x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 95-4097995 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
Large accelerated filer [X] | Accelerated filer [ ] | |
Non-accelerated filer [ ] | Smaller reporting company [ ] | |
(Do not check if a smaller reporting company) |
Page Number | ||
PART I. | FINANCIAL INFORMATION |
ITEM 1. | FINANCIAL STATEMENTS |
September 30, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 72,914 | $ | 98,888 | |||
Trade accounts receivable, less allowance for uncollectible accounts of $22,569 and $21,775 at September 30, 2016 and December 31, 2015, respectively | 82,166 | 76,634 | |||||
Inventory | 60,811 | 51,523 | |||||
Prepaid expenses and other | 33,905 | 30,521 | |||||
Prepaid income taxes | — | 24,598 | |||||
Total current assets | 249,796 | 282,164 | |||||
Property and equipment, net | 582,840 | 507,753 | |||||
Goodwill | 2,063,494 | 1,517,650 | |||||
Other intangible assets, net | 209,095 | 97,377 | |||||
Notes receivable | 2,142 | 2,194 | |||||
Other | 101,695 | 93,994 | |||||
Total assets | $ | 3,209,062 | $ | 2,501,132 | |||
Liabilities and Equity | |||||||
Current liabilities: | |||||||
Current portion of long-term debt | $ | 32,512 | $ | 33,623 | |||
Accounts payable | 54,150 | 52,337 | |||||
Accrued payroll and related liabilities | 70,213 | 75,519 | |||||
Income tax payable | 8,359 | — | |||||
Other accrued liabilities | 85,607 | 70,828 | |||||
Total current liabilities | 250,841 | 232,307 | |||||
Long-term debt, net | 1,246,122 | 832,718 | |||||
Deferred income taxes, net | 127,104 | 131,478 | |||||
Other liabilities | 39,509 | 36,084 | |||||
Total liabilities | 1,663,576 | 1,232,587 | |||||
Commitments and contingencies | |||||||
Redeemable noncontrolling interests | 12,079 | 11,511 | |||||
Preferred stock, par value $0.001, 11,000 shares authorized, none outstanding | — | — | |||||
VCA Inc. stockholders’ equity: | |||||||
Common stock, par value $0.001, 175,000 shares authorized, 81,075 and 80,764 shares outstanding as of September 30, 2016 and December 31, 2015, respectively | 81 | 81 | |||||
Additional paid-in capital | 32,958 | 19,708 | |||||
Retained earnings | 1,443,715 | 1,275,207 | |||||
Accumulated other comprehensive loss | (41,028 | ) | (50,034 | ) | |||
Total VCA Inc. stockholders’ equity | 1,435,726 | 1,244,962 | |||||
Noncontrolling interests | 97,681 | 12,072 | |||||
Total equity | 1,533,407 | 1,257,034 | |||||
Total liabilities and equity | $ | 3,209,062 | $ | 2,501,132 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenue | $ | 656,854 | $ | 551,717 | $ | 1,873,782 | $ | 1,599,955 | |||||||
Direct costs | 500,277 | 414,051 | 1,416,477 | 1,207,580 | |||||||||||
Gross profit | 156,577 | 137,666 | 457,305 | 392,375 | |||||||||||
Selling, general and administrative expense | 49,343 | 44,860 | 147,661 | 133,743 | |||||||||||
Business interruption insurance gain | — | (4,523 | ) | — | (4,523 | ) | |||||||||
Net loss (gain) on sale or disposal of assets | 236 | 250 | 528 | (234 | ) | ||||||||||
Operating income | 106,998 | 97,079 | 309,116 | 263,389 | |||||||||||
Interest expense, net | 9,300 | 5,455 | 24,262 | 15,396 | |||||||||||
Debt retirement costs | — | — | 1,600 | — | |||||||||||
Other (income) expense | (121 | ) | 59 | (985 | ) | 88 | |||||||||
Income before provision for income taxes | 97,819 | 91,565 | 284,239 | 247,905 | |||||||||||
Provision for income taxes | 37,040 | 35,097 | 109,312 | 95,961 | |||||||||||
Net income | 60,779 | 56,468 | 174,927 | 151,944 | |||||||||||
Net income attributable to noncontrolling interests | 2,548 | 1,614 | 6,419 | 4,490 | |||||||||||
Net income attributable to VCA Inc. | $ | 58,231 | $ | 54,854 | $ | 168,508 | $ | 147,454 | |||||||
Basic earnings per share | $ | 0.72 | $ | 0.68 | $ | 2.08 | $ | 1.80 | |||||||
Diluted earnings per share | $ | 0.71 | $ | 0.67 | $ | 2.06 | $ | 1.78 | |||||||
Weighted-average shares outstanding for basic earnings per share | 80,924 | 80,815 | 80,845 | 81,700 | |||||||||||
Weighted-average shares outstanding for diluted earnings per share | 81,812 | 81,795 | 81,695 | 82,744 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income (1) | $ | 60,779 | $ | 56,468 | $ | 174,927 | $ | 151,944 | |||||||
Other comprehensive income: | |||||||||||||||
Foreign currency translation adjustments | (3,389 | ) | (14,005 | ) | 9,241 | (25,274 | ) | ||||||||
Other comprehensive (loss) income | (3,389 | ) | (14,005 | ) | 9,241 | (25,274 | ) | ||||||||
Total comprehensive income | 57,390 | 42,463 | 184,168 | 126,670 | |||||||||||
Comprehensive income attributable to noncontrolling interests (1) | 2,360 | 1,187 | 6,654 | 3,728 | |||||||||||
Comprehensive income attributable to VCA Inc. | $ | 55,030 | $ | 41,276 | $ | 177,514 | $ | 122,942 |
(1) | Includes approximately $3.1 million and $2.5 million of net income related to redeemable and mandatorily redeemable noncontrolling interests for the nine months ended September 30, 2016 and 2015, respectively. |
Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income | Noncontrolling Interests | Total | |||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
Balances, December 31, 2014 | 82,937 | $ | 83 | $ | 155,802 | $ | 1,064,158 | $ | (19,397 | ) | $ | 10,975 | $ | 1,211,621 | ||||||||||||
Net income (excludes $1,392 and $1,088 related to redeemable and mandatorily redeemable noncontrolling interests, respectively) | — | — | — | 147,454 | — | 2,010 | 149,464 | |||||||||||||||||||
Other comprehensive loss (excludes $338 related to mandatorily redeemable noncontrolling interests) | — | — | — | — | (24,512 | ) | (424 | ) | (24,936 | ) | ||||||||||||||||
Formation of noncontrolling interests | — | — | — | — | — | 2,661 | 2,661 | |||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | (1,784 | ) | (1,784 | ) | |||||||||||||||||
Purchase of noncontrolling interests | — | — | (217 | ) | — | — | (473 | ) | (690 | ) | ||||||||||||||||
Share-based compensation | — | — | 12,086 | — | — | — | 12,086 | |||||||||||||||||||
Issuance of common stock under stock incentive plans | 633 | 1 | 1,570 | — | — | — | 1,571 | |||||||||||||||||||
Stock repurchases | (3,003 | ) | (3 | ) | (161,114 | ) | — | — | — | (161,117 | ) | |||||||||||||||
Excess tax benefit from share-based compensation | — | — | 8,008 | — | — | — | 8,008 | |||||||||||||||||||
Balances, September 30, 2015 | 80,567 | $ | 81 | $ | 16,135 | $ | 1,211,612 | $ | (43,909 | ) | $ | 12,965 | $ | 1,196,884 | ||||||||||||
Balances, December 31, 2015 | 80,764 | $ | 81 | $ | 19,708 | $ | 1,275,207 | $ | (50,034 | ) | $ | 12,072 | $ | 1,257,034 | ||||||||||||
Net income (excludes $1,852 and $1,220 related to redeemable and mandatorily redeemable noncontrolling interests, respectively) | — | — | — | 168,508 | — | 3,347 | 171,855 | |||||||||||||||||||
Other comprehensive income (excludes $117 related to mandatorily redeemable noncontrolling interests) | — | — | — | — | 9,006 | 118 | 9,124 | |||||||||||||||||||
Formation of noncontrolling interests | — | — | — | — | — | 86,951 | 86,951 | |||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | (2,667 | ) | (2,667 | ) | |||||||||||||||||
Purchase of noncontrolling interests | — | — | (2,075 | ) | — | — | (2,066 | ) | (4,141 | ) | ||||||||||||||||
Share-based compensation | — | — | 13,669 | — | — | — | 13,669 | |||||||||||||||||||
Issuance of common stock under stock incentive plans | 458 | — | 3,949 | — | — | — | 3,949 | |||||||||||||||||||
Stock repurchases | (147 | ) | — | (9,887 | ) | — | — | — | (9,887 | ) | ||||||||||||||||
Excess tax benefit from share-based compensation | — | — | 7,588 | — | — | — | 7,588 | |||||||||||||||||||
Other | — | — | 6 | — | — | (74 | ) | (68 | ) | |||||||||||||||||
Balances, September 30, 2016 | 81,075 | $ | 81 | $ | 32,958 | $ | 1,443,715 | $ | (41,028 | ) | $ | 97,681 | $ | 1,533,407 |
VCA Inc. and Subsidiaries Condensed, Consolidated Statements of Cash Flows (Unaudited) (In thousands) | |||||||
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 174,927 | $ | 151,944 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 74,072 | 60,634 | |||||
Amortization of debt issue costs | 1,247 | 1,306 | |||||
Provision for uncollectible accounts | 4,949 | 6,723 | |||||
Debt retirement costs | 1,600 | — | |||||
Net loss (gain) on sale or disposal of assets | 528 | (234 | ) | ||||
Share-based compensation | 13,669 | 12,086 | |||||
Excess tax benefits from share-based compensation | (7,588 | ) | (8,008 | ) | |||
Other | 7,668 | (431 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Trade accounts receivable | (8,033 | ) | (20,568 | ) | |||
Inventory, prepaid expenses and other assets | (11,684 | ) | (931 | ) | |||
Accounts payable and other accrued liabilities | 11,142 | (2,451 | ) | ||||
Accrued payroll and related liabilities | (7,783 | ) | 18,892 | ||||
Income taxes | 36,168 | 28,054 | |||||
Net cash provided by operating activities | 290,882 | 247,016 | |||||
Cash flows from investing activities: | |||||||
Business acquisitions, net of cash acquired | (599,655 | ) | (119,336 | ) | |||
Property and equipment additions | (90,546 | ) | (61,470 | ) | |||
Proceeds from sale or disposal of assets | 1,699 | 6,469 | |||||
Other | (7,634 | ) | (434 | ) | |||
Net cash used in investing activities | (696,136 | ) | (174,771 | ) | |||
Cash flows from financing activities: | |||||||
Repayment of long-term obligations | (1,263,394 | ) | (20,174 | ) | |||
Proceeds from issuance of long-term obligations | 1,255,000 | — | |||||
Proceeds from revolving credit facility | 465,000 | 97,000 | |||||
Repayment of revolving credit facility | (65,000 | ) | — | ||||
Payment of financing costs | (3,817 | ) | — | ||||
Distributions to noncontrolling interests | (4,752 | ) | (3,810 | ) | |||
Purchase of noncontrolling interests | (4,239 | ) | (1,493 | ) | |||
Proceeds from issuance of common stock under stock incentive plans | 3,949 | 1,571 | |||||
Excess tax benefits from share-based compensation | 7,588 | 8,008 | |||||
Stock repurchases | (9,887 | ) | (161,117 | ) | |||
Other | (1,310 | ) | 2,210 | ||||
Net cash provided by (used in) financing activities | 379,138 | (77,805 | ) | ||||
Effect of currency exchange rate changes on cash and cash equivalents | 142 | (831 | ) | ||||
Decrease in cash and cash equivalents | (25,974 | ) | (6,391 | ) | |||
Cash and cash equivalents at beginning of period | 98,888 | 81,383 | |||||
Cash and cash equivalents at end of period | $ | 72,914 | $ | 74,992 | |||
VCA Inc. and Subsidiaries Condensed, Consolidated Statements of Cash Flows (Continued) (Unaudited) (In thousands) | |||||||
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Supplemental disclosures of cash flow information: | |||||||
Interest paid | $ | 17,847 | $ | 13,674 | |||
Income taxes paid | $ | 68,748 | $ | 67,814 |
1. | Nature of Operations |
2. | Basis of Presentation |
2. | Basis of Presentation, continued |
3. | Goodwill and Other Long-Lived Assets |
Animal Hospital | Laboratory | All Other | Total | ||||||||||||
Balance as of December 31, 2015 | |||||||||||||||
Goodwill | $ | 1,402,106 | $ | 101,269 | $ | 144,332 | $ | 1,647,707 | |||||||
Accumulated impairment losses | — | — | (130,057 | ) | (130,057 | ) | |||||||||
Subtotal | 1,402,106 | 101,269 | 14,275 | 1,517,650 | |||||||||||
Goodwill acquired | 536,060 | — | 941 | 537,001 | |||||||||||
Foreign translation adjustment | 6,657 | 24 | — | 6,681 | |||||||||||
Other (1) | 2,162 | — | — | 2,162 | |||||||||||
Balance as of September 30, 2016 | |||||||||||||||
Goodwill | 1,946,985 | 101,293 | 145,273 | 2,193,551 | |||||||||||
Accumulated impairment losses | — | — | (130,057 | ) | (130,057 | ) | |||||||||
Subtotal | $ | 1,946,985 | $ | 101,293 | $ | 15,216 | $ | 2,063,494 |
(1) | "Other" consists primarily of measurement period adjustments. |
As of September 30, 2016 | As of December 31, 2015 | ||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||
Non-contractual customer relationships | $ | 214,050 | $ | (61,153 | ) | $ | 152,897 | $ | 116,082 | $ | (48,821 | ) | $ | 67,261 | |||||||||
Covenants not-to-compete | 22,613 | (6,997 | ) | 15,616 | 12,435 | (4,779 | ) | 7,656 | |||||||||||||||
Favorable lease assets | 9,457 | (5,751 | ) | 3,706 | 9,441 | (5,440 | ) | 4,001 | |||||||||||||||
Technology | 1,377 | (748 | ) | 629 | 1,377 | (589 | ) | 788 | |||||||||||||||
Trademarks | 29,525 | (6,604 | ) | 22,921 | 10,551 | (4,086 | ) | 6,465 | |||||||||||||||
Franchise rights | 11,730 | (2,444 | ) | 9,286 | 11,730 | (1,564 | ) | 10,166 | |||||||||||||||
Total | $ | 288,752 | $ | (83,697 | ) | $ | 205,055 | $ | 161,616 | $ | (65,279 | ) | $ | 96,337 |
3. | Goodwill and Other Long-Lived Assets, continued |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Aggregate amortization expense | $ | 10,682 | $ | 5,811 | $ | 26,709 | $ | 17,195 |
Finite-lived intangible assets: | |||
Remainder of 2016 | $ | 11,109 | |
2017 | 40,011 | ||
2018 | 36,554 | ||
2019 | 33,544 | ||
2020 | 28,711 | ||
Thereafter | 55,126 | ||
Total | $ | 205,055 | |
Indefinite-lived intangible assets: | |||
Trademarks | 4,040 | ||
Total intangible assets | $ | 209,095 |
4. | Acquisitions |
Nine Months Ended September 30, | |||||
2016 | 2015 | ||||
Animal Hospitals: | |||||
Acquisitions | 105 | 42 | |||
Acquisitions, merged | (3 | ) | (4 | ) | |
Sold, closed or merged | (8 | ) | (7 | ) | |
Net increase | 94 | 31 | |||
Laboratories: | |||||
Acquisitions | — | 1 | |||
Acquisitions, merged | — | (1 | ) | ||
Net increase | — | — |
4. | Acquisitions, continued |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Consideration: | |||||||
Cash | $ | 247,733 | $ | 116,428 | |||
Cash acquired | (876 | ) | (67 | ) | |||
Cash, net of cash acquired | $ | 246,857 | $ | 116,361 | |||
Assumed debt | 2,860 | 12,402 | |||||
Holdbacks | 6,972 | 4,497 | |||||
Earn-outs | 4,155 | 476 | |||||
Fair value of total consideration transferred | $ | 260,844 | $ | 133,736 | |||
Allocation of the Purchase Price: | |||||||
Tangible assets | $ | 24,761 | $ | 10,060 | |||
Identifiable intangible assets (1) | 32,016 | 34,130 | |||||
Goodwill (2) | 205,394 | 93,645 | |||||
Other liabilities assumed | (376 | ) | (1,424 | ) | |||
Fair value of assets acquired and liabilities assumed | $ | 261,795 | $ | 136,411 | |||
Noncontrolling interest | (951 | ) | (2,675 | ) | |||
Total | $ | 260,844 | $ | 133,736 |
(1) | Identifiable intangible assets include customer relationships, trademarks and covenants-not-to-compete. 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, six years and five years, respectively. |
(2) | We expect that $199.1 million and $73.5 million of the goodwill recorded for these acquisitions, as of September 30, 2016 and 2015, respectively, will be fully deductible for income tax purposes. |
4. | Acquisitions, continued |
Consideration: | |||
Cash | $ | 352,829 | |
Cash acquired | (3,405 | ) | |
Cash, net of cash acquired | $ | 349,424 | |
Holdbacks | 1,000 | ||
Fair value of total consideration transferred | $ | 350,424 | |
Allocation of the Purchase Price: | |||
Tangible assets | $ | 21,118 | |
Identifiable intangible assets (1) | 102,300 | ||
Goodwill (2) | 330,668 | ||
Other liabilities assumed | (17,662 | ) | |
Fair value of assets acquired and liabilities assumed | $ | 436,424 | |
Noncontrolling interest | (86,000 | ) | |
Total | $ | 350,424 |
(1) | Identifiable intangible assets primarily include customer relationships, trademarks and covenants-not-to-compete. The weighted-average amortization period for the total identifiable intangible assets is approximately seven years. The amortization periods for customer relationships, trademarks and covenants is seven years, five years and five years, respectively. |
(2) | As of September 30, 2016, we expect that $265.8 million of goodwill recorded for this acquisition will be deductible for income tax purposes. |
Revenue | Net Income | |||||||
(In thousands): | ||||||||
Results of acquired businesses included in our three months ended | ||||||||
September 30, 2016 actuals | $ | 64,517 | $ | 4,661 | ||||
2016 supplemental pro forma from July 1, 2016 to September 30, 2016 (1) | $ | 662,840 | $ | 58,922 | ||||
2015 supplemental pro forma from July 1, 2015 to September 30, 2015 (1) | $ | 623,568 | $ | 59,070 | ||||
Results of acquired businesses included in our nine months ended | ||||||||
September 30, 2016 actuals | $ | 128,710 | $ | 9,523 | ||||
2016 supplemental pro forma from January 1, 2016 to September 30, 2016 (2) | $ | 1,947,799 | $ | 172,866 | ||||
2015 supplemental pro forma from January 1, 2015 to September 30, 2015 (2) | $ | 1,844,007 | $ | 154,880 |
(1) | 2016 supplemental pro forma net income attributable to VCA was adjusted to exclude $0.1 million of acquisition-related costs incurred during the three months ended September 30, 2016. 2015 supplemental pro forma net income attributable to VCA was adjusted to include these charges. |
(2) | 2016 supplemental pro forma net income attributable to VCA was adjusted to exclude $1.3 million of acquisition-related costs incurred during the nine months ended September 30, 2016. 2015 supplemental pro forma net income attributable to VCA was adjusted to include these charges. |
5. | Other Accrued Liabilities |
September 30, 2016 | December 31, 2015 | ||||||
Deferred revenue | $ | 18,647 | $ | 14,647 | |||
Holdbacks and earn-outs | 14,042 | 9,959 | |||||
Accrued workers' compensation | 7,329 | 3,212 | |||||
Accrued other insurance | 5,988 | 5,013 | |||||
Accrued health insurance | 5,702 | 4,952 | |||||
Deferred rent | 5,469 | 4,791 | |||||
Miscellaneous accrued taxes (1) | 4,867 | 3,317 | |||||
Accrued accounting and legal fees | 3,143 | 2,697 | |||||
Customer deposits | 2,393 | 2,971 | |||||
Accrued lease payments | 2,111 | 1,536 | |||||
Other | 15,916 | 17,733 | |||||
$ | 85,607 | $ | 70,828 |
6. | Long-Term Obligations |
6. | Long-Term Obligations, continued |
September 30, 2016 | December 31, 2015 | |||||||||
Senior term notes | Principal amount | $ | 874,500 | $ | 585,000 | |||||
Less unamortized debt issuance costs | (2,781 | ) | (2,408 | ) | ||||||
Senior term notes less unamortized debt issuance costs, secured by assets, variable interest rate (2.27% and 1.92% at September 30, 2016 and December 31, 2015, respectively) (1) | $ | 871,719 | $ | 582,592 | ||||||
Revolving credit | Principal amount | $ | 340,000 | $ | 232,000 | |||||
Less unamortized debt issuance costs | (4,321 | ) | (3,725 | ) | ||||||
Revolving line of credit less unamortized debt issuance costs, secured by assets, variable interest rate (2.31% and 1.92% at September 30, 2016 and December 31, 2015, respectively) (1) | $ | 335,679 | $ | 228,275 | ||||||
Secured seller note | Notes payable matures in 2016, secured by assets and stock of certain subsidiaries, with interest rate of 10.0% | 230 | 230 | |||||||
Total debt obligations | 1,207,628 | 811,097 | ||||||||
Capital lease obligations and other debt | 71,006 | 55,244 | ||||||||
1,278,634 | 866,341 | |||||||||
Less — current portion | (32,512 | ) | (33,623 | ) | ||||||
$ | 1,246,122 | $ | 832,718 |
(1) | Notes payable and the revolving line of credit at September 30, 2016 mature in 2021 under the New Senior Credit Facility. Notes payable and the revolving line of credit at December 31, 2015 were due to mature in 2019 under the previous senior credit facility dated August 27, 2014. |
• | the base rate (as defined below) plus the applicable margin of 0.75% (Pricing Tier 2, see table below) per annum; or |
• | the Eurodollar rate (as defined below), plus a margin of 1.75% (Pricing Tier 2, see table below) per annum |
6. | Long-Term Obligations, continued |
Pricing Tier | Consolidated Leverage Ratio | Applicable Margin for Eurodollar Loans/Letter of Credit Fees | Applicable Margin for Base Rate Loans | Commitment Fee | |||||||
1 | ≥ 3.50:1.00 | 2.00 | % | 1.00 | % | 0.40 | % | ||||
2 | < 3.50:1.00 and ≥ 2.75:1.00 | 1.75 | % | 0.75 | % | 0.35 | % | ||||
3 | < 2.75:1.00 and ≥ 1.75:1.00 | 1.50 | % | 0.50 | % | 0.30 | % | ||||
4 | < 1.75:1.00 and ≥ 1.00:1.00 | 1.25 | % | 0.25 | % | 0.25 | % | ||||
5 | < 1.00:1.00 | 1.00 | % | — | % | 0.25 | % |
2016 | 2017 | 2018 | 2019 | 2020 | Thereafter | |||||||||||||||||||
Senior term notes | $ | 5,500 | $ | 33,000 | $ | 44,000 | $ | 55,000 | $ | 77,000 | $ | 660,000 | ||||||||||||
Revolving loans | — | — | — | — | — | 340,000 | ||||||||||||||||||
$ | 5,500 | $ | 33,000 | $ | 44,000 | $ | 55,000 | $ | 77,000 | $ | 1,000,000 |
7. | Fair Value |
7. | Fair Value, continued |
• | Level 1. Observable inputs such as quoted prices in active markets; |
• | Level 2. Inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and |
• | Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
As of September 30, | As of December 31, | |||||||||||||||
2016 | 2015 | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
Variable-rate long-term debt | $ | 1,214,500 | $ | 1,214,500 | $ | 817,000 | $ | 817,000 |
8. | Share-Based Compensation |
8. | Share-Based Compensation, continued |
Shares | Grant Date Weighted- Average Fair Value Per Share | |||||
Outstanding at December 31, 2015 | 417 | $ | 38.28 | |||
Granted | 123 | $ | 68.49 | |||
Vested | (18 | ) | $ | 27.58 | ||
Forfeited/Canceled | (5 | ) | $ | 39.05 | ||
Outstanding at September 30, 2016 | 517 | $ | 45.83 |
8. | Share-Based Compensation, continued |
Shares | Grant Date Weighted- Average Fair Value Per Share | |||||
Outstanding at December 31, 2015 | 747 | $ | 37.91 | |||
Granted | 228 | $ | 56.01 | |||
Paid Out | (216 | ) | $ | 25.81 | ||
Forfeited/Canceled | (1 | ) | $ | 21.04 | ||
Outstanding at September 30, 2016 | 758 | $ | 46.82 |
9. | Calculation of Earnings per Share |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income attributable to VCA Inc. | $ | 58,231 | $ | 54,854 | $ | 168,508 | $ | 147,454 | |||||||
Weighted-average common shares outstanding: | |||||||||||||||
Basic | 80,924 | 80,815 | 80,845 | 81,700 | |||||||||||
Effect of dilutive potential common shares: | |||||||||||||||
Stock options | 270 | 338 | 287 | 338 | |||||||||||
Non-vested shares and units | 618 | 642 | 563 | 706 | |||||||||||
Diluted | 81,812 | 81,795 | 81,695 | 82,744 | |||||||||||
Basic earnings per common share | $ | 0.72 | $ | 0.68 | $ | 2.08 | $ | 1.80 | |||||||
Diluted earnings per common share | $ | 0.71 | $ | 0.67 | $ | 2.06 | $ | 1.78 |
9. | Calculation of Earnings per Share, continued |
10. | Lines of Business |
10. | Lines of Business, continued |
Animal Hospital | Laboratory | All Other | Corporate | Eliminations | Total | ||||||||||||||||||
Three Months Ended September 30, 2016 | |||||||||||||||||||||||
External revenue | $ | 553,378 | $ | 84,970 | $ | 17,450 | $ | — | $ | 1,056 | $ | 656,854 | |||||||||||
Intercompany revenue | — | 20,170 | 5,537 | — | (25,707 | ) | — | ||||||||||||||||
Total revenue | 553,378 | 105,140 | 22,987 | — | (24,651 | ) | 656,854 | ||||||||||||||||
Direct costs | 459,242 | 50,934 | 14,066 | — | (23,965 | ) | 500,277 | ||||||||||||||||
Gross profit | 94,136 | 54,206 | 8,921 | — | (686 | ) | 156,577 | ||||||||||||||||
Selling, general and administrative expense | 15,541 | 9,728 | 6,064 | 18,010 | — | 49,343 | |||||||||||||||||
Operating income (loss) before sale or disposal of assets | 78,595 | 44,478 | 2,857 | (18,010 | ) | (686 | ) | 107,234 | |||||||||||||||
Net loss (gain) on sale or disposal of assets | 304 | 1 | 1 | (70 | ) | — | 236 | ||||||||||||||||
Operating income (loss) | $ | 78,291 | $ | 44,477 | $ | 2,856 | $ | (17,940 | ) | $ | (686 | ) | $ | 106,998 | |||||||||
Depreciation and amortization | $ | 23,363 | $ | 2,826 | $ | 848 | $ | 679 | $ | (622 | ) | $ | 27,094 | ||||||||||
Property and equipment additions | $ | 24,917 | $ | 4,953 | $ | 383 | $ | 2,794 | $ | (1,315 | ) | $ | 31,732 | ||||||||||
Three Months Ended September 30, 2015 | |||||||||||||||||||||||
External revenue | $ | 441,924 | $ | 84,129 | $ | 24,544 | $ | — | $ | 1,120 | $ | 551,717 | |||||||||||
Intercompany revenue | — | 16,180 | 6,294 | — | (22,474 | ) | — | ||||||||||||||||
Total revenue | 441,924 | 100,309 | 30,838 | — | (21,354 | ) | 551,717 | ||||||||||||||||
Direct costs | 366,983 | 48,901 | 19,077 | — | (20,910 | ) | 414,051 | ||||||||||||||||
Gross profit | 74,941 | 51,408 | 11,761 | — | (444 | ) | 137,666 | ||||||||||||||||
Selling, general and administrative expense | 10,677 | 9,542 | 7,660 | 16,981 | — | 44,860 | |||||||||||||||||
Operating income (loss) before charges | 64,264 | 41,866 | 4,101 | (16,981 | ) | (444 | ) | 92,806 | |||||||||||||||
Business interruption insurance gain | — | — | (4,523 | ) | — | — | (4,523 | ) | |||||||||||||||
Net loss on sale or disposal of assets | 175 | — | 72 | 3 | — | 250 | |||||||||||||||||
Operating income (loss) | $ | 64,089 | $ | 41,866 | $ | 8,552 | $ | (16,984 | ) | $ | (444 | ) | $ | 97,079 | |||||||||
Depreciation and amortization | $ | 16,520 | $ | 2,731 | $ | 1,181 | $ | 588 | $ | (549 | ) | $ | 20,471 | ||||||||||
Property and equipment additions | $ | 19,429 | $ | 5,735 | $ | 127 | $ | 2,773 | $ | (1,115 | ) | $ | 26,949 |
10. | Lines of Business, continued |
Animal Hospital | Laboratory | All Other | Corporate | Eliminations | Total | ||||||||||||||||||
Nine Months Ended September 30, 2016 | |||||||||||||||||||||||
External revenue | $ | 1,552,377 | $ | 267,475 | $ | 50,560 | $ | — | $ | 3,370 | $ | 1,873,782 | |||||||||||
Intercompany revenue | — | 56,452 | 15,237 | — | (71,689 | ) | — | ||||||||||||||||
Total revenue | 1,552,377 | 323,927 | 65,797 | — | (68,319 | ) | 1,873,782 | ||||||||||||||||
Direct costs | 1,290,145 | 152,458 | 41,049 | — | (67,175 | ) | 1,416,477 | ||||||||||||||||
Gross profit | 262,232 | 171,469 | 24,748 | — | (1,144 | ) | 457,305 | ||||||||||||||||
Selling, general and administrative expense | 41,903 | 29,726 | 17,385 | 58,647 | — | 147,661 | |||||||||||||||||
Operating income (loss) before sale or disposal of assets | 220,329 | 141,743 | 7,363 | (58,647 | ) | (1,144 | ) | 309,644 | |||||||||||||||
Net loss (gain) on sale or disposal of assets | 747 | (34 | ) | 4 | (189 | ) | — | 528 | |||||||||||||||
Operating income (loss) | $ | 219,582 | $ | 141,777 | $ | 7,359 | $ | (58,458 | ) | $ | (1,144 | ) | $ | 309,116 | |||||||||
Depreciation and amortization | $ | 62,811 | $ | 8,446 | $ | 2,635 | $ | 1,985 | $ | (1,805 | ) | $ | 74,072 | ||||||||||
Property and equipment additions | $ | 68,947 | $ | 14,355 | $ | 2,475 | $ | 7,981 | $ | (3,212 | ) | $ | 90,546 | ||||||||||
Nine Months Ended September 30, 2015 | |||||||||||||||||||||||
External revenue | $ | 1,270,326 | $ | 252,645 | $ | 73,895 | $ | — | $ | 3,089 | $ | 1,599,955 | |||||||||||
Intercompany revenue | — | 47,858 | 19,839 | — | (67,697 | ) | — | ||||||||||||||||
Total revenue | 1,270,326 | 300,503 | 93,734 | — | (64,608 | ) | 1,599,955 | ||||||||||||||||
Direct costs | 1,066,516 | 144,410 | 59,160 | — | (62,506 | ) | 1,207,580 | ||||||||||||||||
Gross profit | 203,810 | 156,093 | 34,574 | — | (2,102 | ) | 392,375 | ||||||||||||||||
Selling, general and administrative expense | 32,351 | 27,894 | 24,088 | 49,410 | — | 133,743 | |||||||||||||||||
Operating income (loss) before charges | 171,459 | 128,199 | 10,486 | (49,410 | ) | (2,102 | ) | 258,632 | |||||||||||||||
Business interruption insurance gain | — | — | (4,523 | ) | — | — | (4,523 | ) | |||||||||||||||
Net (gain) loss on sale or disposal of assets | (445 | ) | 41 | 92 | 78 | — | (234 | ) | |||||||||||||||
Operating income (loss) | $ | 171,904 | $ | 128,158 | $ | 14,917 | $ | (49,488 | ) | $ | (2,102 | ) | $ | 263,389 | |||||||||
Depreciation and amortization | $ | 49,032 | $ | 7,940 | $ | 3,509 | $ | 1,755 | $ | (1,602 | ) | $ | 60,634 | ||||||||||
Property and equipment additions | $ | 45,506 | $ | 11,813 | $ | 1,427 | $ | 5,349 | $ | (2,625 | ) | $ | 61,470 | ||||||||||
At September 30, 2016 | |||||||||||||||||||||||
Total assets | $ | 2,961,074 | $ | 329,694 | $ | 70,923 | $ | 1,349,186 | $ | (1,501,815 | ) | $ | 3,209,062 | ||||||||||
At December 31, 2015 | |||||||||||||||||||||||
Total assets | $ | 2,186,959 | $ | 306,296 | $ | 73,491 | $ | 471,112 | $ | (536,726 | ) | $ | 2,501,132 |
11. | Commitments and Contingencies |
a. | Earn-Out Payments |
b. | Legal Proceedings |
11. | Commitments and Contingencies, continued |
12. | Noncontrolling Interests |
a. | Mandatorily Redeemable Noncontrolling Interests |
Income Statement Impact | Mandatorily Redeemable Noncontrolling Interests | ||||||
Balance as of December 31, 2014 | $ | 9,405 | |||||
Noncontrolling interest expense | $ | 1,088 | |||||
Redemption value change | 1 | 1,089 | |||||
Purchase of noncontrolling interests | (803 | ) | |||||
Distributions to noncontrolling interests | (1,099 | ) | |||||
Currency translation adjustment | (338 | ) | |||||
Balance as of September 30, 2015 | $ | 8,254 | |||||
Balance as of December 31, 2015 | $ | 8,588 | |||||
Noncontrolling interest expense | $ | 1,220 | |||||
Redemption value change | 80 | 1,300 | |||||
Distributions to noncontrolling interests | (1,088 | ) | |||||
Currency translation adjustment | 117 | ||||||
Balance as of September 30, 2016 | $ | 8,917 |
12. | Noncontrolling Interests, continued |
b. | Redeemable Noncontrolling Interests |
Income Statement Impact | Redeemable Noncontrolling Interests | ||||||
Balance as of December 31, 2014 | $ | 11,077 | |||||
Noncontrolling interest expense | $ | 1,021 | |||||
Redemption value change | 371 | 1,392 | |||||
Distributions to noncontrolling interests | (1,196 | ) | |||||
Balance as of September 30, 2015 | $ | 11,273 | |||||
Balance as of December 31, 2015 | $ | 11,511 | |||||
Noncontrolling interest expense | $ | 1,233 | |||||
Redemption value change | 619 | 1,852 | |||||
Purchase of noncontrolling interests | (98 | ) | |||||
Distributions to noncontrolling interests | (1,186 | ) | |||||
Balance as of September 30, 2016 | $ | 12,079 |
13. | Recent Accounting Pronouncements |
13. | Recent Accounting Pronouncements, continued |
13. | Recent Accounting Pronouncements, continued |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Our Animal Hospital segment operates the largest network of freestanding, full-service animal hospitals in the nation. Our animal hospitals offer a full range of general medical and surgical services for companion animals. We treat diseases and injuries, offer pharmaceutical and retail products and perform a variety of pet wellness programs, including health examinations, diagnostic testing, routine vaccinations, spaying, neutering and dental care. At September 30, 2016, our animal hospital network consisted of 776 animal hospitals in 43 states and in five Canadian provinces. |
• | Our Laboratory segment operates the largest network of veterinary diagnostic laboratories in the nation. Our laboratories provide sophisticated testing and consulting services used by veterinarians in the detection, diagnosis, evaluation, monitoring, treatment and prevention of diseases and other conditions affecting animals. At September 30, 2016, our laboratory network consisted of 60 laboratories serving all 50 states and certain areas in Canada. |
Nine Months Ended September 30, | |||||
2016 | 2015 | ||||
Animal Hospitals: | |||||
Beginning of period | 682 | 643 | |||
Acquisitions | 49 | 42 | |||
CAPNA acquisition | 56 | — | |||
Acquisitions, merged | (3 | ) | (4 | ) | |
Sold, closed or merged | (8 | ) | (7 | ) | |
End of period | 776 | 674 | |||
Laboratories: | |||||
Beginning of period | 60 | 59 | |||
Acquisitions | — | 1 | |||
Acquisitions, merged | — | (1 | ) | ||
End of period | 60 | 59 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Revenue: | |||||||||||
Animal Hospital | 84.2 | % | 80.1 | % | 82.8 | % | 79.4 | % | |||
Laboratory | 16.0 | 18.2 | 17.3 | 18.8 | |||||||
All Other | 3.5 | 5.6 | 3.5 | 5.9 | |||||||
Intercompany | (3.7 | ) | (3.9 | ) | (3.6 | ) | (4.1 | ) | |||
Total revenue | 100.0 | 100.0 | 100.0 | 100.0 | |||||||
Direct costs | 76.2 | 75.0 | 75.6 | 75.5 | |||||||
Gross profit | 23.8 | 25.0 | 24.4 | 24.5 | |||||||
Selling, general and administrative expense | 7.5 | 8.1 | 7.9 | 8.4 | |||||||
Business interruption insurance gain | — | (0.8 | ) | — | (0.3 | ) | |||||
Net gain (loss) on sale or disposal of assets | — | 0.1 | — | (0.1 | ) | ||||||
Operating income | 16.3 | 17.6 | 16.5 | 16.5 | |||||||
Interest expense, net | 1.4 | 1.0 | 1.3 | 1.0 | |||||||
Debt retirement costs | — | — | 0.1 | — | |||||||
Income before provision for income taxes | 14.9 | 16.6 | 15.1 | 15.5 | |||||||
Provision for income taxes | 5.6 | 6.4 | 5.8 | 6.0 | |||||||
Net income | 9.3 | 10.2 | 9.3 | 9.5 | |||||||
Net income attributable to noncontrolling interests | 0.4 | 0.3 | 0.3 | 0.3 | |||||||
Net income attributable to VCA Inc. | 8.9 | % | 9.9 | % | 9.0 | % | 9.2 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||||||||
$ | % of Total | $ | % of Total | % Change | $ | % of Total | $ | % of Total | % Change | ||||||||||||||||||||||||
Animal Hospital | $ | 553,378 | 84.2 | % | $ | 441,924 | 80.1 | % | 25.2 | % | $ | 1,552,377 | 82.8 | % | $ | 1,270,326 | 79.4 | % | 22.2 | % | |||||||||||||
Laboratory | 105,140 | 16.0 | % | 100,309 | 18.2 | % | 4.8 | % | 323,927 | 17.3 | % | 300,503 | 18.8 | % | 7.8 | % | |||||||||||||||||
All Other | 22,987 | 3.5 | % | 30,838 | 5.6 | % | (25.5 | )% | 65,797 | 3.5 | % | 93,734 | 5.9 | % | (29.8 | )% | |||||||||||||||||
Intercompany | (24,651 | ) | (3.7 | )% | (21,354 | ) | (3.9 | )% | (15.4 | )% | (68,319 | ) | (3.6 | )% | (64,608 | ) | (4.1 | )% | (5.7 | )% | |||||||||||||
Total revenue | $ | 656,854 | 100.0 | % | $ | 551,717 | 100.0 | % | 19.1 | % | $ | 1,873,782 | 100.0 | % | $ | 1,599,955 | 100.0 | % | 17.1 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||||||||
$ | % of Revenue | $ | % of Revenue | % Change | $ | % of Revenue | $ | % of Revenue | % Change | ||||||||||||||||||||||||
Animal Hospital | $ | 459,242 | 83.0 | % | $ | 366,983 | 83.0 | % | 25.1 | % | $ | 1,290,145 | 83.1 | % | $ | 1,066,516 | 84.0 | % | 21.0 | % | |||||||||||||
Laboratory | 50,934 | 48.5 | % | 48,901 | 48.8 | % | 4.2 | % | 152,458 | 47.1 | % | 144,410 | 48.1 | % | 5.6 | % | |||||||||||||||||
All Other | 14,066 | 61.1 | % | 19,077 | 61.9 | % | (26.3 | )% | 41,049 | 62.4 | % | 59,160 | 63.1 | % | (30.6 | )% | |||||||||||||||||
Intercompany | (23,965 | ) | (3.7 | )% | (20,910 | ) | (3.8 | )% | (14.6 | )% | (67,175 | ) | (3.6 | )% | (62,506 | ) | (3.9 | )% | (7.5 | )% | |||||||||||||
Total direct costs | $ | 500,277 | 76.2 | % | $ | 414,051 | 75.0 | % | 20.8 | % | $ | 1,416,477 | 75.6 | % | $ | 1,207,580 | 75.5 | % | 17.3 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||||||||
$ | Gross Margin | $ | Gross Margin | % Change | $ | Gross Margin | $ | Gross Margin | % Change | ||||||||||||||||||||||||
Animal Hospital | $ | 94,136 | 17.0 | % | $ | 74,941 | 17.0 | % | 25.6 | % | $ | 262,232 | 16.9 | % | $ | 203,810 | 16.0 | % | 28.7 | % | |||||||||||||
Laboratory | 54,206 | 51.6 | % | 51,408 | 51.2 | % | 5.4 | % | 171,469 | 52.9 | % | 156,093 | 51.9 | % | 9.9 | % | |||||||||||||||||
All Other | 8,921 | 38.8 | % | 11,761 | 38.1 | % | (24.1 | )% | 24,748 | 37.6 | % | 34,574 | 36.9 | % | (28.4 | )% | |||||||||||||||||
Intercompany | (686 | ) | (444 | ) | (1,144 | ) | (2,102 | ) | |||||||||||||||||||||||||
Consolidated gross profit | $ | 156,577 | 23.8 | % | $ | 137,666 | 25.0 | % | 13.7 | % | $ | 457,305 | 24.4 | % | $ | 392,375 | 24.5 | % | 16.5 | % | |||||||||||||
Intangible asset amortization associated with acquisitions | 9,369 | 5,750 | 24,784 | 17,013 | |||||||||||||||||||||||||||||
Non-GAAP consolidated gross profit and Non-GAAP gross margin (1) | $ | 165,946 | 25.3 | % | $ | 143,416 | 26.0 | % | 15.7 | % | $ | 482,089 | 25.7 | % | $ | 409,388 | 25.6 | % | 17.8 | % |
(1) | Non-GAAP consolidated gross profit and Non-GAAP gross margin are not measurements of financial performance prepared in accordance with GAAP. See Non-GAAP Financial Measures below for information about these Non-GAAP financial measures, including our reasons for including the measures, material limitations with respect to the usefulness of the measures, and a reconciliation of each Non-GAAP financial measure to the most directly comparable GAAP financial measure. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
Same-store facilities: | |||||||||||||||||||||
Orders (1) | 2,550 | 2,524 | 1.0 | % | 7,158 | 7,035 | 1.7 | % | |||||||||||||
Average revenue per order (2) | $ | 180.14 | $ | 172.70 | 4.3 | % | $ | 183.78 | $ | 175.62 | 4.6 | % | |||||||||
Same-store revenue (1) | $ | 459,363 | $ | 435,892 | 5.4 | % | $ | 1,315,486 | $ | 1,235,514 | 6.5 | % | |||||||||
Business-day adjustment (3) | — | — | 4,386 | — | |||||||||||||||||
Acquisitions | 93,710 | 3,512 | 235,622 | 25,039 | |||||||||||||||||
Closures | 176 | 2,520 | 3,603 | 9,773 | |||||||||||||||||
Net acquired revenue (4) | $ | 93,886 | $ | 6,032 | $ | 239,225 | $ | 34,812 | |||||||||||||
Foreign currency impact | 129 | — | (6,720 | ) | — | ||||||||||||||||
Total | $ | 553,378 | $ | 441,924 | 25.2 | % | $ | 1,552,377 | $ | 1,270,326 | 22.2 | % |
(1) | Same-store revenue and orders were calculated using Animal Hospital operating results, adjusted to exclude the operating results for newly acquired animal hospitals that we did not own, as of the beginning of the comparable period in the prior year. Same-store revenue also includes revenue generated by customers referred from our relocated or combined animal hospitals, including those merged upon acquisition. |
(2) | Computed by dividing same-store revenue by same-store orders. The average revenue per order may not calculate exactly due to rounding. |
(3) | The 2016 Business-day adjustment reflects the impact of the one additional day in 2016 as compared to 2015. |
(4) | Net acquired revenue represents the revenue from animal hospitals acquired, net of revenue from animal hospitals sold or closed, on or after the beginning of the comparable period in the prior year. Fluctuations in net acquired revenue occur due to the volume, size, and timing of acquisitions and dispositions. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
Gross profit | $ | 94,136 | $ | 74,941 | 25.6 | % | $ | 262,232 | $ | 203,810 | 28.7 | % | |||||||||
Intangible asset amortization associated with acquisitions | 8,482 | 4,658 | 21,917 | 13,895 | |||||||||||||||||
Non-GAAP gross profit (1) | $ | 102,618 | $ | 79,599 | 28.9 | % | $ | 284,149 | $ | 217,705 | 30.5 | % | |||||||||
Gross margin | 17.0 | % | 17.0 | % | 16.9 | % | 16.0 | % | |||||||||||||
Non-GAAP gross margin (1) | 18.5 | % | 18.0 | % | 18.3 | % | 17.1 | % | |||||||||||||
Same-store gross profit | $ | 80,589 | $ | 74,026 | 8.9 | % | $ | 231,292 | $ | 201,309 | 14.9 | % | |||||||||
Intangible asset amortization associated with acquisitions | 3,979 | 4,537 | 10,946 | 12,970 | |||||||||||||||||
Non-GAAP same-store gross profit (1) | $ | 84,568 | $ | 78,563 | 7.6 | % | $ | 242,238 | $ | 214,279 | 13.0 | % | |||||||||
Same-store gross margin | 17.5 | % | 17.0 | % | 17.5 | % | 16.3 | % | |||||||||||||
Non-GAAP same-store gross margin (1) | 18.4 | % | 18.0 | % | 18.4 | % | 17.3 | % |
(1) | Non-GAAP gross profit and Non-GAAP gross margin and the same measures expressed on a same store basis, are not measurements of financial performance prepared in accordance with GAAP. See Non-GAAP Financial Measures below for information about these Non-GAAP financial measures, including our reasons for including the measures, material |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
Revenue | $ | 105,140 | $ | 100,309 | 4.8 | % | $ | 323,927 | $ | 300,503 | 7.8 | % | |||||||||
Gross profit | $ | 54,206 | $ | 51,408 | 5.4 | % | $ | 171,469 | $ | 156,093 | 9.9 | % | |||||||||
Gross margin | 51.6 | % | 51.2 | % | 52.9 | % | 51.9 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
Internal growth: | |||||||||||||||||||||
Number of requisitions (1) | 3,495 | 3,384 | 3.3 | % | 10,614 | 10,231 | 3.7 | % | |||||||||||||
Average revenue per requisition (2) | $ | 30.08 | $ | 29.45 | 2.1 | % | $ | 30.18 | $ | 29.37 | 2.8 | % | |||||||||
Total internal revenue (1) | $ | 105,140 | $ | 99,662 | 5.5 | % | $ | 320,332 | $ | 300,503 | 6.6 | % | |||||||||
Billing-day adjustment (3) | — | 647 | 695 | — | |||||||||||||||||
Acquired revenue (4) | — | — | 2,900 | — | |||||||||||||||||
Total | $ | 105,140 | $ | 100,309 | 4.8 | % | $ | 323,927 | $ | 300,503 | 7.8 | % |
(1) | Internal revenue and requisitions were calculated using Laboratory operating results, which are adjusted (i) to exclude the operating results of acquired laboratories we recognized during the current year period that we did not own them in the prior year, and (ii) for the impact resulting from any differences in the number of billing days in the comparable period, if applicable. |
(2) | Computed by dividing internal revenue by the number of requisitions. |
(3) | The business day adjustment for the three months ended September 30, 2015 reflects the impact of an additional half day as compared to 2016. The 2016 business day adjustment for the nine months ended September 30, 2016, reflects the impact of an additional half day as compared to 2015. |
(4) | Acquired revenue represents the revenue we recognized from our acquired laboratories during the current year period that we did not own them in the prior year. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||||||||
$ | % of Revenue | $ | % of Revenue | % Change | $ | % of Revenue | $ | % of Revenue | % Change | ||||||||||||||||||||||||
Animal Hospital (1) | $ | 15,541 | 2.8 | % | $ | 10,677 | 2.4 | % | 45.6 | % | $ | 41,903 | 2.7 | % | $ | 32,351 | 2.5 | % | 29.5 | % | |||||||||||||
Laboratory | 9,728 | 9.3 | % | 9,542 | 9.5 | % | 1.9 | % | 29,726 | 9.2 | % | 27,894 | 9.3 | % | 6.6 | % | |||||||||||||||||
All Other | 6,064 | 26.4 | % | 7,660 | 24.8 | % | (20.8 | )% | 17,385 | 26.4 | % | 24,088 | 25.7 | % | (27.8 | )% | |||||||||||||||||
Corporate | 18,010 | 2.7 | % | 16,981 | 3.1 | % | 6.1 | % | 58,647 | 3.1 | % | 49,410 | 3.1 | % | 18.7 | % | |||||||||||||||||
Total SG&A | $ | 49,343 | 7.5 | % | $ | 44,860 | 8.1 | % | 10.0 | % | $ | 147,661 | 7.9 | % | $ | 133,743 | 8.4 | % | 10.4 | % | |||||||||||||
Intangible asset amortization associated with acquisitions | 1,313 | 61 | 1,925 | 182 | |||||||||||||||||||||||||||||
Non-GAAP Consolidated SG&A (2) | $ | 48,030 | $ | 44,799 | $ | 145,736 | $ | 133,561 |
(1) | Animal Hospital SG&A as a percentage of revenue excluding CAPNA totaled 2.4% and 2.5%, for the three and nine months ended September 30, 2016, respectively. CAPNA SG&A included intangible asset amortization of $1.3 million and $1.9 million for the three and nine months ended September 30, 2016, respectively. |
(2) | Non-GAAP SG&A is not a measurement of financial performance prepared in accordance with GAAP. See Non-GAAP Financial Measures below for information about this Non-GAAP financial measure, including our reasons for including the measure and material limitations with respect to the usefulness of the measure, and a reconciliation of each Non-GAAP financial measure to the most directly comparable GAAP financial measure. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||||||||
$ | % of Revenue | $ | % of Revenue | % Change | $ | % of Revenue | $ | % of Revenue | % Change | ||||||||||||||||||||||||
Animal Hospital | $ | 78,291 | 14.1 | % | $ | 64,089 | 14.5 | % | 22.2 | % | $ | 219,582 | 14.1 | % | $ | 171,904 | 13.5 | % | 27.7 | % | |||||||||||||
Laboratory | 44,477 | 42.3 | % | 41,866 | 41.7 | % | 6.2 | % | 141,777 | 43.8 | % | 128,158 | 42.6 | % | 10.6 | % | |||||||||||||||||
All Other | 2,856 | 12.4 | % | 8,552 | 27.7 | % | (66.6 | )% | 7,359 | 11.2 | % | 14,917 | 15.9 | % | (50.7 | )% | |||||||||||||||||
Corporate | (17,940 | ) | (16,984 | ) | (5.6 | )% | (58,458 | ) | (49,488 | ) | (18.1 | )% | |||||||||||||||||||||
Eliminations | (686 | ) | (444 | ) | (54.5 | )% | (1,144 | ) | (2,102 | ) | 45.6 | % | |||||||||||||||||||||
Total GAAP consolidated operating income | $ | 106,998 | 16.3 | % | $ | 97,079 | 17.6 | % | 10.2 | % | $ | 309,116 | 16.5 | % | $ | 263,389 | 16.5 | % | 17.4 | % | |||||||||||||
Impact of business interruption insurance gain | — | (4,523 | ) | — | (4,523 | ) | |||||||||||||||||||||||||||
Adjustments to other long-term liabilities | — | — | 1,954 | — | |||||||||||||||||||||||||||||
Transaction costs related to the CAPNA acquisition | 146 | — | 1,343 | — | |||||||||||||||||||||||||||||
Intangible asset amortization associated with acquisitions | 10,682 | 5,811 | 26,709 | 17,195 | |||||||||||||||||||||||||||||
Non-GAAP consolidated operating income and Non-GAAP consolidated operating margin (1) | $ | 117,826 | 17.9 | % | $ | 98,367 | 17.8 | % | 19.8 | % | $ | 339,122 | 18.1 | % | $ | 276,061 | 17.3 | % | 22.8 | % |
(1) | Non-GAAP consolidated operating income and Non-GAAP consolidated operating margin are not measurements of financial performance prepared in accordance with GAAP. See Non-GAAP Financial Measures below for information about these Non-GAAP financial measures, including our reasons for including the measures, material limitations with respect to the usefulness of the measures, and a reconciliation of each Non-GAAP financial measure to the most directly comparable GAAP financial measure. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Interest expense: | |||||||||||||||
Senior term notes and revolver | $ | 6,920 | $ | 3,535 | $ | 16,891 | $ | 9,839 | |||||||
Capital leases and other | 2,084 | 1,513 | 5,084 | 4,351 | |||||||||||
Amortization of debt costs | 384 | 436 | 1,248 | 1,307 | |||||||||||
Non-GAAP interest expense (1) | 9,388 | 5,484 | 23,223 | 15,497 | |||||||||||
Adjustments to other long-term liabilities | — | — | 1,398 | — | |||||||||||
Consolidated interest expense | 9,388 | 5,484 | 24,621 | 15,497 | |||||||||||
Interest income | (88 | ) | (29 | ) | (359 | ) | (101 | ) | |||||||
Total consolidated interest expense, net of interest income | $ | 9,300 | $ | 5,455 | $ | 24,262 | $ | 15,396 |
(1) | Non-GAAP interest expense is not a measurement of financial performance prepared in accordance with GAAP. See Non-GAAP Financial Measures below for information about this financial measure including our reasons for including the measure and material limitations with respect to the usefulness of this measure. |
• | Adjustments to other long-term liabilities - We recorded a non-cash charge of $3.4 million, of which $2.0 million related to compensation and $1.4 million related to interest accretion. |
• | Discrete tax items - We recorded a non-cash tax adjustment to our income tax liabilities for $1.0 million. |
• | Intangible asset amortization associated with acquisitions - Our GAAP net income includes amortization expense related to intangible assets in our acquired businesses. The amortization expense related to our acquired intangible assets can vary significantly dependent upon the amount and size of our acquisitions in each period; accordingly, we exclude amortization from our GAAP net income, for all periods presented, to provide investors with more comparable operating results. |
• | Transaction costs related to the CAPNA acquisition - For the three and nine months ended September 30, 2016, we have recorded transaction costs of $146,000 and $1.3 million, respectively, related to our acquisition of CAPNA. |
• | Debt retirement costs adjustment - We incurred debt retirement costs of $1.6 million in connection with our new credit facility. |
• | Business interruption insurance gain - Our GAAP net income includes a $4.5 million gain related to business interruption proceeds from the May 14, 2014 fire damage to the Medical Technology headquarters in Carlsbad, California for the three and nine months ended September 30, 2015. There were no additional estimated losses recorded in connection with the fire. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
GAAP net income | $ | 58,231 | $ | 54,854 | $ | 168,508 | $ | 147,454 | |||||||
Impact of business interruption insurance gain | — | (4,523 | ) | — | (4,523 | ) | |||||||||
Adjustments to other long-term liabilities | — | — | 3,352 | — | |||||||||||
Discrete tax items | — | — | 1,045 | — | |||||||||||
Transaction costs related to CAPNA acquisition | 146 | — | 1,343 | — | |||||||||||
Debt retirement costs | — | — | 1,600 | — | |||||||||||
Intangible asset amortization associated with acquisitions | 9,907 | 5,811 | 25,381 | 17,195 | |||||||||||
Tax benefit on above adjustments | (3,934 | ) | (503 | ) | (12,396 | ) | (4,959 | ) | |||||||
Non-GAAP net income | $ | 64,350 | $ | 55,639 | $ | 188,833 | $ | 155,167 | |||||||
Non-GAAP diluted earnings per share | $ | 0.79 | $ | 0.68 | $ | 2.31 | $ | 1.88 | |||||||
Shares used for computing adjusted diluted earnings per share | 81,812 | 81,795 | 81,695 | 82,744 |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Cash provided by (used in): | |||||||
Operating activities | $ | 290,882 | $ | 247,016 | |||
Investing activities | (696,136 | ) | (174,771 | ) | |||
Financing activities | 379,138 | (77,805 | ) | ||||
Effect of currency exchange rate changes on cash and cash equivalents | 142 | (831 | ) | ||||
Decrease in cash and cash equivalents | (25,974 | ) | (6,391 | ) | |||
Cash and cash equivalents at beginning of period | 98,888 | 81,383 | |||||
Cash and cash equivalents at end of period | $ | 72,914 | $ | 74,992 |
Nine Months Ended September 30, | ||||||||||||
2016 | 2015 | Change | ||||||||||
Investing Cash Flows: | ||||||||||||
Business acquisitions, net of cash acquired | $ | (599,655 | ) | $ | (119,336 | ) | $ | (480,319 | ) | (1) | ||
Property and equipment additions | (90,546 | ) | (61,470 | ) | (29,076 | ) | (2) | |||||
Proceeds from sale or disposal of assets | 1,699 | 6,469 | (4,770 | ) | (3) | |||||||
Other | (7,634 | ) | (434 | ) | (7,200 | ) | (4) | |||||
Net cash used in investing activities | $ | (696,136 | ) | $ | (174,771 | ) | $ | (521,365 | ) |
(1) | The number of acquisitions will vary from period to period based upon the available pool of suitable candidates, however, the increase is primarily attributable to the acquisition of CAPNA during the nine months ended September 30, 2016. A discussion of our acquisitions is provided above in our Executive Overview. |
(2) | The cash used to acquire property and equipment will vary from period to period based on upgrade requirements and expansion of our animal hospitals and laboratory facilities. |
(3) | The proceeds from the sale or disposal of assets in 2015 primarily relates to the sale of a hospital. |
(4) | We paid $7.2 million in connection with our acquisition holdbacks. Payouts will vary from period to period based on the timing of each acquisition and the acquisition holdback period. |
Nine Months Ended September 30, | ||||||||||||
2016 | 2015 | Change | ||||||||||
Financing Cash Flows: | ||||||||||||
Repayment of long-term obligations | $ | (1,263,394 | ) | $ | (20,174 | ) | $ | (1,243,220 | ) | (1) | ||
Proceeds from issuance of long-term obligations | 1,255,000 | — | 1,255,000 | (1) | ||||||||
Proceeds from revolving credit facility | 465,000 | 97,000 | 368,000 | (2) | ||||||||
Repayment of revolving credit facility | (65,000 | ) | — | (65,000 | ) | (3) | ||||||
Payment of financing costs | (3,817 | ) | — | (3,817 | ) | (1) | ||||||
Distributions to noncontrolling interests | (4,752 | ) | (3,810 | ) | (942 | ) | ||||||
Purchase of noncontrolling interests | (4,239 | ) | (1,493 | ) | (2,746 | ) | (4) | |||||
Proceeds from issuance of common stock under stock incentive plans | 3,949 | 1,571 | 2,378 | (5) | ||||||||
Excess tax benefits from share-based compensation | 7,588 | 8,008 | (420 | ) | ||||||||
Stock repurchases | (9,887 | ) | (161,117 | ) | 151,230 | (6) | ||||||
Other | (1,310 | ) | 2,210 | (3,520 | ) | (7) | ||||||
Net cash provided by (used in) financing activities | $ | 379,138 | $ | (77,805 | ) | $ | 456,943 |
(1) | On June 29, 2016, we entered into a New Senior Credit Facility which resulted in the payoff of our previous senior credit facility in the amount of $577.5 million and $667.0 million for our term notes and revolving credit facility, respectively, proceeds of $880.0 million and $375.0 million from the issuance of new senior secured term notes and borrowings under our senior secured revolving facility, respectively, and payments of $3.8 million related to financing costs to creditors and third parties. A discussion of our New Senior Credit Facility is provided above in Note 6, Long-Term Obligations. Additionally, the repayments of long-term obligations also include $15.9 million in scheduled senior-term note principal and capital lease payments. Our principal payment obligations on our New Senior Credit Facility commenced in September 2016. |
(2) | We borrowed $435.0 million from our previous revolving credit facility and $30.0 million from our new revolving credit facility in which the proceeds were primarily used to fund our acquisitions. |
(3) | In August 2016 we made a payment of $65.0 million to reduce the balance of our new revolving credit facility in an effort to minimize our interest expense and to manage our overall cash balance. |
(4) | The cash paid to purchase noncontrolling interests will vary based upon differing opportunities and circumstances during each of the respective periods. |
(5) | The proceeds from the issuance of common stock under stock incentive plans increased in 2016 as there were more exercises due to options nearing their expiration. |
(6) | For the nine months ended September 30, 2016, the cash paid for stock repurchases related to income taxes paid on behalf of employees who elected to net settle their tax obligation from option exercises and vested stock. |
(7) | In September 2015, we received $2.7 million in proceeds from the formation of a noncontrolling interest. |
Payment due by period | |||||||||||||||||||
Total | Less than 1 Year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Contractual Obligations: | |||||||||||||||||||
Long-term debt | $ | 1,214,500 | $ | 27,500 | $ | 93,500 | $ | 1,093,500 | $ | — | |||||||||
Variable cash interest expense Term A(1) | 120,920 | 27,416 | 52,243 | 41,261 | — | ||||||||||||||
$ | 1,335,420 | $ | 54,916 | $ | 145,743 | $ | 1,134,761 | $ | — |
(1) | The interest payments on our variable-rate senior term notes are based on rates effective as of September 30, 2016. |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
PART II. | OTHER INFORMATION |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Total Number of | Approximate Dollar | |||||||||||||
Shares Purchased as | Value of Shares That | |||||||||||||
Total Number | Average | Part of Publicly | May Yet Be Purchased | |||||||||||
of Shares | Price Paid | Announced Plan | Under the Plan | |||||||||||
Period | Purchased | Per Share | or Program | or Program | ||||||||||
(1) | (2) | (3) | (4) | (4) | ||||||||||
July 1, 2016 to July 31,2016 | 99 | $ | 67.29 | — | $ | 101,058,831 | ||||||||
August 1, 2016 to August 31, 2016 | 52,658 | $ | 70.92 | — | $ | 101,058,831 | ||||||||
September 1, 2016 to September 30, 2016 | 76,726 | $ | 69.11 | — | $ | 101,058,831 | ||||||||
129,483 | $ | 69.84 | — | $ | 101,058,831 |
(1) | Information is based on settlement dates of repurchase transactions. |
(2) | Consists of shares of our common stock, par value $0.001 per share. For the quarter ended September 30, 2016, no shares were repurchased in the open market or in block trades pursuant to a previously-announced share repurchase program (see (4) below). The were 129,483 shares of common stock surrendered to us by employees to satisfy exercise cost and minimum statutory withholding tax obligations in connection with the option exercise, vesting of restricted stock and payout of restricted stock units. |
(3) | The average price of shares surrendered to us by employees to satisfy exercise costs and tax obligations. |
(4) | In April 2013, our Board of Directors authorized a repurchase program to purchase up to $125 million in shares of our common stock. As of August 2014, we have completed this program and our Board of Directors authorized a new repurchase program to buyback up to $400 million in shares of our common stock in open market purchases or negotiated transactions. |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | OTHER INFORMATION |
ITEM 6. | EXHIBITS |
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase |
101.DEF | XBRL Taxonomy Definition Linkbase |
101.LAB | XBRL Taxonomy Extension Label Linkbase |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
Date: | November 7, 2016 | By: /s/ Tomas W. Fuller | |
Tomas W. Fuller | |||
Chief Financial Officer, Principal Accounting Officer, and Vice President and Secretary |
Exhibit No. | Description |
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
Exhibit 101.INS | XBRL Instance Document |
Exhibit 101.SCH | XBRL Extension Schema Document |
Exhibit 101.CAL | XBRL Extension Calculation Linkbase Document |
Exhibit 101.LAB | XBRL Extension Label Linkbase Document |
Exhibit 101.PRE | XBRL Extension Presentation Linkbase Document |
Exhibit 101.DEF | XBRL Extension Definition Linkbase Document |
1. | I have reviewed this quarterly report on Form 10-Q of VCA Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 7, 2016 | |
/s/ Robert L. Antin | |
Robert L. Antin | |
Chairman of the Board, President and Chief Executive Officer | |
1. | I have reviewed this quarterly report on Form 10-Q of VCA Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 7, 2016 | |
/s/ Tomas W. Fuller | |
Tomas W. Fuller | |
Chief Financial Officer, Principal Accounting Officer, and Vice President and Secretary | |
(i) | the Report fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. |
Date: November 7, 2016 | ||
/s/ Robert L. Antin | ||
Robert L. Antin | ||
Chairman of the Board, President and Chief Executive Officer | ||
/s/ Tomas W. Fuller | ||
Tomas W. Fuller | ||
Chief Financial Officer, Principal Accounting Officer, and Vice President and Secretary |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
May 02, 2017 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | VCA INC | |
Entity Central Index Key | 0000817366 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 81,267,863 |
Condensed, Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Current assets: | ||
Allowance for uncollectible accounts | $ 22,730 | $ 23,440 |
Liabilities and Equity | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 11,000,000 | 11,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
VCA Inc. stockholders’ equity: | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 175,000,000 | 175,000,000 |
Common stock, shares outstanding | 81,262,000 | 81,231,000 |
Condensed, Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|||
Income Statement [Abstract] | ||||
Revenue | $ 678,251 | $ 563,439 | ||
Direct costs | 523,783 | 426,659 | ||
Gross profit | 154,468 | 136,780 | ||
Selling, general and administrative expense | 58,401 | 50,128 | ||
Net loss on sale or disposal of assets | 250 | 563 | ||
Operating income (loss) | 95,817 | 86,089 | ||
Interest expense, net | 9,027 | 7,095 | ||
Other income | (302) | (264) | ||
Income before provision for income taxes | 87,092 | 79,258 | ||
Provision for income taxes | 34,639 | 31,536 | ||
Net income | [1] | 52,453 | 47,722 | |
Net income attributable to noncontrolling interests | 1,360 | 1,495 | ||
Net income attributable to VCA Inc. | $ 51,093 | $ 46,227 | ||
Basic earnings per share (in dollars per share) | $ 0.63 | $ 0.57 | ||
Diluted earnings per share (in dollars per share) | $ 0.62 | $ 0.57 | ||
Weighted-average shares outstanding for basic earnings per share (in shares) | 81,245 | 80,776 | ||
Weighted-average shares outstanding for diluted earnings per share (in shares) | 82,179 | 81,523 | ||
|
Condensed, Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
||||
Statement of Comprehensive Income [Abstract] | |||||
Net income | [1] | $ 52,453 | $ 47,722 | ||
Other comprehensive income: | |||||
Foreign currency translation adjustments | 2,381 | 12,598 | |||
Other comprehensive income | 2,381 | 12,598 | |||
Total comprehensive income | 54,834 | 60,320 | |||
Comprehensive income attributable to noncontrolling interests | [1] | 1,419 | 1,848 | ||
Comprehensive income attributable to VCA Inc. | $ 53,415 | $ 58,472 | |||
|
Condensed, Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income related to redeemable and mandatorily redeemable noncontrolling interests | $ 0.8 | $ 1.0 |
Condensed, Consolidated Statements of Equity (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Statement of Stockholders' Equity [Abstract] | ||
Redeemable noncontrolling interests | $ 384 | $ 641 |
Mandatorily redeemable noncontrolling interest | 406 | 365 |
Other comprehensive income (loss) related to mandatorily redeemable noncontrolling interests | 21 | $ 167 |
Purchase of noncontrolling interests, portion attributable to redeemable noncontrolling interests | $ 1,210 |
Nature of Operations |
3 Months Ended |
---|---|
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | Nature of Operations Our company, VCA Inc. (“VCA”) is a Delaware corporation formed in 1986 and is based in Los Angeles, California. We are an animal healthcare company with the following four operating segments: animal hospitals ("Animal Hospital"), veterinary diagnostic laboratories ("Laboratory"), veterinary medical technology ("Medical Technology"), and Camp Bow Wow Franchising, Inc. (f/k/a D.O.G. Enterprises, LLC ("Camp Bow Wow"). Our operating segments are aggregated into two reportable segments: Animal Hospital and Laboratory. Our Medical Technology and Camp Bow Wow operating segments are combined in our All Other category. See Note 9, Lines of Business within these notes to unaudited condensed, consolidated financial statements. Our Animal Hospitals offer a full range of general medical and surgical services for companion animals. Our Animal Hospitals treat diseases and injuries, provide pharmaceutical products and perform a variety of pet-wellness programs, including health examinations, diagnostic testing, vaccinations, spaying, neutering and dental care. At March 31, 2017, we operated or managed 810 animal hospitals throughout 43 states and five Canadian provinces. We operate a full-service veterinary diagnostic laboratory network serving all 50 states and certain areas in Canada. Our Laboratory network provides sophisticated testing and consulting services used by veterinarians in the detection, diagnosis, evaluation, monitoring, treatment and prevention of diseases and other conditions affecting animals. At March 31, 2017, we operated 61 laboratories of various sizes located strategically throughout the United States and Canada. Our Medical Technology business sells digital radiography and ultrasound imaging equipment, provides education and training on the use of that equipment, provides consulting and mobile imaging services, and sells software and ancillary services to the veterinary market. Our Camp Bow Wow business 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 March 31, 2017, there were 130 Camp Bow Wow franchise locations operating in 33 states and one Canadian province. On May 1, 2016, we acquired an 80% ownership interest in Companion Animal Practices, North America ("CAPNA"). CAPNA, founded in 2010, and at the time of acquisition, operated a network of 56 free standing animal hospitals in 18 states. Accordingly, CAPNA's results of operations are included in our Animal Hospital segment for the quarter ended March 31, 2017. The practice of veterinary medicine is subject to seasonal fluctuation. In particular, demand for veterinary services is significantly higher during the warmer months because pets spend a greater amount of time outdoors where they are more likely to be injured and are more susceptible to disease and parasites. In addition, use of veterinary services may be affected by levels of flea infestation, heartworms and ticks, and the number of daylight hours. Merger Agreement On January 7, 2017, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with MMI Holdings, Inc. (“Acquiror”), Venice Merger Sub Inc., a wholly owned subsidiary of Acquiror (“Merger Sub”), and, solely for purposes of Section 9.15 of the Merger Agreement, Mars, Incorporated (“Mars”), pursuant to which, among other things, at the closing of the merger, we will become a wholly-owned subsidiary of Acquiror (the “Merger”). The Merger is subject to satisfaction of a number of customary closing conditions contained in the Merger Agreement, including the receipt of the outstanding required regulatory approvals and discussed in detail in the definitive proxy statement filed with the U.S. Securities and Exchange Commission by VCA on February 15, 2017 (the “Definitive Proxy Statement”). The Merger Agreement and the Merger are described in greater detail in the Definitive Proxy Statement and other materials and documents filed with the SEC, all of which are available on the SEC’s website at www.sec.gov. The foregoing description of the Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement attached as Exhibit 2.1 to our Current Report on Form 8-K filed with the SEC on January 9, 2017. |
Basis of Presentation |
3 Months Ended |
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Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation Our accompanying unaudited, condensed, consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements as permitted under applicable rules and regulations. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for the full year ending December 31, 2017. The year end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. For further information, refer to our audited consolidated financial statements and notes thereto included in our 2016 Annual Report on Form 10-K. The preparation of our condensed, consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed, consolidated financial statements and notes thereto. Actual results could differ from those estimates. |
Goodwill and Other Long-Lived Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Long-Lived Assets | Goodwill and Other Long-Lived Assets Goodwill The following table presents the changes in the carrying amount of our goodwill for the three months ended March 31, 2017 (in thousands):
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Other Intangible Assets Our acquisition related amortizable intangible assets as of March 31, 2017 and December 31, 2016 are as follows (in thousands):
The following table summarizes our aggregate amortization expense related to other intangible assets (in thousands):
The estimated amortization expense related to other intangible assets for the remainder of 2017 and each of the succeeding years thereafter, as of March 31, 2017, is as follows (in thousands):
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Acquisitions |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Acquisitions The table below reflects the activity related to the acquisitions and dispositions of our animal hospitals during the three months ended March 31, 2017 and 2016, respectively. There were no laboratory acquisitions or dispositions during the three months ended March 31, 2017 and 2016, respectively.
Animal Hospital Acquisitions The purchase price allocations for some of the 2017 animal hospital 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 and the allocation of the purchase price for our independent animal hospitals acquired during the three months ended March 31, 2017 and 2016, respectively (in thousands):
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Other Accrued Liabilities |
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Other Accrued Liabilities | Other Accrued Liabilities Other accrued liabilities consisted of the following at March 31, 2017 and December 31, 2016 (in thousands):
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Long-Term Obligations |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Obligations |
Senior Credit Facility On June 29, 2016, we entered into a New Senior Credit Facility with various lenders for approximately $1.7 billion of senior secured credit facilities with Bank of America, N.A., as the administrative agent, swingline lender and Letter of Credit issuer, and JPMorgan Chase Bank, N.A., Barclays Bank PLC, Suntrust Bank, and Wells Fargo Bank, N.A. as co-syndication agents (the "New Senior Credit Facility"). The New Senior Credit Facility replaced our previous senior credit facility which provided for $600 million of term notes and an $800 million revolving credit facility. The New Senior Credit Facility provides for $880 million of senior secured term notes and an $800 million senior secured revolving facility, which may be used to borrow, on a same-day notice under a swing line, the lesser of $25 million and the aggregate unused amount of the revolving credit facility then in effect. In addition to refinancing all outstanding amounts under our previous senior credit facility, borrowings under our New Senior Credit Facility may be used for general corporate purchases, including permitted share repurchases. At June 30, 2016, we had $375 million in outstanding borrowings under the new senior secured revolving facility, which funds were used together with the proceeds from the $880 million of new senior secured term notes to refinance amounts outstanding under our previous senior credit facility. In connection with the New Senior Credit Facility, we incurred $3.8 million in financing costs, of which approximately $3.2 million were capitalized as deferred financing costs. The remaining $0.6 million of financing costs were expensed as debt retirement costs, along with an additional $1.0 million of previously capitalized deferred financing costs associated with lenders under our previous senior credit facility who are not lenders under our New Senior Credit Facility. In 2016, ASU 2015-03 and ASU 2015-15 were adopted. In accordance with ASU 2015-03, the table below presents debt issuance costs as a direct deduction from the face amount of the corresponding notes in the current period and retrospectively in the prior fiscal year end.
Long-term obligations consisted of the following at March 31, 2017 and December 31, 2016 (in thousands):
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Interest Rate. In general, borrowings under the New Senior Credit Facility (including swing line borrowings) bear interest, at our option, on either:
Each of the aforementioned margins remain applicable until the date of delivery of the compliance certificate and the financial statements, for the period ended March 31, 2017, at which time the applicable margin will be determined by reference to the leverage ratio in effect from time to time as set forth in the following table:
The base rate for the senior term notes is a rate per annum equal to the highest of the (a) Federal Funds Rate plus 0.5%, (b) Bank of America, N.A.'s ("Bank of America") prime rate in effect on such day, and (c) the Eurodollar rate plus 1.0%. The Eurodollar rate is defined as the rate per annum equal to the London Interbank Offered Rate ("LIBOR"), or a comparable or successor rate which is approved by Bank of America. Maturity and Principal Payments. The senior term notes mature on June 29, 2021. Principal payments on the senior term notes are due in the amount of $5.5 million on June 30, 2017, $11.0 million due each calendar quarter from September 30, 2017 to and including June 30, 2019, $16.5 million due each calendar quarter from September 30, 2019 to and including June 30, 2020 and $22.0 million due each calendar quarter thereafter with a final payment of the outstanding principal balance due upon maturity. The revolving credit facility has a per annum commitment fee determined by reference to the Leverage Ratio in effect from time to time and is applied to the unused portion of the commitment. The revolving credit facility matures on June 29, 2021. Principal payments on the revolving credit facility are made at our discretion with the entire unpaid amount due at maturity. At March 31, 2017, we had borrowings of $445.0 million under our revolving credit facility. The following table sets forth the scheduled principal payments for our senior credit facility (in thousands):
Guarantees and Security. We and each of our wholly-owned domestic subsidiaries guarantee the outstanding indebtedness under the New Senior Credit Facility. Any borrowings, along with the guarantees of the domestic subsidiaries, are further secured by a pledge of substantially all of our consolidated assets, including 65% of the voting equity and 100% of the non-voting equity interest in each of our foreign subsidiaries. Debt Covenants. The New Senior Credit Facility contains certain financial covenants pertaining to interest coverage and leverage ratios. In addition, the New Senior Credit Facility has restrictions pertaining to the payment of cash dividends on all classes of stock. At March 31, 2017, we had a interest coverage ratio of 15.45 to 1.00, which was in compliance with the required ratio of no less than 3.00 to 1.00, and a leverage ratio of 2.65 to 1.00, which was in compliance with the required ratio of no more than 3.75 to 1.00. |
Fair Value |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value |
Current fair value accounting guidance includes a hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs
reflect a reporting entity’s pricing based upon their own market assumptions. The current guidance establishes a three-tiered fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
Non-Recurring Financial Measurements Non-financial assets such as property, plant and equipment, land, goodwill and intangible assets are subject to non-recurring fair value measurements if they are deemed to be impaired. The impairment models used for nonfinancial assets depend on the type of asset and are accounted for in accordance with FASB’s guidance on fair value measurement. During the quarter ended March 31, 2017, there were no changes to our non-recurring fair value measurements. Fair Value of Financial Instruments The FASB accounting guidance requires disclosure of fair value information about financial instruments, whether or not recognized in the accompanying consolidated balance sheets. Fair value as defined by the guidance is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value estimates of financial instruments are not necessarily indicative of the amounts we might pay or receive in actual market transactions. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Cash and Cash Equivalents. These balances include cash and cash equivalents with maturities of less than three months. The carrying amount approximates fair value due to the short-term maturities of these instruments. Receivables, Less Allowance for Doubtful Accounts, Accounts Payable and Certain Other Accrued Liabilities. Due to their short-term nature, fair value approximates carrying value. Long-Term Debt. The fair value of debt at March 31, 2017 and December 31, 2016 is based upon the ask price quoted from an external source, which is considered a Level 2 input. The following table reflects the carrying value and fair value of our variable-rate long-term debt (in thousands):
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Calculation of Earnings per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Calculation of Earnings per Share | Calculation of Earnings per Share Basic earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding during the period. Diluted earnings per share is calculated by dividing net income attributable to VCA Inc. by the weighted- average number of common shares outstanding, after giving effect to all dilutive potential common shares outstanding during the period. Basic and diluted earnings per share were calculated as follows (in thousands, except per share amounts):
For the three months ended March 31, 2017 and 2016, potential common shares of 72,225 and 40,193, respectively, were excluded from the computation of diluted earnings per share. In March 2016, the FASB issued ASU 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,”, requiring all tax benefits and tax deficiencies be recognized as income tax expense or benefit in the income statement. Since excess tax benefits are no longer recognized in additional paid-in capital, we amended our calculation of earnings per share to exclude the excess tax benefits that would be included in additional paid-in capital under the treasury stock method. We elected to adopt this standard prospectively effective January 1, 2017. The adoption of this standard did not have a material impact on the weighted average number of diluted shares outstanding during the period. |
Lines of Business |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lines of Business | Lines of Business Our Animal Hospital and Laboratory business segments are each considered reportable segments in accordance with the FASB's guidance related to Segment Reporting. 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 the “All Other” category 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 Camp Bow Wow business, which 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. 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 each of our segments. The accounting policies of our segments are the same as those described in the summary of significant accounting policies included in our 2016 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):
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||
Commitments and Contingencies | Commitments and Contingencies We have certain commitments including operating leases, purchase agreements and acquisition agreements. These items are discussed in detail in our consolidated financial statements and notes thereto included in our 2016 Annual Report on Form 10-K. We also have contingencies as follows:
We have contractual arrangements in connection with certain acquisitions, whereby additional cash may be paid to former owners of acquired companies upon fulfillment of specified financial criteria as set forth in the respective agreements. The amount to be paid cannot be determined until the earn-out periods have expired. If the specified financial criteria are satisfied, we will be obligated to pay an additional $9.2 million. In accordance with business combination accounting guidance, contingent consideration, such as earn-outs, are recognized as part of the consideration transferred on the acquisition date. A liability is initially recorded based upon its acquisition date fair value. The changes in fair value are recognized in earnings where applicable for each reporting period. The fair value is determined using a contractually stated formula using either a multiple of revenue or Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"). The formulas used to determine the estimated fair value are Level 3 inputs. The changes in fair value were immaterial to our condensed, consolidated financial statements taken as a whole. We recorded $8.6 million and $9.2 million in earn-out liabilities as of March 31, 2017 and December 31, 2016, respectively, which are included in other accrued liabilities in our condensed, consolidated balance sheets.
On May 29, 2013, a former veterinary assistant at one of our animal hospitals filed a purported class action lawsuit against us in the Superior Court of the State of California for the County of Los Angeles, titled Jorge Duran vs. VCA Animal Hospitals, Inc., et. al. The lawsuit seeks to assert claims on behalf of current and former veterinary assistants employed by us in California, and alleges, among other allegations, that we improperly failed to pay regular and overtime wages, improperly failed to provide proper meal and rest periods, and engaged in unfair business practices. The lawsuit seeks damages, statutory penalties, and other relief, including attorneys’ fees and costs. Plaintiff Duran moved to certify a meal period premium class, a rest period premium class and a class under California’s Business and Professions Code §§17200 et seq., on January 9, 2014. On May 7, 2014, we obtained partial summary judgment, dismissing four of eight claims of the complaint, including the claims for failure to pay regular and overtime wages. On June 24, 2015, the Court denied Plaintiff’s Motion. The plaintiff continues to have a Private Attorney Generals Act ("PAGA") claim. On or about January 10, 2017, VCA filed a motion to prevent Duran from pursuing his PAGA action. That motion is currently pending before the court. We intend to continue to vigorously defend against the remaining claim in this action. At this time, we are unable to estimate the reasonably possible loss or range of possible loss, but do not believe losses, if any, would have a material effect on our results of operations or financial position taken as a whole. On July 16, 2014, two additional former veterinary assistants filed a purported class action lawsuit against VCA in the Superior Court of the State of California for the County of Los Angeles, titled La Kimba Bradsbery and Cheri Brakensiek vs. Vicar Operating, Inc., et. al. The lawsuit seeks to assert claims on behalf of current and former veterinary assistants, kennel assistants, and client service representatives employed by us in California, and alleges, among other allegations, that VCA improperly failed to pay regular and overtime wages, improperly failed to provide proper meal and rest periods, improperly failed to pay reporting time pay, improperly failed to reimburse for certain business-related expenses, and engaged in unfair business practices. The lawsuit seeks damages, statutory penalties, and other relief, including attorneys’ fees and costs. This lawsuit and the Duran case above are related and are before the same Judge. In September 2014, the court issued an order staying the La Kimba Bradsbery lawsuit. On or about August 23, 2016, the Court lifted the stay and discovery is proceeding. We intend to vigorously defend against the Bradsbery action. At this time, we are unable to estimate the reasonably possible loss or range of possible loss, but do not believe losses, if any, would have a material effect on our results of operations or financial position taken as a whole. On March 12, 2014, an individual client who purchased goods and services from one of our animal hospitals filed a purported class action lawsuit against us in the United States District Court for the Northern District of California, titled Tony M. Graham vs. VCA Antech, Inc. and VCA Animal Hospitals, Inc. The lawsuit sought to assert claims on behalf of the plaintiff and other individuals who purchased similar goods and services from our animal hospitals and alleged, among other allegations,
that we improperly charged such individuals for “biohazard waste management” in connection with the services performed. The lawsuit sought compensatory and punitive damages in unspecified amounts, and other relief, including attorneys' fees and costs. VCA successfully had the venue transferred to the Southern District of California. Plaintiffs filed their motion for class certification on February 12, 2016. On May 16, 2016, VCA filed its opposition to plaintiffs’ motion for class certification. On June 10, 2016, VCA filed a motion for summary judgment as to all of plaintiffs’ individual claims. The Honorable Christina Snyder issued her decision on September 12, 2016, granting Defendants’ summary judgment motion and denying Plaintiffs' motion for class certification as moot. On October 13, 2016, Defendants filed a Notice to Appeal. We intend to continue to vigorously defend this action. At this time, we are unable to estimate the reasonably possible loss or range of possible loss, but do not believe losses, if any, would have a material effect on our results of operations or financial position taken as a whole. Following the announcement of the execution of the Merger Agreement, three putative stockholder class action complaints were filed in the United States District Court for the Central District of California relating to the proposed Merger with Mars: (1) Hight vs. VCA Inc., et al., Case No. 5:14-cv-00289, filed February 15, 2017, which named the Company, the Company’s Board of Directors, Mars, Merger Sub and Acquiror, as defendants, and which alleges, among other allegations, that (a) the consideration to be paid to the Company’s stockholders in connection with the proposed Merger is inadequate, (b) the Company’s Board of Directors and management have a conflict of interest due to continued employment and/or change in control payments, (c) the proposed Merger contains deal protection devices that preclude other bidders from making successful competing offers for the Company, and (d) the disclosures included in the proxy statement filed by the Company contain materially false or misleading statements or omissions; (2) Moran vs. VCA Inc., et al., Case No. 2:17-cv-01502, filed February 23, 2017, which named the Company and the Company’s Board of Directors as defendants, and which alleges, among other allegations, that the disclosures included in the proxy statement filed by the Company contain materially false or misleading statements or omissions; and (3) Krieger vs. VCA Inc., et al., Case No. 2:17-cv-01790, filed March 6, 2017, which named the Company and the Company’s Board of Directors as defendants, and which alleges, among other allegations, that the disclosures included in the proxy statement filed by the Company contain materially false or misleading statements or omissions. Each of the actions assert claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder. The actions seek, among other things, (a) to enjoin the defendants from proceeding with the shareholder vote on the Merger or completing the Merger on the agreed upon terms, (b) rescission of the Merger or an award of rescissory damages, to the extent the proposed Merger has already been consummated, and (c) an award of plaintiff’s costs, including attorneys’ and experts’ fees, and other equitable relief as the court deems proper. On March 6, 2017, the plaintiff in the Krieger action filed a motion for preliminary injunction seeking to enjoin the shareholder vote on the merger, which motion was withdrawn after the Company filed a supplement to the proxy statement on March 13, 2017 addressing the alleged disclosure claims in these actions, without admitting any liability or wrongdoing and specifically denying that any additional disclosures were required under applicable law. On March 28, 2017, our stockholders voted to approve the Merger. Subsequent to the filing of the supplement to the proxy statement and the stockholder vote, the plaintiffs in the actions agreed to file a stipulation of dismissal with prejudice, acknowledging that the claims arising from the Merger identified in their complaints have become moot. As the plaintiffs in actions assert that the prosecution of the actions caused VCA to file the supplemental proxy statement plaintiffs’ counsel may assert a claim for attorneys’ fees and expenses in connection with the common benefit provided to our stockholders as a result of the filing of the supplemental proxy statement, plaintiffs’ counsel intend to petition the court for such fees and expenses if their claims for fees cannot be resolved through negotiations. If and when the stipulation of dismissal is filed, the plaintiffs will voluntarily dismiss their complaints, with prejudice, and the actions shall be so dismissed. Until such time, the Company will continue to vigorously defend against all claims asserted. In addition to the lawsuits described above, we are party to ordinary routine legal proceedings and claims incidental to our business, but we are not currently a party to any legal proceeding that we believe would have a material adverse effect on our financial position, results of operations, or cash flows. |
Noncontrolling Interests |
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Noncontrolling Interests | Noncontrolling Interests We own some of our animal hospitals in partnerships with noncontrolling interest holders. We consolidate our partnerships in our condensed, consolidated financial statements because our ownership interest in these partnerships is equal to or greater than 50.1% and we control these entities. We record noncontrolling interest in income of subsidiaries equal to our partners’ percentage ownership of the partnerships’ income. We also record changes in the redemption value of our redeemable noncontrolling interests in net income attributable to noncontrolling interests in our condensed, consolidated statements of income. We reflect our noncontrolling partners’ cumulative share in the equity of the respective partnerships as either noncontrolling interests in equity, mandatorily redeemable noncontrolling interests in other liabilities, or redeemable noncontrolling interests in temporary equity (mezzanine) in our condensed, consolidated balance sheets.
The terms of some of our partnership agreements require us to purchase the partner’s equity in the partnership in the event of the partner’s death. We report these redeemable noncontrolling interests at their estimated redemption value, which approximates fair value, and classify them as liabilities due to the certainty of the related event. Estimated redemption value is determined using either a contractually stated formula or a discounted cash flow technique, both of which are used as an approximation of fair value. The discounted cash flow inputs used to determine the redemption value are Level 3 and include forecasted growth rates, valuation multiples, and the weighted average cost of capital. We recognize changes in the obligation as interest cost in our condensed, consolidated statements of income. The following table provides a summary of mandatorily redeemable noncontrolling interests included in other liabilities in our condensed, consolidated balance sheets (in thousands):
We also enter into partnership agreements whereby the noncontrolling interest partner is issued certain “put” rights. These rights are normally exercisable at the sole discretion of the noncontrolling interest partner. We report these redeemable noncontrolling interests at their estimated redemption value and classify them in temporary equity (mezzanine). We recognize changes in the obligation in net income attributable to noncontrolling interests in our condensed, consolidated statements of income. The following table provides a summary of redeemable noncontrolling interests (in thousands):
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Recent Accounting Pronouncements |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In January 2017, the FASB issued Accounting Standards Update (ASU) 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” to simplify how an entity is required to test goodwill for impairment. The Board has eliminated Step 2, where an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. An entity will no longer determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Instead, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. These amendments should reduce the cost and complexity of evaluating goodwill for impairment. The effective date and transition requirements of this ASU for public entities are effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update).” The SEC Staff Announcement applies to ASU 2014- 09, Revenue from Contracts with Customers (Topic 606); ASU 2016-02, Leases (Topic 842); and ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The effective dates and transition requirements of this Update are different for each Topic included. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combination (Topic 805) Clarifying the Definition of a Business,” to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This clarification is needed since the definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The effective date and transition requirements of this ASU for public entities are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements. In December 2016, the FASB issued Accounting Standards Update ("ASU") 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” as part of the Board’s ongoing project on its agenda about Technical Corrections and Improvements to clarify the Codification or to correct unintended application of guidance. A separate Update for technical corrections and improvements to Topic 606 and other Topics amended by Update 2014-09 was issued to increase awareness of the proposals and to expedite improvements to Update 2014-09. This Update affects various areas of ASU 2014-09 including: Loan Guarantee Fees, Contract Costs-Impairment Testing, Contract Costs-Interaction of Impairment Testing with Guidance in Other Topics, Scope of Topic 606, Disclosure of Remaining Performance Obligations, Disclosure of Prior-Period Performance Obligations, Contract Modifications Example, Contract Asset versus Receivable, Refund Liability, and Advertising Costs. The effective date and transition requirements of this ASU for public entities would be the same as the effective date for ASU 2014-09 as amended by ASU 2015-04, which are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements. In December 2016, the FASB issued ASU 2016-19, “Technical Corrections and Improvements,” that affect a wide variety of Topics in the Accounting Standards Codification (ASC) including amendments to Subtopic 350-40, Intangibles-Goodwill and Other- Internal-Use Software, Subtopic 360-20, Property, Plant, and Equipment- Real Estate Sales, Topic 820, Fair Value Measurement, Subtopic 405-40, Liabilities-Obligations Resulting from Joint and Several Liability Arrangements, Subtopic 860-20, Transfers and Servicing-Sales of Financial Assets, Subtopic 860-50, Transfers and Servicing-Servicing Assets and Liabilities. The amendments in this Update represent changes to clarify, correct errors, or make minor improvements to the
ASC, making it easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. Most of the amendments in this Update do not require transition guidance and are effective upon issuance of this Update. For the six amendments mentioned above, early adoption is permitted. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” to address the diversity that exists on how entities classify and present changes in restricted cash or restricted cash equivalents on the statement of cash flows. Other than limited guidance for not-for-profit entities, current GAAP does not include specific guidance on the cash flow classification and presentation of changes in restricted cash or restricted cash equivalents. The amendments in this update now provide guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. This ASU is effective for public entities for annual periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. The amendments should be applied using a retrospective transition method to each period presented. We do not believe that the adoption of this ASU will have a significant impact on our consolidated financial statements. In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 710) Intra-Entity Transfers of Assets Other Than Inventory,” to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. While current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party, this ASU requires the entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this Update are part of the Board’s Simplification initiative and align the recognition of income tax consequences for intra-entity transfers of assets other than inventory with International Financial Reporting Standards (IFRS). The effective date and transition requirements of this ASU for public entities are effective for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods, with early adoption permitted. The amendments should be applied using a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” to provide guidance on eight specific cash flow issues where current GAAP is unclear or does not have specific guidance. The cash flow issues covered by this ASU are: 1) debt prepayment or debt extinguishment costs; 2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3) contingent consideration payments made after a business combination; 4) proceeds from the settlement of insurance claims; 5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; 6) distributions received from equity method investees; 7) beneficial interests in securitization transactions; and 8) separately identifiable cash flows and application of the predominance principle. The effective date and transition requirements of this ASU for public entities are effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements, however, we do not believe that the adoption of this ASU will have a significant impact on our consolidated financial statements. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,” to improve the guidance on Topic 606 in assessing collectibility, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. The effective date and transition requirements of this ASU are the same as ASU 2014-09. Since the effective date of ASU 2014-09 was deferred by ASU 2015-14 by one year, ASU 2014-09 and ASU 2016-10 are effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted only as of annual periods beginning after December 15, 2016, including interim periods within that reporting period. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements.
In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” to clarify some issues on Topic 606 that arose on the identifying performance obligations and the licensing implementation guidance. The effective date and transition requirements of this ASU are the same as ASU 2014-09. Since the effective date of ASU 2014-09 was deferred by ASU 2015-14 by one year, ASU 2014-09 and ASU 2016-10 are effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted only as of annual periods beginning after December 15, 2016, including interim periods within that reporting period. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “ Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” as part of the Board’s Simplification Initiative. The Update requires that all excess tax benefits and tax deficiencies be recognized in the income statement as discrete tax items in the interim period in which they occur, clarifies that employee taxes paid when an employer withholds shares for tax purposes should be presented on the statement of cash flows as a financing activity, and changes the presentation of excess tax benefits on the statement of cash flows to be classified along with other income tax cash flows as an operating activity. It also provides for a policy election to either estimate the number of awards expected to vest or account for forfeitures when they occur. This new accounting guidance is effective for public companies for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We adopted the applicable provisions of ASU 2016-09 effective January 1, 2017 as follows:
The adoption of this ASU did not have a significant impact on our consolidated financial statements. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, "Revenue from Contracts with Customers (Topic 606)," which is not yet effective. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements of Update 2014-09. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842) Section A-Leases: Amendments to the FASB Accounting Standards Codification®; Section B-Conforming Amendments Related to Leases: Amendments to the FASB Accounting Standards Codification®; Section C-Background Information and Basis for Conclusions.” The amendments in this Update affect any entity that enters into a lease with some specified scope exemptions and supersedes Topic 840, Leases. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP which did not require lease assets and lease liabilities to be recognized for most leases. The lease assets and lease liabilities arising from operating leases should be recognized in the statement of financial position. A lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. When measuring assets and liabilities arising from
a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. We have made progress toward completing our evaluation of potential changes from adopting the new standard on our leasing activities and continue to evaluate the impact of the adoption of this new guidance on our consolidated financial statements. We expect to have our evaluation completed by the end of 2017. In January 2016, the FASB issued ASU 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” An entity should present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. For public business entities, this Update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We do not expect this adoption to have a significant impact on our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." This new standard will replace most existing revenue recognition guidance in U.S. GAAP. The core principle of the ASU is the recognition of revenue for the transfer of goods or services equal to the amount an entity expects to receive for those goods and services. This ASU requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and estimates and changes in those estimates. In August 2015, the FASB issued ASU 2015-14, " Revenue from Contracts with Customers: Deferral of the Effective Date" that delayed the effective date of ASU 2014-09 by one year to January 1, 2018, as the Company’s annual reporting period begins after December 15, 2017. The Company has begun to analyze the impact of the new standard on its financial results based on an inventory of the Company’s current contracts with customers. The Company has obtained an understanding of the new standard and currently believes that it will retain much of the same accounting treatment as used to recognize revenue under current standards. Revenue on a significant portion of our contracts is currently recognized at the time the related services are rendered. Under the new standard the Company will continue to recognize revenue on these contracts using a similar approach as the performance obligations, transaction prices and related allocations are not expected to differ in comparison to the new standard. In certain other cases we defer revenue related to multiple element arrangements. Based on the contracts currently in place, the Company does not anticipate a significant acceleration of revenue upon applying the new standard to its current contracts under these fact patterns. The Company continues to evaluate the impact of ASU 2014-09 on our financial results and prepare for the adoption of the standard on January 1, 2018, including readying its internal processes and control environment for new requirements, particularly around enhanced disclosures, under the new standard. The standard allows for both retrospective and modified retrospective methods of adoption. The Company is in the process of determining the method of adoption it will elect and the impact on our consolidated financial statements and footnote disclosures, and will continue to provide enhanced disclosures as we continue our assessment. |
Subsequent Events |
3 Months Ended |
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Mar. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Subsequent to March 31, 2017, we acquired 7 hospitals for an estimated total consideration of $33.6 million, with acquired revenues of $17.4 million; the total consideration includes $4.3 million for the purchase of real property in connection with two of the acquisitions |
Basis of Presentation (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||
Segment Reporting | The accounting policies of our segments are the same as those described in the summary of significant accounting policies included in our 2016 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. |
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Noncontrolling Interests | We own some of our animal hospitals in partnerships with noncontrolling interest holders. We consolidate our partnerships in our condensed, consolidated financial statements because our ownership interest in these partnerships is equal to or greater than 50.1% and we control these entities. We record noncontrolling interest in income of subsidiaries equal to our partners’ percentage ownership of the partnerships’ income. We also record changes in the redemption value of our redeemable noncontrolling interests in net income attributable to noncontrolling interests in our condensed, consolidated statements of income. We reflect our noncontrolling partners’ cumulative share in the equity of the respective partnerships as either noncontrolling interests in equity, mandatorily redeemable noncontrolling interests in other liabilities, or redeemable noncontrolling interests in temporary equity (mezzanine) in our condensed, consolidated balance sheets. |
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Recent Accounting Pronouncements | In January 2017, the FASB issued Accounting Standards Update (ASU) 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” to simplify how an entity is required to test goodwill for impairment. The Board has eliminated Step 2, where an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. An entity will no longer determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Instead, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. These amendments should reduce the cost and complexity of evaluating goodwill for impairment. The effective date and transition requirements of this ASU for public entities are effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update).” The SEC Staff Announcement applies to ASU 2014- 09, Revenue from Contracts with Customers (Topic 606); ASU 2016-02, Leases (Topic 842); and ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The effective dates and transition requirements of this Update are different for each Topic included. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combination (Topic 805) Clarifying the Definition of a Business,” to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This clarification is needed since the definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The effective date and transition requirements of this ASU for public entities are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements. In December 2016, the FASB issued Accounting Standards Update ("ASU") 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” as part of the Board’s ongoing project on its agenda about Technical Corrections and Improvements to clarify the Codification or to correct unintended application of guidance. A separate Update for technical corrections and improvements to Topic 606 and other Topics amended by Update 2014-09 was issued to increase awareness of the proposals and to expedite improvements to Update 2014-09. This Update affects various areas of ASU 2014-09 including: Loan Guarantee Fees, Contract Costs-Impairment Testing, Contract Costs-Interaction of Impairment Testing with Guidance in Other Topics, Scope of Topic 606, Disclosure of Remaining Performance Obligations, Disclosure of Prior-Period Performance Obligations, Contract Modifications Example, Contract Asset versus Receivable, Refund Liability, and Advertising Costs. The effective date and transition requirements of this ASU for public entities would be the same as the effective date for ASU 2014-09 as amended by ASU 2015-04, which are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements. In December 2016, the FASB issued ASU 2016-19, “Technical Corrections and Improvements,” that affect a wide variety of Topics in the Accounting Standards Codification (ASC) including amendments to Subtopic 350-40, Intangibles-Goodwill and Other- Internal-Use Software, Subtopic 360-20, Property, Plant, and Equipment- Real Estate Sales, Topic 820, Fair Value Measurement, Subtopic 405-40, Liabilities-Obligations Resulting from Joint and Several Liability Arrangements, Subtopic 860-20, Transfers and Servicing-Sales of Financial Assets, Subtopic 860-50, Transfers and Servicing-Servicing Assets and Liabilities. The amendments in this Update represent changes to clarify, correct errors, or make minor improvements to the
ASC, making it easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. Most of the amendments in this Update do not require transition guidance and are effective upon issuance of this Update. For the six amendments mentioned above, early adoption is permitted. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” to address the diversity that exists on how entities classify and present changes in restricted cash or restricted cash equivalents on the statement of cash flows. Other than limited guidance for not-for-profit entities, current GAAP does not include specific guidance on the cash flow classification and presentation of changes in restricted cash or restricted cash equivalents. The amendments in this update now provide guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. This ASU is effective for public entities for annual periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. The amendments should be applied using a retrospective transition method to each period presented. We do not believe that the adoption of this ASU will have a significant impact on our consolidated financial statements. In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 710) Intra-Entity Transfers of Assets Other Than Inventory,” to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. While current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party, this ASU requires the entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this Update are part of the Board’s Simplification initiative and align the recognition of income tax consequences for intra-entity transfers of assets other than inventory with International Financial Reporting Standards (IFRS). The effective date and transition requirements of this ASU for public entities are effective for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods, with early adoption permitted. The amendments should be applied using a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” to provide guidance on eight specific cash flow issues where current GAAP is unclear or does not have specific guidance. The cash flow issues covered by this ASU are: 1) debt prepayment or debt extinguishment costs; 2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3) contingent consideration payments made after a business combination; 4) proceeds from the settlement of insurance claims; 5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; 6) distributions received from equity method investees; 7) beneficial interests in securitization transactions; and 8) separately identifiable cash flows and application of the predominance principle. The effective date and transition requirements of this ASU for public entities are effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements, however, we do not believe that the adoption of this ASU will have a significant impact on our consolidated financial statements. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,” to improve the guidance on Topic 606 in assessing collectibility, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. The effective date and transition requirements of this ASU are the same as ASU 2014-09. Since the effective date of ASU 2014-09 was deferred by ASU 2015-14 by one year, ASU 2014-09 and ASU 2016-10 are effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted only as of annual periods beginning after December 15, 2016, including interim periods within that reporting period. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements.
In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” to clarify some issues on Topic 606 that arose on the identifying performance obligations and the licensing implementation guidance. The effective date and transition requirements of this ASU are the same as ASU 2014-09. Since the effective date of ASU 2014-09 was deferred by ASU 2015-14 by one year, ASU 2014-09 and ASU 2016-10 are effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted only as of annual periods beginning after December 15, 2016, including interim periods within that reporting period. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “ Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” as part of the Board’s Simplification Initiative. The Update requires that all excess tax benefits and tax deficiencies be recognized in the income statement as discrete tax items in the interim period in which they occur, clarifies that employee taxes paid when an employer withholds shares for tax purposes should be presented on the statement of cash flows as a financing activity, and changes the presentation of excess tax benefits on the statement of cash flows to be classified along with other income tax cash flows as an operating activity. It also provides for a policy election to either estimate the number of awards expected to vest or account for forfeitures when they occur. This new accounting guidance is effective for public companies for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We adopted the applicable provisions of ASU 2016-09 effective January 1, 2017 as follows:
The adoption of this ASU did not have a significant impact on our consolidated financial statements. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, "Revenue from Contracts with Customers (Topic 606)," which is not yet effective. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements of Update 2014-09. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842) Section A-Leases: Amendments to the FASB Accounting Standards Codification®; Section B-Conforming Amendments Related to Leases: Amendments to the FASB Accounting Standards Codification®; Section C-Background Information and Basis for Conclusions.” The amendments in this Update affect any entity that enters into a lease with some specified scope exemptions and supersedes Topic 840, Leases. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP which did not require lease assets and lease liabilities to be recognized for most leases. The lease assets and lease liabilities arising from operating leases should be recognized in the statement of financial position. A lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. When measuring assets and liabilities arising from
a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. We have made progress toward completing our evaluation of potential changes from adopting the new standard on our leasing activities and continue to evaluate the impact of the adoption of this new guidance on our consolidated financial statements. We expect to have our evaluation completed by the end of 2017. In January 2016, the FASB issued ASU 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” An entity should present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. For public business entities, this Update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We do not expect this adoption to have a significant impact on our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." This new standard will replace most existing revenue recognition guidance in U.S. GAAP. The core principle of the ASU is the recognition of revenue for the transfer of goods or services equal to the amount an entity expects to receive for those goods and services. This ASU requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and estimates and changes in those estimates. In August 2015, the FASB issued ASU 2015-14, " Revenue from Contracts with Customers: Deferral of the Effective Date" that delayed the effective date of ASU 2014-09 by one year to January 1, 2018, as the Company’s annual reporting period begins after December 15, 2017. The Company has begun to analyze the impact of the new standard on its financial results based on an inventory of the Company’s current contracts with customers. The Company has obtained an understanding of the new standard and currently believes that it will retain much of the same accounting treatment as used to recognize revenue under current standards. Revenue on a significant portion of our contracts is currently recognized at the time the related services are rendered. Under the new standard the Company will continue to recognize revenue on these contracts using a similar approach as the performance obligations, transaction prices and related allocations are not expected to differ in comparison to the new standard. In certain other cases we defer revenue related to multiple element arrangements. Based on the contracts currently in place, the Company does not anticipate a significant acceleration of revenue upon applying the new standard to its current contracts under these fact patterns. The Company continues to evaluate the impact of ASU 2014-09 on our financial results and prepare for the adoption of the standard on January 1, 2018, including readying its internal processes and control environment for new requirements, particularly around enhanced disclosures, under the new standard. The standard allows for both retrospective and modified retrospective methods of adoption. The Company is in the process of determining the method of adoption it will elect and the impact on our consolidated financial statements and footnote disclosures, and will continue to provide enhanced disclosures as we continue our assessment. |
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Noncontrolling Interests | Mandatorily Redeemable Noncontrolling Interests The terms of some of our partnership agreements require us to purchase the partner’s equity in the partnership in the event of the partner’s death. We report these redeemable noncontrolling interests at their estimated redemption value, which approximates fair value, and classify them as liabilities due to the certainty of the related event. Estimated redemption value is determined using either a contractually stated formula or a discounted cash flow technique, both of which are used as an approximation of fair value. The discounted cash flow inputs used to determine the redemption value are Level 3 and include forecasted growth rates, valuation multiples, and the weighted average cost of capital. We recognize changes in the obligation as interest cost in our condensed, consolidated statements of income. |
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Noncontrolling Interests | Redeemable Noncontrolling Interests We also enter into partnership agreements whereby the noncontrolling interest partner is issued certain “put” rights. These rights are normally exercisable at the sole discretion of the noncontrolling interest partner. We report these redeemable noncontrolling interests at their estimated redemption value and classify them in temporary equity (mezzanine). We recognize changes in the obligation in net income attributable to noncontrolling interests in our condensed, consolidated statements of income. |
Goodwill and Other Long-Lived Assets (Tables) |
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Goodwill | The following table presents the changes in the carrying amount of our goodwill for the three months ended March 31, 2017 (in thousands):
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Summary of Other Intangible Assets | Our acquisition related amortizable intangible assets as of March 31, 2017 and December 31, 2016 are as follows (in thousands):
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Estimated Amortization Expense Related to Intangible Assets | The following table summarizes our aggregate amortization expense related to other intangible assets (in thousands):
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Estimated Amortization Expense Related to Indefinite Intangible Assets | The estimated amortization expense related to other intangible assets for the remainder of 2017 and each of the succeeding years thereafter, as of March 31, 2017, is as follows (in thousands):
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Acquisitions (Tables) |
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Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition Summary Of Acquired Properties | The table below reflects the activity related to the acquisitions and dispositions of our animal hospitals during the three months ended March 31, 2017 and 2016, respectively. There were no laboratory acquisitions or dispositions during the three months ended March 31, 2017 and 2016, respectively.
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Animal Hospital | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the aggregate consideration and the allocation of the purchase price for our independent animal hospitals acquired during the three months ended March 31, 2017 and 2016, respectively (in thousands):
____________________________
|
Other Accrued Liabilities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Accrued Liabilities | Other accrued liabilities consisted of the following at March 31, 2017 and December 31, 2016 (in thousands):
____________________________ (1) Includes property, sales and use taxes. |
Long-Term Obligations (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-Term Debt Instruments | Long-term obligations consisted of the following at March 31, 2017 and December 31, 2016 (in thousands):
____________________________
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Schedule of Percentage Margin for Eurodollar Rate Loans and Commitment Fee | Each of the aforementioned margins remain applicable until the date of delivery of the compliance certificate and the financial statements, for the period ended March 31, 2017, at which time the applicable margin will be determined by reference to the leverage ratio in effect from time to time as set forth in the following table:
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Schedule of Principal Payments for Senior Term Notes | The following table sets forth the scheduled principal payments for our senior credit facility (in thousands):
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Fair Value (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Value and Fair Value of Variable Rate Long-Term Debt | The following table reflects the carrying value and fair value of our variable-rate long-term debt (in thousands):
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Calculation of Earnings per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Calculation of Basic and Diluted Earnings per Share | Basic and diluted earnings per share were calculated as follows (in thousands, except per share amounts):
|
Lines of Business (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lines of Business | The following is a summary of certain financial data for each of our segments (in thousands):
|
Noncontrolling Interests (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mandatorily Redeemable Noncontrolling Interests | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of redeemable noncontrolling interests | The following table provides a summary of mandatorily redeemable noncontrolling interests included in other liabilities in our condensed, consolidated balance sheets (in thousands):
|
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Redeemable Noncontrolling Interests | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of redeemable noncontrolling interests | The following table provides a summary of redeemable noncontrolling interests (in thousands):
|
Nature of Operations (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2017
day_care_location
province
Laboratory
segment
Hospital
State
reportable_segment
|
May 01, 2016
Hospital
State
|
|
Nature of Operations (Textuals) [Abstract] | ||
Number of operating segments | segment | 4 | |
Number of reportable segments | reportable_segment | 2 | |
Number of hospitals operated | Hospital | 810 | |
Number of states in which hospitals are operated | 43 | |
Number of Canadian Provinces | province | 5 | |
Number of states in which the company operate a full-service veterinary diagnostic laboratory network | 50 | |
Number of laboratories operated | Laboratory | 61 | |
Companion Animal Practices, North America | ||
Nature of Operations (Textuals) [Abstract] | ||
Number of hospitals operated | Hospital | 56 | |
Number of states in which hospitals are operated | 18 | |
Percentage of ownership interest | 80.00% | |
Camp Bow Wow | ||
Nature of Operations (Textuals) [Abstract] | ||
Number of dog boarding and day care service locations operated | day_care_location | 130 | |
Number of states in which the entity operates | 33 | |
Number of Canadian Provinces in which entity operates | province | 1 |
Goodwill and Other Long-Lived Assets - Changes in Carrying Amount of Goodwill (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2017
USD ($)
| |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | $ 2,294,479 |
Accumulated impairment losses, beginning balance | (130,057) |
Subtotal, beginning balance | 2,164,422 |
Goodwill acquired | 75,884 |
Foreign translation adjustment | 1,738 |
Other | (13,855) |
Goodwill, ending balance | 2,358,246 |
Accumulated impairment losses, ending balance | (130,057) |
Subtotal, ending balance | 2,228,189 |
Animal Hospital | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 2,047,894 |
Accumulated impairment losses, beginning balance | 0 |
Subtotal, beginning balance | 2,047,894 |
Goodwill acquired | 75,884 |
Foreign translation adjustment | 1,733 |
Other | (13,855) |
Goodwill, ending balance | 2,111,656 |
Accumulated impairment losses, ending balance | 0 |
Subtotal, ending balance | 2,111,656 |
Laboratory | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 101,283 |
Accumulated impairment losses, beginning balance | 0 |
Subtotal, beginning balance | 101,283 |
Goodwill acquired | 0 |
Foreign translation adjustment | 5 |
Other | 0 |
Goodwill, ending balance | 101,288 |
Accumulated impairment losses, ending balance | 0 |
Subtotal, ending balance | 101,288 |
All Other | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 145,302 |
Accumulated impairment losses, beginning balance | (130,057) |
Subtotal, beginning balance | 15,245 |
Goodwill acquired | 0 |
Foreign translation adjustment | 0 |
Other | 0 |
Goodwill, ending balance | 145,302 |
Accumulated impairment losses, ending balance | (130,057) |
Subtotal, ending balance | $ 15,245 |
Goodwill and Other Long-Lived Assets - Other Intangible Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 303,674 | $ 295,549 |
Accumulated Amortization | (96,103) | (87,012) |
Total | 207,571 | 208,537 |
Trademarks | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 30,314 | 30,144 |
Accumulated Amortization | (8,974) | (7,713) |
Total | 21,340 | 22,431 |
Non-contractual customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 228,148 | 218,847 |
Accumulated Amortization | (71,469) | (62,331) |
Total | 156,679 | 156,516 |
Covenants not-to-compete | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 25,592 | 23,990 |
Accumulated Amortization | (8,776) | (7,580) |
Total | 16,816 | 16,410 |
Favorable lease assets | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 6,503 | 9,451 |
Accumulated Amortization | (3,008) | (5,855) |
Total | 3,495 | 3,596 |
Technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 1,377 | 1,377 |
Accumulated Amortization | (845) | (795) |
Total | 532 | 582 |
Client lists | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 10 | 10 |
Accumulated Amortization | (1) | (1) |
Total | 9 | 9 |
Franchise rights | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 11,730 | 11,730 |
Accumulated Amortization | (3,030) | (2,737) |
Total | $ 8,700 | $ 8,993 |
Goodwill and Other Long-Lived Assets - Amortization Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Aggregate amortization expense | $ 11,425 | $ 6,228 | |
Definite-lived intangible assets: | |||
Remainder of 2017 | 33,413 | ||
2018 | 41,576 | ||
2019 | 38,461 | ||
2020 | 33,532 | ||
2021 | 23,264 | ||
Thereafter | 37,325 | ||
Total | 207,571 | $ 208,537 | |
Indefinite-lived intangible assets: | |||
Trademarks | 4,059 | ||
Total intangible assets | $ 211,630 | $ 212,577 |
Acquisitions - Acquisition and Disposal Activity (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2017
Laboratory
Hospital
|
Mar. 31, 2016
Laboratory
Hospital
|
|
Laboratories Acquisitions | ||
Business Acquisition Summary Of Acquired Properties [Line Items] | ||
Net increase | Laboratory | 0 | 0 |
Animal Hospital | ||
Business Acquisition Summary Of Acquired Properties [Line Items] | ||
Acquisitions | 15 | 24 |
Acquisitions, merged | 0 | (1) |
Sold, closed or merged | 0 | (2) |
Net increase | 15 | 21 |
Acquisitions - Animal Hospital Acquisitions (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
|
Consideration: | |||
Cash, net of cash acquired | $ 81,721 | $ 160,385 | |
Earn-outs | 8,600 | $ 9,200 | |
Allocation of the Purchase Price: | |||
Goodwill | 2,228,189 | $ 2,164,422 | |
Animal Hospital | |||
Consideration: | |||
Cash, net of cash acquired | 81,721 | 157,325 | |
Assumed debt | 8,374 | 1,361 | |
Holdbacks | 1,600 | 3,508 | |
Earn-outs | 0 | 3,437 | |
Fair value of total consideration transferred | 91,695 | 165,631 | |
Allocation of the Purchase Price: | |||
Tangible assets | 5,395 | 17,541 | |
Identifiable intangible assets | 10,303 | 18,844 | |
Goodwill | 75,884 | 129,246 | |
Other liabilities assumed | 113 | 0 | |
Fair value of assets acquired and liabilities assumed | $ 91,695 | 165,631 | |
Weighted average amortization period | 5 years | ||
Goodwill recorded for acquisitions, fully deductible for income tax purposes | $ 75,900 | $ 129,200 | |
Animal Hospital | Customer Relationships | |||
Allocation of the Purchase Price: | |||
Weighted average amortization period | 5 years | ||
Animal Hospital | Trademarks | |||
Allocation of the Purchase Price: | |||
Weighted average amortization period | 2 years | ||
Animal Hospital | Covenants | |||
Allocation of the Purchase Price: | |||
Weighted average amortization period | 5 years |
Other Accrued Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Payables and Accruals [Abstract] | ||
Deferred revenue | $ 24,037 | $ 21,400 |
Holdbacks and earn-outs | 14,403 | 20,823 |
Accrued other insurance | 6,380 | 6,169 |
Deferred rent | 5,492 | 5,347 |
Accrued health insurance | 5,012 | 4,818 |
Miscellaneous accrued taxes | 4,407 | 2,966 |
Accrued worker's compensation | 3,938 | 3,733 |
Accrued accounting and legal fees | 3,822 | 2,508 |
Customer deposits | 2,236 | 3,168 |
Accrued lease payments | 1,355 | 1,409 |
Other | 23,963 | 19,442 |
Other accrued liabilities | $ 95,045 | $ 91,783 |
Long-Term Obligations - Narrative (Details) |
3 Months Ended | 9 Months Ended | 21 Months Ended | |||||
---|---|---|---|---|---|---|---|---|
Jun. 29, 2016
USD ($)
|
Mar. 31, 2017
USD ($)
|
Jun. 29, 2021
USD ($)
|
Jun. 30, 2020
USD ($)
|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2019
USD ($)
|
Dec. 31, 2016
USD ($)
|
Jun. 30, 2016
USD ($)
|
|
Debt Instrument [Line Items] | ||||||||
Long-term debt | $ 1,304,235,000 | $ 1,264,333,000 | ||||||
Voting equity guarantee on indebtedness, percentage | 65.00% | |||||||
Non-voting equity guarantee on indebtedness, percentage | 100.00% | |||||||
Revolving credit | ||||||||
Debt Instrument [Line Items] | ||||||||
Long-term debt | $ 441,134,000 | 395,907,000 | ||||||
Financing costs | 3,866,000 | 4,093,000 | ||||||
Principal amount | 445,000,000 | 400,000,000 | ||||||
Senior term notes | ||||||||
Debt Instrument [Line Items] | ||||||||
Long-term debt | 861,052,000 | 866,395,000 | ||||||
Financing costs | 2,448,000 | 2,605,000 | ||||||
Principal amount | $ 863,500,000 | $ 869,000,000 | ||||||
Senior term notes | Eurodollar rate | ||||||||
Debt Instrument [Line Items] | ||||||||
Basis spread on variable rate | 1.00% | |||||||
Senior term notes | Federal funds rate | ||||||||
Debt Instrument [Line Items] | ||||||||
Basis spread on variable rate | 0.50% | |||||||
Senior term notes | Forecast | ||||||||
Debt Instrument [Line Items] | ||||||||
Principal payment (quarterly) | $ 22,000,000 | $ 16,500,000 | $ 5,500,000 | $ 11,000,000 | ||||
New Senior Credit Facility | Base rate | Tier Three | ||||||||
Debt Instrument [Line Items] | ||||||||
Applicable margin | 0.50% | |||||||
New Senior Credit Facility | Eurodollar rate | Tier Three | ||||||||
Debt Instrument [Line Items] | ||||||||
Applicable margin | 1.50% | |||||||
New Senior Credit Facility | Secured debt | ||||||||
Debt Instrument [Line Items] | ||||||||
Payment of financing costs | $ 3,800,000 | |||||||
Financing costs | 3,200,000 | |||||||
Deferred financing costs recognized as part of net income | 600,000 | |||||||
New Senior Credit Facility | Secured debt | Bridge Loan | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing capacity | 25,000,000 | |||||||
New Senior Credit Facility | Line of credit | ||||||||
Debt Instrument [Line Items] | ||||||||
Interest coverage ratio | 15.45 | |||||||
Required interest coverage ratio (no less than) | 3 | |||||||
Leverage ratio | 2.65 | |||||||
Required leverage ratio (no more than) | 3.75 | |||||||
New Senior Credit Facility | Line of credit | Secured debt | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing capacity | 1,700,000,000 | |||||||
New Senior Credit Facility | Senior term notes | Secured debt | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt instrument face amount | 880,000,000 | |||||||
New Senior Credit Facility | Revolving credit | ||||||||
Debt Instrument [Line Items] | ||||||||
Long-term debt | $ 375,000,000 | |||||||
New Senior Credit Facility | Revolving credit | Secured debt | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing capacity | 800,000,000 | |||||||
Credit Agreement | Secured debt | ||||||||
Debt Instrument [Line Items] | ||||||||
Capitalized deferred financing costs expensed | 1,000,000 | |||||||
Credit Agreement | Senior term notes | Secured debt | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing capacity | 600,000,000 | |||||||
Credit Agreement | Revolving credit | Secured debt | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing capacity | $ 800,000,000 |
Long-Term Obligations - Summary of Long-Term Obligations (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Debt Instrument [Line Items] | ||
Debt obligations less unamortized discount and debt issuance costs | $ 1,304,235 | $ 1,264,333 |
Other Debt | 1,819 | 1,801 |
Capital lease obligations | 82,249 | 83,384 |
Long-term debt and capital lease obligations, including current maturities | 1,386,484 | 1,347,717 |
Less — current portion | (43,877) | (38,320) |
Current potion of long-term debt | 1,342,607 | 1,309,397 |
Revolving credit | ||
Debt Instrument [Line Items] | ||
Principal amount | 445,000 | 400,000 |
Less unamortized debt issuance costs | (3,866) | (4,093) |
Debt obligations less unamortized discount and debt issuance costs | $ 441,134 | $ 395,907 |
Effective interest rate (percentage) | 2.49% | 2.28% |
Senior term notes | ||
Debt Instrument [Line Items] | ||
Principal amount | $ 863,500 | $ 869,000 |
Less unamortized debt issuance costs | (2,448) | (2,605) |
Debt obligations less unamortized discount and debt issuance costs | $ 861,052 | $ 866,395 |
Effective interest rate (percentage) | 2.51% | 2.28% |
Secured seller note | ||
Debt Instrument [Line Items] | ||
Debt obligations less unamortized discount and debt issuance costs | $ 230 | $ 230 |
Stated interest rate (percentage) | 10.00% | 10.00% |
Long-Term Obligations - Schedule of Percentage Margin For Eurodollar Rate Loans And Commitment Fee (Details) - New Senior Credit Facility |
3 Months Ended |
---|---|
Mar. 31, 2017 | |
Tier One | |
Debt Instrument [Line Items] | |
Commitment Fee | 0.40% |
Tier One | Minimum | |
Debt Instrument [Line Items] | |
Consolidated Leverage Ratio | 3.5 |
Tier One | Eurodollar rate | |
Debt Instrument [Line Items] | |
Applicable Margin for Eurodollar Loans/Letter of Credit Fees And Applicable Margin for Base Rate Loans | 2.00% |
Tier One | Base rate | |
Debt Instrument [Line Items] | |
Applicable Margin for Eurodollar Loans/Letter of Credit Fees And Applicable Margin for Base Rate Loans | 1.00% |
Tier Two | |
Debt Instrument [Line Items] | |
Commitment Fee | 0.35% |
Tier Two | Maximum | |
Debt Instrument [Line Items] | |
Consolidated Leverage Ratio | 3.5 |
Tier Two | Minimum | |
Debt Instrument [Line Items] | |
Consolidated Leverage Ratio | 2.75 |
Tier Two | Eurodollar rate | |
Debt Instrument [Line Items] | |
Applicable Margin for Eurodollar Loans/Letter of Credit Fees And Applicable Margin for Base Rate Loans | 1.75% |
Tier Two | Base rate | |
Debt Instrument [Line Items] | |
Applicable Margin for Eurodollar Loans/Letter of Credit Fees And Applicable Margin for Base Rate Loans | 0.75% |
Tier Three | |
Debt Instrument [Line Items] | |
Commitment Fee | 0.30% |
Tier Three | Maximum | |
Debt Instrument [Line Items] | |
Consolidated Leverage Ratio | 2.75 |
Tier Three | Minimum | |
Debt Instrument [Line Items] | |
Consolidated Leverage Ratio | 1.75 |
Tier Three | Eurodollar rate | |
Debt Instrument [Line Items] | |
Applicable Margin for Eurodollar Loans/Letter of Credit Fees And Applicable Margin for Base Rate Loans | 1.50% |
Tier Three | Base rate | |
Debt Instrument [Line Items] | |
Applicable Margin for Eurodollar Loans/Letter of Credit Fees And Applicable Margin for Base Rate Loans | 0.50% |
Tier Four | |
Debt Instrument [Line Items] | |
Commitment Fee | 0.25% |
Tier Four | Maximum | |
Debt Instrument [Line Items] | |
Consolidated Leverage Ratio | 1.75 |
Tier Four | Minimum | |
Debt Instrument [Line Items] | |
Consolidated Leverage Ratio | 1 |
Tier Four | Eurodollar rate | |
Debt Instrument [Line Items] | |
Applicable Margin for Eurodollar Loans/Letter of Credit Fees And Applicable Margin for Base Rate Loans | 1.25% |
Tier Four | Base rate | |
Debt Instrument [Line Items] | |
Applicable Margin for Eurodollar Loans/Letter of Credit Fees And Applicable Margin for Base Rate Loans | 0.25% |
Tier Five | |
Debt Instrument [Line Items] | |
Commitment Fee | 0.25% |
Tier Five | Maximum | |
Debt Instrument [Line Items] | |
Consolidated Leverage Ratio | 1.00 |
Tier Five | Eurodollar rate | |
Debt Instrument [Line Items] | |
Applicable Margin for Eurodollar Loans/Letter of Credit Fees And Applicable Margin for Base Rate Loans | 1.00% |
Tier Five | Base rate | |
Debt Instrument [Line Items] | |
Applicable Margin for Eurodollar Loans/Letter of Credit Fees And Applicable Margin for Base Rate Loans | 0.00% |
Long-Term Obligations - Schedule of Long-Term Debt Maturities (Details) $ in Thousands |
Mar. 31, 2017
USD ($)
|
---|---|
Debt Instrument [Line Items] | |
2017 | $ 27,500 |
2018 | 44,000 |
2019 | 55,000 |
2020 | 77,000 |
2021 | 1,105,000 |
Thereafter | 0 |
Revolving loans | |
Debt Instrument [Line Items] | |
2017 | 0 |
2018 | 0 |
2019 | 0 |
2020 | 0 |
2021 | 445,000 |
Thereafter | 0 |
Senior term notes | |
Debt Instrument [Line Items] | |
2017 | 27,500 |
2018 | 44,000 |
2019 | 55,000 |
2020 | 77,000 |
2021 | 660,000 |
Thereafter | $ 0 |
Fair Value (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Carrying value and fair value of long-term debt | ||
Variable-rate long-term debt, Carrying Value | $ 1,308,500 | $ 1,269,000 |
Variable-rate long-term debt, Fair Value | $ 1,308,500 | $ 1,269,000 |
Calculation of Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Calculation of Basic and Diluted Earnings per Share | ||
Net income attributable to VCA Inc. | $ 51,093 | $ 46,227 |
Weighted-average common shares outstanding: | ||
Basic (in shares) | 81,245,000 | 80,776,000 |
Effect of dilutive potential common shares: | ||
Stock options (in shares) | 360,000 | 284,000 |
Non-vested shares and units (in shares) | 574,000 | 463,000 |
Diluted (in shares) | 82,179,000 | 81,523,000 |
Basic earnings per share (in dollars per share) | $ 0.63 | $ 0.57 |
Diluted earnings per share (in dollars per share) | $ 0.62 | $ 0.57 |
Calculation of Earnings per Share (Textuals) [Abstract] | ||
Potential common shares excluded from the computation of diluted earnings per share (in shares) | 72,225 | 40,193 |
Lines of Business (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
|
Lines of Business | |||
External revenue | $ 678,251 | $ 563,439 | |
Intercompany revenue | 0 | 0 | |
Total revenue | 678,251 | 563,439 | |
Direct costs | 523,783 | 426,659 | |
Gross profit | 154,468 | 136,780 | |
Selling, general and administrative expense | 58,401 | 50,128 | |
Operating income (loss) before sale or disposal of assets | 96,067 | 86,652 | |
Net loss (gain) on sale or disposal of assets | 250 | 563 | |
Operating income (loss) | 95,817 | 86,089 | |
Depreciation and amortization | 30,401 | 21,289 | |
Property and equipment additions | 28,919 | 25,806 | |
Total assets | 3,460,678 | $ 3,373,328 | |
Operating Segments | Animal Hospital | |||
Lines of Business | |||
External revenue | 568,181 | 458,623 | |
Intercompany revenue | 0 | 0 | |
Total revenue | 568,181 | 458,623 | |
Direct costs | 481,871 | 385,206 | |
Gross profit | 86,310 | 73,417 | |
Selling, general and administrative expense | 17,611 | 12,085 | |
Operating income (loss) before sale or disposal of assets | 68,699 | 61,332 | |
Net loss (gain) on sale or disposal of assets | 211 | 575 | |
Operating income (loss) | 68,488 | 60,757 | |
Depreciation and amortization | 26,658 | 17,573 | |
Property and equipment additions | 19,603 | 18,544 | |
Total assets | 3,229,297 | 3,137,177 | |
Operating Segments | Laboratory | |||
Lines of Business | |||
External revenue | 90,549 | 89,240 | |
Intercompany revenue | 20,599 | 17,487 | |
Total revenue | 111,148 | 106,727 | |
Direct costs | 51,555 | 50,011 | |
Gross profit | 59,593 | 56,716 | |
Selling, general and administrative expense | 9,906 | 10,296 | |
Operating income (loss) before sale or disposal of assets | 49,687 | 46,420 | |
Net loss (gain) on sale or disposal of assets | 38 | 0 | |
Operating income (loss) | 49,649 | 46,420 | |
Depreciation and amortization | 2,908 | 2,781 | |
Property and equipment additions | 7,640 | 4,652 | |
Total assets | 344,355 | 331,484 | |
Operating Segments | All Other | |||
Lines of Business | |||
External revenue | 18,639 | 14,454 | |
Intercompany revenue | 3,930 | 4,959 | |
Total revenue | 22,569 | 19,413 | |
Direct costs | 13,883 | 12,503 | |
Gross profit | 8,686 | 6,910 | |
Selling, general and administrative expense | 6,640 | 5,299 | |
Operating income (loss) before sale or disposal of assets | 2,046 | 1,611 | |
Net loss (gain) on sale or disposal of assets | 1 | 0 | |
Operating income (loss) | 2,045 | 1,611 | |
Depreciation and amortization | 829 | 883 | |
Property and equipment additions | 1,118 | 607 | |
Total assets | 74,078 | 74,752 | |
Corporate | |||
Lines of Business | |||
External revenue | 0 | 0 | |
Intercompany revenue | 0 | 0 | |
Total revenue | 0 | 0 | |
Direct costs | 0 | 0 | |
Gross profit | 0 | 0 | |
Selling, general and administrative expense | 24,244 | 22,448 | |
Operating income (loss) before sale or disposal of assets | (24,244) | (22,448) | |
Net loss (gain) on sale or disposal of assets | 0 | (12) | |
Operating income (loss) | (24,244) | (22,436) | |
Depreciation and amortization | 692 | 638 | |
Property and equipment additions | 1,621 | 2,851 | |
Total assets | 1,587,845 | 1,502,150 | |
Eliminations | |||
Lines of Business | |||
External revenue | 882 | 1,122 | |
Intercompany revenue | (24,529) | (22,446) | |
Total revenue | (23,647) | (21,324) | |
Direct costs | (23,526) | (21,061) | |
Gross profit | (121) | (263) | |
Selling, general and administrative expense | 0 | 0 | |
Operating income (loss) before sale or disposal of assets | (121) | (263) | |
Net loss (gain) on sale or disposal of assets | 0 | 0 | |
Operating income (loss) | (121) | (263) | |
Depreciation and amortization | (686) | (586) | |
Property and equipment additions | (1,063) | $ (848) | |
Total assets | $ (1,774,897) | $ (1,672,235) |
Commitments and Contingencies (Details) $ in Millions |
1 Months Ended | ||||
---|---|---|---|---|---|
Jul. 16, 2014
plaintiff
|
May 07, 2014
claim
|
Mar. 06, 2017
claim
|
Mar. 31, 2017
USD ($)
|
Dec. 31, 2016
USD ($)
|
|
Loss Contingencies [Line Items] | |||||
Potential earn-out payment | $ | $ 9.2 | ||||
Earn-outs | $ | $ 8.6 | $ 9.2 | |||
Jorge Duran vs. VCA Animal Hospitals | |||||
Loss Contingencies [Line Items] | |||||
Claims dismissed | 4 | ||||
Total claims | 8 | ||||
Kimba Bradsbery and Cheri Brakensiek vs. Vicar Operating, Inc. | |||||
Loss Contingencies [Line Items] | |||||
Number of plaintiffs | plaintiff | 2 | ||||
Hight, Moran, and Krieger vs. VCA | |||||
Loss Contingencies [Line Items] | |||||
Number of putative stockholder class action complaints | 3 |
Noncontrolling Interests - Narrative (Details) |
Mar. 31, 2017 |
---|---|
Noncontrolling Interest [Abstract] | |
Percentage of ownership interest in partnership | 50.10% |
Noncontrolling Interests - Summary of Redeemable Noncontrolling Interests (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Mandatorily Redeemable Noncontrolling Interests | ||
Redeemable noncontrolling interests, beginning balance | $ 11,615 | |
Redemption value change | 384 | $ 641 |
Purchase of noncontrolling interests | (190) | (3,730) |
Distributions to noncontrolling interests | (534) | (637) |
Redeemable noncontrolling interests, ending balance | 10,398 | |
Mandatorily Redeemable Noncontrolling Interests | ||
Summary of redeemable noncontrolling interests | ||
Noncontrolling interest expense, Income Statement Impact | 406 | 365 |
Redemption value change, Income Statement Impact | (39) | (116) |
Mandatorily Redeemable Noncontrolling Interests | ||
Redeemable noncontrolling interests, beginning balance | 10,379 | 8,588 |
Redemption value change | 367 | 249 |
Distributions to noncontrolling interests | (270) | (312) |
Currency translation adjustment | 21 | 167 |
Redeemable noncontrolling interests, ending balance | 10,497 | 8,692 |
Redeemable Noncontrolling Interests | ||
Summary of redeemable noncontrolling interests | ||
Noncontrolling interest expense, Income Statement Impact | 369 | 387 |
Redemption value change, Income Statement Impact | 15 | 254 |
Mandatorily Redeemable Noncontrolling Interests | ||
Redeemable noncontrolling interests, beginning balance | 11,615 | 11,511 |
Redemption value change | 384 | 641 |
Purchase of noncontrolling interests | (1,210) | |
Distributions to noncontrolling interests | (391) | (365) |
Redeemable noncontrolling interests, ending balance | $ 10,398 | $ 11,787 |
Subsequent Events (Details) - Animal Hospital $ in Thousands |
1 Months Ended | 3 Months Ended | |
---|---|---|---|
May 09, 2017
USD ($)
Hospital
|
Mar. 31, 2017
USD ($)
Hospital
|
Mar. 31, 2016
USD ($)
Hospital
|
|
Subsequent Event [Line Items] | |||
Number of hospital acquired | Hospital | 15 | 24 | |
Total consideration | $ 91,695 | $ 165,631 | |
Subsequent Event | |||
Subsequent Event [Line Items] | |||
Number of hospital acquired | Hospital | 7 | ||
Total consideration | $ 33,600 | ||
Acquired revenues | 17,400 | ||
Real estate purchased in connection with hospital acquisition | $ 4,300 |
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