VCA Inc. Reports Fourth Quarter 2015 Results and Provides Financial Guidance for 2016
- Revenue increased 11.2% to a fourth quarter record of $533.7 million
- Gross profit increased 18.9% to $117.7 million
- Operating income increased 26.1% to $66.4 million
- Diluted earnings per common share increased 136.4% to $0.78
- Non-GAAP diluted earnings per common share increased 35.1% to $0.50
LOS ANGELES–(BUSINESS WIRE)–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,
2015, as follows: revenue increased 11.2% to a fourth quarter record of
$533.7 million; gross profit increased 18.9% to $117.7 million;
operating income increased 26.1% to $66.4 million; net income increased
124.2% to $63.6 million and diluted earnings per common share increased
136.4% to $0.78.
Our results for the quarter included a gain of $43.3 million, $26.4
million net of tax, or $0.32 per diluted common share related to the
sale of our Vetstreet business. Excluding this item and
acquisition-related amortization expense, our Non-GAAP net income
increased 29.5% to $41.0 million; and Non-GAAP diluted earnings per
share increased 35.1% to $0.50.
We also reported our financial results for the twelve months ended
December 31, 2015 as follows: revenue increased 11.2% to $2.1 billion;
gross profit increased 14.7% to $510.1 million; operating income
increased 33.4% to $329.8 million; net income increased 55.8% to $211.0
million and diluted earnings per common share increased 66.2% to $2.56.
Our financial results for the twelve months ended December 31, 2015, on
a Non-GAAP basis, are as follows: gross profit increased 14.6% to $533.2
million; operating income increased 18.1% to $348.6 million; net income
increased 18.0% to $196.2 million and Non-GAAP diluted earnings per
common share increased 25.9% to $2.38.
Our financial results for the twelve months ended December 31, 2015
included the aforementioned gain on the sale of our Vetstreet business
and business interruption insurance gain of $4.5 million, $2.8 million
net of tax, or $0.03 per diluted common share. Our 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; debt retirement costs of $1.7 million, $1.0 million net of
tax, or $0.01 per common share.
Bob Antin, Chairman and CEO, stated, “We had an exceptional fourth
quarter, which concluded another strong year. We experienced solid
organic revenue growth of 7.4% and 8.2% in our core Animal Hospital and
Laboratory business segments, respectively. Our same-store Animal
Hospital gross profit margins increased 140 basis points and our
Laboratory gross profit margins increased an impressive 280 basis
points. The positive momentum in our business has continued from the
third quarter to the end of the year and accordingly, we are optimistic
about our overall growth prospects in 2016.
“Animal Hospital revenue in the fourth quarter of 2015 increased 12.3%,
to $427.5 million, driven by acquisitions made in the past twelve months
and same-store revenue growth of 7.4%. Our same-store gross profit
margin increased to 14.8% from 13.4% and our total gross margin
increased to 14.2%, from 13.2% in the prior-year quarter. During the
quarter, we acquired 13 independent animal hospitals which had
historical combined annual revenue of $31.7 million, bringing our year
to date total to $122.0 million.
“Laboratory internal revenue in the fourth quarter of 2015 increased
8.2% to $90.9 million, driven by an increase in requisitions of 5.1%.
Our Laboratory gross profit margin increased to 48.8% from 46.0% and our
operating margin increased to 37.9% from 35.8%.”
2016 Financial Guidance
We provide the following financial guidance for the full year 2016:
- Revenue from $2.37 billion to $2.39 billion;
- Net income from $206 million to $214 million;
- Diluted earnings per common share from $2.52 to $2.62; and
- Non-GAAP diluted earnings per common share from $2.73 to $2.83.
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 2015 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 (888) 311-3471. 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 2016 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, 2014, 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 Ended December 31, |
Twelve Months Ended December 31, |
|||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenue: | ||||||||||||||||
Animal hospital | $ | 427,544 | $ | 380,694 | $ | 1,697,870 | $ | 1,514,878 | ||||||||
Laboratory | 93,397 | 84,004 | 393,900 | 360,396 | ||||||||||||
All other | 33,254 | 33,871 | 126,988 | 115,785 | ||||||||||||
Intercompany | (20,475 | ) | (18,642 | ) | (85,083 | ) | (72,576 | ) | ||||||||
533,720 | 479,927 | 2,133,675 | 1,918,483 | |||||||||||||
Direct costs | 416,024 | 380,909 | 1,623,604 | 1,473,842 | ||||||||||||
Gross profit: | ||||||||||||||||
Animal hospital | 60,525 | 50,128 | 264,335 | 230,801 | ||||||||||||
Laboratory | 45,609 | 38,661 | 201,702 | 175,808 | ||||||||||||
All other | 12,128 | 10,871 | 46,702 | 38,624 | ||||||||||||
Intercompany | (566 | ) | (642 | ) | (2,668 | ) | (592 | ) | ||||||||
117,696 | 99,018 | 510,071 | 444,641 | |||||||||||||
Selling, general and administrative expense: | ||||||||||||||||
Animal hospital | 11,960 | 10,761 | 44,311 | 39,022 | ||||||||||||
Laboratory | 10,181 | 8,641 | 38,075 | 33,550 | ||||||||||||
All other | 9,481 | 9,674 | 33,569 | 33,456 | ||||||||||||
Corporate | 18,630 | 18,267 | 68,040 | 65,478 | ||||||||||||
50,252 | 47,343 | 183,995 | 171,506 | |||||||||||||
Impairment of goodwill and other long-lived assets | — | — | — | 27,019 | ||||||||||||
Business interruption insurance gain, net | — | — | (4,523 | ) | — | |||||||||||
Net loss (gain) on sale of assets | 1,063 | (979 | ) | 829 | (1,152 | ) | ||||||||||
Operating income | 66,381 | 52,654 | 329,770 | 247,268 | ||||||||||||
Interest expense, net | 5,680 | 5,215 | 21,076 | 17,779 | ||||||||||||
Debt retirement costs | — | — | — | 1,709 | ||||||||||||
Other expense | 271 | 41 | 359 | 219 | ||||||||||||
Gain on sale of business, net | (43,306 | ) | — | (43,306 | ) | — | ||||||||||
Income before provision for income taxes | 103,736 | 47,398 | 351,641 | 227,561 | ||||||||||||
Provision for income taxes | 39,582 | 17,489 | 135,543 | 86,878 | ||||||||||||
Net income | 64,154 | 29,909 | 216,098 | 140,683 | ||||||||||||
Net income attributable to noncontrolling interests | 559 | 1,550 | 5,049 | 5,245 | ||||||||||||
Net income attributable to VCA Inc. | $ | 63,595 | $ | 28,359 | $ | 211,049 | $ | 135,438 | ||||||||
Diluted earnings per share | $ | 0.78 | $ | 0.33 | $ | 2.56 | $ | 1.54 | ||||||||
Weighted-average shares outstanding for diluted earnings per share | 81,461 | 85,121 | 82,414 | 87,825 | ||||||||||||
VCA Inc. | ||||||||
Condensed, Consolidated Balance Sheets | ||||||||
(Unaudited) | ||||||||
(In thousands) |
||||||||
December 31, 2015 |
December 31, 2014 |
|||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 98,888 | $ | 81,383 | ||||
Trade accounts receivable, net | 76,634 | 60,482 | ||||||
Inventory | 51,523 | 56,050 | ||||||
Prepaid expenses and other | 30,521 | 36,924 | ||||||
Prepaid income taxes | 24,598 | 18,277 | ||||||
Total current assets | 282,164 | 253,116 | ||||||
Property and equipment, net | 507,753 | 468,041 | ||||||
Other assets: | ||||||||
Goodwill | 1,517,650 | 1,415,861 | ||||||
Other intangible assets, net | 97,377 | 88,175 | ||||||
Notes receivable, net | 2,194 | 2,807 | ||||||
Deferred financing costs, net | 6,133 | 7,874 | ||||||
Other | 93,994 | 65,815 | ||||||
Total assets | $ | 2,507,265 | $ | 2,301,689 | ||||
Liabilities and Equity | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 33,623 | $ | 19,356 | ||||
Accounts payable | 52,337 | 46,284 | ||||||
Accrued payroll and related liabilities | 75,519 | 64,359 | ||||||
Other accrued liabilities | 70,828 | 67,219 | ||||||
Total current liabilities | 232,307 | 197,218 | ||||||
Long-term debt, less current portion | 838,851 | 775,412 | ||||||
Deferred income taxes | 131,478 | 73,171 | ||||||
Other liabilities | 36,084 | 33,190 | ||||||
Total liabilities | 1,238,720 | 1,078,991 | ||||||
Redeemable noncontrolling interests | 11,511 | 11,077 | ||||||
VCA Inc. stockholders’ equity: | ||||||||
Common stock | 81 | 83 | ||||||
Additional paid-in capital | 19,708 | 155,802 | ||||||
Retained earnings | 1,275,207 | 1,064,158 | ||||||
Accumulated other comprehensive loss | (50,034 | ) | (19,397 | ) | ||||
Total VCA Inc. stockholders’ equity | 1,244,962 | 1,200,646 | ||||||
Noncontrolling interests | 12,072 | 10,975 | ||||||
Total equity | 1,257,034 | 1,211,621 | ||||||
Total liabilities and equity | $ | 2,507,265 | $ | 2,301,689 | ||||
VCA Inc. | ||||||||
Condensed, Consolidated Statements of Cash Flows | ||||||||
(Unaudited) | ||||||||
(In thousands) |
||||||||
Twelve Months Ended December 31, |
||||||||
2015 | 2014 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 216,098 | $ | 140,683 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Impairment of goodwill and other long-lived assets | — | 27,019 | ||||||
Gain on sale of business | (43,306 | ) | — | |||||
Depreciation and amortization | 81,688 | 79,427 | ||||||
Amortization of debt issue costs | 1,741 | 1,391 | ||||||
Provision for uncollectible accounts | 8,401 | 6,248 | ||||||
Debt retirement costs | — | 1,709 | ||||||
Net loss (gain) on sale of assets | 829 | (1,152 | ) | |||||
Share-based compensation | 16,264 | 17,200 | ||||||
Deferred income taxes | 56,722 | 8,853 | ||||||
Excess tax benefit from stock based compensation | (11,089 | ) | (6,241 | ) | ||||
Other | 2,159 | 531 | ||||||
Changes in operating assets and liabilities: | ||||||||
Trade accounts receivable | (28,720 | ) | (3,900 | ) | ||||
Inventory, prepaid expense and other assets | (19,268 | ) | (22,897 | ) | ||||
Accounts payable and other accrued liabilities | 7,532 | 11,597 | ||||||
Accrued payroll and related liabilities | 11,323 | 6,782 | ||||||
Income taxes | 4,339 | 2,960 | ||||||
Net cash provided by operating activities | 304,713 | 270,210 | ||||||
Cash flows from investing activities: | ||||||||
Business acquisitions, net of cash acquired | (151,586 | ) | (147,507 | ) | ||||
Property and equipment additions | (91,954 | ) | (72,948 | ) | ||||
Proceeds from sale of assets | 6,762 | 3,904 | ||||||
Proceeds from sale of business | 48,000 | — | ||||||
Other | (2,042 | ) | (2,691 | ) | ||||
Net cash used in investing activities | (190,820 | ) | (219,242 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayment of debt | (35,017 | ) | (568,011 | ) | ||||
Proceeds from issuance of long-term debt | — | 600,000 | ||||||
Proceeds from revolving credit facility | 97,000 | 135,000 | ||||||
Payment of financing costs | — | (7,987 | ) | |||||
Distributions to noncontrolling interest partners | (4,962 | ) | (5,009 | ) | ||||
Purchase of noncontrolling interest | (2,500 | ) | (326 | ) | ||||
Proceeds from issuance of common stock under stock option plans | 2,683 | 2,859 | ||||||
Excess tax benefit from stock based compensation | 11,089 | 6,241 | ||||||
Repurchase of common stock | (165,607 | ) | (255,108 | ) | ||||
Other | 2,041 | (1,424 | ) | |||||
Net cash used in financing activities | (95,273 | ) | (93,765 | ) | ||||
Effect of currency exchange rate changes on cash and cash equivalents | (1,115 | ) | (849 | ) | ||||
Increase (decrease) in cash and cash equivalents | 17,505 | (43,646 | ) | |||||
Cash and cash equivalents at beginning of period | 81,383 | 125,029 | ||||||
Cash and cash equivalents at end of period | $ | 98,888 | $ | 81,383 | ||||
VCA Inc. | ||||||||||||||||
Supplemental Operating Data | ||||||||||||||||
(Unaudited – In thousands, except per share amounts) |
||||||||||||||||
Table #1 | ||||||||||||||||
|
Three Months Ended |
Twelve Months Ended December 31, |
||||||||||||||
Reconciliation of net income attributable to VCA Inc., to |
||||||||||||||||
|
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net income attributable to VCA Inc. | $ | 63,595 | $ | 28,359 | $ | 211,049 | $ | 135,438 | ||||||||
Impairment of goodwill and other long-lived assets (2) | — | — | — | 27,019 | ||||||||||||
Tax benefit on impairment charge (2) | — | — | — | (9,978 | ) | |||||||||||
Business interruption insurance gain, net (4) | — | — | (4,523 | ) | — | |||||||||||
Tax expense on business interruption gain, net (4)(6) | — | — | 1,771 | — | ||||||||||||
Debt Retirement costs (3) | — | — | — | 1,709 | ||||||||||||
Tax benefit from debt retirement costs (3)(6) | — | — | — | (669 | ) | |||||||||||
Gain on sale of business, net (5) | (43,306 | ) | — | (43,306 | ) | — | ||||||||||
Tax expense from gain on sale of business,net (5)(6) | 16,950 | — | 16,950 | — | ||||||||||||
Acquisitions related amortization (1) | 6,201 | 5,434 | 23,396 | 21,039 | ||||||||||||
Tax benefit from acquisitions related amortization (1)(6) | (2,427 | ) | (2,127 | ) | (9,157 | ) | (8,235 | ) | ||||||||
Non-GAAP net income attributable to VCA Inc. | $ | 41,013 | $ | 31,666 | $ | 196,180 | $ | 166,323 | ||||||||
Table #2 |
Three Months Ended December 31, |
Twelve Months Ended December 31, |
||||||||||||||
Reconciliation of diluted earnings per share to Non-GAAP diluted earnings per share (1) |
||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Diluted earnings per share | $ | 0.78 | $ | 0.33 | $ | 2.56 | $ | 1.54 | ||||||||
Impact of goodwill and other long-lived assets | ||||||||||||||||
impairment, net of tax (2) | — | — | — | 0.19 | ||||||||||||
Impact of business interruption insurance gain, net of tax | — | — | (0.03 | ) | — | |||||||||||
Impact of debt retirement costs, net of tax (3) | — | — | — | 0.01 | ||||||||||||
Impact of gain on sale of business, net of tax | (0.32 | ) | — | (0.32 | ) | — | ||||||||||
Impact of acquisitions related amortization, net of tax (1) | 0.05 | 0.04 | 0.17 | 0.15 | ||||||||||||
Non-GAAP diluted earnings per share (7) | $ | 0.50 | $ | 0.37 | $ | 2.38 | $ | 1.89 | ||||||||
Shares used for computing | ||||||||||||||||
diluted earnings per share | 81,461 | 85,121 | 82,414 | 87,825 | ||||||||||||
Table #3 |
Three Months Ended December 31, |
Twelve Months Ended December 31, |
||||||||||||||
Reconciliation of consolidated gross profit to Non-GAAP consolidated gross profit (1) |
||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Consolidated gross profit | $ | 117,696 | $ | 99,018 | $ | 510,071 | $ | 444,641 | ||||||||
Impact of acquisitions related amortization (1) | 6,140 | 5,374 | 23,153 | 20,780 | ||||||||||||
Non-GAAP consolidated gross profit | $ | 123,836 | $ | 104,392 | $ | 533,224 | $ | 465,421 | ||||||||
Non-GAAP consolidated gross profit margin | 23.2 | % | 21.8 | % | 25.0 | % | 24.3 | % | ||||||||
Table #4 |
Three Months Ended December 31, |
Twelve Months Ended December 31, |
||||||||||||||
Reconciliation of consolidated operating income to Non-GAAP consolidated operating income (1) |
||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Consolidated operating income | $ | 66,381 | $ | 52,654 | $ | 329,770 | $ | 247,268 | ||||||||
Impact of goodwill and other long-lived assets impairment (2) | — | — | — | 27,019 | ||||||||||||
Impact of business interruption proceeds | — | — | (4,523 | ) | — | |||||||||||
Impact of acquisitions related amortization (1) | 6,201 | 5,434 | 23,396 | 21,039 | ||||||||||||
Non-GAAP consolidated operating income | $ | 72,582 | $ | 58,088 | $ | 348,643 | $ | 295,326 | ||||||||
Non-GAAP consolidated operating margin | 13.6 | % | 12.1 | % | 16.3 | % | 15.4 | % | ||||||||
_________________________________________________
(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 third quarter of 2014, 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.
(3) Also in the third quarter of 2014, we incurred debt
retirement costs of $1.7 million related to the refinancing of our
senior credit facility.
(4) In the third quarter, we received insurance proceeds
related to the fire that damaged the headquarters of our Medical
Technology business resulting in a net gain of $4.5 million.
(5) We recognized a gain of $43.3 million related to the sale
of our wholly-owned subsidiary, Vetstreet, Inc.
(6) The rate used to calculate the tax benefit is the
statutory rate of the applicable year.
(7) Amounts may not foot due to rounding.
VCA Inc. | ||||||||||||||||
Supplemental Operating Data (continued) | ||||||||||||||||
(Unaudited – In thousands, except per share amounts) |
||||||||||||||||
As of | ||||||||||||||||
Table #5 |
December 31, 2015 |
December 31, 2014 |
||||||||||||||
Selected consolidated balance sheet data | ||||||||||||||||
Debt: | ||||||||||||||||
Senior term notes | $ | 585,000 | $ | 600,000 | ||||||||||||
Revolving credit | 232,000 | 135,000 | ||||||||||||||
Other debt and capital leases | 55,474 | 59,768 | ||||||||||||||
Total debt | $ | 872,474 | $ | 794,768 | ||||||||||||
Three Months Ended December 31, |
Twelve Months Ended December 31, |
|||||||||||||||
Table #6 | ||||||||||||||||
Selected expense data | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Rent expense | $ | 19,933 | $ | 18,463 | $ | 76,694 | $ | 69,747 | ||||||||
Depreciation and amortization included | ||||||||||||||||
in direct costs: | ||||||||||||||||
Animal hospital | $ | 17,042 | $ | 15,822 | $ | 65,850 | $ | 60,395 | ||||||||
Laboratory | 2,754 | 2,649 | 10,606 | 10,358 | ||||||||||||
All other | 926 | 824 | 3,797 | 5,731 | ||||||||||||
Intercompany | (554 | ) | (514 | ) | (2,156 | ) | (1,931 | ) | ||||||||
$ | 20,168 | $ | 18,781 | $ | 78,097 | $ | 74,553 | |||||||||
Depreciation and amortization included in selling, | ||||||||||||||||
general and administrative expense | 886 | 987 | 3,591 | 4,874 | ||||||||||||
Total depreciation and amortization | $ | 21,054 | $ | 19,768 | $ | 81,688 | $ | 79,427 | ||||||||
Share-based compensation included in direct costs: | ||||||||||||||||
Laboratory | $ | 217 | $ | 216 | $ | 685 | $ | 653 | ||||||||
Share-based compensation included in | ||||||||||||||||
selling, general and administrative expense: | ||||||||||||||||
Animal hospital | 715 | 721 | 2,696 | 2,132 | ||||||||||||
Laboratory | 405 | 440 | 1,511 | 1,513 | ||||||||||||
All other | 493 | 237 | 1,119 | 842 | ||||||||||||
Corporate | 2,348 | 3,352 | 10,253 | 12,060 | ||||||||||||
3,961 | 4,750 | 15,579 | 16,547 | |||||||||||||
Total share-based compensation | $ | 4,178 | $ | 4,966 | $ | 16,264 | $ | 17,200 | ||||||||
Source: VCA Inc.
Contacts
VCA Inc.
Tomas Fuller
Chief Financial Officer
(310)
571-6505