IDEXX Laboratories (IDXX) 10-K risk factor changes: FY2016 vs FY2015

| | · | | Developing, manufacturing and marketing innovative new or improved and cost competitive in-clinic laboratory analyzers that drive sales of IDEXX VetLab instruments, grow our installed base of instruments and increase demand for related [added: recurring sales of] consumable products, services and accessories; |

| | · | | Increasing the value to our customers of our companion animal products and services by enhancing the integration of [added: the information and transactions of] these products and the management of diagnostic information derived from our products; |

| | · | | Achieving cost improvements in our worldwide network of [added: reference] laboratories by implementing global best practices, including lean processing techniques, incorporating technological enhancements, including laboratory automation and a global laboratory information management system, employing purchasing strategies to maximize leverage of our global scale, increasing the leverage of existing infrastructure and consolidating testing in high volume laboratory hubs; |

| | · | | Continuing to [removed: expand and] [added: expand,] develop [added: and advance the productivity of] our companion animal diagnostic sales, marketing, customer support and logistics organizations in the U.S. in support of, among other things, our all-direct sales strategy for our rapid assay kits and instrument consumables (“kits and consumables”) in the U.S.; |

The risks of relying on suppliers include our inability to enter into contracts with third-party suppliers on reasonable terms, inconsistent or inadequate quality control, relocation of supplier facilities, supplier work stoppages and suppliers’ failure to comply with [added: applicable regulations or] their contractual obligations.

However, some suppliers decline to enter into long-term contracts and we are required to purchase products [added: with short term contracts or] on a purchase order basis.

We face intense competition within the markets in which we sell our products and [removed: services] [added: services,] and we expect that future competition may become even more intense.

[removed: The promotion and sale of our competitors’ products by our former U.S. distribution partners] [added: which] may adversely affect the retention of our customers for our kits and consumables and the sales and distribution of our products, which could have an adverse effect on our results of operations.

In the U.S., the manufacture and sale of [removed: many] [added: certain] of our products are regulated by agencies such as the USDA, the FDA or the EPA.

Our [removed: infectious disease] diagnostic tests for animal health [removed: applications,] [added: applications that involve the detection of infectious diseases,] including most rapid assay canine and feline SNAP tests and livestock and poultry diagnostic tests, must be approved by the USDA prior to sale in the U.S. Our dairy testing products require approval by the FDA prior to sale in the U.S. Our water testing products must be approved by the EPA before they can be used by customers in the U.S. as a part of a water quality monitoring program required by the EPA.

The manufacture and sale of our OPTI line of human point-of-care electrolytes and blood gas analyzers require approval by the FDA before they may be sold commercially in the U.S. [removed: The manufacture and sale of our] [added: In addition, delays in obtaining regulatory approvals for new] products [removed: are subject to similar] [added: or product upgrades could have a negative impact on our growth] and [removed: sometimes more stringent laws in many foreign countries.][added: profitability.]

We are also subject to a variety of federal, state, local and international laws and regulations that govern, among other things, the importation and exportation of [removed: products and] [added: products;] our business practices in the U.S. and abroad, such as anti-corruption and anti-competition [removed: laws.][added: laws; and immigration and travel restrictions.]

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

Major corporate hospital owners in the U.S. include [removed: Mars Petcare] [added: Mars, Incorporated] (owner of Banfield Pet [removed: Hospitals and] [added: Hospitals,] Blue Pearl Veterinary [added: Partners and Pet] Partners), National Veterinary Associates and VCA [removed: Antech,] Inc. [removed: 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.][added: (formerly named VCA Antech, Inc.).]

In addition, certain corporate owners, most notably [removed: VCA Antech, Inc.,] [added: VCA,] our primary competitor in the U.S. and Canadian markets for veterinary reference laboratory diagnostic services, also operate reference laboratories that serve both their hospitals and unaffiliated hospitals.

Any hospitals acquired by these companies generally shift all or a large portion of their testing to the reference laboratories operated by these [removed: companies.][added: companies, and there can be no assurance that hospitals that otherwise become affiliated with these companies would not shift all or a portion of their testing to such reference laboratories.]

These laws and regulations continue to develop, are subject to differing interpretations and may be [removed: inconsistent] [added: applied inconsistently] from jurisdiction to [removed: jurisdiction.][added: jurisdiction and may be inconsistent with our current data protection and privacy policies and practices.]

We are a global business, with [removed: 39%] [added: 39 percent] of our revenue during the year ended December 31, [removed: 2015] [added: 2016,] 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 foreign currencies, and in particular the euro, British pound, Canadian dollar, Chinese renminbi, Japanese yen, Australian dollar and Brazilian real, adversely affects our results, as it reduces the dollar value of sales and profits that are made in those currencies.

For the year ended December 31, [removed: 2015,] [added: 2016,] approximately [removed: 25%] [added: 21 percent] of our consolidated revenue was derived from products manufactured [added: or sourced] in [removed: the] U.S. [added: dollars] and sold internationally in local currencies, as compared to [removed: 28%] [added: 20 percent] and [removed: 26%] [added: 22 percent] for the years ended December 31, [removed: 2014] [added: 2015] and [removed: 2013,] [added: 2014,] respectively.

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. [removed: currencies may be limited.]

For the year ended December 31, [removed: 2015,] [added: 2016,] approximately [removed: 39%] [added: 39 percent] of our revenue was attributable to sales of products and services to customers outside the U.S., compared to [removed: 43% and 42%] [added: 39 percent] for the [removed: years] [added: year] ended December 31, [removed: 2014] [added: 2015,] and [removed: 2013, respectively.][added: 43 percent for the year ended December 31, 2014.]

Although we intend to continue to expand our international operations and business, we may not be able to successfully promote, market, 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, [added: fluctuations in oil prices, increased border protection and restriction on travel,] the differing product and service needs of foreign customers, difficulties in building and managing foreign [removed: operations;] [added: operations,] import/export 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.

Our Operations are Vulnerable to Interruption as a Result of Natural and Man-Made Disasters, System Disruptions and Security [added: Breaches, and Disruptions, Attacks or] Breaches [added: of Information Systems Could Adversely Affect Our Business]

The operation of all of our [removed: facilities] [added: facilities, as well as those of our third party business partners on which we rely,] may be vulnerable to interruption as a result of natural and man-made disasters, interruptions in power supply or other system failures.

We rely on several information systems throughout our [removed: company] [added: company, as well as our business partners’ information systems,] to keep financial records, analyze results of operations, process customer orders, manage inventory, process shipments to [removed: customers] [added: customers, store confidential or proprietary information] and operate other critical functions.

Further, our information systems [added: and our business partners’ information systems] may be vulnerable to attacks by hackers and other security breaches, including computer [removed: viruses.][added: viruses, through the Internet (including via devices and applications connected to the Internet), email attachments and persons with]

If we [added: or our business partners] were to experience a system disruption, attack or security breach that impacts any of our critical functions, [added: or our customers were to experience a system disruption, attack or security breach via any of our connected products and services,] it could result in [added: a period of shutdown of information systems during which we (or our customers) may not be able to operate,] the loss of sales and customers, financial [removed: misstatement] [added: misstatement, potential liability for damages to our customers, reputational damage] and significant incremental costs, which could adversely affect our business.

Furthermore, any access to, public disclosure of, or other loss of information [added: (including any of our confidential or proprietary information)] as a result of an attack or security breach could result in governmental actions or private claims or proceedings, which could damage our reputation, cause a loss of confidence in our products and services, [added: damage our ability to develop (and protect our rights to) our proprietary technologies] and adversely affect our business.

If we [removed: were] [added: are] unable to obtain financing on favorable terms, we could face restrictions that would limit our ability to execute certain strategies, which could have an adverse effect on our revenue growth and profitability.

Our competitors in the veterinary diagnostic market include companies that develop, manufacture and sell veterinary diagnostic tests and commercial veterinary reference laboratories, as well as corporate hospital chains that operate reference laboratories that serve both their hospitals and unaffiliated hospitals, such as VCA Inc. (formerly named VCA Antech, Inc.).

In January 2017, Mars, Incorporated and VCA announced that Mars, Incorporated agreed to acquire VCA, with the acquisition expected to close in the third quarter of 2017.

If this acquisition closes, it could result in the combination of two large U.S. veterinary hospital chains into a vertically integrated corporate hospital chain providing reference laboratory services to its hospitals and unaffiliated hospitals.

While we believe that our reference laboratory service offerings are competitively differentiated due to our proprietary products and services, such as the IDEXX SDMA test, there can be no assurance that increased consolidation and reference laboratory vertical integration among our customers would not have a negative impact on our ability to compete.

For more information regarding the risks presented by consolidation and reference laboratory vertical integration among our customers, see “Consolidation in Our Customer Base, Including Through Increased Corporate Hospital Ownership, and Prevalence of Buying Consortiums Could Negatively Affect Our Business” below.

Our former U.S. distribution partners currently promote and sell competitive instruments, consumables and rapid assay products.

The manufacture and sale of our products, as well as our research and development processes, are subject to similar and sometimes more stringent laws in many foreign countries.

For example, the European Union regulates the use of certain substances that we currently use in our products or processes.

These regulations include the Biocidal Products Regulation, which may require approval for the use of certain biocides in our products prior to being used or sold in the European Union, and the European Regulation for Registration, Evaluation, Authorization

and Restriction of Chemical Substances, or REACH, which regulates and restricts the use of certain chemicals in the European Union.

Compliance with these regulations (and similar regulations that may be adopted elsewhere) may require registration of the applicable substances or the redesign or reformulation of our products and may reduce or eliminate the availability of certain parts and components used in our products and services in the event our suppliers are unable to comply with the applicable regulations in a timely and cost-effective manner.

Any redesign or reformulation or restricted supply of parts and components may negatively affect the availability or performance of our products and services, add testing lead-times for products and reformulated products, reduce our margins, result in additional costs or have other similar effects.

In addition, the costs to comply with these regulations may be significant.

Any of these could adversely affect our business, financial condition or results of operations.

These legal and regulatory requirements are complex and subject to change, and we continue to evaluate their impact.

In January 2017, Mars, Incorporated and VCA announced that Mars, Incorporated agreed to acquire VCA, with the acquisition expected to close in the third quarter of 2017.

A similar trend exists in other countries, such as in the U.K. and the Nordic countries, and may in the future also develop in other international markets.

The European Commission and the U.S. Department of Commerce issued the final text for the Privacy Shield framework in July 2016, and it became operational when the U.S. Department of Commerce began accepting applications for Privacy Shield certification on August 1, 2016.

We submitted our self-certification under the Privacy Shield in September 2016 and adopted this framework to transfer personal data to the U.S. in compliance with EU data protection laws.

Effective as of January 10, 2017, the U.S. Department of Commerce completed its review of our self-certification, and we joined the Privacy Shield list of participating organizations.

Additionally, in April 2016, the EU Parliament adopted the General Data Protection Regulation, or GDPR, which, among other things, imposes more stringent data protection requirements and provides for greater penalties for noncompliance and is expected to take effect in 2018.

See “Part II, Item 7A.

Quantitative and Qualitative Disclosure About Market Risks” included in this Annual Report on Form 10-K for additional information regarding currency impact.

In addition, our hedging activities involve costs and risks, such as transactions costs and the risk that our hedging counterparties will default on their obligations.

currencies may be limited.

access to these information systems.

While we have implemented network security and internal control measures and invested in our data and information technology infrastructure, there can be no assurance that these efforts will prevent a system disruption, attack or security breach.

In addition, we offer products and services that connect to and are part of the “Internet of Things,” such as our connected devices (e.g., IDEXX VetLab instruments).

While we have implemented security measures to protect our connected products and services from cyberattacks, the risk of system disruptions and security breaches from a cyberattack remains.

See Note 12 to the consolidated financial statements for the year ended December 31, 2016, included in this Annual Report on Form 10-K for more information.

We historically sold significant amounts of our kits and consumables through our former U.S. distribution partners, and two of our previously exclusive U.S. distribution partners joined a third former U.S. distribution partner by beginning to carry competitive instruments, consumables and rapid assay products in the fourth quarter of 2014.

In addition, delays in obtaining regulatory approvals for new products or product upgrades could have a negative impact on our growth and profitability.

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.

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.

Description of [added: Business] Segments.

See Note 15 to the consolidated financial statements for the year ended December 31, [removed: 2015] [added: 2016,] 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.

[removed: Segment revenue] [added: The segment gross profit] and income [added: (loss)] from operations [added: within this Annual Report on Form 10-K] for [added: the] years ended December 31, [removed: 2014] [added: 2015] and [removed: 2013 have] [added: 2014, has] been retrospectively revised [removed: in this Annual Report on Form 10-K] to reflect [removed: this change in] the [removed: composition of] [added: changes to] our [removed: reportable segments.][added: segment performance metrics described above.]

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

[removed: | | · | | The] [added: Effective January 1, 2016, we modified our management reporting to the Chief Operating Decision Maker to provide a more comprehensive view of the performance of our operating segments by including the] capitalization [added: and subsequent recognition] of variances between standard and actual manufacturing [removed: costs to adjust] [added: costs, which adjusts] the timing of [removed: expense] [added: cost] recognition from when the variance is created to the period in which the related inventory is sold. [removed: |]

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

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

We provide diagnostic capabilities that meet [removed: veterinarian’s] [added: veterinarians’] diverse needs through a variety of modalities including in-clinic diagnostic solutions and outside reference [removed: laboratories.][added: laboratory services.]

Veterinarians that utilize our full line of diagnostic modalities obtain a single view of a patient’s diagnostic results, which allows them to [removed: spot] [added: track and evaluate] trends and achieve greater medical insight.

To further increase our customer reach, effective January 1, [removed: 2015] [added: 2015,] we transitioned to an all-direct sales strategy in the U.S. and did not renew our [removed: current] annual contracts with our U.S. distribution partners.

Under this approach, we take orders, ship product, invoice and receive payment for all rapid assay test kits and [removed: instrument] [added: VetLab] consumables in the U.S., aligning with our direct model for instruments, reference laboratory services, and other CAG products and services.

Revenues related to the placement of the [added: IDEXX] VetLab suite of instruments are non-recurring in nature, in that the customer will buy an instrument once over its respective product life cycle, but will purchase consumables for that instrument on a recurring basis as they use that instrument for testing purposes.

As of December 31, [removed: 2015,] [added: 2016,] these three chemistry analyzers provided for a combined active installed base of approximately [added: 43,000 units globally, as compared to] 40,000 units [removed: globally.][added: globally in 2015.]

[removed: Almost half] [added: Approximately 50 percent] of [removed: 2015] [added: 2016] 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.

The [removed: ProCyte] [added: LaserCyte] Dx analyzer is our latest generation hematology analyzer, which we launched in [removed: 2010.][added: 2013.]

In [removed: addition] [added: addition,] we sell the [removed: LaserCyte] [added: ProCyte] Dx [removed: and] LaserCyte [removed: analyzers] and VetAutoread analyzers.

As of December 31, [removed: 2015,] [added: 2016,] these four hematology analyzers provided for a combined active installed base of approximately [added: 31,000 units, as compared to] 29,000 [removed: units.][added: units in 2015 and 27,000 units in 2014.]

In [removed: 2015, nearly half] [added: 2016, approximately 50 percent] of ProCyte placements were made at competitive accounts.

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 [added: a decrease] in [removed: sales of] [added: the associated] recurring revenue stream.

Our SediVue [added: Dx] instrument, which we [removed: plan to launch] [added: launched] in North America early in [added: 2016 and in the U.K. and Australia in the fourth quarter of] 2016, is the first and only in-clinic analyzer to provide urine sediment analysis.

We seek to enhance the attractiveness [added: and customer loyalty] of our SNAP rapid assay [removed: tests] [added: tests,] by providing the SNAP Pro Mobile Device, which activates SNAP tests, properly times the run, [removed: captures] [added: captures,] and saves images of the results and, in conjunction with IVLS, records invoice charges in the patient record.

[removed: This promotes] [added: These features promote] practice efficiency by eliminating manual entry of test results in patient records and also helps ensure that the services are recorded and accurately invoiced.

Prior to 2014, the SNAPshot Dx was our primary in-clinic solution [removed: which screened] for [added: screening] thyroid [removed: disease.][added: disease, cortisol, bile acids and interpreting SNAP rapid assay tests.]

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 [added: the] prior year.

Our long-term success in [removed: this area] [added: the continuing growth] of our [removed: business] [added: CAG recurring diagnostic product and services] is dependent upon new customer acquisition, customer loyalty and retention of their recurring revenues, [added: our ability to realize price increases based on our differentiated products] and customer utilization of existing and new assays introduced for use on our analyzers.

Our latest generation of chemistry and hematology instruments demonstrates this commitment by offering enhanced ease of use, faster time to results, [removed: greater sample throughput,] broader test menu and connectivity to various information technology platforms that enhance the value of the diagnostic information generated by the instruments.

Revenues from our proprietary [added: IDEXX] VetLab consumable products, our SNAP rapid assay test kits, outside reference laboratory and consulting services, and extended maintenance agreements and accessories related to our [removed: VetLab] [added: CAG Diagnostics] instruments are considered recurring in nature.

[removed: Recurring] [added: For the year ended December 31, 2016, recurring] diagnostic [removed: revenue] [added: revenue, which is both highly durable and profitable,] accounts for approximately [removed: 72%] [added: 72 percent] of our consolidated [removed: revenue and is both highly durable and profitable.][added: revenue.]

Our in-clinic diagnostic solutions, consisting of our [added: IDEXX] VetLab consumable products and SNAP rapid assay test kits, provide real-time reference lab quality diagnostic results for a variety of companion animal diseases and health conditions.

We derive substantial revenues and margins from the sale of consumables that are used in [added: IDEXX] VetLab instruments and the multi-year consumable revenue stream is significantly more valuable than the placement of the instrument.

Our strategy is to increase diagnostic testing within veterinary practices by placing [added: IDEXX] VetLab instruments and increasing instrument utilization of consumables.

We seek to differentiate these tests from those of other in-clinic test providers and reference laboratory diagnostic service providers [removed: through ease-of-use,] [added: based on critically important sensitivity and specificity, as well as overall] superior [removed: performance, sensitivity, specificity] [added: performance] and [added: ease of use] by providing our customers with combination tests that test a single sample for up to six diseases at [removed: once.][added: once, including the ability to utilize our SNAP Pro mobile device.]

In the second half of [removed: the year,] [added: 2015,] 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 [removed: ELISA] [added: enzyme-linked immunosorbent assays (“ELISA”)] technology.

We believe that more than half of all diagnostic testing by U.S. veterinarians is provided by outside reference laboratories such as [removed: our] IDEXX Reference Laboratories.

We attempt to differentiate our reference laboratory testing services from those of competitive reference laboratories and competitive in-clinic offerings primarily on the basis of [added: a unique and proprietary] test menu, technology employed, quality, turnaround time, customer service and tools such as VetConnect PLUS that demonstrate the complementary manner in which our laboratory services work with our in-clinic offerings.

Profitability in our lab business is [removed: supported] [added: supported, in part,] by our expanding business scale globally.

Profit improvements [added: also] reflect benefits from price increases and our ability to achieve efficiencies.

[removed: Start-up] [added: New] laboratories that we open typically will operate at a loss until testing volumes achieve sufficient scale.

Recurring [added: reference lab] revenue growth is achieved both through increased sales to existing customers and through the acquisition of new customers.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10‑K.

We have included certain terms and abbreviations used throughout this Annual Report on Form 10-K in the "Glossary of Terms and Selected Abbreviations.”

During the second quarter of 2016, we renamed our customer information management and diagnostic imaging systems line of business in the CAG segment to veterinary software, services and diagnostic imaging systems.

Financial results were not adjusted as a result of this name change.

During the fourth quarter of 2016, we modified our management reporting to rename IDEXX VetLab service and accessories to CAG Diagnostics service and accessories and reclassified the location of SNAP Pro service plans previously located in CAG Diagnostics capital - instruments to CAG Diagnostics service and accessories.

The amount of revenue reclassified was $0.5 million during the year ended December 31, 2015, and $1.4 million during the year ended December 31, 2016.

The amount reclassified was less than $0.1 million during the year ended December 31, 2014.

Differences from these pre-determined budgeted amounts or rates are captured within Unallocated Amounts.

Prior to January 1, 2016, the capitalization and subsequent recognition of these variances were not allocated to our operating segments and were instead reported under the caption “Unallocated Amounts”.

The following is a summary of revised segment gross profit from operations for the years ended December 31, 2015 and 2014:

| | | | | | | | | | Net Impact of Standard Cost | | | | | | | | | | |

| | | For the Year Ended | | | | | | | Variance Capitalization and | | | | For the Year Ended | | | | Adjusted | | |

| Gross Profit | | December 31, 2015 | | | Percent of | | | | Subsequent Recognition | | | | December 31, 2015 | | | | Percent of | | |

| (dollars in thousands) | | As Previously Reported | | | Revenue | | | | to the Operating Segments | | | | As Adjusted | | | | Revenue | | |

| CAG | | $ | 727,626 | | 53.6% | | | | $ | 1,677 | | $ | 729,303 | | | | 53.8% | | |

| Water | | | 68,785 | | 71.0% | | | | | 168 | | | 68,953 | | | | 71.2% | | |

| LPD | | | 77,227 | | 60.7% | | | | | 2,760 | | | 79,987 | | | | 62.9% | | |

| Other | | | 10,574 | | 49.0% | | | | | (293) | | | 10,281 | | | | 47.6% | | |

| Unallocated Amounts | | | 6,058 | | N/A | | | | | (4,312) | | | 1,746 | | | | N/A | | |

| Total Company | | $ | 890,270 | | 55.6% | | | | $ | \- | | $ | 890,270 | | | | 55.6% | | |

| | | | | | | | | | Net Impact of Standard Cost | | | | | | | | | | |

| | | For the Year Ended | | | | | | | Variance Capitalization and | | | | For the Year Ended | | | | Adjusted | | |

| Gross Profit | | December 31, 2014 | | | Percent of | | | | Subsequent Recognition | | | | December 31, 2014 | | | | Percent of | | |

| (dollars in thousands) | | As Previously Reported | | | Revenue | | | | to the Operating Segments | | | | As Adjusted | | | | Revenue | | |

| CAG | | $ | 655,197 | | 53.6% | | | | $ | (3,002) | | $ | 652,195 | | | | 53.3% | | |

| Water | | | 62,924 | | 66.4% | | | | | (348) | | | 62,576 | | | | 66.1% | | |

| LPD | | | 89,519 | | 63.4% | | | | | (4,461) | | | 85,058 | | | | 60.2% | | |

| Other | | | 14,236 | | 53.0% | | | | | 178 | | | 14,414 | | | | 53.7% | | |

| Unallocated Amounts | | | (5,760) | | N/A | | | | | 7,633 | | | 1,873 | | | | N/A | | |

The following is a summary of revised segment operating income (loss) from operations for the years ended December 31, 2015 and 2014:

| | | | | | | | | | | Net Impact of Standard Cost | | | | | | | | | | | |

| | | For the Year Ended | | | | | | | | Variance Capitalization and | | | | | For the Year Ended | | | | Adjusted | | |

| Operating Income (Loss) | | December 31, 2015 | | | | Percent of | | | | Subsequent Recognition | | | | | December 31, 2015 | | | | Percent of | | |

| (dollars in thousands) | | As Previously Reported | | | | Revenue | | | | to the Operating Segments | | | | | As Adjusted | | | | Revenue | | |

| CAG | | $ | | 231,642 | | 17.1% | | | | $ | | 1,677 | | $ | 233,319 | | | | 17.2% | | |

| Water | | | | 44,584 | | 46.0% | | | | | | 168 | | | 44,752 | | | | 46.2% | | |

| LPD | | | | 24,397 | | 19.2% | | | | | | 2,760 | | | 27,157 | | | | 21.4% | | |

| Other | | | | 156 | | 0.7% | | | | | | (293) | | | (137) | | | | (0.6%) | | |

| Unallocated Amounts | | | | (867) | | N/A | | | | | | (4,312) | | | (5,179) | | | | N/A | | |

| Total Company | | $ | | 299,912 | | 18.7% | | | | $ | | \- | | $ | 299,912 | | | | 18.7% | | |

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.

The major categories of these costs include:

Gross Profit:

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

Operating Expenses:

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

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

| | · | | Unusual or extraordinary items. |

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

We refer to the extensiveness and integration of our diagnostic and information management offerings as the IDEXX Diagnostic Advantage.

In 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.

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

We also distribute food safety products, including a wide range of cost effective, sensitive and reproducible diagnostic assays for the detection of multiple contaminants.

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

In 2015, approximately 89% of our sales in this business were from markets outside of the U.S., most notably Europe, China and Australia.

OPTI Medical Systems.

In 2015, approximately 84% of our sales in the OPTI Medical Systems business were from markets outside of the U.S., most notably Asia and Europe.

Prior to January 1, 2014, we calculated this impact by applying the difference between the weighted average exchange rates during the current year period and the comparable previous year period to foreign currency denominated revenues for the current year period.

This change in methodology, which was implemented to achieve operational efficiencies, has not had a material impact on organic revenue growth.

See the subsection below titled “Results of Operations” for the definition of and other information regarding organic revenue growth.

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 virtually 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 currency exchange rate assumptions, we anticipate that the strengthening of the U.S. dollar relative to major foreign currencies in which we transact will decrease total company revenue by approximately $40 million in the year ending December 31, 2016.

Additionally, these changes in foreign currency exchange rates are expected to reduce total company operating profit by $31 million and diluted earnings per share by $0.26.

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 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.

See Item 1.

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

| | | For the Year | | | For the Year | | | | | | | | | | | | | | | | |

| | | Ended | | | Ended | | | | | | | | | Percentage | | | Percentage | | | Organic | |

| Net Revenue | | December 31, | | | December 31, | | | Dollar | | | Percentage | | | Change from | | | Change from | | | Revenue | |

U.S. and International Revenue.

The following table provides further analysis of total company revenue by U.S. markets and non-U.S., or international, markets:

| | | For the Year | | | For the Year | | | | | | | | | | | | | | | | |

| | | Ended | | | Ended | | | | | | | | | Percentage | | | Percentage | | | Organic | |

Our functional currency is the U.S. dollar and our primary manufacturing operations and inventory supply contracts are in the [removed: U.S.,] [added: U.S. or in U.S. dollars,] but we distribute our products worldwide both through direct export and through our foreign subsidiaries.

For the year ended December 31, [removed: 2015,] [added: 2016,] approximately [removed: 25%] [added: 21 percent] of our consolidated revenue was derived from products manufactured [added: or sourced] in [removed: the] U.S. [added: dollars] and sold internationally in local currencies, as compared to [removed: 28% and 26%] [added: 20 percent] for the [removed: years] [added: year] ended December 31, [removed: 2014] [added: 2015,] and [removed: 2013, respectively.][added: 22 percent for the year ended December 31, 2014.]

[removed: If a 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.

See Note 17 to the consolidated financial statements of this Annual Report on Form 10-K for details regarding euro-denominated notes [removed: issued during 2015] that we designated as a hedge of our euro net investment 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: 2015.][added: 2016.]

As a result, no significant ineffectiveness has resulted or been recorded through the statements of operations for the years ended December 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013.][added: 2014.]

We hedge approximately [removed: 85%] [added: 85 percent] 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.

The notional amount of foreign currency exchange contracts to hedge forecasted intercompany purchases and sales totaled [removed: $176.1 million and $186.7] [added: $175.9] million at December 31, [removed: 2015] [added: 2016,] and [added: $176.1 million at] December 31, [removed: 2014, respectively.][added: 2015.]

At December 31, [removed: 2015,] [added: 2016,] we had [removed: $2.5] [added: $5.4] million of net unrealized gains on foreign currency exchange contracts recorded in accumulated other comprehensive income, net of related tax expense.

Based on projected revenues and expenses for [removed: 2016,] [added: 2017,] excluding the impact of intercompany and trade balances denominated in [added: currencies other than the functional subsidiary currencies, a 1 percent strengthening of the U.S. dollar would reduce revenue by approximately $7 million and operating income by approximately $3 million.]

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

Borrowings outstanding under the Credit Facility at December 31, [removed: 2015] [added: 2016,] were [removed: $573.0] [added: $611.0] million at a weighted-average effective interest rate of [removed: 1.9%.][added: 1.95 percent.]

Based on amounts outstanding under our Credit Facility as of December 31, [removed: 2015 and assuming we do not enter into additional interest rate swap agreements following their expiration on June 30,] 2016, an increase in the LIBOR or the CDOR of [removed: 1%] [added: 1 percent] would increase interest expense by approximately [removed: $5.3] [added: $6.1] million on an annualized basis.

During the year ended December 31, [removed: 2015,] [added: 2016,] 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.

As of December 31, [removed: 2015,] [added: 2016,] we estimate that a [removed: 1%] [added: 1 percent] increase in market interest rates would decrease the fair value of our marketable securities portfolio by approximately [removed: $0.8] [added: $0.9] million.

Additionally, our foreign currency hedge contracts in place as of December 31, 2016 would provide incremental offsetting gains of approximately $1 million.

At our current foreign exchange rate assumptions, we anticipate that the effect of a stronger U.S. Dollar will have an adverse effect on our operating results by decreasing our revenues, operating profit and diluted earnings per share in the year ending December 31, 2017, by approximately $26 million, $8 million, and $0.06 per share, respectively.

This unfavorable impact includes foreign currency hedging activity, which is expected to increase total company operating profit by approximately $3 million and diluted earnings per share by $0.03 in the year ending December 31, 2017.

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 $1.06, the British pound at $1.23, the Canadian dollar at $0.75, the Australian dollar at $0.75 and the Japanese yen at ¥117 to the U.S. dollar for the full year of 2017.

The following table is the foreign currency exchange impacts on our revenues, operating profit and diluted earnings per share for the years December 31, 2016, 2015 and 2014, as compared to the respective prior periods:

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

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

| | | For the Years Ended December 31, | | | | | | | | |

| (dollars in thousands) | | 2016 | | | 2015 | | | 2014 | | |

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

| Revenue impact | | $ | (14,105) | | $ | (89,692) | | $ | (10,978) | |

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

| Operating profit impact, excluding hedge activity | | $ | (6,921) | | $ | (38,286) | | $ | (7,544) | |

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

| Hedge gains - prior year | | | (20,879) | | | (3,821) | | | (3,469) | |

| Hedge gains - current year | | | 3,620 | | | 20,879 | | | 3,821 | |

| Hedging activity impact | | | (17,259) | | | 17,058 | | | 352 | |

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

| Operating profit impact, including hedge activity | | $ | (24,180) | | $ | (21,228) | | $ | (7,192) | |

| Diluted earnings per share impact, including hedge activity | | $ | (0.20) | | $ | (0.16) | | $ | (0.05) | |

If a hedging instrument qualifies for hedge accounting, changes in the fair value of the derivative instrument from the effective portion of the hedge

currencies other than the functional subsidiary currencies, a 10% strengthening of the U.S. dollar would reduce operating income by approximately $13 million.

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.

As discussed below, we have entered into forward fixed interest rate swaps to mitigate a portion of our interest rate risk through June 30, 2016.

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.

Beginning on March 28, 2013, the variable interest rate associated with an additional $40 million of borrowings outstanding under the Credit Facility became effectively fixed at 1.64% plus the Credit Spread through June 30, 2016.

We have designated these swaps as qualifying instruments to be accounted for as cash flow hedges.

At December 31, 2015, we had $0.2 million in unrealized losses on interest rate swaps, recorded in other comprehensive income, net of related tax benefit.

See Note 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.

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.

[removed: We are a Delaware corporation] [added: IDEXX was] incorporated in [added: Delaware in] 1983.

| | · | | Point-of-care veterinary diagnostic products, comprising instruments, consumables and rapid [removed: assays;] [added: assay test kits;] |

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

| | · | | Biological materials testing, laboratory [removed: animal] diagnostic instruments and services used by the biomedical research community; |

| | · | | Diagnostic, health-monitoring [removed: and food safety testing] products for livestock, poultry and dairy; |

For the year ended December 31, [removed: 2015,] [added: 2016,] sales of products and services to customers outside the U.S. accounted for approximately [removed: 39%] [added: 39 percent] of our overall revenue.

[removed: Risk Factors.”] [added: Management’s Discussion] and [added: Analysis of Financial Condition and Results of Operations and] Note 15 to the consolidated financial statements for the year ended December 31, [removed: 2015] [added: 2016,] included in this Annual Report on Form 10-K for more information about our segments and revenue from customers outside of the U.S.

CAG provides [removed: to] veterinarians [added: with the] diagnostic capabilities and information management solutions that enhance the health and well-being of pets.

[removed: The] [added: We believe that the] breadth [removed: and complementary nature] of our [added: full diagnostic solution, including novel] products and services [added: developed and made available only by IDEXX, as well as the seamless software integration of our offering,] comprise a unique competitive [removed: advantage that we refer to as the IDEXX Diagnostic Advantage,] [added: advantage,] providing veterinarians with the tools and services to offer advanced veterinary medical care.

In addition, the Catalyst Dx and the Catalyst One analyzers also use dry slide electrolyte consumables manufactured by OPTI Medical Systems, Inc. (“OPTI [removed: Medical Systems”),] [added: Medical”),] one of our wholly-owned subsidiaries, and other slides also manufactured by IDEXX.

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

Sales of consumables to customers who use our chemistry analyzers provide the majority of our instrument consumables revenues from our installed base of IDEXX VetLab [removed: equipment.][added: instruments.]

These analyzers include the ProCyte Dx Hematology Analyzer, the first and only in-house analyzer to combine laser-flow cytometry, optical fluorescence and laminar-flow impedance in its analysis; the original LaserCyte Hematology Analyzer and [removed: next] [added: the latest] generation LaserCyte Dx Hematology Analyzer, launched in 2013, which both use laser-flow cytometry technology in their analysis; and the IDEXX VetAutoread Hematology Analyzer, our original hematology analyzer.

The ProCyte Dx is validated for [removed: ten companion] [added: many] animal species (canine, feline, equine, bovine, ferret, rabbit, gerbil, pig, guinea [removed: pig and] [added: pig,] mini [removed: pig)] [added: pig, llama, alpaca, camel, sheep, goat, dolphin and hamster)] with research and development efforts focused on validating results for additional species.

[removed: Early in] [added: In April] 2016, we [removed: plan to launch] [added: launched] SediVue Dx in North America.

[removed: SediVue Dx] [added: It] is [removed: 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.

We sell IVLS as an integral component of the Catalyst Dx, Catalyst One, LaserCyte Dx and ProCyte Dx analyzers, SNAP Pro Mobile [removed: Device] [added: Device, SNAPshot Dx Analyzer] and also as a standalone hardware platform.

The SNAP rapid assays are single-use, handheld test kits that can work without the use of instrumentation, although many kits may also be read and recorded automatically by the SNAPshot Dx Analyzer or activated and captured automatically by the SNAP Pro Mobile Device [added: and interpreted using ProRead,] as discussed above.

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

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

Canine vector-borne disease testing volumes are greater in the first half of our fiscal year due to seasonality of disease testing in the veterinary [removed: practice.][added: practice in the Northern Hemisphere.]

Upon its [removed: introduction,] [added: introduction in North America,] IDEXX SDMA was included in every chemistry panel submitted by our customers at no incremental charge.

[removed: As of] [added: During] the first quarter of 2016, we [removed: have also] launched IDEXX SDMA in all of [added: the] major European countries and [removed: Australia.][added: Australia, followed by a full international launch of IDEXX SDMA during the remainder of 2016.]

[removed: RADIL] [added: Our diagnostic laboratory business also] provides health monitoring and diagnostic testing services to bioresearch customers in North America, Europe and Asia.

[removed: Customer Information Management] [added: Veterinary Software, Services] and Diagnostic Imaging Systems

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

IDEXX [removed: Neo] [added: Neo, which we launched in the United States during the third quarter of 2015,] and IDEXX Animana are cloud-based practice management systems available in [removed: North America,] [added: the U.S.,] Europe and [removed: Australia, respectively.][added: Australia.]

We commercially launched Pet Health Network Pro in [removed: March] 2013, which is a subscription-based service that permits veterinarians to provide online communication and education to pet owners before, during and after each patient visit, thus strengthening the loyalty between a practice and its clients.

Using [removed: this service] [added: these services] in the exam room improves client communication and facilitates adherence to veterinarian recommendations.

[removed: Our] [added: Previously named IDEXX VetLab service and accessories, our] 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 diagnostic imaging [removed: systems, our] [added: systems primarily used in small animal veterinary applications: the] IDEXX [removed: EliteVision Digital Imaging System, and] [added: ImageVue DR50,] the IDEXX [removed: I-Vision CR] [added: ImageVue DR40] and the IDEXX [removed: I-Vision DR systems for small animal veterinary applications.][added: ImageVue CR20.]

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

[removed: During the third quarter of 2015, we launched] IDEXX Web [removed: PACS,] [added: PACS is] our cloud-based [removed: software solution] [added: software-as-a-service (“SaaS”) offering] for [removed: accessing,] [added: viewing, accessing] storing and sharing [added: multi-modality] diagnostic images.

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

IDEXX I-Vision Mobile is a software application that allows veterinarians with [removed: the I-Vision DR and] IDEXX [removed: I-Vision CR systems, as well as our legacy diagnostic imaging systems,] [added: digital radiography systems the ability] to request, view and send images using an iPad® or an Android™ mobile tablet.

Our [removed: livestock testing] [added: herd health screening] services are offered to livestock veterinarians and producers.

OPTI Medical [removed: Systems]

Through OPTI [removed: Medical Systems,] [added: Medical,] we sell point-of-care analyzers and related consumables for use in human medical hospitals and clinics to measure electrolytes, blood gases, acid-base balance, glucose, lactate, blood urea nitrogen and ionized calcium, and to calculate other parameters such as base excess and anion gap.

Our latest generation OPTI CCA-TS2 Blood Gas and Electrolyte Analyzer, which launched in [removed: April] 2013, contains many new features relative to previous generation blood gas analyzers including customized work flows, faster time to result, improved communication and a multi-level electronic control.

In addition, OPTI Medical [removed: Systems] manufactures our VetStat analyzer, an instrument and consumable system that is a member of the IDEXX VetLab suite for the veterinary market, and provides the dry slides for electrolyte testing on the Catalyst analyzers for our CAG segment.

COMPANY OVERVIEW

Risk Factors.”, Item 7.

We believe that with the use of our products and services, veterinary practices significantly improve the quality of veterinary care provided to their patients, increase staff efficiencies, and effectively communicate the value of this medical care to the pet owner.

We believe that these capabilities, enabled by the use of IDEXX products and services, improve the financial health of the veterinary practice.

In January 2017, we launched ProRead for the SNAP Pro Mobile Device.

ProRead is a software upgrade that enables the SNAP Pro Mobile Device to interpret the test results.

In the fourth quarter of 2016 we launched Sedivue Dx in the UK and Australia.

SediVue Dx is the first and only veterinary in\-clinic urine sediment analyzer.

Veterinary Software and Services.

Our newest radiography system, the IDEXX ImageVue DR50, was launched in June 2016 and enables low-dose radiation image capture without sacrificing clear, high-quality images, reducing the risk posed by excess radiation exposure for veterinary professionals.

The IDEXX ImageVue DR50 system also offers wireless capabilities for flexibility in patient positioning.

In July 2016, we launched Legiolert, a simple culture method test for the detection of Legionella pneumophila, the most common Legionella species in water and the primary cause of Legionnaires’ disease.

The Legiolert test is designed to be used on potable or non-potable water sources with results in seven days.

In June 2016, we launched the Rapid Visual Pregnancy Test for cattle, which is a point-of-care test that can detect pregnancy 28 days after breeding.

This test provides a quick and accurate identifier using whole blood samples that will enable veterinarians to optimize value-added medical consulting services while on farm visits.

In addition, we have a pending U.S. patent application concerning methods for detecting SDMA.

If this patent is granted, we expect that it would expire in 2036.

Many of the instruments that we sell are manufactured by third parties.

The European Union regulates and restricts the use of certain substances that we currently use in our products or processes.

These requirements include the Biocidal Products Regulation, which may require the use of approved biocides in our products prior to being used or sold in the European Union, and the European Regulation for Registration, Evaluation, Authorization and Restriction of Chemical Substances, or REACH, which regulates and restricts the use of certain chemicals in the European Union.

Compliance with these regulations (and similar regulations that may be adopted elsewhere) may require registration of the applicable substances or the redesign or reformulation of our products.

These foreign sales accounted for approximately 33%, 50% and 89% of revenue in our CAG, Water and LPD segments, respectively.

The IDEXX Diagnostic Advantage improves staff efficiencies and also enables the veterinarian to communicate the value of this medical care to the pet owner, which ultimately leads to growing practice revenues.

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

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.

The 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 a portable unit promoted for use in ambulatory veterinary practices, such as equine practices.

This software also permits images from our diagnostic imaging systems to be integrated into patients’ medical records in the Cornerstone system, as well as transferred to other practice management systems.

We also provide tests for detecting pregnancy in bovine, which provides a means to optimize reproductive efficiency.

In the third quarter of 2013, we acquired a Brazilian distributor of certain of our Livestock and Dairy products.

As part of this acquisition, we acquired the right to distribute food safety products that monitor microbial contamination and drug residues for livestock producers, meat exporters and pharmaceutical companies.

The OPTI LION Stat Electrolyte Analyzer runs single-use electrolyte cassettes.

Previously, we restructured the remaining pharmaceutical division and realigned two of our pharmaceutical product lines to the Rapid Assay line of business, which is part of CAG, and realigned the remainder of the products, comprised of one product line and two out-licensing arrangements, to the Other segment.

| | | For the fiscal year ended December 31, [removed: 2015] [added: 2016] | |

Based on the closing sale price on June 30, [removed: 2015] [added: 2016] 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: $5,849,454,087.][added: $8,215,859,816.]

The number of shares outstanding of the registrant’s Common Stock was [removed: 89,638,022] [added: 88,005,221] on February [removed: 5, 2016.][added: 6, 2017.]

Part III—Specifically identified portions of the Company’s definitive Proxy Statement to be filed in connection with the Company’s [removed: 2016] [added: 2017] annual meeting of stockholders (the [removed: “2016] [added: “2017] Annual Meeting”), to be held on May [removed: 4, 2016,] [added: 3, 2017,] are incorporated herein by reference.

Business [removed: 4][added: 6]

Risk Factors [removed: 17][added: 19]

Unresolved Staff Comments [removed: 26][added: 28]

Properties [removed: 27][added: 29]

Legal Proceedings [removed: 27][added: 29]

10-K 1 c716-20161231x10k.htm 10-K

| COMMISSION FILE NUMBER: 0-19271  | | | |

GLOSSARY OF TERMS AND SELECTED ABBREVIATIONS

| | |

| --- | --- |

| Term/ Abbreviation | Definition |

| | |

| 2015 Amended Agreement | Amended and Restated Multi-Currency Note Purchase and Private Shelf Agreement executed in June 2015 |

| 2021 Notes | $50 million of 3.32% Series A Senior Notes due July 21, 2021 |

| 2022 Notes | $75 million of 3.25% Series A Senior Notes due February 12, 2022 |

| 2023 Notes | $75 million of 3.94% Series A Senior Notes due December 11, 2023 |

| 2024 Notes | $75 million of 3.76% Series B Senior Notes due July 21, 2024 |

| 2025 Series B Notes | $75 million of 4.04% Series B Senior Notes due December 11, 2025 |

| 2025 Series C Notes | €88.9 million of 1.785% Series C Senior Notes due June 18, 2025 |

| 2026 Notes | $75 million of unsecured 3.72% Senior notes due September 4, 2026 |

| 2027 Notes | $75 million of 3.72% Series B Senior Notes due February 12, 2027 |

| Adjusted operating income | A non-GAAP financial measure that represents total Company operating income adjusted for the 2015 software impairment charge and the 2014 adjustment for the all-direct sales strategy transition impacts. Adjusted operating income should be considered in addition to, and not as a replacement for or as a superior measure to, operating income reported in accordance with U.S. GAAP. Management believes that reporting adjusted operating income provides useful information to investors by facilitating easier comparisons of our operating income performance with prior and future periods and to the performance of our peers. |

| AOAC RI | Association of Analytical Communities Research Institute |

| AOCI | Accumulated other comprehensive income or loss |

| APHIS | Animal and Plant Health Inspector Service |

| BSE | Bovine spongiform encephalopathy |

| CAG | Companion Animal Group, reporting segment that provides to veterinarians’ diagnostic capabilities and information management solutions that enhance the health and well-being of pets |

| cGMP | The FDA’s current Good Manufacturing Practice regulations |

| Credit Facility | Our $850 million five-year unsecured revolving credit facility under an amended and restated credit agreement that was executed in December 2015 |

| EMA | Extended maintenance agreements |

| EPA | U.S. Environmental Protection Agency |

| EPS | Earnings per share, if not specifically stated, EPS refers to earnings per share on a diluted basis |

| EU | European Union |

| FASB | Financial Accounting Standards Board |

| FDA | U.S. Food and Drug Administration |

| FDC Act | Food, Drug and Cosmetics Act |

| FeLV | Feline leukemia virus |

| FIV | Feline immunodeficiency virus, similar to the virus that leads to AIDS in humans |

| FTC | U.S. Federal Trade Commission |

| IVLS | IDEXX VetLab Station, connects and integrates the diagnostic information from all the IDEXX VetLab analyzers and thus provides reference laboratory information management system capability |

| Kits and consumables | Rapid assay kits and IDEXX VetLab consumables |

| LPD | Livestock, Poultry and Dairy, reporting segment that provides diagnostic products and services for livestock and poultry health and to ensure the quality and safety of milk |

| MEA | Multiple element arrangements, contracts with customers that include multiple deliverables |

| MetLife Agreement | Multi-Currency Note Purchase and Private Shelf Agreement |

| Moss | Moss Inc., a supplier of certain components used in our SNAP products and certain livestock and poultry testing kits |

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

| COMMISSION FILE NUMBER: 0-19271 | | | |

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities [removed: 28][added: 30]

Selected Financial Data [removed: 31][added: 33]

Management’s Discussion and Analysis of Financial Condition and Results of Operations [removed: 32][added: 34]

Quantitative and Qualitative Disclosure about Market Risk [removed: 67][added: 72]

Financial Statements and Supplementary Data [removed: 68][added: 73]

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure [removed: 68][added: 73]

Controls and Procedures [removed: 69][added: 74]

Directors, Executive Officers and Corporate Governance [removed: 70][added: 75]

Executive Compensation [removed: 70][added: 75]

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters [removed: 70][added: 75]

Certain Relationships and Related Transactions, and Director Independence [removed: 71][added: 76]

Principal Accountant Fees and Services [removed: 71][added: 76]

Exhibits, Financial Statement Schedules [removed: 71][added: 76]

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

This Annual Report on Form 10-K for the year ended December 31, [removed: 2015] [added: 2016,] 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.

Item 16.

Form 10-K Summary 76

| | | |

The terms “IDEXX,” “Company,” “registrant,” “we,” “us,” and “our” included in this Annual Report on Form 10-K mean IDEXX Laboratories, Inc. and all subsidiaries that are consolidated under Generally Accepted Accounting Principles.

We have included certain terms and abbreviations used throughout this Annual Report on Form 10-K in the "Glossary of Terms and Selected Abbreviations.”

BASIS OF PRESENTATION

IDEXX Laboratories, Inc. is a Delaware corporation.

Our principal executive offices are located at One IDEXX Drive, Westbrook, Maine 04092, our telephone number is 207-556-0300, and our internet address is www.idexx.com.

References herein to “we,” “us,” “our,” the “Company,” or “IDEXX” include IDEXX Laboratories, Inc. and our wholly-owned subsidiaries and majority-owned subsidiaries unless the context otherwise requires.

References to our website are inactive textual references only and the content of our website should not be deemed incorporated by reference into this Annual Report on Form 10-K for any purpose.

Our worldwide headquarters is located on a company-owned, 65-acre site in Westbrook, Maine where we occupy a [removed: 667,000] [added: 647,000] square foot building utilized for manufacturing, research and development, marketing, sales and general and administrative support functions.

| | · | | [removed: 502,000] [added: 537,000] total square feet of laboratory, office and warehousing space located throughout the U.S., Europe, Canada, Australia, New Zealand, Asia and South Africa, primarily used for our Reference Laboratory Diagnostic and Consulting Services line of business of CAG |

| | · | | 69,300 square feet of office space in Wisconsin related to our [removed: Customer Information Management] [added: Veterinary Software, Services and Diagnostic Imaging Systems] line of business of CAG |

| | · | | [removed: 67,000] [added: 65,000] square feet of office space in Maine for Corporate, Customer Service and Information Technology support services |

The following table shows the quarterly range of high and low sale prices per share (1) of our common stock as reported on the NASDAQ Global Select Market for the years [removed: 2014] [added: 2015] and [removed: 2015.][added: 2016.]

| March 31, 2015 | | [added: $] | 84.26 | | [added: $] | 72.38 |

(1) [added: 2015] Prices have been [removed: split] adjusted to reflect [removed: 2:1] [added: a two-for-one] stock split on June 15, [removed: 2015][added: 2015.]

As of February [removed: 5, 2016,] [added: 6, 2017,] there were [removed: 521] [added: 494] holders of record of our common stock.

During the three months ended December 31, [removed: 2015,] [added: 2016,] we repurchased shares of common stock as described below:

(1) As of December 31, [removed: 2015,] [added: 2016,] our Board of Directors had approved the repurchase of up to 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: 2015,] [added: 2016,] and no repurchase programs expired during the period.

Repurchases of [removed: 1,313,263] [added: 1,951,417] shares were made during the three months ended December 31, [removed: 2015] [added: 2016,] in transactions made pursuant to our repurchase program.

(2) During the three months ended December 31, [removed: 2015,] [added: 2016,] we received [removed: 3,611] [added: 3,702] 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: 2015,] [added: 2016,] we repurchased [removed: 5,658,660] [added: 3,070,644] shares of our common stock in transactions made pursuant to our repurchase program and received [removed: 69,667] [added: 59,860] 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 18 to the consolidated financial statements for the year ended December 31, [removed: 2015] [added: 2016,] included in this Annual Report on Form 10-K for further information.

We have never [added: declared or] paid any cash dividends on our common stock.

However, we have no intention to [added: declare or] pay a dividend at this time.

This graph compares our total stockholder returns, the [added: Total Return for the] Standard & Poor’s (“S&P”) [removed: MidCap 400] [added: 500] Index, the [added: Total Return for the] S&P [removed: MidCap 400] [added: 500] Health Care Index and the Total Return [removed: Index] for the NASDAQ Stock Market [added: Index] (U.S. Companies) prepared by the Center for Research in Security Prices (the “NASDAQ Index”).

This graph assumes the investment of $100 on December 31, [removed: 2010] [added: 2011,] in IDEXX’s common stock, the S&P [removed: MidCap 400] [added: 500] Index, the S&P [removed: MidCap 400] [added: 500] 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: 2010, 2011, 2012, 2013, 2014 and 2015.][added: 2011 to 2016.]

][added: 3](https://www.sec.gov/Archives/edgar/data/874716/000087471617000004/c716-20161231x10kg002.jpg)]

| | | [removed: 12/31/2010 | | |] 12/31/2011 | | | [removed: 12/30/2012] [added: 12/31/2012] | | | [removed: 12/31/2013] [added: 12/30/2013] | | | 12/31/2014 | | | 12/31/2015 | | [added: | 12/31/2016 | |]

| March 31, 2016 | | | 79.03 | | | 63.48 |

| June 30, 2016 | | | 92.87 | | | 76.55 |

| September 30, 2016 | | | 115.06 | | | 92.52 |

| December 31, 2016 | | | 121.77 | | | 102.45 |

| October 1, 2016 to October 31, 2016 | | 67,500 | | $ | 110.66 | | 67,500 | | 5,619,425 | |

| November 1, 2016 to November 30, 2016 | | 1,000,947 | | | 108.65 | | 1,000,947 | | 4,618,478 | |

| December 1, 2016 to December 31, 2016 | | 886,672 | | | 117.24 | | 882,970 | | 3,735,508 | |

| Total | | 1,955,119 | (2) | $ | 115.00 | | 1,951,417 | | 3,735,508 | |

| IDEXX Laboratories, Inc. | | $ | 100.00 | | $ | 120.58 | | $ | 138.23 | | $ | 192.66 | | $ | 189.50 | | $ | 304.76 |

| NASDAQ Index | | | 100.00 | | | 117.45 | | | 164.57 | | | 188.84 | | | 201.98 | | | 219.89 |

| S&P 500 Health Care Index | | | 100.00 | | | 117.89 | | | 166.76 | | | 209.02 | | | 223.42 | | | 217.41 |

| S&P 500 Index | | | 100.00 | | | 116.00 | | | 153.57 | | | 174.60 | | | 177.01 | | | 198.18 |

| 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 |

| 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 | |

| 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 |

The following table sets forth selected consolidated financial data [removed: of the Company] for each of the last five fiscal [removed: years of the Company.][added: years.]

The selected consolidated financial data presented below has been derived from [removed: the Company’s] [added: our] consolidated financial statements.

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 [removed: shares.][added: shares on June 15, 2015.]

All share and per share amounts presented [removed: below] [added: below, for periods prior to June 15, 2015,] retroactively reflect the effect of the stock split.

| | | | [added: 2016 | | |] 2015 | | | 2014 | | | 2013 | | | 2012 | | [removed: | 2011 | |]

| Revenue | | $ | [removed: 1,601,892] [added: 1,775,423] | | $ | [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] | |

| Cost of revenue | | | [added: 799,987 | | |] 711,622 | | | 669,691 | | | 620,940 | | | 594,190 | | [removed: | 572,183 | |]

| Gross profit | | | [added: 975,436 | | |] 890,270 | | | 816,116 | | | 756,118 | | | 699,148 | | [removed: | 646,506 | |]

| Sales and marketing | | | [added: 317,058 | | |] 299,955 | | | 283,708 | | | 243,492 | | | 216,962 | | [removed: | 204,850 | |]

| General and administrative | | | [added: 207,017 | | |] 182,510 | | | 173,890 | | | 157,861 | | | 137,609 | | [removed: | 129,389 | |]

| Research and development | | | [added: 101,122 | | |] 99,681 | | | 98,263 | | | 88,003 | | | 82,014 | | [removed: | 76,042 | |]

| Impairment charge | | | [removed: 8,212] [added: \-] | | | [removed: \-] [added: 8,212] | | | \- | | | \- | | | \- | |

| Income from operations | | | [added: 350,239 | | |] 299,912 | | | 260,255 | | | 266,762 | | | 262,563 | | [removed: | 236,225 | |]

| Interest expense, net | | | [added: (28,393) | | |] (26,771) | | | (13,700) | | | (3,501) | | | (1,946) | | [removed: | (1,803) | |]

| Income before provision for income taxes | | | [added: 321,846 | | |] 273,141 | | | 246,555 | | | 263,261 | | | 260,617 | | [removed: | 234,422 | |]

| Provision for income taxes | | | [added: 99,792 | | |] 81,006 | | | 64,604 | | | 75,467 | | | 82,330 | | [removed: | 72,668 | |]

| Net income | | | [added: 222,054 | | |] 192,135 | | | 181,951 | | | 187,794 | | | 178,287 | | [removed: | 161,754 | |]

| Less: Net income (loss) attributable to noncontrolling interest | | | [added: 9 | | |] 57 | | | 45 | | | (6) | | | 20 | | [removed: | (32) | |]

| Net income attributable to IDEXX Laboratories, Inc. stockholders | | $ | [removed: 192,078] [added: 222,045] | | $ | [removed: 181,906] [added: 192,078] | | $ | [removed: 187,800] [added: 181,906] | | $ | [removed: 178,267] [added: 187,800] | | $ | [removed: 161,786] [added: 178,267] | |

| Basic | | $ | [removed: 2.07] [added: 2.47] | | $ | [removed: 1.82] [added: 2.07] | | $ | [removed: 1.77] [added: 1.82] | | $ | [removed: 1.62] [added: 1.77] | | $ | [removed: 1.42] [added: 1.62] | |

| Diluted | | [added: $] | [added: 2.44 | | $ |] 2.05 | | [added: $] | 1.79 | | [added: $] | 1.74 | | [added: $] | 1.59 | | [removed: | 1.39 | |]

| Basic | | | [added: 89,732 | | |] 92,601 | | | 100,094 | | | 106,318 | | | 109,969 | | [removed: | 113,579 | |]

| Diluted | | | [added: 90,884 | | |] 93,649 | | | 101,503 | | | 107,970 | | | 112,311 | | [removed: | 116,429 | |]

| Cash and cash equivalents | | $ | [removed: 128,994] [added: 154,901] | | $ | [removed: 322,536] [added: 128,994] | | $ | [removed: 279,058] [added: 322,536] | | $ | [removed: 223,986] [added: 279,058] | | $ | [removed: 183,895] [added: 223,986] | |

| Marketable securities(1) | | | [removed: 213,591] [added: 236,949] | | | [removed: \-] [added: 213,591] | | | \- | | | \- | | | \- | |

| Cash and cash equivalents and marketable securities | | [added: $] | [added: 391,850 | | $ |] 342,585 | | [added: $] | 322,536 | | [added: $] | 279,058 | | [added: $] | 223,986 | | [removed: | 183,895 | |]

| Working capital | | [added: $] | [added: (88,984) | | $ |] (35,127) | | [added: $] | (61,508) | | [added: $] | 174,353 | | [added: $] | 163,204 | | [removed: | 87,348 | |]

| Total assets | | [added: $] | [added: 1,530,704 | | $ |] 1,474,993 | | [added: $] | 1,384,211 | | [added: $] | 1,230,516 | | [added: $] | 1,103,602 | | [removed: | 1,030,814 | |]

| Total long-term debt(2) | | [added: $] | [added: 593,110 | | $ |] 597,085 | | [added: $] | 350,000 | | [added: $] | 150,359 | | [added: $] | 1,394 | | [removed: | 2,501 | |]

| Total stockholders' equity (deficit) | | [added: $] | [added: (108,213) | | $ |] (83,995) | | [added: $] | 117,589 | | [added: $] | 518,214 | | [added: $] | 636,257 | | [removed: | 539,593 | |]

(1) During the [removed: year] [added: years] ended December 31, [removed: 2015,] [added: 2015 and 2016,] 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.

(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 [removed: 1.785%] [added: 1.785 percent] to [removed: 4.04%.][added: 4.04 percent.]

Based on the evaluation of our disclosure controls and procedures at December 31, [removed: 2015,] [added: 2016,] 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: 2015,] [added: 2016,] our internal control over financial reporting was effective.

The effectiveness of the Company's internal control over financial reporting at December 31, [removed: 2015] [added: 2016,] 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: 2015] [added: 2016,] 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 “Corporate Governance - Proposal One - Election of Directors,” “Executive Officers,” “Stock Ownership Information - Section 16(a) Beneficial Ownership Reporting Compliance,” “Corporate Governance – Corporate Governance Guidelines and Code of Ethics” and “Corporate Governance –Board Committees” in the Company’s definitive Proxy Statement with respect to its [removed: 2016] [added: 2017] 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 –Board Committees – Compensation Committee – Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” in the Company’s definitive Proxy Statement with respect to its [removed: 2016] [added: 2017] 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: 2016] [added: 2017] 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 “Stock Ownership Information” in the Company’s definitive Proxy Statement with respect to its [removed: 2016] [added: 2017] 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: 2016] [added: 2017] 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 “Audit Committee Matters - Independent Auditors’ Fees” in the Company’s definitive Proxy Statement with respect to its [removed: 2016] [added: 2017] 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.

| | | |

| b | | |

FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND

CONSOLIDATED FINANCIAL STATEMENT SCHEDULE

| | |

| --- | --- |

| | Page No. |

| | |

| Report of Independent Registered Public Accounting Firm | F-2 |

| | |

| Consolidated Balance Sheets as of December 31, 2015 and 2014 | F-3 |

| | |

| Consolidated Statements of Income for the Years Ended December 31, 2015, 2014 and 2013 | F-4 |

| | |

| Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, 2014 and 2013 | F-5 |

| | |

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

| | |

| Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 2013 | F-7 |

| | |

| Notes to Consolidated Financial Statements | F-8 |

| | |

| Schedule II | |

| Valuation and Qualifying Accounts | F-46 |

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of IDEXX Laboratories, Inc.

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, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America.

In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

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

The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Report of Management on Internal Control Over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

| | | |

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

| None. | | |

FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND

CONSOLIDATED FINANCIAL STATEMENT SCHEDULE

| | |

| --- | --- |

| | Page No. |

| | |

| Report of Independent Registered Public Accounting Firm | F-2 |

| | |

| Consolidated Balance Sheets as of December 31, 2016 and 2015 | F-3 |

| | |

| Consolidated Statements of Income for the Years Ended December 31, 2016, 2015 and 2014 | F-4 |

| | |

| Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2016, 2015 and 2014 | F-5 |

| | |

| Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2016, 2015 and 2014 | F-6 |

| | |

| Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 2014 | F-7 |

| | |

| Notes to Consolidated Financial Statements | F-8 |

| | |

| Schedule II | |

| Valuation and Qualifying Accounts | F-47 |

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of IDEXX Laboratories, Inc.

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 as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.

In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Report of Management on Internal Control Over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.