WESTBROOK, Maine, Oct. 22 /PRNewswire-FirstCall/ -- IDEXX Laboratories, Inc. (Nasdaq: IDXX), today reported that revenues for the third quarter of 2010 increased 4% to $269.6 million, from $259.1 million for the third quarter of 2009. Organic revenue growth, as defined below, was 5%. Earnings per diluted share ("EPS") for the quarter ended September 30, 2010 increased 13% to $0.59, compared to $0.52 for the same period in the prior year.

Organic revenue growth excludes the impact of changes in foreign currency exchange rates, which reduced revenue growth by 1%, and revenue from businesses acquired or divested subsequent to the beginning of the prior year period, which contributed less than 1% to revenue growth, in the third quarter of 2010.

"I am very pleased with our third quarter results," stated Jonathan Ayers, Chairman and Chief Executive Officer. "Despite continued weakness in the economic environment and relatively few signs of improvement in customer sentiment, we delivered 5% organic revenue growth, reflecting our continued focus on bringing innovative products and services to our veterinary and other customers. Earnings, excluding benefits from a weaker U.S. dollar and a lower tax rate, met our July projection as we continued to drive operating efficiencies, particularly in our two largest businesses, IDEXX VetLab® instruments and consumables and laboratory diagnostic and consulting services.  

"The third quarter marked the launch of our next generation hematology analyzer, ProCyte Dx™, as we placed 154 of these instruments in the quarter. ProCyte Dx™ offers unprecedented accuracy and precision, providing reference lab quality hematology results in just two minutes. ProCyte Dx™, when used with our Catalyst Dx® chemistry analyzer, provides complete blood work results during a 20 to 30 minute scheduled patient exam, thus raising the standard of care and increasing efficiency for the veterinary practice.

"Chemistry placements were also strong in the third quarter, as we placed over 900 combined Catalyst Dx® and VetTest® units, a growth of nearly 10% over the comparable 2009 period.    

"We remain confident in the fundamental strength of our business model and in the long-term growth prospects for our core markets. Based on this, we are establishing initial 2011 guidance that reflects accelerated revenue growth and double-digit earnings growth over our 2010 outlook."

Revenue Performance

Please refer to the table below entitled "Revenues and Revenue Growth Analysis by Product and Service Categories" in conjunction with the following discussion.

Companion Animal Group. Companion Animal Group ("CAG") revenues for the third quarter of 2010 were $222.9 million compared to $214.5 million for the third quarter of 2009. Incremental revenues attributable to a business acquired in August 2009 contributed less than 1% to revenue growth while changes in foreign currency exchange rates reduced revenue growth by 1%. Organic growth of 4% was primarily the result of higher testing volumes in our laboratory diagnostic and consulting services business and increased sales volumes of IDEXX VetLab® instruments and consumables. The increase in instrument and consumables sales volumes was driven by increased sales of consumables used in our Catalyst Dx® instrument and sales of our ProCyte Dx® instrument, which we began shipping during the quarter. These favorable impacts were partly offset by a decrease in rapid assay revenue due primarily to changes in distributors' inventory levels. Lower average unit sales prices of our SNAP® tests, due to competitive pressures, also contributed to the decrease in rapid assay revenue.

Water. Water segment revenues for the third quarter of 2010 were $20.0 million compared to $19.7 million for the third quarter of 2009. Changes in foreign currency exchange rates reduced revenue growth by 1%. Organic revenue growth of 3% was the result of higher Quanti-Tray® and Colilert® product sales volumes and higher relative sales of Colilert® products in geographies where they are sold at higher average unit sales prices.

Livestock and Poultry Diagnostics. Livestock and Poultry Diagnostics ("LPD") revenues for the third quarter of 2010 were $17.5 million compared to $15.9 million for the third quarter of 2009. Changes in foreign currency exchange rates reduced revenue growth by 6%. Organic revenue growth of 15% was the result of higher sales volumes of certain swine and bovine tests, partly offset by lower average unit sales prices due to competitive pressures.

Additional Operating Results for the Third Quarter

Gross profit for the third quarter of 2010 increased $11.7 million, or 9%, to $142.2 million from $130.5 million for the third quarter of 2009. As a percentage of total revenue, gross profit increased to 52.7% from 50.4%. The increase in the gross profit percentage was primarily attributable to reduced overall manufacturing costs associated with our IDEXX VetLab® instruments and SNAP® tests. The gross profit percentage was also favorably impacted by lower costs of service in our laboratory diagnostic and consulting services business and lower depreciation on our IDEXX VetLab® instruments placed at customer sites under usage agreements. These favorable effects were partly offset by the net unfavorable impact of changes in foreign currency exchange rates.

Research and development ("R&D") expense for the third quarter of 2010 was $17.2 million, or 6.4% of revenue, compared to $16.6 million, or 6.4% of revenue for the third quarter of 2009. The increase in R&D expense was primarily due to increased personnel-related costs.

Selling, general and administrative ("SG&A") expense for the third quarter of 2010 was $75.2 million, or 27.9% of revenue, compared to $69.7 million, or 26.9% of revenue, for the third quarter of 2009. The increase in SG&A expense resulted primarily from increased legal and other fees related to the production of documents to the U.S. Federal Trade Commission, increased personnel-related costs and an increase in the bad debt provision in connection with the bankruptcy of one of our U.S. distributors, Professional Veterinary Products, Inc. These increases were partly offset by a milestone payment earned during the quarter related to the sale of product rights in connection with the 2008 disposition of certain pharmaceutical product lines and pharmaceutical assets.

Supplementary Analysis of Results

The accompanying financial tables provide more information concerning our revenue and other operating results for the three and nine months ended September 30, 2010.

Outlook for 2010 and 2011

The Company provides the following updated guidance for the full year of 2010 and preliminary guidance for 2011. This guidance reflects an assumption that the value of the U.S. dollar relative to other currencies will remain at its current level for the balance of 2010 and 2011. Fluctuations in foreign currency exchange rates from current levels could have a significant positive or negative impact on our actual results of operations in both years.

2010

• Revenues are expected to be approximately $1.10 billion, updated from guidance of $1.09 to $1.10 billion provided in July of this year, which represents reported revenue growth of approximately 7% and organic revenue growth of approximately 6%. This tightening of our revenue outlook to the high end of our previous range reflects modest benefits from the weakening of the U.S. dollar against certain currencies since the date of our previous guidance, which are offset by slightly lower organic revenue growth.
• Diluted earnings per share are expected to be in the range of $2.28 to $2.31, an increase from our previous guidance of $2.23 to $2.28, reflecting currency benefits achieved in the third quarter and anticipated in the fourth quarter as discussed above and third quarter tax benefits from the expiration of certain statutes of limitation.
• Free cash flow is expected to be approximately 110% of net income.(1)

2011

• Revenues are expected to be in the range of $1.18 to $1.20 billion, which represents revenue growth of 7% to 9% compared to projected revenue for 2010.  Organic revenue growth, adjusted to exclude a projected 1% benefit from foreign currency related changes, is estimated to be in the range of 6% to 8%.
• Diluted earnings per share are expected to be in the range of $2.55 to $2.65.

(1) Free cash flow is a non-GAAP measure. It indicates the cash generated from operations and tax benefits attributable to stock option exercises, reduced by investments in fixed assets. We feel free cash flow is a useful measure because it indicates the amount of cash the operations of the business are generating after appropriate reinvestment for recurring investments in fixed assets that are required to operate the business.  We believe this is a common financial measure useful to further evaluate the results of operations. With respect to this particular forward-looking projection, the Company is unable to provide a quantitative reconciliation at this time as the inputs to the measurement are difficult to predict and estimate, and are primarily dependent on future events.

Conference Call and Webcast Information

IDEXX will be hosting a conference call today at 9:00 a.m. (eastern) to discuss its third quarter results and management's outlook. To participate in the conference call, dial 1-800-230-1096 or 1-612-332-0107 and reference confirmation code 174920. An audio replay will be available through October 29, 2010 by dialing 1-320-365-3844 and referencing replay code 174920.

The call will also be available via live or archived webcast on the IDEXX web site at www.idexx.com.

About IDEXX Laboratories, Inc.

IDEXX Laboratories, Inc. is a leader in pet healthcare innovation, serving practicing veterinarians around the world with a broad range of diagnostic and information technology-based products and services. IDEXX products enhance the ability of veterinarians to provide advanced medical care, improve staff efficiency and to build more economically successful practices. IDEXX is also a worldwide leader in providing livestock and poultry diagnostic tests and tests for the quality and safety of water and milk. Headquartered in Maine, IDEXX Laboratories, Inc. employs more than 4,800 people and offers products to customers in over 100 countries.

Note Regarding Forward-Looking Statements

This press release contains statements about the Company's business prospects and estimates of the Company's financial results for future periods that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words such as "expects," "may," "anticipates," "intends," "would," "will," "plans," "believes," "estimates," "should," and similar words and expressions. These statements are based on management's expectations of future events as of the date of this press release, and the Company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments. Actual results could differ materially from management's expectations. Factors that could cause or contribute to such differences include the following: the Company's ability to develop, manufacture, introduce and market new products and enhancements to existing products; the Company's ability to achieve economies of scale in its worldwide network of laboratories;the impact of a weak economy on demand for the Company's products and services; the effectiveness of the Company's sales and marketing activities; the Company's ability to identify acquisition opportunities, complete acquisitions and integrate acquired businesses; disruptions, shortages or pricing changes that affect the Company's purchases of products and materials from third parties, including from sole source suppliers; the Company's ability to manufacture complex biologic products; the effect of government regulation on the Company's business, including government decisions about whether and when to approve the Company's products and decisions regarding labeling, manufacturing and marketing products; the Company's ability to obtain patent and other intellectual property protection for its products, successfully enforce its intellectual property rights and defend itself against third party claims against the Company; the impact of distributor purchasing decisions on sales of the Company's products that are sold through distribution; the impact of competition, technological change, and veterinary hospital consolidation on the markets for the Company's products; changes or trends in veterinary medicine that affect the rate of use of the Company's products and services by veterinarians; the impact of the Company's inexperience in the human point-of-care market; the effects of operations outside the U.S., including  from currency fluctuations, different regulatory, political and economic conditions, and different market conditions; the effects of interruptions to the Company's operations due to natural disasters or system failures; the loss of key employees; class action litigation due to stock price volatility; the effect on the Company's stock price if quarterly or annual operations results do not meet expectations of market analysts or investors in future periods; and potential exposures related to our worldwide provision for income taxes. A further description of these and other factors can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2009, and quarterly report on Form 10-Q for the quarter ended June 30, 2010, in the section captioned "Risk Factors."

Contact: Merilee Raines, Chief Financial Officer, 1-207-556-8155

CONTACT: Merilee Raines, Chief Financial Officer of IDEXX Laboratories, Inc., +1-207-556-8155