WESTBROOK, Maine, Oct. 28 /PRNewswire-FirstCall/ -- IDEXX Laboratories, Inc. , today reported that revenue for the third quarter of 2005 increased 18% to $158.1 million from $134.1 million for the third quarter of 2004. Earnings per diluted share for the quarter ended September 30, 2005 were $0.61, compared to $0.56 for the same period in the prior year.
During the quarter ended September 30, 2004, the Company's earnings per diluted share included an after tax benefit of $0.02 associated with the settlement of a third party claim and certain state tax benefits. During the quarter ended September 30, 2005, the Company incurred acquisition integration costs of $0.01 per diluted share. Excluding the effects of these discrete items in the third quarters of 2004 and 2005, adjusted earnings per diluted share grew approximately 15%. 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 third quarter of 2005 increased 18% to $128.7 million from $108.8 million for the third quarter of 2004. Sales from businesses acquired during 2004 and 2005, consisting primarily of veterinary reference laboratories, contributed approximately 8% to CAG revenue growth. Aside from acquisitions, this increase resulted primarily from higher sales of instruments and consumables, rapid assay products, laboratory and consulting services, and, to a lesser extent, pharmaceutical products and computer systems and digital radiography. The favorable impact of foreign currency contributed less than 1% to CAG revenue growth.
Water segment revenue for the third quarter increased 6% to $15.1 million from $14.2 million for the third quarter of 2004 primarily due to higher worldwide sales volume. The favorable impact of foreign currency contributed less than 1% to Water revenue growth.
Food Diagnostics Group ("FDG") revenue for the third quarter increased 29% to $14.3 million from $11.1 million for the third quarter of 2004. This increase reflects growth in the production animal products business due to sales from businesses acquired in 2004 and higher sales volume of established product lines. The favorable impact of foreign currency contributed less than 1% to FDG revenue growth and acquisitions contributed 11%.
"Our results for the third quarter were slightly higher than our expectation due to strong performance across the CAG segment and in our production animal testing business," said Jonathan Ayers, Chairman and CEO. "The acquisitions we made in 2004 and 2005 contributed significantly to this growth, and continue to exceed our expectations. However, organic growth in our businesses was also strong."
Additional operating results
Gross profit for the third quarter of 2005 increased $10.3 million, or 14%, to $81.3 million from $71.1 million for the third quarter of 2004. As a percentage of total revenue, gross profit decreased to 51% from 53% largely due to the benefit in 2004 from the settlement of a third party claim noted above. Excluding the impact of this item in 2004, the gross profit percentage decreased one percent, primarily due to higher sales of lower margin laboratory and consulting services as a percentage of total sales and to comparatively more favorable product warranty liability adjustments for LaserCyte(R) instruments in the same period of the prior year. LaserCyte(R) service experience continued to improve during the quarter and resulted in a modest favorable change in our estimated cost of product warranty liability for all placed instruments for which we have such future obligations; however, the incremental improvements in the same period of the prior year were relatively greater.
Research and development ("R&D") expense for the quarter was $10.5 million compared to $8.8 million for the third quarter of 2004. R&D expense was approximately constant as a percentage of revenue at 7% for the third quarters of 2005 and 2004.
Selling, general and administrative ("SG&A") expense was $40.7 million, or 26% of revenues, compared to $33.8 million, or 25% of revenues, in the third quarter of 2004. The increase in SG&A expense as a percentage of revenues reflects the investment made to expand our sales and marketing organizations in both the U.S. and Europe, as well as the integration and amortization costs associated with recent business acquisitions. 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.
Year-to-date results
Year-to-date revenue increased 16% to $471.1 million from $404.9 million for the same period in 2004. Year-to-date earnings per diluted share were $1.70 for the nine-month periods in both 2005 and 2004. During the nine months ended September 30, 2004, the Company's earnings per diluted share included a net benefit of $0.09 resulting from a reduction in the Company's provision for income taxes primarily related to the completion of an IRS audit through the year 2001, the settlement of a third party claim, and a payment received in settlement of certain litigation. During the nine months ended September 30, 2005, the Company incurred acquisition integration costs of $0.04 per diluted share. Excluding the effects of these discrete items in 2004 and 2005, adjusted earnings per diluted share grew approximately 8%.
Companion Animal Group revenue for the nine months ended September 30, 2005 increased 16% to $384.9 million from $331.4 million for the same period in 2004. Sales from businesses acquired during 2004 and 2005, consisting primarily of veterinary reference laboratories, contributed approximately 7% to CAG revenue growth. Aside from acquisitions, this increase 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 systems and digital radiography. The favorable impact of currency contributed 1% to year-to-date CAG revenue growth.
Water segment revenue for the nine months ended September 30, 2005 increased 8% to $42.2 million from $39.1 million for the same period in 2004 primarily due to higher worldwide sales volume. The favorable impact of foreign currency contributed 1% to year-to-date Water revenue growth.
Food Diagnostics Group revenue for the nine months ended September 30, 2005 increased 28% to $44.1 million from $34.4 million for the same period in 2004. This increase reflects growth in the production animal products business due to sales from businesses acquired in 2004 and higher sales volume of established product lines. The favorable impact of foreign currency contributed 2% to FDG revenue growth and acquisitions contributed 12%.
Outlook The Company offers the following guidance for the full year of 2005: * Revenue is expected to be approximately $631 to $634 million. * Diluted earnings per share are expected to be approximately $2.28 to $2.30, which includes approximately $0.06 of anticipated acquisition integration costs. The Company offers the following guidance for the full year of 2006: * Revenue is expected to be approximately $695 to $705 million. * Diluted earnings per share are expected to be approximately $2.36 to $2.48, which includes the prospective expensing of equity-based compensation as required by Statement of Financial Accounting Standards No. 123 (revised 2004). Increased Share Repurchase Authorization
The Company also announced today that its Board of Directors has authorized the repurchase by the Company of an additional two million shares of its common stock in the open market or in negotiated transactions. These shares are in addition to 552,000 shares remaining under a previous Board authorization. The timing and amount of any repurchases will be at the discretion of the Company's management.
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 June 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 Nine Months Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2005 2004 2005 2004 Revenue: Revenue $158,069 $134,111 $471,125 $404,907 Expenses and Income: Cost of revenue 76,740 63,053 233,141 194,801 Gross profit 81,329 71,058 237,984 210,106 Sales and marketing 24,303 21,132 75,221 62,794 General and administrative 16,360 12,698 47,304 36,523 Research and development 10,543 8,824 30,312 26,029 Income from operations 30,123 28,404 85,147 84,760 Interest income, net 918 830 2,292 2,315 Income before provision for income taxes and partner's interest 31,041 29,234 87,439 87,075 Provision for income taxes 10,547 9,647 29,533 25,993 Partner's share of consolidated loss (110) (109) (321) (315) Net Income: Net income $20,604 $19,696 $58,227 $61,397 Earnings per share: Basic $0.63 $0.58 $1.78 $1.78 Earnings per share: Diluted $0.61 $0.56 $1.70 $1.70 Shares outstanding: Basic 32,482 34,050 32,686 34,467 Shares outstanding: Diluted 34,044 35,467 34,183 36,120 IDEXX Laboratories, Inc. and Subsidiaries Key Operating Information (Unaudited) Three Months Ended Nine Months Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2005 2004 2005 2004 Key Operating Ratios (as a percentage of revenue): Gross profit 51.5% 53.0% 50.5% 51.9% Sales, marketing, general and administrative expense 25.7% 25.2% 26.0% 24.6% Research and development expense 6.7% 6.6% 6.4% 6.4% Income from operations 19.1% 21.2% 18.1% 20.9% International International Revenue: revenue $52,464 $40,127 $163,432 $123,987 International revenue as percentage of total revenue 33.2% 29.9% 34.7% 30.6% IDEXX Laboratories, Inc. and Subsidiaries Segment Information Amounts in thousands (Unaudited) Three Months Ended Nine Months Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2005 2004 2005 2004 Revenue: Companion Animal Group $128,676 $108,816 $384,888 $331,377 Water 15,077 14,237 42,154 39,095 Food Diagnostics Group 14,316 11,058 44,083 34,435 Total $158,069 $134,111 $471,125 $404,907 Gross Profit: Companion Animal Group $62,926 $53,757 $ 185,014 $161,942 Water 10,226 9,811 28,325 26,552 Food Diagnostics Group 8,177 7,490 24,645 21,612 Total $81,329 $71,058 $237,984 $210,106 Income from Operations: Companion Animal Group $21,303 $19,314 $61,602 $61,022 Water 7,276 6,977 19,320 18,004 Food Diagnostics Group 2,518 2,934 6,856 8,254 Other (974) (821) (2,631) (2,520) Total $30,123 $28,404 $85,147 $84,760 Gross Profit (as a percentage of revenue): Companion Animal Group 48.9% 49.4% 48.1% 48.9% Water 67.8% 68.9% 67.2% 67.9% Food Diagnostics Group 57.1% 67.7% 55.9% 62.8% Income from Operations (as a percentage of revenue): Companion Animal Group 16.6 17.7% 16.0% 18.4% Water 48.3% 49.0% 45.8% 46.1% Food Diagnostics Group 17.6% 26.5% 15.6% 24.0% IDEXX Laboratories, Inc. and Subsidiaries Revenues by Product and Service Categories Amounts in thousands (Unaudited) Three Months Ended Percent- age Percent- Change age Net Percent- Change of Sept. 30, Sept. 30, Dollar age from Currency 2005 2004 Change Change Currency Effect (1) Net CAG Revenue: Instruments and consumables $52,438 $47,864 $4,574 9.6% 0.5% 9.1% Rapid assay products 25,291 22,444 2,847 12.7% 0.1% 12.6% Laboratory and consulting services 39,987 29,444 10,543 35.8% 0.1% 35.7% Computer systems and digital radiography 7,166 6,480 686 10.6% 0.2% 10.4% Pharmaceutical products 3,794 2,584 1,210 46.8% -- 46.8% Net CAG revenue 128,676 108,816 19,860 18.3% 0.3% 18.0% Net Water Revenue: Water 15,077 14,237 840 5.9% 0.5% 5.4% Net FDG Revenue: Production animal products 10,558 7,313 3,245 44.4% 0.5% 43.9% Dairy-testing products 3,758 3,745 13 0.3% 0.2% 0.1% Net FDG revenue 14,316 11,058 3,258 29.5% 0.4% 29.1% Net Revenue: $158,069 $134,111 $23,958 17.9% 0.3% 17.6%
(1) Represents the percentage change in revenue attributed to the effect of changes in currency rates from the three months ended September 30, 2004 to the three months ended September 30, 2005.
Nine Months Ended Percent- age Percent- Change age Net Percent- Change of Sept. 30, Sept. 30, Dollar age from Currency 2005 2004 Change Change Currency Effect (1) Net CAG Revenue: Instruments and consumables $158,356 $145,099 $13,257 9.1% 1.3% 7.8% Rapid assay products 77,440 72,861 4,579 6.3% 0.5% 5.8% Laboratory and consulting services 116,898 85,021 31,877 37.5% 0.5% 37.0% Computer systems and digital radiography 21,826 20,399 1,427 7.0% 0.3% 6.7% Pharmaceutical products 10,368 7,997 2,371 29.6% -- 29.6% Net CAG revenue 384,888 331,377 53,511 16.1% 0.8% 15.3% Net Water Revenue: Water 42,154 39,095 3,059 7.8% 1.3% 6.5% Net FDG Revenue: Production animal products 32,376 22,796 9,580 42.0% 2.7% 39.3% Dairy-testing products 11,707 11,639 68 0.6% 1.6% -1.0% Net FDG revenue 44,083 34,435 9,648 28.0% 2.3% 25.7% Net Revenue: $471,125 $404,907 $66,218 16.4% 1.0% 15.4%
(1) Represents the percentage change in revenue attributed to the effect of changes in currency rates from the nine months ended September 30, 2004 to the nine months ended September 30, 2005.
IDEXX Laboratories, Inc. and Subsidiaries Consolidated Balance Sheet Amounts in thousands (Unaudited) September 30, December 31, 2005 2004 Assets: Current Assets: Cash and cash equivalents $57,768 $47,156 Short-term investments 71,688 90,116 Accounts receivable, net 68,098 65,639 Inventories 80,206 76,424 Other current assets 21,916 22,257 Total current assets 299,676 301,592 Long-term Investments 2,052 19,687 Property and equipment - cost 145,283 137,851 Less: accumulated depreciation 80,347 75,221 Property and equipment, net 64,936 62,630 Other long-term assets, net 125,966 130,328 Total assets $492,630 $514,237 Liabilities and Stockholders' Equity: Current Liabilities: Accounts payable $18,404 $14,723 Accrued expenses 70,229 73,785 Notes payable 542 1,291 Deferred revenue 8,343 10,153 Total current liabilities 97,518 99,952 Total long-term liabilities 13,986 16,233 Partner's interest in subsidiary 362 392 Stockholders' Equity: Common stock 4,579 4,522 Additional paid-in capital 431,611 410,817 Deferred equity-based compensation 1,274 665 Retained earnings 376,909 318,682 Treasury stock, at cost (437,127) (348,327) Accumulated other comprehensive income 3,518 11,301 Total stockholders' equity 380,764 397,660 Total liabilities and stockholders' equity $492,630 $514,237 IDEXX Laboratories, Inc. and Subsidiaries Key Balance Sheet Information (Unaudited) September 30, December 31, 2005 2004 Key Balance Sheet Information: Total cash, cash equivalents and investments $131,508 $156,959 Days sales outstanding 41 39 Inventory turns 1.8 1.9 IDEXX Laboratories, Inc. and Subsidiaries Consolidated Statement of Cash Flows Amounts in thousands (Unaudited) Nine Months Ended September 30, September 30, 2005 2004 Operating: Cash Flows from Operating Activities: Net income $58,227 $61,397 Non-cash charges 21,981 23,524 Changes in current assets and liabilities, net of acquisitions and disposals (3,703) (16,714) Net cash provided by operating activities $76,505 $68,207 Investing: Cash Flows from Investing Activities: Decrease in investments, net 36,075 30,648 Purchase of property and equipment (16,512) (23,431) Net proceeds from sale of land and buildings 803 -- Acquisition of businesses and intangible assets (6,406) (6,839) Acquisition of equipment leased to customers (1,784) (1,951) Net cash used by investing activities $12,176 $(1,573) Financing: Cash Flows from Financing Activities: Repayment of notes payable (2,056) (356) Purchase of treasury stock (88,800) (94,004) Proceeds from the exercise of stock options 14,941 17,550 Net cash used by financing activities $(75,915) $(76,810) Net effect of exchange rate changes (2,154) 68 Net increase (decrease) in cash and cash equivalents 10,612 (10,108) Cash and cash equivalents, beginning of period 47,156 96,942 Cash and cash equivalents, end of period $57,768 $86,834 IDEXX Laboratories, Inc. and Subsidiaries Free Cash Flow (Unaudited) Nine Months Ended September 30, September 30, 2005 2004 Free Cash Flow: Net cash provided by operating activities $76,505 $68,207 Purchase of property and equipment (16,512) (23,431) Acquisition of equipment leased to customers (1,784) (1,951) Free cash flow $58,209 $42,825 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 Nine Months Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2005 2004 2005 2004 Total number of shares purchased 595,500 720,400 1,493,200 1,728,300 Average price paid per share $64.50 $49.88 $59.47 $54.17
IDEXX Laboratories, Inc.CONTACT: Merilee Raines, Chief Financial Officer of IDEXX, +1-207-856-8155
Web site: http://www.idexx.com//
