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IDEXX Laboratories Announces First Quarter Results
Date:4/25/2008

WESTBROOK, Maine, April 25 /PRNewswire-FirstCall/ -- IDEXX Laboratories, Inc. (Nasdaq: IDXX), today reported that revenue for the first quarter of 2008 increased 18% to $249.1 million from $211.2 million for the first quarter of 2007. Diluted earnings per share ("EPS") for the quarter ended March 31, 2008 were $0.43, compared to $0.32, for the same period in the prior year. Non-GAAP adjusted diluted EPS for the first quarter grew 21% to $0.41 from $0.34 for the first quarter of 2007.

"Our first quarter results demonstrated the robustness of our diversified, global business model. We continued to generate strong revenue growth across our portfolio despite a weakening economy in the U.S.," said Jonathan W. Ayers, Chairman and Chief Executive Officer. "Our 17% revenue growth in the Companion Animal Group was driven by 11% organic revenue growth, acquisitions that strengthened our core businesses, and the benefit of currency translation on international sales. We achieved double digit organic revenue growth, despite a comparison to an unusually strong first quarter in 2007, when our business saw a surge in revenue resulting from the pet food recall in North America. Overall, I was very pleased that the company was able to continue to perform well on both the top line and bottom line.

"In addition to this strong current quarter financial performance, IDEXX achieved important milestones on our innovation agenda. We began shipping our two next-generation point-of-care veterinary instruments, Catalyst Dx(TM) and SNAPshot Dx(TM), at the end of the quarter. These two additions to the IDEXX VetLab Suite strengthen an already strong in-house laboratory offering. We are on track with our disciplined ramp objectives and expect to place 1,vidual items may not equal the non-GAAP measurement due to rounding of the individual items in this presentation.

IDEXX Laboratories, Inc. and Subsidiaries

Segment Information

Amounts in thousands (Unaudited)

Three Months Ended

March 31, March 31,

2008 2007

Revenue: CAG $203,609 $173,433

Water 16,816 14,405

PAS 21,162 16,811

Other 7,487 6,506

Total $249,074 $211,155

Gross Profit: CAG $101,985 $86,330

Water 10,315 9,232

PAS 14,233 10,963

Other 3,127 1,914

Unallocated 176 140

Total $129,836 $108,579

Income from

Operations: CAG $29,555 $23,585

Water 6,270 5,642

PAS 5,828 3,965

Other (189) (413)

Unallocated (2,745) (1,902)

Total $38,719 $30,877

Gross Profit

(as a percentage

of revenue): CAG 50.1% 49.8%

Water 61.3% 64.1%

PAS 67.3% 65.2%

Other 41.8% 29.4%

Income from

Operations

(as a percentage

of revenue): CAG 14.5% 13.6%

Water 37.3% 39.2%

PAS 27.5% 23.6%

Other (2.5%) (6.4%)

IDEXX Laboratories, Inc. and Subsidiaries

Revenues by Product and Service Categories

Amounts in thousands (Unaudited)

Three Months Ended

Percentage

Change Net

Percen- Percen- of

tage tage Acquis-

Change Change itions

Percen- from from and

Net March 31, March 31, Dollar tage Currency Acquis- Currency

Revenue 2008 2007 Change Change (1) itions(2) Effect(3)

CAG $203,609 $173,433 $30,176 17.4% 4.2% 2.7% 10.5%

Water 16,816 14,405 2,411 16.7% 4.5% - 12.2%

PAS 21,162 16,811 4,351 25.9% 11.8% 12.2% 1.9%

Other 7,487 6,506 981 15.1% 4.8% 13.7% (3.4%)

Total $249,074 $211,155 $37,919 18.0% 4.9% 3.6% 9.5%

Three Months Ended

Percentage

Change Net

Percen- Percen- of

tage tage Acquis-

Change Change itions

Percen- from from and

Net CAG March 31, March 31, Dollar tage Currency Acquis- Currency

Revenue 2008 2007 Change Change (1) itions(2) Effect(3)

Instruments

and

consumables $75,610 $66,956 $8,654 12.9% 4.8% - 8.1%

Rapid assay

products 38,222 31,237 6,985 22.4% 2.4% - 20.0%

Laboratory

and consult-

ing services 70,107 57,888 12,219 21.1% 5.2% 8.1% 7.8%

Practice

information

management

systems

and digital

radiography 15,025 12,525 2,500 20.0% 2.0% - 18.0%

Pharmaceutical

products 4,645 4,827 (182) (3.8%) - - (3.8%)

Net CAG

revenue $203,609 $173,433 $30,176 17.4% 4.2% 2.7% 10.5%

(1) Represents the percentage change in revenue attributed to the effect of changes in currency rates from the three months ended March 31, 2008 to the three months ended March 31, 2007.

(2) Represents the percentage change in revenue attributed to incremental revenues during the three months ended March 31, 2008 compared to the three months ended March 31, 2007 from businesses acquired since January 1, 2007.

(3) Organic growth

IDEXX Laboratories, Inc. and Subsidiaries

Consolidated Balance Sheet

Amounts in thousands (Unaudited)

March 31, December 31,

2008 2007

Assets:

Current Assets:

Cash and cash equivalents $60,220 $60,360

Accounts receivable, net 125,245 108,384

Inventories 99,878 98,804

Other current assets 37,023 38,115

Total current assets 322,366 305,663

Property and equipment, at cost 270,340 255,176

Less: accumulated depreciation 119,246 113,324

Property and equipment, net 151,094 141,852

Other long-term assets, net 263,397 254,664

Total assets $736,857 $702,179

Liabilities and

Stockholders'

Equity: Current Liabilities:

Accounts payable $25,301 $32,510

Accrued expenses 88,300 107,248

Debt 140,682 72,956

Deferred revenue 10,743 10,678

Total current liabilities 265,026 223,392

Long-term debt, net of

current portion 5,540 5,727

Other long-term liabilities 32,655 34,737

Total long-term liabilities 38,195 40,464

Stockholders' Equity:

Common stock 9,487 9,450

Additional paid-in capital 526,169 514,773

Deferred stock units 2,513 2,201

Retained earnings 613,413 585,862

Treasury stock, at cost (749,318) (696,668)

Accumulated other

comprehensive income 31,372 22,705

Total stockholders' equity 433,636 438,323

Total liabilities and

stockholders' equity $736,857 $702,179

IDEXX Laboratories, Inc. and Subsidiaries

Key Balance Sheet Information (Unaudited)

March 31, December 31,

2008 2007

Key

Balance Sheet Days sales outstanding 42.6 39.4

Information: Inventory turns 2.0 2.3

IDEXX Laboratories, Inc. and Subsidiaries

Consolidated Statement of Cash Flows

Amounts in thousands (Unaudited)

Three Months Ended

March 31, March 31,

2008 2007

Operating: Cash Flows from Operating

Activities:

Net income $27,551 $21,027

Non-cash charges 11,282 6,736

Changes in current assets

and liabilities, net of

acquisitions and disposals (41,622) (29,553)

Net cash used by operating

activities $(2,789) $(1,790)

Investing: Cash Flows from Investing

Activities:

Decrease in investments, net - 35,000

Purchase of property and

equipment (17,049) (10,492)

Acquisition of businesses and

intangible assets (7,533) (80,311)

Acquisition of equipment leased

to customers (226) (238)

Net cash used by investing

activities $(24,808) $(56,041)

Financing: Cash Flows from Financing

Activities:

Borrowings on revolving credit

facilities, net 67,765 73,188

Purchase of treasury stock (51,355) (34,416)

Proceeds from the exercise of

stock options 5,974 7,916

Tax benefit from exercise of

stock options 2,384 3,004

Net cash provided by financing

activities $24,768 $49,692

Net effect of exchange rate

changes 2,689 410

Net decrease in cash and cash

equivalents (140) (7,729)

Cash and cash equivalents,

beginning of period 60,360 61,666

Cash and cash equivalents,

end of period $60,220 $53,937

IDEXX Laboratories, Inc. and Subsidiaries

Free Cash Flow

Amounts in thousands (Unaudited)

Three Months Ended

March 31, March 31,

2008 2007

Free Cash

Flow: Net cash used by operating

activities $(2,789) $(1,790)

Financing cash flows attributable

to tax benefits from exercise of

stock options 2,384 3,004

Purchase of fixed assets (17,049) (10,492)

Acquisition of equipment leased

to customers (226) (238)

Free cash flow $(17,680) $(9,516)

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

Amounts in thousands except per share data (Unaudited)

Three Months Ended

March 31, March 31,

2008 2007

Share repurchases during the period 950 810

Average price paid per share $54.03 $42.50

Shares remaining under repurchase authorization

as of March 31, 2008 5,902

IDEXX Laboratories, Inc. and Subsidiaries

Earnings per Share Adjusted for Stock Split (Unaudited)

Three Months Ended

March 31, March 31,

2008 2007

Basic

As reported $0.45 $0.68

Adjusted for stock split $0.45 $0.34

Diluted

As reported $0.43 $0.65

Adjusted for stock split $0.43 $0.32

Contact: Merilee Raines, Chief Financial Officer, 1-207-556-8155

000 to 1,200 Catalyst Dx(TM) analyzers in 2008. Customer interest is very strong, as we expected, and our sales volumes will not be constrained by market demand this year."

Revenue Performance

Companion Animal Group ("CAG") revenue for the first quarter of 2008 increased 17% to $203.6 million from $173.4 million for the first quarter of 2007. Acquisitions of reference laboratories contributed just under 3% to growth and changes in foreign currency exchange rates contributed an additional 4%. Growth for the quarter adjusted for acquisitions and foreign currency exchange rates was 11%.

Water segment revenue for the first quarter of 2008 increased 17% to $16.8 million from $14.4 million for the first quarter of 2007 due primarily to higher sales volume, partly offset by lower average unit sales prices. Higher sales volumes resulted in part from our commencement in September 2007 of distribution of certain water testing kits manufactured by Invitrogen Corporation, which contributed 6% to revenue growth. Compared to the same period of 2007, changes in foreign currency exchange rates contributed 5% to Water revenue growth.

Production Animal Segment ("PAS") revenue for the first quarter of 2008 increased 26% to $21.2 million from $16.8 million for the first quarter of 2007 due primarily to higher livestock diagnostics sales volume, including sales attributable to Institut Pourquier ("Pourquier"), which we acquired in March 2007. Sales of Pourquier products contributed 12% to PAS revenue growth. The favorable impact of higher sales volume was partly offset by lower average unit sales prices for our post-mortem test for bovine spongiform encephalopathy ("BSE") due to greater price competition. Compared to the same period of 2007, changes in foreign currency exchange rates contributed 12% to PAS revenue growth.

Additional Operating Results

Gross profit for the first quarter of 2008 increased $21.3 million, or 20%, to $129.8 million from $108.6 million for the first quarter of 2007. As a percentage of total revenue, gross profit increased to 52% from 51%. Year-over-year, the gross profit percentage was favorably impacted by higher average unit sales prices in our rapid assay and laboratory and consulting services businesses; lower cost of slides sold for use in our chemistry analyzers; the impact of foreign currency rates on sales denominated in those currencies; and the absence of discrete items associated with purchase accounting for acquisitions that occurred in the first quarter of 2007. These favorable impacts were partially offset by increased cost of service in the laboratory and consulting services business.

Research and development ("R&D") expense for the first quarter of 2008 was $17.3 million, or 7% of revenue, compared to $16.0 million, or 8% of revenue, for the first quarter of 2007. R&D expense grew primarily as a result of higher personnel costs due, in part, to incremental new product and technology development initiatives and product enhancement efforts related primarily to IDEXX VetLab(R) instrumentation, rapid assay, and digital radiography products. These increases were largely offset by a net decrease in new product development spending as we completed development of Catalyst Dx(TM) and SNAPshot Dx(TM).

Selling, general and administrative ("SG&A") expense for the first quarter of 2008 was $73.8 million, or 30% of revenue, compared to $61.7 million, or 29% of revenue, for the first quarter of 2007. Increased SG&A expense was due primarily to expanded worldwide sales, marketing and customer support resources; higher spending on information technology; and incremental activities associated with recently acquired businesses.

Supplementary Analysis of Results

The accompanying financial tables provide more information concerning our revenue and other operating results for the three months ended March 31, 2008, as well as a reconciliation of non-GAAP adjusted diluted EPS to earnings per share.

Outlook

The Company offers the following revised guidance for the full year of 2008:

-- Revenue is expected to be $1.06 billion to $1.075 billion, updated from

guidance of $1.05 billion to $1.07 billion provided in January of this

year, which represents revenue growth of 15% to 17%.

-- Diluted earnings per share are expected to be $1.84 to $1.87, updated

from guidance of $1.83 to $1.87 provided in January of this year, which

represents EPS growth of 26% to 28%. Excluding the impact of

acquisition-related purchase accounting and acquisition integration

costs and the write-down of certain pharmaceutical assets in 2007 and

discrete income tax benefits in 2008, non-GAAP adjusted diluted EPS are

projected to grow 15% to 17%.

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 612-332-0107 or 800-230-1766 and reference confirmation code 919872. An audio replay will be available through May 2, 2008 by dialing 320-365-3844 and referencing replay code 919872.

The call will also be available via live or archived Webcast on the IDEXX Laboratories' web site at http://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 7, 2008, at 10:00 a.m. (eastern) at the Portland Marriott at Sable Oaks in South Portland, Maine.

Chairman and Chief Executive Officer, Jonathan W. 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 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 4,500 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; disruptions, shortages or pricing changes that affect the Company's purchases of products and materials from third parties, including from sole source suppliers; the Company's ability to identify acquisition opportunities, complete acquisitions and integrate acquired businesses; the impact of competition, technological change, and veterinary hospital consolidation on the markets for the Company's products; the Company's ability to manufacture complex biologic 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 the Company's 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 effects of deep or sustained economic weakness on pet owner decisions regarding pet health care; 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; 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, 2007, in the section captioned "Risk Factors."

IDEXX Laboratories, Inc. and Subsidiaries

Consolidated Statement of Operations

Amounts in thousands except per share data (Unaudited)

Three Months Ended

March 31, March 31,

2008 2007

Revenue: Revenue $249,074 $211,155

Expenses

and

Income: Cost of revenue 119,238 102,576

Gross profit 129,836 108,579

Sales and marketing 44,001 35,582

General and administrative 29,821 26,149

Research and development 17,295 15,971

Income from operations 38,719 30,877

Interest income (expense), net (485) 28

Income before provision for income taxes 38,234 30,905

Provision for income taxes 10,683 9,878

Net

Income: Net income $27,551 $21,027

Earnings per share: Basic $0.45 $0.34

Earnings per share: Diluted $0.43 $0.32

Shares outstanding: Basic 60,865 62,274

Shares outstanding: Diluted 63,558 65,083

Historical share and per share data has been retroactively

restated to reflect the additional shares of common stock that

were distributed on November 26, 2007 as a result of the

two-for-one split of our outstanding common stock.

IDEXX Laboratories, Inc. and Subsidiaries

Key Operating Information (Unaudited)

Three Months Ended

March 31, March 31,

2008 2007

Key

Operating Gross profit 52.1% 51.4%

Ratios (as Sales, marketing, general and

a percentage administrative expense 29.6% 29.2%

of revenue): Research and development expense 6.9% 7.6%

Income from operations(1) 15.5% 14.6%

International International revenue (in thousands) $103,328 $80,869

Revenue: International revenue as a

percentage of total revenue 41.5% 38.3%

(1) The sum of individual items may not equal the total due to rounding.

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

Mar. 31, Mar. 31, Mar. 31, Mar. 31,

2008 2007 2008 2007

GAAP measurement $ 129,836 $ 108,579 $ 38,719 $30,877

% of revenue 52.1% 51.4% 15.5% 14.6%

Acquisition-related

purchase accounting

and acquisition

integration

costs (1) - 1,248 - 1,434

Discrete income tax

benefits(2) - - - -

Non-GAAP comparative

measurements(3) $ 129,836 $ 109,827 $ 38,719 $ 32,311

% of revenue 52.1% 52.0% 15.5% 15.3%

Three Months Ended

Earnings per Share

Net Income Diluted

Mar. 31, Mar. 31, Mar. 31, Mar. 31,

2008 2007 2008 2007

GAAP measurement $ 27,551 $ 21,027 $0.43 $0.32

% of revenue 11.1% 10.0%

Acquisition-related

purchase accounting

and acquisition

integration

costs (1) - 904 - 0.01

Discrete income tax

benefits(2) (1,472) - (0.02) -

Non-GAAP comparative

measurements(3) $ 26,079 $ 21,931 $0.41 $0.34

% of revenue 10.5% 10.4%

Management believes adjusted diluted EPS is a useful non-GAAP financial measure to evaluate the results of ongoing operations, excluding significant specified events, period over period, and therefore believes that investors may find this information useful in addition to the GAAP results.

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. We applied the statutory income tax rates of the applicable tax jurisdictions to calculate the after-tax impact of these discrete items.

(2) We believe that certain significant discrete income tax items create impacts on financial measures that are not indicative of future performance because the items are not likely to recur within a reasonable period. For 2008, the separately identified discrete income tax benefit was due to a reduction in international deferred tax liabilities due to lower anticipated international tax rates.

(3) The sum of the indi
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SOURCE IDEXX Laboratories, Inc.
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