VCA Antech, Inc. Reports Third Quarter 2008 Results and Provides Revised Financial...

VCA Antech, Inc. Reports Third Quarter 2008 Results and Provides Revised Financial Guidance for 2008

-- Third quarter revenue increased 8.3% to $332.0 million

-- Third quarter gross profit increased 2.9% to $88.8 million

-- Third quarter net income increased 11.0% to $35.8 million

-- Third quarter diluted earnings per share increased 10.5% to
$0.42
LOS ANGELES--(Business Wire)--
VCA Antech, Inc. (NASDAQ NM SYMBOL: WOOF), a leading animal
healthcare company in the United States, today reported financial
results for the third quarter ended September 30, 2008, as follows:
revenue increased 8.3% to a third quarter record of $332.0 million;
gross profit increased 2.9% to $88.8 million; operating income
increased 4.7% to $66.7 million; net income increased 11.0% to $35.8
million; and diluted earnings per share increased 10.5% to $0.42.

We also reported our financial results for the nine months ended
September 30, 2008, as follows: revenue increased 11.7% to a
nine-month record of $974.3 million; gross profit increased 6.6% to
$268.8 million; operating income increased 8.3% to $200.7 million; net
income increased 11.3% to $107.3 million; and diluted earnings per
share increased 10.6% to $1.25.

Bob Antin, Chairman and CEO, stated, "I am pleased with our
company's performance for the third quarter. We continue to be
challenged by a very complex economic environment, but I believe our
company and our team has met those challenges and has continued our
long record of revenue and earnings growth.

"It is clear that we are navigating very turbulent times for pet
owners. We know that pet owners are tremendously loyal to their pets.
At the same time, we acknowledge that they, too, are sensitive to this
difficult economic environment we are facing. Even with our success to
date, current economic conditions have impacted demand and we have not
been able to maintain previously achieved internal revenue growth
rates. As a result of these conditions we have implemented cost
controls and other measures to manage our business, but achieving
these historical revenue growth rates will continue to be challenging
in the current economic environment. Long term, we have tremendous
confidence that we will continue to enjoy the loyalty of our pet
owners, and be able to regain the momentum our profession historically
enjoys.

"We continue to acquire outstanding animal hospitals and
laboratories, advancing our position as the number one provider of
quality pet care in the United States. We have had great success to
date and we anticipate even greater success through the end of the
year. In the third quarter, we acquired seven animal hospitals with
combined annual revenue of nearly $12 million. Year-to-date, we have
acquired 43 animal hospitals with combined annual revenue of over $87
million. Historically we have targeted acquisition activity at
approximately $50 million to $60 million of acquired revenue per year
(excluding the acquisitions of any animal hospital chains).

"Laboratory revenue in the third quarter increased 3.8% to $77.1
million, driven primarily by internal revenue growth of 3.1%.
Laboratory margins in the third quarter were impacted by the
aforementioned economic environment: our gross margin declined to
45.8% compared to 48.0% and our operating margin declined to 39.0%
compared to 41.4%.

"Animal hospital revenue in the third quarter increased 10.4% to
$253.3 million driven primarily by acquisitions. While same-store
revenue grew 1.4%, adjusted for one less business day during the
quarter, our same-store animal hospital margins in the third quarter
remained essentially flat totaling 20.6% compared to 20.9%.
Consolidated animal hospital gross margin decreased to 19.9% compared
to 20.7% and operating margin was 17.6% compared to 18.2% primarily
due to lower margins at acquired hospitals.

We revise our 2008 financial guidance as follows:

-- Revenue from $1.28 billion to $1.29 billion;

-- Diluted earnings per common share from $1.47 to $1.51.

Conference Call

We will discuss our company's third quarter 2008 financial results
during a conference call today, October 23, 2008 at 4:30 p.m. Eastern
Time. You can access a live broadcast of the call by visiting our
website at http://investor.vcaantech.com. You can also access the call
via telephone by dialing (877) 340-7912. Interested parties should
call at least 10 minutes prior to the start of the call to register.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including, but not limited to, our statements regarding the effect of
the general economy on our operations and our 2008 financial guidance.
Actual results may and likely will differ materially from the guidance
provided in this release. Among the important factors that could cause
actual results to differ are a material adverse change in our
financial condition or operations; the impact of adverse trends in the
general economy on the rate of our laboratory internal revenue growth
and animal hospital same-store revenue growth; the level of direct
costs and our ability to maintain revenue at a level necessary to
maintain expected operating margins; the level of selling, general and
administrative costs; the effects of our recent acquisitions and our
ability to effectively manage our growth and achieve operating
synergies; a decline in demand for some of our products and services;
any disruption in our information technology systems or transportation
networks; the effects of competition; any impairment in the carrying
value of our goodwill and other intangible assets; changes in
prevailing interest rates; our ability to service our debt; and
general economic conditions. These and other risk factors are
discussed in our Report on Form 10-K for the year ended December 31,
2007, and our Report on Form 10-Q for the quarter ended June 30, 2008,
and the reader is directed to these statements for a further
discussion of important factors that could cause actual results to
differ materially from those in the forward-looking statements.

We own, operate and manage the largest networks of freestanding
veterinary hospitals and veterinary-exclusive clinical laboratories in
the country, and we supply diagnostic imaging equipment to the
veterinary industry.

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VCA Antech, Inc.
Consolidated Income Statements
(Unaudited - In thousands, except per share amounts)

Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Revenue:
Laboratory $ 77,065 $ 74,266 $235,634 $227,073
Animal hospital 253,251 229,409 730,352 635,046
Medical technology 12,546 11,091 38,233 32,898
Intercompany (10,827) (8,229) (29,918) (23,030)
--------- --------- --------- ---------
332,035 306,537 974,301 871,987
--------- --------- --------- ---------

Direct costs 243,267 220,235 705,536 619,887

Gross profit:
Laboratory 35,273 35,638 113,489 111,606
Animal hospital 50,286 47,584 144,043 129,465
Medical technology 4,322 3,261 13,457 11,357
Intercompany (1,113) (181) (2,224) (328)
--------- --------- --------- ---------
88,768 86,302 268,765 252,100
--------- --------- --------- ---------

Selling, general and
administrative expense:
Laboratory 5,178 4,859 15,314 14,872
Animal hospital 5,643 5,411 16,815 16,292
Medical technology 3,120 2,761 9,502 8,389
Corporate 8,062 9,264 26,359 26,258
--------- --------- --------- ---------
22,003 22,295 67,990 65,811
--------- --------- --------- ---------

Write-down and loss on sale of
assets 90 333 33 875
--------- --------- --------- ---------

Operating income 66,675 63,674 200,742 185,414

Interest expense, net 6,709 8,930 21,369 21,374
Other expense (income) 12 (1) (24) 226
Minority interest 1,180 1,187 3,125 3,061
--------- --------- --------- ---------
Income before provision for
income taxes 58,774 53,558 176,272 160,753
Provision for income taxes 23,000 21,329 68,979 64,364
--------- --------- --------- ---------
Net income $ 35,774 $ 32,229 $107,293 $ 96,389
========= ========= ========= =========

Diluted earnings per share $ 0.42 $ 0.38 $ 1.25 $ 1.13
========= ========= ========= =========
Shares used for computing
diluted earnings per share 85,789 85,752 85,789 85,572
========= ========= ========= =========
*T

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VCA Antech, Inc.
Consolidated Balance Sheets
(Unaudited - In thousands)

September 30, December 31,
2008 2007
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 95,303 $ 110,866
Trade accounts receivable, net 44,948 42,650
Inventory 24,998 25,517
Prepaid expenses and other 19,245 15,307
Deferred income taxes 15,284 14,402
Prepaid income taxes 549 8,160
------------- -------------
Total current assets 200,327 216,902
Property and equipment, net 251,242 214,020
Other assets:
Goodwill 890,393 821,967
Other intangible assets, net 33,914 22,373
Deferred financing costs, net 1,186 1,537
Other 28,504 9,912
------------- -------------
Total assets $ 1,405,566 $ 1,286,711
============= =============

Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term obligations$ 7,778 $ 7,886
Accounts payable 23,685 28,092
Accrued payroll and related liabilities 34,427 38,341
Other accrued liabilities 47,405 42,074
------------- -------------
Total current liabilities 113,295 116,393
Long-term obligations, less current
portion 546,791 552,294
Deferred income taxes 36,208 28,197
Other liabilities 8,474 11,236
Minority interest 13,422 10,207
Stockholders' equity:
Common stock 85 84
Additional paid-in capital 306,765 296,037
Accumulated earnings 382,891 275,598
Accumulated other comprehensive loss (2,365) (3,335)
------------- -------------
Total stockholders' equity 687,376 568,384
------------- -------------
Total liabilities and stockholders'
equity $ 1,405,566 $ 1,286,711
============= =============
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VCA Antech, Inc.
Consolidated Statements of Cash Flows
(Unaudited - In thousands)

Nine Months Ended
September 30,
---------------------
2008 2007
---------- ----------
Cash flows from operating activities:
Net income $ 107,293 $ 96,389
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 23,762 19,764
Amortization of debt costs 351 253
Provision for uncollectible accounts 3,671 3,561
Write-down and loss on sale of assets 33 875
Share-based compensation 5,309 3,429
Minority interest in income of subsidiaries 3,125 3,061
Distributions to minority interest partners (2,797) (2,262)
Deferred income taxes 9,894 4,627
Excess tax benefit from exercise of stock
options (1,846) (6,576)
Other 212 (115)
Changes in operating assets and liabilities:
Accounts receivable (5,736) (4,823)
Inventory, prepaid expenses and other assets (5,972) 1,140
Accounts payable and other accrued
liabilities (438) (1,195)
Accrued payroll and related liabilities (3,553) (3,958)
Income taxes 9,457 20,983
---------- ----------
Net cash provided by operating activities 142,765 135,153
---------- ----------
Cash flows from investing activities:
Business acquisitions, net of cash acquired (89,775) (214,758)
Real estate acquired in connection with
business acquisitions (15,063) (7,962)
Property and equipment additions (39,764) (38,033)
Proceeds from sale of assets 1,774 1,774
Other (15,024) (188)
---------- ----------
Net cash used in investing activities (157,852) (259,167)
---------- ----------
Cash flows from financing activities:
Repayment of long-term obligations (5,852) (6,282)
Proceeds from issuance of long-term
obligations - 160,000
Payment of financing costs - (897)
Proceeds from issuance of common stock under
stock option plans 3,574 6,668
Excess tax benefit from exercise of stock
options 1,846 6,576
---------- ----------
Net cash (used in) provided by financing
activities (432) 166,065
---------- ----------

Effect of currency exchange rate changes on cash
and cash equivalents (44) -
---------- ----------
(Decrease) increase in cash and cash equivalents (15,563) 42,051
Cash and cash equivalents at beginning of period 110,866 45,104
---------- ----------
Cash and cash equivalents at end of period $ 95,303 $ 87,155
========== ==========
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VCA Antech, Inc.
Supplemental Operating Data
(Unaudited - In thousands)

As of
-------------------
Table #1 September December
30, 31,
Selected consolidated balance
sheet data 2008 2007
--------- ---------

Debt:
Revolving credit facility $ - $ -
Senior term notes 523,630 527,675
Other debt and capital
leases 30,939 32,505
--------- ---------
Total debt $554,569 $560,180
========= =========

Three Months Ended Nine Months Ended
Table #2 September 30, September 30,
------------------- -------------------
Selected expense data 2008 2007 2008 2007
---------- -------- --------- ---------

Rent expense $ 11,140 $ 9,574 $ 31,619 $ 27,109
========== ======== ========= =========

Depreciation and amortization
included in direct costs:
Laboratory $ 1,908 $ 1,727 $ 5,333 $ 4,643
Animal hospital 5,725 4,371 15,947 12,528
Medical technology 309 305 929 897
Intercompany (152) (100) (414) (281)
---------- -------- --------- ---------
7,790 6,303 21,795 17,787
Depreciation and amortization
included in selling, general
and administrative expense 647 721 1,967 1,977
---------- -------- --------- ---------
Total depreciation and
amortization $ 8,437 $ 7,024 $ 23,762 $ 19,764
========== ======== ========= =========

Share-based compensation
included in direct costs:
Laboratory $ 219 $ 161 $ 611 $ 502

Share-based compensation
included in selling, general
and administrative expense:
Laboratory 302 180 807 552
Animal hospital 438 289 1,227 896
Medical technology 54 27 141 81
Corporate 974 472 2,523 1,398
---------- -------- --------- ---------
1,768 968 4,698 2,927
---------- -------- --------- ---------
Total share-based
compensation $ 1,987 $ 1,129 $ 5,309 $ 3,429
========== ======== ========= =========
*T

VCA Antech, Inc.
Tomas Fuller, Chief Financial Officer, 310-571-6505

Copyright Business Wire 2008