VCA Antech, Inc. Reports Second Quarter 2013 Results

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 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 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

(Unaudited)


(In thousands, except per share amounts)

 

Three Months Ended
June 30,

Six Months Ended
June 30,

2013   20122013   2012
Revenue:
Animal hospital$365,205$342,282$705,820$658,407
Laboratory91,23086,620178,565171,350
All other27,47227,41855,99553,743
Intercompany(18,652)(17,948)(36,519)(35,663)
465,255 438,372 903,861 847,837 
 
Direct costs350,961337,765692,644653,851
 
Gross profit:
Animal hospital60,11349,380105,31294,936
Laboratory45,22642,29687,69182,847
All other9,4239,79419,05718,461
Intercompany(468)(863)(843)(2,258)
114,294 100,607 211,217 193,986 
 
Selling, general and administrative expense:
Animal hospital8,7207,99517,04515,052
Laboratory7,9657,51015,97015,108
All other8,0419,02916,95518,312
Corporate14,297 14,463 28,899 29,576 
39,023 38,997 78,869 78,048 
Net (gain) loss on sale of assets(430)1121,296635
Operating income75,70161,498131,052115,303
Interest expense, net5,6584,3649,9658,451
Business combination adjustment gain(5,719)
Other income(18)(148)(27)(355)
Income before provision for income taxes70,06157,282121,114112,926
Provision for income taxes26,601 21,504 45,831 40,827 
Net income43,46035,77875,28372,099
Net income attributable to noncontrolling interests1,798 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 share89,653 88,723 89,531 88,555 
 
 

            

VCA Antech, Inc.

Consolidated Balance Sheets

(Unaudited)


(In thousands)

 

June 30,
2013

December 31,
2012

Assets
Current assets:
Cash and cash equivalents$112,270$68,435
Trade accounts receivable, net70,25255,912
Inventory51,37451,456
Prepaid expenses and other24,66025,086
Deferred income taxes26,13022,579
Prepaid income taxes8,185 20,061
Total current assets292,871243,529
Property and equipment, net429,745403,444
Other assets:
Goodwill1,307,4871,291,231
Other intangible assets, net86,73194,823
Notes receivable, net3,6256,080
Deferred financing costs, net3,6064,232
Other51,434 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 payable37,84139,416
Accrued payroll and related liabilities51,56849,893
Other accrued liabilities62,745 57,131
Total current liabilities199,046185,442
Long-term debt, less current portion587,968591,641
Deferred income taxes82,50875,846
Other liabilities34,437 37,267
Total liabilities903,959890,196
Redeemable noncontrolling interests11,1116,991
VCA Antech, Inc. stockholders' equity:
Common stock8988
Additional paid-in capital394,304390,359
Retained earnings863,356791,209
Accumulated other comprehensive (loss) income(4,494)1,847
Total VCA Antech, Inc. stockholders' equity1,253,2551,183,503
Noncontrolling interests7,174 10,890
Total equity1,260,429 
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