WESTBROOK, Maine, July 25 /PRNewswire-FirstCall/ -- IDEXX Laboratories, Inc. , today reported that revenue for the second quarter of 2008 increased 18% to $280.6 million from $237.0 million for the second quarter of 2007. Diluted earnings per share ("EPS") for the quarter ended June 30, 2008 were $0.63, compared to $0.34 for the same period in the prior year. Second quarter 2007 results included several discrete items detailed in the accompanying non-GAAP reconciliation table that reduced reported EPS by $0.10. There were no adjustments to EPS related to discrete items in the second quarter of 2008. Diluted EPS grew 43% when compared to second quarter 2007 non-GAAP diluted EPS of $0.44.
"Our results for both the second quarter and the first half of the year demonstrate the consistency of our revenue and profit model. The economic environment contributed to slightly slower organic revenue growth compared to recent quarters after taking into account exceptional revenues from one of our pharmaceutical products; however, we had strong earnings growth and above plan operating margins," said Jonathan W. Ayers, Chairman and Chief Executive Officer. "We continue to see solid revenue trends overall, particularly in the companion animal veterinary market, and we have raised our earnings per share guidance for the full year of 2008, even as we remain somewhat cautious about the economic outlook."
"We also continue to achieve milestones in the controlled launch of our next generation point-of-care instrument systems, Catalyst Dx(TM) and SNAPshot Dx(TM). We are gaining customer experience with the early placements and, as part of the controlled launch process, are incorporating refinements in the instruments' design and software, all while building a backlog of orders for higher volume shipments in the second half of the year."
Revenue Performance
Companion Animal Group ("CAG") revenue for the second quarter of 2008 increased 19% to $230.8 million from $194.0 million for the second quarter of 2007. Acquisitions of reference laboratories contributed less than 1% to CAG revenue growth and changes in foreign currency exchange rates contributed an additional 4%. Growth for the quarter adjusted for acquisitions and foreign currency exchange rates was 15%. The increase in CAG revenue was due to increased sales volume across all lines of business, most notably in our pharmaceuticals business where incremental sales of PZI VET(R), our insulin product for the treatment of diabetic cats, contributed an estimated $10 million, or 5%, to CAG revenue growth. In the second quarter we announced that we would be discontinuing this product because the raw material is no longer available, which resulted in the subsequent sale of all of our remaining PZI VET(R) inventory.
Water segment revenue for the second quarter of 2008 increased 18% to $20.2 million from $17.1 million for the second quarter of 2007 as higher sales volume offset lower average unit sales prices driven by changes in regional sales mix. Higher sales volumes reflected the distribution of water testing kits manufactured by Invitrogen Corporation under an arrangement that commenced in September 2007, which contributed 8% to Water revenue growth. Changes in foreign currency exchange rates also added 4% to Water revenue growth.
Production Animal Segment ("PAS") revenue for the second quarter of 2008 increased 15% to $21.5 million from $18.7 million for the second quarter of 2007 as higher livestock diagnostics sales volume offset lower average unit sales prices resulting from increased price competition. Changes in foreign currency exchange rates contributed 11% to PAS revenue growth.
Year-to-Date Results
Year-to-date revenue increased 18% to $529.6 million from $448.2 million for the six months ended June 30, 2007. Revenue for the six months ended June 30, 2008, adjusted for the impacts of acquisitions and foreign currency exchange rates, increased 12%.
Year-to-date diluted EPS increased 61% to $1.06 from $0.66 for the six months ended June 30, 2007. Non-GAAP diluted EPS of $1.04 grew 33% when compared to 2007 non-GAAP diluted EPS of $0.78.
Additional Operating Results for the Second Quarter
Gross profit for the second quarter of 2008 increased $37.0 million, or 32%, to $151.3 million from $114.2 million for the second quarter of 2007. Gross margin increased to 54% from 48%. Gross margin in the second quarter of 2007 was depressed by the write-off of inventory and prepaid royalties related to our Navigator pharmaceutical product.
Research and development ("R&D") expense for the second quarter of 2008 was $18.3 million compared to $17.3 million for the second quarter of 2007. As a percentage of revenue, R&D expense was 7% in both the second quarter of 2007 and 2008. R&D expense growth reflected higher personnel costs due, in part, to increased headcount and increased corporate research and development resources dedicated to software for information management. These increases were partly offset by a decrease in product development spending related to our Catalyst Dx(TM) and SNAPshot Dx(TM) analyzers, which were launched in the first quarter.
Selling, general and administrative ("SG&A") expense for the second quarter of 2008 was $74.1 million, or 26% of revenue, compared to $64.4 million, or 27% of revenue, for the second quarter of 2007. Growth in SG&A expense reflected increased headcount and worldwide expansion of sales, marketing and customer support resources as well as the unfavorable impact of exchange rates on foreign currency denominated expenses.
Supplementary Analysis of Results
The accompanying financial tables provide more information concerning our revenue and other operating results for the three and six months ended June 30, 2008, as well as a reconciliation of non-GAAP diluted EPS to earnings per share.
Outlook
The Company offers the following revised guidance for the full year of 2008:
-- Revenue is expected to be $1.06 billion to $1.07 billion, updated from guidance of $1.06 billion to $1.075 billion provided in April of this year, which represents revenue growth of 15% to 16%.
-- Diluted EPS are expected to be $1.89 to $1.92, updated from guidance of $1.84 to $1.87 provided in April of this year, which represents EPS growth of 29% to 32%.
-- Non-GAAP diluted EPS are expected to be $1.87 to $1.90, reflecting growth of 18% to 20%. Non-GAAP diluted EPS excludes the impact of discrete income tax benefits in 2008 and acquisition-related purchase accounting and acquisition integration costs and the write-down of certain pharmaceutical assets in 2007.
Conference Call and Webcast Information
IDEXX Laboratories will be hosting a conference call today at 9:00 a.m. (eastern) to discuss its second quarter results. To participate in the conference call, dial 612-332-0530 or 800-288-8968 and reference confirmation code 954295. An audio replay will be available through August 1, 2008 by dialing 320-365-3844 and referencing replay code 954295.
The call will also be available via live or archived Webcast on the IDEXX Laboratories' web site at http://www.idexx.com.
About IDEXX Laboratories
IDEXX Laboratories, Inc. is a leader in companion animal health, serving practicing veterinarians around the world with innovative, technology-based offerings, including a broad range of diagnostic products and services, practice management systems and pharmaceuticals. IDEXX products enhance the ability of veterinarians to provide advanced medical care and to build more economically successful practices. IDEXX is also a worldwide leader in providing diagnostic tests and information for the production animal industry and tests for the quality and safety of water and milk. Headquartered in Maine, IDEXX Laboratories employs more than 4,500 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. 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 effectiveness of the Company's sales and marketing activities; 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 identify acquisition opportunities, complete acquisitions and integrate acquired businesses; the impact of competition, technological change, and veterinary hospital consolidation on the markets for the Company's products; 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 impact of distributor purchasing decisions on sales of the Company's products that are sold through distribution; changes or trends in veterinary medicine that affect the rate of use of the Company's products and services by veterinarians; the effects of deep or sustained economic weakness on pet owner decisions regarding pet health care; 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 effects of operations outside the U.S., including from currency fluctuations, different regulatory, political and economic conditions, and different market conditions; and the loss of key employees. 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, 2007, and quarterly report on Form 10-Q for the quarter ended March 31, 2008, in the section captioned "Risk Factors."
CONTACT: Merilee Raines, Chief Financial Officer of IDEXX Laboratories,
Inc., +1-207-556-8155
Web site: http://www.idexx.com/
