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VCA Antech Inc. (WOOF)

Q4 2011 Earnings Call

February 16, 2012 04:30 pm ET


Tom Fuller - CFO & VP

Bob Antin - Co-Founder, CEO, President and Chairman


Kevin Ellich - Piper Jaffray

Ryan Daniels - William Blair

Brian Tanquilut - Jefferies & Company

Jim Macdonald - First Analysis

Jonathan Block - SunTrust

Rob Mains - Morgan Keegan

Mitra Ramgopal - Sidoti

Robert Willoughby - Bank of America Merrill-Lynch



Good day ladies and gentlemen. Before we commence this discussion, I would like to preface the comments made today with the statements regarding forward-looking information. The information contained in this presentation includes forward-looking statements that involve risks and uncertainties. Such statements appear in a number of places in this presentation that include statements regarding, one; our intent, two; our belief or current expectations with respect to our revenues and operating results in future periods, three; our expansion plans for and our business strategy and ability to successfully execute on that strategy. We caution you not to place undue reliance on such forward-looking statements. Such statements are not guarantees of our future performance and involve risks and uncertainties. Our actual results may differ materially from those projected in this presentation, for the reasons among others discussed in our filings with the Securities and Exchange Commission.

The information in this presentation concerning our forecast, future periods represents our outlook only as of today's date, February 16, 2012 and we undertake no obligation to update or revise any forward-looking statements whether as a result of new developments or otherwise. Listeners should also be aware of today's discussion include references to non-GAAP financial measures which management believes are useful to an understanding of our business. A reconciliation of these non-GAAP measures to most of the comparable GAAP measures will be included in our earnings release and posted on our website at investors.vcaantech.com. Our earnings and guidance release is available at our website at investors.vcaantech.com. In addition an audio file of this conference file will be available on our website for a period of three months. Now I would like to hand the conference over to Mr. Tom Fuller, CFO.

Tom Fuller

Thank you Sayeed and thank you all for joining us for the fourth quarter 2011 WOOF earnings call. Today we reported adjusted earnings per share of $0.21 and an earnings per share or loss per share rather of $0.04. In the fourth quarter, we did our annual assessment of impairment and in Sound-Eklin we were impaired and took $21.3 million non-cash charge. So excluding this $0.25 per share charge, we reported $0.21 of adjusted earnings per share, which compares to $0.24 in the fourth quarter of 2010.

Also point out that as expected Vetstreet which we acquired in August of this year generate roughly $0.02 of losses and made an increase in share base comp of about $0.01. So combined included in the $0.21 adjusted earnings per share is about $0.03 per share for Vetstreet and incremental share base comp expense.

I think we had a solid quarter marked by improvements in organic growth rates. Our hospital same store growth is 1.1% compare to 1.0% in the third quarter. That’s the second consecutive quarter of positive growth rates in the Hospital division which we are very pleased about.

And our laboratory internal growth grew at 2.3% compared to 2.2% in the third quarter of 2011. Operating income was down $4.6 million, lab and hospital each saw increases in operating income but those increases were offset by the expected losses at Vetstreet. And the increase in SG&A due to the share based comp expense of about $2.4 million. And as expected operating margins were down 230 basis points due to the Vetstreet and share base comp.

In Antech Diagnostics, total revenue increased 2.3% to $73.9 million all due to internal growth. Operating income decreased 50 basis points to 32.2%. Net decrease was almost entirely due to increase in energy cost. Internal growth of 2.3% was composed of a 1.6% increase in the number of requisitions to $2, 844,000 and average requisition increased 0.7% to $25.97. Total requisitions for the quarter $2,844,000. No additions to the labs of course we ended where we started. 52 labs including 48 in United States and 4 up in Canada. So I think the lab had a good solid quarter 2.3% internal growth, margins down slightly, but all due to energy cost and we continue be in a great place where we can see margin expansion as revenue does grow in the future as we hope.

On the animal hospital side, revenue increased $9.2 million to $285 million mostly due to acquisition. Same-store sale was up 1.1% which is a slight improvement from what we saw in the third quarter of this year. Gross profit increased 1.9% and gross profit margin were down 90 basis points to 25.5% and our same-store gross profit margins decreased 120 basis points to 12.5%.

The components of the growth, average order increased 4.4% to $158.43 and number of orders decreased 3.1% to $1,627,000.

The total orders for the quarter were $1,756,000. Strong quarter for acquisitions, 8 hospitals acquired in the quarter, $16.4 million of annual revenue brings our total for independently owned hospitals, of 18 hospitals with total revenues of about $37 million, adding in the BrightHeart acquisition during the middle of the year. Very good year actually, 27 hospitals acquired with annual revenues of $90 million.

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