BRENTWOOD, Tenn., Nov. 16, 2009 (GLOBE NEWSWIRE) -- Pet DRx Corporation (Nasdaq:VETS), a provider of veterinary primary care and specialized services to companion animals, today announced financial results for the third quarter ended September 30, 2009, and its results for the first nine months of 2009, which showed continued progress and improvement over its prior year results.
Revenues for the three and nine month periods ended September 30, 2009 from continuing operations were $15.7 million and $49.2 million, respectively, compared to revenues of $17.3 million and $52.2 million, respectively, in the same time periods one year ago. The decrease in revenues of 9.0% and 5.8%, respectively, continues to be primarily due to decreased volume of traffic at the Company's clinics as the California economy remained weak during the first nine months of 2009. Revenue decreases for the nine months ended September 30, 2009 from our same stores were partially offset by acquisition revenues of Valley Animal Medical Center which was not acquired until the beginning of the third quarter of 2008.
The Company's hospital contribution margin in the third quarter of 2009 from continuing operations improved to 7.9% when compared with 5.5% in the prior-year third quarter. For the nine months ended September 30, 2009, hospital contribution margin was 9.7% versus 7.9% for the same time period in 2008. The increase in hospital contribution margin continues to be driven by lowered veterinarian and staff payroll expenses which resulted from improvements made in aligning staff levels with revenues, coupled with the elimination of certain cost redundancies from the three hospital consolidations that took place during 2008.
"While we're concerned about the continuing effect the California economy is having on our revenues, we are pleased that we continue to show stronger hospital financial performance over the previous year," said Gene Burleson, Chief Executive Officer of Pet DRx Corporation. "All of our hospitals have continued to achieve positive Hospital EBITDA for the nine months ended September 30, 2009, so while the top line sales are not where we would like them to be, our hospitals are performing more efficiently this year and we are encouraged that when the California economy begins its recovery we will be in a position to capitalize on the increased revenues."
Selling, general, and administrative expenses ("SG&A"), which was $1.6 million and $6.2 million in the three and nine months ended September 30, 2009, respectively, decreased by $2.0 million and $5.2 million, respectively, over the same time periods one year ago. The decrease in SG&A for the nine months of 2009 compared with 2008 was a result of the Company not having incurred certain expenses in 2009 that were incurred in 2008 including completing the relocation of its headquarters from California to Tennessee, charges incurred for reductions in corporate and executive level staff, and a one-time impairment charge of $0.3 million on the carrying value of its vacant building that was later sold in 2009. Also leading to the decreased SG&A were reduced expenses from outside professional fees and stock compensation costs as compared to the same time periods one year ago.
For the third quarter of 2009, Pet DRx had an operating loss of $398,000 compared to an operating loss in the third quarter of 2008 of $2.7 million. For the nine months ended September 30, 2009, the operating loss was $1.4 million as compared to an operating loss of $7.2 million for the nine months ended September 30, 2008.
The net loss from continuing operations in the three and nine months ended September 30, 2009 was $1.8 million and $9.2 million, or a loss per share of ($0.08) and $(0.39), respectively, compared with a net loss in the same time periods in 2008 of $3.0 million and $11.1 million, or ($0.13) and ($0.47) loss per share, respectively. The net loss in the third quarter of 2009 includes interest expense of $1.5 million, compared with $0.3 million in the prior-year third quarter. The nine months ended September 30, 2009 includes a loss from the change in fair value of warrant liabilities of $3.4 million and interest expense of $4.3 million. Interest expense was $4.2 million in the prior year nine month period. There was no gain or loss recognized in 2008 on the change in fair value of warrant liabilities. Excluding the loss from the change in fair value of warrant liabilities, the net loss from continuing operations for the first nine months of 2009 would have been $5.8 million.
Earnings before interest, loss on change in fair value of warrant liabilities, income taxes, depreciation, and amortization ("Adjusted EBITDA") for the three and nine months ended September 30, 2009 was $0.3 million and $0.6 million, respectively, as compared to negative Adjusted EBITDA of $2.2 million in the third quarter of 2008 and $5.6 million in the nine months ended September 30, 2008. This is an increase of $2.5 million and $6.2 million, respectively, in Adjusted EBITDA over the same periods in the prior year. The increase in Adjusted EBITDA in 2009 was primarily due to the reduced spending in selling, general, and administrative expenses as compared to the same time period in the previous year as well as improved hospital contribution margins. See reconciliation of Adjusted EBITDA to Net Loss from Continuing Operations in the table below.
Conference Call
Pet DRx management will host a conference call on Monday, November 16, 2009, beginning at 3:00 p.m. Eastern time to discuss third quarter 2009 results and to answer questions. Individuals interested in participating in the call should dial (888) 713-4214 from the U.S. or (617) 213-4866 from outside the U.S and entering pass code 29319777. The live call also will be available in the Investors section of the Company's Web site at www.petdrx.com.
A telephone replay will be available for 48 hours beginning approximately one hour after the conclusion of the call by dialing (888) 286-8010 from the U.S. or (617) 801-6888 from outside the U.S., and entering reservation code 23626058. The webcast will be available in the Investors section of the Company's Web site for 14 days following the completion of the call.
About Pet DRx
Pet DRx Corporation provides veterinary primary care and specialized services to companion animals through a network of fully-owned veterinary hospitals. The Company currently owns and operates 23 veterinary hospitals in the state of California, which it has organized into regional "hub and spoke" networks. Pet DRx provides a full range of general medical treatments for companion animals, including (i) preventive care, such as examinations, vaccinations, spaying/neutering and dental care and (ii) a broad range of specialized diagnostic and medical services, such as internal medicine, surgery, cardiology, ophthalmology, dermatology, oncology, neurology, x-ray, ultrasound and other services.
SAFE HARBOR STATEMENT
Certain statements and information included in this press release, including statements as to the expected operations of the Company, its prospects for growth, and future product and service offerings constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including, but not limited to, the ability of the Company to successfully acquire, integrate and operate veterinary hospitals and clinics, requirements or changes affecting the businesses in which the Company is engaged, veterinary services trends, including factors affecting supply and demand, the effect of competition, decline in demand for the Company's products or services, dependence on acquisitions for growth, labor and personnel relations, changing interpretations of generally accepted accounting principles, the Company's ability to service its substantial indebtedness, the level of direct costs and the Company's ability to maintain revenue at a level necessary to maintain expected operating margins, the level of selling, general and administrative costs, any impairment in the carrying value of the Company's goodwill and other intangible assets, changes in prevailing interest rates, and general economic conditions. These and other risks and uncertainties are described in greater detail in the Company's filings with the Securities and Exchange Commission, including its reports on Forms 10-K and 10-Q, and the foregoing information should be read in conjunction with these filings. These forward-looking statements speak only as of the date hereof and the Company disclaims any intention or obligation to update or revise any forward-looking statements, either as a result of new information, future events or otherwise.
PET DRX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
September 30,
--------------------------------------
2009 % 2008 %
-------- -------- -------- --------
Revenue $ 15,734 100.0% $ 17,299 100.0%
Direct costs 14,488 92.0% 16,339 94.5%
-------- -------- -------- --------
Hospital contribution 1,246 7.9% 960 5.5%
Selling, general, and
administrative expenses 1,644 10.4% 3,677 21.2%
-------- -------- -------- --------
(Loss) from operations (398) (2.5)% (2,717) (15.7)%
Other income (expense):
Gain/(Loss) on change in
fair value of warrant
liabilities 144 0.9% -- 0.0%
Interest income 3 0.0% 5 0.0%
Interest expense (1,535) 9.8% (292) (1.7)%
-------- -------- -------- --------
Loss before
provision/(benefit)
for income taxes (1,786) (11.4)% (3,004) (17.4)%
Provision/(benefit)
for income taxes 23 0.1% 12 0.0%
-------- -------- -------- --------
Loss from continuing
operations (1,809) (11.5)% (3,016) (17.4)%
Loss from discontinued
operations, net of tax -- (156) (0.9)%
-------- -------- -------- --------
Net loss $ (1,809) (11.5)% $ (3,172) (18.3)%
======== ======== ======== ========
Basic and diluted
loss per common share
Loss from continuing
operations $ (0.08) $ (0.13)
Loss from discontinued
operations $ (0.00) $ (0.00)
-------- --------
Net loss per share $ (0.08) $ (0.13)
======== ========
Shares used for
computing basic and
diluted loss per share 23,674 23,656
Nine Months Ended
September 30,
--------------------------------------
2009 % 2008 %
-------- -------- -------- --------
Revenue $ 49,158 100.0% $ 52,193 100.0%
Direct costs 44,375 90.3% 48,054 92.1%
-------- -------- -------- --------
Hospital contribution 4,783 9.7% 4,139 7.9%
Selling, general, and
administrative expenses 6,204 12.6% 11,388 21.8%
-------- -------- -------- --------
(Loss) from operations (1,421) (2.9)% (7,249) (13.9)%
Other income (expense):
Gain/(Loss) on change in
fair value of warrant
liabilities (3,449) (7.0)% -- 0.0%
Interest income 9 0.0% 344 0.7%
Interest expense (4,324) (8.8)% (4,179) 8.0%
-------- -------- -------- --------
Loss before provision/
(benefit) for income taxes (9,185) (18.7)% (11,084) (21.2)%
Provision/(benefit)
for income taxes 28 0.0% (17) (0.0)%
-------- -------- -------- --------
Loss from continuing
operations (9,213) (18.7)% (11,067) (21.2)%
Loss from discontinued
operations, net of tax (371) (0.7)%
-------- -------- -------- --------
Net loss $ (9,213) (18.7)% $(11,438) (21.9)%
======== ======== ======== ========
Basic and diluted loss
per common share
Loss from continuing
operations $ (0.39) $ (0.47)
Loss from discontinued
operations $ (0.00) $ (0.02)
-------- --------
Net loss per share $ (0.39) $ (0.49)
======== ========
Shares used for
computing basic and
diluted loss per share 23,665 23,357
PET DRX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and number of shares)
Sept. 30,
2009 Dec. 31,
(unaudited) 2008
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 3,716 $ 1,723
Trade accounts receivable, net 360 369
Inventory 944 1,154
Prepaid expenses and other 953 1,719
Assets held for sale -- 900
Due from related parties -- 32
Assets of discontinued operations -- 1
-------- --------
Total current assets 5,973 5,898
Property and equipment, net 6,832 7,422
Other assets:
Goodwill 49,031 49,373
Other intangible assets, net 5,917 6,704
Restricted cash 425 500
Other 299 447
-------- --------
Total assets $ 68,477 $ 70,344
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations, net
of debt discount $ 3,778 $ 3,718
Accounts payable 1,464 2,394
Accrued payroll and other expenses 4,391 6,551
Due to a related party -- 96
Obligations under capital leases, current portion 334 312
Deferred rent, current portion 8 --
Liabilities of discontinued operations -- 55
-------- --------
Total current liabilities 9,975 13,126
Long-term liabilities:
Convertible debt, net of debt discount 9,239 4,949
Term notes, less current portion and net of debt
discount 2,102 3,687
Warrant liabilities 213 --
Obligations under capital leases, less current
portion 430 361
Deferred rent, less current portion 503 355
Other 150 83
-------- --------
Total long term liabilities 12,637 9,435
-------- --------
Total liabilities 22,612 22,561
Stockholders' equity:
Common stock, par value $0.0001, 90,000,000 shares
authorized and 23,690,460 and 23,660,460
outstanding as of September 30, 2009 and
December 31, 2008, respectively, net of
treasury shares of 1,361,574 at
September 30, 2009 and December 31, 2008,
respectively 2 2
Additional paid-in-capital 93,101 87,686
Accumulated deficit (47,238) (39,905)
-------- --------
Total stockholders' equity 45,865 47,783
-------- --------
Total liabilities and stockholders' equity $ 68,477 $ 70,344
======== ========
NON-GAAP FINANCIAL MEASURES
The financial tables below contain certain non-GAAP financial measures as defined under SEC rules, such as Adjusted EBITDA for the three and nine month periods ended September 30, 2009 and 2008, respectively, and Hospital EBITDA for the three and nine month periods ended September 30, 2009 and 2008, respectively. As required by SEC rules, the Company has provided reconciliations of these measures to the most directly comparable GAAP measures, which are set forth in the tables below. The Company believes that each of the foregoing non-GAAP financial measures improves the transparency of the Company's disclosure, provides a meaningful presentation of the Company's results from its core hospital operations excluding the impact of items not related to the Company's ongoing core hospital operations, and improves the period-to-period comparability of the Company's results from its core hospital operations.
ADJUSTED EBITDA
---------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2009 2008 2009 2008
-------- -------- -------- --------
Net loss from continuing
operations $ (1,809) $ (3,016) $ (9,213) $(11,067)
Depreciation 433 333 1,249 967
Amortization 259 218 786 661
(Gain)/Loss on change in
fair value of warrant
liabilities (144) -- 3,449 --
Interest expense, net 1,532 287 4,315 3,835
Provision/(benefit) for
income taxes 23 12 28 (17)
-------- -------- -------- --------
Adjusted EBITDA $ 294 $ (2,166) $ 614 $ (5,621)
======== ======== ======== ========
HOSPITAL EBITDA
---------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2009 2008 2009 2008
-------- -------- -------- --------
Hospital contribution $ 1,246 $ 960 $ 4,783 $ 4,139
Depreciation at hospitals 353 293 995 844
Amortization at hospitals 259 218 787 661
-------- -------- -------- --------
Hospital EBITDA $ 1,858 $ 1,471 $ 6,565 $ 5,644
======== ======== ======== ========