Mail Stop 6010
June 22, 2005
James F. Cleary, Jr.
President and Chief Executive Officer
MWI Veterinary Supply, Inc.
651 S. Stratford Drive, Suite 100
Meridan, Idaho 83642
Re: MWI Veterinary Supply, Inc.
Amendment No. 1 to the Registration Statement on Form S-1
File No. 333-124264
Dear Mr. Cleary:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form S-1
Summary Consolidated Financial and Operating Data, page 7
1. We note your response to comment 7; however, we continue to
believe that EBITDA is a non-GAAP measure that eliminates
recurring
items. Since the items excluded from EBITDA are significant
components of your business, the financial impact of these items
will
not disappear or become immaterial in the future. While Item 10(e)
of
Regulation S-K does not expressly prohibit the removal of
recurring
items, Answer 8 of "Frequently Asked Questions Regarding the Use
of
Non-GAAP Financial Measures" indicates that registrants must meet
the
burden of demonstrating the usefulness of any measure that
excludes
recurring items, especially if that measure is used to evaluate
performance. Your disclosures do not meet the burden as
illustrated
in Answer 8 of the Non-GAAP FAQ. Answer 8 further states that it
is
permissible, and may be necessary, to identify, discuss, and
analyze
material items, whether they are recurring or non-recurring, in
MD&A
and it may be necessary to discuss the nature of such items and
their
significance to an investor in evaluating the company`s results of
operations. Therefore, we believe that material items such as
depreciation, amortization, interest expense and income taxes
should
be discussed in MD&A but should not be eliminated or adjusted in
connection with a non-GAAP measure. Please revise your disclosures
here and throughout the document to delete your presentation of
EBITDA or provide us with additional information to demonstrate
why
EBITDA provides useful information to investors.
Management`s Discussion and Analysis of Financial Condition, page
28
Results of Operations, page 30
2. We acknowledge your response to comment 26; however, we
continue
to believe that the combination of the predecessor and successor
statements of operations is akin to a pooling of interests, which
does not comply with GAAP. Please revise your tabular presentation
and the related underlying discussion of your results of
operations
to separately distinguish the predecessor and successor financial
information and remove any subtotals of the predecessor and
successor.
Underwriting, page 72
3. We note your response to comment 40 and your supplemental
response
regarding the posting of electronic versions of the preliminary
prospectus and amendments on the "i-Deal" website. Please provide
us
with screen shots of the site as well as any proposed emails that
may
be sent to investors of MWI Veterinary Supply Inc. We may have
further comments.
Notes to Consolidated Financial Statements
Note 1. Formation and Acquisition, page F-8
4. We have read your response to comment 42, but we have
additional
comments regarding whether or not your acquisition of MWI
Veterinary
Supply Co. was a related party transaction. We note from your
disclosures in "Certain Relationship and Related Party
Transactions"
that Bruckmann, Rosser, Sherrill & Co. II, LP (BRS) and two co-
investors purchased stock in your company for $19.6 million for
purposes of financing the acquisition of MWI Veterinary Supply Co.
Additionally, we note that Bruckmann and Sherrill are members of
your
board of directors. We also note that you purchased stock in MWI
Veterinary Supply Co. from Agri-Beef. We note that Agri-Beef is
currently controlled 92% by Mr. Rebholtz, one of your directors,
and
that Mrs. Cleary, the wife of your President and CEO along with
Mr.
Rebholtz and Mrs. Cleary`s mother, currently control 94% of the
outstanding stock of Agri Beef Co. Based on these factors, we
request the following:
* Please clarify to us and in the filing why, at the time of the
transaction, the acquisition did not qualify as a related party
transaction.
* Please clarify the ownership percentages for each stockholder of
each entity involved in the transaction, at the time of the
transaction.
* If related parties acquired control of Agri Beef Co. after the
transaction, please tell us the circumstances that resulted in
that
change in control.
* You state in your response that BRS, an unrelated party,
acquired
MWI Veterinary Supply Co. from Agri Beef. This appears to
conflict
with the disclosure in "Certain Relationship and Related Party
Transactions" that indicates that BRS financed your acquisition of
MWI Veterinary Supply Co. In addition, it does not appear that
BRS
was an unrelated party since BRS consisted of members of your
board
of directors. Please clarify.
Note 2. Summary of Significant Accounting Policies, page F-9
Revenue Recognition, page F-10
5. We note on pages 1 and 47 that you provide products and
services
and earn commissions. Please address the following comments:
a.) Tell us what consideration was given to separately disclosing
products and services on the face of the statements of operations
and
revise as applicable. Refer to Rule 5-03(b) of Regulation S-X.
b.) Disclose your revenue recognition policy for services
provided
and commissions earned.
c.) We note on page 28 that you have two types of revenue
arrangements and that you record buy/sell arrangements gross and
agency arrangements net. Please provide us with an analysis of
the
different arrangements and clarify to us why you record some
revenue
gross and some revenue net. Refer to EITF 99-19 in your response.
d.) Tell us and consider clarifying in the filing how you
addressed
EITF 00-21 for your sales of products and services.
e.) Revise the statements of operations for all periods presented
to
delete your reference to the agency gross billings amounts.
Note 11. Sale of Subsidiary Stock, page F-21
6. Please disclose significant related party transactions on the
face
of your financial statements. Refer to Rule 4-08(k) of Regulation
S-
X.
Note 14. Subsequent Events, page F-22
7. Please provide to us, supplementally, your significance test
calculations related to your acquisition of Vetpo Distributors,
Inc.
that support your determination to exclude the financial
statements
and pro forma information prescribed by Item 3-05 and Article 11
of
Regulation S-X.
* * *
File a pre-effective amendment in response to these
comments.
Provide a letter keying your responses to the comments, and
provide
any requested supplemental information. If you believe complying
with these comments is not appropriate, tell us why in your
letter.
The response letter should be uploaded to EDGAR, with the form
type
label "CORRESP" and linked to the registration statement file
number.
We may have comments after reviewing revised materials and your
responses.
Submit your request for acceleration at least two business
days
prior to the requested effective date.
You may contact Amy Bruckner at (202) 551-3657 or Mary Mast
at
(202) 551-3613 if you have questions regarding comments on the
financial statements and related matters. Please contact Song
Brandon at (202) 551-3621, John Krug, Senior Attorney at (202)
551-
3862 or me at (202) 551-3710 with any other questions.
Sincerely,
Jeffrey Riedler
Assistant Director
cc: James A. Lebovitz, Esq.
Stephen M. Leitzell, Esq.
Dechert LLP
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
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