Exhibit 99.1
VCA Antech, Inc. Reports Second Quarter Results
LOS ANGELES--(BUSINESS WIRE)--July 26, 2005--VCA Antech, Inc.
(NASDAQ:WOOF):
-- Second quarter reported diluted earnings per common share was
$0.13, which includes a $0.14 charge for debt retirement
costs.
-- Second quarter adjusted diluted earnings per common share
increased 22.7% to $0.27.
-- Second quarter reported revenue increased 21.6% to a record
$206.6 million.
Our company, VCA Antech, Inc. (NASDAQ:WOOF), a leading animal
healthcare company in the United States, today reported financial
results for our second quarter ended June 30, 2005 as follows: revenue
increased 21.6% to a record $206.6 million; operating income increased
18.7% to $45.4 million; reported net income was $11.3 million; and
reported diluted earnings per common share was $0.13.
Reported net income and reported diluted earnings per common share
for the quarter ended June 30, 2005 included an after-tax charge of
$11.5 million, or $0.14 per diluted common share, for debt retirement
costs related to both the refinancing of our senior term notes and the
purchase of our 9.875% senior subordinated notes. 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. Excluding these items from the quarters ended June
30, 2005 and 2004, adjusted net income increased 22.2% to $22.8
million and adjusted diluted earnings per common share increased 22.7%
to $0.27.
We also reported our financial results for the six months ended
June 30, 2005 as follows: revenue increased 25.2% to a record $393.4
million; operating income increased 18.5% to $81.8 million; reported
net income was $28.5 million; and reported diluted earnings per common
share was $0.34.
Reported net income and reported diluted earnings per common share
for the six months ended June 30, 2005 included an after-tax charge of
$11.5 million, or $0.14 per diluted common share, for debt retirement
costs, as discussed above. Reported net income and reported diluted
earnings per common share for the six months ended June 30, 2004
included an after-tax credit for certain significant items of
$646,000. Excluding these items from the six months ended June 30,
2005 and 2004, adjusted net income increased 24.1% to $40.0 million
and adjusted diluted earnings per common share increased 23.1% to
$0.48.
Bob Antin, Chairman and CEO, stated, "We had another excellent and
productive quarter marked by continued growth in our core businesses
with revenue increasing 21.6% to a second quarter record of $206.6
million and adjusted diluted earnings per common share increasing
22.7% to $0.27.
"In addition, we successfully refinanced our senior credit
facility, lowering the interest rate on our senior term notes by 25
basis points to LIBOR plus 150 basis points. As part of that
refinancing, we borrowed additional funds used to purchase all of our
9.875% senior subordinated notes in May 2005 and to acquire Pet's
Choice, Inc. on July 1, 2005. We are very excited about the Pet's
Choice merger and the opportunity to expand our presence in Texas,
Arizona and Washington. Pet's Choice operates 46 animal hospitals in
five states with annual revenue for the fiscal year ended March 27,
2005 of $69.4 million.
"Our laboratory internal revenue growth for the second quarter of
2005 was 12.2%, generating a 14.2% increase in laboratory gross profit
and an increase in laboratory gross profit margins to 47.0% compared
to 46.1% in the comparable prior year quarter. Our laboratory
operating margins increased to 41.2% compared to 40.0% in the second
quarter of 2004.
"Our consolidated animal hospital revenue for the second quarter
of 2005 grew 21.9%, generating a 22.2% increase in animal hospital
gross profit and an increase in animal hospital gross profit margins
to 21.5% compared to 21.4% in the comparable prior year quarter. Our
animal hospital same-store revenue growth for the second quarter of
2005 was 6.4% and our same-store gross profit margins increased to
22.2% compared to 21.8% in the comparable prior year quarter. Our
consolidated animal hospital operating margins increased to 19.0%
compared to 18.9% in the second quarter of 2004."
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 related to both the refinancing of our senior term
notes and the purchase of our 9.875% senior subordinated notes
incurred during the second quarter of 2005. 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 effect of the litigation settlement
reimbursement and debt retirement costs and related expenses that we
believe are not representative of our core operations for the period
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 is a material limitation 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) on current performance;
and adjusted net income excludes the impact of significant items (in
this case, the litigation settlement reimbursement and debt retirement
costs and related expenses) 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
We will discuss our company's second quarter 2005 financial
results during a conference call today, July 26, 2005 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 via telephone by dialing (800) 289-0496. 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,
including our statement regarding continued growth in our core
businesses and our expectations regarding our acquisition of Pet's
Choice. Among the important factors that could cause actual results to
differ are: a material adverse change in the financial condition or
operations of VCA Antech, Inc. or Pet's Choice; the ability to
successfully integrate the two companies and achieve expected
operating synergies following the merger; 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; the effects of competition;
any impairment in the carrying value of our goodwill; the effects of
our recent acquisitions and our ability to effectively manage our
growth; changes in prevailing interest rates; our ability to service
our debt; and general economic conditions. These and other risk
factors are discussed in our periodic reports filed with the SEC,
including our Report on Form 10-K for the year ended December 31, 2004
and our periodic Report on Form 10-Q for the quarter ended March 31,
2005, 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 ultrasound and digital radiography
equipment to the veterinary industry.
VCA Antech, Inc.
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2005 and 2004
(Unaudited - In Thousands, Except Per Share Amounts)
Three Months Six Months
Ended June 30, Ended June 30,
----------------- -------------------
2005 2004 2005 2004
-------- -------- --------- ---------
Revenue:
Laboratory $58,277 $51,951 $111,716 $101,133
Animal hospital 147,959 121,384 281,313 219,340
Medical technology 5,358 - 9,842 -
Intercompany (5,010) (3,388) (9,424) (6,176)
-------- -------- --------- ---------
206,584 169,947 393,447 314,297
-------- -------- --------- ---------
Direct costs 145,849 119,943 282,185 224,733
Gross profit:
Laboratory 27,378 23,968 51,247 45,435
Animal hospital 31,817 26,036 57,552 44,129
Medical technology 1,658 - 2,697 -
Intercompany (118) - (234) -
-------- -------- --------- ---------
60,735 50,004 111,262 89,564
-------- -------- --------- ---------
Selling, general and
administrative:
Laboratory 3,346 3,190 6,711 6,363
Animal hospital 3,807 3,056 7,510 5,804
Medical technology 1,922 - 3,489 -
Corporate 6,342 5,519 11,839 8,299
-------- -------- --------- ---------
15,417 11,765 29,549 20,466
-------- -------- --------- ---------
Loss (gain) on sale of assets (78) 4 (88) 66
-------- -------- --------- ---------
Operating income 45,396 38,235 81,801 69,032
Interest expense, net 6,081 6,098 12,748 12,083
Other (income) expense 67 (287) 131 (176)
Minority interest expense 846 755 1,531 1,171
Debt retirement costs 19,282 810 19,282 810
-------- -------- --------- ---------
Income before provision for
income taxes 19,120 30,859 48,109 55,144
Provision for income taxes 7,858 12,692 19,601 22,233
-------- -------- --------- ---------
Net income $11,262 $18,167 $28,508 $32,911
======== ======== ========= =========
Diluted earnings per common
share (a) $0.13 $0.22 $0.34 $0.40
======== ======== ========= =========
Shares used for computing
diluted earnings per common
share (a) 83,874 83,382 83,709 83,218
======== ======== ========= =========
VCA Antech, Inc.
Supplemental Operating Data
For the Three and Six Months Ended June 30, 2005 and 2004
(Unaudited - In Thousands, Except Per Share Amounts)
Three Months Six Months
Table #1 Ended June 30, Ended June 30,
------------------- -------------------
Reconciliation of net income 2005 2004 2005 2004
to adjusted net income --------- --------- --------- ---------
Net income $11,262 $18,167 $28,508 $32,911
Certain significant items:
Debt retirement costs 19,282 810 19,282 810
Litigation settlement
reimbursement - - - (1,124)
Related income tax benefit (7,765) (332) (7,765) (332)
--------- --------- --------- ---------
11,517 478 11,517 (646)
--------- --------- --------- ---------
Adjusted net income $22,779 $18,645 $40,025 $32,265
========= ========= ========= =========
Table #2
Reconciliation of diluted
earnings per common share to
adjusted diluted earnings per
common share (a)
Diluted earnings per common
share $0.13 $0.22 $0.34 $0.40
Certain significant items as
detailed in Table #1, net of
income tax benefit 0.14 - 0.14 (0.01)
--------- --------- --------- ---------
Adjusted diluted earnings per
common share $0.27 $0.22 $0.48 $0.39
========= ========= ========= =========
Shares used for computing
adjusted diluted earnings per
common share 83,874 83,382 83,709 83,218
========= ========= ========= =========
Table #3
Reconciliation of operating
income to adjusted operating
income and operating margin
to adjusted operating margin
Revenue $206,584 $169,947 $393,447 $314,297
========= ========= ========= =========
Operating income $45,396 $38,235 $81,801 $69,032
Operating margin 22.0% 22.5% 20.8% 22.0%
Certain significant items:
Litigation settlement
reimbursement - - - (1,124)
--------- --------- --------- ---------
Adjusted operating income $45,396 $38,235 $81,801 $67,908
========= ========= ========= =========
Adjusted operating margin 22.0% 22.5% 20.8% 21.6%
Three Months Six Months
Table #4 Ended June 30, Ended June 30,
--------------- ---------------
Depreciation and amortization 2005 2004 2005 2004
------- ------- ------- -------
Depreciation and amortization included
in direct costs:
Laboratory $863 $897 $1,750 $1,718
Animal hospital 2,888 2,536 5,614 $4,937
Medical technology 278 - 556 -
Intercompany (16) - (16) -
------- ------- ------- -------
4,013 3,433 7,904 6,655
Depreciation and amortization included
in selling, general and
administrative expense: 430 386 881 780
------- ------- ------- -------
Total depreciation and amortization $4,443 $3,819 $8,785 $7,435
======= ======= ======= =======
As of June 30, 2005 and December 31, 2004
(Unaudited - In Thousands)
Table #5 June 30, December 31,
2005 2004
Selected consolidated balance sheet data ------------- --------------
Cash $115,515 $30,964
Accounts receivable, net $33,268 $28,936
Stockholders' equity $263,855 $232,759
Total assets $859,104 $742,100
Debt:
Revolving credit facility $- $-
Senior term B notes 473,813 -
Senior term F notes - 223,313
9.875% senior subordinated notes - 170,000
Other debt 2,751 3,576
------------- --------------
Total debt $476,564 $396,889
============= ==============
VCA Antech, Inc.
Supplemental Operating Data - Continued
For the Six Months Ended June 30, 2005 and 2004
(Unaudited - In Thousands)
For the Six Months
Table #6 Ended June 30,
-------------------------
Selected cash flow and expense data 2005 2004
------------ ------------
Net cash provided by operating activities $54,425 $42,315
Rent expense $12,389 $9,397
Capital expenditures $14,681 $9,027
Notes to Press Release
(a) 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.
Tomas Fuller, 310-571-6505