IDEXX Laboratories, Inc. (Nasdaq: IDXX), today reported that revenue for the first quarter of 2006 increased 10% to $168.2 million from $152.4 million for the first quarter of 2005. Earnings per diluted share for the quarter ended March 31, 2006 were $0.55, compared to $0.51 for the same period in the prior year.
Net income for 2006 includes the after-tax impact of share-based compensation expense of $0.07 per diluted share, including the impact of SFAS No. 123(R). Net income for the quarter ended March 31, 2005 included acquisition integration costs of $0.02 per diluted share. Adjusting the results for both periods to exclude the effects of these specified items, adjusted non-GAAP earnings per diluted share grew approximately 15%. Management believes adjusted earnings per diluted share 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.
Companion Animal Group ("CAG") revenue for the first quarter of 2006 increased 12% to $139.4 million from $124.9 million for the first quarter of 2005 primarily due to higher sales in all CAG product and service categories. Incremental sales from businesses acquired during 2005, consisting of veterinary reference laboratories and a digital radiography business, contributed approximately 2% to CAG revenue growth, while the impact of foreign exchange reduced growth by 2%.
Food Diagnostics Group ("FDG") revenue for the first quarter increased 14% to $16.7 million from $14.7 million for the first quarter of 2005 primarily due to higher livestock diagnostics sales volume. The unfavorable impact of foreign currency decreased FDG revenue growth by 7%.
Water segment revenue for the first quarter decreased 6% to $12.1 million from $12.8 million for the first quarter of 2005 primarily due to lower worldwide sales volume. The unfavorable impact of foreign currency contributed 2% to the decline.
"We are pleased with the fundamentals of the business, with very good growth in most of the businesses contributing to 13% growth, adjusting for the impact of currency, and good profit realization as a result," said Jonathan Ayers, Chairman and CEO. "Our confidence leads us to increase our financial outlook for the year."
Additional operating results
Gross profit for the first quarter of 2006 increased $9.9 million, or 13%, to $86.0 million from $76.1 million for the first quarter of 2005. As a percentage of revenue, gross profit increased to 51% from 50% in the first quarter of 2005. The increase in the gross profit percentage was attributable, in part, to relatively favorable pricing in certain businesses; lower overall manufacturing and purchased materials costs including lower cost of instruments and consumables; and the absence in 2006 of the acquisition integration costs incurred in the first quarter of 2005.
Research and development ("R&D") expense for the quarter was $12.7 million compared to $9.8 million for the first quarter of 2005. R&D expense as a percentage of total revenue increased to 8% from 6% in the first quarter of 2005. The increase in R&D expense resulted from increased product development spending related primarily to IDEXX VetLab(R) instrumentation.
Selling, general and administrative ("SG&A") expense for the quarter was $46.4 million, or 28% of revenue, compared to $40.2 million, or 26% of revenue, in the first quarter of 2005. The increase in SG&A expense as a percentage of total revenue was primarily due to the change in accounting for share-based compensation beginning on January 1, 2006.
Outlook
The Company offers the following revised guidance for the full year of 2006:
* Revenue is expected to be approximately $704 to $712 million, updated
from $700 to $710 million.
* Diluted earnings per share are expected to be approximately $2.44 to
$2.52, updated from $2.40 to $2.50.
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 10, 2006, 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, http://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 worldwide leader in the development and commercialization of innovative, technology-based products and services for veterinary, food and water applications. The Company's largest business is focused on companion animal health, combining biotechnology, medical device technology and information technology to aid veterinarians in providing better medicine while building successful practices. IDEXX Laboratories' food and water businesses are focused on employing innovative technologies to monitor production animal health and the safety and quality of drinking water and milk. Headquartered in Westbrook, Maine, IDEXX Laboratories employs more than 3,000 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 effectiveness of the Company's sales and marketing activities; the Company's ability to develop, license or obtain rights to new technologies; the Company's ability to identify acquisition opportunities, complete acquisitions and integrate acquired businesses; the impact of competition and technological change on the markets for the Company's 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 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 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; disruptions, shortages or pricing changes that affect the Company's purchases of products and materials from third parties, including from sole source suppliers; 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, 2005, in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Contact: Merilee Raines, Chief Financial Officer, (207) 856-8155
IDEXX Laboratories, Inc. and Subsidiaries
Consolidated Statement of Operations
Amounts in thousands except per share data (Unaudited)
Three Months Ended
March 31, March 31,
2006 2005
Revenue: Revenue $168,164 $152,426
Expenses and
Income: Cost of revenue 82,139 76,346
Gross profit 86,025 76,080
Sales and marketing 26,938 25,070
General and administrative 19,434 15,098
Research and development 12,678 9,774
Income from operations 26,975 26,138
Interest income, net 769 503
Income before provision
for income taxes and
partner's interest 27,744 26,641
Provision for income taxes 9,584 9,052
Partner's share of
consolidated loss (113) (101)
Net Income: Net income $18,273 $17,690
Earnings per share: Basic $0.57 $ 0.54
Earnings per share: Diluted $0.55 $ 0.51
Shares outstanding: Basic 31,800 32,955
Shares outstanding: Diluted 33,418 34,439
IDEXX Laboratories, Inc. and Subsidiaries
Key Operating Information (Unaudited)
Three Months Ended
March 31, March 31,
2006 2005
Key Operating Gross profit 51.2% 49.9%
Ratios (as a Sales, marketing, general and
percentage of administrative expense 27.7% 26.4%
revenue): Research and development expense 7.5% 6.4%
Income from operations 16.0% 17.1%
International International revenue
(in thousands) $58,400 $53,549
Revenue: International revenue as
a percentage of total revenue 34.7% 35.1%
IDEXX Laboratories, Inc. and Subsidiaries
Non-GAAP Financial Measures
Amounts in thousands except per share data (Unaudited)
Three Months Ended
Income from
Gross Profit Operations
March 31, March 31, March 31, March 31,
2006 2005 2006 2005
GAAP measures $86,025 $76,080 $26,975 $26,138
Specified items:
Share-based compensation
expense 378 - 2,795 -
Acquisition integration
expense - 752 - 1,068
Non-GAAP comparative
measures $86,403 $76,832 $29,770 $27,206
IDEXX Laboratories, Inc. and Subsidiaries
Non-GAAP Financial Measures
Amounts in thousands except per share data (Unaudited)
Three Months Ended
Earnings per Share
Net Income Diluted
March 31, March 31, March 31, March 31,
2006 2005 2006 2005
GAAP measures $18,273 $17,690 $0.55 $0.51
Specified items:
Share-based compensation
expense 2,309 - 0.07 -
Acquisition integration
expense - 706 - 0.02
Non-GAAP comparative
measures $20,582 $18,396 $0.62 $0.53
We use these supplemental non-GAAP financial measures to evaluate the
Company's comparative financial performance. The specified items that are
excluded from 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. We
adjust 2006 GAAP financial results to exclude the after-tax impact of
share-based compensation expense in order to evaluate the Company's
performancerelative to 2005 financial results. We do not consider the pro
forma 2005 financial results that are included in our Annual Report on
Form 10-K and quarterly reports on Form 10-Q to be reasonably comparable
to 2006 financial results with respect to the impact of
share-based compensation expense due to several factors, including
changes in 2006 in the types,terms and total fair value of share-based
compensation awards; changes inthe timing of expense recognition for 2006
awards; and differences betweenperiods in income tax benefits.
IDEXX Laboratories, Inc. and Subsidiaries
Segment Information
Amounts in thousands (Unaudited)
Three Months Ended
March 31, March 31,
2006 2005
Revenue: Companion Animal Group $139,363 $124,880
Water 12,066 12,806
Food Diagnostics Group 16,735 14,740
Total $168,164 $152,426
Gross Profit: Companion Animal Group $68,605 $59,263
Water 7,961 8,477
Food Diagnostics Group 9,837 8,340
Other (378) -
Total $86,025 $76,080
Income from
Operations: Companion Animal Group $22,604 $18,888
Water 4,822 5,504
Food Diagnostics Group 3,671 2,578
Other (4,122) (832)
Total $26,975 $26,138
Gross Profit
(as a percentage
of revenue): Companion Animal Group 49.2% 47.5%
Water 66.0% 66.2%
Food Diagnostics Group 58.8% 56.6%
Income from
Operations
(as a percentage
of revenue): Companion Animal Group 16.2% 15.1%
Water 40.0% 43.0%
Food Diagnostics Group 21.9% 17.5%
IDEXX Laboratories, Inc. and Subsidiaries
Revenues by Product and Service Categories
Amounts in thousands (Unaudited)
Three Months Ended
Percent- Percent-
age age
Change Change
Percent- from Net of
March 31, March 31, Dollar age Currency Currency
2006 2005 Change Change (1) Effect
Net CAG Revenue:
Instruments and
consumables $ 55,820 $ 52,873 $ 2,947 5.6% -2.9% 8.5%
Rapid assay
products 26,004 24,752 1,252 5.1% -0.9% 6.0%
Laboratory and
consulting
services 43,583 36,544 7,039 19.3% -2.9% 22.2%
Practice
information
systems and
digital
radiography 9,695 7,461 2,234 29.9% 0.1% 29.8%
Pharmaceutical
products 4,261 3,250 1,011 31.1% -- 31.1%
Net CAG
revenue 139,363 124,880 14,483 11.6% -2.3% 13.9%
Net Water Revenue:
Water 12,066 12,806 (740) -5.8% -2.5% -3.3%
Net FDG Revenue:
Production
animal
products 12,953 10,862 2,091 19.2% -7.6% 26.8%
Dairy testing
products 3,782 3,878 (96) -2.5% -4.5% 2.0%
Net FDG revenue 16,735 14,740 1,995 13.5% -6.8% 20.3%
Net Revenue: $ 168,164 $ 152,426 $ 15,738 10.3% -2.7% 13.0%
(1) Represents the percentage change in revenue attributed to the effect
of changes in currency rates from the three months ended March 31,
2005 to the three months ended March 31, 2006.
IDEXX Laboratories, Inc. and Subsidiaries
Consolidated Balance Sheet
Amounts in thousands (Unaudited)
March 31, December 31,
2006 2005
Assets: Current Assets:
Cash and cash equivalents $35,339 $67,151
Short-term investments 57,658 65,580
Accounts receivable, net 81,916 71,688
Inventories 81,229 69,369
Other current assets 24,817 25,457
Total current assets 280,959 299,245
Property and equipment, at cost 147,785 142,777
Less: accumulated depreciation 80,512 77,080
Property and equipment, net 67,273 65,697
Other long-term assets, net 127,010 125,734
Total assets $475,242 $490,676
Liabilities and
Stockholders'
Equity: Current Liabilities:
Accounts payable $25,034 $19,842
Accrued expenses 65,033 78,208
Notes payable - 551
Deferred revenue 8,301 7,965
Total current liabilities 98,368 106,566
Total long-term liabilities 13,627 14,800
Partner's interest in subsidiary 188 300
Stockholders' Equity:
Common stock 4,628 4,594
Additional paid-in capital 455,663 437,394
Deferred stock units 1,836 1,316
Retained earnings 415,209 396,936
Treasury stock, at cost (514,791) (472,096)
Accumulated other
comprehensive income 514 866
Total stockholders' equity 363,059 369,010
Total liabilities and
stockholders' equity $475,242 $490,676
IDEXX Laboratories, Inc. and Subsidiaries
Key Balance Sheet Information (Unaudited)
March 31, December 31,
2006 2005
Key
Balance Sheet Total cash, cash equivalents
Information: and investments (in thousands) $92,997 $132,731
Days sales outstanding 42 38
Inventory turns(1) 1.9 2.4
(1) Reported inventory turns as of December 31, 2005 were favorably
impacted by the timing of contractual inventory receipts subsequent
to December 31, 2005.
IDEXX Laboratories, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
Amounts in thousands (Unaudited)
Three Months Ended
March 31, March 31,
2006 2005
Operating: Cash Flows from Operating
Activities:
Net income $18,273 $17,690
Non-cash charges 8,728 6,390
Changes in current assets and
liabilities, net of
acquisitions and disposals (30,024) (23,798)
Net cash provided (used) by
operating activities $(3,023) $282
Investing: Cash Flows from Investing
Activities:
Decrease in investments, net 7,954 32,112
Purchase of property and
equipment (6,357) (4,536)
Purchase of land and buildings (600) -
Acquisition of businesses and
intangible assets (636) (659)
Acquisition of equipment leased
to customers (382) (696)
Net cash provided (used) by
investing activities $(21) $26,221
Financing: Cash Flows from Financing
Activities:
Repayments of notes payable (551) (1,271)
Purchase of treasury stock (42,695) (29,540)
Proceeds from the exercise of
stock options 9,995 2,603
Tax benefit from exercise of
stock options 4,681 -
Net cash used by financing
activities $(28,570) $(28,208)
Net effect of exchange rate
changes (198) (872)
Net decrease in cash and cash
equivalents (31,812) (2,577)
Cash and cash equivalents,
beginning of period 67,151 47,156
Cash and cash equivalents,
end of period $35,339 $44,579
IDEXX Laboratories, Inc. and Subsidiaries
Free Cash Flow
Amounts in thousands (Unaudited)
Three Months Ended
March 31, March 31,
2006 2005
Free Cash
Flow: Net cash provided (used) by
operating activities $(3,023) $282
Financing cash flows
attributable to tax benefits
from exercise of stock options 4,681 -
Purchase of fixed assets other
than real property (6,357) (4,536)
Acquisition of equipment leased
to customers (382) (696)
Free cash flow $(5,081) $(4,950)
Free cash flow indicates the cash generated from operations and tax
benefits attributable to stock option exercises, reduced by investments
in fixed assets other than real property. 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,
2006 2005
Total number of shares purchased 541,400 530,800
Average price paid per share $78.86 $55.65