- Revenue increased 12.1% to a second
quarter record of $548.8 million
- Gross profit increased 17.0% to $140.8
million
- Operating income increased 21.6% to
$97.2 million
- Diluted earnings per common share
increased 27.5% to $0.65
- Non-GAAP diluted earnings per common
share increased 27.3% to $0.70
VCA Inc. (NASDAQ: WOOF), a leading animal
healthcare company in the United States and Canada, today reported
financial results for the second quarter ended June 30, 2015, as
follows: revenue increased 12.1% to a second quarter record of
$548.8 million; gross profit increased 17.0% to $140.8 million;
operating income increased 21.6% to $97.2 million; net income
increased 19.1% to $54.3 million and diluted earnings per common
share increased 27.5% to $0.65. Non-GAAP diluted earnings per
common share, which excludes acquisition-related amortization,
increased 27.3% to $0.70.
We also reported our financial results for the six months ended
June 30, 2015, as follows: revenue increased 11.6% to $1.0 billion,
gross profit increased 14.8% to $254.7 million, operating income
increased 17.8% to $166.3 million, net income increased 16.3% to
$92.6 million, and diluted earnings per common share increased
24.7% to $1.11. Our financial results for the six months ended June
30, 2015, on a Non-GAAP basis, are as follows: gross profit
increased 14.6% to $266.0 million, operating income increased 17.3%
to $178.0 million, net income increased 15.8% to $99.5 million, and
Non-GAAP diluted earnings per common share increased 25.0% to
$1.20.
Bob Antin, Chairman and CEO, stated, "We had a great quarter.
Our Animal Hospital business segment same-store revenue growth rate
continues to accelerate, driven once again by an increase in both
the number of orders and the average revenue per order. Our
Laboratory business segment experienced 7.3% internal revenue
growth resulting in a 220 basis point increase in gross profit
margin. Accordingly, we remain very optimistic with respect to our
results for the full year ended December 2015.
"Animal Hospital revenue in the current quarter increased 12.6%,
to $435.4 million, driven by acquisitions made during the past 12
months and same-store revenue growth of 6.0%. Our same-store gross
profit margin increased to 17.3%, from 16.6% and our total gross
margin increased to 16.9%, from 16.4% in the prior-year quarter.
During the quarter, we acquired 12 independent animal hospitals
which had historical combined annual revenue of $30.5 million.
"Laboratory internal revenue in the second quarter increased
7.3%, to $103.0 million. Our Laboratory gross profit margin
increased to 53.4%, from 51.2% and our operating margin increased
to 44.4%, from 42.5% in the prior-year quarter.
"During the quarter we repurchased 840,000 shares of our common
stock for $43.9 million. Since the Board authorized our repurchase
programs in April 2013, through the second quarter 2015, we have
acquired 9.1 million shares for $365.7 million, including
commissions. At the end of the second quarter, we have $159.5
million left in our authorization."
2015 Guidance
We are revising our guidance as follows:
• Revenue from $2.12 billion to $2.13 billion;
• Net income from $172 million to $181 million;
• Diluted earnings per common share from $2.08 to $2.18; and
• Non-GAAP diluted earnings per common share of $2.25 to
$2.35.
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 second quarter 2015 financial results during
a conference call today, July 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 EndedJune 30,
Six Months EndedJune 30, 2015
2014 2015 2014 Revenue: Animal hospital
$ 435,376 $ 386,776 $ 828,402 $ 738,364 Laboratory 106,222 95,955
200,194 184,489 All other 28,669 23,712 62,896 51,833 Intercompany
(21,482 ) (16,971 ) (43,254 ) (35,707 ) 548,785 489,472
1,048,238 938,979 Direct costs 407,938
369,057 793,529 717,113 Gross profit: Animal hospital 73,385
63,336 128,869 112,136 Laboratory 56,703 49,092 104,685 92,123 All
other 11,389 7,648 22,813 17,617 Intercompany (630 ) 339
(1,658 ) (10 ) 140,847 120,415 254,709 221,866
Selling, general and administrative expense: Animal
hospital 10,453 9,864 21,674 18,992 Laboratory 9,487 8,281 18,352
16,299 All other 7,741 7,411 16,428 15,759 Corporate 16,804
14,375 32,429 30,321 44,485 39,931
88,883 81,371 Net (gain) loss on sale
or disposal of assets (819 ) 578 (484 ) (643 ) Operating
income 97,181 79,906 166,310 141,138 Interest expense, net 5,104
4,030 9,941 8,197 Other (income) expense (37 ) 43 29
(10 ) Income before provision for income taxes 92,114 75,833
156,340 132,951 Provision for income taxes 36,191 28,925
60,864 51,128 Net income 55,923 46,908 95,476
81,823 Net income attributable to noncontrolling interests 1,624
1,324 2,876 2,196 Net income
attributable to VCA Inc. $ 54,299 $ 45,584 $ 92,600
$ 79,627 Diluted earnings per share $ 0.65
$ 0.51 $ 1.11 $ 0.89
Weighted-average shares outstanding for diluted earnings per share
83,084 89,191 83,227 89,312
VCA Inc. Condensed, Consolidated Balance
Sheets (Unaudited) (In thousands) June
30, 2015 December 31, 2014 Assets
Current assets: Cash and cash equivalents $ 74,326 $ 81,383 Trade
accounts receivable, net 81,593 60,482 Inventory 53,789 56,050
Prepaid expenses and other 27,874 36,924 Deferred income taxes
30,324 30,331 Prepaid income taxes 6,472 18,277 Total
current assets 274,378 283,447 Property and equipment, net 477,929
468,041 Other assets: Goodwill 1,452,370 1,415,861 Other intangible
assets, net 98,908 88,175 Notes receivable 2,471 2,807 Deferred
financing costs, net 7,004 7,874 Other 84,050 65,815
Total assets $ 2,397,110 $ 2,332,020
Liabilities
and Equity Current liabilities: Current portion of long-term
debt $ 33,881 $ 19,356 Accounts payable 42,071 46,284 Accrued
payroll and related liabilities 72,697 64,359 Other accrued
liabilities 73,093 67,219 Total current liabilities
221,742 197,218 Long-term debt, less current portion 819,380
775,412 Deferred income taxes 103,424 103,502 Other liabilities
31,862 33,190 Total liabilities 1,176,408 1,109,322
Redeemable noncontrolling interests 11,183 11,077 VCA Inc.
stockholders’ equity: Common stock 81 83 Additional paid-in capital
72,590 155,802 Retained earnings 1,156,758 1,064,158 Accumulated
other comprehensive loss (30,331 ) (19,397 ) Total VCA Inc.
stockholders’ equity 1,199,098 1,200,646 Noncontrolling interests
10,421 10,975 Total equity 1,209,519 1,211,621
Total liabilities and equity $ 2,397,110 $ 2,332,020
VCA Inc. Condensed,
Consolidated Statements of Cash Flows (Unaudited) (In
thousands) Six Months EndedJune 30,
2015 2014 Cash flows from operating
activities: Net income $ 95,476 $ 81,823 Adjustments to reconcile
net income to net cash provided by operating activities:
Depreciation and amortization 40,163 39,797 Amortization of debt
issue costs 870 604 Provision for uncollectible accounts 3,379
2,612 Net gain on sale or disposal of assets (484 ) (643 )
Share-based compensation 8,269 8,571 Excess tax benefit from stock
based compensation (4,729 ) (2,092 ) Other (658 ) (53 ) Changes in
operating assets and liabilities: Trade accounts receivable (24,217
) (8,945 ) Inventory, prepaid expense and other assets (8,942 )
(6,610 ) Accounts payable and other accrued liabilities (4,196 )
1,171 Accrued payroll and related liabilities 8,300 3,816 Income
taxes 16,525 8,062 Net cash provided by operating
activities 129,756 128,113 Cash flows from investing
activities: Business acquisitions, net of cash acquired (66,529 )
(30,764 ) Property and equipment additions (34,521 ) (27,979 )
Proceeds from sale of assets 6,164 4,456 Other 205 55
Net cash used in investing activities (94,681 ) (54,232 ) Cash
flows from financing activities: Repayment of debt (7,924 ) (26,218
) Proceeds from revolving credit facility 61,000 — Distributions to
non-controlling interest partners (2,447 ) (2,259 ) Purchase of
non-controlling interests (1,493 ) (326 ) Proceeds from issuance of
common stock under stock option plans 679 467 Excess tax benefit
from stock based compensation 4,729 2,092 Repurchase of common
stock (96,674 ) (49,091 ) Other (80 ) (838 ) Net cash used in
financing activities (42,210 ) (76,173 ) Effect of currency
exchange rate changes on cash and cash equivalents 78 (202 )
Decrease in cash and cash equivalents (7,057 ) (2,494 ) Cash and
cash equivalents at beginning of period 81,383 125,029
Cash and cash equivalents at end of period $ 74,326 $
122,535
VCA Inc.
Supplemental Operating Data (Unaudited - In thousands,
except per share amounts) Table #1
Reconciliation of net income attributable to Three Months
EndedJune 30, Six Months EndedJune 30,
VCA Inc., to Non-GAAP net income attributable to VCA
Inc. (1) 2015 2014 2015 2014
Net income attributable to VCA Inc. $ 54,299 $ 45,584 $
92,600 $ 79,627 Acquisitions related amortization (1) 5,858 5,227
11,384 10,374 Tax benefit from acquisitions related amortization
(1) (2,293 ) (2,046 ) (4,456 ) (4,060 ) Non-GAAP net income
attributable to VCA Inc. $ 57,864 $ 48,765 $ 99,528
$ 85,941
Table #2 Three Months
EndedJune 30, Six Months EndedJune 30,
Reconciliation of diluted earnings per share to Non-GAAP
diluted earnings per share (1) 2015 2014
2015 2014 Diluted earnings per share $ 0.65 $
0.51 $ 1.11 $ 0.89 Impact of acquisitions related amortization, net
of tax (1) 0.04 0.04 0.08 0.07 Non-GAAP
diluted earnings per share (2) $ 0.70 $ 0.55 $ 1.20
$ 0.96 Shares used for computing diluted
earnings per share 83,084 89,191 83,227 89,312
Table #3 Three Months
EndedJune 30, Six Months EndedJune 30,
Reconciliation of consolidated gross profit to Non-GAAP
consolidated gross profit (1) 2015 2014
2015 2014 Consolidated gross profit $ 140,847
$ 120,415 $ 254,709 $ 221,866 Impact of acquisitions related
amortization (1) 5,798 5,160 11,263 10,240
Non-GAAP consolidated gross profit $ 146,645 $
125,575 $ 265,972 $ 232,106 Non-GAAP
consolidated gross profit margin 26.7% 25.7% 25.4% 24.7%
Table #4 Three Months EndedJune 30, Six
Months EndedJune 30, Reconciliation of consolidated
operating income to Non-GAAP consolidated operating
income (1) 2015 2014 2015
2014 Consolidated operating income $ 97,181 $ 79,906
$ 166,310 $ 141,138 Impact of acquisitions related amortization (1)
5,858 5,227 11,384 10,374 Non-GAAP
consolidated operating income $ 103,039 $ 85,133 $
177,694 $ 151,512 Non-GAAP consolidated operating
margin 18.8% 17.4% 17.0% 16.1%
_________________________________________________
(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) Amounts may not add due to rounding.
VCA Inc. Supplemental Operating Data
(cont) (Unaudited - In thousands, except per share
amounts) As of Table #5 June
30, 2015 December 31, 2014
Selected consolidated balance sheet data Debt: Senior term
notes $ 600,000 $ 600,000 Revolving credit 196,000 135,000 Other
debt and capital leases 57,261 59,768 Total debt $
853,261 $ 794,768
Three Months
EndedJune 30, Six Months EndedJune 30,
Table #6 Selected expense data 2015
2014 2015 2014 Rent expense $ 18,841
$ 16,879 $ 37,621 $ 33,808
Depreciation and amortization included in direct costs: Animal
hospital $ 16,381 $ 14,955 $ 32,343 $ 29,529 Laboratory 2,676 2,543
5,151 5,059 All other 963 1,671 1,903 3,402 Intercompany (530 )
(473 ) (1,053 ) (938 ) $ 19,490 $ 18,696 $ 38,344 $ 37,052
Depreciation and amortization included in selling, general and
administrative expense 876 1,334 1,819 2,745
Total depreciation and amortization $ 20,366 $ 20,030
$ 40,163 $ 39,797 Share-based
compensation included in direct costs: Laboratory $ 163 $ 133 $ 324
$ 283 Share-based compensation included in selling, general
and administrative expense: Animal hospital 673 424 1,337 941
Laboratory 376 352 742 733 All other 198 191 400 373 Corporate
2,727 2,927 5,466 6,241 3,974
3,894 7,945 8,288 Total share-based
compensation $ 4,137 $ 4,027 $ 8,269 $ 8,571
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VCA Inc.Tomas FullerChief Financial Officer(310) 571-6505
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