

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,
	2014		2013		2012
Animal Hospitals:
Acquisitions ⁽¹⁾, excluding AVC in 2012	47		20		35
AVC ⁽¹⁾	—		—		44
New facilities	—		—		1
Acquisitions relocated into our existing animal hospitals	(4	)	(2	)	(6	)
Sold, closed or merged	(9	)	(18	)	(6	)
Net increase	34		—		68
Laboratories:
Acquisitions	—		1		1
New facilities	3		—		2
Acquisitions relocated into our existing laboratories	—		—		(1	)
Net increase	3		1		2

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⁽¹⁾	Associate Veterinary Clinics (1981) LTD ("AVC") was acquired on January 31, 2012.



4.	Acquisitions, continued

Animal Hospital and Laboratory Acquisitions, excluding AVC

The purchase price allocations for some of the 2014 acquisitions included in the table below are preliminary; however, adjustments, if any, are not expected to be material. The measurement periods for purchase price allocations do not exceed 12 months from the acquisition date. The following table summarizes the aggregate consideration for our acquired independent animal hospitals and laboratories, excluding AVC and the allocation of the purchase price (in thousands):



	For Years Ended December 31,
	2014			2013			2012
Consideration:
Cash, net of cash acquired	$	122,803		$	52,688		$	78,629
Assumed debt	7,426			2,360			—
Holdbacks	3,000			1,092			2,425
Earn-out contingent consideration	2,037			1,285			1,306
Fair value of total consideration transferred	$	135,266		$	57,425		$	82,360
Allocation of the Purchase Price:
Tangible assets	$	5,902		$	14,779		$	3,515
Identifiable intangible assets⁽¹⁾	22,964			15,001			14,718
Goodwill⁽²⁾	110,234			45,665			64,253
Notes payable and other liabilities assumed	(115		)	(11,084		)	(126		)
	$	138,985		$	64,361		$	82,360
Noncontrolling interest	(1,705		)	(6,936		)	—
Fair value of pre-existing investment	(2,014		)	—			—
Total	$	135,266		$	57,425		$	82,360

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⁽¹⁾

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


⁽²⁾	We expect that $67.2 million, $15.0 million and $60.4 million of the goodwill recorded in 2014, 2013 and 2012, 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 $9.0 million, $5.3 million and $5.3 million in 2014, 2013, and 2012, 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 facilitates 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, net of cash acquired	$	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

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⁽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 $0.4 million of the goodwill recognized would be fully deductible for income tax purposes.

Other Acquisitions

2014 Camp Bow Wow

On August 15, 2014 we acquired 100% of D.O.G. Enterprises, LLC for $17.0 million in cash with up to an additional $3.0 million that may be earned over the next three years. Camp Bow Wow primarily franchises a premier provider of pet services including dog day care, overnight boarding, grooming and other ancillary services at specially designed pet care facilities, principally under the trademark Camp Bow Wow^®_.As of December 31, 2014, there were 129 Camp Bow Wow^® franchise locations operating in 36 states and one Canadian province.



4.	Acquisitions, continued

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



Consideration:
Cash, net of cash acquired	$	15,174
Assumed debt	323
Holdbacks	1,500
Earn-out contingent consideration	760
Fair value of total consideration transferred	$	17,757

Allocation of the Purchase Price:
Tangible assets	$	637
Identifiable intangible assets⁽¹⁾	13,420
Goodwill⁽²⁾	4,219
Other liabilities assumed	(519		)
Total	$	17,757

____________________________

⁽¹⁾

Identifiable intangible assets primarily include franchise rights, trademarks, covenants-not-to-compete and existing technology. The weighted-average amortization period for the total identifiable intangible assets is approximately ten years. The weighted-average amortization periods for the franchise rights, covenants and existing technology is approximately ten years, three years and four years, respectively. The trademarks have an indefinite life and will be assessed annually for impairment.


⁽²⁾	We expect that the full amount of the goodwill recognized will be fully deductible for income tax purposes.

Additionally, Camp Bow Wow subsequently acquired two additional dog day care facilities for a combined total of approximately $0.5 million in cash.

2012 ThinkPets, Inc. ("ThinkPets")

On February 1, 2012, we acquired 100% interest in ThinkPets for $21.0 million , payable by delivery of 473,389 shares of VCA common stock and $10.5 million in cash. We merged the operations of ThinkPets with Vetstreet, 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.



4.	Acquisitions, continued

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



Consideration:
Cash, net of cash acquired	$	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 $0.8 million of the goodwill recognized would be fully deductible for income tax purposes.

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

Pro Forma Information (unaudited)

The following unaudited pro forma financial information for the years ended December 31, 2014 and 2013 presents, (i) the actual results of operations of our 2014 acquisitions and (ii) the combined results of operations for our company and our 2014 acquisitions as if those acquisitions had been completed on January 1, 2013, 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, 2013. 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.



4.	Acquisitions, continued

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, 2014	45,343	3,771
2014 supplemental pro forma from January 1, 2014 to December 31, 2014⁽¹⁾	2,000,978	142,959
2013 supplemental pro forma from January 1, 2013 to December 31, 2013⁽¹⁾	1,946,643	148,747

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⁽¹⁾	2014 supplemental pro forma net income was adjusted to exclude $0.2 million of acquisition-related costs incurred in 2014. 2013 supplemental pro forma net income was adjusted to include these charges.