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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Petco Health and Wellness Company Inc | NASDAQ:WOOF | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.07 | 4.52% | 1.62 | 1.57 | 1.62 | 1.60 | 1.5592 | 1.57 | 2,456,330 | 00:54:02 |
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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95-4097995
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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Large accelerated filer [X]
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Accelerated filer [ ]
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Non-accelerated filer [ ]
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Smaller reporting company [ ]
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(Do not check if a smaller reporting company)
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PART I.
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FINANCIAL INFORMATION
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ITEM 1.
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FINANCIAL STATEMENTS
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September 30, 2016
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December 31, 2015
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||||
Assets
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||||
Current assets:
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||||
Cash and cash equivalents
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$
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72,914
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$
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98,888
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Trade accounts receivable, less allowance for uncollectible accounts of $22,569 and $21,775 at September 30, 2016 and December 31, 2015, respectively
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82,166
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76,634
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Inventory
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60,811
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51,523
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Prepaid expenses and other
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33,905
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30,521
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Prepaid income taxes
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—
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24,598
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Total current assets
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249,796
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282,164
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Property and equipment, net
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582,840
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507,753
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Goodwill
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2,063,494
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1,517,650
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Other intangible assets, net
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209,095
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97,377
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Notes receivable
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2,142
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2,194
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Other
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101,695
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93,994
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Total assets
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$
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3,209,062
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$
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2,501,132
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Liabilities and Equity
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||||
Current liabilities:
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Current portion of long-term debt
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$
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32,512
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$
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33,623
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Accounts payable
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54,150
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52,337
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Accrued payroll and related liabilities
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70,213
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75,519
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Income tax payable
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8,359
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—
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Other accrued liabilities
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85,607
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70,828
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Total current liabilities
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250,841
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232,307
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Long-term debt, net
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1,246,122
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832,718
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Deferred income taxes, net
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127,104
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131,478
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Other liabilities
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39,509
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36,084
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Total liabilities
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1,663,576
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1,232,587
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Commitments and contingencies
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Redeemable noncontrolling interests
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12,079
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11,511
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Preferred stock, par value $0.001, 11,000 shares authorized, none outstanding
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—
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—
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VCA Inc. stockholders’ equity:
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Common stock, par value $0.001, 175,000 shares authorized, 81,075 and 80,764 shares outstanding as of September 30, 2016 and December 31, 2015, respectively
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81
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81
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Additional paid-in capital
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32,958
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19,708
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Retained earnings
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1,443,715
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1,275,207
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Accumulated other comprehensive loss
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(41,028
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)
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(50,034
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)
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Total VCA Inc. stockholders’ equity
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1,435,726
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1,244,962
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Noncontrolling interests
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97,681
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12,072
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Total equity
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1,533,407
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1,257,034
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Total liabilities and equity
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$
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3,209,062
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$
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2,501,132
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
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2016
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2015
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2016
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2015
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||||||||
Revenue
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$
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656,854
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$
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551,717
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$
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1,873,782
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$
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1,599,955
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Direct costs
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500,277
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414,051
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1,416,477
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1,207,580
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Gross profit
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156,577
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137,666
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457,305
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392,375
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Selling, general and administrative expense
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49,343
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44,860
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147,661
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133,743
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Business interruption insurance gain
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—
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(4,523
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)
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—
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(4,523
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)
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Net loss (gain) on sale or disposal of assets
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236
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250
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528
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(234
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)
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Operating income
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106,998
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97,079
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309,116
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263,389
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Interest expense, net
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9,300
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5,455
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24,262
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15,396
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Debt retirement costs
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—
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—
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1,600
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—
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Other (income) expense
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(121
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)
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59
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(985
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)
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88
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Income before provision for income taxes
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97,819
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91,565
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284,239
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247,905
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Provision for income taxes
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37,040
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35,097
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109,312
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95,961
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Net income
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60,779
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56,468
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174,927
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151,944
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Net income attributable to noncontrolling interests
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2,548
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1,614
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6,419
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4,490
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Net income attributable to VCA Inc.
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$
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58,231
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$
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54,854
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$
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168,508
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$
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147,454
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Basic earnings per share
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$
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0.72
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$
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0.68
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$
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2.08
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$
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1.80
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Diluted earnings per share
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$
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0.71
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$
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0.67
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$
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2.06
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$
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1.78
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Weighted-average shares outstanding for basic earnings per share
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80,924
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80,815
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80,845
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81,700
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Weighted-average shares outstanding for diluted earnings per share
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81,812
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81,795
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81,695
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82,744
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
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2016
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2015
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2016
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2015
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||||||||
Net income
(1)
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$
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60,779
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$
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56,468
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$
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174,927
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$
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151,944
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Other comprehensive income:
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Foreign currency translation adjustments
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(3,389
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)
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(14,005
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)
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9,241
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(25,274
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)
|
||||
Other comprehensive (loss) income
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(3,389
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)
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(14,005
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)
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9,241
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(25,274
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)
|
||||
Total comprehensive income
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57,390
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42,463
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184,168
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126,670
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|
||||
Comprehensive income attributable to noncontrolling interests
(1)
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2,360
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1,187
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6,654
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3,728
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||||
Comprehensive income attributable to VCA Inc.
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$
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55,030
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$
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41,276
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$
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177,514
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$
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122,942
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(1)
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Includes approximately
$3.1 million
and
$2.5 million
of net income related to redeemable and mandatorily redeemable noncontrolling interests for the
nine
months ended
September 30, 2016
and
2015
, respectively.
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Common Stock
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Additional
Paid-In
Capital
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Retained
Earnings
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Accumulated
Other
Comprehensive
Income
|
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Noncontrolling
Interests
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Total
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|||||||||||||||
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Shares
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Amount
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||||||||||||||||||
Balances, December 31, 2014
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82,937
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$
|
83
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|
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$
|
155,802
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|
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$
|
1,064,158
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|
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$
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(19,397
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)
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$
|
10,975
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$
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1,211,621
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Net income (excludes $1,392 and $1,088 related to redeemable and mandatorily redeemable noncontrolling interests, respectively)
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—
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—
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—
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147,454
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—
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2,010
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|
|
149,464
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|
||||||
Other comprehensive loss (excludes $338 related to mandatorily redeemable noncontrolling interests)
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—
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—
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—
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—
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(24,512
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)
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(424
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)
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(24,936
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)
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||||||
Formation of noncontrolling interests
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—
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—
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—
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—
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—
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2,661
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2,661
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||||||
Distributions to noncontrolling interests
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—
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—
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—
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—
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—
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(1,784
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)
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(1,784
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)
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||||||
Purchase of noncontrolling interests
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—
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—
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(217
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)
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—
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—
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(473
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)
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(690
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)
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||||||
Share-based compensation
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—
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—
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12,086
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—
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—
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—
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12,086
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|
||||||
Issuance of common stock under stock incentive plans
|
633
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|
1
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|
1,570
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—
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—
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—
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1,571
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||||||
Stock repurchases
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(3,003
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)
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(3
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)
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(161,114
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)
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—
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—
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—
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(161,117
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)
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||||||
Excess tax benefit from share-based compensation
|
—
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—
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|
8,008
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—
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—
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—
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|
8,008
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||||||
Balances, September 30, 2015
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80,567
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|
|
$
|
81
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|
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$
|
16,135
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|
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$
|
1,211,612
|
|
|
$
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(43,909
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)
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$
|
12,965
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$
|
1,196,884
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|||||||||||||
Balances, December 31, 2015
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80,764
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|
$
|
81
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|
|
$
|
19,708
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$
|
1,275,207
|
|
|
$
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(50,034
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)
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|
$
|
12,072
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|
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$
|
1,257,034
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Net income (excludes $1,852 and $1,220 related to redeemable and mandatorily redeemable noncontrolling interests, respectively)
|
—
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—
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|
—
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168,508
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|
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—
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|
|
3,347
|
|
|
171,855
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|
||||||
Other comprehensive income (excludes $117 related to mandatorily redeemable noncontrolling interests)
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—
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—
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|
—
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|
—
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|
|
9,006
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|
|
118
|
|
|
9,124
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|
||||||
Formation of noncontrolling interests
|
—
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|
—
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|
|
—
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|
|
—
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|
|
—
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|
|
86,951
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|
|
86,951
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|
||||||
Distributions to noncontrolling interests
|
—
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|
|
—
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|
|
—
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|
|
—
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|
|
—
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|
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(2,667
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)
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|
(2,667
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)
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||||||
Purchase of noncontrolling interests
|
—
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|
|
—
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(2,075
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)
|
|
—
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|
|
—
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(2,066
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)
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(4,141
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)
|
||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
13,669
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—
|
|
|
—
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|
|
—
|
|
|
13,669
|
|
||||||
Issuance of common stock under stock incentive plans
|
458
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|
|
—
|
|
|
3,949
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|
|
—
|
|
|
—
|
|
|
—
|
|
|
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
|
|
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
|
Date:
|
November 7, 2016
|
By:
/s/ Tomas W. Fuller
|
|
|
|
Tomas W. Fuller
|
|
|
|
Chief Financial Officer, Principal Accounting Officer, and Vice President and Secretary
|
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