LOS ANGELES, California, July 26, 2007 VCA Antech, Inc. (NASDAQ Global Select Market: WOOF), a leading animal healthcare company in the United States, today reported financial results for the quarter ended June 30, 2007, as follows: revenue increased 17.7% to a second quarter record of $300.3 million; gross profit increased 19.9% to $89.9 million; operating income increased 21.3% to $67.4 million; net income increased 21.3% to $35.8 million; and diluted earnings per common share increased 20.0% to $0.42.
We also reported our financial results for the six months ended June 30, 2007, as follows: revenue increased 15.6% to a first six-months record of $565.5 million; gross profit increased 19.7% to $165.8 million; operating income increased 21.4% to $121.7 million; net income was $64.2 million; and diluted earnings per common share was $0.75. 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. Excluding this item from 2006, adjusted net income increased 22.4% to $64.2 million and adjusted diluted earnings per common share increased 21.0% to $0.75.
Bob Antin, Chairman and CEO, stated, "The second quarter was marked by the outstanding operating performance of our company and the acquisition of Healthy Pet Corp., which occurred on June 1, 2007. On a 17.7% increase in consolidated revenue, our gross profit and operating income increased 19.9% and 21.3%, respectively, net income increased 21.3% and diluted earnings per common share increased 20.0% to $0.42.
"Our laboratory revenue increased 17.4% to $79.2 million. Our laboratory gross profit increased 22.9% and our laboratory gross margin increased to 50.5% compared to 48.2% in the comparable prior year quarter. Our laboratory operating income increased 23.7% and our laboratory operating margin increased to 44.0% compared to 41.8% in the comparable prior year quarter. Laboratory internal revenue growth was 15.9% for the second quarter of 2007.
"Our animal hospital revenue increased 17.5% to $218.5 million. Our animal hospital same-store revenue growth was 6.6% for the second quarter of 2007 and our animal hospital same-store gross margin increased to 21.6% compared to 21.4% in the comparable prior year quarter. Our consolidated animal hospital gross margin declined to 21.2% compared to 21.3% in the comparable prior year quarter and our consolidated animal hospital operating margin remained unchanged at 18.6%.
"Our medical technology revenue increased 26.6% to $10.6 million, our medical technology gross profit increased 20.4% to $3.8 million and our medical technology gross margin was 35.6% compared to 37.4% in the comparable prior year quarter. Our medical technology operating income was $1.1 million compared to $595,000 reported in the second quarter of 2006."
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 a $6.8 million tax benefit recorded during the first quarter of 2006. For the quarter and six months ended June 30, 2007, there were no adjustments.
There is a material limitation associated with the use of these non-GAAP financial measures: our computation of adjusted net income for the six months ended June 30, 2006, excludes the impact of the $6.8 million tax benefit 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 second quarter 2007 financial results during a conference call today, July 26, 2007 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) 500-3792. 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 ability to successfully integrate the acquisition of Healthy Pet Corp. and achieve expected operating synergies; 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 and our ability to effectively manage our growth and achieve operating synergies; a 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, 2006, and our Report on Form 10-Q for the quarter ended March 31, 2007, 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 diagnostic imaging equipment to the veterinary industry.
Tomas Fuller, Chief Financial Officer