www.idexx.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

·

Revenue is expected to be $1.025 billion to $1.03 billion, updated from guidance of $1.06 billion to $1.07 billion provided in July of this year, which represents revenue growth of 11% to 12%. The change in the revenue outlook is largely due to the recent and significant strengthening of the U.S. dollar, which decreases the dollar value of international revenues. Changes in foreign currency exchange rates, which we previously estimated would add 4% to overall revenue growth for 2008, now are estimated to add only 1% due to the recent strengthening of the U.S. dollar, assuming currency rates remain at current levels.

·

Diluted EPS are expected to be $1.88 to $1.91, which represents EPS growth of 29% to 31%. This guidance reflects the impact of the reinstatement of the federal research and development tax credit, offset by the effects of the strengthening U.S. dollar and lower organic revenue growth in a few of our businesses due to economic and other factors. Diluted EPS excludes the anticipated fourth quarter 2008 disposition of pharmaceutical assets described above.

 

·

Non-GAAP diluted EPS are expected to be $1.86 to $1.89, reflecting growth of 18% to 20%. Non-GAAP diluted EPS excludes the impact of discrete income tax benefits in 2008, the anticipated fourth quarter 2008 dispositions, and acquisition-related purchase accounting and acquisition integration costs and the write-down of certain pharmaceutical assets in 2007.

 

 

 

 

 

·

Revenue is expected to be $1.05 to $1.07 billion, which represents revenue growth of 2% to 4% compared to projected revenue for 2008. Changes in foreign currency exchange rates and the absence of sales of certain pharmaceutical products to be disposed of in 2008 account for a substantial majority of the reduction in the 2009 growth rate as compared to the 2008 growth rate.

 

·	Diluted EPS are expected to be in the range of $1.82 to $1.92. Changes in foreign currency exchange rates since July are anticipated to reduce EPS by approximately $0.20.

 

 

 

 

 

 

 

 

 

 

IDEXX Laboratories, Inc. and Subsidiaries

Consolidated Statement of Operations

Amounts in thousands except per share data (Unaudited)

 

				Three Months Ended						Nine Months Ended
				September 30,			September 30,			September 30,			September 30,
				2008			2007			2008			2007
Revenue:	Revenue		$	251,093		$	229,385		$	780,737		$	677,586
Expenses and
Income:	Cost of revenue			122,944			110,907			371,492			336,308
	Gross profit			128,149			118,478			409,245			341,278
	Sales and marketing			41,527			37,757			129,742			110,086
	General and administrative			29,705			27,343			89,407			81,182
	Research and development			17,920			17,281			53,489			50,569
	Income from operations			38,997			36,097			136,607			99,441
	Interest expense, net			(560	)		(515	)		(1,688	)		(1,321	)
	Income before provision for income taxes			38,437			35,582			134,919			98,120
	Provision for income taxes			12,738			9,787			42,305			29,634
Net Income:	Net income		$	25,699		$	25,795		$	92,614		$	68,486
	Earnings per share: Basic		$	0.43		$	0.42		$	1.54		$	1.11
	Earnings per share: Diluted		$	0.42		$	0.40		$	1.48		$	1.06
	Shares outstanding: Basic			59,473			61,094			60,121			61,685
	Shares outstanding: Diluted			61,865			63,916			62,603			64,449
	Historical share and per share data has been retroactively restated to reflect the additional shares of common stock that were distributed on November 26, 2007 as a result of the two-for-one split of our outstanding common stock.

 

IDEXX Laboratories, Inc. and Subsidiaries

Key Operating Information (Unaudited)

 

				Three Months Ended						Nine Months Ended
				September 30,			September 30,			September 30,			September 30,
				2008			2007			2008			2007
Key Operating	Gross profit				51.0	%		51.7	%		52.4	%		50.4	%
Ratios (as a	Sales, marketing, general and
percentage of	administrative expense				28.4	%		28.4	%		28.1	%		28.2	%
revenue):	Research and development expense				7.1	%		7.5	%		6.9	%		7.5	%
	Income from operations (1)				15.5	%		15.7	%		17.5	%		14.7	%
International	International revenue (in thousands)			$	99,646		$	89,547		$	316,902		$	264,514
Revenue:	International revenue as a percentage of
	total revenue				39.7	%		39.0	%		40.6	%		39.0	%

 

 

 

IDEXX Laboratories, Inc. and Subsidiaries

Non-GAAP Financial Measures

Amounts in thousands except per share data (Unaudited)

 

		Three Months Ended
								Income from												Earnings per Share
		Gross Profit						Operations						Net Income						Diluted
		Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,
		2008			2007			2008			2007			2008			2007			2008			2007
GAAP measurement		$	128,149		$	118,478		$	38,997		$	36,097		$	25,699		$	25,795		$	0.42		$	0.40
% of revenue			51.0	%		51.7	%		15.5	%		15.7	%		10.2	%		11.2	%
Acquisition-related purchase accounting
and acquisition integration costs (1)			-			87			-			139			-			90			-			-
Non-GAAP comparative measurements(2)		$	128,149		$	118,565		$	38,997		$	36,236		$	25,699		$	25,885		$	0.42		$	0.40
% of revenue			51.0	%		51.7	%		15.5	%		15.8	%		10.2	%		11.2	%

 

Management believes adjusted diluted EPS is a useful non-GAAP financial measure to evaluate the results of ongoing operations, excluding significant specified events, period over period, and therefore believes that investors may find this information useful in addition to the GAAP results.   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. We applied the statutory income tax rates of the applicable tax jurisdictions to calculate the after-tax impact of these discrete items.

(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

Non-GAAP Financial Measures

Amounts in thousands except per share data (Unaudited)

 

		Nine Months Ended
								Income from												Earnings per Share
		Gross Profit						Operations						Net Income						Diluted
		Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,
		2008			2007			2008			2007			2008			2007			2008			2007
GAAP measurement		$	409,245		$	341,278		$	136,607		$	99,441		$	92,614		$	68,486		$	1.48		$	1.06
% of revenue			52.4	%		50.4	%		17.5	%		14.7	%		11.9	%		10.1	%
Write-downs of certain pharmaceutical
assets (1)			-			10,138			-			10,138			-			6,392			-			0.10
Acquisition-related purchase accounting
and acquisition integration costs (2)			-			1,979			-			2,381			-			1,522			-			0.02
Discrete income tax benefits(3)			-			-			-			-			(1,472	)		-			(0.02	)		-
Non-GAAP comparative measurements(4)		$	409,245		$	353,395		$	136,607		$	111,960		$	91,142		$	76,400		$	1.46		$	1.18
% of revenue			52.4	%		52.2	%		17.5	%		16.5	%		11.7	%		11.3	%

 

Management believes adjusted diluted EPS is a useful non-GAAP financial measure to evaluate the results of ongoing operations, excluding significant specified events, period over period, and therefore believes that investors may find this information useful in addition to the GAAP results.   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 write-down of certain pharmaceutical assets is not indicative of future performance because significant costs of a similar nature are not likely to recur within a reasonable period. We believe that we do not have other large inventory investments where the relationship of inventory to current sales volumes creates significant exposure to valuation risk. During the second quarter of 2007, we recognized a $9.1 million write-down of raw materials inventory and a $1.0 million write-off of a prepaid royalty license associated with Navigator® paste, a nitazoxanide product for the treatment of equine protozoal myeloencephalitis. We have written down these assets because the third-party contract manufacturer of finished goods recently gave notification that it will discontinue manufacturing the product in 2009. Additionally, product sales have been significantly lower than projected. Due in part to an estimated production volume which is low, we believe that we will not be able to enter into a replacement manufacturing arrangement on economically feasible terms and that we will not be able to obtain the product after termination of the existing manufacturing arrangement. We applied the statutory income tax rate of the applicable tax jurisdiction to calculate the after-tax impact of this discrete item.

(2) 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. We applied the statutory income tax rates of the applicable tax jurisdictions to calculate the after-tax impact of these discrete items.

(3) We believe that certain significant discrete income tax items create impacts on financial measures that are not indicative of future performance because the items are not likely to recur within a reasonable period. For 2008, the separately identified discrete income tax benefit was due to a reduction in international deferred tax liabilities due to lower anticipated international tax rates.

(4) 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)

 

 

IDEXX Laboratories, Inc. and Subsidiaries

Revenues by Product and Service Categories

Amounts in thousands (Unaudited)

 

Three Months Ended
Net Revenue		September 30, 2008			September 30, 2007			Dollar Change			Percentage Change			Percentage Change from Currency (1)			Percentage Change from Acquisitions (2)			Percentage Change Net of Acquisitions and Currency Effect(3)
CAG		$	205,050		$	187,481		$	17,569		9.4	%		1.3	%		0.3	%		7.8	%
Water			20,321			17,431			2,890		16.6	%		1.2	%		-			15.4	%
PAS			17,801			17,377			424		2.4	%		5.6	%		-			(3.2	%)
Other			7,921			7,096			825		11.6	%		3.0	%		-			8.6	%
Total		$	251,093		$	229,385		$	21,708		9.5	%		1.8	%		0.2	%		7.5	%

 

Three Months Ended
Net CAG Revenue		September 30, 2008			September 30, 2007			Dollar Change			Percentage Change			Percentage Change from Currency (1)			Percentage Change from Acquisitions (2)			Percentage Change Net of Acquisitions and Currency Effect(3)
Instruments and consumables		$	80,587		$	71,443		$	9,144		12.8	%		1.2	%		-			11.6	%
Rapid assay products			36,212			33,639			2,573		7.6	%		0.7	%		-			6.9	%
Laboratory and consulting services			73,536			64,914			8,622		13.3	%		2.0	%		0.8	%		10.5	%
Practice information management systems and digital radiography			13,333			12,197			1,136		9.3	%		0.3	%		-			9.0	%
Pharmaceutical products			1,382			5,288			(3,906	)	(73.9	%)		-			-			(73.9	%)
Net CAG revenue		$	205,050		$	187,481		$	17,569		9.4	%		1.3	%		0.3	%		7.8	%

 

 

IDEXX Laboratories, Inc. and Subsidiaries

Revenues by Product and Service Categories

Amounts in thousands (Unaudited)

 

Nine Months Ended
Net Revenue		September 30, 2008			September 30, 2007			Dollar Change			Percentage Change			Percentage Change from Currency (1)			Percentage Change from Acquisitions (2)			Percentage Change Net of Acquisitions and Currency Effect(3)
CAG		$	639,411		$	554,939		$	84,472		15.2	%		3.1	%		1.1	%		11.0	%
Water			57,287			48,941			8,346		17.1	%		3.3	%		-			13.8	%
PAS			60,452			52,871			7,581		14.3	%		9.6	%		3.9	%		0.8	%
Other			23,587			20,835			2,752		13.2	%		4.3	%		4.3	%		4.6	%
Total		$	780,737		$	677,586		$	103,151		15.2	%		3.7	%		1.3	%		10.2	%

 

Nine Months Ended
Net CAG Revenue		September 30, 2008			September 30, 2007			Dollar Change			Percentage Change			Percentage Change from Currency (1)			Percentage Change from Acquisitions (2)			Percentage Change Net of Acquisitions and Currency Effect(3)
Instruments and consumables		$	236,974		$	209,889		$	27,085		12.9	%		3.6	%		-			9.3	%
Rapid assay products			115,699			101,464			14,235		14.0	%		1.6	%		-			12.4	%
Laboratory and consulting services			222,984			191,350			31,634		16.5	%		4.1	%		3.1	%		9.3	%
Practice information management systems and digital radiography			42,373			36,419			5,954		16.3	%		1.3	%		-			15.0	%
Pharmaceutical products			21,381			15,817			5,564		35.2	%		-			-			35.2	%
Net CAG revenue		$	639,411		$	554,939		$	84,472		15.2	%		3.1	%		1.1	%		11.0	%

 

 

IDEXX Laboratories, Inc. and Subsidiaries

Consolidated Balance Sheet

Amounts in thousands (Unaudited)

 

			September 30,			December 31,
			2008			2007
Assets:	Current Assets:
	Cash and cash equivalents		$	84,586		$	60,360
	Accounts receivable, net			112,053			108,384
	Inventories			112,907			98,804
	Other current assets			43,831			38,115
	Total current assets			353,377			305,663
	Property and equipment, at cost			311,804			255,176
	Less: accumulated depreciation			133,149			113,324
	Property and equipment, net			178,655			141,852
	Other long-term assets, net			246,661			254,664
	Total assets		$	778,693		$	702,179
Liabilities and
Stockholders’
Equity: :	Current Liabilities
	Accounts payable		$	28,937		$	32,510
	Accrued expenses			103,659			107,248
	Debt			164,696			72,956
	Deferred revenue			10,458			10,678
	Total current liabilities			307,750			223,392
	Long-term debt, net of current portion			5,157			5,727
	Other long-term liabilities			28,459			34,737
	Total long-term liabilities			33,616			40,464
	Stockholders’ Equity:
	Common stock			9,531			9,450
	Additional paid-in capital			544,077			514,773
	Deferred stock units			2,614			2,201
	Retained earnings			678,476			585,862
	Treasury stock, at cost			(820,468	)		(696,668	)
	Accumulated other comprehensive income			23,097			22,705
	Total stockholders’ equity			437,327			438,323
	Total liabilities and stockholders’ equity		$	778,693		$	702,179

 

 

IDEXX Laboratories, Inc. and Subsidiaries

Key Balance Sheet Information (Unaudited)

 

			September 30,			December 31,			September 30,
			2008			2007			2007
Key
Balance Sheet	Days sales outstanding			42.3			39.4			41.8
Information:	Inventory turns			1.9			2.3			2.1

 

IDEXX Laboratories, Inc. and Subsidiaries

Consolidated Statement of Cash Flows

Amounts in thousands (Unaudited)

 

			Nine Months Ended
			September 30,			September 30,
			2008			2007
Operating:	Cash Flows from Operating Activities:
	Net income		$	92,614		$	68,486
	Non-cash charges			38,843			30,907
	Changes in current assets and liabilities, net of
	acquisitions and disposals			(21,643	)		(4,643	)
	Net cash provided by operating activities		$	109,814		$	94,750
Investing:	Cash Flows from Investing Activities:
	Decrease in investments, net			-			35,000
	Purchase of property and equipment			(64,982	)		(41,723	)
	Acquisition of businesses and intangible assets			(8,649	)		(87,738	)
	Acquisition of equipment leased to customers			(560	)		(740	)
	Net cash used by investing activities		$	(74,191	)	$	(95,201	)
Financing:	Cash Flows from Financing Activities:
	Borrowings on revolving credit facilities, net			92,099			71,031
	Payment of other notes payable			(542	)		(2,212	)
	Purchase of treasury stock			(122,429	)		(99,241	)
	Proceeds from the exercise of stock options			14,856			17,655
	Tax benefit from exercise of stock options			5,906			7,544
	Net cash used by financing activities		$	(10,110	)	$	(5,223	)
	Net effect of exchange rate changes			(1,287	)		2,515
	Net increase (decrease) in cash and cash equivalents			24,226			(3,159	)
	Cash and cash equivalents, beginning of period			60,360			61,666
	Cash and cash equivalents, end of period		$	84,586		$	58,507

 

 

IDEXX Laboratories, Inc. and Subsidiaries

Free Cash Flow

Amounts in thousands (Unaudited)

 

			Nine Months Ended
			September 30,			September 30,
			2008			2007
Free Cash
Flow:	Net cash provided by operating activities		$	109,814		$	94,750
	Financing cash flows attributable to tax benefits from exercise of stock options			5,906			7,544
	Purchase of fixed assets			(64,982	)		(41,723	)
	Acquisition of equipment leased to customers			(560	)		(740	)
	Free cash flow		$	50,178		$	59,831
	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 Amounts in thousands except per share data (Unaudited)

 

		Three Months Ended						Nine Months Ended
		September 30,			September 30,			September 30,			September 30,
		2008			2007			2008			2007
Share repurchases during the period			391			140			2,343			2,259
Average price paid per share		$	51.43		$	50.91		$	52.26		$	43.93
Shares remaining under repurchase authorization as of September 30, 2008									4,509

 

 

IDEXX Laboratories, Inc. and Subsidiaries

Earnings per Share Adjusted for Stock Split (Unaudited)

 

		Three Months Ended						Nine Months Ended
		September 30, 2008			September 30, 2007			September 30, 2008			September 30, 2007
Basic
As reported		$	0.43		$	0.84		$	1.54		$	2.22
Adjusted for stock split		$	0.43		$	0.42		$	1.54		$	1.11
Diluted
As reported		$	0.42		$	0.81		$	1.48		$	2.12
Adjusted for stock split		$	0.42		$	0.40		$	1.48		$	1.06