LOS ANGELES, California, October 22, 2009 - 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, 2009 as follows: revenue increased 2.0% to a third quarter record of $338.6 million; gross profit increased 2.7% to $91.1 million; net income increased 1.6% to $36.4 million and diluted earnings per share of $0.42.
For the nine months ended September 30, 2009 diluted earnings per share were $1.23. The second quarter of 2009 included a non-cash charge of $5.3 million, or $3.2 million after tax, related to the write-off of an internal-use software project due to the failure of the project to reach development milestones and the company's decision to pursue alternative solutions. Excluding this charge, adjusted diluted earnings per share increased 1.6% to $1.27.
Bob Antin, Chairman and CEO, stated, "Given the economic landscape in which we currently reside, I am proud of our results for the third quarter of 2009. Our continued focus on maintaining margins through various initiatives has provided us the ability to continue to successfully grow earnings despite the challenges presented by the general economic environment.
"Animal hospital revenue in the third quarter increased 1.6% to $257.4 million driven by acquisitions made in the past twelve months. Our animal hospital gross margin and operating margin remained relatively unchanged at 19.9% and 17.7%, respectively. Our same-store revenue declined 4.9% during the quarter; however, we improved our same-store gross profit margin by 40 basis points to 20.5%. We made four acquisitions during the quarter with historical combined annual revenue of $8.4 million.
"Our laboratory segment had revenue of $77.5 million and essentially flat internal revenue growth. We improved our laboratory gross profit margin by 40 basis points to 46.2% and our laboratory operating margin remained unchanged at 39.0%.
"We also acquired Eklin Medical Systems, Inc. during the quarter which we have merged into our Sound Technologies business segment. Eklin is a leading seller of digital radiography, ultrasound and practice management software systems in the veterinary market. The integration of Eklin during the quarter has proven to be more challenging than expected. However, given the fact that we are operating in a difficult market for the acquisition of capital equipment, we remain optimistic regarding the future potential of the combined Sound Technologies/Eklin operations."
2009 Financial Guidance
We update our annual 2009 financial guidance as follows:
Diluted earnings per common share from $1.48 to $1.52 or adjusted diluted earnings per common share from $1.52 to $1.56.
Current uncertainty in the economy and the lack of visibility regarding the timing and degree of any recovery in our business sector makes it particularly difficult to predict consumer demand for our services and makes it more likely that our actual results could differ materially from expectations.
Non-GAAP Financial Measures
We believe investors' understanding of our total performance is enhanced by disclosing adjusted operating income, 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 are 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 nine months ended September 30, 2009, we adjusted our reported amounts for the aforementioned write-off of $5.3 million, or $3.2 million after tax.
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 company's third quarter 2009 financial results during a conference call today, October 22, 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 by dialing (877) 545-1407. 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 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 acquisitions (including Eklin Medical Systems, Inc.) 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, 2008 and will be discussed in our Report on Form 10-Q for the quarter and nine months ended September 30, 2009 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