LOS ANGELES, California, October 23, 2008 - VCA Antech, Inc. (NASDAQ NM SYMBOL: WOOF), a leading animal healthcare company in the United States, today reported financial results for the third quarter ended September 30, 2008, as follows: revenue increased 8.3% to a third quarter record of $332.0 million; gross profit increased 2.9% to $88.8 million; operating income increased 4.7% to $66.7 million; net income increased 11.0% to $35.8 million; and diluted earnings per share increased 10.5% to $0.42.
We also reported our financial results for the nine months ended September 30, 2008, as follows: revenue increased 11.7% to a nine-month record of $974.3 million; gross profit increased 6.6% to $268.8 million; operating income increased 8.3% to $200.7 million; net income increased 11.3% to $107.3 million; and diluted earnings per share increased 10.6% to $1.25.
Bob Antin, Chairman and CEO, stated, "I am pleased with our company's performance for the third quarter. We continue to be challenged by a very complex economic environment, but I believe our company and our team has met those challenges and has continued our long record of revenue and earnings growth.
"It is clear that we are navigating very turbulent times for pet owners. We know that pet owners are tremendously loyal to their pets. At the same time, we acknowledge that they, too, are sensitive to this difficult economic environment we are facing. Even with our success to date, current economic conditions have impacted demand and we have not been able to maintain previously achieved internal revenue growth rates. As a result of these conditions we have implemented cost controls and other measures to manage our business, but achieving these historical revenue growth rates will continue to be challenging in the current economic environment. Long term, we have tremendous confidence that we will continue to enjoy the loyalty of our pet owners, and be able to regain the momentum our profession historically enjoys.
"We continue to acquire outstanding animal hospitals and laboratories, advancing our position as the number one provider of quality pet care in the United States. We have had great success to date and we anticipate even greater success through the end of the year. In the third quarter, we acquired seven animal hospitals with combined annual revenue of nearly $12 million. Year-to-date, we have acquired 43 animal hospitals with combined annual revenue of over $87 million. Historically we have targeted acquisition activity at approximately $50 million to $60 million of acquired revenue per year (excluding the acquisitions of any animal hospital chains).
"Laboratory revenue in the third quarter increased 3.8% to $77.1 million, driven primarily by internal revenue growth of 3.1%. Laboratory margins in the third quarter were impacted by the aforementioned economic environment: our gross margin declined to 45.8% compared to 48.0% and our operating margin declined to 39.0% compared to 41.4%.
"Animal hospital revenue in the third quarter increased 10.4% to $253.3 million driven primarily by acquisitions. While same-store revenue grew 1.4%, adjusted for one less business day during the quarter, our same-store animal hospital margins in the third quarter remained essentially flat totaling 20.6% compared to 20.9%. Consolidated animal hospital gross margin decreased to 19.9% compared to 20.7% and operating margin was 17.6% compared to 18.2% primarily due to lower margins at acquired hospitals.
We revise our 2008 financial guidance as follows:
We will discuss our company's third quarter 2008 financial results during a conference call today, October 23, 2008 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 (877) 340-7912. 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, including, but not limited to, our statements regarding the effect of the general economy on our operations and our 2008 financial guidance. Actual results may and likely will differ materially from the guidance provided in this release. Among the important factors that could cause actual results to differ are a material adverse change in our financial condition or operations; the impact of adverse trends in the general economy on 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 and other intangible assets; 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, 2007, and our Report on Form 10-Q for the quarter ended June 30, 2008, 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.
Chief Financial Officer