VCA Antech, Inc. Reports Fourth Quarter 2012 Results and Provides Financial Guidance for 2013

VCA Antech, Inc. Reports Fourth Quarter 2012 Results and Provides Financial Guidance for 2013

  • Revenue increased 13.3% to a fourth quarter record of $418.2 million
  • Gross profit increased 14.1% to $81.8 million
  • Loss per common share of $0.66 resulting from a $0.90 per common share impairment charge
  • Adjusted diluted earnings per common share of $0.24

LOS ANGELES--(BUSINESS WIRE)-- VCA Antech, Inc. , a leading animal healthcare company in the United States and Canada, today reported financial results for the fourth quarter ended December 31, 2012, as follows: revenue increased 13.3% to $418.2 million; gross profit increased 14.1% to $81.8 million; loss per common share of $0.66; and adjusted diluted earnings per common share of $0.24.

Bob Antin, Chairman and CEO, stated, "We are pleased that we are experiencing improving revenue growth in both our core Animal Hospital and Laboratory segments. We are also encouraged that we were able to increase our same-store gross profit margins in each of those segments. We are seeing steady improvement and growth in the veterinary market which bolsters our optimism for our overall growth prospects.

"Our results also included a non-cash impairment charge of $123.6 million, or $79.2 million net of tax, primarily related to the write-down of goodwill and other long-lived assets in our Vetstreet business, included in our All Other segments category. As a result of our 2012 impairment review, we determined that the write-down of goodwill and long-lived assets was necessary as our fiscal 2012 actual operating results and cash flow, and projections of future operating results and cash flow, were significantly lower than previously forecasted. We do not expect this accounting write-down to affect our ongoing business or financial performance.

"Vetstreet continues to provide us with an array of product and service offerings that complement our core business. As well, this business provides its animal hospital clients valuable services to improve communication with pet owners which contributes to higher patient traffic. We are committed to building on our leadership position in the industry by continuing to offer innovative services to our animal hospital clients.

"Excluding this charge of $0.90 per common share, adjusted diluted earnings per common share for the fourth quarter of 2012 was $0.24, a $0.03 per common share or 14.3% increase over the same period in 2011.

"We also reported our financial results for the twelve months ended December 31, 2012, as follows: revenue increased 14.4% to $1.7 billion; gross profit increased 10.8% to $375.0 million; and diluted earnings per common share of $0.51. The results for the twelve months ended December 31, 2012, included a gain of $5.7 million on our 20% interest in Associate Veterinary Clinics held at the time we became its sole non-veterinarian shareholder; a depreciation adjustment of $3.1 million, or $1.9 million net of tax, related to acquired capital leases; and the non-cash impairment charge of $123.6 million, or $79.2 million net of tax, noted above. Excluding these items, adjusted diluted earnings per common share was $1.36 compared to adjusted diluted earnings per common share of $1.35 for the prior year.

"Animal Hospital revenue in the fourth quarter of 2012 increased 15.6%, to $330.1 million, driven by acquisitions made in the past twelve months and same-store revenue growth of 1.6%. Our same-store gross profit margin increased to 12.8% from 12.7%, and with the lower margins for acquired Animal Hospitals, our consolidated gross margin decreased to 12.1%, compared to 12.5% for the prior-year quarter. Our Animal Hospital operating margin decreased to 9.2%, compared to 10.2%, for the prior-year quarter. During the quarter, we acquired 11 independent animal hospitals which had historical combined annual revenue of $26.8 million.

"Laboratory internal revenue in the fourth quarter increased 3.0%, to $75.1 million, driven by both an increase in the number of requisitions and the average revenue per requisition. Our Laboratory gross profit margin increased to 42.2% from 42.0%, and our operating margin increased from 32.2% to 32.6%.

"Revenue from our All Other segment increased $4.9 million in the fourth quarter, to $31.1 million, primarily as a result of the acquisitions of Vetstreet and ThinkPets."

2013 Financial Guidance

Based on the assumptions stated below, we provide the following financial guidance for the full year 2013:

  • Revenue from $1.825 billion to $1.855 billion
  • Net income from $130 million to $139 million; and
  • Diluted earnings per common share from $1.45 to $1.55.

Our earning guidance excludes the impact of any acquisition related expenses, the write off of any lease-hold or other real estate assets, the impairment of intangible assets from prior acquisitions, or other special, unusual or extraordinary items; assumes normal weather conditions for the remainder of the year.

Conference Call

We will discuss our fourth quarter 2012 financial results during a conference call today, February 14th, 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 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: 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 for the year ended December 31, 2011, 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 EndedTwelve Months Ended
December 31,December 31,
2012  20112012  2011
Animal hospital$330,067$285,644$1,331,314$1,150,120
All other31,11726,243112,96080,430
418,192 368,998 1,699,642 1,485,361 
Direct costs336,385297,2881,324,6681,146,904
Gross profit:
Animal hospital39,92335,727189,111179,810
All other11,3636,99038,70720,971
81,807 71,710 374,974 338,457 
Selling, general and administrative expense:
Animal hospital8,0296,08930,82624,342
All other10,8037,32737,87919,136
Corporate15,400 15,075 58,790 49,770 
Goodwill and other long-lived assets impairment123,57321,310123,57321,310
Net loss on sale of assets288 425 1,310 382 
Operating (loss) income(83,553)14,19792,936195,653
Interest expense, net3,8064,06816,55216,884
Debt retirement costs2,764
Business combination adjustment gain(5,719)
Other expense (income)151 119 (488)118 
(Loss) income before provision for income taxes(87,510)10,01082,591175,887
Provision for income taxes(30,485)12,070 31,875 76,027 
Net (loss) income(57,025)(2,060)50,71699,860
Net income attributable to noncontrolling interests1,026 1,155 5,165 4,455 
Net (loss) income attributable to VCA Antech, Inc.$(58,051)$(3,215)$45,551 $95,405 
Diluted (loss) earnings per share$(0.66)$(0.04)$0.51 $1.09 
Weighted-average shares outstanding for diluted earnings per share88,060 86,829 88,671 87,394 

VCA Antech, Inc.
Consolidated Balance Sheets

(In thousands)

December 31,December 31,
Current assets:
Cash and cash equivalents$68,435$63,651
Trade accounts receivable, net55,91258,279
Prepaid expenses and other25,08621,883
Deferred income taxes26,66726,310
Prepaid income taxes20,061 18,373
Total current assets247,617237,157
Property and equipment, net403,444370,646
Other assets:
Other intangible assets, net94,82392,403
Notes receivable, net6,0806,202
Deferred financing costs, net4,2325,435
Other48,241 45,918
Total assets$2,095,668 $1,995,368
Liabilities and Equity
Current liabilities:
Current portion of long-term debt$35,057$32,571
Accounts payable39,41637,797
Accrued payroll and related liabilities49,89342,658
Other accrued liabilities57,131 43,968

Total current liabilities

Long-term debt, less current portion595,586586,282
Deferred income taxes79,934101,229
Other liabilities37,267 25,947
Total liabilities894,284870,452
Redeemable noncontrolling interests6,9916,964
VCA Antech, Inc. stockholders' equity:
Common stock8887
Additional paid-in capital390,359361,715
Retained earnings791,209745,658
Accumulated other comprehensive income1,847 418
Total VCA Antech, Inc. stockholders' equity1,183,5031,107,878
Noncontrolling interests10,890 10,074
Total equity1,194,393 1,117,952
Total liabilities and equity$2,095,668 $1,995,368

VCA Antech, Inc.
Consolidated Statements of Cash Flows

(In thousands)

Twelve Months Ended
December 31,
2012  2011
Cash flows from operating activities:
Net income$50,716$99,860
Adjustments to reconcile net income to net cash provided by operating activities:
Goodwill and other long-lived assets impairment123,57321,310
Depreciation and amortization76,22756,988
Amortization of debt issue costs1,2781,445
Provision for uncollectible accounts6,3966,742
Debt retirement costs2,764
Business combination adjustment gain(5,719)
Net loss on sale of assets1,310382
Share-based compensation14,08710,773
Deferred inc
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