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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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Page
Number
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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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)
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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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|
|
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||||||||||||||||||
Balances, December 31, 2014
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82,937
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|
|
$
|
83
|
|
|
$
|
155,802
|
|
|
$
|
1,064,158
|
|
|
$
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(19,397
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)
|
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$
|
10,975
|
|
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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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147,454
|
|
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—
|
|
|
2,010
|
|
|
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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(24,512
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)
|
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(424
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)
|
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(24,936
|
)
|
||||||
Formation of noncontrolling interests
|
—
|
|
|
—
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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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(1,784
|
)
|
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(1,784
|
)
|
||||||
Purchase of noncontrolling interests
|
—
|
|
|
—
|
|
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(217
|
)
|
|
—
|
|
|
—
|
|
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(473
|
)
|
|
(690
|
)
|
||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
12,086
|
|
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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
|
|
|
1
|
|
|
1,570
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|
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—
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|
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—
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—
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|
1,571
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||||||
Stock repurchases
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(3,003
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)
|
|
(3
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)
|
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(161,114
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)
|
|
—
|
|
|
—
|
|
|
—
|
|
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(161,117
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)
|
||||||
Excess tax benefit from share-based compensation
|
—
|
|
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—
|
|
|
8,008
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—
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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
|
80,567
|
|
|
$
|
81
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|
|
$
|
16,135
|
|
|
$
|
1,211,612
|
|
|
$
|
(43,909
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)
|
|
$
|
12,965
|
|
|
$
|
1,196,884
|
|
|
|
|
|
|
|
|
|
|
|
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|||||||||||||
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
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)
|
||||||
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
|
|
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
|
|
|
—
|
|