Eminence Capital and VCA Antech, Inc.
Eminence Capital lowered its position in VCA (WOOF) during 3Q14. The stock accounts for 1.95% of the total portfolio—down from 3.01% of the fund’s 2Q14 portfolio.
Overview of VCA
VCA is a North American animal healthcare company. It provides veterinary and diagnostic testing services. VCA supports veterinary care. It sells diagnostic imaging equipment and other medical technology products and related services to veterinarians. It provides online and print communications, education, and information. It also provides the veterinary community with analytical marketing solutions. The company has two reportable segments:
- Animal Hospital segment – operates the largest network of freestanding, full-service animal hospitals. The hospitals offer a range of general medical and surgical services for companion animals. On September 30, the animal hospital network consisted of 622 animal hospitals in 41 US states and four Canadian provinces.
- Laboratory segment – operates the largest network of veterinary diagnostic laboratories. The laboratories provide sophisticated testing and consulting services. The services are used by veterinarians to detect, diagnosis, evaluate, monitor, treat, and prevent diseases and other conditions that affect animals. On September 30, the laboratory network consisted of 59 laboratories serving all 50 US states and certain areas in Canada.
New $1.4 billion credit facility
During the quarter, VCA completed the refinancing of its Senior Credit Facility. The new facility provides for $600 million in senior term notes. It also provides an additional $800 million revolving credit facility. The proceeds from the facility will be used to accelerate the acquisition program and to repurchase shares.
Share repurchase authorization up to $400 million
During the quarter, VCA repurchased 2.3 million shares for $88.7 million. It completed the entire $125 million share repurchase. It was previously authorized by the board of directors. The board authorized an additional $400 million share repurchase.
VCA’s revenue increased 7.7% year-over-year, or YoY, to $499.6 million. Diluted earnings per share, or EPS, was down 31% YoY. It reached $0.31 per share. During the quarter, it had an impairment charge of $0.20 per share. The charge was related to the write-down of goodwill and other long-lived assets in Vetstreet’s business. It took $0.01 per share of expenses as a result of refinancing the credit facility in August. It also took $0.04 of amortization expenses. Excluding these charges, non-GAAP (generally accepted accounting principles) adjusted earnings per diluted common share increased 19.1% to $0.56.
The Animal Hospital segment saw same-store revenue growth of 4.1%. During the quarter, VCA acquired 13 independent animal hospitals. They had combined annual revenue of $26 million.
Lower 2014 guidance
VCA expects adjusted EPS, excluding amortization, to be$0.35–$0.37.
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