Attached files
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| 8-K - VCA ANTECH, INC. 8-K - VCA INC | a50045916.htm |
Exhibit 99.1
VCA Antech, Inc. Reports Third Quarter 2011 Results
- Third quarter revenue increased 7.4% to a third quarter record of $385.1 million
- Third quarter diluted earnings per common share of $0.35
- Third quarter adjusted diluted earnings per common share of $0.37
LOS ANGELES--(BUSINESS WIRE)--October 27, 2011--VCA Antech, Inc. (NASDAQ NM SYMBOL: WOOF), a leading animal healthcare company in the United States, today reported financial results for the third quarter ended September 30, 2011 as follows: revenue increased 7.4% to a third quarter record of $385.1 million; gross profit of $90.1 million; net income of $30.2 million; and diluted earnings per common share of $0.35.
Our earnings for the quarter ended September 30, 2011 included debt retirement costs of $2.8 million, or $1.7 million net of tax, related to the refinancing of our senior credit facility. Excluding these items, adjusted diluted earnings per common share was $0.37.
We also reported our financial results for the nine months ended September 30, 2011, as follows: revenue increased 7.0% to a nine-month record of $1.116 billion; gross profit of $266.7 million; net income of $98.6 million; and diluted earnings per common share of $1.13. Excluding the aforementioned debt retirement costs adjusted diluted earnings per common share was $1.15.
Bob Antin, Chairman and CEO, stated, “I am pleased with our company’s performance for the third quarter. Although we continue to face a challenging business environment, we have been able to grow both organic Animal Hospital and Laboratory revenues during the quarter. We also continue to be excited about the growth prospects of Vetstreet and we continue to be optimistic regarding the future prospects of the companion animal healthcare industry.
“The three and nine months ended September 30, 2010 included $2.6 million, or $1.6 million net of tax, of debt retirement costs and $5.4 million, or $3.5 million net of tax, related to additional state tax payments required as a result of a tax audit settlement. Excluding these charges, adjusted diluted earnings per share for the three-month period ended September 30, 2010 was $0.37. The nine-month period ended September 30, 2010 also included a $14.5 million, or $8.9 million net of tax charge, as previously disclosed. Excluding this charge, adjusted diluted earnings per share was $1.18.
“Animal Hospital revenue in the third quarter of 2011 increased 9.6% to $303.2 million driven by acquisitions made in the past twelve months and same-store revenue growth, adjusted for one less business day, of 1.0%. Our Animal Hospital gross margin increased to 17.0%, compared to 16.8%, for the prior year quarter, and our Animal Hospital operating margin increased to 15.1%, compared to 14.8%, for the prior year quarter. Our same-store revenue increased by 1.0% and our same-store gross profit margin increased to 17.1%, from 17.0%. During the quarter, we acquired four independent animal hospitals which had historical combined annual revenue of $8.7 million, as well as BrightHeart Veterinary Centers which operates nine hospitals with historical combined annual revenue of $53.0 million.
“Laboratory revenue in the third quarter increased 2.2% to $79.0 million. Internal revenue growth was 2.2%, driven by an increase in the number of requisitions. Our Laboratory gross profit margin decreased by 20 basis points to 44.7% and our operating margin decreased 30 basis points to 35.8%.
“Revenue from all other business operations increased $1.5 million to $18.9 million, which related to the acquisition of Vetstreet during the quarter.”
Non-GAAP Financial Measures
We believe investors’ understanding of our total performance is enhanced by disclosing adjusted net income and adjusted diluted earnings per common share. We define these adjusted measures as the reported amounts, adjusted to exclude certain significant items. Adjusted diluted earnings per common share equals adjusted net income divided by diluted common shares outstanding.
Management uses adjusted measures because they exclude the effect of significant items that we believe are not representative of our core operations for the periods presented. As a result, these non-GAAP financial measures help to provide meaningful comparisons of our overall performance from one reporting period to another and meaningful assessments of related trends. For the three and nine months ended September 30, 2011, we made the following adjustments: $2.8 million, or $1.7 million after tax, and $0.02 per diluted common share for debt retirement costs related to the refinancing of our senior credit facility. Further, for the three and nine months ended September 30, 2010, we adjusted our reported amounts for $14.5 million, or $8.9 million net of tax, or $0.10 per diluted common share, for future compensation in connection with executive consulting agreements, and $5.4 million, or $3.5 million net of tax, or $0.04 per diluted common share, for a tax expense related to the settlement of state taxes assessed on taxable income for the tax years 2004 through 2007, and $2.6 million, or $1.6 million after tax, or $0.02 per diluted common share, for debt retirement costs related to the refinancing of our senior term notes.
There is a material limitation associated with the use of these non-GAAP financial measures: our adjusted measures exclude the impact of these significant items, and as a result, our computation of adjusted diluted earnings per common share does not depict diluted earnings per common share in accordance with GAAP.
To compensate for the limitations in the non-GAAP financial measures discussed above, our disclosures provide a complete understanding of all adjustments found in non-GAAP financial measures, and we reconcile the non-GAAP financial measures to the GAAP financial measures in the attached financial schedules titled “Supplemental Operating Data.”
Conference Call
We will discuss our third quarter 2011 financial results during a conference call today, October 27th, at 4:30 p.m. Eastern Time. A live broadcast of the call may be accessed by visiting our website at http://investor.vcaantech.com. The call may also be accessed by dialing (877) 293-5492. Interested parties should call at least 10 minutes prior to the start of the call to register.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may and likely will differ materially from this forward-looking information. Our Animal Hospital and Laboratory revenues have been materially adversely impacted by the current economic recession. We are unable to forecast accurately the timing or degree of any economic recovery. Further, trends in the general economy may not be reflected in our business at the same time or in the same degree as in the general economy. The timing and degree of any economic recovery, and its impact on our business, are among the important factors that could cause actual results to differ from this forward-looking information. Among other factors that could cause our actual results to differ from this forward-looking information are: an increase in the level of direct costs or a failure to increase revenue at a level necessary to maintain our expected operating margins, a material adverse change in our financial condition or operations; the level of selling, general and administrative costs; the effects of our recent and future acquisitions (including Vetstreet) and our ability to effectively manage our growth and achieve operating synergies; a decline in demand for any of our products and services; any disruption in our information technology systems or transportation networks; the effects of competition; any impairment in the carrying value of our goodwill and other intangible assets; changes in prevailing interest rates; our ability to service our debt; and general economic conditions. These and other risks are discussed in our Report on Form 10-K for the year ended December 31, 2010 and the reader is directed to these statements for a further discussion of important factors that could cause actual results to differ materially from those in the forward-looking statements.
We own, operate and manage the largest networks of freestanding veterinary hospitals and veterinary-exclusive clinical laboratories in the country and we provide the largest online communication, professional education and marketing solution to the veterinary community. We also supply diagnostic imaging equipment to the veterinary industry.
| VCA Antech, Inc. | |||||||||||||||||
| Consolidated Income Statements | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||
| Revenue: | |||||||||||||||||
| Animal hospital | $ | 303,203 | $ | 276,739 | $ | 864,476 | $ | 791,002 | |||||||||
| Laboratory | 78,985 | 77,292 | 242,919 | 238,444 | |||||||||||||
| All other | 18,882 | 17,406 | 54,187 | 47,805 | |||||||||||||
| Intercompany | (15,935 | ) | (12,734 | ) | (45,219 | ) | (33,895 | ) | |||||||||
| 385,135 | 358,703 | 1,116,363 | 1,043,356 | ||||||||||||||
| Direct costs | 294,998 | 273,404 | 849,616 | 781,778 | |||||||||||||
| Gross profit: | |||||||||||||||||
| Animal hospital | 51,590 | 46,626 | 144,083 | 137,331 | |||||||||||||
| Laboratory | 35,328 | 34,713 | 112,727 | 111,797 | |||||||||||||
| All other | 4,733 | 5,254 | 13,981 | 14,432 | |||||||||||||
| Intercompany | (1,514 | ) | (1,294 | ) | (4,044 | ) | (1,982 | ) | |||||||||
| 90,137 | 85,299 | 266,747 | 261,578 | ||||||||||||||
| Selling, general and administrative expense: | |||||||||||||||||
| Animal hospital | 6,126 | 5,599 | 18,253 | 16,859 | |||||||||||||
| Laboratory | 7,088 | 6,804 | 20,577 | 19,485 | |||||||||||||
| All other | 4,669 | 3,731 | 11,809 | 10,650 | |||||||||||||
| Corporate | 14,605 | 10,971 | 34,695 | 47,296 | |||||||||||||
| 32,488 | 27,105 | 85,334 | 94,290 | ||||||||||||||
| Loss (gain) on sale and disposal of assets | (192 | ) | 152 | (43 | ) | 163 | |||||||||||
| Operating income | 57,841 | 58,042 | 181,456 | 167,125 | |||||||||||||
| Interest expense, net | 4,222 | 3,619 | 12,816 | 9,564 | |||||||||||||
| Other expense | 2,772 | 2,370 | 2,763 | 2,060 | |||||||||||||
|
Income before provision for income taxes |
50,847 | 52,053 | 165,877 | 155,501 | |||||||||||||
| Provision for income taxes | 19,488 | 23,466 | 63,957 | 63,465 | |||||||||||||
| Net income | 31,359 | 28,587 | 101,920 | 92,036 | |||||||||||||
| Net income attributable to noncontrolling interests | 1,190 | 1,156 | 3,300 | 3,266 | |||||||||||||
| Net income attributable to VCA Antech, Inc. | $ | 30,169 | $ | 27,431 | $ | 98,620 | $ | 88,770 | |||||||||
| Diluted earnings per share | $ | 0.35 | $ | 0.32 | $ | 1.13 | $ | 1.02 | |||||||||
|
Shares used for computing diluted earnings per share |
87,253 | 86,964 | 87,293 | 86,998 | |||||||||||||
| VCA Antech, Inc. | ||||||
| Consolidated Balance Sheets | ||||||
| (Unaudited) | ||||||
| (In thousands) | ||||||
| September 30, | December 31, | |||||
| 2011 | 2010 | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 79,243 | $ | 97,126 | ||
| Trade accounts receivable, net | 53,445 | 49,224 | ||||
| Inventory | 46,876 | 40,760 | ||||
| Prepaid expenses and other | 23,203 | 21,138 | ||||
| Deferred income taxes | 20,129 | 19,019 | ||||
| Prepaid income taxes | 10,765 | 19,047 | ||||
| Total current assets | 233,661 | 246,314 | ||||
| Property and equipment, net | 361,451 | 331,687 | ||||
| Other assets: | ||||||
| Goodwill | 1,254,061 | 1,092,480 | ||||
| Other intangible assets, net | 94,072 | 46,986 | ||||
| Deferred financing costs, net | 5,711 | 6,700 | ||||
| Other | 47,858 | 42,255 | ||||
| Total assets | $ | 1,996,814 | $ | 1,766,422 | ||
| Liabilities and Equity | ||||||
| Current liabilities: | ||||||
| Current portion of long-term debt | $ | 28,480 | $ | 28,101 | ||
| Accounts payable | 34,178 | 31,970 | ||||
| Accrued payroll and related liabilities | 46,594 | 35,754 | ||||
| Other accrued liabilities | 45,179 | 45,769 | ||||
| Total current liabilities | 154,431 | 141,594 | ||||
| Long-term debt, less current portion | 598,918 | 498,935 | ||||
| Deferred income taxes | 95,745 | 82,131 | ||||
| Other liabilities | 26,247 | 28,478 | ||||
| Redeemable noncontrolling interest | 6,891 | 5,799 | ||||
| VCA Antech, Inc. stockholders' equity: | ||||||
| Common stock | 87 | 86 | ||||
| Additional paid-in capital | 355,077 | 347,848 | ||||
| Accumulated earnings | 748,873 | 650,253 | ||||
| Accumulated other comprehensive income | 138 | 737 | ||||
| Total VCA Antech, Inc. stockholders' equity | 1,104,175 | 998,924 | ||||
| Noncontrolling interest | 10,407 | 10,561 | ||||
| Total equity | 1,114,582 | 1,009,485 | ||||
| Total liabilities and equity | $ | 1,996,814 | $ | 1,766,422 | ||
| VCA Antech, Inc. | |||||||||
| Consolidated Statements of Cash Flows | |||||||||
| (Unaudited) | |||||||||
| (In thousands) | |||||||||
| Nine Months Ended | |||||||||
| September 30, | |||||||||
| 2011 | 2010 | ||||||||
| Cash flows from operating activities: | |||||||||
| Net income | $ | 101,920 | $ | 92,036 | |||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||||
| Depreciation and amortization | 41,386 | 33,387 | |||||||
| Amortization of debt costs | 1,169 | 461 | |||||||
| Provision for uncollectible accounts | 4,510 | 5,388 | |||||||
| Debt retirement costs | 2,764 | 2,550 | |||||||
| (Gain) loss on sale and disposal of assets | (43 | ) | 163 | ||||||
| Share-based compensation | 6,610 | 7,490 | |||||||
| Deferred income taxes | 14,649 | 10,992 | |||||||
| Excess tax benefit from exercise of stock options | (963 | ) | (370 | ) | |||||
| Other | (489 | ) | (550 | ) | |||||
| Changes in operating assets and liabilities: | |||||||||
| Accounts receivable | (7,018 | ) | (7,533 | ) | |||||
| Inventory, prepaid expenses and other assets | (9,806 | ) | (1,754 | ) | |||||
| Income taxes | 8,707 | (9,545 | ) | ||||||
| Accounts payable and other accrued liabilities | (8,328 | ) | 7,038 | ||||||
| Accrued payroll and related liabilities | 8,523 | 3,717 | |||||||
| Net cash provided by operating activities | 163,591 | 143,470 | |||||||
| Cash flows from investing activities: | |||||||||
| Business acquisitions, net of cash acquired | (190,363 | ) | (44,126 | ) | |||||
| Real estate acquired in connection with business acquisitions | (1,900 | ) | (5,834 | ) | |||||
| Property and equipment additions | (43,275 | ) | (47,675 | ) | |||||
| Proceeds from sale of assets | 447 | 15 | |||||||
| Other | (723 | ) | 188 | ||||||
| Net cash used in investing activities | (235,814 | ) | (97,432 | ) | |||||
| Cash flows from financing activities: | |||||||||
| Repayment of long-term obligations | (90,945 | ) | (548,560 | ) | |||||
| Proceeds from the issuance of long-term obligations | 150,000 | 500,000 | |||||||
| Payment of financing costs | (2,944 | ) | (9,112 | ) | |||||
| Borrowings on revolving credit facility | 50,000 | - | |||||||
| Repayments on revolving credit facility | (50,000 | ) | - | ||||||
| Distributions to noncontrolling interest partners | (1,959 | ) | (3,314 | ) | |||||
| Proceeds from issuance of common stock under stock option plans | 2,596 | 4,781 | |||||||
| Repurchase of common stock | (2,663 | ) | (2,292 | ) | |||||
| Excess tax benefit from exercise of stock options | 963 | 370 | |||||||
| Other | (345 | ) | (897 | ) | |||||
| Net cash provided by (used in) financing activities | 54,703 | (59,024 | ) | ||||||
| Effect of currency exchange rate changes on cash and cash equivalents | (363 | ) | 38 | ||||||
| Decrease in cash and cash equivalents | (17,883 | ) | (12,948 | ) | |||||
| Cash and cash equivalents at beginning of period | 97,126 | 145,181 | |||||||
| Cash and cash equivalents at end of period | $ | 79,243 | $ | 132,233 | |||||
| VCA Antech, Inc. | ||||||||||||||||
| Supplemental Operating Data | ||||||||||||||||
| (Unaudited - In thousands, except per share amounts) | ||||||||||||||||
| Table #1 | ||||||||||||||||
| Reconciliation of net income attributable to | Three Months Ended | Nine Months Ended | ||||||||||||||
| VCA Antech, Inc., to adjusted net income | September 30, | September 30, | ||||||||||||||
| attributable to VCA Antech, Inc. | 2011 | 2010 | 2011 | 2010 | ||||||||||||
| Net income attributable to VCA Antech, Inc. | $ | 30,169 | $ | 27,431 | $ | 98,620 | $ | 88,770 | ||||||||
| Debt retirement costs | 2,764 | 2,550 | 2,764 | 2,550 | ||||||||||||
| Tax benefit from debt retirement costs (1) | (1,079 | ) | (992 | ) | (1,079 | ) | (992 | ) | ||||||||
| Tax settlement | - | 5,400 | - | 5,400 | ||||||||||||
| Tax benefit from tax settlement (1) | - | (1,920 | ) | - | (1,920 | ) | ||||||||||
| Compensation charges | - | - | - | 14,525 | ||||||||||||
| Tax benefit from compensation charges (1) | - | - | - | (5,653 | ) | |||||||||||
| Adjusted net income attributable to VCA Antech, Inc. | $ | 31,854 | $ | 32,469 | $ | 100,305 | $ | 102,680 | ||||||||
| (1) The rate used to calculate the tax benefit is the statutory tax rate for the year. | ||||||||||||||||
| Table #2 | Three Months Ended | Nine Months Ended | ||||||||||||||
|
Reconciliation of diluted earnings per share to |
September 30, | September 30, | ||||||||||||||
| adjusted diluted earnings per share | 2011 | 2010 | 2011 | 2010 | ||||||||||||
| Diluted earnings per share | $ | 0.35 | $ | 0.32 | $ | 1.13 | $ | 1.02 | ||||||||
| Impact of debt retirement costs, net of tax | 0.02 | 0.02 | 0.02 | 0.02 | ||||||||||||
| Impact of tax settlement, net of tax | - | 0.04 | - | 0.04 | ||||||||||||
| Impact of compensation charges, net of tax | - | - | - | 0.10 | ||||||||||||
| Adjusted diluted earnings per share (1) | $ | 0.37 | $ | 0.37 | $ | 1.15 | $ | 1.18 | ||||||||
| Shares used for computing adjusted | ||||||||||||||||
| diluted earnings per share | 87,253 | 86,964 | 87,293 | 86,998 | ||||||||||||
| (1) Amounts may not add due to rounding. | ||||||||||||||||
| Table #3 | Three Months Ended | Nine Months Ended | ||||||||||||||
| Reconcilliation of operating income to | September 30, | September 30, | ||||||||||||||
| adjusted operating income | 2011 | 2010 | 2011 | 2010 | ||||||||||||
| Consolidated operating income | $ | 57,841 | $ | 58,042 | $ | 181,456 | $ | 167,125 | ||||||||
| Compensation charges | - | - | - | 14,525 | ||||||||||||
| Consolidated adjusted operating income | $ | 57,841 | $ | 58,042 | $ | 181,456 | $ | 181,650 | ||||||||
| Consolidated adjusted operating margin | 15.0 | % | 16.2 | % | 16.3 | % | 17.4 | % | ||||||||
| VCA Antech, Inc. | ||||||||||||||||||||
| Supplemental Operating Data | ||||||||||||||||||||
| (Unaudited - In thousands) | ||||||||||||||||||||
| As of | ||||||||||||||||||||
| Table #4 | September 30, | December 31, | ||||||||||||||||||
| Selected consolidated balance sheet data | 2011 | 2010 | ||||||||||||||||||
| Debt: | ||||||||||||||||||||
| Senior term notes | $ | 581,250 | $ | 493,750 | ||||||||||||||||
| Other debt and capital leases | 46,148 | 33,286 | ||||||||||||||||||
| Total debt | $ | 627,398 | $ | 527,036 | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| Table #5 | September 30, | September 30, | ||||||||||||||||||
| Selected expense data | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
| Rent expense | $ | 13,952 | $ | 13,211 | $ | 40,337 | $ | 37,698 | ||||||||||||
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Depreciation and amortization included in direct costs: |
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| Animal hospital | $ | 10,301 | $ | 8,189 | $ | 29,544 | $ | 23,037 | ||||||||||||
| Laboratory | 2,458 | 2,317 | 7,232 | 6,946 | ||||||||||||||||
| All other | 1,299 | 387 | 2,130 | 1,139 | ||||||||||||||||
| Intercompany | (334 | ) | (263 | ) | (953 | ) | (753 | ) | ||||||||||||
| 13,724 | 10,630 | 37,953 | 30,369 | |||||||||||||||||
|
Depreciation and amortization included in selling, general and administrative expense |
1,206 | 1,051 | 3,433 | 3,018 | ||||||||||||||||
| Total depreciation and amortization | $ | 14,930 | $ | 11,681 | $ | 41,386 | $ | 33,387 | ||||||||||||
| Share-based compensation included in direct costs: | ||||||||||||||||||||
| Laboratory | $ | 116 | $ | 156 | $ | 311 | $ | 488 | ||||||||||||
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Share-based compensation included in selling, general and administrative expense: |
||||||||||||||||||||
| Animal hospital | 329 | 361 | 877 | 1,110 | ||||||||||||||||
| Laboratory | 399 | 309 | 920 | 950 | ||||||||||||||||
| All other | 73 | 63 | 201 | 195 | ||||||||||||||||
| Corporate | 3,162 | 746 | 4,301 | 4,747 | ||||||||||||||||
| 3,963 | 1,479 | 6,299 | 7,002 | |||||||||||||||||
| Total share-based compensation | $ | 4,079 | $ | 1,635 | $ | 6,610 | $ | 7,490 | ||||||||||||
CONTACT:
VCA Antech, Inc.
Tomas Fuller
Chief Financial Officer
(310)
571-6505