10-QPeriod: Q3 FY2007

IDEXX LABORATORIES INC /DE Quarterly Report for Q3 Ended Sep 30, 2007

Filed October 31, 2007For Securities:IDXX

Summary

IDEXX Laboratories Inc. reported solid revenue growth for the third quarter and first nine months of 2007, driven by its Companion Animal Group (CAG) segment and strategic acquisitions. Total revenue increased by 22% year-over-year for the third quarter to $229.4 million and by 24% for the first nine months to $677.6 million. While gross profit margins remained relatively stable, operating income saw a modest increase of 5% in the third quarter and remained flat year-to-date. The company has been actively integrating recent acquisitions, notably in veterinary reference laboratories and production animal diagnostics, which contributed significantly to revenue expansion. IDEXX also continues to invest in research and development and expand its market presence through product innovation and strategic partnerships.

Key Highlights

  • 1Revenue increased by 22% in Q3 2007 to $229.4 million and by 24% for the first nine months to $677.6 million, driven by strong performance in the Companion Animal Group (CAG) and acquisitions.
  • 2The Companion Animal Group (CAG) remains the largest segment, with revenue up 22.5% in Q3 and 23.5% year-to-date, fueled by laboratory services and instruments/consumables.
  • 3The company completed several acquisitions during the nine-month period, including Osmetech plc's Critical Care Division, Vita-Tech Canada Inc., and Institut Pourquier SAS, contributing to revenue growth and market expansion.
  • 4Operating income increased by 5% to $36.1 million in Q3 2007, but remained relatively flat year-to-date at $99.4 million due to increased operating expenses.
  • 5Gross profit margin remained stable at approximately 52% for Q3 and decreased slightly to 50% for the nine-month period, impacted by a significant inventory write-down related to the Navigator® product.
  • 6Cash flow from operating activities showed a substantial increase, reaching $95.2 million for the first nine months of 2007, up from $71.4 million in the prior year.
  • 7IDEXX continues to actively repurchase its common stock under its share repurchase program, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

The primary driver of IDEXX's revenue growth in the third quarter of 2007 was the strong performance of its Companion Animal Group (CAG) segment, which benefited from organic growth and contributions from recent acquisitions, particularly in veterinary reference laboratories. Overall revenue increased by 22% year-over-year.

Yes, IDEXX recognized a significant write-down of pharmaceutical raw materials inventory and a write-off of a prepaid royalty license related to its Navigator® Antiprotozoal Oral Paste product during the second quarter of 2007. This was due to the manufacturer discontinuing production and lower-than-projected sales. This resulted in a $9.1 million inventory write-down and a $1.0 million license impairment charge.

IDEXX is funding its operations through cash generated from operations and its revolving credit facility. As of September 30, 2007, the company had $58.5 million in cash and cash equivalents and working capital of $84.6 million. It also has $47.8 million available under its revolving credit facility. The company believes its liquidity is sufficient to meet its ongoing operational needs, capital expenditures, and strategic growth initiatives, including acquisitions.

Acquisitions played a significant role in IDEXX's growth. Several businesses were acquired during the nine-month period, including veterinary reference laboratories and production animal diagnostic product companies. These acquisitions contributed to increased revenue across various segments and expanded the company's geographic reach and product offerings.