IDEXX Laboratories (IDXX) 10-K risk factor changes: FY2015 vs FY2014

These products include the majority of our Catalyst Dx and Catalyst One consumables; [added: VetLyte electrolyte consumables,] ProCyte Dx hematology, IDEXX VetAutoread hematology, [removed: VetLyte electrolyte,] VetTest chemistry analyzers and related consumables and accessories; [added: SediVue Dx urine sediment analyzer;] image capture plates used in our [removed: digital radiography] [added: diagnostic imaging] systems; and certain components and raw materials used in our SNAP rapid assay kits and SNAP Pro Mobile Device, [added: Catalyst One, LaserCyte and LaserCyte Dx hematology analyzers,] livestock and poultry diagnostic tests, dairy testing products, [removed: Catalyst One, LaserCyte] and [removed: LaserCyte Dx hematology analyzers.][added: water testing products.]

New [removed: competitors may enter our markets and new] or existing competitors may introduce new and competitive products and services, which could be superior to our products and services.

The costs associated with compliance with these [added: evolving] legal and regulatory requirements are significant and likely to increase in the [removed: future.][added: future and as a result may cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.]

In addition, any failure to comply with these legal and regulatory requirements could result in fines, penalties and sanctions; suspensions or discontinuations of our ability to manufacture, [removed: market] [added: market, import, export] or sell our products; and damage to our reputation.

[removed: Increase] [added: Consolidation] in [added: Our Customer Base, Including Through Increased] Corporate Hospital [removed: Ownership] [added: Ownership,] and Prevalence of Buying Consortiums Could Negatively Affect Our Business

[removed: An] [added: The number of owners of veterinary hospitals has been declining, and an] increasing percentage of veterinary hospitals in the U.S. are owned by corporations that are in the business of acquiring veterinary hospitals and/or opening new veterinary hospitals nationally or regionally.

Major corporate hospital owners in the U.S. include [added: Mars Petcare (owner of] Banfield Pet [removed: Hospital,] [added: Hospitals and Blue Pearl Veterinary Partners),] National Veterinary Associates and VCA Antech, Inc. A similar trend exists in other countries, such as in the U.K. and Nordic countries and may in the future also develop in other international markets.

Furthermore, because these companies compete with us in the reference laboratory services marketplace, hospitals acquired by these companies [added: or those that establish other affiliations with these companies] may cease to be customers or potential customers of our other companion animal products and services, which would cause our sales of these products and services to decline.

For example, the demand for our bovine spongiform encephalopathy (“BSE”) testing products has been negatively impacted as a result of regulatory changes in the European Union, including the European Union’s Standing Committee on the Food Chain and Animal Health agreement to allow European Union member states the option to eliminate BSE testing of healthy cattle at [removed: slaughter effective March 2013.][added: slaughter.]

Our Operations and Reputation May Be Impaired if We, Our Products or Our Services Do Not Comply with [removed: Regulations] [added: Evolving Laws] and [removed: Policies] [added: Regulations] Regarding [added: Data] Privacy and Protection [removed: of User Data]

We offer products and services that [removed: store] [added: collect] and use [removed: practice and] [added: data provided by] client [removed: information,] [added: practices and individuals,] including practice management systems for veterinary practices (e.g., [removed: Cornerstone),] [added: Cornerstone and Neo),] online client communication tools and services (e.g., Pet Health Network Pro), and cloud-based technology through VetConnect PLUS that enables veterinarians to access and analyze patients’ diagnostic data from IDEXX in-clinic analyzers, our Rapid Assays and Reference Laboratories in one place.

We also engage in e-commerce through various IDEXX websites and collect contact and other [removed: personal or identifying] [added: personally identifiable] information from our customers and visitors to our websites.

Federal, state and international laws and regulations govern the collection, use, retention, sharing and security of [removed: personal] [added: personally identifiable] information, including data that we receive from our employees, [removed: customers] [added: customers, vendors] and visitors to our websites and data collected by our customers and others when using our products and services.

[added: We are a global business, with 39% of our revenue during the year ended December 31, 2015 attributable to sales of products and services to customers outside of the U.S.] Any strengthening of the rate of exchange for the U.S. dollar against [removed: non-U.S.] [added: foreign] currencies, and in particular the [removed: Euro,] [added: euro,] British pound, Canadian dollar, [added: Chinese renminbi,] Japanese [removed: yen and] [added: yen,] Australian [removed: dollar,] [added: dollar and Brazilian real,] adversely affects our results, as it reduces the dollar value of sales [added: and profits] that are made in those [removed: currencies and reduces the profits on products manufactured or sourced in U.S. dollars and exported to international markets.][added: currencies.]

[removed: Approximately 28% of our consolidated revenue for] [added: For] the year ended December 31, [removed: 2014 and 26%] [added: 2015, approximately 25%] of our consolidated revenue [removed: for each of the years ended December 31, 2013 and 2012] was derived from products manufactured in the U.S. and sold internationally in local [removed: currencies.][added: currencies, as compared to 28% and 26% for the years ended December 31, 2014 and 2013, respectively.]

A strengthening U.S. dollar could also negatively impact the ability of customers outside the U.S. to pay for purchases denominated in U.S. [removed: dollars.][added: dollars as well as affect our overall competitiveness in international markets.]

A Weak [added: Worldwide] Economy Could Result in Reduced Demand for Our Products and Services or Increased Customer Credit Risk

These conditions, if they continue, could result in a decrease in sales [added: or decrease in sales growth,] of diagnostic products and services, which could have an adverse effect on our results of operations.

For the year ended December 31, [removed: 2014,] [added: 2015,] approximately [removed: 43%] [added: 39%] of our revenue was attributable to sales of products and services to customers outside the U.S., compared to [removed: 42%] [added: 43%] and [removed: 41%] [added: 42%] for the years ended December 31, [removed: 2013] [added: 2014] and [removed: 2012,] [added: 2013,] respectively.

Although we intend to continue to expand our international operations and business, we may not be able to successfully promote, market, [added: import, export,] sell or distribute our products and services outside the U.S. Various risks associated with foreign operations may impact our international sales, including disruptions in transportation of our products, the differing product and service needs of foreign customers, difficulties in building and managing foreign [removed: operations,] [added: operations;] import/export [added: restrictions,] duties and licensing requirements, natural disasters, unexpected regulatory and economic or political changes in foreign markets, security concerns and local business and cultural factors that differ from our normal standards and practices, including business practices prohibited by the Foreign Corrupt Practices Act and other anti-corruption laws and regulations.

Further, prices that we charge to foreign customers may be different than the prices we charge for the same products in the U.S. due to competitive, market or other [removed: factors.][added: factors, or changes in foreign currency exchange rates.]

In addition, we maintain major distribution facilities in North America and in the Netherlands and major reference laboratories in Memphis, Tennessee; Leipzig, Germany; Ludwigsburg, Germany; Sacramento, California; Elmhurst, Illinois; North Grafton, Massachusetts; East Brisbane, Australia; Markham, Ontario; Wetherby, [removed: U.K;] [added: U.K.;] and Tokyo, Japan.

We rely on several information systems throughout our company to keep financial records, [added: analyze results of operations,] process customer orders, manage inventory, process shipments to customers and operate other critical functions.

Our prior operating results have fluctuated due to a number of factors, including seasonality of certain product lines; changes in our accounting estimates; the impact of acquisitions; timing of distributor purchases, product launches, operating expenditures, customer marketing and incentive programs, changes in foreign currency exchange rates, [added: timing of regulatory approvals] and [added: licenses,] litigation and claim-related expenditures; increase in the number and type of competitors; changes in competitors’ product offerings; changes in our sales and distribution model; changes in the economy affecting consumer spending; and other matters.

While we believe that our rulings [added: in the Netherlands and Switzerland] are different than those being discussed, the ultimate resolution of such activities cannot be predicted and could also have an adverse impact on future operating results.

We fund our operations, capital purchase requirements and strategic growth needs through cash on hand, funds generated from [removed: operations and] [added: operations,] amounts available under our credit [removed: facility.][added: facility and senior note financings.]

New competitors may enter our markets through the development of new technology, the acquisition of rights to use existing technologies or the use of existing technologies when patents protecting such existing technologies expire.

Veterinarians are our primary customers for our CAG products and services, and the U.S. veterinary industry has been consolidating in recent years.

In many cases, these laws apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, and among us, our subsidiaries and other parties with which we have commercial relations.

Several jurisdictions have passed laws in this area, and other jurisdictions are considering imposing additional restrictions, including requiring local storage and processing of data.

These laws and regulations continue to develop, are subject to differing interpretations and may be inconsistent from jurisdiction to jurisdiction.

For example, on October 6, 2015, the Court of Justice of the European Union decided that the EU-U.S. Safe Harbor framework that had been in place since 2000, which allowed transfers of personal data to the U.S. in compliance with applicable EU data protection laws, was invalid.

On February 2, 2016, U.S. and European Commission officials announced they had agreed upon a framework for a new data sharing agreement, called the EU-U.S. Privacy Shield, to replace the EU-U.S. Safe Harbor framework.

We are evaluating the potential impact of these changes to our business and practices and determining which of the multiple legal mechanisms available we will utilize to lawfully transfer personal data to the U.S. in compliance with EU data protection laws.

The strengthening of the U.S. dollar has a greater adverse effect on the profits from products manufactured or sourced in U.S. dollars that are exported to international markets and a lesser effect on profits from foreign sourced products and services due to a natural hedge from international expenses denominated in the corresponding foreign currencies.

The accumulated impacts from any continued, longer-term growth in the value of the U.S. dollar against foreign currencies may have a material adverse effect on our operating results.

Our foreign currency hedging activities (see Note 17 — Hedging Instruments in the accompanying Notes to the Consolidated Financial Statements), which are designed to minimize and delay, but not to eliminate, the effects of foreign currency fluctuations, may not sufficiently offset the adverse financial effect of unfavorable movements in foreign exchange rates on our financial results over the limited time the hedges are in place.

We primarily hedge intercompany product purchases and sales denominated in the euro, British pound, Canadian dollar, Japanese yen, Australian dollar and Swiss franc.

Other foreign currency exposures related to foreign sourced services and emerging markets may not be practical to hedge.

In certain cases, these exposures are not offset by foreign currency denominated costs.

As we primarily use foreign currency exchange contracts with durations of less than 24 months and enter into contracts to hedge incremental portions of anticipated foreign currency transactions on a quarterly basis for the current and following year, the effectiveness of our foreign currency hedging activities to offset longer-term appreciation in the value of the U.S. dollar against non-U.S. currencies may be limited.

Factors that could affect the effectiveness of our hedging activities include accuracy of sales and other forecasts, volatility of currency markets, and the cost and availability of hedging instruments.

Since the hedging activities are designed to minimize volatility, they not only temporarily reduce the negative impact of a stronger U.S. dollar, but they also temporarily reduce the positive impact of a weaker U.S. dollar.

Our future financial results could be significantly affected by a strengthening value of the U.S. dollar in relation to the foreign currencies in which we conduct business.

The degree to which our financial results are affected for any given time period will depend in part upon our hedging activities.

During the year ended December 31, 2015, as compared to the prior year, changes in foreign currency exchange rates decreased our revenues by approximately $89.7 million, due primarily to the strengthening of the rate of exchange for the U.S. dollar against all major foreign currencies in which we conduct business.

Additionally, our operating profit and diluted earnings per share for the year ended December 31, 2015 were reduced by $21.2 million and $0.16 per share, respectively, which are net of offsetting gains of $20.9 million and $0.16 per share, respectively, from our foreign currency hedging activities.

At our current foreign exchange rate assumptions, we anticipate that the effect of a stronger U.S. Dollar will have a material adverse effect on our operating results by decreasing our revenues, operating profit and diluted earnings per share in the year ending December 31, 2016 by approximately $40 million, $31 million, and $0.26 per share, respectively.

This unfavorable impact is net of offsetting foreign currency hedging gains, which are expected to increase total company operating profit by $8 million and diluted earnings per share by $0.06 in the year ending December 31, 2016.

The actual impact of changes in the value of the U.S. dollar against foreign currencies in which we transact may materially differ from our expectations described above.

The above estimate assumes that the value of the U.S. dollar relative to other currencies will reflect the euro at $1.07, the British pound at $1.41, the Canadian dollar at $0.68, the Australian dollar at $0.68 and the Japanese yen at ¥118 to the U.S. dollar for the full year of 2016.

We process credit card payments electronically over secure networks.

Risks Associated with Fluctuations in the Market Values of our Investment Portfolio

We invest our surplus cash in a diversified portfolio of marketable securities, including corporate bonds, commercial paper, and a short-term money market fund which invests in securities issued or sponsored by the U.S. government.

The value and liquidity of these marketable securities may fluctuate substantially, and could be negatively affected by increases in interest rates, downgrades of the bonds and other securities included in our portfolio, instability in the global financial markets, declines in the value of collateral underlying the securities included in our portfolio, geopolitical events or other factors.

Any adverse changes in the financial markets and resulting declines in the value of our portfolio could have an adverse impact on our financial condition and operating results.

[removed: Prior to January 1, 2013, we operated] [added: We operate] primarily through three business segments: diagnostic and information technology-based products and services for the veterinary market, which we [removed: continue to] refer to as the Companion Animal Group (“CAG”); water quality products (“Water”); and diagnostic products [added: and services] for livestock and poultry [removed: health,] [added: health and to ensure the quality and safety of milk and food,] which we [removed: referred] [added: refer] to as [removed: Livestock and] [added: Livestock,] Poultry [removed: Diagnostics.][added: and Dairy (“LPD”).]

[removed: Financial information about our Dairy and OPTI Medical] [added: Our Other] operating [removed: segments was combined] [added: segment combines] and [removed: presented] [added: presents products for the human point-of-care medical diagnostics market (“OPTI Medical”)] with our [removed: remaining] pharmaceutical product line and our out-licensing arrangements [removed: in an “Other” category] because they [removed: did] [added: do] not meet the quantitative or qualitative thresholds for reportable segments.

[removed: The segment] [added: Segment revenue and] income [removed: (loss)] from operations [removed: discussed within this report] for [removed: the year] [added: years] ended December 31, [removed: 2012 has] [added: 2014 and 2013 have] been retrospectively revised [added: in this Annual Report on Form 10-K] to reflect this change in the composition of our reportable segments.

See Note [removed: 14] [added: 15] to the consolidated financial statements for the year ended December 31, [removed: 2014] [added: 2015] included in this Annual Report on Form 10-K for financial information about our segments, including our product and service categories, and our geographic areas.

Revenues [removed: related to capital placements of our in-clinic VetLab suite of instruments and our SNAP Pro Mobile Device are non-recurring in nature, while revenues] from the associated proprietary [added: IDEXX] VetLab consumables, SNAP rapid assay test kits, [removed: outside] reference laboratory and consulting services, and extended maintenance agreements and accessories related to our [added: IDEXX] VetLab instruments [added: and our SNAP Pro Mobile Device] are recurring in [removed: nature.][added: nature, in that they are regularly purchased by our customers, typically as they perform diagnostic testing as part of ongoing veterinary care services.]

[removed: Instrument sales] [added: Our recurring revenues, most prominently IDEXX VetLab consumables and rapid assay test kits,] have significantly [removed: lower] [added: higher] gross margins than those provided by our [removed: recurring revenues, especially in the case of VetLab consumables and rapid assay test kits.][added: instrument sales.]

Therefore, the mix of [removed: nonrecurring and] recurring [added: and non-recurring] revenues in a particular period will impact our gross margins.

Under this marketing program, we deferred $7 million of instrument revenue in 2014, which [removed: will not be] [added: was fully] recognized [removed: until] [added: in 2015 upon] delivery of the Catalyst One [removed: instrument occurs in 2015.][added: instruments or customer election to keep the Catalyst Dx was received.]

As of December 31, [removed: 2014,] [added: 2015,] these three chemistry analyzers provided for a combined active installed base of approximately [removed: 38,000 units.][added: 40,000 units globally.]

[removed: Approximately] [added: Almost] half of [removed: 2014] [added: 2015] Catalyst analyzer placements were to customers that are new to IDEXX, including customers who had been using instruments from one of our competitors, sometimes referred to as competitive accounts.

Generally, placement of an instrument with a [added: new or] competitive account is more attractive as the entire consumable stream associated with that placement represents incremental [added: recurring] revenue, whereas the consumable stream associated with a Catalyst placement at a VetTest customer substitutes a Catalyst consumable stream for a VetTest consumable stream.

We have found that the consumables revenues increase [removed: by approximately 25%] when a customer upgrades from a VetTest analyzer to a Catalyst analyzer due to the superior [added: test menu] capability, flexibility and ease of use of the [removed: Catalyst,] [added: Catalyst analyzers,] which leads to additional testing by the customer.

As of December 31, [removed: 2014,] [added: 2015,] these four hematology analyzers provided for a combined active installed base of approximately [removed: 27,000] [added: 29,000] units.

In [removed: 2014, slightly less than] [added: 2015, nearly] half of ProCyte placements were made at competitive accounts.

In [removed: 2014,] [added: 2015,] a significant number of LaserCyte instruments that were placed were recertified instruments that had been received in trade in the sale of a ProCyte Dx analyzer.

As we continue to experience growth in placements of ProCyte Dx analyzers and in sales of related consumables, we expect this growth to be partly offset by a decline in placements of LaserCyte and VetAutoread analyzers and in sales of [removed: related consumables.][added: recurring revenue stream.]

Our long-term success in this area of our business is dependent upon new customer acquisition, customer loyalty and retention [added: of their recurring revenues,] and customer utilization of existing and new assays introduced for use on our analyzers.

In addition, we provide marketing tools and [removed: consultative services] [added: customer support] that help drive efficiencies in veterinary practice processes and allow practices to increase the number of clients they see on a daily basis.

Recurring diagnostic revenue accounts for approximately [removed: 71%] [added: 72%] of our consolidated revenue and is both highly durable and profitable.

To increase utilization, we seek to educate veterinarians about best medical practices that emphasize the importance of [removed: chemistry and] [added: chemistry,] hematology [added: and urinalysis] testing for a variety of diagnostic purposes, as well as by introducing new testing capabilities that were previously not available to veterinarians.

When possible, we utilize core reference laboratories to service samples from other [added: states or] countries, expanding our customer reach without an associated expansion in our reference laboratory footprint.

Under these arrangements, we provide incentives to customers in the form of cash payments or IDEXX Points upon entering multi-year agreements to purchase annual minimum amounts of products or [removed: services in the future.][added: services.]

Customer Information Management and [removed: Digital] [added: Diagnostic] Imaging Systems.

[removed: Our Cornerstone] [added: These] practice management [removed: system provides a superior integrated information solution, backed by exceptional customer support and education, to] [added: systems] allow the veterinarian to practice better medicine and achieve the practice’s business objectives, including a quality client experience, staff efficiency and practice profitability.

Our [removed: digital] [added: diagnostic] imaging systems offer a convenient [removed: system] [added: diagnostic imaging solution] that provides superior image quality and software capability that enables sharing of these images with clients virtually anywhere and enhanced diagnostic features and customer workflow, backed by the same customer support provided for our other products and services in CAG.

Sales of water testing products outside of the U.S. represented [removed: 52%] [added: 50%] of total water product sales in [removed: 2014,] [added: 2015,] and we expect that future growth in this business will be significantly dependent on our ability to increase international sales.

We develop, manufacture, market and sell a broad range of tests [added: and perform services] for various [removed: cattle, swine and poultry] [added: livestock] diseases and conditions, and have active research and development and in-licensing programs in this area.

We also distribute food safety products, including [removed: Randox Food Diagnostics,] a wide range of cost [removed: effective ELISAs,] [added: effective,] sensitive and reproducible diagnostic [removed: assays,] [added: assays] for the detection of multiple [removed: compounds in one test based on a multi-analyte quantitative screening drug residue analyzer called the Evidence Investigator.][added: contaminants.]

In [removed: 2014,] [added: 2015,] approximately [removed: 90%] [added: 89%] of our sales in this business were from markets outside of the U.S., most notably [removed: Europe] [added: Europe, China] and [removed: China.][added: Australia.]

Our strategy in the OPTI Medical Systems business for the veterinary market is to utilize this unit’s know-how, intellectual property and manufacturing capability to continue to expand the menu and instrument capability of the VetStat and Catalyst [removed: Dx] platforms for veterinary applications while reducing our cost of consumables by leveraging experience and economies of scale.

In [removed: 2014,] [added: 2015,] approximately [removed: 83%] [added: 84%] of our sales in the OPTI Medical Systems business were from markets outside of the U.S., most notably Asia and Europe.

See Note [removed: 2(i)] [added: 2(j)] to the consolidated financial statements for the year ended December 31, [removed: 2014] [added: 2015] included in this Annual Report on Form 10-K for additional information about our revenue recognition policy and criteria for recognizing revenue.

Our most significant MEAs include the sale of one or more of the instruments from the IDEXX VetLab suite of analyzers, [removed: digital] [added: diagnostic] imaging systems or practice management software, combined with one or more of the following products: extended maintenance agreements (“EMAs”), consumables and reference laboratory diagnostic and consulting services.

Delivery of our IDEXX VetLab instruments, [removed: digital] [added: diagnostic] imaging systems and practice management software generally occurs at the onset of the arrangement.

If a customer breaches its agreement, it is required to refund [added: all or] a [removed: prorated] portion of the up-front cash or IDEXX Points, [removed: among] [added: or make] other [removed: things.][added: repayments, remedial actions or both.]

These incentives are considered to be customer acquisition costs and are capitalized [added: within other current assets] and [added: other long-term assets and are subsequently] recognized as a reduction to revenue over the term of the customer agreement.

If these up-front incentives are subsequently utilized to purchase IDEXX VetLab instruments, [removed: digital] [added: diagnostic] imaging systems or Cornerstone practice management systems, product revenue and cost is deferred and recognized over the term of the customer agreement as products and services are provided to the customer.

For the years ended December 31, [removed: 2014, 2013] [added: 2015, 2014] and [removed: 2012,] [added: 2013,] impairments of customer acquisition costs were immaterial.

Our estimates are based on historical experience and the specific terms and conditions of the marketing [removed: program and require] [added: program, requiring] us to apply judgment to [removed: approximate] [added: estimate] future product purchases and utilization.

These differences were not material for the years ended December 31, [removed: 2014, 2013] [added: 2015, 2014] and [removed: 2012.][added: 2013.]

Prior to January 1, 2015, our CAG segment included certain livestock testing services processed within our CAG Reference Laboratories.

We have transitioned the responsibility for these diagnostic services from our CAG segment to our LPD segment to more effectively align our business with the nature and customers of these livestock services.

Revenue related to these livestock diagnostic services was $13.8 million and $9.9 million for the years ended December 31, 2014 and 2013, respectively.

For the year ended December 31, 2014, this reclassification of revenue between segments increases our LPD organic revenue growth as compared to previously reported numbers by 2.9% and decreases our CAG, CAG Diagnostic Recurring, and Reference Laboratory Diagnostic and Consulting Services organic revenue growth rates as compared to previously reported numbers by 0.3%, 0.4% and 0.8%, respectively.

See the subsection below titled “Results of Operations” for a description of the calculation of organic revenue growth.

Certain costs are not allocated to our operating segments and are instead reported under the caption “Unallocated Amounts.” Our business segments generally have limited control over the timing and amount of these expenses.

The major categories of these costs include:

Gross Profit:

| | · | | The capitalization of variances between standard and actual manufacturing costs to adjust the timing of expense recognition from when the variance is created to the period in which the related inventory is sold. |

Operating Expenses:

| | · | | Costs that do not align with one of our existing operating segments or are cost prohibitive to allocate, primarily our R&D function, regional or country expenses and certain foreign currency revaluation gains/losses on monetary balances in currencies other than our subsidiaries’ functional currency. |

| | · | | Corporate support function costs (such as information technology, facilities, human resources, finance and legal), health benefits and incentive compensation, which are charged to our business segments at pre-determined budgeted amounts or rates. Differences from pre-determined budgeted amounts or rates are captured within our Unallocated Segment. |

| | · | | Unusual or extraordinary items. |

Revenues related to capital placements of our in-clinic IDEXX VetLab suite of instruments and our SNAP Pro Mobile Device are non-recurring in nature in that they are sold to a particular customer only once.

Our SediVue instrument, which we plan to launch in North America early in 2016, is the first and only in-clinic analyzer to provide urine sediment analysis.

This instrument and single-use consumable system provides an entirely new automated and highly accurate way to automate the in-house process of examining urine under a microscope.

We anticipate reported revenues of approximately $20 million in 2016 resulting from SediVue instrument placements and the resulting recurring revenue stream.

Upon the launch of the total thyroxine (“T4”) slide for use with our Catalyst analyzers during 2015, we experienced a decline in SNAPshot Dx placements.

We reported revenues of $1.5 million from SNAPshot Dx during the year ended December 31, 2015, which reflects approximately a $1 million decrease in revenue relative to prior year.

We will continue to service the existing SNAPshot Dx install base.

The expiration of a third party’s U.S. lateral flow patent in early 2015 enabled competitors to launch single use tests that competed with several of our early generation SNAP rapid assay products, including Heartworm RT, FIV/FeLV Combo Test, Feline Triple, Parvo and Giardia.

These companies partnered with several of our former national distributors to gain market share by competing primarily on price.

In the second half of the year, we stabilized our market share on these products in part by communicating the significant superiority in test sensitivity for both our Canine and Feline lines over competing tests using the lateral flow platform, and in part with more effective marketing and promotion programs.

Our higher sensitivity in the detection of infectious diseases is due in part to our SNAP platform, which is unique in using ELISA technology.

Test accuracy through specificity and sensitivity is a primary factor that customers value with these in-house tests, given the importance of detecting the presence of serious infectious diseases in the practice.

Profitability in our lab business is supported by our expanding business scale globally.

Profit improvements reflect benefits from price increases and our ability to achieve efficiencies.

Our portfolio of practice management offerings is designed to serve the full range of customers within the North American, Australian and European markets.

Cornerstone, DVMAX, Animana and Neo practice management systems provide superior integrated information solution, backed by exceptional customer support and education.

We market Cornerstone, DVMAX and Neo to customers primarily in North America and Australia.

We market Animana to customers primarily throughout Europe.

Animana and Neo are subscription-based SaaS practice management offerings designed to provide flexible pricing and a durable, recurring revenue stream.

While we continue to sell and support Cornerstone and DVMAX software, we anticipate that demand for Neo, our subscription-based SaaS practice management offering, will moderate future revenue growth from new licensed-based Cornerstone placements as we evolve to a subscription-based model for new customer acquisitions of IDEXX practice management systems.

We believe that once established, this subscription-based model will provide higher profitability as compared to the historical license-based placements.

Our Cornerstone and DVMAX customer base continues to be an important driver of growth through enhanced diagnostic integrations and high value add-on subscription services, such as Pet Health Network Pro, Petly Plans, and credit card processing, and we continue to make investments to enhance the customer experience of our licensed-based offerings.

We believe distributing food safety products complements our livestock and dairy testing products.

Our transition to an all-direct sales model and the subsequent increase in competitive activity resulted in an increase in the rate of new up-front customer loyalty incentives, predominantly in response to competitive offerings during the fourth quarter of 2014 and in 2015.

We saw a slowing in the rate of increase for new up\-front customer loyalty incentives in the fourth quarter of 2015.

Our business combinations regularly include contingent consideration arrangements that require additional consideration to be paid based on the achievement of established objectives, most commonly surrounding the retention of customers during the post\-combination period.

Changes in fair value of contingent consideration and differences arising upon settlement were not material during the years ended December 31, 2015, 2014 and 2013.

We also operated two smaller operating segments that comprised products for milk quality and safety (“Dairy”) and products for the human point-of-care medical diagnostics market (“OPTI Medical”).

In 2013, we combined the management of our Livestock and Poultry Diagnostics, and Dairy lines of business to more effectively realize the market synergies between the product lines and to achieve operational efficiencies.

We refer to this segment as Livestock, Poultry and Dairy (“LPD”).

Our OPTI Medical operating segment remains combined and presented with our remaining pharmaceutical product line and our out-licensing arrangements in an “Other” category because they do not meet the quantitative or qualitative thresholds for reportable segments.

Items that are not allocated to our operating segments are as follows: a portion of corporate support function and personnel-related expenses; certain manufacturing costs; corporate research and development expenses that do not align with one of our existing business or service categories; the difference between estimated and actual share-based compensation expense; certain foreign currency exchange gains and losses; and variances from standard cost for products sold resulting from changes in certain currency exchange rates.

In our segment disclosure, these amounts are shown under the caption “Unallocated Amounts.”

During 2013, we reorganized our companion animal diagnostic sales organization in North America, transitioning our specialty sales force that represented either in-clinic or outside reference laboratory diagnostics to account representatives who represent all CAG diagnostic modalities.

In addition to this reorganization, we increased the size of our sales force resulting in smaller geographically sized sales territories.

These changes allowed for more frequent customer contact by a consistent sales professional.

We have experienced accelerated revenue growth subsequently to implementing this change.

With the recent launch of the total thyroxine (“T4”) slide for use with the Catalyst One analyzer, we anticipate a decline in placements of the SNAPshot Dx, although we will continue to service the existing install base.

Profitability from our reference laboratory diagnostic and consulting services is largely the result of our ability to achieve efficiencies from both volume and operational improvements.

Our technology for food safety screening reduces the number of samples sent to confirmation laboratories, lowering costs on expensive confirmation tests.

We believe distributing food safety products provides us opportunities at a later stage in the food value chain.

business combination or if it should be accounted for separately from the business combination in the postcombination period.

Changes in fair value of contingent consideration are recognized in earnings.

A determination of the related tax liability that would be paid on these undistributed earnings if repatriated is not practicable.

The instrument consumables and rapid assay products in our CAG segment were sold in the U.S. and continue to be sold in certain other geographies by third party distributors, who purchase products from us and sell them to veterinary practices, which are the end users.

As a result, distributor purchasing dynamics have an impact on our reported sales of these products.

Distributor purchasing dynamics may be affected by many factors and in a given period may not be directly related to underlying end-user demand for our products.

Consequently, reported results may reflect fluctuations in inventory levels held at distributors and not necessarily reflect changes in underlying end-user demand.

We continue to expect to capture an additional $50 million to $55 million in annual revenue on these direct sales.

We estimate that annual operating profit associated with this incremental revenue stream will increase approximately $5 million to $8 million in 2015 and will continue to provide accretive benefits that will scale over time based on our expected future growth rates.

During the twelve months ended December 31, 2014, compared to the twelve months ended December 31, 2013, changes in foreign currency exchange rates decreased total company revenue by approximately $8.3 million, due primarily to the strengthening of the U.S. dollar against the Canadian dollar, Australian dollar and Japanese yen, partly offset by a weakening of the U.S. dollar against the British pound.

We believe the overall trends in patient visits and capital investments since the beginning of the economic downturn in 2008 have had a slightly negative impact on our CAG segment revenue growth rates.

Although the rate of growth has not been steady, we have seen an improvement in growth of patient visits since the beginning of 2012.

| CAG | | $ | 1,236,855 | | $ | 1,150,169 | | $ | 86,686 | | 7.5% | | | (0.8%) | | | 0.3% | | | 8.0% | |

| LPD | | | 127,388 | | | 113,811 | | | 13,577 | | 11.9% | | | (0.7%) | | | 4.0% | | | 8.6% | |

| CAG Diagnostics recurring revenue: | | $ | 1,053,410 | | $ | 973,886 | | $ | 79,524 | | 8.2% | | | (0.7%) | | | 0.3% | | | 8.6% | |

| Reference laboratory diagnostic and consulting services | | | 492,983 | | | 441,207 | | | 51,776 | | 11.7% | | | (0.9%) | | | 0.5% | | | 12.1% | |

| Net CAG revenue | | $ | 1,236,855 | | $ | 1,150,169 | | $ | 86,686 | | 7.5% | | | (0.8%) | | | 0.3% | | | 8.0% | |

Lower European bovine volumes are expected to reduce revenue by less than $5 million for the year ending December 31, 2015.

| CAG | | $ | 665,477 | | 53.8% | | | $ | 616,335 | | 53.6% | | | $ | 49,142 | | | 8.0% | |

| LPD | | | 79,239 | | 62.2% | | | | 62,534 | | 54.9% | | | | 16,705 | | | 26.7% | |

| | (1) | | “Unallocated amounts” refers to items not allocated to our operating segments, including a portion of corporate support function and personnel-related expenses, certain manufacturing costs, corporate research and development expenses that do not align with one of our existing business or service categories, the difference between estimated and actual share-based compensation expense and certain foreign currency exchange gains and losses. |

In certain geographies where we maintain inventories in currencies other than the U.S. dollar, the product costs reported in our operating segments include our standard cost for products sold, which is stated at the budgeted currency exchange rate from the beginning of the fiscal year.

| CAG | | $ | 452,368 | | 36.6% | | | $ | 397,690 | | 34.6% | | | $ | 54,678 | | | 13.7% | |

| LPD | | | 55,024 | | 43.2% | | | | 48,375 | | 42.5% | | | | 6,649 | | | 13.7% | |

| CAG | | $ | 213,109 | | 17.2% | | | $ | 218,645 | | 19.0% | | | $ | (5,536) | | | (2.5%) | |

| LPD | | | 24,215 | | 19.0% | | | | 14,159 | | 12.4% | | | | 10,056 | | | 71.0% | |

[removed: Approximately 28% of our consolidated revenue for] [added: For] the year ended December 31, [removed: 2014 and 26%] [added: 2015, approximately 25%] of our consolidated revenue [removed: for each of the years ended December 31, 2013 and 2012] was derived from products manufactured in the U.S. and sold internationally in local [removed: currencies.][added: currencies, as compared to 28% and 26% for the years ended December 31, 2014 and 2013, respectively.]

For [removed: two] [added: three] of our subsidiaries located in the [removed: Netherlands] [added: Netherlands, Singapore] and [removed: Singapore,] [added: Dubai,] the functional currency is the U.S. dollar.

If a [removed: derivative] [added: hedging] instrument qualifies for hedge accounting, changes in the fair value of the derivative instrument from the effective portion of the hedge are deferred in accumulated other comprehensive income, net of tax, and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

From time to time, we may also enter into [added: other] foreign currency exchange contracts [added: or foreign-denominated debt issuances] to minimize the impact of foreign currency fluctuations associated with [removed: specific, significant transactions.][added: specific balance sheet exposures, including net investments in certain foreign subsidiaries.]

Our foreign currency hedging strategy is consistent with prior periods and there were no material changes in our market risk exposure during the year ended December 31, [removed: 2014.][added: 2015.]

As a result, no significant ineffectiveness has resulted or been recorded through the statements of operations for the years ended December 31, [removed: 2014, 2013] [added: 2015, 2014] and [removed: 2012.][added: 2013.]

We enter into hedge agreements where we believe we have meaningful exposure to foreign currency exchange [removed: risk.][added: risk, with the exception of certain emerging markets where it is not practical to hedge our exposure.]

The notional amount of foreign currency exchange contracts to hedge forecasted intercompany purchases and sales totaled [removed: $186.7] [added: $176.1] million and [removed: $168.3] [added: $186.7] million at December 31, [removed: 2014] [added: 2015] and December 31, [removed: 2013,] [added: 2014,] respectively.

At December 31, [removed: 2014,] [added: 2015,] we had [removed: $8.1] [added: $2.5] million of net unrealized gains on foreign currency exchange contracts recorded in accumulated other comprehensive income, net of [added: related] tax expense.

Our foreign currency exchange [removed: risk is] [added: impacts are] comprised of three components: 1) local currency revenues and expenses; 2) the impact of [removed: settled] hedge contracts; and 3) intercompany and monetary balances for our subsidiaries that are denominated in a currency that is different from the functional currency used by each subsidiary.

[removed: Based on projected revenues and expenses for 2015, excluding the impact of intercompany and trade balances denominated in] currencies other than the functional subsidiary currencies, a 10% strengthening of the U.S. dollar would reduce operating income by approximately [removed: $9] [added: $13] million.

In [removed: June 2014,] [added: December 2015,] we refinanced our existing [removed: $450.0] [added: $700] million unsecured revolving credit facility by entering into an amended and restated credit agreement relating to a five-year unsecured revolving credit facility in the principal amount of [removed: $700] [added: $850] million with a syndicate of multinational banks, which matures on [removed: June 18, 2019.][added: December 4, 2020 (the new credit facility and the previous credit facility are referred to collectively as the “Credit Facility”) and requires no scheduled prepayments before that date.]

As discussed below, we have entered into forward fixed interest rate swaps to mitigate a portion of our interest rate risk [removed: in future periods.][added: through June 30, 2016.]

Borrowings outstanding under the Credit Facility at December 31, [removed: 2014] [added: 2015] were [removed: $549] [added: $573.0] million at a weighted-average effective interest rate of [removed: 1.5%.][added: 1.9%.]

Based on amounts outstanding [removed: and] [added: under] our [added: Credit Facility as of December 31, 2015 and assuming we do not enter into additional] interest rate swap [removed: effective at December 31, 2014,] [added: agreements following their expiration on June 30, 2016,] an increase in the LIBOR or the CDOR of 1% would increase interest expense by approximately [removed: $4.7] [added: $5.3] million on an annualized basis.

[removed: Beginning on March 30, 2012, the] [added: The] variable interest rate associated with $40 million of borrowings outstanding under the Credit Facility became effectively fixed at 1.36% plus the Credit Spread through June 30, 2016.

At December 31, [removed: 2014,] [added: 2015,] we had [removed: $0.7] [added: $0.2] million in unrealized [removed: losses, net of income tax benefit,] [added: losses] on interest rate [removed: swaps designated as hedging instruments.][added: swaps, recorded in other comprehensive income, net of related tax benefit.]

See Note [removed: 16] [added: 17] to the consolidated financial statements included in this Annual Report on Form 10-K for a discussion of our derivative instruments and hedging activities.

See Note 17 to the consolidated financial statements of this Annual Report on Form 10-K for details regarding euro-denominated notes issued during 2015 that we designated as a hedge of our euro net investment in certain foreign subsidiaries.

We hedge approximately 85% of the estimated exposure from intercompany product purchases and sales denominated in the euro, British pound, Canadian dollar, Japanese yen, Australian dollar and Swiss franc.

We have additional unhedged foreign currency exposures related to foreign services and emerging markets where it is not practical to hedge.

Based on projected revenues and expenses for 2016, excluding the impact of intercompany and trade balances denominated in

This level is higher than in previous years due to the addition of estimated unhedged foreign currency exposures, including emerging market currencies that have higher relative revenue growth and volatility.

Although the Credit Facility does not mature until December 4, 2020, all individual borrowings under the terms of the Credit Facility have a stated term between 30 and 180 days.

During the year ended December 31, 2015, we purchased marketable debt securities, which are classified as available-for-sale and carried at fair value in the accompanying consolidated balance sheet included in this Annual Report on Form 10-K.

The fair value of our cash equivalents and marketable securities is subject to changes in market interest rates.

As of December 31, 2015, we estimate that a 1% increase in market interest rates would decrease the fair value of our marketable securities portfolio by approximately $0.8 million.

Additionally, our cash equivalents and marketable securities are subject to credit risk.

The fair value of our investments can be negatively impacted by liquidity, credit deterioration, financial results and other factors.

To minimize this risk, we invest in high quality investments with original maturities of two years or less.

We perform periodic evaluations of the credit ratings related to cash equivalents and marketable securities.

As of December 31, 2014 and 2013, we were not hedging any specific, significant transactions.

We are subject to interest rate risk based on the terms of the Credit Facility to the extent that the London interbank rate (“LIBOR”) or the Canadian Dollar-denominated bankers’ acceptance rate (“CDOR”) increases.

Borrowings under the Credit Facility bear interest in the range from 0.875 to 1.375 percentage points (“Credit Spread”) above the LIBOR or the CDOR, dependent on our consolidated leverage ratio, and the interest period terms for the outstanding borrowings, which range from one to six months.

We develop, manufacture and distribute products and provide services primarily for the companion animal veterinary, livestock and poultry, [added: dairy and] water testing [removed: and dairy] markets.

| | · | | Practice management systems and services and [removed: digital] [added: diagnostic] imaging systems used by veterinarians; |

[removed: Prior to January 1, 2013, we operated] [added: We operate] primarily through three business segments: diagnostic and information technology-based products and services for the veterinary market, which we [removed: continue to] refer to as the Companion Animal Group (“CAG”); water quality products (“Water”); and diagnostic products [added: and services] for livestock and poultry [removed: health,] [added: health and to ensure the quality and safety of milk and food,] which we [removed: referred] [added: refer] to as [removed: Livestock and] [added: Livestock,] Poultry [removed: Diagnostics.][added: and Dairy (“LPD”).]

[removed: Financial information about our Dairy and OPTI Medical] [added: Our Other] operating [removed: segments was combined] [added: segment combines] and [removed: presented] [added: presents products for the human point-of-care medical diagnostics market (“OPTI Medical”)] with our [removed: remaining] pharmaceutical product line and our out-licensing arrangements [removed: in an “Other” category] because they [removed: did] [added: do] not meet the quantitative or qualitative thresholds for reportable segments.

[removed: See] [added: Risk Factors.” and] Note [removed: 14] [added: 15] to the consolidated financial statements for the year ended December 31, [removed: 2014] [added: 2015] included in this Annual Report on Form 10-K for [removed: financial] [added: more] information about our [removed: segments, including our product and service categories] [added: segments] and [removed: our geographic areas.][added: revenue from customers outside of the U.S.]

For the year ended December 31, [removed: 2014,] [added: 2015,] sales of products and services to customers outside the U.S. accounted for approximately [removed: 43%] [added: 39%] of our overall revenue.

These foreign sales accounted for approximately [removed: 36%, 52%] [added: 33%, 50%] and [removed: 90%] [added: 89%] of revenue in our CAG, Water and LPD segments, respectively.

VetConnect PLUS is currently available in North America, Australia, New Zealand, [added: Japan,] Israel and in numerous countries throughout Europe.

All three analyzers also run a urine test called urine protein:creatinine ratio, which assists in the [removed: early] detection of renal disease.

The Catalyst Dx and Catalyst One analyzers provide significantly improved throughput, ease of use and test menu relative to the VetTest analyzer (our original chemistry analyzer), including the ability to run electrolytes, [removed: phenobarbital] [added: phenobarbital, fructosamine] and [removed: fructosamine.][added: total thyroxine (“T4”).]

Our fructosamine test helps veterinarians to [added: diagnose and] manage canine and feline diabetes mellitus, helping to assess insulin treatments and adjust insulin dosages.

We launched [removed: a] [added: our] total [removed: thyroxine (“T4”)] [added: T4] test [added: globally] for use [removed: with] [added: on] the Catalyst One analyzer [removed: in February] [added: during the first quarter of] 2015 and [removed: will be introducing a similar test] for use [removed: with] [added: on] the Catalyst Dx [removed: during] [added: analyzer early in] the [removed: first half] [added: third quarter] of 2015.

T4 testing is essential to assessing [added: and managing] thyroid function and is an accepted standard for baseline testing for both sick pets and preventive care in senior pets.

We also [removed: sell] [added: have] two other chemistry analyzers, the VetLyte Electrolyte Analyzer and the VetStat Electrolyte and Blood Gas Analyzer.

The VetStat analyzer runs single-use disposable cassettes that are manufactured by [added: our] OPTI Medical [removed: Systems.][added: Systems business.]

Sales of consumables [removed: for] [added: to customers who] use [removed: in] our [removed: installed base of] chemistry analyzers provide the majority of [added: our instrument] consumables [removed: volumes and recurring diagnostic] revenues [removed: generated] from our installed base of IDEXX VetLab equipment.

The ProCyte Dx [removed: analyzer] [added: analyzer, our premier hematology analyzer,] provides significantly improved throughput and accuracy and more complete medical information relative to the LaserCyte, LaserCyte Dx and VetAutoread hematology analyzers.

The SNAPshot Dx Analyzer also reads, interprets and records the results of many IDEXX rapid assay SNAP tests, including our canine SNAP 4Dx Plus test, feline SNAP FIV/FeLV Combo test, canine SNAP cPL test, feline SNAP fPL test, SNAP Feline Triple [removed: test,] [added: test and] canine SNAP Heartworm RT [removed: test and SNAP Feline proBNP] test.

| | · | | SNAP 4Dx Plus, [removed: launched during the second quarter of 2012,] which tests for the six vector\-borne diseases; Lyme disease, Ehrlichia canis, Ehrlichia ewingii, Anaplasma phagocytophilum and Anaplasma platys, and canine heartworm; |

| | · | | SNAP [removed: 3Dx,] [added: Heartworm RT,] which tests for [removed: Lyme disease, Ehrlichia canis and canine] heartworm; |

| | · | | SNAP [removed: Heartworm RT,] [added: cPL,] which tests for canine [removed: heartworm;] [added: pancreatitis;] |

| | · | | SNAP Giardia, which is a fecal test for soluble Giardia antigens, a common cause of waterborne [removed: infection.] [added: infection; and] |

| | · | | SNAP Feline Triple, which tests for feline immunodeficiency virus (“FIV”) (which is similar to the [removed: human] [added: virus that leads to] AIDS [removed: virus),] [added: in humans),] feline leukemia virus (“FeLV”) and feline heartworm; |

Sales of canine vector-borne disease tests, including SNAP 4Dx [removed: Plus, SNAP 3Dx] [added: Plus] and SNAP Heartworm RT, are greater in the first half of our fiscal year due to seasonality of disease testing in the veterinary practice.

We offer commercial reference laboratory diagnostic and consulting services to veterinarians worldwide, including customers in the U.S., Europe, Canada, Australia, Japan, [added: New Zealand,] South Africa and South Korea.

We have large reference laboratories in Memphis, Tennessee and Leipzig, Germany that are strategically located near large [removed: courier hubs.][added: logistics hubs of major air cargo carriers.]

In [removed: January] [added: the third quarter of] 2015, we [removed: announced an upcoming] [added: launched IDEXX SDMA in North America, a new] kidney test [removed: SDMA,] which [removed: utilizes a new renal biomarker to detect] [added: detects] the onset of canine and feline kidney disease months or years earlier than traditional methods.

In the [removed: spring] [added: second quarter] of 2015, we [removed: plan to introduce] [added: launched] Hookworm and Roundworm antigen tests to all fecal panels that already include the Whipworm antigen test.

[removed: In 2012,] [added: As part of a previous business combination,] we acquired the research and diagnostic laboratory (“RADIL”) business of the College of Veterinary Medicine from the University of Missouri.

Customer Information Management and [removed: Digital] [added: Diagnostic] Imaging Systems

We also support several other practice management systems installed with our customers, including [removed: IDEXX] Better Choice, [removed: IDEXX] VPM, [removed: IDEXX] VetLINK and BeeFree.

Our practice management services include [added: Payment Solutions, Data Backup & Recovery,] Cornerstone [removed: Coaching,] [added: Coach,] Practice [removed: Profile, VetVault Backup Solution, Payment Solutions] [added: Profile] and PetDetect [removed: Pet Identification System.][added: boarding collars.]

In addition, we offer [added: client communication and preventive care plan management] services designed to strengthen the relationship between the veterinarian and the pet owner.

Petly Plans complements the Pet Health Network suite of client marketing services by making it easier for practices to increase access to the best care and offer plans that spread the cost of that [removed: care –] [added: care,] including examinations, vaccines and [removed: diagnostics –] [added: diagnostics,] over the course of [removed: a year rather than payment in full upon each visit.][added: the year.]

[removed: Digital] [added: Diagnostic] Imaging Systems.

Our [removed: digital] [added: diagnostic] imaging systems capture radiographic images in digital form, replacing traditional x-ray film and the film development process, which generally requires the use of hazardous chemicals and darkrooms.

We market and sell three [removed: digital] [added: diagnostic] imaging systems, our [removed: latest generation] IDEXX EliteVision Digital Imaging System, [added: and] the IDEXX I-Vision CR and the IDEXX I-Vision DR [removed: system.][added: systems for small animal veterinary applications.]

The [removed: newly launched] IDEXX EliteVision Digital Imaging System is a wireless system which uses advanced plate technology to capture clear, high-quality images in a short capture time.

The IDEXX EliteVision Digital Imaging system is [removed: promoted for use as] a portable unit [added: promoted for use] in ambulatory veterinary practices, such as equine practices.

Our [removed: digital] [added: diagnostic] imaging systems employ picture archiving and communication system (“PACS”) software, IDEXX-PACS, [removed: allowing] [added: that allows] for the viewing, manipulation, management, storage and retrieval of the digital images generated by the digital capture plate.

Early in 2016, we plan to launch SediVue Dx in North America.

SediVue Dx is the first and only in-clinic urine sediment analyzer, designed to provide automated real-time results in a fraction of the time of manual microscope analysis.

SediVue Dx brings automation, speed and consistency to urinalysis, a traditionally laborious and variable process.

Its leading-edge technology allows veterinary staff to perform a complete urinalysis in approximately 3 minutes.

SediVue Dx uses proprietary image processing algorithms similar to facial recognition technology to identify clinically relevant particles found in urine and to capture high-contrast digital images that become part of the permanent patient record.

| | · | | SNAP Lepto, which tests for leptospirosis, a life-threatening bacterial infection spread through contact with water or soil that has been contaminated by the urine of infected animals. |

Upon its introduction, IDEXX SDMA was included in every chemistry panel submitted by our customers at no incremental charge.

As of the first quarter of 2016, we have also launched IDEXX SDMA in all of major European countries and Australia.

A full international launch of IDEXX SDMA is planned over the remainder of 2016.

Our principal practice management systems are Cornerstone, DVMAX, Animana and Neo, which we launched in North America during the third quarter of 2015.

IDEXX Neo and IDEXX Animana are cloud-based practice management systems available in North America, Europe and Australia, respectively.

During the third quarter of 2015, we launched IDEXX Web PACS, our cloud-based software solution for accessing, storing and sharing diagnostic images.

IDEXX Web PACS is a software-as-a-service (“SaaS”) offering, which is integrated with IDEXX VetConnect PLUS to provide centralized access to diagnostic imaging results alongside patient diagnostic results from any internet connected device.

IDEXX Web PACS updates automatically and offers secure storage for an unlimited number of diagnostic images.

The new software features advanced radiology measurement tools as well as an interactive collaboration feature that allows veterinarians to collaborate and consult remotely with other practitioners.

In the second quarter of 2015, we launched the Quanti-Tray Sealer PLUS, a next generation instrument of the previously available Quanti-Tray Sealer 2X.

These instruments are used with the Quanti-Tray products for the determination of bacterial density in water samples.

Our livestock testing services are offered to livestock veterinarians and producers.

| | · | | Patents relating to reagents and methods for the detection of canine pancreatic lipase that expire in 2026; and |

| | · | | Patents relating to reagents and methods for the detection of IDEXX SDMA that expire beginning in 2029. |

| --- | --- | --- | --- |

Any acquisitions of new products and technologies may subject us to additional areas of government regulation.

We also operated two smaller operating segments that comprised products for milk quality and safety (“Dairy”) and products for the human point-of-care medical diagnostics market (“OPTI Medical”).

In 2013, we combined the management of our Livestock and Poultry Diagnostics, and Dairy lines of business to more effectively realize the market synergies between the product lines and to achieve operational efficiencies.

We refer to this segment as Livestock, Poultry and Dairy (“LPD”).

Our OPTI Medical operating segment remains combined and presented with our remaining pharmaceutical product line and our out-licensing arrangements in an “Other” category because they do not meet the quantitative or qualitative thresholds for reportable segments.

The segment income (loss) from operations discussed within this report for the year ended December 31, 2012 has been retrospectively revised to reflect this change in the composition of our reportable segments.

Risk Factors.” and Note 14 to the consolidated financial statements for the year ended December 31, 2014 included in this Annual Report on Form 10-K for more information on revenue from customers outside of the U.S.

Additionally, the instrument is the industry’s first to combine chemistry, electrolytes and T4 in a single blood sample run.

The ProCyte Dx analyzer is our premier hematology analyzer, which we launched in 2010.

In 2012, we began to place ProCyte Dx analyzers containing a more advanced and research-focused user interface with customers in the bioresearch market.

| | · | | SNAP cPL, which tests for canine pancreatitis; and |

We anticipate offering SDMA as part of a standard chemistry panel in North America during the summer of 2015.

Our principal practice management systems are Cornerstone, DVMAX Veterinary Practice Management Software and IDEXX Animana.

In November 2013, we launched the IDEXX ImageBank storage system, a cloud-based image storage solution which provides secure storage for an unlimited number of diagnostic images and is accessible anywhere through VetConnect PLUS.

In the fourth quarter of 2008, we sold our Acarexx® and SURPASS® veterinary pharmaceutical products and a feline insulin product under development.

We earned a milestone payment of $3.5 million in 2012 in connection with the achievement of certain sales milestones by the acquirer of our feline insulin product following commercialization of that product.

See Note 21 to the consolidated financial statements for the year ended December 31, 2014, included in this Annual Report on Form 10-K, for additional information regarding the restructuring of our pharmaceutical business.

Since realignment to the Rapid Assay line of business, we have discontinued the production and sale of the two remaining pharmaceutical product lines.

Neither of these product lines is or was a significant contributor to revenue in the Rapid Assay line of business.

Historically, our largest customers have been the U.S. distributors of our products in the CAG segment.

Our two largest CAG distributors were Henry Schein Animal Health Supply, LLC (“Henry Schein”) and MWI Veterinary Supply, Inc. (“MWI”).

Henry Schein accounted for 8% of our 2014 revenue and 9% of our 2013 and 2012 revenue, and 2% and 7% of our net accounts receivable at December 31, 2014 and 2013, respectively.

MWI accounted for 8% of our 2014, 2013 and 2012 revenue and 8% and 11% of our net accounts receivable at December 31, 2014 and 2013, respectively.

Effective January 1, 2015, most U.S. distributors are no longer our customers as a result of our transition to an all-direct sales strategy in the U.S.

| | · | | Patents concerning the SNAP immunoassay platform that expire in 2015; |

| | | For the fiscal year ended December 31, [removed: 2014] [added: 2015] | |

Based on the closing sale price on June 30, [removed: 2014] [added: 2015] of the registrant’s Common Stock, the last business day of the registrant’s most recently completed second fiscal quarter, as reported by the NASDAQ Global Select Market, the aggregate market value of the voting stock held by non-affiliates of the registrant was [removed: $6,663,805,564.][added: $5,849,454,087.]

The number of shares outstanding of the registrant’s Common Stock was [removed: 47,125,601] [added: 89,638,022] on February [removed: 6, 2015.][added: 5, 2016.]

Part III—Specifically identified portions of the Company’s definitive Proxy Statement to be filed in connection with the Company’s [removed: 2015] [added: 2016] annual meeting of stockholders (the [removed: “2015] [added: “2016] Annual Meeting”), to be held on May [removed: 6, 2015,] [added: 4, 2016,] are incorporated herein by reference.

Unresolved Staff Comments [removed: 24][added: 26]

Properties [removed: 25][added: 27]

Legal Proceedings [removed: 25][added: 27]

10-K 1 c716-20151231x10k.htm 10-K

| | |

10-K 1 c716-20141231x10k.htm 10-K

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities [removed: 26][added: 28]

Selected Financial Data [removed: 29][added: 31]

Management’s Discussion and Analysis of Financial Condition and Results of Operations [removed: 30][added: 32]

Quantitative and Qualitative Disclosure about Market Risk [removed: 62][added: 67]

Financial Statements and Supplementary Data [removed: 63][added: 68]

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure [removed: 63][added: 68]

Controls and Procedures [removed: 64][added: 69]

Directors, Executive Officers and Corporate Governance [removed: 65][added: 70]

Executive Compensation [removed: 65][added: 70]

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters [removed: 65][added: 70]

Certain Relationships and Related Transactions, and Director Independence [removed: 66][added: 71]

Principal Accountant Fees and Services [removed: 66][added: 71]

Exhibits, Financial Statement Schedules [removed: 66][added: 71]

[removed: The] [added: Our name, logo and the] following terms used in this Annual Report on Form 10-K are [removed: our trademarks:] [added: either registered trademarks or trademarks of IDEXX Laboratories, Inc. in the United States and/or other countries:] 4Dx®, [added: Animana® Veterinary Software,] Catalyst Dx®, Catalyst One™, Coag Dx™, Colilert®, Colisure®, Cornerstone®, DVMAX®, Enterolert®, Feline Triple®, Filta-Max®, Filta-Max xpress®, IDEXX I-Vision CR®, IDEXX I-Vision DR®, IDEXX I-Vision Mobile™, IDEXX ImageBank™ , [added: IDEXX Neo™,] IDEXX-PACS™, IDEXX [added: Petly™ Plans, IDEXX SDMA™, IDEXX] VetLab®, IDEXX VPM™, LaserCyte®, LaserCyte Dx™, Navigator™, OPTI®, OPTI LION™, PetChek®, PetDetect®, Pet Health Network®, Practice Profile™, ProCyte Dx®, Pseudalert®, Quanti-Tray®, [added: SediVue Dx™,] SimPlate®, SmartService™, SNAP®, SNAPduo®, SNAP Pro®, SNAP cPL™ , SNAP fPL™, SNAPshot Dx®, VetAutoread™, VetConnect®, VetLab UA™, VetLINK®, VetLyte®, VetStat®, VetTest® and VetVault®.

This Annual Report on Form 10-K for the year ended December 31, [removed: 2014] [added: 2015] contains statements which, to the extent they are not statements of historical fact, constitute “forward-looking statements.” Such forward-looking statements about our business and expectations within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), include statements relating to future revenue growth rates, earnings and other measures of financial performance; the effect of economic downturns on our business performance; demand for our products; realizability of assets; future cash flow and uses of cash; future repurchases of common stock; future levels of indebtedness and capital spending; interest expense; warranty expense; share-based compensation expense; and competition.

| | · | | [removed: 501,900] [added: 502,000] total square feet of laboratory, office and warehousing space located throughout the U.S., Europe, Canada, Australia, [added: New Zealand,] Asia and South Africa, primarily used for our Reference Laboratory Diagnostic and Consulting Services line of business of CAG |

In 2011, we began the construction of an 111,100 square foot administrative building adjacent to our primary facility in Westbrook, Maine, which was completed in August 2013.

The following table shows the quarterly range of high and low sale prices per share [added: (1)] of our common stock as reported on the NASDAQ Global Select Market for the years [removed: 2013] [added: 2014] and [removed: 2014.][added: 2015.]

As of February [removed: 6, 2015,] [added: 5, 2016,] there were [removed: 558] [added: 521] holders of record of our common stock.

During the three months ended December 31, [removed: 2014,] [added: 2015,] we repurchased shares of common stock as described below:

(1) As of December 31, [removed: 2014,] [added: 2015,] our Board of Directors had approved the repurchase of up to [removed: 57] [added: 65] million shares of our common stock in the open market or in negotiated transactions pursuant to the Company’s share repurchase program.

There were no other repurchase programs outstanding during the three months ended December 31, [removed: 2014,] [added: 2015,] and no repurchase programs expired during the period.

Repurchases of [removed: 1,134,320] [added: 1,313,263] shares were made during the three months ended December 31, [removed: 2014] [added: 2015] in transactions made pursuant to our repurchase program.

(2) During the three months ended December 31, [removed: 2014,] [added: 2015,] we received [removed: 3,448] [added: 3,611] shares of our common stock that were surrendered by employees in payment for the minimum required withholding taxes due on the vesting of restricted stock units and settlement of deferred stock units.

During the year ended December 31, [removed: 2014,] [added: 2015,] we repurchased [removed: 4,880,524] [added: 5,658,660] shares of our common stock in transactions made pursuant to our repurchase program and received [removed: 46,190] [added: 69,667] shares of common stock that were surrendered by employees in payment for the minimum required withholding taxes due on the vesting of restricted stock units and settlement of deferred stock units.

See Note [removed: 17] [added: 18] to the consolidated financial statements for the year ended December 31, [removed: 2014] [added: 2015] included in this Annual Report on Form 10-K for further information.

This graph assumes the investment of $100 on December 31, [removed: 2009] [added: 2010] in IDEXX’s common stock, the S&P MidCap 400 Index, the S&P MidCap 400 Health Care Index and the NASDAQ Index and assumes dividends, if any, are reinvested.

Measurement points are the last trading days of the years ended December [removed: 2009,] 2010, 2011, 2012, [removed: 2013] [added: 2013, 2014] and [removed: 2014.][added: 2015.]

][added: 2](https://www.sec.gov/Archives/edgar/data/874716/000087471616000020/c716-20151231x10kg001.jpg)]

| | | [removed: 12/31/2009 | | |] 12/31/2010 | | | [removed: 12/30/2011] [added: 12/31/2011] | | | [removed: 12/31/2012] [added: 12/30/2012] | | | 12/31/2013 | | | 12/31/2014 | | [added: | 12/31/2015 | |]

| March 31, 2014 | | $ | 64.64 | | $ | 52.32 |

| June 30, 2014 | | | 68.07 | | | 57.92 |

| September 30, 2014 | | | 70.00 | | | 56.75 |

| December 31, 2014 | | | 76.95 | | | 57.56 |

| March 31, 2015 | | | 84.26 | | | 72.38 |

| June 30, 2015 | | | 82.24 | | | 61.37 |

| September 30, 2015 | | | 79.62 | | | 61.58 |

| December 31, 2015 | | | 77.27 | | | 65.03 |

(1) Prices have been split adjusted to reflect 2:1 stock split on June 15, 2015

| October 1, 2015 to October 31, 2015 | | 407,000 | | $ | 73.02 | | 407,000 | | 7,712,415 | |

| November 1, 2015 to November 30, 2015 | | 423,097 | | | 69.36 | | 422,863 | | 7,289,552 | |

| December 1, 2015 to December 31, 2015 | | 486,777 | | | 70.95 | | 483,400 | | 6,806,152 | |

| Total | | 1,316,874 | (2) | $ | 71.08 | | 1,313,263 | | 6,806,152 | |

Effective June 15, 2015, an additional 8 million shares of our common stock was authorized for repurchase, increasing the total shares of common stock authorized to be repurchased by the Company up from 57 million to 65 million shares.

| IDEXX Laboratories, Inc. | | $ | 100.00 | | $ | 111.18 | | $ | 134.07 | | $ | 153.67 | | $ | 214.20 | | $ | 210.69 |

| S&P MidCap 400 Health Care Index | | | 100.00 | | | 101.05 | | | 128.10 | | | 186.93 | | | 231.20 | | | 252.51 |

| S&P MidCap 400 Index | | | 100.00 | | | 98.27 | | | 115.84 | | | 154.64 | | | 169.75 | | | 166.06 |

| NASDAQ Index | | | 100.00 | | | 99.17 | | | 116.48 | | | 163.21 | | | 187.27 | | | 200.31 |

| March 31, 2013 | | $ | 100.81 | | $ | 90.19 |

| June 30, 2013 | | | 92.60 | | | 81.57 |

| September 30, 2013 | | | 100.37 | | | 87.99 |

| December 31, 2013 | | | 113.11 | | | 99.13 |

| March 31, 2014 | | | 129.27 | | | 104.64 |

| June 30, 2014 | | | 136.13 | | | 115.84 |

| September 30, 2014 | | | 140.00 | | | 113.49 |

| December 31, 2014 | | | 153.89 | | | 115.12 |

| October 1, 2014 to October 31, 2014 | | 644,140 | | $ | 119.51 | | 644,140 | | 3,571,483 | |

| November 1, 2014 to November 30, 2014 | | 180,507 | | | 145.55 | | 178,880 | | 3,392,603 | |

| December 1, 2014 to December 31, 2014 | | 313,121 | | | 148.30 | | 311,300 | | 3,081,303 | |

| Total | | 1,137,768 | (2) | $ | 131.57 | | 1,134,320 | | 3,081,303 | |

| IDEXX Laboratories, Inc. | | $ | 100.00 | | $ | 129.50 | | $ | 143.99 | | $ | 173.62 | | $ | 199.01 | | $ | 277.40 |

| S&P MidCap 400 Health Care Index | | | 100.00 | | | 123.02 | | | 124.31 | | | 157.59 | | | 229.96 | | | 284.43 |

| S&P MidCap 400 Index | | | 100.00 | | | 126.64 | | | 124.45 | | | 146.70 | | | 195.84 | | | 214.97 |

| NASDAQ Index | | | 100.00 | | | 118.02 | | | 117.04 | | | 137.47 | | | 192.62 | | | 221.02 |

[removed: These] [added: This] financial data should be read in conjunction with the consolidated financial statements, related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K.

| | | | [added: 2015 | | |] 2014 | | | 2013 | | | 2012 | | | 2011 | | [removed: | 2010 | |]

| Revenue | | $ | [removed: 1,485,807] [added: 1,601,892] | | $ | [removed: 1,377,058] [added: 1,485,807] | | $ | [removed: 1,293,338] [added: 1,377,058] | | $ | [removed: 1,218,689] [added: 1,293,338] | | $ | [removed: 1,103,392] [added: 1,218,689] | |

| Cost of revenue | | | [added: 711,622 | | |] 669,691 | | | 620,940 | | | 594,190 | | | 572,183 | | [removed: | 524,769 | |]

| Gross profit | | | [added: 890,270 | | |] 816,116 | | | 756,118 | | | 699,148 | | | 646,506 | | [removed: | 578,623 | |]

| Sales and marketing | | | [added: 299,955 | | |] 283,708 | | | 243,492 | | | 216,962 | | | 204,850 | | [removed: | 179,626 | |]

| General and administrative | | | [added: 182,510 | | |] 173,890 | | | 157,861 | | | 137,609 | | | 129,389 | | [removed: | 126,519 | |]

| Research and development | | | [added: 99,681 | | |] 98,263 | | | 88,003 | | | 82,014 | | | 76,042 | | [removed: | 68,597 | |]

| Income from operations | | | [added: 299,912 | | |] 260,255 | | | 266,762 | | | 262,563 | | | 236,225 | | [removed: | 203,881 | |]

| Interest expense, net | | | [added: (26,771) | | |] (13,700) | | | (3,501) | | | (1,946) | | | (1,803) | | [removed: | (1,752) | |]

| Income before provision for income taxes | | | [added: 273,141 | | |] 246,555 | | | 263,261 | | | 260,617 | | | 234,422 | | [removed: | 202,129 | |]

| Provision for income taxes | | | [added: 81,006 | | |] 64,604 | | | 75,467 | | | 82,330 | | | 72,668 | | [removed: | 60,809 | |]

| Net income | | | [added: 192,135 | | |] 181,951 | | | 187,794 | | | 178,287 | | | 161,754 | | [removed: | 141,320 | |]

| Less: Net income (loss) attributable to noncontrolling interest | | | [added: 57 | | |] 45 | | | (6) | | | 20 | | | (32) | | [removed: | 36 | |]

| Net income attributable to IDEXX Laboratories, Inc. stockholders | | $ | [removed: 181,906] [added: 192,078] | | $ | [removed: 187,800] [added: 181,906] | | $ | [removed: 178,267] [added: 187,800] | | $ | [removed: 161,786] [added: 178,267] | | $ | [removed: 141,284] [added: 161,786] | |

| Cash and cash equivalents | | $ | [removed: 322,536] [added: 128,994] | | $ | [removed: 279,058] [added: 322,536] | | $ | [removed: 223,986] [added: 279,058] | | $ | [removed: 183,895] [added: 223,986] | | $ | [removed: 156,915] [added: 183,895] | |

| Working capital | | | [added: (35,127) | | |] (61,508) | | | 174,353 | | | 163,204 | | | 87,348 | | [removed: | 175,479 | |]

| Total assets | | | [added: 1,474,993 | | |] 1,384,211 | | | 1,230,516 | | | 1,103,602 | | | 1,030,814 | | [removed: | 897,144 | |]

| Total long-term [removed: debt1] [added: debt(2)] | | | [added: 597,085 | | |] 350,000 | | | 150,359 | | | 1,394 | | | 2,501 | | [removed: | 3,418 | |]

| Total stockholders' equity [added: (deficit)] | | | [added: (83,995) | | |] 117,589 | | | 518,214 | | | 636,257 | | | 539,593 | | [removed: | 574,281 | |]

On May 6, 2015, we announced a two-for-one split of our outstanding shares of common stock which was effected through a stock dividend that was paid through the issuance of treasury shares.

All share and per share amounts presented below retroactively reflect the effect of the stock split.

| Impairment charge | | | 8,212 | | | \- | | | \- | | | \- | | | \- | |

| Basic | | $ | 2.07 | | $ | 1.82 | | $ | 1.77 | | $ | 1.62 | | $ | 1.42 | |

| Diluted | | | 2.05 | | | 1.79 | | | 1.74 | | | 1.59 | | | 1.39 | |

| Basic | | | 92,601 | | | 100,094 | | | 106,318 | | | 109,969 | | | 113,579 | |

| Diluted | | | 93,649 | | | 101,503 | | | 107,970 | | | 112,311 | | | 116,429 | |

| Marketable securities(1) | | | 213,591 | | | \- | | | \- | | | \- | | | \- | |

| Cash and cash equivalents and marketable securities | | | 342,585 | | | 322,536 | | | 279,058 | | | 223,986 | | | 183,895 | |

(1) During the year ended December 31, 2015, we purchased marketable debt securities, which are classified as available-for-sale and carried at fair value in the accompanying consolidated balance sheets on a trade date basis.

See Note 5 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding our marketable securities.

(2) Between December 2013 and June 2015, we issued and sold approximately $600 million in senior notes through private placements at fixed interest rates ranging from 1.785% to 4.04%.

See Note 11 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding our senior notes.

| Basic | | $ | 3.63 | | $ | 3.53 | | $ | 3.24 | | $ | 2.85 | | $ | 2.45 | |

| Diluted | | | 3.58 | | | 3.48 | | | 3.17 | | | 2.78 | | | 2.37 | |

| Basic | | | 50,047 | | | 53,159 | | | 54,985 | | | 56,790 | | | 57,713 | |

| Diluted | | | 50,751 | | | 53,985 | | | 56,155 | | | 58,214 | | | 59,559 | |

| 1 In September 2014, we issued and sold through a private placement an aggregate principal amount of $75 million of 3.72% Senior Notes due September 4, 2026 under a Note Purchase Agreement dated as of July 22, 2014 among the Company, New York Life Insurance Company and the accredited institutional purchasers named therein. In July 2014, we issued and sold through a private placement an aggregate principal amount of $125 million of senior notes consisting of $75 million of 3.76% Series B Senior Notes due July 21, 2024 and $50 million of 3.32% Series A Senior Notes due July 21, 2021 under a Note Purchase and Private Shelf Agreement among the Company, Prudential Investment Management, Inc. and the accredited institutional purchasers named therein. In December 2013, we issued and sold through a private placement an aggregate amount of $150 million of senior notes consisting of $75 million of 3.94% Series A Senior Notes due December 11, 2023 and $75 million of 4.04% Series B Senior Notes due December 11, 2025 under a Note Purchase Agreement among the Company and the accredited institutional purchasers named therein. See Note 10 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information about these senior notes. | | | | | | | | | | | | | | | | |

Based on the evaluation of our disclosure controls and procedures at December 31, [removed: 2014,] [added: 2015,] our chief executive officer and chief financial officer have concluded that, as of such date, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

Based on this evaluation, we concluded that, at December 31, [removed: 2014,] [added: 2015,] our internal control over financial reporting was effective.

The effectiveness of the Company's internal control over financial reporting at December 31, [removed: 2014] [added: 2015] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended December 31, [removed: 2014] [added: 2015] that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The information required by this Item with respect to Directors, executive officers, compliance with Section 16(a) of the Exchange Act, our code of ethics and corporate governance is omitted from this Annual Report on Form 10-K and, pursuant to Regulation 14A of the Exchange Act, is incorporated herein by reference from the sections entitled [removed: “Proposal] [added: “Corporate Governance - Proposal] One - Election of Directors,” [removed: “Directors and Executive Officers of the Company,” “Section] [added: “Executive Officers,” “Stock Ownership Information - Section] 16(a) Beneficial Ownership Reporting Compliance,” “Corporate Governance – Corporate Governance Guidelines and Code of Ethics” and “Corporate Governance [removed: – Committees of the Board – Audit Committee”] [added: –Board Committees”] in the Company’s definitive Proxy Statement with respect to its [removed: 2015] [added: 2016] Annual Meeting, which Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

The information required by this Item is omitted from this Annual Report on Form 10-K and, pursuant to Regulation 14A of the Exchange Act, is incorporated herein by reference from the sections entitled “Executive Compensation – Compensation Discussion and Analysis,” “Executive Compensation – Executive Compensation Tables,” “Executive Compensation – Potential Payments Upon Termination or Change-in-Control,” “Corporate Governance [removed: –] [added: –Board] Committees [removed: of the Board] – Compensation Committee – Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” in the Company’s definitive Proxy Statement with respect to its [removed: 2015] [added: 2016] Annual Meeting, which Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

The information required by this Item with respect to Item 201(d) of Regulation S-K is omitted from this Annual Report on Form 10-K and, pursuant to Regulation 14A of the Exchange Act, is incorporated herein by reference from the section entitled “Equity Compensation Plan Information” in the Company’s definitive Proxy Statement with respect to its [removed: 2015] [added: 2016] Annual Meeting, which Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

The information required by this Item with respect to Item 403 of Regulation S-K is omitted from this Annual Report on Form 10-K and, pursuant to Regulation 14A of the Exchange Act, is incorporated herein by reference from the sections entitled [removed: “Ownership of Common Stock by Directors and Officers” and “Ownership of More Than Five Percent of Our Common Stock”] [added: “Stock Ownership Information”] in the Company’s definitive Proxy Statement with respect to its [removed: 2015] [added: 2016] Annual Meeting, which Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

The information required by this Item is omitted from this Annual Report on Form 10-K and, pursuant to Regulation 14A of the Exchange Act, is incorporated herein by reference from the sections entitled “Corporate Governance – Related Person Transactions” and “Corporate Governance – Director Independence” in the Company’s definitive Proxy Statement with respect to its [removed: 2015] [added: 2016] Annual Meeting, which Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

The information required by this Item is omitted from this Annual Report on Form 10-K and, pursuant to Regulation 14A of the Exchange Act, is incorporated herein by reference from the section entitled [removed: “Independent] [added: “Audit Committee Matters - Independent] Auditors’ Fees” in the Company’s definitive Proxy Statement with respect to its [removed: 2015] [added: 2016] Annual Meeting, which Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this report.

| Consolidated Balance Sheets as of December 31, [removed: 2014] [added: 2015] and [removed: 2013] [added: 2014] | F-3 |

| Consolidated Statements of Income for the Years Ended December 31, [removed: 2014, 2013] [added: 2015, 2014] and [removed: 2012] [added: 2013] | F-4 |

| Consolidated Statements of Comprehensive Income for the Years Ended December 31, [removed: 2014, 2013] [added: 2015, 2014] and [removed: 2012] [added: 2013] | F-5 |

| Consolidated Statements of Stockholders’ Equity [added: (Deficit)] for the Years Ended December 31, [removed: 2014, 2013] [added: 2015, 2014] and [removed: 2012] [added: 2013] | F-6 |

| Consolidated Statements of Cash Flows for the Years Ended December 31, [removed: 2014, 2013] [added: 2015, 2014] and [removed: 2012] [added: 2013] | F-7 |

| Valuation and Qualifying Accounts | [removed: F-44] [added: F-46] |

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of IDEXX Laboratories, Inc. and its subsidiaries at December 31, [removed: 2014] [added: 2015] and [removed: 2013,] [added: 2014,] and the results of their operations and their cash flows for each of the three years in the period ended December 31, [removed: 2014] [added: 2015] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2014,] [added: 2015,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

| | [removed: 2014] | | [added: 2015] | [removed: 2013] | | [added: 2014] | [added: | | 2013 |]

| Cash and cash equivalents [added: at beginning of period] | [removed: $] | [added: |] 322,536 | | [removed: $] | 279,058 | | [added: | 223,986 |]

| Accounts receivable, net of reserves of [removed: $4,306] [added: $5,128] in [removed: 2014] [added: 2015] and [removed: $3,533] [added: $4,306] in [removed: 2013] [added: 2014] | | [removed: 152,380] [added: 188,318] | | | [removed: 158,038] [added: 152,380] | |

| Inventories | | [removed: 160,342] [added: 188,833] | | | [removed: 133,427] [added: 160,342] | |

| Deferred income tax assets | | [removed: 37,689] [added: 39,829] | | | [removed: 33,226] [added: 37,689] | |

| Other current assets | | [removed: 86,451] [added: 62,069] | | | [removed: 48,957] [added: 86,451] | |

| Total current assets | | [removed: 759,398] [added: 821,634] | | | [removed: 652,706] [added: 759,398] | |

| Property and equipment, net | | [removed: 303,587] [added: 333,026] | | | [removed: 281,214] [added: 303,587] | |

| Goodwill | | [removed: 184,450] [added: 178,934] | | | [removed: 180,521] [added: 184,450] | |

| Intangible assets, net | | [removed: 65,122] [added: 55,909] | | | [removed: 58,844] [added: 65,122] | |

| Other long-term [removed: assets, net] [added: assets] | | [removed: 71,654] [added: 85,490] | | | [removed: 57,231] [added: 71,654] | |

| Total long-term assets | | [removed: 624,813] [added: 653,359] | | | [removed: 577,810] [added: 624,813] | |

| TOTAL ASSETS | $ | [removed: 1,384,211] [added: 1,474,993] | | $ | [removed: 1,230,516] [added: 1,384,211] | |

| LIABILITIES AND STOCKHOLDERS’ EQUITY [added: (DEFICIT)] | | | | | | |

| Accounts payable | $ | [removed: 44,743] [added: 52,648] | | $ | [removed: 29,941] [added: 44,743] | |

| Accrued liabilities | | [removed: 195,351] [added: 205,530] | | | [removed: 148,919] [added: 195,351] | |

| Line of credit | | [removed: 549,000] [added: 573,000] | | | [removed: 277,000] [added: 549,000] | |

| Current portion of deferred revenue | | [removed: 31,812] [added: 25,583] | | | [removed: 21,458] [added: 31,812] | |

| Total current liabilities | | [removed: 820,906] [added: 856,761] | | | [removed: 478,353] [added: 820,906] | |

| Deferred income tax liabilities | | [removed: 41,688] [added: 49,389] | | | [removed: 33,948] [added: 41,688] | |

| Long-term [removed: debt, net of current portion] [added: debt] | | [removed: 350,000] [added: 597,085] | | | [removed: 150,359] [added: 350,000] | |

| Long-term deferred revenue, net of current portion | | [removed: 21,665] [added: 27,055] | | | [removed: 18,427] [added: 21,665] | |

| Other long-term liabilities | | [removed: 32,363] [added: 28,698] | | | [removed: 31,215] [added: 32,363] | |

| Total long-term liabilities | | [removed: 445,716] [added: 702,227] | | | [removed: 233,949] [added: 445,716] | |

| Total liabilities | | [removed: 1,266,622] [added: 1,558,988] | | | [removed: 712,302] [added: 1,266,622] | |

| Commitments and Contingencies (Note [removed: 13)] [added: 14)] | | | | | | |

| Stockholders’ [removed: Equity:] [added: Equity (Deficit):] | | | | | | |

| Common stock, $0.10 par value: Authorized: 120,000 shares; Issued: [removed: 101,947] [added: 102,237] and [removed: 101,188] [added: 101,947] shares in [removed: 2014] [added: 2015] and [removed: 2013,] [added: 2014,] respectively | | [removed: 10,195] [added: 10,258] | | | [removed: 10,119] [added: 10,195] | |

| Additional paid-in capital | | [removed: 888,293] [added: 940,534] | | | [removed: 825,320] [added: 888,293] | |

| Deferred stock units: Outstanding: [removed: 118] [added: 240] and [removed: 122] [added: 235] units in [removed: 2014] [added: 2015] and [removed: 2013,] [added: 2014,] respectively | | [removed: 5,066] [added: 5,409] | | | [removed: 5,110] [added: 5,066] | |

| Retained earnings | | [removed: 1,675,299] [added: 318,356] | | | [removed: 1,493,393] [added: 1,675,299] | |

| Accumulated other comprehensive [removed: (loss) income] [added: loss] | | [removed: (8,071)] [added: (42,265)] | | | [removed: 13,622] [added: (8,071)] | |

| Cash and cash equivalents | $ | 128,994 | | $ | 322,536 | |

| Marketable securities | | 213,591 | | | \- | |

| Impairment charge | | | 8,212 | | | \- | | | \- |

| Basic | | $ | 2.07 | | $ | 1.82 | | $ | 1.77 |

| Diluted | | $ | 2.05 | | $ | 1.79 | | $ | 1.74 |

| Basic | | | 92,601 | | | 100,094 | | | 106,318 |

| Diluted | | | 93,649 | | | 101,503 | | | 107,970 |

| Unrealized gain on net investment hedge | | | 1,894 | | | | \- | | | | \- | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Net income | | | \- | | | \- | | | \- | | | \- | | | 192,078 | | | \- | | | \- | | | 57 | | | 192,135 | |

| Other comprehensive loss, net | | | \- | | | \- | | | \- | | | \- | | | \- | | | (34,194) | | | \- | | | \- | | | (34,194) | |

| Stock split enacted through stock dividend | | | \- | | | \- | | | \- | | | \- | | | (1,518,264) | | | \- | | | 1,518,264 | | | \- | | | \- | |

| Shares retired | | | (346) | | | \- | | | \- | | | \- | | | (30,757) | | | \- | | | 30,757 | | | \- | | | \- | |

| Balance December 31, 2015 | | | 102,237 | | $ | 10,258 | | $ | 940,534 | | $ | 5,409 | | $ | 318,356 | | $ | (42,265) | | $ | (1,316,417) | | $ | 130 | | $ | (83,995) | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Amortization on marketable securities, net | | | 1,432 | | | \- | | | \- |

| Impairment charge | | | 8,212 | | | \- | | | \- |

| Other assets and liabilities | | | 18,087 | | | 11,319 | | | 12,187 |

| Purchase of marketable securities | | | (271,958) | | | \- | | | \- |

| Proceeds from the sale and maturities of marketable securities | | | 56,775 | | | \- | | | \- |

Stock Split

On May 6, 2015, we announced a two\-for-one split of our outstanding shares of common stock which was effected through a stock dividend that was paid through the issuance of treasury shares.

The stock split entitled each stockholder of record at the close of business on May 18, 2015 to receive one additional share of common stock for each outstanding share of common stock held.

The additional shares of our common stock paid pursuant to the stock split were distributed by the Company’s transfer agent on June 15, 2015.

All share and per share amounts in the consolidated balance sheets, consolidated statement of operations and notes to the consolidated financial statements retroactively reflect the effect of the stock split unless otherwise noted.

(c)Marketable Securities

During the year ended December 31, 2015, we purchased marketable debt securities, which are classified as available-for-sale and carried at fair value in the accompanying consolidated balance sheets on a trade date basis.

We have classified our investments with maturities beyond one year as short-term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

Unrealized holding gains and losses are deferred within accumulated other comprehensive income (“AOCI”), net of applicable taxes, except for when an impairment is determined to be other-than-temporary or the security is divested prior to maturity.

Within the accompanying consolidated statements of operations, interest earned and amortization of premiums or discounts on marketable securities are included in interest income, realized gains and losses on the sale of our marketable securities are included in other income.

Our business combinations regularly include contingent consideration arrangements that require additional consideration to be paid based on the achievement of established objectives, most commonly surrounding the retention of customers during the post-combination period.

Changes in fair value of contingent consideration and differences arising upon settlement were not material during the years ended December 31, 2015, 2014 and 2013.

See Note 3 for additional information regarding contingent consideration arising from recent business acquisitions.

| | · | | We recognize revenue from the sales of consumables, rapid assay test kits and other diagnostic products when the product is delivered to the customer, except as noted below. |

We have no significant customers that accounted for greater than 10% of our consolidated revenues for the year ended December 31, 2015.

Similarly, we have no concentration of credit risk as of December 31, 2015.

(p)Leases

Additionally, we enter into operating leases for certain vehicles and office equipment in the normal course of business.

| | |

February 17, 2015

| Current portion of long-term debt | | \- | | | 1,035 | |

| Basic | | $ | 3.63 | | $ | 3.53 | | $ | 3.24 |

| Diluted | | $ | 3.58 | | $ | 3.48 | | $ | 3.17 |

| Basic | | | 50,047 | | | 53,159 | | | 54,985 |

| Diluted | | | 50,751 | | | 53,985 | | | 56,155 |

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | Total IDEXX | | | | | | | |

| Balance January 1, 2012 | | | 99,229 | | $ | 9,923 | | $ | 702,575 | | $ | 4,688 | | $ | 1,127,326 | | $ | 15,443 | | $ | (1,320,376) | | $ | 539,579 | | $ | 14 | | $ | 539,593 | |

| Net income | | | \- | | | \- | | | \- | | | \- | | | 178,267 | | | \- | | | \- | | | 178,267 | | | 20 | | | 178,287 | |

| Other comprehensive income, net of tax | | | \- | | | \- | | | \- | | | \- | | | \- | | | 511 | | | \- | | | 511 | | | \- | | | 511 | |

| Total comprehensive income | | | \- | | | \- | | | \- | | | \- | | | \- | | | \- | | | \- | | | 178,778 | | | 20 | | | 178,798 | |

| Vesting of deferred stock units | | | \- | | | \- | | | (165) | | | 165 | | | \- | | | \- | | | \- | | | \- | | | \- | | | \- | |

| Total comprehensive income | | | \- | | | \- | | | \- | | | \- | | | \- | | | \- | | | \- | | | 185,468 | | | (6) | | | 185,462 | |

| Vesting of deferred stock units | | | \- | | | \- | | | (259) | | | 259 | | | \- | | | \- | | | \- | | | \- | | | \- | | | \- | |

| Total comprehensive income | | | \- | | | \- | | | \- | | | \- | | | \- | | | \- | | | \- | | | 160,213 | | | 45 | | | 160,258 | |

| Vesting of deferred stock units | | | \- | | | \- | | | (218) | | | 218 | | | \- | | | \- | | | \- | | | \- | | | \- | | | \- | |

| Other assets | | | (25,073) | | | (4,325) | | | 3,933 |

| Accrued liabilities | | | 36,392 | | | 16,512 | | | 187 |

| Proceeds from disposition of pharmaceutical product lines | | | \- | | | 3,500 | | | 3,000 |

| Cash and cash equivalents at beginning of period | | | 279,058 | | | 223,986 | | | 183,895 |

| Supplemental Disclosure of Non-Cash Information: | | | | | | | | | |

| Market value of common shares received from employees in connection with share-based compensation – see Note 17 | | $ | 5,809 | | $ | 4,548 | | $ | 4,662 |

| Receivable on disposition of pharmaceutical product lines | | $ | \- | | $ | \- | | $ | 3,500 |

As of December 31, 2013, our reported cash and cash equivalents balances contained restricted cash in the aggregate of $0.7 million securing various obligations.

(d)Property and Equipment

Changes in fair value of contingent consideration are recognized in earnings.

| | · | | Revenue from substantially all U.S. distributors is recognized upon delivery to the distributor because title and risk of loss remains with IDEXX until the product is delivered. Effective December 31, 2014, we did not renew our existing contracts with our key U.S. distribution partners and transitioned to an all-direct sales strategy for our rapid assay test kits and instrument consumables. We recognize revenue for the remainder of our customers, including most distributors outside of the U.S., when the product is delivered to the customer, except as noted below. |

During the year ended December 31, 2014, we disposed of notes receivable representing a strategic investment in a privately held company.

As of December 31, 2013, these notes receivable had a carrying value that approximated their fair value of $5.1 million and were valued using Level 3 inputs.

See Note 3 for further information regarding the disposition of the notes receivable during June 2014.

(s)Comprehensive Income

Customers.

Our largest customers are our U.S. distributors of our products in the CAG segment.

Our two largest CAG distributors are Henry Schein Animal Health Supply, LLC (“Henry Schein”) and MWI Veterinary Supply (“MWI”).

Henry Schein accounted for 8% of our 2014 consolidated revenue and 9% of our 2013 and 2012 consolidated revenue, and 2% and 7% of our net accounts receivable at December 31, 2014 and 2013.

MWI accounted for 8% of our 2014, 2013 and 2012 consolidated revenue, respectively, and 8% and 11% of our net accounts receivable at December 31, 2014 and 2013, respectively.