IDEXX Laboratories Announces Second Quarter Results
WESTBROOK, Maine, July 22, 2011 /PRNewswire/ -- IDEXX Laboratories, Inc. (NASDAQ: IDXX), today reported that revenues for the second quarter of 2011 increased 13% to $317.9 million, from $281.5 million for the second quarter of 2010. Organic revenue growth, as defined below, was 8%. Earnings per diluted share ("EPS") for the quarter ended June 30, 2011 increased 34% to $0.83, compared to $0.62 for the same period in the prior year.
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Organic revenue growth excludes the impact of changes in foreign currency exchange rates, which contributed 5% to revenue growth, and revenue from acquisitions subsequent to March 31, 2010, which contributed less than 1% to revenue growth in the second quarter of 2011.
"Our second quarter results exceeded our expectations," stated Jonathan Ayers, Chairman and Chief Executive Officer. "Our 8% organic revenue growth, in an economic environment that remains challenging, demonstrates our continued success in bringing innovative products and services to our veterinary and other customers, as well as strong commercial execution in markets around the world."
"Our results reflect continued momentum in advancing our strategic and operational initiatives aimed at helping veterinarians practice better medicine and run more efficient practices. Market response to our ProCyte Dx® hematology analyzer continues to be very positive in domestic and international markets with 284 placements in the second quarter, including our first placement of a ProCyte Dx® instrument in the Asia Pacific region. ProCyte Dx® provides reference lab quality test results in just two minutes and is a key enabler of our real-time care strategy, working seamlessly with our Catalyst Dx® chemistry analyzer. I was also pleased with the performance of our global reference laboratory and consulting services business where we achieved 10% organic revenue growth for the second consecutive quarter."
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 second quarter of 2011 were $259.7 million compared to $232.3 million for the second quarter of 2010. Changes in foreign currency exchange rates contributed 4% to revenue growth. Organic revenue growth of 7% was due primarily to performance in our reference laboratory diagnostic and consulting services business and in our instrument and consumables product lines. In the reference lab business, revenues increased due to higher sales volume due primarily to the acquisition of new customers and to an increase in sales prices. The revenue increase in our instruments and consumables business was largely the result of higher sales volume of consumables used with our IDEXX VetLab® instruments, primarily sales of consumables used with our Catalyst Dx® instrument, and higher sales volume of ProCyte Dx®, our new hematology analyzer introduced in the third quarter of 2010.
Water. Water revenues for the second quarter of 2011 were $21.5 million compared to $19.4 million for the second quarter of 2010. Changes in foreign currency exchange rates contributed 5% to revenue growth. Organic revenue growth of 6% 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.
Livestock and Poultry Diagnostics. Livestock and Poultry Diagnostics ("LPD") revenues for the second quarter of 2011 were $25.4 million compared to $19.2 million for the second quarter of 2010. Changes in foreign currency exchange rates contributed 11% to revenue growth. Organic revenue growth of 21% 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, partly offset by lower average unit sales prices due to increasing competitive pressures.
Additional Operating Results for the Second Quarter
Gross profit for the second quarter of 2011 increased $24.7 million, or 17%, to $174.0 million from $149.3 million for the second quarter of 2010. As a percentage of total revenue, gross profit increased to 55% from 53% as a result of reduced overall manufacturing costs, primarily those associated with our IDEXX VetLab® instruments, and higher relative sales of higher margin products. These favorable impacts were partly offset by hedging losses in the second quarter of 2011 compared to hedging gains in the second quarter of 2010.
Research and development ("R&D") expense for the second quarter of 2011 was $18.6 million, or 6% of revenue, compared to $17.2 million, or 6% of revenue for the second 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 second quarter of 2011 was $84.1 million, or 26% of revenue, compared to $77.2 million, or 27% of revenue, for the second 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 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 six months ended June 30, 2011.
Outlook for full year 2011
The Company provides the following updated guidance for the full year 2011. This guidance reflects an assumption that the value of the U.S. dollar relative to the other currencies will remain at its current level for the balance of 2011. Fluctuations in foreign currency exchange rates from current levels could have a significant positive or negative impact on our actual results of operations in 2011.
-- Revenues are expected to be $1.205 to $1.215 billion, which represents
reported revenue growth of 9 to 10% and organic revenue growth of 7 to
8%. This outlook is unchanged from our previous guidance provided in
April of this year.
-- EPS are expected to be in the range of $2.68 to $2.73, compared to our
previous guidance of $2.66 to $2.71. This increase in guidance reflects
business performance in the second quarter that exceeded our
expectations.
-- Our total capital expenditure plan for 2011 is approximately $55
million.
-- Free cash flow is expected to be approximately 115% of net income.(1)
(1) Free cash flow is a non-U.S. 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.
Conference Call and Webcast Information
IDEXX Laboratories will be hosting a conference call today at 9:00 a.m. (eastern) to discuss its second quarter results and management's outlook. To participate in the conference call, dial 1-612-234-9960 or 1-800-230-1074 and reference confirmation code 210465. An audio replay will be available through July 29, 2011 by dialing 1-320-365-3844 and referencing replay code 210465.
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 4,800 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 Annual Report on Form 10-K for the year ended December 31, 2010, and quarterly report on Form 10-Q for the quarter ended March 31, 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 Six Months Ended
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
Revenue: Revenue $ 317,862 $ 281,482 $ 610,534 $ 550,007
Expenses and
Income: Cost of revenue 143,829 132,198 281,576 258,362
Gross profit 174,033 149,284 328,958 291,645
Sales and marketing 50,974 44,167 101,959 88,583
General and
administrative 33,140 33,076 65,736 65,884
Research and development 18,621 17,206 36,433 33,915
Income from operations 71,298 54,835 124,830 103,263
Interest expense, net 363 551 722 863
Income before provision
for income taxes 70,935 54,284 124,108 102,400
Provision for income
taxes 22,281 17,087 38,848 32,175
Net Income: Net income 48,654 37,197 85,260 70,225
Less: Noncontrolling
interest in subsidiary's
(losses) earnings (3) 4 (9) 6
Net income attributable
to stockholders $ 48,657 $ 37,193 $ 85,269 $ 70,219
Earnings per share:
Basic $ 0.85 $ 0.64 $ 1.49 $ 1.21
Earnings per share:
Diluted $ 0.83 $ 0.62 $ 1.45 $ 1.17
Shares outstanding:
Basic 57,276 57,747 57,366 57,890
Shares outstanding:
Diluted 58,727 59,646 58,934 59,875
IDEXX Laboratories, Inc. and
Subsidiaries
Selected Operating Information
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
Operating Gross profit 54.8% 53.0% 53.9% 53.0%
Sales, marketing,
Ratios(as a general and
percentage of administrative expense 26.5% 27.4% 27.5% 28.1%
Research and
revenue): development expense 5.9% 6.1% 6.0% 6.2%
Income from operations
(1) 22.4% 19.5% 20.5% 18.8%
International revenue
International (in thousands) $ 137,585 $ 113,701 $ 260,155 $ 222,360
International revenue
Revenue: as percentage of
total revenue 43.3% 40.4% 42.6% 40.4%
(1) The sum of individual items may not equal the total due to rounding.
IDEXX Laboratories, Inc. and
Subsidiaries
Segment Information
Amounts in thousands (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
Revenue: CAG $ 259,734 $ 232,320 $ 500,323 $ 453,737
Water 21,510 19,448 40,475 37,312
LPD 25,367 19,160 49,306 39,101
Other 11,251 10,554 20,430 19,857
Total $ 317,862 $ 281,482 $ 610,534 $ 550,007
Gross Profit: CAG $ 138,332 $ 120,125 $ 261,683 $ 233,868
Water 12,968 12,328 24,359 23,903
LPD 17,335 13,275 33,882 26,483
Other 4,742 4,610 8,484 8,983
Unallocated 656 (1,054) 550 (1,592)
Total $ 174,033 $ 149,284 $ 328,958 $ 291,645
Income from
Operations: CAG $ 58,270 $ 47,140 $ 101,242 $ 87,962
Water 8,401 8,150 15,348 15,662
LPD 7,176 4,549 14,326 9,127
Other 309 638 (241) 1,188
Unallocated (2,858) (5,642) (5,845) (10,676)
Total $ 71,298 $ 54,835 $ 124,830 $ 103,263
Gross Profit
(as a percentage
of revenue): CAG 53.3% 51.7% 52.3% 51.5%
Water 60.3% 63.4% 60.2% 64.1%
LPD 68.3% 69.3% 68.7% 67.7%
Other 42.2% 43.7% 41.5% 45.2%
Total 54.8% 53.0% 53.9% 53.0%
Income from
Operations
(as a percentage
of revenue): CAG 22.4% 20.3% 20.2% 19.4%
Water 39.1% 41.9% 37.9% 42.0%
LPD 28.3% 23.7% 29.1% 23.3%
Other 2.8% 6.1% (1.2%) 6.0%
Total 22.4% 19.5% 20.5% 18.8%
IDEXX Laboratories, Inc. and Subsidiaries
Revenues and Revenue Growth Analysis by Product and Service Categories
Amounts in thousands (Unaudited)
Three Months Ended
Percentage
Percentage
Change
from Change from
June Dollar Percentage Organic
Net June 30, 30, Currency Acquisitions Growth
Revenue 2011 2010 Change Change (1) (2) (3)
CAG $ 259,734 $ 232,320 $ 27,414 11.8 % 4.3 % 0.1 % 7.4 %
Water 21,510 19,448 2,062 10.6 % 4.7 % - 5.9 %
LPD 25,367 19,160 6,207 32.4 % 11.1 % - 21.3 %
Other 11,251 10,554 697 6.6 % 3.1 % - 3.5 %
Total $ 317,862 $ 281,482 $ 36,380 12.9 % 4.8 % - 8.1 %
Three Months Ended
Percentage
Percentage
Change
from Change from
June Dollar Percentage Organic
Net CAG June 30, 30, Currency Acquisitions Growth
Revenue 2011 2010 Change Change (1) (2) (3)
Instruments
and
consumables $ 98,603 $ 86,455 $ 12,148 14.1% 5.2% - 8.9%
Rapid assay
products 44,193 40,481 3,712 9.2% 2.3% - 6.9%
Reference
laboratory
diagnostic
and
consulting
services 99,087 86,048 13,039 15.2% 5.3% 0.1% 9.8%
Practice
management
systems and
digital
radiography 17,851 19,336 (1,485) (7.7%) 0.5% - (8.2%)
Net CAG
revenue $ 259,734 $ 232,320 $ 27,414 11.8% 4.3% 0.1% 7.4%
(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 June 30, 2011 and the same period of the prior year
applied to foreign currency denominated revenues for the three months ended June 30, 2011.
(2) Represents the percentage change in revenue during the three months ended June 30, 2011
compared to the three months ended June 30, 2010 attributed to acquisitions subsequent to
March 31, 2010.
(3) Organic revenue growth is a non-U.S. GAAP measure and represents the percentage change
in revenue during the three months ended June 30, 2011 compared to the three months ended
June 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)
Six Months Ended
Percentage
Percentage
Change
from Change from
June Dollar Percentage Organic
Net June 30, 30, Currency Acquisitions Growth
Revenue 2011 2010 Change Change (1) (2) (3)
CAG $ 500,323 $ 453,737 $ 46,586 10.3 % 2.8 % 0.1 % 7.4 %
Water 40,475 37,312 3,163 8.5 % 3.2 % - 5.3 %
LPD 49,306 39,101 10,205 26.1 % 5.5 % - 20.6 %
Other 20,430 19,857 573 2.9 % 2.2 % - 0.7 %
Total $ 610,534 $ 550,007 $ 60,527 11.0 % 3.1 % - 7.9 %
Six Months Ended
Percentage
Percentage
Change
from Change from
June Dollar Percentage Organic
Net CAG June 30, 30, Currency Acquisitions Growth
Revenue 2011 2010 Change Change (1) (2) (3)
Instruments
and
consumables $ 192,490 $ 169,837 $ 22,653 13.3% 3.4% - 9.9%
Rapid assay
products 82,810 79,924 2,886 3.6% 1.4% - 2.2%
Reference
laboratory
diagnostic
and
consulting
services 188,215 165,888 22,327 13.5% 3.5% 0.1% 9.9%
Practice
management
systems and
digital
radiography 36,808 38,088 (1,280) (3.4%) 0.5% - (3.9%)
Net CAG
revenue $ 500,323 $ 453,737 $ 46,586 10.3% 2.8% 0.1% 7.4%
(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 six months ended June 30, 2011 and the same period of the prior year
applied to foreign currency denominated revenues for the six months ended June 30, 2011.
(2) Represents the percentage change in revenue during the six months ended June 30, 2011
compared to the six months ended June 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 six months ended June 30, 2011 compared to the six months ended June
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)
June 30, December 31,
2011 2010
Assets: Current Assets:
Cash and cash equivalents $ 159,398 $ 156,915
Accounts receivable, net 149,314 120,080
Inventories 133,934 127,885
Other current assets 50,925 55,711
Total current assets 493,571 460,591
Property and equipment, net 210,163 201,725
Other long-term assets, net 246,841 234,828
Total assets $ 950,575 $ 897,144
Liabilities and
Stockholders'
Equity: Current Liabilities:
Accounts payable $ 29,888 $ 22,669
Accrued liabilities 121,898 118,598
Debt 133,438 129,862
Deferred revenue 12,913 13,983
Total current liabilities 298,137 285,112
Long-term debt, net of current
portion 2,966 3,418
Other long-term liabilities 40,661 34,333
Total long-term liabilities 43,627 37,751
Total stockholders' equity 608,774 574,235
Noncontrolling interest 37 46
Total equity 608,811 574,281
Total liabilities and
stockholders' equity $ 950,575 $ 897,144
IDEXX Laboratories, Inc. and
Subsidiaries
Selected Balance Sheet
Information (Unaudited)
September
June 30, March 31, December 31, 30, June 30,
2011 2011 2010 2010 2010
Selected
Days sales
Balance outstanding
Sheet (1) 41.2 40.2 38.7 41.9 41.8
Inventory
Information: turns(2) 1.7 1.8 1.8 1.7 1.9
(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 sales 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)
Six Months Ended
June 30, June 30,
2011 2010
Cash Flows from Operating
Operating: Activities:
Net income $ 85,260 $ 70,225
Non-cash charges 34,316 31,089
Changes in current assets and liabilities (20,412) (16,857)
Tax benefit from exercises of stock options
and vesting of restricted stock units (10,854) (9,372)
Net cash provided by operating
activities 88,310 75,085
Cash Flows from Investing
Investing: Activities:
Purchase of property and equipment (26,173) (17,437)
Proceeds from disposition of pharmaceutical
product lines 3,000 -
Proceeds from sale of property and
equipment 218 64
Acquisitions of intangible assets - (144)
Net cash used by investing
activities (22,955) (17,517)
Cash Flows from Financing
Financing: Activities:
Borrowings on revolving credit facilities,
net 3,486 15,099
Payment of other notes payable (425) (400)
Purchase of treasury stock (98,419) (83,724)
Proceeds from the exercise of stock options
and employee
stock purchase plans 19,367 16,446
Tax benefit from exercises of stock options
and vesting of
restricted stock units 10,854 9,372
Net used by financing activities (65,137) (43,207)
Net effect of changes in exchange
rates on cash 2,265 (3,114)
Net increase in cash and cash
equivalents 2,483 11,247
Cash and cash equivalents,
beginning of period 156,915 106,728
Cash and cash equivalents, end of
period $ 159,398 $ 117,975
IDEXX Laboratories, Inc. and
Subsidiaries
Free Cash Flow
Amounts in thousands (Unaudited)
Six Months Ended
June 30, June 30,
2011 2010
Free Cash
Net cash provided by
Flow: operating activities $ 88,310 $ 75,085
Financing cash flows attributable to tax benefits
from exercise of stock options
and vesting of
restricted stock
units 10,854 9,372
Purchase of property
and equipment (26,173) (17,437)
Free cash flow $ 72,991 $ 67,020
IDEXX Laboratories, Inc. and
Subsidiaries
Common Stock Repurchases
Amounts in thousands except per share data
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
Share repurchases during the period 759 422 1,297 1,513
Average price paid per share $ 77.08 $ 61.66 $ 75.89 $ 55.32
Shares remaining under repurchase
authorization as of June 30, 2011: 2,510
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.
Released July 22, 2011