IDEXX Laboratories Announces First Quarter Results
WESTBROOK, Maine, April 27 /PRNewswire-FirstCall/ -- IDEXX Laboratories, Inc. (Nasdaq: IDXX), today reported that revenue for the first quarter of 2007 increased 26% to $211.2 million from $168.2 million for the first quarter of 2006. The favorable impact of currency exchange rates contributed 3% to revenue growth. Earnings per diluted share ("EPS") for the quarter ended March 31, 2007 increased 18% to $0.65 from $0.55 for the same period in the prior year.
Non-GAAP adjusted diluted EPS for the first quarter were $0.67, an increase of 22% compared to non-GAAP adjusted diluted EPS for the same period of the prior year. Non-GAAP adjusted diluted EPS in 2007 excludes the impact of acquisition-related purchase accounting and integration costs. Management believes adjusted diluted EPS is a useful non-GAAP financial measure to evaluate the results of ongoing operations, excluding significant specified items, period over period, and therefore believes that investors may find this information useful in addition to the GAAP results. The accompanying financial table provides additional information and reconciles these non-GAAP measures to earnings per diluted share.
"Excellent revenue growth across all of our lines of business led to earnings performance that exceeded our plans for the quarter," said Jonathan Ayers, Chairman and CEO. "Particularly strong revenue growth in the reference laboratories and instrument consumables businesses resulted in part from the well-publicized pet food recalls during the quarter, which we believe caused an unusually high number of pet visits to the veterinary clinic for exams that included diagnostic testing. In the quarter, we also completed several important complementary acquisitions that we have previously announced, all of which are performing at or above expectations."
"We believe that the attractiveness of our business supports continued investment in longer term growth drivers such as new products, including our Catalyst(TM) Dx and SnapShot(TM) Dx analyzers expected to launch in January 2008, and expanded sales, marketing and customer service resources. Our revised revenue and earnings guidance for 2007 reflects the impressive first quarter results, the collective impact of our strategic acquisitions, and our aggressive reinvestment in our pet health business."
Companion Animal Group ("CAG") revenue for the first quarter of 2007 increased 24% to $173.4 million from $139.4 million for the first quarter of 2006 primarily due to higher sales in all CAG product and service categories. Incremental sales from businesses acquired since January 2006, consisting primarily of veterinary reference laboratories, contributed 5% to CAG revenue growth. The favorable impact of foreign currency exchange rates also contributed 2% to CAG revenue growth.
Water segment revenue for the first quarter of 2007 increased 19% to $14.4 million from $12.1 million for the first quarter of 2006 primarily due to higher worldwide sales volume, partly offset by lower average unit sales prices. The favorable impact of currency exchange rates contributed 4% to Water revenue growth.
Production Animal Segment ("PAS") revenue for the first quarter increased 30% to $16.8 million from $13.0 million for the first quarter of 2006 primarily due to higher livestock diagnostics sales volume, including sales attributable to Institut Pourquier, a France-based manufacturer of production animal diagnostic products that we acquired in March 2007. Sales of Pourquier products contributed 6% to PAS revenue growth. Increased average unit sales prices for certain livestock diagnostics products also contributed to PAS revenue growth. The favorable impact of currency exchange rates contributed 7% to PAS revenue growth.
The accompanying financial table provides additional information on revenue by product and service categories.
Additional Operating Results
Gross profit for the first quarter of 2007 increased $22.6 million, or 26%, to $108.6 million from $86.0 million for the first quarter of 2006. As a percentage of revenue, gross profit remained constant at 51%. The gross profit percentage was favorably impacted by our lower cost of slides that are sold for use in VetTest(R) Chemistry Analyzers under the agreement with our supplier and other lower product costs due, in part, to manufacturing and purchasing efficiencies. Higher average selling prices, resulting in part from higher relative sales of combination rapid assay products such as the SNAP(R)4Dx(R), which was launched in the U.S. in September 2006, also contributed to gross profit improvements. Increases in the gross profit percentage were partly offset by greater relative sales of lower margin products and services such as laboratory and consulting services and by lower margins on sales by recently acquired businesses due, in part, to acquisition- related purchase accounting and integration costs.
Research and development ("R&D") expense for the quarter was $16.0 million compared to $12.7 million for the first quarter of 2006. As a percentage of revenue, R&D expense increased slightly to 7.6% from 7.5%. R&D expense grew primarily as a result of personnel additions in 2006 to support increased long-term product development activities.
Selling, general and administrative ("SG&A") expense for the quarter was $61.7 million, or 29% of revenue, compared to $46.4 million, or 28% of revenue, in the first quarter of 2006. Increased SG&A expense was due, in part, to investments in worldwide sales, marketing and customer service organizations and higher sales commissions as a result of revenue performance; higher spending on facilities, information technology and other general support functions; and incremental activities associated with recently acquired businesses, including amortization of intangible assets.
Outlook
The Company offers the following revised guidance for the full year of 2007:
-- Revenue is expected to be $890 to $897 million, updated from $875 to
$887 million.
-- Diluted earnings per share are expected to be $3.00 to $3.07, updated
from $2.89 to $2.97.
Conference Call and Webcast Information
IDEXX Laboratories will be hosting a conference call today at 9:00 a.m. (eastern) to discuss its first quarter results. To participate in the conference call, dial 800-310-6649 or 719-457-2692 and reference confirmation code 4929938. An audio replay will be available through May 4, 2007 by dialing 719-457-0820 and referencing replay code 4929938.
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 9, 2007, at 10:00 a.m. (eastern) at the Portland Marriott at Sable Oaks in South Portland, Maine.
Chairman and CEO Jonathan Ayers will chair the meeting. Investors may listen to the Annual Meeting and view a presentation live 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 companion animal health, serving practicing veterinarians around the world with innovative, technology-based offerings, including a broad range of diagnostic products and services, practice management systems and pharmaceuticals. IDEXX products enhance the ability of veterinarians to provide advanced medical care and to build more economically successful practices. IDEXX is also a worldwide leader in providing diagnostic tests and information for the production animal industry and tests for the quality and safety of water and milk. Headquartered in Maine, IDEXX Laboratories employs more than 4,000 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. 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 integrate and operate acquired businesses; the effect of government regulation on the Company's business, including government decisions about whether and when to approve the sale of the Company's products and decisions regarding labeling, manufacturing and marketing of products; disruptions, shortages or pricing changes that affect the Company's purchases of products and materials from third parties, including from sole source suppliers; the impact of distributor purchasing decisions on sales of our products that are sold through distribution; changes or trends in veterinary medicine that affect the rate of use of the Company's products and services by veterinarians; the Company's ability to obtain and maintain 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 effects of government regulatory decisions, customer demand, pricing and other factors on the realizability of the Company's inventories; the Company's ability to manufacture complex biologic products; the effects of operations outside the U.S., including from currency fluctuations, different regulatory, political and economic conditions, and different market conditions; and the loss of key employees. 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, 2006, in the section captioned "Risk Factors."
Contact: Merilee Raines, Chief Financial Officer, (207) 556-8155
IDEXX Laboratories, Inc. and Subsidiaries
Consolidated Statement of Operations
Amounts in thousands except per share data
(Unaudited)
Three Months Ended
March 31, March 31,
2007 2006
Revenue: Revenue $211,155 $168,164
Expenses and
Income: Cost of revenue 102,576 82,139
Gross profit 108,579 86,025
Sales and marketing 35,582 26,938
General and administrative 26,149 19,434
Research and development 15,971 12,678
Income from operations 30,877 26,975
Interest income, net 28 769
Income before provision for
income taxes and partner's
interest 30,905 27,744
Provision for income taxes 9,878 9,584
Partner's share of consolidated
loss - (113)
Net Income: Net income $21,027 $18,273
Earnings per share: Basic $0.68 $0.57
Earnings per share: Diluted $0.65 $0.55
Shares outstanding: Basic 31,137 31,800
Shares outstanding: Diluted 32,542 33,418
IDEXX Laboratories, Inc. and Subsidiaries
Key Operating Information (Unaudited)
Three Months Ended
March 31, March 31,
2007 2006
Key Operating Gross profit 51.4% 51.2%
Ratios (as a Sales, marketing, general and
percentage administrative expense 29.2% 27.7%
of revenue): Research and development
expense 7.6% 7.5%
Income from operations 14.6% 16.0%
International International revenue (in
Revenue: thousands) $80,869 $58,400
International revenue as
percentage of total revenue 38.3% 34.7%
IDEXX Laboratories, Inc. and Subsidiaries
Non-GAAP Financial Measures
Amounts in thousands except per share data (Unaudited)
Three Months Ended
Earnings per
Income from Share
Gross Profit Operations Net Income Diluted
March March March March March March March March
31, 31, 31, 31, 31, 31, 31, 31,
2007 2006 2007 2006 2007 2006 2007 2006
GAAP
measurement $108,579 $86,025 $30,877 $26,975 $21,027 $18,273 $0.65 $0.55
Acquisition-
related
purchase
accounting
&
integration
costs (1) 1,248 - 1,434 - 904 - 0.03 -
Non-GAAP
comparative
measure-
ments(2) $109,827 $86,025 $32,311 $26,975 $21,931 $18,273 $0.67 $0.55
We use these supplemental non-GAAP financial measures to evaluate the
Company's comparative financial performance. The specified items that are
excluded in these non-GAAP measures are actual charges that impact net
income and cash flows, however, we believe that it is useful to evaluate
our core business performance period over period excluding these specified
items, in addition to relying upon GAAP financial measures.
(1) We believe that the change from period to period due to specific
acquisition-related purchase accounting and integration costs is not
representative of ongoing operations and is not indicative of future
performance. Specific acquisition-related discrete costs do not
include amortization expense related to acquired intangible assets.
(2) The sum of the individual items may not equal the non-GAAP measurement
due to rounding of the individual items in this presentation.
IDEXX Laboratories, Inc. and Subsidiaries
Segment Information
Amounts in thousands (Unaudited)
Three Months Ended
March 31, March 31,
2007 2006
Revenue: Companion Animal Group $173,433 $139,363
Water 14,405 12,066
Production Animal Segment 16,811 12,953
Other 6,506 3,782
Total $211,155 $168,164
Gross Profit: Companion Animal Group $86,330 $68,605
Water 9,232 7,961
Production Animal Segment 10,963 8,322
Other 1,914 1,515
Unallocated 140 (378)
Total $108,579 $86,025
Income from
Operations: Companion Animal Group $23,585 $22,604
Water 5,642 4,822
Production Animal Segment 3,965 3,237
Other (413) 434
Unallocated (1,902) (4,122)
Total $30,877 $26,975
Gross Profit
(as a percentage
of revenue): Companion Animal Group 49.8 % 49.2 %
Water 64.1 % 66.0 %
Production Animal Segment 65.2 % 64.3 %
Other 29.4 % 40.1 %
Income from
Operations
(as a percentage
of revenue): Companion Animal Group 13.6 % 16.2 %
Water 39.2 % 40.0 %
Production Animal Segment 23.6 % 25.0 %
Other (6.4 %) 11.5 %
IDEXX Laboratories, Inc. and Subsidiaries
Revenues by Product and Service Categories
Amounts in thousands (Unaudited)
Three Months Ended
Percentage
Change Net
Net Revenue (dollars in thousands) Percent- of
Percent- age Acqui-
age Change sitions
March March Percent- Change from and
31, 31, Dollar age from Acqui- Currency
2007 2006 Change Change Currency(1) sitions(2) Effect
CAG $173,433 $139,363 $34,070 24.4% 2.4% 4.6% 17.4%
Water 14,405 12,066 2,339 19.4% 3.9% - 15.5%
Production
Animal
Segment 16,811 12,953 3,858 29.8% 7.4% 5.5% 16.9%
Other 6,506 3,782 2,724 72.0% 3.2% 70.8% (2.0%)
Total $211,155 $168,164 $42,991 25.6% 3.0% 5.8% 16.8%
Three Months Ended
Percentage
Change Net
Net CAG Revenue Percent- of
Percent- age Acqui-
age Change sitions
March March Percent- Change from and
31, 31, Dollar age from Acqui- Currency
2007 2006 Change Change Currency(1) sitions(2) Effect
Instruments
and
consum-
ables $66,956 $55,820 $11,136 20.0% 3.0% - 17.0%
Rapid
assay
products 31,237 26,004 5,233 20.1% 0.7% 3.5% 15.9%
Laboratory
and
consulting
services 57,888 43,583 14,305 32.8% 3.4% 12.7% 16.7%
Practice
information
management
systems
and digital
radio-
graphy 12,525 9,695 2,830 29.2% 0.5% - 28.7%
Pharma-
ceutical
products 4,827 4,261 566 13.3% - - 13.3%
Net
CAG
revenue $173,433 $139,363 $34,070 24.4% 2.4% 4.6% 17.4%
(1) Represents the percentage change in revenue attributed to the effect
of changes in currency rates from the three months ended March 31,
2006 to the three months ended March 31, 2007.
(2) Represents the percentage change in revenue attributed to incremental
revenues from businesses acquired since January 2006.
IDEXX Laboratories, Inc. and Subsidiaries
Consolidated Balance Sheet
Amounts in thousands (Unaudited)
March 31, December 31,
2007 2006
Assets: Current Assets:
Cash and cash equivalents $53,937 $61,666
Short-term investments - 35,000
Accounts receivable, net 104,791 81,389
Inventories 106,373 95,996
Other current assets 31,655 28,212
Total current assets 296,756 302,263
Property and equipment, at cost 205,154 191,538
Less: accumulated depreciation 96,358 91,910
Property and equipment, net 108,796 99,628
Other long-term assets, net 240,942 157,669
Total assets $646,494 $559,560
Liabilities and
Stockholders'
Equity: Current Liabilities:
Accounts payable $27,316 $24,374
Accrued expenses 75,960 90,715
Current portion of long-term debt 75,904 678
Deferred revenue 9,235 8,976
Total current liabilities 188,415 124,743
Long-term debt, net of current
portion 6,271 6,447
Other long-term liabilities 39,724 18,509
Total long-term liabilities 45,995 24,956
Stockholders' Equity:
Common stock 4,688 4,662
Additional paid-in capital 493,404 479,993
Deferred stock units 2,072 1,852
Retained earnings 512,875 490,614
Treasury stock, at cost (612,644) (577,826)
Accumulated other comprehensive
income 11,689 10,566
Total stockholders' equity 412,084 409,861
Total liabilities and
stockholders' equity $646,494 $559,560
IDEXX Laboratories, Inc. and Subsidiaries
Key Balance Sheet Information (Unaudited)
March 31, December 31,
2007 2006
Key
Balance Total cash, cash equivalents
Sheet and investments (in thousands) $53,937 $96,666
Information: Days sales outstanding 40 38
Inventory turns 1.8 1.9
IDEXX Laboratories, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
Amounts in thousands (Unaudited)
Three Months Ended
March 31, March 31,
2007 2006
Operating: Cash Flows from Operating Activities:
Net income $21,027 $18,273
Non-cash charges 6,736 3,359
Changes in current assets and
liabilities, net of acquisitions and
disposals (29,150) (24,655)
Net cash used by operating
activities $(1,387) $(3,023)
Investing: Cash Flows from Investing Activities:
Decrease in investments, net 35,000 7,954
Purchase of property and equipment (10,415) (6,357)
Purchase of land and buildings (77) (600)
Acquisition of businesses and
intangible assets (80,311) (636)
Acquisition of equipment leased to
customers (238) (382)
Net cash used by investing
activities $(56,041) $(21)
Financing: Cash Flows from Financing Activities:
Borrowings (payments) of notes
payable, net 73,188 (551)
Purchase of treasury stock (34,819) (42,695)
Proceeds from the exercise of
stock options 7,916 9,995
Tax benefit from exercise of
stock options 3,004 4,681
Net cash provided (used) by
financing activities $49,289 $(28,570)
Net effect of exchange rate
changes 410 (198)
Net decrease in cash and
cash equivalents (7,729) (31,812)
Cash and cash equivalents,
beginning of period 61,666 67,151
Cash and cash equivalents,
end of period $53,937 $35,339
IDEXX Laboratories, Inc. and Subsidiaries
Free Cash Flow (Unaudited)
Three Months Ended
March 31, March 31,
2007 2006
Free Cash
Flow: Net cash used by operating activities $(1,387) $(3,023)
Financing cash flows attributable
to tax benefits from exercise of
stock options 3,004 4,681
Purchase of property, plant and
equipment (10,492) (6,957)
Acquisition of equipment leased
to customers (238) (382)
Free cash flow $(9,113) $(5,681)
Free cash flow 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 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.
IDEXX Laboratories, Inc. and Subsidiaries
Common Stock Repurchases (Unaudited)
Three Months Ended
March 31, March 31,
2007 2006
Share repurchases during the period 404,893 541,400
Average price paid per share $85.00 $78.86
Shares remaining under repurchase authorization
as of March 31, 2007 2,309,737
SOURCE IDEXX Laboratories, Inc.
Released April 27, 2007