IDEXX Laboratories Announces Third Quarter Results
WESTBROOK, Maine, Oct. 22 /PRNewswire-FirstCall/ -- IDEXX Laboratories, Inc. (Nasdaq: IDXX), today reported that revenues for the third quarter of 2010 increased 4% to $269.6 million, from $259.1 million for the third quarter of 2009. Organic revenue growth, as defined below, was 5%. Earnings per diluted share ("EPS") for the quarter ended September 30, 2010 increased 13% to $0.59, compared to $0.52 for the same period in the prior year.
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 contributed less than 1% to revenue growth, in the third quarter of 2010.
"I am very pleased with our third quarter results," stated Jonathan Ayers, Chairman and Chief Executive Officer. "Despite continued weakness in the economic environment and relatively few signs of improvement in customer sentiment, we delivered 5% organic revenue growth, reflecting our continued focus on bringing innovative products and services to our veterinary and other customers. Earnings, excluding benefits from a weaker U.S. dollar and a lower tax rate, met our July projection as we continued to drive operating efficiencies, particularly in our two largest businesses, IDEXX VetLab® instruments and consumables and laboratory diagnostic and consulting services.
"The third quarter marked the launch of our next generation hematology analyzer, ProCyte Dx™, as we placed 154 of these instruments in the quarter. ProCyte Dx™ offers unprecedented accuracy and precision, providing reference lab quality hematology results in just two minutes. ProCyte Dx™, when used with our Catalyst Dx® chemistry analyzer, provides complete blood work results during a 20 to 30 minute scheduled patient exam, thus raising the standard of care and increasing efficiency for the veterinary practice.
"Chemistry placements were also strong in the third quarter, as we placed over 900 combined Catalyst Dx® and VetTest® units, a growth of nearly 10% over the comparable 2009 period.
"We remain confident in the fundamental strength of our business model and in the long-term growth prospects for our core markets. Based on this, we are establishing initial 2011 guidance that reflects accelerated revenue growth and double-digit earnings growth over our 2010 outlook."
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 2010 were $222.9 million compared to $214.5 million for the third quarter of 2009. Incremental revenues attributable to a business acquired in August 2009 contributed less than 1% to revenue growth while changes in foreign currency exchange rates reduced revenue growth by 1%. Organic growth of 4% was primarily the result of higher testing volumes in our laboratory diagnostic and consulting services business and increased sales volumes of IDEXX VetLab® instruments and consumables. The increase in instrument and consumables sales volumes was driven by increased sales of consumables used in our Catalyst Dx® instrument and sales of our ProCyte Dx® instrument, which we began shipping during the quarter. These favorable impacts were partly offset by a decrease in rapid assay revenue due primarily to changes in distributors' inventory levels. Lower average unit sales prices of our SNAP® tests, due to competitive pressures, also contributed to the decrease in rapid assay revenue.
Water. Water segment revenues for the third quarter of 2010 were $20.0 million compared to $19.7 million for the third quarter of 2009. Changes in foreign currency exchange rates reduced revenue growth by 1%. Organic revenue growth of 3% was the result of higher Quanti-Tray® and Colilert® product sales volumes and higher relative sales of Colilert® products in geographies where they are sold at higher average unit sales prices.
Livestock and Poultry Diagnostics. Livestock and Poultry Diagnostics ("LPD") revenues for the third quarter of 2010 were $17.5 million compared to $15.9 million for the third quarter of 2009. Changes in foreign currency exchange rates reduced revenue growth by 6%. Organic revenue growth of 15% was the result of higher sales volumes of certain swine and bovine tests, partly offset by lower average unit sales prices due to competitive pressures.
Additional Operating Results for the Third Quarter
Gross profit for the third quarter of 2010 increased $11.7 million, or 9%, to $142.2 million from $130.5 million for the third quarter of 2009. As a percentage of total revenue, gross profit increased to 52.7% from 50.4%. The increase in the gross profit percentage was primarily attributable to reduced overall manufacturing costs associated with our IDEXX VetLab® instruments and SNAP® tests. The gross profit percentage was also favorably impacted by lower costs of service in our laboratory diagnostic and consulting services business and lower depreciation on our IDEXX VetLab® instruments placed at customer sites under usage agreements. These favorable effects were partly offset by the net unfavorable impact of changes in foreign currency exchange rates.
Research and development ("R&D") expense for the third quarter of 2010 was $17.2 million, or 6.4% of revenue, compared to $16.6 million, or 6.4% of revenue for the third quarter of 2009. The increase in R&D expense was primarily due to increased personnel-related costs.
Selling, general and administrative ("SG&A") expense for the third quarter of 2010 was $75.2 million, or 27.9% of revenue, compared to $69.7 million, or 26.9% of revenue, for the third quarter of 2009. The increase in SG&A expense resulted primarily from increased legal and other fees related to the production of documents to the U.S. Federal Trade Commission, increased personnel-related costs and an increase in the bad debt provision in connection with the bankruptcy of one of our U.S. distributors, Professional Veterinary Products, Inc. These increases were partly offset by a milestone payment earned during the quarter related to the sale of product rights in connection with the 2008 disposition of certain pharmaceutical product lines and pharmaceutical assets.
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, 2010.
Outlook for 2010 and 2011
The Company provides the following updated guidance for the full year of 2010 and preliminary guidance for 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 2010 and 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 both years.
2010
-- Revenues are expected to be approximately $1.10 billion, updated from
guidance of $1.09 to $1.10 billion provided in July of this year, which
represents reported revenue growth of approximately 7% and organic
revenue growth of approximately 6%. This tightening of our revenue
outlook to the high end of our previous range reflects modest benefits
from the weakening of the U.S. dollar against certain currencies since
the date of our previous guidance, which are offset by slightly lower
organic revenue growth.
-- Diluted earnings per share are expected to be in the range of $2.28 to
$2.31, an increase from our previous guidance of $2.23 to $2.28,
reflecting currency benefits achieved in the third quarter and
anticipated in the fourth quarter as discussed above and third quarter
tax benefits from the expiration of certain statutes of limitation.
-- Free cash flow is expected to be approximately 110% of net income.(1)
2011
-- Revenues are expected to be in the range of $1.18 to $1.20 billion,
which represents revenue growth of 7% to 9% compared to projected
revenue for 2010. Organic revenue growth, adjusted to exclude a
projected 1% benefit from foreign currency related changes, is estimated
to be in the range of 6% to 8%.
-- Diluted earnings per share are expected to be in the range of $2.55 to
$2.65.
(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 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 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 1-800-230-1096 or 1-612-332-0107 and reference confirmation code 174920. An audio replay will be available through October 29, 2010 by dialing 1-320-365-3844 and referencing replay code 174920.
The call will also be available via live or archived webcast on the IDEXX 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 to build more economically successful practices. IDEXX is also a worldwide leader in providing livestock and poultry diagnostic tests and tests for the quality and safety of water and milk. Headquartered in Maine, IDEXX Laboratories, Inc. 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, 2009, and quarterly report on Form 10-Q for the quarter ended June 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 Nine Months Ended
September September
30, 30, September 30, September 30,
2010 2009 2010 2009
Revenue: Revenue $ 269,628 $ 259,120 $ 819,635 $ 761,298
Expenses and
Cost of
Income: revenue 127,421 128,643 385,783 367,948
Gross profit 142,207 130,477 433,852 393,350
Sales and
marketing 44,486 41,504 133,069 124,365
General and
administrative 30,704 28,185 96,588 88,047
Research and
development 17,203 16,583 51,118 49,116
Income from
operations 49,814 44,205 153,077 131,822
Interest
expense, net (551) (388) (1,414) (1,187)
Income before
provision for
income taxes 49,263 43,817 151,663 130,635
Provision for
income taxes 14,548 12,281 46,723 39,361
Net Income: Net income 34,715 $ 31,536 104,940 $ 91,274
Less: Net
income
attributable
to
noncontrolling
interest 21 - 27 -
Net income
attributable
to IDEXX
Laboratories,
Inc.
stockholders $ 34,694 $ 31,536 $ 104,913 $ 91,274
Earnings per
share: Basic $ 0.60 $ 0.54 $ 1.82 $ 1.55
Earnings per
share: Diluted $ 0.59 $ 0.52 $ 1.76 $ 1.50
Shares
outstanding:
Basic 57,620 58,656 57,799 58,911
Shares
outstanding:
Diluted 59,276 60,668 59,691 60,718
IDEXX Laboratories, Inc. and Subsidiaries
Selected Operating Information (Unaudited)
Three Months Ended Nine Months Ended
September September
30, 30, September 30, September 30,
2010 2009 2010 2009
Operating Gross profit 52.7% 50.4% 52.9% 51.7%
Sales,
marketing,
Ratios(as a general and
administrative
percentage of expense 27.9% 26.9% 28.0% 27.9%
Research and
development
revenue): expense 6.4% 6.4% 6.2% 6.5%
Income from
operations(1) 18.5% 17.1% 18.7% 17.3%
International
revenue (in
International thousands) $ 106,713 $ 102,044 $ 329,073 $ 298,456
International
revenue as
Revenue: percentage of
total revenue 39.6% 39.4% 40.1% 39.2%
(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 Nine Months Ended
September
30, September 30, September 30, September 30,
2010 2009 2010 2009
Revenue: CAG $ 222,909 $ 214,461 $ 676,646 $ 625,442
Water 20,044 19,691 57,356 54,707
LPD 17,476 15,943 56,577 53,848
Other 9,199 9,025 29,056 27,301
Total $ 269,628 $ 259,120 $ 819,635 $ 761,298
Gross
Profit: CAG $ 113,561 $ 105,234 $ 346,523 $ 310,010
Water 12,628 12,251 36,071 35,961
LPD 11,446 9,257 38,025 35,664
Other 4,579 3,721 12,980 11,462
Unallocated (7) 14 253 253
Total $ 142,207 130,477 $ 433,852 $ 393,350
Income from
Operations: CAG $ 38,831 $ 38,002 $ 123,477 $ 106,993
Water 8,698 8,416 23,738 24,336
LPD 3,042 944 11,964 11,002
Other 1,376 (244) 1,838 (145)
Unallocated (2,133) (2,913) (7,940) (10,364)
Total $ 49,814 $ 44,205 $ 153,077 $ 131,822
Gross Profit
(as a
percentage
of revenue): CAG 50.9% 49.1% 51.2% 49.6%
Water 63.0% 62.2% 62.9% 65.7%
LPD 65.5% 58.1% 67.2% 66.2%
Other 49.8% 41.2% 44.7% 42.0%
Total 52.7% 50.4% 52.9% 51.7%
Income from
Operations
(as a
percentage
of revenue): CAG 17.4% 17.7% 18.2% 17.1%
Water 43.4% 42.7% 41.4% 44.5%
LPD 17.4% 5.9% 21.1% 20.4%
Other 15.0% (2.7%) 6.3% (0.5%)
Total 18.5% 17.1% 18.7% 17.3%
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
from Percentage Change Net of
Change from Acquisitions/
Acquisitions/ Divestitures
Net Sept. 30, Sept. 30, Dollar Percentage Currency Divestitures and Currency
Revenue 2010 2009 Change Change (1) (2) Effect (3)
CAG $ 222,909 $ 214,461 $ 8,448 3.9% (0.9%) 0.4% 4.4%
Water 20,044 19,691 353 1.8% (1.0%) - 2.8%
LPD 17,476 15,943 1,533 9.6% (5.8%) - 15.4%
Other 9,199 9,025 174 1.9% (0.7%) - 2.6%
Total $ 269,628 $ 259,120 $ 10,508 4.1% (1.2%) 0.4% 4.9%
Three Months Ended
Percentage
Percentage Percentage Change Net of
Change Change from Acquisitions/
from Acquisitions/ Divestitures
Net CAG Sept. 30, Sept. 30, Dollar Percentage Currency Divestitures and Currency
Revenue 2010 2009 Change Change (1) (2) Effect(3)
Instruments
and
consumables $ 88,481 $ 83,922 $ 4,559 5.4% (1.2%) - 6.6%
Rapid assay
products 35,576 37,753 (2,177) (5.8%) (0.4%) - (5.4%)
Laboratory
diagnostic
and
consulting
services 82,534 76,419 6,115 8.0% (1.1%) 1.1% 8.0%
Practice
information
systems and
digital
radiography 16,318 16,367 (49) (0.3%) 0.0% 0.7% (1.0%)
Net CAG
revenue $ 222,909 $ 214,461 $ 8,448 3.9% (0.9%) 0.4% 4.4%
(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
three months ended September 30, 2010 and the same period of the prior year applied to foreign
currency denominated revenues for the three months ended September 30, 2010.
(2) Represents the percentage change in revenue during the three months ended September 30, 2010
compared to the three months ended September 30, 2009 attributed to incremental revenues from
businesses acquired or revenues lost from businesses divested or discontinued subsequent to June
30, 2009.
(3) Organic Growth
IDEXX Laboratories, Inc. and Subsidiaries
Revenues and Revenue Growth Analysis by Product and Service Categories
Amounts in thousands (Unaudited)
Nine Months Ended
Percentage
Percentage Percentage Change Net of
Change Change from Acquisitions/
from Acquisitions/ Divestitures
Net Sept. 30, Sept. 30, Dollar Percentage Currency Divestitures and Currency
Revenue 2010 2009 Change Change (1) (2) Effect (3)
CAG $ 676,646 $ 625,442 $ 51,204 8.2% 1.0% 0.6% 6.6%
Water 57,356 54,707 2,649 4.8% 1.2% - 3.6%
LPD 56,577 53,848 2,729 5.1% (1.2%) - 6.3%
Other 29,056 27,301 1,755 6.4% 0.1% - 6.3%
Total $ 819,635 $ 761,298 $ 58,337 7.7% 0.8% 0.5% 6.4%
Nine Months Ended
Percentage
Percentage Percentage Change Net of
Change Change from Acquisitions/
from Acquisitions/ Divestitures
Net CAG Sept. 30, Sept. 30, Dollar Percentage Currency Divestitures and Currency
Revenue 2010 2009 Change Change (1) (2) Effect(3)
Instruments
and
consumables $ 258,318 $ 239,889 $ 18,429 7.7% 0.5% - 7.2%
Rapid assay
products 115,500 116,997 (1,497) (1.3%) 0.4% - (1.7%)
Laboratory
diagnostic and
consulting
services 248,422 222,987 25,435 11.4% 1.6% 1.6% 8.2%
Practice
information
systems and
digital
radiography 54,406 45,515 8,891 19.5% 1.1% 0.8% 17.6%
Pharmaceutical
products - 54 (54) (100.0%) - (100.0%) -
Net CAG
revenue $ 676,646 $ 625,442 $ 51,204 8.2% 1.0% 0.6% 6.6%
(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 nine months
ended September 30, 2010 and the same period of the prior year applied to foreign currency
denominated revenues for the nine months ended September 30, 2010.
(2) Represents the percentage change in revenue during the nine months ended September 30, 2010
compared to the nine months ended September 30, 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)
September 30, December 31,
2010 2009
Assets: Current Assets:
Cash and cash equivalents $ 133,512 $ 106,728
Accounts receivable, net 120,454 115,107
Inventories, net 131,555 110,425
Other current assets 44,390 44,078
Total current assets 429,911 376,338
Property and equipment, at cost 367,310 346,592
Less: accumulated depreciation 166,700 146,646
Property and equipment, net 200,610 199,946
Other long-term assets, net 231,776 232,243
Total assets $ 862,297 $ 808,527
Liabilities and
Stockholders'
Equity: Current Liabilities:
Accounts payable $ 25,273 $ 19,133
Accrued liabilities 108,184 104,959
Debt 126,762 119,603
Deferred revenue 10,714 12,610
Total current liabilities 270,933 256,305
Long-term debt, net of current
portion 3,639 4,281
Other long-term liabilities 41,073 33,362
Total long-term liabilities 44,712 37,643
Total IDEXX Laboratories, Inc.
stockholders' equity 546,614 514,569
Noncontrolling interest 38 10
Total stockholders' equity 546,652 514,579
Total liabilities and stockholders'
equity $ 862,297 $ 808,527
IDEXX Laboratories, Inc. and Subsidiaries
Selected Balance Sheet Information (Unaudited)
September September
30, June 30, March 31, December 31, 30,
2010 2010 2010 2009 2009
Selected
Days sales
Balance outstanding
Sheet (1) 41.9 41.8 41.7 38.9 41.2
Inventory
Information: turns (2) 1.7 1.9 2.0 1.9 1.8
(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)
Nine Months Ended
September 30, September 30,
2010 2009
Operating: Cash Flows from Operating Activities:
Net income $ 104,940 $ 91,274
Non-cash charges 48,424 53,290
Changes in current assets and
liabilities (10,088) (25,210)
Tax benefit from exercises of stock
options and vesting of restricted stock
units (13,293) (3,851)
Net cash provided by operating
activities 129,983 115,503
Investing: Cash Flows from Investing Activities:
Purchase of property and equipment (28,646) (36,362)
Proceeds from disposition of
pharmaceutical product lines - 1,377
Proceeds from sale of property and
equipment 86 2,056
Acquisitions of intangible assets and
businesses, net of cash acquired (244) (6,680)
Net cash used by investing activities (28,804) (39,609)
Financing: Cash Flows from Financing Activities:
Borrowings on revolving credit
facilities, net 7,135 (8,798)
Payment of other notes payable (605) (731)
Purchase of treasury stock (117,157) (57,966)
Proceeds from the exercises of stock
options and employee stock purchase
plans 22,055 13,104
Tax benefit from exercises of stock
options and vesting of restricted stock
units 13,293 3,851
Net used by financing activities (75,279) (50,540)
Net effect of changes in exchange rates
on cash 884 2,506
Net increase in cash and cash
equivalents 26,784 27,860
Cash and cash equivalents, beginning of
period 106,728 78,868
Cash and cash equivalents, end of
period $ 133,512 $ 106,728
IDEXX Laboratories, Inc. and Subsidiaries
Free Cash Flow
Amounts in thousands (Unaudited)
Nine Months Ended
September 30, September 30,
2010 2009
Free Cash
Net cash provided by operating
Flow: activities $ 129,983 $ 115,503
Financing cash flows attributable to tax
benefit from exercises of stock options
and vesting of restricted stock units 13,293 3,851
Purchase of property and equipment (28,646) (36,362)
Free cash flow $ 114,630 $ 82,992
IDEXX Laboratories, Inc. and Subsidiaries
Common Stock Repurchases
Amounts in thousands except per share data (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2010 2009 2010 2009
Share repurchases
during the period 567 372 2,080 1,433
Average price paid
per share $ 58.98 $ 48.99 $ 56.32 $ 40.45
Shares remaining
under repurchase
authorization as of
September 30, 2010: 4,213
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 October 22, 2010