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IDEXX Laboratories Announces Third Quarter Results Friday, October 19, 2012, 7:00:00 AM ET IDEXX Laboratories, Inc. (IDXX), today reported that revenues for the third quarter of 2012 increased 5% to $315.5 million, from $301.0 million for the third quarter of 2011. Organic revenue growth1 was 6%. Earnings per diluted share ("EPS") for the quarter ended September 30, 2012 increased 15% to $0.76, compared to $0.66 for the same period in the prior year. (Logo: http://photos.prnewswire.com/prnh/20110602/NE13041LOGO ) "Overall for the quarter, our revenue growth was solid and our earnings were in-line with our expectations," stated Jonathan Ayers, Chairman and Chief Executive Officer. "We also made great progress on our strategy of bringing innovation to our veterinary customers around the world." "During the quarter we continued to advance our strategy of transforming diagnostics through information technology. VetConnect? PLUS, our integrated web-based platform for presentation of both in-house and reference lab diagnostic results, saw unprecedented acceptance, with over 2000 practices activating this advanced capability since its official launch in early July. In addition to its importance to clinical decisions, VetConnect PLUS facilitates impactful conversations between veterinarians and pet owners, which strengthens these relationships." "We also achieved a successful beta roll-out of IDEXX Pet Health Network? Pro, our new suite of client education and communication services, and strong revenue growth in our Cornerstone? Practice Information Management systems business. All of these information strategies will help promote growth in our core in-house and reference lab diagnostics businesses, translating into an expected organic revenue growth rate of 8% to 9% for the company in 2013." 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 2012 were $262.4 million compared to $248.1 million for the third quarter of 2011. Organic revenue growth of 7% was due primarily to growth in our reference laboratory diagnostic and consulting services business and in our instrument and consumables business. The revenue increase in our reference laboratory diagnostic and consulting services business was largely the result of higher sales volumes driven primarily by the acquisition of new customers due, in part, to geographic expansion and, to a lesser extent, price increases. The revenue increase in our instruments and consumables business was largely the result of higher sales volumes of consumables used with our Catalyst Dx? and ProCyte Dx? instruments. Revenue from acquired businesses contributed 1% to revenue growth and changes in foreign currency exchange rates reduced revenue growth by 2%. Water. Water revenues for the third quarter of 2012 were $22.2 million compared to $21.6 million for the third quarter of 2011. Organic revenue growth of 5% was due primarily to higher Quanti-Tray? and Colilert? product sales volumes, driven by new account acquisitions. Changes in foreign currency exchange rates reduced revenue growth by 2%. Livestock and Poultry Diagnostics. Livestock and Poultry Diagnostics ("LPD") revenues for the third quarter of 2012 were $18.9 million compared to $20.7 million for the third quarter of 2011. The 2% decline in organic revenue was due primarily to lower sales volumes of certain bovine tests, driven principally by lower testing levels from certain government programs in Europe. Changes in foreign currency exchange rates reduced revenue growth by 6%. Additional Operating Results for the Third Quarter Gross profit for the third quarter of 2012 increased $12.0 million, or 8%, to $170.6 million from $158.7 million for the third quarter of 2011. As a percentage of total revenue, gross profit increased to 54% from 53%. The increase in the gross profit percentage was due primarily to lower overall costs driven by higher volumes of consumables used in our VetLab? instruments and the favorable impact of currency, partly offset by higher costs to support the continued expansion of our reference laboratories network. The net effect of currency was positive as hedging gains more than offset the net unfavorable impact of changes in foreign currency exchange rates. Selling, general and administrative ("SG&A") expense for the third quarter of 2012 was $87.4 million, or 28% of revenue, compared to $83.2 million, or 28% of revenue, for the third quarter of 2011. The increase in SG&A expense was due primarily to higher personnel-related costs, partly offset by the favorable impact of changes in foreign currency exchange rates. Research and development ("R&D") expense for the third quarter of 2012 was $20.3 million, or 6% of revenue, compared to $19.4 million, or 6% of revenue for the third quarter of 2011. The increase in R&D expense resulted primarily from increased personnel-related costs and higher external consulting and development costs. 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, 2012. Outlook for Full Year 2012 and 2013 The Company provides the following updated guidance for the full year of 2012 and preliminary guidance for 2013. This guidance reflects an assumption that the value of the U.S. dollar relative to other currencies will remain at our current assumptions of the euro at $1.28, the British pound at $1.60 and the Canadian dollar at $1.00 for the balance of 2012 and 2013. For 2012, every 1% weakening of the U.S. dollar relative to our basket of currencies increases revenues by approximately $4.5 million and operating profit by approximately $0.8 million on an annual basis. For 2013, every 1% weakening of the U.S. dollar relative to our basket of currencies is expected to increase revenue by approximately $5 million and operating profit by approximately $1 million on an annual basis. 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. 2012 Revenues are expected to be approximately $1.30 billion, updated from guidance of $1.30 to $1.31 billion provided in July of this year, which represents reported growth of approximately 6.5% and organic growth of approximately 7.5%. Diluted earnings per share are expected to be in the range of $3.08 to $3.11, an increase from our previous guidance of $3.05 to $3.10. The increase at the high end of our range is due to favorable changes in foreign currency exchange rates since July. The increase at the low end of our range is due to the favorable impact of currency exchange rates and a modest tightening due to business performance. Free cash flow is expected to be approximately 105% of net income.2 Capital expenditures are expected to be approximately $60 million. 2013 Revenues are expected to be in the range of $1.405 to $1.425 billion, which represents reported and organic revenue growth of 8% to 9% compared to projected revenue for 2012. Diluted earnings per share are expected to be in the range of $3.37 to $3.47. Conference Call and Webcast Information IDEXX Laboratories 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 1-612-234-9960 or 1-800-230-1951 and reference confirmation code 267707. An audio replay will be available through October 26, 2012 by dialing 1-320-365-3844 and referencing replay code 267707. The call will also be available via live or archived webcast on the IDEXX Laboratories’ web site at http://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 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 5,000 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. 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 cost improvements in its worldwide network of laboratories and in the manufacture of in-clinic instruments;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 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 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 impact of the resolution of the U.S. Federal Trade Commission investigation into the Company’s marketing and sales practices; the impact of a change in the status of one of the Company’s distributors on its results of operations;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, veterinary hospital consolidation, and the prevalence of buying consortiums 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 and small scale 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 impact of any 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 and the potential loss of tax incentives. A further description of these and other factors can be found in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012,in the section captioned "Risk Factors." 1 Organic revenue growth for the third quarter of 2012 excludes revenue from business acquisitions subsequent to June 30, 2011, which contributed 1% to revenue growth, and the impact of changes in foreign currency exchange rates, which reduced revenue growth by 3%. 2 Free cash flow is a non-GAAP measure. We calculate free cash flow as cash generated from operations, excluding our royalty prepayment in the first quarter of 2012, and tax benefits attributable to share-based compensation arrangements, reduced by our 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. Refer to our reconciliation below for our calculation of free cash flow. 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. 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,
2012 2011 2012 2011
Revenue: Revenue $ 315,475 $ 300,954 $ 973,800 $ 911,488
Expenses and
Income: Cost of revenue 144,840 142,287 443,702 423,863
Gross profit 170,635 158,667 530,098 487,625
Sales and marketing 52,067 50,682 164,238 152,641
General and administrative 35,307 32,483 105,760 98,219
Research and development 20,349 19,406 60,964 55,839
Income from operations 62,912 56,096 199,136 180,926
Interest expense, net 400 478 1,603 1,200
Income before provision for income taxes 62,512 55,618 197,533 179,726
Provision for income taxes 19,639 17,122 62,606 55,970
Net Income: Net income 42,873 38,496 134,927 123,756
Less: Noncontrolling interest in subsidiary’s
earnings (losses) 20 (11) 14 (20)
Net income attributable to stockholders $ 42,853 $ 38,507 $ 134,913 $ 123,776
Earnings per share: Basic $ 0.78 $ 0.68 $ 2.45 $ 2.17
Earnings per share: Diluted $ 0.76 $ 0.66 $ 2.40 $ 2.11
Shares outstanding: Basic 54,938 56,699 55,074 57,141
Shares outstanding: Diluted 56,088 58,007 56,270 58,636
IDEXX Laboratories, Inc. and Subsidiaries
Selected Operating Information (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2012 2011 2012 2011
Operating Gross profit 54.1% 52.7% 54.4% 53.5%
Ratios (as a Sales, marketing, general and
percentage of administrative expense 27.7% 27.6% 27.7% 27.5%
revenue): Research and development expense 6.5% 6.5% 6.3% 6.1%
Income from operations1 19.9% 18.6% 20.4% 19.9%
International International revenue (in thousands) $ 129,139 $ 126,750 $ 397,373 $ 386,905
Revenue: International revenue as percentage of total revenue 40.9% 42.1% 40.8% 42.4%
1Amounts presented may not recalculate due to rounding. IDEXX Laboratories, Inc. and Subsidiaries
Segment Information
Amounts in thousands (Unaudited)
Three Months Ended Three Months Ended
September 30, Percent of September 30, Percent of
2012 Revenue 2011 Revenue
Revenue: CAG $ 262,357 $ 248,074
Water 22,223 21,648
LPD 18,911 20,675
Other 11,984 10,557
Total $ 315,475 $ 300,954
Gross Profit: CAG $ 138,558 52.8% $ 126,048 50.8%
Water 14,489 65.2% 14,317 66.1%
LPD 12,630 66.8% 13,666 66.1%
Other 4,577 38.2% 4,009 38.0%
Unallocated Amounts 381 N/A 627 N/A
Total $ 170,635 54.1% $ 158,667 52.7%
Income from
Operations: CAG $ 50,651 19.3% $ 44,296 17.9%
Water 10,128 45.6% 9,979 46.1%
LPD 3,504 18.5% 3,648 17.6%
Other (119) (1.0%) 34 0.3%
Unallocated Amounts (1,252) N/A (1,861) N/A
Total $ 62,912 19.9% $ 56,096 18.6%
Nine Months Ended Nine Months Ended
September 30, Percent of September 30, Percent of
2012 Revenue 2011 Revenue
Revenue: CAG $ 808,724 $ 748,397
Water 63,788 62,123
LPD 64,153 69,981
Other 37,135 30,987
Total $ 973,800 $ 911,488
Gross Profit: CAG $ 425,867 52.7% $ 387,734 51.8%
Water 42,250 66.2% 38,676 62.3%
LPD 43,483 67.8% 47,548 67.9%
Other 14,469 39.0% 12,493 40.3%
Unallocated Amounts 4,029 N/A 1,174 N/A
Total $ 530,098 54.4% $ 487,625 53.5%
Income from
Operations: CAG $ 157,337 19.5% $ 145,137 19.4%
Water 28,619 44.9% 25,327 40.8%
LPD 14,580 22.7% 17,974 25.7%
Other 669 1.8% (207) (0.7%)
Unallocated Amounts (2,069) N/A (7,305) N/A
Total $ 199,136 20.4% $ 180,926 19.9%
IDEXX Laboratories, Inc. and Subsidiaries
Revenues and Revenue Growth Analysis by Product and Service Categories
Amounts in thousands (Unaudited)
Net Revenue Three Months Ended September 30, 2012 Three Months Ended September 30, 2011 Dollar Percentage Percentage Percentage Organic Revenue
Change Change Change from Change from Growth3
Currency1 Acquisitions2
CAG $ 262,357 $ 248,074 $ 14,283 5.8% (2.3%) 1.4% 6.7%
Water 22,223 21,648 575 2.7% (2.0%) - 4.7%
LPD 18,911 20,675 (1,764) (8.5%) (6.1%) - (2.4%)
Other 11,984 10,557 1,427 13.5% (1.6%) - 15.1%
Total $ 315,475 $ 300,954 $ 14,521 4.8% (2.5%) 1.1% 6.2%
Net CAG Revenue Three Months Ended September 30, 2012 Three Months Ended September 30, 2011 Dollar Percentage Percentage Percentage Organic
Change Change Change from Change from Revenue
Currency 1 Acquisitions2 Growth3
Instruments and consumables $ 101,325 $ 99,719 $ 1,606 1.6% (2.6%) - 4.2%
Rapid assay products 39,315 36,073 3,242 9.0% (1.1%) - 10.1%
Reference laboratory diagnostic and consulting services 101,449 94,027 7,422 7.9% (3.0%) 3.7% 7.2%
Practice management and digital imaging systems 20,268 18,255 2,013 11.0% (0.1%) - 11.1%
Net CAG revenue $ 262,357 $ 248,074 $ 14,283 5.8% (2.3%) 1.4% 6.7%
1The 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 September 30, 2012 and the same period of the prior year applied to foreign currency denominated revenues for the three months ended September 30, 2012. 2The percentage change from acquisitions is a non-U.S. GAAP measure. It represents the percentage change in revenue during the three months ended September 30, 2012 compared to the three months ended September 30, 2011 attributed to acquisitions subsequent to June 30, 2011. 3Organic revenue growth is a non-U.S. GAAP measure and represents the percentage change in revenue during the three months ended September 30, 2012 compared to the three months ended September 30, 2011 net of acquisitions and the effect of changes in foreign currency exchange rates. IDEXX Laboratories, Inc. and Subsidiaries
Revenues and Revenue Growth Analysis by Product and Service Categories
Amounts in thousands (Unaudited)
Net Revenue Nine Nine Months Ended September 30, 2011 Dollar Percentage Percentage Percentage Organic Revenue
Months Ended September 30, 2012 Change Change Change from Change from Growth3
Currency1 Acquisitions2
CAG $ 808,724 $ 748,397 $ 60,327 8.1% (1.7%) 1.4% 8.4%
Water 63,788 62,123 1,665 2.7% (1.6%) - 4.3%
LPD 64,153 69,981 (5,828) (8.3%) (4.3%) - (4.0%)
Other 37,135 30,987 6,148 19.8% (0.9%) - 20.7%
Total $ 973,800 $ 911,488 $ 62,312 6.8% (2.0%) 1.2% 7.6%
Net CAG Revenue Nine Nine Months Ended September 30, 2011 Dollar Percentage Percentage Percentage Organic Revenue
Months Ended September 30, 2012 Change Change Change from Change from Growth3
Currency1 Acquisitions2
Instruments and consumables $ 307,565 $ 292,209 $ 15,356 5.3% (2.0%) - 7.3%
Rapid assay products 128,556 118,883 9,673 8.1% (0.8%) - 8.9%
Reference laboratory diagnostic and consulting services 309,696 282,242 27,454 9.7% (2.2%) 3.7% 8.2%
Practice management and digital imaging systems 62,907 55,063 7,844 14.2% (0.2%) - 14.4%
Net CAG revenue $ 808,724 $ 748,397 $ 60,327 8.1% (1.7%) 1.4% 8.4%
1The 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 nine months ended September 30, 2012 and the same period of the prior year applied to foreign currency denominated revenues for the nine months ended September 30, 2012. 2The percentage change from acquisitions is a non-U.S. GAAP measure. It represents the percentage change in revenue during the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 attributed to acquisitions subsequent to December 31, 2010. 3Organic revenue growth is a non-U.S. GAAP measure and represents the percentage change in revenue during the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 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)
September 30, December 31,
2012 2011
Assets: Current Assets:
Cash and cash equivalents $ 221,441 $ 183,895
Accounts receivable, net 141,374 141,275
Inventories 147,474 133,099
Other current assets 60,485 65,958
Total current assets 570,774 524,227
Property and equipment, net 231,639 216,777
Other long-term assets, net 290,938 289,810
Total assets $ 1,093,351 $ 1,030,814
Liabilities and
Stockholders’
Equity: Current Liabilities:
Accounts payable $ 31,728 $ 36,551
Accrued liabilities 134,664 141,383
Debt 232,960 243,917
Deferred revenue 16,494 15,028
Total current liabilities 415,846 436,879
Long-term debt, net of current portion 1,776 2,501
Other long-term liabilities 58,194 51,841
Total long-term liabilities 59,970 54,342
Total stockholders’ equity 617,507 539,579
Noncontrolling interest 28 14
Total equity 617,535 539,593
Total liabilities and stockholders’ equity $ 1,093,351 $ 1,030,814
IDEXX Laboratories, Inc. and Subsidiaries
Selected Balance Sheet Information (Unaudited)
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
Selected
Balance Sheet Days sales outstanding1 41.7 41.9 42.7 41.0 43.1
Information: Inventory turns 2 1.7 1.8 1.8 1.8 1.7
1Days 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.
2Inventory 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,
2012 2011
Operating: Cash Flows from Operating Activities:
Net income $ 134,927 $ 123,756
Non-cash charges 49,520 48,641
Changes in assets and liabilities (20,777) 5,130
Tax benefit from share-based compensation arrangements (10,182) (14,009)
Net cash provided by operating activities 153,488 163,518
Investing: Cash Flows from Investing Activities:
Purchases of property and equipment (43,230) (39,927)
Proceeds from disposition of pharmaceutical product lines 3,000 3,000
Proceeds from sale of property and equipment 45 223
Acquisition of intangible asset (900) -
Acquisition of a business, net of cash acquired - (2,600)
Net cash used by investing activities (41,085) (39,304)
Financing: Cash Flows from Financing Activities:
(Repayment) borrowings on revolving credit facilities, net (11,000) 24,903
Payment of notes payable (682) (643)
Repurchases of common stock (91,152) (166,016)
Proceeds from the exercise of stock options and employee stock purchase plans 17,156 26,080
Tax benefit from share-based compensation arrangements 10,182 14,009
Net cash used by financing activities (75,496) (101,667)
Net effect of changes in exchange rates on cash 639 2,037
Net increase in cash and cash equivalents 37,546 24,584
Cash and cash equivalents, beginning of period 183,895 156,915
Cash and cash equivalents, end of period $ 221,411 $ 181,499
IDEXX Laboratories, Inc. and Subsidiaries
Free Cash Flow
Amounts in thousands (Unaudited)
Nine Months Ended
September 30, September 30,
2012 2011
Free Cash
Flow: Net cash provided by operating activities $ 153,488 $ 163,518
Royalty prepayment to obtain exclusive patent rights 6,250 -
Financing cash flows attributable to tax benefits from share-based compensation arrangements 10,182 14,009
Purchases of property and equipment (43,230) (39,927)
Free cash flow $ 126,690 $ 137,600
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,
2012 2011 2012 2011
Share repurchases during the period 386 886 1,038 2,183
Average price paid per share $ 93.76 $ 76.27 $ 87.82 $ 76.04
Shares remaining under repurchase authorization as of September 30, 2012 totaled 3,349,826.
Share repurchases do 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. |
  
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