Exhibit 99.1
VCA Antech, Inc. Beats Fourth Quarter Consensus Estimate by $0.02 with a 41.7%
Increase in Net Income
LOS ANGELES--(BUSINESS WIRE)--Feb. 24, 2005--VCA Antech, Inc.
(NASDAQ:WOOF):
-- Fourth quarter diluted earnings per common share was $0.16, beating
the consensus estimate by $0.02.
-- Fourth quarter net income increased 41.7% to $13.3 million.
VCA Antech, Inc. (NASDAQ:WOOF), a leading animal health care company in the
United States, today reported financial results for the quarter ended December
31, 2004 as follows: revenue increased 33.2% to a fourth quarter record of
$176.4 million; net income increased 41.7% to $13.3 million; and diluted
earnings per common share increased 45.5% to $0.16.
The Company also reported the financial results for the year ended December
31, 2004 as follows: revenue increased 23.8% to $674.1 million; net income
increased 46.4% to $63.6 million; and diluted earnings per common share
increased 43.4% to $0.76.
Net income and diluted earnings per common share for the year ended
December 31, 2004 included (i) an after-tax charge of $519,000 for debt
retirement costs, $41,000 of which occurred in the fourth quarter, and (ii) an
after-tax benefit of $1.1 million recognized in the first quarter for the
settlement of an insurance claim relating to a prior legal settlement. Net
income and diluted earnings per common share for the year ended December 31,
2003 included an after-tax charge of $5.4 million for debt retirement costs.
Excluding these items, adjusted net income for the year increased 29.0% to $63.0
million, and adjusted diluted earnings per common share increased 26.7% to
$0.76.
Bob Antin, Chairman and CEO, stated, "We had an outstanding quarter marked
by continued growth in our core businesses as we continued to integrate the
animal hospitals acquired from National PetCare Centers, Inc., or NPC, on June
1, 2004. We also refinanced our senior credit facility resulting in a 50 basis
point reduction in the interest rate and acquired Sound Technologies, Inc. on
October 1, 2004. For the quarter, revenue increased 33.2% to a record $176.4
million and diluted earnings per common share increased by 45.5%, from $0.11 to
$0.16.
"Our laboratory internal revenue growth for the fourth quarter of 2004 was
10.5%, generating an increase in laboratory gross profit of 15.3% to $20.1
million and an increase in laboratory gross profit margin to 41.4% from 39.7% in
the fourth quarter of 2003.
"Our consolidated animal hospital revenue growth for the fourth quarter of
2004 was 37.9%, generating an increase in animal hospital gross profit of 40.6%
and an increase in animal hospital gross profit margin to 17.4% from 17.1% in
the fourth quarter of 2003. In addition, our animal hospital same-store revenue
growth for the fourth quarter of 2004 was 6.6%, generating an increase in
same-store gross profit of 11.2% to $17.4 million and an increase in same-store
gross profit margin to 18.0% from 17.3% in the fourth quarter of 2003.
"We incurred costs related to the integration of NPC in the amount of
approximately $157,000 and $1.4 million for the quarter and year ended December
31, 2004, respectively. These costs are included in corporate selling, general
and administrative expense.
"We completed the acquisition of Sound Technologies, Inc., or STI, on
October 1, 2004. STI is one of the largest suppliers of ultrasound and digital
radiography equipment to the veterinary industry in the United States. We are
very excited about the acquisition of STI and the opportunity to expand the
diagnostic capabilities in our animal hospitals as well as the advanced
diagnostic capabilities in our laboratories."
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 and
fourth quarters 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 fourth quarter 2004 financial results during a
conference call today, February 24, 2005 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 800-361-0912. Interested parties should
call at least 10 minutes prior to the start of the conference call to register.
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, including our statement
regarding continued growth in our core businesses and our expectations regarding
our acquisitions of NPC and STI. Actual results may vary substantially from
these forward-looking statements as a result of a variety of factors. Among the
important factors that could cause actual results to differ are: our ability to
successfully integrate NPC and STI into our existing operations and achieve
expected operating synergies following the mergers; 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; any impairment in the carrying value of our goodwill; the
effects of our recent acquisitions and our ability to effectively manage our
growth; the effects of competition; our ability to service our debt; and general
economic conditions. These and other risk factors that could affect actual
results are discussed in our periodic reports filed with the Securities and
Exchange Commission, including our Report on Form 10-K for the year ended
December 31, 2003 and our Report on Form 10-Q for the quarter ended September
30, 2004 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 Twelve Months Ended December 31, 2004 and 2003
(Unaudited - In Thousands, Except per Share Amounts)
Three Months Twelve Months
Ended December 31, Ended December 31,
----------------- -------------------
2004 2003 2004 2003
-------- -------- --------- ---------
Revenue:
Laboratory $48,623 $43,994 $200,441 $178,812
Animal hospital 125,284 90,851 481,023 376,040
Medical technology 6,090 - 6,090 -
Intercompany (3,557) (2,404) (13,465) (10,187)
-------- -------- --------- ---------
176,440 132,441 674,089 544,665
-------- -------- --------- ---------
Direct costs (1) 132,254 99,439 490,558 394,853
Gross profit:
Laboratory 20,130 17,457 87,780 75,786
Animal hospital 21,851 15,545 93,546 74,026
Medical technology 2,205 - 2,205 -
-------- -------- --------- ---------
44,186 33,002 183,531 149,812
-------- -------- --------- ---------
Selling, general and
administrative (1):
Laboratory 3,161 3,072 12,660 11,431
Animal hospital 3,534 2,791 12,761 10,329
Medical technology 1,842 - 1,842 -
Corporate 6,217 4,293 20,994 16,942
-------- -------- --------- ---------
14,754 10,156 48,257 38,702
-------- -------- --------- ---------
Write-down and loss on sale
of assets 5 308 59 590
-------- -------- --------- ---------
Operating income 29,427 22,538 135,215 110,520
Interest expense, net 6,780 6,316 25,492 26,087
Other income (153) (247) (338) (118)
Minority interest expense 641 354 2,558 1,633
Debt retirement costs 70 - 880 9,118
-------- -------- --------- ---------
Income before provision for
income taxes 22,089 16,115 106,623 73,800
Provision for income taxes 8,772 6,714 43,051 30,377
-------- -------- --------- ---------
Net income $13,317 $9,401 $63,572 $43,423
======== ======== ========= =========
Diluted earnings per common
share (2) $0.16 $0.11 $0.76 $0.53
======== ======== ========= =========
Shares used for computing
diluted earnings per common
share (2) 83,541 82,906 83,361 81,746
======== ======== ========= =========
VCA Antech, Inc.
Supplemental Operating Data
For the Three and Twelve Months Ended December 31, 2004 and 2003
(Unaudited - In Thousands, Except per Share Amounts)
Table #1 Three Months Twelve Months
Ended December 31, Ended December 31,
Reconciliation of net income ------------------- -------------------
to adjusted net income 2004 2003 2004 2003
--------- --------- --------- ---------
Net income $13,317 $9,401 $63,572 $43,423
Certain significant items:
Debt retirement costs 70 - 880 9,118
Litigation settlement
reimbursement - - (1,124) -
Related income tax benefit (29) - (361) (3,738)
--------- --------- --------- ---------
41 - (605) 5,380
--------- --------- --------- ---------
Adjusted net income $13,358 $9,401 $62,967 $48,803
========= ========= ========= =========
Table #2
Reconciliation of diluted
earnings per common share to
adjusted diluted earnings per
common share (2)
Diluted earnings per common
share $0.16 $0.11 $0.76 $0.53
Certain significant items as
detailed in Table #1, net of
income tax benefit - - - 0.07
--------- --------- --------- ---------
Adjusted diluted earnings per
common share $0.16 $0.11 $0.76 $0.60
========= ========= ========= =========
Shares used for computing
adjusted diluted
earnings per common share 83,541 82,906 83,361 81,746
========= ========= ========= =========
Table #3
Reconciliation of operating
income to adjusted operating
income and operating margin to
adjusted operating margin
Revenue $176,440 $132,441 $674,089 $544,665
========= ========= ========= =========
Operating income $29,427 $22,538 $135,215 $110,520
Operating margin 16.7% 17.0% 20.1% 20.3%
Certain significant items:
Litigation settlement
reimbursement - - (1,124) -
--------- --------- --------- ---------
Adjusted operating income $29,427 $22,538 $134,091 $110,520
========= ========= ========= =========
Adjusted operating margin 16.7% 17.0% 19.9% 20.3%
VCA Antech, Inc.
Supplemental Operating Data - Continued
For the Three and Twelve Months Ended December 31, 2004 and 2003
(Unaudited - In Thousands)
Table #4
Reconciliation of animal Three Months Twelve Months
hospital operating margin to Ended December 31, Ended December 31,
animal hospital adjusted ------------------ -------------------
operating margin 2004 2003 2004 2003
--------- -------- --------- ---------
Revenue $125,284 $90,851 $481,023 $376,040
========= ======== ========= =========
Animal hospital operating
income $18,312 $12,660 $80,727 $63,378
Animal hospital operating
margin 14.6% 13.9% 16.8% 16.9%
Certain items:
Write-down of assets - - - 392
--------- -------- --------- ---------
Animal hospital adjusted
operating income $18,312 $12,660 $80,727 $63,770
========= ======== ========= =========
Animal hospital adjusted
operating margin 14.6% 13.9% 16.8% 17.0%
Table #5
Depreciation and amortization (1)
Depreciation and amortization
included in direct costs:
Laboratory $899 $753 $3,426 $3,100
Animal hospital 2,827 2,453 10,446 9,597
Medical technology 270 - 270 -
--------- -------- --------- ---------
3,996 3,206 14,142 12,697
Depreciation and amortization
included in selling, general
and administrative expense 412 427 1,673 1,589
--------- -------- --------- ---------
Total depreciation and
amortization $4,408 $3,633 $15,815 $14,286
========= ======== ========= =========
VCA Antech, Inc.
Supplemental Operating Data - Continued
As of December 31, 2004 and 2003
(Unaudited - In Thousands)
Table #6 December December
31, 2004 31, 2003
Selected consolidated balance sheet data --------- ---------
Cash $30,964 $17,237
Accounts receivable, net $29,358 $22,335
Stockholders' equity $232,759 $161,923
Total assets $742,100 $554,803
Debt:
Revolving credit facility $- $-
Senior term F notes 223,313 -
Senior term D notes - 145,703
9.875% senior subordinated notes 170,000 170,000
Other 3,576 1,770
Unamortized discounts - (4)
--------- ---------
Total debt $396,889 $317,469
========= =========
For the Twelve Months Ended December 31, 2004 and 2003
(Unaudited - In Thousands)
Table #7 For the Twelve Months
Selected cash flow and expense data Ended December 31,
-------------------
2004 2003
--------- ---------
Net cash provided by operating activities $86,359 $76,107
Rent expense $21,137 $16,407
Capital expenditures $23,954 $15,433
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 method of
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
on August 25, 2004.
CONTACT: VCA Antech, Inc.
Tom Fuller, 310-571-6505