Lines of Business

9 Months Ended

Sep. 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 (i) Medical Technology business, which sells digital radiography and ultrasound imaging equipment, related computer hardware, software and ancillary services to the veterinary market and our (ii) Vetstreet business and our (iii) ThinkPets business. Vetstreet and ThinkPets provide 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 segments.

10. Lines of Business, continued

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):

	Animal Hospital			Laboratory		All Other			Corporate			Intercompany Eliminations			Total
Three Months Ended September 30, 2012
External revenue	$	342,840		$	68,139	$	22,634		$	—		$	—		$	433,613
Intercompany revenue	—			13,147		5,466			—			(18,613		)	—
Total revenue	342,840			81,286		28,100			—			(18,613		)	433,613
Direct costs	288,588			44,109		19,217			—			(17,482		)	334,432
Gross profit	54,252			37,177		8,883			—			(1,131		)	99,181
Selling, general and administrative expense	7,745			7,285		8,764			13,814			—			37,608
Net (gain) loss on sale and disposal of assets	(77		)	—		464			—			—			387
Operating income (loss)	$	46,584		$	29,892	$	(345	)	$	(13,814	)	$	(1,131	)	$	61,186
Depreciation and amortization	$	13,953		$	2,544	$	2,611		$	806		$	(395	)	$	19,519
Property and equipment additions	$	14,069		$	1,342	$	1,660		$	2,120		$	(1,099	)	$	18,092
Three Months Ended September 30, 2011
External revenue	$	303,203		$	67,588	$	14,344		$	—		$	—		$	385,135
Intercompany revenue	—			11,397		4,538			—			(15,935		)	—
Total revenue	303,203			78,985		18,882			—			(15,935		)	385,135
Direct costs	251,613			43,657		14,149			—			(14,421		)	294,998
Gross profit	51,590			35,328		4,733			—			(1,514		)	90,137
Selling, general and administrative expense	6,126			7,088		4,669			14,605			—			32,488
Net loss on sale and disposal of assets	(213		)	1		20			—			—			(192		)
Operating income (loss)	$	45,677		$	28,239	$	44		$	(14,605	)	$	(1,514	)	$	57,841
Depreciation and amortization	$	10,393		$	2,563	$	1,606		$	702		$	(334	)	$	14,930
Property and equipment additions	$	11,061		$	1,085	$	1,986		$	1,338		$	(629	)	$	14,841

10. Lines of Business, continued

	Animal Hospital			Laboratory			All Other			Corporate			Intercompany Eliminations			Total
Nine Months Ended September 30, 2012
External revenue	$	1,001,247		$	212,562		$	67,641		$	—		$	—		$	1,281,450
Intercompany revenue	—			40,074			14,202			—			(54,276		)	—
Total revenue	1,001,247			252,636			81,843			—			(54,276		)	1,281,450
Direct costs	852,059			132,612			54,499			—			(50,887		)	988,283
Gross profit	149,188			120,024			27,344			—			(3,389		)	293,167
Selling, general and administrative expense	22,797			22,393			27,076			43,390			—			115,656
Net loss (gain) on sale and disposal of assets	316			(14		)	704			16			—			1,022
Operating income (loss)	$	126,075		$	97,645		$	(436	)	$	(43,406	)	$	(3,389	)	$	176,489
Depreciation and amortization	$	40,536		$	7,618		$	7,456		$	2,374		$	(1,102	)	$	56,882
Property and equipment additions	$	40,132		$	4,691		$	4,430		$	8,111		$	(2,107	)	$	55,257
Nine Months Ended September 30, 2011
External revenue	$	864,476		$	209,639		$	42,248		$	—		$	—		$	1,116,363
Intercompany revenue	—			33,280			11,939			—			(45,219		)	—
Total revenue	864,476			242,919			54,187			—			(45,219		)	1,116,363
Direct costs	720,393			130,192			40,206			—			(41,175		)	849,616
Gross profit	144,083			112,727			13,981			—			(4,044		)	266,747
Selling, general and administrative expense	18,253			20,577			11,809			34,695			—			85,334
Net loss on sale and disposal of assets	(84		)	19			22			—			—			(43		)
Operating income (loss)	$	125,914		$	92,131		$	2,150		$	(34,695	)	$	(4,044	)	$	181,456
Depreciation and amortization	$	29,799		$	7,542		$	2,931		$	2,067		$	(953	)	$	41,386
Property and equipment additions	$	33,832		$	4,049		$	3,003		$	3,923		$	(1,532	)	$	43,275
At September 30, 2012
Total assets	$	1,623,778		$	244,811		$	219,630		$	139,314		$	(26,248	)	$	2,201,285
At December 31, 2011
Total assets	$	1,439,103		$	232,423		$	202,187		$	142,793		$	(21,138	)	$	1,995,368