IDEXX Laboratories Announces Third Quarter Results

WESTBROOK, Maine, Oct. 21, 2011 /PRNewswire/ -- IDEXX Laboratories, Inc. (NASDAQ: IDXX), today reported that revenues for the third quarter of 2011 increased 12% to $301.0 million, from $269.6 million for the third quarter of 2010. Organic revenue growth, as defined below, was 8%. Earnings per diluted share ("EPS") for the quarter ended September 30, 2011 increased 12% to $0.66, compared to $0.59 for the same period in the prior year.

Organic revenue growth excludes the impact of changes in foreign currency exchange rates, which contributed 4% to revenue growth, and revenue from acquisitions subsequent to June 30, 2010, which contributed less than 1% to revenue growth in the third quarter of 2011.

"Our strategy of bringing innovations to our global markets continues to deliver," stated Jonathan Ayers, Chairman and Chief Executive Officer. "In an economic environment that remains challenging, our organic growth of 8% in the third quarter demonstrates our continued success in bringing an integrated portfolio of products and services to our veterinary and other customers, as well as strong commercial execution in markets around the world."

"Our initiatives aimed at helping veterinarians practice better medicine, run more efficient practices and increase their relevance with pet owners, continue to show momentum. I was particularly pleased with our strong instrument placement success, including an almost 40% year over year growth in placements of our Catalyst Dx® chemistry analyzer, which bodes well for future consumable sales growth. Our other large line of business, the global reference laboratory and consulting services business, achieved 10% organic growth for the third consecutive quarter. Our pace of innovation continues with the recent release of Cornerstone® 8.2, the latest version of our flagship practice management system, as well as the launch of our I-Vision Mobile™ application, which allows veterinarians to view and share digital radiograph images using a mobile tablet. These latest innovations demonstrate our continued commitment to helping veterinarians efficiently manage diagnostic information and communicate that information effectively to clients."

Revenue Performance

Please refer to the table below entitled "Revenues and Revenue Growth Analysis by Product and Service Categories" in conjunction with the following discussion.

Companion Animal Group. Companion Animal Group ("CAG") revenues for the third quarter of 2011 were $248.1 million compared to $222.9 million for the third quarter of 2010. Organic revenue growth of 8% was due primarily to growth in our reference laboratory diagnostic and consulting services business and in our instrument and consumables business. In the reference laboratory diagnostic and consulting services business, revenues increased due to higher sales volume driven primarily by the acquisition of new customers and, to a lesser extent, an increase in net sales prices. The revenue increase in our instruments and consumables business was largely the result of higher unit sales volume of our Catalyst Dx® and ProCyte Dx® instruments and related consumables. Changes in foreign currency exchange rates contributed 3% to revenue growth.

Water.  Water revenues for the third quarter of 2011 were $21.6 million compared to $20.0 million for the third quarter of 2010. Organic revenue growth of 4% was due primarily to higher Colilert® product sales volume driven by new account acquisitions, partly offset by lower average unit sales prices of this product. Changes in foreign currency exchange rates contributed 4% to revenue growth.

Livestock and Poultry Diagnostics.  Livestock and Poultry Diagnostics ("LPD") revenues for the third quarter of 2011 were $20.7 million compared to $17.5 million for the third quarter of 2010. Organic revenue growth of 10% was primarily the result of higher sales volumes of certain bovine tests, especially in Germany where we have won several government tenders in connection with a country-wide eradication program for a virus impacting beef and dairy production yields. This growth was partly offset by lower sales volumes of certain swine tests and lower sales of Bovine Spongiform Encephalopathy ("BSE" or "mad cow disease") tests resulting from the changes in European Union BSE testing requirements. Effective July 1, 2011, the age at which healthy cattle to be slaughtered are required to be tested for BSE in the European Union was increased from 48 months to 72 months, which is reducing the population of cattle tested for this disease. Changes in foreign currency exchange rates contributed 8% to revenue growth.

Additional Operating Results for the Third Quarter

Gross profit for the third quarter of 2011 increased $16.5 million, or 12%, to $158.7 million from $142.2 million for the third quarter of 2010. As a percentage of total revenue, gross profit remained steady at 53%.

Research and development ("R&D") expense for the third quarter of 2011 was $19.4 million, or 6% of revenue, compared to $17.2 million, or 6% of revenue for the third quarter of 2010. The increase in R&D expense was due primarily to increased personnel-related costs.

Selling, general and administrative ("SG&A") expense for the third quarter of 2011 was $83.2 million, or 28% of revenue, compared to $75.2 million, or 28% of revenue, for the third quarter of 2010. The increase in SG&A expense resulted primarily from the net unfavorable impact of changes in foreign currency exchange rates and higher sales and marketing personnel-related costs.

Supplementary Analysis of Results

The accompanying financial tables provide more information concerning our revenue and other operating results for the three and nine months ended September 30, 2011.

Outlook for Full Year 2011 and 2012

The Company provides the following updated guidance for the full year of 2011 and preliminary guidance for 2012. This guidance reflects an assumption that the value of the U.S. dollar relative to other currencies will remain at its current level for the balance of 2011 and 2012. Fluctuations in foreign currency exchange rates from current levels could have a significant positive or negative impact on our actual results of operations in both years.

2011

  • Revenues are expected to be approximately $1.215 billion, updated from guidance of $1.205 to $1.215 billion provided in July of this year, which represents reported growth of approximately 10% and organic growth of approximately 8%.
  • Diluted earnings per share are expected to be in the range of $2.71 to $2.74, an increase from our previous guidance of $2.68 to $2.73.
  • Free cash flow is expected to be approximately 115% of net income.(1)
  • Capital expenditures are expected to be approximately $55 million.

2012

  • Revenues are expected to be in the range of $1.295 to $1.315 billion, which represents reported revenue growth of 6% to 8% compared to projected revenue for 2011. Organic revenue growth, which excludes a projected 1% unfavorable impact from foreign currency related changes, is estimated to be in the range of 7% to 9%.
  • Diluted earnings per share are expected to be in the range of $3.00 to $3.10.  

(1) Free cash flow is a non-GAAP measure. It indicates the cash generated from operations and tax benefits attributable to stock option exercises and vesting of restricted stock units, reduced by investments in fixed assets. We feel free cash flow is a useful measure because it indicates the cash the operations of the business are generating after appropriate reinvestment for recurring investments in fixed assets that are required to operate the business.  We believe this is a common financial measure useful to further evaluate the results of operations. With respect to this particular forward-looking projection, the Company is unable to provide a quantitative reconciliation at this time as the inputs to the measurement are difficult to predict and estimate and are primarily dependent on future events.

Increased Share Repurchase Authorization

The Company also announced today that its Board of Directors has authorized the repurchase by the Company of an additional four million shares of its common stock in the open market (including through Rule 10b5-1 plans) or in negotiated transactions. These shares are in addition to 1,623,304 shares remaining as of September 30, 2011 under a previous Board authorization. The timing and amount of any repurchases will be at the discretion of the Company's management.

Conference Call and Webcast Information

IDEXX Laboratories will be hosting a conference call today at 9:00 a.m. (eastern) to discuss its third quarter results and management's outlook. To participate in the conference call, dial 1-612-288-0337 or 1-800-230-1085 and reference confirmation code 220384. An audio replay will be available through October 28, 2011 by dialing 1-320-365-3844 and referencing replay code 220384.

The call will also be available via live or archived Webcast on the IDEXX Laboratories' web site at www.idexx.com.

About IDEXX Laboratories, Inc.

IDEXX Laboratories, Inc. is a leader in pet healthcare innovation, serving practicing veterinarians around the world with a broad range of diagnostic and information technology-based products and services. IDEXX products enhance the ability of veterinarians to provide advanced medical care, improve staff efficiency and build more economically successful practices. IDEXX is also a worldwide leader in providing diagnostic tests and information for livestock and poultry and tests for the quality and safety of water and milk. Headquartered in Maine, IDEXX Laboratories employs more than 4,900 people and offers products to customers in over 100 countries.

Note Regarding Forward-Looking Statements

This press release contains statements about the Company's business prospects and estimates of the Company's financial results for future periods that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words such as "expects," "may," "anticipates," "intends," "would," "will," "plans," "believes," "estimates," "should," and similar words and expressions. These statements are based on management's expectations of future events as of the date of this press release, and the Company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments. Actual results could differ materially from management's expectations. Factors that could cause or contribute to such differences include the following: the Company's ability to develop, manufacture, introduce and market new products and enhancements to existing products; the Company's ability to achieve economies of scale in its worldwide network of laboratories; the impact of a weak economy on demand for the Company's products and services; the effectiveness of the Company's sales and marketing activities; the Company's ability to identify acquisition opportunities, complete acquisitions and integrate acquired businesses; disruptions, shortages or pricing changes that affect the Company's purchases of products and materials from third parties, including from sole source suppliers; the Company's ability to manufacture complex biologic products; the effect of government regulation on the Company's business, including government decisions about whether and when to approve the Company's products and decisions regarding labeling, manufacturing and marketing products; the Company's ability to obtain patent and other intellectual property protection for its products, successfully enforce its intellectual property rights and defend itself against third party claims against the Company; the impact of distributor purchasing decisions on sales of the Company's products that are sold through distribution; the impact of competition, technological change, and veterinary hospital consolidation on the markets for the Company's products; changes or trends in veterinary medicine that affect the rate of use of the Company's products and services by veterinarians; the impact of the Company's inexperience in the human point-of-care market; the effects of operations outside the U.S., including  from currency fluctuations, different regulatory, political and economic conditions, and different market conditions; the effects of interruptions to the Company's operations due to natural disasters or system failures; the loss of key employees; class action litigation due to stock price volatility; the effect on the Company's stock price if quarterly or annual operations results do not meet expectations of market analysts or investors in future periods; and potential exposures related to our worldwide provision for income taxes. A further description of these and other factors can be found in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, in the section captioned "Risk Factors."


IDEXX Laboratories, Inc. and Subsidiaries







Consolidated Statement of Operations







Amounts in thousands except per share data (Unaudited)

















Three Months Ended


Nine Months Ended




Sept. 30,

Sept. 30,


Sept. 30,

Sept. 30,




2011

2010


2011

2010

Revenue:

Revenue


$      300,954

$      269,628


$       911,488

$      819,635

Expenses and








Income:

Cost of revenue


142,287

127,421


423,863

385,783


Gross profit


158,667

142,207


487,625

433,852


Sales and marketing


50,682

44,486


152,641

133,069


General and administrative


32,483

30,704


98,219

96,588


Research and development


19,406

17,203


55,839

51,118


Income from operations


56,096

49,814


180,926

153,077


Interest expense, net


(478)

(551)


(1,200)

(1,414)


Income before provision for income taxes


55,618

49,263


179,726

151,663


Provision for income taxes


17,122

14,548


55,970

46,723

Net Income:

Net income


38,496

34,715


123,756

104,940


Less: Noncontrolling interest in subsidiary's








(losses) earnings


(11)

21


(20)

27


Net income attributable to  stockholders

$       38,507

$       34,694


$       123,776

$     104,913


Earnings per share: Basic


$           0.68

$           0.60


$             2.17

$           1.82


Earnings per share: Diluted


$           0.66

$           0.59


$             2.11

$           1.76


Shares outstanding: Basic


56,699

57,620


57,141

57,799


Shares outstanding: Diluted


58,007

59,276


58,636

59,691













IDEXX Laboratories, Inc. and Subsidiaries







Selected Operating Information (Unaudited)


















Three Months Ended


Nine Months Ended




Sept. 30,

Sept. 30,


Sept. 30,

Sept. 30,




2011

2010


2011

2010

Operating

Gross profit


52.7%

52.7%


53.5%

52.9%

Ratios (as a

Sales, marketing, general and







percentage of

administrative expense


27.6%

27.9%


27.5%

28.0%

revenue):

Research and development expense


6.5%

6.4%


6.1%

6.2%


Income from operations (1)


18.6%

18.5%


19.9%

18.7%

















International

International revenue (in thousands)


$     126,750

$     106,713


$      386,905

$     329,073

Revenue:

International revenue as percentage of








total revenue


42.1%

39.6%


42.4%

40.1%










(1) Amounts presented may not recalculate due to rounding.





IDEXX Laboratories, Inc. and Subsidiaries







Segment Information







Amounts in thousands (Unaudited)


















Three Months Ended


Nine Months Ended




Sept. 30,

Sept. 30,


Sept. 30,

Sept. 30,




2011

2010


2011

2010

Revenue:

CAG


$     248,074

$     222,909


$     748,397

$     676,646


Water


21,648

20,044


62,123

57,356


LPD


20,675

17,476


69,981

56,577


Other


10,557

9,199


30,987

29,056


Total


$     300,954

$     269,628


$     911,488

$     819,635









Gross Profit:

CAG


$     126,048

$     113,924


$     387,734

$     347,792


Water


14,317

12,542


38,676

36,445


LPD


13,666

11,812


47,548

38,295


Other


4,009

4,104


12,493

13,087


Unallocated Amounts


627

(175)


1,174

(1,767)


Total


$     158,667

$     142,207


$     487,625

$     433,852









Income from








Operations:

CAG


$      44,296

$       40,535


$     145,137

$     128,497


Water


9,979

8,566


25,327

24,228


LPD


3,648

3,320


17,974

12,447


Other


34

869


(207)

2,057


Unallocated Amounts


(1,861)

(3,476)


(7,305)

(14,152)


Total


$      56,096

$      49,814


$     180,926

$     153,077









Gross Profit








(as a percentage








of revenue):

CAG


50.8%

51.1%


51.8%

51.4%


Water


66.1%

62.6%


62.3%

63.5%


LPD


66.1%

67.6%


67.9%

67.7%


Other


38.0%

44.6%


40.3%

45.0%


Total


52.7%

52.7%


53.5%

52.9%









Income from








Operations








(as a percentage








of revenue):

CAG


17.9%

18.2%


19.4%

19.0%


Water


46.1%

42.7%


40.8%

42.2%


LPD


17.6%

19.0%


25.7%

22.0%


Other


0.3%

9.5%


(0.7%)

7.1%


Total


18.6%

18.5%


19.9%

18.7%





IDEXX Laboratories, Inc. and Subsidiaries

Revenues and Revenue Growth Analysis by Product and Service Categories

Amounts in thousands (Unaudited)















Three Months Ended

Net Revenue

Sept. 30, 2011



Sept. 30, 2010


Dollar

Change


Percentage

Change


Percentage

Change from

Currency (1)


Percentage

Change from

Acquisitions (2)


Organic Growth(3)






















CAG

$

248,074


$

222,909


$

25,165


11.3

%


3.2

%


0.1

%


8.0

%

Water


21,648



20,044



1,604


8.0

%


3.5

%


-



4.5

%

LPD


20,675



17,476



3,199


18.3

%


7.9

%


-



10.4

%

Other


10,557



9,199



1,358


14.8

%


3.2

%


-



11.6

%

Total

$

300,954


$

269,628


$

31,326


11.6

%


3.5

%


0.1

%


8.0

%


























Three Months Ended

Net CAG Revenue

Sept. 30, 2011



Sept. 30, 2010


Dollar

Change


Percentage

Change


Percentage Change from
Currency (1)


Percentage

Change from

Acquisitions (2)


Organic
Growth(3)






















Instruments and consumables

$

99,719


$

88,481


$

11,238


12.7

%


3.7

%


-



9.0

%

Rapid assay products


36,073



35,576



497


1.4

%


1.5

%


-



(0.1

%)

Reference laboratory diagnostic and consulting services


94,027



82,534



11,493


13.9

%


3.9

%


0.2

%


9.8

%

Practice management systems and digital radiography


18,255



16,318



1,937


11.9

%


0.5

%


-



11.4

%

Net CAG revenue

$

248,074


$

222,909


$

25,165


11.3

%


3.2

%


0.1

%


8.0

%

























(1) The percentage change from currency is a non-U.S. GAAP measure. It represents the percentage change in revenue resulting from the difference between the average exchange rates during the three months ended September 30, 2011 and the same period of the prior year applied to foreign currency denominated revenues for the three months ended September 30, 2011.


(2) The percentage change from acquisitions is a non-U.S. GAAP measure. It represents the percentage change in revenue during the three months ended September 30, 2011 compared to the three months ended September 30, 2010 attributed to acquisitions subsequent to June 30, 2010.


(3) Organic revenue growth is a non-U.S. GAAP measure and represents the percentage change in revenue during the three months ended September 30, 2011 compared to the three months ended September 30, 2010 net of acquisitions and the effect of changes in foreign currency exchange rates.




IDEXX Laboratories, Inc. and Subsidiaries

Revenues and Revenue Growth Analysis by Product and Service Categories

Amounts in thousands (Unaudited)















Nine Months Ended

Net Revenue

Sept. 30, 2011



Sept. 30, 2010


Dollar

Change


Percentage

Change


Percentage

Change from

Currency (1)


Percentage

Change from

Acquisitions (2)


Organic Growth(3)






















CAG

$

748,397


$

676,646


$

71,751


10.6

%


2.9

%


0.1

%


7.6

%

Water


62,123



57,356



4,767


8.3

%


3.3

%


-



5.0

%

LPD


69,981



56,577



13,404


23.7

%


6.2

%


-



17.5

%

Other


30,987



29,056



1,931


6.6

%


2.5

%


-



4.1

%

Total

$

911,488


$

819,635


$

91,853


11.2

%


3.1

%


0.1

%


8.0

%


























Nine Months Ended

Net CAG Revenue

Sept. 30, 2011



Sept. 30, 2010


Dollar

Change


Percentage

Change


Percentage

Change from

Currency (1)


Percentage

Change from

Acquisitions (2)


Organic Growth(3)






















Instruments and consumables

$

292,209


$

258,318


$

33,891


13.1

%


3.5

%


-



9.6

%

Rapid assay products


118,883



115,500



3,383


2.9

%


1.4

%


-



1.5

%

Reference laboratory diagnostic and consulting  services


282,242



248,422



33,820


13.6

%


3.6

%


0.1

%


9.9

%

Practice management systems and  digital radiography


55,063



54,406



657


1.2

%


0.5

%


-



0.7

%

Net CAG revenue

$

748,397


$

676,646


$

71,751


10.6

%


2.9

%


0.1

%


7.6

%

























(1) The percentage change from currency is a non-U.S. GAAP measure. It represents the percentage change in revenue resulting from the difference between the average exchange rates during the nine months ended September 30, 2011 and the same period of the prior year applied to foreign currency denominated revenues for the nine months ended September 30, 2011.


(2) The percentage change from acquisitions is a non-U.S. GAAP measure. It represents the percentage change in revenue during the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010 attributed to acquisitions subsequent to December 31, 2009.


(3) Organic revenue growth is a non-U.S. GAAP measure and represents the percentage change in revenue during the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010 net of acquisitions and the effect of changes in foreign currency exchange rates.




IDEXX Laboratories, Inc. and Subsidiaries






Consolidated Balance Sheet






Amounts in thousands (Unaudited)


















September 30,

December 31,






2011

2010

Assets:

Current Assets:







Cash and cash equivalents




$          181,499

$         156,915


Accounts receivable, net




134,923

120,080


Inventories




137,143

127,885


Other current assets




57,187

55,711


Total current assets




510,752

460,591


Property and equipment, net




213,868

201,725


Other long-term assets, net




244,579

234,828


Total assets




$          969,199

$         897,144

Liabilities and







Stockholders'







Equity:

Current Liabilities:







Accounts payable




$            31,032

$           22,669


Accrued liabilities




136,799

118,598


Debt




154,903

129,862


Deferred revenue




13,635

13,983


Total current liabilities




336,369

285,112


Long-term debt, net of current portion




2,735

3,418


Other long-term liabilities




44,127

34,333


Total long-term liabilities




46,862

37,751









Total stockholders' equity


585,942

574,235


Noncontrolling interest



26

46


Total equity



585,968

574,281


Total liabilities and stockholders' equity



$          969,199

$        897,144
























IDEXX Laboratories, Inc. and Subsidiaries







Selected Balance Sheet Information (Unaudited)

















Sept. 30,


June 30,

March 31,


Dec. 31,

Sept. 30,



2011


2011

2011


2010

2010

Selected                  









Balance Sheet

Days sales outstanding (1)

43.1


41.2

40.2


38.7

41.9

Information:

Inventory turns (2)

1.7


1.7

1.8


1.8

1.7










(1) Days sales outstanding represents the average of the accounts receivable balances at the beginning and end of each quarter divided by revenue for that quarter, the result of which is then multiplied by 91.25 days.

(2) Inventory turns represents inventory-related cost of product revenues for the 12 months preceding each quarter-end divided by the inventory balance at the end of the quarter.





IDEXX Laboratories, Inc. and Subsidiaries







Consolidated Statement of Cash Flows







Amounts in thousands (Unaudited)





















Nine Months Ended







Sept. 30,

Sept. 30,







2011

2010

Operating:

Cash Flows from Operating Activities:








Net income





$       123,756

$       104,940


Non-cash charges





48,641

48,424


Changes in assets and liabilities



5,130

(10,088)


Tax benefit from exercises of stock options and vesting of restricted stock units


(14,009)

(13,293)


Net cash provided by operating activities





163,518

129,983

Investing:

Cash Flows from Investing Activities:








Purchases of property and equipment





(39,927)

(28,646)


Proceeds from disposition of pharmaceutical product lines



3,000

-


Proceeds from sale of property and equipment




223

86


Acquisitions of intangible assets and a business, net of cash acquired



(2,600)

(244)


Net cash used by investing activities




(39,304)

(28,804)

Financing:

Cash Flows from Financing Activities:








Borrowings on revolving credit facilities, net



24,903

7,135


Payment of notes payable





(643)

(605)


Repurchases of common stock





(166,016)

(117,157)


Proceeds from the exercise of stock options and employee stock purchase plans


26,080

22,055


Tax benefit from exercises of stock options and vesting of restricted stock units


14,009

13,293


Net cash used by financing activities




(101,667)

(75,279)


Net effect of changes in exchange rates on cash





2,037

884


Net increase in cash and cash equivalents





24,584

26,784


Cash and cash equivalents, beginning of period




156,915

106,728


Cash and cash equivalents, end of period





$       181,499

$      133,512



















IDEXX Laboratories, Inc. and Subsidiaries







Free Cash Flow







Amounts in thousands (Unaudited)













Nine Months Ended







Sept. 30,

Sept. 30,







2011

2010

Free Cash








Flow:

Net cash provided by operating activities





$      163,518

$      129,983


Financing cash flows attributable to tax benefits from exercise of stock options





 and vesting of restricted stock units





14,009

13,293


Purchases of property and equipment





(39,927)

(28,646)


Free cash flow





$      137,600

$      114,630













IDEXX Laboratories, Inc. and Subsidiaries







Common Stock Repurchases







Amounts in thousands except per share data (Unaudited)








Three Months Ended


Nine Months Ended




Sept. 30,

Sept. 30,


Sept. 30,

Sept. 30,




2011

2010


2011

2010


Share repurchases during the period


886

567


2,183

2,080


Average price paid per share


$      76.27

$      58.98


$      76.04

$      56.32










The number of shares remaining under repurchase authorization as of September 30, 2011 totaled 1,623,304.










Share repurchases does not include shares surrendered by employees in payment for the minimum required withholding taxes due on the vesting of restricted stock units and the settlement of deferred stock units.




Contact: Merilee Raines, Chief Financial Officer, 1-207-556-8155

SOURCE IDEXX Laboratories, Inc.



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