UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended September 30, 2004. |
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For The Transiton Period From __________To __________. |
COMMISSION FILE NUMBER 0-19271
IDEXX LABORATORIES,
INC.
(Exact name of registrant as specified in its charter)
| DELAWARE | 01-0393723 | ||
|---|---|---|---|
| (State of incorporation) |
(IRS Employer Identification No.) |
||
| One IDEXX Drive, Westbrook, Maine | 04092 | ||
| (Address of principal executive offices) | (ZIP Code) | ||
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of October 29, 2004, 33,650,985 shares of the registrant’s Common Stock, $.10 par value, were outstanding.
1
| PART I | FINANCIAL INFORMATION | Page | |||||
| Item 1. | Financial Statements | ||||||
| Consolidated Balance Sheets as of September 30, 2004 and | |||||||
| December 31, 2003 | 3 | ||||||
| Consolidated Statements of Operations for the three and nine months | |||||||
| ended September 30, 2004 and 2003 | 4 | ||||||
| Consolidated Statements of Cash Flows for the nine months | |||||||
| ended September 30, 2004 and 2003 | 5 | ||||||
| Notes to Consolidated Financial Statements | 6 | ||||||
| Item 2. | Management's Discussion and Analysis of Financial Condition | ||||||
| and Results of Operations | 12 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 25 | |||||
| Item 4. | Controls and Procedures | 26 | |||||
| PART II | OTHER INFORMATION | ||||||
| Item 2. | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 26 | |||||
| Item 6. | Exhibits | 27 | |||||
| SIGNATURES | 28 | ||||||
2
CONSOLIDATED BALANCE
SHEETS
(in thousands, except per share amounts)
(Unaudited)
| September 30, | December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2004 | 2003 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 146,534 | $ | 186,717 | ||||
| Short-term investments | 50,040 | 33,988 | ||||||
| Accounts receivable, less reserves of $1,465 and $1,950 in 2004 and 2003, | ||||||||
| respectively | 57,950 | 53,976 | ||||||
| Inventories | 85,998 | 75,333 | ||||||
| Deferred income taxes | 13,860 | 13,775 | ||||||
| Other current assets | 6,038 | 6,800 | ||||||
| Total current assets | 360,420 | 370,589 | ||||||
| Long-term Investments | 18,386 | 35,082 | ||||||
| Property and Equipment, at cost: | ||||||||
| Land | 2,169 | 1,202 | ||||||
| Buildings | 5,225 | 5,213 | ||||||
| Leasehold improvements | 31,610 | 23,139 | ||||||
| Machinery and equipment | 50,317 | 44,843 | ||||||
| Office furniture and equipment | 37,828 | 34,802 | ||||||
| Construction in progress | 5,392 | 2,824 | ||||||
| 132,541 | 112,023 | |||||||
| Less accumulated depreciation and amortization | 74,212 | 66,799 | ||||||
| 58,329 | 45,224 | |||||||
| Other Long-term Assets: | ||||||||
| Goodwill and other intangible assets, net of accumulated amortization of | ||||||||
| $36,114 and $35,451 for 2004 and 2003, respectively | 69,663 | 61,766 | ||||||
| Other noncurrent assets, net | 5,606 | 9,214 | ||||||
| 75,269 | 70,980 | |||||||
| Total Assets | $ | 512,404 | $ | 521,875 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 18,786 | $ | 19,160 | ||||
| Accrued expenses | 15,270 | 21,521 | ||||||
| Accrued employee compensation and related expenses | 21,087 | 20,792 | ||||||
| Accrued taxes | 16,782 | 21,091 | ||||||
| Accrued marketing and customer programs | 11,241 | 6,762 | ||||||
| Warranty and extended maintenance agreement reserves | 2,626 | 2,250 | ||||||
| Notes payable | 674 | 494 | ||||||
| Deferred revenue | 7,511 | 8,275 | ||||||
| Total current liabilities | 93,977 | 100,345 | ||||||
| Long-term Liabilities: | ||||||||
| Deferred tax liabilities | 1,503 | 236 | ||||||
| Notes payable | 500 | -- | ||||||
| Warranty and extended maintenance agreement reserves | 993 | 1,444 | ||||||
| Deferred revenue | 6,231 | 5,772 | ||||||
| Total long-term liabilities | 9,227 | 7,452 | ||||||
| Commitments and Contingencies (Note 7): | ||||||||
| Partner's Interest in Consolidated Subsidiary | 471 | 786 | ||||||
| Stockholders' Equity: | ||||||||
| Common stock, $0.10 par value; Authorized: 60,000 shares; Issued: 45,155 | ||||||||
| and 44,390 shares in 2004 and 2003, respectively | 4,516 | 4,439 | ||||||
| Additional paid-in capital | 408,509 | 383,249 | ||||||
| Deferred equity-based compensation; Issued: 13 and 3 units in 2004 | ||||||||
| and 2003, respectively | 620 | 138 | ||||||
| Retained earnings | 301,747 | 240,350 | ||||||
| Accumulated other comprehensive income | 6,477 | 4,565 | ||||||
| Treasury stock (11,440 and 9,711 shares in 2004 and 2003, respectively), | ||||||||
| at cost | (313,140 | ) | (219,449 | ) | ||||
| Total stockholders' equity | 408,729 | 413,292 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 512,404 | $ | 521,875 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
3
CONSOLIDATED STATEMENTS
OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2004 | 2003 | 2004 | 2003 | |||||||||||
| Revenue: | ||||||||||||||
| Product revenue | $ | 99,996 | $ | 91,692 | $ | 306,026 | $ | 267,011 | ||||||
| Service revenue | 34,115 | 28,369 | 98,881 | 84,143 | ||||||||||
| 134,111 | 120,061 | 404,907 | 351,154 | |||||||||||
| Cost of Revenue: | ||||||||||||||
| Cost of product revenue | 39,899 | 41,665 | 128,178 | 122,495 | ||||||||||
| Cost of service revenue | 23,154 | 19,306 | 66,623 | 58,436 | ||||||||||
| 63,053 | 60,971 | 194,801 | 180,931 | |||||||||||
| Gross profit | 71,058 | 59,090 | 210,106 | 170,223 | ||||||||||
| Expenses: | ||||||||||||||
| Sales and marketing | 21,132 | 18,222 | 62,794 | 51,743 | ||||||||||
| General and administrative | 12,698 | 9,206 | 36,523 | 29,396 | ||||||||||
| Research and development | 8,824 | 8,376 | 26,029 | 24,017 | ||||||||||
| Income from operations | 28,404 | 23,286 | 84,760 | 65,067 | ||||||||||
| Interest income | 830 | 734 | 2,315 | 2,188 | ||||||||||
| Income before provision for income taxes | ||||||||||||||
| and partner's interest | 29,234 | 24,020 | 87,075 | 67,255 | ||||||||||
| Provision for income taxes | 9,647 | 8,047 | 25,993 | 22,530 | ||||||||||
| Partner's interest in loss of subsidiary | 109 | -- | 315 | -- | ||||||||||
| Net income | $ | 19,696 | $ | 15,973 | $ | 61,397 | $ | 44,725 | ||||||
| Earnings per Share: | ||||||||||||||
| Basic | $ | 0.58 | $ | 0.46 | $ | 1.78 | $ | 1.31 | ||||||
| Diluted | $ | 0.56 | $ | 0.44 | $ | 1.70 | $ | 1.25 | ||||||
| Weighted Average Shares Outstanding: | ||||||||||||||
| Basic | 34,050 | 34,408 | 34,467 | 34,109 | ||||||||||
| Diluted | 35,467 | 35,977 | 36,120 | |||||||||||