MWI Veterinary Supply Announces 2013 Third Quarter Results and Updates Its 2013 Business Outlook

Marketwired

BOISE, ID--(Marketwired - Jul 29, 2013) - MWI Veterinary Supply, Inc. (NASDAQ: MWIV) (the "Company") announced financial results today for its third quarter ended June 30, 2013.

Highlights:

  • Total revenues were $606.4 million for the quarter, 9.3% higher than revenues for the same period in the prior fiscal year. Revenue growth was 11.3% in the United States.
  • Gross profit as a percentage of total revenues improved to 12.8% for the quarter, compared to 12.5% for the same period in the prior fiscal year.
  • Operating income was $26.5 million for the quarter, 13.9% higher than operating income for the same period in the prior fiscal year. Operating income as a percentage of total revenues improved to 4.4% for the quarter, compared to 4.2% for the same period in the prior fiscal year.
  • Net income was $16.8 million for the quarter, 15.7% higher than net income for the same period in the prior fiscal year. Diluted earnings per share were $1.32 for the quarter, compared to $1.15 for the same period in the prior fiscal year.
  • We generated cash flow from operations for the nine months ended June 30, 2013 of $60.5 million compared to cash provided by operations of $5.4 million for the same period in the prior fiscal year.
  • Internet sales to independent veterinary practices and producers in the United States grew by 25.8% for the quarter compared to the same period in the prior fiscal year.
  • Revenues from our veterinary pharmacy programs in the United States increased 11.6% to $51.3 million for the quarter compared to the same period in the prior fiscal year.
  • The rollout of our Diagnostics Unlimited program continued to perform very well as revenues to all customers reached approximately $43 million for the quarter.

"Our results for the quarter continued to be strong," said Jim Cleary, President and Chief Executive Officer. "Our revenue growth in the United States was double-digit. Both our gross margin and cash flow exceeded our expectations. We experienced very positive results from our value-added services, and our diagnostics rollout continued to generate great results and customer service."

Quarter ended June 30, 2013 compared to quarter ended June 30, 2012

Total revenues increased 9.3% to $606.4 million for the quarter ended June 30, 2013, compared to $554.7 million for the quarter ended June 30, 2012. Revenue growth in the United States was 11.3% for the quarter ended June 30, 2013, compared to the quarter ended June 30, 2012. Organic revenues were flat in the United Kingdom but decreased by 3.0% related to foreign currency translation. Commissions increased 4.8% to $4.8 million for the quarter ended June 30, 2013, compared to $4.6 million for the quarter ended June 30, 2012.

Gross profit increased by 11.5% to $77.5 million for the quarter ended June 30, 2013, compared to $69.5 million for the quarter ended June 30, 2012. Gross profit as a percentage of total revenues improved to 12.8% for the quarter ended June 30, 2013, compared to 12.5% for the quarter ended June 30, 2012 due to an improvement in vendor rebates as a percentage of total revenues. Vendor rebates for the quarter ended June 30, 2013 increased by approximately $3.0 million compared to the quarter ended June 30, 2012 primarily due to the timing of manufacturer rebate programs and growth in revenues.

Operating income increased 13.9% to $26.5 million for the quarter ended June 30, 2013, compared to $23.3 million for the quarter ended June 30, 2012. SG&A expenses increased 10.2% to $48.4 million for the quarter ended June 30, 2013, compared to $44.0 million for the quarter ended June 30, 2012. SG&A expenses as a percentage of total revenues were 8.0% for the quarter ended June 30, 2013, compared to 7.9% for the quarter ended June 30, 2012. The increase in SG&A expenses was primarily due to an increase in compensation and benefit costs.

Net income increased 15.7% to $16.8 million for the quarter ended June 30, 2013, compared to $14.5 million for the quarter ended June 30, 2012. Diluted earnings per share were $1.32 and $1.15 for the quarter ended June 30, 2013 and 2012, respectively, an increase of 14.8%.

As of June 30, 2013, we had $11.8 million outstanding on our credit facilities after acquiring substantially all of the assets of PCI Animal Health for approximately $17 million on December 31, 2012, compared to $48.1 million as of September 30, 2012.

Nine months ended June 30, 2013 compared to nine months ended June 30, 2012

Total revenues increased 14.4% to $1.742 billion for the nine months ended June 30, 2013, compared to $1.524 billion for the nine months ended June 30, 2012. Excluding the revenues resulting from the acquisition of the assets of Micro during the month of October 2012, revenue growth in the United States was 12.7% for the nine months ended June 30, 2013, compared to the nine months ended June 30, 2012. We acquired the assets of Micro on October 31, 2011, and therefore did not own Micro for one month of the comparable nine month period in the prior fiscal year. Revenues resulting from the acquisition of Micro were $28.7 million during the month of October 2012. Revenue growth in the United Kingdom was 11.0% for the nine months ended June 30, 2013, consisting of 11.6% organic growth reduced by 0.6% related to foreign currency translation. Commissions increased 12.1% to $14.2 million for the nine months ended June 30, 2013, compared to $12.7 million for the nine months ended June 30, 2012.

Gross profit increased by 15.3% to $229.1 million for the nine months ended June 30, 2013, compared to $198.7 million for the nine months ended June 30, 2012. Gross profit as a percentage of total revenues improved to 13.1% for the nine months ended June 30, 2013, compared to 13.0% for the nine months ended June 30, 2012 due to an improvement in vendor rebates as a percentage of total revenues, offset in part by a decrease in product margin. Vendor rebates for the nine months ended June 30, 2013 increased by approximately $6.9 million compared to the nine months ended June 30, 2012 primarily due to the timing of manufacturer rebate programs and growth in revenues.

Operating income increased 17.8% to $77.8 million for the nine months ended June 30, 2013, compared to $66.1 million for the nine months ended June 30, 2012. SG&A expenses increased 14.3% to $143.8 million for the nine months ended June 30, 2013, compared to $125.8 million for the nine months ended June 30, 2012. SG&A expenses as a percentage of total revenues were 8.3% for each of the nine months ended June 30, 2013 and 2012. The increase in SG&A expenses was primarily due to an increase in compensation and benefit costs and Micro expenses for the month of October 2012.

Net income increased 19.0% to $48.6 million for the nine months ended June 30, 2013, compared to $40.9 million for the nine months ended June 30, 2012. Diluted earnings per share were $3.83 and $3.23 for the nine months ended June 30, 2013 and 2012, respectively, an increase of 18.6%.

Business Outlook

The Company estimates that for the fiscal year ending September 30, 2013, revenues will be from $2.330 billion to $2.360 billion, which represents growth of 12.3% to 13.7% compared to revenues in fiscal year 2012. The Company estimates that diluted earnings per share will be from $4.89 to $4.94 per share, which represents growth of 15.6% to 16.8% compared to diluted earnings per share in fiscal year 2012. The Company's previous guidance for the fiscal year ending September 30, 2013 was revenues from $2.320 billion to $2.360 billion and diluted earnings per share of $4.79 to $4.89. These estimates are based on the Company's current calendar-year and quarterly vendor contracts which typically undergo annual renegotiation and which may include terms such as rebates, commissions and exclusivity requirements.

Conference Call

The Company will be hosting a conference call on July 29, 2013 at 10:00 a.m. Eastern time to discuss in greater detail these results and its fiscal year 2013 business outlook. Participants can access the conference call by dialing (877) 638-4561 and international callers can access the conference call by dialing (720) 545-0002. The conference call will also be carried live on the Company's web site at www.mwivet.com. Audio replay will be made available through August 5, 2013 by calling (855) 859-2056 for calls within the United States or (404) 537-3406 for international calls using the passcode 19215654. The conference call will also be available on the Company's web site, www.mwivet.com.

MWI is a leading distributor of animal health products across the United States of America and United Kingdom. MWI sells both companion animal and production animal products including pharmaceuticals, vaccines, parasiticides, diagnostics, micro feed ingredients, supplies, pet food, capital equipment and nutritional products. MWI also is a leading innovator and provider of value-added services and technologies used by veterinarians and producers. For more information about MWI, please visit our website at www.mwivet.com. For investor relations information please contact Mary Pat Thompson, Senior Vice President of Finance and Administration, and Chief Financial Officer at (208) 955-8930 or email investorrelations@mwivet.com.

Certain statements contained herein that are not descriptions of historical facts are "forward-looking" statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in filings made by the Company with the Securities and Exchange Commission. Many of the factors that will determine the Company's future results are beyond the ability of management to control or predict. Readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date hereof. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. Important assumptions and other important factors that could cause actual results to differ materially from those set forth in the forward-looking information include the impact of vendor consolidation on our business; changes in or availability of vendor contracts or rebate programs; exclusivity requirements with certain vendors that may prohibit us from distributing competing products manufactured by other vendors or margin reductions if we become a non-exclusive distributor; transitional challenges associated with acquisitions, including the failure to achieve anticipated synergies; vendor rebates based upon attaining certain growth goals; changes in the way vendors introduce/deliver products to market; a disruption caused by adverse weather (i.e. drought) or other natural conditions or disasters; possible changes in the use of feed additives (antibiotics, growth promotants) used in the production animal markets due to trade restrictions, consumer concern and/or government regulations; seasonality; unforeseen litigation; risks associated with our international operations; financial risks associated with acquisitions and investments; the impact of general economic trends on our business; the recall of a significant product by one of our vendors; extended shortage or backorder of a significant product by one of our vendors; the timing and effectiveness of marketing programs or price changes offered by our vendors; the timing of the introduction of new products and services by our vendors; our intellectual property rights may be inadequate to protect our business; the ability to borrow on our credit line, extend the terms of our credit line or obtain alternative financing on favorable terms or at all; risks from potential increases in variable interest rates; the impact of tightening credit standards and/or access to credit on behalf of our customers and suppliers; inability to ship products to the customer as a result of technological or shipping disruptions; and competition. Other factors include changes in the rate of inflation; changes in state or federal legislation or regulation; the continued safety of the products the Company sells; and changes in the general economy. Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of MWI Veterinary Supply, Inc.

MWI Veterinary Supply, Inc.  
(Unaudited - Dollars and shares in thousands, except per share amounts)  
                         
Condensed Consolidated   Quarter Ended June 30,     Nine Months Ended June 30,  
Statements of Income   2013     2012     2013     2012  
Revenues   $ 606,443     $ 554,669     $ 1,742,405     $ 1,523,740  
Cost of product sales     528,932       485,150       1,513,286       1,325,089  
Gross profit     77,511       69,519       229,119       198,651  
Selling, general and administrative expenses     48,432       43,959       143,820       125,799  
Depreciation and amortization     2,545       2,273       7,450       6,739  
Operating income     26,534       23,287       77,849       66,113  
Interest expense     (173 )     (249 )     (599 )     (684 )
Other income     229       241       820       771  
Income before taxes     26,590       23,279       78,070       66,200  
Income tax expense     (9,809 )     (8,776 )     (29,438 )     (25,323 )
Net income   $ 16,781     $ 14,503     $ 48,632     $ 40,877  
                                 
Net income per share - diluted   $ 1.32     $ 1.15     $ 3.83     $ 3.23  
Weighted average common                                
shares outstanding - diluted     12,713       12,662       12,705       12,638  
                                 
Condensed Consolidated Balance Sheets                     June 30,
2013
      September 30,
2012
 
 
Assets                                
  Cash                   $ 531     $ 514  
  Receivables, net                     310,303       288,922  
  Inventories                     283,589       251,375  
  Prepaid expenses and other current assets                     6,006       10,094  
  Deferred income taxes                     2,853       1,580  
  Total current assets                     603,282       552,485  
                                   
  Property and equipment, net                     37,772       35,784  
  Goodwill                     70,588       61,841  
  Intangibles, net                     40,428       38,706  
  Other assets, net                     8,119       7,567  
    Total Assets                   $ 760,189     $ 696,383  
                                 
Liabilities                                
  Credit facilities                   $ 11,781     $ 48,080  
  Accounts payable                     308,987       258,741  
  Accrued expenses and other current liabilities                     20,070       19,952  
  Current portion of capital lease obligations                     127       337  
    Total current liabilities                     340,965       327,110  
                                   
  Deferred income taxes                     8,690       7,180  
  Long-term debt and capital lease obligations                     33       104  
  Other long-term liabilities                     2,290       2,687  
                                 
Stockholders' Equity                     408,211       359,302  
                                 
Total Liabilities and Stockholders' Equity                   $ 760,189     $ 696,383  
Contact:

Mary Pat Thompson
Senior Vice President of Finance and Administration and Chief Financial Officer
(208) 955-8930
Email Contact

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