<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended JUNE 30, 1996
-------------
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number: 0-19271
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IDEXX LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 01-0393723
(State of incorporation) (I.R.S. Employer Identification No.)
ONE IDEXX DRIVE, WESTBROOK, MAINE 04092
(Address of principal executive offices) (Zip Code)
(207) 856-0300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of July 24, 1996, 37,138,878 shares of the registrant's Common Stock, $.10
par value, were outstanding.
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IDEXX LABORATORIES, INC. AND SUBSIDIARIES
INDEX
Page
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements: 3
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
Consolidated Statements of Operations 4
Three and Six Months Ended
June 30, 1996 and June 30, 1995
Consolidated Statements of Cash Flows 5
Six Months Ended
June 30, 1996 and June 30, 1995
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial 10-11
Condition and Results of Operations
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings 12-13
Item 4. Submission of Matters to a Vote of Security-Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
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PART I -- FINANCIAL INFORMATION
Item 1. -- Financial Statements
--------------------
<TABLE>
IDEXX LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
ASSETS
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $139,408,462 $149,252,497
Short-term investments 48,022,684 34,409,074
Accounts receivable, less reserves of $3,179,000
and $2,510,000 in 1996 and 1995, respectively 59,540,881 44,091,136
Inventories 40,195,223 28,192,490
Other current assets 8,648,210 6,034,503
------------ ------------
Total current assets 295,815,460 261,979,700
LONG-TERM INVESTMENTS 10,466,300 13,625,890
PROPERTY AND EQUIPMENT, AT COST:
Leasehold improvements 15,053,664 14,878,226
Machinery and equipment 15,616,555 13,406,525
Office furniture and equipment 15,048,649 10,615,208
Construction in Progress 1,665,716 1,439,448
Building 388,075 --
------------ ------------
47,772,659 40,339,407
Less -- Accumulated depreciation & amortization 17,797,580 14,843,799
------------ ------------
29,975,079 25,495,608
OTHER ASSETS 12,572,311 11,438,427
------------ ------------
$348,829,150 $312,539,625
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 23,396,351 $ 10,807,092
Accrued expenses 21,390,764 16,656,872
Notes payable -- 1,687,433
Deferred revenue 5,223,567 4,263,550
------------ ------------
Total current liabilities 50,010,682 33,414,947
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY:
Common stock, $0.10 par value
Authorized 60,000,000 shares
Issued and outstanding 36,953,424 shares in 1996
and 36,548,596 shares in 1995 3,695,342 3,654,860
Additional paid-in capital 236,138,511 230,805,959
Retained earnings 60,075,037 45,221,905
Cumulative translation adjustment (1,090,422) (558,046)
------------ ------------
Total stockholders' equity 298,818,468 279,124,678
------------ ------------
$348,829,150 $312,539,625
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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<TABLE>
IDEXX LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $65,875,210 $46,501,555 $123,275,066 $85,675,756
Cost of revenue 28,579,930 19,540,742 53,086,914 35,737,153
----------- ----------- ------------ -----------
Gross Profit 37,295,280 26,960,813 70,188,152 49,938,603
Expenses:
Sales and marketing 16,018,957 11,896,774 31,730,068 22,341,726
General and administrative 7,107,499 4,376,276 11,940,037 8,154,163
Research and development 3,091,131 2,723,364 5,900,626 5,184,718
----------- ----------- ------------ -----------
Income from operations 11,077,693 7,964,399 20,617,421 14,257,996
Interest income, net 2,300,937 579,013 4,557,379 1,159,606
----------- ----------- ------------ -----------
Net income before provision for
income taxes 13,378,630 8,543,412 25,174,800 15,417,602
Provision for income taxes 5,485,238 3,599,000 10,321,668 6,439,000
----------- ----------- ------------ -----------
Net income $ 7,893,392 $ 4,944,412 14,853,132 8,978,602
=========== =========== ============ ===========
Net income per common and
common equivalent share $0.20 $0.15 $0.38 $0.27
=========== =========== =========== ===========
Weighted average number of
common and common equivalent
shares outstanding 39,288,396 33,957,246 39,321,556 33,878,445
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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<TABLE>
IDEXX LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30, June 30,
1996 1995
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 14,853,132 $ 8,978,602
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 3,543,383 2,725,010
Changes in assets and liabilities -
Accounts receivable (14,199,299) (8,400,709)
Inventories (12,002,733) (6,628,162)
Other current assets (2,438,665) (1,114,253)
Accounts payable 11,613,211 5,010,933
Accrued expenses 2,556,941 3,128,953
Deferred revenue 960,017 1,273,321
------------ -----------
Net cash provided by
operating activities 4,885,987 4,973,695
------------ -----------
Cash Flows from Investing Activities:
Purchases of property and equipment (5,475,757) (8,623,246)
Decrease (increase) in investments, net (10,454,020) 8,464,435
Decrease in other assets 617,914 37,105
Acquisitions (see Note 5) (2,571,384) (3,500,000)
------------ -----------
Net cash used in investing activities (17,883,247) (3,621,706)
------------ -----------
Cash Flows from Financing Activities:
Proceeds from (repayment of) notes payable (1,687,433) 1,687,433
Proceeds from the exercise of stock options 5,373,034 2,537,795
------------ -----------
Net cash provided by financing activities 3,685,601 4,225,228
------------ -----------
Net Effect of Foreign Currency Translation (532,376) 699,008
------------ -----------
Net Increase (decrease) in Cash and Cash Equivalents (9,844,035) 6,276,225
Cash and Cash Equivalents, beginning of period 149,252,497 25,178,539
------------ -----------
Cash and Cash Equivalents, end of period 139,408,462 $31,454,764
============ ===========
Supplemental Disclosure of Cash Flow Information:
Interest paid during the period $ 126,700 $ 11,901
============ ===========
Income taxes paid during the period $ 6,744,400 $ 5,126,321
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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IDEXX LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited financial statements included herein have been prepared by
IDEXX Laboratories, Inc. and subsidiaries (the "Company") pursuant to the
rules and regulations of the Securities and Exchange Commission and
include, in the opinion of management, all adjustments which the Company
considers necessary for a fair presentation of such information. The
December 31, 1995 Balance Sheet was derived from the audited Consolidated
Balance Sheets contained in the Company's latest stockholders' annual
report. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. These statements should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto which
are contained in the Company's latest stockholders' annual report. The
results for the interim periods presented are not necessarily indicative of
results to be expected for the full fiscal year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements reflect the application
of certain accounting policies described in this and other notes to the
consolidated financial statements.
a. Principles of Consolidation: The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All material intercompany transactions and balances have
been eliminated in consolidation.
b. Certain reclassifications have been made in the 1995 consolidated
financial statements to conform with the current years presentation.
c. The Company adopted Statement of Financial Accounting Standards No.
115 "Accounting for Certain Investments in Debt and Equity Securities"
(SFAS No. 115) effective January 1, 1994. Accordingly, the Company's
cash equivalent and short-term investments are classified as
held-to-maturity and are recorded at amortized cost which approximates
market value.
<TABLE>
Cash Equivalents and Short-term Investments: Cash equivalents are
short-term, highly liquid investments with original maturities of less
than three months. Short-term investments are investment securities
with original maturities of greater than three months but less than
one year and consist of the following:
<S> <C>
Municipal bonds $ 9,500,000
U.S. Treasury bills 38,522,684
-----------
$48,022,684
===========
</TABLE>
<TABLE>
<CAPTION>
Long-term investments are investment securities with original
maturities of greater than one year and consist of the following:
<S> <C>
Municipal bonds $ 6,426,612
U.S. Treasury note 4,039,688
-----------
$10,466,300
===========
</TABLE>
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<TABLE>
d. Inventories include material, labor and overhead, and are stated at
the lower of cost (first-in, first-out) or market. The components of
inventories are as follows:
<CAPTION>
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Raw materials $ 8,060,284 $ 5,058,199
Work-in-process 5,033,363 4,393,946
Finished goods 27,101,576 18,740,345
----------- -----------
$40,195,223 $28,192,490
=========== ===========
</TABLE>
3. NET INCOME PER SHARE
Net income per common and common equivalent share is based on the weighted
average number of common and common equivalent shares outstanding during
each period, computed in accordance with the treasury stock method. Fully
diluted net income per common and common equivalent share has not been
presented as it is not significantly different.
4. COMMITMENTS AND CONTINGENCIES
From time to time the Company has received notices alleging that the
Company's products infringe third-party proprietary rights. In particular,
the Company has received notices claiming that certain of the Company's
immunoassay products infringe third-party patents. Except as noted below
with respect to the patent infringement suit brought by The Jewish Hospital
of St. Louis, no litigation has been brought against the Company with
respect to such claims. Patent litigation frequently is complex and
expensive, and the outcome of patent litigation can be difficult to
predict. There can be no assurance that the Company will prevail in any
infringement proceedings that have been or may be commenced against the
Company. A significant portion of the Company's revenue during the three
month period ended June 30, 1996 was attributable to products incorporating
certain immunoassay technologies and products relating to the diagnosis of
canine heartworm infection. If the Company were to be precluded from
selling such products or required to pay damages or make additional royalty
or other payments with respect to such sales, the Company's business and
results of operations could be materially and adversely affected.
On February 4, 1993, the Company acquired Environetics, Inc.
("Environetics"), which brought a patent infringement suit with Stephen
Edberg, Ph.D. against Millipore Corporation ("Millipore") in the U.S.
District Court for the District of Connecticut on September 30, 1992 (the
"Millipore I suit"). The complaint in the Millipore I suit was subsequently
amended to add as additional plaintiffs Access Medical Systems, Inc., a
subsidiary of the Company ("Access"), and Stephen C. Wardlaw, M.D. The
primary relief sought by the plaintiffs is an injunction against Millipore
which would prevent Millipore from selling a competitive product that the
plaintiffs believe infringes U.S. Patent No. 4,925,789 (the " '789 Patent")
covering the Company's Colilert product, under which Access and
Environetics have an exclusive license from Drs. Edberg and Wardlaw.
Millipore has filed a counterclaim alleging that the '789 Patent is invalid
or not infringed.
In addition, on July 26, 1995, the Company, Environetics, Access and Drs.
Edberg and Wardlaw brought a second patent infringement suit against
Millipore in the U.S. District Court for the District of Connecticut (the
"Millipore II suit"). The principal relief sought by the plaintiffs in the
Millipore II suit is an injunction against Millipore which would prevent
Millipore from selling a product which the plaintiffs believe infringes
U.S. Patent No. 5,429,933 (the " '933 Patent"), which also covers the
Colilert product. The '933 Patent, which is related to the '789 Patent, was
issued in July 1995 to Dr. Edberg. Access and Environetics have an
exclusive license under the '933 Patent from Drs. Edberg and Wardlaw.
Millipore has filed a counterclaim alleging that the '933 Patent is invalid
or not infringed.
If the plaintiffs do not prevail in the Millipore I and Millipore II suits
(which have been consolidated for trial), the Company anticipates that the
Colilert product would encounter increased competition, which could
adversely affect sales of the Colilert product.
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<PAGE> 8
On February 24, 1995, CDC Technologies, Inc. ("CDC Technologies") filed
suit against the Company in the U.S. District Court for the District of
Connecticut. In its complaint, CDC Technologies alleges that the Company's
conduct in, and its relationships with its distributors in connection with,
the distribution of the Company's hematology products (i) violate federal
and state antitrust statutes, (ii) violate Connecticut statutes regarding
unfair trade practices, and (iii) constitute a civil conspiracy and
interfere with CDC Technologies' business relations. The relief sought by
CDC Technologies includes treble damages for antitrust violations as well
as compensatory and punitive damages, and an injunction to prevent the
Company from interfering with CDC Technologies' relations with
distributors. The Company has filed an answer denying the allegations in
CDC's complaint. Since discovery in this litigation is ongoing, the Company
is unable to assess the likelihood of an adverse result or estimate the
amount of any damages which the Company may be required to pay. Any adverse
outcome resulting in the payment of damages would adversely affect the
Company's results of operations.
On May 26, 1995, The Jewish Hospital of St. Louis (the "Hospital") brought
a suit against the Company which is currently pending in the U.S. District
Court for the District of Maine for infringement of U.S. Patent No.
4,839,275 issued June 13, 1989 (the " '275 Patent"). The '275 Patent, which
is owned by the Hospital, claims certain methods and compositions for the
diagnosis of canine heartworm infection. The primary relief sought by the
Hospital is an injunction against the Company which would prevent the
Company from selling canine heartworm diagnostic products which infringe
the '275 Patent, as well as treble damages for past infringement. While the
Company believes that it has meritorious defenses in this matter, since
discovery is ongoing, the Company is unable to assess the likelihood of an
adverse result or estimate the amount of any damages which the Company may
be required to pay. If the Company is precluded from selling canine
heartworm diagnostic products or required to pay damages or make additional
royalty or other payments with respect to such sales, the Company's
business and results of operations could be materially and adversely
affected.
On September 18, 1995, Purisys Inc. ("Purisys"), a producer of home
pollution test kits, and certain of its employees filed suit against the
Company in the Supreme Court of the state of New York. In their complaint,
the plaintiffs allege that the Company has breached promises and made
negligent misrepresentations, and has breached fiduciary and other duties.
The plaintiffs are seeking damages in excess of $50,000,000. The Company
purchased a 15% equity interest in Purisys in August 1994 for $616,000, and
the Company subsequently advanced additional amounts to Purisys to purchase
certain international distribution rights. In March 1995, the Company
ceased advancing funds to Purisys, which filed for protection under Chapter
11 of the Bankruptcy Code in July 1995. In May 1996, the court granted
IDEXX's motion to dismiss the plaintiffs' suit, however the plaintiffs have
requested the court to reconsider the dismissal and permit the plaintiffs
to amend their complaint. While the Company believes it has meritorious
defenses, since discovery has not yet commenced, the Company is unable to
assess the likelihood of an adverse result or estimate the amount of any
damages which the Company may be required to pay. Any adverse outcome
resulting in the payment of damages would adversely affect the Company's
results of operations.
5. ACQUISITIONS
The Company's consolidated results of operations include the results of
operations of three veterinary reference laboratory businesses recently
acquired by the Company for an aggregate purchase price of approximately
$2.6 million in cash and the assumption of certain liabilities. In
connection with these acquisitions, the Company entered into non-compete
agreements for a period up to five years with certain of the entities,
shareholders or former shareholders, and may become obligated to pay
additional compensation to management of these companies based on achieving
certain operating results. The Company has accounted for these acquisitions
under the purchase method of accounting. The results of operations of each
of the laboratories has been included in the Company's consolidated results
of operations of the Company since each of their respective dates of
acquisition. The Company has not presented pro forma financial information
relating to any of these acquisitions because of immateriality. These
acquisitions are as follows:
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- On March 29, 1996, the Company acquired all of the capital stock
of VetLab, Inc., which operates two veterinary reference
laboratories in Texas.
- On April 2, 1996, the Company, through its wholly-owned U.K.
subsidiary, acquired substantially all of the assets and assumed
certain of the liabilities of Grange Laboratories Ltd. Grange
Laboratories' business, which includes three veterinary reference
laboratories in the United Kingdom, is now operated as a division
of IDEXX Laboratories, Limited.
- On May 15, 1996, the Company acquired all of the capital stock of
Veterinary Services, Inc., which operates veterinary reference
laboratories in Colorado, Illinois and Oklahoma.
6. SUBSEQUENT EVENTS
On July 12, 1996, the Company acquired substantially all of the assets and
assumed certain of the liabilities of Consolidated Veterinary Diagnostics,
Inc. ("CVD") for approximately $17 million in cash and notes. In addition,
the Company may be required to make further payments to CVD of up to $3.0
million based on operating results for the year ended July 31, 1997. As a
result of the CVD acquisition, the Company is now operating CVD's
veterinary reference laboratories in Northern California, Oregon and
Nevada. In connection with the acquisition, the Company entered into
five-year non-compete agreements with CVD and the shareholders of CVD. The
Company will account for this acquisition under the purchase method of
accounting.
On July 18, 1996, the Company acquired all of the capital stock of Ubitech
Aktiebolag ("Ubitech") for approximately $400,000 in cash. Ubitech, located
in Uppsala, Sweden manufactures and distributes diagnostic kits for the
livestock industry. The Company will account for this acquisition under the
purchase method of accounting.
On July 17, 1996 the Company signed a definitive merger agreement to
acquire Idetek, Inc. ("Idetek") for IDEXX common stock valued at
approximately $20 million, less certain adjustments. Idetek, located in
Sunnyvale, California, manufactures and distributes diagnostic tests for
food, agricultural and environmental industries. The exact number of shares
of IDEXX stock to be issued will be determined at the closing. Completion
of this acquisition is subject to various conditions, including approval by
Idetek's shareholders. The Company intends to treat this merger as a
pooling-of-interests transaction.
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Item 2.
IDEXX LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total revenue for the second quarter of 1996 increased 42% to $65.9 million from
$46.5 million for the second quarter of 1995. Total revenue for the six months
ended June 30, 1996 increased 44% to $123.3 million from $85.7 million for the
first six months of 1995.
The increase in total revenue for the quarter ended June 30, 1996 compared to
the same period in 1995 was principally attributable to increased unit sales of
veterinary clinical chemistry and hematology consumables and instruments, test
kits for feline viruses, and sales of veterinary laboratory services resulting
from recent acquisitions of veterinary reference laboratories. The increase in
revenue for the six-month period ended June 30, 1996 as compared to the same
period in the prior year was attributable to increases in the products noted
above, canine test products, and the introduction of a quantitative thyroid
instrument. Other important contributors to revenue growth in the first half of
1996 compared to the same period in 1995 included an instrument system to test
cleaning effectiveness in food processing plants. Price increases in certain
veterinary clinical products also contributed to the increase in revenue.
International revenue increased 40% to $23.2 million in the second quarter of
1996, and 47% to $43.3 million for the six months ended June 30, 1996, compared
to $16.5 million and $29.5 million, respectively, for the prior year periods.
Increased revenue in Europe, which included revenues of Grange Laboratories
acquired in the current quarter, accounted for 34% and 52%, and increased
revenue in Japan accounted for 48% and 31%, of the increase in international
revenues for the three- and six-month periods ended June 30, 1996, respectively,
compared to the same periods in 1995. The remaining increase is primarily
attributable to increased revenues in Canada, Australia, and Asia. Revenue from
the Company's European subsidiaries, transacted in local currencies, increased
approximately 25% and 37% for the three- and six-month periods ended June 30,
1996, respectively, as compared to the same periods in 1995. In U.S. dollars,
the revenue increase was 18% to $14.8 million for the current three-month period
and 32% to $29.6 million for current six-month period.
Gross profit as a percentage of revenue was 57% for the three- and six-month
periods ended June 30, 1996 and 58% for the same periods in 1995. Higher selling
prices for certain veterinary clinical products were offset by product mix, as
revenue growth of lower margin consumables exceeded the revenue growth in higher
margin diagnostic kit products, and by the impact of lower margins generated by
the recently acquired veterinary reference laboratories.
Sales and marketing expenses were 24% and 26% of revenue for the three- and
six-month periods ended June 30, 1996, respectively, compared to 26% for the
same periods in 1995. The decrease as a percentage of revenue for the three
months ended June 30, 1996 in comparison to the same period in 1995 was
principally attributable to the current quarter sales growth in Japan and the
acquisition of veterinary reference laboratories, which have lower sales and
marketing expenses as a percentage of revenue. The increases of $4.1 million and
$9.4 million for the three- and six-month periods ended June 30, 1996,
respectively, over the same periods in the prior year were principally
attributable to additional personnel in sales functions worldwide.
Research and development expenses were 5% of revenue for the three- and
six-month periods ended June 30, 1996 compared to 6% for the same periods in
1995. In dollars, such expenses increased 14% for the three- and six-month
periods ended June 30, 1996, respectively, as compared to the same period in
1995, reflecting additional resources and related overhead to support product
development.
General and administrative expenses were 11% and 10% of revenue for the three-
and six-month periods ended June 30, 1996, respectively, compared to 9% and 10%,
respectively, for the same periods in the prior year. The increase as a
percentage of revenue for the three months ended June 30, 1996 in comparison to
the same period in 1995 is principally attributable to higher legal expenses,
acquisition costs and the acquisition of veterinary reference laboratories which
have higher general and administrative costs as a percent of revenue.
Page 10
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Net interest income was $2.3 million and $4.6 million for the three- and
six-month periods ended June 30, 1996 as compared to $579,000 and $1,160,000 for
the same periods in 1995. The increase in interest income is due to higher
invested cash balances, due in large part to a public stock offering in
September 1995 that generated approximately $153.0 million in net proceeds.
The Company's effective tax rate was 41% for the three- and six-month periods
ended June 30, 1996 compared to 42% for the same periods in 1995. The decrease
in the effective tax rate is principally attributable to lower state income
taxes.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company had cash, cash equivalents, and short-term
investments of $187.4 million and $245.8 million of working capital.
The Company's consolidated results of operations include the results of
operations of three veterinary reference laboratory businesses recently acquired
by the Company for an aggregate purchase price of approximately $2.6 million in
cash and the assumption of certain liabilities. The Company has accounted for
these acquisitions under the purchase method of accounting. The results of
operations have been included in the Company's consolidated results of
operations since each of their dates of acquisition. The Company has not
presented pro forma financial information relating to any of these acquisitions
because of immateriality.
The Company believes that current cash and short-term investments, which include
net proceeds from the offering of the Company's Common Stock in 1995, and funds
expected to be generated from operations, will be sufficient to fund the
Company's operations for the foreseeable future.
Page 11
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PART II -- OTHER INFORMATION
Item 1. -- Legal Proceedings
-----------------
On February 4, 1993, the Company acquired Environetics, Inc.
("Environetics"), which brought a patent infringement suit with Stephen
Edberg, Ph.D. against Millipore Corporation ("Millipore") in the U.S.
District Court for the District of Connecticut on September 30, 1992 (the
"Millipore I suit"). The complaint in the Millipore I suit was subsequently
amended to add as additional plaintiffs Access Medical Systems, Inc., a
subsidiary of the Company ("Access"), and Stephen C. Wardlaw, M.D. The
primary relief sought by the plaintiffs is an injunction against Millipore
which would prevent Millipore from selling a competitive product that the
plaintiffs believe infringes U.S. Patent No. 4,925,789 (the " '789 Patent")
covering the Company's Colilert product, under which Access and
Environetics have an exclusive license from Drs. Edberg and Wardlaw.
Millipore has filed a counterclaim alleging that the '789 Patent is invalid
or not infringed.
In addition, on July 26, 1995, the Company, Environetics, Access and Drs.
Edberg and Wardlaw brought a second patent infringement suit against
Millipore in the U.S. District Court for the District of Connecticut (the
"Millipore II suit"). The principal relief sought by the plaintiffs in the
Millipore II suit is an injunction against Millipore which would prevent
Millipore from selling a product which the plaintiffs believe infringes
U.S. Patent No. 5,429,933 (the " '933 Patent"), which also covers the
Colilert product. The '933 Patent, which is related to the '789 Patent, was
issued in July 1995 to Dr. Edberg. Access and Environetics have an
exclusive license under the '933 Patent from Drs. Edberg and Wardlaw.
Millipore has filed a counterclaim alleging that the '933 Patent is invalid
or not infringed.
If the plaintiffs do not prevail in the Millipore I and Millipore II suits
(which have been consolidated for trial), the Company anticipates that the
Colilert product would encounter increased competition, which could
adversely affect sales of the Colilert product.
On February 24, 1995, CDC Technologies, Inc. ("CDC Technologies") filed
suit against the Company in the U.S. District Court for the District of
Connecticut. In its complaint, CDC Technologies alleges that the Company's
conduct in, and its relationships with its distributors in connection with,
the distribution of the Company's hematology products (i) violate federal
and state antitrust statutes, (ii) violate Connecticut statutes regarding
unfair trade practices, and (iii) constitute a civil conspiracy and
interfere with CDC Technologies' business relations. The relief sought by
CDC Technologies includes treble damages for antitrust violations as well
as compensatory and punitive damages, and an injunction to prevent the
Company from interfering with CDC Technologies' relations with
distributors. The Company has filed an answer denying the allegations in
CDC's complaint. Since discovery in this litigation is ongoing, the Company
is unable to assess the likelihood of an adverse result or estimate the
amount of any damages which the Company may be required to pay. Any adverse
outcome resulting in the payment of damages would adversely affect the
Company's results of operations.
On May 26, 1995, The Jewish Hospital of St. Louis (the "Hospital") brought
a suit against the Company which is currently pending in the U.S. District
Court for the District of Maine for infringement of U.S. Patent No.
4,839,275 issued June 13, 1989 (the " '275 Patent"). The '275 Patent, which
is owned by the Hospital, claims certain methods and compositions for the
diagnosis of canine heartworm infection. The primary relief sought by the
Hospital is an injunction against the Company which would prevent the
Company from selling canine heartworm diagnostic products which infringe
the '275 Patent, as well as treble damages for past infringement. While the
Company believes that it has meritorious defenses in this matter, since
discovery is ongoing, the Company is unable to assess the likelihood of an
adverse result or estimate the amount of any damages which the Company may
be required to pay. If the Company is precluded from selling canine
heartworm diagnostic products or required to pay damages or make additional
royalty or other payments with respect to such sales, the Company's
business and results of operations could be materially and adversely
affected.
Page 12
<PAGE> 13
On September 18, 1995, Purisys Inc. ("Purisys"), a producer of home
pollution test kits, and certain of its employees filed suit against the
Company in the Supreme Court of the state of New York. In their complaint,
the plaintiffs allege that the Company has breached promises and made
negligent misrepresentations, and has breached fiduciary and other duties.
The plaintiffs are seeking damages in excess of $50,000,000. The Company
purchased a 15% equity interest in Purisys in August 1994 for $616,000, and
the Company subsequently advanced additional amounts to Purisys to purchase
certain international distribution rights. In March 1995, the Company
ceased advancing funds to Purisys, which filed for protection under Chapter
11 of the Bankruptcy Code in July 1995. In May 1996, the court granted
IDEXX's motion to dismiss the plaintiffs' suit, however the plaintiffs have
requested the court to reconsider the dismissal and permit the plaintiffs
to amend their complaint. While the Company believes it has meritorious
defenses, since discovery has not yet commenced, the Company is unable to
assess the likelihood of an adverse result or estimate the amount of any
damages which the Company may be required to pay. Any adverse outcome
resulting in the payment of damages would adversely affect the Company's
results of operations.
Item 4 -- Submission of Matters to a Vote of Security-Holders
---------------------------------------------------
<TABLE>
At the Company's Annual Meeting of Stockholders held on May 24, 1996, the
following proposals were adopted by the votes specified below:
<CAPTION>
BROKER
PROPOSAL FOR AGAINST ABSTAIN NON-VOTES
- ---------------------------------------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1. Election of two Class II Directors:
John R. Hesse 31,320,427 67,414 0 0
Kenneth Paigen, Ph.D. 31,320,427 67,414 0 0
2. Approval of the amendment to the
Company's 1991 Stock Option Plan
increasing from 5,500,000 to
6,475,000 the number of shares of
Common Stock authorized for
issuance under the plan. 23,000,215 8,044,974 176,044 166,608
3. Ratification of Arthur Andersen LLP
as auditors. 31,353,343 17,639 16,859 0
</TABLE>
Page 13
<PAGE> 14
<TABLE>
Item 6. -- Exhibits and Reports on Form 8-K
--------------------------------
<CAPTION>
(a) Exhibits Page
----
<S> <C> <C>
**10.1 Fourth Amendment to Supply Agreement, effective as of January 1, 1996, between the 16
Company and Johnson & Johnson Clinical Diagnostics, Inc.
21. Subsidiaries of the Company. 28
99.1 Schedules A and C to Technology License and Distributor Agreement, dated January 4, 1991, 29
by and between the Company and Baxter Diagnostics Inc.* (previously filed as Exhibit 15.10
to the Company's Registration Statement on Form S-1 (File No. 33-40447), which is
incorporated herein by reference).
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the fiscal quarter for which this report is filed.
<FN>
- ------------------------------------------
* Confidential treatment previously granted as to certain portions.
** Confidential treatment requested as to certain portions.
</TABLE>
page 14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IDEXX LABORATORIES, INC.
Date: July 26, 1996
/s/ Merilee Raines
---------------------------------------
Merilee Raines, Vice President of Finance
(Principal Financial Officer and Principal
Accounting Officer)
Page 15
<PAGE> 1
CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION (# Denotes Omissions)
EXHIBIT 10.1
Fourth Amendment to the IDEXX Laboratories, Inc.
and Johnson & Johnson Clinical Diagnostics, Inc.
(as successor in interest to Eastman Kodak Company)
Supply Agreement dated January 15, 1992 (the "Supply Agreement")
This Amendment (the "Amendment") is effective as of January 1, 1996, by and
between Johnson & Johnson Clinical Diagnostics, Inc., a New York corporation
with offices at 100 Indigo Creek Drive, Rochester, N.Y. ("JJCD"), and IDEXX
Laboratories, Inc., a Delaware corporation, with offices at One IDEXX Drive,
Westbrook, Maine, 04092 ("IDEXX").
WHEREAS JJCD and IDEXX desire to amend the Supply Agreement, as amended on
November 16, 1993, November 19, 1993 and March 15, 1994 (such amendments are
collectively referred to as the "Original Amendments") as provided herein:
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto agree as follows:
1. All references to the Eastman Kodak Company or Kodak shall be deemed to be
replaced by reference to Johnson & Johnson Clinical Diagnostics Systems, Inc. or
JJCD.
2. All references to EKTACHEM slides shall be deemed to be replaced by reference
to VITROS slides.
3. Each of the Original Amendments, including the Schedules thereto, is hereby
superseded by this Amendment and shall hereafter be null and void and of no
further effect.
4. In Clause 1, the definition of "the Term" is hereby deleted in its entirety
and replaced with the following:
"The period from the Commencement date until December 31, 2006."
5. In Clause 1, insert the following terms:
"Applicable Percentage" The percentage for each Corresponding Slide
as set forth on Schedule 9, as revised
pursuant to sub-Clause 7.04 below.
"Benchmark" The Weighted Average List Price as set forth
on Schedule 9, as it may be revised pursuant
to sub-Clause 7.04.
<PAGE> 2
"Corresponding Slide" Any VITROS slide which provides the same
blood chemistry measurement as a particular
VETTEST slide (e.g., a DT60 Glucose slide is
a Corresponding Slide for a VETTEST Glucose
slide).
"the PANELS/PROFILES" Packages of VETTEST slides consisting of two
or more sets of slides of specified
chemistries. The initial PANEL and the
initial PROFILES shall consist of the slides
set forth on Schedule 6 attached hereto, with
any changes or additional PANELS/PROFILES to
be mutually agreed upon by the parties as
specified in Schedule 6.
"Weighted Average List Price" As set forth on Schedule 9, as it may be
revised pursuant to sub-Clause 7.04.
6. In sub-Clause 4.01, in the third line after the words "the VETTEST slides"
insert the words ", including slides packaged as PANELS/PROFILES,".
7. Clause 5 is hereby deleted in its entirety and replaced with the following:
5. FORECASTS, COMMITMENTS AND ORDERS
---------------------------------
5.01 Attached hereto as Schedule 7 are Purchase Forecasts and Purchase
Commitments by IDEXX for VETTEST slides, including slides packaged as
PANELS/PROFILES, for the period 1996 to 2006. The Purchase Forecasts
constitute non-binding forecasts which shall be the basis for
determining IDEXX's eligibility for rebates pursuant to sub-Clause
7.03 below. The Purchase Commitments constitute IDEXX's anticipated
minimum purchase quantities for single chemistry VETTEST slides and
PANELS/PROFILES slides in the indicated calendar years. For calendar
years beginning with 1999, IDEXX shall provide to JJCD the anticipated
Purchase Forecasts and Purchase Commitments by type of VETTEST slides
(single chemistry or PANELS/PROFILES) at least two years in advance,
and upon receipt by JJCD such Purchase Forecasts and Purchase
Commitments shall be deemed to be incorporated into Schedule 7. The
total single and PANEL/PROFILE slides reflected in such updated
Purchase Forecasts and Purchase Commitments shall be equal to the
respective totals set forth in Schedule 7. Failure by IDEXX to
purchase at least the indicated Purchase Commitment quantities of each
type of slides in any year may subject IDEXX to the requirement to
make a payment to JJCD as set forth in sub-Clause 5.02 below, but such
failure shall in no event be deemed to be a breach of this Agreement.
5.02 If IDEXX fails to purchase the quantities of slides set forth as
Purchase Commitments on Schedule 7 in a particular calendar year,
unless there has been a Material Adverse Change" (as defined below)
IDEXX shall pay to JJCD within
2
<PAGE> 3
30 days after the end of such calendar year #########################
#####################################################################
#####################################################################
####################
For the purposes of this sub-Clause 5.02, Material Adverse Changes
shall mean material changes in the veterinary clinical chemistry
markets which result from (a) non-invasive diagnostic testing other
than any such testing which is introduced by IDEXX, (b) invasive
diagnostic testing other than any such testing which is introduced by
IDEXX, (c) the eradication of one or more diseases, or the development
of new disease therapies, treatments or diagnostics, which
significantly reduces demand for veterinary clinical chemistry
testing, (d) decreased commitment by or ability of Johnson & Johnson
to supply VETTEST or VITROS slides, and (e) the availability in one or
more significant markets of slides compatible with the VETTEST
analyzer from sources other than IDEXX, which availability is not
promptly enjoined or otherwise terminated by JJCD.
The parties shall discuss in good faith any assertion by IDEXX that a
Material Adverse Change has occurred or is continuing. If the parties
agree that a Material Adverse Change has occurred or is continuing,
they shall negotiate in good faith with respect to appropriate
reductions in Purchase Commitments, VETTEST slide prices (including
single and PANELS/PROFILES slides) and/or amounts which would
otherwise be payable pursuant to the first sentence of this sub-Clause
5.02 to appropriately allocate the effects of such Material Adverse
Change on the parties.
5.03 IDEXX shall place orders for slides at least three calendar months
prior to the required delivery date. Unless otherwise agreed between
the parties in any particular case, orders for slides shall be placed
by IDEXX three times per year and each order shall specify a business
day delivery date for each delivery.
5.04 Not later than October 1 of each calendar year commencing with 1996,
IDEXX shall notify JJCD of quantity requirements for the subsequent
year for each of the VETTEST slides, and IDEXX order quantities in the
subsequent year for each of the VETTEST slides shall be within
+/- 25% of such notification unless the parties otherwise agree. As
long as slide orders are within the indicated range of +/- 25% of
the applicable notification, JJCD shall deliver the slides in
accordance with the orders.
5.05 In the event that IDEXX in any year notifies JJCD that it wishes to
order quantities which exceed the quantities mentioned in sub-Clause
5.04 above by more than 25%, JJCD will endeavor to supply the excess
quantities and notify IDEXX of the extent of its ability to so supply.
3
<PAGE> 4
5.06 It is understood and agreed that orders for the VETTEST slides shall
include only those chemistries set forth in Schedule 8 hereto. In the
event that a chemistry listed in Schedule 8 should become known by
JJCD to be unavailable at any future date during the Term, JJCD will
so notify IDEXX at the earliest practicable date and will cooperate
with IDEXX to ameliorate the possible adverse effects upon IDEXX of
such unavailability.
5.07 Order and delivery of VETTEST slides (including PANELS/PROFILES) shall
be made in multiples of 100 boxes. The number of orders and deliveries
shall be limited to three in each year unless otherwise agreed to in
writing by the parties. Order and delivery of the VETTEST tips shall
be made in multiples of 10,000 tips (20 cartons each containing 500
tips). The number of orders and deliveries of the VETTEST tips and
Vetrols shall be limited to two in each year. JJCD shall deliver the
VETTEST tips and Vetrols in the ordered quantities in each year.
8. Sub-Clause 6.02 is deleted in its entirety and is replaced by the following:
"6.02. Order and delivery for all purchases hereunder shall be FOB
Rochester, New York."
9. Sub-Clause 6.03 is amended by deleting the first sentence thereof in its
entirety.
10. Clause 7 is hereby deleted in its entirety and is replaced by the following:
7. PRICES
------
7.01 The initial prices for each of the VETTEST slides (including the
PANELS/PROFILES) shall be as set forth in Schedule 8 hereto. Such
prices are broken out to provide prices for each individual product
code for each of the three following geographic regions (additional
regions may be added, and changes within regions may be agreed to,
from time to time in writing by the parties):
US--United States, Canada and all other countries not identified
in this sub-Clause 7.01;
European--Australia, Europe, New Zealand, South Africa;
Asian--Brunei, China, Hong Kong, Indonesia, Japan, Korea,
Malaysia, Philippines, Singapore, Taiwan, Thailand, Viet Nam.
IDEXX agrees that JJCD may audit IDEXX books and records to verify
sales of VETTEST slides in each region.
7.02 The prices set forth in Schedule 8 shall remain in effect for orders
placed through December 31, 1996. Thereafter, the prices may be
adjusted, subject to the next
4
<PAGE> 5
sentence of this sub-Clause 7.02, effective as of January 1 of each
year for orders placed on or after that date by an amount not to
exceed ##############################################################
################################################## for the calendar
year since the immediately preceding price adjustment. Notwithstanding
the preceding sentence, if the aggregate quantities of IDEXX's single
slide and PANELS/PROFILES slide purchases exceed #### of the Purchase
Forecasts for a particular year as set forth on Schedule 7, there
shall be no price increase for the immediately succeeding year.
7.03 In the event IDEXX purchases more than #### of the Purchase Forecasts
for each of (i) single slides and (ii) PANELS/PROFILES slides, IDEXX
shall be entitled to a credit rebate based on the amount by which
IDEXX exceeds the Purchase Forecasts for each category (single or
PANELS/PROFILES slides) as follows:
Purchases by Category Rebate Schedule for total
% above applicable Purchase Category purchases above
Forecast applicable Purchase Forecast
#### ####
######### ####
######### ####
#### ####
Notwithstanding the termination or expiration of, or anything to the
contrary in, this Agreement, IDEXX shall be entitled to receive a cash
refund, rather than a credit rebate, from JJCD if IDEXX is entitled to
a rebate pursuant to the preceding sentence immediately prior to the
expiration or termination of this Agreement.
7.04 JJCD agrees to provide to IDEXX on a regular basis during the Term
current list prices for all Corresponding Slides. Each revised
Corresponding Slide price list shall be used by the parties to
calculate an updated Weighted Average List Price for all Corresponding
Slides. In the event that the Weighted Average List Price for
Corresponding Slides is less than ### of the Benchmark in effect
immediately prior to the effectiveness of the new Corresponding Slide
price list, (i) all of the VETTEST single and PANELS/PROFILES slide
prices to IDEXX shall be ############################################
##############################, effective for all orders after the new
JJCD Corresponding Slide prices which give rise to the reduction in
the Weighted Average List Price go into effect, and (ii) a new
Benchmark shall be established at the new Weighted Average List Price.
If IDEXX elects to add to, or delete from, the list of available
VETTEST slides set forth on Schedule 8 one or more of the slide
chemistries offered by JJCD, the parties agree to revise Schedule 9 as
necessary to add or delete the appropriate Corresponding Slide(s) and
its list price, and to recalculate the Applicable Percentages so that
such percentages on the revised Schedule 9 reflect the actual unit
volume sales percentages of each Corresponding Slide. Applicable
5
<PAGE> 6
Percentages of unit volume sales shall be determined based on JJCD's
sales for its most recently completed fiscal quarter, and the sum of
the Applicable Percentages shall always be 100%. In the case of any
revision to Schedule 9, the Weighted Average List Price shall be
recalculated by multiplying the Applicable Percentage for each
Corresponding Slide by its list price and aggregating the total of
such multiplication calculations.
JJCD and IDEXX agree that IDEXX may request that a Big 6 accounting
firm, other than the principal accounting firm of either party, audit
JJCD's books and records to verify the Weighted Average List Price and
actual unit volume sales of Corresponding Slides. Such auditor shall
report to the parties only (a) JJCD's Weighted Average List Price and
(b) the Applicable Percentage for each Corresponding Slide. The prices
and percentages contained in such auditor's report shall be deemed to
be the Weighted Average List Price and Applicable Percentages for
Corresponding Slides, respectively, hereunder until modified in
accordance with this sub-Clause 7.04. The fees and expenses of such
auditor shall be borne equally by the parties.
7.05 If JJCD is entitled to a price increase pursuant to sub-Clause 7.02
and IDEXX is entitled to a price decrease pursuant to sub-Clause 7.04,
the net percentage increase or decrease in price shall be used to
calculate slide prices for the next calendar year.
11. In Clause 9, insert the following as sub-Clause 9.09:
9.09 JJCD shall use all commercially reasonable efforts to (i) ensure that
neither VITROS slides (including without limitation VITROS slides to
which bar coding for use in the VETTEST analyzer has been added) nor
any other product manufactured by or for Johnson & Johnson is
supplied, marketed, distributed or sold for use in the VETTEST
analyzer and (ii) promptly enjoin or otherwise terminate any such
supplying, marketing, distribution or sale. The commercial
reasonableness of JJCD's efforts shall be determined solely with
regard to the relationship between the parties set forth in this
Agreement, and not with regard to JJCD's or Johnson & Johnson's
business as a whole. Notwithstanding the foregoing, JJCD's obligation
to use commercially reasonable efforts for the purposes of this
sub-Clause 9.09 shall not include any obligation to reduce non-VETTEST
VITROS slide prices.
JJCD shall include a provision in future supply and distributor
contracts that if a customer opens a mainframe slide cartridge and
uses the slides individually, or otherwise repackages or modifies JJCD
slides for a use other than for which the slides are sold by JJCD,
such activity, if not ceased upon notice, shall give JJCD the right to
terminate such contract. JJCD will exercise such right where the
customer does not cease such activity after due notice. JJCD and IDEXX
shall also reasonably cooperate in efforts to stop any such
unauthorized slide
6
<PAGE> 7
repackaging or modification, where the modified or repackaged slides
are supplied, marketed or sold for use in VETTEST analyzer. The
failure of JJCD to exert commercially reasonable efforts as
contemplated by this sub-Clause 9.09 shall in no event be deemed to be
a breach of this Agreement by JJCD but shall give IDEXX the right, as
its exclusive remedy for such failure, to terminate any obligations it
may have pursuant to sub-Clause 5.01, the first two of paragraphs of
sub-Clause 5.02 and Schedule 7 of this Agreement, effective
immediately upon written notice to JJCD.
12. In Clause 19, insert the following as sub-Clauses 19.03 and 19.04:
19.03 JJCD shall have the right to terminate this Agreement upon five years'
prior written notice to IDEXX in the event JJCD elects to cease the
manufacture and sale of dry slide diagnostic products. The minimum
purchase obligations of IDEXX shall terminate upon delivery of such a
notice of termination.
19.04 IDEXX shall have the right to terminate any obligations it may have
pursuant to sub-Clauses 5.01 and 5.02 and Schedule 7 of this Agreement
upon prior written notice to JJCD of either (a) two full calendar
years, if IDEXX commits to JJCD that IDEXX shall not supply competing
clinical chemistry diagnostic products to the veterinarian's office
market, or (b) four full calendar years. Upon the commencement of the
first full calendar year of a notice period pursuant to the preceding
sentence, sub-Clauses 7.03, 7.04 and 7.05 and the last sentence of
sub-Clause 7.02 shall be terminated, except for any previously accrued
obligation of JJCD to provide a credit rebate pursuant to sub-Clause
7.03 for the immediately preceding calendar year.
13. Sub-Clause 29.01 is amended by deleting in their entirety the two addresses
for Eastman Kodak Company and replacing them with the following:
Johnson & Johnson Clinical Diagnostics, Inc.
100 Indigo Creek Drive
Rochester, New York 14650
For the attention of: Vice President, Marketing
with a copy to:
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, New Jersey 08933
For the attention of: Office of General Counsel
7
<PAGE> 8
14. Clause 30 is hereby added to the Agreement as follows:
30. DISPUTES
--------
Any and all disputes, controversies or differences between the parties
hereto arising out of or in relation to or in connection with this
Agreement, or the breach hereof, which cannot be settled amicably
through negotiations between the parties hereto, shall be submitted to
and settled by arbitration. Such arbitration shall be conducted in New
York, New York in accordance with the rules then obtaining of the
American Arbitration Association ("AAA") by a panel of three
arbitrators selected from the National Panel of Arbitrators of the
AAA. If the parties cannot agree on three arbitrators, the AAA shall
select one or more arbitrators as necessary to complete the panel.
Reasonable discovery shall be permitted in connection with the
arbitration proceeding, and the arbitrators shall apply the
substantive laws of the State of New York except that the
interpretation and enforcement of this arbitration provision shall be
governed by the Federal Arbitration Act. Any award rendered in any
such arbitration shall be final and binding upon both parties hereto
and judgment upon the award rendered by the panel of arbitrators may
be entered in any court having jurisdiction over the party against
whom the award is to be enforced. Each party shall bear its own costs
in connection with any such arbitration, and any costs of the
arbitrators or the AAA shall be borne equally by the parties. The
arbitrators shall have no authority to assess or award punitive,
incidental or consequential damages, and each party hereby waives its
rights to any such damages.
15. Schedules 6, 7, 8 and 9 to the Agreement are hereby deleted in their
entirety and replaced by Schedules 6, 7, 8 and 9 attached hereto.
16. Except as modified by this Fourth Amendment, all terms and conditions of the
Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, each of the parties have caused this Agreement to be
executed by its duly authorized officer to be effective as of the date first
above written.
JOHNSON & JOHNSON CLINICAL IDEXX LABORATORIES, INC.
DIAGNOSTICS, INC.
By: /s/ Jose Coronas By: /s/ Brad R. MacKinnon
---------------------- ----------------------
Name: Jose Coronas Brad R. MacKinnon
Title: President, President, Veterinary Products Division
Johnson & Johnson
Clinical Diagnostics
8
<PAGE> 9
SCHEDULE 6
PANELS/PROFILES
The initial PANEL shall be the "Young Presurgical Panel" consisting of four sets
of the following six VETTEST slides:
BUN Urea Nitrogen
ALT Alanine aminotransferase
GLU Glucose
TP Total protein
CREA Creatinine
ALKP Alkaline phosphatase
The initial PROFILES shall be the "General Health Profile" and the "Large Animal
Profile", each consisting of two sets of 12 VETTEST slides as follows:
General Health Profile Large Animal Profile
ALB Albumin ALB Albumin
ALKP Alkaline phosphatase ALKP Alkaline phosphatase
ALT(SGPT) Alanine aminotransferase AST AST
AMYL Amylase Ca2+ Calcium
Ca2+ Calcium CK CK
CHOL Cholesterol GGT Gamma GT
CREA Creatinine GLU Glucose
GLU Glucose PHOS Inorganic phosphate
PHOS Inorganic phosphate LDH LDH
TBIL Total bilirubin MG Magnesium
TP Total protein TP Total Protein
BUN Urea Nitrogen BUN Urea Nitrogen
Packaging for the Young Presurgical Panels, the General Health Profiles and the
Large Animal Profiles has been previously agreed upon by the parties, and any
changes to the slide composition or packaging of the initial PANEL or the
initial PROFILES shall be negotiated in good faith and mutually agreed upon by
JJCD and IDEXX. The slide composition, packaging and initial pricing of any
additional PANELS/PROFILES shall be mutually agreed upon by JJCD and IDEXX.
Unless otherwise agreed by the parties in writing with respect to one or more
specific PANELS or PROFILES, all IDEXX purchases of VETTEST slides packaged as
PANELS/PROFILES shall be credited against the Purchase Forecasts and Purchase
Commitments for such slides under this Agreement.
9
<PAGE> 10
<TABLE>
Schedule 7
Purchase Forecasts and Purchase Commitments
<CAPTION>
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PURCHASE FORECASTS
Vol % Vol % Vol % Vol Vol Vol Vol Vol Vol Vol Vol
--- - --- - --- - --- --- --- --- --- --- --- ---
Single slides #### #### #### #### #### ### * * * * * * * *
Panel & Profile slides #### #### #### #### #### ### * * * * * * * *
- ---------------------- ---- ---- ---- - - - - - - - -
Total slides #### #### #### #### #### #### #### #### #### #### ####
PURCHASE COMMITMENTS
Single slides #### #### #### * * * * * * * *
Panel & Profile slides #### #### #### * * * * * * * *
- ---------------------- ---- ---- ---- - - - - - - - -
Total Slides #### #### #### #### #### #### #### #### #### #### ####
<FN>
* Category (single and PANEL/PROFILE) forecasts and commitments shall be provided by IDEXX as specified in
sub-Clause 5.01 of the Agreement.
</TABLE>
10
<PAGE> 11
<TABLE>
Schedule 8
Products and Prices
<CAPTION>
Sales Region US Sales European Sales Asian Sales
- ------------ -------- -------------- -----------
Customer Number 164 9706 314 8251 318 3258
US Pricing
----------
Single slides (Bx 25) Catalog Number >1500 bxs* <1500 bxs* European Pricing Asian Pricing
- --------------------- -------------- ---------- ---------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Albumin 822 7134 ##### ##### ##### #####
Alk Phos 831 5459 ##### ##### ##### #####
ALT 808 3750 ##### ##### ##### #####
Ammonia 181 6842 ##### ##### ##### #####
Amylase 820 8191 ##### ##### ##### #####
AST 811 3979 ##### ##### ##### #####
Calcium 804 8191 ##### ##### ##### #####
Cholesterol 835 4888 ##### ##### ##### #####
CK 835 8582 ##### ##### ##### #####
Creatinine 818 3477 ##### ##### ##### #####
ECO2 853 8670 ##### ##### ##### #####
Gamma GT 826 1315 ##### ##### ##### #####
Glucose 813 0536 ##### ##### ##### #####
LDH 835 1082 ##### ##### ##### #####
Lipase 196 6191 ##### ##### ##### #####
Magnesium 108 0266 ##### ##### ##### #####
Phosphorus 807 0856 ##### ##### ##### #####
Total Bilirubin 838 0396 ##### ##### ##### #####
Total Protein 193 7093 ##### ##### ##### #####
Triglycerides 192 2285 ##### ##### ##### #####
Urea Nitrogen 150 7326 ##### ##### ##### #####
Uric Acid 100 0793 ##### ##### ##### #####
Profile Slides (Bx 24) Catalog Number US Pricing European Pricing Asian Pricing
- ---------------------- -------------- ---------- ---------------- -------------
<S> <C> <C> <C> <C>
General Health Profile 160 7175 ###### ###### ######
Young Presurgical Panel 801 5109 ###### ###### ######
Large Animal Profile 680 0071 ###### ###### ######
Other Catalog Number WW Pricing
- ----- -------------- ----------
<S> <C> <C>
Vetrols 869 9852 ######
Tips 175 7384 ######
<FN>
* per chemistry per order
</TABLE>
11
<PAGE> 12
<TABLE>
SCHEDULE 9
<CAPTION>
Test % of Total List Price
- ---- ---------- ----------
<S> <C> <C>
Albumin ##### #####
Alk Phos ##### #####
ALT (SGPT) ##### #####
Ammonia ##### #####
Amylase ##### #####
AST (SGOT) ##### #####
Bilirubin ##### #####
BUN ##### #####
Calcium ##### #####
Cholesterol ##### #####
CK (CPK) ##### #####
CO2 ##### #####
Creatinine ##### #####
GGT ##### #####
Glucose ##### #####
LDH ##### #####
Lipase ##### #####
Magnesium ##### #####
Phosphorus ##### #####
Total Protein ##### #####
Triglycerides ##### #####
Uric Acid ##### #####
- ---------
Weighted Average ##### #####
List Price
(per box of 25 slides)
</TABLE>
12
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Name Jurisdiction of Incorporation
---- -----------------------------
Access Medical Systems, Inc. Delaware
Cardiopet Incorporated Delaware
Environetics, Inc. Delaware
ETI Corporation Delaware
IDEXX Laboratories Foreign Sales Corporation U.S. Virgin Islands
IDEXX GmbH Germany
IDEXX LABORATORIES PTY. LIMITED Australia
IDEXX Laboratories, Limited England and Wales
IDEXX Laboratories, KK Japan
IDEXX S.A. France
IDEXX Laboratories Canada Corporation Canada
IDEXX Laboratories B.V. The Netherlands
IDEXX Logistique et Scientifique Europe S.A. France
IDEXX Management Services Europe S.A. France
IDEXX Veterinary Services, Inc. Delaware
RADIOPET INCORPORATED Delaware
VetLab, Inc. Texas
Veterinary Services, Inc. Colorado
Ubitech Aktiebolag Sweden
<PAGE> 1
EXHIBIT 99.1
<TABLE>
SCHEDULE A
AGREEMENTS TRANSFERRED
PURSUANT TO THIS AGREEMENT
<CAPTION>
COMPANY DESCRIPTION DATE TERM
- ------- ----------- ---- ----
<S> <C> <C> <C>
International Non-exclusive license and May 3 Years/
Diagnostics marketing agreement concerning 1988 Annual Renewal
Systems equine drugs of abuse reagents Option
Flurotec, Inc. Non-exclusive license agree- October 3 Years/
ment to develop, manufacture 1988 Automatic
and sell assays in the bio- Renewal
technology industrial (non-
clinical) market
Hospital for Feasibility and development April 3 Years
Sick Children funding agreement related to 1988
cellular flourescence biassays
Southern Exclusive supply agreement December 2 1/2 Years
Biotechnology for private label reagents 1987 Expired
Associates and supplies May 1990
Pacific Non-exclusive license agree- Agreement
Diagnostics ment to make, use, and pending
sell products using the Screen signature
Machine/FCA technology in the approval
medical research market in
Australia, New Zealand, and
the Far East.
Chicago Research funding agreement August 6 Months
Medical related to measuring in vitro 1990
School cell-mediated cytotoxicity
using FCA technology.
</TABLE>
<PAGE> 2
<TABLE>
SCHEDULE C
EXISTING BAXTER SERVICE CONTRACTS AND WARRANTY AGREEMENTS
TRANSFERRED PURSUANT TO THIS AGREEMENT
<CAPTION>
CUSTOMER INSTRUMENT
- -------- ----------
<S> <C>
M.D. Anderson FCA 63
Miami Baptist S/M 38
Miami Baptist FCA 84
Monsanto S/M 115
Affymax S/M 162
U of West Ontario FCA 1054
NIH S/M 54
NIH S/M 104
Abbott S/M 28
Alcon Labs S/M 12
Centocor S/M 20
Mol Biosyst FCA 1022
Genentech S/M 37
Hosp for Sick Children S/M 75
Hosp for Sick Children S/M 101
Hosp for Sick Children FCA 66
Comnaught S/M 110
M.D. Anderson S/M 41
3M Company S/M 59
IDEXX FCA 1041
Henry Jackson FCA 1084
Boehringer S/M 164
U of Alabama S/M 100
U of Minnesota FCA 82
Glaxco FCA 1096
Glaxco FCA 1097
U of Miami FCA 77
Athena S/M 107
Unearned Service Contract Revenue $60,809
@ 7/31/90 =======
90 day warranty on new instruments -
warranty reserve balance @ 7/31/90 $2,583
======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE IDEXX
LABORATORIES, INC. UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE
SECOND QUARTER ENDING JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000874716
<NAME> IDEXX LABORATORIES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 139,408,462
<SECURITIES> 48,022,684
<RECEIVABLES> 62,719,881
<ALLOWANCES> 3,179,000
<INVENTORY> 40,195,223
<CURRENT-ASSETS> 295,815,460
<PP&E> 47,772,659
<DEPRECIATION> 17,797,580
<TOTAL-ASSETS> 348,829,150
<CURRENT-LIABILITIES> 50,010,682
<BONDS> 0
<COMMON> 3,695,342
0
0
<OTHER-SE> 295,123,126
<TOTAL-LIABILITY-AND-EQUITY> 348,829,150
<SALES> 123,275,066
<TOTAL-REVENUES> 123,275,066
<CGS> 53,086,914
<TOTAL-COSTS> 53,086,914
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 126,700
<INCOME-PRETAX> 25,174,800
<INCOME-TAX> 10,321,668
<INCOME-CONTINUING> 14,853,132
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,853,132
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
