VCA Inc. Reports Third Quarter 2015 Results

• Revenue increased 10.4% to a third quarter record of $551.7 million
• Gross profit increased 11.2% to $137.7 million
• Operating income increased 81.5% to $97.1 million
• Non-GAAP operating income increased 14.7% to $98.4 million
• Diluted earnings per common share increased 116.1% to $0.67
• Non-GAAP diluted earnings per common share increased 21.4% to $0.68

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 third quarter ended September 30, 2015, as follows: revenue
increased 10.4% to a third quarter record of $551.7 million; gross
profit increased 11.2% to $137.7 million; operating income increased
81.5% to $97.1 million; net income increased 99.8% to $54.9 million;
diluted earnings per common share increased 116.1% to $0.67.

Our results for the quarter included business interruption proceeds of
$4.5 million, $2.8 million net of tax, or $0.03 per diluted common
share. Our results for the 2014 quarter included a non-cash impairment
charge of $27.0 million, $17.0 million net of tax, or $0.20 per diluted
common share; debt retirement costs of $1.7 million, $1.0 million net of
tax, or $0.01 per diluted common share. Excluding these items and
acquisition-related amortization expense, our Non-GAAP gross profit
increased 11.2% to $143.4 million; Non-GAAP operating income increased
14.7% to $98.4 million; Non-GAAP net income increased 14.2% to $55.6
million; and Non-GAAP diluted earnings per common share increased 21.4%
to $0.68.

Bob Antin, Chairman and CEO, stated, “We had another excellent quarter.
We continued to experience robust organic revenue growth rates in our
Animal Hospital and Laboratory business segments. We remain very
optimistic with respect to our results for the full year ended December
2015.

“Animal Hospital revenue in the third quarter increased 11.6%, to $441.9
million, driven by acquisitions made during the past 12 months and
same-store revenue growth of 5.4%. Our same-store gross profit margin
was 17.3%, slightly down from 17.5% in the prior-year quarter and our
total gross margin decreased to 17.0%, from 17.3% in the prior-year
quarter. During the 2015 third quarter, we acquired 19 independent
animal hospitals which had historical combined annual revenue of $43.6
million.

“Laboratory revenue increased 9.1%, to $100.3 million. Our Laboratory
internal revenue growth increased 6.0% to $97.4 million from $91.9
million; laboratory gross profit margin increased 220 basis points to
51.2%, from 49.0%; and our operating margin increased 210 basis points
to 41.7%, from 39.6% in the prior-year quarter.

“During the quarter we repurchased 1,030,000 shares of our common stock
for $58.5 million. Since the Board authorized our repurchase programs in
April 2013, through the end of the third quarter 2015, we have acquired
10.1 million shares for $424.2 million.

“Our financial results for the nine months ended September 30, 2015 are
as follows: revenue increased 11.2% to $1.6 billion; gross profit
increased 13.5% to $392.4 million; operating income increased 35.3% to
$263.4 million; net income increased 37.7% to $147.5 million; and
diluted earnings per common share increased 47.1% to $1.78. Our
financial results for the nine months ended September 30, 2015, on a
Non-GAAP basis, are as follows: gross profit increased 13.4% to $409.4
million, operating income increased 16.4% to $276.1 million, net income
increased 15.2% to $155.2 million, and Non- GAAP diluted earnings per
common share increased 23.7% to $1.88.”

2015 Guidance

We reaffirm our previously provided guidance as follows:

• Revenue from $2.12 billion to $2.13 billion;

• Net income from $172 million to $181 million;

• Diluted earnings per common share from $2.08 to $2.18; and

• Non-GAAP diluted earnings per common share of $2.25 to $2.35

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 third quarter 2015 financial results during a
conference call today, October 28^th, 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 (877) 293-5492. 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 statements
addressing our 2015 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; 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, additionally we are the largest provider of online
communication, professional education and marketing solutions to the
veterinary community. 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 September 30,										Nine Months Ended September 30,
			2015					2014					2015					2014
Revenue:
Animal hospital			$	441,924				$	395,820				$	1,270,326				$	1,134,184
Laboratory			100,309					91,903					300,503					276,392
All other			30,838					30,081					93,734					81,914
Intercompany			(21,354		)			(18,227		)			(64,608		)			(53,934		)
			551,717					499,577					1,599,955					1,438,556
Direct costs			414,051					375,820					1,207,580					1,092,933
Gross profit:
Animal hospital			74,941					68,537					203,810					180,673
Laboratory			51,408					45,024					156,093					137,147
All other			11,761					10,136					34,574					27,753
Intercompany			(444		)			60					(2,102		)			50
			137,666					123,757					392,375					345,623
Selling, general and administrative expense:
Animal hospital			10,677					9,269					32,351					28,261
Laboratory			9,542					8,610					27,894					24,909
All other			7,660					8,023					24,088					23,782
Corporate			16,981					16,890					49,410					47,211
			44,860					42,792					133,743					124,163
Impairment of goodwill and other long-lived assets			—					27,019					—					27,019
Business interruption insurance proceeds, net			(4,523		)			—					(4,523		)			—
Net loss (gain) on sale or disposal of assets			250					470					(234		)			(173		)
Operating income			97,079					53,476					263,389					194,614
Interest expense, net			5,455					4,367					15,396					12,564
Debt retirement costs			—					1,709					—					1,709
Other expense			59					188					88					178
Income before provision for income taxes			91,565					47,212					247,905					180,163
Provision for income taxes			35,097					18,261					95,961					69,389
Net income			56,468					28,951					151,944					110,774
Net income attributable to noncontrolling interests			1,614					1,499					4,490					3,695
Net income attributable to VCA Inc.			$	54,854				$	27,452				$	147,454				$	107,079
Diluted earnings per share			$	0.67				$	0.31				$	1.78				$	1.21
Weighted-average shares outstanding for diluted earnings per share			81,795					87,360					82,744					88,665

VCA Inc.
Condensed, Consolidated Balance Sheets
(Unaudited)
(In thousands)
			September 30, 2015					December 31, 2014
Assets
Current assets:
Cash and cash equivalents			$	74,992				$	81,383
Trade accounts receivable, net			74,654					60,482
Inventory			51,597					56,050
Prepaid expenses and other			30,827					36,924
Deferred income taxes			30,329					30,331
Prepaid income taxes			—					18,277
Total current assets			262,399					283,447
Property and equipment, net			492,532					468,041
Other assets:
Goodwill			1,489,843					1,415,861
Other intangible assets, net			100,939					88,175
Notes receivable			2,345					2,807
Deferred financing costs, net			6,568					7,874
Other			76,564					65,815
Total assets			$	2,431,190				$	2,332,020
Liabilities and Equity
Current liabilities:
Current portion of long-term debt			$	34,043				$	19,356
Accounts payable			45,512					46,284
Accrued payroll and related liabilities			82,966					64,359
Income tax payable			1,827					—
Other accrued liabilities			75,179					67,219
Total current liabilities			239,527					197,218
Long-term debt, less current portion			847,112					775,412
Deferred income taxes			104,425					103,502
Other liabilities			31,969					33,190
Total liabilities			1,223,033					1,109,322
Redeemable noncontrolling interests			11,273					11,077
VCA Inc. stockholders’ equity:
Common stock			81					83
Additional paid-in capital			16,135					155,802
Retained earnings			1,211,612					1,064,158
Accumulated other comprehensive loss			(43,909		)			(19,397		)
Total VCA Inc. stockholders’ equity			1,183,919					1,200,646
Noncontrolling interests			12,965					10,975
Total equity			1,196,884					1,211,621
Total liabilities and equity			$	2,431,190				$	2,332,020

VCA Inc.
Condensed, Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
			Nine Months Ended September 30,
			2015					2014
Cash flows from operating activities:
Net income			$	151,944				$	110,774
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment of goodwill and other long-lived assets			—					27,019
Depreciation and amortization			60,634					59,659
Amortization of debt issue costs			1,306					957
Provision for uncollectible accounts			6,723					4,388
Debt retirement costs			—					1,709
Net gain on sale or disposal of assets			(234		)			(173		)
Share-based compensation			12,086					12,234
Excess tax benefit from stock based compensation			(8,008		)			(3,808		)
Other			(431		)			381
Changes in operating assets and liabilities:
Trade accounts receivable			(20,568		)			(9,678		)
Inventory, prepaid expense and other assets			(931		)			(8,233		)
Accounts payable and other accrued liabilities			(2,451		)			2,920
Accrued payroll and related liabilities			18,892					14,761
Income taxes			28,054					12,137
Net cash provided by operating activities			247,016					225,047
Cash flows from investing activities:
Business acquisitions, net of cash acquired			(119,336		)			(65,415		)
Property and equipment additions			(61,470		)			(50,093		)
Proceeds from sale of assets			6,469					4,464
Other			(434		)			(202		)
Net cash used in investing activities			(174,771		)			(111,246		)
Cash flows from financing activities:
Repayment of debt			(20,174		)			(563,976		)
Proceeds from issuance of long-term debt			—					600,000
Proceeds from revolving credit facility			97,000					—
Payment of financing costs			—					(7,987		)
Distributions to non-controlling interest partners			(3,810		)			(3,577		)
Purchase of non-controlling interests			(1,493		)			(326		)
Proceeds from issuance of common stock under stock option plans			1,571					926
Excess tax benefit from stock based compensation			8,008					3,808
Repurchase of common stock			(161,117		)			(139,910		)
Other			2,210					(838		)
Net cash used in financing activities			(77,805		)			(111,880		)
Effect of currency exchange rate changes on cash and cash equivalents			(831		)			(443		)
(Decrease) increase in cash and cash equivalents			(6,391		)			1,478
Cash and cash equivalents at beginning of period			81,383					125,029
Cash and cash equivalents at end of period			$	74,992				$	126,507

VCA Inc.
Supplemental Operating Data
(Unaudited – In thousands, except per share amounts)
Table #1
Reconciliation of net income attributable to			Three Months Ended September 30,										Nine Months Ended September 30,
VCA Inc., to Non-GAAP net income attributable
to VCA Inc. (1)			2015					2014					2015					2014
Net income attributable to VCA Inc.			$	54,854				$	27,452				$	147,454				$	107,079
Impairment of goodwill and other long-lived assets (2)			—					27,019					—					27,019
Tax benefit on impairment charge (2)			—					(9,978		)			—					(9,978		)
Debt retirement costs (3)			—					1,709					—					1,709
Tax benefit from debt retirement costs (3)			—					(669		)			—					(669		)
Business interruption proceeds (4)			(4,523		)			—					(4,523		)			—
Tax expense on business interruption proceeds (4)			1,771					—					1,771					—
Acquisitions related amortization (1)			5,811					5,231					17,195					15,605
Tax benefit from acquisitions related amortization (1)			(2,274		)			(2,047		)			(6,730		)			(6,108		)
Non-GAAP net income attributable to VCA Inc.			$	55,639				$	48,717				$	155,167				$	134,657
Table #2			Three Months Ended September 30,										Nine Months Ended September 30,
Reconciliation of diluted earnings per share to
Non-GAAP diluted earnings per share (1)			2015					2014					2015					2014
Diluted earnings per share			$	0.67				$	0.31				$	1.78				$	1.21
Impact of impairment charge, net of tax (2)			—					0.20					—					0.19
Impact of debt retirement costs, net of tax (3)			—					0.01					—					0.01
Impact of business interruption proceeds, net of tax (4)			(0.03		)			—					(0.03		)			—
Impact of acquisitions related amortization, net of tax (1)			0.04					0.04					0.13					0.11
Non-GAAP diluted earnings per share			$	0.68				$	0.56				$	1.88				$	1.52
Shares used for computing diluted earnings per share			81,795					87,360					82,744					88,665
Table #3			Three Months Ended September 30,										Nine Months Ended September 30,
Reconciliation of consolidated gross profit to
Non-GAAP consolidated gross profit (1)			2015					2014					2015					2014
Consolidated gross profit			$	137,666				$	123,757				$	392,375				$	345,623
Impact of acquisitions related amortization (1)			5,750					5,166					17,013					15,406
Non-GAAP consolidated gross profit			$	143,416				$	128,923				$	409,388				$	361,029
Non-GAAP consolidated gross profit margin			26.0%					25.8%					25.6%					25.1%
Table #4			Three Months Ended September 30,										Nine Months Ended September 30,
Reconciliation of consolidated operating income to
Non-GAAP consolidated operating income (1)			2015					2014					2015					2014
Consolidated operating income			$	97,079				$	53,476				$	263,389				$	194,614
Impact of impairment charge (2)			—					27,019					—					27,019
Impact of business interruption proceeds (4)			(4,523		)			—					(4,523		)			—
Impact of acquisitions related amortization (1)			5,811					5,231					17,195					15,605
Non-GAAP consolidated operating income			$	98,367				$	85,726				$	276,061				$	237,238
Non-GAAP consolidated operating margin			17.8%					17.2%					17.3%					16.5%

_________________________________________________

(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)			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)			We incurred debt retirement costs of $1.7 million related to the refinancing of our senior credit facility.
(4)			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.

VCA Inc.
Supplemental Operating Data (cont)
(Unaudited – In thousands, except per share amounts)
													As of
Table #5													September 30, 2015					December 31, 2014
Selected consolidated balance sheet data
Debt:
Senior term notes													$	592,500				$	600,000
Revolving credit													232,000					135,000
Other debt and capital leases													56,655					59,768
Total debt													$	881,155				$	794,768
			Three Months Ended September 30,										Nine Months Ended September 30,
Table #6
Selected expense data			2015					2014					2015					2014
Rent expense			$	19,140				$	17,476				$	56,761				$	51,284
Depreciation and amortization included in direct costs:
Animal hospital			$	16,465				$	15,044				$	48,808				$	44,573
Laboratory			2,701					2,650					7,852					7,709
All other			968					1,505					2,871					4,907
Intercompany			(549		)			(479		)			(1,602		)			(1,417		)
			$	19,585				$	18,720				$	57,929				$	55,772
Depreciation and amortization included in selling, general and administrative expense			886					1,142					2,705					3,887
Total depreciation and amortization			$	20,471				$	19,862				$	60,634				$	59,659
Share-based compensation included in direct costs:
Laboratory			$	144				$	154				$	468				$	437
Share-based compensation included in selling, general and administrative expense:
Animal hospital			644					470					1,981					1,411
Laboratory			364					340					1,106					1,073
All other			226					232					626					605
Corporate			2,439					2,467					7,905					8,708
			3,673					3,509					11,618					11,797
Total share-based compensation			$	3,817				$	3,663				$	12,086				$	12,234

Contacts

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