EX-99.1 2 v56692ntexv99w1.htm EXHIBIT 99.1 exv99w1
EXHIBIT 99.1
VCA ANTECH, INC. REPORTS REVISED SECOND QUARTER 2010 RESULTS TO
REFLECT ADDITIONAL NON-CASH SG&A ACCRUALS
     LOS ANGELES, California, August 10, 2010 — VCA Antech, Inc. (NASDAQ NM SYMBOL: WOOF), a leading animal healthcare company in the United States, today reported revised financial results for the second quarter ended June 30, 2010 to reflect an incremental $14.5 million non-cash charge primarily with respect to previously announced Consulting Agreements and SERPs entered into with the Company’s senior executive officers in June 2010. Revised financial results for the three and six months ended June 30, 2010 were as follows: for the second quarter 2010 net income was $29.4 million; and diluted earnings per common share was $0.34; and for the six months ended June 30, 2010, net income was $61.3 million and diluted earnings per common share was $0.70. Excluding this charge, adjusted net income and adjusted diluted earnings per common share was unchanged from amounts previously announced. For the three months ended June 30, 2010, adjusted net income was $38.3 million and adjusted diluted earnings per share was $0.44. For the six month period, adjusted net income was $70.2 million and adjusted diluted earnings per share was $0.81.
     In June 2010, the Company entered into Consulting Agreements with VCA’s three founders Bob Antin, Art Antin, Neil Tauber and Tomas Fuller, our Chief Financial Officer who has been with the Company for over twenty years. The Consulting Agreements are part of a long-term succession plan securing for the continued benefit of the Company the unique competencies and networks of each of the senior executive officers following the time that they ultimately step down from their current officer positions during a phase-down period leading to their ultimate retirement. At the same time, the Company entered into Supplemental Executive Retirement Programs with each of the senior executive officers, providing them a retirement benefit over a 12 year period as specified in the agreements. None of the senior executive officers has notified the Company of any intention to retire or step down from their officer positions and the full benefit of the SERPs vest over a 3-5 year period (depending on the officer). The Consulting Agreements and SERPs were previously publicly announced by the Company and have been filed with the Securities and Exchange Commission.
     On July 22, 2010 we announced second quarter results of operations. Results announced at that time did not include any compensation charges associated with the Consulting Agreements. Following further analysis of applicable accounting literature, and after further consultation with its outside auditors, the Company determined that it should accrue the full cost of the benefits under the Consulting Agreements, the SERPs and outstanding share awards for two of the executives on the date the agreements were executed during the second quarter 2010. Costs associated with the Consulting Agreements and SERPs of the other two officers will be accrued during future periods in light of the different effective dates and vesting periods applicable to those agreements.
     For the three and six months ended June 30, 2010 we recorded a non-cash charge of $14.5 million, or $8.9 million after tax, for future estimated executive compensation. Our revised results for the three and six months ended June 30, 2010 included diluted earnings per share of $0.34 and $0.70, respectively. Excluding this charge, adjusted diluted earnings per share for the three and six months ended June 30, 2010 were $0.44 and $0.81, respectively.

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     For the three and six months ended June 30, 2009 diluted earnings per share were $0.44 and $0.81, respectively. The second quarter of 2009 included a non-cash charge of $5.3 million, or $3.2 million after tax, related to the abandonment of an internally developed software project. Excluding this charge, adjusted diluted earnings per share for the three and six months ended June 30, 2009 were $0.48 and $0.85, respectively.
2010 Financial Guidance
     We have not changed our outlook for the remainder of 2010; however, including the aforementioned charge, diluted earnings per common share for the full year will be $1.33 to $1.43. Adjusted diluted earnings per common share for the full year will be $1.43 to $1.53.
     Our senior term notes are scheduled to mature in 2011, although they are currently scheduled to be refinanced in August, 2010. The guidance above is based on our capital structure after the effect of our debt refinancing, which we expect to have approximately $0.01 to $0.02 negative impact on diluted earnings per common share. Accordingly, the attached Consolidated Balance Sheet reflects these senior-term notes in the current portion of long-term obligations.
     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 three and six months ended June 30, 2010, we adjusted our reported amounts for a non-cash charge of $14.5 million, or $8.9 million after tax, and $0.10 per diluted share related to estimated executive compensation expensed for future payments under consulting agreements and SERPs entered into by the company on June 30, 2010 with Robert Antin and Art Antin. For the three and six months ended June 30, 2009, we adjusted our reported amounts for the non-cash charge of $5.3 million, or $3.2 million after tax, and $0.04 per diluted share related to the abandonment of an internally developed software project.
     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

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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.”
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 and future acquisitions (including Firehouse Ventures, LLC and Pet DRx Corporation) 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, 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.
  Contact:     Tomas Fuller
Chief Financial Officer
(310) 571-6505

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VCA Antech, Inc.
Consolidated Income Statements
(Unaudited)
(In thousands, except per share amounts)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2010     2009     2010     2009  
Revenue:
                                
Animal hospital
   $ 267,595     $ 261,287     $ 514,263     $ 499,645  
Laboratory
     82,972       83,176       161,152       161,038  
Medical technology
     14,602       10,263       30,399       19,048  
Intercompany
     (11,250 )     (9,850 )     (21,161 )     (19,005 )
 
                        
 
     353,919       344,876       684,653       660,726  
 
                        
 
                                
Direct costs
     260,435       247,528       508,374       481,209  
 
                                
Gross profit:
                                
Animal hospital
     49,028       53,133       90,705       96,297  
Laboratory
     40,556       41,074       77,084       77,105  
Medical technology
     4,347       3,525       9,178       6,753  
Intercompany
     (447 )     (384 )     (688 )     (638 )
 
                        
 
     93,484       97,348       176,279       179,517  
 
                        
 
                                
Selling, general and administrative expense:
                                
Animal hospital
     5,673       5,378       11,260       10,762  
Laboratory
     6,527       5,644       12,681       11,211  
Medical technology
     3,404       2,394       6,919       5,206  
Corporate
     25,441       9,525       36,325       18,679  
 
                        
 
     41,045       22,941       67,185       45,858  
 
                        
 
                                
(Gain) loss on sale and disposal of assets
     (14 )     5,443       11       5,195  
 
                        
 
                                
Operating income
     52,453       68,964       109,083       128,464  
 
                                
Interest expense, net
     2,778       5,726       5,945       11,844  
Other income
     (335 )     (20 )     (310 )     (130 )
 
                        
Income before provision for income taxes
     50,010       63,258       103,448       116,750  
Provision for income taxes
     19,493       24,290       39,999       44,901  
 
                        
Net income
     30,517       38,968       63,449       71,849  
 
                        
Net income attributable to noncontrolling interests
     1,113       1,223       2,110       2,134  
 
                        
Net income attributable to VCA Antech, Inc.
   $ 29,404     $ 37,745     $ 61,339     $ 69,715  
 
                        
Diluted earnings per share
   $ 0.34     $ 0.44     $ 0.70     $ 0.81  
 
                        
Shares used for computing diluted earnings per share
     87,178       85,937       87,069       85,629  
 
                        

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VCA Antech, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands)
                 
    June 30,     December 31,  
    2010     2009  
Assets
                
 
                
Current assets:
                
Cash and cash equivalents
   $ 193,757     $ 145,181  
Trade accounts receivable, net
     53,407       49,186  
Inventory
     34,088       32,031  
Prepaid expenses and other
     22,299       27,242  
Deferred income taxes
     18,727       18,318  
Prepaid income taxes
     13,352       6,252  
 
            
Total current assets
     335,630       278,210  
Property and equipment, net
     302,515       289,415  
Other assets:
                
Goodwill
     1,006,562       985,674  
Other intangible assets, net
     42,019       44,280  
Deferred financing costs, net
     342       581  
Other
     33,789       29,244  
 
            
Total assets
   $ 1,720,857     $ 1,627,404  
 
            
 
                
Liabilities and Equity
                
 
                
Current liabilities:
                
Current portion of long-term obligations
   $ 508,687     $ 17,195  
Accounts payable
     28,814       28,326  
Accrued payroll and related liabilities
     46,372       33,539  
Other accrued liabilities
     51,509       43,298  
 
            
Total current liabilities
     635,382       122,358  
Long-term obligations, less current portion
     23,607       527,860  
Deferred income taxes
     84,698       75,197  
Other liabilities
     16,846       10,651  
VCA Antech, Inc. stockholders’ equity:
                
Common stock
     86       86  
Additional paid-in capital
     342,339       335,114  
Retained earnings
     601,349       540,010  
Accumulated other comprehensive loss
     (47 )     (163 )
 
            
Total VCA Antech, Inc. stockholders’ equity
     943,727       875,047  
Noncontrolling interest
     16,597       16,291  
 
            
Total equity
     960,324       891,338  
 
            
Total liabilities and equity
   $ 1,720,857     $ 1,627,404  
 
            

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VCA Antech, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
                 
    Six Months Ended  
    June 30,  
    2010     2009  
Cash flows from operating activities:
                
Net income
   $ 63,449     $ 71,849  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation and amortization
     21,706       18,840  
Amortization of debt costs
     239       241  
Provision for uncollectible accounts
     3,143       2,936  
Net loss on sale and disposal of assets
     11       5,195  
Share-based compensation
     5,855       3,920  
Deferred income taxes
     6,461       10,944  
Excess tax benefit from exercise of stock options
     (331 )     (154 )
Other
     (225 )     (218 )
Changes in operating assets and liabilities:
                
Accounts receivable
     (7,344 )     (7,989 )
Inventory, prepaid expenses and other assets
     (727 )     (2,929 )
Accounts payable and other accrued liabilities
     13,691       4,357  
Accrued payroll and related liabilities
     12,656       2,134  
Prepaid income taxes
     (7,248 )     1,073  
 
            
Net cash provided by operating activities
     111,336       110,199  
 
            
Cash flows from investing activities:
                
Business acquisitions, net of cash acquired
     (20,344 )     (28,144 )
Real estate acquired in connection with business acquisitions
     (1,300 )     (3,828 )
Property and equipment additions
     (27,925 )     (25,208 )
Proceeds from sale of assets
     9       108  
Other
     (162 )     (281 )
 
            
Net cash used in investing activities
     (49,722 )     (57,353 )
 
            
Cash flows from financing activities:
                
Repayment of debt
     (12,859 )     (3,899 )
Distributions to noncontrolling interest partners
     (2,021 )     (1,493 )
Proceeds from issuance of common stock under stock option plans
     3,770       2,895  
Repurchase of common stock
     (2,253 )     (549 )
Excess tax benefit from exercise of stock options
     331       154  
 
            
Net cash used in financing activities
     (13,032 )     (2,892 )
 
            
Effect of currency exchange rate changes on cash and cash equivalents
     (6 )     (18 )
Increase in cash and cash equivalents
     48,576       49,936  
Cash and cash equivalents at beginning of period
     145,181       88,959  
 
            
Cash and cash equivalents at end of period
   $ 193,757     $ 138,895  
 
            

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VCA Antech, Inc.
Supplemental Operating Data
(Unaudited — In thousands, except per share amounts)
Table #1
                                 
Reconciliation of net income attributable to   Three Months Ended     Six Months Ended  
VCA Antech, Inc., to adjusted net income   June 30,     June 30,  
attributable to VCA Antech, Inc.   2010     2009     2010     2009  
 
                                
Net income attributable to VCA Antech, Inc.
   $ 29,404     $ 37,745     $ 61,339     $ 69,715  
Compensation charges
     14,525       —       14,525       —  
Tax benefit from compensation charges (1)
     (5,653 )     —       (5,653 )     —  
Write-down of internal-use software
     —       5,271       —       5,271  
Tax benefit from write-down of internal-use software (1)
     —       (2,051 )     —       (2,051 )
 
                        
Adjusted net income attributable to VCA Antech, Inc.
   $ 38,276     $ 40,965     $ 70,211     $ 72,935  
 
                        
 
(1)   The rate used to calculate the tax benefit is the statutory tax rate for the year.
Table #2
                                 
    Three Months Ended     Six Months Ended  
Reconciliation of diluted earnings per share to   June 30,     June 30,  
adjusted diluted earnings per share   2010     2009     2010     2009  
 
                                
Diluted earnings per share
   $ 0.34     $ 0.44     $ 0.70     $ 0.81  
Impact of compensation charges, net of tax
     0.10       —       0.10       —  
Impact of internal-use software write-down, net of tax
     —       0.04       —       0.04  
 
                        
Adjusted diluted earnings per share (1)
   $ 0.44     $ 0.48     $ 0.81     $ 0.85  
 
                        
Shares used for computing adjusted diluted earnings per share
     87,178       85,937       87,069       85,629  
 
                        
 
(1)   Amounts may not add due to rounding.

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