IDEXX Laboratories Announces Second Quarter Results

WESTBROOK, Maine, July 27, 2007—IDEXX Laboratories, Inc. (NASDAQ: IDXX), today reported that revenue for the second quarter of 2007 increased 24% to $237.0 million from $191.4 million for the second quarter of 2006. Earnings per diluted share (“EPS”) for the quarter ended June 30, 2007 were $0.67, compared to $0.78 for the same period in the prior year. EPS reflects a write-down of certain pharmaceutical assets of $10.1 million, or $0.20 per diluted share, as described further below, and $0.02 per share of discrete acquisition-related purchase accounting and integration costs.

Non-GAAP adjusted diluted EPS for the second quarter were $0.89, an increase of 20% compared to non-GAAP adjusted diluted EPS for the same period of the prior year. Non-GAAP adjusted diluted EPS for the second quarter of 2007 excludes the impact of the write-down of certain pharmaceutical assets, described below, and acquisition-related purchase accounting and integration costs. Non-GAAP adjusted diluted EPS for the second quarter of 2006 excludes the income tax benefits from certain discrete tax events. The accompanying financial table provides additional information and reconciles these non-GAAP measures to earnings per diluted share. Management believes adjusted diluted EPS is a useful non-GAAP financial measure to evaluate the results of ongoing operations, excluding significant specified items, period over period, and therefore believes that investors may find this information useful in addition to the GAAP results.

During the second quarter, the Company recognized a $9.1 million write-down of raw materials inventory and a $1.0 million write-off of a prepaid royalty license associated with Navigator® paste, a nitazoxanide product for the treatment of equine protozoal myeloencephalitis. The Company has written down these assets because the third-party contract manufacturer of finished goods recently gave notification that it will discontinue manufacturing the product in 2009. Additionally, product sales have been significantly lower than projected. Due in part to an estimated production volume which is low, the Company believes that it will not be able to enter into a replacement manufacturing arrangement on economically feasible terms and that it will not be able to obtain the product after termination of the existing manufacturing arrangement. Sales of Navigator® were $0.2 million for the first six months of 2007.

“I am pleased with our revenue momentum, and particularly with the growth of our three core companion animal diagnostics businesses, which together make up almost 75% of the company revenues and accounted for over 80% of organic growth for the quarter,” said Jonathan Ayers, Chairman and CEO. “The positive trends in these three businesses included record in-house instrument placements, a high level of conversions to our SNAP®4Dx® rapid assay screening product, and strong performance in our global reference laboratory business. Based on our current outlook, we are raising our revenue and adjusted earnings per share guidance for the balance of 2007.”

Companion Animal Group (“CAG”) revenue for the second quarter of 2007 increased 24% to $194.0 million from $156.9 million for the second quarter of 2006 primarily due to higher sales in all CAG product and service categories, generated in part by acquisitions, with the largest growth in revenue dollars from laboratory and consulting services and from instruments and consumables products.

Water segment revenue for the second quarter of 2007 increased 13% to $17.1 million from $15.1 million for the second quarter of 2006 primarily due to higher worldwide sales volume.

Production Animal Segment (“PAS”) revenue for the second quarter increased 21% to $18.7 million from $15.4 million for the second quarter of 2006 primarily from higher livestock diagnostics sales volume including sales attributable to the Institut Pourquier business, which was acquired in March 2007. The favorable impact of higher sales volume was partly offset by lower average unit sales prices for products that test for transmissible spongiform encephalopathies (“TSE”) due to greater price competition.

Year-to-date results

Year-to-date revenue increased 25% to $448.2 million from $359.5 million for the same period in 2006. Revenue for the six months ended June 30, 2007, adjusted for the impacts of acquisitions and foreign currency exchange rates, increased 14%.

Year-to-date earnings per diluted share decreased 1% to $1.32 from $1.33 for the same period in the prior year. Non-GAAP adjusted diluted EPS for the six months ended June 30, 2007 grew 20% to $1.55 compared to the same period in the prior year. Non-GAAP adjusted diluted EPS for the six months ended June 30, 2007 excludes the impact of the write-down of certain pharmaceutical assets, described above, and acquisition-related purchase accounting and integration costs. Non-GAAP adjusted diluted EPS for the six months ended June 30, 2006 excludes the income tax benefits from certain discrete tax events. The accompanying financial table provides additional information and reconciles these non-GAAP measures to earnings per diluted share.

Companion Animal Group revenue for the six months ended June 30, 2007 increased 24% to $367.5 million from $296.3 million due to higher sales in all CAG product and service categories, with the largest growth in revenue dollars from laboratory and consulting services and from instruments and consumables products.

Water segment revenue for the six months ended June 30, 2007 increased 16% to $31.5 million from $27.2 million primarily due to higher worldwide sales volume.

Production Animal Segment revenue for the six months ended June 30, 2007 increased 25% to $35.5 million from $28.4 million for the same period in 2006. The increase resulted primarily from higher livestock diagnostics sales volume including sales attributable to the Institut Pourquier business. The favorable impact of higher sales volume was partly offset by lower average unit sales prices for TSE testing products due to greater price competition.

Additional operating results for the second quarter

Gross profit for the second quarter of 2007 increased $15.2 million, or 15%, to $114.2 million from $99.0 million for the second quarter of 2006. As a percentage of revenue, gross profit decreased to 48% from 52%. Excluding the write-down of certain pharmaceutical assets of $10.1 million, described above, and acquisition-related purchase accounting and integration costs, the adjusted gross profit percentage increased to 53%. The accompanying financial table provides additional information and reconciles these non-GAAP measures. The gross profit percentage was favorably impacted by higher average selling prices, resulting in part from higher relative sales of combination rapid assay products such as the SNAP®4Dx®, which was launched in the U.S. in September 2006, and a lower cost of slides that are sold for use in VetTest® chemistry analyzers. Increases in the gross profit percentage were partly offset by greater relative sales of lower margin products and services such as laboratory and consulting services.

Research and development (“R&D”) expense for the quarter was $17.3 million compared to $13.3 million for the second quarter of 2006. As a percentage of revenue, R&D expense increased to 7.3% from 7.0%. R&D expense grew primarily as a result of personnel additions in 2006 and 2007 to support increased long-term product development activities.

Selling, general and administrative (“SG&A”) expense for the quarter was $64.4 million, or 27% of revenue, compared to $48.7 million, or 25% of revenue, in the second quarter of 2006. Increased SG&A expense was due primarily to higher personnel-related costs due, in part, to expanded worldwide sales, marketing and customer service headcount and higher sales commissions as a result of revenue performance; higher spending on facilities, information technology and other general support functions; and incremental activities associated with recently acquired businesses.

Outlook

The Company offers the following revised guidance for the full year of 2007:

• Revenue is expected to be $900 to $905 million, updated from guidance of $890 to $897 million provided in April of this year.
• Diluted earnings per share are expected to be $2.86 to $2.91 (or $3.06 to $3.11 excluding the impact of the write-down of certain pharmaceutical assets, described above), updated from guidance of $3.00 to $3.07 provided in April.

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 719-457-2621 or 800-238-9007 and reference confirmation code 5945803. An audio replay will be available through August 3, 2007 by dialing 719-457-0820 and referencing replay code 5945803.

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

IDEXX Laboratories Names Bill Goodspeed Corporate Vice President and General Manager, Production Animal Segment

IDEXX Laboratories, Inc. today announced the appointment of Bill Goodspeed as Corporate Vice President and General Manager, Production Animal Segment.

Mr. Goodspeed joins IDEXX from the J.M. Huber Corporation, a privately-held company in chemicals, food ingredients, building products, energy and timber industries, where he served most recently as Sector CEO for Natural Resources and Technology-based Services, located in Houston. In that role, he held responsibility for operations in energy exploration and development, timber, energy trading, and receivables securitization. Prior to that role, Mr. Goodspeed served as the President of Huber Engineered Woods, where he led development of a new specialty strategy that transformed Huber from a traditional commodity wood products business to an industry-leading branded products company. Prior to joining Huber in 1994, Mr. Goodspeed served as Executive Vice President of Japan-based Pasona International, managing the non-Japanese businesses of the Pasona Group. He also spent three years as a consultant at McKinsey & Company and three years as an attorney. Mr. Goodspeed graduated from Dartmouth College and received his JD from the University of Michigan.

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 4,000 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; the Company’s ability to identify acquisition opportunities, complete acquisitions and integrate acquired businesses; the impact of competition and technological change on the markets for the Company’s 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 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; disruptions, shortages or pricing changes that affect the Company’s purchases of products and materials from third parties, including from sole source suppliers; the effects of government regulatory decisions, customer demand, pricing and other factors on the realizability of the Company’s inventories; the Company’s ability to manufacture complex biologic products; 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, 2006 (1.5 MB) and on the Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (272 KB), in the section captioned “Risk Factors.”