IDEXX Laboratories Announces First Quarter Results
WESTBROOK, Maine, April 21, 2011 /PRNewswire/ -- IDEXX Laboratories, Inc. (NASDAQ: IDXX), today reported that revenues for the first quarter of 2011 increased 9% to $292.7 million, from $268.5 million for the first quarter of 2010. Organic revenue growth, as defined below, was 8%. Earnings per diluted share ("EPS") for the quarter ended March 31, 2011 increased 13% to $0.62, compared to $0.55 for the same period in the prior year.
Organic revenue growth excludes the impact of changes in foreign currency exchange rates, which increased revenue growth by 1%, and revenue from acquisitions subsequent to December 31, 2009, which increased revenue growth by less than one percent.
"Overall for the quarter, our revenue growth was solid and our strong earnings growth was slightly above our expectations in January," stated Jonathan Ayers, Chairman and Chief Executive Officer. "In an economic environment that remains challenging, our 8% organic revenue growth is a testament to our success in continued innovation and strong commercial execution across our markets around the world. Earnings were slightly ahead of our expectation in January largely due to somewhat higher revenues, particularly in instrument consumables, livestock and poultry diagnostic kits and laboratory services, as well as our achievement of operating efficiencies."
"Market response to our ProCyte Dx® hematology analyzer, launched in the third quarter of last year, continues to be very positive with 235 placements in the first quarter. 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. Our pace of innovation continues this month with the launch of a new SNAP® test kit, SNAP® fPL™, an in-clinic test that will help veterinarians rule in or rule out pancreatitis in cats in just ten minutes. This test can be used in conjunction with our Spec fPL® test run in the reference labs, which permits further diagnosis and refinement of treatment options."
"Continued stable market conditions, coupled with our solid first quarter results and recent weakening of the U.S. dollar, lead us to increase our earnings guidance for 2011, while we maintain our organic revenue growth outlook of 7-8%."
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 first quarter of 2011 were $240.6 million compared to $221.4 million for the first quarter of 2010. Changes in foreign currency exchange rates contributed 1% to revenue growth. Organic revenue growth of 7% was due primarily to increased sales volume and sales prices in our reference laboratory diagnostic and consulting services business and increased sales volumes of IDEXX VetLab® instruments and consumables driven primarily by sales of ProCyte Dx®, our new hematology analyzer introduced in the third quarter of 2010, and higher sales volume of consumables used with our Catalyst Dx® analyzer.
Water. Water segment revenues for the first quarter of 2011 were $19.0 million compared to $17.9 million for the first quarter of 2010. Changes in foreign currency exchange rates contributed 2% to revenue growth. Organic revenue growth of 5% was due primarily to higher Colilert® and Quanti-Tray® product sales volume, partly offset by lower average unit sales prices for these products.
Livestock and Poultry Diagnostics. Livestock and Poultry Diagnostics ("LPD") revenues for the first quarter of 2011 were $23.9 million compared to $19.9 million for the first quarter of 2010. Organic revenue growth of 20% was the result of higher sales volumes of certain bovine tests, partly offset by lower average unit sales prices due to increasing competitive pressures.
Additional Operating Results for the First Quarter
Gross profit for the first quarter of 2011 increased $12.6 million, or 9%, to $154.9 million from $142.4 million for the first quarter of 2010. As a percentage of total revenue, gross profit remained at 53% as higher average unit sales prices in our reference laboratory diagnostic and consulting services business and operational efficiencies achieved from increased sales volume of our livestock and poultry diagnostic tests were essentially offset by higher freight costs as a result of rising fuel prices and the net unfavorable impact of changes in foreign currency exchange rates, due primarily to higher hedging losses.
Research and development ("R&D") expense for the first quarter of 2011 was $17.8 million, or 6% of revenue, compared to $16.7 million, or 6% of revenue for the first quarter of 2010. The increase in R&D expense resulted primarily from an overall increase in compensation and benefit costs. Selling, general and administrative ("SG&A") expense for the first quarter of 2011 was $83.6 million, or 29% of revenue, compared to $77.2 million, or 29% of revenue, for the first quarter of 2010. The increase in SG&A expense resulted primarily from an overall increase in compensation and benefit costs.
Supplementary Analysis of Results
The accompanying financial tables provide more information concerning our revenue and other operating results for the three months ended March 31, 2011.
Outlook for 2011
The Company provides the following updated guidance for the full year of 2011. 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. Fluctuations in foreign currency exchange rates from current levels could have a significant positive or negative impact on our actual results of operations for 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%. The increase in reported revenue growth compared to our previous
guidance is due primarily to changes in foreign currency exchange rates,
reflecting a weakening of the U.S. dollar relative to certain other
currencies since the date of our previous guidance.
-- EPS are expected to be $2.66 to $2.71, compared to our previous guidance
of $2.62 to $2.68. This increase in guidance, and a modest tightening of
our range toward the high end, reflects business performance in the
first quarter that was slightly above our expectations, as well as the
favorable impact of changes in foreign currency exchange rates. These
factors more than offset a modest unfavorable impact caused by a
projected higher average share count for the year.
-- Our total capital expenditure plan for 2011 is approximately $50
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, reduced by investments in fixed assets. We feel free cash flow is a useful measure because it indicates the amount of cash the operations of the business are generating after appropriate reinvestment 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, Inc. will be hosting a conference call today at 10:00 a.m. (eastern) to discuss its first quarter results and management's outlook. To participate in the conference call, dial 1-651-291-0344 or 1-800-288-8961 and reference confirmation code 199168. An audio replay will be available through April 29, 2011 by dialing 1-320-365-3844 and referencing replay code 199168.
The call will also be available via live or archived Webcast on the IDEXX Laboratories' web site at www.idexx.com.
Annual Meeting
IDEXX Laboratories, Inc. today announced that it will host a simultaneous Webcast of its Annual Meeting of Stockholders, to be held on Wednesday, May 4, 2011, at 10:00 a.m. (eastern) at IDEXX Laboratories, One IDEXX Drive, Westbrook, Maine.
Chairman and Chief Executive Officer, Jonathan Ayers will chair the meeting. Investors may listen to live audio of the Annual Meeting and view a presentation via a link on the Company's web site, www.idexx.com. An archived edition of the meeting will be available after 1:00 p.m. (eastern) on that day via the same link.
About IDEXX Laboratories
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, 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
March 31, March 31,
2011 2010
Revenue: Revenue $ 292,672 $ 268,525
Expenses and
Income: Cost of revenue 137,747 126,164
Gross profit 154,925 142,361
Sales and marketing 50,985 44,416
General and administrative 32,596 32,808
Research and development 17,812 16,709
Income from operations 53,532 48,428
Interest expense, net 359 312
Income before provision for income taxes 53,173 48,116
Provision for income taxes 16,567 15,088
Net Income: Net income $ 36,606 $ 33,028
Less: Noncontrolling interest in
subsidiary's (losses) earnings (6) 2
Net income attributable to stockholders $ 36,612 $ 33,026
Earnings per share: Basic $ 0.64 $ 0.57
Earnings per share: Diluted $ 0.62 $ 0.55
Shares outstanding: Basic 57,457 58,033
Shares outstanding: Diluted 59,090 60,029
IDEXX Laboratories, Inc. and Subsidiaries
Selected Operating Information (Unaudited)
Three Months Ended
March 31, March 31,
2011 2010
Operating Gross profit 52.9% 53.0%
Ratios(as a Sales, marketing, general and
percentage of administrative expense 28.6% 28.8%
revenue): Research and development expense 6.1% 6.2%
Income from operations(1) 18.3% 18.0%
International International revenue (in thousands) $ 122,571 $ 108,659
Revenue: International revenue as percentage of
total revenue 41.9% 40.5%
(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
March 31, March 31,
2011 2010
Revenue: CAG $ 240,589 $ 221,417
Water 18,965 17,864
LPD 23,939 19,941
Other 9,179 9,303
Total 292,672 $ 268,525
Gross Profit: CAG $ 123,351 $ 113,743
Water 11,391 11,575
LPD 16,547 13,208
Other 3,742 4,373
Unallocated (106) (538)
Total $ 154,925 $ 142,361
Income from
Operations: CAG $ 42,972 $ 40,822
Water 6,947 7,512
LPD 7,150 4,578
Other (550) 550
Unallocated (2,987) (5,034)
Total $ 53,532 $ 48,428
Gross Profit
(as a percentage
of revenue): CAG 51.3% 51.4%
Water 60.1% 64.8%
LPD 69.1% 66.2%
Other 40.8% 47.0%
Income from
Operations
(as a percentage
of revenue): CAG 17.9% 18.4%
Water 36.6% 42.1%
LPD 29.9% 23.0%
Other (6.0%) 5.9%
IDEXX Laboratories, Inc. and Subsidiaries
Revenues and Revenue Growth Analysis by Product and Service Categories
Amounts in thousands (Unaudited)
Three Months Ended
Percentage
Change Percentage Organic
March Dollar Percentage from Change from Revenue
Net March 31, 31, Currency Acquisitions Growth
Revenue 2011 2010 Change Change (1) (2) (3)
CAG $ 240,589 $ 221,417 $ 19,172 8.7% 1.3% 0.1% 7.3%
Water 18,965 17,864 1,101 6.2% 1.5% - 4.7%
LPD 23,939 19,941 3,998 20.0% - - 20.0%
Other 9,179 9,303 (124) (1.3%) 1.2% - (2.5%)
Total $ 292,672 $ 268,525 $ 24,147 9.0% 1.2% - 7.8%
Three Months Ended
Percentage
Change Percentage Organic
March Dollar Percentage from Change from Revenue
Net CAG March 31, 31, Currency Acquisitions Growth
Revenue 2011 2010 Change Change (1) (2) (3)
Instruments
and
consumables $ 93,887 $ 83,382 $ 10,505 12.6% 1.6% - 11.0%
Rapid assay
products 38,617 39,443 (826) (2.1%) 0.5% - (2.6%)
Reference
laboratory
diagnostic
and
consulting
services 89,128 79,840 9,288 11.6% 1.5% 0.1% 10.0%
Practice
information
management
systems and
digital
radiography 18,957 18,752 205 1.1% 0.6% - 0.5%
Net CAG
revenue $ 240,589 $ 221,417 $ 19,172 8.7% 1.3% 0.1% 7.3%
(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 March 31, 2011 and the same period of the prior year
applied to foreign currency denominated revenues for the three months ended March 31,
2011.
(2) Represents the percentage change in revenue during the three months ended March 31,
2011 compared to the three months ended March 31, 2010 attributed to incremental revenues
from 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 three months ended March 31, 2011 compared to the three
months ended March 31, 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)
March 31, December 31,
2011 2010
Assets: Current Assets:
Cash and cash equivalents $ 153,459 $ 156,915
Accounts receivable, net 137,551 120,080
Inventories 127,054 127,885
Other current assets 47,377 55,711
Total current assets 465,441 460,591
Property and equipment, net 202,748 201,725
Other long-term assets, net 241,289 234,828
Total assets $ 909,478 $ 897,144
Liabilities and
Stockholders'
Equity: Current Liabilities:
Accounts payable $ 23,334 $ 22,669
Accrued expenses 107,650 118,598
Debt 127,467 129,862
Deferred revenue 14,119 13,983
Total current liabilities 272,570 285,112
Long-term debt, net of current
portion 3,194 3,418
Other long-term liabilities 36,806 34,333
Total long-term liabilities 40,000 37,751
Total stockholders' equity 596,868 574,235
Noncontrolling interest 40 46
Total equity 596,908 574,281
Total liabilities and
stockholders' equity $ 909,478 $ 897,144
IDEXX Laboratories, Inc. and Subsidiaries
Selected Balance Sheet Information (Unaudited)
September
March 31, December 31, 30, June 30, March 31,
2011 2010 2010 2010 2010
Selected
Days sales
Balance outstanding
Sheet (1) 40.2 38.7 41.9 41.8 41.7
Inventory
Information: turns (2) 1.8 1.8 1.7 1.9 2.0
(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)
Three Months Ended
March 31, March 31,
2011 2010
Operating: Cash Flows from Operating Activities:
Net income 36,606 33,028
Non-cash charges 18,929 16,937
Changes in current assets and liabilities (23,299) (27,442)
Tax benefit from exercises of stock options
and vesting of restricted stock units (7,018) (3,318)
Net cash provided by operating activities $ 25,218 $ 19,205
Investing: Cash Flows from Investing Activities:
Purchase of property and equipment (9,575) (8,473)
Proceeds from disposition of pharmaceutical
product lines 3,000 -
Proceeds from sale of property and equipment 82 27
Acquisitions of intangible assets - (144)
Net cash used by investing activities $ (6,493) $ (8,590)
Financing: Cash Flows from Financing Activities:
(Payments) borrowings on revolving credit
facilities, net (2,487) 38,523
Payment of other notes payable (210) (200)
Purchase of treasury stock (39,940) (57,728)
Proceeds from the exercise of stock options
and employee stock purchase plans 12,169 6,483
Tax benefit from exercise of stock options and
vesting of restricted stock units 7,018 3,318
Net cash used by financing activities $ (23,450) $ (9,604)
Net effect of changes in exchange rates on
cash 1,269 (1,385)
Net decrease in cash and cash equivalents (3,456) (374)
Cash and cash equivalents, beginning of period 156,915 106,728
Cash and cash equivalents, end of period $ 153,459 $ 106,354
IDEXX Laboratories, Inc. and Subsidiaries
Free Cash Flow
Amounts in thousands (Unaudited)
Three Months Ended
March 31, March 31,
2011 2010
Free Cash
Flow: Net cash provided by operating activities $ 25,218 $ 19,205
Financing cash flows attributable to tax
benefits from exercise of stock options
and vesting of restricted stock units 7,018 3,318
Purchase of property and equipment (9,575) (8,473)
Free cash flow $ 22,661 $ 14,050
IDEXX Laboratories, Inc. and Subsidiaries
Common Stock Repurchases
Amounts in thousands except per share data (Unaudited)
Three Months Ended
March 31, March 31,
2011 2010
Share repurchases during
the period 538 1,092
Average price paid per
share $ 74.21 $ 52.88
Shares remaining under repurchase authorization as of
March 31, 2011: 3,268
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 April 21, 2011