Exhibit 99.1
VCA Antech, Inc. Reports Fourth Quarter Results
-- Fourth quarter revenue increased 11.7% to $242.4 million
-- Fourth quarter gross profit increased 18.6% to $61.6 million
-- Fourth quarter diluted earnings per common share increased
15.0% to $0.23
Business Editors
LOS ANGELES--(BUSINESS WIRE)--Feb. 21, 2007--VCA Antech, Inc.
(NASDAQ:WOOF), a leading animal healthcare company in the United
States, today reported financial results for the quarter ended
December 31, 2006, as follows: revenue increased 11.7% to a fourth
quarter record of $242.4 million; gross profit increased 18.6% to
$61.6 million; operating income increased 22.2% to $40.7 million; net
income increased 13.4% to $19.3 million; and diluted earnings per
common share increased 15.0% to $0.23.
We also reported our financial results for the year ended December
31, 2006, as follows: revenue increased 17.1% to a twelve-month record
of $983.3 million; gross profit increased 19.8% to $270.6 million;
operating income increased 20.9% to $192.5 million; net income was
$105.5 million; and diluted earnings per common share was $1.24. The
first quarter of 2006 included a tax benefit 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 December 31, 2005 included an after-tax charge of
$11.7 million, or $0.14 per diluted common share, for debt retirement
costs. Excluding these items, adjusted net income increased 24.1% to
$98.7 million and adjusted diluted earnings per common share increased
22.1% to $1.16.
Bob Antin, Chairman and CEO, stated, "We had an outstanding
quarter. Our consolidated revenue increased 11.7% to $242.4 million
and our consolidated margins improved over the comparable prior year
quarter. Our consolidated gross profit increased 18.6% and our
consolidated gross margin increased to 25.4% compared to 23.9% in the
comparable prior year quarter. In addition, our consolidated operating
income increased 22.2% and our consolidated operating margin increased
to 16.8% compared to 15.3% in the comparable prior year quarter.
"Our laboratory revenue increased 17.6% to $63.3 million, our
laboratory gross profit increased 25.5% and our laboratory gross
margin increased to 44.8% compared to 42.0% in the comparable prior
year quarter. Our laboratory operating income increased 25.1% and our
laboratory operating margin increased to 37.5% compared to 35.2% in
the comparable prior year quarter. Laboratory internal revenue growth
was 15.4% for the fourth quarter of 2006.
"Our animal hospital revenue increased 8.5% to $171.9 million, our
animal hospital gross profit increased 8.3% and our animal hospital
gross margin of 16.7% was consistent with the prior year comparable
quarter. Our animal hospital operating income increased 9.0% and our
operating margin increased to 13.6% compared to 13.5% in the
comparable prior year quarter. Our animal hospital same-store revenue
growth, adjusted for two less business days in the current quarter,
was 5.5% for the fourth quarter of 2006 and our animal hospital
same-store gross margin of 16.7% was consistent with the comparable
prior year quarter.
"Our medical technology revenue increased 41.1% to $14.0 million
and our medical technology gross profit increased 70.1% to $5.1
million, while our medical technology gross margin increased to 36.8%
compared to 30.5% in the comparable prior year quarter. Our medical
technology operating income was $2.1 million compared to $284,000
reported in the fourth 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 year ended December 31, 2006,
the only item excluded in computing adjusted net income and adjusted
diluted earnings per common share was a $6.8 million tax benefit. For
the year ended December 31, 2005, the only item excluded in computing
adjusted net income and adjusted diluted earnings per common share was
debt retirement costs, net of tax, in the amount of $11.7 million.
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 fourth quarter 2006 financial
results during a conference call today, February 21, 2007 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) 289-0544. 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. 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 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 September 30, 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 diagnostic imaging equipment to the
veterinary industry.
VCA ANTECH, INC.
CONSOLIDATED INCOME STATEMENTS
For the Three Months and Year Ended December 31, 2006 and 2005
(In thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
Revenue:
Laboratory $63,281 $53,793 $258,345 $222,064
Animal hospital 171,880 158,437 711,997 607,565
Medical technology 13,957 9,893 39,305 30,330
Intercompany (6,767) (5,146) (26,334) (20,293)
--------- -------- --------- ---------
242,351 216,977 983,313 839,666
--------- -------- --------- ---------
Direct costs 180,735 165,016 712,749 613,799
Gross profit:
Laboratory 28,362 22,602 119,449 98,926
Animal hospital 28,650 26,443 138,358 118,239
Medical technology 5,141 3,022 14,213 9,433
Intercompany (537) (106) (1,456) (731)
--------- -------- --------- ---------
61,616 51,961 270,564 225,867
--------- -------- --------- ---------
Selling, general and
administrative:
Laboratory 4,667 3,646 17,460 13,993
Animal hospital 5,125 4,642 20,232 16,224
Medical technology 3,028 2,738 10,762 9,033
Corporate 7,885 7,216 29,566 26,935
--------- -------- --------- ---------
20,705 18,242 78,020 66,185
--------- -------- --------- ---------
Write-down and loss on sale of
assets 217 414 17 441
--------- -------- --------- ---------
Operating income 40,694 33,305 192,527 159,241
Interest expense, net 5,917 6,261 24,240 25,043
Other (income) expense 32 (123) 8 (122)
Minority interest 580 800 3,100 3,109
Debt retirement costs - - - 19,282
--------- -------- --------- ---------
Income before provision for
income taxes 34,165 26,367 165,179 111,929
Provision for income taxes 14,825 9,316 59,650 44,113
--------- -------- --------- ---------
Net income $19,340 $17,051 $105,529 $67,816
========= ======== ========= =========
Diluted earnings per common
share $0.23 $0.20 $1.24 $0.81
========= ======== ========= =========
Shares used for computing
diluted earnings per common
share 85,165 84,369 84,882 83,996
========= ======== ========= =========
VCA ANTECH, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2006 and 2005
(In thousands)
December 31, December 31,
2006 2005
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $45,104 $58,488
Trade accounts receivable, net 44,491 37,436
Inventory 21,420 17,856
Prepaid expenses and other 13,492 9,867
Deferred income taxes 14,935 10,972
Prepaid income taxes 13,523 12,337
------------ ------------
Total current assets 152,965 146,956
Property and equipment, net 166,033 143,781
Other assets:
Goodwill 625,748 586,444
Other intangible assets, net 16,293 10,735
Deferred financing costs, net 979 1,340
Other 9,939 9,149
------------ ------------
Total assets $971,957 $898,405
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $6,648 $5,884
Accounts payable 23,328 20,718
Accrued payroll and related liabilities 33,864 30,131
Accrued interest 388 306
Other accrued liabilities 30,573 25,262
------------ ------------
Total current liabilities 94,801 82,301
Long-term obligations, less current portion 384,067 446,828
Deferred income taxes 39,804 30,803
Other liabilities 13,294 19,775
Minority interest 9,686 9,947
Stockholders' equity:
Common stock 84 83
Additional paid-in capital 275,013 258,402
Retained earnings 154,586 49,057
Accumulated other comprehensive income 622 1,209
------------ ------------
Total stockholders' equity 430,305 308,751
------------ ------------
Total liabilities and stockholders'
equity $971,957 $898,405
============ ============
VCA ANTECH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2006 and 2005
(In thousands)
Year Ended
December 31,
-------------------
2006 2005
--------- ---------
Cash flows from operating activities:
Net income $105,529 $67,816
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 22,242 19,335
Amortization of debt costs 361 547
Provision for uncollectible accounts 5,923 4,766
Debt retirement costs - 19,282
Write-down and loss on sale of assets 17 441
Share-based compensation 3,071 -
Minority interest in income of subsidiaries 3,100 3,109
Distributions to minority interest partners (3,514) (3,078)
Deferred income taxes 5,807 10,502
Excess tax benefit from exercise of stock
options (6,645) -
Other (949) (223)
Changes in operating assets and liabilities:
Increase in accounts receivable (12,308) (11,335)
Increase in inventory, prepaid expenses and
other assets (8,594) (9,092)
Increase in accounts payable and other accrued
liabilities 2,907 8,404
Increase in accrued payroll and related
liabilities 3,733 2,660
Increase (decrease) in accrued interest 82 (1,272)
Decrease in prepaid income taxes 6,128 3,238
--------- ---------
Net cash provided by operating activities 126,890 115,100
--------- ---------
Cash flows from investing activities:
Business acquisitions, net of cash acquired (50,484) (89,149)
Real estate acquired in connection with
business acquisitions (2,872) (2,405)
Property and equipment additions (35,316) (29,209)
Proceeds from sale of assets 598 1,702
Other 342 3,630
--------- ---------
Net cash used in investing activities (87,732) (115,431)
--------- ---------
Cash flows from financing activities:
Repayment of long-term obligations (65,414) (447,100)
Proceeds from the issuance of long-term
obligations - 475,000
Payment of financing costs - (3,257)
Proceeds from issuance of common stock under
stock option plans 6,227 3,212
Excess tax benefit from exercise of stock
options 6,645 -
--------- ---------
Net cash provided by (used in) financing
activities (52,542) 27,855
--------- ---------
Increase (decrease) in cash and cash equivalents (13,384) 27,524
Cash and cash equivalents at beginning of period 58,488 30,964
--------- ---------
Cash and cash equivalents at end of period $45,104 $58,488
========= =========
VCA ANTECH, INC.
SUPPLEMENTAL OPERATING DATA
For the Three Months and Year Ended December 31, 2006 and 2005
(In thousands, except per share amounts)
Table #1 Three Months Ended Year Ended
Reconciliation of net income to December 31, December 31,
adjusted net income ------------------ ------------------
2006 2005 2006 2005
--------- -------- --------- --------
Net income $19,340 $17,051 $105,529 $67,816
Certain significant items (net
of taxes):
Tax benefit - - (6,806) -
Debt retirement costs - - - 11,704
--------- -------- --------- --------
Adjusted net income $19,340 $17,051 $98,723 $79,520
========= ======== ========= ========
Table #2
Reconciliation of diluted
earnings per common share to
adjusted diluted earnings per
common share
Diluted earnings per common
share $0.23 $0.20 $1.24 $0.81
Certain significant items as
detailed in Table #1 - - (0.08) 0.14
--------- -------- --------- --------
Adjusted diluted earnings per
common share $0.23 $0.20 $1.16 $0.95
========= ======== ========= ========
Shares used for computing
adjusted diluted earnings per
common share 85,165 84,369 84,882 83,996
========= ======== ========= ========
Table #3
Depreciation and amortization
Depreciation and amortization
included in direct costs:
Laboratory $1,256 $1,134 $4,584 $3,894
Animal hospital 3,875 3,404 14,455 12,381
Medical technology 283 284 1,174 1,116
Intercompany (93) (28) (202) (64)
--------- -------- --------- --------
5,321 4,794 20,011 17,327
Depreciation and amortization
included in selling, general
and administrative expense: 574 594 2,231 2,008
--------- -------- --------- --------
Total depreciation and
amortization $5,895 $5,388 $22,242 $19,335
========= ======== ========= ========
VCA ANTECH, INC.
SUPPLEMENTAL OPERATING DATA - Continued
As of December 31, 2006 and 2005
(In thousands)
Table #4 December 31,
-------------------
Selected consolidated balance
sheet data 2006 2005
--------- ---------
Debt:
Revolving credit facility $- $-
Senior term notes 372,668 436,613
Other debt and capital leases 18,047 16,099
--------- ---------
Total debt $390,715 $452,712
========= =========
For the Three Months and Year Ended December 31, 2006 and 2005
(In thousands)
Three Months Ended Year Ended
Table #5 December 31, December 31,
------------------- -----------------
Selected expense data 2006 2005 2006 2005
--------- --------- -------- --------
Rent expense $8,359 $7,698 $32,058 $27,571
Share-based compensation
included in direct costs:
Laboratory $164 $- $656 $-
Share-based compensation
included in selling, general
and administrative expense:
Laboratory 127 - 509 -
Animal hospital 269 - 1,076 -
Corporate 185 - 830 -
--------- --------- -------- --------
581 - 2,415 -
--------- --------- -------- --------
Total share-based
compensation $745 $- $3,071 $-
========= ========= ======== ========
CONTACT: VCA Antech, Inc.
Tomas Fuller, Chief Financial Officer, 310-571-6505