IDEXX Laboratories Announces Third Quarter Results

Oct 21, 2011, 07:00 ET from IDEXX Laboratories, Inc.

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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