VCA Antech, Inc. Reports Fourth Quarter 2012 Results and Provides Financial Guidance for 2013
Revenue increased 13.3% to a fourth quarter record of $418.2 million
Gross profit increased 14.1% to $81.8 million
Loss per common share of $0.66 resulting from a $0.90 per common share
impairment charge
Adjusted diluted earnings per common share of $0.24
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 fourth quarter ended December 31, 2012, as follows:
revenue increased 13.3% to $418.2 million; gross profit increased 14.1%
to $81.8 million; loss per common share of $0.66; and adjusted diluted
earnings per common share of $0.24.
Bob Antin, Chairman and CEO, stated, “We are pleased that we are
experiencing improving revenue growth in both our core Animal Hospital
and Laboratory segments. We are also encouraged that we were able to
increase our same-store gross profit margins in each of those segments.
We are seeing steady improvement and growth in the veterinary market
which bolsters our optimism for our overall growth prospects.
"Our results also included a non-cash impairment charge of $123.6
million, or $79.2 million net of tax, primarily related to the
write-down of goodwill and other long-lived assets in our Vetstreet
business, included in our All Other segments category. As a result of
our 2012 impairment review, we determined that the write-down of
goodwill and long-lived assets was necessary as our fiscal 2012 actual
operating results and cash flow, and projections of future operating
results and cash flow, were significantly lower than previously
forecasted. We do not expect this accounting write-down to affect our
ongoing business or financial performance.
"Vetstreet continues to provide us with an array of product and service
offerings that complement our core business. As well, this business
provides its animal hospital clients valuable services to improve
communication with pet owners which contributes to higher patient
traffic. We are committed to building on our leadership position in the
industry by continuing to offer innovative services to our animal
hospital clients.
"Excluding this charge of $0.90 per common share, adjusted diluted
earnings per common share for the fourth quarter of 2012 was $0.24, a
$0.03 per common share or 14.3% increase over the same period in 2011.
"We also reported our financial results for the twelve months ended
December 31, 2012, as follows: revenue increased 14.4% to $1.7 billion;
gross profit increased 10.8% to $375.0 million; and diluted earnings per
common share of $0.51. The results for the twelve months ended December
31, 2012, included a gain of $5.7 million on our 20% interest in
Associate Veterinary Clinics held at the time we became its sole
non-veterinarian shareholder; a depreciation adjustment of $3.1 million,
or $1.9 million net of tax, related to acquired capital leases; and the
non-cash impairment charge of $123.6 million, or $79.2 million net of
tax, noted above. Excluding these items, adjusted diluted earnings per
common share was $1.36 compared to adjusted diluted earnings per common
share of $1.35 for the prior year.
“Animal Hospital revenue in the fourth quarter of 2012 increased 15.6%,
to $330.1 million, driven by acquisitions made in the past twelve months
and same-store revenue growth of 1.6%. Our same-store gross profit
margin increased to 12.8% from 12.7%, and with the lower margins for
acquired Animal Hospitals, our consolidated gross margin decreased to
12.1%, compared to 12.5% for the prior-year quarter. Our Animal Hospital
operating margin decreased to 9.2%, compared to 10.2%, for the
prior-year quarter. During the quarter, we acquired 11 independent
animal hospitals which had historical combined annual revenue of $26.8
million.
“Laboratory internal revenue in the fourth quarter increased 3.0%, to
$75.1 million, driven by both an increase in the number of requisitions
and the average revenue per requisition. Our Laboratory gross profit
margin increased to 42.2% from 42.0%, and our operating margin increased
from 32.2% to 32.6%.
“Revenue from our All Other segment increased $4.9 million in the fourth
quarter, to $31.1 million, primarily as a result of the acquisitions of
Vetstreet and ThinkPets."
2013 Financial Guidance
Based on the assumptions stated below, we provide the following
financial guidance for the full year 2013:
Revenue from $1.825 billion to $1.855 billion
Net income from $130 million to $139 million; and
Diluted earnings per common share from $1.45 to $1.55.
Our earning guidance excludes the impact of any acquisition related
expenses, the write off of any lease-hold or other real estate assets,
the impairment of intangible assets from prior acquisitions, or other
special, unusual or extraordinary items; assumes normal weather
conditions for the remainder of the year.
Conference Call
We will discuss our fourth quarter 2012 financial results during a
conference call today, February 14th, 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 10 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 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: 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 for the year ended December
31, 2011, 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.
VCA Antech, Inc.
Consolidated Income Statements
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2012
2011
2012
2011
Revenue:
Animal hospital
$
330,067
$
285,644
$
1,331,314
$
1,150,120
Laboratory
75,165
73,878
327,801
316,797
All other
31,117
26,243
112,960
80,430
Intercompany
(18,157
)
(16,767
)
(72,433
)
(61,986
)
418,192
368,998
1,699,642
1,485,361
Direct costs
336,385
297,288
1,324,668
1,146,904
Gross profit:
Animal hospital
39,923
35,727
189,111
179,810
Laboratory
31,737
31,063
151,761
143,790
All other
11,363
6,990
38,707
20,971
Intercompany
(1,216
)
(2,070
)
(4,605
)
(6,114
)
81,807
71,710
374,974
338,457
Selling, general and administrative expense:
Animal hospital
8,029
6,089
30,826
24,342
Laboratory
7,267
7,287
29,660
27,864
All other
10,803
7,327
37,879
19,136
Corporate
15,400
15,075
58,790
49,770
41,499
35,778
157,155
121,112
Goodwill and other long-lived assets impairment
123,573
21,310
123,573
21,310
Net loss on sale of assets
288
425
1,310
382
Operating (loss) income
(83,553
)
14,197
92,936
195,653
Interest expense, net
3,806
4,068
16,552
16,884
Debt retirement costs
—
—
—
2,764
Business combination adjustment gain
—
—
(5,719
)
—
Other expense (income)
151
119
(488
)
118
(Loss) income before provision for income taxes
(87,510
)
10,010
82,591
175,887
Provision for income taxes
(30,485
)
12,070
31,875
76,027
Net (loss) income
(57,025
)
(2,060
)
50,716
99,860
Net income attributable to noncontrolling interests
1,026
1,155
5,165
4,455
Net (loss) income attributable to VCA Antech, Inc.
$
(58,051
)
$
(3,215
)
$
45,551
$
95,405
Diluted (loss) earnings per share
$
(0.66
)
$
(0.04
)
$
0.51
$
1.09
Weighted-average shares outstanding for diluted earnings per share
88,060
86,829
88,671
87,394
VCA Antech, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands)
December 31,
December 31,
2012
2011
Assets
Current assets:
Cash and cash equivalents
$
68,435
$
63,651
Trade accounts receivable, net
55,912
58,279
Inventory
51,456
48,661
Prepaid expenses and other
25,086
21,883
Deferred income taxes
26,667
26,310
Prepaid income taxes
20,061
18,373
Total current assets
247,617
237,157
Property and equipment, net
403,444
370,646
Other assets:
Goodwill
1,291,231
1,237,607
Other intangible assets, net
94,823
92,403
Notes receivable, net
6,080
6,202
Deferred financing costs, net
4,232
5,435
Other
48,241
45,918
Total assets
$
2,095,668
$
1,995,368
Liabilities and Equity
Current liabilities:
Current portion of long-term debt
$
35,057
$
32,571
Accounts payable
39,416
37,797
Accrued payroll and related liabilities
49,893
42,658
Other accrued liabilities
57,131
43,968
Total current liabilities
181,497
156,994
Long-term debt, less current portion
595,586
586,282
Deferred income taxes
79,934
101,229
Other liabilities
37,267
25,947
Total liabilities
894,284
870,452
Redeemable noncontrolling interests
6,991
6,964
VCA Antech, Inc. stockholders’ equity:
Common stock
88
87
Additional paid-in capital
390,359
361,715
Retained earnings
791,209
745,658
Accumulated other comprehensive income
1,847
418
Total VCA Antech, Inc. stockholders’ equity
1,183,503
1,107,878
Noncontrolling interests
10,890
10,074
Total equity
1,194,393
1,117,952
Total liabilities and equity
$
2,095,668
$
1,995,368
VCA Antech, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Twelve Months Ended
December 31,
2012
2011
Cash flows from operating activities:
Net income
$
50,716
$
99,860
Adjustments to reconcile net income to net cash provided by
operating activities:
Goodwill and other long-lived assets impairment
123,573
21,310
Depreciation and amortization
76,227
56,988
Amortization of debt issue costs
1,278
1,445
Provision for uncollectible accounts
6,396
6,742
Debt retirement costs
—
2,764
Business combination adjustment gain
(5,719
)
—
Net loss on sale of assets
1,310
382
Share-based compensation
14,087
10,773
Deferred income taxes
(32,186
)
19,552
Excess tax benefit from exercise of stock options
(2,868
)
(1,708
)
Other
(584
)
(637
)
Changes in operating assets and liabilities:
Trade accounts receivable
1,640
(14,107
)
Inventory, prepaid expense and other assets
(10,329
)
(12,297
)
Accounts payable and other accrued liabilities
3,640
(5,415
)
Accrued payroll and related liabilities
7,181
4,583
Income taxes
2,891
816
Net cash provided by operating activities
237,253
191,051
Cash flows from investing activities:
Business acquisitions, net of cash acquired
(134,916
)
(205,794
)
Real estate acquired in connection with business acquisitions
(5,337
)
(1,900
)
Property and equipment additions
(76,807
)
(63,485
)
Proceeds from sale of assets
115
465
Other
(2,313
)
(596
)
Net cash used in investing activities
(219,258
)
(271,310
)
Cash flows from financing activities:
Repayment of debt
(60,775
)
(98,990
)
Proceeds from issuance of long-term debt
50,000
150,000
Proceeds from revolving credit facility
50,000
50,000
Repayment of revolving credit facility
(50,000
)
(50,000
)
Payment of financing costs
(122
)
(2,944
)
Distributions to noncontrolling interest partners
(4,481
)
(3,277
)
Proceeds from issuance of common stock under stock option plans
9,533
3,999
Excess tax benefit from exercise of stock options
2,868
1,708
Stock repurchases
(8,159
)
(2,673
)
Other
(2,378
)
(819
)
Net cash (used in) provided by financing activities
(13,514
)
47,004
Effect of currency exchange rate changes on cash and cash equivalents
303
(220
)
Increase (decrease) in cash and cash equivalents
4,784
(33,475
)
Cash and cash equivalents at beginning of period
63,651
97,126
Cash and cash equivalents at end of period
$
68,435
$
63,651
VCA Antech, Inc.
Supplemental Operating Data
(Unaudited - In thousands, except per share amounts)
Table #1
Reconciliation of net income attributable to
Three Months Ended December 31,
Twelve Months Ended December 31,
VCA Antech, Inc., to adjusted net income
attributable to VCA Antech, Inc. (1)
2012
2011
2012
2011
Net (loss) income attributable to VCA Antech, Inc.
$
(58,051
)
$
(3,215
)
$
45,551
$
95,405
Goodwill and other long-lived assets impairment (2)
123,573
21,310
123,573
21,310
Tax benefit from goodwill and other long-lived assets impairment (2)
(44,353
)
—
(44,353
)
—
Debt retirement costs (3)
—
—
—
2,764
Tax benefit from debt retirement costs (3)
—
—
—
(1,082
)
Business combination adjustment gain (4)
—
—
(5,719
)
—
Depreciation expense adjustment (5)
—
—
3,051
—
Tax benefit from depreciation expense adjustment (5)
—
—
(1,194
)
—
Adjusted net income attributable to VCA Antech, Inc.
$
21,169
$
18,095
$
120,909
$
118,397
Table #2
Three Months Ended December 31,
Twelve Months Ended December 31,
Reconciliation of diluted earnings per share to
adjusted diluted earnings per share (1)
2012
2011
2012
2011
Diluted (loss) earnings per share
$
(0.66
)
$
(0.04
)
$
0.51
$
1.09
Impact of goodwill and other long-lived assets impairment, net of
tax(2)
0.90
0.25
0.89
0.24
Impact of debt retirement costs, net of tax (3)
—
—
—
0.02
Impact of business combination adjustment gain (4)
—
—
(0.06
)
—
Impact of depreciation expense adjustment, net of tax (5)
—
—
0.02
—
Adjusted diluted earnings per share
$
0.24
$
0.21
$
1.36
$
1.35
Shares used for computing diluted loss per share
88,060
86,829
Shares used for computing adjusted
diluted earnings per share
88,914
87,531
88,671
87,394
Table #3
Three Months Ended December 31,
Twelve Months Ended December 31,
Reconciliation of operating income to
adjusted operating income (1)
2012
2011
2012
2011
Consolidated operating (loss) income
$
(83,553
)
$
14,197
$
92,936
$
195,653
Impact of goodwill and other long-lived assets impairment (2)
123,573
21,310
123,573
21,310
Impact of depreciation expense adjustment (5)
—
—
3,051
Consolidated adjusted operating income
$
40,020
$
35,507
$
219,560
$
216,963
Consolidated adjusted operating margin
9.6
%
9.6
%
12.9
%
14.6
%
_________________________________________________
(1)
Management uses adjusted net income, adjusted diluted earnings per
share, and adjusted gross profit 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 and its
components and adjusted diluted EPS 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 fourth quarter of 2012, we recorded a non-cash impairment
charge of $123.6 million, of which $122.4 million relates to the
write-down of goodwill and other long-lived assets in our Vetstreet
business, reported in our All Other segment. In the prior-year
quarter, we recorded a non-cash impairment charge of $21.3 million
related to the write-down of goodwill in our Medical Technology
business, also reported in our All Other segment.
(3)
During the prior year, we incurred debt retirement costs related to
the refinancing of our senior credit facility. The rate used to
calculate the tax benefit is the statutory rate of the applicable
year.
(4)
As a result of the acquisition of a controlling interest in AVC, we
recorded a gain for the increase in value of our previously held
interest in AVC, which we acquired in 2008.
(5)
Due to corrections in the calculation of depreciation on certain
assets, we recognized an additional depreciation expense during the
second quarter. The rate used to calculate the tax benefit is the
statutory rate of the applicable year.
VCA Antech, Inc.
Supplemental Operating Data (continued)
(Unaudited - In thousands, except per share amounts)
As of
December 31,
December 31,
Table #4
2012
2011
Selected consolidated balance sheet data
Debt:
Senior term notes
$
592,422
$
573,984
Other debt and capital leases
38,221
44,869
Total debt
$
630,643
$
618,853
Three Months Ended December 31,
Twelve Months Ended December 31,
Table #5
Selected expense data
2012
2011
2012
2011
Rent expense
$
17,105
$
14,853
$
66,032
$
55,190
Depreciation and amortization included in direct costs:
Animal hospital
$
13,865
$
10,429
$
53,932
$
39,973
Laboratory
2,431
2,464
9,775
9,696
All other
1,172
301
6,485
2,431
Intercompany
(427
)
(364
)
(1,529
)
(1,317
)
$
17,041
$
12,830
$
68,663
$
50,783
Depreciation and amortization included in selling, general and
administrative expense
2,304
2,772
7,564
6,205
Total depreciation and amortization
$
19,345
$
15,602
$
76,227
$
56,988
Share-based compensation included in direct costs:
Laboratory
$
86
$
99
$
330
$
410
Share-based compensation included in selling, general and
administrative expense:
Animal hospital
291
271
1,049
1,148
Laboratory
294
359
1,141
1,279
All other
166
227
602
428
Corporate
2,784
3,207
10,965
7,508
3,535
4,064
13,757
10,363
Total share-based compensation
$
3,621
$
4,163
$
14,087
$
10,773
VCA Antech, Inc. Tomas Fuller Chief Financial Officer 310-571-6505
Press Release $WOOF VCA Antech Inc.
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 fourth quarter ended December 31, 2012, as follows: revenue increased 13.3% to $418.2 million; gross profit increased 14.1% to $81.8 million; loss per common share of $0.66; and adjusted diluted earnings per common share of $0.24.
Bob Antin, Chairman and CEO, stated, “We are pleased that we are experiencing improving revenue growth in both our core Animal Hospital and Laboratory segments. We are also encouraged that we were able to increase our same-store gross profit margins in each of those segments. We are seeing steady improvement and growth in the veterinary market which bolsters our optimism for our overall growth prospects.
"Our results also included a non-cash impairment charge of $123.6 million, or $79.2 million net of tax, primarily related to the write-down of goodwill and other long-lived assets in our Vetstreet business, included in our All Other segments category. As a result of our 2012 impairment review, we determined that the write-down of goodwill and long-lived assets was necessary as our fiscal 2012 actual operating results and cash flow, and projections of future operating results and cash flow, were significantly lower than previously forecasted. We do not expect this accounting write-down to affect our ongoing business or financial performance.
"Vetstreet continues to provide us with an array of product and service offerings that complement our core business. As well, this business provides its animal hospital clients valuable services to improve communication with pet owners which contributes to higher patient traffic. We are committed to building on our leadership position in the industry by continuing to offer innovative services to our animal hospital clients.
"Excluding this charge of $0.90 per common share, adjusted diluted earnings per common share for the fourth quarter of 2012 was $0.24, a $0.03 per common share or 14.3% increase over the same period in 2011.
"We also reported our financial results for the twelve months ended December 31, 2012, as follows: revenue increased 14.4% to $1.7 billion; gross profit increased 10.8% to $375.0 million; and diluted earnings per common share of $0.51. The results for the twelve months ended December 31, 2012, included a gain of $5.7 million on our 20% interest in Associate Veterinary Clinics held at the time we became its sole non-veterinarian shareholder; a depreciation adjustment of $3.1 million, or $1.9 million net of tax, related to acquired capital leases; and the non-cash impairment charge of $123.6 million, or $79.2 million net of tax, noted above. Excluding these items, adjusted diluted earnings per common share was $1.36 compared to adjusted diluted earnings per common share of $1.35 for the prior year.
“Animal Hospital revenue in the fourth quarter of 2012 increased 15.6%, to $330.1 million, driven by acquisitions made in the past twelve months and same-store revenue growth of 1.6%. Our same-store gross profit margin increased to 12.8% from 12.7%, and with the lower margins for acquired Animal Hospitals, our consolidated gross margin decreased to 12.1%, compared to 12.5% for the prior-year quarter. Our Animal Hospital operating margin decreased to 9.2%, compared to 10.2%, for the prior-year quarter. During the quarter, we acquired 11 independent animal hospitals which had historical combined annual revenue of $26.8 million.
“Laboratory internal revenue in the fourth quarter increased 3.0%, to $75.1 million, driven by both an increase in the number of requisitions and the average revenue per requisition. Our Laboratory gross profit margin increased to 42.2% from 42.0%, and our operating margin increased from 32.2% to 32.6%.
“Revenue from our All Other segment increased $4.9 million in the fourth quarter, to $31.1 million, primarily as a result of the acquisitions of Vetstreet and ThinkPets."
2013 Financial Guidance
Based on the assumptions stated below, we provide the following financial guidance for the full year 2013:
Our earning guidance excludes the impact of any acquisition related expenses, the write off of any lease-hold or other real estate assets, the impairment of intangible assets from prior acquisitions, or other special, unusual or extraordinary items; assumes normal weather conditions for the remainder of the year.
Conference Call
We will discuss our fourth quarter 2012 financial results during a conference call today, February 14th, 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 10 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 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: 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 for the year ended December 31, 2011, 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.
(In thousands, except per share amounts)
(In thousands)
Total current liabilities
(In thousands)
Supplemental Operating Data
(Unaudited - In thousands, except per share amounts)
December 31,
December 31,
Tax benefit from goodwill and other long-lived assets impairment (2)
December 31,
December 31,
Impact of goodwill and other long-lived assets impairment, net of tax(2)
December 31,
December 31,
Impact of goodwill and other long-lived assets impairment (2)
_________________________________________________
(Unaudited - In thousands, except per share amounts)
December 31,
December 31,
Depreciation and amortization included in direct costs:
Depreciation and amortization included in selling, general and administrative expense
Share-based compensation included in selling, general and administrative expense:
VCA Antech, Inc.
Tomas Fuller
Chief Financial Officer
310-571-6505
Source: VCA Antech, Inc.