IDEXX Laboratories, Inc. (



Q4 2011 Earnings Call

January 27, 2012 09:00 am ET


Jon Ayers - Chairman, President & CEO

Merilee Raines - Corporate VP, CFO & Treasurer


Ryan Daniels - William Blair

David Clair - Piper Jaffray

Miroslava Minkova - Leerink Swann

Jonathan Block - SunTrust Robinson Humphrey

Ross Taylor - CL King

Erin Wilson - Bank of America-Merrill Lynch

Nicholas Jansen - Raymond James & Associates

Mitra Ramgopal - Sidoti



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Good morning everyone and welcome to the IDEXX Laboratories fourth quarter 2011 earnings conference call. As a reminder, today’s conference is being recorded. Participating in the call this morning are Jon Ayers, Chief Executive Officer; Merilee Raines, Chief Financial Officer; and Pete Levine, Director, Investor Relations.

IDEXX would like to prefix the discussion today with a caution regarding forward-looking statements. Listeners are reminded that statements that members of IDEXX management may make on this call regarding management’s future expectations and plans and IDEXX’s future prospects constitute forward-looking statements for the purposes of 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. Such statements include, but are not limited to statements regarding management’s expectations for financial results for future periods.

Listeners are reminded that actual results could differ materially from management’s expectations. Factors that could cause or contribute to such differences are described in IDEXX’s quarterly report on Form 10-Q for the quarter ended September 30, 2011 and annual report on Form 10-K for the year ended December 31, 2010 in the section captioned risk factors which are on file with the SEC and also available on IDEXX’s website In addition any forward-looking statements represent any IDEXX’s estimates only as of today and should not be relied upon as representing the company’s estimates as of any subsequent date.

The company disclaims any obligation to update or revise any forward-looking statements in the future even if its estimates or expectations change. Also during this call, we will discuss certain financial measures not prepared in accordance with Generally Accepted Accounting Principles or GAAP. A definition of these non-GAAP financial measures is provided in our earnings release which can be found on our website

Finally, we plan to end today’s call by 10 am eastern. In order to allow, broad participation in the Q&A we ask that each participant limit his or her questions to one with one follow-up as necessary. We do appreciate you may have additional questions, so please free to back into the queue and if time permits we will be more than happy to take your additional questions.

I would now like to turn the conference over to Merilee Raines. Please go ahead.

Merilee Raines

Good morning and thank you for joining us today. For the fourth quarter, our revenues of $307.2 million yielding 7% organic growth were largely in line with our expectations at the time of our third quarter call. And earnings per share of $0.67 were about four pennies above our thinking.

As we had expected, revenue growth in our Livestock and Poultry Diagnostic business abated from previous quarters and was the driver for the 1% lower organic growth than the 8% that we experienced in the first three quarters of the year. The earnings favorability was primarily driven by a $3 million milestone payment related to sale in late 2008 of our feline diabetes therapeutic. This contributed just over three pennies to EPS, slightly lower share count was a minor secondary factor in EPS favorability.

Let me speak for moment on the economic backdrop for our Companion Animal business. Recent data showing a modest improving trend in certain aspects of the US economy are reflected as well in our fourth quarter metrics from a subset of nearly 500 veterinary clinics using our Cornerstone Practice Management System. Patient visits were up about 1% in the fourth quarter and this is versus flat in the third quarter and down 0.5% in the first half of the year. And practice revenues grew by 3.5% which was up 50 basis points from the third quarter and up about 150 basis points from the first half.

Despite the turmoil in the European economy, our Companion Animal business in Europe achieved 8% organic growth in the fourth quarter. While we remain cautious along with others about the predictive reliability of short-term data and the negative impacts to global economy from potential further shocks occurring in any one geography such as Europe. We nonetheless feel that the metrics we are observing support the assumption in our 2012 outlook that our businesses will benefit modestly from a very gradual improvement in the macroeconomic environment.

Now for some further detail on revenue performance for some of our businesses. VetLab Instruments and Consumables with fourth quarter revenue of $102.4 million grew 6% organically. Sales of instruments were $28.7 million and organic growth up 2%. Worldwide placements of Catalyst were up 13% year-to-year marked by solid performance in the US and on the international front, strong placements in Asia Pacific due in part to the launch in Japan offset relatively flat placements in Europe.

For the year, our combined chemistry placements of VetTest and Catalyst were within a couple of percentage points of our goal of 4000. ProCyte and LaserCyte hematology placements increased by 12% over prior year. ProCyte continues to be a significant contributor to our growth. With 381 units installed in the fourth quarter, we ended the year with 1,179 placements, nearly 20% above our 2011 goal of 1000 units.

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