LOS ANGELES--(BUSINESS WIRE)--VCA Antech, Inc. (NASDAQ: WOOF), a leading animal healthcare company in the United States and Canada, today reported financial results for the first quarter ended March 31, 2014, as follows: revenue increased 2.5% to a first quarter record of $449.5 million; gross profit increased 4.7% to $101.5 million; operating income increased 10.6% to $61.2 million; net income increased 11.7 % to $34.0 million and diluted earnings per common share increased 11.8% to $0.38. Non-GAAP earnings per diluted common share excluding acquisition-related amortization (“Adjusted EPS Excluding Amortization”) increased 5.0% to $0.42 for the three months ended March 31, 2014.
For the three months ended March 31, 2014 and 2013, adjusted diluted earnings per share was $0.38 and $0.37, respectively. Adjusted diluted earnings per share for the three months ended March 31, 2013, excludes $3.8 million of charges related to vacated properties. The operations of two animal hospitals we vacated were consolidated into the newly constructed, VCA West Los Angeles Animal Hospital in the prior-year quarter.
Bob Antin, Chairman and CEO, stated, "While weather presented challenges of historical proportions, we were certainly excited by our ability to achieve revenue growth in both our core Animal Hospital and Laboratory business segments. In addition, we experienced improving results in the latter portion of the quarter and we remain optimistic with respect to our full year 2014 results.
"Animal Hospital revenue in the current quarter increased 3.2%, to $351.6 million, driven by acquisitions made during the past 12 months and same-store revenue growth of 0.5%. Our same-store gross profit margin increased to 14.4% from 13.6%, while our consolidated gross margin increased to 13.9% from 13.3%, in the prior-year quarter. Our adjusted same-store gross profit margin increased to 14.4% from 14.1%, in the prior-year quarter. Adjusted consolidated gross margin was flat at 13.9%. Adjusted operating margin decreased slightly to 11.2%, compared to 11.4%, in the prior-year quarter. During the quarter, we acquired four independent animal hospitals which had historical combined annual revenue of $16.0 million.
"Laboratory internal revenue in the first quarter increased 1.9%, to $88.4 million, driven by a 4.5% increase in the average revenue per requisition, offset by a 2.4% decrease in requisitions clearly affected by the significant number of weather-impacted pet care facilities throughout most of the country. Our Laboratory gross profit margin remained flat at 48.6%, and our operating margin was essentially flat at 39.6% from 39.5%.
"Revenue from our other operations reported in our All Other segment were essentially flat at $28.1 million in the 2014 quarter compared to $28.5 million in the prior-year quarter."
2014 Financial Guidance
We reaffirm the annual guidance provided on February 13, 2014.
Non-GAAP Financial Measures
We believe investors’ understanding of our total performance is enhanced by disclosing adjusted net income, adjusted diluted earnings per common share and Adjusted EPS Excluding Amortization. We define these adjusted measures as the reported amounts, adjusted to exclude certain significant items and amortization of intangibles acquired in acquisitions.
Management believes these adjusted measures are useful to management and investors in evaluating the Company's operational performance and their use provides an additional tool for evaluating the Company's operating results and trends. 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 related trends.
There is a material limitation associated with the use of these non-GAAP financial measures: our adjusted measures exclude the impact of these significant 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 first quarter 2014 financial results during a conference call today, April 24th, at 4:30 p.m. Eastern Time. A live broadcast of the call may be accessed by visiting our website at investor.vcaantech.com. The call may also be accessed by dialing (877) 293-5492. Interested parties should call at least ten minutes prior to the start of the call to register. Replay of the webcast will be available for ninety days by visiting the company's website.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Among the forward looking statements in this press release are statements addressing our 2014 guidance and plans, expectations, future financial position and results of operation. These forward-looking statements are not historical facts and are inherently uncertain and out of our control. Any or all of our forward-looking statements in this press release may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Actual future results may vary materially. Among other factors that could cause our actual results to differ from this forward-looking information are: the continued effects of the economic uncertainty prevailing in regions in which we operate; our ability to execute on our growth strategy and to manage acquired operations; changes in demand for our products and services; fluctuations in our revenue adversely affecting our gross profit, operating income and margins; and the effects of the other factors discussed in our Annual Report on Form 10-K, Reports on Form 10-Q and our other filings with the SEC.
About VCA Antech
We own, operate and manage the largest networks of freestanding veterinary hospitals and veterinary-exclusive clinical laboratories in the country, additionally we are the largest provider of online communication, professional education and marketing solutions to the veterinary community. We also supply diagnostic imaging equipment to the veterinary industry.
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VCA Antech, Inc. Consolidated Income Statements (Unaudited) (In thousands, except per share amounts) |
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Three Months Ended March 31, |
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| 2014 | 2013 | ||||||||||||
| Revenue: | |||||||||||||
| Animal hospital | $ | 351,588 | $ | 340,615 | |||||||||
| Laboratory | 88,534 | 87,335 | |||||||||||
| All other | 28,121 | 28,523 | |||||||||||
| Intercompany | (18,736 | ) | (17,867 | ) | |||||||||
| 449,507 | 438,606 | ||||||||||||
| Direct costs | 348,056 | 341,683 | |||||||||||
| Gross profit: | |||||||||||||
| Animal hospital | 48,800 | 45,199 | |||||||||||
| Laboratory | 43,031 | 42,465 | |||||||||||
| All other | 9,969 | 9,634 | |||||||||||
| Intercompany | (349 | ) | (375 | ) | |||||||||
| 101,451 | 96,923 | ||||||||||||
| Selling, general and administrative expense: | |||||||||||||
| Animal hospital | 9,128 | 8,325 | |||||||||||
| Laboratory | 8,018 | 8,005 | |||||||||||
| All other | 8,348 | 8,914 | |||||||||||
| Corporate | 15,946 | 14,602 | |||||||||||
| 41,440 | 39,846 | ||||||||||||
| Net (gain) loss on sale of assets | (1,221 | ) | 1,726 | ||||||||||
| Operating income | 61,232 | 55,351 | |||||||||||
| Interest expense, net | 4,167 | 4,307 | |||||||||||
| Other income | (53 | ) | (9 | ) | |||||||||
| Income before provision for income taxes | 57,118 | 51,053 | |||||||||||
| Provision for income taxes | 22,203 | 19,230 | |||||||||||
| Net income | 34,915 | 31,823 | |||||||||||
| Net income attributable to noncontrolling interests | 872 | 1,338 | |||||||||||
| Net income attributable to VCA Antech, Inc | $ | 34,043 | $ | 30,485 | |||||||||
| Diluted earnings per share | $ | 0.38 | $ | 0.34 | |||||||||
| Weighted-average shares outstanding for diluted earnings per share | 89,421 | 89,379 | |||||||||||
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VCA Antech, Inc. Consolidated Balance Sheets (Unaudited) (In thousands) |
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March 31, 2014 |
December 31, 2013 |
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| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 137,288 | $ | 125,029 | ||||||||||
| Trade accounts receivable, net | 64,520 | 59,900 | ||||||||||||
| Inventory | 54,227 | 55,067 | ||||||||||||
| Prepaid expenses and other | 23,713 | 25,417 | ||||||||||||
| Deferred income taxes | 29,075 | 28,907 | ||||||||||||
| Prepaid income taxes | 454 | 15,434 | ||||||||||||
| Total current assets | 309,277 | 309,754 | ||||||||||||
| Property and equipment, net | 449,434 | 448,366 | ||||||||||||
| Other assets: | ||||||||||||||
| Goodwill | 1,340,054 | 1,330,917 | ||||||||||||
| Other intangible assets, net | 85,128 | 86,671 | ||||||||||||
| Notes receivable, net | 3,225 | 3,454 | ||||||||||||
| Deferred financing costs, net | 2,683 | 2,987 | ||||||||||||
| Other | 60,130 | 55,632 | ||||||||||||
| Total assets | $ | 2,249,931 | $ | 2,237,781 | ||||||||||
| Liabilities and Equity | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Current portion of long-term debt | $ | 50,839 | $ | 51,087 | ||||||||||
| Accounts payable | 36,240 | 36,962 | ||||||||||||
| Accrued payroll and related liabilities | 63,535 | 57,337 | ||||||||||||
| Other accrued liabilities | 54,830 | 58,762 | ||||||||||||
| Total current liabilities | 205,444 | 204,148 | ||||||||||||
| Long-term debt, less current portion | 555,592 | 568,558 | ||||||||||||
| Deferred income taxes | 100,033 | 100,099 | ||||||||||||
| Other liabilities | 35,953 | 36,758 | ||||||||||||
| Total liabilities | 897,022 | 909,563 | ||||||||||||
| Redeemable noncontrolling interests | 11,052 | 10,678 | ||||||||||||
| VCA Antech, Inc. stockholders’ equity: | ||||||||||||||
| Common stock | 88 | 89 | ||||||||||||
| Additional paid-in capital | 380,267 | 384,721 | ||||||||||||
| Retained earnings | 962,763 | 928,720 | ||||||||||||
| Accumulated other comprehensive loss | (11,283 | ) | (6,190 | ) | ||||||||||
| Total VCA Antech, Inc. stockholders’ equity | 1,331,835 | 1,307,340 | ||||||||||||
| Noncontrolling interests | 10,022 | 10,200 | ||||||||||||
| Total equity | 1,341,857 | 1,317,540 | ||||||||||||
| Total liabilities and equity | $ | 2,249,931 | $ | 2,237,781 | ||||||||||
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VCA Antech, Inc. Consolidated Statements of Cash Flows (Unaudited) (In thousands) |
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Three Months Ended March 31, |
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| 2014 | 2013 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net income | $ | 34,915 | $ | 31,823 | ||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | 19,767 | 18,239 | ||||||||||||
| Amortization of debt issue costs | 304 | 314 | ||||||||||||
| Provision for uncollectible accounts | 890 | 1,093 | ||||||||||||
| Net (gain) loss on sale of assets | (1,221 | ) | 1,726 | |||||||||||
| Share-based compensation | 4,544 | 3,770 | ||||||||||||
| Deferred income taxes | — | 2,868 | ||||||||||||
| Excess tax benefit from exercise of stock options | (392 | ) | (62 | ) | ||||||||||
| Other | (905 | ) | (414 | ) | ||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Trade accounts receivable | (5,825 | ) | (16,126 | ) | ||||||||||
| Inventory, prepaid expense and other assets | (1,389 | ) | (2,491 | ) | ||||||||||
| Accounts payable and other accrued liabilities | (3,773 | ) | 12,127 | |||||||||||
| Accrued payroll and related liabilities | 6,247 | 9,149 | ||||||||||||
| Income taxes | 15,165 | 13,235 | ||||||||||||
| Net cash provided by operating activities | 68,327 | 75,251 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Business acquisitions, net of cash acquired | (17,295 | ) | (6,756 | ) | ||||||||||
| Real estate acquired in connection with business acquisitions | — | (510 | ) | |||||||||||
| Property and equipment additions | (16,619 | ) | (17,969 | ) | ||||||||||
| Proceeds from sale of assets | 859 | 177 | ||||||||||||
| Other | 520 | (115 | ) | |||||||||||
| Net cash used in investing activities | (32,535 | ) | (25,173 | ) | ||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Repayment of debt | (12,806 | ) | (8,733 | ) | ||||||||||
| Distributions to non-controlling interest partners | (1,090 | ) | (1,197 | ) | ||||||||||
| Purchase of non-controlling interest | (326 | ) | (5,032 | ) | ||||||||||
| Proceeds from issuance of common stock under stock option plans | 372 | 1,876 | ||||||||||||
| Excess tax benefit from exercise of stock options | 392 | 62 | ||||||||||||
| Stock repurchases | (9,793 | ) | (59 | ) | ||||||||||
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Net cash used in financing activities |
(23,251 | ) | (13,083 | ) | ||||||||||
| Effect of currency exchange rate changes on cash and cash equivalents | (282 | ) | (144 | ) | ||||||||||
| Increase in cash and cash equivalents | 12,259 | 36,851 | ||||||||||||
| Cash and cash equivalents at beginning of period | 125,029 | 68,435 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 137,288 | $ | 105,286 | ||||||||||
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VCA Antech, Inc. Supplemental Operating Data (Unaudited - In thousands, except per share amounts) |
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| Table #1 | ||||||||||||||
| Reconciliation of net income attributable to |
Three Months Ended March 31, |
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| VCA Antech, Inc., to adjusted net income | ||||||||||||||
| attributable to VCA Antech, Inc., excluding amortization (1) | 2014 | 2013 | ||||||||||||
| Net income attributable to VCA Antech, Inc. | $ | 34,043 | $ | 30,485 | ||||||||||
| Vacant property adjustments (2) | — | 3,804 | ||||||||||||
| Tax benefit from vacant property adjustments (2) | — | (1,489 | ) | |||||||||||
| Adjusted net income attributable to VCA Antech Inc. | $ | 34,043 | $ | 32,800 | ||||||||||
| Impact of intangible asset amortization associated with acquisitions, | ||||||||||||||
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net of tax (3) |
3,132 | 3,070 | ||||||||||||
| Adjusted net income attributable to VCA Antech, Inc. excluding amortization | $ | 37,175 | $ | 35,870 | ||||||||||
| Table #2 |
Three Months Ended March 31, |
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| Reconciliation of diluted earnings per share to | ||||||||||||||
| adjusted diluted earnings per share, excluding amortization (1) | 2014 | 2013 | ||||||||||||
| Diluted earnings per share | $ | 0.38 | $ | 0.34 | ||||||||||
| Impact of vacant property adjustments, net of tax (2) | — | 0.03 | ||||||||||||
| Adjusted Earnings per share | $ | 0.38 | $ | 0.37 | ||||||||||
| Impact of intangible asset amortization associated with acquisitions, | ||||||||||||||
| net of tax (3) | 0.04 | 0.03 | ||||||||||||
| Adjusted diluted earnings per share excluding amortization (3) | $ | 0.42 | $ | 0.40 | ||||||||||
| Shares used for computing adjusted diluted earnings per share | 89,421 | 89,379 | ||||||||||||
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VCA Antech, Inc. Supplemental Operating Data (cont) (Unaudited - In thousands, except per share amounts) |
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| Table #3 |
Three Months Ended March 31, |
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| Reconciliation of gross profit to | |||||||||||||||||||||
| adjusted gross profit, excluding amortization (1) | 2014 | 2013 | |||||||||||||||||||
| Consolidated gross profit | $ | 101,451 | $ | 96,923 | |||||||||||||||||
| Impact of vacant property adjustments (2) | — | 2,046 | |||||||||||||||||||
| Consolidated adjusted gross profit | $ | 101,451 | $ | 98,969 | |||||||||||||||||
| Consolidated adjusted gross profit margin | 22.6 | % | 22.6 | % | |||||||||||||||||
| Intangible asset amortization associated with acquisitions (3) | 5,080 | 5,063 | |||||||||||||||||||
| Consolidated adjusted gross profit excluding amortization | 106,531 | 104,032 | |||||||||||||||||||
| Consolidated adjusted gross profit margin excluding amortization | 23.7 | % | 23.7 | % | |||||||||||||||||
| Table #4 |
Three Months Ended |
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| Reconciliation of operating income to | |||||||||||||||||||||
| adjusted operating income, excluding amortization (1) | 2014 | 2013 | |||||||||||||||||||
| Consolidated operating income | $ | 61,232 | $ | 55,351 | |||||||||||||||||
| Impact of vacant property adjustments (2) | — | 3,804 | |||||||||||||||||||
| Consolidated adjusted operating income | $ | 61,232 | $ | 59,155 | |||||||||||||||||
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Consolidated adjusted operating income margin |
13.6 |
% | 13.5 | % | |||||||||||||||||
| Intangible asset amortization associated with acquisitions (3) | 5,147 | 5,044 | |||||||||||||||||||
| Consolidated adjusted operating income excluding amortization | 66,379 | 64,199 | |||||||||||||||||||
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Consolidated adjusted operating income margin excluding amortization |
14.8 | % | 14.6 | % | |||||||||||||||||
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| (1) | Management uses adjusted net income excluding acquisition-related amortization, adjusted EPS excluding amortization, adjusted gross profit excluding acquisition-related amortization and adjusted operating income excluding acquisition-related amortization and its components among other factors, to measure the performance of the overall Company. Further, we believe that investors' understanding of our performance is enhanced by disclosing these measures. Adjusted net income excluding acquisition-related amortization , adjusted EPS excluding amortization, consolidated adjusted gross profit excluding acquisition-related amortization, consolidated adjusted operating income excluding acquisition-related amortization measures are not, and should not be viewed as substitutes for, U.S. generally accepted accounting principles (GAAP) net income and its components and diluted earnings per share. | |
| (2) | During the first quarter of 2013, we recorded a write-down to net realizable value of $1.8 million related to a vacant property that is held for sale, and we accrued costs totaling $2.0 million related to a vacant leased property. | |
| (3) | In the first quarter of 2013, we began to report Adjusted EPS Excluding Amortization to exclude acquisition-related amortization, and other infrequent charges and credits. We believe Adjusted EPS Excluding Amortization will provide our investors with better insight into the operating performance of the business. | |
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VCA Antech, Inc. Supplemental Operating Data (cont) (Unaudited - In thousands, except per share amounts) |
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| As of | |||||||||||||||||||||
| Table #5 |
March 31, 2014 |
December 31, 2013 |
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| Selected consolidated balance sheet data | |||||||||||||||||||||
| Debt: | |||||||||||||||||||||
| Senior term notes | $ | 545,078 | $ | 556,914 | |||||||||||||||||
| Other debt and capital leases | 61,353 | 62,731 | |||||||||||||||||||
| Total debt | $ | 606,431 | $ | 619,645 | |||||||||||||||||
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Three Months Ended March 31, |
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| Table #6 | |||||||||||||||||||||
| Selected expense data | 2014 | 2013 | |||||||||||||||||||
| Rent expense | $ | 16,929 | $ | 18,625 | |||||||||||||||||
| Depreciation and amortization included | |||||||||||||||||||||
| in direct costs: | |||||||||||||||||||||
| Animal hospital | $ | 14,574 | $ | 13,179 | |||||||||||||||||
| Laboratory | 2,516 | 2,486 | |||||||||||||||||||
| All other | 1,731 | 1,241 | |||||||||||||||||||
| Intercompany | (465 | ) | (439 | ) | |||||||||||||||||
| $ | 18,356 | $ | 16,467 | ||||||||||||||||||
| Depreciation and amortization included in selling, | |||||||||||||||||||||
| general and administrative expense | 1,411 | 1,772 | |||||||||||||||||||
| Total depreciation and amortization | $ | 19,767 | $ | 18,239 | |||||||||||||||||
| Share-based compensation included in direct costs: | |||||||||||||||||||||
| Laboratory | $ | 150 | $ | 109 | |||||||||||||||||
| Share-based compensation included in | |||||||||||||||||||||
| selling, general and administrative expense: | |||||||||||||||||||||
| Animal hospital | 517 | 641 | |||||||||||||||||||
| Laboratory | 381 | 299 | |||||||||||||||||||
| All other | 182 | 186 | |||||||||||||||||||
| Corporate | 3,314 | 2,535 | |||||||||||||||||||
| 4,394 | 3,661 | ||||||||||||||||||||
| Total share-based compensation | $ | 4,544 | $ | 3,770 | |||||||||||||||||
