Lines of Business

9 Months Ended

Sep. 30, 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, 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, and our Camp Bow Wow business, which primarily franchises the right to operate dog day care, overnight boarding and grooming services. 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.

9. 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 September 30, 2014
External revenue	$	395,820		$	77,394	$	25,397		$	—		$	966		$	499,577
Intercompany revenue	—			14,509		4,684			—			(19,193		)	—
Total revenue	395,820			91,903		30,081			—			(18,227		)	499,577
Direct costs	327,283			46,879		19,945			—			(18,287		)	375,820
Gross profit	68,537			45,024		10,136			—			60			123,757
Selling, general and administrative expense	9,269			8,610		8,023			16,890			—			42,792
Operating income (loss) before charges	59,268			36,414		2,113			(16,890		)	60			80,965
Impairment of goodwill and other long-lived assets	—			—		27,019			—			—			27,019
Net loss (gain) on sale or disposal of assets	598			7		—			(135		)	—			470
Operating income (loss)	$	58,670		$	36,407	$	(24,906	)	$	(16,755	)	$	60		$	53,476
Depreciation and amortization	$	15,201		$	2,671	$	1,781		$	688		$	(479	)	$	19,862
Capital expenditures	$	17,224		$	2,391	$	1,123		$	2,025		$	(649	)	$	22,114
Three Months Ended September 30, 2013
External revenue	$	368,868		$	72,877	$	21,482		$	—		$	828		$	464,055
Intercompany revenue	—			13,583		5,980			—			(19,563		)	—
Total revenue	368,868			86,460		27,462			—			(18,735		)	464,055
Direct costs	308,029			45,650		17,456			—			(17,757		)	353,378
Gross profit	60,839			40,810		10,006			—			(978		)	110,677
Selling, general and administrative expense	8,678			7,921		7,618			14,530			—			38,747
Operating income (loss) before charges	52,161			32,889		2,388			(14,530		)	(978		)	71,930
Net (gain) loss on sale or disposal of assets	(110		)	11		—			(10		)	—			(109		)
Operating income (loss)	$	52,271		$	32,878	$	2,388		$	(14,520	)	$	(978	)	$	72,039
Depreciation and amortization	$	15,037		$	2,554	$	2,087		$	816		$	(450	)	$	20,044
Capital expenditures	$	15,915		$	1,905	$	872		$	1,795		$	(900	)	$	19,587

9. Lines of Business, continued

	Animal Hospital		Laboratory			All Other			Corporate			Eliminations			Total
Nine Months Ended September 30, 2014
External revenue	$	1,134,184	$	233,497		$	68,055		$	—		$	2,820		$	1,438,556
Intercompany revenue	—		42,895			13,859			—			(56,754		)	—
Total revenue	1,134,184		276,392			81,914			—			(53,934		)	1,438,556
Direct costs	953,511		139,245			54,161			—			(53,984		)	1,092,933
Gross profit	180,673		137,147			27,753			—			50			345,623
Selling, general and administrative expense	28,261		24,909			23,782			47,211			—			124,163
Operating income (loss) before charges	152,412		112,238			3,971			(47,211		)	50			221,460
Impairment of goodwill and other long-lived assets	—		—			27,019			—			—			27,019
Net loss (gain) on sale and disposal of assets	1,180		(71		)	(1,087		)	(195		)	—			(173		)
Operating income (loss)	$	151,232	$	112,309		$	(21,961	)	$	(47,016	)	$	50		$	194,614
Depreciation and amortization	$	45,053	$	7,769		$	5,921		$	2,333		$	(1,417	)	$	59,659
Capital expenditures	$	38,411	$	5,676		$	2,801		$	4,769		$	(1,564	)	$	50,093
Nine Months Ended September 30, 2013
External revenue	$	1,074,688	$	223,466		$	67,339		$	—		$	2,423		$	1,367,916
Intercompany revenue	—		41,559			16,118			—			(57,677		)	—
Total revenue	1,074,688		265,025			83,457			—			(55,254		)	1,367,916
Direct costs	908,537		136,524			54,394			—			(53,433		)	1,046,022
Gross profit	166,151		128,501			29,063			—			(1,821		)	321,894
Selling, general and administrative expense	25,723		23,891			24,573			43,429			—			117,616
Operating income (loss) before charges	140,428		104,610			4,490			(43,429		)	(1,821		)	204,278
Net loss (gain) on sale and disposal of assets	1,459		5			3			(280		)	—			1,187
Operating income (loss)	$	138,969	$	104,605		$	4,487		$	(43,149	)	$	(1,821	)	$	203,091
Depreciation and amortization	$	43,108	$	7,651		$	5,989		$	2,370		$	(1,335	)	$	57,783
Capital expenditures	$	41,682	$	5,641		$	3,244		$	3,741		$	(1,626	)	$	52,682
At September 30, 2014
Total assets	$	1,904,183	$	261,245		$	85,031		$	174,308		$	(152,282	)	$	2,272,485
At December 31, 2013
Total assets	$	1,854,609	$	247,591		$	96,245		$	77,153		$	(37,817	)	$	2,237,781