LOS ANGELES, California, August 10, 2010 - VCA Antech, Inc. (NASDAQ NM SYMBOL: WOOF), a leading animal healthcare company in the United States, today reported revised financial results for the second quarter ended June 30, 2010 to reflect an incremental $14.5 million non-cash charge primarily with respect to previously announced Consulting Agreements and SERPs entered into with the Company's senior executive officers in June 2010. Revised financial results for the three and six months ended June 30, 2010 were as follows: for the second quarter 2010 net income was $29.4 million; and diluted earnings per common share was $0.34; and for the six months ended June 30, 2010, net income was $61.3 million and diluted earnings per common share was $0.70. Excluding this charge, adjusted net income and adjusted diluted earnings per common share was unchanged from amounts previously announced. For the three months ended June 30, 2010, adjusted net income was $38.3 million and adjusted diluted earnings per share was $0.44. For the six month period, adjusted net income was $70.2 million and adjusted diluted earnings per share was $0.81.
In June 2010, the Company entered into Consulting Agreements with VCA's three founders Bob Antin, Art Antin, Neil Tauber and Tomas Fuller, our Chief Financial Officer who has been with the Company for over twenty years. The Consulting Agreements are part of a long-term succession plan securing for the continued benefit of the Company the unique competencies and networks of each of the senior executive officers following the time that they ultimately step down from their current officer positions during a phase-down period leading to their ultimate retirement. At the same time, the Company entered into Supplemental Executive Retirement Programs with each of the senior executive officers, providing them a retirement benefit over a 12 year period as specified in the agreements. None of the senior executive officers has notified the Company of any intention to retire or step down from their officer positions and the full benefit of the SERPs vest over a 3-5 year period (depending on the officer). The Consulting Agreements and SERPs were previously publicly announced by the Company and have been filed with the Securities and Exchange Commission.
On July 22, 2010 we announced second quarter results of operations. Results announced at that time did not include any compensation charges associated with the Consulting Agreements. Following further analysis of applicable accounting literature, and after further consultation with its outside auditors, the Company determined that it should accrue the full cost of the benefits under the Consulting Agreements, the SERPs and outstanding share awards for two of the executives on the date the agreements were executed during the second quarter 2010. Costs associated with the Consulting Agreements and SERPs of the other two officers will be accrued during future periods in light of the different effective dates and vesting periods applicable to those agreements.
For the three and six months ended June 30, 2010 we recorded a non-cash charge of $14.5 million, or $8.9 million after tax, for future estimated executive compensation. Our revised results for the three and six months ended June 30, 2010 included diluted earnings per share of $0.34 and $0.70, respectively. Excluding this charge, adjusted diluted earnings per share for the three and six months ended June 30, 2010 were $0.44 and $0.81, respectively.
For the three and six months ended June 30, 2009 diluted earnings per share were $0.44 and $0.81, respectively. The second quarter of 2009 included a non-cash charge of $5.3 million, or $3.2 million after tax, related to the abandonment of an internally developed software project. Excluding this charge, adjusted diluted earnings per share for the three and six months ended June 30, 2009 were $0.48 and $0.85, respectively.
2010 Financial Guidance
We have not changed our outlook for the remainder of 2010; however, including the aforementioned charge, diluted earnings per common share for the full year will be $1.33 to $1.43. Adjusted diluted earnings per common share for the full year will be $1.43 to $1.53.
Our senior term notes are scheduled to mature in 2011, although they are currently scheduled to be refinanced in August, 2010. The guidance above is based on our capital structure after the effect of our debt refinancing, which we expect to have approximately $0.01 to $0.02 negative impact on diluted earnings per common share. Accordingly, the attached Consolidated Balance Sheet reflects these senior-term notes in the current portion of long-term obligations.
Current uncertainty in the economy and the lack of visibility regarding the timing and degree of any recovery in our business sector makes it particularly difficult to predict consumer demand for our services and makes it more likely that our actual results could differ materially from expectations.
Non-GAAP Financial Measures
We believe investors' understanding of our total performance is enhanced by disclosing adjusted operating income, adjusted net income and adjusted diluted earnings per common share. We define these adjusted measures as the reported amounts, adjusted to exclude certain significant items. Adjusted diluted earnings per common share are adjusted net income divided by diluted common shares outstanding.
Management uses adjusted measures because they exclude the effect of significant items that we believe are not representative of our core operations for the periods presented. 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. For the three and six months ended June 30, 2010, we adjusted our reported amounts for a non-cash charge of $14.5 million, or $8.9 million after tax, and $0.10 per diluted share related primarily to estimated executive compensation expensed for future payments under consulting agreements and SERPs entered into by the company on June 30, 2010 with Robert Antin and Art Antin. For the three and six months ended June 30, 2009, we adjusted our reported amounts for the non-cash charge of $5.3 million, or $3.2 million after tax, and $0.04 per diluted share related to the abandonment of an internally developed software project.
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."
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may and likely will differ materially from this forward-looking information. Our animal hospital and laboratory revenues have been materially adversely impacted by the current economic recession. We are unable to forecast the timing or degree of any economic recovery. Further, trends in the general economy may not be reflected in our business at the same time or in the same degree as in the general economy. The timing and degree of any economic recovery, and its impact on our business, are among the important factors that could cause actual results to differ from this forward-looking information. Among other factors that could cause our actual results to differ from this forward-looking information are: an increase in the level of direct costs or a failure to increase revenue at a level necessary to maintain our expected operating margins, a material adverse change in our financial condition or operations; the level of selling, general and administrative costs; the effects of our recent and future acquisitions (including Firehouse Ventures, LLC and Pet DRx Corporation) and our ability to effectively manage our growth and achieve operating synergies; a decline in demand for any of our products and services; any disruption in our information technology systems or transportation networks; the effects of competition; any impairment in the carrying value of our goodwill and other intangible assets; changes in prevailing interest rates; our ability to service our debt; and general economic conditions. These and other risks are discussed in our Report on Form 10-K for the year ended December 31, 2009 and the reader is directed to these statements for a further discussion of important factors that could cause actual results to differ materially from those in the forward-looking statements.
We own, operate and manage the largest networks of freestanding veterinary hospitals and veterinary-exclusive clinical laboratories in the country, and we supply diagnostic imaging equipment to the veterinary industry.
Chief Financial Officer