Exhibit 99.1
VCA Antech, Inc. Reports Third Quarter Results
LOS ANGELES--(BUSINESS WIRE)--Oct. 26, 2004--VCA Antech, Inc.
(Nasdaq:WOOF):
-- Third quarter diluted earnings per common share was $0.21 (a
16.7% increase compared to adjusted diluted earnings per
common share in the comparable prior year period).
-- Third quarter reported revenue increased 27.4% to a record
$183.4 million.
-- Third quarter reported net income increased to $17.3 million
(a 19.7% increase compared to adjusted net income in the
comparable prior year period).
VCA Antech, Inc. (Nasdaq:WOOF), a leading animal health care
company in the United States, today reported financial results for the
third quarter ended September 30, 2004 as follows: revenue increased
27.4% to a third quarter record of $183.4 million; reported net income
increased to $17.3 million; and reported diluted earnings per common
share increased to $0.21.
Reported net income and reported diluted earnings per common share
for the quarter ended September 30, 2003 included an after-tax charge
of $1.0 million for debt retirement costs. Excluding this item from
2003, adjusted net income increased 19.7% and adjusted diluted
earnings per common share increased 16.7%.
The Company also reported the financial results for the nine
months ended September 30, 2004 as follows: revenue increased 20.7% to
$497.6 million; reported net income increased to $50.3 million; and
reported diluted earnings per common share increased to $0.60.
Reported net income and reported diluted earnings per common share
for the nine months ended September 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 nine months ended September
30, 2003 included an after-tax charge of $5.4 million for debt
retirement costs. Excluding these items, adjusted net income increased
25.9% to $49.6 million, and adjusted diluted earnings per common share
increased 25.0% to $0.60.
Bob Antin, Chairman and CEO, stated, "We had another excellent and
productive quarter marked by continued growth in our core businesses,
despite the impact of hurricanes in the Southeastern United States.
For the quarter, adjusted diluted earnings per common share increased
by 16.7% from $0.18 to $0.21. The hurricanes resulted in an aggregate
loss of 58 business days for impacted animal hospitals and a reduction
in laboratory revenue in the affected markets.
"Our laboratory internal revenue growth for the third quarter of
2004 was 9.2%. Excluding the Florida market, which was the market most
significantly impacted by the hurricanes, our laboratory internal
revenue growth was 10.1% for the quarter. The 9.2% growth in revenue
generated an increase in laboratory gross profit of 12.4% to $22.2
million and an increase in laboratory gross profit margins to 43.8%
from 42.6% in 2003.
"The integration of National PetCare Centers, Inc. ("NPC") animal
hospitals, which we acquired on June 1, 2004, continues to proceed
well. Revenue and gross profit for NPC's animal hospitals met our
expectations. Our consolidated animal hospital segment revenue growth
for the third quarter of 2004 was 36.3%. 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 21.3% in 2003 to 20.2% in
2004.
"Our animal hospital same-store revenue growth for the third
quarter of 2004 was 2.8%. Same-store animal hospital gross profit
margins declined from 21.4% to 21.0% primarily due to decreased
margins at two specialty/referral practices located in Chicago and
Manhattan as the result of interruptions in business operations due to
expansion activities at these sites. Margins on these practices are
expected to return to historical norms as the expansion is completed
and operations return to normal.
"We incurred integration costs related to the acquisition of NPC
in the amount of approximately $670,000 and $1.2 million for the three
and nine months ended September 30, 2004, respectively. These costs
are within management's forecasts. The integration process is
substantially complete and we expect to incur nominal costs during the
fourth quarter of 2004. These costs are included in corporate selling,
general and administrative expense. 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."
The Company completed its acquisition of Sound Technologies, Inc.
on October 1, 2004, following the close of the third quarter.
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 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 third quarter 2004 financial results
during a conference call today, October 26, 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 800-289-0493. 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 Nine Months Ended September 30, 2004 and 2003
(Unaudited -- In Thousands, Except Per Share Amounts)
Three Months Nine Months
Ended Ended
September 30, September 30,
---------------- -----------------
2004 2003 2004 2003
------- ------- ------- -------
Revenue:
Laboratory $ 50,685 $ 46,429 $ 151,818 $ 134,818
Animal hospital 136,399 100,060 355,739 285,189
Intercompany (3,732) (2,605) (9,908) (7,783)
------- ------- ------- -------
183,352 143,884 497,649 412,224
------- ------- ------- -------
Direct costs (1):
Laboratory 28,470 26,664 84,168 76,489
Animal hospital 108,833 78,789 284,044 226,708
Intercompany (3,732) (2,605) (9,908) (7,783)
------- ------- ------- -------
133,571 102,848 358,304 295,414
------- ------- ------- -------
Gross profit:
Laboratory 22,215 19,765 67,650 58,329
Animal hospital 27,566 21,271 71,695 58,481
------- ------- ------- -------
49,781 41,036 139,345 116,810
------- ------- ------- -------
Selling, general and
administrative (1):
Laboratory 3,136 2,855 9,499 8,359
Animal hospital 3,423 2,516 9,227 7,538
Corporate 6,478 3,982 14,777 12,649
------- ------- ------- -------
13,037 9,353 33,503 28,546
------- ------- ------- -------
Write-down and loss (gain) on
sale of assets (12) 442 54 282
-------- -------- --------- ---------
Operating income 36,756 31,241 105,788 87,982
Interest expense, net 6,629 6,361 18,712 19,771
Other (income) expense (9) (129) (185) 129
Minority interest expense 746 456 1,917 1,279
Debt retirement costs - 1,701 810 9,118
------- ------- ------- -------
Income before provision for
income taxes 29,390 22,852 84,534 57,685
Provision for income taxes 12,046 9,363 34,279 23,663
------- ------- ------- -------
Net income $ 17,344 $ 13,489 $ 50,255 $ 34,022
======= ======= ======= =======
Diluted earnings per common
share (2) $0.21 $0.16 $0.60 $0.42
======= ======= ======= =======
Shares used for computing
diluted earnings per common
share (2) 83,455 82,668 83,300 81,300
======= ======= ======= =======
VCA Antech, Inc.
Supplemental Operating Data
For the Three and Nine Months Ended September 30, 2004 and 2003
(Unaudited -- In Thousands, Except Per Share Amounts)
Table #1 Three Months Nine Months
Reconciliation of net income Ended Ended
to adjusted net income September 30, September 30,
2004 2003 2004 2003
------ ------ ------ ------
Net income $17,344 $13,489 $50,255 $34,022
Certain significant items:
Debt retirement costs - 1,701 810 9,118
Litigation settlement
reimbursement - - (1,124) -
Related income tax benefit - (697) (332) (3,738)
------ ------ ------ ------
- 1,004 (646) 5,380
------ ------ ------ ------
Adjusted net income $17,344 $14,493 $49,609 $39,402
====== ====== ====== ======
Table #2
Reconciliation of diluted
earnings per common share to
adjusted diluted earnings per
common share (2)
Diluted earnings per common
share $ 0.21 $ 0.16 $ 0.60 $ 0.42
Certain significant items as
detailed in Table #1, net of
income tax benefit - 0.02 - 0.06
------ ------ ------ ------
Adjusted diluted earnings per
common share $ 0.21 $ 0.18 $ 0.60 $ 0.48
====== ====== ====== ======
Shares used for computing
adjusted diluted earnings per
common share 83,455 82,668 83,300 81,300
====== ====== ====== ======
Table #3
Reconciliation of operating
income to adjusted operating
income and operating margin to
adjusted operating margin
Revenue $183,352 $143,884 $497,649 $412,224
------ ------ ------ ------
Operating income $36,756 $31,241 $105,788 $87,982
Operating margin 20.0% 21.7% 21.3% 21.3%
Certain significant items:
Litigation settlement
reimbursement - - (1,124) -
------ ------ ------ ------
Adjusted operating income $36,756 $31,241 $104,664 $87,982
====== ====== ====== ======
Adjusted operating margin 20.0% 21.7% 21.0% 21.3%
VCA Antech, Inc.
Supplemental Operating Data -- Continued
For the Three and Nine Months Ended September 30, 2004 and 2003
(Unaudited -- In Thousands)
Table #4
Reconciliation of animal Three Months Nine Months
hospital operating margin to Ended Ended
animal hospital adjusted September 30, September 30,
operating margin ----------------- -----------------
2004 2003 2004 2003
------- ------- ------- -------
Revenue $136,399 $100,060 $355,739 $285,189
======= ======= ======= =======
Animal hospital operating
income $ 24,155 $ 18,352 $ 62,415 $ 50,718
Animal hospital operating
margin 17.7% 18.3% 17.5% 17.8%
Certain items:
Write-down of assets - 392 - 392
------- ------- ------- -------
Animal hospital adjusted
operating income $ 24,155 $ 18,744 $ 62,415 $ 51,110
======= ======= ======= =======
Animal hospital adjusted
operating margin 17.7% 18.7% 17.5% 17.9%
Table #5
Depreciation and amortization(1)
Depreciation and amortization
included in direct costs:
Laboratory $ 809 $ 794 $ 2,527 $ 2,347
Animal hospital 2,682 2,363 7,619 7,144
------- ------- ------- -------
3,491 3,157 10,146 9,491
Other 481 422 1,261 1,162
------- ------- ------- -------
Depreciation and amortization $ 3,972 $ 3,579 $ 11,407 $ 10,653
======= ======= ======= =======
VCA Antech, Inc.
Supplemental Operating Data -- Continued
As of September 30, 2004 and December 31, 2003
(Unaudited -- In Thousands)
Table #6 September December
30, 31,
Selected consolidated balance sheet data 2004 2003
-------- --------
Cash $ 50,834 $ 17,237
Accounts receivable, net $ 25,765 $ 22,335
Stockholders' equity $ 218,331 $ 161,923
Total assets $ 723,738 $ 554,803
Debt:
Revolving credit facility $ - $ -
Senior term E notes 223,875 -
Senior term D notes - 145,703
9.875% senior subordinated notes 170,000 170,000
Other 3,779 1,770
Unamortized discounts - (4)
-------- --------
Total debt $ 397,654 $ 317,469
======== ========
For the Nine Months Ended September 30, 2004 and 2003
(Unaudited -- In Thousands)
For the Nine Months
Table #7 Ended September 30,
------------------
Selected cash flow and expense data 2004 2003
-------- --------
Net cash provided by operating activities $ 71,735 $ 67,690
Rent expense $ 15,272 $ 12,196
Capital expenditures $ 16,035 $ 11,040
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 financial statement 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 which was
distributed on August 25, 2004.
CONTACT: VCA Antech, Inc.
Tom Fuller, 310-571-6505