

4.	Acquisitions

Our acquisition strategy includes the acquisition of animal hospitals, animal hospital chains, laboratories or related businesses. In accordance with that strategy, we acquired the following:



	For the Years Ended December 31,
	2013		2012		2011
Animal hospitals:
Acquisitions ⁽¹⁾, excluding AVC in 2012 and BrightHeart in 2011	20		35		18
AVC ⁽¹⁾	—		44		—
BrightHeart⁽¹⁾	—		—		9
New facilities	—		1		—
Acquisitions relocated into our existing animal hospitals	(2	)	(6	)	(3	)
Sold, closed or merged	(18	)	(6	)	(11	)
Total	—		68		13
Laboratories:
Acquisitions	1		1		1
Acquisitions relocated into our existing laboratories	—		(1	)	—
New facilities	—		2		2
Total	1		2		3


⁽¹⁾	Associate Veterinary Clinics (1981) LTD ("AVC") was acquired on January 31, 2012 and BrightHeart Veterinary Centers (“BrightHeart") was acquired on July 11, 2011.



4.	Acquisitions, continued

Animal Hospital and Laboratory Acquisitions, excluding AVC and BrightHeart

The following table summarizes the aggregate consideration, including acquisition costs, paid by us for our acquired animal hospitals and laboratories, excluding AVC and BrightHeart, and the allocation of the purchase price (in thousands):



	For Years Ended December 31,
	2013			2012			2011
Consideration:
Cash	$	52,688		$	78,629		$	34,243
Assumed debt	2,360			—			—
Holdback	1,092			2,425			1,500
Contingent consideration	1,285			1,306			79
Fair value of total consideration transferred	$	57,425		$	82,360		$	35,822
Allocation of the Purchase Price:
Tangible assets	$	14,779		$	3,515		$	1,237
Identifiable intangible assets	15,001			14,718			6,414
Goodwill⁽¹⁾	45,665			64,253			28,171
Notes payable and other liabilities assumed	(11,084		)	(126		)	—
	$	64,361		$	82,360		$	35,822
Noncontrolling interest	(6,936		)	—			—
Total	$	57,425		$	82,360		$	35,822


⁽¹⁾	We expect that $15.0 million, $60.4 million and $26.4 million of the goodwill recorded in 2013, 2012 and 2011, respectively, will be fully deductible for income tax purposes.

In addition to the purchase price listed above are cash payments made for real estate acquired in connection with our purchase of animal hospitals totaling $5.3 million, $5.3 million and $1.9 million in 2013, 2012, and 2011, respectively.

2012 AVC Investment

On January 31, 2012, we increased our investment in AVC by approximately CDN $81 million (approximately US $81 million) becoming the sole non-veterinarian shareholder of AVC. At the time of the additional investment, AVC operated 44 animal hospitals in three Canadian provinces, offering services ranging from primary care, to specialty referral services and 24-hour emergency care. This investment and planned additional investments in AVC will facilitate our continued expansion in the Canadian market. At the time of the investment, AVC had annualized revenue of approximately CDN $95 million (approximately US $95 million). Our consolidated financial statements reflect the operating results of AVC since January 31, 2012.



4.	Acquisitions, continued

The following table summarizes the total investment and final allocation of the investment in AVC (in thousands):



Consideration:
Cash	$	48,819
Assumed debt	25,915
Fair value of total consideration transferred	$	74,734

Allocation of the Purchase Price:
Tangible assets	$	11,694
Identifiable intangible assets⁽¹⁾	25,170
Goodwill⁽²⁾	79,707
Other liabilities assumed	(21,826		)
	$	94,745
Noncontrolling interest	(8,161		)
Fair value of pre-existing investment in AVC	(11,850		)
Total	$	74,734

⁽¹⁾

Identifiable intangible assets include customer relationships, trademark and covenants-not-to-compete. The weighted- average amortization period for the total identifiable intangible assets is approximately six years. The customer-related intangible assets weighted-average amortization period is approximately five years. The trademark weighted-average amortization period is approximately ten years. The covenants-not-to-compete weighted-average amortization period is approximately three years.


⁽²⁾	We expected that $362,000 of the goodwill recognized would be fully deductible for income tax purposes.

2011 BrightHeart Acquisition

On July 11, 2011, we acquired 100% of the membership interests of BrightHeart for approximately $50 million in cash. BrightHeart operates nine animal hospitals, eight of which focus on the delivery of specialty and emergency medicine. The acquisition increased our level of market recognition in areas where we had an existing market presence. Our consolidated financial statements reflect the operating results of BrightHeart since July 11, 2011.



4.	Acquisitions, continued

The following table summarizes the final purchase price and the final allocation of the purchase price (in thousands):



Consideration:
Cash	$	23,490
Assumed debt	26,048
Contingent consideration	481
Fair value of total consideration transferred	$	50,019

Allocation of the Purchase Price:
Tangible assets	$	18,921
Identifiable intangible assets⁽¹⁾	8,796
Goodwill⁽²⁾	39,806
Other liabilities assumed	(17,504		)
Total	$	50,019


⁽¹⁾	Identifiable intangible assets primarily include customer relationships. The weighted average amortization period for both the total identifiable intangible assets and the customer-related intangible assets is approximately five years.


⁽²⁾	We expected that $38.8 million of the goodwill recognized would be fully deductible for income tax purposes.



4.	Acquisitions, continued

Other Acquisitions

2012 ThinkPets, Inc. ("ThinkPets")

On February 1, 2012, we acquired 100% interest in ThinkPets for $21 million , payable by delivery of 473,389 shares of VCA common stock and $10.5 million in cash. We intend to combine the operations of ThinkPets with our Vetstreet business, which we expect will improve the products and services it offers to clients of both companies. Our consolidated financial statements reflect the operating results of ThinkPets since February 1, 2012.

The following table summarizes the total purchase price and the final allocation of the investment in ThinkPets (in thousands):



Consideration:
Cash	$	7,468
Issuance of common stock for acquisitions	10,500
Holdback	1,050
Fair value of total consideration transferred	$	19,018

Allocation of the Purchase Price:
Tangible assets	$	2,093
Identifiable intangible assets⁽¹⁾	7,221
Goodwill⁽²⁾	12,155
Other liabilities assumed	(2,451		)
Total	$	19,018


⁽¹⁾	Identifiable intangible assets include customer relationships, contracts and trademarks. The weighted average amortization period for the total identifiable intangible assets is approximately eight years, for the customer-related intangible assets approximately nine years, for the technology approximately four years, and for the trademarks approximately two years.


⁽²⁾	We expected that $821,000 of the goodwill recognized would be fully deductible for income tax purposes.

Our ThinkPets business is reported within our “All Other” category in our segment disclosures combined with our Medical Technology and Vetstreet operating segments.

2011 MediMedia Animal Health, LLC (“Vetstreet”)

On August 9, 2011, we acquired 100% of the ownership interests of Vetstreet, a provider of online and printed communications, professional education and marketing solutions to the veterinary community. The acquisition of Vetstreet expanded the breadth of our product offerings to the veterinary community. We acquired Vetstreet for a final purchase price of $146.4 million, net of cash acquired. The following table summarizes the final purchase price and final allocation of the purchase price (in thousands):



4.	Acquisitions, continued



Consideration:
Cash	$	146,420

Allocation of the Purchase Price:
Tangible assets	$	8,565
Identifiable intangible assets⁽¹⁾	45,810
Goodwill⁽²⁾	96,149
Other liabilities assumed	(4,104		)
Total	$	146,420

⁽¹⁾

Identifiable intangible assets include customer relationships, technology, trademarks, non-compete agreements and contracts. The weighted average amortization period for the total identifiable intangible assets is approximately nine years, for the customer-related intangible assets approximately ten years, for the technology and trademarks approximately seven years, for the non-compete agreements approximately two years and for the contracts approximately eight years.


⁽²⁾	We expected that all of the goodwill recognized would be fully deductible for income tax purposes.

Our Vetstreet business is reported within our “All Other” category in our segment disclosures combined with our Medical Technology operating segment.

Pro Forma Information (unaudited)

The following unaudited pro forma financial information for the years ended December 31, 2013 and 2012 presents, (i) the actual results of operations of our 2013 acquisitions and (ii) the combined results of operations for our company and our 2013 acquisitions as if those acquisitions had been completed on January 1, 2012, the first day of the comparable prior annual reporting period. The pro forma financial information considers principally (i) our company’s financial results, (ii) the unaudited historical financial results of our acquisitions, and (iii) select pro forma adjustments to the historical financial results of our acquisitions. Such pro forma adjustments represent principally estimates of (i) the impact of the hypothetical amortization of acquired intangible assets, (ii) the recognition of fair value adjustments relating to tangible assets, (iii) adjustments reflecting the new capital structure, including additional financing or repayments of debt as part of the acquisitions and (iv) the tax effects of the acquisitions and related adjustments as if those acquisitions had been completed on January 1, 2012. The unaudited pro forma financial information is not necessarily indicative of what our consolidated results of operations would have been had we completed the acquisition at the beginning of the comparable prior annual reporting period.

In addition, the unaudited pro forma financial information does not attempt to project the future results of operations of our company:



	Revenue	Net Income
	(Unaudited)
(In thousands):
Actual from acquisition date to December 31, 2013	12,615	1,350
2013 supplemental pro forma from January 1, 2013 to December 31, 2013⁽¹⁾	1,837,872	138,621
2012 supplemental pro forma from January 1, 2012 to December 31, 2012⁽¹⁾	1,819,693	47,385


⁽¹⁾	2013 supplemental pro forma net income was adjusted to exclude $869,000 of acquisition-related costs incurred in 2013. 2012 supplemental pro forma net income was adjusted to include these charges.