Jon Ayers - Chief Executive Officer Brian McKeon - Chief Financial Officer Ed Garber - Director, Investor Relations.

Ryan Daniels - William Blair Erin Wilson - Bank of America/Merrill Lynch Jon Block - Stifel Kevin Ellich - Piper Jaffray Mark Massaro - Canaccord Genuity Ben Haynor - Feltl and Company.

Good morning. And welcome to the IDEXX Laboratories' Fourth Quarter 2014 Earnings Conference Call. As a reminder, today's conference is being recorded. Participating in the call this morning are Jon Ayers, Chief Executive Officer; Brian McKeon, Chief Financial Officer; and Ed Garber, Director, 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 IDEXX's future expectations, plans and prospects constitute forward-looking statements for 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.

Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission.

Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements.

All forward-looking statements are made as of today and except as required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Also during this call, we will be discussing certain financial measures not prepared in accordance with Generally Accepted Accounting Principles or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure is provided in our earnings release, which can be found on our website, www.idexx.com.

In reviewing our fourth quarter and full year 2014 results, please note all reference to growth and organic growth refer to growth compared to the equivalent period in 2013 unless otherwise noted.

Also when we refer to normalized organic growth, in addition to adjusting for exchange in acquisitions, we have adjusted for changes in distributor inventory levels. 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 feel free to get 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 call over to Brian McKeon..

Good morning. I am pleased to take you through the solid progress we achieved in the fourth quarter and for the full year 2014 that has us well positioned for continued strong performance in 2015.

In reviewing our financial results today, we'll focus on our underlying operating trends excluding transitional impacts in Q3 and Q4, 2014, related to the move towards the all-direct sales and distribution model in the U.S.

These impacts reduce full year revenues by $25 million, operating profit by $35 million and EPS by $0.45 consistent with our prior guidance range. With the majority of these effects reflected in the fourth quarter performance. We had a solid finish in 2014.

Highlights included 9% normalized organic growth in Q4 supported by 11.5% normalized CAG recurring growth. We saw continued robust trends in recurring revenue growth globally driven by strong double digit growth in instrument consumables and Reference Lab volume.

We finished the year with 10% normalized organic growth supported by overall 11% full year growth in CAG diagnostic recurring revenues. Reported revenue growth was negatively impacted by about 3% in Q4 related to the strengthening of the US dollar. Despite these impacts we delivered strong profit performance.

We achieved full year adjusted EPS of $3.99 including $6.50 per share benefit from the extension of the US Federal R&D tax credit. This represents growth of 15% or 18% adjusted for currency impacts.

EPS gains reflected accelerated revenue growth, modest operating margin gains and benefits from our accelerated capital allocation towards share repurchases, which resulted in a 6% year-on-year reduction in average share count.

Finally, we effectively manage our transition to an all-direct model in the US reducing channel inventory to immaterial levels at yearend. Today, we'll take you through our 2015 outlook. Of note, we are raising our normalized organic growth guidance to 13.5% to 14.5% reflecting strong continued momentum in our business.

This benefit will mitigate the significant recent strengthening of the US dollar. The net result is the change to our 2015 EPS guidance to $4.33 to $4.43 per share.

As we provide guidance today consistent with our approach last year, we'll focus on our outlook for combined recurring CAG diagnostic revenue growth with more directional information provided for growth by CAG modality.

This is aligned with significant steps we have taken to integrate our go to market approach across modalities to support veterinary care and customer development. Let's begin with review of our fourth quarter and full year 2014 results, beginning with an overview of regional performance.

We achieved strong organic growth across regions for the fourth quarter, driven by CAG as well as solid continued gains in LPD and Water. This is positioning us well for continued strong growth across global markets in 2015.

US revenues were $191 million in the quarter, driven by normalized CAG diagnostic recurring revenue growth of 10% supported by 13% volume driven growth in Reference Lab revenues and 14% growth in vet lab consumables.

Approximately 1% of recurring CAG diagnostic growth benefit came from accelerated go direct margin capture which offset expected effects from the later timing of the annual rapid SA price increases and our enhanced snap up the savings program.

Increases in deferred revenues associated with instrument sales including the final two months of our Catalyst One introductory offer constrained overall US normalized organic revenue growth for the quarter to 7%. These placement and associated deferred revenues will benefit future IDEXX's financial performance as these revenues are realized.

IDEXX's performances continue to outpace continued solid US market growth. In Q4, patient visit increased 2% and clinic revenues increased 6.1% compared to the prior year period. Our data is from a broaden dataset of 5,100 clinics. Our comparable customer dataset in Q3 show patient visit and clinic revenue growth of 1.8% and 5.8% respectively.

For the full year US revenues were $849 million. We achieved accelerated US CAG normalized organic growth of 9% in 2014 driven by 10% normalized CAG diagnostic recurring revenue gains. International revenues in the fourth quarter were $161 million supported by 12% normalized organic growth.

Normalized CAG diagnostic recurring revenue growth was 14% in international markets in Q4, reflecting continued strong gains across regions. Full year international revenues reached $637 million, up 11% organically.

For 2014, international normalized CAG diagnostic recurring revenues increased 14%, reflecting 13% gains in Europe, 19% gain in Asia Pacific and 24% gains in Latin America. We see accelerated growth in both the US and international in 2014 and we are well positioned to build on our strong global momentum this year.

Strong momentum in instrument placements in both U.S. and international markets sets the stage for continued high growth in CAG recurring diagnostic revenues. Global catalyst placements increased 90% year-on-year in Q4 and premium hematology placements increased 23%.

For the full year, we placed over 3,100 catalysts and over 3,200 premium Hematology Analyzers globally representing growth of 29% and 22% respectively well ahead of our goals. Global instrument revenue of $24 million was down 9% organically year-on-year in Q4.

Lower recorded revenues reflected mix impacts from high growth and relatively lower average unit price instrument globally and higher levels of deferred revenue deals. In the US, we placed 450 catalysts of 9% year-on-year with an estimated 54% going to competitive and new accounts.

This caps full year effort will replace over 1,600 catalysts in the US, up 20% increasing our overall installed base to nearly 10,000.

At the same time we placed 489 premium Hematology Analyzers of 18% year-on-year in Q4 and 23% for the full year, demonstrating continued high customer interest and benefiting from the integration of IDEXX's in house solutions. We also continued achieve impressive placement result in the international markets.

Total catalysts in premium hematology placements were up 28% in Q4 and 30% for the full year with total international premium placements exceeding US levels. We are building on this momentum with the launch of Catalysts One in Europe this month and rollout to Asia Pacific and Latin America in Q2.

Gains in international markets augmented strong US momentum resulting in a 20% increase in our total catalysts in premium Hematology Analyzer stall base in 2014. Strong instrument placements are driving continued high growth in CAG diagnostic recurring revenues.

Revenues associated with instrument consumables and service rapid assay test kits and labs services were $235 million in the fourth quarter. The transition to the all direct model resulted in a one time impact the CAG diagnostic recurring revenues of $25 million related to the elimination in channel inventory.

As noted organic growth normalized for these impacts was 11.5% in Q4 bringing full year gains to over 11%. Overall CAG diagnostic recurring revenues reached $1.05 billion in 2014, or 71% of total IDEXX's revenue.

Looking ahead to 2015, we are targeting global growth and catalysts placements of 20% to $25% supported by the international launch of Catalyst One and premium Hematology placement growth of 10% compared to very strong placement levels in 2014.

The continued expansion of our global instrument base and uplift in testing that occurs and customers switch to catalyst, supports our outlook for 15.5% to 16.5% normalized organic growth in global CAG diagnostic recurring revenues in 2015 including about 5% of growth benefit from US margin capture.

Our CAG recurring annuity growth reflects continued strong gains in Reference Lab services and instrument consumables. Our Reference Laboratory consulting services modality with revenues of $119 million grew organically 13% in the fourth quarter. High growth continues to cross all our major regions.

In the US, we achieved volume driven 13% organic revenue growth reflecting the benefits of our integrated sales force model, test innovation and continued adoption and increase utilization of VetConnect PLUS. For the full year global Reference Lab laboratory and consulting services grew 12% organically.

For 2015, we expect to sustain double digit volume driven organic growth for lab revenues globally as we leverage our expanded commercial capability and benefits from our test menu expansion including SDMA. Instrument consumable revenues were $77 million in Q4, grew 15% organically, and were normalized for changes in US distributor inventory levels.

Including less than 2% growth benefit from accelerated US margin capture. Including one time distributor inventory reduction associated with the US go direct implementation, organic revenues declines 3%. Full year normalized organic consumer growth was 15% including less than 1% benefit from accelerated margin capture.

Strong continued growth reflects our expanding base of premium instrument placements in the US and international markets and continue to high retention rates. Global growth in our active catalyst customer base which reached over 15,000 analyzers this year is a key driver of our growth momentum.

Catalyst customers now account for about 92% of our US chemistry consumable revenue exclusive of corporate accounts. For 2015, we are planning for continued strong double digit volume driven base growth in consumable revenues with an additional $30 million or about 9% of our growth benefit from US margin capture.

We also drove solid momentum in our rapid assay modality this year. For the year rapid assay revenues grew organically 6% adjusted for changes and distributor inventory levels. Our fourth quarter rapid assay revenue was $26 million, reflected normalized organic growth of 2% including about 1% growth benefit associated with accelerated margin capture.

As expected Q4 growth was relatively lower reflected delay timing of our annual price increase to align with January industry norm and impacts from our enhanced SNAP Up The Savings royalty program.

For 2015, we are targeting low to mid single digit normalized organic revenue growth in rapid assay with an additional $20 million or about 13% growth benefit projected from US margin capture.

Our customer information management and digital imaging systems business with revenues of $29 million in Q4 grew organically by 5% in the quarter to year full year growth of 12%.Fourth quarter organic growth was supported by solid growth in practice management revenues and benefits from the continued ramp of Pet Health Network Pro which reached over 1,400 users, a 50% plus increase this year.

Strong digital instrument placement growth in Q4 contributed 13% overall placement growth for 2014. A higher percentage of our digital placement was integrated with multiyear diagnostic volume commitment resulting in higher levels of deferred instrument revenue which constrained Q4 reported revenue gains.

We are entering 2015 with a healthy backlog and good commercial momentum and we are projecting about 15% plus organic revenue growth next year for practice management and digital imaging systems. Our livestock, poultry and dairy business revenue grew nearly 10% organically in Q4 to $34 million.

Quarterly results benefit from stronger volumes of bovine products globally as well as solid gains across dairy, swine and poultry diagnostics. For the full year our LPD revenues grew 9% organically and 12% overall to $127 million. For 2015, we are planning for relatively flat growth in LPD.

We continue to anticipate reduction in BSE and other bovine testing related to the success of eradication programs in Europe. These impacts will be offset by global growth in new products including worldwide growth in dairy pregnancy testing and swine testing in Asia and Eastern Europe.

Our water business revenue also grew nearly 10% organically in the fourth quarter to $23 million, driven by new business gains across the US, Europe, Asia and Latin America. For the full year 2014, water business grew 7% organically.

We are targeting mid to high single digit revenue growth for water in 2015 supported by our expanded commercial capability. Solid Q4 growth and flow through supported delivery of full year EPS results to the high end of our guidance range.

With additional EPS benefits from the lower effective tax rate including extension of the US Federal R&D test credit for 2014. In Q4, we are pleased to have reduced US channel inventory to immaterial levels and advance of our transition to an all direct sales and distribution model.

This resulted in a one time revenue reduction of 25% with an associated negative one time operating profit impact of $21 million.

We incurred $4.6 million in net operating profit impact in Q4 and $5 million in 2014 associated with the ramp up of sales and operating resources ahead of the expand in 2015 all direct sales and product distribution model in the US.

We also incurred about $5 million in non-recurring project management another one time cost in Q4 and $9.5 million in 2014 required to implement the transition to the all direct sales and product distribution strategy in the US. These impacts combined reduced Q4 EPS by $0.41 per share and 2014 EPS by $0.45 in line with our expectations.

The commentary that follows focuses on Q4 and full year profit drivers that exclude these transitional impacts. Gross profit was $182 million in Q4, down 3% on a reported basis.

Adjusted for transitional impact associated with the US all direct transition, we estimate gross margin to increase moderately year-over-year reflecting lower product cost and modest net price increases.

Operating expenses increased 16% in Q4 or 8% excluding about $10 million in transition impacts driven by increases in global commercial spending in support of accelerated revenue growth. Reported operating profit for Q4 was $35 million, net of above $31 million of transitional impacts. For the full year 2014, operating profit was $260 million.

Adjusting for transitional impacts of about $35 million, we estimate that full year 2014 operating margins were about 19.6%, up 20 basis points versus the prior year. Adjusted EPS was $0.95 for the quarter, up 16% year-on-year and $3.99 for 2014, up 15%.

Result benefited in part from favorable impact in our tax rate including $6.50 per share benefit from the extension of the US R&D tax credit, all which was reflected in Q4 adjusted EPS. Reported EPS in 2014 benefited by about $0.04 per share from a non-recurring income tax benefit related to prior years.

Including this benefit and transitional impact associated with implementing the all direct US sales strategy, reported EPS was $0.54 in Q4 and $3.58 for 2014. Free cash flow was $191 million for 2014, or 105% of net income. Our strong cash flows have enabled continued allocation of capital to our share repurchases.

We repurchased over 1.1 million shares for about $149 million during the quarter on average price of $132 per share. In 2014, we repurchased almost 4.9 million shares or over a 9% of our diluted shares outstanding at the beginning of 2014 for $618 million. We ended 2014 with about $900 million debt outstanding.

At yearend, we had $323 million in cash balances and about $150 million of borrowing capacity available under our expanded $700 million revolving credit facility. Prior to benefits from our plan a $150 million of new term debt issuances to be funded in February.

Our leverage ratios as a multiple EBITDA adjusted to exclude transition impacts associated with all direct change were 2.43x gross and 1.56x net of cash balances at yearend. That concludes our review of 2014 financial performance.

As we look forward to 2015, we need to adjust our outlook to reflect a significant continuing strengthening of the US dollar we've seen over the last three months. Since we provided preliminary guidance in October earnings call, the US dollar is appreciated about 10% against the major currencies.

At the exchange rate shown in our press release, we now estimate that effects from the strengthening of the US dollar will reduce year-on-year growth by about 5% and adjusted EPS by an estimated $0.22 per share.

This has the effect of reducing our 2015 revenue outlook by about $55 million and EPS by $0.13 per share, more than we had estimated when we provided preliminary guidance last October.

Please note that our 2015 profit outlook benefits from about $21 million in pretax foreign currency hedge gains from previously established contracts which will mitigate the 2015 profit impacts from the stronger dollar. At current rate and timing of hedge contracts we'll lap these benefits in 2016.

As a sensitivity a 1% change in the dollar from rates assumed in our press release, would impact 2015 revenues by about $5.3 million and 2015 operating profit by about $900,000 net of hedge positions currently in place.

Adjusting for current FX rates we are now projecting 2015 revenues of $1.64 billion to $1.66 billion or reported revenue growth of 10% to 12%. Our revenue growth outlook reflects raised expectations for 13.5% to 14.5% normalized organic revenue growth including about 3.5% of growth benefit from US margin capture.

Our higher revenue growth outlook mitigates the negative impacts from FX changes resulting in a net $0.05 reduction in our 2015 outlook to $4.33 to $4.43 per share. A key driver of our growth plan is our expectation for 15.5% to 16.5% normalized growth in CAG diagnostic recurring revenues including about 5% growth benefit from margin capture.

For 2015, we estimated that CAG diagnostic recurring revenues will grow to about 72% of the company's total revenues. We expect our recurring revenue gains will continue to be primarily volume driven with expectations for a continued modest 1% net price increase in the US consistent with general levels of inflation.

We continue to target flat comparable operating margins in 2015 despite headwinds from foreign currency changes. Moderate gains in gross margin will offset operating expense increases associated with expanded commercial capability including resources added to support the US all direct sales strategy.

Our EPS outlook is supported by benefits from share repurchases. Given share repurchase activities to date and expectations for continued future capital allocation towards share repurchases, we expect year-on-year weighted average share count reduction of about 6.5% to 7% in 2015.

This is slightly lower than our earlier estimate reflecting recent increases in our stock price. In support of higher share repurchases with increased debt moderately and we will fund $150 million of term debt in Q1. We now project interest cost in 2015 to be about $27 million to $28 million, reflecting low rate achieved in our more recent financing.

Our 2015 outlook reflects expected effective tax rate of about 30%. Please note that our 2015 tax rate outlook does not assume the further extension of the US Federal R&D tax credit. While US Federal tax policy for 2015 is an unknown, as an aside, I'd note that the R&D tax credit has been extended for 18 years in a row historically.

Free cash flow is projected 90% to 100% of net income for 2015, net of effect related to the addition of about $15 million to $20 million of working capital to support the US all direct strategy.

Capital expenditures are estimated at $85 million, up from $65 million in 2014, primarily due to anticipate investment in manufacturing and Reference Lab operations as well as information technology products to enhance infrastructure and business processes.

In terms of our entry rate heading into 2014, we expect Q1 normalized organic growth to be in line with our targeted full growth range. Year-on-year foreign exchange effects will be significant in Q1 resulting in 6% reduction in reported growth and over $4 million of headwinds to operating profits.

These impacts combined with the year-on-year effects from the ramping of incremental commercial resources globally in 2014 will result in operating margins about 100 to 150 basis points below prior year Q1 levels and limited year-on-year reported operating profit growth in the quarter. That concludes our financial review.

Let me turn the call over to Jon for his comments in our business performance and our areas of focus heading into 2015..

Thank you, Brian. We finished the year with strong momentum in our business. Our business model is nearly 90% recurring revenue including the contribution of over 70% from CAG diagnostics.

These revenues form an enduring profitable growth factor and we are pleased to be able to raise our organic revenue growth guidance adjusted in 2015 building on our success and accelerating growth in 2014. Our performance reflects the key elements of our company's strategy.

First, a sustained focused on innovation which transforms the capabilities of our customers. Second, our new greatly expanded commercial model in the US now fully in operation. And third, a strengthened global presence supported by key investments driving strong growth in virtually all regions and lines of business.

Let me provide an update on these operating strategies starting with innovation. During Q4 we started shipping our next generation flagship Catalyst One point of chemistry analyzer to the North America market. We now have over 350 of these instruments in a field and the customer feedback has been extremely positive.

Catalyst One combines the unique capabilities of catalyst Dx with a smaller and even simpler instrument. And at a 40% lower cost. We are excited to offer a very competitive Catalyst One solution in 2015 to the market of well over 10,000 US veterinary practices that are not yet IDEXX in house customers.

The majority of this market consists of practices using outdated competitive instruments that lack menu turnaround time. And advanced software integration that are capable of what Catalyst One. Not to mention VetConnect PLUS results on the smartphone, all at the lowest price per test.

The international market opportunity for Catalyst One is even more than twice as large as US. With the launch of Catalyst One this month in Europe, we expect to build further on the tremendous momentum achieved in 2014 with Catalyst Dx placement in our international market. Catalyst One appeals to a far broader segment of practices in this market.

We are also innovating in a big way with test menu. By this summer, we will be offering SDMA, a novel kidney function test in our Reference Lab chemistry panel. This new biomarker provides an early indication of progressive and irreversible loss of kidney function.

Current diagnostic method including creatinine Included in most all chemistry panel identify kidney functional loss very late in the process limiting treatment options. Even today with sub optical test parameters, screening for chronic kidney disease or CKD is well adopted by veterinarians and practice.

And many pet owners also know about CKD due to the fact that one in three cats and 1 in 10 dogs will in time develop this deadly disease.

While SDMA can generally be run on expensive equipment such as mass spectrometry IDEXX's proprietary innovation has been to develop low cost creation that run on standard, high throughput clinical chemistry analyzers that we use in our Reference Lab. With the same fast turnaround time as the rest of the chemistry panel.

This proprietary innovation will enable us include SDMA automatically and cost effectively in every chemistry panel. Our veterinary customers are thrilled to hear that we will automatically include SDMA in all IDEXX Reference Lab chemistry panel at no incremental charge starting this summer.

We will also provide a Reference Lab SDMA result without incremental charge for all of our in-house customers when they run a patient sample on their catalysts as long as they use IDEXX as their primary outside lab provider.

Our ability to offer proprietary and innovative test as part of comprehensive chemistry profile with the performed in practice or at the Reference Lab creates a compelling and differentiated value proposition. SDMA is one of the most important new diagnostic at test innovations to come to veterinary medicine half a century.

Of all the reasons to run prevented care a wellness chemistry in Hematology testing, veterinarians routinely put screening for chronic kidney disease at the of the list.

With SDMA we will now enable practitioners to diagnose CKD early enough to do something to slow the progression through a therapeutic diet, a drug regimen or both, keeping pets clinically healthy and adding months or years to their lives.

As such we believe the adoption of SDMA will be promoted by many industry players who sell therapeutic diets and drugs for CKD. As SDMA will be a huge boost to their volumes in this already important category.

We believe our strategy of automating inclusion in the chemistry panel, a move applauded by our customers at last weeks' North American Veterinary Conference will also accelerate SDMA's broad recognition as the standard of care.

Note the importance of chemistry testing and the Reference Lab modality, more than half the requisitions that come to IDEXX's Reference Lab in North America include a chemistry panel and virtually all customers who use IDEXX as their primarily reference level routinely request chemistry panels.

We have yet another important IDEXX Reference Lab menu introduction to discuss today. IDEXX will introduce this spring two more exciting and proprietary innovations in an intestinal parasites screening for dogs and cats. We will be introducing new hookworm and roundworm antigen test to all fecal panels that already include the whipworm antigen test.

Like whipworm antigen testing, these novel tests will find the presence of intestinal worms that current methods miss and find them earlier in the infection cycle, enabling earlier disease to diagnosis and treatment intervention.

We begin -- expect to begin field trials in February for this new test and to rollout this offering across the US in the first part of Q2. Screening for intestinal parasite including whip round and hookworm is a well established part of routine preventive care.

And with an addition of a low cost fecal antigen test, we will have unique offering for customers. Parasites screening with fecal testing is commonly conducted manually within the veterinary practice today using difficult and less accurate sample prep procedures combined with microscopy.

We estimate that 80% of the $40 million tests conducted in the US are conducted with the microscope in practice. Assuming we can covert a quarter of the $40 million to this novel and competitively priced fecal offering over time, we can grow our Reference Lab fecal testing business over four fold to $100 million annually.

We are also continuing to innovate in information technology. We continue advanced the capability and the utilization of the VetConnect PLUS globally. With the Catalyst One launched internationally, we have recently introduced VetConnect PLUS in 13 countries in Europe beyond the UK. We now stand at 17,500 activations globally with 13,200 in the US.

Speaking of information technology, we were pleased last quarter to have added through acquisition a leading SaaS based practice management software and suite solution in Europe called Animana. Now like the US with cornerstone, we can offer 10 solutions to our European customers. And on an advanced SaaS platform.

We are also introducing in the US a SaaS based software solution called Petley Plans that enables practices to more easily adopt monthly preventive care plan. Preventive care plan have proven to be a client centric way to expand diagnostic testing adoption with pet owners.

Between VetConnect PLUS, Animana, Petley Plans and Pet Health Network Pro, our client communication offering, we now have four advanced SaaS offerings for customers to managing grow their practice. Other than VetConnect PLUS, all these offerings are subscription based.

You will see over the course of 2015 a continued build up of a highly capable and uniquely integrated SaaS eco system leveraging the already broad adoption of VetConnect PLUS. This IT eco system is designed to grow the profession and in turn our recurring revenue streams in the companion animal business.

Let me provide an update on our fully direct commercial model now in operation in the US. We exit 2014 with four capabilities including the launch of our e-commerce site in December that is already receiving over 30% of our customer order value, a testament to its instant success.

We've hired and trained our expanded organization service customers in 174 veterinary diagnostic consultants or VDC territory.

We believe that b expanding the number of territories serving the US companion animal market and the shrinking the size of each territory, we will be able to grow our presence in veterinary practices from 25,000 sales that's realized in Q4 to at least 45,000 visits quarterly in 2015. And 84% sequential quarterly increase.

We know that when we call on customers they grow faster. In fact, customers we call on in 2014 grew 13% faster than customers we did not reach for at least one in person visit. Overall, our field base front line professionals and phone base sales serving the US companion animal market is the largest in the profession at over 400.

Let me give an example of how we expand the market with our direct customer present. Our US Reference Lab modality grew 13% in Q4 of 2014. Almost all of that was volume growth as price contributed less than 1%.

Same customer volume that is volume from customers, who use IDEXX Reference Labs in both current quarter and the same quarter prior year, generated almost 8% of the overall volume growth for the quarter. This same customer volume growth occurred in part through the customer adoption of our advanced testing portfolio.

Same customer volume growth has accelerated every quarter over the last two years since the transition of our account management model in 2013. And at the beginning it was basically nothing, so it is gone from 0% to 8% acceleration. Also during the fourth quarter we have a strong number of catalyst placements to new and competitive accounts in the US.

At 54% total placement, this amounted to 250 of our 460 placements and these were to generally higher volume accounts. The rest was at test upgrade placement where typically achieve a 25% uplift in consumable revenue. We also achieved a precedent level of hematology placements that build customer loyalty and diagnostic utilization.

So even with the more limited 125 US VDC territories in Q4, we grew the active and installed based of catalyst customers. The growth in the instrument installed based in what help drive 14% growth in our vet lab consumables in Q4 net of distributor margin capture.

As to our rapid assay business, we've successfully placed 8,400 snap pro mobile instruments with 6,100 customers in 2014. These customers along with snap shot the ex instrument customers now account for little over 50% of our rapid assay volume in North America.

Thus we have transformed a little more than half of rapid assay business to an installed base instrument business model and with only 10 months of snap pro placement. In addition, since October of last year, we have enrolled a record 13,700 customers in the 2015 SNAP Up The Savings program or SUTS.

A dramatic increase of 6,700 accounts over the prior year program. SUTS is a membership discount program which we have offers with variations in design every year for over a decade and is a recognized brand with customers.

The 2015 program design provides both upfront and ends of the year discounts off list price, the latter which are earned when customers achieve a minimum purchase volume of canine and separately feline kits. Moving to our international business.

It is notable that the veterinary market in developed countries have a standard of diagnostic usage is approximately a third of the US, even though pet owners lover their pets just as much.

Thus we believe the growth potential internationally is even stronger than US which is why have been rapidly expanding our commercial capability in virtually all global markets. As we move into 2015, we are supported internationally with the launch of Catalyst One and VetConnect PLUS and an expanding Reference Lab network and SDMA.

In addition to the investment we made to advance service level and improved cost structure of our Reference Lab internationally, we've also completed three lab acquisitions in Europe in 2014 to expand our geographic presence including Switzerland, Spain and Finland.

The combination of innovation and opportunities for growth globally is showing in the numbers. In 2014 both our US and international CAG diagnostic recurring growth normalized accelerated by a little over 2% to 14% internationally and 10% in the US. We see doubling the international CAG diagnostic recurring revenues over the next five years.

In summary, we enter 2015 with strong momentum and an ever expanding set of product innovations which benefits from roughly 85% of identifiable industry investment and R&D in new products in the diagnostic category. And a transformed commercial capability to bring these innovations to the veterinary practice.

Underlying our outlook for strong enduring growth of our recurring revenue stream is the insight that the pet owners still today significantly underserved by the profession.

Pet health care could expand by as much as three to four folds in the US alone based on standard of care and compliance level at the best and class practices are achieving with the pet loving population.

And of course our menu innovations in 2015 including SDMA and fecal antigen are bringing powerful new tools to empower the veterinarians to be heroes in diagnosing disease early and providing effective treatment plans that allow pets to live longer happier life.

As we conclude this report of our 2014 results, I want to express my deep appreciation for our 6000 Idexxers for their continued passion. I cannot think of a better way to have celebrated our 30 year anniversary than with such a great year. With that we will open the call for questions. .

[Operator Instructions] We will take our first question from the line of Ryan Daniels with William Blair. Please go ahead.

Yes, good morning. Thanks for taking the questions. I guess my first one the one number that really stands out is a Reference Lab same client volume growth and how rapidly that accelerated.

Do you guys have any more details or color on what's driving that? If it is -- your clients moving more their test to you, more overall testing or they are doing more of your proprietary testing.

Just kind of what is that and how sustainable do you think that big organic uplift is?.

Yes, Ryan, thank you for the question. We believe the primary driver for that is the adoption of our unique advanced test menu that we've launched over the last virtually a decade combined with the new customer account model where our sales reps are calling existing Reference Lab customers. We believe that is clearly sustainable.

It has the opportunity for upside because we had actually expanded not only the number of specialized tests in our Reference Lab of course with big launch of SDMA and now that the new fecal antigen tests but of course we are expanding the number of calls that we are going to be making on our Reference Lab customers.

I will know is an important observation because the Reference Lab modality is the number one contributor to our recurring diagnostic revenues. .

Okay appreciate that. Then maybe just a follow- up there as well.

If we think about your R&D pipeline and what it is yield and specifically in the Reference Lab was SDMA on the way with extended fecal test, is those become I think as you mentioned kind of industry standards, do you think that will start to kind of need IDEXX laboratories from a Reference Lab standpoint because there will be demand from patients are within the communities for these and in fact you are the only one they can get them from?.

We believe absolutely that it is important to expand the standard of care. Let's just take SDMA. The reason why we are offering it at no additional charge in all of our reference panel is because you really shouldn't be running chemistry with creatinine and without SDMA and creatinine is in virtually every chemistry panel.

So we believe this will create uplift in the standard of care that will be well appreciated by pet owners. If you talk to any multi cat owner, they probably had a cat that passed away of chronic kidney disease. So it is well appreciated and we would expect that over time pet owners will demand high standard of care. .

Thank you. With that we will go to the next question from Erin Wilson with Bank of America/Merrill Lynch. Your line is open. .

Great, thanks for taking my question.

Have you seen I guess any meaningful shift in overall kind of retention rate across consumables and equipment, and surely there were some customers that were really loyal to the distributors but could you talk, speak to some of the dynamics and the feedback you are getting on the go direct strategy so far?.

Yes. We've seen no meaningful shift. We are pleased to have continued to expand our catalyst and install base, our active installed base in Q4. We measure the active installed base.

Of course the record number of Hematology placement also continues to expand and now we are really moving into 2015 with Catalyst One which is a very competitive priced and highly capable, really uniquely capable instrument.

And so I think as we move to 84% sequential growth in the number of calls that we are making on customers from Q4 to Q1 in 2015, we will see the continued business benefit of the direct model play out..

Okay, great.

And then thinking about VCA how much I guess of an impact towards that over the past year and I guess will be lapping that to some extent but in --I guess this brings an important point on like the quality of customers and thinking about the way you look at your book of business, book of customers here, do you have metrics around like quality of customer in terms of consumable utilization that might be an interesting metric to sort of track in light of all these shift?.

We do track that. We find that the larger the customer the more they appreciate our technology and all of the benefits that it brings. With regard to your question on VCA, that was really an immaterial impact and the reason is that VCA is primarily drives their diagnostic volume to the Reference Lab as you can imagine.

And thus each of VCA practice is we have found a very small user of the in-house chemistry analyzer. .

Thank you. Our next question comes from the line Jon Block with Stifel. Your line is open. .

Thanks and good morning. Two questions.

First one Jon, we had done some work, it seems like you are increasing your utilization with your current customers by your go direct strategy, seems to be resonating but maybe if you can help tease out for us, where you guys having the most impact? Are you seeing the biggest lift on explaining these specialty test at the Reference Lab, is it left in clinical consumables, is it VetConnect PLUS, where you are seeing that approach resonate across your different modalities?.

Thank you for the question, John. Of course we have been direct with Reference Lab modality from the beginning, I think when we move to the account manager model, we were calling on existing Reference Lab customers, and we began to see the acceleration in the same store utilization that I referenced.

We have now only move to a direct model calling on our customers directly for the in-house consumable.

So we are really at the beginning of that utilization trend in 2015 and we have a number of tests whether they are menu on the in-house instrument suite such as fructosamine or phenobarbital [ph] are coming shortly a T4 or snap test that are not well adopted yet by customers.

They have the same adoption and utilization potential that we have seen in the Reference Lab. And so we really do see that as one of the avenues same store utilization growth and expanding the market and expanding the standard of care that will be driven by this model. As I mentioned the pet owner is really not well served yet.

And I think veterinarians want to learn how to better close that gap of three to four times. And that's what our diagnostic subject matter experts, the only ones in the profession who are regularly calling on veterinary practices and help them with since diagnostic is such a key component of the practice quick care equation..

Okay, very helpful. And the other question maybe the biggest is, I am really not kind of start a war words here but they were very big numbers from your primary competitor last night and I guess I have two questions to that.

You also had big chemistry numbers, why are there so many chemistry boxes going out the door in what is largely a saturated chemistry market where 88%, 89% or 90% according to our work of the clinics out there do have an in clinic analyzer, that sort of question number one.

And question number two is based on some of those numbers last night they actually place more chemistry analyzers to end users than you guys in the fourth quarter.

So what are you seeing within your customer base? In other words, are you seeing some of the guys who had VetTest and just never ran volume on it or very little volume on it over the past 6 or 12 or 18 months? Are you conceding those accounts and you are willing to do that just because they might be your Reference Lab customers they were never committed to in clinic.

Can you parse through some of that Jon? Thank you. .

Well, we believe that there are well over 10,000 accounts that are really using technology that was launched a decade ago. And if you think about what happen with IDEXX over the last decade, we launched Catalyst One, we launched ProCyte, we launched Catalyst Dx, we launched VetConnect PLUS, we've expanded the venue on catalyst platform.

And so we see a great opportunity to upgrade those accounts that have outdated technology and of course to continue upgrade our vet test install base as Brian mentioned 92% of our chemistry volumes exclusive corporate account is coming from the catalyst and installed base already. That's only 8% that does represent many thousand vet test customers.

So it is very large number of customers but a very small amount of our volume.

What we see is the greater opportunity is the 10,000 customers out there that do not have the real time care, the advanced menu, the flexibility and the lower cost per test, let alone the connection into a full diagnostic solution that is at the current standard of care that we will establish to 2015 that include SDMA, I will mention that for accounts that use catalysts and use us as their primary Reference Lab, we will be ensuring that they can practice the current standard of care that include SDMA even when they are running their chemistry panel in-house because they will be able to include that Reference Lab SDMA at no incremental charge.

So we see a very significant opportunity and that's our framework, that's our outlook for the market. We are pleased with the 14% growth that we had adjusted even for margin capture. And the instrument consumable modality and we think that's a very good number. And we expect to continue to grow the instrument modality..

Thank you. Our next question will come from the line of Kevin Ellich with Piper Jaffray. Your line is open..

Good morning. Thanks for taking the questions. Jon, just kind of following up on SDMA.

Could you give us some color as to kind of the work you guys did to see what type adoption you should see out of the vet clinics in the market? I guess where is the demand? And then combined with your new fecal test that you talked about that will be out later, how much do you think that will boost your Reference Lab growth?.

Well, we expect that both those menu items will be beneficial to all of our recurring revenues even though they are both Reference Lab modalities because they are part of integrated diagnostic solution. Just to give you a little bit background.

Basically the current way that you screen for chronic kidney disease, the primary parameter is creatinine The problem is that when creatinine goes up that's basically means that the kidney ran out of capacity and it is being overwhelmed by the bodies and creation of creatinine which is a metabolic waste product. So basically it is too late.

75% of the kidney is gone. So what SDMA does is it catches this progress of this disease far earlier, 40% or even 25% when the pet is clinically totally healthy. You can donate one of your kidneys if you are healthy and still live on one kidney. So 50% loss of kidney function is not a problem, but it is a problem if progresses to 75%.

And then there are a number of treatments. This is a big category in the therapeutic diet area for kidney diets that preserve a kidney function.

So we suspect that there going to be others that are going to be jumping on board and promoting SDMA because there will be a market which will demonstrate the need for their diets or in other cases for therapies, for drug therapies. Chronic kidney disease, there isn't any ambiguity about chronic kidney disease in the practice.

You talk to any veterinarian they are going to see I see it all the time in my practice. This is a major category.

We expect this will be the standard of care, that's why we decided to exclude SDMA automatically in the chemistry panel; of course we can do so with our innovation because we felt that running a panel without SDMA was really incomplete and this has been extraordinarily well accepted.

Immediately, instantaneously as we informed customers of what we are doing here. There is just no-- it is all good. It actually expands the reason to do preventive care testing because they can get to it, now they are more -- they are with the higher energy to recommend preventive care testing to pet owners. .

Thanks. Then my follow is with changes in the competitive landscape as Jon was talking about, how should we think about your catalyst retention rate, can you guys breakout the mix between Cat One and Dx and how will this impact your consumable revenue stream and margins going forward? Thanks..

Yes. It is the practice owned to Catalyst Dx, they have all the capability of Catalyst One. So Catalyst One is really targeted at any practice that doesn't currently enjoy the benefits of catalyst technology. And so we see Catalyst One as a very competitive way to grow the catalyst and installed base.

And as we've mentioned we've really seen an immaterial impact on our catalyst retention rates which is what gives confidence for continued double digit growth in this modality..

Yes. I just want to reinforce that. Today, we raised our outlook for CAG recurring diagnostic revenue growth and make clear that we are expecting continued strong double digit growth in consumable revenues in 2015. So we are maintaining the very strong momentum -- accelerated momentum that we achieved this year. .

[Operator Instructions] We will go to line of Mark Massaro with Canaccord Genuity. Your line is open..

Hey, guys. Thanks very much for taking the questions. Your customer retention rates have always been quite good in the high 90s.

Overall, has there been any change to the -- I think it is for 96% to 99% retention rate that you have decided?.

No. .

Okay, great.

And then with respect to US catalyst placement, perhaps to competitive account, can you maybe walk us through where you see that metric going in the next couple of quarters? I know I think you have been reporting roughly 60% going to competitive account and the number came in I think around 54% this quarter, so how should we think about that metric going forward? Thank you..

I think if you look at the last four quarter we had between 50% and 60% in competitive placement I saw obviously we saw big jump in the absolute number placement in Q4 and 54% is pretty solid and there is obviously as the number of vet test accounts diminishes that are out there and you got well over 10,000 competitive account, we are going to see that is attractive opportunity for the continue placement of Catalyst One.

And its unique capabilities and price point..

Next we will go to line of Ben Haynor with Feltl and Company. Your line is open..

Good morning, gentlemen. Thanks for taking the questions. Just a couple of numbers questions for you. On the tax rate I did see the $6.50 called out in the press release, but I was wondering what else alter the tax rate there. I recall the guidance on the Q3 call been for 29% tax rate for 2014 excluding the $0.04 benefit in Q3.

I think that would have implied 28%, 29% in Q4.

So how would you categorize the remainder of the benefit relative to the 30% rate that you have reported?.

We literally had five things that are smaller in nature, are all moving in the right direction in the quarter.

And it is not one specific thing, they created a little bit of an upside there and get the benefit of some of those were related to planning initiatives and that's one of the reasons why lowered our outlook for the 2015 tax rate to 30%, the prior guidance has been 30.5%.

Okay, thanks for that.

And then with your plans for share repurchases and the financial outlook, it seems you're going to continue to take on debt to repurchase shares, by my math kind of back of the envelop that would put your book value at maybe negative $5 a share existing 2015 which would be a pretty similar decline to the $7.50 a share we saw during 2014.

Am I in the ballpark here and I guess at what point would you consider slowing down taking on debt to conduct share buyback?.

Well, we are very comfortable with the path we've been on in terms of our capital structure. As I mentioned, we are ending the year at little over 2.4x EBITDA in terms of our leverage ratios adjusted for the transitional impacts. We are very comfortable with leveraged range in the 2.5 to 3 range.

We said that consistently and in terms of our capital allocation strategy we want to ensure that we are maximizing value for shareholders. And as long as we are comfortable with our business outlook which today we reinforced and raised our operating outlook.

Our confidence will help us to assess how we look at allocating capital to share repurchase and we would anticipate continue to allocate capital because we feel great about our strategic plan and the deposit momentum we are driving..

I also just might mention, of course that we have a pretty strong cash flow coming out of the operation of the business. And it is one of the benefits of our business model which allows us to have capital to allocate to share repurchase. .

Thank you. Our final question will come from the line of Kevin Ellich with Piper Jaffray. Please go ahead. .

Thanks for the follow up. Brian, just a quick question. I know there is a number of moving parts but free cash flow was only 20% of GAAP net income or$9 million this quarter just wondering what's going on there and I guess what's your outlook for free cash flow in 2015? Thanks..

I would have to look at more closely; I would assume that's related to the transitional impacts. So I wouldn't look at the quarters indicative can be related to timing of capital spending and things like that.

We did share that our outlook for free cash flow in 2015, it was 90% to 100% of net income and keep in mind that we got-- and we've signal this earlier we are going to add about $15 million to $20 million of working capital primarily receivables related to the go direct change which is 7% or 10% or so of net income.

So it is effectively the same range that we've been around a 100% of net income or better normalized for those impacts. .

Thank you very much for the calls. And for joining the conference call. I just want to wrap again by really expressing my appreciation to IDEXX. We celebrated our 30th anniversary over the last 12 months, 30 years of innovation.

And I just extraordinarily grateful for what we've accomplished both on the innovation front and on the global commercial front, which positions us so well for the next many years to serve our customers and to continue to transform their capabilities to achieve their objectives and in the case of, of course the companion animal business to serve the pet owner.

We believe there is just very significant opportunity to both grow their capabilities to provide high standard of care. And to expand the level of standard of care that is provided both in the US and even more so in the international market. And the accomplishments that we've achieved in the 2014 have just positioned us very, very well to do that.

And therefore to continue to see sustained growth in the attractive and profitable growth factor of our recurring revenue. And with that we will conclude the call. Thank you. .

Thank you. And ladies and gentlemen, today's conferece call will be available after 10.30 AM today until midnight February 6. You may access the AT&T Teleconference replay system by dialing 1800-475-6701 and entering the access code of 351513. International participants may dial 320-365-3844. Those numbers once again.

1800-475-6701 or 320-365-3844 and enter the access code of 351513. That does conclude your conference call for today. Thank you for your participation and for using AT&T Executive Teleconference service. You may now disconnect..