10-QPeriod: Q3 FY2006

IDEXX LABORATORIES INC /DE Quarterly Report for Q3 Ended Sep 30, 2006

Filed November 1, 2006For Securities:IDXX

Summary

IDEXX Laboratories, Inc. reported strong financial performance for the quarter and nine months ended September 30, 2006. Revenue increased significantly year-over-year, driven by robust growth in the Companion Animal Group (CAG) and Food Diagnostics Group (FDG). Gross profit and operating income also saw substantial increases, reflecting improved operational efficiency and strategic acquisitions. The company's adoption of SFAS No. 123(R) for share-based compensation effective January 1, 2006, impacted expense recognition, leading to increased reporting of share-based compensation costs. Despite this, the company demonstrated solid top-line and bottom-line growth, highlighting the continued demand for its veterinary and diagnostic products and services. Investments in research and development and acquisitions continue to shape the company's strategic landscape.

Key Highlights

  • 1Total revenue for the nine months ended September 30, 2006, increased by 16% to $546.9 million compared to the prior year.
  • 2Companion Animal Group (CAG) revenue grew by 16.7% year-over-year for the nine-month period, driven by instruments, consumables, and laboratory services.
  • 3Food Diagnostics Group (FDG) revenue saw a significant increase of 22.2% for the nine-month period, primarily due to strong performance in production animal products.
  • 4Gross profit for the nine months increased by 19% to $283.3 million, with an improved gross profit margin of 51.8% compared to 50.5% in the prior year.
  • 5Operating income for the nine months rose by 15.6% to $98.5 million.
  • 6The company adopted SFAS No. 123(R) for share-based compensation on January 1, 2006, resulting in increased recognition of share-based compensation expenses.
  • 7Cash used by investing activities was $21.7 million for the nine months ended September 30, 2006, largely due to investments in property and equipment and acquisitions.

Frequently Asked Questions

For the nine months ended September 30, 2006, IDEXX Laboratories reported a 16% increase in total revenue, reaching $546.9 million, compared to $471.1 million for the same period in 2005. The three months ended September 30, 2006, also showed a strong 19% increase in revenue to $187.4 million.

The adoption of SFAS No. 123(R) on January 1, 2006, required IDEXX to recognize share-based compensation expense at fair value. This led to an increase in reported share-based compensation expenses for the current period, impacting both operating expenses and net income. Specifically, for the nine months ended September 30, 2006, total share-based compensation expense was $8.0 million, compared to $0.2 million in the prior year (pro forma for the prior year under SFAS 123).

Revenue growth in the Companion Animal Group (CAG) was driven by several factors, including increased sales volume for instruments and consumables, higher testing volume for laboratory and consulting services, and growth in practice information management systems and digital radiography. Acquisitions also contributed to the revenue increase.

IDEXX Laboratories expects that its current cash and cash equivalents, short-term investments, and cash generated from operations will be sufficient to fund its ongoing operations, capital expenditures, and strategic growth initiatives. The company anticipates total capital expenditures of $55-$60 million for 2006 and approximately $50 million for 2007-2008 for facility projects.