IDEXX Laboratories (IDXX) 10-K risk factor changes: FY2017 vs FY2016

[removed: Actual] [added: Our future operating results involve a number of risks and uncertainties and actual] events or results may differ materially from those discussed in this [removed: report.][added: Annual Report on Form 10-K.]

Factors that could cause or contribute to such differences include, but are not limited to, the factors discussed below, as well as those factors discussed elsewhere [removed: in this report.][added: herein.]

Our [removed: Business Lines are Highly Competitive and Our Failure] [added: failure] to [removed: Successfully Execute Certain Strategies Could Have] [added: successfully execute certain strategies within this competitive environment could have] a [removed: Material Negative Impact] [added: material negative impact] on [removed: Our Growth] [added: our future growth] and [removed: Profitability][added: profitability]

The companion animal healthcare industry is highly [removed: competitive] [added: competitive,] and we anticipate increasing levels of competition from both existing competitors and new market [removed: entrants.][added: entrants given our performance and the market’s strong growth and returns.]

| | · | | 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 recurring sales of consumable products, [removed: services] [added: services,] and accessories; |

| | · | | Developing and introducing new proprietary diagnostic tests and services [added: for both our reference laboratories and in-clinic applications] that provide valuable medical information to our customers and effectively differentiate our products and services from those of our competitors; |

| | · | | Providing our veterinary customers with the medical and business tools, [removed: information] [added: information,] and resources that enable them to grow their practices [added: and the utilization of our diagnostic products and services,] through increased pet visits and enhanced practice of real-time care; |

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

| | · | | Attracting, [removed: developing] [added: developing,] and retaining key leadership and talent necessary to support all elements of our [removed: strategy;] [added: strategy, which is challenging due to the increasingly competitive and tight labor markets in which we operate;] |

| | · | | Identifying, [removed: completing] [added: completing,] and integrating acquisitions that enhance our existing businesses or create new business or geographic areas for us; [removed: and] |

| | · | | Developing and implementing new technology and licensing [removed: strategies.] [added: strategies; and] |

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

[removed: Problems] [added: Any problems] with [added: our] suppliers [added: and associated disruptions to our supply chain] could materially negatively impact our ability to supply the market, substantially decrease sales, lead to higher [removed: costs] [added: costs,] or damage our reputation with our [removed: customers.][added: customers, and any longer-term disruptions could potentially result in the permanent loss of our customers, which could reduce our recurring revenues and long-term profitability.]

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

[removed: To] [added: We seek to] mitigate risks associated with sole and single source suppliers, [removed: we seek] when [removed: possible to enter] [added: possible, by entering] into long-term contracts that provide for an uninterrupted supply of products at predictable prices.

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

There can be no assurance that suppliers with which we do not have [added: long-term] contracts will continue to supply our requirements for products, that suppliers with which we do have contracts will always fulfill their obligations under [removed: these] [added: those] contracts, or that any of our suppliers will not experience disruptions in their ability to supply our requirements for products.

If we are unable to obtain adequate quantities of products in the future from sole and single source suppliers, [added: or if such sole and single source suppliers are unable to obtain the components or other materials required to manufacture the products,] we may be unable to supply the market, which could have a material adverse effect on our results of [removed: operations.][added: operations, and any longer-term disruptions could potentially result in the permanent loss of customers, which could reduce our recurring revenues and long-term profitability.]

Many of our rapid assay, livestock and poultry diagnostic, water and dairy products are biologic products, which are products that include materials from living organisms, such as antibodies, [removed: cells] [added: cells,] and sera.

Manufacturing biologic products is highly complex due to the inherent variability of biological input materials and [removed: to] the difficulty of controlling the interactions of these materials with other components of the products, [removed: samples] [added: samples,] and the environment.

There can be no assurance that we will be able to maintain adequate sources of biological materials or that we will be able to consistently manufacture biologic products that satisfy applicable product release [removed: criteria.][added: criteria and regulatory requirements.]

Further, products that meet release criteria at the time of manufacture may fall out of specification while in customer inventory, which could require us to incur expenses associated with recalling products and providing customers with new products, [removed: and] [added: either of which] could damage customer relations.

Our inability to produce or obtain necessary biological materials or to successfully manufacture biologic products that incorporate such materials could result in our inability to supply the market with these [removed: products and] [added: products, which would] have an adverse effect on our results of operations.

Increased [removed: Competition] [added: competition from] and [removed: Technological Advances] [added: technological advances] by [removed: Our Competitors Could Negatively Affect Our Operating Results][added: our competitors could negatively affect our operating results]

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

Our competitors in the veterinary diagnostic market [added: in the United States and abroad] include companies that develop, [removed: manufacture] [added: manufacture,] and sell veterinary diagnostic tests and commercial veterinary reference laboratories, [added: certain large and well-funded animal health pharmaceutical companies,] as well as corporate hospital chains that operate reference laboratories that serve both their hospitals and unaffiliated hospitals, such as [added: the vertically integrated corporate hospital chain formed when Mars, Incorporated acquired] VCA Inc. (formerly named VCA Antech, [removed: Inc.).][added: Inc.) in 2017, which resulted in the combination of two large U.S. veterinary hospital chains.]

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 [removed: compete.][added: compete successfully.]

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

New or existing competitors may introduce [removed: new] [added: new, innovative,] and competitive products and services, which could be [removed: superior] [added: superior, or be perceived by our customers] to [added: be superior, to] our products and [added: services or lead to the obsolescence of one or more of our products or] services.

[removed: Some] [added: Certain] of our competitors and potential competitors, including large diagnostic and pharmaceutical companies, also have substantially greater financial [added: and managerial] resources than us, [removed: and] [added: as well as] greater experience in manufacturing, marketing, research and [removed: development] [added: development,] and obtaining regulatory approvals than we do.

Various [removed: Government Regulations Could Limit] [added: U.S. and foreign government regulations could limit] or [removed: Delay Our Ability] [added: delay our ability] to [removed: Market] [added: market] and [removed: Sell Our Products] [added: sell our products] or [removed: Otherwise Negatively Impact Our Business][added: otherwise negatively impact our business]

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

Our diagnostic tests for animal health 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 [added: as well as the manufacture and sale of our OPTI line of human point-of-care electrolytes and blood gas analyzers] require approval by the FDA [removed: prior to sale] [added: before they may be sold commercially] in the U.S. Our water testing products must be approved by the [removed: EPA before they can be used by customers in the U.S.] [added: EPA,] as a part of a water quality monitoring program required by the [removed: EPA.][added: EPA, before they can be used by customers in the U.S. Delays in obtaining regulatory approvals for new products or product upgrades could have a negative impact on our growth and profitability.]

The [removed: manufacture] [added: manufacture, import,] 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.

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, [removed: and] the European Regulation for Registration, Evaluation, Authorization [added: and Restriction of Chemical Substances, or REACH, which regulates and restricts the use of certain chemicals in the European Union, and the Restriction of Hazardous Substances which regulates and restricts certain hazardous substances in electrical and electronic equipment.]

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 [removed: costs] [added: costs,] or have other similar effects.

Any of these could adversely affect our business, financial [removed: condition] [added: condition,] or results of operations.

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

These [removed: legal] [added: legal, regulatory,] and [removed: regulatory] [added: political] requirements [added: and environments] differ among jurisdictions around the world and are rapidly changing and increasingly complex.

The costs associated with compliance with these legal and regulatory requirements [added: and adjusting to changing legal and political environments] are significant and likely to increase in the future.

You should consider carefully the risks and uncertainties described below in addition to the other information included or incorporated by reference in this Annual Report on Form 10-K in evaluating our company and our business.

Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and stock price.

Because our business lines are highly attractive, they are also highly competitive.

| | · | | Maintaining premium pricing, including by effectively implementing price increases, for our differentiated products and services through, among other things, effective communication and promotion of the value of our products and services in an environment where many of our competitors promote, market and sell lesser offerings at prices lower than ours; |

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

| | · | | Continuing to effectively manage our growth and expansion on a global scale through, among other things, designing and implementing cost-effective improvements to our processes, procedures, and infrastructure. |

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

Disruption to our supply chain could occur as a result of any number of events, including, but not limited to, increases in wages that drive up prices; the imposition of regulations, quotas or embargoes on key components; labor stoppages; transportation failures affecting the supply and shipment of materials and finished goods; the unavailability of raw materials; severe weather conditions; natural disasters; civil unrest, geopolitical developments, war or terrorism; computer viruses, physical or electronic breaches, or other information system disruptions or security breaches; and disruptions in utility and other services.

For more information regarding the risks presented by natural and other disasters and system disruptions and security breaches from cyberattacks, see “Natural and other disasters, information technology system failures and network disruptions and cybersecurity breaches and attacks could adversely affect our business” below.

Even where products and materials are available from alternate suppliers, if any becomes unavailable to us for any reason we likely would incur added costs and delays in identifying or qualifying replacement materials and there can be no assurance that replacements would be available to us on acceptable terms, or at all.

In certain cases, we may be required to obtain regulatory approval to use alternative suppliers, and this process of approval could delay production of our products or development of product candidates indefinitely.

As a global business, we sell products and services in more than 175 countries and operate in an increasingly complex legal and regulatory environment.

In addition, some foreign governments require us to register our products, and these product registration requirements, which vary among the applicable jurisdictions and change from time to time, are often complex and require us to engage in lengthy and costly processes.

There can be no assurance that we will be able to obtain or maintain any product registration required by one or more foreign governments.

Any inability to obtain or maintain a required product registration in a jurisdiction could adversely affect our ability to market and sell the applicable product in that jurisdiction, which could have a negative effect on our business, financial condition and results of operations.

Any of these could negatively impact our business.

While an important aspect of our strategy is to continue, on a cost-effective and timely basis, to enhance our existing products and services and to develop and introduce new and innovative products and services, there can be no assurance that we will be able to successfully develop such products and services or that those products or services will be superior to our competitors’ products or service or otherwise achieve market acceptance.

assurance that hospitals that otherwise become affiliated with these companies would not shift all or a portion of their testing to such reference laboratories.

In addition, changes and trends in local dairy, poultry, or other food markets around the world could negatively affect the related production markets resulting in a decline in demand for our testing products.

Our business and results of operations could be negatively affected by certain factors beyond our control, such as natural disasters (such as hurricanes, earthquakes, fires, and floods); civil unrest; negative geopolitical conditions and developments; war, terrorism or other man-made disasters; and information technology system failures, network disruptions and cybersecurity breaches and attacks.

Any of these events could result in, among other things, damage to or the temporary closure of one or more of our manufacturing or distribution facilities or reference laboratories (damage to one of our facilities or the manufacturing equipment we use could be costly and may require substantial lead-time to repair or replace); damage to or closure of one or more facilities of our third-party business partners or suppliers on which we rely; a temporary lack of an adequate work force in one or more markets; an interruption in power supply; a temporary or long-term disruption in our supply chain (including a disruption to our ability to obtain critical components for the manufacture of our products); a temporary disruption

in our ability to deliver (or delays in the delivery of) our products or services; and short- or long-term damage to our customers’ businesses (which would adversely impact customer demand for our products and services).

For more information regarding the risks presented by disruption to our suppliers’ operations and supply chain, see “Our dependence on suppliers could limit our ability to sell certain products or negatively affect our operating results” above.

As information systems and the use of software and related applications by us, our business partners, suppliers, and customers become more cloud-based and connected to the “Internet of Things,” there has been an increase in global cybersecurity vulnerabilities and threats, including more sophisticated and targeted cyber-related attacks that pose a risk to the security of our information systems and networks and the confidentiality, availability and integrity of data and information.

The privacy and security of personally identifiable information stored, maintained, received, or transmitted electronically is a major issue in the United States and abroad.

We are also subject to laws and regulations in non-U.S. countries covering data privacy and the protection of personal information.

EU member states and other jurisdictions have adopted, or are considering adopting, data protection laws and regulations, which impose significant compliance obligations.

Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure, sharing and security of personal information that identifies or may be used to identify an individual, such as names, contact information, and sensitive personal data.

These laws and regulations are subject to frequent revisions and differing interpretations, and have generally become more stringent over time.

The GDPR is expected to take effect in 2018.

In addition, concerns about our practices with regard to the collection, use, disclosure, or security of personally identifiable information or other privacy-related matters, even if unfounded and even if we are in compliance with applicable laws, could damage our reputation and harm our business.

Availability of funds also affects demand by

Some of our product sales in international markets occur through distributors.

As a result, we are dependent on these distributors to promote and create demand for our products.

Additionally, tax rules governing cross-border activities are continually subject to modification as a result of both coordinated actions by governments and unilateral measures designed by individual countries, both intended to tackle concerns over base erosion and profit shifting (BEPS) and perceived international tax avoidance techniques.

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted in the U.S. on December 22, 2017 and includes significant changes to the U.S. corporate tax system.

Effective January 1, 2018, the Tax Act reduced the U.S. federal corporate tax rate from 35 percent to 21 percent, and transitioned from a worldwide tax system to a territorial tax system.

The Tax Act introduced new provisions including the Global Intangible Low-Taxed Income (“GILTI”), Foreign Derived Intangible Income (“FDII”), Base Erosion Anti-Abuse Tax (“BEAT’), expanded bonus depreciation and changed deductions for executive compensation and interest expense.

We continue to assess the impact of the new provisions which become effective beginning in 2018.

See Note 12 – Income Taxes in the accompanying Notes to the consolidated financial statements for more information regarding the impact of the Tax Act.

Our future operating results involve a number of risks and uncertainties.

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.

With our transition to an all-direct sales strategy for our kits and consumables in the U.S. effective January 1, 2015, we did not renew our distribution agreements with our former key U.S. distribution partners after their expiration at the end of 2014, including exclusive distribution agreements with some of the largest U.S. distributors of companion animal veterinary products.

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

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.

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

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

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

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

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

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

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.

currencies may be limited.

For the year ended December 31, 2016, approximately 39 percent of our revenue was attributable to sales of products and services to customers outside the U.S., compared to 39 percent for the year ended December 31, 2015, and 43 percent for the year ended December 31, 2014.

In addition, foreign government regulations may restrict our ability to repatriate funds currently held in foreign jurisdictions, and any repatriation of such funds to the U.S. may result in higher effective tax rates for us.

We sell many of our products outside of the U.S. through distributors.

The operation of all of our 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.

access to these information systems.

We process credit card payments electronically over secure networks.

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.

Due to economic and political conditions, the various tax rates applied to the earnings of our activities are subject to significant change.

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.

See Note 15 to the consolidated financial statements for the year ended December 31, [removed: 2016,] [added: 2017,] 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.

Certain costs [added: are] not allocated to our operating segments and are instead reported under the caption “Unallocated Amounts”.

| | | [added: |] For the Year Ended [removed: | | |] [added: December 31,] | | | | [removed: Variance Capitalization and] | | | | [removed: For the Year Ended] | [added: Change] | | | [removed: Adjusted] | | |

[removed: |] Unallocated Amounts [removed: | | | 6,058 | | N/A | | | | | (4,312) | | | 1,746 | | | | N/A | | |]

[removed: |] Total Company [removed: | | $ | 890,270 | | 55.6% | | | | $ | \- | | $ | 890,270 | | | | 55.6% | | |]

[removed: |] Unallocated Amounts [removed: | | | (5,760) | | N/A | | | | | 7,633 | | | 1,873 | | | | N/A | | |]

[removed: |] Total Company [removed: | | $ | 816,116 | | 54.9% | | | | $ | \- | | $ | 816,116 | | | | 54.9% | | |]

| | | [added: |] For the Year Ended [removed: | | | | |] [added: December 31,] | | | [removed: Variance Capitalization and] | | | | | [removed: For the Year Ended] | [added: Change] | | | [removed: Adjusted] | | |

By doing so, we are able to build a mutually successful [removed: partnership] [added: relationship] with our veterinarian customers based on healthy pets, loyal customers and expanding practice revenues.

As the market for the product matures, an increasing percentage of placements are made in transactions, sometimes referred to as “reagent rentals,” in which instruments are placed at customer sites at little or no cost in exchange for a [removed: long-term] [added: multi-year] customer commitment to purchase instrument consumables.

As of December 31, [removed: 2016,] [added: 2017,] these three chemistry analyzers provided for a combined active installed base of approximately [removed: 43,000] [added: 47,000] units globally, as compared to [removed: 40,000] [added: 43,000] units globally in [removed: 2015.][added: 2016.]

Approximately [removed: 50] [added: 54] percent of [removed: 2016] [added: 2017] 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.

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

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

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

As of December 31, [removed: 2016,] [added: 2017,] these [removed: four] hematology analyzers provided for a combined active installed base of approximately [removed: 31,000] [added: 33,400] units, as compared to [removed: 29,000] [added: 31,000] units in [removed: 2015] [added: 2016] and [removed: 27,000] [added: 29,000] units in [removed: 2014.][added: 2015.]

A substantial portion of ProCyte Dx analyzer placements continue to be made at veterinary clinics that elect to upgrade from their LaserCyte [added: Dx] analyzer to a ProCyte Dx analyzer.

In [removed: 2016,] [added: 2017,] approximately [removed: 50] [added: 60] percent of ProCyte placements were made at competitive accounts.

We also continue to place a substantial number of LaserCyte Dx [removed: and LaserCyte] instruments, both new and recertified, as trade-ups from the VetAutoread analyzer and at new and 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 [added: Dx] and VetAutoread analyzers and a decrease in the associated recurring revenue stream.

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

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

Beginning in January of 2017, with our ProRead software, the SNAP Pro Mobile Device [removed: will interpret] [added: interprets] results.

For the year ended December 31, [removed: 2016,] [added: 2017,] recurring diagnostic revenue, which is both highly durable and profitable, [removed: accounts] [added: accounted] for approximately [removed: 72] [added: 74] percent of our consolidated revenue.

[removed: Additionally, we] have found that veterinarian adoption of VetConnect PLUS drives utilization by spurring testing across all IDEXX diagnostic modalities.

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

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

Our up-front customer loyalty programs associated with customer acquisitions [removed: provides] [added: and retention provide] incentives to customers in the form of cash payments or IDEXX Points upon entering multi-year agreements to purchase annual minimum amounts of products or services, including reference laboratory services.

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

Cornerstone, DVMAX, Animana and [added: IDEXX] Neo practice management systems provide superior integrated information solutions, backed by exceptional customer support and education.

We market Cornerstone, DVMAX and [added: IDEXX] Neo [added: practice management systems] to customers primarily in North America and Australia.

We market [added: our] Animana [added: offering] to customers primarily throughout Europe.

Animana and [added: IDEXX] Neo [added: practice management systems] are subscription-based SaaS [removed: practice management] offerings designed to provide flexible pricing and a durable, recurring revenue stream, while utilizing cloud technology instead of a client server platform.

While we continue to develop, [removed: sell] [added: sell,] and support our licensed-based Cornerstone and DVMAX software, we are growing our installed base of subscription-based practice management offerings for new customers of IDEXX practice management systems.

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

Placements of imaging systems are important to the growth of revenue streams that are recurring in nature, including extended maintenance agreements and IDEXX Web PACS, which is our cloud-based SaaS offering for viewing, accessing, [removed: storing] [added: storing,] and sharing multi-modality diagnostic images.

IDEXX Web PACS is integrated with Cornerstone, [added: IDEXX] Neo and IDEXX VetConnect PLUS to provide centralized access to diagnostic imaging results alongside patient diagnostic results from any internet connected device.

Our strategy is to offer proprietary tests with superior performance characteristics for use in government programs to control or eradicate disease and disease outbreaks and in livestock and poultry producers’ [removed: disease] [added: disease, reproductive,] and [removed: reproductive] [added: herd health and production] management programs.

We leverage this facility’s know-how, intellectual [removed: property] [added: property,] and manufacturing capability to continue to expand the menu and instrument capability of the VetStat and Catalyst platforms for veterinary applications while reducing our cost of consumables by leveraging experience and economies of scale.

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with [removed: accounting principles generally accepted in the United States of America (“U.S. GAAP”).][added: U.S. GAAP.]

Companion Animal Group

During 2017, we continued to launch Sedivue Dx internationally.

Sedivue Dx is the first veterinary in-clinic analyzer to provide urine sediment analysis.

Additionally, we

We also offer rVetLink, a comprehensive referral management solution for specialty care hospitals that streamlines the referral process between primary care and specialty care veterinarians.

rVetLink’s cloud technology integrates with major specialty hospital management systems, including Cornerstone Software and DVMAX Software.

Water

Livestock, Poultry and Dairy

Our Rapid Visual Pregnancy Test for cattle can detect pregnancy 28 days after breeding.

This test provides a quick and accurate identifier using whole blood samples.

We predominately offer up-front loyalty incentives in response to competitive offerings.

| | | | | | | | | |

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

| | | | | | | | | |

| | | | | | |

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

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

| | | 2017 | | | 2016 |

| | | | | | |

New Revenue Standard.

We will adopt ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (the “New Revenue Standard”) in the first quarter of 2018 on a modified-retrospective basis.

ASU 2014-09 will replace most of the existing revenue recognition guidance within U.S. GAAP.

While ASU 2014-09 will not impact the overall economics of our products and services sold under customer marketing and incentive programs, we expect the New Revenue Standard will require us to accelerate revenue recognition related to certain of our customer programs and to delay revenue recognition for certain other customer programs.

We expect to accelerate revenue recognition on instruments and systems placed through programs where customers are committed to purchase future goods and services, including our up-front customer loyalty and volume commitment programs.

This change is the result of the New Revenue Standard no longer limiting revenue recognition to the amount of customer consideration received upon placement.

Conversely, we expect to defer an increased portion of revenue related to instrument placements under programs that provide rebate incentives on future purchases, including certain of our IDEXX instrument marketing programs.

Under the New Revenue Standard, future purchases that are optional and not subject to a customer commitment, are not considered part of the customer arrangement, resulting in the instrument absorbing a higher relative allocation of rebate incentives.

We expect this change to result in lower instrument revenue upon placement and higher recurring revenues over the term of the rebate incentive program.

We believe these will be the most significant impacts related to our adoption of the New Revenue Standard and we estimate a net increase in revenue of approximately $10 million for the year ending December 31, 2018, in connection with such adoption.

The estimated net increase in revenue is the result of anticipated earlier recognition on 2018 activity, which is expected to be partially offset by the net impact of the modified-retrospective cumulative adjustments on 2018.

These impacts are expected to increase CAG Diagnostics recurring revenues related to the modified-retrospective cumulative adjustments, which is expected to be partially offset by a net decrease in both CAG Diagnostics capital instrument revenue and Veterinary software, services and imaging systems revenue.

This assessment is based on the anticipated volume, mix and

design of our customer marketing and incentive programs, which may change in response to future customer and competitive demands.

Furthermore, the New Revenue Standard requires the deferral of incremental costs to obtain a customer contract over the term of the customer arrangement, such as sales commissions.

Based on the current design of our sales commission plans, the impact of implementing this element of the New Revenue Standard is not expected to be material to our results for the year ending December 31, 2018.

We had no impairments of our intangible assets during the year ended December 31, 2017.

Non-cash intangible asset impairments of $2.2 million were recognized during the six months ended June 30, 2016.

Effective January 1, 2017, we adopted the FASB Accounting Standard Update (“ASU”) 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting which simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, recognition of stock compensation award forfeitures, classification of awards as either equity or liabilities, the calculation of diluted shares outstanding and classification on the statement of cash flows.

The tax benefits related to share-based payments reduced income tax expense by approximately $28 million for the year ended December 31, 2017, primarily through a reduction in our effective income tax rate.

We do not estimate that the level of share-based payment activity in 2017 will continue in future periods.

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.

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 and subsequent recognition of variances between standard and actual manufacturing costs, which adjusts the timing of cost recognition from when the variance is created to the period in which the related inventory is sold.

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 segment gross profit and income (loss) from operations within this Annual Report on Form 10-K for the years ended December 31, 2015 and 2014, has been retrospectively revised to reflect the changes to our segment performance metrics described above.

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 | | | | | | | | | | |

| 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% | | |

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

| 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% | | |

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

| 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% | | |

| Operating Income (Loss) | | December 31, 2014 | | | | Percent of | | | | Subsequent Recognition | | | | | December 31, 2014 | | | | Percent of | | |

| CAG | | $ | | 203,536 | | 16.6% | | | | $ | | (3,002) | | $ | 200,534 | | | | 16.4% | | |

| Water | | | | 39,262 | | 41.4% | | | | | | (348) | | | 38,914 | | | | 41.1% | | |

| LPD | | | | 33,788 | | 23.9% | | | | | | (4,461) | | | 29,327 | | | | 20.8% | | |

| Other | | | | 2,479 | | 9.2% | | | | | | 178 | | | 2,657 | | | | 9.9% | | |

For the year ended December 31, [removed: 2016,] [added: 2017,] approximately 21 percent of our consolidated revenue was derived from products manufactured or sourced in U.S. dollars and sold internationally in local currencies, as compared to [removed: 20] [added: 21] percent for the year ended December 31, [removed: 2015,] [added: 2016,] and [removed: 22] [added: 20] percent for the year ended December 31, [removed: 2014.][added: 2015.]

Based on projected revenues and expenses for [removed: 2017,] [added: 2018,] excluding the impact of intercompany and trade balances denominated in currencies other than the functional subsidiary currencies, a 1 percent strengthening of the U.S. dollar would reduce revenue by approximately [removed: $7] [added: $8] million and operating income by approximately [removed: $3] [added: $4] million.

Additionally, our foreign currency hedge contracts in place as of December 31, [removed: 2016] [added: 2017,] would provide incremental offsetting gains of approximately [removed: $1] [added: $2] million.

At our current foreign exchange rate assumptions, we anticipate that the effect of a [removed: stronger] [added: weaker] U.S. [removed: Dollar] [added: dollar] will have [removed: an adverse] [added: a favorable] effect on our operating results by [removed: decreasing] [added: increasing] our revenues, operating [removed: profit] [added: profit,] and diluted earnings per share in the year ending December 31, [removed: 2017,] [added: 2018,] by approximately [removed: $26] [added: $46] million, [removed: $8] [added: $14] million, and [removed: $0.06] [added: $0.12] per share, respectively.

This [removed: unfavorable] [added: favorable] impact includes foreign currency hedging activity, which is expected to [removed: increase] [added: decrease] total company operating profit by approximately [removed: $3] [added: $7] million and diluted earnings per share by [removed: $0.03] [added: $0.06] in the year ending December 31, [removed: 2017.][added: 2018.]

The above estimate assumes that the value of the U.S. dollar relative to other currencies will reflect the euro at [removed: $1.06,] [added: $1.22,] the British pound at [removed: $1.23,] [added: $1.40,] the Canadian dollar at [removed: $0.75,] [added: $0.79, and] the Australian dollar at [removed: $0.75] [added: $0.78;] and the Japanese yen at [removed: ¥117] [added: ¥111, the Chinese renminbi at RMB 6.45, and the Brazilian real at R$3.21] to the U.S. dollar for the full year of [removed: 2017.][added: 2018.]

The following table [removed: is] [added: presents] the foreign currency exchange impacts on our revenues, operating [removed: profit] [added: profit,] and diluted earnings per share for the years December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014,] [added: 2015,] as compared to the respective prior periods:

| | | For the Years Ended December 31, | | | | | | | | [removed: |]

| (dollars in thousands) | | [removed: 2016 |] [added: 2017] | | [removed: 2015] | [added: 2016] | | [removed: 2014] | [added: 2015] | |

| Revenue impact | | $ | [removed: (14,105)] [added: 6,615] | | $ | [removed: (89,692)] [added: (14,105)] | | $ | [removed: (10,978) |] [added: (89,692)] |

| Operating profit impact, excluding hedge activity | | $ | [removed: (6,921)] [added: 2,542] | | $ | [removed: (38,286)] [added: (6,921)] | | $ | [removed: (7,544) |] [added: (38,286)] |

| Hedge gains - prior year | | | [removed: (20,879) |] [added: (3,620)] | | [removed: (3,821)] | [added: (20,879)] | | [removed: (3,469)] | [added: (3,821)] |

| Hedge gains - current year | | | [removed: 3,620 |] [added: 27] | | [removed: 20,879] | [added: 3,620] | | [removed: 3,821] | [added: 20,879] |

| Hedging activity impact | | | [removed: (17,259) |] [added: (3,593)] | | [removed: 17,058] | [added: (17,259)] | | [removed: 352] | [added: 17,058] |

| Operating profit impact, including hedge activity | | $ | [removed: (24,180)] [added: (1,051)] | | $ | [removed: (21,228)] [added: (24,180)] | | $ | [removed: (7,192) |] [added: (21,228)] |

| Diluted earnings per share impact, including hedge activity | | $ | [removed: (0.20)] [added: (0.01)] | | $ | [removed: (0.16)] [added: (0.20)] | | $ | [removed: (0.05) |] [added: (0.16)] |

[added: 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.

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: 2016.][added: 2017.]

As a result, no significant ineffectiveness has resulted or been recorded through the statements of operations for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014.][added: 2015.]

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

The notional amount of foreign currency exchange contracts to hedge forecasted intercompany purchases and sales totaled [removed: $175.9] [added: $176.5] million at December 31, [removed: 2016,] [added: 2017,] and [removed: $176.1] [added: $175.9] million at December 31, [removed: 2015.][added: 2016.]

At December 31, [removed: 2016,] [added: 2017,] we had [removed: $5.4] [added: $5.2] million of net unrealized [removed: gains] [added: losses] on foreign currency exchange contracts recorded in accumulated other comprehensive income, net of related tax expense.

We have a [removed: five-year unsecured revolving credit facility in the principal amount of $850 million] [added: Credit Facility] with a syndicate of multinational banks, which matures on December 4, [removed: 2020 (“Credit Facility”)] [added: 2020,] and requires no scheduled prepayments before that date.

Borrowings outstanding under the Credit Facility at December 31, [removed: 2016,] [added: 2017,] were [removed: $611.0] [added: $655] million at a weighted-average effective interest rate of [removed: 1.95] [added: 2.81] percent.

Based on amounts outstanding under our Credit Facility as of December 31, [removed: 2016,] [added: 2017,] an increase in the LIBOR or the CDOR of 1 percent would increase interest expense by approximately [removed: $6.1] [added: $6.6] million on an annualized basis.

During the year ended December 31, [removed: 2016,] [added: 2017,] 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: 2016,] [added: 2017,] we estimate that a 1 percent increase in market interest rates would decrease the fair value of our marketable securities portfolio by approximately [removed: $0.9] [added: $1.5] million.

| | | | | | | | | | |

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

| | | | | | | | | | |

| | | | | | | | | | |

| | | | | | | | | | |

| | | | | | | | | | |

If a hedging instrument qualifies

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

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

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

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

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

| | · | | Products that test water for certain microbiological contaminants; [added: and] |

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

For the year ended December 31, [removed: 2016,] [added: 2017,] sales of products and services to customers outside the U.S. accounted for approximately 39 percent of our overall revenue.

See “Part [removed: 1,] [added: I,] Item 1A.

Risk [removed: Factors.”,] [added: Factors”, “Part II,] Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations] [added: Operations”] and Note 15 to the consolidated financial statements for the year ended December 31, [removed: 2016,] [added: 2017,] included in this Annual Report on Form 10-K for more information about our segments and revenue from customers outside of the U.S.

Our in-clinic diagnostic solutions are comprised of our IDEXX VetLab suite of in-clinic chemistry, hematology, immunoassay, [removed: urinalysis] [added: urinalysis,] and coagulation analyzers, associated proprietary consumable products that provide real-time reference lab quality diagnostic results and a broad range of single-use, handheld IDEXX SNAP rapid assay test kits that provide quick, [removed: accurate] [added: accurate,] and convenient point-of-care diagnostic test results for a variety of companion animal diseases and health conditions.

We sell three chemistry analyzers, the Catalyst [removed: Dx] [added: One] Chemistry [removed: Analyzer,] [added: analyzer,] the Catalyst [removed: One] [added: Dx] Chemistry [removed: Analyzer] [added: analyzer,] and the VetTest [removed: Chemistry Analyzer,] [added: chemistry analyzer,] that are used by veterinarians to measure levels of certain enzymes and other substances in blood or urine for monitoring health status and assisting in diagnosing physiologic conditions.

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

Blood tests commonly run on these analyzers include glucose, alkaline phosphatase, ALT (alanine aminotransferase), albumin, calcium, creatinine, blood urea nitrogen, total [removed: protein] [added: protein,] and many others.

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

The Catalyst Dx analyzer allows a veterinarian to run multiple patient samples simultaneously and both the Catalyst Dx and Catalyst One run different sample types including whole blood, plasma, [removed: serum] [added: serum,] and urine.

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

The Catalyst One analyzer, launched in November 2014, is engineered to deliver the same laboratory-quality results and real-time work flow as the Catalyst Dx [removed: analyzer, offering an attractive in-house chemistry option when a single sample drawer is sufficient for a clinic’s work-flow requirements.][added: analyzer.]

The Catalyst One analyzer currently offers [added: all the same tests as the Catalyst Dx, plus] an [removed: expanding] [added: expanded] menu of 30 tests, including tests for thyroid disease, kidney disease, [removed: diabetes] [added: diabetes,] and therapeutic drug monitoring.

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

In addition, the ProCyte Dx [removed: Hematology Analyzer,] [added: hematology analyzer,] the LaserCyte Dx [removed: Hematology Analyzer] [added: hematology analyzer,] and the LaserCyte [removed: Hematology Analyzer] [added: hematology analyzer] each have the ability to analyze the components of certain body fluids.

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

During the first quarter of 2014, we launched the SNAP Pro Mobile Device, which automatically activates a SNAP test, properly times the [removed: run] [added: run,] and captures an image of the result.

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

In April 2016, we launched [added: the] SediVue Dx [added: urine sediment analyzer] in North America.

IVLS securely connects to the internet, and in this [removed: way] [added: way,] enables IDEXX to perform, through its SmartService Solutions wireless services, remote instrument service and software updates to IVLS and certain connected instruments.

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

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 Africa, South [removed: Korea] [added: Korea,] and Brazil.

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

This menu of tests also includes a number of specialized and proprietary tests that we have developed that allow practitioners to diagnose increasingly relevant diseases and conditions in dogs and cats, including parasites, heart disease, allergies, pancreatitis, [removed: diabetes] [added: diabetes,] and infectious diseases.

In the third quarter of 2015, we launched [added: the] IDEXX SDMA [added: test] in North America, a new [added: proprietary] kidney test which detects the onset of canine and feline kidney disease months or years earlier than traditional methods.

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

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

Additionally, we provide specialized veterinary consultation, [removed: telemedicine] [added: telemedicine,] and advisory services, including radiology, cardiology, internal [removed: medicine] [added: medicine,] and ultrasound consulting.

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

We develop, market and sell practice management systems, including hardware, software and services that run key functions of veterinary clinics, including managing patient electronic health records, scheduling (including for boarding and grooming), client communication, [removed: billing] [added: billing,] and inventory management.

Our principal practice management systems are Cornerstone, DVMAX, Animana and [added: IDEXX] Neo.

IDEXX 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 the U.S., [removed: Europe] [added: Europe,] and Australia.

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

Petly Plans complements the Pet Health Network suite of client marketing services by making it easier for practices to increase access to the best care and offer plans that spread the cost of that care, including [removed: examinations, vaccines and diagnostics, over the course of the year.]

[removed: Previously named IDEXX VetLab service and accessories, our] [added: 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.

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, [added: a component in] reducing the risk posed by excess radiation exposure for veterinary professionals.

Our purpose guides our strategy: to be a great company that creates exceptional long-term value for our customers, employees, and shareholders by enhancing the health and well-being of pets, people, and livestock.



Customers have activated VetConnect PLUS in over 80 countries.

In January 2018, we launched the Catalyst SDMA Test in North America, which allows our customers to use the Catalyst One and Catalyst Dx to screen for SDMA.

We expect to launch our Catalyst SDMA Test outside of North America in 2018 as well.

During the first half of 2017, we continued our international launch of SediVue Dx to include other parts of Europe and New Zealand.

We plan to continue our international deployment in 2018 to include Switzerland, Poland, and Japan.

examinations, vaccines, and diagnostics, over the course of the year.

With our acquisition of rVetLink in June 2017, we now also offer a comprehensive referral management solution for specialty care hospitals that streamlines the referral process between primary care and specialty care veterinarians.

General practice veterinarians occasionally refer patients to board-certified specialists for advanced care in areas such as cardiology, oncology, dermatology, ophthalmology, surgery, or internal medicine.

rVetLink automates the time-consuming process of sharing medical records and images, and sending notifications to facilitate generalist-specialist collaboration in the delivery of care.

rVetLink’s cloud technology integrates with our other major specialty hospital management systems, including IDEXX Cornerstone Software and IDEXX DVMAX Software.



If such applications are granted, we expect the associated patents would have expirations ranging from 2036 to 2038.

From time to time we seek to qualify alternative suppliers.

In the EU, our veterinary diagnostic instrument systems are not subject to regulation under the European Medical Device Directive or the In Vitro Diagnostic Directive, which are both strictly applicable to human use products.

However, these systems are subject to the requirements of the Electromagnetic Compatibility Directive, which applies to all electronic or electrical products capable of causing or being disturbed by electromagnetic interference and requires European Conformity marking on our analyzers.

In addition, we anticipate our analyzers will be subject to the requirements of the Restriction of Hazardous Substances Directive, or RoHS, which regulates and restricts certain hazardous substances in electrical and electronic equipment, beginning in July 2019.

COMPANION ANIMAL GROUP

CAG provides veterinarians with the diagnostic capabilities and information management solutions that enhance the health and well-being of pets.

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

Using these services in the exam room improves client communication and facilitates adherence to veterinarian recommendations.

WATER

We provide innovative testing solutions for easy, rapid and accurate detection and quantification of various microbiological parameters in water, helping to ensure water safety for billions of people around the world.

LIVESTOCK, POULTRY and dairy

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

These instrument systems also are subject to the European Medical Device Directives, which create a single set of medical device regulations for all European Union (“EU”) member countries and require companies that wish to manufacture and distribute medical devices in EU member countries to obtain European Conformity marking for their products.

In the opinion of management, based in part upon advice of legal counsel, the disposition of any such currently pending matters is not expected to have a material effect on our results of operations, financial [removed: condition] [added: condition,] or cash flows.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

PART II

| UNITED STATES | | | | [added: | | | |]

| SECURITIES AND EXCHANGE COMMISSION | | | | [added: | | | |]

| Washington, D.C. 20549 | | | | [added: | | | |]

| Form 10-K | | | | [added: | | | |]

| | [added: |] (Mark One) | | | [added: | | |]

| ☒ | [added: |] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | | [added: | | |]

| | | [added: |] For the fiscal year ended December 31, [removed: 2016] [added: 2017] | | [added: | | |]

| ☐ | [added: |] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | | [added: | | |]

| | | [added: |] For the transition period from _______________ to _______________. | | [added: | | |]

| COMMISSION FILE NUMBER: 0-19271 ] [added: 2](https://www.sec.gov/Archives/edgar/data/874716/000087471618000005/idxx-20171231x10kg001.jpg)] | | | | [added: | | | |]

| IDEXX LABORATORIES, INC. | | | | [added: | | | |]

| (Exact name of registrant as specified in its charter) | | | | [added: | | | |]

| DELAWARE (State or other jurisdiction of incorporation or organization) ONE IDEXX DRIVE, WESTBROOK, MAINE (Address of principal executive offices) | | | [added: | |] 01-0393723 (I.R.S. Employer Identification No.) 04092 (ZIP Code) | [added: | |]

| Registrant’s telephone number, including area code: 207-556-0300 | | | | [added: | | | |]

Based on the closing sale price on June 30, [removed: 2016] [added: 2017] 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: $8,215,859,816.][added: $ 14,011,555,111.]

The number of shares outstanding of the registrant’s Common Stock was [removed: 88,005,221] [added: 87,122,794] on February 6, [removed: 2017.][added: 2018.]

Part III—Specifically identified portions of the Company’s definitive Proxy Statement to be filed in connection with the Company’s [removed: 2017] [added: 2018] annual meeting of stockholders (the [removed: “2017] [added: “2018] Annual Meeting”), to be held on May [removed: 3, 2017,] [added: 9, 2018,] are incorporated herein by reference.

[added: |] GLOSSARY OF TERMS AND SELECTED ABBREVIATIONS [added: | | |]

| [removed: Term/ Abbreviation] [added: Term/Abbreviation] | [added: |] Definition |

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

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

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

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

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

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

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

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

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

| Adjusted operating income | [added: |] A non-GAAP financial measure that represents total Company operating income adjusted for the 2015 software impairment [removed: charge and the 2014 adjustment for the all-direct sales strategy transition impacts.] [added: charge.] 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 | [added: |] Association of Analytical Communities Research Institute |

| AOCI | [added: |] Accumulated other comprehensive income or loss |

| APHIS | [added: |] Animal and Plant Health Inspector Service |

| BSE | [added: |] Bovine spongiform encephalopathy |

| CAG | [added: |] Companion Animal Group, [added: a] reporting segment that provides [removed: to veterinarians’] [added: veterinarians] diagnostic [removed: capabilities] [added: products] and [added: services and] information management solutions that enhance the health and well-being of pets |

| cGMP | [added: |] The FDA’s current Good Manufacturing Practice regulations |

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

| EMA | [added: |] Extended maintenance agreements |

| EPA | [added: |] U.S. Environmental Protection Agency |

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

| EU | [added: |] European Union |

10-K 1 idxx-20171231x10k.htm 10-K

| | | | | | | | |

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

| | | | | | | | |

| or | | | | | | | |

| | | | | | | | |

| | | | | | | | |

| | | | | | | | |

| Emerging growth company | ☐ | | |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

| | | |

| | | |

| ASU 2014-09 | | Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), also referred to as the “New Revenue Standard” |

| ASU 2016-02 | | ASU 2016-02, Leases (Topic 842) |

| ASU 2016-09 | | ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting |

| ASU 2017-01 | | ASU 2017-01, Business Combinations (Topic 805): Clarify the Definition of a Business |

| ASU 2017-09 | | ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting |

| | | |

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

| S&P 500 Health Care Index | | The index for the S&P 500 Health Care (U.S. companies) measures the performance of companies that are classified as members in the Global Industry Classification Standard of health care services sub-industry |

| S&P 500 Index | | The S&P 500 Index is a U.S. stock market index based on the market capitalization of 500 large companies having common stock listed on the New York Stock Exchange or NASDAQ, including IDEXX |

| SDMA | | Symmetrical dimethyl arginine, a biomarker that detects kidney disease |

| Tax Act | | The Tax Cuts and Jobs Act enacted on December 22, 2017, which has significant changes to the U.S. corporate tax system |

| | | |

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

| | | |

| [Item 4](#minesafety) | [Mine Safety Disclosures](#minesafety) | [34](#minesafety) |

| | | |

| | PART II | |

| [Item 5](#marketforregist) | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#marketforregist) | [35](#marketforregist) |

| [Item 6](#item6) | [Selected Financial Data](#item6) | [38](#item6) |

| [Item 7](#item7) | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#item7) | [39](#item7) |

| [Item 7A](#Item7a) | [Quantitative and Qualitative Disclosure about Market Risk](#Item7a) | [82](#Item7a) |

| [Item 8](#item8) | [Financial Statements and Supplementary Data](#item8) | [83](#item8) |

| [Item 9](#item9) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#item9) | [83](#item9) |

| [Item 9A](#item9a) | [Controls and Procedures](#item9a) | [84](#item9a) |

| [Item 9B](#item9b) | [Other Information](#item9b) | [85](#item9b) |

| | | |

| | PART III | |

| [Item 10](#item10) | [Directors, Executive Officers and Corporate Governance](#item10) | [85](#item10) |

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

| | | | |

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

| or | | | |

| | |

| --- | --- |

Business 6

Item 1A.

Item 1B.

Properties 29

Item 3.

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

| | · | | [removed: 23,000] [added: 24,800] square feet of office and laboratory space located in the U.K., used for our Reference Laboratory Diagnostic and Consulting Services line of business of CAG |

| | · | | [removed: 537,000] [added: 633,900] total square feet of laboratory, office and warehousing space located throughout the U.S., Europe, Canada, Australia, New Zealand, [removed: Asia] [added: Brazil, Asia,] and South Africa, primarily used for our Reference Laboratory Diagnostic and Consulting Services line of business of CAG |

| | · | | [removed: 100,100] [added: 126,200] square feet of distribution, warehousing and office space in the Netherlands, which serves as our European headquarters |

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

| | · | | [removed: 52,800] [added: 84,000] total square feet of office and manufacturing space in France, [removed: Switzerland] [added: Switzerland,] and Brazil related to our Livestock, Poultry and Dairy line of business |

| | · | | [removed: 7,600] [added: 8,100] square feet of manufacturing space in the U.K. related to our Water line of business |

[removed: | |] PART II [removed: | |]

Not applicable.

| | | |

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 30

Item 6.

Selected Financial Data 33

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations 34

Item 7A.

Quantitative and Qualitative Disclosure about Market Risk 72

Item 8.

Financial Statements and Supplementary Data 73

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 73

Item 9A.

Controls and Procedures 74

The following table shows the quarterly range of high and low sale prices per share [removed: (1)] of our common stock as reported on the NASDAQ Global Select Market for the years [removed: 2015] [added: 2016] and [removed: 2016.][added: 2017.]

| March 31, 2016 | | [added: $] | 79.03 | | [added: $] | 63.48 |

As of February 6, [removed: 2017,] [added: 2018,] there were [removed: 494] [added: 460] holders of record of our common stock.

During the three months ended December 31, [removed: 2016,] [added: 2017,] we repurchased shares of common stock as described below:

(1) As of December 31, [removed: 2016,] [added: 2017,] our Board of Directors had approved the repurchase of up to [removed: 65] [added: 68] million shares of our common stock in the open market or in negotiated transactions pursuant to the Company’s share repurchase program.

The program was approved and announced on August 13, 1999, and the maximum number of shares that may be purchased under the program was subsequently increased on [added: each of] October 4, 1999, November 16, 1999, July 21, 2000, October 20, 2003, October 12, 2004, October 12, 2005, February 14, 2007, February 13, 2008, February 10, 2010, October 12, 2011, May 7, [removed: 2013 and again on] [added: 2013,] July 16, [removed: 2014.][added: 2014, and June 15, 2015.]

Effective [removed: June 15, 2015,] [added: May 2, 2017,] an additional [removed: 8] [added: 3] million shares of our common stock was authorized for repurchase, increasing the total shares of common stock authorized to be repurchased by the Company up from [removed: 57] [added: 65] million to [removed: 65] [added: 68] million shares.

There were no other repurchase programs outstanding during the three months ended December 31, [removed: 2016,] [added: 2017,] and no repurchase programs expired during the period.

Repurchases of [removed: 1,951,417] [added: 351,143] shares were made during the three months ended December 31, [removed: 2016,] [added: 2017,] in transactions made pursuant to our repurchase program.

(2) During the three months ended December 31, [removed: 2016,] [added: 2017,] we received [removed: 3,702] [added: 1,563] 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: 2016,] [added: 2017,] we repurchased [removed: 3,070,644] [added: 1,749,416] shares of our common stock in transactions made pursuant to our repurchase program and received [removed: 59,860] [added: 56,638] 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: 2016,] [added: 2017,] included in this Annual Report on Form 10-K for further information.

This graph compares our total stockholder returns, the Total Return for the Standard & Poor’s (“S&P”) 500 Index, the Total Return for the S&P 500 Health Care [removed: Index] [added: Index,] and the Total Return for the NASDAQ Stock Market 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: 2011,] [added: 2012,] in IDEXX’s common stock, the S&P 500 Index, the S&P 500 Health Care [removed: Index] [added: 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: 2011] [added: 2012] to [removed: 2016.][added: 2017.]

][added: 8](https://www.sec.gov/Archives/edgar/data/874716/000087471618000005/idxx-20171231x10kg006.jpg)]

| | | [removed: 12/31/2011 | | |] 12/31/2012 | | | [removed: 12/30/2013] [added: 12/31/2013] | | | 12/31/2014 | | | 12/31/2015 | | | 12/31/2016 | | [added: | 12/31/2017 | |]

| March 31, 2017 | | | 155.65 | | | 113.92 |

| June 30, 2017 | | | 173.01 | | | 153.24 |

| September 30, 2017 | | | 171.37 | | | 148.80 |

| December 31, 2017 | | | 168.66 | | | 146.09 |

| October 1, 2017 to October 31, 2017 | | 106,900 | | $ | 160.71 | | 106,900 | | 5,230,335 | |

| November 1, 2017 to November 30, 2017 | | 140,343 | | | 152.12 | | 140,343 | | 5,089,992 | |

| December 1, 2017 to December 31, 2017 | | 105,463 | | | 158.28 | | 103,900 | | 4,986,092 | |

| Total | | 352,706 | (2) | $ | 156.57 | | 351,143 | | 4,986,092 | |

| IDEXX Laboratories, Inc. | | $ | 100.00 | | $ | 114.63 | | $ | 159.77 | | $ | 157.16 | | $ | 252.74 | | $ | 337.03 |

| NASDAQ Index | | | 100.00 | | | 140.12 | | | 160.78 | | | 171.97 | | | 187.22 | | | 242.71 |

| S&P 500 Health Care Index | | | 100.00 | | | 141.46 | | | 177.30 | | | 189.52 | | | 184.42 | | | 225.13 |

| S&P 500 Index | | | 100.00 | | | 132.39 | | | 150.51 | | | 152.59 | | | 170.84 | | | 208.14 |

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

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

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

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

(1) 2015 Prices have been adjusted to reflect a two-for-one stock split on June 15, 2015.

| 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 |

| | | For the Years Ended December 31, | | | | | | | | | | | | | | [removed: |]

| | | (in thousands, except per share data) | | | | | | | | | | | | | | [removed: |]

| | | | [added: 2017 | | |] 2016 | | | 2015 | | | 2014 | | | 2013 | [removed: | | 2012 | |]

| INCOME STATEMENT DATA: | | | | | | | | | | | | | | | | [removed: |]

| Revenue | | $ | [removed: 1,775,423] [added: 1,969,058] | | $ | [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] |

| Cost of revenue | | | [added: 871,676 | | |] 799,987 | | | 711,622 | | | 669,691 | | | 620,940 | [removed: | | 594,190 | |]

| Gross profit | | | [added: 1,097,382 | | |] 975,436 | | | 890,270 | | | 816,116 | | | 756,118 | [removed: | | 699,148 | |]

| Expenses: | | | | | | | | | | | | | | | | [removed: |]

| Sales and marketing | | | [added: 354,294 | | |] 317,058 | | | 299,955 | | | 283,708 | | | 243,492 | [removed: | | 216,962 | |]

| General and administrative | | | [added: 220,878 | | |] 207,017 | | | 182,510 | | | 173,890 | | | 157,861 | [removed: | | 137,609 | |]

| Research and development | | | [added: 109,182 | | |] 101,122 | | | 99,681 | | | 98,263 | | | 88,003 | [removed: | | 82,014 | |]

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

| Income from operations | | | [added: 413,028 | | |] 350,239 | | | 299,912 | | | 260,255 | | | 266,762 | [removed: | | 262,563 | |]

| Interest expense, net | | | [added: (31,971) | | |] (28,393) | | | (26,771) | | | (13,700) | | | (3,501) | [removed: | | (1,946) | |]

| Income before provision for income taxes | | | [added: 381,057 | | |] 321,846 | | | 273,141 | | | 246,555 | | | 263,261 | [removed: | | 260,617 | |]

| Provision for income taxes | | | [added: 117,788 | | |] 99,792 | | | 81,006 | | | 64,604 | | | 75,467 | [removed: | | 82,330 | |]

| Net income | | | [added: 263,269 | | |] 222,054 | | | 192,135 | | | 181,951 | | | 187,794 | [removed: | | 178,287 | |]

| Less: Net income (loss) attributable to noncontrolling interest | | | [added: 125 | | |] 9 | | | 57 | | | 45 | | | (6) | [removed: | | 20 | |]

| Net income attributable to IDEXX Laboratories, Inc. stockholders | | $ | [removed: 222,045] [added: 263,144] | | $ | [removed: 192,078] [added: 222,045] | | $ | [removed: 181,906] [added: 192,078] | | $ | [removed: 187,800] [added: 181,906] | | $ | [removed: 178,267 |] [added: 187,800] |

| Earnings per share: | | | | | | | | | | | | | | | | [removed: |]

| Basic | | $ | [removed: 2.47] [added: 3.00] | | $ | [removed: 2.07] [added: 2.47] | | $ | [removed: 1.82] [added: 2.07] | | $ | [removed: 1.77] [added: 1.82] | | $ | [removed: 1.62 |] [added: 1.77] |

| Diluted | | $ | [removed: 2.44] [added: 2.94] | | $ | [removed: 2.05] [added: 2.44] | | $ | [removed: 1.79] [added: 2.05] | | $ | [removed: 1.74] [added: 1.79] | | $ | [removed: 1.59 |] [added: 1.74] |

| Weighted average shares outstanding: | | | | | | | | | | | | | | | | [removed: |]

| Basic | | | [added: 87,769 | | |] 89,732 | | | 92,601 | | | 100,094 | | | 106,318 | [removed: | | 109,969 | |]

| Diluted | | | [added: 89,567 | | |] 90,884 | | | 93,649 | | | 101,503 | | | 107,970 | [removed: | | 112,311 | |]

| BALANCE SHEET DATA: | | | | | | | | | | | | | | | | [removed: |]

| Cash and cash equivalents | | $ | [removed: 154,901] [added: 187,675] | | $ | [removed: 128,994] [added: 154,901] | | $ | [removed: 322,536] [added: 128,994] | | $ | [removed: 279,058] [added: 322,536] | | $ | [removed: 223,986 |] [added: 279,058] |

| Marketable securities(1) | | | [removed: 236,949] [added: 284,255] | | | [removed: 213,591] [added: 236,949] | | | [removed: \-] [added: 213,591] | | | \- | | | \- | [removed: |]

| Cash and cash equivalents and marketable securities | | $ | [removed: 391,850] [added: 471,930] | | $ | [removed: 342,585] [added: 391,850] | | $ | [removed: 322,536] [added: 342,585] | | $ | [removed: 279,058] [added: 322,536] | | $ | [removed: 223,986 |] [added: 279,058] |

| Working capital | | $ | [removed: (88,984)] [added: (32,582)] | | $ | [removed: (35,127)] [added: (88,984)] | | $ | [removed: (61,508)] [added: (35,127)] | | $ | [removed: 174,353] [added: (61,508)] | | $ | [removed: 163,204 |] [added: 174,353] |

| Total assets | | $ | [removed: 1,530,704] [added: 1,713,416] | | $ | [removed: 1,474,993] [added: 1,530,704] | | $ | [removed: 1,384,211] [added: 1,474,993] | | $ | [removed: 1,230,516] [added: 1,384,211] | | $ | [removed: 1,103,602 |] [added: 1,230,516] |

| Total long-term debt(2) | | $ | [removed: 593,110] [added: 606,075] | | $ | [removed: 597,085] [added: 593,110] | | $ | [removed: 350,000] [added: 597,085] | | $ | [removed: 150,359] [added: 350,000] | | $ | [removed: 1,394 |] [added: 150,359] |

| Total stockholders' equity (deficit) | | $ | [removed: (108,213)] [added: (53,842)] | | $ | [removed: (83,995)] [added: (108,213)] | | $ | [removed: 117,589] [added: (83,995)] | | $ | [removed: 518,214] [added: 117,589] | | $ | [removed: 636,257 |] [added: 518,214] |

[added: (1)] See Note 5 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding our marketable securities.

[added: (2)] See Note 11 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding our senior notes.

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

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

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

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

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

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

(1) During the years ended December 31, 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 1.785 percent to 4.04 percent.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, [removed: summarized] [added: summarized,] and reported, within the time periods specified in the SEC's rules and forms.

Based on the evaluation of our disclosure controls and procedures at December 31, [removed: 2016,] [added: 2017,] 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: 2016,] [added: 2017,] our internal control over financial reporting was effective.

The effectiveness of the Company's internal control over financial reporting at December 31, [removed: 2016,] [added: 2017,] 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: 2016,] [added: 2017,] that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

During 2017, we implemented internal controls to ensure we have adequately evaluated our contracts and properly assessed the impact of the new accounting standard related to revenue recognition on our financial statements to facilitate the adoption on January 1, 2018.

Beyond these new implementation controls, we do not expect significant changes to our internal controls over financial reporting due to the adoption of the new revenue recognition accounting standard, as we plan to utilize our existing systems and similar processes and procedures in 2018.

ITEM 9B.OTHER INFORMATION

Not applicable.

PART III

[removed: | |] PART III [removed: | |]

Not applicable.

| | | |

Item 10.

Directors, Executive Officers and Corporate Governance 75

Item 11.

Executive Compensation 75

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 75

Item 13.

Certain Relationships and Related Transactions, and Director Independence 76

Item 14.

Principal Accountant Fees and Services 76

| | PART IV | |

Item 15.

Exhibits, Financial Statement Schedules 76

Item 16.

Form 10-K Summary 76

| Financial Statements and Supplementary Data – Index to Consolidated Financial Statements | | F-1 |

| Exhibit Index | | |

| Signatures | | |

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.”

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 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 Neo®, IDEXX-PACS™, IDEXX Petly® Plans, IDEXX SDMA®, IDEXX VetLab®, IDEXX VPM™, LaserCyte®, LaserCyte Dx™, OPTI®, OPTI LION™, PetChek®, PetDetect®, Pet Health Network®, Practice Profile™, ProCyte Dx®, Pseudalert®, Quanti-Tray®, SediVue Dx®, SimPlate®, IDEXX SmartService™, SNAP®, SNAPduo®, SNAP Pro®, SNAP cPL® , SNAP fPL®, SNAPshot Dx®, IDEXX VetAutoread™, VetConnect®, IDEXX VetLab®UA™, VetLINK®, VetLyte®, VetStat®, VetTest® and VetVault®.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K for the year ended December 31, 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.

Forward-looking statements can be identified by the use of words such as “expects,” “may,” “anticipates,” “intends,” “would,” “will,” “plans,” “believes,” “estimates,” “should,” and similar words and expressions.

These forward-looking statements are intended to provide our current expectations or forecasts of future events, are based on current estimates, projections, beliefs, and assumptions, and are not guarantees of future performance.

Actual events or results may differ materially from those described in the forward-looking statements.

These forward-looking statements involve a number of risks and uncertainties as more fully described under the heading “Part I, Item 1A.

Risk Factors” in this Annual Report on Form 10-K.

Any forward-looking statements represent our estimates only as of the day this Annual Report on Form 10-K was first filed with the Securities and Exchange Commission (“SEC”) and should not be relied upon as representing our estimates as of any subsequent date.

From time to time, oral or written forward-looking statements may also be included in other materials released to the public and they are subject to the risks and uncertainties described or cross-referenced in this section.

While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates or expectations change.

PART I

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: 2017] [added: 2018] 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: 2017] [added: 2018] 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: 2017] [added: 2018] 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: 2017] [added: 2018] 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: 2017] [added: 2018] 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: 2017] [added: 2018] 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.

| [removed: Report] [added: [Report] of Independent Registered Public Accounting [removed: Firm] [added: Firm](#reportofindep)] | [removed: F-2] [added: [F-2](#reportofindep)] |

| [removed: Consolidated] [added: [Consolidated] Balance Sheets as of December 31, [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016](#balancesheet)] | [removed: F-3] [added: [F-4](#balancesheet)] |

| [removed: Consolidated] [added: [Consolidated] Statements of Income for the Years Ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015](#incomestatement)] | [removed: F-4] [added: [F-5](#incomestatement)] |

| [removed: Consolidated] [added: [Consolidated] Statements of Comprehensive Income for the Years Ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015](#comprehensive)] | [removed: F-5] [added: [F-6](#comprehensive)] |

| [removed: Consolidated] [added: [Consolidated] Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015](#equity)] | [removed: F-6] [added: [F-7](#equity)] |

| [removed: Consolidated] [added: [Consolidated] Statements of Cash Flows for the Years Ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015](#cashflow)] | [removed: F-7] [added: [F-8](#cashflow)] |

| [removed: Notes] [added: [Notes] to Consolidated Financial [removed: Statements] [added: Statements](#notestostatements)] | [removed: F-8] [added: [F-9](#notestostatements)] |

| [removed: Schedule II] [added: [Schedule II](#scheduleII)] | |

In our opinion, the consolidated financial statements [removed: listed in the accompanying index] [added: referred to above] present fairly, in all material respects, the financial position of [removed: IDEXX Laboratories, Inc. and its subsidiaries] [added: the Company] as of December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and the results of [removed: their] [added: its] operations and [removed: their] [added: its] cash flows for each of the three years in the period ended December 31, [removed: 2016] [added: 2017] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the [removed: Committee of Sponsoring Organizations of the Treadway Commission (COSO).][added: COSO.]

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

Our responsibility is to express opinions on [removed: these financial statements, on] the [added: Company’s consolidated] financial [removed: statement schedule,] [added: statements] and on the Company's internal control over financial reporting based on our [removed: integrated] audits.

We conducted our audits in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the [added: consolidated] financial statements are free of material [removed: misstatement] [added: misstatement, whether due to error or fraud,] and whether effective internal control over financial reporting was maintained in all material respects.

Our audits [removed: of the financial statements] [added: also] included [removed: examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing] [added: evaluating] the accounting principles used and significant estimates made by management, [removed: and] [added: as well as] evaluating the overall [added: presentation of the consolidated] financial [removed: statement presentation.][added: statements.]

As [removed: discussed] [added: noted] in Note [removed: 12] [added: 2] to the consolidated financial statements, the Company changed the manner in which it [removed: classifies deferred taxes on the balance sheet in 2016.][added: accounts for share-based compensation.]

| | December 31, | | | December 31, | | [removed: |]

| | [removed: 2016] | | [added: 2017] | [removed: 2015] | | [added: 2016] | [added: | | 2015 |]

| ASSETS | | | | | | [removed: |]

| Current Assets: | | | | | | [removed: |]

| Cash and cash equivalents [added: at beginning of period] | [removed: $] | [added: |] 154,901 | | [removed: $] | 128,994 | | [added: | 322,536 |]

| Marketable securities | | [removed: 236,949 |] [added: 284,255] | | [removed: 213,591] | [added: 236,949] |

| Accounts receivable, net of reserves of [removed: $4,523] [added: $4,576] in [removed: 2016] [added: 2017] and [removed: $5,128] [added: $4,523] in [removed: 2015 |] [added: 2016] | [removed: 204,494] | [added: 234,597] | | [removed: 188,318] | [added: 204,494] |

| Inventories | | [removed: 158,034 |] [added: 164,318] | | [removed: 188,833] | [added: 158,034] |

| Other current assets | | [removed: 91,206 |] [added: 101,140] | | [removed: 62,069] | [added: 91,206] |

| Total current assets | | [removed: 845,584 |] [added: 971,985] | | [removed: 821,634] | [added: 845,584] |

| Long-Term Assets: | | | | | | [removed: |]

| Property and equipment, net | | [removed: 357,422 |] [added: 379,096] | | [removed: 333,026] | [added: 357,422] |

| Goodwill | | [removed: 178,228 |] [added: 199,873] | | [removed: 178,934] | [added: 178,228] |

| Intangible assets, net | | [removed: 46,155 |] [added: 43,846] | | [removed: 55,909] | [added: 46,155] |

| Other long-term assets | | [removed: 103,315 |] [added: 118,616] | | [removed: 85,490] | [added: 103,315] |

| Total long-term assets | | [removed: 685,120 |] [added: 741,431] | | [removed: 653,359] | [added: 685,120] |

| TOTAL ASSETS | $ | [removed: 1,530,704] [added: 1,713,416] | | $ | [removed: 1,474,993 |] [added: 1,530,704] |

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

| Current Liabilities: | | | | | | [removed: |]

| Accounts payable | $ | [removed: 60,057] [added: 66,968] | | $ | [removed: 52,648 |] [added: 60,057] |

| Accrued liabilities | | [removed: 236,131 |] [added: 253,418] | | [removed: 205,530] | [added: 236,131] |

| Line of credit | | [removed: 611,000 |] [added: 655,000] | | [removed: 573,000] | [added: 611,000] |

| Current portion of deferred revenue | | [removed: 27,380 |] [added: 29,181] | | [removed: 25,583] | [added: 27,380] |

| Total current liabilities | | [removed: 934,568 |] [added: 1,004,567] | | [removed: 856,761] | [added: 934,568] |

| [Valuation and Qualifying Accounts for the Years Ended December 31, 2017, 2016 and 2015](#scheduleII) | [F-49](#scheduleII) |

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of IDEXX Laboratories, Inc. and its subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2017, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Change in accounting principle

Basis for Opinions

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Definition and Limitations of Internal Control over Financial Reporting

February 16, 2018

We have served as the Company’s auditor since 2002.

| | | | | | |

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

| | | | | | |

| Cash and cash equivalents | $ | 187,675 | | $ | 154,901 |

| | | | | | |

| | | | | | |

| | | | | | |

| | | | | | |

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

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

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

| Net income | | | \- | | | \- | | | \- | | | \- | | | 263,144 | | | \- | | | \- | | | 125 | | | 263,269 |

| Balance December 31, 2017 | | | 104,275 | | $ | 10,428 | | $ | 1,073,931 | | $ | 5,988 | | $ | 803,545 | | $ | (36,470) | | $ | (1,911,528) | | $ | 264 | | $ | (53,842) |

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

| Net cash provided by operating activities | | | 373,276 | | | 338,943 | | | 221,802 |

| Shares withheld for statutory tax withholding on restricted stock (Note 2) | | | (8,073) | | | (4,372) | | | (5,438) |

| Net cash used by financing activities | | | (208,016) | | | (222,196) | | | (100,990) |

These amounts are presented on a net basis when applicable, which accounts for any differences between estimates and actual incentives earned for the relevant customer marketing or incentive program.

These differences have been insignificant in all quarterly or annual periods.

We predominately offer up-front loyalty incentives in response to competitive offerings.

realizability of our capitalized customer acquisition costs.

At December 31, 2017, a 5 percent change in our estimate of future customer utilization would increase or reduce revenue by approximately $0.4 million.

(w)New Accounting Pronouncements Adopted

The following table summarizes the most significant impacts of the new accounting guidance for the years ended December 31, 2017 and 2016, as applicable:

| Description of Change: | | Impact of Change: | | Adoption Method: |

| Tax benefits related to share-based payments at settlement are recorded through the income statement instead of equity | | Decrease in income tax expense by approximately $27.7 million for the year ended December 31, 2017 | | Prospective (required) |

| Calculation of diluted shares outstanding under the treasury method will no longer assume that tax benefits related to share-based payments are used to repurchase common stock | | Increase in the weighted average diluted shares outstanding by approximately 450,000 shares for the year ended December 31, 2017 | | Prospective (required) |

| An election can be made to reduce share-based compensation expense for forfeitures as they occur instead of estimating forfeitures that are expected to occur | | No change to share-based compensation expense, as we have elected to continue to estimate forfeitures that are expected to occur | | N/A |

| | |

| Valuation and Qualifying Accounts | F-47 |

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.

February 17, 2017

| Deferred income tax assets | | \- | | | 39,829 | |

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

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

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

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

| Balance January 1, 2014 | | | 101,188 | | $ | 10,119 | | $ | 825,320 | | $ | 5,110 | | $ | 1,493,393 | | $ | 13,622 | | $ | (1,829,378) | | $ | 28 | | $ | 518,214 | |

| Net income (loss) | | | \- | | | \- | | | \- | | | \- | | | 181,906 | | | \- | | | \- | | | 45 | | | 181,951 | |

| Net cash provided by operating activities | | | 334,571 | | | 216,364 | | | 235,846 |

| Proceeds from sale of equity investment | | | \- | | | \- | | | 5,400 |

| Payment of notes payable | | | \- | | | \- | | | (1,394) |

| Net cash used by financing activities | | | (217,824) | | | (95,552) | | | (103,438) |

| Cash and cash equivalents at beginning of period | | | 128,994 | | | 322,536 | | | 279,058 |

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

Reclassifications had no material impact on previously reported results of operations, financial position or cash flows.

We consider the foreign currency cumulative translation adjustment to be permanently invested and, therefore, have not provided income taxes on those amounts.

We are continuing to evaluate the impact of this new standard.

revenue recognition for certain other customer incentive programs.

The volume and mix of future customer incentive programs will affect our assessment of the overall net impact of the new standard on our results and will also influence our choice of adoption method.

We plan to determine our method of adoption and provide an estimate of any impacts by October 2017, in connection with our financial reporting for the quarter ending September 30, 2017.

The most significant change resulting from these amendments is recording all the tax effects related to share-based payments at settlement through the income statement.

Under existing guidance, tax benefits in excess of compensation costs (“windfalls”) are recorded in equity.

Similarly, tax deficiencies below compensation costs (“shortfalls”) are recorded in equity to the extent of previous windfalls, while shortfalls in excess of this are recorded to the income statement.

Furthermore, the new guidance is expected to increase the dilutive effect of share-based payment awards as a result of no longer assuming that tax benefits are used to purchase our common stock under the treasury method.

The amendments also provide an alternative to estimating stock award forfeitures and instead recording at the time of forfeiture.

We will adopt this update beginning in the first quarter of 2017.

We estimate that tax benefits related to share-based payments will add approximately $0.12 to $0.16 in annual diluted earnings per share for 2017, primarily through a reduction in IDEXX’s effective tax rate, partially offset by an increase in diluted shares outstanding resulting from this accounting change.

These impacts may vary significantly by quarter based on the timing of actual settlement activity.

We will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first effective reporting period.

Early adoption is permitted in the first interim period of an annual reporting period for which financial statements have not been issued.

In January 2017, the FASB amended business combination guidance to modify the definition of a business.

This amendment may impact the allocation of purchase price in future acquisitions depending on the structure of future acquisitions.

All assets acquired in connection with this acquisition were assigned to our CAG segment.

We expect the purchase price allocation will be completed in the first quarter of 2017.

All assets acquired in connection with these business acquisitions were assigned to our CAG segment.

One of the businesses acquired is located outside of the U.S. and, as such, the assets and liabilities recorded are subject to impacts of changes in foreign currency exchange rates.