WESTBROOK, Maine, Jan. 27 /PRNewswire-FirstCall/ -- IDEXX Laboratories, Inc. , today reported that revenue for the fourth quarter of 2005 increased 16% to $167.0 million from $144.3 million for the fourth quarter of 2004. Earnings per diluted share for the quarter ended December 31, 2005 were $0.60, compared to $0.49 for the same period in the prior year.
During the quarter ended December 31, 2005, the Company incurred acquisition integration costs of $0.02 per diluted share and income tax expense on the repatriation of foreign earnings under the American Jobs Creation Act of $0.03 per diluted share. During the quarter ended December 31, 2004, the Company incurred acquisition-related costs of $0.02 per diluted share. Excluding the effects of these discrete items in the fourth quarters of 2005 and 2004, adjusted earnings per diluted share grew approximately 28%. The Company believes adjusted earnings per diluted share is a useful financial measure to indicate the results of ongoing operations, excluding significant infrequent items.
Companion Animal Group (“CAG”) revenue for the fourth quarter of 2005 increased 16% to $135.9 million from $117.3 million for the fourth quarter of 2004. Incremental sales from businesses acquired during 2004 and 2005, consisting of veterinary reference laboratories and a digital radiography business, contributed approximately 5% to CAG revenue growth. Aside from acquisitions, the increased CAG revenue resulted primarily from higher sales of instruments and consumables, laboratory and consulting services, rapid assay products, and, to a lesser extent, computer and digital radiography systems and pharmaceutical products. The unfavorable impact of foreign currency decreased CAG revenue growth by 2%.
Water segment revenue for the fourth quarter increased 4% to $14.6 million from $14.0 million for the fourth quarter of 2004 primarily due to higher worldwide sales volume. The unfavorable impact of foreign currency decreased Water revenue growth by 3%.
Food Diagnostics Group (“FDG”) revenue for the fourth quarter increased 27% to $16.4 million from $13.0 million for the fourth quarter of 2004. Incremental sales from businesses acquired in the fourth quarter of 2004 contributed approximately 9% to FDG revenue growth. The remainder of the growth resulted primarily from higher sales volume of established product lines in the production animal diagnostic products business. The unfavorable impact of foreign currency decreased FDG revenue growth by 7%.
“IDEXX Laboratories wrapped up a strong year in 2005 with organic revenue growth, adjusting for acquisitions and foreign exchange, of nearly 14%, bringing organic growth for the year to 10%,” said Jonathan W. Ayers, President and CEO. “The fourth quarter was a particularly strong quarter for the instrument and consumables business as well as production animal diagnostic products. Solid growth trends in the business, several recent product introductions and the benefits from our focus on world class quality over the last twelve months put us in good position to meet our revenue and profit plans for 2006.”
Additional operating results
Gross profit for the fourth quarter of 2005 increased $16.0 million, or 23%, to $84.9 million from $68.9 million for the fourth quarter of 2004. As a percentage of revenue, gross profit increased to 51% from 48%. The increase in the gross profit percentage was attributable, in part, to relatively favorable pricing in certain businesses; the net favorable change in the impact of foreign currency rates; higher proportional sales of higher margin products and services; lower costs of slides sold for use in our VetTest(R) instruments under the agreement with our supplier; and lower acquisition-related costs in the fourth quarter of 2005 compared to the same period of the prior year.
Research and development (“R&D”) expense for the quarter was $10.6 million compared to $9.4 million for the fourth quarter of 2004. R&D expense was approximately constant as a percentage of total revenue at 6% for the fourth quarters of 2005 and 2004.
Selling, general and administrative (“SG&A”) expense was $44.1 million, or 26% of revenue, compared to $36.3 million, or 25% of revenue, in the fourth quarter of 2004. The increase in SG&A expense as a percentage of total revenue reflects the investment made to expand our sales and marketing organizations in both the U.S. and Europe, as well as higher integration costs and intangible amortization expenses associated with the businesses acquired in the fourth quarter of 2004 and in 2005. The increase in SG&A expense in total dollars was also attributable to costs incurred to support the operating activities of businesses acquired in the fourth quarter of 2004 and in 2005.
Full year results
Revenue for the year ended December 31, 2005 increased 16% to $638.1 million from $549.2 million for the year ended December 31, 2004.
Earnings per diluted share for 2005 were $2.30, a 5% increase over earnings per diluted share of $2.19 for 2004. In 2005, earnings per diluted share included net expenses of $0.08 resulting from (i) integration costs associated with businesses acquired in the fourth quarter of 2004 and in 2005, including costs incurred in connection with the consolidation of our European production animal diagnostics operations in Bern, Switzerland, and (ii) income tax expense on the repatriation of foreign earnings under the American Jobs Creation Act. In 2004, earnings per diluted share included a net benefit of $0.08 resulting from (i) a reduction in the Company’s provision for income taxes primarily related to the completion of a tax audit through the year 2001 and the receipt of certain state tax benefits, (ii) reductions in the estimated liability for a third party claim, and (iii) a payment received in settlement of certain litigation, offset partly by acquisition-related costs associated with businesses acquired in the fourth quarter of 2004. Excluding the effects of these discrete items in 2005 and 2004, adjusted earnings per diluted share grew approximately 13%.
Companion Animal Group revenue for the year ended December 31, 2005 increased 16% to $520.8 million from $448.7 million for 2004. Incremental sales from businesses acquired during 2004 and 2005, consisting of veterinary reference laboratories and a digital radiography business, contributed approximately 7% to CAG revenue growth. Aside from acquisitions, the increased CAG revenue resulted primarily from increased sales of instruments and consumables, laboratory and consulting services, rapid assay products, and, to a lesser extent, pharmaceutical products and computer and digital radiography systems.
Water segment revenue for the year ended December 31, 2005 increased 7% to $56.8 million from $53.1 million in 2004 primarily due to higher worldwide sales volume.
Food Diagnostics Group revenue for the year ended December 31, 2005 increased 28% to $60.5 million from $47.4 million in 2004. Incremental sales from businesses acquired in the fourth quarter of 2004 contributed approximately 11% to FDG revenue growth. The remainder of the growth resulted primarily from higher sales volume of established product lines in the production animal products business.
Outlook
The Company offers the following revised guidance for the full year of 2006:
* Revenue is expected to be approximately $700 to $710 million. * Diluted earnings per share are expected to be approximately $2.40 to $2.50, which includes the expensing of equity-based compensation as required by Statement of Financial Accounting Standards No. 123 (revised 2004).
IDEXX Laboratories to Present at Merrill Lynch Global Pharmaceutical, Biotechnology and Medical Device Conference
The Company also announced today that it will participate in the Merrill Lynch Global Pharmaceutical, Biotechnology and Medical Device Conference. Jonathan W. Ayers, President and CEO, is scheduled to make a presentation on the Company on Tuesday, February 7, 2006 at 10:20 a.m. (ET) at the Grand Hyatt in New York City. Individuals can access the live webcast audio presentation through a link on the home page of the IDEXX Laboratories Web site, idexx.com. An archived edition of the presentation will be available for 14 days 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 therapeutics. Our 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 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, 2004 and the Quarterly Report on Form 10-Q for the quarter ended September 30, 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 Twelve Months Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2005 2004 2005 2004 Revenue: Revenue $ 166,970 $ 144,274 $ 638,095 $ 549,181 Expenses and Income: Cost of revenue 82,054 75,363 315,195 270,164 Gross profit 84,916 68,911 322,900 279,017 Sales and marketing 26,769 22,916 101,990 85,710 General and administrative 17,327 13,347 64,631 49,870 Research and development 10,636 9,373 40,948 35,402 Income from operations 30,184 23,275 115,331 108,035 Interest income, net 849 753 3,141 3,068 Income before provision for income taxes and partner’s interest 31,033 24,028 118,472 111,103 Provision for income taxes 11,137 7,172 40,670 33,165 Partner’s share of consolidated loss (131) (79) (452) (394) Net Income: Net income $ 20,027 $ 16,935 $ 78,254 $ 78,332 Earnings per share: Basic $ 0.63 $ 0.51 $ 2.41 $ 2.29 Earnings per share: Diluted $ 0.60 $ 0.49 $ 2.30 $ 2.19 Shares outstanding: Basic 32,032 33,462 32,521 34,214 Shares outstanding: Diluted 33,627 34,845 34,055 35,800 IDEXX Laboratories, Inc. and Subsidiaries Key Operating Information (Unaudited) Three Months Twelve Months Ended Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2005 2004 2005 2004 Key Operating Ratios (as a percentage of revenue): Gross profit 50.9% 47.8% 50.6% 50.8% Sales, marketing, general and administrative expense 26.4% 25.2% 26.1% 24.6% Research and development expense 6.4% 6.5% 6.4% 6.5% Income from operations 18.1% 16.1% 18.1% 9.7% International Revenue: International Revenue $59,153 $51,578 $225,789 $175,566 International revenue as percentage of total revenue 35.4% 35.8% 35.4% 32.0% IDEXX Laboratories, Inc. and Subsidiaries Segment Information Amounts in thousands (Unaudited) Three Months Ended Twelve Months Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2005 2004 2005 2004 Revenue: Companion Animal Group $ 135,942 $ 117,310 $ 520,830 $ 448,687 Water 14,606 14,003 56,760 53,098 Food Diagnostics Group 16,422 12,961 60,505 47,396 Total $ 166,970 $ 144,274 $ 638,095 $ 549,181 Gross Profit: Companion Animal Group $ 65,396 $ 52,985 $ 250,409 $ 214,927 Water 9,951 9,333 38,277 35,885 Food Diagnostics Group 9,569 6,593 34,214 28,205 Total $ 84,916 $ 68,911 $ 322,900 $ 279,017 Income from Operations: Companion Animal Group $ 21,369 $ 16,101 $ 82,970 $ 77,123 Water 6,653 6,255 25,974 24,259 Food Diagnostics Group 3,038 1,577 9,894 9,831 Other (876) (658) (3,507) (3,178) Total $ 30,184 $ 23,275 $ 115,331 $ 108,035 Gross Profit (as a percentage of revenue): Companion Animal Group 48.1% 45.2% 48.1% 47.9% Water 68.1% 66.7% 67.4% 67.6% Food Diagnostics Group 58.3% 50.9% 56.5% 59.5% Income from Operations (as a percentage of revenue): Companion Animal Group 15.7% 13.7% 15.9% 17.2% Water 45.5% 44.7% 45.8% 45.7% Food Diagnostics Group 18.5% 12.2% 16.4% 20.7% 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 Dec. 31, Dec. 31, Dollar age Currency Currency 2005 2004 Change Change (1) Effect Net CAG Revenue: Instruments and consumables $ 59,181 $ 52,840 $ 6,341 12.0% -3.4% 15.4% Rapid assay products 22,815 20,645 2,170 10.5% -0.8% 11.3% Laboratory and consulting services 39,527 33,575 5,952 17.7% -2.9% 20.6% Computer systems and digital radiography 10,763 7,764 2,999 38.6% -0.1% 38.7% Pharmaceutical products 3,656 2,486 1,170 47.1% -- 47.1% Net CAG revenue 135,942 117,310 18,632 15.9% -2.5% 18.4% Net Water Revenue: Water 14,606 14,003 603 4.3% -2.5% 6.8% Net FDG Revenue: Production animal products 12,569 8,894 3,675 41.3% -7.9% 49.2% Dairy-testing products 3,853 4,067 (214) -5.3% -3.5% -1.8% Net FDG revenue 16,422 12,961 3,461 26.7% -6.5% 33.2% Net Revenue: $ 166,970 $ 144,274 $ 22,696 15.7% -2.9% 18.6% (1) Represents the percentage change in revenue attributed to the effect of changes in currency rates from the three months ended December 31, 2004 to the three months ended December 31, 2005. Twelve Months Ended Percent- Percent- age age Change Change Percent- from Net of Dec. 31, Dec. 31, Dollar age Currency Currency 2005 2004 Change Change (1) Effect Net CAG Revenue: Instruments and consumables $ 217,537 $ 197,939 $ 19,598 9.9% -- 9.9% Rapid assay products 100,255 93,506 6,749 7.2% 0.2% 7.0% Laboratory and consulting services 156,425 118,596 37,829 31.9% -0.3% 32.2% Computer systems and digital radiography 32,589 28,163 4,426 15.7% 0.2% 15.5% Pharmaceutical products 14,024 10,483 3,541 33.8% -- 33.8% Net CAG revenue 520,830 448,687 72,143 16.1% -- 16.1% Net Water Revenue: Water 56,760 53,098 3,662 6.9% 0.3% 6.6% Net FDG Revenue: Production animal products 44,945 31,690 13,255 41.8% -0.3% 42.1% Dairy-testing products 15,560 15,706 (146) -0.9% 0.3% -1.2% Net FDG revenue 60,505 47,396 13,109 27.7% -0.1% 27.8% Net Revenue: $ 638,095 $ 549,181 $ 88,914 16.2% -- 16.2% (1) Represents the percentage change in revenue attributed to the effect of changes in currency rates from the twelve months ended December 31, 2004 to the twelve months ended December 31, 2005. IDEXX Laboratories, Inc. and Subsidiaries Consolidated Balance Sheet Amounts in thousands (Unaudited) Dec. 31, Dec. 31, 2005 2004 Assets: Current Assets: Cash and cash equivalents $ 67,151 $ 47,156 Short-term investments 65,580 90,116 Accounts receivable, net 71,688 65,639 Inventories 69,369 76,424 Other current assets 25,457 22,257 Total current assets 299,245 301,592 Long-term Investments -- 19,687 Property and equipment - cost 142,777 137,851 Less: accumulated depreciation 77,080 75,221 Property and equipment, net 65,697 62,630 Other long-term assets, net 125,734 130,328 Total assets $ 490,676 $ 514,237 Liabilities and Stockholders’ Equity: Current Liabilities: Accounts payable $ 19,842 $ 14,723 Accrued expenses 78,208 73,785 Notes payable 551 1,291 Deferred revenue 7,965 8,998 Total current liabilities 106,566 98,797 Total long-term liabilities 14,800 17,388 Partner’s interest in subsidiary 300 392 Stockholders’ Equity: Common stock 4,594 4,522 Additional paid-in capital 437,394 410,817 Deferred equity-based compensation 1,316 665 Retained earnings 396,936 318,682 Treasury stock, at cost (472,096) (348,327) Accumulated other comprehensive income 866 11,301 Total stockholders’ equity 369,010 397,660 Total liabilities and stockholders’ equity $ 490,676 $ 514,237 IDEXX Laboratories, Inc. and Subsidiaries Key Balance Sheet Information (Unaudited) Dec. 31, Dec. 31, 2005 2004 Key Balance Sheet Information: Total cash, cash equivalents and investments $ 132,731 $ 156,959 Days sales outstanding 38 39 Inventory turns(1) 2.4 1.9 (1) Reported inventory turns as of December 31, 2005 are favorably impacted by the timing of contractual inventory receipts subsequent to December 31, 2005. We expect future inventory turns to be consistent with our historical range of 1.5 to 2.0 turns per year. IDEXX Laboratories, Inc. and Subsidiaries Consolidated Statement of Cash Flows Amounts in thousands (Unaudited) Twelve Months Ended Dec. 31, Dec. 31, 2005 2004 Operating: Cash Flows from Operating Activities: Net income $ 78,254 $ 78,332 Non-cash charges 28,103 30,684 Changes in current assets and liabilities, net of acquisitions and disposals 10,195 (13,637) Net cash provided by operating activities $ 116,552 $ 95,379 Investing: Cash Flows from Investing Activities: Decrease in investments, net 44,261 48,896 Purchase of property and equipment (24,199) (29,065) Net proceeds from sales of land and buildings 2,751 -- Acquisition of businesses and intangible assets (7,604) (53,942) Acquisition of equipment leased to customers (2,615) (2,640) Net cash provided (used) by investing activities $ 12,594 $ (36,751) Financing: Cash Flows from Financing Activities: Repayments of notes payable (2,057) (356) Purchase of treasury stock (123,769) (129,191) Proceeds from the exercise of stock options 18,841 19,376 Net cash used by financing activities $ (106,985) $(110,171) Net effect of exchange rate changes (2,166) 1,757 Net increase (decrease) in cash and cash equivalents 19,995 (49,786) Cash and cash equivalents, beginning of period 47,156 96,942 Cash and cash equivalents, end of period $ 67,151 $ 47,156 IDEXX Laboratories, Inc. and Subsidiaries Free Cash Flow (Unaudited) Twelve Months Ended Dec. 31, Dec. 31, 2005 2004 Free Cash Flow: Net cash provided by operating activities $ 116,552 $ 95,379 Purchase of property and equipment (24,199) (29,065) Acquisition of equipment leased to customers (2,615) (2,640) Free cash flow $ 89,738 $ 63,674 Free cash flow indicates the cash generated from operations reduced by investments in capital and other long-term assets. Free cash flow excludes financing activities, investments in monetary securities, and business acquisitions and divestitures. 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 Three Months Ended Twelve Months Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2005 2004 2005 2004 Total number of shares purchased 499,700 685,100 1,992,900 2,413,400 Average price paid per share $ 69.98 $ 51.36 $ 62.11 $ 53.37
IDEXX Laboratories, Inc.
CONTACT: Merilee Raines, Chief Financial Officer of IDEXX Laboratories,Inc., +1-207-856-8155
Web site: http://www.idexx.com//
