Reported net income and reported diluted earnings per common share for the first quarter of 2004 included an after-tax benefit of $1.1 million for the settlement of an insurance claim relating to a prior legal settlement. Excluding this item from 2004, first quarter 2005 net income increased 26.6% from $13.6 million to $17.2 million, and diluted earnings per share increased 31.3% from $0.16 to $0.21, compared to the comparable quarter in the prior year.
Bob Antin, Chairman and CEO, stated, "We had a very strong first quarter marked by continued growth in our core businesses. Revenue increased 29.5% to a first quarter record of $186.9 million and diluted earnings per common share increased to $0.21, a 31.3% increase compared to adjusted diluted earnings per common share in the first quarter of 2004.
"Our laboratory internal revenue growth for the first quarter of 2005, adjusted for one less billing day, was 10.1%. Our laboratory gross profit increased 11.2% to $23.9 million and our laboratory gross profit margin increased to 44.7% from 43.6% in the first quarter of 2004.
"Our consolidated animal hospital revenue for the first quarter of 2005 grew 36.1%, generating an increase in animal hospital gross profit of 42.2% and an increase in animal hospital gross profit margin to 19.3% from 18.5% in the first quarter of 2004. In addition, our animal hospital same-store revenue growth for the first quarter of 2005, adjusted for one less business day, was 7.3% and our same-store gross profit margin increased to 19.8% from 18.5% in the first quarter of 2004.
"We remain very excited about the acquisition of Sound Technologies, Inc., or STI, on October 1, 2004 and the opportunity to sell digital imaging equipment, which we believe is an emerging and dynamic segment within the animal healthcare industry."
Non-GAAP Financial Measures
We believe investors' understanding of our total performance is enhanced by disclosing adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted earnings per common share. We define adjusted net income, adjusted operating income, adjusted operating margin and adjusted diluted earnings per common share as the reported items, adjusted to exclude certain significant items. For the period presented in this press release, the only significant item that was excluded from adjusted operating income, adjusted operating margin and adjusted net income was a litigation settlement reimbursement recognized during the first quarter of 2004 as a result of the Company settling a claim with its insurance company. Adjusted diluted earnings per common share is adjusted net income divided by diluted common shares outstanding.
Management uses adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted earnings per common share because they exclude the effect of the litigation settlement reimbursement that we believe is not representative of our core operations for the period 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.
There is a material limitation associated with the use of these non-GAAP financial measures: adjusted operating income, adjusted operating margin and adjusted net income exclude the impact of significant items (in this case, the litigation settlement reimbursement) on current performance and adjusted diluted earnings per common share does not depict the amount accrued directly to each stockholder's benefit.
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."
VCA Antech will discuss its first quarter 2005 financial results during a conference call today, April 26, 2005 at 4:30 p.m. Eastern Time. The call will be broadcast live on the Internet and can be accessed by visiting the Company's website at http://investor.vcaantech.com. The conference call can also be accessed via telephone by dialing (800) 406-5356. Interested parties should call at least 10 minutes prior to the start of the conference call to register.
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 and our expectations regarding our acquisition of STI. Actual results may vary substantially from these forward-looking statements as a result of a variety of factors. Among the important factors that could cause actual results to differ are: our ability to successfully integrate National PetCare Centers, Inc. and STI into our existing operations and achieve expected operating synergies following the mergers; 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; any impairment in the carrying value of our goodwill; the effects of our recent acquisitions and our ability to effectively manage our growth; the effects of competition; changes in the markets for financing; failure to satisfy the conditions to consummate the tender offer and consent solicitation; our ability to service our debt; and general economic conditions. These and other risk factors that could affect actual results are discussed in our periodic reports filed with the Securities and Exchange Commission, including our Report on Form 10-K for the year ended December 31, 2004 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.
VCA Antech owns, operates and manages the largest networks of freestanding veterinary hospitals and veterinary-exclusive clinical laboratories in the country and is one of the largest suppliers of ultrasound and digital radiography equipment to the veterinary industry in the country.
Chief Financial Officer