Exhibit 99.1
VCA Antech, Inc. Reports Second Quarter 2007 Results
-- Revenue increased 17.7% to $300.3 million
-- Gross profit increased 19.9% to $89.9 million
-- Diluted earnings per common share increased 20.0% to $0.42
Business Editors
LOS ANGELES--(BUSINESS WIRE)--July 26, 2007--VCA Antech, Inc.
(NASDAQ:WOOF), a leading animal healthcare company in the United
States, today reported financial results for the quarter ended June
30, 2007, as follows: revenue increased 17.7% to a second quarter
record of $300.3 million; gross profit increased 19.9% to $89.9
million; operating income increased 21.3% to $67.4 million; net income
increased 21.3% to $35.8 million; and diluted earnings per common
share increased 20.0% to $0.42.
We also reported our financial results for the six months ended
June 30, 2007, as follows: revenue increased 15.6% to a first
six-months record of $565.5 million; gross profit increased 19.7% to
$165.8 million; operating income increased 21.4% to $121.7 million;
net income was $64.2 million; and diluted earnings per common share
was $0.75. 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. Excluding this item from 2006, adjusted
net income increased 22.4% to $64.2 million and adjusted diluted
earnings per common share increased 21.0% to $0.75.
Bob Antin, Chairman and CEO, stated, "The second quarter was
marked by the outstanding operating performance of our company and the
acquisition of Healthy Pet Corp., which occurred on June 1, 2007. On a
17.7% increase in consolidated revenue, our gross profit and operating
income increased 19.9% and 21.3%, respectively, net income increased
21.3% and diluted earnings per common share increased 20.0% to $0.42.
"Our laboratory revenue increased 17.4% to $79.2 million. Our
laboratory gross profit increased 22.9% and our laboratory gross
margin increased to 50.5% compared to 48.2% in the comparable prior
year quarter. Our laboratory operating income increased 23.7% and our
laboratory operating margin increased to 44.0% compared to 41.8% in
the comparable prior year quarter. Laboratory internal revenue growth
was 15.9% for the second quarter of 2007.
"Our animal hospital revenue increased 17.5% to $218.5 million.
Our animal hospital same-store revenue growth was 6.6% for the second
quarter of 2007 and our animal hospital same-store gross margin
increased to 21.6% compared to 21.4% in the comparable prior year
quarter. Our consolidated animal hospital gross margin declined to
21.2% compared to 21.3% in the comparable prior year quarter and our
consolidated animal hospital operating margin remained unchanged at
18.6%.
"Our medical technology revenue increased 26.6% to $10.6 million,
our medical technology gross profit increased 20.4% to $3.8 million
and our medical technology gross margin was 35.6% compared to 37.4% in
the comparable prior year quarter. Our medical technology operating
income was $1.1 million compared to $595,000 reported in the second
quarter of 2006."
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 a $6.8 million tax
benefit recorded during the first quarter of 2006. For the quarter and
six months ended June 30, 2007, there were no adjustments.
There is a material limitation associated with the use of these
non-GAAP financial measures: our computation of adjusted net income
for the six months ended June 30, 2006, excludes the impact of the
$6.8 million tax benefit 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 2007 financial
results during a conference call today, July 26, 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) 500-3792. 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
ability to successfully integrate the acquisition of Healthy Pet Corp.
and achieve expected operating synergies; 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 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,
2006, and our Report on Form 10-Q for the quarter ended March 31,
2007, 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 and Six Months Ended June 30, 2007 and 2006
(In thousands, except per share amounts)
Three Months Six Months
Ended June 30, Ended June 30,
-------------------- --------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Revenue:
Laboratory $ 79,210 $ 67,473 $152,807 $129,010
Animal hospital 218,466 186,002 405,637 356,525
Medical technology 10,635 8,400 21,807 16,392
Intercompany (8,006) (6,725) (14,801) (12,597)
--------- --------- --------- ---------
300,305 255,150 565,450 489,330
--------- --------- --------- ---------
Direct costs 210,427 180,188 399,652 350,847
Gross profit:
Laboratory 39,966 32,524 75,968 61,074
Animal hospital 46,301 39,651 81,881 72,248
Medical technology 3,785 3,144 8,096 5,646
Intercompany (174) (357) (147) (485)
--------- --------- --------- ---------
89,878 74,962 165,798 138,483
--------- --------- --------- ---------
Selling, general and
administrative:
Laboratory 5,046 4,349 10,013 8,443
Animal hospital 5,321 5,123 10,881 9,946
Medical technology 2,693 2,549 5,628 5,200
Corporate 8,983 7,463 16,994 14,780
--------- --------- --------- ---------
22,043 19,484 43,516 38,369
--------- --------- --------- ---------
Write-down and loss (gain)
on sale of assets 420 (85) 542 (203)
--------- --------- --------- ---------
Operating income 67,415 55,563 121,740 100,317
Interest expense, net 6,671 5,927 12,444 12,239
Other (income) expense 172 (31) 227 (97)
Minority interest expense 1,028 900 1,874 1,674
--------- --------- --------- ---------
Income before provision
for income taxes 59,544 48,767 107,195 86,501
Provision for income taxes 23,697 19,214 43,035 27,289
--------- --------- --------- ---------
Net income $ 35,847 $ 29,553 $ 64,160 $ 59,212
========= ========= ========= =========
Diluted earnings per
common share $ 0.42 $ 0.35 $ 0.75 $ 0.70
========= ========= ========= =========
Shares used for computing
diluted earnings per
common share 85,605 84,838 85,481 84,699
========= ========= ========= =========
VCA ANTECH, INC.
CONSOLIDATED BALANCE SHEETS
As of June 30, 2007 and December 31, 2006
(In thousands)
June 30, December 31,
2007 2006
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 62,107 $ 45,104
Trade accounts receivable, net 48,071 44,491
Inventory 20,832 21,420
Prepaid expenses and other 15,617 13,492
Deferred income taxes 16,988 14,935
Prepaid income taxes 579 13,523
------------ ------------
Total current assets 164,194 152,965
Property and equipment, net 192,081 166,033
Other assets:
Goodwill 833,336 625,748
Other intangible assets, net 17,756 16,293
Deferred financing costs, net 1,636 979
Other 12,003 9,939
------------ ------------
Total assets $ 1,221,006 $ 971,957
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 7,554 $ 6,648
Accounts payable 25,307 23,328
Accrued payroll and related liabilities 36,873 33,864
Other accrued liabilities 41,838 30,961
------------ ------------
Total current liabilities 111,572 94,801
Long-term obligations, less current
portion 540,658 384,067
Deferred income taxes 44,652 39,804
Other liabilities 11,855 13,294
Minority interest 10,348 9,686
Stockholders' equity:
Common stock 84 84
Additional paid-in capital 282,521 275,013
Retained earnings 218,746 154,586
Accumulated other comprehensive income 570 622
------------ ------------
Total stockholders' equity 501,921 430,305
------------ ------------
Total liabilities and stockholders'
equity $ 1,221,006 $ 971,957
============ ============
VCA ANTECH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2007 and 2006
(In thousands)
Six Months Ended
June 30,
----------------------
2007 2006
---------- ---------
Cash flows from operating activities:
Net income $ 64,160 $ 59,212
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 12,740 10,851
Amortization of debt costs 137 226
Provision for uncollectible accounts 2,110 2,976
Write-down and loss (gain) on sale of
assets 542 (203)
Share-based compensation 2,300 1,445
Excess tax benefit from exercise of stock
options (2,680) (3,939)
Minority interest in income of
subsidiaries 1,874 1,674
Distributions to minority interest
partners (1,364) (1,339)
Deferred income taxes 3,025 4,701
Other (173) (561)
Changes in operating assets and
liabilities:
Accounts receivable (5,244) (6,182)
Inventory, prepaid expenses and other
assets 45 (4,555)
Accounts payable and other accrued
liabilities (173) (6,480)
Accrued payroll and related liabilities 1,105 (526)
Income taxes 15,789 6,841
---------- ---------
Net cash provided by operating
activities 94,193 64,141
---------- ---------
Cash flows from investing activities:
Business acquisitions, net of cash
acquired (203,322) (30,172)
Real estate acquired in connection with
business acquisitions (7,962) (1,781)
Property and equipment additions (27,236) (15,067)
Proceeds from sale of assets 1,564 297
Other (256) 161
---------- ---------
Net cash used in investing activities (237,212) (46,562)
---------- ---------
Cash flows from financing activities:
Repayment of long-term obligations (4,224) (62,781)
Proceeds from issuance of long-term
obligations 160,000 -
Payment of financing costs (794) -
Proceeds from issuance of common stock
under stock option plans 2,360 3,576
Excess tax benefit from exercise of stock
options 2,680 3,939
---------- ---------
Net cash provided by (used in)
financing activities 160,022 (55,266)
---------- ---------
Increase (decrease) in cash and cash
equivalents 17,003 (37,687)
Cash and cash equivalents at beginning of
period 45,104 58,488
---------- ---------
Cash and cash equivalents at end of period $ 62,107 $ 20,801
========== =========
VCA ANTECH, INC.
SUPPLEMENTAL OPERATING DATA
For the Three and Six Months Ended June 30, 2007 and 2006
(In thousands, except per share amounts)
Table #1 Three Months Ended Six Months
Reconciliation of net income to June 30, Ended June 30,
adjusted net income ------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
Net income $35,847 $29,553 $64,160 $59,212
Certain significant item:
Tax benefit - - - (6,806)
-------- -------- -------- --------
Adjusted net income $35,847 $29,553 $64,160 $52,406
======== ======== ======== ========
Table #2
Reconciliation of diluted
earnings per common share to
adjusted diluted earnings per
common share
Diluted earnings per common
share $ 0.42 $ 0.35 $ 0.75 $ 0.70
Certain significant item as
detailed in Table #1 - - - (0.08)
-------- -------- -------- --------
Adjusted diluted earnings per
common share $ 0.42 $ 0.35 $ 0.75 $ 0.62
======== ======== ======== ========
Shares used for computing
adjusted diluted earnings per
common share 85,605 84,838 85,481 84,699
======== ======== ======== ========
Table #3
Depreciation and amortization
Depreciation and amortization
included in direct costs:
Laboratory $ 1,578 $ 1,065 $ 2,916 $ 2,122
Animal hospital 4,342 3,543 8,157 7,049
Medical technology 299 289 592 607
Intercompany (92) (37) (181) (68)
-------- -------- -------- --------
6,127 4,860 11,484 9,710
Depreciation and amortization
included in selling, general
and administrative expense: 682 569 1,256 1,141
-------- -------- -------- --------
Total depreciation and
amortization $ 6,809 $ 5,429 $12,740 $10,851
======== ======== ======== ========
VCA ANTECH, INC.
SUPPLEMENTAL OPERATING DATA - Continued
As of June 30, 2007 and December 31, 2006
(In thousands)
Table #4 June 30, December 31,
Selected
consolidated
balance sheet data 2007 2006
---------- ------------
Debt:
Revolving credit
facility $ - $ -
Senior term notes 530,372 372,668
Other debt and
capital leases 17,840 18,047
---------- ------------
Total debt $ 548,212 $ 390,715
========== ============
For the Three and Six Months Ended June 30, 2007 and 2006
(In thousands)
Three Months Ended Six Months Ended
Table #5 June 30, June 30,
---------------------- ------------------------
Selected expense
data 2007 2006 2007 2006
---------- ---------- ---------- ------------
Rent expense $ 9,106 $ 7,905 $ 17,531 $ 15,604
Share-based
compensation
included in
direct costs:
Laboratory $ 158 $ 160 $ 341 $ 320
Share-based
compensation
included in
selling, general
and administrative
expense:
Laboratory 175 126 372 254
Animal hospital 283 216 607 431
Medical technology 26 - 54 -
Corporate 441 167 926 440
---------- ---------- ---------- ------------
925 509 1,959 1,125
---------- ---------- ---------- ------------
Total share-
based
compensation $ 1,083 $ 669 $ 2,300 $ 1,445
========== ========== ========== ============
CONTACT: VCA Antech, Inc.
Tomas Fuller, Chief Financial Officer, 310-571-6505