- Revenue increased 19.1% to a second
quarter record of $653.5 million
- Gross profit increased 16.4% to $163.9
million
- Operating income increased 19.4% to
$116.0 million
- Diluted earnings per common share
increased 20.0% to $0.78
- Non-GAAP diluted earnings per common
share increased 24.3% to $0.87
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, 2016, as
follows: revenue increased 19.1% to a second quarter record of
$653.5 million; gross profit increased 16.4% to $163.9 million;
operating income increased 19.4% to $116.0 million; net income
increased 18.0% to $64.0 million; and diluted earnings per common
share increased 20.0% to $0.78.
Excluding acquisition-related amortization expense, transaction
expenses related to the acquisition of Companion Animal Practices,
North America (“CAPNA”) and debt retirement costs detailed in this
press release, Non-GAAP operating income increased 22.3% to $126.1
million; Non-GAAP net income for the quarter increased 22.3% to
$70.8 million; and Non-GAAP diluted earnings per common share for
the quarter increased 24.3% to $0.87.
We also reported our financial results for the six months ended
June 30, 2016 as follows: revenue increased 16.1% to $1.2 billion;
gross profit increased 18.1% to $300.7 million; operating income
increased 21.5% to $202.1 million; net income increased 19.1% to
$110.3 million; and diluted earnings per common share increased
21.6% to $1.35. Excluding acquisition-related amortization expense,
transaction expenses related to the acquisition of CAPNA, other
discrete items and debt retirement costs detailed in this press
release, our financial results for the six months ended June 30,
2016, on a Non-GAAP basis, are as follows: gross profit increased
18.9% to $316.1 million; operating income increased 24.5% to $221.3
million; net income increased 25.1% to $124.5 million; and Non-GAAP
diluted earnings per common share increased 27.5% to $1.53.
Bob Antin, Chairman and CEO, stated, "We had an outstanding
quarter highlighted by the acquisition and integration of CAPNA,
and 24.3% growth in our adjusted diluted earnings per common share.
We have continued to experience strong organic revenue growth and
gross margins in both our core Animal Hospital and Laboratory
businesses. Given our results relative to our expectations and our
future acquisition pipeline, we are extremely optimistic with
respect to our results for the full year ended December 31,
2016.
"Animal Hospital revenue in the second quarter increased 24.1%,
to $540.4 million, driven by acquisitions made during the past 12
months and same-store revenue growth of 6.3%. Our same-store gross
profit margin increased to 18.3%, from 17.0% in the prior-year
quarter and our total gross margin increased to 17.5%, from 16.9%
in the prior-year quarter. Excluding acquisition-related
amortization expense, our Non-GAAP same-store gross profit margin
increased to 19.1% from 18.1%; and Non-GAAP Animal Hospital total
gross profit margin increased to 19.0% from 17.9% in the prior year
quarter. During the 2016 second quarter, we acquired CAPNA with 56
hospitals which had historical combined annual revenue of $178.3
million; and 13 independent animal hospitals which had historical
combined annual revenue of $23.8 million.
"Our Laboratory internal revenue increased 5.5% to $112.1
million from $106.2 million; laboratory gross profit margin
increased 60 basis points to 54.0%, from 53.4%; and our operating
margin increased 100 basis points to 45.4%, from 44.4% in the
prior-year quarter. Excluding acquisition-related amortization
expense, Non-GAAP Laboratory gross profit increased to 54.4% from
53.8%; and Non-GAAP Laboratory operating margin increased to 45.8%
from 44.8% in the prior year quarter."
2016 Guidance
We are revising our previously provided guidance to include our
expected impact from the CAPNA acquisition as follows:
- Revenue from $2.52 billion to $2.54
billion;
- Net income from $210 million to $218
million;
- Diluted earnings per common share from
$2.57 to $2.67; and
- Non-GAAP diluted earnings per common
share from $2.87 to $2.97.
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 2016 financial results during
a conference call today, July 27th, 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 (888)
311-3471 (domestic) or (503) 406-4063 (international) and refer to
conference ID 34372463. Interested parties should call at least
five minutes prior to the start of the call to register. Replay of
the webcast will be available for one year 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 2016 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;
a material adverse change in the financial condition or operations
of the company; the ability to successfully integrate CAPNA into
VCA and achieve expected operating synergies following the
acquisition; 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. 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, 2016
2015 2016 2015 Revenue:
Animal hospital $ 540,376 $ 435,376 $ 998,999 $ 828,402 Laboratory
112,060 106,222 218,787 200,194 All other 23,397 28,669 42,810
62,896 Intercompany (22,344 ) (21,482 ) (43,668 ) (43,254 ) 653,489
548,785 1,216,928 1,048,238
Direct costs 489,541 407,938 916,200 793,529 Gross profit:
Animal hospital 94,679 73,385 168,096 128,869 Laboratory 60,547
56,703 117,263 104,685 All other 8,917 11,389 15,827 22,813
Intercompany (195 ) (630 ) (458 ) (1,658 ) 163,948 140,847
300,728 254,709 Selling, general and
administrative expense: Animal hospital 14,277 10,453 26,362 21,674
Laboratory 9,702 9,487 19,998 18,352 All other 6,022 7,741 11,321
16,428 Corporate 18,189 16,804 40,637 32,429
48,190 44,485 98,318 88,883 Net (gain) loss on sale
or disposal of assets (271 ) (819 ) 292 (484 ) Operating
income 116,029 97,181 202,118 166,310 Interest expense, net 7,867
5,104 14,962 9,941 Debt retirement costs 1,600 — 1,600 — Other
(income) expense (600 ) (37 ) (864 ) 29 Income before
provision for income taxes 107,162 92,114 186,420 156,340 Provision
for income taxes 40,736 36,191 72,272 60,864
Net income 66,426 55,923 114,148 95,476 Net income
attributable to noncontrolling interests 2,376 1,624
3,871 2,876 Net income attributable to VCA Inc. $
64,050 $ 54,299 $ 110,277 $ 92,600
Diluted earnings per share $ 0.78 $ 0.65 $
1.35 $ 1.11 Weighted-average shares
outstanding for diluted earnings per share 81,729 83,084
81,630 83,227
VCA Inc.
Condensed, Consolidated Balance Sheets (Unaudited)
(In thousands)
June 30, 2016 December
31, 2015 Assets Current assets: Cash and cash
equivalents $ 109,684 $ 98,888 Trade accounts receivable, net
83,157 76,634 Inventory 61,829 51,523 Prepaid expenses and other
36,221 30,521 Prepaid income taxes 1,153 24,598 Total
current assets 292,044 282,164 Property and equipment, net 564,034
507,753 Other assets: Goodwill 1,963,377 1,517,650 Other intangible
assets, net 257,648 97,377 Notes receivable 2,173 2,194 Other
99,851 93,994 Total assets $ 3,179,127 $
2,501,132
Liabilities and Equity Current liabilities:
Current portion of long-term debt $ 25,980 $ 33,623 Accounts
payable 53,177 52,337 Accrued payroll and related liabilities
80,817 75,519 Other accrued liabilities 81,907 70,828
Total current liabilities 241,881 232,307 Long-term debt, net
1,279,453 832,718 Deferred income taxes 130,209 131,478 Other
liabilities 39,236 36,084 Total liabilities 1,690,779
1,232,587 Redeemable noncontrolling interests 12,053 11,511 VCA
Inc. stockholders’ equity: Common stock 81 81 Additional paid-in
capital 28,696 19,708 Retained earnings 1,385,484 1,275,207
Accumulated other comprehensive loss (37,827 ) (50,034 ) Total VCA
Inc. stockholders’ equity 1,376,434 1,244,962 Noncontrolling
interests 99,861 12,072 Total equity 1,476,295
1,257,034 Total liabilities and equity $ 3,179,127 $
2,501,132
VCA Inc. Condensed, Consolidated
Statements of Cash Flows (Unaudited)
(In thousands)
Six Months EndedJune 30, 2016
2015 Cash flows from operating activities: Net
income $ 114,148 $ 95,476 Adjustments to reconcile net income to
net cash provided by operating activities: Depreciation and
amortization 46,978 40,163 Amortization of debt issue costs 865 870
Provision for uncollectible accounts 2,891 3,379 Debt retirement
costs 1,600 — Net loss (gain) on sale or disposal of assets 292
(484 ) Share-based compensation 9,104 8,269 Excess tax benefit from
share-based compensation (1,421 ) (4,729 ) Other 6,665 (658 )
Changes in operating assets and liabilities: Trade accounts
receivable (7,065 ) (24,217 ) Inventory, prepaid expense and other
assets (15,607 ) (8,942 ) Accounts payable and other accrued
liabilities 5,889 (4,196 ) Accrued payroll and related liabilities
2,817 8,300 Income taxes 23,557 16,525 Net cash
provided by operating activities 190,713 129,756 Cash
flows from investing activities: Business acquisitions, net of cash
acquired (540,878 ) (66,529 ) Property and equipment additions
(58,814 ) (34,521 ) Proceeds from sale of assets 282 6,164 Other
(4,924 ) 205 Net cash used in investing activities (604,334
) (94,681 ) Cash flows from financing activities: Repayment of
long-term debt (1,256,250 ) (7,924 ) Proceeds from issuance of
long-term debt 1,255,000 — Proceeds from revolving credit facility
435,000 61,000 Payment of financing costs (3,829 ) — Distributions
to noncontrolling interest partners (2,554 ) (2,447 ) Purchase of
noncontrolling interests (3,730 ) (1,493 ) Proceeds from issuance
of common stock under stock option plans 1,122 679 Excess tax
benefit from share-based compensation 1,421 4,729 Repurchase of
common stock (843 ) (96,674 ) Other (1,233 ) (80 ) Net cash
provided (used) in financing activities 424,104 (42,210 )
Effect of currency exchange rate changes on cash and cash
equivalents 313 78 Increase (decrease) in cash and
cash equivalents 10,796 (7,057 ) Cash and cash equivalents at
beginning of period 98,888 81,383 Cash and cash
equivalents at end of period $ 109,684 $ 74,326
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) 2016 2015 2016
2015 Net income attributable to VCA Inc. $ 64,050 $
54,299 $ 110,277 $ 92,600 Adjustments to Other Long-term
liabilities, net of tax (2) — — 2,040 — Discrete tax items (3) — —
1,045 — Transaction costs related to the CAPNA acquisition, net of
tax (4) 141 — 728 —
Debt retirement costs, net of tax (5)
974 — 974 — Acquisitions related amortization, net of tax (1) 5,628
3,565 9,419 6,928 Non-GAAP net income
attributable to VCA Inc. $ 70,793 $ 57,864 $ 124,483
$ 99,528
Table #2 Three Months
EndedJune 30, Six Months EndedJune 30,
Reconciliation of diluted earnings per share to Non-GAAP
diluted earnings per share (1) 2016 2015
2016 2015 Diluted earnings per share $ 0.78 $
0.65 $ 1.35 $ 1.11 Adjustments to Other Long-term liabilities, net
of tax (2) — — 0.02 — Discrete tax items (3) — — 0.01 — Transaction
costs related to the CAPNA acquisition, net of tax (4) — — 0.01 —
Debt retirement costs, net of tax (5) 0.01 — 0.01 — Acquisitions
related amortization, net of tax (1) 0.07 0.04 0.12
0.08 Non-GAAP diluted earnings per share (6) $ 0.87 $
0.70 $ 1.53 $ 1.20 Shares used for computing
diluted earnings per share 81,729 83,084 81,630
83,227
Table #3 Three Months
EndedJune 30, Six Months EndedJune 30,
Reconciliation of consolidated gross profit to Non-GAAP
consolidated gross profit (1) 2016 2015
2016 2015 Consolidated gross profit $ 163,948
$ 140,847 $ 300,728 $ 254,709 Acquisitions related amortization (1)
9,187 5,798 15,415 11,263 Non-GAAP
consolidated gross profit $ 173,135 $ 146,645 $
316,143 $ 265,972 Non-GAAP consolidated gross profit margin
26.5% 26.7% 26.0% 25.4%
Table #4 Three Months
EndedJune 30, Six Months EndedJune 30,
Reconciliation of consolidated operating income to
Non-GAAP consolidated operating income (1)
2016 2015 2016 2015 Consolidated
operating income $ 116,029 $ 97,181 $ 202,118 $ 166,310 Adjustments
to Other Long-term liabilities (2) — — 1,954 — Transaction costs
related to the CAPNA acquisition (4) 231 — 1,197 — Acquisitions
related amortization (1) 9,799 5,858 16,027
11,384 Non-GAAP consolidated operating income $ 126,059 $
103,039 $ 221,296 $ 177,694 Non-GAAP consolidated
operating margin 19.3% 18.8% 18.2% 17.0%
_________________________________________________
(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) In the first quarter of 2016, we
recorded a non-cash charge to adjust certain long-term liabilities
for $3.4 million, or $2.0 million net of tax. $2.0 million of this
amount relates to compensation and $1.4 million relates to interest
accretion. (3) In the first quarter of 2016, we recorded a
tax adjustment to our income tax liabilities for $1.0 million.
(4) As of the end of the second quarter, we have recorded
transaction costs of $1.2 million or $728,000 net of tax related to
our acquisition of CAPNA. (5) We incurred debt retirement
costs of $1.6 million, or $974,000 net of tax, in connection with
our new credit facility, entered into on June 29, 2016. (6)
Amounts may not foot due to rounding.
VCA Inc.
Supplemental Operating Data (cont)
(Unaudited - In thousands, except per
share amounts)
As of Table #5
June 30, 2016 December
31, 2015 Selected consolidated balance sheet data
Debt: Senior term notes $ 880,000 $ 585,000 Revolving credit
375,000 232,000 Other debt and capital leases 57,919 55,474
Total debt
$ 1,312,919 $ 872,474
Three Months
EndedJune 30, Six Months EndedJune 30,
Table #6 Selected expense data 2016
2015 2016 2015 Rent expense $ 23,449
$ 18,841 $ 44,313 $ 37,621
Depreciation and amortization included in
direct costs:
Animal hospital $ 21,190 $ 16,381 $ 38,714 $ 32,343 Laboratory
2,803 2,676 5,551 5,151 All other 767 963 1,519 1,903 Intercompany
(597 ) (530 ) (1,183 ) (1,053 ) $ 24,163 $ 19,490 $ 44,601 $ 38,344
Depreciation and amortization included in
selling, general and administrative expense
1,526 876 2,377 1,819 Total
depreciation and amortization $ 25,689 $ 20,366 $
46,978 $ 40,163 Share-based compensation
included in direct costs: Laboratory $ 181 $ 163 $ 358 $ 324
Share-based compensation included in
selling, general and administrative expense:
Animal hospital 724 673 1,508 1,337 Laboratory 407 376 836 742 All
other 147 198 300 400 Corporate 2,739 2,727 6,102
5,466 4,017 3,974 8,746 7,945
Total share-based compensation $ 4,198 $ 4,137
$ 9,104 $ 8,269
Source: VCA Inc.
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version on businesswire.com: http://www.businesswire.com/news/home/20160727005347/en/
VCA Inc.Tomas Fuller, 310-571-6505Chief Financial Officer
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