidated results are not necessarily indicative of what our consolidated results of operations would have been had we completed the acquisition on October 1, 2010.  Additionally, the unaudited pro forma consolidated results do not purport to project the future results of operations of the combined company.

XML

Related Party (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Related Party Transaction [Line Items]
Product sales to related party	$ 68,355	$ 61,873	$ 55,185
Feeders Advantage [Member]
Related Party Transaction [Line Items]
Equity Method Investment Ownership Percentage	50.00%
Product sales to related party	68,355	61,873	55,185
Related Party Transaction, Selling, General and Administrative Expenses from Transactions with Related Party	1,079	1,008	919
Due to Related Parties, Current	777
Due from Related Parties, Current		$ 62

XML

Business Description and Basis of Presentation

12 Months Ended

Sep. 30, 2013

Business Description and Basis of Presentation [Abstract]

Business Description and Basis of Presentation

1. Business Description and Basis of Presentation

      MWI Veterinary Supply, Inc. is a leading distributor of animal health products to veterinarians in the United States and United Kingdom. We sell our products primarily to veterinarians in both the companion and production animal markets. As of September 30, 2013, we operated thirteen distribution centers located across the United States and one distribution center in the United Kingdom.

XML

Business Description and Basis of Presentation (Details)	12 Months Ended
	Sep. 30, 2013 store
UNITED STATES
Business Description And Basis Of Presentation Details [Line Items]
Number Of Distribution Centers	13
UNITED KINGDOM
Business Description And Basis Of Presentation Details [Line Items]
Number Of Distribution Centers	1

XML

Summary of Significant Accounting Policies (Table)

12 Months Ended

Sep. 30, 2013

Summary of Significant Accounting Policies [Abstract]

Property and Equipment, Estimated Useful Lives

Buildings	25 to 35 years
Machinery, furniture and equipment	3 to 15 years
Computer equipment	3 to 7 years
Leasehold improvements	1 to 10 years

XML

Goodwill and Intangibles (Tables)

12 Months Ended

Sep. 30, 2013

Goodwill and Intangibles [Abstract]

Changes in the Carrying Value of Goodwill

	2013		2012
Goodwill - Beginning of year	$	61,841	$	49,041
Acquisition activity		9,327		12,473
Foreign exchange translation		(18)		327
Goodwill - End of year	$	71,150	$	61,841

Schedule of Intangible Assets

	Useful Lives	2013		2012
Amortizing:
Customer relationships	9 - 20 years	$	35,797	$	31,045
Covenants not to compete	1 - 5 years		450		710
Technology	11 years		5,830		5,830
Other	3 - 5 years		1,126		1,084
			43,203		38,669
Accumulated amortization			(10,388)		(7,640)
			32,815		31,029
Non-Amortizing:
Trade names and patents			7,675		7,677
		$	40,490	$	38,706

Schedule of Expected Amortization Expense

	Amount
2014	$	3,102
2015		2,799
2016		2,669
2017		2,596
2018		2,578
Thereafter		19,071
	$	32,815

XML

Statements of Cash Flows - Supplemental and Noncash Disclosures (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Statements of Cash Flows — Supplemental and Noncash Disclosures [Abstract]
Cash Paid For Interest	$ 620	$ 788	$ 505
Cash Paid for Income Taxes	34,045	31,025	21,302
Issuance of restricted common stock for asset acquisition		7,158
Capital lease asset additions and related obligations		165	455
Equipment acquisitions financed with accounts payable	$ 265	$ 192	$ 124

XML

Commitments and Contingencies (Table)

12 Months Ended

Sep. 30, 2013

Commitments and Contingencies [Abstract]

Contractual Obligation, Fiscal Year Maturity Schedule

	Lease Obligations
Fiscal Year	Operating Leases		Capital Leases
2014	$	5,160	$	103
2015		4,634		16
2016		4,541
2017		4,317
2018		4,226
Thereafter		11,573
Total future minimum obligations	$	34,451	$	119

XML

Income Taxes (Schedule of Unrecognized Tax Benefits) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Unrecognized Tax Benefits Details [Abstract]
Unrecognized Tax Benefits, Beginning of year	$ 23	$ 198
Gross decreases related to prior period tax positions	(8)	(175)
Settlements	(15)
Unrecognized Tax Benefits, End of year		$ 23

XML

Intangibles (Changes in the Carrying Value of Goodwill) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Goodwill and Intangibles [Abstract]
Goodwill, Beginning Balance	$ 61,841	$ 49,041
Acquisition activity	9,327	12,473
Foreign exchange	(18)	327
Goodwill, Ending Balance	$ 71,150	$ 61,841

XML

Acquisitions (Schedule of Recognized Identified Assets Acquired and Liabilities Assumed) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Business Acquisition [Line Items]
Goodwill	$ 71,150	$ 61,841	$ 49,041
Nelson Laboratories [Member]
Business Acquisition [Line Items]
Receivables			4,041
Inventories			3,594
Property and equipment			1,900
Goodwill			1,823
Intangibles			140
Total assets acquired			11,498
Accounts payable			4,498
Total liabilities assumed			4,498
Net assets acquired			7,000
Micro Beef Technologies [Member]
Business Acquisition [Line Items]
Cash		1
Receivables		22,374
Inventories		27,701
Other current assets		105
Property and equipment		8,882
Investments		199
Goodwill		12,473
Intangibles		15,760
Total assets acquired		87,495
Accounts payable		25,026
Accrued expenses		1,591
Total liabilities assumed		26,617
Net assets acquired		60,878
Prescription Containers, Inc. [Member]
Business Acquisition [Line Items]
Receivables	3,585
Inventories	1,928
Goodwill	9,327
Intangibles	4,780
Total assets acquired	19,620
Accounts payable	2,513
Total liabilities assumed	2,513
Net assets acquired	$ 17,107

XML

Summary of Significant Accounting Policies (Property and Equipment) (Details)	12 Months Ended
	Sep. 30, 2013
Minimum [Member] | Buildings [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	25 years
Minimum [Member] | Machinery, Furniture, and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Minimum [Member] | Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Minimum [Member] | Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	1 year
Maximum [Member] | Buildings [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	35 years
Maximum [Member] | Machinery, Furniture, and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	15 years
Maximum [Member] | Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	7 years
Maximum [Member] | Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	10 years

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Statement of Comprehensive Income [Abstract]
Net income	$ 62,849	$ 53,477	$ 42,580
Other comprehensive income (loss)
Foreign currency translation	237	1,877	(663)
Actuarial gain on unfunded pension liability adjustment, net of tax	139	228	21
Total comprehensive income	$ 63,225	$ 55,582	$ 41,938

XML

Goodwill and Intangibles

12 Months Ended

Sep. 30, 2013

Goodwill and Intangibles [Abstract]

Goodwill and Intangibles

6. Goodwill and Intangibles

The changes in the carrying value of goodwill for the fiscal years ended September 30, are as follows:

	2013		2012
Goodwill - Beginning of year	$	61,841	$	49,041
Acquisition activity		9,327		12,473
Foreign exchange translation		(18)		327
Goodwill - End of year	$	71,150	$	61,841

Intangible assets consist of the following as of September 30:

	Useful Lives	2013		2012
Amortizing:
Customer relationships	9 - 20 years	$	35,797	$	31,045
Covenants not to compete	1 - 5 years		450		710
Technology	11 years		5,830		5,830
Other	3 - 5 years		1,126		1,084
			43,203		38,669
Accumulated amortization			(10,388)		(7,640)
			32,815		31,029
Non-Amortizing:
Trade names and patents			7,675		7,677
		$	40,490	$	38,706

We recorded amortization expense of $3,064,  $2,852 and $1,783 for the years ended September 30, 2013, 2012 and 2011, respectively.  Estimated amortization expense related to intangible assets as of September 30, 2013 is as follows:

	Amount
2014	$	3,102
2015		2,799
2016		2,669
2017		2,596
2018		2,578
Thereafter		19,071
	$	32,815

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Sep. 30, 2012
Current Assets:
Cash and cash equivalents	$ 953	$ 514
Receivables, net	307,445	288,922
Inventories	326,093	251,375
Prepaid expenses and other current assets	6,004	10,094
Deferred income taxes	2,327	1,580
Total current assets	642,822	552,485
Property and equipment, net	39,183	35,784
Goodwill	71,150	61,841
Intangibles, net	40,490	38,706
Other assets, net	8,910	7,567
Total assets	802,555	696,383
Current Liabilities:
Credit facilities	18,801	48,080
Accounts payable	324,057	258,741
Accrued expenses and other current liabilities	21,816	19,952
Current portion of capital lease obligations	103	337
Total current liabilities	364,777	327,110
Deferred income taxes	9,321	7,180
Long-term portion of capital lease obligations	16	104
Other long-term liabilities	2,122	2,687
Stockholders Equity
Common stock $0.01 par value, 40,000 authorized; 12,848 and 12,792 shares issued and outstanding, respectively	128	128
Additional paid in capital	148,459	144,667
Retained earnings	275,814	212,965
Accumulated other comprehensive income	1,918	1,542
Total stockholders’ equity	426,319	359,302
Total liabilities and stockholders’ equity	$ 802,555	$ 696,383

XML

Debt (Narrative) (Details)	12 Months Ended	6 Months Ended	12 Months Ended			12 Months Ended
	Sep. 30, 2013 Bank Of America And Wells Fargo Facilities [Member] USD ($)	Sep. 30, 2013 Wells Fargo Facility [Member] GBP (£)	Sep. 30, 2013 Wells Fargo Facility [Member] GBP (£)	Sep. 30, 2013 Wells Fargo Facility [Member] USD ($)	Sep. 30, 2013 Overdraft Facility [Member] GBP (£)	Sep. 30, 2013 Minimum [Member] Bank Of America And Wells Fargo Facilities [Member]	Sep. 30, 2012 Minimum [Member] Bank Of America And Wells Fargo Facilities [Member]	Sep. 30, 2013 Minimum [Member] Wells Fargo Facility [Member]	Sep. 30, 2013 Maximum [Member] Bank Of America And Wells Fargo Facilities [Member]	Sep. 30, 2013 Maximum [Member] Wells Fargo Facility [Member]
Line of Credit Facility [Line Items]
Maximum Borrowing Capacity	$ 150,000,000	£ 20,000,000	£ 20,000,000		£ 10,000,000
Debt Instrument, Basis Spread on Variable Rate						0.95%		0.95%	1.50%	1.50%
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage							0.15%	0.15%	0.25%	0.25%
Termination Date	Nov. 01, 2016		Nov. 01, 2016
Line of Credit Facility, Increase (Decrease) in Borrowing Capacity			7,500,000
Amount Outstanding		1,550,000	1,550,000	2,501,000
Interest Rate at Period End	1.06%			1.44%
Line of Credit Facility, Covenant Terms, Minimum Tangible Net Worth		£ 5,000,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Revenues:
Product sales	$ 2,260,279	$ 1,996,294	$ 1,489,500
Product sales to related party	68,355	61,873	55,185
Commissions	18,851	16,979	20,655
Total revenues	2,347,485	2,075,146	1,565,340
Cost of product sales	2,043,147	1,808,230	1,359,755
Gross profit	304,338	266,916	205,585
Selling, general and administrative expenses	193,999	172,104	130,656
Depreciation and amortization	10,016	9,045	6,263
Operating income	100,323	85,767	68,666
Other income (expense):
Interest expense	(714)	(926)	(741)
Earnings of equity method investees	337	318	268
Other	735	781	507
Total other income (expense), net	358	173	34
Income before taxes	100,681	85,940	68,700
Income tax expense	(37,832)	(32,463)	(26,120)
Net income	$ 62,849	$ 53,477	$ 42,580
Earnings Per Share, Basic and Diluted [Abstract]
Basic	$ 4.96	$ 4.24	$ 3.42
Diluted	$ 4.95	$ 4.23	$ 3.40
Earnings Per Share, Basic and Diluted, Other Disclosures [Abstract]
Weighted Average Number of Shares Outstanding, Basic	12,675	12,616	12,464
Weighted Average Number of Shares Outstanding, Diluted	12,709	12,647	12,513

XML

Acquisitions (Information Included in Statements of Income) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012
Business Acquisitions [Abstract]
Business Acquisition, Revenue	$ 246,624
Business Acquisition, Net Income (Loss)	$ 4,089

XML

Geographic Information (Revenues and Long-Lived Assets by Geographic Region) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 605,080	$ 606,443	$ 563,114	$ 572,848	$ 551,406	$ 554,669	$ 507,170	$ 461,901	$ 2,347,485	$ 2,075,146	$ 1,565,340
Property, Plant and Equipment, Net	39,183				35,784				39,183	35,784	25,209
UNITED STATES
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues									2,032,260	1,776,414	1,304,794
Property, Plant and Equipment, Net	32,881				29,001				32,881	29,001	18,953
International [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues									315,225	298,732	260,546
Property, Plant and Equipment, Net	$ 6,302				$ 6,783				$ 6,302	$ 6,783	$ 6,256

XML

Benefit Plans (Schedule of Net Funded Status) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Employee Benefit Plans [Abstract]
Fair value of plan assets	$ 5,242	$ 5,329	$ 4,760
Benefit obligation	(6,667)	(7,228)	(7,031)
Unfunded pension liability	$ (1,425)	$ (1,899)	$ (2,271)

XML

Business Acquisitions (Tables)

12 Months Ended

Sep. 30, 2013

Business Acquisitions [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

	2013		2012		2011
Cash	$	-	$	1	$	-
Receivables		3,585		22,374		4,041
Inventories		1,928		27,701		3,594
Other current assets		-		105		-
Property and equipment		-		8,882		1,900
Investments		-		199		-
Goodwill		9,327		12,473		1,823
Intangibles		4,780		15,760		140
Total assets acquired		19,620		87,495		11,498
Accounts payable		2,513		25,026		4,498
Accrued expenses		-		1,591		-
Other liabilities				-		-
Total liabilities assumed		2,513		26,617		4,498
Net assets acquired	$	17,107	$	60,878	$	7,000

Information Included in Statements of Income

Micro's operations included in MWI's results
		Fiscal year ended September 30, 2012
Revenues	$	246,624
Net Income	$	4,089

Business Acquisition Pro Forma Information

	Unaudited Pro Forma Consolidated Results
	Fiscal year ended September 30,
	2012		2011
Revenues	$	2,097,076	$	1,793,672
Net Income	$	53,571	$	45,769

XML

Fair Value of Financial Instruments

12 Months Ended

Sep. 30, 2013

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

15. Fair Value of Financial Instruments

Current fair value accounting guidance includes a hierarchy that is intended to increase consistency and comparability in fair value measurements and disclosures.  This hierarchy prioritizes inputs to valuation techniques based on observable and unobservable data.  The guidance categorizes these inputs used in measuring fair value into three levels which include the following:

· Level 1 – observable inputs such as quoted prices in active markets;

· Level 2 – inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and

· Level 3 – unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

As of September 30, 2013 and 2012, financial instruments include cash and cash equivalents, receivables and accounts payable, and the fair values approximate book values due to their short maturities. 

Our revolving credit facilities in the United States and in the United Kingdom were amended in the recent past and are based on market conditions such as LIBOR.  Because these credit facilities include interest rates based on current market conditions (Level 1 inputs), we believe that the estimated fair value of our debt was materially the same as our carrying value.

XML

Summary of Significant Accounting Policies (Revenue Recognition) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Summary of Significant Accounting Policies [Abstract]
Gross Billings From Agency Contracts	$ 349,006	$ 332,343	$ 371,024
Commission Revenue	$ 18,851	$ 16,979	$ 20,655

XML

Benefit Plans (Schedule of Weighted-Average Actuarial Assumptions) (Details)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Defined Benefit Plan, Weighted Average Assumptions Used in Calculating Benefit Obligation [Abstract]
Discount Rate	3.60%	3.00%
Rate of Compensation Increase
Defined Benefit Plan, Weighted Average Assumptions Used in Calculating Net Periodic Benefit Cost [Abstract]
Discount Rate, Periodic Benefit Costs	3.00%	3.10%	3.60%
Expected Return on Assets	5.00%	5.20%	4.30%
Net Periodic Benefit Cost, Rate of Compensation Increase

XML

Property and Equipment (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 69,074	$ 59,496
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	(29,891)	(23,712)
Property, Plant and Equipment, Net	39,183	35,784	25,209
Depreciation	6,974	6,210	4,501
Land [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	1,932	1,952
Building and Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	14,914	14,420
Machinery, Furniture, and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	38,032	33,075
Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	9,868	8,276
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 4,328	$ 1,773

XML

Income Taxes (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2013 Foreign Tax Authority [Member]	Sep. 30, 2012 Foreign Tax Authority [Member]
Income Tax Contingency [Line Items]
Deferred Tax Assets, Gross, Noncurrent			$ 711	$ 770
Unrecognized Tax Benefits	23	198
Unrecognized Tax Benefits that Would Impact Effective Tax Rate	15
Tax Adjustments, Settlements, and Unusual Provisions	$ 175

XML

Geographic Information (Table)

12 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Revenues and Long-Lived Assets by Geographic Region

	2013		2012		2011
Revenues for the fiscal years ended September 30
United States	$	2,032,260	$	1,776,414	$	1,304,794
International		315,225		298,732		260,546
Total	$	2,347,485	$	2,075,146	$	1,565,340
Long-lived assets as of September 30
United States	$	32,881	$	29,001	$	18,953
International		6,302		6,783		6,256
Total	$	39,183	$	35,784	$	25,209

XML

Earnings Per Common Share (Table)

12 Months Ended

Sep. 30, 2013

Computation Of Earnings Per Common Share [Abstract]

Computation Of Earnings Per Common Share

	2013				2012				2011
	Basic		Diluted		Basic		Diluted		Basic		Diluted
Net income	$	62,849	$	62,849	$	53,477	$	53,477	$	42,580	$	42,580
Weighted average common
shares outstanding		12,675		12,675		12,616		12,616		12,464		12,464
Effect of diluted securities
Stock options and restricted stock				34				31				49
Weighted average shares
outstanding				12,709				12,647				12,513
Earnings per share	$	4.96	$	4.95	$	4.24	$	4.23	$	3.42	$	3.40

XML

Income Taxes (Tables)

12 Months Ended

Sep. 30, 2013

Income Taxes [Abstract]

Schedule of Income before Income Tax

	2013		2012		2011
Income before taxes
United States	$	96,915	$	81,482	$	65,271
Foreign		3,766		4,458		3,429
Total income before taxes	$	100,681	$	85,940	$	68,700

Schedule of Components of Income Tax Expense (Benefit)

	2013		2012		2011
United States
Current payable
Federal	$	30,200	$	25,535	$	20,741
State		4,952		4,494		3,696
Deferred
Federal		1,652		1,308		628
State		253		220		120
Total U.S. tax expense		37,057		31,557		25,185
International
Current payable		1,275		1,252		1,109
Deferred		(500)		(346)		(174)
Total international tax expense		775		906		935
Total income tax expense	$	37,832	$	32,463	$	26,120

Schedule of Deferred Tax Assets and Liabilities

	2013		2012
Deferred tax assets:
Allowance for doubtful accounts	$	866	$	958
Inventories		658		521
Lease expense		544		394
Employee benefits		334		439
Acquisition-related costs		444		-
Other		164		368
Total deferred tax assets		3,010		2,680
Deferred tax liabilities:
Investments		(786)		-
Property and equipment		(8,876)		(7,684)
Prepaid expenses		(227)		(395)
Other		(115)		(201)
Total deferred tax liabilities		(10,004)		(8,280)
Net deferred liabilities	$	(6,994)	$	(5,600)

Schedule of Effective Income Tax Rate Reconciliation

	2013	2012	2011
Taxes computed at statutory rate	35.0%	35.0%	35.0%
State income taxes (net of federal income tax benefit)	3.4	3.6	3.7
Foreign	(0.9)	(1.1)	(0.9)
Other	0.1	0.3	0.2
	37.6%	37.8%	38.0%

Schedule of Unrecognized Tax Benefits

	2013		2012		2011
Unrecognized tax benefits – Beginning of year	$	-	$	23	$	198
Gross increases related to prior period tax positions		-		-		-
Gross decreases related to prior period tax positions		-		(8)		(175)
Gross increases related to current period tax positions		-		-		-
Settlements		-		(15)		-
Unrecognized tax benefits – End of year	$	-	$	-	$	23

XML

Property and Equipment

12 Months Ended

Sep. 30, 2013

Property And Equipment [Abstract]

Property And Equipment

5. Property and Equipment

Property and equipment consists of the following at September 30:

	2013		2012
Land	$	1,932	$	1,952
Building and leasehold improvements		14,914		14,420
Machinery, furniture and equipment		38,032		33,075
Computer equipment		9,868		8,276
Construction in progress		4,328		1,773
		69,074		59,496
Accumulated depreciation and amortization		(29,891)		(23,712)
	$	39,183	$	35,784

We recorded depreciation expense of $6,974,  $6,210 and $4,501 for the years ended September 30, 2013, 2012 and 2011, respectively.

XML

Common Stock and Stock-Based Awards (Stock Options, by Exercise Price Range) (Details) (USD $)				12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2013 $17.00 to $19.99	Sep. 30, 2013 $20.00 to $22.60
Common Stock Outstanding [Line Items]
Shares Exercisable, End of Year	16,038	22,360	37,385	14,248	1,790
Weighted Average Remaining Contractual Life (in years)				1 year 9 months 18 days	2 years
Weighted Average Exercise Price	$ 17.58	$ 17.53	$ 14.73	$ 17.00	$ 22.17
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Lower Range Limit				$ 17.00	$ 20.00
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Upper Range Limit				$ 19.99	$ 22.60

XML

Receivables (Table)

12 Months Ended

Sep. 30, 2013

Receivables [Abstract]

Schedule Of Accounts Receivable

	2013		2012
Trade	$	282,923	$	271,199
Vendor rebates and programs		26,983		20,469
		309,906		291,668
Allowance for doubtful accounts		(2,461)		(2,746)
	$	307,445	$	288,922

XML

Summary of Significant Accounting Policies (Segment Information) (Details)	12 Months Ended
	Sep. 30, 2013 segment
Summary of Significant Accounting Policies [Abstract]
Number of Reportable Segments	1
Number of Operating Segments	2

XML

Common Stock and Stock-Based Awards

12 Months Ended

Sep. 30, 2013

Common Stock and Stock-Based Awards [Abstract]

Common Stock and Stock-Based Awards

8. Common Stock and Stock-Based Awards

2002 Stock Plan

We had a 2002 Stock Plan (the “2002 Plan”) to provide our directors, executives and other key employees with additional incentives by allowing them to acquire an ownership interest in us and, as a result, encouraging them to contribute to our success. All options that were granted under this plan have been exercised and there are no additional shares available for issuance under the 2002 Plan.   

2005 Stock Plan

We have a 2005 Stock-Based Award and Incentive Compensation Plan (the “2005 Plan”), under which we may offer restricted shares of our common stock and grant options to purchase shares of our common stock to selected employees and non-employee directors. The purpose of the 2005 Plan is to promote our long-term financial success by attracting, retaining and rewarding eligible participants. At September 30, 2013 and 2012 we had 815,260 and 865,917 shares, respectively, of our common stock available for issuance under the 2005 Plan. 

The 2005 Plan permits us to grant stock options (both incentive stock options and non‑qualified stock options), restricted stock and deferred stock. The compensation committee will determine the number and type of stock-based awards to each participant, the exercise price of each award, the duration of the award (not to exceed ten years), vesting provisions and all other terms and conditions of such award in individual award agreements. The 2005 Plan provides for the cancellation of all unvested awards upon termination of employment with us, unless determined otherwise by the compensation committee at the time awards are granted.

A summary of common stock options activity under the 2002 and 2005 Plans is as follows:

	2013			2012				2011
		Weighted				Weighted				Weighted
	Number	average		Number		average		Number		average
	of	exercise		of		exercise		of		exercise
	Shares	price		Shares		price		Shares		price
Outstanding at beginning of year	22,360	$	17.53		37,385	$	14.73		139,550	$	4.65
Exercised	(6,186)		17.43		(14,769)		10.44		(102,128)		0.96
Cancelled or expired	(136)		17.00		(256)		17.00		(37)		17.00
Outstanding at end of year	16,038	$	17.58		22,360	$	17.53		37,385	$	14.73
Exercisable at end of year	16,038	$	17.58		22,360	$	17.53		37,385	$	14.73

	Outstanding and exercisable options
			Weighted
			average
			remaining	Weighted
			contractual	average
		Number of	life	exercise
Range of exercise prices		Shares	(in years)	price
$17.00 - $19.99		14,248	1.8	$	17.00
$20.00 - $22.60		1,790	2.0	$	22.17

The intrinsic value of the shares outstanding and exercisable was $2,114 as of September 30, 2013 and $1,993 as of September 30, 2012.The total intrinsic value of options exercised during the years ended September 30, 2013, 2012 and 2011 was $644,  $1,105, and $6,548, respectively.

A summary of restricted stock awards activity under the 2005 Plan is as follows:

	2013			2012				2011
		Weighted				Weighted				Weighted
	Number	average		Number		average		Number		average
	of	grant date		of		grant date		of		grant date
	Shares	fair value		Shares		fair value		Shares		fair value
Nonvested at beginning of year	129,396	$	69.94		105,540	$	61.69		70,584	$	49.33
Granted	70,575		145.65		74,848		101.97		63,900		71.14
Vested	(44,547)		144.52		(48,072)		102.09		(25,934)		52.46
Forfeitures	(13,180)		80.96		(2,920)		63.49		(3,010)		51.92
Nonvested at end of year	142,244	$	83.13		129,396	$	69.94		105,540	$	61.69

As of September 30, 2013, total unrecognized stock based compensation expense related to nonvested awards was approximately $15,911 before income taxes, which is expected to be recognized over the remaining term of the awards which range from 1 to 5 years.  During the fiscal years ended September 30, 2013 and 2012, we recognized $3,553 and $3,569, respectively, in compensation expense related to common stock awards.  The total fair value of shares vested during the years ended September 30, 2013, 2012, and 2011, was $6,438,  $4,908, and $1,800, respectively.

2008 Employee Stock Purchase Plan

The 2008 Employee Stock Purchase Plan (the “ESPP”) allows substantially all employees to purchase shares of our common stock at 95% of the fair market value on the date of purchase.  The purchase date is the last trading date of the purchase period, which begins in March, June, September and December.  Employees accumulate amounts through payroll deductions during the purchase period of between 1% and 10% but no more than $20 annually.  An employee is allowed to purchase a maximum of 200 shares per purchase period.  We issued 5,396 and 6,859 shares of our common stock under the ESPP during fiscal years ended September 30, 2013 and 2012, respectively.

XML

Benefit Plans (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Minimum [Member]
Defined Contribution Plan [Line Items]
Defined Contribution Plan, Discretionary Matching Percentage	0.00%
Maximum [Member]
Defined Contribution Plan [Line Items]
Defined Contribution Plan, Discretionary Matching Percentage	3.00%
United States Defined Contribution Plans Of US Entity [Member]
Defined Contribution Plan [Line Items]
Defined Contribution Plan, Cost Recognized	$ 2,122	$ 1,871	$ 1,464
Defined Contribution Plan, Employer Matching Contribution, Percent of Match	50.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	6.00%
Defined Contribution Plan, Employer Discretionary Contribution Amount	1,997	1,847	1,516
401k Portion [Member]
Defined Contribution Plan [Line Items]
Defined Contribution Plan, Requisite Service Period	2 years
Defined Contribution Plan, Minimum Age	21 years
Profit Sharing Portion [Member]
Defined Contribution Plan [Line Items]
Defined Contribution Plan, Requisite Service Period	3 months
Defined Contribution Plan, Minimum Age	21 years
Foreign Defined Contribution Plans [Member]
Defined Contribution Plan [Line Items]
Defined Contribution Plan, Cost Recognized	$ 257	$ 250	$ 269
Foreign Defined Contribution Plans [Member] | Minimum [Member]
Defined Contribution Plan [Line Items]
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	3.00%
Foreign Defined Contribution Plans [Member] | Maximum [Member]
Defined Contribution Plan [Line Items]
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	6.00%

XML

Receivables

12 Months Ended

Sep. 30, 2013

Receivables [Abstract]

Receivables

4. Receivables

Receivables consist of the following at September 30:

	2013		2012
Trade	$	282,923	$	271,199
Vendor rebates and programs		26,983		20,469
		309,906		291,668
Allowance for doubtful accounts		(2,461)		(2,746)
	$	307,445	$	288,922

XML

STATEMENT OF STOCKHOLDERS' EQUITY (USD $) In Thousands	Common Stock Member	Additional Paid In Capital Member	Accumulated Other Comprehensive Income (Loss) Member	Retained Earnings Member	Total
Balance at Sep. 30, 2010	$ 125	$ 129,675	$ 79	$ 116,908	$ 246,787
Shares Balance at Sep. 30, 2010	12,457
Net income				42,580	42,580
Issuance of common stock		412			412
Issuance of common stock (shares)	6
Exercises of common stock options	1	97			98
Exercises of common stock options (shares)	102
Tax benefit of common stock exercises		2,714			2,714
Issuance of stock awards, net of forfeitures		861			861
Issuance of stock awards, net of forfeitures (shares)	53
Foreign currency translation			(663)		(663)
Actuarial gain on unfunded pension liability adjustment, net of tax			21		21
Balance at Sep. 30, 2011	126	133,759	(563)	159,488	292,810
Shares Balance at Sep. 30, 2011	12,618
Net income				53,477	53,477
Issuance of common stock		562			562
Issuance of common stock (shares)	7
Issuance of common stock for purchase of Micro	1	7,158			7,159
Issuance of common stock for purchase of Micro (shares)	94
Exercises of common stock options		154			154
Exercises of common stock options (shares)	15
Tax benefit of common stock exercises		895			895
Issuance of stock awards, net of forfeitures	1	2,139			2,140
Issuance of stock awards, net of forfeitures (shares)	58
Foreign currency translation			1,877		1,877
Actuarial gain on unfunded pension liability adjustment, net of tax			228		228
Balance at Sep. 30, 2012	128	144,667	1,542	212,965	359,302
Shares Balance at Sep. 30, 2012	12,792				12,792
Net income				62,849	62,849
Issuance of common stock		651			651
Issuance of common stock (shares)	5
Exercises of common stock options		108			108
Exercises of common stock options (shares)	6
Tax benefit of common stock exercises		1,323			1,323
Issuance of stock awards, net of forfeitures		1,710			1,710
Issuance of stock awards, net of forfeitures (shares)	45
Foreign currency translation			237		237
Actuarial gain on unfunded pension liability adjustment, net of tax			139		139
Balance at Sep. 30, 2013	$ 128	$ 148,459	$ 1,918	$ 275,814	$ 426,319
Shares Balance at Sep. 30, 2013	12,848				12,848

XML

Acquisitions (Business Acquisition Pro Forma Information) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Business Acquisitions [Abstract]
Business Acquisition, Pro Forma Revenue	$ 2,097,076	$ 1,793,672
Business Acquisition, Pro Forma Net Income (Loss)	$ 53,571	$ 45,769

XML

Summary of Significant Accounting Policies (Concentrations of Risk) (Details) (Accounts Receivable [Member])	3 Months Ended	12 Months Ended
	Dec. 31, 2012	Sep. 30, 2013
Customer Concentration Risk [Member]
Concentration Risk [Line Items]
Customer Concentration Risk	7.60%	2.60%
Geographic Concentration Risk [Member]
Concentration Risk [Line Items]
Customer Concentration Risk	18.10%	14.50%

XML

Debt (Table)

12 Months Ended

Sep. 30, 2013

Debt [Abstract]

Schedule of Debt

	2013		2012
Revolving credit facility, 1.06% as of September 30, 2013	$	16,300	$	39,500
Sterling revolving credit facility, 1.44% as of September 30, 2013		2,501		8,580
Capital lease obligations (1)		119		441
Total debt and capital lease obligations		18,920		48,521
Less: Long-term portion of capital lease obligations		(16)		(104)
Total debt and capital lease obligations included in current liabilities	$	18,904	$	48,417
(1) The capital lease obligations have varying maturity dates.

XML

Subsequent Event (Details) (IVESCO Holdings, L.L.C. [Member], Subsequent Event [Member], USD $) In Thousands, unless otherwise specified	0 Months Ended
	Nov. 01, 2013
IVESCO Holdings, L.L.C. [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Business Acquisition, Cost of Acquired Entity, Purchase Price	$ 67,500
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustment, Consideration Transferred	$ 11,200

XML

Income Taxes (Schedule of Income before Income Tax) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Income Taxes [Abstract]
United States	$ 96,915	$ 81,482	$ 65,271
Foreign	3,766	4,458	3,429
Income before taxes	$ 100,681	$ 85,940	$ 68,700

XML

Debt (Schedule of Long-term Debt Instruments) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Sep. 30, 2012
Debt Instrument [Line Items]
Total debt and capital lease obligations	$ 18,920	$ 48,521
Less: Long-term portion of capital lease obligations	(16)	(104)
Total debt and capital lease obligations included in current liabilities	18,904	48,417
Domestic Line of Credit [Member]
Debt Instrument [Line Items]
Total debt and capital lease obligations	16,300	39,500
Foreign Line of Credit [Member]
Debt Instrument [Line Items]
Total debt and capital lease obligations	2,501	8,580
Capital Lease Obligations [Member]
Debt Instrument [Line Items]
Total debt and capital lease obligations	$ 119	$ 441

XML

Statements of Cash flows - Supplemental and Non-Cash Disclosures

12 Months Ended

Sep. 30, 2013

Statements of Cash Flows — Supplemental and Noncash Disclosures [Abstract]

Statements of Cash Flows — Supplemental and Noncash Disclosures

11. Statements of Cash Flows — Supplemental and Noncash Disclosures

	2013		2012		2011
Supplemental Disclosures
Cash paid for interest	$	620	$	788	$	505
Cash paid for income taxes		34,045		31,025		21,302
Noncash Investing and Financing Activities
Issuance of restricted common stock for asset acquisition		-		7,158		-
Capital lease asset additions and related obligations		-		165		455
Equipment acquisitions financed with accounts payable		265		192		124

XML

Debt

12 Months Ended

Sep. 30, 2013

Debt [Abstract]

Debt

7. Debt

	2013		2012
Revolving credit facility, 1.06% as of September 30, 2013	$	16,300	$	39,500
Sterling revolving credit facility, 1.44% as of September 30, 2013		2,501		8,580
Capital lease obligations (1)		119		441
Total debt and capital lease obligations		18,920		48,521
Less: Long-term portion of capital lease obligations		(16)		(104)
Total debt and capital lease obligations included in current liabilities	$	18,904	$	48,417
(1) The capital lease obligations have varying maturity dates.

Revolving Credit Facility — MWI Co. as borrower, is party to a Credit Agreement dated December 13, 2006, as amended (the “Credit Agreement”), by and among MWI Co., MWI, and Memorial Pet Care, Inc. and Bank of America, N.A. and Wells Fargo Bank, N.A. as lenders (collectively, the “Lenders”).  The Credit Agreement allows for an aggregate revolving commitment of the Lenders of $150,000 and a maturity date of November 1, 2016.  Under the Credit Agreement, the margin on variable interest rate borrowings ranges from 0.95% to 1.50%.  The commitment fee under the Credit Agreement ranges from 0.15% to 0.25% depending on the funded debt to EBITDA ratio.  The variable interest rate is equal to the Daily LIBOR Floating Rate or the LIBOR 1-month, 2-month, 3-month or 6-month fixed rate (at MWI Co.’s option) plus the margin.  The Credit Agreement contains financial covenants, including a fixed charge ratio and a funded debt to EBITDA ratio.  We were in compliance with all of the covenants as of September 30, 2013 and 2012. 

Sterling Revolving Credit Facility— On March 15, 2013, Centaur entered into a First Amendment (the “Amendment”) to the unsecured revolving line of credit facility (the “Sterling Revolving Credit Facility”) dated November 5, 2010 with Wells Fargo Bank, N.A. London Branch.  The Amendment increases the maximum loan amount of the Sterling Revolving Credit Facility to £20,000, an increase of £7,500, and extends the term of the facility to November 1, 2016. Interest is based on LIBOR for the applicable interest period plus an applicable margin of 0.95% to 1.50%, and the commitment fee ranges from 0.15% to 0.25%, depending on our funded debt to EBITDA ratio.  The facility contains a financial covenant requiring Centaur to maintain a minimum tangible net worth of £5,000.  As of September 30, 2013 and 2012, Centaur was in compliance with the covenant. Our outstanding balance on the Sterling Revolving Credit Facility at September 30, 2013 was £1,550, or $2,501 using the exchange rate on September 30, 2013.  The interest rate for the Sterling Revolving Credit Facility was 1.44% as of September 30, 2013. 

Also on March 15, 2013, Centaur entered into an uncommitted overdraft facility (the “Overdraft Facility”) with Wells Fargo. The Overdraft Facility allows Centaur to borrow an additional £10,000 to fund short term normal trading cycle fluctuations. The Overdraft Facility will expire on November 1, 2016.  Interest on the borrowing under the Overdraft Facility is the same as the terms under the Amendment.

XML

Income Taxes (Schedule of Deferred Tax Assets and Liabilities) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Sep. 30, 2012
Components of Deferred Tax Assets [Abstract]
Allowance for Doubtful Accounts	$ 866	$ 958
Inventory	658	521
Lease Expense	544	394
Employee Benefits	334	439
Acquisition-related costs	444
Other Deferred Tax Assets	164	368
Total Deferred Tax Assets	3,010	2,680
Components of Deferred Tax Liabilities [Abstract]
Investments	(786)
Property and Equipment	(8,876)	(7,684)
Prepaid expenses	(227)	(395)
Other Deferred Tax Liabilities	(115)	(201)
Total Deferred Tax Liabilities	(10,004)	(8,280)
Deferred Tax Assets (Liabilities), Net	$ (6,994)	$ (5,600)

XML

Employee Benefit Plans

12 Months Ended

Sep. 30, 2013

Employee Benefit Plans [Abstract]

Employee Benefit Plans

14. Employee Benefit Plans

We have a multi-employer defined contribution profit sharing plan with a 401(k) arrangement for employees in the United States.  To become eligible for the profit sharing portion of the plan, an employee must complete two years of service and attain the age of twenty-one. Participation is automatic beginning the following January or July. To become eligible for the 401(k) portion of the plan, the employee must complete three-months of service and attain the age of twenty-one.

Both portions of the plan allow for employer contributions. We are required to match 50% of the employee’s contribution to the 401(k) portion of the plan up to 6% of the employee’s salary. Our matching contributions for the 401(k) portion of the plan were $2,122,  $1,871 and $1,464 for the fiscal years ended September 30, 2013, 2012 and 2011, respectively. Employee’s contributions are fully vested immediately while employer contributions vest over a five-year period.

Contributions to the profit sharing portion of the Plans are discretionary, ranging from 0% to 3%, and are approved by our board of directors. Total profit sharing expense for the fiscal years ended September 30, 2013, 2012 and 2011 were $1,997,  $1,847 and $1,516, respectively. Employer contributions are fully vested immediately.

Centaur sponsors a defined contribution plan for all other staff not participating in the defined benefit plan described below. The contributions made by the employer over the period are detailed below. Contributions are currently payable at a minimum of 3% up to a maximum of 6% of eligible pay if matched by employee.  The matching contribution for the plan was $257,  $250 and $269 for the fiscal years ended September 30, 2013, 2012 and 2011, respectively.

Centaur operates a defined benefit pension plan which provides benefits based on pensionable pay and is closed to future benefit accrual.

The fair value of plan assets, benefit obligation and funded status of the defined benefit plan as of September 30 is as follows:

	2013		2012		2011
Fair value of plan assets	$	5,242	$	5,329	$	4,760
Benefit obligation		(6,667)		(7,228)		(7,031)
Unfunded pension liability	$	(1,425)	$	(1,899)	$	(2,271)

The unfunded pension liability is recognized as other long-term liabilities in the Consolidated Balance Sheets.  Net periodic benefit expense for the fiscal year ended September 30 consisted of the following:

	2013		2012		2011
Interest cost	$	195	$	219	$	255
Expected return on plan assets		(252)		(249)		(205)
Net periodic (benefit)/cost		(57)		(30)		50
Other changes recognized in other comprehensive income
Actuarial gain		(187)		(373)		(88)
Total recognized in net periodic benefit costs and
other comprehensive income	$	(244)	$	(403)	$	(38)
Total gain recognized in other comprehensive income, net of tax	$	(139)	$	(228)	$	(21)

The estimated net actuarial gain that will be amortized from accumulated other comprehensive income into net periodic benefit costs during fiscal year 2014 is not significant.  The following table provides the weighted-average actuarial assumptions:

	2013	2012
Assumptions used to determine benefit obligations
Discount rate	3.6%	3.0%
Rate of compensation increase (1)	N/A	N/A
	2013	2012	2011
Assumptions used to determine net periodic benefit cost
Discount rate	3.0%	3.1%	3.6%
Expected return on plan assets	5.0%	5.2%	4.3%
Rate of compensation increase (1)	N/A	N/A	N/A
(1) There is no assumed rate of compensation increase as there have been no current active members since April 2006.

The following table sets forth, by level within the fair value hierarchy, as discussed in Note 15, Fair Value of Financial Instruments, the assets of the plan, by major asset category, at fair value as of September 30:

	2013				2012
	Market		Asset	Fair Value	Market		Asset	Fair Value
Asset Class	Value		Allocation	Level	Value		Allocation	Level
Equities	$	2,062	39%	2	$	1,793	34%	2
Corporate bonds		979	19%	2		1,275	24%	2
UK Government bonds		-	0%	2		485	9%	2
Cash		82	2%	1		218	4%	1
Other assets		2,119	40%	2		1,558	29%	2
Total	$	5,242	100%		$	5,329	100%

XML

Commitments and Contingencies

12 Months Ended

Sep. 30, 2013

Commitments and Contingencies [Abstract]

Commitments and Contingencies

12. Commitments and Contingencies

From time to time, in the normal course of business, we may become a party to legal proceedings that may have an adverse effect on our financial position, results of operations and cash flow.  At September 30, 2013, we were not a party to any material pending legal proceedings and were not aware of any claims that could have a material adverse effect on our financial position, results of operations or cash flows.

We have operating leases for office and distribution center space and equipment for varying periods. We also lease some of our vehicles in the United Kingdom under capital leases.  Certain leases have renewal options and require contingent payments for increases, including executory costs, property taxes, insurance and certain other costs in excess of a base year amount. Total rent expense for the years ended September 30, 2013, 2012 and 2011 were $6,301,  $5,382 and $4,259, respectively.

The aggregate future noncancelable minimum rental payments on operating leases and capital leases at September 30, 2013 are as follows:

	Lease Obligations
Fiscal Year	Operating Leases		Capital Leases
2014	$	5,160	$	103
2015		4,634		16
2016		4,541
2017		4,317
2018		4,226
Thereafter		11,573
Total future minimum obligations	$	34,451	$	119

XML

Document and Entity Information (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Nov. 15, 2013	Mar. 31, 2013
Document And Entity Information [Abstract]
DocumentType	10-K
DocumentPeriodEndDate	Sep. 30, 2013
AmendmentFlag	false
DocumentFiscalPeriodFocus	FY
Document Fiscal Year Focus	2013
CurrentFiscalYearEndDate	--09-30
EntityCentralIndexKey	0001323974
Trading Symbol	mwiv
EntityCurrentReportingStatus	Yes
EntityFilerCategory	Large Accelerated Filer
EntityRegistrantName	MWI Veterinary Supply, Inc.
EntityVoluntaryFilers	No
EntityWellKnownSeasonedIssuer	Yes
EntityCommonStockSharesOutstanding		12,851,474
EntityPublicFloat			$ 1,609

XML

Related Party Transactions

12 Months Ended

Sep. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions

13. Related Party Transactions

MWI Co., our subsidiary, holds a 50% membership interest in Feeders’ Advantage that is accounted for as an investment using the equity method. Sales of products to Feeders’ Advantage, which are at our cost, were $68,355,  $61,873 and $55,185 for the fiscal years ended September 30, 2013, 2012 and 2011, respectively. MWI Co. charged Feeders’ Advantage for certain operating and administrative services of $1,079,  $1,008 and $919 for the fiscal years ended September 30, 2013, 2012 and 2011, respectively. Our President and Chief Executive Officer and a member of our board of directors are each members of the board of managers of Feeders’ Advantage.

MWI Co. allows Feeders’ Advantage to use its cash management system to finance its day-to-day operations. At any given time, the outstanding position used in the cash management system may be a receivable or payable depending on the cash activity.  A receivable balance bears interest at the prime rate. The interest due on the outstanding receivable is calculated and charged to Feeders’ Advantage on the last day of each month. Conversely, to the extent MWI Co. has a payable balance due to Feeders’ Advantage, the payable balance accrues interest in favor of Feeders’ Advantage at the average federal funds rates in effect for that month.  As of September 30, 2013 MWI Co. had a payable balance to Feeders’ Advantage of $777.  As of September 30, 2012 MWI Co. had a receivable balance from Feeders' Advantage of $62. 

XML

Common Stock and Stock-Based Awards (Stock Options Activity) (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Common Stock and Stock-Based Awards [Abstract]
Outstanding at beginning of year	22,360	37,385	139,550
Exercised	(6,186)	(14,769)	(102,128)
Cancelled or expired	(136)	(256)	(37)
Outstanding at end of year	16,038	22,360	37,385
Exercisable at end of year	16,038	22,360	37,385
Weighted average exercise price, Outstanding at beginning of year	$ 17.53	$ 14.73	$ 4.65
Weighted average exercise price, Exercised	$ 17.43	$ 10.44	$ 0.96
Weighted average exercise price, Cancelled or expired	$ 17.00	$ 17.00	$ 17.00
Weighted average exercise price, Outstanding at end of year	$ 17.58	$ 17.53	$ 14.73
Weighted average exercise price, Exercisable	$ 17.58	$ 17.53	$ 14.73

XML

Common Stock and Stock-Based Awards (Narrative) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Share-Based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock available for issuance	815,260	865,917
Award expiration period	10 years
Number Of Outstanding Options	16,038	22,360	37,385	139,550
Weighted Average Exercise Price	$ 17.58	$ 17.53	$ 14.73
Intrinsic value of the shares outstanding and exercisable	$ 2,114	$ 1,993
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value	644	1,105	6,548
Nonvested Awards, Total Compensation Cost Not yet Recognized	15,911
Compensation Expense	3,553	3,569
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value	6,438	4,908	1,800
Share purchase price as a percentage of share market value	95.00%
Employee Stock Purchase Plan Payroll Deduction Rate Minimum	1.00%
Employee Stock Purchase Plan Payroll Deduction Rate Maximum	10.00%
Employee Stock Purchase Plan Annual Limit	$ 20
Maximum shares per purchase period	200
Shares issued during the period pursuant to ESPP	5,396		6,859
Minimum [Member]
Share-Based Compensation Arrangement by Share-based Payment Award [Line Items]
Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year
Maximum [Member]
Share-Based Compensation Arrangement by Share-based Payment Award [Line Items]
Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	5 years