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VCA Antech, Inc. Reports Second Quarter 2006 Results

LOS ANGELES, California, July 26, 2006 - VCA Antech, Inc. (NASDAQ NM SYMBOL: WOOF), a leading animal healthcare company in the United States, today reported financial results for the quarter ended June 30, 2006, as follows: revenue increased 23.5% to a second quarter record of $255.2 million; gross profit increased 23.4% to $75.0 million; operating income increased 22.4% to $55.6 million; net income was $29.6 million; and diluted earnings per common share was $0.35.

The quarter ended June 30, 2005 included an after-tax charge of $11.5 million, or $0.14 per diluted common share, for debt retirement costs. Excluding this item, adjusted net income for the second quarter of 2006 increased 29.7% to $29.6 million and adjusted diluted earnings per common share increased 29.6% to $0.35.

We also reported our financial results for the six months ended June 30, 2006, as follows: revenue increased 24.4% to a first six-months record of $489.3 million; gross profit increased 24.5% to $138.5 million; operating income increased 22.6% to $100.3 million; net income was $59.2 million; and diluted earnings per common share was $0.70. 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 $0.14 per diluted common share, for debt retirement costs. Excluding these items from the six months ended June 30, 2006 and 2005, adjusted net income increased 30.9% to $52.4 million and adjusted diluted earnings per common share increased 29.2% to $0.62.

Bob Antin, Chairman and CEO, stated, "Our operating results for the second quarter were marked by continued growth in our core businesses. Our consolidated revenue increased to $255.2 million and our consolidated gross profit margin of 29.4% remained unchanged from the comparable prior year quarter. Our consolidated operating income margin was 21.8% compared to 22.0% in the comparable prior year quarter. Operating income for the second quarter of 2006 includes share-based compensation of $669,000, or 0.3% of consolidated revenue, as a result of adopting SFAS No. 123R on January 1, 2006. In addition, during the second quarter of 2006, we made a $20.0 million prepayment of our senior term notes, which brings the total year-to-date prepaid amount to $60.0 million.

"Our laboratory revenue for the second quarter of 2006 increased 15.8%, generating an 18.8% increase in laboratory gross profit and our laboratory gross profit margin increased to 48.2% compared to 47.0% in the comparable prior year quarter. Our laboratory operating margin increased to 41.8% compared to 41.2% in the comparable prior year quarter. Laboratory internal revenue growth was 14.9% for the second quarter.

"Our consolidated animal hospital revenue increased 25.7% to $186.0 million. We saw improvements in the performance of those animal hospitals that we have operated for more than one year. We experienced animal hospital same-store revenue growth of 5.4% and animal hospital same-store gross profit margin increased to 21.8% from 21.7% in the comparable prior year period. We continue to experience lower gross profit margins on animal hospitals acquired within the last year, including Pet's Choice, Inc. (acquired on July 1, 2005), resulting in a consolidated animal hospital gross profit margin of 21.3% for the second quarter of 2006 as compared to 21.5% in the comparable period in 2005. Our consolidated animal hospital operating margin for the second quarter of 2006 was 18.6% compared to 19.0% in the comparable prior year quarter.

"Our medical technology revenue increased 56.8% to $8.4 million and our medical technology gross profit margin increased to 37.4% compared to 30.9% in the comparable prior year quarter. Our medical technology segment reported operating income of $595,000 compared to an operating loss of $264,000 reported in the second 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 six months ended June 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 six months ended June 30, 2005, the only item excluded in computing adjusted net income and adjusted diluted earnings per common share was debt retirement costs 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."

Conference Call

We will discuss our company's second quarter 2006 financial results during a conference call today, July 26, 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) 289-0496. Interested parties should call at least 10 minutes prior to the start of the call to register.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including our statement regarding continued growth in our core businesses. 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 March 31, 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.

Media contact:
Tom Fuller
Chief Financial Officer
(310) 571-6505

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