Exhibit 99.1
VCA Antech, Inc. Reports Second Quarter Results
LOS ANGELES--(BUSINESS WIRE)--July 26, 2006--VCA Antech, Inc.
(NASDAQ:WOOF):
-- Second quarter revenue increased 23.5% to $255.2 million
-- Second quarter gross profit increased 23.4% to $75.0 million
-- Second quarter diluted earnings per common share was $0.35
-- Second quarter adjusted diluted earnings per common share
increased 29.6% to $0.35
VCA Antech, Inc. (NASDAQ:WOOF), a leading animal healthcare
company in the United States, today reported financial results for the
quarter ended June 30, 2006, as follows: revenue increased 23.5% to a
second quarter record of $255.2 million; gross profit increased 23.4%
to $75.0 million; operating income increased 22.4% to $55.6 million;
net income was $29.6 million; and diluted earnings per common share
was $0.35.
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. Excluding this item, adjusted net income for the second quarter
of 2006 increased 29.7% to $29.6 million and adjusted diluted earnings
per common share increased 29.6% to $0.35.
We also reported our financial results for the six months ended
June 30, 2006, as follows: revenue increased 24.4% to a first
six-months record of $489.3 million; gross profit increased 24.5% to
$138.5 million; operating income increased 22.6% to $100.3 million;
net income was $59.2 million; and diluted earnings per common share
was $0.70. The first quarter of 2006 included a tax benefit in the
amount of $6.8 million, or $0.08 per diluted common share, due to a
favorable outcome of an income tax audit that resulted in a change to
our estimated tax liabilities. The second quarter of 2005 included an
after-tax charge of $11.5 million, or $0.14 per diluted common share,
for debt retirement costs. Excluding these items from the six months
ended June 30, 2006 and 2005, adjusted net income increased 30.9% to
$52.4 million and adjusted diluted earnings per common share increased
29.2% to $0.62.
Bob Antin, Chairman and CEO, stated, "Our operating results for
the second quarter were marked by continued growth in our core
businesses. Our consolidated revenue increased to $255.2 million and
our consolidated gross profit margin of 29.4% remained unchanged from
the comparable prior year quarter. Our consolidated operating income
margin was 21.8% compared to 22.0% in the comparable prior year
quarter. Operating income for the second quarter of 2006 includes
share-based compensation of $669,000, or 0.3% of consolidated revenue,
as a result of adopting SFAS No. 123R on January 1, 2006. In addition,
during the second quarter of 2006, we made a $20.0 million prepayment
of our senior term notes, which brings the total year-to-date prepaid
amount to $60.0 million.
"Our laboratory revenue for the second quarter of 2006 increased
15.8%, generating an 18.8% increase in laboratory gross profit and our
laboratory gross profit margin increased to 48.2% compared to 47.0% in
the comparable prior year quarter. Our laboratory operating margin
increased to 41.8% compared to 41.2% in the comparable prior year
quarter. Laboratory internal revenue growth was 14.9% for the second
quarter.
"Our consolidated animal hospital revenue increased 25.7% to
$186.0 million. We saw improvements in the performance of those animal
hospitals that we have operated for more than one year. We experienced
animal hospital same-store revenue growth of 5.4% and animal hospital
same-store gross profit margin increased to 21.8% from 21.7% in the
comparable prior year period. We continue to experience lower gross
profit margins on animal hospitals acquired within the last year,
including Pet's Choice, Inc. (acquired on July 1, 2005), resulting in
a consolidated animal hospital gross profit margin of 21.3% for the
second quarter of 2006 as compared to 21.5% in the comparable period
in 2005. Our consolidated animal hospital operating margin for the
second quarter of 2006 was 18.6% compared to 19.0% in the comparable
prior year quarter.
"Our medical technology revenue increased 56.8% to $8.4 million
and our medical technology gross profit margin increased to 37.4%
compared to 30.9% in the comparable prior year quarter. Our medical
technology segment reported operating income of $595,000 compared to
an operating loss of $264,000 reported in the second quarter of 2005."
Non-GAAP Financial Measures
We believe investors' understanding of our total performance is
enhanced by disclosing adjusted net income and adjusted diluted
earnings per common share. We define adjusted net income and adjusted
diluted earnings per common share as the reported items, adjusted to
exclude certain significant items. Adjusted diluted earnings per
common share is adjusted net income divided by diluted common shares
outstanding.
Management uses adjusted net income and adjusted diluted earnings
per common share because they exclude the effect of significant items
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. For the six months ended June 30,
2006, the only item excluded in computing adjusted net income and
adjusted diluted earnings per common share was the $6.8 million tax
benefit recorded during the first quarter of 2006. For the six months
ended June 30, 2005, the only item excluded in computing adjusted net
income and adjusted diluted earnings per common share was debt
retirement costs recorded during the second quarter of 2005.
There is a material limitation associated with the use of these
non-GAAP financial measures: our computation of adjusted net income
excludes the impact of certain 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 company's second quarter 2006 financial
results during a conference call today, July 26, 2006 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. Among the important factors that could cause actual
results to differ are: a material adverse change in our financial
condition or operations; 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 our recent acquisitions,
including Pet's Choice, Inc., and our ability to effectively manage
our growth and achieve operating synergies; a continued decline in
demand for some of our products and services; any disruption in our
information technology systems or transportation networks; the effects
of competition; any impairment in the carrying value of our goodwill;
changes in prevailing interest rates; our ability to service our debt;
and general economic conditions. These and other risk factors are
discussed in our Report on Form 10-K for the year ended December 31,
2005 and our Report on Form 10-Q for the quarter ended March 31, 2006,
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 Income Statements
For the Three and Six Months Ended June 30, 2006 and 2005
(Unaudited - In Thousands, Except Per Share Amounts)
Three Months Six Months
Ended June 30, Ended June 30,
------------------- -------------------
2006 2005 2006 2005
-------- -------- -------- --------
Revenue:
Laboratory $ 67,473 $ 58,277 $129,010 $111,716
Animal hospital 186,002 147,959 356,525 281,313
Medical technology 8,400 5,358 16,392 9,842
Intercompany (6,725) (5,010) (12,597) (9,424)
-------- -------- -------- --------
255,150 206,584 489,330 393,447
-------- -------- -------- --------
Direct costs 180,188 145,849 350,847 282,185
Gross profit:
Laboratory 32,524 27,378 61,074 51,247
Animal hospital 39,651 31,817 72,248 57,552
Medical technology 3,144 1,658 5,646 2,697
Intercompany (357) (118) (485) (234)
-------- -------- -------- --------
74,962 60,735 138,483 111,262
-------- -------- -------- --------
Selling, general and
administrative:
Laboratory 4,349 3,346 8,443 6,711
Animal hospital 5,123 3,807 9,946 7,510
Medical technology 2,549 1,922 5,200 3,489
Corporate 7,463 6,342 14,780 11,839
-------- -------- -------- --------
19,484 15,417 38,369 29,549
-------- -------- -------- --------
Gain on sale of assets (85) (78) (203) (88)
-------- -------- -------- --------
Operating income 55,563 45,396 100,317 81,801
Interest expense, net 5,927 6,081 12,239 12,748
Other (income) expense (31) 67 (97) 131
Minority interest expense 900 846 1,674 1,531
Debt retirement costs - 19,282 - 19,282
-------- -------- -------- --------
Income before provision for
income taxes 48,767 19,120 86,501 48,109
Provision for income taxes 19,214 7,858 27,289 19,601
-------- -------- -------- --------
Net income $ 29,553 $ 11,262 $ 59,212 $ 28,508
======== ======== ======== ========
Diluted earnings per common
share $ 0.35 $ 0.13 $ 0.70 $ 0.34
======== ======== ======== ========
Shares used for computing
diluted earnings per common
share 84,838 83,874 84,699 83,709
======== ======== ======== ========
VCA ANTECH, INC.
CONSOLIDATED BALANCE SHEETS
As of June 30, 2006 and December 31, 2005
(Unaudited - In thousands)
June 30, December 31,
2006 2005
--------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 20,801 $ 58,488
Trade accounts receivable, net 39,734 36,104
Inventory 18,851 17,856
Prepaid expenses and other 13,779 9,867
Deferred income taxes 11,952 10,972
Prepaid income taxes 9,913 12,337
--------------- --------------
Total current assets 115,030 145,624
Property and equipment, net 154,188 143,781
Other assets:
Goodwill 610,658 586,444
Other intangible assets, net 14,495 10,735
Deferred financing costs, net 1,114 1,340
Other 10,357 9,149
--------------- --------------
Total assets $ 905,842 $ 897,073
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
obligations $ 6,619 $ 5,884
Accounts payable 17,317 20,718
Accrued payroll and related
liabilities 24,675 25,201
Accrued interest 246 306
Other accrued liabilities 31,349 28,860
--------------- --------------
Total current liabilities 80,206 80,969
Long-term obligations, less current
portion 386,729 446,828
Deferred income taxes 36,734 30,803
Other liabilities 13,803 19,775
Minority interest 10,282 9,947
Stockholders' equity:
Common stock 83 83
Additional paid-in capital 267,840 258,402
Retained earnings 108,269 49,057
Accumulated other comprehensive
income 1,896 1,209
--------------- --------------
Total stockholders' equity 378,088 308,751
--------------- --------------
Total liabilities and stockholders'
equity $ 905,842 $ 897,073
=============== ==============
VCA ANTECH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2006 and 2005
(Unaudited - In thousands)
Six Months Ended
June 30,
--------------------------------
2006 2005
--------------- --------------
Cash flows from operating activities:
Net income $ 59,212 $ 28,508
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 10,851 8,785
Amortization of debt costs 226 351
Provision for uncollectible accounts 2,976 2,025
Debt retirement costs - 19,282
Gain on sale of assets (203) (88)
Share-based compensation 1,445 -
Minority interest in income of
subsidiaries 1,674 1,531
Distributions to minority interest
partners (1,339) (1,145)
Deferred income taxes 4,701 2,713
Excess tax benefit from exercise of
stock options (3,939) -
Other (561) (377)
Changes in operating assets and
liabilities (10,902) (7,160)
--------------- --------------
Net cash provided by operating
activities 64,141 54,425
--------------- --------------
Cash flows used in investing
activities:
Business acquisitions, net of cash
acquired (30,172) (22,174)
Real estate acquired in connection
with business acquisitions (1,781) (221)
Property and equipment additions (15,067) (14,681)
Proceeds from sale of assets 297 338
Other 161 3,039
--------------- --------------
Net cash used in investing
activities (46,562) (33,699)
--------------- --------------
Cash flows used in financing
activities:
Repayment of long-term obligations (62,781) (409,187)
Proceeds from the issuance of long-
term obligations - 475,000
Payment of financing costs - (3,216)
Proceeds from issuance of common
stock under stock option plans 3,576 1,228
Excess tax benefit from exercise of
stock options 3,939 -
--------------- --------------
Net cash used in financing
activities (55,266) 63,825
--------------- --------------
Increase (decrease) in cash and cash
equivalents (37,687) 84,551
Cash and cash equivalents at
beginning of period 58,488 30,964
--------------- --------------
Cash and cash equivalents at end of
period $ 20,801 $ 115,515
=============== ==============
VCA Antech, Inc.
Supplemental Operating Data
For the Three and Six Months Ended June 30, 2006 and 2005
(Unaudited - In Thousands, Except Per Share Amounts)
Table #1 Three Months Six Months
Ended June 30, Ended June 30,
----------------- -----------------
Reconciliation of net income to
adjusted net income 2006 2005 2006 2005
------- ------- ------- -------
Net income $29,553 $11,262 $59,212 $28,508
Certain significant items:
Tax benefit - - (6,806) -
Debt retirement costs, net of tax - 11,517 - 11,517
------- ------- ------- -------
Adjusted net income $29,553 $22,779 $52,406 $40,025
======= ======= ======= =======
Table #2
Reconciliation of diluted earnings
per common share to adjusted
diluted earnings per common share
Diluted earnings per common share $ 0.35 $ 0.13 $ 0.70 $ 0.34
Certain significant item as
detailed in Table #1 - 0.14 (0.08) 0.14
------- ------- ------- -------
Adjusted diluted earnings per
common share $ 0.35 $ 0.27 $ 0.62 $ 0.48
======= ======= ======= =======
Shares used for computing adjusted
diluted earnings per common share 84,838 83,874 84,699 83,709
======= ======= ======= =======
Table #3
Depreciation and amortization
Depreciation and amortization
included in direct costs:
Laboratory $ 1,065 $ 863 $ 2,122 $ 1,750
Animal hospital 3,543 2,888 7,049 5,614
Medical technology 289 278 607 556
Intercompany (37) (16) (68) (16)
------- ------- ------- -------
4,860 4,013 9,710 7,904
Depreciation and amortization included in
selling, general
and administrative expense 569 430 1,141 881
------- ------- ------- -------
Total depreciation and
amortization $ 5,429 $ 4,443 $10,851 $ 8,785
======= ======= ======= =======
VCA Antech, Inc.
Supplemental Operating Data - Continued
As of June 30, 2006 and December 31, 2005
(Unaudited - In Thousands)
Table #4
Selected consolidated balance sheet June 30, December 31,
data 2006 2005
---------------- ---------------
Debt:
Revolving credit facility $ - $ -
Senior term notes 374,565 436,613
Other debt and capital leases 18,783 16,099
--------------- --------------
Total debt $ 393,348 $ 452,712
=============== ==============
For the Three and Six Months Ended June 30, 2006 and 2005
(Unaudited - In Thousands)
For the Three For the Six
Months Months
Table #5 Ended June 30, Ended June 30,
--------------- -----------------
Selected expense data 2006 2005 2006 2005
------ ------ ------- -------
Rent expense $7,905 $6,284 $15,604 $12,389
Share-based compensation included
in:
Lab direct costs $ 160 $ - $ 320 $ -
Lab SG&A 126 - 254 -
Animal hospital SG&A 216 - 431 -
Corporate SG&A 167 - 440 -
------ ------ ------- -------
Total share-based compensation $ 669 $ - $ 1,445 $ -
====== ====== ======= =======
CONTACT: VCA Antech, Inc.
Tom Fuller, 310-571-6505