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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH 31, 1996
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-19271
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IDEXX LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 01-0393723
(State of incorporation) (I.R.S. Employer Identification No.)
ONE IDEXX DRIVE, WESTBROOK, MAINE 04092
(Address of principal executive offices) (Zip Code)
(207) 856-0300
(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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of April 30, 1996, 36,737,429 shares of the registrant's Common Stock, $.10
par value, were outstanding.
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IDEXX LABORATORIES, INC. AND SUBSIDIARIES
INDEX
Page
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 3
Consolidated Statements of Operations
Three Months Ended
March 31, 1996 and March 31, 1995 4
Consolidated Statements of Cash Flows
Three Months Ended
March 31, 1996 and March 31, 1995 5
Notes to Consolidated Financial Statements 6-8
SIGNATURES 9
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PART I -- FINANCIAL INFORMATION
Item 1. -- Financial Statements
IDEXX LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $128,683,485 $149,252,497
Short-term investments 50,256,706 34,409,074
Accounts receivable, less reserves of $2,691,000
and $2,510,000 in 1996 and 1995, respectively 55,800,307 44,091,136
Inventories 33,431,041 28,192,490
Other current assets 8,066,154 6,034,503
------------ ------------
Total current assets 276,237,693 261,979,700
LONG-TERM INVESTMENTS 11,382,040 13,625,890
PROPERTY AND EQUIPMENT, AT COST:
Leasehold improvements 15,704,142 14,878,226
Machinery and equipment 14,348,888 13,406,525
Office furniture and equipment 12,068,770 10,615,208
Construction in Progress -- 1,439,448
------------ ------------
42,121,800 40,339,407
Less -- Accumulated depreciation and amortization 16,244,358 14,843,799
------------ ------------
25,877,442 25,495,608
OTHER ASSETS 10,997,747 11,438,427
------------ ------------
$324,494,922 $312,539,625
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 14,020,894 $ 10,807,092
Accrued expenses 16,967,109 16,656,872
Notes Payable -- 1,687,433
Deferred revenue 4,796,397 4,263,550
------------ ------------
Total current liabilities 35,784,400 33,414,947
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY:
Common stock, $0.10 par value
Authorized 60,000,000 shares
Issued and outstanding 36,708,960 shares in 1996
and 36,548,596 shares in 1995 3,670,896 3,654,860
Additional paid-in capital 233,690,501 230,805,959
Retained earnings 52,181,645 45,221,905
Cumulative translation adjustment (832,520) (558,046)
------------ ------------
Total stockholders' equity 288,710,522 279,124,678
------------ ------------
$324,494,922 $312,539,625
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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IDEXX LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Revenue $57,399,856 $39,174,201
Cost of revenue 24,506,984 16,196,411
----------- -----------
Gross Profit 32,892,872 22,977,790
Expenses:
Sales and marketing 15,711,111 10,444,952
General and administrative 4,832,538 3,777,887
Research and development 2,809,495 2,461,354
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Income from operations 9,539,728 6,293,597
Interest income, net 2,256,442 580,593
----------- -----------
Net income before provision for
income taxes 11,796,170 6,874,190
Provision for income taxes 4,836,430 2,840,000
----------- -----------
Net income $ 6,959,740 $ 4,034,190
=========== ===========
Net income per common and common
equivalent share $0.18 $0.12
===== =====
Weighted average number of common and
common equivalent shares outstanding 39,362,309 33,799,644
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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IDEXX LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 6,959,740 $ 4,034,190
Adjustments to reconcile net income to net cash
provided by (used in) operating activities -
Depreciation and amortization 2,135,104 1,231,187
Changes in assets and liabilities -
Accounts receivable (11,709,171) (3,895,559)
Inventories (5,238,551) (3,942,477)
Other current assets (2,031,651) (244,622)
Accounts payable 3,213,802 4,051,722
Accrued expenses 310,237 3,967,948
Deferred revenue 532,847 460,866
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Net cash provided by (used in)
operating activities (5,827,643) 5,663,255
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Cash Flows from Investing Activities:
Purchases of property and equipment (1,782,393) (3,681,005)
Decrease (increase) in short-term investments (15,847,632) 6,115,150
Decrease in long-term investments 2,243,850 --
Increase in other assets (293,865) (264,436)
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Net cash provided by (used in) investing activities (15,680,040) 2,169,709
------------ ------------
Cash Flows from Financing Activities:
Payment of notes payable (1,687,433) --
Proceeds from the exercise of stock options 2,900,578 892,223
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Net cash provided by financing activities 1,213,145 892,223
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Net effect of foreign currency translation (274,474) 769,997
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Net Increase (decrease) in Cash and Cash Equivalents (20,569,012) 9,495,184
Cash and Cash Equivalents, beginning of period 149,252,497 25,178,539
------------ ------------
Cash and Cash Equivalents, end of period $128,683,485 $ 34,673,723
============ ============
Supplemental Disclosure of Cash Flow Information:
Interest paid during the period $ 119,200 $ 2,800
============ ============
Income taxes paid during the period $ 3,308,100 $ 376,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
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IDEXX LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited financial statements included herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and
Exchange Commission and include, in the opinion of management, all
adjustments which the Company considers necessary for a fair presentation
of such information. The December 31, 1995 Balance Sheet was derived from
the audited Consolidated Balance Sheets contained in the Company's latest
stockholders' annual report. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These statements should be read in
conjunction with the Company's audited consolidated financial statements
and notes thereto which are contained in the Company's latest stockholders'
annual report. The results for the interim periods presented are not
necessarily indicative of results to be expected for the full fiscal year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements reflect the application
of certain accounting policies described in this and other notes to the
consolidated financial statements.
a. Principles of Consolidation: The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All material intercompany transactions and balances have
been eliminated in consolidation.
b. Certain reclassifications have been made in the 1995 consolidated
financial statements to conform with the current years presentation.
c. The Company adopted Statement of Financial Accounting Standards No.
115 "Accounting for Certain Investments in Debt and Equity Securities"
(SFAS No. 115) effective January 1, 1994. Accordingly, the Company's
cash equivalent and short-term investments are classified as
held-to-maturity and are recorded at amortized cost which approximates
market value.
Cash Equivalents and Short-term Investments: Cash equivalents are
short-term, highly liquid investments with original maturities of less
than three months. Short-term investments are investment securities
with original maturities of greater than three months but less than
one year and consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Municipal bonds $ 7,703,034
U.S. Treasury bills 38,553,672
Certificates of Deposit 4,000,000
-----------
$50,256,706
===========
</TABLE>
Long-term investments are investment securities with original
maturities of greater than one year and consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Municipal bonds $ 7,342,352
U.S. Treasury note 4,039,688
-----------
$11,382,040
===========
</TABLE>
d. Inventories include material, labor and overhead, and are stated at
the lower of cost (first-in, first-out) or market. The components of
inventories are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
Raw materials $ 7,274,137 $ 5,058,199
Work-in-process 5,582,989 4,393,946
Finished goods 20,573,915 18,740,345
----------- -----------
$33,431,041 $28,192,490
=========== ===========
</TABLE>
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3. NET INCOME PER SHARE
Net income per common and common equivalent share is based on the weighted
average number of common and common equivalent shares outstanding during
each period, computed in accordance with the treasury stock method. Fully
diluted net income per common and common equivalent share has not been
presented as it is not significantly different.
Net income per common and common equivalent share and weighted average
number of common and common equivalent shares outstanding for the three
month period ended March 31, 1995 have been adjusted to reflect a 2-for-1
stock split in the form of a stock dividend paid on June 5, 1995.
4. COMMITMENTS AND CONTINGENCIES
From time to time the Company has received notices alleging that the
Company's products infringe third-party proprietary rights. In particular,
the Company has received notices claiming that certain of the Company's
immunoassay products infringe third-party patents. Except as noted below
with respect to the patent infringement suit brought by The Jewish Hospital
of St. Louis, no litigation has been brought against the Company with
respect to such claims. Patent litigation frequently is complex and
expensive, and the outcome of patent litigation can be difficult to
predict. There can be no assurance that the Company will prevail in any
infringement proceedings that have been or may be commenced against the
Company. A significant portion of the Company's revenue during the three
month period ended March 31, 1996 was attributable to products
incorporating certain immunoassay technologies and products relating to the
diagnosis of canine heartworm infection. If the Company were to be
precluded from selling such products or required to pay damages or make
additional royalty or other payments with respect to such sales, the
Company's business and results of operations could be materially and
adversely affected.
On February 4, 1993, the Company acquired Environetics, Inc.
("Environetics"), which brought a patent infringement suit with Stephen
Edberg, Ph.D. against Millipore Corporation ("Millipore") in the U.S.
District Court for the District of Connecticut on September 30, 1992 (the
"Millipore I suit"). The complaint in the Millipore I suit was subsequently
amended to add as additional plaintiffs Access Medical Systems, Inc., a
subsidiary of the Company ("Access"), and Stephen C. Wardlaw, M.D. The
primary relief sought by the plaintiffs is an injunction against Millipore
which would prevent Millipore from selling a competitive product that the
plaintiffs believe infringes U.S. Patent No. 4,925,789 (the " '789 Patent")
covering the Company's Colilert product, under which Access and
Environetics have an exclusive license from Drs. Edberg and Wardlaw.
Millipore has filed a counterclaim alleging that the '789 Patent is invalid
or not infringed.
In addition, on July 26, 1995, the Company, Environetics, Access and Drs.
Edberg and Wardlaw brought a second patent infringement suit against
Millipore in the U.S. District Court for the District of Connecticut (the
"Millipore II Suit"). The principal relief sought by the plaintiffs in the
Millipore II suit is an injunction against Millipore which would prevent
Millipore from selling a product which the plaintiffs believe infringes
U.S. Patent No. 5,429,933 (the " '933 Patent"), which also covers the
Colilert product. The '933 Patent, which is related to the '789 Patent, was
issued in July 1995 to Dr. Edberg. Access and Environetics have an
exclusive license under the '933 Patent from Drs. Edberg and Wardlaw.
Millipore has filed a counterclaim alleging that the '933 Patent is invalid
or not infringed.
If the plaintiffs do not prevail in the Millipore I and Millipore II suits
(which have been consolidated for trial), the Company anticipates that the
Colilert product would encounter increased competition, which could
adversely affect sales of the Colilert product.
On February 24, 1995, CDC Technologies, Inc. ("CDC Technologies") filed
suit against the Company in the U.S. District Court for the District of
Connecticut. In its complaint, CDC Technologies alleges that the Company's
conduct in, and its relationships with its distributors in connection with,
the distribution of the Company's hematology products (i) violate federal
and state antitrust statutes, (ii) violate Connecticut statutes regarding
unfair trade practices, and (iii) constitute a civil conspiracy and
interfere with CDC Technologies' business relations. The relief sought by
CDC Technologies includes treble damages for antitrust violations as well
as compensatory and punitive damages, and an injunction to prevent the
Company from interfering with CDC Technologies' relations with
distributors. The Company has filed an answer denying the allegations in
CDC's complaint. Since discovery in this litigation is ongoing, the
7
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Company is unable to assess the likelihood of an adverse result or estimate
the amount of any damages which the Company may be required to pay. Any
adverse outcome resulting in the payment of damages would adversely affect
the Company's results of operations.
On May 26, 1995, The Jewish Hospital of St. Louis (the "Hospital") brought
a suit against the Company which is currently pending in the U.S. District
Court for the District of Maine for infringement of U.S. Patent No.
4,839,275 issued June 13, 1989 (the " '275 Patent"). The '275 Patent, which
is owned by the Hospital, claims certain methods and compositions for the
diagnosis of canine heartworm infection. The primary relief sought by the
Hospital is an injunction against the Company which would prevent the
Company from selling canine heartworm diagnostic products which infringe
the '275 Patent, as well as treble damages for past infringement. While the
Company believes that it has meritorious defenses in this matter, since
discovery has recently commenced, the Company is unable to assess the
likelihood of an adverse result or estimate the amount of any damages which
the Company may be required to pay. If the Company is precluded from
selling canine heartworm diagnostic products or required to pay damages or
make additional royalty or other payments with respect to such sales, the
Company's business and results of operations could be materially and
adversely affected.
On September 18, 1995, Purisys Inc. ("Purisys"), a producer of home
pollution test kits, and certain of its employees filed suit against the
Company in the Supreme Court of the state of New York. In their complaint,
the plaintiffs allege that the Company has breached promises and made
negligent misrepresentations, and has breached fiduciary and other duties.
The plaintiffs are seeking damages in excess of $50,000,000. The Company
purchased a 15% equity interest in Purisys in August 1994 for $616,000, and
the Company subsequently advanced additional amounts to Purisys to purchase
certain international distribution rights. In March 1995, the Company
ceased advancing funds to Purisys, which filed for protection under Chapter
11 of the Bankruptcy Code in July 1995. While the Company believes it has
meritorious defenses, since the litigation has just been filed and
discovery has not yet commenced, the Company is unable to assess the
likelihood of an adverse result or estimate the amount of any damages which
the Company may be required to pay. Any adverse outcome resulting in the
payment of damages would adversely affect the Company's results of
operations.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IDEXX LABORATORIES, INC.
Date: May 7, 1996
/s/ Merilee Raines
--------------------------------------------
Merilee Raines, Vice President of Finance
(Principal Financial Officer and Principal
Accounting Officer)
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