Lines of Business

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Lines of Business

Lines 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 business, which provides online and printed 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 2013 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 segment information presented includes a reclassification to eliminate discounts on certain Laboratory contracts that were previously allocated to the All Other operating segment from Eliminations in the prior year financial data. These reclasses better represent the corresponding discounts and thus the operating results of our standalone entities. These changes in segment reporting only revised the presentation within the table below and did not impact our condensed, consolidated financial statements for any period presented.

8. Lines of Business, continued

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

	Animal Hospital		Laboratory			All Other			Corporate			Eliminations			Total
Three Months Ended March 31, 2014
External revenue	$	351,588	$	74,783		$	22,201		$	—		$	935		$	449,507
Intercompany revenue	—		13,751			5,920			—			(19,671		)	—
Total revenue	351,588		88,534			28,121			—			(18,736		)	449,507
Direct costs	302,788		45,503			18,152			—			(18,387		)	348,056
Gross profit	48,800		43,031			9,969			—			(349		)	101,451
Selling, general and administrative expense	9,128		8,018			8,348			15,946			—			41,440
Operating income (loss) before sale or disposal of assets	39,672		35,013			1,621			(15,946		)	(349		)	60,011
Net loss (gain) on sale or disposal of assets	168		(71		)	(1,184		)	(134		)	—			(1,221		)
Operating income (loss)	$	39,504	$	35,084		$	2,805		$	(15,812	)	$	(349	)	$	61,232
Depreciation and amortization	$	14,742	$	2,535		$	2,136		$	819		$	(465	)	$	19,767
Capital expenditures	$	13,068	$	1,981		$	758		$	1,411		$	(599	)	$	16,619
Three Months Ended March 31, 2013
External revenue	$	340,615	$	73,638		$	23,628		$	—		$	725		$	438,606
Intercompany revenue	—		13,697			4,895			—			(18,592		)	—
Total revenue	340,615		87,335			28,523			—			(17,867		)	438,606
Direct costs	295,416		44,870			18,889			—			(17,492		)	341,683
Gross profit	45,199		42,465			9,634			—			(375		)	96,923
Selling, general and administrative expense	8,325		8,005			8,914			14,602			—			39,846
Operating income (loss) before sale or disposal of assets	36,874		34,460			720			(14,602		)	(375		)	57,077
Net loss (gain) on sale or disposal of assets	1,729		(5		)	2			—			—			1,726
Operating income (loss)	$	35,145	$	34,465		$	718		$	(14,602	)	$	(375	)	$	55,351
Depreciation and amortization	$	13,387	$	2,507		$	1,965		$	819		$	(439	)	$	18,239
Capital expenditures	$	14,441	$	1,918		$	1,333		$	640		$	(363	)	$	17,969

At March 31, 2014
Total assets	$	1,864,993	$	261,178	$	94,145	$	70,046	$	(40,431	)	$	2,249,931
At December 31, 2013
Total assets	$	1,854,609	$	247,591	$	96,245	$	77,153	$	(37,817	)	$	2,237,781