VCA Antech fourth quarter 2013 revenue increases 4.1% to $435.5 million

VCA Antech, 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, 2013, as follows: revenue increased 4.1% to $435.5 million and gross profit increased 6.9% to $87.5 million; operating income increased 155.0% to $45.9 million; net income increased 142.6% to $24.7 million and diluted earnings per common share increased 142.4% to $0.28.

The three and twelve months ended December 31, 2012 include a non-cash impairment charge of $123.6 million, $79.2 million net of tax or $0.90 per common share, primarily related to the write-down of goodwill and other long-lived assets in our Vetstreet business, included in our All Other segments category. On an as adjusted basis, operating income increased 14.8% to $45.9 million; net income increased 16.8% to $24.7 million; diluted earnings per common share increased 16.7% to $0.28. Non-GAAP earnings per diluted share, excluding acquisition-related amortization ("Adjusted EPS Excluding Amortization"), increased 10.7% to $0.31 for the three months ended December 31, 2013.

We also reported our financial results for the twelve months ended December 31, 2013, as follows: revenue increased 6.1% to $1.8 billion and gross profit increased 9.2% to $409.4 million; operating income increased 167.9% to $249.0 million; net income increased 201.9% to $137.5 million and diluted earnings per common share increased 200.0% to $1.53. Our financial results for the twelve months ended December 31, 2013, on an as adjusted basis are as follows: gross profit increased 7.7% to $407.2 million; operating income increased 13.2% to $248.6 million; net income increased 14.2% to $138.1 million and diluted earnings per common share increased 13.2% to $1.54. Adjusted EPS Excluding Amortization increased 10.5% to $1.68 for the twelve months ended December 31, 2013.

Bob Antin, Chairman and CEO, stated, "Our core Animal Hospital and Laboratory segments have continued to experience revenue growth. As a result, we are optimistic about our overall growth prospects in 2014.

"Animal Hospital revenue in the fourth quarter of 2013 increased 4.0%, to $343.2 million, driven by acquisitions made in the past twelve months and same-store revenue growth of 0.9%. Our same-store gross profit margin increased to 13.0% from 12.4% and with the expected lower margins for acquired Animal Hospitals, our consolidated gross margin increased to 12.5%, compared to 12.1% for the prior-year quarter. Our Animal Hospital operating margin increased to 9.7%, compared to 9.2%, for the prior-year quarter. During the quarter, we acquired 6 independent animal hospitals which had historical combined annual revenue of $14.6 million.

"Laboratory internal revenue in the fourth quarter increased 5.3%, to $79.2 million, driven by both an increase in the number of requisitions of 2.1% and average revenue per requisition of 3.2%. Our Laboratory gross profit margin increased to 44.3% from 42.2% and our operating margin increased to 34.4% from 32.6%."

2014 Financial Guidance

We provide the following financial guidance for the full year 2014:

• Revenue from $1.9 billion to $1.925 billion;
• Net income from $144 million to $153 million;
• Diluted earnings per common share from $1.62 to $1.72; and
• Adjusted EPS Excluding Amortization from $1.77 to $1.87.

During the first quarter, we began reporting Adjusted EPS Excluding Amortization as we believe that by providing this non-GAAP financial measure, we will provide our investors better insight into the operating performance of the business. As we continue to grow our business through acquisitions, we will use Adjusted EPS Excluding Amortization as a measure of operational performance, growth and shareholder returns.

Non-GAAP Financial Measures

We believe investors' understanding of our total performance is enhanced by disclosing adjusted net income, adjusted diluted earnings per common share and Adjusted EPS Excluding Amortization. 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."