Exhibit 99.3
VCA Antech, Inc. Reports Second Quarter Results
Business Editors
LOS ANGELES--(BUSINESS WIRE)--July 27, 2004--VCA Antech, Inc.
(Nasdaq:WOOF):
-- Second quarter reported diluted earnings per common share was
$0.44.
-- Second quarter adjusted diluted earnings per common share was
$0.45, beating earnings consensus estimate by $0.02 per
diluted common share.
-- Second quarter reported revenue increased 19.0% to a record
$169.9 million.
VCA Antech, Inc. (Nasdaq:WOOF), a leading animal health care
company in the United States, today reported financial results for the
second quarter ended June 30, 2004 as follows: revenue increased 19.0%
to a second quarter record of $169.9 million; reported net income
increased to $18.2 million; and reported diluted earnings per common
share increased to $0.44.
Reported net income and reported diluted earnings per common share
for the quarter ended June 30, 2004 included an after-tax charge of
$478,000 for debt retirement costs related to the refinance of the
Company's senior credit facility. Excluding this item, adjusted net
income increased 21.5% to $18.6 million, and adjusted diluted earnings
per common share increased 21.6% to $0.45, exceeding the Bloomberg.com
earnings consensus estimate by $0.02.
The Company also reported the financial results for the six months
ended June 30, 2004 as follows: revenue increased 17.1% to $314.3
million; reported net income increased to $32.9 million; and reported
diluted earnings per common share increased to $0.79.
Reported net income and reported diluted earnings per common share
for the six months ended June 30, 2004 included (i) an after-tax
charge of $478,000 for debt retirement costs and (ii) an after-tax
benefit of $1.1 million for the settlement of an insurance claim
relating to a prior legal settlement. Reported net income and reported
diluted earnings per common share for the six months ended June 30,
2003 included an after-tax charge of $4.4 million for debt retirement
costs. Excluding these items, adjusted net income increased 29.5% to
$32.3 million, and adjusted diluted earnings per share increased 25.8%
to $0.78, compared to the same period in 2003.
In a separate press release issued today, the Company announced a
2-for-1 stock split to be effected in the form of a 100% stock
dividend to shareholders of record on August 11, 2004 payable on
August 25, 2004. The effect of the stock split will be an increase in
outstanding shares of the Company's common stock from approximately 41
million to 82 million based on shares outstanding on June 30, 2004.
Diluted shares outstanding and earnings per share information
presented in this release are on a pre-split basis.
Bob Antin, Chairman and CEO, stated, "We had another excellent and
productive quarter marked by continued growth in our core operations,
a refinancing of our senior credit facility resulting in a 25 basis
point reduction in the interest rate, and the completion of the
National PetCare Centers, Inc. ("NPC") merger on June 1, 2004. For the
quarter, adjusted diluted earnings per common share increased by 21.6%
from $0.37 to $0.45.
"Our laboratory segment for the second quarter of 2004 increased
laboratory revenue by 11.3%, generating an increase in laboratory
gross profit of 13.7% to $24.0 million and an increase in laboratory
gross profit margins to 46.1% from 45.1% in 2003. Laboratory internal
revenue growth was 8.2% for the second quarter of 2004.
"The integration of NPC's animal hospitals is proceeding well. We
are pleased that the June operating results for NPC's animal hospitals
were in-line with our expectations. The Company's consolidated animal
hospital revenue increased 22.8%. However, as expected, NPC's gross
profit margins, which are lower than our existing margins, resulted in
a reduction in our consolidated animal hospital segment gross profit
margins, which decreased from 21.9% in 2003 to 21.4% in 2004.
Same-store animal hospital gross profit margins declined from 22.2% to
22.0%. Same-store animal hospital revenue growth was 4.4% for the
second quarter of 2004.
"As anticipated, we incurred $570,000 of NPC integration costs
during the quarter, which is included in corporate selling, general
and administrative expense. The integration process will continue
through the third quarter. Because the NPC animal hospitals have
historically had lower gross profit margins than our existing animal
hospitals, we anticipate lower margins in our animal hospital segment
for the next several quarters. We remain excited about the
opportunities to achieve shared synergies as we continue to integrate
the two companies."
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 quarter of 2004 and debt
retirement costs incurred during the first quarter 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.
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); 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, we ensure that 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 second quarter 2004 financial results
during a conference call today, July 27, 2004 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 800-263-8506. Interested parties
should call at least ten minutes prior to the start of the conference
call to register.
Statements contained in this release that are not based on
historical information are forward looking statements that involve
risks and uncertainties. Actual results may vary substantially as a
result of a variety of factors. Among the important factors that could
cause actual results to differ are: the ability to successfully
integrate NPC into the Company's existing operations and achieve
expected operating synergies following the merger; the level of direct
costs and the ability of the Company to maintain revenue at a level
necessary to maintain expected operating margins; the level of
selling, general and administrative costs; the effects of competition;
the effects of the Company's recent acquisitions and its ability to
effectively manage its growth; the ability of the Company to service
its debt; the continued implementation of the Company's management
information systems; pending litigation and governmental
investigations; general economic conditions; and the results of the
Company's acquisition program. These and other risk factors are
discussed in the Company's recent filings with the Securities and
Exchange Commission on Form 10-K and Form 10-Q 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 Six Months Ended June 30, 2004 and 2003
(Unaudited - In Thousands, Except Per Share Amounts)
Three Months Six Months
Ended June 30, Ended June 30,
---------------- ----------------
2004 2003 (1) 2004 2003 (1)
------- ------- ------- -------
Revenue:
Laboratory $51,951 $46,691 $101,133 $88,389
Animal hospital 121,384 98,822 219,340 185,129
Intercompany (3,388) (2,752) (6,176) (5,178)
------- ------- ------- -------
169,947 142,761 314,297 268,340
------- ------- ------- -------
Direct costs:
Laboratory 27,983 25,615 55,698 49,825
Animal hospital 95,348 77,142 175,211 147,919
Intercompany (3,388) (2,752) (6,176) (5,178)
------- ------- ------- -------
119,943 100,005 224,733 192,566
------- ------- ------- -------
Gross profit:
Laboratory 23,968 21,076 45,435 38,564
Animal hospital 26,036 21,680 44,129 37,210
------- ------- ------- -------
50,004 42,756 89,564 75,774
------- ------- ------- -------
Selling, general and administrative:
Laboratory 3,190 2,797 6,363 5,504
Animal hospital 3,056 2,519 5,804 5,022
Corporate 5,519 4,168 8,299 8,667
------- ------- ------- -------
11,765 9,484 20,466 19,193
------- ------- ------- -------
Loss (gain) on sale of assets 4 78 66 (160)
------- ------- ------- -------
Operating income 38,235 33,194 69,032 56,741
Interest expense, net 6,098 6,418 12,083 13,410
Other (income) expense (287) 131 (176) 258
Minority interest expense 755 462 1,171 823
Debt retirement costs 810 - 810 7,417
------- ------- ------- -------
Income before provision
for income taxes 30,859 26,183 55,144 34,833
Provision for income taxes 12,692 10,833 22,233 14,300
------- ------- ------- -------
Net income $18,167 $15,350 $32,911 $20,533
======= ======= ======= =======
Diluted earnings per common share $0.44 $0.37 $0.79 $0.51
======= ======= ======= =======
Shares used for computing diluted
earnings per common share 41,691 41,136 41,609 40,288
======= ======= ======= =======
VCA Antech, Inc.
Supplemental Operating Data
For the Three and Six Months Ended June 30, 2004 and 2003
(Unaudited - In Thousands, Except Per Share Amounts)
Table #1
Reconciliation of net income Three Months Six Months
to adjusted net income Ended June 30, Ended June 30,
------------------ ------------------
2004 2003 2004 2003
-------- -------- -------- --------
Net income $18,167 $15,350 $32,911 $20,533
Certain significant items:
Debt retirement costs 810 - 810 7,417
Litigation settlement
reimbursement - - (1,124) -
Related income tax benefit (332) - (332) (3,041)
-------- -------- -------- --------
478 - (646) 4,376
-------- -------- -------- --------
Adjusted net income $18,645 $15,350 $32,265 $24,909
======== ======== ======== ========
Table #2
Reconciliation of diluted earnings
per common share to adjusted
diluted earnings per common share
Diluted earnings per
common share $0.44 $0.37 $0.79 $0.51
Certain significant items as
detailed in Table #1, net of
income tax benefit 0.01 - (0.01) 0.11
-------- -------- -------- --------
Adjusted diluted earnings per
common share $0.45 $0.37 $0.78 $0.62
======== ======== ======== ========
Shares used for computing
adjusted diluted earnings
per common share 41,691 41,136 41,609 40,288
======== ======== ======== ========
Table #3
Reconciliation of operating income
to adjusted operating income and
operating margin to adjusted
operating margin
Revenue $169,947 $142,761 $314,297 $268,340
======== ======== ======== ========
Operating income $38,235 $33,194 $69,032 $56,741
Operating margin 22.5% 23.3% 22.0% 21.1%
Certain significant items:
Litigation settlement
reimbursement - - (1,124) -
-------- -------- -------- --------
Adjusted operating income $38,235 $33,194 $67,908 $56,741
======== ======== ======== ========
Adjusted operating margin 22.5% 23.3% 21.6% 21.1%
VCA Antech, Inc.
Supplemental Operating Data - Continued
For the Three and Six Months Ended June 30, 2004 and 2003
(Unaudited - In Thousands)
Table #4
Depreciation and amortization Three Months Six Months
Ended June 30, Ended June 30,
----------------- ----------------
2004 2003 (1) 2004 2003 (1)
------- ------- ------- -------
Depreciation and amortization
included in direct costs:
Laboratory $897 $799 $1,718 $1,553
Animal hospital 2,536 2,304 4,937 4,781
------- ------- ------- -------
3,433 3,103 6,655 6,334
Other 386 394 780 740
------- ------- ------- -------
Depreciation and amortization $3,819 $3,497 $7,435 $7,074
======= ======= ======= =======
As of June 30, 2004 and December 31, 2003
(Unaudited - In Thousands)
Table #5
Selected consolidated June 30, Dec. 31,
balance sheet data 2004 2003
-------- --------
Cash $32,836 $17,237
Accounts receivable, net $26,753 $22,335
Stockholders' equity $199,150 $161,923
Total assets $697,408 $554,803
Debt:
Revolving credit facility $- $-
Senior term E notes 224,438 -
Senior term D notes - 145,703
9.875% senior subordinated notes 170,000 170,000
Other 4,129 1,770
Unamortized discounts - (4)
-------- --------
Total debt $398,567 $317,469
======== ========
VCA Antech, Inc.
Supplemental Operating Data - Continued
For the Six Months Ended June 30, 2004 and 2003
(Unaudited - In Thousands)
For the Six Months
Table #6 Ended June 30,
Selected cash flow and expense data ------------------
2004 2003
-------- --------
Net cash provided by operating activities $42,315 $38,520
Rent expense $9,397 $8,043
Capital expenditures $9,027 $6,168
(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 financial
statement presentation.
CONTACT: VCA Antech, Inc.
Tom Fuller (CFO), 310-571-6505