We also reported our financial results for the nine months ended September 30, 2006, as follows: revenue increased 19.0% to a nine-months record of $741.0 million; gross profit increased 20.1% to $208.9 million; operating income increased 20.6% to $151.8 million; net income was $86.2 million; and diluted earnings per common share was $1.02. The first quarter of 2006 included a tax benefit in the amount of $6.8 million, or $0.08 per diluted common share, due to a favorable outcome of an income tax audit that resulted in a change to our estimated tax liabilities. The second quarter of 2005 included an after-tax charge of $11.5 million, or $0.13 per diluted common share, for debt retirement costs. Excluding these items from the nine months ended September 30, 2006 and 2005, adjusted net income increased 27.5% to $79.4 million and adjusted diluted earnings per common share increased 27.0% to $0.94.
Bob Antin, Chairman and CEO, stated, "We had an excellent quarter. Our consolidated revenue increased 9.8% to $251.6 million and our consolidated margins improved over the comparable prior year quarter. Our consolidated gross profit increased 12.5% and our consolidated gross profit margin increased to 28.0% compared to 27.3% in the comparable prior year quarter. In addition, our consolidated operating income increased 16.7% and our consolidated operating income margin increased to 20.5% compared to 19.3% in the comparable prior year quarter.
"Our laboratory revenue increased 16.8% to $66.1 million, our laboratory gross profit increased 19.7% and our laboratory gross profit margin increased to 45.4% compared to 44.3% in the comparable prior year quarter. Our laboratory operating income increased 19.7% and our laboratory operating income margin increased to 38.8% compared to 37.9% in the comparable prior year quarter. Laboratory internal revenue growth was 15.2% for the third quarter of 2006.
"Our animal hospital revenue increased 9.4% to $183.6 million, our animal hospital gross profit increased 9.4% and our animal hospital gross profit margin of 20.4% was consistent with the prior comparable quarter. Our animal hospital operating income increased 7.5% and our operating income margin was 17.6% compared to 17.9% in the comparable prior year quarter. Our animal hospital same-store revenue growth was 4.8% for the third quarter of 2006 and our animal hospital same-store gross profit margin increased to 20.6% from 20.5% in the comparable prior year quarter.
"Our medical technology revenue declined 15.5% to $9.0 million and our medical technology gross profit declined 7.8%, while our medical technology gross profit margin increased to 38.3% compared to 35.1% in the comparable prior year quarter. Our medical technology operating income was $892,000 compared to $908,000 reported in the third quarter of 2005."
Non-GAAP Financial Measures
We believe investors' understanding of our total performance is enhanced by disclosing adjusted net income and adjusted diluted earnings per common share. We define adjusted net income and adjusted diluted earnings per common share as the reported items, adjusted to exclude certain significant items. Adjusted diluted earnings per common share is adjusted net income divided by diluted common shares outstanding.
Management uses adjusted net income and adjusted diluted earnings per common share because they exclude the effect of significant items that we believe are not representative of our core operations for the periods presented. As a result, these non-GAAP financial measures help to provide meaningful comparisons of our overall performance from one reporting period to another and meaningful assessments of our future performance and related trends. For the nine months ended September 30, 2006, the only item excluded in computing adjusted net income and adjusted diluted earnings per common share was the $6.8 million tax benefit recorded during the first quarter of 2006. For the nine months ended September 30, 2005, the only item excluded in computing adjusted net income and adjusted diluted earnings per common share was debt retirement costs, net of tax in the amount of $11.5 million recorded during the second quarter of 2005.
There is a material limitation associated with the use of these non-GAAP financial measures: our computation of adjusted net income excludes the impact of certain items and as a result, our computation of adjusted diluted earnings per common share does not depict diluted earnings per common share in accordance with GAAP.
To compensate for the limitations in the non-GAAP financial measures discussed above, our disclosures provide a complete understanding of all adjustments found in non-GAAP financial measures, and we reconcile the non-GAAP financial measures to the GAAP financial measures in the attached financial schedules titled "Supplemental Operating Data."
We will discuss our company's third quarter 2006 financial results during a conference call today, October 25, 2006 at 4:30 p.m. Eastern Time. You can access a live broadcast of the call by visiting our website at http://investor.vcaantech.com. You can also access the call via telephone by dialing (800) 289-0544. Interested parties should call at least 10 minutes prior to the start of the call to register.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Among the important factors that could cause actual results to differ are: a material adverse change in our financial condition or operations; the rate of our laboratory internal revenue growth and animal hospital same-store revenue growth; the level of direct costs and our ability to maintain revenue at a level necessary to maintain expected operating margins; the level of selling, general and administrative costs; the effects of our recent acquisitions, including Pet's Choice, Inc., and our ability to effectively manage our growth and achieve operating synergies; a continued decline in demand for some of our products and services; any disruption in our information technology systems or transportation networks; the effects of competition; any impairment in the carrying value of our goodwill; changes in prevailing interest rates; our ability to service our debt; and general economic conditions. These and other risk factors are discussed in our Report on Form 10-K for the year ended December 31, 2005 and our Report on Form 10-Q for the quarter ended June 30, 2006, and the reader is directed to these statements for a further discussion of important factors that could cause actual results to differ materially from those in the forward-looking statements.
We own, operate and manage the largest networks of freestanding veterinary hospitals and veterinary-exclusive clinical laboratories in the country, and we supply ultrasound and digital radiography equipment to the veterinary industry.
Chief Financial Officer