☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________.
COMMISSION FILE NUMBER: 000-19271
IDEXX LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
01-0393723
(State or other jurisdiction of incorporation
or organization)
(IRSEmployer Identification No.)
One IDEXX Drive
Westbrook
Maine
04092
(Address of principal executive offices)
(ZIP Code)
207-556-0300
(Registrant’s telephone number, including area code)
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.10 par value per share
IDXX
NASDAQ Global Select Market
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. YesýNo ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The number of shares outstanding of the registrant’s Common Stock, $0.10 par value per share, was 85,782,572 on October 28, 2019.
GLOSSARY OF TERMS AND SELECTED ABBREVIATIONS
In order to aid the reader, we have included certain terms and abbreviations used throughout this Quarterly Report on Form 10-Q below:
Term/ Abbreviation
Definition
AOCI
Accumulated other comprehensive income or loss
ASU 2016-02
ASU 2016-02, Leases (Topic 842); also referred to as the “New Leasing Standard”
CAG
Companion Animal Group, a reporting segment that provides veterinarians diagnostic products and services and information management solutions that enhance the health and well-being of pets
Credit Facility
Our $850 million five-year unsecured revolving credit facility under an amended and restated credit agreement that was executed in December 2015, also referred to as line of credit
FASB
U.S. Financial Accounting Standards Board
LPD
Livestock, Poultry and Dairy, a reporting segment that provides diagnostic products and services for livestock and poultry health and to ensure the quality and safety of milk and improve dairy efficiency
OPTI Medical
OPTI Medical Systems, Inc., a wholly-owned subsidiary of IDEXX Laboratories Inc., located in Roswell, Georgia. This business manufactures and supplies blood gas analyzers and consumables worldwide for the human point-of-care medical diagnostics market. The Roswell facility also manufactures electrolytes slides (instrument consumables) to run Catalyst One®, Catalyst Dx®, and blood gas analyzers and consumables for the veterinary market; also referred to as OPTI.
Organic revenue growth
A non-GAAP financial measure and represents the percentage change in revenue, as compared to the same period for the prior year, net of the effect of changes in foreign currency exchange rates, certain business acquisitions and divestitures. Organic revenue growth should be considered in addition to, and not as a replacement for or as a superior measure to, revenues reported in accordance with U.S. GAAP, and may not be comparable to similarly titled measures reported by other companies.
R&D
Research and Development
Reported revenue growth
Represents the percentage change in revenue reported in accordance with U.S. GAAP, as compared to the same period in the prior year
SaaS
Software-as-a-service
SEC
U.S. Securities and Exchange Commission
Senior Note Agreements
Note purchase agreements for the private placement of senior notes having an aggregate principal amount of approximately $700 million, referred to as senior notes or long-term debt
U.S. GAAP
Accounting principles generally accepted in the United States of America
Water
Water, a reporting segment that provides water microbiology testing products
Accounts receivable, net of reserves of $3,831 in 2019 and $4,702 in 2018
268,319
248,855
Inventories
204,893
173,303
Other current assets
126,174
108,220
Total current assets
703,382
654,172
Long-Term Assets:
Property and equipment, net
496,584
437,270
Operating lease right-of-use assets (Notes 2 and 8)
78,977
—
Goodwill
212,171
214,489
Intangible assets, net
35,662
41,825
Other long-term assets
224,705
189,593
Total long-term assets
1,048,099
883,177
TOTAL ASSETS
$
1,751,481
$
1,537,349
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts payable
$
75,515
$
69,534
Accrued liabilities
278,626
260,683
Line of credit
229,500
398,937
Current portion of deferred revenue
42,986
41,290
Total current liabilities
626,627
770,444
Long-Term Liabilities:
Deferred income tax liabilities
33,734
29,267
Long-term debt
696,634
601,348
Long-term deferred revenue, net of current portion
48,345
60,697
Long-term operating lease liabilities (Notes 2 and 8)
66,341
—
Other long-term liabilities
77,078
84,826
Total long-term liabilities
922,132
776,138
Total liabilities
1,548,759
1,546,582
Commitments and Contingencies (Note 16)
Stockholders’ Equity (Deficit):
Common stock, $0.10 par value: Authorized: 120,000 shares; Issued: 105,594 shares in 2019 and 105,087 shares in 2018; Outstanding: 85,888 shares in 2019 and 86,100 shares in 2018
10,559
10,509
Additional paid-in capital
1,189,554
1,138,216
Deferred stock units: Outstanding: 143 units in 2019 and 162 units in 2018
4,416
4,524
Retained earnings
1,505,152
1,167,928
Accumulated other comprehensive loss
(45,565
)
(41,791
)
Treasury stock, at cost: 19,707 shares in 2019 and 18,988 shares in 2018
(2,461,698
)
(2,288,899
)
Total IDEXX Laboratories, Inc. stockholders’ equity (deficit)
202,418
(9,513
)
Noncontrolling interest
304
280
Total stockholders’ equity (deficit)
202,722
(9,233
)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
$
1,751,481
$
1,537,349
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
IDEXX LABORATORIES,INC.ANDSUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2019
2018
2019
2018
Revenue:
Product revenue
$
360,000
$
324,303
$
1,059,696
$
990,364
Service revenue
245,303
221,145
741,766
673,492
Total revenue
605,303
545,448
1,801,462
1,663,856
Cost of Revenue:
Cost of product revenue
125,112
120,294
370,388
365,810
Cost of service revenue
135,241
119,511
396,674
356,865
Total cost of revenue
260,353
239,805
767,062
722,675
Gross profit
344,950
305,643
1,034,400
941,181
Expenses:
Sales and marketing
104,551
95,146
312,499
291,502
General and administrative
66,337
63,955
186,653
185,966
Research and development
34,260
29,192
98,033
87,725
Income from operations
139,802
117,350
437,215
375,988
Interest expense
(7,090
)
(8,453
)
(23,662
)
(26,184
)
Interest income
86
142
159
893
Income before provision for income taxes
132,798
109,039
413,712
350,697
Provision for income taxes
23,960
15,825
76,464
59,327
Net income
108,838
93,214
337,248
291,370
Less: Net income (loss) attributable to noncontrolling interest
1
(37
)
24
(23
)
Net income attributable to IDEXX Laboratories, Inc. stockholders
$
108,837
$
93,251
$
337,224
$
291,393
Earnings per Share:
Basic
$
1.26
$
1.07
$
3.91
$
3.35
Diluted
$
1.24
$
1.05
$
3.85
$
3.29
Weighted Average Shares Outstanding:
Basic
86,198
86,756
86,206
87,029
Diluted
87,667
88,453
87,633
88,687
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
IDEXX LABORATORIES, INC.ANDSUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OFCOMPREHENSIVE INCOME
(in thousands)
(Unaudited)
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2019
2018
2019
2018
Net income
$
108,838
$
93,214
$
337,248
$
291,370
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
(13,912
)
(1,845
)
(12,231
)
(18,172
)
Unrealized gain on net investment hedge, net of tax expense of $947 and $1,105 in 2019 and $175 and $888 in 2018
3,007
555
3,507
2,818
Unrealized (loss) gain on investments, net of tax (benefit) expense of $(21) and $93 in 2019 and $12 and $61 in 2018
(67
)
37
295
187
Unrealized gain (loss) on derivative instruments:
Unrealized gain, net of tax expense of $1,973 and $2,335 in 2019 and $62 and $1,846 in 2018
8,473
1,728
10,451
7,514
Reclassification adjustment for (gain) loss included in net income, net of tax (expense) benefit of $(688) and $(1,295) in 2019 and $(153) and $476 in 2018
(2,483
)
(103
)
(5,796
)
1,936
Unrealized gain on derivative instruments
5,990
1,625
4,655
9,450
Other comprehensive (loss) gain, net of tax
(4,982
)
372
(3,774
)
(5,717
)
Comprehensive income
103,856
93,586
333,474
285,653
Less: Comprehensive income (loss) attributable to noncontrolling interest
1
(37
)
24
(23
)
Comprehensive income attributable to IDEXX Laboratories, Inc.
$
103,855
$
93,623
$
333,450
$
285,676
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
IDEXX LABORATORIES, INC. ANDSUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except per share amounts)
(Unaudited)
Common Stock
Number of Shares
$0.10 Par Value
Additional Paid-in Capital
Deferred Stock Units
Retained Earnings
Accumulated Other Comprehensive Loss
Treasury Stock
Noncontrolling Interest
Total Stockholders’ Equity (Deficit)
Balance December 31, 2018
105,087
$
10,509
$
1,138,216
$
4,524
$
1,167,928
$
(41,791
)
$
(2,288,899
)
$
280
$
(9,233
)
Net income
—
—
—
—
102,681
—
—
28
102,709
Other comprehensive income, net
—
—
—
—
—
1,776
—
—
1,776
Repurchases of common stock, net
—
—
—
—
—
—
(61,135
)
—
(61,135
)
Common stock issued under stock plans
258
26
11,393
—
—
—
—
—
11,419
Share-based compensation cost
—
—
6,266
68
—
—
—
—
6,334
Balance March 31, 2019
105,345
$
10,535
$
1,155,875
$
4,592
$
1,270,609
$
(40,015
)
$
(2,350,034
)
$
308
$
51,870
Net income (loss)
—
—
—
—
125,706
—
—
(5
)
125,701
Other comprehensive loss, net
—
—
—
—
—
(568
)
—
—
(568
)
Repurchases of common stock, net
—
—
—
—
—
—
(20,343
)
—
(20,343
)
Common stock issued under stock plans
133
13
8,556
(578
)
—
—
—
—
7,991
Deferred stock units activity
—
—
(324
)
324
—
—
—
—
—
Share-based compensation cost
—
—
6,855
43
—
—
—
—
6,898
Balance June 30, 2019
105,478
$
10,548
$
1,170,962
$
4,381
$
1,396,315
$
(40,583
)
$
(2,370,377
)
$
303
$
171,549
Net income
—
—
—
—
108,837
—
—
1
108,838
Other comprehensive loss, net
—
—
—
—
—
(4,982
)
—
—
(4,982
)
Repurchases of common stock, net
—
—
—
—
—
—
(91,321
)
—
(91,321
)
Common stock issued under stock plans
116
11
9,247
(11
)
—
—
—
—
9,247
Share-based compensation cost
—
—
9,345
46
—
—
—
—
9,391
Balance September 30, 2019
105,594
$
10,559
$
1,189,554
$
4,416
$
1,505,152
$
(45,565
)
$
(2,461,698
)
$
304
$
202,722
The accompanying notes are an integral part of these consolidated financial statements.
6
IDEXX LABORATORIES, INC. ANDSUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Cont.)
(in thousands, except per share amounts)
(Unaudited)
Common Stock
Number of Shares
$0.10 Par Value
Additional Paid-in Capital
Deferred Stock Units
Retained Earnings
Accumulated Other Comprehensive Loss
Treasury Stock
Noncontrolling Interest
Total Stockholders’ Equity (Deficit)
Balance December 31, 2017
104,275
$
10,428
$
1,073,931
$
5,988
$
803,545
$
(36,470
)
$
(1,911,528
)
$
264
$
(53,842
)
Cumulative effect of accounting changes
—
—
—
—
(12,648
)
—
—
—
(12,648
)
Balance January 1, 2018
104,275
$
10,428
$
1,073,931
$
5,988
$
790,897
$
(36,470
)
$
(1,911,528
)
$
264
$
(66,490
)
Net income
—
—
—
—
89,451
—
—
25
89,476
Other comprehensive income, net
—
—
—
—
—
2,264
—
—
2,264
Repurchases of common stock, net
—
—
—
—
—
—
(94,285
)
—
(94,285
)
Common stock issued under stock plans
401
40
14,311
(259
)
—
—
—
—
14,092
Share-based compensation cost
—
—
5,917
43
—
—
—
—
5,960
Balance March 31, 2018
104,676
$
10,468
$
1,094,159
$
5,772
$
880,348
$
(34,206
)
$
(2,005,813
)
$
289
$
(48,983
)
Net income (loss)
—
—
—
—
108,691
—
—
(11
)
108,680
Other comprehensive loss, net
—
—
—
—
—
(8,353
)
—
—
(8,353
)
Repurchases of common stock, net
—
—
—
—
—
—
(105,834
)
—
(105,834
)
Common stock issued under stock plans
171
17
9,053
(1,821
)
—
—
—
—
7,249
Deferred stock units activity
—
—
(385
)
385
—
—
—
—
—
Share-based compensation cost
—
—
6,330
62
—
—
—
—
6,392
Balance June 30, 2018
104,847
$
10,485
$
1,109,157
$
4,398
$
989,039
$
(42,559
)
$
(2,111,647
)
$
278
$
(40,849
)
Net income (loss)
—
—
—
—
93,251
—
—
(37
)
93,214
Other comprehensive income, net
—
—
—
—
—
372
—
—
372
Repurchases of common stock, net
—
—
—
—
—
—
(73,505
)
—
(73,505
)
Common stock issued under stock plans
195
19
12,800
(12
)
—
—
—
—
12,807
Share-based compensation cost
—
—
6,527
69
—
—
—
—
6,596
Balance September 30, 2018
105,042
$
10,504
$
1,128,484
$
4,455
$
1,082,290
$
(42,187
)
$
(2,185,152
)
$
241
$
(1,365
)
The accompanying notes are an integral part of these consolidated financial statements.
7
IDEXX LABORATORIES, INC. ANDSUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OFCASHFLOWS
(in thousands)
(Unaudited)
For the Nine Months Ended September 30,
2019
2018
Cash Flows from Operating Activities:
Net income
$
337,248
$
291,370
Adjustments to reconcile net income to net cash provided by operating activities:
