10-QPeriod: Q2 FY2014

IDEXX LABORATORIES INC /DE Quarterly Report for Q2 Ended Jun 30, 2014

Filed July 25, 2014For Securities:IDXX

Summary

IDEXX Laboratories Inc. reported solid financial results for the second quarter and the first half of 2014. Total revenue increased by 10.6% to $390.1 million for the quarter and by 9.6% to $750.3 million for the half-year, driven by strong performance in the Companion Animal Group (CAG) segment. Net income also saw an increase, reaching $57.2 million for the quarter and $103.8 million for the half-year. The company highlighted its strategic transition to an all-direct distribution model in the U.S. for certain product lines, expected to be completed by January 1, 2015, which will require transitional costs but is anticipated to yield significant long-term revenue and profit benefits. Furthermore, IDEXX successfully refinanced its revolving credit facility, increasing its capacity, and issued new senior notes to strengthen its financial position.

Financial Highlights

51 data points
Beta

Revenue

$390.12M

56.0% Gross Margin

Net Income

$57.22M

14.7% Net Margin

EPS (Diluted)

$0.55

Total Assets

$1.28B

Cash & Equivalents

$305.05M

Free Cash Flow

$67.65M

Financial Statements
Beta
Revenue$390.12M
Cost of Revenue$171.60M
Gross Profit$218.52M
R&D Expenses$25.43M
Operating Income$83.22M
Interest Expense$2.96M
Net Income$57.22M
EPS (Basic)$0.56
EPS (Diluted)$0.55
Shares Outstanding (Basic)102.25M
Shares Outstanding (Diluted)103.59M

Key Highlights

  • 1Total revenue for Q2 2014 increased by 10.6% to $390.1 million, and for the first six months of 2014, it grew by 9.6% to $750.3 million.
  • 2Net income for Q2 2014 was $57.2 million, a 6.0% increase from the prior year, and for the first six months, it was $103.8 million, a 5.0% increase.
  • 3The Companion Animal Group (CAG) segment remains the primary revenue driver, showing a 10.4% increase in Q2 and a 9.7% increase for the first six months.
  • 4IDEXX announced a strategic shift to an all-direct distribution model in the U.S. for specific products, expected to be implemented by January 1, 2015, with associated transitional costs but long-term revenue growth expectations.
  • 5The company successfully refinanced its revolving credit facility in June 2014, increasing its capacity to $700 million.
  • 6In December 2013 and July 2014, IDEXX issued a total of $275 million in senior notes to further bolster its financial flexibility.
  • 7Earnings per diluted share were $1.10 for Q2 2014, up from $0.99 in the prior year, and $1.99 for the first six months, up from $1.80.

Frequently Asked Questions

IDEXX announced its plan to transition to an all-direct product distribution model in the U.S. for its rapid assay test kits and instrument consumables, effective January 1, 2015. This involves not renewing contracts with existing U.S. distribution partners and taking over sales, logistics, and customer support directly. While this transition will incur transitional costs in late 2014 and early 2015, the company expects it to capture additional revenue and provide accretive benefits in the long term.

IDEXX significantly strengthened its financial flexibility by refinancing its existing $450 million unsecured revolving credit facility into a new five-year, $700 million facility in June 2014. Additionally, the company issued $150 million in senior notes in December 2013 and another $125 million in July 2014, providing substantial liquidity and funding options.

The primary growth driver for IDEXX is its Companion Animal Group (CAG) segment, which experienced strong revenue growth driven by increased volumes and higher realized prices in reference laboratory diagnostic services and VetLab consumables. Growth in canine testing products and customer information management systems also contributed positively.

For the three months ended June 30, 2014, changes in foreign currency exchange rates increased total company revenue by approximately $2.1 million, mainly due to the weakening U.S. dollar against the euro and British pound. For the six months, the impact was an increase of approximately $1.4 million. While currency movements can affect reported revenue, the company uses hedging strategies to mitigate some of this impact.