SOURCE: MWI Veterinary Supply

July 31, 2008 08:30 ET

MWI Veterinary Supply Announces Fiscal 2008 Third Quarter Results and Updates Its Fiscal Year 2008 Business Outlook

MERIDIAN, ID--(Marketwire - July 31, 2008) - MWI Veterinary Supply, Inc. (NASDAQ: MWIV) (the "Company") announced financial results today for its third quarter ended June 30, 2008 of fiscal year 2008.

Highlights include:

--  Revenues were $208.3 million for the quarter, 13% higher than revenues
    for the same period in fiscal year 2007.  Revenues were $606.6 million for
    the nine months ended June 30, 2008, 17% higher than revenues for the same
    period in fiscal year 2007.
--  Net income for the quarter was $5.4 million, 27% higher than net
    income for the same period in fiscal year 2007.  Diluted earnings per share
    for the quarter were $0.44, compared to $0.35 for the same period in fiscal
    year 2007, an increase of 26%.
--  Gross margin as a percentage of total revenues increased to 14.6% for
    the quarter from 13.9% for the same period in fiscal year 2007.  The
    improvement was primarily a result of increases in vendor rebates and
    commissions on agency sales.
--  Cash flow provided by operations for the quarter was $11.5 million,
    compared to $11.8 million for the same period in fiscal year 2007.
--  Our pharmacy sales grew by 17% and our internet sales to independent
    veterinary practices and producers grew by 33% for the quarter compared to
    the same period in fiscal year 2007.  Our product sales from the internet
    as a percentage of sales improved to 28% for the quarter as compared to 25%
    for the same period in fiscal year 2007.
--  Effective July 1, 2008, we acquired substantially all of the assets of
    AAHA Services Corporation, operating as AAHA MARKETLink, for a cash
    purchase price of approximately $10 million, and entered into long-term
    sponsorship and licensing agreements between the Company and American
    Animal Hospital Association.
    

Jim Cleary, President and Chief Executive Officer, commented on the Company's results: "MWI had a strong quarter, and I am pleased with our revenue growth, earnings growth, gross margin improvement, cash flow generation and value-added service. The acquisition of AAHA MARKETLink is another important step for our business, and our team is working hard to deliver our core values to these veterinary customers."

Total revenues grew 13% to $208.3 million for the quarter ended June 30, 2008, compared to $183.9 million for the quarter ended June 30, 2007. The increase in revenues for the quarter ended June 30, 2008 was attributable to an increase in product sales volumes for both new and existing customers, which represented 62% and 38%, respectively, of the growth in total revenues during the quarter ended June 30, 2008.

Gross profit increased 19% to $30.3 million for the quarter ended June 30, 2008, from $25.5 million for the same period in the prior fiscal year. Gross profit as a percentage of total revenues was 14.6% and 13.9% for the quarters ended June 30, 2008 and 2007, respectively. Contributing to the increase in gross profit was an increase in commissions on our agency sales of 28% to $3.3 million for the quarter ended June 30, 2008, compared to $2.6 million for the same period in the prior fiscal year. Vendor rebates increased approximately $1.7 million for the quarter ended June 30, 2008 compared to the quarter ended June 30, 2007. This increase was primarily due to a shift in the timing of when certain rebates were achieved. We earned certain rebates in the quarter ended June 30, 2008 that in the prior fiscal year were partially earned during the quarter ended March 31, 2007. Additionally, in our press release issued January 31, 2008, we reported that rebates for the three months ended December 31, 2007 were approximately $1.0 million less than anticipated due to a difference with a key vendor over the amount of rebate dollars that were expected during the quarter under their program. We earned approximately $350,000 of this amount in the quarter ended June 30, 2008. We expect to earn the balance of these rebate dollars during the fourth quarter of fiscal year 2008.

Operating income increased 33% to $8.7 million for the quarter ended June 30, 2008, from $6.6 million for the same period in the prior fiscal year. Selling, general and administrative ("SG&A") expenses as a percentage of total revenues were 10.0% for each of the quarters ended June 30, 2008 and 2007. SG&A expenses increased 14% to $20.8 million for the quarter ended June 30, 2008 from $18.3 million for the same period in the prior fiscal year. The dollar increase in SG&A expenses was primarily due to increased compensation costs and location and occupancy costs. These costs increased as we added 29 new field sales and telesales representatives, employees from the Securos acquisition and the new distribution center in Edwardsville, Kansas. This distribution center also increased our capacity by approximately 105,000 square feet.

Net income increased 27% to $5.4 million for the quarter ended June 30, 2008, compared to $4.3 million for the same period in the prior year. Diluted earnings per share were $0.44 and $0.35 per share for the quarters ended June 30, 2008 and 2007, respectively.

Nine months ended June 30, 2008 compared to nine months ended June 30, 2007

Total revenues grew 17% to $606.6 million for the nine months ended June 30, 2008, compared to $520.0 million for the nine months ended June 30, 2007. The increase in revenues for the nine months ended June 30, 2008 was attributable to an increase in product sales volumes for both new and existing customers, which represented 55% and 45%, respectively, of the growth in total revenues during the nine months ended June 30, 2008.

Gross profit increased 17% to $88.4 million for the nine months ended June 30, 2008, from $75.6 million for the same period in the prior fiscal year. Gross profit as a percentage of total revenues was 14.6% and 14.5% for the nine months ended June 30, 2008 and 2007, respectively. Contributing to our gross profit was the increase in commissions on our agency sales of 37% to $9.8 million for the nine months ended June 30, 2008, from $7.1 million for the same period in the prior fiscal year. Actual rebate dollars increased by approximately $894,000 for the nine months ended June 30, 2008 as compared to the same period in the prior fiscal year.

Operating income increased 18% to $23.6 million for the nine months ended June 30, 2008, from $20.1 million for the same period in the prior fiscal year. The increase is a result of the revenue and gross profit growth discussed above. SG&A expenses as a percentage of total revenues were 10.3% for each of the nine month periods ended June 30, 2008 and 2007. SG&A expenses increased 16% to $62.5 million for the nine months ended June 30, 2008 from $53.8 million for the same period in the prior fiscal year. The dollar increase in SG&A expenses was primarily due to increased compensation costs and location and occupancy costs. These costs increased as we added 29 new field sales and telesales representatives, employees from the Securos acquisition and the new distribution center in Edwardsville, Kansas. This distribution center also increased our capacity by approximately 105,000 square feet.

Net income increased 15% to $14.5 million for the nine months ended June 30, 2008, compared to $12.6 million for the same period in the prior year. Diluted earnings per share were $1.18 and $1.05 per share for the nine months ended June 30, 2008 and 2007, respectively.

Business Outlook

The Company updates its previous estimates for the fiscal year ending September 30, 2008. The Company expects revenues will grow approximately 17% for the fiscal year ending September 30, 2008 to approximately $831 million from $710 million in fiscal year 2007, and diluted earnings per share will be approximately $1.62 per share. Our previous guidance was approximately 16% growth in revenues to $825 million, and diluted earnings per share of approximately $1.62.

Conference Call

The Company will be hosting a conference call on July 31, 2008 at 11:00 a.m. eastern daylight time to discuss these results and its business outlook. Participants can access the conference call by dialing (877) 627-6585 and international callers can access the conference by dialing (719) 325-4863. 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 14, 2008 by calling (888) 203-1112 for calls within the United States or (719) 457-0820 for international calls using the passcode 9430724 or by accessing the Company's web site.

MWI is a leading distributor of animal health products to veterinarians across the United States of America. Products MWI sells include pharmaceuticals, vaccines, parasiticides, diagnostics, capital equipment, supplies, veterinary pet food and nutritional products. We market these products to veterinarians in both the companion animal and production animal markets. 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 vendor rebates based upon attaining certain growth goals; changes in vendor contract terms including rebates, commissions, and exclusivity requirements; changes in the way vendors introduce products to market; the recall of a significant product by one of the Company's vendors; seasonality; the impact of general economic trends on the Company's business; the timing and effectiveness of marketing programs offered by the Company's vendors; the timing of the introduction of new products and services by the Company's vendors; regulatory matters; 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)


                                 Three Months Ended     Nine Months Ended
Condensed Consolidated                June 30,              June 30,
 Statements of Income             2008       2007       2008       2007
                                ---------  ---------  ---------  ---------
 Revenues                       $ 208,277  $ 183,853  $ 606,598  $ 519,951
 Cost of product sales            177,970    158,391    518,238    444,318
                                ---------  ---------  ---------  ---------
 Gross profit                      30,307     25,462     88,360     75,633
 Selling, general and
  administrative expenses          20,802     18,302     62,515     53,802
 Depreciation and amortization        757        603      2,250      1,774
                                ---------  ---------  ---------  ---------
 Operating income                   8,748      6,557     23,595     20,057
 Interest expense                     (53)       (76)      (218)      (505)
 Other income                         152        278        596        556
                                ---------  ---------  ---------  ---------
 Income before taxes                8,847      6,759     23,973     20,108
 Income tax expense                (3,429)    (2,499)    (9,477)    (7,556)
                                ---------  ---------  ---------  ---------
 Net income                     $   5,418  $   4,260  $  14,496  $  12,552
                                =========  =========  =========  =========
 Net income per share - diluted $    0.44  $    0.35  $    1.18  $    1.05
 Weighted average common shares
  outstanding - diluted            12,298     12,168     12,297     11,967
                                ---------  ---------  ---------  ---------


                                                       June 30,  September
 Condensed Consolidated Balance Sheets                   2008    30, 2007
                                                      ---------  ---------
 Assets
    Cash                                              $  12,764  $   8,599
    Receivables, net                                    107,704    111,676
    Inventories                                         119,160     94,623
    Prepaid expenses and other current assets             1,955      2,362
    Deferred income taxes                                 1,094        518
                                                      ---------  ---------
       Total current assets                             242,677    217,778
    Property and equipment, net                           8,643      9,206
    Goodwill                                             34,598     32,964
    Intangibles, net                                      7,295      5,014
    Other assets, net                                     2,022      2,232
                                                      ---------  ---------
       Total Assets                                   $ 295,235  $ 267,194
                                                      =========  =========
 Liabilities
    Line-of-credit                                    $       -  $       -
    Accounts payable                                    110,876     98,724
    Accrued expenses                                      8,277      7,693
    Current portion of long-term debt                        97         97
                                                      ---------  ---------
       Total current liabilities                        119,250    106,514
    Deferred income taxes                                   582        474
    Long-term debt                                           97        195
    Other long-term liabilities                             249          -
 Stockholders' Equity                                   175,057    160,011
                                                      ---------  ---------
    Total Liabilities and Stockholders' Equity        $ 295,235  $ 267,194
                                                      =========  =========

Contact Information

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