Los Angeles, California, October 24, 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 September 30, 2007, as follows: revenue increased 21.8% to a third quarter record of $306.5 million; gross profit increased 22.5% to $86.3 million; operating income increased 23.6% to $63.7 million; net income increased 19.5% to $32.2 million; and diluted earnings per common share increased 18.8% to $0.38.
We also reported our financial results for the nine months ended September 30, 2007, as follows: revenue increased 17.7% to $872.0 million; gross profit increased 20.7% to $252.1 million; operating income increased 22.1% to $185.4 million; net income was $96.4 million; and diluted earnings per common share was $1.13. The nine months ended September 30, 2006 included a tax benefit in the amount of $6.8 million, or $0.08 per diluted common share, and excluding this benefit from 2006, adjusted net income increased 21.4% to $96.4 million and adjusted diluted earnings per common share increased 20.2% to $1.13.
Bob Antin, Chairman and CEO, stated, "The third quarter was highlighted by the outstanding operating performance of our laboratory and animal hospital businesses. On a 21.8% increase in consolidated revenue, our gross profit and operating income increased 22.5% and 23.6%, respectively, and diluted earnings per common share increased 18.8%.
"Our laboratory revenue increased 12.4% to $74.3 million driven primarily by internal revenue growth of 11.6%. Our laboratory gross profit increased 18.7% and operating income increased 19.9%. Laboratory gross margin increased to 48.0% compared to 45.4% and operating margin increased to 41.4% compared to 38.8% in the comparable prior year quarter.
"Our animal hospital revenue increased 25.0% to $229.4 million driven by acquisitions, including Healthy Pet Corp. acquired on June 1, 2007, and same-store revenue growth, adjusted for one less business day, of 5.7%. Our animal hospital gross profit increased 27.0% and operating income increased 29.6%. Animal hospital gross margin increased to 20.7% compared to 20.4% and operating margin increased to 18.2% compared to 17.6% in the comparable prior year quarter. Our animal hospital same-store gross margin increased to 21.0% compared to 20.5% in the comparable prior year quarter."
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 a $6.8 million tax benefit recorded during the first quarter of 2006. For the quarter and nine months ended September 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 nine months ended September 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 third quarter 2007 financial results during a conference call today, October 24, 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 (888) 455-2311. 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 June 30, 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 W. Fuller, Chief Financial Officer