IDEXX Laboratories (IDXX) Q4 2008 earnings summary

Executive summary

• FY08 revenue rose 11% to $1.024B; net income increased to $116.2M from $94.0M, while diluted EPS was $1.87.

• Q4 revenue was $243.3M versus $245.0M a year earlier; operating income was $35.8M versus $36.7M, and net income was $23.6M versus $25.5M.

Financial highlights

• FY08 gross profit reached $529.8M, up from $463.5M; gross margin was 51.7% versus 50.2%.

• Operating income rose 26.6% to $172.5M; operating margin increased to 16.8% from 14.8%.

• Cash from operations was $143.3M versus $135.1M; cash and equivalents ended the year at $78.9M.

• Effective tax rate was 31.7% versus 30.3%, driven in part by the nondeductible goodwill write-off on pharmaceutical product lines sold.

Outlook and guidance

• Catalyst Dx penetration is expected to weigh on near-term gross margin percentage as instrument placements outpace consumables; a shift from VetTest consumables is not expected to materially affect gross margin.

• Pharmaceutical product revenue is not expected to be meaningful in 2009 or later following the product-line sale and restructuring.

• 2009–2011 capital spending for the Westbrook facility expansion was projected at $35M, including $16M in 2009.

• Losses are expected in Filta-Max sales to customers testing for Cryptosporidium only for regulation in England and Wales, and in some BSE test sales after EU testing-age rules changed.

• Current cash, operating cash generation and $48.8M of revolving-credit availability were considered sufficient for operations, capital needs and strategic growth for the foreseeable future.