• Revenue increased 11.1% to a first quarter record of $499.5 million
  • Gross profit increased 12.2% to $113.9 million
  • Operating income increased 12.9% to $69.1 million
  • Diluted earnings per common share increased 21.1% to $0.46
  • Non-GAAP diluted earnings per common share increased 19.0% to $0.50

VCA 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, 2015, as follows: revenue increased 11.1% to a first quarter record of $499.5 million; gross profit increased 12.2% to $113.9 million; operating income increased 12.9% to $69.1 million; net income increased 12.5% to $38.3 million and diluted earnings per common share increased 21.1% to $0.46. Non-GAAP diluted earnings per common share, which excludes acquisition-related amortization, increased 19.0% to $0.50.

Bob Antin, Chairman and CEO, stated, “Our Animal Hospital business segment same-store revenue growth rate continues to accelerate, driven by an increase in both the number of orders and the average revenue per order. Our Laboratory business segment experienced 6.1% internal revenue growth resulting in a 250 basis point increase in gross profit margin. Accordingly, we are very optimistic with respect to our results for the full year ended December 2015.

“Animal Hospital revenue in the current quarter increased 11.8%, to $393.0 million, driven by acquisitions made during the past 12 months and same-store revenue growth of 5.3%. Our same-store gross profit margin increased to 14.6% from 14.1%, and our total gross margin increased to 14.1%, from 13.9% in the prior-year quarter. During the quarter, we acquired 11 independent animal hospitals which had historical combined annual revenue of $16.3 million.

“Laboratory internal revenue in the first quarter increased 6.1%, to $94.0 million. Our Laboratory gross profit margin increased to 51.1% from 48.6%, and our operating margin increased to 41.6%, from 39.6% in the prior-year quarter.

“During the quarter we repurchased 850,000 shares of our common stock for $43.3 million. Since the Board authorized our repurchase programs in April 2013, through the first quarter 2015, we have acquired 8.2 million shares for $321.8 million. We currently have $203.4 million left in our authorization.”

2015 Guidance

We re-affirm the annual guidance we provided on February 11, 2015.

Non-GAAP Financial Measures

We believe investors’ understanding of our total performance is enhanced by disclosing Non-GAAP financial measures including Non-GAAP net income, Non-GAAP gross profit, Non-GAAP operating income and Non-GAAP diluted earnings per common share. 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 2015 financial results during a conference call today, April 29th, at 9:00 a.m. Eastern Time. A live broadcast of the call may be accessed by visiting our website at investor.vca.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 2015 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 Inc.

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 Inc. Condensed, Consolidated Income Statements (Unaudited)

(In thousands, except per share amounts)

        Three Months Ended March 31, 2015       2014 Revenue: Animal hospital $ 393,026 $ 351,588 Laboratory 93,972 88,534 All other 34,227 28,121 Intercompany   (21,772 )   (18,736 )   499,453     449,507     Direct costs 385,591 348,056   Gross profit: Animal hospital 55,484 48,800 Laboratory 47,982 43,031 All other 11,424 9,969 Intercompany   (1,028 )   (349 )   113,862     101,451     Selling, general and administrative expense: Animal hospital 11,221 9,128 Laboratory 8,865 8,018 All other 8,687 8,348 Corporate   15,625     15,946     44,398     41,440     Net loss (gain) on sale or disposal of assets   335     (1,221 ) Operating income 69,129 61,232 Interest expense, net 4,837 4,167 Other expense (income)   66     (53 ) Income before provision for income taxes 64,226 57,118 Provision for income taxes   24,673     22,203   Net income 39,553 34,915 Net income attributable to noncontrolling interests   1,252     872   Net income attributable to VCA Inc. $ 38,301   $ 34,043     Diluted earnings per share $ 0.46   $ 0.38     Weighted-average shares outstanding for diluted earnings per share   83,373     89,421       VCA Inc. Condensed, Consolidated Balance Sheets (Unaudited)

(In thousands)

        March 31,       December 31, 2015 2014 Assets Current assets: Cash and cash equivalents $ 59,278 $ 81,383 Trade accounts receivable, net 73,766 60,482 Inventory 55,142 56,050 Prepaid expenses and other 30,425 36,924 Deferred income taxes 30,324 30,331 Prepaid income taxes   —     18,277   Total current assets 248,935 283,447 Property and equipment, net 472,944 468,041 Other assets: Goodwill 1,439,598 1,415,861 Other intangible assets, net 82,913 88,175 Notes receivable 2,695 2,807 Deferred financing costs, net 7,440 7,874 Other   70,477     65,815  

Total assets

$ 2,325,002   $ 2,332,020   Liabilities and Equity Current liabilities: Current portion of long-term debt $ 26,598 $ 19,356 Accounts payable 40,997 46,284 Accrued payroll and related liabilities 78,159 64,359 Income tax payable 2,570 — Other accrued liabilities   69,979     67,219   Total current liabilities 218,303 197,218 Long-term debt, less current portion 766,591 775,412 Deferred income taxes 103,162 103,502 Other liabilities   31,745     33,190   Total liabilities 1,119,801 1,109,322 Redeemable noncontrolling interests 11,108 11,077 VCA Inc. stockholders’ equity: Common stock 82 83 Additional paid-in capital 116,068 155,802 Retained earnings 1,102,459 1,064,158 Accumulated other comprehensive loss   (34,605 )   (19,397 ) Total VCA Inc. stockholders’ equity 1,184,004 1,200,646 Noncontrolling interests   10,089     10,975   Total equity   1,194,093     1,211,621   Total liabilities and equity $ 2,325,002   $ 2,332,020       VCA Inc. Condensed, Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

        Three Months Ended March 31, 2015       2014 Cash flows from operating activities: Net income $ 39,553 $ 34,915 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 19,797 19,767 Amortization of debt issue costs 434 304 Provision for uncollectible accounts 1,183 890 Net loss (gain) on sale or disposal of assets 335 (1,221 ) Share-based compensation 4,132 4,544 Excess tax benefit from stock based compensation (791 ) (392 ) Other (989 ) (905 ) Changes in operating assets and liabilities: Trade accounts receivable (14,570 ) (5,825 ) Inventory, prepaid expense and other assets 2,862 (1,389 ) Accounts payable and other accrued liabilities (6,954 ) (3,773 ) Accrued payroll and related liabilities 14,052 6,247 Income taxes   21,581     15,165   Net cash provided by operating activities   80,625     68,327   Cash flows from investing activities: Business acquisitions, net of cash acquired (32,150 ) (17,295 ) Real estate acquired in connection with business acquisitions (1,502 ) — Property and equipment additions (16,526 ) (16,619 ) Proceeds from sale of assets 92 859 Other   (576 )   520   Net cash used in investing activities   (50,662 )   (32,535 ) Cash flows from financing activities: Repayment of debt (5,165 ) (12,806 ) Distributions to non-controlling interest partners (1,325 ) (1,090 )

Purchase of non-controlling interests

(1,483 ) (326 ) Proceeds from issuance of common stock under stock option plans 404 372 Excess tax benefit from stock based compensation 791 392 Repurchase of common stock (44,845 ) (9,793 ) Other   (80 )   —   Net cash used in financing activities   (51,703 )   (23,251 ) Effect of currency exchange rate changes on cash and cash equivalents (365 ) (282 ) (Decrease) increase in cash and cash equivalents (22,105 ) 12,259 Cash and cash equivalents at beginning of period   81,383     125,029   Cash and cash equivalents at end of period $ 59,278   $ 137,288       VCA Inc. Supplemental Operating Data (cont)

(Unaudited - In thousands, except per share amounts)

  Table #1             Reconciliation of net income attributable to

Three Months EndedMarch 31,

VCA Inc., to Non-GAAP net income attributable to VCA Inc. (1) 2015 2014   Net income attributable to VCA Inc. $ 38,301 $ 34,043 Acquisitions related amortization (1) 5,526 5,147

Tax benefit from acquisitions related amortization (1)

  (2,163 )   (2,015 ) Non-GAAP net income attributable to VCA Inc. $ 41,664   $ 37,175     Table #2 Three Months EndedMarch 31, Reconciliation of diluted earnings per share to Non-GAAP diluted earnings per share (1) 2015 2014   Diluted earnings per share $ 0.46 $ 0.38 Impact of acquisitions related amortization, net of tax (1)   0.04     0.04   Non-GAAP diluted earnings per share $ 0.50   $ 0.42     Shares used for computing diluted earnings per share   83,373     89,421       Table #3 Three Months EndedMarch 31, Reconciliation of consolidated gross profit to Non-GAAP consolidated gross profit (1) 2015 2014   Consolidated gross profit $ 113,862 $ 101,451 Impact of acquisitions related amortization (1)   5,465     5,080   Non-GAAP consolidated gross profit $ 119,327   $ 106,531   Non-GAAP consolidated gross profit margin   23.9 %   23.7 %   Table #4 Three Months EndedMarch 31, Reconciliation of consolidated operating income to Non-GAAP consolidated operating income (1) 2015 2014   Consolidated operating income $ 69,129 $ 61,232 Impact of acquisitions related amortization (1)   5,526     5,147   Non-GAAP consolidated operating income $ 74,655   $ 66,379   Non-GAAP consolidated operating margin   14.9 %   14.8 %  

_________________________________________________

(1) Management believes that investors’ understanding of our performance is enhanced by disclosing adjusted measures as the reported amounts, adjusted to exclude certain significant items and acquisition-related amortization. Non-GAAP net income, Non-GAAP diluted earnings per common share, Non-GAAP consolidated gross profit and Non-GAAP consolidated operating income measures are not, and should not be viewed as substitutes for U.S. generally accepted accounting principles (GAAP) net income, its components and diluted earnings per share.

  VCA Inc. Supplemental Operating Data (cont)

(Unaudited - In thousands, except per share amounts)

        As of Table #5

March 31, 2015

     

December 31, 2014

Selected consolidated balance sheet data Debt: Senior term notes $ 600,000 $ 600,000 Revolving credit 135,000 135,000 Other debt and capital leases   58,189     59,768   Total debt $ 793,189   $ 794,768     Three Months EndedMarch 31, Table #6 Selected expense data 2015 2014   Rent expense $ 18,780   $ 16,929    

Depreciation and amortization included in direct costs:

Animal hospital $ 15,962 $ 14,574 Laboratory 2,475 2,516 All other 940 1,731 Intercompany   (523 )   (465 ) $ 18,854 $ 18,356

 

Depreciation and amortization included in selling, general and administrative expense

  943     1,411   Total depreciation and amortization $ 19,797   $ 19,767     Share-based compensation included in direct costs: Laboratory $ 161 $ 150  

Share-based compensation included in selling, general and administrative expense:

Animal hospital 664 517 Laboratory 366 381 All other 202 182 Corporate   2,739     3,314     3,971     4,394   Total share-based compensation $ 4,132   $ 4,544    

VCA Inc.Tomas Fuller, 310-571-6505Chief Financial Officer

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