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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 March 31, 2004.

OR

[   ] 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)  
 

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 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 April 30, 2004, 34,727,898 shares of the registrant’s Common Stock, $.10 par value, were outstanding.

1

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

INDEX

PART I       FINANCIAL INFORMATION   Page  
               
   Item 1.  Financial Statements     
               
      Consolidated Balance Sheets as of March 31, 2004 and     
          December 31, 2003  3  
               
      Consolidated Statements of Operations for the three months     
          ended March 31, 2004 and 2003  4  
               
      Consolidated Statements of Cash Flows for the three months     
          ended March 31, 2004 and 2003  5  
               
      Notes to Consolidated Financial Statements  6  
               
   Item 2.  Management's Discussion and Analysis of Financial Condition     
          and Results of Operations  11  
               
   Item 3.  Quantitative and Qualitative Disclosures About Market Risk  21  
               
   Item 4.  Controls and Procedures  22  
               
PART II      OTHER INFORMATION  
               
               
   Item 2.  Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities  23  
               
   Item 6.  Exhibits and Reports on Form 8-K  23  
               
SIGNATURES         24  
               
 

2

PART I FINANCIAL INFORMATION
Item 1. Financial Statements

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(Unaudited)

March 31, December 31,
2004
 2003
        ASSETS                
Current Assets:            
     Cash and cash equivalents   $ 180,510   $ 186,717  
     Short-term investments    28,911    33,988  
     Accounts receivable, less reserves of $1,765 and $1,950 in 2004 and 2003, respectively    61,466    53,976  
     Inventories    75,863    75,333  
     Deferred income taxes    13,674    13,775  
     Other current assets    6,454    6,800  
        Total current assets    366,878    370,589  
Long-term Investments    33,787    35,082  
Property and Equipment, at cost:            
     Land    1,204    1,202  
     Buildings    5,227    5,213  
     Leasehold improvements    23,460    23,139  
     Machinery and equipment    47,023    44,843  
     Office furniture and equipment    35,299    34,802  
     Construction in progress    5,373    2,824  
     117,586    112,023  
     Less accumulated depreciation and amortization    69,193    66,799  
     48,393    45,224  
Other Long-term Assets:            
     Goodwill and other intangible assets, net of accumulated amortization of  
          $35,766 and $35,451 for 2004 and 2003, respectively    67,755    61,766  
     Other noncurrent assets, net    6,272    9,214  
     74,027    70,980  
        TOTAL ASSETS   $ 523,085   $ 521,875  
        LIABILITIES AND STOCKHOLDERS' EQUITY            
Current Liabilities:            
     Accounts payable   $ 14,848   $ 19,160  
     Accrued expenses    19,596    21,521  
     Accrued employee compensation and related expenses    17,251    20,792  
     Accrued taxes    14,538    21,091  
     Accrued marketing and customer programs    7,806    6,762  
     Warranty reserve    3,565    2,250  
     Notes payable    744    494  
     Deferred revenue    8,252    8,275  
        Total current liabilities    86,600    100,345  
Long-term Liabilities:            
     Deferred tax liabilities    260    236  
     Notes payable    500    --  
     Warranty and extended maintenance agreement reserves    2,259    1,444  
     Deferred revenue    5,868    5,772  
        Total long-term liabilities    8,887    7,452  
Commitments and Contingencies (Note 6):            
Partner's Interest in Consolidated Subsidiary    653    786  
Stockholders' Equity:            
     Common stock, $0.10 par value; Authorized: 60,000 shares; Issued: 44,888 and  
          44,390 shares in 2004 and 2003, respectively    4,489    4,439  
     Additional paid-in capital    399,004    383,249  
     Deferred equity-based compensation; Issued: 12 and 3 units in 2004 and 2003, respectively    576    138  
     Retained earnings    258,141    240,350  
     Accumulated other comprehensive income    6,280    4,565  
     Treasury stock (10,146 and 9,711 shares in 2004 and 2003, respectively), at cost    (241,545 )  (219,449 )
        Total stockholders' equity    426,945    413,292  
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 523,085   $ 521,875  

The accompanying notes are an integral part of these consolidated financial statements.

3

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)

For the Three Months Ended
March 31,
2004
 2003
Revenue:                
    Product revenue   $ 101,712   $ 82,071  
    Service revenue    31,705    27,176  
     133,417    109,247  
Cost of Revenue:            
    Cost of product revenue    44,752    38,271  
    Cost of service revenue    21,619    19,514  
     66,371    57,785  
    Gross profit    67,046    51,462  
Expenses:            
    Sales and marketing    20,983    16,323  
    General and administrative    12,242    10,355  
    Research and development    8,520    7,337  
      Income from operations    25,301    17,447  
Interest income    729    690  
      Income before provision for income taxes            
           and partner's interest    26,030    18,137  
Provision for income taxes    8,372    6,075  
Partner's interest in loss of subsidiary    (133 )  --  
      Net income   $ 17,791   $ 12,062  
Earnings per Share:  
    Basic   $ 0.51   $ 0.36  
    Diluted   $ 0.49   $ 0.34  
Weighted Average Shares Outstanding:                
    Basic    34,775    33,812  
    Diluted    36,437    35,520  
  

The accompanying notes are an integral part of these consolidated financial statements.

4

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

For the Three Months Ended
March 31,
2004
 2003
Cash Flows from Operating Activities:                
     Net income   $ 17,791   $ 12,062  
     Adjustments to reconcile net income to net cash provided (used) by            
     operating activities:            
        Depreciation and amortization    4,314    4,912  
        Partner's interest in loss of subsidiary    (133 )  --  
        Provision for (recovery of) uncollectible accounts    (4 )  195  
        Provision for deferred income taxes    2,697    460  
        Tax benefit on exercise of nonqualified stock options and disqualifying            
             dispositions    4,743    4,849  
        Provision for deferred equity-based compensation    46    --  
     Changes in assets and liabilities, net of acquisitions:            
        Accounts receivable    (6,889 )  (5,804 )
        Inventories    (527 )  5,708  
        Other current assets    124    255  
        Accounts payable    (4,317 )  7,577  
        Accrued liabilities    (7,226 )  (1,153 )
        Deferred revenue    49    483  
             Net cash provided by operating activities    10,668    29,544  
 Cash Flows from Investing Activities: