- Revenue increased 10.2% to a fourth
quarter record of $479.9 million
- Gross profit increased 13.2% to $99.0
million
- Operating income increased 14.7% to
$52.7 million
- Diluted earnings per common share
increased 17.9% to $0.33
- Non-GAAP diluted earnings per common
share increased 19.4% to $0.37
- Acquired a quarterly record 24
independent animal hospitals
VCA 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, 2014,
as follows: revenue increased 10.2% to a fourth quarter record of
$479.9 million, gross profit increased 13.2% to $99.0 million,
operating income increased 14.7% to $52.7 million, net income
increased 16.3% to $29.9 million, and diluted earnings per common
share increased 17.9% to $0.33. Non-GAAP diluted earnings per
common share, which excludes acquisition-related amortization,
increased 19.4% to $0.37.
We also reported our financial results for the twelve months
ended December 31, 2014, as follows: revenue increased 6.4% to $1.9
billion, gross profit increased 8.6% to $444.6 million, operating
income decreased 0.7% to $247.3 million, net income decreased 1.6%
to $140.7 million, and diluted earnings per common share increased
0.7% to $1.54. Our financial results for the twelve months ended
December 31, 2014, on a Non-GAAP basis, are as follows: gross
profit increased 8.7% to $465.4 million, operating income increased
9.6% to $295.3 million, net income increased 10.3% to $166.3
million, and Non-GAAP diluted earnings per common share increased
12.5% to $1.89.
Our financial results for the twelve months ended December 31,
2014, included a non-cash impairment charge of $27.0 million, $17.0
million net of tax, or $0.19 per diluted common share, related to
the write-down of goodwill and other long-lived assets in our
Vetstreet business, included in our All Other segments category.
Our results also included debt retirement costs of $1.7 million,
$1.0 million net of tax, or $0.01 per common share, related to the
refinancing of our senior credit facility. Our results for the
twelve months ended December 31, 2013, included charges of $3.8
million, $2.3 million net of tax, or $0.03 per diluted common
share, related to vacated properties that were consolidated into
the then newly constructed VCA West Los Angeles Animal Hospital, as
well as a non-cash inventory credit adjustment of $2.8 million,
$1.7 million net of tax, or $0.02 per diluted common share.
Bob Antin, Chairman and CEO, stated, “We had another terrific
quarter. We experienced solid internal revenue growth of 4.4% and
5.1% in our core Animal Hospital and Laboratory business segments,
respectively. Our same-store Animal Hospital gross profit margins
increased 80 basis points and our Laboratory gross profit margins
increased an impressive 170 basis points. The positive momentum in
our business has continued from the third quarter to the end of the
year and we are optimistic about our overall growth prospects in
2015.
“Animal Hospital revenue in the fourth quarter of 2014 increased
10.9% to $380.7 million, driven by acquisitions made in the past
twelve months and same-store revenue growth of 4.4%. Our same-store
gross profit margin increased to 13.5% from 12.7% and our total
gross margin increased to 13.2% from 12.5% in the prior-year
quarter. During the quarter, we acquired a record 24 independent
animal hospitals which had historical combined annual revenue of
$68.5 million, bringing our year to date total to $122.5
million.
“Laboratory internal revenue in the fourth quarter of 2014
increased 5.1% to $83.9 million, driven by an increase in the
average revenue per requisition of 5.2%. Our Laboratory gross
profit margin increased to 46.0% from 44.3% and our operating
margin increased to 35.8% from 34.4%.
“During the fourth quarter, we purchased 2.6 million shares of
our common stock for $112.8 million. Since the Board authorized our
share repurchase program, we have acquired 7.4 million shares of
our common stock for $278.5 million from April 2013 through
December 31, 2014."
2015 Financial Guidance
We provide the following financial guidance for the full year
2015:
- Revenue from $2.08 billion to $2.09
billion;
- Net income from $166 million to $175
million;
- Diluted earnings per common share from
$2.00 to $2.10; and
- Non-GAAP diluted earnings per common
share from $2.17 to $2.27.
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 fourth quarter 2014 financial results during
a conference call today, February 11th, 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 2015 Financial Guidance and other 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, 2013, reports on Form
10-Q and our other filings with the SEC.
About VCA Inc.
We own, operate and manage the largest network 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 EndedDecember 31, Twelve
Months EndedDecember 31, 2014
2013 2014 2013
Revenue: Animal hospital $ 380,694 $ 343,220 $ 1,514,878 $
1,417,908 Laboratory 84,004 79,806 360,396 344,831 All other 33,871
29,283 115,785 112,740 Intercompany (18,642 ) (16,856 ) (72,576 )
(72,110 ) 479,927 435,453 1,918,483 1,803,369
Direct costs 380,909 347,967 1,473,842 1,393,989
Gross profit: Animal hospital 50,128 42,976 230,801 209,127
Laboratory 38,661 35,378 175,808 163,879 All other 10,871 9,538
38,624 38,601 Intercompany (642 ) (406 ) (592 ) (2,227 ) 99,018
87,486 444,641 409,380 Selling,
general and administrative expense: Animal hospital 10,761 8,410
39,022 34,133 Laboratory 8,641 8,024 33,550 31,915 All other 9,674
8,368 33,456 32,941 Corporate 18,267 15,493 65,478
58,922 47,343 40,295 171,506 157,911 Impairment of
goodwill and other long-lived assets — — 27,019 — Net (gain) loss
on sale of assets (979 ) 1,268 (1,152 ) 2,455
Operating income 52,654 45,923 247,268 249,014 Interest expense,
net 5,215 4,110 17,779 18,549 Debt retirement costs — — 1,709 —
Other expense 41 203 219 90 Income
before provision for income taxes 47,398 41,610 227,561 230,375
Provision for income taxes 17,489 15,882 86,878
87,453 Net income 29,909 25,728 140,683 142,922 Net
income attributable to noncontrolling interests 1,550 1,011
5,245 5,411 Net income attributable to VCA
Inc. $ 28,359 $ 24,717 $ 135,438 $ 137,511
Diluted earnings per share $ 0.33 $ 0.28
$ 1.54 $ 1.53 Weighted-average shares
outstanding for diluted earnings per share 85,121 89,650
87,825 89,663
VCA Inc.
Condensed, Consolidated Balance
Sheets
(Unaudited)
(In thousands)
December 31, 2014 December 31,
2013 Assets Current assets: Cash and cash equivalents
$ 81,383 $ 125,029 Trade accounts receivable, net 60,482 59,900
Inventory 56,050 55,067 Prepaid expenses and other 36,924 25,417
Deferred income taxes 30,331 29,018 Prepaid income taxes 18,277
15,434 Total current assets 283,447 309,865 Property
and equipment, net 468,041 448,366 Other assets: Goodwill 1,415,861
1,321,234 Other intangible assets, net 88,175 86,671 Notes
receivable, net 2,807 3,454 Deferred financing costs, net 7,874
2,987 Other 65,815 55,632 Total assets $ 2,332,020
$ 2,228,209
Liabilities and Equity
Current liabilities: Current portion of long-term debt $ 19,356 $
51,087 Accounts payable 46,284 36,962 Accrued payroll and related
liabilities 64,359 57,337 Other accrued liabilities 67,219
58,762 Total current liabilities 197,218 204,148 Long-term
debt, less current portion 775,412 568,558 Deferred income taxes
103,502 93,082 Other liabilities 33,190 34,127 Total
liabilities 1,109,322 899,915 Redeemable noncontrolling interests
11,077 10,678 VCA Inc. stockholders’ equity: Common stock 83 89
Additional paid-in capital 155,802 384,797 Retained earnings
1,064,158 928,720 Accumulated other comprehensive loss (19,397 )
(6,190 ) Total VCA Inc. stockholders’ equity 1,200,646 1,307,416
Noncontrolling interests 10,975 10,200 Total equity
1,211,621 1,317,616 Total liabilities and equity $
2,332,020 $ 2,228,209
VCA Inc.
Condensed, Consolidated Statements of
Cash Flows
(Unaudited)
(In thousands)
Twelve Months EndedDecember 31, 2014
2013
Cash flows from operating activities: Net income $ 140,683 $
142,922 Adjustments to reconcile net income to net cash provided by
operating activities: Impairment of goodwill and other long-lived
assets 27,019 — Depreciation and amortization 79,427 77,409
Amortization of debt issue costs 1,391 1,245 Provision for
uncollectible accounts 6,248 7,360 Debt retirement costs 1,709 —
Net (gain) loss on sale of assets (1,152 ) 2,455 Share-based
compensation 17,200 14,104 Deferred income taxes 8,853 18,064
Excess tax benefit from stock based compensation (6,241 ) (3,446 )
Other 531 (377 ) Changes in operating assets and liabilities: Trade
accounts receivable (3,900 ) (11,048 ) Inventory, prepaid expense
and other assets (22,897 ) (7,134 ) Accounts payable and other
accrued liabilities 11,597 557 Accrued payroll and related
liabilities 6,782 6,502 Income taxes 2,960 7,759 Net
cash provided by operating activities 270,210 256,372
Cash flows from investing activities: Business acquisitions, net of
cash acquired (138,490 ) (52,688 ) Real estate acquired in
connection with business acquisitions (9,017 ) (5,328 ) Property
and equipment additions (72,948 ) (73,270 ) Proceeds from sale of
assets 3,904 7,096 Other (2,691 ) (2,541 ) Net cash used in
investing activities (219,242 ) (126,731 ) Cash flows from
financing activities: Repayment of debt (568,011 ) (41,129 )
Proceeds from issuance of long-term debt 600,000 — Proceeds from
revolving credit facility 135,000 — Payment of financing costs
(7,987 ) — Distributions to noncontrolling interest partners (5,009
) (4,866 ) Purchase of noncontrolling interest (326 ) (6,581 )
Proceeds from issuance of common stock under stock option plans
2,859 17,233 Excess tax benefit from stock based compensation 6,241
3,446 Repurchase of common stock (255,108 ) (39,367 ) Other (1,424
) (749 ) Net cash used in financing activities (93,765 ) (72,013 )
Effect of currency exchange rate changes on cash and cash
equivalents (849 ) (1,034 ) (Decrease) increase in cash and cash
equivalents (43,646 ) 56,594 Cash and cash equivalents at beginning
of period 125,029 68,435 Cash and cash equivalents at
end of period $ 81,383 $ 125,029
VCA Inc.
Supplemental Operating Data
(Unaudited - In thousands, except per
share amounts)
Table #1
Reconciliation of net income
attributable to VCA Inc., to Non-GAAP net income
attributable to VCA Inc.(1)
Three Months EndedDecember
31,
Twelve Months EndedDecember 31,
2014 2013 2014 2013 Net income
attributable to VCA Inc. $ 28,359 $ 24,717 $ 135,438 $ 137,511
Vacant property adjustments(2)
— — — 3,804
Tax benefit from vacant property
adjustments(2), (7)
— — — (1,489 )
Inventory adjustment(3)
— — — (2,808 )
Tax expense from inventory adjustment(3),
(7)
— — — 1,099
Impairment of goodwill and other
long-lived assets(4)
— — 27,019 —
Tax benefit on impairment charge(4),
(7)
— — (9,978 ) —
Debt Retirement costs(5)
— — 1,709 —
Tax benefit from debt retirement costs(5),
(7)
— — (669 ) —
Acquisitions related amortization(1)
5,434 4,781 21,039 20,934
Tax benefit from acquisitions related
amortization(1), (7)
(2,127 ) (1,871 ) (8,235 ) (8,194 )
Non-GAAP net income attributable to VCA
Inc. $ 31,666 $ 27,627 $ 166,323 $ 150,857
Table #2 Three Months
EndedDecember 31, Twelve Months EndedDecember
31,
Reconciliation of diluted earnings per
share to Non-GAAP diluted earnings per share(1)
2014 2013 2014 2013 Diluted
earnings per share $ 0.33 $ 0.28 $ 1.54 $ 1.53
Impact of vacant property adjustments, net
of tax(2)
— — — 0.03
Impact of inventory adjustment, net of
tax(3)
— — — (0.02 )
Impact of goodwill and other long-lived
assets impairment, net of tax(4)
— — 0.19 —
Impact of debt retirement costs, net of
tax(5)
— — 0.01 —
Impact of acquisitions related
amortization, net of tax(1)
0.04 0.03 0.15 0.14
Non-GAAP diluted earnings per share $ 0.37 $
0.31 $ 1.89 $ 1.68
Shares used for computing diluted earnings
per share
85,121 89,650 87,825 89,663
VCA Inc.
Supplemental Operating Data
(continued)
(Unaudited - In thousands, except per
share amounts)
Table #3
Reconciliation of consolidated gross
profit to Non-GAAP consolidated gross profit(1)
December 31,
December 31,
2014 2013 2014
2013 Consolidated gross profit $ 99,018
$ 87,486 $ 444,641 $ 409,380
Impact of vacant property
adjustments(2)
— — — 2,046
Impact of inventory adjustment(3)
— — — (2,808 )
Impact of rent expense adjustments(6)
— — — (1,396 )
Impact of acquisitions related
amortization(1)
5,374 4,718 20,780 20,753
Non-GAAP consolidated gross profit $ 104,392 $
92,204 $ 465,421 $ 427,975 Non-GAAP
consolidated gross profit margin 21.8 % 21.2 % 24.3 % 23.7 %
Table #4 Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
Reconciliation of consolidated
operating income to Non-GAAP consolidated operating
income(1)
2014 2013 2014 2013 Consolidated
operating income $ 52,654 $ 45,923 $ 247,268 $ 249,014
Impact of vacant property
adjustments(2)
— — — 3,804
Impact of inventory adjustment(3)
— — — (2,808 )
Impact of goodwill and other long-lived
assets impairment(4)
— — 27,019 —
Impact of rent expense adjustments(6)
— — — (1,396 )
Impact of acquisitions related
amortization(1)
5,434 4,781 21,039 20,934
Non-GAAP consolidated operating income $ 58,088
$ 50,704 $ 295,326 $ 269,548 Non-GAAP
consolidated operating margin 12.1 % 11.6 % 15.4 % 14.9 %
_________________________________________________
(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.
(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 was held for sale, and we accrued
costs totaling $2.0 million related to a vacant leased
property.
(3)
In the third quarter of 2013, we recorded
a non-cash physical inventory adjustment in our Animal Hospital
business segment which resulted in a $2.8 million credit adjustment
to direct costs.
(4) In the third quarter, we recognized a non-cash
impairment charge of $27.0 million related to the write-down of
goodwill and other long-lived assets in our Vetstreet business.
(5) Also in the third quarter, we incurred debt retirement
costs of $1.7 million related to the refinancing of our senior
credit facility. (6) In the second quarter of 2013, we
recorded a reduction in rent expense as a result of a capital lease
that was previously treated as an operating lease in our Animal
Hospital segment. (7) The rate used to calculate the tax
benefit is the statutory rate of the applicable year.
VCA Inc.
Supplemental Operating Data
(continued)
(Unaudited - In thousands, except per
share amounts)
As of Table #5 December 31, 2014
December 31, 2013 Selected
consolidated balance sheet data Debt: Senior term notes $
600,000 $ 556,914 Revolving credit 135,000 — Other debt and capital
leases 59,768 62,731 Total debt $ 794,768 $
619,645
Three Months EndedDecember
31, Twelve Months EndedDecember 31, Table
#6 Selected expense data 2014 2013
2014 2013 Rent expense $ 18,463 $
16,940 $ 69,747 $ 67,615
Depreciation and amortization included in
direct costs:
Animal hospital $ 15,822 $ 14,530 $ 60,395 $ 57,011 Laboratory
2,649 2,571 10,358 10,157 All other 824 1,519 5,731 5,122
Intercompany (514 ) (448 ) (1,931 ) (1,783 ) $ 18,781 $ 18,172 $
74,553 $ 70,507
Depreciation and amortization included in
selling, general and administrative expense
987 1,454 4,874 6,902 Total
depreciation and amortization $ 19,768 $ 19,626 $
79,427 $ 77,409 Share-based compensation
included in direct costs: Laboratory $ 216 $ 120 $ 653 $ 448
Share-based compensation included in
selling, general and administrative expense:
Animal hospital 721 306 2,132 1,723 Laboratory 440 319 1,513 1,198
All other 237 236 842 794 Corporate 3,352 2,783
12,060 9,941 4,750 3,644 16,547
13,656 Total share-based compensation $ 4,966 $ 3,764
$ 17,200 $ 14,104
VCA Inc.Tomas FullerChief Financial Officer(310) 571-6505
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