Contact: Merilee Raines, Chief Financial Officer, (207) 556-8155
FOR IMMEDIATE RELEASE
IDEXX Laboratories Announces First Quarter Results
WESTBROOK, Maine, April 27, 2007— 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™ Dx and SnapShot™ 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.
IDEXX Announces First Quarter Results
April 27, 2007
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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. 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. Higher average selling prices, resulting in part from higher relative sales of combination rapid assay products such as the SNAP®4Dx®, 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.
IDEXX Announces First Quarter Results
April 27, 2007
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.
IDEXX Announces First Quarter Results
April 27, 2007
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.”
IDEXX Announces First Quarter Results
April 27, 2007
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 of | administrative expense | | | 29.2 | % | | 27.7 | % |
revenue): | Research and development expense | | | 7.6 | % | | 7.5 | % |
| | Income from operations | | | 14.6 | % | | 16.0 | % |
| | | | | | | | | |
| | | | | | | | | |
International | International revenue (in thousands) | | $ | 80,869 | | $ | 58,400 | |
Revenue: | International revenue as percentage of | | | | | | | |
| | total revenue | | | 38.3 | % | | 34.7 | % |
IDEXX Announces First Quarter Results
April 27, 2007
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 | |
| | | March 31, | | March 31, | | March 31, | | March 31, | | March 31, | | March 31, | | March 31, | | March 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 measurements(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 Announces First Quarter Results
April 27, 2007
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 Announces First Quarter Results
April 27, 2007
IDEXX Laboratories, Inc. and Subsidiaries
Revenues by Product and Service Categories
Amounts in thousands (Unaudited)
Three Months Ended | |
Net Revenue (dollars in thousands) | | March 31, 2007 | | March 31, 2006 | | Dollar Change | | Percentage Change | | Percentage Change from Currency (1) | | Percentage Change from Acquisitions (2) | | Percentage Change Net of Acquisitions and Currency 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 | |
Net CAG Revenue | | March 31, 2007 | | March 31, 2006 | | Dollar Change | | Percentage Change | | Percentage Change from Currency (1) | | Percentage Change from Acquisitions (2) | | Percentage Change Net of Acquisitions and Currency Effect | |
| | | | | | | | | | | | | | | | |
| Instruments and consumables | | $ | 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 radiography | | | 12,525 | | | 9,695 | | | 2,830 | | | 29.2 | % | | 0.5 | % | | - | | | 28.7 | % |
| Pharmaceutical 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 Announces First Quarter Results
April 27, 2007
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 Sheet | Total cash, cash equivalents and investments (in thousands) | | $ | 53,937 | | $ | 96,666 | |
Information: | Days sales outstanding | | | 40 | | | 38 | |
| | Inventory turns | | | 1.8 | | | 1.9 | |
IDEXX Announces First Quarter Results
April 27, 2007
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 | | | | |
