LOS ANGELES, California, October 27, 2011 - 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, 2011 as follows: revenue increased 7.4% to a third quarter record of $385.1 million; gross profit of $90.1 million; net income of $30.2 million; and diluted earnings per common share of $0.35.
Our earnings for the quarter ended September 30, 2011 included debt retirement costs of $2.8 million, or $1.7 million net of tax, related to the refinancing of our senior credit facility. Excluding these items, adjusted diluted earnings per common share was $0.37.
We also reported our financial results for the nine months ended September 30, 2011, as follows: revenue increased 7.0% to a nine-month record of $1.116 billion; gross profit of $266.7 million; net income of $98.6 million; and diluted earnings per common share of $1.13. Excluding the aforementioned debt retirement costs adjusted diluted earnings per common share was $1.15.
Bob Antin, Chairman and CEO, stated, "I am pleased with our company's performance for the third quarter. Although we continue to face a challenging business environment, we have been able to grow both organic Animal Hospital and Laboratory revenues during the quarter. We also continue to be excited about in the growth prospects of Vetstreet and we continue to be optimistic regarding the future prospects of the companion animal healthcare industry.
"The three and nine months ended September 30, 2010 included $2.6 million, or $1.6 million net of tax, of debt retirement costs and $5.4 million, or $3.5 million net of tax, related to additional state tax payments required as a result of a tax audit settlement. Excluding these charges, adjusted diluted earnings per share for the three-month period ended September 30, 2010 was $0.37. The nine-month period ended September 30, 2010 also included a $14.5 million, or $8.9 million net of tax charge, as previously disclosed. Excluding this charge, adjusted diluted earnings per share was $1.18.
"Animal Hospital revenue in the third quarter of 2011 increased 9.6% to $303.2 million driven by acquisitions made in the past twelve months and same-store revenue growth, adjusted for one less business day, of 1.0%. Our Animal Hospital gross margin increased to 17.0%, compared to 16.8%, for the prior year quarter, and our Animal Hospital operating margin increased to 15.1%, compared to 14.8%, for the prior year quarter. Our same-store revenue increased by 1.0% and our same-store gross profit margin increased to 17.1%, from 17.0%. During the quarter, we acquired four independent animal hospitals which had historical combined annual revenue of $8.7 million, as well as BrightHeart Veterinary Centers which operates nine hospitals with historical combined annual revenue of $53.0 million.
"Laboratory revenue in the third quarter increased 2.2% to $79.0 million. Internal revenue growth was 2.2%, driven by an increase in the number of requisitions. Our Laboratory gross profit margin decreased by 20 basis points to 44.7% and our operating margin decreased 30 basis points to 35.8%.
"Revenue from all other business operations increased $1.5 million to $18.9 million, which related to the acquisition of Vetstreet during the 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 these adjusted measures as the reported amounts, adjusted to exclude certain significant items. Adjusted diluted earnings per common share equals adjusted net income divided by diluted common shares outstanding.
Management uses adjusted measures 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 related trends. For the three and nine months ended September 30, 2011, we made the following adjustments: $2.8 million, or $1.7 million after tax, and $0.02 per diluted common share for debt retirement costs related to the refinancing of our senior credit facility. Further, for the three and nine months ended September 30, 2010, we adjusted our reported amounts for $14.5 million, or $8.9 million net of tax, or $0.10 per diluted common share, for future compensation in connection with executive consulting agreements, and $5.4 million, or $3.5 million net of tax, or $0.04 per diluted common share, for a tax expense related to the settlement of state taxes assessed on taxable income for the tax years 2004 through 2007, and $2.6 million, or $1.6 million after tax, or $0.02 per diluted common share, for debt retirement costs related to the refinancing of our senior term notes.
There is a material limitation associated with the use of these non-GAAP financial measures: our adjusted measures exclude the impact of these significant 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 third quarter 2011 financial results during a conference call today, October 27th, at 4:30 p.m. Eastern Time. A live broadcast of the call may be accessed by visiting our website at http://investor.vcaantech.com. The call may also be accessed by dialing (877) 293-5492. 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. Actual results may and likely will differ materially from this forward-looking information. Our Animal Hospital and Laboratory revenues have been materially adversely impacted by the current economic recession. We are unable to forecast accurately the timing or degree of any economic recovery. Further, trends in the general economy may not be reflected in our business at the same time or in the same degree as in the general economy. The timing and degree of any economic recovery, and its impact on our business, are among the important factors that could cause actual results to differ from this forward-looking information. Among other factors that could cause our actual results to differ from this forward-looking information are: an increase in the level of direct costs or a failure to increase revenue at a level necessary to maintain our expected operating margins, a material adverse change in our financial condition or operations; the level of selling, general and administrative costs; the effects of our recent and future acquisitions (including Vetstreet) and our ability to effectively manage our growth and achieve operating synergies; a decline in demand for any 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 risks are discussed in our Report on Form 10-K for the year ended December 31, 2010 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 provide the largest online communication, professional education and marketing solution to the veterinary community . We also supply diagnostic imaging equipment to the veterinary industry.
Chief Financial Officer