SOURCE: MWI Veterinary Supply

MWI Veterinary Supply

February 03, 2011 06:00 ET

MWI Veterinary Supply Announces 2011 First Quarter Results and Updates Its 2011 Business Outlook

MERIDIAN, ID--(Marketwire - February 3, 2011) - MWI Veterinary Supply, Inc. (NASDAQ: MWIV) (the "Company") announced financial results today for its first quarter ended December 31, 2010.

Highlights:

  • Total revenues were $366.2 million for the quarter, 55.1% higher than revenues for the same period in the prior fiscal year. Of the 55.1% increase in total revenues, 28.6% was due to organic growth in the United States and 26.5% was related to our acquisition of Centaur Services Limited ("Centaur"), which was acquired on February 8, 2010. 
  • Selling, general and administrative ("SG&A") expenses as a percentage of total revenues were 8.5% for the quarter, compared to 9.5% for the same period in the prior fiscal year.
  • Operating income was $17.5 million for the quarter, 37.7% higher than operating income for the same period in the prior fiscal year.
  • Net income was $10.8 million for the quarter, 38.2% higher than net income for the same period in the prior fiscal year. Diluted earnings per share were $0.87 for the quarter, compared to $0.63 for the same period in the prior fiscal year. 
  • Internet sales to independent veterinary practices and producers in the United States grew by approximately 57% for the quarter compared to the same period in the prior fiscal year. Our product sales from the internet as a percentage of sales in the United States improved to 34% for the quarter as compared to 32% for the same period in the prior fiscal year.
  • In December, we moved our distribution center in Visalia, California to a larger facility with 81,000 square feet to accommodate our growth in that region. 
  • In January, we added our sixth veterinary pharmacy in Whitestown, Indiana to better serve our customers in the Midwest and we now have pharmacies in six of our twelve distribution centers. During the quarter ended December 31, 2010, our revenues from our veterinary pharmacy programs increased over 60% to $33.0 million. 

"MWI's team delivered outstanding results during the quarter," said Jim Cleary, President and Chief Executive Officer. "Our organic growth in the U.S. was driven by our commitment to customer service in response to the bankruptcy and liquidation of a competitor, our product line expansion, the rapid adoption by veterinarians of our leading e-commerce platform, and the strong performance of both our existing and new sales representatives."

Quarter ended December 31, 2010 compared to quarter ended December 31, 2009

Total revenues grew 55.1% to $366.2 million for the quarter ended December 31, 2010, compared to $236.1 million for the quarter ended December 31, 2009. Of the 55.1% increase in total revenues, 28.6% was due to organic growth in the United States and 26.5% was related to our acquisition of Centaur. Excluding the acquisition of Centaur, our revenues attributable to existing customers represented 51% of the growth in revenues during the quarter ended December 31, 2010. Commissions grew 3.9% to $3.7 million for the quarter ended December 31, 2010, compared to $3.6 million for the quarter ended December 31, 2009.

Gross profit increased by 39.1% to $50.1 million for the quarter ended December 31, 2010, compared to $36.0 million for the quarter ended December 31, 2009. Gross profit as a percentage of total revenues was 13.7% for the quarter ended December 31, 2010, compared to 15.3% for the quarter ended December 31, 2009. Gross profit as a percentage of total revenues decreased due to the addition of Centaur because Centaur's gross profit as a percentage of total revenues is generally lower than MWI's, which serves to reduce the overall gross margin of the consolidated Company when compared to our results for the same period in the prior year. Additionally, our gross margin decreased for the quarter ended December 31, 2010 due to a shift in product mix compared to the same period in the prior year. Vendor rebates for the quarter ended December 31, 2010 increased by $2.3 million compared to the quarter ended December 31, 2009. This increase was primarily due to our organic revenue growth described above. 

Operating income increased 37.7% to $17.5 million for the quarter ended December 31, 2010, compared to $12.7 million for the quarter ended December 31, 2009. SG&A expenses increased 38.5% to $31.0 million for the quarter ended December 31, 2010, compared to $22.4 million for the quarter ended December 31, 2009. SG&A expenses as a percentage of total revenues were 8.5% for the quarter ended December 31, 2010, compared to 9.5% for the quarter ended December 31, 2009. SG&A expenses as a percentage of total revenues decreased due to the addition of Centaur because Centaur's SG&A expenses as a percentage of total revenues are generally lower than MWI's, which serves to reduce the overall SG&A expenses as a percentage of total revenues when compared to our results for the same period in the prior year. Additionally, we had improvement in our SG&A expenses as a percentage of revenues due to our organic revenue growth. 

Net income increased 38.2% to $10.8 million for the quarter ended December 31, 2010, compared to $7.8 million for the quarter ended December 31, 2009. Diluted earnings per share were $0.87 and $0.63 for the quarters ended December 31, 2010 and 2009, respectively, an increase of 38.1%. 

Our cash balance as of December 31, 2010 was $853,000 and we had $22.2 million outstanding on our credit facilities. The increase in the outstanding balance on our credit facilities of $12.1 from September 30, 2010 resulted primarily from the use of our credit facility to fund working capital due to our revenue growth, and also the purchase of an office building that will be used for our headquarters in Boise, Idaho. Accounts payable decreased 13.3% as strategic inventory purchases were made during the quarter ended September 30, 2010 to support our organic growth, and payments for those purchases were made during the quarter ended December 31, 2010. Receivables decreased 2.1% as receivables with extended payment terms from the quarter ended September 30, 2010 were collected during the quarter ended December 31, 2010. Inventories increased 1.7% to support the continued organic growth of 28.6% during the quarter ended December 31, 2010.

Business Outlook

The Company estimates that for the fiscal year ending September 30, 2011, revenues will be from $1.45 billion to $1.50 billion, which represents growth of 18% to 22% compared to revenues in fiscal year 2010. The Company estimates that diluted earnings per share will be from $3.14 to $3.22 per share, which represents growth of 16% to 19% compared to diluted earnings per share in fiscal year 2010. The Company's previous guidance for the fiscal year ending September 30, 2011 was revenues from $1.41 billion to $1.46 billion and diluted earnings per share of $3.02 to $3.10. 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 February 3, 2011 at 11:00 a.m. eastern time to discuss in greater detail these results and its fiscal year 2011 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 February 17, 2011 by calling (800) 642-1687 for calls within the United States or (706) 645-9291 for international calls using the passcode 38606347. 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 to veterinarians across the United States of America and United Kingdom. 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 the impact of vendor consolidation on our business; changes in or availability of vendor rebate programs; vendor rebates based upon attaining certain growth goals; changes in the way vendors introduce products to market; exclusivity requirements with certain vendors that may prohibit us from distributing competing products manufactured by other vendors; risks associated with our international operations; transitional challenges associated with acquisitions, including the failure to achieve anticipated synergies; financial risks associated with acquisitions; 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; seasonality; the timing and effectiveness of marketing programs offered by our vendors; the timing of the introduction of new products and services by our vendors; 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; unforeseen litigation; a disruption caused by adverse weather or other natural conditions; 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 December 31,  
Statements of Income               2010       2009  
Revenues             $ 366,174     $ 236,111  
Cost of product sales               316,102       200,102  
Gross profit               50,072       36,009  
Selling, general and administrative expenses               31,047       22,421  
Depreciation and amortization               1,489       855  
Operating income               17,536       12,733  
Interest expense               (182 )     (40 )
Other income               208       164  
Income before taxes               17,562       12,857  
Income tax expense               (6,734 )     (5,023 )
Net income             $ 10,828     $ 7,834  
                               
Net income per share - diluted             $ 0.87     $ 0.63  
Weighted average common shares outstanding - diluted                 12,483       12,356  
                               
                  December 31,     September 30,  
Condensed Consolidated Balance Sheets               2010       2010  
Assets                          
  Cash             $ 853     $ 911  
  Receivables, net               185,370       189,428  
  Inventories               178,247       175,292  
  Prepaid expenses and other current assets               4,963       8,729  
  Deferred income taxes               1,697       1,556  
    Total current assets               371,130       375,916  
  Property and equipment, net               21,119       15,238  
  Goodwill               47,125       47,330  
  Intangibles, net               25,938       26,710  
  Other assets, net               2,718       2,738  
    Total Assets             $ 468,030     $ 467,932  
Liabilities                          
  Line-of-credit             $ 22,225     $ 10,140  
  Accounts payable               159,201       183,604  
  Accrued expenses               16,837       15,118  
  Current portion of long-term debt and capital lease obligations     2,935       3,631  
    Total current liabilities               201,198       212,493  
  Deferred income taxes               5,645       5,310  
  Long-term debt and capital lease obligations           702       953  
  Other long-term liabilities               2,337       2,389  
Stockholders' Equity               258,148       246,787  
  Total Liabilities and Stockholders' Equity             $ 468,030     $ 467,932  

Contact Information

  • For investor relations information please contact
    Mary Pat Thompson
    Senior Vice President of Finance and Administration
    and Chief Financial Officer
    (208) 955-8930
    Email Contact