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Press Release 4/1/2009
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Company Contact:
Pet DRx Corporation
Harry L. Zimmerman
(hzimmerman@petdrx.com)
(615) 369-1914 - http://www.petdrx.com
Pet DRx Reports 2008 Fourth Quarter and Full Year Results
BRENTWOOD, Tenn. (April 1, 2009) - Pet DRx Corporation (Nasdaq:
VETS), a provider of veterinary primary care and specialized
services to companion animals, today announced financial results
for the fourth quarter and twelve months ended December 31,
2008.
Revenue in the fourth quarter of 2008 for continuing operations
was $16.1 million, compared to revenue of $15.9 million in the
fourth quarter of 2007. New revenues from the acquisition of
Valley Animal Medical Center were offset partially by the
temporary closure of another of our facilities which resumed
operations in December 2008. For the twelve months ended
December 31, 2008, Pet DRx reported revenue of $68.3 million, up
13.3% compared with revenue of $60.3 million for the twelve
months ended December 31, 2007. The revenue increase was
primarily due to the acquisition of five veterinary hospitals
late in the first quarter of 2007, and the acquisition of Valley
Animal Medical Center in July 2008.
"We continue to be pleased that our same store-revenues have
remained relatively consistent with prior years considering the
economic environment that we all know has been very
challenging," stated Gene Burleson, chief executive officer of
Pet DRx. "We know 2008 was a transition year for Pet DRx. We
have taken and are taking many steps that we believe will begin
to show positive results in 2009. We are continuing to put in
place the appropriately sized infrastructure for our
multi-clinic public company platform. Our management team is
committed to driving our company towards profitability and
positive cash flow. Pet DRx’s team continues to focus on our
operational challenges and made two more strategic decisions in
the fourth quarter, including the closure of the South Bay
clinic and the merger of our Palm Springs animal emergency
clinic into our newly acquired Valley Animal Medical Center
hospital in the Coachella Valley region. These actions have
already begun to show a favorable impact to our financial
results."
Hospital contribution margin in the fourth quarter of 2008 from
continuing operations was (2.6%) compared with 5.6% in the
prior-year fourth quarter. The margin contraction in the fourth
quarter was primarily due to increased veterinarian costs, an
unfavorable true-up of our 2008 California workers compensation
insurance expense and larger amounts of amortization expense
recorded as a result of the true-up of purchase accounting of
our Valley Animal acquisition. For the year ended December 31,
2008, hospital contribution margin was 5.5%, which was generally
in line with the hospital contribution margin of 6.4% for the
year ended December 31, 2007. The hospital contribution margin
in 2008 was negatively impacted by the costs related to the
temporary interruption of services at one of our hospitals, by
increased costs in recruiting and employing veterinarians, and
by costs related to facilities that have now been consolidated
into other facilities.
Selling, general and administrative expenses as a percent of
revenue increased to 47.2% during the fourth quarter of 2008
from 21.4% in the same quarter a year ago. The increase in costs
was primarily attributable to larger non-cash charges for stock
compensation costs incurred in the fourth quarter of 2008 versus
2007 and one-time impairment charges recorded for goodwill and
intangible assets at two of our hospitals. These increased costs
were offset partially by the cost savings realized from the
reduced occupancy costs of our headquarters in Brentwood,
Tennessee versus those incurred in San Jose, California, our
prior location. For the twelve months ended December 31, 2008,
selling, general and administrative expenses as a percent of
revenue were 27.9%, compared to 21.0% for the same period in
2007. The increase in selling, general and administrative
expenses during 2008 is due predominately to expenses incurred
during the first part of the year as a result of: (i) the
Company’s relocation of its office from California to Tennessee,
(ii) large non-cash charges for stock compensation expense,
(iii) the establishment of our new executive and clerical team
to meet the challenges of being a multi-clinic, public reporting
company, (iv) additional payments related to prior acquisitions
and (v) the charges that were taken in 2008 for goodwill and
intangible asset impairment and the reduction in value of
certain real estate, whereas in 2007 such impairment charges
have been classified as part of discontinued operations.
"While our selling, general, and administrative expenses
continued to be high in 2008, a large portion of this was from
various non-recurring charges including costs associated with
the relocation and development of our existing management team
which occurred during the year" stated Harry L. Zimmerman, Chief
Financial Officer. "We expect our corporate overhead expenses
for 2009 to be significantly reduced, which will favorably
impact our financial performance in 2009. We have created a
leaner, more efficient infrastructure with a focus on improving
operations, instituted tighter controls on discretionary
expenditures and brought in-house certain services that
third-parties had been doing for us."
The net loss in the fourth quarter of 2008 from continuing
operations was $8.4 million, or a loss of $0.36 per share,
compared with a net loss in the fourth quarter of 2007 of $3.5
million, or a loss of $0.85 per share (adjusted for merger share
conversion ratio). The net loss in the fourth quarter of 2008
includes interest expense of $0.4 million, compared with $1.2
million in the prior-year fourth quarter. Additionally, the
current year net loss includes goodwill and intangible
impairment expense of $4.6 million. The net loss from continuing
operations for the twelve months of 2008 was $19.4 million, or a
loss of $0.83 per share, compared with a net loss of $12.4
million, or a loss of $3.00 per share (adjusted for merger share
conversion ratio) for the twelve months ended December 31, 2007.
Conference Call
Pet DRx management will host a conference call on Thursday,
April 2, 2009, beginning at 2:00 p.m. Eastern time to discuss
fourth quarter and 2008 results and to answer questions.
Individuals interested in participating in the call should dial
(888) 679-8040 from the U.S. or (617) 213-4851 from outside the
U.S. The live call also will be available in the Investors
section of the Company’s Web site at www.petdrx.com.
A telephone replay will be available for 48 hours beginning
approximately one hour after the conclusion of the call by
dialing (888) 286-8010 from the U.S. or (617) 801-6888 from
outside the U.S., and entering reservation code 77963683. The
webcast will be available in the Investors section of the
Company’s Web site for 14 days following the completion of the
call.
About Pet DRx
Pet DRx Corporation provides veterinary primary care and
specialized services to companion animals through a network of
fully-owned veterinary hospitals. The Company currently owns and
operates 23 veterinary hospitals in the state of California,
which it has organized into unique, regional "hub and spoke"
networks. Pet DRx provides a full range of general medical
treatments for companion animals, including (i) preventive care,
such as examinations, vaccinations, spaying/neutering and dental
care and (ii) a broad range of specialized diagnostic and
medical services, such as internal medicine, surgery,
cardiology, ophthalmology, dermatology, oncology, neurology,
x-ray, ultrasound and other services.
SAFE HARBOR STATEMENT
Certain statements and information included in this press
release, including statements as to the expected operations of
the Company, its prospects for growth, and future product and
service offerings constitute "forward-looking statements" within
the meaning of the Federal Private Securities Litigation Reform
Act of 1995. These forward-looking statements are subject to
risks and uncertainties that may cause actual results to differ
materially, including, but not limited to, the ability of the
Company to successfully acquire, integrate and operate
veterinary hospitals and clinics, requirements or changes
affecting the businesses in which the Company is engaged,
veterinary services trends, including factors affecting supply
and demand, the effect of competition, decline in demand for the
Company’s products or services, dependence on acquisitions for
growth, labor and personnel relations, changing interpretations
of generally accepted accounting principles, the Company’s
ability to service its substantial indebtedness, the level of
direct costs and the Company’s ability to maintain revenue at a
level necessary to maintain expected operating margins, the
level of selling, general and administrative costs, any
impairment in the carrying value of the Company’s goodwill and
other intangible assets, changes in prevailing interest rates,
and general economic conditions. These and other risks and
uncertainties are described in greater detail in the Company’s
filings with the Securities and Exchange Commission, including
its reports on Form 10-K and 10-Q, and the foregoing information
should be read in conjunction with these filings. These
forward-looking statements speak only as of the date hereof and
the Company disclaims any intention or obligation to update or
revise any forward-looking statements, either as a result of new
information, future events or otherwise.
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