Ryan Daniels - William Blair Ross Taylor - C.L. King Dawn Brock - J.P. Morgan

Welcome to the IDEXX Laboratories second quarter 2008 earnings conference call. (Operator Instructions) Participating in the call this morning are Jonathan Ayers, Chief Executive Officer; Merilee Raines, Chief Financial Officer; and [Susan Astro], Director of Investor Relations. IDEXX would like to preface 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 purposes of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to statements regarding management's expectations for financial results for future periods and the timing of new product introductions. 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-K for the quarter ended March 31, 2008 and Form 10-K for the year ended December 31, 2007, in the section captioned Risk Factors which are on filed with the SEC and also available on IDEXX's website idexx.com. In addition, any forward-looking statements represent 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. At this time I would like to turn the conference over to Merilee Raines. Please go ahead.

As we noted in our earnings press release today, revenues for the quarter were $280.6 million a year-to-year increase of 18% and diluted earnings per share were $0.63, an increase of 85% from the second quarter of 2007. To remind you we had discrete items last year of $0.10 relating to acquisitions and the write down of pharmaceutical inventory and related assets, so earnings per share growth adjusted for discrete items was 43%. This quarter’s revenue and earnings were impacted by the timing of sales of our feline insulin product (PZI VET). As we noted in our first quarter call and 10-Q we expected we would be selling substantially all of the remaining inventory of this product in the second quarter as we communicated to customers that the product would no longer be available once the current supply was depleted. We in fact did sell all of this inventory in the second quarter and the incremental revenue impact was approximately $10 million, with an earnings impact of $0.09 inline with our thinking. As we also noted in April our financial plans had anticipated sales of this product facing by the end of 2008. So this event does not impact full year financial guidance. Earnings for the quarter were about $0.03 to $0.04 above our expectations at the time of our call in April and this was the result of a somewhat more favorable growth margins and continued operating expense management in response to slightly lower revenue, and now for some further detail on the P&L. The second quarter revenue growth of 18% included 5% from currency and virtually no impact from acquisitions, so organic growth with 13%. As we further normalized for the timing of PZI VET sells up 4% favorable impact to growth and the top compare created by…

We are very pleased with the second quarter, and the first half of the year. Revenue for the second quarter finished just above, on our expectations was a 14% year-over-year growth adjusting out the exceptional pharma revenues. In addition we achieved impressive earnings growth. I think the most informative way to view earnings growth is to reduce the non-GAAP number in the press release by the nine tenths of income that resulted from the exceptional pharma revenue, and if you do that you get 23% growth and earnings per share for the quarter. Good revenue and earnings results on any measure to be sure. I’d also like to observe that IDEXX is now cross the $1 billion threshold looking at our trailing four quarters of reported revenues. This is a really exciting accomplishment for IDEXX and our employees. As it was a goal of the strategic plan we put together just a short three year ago when we were only a little more than half this size. At the time internally we dubbed this plan or our blueprint to a $1 billion, and I would like to take this opportunity to congratulate and thanks the IDEXX team for completing the construction of this blueprint and ahead of schedule no less. At the same time we still have much work ahead of us in building a great company. We are a company focused on bringing innovative technology to our served markets, most notably diagnostic and information systems technology to the pet veterinarian, and the second quarter showed that our global markets continue to exhibited growth even during times when U.S. consumers, many of them pet owners are facing difficult economic times. People take care of their pets and generally do not view there, vets pet’s help as of discretionary expenses. In…

(Operator Instructions) Our first question will come from Ryan Daniels with William Blair. Please go ahead.

On Catalyst it sounds like maybe your thoughts now are a 100 or so less than you may previously though. Is that just taking more time to make sure the software is upgraded appropriately before you get it on to the market or anything else in there particular that’s bringing that down just a little bit?

We are in the controlled launch process and the gaining factor here is the positive customer experience with every new system installation and its important platform for the practice, it needs to operate consistently and flawlessly and as we gained early installed base experience we have some improvements in the software, in fact we are going to be releasing a new version of the software in next week which will take that up notch.

We have a couple of 100 customers who are using the Feline Triple and I think it’s basically a one for one replacement, our Combo product is used in roughly 20,000 practices in the U.S.. So it’s a pretty widely utilizes, that the way that to test for these feline diseases and so we really see this as a one for one replacement.

Okay, and then last question and I hop back in the queue. I am just curious if you have any commentary about what’s going on with the economy. I guess if I look at your ex-currency growth it seems like most of your divisions actually saw a better growth this quarter, certainly the labs was a lot stronger than we would have anticipated. It had an uptake from Q1 as that instrument, and even at practice management systems. So that assigned, you’re actually seeing some stabilization or improvement or is there anything you need that has driven some of the organic growth higher this quarter than last?

Ryan its Merilee. I don’t think we see really any significant changes from the first quarter as we said. The impact from the economy, I think it has been pretty minor on a couple of our product lines, but overall the growth trends I think are just fairly consistent.

Okay, fair enough. Thanks a lot guys.

Our next question is from Ross Taylor with C.L. King. Please go ahead.

Hi, just a couple of questions. I wonder within some of your key companion animal lines new instruments, consumables in the lab. Whether you can give any color on how the U.S. business did versus, outside the U.S.?

We are a global business in the companion animal business. I think as Merilee said we saw, everybody ask us the question about the economy. We saw a modest impact in the U.S. on that, but it’s a good growth business worldwide. So I don’t think there is a particular story there one way or another.

Okay, so you are not to out words in your mouth, but so the organic growth rates probably weren’t that, much difference between U.S. and outside U.S.?

Ross I would say from the trends that each area had been exhibiting, we didn’t see a lot of change.

Okay, and another question, the reference lab growth was very strong in the quarter and I just wondered if you get the sense that you are capturing much market share, within the U.S. or if anything is changed between, Q2 and Q1?

Well the reference lab business, I think everybody knows very competitive business in North America and at the same time we are pleased with the global performance of the reference lab business, we continue to invest in that business, we’re pleased with the service levels that we provide in that business worldwide and the advancements in the technology innovation, and so it’s a great business for us.

Okay, and yeah there is two other questions. I wonder with regard to the economy whether regionally you can see much impact on your business in different areas of the United States and lastly and final question and you might have addressed this earlier in response to the Ryan’s questions, but with regards to market share shifts between in-house testing and the reference labs. Are you seeing much change in behavior on the part of your customers in response to change in economy or changing desires on the part of pet owners?

I won’t say that we spend a great deal of time looking regionally, we are a global business so, there is a lot of regions to look at it, we’ve started doing that, because it’s really been a modest impact to the economy, it hasn’t been a huge focus if regional differentiation to answer your first question. With regard to your second question on in-house versus reference lab testing, we have released that consistently and wouldn’t change that based on our recent trends that we would see any difference in utilization of in-house testing and reference lab testing. They both have their roles in the practice; they both have some unique solutions that they are providing. We don’t see a particular shift in one direction or the other and what we really like about the business is that, in general testing against testing as customers appreciate the value as our customers or clients, meaning the veterinarian appreciates the value of diagnostic testing and advancing their standard of care to get more confident in utilizing it in different protocols and that’s just a reinforcing behavior.

And our next question from Dawn Brock with J.P. Morgan. Please go ahead.

Good morning. John maybe if you could talk a little bit about Catalyst placements. Yet again, I know you said they were effected between SNAPshot and Catalyst they’re about a 100 placements. Can you give us a better idea of how many Catalysts exactly?

Well that’s a mix of the two systems they generally go hand-and-hand. It’s really not much different than the equal share as you would expect. Dawn Brock – J.P. Morgan: Okay, yeah thanks a lot, and then maybe just moving onto some more macro issues and speaking with your vets, with your clients. Did you hear or were you getting any pushback that as far as differences in the way that specific consumables volume is being utilized? In other words, I guess what I’m trying to get is, it seems as though in-house may have seen a little bit of pressure in that quarter and I guess my curiosity is where was it more on the emergent side, where maybe there were more blood test, because you had more emergencies coming in for that or was it on your wellness and preventative profiles?

Whether it’s in-house or reference lad testing, they are both used in emergency and they’re both used in wellness, because we don’t actually practice medicines. We don’t compete with our customers, we serve our customers. We’re not able to have the visibility of how they’re using are our diagnostic technology, but I will did see same-store sales growth and in both sides of the equation. So, we don’t really see a big shift one way or the other. Dawn Brock – J.P. Morgan: Okay. So just from an ordering perspective, you didn’t see any difference in the ordering patterns for consumables based on any shift and say equity at the VET clinic?

No. Dawn Brock – J.P. Morgan: Okay, and then again just kind of more macro, I mean have you seen any changes other than the typical seasonality for heartworm in the demand side over the last couple of months. Let’s say, was April or May different than June or July for that matter?

Well, I think in general what we are, the trend that we’re really seeing is the substitution of heartworm only testing which is sort of the - in most places where there is tick-borne diseases, is sort of the old way of testing to full parasitic disease testing and really protecting the animal for the kinds of diseases that they can be subject and that annual screen in the penetration that occurs has been continuing theme as we’ve introduced 3Dx and then 4Dx. We kind of kind of look at our overall, we did see a volume growth in our entire K-9 test portfolio test portfolio that includes heartworm only or 3Dx or 4Dx, all three of those have heartworm, so we kind of throw all together. We did see, good unit of volume growth, some people said that anecdotally that some of the testing was occurring a little later in the spring than earlier in the spring, it’s kind of hard for us to tell because we sell to the veterinary practice and then they subsequently use it, we can’t measure when they use our product, we can just measure when they purchase our product. I mean that’s an important point, is that we do have very, very good systems that give us visibility to sales by practices, through distributions. We’ve always had for a number of years now an excellent handle on what’s happening at the point of purchase to the practice and as result, I’ve done a good job in terms of maintaining low distributor inventories and having an appreciation and thus lack of surprises on what happens in terms of distributor back and forward. What we can’t measure of courses is when the products are used in the practice, so that would be a anecdotal information that the testing had heard a little bit, in some cases a little bit later in the spring. Dawn Brock – J.P. Morgan: I wouldn’t be asking you when the actual testing was done just when the ordering was done, because that would be in anticipation of the testing. So I was just curious whether or not you guys saw any sort of shift or any sort of change, say from a year ago in that pattern.

No, I would say, we had good growth in the first quarter and we had good growth in the second quarter, year-over-year in our canine rapid assay business. Dawn Brock – J.P. Morgan: Excellent, the last thing is the Med Tech side was actually quite strong. It’s seems as though vets don’t mind spending money, but pet owners are tightening up a little bit. Can you just talk a little bit about that?

Sorry, can you be more specific on Med Tech, so I’ll make sure I answer the question correctly? Dawn Brock – J.P. Morgan: Just as far as the TIM and the digital radiography side of the business is concerned.

Well I think that’s more of the technology cycle for us. We are very pleased with our digital radiography offering right now. We’ve made significant advancements in that offering both in hardware and software and we have a pipeline of continued advancements in that, and we’ve really seen great performance particularly on the digital side which is driving the majority of that growth. This year over last and I think we’re just in a very interesting technology substitution cycle of people seeing the numerous of benefits associated with digital radiography over film radiography, but we are still early days in that substitution curve, so we are excited about that business.

There are no further questions at this time, if you would like to continue.

Okay, I want to thank everybody for joining in the call and again I want to congratulate IDEXX employees for good quarter, for good half year and for crossing the $1 billion threshold. Thank you all, that ends our call.