WESTBROOK, Maine, July 20, 2012 /PRNewswire/ -- IDEXX Laboratories, Inc. (NASDAQ: IDXX), today reported that revenues for the second quarter of 2012 increased 6% to $335.6 million, from $317.9 million for the second quarter of 2011. Organic revenue growth[1] was 7%. Earnings per diluted share ("EPS") for the quarter ended June 30, 2012 increased 10% to $0.91, compared to $0.83 for the same period in the prior year.
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"I am pleased with our second quarter results," stated Jonathan Ayers, Chairman and Chief Executive Officer. "With the first half of the year complete, we remain on track for 8-9% organic revenue growth for full year 2012, based on our continued strategy of innovation that supports our customers' growth and success around the globe."
"In the third quarter, we are introducing two new software offerings that advance our strategy of supporting the veterinarian in communicating the value of pet health to pet owners. The first, Pet Health Network® Pro, is a new client communication and education service for veterinarians, practice managers and their teams that offers an automated set of tools to strengthen the client relationship before, during and after each patient visit. The second, VetConnect® PLUS, is an innovative cloud-based tool that enables veterinarians to see all of a patient's diagnostic history generated from IDEXX in-house analyzers and IDEXX Reference Laboratories on one interactive screen, and share those results with pet owners in a client-friendly way. With easy access to a patient's blood work history, the veterinarian is able to more easily discern important trends and thus make better medical recommendations, while conveying those recommendations to the pet owner in a way that results in higher client compliance and practice growth."
"I am also pleased to announce some organizational changes that will position us for continued growth. We have created a new structure consisting of three operating Executive Vice Presidents and a set of key functional staff that will report to the CEO. The three operating Executive Vice Presidents collectively will have responsibility for essentially all of the Company's global operations, each with direct oversight of a portfolio of lines of business and geographic regions."
"I am pleased that Johnny Powers and Michael Williams, executives with extensive track records of success at IDEXX, have been elevated to two of these Executive Vice President positions. I am also very pleased to announce the recruitment of Jay Mazelsky for the third Executive Vice President role. Jay comes from Philips Healthcare, where he was most recently Senior Vice President and General Manager of their global Computed Tomography, Nuclear Medicine and Radiation Therapy Planning businesses. Jay is a seasoned executive who has extensive experience with product and software innovation in the healthcare field, and will be a great addition to our IDEXX team."
"In connection with these changes we also have promoted Merilee Raines, our Chief Financial Officer, and Bill Brown, our Chief Scientific Officer, to Executive Vice President in recognition of their respective critical roles in the past and future success of IDEXX."
"I look forward to working closely with this executive team, as well as our broader leadership team, in the years ahead to promote continued growth and innovation at IDEXX."
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 second quarter of 2012 were $278.3 million compared to $259.7 million for the second quarter of 2011. Organic revenue growth of 8% was due primarily to growth in our instrument and consumables business and in our reference laboratory diagnostic and consulting services business. The revenue increase in our instruments and consumables business was largely the result of higher sales volumes of our Catalyst Dx® and ProCyte Dx® instruments and related consumables. In our reference laboratory diagnostic and consulting services business, revenues increased due to higher sales volumes driven primarily by the acquisition of new customers due, in part, to geographic expansion. Revenue from acquisitions contributed 1% to revenue growth and changes in foreign currency exchange rates reduced revenue growth by 3%.
Water. Water revenues for the second quarter of 2012 were $22.0 million compared to $21.5 million for the second quarter of 2011. Organic revenue growth of 5% was due primarily to higher Colilert® product sales volumes driven by new account acquisitions. Changes in foreign currency exchange rates reduced revenue growth by 3%.
Livestock and Poultry Diagnostics. Livestock and Poultry Diagnostics ("LPD") revenues for the second quarter of 2012 were $23.1 million compared to $25.4 million for the second quarter of 2011. The 4% decline in organic revenue was due primarily to lower sales of Bovine Spongiform Encephalopathy ("BSE" or otherwise commonly referred to as mad cow disease) tests resulting from changes in European Union BSE testing requirements. Effective July 1, 2011, the age at which healthy cattle to be slaughtered are required to be tested for BSE in the European Union was increased from 48 to 72 months, which is reducing the population of cattle tested for this disease. Changes in foreign currency exchange rates reduced revenue growth by 5%.
Additional Operating Results for the Second Quarter
Gross profit for the second quarter of 2012 increased $10.7 million, or 6%, to $184.7 million from $174.0 million for the second quarter of 2011. As a percentage of total revenue, gross profit increased slightly to 55%. The increase in the gross profit percentage was due primarily to the favorable impact of currency 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 second quarter of 2012 was $88.8 million, or 26% of revenue, compared to $84.1 million, or 26% of revenue, for the second quarter of 2011. The increase in SG&A expense was due primarily to increased personnel-related costs, partly offset by the favorable impact of changes in foreign currency exchange rates. Research and development ("R&D") expense for the second quarter of 2012 was $20.0 million, or 6% of revenue, compared to $18.6 million, or 6% of revenue for the second 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 six months ended June 30, 2012.
Outlook for 2012
The Company provides the following guidance for the full year of 2012. The 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 $1.23, the British pound at $1.53 and the Canadian dollar at $0.97 for the balance of 2012. Based on these assumptions, a 1% strengthening of the U.S. dollar would decrease revenue by approximately $4.5 million and operating profit by approximately $0.8 million on an annual basis. Fluctuations in foreign currency exchange rates from current assumptions could have a significant positive or negative impact on our actual results of operations for 2012.
- Revenues are expected to be $1.30 to $1.31 billion, which represents reported growth of 7% to 8% and organic growth of 8% to 9%. Organic revenue growth is unchanged from our previous guidance. The decrease in expected reported revenue compared to our previous guidance is due exclusively to unfavorable changes in foreign currency exchange rates, reflecting a strengthening of the U.S. dollar relative to other currencies since the date of our previous guidance.
- EPS are expected to be $3.05 to $3.10, compared to our previous guidance of $3.07 to $3.12. The change in EPS guidance is due exclusively to the unfavorable impact of changes in foreign currency exchange rates since the date of our previous guidance.
- Free cash flow is expected to be 105% to 110% of net income.[2]
- Capital expenditures are expected to be approximately $60 million.
Conference Call and Webcast Information
IDEXX Laboratories will be hosting a conference call today at 9:00 a.m. (eastern) to discuss its second quarter results and management's outlook. To participate in the conference call, dial 1-612-288-0337 or 1-800-230-1074 and reference confirmation code 254010. An audio replay will be available through July 27, 2012 by dialing 1-320-365-3844 and referencing replay code 254010.
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.
