Vca 8-K VCA Inc. Reports First Quarter 2015 Results

Exhibit 99.1

VCA Inc. Reports First Quarter 2015 Results

• Revenue increased 11.1% to a first quarter record of $499.5 million
• Gross profit increased 12.2% to $113.9 million
• Operating income increased 12.9% to $69.1 million
• Diluted earnings per common share increased 21.1% to $0.46
• Non-GAAP diluted earnings per common share increased 19.0% to $0.50

LOS ANGELES--(BUSINESS WIRE)--April 29, 2015--VCA Inc. (NASDAQ: WOOF), a leading animal healthcare company in the United States and Canada, today reported financial results for the first quarter ended March 31, 2015, as follows: revenue increased 11.1% to a first quarter record of $499.5 million; gross profit increased 12.2% to $113.9 million; operating income increased 12.9% to $69.1 million; net income increased 12.5% to $38.3 million and diluted earnings per common share increased 21.1% to $0.46. Non-GAAP diluted earnings per common share, which excludes acquisition-related amortization, increased 19.0% to $0.50.

Bob Antin, Chairman and CEO, stated, “Our Animal Hospital business segment same-store revenue growth rate continues to accelerate, driven by an increase in both the number of orders and the average revenue per order. Our Laboratory business segment experienced 6.1% internal revenue growth resulting in a 250 basis point increase in gross profit margin. Accordingly, we are very optimistic with respect to our results for the full year ended December 2015.

“Animal Hospital revenue in the current quarter increased 11.8%, to $393.0 million, driven by acquisitions made during the past 12 months and same-store revenue growth of 5.3%. Our same-store gross profit margin increased to 14.6% from 14.1%, and our total gross margin increased to 14.1%, from 13.9% in the prior-year quarter. During the quarter, we acquired 11 independent animal hospitals which had historical combined annual revenue of $16.3 million.

“Laboratory internal revenue in the first quarter increased 6.1%, to $94.0 million. Our Laboratory gross profit margin increased to 51.1% from 48.6%, and our operating margin increased to 41.6%, from 39.6% in the prior-year quarter.

“During the quarter we repurchased 850,000 shares of our common stock for $43.3 million. Since the Board authorized our repurchase programs in April 2013, through the first quarter 2015, we have acquired 8.2 million shares for $321.8 million. We currently have $203.4 million left in our authorization.”

2015 Guidance

We re-affirm the annual guidance we provided on February 11, 2015.

Non-GAAP Financial Measures

We believe investors’ understanding of our total performance is enhanced by disclosing Non-GAAP financial measures including Non-GAAP net income, Non-GAAP gross profit, Non-GAAP operating income and Non-GAAP diluted earnings per common share. We define these adjusted measures as the reported amounts, adjusted to exclude certain significant items and amortization of intangibles acquired in acquisitions.

Management believes these adjusted measures are useful to management and investors in evaluating the Company’s operational performance and their use provides an additional tool for evaluating the Company’s operating results and trends. 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.

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 first quarter 2015 financial results during a conference call today, April 29^th, at 9:00 a.m. Eastern Time. A live broadcast of the call may be accessed by visiting our website at investor.vca.com. The call may also be accessed by dialing 877-293-5492. Interested parties should call at least ten minutes prior to the start of the call to register. Replay of the webcast will be available for ninety days by visiting the company’s website.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Among the forward-looking statements in this press release are statements addressing our 2015 guidance and plans, expectations, future financial position and results of operation. These forward-looking statements are not historical facts and are inherently uncertain and out of our control. Any or all of our forward-looking statements in this press release may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Actual future results may vary materially. Among other factors that could cause our actual results to differ from this forward-looking information are: the continued effects of the economic uncertainty prevailing in regions in which we operate; our ability to execute on our growth strategy and to manage acquired operations; changes in demand for our products and services; fluctuations in our revenue adversely affecting our gross profit, operating income and margins; and the effects of the other factors discussed in our Annual Report on Form 10-K, Reports on Form 10-Q and our other filings with the SEC.

About VCA Inc.

We own, operate and manage the largest networks of freestanding veterinary hospitals and veterinary-exclusive clinical laboratories in the country, additionally we are the largest provider of online communication, professional education and marketing solutions to the veterinary community. We also supply diagnostic imaging equipment to the veterinary industry.

VCA Inc.
Condensed, Consolidated Income Statements
(Unaudited)
(In thousands, except per share amounts)
	Three Months Ended
	March 31,
	2015			2014
Revenue:
Animal hospital	$	393,026		$	351,588
Laboratory		93,972			88,534
All other		34,227			28,121
Intercompany		(21,772	)		(18,736	)
		499,453			449,507
Direct costs		385,591			348,056
Gross profit:
Animal hospital		55,484			48,800
Laboratory		47,982			43,031
All other		11,424			9,969
Intercompany		(1,028	)		(349	)
		113,862			101,451
Selling, general and administrative expense:
Animal hospital		11,221			9,128
Laboratory		8,865			8,018
All other		8,687			8,348
Corporate		15,625			15,946
		44,398			41,440
Net loss (gain) on sale or disposal of assets		335			(1,221	)
Operating income		69,129			61,232
Interest expense, net		4,837			4,167
Other expense (income)		66			(53	)
Income before provision for income taxes		64,226			57,118
Provision for income taxes		24,673			22,203
Net income		39,553			34,915
Net income attributable to noncontrolling interests		1,252			872
Net income attributable to VCA Inc.	$	38,301		$	34,043
Diluted earnings per share	$	0.46		$	0.38
Weighted-average shares outstanding for diluted earnings per share		83,373			89,421

VCA Inc.
Condensed, Consolidated Balance Sheets
(Unaudited)
(In thousands)
	March 31,			December 31,
	2015			2014
Assets
Current assets:
Cash and cash equivalents	$	59,278		$	81,383
Trade accounts receivable, net		73,766			60,482
Inventory		55,142			56,050
Prepaid expenses and other		30,425			36,924
Deferred income taxes		30,324			30,331
Prepaid income taxes		—			18,277
Total current assets		248,935			283,447
Property and equipment, net		472,944			468,041
Other assets:
Goodwill		1,439,598			1,415,861
Other intangible assets, net		82,913			88,175
Notes receivable		2,695			2,807
Deferred financing costs, net		7,440			7,874
Other		70,477			65,815
Total assets	$	2,325,002		$	2,332,020
Liabilities and Equity
Current liabilities:
Current portion of long-term debt	$	26,598		$	19,356
Accounts payable		40,997			46,284
Accrued payroll and related liabilities		78,159			64,359
Income tax payable		2,570			—
Other accrued liabilities		69,979			67,219
Total current liabilities		218,303			197,218
Long-term debt, less current portion		766,591			775,412
Deferred income taxes		103,162			103,502
Other liabilities		31,745			33,190
Total liabilities		1,119,801			1,109,322
Redeemable noncontrolling interests		11,108			11,077
VCA Inc. stockholders’ equity:
Common stock		82			83
Additional paid-in capital		116,068			155,802
Retained earnings		1,102,459			1,064,158
Accumulated other comprehensive loss		(34,605	)		(19,397	)
Total VCA Inc. stockholders’ equity		1,184,004			1,200,646
Noncontrolling interests		10,089			10,975
Total equity		1,194,093			1,211,621
Total liabilities and equity	$	2,325,002		$	2,332,020

VCA Inc.
Condensed, Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
	Three Months Ended
	March 31,
	2015			2014
Cash flows from operating activities:
Net income	$	39,553		$	34,915
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		19,797			19,767
Amortization of debt issue costs		434			304
Provision for uncollectible accounts		1,183			890
Net loss (gain) on sale or disposal of assets		335			(1,221	)
Share-based compensation		4,132			4,544
Excess tax benefit from stock based compensation		(791	)		(392	)
Other		(989	)		(905	)
Changes in operating assets and liabilities:
Trade accounts receivable		(14,570	)		(5,825	)
Inventory, prepaid expense and other assets		2,862			(1,389	)
Accounts payable and other accrued liabilities		(6,954	)		(3,773	)
Accrued payroll and related liabilities		14,052			6,247
Income taxes		21,581			15,165
Net cash provided by operating activities		80,625			68,327
Cash flows from investing activities:
Business acquisitions, net of cash acquired		(32,150	)		(17,295	)
Real estate acquired in connection with business acquisitions		(1,502	)		—
Property and equipment additions		(16,526	)		(16,619	)
Proceeds from sale of assets		92			859
Other		(576	)		520
Net cash used in investing activities		(50,662	)		(32,535	)
Cash flows from financing activities:
Repayment of debt		(5,165	)		(12,806	)
Distributions to non-controlling interest partners		(1,325	)		(1,090	)
Purchase of non-controlling interests		(1,483	)		(326	)
Proceeds from issuance of common stock under stock option plans		404			372
Excess tax benefit from stock based compensation		791			392
Repurchase of common stock		(44,845	)		(9,793	)
Other		(80	)		—
Net cash used in financing activities		(51,703	)		(23,251	)
Effect of currency exchange rate changes on cash and cash equivalents		(365	)		(282	)
(Decrease) increase in cash and cash equivalents		(22,105	)		12,259
Cash and cash equivalents at beginning of period		81,383			125,029
Cash and cash equivalents at end of period	$	59,278		$	137,288

VCA Inc.
Supplemental Operating Data (cont)
(Unaudited - In thousands, except per share amounts)
Table #1
Reconciliation of net income attributable to	Three Months Ended March 31,
VCA Inc., to Non-GAAP net income attributable
to VCA Inc. (1)	2015			2014
Net income attributable to VCA Inc.	$	38,301		$	34,043
Acquisitions related amortization (1)		5,526			5,147
Tax benefit from acquisitions related amortization (1)		(2,163	)		(2,015	)
Non-GAAP net income attributable to VCA Inc.	$	41,664		$	37,175
Table #2	Three Months Ended March 31,
Reconciliation of diluted earnings per share to
Non-GAAP diluted earnings per share (1)	2015			2014
Diluted earnings per share	$	0.46		$	0.38
Impact of acquisitions related amortization, net of tax (1)		0.04			0.04
Non-GAAP diluted earnings per share	$	0.50		$	0.42
Shares used for computing diluted earnings per share		83,373			89,421
Table #3	Three Months Ended March 31,
Reconciliation of consolidated gross profit to
Non-GAAP consolidated gross profit (1)	2015			2014
Consolidated gross profit	$	113,862		$	101,451
Impact of acquisitions related amortization (1)		5,465			5,080
Non-GAAP consolidated gross profit	$	119,327		$	106,531
Non-GAAP consolidated gross profit margin		23.9	%		23.7	%
Table #4	Three Months Ended March 31,
Reconciliation of consolidated operating income to
Non-GAAP consolidated operating income (1)	2015			2014
Consolidated operating income	$	69,129		$	61,232
Impact of acquisitions related amortization (1)		5,526			5,147
Non-GAAP consolidated operating income	$	74,655		$	66,379
Non-GAAP consolidated operating margin		14.9	%		14.8	%

_________________________________________________

(1) Management believes that investors’ understanding of our performance is enhanced by disclosing adjusted measures as the reported amounts, adjusted to exclude certain significant items and acquisition-related amortization. Non-GAAP net income, Non-GAAP diluted earnings per common share, Non-GAAP consolidated gross profit and Non-GAAP consolidated operating income measures are not, and should not be viewed as substitutes for U.S. generally accepted accounting principles (GAAP) net income, its components and diluted earnings per share.

VCA Inc.
Supplemental Operating Data (cont)
(Unaudited - In thousands, except per share amounts)
	As of
Table #5	March 31, 2015			December 31, 2014
Selected consolidated balance sheet data
Debt:
Senior term notes	$	600,000		$	600,000
Revolving credit		135,000			135,000
Other debt and capital leases		58,189			59,768
Total debt	$	793,189		$	794,768
	Three Months Ended March 31,
Table #6
Selected expense data	2015			2014
Rent expense	$	18,780		$	16,929
Depreciation and amortization included in direct costs:
Animal hospital	$	15,962		$	14,574
Laboratory		2,475			2,516
All other		940			1,731
Intercompany		(523	)		(465	)
	$	18,854		$	18,356
Depreciation and amortization included in selling, general and administrative expense		943			1,411
Total depreciation and amortization	$	19,797		$	19,767
Share-based compensation included in direct costs:
Laboratory	$	161		$	150
Share-based compensation included in selling, general and administrative expense:
Animal hospital		664			517
Laboratory		366			381
All other		202			182
Corporate		2,739			3,314
		3,971			4,394
Total share-based compensation	$	4,132		$	4,544

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