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Press Release 5/18/2009
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Download Full Press Release with Tables
Company Contact:
Pet DRx Corporation
Harry L. Zimmerman
(HZimmerman@petdrx.com)
(615) 369-1914 – www.petdrx.com
Pet DRx Corporation Reports 2009 First Quarter Results
BRENTWOOD, Tenn. (May 18, 2009) – Pet DRx Corporation (Nasdaq:
VETS), a provider of veterinary primary care and specialized
services to companion animals, today announced financial results
for the first quarter ended March 31, 2009. Overall, the results
from the quarter were encouraging. There was a slight decrease
in revenue when compared to the first quarter of 2008, but a
significant decrease in the net loss for the quarter, as well as
a significant increase in Adjusted EBITDA (as defined below)
when compared to the same period in 2008.
Revenue in the first quarter of 2009 for continuing operations
was $16.7 million, compared to revenue of $17.4 million in the
first quarter of 2008. The decrease in revenues of 3.9% was
primarily due to decreased volume of foot traffic at the clinics
during the weak economy of the first quarter of 2009. However,
despite the economy, approximately one-third of our facilities
showed revenue growth over the first quarter of 2008.
“While the economic decline certainly had a negative effect on
our revenue growth in the first quarter of 2009, some of the
efforts we have made both at the hospital level and at the
corporate level to control spending during the quarter helped to
alleviate the revenue decline,” stated Gene Burleson, Chief
Executive Officer of Pet DRx. “Our operating loss for the
quarter actually decreased by 67% compared to the first quarter
of 2008, so we are pleased we were able to make improvements
even during these challenging times.”
Hospital contribution margin in the first quarter of 2009 from
continuing operations was 10.1% compared with 10.3% in the
prior-year first quarter. The slight margin decrease in the
first quarter was primarily attributable to the lower revenues
in the first quarter of 2009 compared to 2008, offset partially
by the three consolidations completed in 2008, which reduced
certain duplicative staff and occupancy costs at our hospitals.
However, the hospital contribution margin for the first quarter
of 2009 was a clear improvement over our hospital contribution
margin in the last half of 2008 when our margin was below 6%.
This was a result of the efforts made at the end of 2008 that
carried over into the first quarter of 2009 to insure that
staffing at our hospitals was in line with the amount of revenue
that the hospitals were generating.
Selling, general, and administrative expenses were $2.3 million
for the first quarter of 2009, as compared to $3.8 million in
the first quarter of 2008. As a percent of revenue SG&A
decreased to 14.0% during the first quarter of 2009 from 21.3%
in the same quarter a year ago. During the first quarter of
2008, the Company incurred significant costs as a result of
moving its corporate office from San Jose, California to
Brentwood, Tennessee. Payroll, travel, and occupancy related
costs in 2009 were down collectively by approximately $0.9
million as a result of the Company not incurring costs from
having both facilities. Additionally, the Company reduced its
staffing fees for the quarter by $0.5 million as a result of the
Company having transitioned to a full time staff in Tennessee
versus predominately using contract labor in San Jose. Also, the
Company reduced its overall management payroll as the number of
senior executives was decreased. Furthermore, the Company was
able to reduce its outside professional fees in the first
quarter of 2009 as compared to the first quarter of 2008. The
Company has now decreased its selling, general, and
administrative expenses for three consecutive quarters,
excluding the one-time impairment charges taken in the fourth
quarter of 2008.
The reported net loss in the first quarter of 2009 from
continuing operations was $21,000, or a loss of $0.00 per share,
compared with a net loss in the first quarter of 2008 of $2.9
million, or a loss of $0.13 per share. The net loss was
significantly reduced as a result of the $2.0 million gain
recognized from the change in fair value of the Company’s
warrant liabilities on its balance sheet. This non-cash gain
resulted from the Company adopting a newly required accounting
treatment for the warrants that it has issued, EITF 07-5,
“Determining Whether an Instrument (or Embedded Feature) Is
Indexed to an Entity’s Own Stock.” However, this gain could be
offset in the future based on interest rate changes or if our
stock price increases over its closing price at the end of the
first quarter of 2009. Therefore the Company’s results should
more appropriately be evaluated without taking into account this
gain or any potential subsequent losses that would result if our
stock price were to increase (as it has already since the end of
the first quarter of 2009). The net loss in the first quarter of
2009 includes interest expense of $1.3 million, compared with
$1.2 million in the prior-year first quarter.
Earnings before interest, income taxes, depreciation, and
amortization, and gain on change in fair value of warrant
liabilities (“Adjusted EBITDA”) for the first three months of
2009 was $21,000 as compared to a negative $1.5 million for the
three months ended March 31, 2008. This represents the first
time that the Company’s Adjusted EBITDA has been positive. The
increase in Adjusted EBITDA in the first quarter of 2009 was
primarily due to the reduced spending in selling, general, and
administrative expenses as compared to the same time period in
the previous year. See reconciliation of Adjusted EBITDA to Net
Loss from Continuing Operations in the table below.
Conference Call
Pet DRx management will host a conference call on Wednesday, May
20, 2009, beginning at 11 a.m. Eastern time to discuss first
quarter 2009 results and to answer questions. Individuals
interested in participating in the call should dial (888)
713-4209 from the U.S. or (617) 213-4863 from outside the U.S
and entering pass code 83565654. 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 81389712. 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.
NON-GAAP FINANCIAL MEASURES
The attached financial table contains certain non-GAAP financial
measures as defined under SEC rules, such as earnings before
interest, income taxes, depreciation, and amortization adjusted
to exclude certain items disclosed in the attached financial
table. As required by SEC rules, the Company has provided
reconciliations of this measure to the most directly comparable
GAAP measure, which is set forth in the attachments to this
release. The Company believes that the foregoing non-GAAP
financial measure improves the transparency of the Company’s
disclosure, provides a meaningful presentation of the Company’s
results from its core hospital operations excluding the impact
of items not related to the Company’s ongoing core hospital
operations.
[Tables Included in Press Release Download]
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