* Third quarter revenue increased 2.0% to $338.6 million
* Third quarter gross profit increased 2.7% to $91.1 million
* Third quarter net income increased 1.6% to $36.4 million
* Third quarter diluted earnings per share of $0.42
LOS ANGELES, Oct. 22, 2009 (GLOBE NEWSWIRE) -- VCA Antech, Inc. (Nasdaq:WOOF), a leading animal healthcare company in the United States, today reported financial results for the third quarter ended September 30, 2009 as follows: revenue increased 2.0% to a third quarter record of $338.6 million; gross profit increased 2.7% to $91.1 million; net income increased 1.6% to $36.4 million and diluted earnings per share of $0.42.
For the nine months ended September 30, 2009 diluted earnings per share were $1.23. The second quarter of 2009 included a non-cash charge of $5.3 million, or $3.2 million after tax, related to the write-off of an internal-use software project due to the failure of the project to reach development milestones and the company's decision to pursue alternative solutions. Excluding this charge, adjusted diluted earnings per share increased 1.6% to $1.27.
Bob Antin, Chairman and CEO, stated, "Given the economic landscape in which we currently reside, I am proud of our results for the third quarter of 2009. Our continued focus on maintaining margins through various initiatives has provided us the ability to continue to successfully grow earnings despite the challenges presented by the general economic environment.
"Animal hospital revenue in the third quarter increased 1.6% to $257.4 million driven by acquisitions made in the past twelve months. Our animal hospital gross margin and operating margin remained relatively unchanged at 19.9% and 17.7%, respectively. Our same-store revenue declined 4.9% during the quarter; however, we improved our same-store gross profit margin by 40 basis points to 20.5%. We made four acquisitions during the quarter with historical combined annual revenue of $8.4 million.
"Our laboratory segment had revenue of $77.5 million and essentially flat internal revenue growth. We improved our laboratory gross profit margin by 40 basis points to 46.2% and our laboratory operating margin remained unchanged at 39.0%.
"We also acquired Eklin Medical Systems, Inc. during the quarter which we have merged into our Sound Technologies business segment. Eklin is a leading seller of digital radiography, ultrasound and practice management software systems in the veterinary market. The integration of Eklin during the quarter has proven to be more challenging than expected. However, given the fact that we are operating in a difficult market for the acquisition of capital equipment, we remain optimistic regarding the future potential of the combined Sound Technologies/Eklin operations."
2009 Financial Guidance
We update our annual 2009 financial guidance as follows:
* Diluted earnings per common share from $1.48 to $1.52 or adjusted diluted earnings per common share from $1.52 to $1.56.
Current uncertainty in the economy and the lack of visibility regarding the timing and degree of any recovery in our business sector makes it particularly difficult to predict consumer demand for our services and makes it more likely that our actual results could differ materially from expectations.
Non-GAAP Financial Measures
We believe investors' understanding of our total performance is enhanced by disclosing adjusted operating income, adjusted net income and adjusted diluted earnings per common share. We define these adjusted measures as the reported amounts, adjusted to exclude certain significant items. Adjusted diluted earnings per common share are adjusted net income divided by diluted common shares outstanding.
Management uses adjusted measures because they exclude the effect of significant items that we believe are not representative of our core operations for the periods presented. 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. For the nine months ended September 30, 2009, we adjusted our reported amounts for the aforementioned write-off of $5.3 million, or $3.2 million after tax.
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 company's third quarter 2009 financial results during a conference call today, October 22, at 4:30 p.m. Eastern Time. You can access a live broadcast of the call by visiting our website at http://investor.vcaantech.com. You can also access the call by dialing (877) 545-1407. Interested parties should call at least 10 minutes prior to the start of the call to register.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may and likely will differ materially from this forward-looking information. Our animal hospital and laboratory revenues have been materially adversely impacted by the current economic recession. We are unable to forecast the timing or degree of any economic recovery. Further, trends in the general economy may not be reflected in our business at the same time or in the same degree as in the general economy. The timing and degree of any economic recovery, and its impact on our business, are among the important factors that could cause actual results to differ from this forward-looking information. Among other factors that could cause our actual results to differ from this forward-looking information are: an increase in the level of direct costs or a failure to increase revenue at a level necessary to maintain our expected operating margins, a material adverse change in our financial condition or operations; the level of selling, general and administrative costs; the effects of our recent acquisitions (including Eklin Medical Systems, Inc.) and our ability to effectively manage our growth and achieve operating synergies; a decline in demand for any of our products and services; any disruption in our information technology systems or transportation networks; the effects of competition; any impairment in the carrying value of our goodwill and other intangible assets; changes in prevailing interest rates; our ability to service our debt; and general economic conditions. These and other risks are discussed in our Report on Form 10-K for the year ended December 31, 2008 and will be discussed in our Report on Form 10-Q for the quarter and nine months ended September 30, 2009 and the reader is directed to these statements for a further discussion of important factors that could cause actual results to differ materially from those in the forward-looking statements.
We own, operate and manage the largest networks of freestanding veterinary hospitals and veterinary-exclusive clinical laboratories in the country, and we supply diagnostic imaging equipment to the veterinary industry.
The VCA Antech, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4252
VCA Antech, Inc.
Consolidated Income Statements
(Unaudited - In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------------------
2009 2008 2009 2008
--------- --------- ---------- ---------
Revenue:
Animal Hospital $ 257,385 $ 253,251 $ 757,030 $ 730,352
Laboratory 77,462 77,065 237,762 235,634
Medical
Technology 13,732 12,546 33,518 38,233
Intercompany (10,017) (10,827) (29,022) (29,918)
--------- --------- ---------- ---------
338,562 332,035 999,288 974,301
--------- --------- ---------- ---------
Direct costs 247,422 243,267 728,095 705,536
Gross profit:
Animal Hospital 51,213 50,286 147,510 144,043
Laboratory 35,826 35,273 112,862 113,489
Medical
Technology 4,708 4,322 12,066 13,457
Intercompany (607) (1,113) (1,245) (2,224)
--------- --------- ---------- ---------
91,140 88,768 271,193 268,765
--------- --------- ---------- ---------
Selling, general
and administrative
expense:
Animal Hospital 5,162 5,643 15,924 16,815
Laboratory 5,621 5,178 16,832 15,314
Medical
Technology 4,316 3,120 10,058 9,502
Corporate 10,159 8,062 28,838 26,359
--------- --------- ---------- ---------
25,258 22,003 71,652 67,990
--------- --------- ---------- ---------
Write-off of
internal-use
software -- -- 5,271 --
Net loss on
sale and disposal
of assets 409 90 333 33
--------- --------- ---------- ---------
Operating income 65,473 66,675 193,937 200,742
Interest expense,
net 4,808 6,709 16,652 21,369
Other (income)
expense (1) 88 (131) (44)
--------- --------- ---------- ---------
Income before
provision for
income taxes 60,666 59,878 177,416 179,417
Provision for
income taxes 23,180 23,000 68,081 68,979
--------- --------- ---------- ---------
Net income 37,486 36,878 109,335 110,438
--------- --------- ---------- ---------
Net income
attributable
to noncontrolling
interests 1,125 1,104 3,259 3,145
--------- --------- ---------- ---------
Net income
attributable
to VCA
Antech, Inc. $ 36,361 $ 35,774 $ 106,076 $ 107,293
========= ======== ========= =========
Diluted
earnings
per share $ 0.42 $ 0.42 $ 1.23 $ 1.25
========= ======== ========= =========
Shares used for
computing diluted
earnings per
share 86,431 85,789 85,893 85,789
========= ======== ========= =========
VCA Antech, Inc.
Consolidated Balance Sheets
(Unaudited - In thousands)
September 30, December 31,
2009 2008
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 155,001 $ 88,959
Trade accounts receivable, net 49,439 43,453
Inventory 31,100 26,631
Prepaid expenses and other 20,671 18,800
Deferred income taxes 17,364 15,938
Prepaid income taxes 1,152 5,287
------------- -------------
Total current assets 274,727 199,068
Property and equipment, net 283,457 263,443
Other assets:
Goodwill 970,274 922,057
Other intangible assets, net 44,211 35,645
Notes receivable, net 4,819 12,893
Deferred financing costs, net 704 1,067
Other 21,586 14,865
------------- -------------
Total assets $ 1,599,778 $ 1,449,038
============= =============
Liabilities and Equity
Current liabilities:
Current portion of long-term
obligations $ 8,418 $ 7,771
Accounts payable 28,958 26,087
Accrued payroll and related liabilities 37,026 42,840
Other accrued liabilities 48,291 46,424
------------- -------------
Total current liabilities 122,693 123,122
Long-term obligations, less current
portion 538,663 544,860
Deferred income taxes 67,560 47,331
Other liabilities 10,525 9,890
------------- -------------
Total liabilities 739,441 725,203
VCA Antech, Inc. stockholders' equity:
Common stock 85 85
Additional paid-in capital 330,549 308,674
Accumulated earnings 514,658 408,582
Accumulated other comprehensive loss (1,482) (6,352)
------------- -------------
Total VCA Antech, Inc. stockholders'
equity 843,810 710,989
------------- -------------
Noncontrolling interest 16,527 12,846
------------- -------------
Total equity 860,337 723,835
------------- -------------
Total liabilities and equity $ 1,599,778 $ 1,449,038
============= =============
VCA Antech, Inc.
Consolidated Statements of Cash Flows
(Unaudited - In thousands)
Nine Months Ended
September 30,
--------------------
2009 2008
--------- ---------
Cash flows from operating
activities:
Net income $ 109,335 $ 110,438
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 28,986 23,762
Amortization of debt costs 363 351
Provision for uncollectible
accounts 5,075 3,671
Net loss on sale and disposal of
assets 333 33
Share-based compensation 5,940 5,309
Deferred income taxes 16,057 9,894
Excess tax benefit from exercise
of stock options (591) (1,846)
Write-off of internal-use
software 5,271 --
Other (299) 192
Changes in operating assets and
liabilities:
Accounts receivable (8,312) (5,736)
Inventory, prepaid expenses and
other assets (7,820) (5,972)
Accounts payable and other
accrued liabilities 742 (438)
Accrued payroll and related
liabilities (4,339) (3,553)
Income taxes 5,580 9,457
--------- ---------
Net cash provided by operating
activities 156,321 145,562
--------- ---------
Cash flows from investing activities:
Business acquisitions, net of cash
acquired (51,853) (89,775)
Real estate acquired in connection
with business acquisitions (3,828) (15,063)
Property and equipment additions (38,522) (39,764)
Proceeds from sale of assets 123 1,774
Other (440) (15,024)
--------- ---------
Net cash used in investing activities (94,520) (157,852)
--------- ---------
Cash flows from financing activities:
Repayment of long-term obligations (5,898) (5,852)
Distributions to noncontrolling
interest partners (3,018) (2,797)
Proceeds from issuance of common
stock under stock option plans 13,110 3,574
Excess tax benefit from exercise
of stock options 591 1,846
Stock repurchases (561) --
--------- ---------
Net cash provided by (used in)
financing activities 4,224 (3,229)
--------- ---------
Effect of currency exchange rate
changes on cash and cash equivalents 17 (44)
--------- ---------
Increase (decrease) in cash and cash
equivalents 66,042 (15,563)
Cash and cash equivalents at beginning
of period 88,959 110,866
--------- ---------
Cash and cash equivalents at end of
period $ 155,001 $ 95,303
========= =========
VCA Antech, Inc.
Supplemental Operating Data
(Unaudited - In thousands, except per share amounts)
Table #1 Three Months Ended Nine Months Ended
Reconciliation of September 30, September 30,
net income to -------------------- ----------------------
adjusted net income 2009 2008 2009 2008
--------- --------- ----------- ---------
Net income
attributable
to VCA Antech, Inc. $ 36,361 $ 35,774 $ 106,076 $ 107,293
Write-off of
internal-use
software -- -- 5,271 --
Tax benefit from
write-off of
internal-use
software(1) -- -- (2,051) --
-------- -------- ---------- ---------
Adjusted net income
attributable to VCA
Antech, Inc. $ 36,361 $ 35,774 $ 109,296 $ 107,293
======== ======== ========= =========
----------------------
(1) The rate used to calculate the tax benefit is the
statutory tax rate for the year.
Table #2
Reconciliation of
diluted earnings per Three Months Ended Nine Months Ended
share to adjusted September 30, September 30,
diluted earnings -------------------- -----------------------
per share 2009 2008 2009 2008
-------------------- -----------------------
Diluted earnings per
share $ 0.42 $ 0.42 $ 1.23 $ 1.25
Impact of internal-
use software
write-off,
net of tax -- -- 0.04 --
-------- -------- ---------- ---------
Adjusted diluted
earnings per share $ 0.42 $ 0.42 $ 1.27 $ 1.25
======== ======== ========== =========
Shares used for
computing adjusted
diluted earnings per
share 86,431 85,789 85,893 85,789
======== ======== ========= =========
Table #3
Reconciliation of Three Months Ended Nine Months Ended
operating income to September 30, September 30,
adjusted operating -------------------- -----------------------
income 2009 2008 2009 2008
--------- --------- ----------- ----------
Consolidated
operating
income $ 65,473 $ 66,675 $ 193,937 $ 200,742
Write-off of
internal-use
software -- -- 5,271 --
-------- -------- ---------- ---------
Consolidated adjusted
operating income $ 65,473 $ 66,675 $ 199,208 $ 200,742
======== ======== ========= =========
Consolidated adjusted
operating margin 19.3% 20.1% 19.9% 20.6%
VCA Antech, Inc.
Supplemental Operating Data - (Continued)
(Unaudited - In thousands)
As of
--------------------
Table #4 Sept. 30, Dec. 31,
Selected consolidated balance sheet data 2009 2008
Debt: -------- --------
Senior term notes $518,237 $522,282
Other debt and capital leases 28,844 30,349
Revolving credit facility -- --
-------- --------
Total debt $547,081 $552,631
======== ========
Table #5 Three Months Ended Nine Months Ended
Selected expense September 30, September 30,
data ------------------ --------------------
2009 2008 2009 2008
-------- -------- -------- --------
Rent expense $ 11,714 $ 11,140 $ 34,881 $ 31,619
======== ======== ======== ========
Depreciation and
amortization
included in
direct costs:
Animal Hospital $ 6,705 $ 5,725 $ 19,407 $ 15,947
Laboratory 2,349 1,908 6,782 5,333
Medical Technology 340 309 647 929
Intercompany (214) (152) (601) (414)
-------- -------- -------- --------
$ 9,180 $ 7,790 $ 26,235 $ 21,795
Depreciation and
amortization included
in selling, general
and administrative
expense 966 647 2,751 1,967
-------- -------- -------- --------
Total depreciation
and amortization $ 10,146 $ 8,437 $ 28,986 $ 23,762
======== ======== ======== ========
Share-based
compensation included
in direct costs:
Laboratory $ 158 $ 219 $ 463 $ 611
Share-based
compensation included
in selling, general
and administrative
expense:
Animal Hospital 377 438 1,108 1,227
Laboratory 311 302 909 807
Medical Technology 71 54 213 141
Corporate 1,103 974 3,247 2,523
-------- -------- -------- --------
1,862 1,768 5,477 4,698
-------- -------- -------- --------
Total share-based
compensation $ 2,020 $ 1,987 $ 5,940 $ 5,309
======== ======== ======== ========