IDEXX Laboratories Announces Fourth Quarter and Full Year Results
WESTBROOK, Maine, Jan. 28, 2011 /PRNewswire/ -- IDEXX Laboratories, Inc. (Nasdaq: IDXX), today reported that revenues for the fourth quarter of 2010 increased 5% to $283.8 million, from $270.3 million for the fourth quarter of 2009. Organic revenue growth, as defined below, was 6%. Earnings per diluted share ("EPS") for the quarter ended December 31, 2010 increased 22% to $0.62, compared to $0.51 for the same period in the prior year. Fourth quarter 2010 EPS includes the full year 2010 benefit from the reinstatement of the Federal Research and Development tax credit, which added $0.04 to EPS, and a $2 million milestone payment earned related to the 2008 sale of product rights previously included in our pharmaceutical product lines, which added $0.02 to EPS.
Organic revenue growth excludes the impact of changes in foreign currency exchange rates, which reduced revenue growth by 1%, and revenue from businesses acquired or divested subsequent to the beginning of the prior year period, which had no impact on revenue growth.
"Our fourth quarter results marked a strong conclusion to the year," stated Jonathan Ayers, Chairman and Chief Executive Officer. "Organic revenue growth accelerated 1% from the rate achieved in the prior two quarters, resulting in 6% organic growth for the year. Earnings for the quarter exceeded our October projection, as benefits from higher than planned revenues, a lower tax rate and an unforecasted milestone payment offset the negative impact of a slightly stronger U.S. dollar."
"Market response to our ProCyte Dx™ hematology analyzer, launched in the third quarter, has been very positive. The 449 units that we placed in the third and fourth quarters exceeded our expectations. 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. The real-time care strategy aims to provide veterinarians with the tools to transform the pet owner experience with veterinary medical care, while also growing veterinary practice revenues and improving staff efficiency, even in a challenging economy."
"We also are encouraged by early indications that the U.S. economy and overall consumer sentiment is stabilizing. These indications, combined with our confidence in the fundamental strength and the long-term growth prospects for our core markets, lead us to project 7 to 8% organic revenue growth and double-digit earnings growth in 2011."
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 fourth quarter of 2010 were $229.0 million compared to $217.9 million for the fourth quarter of 2009. Changes in foreign currency exchange rates reduced revenue growth by less than 1%. Organic growth of 6% was due primarily to increased sales volume and sales prices in our laboratory and consulting services business and increased sales volumes of IDEXX VetLab® instruments and consumables. The increase in instruments sales volume was driven primarily by sales of ProCyte Dx™, our new hematology analyzer introduced in the third quarter of 2010.
Water. Water segment revenues for the fourth quarter of 2010 were $19.2 million compared to $18.5 million for the fourth quarter of 2009. Changes in foreign currency exchange rates reduced revenue growth by less than 1%. Organic revenue growth of 4% was the result of higher Colilert® product sales volume.
Livestock and Poultry Diagnostics. Livestock and Poultry Diagnostics ("LPD") revenues for the fourth quarter of 2010 were $24.6 million compared to $23.4 million for the fourth quarter of 2009. Changes in foreign currency exchange rates reduced revenue growth by approximately 5%. Organic revenue growth of 11% was the result of higher sales volumes of certain bovine tests, partly offset by lower average unit sales prices.
Year-to-Date Results
Revenues for the year ended December 31, 2010 increased 7% to $1.103 billion, from $1.032 billion for the year ended December 31, 2009. Organic revenue growth for the year ended December 31, 2010 was 6%. Changes in foreign currency exchange rates and revenue from businesses acquired or divested subsequent to the beginning of 2009 each contributed less than 1% to revenue growth.
EPS for the year ended December 31, 2010 increased 18% to $2.37, compared to $2.01 for the same period in the prior year.
Additional Operating Results for the Fourth Quarter
Gross profit for the fourth quarter of 2010 increased $11.8 million, or 9%, to $144.8 million from $132.9 million for the fourth quarter of 2009. As a percentage of total revenue, gross profit increased to 51% from 49%. The increase in gross profit percentage was due primarily to lower overall manufacturing and service costs associated with our IDEXX VetLab® analyzers and lower costs of service in our laboratory diagnostic and consulting services business.
Research and development ("R&D") expense for the fourth quarter of 2010 was $17.5 million, or 6% of revenue, compared to $16.0 million, or 6% of revenue for the fourth quarter of 2009. The increase in R&D expense resulted primarily from increased headcount. Selling, general and administrative ("SG&A") expense for the fourth quarter of 2010 was $76.5 million, or 27% of revenue, compared to $72.8 million, or 27% of revenue, for the fourth quarter of 2009. The increase in SG&A expense resulted primarily from increased headcount in sales and customer support functions and an overall increase in compensation and benefit costs. This increase was partly offset by the absence of an impairment charge during the fourth quarter of 2010 in comparison to the fourth quarter of 2009 and the net favorable impact of changes in foreign currency exchange rates. The impairment charge recorded in the fourth quarter of 2009 was to write off an acquired intangible asset associated with our equine digital radiography business.
Supplementary Analysis of Results
The accompanying financial tables provide more information concerning our revenue and other operating results for the three and twelve months ended December 31, 2010.
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 $1.19 to $1.20 billion, which represents
reported revenue growth of 8 to 9% and organic revenue growth of 7 to
8%. The increase to the low end of our previous guidance range is
reflective of our improved 2010 performance as we exited the year.
-- EPS are expected to be $2.62 to $2.68, compared to our previous guidance
of $2.55 to $2.65. This increase in guidance reflects a decrease in the
effective tax rate due primarily to benefits from the extension of the
U.S. R&D tax credit for 2011. The increase to the low end of our
guidance range also incorporates the higher organic revenue growth
guidance noted above.
-- Free cash flow is expected to be approximately 115% of net income(1).
(1) Free cash flow is a non-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 will be hosting a conference call today at 9:00 a.m. (eastern) to discuss its fourth quarter results and management's outlook. To participate in the conference call, dial 1-612-332-0636 or 1-800-288-8968 and reference confirmation code 188705. An audio replay will be available through February 4, 2011 by dialing 1-320-365-3844 and referencing replay code 188705.
The call will also be available via live or archived Webcast on the IDEXX Laboratories' web site at www.idexx.com.
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 4,900 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 Annual Report on Form 10-K for the year ended December 31, 2009 and quarterly report on Form 10-Q for the quarter ended September 30, 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 Twelve Months Ended
December
31, December 31, December 31, December 31,
2010 2009 2010 2009
Revenue: Revenue $ 283,757 $ 270,335 $ 1,103,392 $ 1,031,633
Expenses
and
Cost of
Income: revenue 138,986 137,404 524,769 505,352
Gross profit 144,771 132,931 578,623 526,281
Sales and
marketing 46,557 43,383 179,626 167,748
General and
administrative 29,931 29,393 126,519 117,440
Research and
development 17,479 16,008 68,597 65,124
Income from
operations 50,804 44,147 203,881 175,969
Interest
expense, net (338) (243) (1,752) (1,430)
Income before
provision for
income taxes 50,466 43,904 202,129 174,539
Provision for
income taxes 14,086 12,943 60,809 52,304
Net income 36,380 30,961 141,320 122,235
Less:
Noncontrolling
interest in
subsidiary's
Net Income: earnings 9 10 36 10
Net income
attributable
to
stockholders $ 36,371 $ 30,951 $ 141,284 $ 122,225
Earnings per
share: Basic $ 0.63 $ 0.53 $ 2.45 $ 2.08
Earnings per
share: Diluted $ 0.62 $ 0.51 $ 2.37 $ 2.01
Shares
outstanding:
Basic 57,455 58,506 57,713 58,809
Shares
outstanding:
Diluted 59,108 60,507 59,559 60,682
IDEXX Laboratories, Inc. and
Subsidiaries
Selected Operating
Information (Unaudited)
Three Months Ended Twelve Months Ended
December
31, December 31, December 31, December 31,
2010 2009 2010 2009
Operating Gross profit 51.0% 49.2% 52.4% 51.0%
Sales,
marketing,
Ratios(as a general and
administrative
percentage of expense 27.0% 26.9% 27.7% 27.6%
Research and
development
revenue): expense 6.2% 5.9% 6.2% 6.3%
Income from
operations(1) 17.9% 16.3% 18.5% 17.1%
International
revenue (in
International thousands) $ 122,293 $ 118,660 $ 451,366 $ 417,116
International
revenue as
Revenue: percentage of
total revenue 43.1% 43.9% 40.9% 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 Twelve Months Ended
December 31, December 31, December 31, December 31,
2010 2009 2010 2009
Revenue: CAG $ 229,009 $ 217,861 $ 905,655 $ 843,303
Water 19,158 18,507 76,514 73,214
LPD 24,600 23,360 81,177 77,208
Other 10,990 10,607 40,046 37,908
Total $ 283,757 $ 270,335 $ 1,103,392 $ 1,031,633
Gross Profit: CAG $ 110,996 $ 100,346 $ 457,519 $ 410,356
Water 11,605 11,272 47,676 47,233
LPD 16,873 15,592 54,898 51,256
Other 5,317 5,605 18,297 17,067
Unallocated (20) 116 233 369
Total $ 144,771 $ 132,931 $ 578,623 $ 526,281
Income from
Operations: CAG $ 36,249 $ 29,304 $ 159,726 $ 136,121
Water 7,338 7,279 31,076 31,615
LPD 7,124 6,269 19,088 17,271
Other 2,745 3,570 4,583 3,425
Unallocated (2,652) (2,275) (10,592) (12,463)
Total $ 50,804 $ 44,147 $ 203,881 $ 175,969
Gross Profit
(as a
percentage
of revenue): CAG 48.5% 46.1% 50.5% 48.7%
Water 60.6% 60.9% 62.3% 64.5%
LPD 68.6% 66.7% 67.6% 66.4%
Other 48.4% 52.8% 45.7% 45.0%
Income from
Operations
(as a
percentage
of revenue): CAG 15.8% 13.5% 17.6% 16.1%
Water 38.3% 39.3% 40.6% 43.2%
LPD 29.0% 26.8% 23.5% 22.4%
Other 25.0% 33.7% 11.4% 9.0%
IDEXX Laboratories, Inc. and Subsidiaries
Revenues and Revenue Growth Analysis by Product and Service Categories
Amounts in thousands (Unaudited)
Three Months Ended
Percentage
Percentage Percentage Change Net of
Change Change from Acquisitions/
from Acquisitions/ Divestitures
December December
Net 31, 31, Dollar Percentage Currency Divestitures and Currency
Revenue 2010 2009 Change Change (1) (2) Effect (3)
CAG $ 229,009 $ 217,861 $ 11,148 5.1% (0.7%) - 5.8%
Water 19,158 18,507 651 3.5% (0.6%) - 4.1%
LPD 24,600 23,360 1,240 5.3% (5.3%) - 10.6%
Other 10,990 10,607 383 3.6% - - 3.6%
Total $ 283,757 $ 270,335 $ 13,422 5.0% (1.0%) - 6.0%
Three Months Ended
Percentage
Change Net of
Percentage Percentage
Acquisitions/
Change Change from Divestitures
December December from
31, 31, Dollar Percentage Acquisitions/ and Currency
Net CAG Currency Divestitures
Revenue 2010 2009 Change Change (1) (2) Effect(3)
Instruments
and
consumables $ 95,921 $ 92,817 $ 3,104 3.3% (1.1%) - 4.4%
Rapid assay
products 31,038 30,081 957 3.2% (0.2%) - 3.4%
Laboratory
and
consulting
services 81,244 75,423 5,821 7.7% (0.6%) - 8.3%
Practice
information
systems and
digital
radiography 20,806 19,540 1,266 6.5% 0.3% - 6.2%
Net CAG
revenue $ 229,009 $ 217,861 $ 11,148 5.1% (0.7%) - 5.8%
(1) The percentage change from currency is a non-GAAP measure. It represents the percentage
change in revenue resulting from the
difference between the average exchange rates during the three months ended December 31, 2010 and
the same period of the prior year applied to foreign currency denominated revenues for the three
months ended December 31, 2010.
(2) Represents the percentage change in revenue during the three months ended December 31, 2010
compared to the three months ended December 31, 2009 attributed to incremental revenues from
businesses acquired or revenues lost from businesses divested or discontinued subsequent to
September 30, 2009.
(3) Organic Growth
IDEXX Laboratories, Inc. and Subsidiaries
Revenues and Revenue Growth Analysis by Product and Service Categories
Amounts in thousands (Unaudited)
Twelve Months Ended
Percentage
Percentage Change Net of
Percentage
Change from Acquisitions/
Change
from Acquisitions/ Divestitures
December December
Net 31, 31, Dollar Percentage Currency Divestitures and Currency
Revenue 2010 2009 Change Change (1) (2) Effect(3)
CAG $ 905,655 $ 843,303 $ 62,352 7.4% 0.5% 0.5% 6.4%
Water 76,514 73,214 3,300 4.5% 0.8% - 3.7%
LPD 81,177 77,208 3,969 5.1% (2.5%) - 7.6%
Other 40,046 37,908 2,138 5.6% - - 5.6%
Total $ 1,103,392 $ 1,031,633 $ 71,759 7.0% 0.3% 0.4% 6.3%
Twelve Months Ended
Percentage
Change Net of
Percentage Percentage
Acquisitions/
Change Change from Divestitures
December December from
31, 31, Dollar Percentage Acquisitions/ and Currency
Net CAG Currency Divestitures
Revenue 2010 2009 Change Change (1) (2) Effect(3)
Instruments
and
consumables $ 354,239 $ 332,706 $ 21,533 6.5% 0.1% - 6.4%
Rapid assay
products 146,538 147,078 (540) (0.4%) 0.3% - (0.7%)
Laboratory and
consulting
services 329,666 298,410 31,256 10.5% 1.0% 1.2% 8.3%
Practice
information
systems and
digital
radiography 75,212 65,055 10,157 15.6% 0.9% 0.5% 14.2%
Pharmaceutical
products - 54 (54) (100%) - - (100%)
Net CAG
revenue $ 905,655 $ 843,303 $ 62,352 7.4% 0.5% 0.5% 6.4%
(1) The percentage change from currency is a non-GAAP measure. It represents the percentage change
in revenue resulting from the difference between the average exchange rates during the twelve
months ended December 31, 2010 and the same period of the prior year applied to foreign currency
denominated revenues for the twelve months ended December 31, 2010.
(2) Represents the percentage change in revenue during the twelve months ended December 31, 2010
compared to the twelve months ended December 31, 2009 attributed to incremental revenues from
businesses acquired or revenues lost from businesses divested or discontinued subsequent to
December 31, 2008.
(3) Organic Growth
IDEXX Laboratories, Inc. and Subsidiaries
Consolidated Balance Sheet
Amounts in thousands (Unaudited)
December 31, December 31,
2010 2009
Assets: Current Assets:
Cash and cash equivalents $156,915 $106,728
Accounts receivable, net 120,080 115,107
Inventories 127,885 110,425
Other current assets 55,711 44,078
Total current assets 460,591 376,338
Property and equipment, at cost 376,625 346,592
Less: accumulated depreciation 174,900 146,646
Property and equipment, net 201,725 199,946
Other long-term assets, net 234,828 232,243
Total assets $897,144 $808,527
Liabilities and
Stockholders'
Equity: Current Liabilities:
Accounts payable $22,669 $19,133
Accrued expenses 118,598 104,959
Debt 129,862 119,603
Deferred revenue 13,983 12,610
Total current liabilities 285,112 256,305
Long-term debt, net of current
portion 3,418 4,281
Other long-term liabilities 34,333 33,362
Total long-term liabilities 37,751 37,643
Total stockholders' equity 574,235 514,569
Noncontrolling interest 46 10
Total equity 574,281 514,579
Total liabilities and stockholders'
equity $897,144 $808,527
IDEXX Laboratories, Inc. and
Subsidiaries
Selected Balance Sheet Information
(Unaudited)
December September
31, 30, June 30, March 31, December 31,
2010 2010 2010 2010 2009
Selected
Days sales
Balance outstanding
Sheet (1) 38.7 41.9 41.8 41.7 38.9
Inventory
Information: turns (2) 1.8 1.7 1.9 2.0 2.2
(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)
Twelve Months Ended
December 31, December 31,
2010 2009
Cash Flows from
Operating
Operating: Activities:
Net income 141,320 122,235
Non-cash charges 58,774 68,211
Changes in current assets and
liabilities (3,135) (10,300)
Tax benefit from exercises of stock
options and vesting of restricted stock
units (18,126) (5,194)
Net cash provided
by operating
activities $ 178,833 $ 174,952
Cash Flows from
Investing
Investing: Activities:
Purchase of
property and
equipment (38,908) (50,663)
Proceeds from disposition of
pharmaceutical product lines - 3,377
Proceeds from sale
of property and
equipment 112 2,079
Acquisitions of intangible assets and
businesses, net of cash acquired (394) (8,414)
Investment in notes receivable (4,000) -
Net cash used by
investing activities $ (43,190) $ (53,621)
Cash Flows from
Financing
Financing: Activities:
Borrowings (payments) on revolving
credit facilities, net 10,143 (32,830)
Payment of other
notes payable (813) (926)
Purchase of
treasury stock (143,090) (83,099)
Proceeds from the exercise of stock
options and employee stock purchase plans 28,865 16,366
Tax benefit from exercise of stock
options and vesting of restricted stock
units 18,126 5,194
Net cash used by
financing activities $ (86,769) $ (95,295)
Net effect of
changes in exchange
rates on cash 1,313 1,824
Net increase in
cash and cash
equivalents 50,187 27,860
Cash and cash
equivalents,
beginning of period 106,728 78,868
Cash and cash
equivalents, end of
period $ 156,915 $ 106,728
IDEXX Laboratories, Inc. and Subsidiaries
Free Cash Flow
Amounts in thousands (Unaudited)
Twelve Months Ended
December 31, December 31,
2010 2009
Free Cash
Flow: Net cash provided by operating activities $178,833 $174,952
Financing cash flows attributable to tax
benefits from
exercise of stock options and vesting of
restricted stock units 18,126 5,194
Purchase of property and equipment (38,908) (50,663)
Free cash flow $158,051 $129,483
IDEXX Laboratories,
Inc. and
Subsidiaries
Common Stock
Repurchases
Amounts in thousands except per
share data (Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31, December 31, December 31,
2010 2009 2010 2009
Share repurchases
during the period 407 486 2,487 1,919
Average price paid
per share $ 63.73 $ 51.69 $ 57.53 $ 43.30
Shares remaining under repurchase authorization as
of December 31, 2010: 3,806
Share repurchases does not include shares surrendered by employees in payment
for the minimum required withholding taxes due on the exercise of stock
options, the vesting of restricted stock units and the settlement of deferred
stock units, and in payment for the exercise price of stock options.
Contact: Merilee Raines, Chief Financial Officer, 1-207-556-8155
SOURCE IDEXX Laboratories, Inc.
Released January 28, 2011