EX-99.1 2 a4829559ex991.txt EARNINGS PRESS RELEASE Exhibit 99.1 VCA Antech, Inc. Beats Fourth Quarter Consensus Estimate by $0.02 with a 41.7% Increase in Net Income LOS ANGELES--(BUSINESS WIRE)--Feb. 24, 2005--VCA Antech, Inc. (NASDAQ:WOOF): -- Fourth quarter diluted earnings per common share was $0.16, beating the consensus estimate by $0.02. -- Fourth quarter net income increased 41.7% to $13.3 million. VCA Antech, Inc. (NASDAQ:WOOF), a leading animal health care company in the United States, today reported financial results for the quarter ended December 31, 2004 as follows: revenue increased 33.2% to a fourth quarter record of $176.4 million; net income increased 41.7% to $13.3 million; and diluted earnings per common share increased 45.5% to $0.16. The Company also reported the financial results for the year ended December 31, 2004 as follows: revenue increased 23.8% to $674.1 million; net income increased 46.4% to $63.6 million; and diluted earnings per common share increased 43.4% to $0.76. Net income and diluted earnings per common share for the year ended December 31, 2004 included (i) an after-tax charge of $519,000 for debt retirement costs, $41,000 of which occurred in the fourth quarter, and (ii) an after-tax benefit of $1.1 million recognized in the first quarter for the settlement of an insurance claim relating to a prior legal settlement. Net income and diluted earnings per common share for the year ended December 31, 2003 included an after-tax charge of $5.4 million for debt retirement costs. Excluding these items, adjusted net income for the year increased 29.0% to $63.0 million, and adjusted diluted earnings per common share increased 26.7% to $0.76. Bob Antin, Chairman and CEO, stated, "We had an outstanding quarter marked by continued growth in our core businesses as we continued to integrate the animal hospitals acquired from National PetCare Centers, Inc., or NPC, on June 1, 2004. We also refinanced our senior credit facility resulting in a 50 basis point reduction in the interest rate and acquired Sound Technologies, Inc. on October 1, 2004. For the quarter, revenue increased 33.2% to a record $176.4 million and diluted earnings per common share increased by 45.5%, from $0.11 to $0.16. "Our laboratory internal revenue growth for the fourth quarter of 2004 was 10.5%, generating an increase in laboratory gross profit of 15.3% to $20.1 million and an increase in laboratory gross profit margin to 41.4% from 39.7% in the fourth quarter of 2003. "Our consolidated animal hospital revenue growth for the fourth quarter of 2004 was 37.9%, generating an increase in animal hospital gross profit of 40.6% and an increase in animal hospital gross profit margin to 17.4% from 17.1% in the fourth quarter of 2003. In addition, our animal hospital same-store revenue growth for the fourth quarter of 2004 was 6.6%, generating an increase in same-store gross profit of 11.2% to $17.4 million and an increase in same-store gross profit margin to 18.0% from 17.3% in the fourth quarter of 2003. "We incurred costs related to the integration of NPC in the amount of approximately $157,000 and $1.4 million for the quarter and year ended December 31, 2004, respectively. These costs are included in corporate selling, general and administrative expense. "We completed the acquisition of Sound Technologies, Inc., or STI, on October 1, 2004. STI is one of the largest suppliers of ultrasound and digital radiography equipment to the veterinary industry in the United States. We are very excited about the acquisition of STI and the opportunity to expand the diagnostic capabilities in our animal hospitals as well as the advanced diagnostic capabilities in our laboratories." Non-GAAP Financial Measures We believe investors' understanding of our total performance is enhanced by disclosing adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted earnings per common share. We define adjusted net income, adjusted operating income, adjusted operating margin and adjusted diluted earnings per common share as the reported items, adjusted to exclude certain significant items. For the periods presented in this press release, the only significant item that was excluded from adjusted operating income and adjusted operating margin was a litigation settlement reimbursement recognized during the first quarter of 2004 as a result of the Company settling a claim with its insurance company. The only significant items excluded from adjusted net income were the litigation settlement reimbursement recognized during the first quarter of 2004, debt retirement costs incurred during the second and fourth quarters of 2004 and debt retirement costs incurred during the first and third quarters of 2003. Adjusted diluted earnings per common share is adjusted net income divided by diluted common shares outstanding. Management uses adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted earnings per common share because they exclude the effects of the litigation settlement reimbursement and debt retirement costs 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 our future performance and related trends. We also believe that disclosing animal hospital adjusted operating margin enhances investors' understanding of our animal hospital division's performance. We define animal hospital adjusted operating margin as reported operating margin adjusted to exclude certain items. For the periods reported in this press release, the only item that was excluded from animal hospital adjusted operating margin was a third quarter 2003 impairment charge of $392,000 for the write-down of real estate. There are material limitations associated with the use of these non-GAAP financial measures: adjusted operating income and adjusted operating margin exclude the impact of significant items (in this case, the litigation settlement reimbursement); animal hospital adjusted operating margin does not include the impact of significant items (in this case, an impairment charge); adjusted net income excludes the impact of significant items (in this case, the litigation settlement reimbursement and debt retirement costs) on current performance; and adjusted diluted earnings per common share does not depict the amount accrued directly to each stockholder's benefit. 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 VCA Antech will discuss its fourth quarter 2004 financial results during a conference call today, February 24, 2005 at 4:30 p.m. Eastern Time. The call will be broadcast live on the Internet and can be accessed by visiting the Company's website at http://investor.vcaantech.com. The conference call can also be accessed via telephone by dialing 800-361-0912. Interested parties should call at least 10 minutes prior to the start of the conference call to register. This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including our statement regarding continued growth in our core businesses and our expectations regarding our acquisitions of NPC and STI. Actual results may vary substantially from these forward-looking statements as a result of a variety of factors. Among the important factors that could cause actual results to differ are: our ability to successfully integrate NPC and STI into our existing operations and achieve expected operating synergies following the mergers; the rate of our laboratory internal revenue growth and animal hospital same-store revenue growth; the level of direct costs and our ability to maintain revenue at a level necessary to maintain expected operating margins; the level of selling, general and administrative costs; any impairment in the carrying value of our goodwill; the effects of our recent acquisitions and our ability to effectively manage our growth; the effects of competition; our ability to service our debt; and general economic conditions. These and other risk factors that could affect actual results are discussed in our periodic reports filed with the Securities and Exchange Commission, including our Report on Form 10-K for the year ended December 31, 2003 and our Report on Form 10-Q for the quarter ended September 30, 2004 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. VCA Antech owns, operates and manages the largest networks of freestanding veterinary hospitals and veterinary-exclusive clinical laboratories in the country. VCA Antech, Inc. Consolidated Statements of Operations For the Three and Twelve Months Ended December 31, 2004 and 2003 (Unaudited - In Thousands, Except per Share Amounts) Three Months Twelve Months Ended December 31, Ended December 31, ----------------- ------------------- 2004 2003 2004 2003 -------- -------- --------- --------- Revenue: Laboratory $48,623 $43,994 $200,441 $178,812 Animal hospital 125,284 90,851 481,023 376,040 Medical technology 6,090 - 6,090 - Intercompany (3,557) (2,404) (13,465) (10,187) -------- -------- --------- --------- 176,440 132,441 674,089 544,665 -------- -------- --------- --------- Direct costs (1) 132,254 99,439 490,558 394,853 Gross profit: Laboratory 20,130 17,457 87,780 75,786 Animal hospital 21,851 15,545 93,546 74,026 Medical technology 2,205 - 2,205 - -------- -------- --------- --------- 44,186 33,002 183,531 149,812 -------- -------- --------- --------- Selling, general and administrative (1): Laboratory 3,161 3,072 12,660 11,431 Animal hospital 3,534 2,791 12,761 10,329 Medical technology 1,842 - 1,842 - Corporate 6,217 4,293 20,994 16,942 -------- -------- --------- --------- 14,754 10,156 48,257 38,702 -------- -------- --------- --------- Write-down and loss on sale of assets 5 308 59 590 -------- -------- --------- --------- Operating income 29,427 22,538 135,215 110,520 Interest expense, net 6,780 6,316 25,492 26,087 Other income (153) (247) (338) (118) Minority interest expense 641 354 2,558 1,633 Debt retirement costs 70 - 880 9,118 -------- -------- --------- --------- Income before provision for income taxes 22,089 16,115 106,623 73,800 Provision for income taxes 8,772 6,714 43,051 30,377 -------- -------- --------- --------- Net income $13,317 $9,401 $63,572 $43,423 ======== ======== ========= ========= Diluted earnings per common share (2) $0.16 $0.11 $0.76 $0.53 ======== ======== ========= ========= Shares used for computing diluted earnings per common share (2) 83,541 82,906 83,361 81,746 ======== ======== ========= ========= VCA Antech, Inc. Supplemental Operating Data For the Three and Twelve Months Ended December 31, 2004 and 2003 (Unaudited - In Thousands, Except per Share Amounts) Table #1 Three Months Twelve Months Ended December 31, Ended December 31, Reconciliation of net income ------------------- ------------------- to adjusted net income 2004 2003 2004 2003 --------- --------- --------- --------- Net income $13,317 $9,401 $63,572 $43,423 Certain significant items: Debt retirement costs 70 - 880 9,118 Litigation settlement reimbursement - - (1,124) - Related income tax benefit (29) - (361) (3,738) --------- --------- --------- --------- 41 - (605) 5,380 --------- --------- --------- --------- Adjusted net income $13,358 $9,401 $62,967 $48,803 ========= ========= ========= ========= Table #2 Reconciliation of diluted earnings per common share to adjusted diluted earnings per common share (2) Diluted earnings per common share $0.16 $0.11 $0.76 $0.53 Certain significant items as detailed in Table #1, net of income tax benefit - - - 0.07 --------- --------- --------- --------- Adjusted diluted earnings per common share $0.16 $0.11 $0.76 $0.60 ========= ========= ========= ========= Shares used for computing adjusted diluted earnings per common share 83,541 82,906 83,361 81,746 ========= ========= ========= ========= Table #3 Reconciliation of operating income to adjusted operating income and operating margin to adjusted operating margin Revenue $176,440 $132,441 $674,089 $544,665 ========= ========= ========= ========= Operating income $29,427 $22,538 $135,215 $110,520 Operating margin 16.7% 17.0% 20.1% 20.3% Certain significant items: Litigation settlement reimbursement - - (1,124) - --------- --------- --------- --------- Adjusted operating income $29,427 $22,538 $134,091 $110,520 ========= ========= ========= ========= Adjusted operating margin 16.7% 17.0% 19.9% 20.3% VCA Antech, Inc. Supplemental Operating Data - Continued For the Three and Twelve Months Ended December 31, 2004 and 2003 (Unaudited - In Thousands) Table #4 Reconciliation of animal Three Months Twelve Months hospital operating margin to Ended December 31, Ended December 31, animal hospital adjusted ------------------ ------------------- operating margin 2004 2003 2004 2003 --------- -------- --------- --------- Revenue $125,284 $90,851 $481,023 $376,040 ========= ======== ========= ========= Animal hospital operating income $18,312 $12,660 $80,727 $63,378 Animal hospital operating margin 14.6% 13.9% 16.8% 16.9% Certain items: Write-down of assets - - - 392 --------- -------- --------- --------- Animal hospital adjusted operating income $18,312 $12,660 $80,727 $63,770 ========= ======== ========= ========= Animal hospital adjusted operating margin 14.6% 13.9% 16.8% 17.0% Table #5 Depreciation and amortization (1) Depreciation and amortization included in direct costs: Laboratory $899 $753 $3,426 $3,100 Animal hospital 2,827 2,453 10,446 9,597 Medical technology 270 - 270 - --------- -------- --------- --------- 3,996 3,206 14,142 12,697 Depreciation and amortization included in selling, general and administrative expense 412 427 1,673 1,589 --------- -------- --------- --------- Total depreciation and amortization $4,408 $3,633 $15,815 $14,286 ========= ======== ========= ========= VCA Antech, Inc. Supplemental Operating Data - Continued As of December 31, 2004 and 2003 (Unaudited - In Thousands) Table #6 December December 31, 2004 31, 2003 Selected consolidated balance sheet data --------- --------- Cash $30,964 $17,237 Accounts receivable, net $29,358 $22,335 Stockholders' equity $232,759 $161,923 Total assets $742,100 $554,803 Debt: Revolving credit facility $- $- Senior term F notes 223,313 - Senior term D notes - 145,703 9.875% senior subordinated notes 170,000 170,000 Other 3,576 1,770 Unamortized discounts - (4) --------- --------- Total debt $396,889 $317,469 ========= ========= For the Twelve Months Ended December 31, 2004 and 2003 (Unaudited - In Thousands) Table #7 For the Twelve Months Selected cash flow and expense data Ended December 31, ------------------- 2004 2003 --------- --------- Net cash provided by operating activities $86,359 $76,107 Rent expense $21,137 $16,407 Capital expenditures $23,954 $15,433 Notes to Press Release --------------------------------------------- (1) During 2004, the Company began including depreciation and amortization in direct costs and selling, general and administrative expense. Prior periods presented in this press release have been reclassified to conform to the 2004 method of presentation. (2) Diluted shares outstanding and earnings per share information presented in this release have been adjusted to reflect the 2-for-1 stock split effected in the form of a 100% stock dividend on August 25, 2004. CONTACT: VCA Antech, Inc. Tom Fuller, 310-571-6505