Lines of Business

6 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Lines of Business

ines of Business

Our reportable segments are Animal Hospital and Laboratory. Our Animal Hospital segment provides veterinary services for companion animals and sells related retail and pharmaceutical products. Our Laboratory segment provides diagnostic laboratory testing services for veterinarians, both associated with our animal hospitals and those independent of us. Our other operating segments included in “All Other” in the following tables are our Medical Technology business, which sells digital radiography and ultrasound imaging equipment, related computer hardware, software and ancillary services to the veterinary market and our Vetstreet and ThinkPets businesses, which provides online communications, professional education, marketing solutions to the veterinary community and an ecommerce platform for independent animal hospitals. These operating segments do not meet the quantitative requirements for reportable segments. Our operating segments are strategic business units that have different services, products and/or functions. The segments are managed separately because each is a distinct and different business venture with unique challenges, risks and rewards. We also operate a corporate office that provides general and administrative support services for our other segments.

The accounting policies of our segments are essentially the same as those described in the summary of significant accounting policies included in our 2011 Annual Report on Form 10-K. We evaluate the performance of our segments based on gross profit and operating income. For purposes of reviewing the operating performance of our segments all intercompany sales and purchases are generally accounted for as if they were transactions with independent third parties at current market prices.

The following is a summary of certain financial data for each of our segments (in thousands):

9. Lines of Business, continued

	Animal Hospital			Laboratory			All Other		Corporate			Intercompany Eliminations			Total
Three Months Ended June 30, 2012
External revenue	$	342,282		$	72,452		$	23,638	$	—		$	—		$	438,372
Intercompany revenue	—			14,168			3,780		—			(17,948		)	—
Total revenue	342,282			86,620			27,418		—			(17,948		)	438,372
Direct costs	292,902			44,324			17,624		—			(17,085		)	337,765
Gross profit	49,380			42,296			9,794		—			(863		)	100,607
Selling, general and administrative expense	7,995			7,510			9,029		14,463			—			38,997
Net (gain) loss on sale and disposal of assets	(112		)	(7		)	232		(1		)	—			112
Operating income (loss)	$	41,497		$	34,793		$	533	$	(14,462	)	$	(863	)	$	61,498
Depreciation and amortization	$	15,239		$	2,521		$	2,582	$	804		$	(345	)	$	20,801
Property and equipment additions	$	15,297		$	2,282		$	1,048	$	3,008		$	(542	)	$	21,093
Three Months Ended June 30, 2011
External revenue	$	291,332		$	72,955		$	11,818	$	—		$	—		$	376,105
Intercompany revenue	—			11,430			4,391		—			(15,821		)	—
Total revenue	291,332			84,385			16,209		—			(15,821		)	376,105
Direct costs	238,392			43,716			11,419		—			(14,254		)	279,273
Gross profit	52,940			40,669			4,790		—			(1,567		)	96,832
Selling, general and administrative expense	6,044			6,853			3,584		10,182			—			26,663
Net loss on sale and disposal of assets	51			7			2		—			—			60
Operating income (loss)	$	46,845		$	33,809		$	1,204	$	(10,182	)	$	(1,567	)	$	70,109
Depreciation and amortization	$	9,533		$	2,508		$	668	$	685		$	(318	)	$	13,076
Property and equipment additions	$	13,236		$	1,728		$	258	$	1,627		$	(449	)	$	16,400

9. Lines of Business, continued

	Animal Hospital		Laboratory			All Other			Corporate			Intercompany Eliminations			Total
Six Months Ended June 30, 2012
External revenue	$	658,407	$	144,423		$	45,007		$	—		$	—		$	847,837
Intercompany revenue	—		26,927			8,736			—			(35,663		)	—
Total revenue	658,407		171,350			53,743			—			(35,663		)	847,837
Direct costs	563,471		88,503			35,282			—			(33,405		)	653,851
Gross profit	94,936		82,847			18,461			—			(2,258		)	193,986
Selling, general and administrative expense	15,052		15,108			18,312			29,576			—			78,048
Net loss (gain) on sale and disposal of assets	393		(14		)	240			16			—			635
Operating income (loss)	$	79,491	$	67,753		$	(91	)	$	(29,592	)	$	(2,258	)	$	115,303
Depreciation and amortization	$	26,583	$	5,074		$	4,845		$	1,568		$	(707	)	$	37,363
Property and equipment additions	$	26,063	$	3,349		$	2,770		$	5,991		$	(1,008	)	$	37,165
Six Months Ended June 30, 2011
External revenue	$	561,273	$	142,051		$	27,904		$	—		$	—		$	731,228
Intercompany revenue	—		21,883			7,401			—			(29,284		)	—
Total revenue	561,273		163,934			35,305			—			(29,284		)	731,228
Direct costs	468,780		86,535			26,057			—			(26,754		)	554,618
Gross profit	92,493		77,399			9,248			—			(2,530		)	176,610
Selling, general and administrative expense	12,127		13,489			7,140			20,090			—			52,846
Net loss on sale and disposal of assets	129		18			2			—			—			149
Operating income (loss)	$	80,237	$	63,892		$	2,106		$	(20,090	)	$	(2,530	)	$	123,615
Depreciation and amortization	$	19,406	$	4,979		$	1,325		$	1,365		$	(619	)	$	26,456
Property and equipment additions	$	22,771	$	2,964		$	1,017		$	2,585		$	(903	)	$	28,434
At June 30, 2012
Total assets	$	1,578,725	$	244,360		$	219,390		$	132,700		$	(23,980	)	$	2,151,195
At December 31, 2011
Total assets	$	1,439,103	$	232,423		$	202,187		$	142,793		$	(21,138	)	$	1,995,368