Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

VCA Antech, Inc. (NASDAQ:WOOF)

Q4 2012 Earnings Conference Call

February 14, 2013, 16:30 PM ET

Executives

Robert L. Antin - President and CEO

Tomas W. Fuller - CFO, VP and Secretary

Analysts

Erin Wilson - Bank of America Merrill Lynch

Bob Willoughby - Bank of America Merrill Lynch

James Macdonald - First Analysis Securities Corporation

Kevin Ellich - Piper Jaffray

Ryan Daniels - William Blair

Jonathan Block - Stifel Nicolaus

Mitra Ramgopal - Sidoti & Co.

Operator

Good day, ladies and gentlemen. Welcome to the VCA Antech, Inc. Fourth Quarter 2012 Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, we'll have a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, today's conference is being recorded for replay purposes.

Before we commence the discussion, I would like to preface the comments made today with a statement 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 and include statements regarding our intent, our belief or current expectations with respect to our revenues and operating results in future periods, our expansion plans 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 reasons among others discussed in our filings with the Securities and Exchange Commission.

The information in this presentation concerning our forecast for future periods represents our outlook only as of today's date, February 14, 2013, 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 that today's discussion includes reference to non-GAAP financial measures, which management believes are useful to an understanding of our business. A reconciliation of these non-GAAP measures to the most comparable GAAP measure will be included with our earnings release and posted on our website at investor.vcaantech.com. Our earnings and guidance releases are available on our website at investor.vcaantech.com. In addition, an audio file of this conference call will be available on our website for a period of three months.

I would now like to turn the conference over to your host for today, Mr. Tom Fuller. Sir, you may begin.

Tomas W. Fuller

Thank you, Mary, and thank you, all of you, for joining us for the fourth quarter 2012 WOOF earnings call. Today, we reported a $0.66 loss per share which included a $0.90 impairment charge. So adjusting for that charge, our adjusted earnings per share for the fourth quarter was $0.24, which is a nice increase off of $0.21 of adjusted earnings per share in the preceding year or the 2011 quarter.

As a result of our impairment testing, we determine that the goodwill of our Vetstreet business was impaired and we took a write-down of goodwill and other intangible assets in the quarter of $122 million pre-tax which is $79 million after-tax or $0.90 per share. So excluding that charge, on an adjusted diluted earnings per share for the quarter $0.24.

Operation, again a good quarter. In absolute terms, the $0.24 is a 14% increase over the $0.21 per share in the fourth quarter of 2012, which is really the first real increase in earnings we've seen for quite some time now. On a relative basis sequentially, our core businesses; Hospital and Labs, the comps continue to improve and doing a very good job of holding and improving margins actually.

In Antech Diagnostics, we had 2.1% day adjusted internal growth which is down slightly from the 2.5% internal growth we saw in the third quarter of 2012, but Sandy did impact us. We think it's around 1.5%. So adjusted for Sandy, our internal growth in our Lab was 4.5%, which is a nice improvement after 2.5 in Q3.

Similarly, in the hospital division where Sandy impacted, it was roughly 50 basis points we reported the same day a day adjusted internal growth of 1.6% but around 2.1% adjusted for Sandy. So nice sequential improvement in growth rate and this is holding margin -- a lot of margins. Operating margin is up 30 basis point for the year and our hospital same-store margin is up 10 basis points.

So, operating margin on a consolidated basis, adjusted operating margins were flat at 9.6% which is actually pretty good based on past history. Our cost, as I said, Lab and Hospital business were seeing improvement growth rates, holding margins and our adjusted operating margin was flat. As a result of that, we're holding margin on 13.3% revenue growth. Our adjusted diluted earnings per share increased 14% to $0.24 per share.

In Antech Diagnostics, revenue increased 1.7% to 57.2 million due to internal growth on our adjusted basis 3.0% day adjusted internal growth. On that growth, operating income increased 2.9%, operating margins increased 40 basis points to 32.6%. As for the components of the day adjusted growth, number of requisitions increased 0.7% to 2,828,000 and the average revenue per requisition increased 2.3% to $26.56 for that all-in 3% day adjusted growth. The total requisitions for the quarter was 2,828,000.

So looking at the volume trends, going back and looking at the 27% increase in volume in the fourth quarter, a pretty big drop off and the 2.2% increases in volumes we saw in the third quarter. But again I'll remind that Sandy 1.5% impact on our growth rates would affect volumes. So if you adjust the volume, we're probably around 2.2% which compares very favorably to the 2.2% we saw in the third quarter of this year.

So I think the Labs again had a very positive quarter, good internal growth, 4.5 adjusted for Sandy and doing a good job of holding margin. I think we're in a good position to -- as we see revenue continue to grow hopefully, we'll see margin expansion capture that more higher leveraged revenue.

In VCA Animal Hospitals, revenue increased 15.6% to 330.1 million mostly from acquisitions particularly the AVC, our friends up in Canada, acquisition on February 1 of 2012 and day adjusted same-store growth of 1.6. On that 1.6% growth, same-store margins increased 10 basis points to 12.8% and total hospital margins were down slightly 30 basis points to 12.1% due to lower margins at acquired hospitals which is typical.

As for the components of same-store growth, number of orders down 2.5% to 1,678,000 and the average order up 4.3% to 170.23 for 1.6% day adjusted growth. I'll remind again Sandy we think hit us about 50 basis points which were affected under volumes. Hospital acquisitions, we acquired 11 hospitals for the quarter, so roughly $27 million of annual revenues which brings our year-to-date total to 79 hospitals which include the hospitals we acquired from Canada. 79 hospitals and the revenues are around $177 million. We started the quarter with 601 hospitals and ended the quarter with 609 hospitals.

In our other category which includes Sound-Eklin and Vetstreet, revenue increased 4.9 million to 31.1 million, due mostly to acquisitions. Our operating income increased about $900,000 from the loss of $300,000 from 2011 to income of $600,000 in 2012. So although operating income in that segment or category did improve slightly in the quarter, annual results for Vetstreet are significantly lower than what was originally expected.

More importantly our revised long-term projections of revenues and operating cash flows are significantly lower than what was originally expected. Because they are lower, this resulted in a significant decrease in the accounting fair market value of the Vetstreet segment which resulted in the write-down in the quarter of the goodwill and intangible assets.

So I think operationally, again a strong positive quarter with improving growth rates, holding margin. Clearly there's no guarantee that we continue to see the trends we've seen in our growth rates, but we remain cautiously optimistic. And I think what we're seeing in the industry makes us certainty encouraged about the outlook for 2013.

On that, our guidance for 2013 is revenues of $1.825 billion to $1.855 billion; net income 130 million to 139 million and diluted earnings per share of $1.45 to $1.55 per share. I will point out that our guidance excludes any unusual -- special unusual or extraordinary items such as unusual acquisition rate of costs, impairment charges or write-offs of lease-hold or other real estate assets.

In fact, I should point out that in the first quarter of 2013, we do expect to take a charge of about $5 million or about $0.03 per diluted share. It should write-down and incur the future lease cost of two facilities that we closed this month. We merged and moved those populations into a brand new facility.

So now I'll go back to Bob.

Robert L. Antin

Thank you, Tom. We are very encouraged by what we see. We've turned the corner in January and we've seen very good comps. We see the same direction we felt at the end of the year. As Tom pointed out, it's hard to tell what's going on in the future but so far the continued improvement that we have seen at the end of the year coming into the beginning of the year is still there.

It's a little bit massed by what's gone on with the weather back East, but we've seem pretty encouraged by the trends that we're seeing. As Tom mentioned, the Hospitals had an improvement in margins as did the Lab. Both their comps are up, which is very positive and the feeling that we get out of the marketplace is also very strong.

We still have a very strong feeling for Vetstreet. We went through a difficult transition period. We underestimated how difficult it would be to transition from the former owner and the data center that they had and it took an awful lot of our resource, our time and we are happy to announce that we have finally transitioned almost all of the activity that we were reliant on to former owners data center which delayed an awful lot of our new product offerings, our revisions.

Hence we fell behind the plan and much of the impairment is, in large part, due to that as well as the realization that that delay in entering the consumer market with the changing, as much as it has, that we put off now into any consumer market for a period of time. So we still have a great feeling towards Vetstreet. We think that some of the activities they had and some of the releases that they're about to make are heading in the right direction.

We have completed now the integration of Vetstreet with all of VCA hospitals. Going through the transition that we went through, besides releasing some of the resources that we had to focus on that transition for a prolonged period of time has resulted in us having heck of a lot more capacity in our data center, 50% more speed and at the same time we see the number of visitors to our sites going up and a year-over-year, our traffic on this site is up over 80%.

So we continue to be very, very confident in Vetstreet. Unfortunately we needed to take the impairment but we seem overall between our Hospitals, our Labs and Sound heading in the right direction with most of the numbers looking towards positive outlook and we're very encouraged.

So I'll open it up to questions now.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from Erin Wilson from Bank of America Merrill Lynch. Your line is open.

Erin Wilson - Bank of America Merrill Lynch

Hi. Thanks for taking my questions. I guess I just want to know kind of what's outstanding on Vetstreet integration, kind of what's next? You alluded to some possibly near-term launches, what are your thoughts on how we should think about kind of the revenue growth trajectory for that business going forward?

Robert L. Antin

I think on the revenues, I'll answer the last one first, Erin. The revenue is in the range of about $50 million, so it is cash flow positive. We're looking at around 5 million cash flow positive. We're about to introduce our first joint introduction between Antech Diagnostics and Vetstreet. We have some other offerings that we're providing out on the consumer side. The Vetstreet.com itself which originally was going to be our vehicle for the consumer side has a wonderful site for data and content. It is a phenomenon site.

So we have now made it easier for hospitals to access and the clients on the portals to access, so we've been releasing that over the last three weeks. So, going through the transition from the current data center, it is allowing us to be able to move some of those out into the marketplace. We're also now allowing clients -- previous clients to access online the ability to order the magazine Healthy Pets which we before couldn't do to about 75% of our clients. So, we're slowly integrating some of our capabilities now that we've moved the data center.

Erin Wilson - Bank of America Merrill Lynch

Okay. And how should we think about current utilization trends going into, I guess we're now in the first quarter and last year, there was unfavorable weather impact. How should we think about the quarterly progression?

Robert L. Antin

Well, it's a great question. We turn -- over the course of the year in terms of the guidance that Tom provided, we're still cautiously optimistic and we're assuming that the revenue assumptions on the hospital side are going to grow 2% to 3.5%. We are very encouraged by what we saw in January, but then we got hit with the snow in February, so it really -- the visibility to it was changed a little bit just because we didn't know what impact the economy was having or the snow was having. But so far when we turn the corner; it looked very encouraging.

Erin Wilson - Bank of America Merrill Lynch

Okay. And just one last one. On the Lab side of your business, I guess your growth was sequentially better adjusted for the weather, but it continues to lag your competitors and with regards to competition, your answer doesn't really seem to change all that much and the trends are continuing to lag, I guess, with the competition. What's the disconnect there and skeptics might think that there is ultimately a conflict of interest there?

Robert L. Antin

I'm not sure the conflict of interest. I could address both of them and you do know IDEXX is a very tough competitor, they're very strong. And I think we've held -- we're holding market share. I think the new entrants into the market is going after placements of machines through selling very, very small clients. And we track them very, very carefully and they typically are the small clients that we previously ran through our Test Express in Memphis. So we're aware of it. We are competing with one other competitor which I think releases their numbers and they're finding out that it's a very challenging market on the small one. So I don't know what resolve they have, but we're still seeing growth. If we looked at the requisitions and we adjusted it for Sandy, we still had positive requisition growth.

Erin Wilson - Bank of America Merrill Lynch

Okay. Thanks.

Operator

Thank you. Our next question comes from Bob Willoughby from Bank of America. Your line is open.

Bob Willoughby - Bank of America Merrill Lynch

Bob, you got to look at the magnitude of write-downs for Vetstreet as well as that technology business and how quickly they came post the closing. It just really makes me wonder what would -- where would the stock be had the capital being deployed in share repurchases and dividends? And is the Board any closer to finding religion on that front or are you just still asking people to believe the deal strategy is going to pull you out of this stock slump?

Robert L. Antin

Well, I think the first part, we were committed to Vetstreet and we did find -- I think you could see it in the results, we did find it challenging. We underestimated the -- the difficulty was on the electronics side, which I mentioned before. So there's no disagreement that that is -- you put an awful lot of resource into it and that is a challenge. But the positive side of it is we still feel Vetstreet will be positive and a positive contributor.

In terms of the underlying question of share repurchase, I think one of the questions that Erin was alluding to that maybe I didn't answer is our hospital acquisitions this year, we're targeted towards 50 million to 60 million which is down some from last year. And we're taking a slower approach in the beginning of the year to see whether or not it rebounds. If the business rebounds, we'll be more aggressive. If it doesn't rebound and doesn't perform as we expect, then we would, as you say, find more religion and would strongly consider a share buyback.

But I'm not committing to that. I think part of it is what we see in the beginning of the year. We've taken feedback from folks like you and some of the other shareholders and have tempered the aggression in acquisitions to see whether or not it comes back in the beginning of the year. If the market comes back as we hope and as we're seeing, we will be again more aggressive in growing the business. If it doesn't, we will strongly consider. And it's been discussed we will strongly consider a strategy that looks more towards maybe deploying some of the capital and leverage towards a share buyback.

Bob Willoughby - Bank of America Merrill Lynch

Yeah I think definitely, Bob, the change is in order, so we're certainty pulling for that. Thanks.

Robert L. Antin

Thank you, Bob.

Operator

Thank you. Our next question comes from Jim Macdonald from First Analysis. Your line is open.

James Macdonald - First Analysis Securities Corporation

Yes. Thanks, guys. I want to circle back on the Vetstreet question. What kind of growth rate did you see there going forward? And have you seen any impact yet from the new IDEXX entry?

Robert L. Antin

Well, I think it's adding to the competition. We've seen IDEXX, we've seen a few others that have been there and raising their head. But Vetstreet is still by far the largest, has great relationships with the hospitals. But yes, they are picking away and it makes us one of the difficulties because the transition was so clumsy that it prevented us from rolling out some of the stuff that we did have and some of the investment we wanted to make because we were so tied up and going through the transition. So yeah, they are going to have an impact. And I suspect on a year-over-year basis, it's close to flat.

James Macdonald - First Analysis Securities Corporation

Okay. And the other category had a nice jump up this quarter. Was that Vetstreet or was that in the Sound-Eklin business?

Robert L. Antin

It was actually a little of both, Jim.

James Macdonald - First Analysis Securities Corporation

Okay.

Tomas W. Fuller

So the $98,000 increase included some improvement at Vetstreet and some improvement at Sound Technologies, but the point which I had to make was in spite of that improvement, it still fell short for the year and more importantly are our projections which is what the fair market value (inaudible) which it's based on have come down, which resulted in the impairment, but there was a slight improvement in the quarter.

James Macdonald - First Analysis Securities Corporation

Okay. And just to make sure I heard it right, as part of guidance, you're talking about 50 million to 60 million of acquisitions that are built into guidance.

Tomas W. Fuller

That's correct.

James Macdonald - First Analysis Securities Corporation

Okay. Thanks very much.

Operator

Thank you. Our next question comes from Kevin Ellich from Piper Jaffray. Your line is open.

Kevin Ellich - Piper Jaffray

Good afternoon. Just a handful of questions. First of all, Tom, I was hoping -- could you explain why Hurricane Sandy's impact had a greater magnitude impact on the Lab business versus the Animal Hospital business?

Tomas W. Fuller

I think just concentration of business.

Kevin Ellich - Piper Jaffray

So, we had a concentration of Lab business and…

Tomas W. Fuller

Yeah, I mean we have like 20% of the hospitals in California and obviously a lot more in the West Coast, so we're more skewed on those areas in terms of Lab.

Kevin Ellich - Piper Jaffray

Got it. And then thinking about the guidance you provided, last year you guys gave us some guidance for Animal Hospital's same-store growth and internal Lab revenue growth. I'm wondering if you're willing to provide the same metrics for 2013?

Tomas W. Fuller

I think perhaps they're related. We're looking for kind of similar growth. That's what we see in the last quarter. So we're seeing slight improvement throughout the rest of the year. So somewhere in the 2 going to mid 3s for the Hospitals, Labs; mid 3s going to the 4s, low 4s through the year. So I think for the year, we're looking for something in 2.5 to 3 for the Hospitals and 3.5 to 4 for the Labs in the year.

Kevin Ellich - Piper Jaffray

Okay, that's helpful. Then thinking about the Animal Hospital business, looking at the same-store growth we've seen, negative 2% order growth, it seems like that's kind of being the trend and a lot of the growth this quarter came from, I think you said 4.3% average revenue per order, which is pretty strong and I guess we saw the same type of growth a year ago. What's behind that? Is there seasonality with bigger purchases or some mix shift to higher price products, any explanation?

Tomas W. Fuller

First off, the Sandy adjusted the volume declines 2.0% rather than the 2.5% that we computed. So it's kind of close to what we saw in Q2 and a little bit worse we saw in Q3. I think it's a combination of -- not seasonality, because you're doing quarter-to-quarter, so wouldn't imagine it's that but it's a combination of the channel shift for the products continues at a slower pace. I think you said the general economy people are still waiting and seeing, in that range, that is as quickly as we might have two or three years ago. We are seeing over the past eight, nine quarters, we are seeing continued improvement and they were now starting to approach, get closer to zero than it was two or three years ago.

Kevin Ellich - Piper Jaffray

And then any comment on the 4% revenue per order growth.

Tomas W. Fuller

No.

Kevin Ellich - Piper Jaffray

Okay. Just wondering, Bob, you might have given us a little bit of color in your comments, but just wondering how you guys are starting off the year, trend strong. It sounds like you're encouraged by what you've seen. Any update year-to-date so far?

Robert L. Antin

We're certainly encouraged. We're also so hesitant to forecast like that, but we're encouraged by the churn of the year. January, it looked like for many, many sectors it looked very, very positive and we've seem encouraged but we're cautious because it's a difficult world. But we seem definitely encouraged. There's definitely a positive feel.

Kevin Ellich - Piper Jaffray

And then just last kind of big picture question. It seems as if the vet industry makes a lot of excess capacity, a lot of unused capacity and that's what I heard from a lot of participants in the market. Is that how you guys view the market, and is that why order growth and same-store sales have been kind of challenging as it's just the competitive dynamics in the market or if there's something else at play?

Robert L. Antin

I'd never under estimate the competitive side of it, but I think the bigger one over the last few years has been the economy. If I looked across our own business and it's -- some of it is counterintuitive. Our most intensive hospitals, the larger specialty hospitals, the ones that have the capability that you need when your pet is sick, those have had a higher growth rate and a higher revenue per invoice then general practices. So, you would think it would be the other way around that people would be hesitant to spend the money on sick pets.

In turn, what they're really hesitant is they're hesitant to spend the money on well pets. They're just in numbers across the industry. I've just saw a report of non-owned hospitals reflected during the year in California that the volumes were down. So I think it's more to the economy. I think as we see the economy coming back, and you asked in your first question, we turn the year the general conversation of people in the industry is that it was positive. Whether it maintains that slope, I don't know, but it seems that it's more the economy and it's changing.

Kevin Ellich - Piper Jaffray

Good. Thank you.

Operator

Thank you. Our next question comes from Ryan Daniels from William Blair. Your line is open.

Ryan Daniels - William Blair

Hi, guys, evening. Thanks for taking my questions. Bob, one for you, when you were talking a little bit about some of the developments on Vetstreet in the Q&A you mentioned a joint product with the reference slab. And I'm curious if you could give us a little bit more detail on what that product is, just from a results reporting standpoint or anything more kind of integrated there?

Robert L. Antin

Sure. We're going to release some of it in the upcoming conference. But on the one side, Antech has brought out and has announced a product that doctors can now -- veterinarians can now see the results through their iPhones or their iPads or their tablets and that gives great accessibility for veterinarians. The second one that's combined between them is a product called [Health Tracks] where we're actually striving which part of this technology difficulty we have has actually delayed some of it where we're not only reporting the results, but we're also giving the veterinarian tools to be able to communicate with their clients.

And that's a broader impact on the entire industry, because I think what that will do is educate clients a little bit more about diagnostics. It will help us understand as a lay person what's reasonable in testing as opposed to what's normal, what's outer range? Give us a little bit more information as pet owners. So it's going to arm the veterinarian with some additional things they could provide their clients. So, that's one of the first ones that are going to be introduced.

Ryan Daniels - William Blair

Okay, that's great color. And then I'm curious with, maybe the expected growth slowdown from what you previously had in Vetstreet, have you considered utilizing that more with the existing lab client base, maybe going out with bundles or some kind of discounted pricing because if the thesis behind driving more visits and this helping drive more lab utilization is correct, which I think it is, getting Vetstreet out to more of your lab clients is going to help your high margin Lab business a lot. So curious if you guys internally have debated that or what's your thoughts would be on that?

Robert L. Antin

Well, the introduction of [Health Tracks] is the first. We're hoping as we have, we worked hard of getting the other divisions, Sound Technologies and Antech to work very closely together. One of the boxes as you can imagine, because you know the business so well is Antech is a very IT intensive business as is Vetstreet, and having the difficulty trying to bring them together has been a challenge which I think for a good part of it we're through. So I expect to see more.

I expect more coordination between our Hospital division which needs the same attributes as non-owned hospitals. We need to be able to be able to communicate with our clients. So I think you'll see in the future a more coordinated effort which was our overall intent when we bought Vetstreet to coordinate those needs at our Hospital, those requirements at Antech and Sound to be able to communicate with the clients in Vetstreet still remains a great vehicle to do that.

Ryan Daniels - William Blair

Great, that's helpful. And then one last one, I'll hop off. I'm just curious, and you may have talked about this, I had to hop on a few minutes late, but where I think that rolled out across the entire hospital network in the fourth quarter, so I'm curious if you could give an update on kind of what the reception has been at the Hospital level? And then you've been piloting this, I think, in a handful of hospitals for a year now, maybe the benefits you've seen from that and what you might expect going forward as that becomes a piece of the operating model? Thanks.

Robert L. Antin

It's a great question. Yes, we've begun to rollout what we call WoofWare, it's a practice management system that will replace (inaudible), the systems we have throughout our network. We intend by the end of the year to have roughly 300 hospitals replaced on this offer on WoofWare. So far the feedback has been great. The user interface is spectacular. The people have done a great job doing it. So, we believe it will take us a couple of years to get it throughout the hospitals. And as we do it and as we implement it, we're building additional models.

I think along with the question you asked before about Vetstreet and how it's going to relate, I think it will give us an opportunity to be able to blend some of the attributes that WoofWare has with Vetstreet to be able to communicate with clients and do such things as texting, emails more effectively, two-way appointment and also providing information along with the rest of the curative service that we provide. So it's on its way. It's actually doing very well.

Ryan Daniels - William Blair

Okay, great. Thanks again for all the color.

Operator

Thank you. Our next question comes from Jon Block from Stifel Nicolaus. Your line is open.

Jonathan Block - Stifel Nicolaus

Great, guys, thanks for taking the questions and Happy Valentine's Day. I guess just maybe a handful, a small handful. The first one at the time of the Vetstreet acquisition, I believe the level of goodwill intangibles was around $145 million to $146 million, the amount of impairment that you guys talked about today was $124 million. So, Tom, I'm just trying to tease it out, was the $124 million all from the Vetstreet $146 million if you would?

Tomas W. Fuller

It was actually roughly $152 million of goodwill and amortizable intangibles on Vetstreet's books, and we wrote out $122 million of that bringing it down to $30 million.

Jonathan Block - Stifel Nicolaus

Okay. So you wrote down, off the top of my head, about 80% if you would?

Tomas W. Fuller

Yeah.

Jonathan Block - Stifel Nicolaus

Okay, got it. And then the Hospital, the growth was good. I felt the growth was good and normalized right around 2%, but the op margins or the reported op margins were still down about 100 basis points year-over-year off of what I thought was an easy comp. So can you just talk to your expectations there and what you really need top line to finally drive margin expansion at the Hospital?

Tomas W. Fuller

Again, the 1.6% was day adjusted growth. In terms of real operating leverage, you'd see that -- it should be more related to total growth not day adjusted growth, which was quite a bit less than 1.6%. So, I think something in the 2% range give or take is about where you need and that was the portfolio of 500 hospitals, so you have different dynamics but something in that range.

Our same-store gross profit margin was actually up 10 basis points. Our operating margin was down. You can't compute that same-store, but our total operating margin adjusted for the Hospital was down a little bit because of the lower gross profit acquired hospitals and a little bit of uptick in the Hospital SG&A. But in terms of monitoring productivity and margin expansion, it's really the same-store gross profit margin which was up 10% on the 1.6%...

Jonathan Block - Stifel Nicolaus

10 basis points of the 1.6%?

Tomas W. Fuller

Correct.

Jonathan Block - Stifel Nicolaus

Got it, okay. And then Bob maybe this one is for you, the Vetstreet, can you just talk about the number of subscribers, Vetstreet/ThinkPets, the number of subscribers you had at the end of the year versus the end of the third quarter of 2012?

Robert L. Antin

The subscribers have not changed much. It's still around 6,500, which includes our 500 hospitals. Our 500 plus hospitals, I guess.

Jonathan Block - Stifel Nicolaus

Okay, got it. And then maybe just the last one…

Robert L. Antin

That's not subscribers pushed, that's customers. So there is a fair amount of customers that were not on the subscription model. We're doing the mailing from this, we're in the process of integrating those two businesses. So, it's probably a basis less than that, but the total customers we touched is around 6,500 which includes our hospitals.

Jonathan Block - Stifel Nicolaus

Understood. And maybe just a last one, if you're willing to share the number of hospitals in your portfolio that were reporting negative year-over-year revenue growth in the fourth quarter versus maybe six or 12 months ago, I'm just trying to see sort of the variation hospital to hospital, has that come down dramatically? Thanks, guys.

Robert L. Antin

Unfortunately, I don't have that number handy right now. But given that the growth rates are improving, my guess is that's not much of -- what we saw in the third quarter and maybe a little bit better, but not significantly different. But I don't have the number in front of me.

Jonathan Block - Stifel Nicolaus

Thanks.

Operator

Thank you. Our next question comes from Mitra Ramgopal from Sidoti. Your line is open.

Mitra Ramgopal - Sidoti & Co.

Good afternoon. Just a few questions. First, Tom, could you say if Sandy was confined to the fourth quarter or is there any carryover effect into the first?

Tomas W. Fuller

It was primarily the first quarter -- fourth quarter, excuse me -- very, very, in any, in the first quarter.

Mitra Ramgopal - Sidoti & Co.

Okay, thanks. And again if you can remind us, I know the question came about potential share buybacks which you have available in terms of the existent authorization?

Tomas W. Fuller

We don't have an authorization, but we do $68 million in cash.

Mitra Ramgopal - Sidoti & Co.

That could be used for that?

Tomas W. Fuller

Yes.

Mitra Ramgopal - Sidoti & Co.

Okay. And Bob, just a couple of long-term questions. On the acquisitions, it seems like at least near term you're limiting it to the Animal Hospital business. I know if that Canada continues to do well, I was just wondering if potential of maybe acquiring labs in Canada remains on the table?

Robert L. Antin

We are actively looking for labs and hospitals. So it would be either one. I think the question in terms of the acquisitions that I think Bob Willoughby was the one who asked was in terms of our guidance, we've guided towards $50 million to $60 million, but we said at the same time that we would take a look at how the market is doing and we would then consider what our level of appetite is for more acquisitions. If the market continues to improve, we think capital could be well deployed inside the marketplace. If it's not, then the Board has not approved, we've not been authorized to buy back shares, but I think Bob's question which some of the other shareholders, would we consider it? And the answer is yes. We would consider buyback of shares.

So there's nothing that's authorized. We have cash available and I think you know from our debt capacity, we have a fair amount of debt capacity left. But I will say, now we used this opportunity. We see from the Lab and the Hospital side, we see still a strong business getting stronger now. We've turned the corner, we've seen it, we've see margins improve, however slightly. We've seen good indication that some of the difficulties we've had in the last few years in the marketplace hopefully are behind us. I'm sure they're never behind us, but I'm pretty hopeful that what we've seen, and the change in the last few months will continue to go. So, I think we've held margins and improved even in the Labs. We've improved a little bit in the Hospital side. So I think that's pretty strong and pretty robust. So we're pretty encouraged by it.

Mitra Ramgopal - Sidoti & Co.

Okay. Thanks very much.

Robert L. Antin

Thank you, Mary. I'd like to conclude and just a follow-up. We did go through the impairment. It is behind us. It did take some of our resources and our manpower. We still seem very encourage by it. We think that there is plenty of opportunity. We think the resource is a strong one. The assets are good ones that can over the course of time affect many parts of our business in a positive and integrated way.

We're still encouraged by the changes that we're seeing on the Hospital side and certainly on the Lab side. We do give credit that there is competition out there and we've been competing and we think we have staying power, because I think even on the questions to the Lab side our gross profit margins have remained in the mid-40s, which still gives us a lot of gun power, a lot of pricing power. And we do have great relationships in the industry with over 16,000 clients.

The last part of it is we have a phenomenal future on the Hospital side as the economy starts to improve, because we've continued to invest in education, in our resources and in the industry and we have a strong impact in the education of what's gone on in the future.

So, I'd like to thank you. I wish all of you a Happy Valentine's Day. And I am confident that we'll see a better future. Thanks a lot. Bye-bye.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may all disconnect at this time.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: VCA Antech's CEO Discusses Q4 2012 Results - Earnings Call Transcript
This Transcript
All Transcripts