IDEXX Laboratories, Inc. (Nasdaq: IDXX), today reported that revenues for the third quarter of 2009 were $259.1 million compared to $251.1 million for the third quarter of 2008. Organic revenue growth, as defined below, was 5%. Earnings per diluted share ("EPS") for the quarter ended September 30, 2009 grew 24% to $0.52 from $0.42 for the same period in the prior year.
Organic revenue growth excludes the impact of changes in currency exchange rates, which reduced revenue growth by approximately 2%, and revenue from businesses acquired or divested subsequent to the beginning of the prior year period, which had minimal impact on revenue growth.
"In the third quarter IDEXX continued to execute against our strategy of technological innovation and international expansion, while addressing an economy that remains challenging," said Jonathan W. Ayers, Chief Executive Officer. "Our overall performance varied by line of business and geography, but our core companion animal businesses achieved solid organic growth worldwide. Growth of instrument and consumable sales, our largest business, continued to be led by sales of Catalyst Dx®, our next generation chemistry analyzer. Third quarter placements of 469 units put us on track for around 1,900 placements for the year. We continue to feel good about the progress in the Catalyst performance in the field and the energy and alignment in our sales channels, and thus, we expect a strong finish in the fourth quarter in both North America and Europe."
"Our international performance was a highlight of the quarter, particularly in Asia where we have experienced organic growth of 17% year-to-date, driven by more than 20% organic growth in the last two quarters. All of our major lines of business are present in the region, and we believe that some of our most attractive growth opportunities are found in Asia as well as other international markets. The relative strength of certain markets outside the U.S. is helping us continue to achieve growth despite the difficult economy."
"Strong bottom line performance during the quarter was driven to a large extent by our ongoing close management of operating expenses, where we have achieved some meaningful efficiencies. We also continue to see bottom line impact from careful management of the tax rate, finance leverage and share count."
"While we are cautious about the near-term economy, we remain confident in our long-term outlook based on the fundamental attractiveness of our markets, our unique and innovative product and service offerings, our international footprint, and our ability to achieve increasing operating efficiencies based on our growing experience and the scale of our businesses."
Revenue Performance
Please refer to the table below entitled "Revenues and Revenue Growth Analysis by Product and Service Categories" in conjunction with the following discussion.
Companion Animal Group. Companion Animal Group ("CAG") revenues for the third quarter of 2009 were $214.5 million compared to $204.8 million for the third quarter of 2008. Changes in foreign currency exchange rates reduced revenue growth by approximately 2%. Organic growth of 7% was the result of increased sales volume across all product lines and higher average unit sales prices. In the IDEXX VetLab® product line, higher sales volume was driven by sales of our Catalyst Dx® chemistry analyzer and related consumables. These favorable impacts were partly offset by lower sales volume and lower average unit sales prices for LaserCyte® hematology analyzers.
Water. Water segment revenues for the third quarter of 2009 were $19.7 million compared to $20.3 million for the third quarter of 2008. The decrease in Water revenue was due to the unfavorable impact of changes in foreign currency exchange rates, which reduced reported revenue by 3%. The favorable impact of higher sales volumes was offset by lower unit sales prices.
Production Animal Segment. Production Animal Segment ("PAS") revenues for the third quarter of 2009 were $15.9 million compared to $17.8 million for the third quarter of 2008. Changes in foreign currency exchange rates unfavorably impacted revenue by approximately 3%. Organically, PAS revenue declined due primarily to lower sales volumes.
Year-to-Date Results
Year-to-date revenues were $761.3 million compared to $780.7 million for the nine months ended September 30, 2008. Organic growth for the nine months ended September 30, 2009 was 4%.
Year-to-date diluted EPS were $1.50 compared to $1.48 for the nine months ended September 30, 2008. As shown in the reconciliation of non-GAAP diluted EPS to earnings per share in the supplementary table provided below, diluted EPS of $1.50 grew 3% compared to 2008 non-GAAP diluted EPS of $1.46.
Additional Operating Results for the Third Quarter
Gross profit for the third quarter of 2009 increased $2.3 million, or 2%, to $130.5 million from $128.1 million for the third quarter of 2008. As a percentage of total revenue, gross profit decreased to 50% from 51%. The decrease in gross profit percentage was due primarily to higher overall manufacturing costs and higher relative sales of lower margin IDEXX VetLab® instruments and digital radiography systems, partly offset by lower depreciation expense related to IDEXX VetLab® instruments placed at customer sites and the impact of higher selling prices.
Research and development ("R&D") expense for the third quarter of 2009 was $16.6 million, or 6% of revenue, compared to $17.9 million, or 7% of revenue for the third quarter of 2008. The decrease in R&D expense was due primarily to the absence of pharmaceutical business R&D spending in the third quarter of 2009, resulting from the disposition of substantially all of our pharmaceutical business and assets in the fourth quarter of 2008.