EX-99.1 2 a5738969ex99_1.htm EXHIBIT 99.1

Exhibit 99.1

VCA Antech, Inc. Reports Second Quarter 2008 Results and Reaffirms its Financial Guidance for 2008

  • Second quarter revenue increased 11.4% to $334.4 million
  • Second quarter gross profit increased 7.9% to $97.0 million
  • Second quarter net income increased 12.5% to $40.3 million
  • Second quarter diluted earnings per share increased 11.9% to $0.47

LOS ANGELES--(BUSINESS WIRE)--VCA Antech, Inc. (NASDAQ: WOOF), a leading animal healthcare company in the United States, today reported financial results for the second quarter ended June 30, 2008, as follows: revenue increased 11.4% to a second quarter record of $334.4 million; gross profit increased 7.9% to $97.0 million; operating income increased 9.8% to $74.0 million; net income increased 12.5% to $40.3 million; and diluted earnings per share increased 11.9% to $0.47.

We also reported our financial results for the six months ended June 30, 2008, as follows: revenue increased 13.6% to a six-month record of $642.3 million; gross profit increased 8.6% to $180.0 million; operating income increased 10.1% to $134.1 million; net income was $71.5 million; and diluted earnings per share increased 10.7% to $0.83.

Bob Antin, Chairman and CEO, stated, “I am pleased with our company’s performance in the second quarter of 2008. In spite of the challenging economy and the difficulties being felt by the consumer, our team met those challenges and we continued our long record of revenue and earnings growth.

“Current economic conditions prevailing in the nation’s economy have had an adverse impact on our internal revenue growth rates. However, we have been able to counteract the effects of the general economy and continue to grow our bottom line results without compromising our high standard of animal healthcare by increasing our rate of acquisitions to drive revenue growth, and by implementing cost controls.

“In the second quarter, we acquired 15 animal hospitals with combined annual revenue of over $30 million. Year-to-date, we have acquired 36 animal hospitals with combined annual revenue of over $75 million. Historically we have targeted acquisition activity at approximately $50 million to $60 million of acquired revenue per year (excluding the acquisitions of any animal hospital chains).

“Laboratory revenue in the second quarter increased 3.3% to $81.8 million, driven primarily by internal revenue growth of 2.5%. Laboratory margins in the second quarter were essentially flat: our gross margin declined to 49.9% compared to 50.5% and our operating margin declined to 43.6% compared to 44.0%.

“Animal hospital revenue in the second quarter increased 14.9% to $251.0 million driven by acquisitions. While same-store revenue declined 0.2% during the quarter, our animal hospital margins in the second quarter remained essentially flat: same-store gross margin was 21.6% compared to 21.5%; gross margin was 21.0% compared to 21.2% and operating margin was 18.7% compared to 18.6%.”

We reaffirm our 2008 financial guidance as follows:

  • Revenue from $1.30 billion to $1.33 billion;
  • Diluted earnings per common share from $1.55 to $1.60.

Conference Call

We will discuss our company’s second quarter 2008 financial results during a conference call today, July 24, 2008 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 via telephone by dialing (877) 440-5785. 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 the guidance provided in this release. Among the important factors that could cause actual results to differ are a material adverse change in our financial condition or operations; the impact of adverse trends in the general economy on 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; the effects of our recent acquisitions and our ability to effectively manage our growth and achieve operating synergies; a decline in demand for some 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 risk factors are discussed in our Report on Form 10-K for the year ended December 31, 2007, and our Report on Form 10-Q for the quarter ended March 31, 2008, 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.

VCA Antech, Inc.
Consolidated Income Statements
(Unaudited - In thousands, except per share amounts)
       
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Revenue:
Laboratory $ 81,840 $ 79,210 $ 158,569 $ 152,807
Animal hospital 251,001 218,466 477,101 405,637
Medical technology 11,838 10,635 25,687 21,807
Intercompany   (10,245 )   (8,006 )   (19,091 )   (14,801 )
  334,434     300,305     642,266     565,450  
 
Direct costs 237,468 210,427 462,269 399,652
 
Gross profit:
Laboratory 40,874 39,966 78,216 75,968
Animal hospital 52,620 46,301 93,757 81,881
Medical technology 4,222 3,785 9,135 8,096
Intercompany   (750 )   (174 )   (1,111 )   (147 )
  96,966     89,878     179,997     165,798  
 
Selling, general and administrative expense:
Laboratory 5,185 5,046 10,136 10,013
Animal hospital 5,694 5,321 11,172 10,881
Medical technology 2,948 2,693 6,382 5,628
Corporate   8,982     8,983     18,297     16,994  
  22,809     22,043     45,987     43,516  
 
Write-down and loss (gain) on sale of assets   127     420     (57 )   542  
 
Operating income 74,030 67,415 134,067 121,740
 
Interest expense, net 7,045 6,671 14,660 12,444
Other (income) expense (213 ) 172 (36 ) 227
Minority interest   988     1,028     1,945     1,874  

Income before provision for income taxes

66,210 59,544 117,498 107,195
Provision for income taxes   25,893     23,697     45,979     43,035  
Net income $ 40,317   $ 35,847   $ 71,519   $ 64,160  
 
Diluted earnings per share $ 0.47   $ 0.42   $ 0.83   $ 0.75  

Shares used for computing diluted earnings per share

  85,725     85,605     85,805     85,481  
 
 
VCA Antech, Inc.
Consolidated Balance Sheets
(Unaudited - In thousands)
   
June 30, December 31,
2008 2007
Assets
Current assets:
Cash and cash equivalents $ 75,924 $ 110,866
Trade accounts receivable, net 48,834 42,650
Inventory 25,527 25,517
Prepaid expenses and other

19,251

15,307
Deferred income taxes 14,907 14,402
Prepaid income taxes   -     8,160  
Total current assets

184,443

216,902
Property and equipment, net 241,634 214,020
Other assets:
Goodwill 885,447 821,967
Other intangible assets, net 34,156 22,373
Deferred financing costs, net 1,304 1,537
Other  

26,774

    9,912  
Total assets $ 1,373,758   $ 1,286,711  
 
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term obligations $ 7,810 $ 7,886
Accounts payable 26,288 28,092
Accrued payroll and related liabilities 39,451 38,341
Income taxes payable 2,464 -
Other accrued liabilities   49,298     42,074  
Total current liabilities 125,311 116,393
Long-term obligations, less current portion 548,686 552,294
Deferred income taxes 33,321 28,197
Other liabilities 9,208 11,236
Minority interest 12,403 10,207
Stockholders' equity:
Common stock 84 84
Additional paid-in capital 300,606 296,037
Accumulated earnings 347,117 275,598
Accumulated other comprehensive loss   (2,978 )   (3,335 )
Total stockholders' equity   644,829     568,384  
Total liabilities and stockholders' equity $ 1,373,758   $ 1,286,711  
 
 
VCA Antech, Inc.
Consolidated Statements of Cash Flows
(Unaudited - In thousands)
   
Six Months Ended
June 30,
2008 2007
Cash flows from operating activities:
Net income $ 71,519 $ 64,160

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 15,325 12,740
Amortization of debt costs 233 137
Provision for uncollectible accounts 2,008 2,110
Write-down and (gain) loss on sale of assets (57 ) 542
Share-based compensation 3,322 2,300
Minority interest in income of subsidiaries 1,945 1,874
Distributions to minority interest partners (1,456 ) (1,364 )
Deferred income taxes 5,431 3,025
Excess tax benefit from exercise of stock options (355 ) (2,680 )
Other (150 ) (173 )
Changes in operating assets and liabilities:
Accounts receivable (8,004 ) (5,244 )
Inventory, prepaid expenses and other assets (4,519 ) 45
Accounts payable and other accrued liabilities 2,307 (173 )
Accrued payroll and related liabilities 1,465 1,105
Income taxes   10,979     15,789  
Net cash provided by operating activities   99,993     94,193  
Cash flows from investing activities:
Business acquisitions, net of cash acquired (80,367 ) (203,322 )
Real estate acquired in connection with business acquisitions (13,098 ) (7,962 )
Property and equipment additions (25,543 ) (27,236 )
Proceeds from sale of assets 1,753 1,564
Other   (14,987 )   (256 )
Net cash used in investing activities   (132,242 )   (237,212 )
Cash flows from financing activities:
Repayment of long-term obligations (3,925 ) (4,224 )
Proceeds from issuance of long-term obligations - 160,000
Payment of financing costs - (794 )
Proceeds from issuance of common stock under stock option plans 892 2,360
Excess tax benefit from exercise of stock options   355     2,680  
Net cash (used in) provided by financing activities   (2,678 )   160,022  
 
Effect of currency exchange rate changes on cash and cash equivalents   (15 )   -  
(Decrease) increase in cash and cash equivalents (34,942 ) 17,003
Cash and cash equivalents at beginning of period   110,866     45,104  
Cash and cash equivalents at end of period $ 75,924   $ 62,107  
 
 
VCA Antech, Inc.
Supplemental Operating Data
(Unaudited - In thousands)
       
As of
Table #1 June 30, December 31,
Selected consolidated balance sheet data 2008 2007
 
Debt:
Revolving credit facility $ - $ -
Senior term notes 524,979 527,675
Other debt and capital leases   31,517     32,505  
Total debt $ 556,496   $ 560,180  
 
Three Months Ended Six Months Ended
Table #2 June 30, June 30,
Selected expense data 2008 2007 2008 2007
 
Rent expense $ 10,271   $ 9,106   $ 20,479   $ 17,531  
 

Depreciation and amortization included in direct costs:

Laboratory $ 1,793 $ 1,578 $ 3,425 $ 2,916
Animal hospital 5,439 4,342 10,222 8,157
Medical technology 313 299 620 592
Intercompany   (139 )   (92 )   (262 )   (181 )
7,406 6,127 14,005 11,484

Depreciation and amortization included in selling, general and administrative expense

  656     682     1,320     1,256  
Total depreciation and amortization $ 8,062   $ 6,809   $ 15,325   $ 12,740  
 

Share-based compensation included in direct costs:

Laboratory $ 219 $ 158 $ 392 $ 341
 

Share-based compensation included in selling, general and administrative expense:

Laboratory 303 175 505 372
Animal hospital 456 283 789 607
Medical technology 54 26 87 54
Corporate   981     441     1,549     926  
  1,794     925     2,930     1,959  
Total share-based compensation $ 2,013   $ 1,083   $ 3,322   $ 2,300  

CONTACT:
VCA Antech, Inc.
Tomas Fuller, Chief Financial Officer, 310-571-6505