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 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. 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

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2012

2011

2012

2011

Revenue:

Animal hospital

$

330,067

$

285,644

$

1,331,314

$

1,150,120

Laboratory

75,165

73,878

327,801

316,797

All other

31,117

26,243

112,960

80,430

Intercompany

(18,157

)

(16,767

)

(72,433

)

(61,986

)

418,192

368,998

1,699,642

1,485,361

Direct costs

336,385

297,288

1,324,668

1,146,904

Gross profit:

Animal hospital

39,923

35,727

189,111

179,810

Laboratory

31,737

31,063

151,761

143,790

All other

11,363

6,990

38,707

20,971

Intercompany

(1,216

)

(2,070

)

(4,605

)

(6,114

)

81,807

71,710

374,974

338,457

Selling, general and administrative expense:

Animal hospital

8,029

6,089

30,826

24,342

Laboratory

7,267

7,287

29,660

27,864

All other

10,803

7,327

37,879

19,136

Corporate

15,400

15,075

58,790

49,770

41,499

35,778

157,155

121,112

Goodwill and other long-lived assets impairment

123,573

21,310

123,573

21,310

Net loss on sale of assets

288

425

1,310

382

Operating (loss) income

(83,553

)

14,197

92,936

195,653

Interest expense, net

3,806

4,068

16,552

16,884

Debt retirement costs

2,764

Business combination adjustment gain

(5,719

)

Other expense (income)

151

119

(488

)

118

(Loss) income before provision for income taxes

(87,510

)

10,010

82,591

175,887

Provision for income taxes

(30,485

)

12,070

31,875

76,027

Net (loss) income

(57,025

)

(2,060

)

50,716

99,860

Net income attributable to noncontrolling interests

1,026

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 share

88,060

86,829

88,671

87,394

VCA Antech, Inc.

Consolidated Balance Sheets

(Unaudited)

(In thousands)

December 31,

December 31,

2012

2011

Assets

Current assets:

Cash and cash equivalents

$

68,435

$

63,651

Trade accounts receivable, net

55,912

58,279

Inventory

51,456

48,661

Prepaid expenses and other

25,086

21,883

Deferred income taxes

26,667

26,310

Prepaid income taxes

20,061

18,373

Total current assets

247,617

237,157

Property and equipment, net

403,444

370,646

Other assets:

Goodwill

1,291,231

1,237,607

Other intangible assets, net

94,823

92,403

Notes receivable, net

6,080

6,202

Deferred financing costs, net

4,232

5,435

Other

48,241

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 payable

39,416

37,797

Accrued payroll and related liabilities

49,893

42,658

Other accrued liabilities

57,131

43,968

Total current liabilities

181,497

156,994

Long-term debt, less current portion

595,586

586,282

Deferred income taxes

79,934

101,229

Other liabilities

37,267

25,947

Total liabilities

894,284

870,452

Redeemable noncontrolling interests

6,991

6,964

VCA Antech, Inc. stockholders' equity:

Common stock

88

87

Additional paid-in capital

390,359

361,715

Retained earnings

791,209

745,658

Accumulated other comprehensive income

1,847

418

Total VCA Antech, Inc. stockholders' equity

1,183,503

1,107,878

Noncontrolling interests

10,890

10,074

Total equity

1,194,393

1,117,952

Total liabilities and equity

$

2,095,668

$

1,995,368

VCA Antech, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(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 impairment

123,573

21,310

Depreciation and amortization

76,227

56,988

Amortization of debt issue costs

1,278

1,445

Provision for uncollectible accounts

6,396

6,742

Debt retirement costs

2,764

Business combination adjustment gain

(5,719

)

Net loss on sale of assets

1,310

382

Share-based compensation

14,087

10,773

Deferred inc