IDEXX Laboratories, Inc. Announces First Quarter Results

WESTBROOK, Maine, April 28 /PRNewswire-FirstCall/ -- IDEXX Laboratories, Inc. , 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

CONTACT: Merilee Raines, Chief Financial Officer of IDEXX Laboratories,Inc., +1-207-856-8155

Web site: http://www.idexx.com/