VCA Antech, Inc. Reports Fourth Quarter 2007 Results and Affirms its Financial Guidance for 2008

Business Wire, Feb 21, 2008

* Fourth quarter revenue increased 17.3% to $284.2 million

* Fourth quarter gross profit increased 12.5% to $69.3 million

* Fourth quarter diluted earnings per common share increased 26.1% to $0.29

* Fourth quarter adjusted diluted earnings per common share increased 13.0% to $0.26

LOS ANGELES -- VCA Antech, Inc. (NASDAQ:WOOF), a leading animal healthcare company in the United States, today reported financial results for the quarter ended December 31, 2007, as follows: revenue increased 17.3% to a fourth quarter record of $284.2 million; gross profit increased 12.5% to $69.3 million; operating income increased 17.5% to $47.8 million; net income was $24.6 million; and diluted earnings per common share was $0.29. The fourth quarter of 2007 included a benefit of $3.5 million, or $2.2 million after tax, related to a decrease in our estimated workers' compensation insurance liability for policy periods prior to 2007. Excluding this benefit from 2007, adjusted diluted earnings per common share increased 13.0% to $0.26.

We also reported our financial results for the year ended December 31, 2007, as follows: revenue increased 17.6% to a twelve-month record of $1.16 billion; gross profit increased 18.8% to $321.4 million; operating income increased 21.1% to $233.2 million; net income was $121.0 million; and diluted earnings per share was $1.41. The fourth quarter of 2007 included a benefit of $3.5 million, or $2.2 million after tax, related to a decrease in our estimated workers' compensation insurance liability for policy periods prior to 2007. The first quarter of 2006 included a tax benefit of $6.8 million due to a favorable outcome of an income tax audit that resulted in a change to our estimated tax liabilities. Excluding these benefits from 2007 and 2006, adjusted diluted earnings per common share increased 19.8% to $1.39.

Bob Antin, Chairman and CEO, stated, "VCA Antech had a very strong year highlighted by organic growth in each of its business segments and the execution of a very successful acquisition program. In 2007, laboratory internal revenue growth, adjusted for differences in billing days, was 13.5% and animal hospital same-store revenue growth was 5.2%. In the fourth quarter of 2007, laboratory internal revenue growth, adjusted for differences in billing days, and animal hospital same-store revenue growth, adjusted for differences in business days, was 9.1% and 2.5%, respectively.

"Laboratory revenue in the fourth quarter increased 8.4% to $68.6 million driven primarily by internal revenue growth. Gross profit and operating margins in the fourth quarter of 2007 were 45.9% and 38.9%, respectively. Laboratory results for the fourth quarter of 2007 included a benefit of $597,000 related to a decrease in our workers' compensation insurance liability for policy periods prior to 2007. Excluding this benefit, laboratory adjusted gross profit and operating margins were 45.1% and 38.0%, respectively.

"Animal hospital revenue in the fourth quarter increased 21.8% to $209.3 million driven by acquisitions, including Healthy Pet Corp. acquired on June 1, 2007, and same-store revenue growth. Gross profit and operating margins in the fourth quarter of 2007 were 16.0% and 13.3%, respectively. Animal hospital results for the fourth quarter of 2007 included a benefit of $2.8 million related to a decrease in our workers' compensation insurance liability as previously discussed. Excluding this benefit, animal hospital adjusted gross profit and operating margins were 14.8% and 12.0%, respectively. Animal hospital same-store gross profit margin in the fourth quarter of 2007 was 16.7%. Excluding the impact for the decrease in our workers' compensation insurance liability, same-store adjusted gross profit margin declined to 15.2% compared to 16.9% in the comparable prior year quarter."

2008 Financial Guidance

We affirm our 2008 financial guidance previously provided on February 4, 2008. Our 2008 financial guidance is as follows:

* Revenue from $1.30 billion to $1.33 billion;

* Laboratory internal revenue growth to a range from 8% to 10%;

* Animal hospital same-store revenue growth to a range from 3% to 5%;

* Animal hospital acquired revenue from $50.0 million to $60.0 million;

* Net income from $135.0 million to $139.0 million; and

* Diluted earnings per common share from $1.55 to $1.60.

Non-GAAP Financial Measures

We believe investors' understanding of our total performance is enhanced by disclosing adjusted gross profit, adjusted gross margin, adjusted operating income, adjusted operating margin, 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 is 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 our future performance and related trends. For the year and quarter ended December 31, 2007, we adjusted our reported amounts for a benefit in the amount of $3.5 million, or $2.2 million after tax, related to a decrease in our estimated workers' compensation insurance liability recorded during the fourth quarter of 2007. For the year ended December 31, 2006, we adjusted our reported amounts for a $6.8 million tax benefit recorded during the first quarter of 2006.