Lines of Business

Our Animal Hospital and Laboratory business segments are each considered reportable segments in accordance with the FASB's guidance related to Segment Reporting. Our Animal Hospital segment provides veterinary services for companion animals and sells related retail and pharmaceutical products. Our Laboratory segment provides diagnostic laboratory testing services for veterinarians, both associated with our animal hospitals and those independent of us. Our other operating segments included in the “All Other” category in the following tables are our Medical Technology business, which sells digital radiography and ultrasound imaging equipment, related computer hardware, software and ancillary services to the veterinary market, and our Camp Bow Wow business, which primarily franchises a premier provider of pet services including dog day care, overnight boarding, grooming and other ancillary services at specially designed pet care facilities. These operating segments do not meet the quantitative requirements for reportable segments. Our operating segments are strategic business units that have different services, products and/or functions. The segments are managed separately because each is a distinct and different business venture with unique challenges, risks and rewards. We also operate a corporate office that provides general and administrative support services for each of our segments.

The accounting policies of our segments are the same as those described in the summary of significant accounting policies included in our 2016 Annual Report on Form 10-K. We evaluate the performance of our segments based on gross profit and operating income. For purposes of reviewing the operating performance of our segments, all intercompany sales and purchases are generally accounted for as if they were transactions with independent third parties at current market prices.


9.	Lines of Business, continued

The following is a summary of certain financial data for each of our segments (in thousands):



	Animal Hospital			Laboratory			All Other		Corporate			Eliminations			Total
Three Months Ended June 30, 2017
External revenue	$	628,798		$	95,269		$	18,225	$	—		$	840		$	743,132
Intercompany revenue	—			21,932			4,308		—			(26,240		)	—
Total revenue	628,798			117,201			22,533		—			(25,400		)	743,132
Direct costs	516,239			53,777			13,177		—			(25,154		)	558,039
Gross profit	112,559			63,424			9,356		—			(246		)	185,093
Selling, general and administrative expense	16,745			9,975			7,512		25,544			—			59,776
Operating income (loss) before sale or disposal of assets	95,814			53,449			1,844		(25,544		)	(246		)	125,317
Net loss on sale or disposal of assets	225			3			2		—			—			230
Operating income (loss)	$	95,589		$	53,446		$	1,842	$	(25,544	)	$	(246	)	$	125,087
Depreciation and amortization	$	26,486		$	3,173		$	849	$	715		$	(704	)	$	30,519
Property and equipment additions	$	19,965		$	5,042		$	359	$	1,259		$	(906	)	$	25,719
Three Months Ended June 30, 2016
External revenue	$	540,376		$	93,265		$	18,656	$	—		$	1,192		$	653,489
Intercompany revenue	—			18,795			4,741		—			(23,536		)	—
Total revenue	540,376			112,060			23,397		—			(22,344		)	653,489
Direct costs	445,697			51,513			14,480		—			(22,149		)	489,541
Gross profit	94,679			60,547			8,917		—			(195		)	163,948
Selling, general and administrative expense	14,277			9,702			6,022		18,189			—			48,190
Operating income (loss) before sale or disposal of assets	80,402			50,845			2,895		(18,189		)	(195		)	115,758
Net (gain) loss on sale or disposal of assets	(132		)	(35		)	3		(107		)	—			(271		)
Operating income (loss)	$	80,534		$	50,880		$	2,892	$	(18,082	)	$	(195	)	$	116,029
Depreciation and amortization	$	21,875		$	2,839		$	904	$	668		$	(597	)	$	25,689
Property and equipment additions	$	25,486		$	4,750		$	1,485	$	2,336		$	(1,049	)	$	33,008


9.	Lines of Business, continued



	Animal Hospital		Laboratory			All Other		Corporate			Eliminations			Total
Six Months Ended June 30, 2017
External revenue	$	1,196,979	$	185,818		$	36,864	$	—		$	1,722		$	1,421,383
Intercompany revenue	—		42,531			8,238		—			(50,769		)	—
Total revenue	1,196,979		228,349			45,102		—			(49,047		)	1,421,383
Direct costs	998,110		105,332			27,060		—			(48,680		)	1,081,822
Gross profit	198,869		123,017			18,042		—			(367		)	339,561
Selling, general and administrative expense	34,356		19,881			14,152		49,788			—			118,177
Operating income (loss) before sale or disposal of assets	164,513		103,136			3,890		(49,788		)	(367		)	221,384
Net loss on sale or disposal of assets	436		41			3		—			—			480
Operating income (loss)	$	164,077	$	103,095		$	3,887	$	(49,788	)	$	(367	)	$	220,904
Depreciation and amortization	$	53,144	$	6,081		$	1,678	$	1,407		$	(1,390	)	$	60,920
Property and equipment additions	$	39,568	$	12,682		$	1,477	$	2,880		$	(1,969	)	$	54,638
Six Months Ended June 30, 2016
External revenue	$	998,999	$	182,505		$	33,110	$	—		$	2,314		$	1,216,928
Intercompany revenue	—		36,282			9,700		—			(45,982		)	—
Total revenue	998,999		218,787			42,810		—			(43,668		)	1,216,928
Direct costs	830,903		101,524			26,983		—			(43,210		)	916,200
Gross profit	168,096		117,263			15,827		—			(458		)	300,728
Selling, general and administrative expense	26,362		19,998			11,321		40,637			—			98,318
Operating income (loss) before sale or disposal of assets	141,734		97,265			4,506		(40,637		)	(458		)	202,410
Net loss (gain) on sale or disposal of assets	443		(35		)	3		(119		)	—			292
Operating income (loss)	$	141,291	$	97,300		$	4,503	$	(40,518	)	$	(458	)	$	202,118
Depreciation and amortization	$	39,448	$	5,620		$	1,787	$	1,306		$	(1,183	)	$	46,978
Property and equipment additions	$	44,030	$	9,402		$	2,092	$	5,187		$	(1,897	)	$	58,814

At June 30, 2017
Total assets	$	3,282,596	$	350,220		$	74,838	$	1,970,760		$	(2,140,689	)	$	3,537,725
At December 31, 2016
Total assets	$	3,137,177	$	331,484		$	74,752	$	1,502,150		$	(1,672,235	)	$	3,373,328