EX-99.1 2 a6810192ex99_1.htm EXHIBIT 99.1

Exhibit 99.1

VCA Antech, Inc. Reports Second Quarter 2011 Results

  • Second quarter revenue increased 6.3% to a second quarter record $376.1 million
  • Second quarter gross profit increased 3.6% to $96.8 million
  • Second quarter adjusted net income increased 3.5% to $39.6 million
  • Second quarter adjusted diluted earnings per common share increased 2.3% to $0.45

LOS ANGELES--(BUSINESS WIRE)--July 28, 2011--VCA Antech, Inc. (NASDAQ NM SYMBOL: WOOF), a leading animal healthcare company in the United States, today reported financial results for the second quarter ended June 30, 2011 as follows: revenue increased 6.3% to a second quarter record of $376.1 million, gross profit increased 3.6% to $96.8 million, adjusted operating income increased 4.7% to $70.1 million, adjusted net income increased 3.5% to $39.6 million, and adjusted diluted earnings per common share increased 2.3% to $0.45.

For the three and six months ended June 30, 2011 and 2010 diluted earnings per share were $0.45 and $0.34 and $0.78 and $0.70, respectively. The second quarter of 2010 included a non-cash charge of $14.5 million, or $8.9 million after tax for future estimated executive compensation. 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.

Bob Antin, Chairman and CEO, stated, “We had a very active quarter with the acquisition of BrightHeart Veterinary Centers which operates nine animal hospitals with annual revenues of approximately $53.0 million, eight of which focus on the delivery of specialty and emergency medicine and a general practice in Charlotte, North Carolina. We have enjoyed a long relationship with the management of BrightHeart and believe they will be an excellent addition to our strategic focus of providing the highest level of service in the communities we serve.

“As previously announced, VCA Antech entered into an agreement to purchase MediMedia Animal Health, LLC, which operates under the name VetStreet. VetStreet is the nation’s largest provider of online communications, professional education and marketing solutions to the veterinary community. VetStreet is a rapidly growing company that has relationships with approximately 5,000 animal hospitals which facilitates the veterinarians’ ability to communicate to more than 20 million pet owners. We believe that VetStreet will enhance VCA Antech’s ability to serve the community of veterinary professionals and provide them a more effective channel to educate and communicate with their clients.

“Animal Hospital revenue in the second quarter increased 8.9% to $291.3 million driven by acquisitions made in the past twelve months. While same-store revenues declined 1.9%, our gross margins of 18.2% remained relatively flat compared to the prior year quarter. As a result we are pleased in our ability to successfully manage expenses. Our Animal Hospital operating margin likewise remained relatively flat at 16.1% compared to the prior year quarter. During the quarter, we acquired four animal hospitals which had historical combined annual revenue of $7.0 million.

“Laboratory revenue in the second quarter increased 1.7% due to organic growth to $84.4 million. Our Laboratory gross profit margin and operating margin were 48.2% and 40.1%, respectively, a decline of 70 bps and 90 bps, compared to the same period last year.

“Medical Technology revenue in the second quarter increased 11.0% to $16.2 million and gross profit increased 10.2% to $4.8 million. Gross profit margin was 29.6%, essentially flat compared to the prior year quarter. The operating margin increased to 7.4% from 6.4% as SG&A expenses decreased to 22.1% from 23.3%.”

Conference Call

We will discuss our company’s second quarter 2011 financial results during a conference call today, July 28th, 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) 293-5492. 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 accurately 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 the planned consummation of our VetStreet acquisition) 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, 2010 and our other filings with the Securities and Exchange Commission 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,
2011 2010 2011 2010
Revenue:
Animal hospital $ 291,332 $ 267,595 $ 561,273 $ 514,263
Laboratory 84,385 82,972 163,934 161,152
Medical technology 16,209 14,602 35,305 30,399
Intercompany   (15,821 )   (11,250 )   (29,284 )   (21,161 )
  376,105     353,919     731,228     684,653  
 
Direct costs 279,273 260,435 554,618 508,374
 
Gross profit:
Animal hospital 52,940 49,028 92,493 90,705
Laboratory 40,669 40,556 77,399 77,084
Medical technology 4,790 4,347 9,248 9,178
Intercompany   (1,567 )   (447 )   (2,530 )   (688 )
  96,832     93,484     176,610     176,279  
 
Selling, general and administrative expense:
Animal hospital 6,044 5,673 12,127 11,260
Laboratory 6,853 6,527 13,489 12,681
Medical technology 3,584 3,404 7,140 6,919
Corporate   10,182     25,441     20,090     36,325  
  26,663     41,045     52,846     67,185  
 
Loss (gain) on sale and disposal of assets   60     (14 )   149     11  
 
Operating income 70,109 52,453 123,615 109,083
 
Interest expense, net 4,575 2,778 8,594 5,945
Other expense   (67 )   (335 )   (9 )   (310 )

Income before provision for income taxes

65,601 50,010 115,030 103,448
Provision for income taxes   25,536     19,493     44,469     39,999  
Net income   40,065     30,517     70,561     63,449  
Net income attributable to noncontrolling interests   453     1,113     2,110     2,110  
Net income attributable to VCA Antech, Inc. $ 39,612   $ 29,404   $ 68,451   $ 61,339  
 
Diluted earnings per share $ 0.45   $ 0.34   $ 0.78   $ 0.70  

Shares used for computing diluted earnings per share

  87,304     87,178     87,303     87,069  
 
 
                         
VCA Antech, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
June 30, December 31,
2011 2010
Assets
 
Current assets:
Cash and cash equivalents $ 155,783 $ 97,126
Trade accounts receivable, net 54,478 49,224
Inventory 42,682 40,760
Prepaid expenses and other 22,701 21,138
Deferred income taxes 20,330 19,019
Prepaid income taxes   11,554   19,047
Total current assets 307,528 246,314
Property and equipment, net 341,070 331,687
Other assets:
Goodwill 1,100,858 1,092,480
Other intangible assets, net 43,625 46,986
Deferred financing costs, net 5,926 6,700
Other   44,405   42,255
Total assets $ 1,843,412 $ 1,766,422
 
Liabilities and Equity
 
Current liabilities:
Current portion of long-term debt $ 27,774 $ 28,101
Accounts payable 30,708 31,970
Accrued payroll and related liabilities 51,710 35,754
Other accrued liabilities   41,646   45,769
Total current liabilities 151,838 141,594
Long-term debt, less current portion 485,130 498,935
Deferred income taxes 92,367 82,131
Other liabilities 26,512 28,478
Redeemable noncontrolling interest 6,257 5,799
VCA Antech, Inc. stockholders' equity:
Common stock 87 86
Additional paid-in capital 351,206 347,848
Accumulated earnings 718,704 650,253
Accumulated other comprehensive income   1,178   737
Total VCA Antech, Inc. stockholders' equity 1,071,175 998,924
Noncontrolling interest   10,133   10,561
Total equity   1,081,308   1,009,485
Total liabilities and equity $ 1,843,412 $ 1,766,422
 
 
                         
VCA Antech, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
Six Months Ended
June 30,
2011 2010
Cash flows from operating activities:
Net income $ 70,561 $ 63,449

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

Depreciation and amortization 26,456 21,706
Amortization of debt costs 774 239
Provision for uncollectible accounts 2,492 3,143
Net loss on sale and disposal of assets 149 11
Share-based compensation 2,531 5,855
Deferred income taxes 10,833 6,461
Excess tax benefit from exercise of stock options (906 ) (331 )
Other (202 ) (225 )
Changes in operating assets and liabilities:
Accounts receivable (7,813 ) (7,344 )
Inventory, prepaid expenses and other assets (5,222 ) (727 )
Income taxes 7,940 (7,248 )
Accounts payable and other accrued liabilities (7,994 ) 13,691
Accrued payroll and related liabilities   16,021     12,656  
Net cash provided by operating activities   115,620     111,336  
Cash flows from investing activities:
Business acquisitions, net of cash acquired (11,804 ) (20,078 )
Real estate acquired in connection with business acquisitions (1,900 ) (1,300 )
Property and equipment additions (28,434 ) (27,925 )
Proceeds from sale of assets 140 9
Other   (493 )   (162 )
Net cash used in investing activities   (42,491 )   (49,456 )
Cash flows from financing activities:
Repayment of long-term obligations (14,164 ) (12,859 )
Distributions to noncontrolling interest partners (1,141 ) (2,021 )
Proceeds from issuance of common stock under stock option plans 2,456 3,770
Repurchase of common stock (2,337 ) (2,253 )
Excess tax benefit from exercise of stock options 906 331
Other   (345 )   (266 )
Net cash used in financing activities   (14,625 )   (13,298 )
Effect of currency exchange rate changes on cash and cash equivalents 153 (6 )
Increase in cash and cash equivalents 58,657 48,576
Cash and cash equivalents at beginning of period   97,126     145,181  
Cash and cash equivalents at end of period $ 155,783   $ 193,757  
 
 
                       
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. 2011 2010 2011 2010
 
Net income attributable to VCA Antech, Inc. $ 39,612 $ 29,404 $ 68,451 $ 61,339
Compensation charges - 14,525 - 14,525
Tax benefit from compensation charges (1)   -     (5,653 )   -     (5,653 )
Adjusted net income attributable to VCA Antech, Inc. $ 39,612   $ 38,276   $ 68,451   $ 70,211  
 
(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 2011 2010 2011 2010
 
Diluted earnings per share $ 0.45 $ 0.34 $ 0.78 $ 0.70
Impact of compensation charges, net of tax   -     0.10     -     0.10  
Adjusted diluted earnings per share (1) $ 0.45   $ 0.44   $ 0.78   $ 0.81  

Shares used for computing adjusted diluted earnings per share

  87,304     87,178     87,303     87,069  
 
(1) Amounts may not add due to rounding.
 
Table #3 Three Months Ended Six Months Ended

Reconciliation of operating income to

June 30, June 30,
adjusted operating income 2011 2010 2011 2010
 
Consolidated operating income $ 70,109 $ 52,453 $ 123,615 $ 109,083
Compensation charges   -     14,525     -     14,525  
Consolidated adjusted operating income $ 70,109   $ 66,978   $ 123,615   $ 123,608  
Consolidated adjusted operating margin 18.6 % 18.9 % 16.9 % 18.1 %
 
 
                       
VCA Antech, Inc.
Supplemental Operating Data
(Unaudited - In thousands)
 
As of
Table #4 June 30, December 31,
Selected consolidated balance sheet data 2011 2010
 
Debt:
Senior term notes $ 481,250 $ 493,750
Other debt and capital leases   31,654     33,286  
Total debt $ 512,904   $ 527,036  
 
Three Months Ended Six Months Ended
Table #5 June 30, June 30,
Selected expense data 2011 2010 2011 2010
 
Rent expense $ 13,114   $ 12,378   $ 26,385   $ 24,487  
 

Depreciation and amortization included in direct costs:

Animal hospital $ 9,444 $ 7,569 $ 19,243 $ 14,848
Laboratory 2,405 2,305 4,774 4,629
Medical technology 421 378 831 752
Intercompany   (318 )   (250 )   (619 )   (490 )
11,952 10,002 24,229 19,739

Depreciation and amortization included in selling, general and administrative expense

  1,124     997     2,227     1,967  
Total depreciation and amortization $ 13,076   $ 10,999   $ 26,456   $ 21,706  
 
Share-based compensation included in direct costs:
Laboratory $ 117 $ 171 $ 195 $ 332
 

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

Animal hospital 330 372 548 749
Laboratory 281 326 521 641
Medical technology 73 55 128 132
Corporate   662     2,843     1,139     4,001  
  1,346     3,596     2,336     5,523  
Total share-based compensation $ 1,463   $ 3,767   $ 2,531   $ 5,855  

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