VCA Antech, Inc. Reports Second Quarter 2013 Results

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VCA Antech, Inc. Reports Second Quarter 2013 Results

  • Revenue increased 6.1% to a second quarter record of $465.3 million
  • Gross profit increased 13.6% to $114.3 million, or 8.9% to $112.9 million on an as adjusted basis
  • Operating income increased 23.1% to $75.7 million, or 15.1% to $74.3 million on an as adjusted basis
  • Diluted earnings per common share increased 17.9% to $0.46
  • Adjusted EPS Excluding Amortization increased 13.6% to $0.50

LOS ANGELES--(BUSINESS WIRE)-- VCA Antech, Inc. , a leading animal healthcare company in the United States and Canada, today reported financial results for the second quarter ended June 30, 2013, as follows: revenue increased 6.1% to a second quarter record of $465.3 million; gross profit increased 13.6% to $114.3 million; operating income increased 23.1% to $75.7 million; net income increased 21.4% to $41.7 million; and diluted earnings per common share increased 17.9% to $0.46. Non-GAAP earnings per diluted share excluding acquisition-related amortization and other special charges ("Adjusted EPS Excluding Amortization") increased 13.6% to $0.50 for the three months ended June 30, 2013.

For the six months ended June 30, 2013 and 2012, diluted earnings per common share were $0.81 and $0.79, respectively. Adjusted EPS Excluding Amortization for the six months ended June 30, 2013 and 2012 were $0.90 and $0.81.

Bob Antin, Chairman and CEO, stated, "We had an excellent quarter with improvements in revenue growth and margins in both our core Animal Hospital and Laboratory business segments. Looking forward, we remain optimistic with respect to our results for the second half of 2013.

"Animal Hospital revenue in the second quarter of 2013 increased 6.7%, to $365.2 million, driven by acquisitions made in the past 12 months and same-store revenue growth of 1.3%. Our same-store gross profit margin increased to 16.7%, from 14.6%, and our consolidated gross margin increased to 16.5%, compared to 14.4% in the prior-year quarter. Our Animal Hospital operating margin increased to 14.1%, compared to 12.1% in the prior-year quarter. In the current and prior-year quarters, we recorded adjustments of a credit of $1.4 million related to rent expense and $3.1 million for a depreciation adjustment related to acquired capital leases, respectively. Excluding these items, our adjusted same-store gross profit margin increased to 16.3% from 15.5%; adjusted consolidated gross margin increased to 16.1%, compared to 15.3% in the prior-year quarter; and adjusted operating margin increased to 13.7%, compared to 13.0% in the prior-year quarter. During the quarter, we acquired three independent animal hospitals which had historical combined annual revenue of $9.7 million.

"Laboratory internal revenue in the second quarter increased 5.2%, to $91.1 million, driven by both an increase in the number of requisitions and the average revenue per requisition. Our Laboratory gross profit margin increased to 49.6%, from 48.8%, and our operating margin increased to 40.8% from 40.2%."

2013 Financial Guidance

We reaffirm the guidance provided on February 14, 2013.

Non-GAAP Financial Measures

We believe investors' understanding of our total performance is enhanced by disclosing adjusted net income, adjusted diluted earnings per common share and adjusted diluted earnings per common share excluding acquisition-related amortization. We define these adjusted measures as the reported amounts, adjusted to exclude certain significant items and amortization of intangibles acquired in acquisitions.

Management believes these adjusted measures are useful to management and investors in evaluating the Company's operational performance and their use provides an additional tool for evaluating the Company's operating results and trends. 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.

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 second quarter 2013 financial results during a conference call today, July 25th, at 4:30 p.m. Eastern Time. A live broadcast of the call may be accessed by visiting our website at 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. Replay of the webcast will be available for ninety days by visiting the company's website.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Among the forward looking statements in this press release are statements addressing our 2013 guidance and plans, expectations, future financial position and results of operation. These forward-looking statements are not historical facts and are inherently uncertain and out of our control. Any or all of our forward-looking statements in this press release may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Actual future results may vary materially. Among other factors that could cause our actual results to differ from this forward-looking information are: the continued effects of the economic uncertainty prevailing in regions in which we operate; our ability to execute on our growth strategy and to manage acquired operations; changes in demand for our products and services; fluctuations in our revenue adversely affecting our gross profit, operating income and margins; and the effects of the other factors discussed in our Annual Report on Form 10-K, Reports on Form 10-Q and our other filings with the SEC.

About VCA Antech

We own, operate and manage the largest networks of freestanding veterinary hospitals and veterinary-exclusive clinical laboratories in the country, additionally we are the largest provider of online communication, professional education and marketing solutions to the veterinary community. We also supply diagnostic imaging equipment to the veterinary industry.


VCA Antech, Inc.

Consolidated Income Statements


(In thousands, except per share amounts)


Three Months Ended
June 30,

Six Months Ended
June 30,

2013       2012 2013       2012
Animal hospital $ 365,205 $ 342,282 $ 705,820 $ 658,407
Laboratory 91,230 86,620 178,565 171,350
All other 27,472 27,418 55,995 53,743
Intercompany (18,652 ) (17,948 ) (36,519 ) (35,663 )
465,255   438,372   903,861   847,837  
Direct costs 350,961 337,765 692,644 653,851
Gross profit:
Animal hospital 60,113 49,380 105,312 94,936
Laboratory 45,226 42,296 87,691 82,847
All other 9,423 9,794 19,057 18,461
Intercompany (468 ) (863 ) (843 ) (2,258 )
114,294   100,607   211,217   193,986  
Selling, general and administrative expense:
Animal hospital 8,720 7,995 17,045 15,052
Laboratory 7,965 7,510 15,970 15,108
All other 8,041 9,029 16,955 18,312
Corporate 14,297   14,463   28,899   29,576  
39,023   38,997   78,869   78,048  
Net (gain) loss on sale of assets (430 ) 112 1,296 635
Operating income 75,701 61,498 131,052 115,303
Interest expense, net 5,658 4,364 9,965 8,451
Business combination adjustment gain (5,719 )
Other income (18 ) (148 ) (27 ) (355 )
Income before provision for income taxes 70,061 57,282 121,114 112,926
Provision for income taxes 26,601   21,504   45,831   40,827  
Net income 43,460 35,778 75,283 72,099
Net income attributable to noncontrolling interests 1,798   1,458   3,136   2,534  
Net income attributable to VCA Antech, Inc $ 41,662   $ 34,320   $ 72,147   $ 69,565  
Diluted earnings per share $ 0.46   $ 0.39   $ 0.81   $ 0.79  
Weighted-average shares outstanding for diluted earnings per share 89,653   88,723   89,531   88,555  


VCA Antech, Inc.

Consolidated Balance Sheets


(In thousands)


June 30,

December 31,

Current assets:
Cash and cash equivalents $ 112,270 $ 68,435
Trade accounts receivable, net 70,252 55,912
Inventory 51,374 51,456
Prepaid expenses and other 24,660 25,086
Deferred income taxes 26,130 22,579
Prepaid income taxes 8,185   20,061
Total current assets 292,871 243,529
Property and equipment, net 429,745 403,444
Other assets:
Goodwill 1,307,487 1,291,231
Other intangible assets, net 86,731 94,823
Notes receivable, net 3,625 6,080
Deferred financing costs, net 3,606 4,232
Other 51,434   48,241
Total assets $ 2,175,499   $ 2,091,580
Liabilities and Equity
Current liabilities:
Current portion of long-term debt $ 46,892 $ 39,002
Accounts payable 37,841 39,416
Accrued payroll and related liabilities 51,568 49,893
Other accrued liabilities 62,745   57,131
Total current liabilities 199,046 185,442
Long-term debt, less current portion 587,968 591,641
Deferred income taxes 82,508 75,846
Other liabilities 34,437   37,267
Total liabilities 903,959 890,196
Redeemable noncontrolling interests 11,111 6,991
VCA Antech, Inc. stockholders' equity:
Common stock 89 88
Additional paid-in capital 394,304 390,359
Retained earnings 863,356 791,209
Accumulated other comprehensive (loss) income (4,494 ) 1,847
Total VCA Antech, Inc. stockholders' equity 1,253,255 1,183,503
Noncontrolling interests 7,174   10,890
Total equity 1,260,429  
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