VCA Inc. Reports First Quarter 2016 Results and Increases Financial Guidance for 2016

• Revenue increased 12.8% to a first quarter record of $563.4 million
• Gross profit increased 20.1% to $136.8 million
• Operating income increased 24.5% to $86.1 million
• Diluted earnings per common share increased 23.9% to $0.57
• Non-GAAP diluted earnings per common share increased 32.0% to $0.66

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 first quarter ended March 31, 2016, as follows: revenue increased
12.8% to a first quarter record of $563.4 million; gross profit
increased 20.1% to $136.8 million; operating income increased 24.5% to
$86.1 million; net income increased 20.7% to $46.2 million; diluted
earnings per common share increased 23.9% to $0.57.

Excluding acquisition-related amortization expense, transaction expenses
related to the acquisition of Companion Animal Practices, North America
(“CAPNA”) and other discrete items detailed in this press release,
Non-GAAP operating income increased 27.6% to $95.2 million; Non-GAAP net
income for the quarter increased 28.9% to $53.7 million; and Non-GAAP
diluted earnings per common share for the quarter increased 32.0% to
$0.66.

Bob Antin, Chairman and CEO, stated, “We had an outstanding quarter
highlighted by 32.0% growth in our adjusted diluted earnings per common
share. We have continued to experience increasing organic revenue growth
and gross margins in both our core Animal Hospital and Laboratory
business segments. Given our results relative to our expectations and
our future acquisition pipeline, we are increasing our guidance for the
full year ended December 2016.

“Animal Hospital revenue in the first quarter increased 16.7%, to $458.6
million, driven by acquisitions made during the past 12 months and
same-store revenue growth of 7.6%. Our same-store gross profit margin
increased to 16.4%, from 14.3% in the prior-year quarter and our total
gross margin increased to 16.0%, from 14.1% in the prior-year quarter.
During the 2016 first quarter, we acquired 24 independent animal
hospitals which had historical combined annual revenue of $84.0 million.

“Laboratory revenue increased 13.6%, to $106.7 million. Our Laboratory
internal revenue growth increased 9.1% to $102.5 million from $94.0
million; laboratory gross profit margin increased 200 basis points to
53.1%, from 51.1%; and our operating margin increased 190 basis points
to 43.5%, from 41.6% in the prior-year quarter.”

2016 Guidance

We revise our previously provided guidance as follows:

• Revenue from $2.39 billion to $2.41 billion;
• Net income from $210 million to $218 million;
• Diluted earnings per common share from $2.57 to $2.67; and
• Non-GAAP diluted earnings per common share from $2.82 to $2.92.

The above revised guidance does not include the impact of the CAPNA
acquisition. Assuming a closing date during the second quarter of 2016,
we estimate an additional $0.03 to $0.04 in 2016 Non-GAAP adjusted
diluted earnings per share excluding amortization, transaction and
integration costs.

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 first quarter 2016 financial results during a
conference call today, April 27^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 (888) 311-3471. 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 2016 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; our ability to consummate the acquisition of CAPNA; a material
adverse change in the financial condition or operations of either
company; the ability to successfully integrate the two companies and
achieve expected operating synergies following the transaction; 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. 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 March 31,
		2016				2015
Revenue:
Animal hospital		$	458,623			$	393,026
Laboratory		106,727				93,972
All other		19,413				34,227
Intercompany		(21,324		)		(21,772		)
		563,439				499,453
Direct costs		426,659				385,591
Gross profit:
Animal hospital		73,417				55,484
Laboratory		56,716				47,982
All other		6,910				11,424
Intercompany		(263		)		(1,028		)
		136,780				113,862
Selling, general and administrative expense:
Animal hospital		12,085				11,221
Laboratory		10,296				8,865
All other		5,299				8,687
Corporate		22,448				15,625
		50,128				44,398
Net loss on sale or disposal of assets		563				335
Operating income		86,089				69,129
Interest expense, net		7,095				4,837
Other (income) expense		(264		)		66
Income before provision for income taxes		79,258				64,226
Provision for income taxes		31,536				24,673
Net income		47,722				39,553
Net income attributable to noncontrolling interests		1,495				1,252
Net income attributable to VCA Inc.		$	46,227			$	38,301
Diluted earnings per share		$	0.57			$	0.46
Weighted-average shares outstanding for diluted earnings per share		81,523				83,373

VCA Inc. Condensed, Consolidated Balance Sheets (Unaudited) (In thousands)
		March 31, 2016				December 31, 2015
Assets
Current assets:
Cash and cash equivalents		$	74,480			$	98,888
Trade accounts receivable, net		79,540				76,634
Inventory		54,961				51,523
Prepaid expenses and other		33,090				30,521
Prepaid income taxes		7,798				24,598
Total current assets		249,869				282,164
Property and equipment, net		540,017				507,753
Other assets:
Goodwill		1,656,389				1,517,650
Other intangible assets, net		114,469				97,377
Notes receivable		5,472				2,194
Deferred financing costs, net		5,699				6,133
Other		97,459				93,994
Total assets		$	2,669,374			$	2,507,265
Liabilities and Equity
Current liabilities:
Current portion of long-term debt		$	33,947			$	33,623
Accounts payable		46,573				52,337
Accrued payroll and related liabilities		88,510				75,519
Other accrued liabilities		77,417				70,828
Total current liabilities		246,447				232,307
Long-term debt, less current portion		924,322				838,851
Deferred income taxes		131,150				131,478
Other liabilities		39,167				36,084
Total liabilities		1,341,086				1,238,720
Redeemable noncontrolling interests		11,787				11,511
VCA Inc. stockholders’ equity:
Common stock		81				81
Additional paid-in capital		22,681				19,708
Retained earnings		1,321,434				1,275,207
Accumulated other comprehensive loss		(37,789		)		(50,034		)
Total VCA Inc. stockholders’ equity		1,306,407				1,244,962
Noncontrolling interests		10,094				12,072
Total equity		1,316,501				1,257,034
Total liabilities and equity		$	2,669,374			$	2,507,265

VCA Inc. Condensed, Consolidated Statements of Cash Flows (Unaudited) (In thousands)
		Three Months Ended March 31,
		2016				2015
Cash flows from operating activities:
Net income		$	47,722			$	39,553
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		21,289				19,797
Amortization of debt issue costs		434				434
Provision for uncollectible accounts		851				1,183
Net loss on sale or disposal of assets		563				335
Share-based compensation		4,906				4,132
Excess tax benefit from stock based compensation		(445		)		(791		)
Other		4,489				(989		)
Changes in operating assets and liabilities:
Trade accounts receivable		(3,339		)		(14,570		)
Inventory, prepaid expense and other assets		(7,569		)		2,862
Accounts payable and other accrued liabilities		(4,802		)		(6,954		)
Accrued payroll and related liabilities		12,955				14,052
Income taxes		16,855				21,581
Net cash provided by operating activities		93,909				80,625
Cash flows from investing activities:
Business acquisitions, net of cash acquired		(160,385		)		(33,652		)
Property and equipment additions		(25,806		)		(16,526		)
Proceeds from sale of assets		12				92
Other		(7,346		)		(576		)
Net cash used in investing activities		(193,525		)		(50,662		)
Cash flows from financing activities:
Repayment of debt		(9,678		)		(5,165		)
Proceeds from revolving credit facility		90,000				—
Distributions to non-controlling interest partners		(1,238		)		(1,325		)
Purchase of non-controlling interests		(3,730		)		(1,483		)
Proceeds from issuance of common stock under stock option plans		286				404
Excess tax benefit from stock based compensation		445				791
Repurchase of common stock		(843		)		(44,845		)
Other		(333		)		(80		)
Net cash provided (used) in financing activities		74,909				(51,703		)
Effect of currency exchange rate changes on cash and cash equivalents		299				(365		)
Decrease in cash and cash equivalents		(24,408		)		(22,105		)
Cash and cash equivalents at beginning of period		98,888				81,383
Cash and cash equivalents at end of period		$	74,480			$	59,278

VCA Inc. Supplemental Operating Data (Unaudited – In thousands, except per share amounts)
Table #1
Reconciliation of net income attributable to		Three Months Ended March 31,
VCA Inc., to Non-GAAP net income attributable
to VCA Inc. (1)		2016					2015
Net income attributable to VCA Inc.		$	46,227				$	38,301
Adjustments to Other Long-term liabilities, net of tax (2)		2,040					—
Discrete tax items (3)		1,045					—
Transaction costs related to the CAPNA acquisition, net of tax (4)		587					—
Acquisitions related amortization, net of tax (1)		3,791					3,363
Non-GAAP net income attributable to VCA Inc.		$	53,690				$	41,664
Table #2		Three Months Ended March 31,
Reconciliation of diluted earnings per share to
Non-GAAP diluted earnings per share (1)		2016					2015
Diluted earnings per share		$	0.57				$	0.46
Adjustments to Other Long-term liabilities, net of tax (2)		0.02					—
Discrete tax items (3)		0.01					—
Transaction costs related to the CAPNA acquisition, net of tax (4)		0.01					—
Acquisitions related amortization, net of tax (1)		0.05					0.04
Non-GAAP diluted earnings per share		$	0.66				$	0.50
Shares used for computing diluted earnings per share		81,523					83,373
Table #3		Three Months Ended March 31,
Reconciliation of consolidated gross profit to
Non-GAAP consolidated gross profit (1)		2016					2015
Consolidated gross profit		$	136,780				$	113,862
Acquisitions related amortization (1)		6,228					5,465
Non-GAAP consolidated gross profit		$	143,008				$	119,327
Non-GAAP consolidated gross profit margin		25.4			%		23.9		%
Table #4		Three Months Ended March 31,
Reconciliation of consolidated operating income to
Non-GAAP consolidated operating income (1)		2016					2015
Consolidated operating income		$	86,089				$	69,129
Adjustments to Other Long-term liabilities (2)		1,954					—
Transaction costs related to the CAPNA acquisition (4)		966					—
Acquisitions related amortization (1)		6,228					5,526
Non-GAAP consolidated operating income		$	95,237				$	74,655
Non-GAAP consolidated operating margin		16.9			%		14.9		%

VCA Inc. Supplemental Operating Data (cont) (Unaudited – In thousands, except per share amounts)
_________________________________________________
(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 recorded a non-cash charge to adjust certain long-term liabilities for $3.4 million, or $2.0 million net of tax. $2.0 million of this amount relates to compensation and $1.4 million relates to interest accretion.
(3)		We recorded a tax adjustment to our income tax liabilities for $1.0 million.
(4)		In the first quarter of 2016, we recorded transaction costs of $966,000, or $587,000 net of tax related to our acquisition of CAPNA.

VCA Inc. Supplemental Operating Data (cont) (Unaudited – In thousands, except per share amounts)
		As of
Table #5		March 31, 2016				December 31, 2015
Selected consolidated balance sheet data
Debt:
Senior term notes		$	577,500			$	585,000
Revolving credit		322,000				232,000
Other debt and capital leases		58,769				55,474
Total debt		$	958,269			$	872,474
		Three Months Ended March 31,
Table #6
Selected expense data		2016				2015
Rent expense		$	20,864			$	18,780
Depreciation and amortization included in direct costs:
Animal hospital		$	17,524			$	15,962
Laboratory		2,748				2,475
All other		752				940
Intercompany		(586		)		(523		)
		$	20,438			$	18,854
Depreciation and amortization included in selling, general and administrative expense		851				943
Total depreciation and amortization		$	21,289			$	19,797
Share-based compensation included in direct costs:
Laboratory		$	177			$	161
Share-based compensation included in selling, general and administrative expense:
Animal hospital		784				664
Laboratory		429				366
All other		153				202
Corporate		3,363				2,739
		4,729				3,971
Total share-based compensation		$	4,906			$	4,132

Contacts

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