* Second quarter revenue increased 3.1% to $344.9
* Second quarter diluted earnings per share of $0.44
* Second quarter adjusted diluted earnings per share of $0.48
LOS ANGELES, July 23, 2009 (GLOBE NEWSWIRE) -- VCA Antech, Inc. (Nasdaq:WOOF), a leading animal healthcare company in the United States, today reported diluted earnings per share of $0.44 for the second quarter ended June 30, 2009.
The second quarter of 2009 included a non-cash charge of $5.3 million, or $3.2 million after tax, and $0.04 per diluted share related to the write-off of an internal-use software project due to the failure of the project to reach development milestones and the company's decision to pursue alternative solutions. Excluding this charge, adjusted diluted earnings per share increased 2.1% to $0.48.
For the six months ended June 30, 2009 diluted earnings per share was $0.81. Excluding the write-off, adjusted diluted earnings per share increased 2.4% to $0.85.
Bob Antin, Chairman and CEO, stated, "I am pleased with our company's performance in the second quarter of 2009. Despite the ongoing challenges presented by the current economic environment, we have upheld our long history of revenue and earnings growth as a result of our continued focus on our core business strategy and successful efforts to manage expenses. Our revenue increased 3.1%, our adjusted net income increased 1.6% and our adjusted diluted earnings per share increased 2.1%.
"Animal hospital revenue in the second quarter increased 4.1% to $261.3 million driven by acquisitions made in the past twelve months. Our animal hospital gross margin was 20.3% compared to 21.0% in the prior year and our operating margin was 18.2% compared to 18.7% in the prior year. Our same-store revenue declined 3.3% during the quarter however we successfully held our same-store gross profit margin of 20.9% to a decline of only 30 basis points.
"We made five acquisitions during the quarter with historical combined annual revenue of $12.1 million. In addition, on July 1, 2009, we completed the merger of Eklin Medical Systems, Inc., with our Sound Technologies business. Eklin is a leading seller of digital radiology, ultrasound and practice management software systems in the veterinary market.
"Laboratory revenue in the second quarter increased 1.2% to $82.8 million. Our laboratory internal revenue growth was 0.6%. Our laboratory gross profit margin was 49.5% compared to 49.9% in the prior year and our operating margin was 42.7% compared to 43.6% in the prior year."
2009 Financial Guidance
We revise our financial guidance as follows:
* Diluted earnings per common share from $1.52 to $1.56 or
adjusted diluted earnings per common share from $1.56 to $1.60.
Non-GAAP Financial Measures
We believe investors' understanding of our total performance is enhanced by disclosing adjusted operating income, 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 is 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 six months ended June 30, 2009, we adjusted our reported amounts for the aforementioned write-off of $5.3 million, or $3.2 million after tax.
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 company's second quarter 2009 financial results during a conference call today, July 23, at 4:30 p.m. Eastern Time. You can access a live broadcast of the call by visiting our website at http://investor.vcaantech.com. You can also access the call via telephone by dialing (888) 318-7470. 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. Among the important factors that could cause actual results to differ are: a material adverse change in our financial condition or operations; the impact of adverse trends in the general economy on the rate of our laboratory internal revenue growth and animal hospital same-store revenue growth; the level of direct costs and our ability to increase revenue at a level necessary to maintain expected operating margins; the level of selling, general and administrative costs; the effects of our recent acquisitions 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 risk factors are discussed in our Report on Form 10-K for the year ended December 31, 2008 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 supply diagnostic imaging equipment to the veterinary industry.
The VCA Antech, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4252
VCA Antech, Inc.
Consolidated Income Statements
(Unaudited - In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -----------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Revenue:
Animal hospital $ 261,287 $ 251,001 $ 499,645 $ 477,101
Laboratory 82,811 81,840 160,300 158,569
Medical
technology 10,628 11,838 19,786 25,687
Intercompany (9,850) (10,245) (19,005) (19,091)
--------- --------- --------- ---------
344,876 334,434 660,726 642,266
--------- --------- --------- ---------
Direct costs 247,264 237,468 480,673 462,269
Gross profit:
Animal hospital 53,133 52,620 96,297 93,757
Laboratory 41,030 40,874 77,036 78,216
Medical
technology 3,833 4,222 7,358 9,135
Intercompany (384) (750) (638) (1,111)
--------- --------- --------- ---------
97,612 96,966 180,053 179,997
--------- --------- --------- ---------
Selling, general
and
administrative
expense:
Animal hospital 5,378 5,694 10,762 11,172
Laboratory 5,644 5,185 11,211 10,136
Medical
technology 2,658 2,948 5,742 6,382
Corporate 9,525 8,982 18,679 18,297
--------- --------- --------- ---------
23,205 22,809 46,394 45,987
--------- --------- --------- ---------
Write-off of
internal-use
software 5,271 -- 5,271 --
Loss (gain) on
sale of assets 172 127 (76) (57)
--------- --------- --------- ---------
Operating income 68,964 74,030 128,464 134,067
Interest expense,
net 5,726 7,045 11,844 14,660
Other income (20) (309) (130) (132)
--------- --------- --------- ---------
Income before
provision for
income taxes 63,258 67,294 116,750 119,539
Provision for
income taxes 24,290 25,893 44,901 45,979
--------- --------- --------- ---------
Net income 38,968 41,401 71,849 73,560
--------- --------- --------- ---------
Net income
attributable to
noncontrolling
interests 1,223 1,084 2,134 2,041
--------- --------- --------- ---------
Net income
attributable to
VCA Antech, Inc. $ 37,745 $ 40,317 $ 69,715 $ 71,519
========== ========= ========= =========
Diluted earnings
per share $ 0.44 $ 0.47 $ 0.81 $ 0.83
========== ========= ========= =========
Shares used for
computing
diluted
earnings per
share 85,937 85,725 85,629 85,805
========== ========= ========= =========
VCA Antech, Inc.
Consolidated Balance Sheets
(Unaudited - In thousands)
June 30, December 31,
2009 2008
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 138,895 $ 88,959
Trade accounts receivable, net 49,169 43,453
Inventory 26,322 26,631
Prepaid expenses and other 19,689 18,800
Deferred income taxes 16,980 15,938
Prepaid income taxes 4,105 5,287
----------- -----------
Total current assets 255,160 199,068
Property and equipment, net 276,663 263,443
Other assets:
Goodwill 951,701 922,057
Other intangible assets, net 36,195 35,645
Notes receivable, net 4,660 12,893
Deferred financing costs, net 826 1,067
Other 17,699 14,865
----------- -----------
Total assets $ 1,542,904 $ 1,449,038
=========== ===========
Liabilities and Equity
Current liabilities:
Current portion of long-term
obligations $ 8,178 $ 7,771
Accounts payable 28,967 26,087
Accrued payroll and related
liabilities 43,150 42,840
Other accrued liabilities 42,237 46,424
----------- -----------
Total current liabilities 122,532 123,122
Long-term obligations, less current
portion 540,682 544,860
Deferred income taxes 61,295 47,331
Other liabilities 9,408 9,890
VCA Antech, Inc. stockholders'
equity:
Common stock 85 85
Additional paid-in capital 316,772 308,674
Accumulated earnings 478,297 408,582
Accumulated other comprehensive
loss (3,094) (6,352)
----------- -----------
Total VCA Antech, Inc.
stockholders' equity 792,060 710,989
----------- -----------
Noncontrolling interest 16,927 12,846
----------- -----------
Total equity 808,987 723,835
----------- -----------
Total liabilities and equity $ 1,542,904 $ 1,449,038
=========== ===========
VCA Antech, Inc.
Consolidated Statements of Cash Flows
(Unaudited - In thousands)
Six Months Ended
June 30,
--------------------------
2009 2008
--------- --------
Cash flows from operating activities:
Net income $ 71,849 $ 73,560
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 18,840 15,325
Amortization of debt issue costs 241 233
Provision for uncollectible
accounts 2,936 2,008
Gain on sale of assets (76) (57)
Share-based compensation 3,920 3,322
Deferred income taxes 10,944 5,431
Excess tax benefit from exercise
of stock options (154) (355)
Write-off of internal-use software 5,271 --
Other (218) (246)
Changes in operating assets and
liabilities:
Accounts receivable (7,989) (8,004)
Inventory, prepaid expenses and
other assets (2,929) (4,519)
Accounts payable and other accrued
liabilities 4,357 2,307
Accrued payroll and related
liabilities 2,134 1,465
Income taxes 1,073 10,979
--------- --------
Net cash provided by operating
activities 110,199 101,449
--------- --------
Cash flows from investing activities:
Business acquisitions, net of cash
acquired (28,144) (80,367)
Real estate acquired in connection
with business acquisitions (3,828) (13,098)
Property and equipment additions (25,208) (25,543)
Proceeds from sale of assets 108 1,753
Other (281) (14,987)
--------- --------
Net cash used in investing
activities (57,353) (132,242)
--------- --------
Cash flows from financing activities:
Repayment of long-term obligations (3,899) (3,925)
Distributions to noncontrolling
interest partners (1,493) (1,456)
Proceeds from issuance of common
stock under stock option plans 2,895 892
Excess tax benefit from exercise of
stock options 154 355
Stock repurchases (549) --
--------- --------
Net cash used in financing
activities (2,892) (4,134)
--------- --------
Effect of currency exchange rate
changes on cash and cash equivalents (18) (15)
--------- --------
Increase (decrease) in cash and cash
equivalents 49,936 (34,942)
Cash and cash equivalents at
beginning of period 88,959 110,866
--------- --------
Cash and cash equivalents at end of
period $ 138,895 $ 75,924
========= ========
VCA Antech, Inc.
Supplemental Operating Data
(Unaudited - In thousands, except per share amounts)
Table #1
Reconciliation of net
income to adjusted
net income Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ------------------------
2009 2008 2009 2008
-------- -------- --------- ---------
Net income
attributable to
VCA Antech, Inc. $ 37,745 $ 40,317 $ 69,715 $ 71,519
Write-off of
internal-use
software 5,271 -- 5,271 --
Tax benefit
from
write-off of
internal-use
software(1) (2,051) -- (2,051) --
-------- -------- --------- ---------
Adjusted net
income
attributable
to VCA
Antech, Inc. $ 40,965 $ 40,317 $ 72,935 $ 71,519
======== ======== ======== ========
--------------------
(1) The rate used to calculate the tax benefit is the statutory tax
rate for the year.
Table #2
Reconciliation of diluted
earnings per share to
adjusted diluted
earnings per share Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ------------------------
2009 2008 2009 2008
-------- -------- --------- ---------
Diluted earnings
per share $ 0.44 $ 0.47 $ 0.81 $ 0.83
Impact of
internal-use
software
write-off,
net of tax 0.04 -- 0.04 --
-------- -------- --------- ---------
Adjusted diluted
earnings per
share $ 0.48 $ 0.47 $ 0.85 $ 0.83
======== ======== ========= =========
Shares used for
computing
adjusted
diluted earnings
per share 85,937 85,725 85,629 85,805
======== ======== ========= =========
Table #3
Reconciliation of
operating income to
adjusted income Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ------------------------
2009 2008 2009 2008
-------- -------- --------- ---------
Consolidated
operating
income $ 68,964 $ 74,030 $ 128,464 $ 134,067
Write-off of
internal-use
software 5,271 -- 5,271 --
-------- -------- --------- ---------
Consolidated
adjusted
operating income $ 74,235 $ 74,030 $ 133,735 $ 134,067
======== ======== ========= =========
Consolidated
adjusted
operating margin 21.5% 22.1% 20.2% 20.9%
VCA Antech, Inc.
Supplemental Operating Data - (Continued)
(Unaudited - In thousands)
Table #4
Selected consolidated balance sheet data
As of
------------------------
June 30, Dec. 31,
2009 2008
--------- ----------
Debt:
Senior term notes $ 519,585 $ 522,282
Other debt and
capital leases 29,275 30,349
Revolving
credit facility -- --
--------- ---------
Total debt $ 548,860 $ 552,631
========= =========
Table #5
Selected expense data
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2009 2008 2009 2008
-------- -------- -------- --------
Rent expense $ 11,758 $ 10,438 $ 23,167 $ 20,479
======== ======== ======== ========
Depreciation
and amortization
included in
direct costs:
Animal
hospital $ 6,483 $ 5,439 $ 12,702 $ 10,222
Laboratory 2,265 1,793 4,433 3,425
Medical
technology 155 313 307 620
Intercompany (200) (139) (387) (262)
-------- -------- -------- --------
$ 8,703 $ 7,406 $ 17,055 $ 14,005
Depreciation
and amortization
included in
selling,
general
and administrative
expense 985 656 1,785 1,320
-------- -------- -------- --------
Total
depreciation
and
amortization $9,688 $ 8,062 $ 18,840 $ 15,325
======== ======== ======== ========
Share-based
compensation
included in
direct costs:
Laboratory $ 150 $ 219 $ 305 $ 392
Share-based
compensation
included in
selling,
general and
administrative
expense:
Animal
hospital 360 456 731 789
Laboratory 297 303 598 505
Medical
technology 67 54 142 87
Corporate 1,070 981 2,144 1,549
-------- -------- -------- --------
1,794 1,794 3,615 2,930
-------- -------- -------- --------
Total
share-based
compensation $ 1,944 $ 2,013 $ 3,920 $ 3,322
======== ======== ======== ========