Item 16. FORM 10-K SUMMARY

None.

FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND

CONSOLIDATED FINANCIAL STATEMENT SCHEDULE

	Page No.
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2018 and 2017	F-4
Consolidated Statements of Income for the Years Ended December 31, 2018, 2017 and 2016	F-5
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2018, 2017 and 2016	F-6
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2018, 2017 and 2016	F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016	F-8
Notes to Consolidated Financial Statements	F-9
Schedule II
Valuation and Qualifying Accounts for the Years Ended December 31, 2018, 2017 and 2016	F-52

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

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 (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of income, comprehensive income, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2018, 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, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 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, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2. Summary of Significant Accounting Policies to the consolidated financial statements, the Company changed the manner in which it accounts for revenues from contracts with customers in 2018 and the manner in which it accounts for share-based compensation in 2017.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. 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.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

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. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and

F-2

dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

February 15, 2019

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

F-3

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

	December 31, 2018				December 31, 2017
ASSETS
Current Assets:
Cash and cash equivalents	$	123,794			$	187,675
Marketable securities	—				284,255
Accounts receivable, net of reserves of $4,702 in 2018 and $4,576 in 2017	248,855				234,597
Inventories	173,303				164,318
Other current assets	108,220				101,140
Total current assets	654,172				971,985
Long-Term Assets:
Property and equipment, net	437,270				379,096
Goodwill	214,489				199,873
Intangible assets, net	41,825				43,846
Other long-term assets	189,593				118,616
Total long-term assets	883,177				741,431
TOTAL ASSETS	$	1,537,349			$	1,713,416
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts payable	$	69,534			$	66,968
Accrued liabilities	260,683				253,418
Line of credit	398,937				655,000
Current portion of deferred revenue	41,290				29,181
Total current liabilities	770,444				1,004,567
Long-Term Liabilities:
Deferred income tax liabilities	29,267				25,353
Long-term debt	601,348				606,075
Long-term deferred revenue, net of current portion	60,697				35,545
Other long-term liabilities	84,826				95,718
Total long-term liabilities	776,138				762,691
Total liabilities	1,546,582				1,767,258
Commitments and Contingencies (Note 15)
Stockholders’ Equity (Deficit):
Common stock, $0.10 par value: Authorized: 120,000 shares; Issued: 105,087 shares in 2018 and 104,275 shares in 2017; Outstanding: 86,100 shares in 2018 and 87,104 shares in 2017	10,509				10,428
Additional paid-in capital	1,138,216				1,073,931
Deferred stock units: Outstanding: 162 units in 2018 and 229 units in 2017	4,524				5,988
Retained earnings	1,167,928				803,545
Accumulated other comprehensive loss	(41,791		)		(36,470		)
Treasury stock, at cost: 18,988 shares in 2018 and 17,171 shares in 2017	(2,288,899		)		(1,911,528		)
Total IDEXX Laboratories, Inc. stockholders’ deficit	(9,513		)		(54,106		)
Noncontrolling interest	280				264
Total stockholders’ equity (deficit)	(9,233		)		(53,842		)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	1,537,349			$	1,713,416
The accompanying notes are an integral part of these consolidated financial statements.

໿

F-4

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

		For the Years Ended December 31,
		2018				2017				2016
Revenue:
Product revenue		$	1,322,683			$	1,176,115			$	1,070,973
Service revenue		890,559				792,943				704,450
Total revenue		2,213,242				1,969,058				1,775,423
Cost of Revenue:
Cost of product revenue		494,889				446,449				416,810
Cost of service revenue		476,811				425,227				383,177
Total cost of revenue		971,700				871,676				799,987
Gross profit		1,241,542				1,097,382				975,436
Expenses:
Sales and marketing		387,406				354,294				317,058
General and administrative		244,938				220,878				207,017
Research and development		117,863				109,182				101,122
Income from operations		491,335				413,028				350,239
Interest expense		(34,744		)		(37,225		)		(32,049		)
Interest income		1,151				5,254				3,656
Income before provision for income taxes		457,742				381,057				321,846
Provision for income taxes		80,695				117,788				99,792
Net income		377,047				263,269				222,054
Less: Net income attributable to noncontrolling interest		16				125				9
Net income attributable to IDEXX Laboratories, Inc. stockholders		$	377,031			$	263,144			$	222,045
Earnings per Share:
Basic		$	4.34			$	3.00			$	2.47
Diluted		$	4.26			$	2.94			$	2.44
Weighted Average Shares Outstanding:
Basic		86,864				87,769				89,732
Diluted		88,470				89,567				90,884
The accompanying notes are an integral part of these consolidated financial statements.

F-5

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

		For the Years Ended December 31,
		2018				2017				2016
Net income		$	377,047			$	263,269			$	222,054
Other comprehensive income, net of tax:
Foreign currency translation adjustments		(21,911		)		25,107				(5,874		)
Unrealized gain (loss) on net investment hedge		3,917				(8,347		)		2,142
Unrealized gain (loss) on investments, net of tax expense (benefit) of ($40) in 2018, $0 in 2017 and $113 in 2016		(135		)		(42		)		245
Unrealized gain (loss) on derivative instruments:
Unrealized gain (loss), net of tax expense (benefit) of $2,852 in 2018, ($5,304) in 2017 and $2,174 in 2016		12,019				(10,332		)		4,950
Less: reclassification adjustment for (gains) losses included in net income, net of tax (expense) benefit of $187 in 2018, $224 in 2017 and ($949) in 2016		789				197				(2,251		)
Unrealized gain (loss) on derivative instruments		12,808				(10,135		)		2,699
Other comprehensive income gain (loss), net of tax		(5,321		)		6,583				(788		)
Comprehensive income		371,726				269,852				221,266
Less: comprehensive income attributable to noncontrolling interest		16				125				9
Comprehensive income attributable to IDEXX Laboratories, Inc.		$	371,710			$	269,727			$	221,257
The accompanying notes are an integral part of these consolidated financial statements.

F-6

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except per share amounts)

໿

	Common Stock
	Number of Shares			$0.10 Par Value				Additional Paid-in Capital				Deferred Stock Units				Retained Earnings				Accumulated Other Comprehensive Loss				Treasury Stock				Noncontrolling Interest				Total Stockholders’ Equity (Deficit)
Balance January 1, 2016	102,237			$	10,258			$	940,534			$	5,409			$	318,356			$	(42,265	)		$	(1,316,417	)		$	130			$	(83,995	)
Net income	—			—				—				—				222,045				—				—				9				222,054
Other comprehensive loss, net	—			—				—				—				—				(788		)		—				—				(788		)
Repurchases of common stock, net	—			—				—				—				—				—				(317,026		)		—				(317,026		)
Common stock issued under stock plans, including excess tax benefit	1,104			76				51,904				—				—				—				—				—				51,980
Deferred stock units activity	—			—				(343		)		14				—				—				—				—				(329		)
Share-based compensation cost	—			—				19,800				91				—				—				—				—				19,891
Balance December 31, 2016	103,341			$	10,334			$	1,011,895			$	5,514			$	540,401			$	(43,053	)		$	(1,633,443	)		$	139			$	(108,213	)
Net income	—			—				—				—				263,144				—				—				125				263,269
Other comprehensive income, net	—			—				—				—				—				6,583				—				—				6,583
Repurchases of common stock, net	—			—				—				—				—				—				(278,085		)		—				(278,085		)
Common stock issued under stock plans	934			94				39,005				—				—				—				—				—				39,099
Deferred stock units activity	—			—				(350		)		338				—				—				—				—				(12		)
Share-based compensation cost	—			—				23,381				136				—				—				—				—				23,517
Balance December 31, 2017	104,275			$	10,428			$	1,073,931			$	5,988			$	803,545			$	(36,470	)		$	(1,911,528	)		$	264			$	(53,842	)
Cumulative effect of accounting changes (Note 2)	—			—				—				—				(12,648		)		—				—				—				(12,648		)
Net income	—			—				—				—				377,031				—				—				16				377,047
Other comprehensive loss, net	—			—				—				—				—				(5,321		)		—				—				(5,321		)
Repurchases of common stock, net	—			—				—				—				—				—				(377,371		)		—				(377,371		)
Common stock issued under stock plans	812			81				39,756				(2,092		)		—				—				—				—				37,745
Deferred stock units activity	—			—				(385		)		385				—				—				—				—				—
Share-based compensation cost	—			—				24,914				243				—				—				—				—				25,157
Balance December 31, 2018	105,087			$	10,509			$	1,138,216			$	4,524			$	1,167,928			$	(41,791	)		$	(2,288,899	)		$	280			$	(9,233	)
The accompanying notes are an integral part of these consolidated financial statements.

F-7

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

໿

		For the Years Ended December 31,
		2018				2017				2016
Cash Flows from Operating Activities:
Net income		$	377,047			$	263,269			$	222,054
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		83,178				83,140				78,218
Amortization on marketable securities, net		(5		)		38				843
Impairment charge		2,629				—				2,228
Provision for uncollectible accounts		1,609				1,881				1,170
Benefit of (provision for) deferred income taxes		1,209				(7,918		)		20,881
Share-based compensation expense		25,157				23,517				19,891
Other		900				969				986
Tax benefit from share-based compensation arrangements		—				—				(14,702		)
Changes in assets and liabilities:
Accounts receivable		(18,401		)		(24,918		)		(22,554		)
Inventories		(25,623		)		(19,062		)		7,648
Accounts payable		(166		)		1,391				2,117
Deferred revenue		(7,719		)		3,551				7,672
Other assets and liabilities		(39,731		)		47,418				12,491
Net cash provided by operating activities		400,084				373,276				338,943
Cash Flows from Investing Activities:
Purchases of property and equipment		(115,751		)		(74,384		)		(64,787		)
Purchases of marketable securities		(87		)		(334,164		)		(227,894		)
Proceeds from the sale and maturities of marketable securities		284,125				286,759				203,859
Acquisitions of intangible assets and equity investment		(7,185		)		(2,320		)		—
Acquisitions of businesses, net of cash acquired		(22,500		)		(14,579		)		(1,964		)
Net cash provided (used) by investing activities		138,602				(138,688		)		(90,786		)
Cash Flows from Financing Activities:
(Repayment) borrowings on revolving credit facilities, net		(256,040		)		44,000				38,000
Debt issue costs		—				—				(56		)
Repurchases of common stock		(369,319		)		(282,565		)		(304,086		)
Proceeds from exercises of stock options and employee stock purchase plans		38,201				38,622				38,344
Payment of acquisition-related contingent consideration		(1,266		)		—				(4,728		)
Shares withheld for statutory tax withholding on restricted stock (Note 2)		(9,375		)		(8,073		)		(4,372		)
Tax benefit from share-based compensation arrangements		—				—				14,702
Net cash used by financing activities		(597,799		)		(208,016		)		(222,196		)
Net effect of changes in exchange rates on cash		(4,768		)		6,202				(54		)
Net increase (decrease) in cash and cash equivalents		(63,881		)		32,774				25,907
Cash and cash equivalents at beginning of period		187,675				154,901				128,994
Cash and cash equivalents at end of period		$	123,794			$	187,675			$	154,901
The accompanying notes are an integral part of these consolidated financial statements.

F-8

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements of IDEXX Laboratories, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and with the requirements of Regulation S-X.

These statements include the accounts of IDEXX Laboratories, Inc. and our wholly-owned and majority-owned subsidiaries (“IDEXX,” the “Company,” “we” or “our”). We do not have any variable interest entities for which we are the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.

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

We develop, manufacture, and distribute products and provide services for the veterinary, biomedical research, water, livestock, poultry, and dairy markets. We also sell a line of portable electrolytes and blood gas analyzers for the human point-of-care medical diagnostics market. Our principal line of business, which we refer to as our Companion Animal Group (“CAG”) operating segment, provides diagnostic capabilities and information management solutions for the veterinary market as well as biological materials testing and services for the bioresearch market. Our principal markets for these products and services are the United States (“U.S.”), Europe, Japan, and Australia, but we also sell to customers and distributors in many other countries around the world. Our Water operating segment provides innovative testing solutions for the quality and safety of water in our principal markets of the U.S. and Europe, but we also sell to customers in many other countries around the world. Our Livestock, Poultry and Dairy (“LPD”) operating segment provides diagnostic tests and related instrumentation and performs services that are used to manage the health status of livestock and poultry, to improve dairy efficiency, and to ensure the quality and safety of milk and food. Our principal markets for these products and services are Europe, China, and Australia but we also sell to customers in many other countries around the world. We also operate a smaller operating segment that comprises products for the human point-of-care medical diagnostics market (“OPTI Medical”). Financial information about our OPTI Medical operating segment is combined and presented with our out-licensing arrangements remaining from our pharmaceutical business in an “Other” category because they do not meet the quantitative or qualitative thresholds for reportable segments. See "Note 3. Revenue Recognition" for additional information regarding disaggregated revenue by segment and major product and service categories. See "Note 16. Segment Reporting " for additional information regarding our reportable operating segments and geographical areas.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Estimates

The preparation of these consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. On an ongoing basis, we evaluate these estimates, including those related to reserves for accounts receivable; goodwill and other intangible assets; income taxes; inventory valuation; revenue recognition, product returns, customer programs and multiple element arrangements; share-based compensation; warranty reserves; self-insurance reserves; fair value measurements and loss contingencies. We accrue contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

(b) Cash and Cash Equivalents

We consider all highly liquid investments with original maturities of ninety days or less to be cash equivalents. Cash and cash equivalents consist primarily of demand deposits, money market funds and short duration agency bonds and commercial paper as described above. There is no restricted cash on our consolidated balance sheet for the years ended December 31, 2018 and 2017.

F-9

(c) Marketable Securities – See Note 6

(d) Inventories – See Note 7

(e) Property and Equipment – See Note 8

(f) Goodwill and Other Intangible Assets – See Note 10

(g) Warranty Reserves

We provide a standard twelve-month warranty on all instruments sold. We recognize the cost of instrument warranties in cost of product revenue at the time revenue is recognized based on the estimated cost to repair the instrument over its warranty period. Cost of product revenue reflects not only estimated warranty expense for instruments sold in the current period, but also any changes in estimated warranty expense for the portion of the aggregate installed base that is under warranty. Estimated warranty expense is based on a variety of inputs, including historical instrument performance in the customers’ environment, historical and estimated costs incurred in servicing instruments and projected instrument reliability. Should actual service rates or costs differ from our estimates, revisions to the estimated warranty liability would be required. The liability for warranties is included in accrued liabilities in the accompanying consolidated balance sheets. The amount of warranty reserve during the years ended December 31, 2018 and 2017, was not material.

(h) Income Taxes – See Note 13

(i) Taxes Remitted to Governmental Authorities by IDEXX on Behalf of Customer

We calculate, collect from our customers, and remit to governmental authorities sales, value-added and excise taxes assessed by governmental authorities in connection with revenue-producing transactions with our customers. We report these taxes on a net basis and do not include these tax amounts in revenue or cost of product or service revenue.

(j) Revenue Recognition – See Note 3

(k) Research and Development Costs

Research and development costs, which consist of salaries, employee benefits, materials and external consulting and product development costs, are expensed as incurred. We evaluate our research and development costs for capitalization after the technological feasibility has been established for software and products containing software to be sold, however no costs were capitalized during the years ended December 31, 2018, 2017 and 2016. Software developed to deliver hosted services to our customers has been designated as internal use and we capitalize certain costs incurred in connection with developing or obtaining software designated for internal use based on three distinct stages of development. See "Note 8. Property and Equipment, Net" for further information on internal use software.

(l) Advertising Costs

Advertising costs, which are recognized as sales and marketing expense in the period in which they are incurred, were $1.8 million, $1.7 million, and $2.1 million for the years ended December 31, 2018, 2017 and 2016, respectively.

(m) Legal Costs

Legal costs are considered period costs and accordingly are expensed in the year services are provided.

(n) Share-Based Compensation – See Note 5

(o) Self-Insurance Accruals

We self-insure costs associated with health, workers’ compensation, and general welfare claims incurred by our U.S. and Canadian employees up to certain limits. Insurance companies provide insurance for claims above these limits. Claim liabilities are recorded for estimates of the loss that we will ultimately incur on reported claims, as well as estimates of claims that have been incurred but not yet reported. Such liabilities are based on individual coverage, the average time from when a claim is incurred to the time it is paid and judgments about the present and expected levels of claim frequency and severity.

F-10

Estimated claim liabilities could be significantly affected if future occurrences and claims differ from these assumptions and historical trends. Estimated claim liabilities are included in accrued liabilities in the accompanying consolidated balance sheets.

(p) Leases – See Note 15

(q) Earnings per Share – See Note 14

(r) Foreign Currency

The functional currency of all but three of our subsidiaries is their local currency. Assets and liabilities of these foreign subsidiaries are translated to the U.S. dollar using the exchange rate in effect at the balance sheet date. Revenue and expense accounts are translated to the U.S. dollar using the exchange rate at the date which those elements are recognized, and where it is impractical to do so, an average exchange rate in effect during the period is used to translate those elements. Cumulative translation gains and losses are shown in the accompanying consolidated balance sheets as a separate component of accumulated other comprehensive income (“AOCI”).

Revenues and expenses denominated in a currency other than the respective subsidiary’s functional currency are recorded at the current exchange rate when the transaction is recognized. Monetary assets and liabilities denominated in a currency other than the respective subsidiary’s functional currency are remeasured at each balance sheet date using the exchange rate in effect at each balance sheet date. These foreign currency gains and losses are included in general and administrative expenses. We recognized aggregate foreign currency losses of $3.1 million for the year ended December 31, 2018, gains of $1.1 million for the year ended December 31, 2017, and losses of $1.3 million for the year ended December 31, 2016.

(s) Hedging Instruments – See Note 18

(t) Fair Value Measurements – See Note 17

(u) Comprehensive Income

We report all changes in equity, including net income and transactions or other events and circumstances from non-owner sources during the period in which they are recognized. We have chosen to present comprehensive income, which encompasses net income, foreign currency translation adjustments, gains and losses on our net investment hedge and the difference between the cost and the fair market value of investments in debt and equity securities, forward currency exchange contracts and interest rate swap agreements, in the consolidated statements of comprehensive income. See "Note 20. Accumulated Other Comprehensive Income" for information about the effects on net income of significant amounts reclassified out of each component of AOCI for the years ended December 31, 2018, 2017 and 2016.

(v) Concentrations of Risk

Financial Instruments. Financial instruments that potentially subject us to concentrations of credit risk are principally cash, cash equivalents, accounts receivable and derivatives. To mitigate such risk with respect to cash and cash equivalents, we place our cash with highly-rated financial institutions, in non-interest bearing accounts that are insured by the U.S. government and money market funds invested in government securities. Concentration of credit risk with respect to accounts receivable is limited to certain customers to whom we make substantial sales. To reduce risk, we routinely assess the financial strength of our most significant customers and monitor the amounts owed to us, taking appropriate action when necessary. As a result, we believe that accounts receivable credit risk exposure is limited. We maintain an allowance for doubtful accounts, but historically have not experienced any material losses related to an individual customer or group of customers in any particular industry or geographic area.

To mitigate concentration of credit risk with respect to derivatives we enter into transactions with highly-rated financial institutions, enter into master netting arrangements with counterparties to our derivative transactions and frequently monitor the credit worthiness of our counterparties. Our master netting arrangements reduce our exposure in that they permit outstanding receivables and payables with the counterparties to our derivative transactions to be offset in the event of default. We have not incurred such losses and consider the risk of counterparty default to be minimal.

Inventory. If we are unable to obtain adequate quantities of the inventory we need to sell our products, we could face cost increases or delays or discontinuations in product shipments, which could have a material adverse effect on our results of operations. Many of the third parties that provide us with the instruments we sell and certain components, raw materials and

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consumables used in or with our products are obtained from sole or single source suppliers. Some of the products that we purchase from these sources are proprietary or complex in nature, and, therefore, cannot be readily or easily replaced by alternative sources.

(w) New Accounting Pronouncements Adopted

Effective January 1, 2018, we adopted the New Revenue Standard using the modified retrospective method for all contracts not completed as of the date of adoption.

We recognized the cumulative effect of initially applying the New Revenue Standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods presented. As a result of the adoption of ASU 2014-09, we have changed our accounting policy for revenue recognition and the details of the significant changes and quantitative impact of the changes are set out below.

Up-Front Customer Loyalty Programs. Our up-front loyalty programs provide customers with incentives in the form of cash or IDEXX Points upon entering into multi-year agreements to purchase annual minimum amounts of products or services. Under previous U.S. GAAP, if up-front incentives were subsequently utilized to purchase instruments, we limited instrument revenue to the amount of consideration received from the customer at the time of placement that was not contingent on future purchases and consequently deferred instrument revenue and costs at the time of placement. The New Revenue Standard permits revenue recognition at the time of instrument placement when the consideration is committed, but contingent on the purchase of future goods and services. As a result, we have accelerated our recognition of instrument revenues and costs when up-front incentives are used to purchase instruments. The New Revenue Standard did not change our accounting for up-front payments to customers, which continue to be capitalized as customer acquisition costs, within other assets, and subsequently recognized as a reduction to revenue over the term of the agreement. We previously reported deferred instrument revenues and costs within net customer acquisition cost, and upon transition to the New Revenue Standard the decrease in deferred revenue and costs resulted in an increase in our reported customer acquisition costs.

Volume Commitment Programs. Our volume commitment programs provide customers with a free or discounted instrument or system upon entering into multi-year agreements to purchase annual minimum amounts of products or services and includes our IDEXX 360 program introduced in the first quarter of 2018. Under previous U.S. GAAP, we limited instrument revenue to the amount of consideration received from the customer at the time of placement that was not contingent on future purchases and consequently instrument revenue and cost were recognized over the term of the customer agreement. The New Revenue Standard permits revenue recognition at the time of instrument placement when the consideration is committed, but contingent on the purchase of future goods and services. As a result, we have accelerated recognition on instrument revenues and costs placed through our volume commitment programs. This change resulted in a net increase in current and long-term other assets upon transition to the New Revenue Standard as we recognized contract assets related to instrument revenue recognized in advance of billings, offset by a reduction in previously deferred instrument costs.

Instrument Rebate Programs. Our instrument rebate programs, previously referred to as IDEXX Instrument Marketing Programs, require an instrument purchase and provide customers the opportunity to earn future rebates based on the volume of products and services they purchase over the term of the program. Under previous U.S. GAAP, the total consideration in the contract, including an estimate of future optional purchases, was allocated to all products and services based on their standalone selling prices. This resulted in deferring a portion of instrument revenue related to our obligation to provide future rebate incentives, which was included in accrued liabilities. Under the New Revenue Standard, the total consideration in the contract is limited to only goods and services that the customer is presently obligated to purchase and does not include future purchases that are optional. The customer’s right to earn rebates on future purchases is accounted for as a separate performance obligation. The exclusion of optional future purchases resulted in the instrument absorbing a higher relative allocation of future rebates. Therefore, we defer an increased portion of instrument revenue upon placement, which is realized as higher recurring revenue when customers buy future products and services, offsetting future rebates as they are earned. This change resulted in an increase in current and long-term deferred revenue upon transition to the New Revenue Standard and a reduction to accrued and other long-term liabilities for rebate obligations that are now reported as deferred revenues.

Reagent Rental Programs. Our reagent rental programs provide customers the right to use our instruments upon entering into multi-year agreements to purchase annual minimum amounts of consumables. These types of agreements include an embedded operating lease for the right to use our instrument and no instrument revenue is recognized at the time of instrument installation. Under the New Revenue Standard, we continue to recognize a portion of the revenue allocated to the embedded lease concurrent with the future sale of consumables over the term of the agreement. We determine the amount of revenue allocated from the consumable to the embedded lease based on standalone selling prices and determine the rate of lease

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revenue recognition in proportion to the customer’s minimum volume commitment. There was no impact to our consolidated financial statements upon transition to the New Revenue Standard, as a result of our reagent rental programs.

Other Customer Incentive Programs. Certain agreements with customers include discounts or rebates on the sale of products and services applied retrospectively, such as volume rebates achieved by purchasing a specified threshold of goods and services. Under the New Revenue Standard, we continue to record revenue reductions related to these customer incentive programs and record the related refund obligations in accrued liabilities based on the actual issuance of incentives, incentives earned but not yet issued and estimates of incentives to be earned in the future. There was no impact to our consolidated financial statements upon transition to the New Revenue Standard, as a result of our other customer incentive programs.

IDEXX Points. IDEXX Points may be applied to trade receivables due to us, converted to cash, or applied against the purchase price of IDEXX products and services. Under the New Revenue Standard, we continue to consider IDEXX Points equivalent to cash and IDEXX Points that have not yet been used by customers are included in accrued liabilities until utilized or expired. There was no impact to our consolidated financial statements upon transition to the New Revenue Standard, as a result of IDEXX Points.

Shipping and Delivery. Under previous U.S. GAAP, we recognized revenue and cost from the sales of diagnostic products and accessories upon delivery to the customer because our typical business practice is to cover losses incurred while in transit. Under the New Revenue Standard, revenue and costs are recognized when a customer obtains control of the product based on legal title transfer and our right to payment, which generally occurs at the time of shipment. This resulted in an acceleration of revenue and cost recognition and an increase in accounts receivable and a reduction in inventories upon transition to the New Revenue Standard.

Costs to Obtain a Contract. Under previous U.S. GAAP, we recognized sales commissions incurred to obtain long-term product and service contracts as sales and marketing expenses as incurred. Under the New Revenue Standard, we defer commissions incurred to obtain long-term contracts, when considered incremental and recoverable. Sales commissions are amortized as sales and marketing expenses consistently with the pattern of transfer for the product or service to which the asset relates. If the expected amortization period is one year or less, the sales commission is expensed when incurred. This change resulted in an increase to other current and long-term assets upon transition to the New Revenue Standard.

Income Taxes. The adoption of the New Revenue Standard primarily resulted in an acceleration of revenues under up-front customer loyalty programs and an increase in deferred revenue under instrument rebate programs, which in turn generated additional deferred tax assets within other long-term assets.

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The cumulative effects of the changes made to our consolidated balance sheet as of January 1, 2018, in connection with the adoption of the New Revenue Standard were as follows (in thousands):

	Consolidated Balance Sheet
	Previous U.S. GAAP December 31, 2017 (Reported)				New U.S. GAAP January 1, 2018				Attributed to the New Revenue Standard
ASSETS
Cash, cash equivalents and marketable securities	$	471,930			$	471,930			$	—
Accounts receivable	234,597				237,281				2,684
Inventories	164,318				163,184				(1,134		)
Property and equipment, net	379,096				379,096				—
Goodwill and intangible assets, net	243,719				243,719				—
Other assets	219,756				246,481				26,725
TOTAL ASSETS	$	1,713,416			$	1,741,691			$	28,275
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Accounts payable	$	66,968			$	66,968			$	—
Accrued liabilities	253,418				254,381				963
Deferred income tax liabilities	25,353				25,087				(266		)
Line of credit and long-term debt	1,261,075				1,261,075				—
Deferred revenue	64,726				110,158				45,432
Other long-term liabilities	95,718				82,840				(12,878		)
Total liabilities	1,767,258				1,800,509				33,251
Stockholders’ Deficit:
Retained earnings	803,545				798,569				(4,976		)
All other stockholders' deficit and noncontrolling interest	(857,387		)		(857,387		)		—
Total stockholders’ deficit	(53,842		)		(58,818		)		(4,976		)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	1,713,416			$	1,741,691			$	28,275

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The following tables compare the reported consolidated balance sheet, statements of income and cash flows, as of and for the year ended December 31, 2018, to the balances without the adoption of the New Revenue Standard ("previous U.S. GAAP") (in thousands):

	Consolidated Balance Sheet
	As of December 31, 2018
	Previous U.S. GAAP				New U.S. GAAP (As Reported)				Attributed to the New Revenue Standard
ASSETS
Cash and cash equivalents	$	123,794			$	123,794			$	—
Accounts receivable	245,189				248,855				3,666
Inventories	175,540				173,303				(2,237		)
Property and equipment, net	437,270				437,270				—
Goodwill and intangible assets, net	256,314				256,314				—
Other assets	253,339				297,813				44,474
TOTAL ASSETS	$	1,491,446			$	1,537,349			$	45,903
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Accounts payable	$	69,534			$	69,534			$	—
Accrued liabilities	252,723				260,683				7,960
Deferred income tax liabilities	34,424				29,267				(5,157		)
Line of credit and long-term debt	1,000,285				1,000,285				—
Deferred revenue	63,270				101,987				38,717
Other long-term liabilities	93,643				84,826				(8,817		)
Total liabilities	1,513,879				1,546,582				32,703
Stockholders’ Deficit:
Retained earnings	1,154,778				1,167,928				13,150
Accumulated other comprehensive (loss) income	(41,841		)		(41,791		)		50
All other stockholders' deficit and noncontrolling interest	(1,135,370		)		(1,135,370		)		—
Total stockholders’ deficit	(22,433		)		(9,233		)		13,200
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	1,491,446			$	1,537,349			$	45,903

	Consolidated Statement of Income
	For the Year Ended December 31, 2018
	Previous U.S. GAAP				New U.S. GAAP (As Reported)				Attributed to the New Revenue Standard
Total revenue	$	2,154,902			$	2,213,242			$	58,340
Total cost of revenue	936,302				971,700				35,398
Gross profit	1,218,600				1,241,542				22,942
Total operating expense	752,268				750,207				(2,061		)
Income from operations	466,332				491,335				25,003
Interest expense	(34,744		)		(34,744		)		—
Interest income	2,198				1,151				(1,047		)
Income before provision for income taxes	433,786				457,742				23,956
Provision for income taxes	74,865				80,695				5,830
Net income	$	358,921			$	377,047			$	18,126

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	Condensed Consolidated Statement of Cash Flows
	For the Year Ended December 31, 2018
	Previous U.S. GAAP				New U.S. GAAP (As Reported)				Attributed to the New Revenue Standard
Cash Flows from Operating Activities:
Net income	$	358,921			$	377,047			$	18,126
Adjustments to reconcile net income to net cash provided by operating activities:
Benefit of deferred income taxes	3,482				1,209				(2,273		)
All other adjustments to reconcile net income to net cash provided by operating activities	113,468				113,468				—
Changes in assets and liabilities, net	(75,787		)		(91,640		)		(15,853		)
Net cash provided by operating activities	$	400,084			$	400,084			$	—

There were no changes to cash flows from investing and financing activities as a result of the adoption of the New Revenue Standard.

Effective January 1, 2018, we adopted FASB ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. We recognized the cumulative effect of applying this standard as an adjustment to the opening balance of retained earnings and a reduction to other long-term assets of $7.7 million.

Effective January 1, 2018, we adopted FASB ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance on the statement of cash flows presentation of certain transactions where diversity in practice exists on the classification of certain cash receipts and payments. We adopted this amendment on a retrospective basis. This amendment did not have an impact on our financial statements.

Effective January 1, 2018, we adopted FASB ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, to add guidance on the classification and presentation of restricted cash. These amendments require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The adoption of this standard did not have an impact on our financial statements.

Effective January 1, 2018, we adopted FASB ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, to simplify the measurement of goodwill by eliminating step two from the goodwill impairment test. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill. The adoption of this standard did not have an impact on our financial statements.

Effective January 1, 2018, we adopted FASB ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, which provides clarification on accounting for modifications in share-based payment awards. The adoption of this guidance did not have an impact on our consolidated financial statements or related disclosures as there were no modifications to our share-based payment awards during 2018.

In March 2018, we adopted FASB ASU 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, which updates the income tax accounting to reflect the SEC’s interpretive guidance released on December 22, 2017, when the 2017 Tax Act was signed into law. See “Note 13. Income Taxes" for the impact of adoption to our consolidated financial statements.

In April 2018, we early adopted FASB ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which amends the hedge accounting recognition and presentation requirements, effective January 1, 2018. The adoption of this guidance allowed us to simplify our procedures to assess critical terms and broadens the

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application of hedge accounting. The early adoption of this standard did not have a material impact on our consolidated financial statements.

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 following table summarizes the most significant impacts of the new accounting guidance for the years ended December 31, 2018, 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		Decreases in income tax expense by approximately $21.5 and $27.7 million for the years ended December 31, 2018 and 2017, respectively		Prospective (required)
Tax benefits related to share-based payments at settlement are classified as operating cash flows instead of financing cash flows		Increase in cash flow from operating activities and decrease in cash flow from financing activities by approximately $21.5 million and $27.7 million for the years ended December 31, 2018 and 2017, respectively		Prospective (elected)
Cash payments to tax authorities for shares withheld to meet employee tax withholding requirements on restricted stock units are classified as financing cash flow instead of operating cash flow		Increases in cash flow from operating activities and decreases in cash flow from financing activities for the years ended December 31, 2018, 2017, and 2016, by approximately $9.4, $8.1 million, and $4.4 million, respectively		Retrospective (required)

(x) New Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (the "New Leasing Standard"), to increase transparency and comparability among organizations’ leasing arrangements. Since then, the FASB has issued updates to ASU 2016-02. The principal difference from previous guidance is that effective upon adoption, the lease assets and lease liabilities arising from operating leases will be recognized in the balance sheet. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. We intend to elect the optional transition method that allows for a cumulative-effect adjustment in the period of adoption and will not restate prior periods. We also intend to elect the transition package of three practical expedients permitted within the New Leasing Standard, which among other things, allows the carryforward of historical lease classifications.

As a lessee, under the New Leasing Standard, we expect to recognize the present value of our operating lease commitments of approximately $85 million as operating lease liabilities and right-of-use assets upon our adoption, which will increase our total assets and total liabilities relative to such amounts prior to adoption.

As a lessor, the New Leasing Standard will not impact the overall economics of our products and services sold under customer incentive programs, however we expect the New Leasing Standard will require us to classify new instrument placements for certain reagent rental programs as sales-type leases and thus accelerate instrument revenue and cost recognition at the time of placement. Under current U.S. GAAP, instruments placed under our reagent rental programs are classified as operating leases and instrument revenue and cost is recognized over the term of the program. We do not expect this change to have a material impact on our financial statements. See "Note 3 - Revenue Recognition" for a description of our Reagent Rental Programs.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which require that financial assets measured at amortized cost be presented at the net amount expected to be collected. Since then, the FASB has issued an update to ASU 2016-13. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

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Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. Credit losses on available-for-sale securities will be required when the amortized cost is below the fair market value. The amendments in this update are effective for fiscal years beginning after December 15, 2019 and interim periods within those annual periods. Early adoption for fiscal year beginning after December 15, 2018 is permitted. We do not anticipate any impact related to our allowance for doubtful accounts from this amendment on our financial statements. Furthermore, during 2018, with the passage of the 2017 Tax Act in the fourth quarter of 2017, we liquidated our marketable securities that would have been subject to this amendment.

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, to allow a reclassification from accumulated other comprehensive income to retained earnings related to the stranded effects of the 2017 Tax Act. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years with early adoption permitted. In transition, we are required to apply the amendments either in the period of adoption or retrospectively. The adoption of this guidance is not expected to have a material impact to our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"), which modifies the disclosure requirements of fair value measurements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangible-Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Cost Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"), which clarifies the accounting for implementation costs in cloud computing arrangements. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financial Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes ("ASU 2018-16"), which expands the list of U.S. benchmark interest rates permitted in the application of hedge accounting to include the Overnight Index Swap (“OIS”) rate based on the Secured Overnight Financing Rate (“SOFR”). SOFR is a new index calculated by reference to short-term repurchase agreements backed by Treasury securities. It was selected as a preferred replacement for U.S. dollar LIBOR, which will be phased out by the end of 2021. The ASU is effective for us no later than January 1, 2019, with early adoption permitted, and will be applied prospectively for new or redesignated hedging relationships entered into on or after the date of adoption. We will adopt the new standard on January 1, 2019, but will continue to use LIBOR while available. We will use an alternative rate at such time when the alternative rates available become standard and mature. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

NOTE 3. REVENUE RECOGNITION

Under the New Revenue Standard, revenue is recognized when, or as, performance obligations under the terms of a contract are satisfied, which occurs when control of the promised products or services is transferred to a customer. We exclude sales, use, value-added, and other taxes we collect on behalf of third parties from revenue. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services to a customer. To meet the requirements of the New Revenue Standard and accurately present the consideration received in exchange for promised products or services, we applied the prescribed five-step model outlined below:

1.	Identification of a contract or agreement with a customer

2.	Identification of our performance obligations in the contract or agreement

3.	Determination of the transaction price

4.	Allocation of the transaction price to the performance obligations

5.	Recognition of revenue when, or as, we satisfy a performance obligation

We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. The timing of revenue recognition, billings, and cash collections results in accounts receivable, contract assets as a result of revenue recognized in advance of billings (included within other assets), and contract liabilities or deferred revenue as a result of receiving consideration in advance of revenue

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recognition within our condensed consolidated balance sheet. Our general payment terms range from 30 to 60 days, with exceptions in certain geographies. Below is a listing of our major categories of revenue for our products and services:

Diagnostic Products and Accessories. Diagnostic products and accessories revenues, including IDEXX VetLab consumables and accessories, rapid assay, LPD, Water, and OPTI testing products, are recognized and invoiced at the time of shipment, which is when the customer obtains control of the product based on legal title transfer and we have the right to payment. Shipping costs reimbursed by the customer are included in revenue and cost of sales. As a practical expedient, we do not account for shipping activities as a separate performance obligation.

Reference Laboratory Diagnostic and Consulting Services. Reference laboratory revenues are recognized and invoiced when the laboratory diagnostic service is performed.

Instruments, Software and Systems. CAG Diagnostics capital instruments, veterinary software and diagnostic imaging systems revenues are recognized and invoiced when the customer obtains control of the products based on legal title transfer and we have the right to payment, which generally occurs at the time of installation and customer acceptance. Our instruments, software, and systems are often included in one of our significant customer programs, as further described below. For veterinary software systems that include multiple performance obligations, such as perpetual software licenses and computer hardware, we allocate revenue to each performance obligation based on estimates of the price that we would charge the customer for each promised product or service if it were sold on a standalone basis.

Lease Revenue. Revenue from operating leases for instrument systems under rental agreements and reagent rental programs is recognized on a ratable basis over the term of the agreement. Customers typically pay for rental agreements in equal monthly amounts over the term of the rental agreement. See below for revenue recognition under Reagent Rental Programs.

Extended Warranties and Post-Contract Support. CAG Diagnostics capital instruments and diagnostic imaging systems extended warranties typically provide customers with continued coverage for a period of 1 to 5 years beyond the first-year standard warranty. Customers can either pay in full for the extended warranty at the time of instrument or system purchase or can be billed on a quarterly basis over the term of the contract. We recognize revenue associated with extended warranties over time on a ratable basis using a time elapsed measure of performance over the contract term, which approximates the expected timing in which applicable services are performed.

Veterinary software post-contract support provides customers with access to technical support when and as needed through access to call centers and online customer assistance. Post-contract support contracts typically have a term of 12 months and customers are billed for post-contract support in equal quarterly amounts over the term. We recognize revenue for post-contract support services over time on a ratable basis using a time-elapsed measure of performance over the contract term, which approximates the expected timing in which applicable services are performed.

Upon adoption of the New Revenue Standard on January 1, 2018, our deferred revenue related to extended warranties and post-contract support was $40.3 million, of which approximately $18.8 million was recognized during the year ended December 31, 2018. Furthermore, as a result of new agreements, our deferred revenue related to extended warranties and post-contract support was $40.7 million at December 31, 2018. We do not disclose information about remaining performance obligations that are part of contracts with an original expected duration of one year or less and do not adjust for the effect of the financing components when the period between customer payment and revenue recognition is one year or less, which are practical expedients provided within the New Revenue Standard. Deferred revenue related to extended warranties and post-contract support with an original duration of more than one year was $27.7 million at December 31, 2018, of which approximately 30%, 28%, 21% and 21% are expected to be recognized during 2019, 2020, 2021, and thereafter, respectively. Additionally, we have determined these agreements do not include a significant financing component.

SaaS Subscriptions. We offer a variety of veterinary software and diagnostic imaging SaaS subscriptions including Neo, Animana, Pet Health Network Pro, Petly Plans, Web PACS, rVetLink, and Smart Flow. We recognize revenue for our SaaS subscriptions over time on a ratable basis over the contract term, beginning on the date our service is made available to the customer. Our subscription contracts vary in term from monthly to 2 years. Customers typically pay for our subscription contracts in equal monthly amounts over the term of the agreement. Deferred revenue related to our SaaS subscriptions is not material.

Contracts with Multiple Performance Obligations. We enter into contracts where customers purchase a combination of IDEXX products and services. Determining whether products and services are considered distinct performance obligations that should be accounted for separately requires significant judgment. We determine the transaction price for a contract based

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on the consideration we expect to receive in exchange for the transferred goods or services. To the extent the transaction price includes variable consideration, such as volume rebates or expected price adjustments, we apply judgment in constraining the estimated variable consideration due to factors that may cause reversal of revenue recognized. We evaluate constraints based on our historical and projected experience with similar customer contracts.

We allocate revenue to each performance obligation in proportion to the relative standalone selling prices and recognize revenue when transfer of the related goods or services has occurred for each obligation. We utilize the observable standalone selling price when available, which represents the price charged for the performance obligation when sold separately. When standalone selling prices for our products or services are not directly observable we determine the standalone selling prices using relevant information available and apply suitable estimation methods including, but not limited to, the cost plus a margin approach. We recognize revenue as each performance obligation is satisfied, either at a point in time or over time, as described in the revenue categories above. We apply a practical expedient provided by the New Revenue Standard and do not disclose information about remaining performance obligations that are part of contracts with an original expected duration of one year or less.

The following customer programs represent our most significant customer contracts which contain multiple performance obligations:

Customer Commitment Programs. We offer customer incentives upon entering into multi-year agreements to purchase annual minimum amounts of products and services.

Up-Front Customer Loyalty Programs. Our up-front loyalty programs provide customers with incentives in the form of cash payments or IDEXX Points upon entering into multi-year agreements to purchase annual minimum amounts of future products or services. If a customer breaches its agreement, they are required to refund all or a portion of the up-front cash or IDEXX Points, or make other repayments, remedial actions, or both. Up-front incentives to customers in the form of cash or IDEXX Points are not made in exchange for distinct goods or services and are capitalized as customer acquisition costs within other assets, which are subsequently recognized as a reduction to revenue over the term of the customer agreement. If these up-front incentives are subsequently utilized to purchase instruments, we allocate total consideration, including future committed purchases less up-front incentives and estimates of expected price adjustments, based on relative standalone selling prices to identified performance obligations and recognize instrument revenue and cost at the time of installation and customer acceptance. We have determined these agreements do not include a significant financing component.

Upon adoption of the New Revenue Standard on January 1, 2018, our capitalized customer acquisition costs were $107.5 million, of which approximately $28.5 million were recognized as a reduction of revenue during the year ended December 31, 2018. Furthermore, as a result of new up-front customer loyalty payments, our capitalized customer acquisition costs were $124.4 million at December 31, 2018. We monitor customer purchases over the term of their agreement to assess the realizability of our capitalized customer acquisition costs and review estimates of variable consideration. Impairments, revenue adjustments that relate to performance obligations satisfied in prior periods, and contract modifications during the year ended December 31, 2018, were not material.

Volume Commitment Programs. Our volume commitment programs, such as our IDEXX 360 program, provide customers with a free or discounted instrument or system upon entering into multi-year agreements to purchase annual minimum amounts of products and services. We allocate total consideration, including future committed purchases and expected price adjustments, based on relative standalone selling prices to identified performance obligations and recognize instrument revenue and cost in advance of billing the customer at the time of installation and customer acceptance, which is also when the customer obtains control of the instrument based on legal title transfer. Our right to future consideration related to instrument revenue is recorded as a contract asset within other current and long-term assets. The contract asset is transferred to accounts receivable when customers are billed for future products and services over the term of the contract. We have determined these agreements do not include a significant financing component.

Upon adoption of the New Revenue Standard on January 1, 2018, our volume commitment contract assets were $5.6 million, of which approximately $4.1 million were reclassified to accounts receivable when customers were billed for related products and services during the year ended December 31, 2018. Furthermore, as a result of new placements under volume commitment programs, our contract assets were $40.9 million at December 31, 2018. We monitor customer purchases over the term of their agreement

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to assess the realizability of our contract assets and review estimates of variable consideration. Impairments, revenue adjustments that relate to performance obligations satisfied in prior periods, and contract modifications during the year ended December 31, 2018, were not material.

For our up-front customer loyalty and volume commitment programs, we estimate future revenues related to multi-year agreements to be approximately $1.3 billion, of which approximately 26%, 22%, 18%, and 34% are expected to be recognized during 2019, 2020, 2021, and thereafter, respectively. These future revenues relate to performance obligations not yet satisfied, for which customers have committed to purchase goods and services, net of the expected revenue reductions from customer acquisition costs and expected price adjustments, and as a result, are lower than stated contractual commitments by our customers.

Instrument Rebate Programs. Our instrument rebate programs, previously referred to as IDEXX Instrument Marketing Programs, require an instrument purchase and provide customers the opportunity to earn future rebates based on the volume of products and services they purchase over the term of the program. We account for the customer’s right to earn rebates on future purchases as a separate performance obligation and determine the standalone selling price based on an estimate of rebates the customer will earn over the term of the program. Total consideration allocated to identified performance obligations is limited to goods and services that the customer is presently obligated to purchase and does not include estimates of future purchases that are optional. We allocate total consideration to identified performance obligations, including customer’s right to earn rebates on future purchases, which is deferred and recognized upon the purchase of future products and services, offsetting future rebates as they are earned.

Upon adoption of the New Revenue Standard on January 1, 2018, our deferred revenue related to instrument rebate programs was $65.9 million, of which approximately $18.2 million was recognized when customers purchased eligible products and services and earned rebates during the year ended December 31, 2018. Furthermore, as a result of new instrument purchases under rebate programs, our deferred revenue was $57.4 million at December 31, 2018, of which approximately 32%, 25%, 19%, and 24% are expected to be recognized during 2019, 2020, 2021, and thereafter, respectively.

Reagent Rental Programs. Our reagent rental programs provide our customers the right to use our instruments upon entering into multi-year agreements to purchase annual minimum amounts of consumables. These types of agreements include an embedded operating lease for the right to use our instrument and no instrument revenue is recognized at the time of instrument installation. We determine the amount of lease revenue allocated to the instrument based on relative standalone selling prices and determine the pattern of instrument revenue recognition in proportion to the customer’s minimum purchase commitment. The cost of the instrument is removed from inventory and capitalized within property and equipment, and is charged to cost of product revenue ratably over the term of the agreement. See "Note 8. Property and Equipment, Net" for more information on the costs of instruments placed under rental programs.

We estimate future revenue to be recognized related to these multi-year agreements with customers of approximately $49.6 million, of which approximately 36%, 29%, 20%, and 15% are expected to be recognized during 2019, 2020, 2021, and thereafter, respectively. These future revenues relate to future performance obligations not yet satisfied for which customers have committed to future purchases, net of any expected price adjustments, and as a result, may be lower than stated contractual commitments by our customers.

Other Customer Incentive Programs. Certain agreements with customers include discounts or rebates on the sale of products and services applied retrospectively, such as volume rebates achieved by purchasing a specified threshold of goods and services. We account for these discounts as variable consideration and estimate the likelihood of a customer meeting the threshold in order to determine the transaction price using the most predictive approach. We typically use the most-likely-amount method, for incentives that are offered to individual customers, and the expected-value method, for programs that are offered to a broad group of customers. Revenue adjustments that relate to performance obligations satisfied in prior periods during the year ended December 31, 2018, were not material. Refund obligations related to customer incentive programs are recorded in accrued liabilities for the actual issuance of incentives, incentives earned but not yet issued and estimates of incentives to be earned in the future.

Program Combinations. At times, we combine elements of our significant customer programs within a single customer contract. We separate each significant program element and include the contract assets, customer acquisition costs, deferred revenues and estimated future revenues within the most relevant program disclosures above. Each customer contract is presented as a net contract asset or net contract liability on our condensed consolidated balance sheet.

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Future market conditions and changes in product offerings may cause us to change marketing strategies to increase or decrease customer incentive offerings, possibly resulting in incremental reductions of revenue in future periods as compared to reductions in the current or prior periods. Additionally, certain customer programs require us to estimate, based on historical experience, and apply judgment to predict the amounts of future customer purchases, customer rebates and other incentive payments, and price adjustments related to multi-year agreements. Differences between estimated and actual customer purchases may impact the amount and timing of revenue recognition.

IDEXX Points. IDEXX Points may be applied to trade receivables due to us, converted to cash, or applied against the purchase price of IDEXX products and services. We consider IDEXX Points equivalent to cash and IDEXX Points that have not yet been used by customers are included in accrued liabilities until utilized or expired. Breakage is not material because customers can apply IDEXX Points to trade receivables at any time.

Accounts Receivable. We recognize revenue when it is probable that we will collect substantially all of the consideration to which we will be entitled, based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer. We maintain allowances for doubtful accounts for potentially uncollectible receivables. We base our estimates on a detailed analysis of specific customer situations and a percentage of our accounts receivable by aging category. Additional allowances may be required if either the financial condition of our customers were to deteriorate, or a strengthening U.S. dollar impacts the ability of foreign customers to make payments to us on their U.S. dollar denominated purchases. Account balances are charged off against the allowance when we believe it is probable the receivable will not be recovered. We do not have any off-balance sheet credit exposure related to our customers. We have no significant customers that accounted for greater than 10% of our consolidated revenues and we have no concentration of credit risk as of December 31, 2018.

Disaggregated Revenues. We present disaggregated revenue for our CAG segment based on major product and service categories. Our Water segment is comprised of a single major product category. Although our LPD segment does not meet the quantitative thresholds to be reported as a separate segment, we believe it is important to disaggregate these revenues as a major product and service category within our Other reportable segment given its distinct markets, and therefore we have elected to report LPD as a reportable segment. The following table presents disaggregated revenue by major product and service categories for the years ended December 31, 2018, 2017, and 2016 (in thousands):

		For the Years Ended December 31,
		2018				2017				2016
CAG segment revenue:
CAG Diagnostics recurring revenue:		$	1,654,530			$	1,451,701			$	1,281,262
IDEXX VetLab consumables		617,237				518,774				451,456
Rapid assay products		217,541				205,309				189,122
Reference laboratory diagnostic and consulting services		746,794				660,142				581,067
CAG Diagnostics services and accessories		72,958				67,476				59,617
CAG Diagnostics capital - instruments		134,264				119,963				121,191
Veterinary software, services and diagnostic imaging systems		146,634				131,713				120,236
CAG segment revenue		1,935,428				1,703,377				1,522,689
Water segment revenue		125,198				114,395				103,579
LPD segment revenue		130,581				128,481				126,491
Other segment revenue		22,035				22,805				22,664
Total revenue		$	2,213,242			$	1,969,058			$	1,775,423

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Revenue by principal geographic area, based on customers’ domiciles, was as follows (in thousands):

		For the Years Ended December 31,
		2018				2017				2016
Americas
United States		$	1,357,909			$	1,203,547			$	1,089,595
Canada		94,206				83,818				74,923
Latin America		50,969				46,893				38,872
		1,503,084				1,334,258				1,203,390
Europe, the Middle East and Africa
Germany		100,459				88,328				80,156
United Kingdom		87,807				80,149				77,671
France		60,319				55,993				51,204
Italy		36,956				31,889				28,907
Spain		33,687				28,866				24,268
Switzerland		19,875				17,913				16,361
Netherlands		18,090				15,877				14,049
Other		114,877				100,409				83,147
		472,070				419,424				375,763
Asia Pacific Region
Australia		63,386				56,994				52,871
China		57,621				55,810				48,257
Japan		60,213				53,344				51,544
Other		56,868				49,228				43,598
		238,088				215,376				196,270
Total		$	2,213,242			$	1,969,058			$	1,775,423

Costs to Obtain a Contract. We capitalize sales commissions and the related fringe benefits earned by our sales force when considered incremental and recoverable costs of obtaining a contract. Our contracts include performance obligations related to various goods and services, some of which are satisfied at a point in time and others over time. Commission costs related to performance obligations satisfied at a point in time are expensed at the time of sale, which is when revenue is recognized. Commission costs related to long-term service contracts and performance obligations satisfied over time, including extended warranties and SaaS subscriptions, are deferred and recognized on a systematic basis that is consistent with the transfer of the goods or services to which the asset relates. We apply judgment in estimating the amortization period, which ranges from 3 to 7 years, by taking into consideration our customer contract terms, history of renewals, expected length of customer relationship, as well as the useful life of the underlying technology and products. Amortization expense is included in sales and marketing expenses in the accompanying condensed consolidated statements of income. Deferred commission costs are periodically reviewed for impairment.

Upon adoption of the New Revenue Standard on January 1, 2018, our deferred commissions costs, included within other assets, were $11.8 million, of which approximately $3.6 million of commissions expense were recognized during the year ended December 31, 2018. Furthermore, as a result of commissions related to new extended warranties and SaaS subscriptions, our deferred commission costs were $13.9 million at December 31, 2018. Impairments of deferred commission costs during the year ended December 31, 2018, were not material.

NOTE 4. ACQUISITIONS AND INVESTMENTS

We believe that our acquisitions of businesses and other assets enhance our existing businesses by either expanding our geographic range and customer base or expanding our existing product lines.

During 2018, we acquired four reference laboratory customer lists in the United States for approximately $2.2 million and recorded all four transactions as asset acquisitions, with substantially all of the acquisition price valued as intangible assets. The results of operations have been included in our CAG segment since the acquisition dates. In addition to the amount paid at time of purchase, these agreements include contingent payments of up to $0.3 million, that will be recorded upon payment. The acquisition expenses incurred were not material.

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During the fourth quarter of 2018, we invested $5 million for a noncontrolling minority interest in a technology company. This equity investment has been accounted for under the cost method of accounting.

During the third quarter of 2018, we acquired substantially all of the assets of a software company for $25.0 million, including a holdback payment of $1.0 million, to offset possible pre-acquisition indemnity claims and a contingent payment of $1.5 million. The holdback payment, less settlement of any indemnity claims, will be paid on the second anniversary of the acquisition date, while the contingent payment will be paid within 36 months if certain commercial goals are achieved. This acquisition expands the IDEXX suite of veterinary software offerings and further underscores our commitment to investing in software innovations that advance the veterinary profession. This acquisition was accounted for as a business combination. The fair value estimate of the assets acquired consists of approximately $20.3 million of goodwill, representing synergies with our current software product offerings, approximately $2.6 million in technology intangible assets, approximately $2.4 million in customer relationship intangible assets, and approximately $0.3 million of net tangible liabilities. The valuation was finalized during the fourth quarter of 2018. The goodwill is expected to be deductible for income tax purposes. Pro forma information has not been presented for this acquisition because such information is not material to our financial statements. The results of operations have been included in our CAG segment since the acquisition date. The acquisition expenses incurred were not material.

During the third and fourth quarters of 2017, we acquired four reference laboratory customer lists in the United States for approximately $2.3 million and recorded these transactions as asset acquisitions, with a majority of the acquisition price valued as intangible assets. The results of operations for these reference laboratories have been included in our CAG segment since the acquisition dates. In addition to the amount paid at time of purchase, additional contingent payments of approximately $0.3 million were paid in 2018.

During the second quarter of 2017, we acquired the assets of two software companies that expand our suite of technology applications for the veterinary profession, specifically related to patient referral management and other connectivity needs between practices and other parties. The combined purchase price of $15.0 million consists of $12.0 million paid at closing and a $3.0 million contingent payment to be paid within 36 months if certain commercial goals are achieved. We finalized the valuation of the acquired assets in the third quarter of 2017. The fair value estimate of the assets acquired consists of $13.3 million of goodwill, representing synergies within our broader CAG portfolio, $1.0 million of customer relationship intangibles and $0.6 million of technology intangible assets. Goodwill related to these acquisitions is expected to be deductible for income tax purposes. The amount of net tangible assets acquired was immaterial. Pro forma information has not been presented for these acquisitions because such information is not material to our financial statements. The results of operations have been included in our CAG segment since the acquisition date.

During the first quarter of 2017, we acquired a reference laboratory in Austria for approximately €1.3 million, with the majority of the acquisition price valued as an intangible asset. The results of operations of this reference laboratory have been included in our CAG segment since the acquisition date.

During the year ended December 31, 2016, we paid an aggregate of $3.5 million in cash and amounts payable to acquire the assets of a veterinary reference laboratory testing business. We allocated the purchase price and recognized customer related amortizable intangible assets and goodwill. The fair value of the fixed assets acquired was immaterial. Goodwill is calculated as the consideration in excess of net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill recorded from the business acquisition is deductible for income tax purposes. The results of operations have been included in our CAG segment since the acquisition date. Pro forma information has not been presented for this business acquisition because such information is not material to the financial statements.

NOTE 5. SHARE-BASED COMPENSATION

We provide for various forms of share-based compensation awards to our employees and non-employee directors. Our share-based compensation plans allow for the issuance of a mix of stock options, restricted stock, stock appreciation rights, employee stock purchase rights and other stock unit awards. With the exception of stock options, the fair value of our awards is equal to the closing stock price of IDEXX common stock on the date of grant. We calculate the fair value of our stock option awards using the Black-Scholes-Merton option-pricing model. For stock options, restricted stock units (“RSUs”), and “deferred stock units (DSUs”), share-based compensation expense is recognized net of estimated forfeitures, on a straight-line basis over the requisite service period of the award for stock options. For performance-based restricted stock units (PBRSUs”), share-based compensation expense is recognized net of estimated forfeitures, on a grade-vesting methodology over the requisite service period.

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Stock options permit a holder to buy IDEXX stock upon vesting at the stock’s price on the date the option was granted. An RSU is an agreement to issue shares of IDEXX stock at the time of vesting. A PBRSUs is an agreement to issue shares of IDEXX stock at the time of vesting upon successful completion of certain performance goals. DSUs are granted under our Executive Deferred Compensation Plan (the “Executive Plan”) and non-employee Director Deferred Compensation Plan (the “Director Plan”). DSUs may or may not have vesting conditions depending on the plan under which they are issued. We did not issue any restricted stock or stock appreciation rights during the years ended December 31, 2018, 2017 and 2016, nor were any restricted stock or stock appreciation rights outstanding as of those years ended. There were no material modifications to the terms of outstanding options, RSUs, PBRSUs, or DSUs during the years ended December 31, 2018, 2017 or 2016.

We primarily issue shares of common stock to satisfy stock option exercises and employee stock purchase rights and to settle RSUs, PBRSUs, and DSUs. We issue shares of treasury stock to settle certain RSUs and upon the exercise of certain stock options, which were not material for the years ended December 31, 2018, 2017 and 2016. The number of shares of common stock and treasury stock issued are equivalent to the number of awards exercised or settled.

With the exception of employee stock purchase rights, equity awards are issued to employees and non-employee directors under the 2018 Stock Incentive Plan (the "2018 Stock Plan"), which replaced the 2009 Stock Incentive Plan in May 2018. Our Board of Directors has authorized the issuance of 7.5 million shares of our common stock under the 2018 Stock Plan. Any shares that are subject to awards of stock options or stock appreciation rights will be counted against the share limit as one share for every share granted. Any shares that are issued other than stock options and stock appreciation rights will be counted against the share limit as 2.4 shares for every share granted. If any shares issued under our prior plans are forfeited, settled for cash, or expire, these shares, to the extent of such forfeiture, cash settlement or expiration, will again be available for issuance under the 2018 Stock Plan. As of December 31, 2018, there were approximately 7.2 million remaining shares available for issuance under the 2018 Stock Plan.

Share-Based Compensation

Share-based compensation costs are classified in our consolidated financial statements consistent with the classification of cash compensation paid to the employees receiving such share-based compensation. The following is a summary of share-based compensation costs and related tax benefits recorded in our consolidated statements of income for the years ended December 31, 2018, 2017 and 2016 (in thousands):

		For the Years Ended December 31,
		2018				2017				2016
Share-based compensation expense included in cost of revenue		$	2,816			$	2,675			$	2,305
Share-based compensation expense included in operating expenses		22,341				20,842				17,586
Total share-based compensation expense included in consolidated statements of income		25,157				23,517				19,891
Income tax benefit resulting from share-based compensation expense		(4,190		)		(6,810		)		(6,143		)
Net share-based compensation expense included in consolidated statements of income, excluding tax benefit from settlement of share-based awards		20,967				16,707				13,748
Income tax benefit resulting from settlement of share-based awards under ASU 2016-09		(21,496		)		(27,743		)		—
Net (benefit) expense related to share-based compensation arrangements included in consolidated statements of income		$	(529	)		$	(11,036	)		$	13,748

Share-based compensation expense is reduced for an estimate of the number of awards that are expected to be forfeited. We use historical data and other factors to estimate expected employee terminations and to evaluate whether particular groups of employees have significantly different forfeiture expectations.

The total unrecognized compensation expense, net of estimated forfeitures, for unvested share-based compensation awards at December 31, 2018, was $51.2 million, which will be recognized over a weighted average period of approximately 1.7 years.

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Stock Options

Option awards are granted with an exercise price equal to the closing market price of our common stock on the date of grant. Options granted to employees primarily vest ratably over five years on each anniversary of the date of grant and options granted to non-employee directors vest fully on the first anniversary of the date of grant. Vesting of option awards issued is conditional based on continuous service. Options granted after May 8, 2013 have a contractual term of ten years and options granted between January 1, 2006 and May 8, 2013 have contractual terms of seven years. Upon any change in control of the company, 25% of the unvested stock options then outstanding will vest and become exercisable. However, if the acquiring entity does not assume outstanding options, then all options will vest immediately prior to the change in control.

We use the Black-Scholes-Merton option-pricing model to determine the fair value of options granted. Option-pricing models require the input of highly subjective assumptions, particularly for the expected stock price volatility and the expected term of options. Changes in the subjective input assumptions can materially affect the fair value estimate. Our expected stock price volatility assumptions are based on the historical volatility of our stock over periods that are similar to the expected terms of grants and other relevant factors. We derive the expected term based on historical experience and other relevant factors concerning expected employee behavior with regard to option exercise. The risk-free interest rate is based on U.S. Treasury yields for a maturity approximating the expected term calculated at the date of grant. We have never paid any cash dividends on our common stock and we have no intention to pay a dividend at this time; therefore, we assume that no dividends will be paid over the expected terms of option awards.

We determine the assumptions used in the valuation of option awards as of the date of grant. Differences in the expected stock price volatility, expected term or risk-free interest rate may necessitate distinct valuation assumptions at those grant dates. As such, we may use different assumptions for options granted throughout the year. The weighted averages of the valuation assumptions used to determine the fair value of each option award on the date of grant and the weighted average estimated fair values were as follows:

		For the Years Ended December 31,
		2018				2017				2016
Share price at grant		$	179.56			$	142.89			$	69.07
Expected stock price volatility		24		%		26		%		25		%
Expected term, in years		5.8				5.8				5.7
Risk-free interest rate		2.7		%		2.0		%		1.2		%
Weighted average fair value of options granted		$	52.99			$	40.83			$	17.87

A summary of the status of options granted under our share-based compensation plans at December 31, 2018, and changes during the year then ended, are presented in the table below:

		Number of Options (000)			Weighted Average Exercise Price				Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value ($000)
Outstanding as of December 31, 2017		2,727			$	72.72
Granted		333			$	179.56
Exercised		(561	)		$	51.55
Forfeited		(50	)		$	95.19
Outstanding as of December 31, 2018		2,449			$	91.64			6.2		$	231,414
Fully vested as of December 31, 2018		1,239			$	67.69			4.7		$	146,555
Fully vested and expected to vest as of December 31, 2018		2,402			$	91.28			6.1		$	227,861

The total fair value of options vested was $10.5 million, $9.2 million, and $9.3 million during the years ended December 31, 2018, 2017 and 2016, respectively.

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Intrinsic value of stock options exercised represents the amount by which the market price of the common stock exceeded the exercise price, before applicable income taxes. The total intrinsic value of stock options exercised was $87.1 million, $78.3 million, and $51.0 million during the years ended December 31, 2018, 2017 and 2016, respectively.

Restricted Stock Units

The majority of RSUs, including our PBRSUs, granted to employees vest ratably over five years on each anniversary of the date of grant. PBRSUs granted to employees vest based on meeting performance goals in the year of grant. RSUs granted to non-employee directors vest fully on the first anniversary of the date of grant. Vesting as it relates to RSUs and PBRSUs issued is conditional based on continuous service. Upon any change in control of the company, 25 percent of the unvested RSUs and PBRSUs then outstanding will vest, provided, however, that if the acquiring entity does not assume the RSUs and PBRSUs, then all such units will vest immediately prior to the change in control. At time of grant, we assume all PBRSUs will meet performance goals to vest.

A summary of the status of RSUs and PBRSUs granted under our share-based compensation plans at December 31, 2018, and changes during the period then ended, are presented in the table below:

		Number of Units (000)			Weighted Average Grant-Date Fair Value
Nonvested as of December 31, 2017		383			$	85.74
Granted		79			$	179.22
Vested		(136	)		$	74.69
Forfeited		(20	)		$	100.02
Nonvested as of December 31, 2018		306			$	113.87
Expected to vest as of December 31, 2018		289			$	113.44

The total fair value of RSUs and PBRSUs vested was $24.5 million, $22.1 million, and $12.4 million during the years ended December 31, 2018, 2017 and 2016, respectively. The aggregate intrinsic value of nonvested RSUs and PBRSUs as of December 31, 2018, is equal to the fair value of IDEXX’s common stock as of December 31, 2018, multiplied by the number of nonvested units as of December 31, 2018.

Deferred Stock Units

Under our Director Plan, non-employee directors may defer a portion of their cash fees in the form of vested DSUs. Prior to 2014, certain members of our management could elect to defer a portion of their cash compensation in the form of vested deferred stock units under our Executive Plan. Each DSU represents the right to receive one unissued share of our common stock. These recipients receive a number of DSUs equal to the amount of cash fees or compensation deferred divided by the closing sale price of the common stock on the date of deferral. Also, under the Director Plan, non-employee directors are awarded annual grants of DSUs that vest fully on the first anniversary of the date of grant. Vesting for these annual DSU grants is conditional based on continuous service. DSUs are exchanged for a fixed number of shares of common stock, upon vesting if vesting criteria apply, subject to the limitations of the Director and Executive Plans and applicable law.

There were approximately 162,000 and 229,000 vested DSUs outstanding under our share-based compensation plans as of December 31, 2018 and 2017, respectively. Unvested DSUs as of December 31, 2018 and 2017, were not material.

Employee Stock Purchase Rights

Employee stock purchase rights are issued under the 1997 Employee Stock Purchase Plan, under which we reserved and may issue up to an aggregate of 4.7 million shares of common stock in periodic offerings. Under this plan, stock is sold to employees at a 15% discount off the closing price of the stock on the last day of each quarter. The dollar value of this discount is equal to the fair value of purchase rights recognized as share-based compensation. We issued approximately 52,000, 61,000, and 85,000 shares of common stock in connection with the Employee Stock Purchase Plan during the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, there were approximately 1.2 million remaining shares available for issuance under the 1997 Employee Stock Purchase Plan.

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NOTE 6. MARKETABLE SECURITIES

As a result of the passage of the 2017 Tax Act during the fourth quarter of 2017, we liquidated our marketable securities held outside the U.S. during the first quarter of 2018 and recognized a loss of approximately $0.3 million. We repatriated these funds and reduced our revolving debt balance during the first quarter of 2018.

Purchased marketable debt securities were classified as available-for-sale and carried at fair value in the accompanying consolidated balance sheets on a trade date basis. We had classified our investments with maturities beyond one year as short-term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. Unrealized holding gains and losses were deferred within accumulated other comprehensive income (“AOCI”), net of applicable taxes, except when an impairment is determined to be other-than-temporary or the security is divested prior to maturity. Within the accompanying consolidated statements of operations, interest earned and amortization of premiums or discounts on marketable securities were included in interest income, and realized gains and losses on the sale of our marketable securities were included in other income.

The amortized cost and fair value of marketable securities as of December 31, 2017, were as follows (in thousands):

As of December 31, 2017		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
Corporate bonds		$	140,969			$	96			$	(179	)		$	140,886
Certificates of deposit		58,510				—				—				58,510
Commercial paper		29,171				—				—				29,171
Asset backed securities		22,206				4				(43		)		22,167
U.S. government bonds		15,619				11				(19		)		15,611
Agency bonds		10,990				9				(52		)		10,947
Treasury bills		6,964				—				(1		)		6,963
Total marketable securities		$	284,429			$	120			$	(294	)		$	284,255

As of December 31, 2017, we held marketable securities with effective maturities of two years or less that had an average AA- credit rating.

NOTE 7. INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We write down the carrying value of inventory for estimated obsolescence by an amount equal to the difference between the cost of inventory and the estimated market value when warranted based on assumptions of future demand, market conditions, remaining shelf life, or product functionality. If actual market conditions or results of estimated functionality are less favorable than those we estimated, additional inventory write-downs may be required, which would have a negative effect on results of operations.

Unpaid inventory reflected within accounts payable in our consolidated balance sheets was $41.3 million, $37.2 million, and $32.7 million at December 31, 2018, 2017 and 2016, respectively.

The components of inventories are as follows (in thousands):

		December 31, 2018				December 31, 2017
Raw materials		$	31,973			$	32,994
Work-in-process		17,009				17,786
Finished goods		124,321				113,538
Inventories (Note 2)		$	173,303			$	164,318

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NOTE 8. PROPERTY AND EQUIPMENT, NET

Property and equipment are stated at cost, net of accumulated depreciation and amortization. The costs of additions and improvements are capitalized, while maintenance and repairs are charged to expense as incurred. When an item is sold or retired, the cost and related accumulated depreciation is relieved, and the resulting gain or loss, if any, is recognized in the consolidated statements of income. We evaluate our property and equipment for impairment periodically or as changes in circumstances or the occurrence of events suggest the remaining value is not recoverable from future cash flows. If the carrying value of our property and equipment is impaired, an impairment charge is recorded for the amount by which the carrying value of the property and equipment exceeds its fair value. We provide for depreciation and amortization primarily using the straight-line method by charges to the consolidated statements of income in amounts that allocate the cost of property and equipment over their estimated useful lives as follows:

Asset Classification		Estimated Useful Life
Land improvements		15 to 20 years
Buildings and improvements		10 to 40 years
Leasehold improvements		Shorter of remaining lease term or useful life of improvements
Machinery and equipment		3 to 8 years
Office furniture and equipment		3 to 7 years
Computer hardware and software		3 to 7 years

We capitalize interest on the acquisition and construction of significant assets that require a substantial period of time to be made ready for use. The capitalized interest is included in the cost of the completed asset and depreciated over the asset’s estimated useful life. The amount of interest capitalized during the years ended December 31, 2018 and 2017, was not material.

We capitalize certain costs incurred in connection with developing or obtaining software designated for internal use based on three distinct stages of development. Qualifying costs incurred during the application development stage, which consist primarily of internal payroll and direct fringe benefits and external direct project costs, including labor and travel, are capitalized and amortized on a straight-line basis over the estimated useful life of the asset. Costs incurred during the preliminary project and post-implementation and operation phases are expensed as incurred. These costs are general and administrative in nature and relate primarily to the determination of performance requirements, data conversion and training. Software developed to deliver hosted services to our customers has been designated as internal use.

Property and equipment, net, consisted of the following (in thousands):

		December 31, 2018				December 31, 2017
Land and improvements		$	8,701			$	7,323
Buildings and improvements		190,809				180,185
Leasehold improvements		66,917				52,227
Machinery and equipment		299,204				284,375
Office furniture and equipment		51,661				47,476
Computer hardware and software		218,150				206,580
Construction in progress		70,561				33,470
		906,003				811,636
Less accumulated depreciation and amortization		468,733				432,540
Total property and equipment, net		$	437,270			$	379,096

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Below are the amounts of depreciation and amortization of property and equipment, capitalized computer software for internal use, unpaid property and equipment reflected in account payable and accrued expenses, and rental and reagent rental program instruments transferred from inventory to property and equipment:

		December 31, 2018				December 31, 2017				December 31, 2016
Depreciation and amortization expense		$	74,208			$	73,797			$	63,537
Capitalized computer software developed for internal use		$	17,115			$	16,131			$	15,590
Unpaid property and equipment, reflected in accounts payable and accrued liabilities		$	17,894			$	11,744			$	10,601
Rental and Reagent Rental Program instruments transferred from inventory to property and equipment (Note 3)		$	20,360			$	16,313			$	18,324

During the third quarter of 2018, we decided to discontinue the development of our in–clinic SNAP Fecal product and focus resources and capital on supporting fecal antigen testing within our reference laboratories, which resulted in a $2.6 million impairment of construction in progress production equipment related to SNAP Fecal. This impairment charge is recorded as general and administrative expense in our CAG reporting segment.

NOTE 9. OTHER CURRENT AND LONG-TERM ASSETS

Other current assets consisted of the following (in thousands):

		December 31, 2018				December 31, 2017
Prepaid expenses		$	30,314			$	28,967
Taxes receivable		14,098				35,475
Customer acquisition costs (Notes 2 and 3)		34,515				23,520
Contract assets (Notes 2 and 3)		9,670				—
Deferred sales commissions (Notes 2 and 3)		4,464				—
Other assets (Notes 2 and 3)		15,159				13,178
Other current assets		$	108,220			$	101,140

Other noncurrent assets consisted of the following (in thousands):

		December 31, 2018				December 31, 2017
Investment in long-term product supply arrangements		$	10,894			$	9,949
Customer acquisition costs (Notes 2 and 3)		89,862				64,670
Contract assets (Notes 2 and 3)		31,269				—
Deferred sales commissions (Notes 2 and 3)		9,470				—
Deferred income taxes (Note 2)		8,481				7,698
Other assets (Notes 2 and 3)		39,617				36,299
Other long-term assets		$	189,593			$	118,616

NOTE 10. GOODWILL AND INTANGIBLE ASSETS, NET

A significant portion of the purchase price for acquired businesses is generally assigned to intangible assets. Intangible assets other than goodwill are initially valued at fair value. If a quoted price in an active market for the identical asset is not readily available at the measurement date, the fair value of the intangible asset is estimated based on discounted cash flows using market participant assumptions, which are assumptions that are not specific to IDEXX. The selection of appropriate valuation methodologies and the estimation of discounted cash flows require significant assumptions about the timing and amounts of future cash flows, risks, appropriate discount rates, and the useful lives of intangible assets. When material, we utilize independent valuation experts to advise and assist us in determining the fair values of the identified intangible assets acquired in connection with a business acquisition and in determining appropriate amortization methods and periods for those

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intangible assets. Goodwill is initially valued based on the excess of the purchase price of a business combination over the fair value of acquired net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

Our business combinations regularly include contingent consideration arrangements that require additional consideration to be paid based on the achievement of established objectives, most commonly related to the retention or growth of the customer base during the post-combination period. We assess contingent consideration to determine if it is part of the business combination or if it should be accounted for separately from the business combination in the post-combination period. Contingent consideration is recognized at its fair value on the acquisition date. A liability resulting from contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved, with changes in fair value recognized in earnings. Changes in fair value of contingent consideration and differences arising upon settlement were not material during the years ended December 31, 2018, 2017 and 2016. See "Note 4. Acquisitions and Investments" for additional information regarding contingent consideration arising from recent business acquisitions.

We assess goodwill for impairment annually, at the reporting unit level, in the fourth quarter and whenever events or circumstances indicate impairment may exist. In evaluating goodwill for impairment, we have the option to first assess the qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the goodwill impairment test. The more likely than not threshold is defined as having a likelihood of more than 50%. If, after assessing the totality of events or circumstances, we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we would assess the fair value of all of our reporting unit and compare the fair value of the reporting unit to carrying value to determine if any impairment is necessary. In contrast, we can opt to bypass the qualitative assessment for any reporting unit in any period and proceed directly to assess the fair value of all of our reporting units and compare the fair value of the reporting units to carrying value to determine if any impairment is necessary. Doing so does not preclude us from performing the qualitative assessment in any subsequent period.

In the fourth quarter of 2018, we elected to bypass the qualitative approach that allows the assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount and instead proceeded directly to assessing the fair value of all of our reporting units and comparing the fair value of the reporting units to the carrying value to determine if any impairment is necessary. We estimate the fair values of applicable reporting units using an income approach based on discounted forecasted cash flows. We make significant assumptions about the extent and timing of future cash flows, growth rates and discount rates. Model assumptions are based on our projections and best estimates, using appropriate and customary market participant assumptions. In addition, we make certain assumptions in allocating shared assets and liabilities to individual reporting units in determining the carrying value of each reporting unit. Changes in forecasted cash flows or the discount rate would affect the estimated fair values of our reporting units and could result in a goodwill impairment charge in a future period.

No goodwill impairments were identified during the years ended December 31, 2018, 2017 or 2016.

We assess the realizability of intangible assets other than goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If an impairment review is triggered, we evaluate the carrying value of intangible assets based on estimated undiscounted future cash flows over the remaining useful life of the primary asset of the asset group and compare that value to the carrying value of the asset group. The cash flows that are used contain our best estimates, using appropriate and customary assumptions and projections at the time. If the net carrying value of an intangible asset exceeds the related estimated undiscounted future cash flows, an impairment to adjust the intangible asset to its fair value would be reported as a non-cash charge to earnings. If necessary, we would calculate the fair value of an intangible asset using the present value of the estimated future cash flows to be generated by the intangible asset, and applying a risk-adjusted discount rate. We had no impairments of our intangible assets during the years ended December 31, 2018 and 2017.

During the first half of 2016, management reviewed the OPTI Medical product offerings. As a result of this review, we discontinued certain development activities in the human point-of-care medical diagnostics market during March 2016 that was devoted to a new platform and focused our efforts in this market on supporting our current generation OPTI CCA-TS2 Blood Gas and Electrolyte analyzer. Non-cash intangible asset impairments of $2.2 million were recorded within our condensed consolidated statements of income, within general and administrative expenses, within our Other segment, during 2016. The intangibles associated with our OPTI Medical human point-of-care medical diagnostics market are fully written off.

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We provide for amortization primarily using the straight-line method by charges to income in amounts that allocate the intangible assets over their estimated useful lives as follows:

Asset Classification		Estimated Useful Life
Product rights(1)		5 to 15 years
Customer-related intangible assets(2)		3 to 17 years
Noncompete agreements		3 to 5 years

(1)	Product rights comprise certain technologies, intellectual property, licenses, and trade names acquired from third parties.

(2)	Customer-related intangible assets are comprised of customer lists and customer relationships acquired from third parties.

Intangible assets other than goodwill consisted of the following (in thousands):

		December 31, 2018												December 31, 2017
		Cost				Accumulated Amortization				Net				Cost				Accumulated Amortization				Net
Product rights(1)		$	27,060			$	19,153			$	7,907			$	32,558			$	25,251			$	7,307
Customer-related intangible assets(2)		77,015				43,352				33,663				80,398				44,382				36,016
Noncompete agreements		856				601				255				1,271				748				523
		$	104,931			$	63,106			$	41,825			$	114,227			$	70,381			$	43,846

The above table excludes fully amortized intangible assets for the periods presented.

(1)	Product rights comprise certain technologies, licenses and trade names acquired from third parties.

(2)	Customer-related intangible assets are comprised of customer lists and customer relationships acquired from third parties.

Amortization expense of intangible assets other than goodwill was $8.9 million, $9.0 million, and $9.5 million for the years ended December 31, 2018, 2017 and 2016, respectively.

At December 31, 2018, the aggregate amortization expense associated with intangible assets is estimated to be as follows for each of the next five years and thereafter (in thousands):

	Amortization Expense
2019	$	8,450
2020	7,087
2021	6,232
2022	5,063
2023	3,330
Thereafter	11,663
	$	41,825

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The changes in the carrying amount of goodwill for the years ended December 31, 2018, 2017 and 2016, were as follows (in thousands):

		CAG				Water				LPD				Other				Consolidated Total
Balance as of December 31, 2015		$	145,191			$	13,038			$	14,174			$	6,531			$	178,934
Business combinations		1,720				—				—				—				1,720
Impact of changes in foreign currency exchange rates		(717		)		(2,148		)		439				—				(2,426		)
Balance as of December 31, 2016		$	146,194			$	10,890			$	14,613			$	6,531			$	178,228
Business combinations		13,541				—				—				—				13,541
Impact of changes in foreign currency exchange rates		6,501				1,061				542				—				8,104
Balance as of December 31, 2017		$	166,236			$	11,951			$	15,155			$	6,531			$	199,873
Business combinations		20,282				—				—				—				20,282
Impact of changes in foreign currency exchange rates		(4,132		)		(730		)		(804		)		—				(5,666		)
Balance as of December 31, 2018		$	182,386			$	11,221			$	14,351			$	6,531			$	214,489

See "Note 4. Acquisitions and Investments" for information regarding goodwill and other intangible assets recognized in connection with the acquisition of businesses and other assets during the years ended December 31, 2018, 2017 and 2016.

NOTE 11. ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES

Accrued liabilities consisted of the following (in thousands):

		December 31, 2018				December 31, 2017
Accrued expenses		$	65,212			$	64,430
Accrued employee compensation and related expenses		109,488				102,944
Accrued taxes		26,609				29,389
Accrued customer incentives and refund obligations (Notes 2 and 3)		59,374				56,655
Accrued liabilities		$	260,683			$	253,418

Other long-term liabilities consisted of the following (in thousands):

		December 31, 2018				December 31, 2017
Accrued taxes		$	66,767			$	66,506
Accrued customer incentives (Note 2)		—				12,956
Other accrued long-term expenses		18,059				16,256
Other long-term liabilities		$	84,826			$	95,718

NOTE 12. DEBT

Credit Facility

In December 2015, we refinanced our existing $700 million unsecured revolving credit facility by entering into a second amended and restated credit agreement relating to a five-year unsecured revolving credit facility in the principal amount of $850 million with a syndicate of multinational banks, which matures on December 4, 2020, (“Credit Facility”) and requires no scheduled prepayments before that date. Although the Credit Facility does not mature until December 4, 2020, all individual borrowings under the terms of the Credit Facility have a stated term between 30 and 180 days. At the end of each term, the obligation is either repaid or rolled over into a new borrowing. The Credit Facility contains a subjective material adverse event clause, which allows the debt holders to call the loans under the Credit Facility if we fail to provide prompt written notice to the syndicate of such an event. Based on the stated term and the existence of the subjective material adverse event clause, this

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Credit Facility is reflected in the current liabilities section of our consolidated balance sheets. At December 31, 2018, we had $398.9 million outstanding under our Credit Facility with a weighted average effective interest rate of 3.63%. At December 31, 2017, we had $655.0 million outstanding under our Credit Facility with a weighted average effective interest rate 2.81%. The funds available under the Credit Facility at December 31, 2018, and December 31, 2017, reflect a further reduction due to the issuance of letters of credit for $1.3 million and $1.0 million, respectively, which were issued in connection with our workers’ compensation policy.

Applicable interest rates on borrowings under the Credit Facility generally range from 0.875 to 1.375 percentage points (“Credit Spread”) above the London interbank offered rate, based on our leverage ratio, or the prevailing prime rate plus a maximum spread of up to 0.375%, based on our leverage ratio. We previously entered into forward fixed interest rate swap agreements to manage the economic effect of the first $80 million of variable interest rate borrowings. We designated the interest rate swaps as cash flow hedges. See "Note 18. Hedging Instruments" for a discussion of our derivative instruments and hedging activities. Under the Credit Facility, we pay quarterly commitment fees of 0.075% to 0.25%, based on our leverage ratio, on any unused commitment.

The obligations under the Credit Facility may be accelerated upon the occurrence of an event of default under the Credit Facility, which includes customary events of default including payment defaults, defaults in the performance of the affirmative, negative and financial covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency related defaults, defaults relating to judgments, certain events related to employee pension benefit plans under the Employee Retirement Income Security Act of 1974, the failure to pay specified indebtedness, cross-acceleration to specified indebtedness and a change of control default. The Credit Facility contains affirmative, negative, and financial covenants customary for financings of this type. The negative covenants include restrictions on liens, indebtedness of subsidiaries of the Company, fundamental changes, investments, transactions with affiliates and certain restrictive agreements. The sole financial covenant is a consolidated leverage ratio test that requires our ratio of debt to earnings before interest, taxes, depreciation, amortization, and share-based compensation defined as the consolidated leverage ratio under the terms of the Credit Facility, not to exceed 3.5-to-1. At December 31, 2018, we were in compliance with the covenants of the Credit Facility.

Senior Notes

In December 2013, we issued and sold through a private placement an aggregate principal amount of $150 million of unsecured senior notes consisting of $75 million of 3.94% Series A Senior Notes due December 11, 2023 (the “2023 Notes”) and $75 million of 4.04% Series B Senior Notes due December 11, 2025 (the “2025 Series B Notes” and together with the 2023 Notes, the “December Notes”) under a Note Purchase Agreement among the Company, New York Life Insurance Company and the accredited institutional purchasers named therein (the “December 2013 Note Agreement”).

In July 2014, we issued and sold through a private placement an aggregate principal amount of $125 million of unsecured senior notes consisting of $75 million of 3.76% Series B Senior Notes due July 21, 2024 (the “2024 Notes”) and $50 million of 3.32% Series A Senior Notes due July 21, 2021 (the “2021 Notes” and together with the 2024 Notes, the “Prudential Notes”) under a Note Purchase and Private Shelf Agreement among the Company, Prudential Investment Management, Inc. (“Prudential”) and the accredited institutional purchasers named therein (the “July 2014 Note Agreement”).

In September 2014, we issued and sold through a private placement an aggregate principal amount of $75 million of unsecured 3.72% senior notes due September 4, 2026 (the “2026 Notes”) under a Note Purchase Agreement dated as of July 22, 2014, among the Company, New York Life Insurance Company and the accredited institutional purchasers named therein (the “September 2014 Note Agreement”).

In December 2014, we entered into a Multi-Currency Note Purchase and Private Shelf Agreement among the Company, Metropolitan Life Insurance Company (“MetLife”), and the accredited institutional purchasers named therein pursuant to which we agreed to issue and sell $75 million of its unsecured 3.25% Series A Senior Notes having a seven-year term (the "2022 Notes"), and $75 million of its unsecured 3.72% Series B Senior Notes having a twelve-year term ("2027 Notes"). The issuance, sale and purchase of these notes occurred in February 2015 (the “MetLife Notes”). The agreement (the “December 2014 Note Agreement”) also provided for an uncommitted shelf facility by which we may request that MetLife purchase, over the subsequent three years, up to $50 million of additional senior promissory notes of the Company at a fixed interest rate to be determined at the time of purchase and with a maturity date not to exceed fifteen years.

In June 2015, we entered into an Amended and Restated Multi-Currency Note Purchase and Private Shelf Agreement (the “2015 Amended Agreement”), among the Company, Prudential Investment Management, Inc., and the accredited institutional purchasers named therein, which amends and restates the Note Purchase and Private Shelf Agreement dated

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July 21, 2014. We refer to the 2015 Amended Agreement together with the December 2013 Note Agreement, September 2014 Note Agreement, and December 2014 Note Agreement collectively as the “Senior Note Agreements.”)

Pursuant to the 2015 Amended Agreement, we issued and sold through a private placement a principal amount of €88.9 million of unsecured 1.785% Series C Senior Notes due June 18, 2025 (the “2025 Series C Notes”). We refer to the 2025 Series C Notes together with the Prudential Notes, December Notes, MetLife Notes and the 2026 Notes, collectively, as the “Senior Notes”). We used the net proceeds from this issuance and sale of the 2025 Notes for general corporate purposes, including repaying amounts outstanding under our Credit Facility.

The 2015 Amended Agreement also provides for an uncommitted shelf facility by which we may request that Prudential purchase, over the next three years, up to $75.0 million (or the foreign currency equivalent) of additional senior promissory notes of the Company at a fixed interest rate and with a maturity date not to exceed twelve years (the “Shelf Notes”). Prudential is under no obligation to purchase any of the Shelf Notes. The interest rate of any series of Shelf Notes will be determined at the time of purchase. The proceeds of any series of Shelf Notes are able to be used for general corporate purposes.

The Senior Note Agreements contain affirmative, negative, and financial covenants customary for agreements of this type. The negative covenants include restrictions on liens, indebtedness of our subsidiaries, priority indebtedness, fundamental changes, investments, transactions with affiliates, certain restrictive agreements, and violations of laws and regulations. The sole financial covenant is a consolidated leverage ratio test that requires our ratio of debt to earnings before interest, taxes, depreciation, amortization, and share-based compensation, as defined in the Senior Note Agreements, not to exceed 3.5-to-1. At December 31, 2018, we were in compliance with the covenants of the Senior Note Agreements.

Should we elect to prepay the Senior Notes, such aggregate prepayment will include the applicable make-whole amount(s), as defined within the applicable Senior Note Agreements. Additionally, in the event of a change in control of the Company or upon the disposition of certain assets of the Company the proceeds of which are not reinvested (as defined in the Senior Note Agreements), we may be required to prepay all or a portion of the Senior Notes. The obligations under the Senior Notes may be accelerated upon the occurrence of an event of default under the applicable Senior Note Agreement, each of which includes customary events of default including payment defaults, defaults in the performance of the affirmative, negative and financial covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency related defaults, defaults relating to judgments, certain events related to employee pension benefit plans under the Employee Retirement Income Security Act of 1974, the failure to pay specified indebtedness and cross-acceleration to specified indebtedness.

Interest paid for the periods ended December 31, 2018, 2017 and 2016, was $34.7 million, $37.6 million, and $31.8 million, respectively.

Annual principal payments on long-term debt at December 31, 2018, are as follows (in thousands):

Years Ending December 31,		Amount
2019		$	—
2020		—
2021		50,000
2022		75,000
2023		75,000
Thereafter		401,777
		$	601,777

NOTE 13. INCOME TAXES

The Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted on December 22, 2017, and includes significant changes to the U.S. corporate tax system. Effective January 1, 2018, the 2017 Tax Act reduced the U.S. federal corporate tax rate from 35% to 21%, and transitioned the U.S. federal tax system from a worldwide tax system to a territorial tax system, and eliminated or reduced certain domestic deductions among other changes. In converting to the new territorial tax system, a deemed repatriation tax on previously tax-deferred earnings of certain foreign subsidiaries was required to be recognized as of December 31, 2017, and is payable over eight years.

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On December 22, 2017, the SEC issued Staff Accounting Bulletin 118 (“SAB 118”) that provides additional guidance allowing companies to apply a measurement period of up to twelve months to account for the impacts of the 2017 Tax Act in their financial statements. In the period ending December 31, 2018, we recognized measurement period adjustments of $2.1 million related to the deemed repatriation tax and the remeasurement of our deferred tax assets and liabilities. The effect of the measurement period adjustment on the 2018 effective tax rate was an increase of 0.5%. The accounting for the transitional impacts of the 2017 Tax Act are now complete.

We are no longer asserting indefinite reversal under ASC 740-30-25 for undistributed earnings of non-U.S. subsidiaries and have accrued for related tax liabilities as of December 31, 2018.

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the estimated future tax effects of temporary differences between book and tax treatment of assets and liabilities and carryforwards to the extent they are realizable. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance, in the event we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, a reduction of the valuation allowance would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, a reduction to the deferred tax asset would be charged to income in the period such determination was made.

We record a liability for uncertain tax positions that do not meet the more likely than not standard as prescribed by the authoritative guidance for income tax accounting. We record tax benefits for only those positions that we believe will more likely than not be sustained. Unrecognized tax benefits are the differences between tax positions taken, or expected to be taken, in tax returns, and the benefits recognized for accounting purposes. We classify uncertain tax positions as long-term liabilities.

Significant judgment is required in determining our worldwide provision for income taxes and our income tax filings are regularly under audit by tax authorities. Any audit result differing from amounts recorded would increase or decrease income in the period that we determine such adjustment is likely. Interest expense and penalties associated with the underpayment of income taxes are included in income tax expense.

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Earnings before income taxes were as follows (in thousands):໿

		For the Years Ended December 31,
		2018				2017				2016
Domestic		$	337,437			$	268,714			$	227,875
International		120,305				112,343				93,971
		$	457,742			$	381,057			$	321,846

The provision (benefit) for income taxes comprised the following (in thousands):

		For the Years Ended December 31,
		2018				2017				2016
Current
Federal		$	47,130			$	92,453			$	53,285
State		10,415				9,258				6,608
International		22,015				23,993				19,291
		79,560				125,704				79,184
Deferred
Federal		3,970				(1,201		)		20,305
State		(937		)		(4,102		)		1,196
International		(1,898		)		(2,613		)		(893		)
		1,135				(7,916		)		20,608
		$	80,695			$	117,788			$	99,792

The provision for income taxes differs from the amounts computed by applying the statutory federal income tax rate as follows:໿

		For the Years Ended December 31,
		2018			2017			2016
U.S. federal statutory rate		21.0	%		35.0	%		35.0	%
State income tax, net of federal tax benefit		2.6			1.9			1.8
Taxation on international earnings		(0.8	)		(5.5	)		(4.8	)
Foreign derived intangible income		(1.3	)		—			—
Share-based compensation from settlements under ASU 2016-09		(4.7	)		(7.3	)		—
Domestic manufacturing exclusions		—			(1.1	)		(1.0	)
Research and development credit		(0.9	)		(0.9	)		(0.8	)
Impact of the Tax Cuts and Jobs Act		0.5			9.4			—
State income tax carryforwards		(0.2	)		(1.4	)		—
Other, net		1.4			0.8			0.8
Effective tax rate		17.6	%		30.9	%		31.0	%

Our effective income tax rate was 17.6% for the year ended December 31, 2018, and 30.9% for the year ended December 31, 2017. Our effective income tax rate for the year ended December 31, 2018 was lower primarily related to the reduction in the 2018 U.S. statutory tax rate to 21% from 35%, as well as the comparison to a non-recurring charge resulting from the 2017 Tax Act for the year ended December 31, 2017. These favorable impacts were offset by lower tax benefits related to share-based compensation and the prior year utilization of foreign tax credits.

Our effective income tax rate was 30.9% for the year ended December 31, 2017, and 31.0% for the year ended December 31, 2016. Our effective income tax rate for the year ended December 31, 2017, was lower as a result of the adoption of ASU 2016-09 related to share-based compensation, which decreased our effective tax rate by approximately 7% and the utilization of foreign tax credits, which reduced our effective tax rate by approximately 1%. These decreases were offset by the following non-recurring items: A deemed repatriation tax, net of the remeasurement of our deferred tax assets and liabilities resulting from the 2017 Tax Act and a tax benefit related to state tax credit carryforwards, which combined, increased our tax rate by approximately 8%.

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Income taxes paid for the periods ended December 31, 2018, 2017 and 2016 was $69.7 million, $81.2 million, and $74.7 million, respectively.

We have business operations in Switzerland and the Netherlands and have been granted tax rulings by each jurisdiction. Our Netherlands ruling is set to expire on December 31, 2022, and our Switzerland ruling remains in effect as long as our business operations comply with the ruling requirements or as long as Switzerland statutorily allows such rulings. As a result of the tax rulings, our net income was higher by $9.2 million, $8.9 million, and $7.8 million for the years ended December 31, 2018, 2017, and 2016, respectively. The benefit from these tax rulings is reflected within the overall benefit received from international income taxes in the table above.

The components of the net deferred tax assets (liabilities) included in the accompanying consolidated balance sheets are as follows (in thousands):

		December 31, 2018				December 31, 2017
Assets
Accrued expenses		$	21,065			$	13,843
Accounts receivable reserves		2,363				2,624
Deferred revenue		7,637				10,618
Inventory basis differences		2,787				3,039
Property-based differences		1,652				1,324
Share-based compensation		9,267				9,035
Other		2,314				918
Net operating loss carryforwards		3,208				3,350
Tax credit carryforwards		10,226				8,096
Unrealized losses on foreign currency exchange contracts, interest rate swaps and investments		404				2,355
Total assets		60,923				55,202
Valuation allowance		(6,212		)		(6,211		)
Total assets, net of valuation allowance		54,711				48,991
Liabilities
Deferred instrument costs		(27,210		)		(20,399		)
Property-based differences		(32,494		)		(31,859		)
Intangible asset basis differences		(13,454		)		(13,574		)
Other		(432		)		(656		)
Unrealized gains on foreign currency exchange contracts, interest rate swaps and investments		(1,907		)		(158		)
Total liabilities		(75,497		)		(66,646		)
Net deferred tax assets (liabilities)		$	(20,786	)		$	(17,655	)

As of December 31, 2018, we have recorded a valuation allowance of $6.2 million against certain deferred tax assets related to temporary differences including net operating loss (“NOL”) and tax credit carryforwards, as it is more likely than not that they will not be realized or utilized within the carryforward period.

As of December 31, 2018, we have NOL’s in certain state and international jurisdictions of approximately $15.1 million available to offset future taxable income. Most of these NOL’s will expire at various dates between 2021 and 2026 and the remainder have indefinite lives.

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The following table summarizes the changes in unrecognized tax benefits during the years ended December 31, 2018, 2017 and 2016 (in thousands):

		For the Years Ended December 31,
		2018				2017				2016
Total amounts of unrecognized tax benefits, beginning of period		$	21,417			$	18,463			$	7,204
Gross increases in unrecognized tax benefits as a result of tax positions taken during a prior period		2,991				74				75
Gross increases in unrecognized tax benefits as a result of tax positions taken in the current period		461				4,681				12,657
Decreases in unrecognized tax benefits relating to settlements with taxing authorities		—				(713		)		(1,326		)
Decreases in unrecognized tax benefits as a result of a lapse of the applicable statutes of limitations		(622		)		(1,088		)		(147		)
Total amounts of unrecognized tax benefits, end of period		$	24,247			$	21,417			$	18,463

The total amount of unrecognized tax benefits at December 31, 2018 and December 31, 2017, was $24.2 million and $21.4 million, respectively. Of the total unrecognized tax benefits at December 31, 2018 and 2017, $18.3 million and $9.1 million, respectively, comprise unrecognized tax positions that would, if recognized, affect our effective tax rate.

During the years ended December 31, 2018, 2017 and 2016, we recorded interest expense and penalties of $1.2 million, $0.9 million, and $0.3 million, respectively, as income tax expense in our consolidated statement of income. At December 31, 2018 and 2017, we had $2.1 million and $1.0 million, respectively, of estimated interest expense and penalties accrued in our consolidated balance sheets.

In the ordinary course of our business, our income tax filings are regularly under audit by tax authorities. While we believe we have appropriately provided for all uncertain tax positions, amounts asserted by taxing authorities could be greater or less than our accrued position. Accordingly, additional provisions on income tax matters, or reductions of previously accrued provisions, could be recorded in the future as we revise our estimates due to changing facts and circumstances or the underlying matters are settled or otherwise resolved. We are currently under tax examinations in various jurisdictions. We anticipate that these examinations will be concluded within the next two years. With few exceptions, we are no longer subject to income tax examinations in any jurisdiction in which we conduct significant taxable activities for years before 2014.

NOTE 14. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income attributable to IDEXX Laboratories, Inc. stockholders by the weighted average number of shares of common stock and vested deferred stock units outstanding during the year. The computation of diluted earnings per share is similar to the computation of basic earnings per share, except that the denominator is increased for the assumed exercise of dilutive options and assumed issuance of unvested restricted stock units and unvested deferred stock units using the treasury stock method unless the effect is anti-dilutive. The treasury stock method assumes that proceeds, including cash received from the exercise of employee stock options and the total unrecognized compensation expense for unvested share-based compensation awards and, prior to the adoption of new accounting guidance related to share-based compensation on January 1, 2017, the tax benefits resulting from share-based compensation tax deductions in excess of the related expense recognized for financial reporting purposes, would be used to purchase our common stock at the average market price during the period. Vested deferred stock units outstanding are included in shares outstanding for basic and diluted earnings per share because the associated shares of our common stock are issuable for no cash consideration, the number of shares of our common stock to be issued is fixed and issuance is not contingent. See Note 5- Share-Based Compensation for additional information regarding deferred stock units.

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The following is a reconciliation of shares outstanding for basic and diluted earnings per share for the years ended December 31, 2018, 2017 and 2016 (in thousands):

		For the Years Ended December 31,
		2018			2017			2016
Shares outstanding for basic earnings per share:		86,864			87,769			89,732
Shares outstanding for diluted earnings per share:
Shares outstanding for basic earnings per share		86,864			87,769			89,732
Dilutive effect of share-based payment awards		1,606			1,798			1,152
		88,470			89,567			90,884

Certain options to acquire shares have been excluded from the calculation of shares outstanding for diluted earnings per share because they were anti-dilutive. The following table presents information concerning those anti-dilutive options for the years ended December 31, 2018, 2017 and 2016 (in thousands):

		For the Years Ended December 31,
		2018			2017			2016
Weighted average number of shares underlying anti-dilutive options		287			327			88

NOTE 15. COMMITMENTS, CONTINGENCIES AND GUARANTEES

Leases

The majority of our facilities are occupied under operating lease arrangements with various expiration dates through 2067. We are responsible for the real estate taxes and operating expenses related to these facilities. Additionally, we enter into operating leases for certain vehicles and office equipment in the normal course of business. We determine the expected term of any executed agreements using the non-cancelable lease term plus any renewal options by which the failure to renew imposes a penalty in such amount that renewal is reasonably assured. The derived expected term is then used in the determination of a capital or operating lease and in the calculation of straight-line rent expense. Rent escalations are considered in the calculation of minimum lease payments in our capital lease tests and in determining straight-line rent expense for operating leases.

Commitments

Rent expense charged to operations under operating leases was approximately $25.2 million, $23.0 million, and $22.7 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Minimum annual rental payments under these agreements are estimated as follows (in thousands):

Years Ending December 31,		Amount
2019		$	19,351
2020		17,109
2021		14,528
2022		10,799
2023		8,518
Thereafter		36,514
		$	106,819

We have various minimum royalty payments due through 2035 of $2.1 million. If these obligations are not satisfied, the related license arrangements may be terminated, resulting in either a loss in exclusivity or the right to use the technology.

We are required to annually purchase a minimum amount of inventory from certain suppliers. Through 2025, we have a total of $8.4 million in minimum purchase commitments under these arrangements.

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Contingencies

Although we are not currently party to any material contingencies of which we are aware or have recorded a reserve for, we are subject to claims that may arise in the ordinary course of business, including with respect to actual and threatened litigation and other matters. We accrue for loss contingencies when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated. However, our actual losses with respect to these contingencies could exceed our accruals.

Under our current employee healthcare insurance policy for U.S. employees, we retain claims liability risk per incident up to $1 million per year in 2018, $1 million per year in 2017, and $0.45 million per year in 2016. We recognized U.S. employee healthcare claim expense of $52.7 million for the year ended December 31, 2018, $47.2 million for the year ended December 31, 2017 and $40.4 million during the year ended December 31, 2016, which represents actual claims paid and an estimate of our liability for the uninsured portion of employee healthcare obligations that have been incurred but not paid. Should employee health insurance claims exceed our estimated liability, we would have further obligations. Our estimated liability for healthcare claims that have been incurred but not paid as of December 31, 2018 and 2017, was $4.8 million and $4.2 million, respectively.

Under our workers’ compensation insurance policies for U.S. employees, we have retained the first $0.3 million for the years ended December 31, 2018, 2017 and 2016, in claim liability per incident with aggregate maximum claim liabilities per year of $2.5 million, $2.5 million, and $2.6 million for the years ended December 31, 2018, 2017 and 2016, respectively. Workers’ compensation expense recognized during the years ended December 31, 2018, 2017 and 2016 and our respective liability for such claims as of December 31, 2018, 2017 and 2016 was not material. Claims incurred during the years ended December 31, 2018 and 2017 are relatively undeveloped as of December 31, 2018. Therefore, it is possible that we could incur additional healthcare and wage indemnification costs beyond those previously recognized up to our aggregate liability for each of the respective claim years. For the years ended on or prior to December 31, 2016, based on our retained claim liability per incident and our aggregate claim liability per year, our maximum liability in excess of the amounts deemed probable and previously recognized is not material as of December 31, 2018. As of December 31, 2018, we had outstanding letters of credit totaling $1.3 million to the insurance companies as security for the claims in connection with these policies.

We have entered into an employment agreement with our chief executive officer whereby payment may be required if we terminate his employment without cause other than following a change in control. The amount payable is based upon the executive’s salary at the time of termination and the cost to us of continuing to provide certain benefits. Had this officer been terminated without cause at December 31, 2018, other than following a change in control, we would have had an obligation for salaries and benefits of approximately $1.6 million under such agreement. In addition, the agreement provides for continued vesting of his outstanding equity awards for a period of two years.

We have entered into employment agreements with each of our officers that require us to make certain payments in the event the officer’s employment is terminated under certain circumstances within a certain period following a change in control. The amount payable by us under each of these agreements is based on the officer’s salary and bonus history at the time of termination and the cost to us of continuing to provide certain benefits. Had all of our officers been terminated in qualifying terminations following a change in control at December 31, 2018, we would have had aggregate obligations of approximately $31.9 million under these agreements. These agreements also provide for the acceleration of the vesting of all stock options and restricted stock units upon any qualifying termination following a change in control. At this time, we believe the likelihood of terminations as a result of the scenarios described is remote, and therefore, we have not accrued for such loss contingencies.

We have total acquisition-related contingent consideration liabilities outstanding of $3.5 million, primarily related to the achievement of certain revenue milestones, recorded at December 31, 2018, and $3.0 million recorded at December 31, 2017.

From time to time, we have received notices alleging that our products infringe third-party proprietary rights, although we are not aware of any pending litigation with respect to such claims. Patent litigation frequently is complex and expensive, and the outcome of patent litigation can be difficult to predict. There can be no assurance that we will prevail in any infringement proceedings that may be commenced against us. If we lose any such litigation, we may be stopped from selling certain products and/or we may be required to pay damages as a result of the litigation.

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Guarantees

We enter into agreements with third parties in the ordinary course of business under which we are obligated to indemnify such third parties for and against various risks and losses. The precise terms of such indemnities vary with the nature of the agreement. In many cases, we limit the maximum amount of our indemnification obligations, but in some cases those obligations may be theoretically unlimited. We have not incurred material expenses in discharging any of these indemnification obligations, and based on our analysis of the nature of the risks involved, we believe that the fair value of potential indemnification under these agreements is minimal. Accordingly, we have recorded no liabilities for these obligations at December 31, 2018 and 2017.

When acquiring a business, we sometimes assume liability for certain events or occurrences that took place prior to the date of acquisition. As of December 31, 2018 and 2017, we do not have any material pre-acquisition liabilities recorded.

NOTE 16. SEGMENT REPORTING

We operate primarily through three business segments: diagnostic and information technology-based products and services for the veterinary market, which we refer to as 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, which we refer to as LPD. Our Other operating segment combines and presents products for the human point-of-care medical diagnostics market with our out-licensing arrangements because they do not meet the quantitative or qualitative thresholds for reportable segments.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision-maker is our Chief Executive Officer. Our reportable segments include: CAG, Water, LPD, and Other. Assets are not allocated to segments for internal reporting purposes.

CAG develops, designs, manufactures, and distributes products and performs services for veterinarians and the biomedical analytics market, primarily related to diagnostics and information management. Water develops, designs, manufactures, and distributes a range of products used in the detection of various microbiological parameters in water. LPD develops, designs, manufactures, and distributes diagnostic tests and related instrumentation and performs services that are used to manage the health status of livestock and poultry, to improve dairy efficiency, and to ensure the quality and safety of milk and food. OPTI Medical manufactures and distributes point-of-care electrolyte and blood gas analyzers and related consumable products for the human medical diagnostics market.

Intersegment revenues, which are not included in the table below, were not material for the years ended December 31, 2018, 2017 and 2016.

Certain costs are not allocated to our reportable segments and are instead reported under the caption “Unallocated Amounts”. These costs include costs that do not align with one of our existing operating segments or are cost prohibitive to allocate, which primarily consist of our R&D function, regional or country expenses, certain foreign currency revaluation gains and losses on monetary balances in currencies other than our subsidiaries’ functional currency and unusual items. Corporate support function costs (such as information technology, facilities, human resources, finance and legal), health benefits and incentive compensation are charged to our business segments at pre-determined budgeted amounts or rates. Differences from these pre-determined budgeted amounts or rates are captured within Unallocated Amounts.

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Below is our segment information (in thousands):

		For the Years Ended December 31,
		CAG				Water				LPD				Other				Unallocated Amounts				Consolidated Total
2018
Revenue		$	1,935,428			$	125,198			$	130,581			$	22,035			$	—			$	2,213,242
Income (loss) from operations		$	429,483			$	56,607			$	19,412			$	3,729			$	(17,896	)		$	491,335
Interest expense, net																						(33,593		)
Income before provision for income taxes																						457,742
Provision for income taxes																						80,695
Net income																						377,047
Less: Net income attributable to noncontrolling interest																						16
Net income attributable to IDEXX Laboratories, Inc. stockholders																						$	377,031
Depreciation and amortization		$	72,789			$	2,592			$	4,094			$	3,703			$	—			$	83,178
Expenditures for long-lived assets(1)		$	103,300			$	3,172			$	4,787			$	4,492			$	—			$	115,751
2017
Revenue		$	1,703,377			$	114,395			$	128,481			$	22,805			$	—			$	1,969,058
Income (loss) from operations		$	363,557			$	50,616			$	16,464			$	4,837			$	(22,446	)		$	413,028
Interest expense, net																						(31,971		)
Income before provision for income taxes																						381,057
Provision for income taxes																						117,788
Net income																						263,269
Less: Net income attributable to noncontrolling interest																						125
Net income attributable to IDEXX Laboratories, Inc. stockholders																						$	263,144
Depreciation and amortization		$	71,835			$	2,856			$	5,052			$	3,397			$	—			$	83,140
Expenditures for long-lived assets(1)		$	64,759			$	2,573			$	3,021			$	4,031			$	—			$	74,384
2016
Revenue		$	1,522,689			$	103,579			$	126,491			$	22,664			$	—			$	1,775,423
Income (loss) from operations		$	301,342			$	45,702			$	18,914			$	884			$	(16,603	)		$	350,239
Interest expense, net																						(28,393		)
Income before provision for income taxes																						321,846
Provision for income taxes																						99,792
Net income																						222,054
Less: Net income attributable to noncontrolling interest																						9
Net income attributable to IDEXX Laboratories, Inc. stockholders																						$	222,045
Depreciation and amortization		$	64,878			$	3,098			$	5,543			$	4,699			$	—			$	78,218
Expenditures for long-lived assets(1)		$	56,329			$	2,102			$	4,824			$	1,532			$	—			$	64,787

(1)	Expenditures for long-lived assets exclude expenditures for intangible assets. See "Note 4. Acquisitions and Investments" for information regarding acquisitions of intangible assets during the years ended December 31, 2018, 2017 and 2016.

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See "Note 3. Revenue Recognition" for a summary of disaggregated revenue by reportable segment and by major product and service category for the years ended December 31, 2018, 2017 and 2016.

Net long-lived assets, consisting of net property and equipment, are subject to geographic risks because they are generally difficult to move and to effectively utilize in another geographic area in a reasonable time period and because they are relatively illiquid. Net long-lived assets by principal geographic areas were as follows (in thousands):

		December 31, 2018				December 31, 2017
Americas
United States		$	348,240			$	310,696
Brazil		16,735				17,030
Canada		1,859				2,238
		366,834				329,964
Europe, the Middle East and Africa
Germany		25,036				7,522
United Kingdom		11,517				11,528
Netherlands		10,273				8,225
France		2,130				2,305
Switzerland		2,742				1,755
Other		3,763				3,838
		55,461				35,173
Asia Pacific Region
Japan		5,296				4,065
Australia		4,257				4,426
Other		5,422				5,468
		14,975				13,959
Total		$	437,270			$	379,096

NOTE 17. FAIR VALUE MEASUREMENTS

U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.

We have certain financial assets and liabilities that are measured at fair value on a recurring basis, certain nonfinancial assets and liabilities that may be measured at fair value on a non-recurring basis and certain financial assets and liabilities that are not measured at fair value in our consolidated balance sheets but for which we disclose the fair value. The fair value disclosures of these assets and liabilities are based on a three-level hierarchy, which is defined as follows:

Level 1	Quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

In prior years, our marketable debt securities were initially valued at the transaction price and were subsequently remeasured to fair value as of the balance sheet date utilizing third-party pricing services. The pricing services utilized industry standard valuation models, including both income and market-based approaches and observable market inputs to determine value. Observable market inputs included reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers and other industry and economic events. We validated the prices provided by our third-party pricing services by obtaining independent market values from other pricing sources and analyzed pricing data in certain instances.

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Our cross currency swap contracts are measured at fair value on a recurring basis in our accompanying consolidated balance sheets. We measure the fair value of our cross currency swap contracts classified as derivative instruments using prevailing market conditions as of the close of business on each balance sheet date. The product of this calculation is then adjusted for counterparty risk.

Our foreign currency exchange contracts are measured at fair value on a recurring basis in our accompanying consolidated balance sheets. We measure the fair value of our foreign currency exchange contracts classified as derivative instruments using an income approach, based on prevailing market forward rates less the contract rate multiplied by the notional amount. The product of this calculation is then adjusted for counterparty risk.

Our interest rate swap agreements in prior years were measured at fair value on a recurring basis in our accompanying consolidated balance sheets. These interest rate swaps were classified as derivative instruments using an income approach, utilizing a discounted cash flow analysis based on the terms of the contract and the interest rate curve adjusted for counterparty risk. Beginning July 1, 2016, we no longer have outstanding interest rate swap agreements.

The amount outstanding under our unsecured revolving credit facility and long-term debt are measured at carrying value in our accompanying consolidated balance sheets though we disclose the fair value of these financial instruments. We determine the fair value of the amount outstanding under our credit facility and long-term debt using an income approach, utilizing a discounted cash flow analysis based on current market interest rates for debt issues with similar remaining years to maturity, adjusted for applicable credit risk. Our credit facility and long-term debt are valued using Level 2 inputs. The estimated fair value of our credit facility approximates its carrying value. At December 31, 2018, the estimated fair value and carrying value of our long-term debt were $607.3 million and $601.8 million, respectively. At December 31, 2017, the estimated fair value and carrying value of our long-term debt were $632.0 million and $606.6 million, respectively.

The following tables set forth our assets and liabilities that were measured at fair value on a recurring basis at December 31, 2018, and at December 31, 2017, by level within the fair value hierarchy (in thousands):

As of December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Balance at December 31, 2018
Assets
Money market funds(1)		$	250			$	—			$	—			$	250
Equity mutual funds(2)		$	1,673			$	—			$	—			$	1,673
Cross currency swaps(3)		$	—			$	1,789			$	—			$	1,789
Foreign currency exchange contracts(3)		$	—			$	8,163			$	—			$	8,163
Liabilities
Foreign currency exchange contracts(3)		$	—			$	603			$	—			$	603
Deferred compensation(4)		$	1,673			$	—			$	—			$	1,673

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As of December 31, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Balance at December 31, 2017
Assets
Money market funds(1)		$	32,962			$	—			$	—			$	32,962
Certificates of deposit(1)		$	—			$	1,250			$	—			$	1,250
Marketable securities
Corporate bonds		$	—			$	140,886			$	—			$	140,886
Certificates of deposit		—				58,510				—				58,510
Commercial paper		—				29,171				—				29,171
Asset backed securities		—				22,167				—				22,167
U.S. government bonds		—				15,611				—				15,611
Agency bonds		—				10,947				—				10,947
Treasury bills		—				6,963				—				6,963
Total marketable securities		$	—			$	284,255			$	—			$	284,255
Equity mutual funds(2)		$	2,162			$	—			$	—			$	2,162
Foreign currency exchange contracts(3)		$	—			$	477			$	—			$	477
Liabilities
Foreign currency exchange contracts(3)		$	—			$	6,468			$	—			$	6,468
Deferred compensation(4)		$	2,162			$	—			$	—			$	2,162

(1)	Money market funds and certificates of deposit with an original maturity of less than ninety days are included within cash and cash equivalents. The remaining balance of cash and cash equivalents as of December 31, 2018, and December 31, 2017, consisted of demand deposits. Certificates of deposit with an original maturity of over ninety days are included within marketable securities.

(2)	Equity mutual funds relate to a deferred compensation plan that was assumed as part of a previous business combination. This amount is included within other long-term assets. See number (4) below for a discussion of the related deferred compensation liability.

(3)	Cross currency swaps and foreign currency exchange contracts are included within other current assets; other long-term assets; accrued liabilities; or other long-term liabilities depending on the gain (loss) position and anticipated settlement date.

(4)	A deferred compensation plan assumed as part of a previous business combination is included within accrued liabilities and other long-term liabilities. The fair value of our deferred compensation plan is indexed to the performance of the underlying equity mutual funds discussed in number (2) above.

We did not have any transfers between Level 1 and Level 2 or transfers in or out of Level 3 of the fair value hierarchy during the years ended December 31, 2018 and 2017.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate carrying value due to their short maturity.

NOTE 18. HEDGING INSTRUMENTS

We recognize all derivative and non-derivative instruments (collectively “hedging instruments”) on the balance sheet at fair value at the balance sheet date. Instruments that do not qualify for hedge accounting treatment must be recorded at fair value through earnings. To qualify for hedge accounting treatment, cash flow and net investment hedges must be highly effective in offsetting changes to expected future cash flows or fair value on hedged transactions. If the instrument qualifies for hedge accounting, changes in the fair value of the hedging instrument from the effective portion of the hedge are deferred in AOCI, net of tax, and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. We immediately record in earnings the extent to which a hedging instrument is not effective in achieving offsetting changes in fair value. We de-designate hedging instruments from hedge accounting when the likelihood of the hedged transaction occurring becomes less than probable. For de-designated instruments, the gain or loss from the time of de-designation through maturity of the instrument is recognized in earnings. Any gain or loss in AOCI at the time of de-designation is reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

We enter into master netting arrangements with the counterparties to our derivative transactions which permit certain outstanding receivables and payables to be offset in the event of default. Our derivative contracts do not require either party to post cash collateral. We elect to present our derivative assets and liabilities in the accompanying consolidated balance sheets on

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a gross basis. All cash flows related to our foreign currency exchange contracts and interest rate swaps are classified as operating cash flows, which is consistent with the cash flow treatment of the underlying items being hedged.

Disclosure within this footnote is presented to provide transparency about how and why we use derivative and non-derivative instruments (collectively “hedging instruments”) and how the hedging instruments and related hedged items affect our financial position, results of operations, and cash flows. See "Note 17. Fair Value Measurements" for additional information regarding the fair value of our derivative instruments and "Note 20. Accumulated Other Comprehensive Income" for additional information regarding the effect of derivative instruments designated as cash flow hedges on the consolidated statements of income.

We are exposed to certain risks related to our ongoing business operations. The primary risks that we manage by using hedging instruments are foreign currency exchange risk and interest rate risk. Our subsidiaries enter into foreign currency exchange contracts to manage the exchange risk associated with their forecasted intercompany inventory purchases and sales for the next year. From time to time, we may also enter into other foreign currency exchange contracts, cross currency swaps or foreign-denominated debt issuances to minimize the impact of foreign currency fluctuations associated with specific balance sheet exposures, including net investments in certain foreign subsidiaries. We may also enter into interest rate swaps to minimize the impact of interest rate fluctuations associated with borrowings under our variable-rate Credit Facility.

The primary purpose of our foreign currency hedging activities is to protect against the volatility associated with foreign currency transactions, including transactions denominated in euro, British pound, Japanese yen, Canadian dollar, and Australian dollar. We also utilize natural hedges to mitigate our transaction and commitment exposures. Our corporate policy prescribes the range of allowable hedging activity. We enter into foreign currency exchange contracts with well-capitalized multinational financial institutions, and we do not hold or engage in transactions involving hedging instruments for purposes other than risk management. Our accounting policies for these contracts are based on our designation of such instruments as hedging transactions.

Cash Flow Hedges

We have designated our foreign currency exchange contracts and variable-to-fixed interest rate swaps as cash flow hedges as these derivative instruments mitigate the exposure to variability in the cash flows of forecasted transactions attributable to foreign currency exchange and interest rates. Unless noted otherwise, we have also designated our derivative instruments as qualifying for hedge accounting treatment.

We did not de-designate any instruments from hedge accounting treatment during the years ended December 31, 2018, 2017 and 2016. Gains or losses related to hedge ineffectiveness recognized in earnings during the years ended December 31, 2018, 2017 and 2016 were not material. At December 31, 2018, the estimated amount of net gains, net of income tax expense, which are expected to be reclassified out of AOCI and into earnings within the next twelve months is $6.2 million if exchange rates do not fluctuate from the levels at December 31, 2018.

We hedge approximately 85% of the estimated exposure from intercompany product purchases and sales denominated in the euro, British pound, Canadian dollar, Japanese yen, Australian dollar, and Swiss franc. We have additional unhedged foreign currency exposures related to foreign services and emerging markets where it is not practical to hedge. We primarily utilize foreign currency exchange contracts with durations of less than 24 months. Quarterly, we enter into contracts to hedge incremental portions of anticipated foreign currency transactions for the current and following year. As a result, our risk with respect to foreign currency exchange rate fluctuations and the notional value of foreign currency exchange contracts may vary throughout the year. The U.S. dollar is the currency purchased or sold in all of our foreign currency exchange contracts. The notional amount of foreign currency exchange contracts to hedge forecasted intercompany inventory purchases and sales totaled $190.9 million, and $176.5 million at December 31, 2018 and 2017, respectively.

Net Investment Hedges

In June 2015, we issued and sold our 2025 Series C Notes through a private placement an aggregate principal amount of €88.9 million. We have designated these euro-denominated notes as a hedge of our euro net investment in certain foreign subsidiaries to reduce the volatility in stockholders’ equity caused by changes in foreign currency exchange rates in the euro relative to the U.S. dollar. As a result of this designation, gains and losses from the change in translated U.S. dollar value of these euro-denominated notes are recorded in AOCI rather than to earnings. We recorded a $3.9 million gain, net of income tax, within AOCI as a result of this net investment hedge for the year ended December 31, 2018. This unrealized gain recorded at December 31, 2018, will not be reclassified in earnings until the complete or substantially complete liquidation of the net investment in the hedged foreign operations or all or a portion of the hedge no longer qualifies for hedge accounting treatment.

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See "Note 12. Debt" to the consolidated financial statements included in this Annual Report on Form 10-K for further information regarding the issuance of these 2025 Series C Notes.

In May 2018, we entered into two cross currency swap contracts as a hedge of our net investment in foreign operations to offset foreign currency translation gains and losses on the net investment. The cross currency swaps have a maturity date of June 30, 2023. At maturity of the cross currency swap contract, we will deliver the notional amount of €50.0 million and will receive approximately $59.4 million from the counterparties. The change in fair value of the cross currency swap contracts are recorded in AOCI and will be reclassified to earnings when the foreign subsidiaries are sold or substantially liquidated. During the year ended December 31, 2018, we recorded a gain of $1.4 million, net of income tax, within AOCI as a result of these net investment hedges. We will receive quarterly interest payments from the counterparties based on a fixed interest rate until maturity of the cross currency swap. This interest rate component is excluded from the assessment of hedge effectiveness, thus will be recognized as a reduction to interest expense over the life of the hedge instrument. We recognized approximately $1.0 million related to the excluded component as a reduction of interest expense for the year ended December 31, 2018.

The following tables present the effect of cash flow hedge accounting on our consolidated statements of income and comprehensive income, and provide information regarding the location and amounts of pretax gains or losses of derivatives (in thousands):

				Years Ended December 31,
				2018				2017				2016
Financial statement line items in which effects of cash flow hedges are recorded		Cost of revenue		$	971,700			$	871,676			$	799,987
Foreign exchange contracts
Amount of gain (loss) reclassified from accumulated other comprehensive income into income				$	(976	)		$	27			$	3,200

Fair Values of Hedging Instruments Designated as Hedges in Consolidated Balance Sheets

The fair values of hedging instruments, and their respective classification on the consolidated balance sheets and amounts subject to offset under master netting arrangements consisted of the following derivative instruments, unless otherwise noted (in thousands):

				Hedging Assets
				December 31, 2018				December 31, 2017
Derivatives and non-derivatives designated as hedging instruments		Balance Sheet Classification
Foreign currency exchange contracts		Other current assets		$	8,163			$	477
Cross currency swaps		Other long-term assets		1,789				—
Total derivative instruments presented as hedge instruments on the balance sheet				9,952				477
Gross amounts subject to master netting arrangements not offset on the balance sheet				603				477
Net amount				$	9,349			$	—

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				Hedging Liabilities
				December 31, 2018				December 31, 2017
Derivatives and non-derivatives designated as hedging instruments		Balance Sheet Classification
Foreign currency exchange contracts		Accrued liabilities		$	603			$	6,468
Total derivative instruments presented as cash flow hedges on the balance sheet				603				6,468
Non-derivative foreign currency denominated debt designated as net investment hedge on the balance sheet(1)		Long-term debt		101,777				106,567
Total hedging instruments presented on the balance sheet				102,380				113,035
Gross amounts subject to master netting arrangements not offset on the balance sheet				603				477
Net amount				$	101,777			$	112,558

(1)	Amounts represent reported carrying amounts of our foreign currency denominated debt. See "Note 17. Fair Value Measurements" for information regarding the fair value of our long-term debt.

NOTE 19. REPURCHASES OF COMMON STOCK

Our Board of Directors has authorized the repurchase of up to 68.0 million shares of our common stock in the open market or in negotiated transactions pursuant to the Company’s share repurchase program. We believe that the repurchase of our common stock is a favorable means of returning value to our shareholders, and we also repurchase to offset the dilutive effect of our share-based compensation programs. Repurchases of our common stock may vary depending upon the level of other investing activities and the share price. As of December 31, 2018, there are approximately 3.2 million remaining shares available for repurchase under this authorization.

We primarily acquire shares by means of repurchases in the open market. However, we also acquire shares that are surrendered by employees in payment for the minimum required withholding taxes due on the vesting of restricted stock units and the settlement of deferred stock units, otherwise referred to herein as employee surrenders.

The following is a summary of our open market common stock repurchases and shares acquired through employee surrender for the years ended December 31, 2018, 2017 and 2016 (in thousands, except per share amounts):

		For the Years Ended December 31,
		2018				2017				2016
Shares repurchased in the open market		1,773				1,749				3,071
Shares acquired through employee surrender for statutory tax withholding		52				57				60
Total shares repurchased		1,825				1,806				3,131
Cost of share repurchased in the open market		$	368,691			$	270,297			$	313,072
Cost of shares for employee surrenders		9,375				8,074				4,372
Total cost of shares		$	378,066			$	278,371			$	317,444
Average cost per share - open market repurchases		$	207.92			$	154.51			$	101.96
Average cost per share - employee surrenders		$	182.18			$	142.55			$	73.04
Average cost per share - total		$	207.19			$	154.13			$	101.40

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NOTE 20. ACCUMULATED OTHER COMPREHENSIVE INCOME

The changes in accumulated other comprehensive income, net of tax, for the years ended December 31, 2018 and 2017 consisted of the following (in thousands):

		Unrealized Gain (Loss) on Investments, Net of Tax				Unrealized Gain (Loss) on Derivatives Instruments, Net of Tax				Unrealized Gain (Loss) on Net Investment Hedge, Net of Tax				Cumulative Translation Adjustment				Total
Balance as of December 31, 2016		$	20			$	4,916			$	4,036			$	(52,025	)		$	(43,053	)
Other comprehensive (loss) income before reclassifications		(42		)		(10,332		)		(8,347		)		25,107				6,386
Gains reclassified from accumulated other comprehensive income		—				197				—				—				197
Balance as of December 31, 2017		(22		)		(5,219		)		(4,311		)		(26,918		)		(36,470		)
Other comprehensive (loss) income before reclassifications		(135		)		12,019				3,917				(21,911		)		(6,110		)
Gains reclassified from accumulated other comprehensive income		—				789				—				—				789
Balance as of December 31, 2018		$	(157	)		$	7,589			$	(394	)		$	(48,829	)		$	(41,791	)

The following is a summary of reclassifications out of accumulated other comprehensive income for the years ended December 31, 2018, 2017 and 2016 (in thousands):

Details about Accumulated Other Comprehensive Income Components		Affected Line Item in the Statement Where Net Income is Presented		Amounts Reclassified from Accumulated Other Comprehensive Income for the Years Ended December 31,
				2018				2017				2016
Gains (losses) on derivative instruments included in net income:
Foreign currency exchange contracts		Cost of revenue		$	(976	)		$	27			$	3,621
Interest rate swaps		Interest expense		—				—				(421		)
		Total (losses) gains before tax		(976		)		27				3,200
		Tax (benefit) expense		(187		)		224				949
		(Losses) gains, net of tax		$	(789	)		$	(197	)		$	2,251

NOTE 21. PREFERRED STOCK

Our Board of Directors is authorized, subject to any limitations prescribed by law, without further stockholder approval, to issue from time to time up to 500,000 shares of Preferred Stock, $1.00 par value per share (“Preferred Stock”), in one or more series. Each such series of Preferred Stock shall have such number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by the Board of Directors, which may include, among others, dividend rights, voting rights, redemption and sinking fund provisions, liquidation preferences, conversion rights and preemptive rights. There are no shares of Preferred Stock outstanding as of December 31, 2018 and 2017.

NOTE 22. IDEXX RETIREMENT AND INCENTIVE SAVINGS PLAN

We have established the IDEXX Retirement and Incentive Savings Plan (the “401(k) Plan”). U.S. employees eligible to participate in the 401(k) Plan may contribute specified percentages of their salaries. Beginning January 1, 2018, we matched a portion of these contributions, not to exceed 5% of participants’ eligible compensation. Prior to January 1, 2018, we matched a portion of these contributions, not to exceed 4% of participants' eligible compensation. We matched $19.0 million, $13.8 million, and $12.5 million for the years ended December 31, 2018, 2017 and 2016, respectively. In addition, we may make contributions to the 401(k) Plan at the discretion of the Board of Directors. There were no discretionary contributions in 2018, 2017 or 2016.

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We also have established defined contribution plans for regional employees in Europe and in Canada. With respect to these plans, our contributions over the past three years have not been material.

NOTE 23. SUMMARY OF QUARTERLY DATA (UNAUDITED)

A summary of quarterly data(1) follows (in thousands, except per share data):

		For the Three Months Ended
		March 31,				June 30,				September 30,				December 31,
2018
Revenue		$	537,656			$	580,752			$	545,448			$	549,386
Gross profit		303,099				332,439				305,643				300,361
Operating income		113,044				145,594				117,350				115,347
Net income attributable to IDEXX Laboratories, Inc. stockholders		89,451				108,691				93,251				85,638
Earnings per share:
Basic		$	1.02			$	1.25			$	1.07			$	0.99
Diluted		$	1.01			$	1.23			$	1.05			$	0.98
2017
Revenue		$	462,021			$	508,940			$	491,976			$	506,121
Gross profit		258,191				292,715				274,002				272,474
Operating income		92,243				122,564				100,413				97,808
Net income attributable to IDEXX Laboratories, Inc. stockholders		69,019				85,357				70,511				38,257
Earnings per share:
Basic		$	0.78			$	0.97			$	0.81			$	0.44
Diluted		$	0.77			$	0.95			$	0.79			$	0.43

(1)	Amounts presented may not recalculate to full-year totals due to rounding.

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SCHEDULE II

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

(in thousands)໿

		Balance at Beginning of Year				Charges to Costs and Expenses				Write-Offs/Cash Payments				Foreign Currency Translation				Balance at End of Year
Reserves for doubtful accounts receivable:
December 31, 2016		$	5,128			$	822			$	(531	)		$	(896	)		$	4,523
December 31, 2017		4,523				591				(1,660		)		1,122				4,576
December 31, 2018		4,576				390				(969		)		705				4,702
Valuation allowance for deferred tax assets:
December 31, 2016		$	4,446			$	885			$	(816	)		$	376			$	4,891
December 31, 2017		4,891				1,789				(679		)		210				6,211
December 31, 2018		6,211				402				—				(401		)		6,212

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EXHIBIT INDEX

Exhibit No.	Description
3.1	Restated Certificate of Incorporation of the Company, as amended (filed as Exhibit No. 3(i) to Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, File No. 0-19271, and incorporated herein by reference).
3.2	Amended and Restated By-Laws of the Company (filed as Exhibit No. 3.1 to Current Report on Form 8-K filed December 12, 2017, File No. 0-19271, and incorporated herein by reference).
4.1	Note Purchase Agreement, dated as of December 11, 2013, among the Company, as issuer, New York Life Insurance Company, and New York Life Investment Management LLC, as investment manager for New York Life Insurance and Annuity Corporation and New York Life Insurance and Annuity Corporation Institutionally Owned Life Insurance Separate Account (BOLI 30C), as purchasers (filed as Exhibit No. 99.1 to Current Report on Form 8-K filed December 12, 2013, File No. 0-19271, and incorporated herein by reference).
4.2	Note Purchase and Private Shelf Agreement, dated as of July 21, 2014, among the Company, as issuer, Prudential Investment Management, Inc., Pruco Life Insurance Company, The Prudential Insurance Company of America, Prudential Investment Japan Co., Ltd., as investment manager, and Prudential Investment Management, Inc., as sub-adviser for The Gibraltar Life Insurance Co., Ltd., Prudential Arizona Reinsurance Universal Company, as grantor, and Prudential Investment Management, Inc., as investment manager for PAR U Hartford Life Insurance Comfort Trust, Prudential Private Placement Investors, L.P., as investment advisor, and Prudential Private Placement Investors, Inc., as general partner to each of, The Independent Order of Foresters, Zurich American Insurance Company, Globe Life and Accident Insurance Company, Family Heritage Life Insurance Company of America, MTL Insurance Company, The Lincoln National Life Insurance Company, William Penn Life Insurance Company of New York, Farmers Insurance Exchange and Mid Century Insurance Company, as purchasers (filed as Exhibit No. 99.1 to Current Report on Form 8-K Filed July 25, 2014, File No. 0-19271, and incorporated herein by reference).
4.3	Note Purchase Agreement, dated as of July 22, 2014, among the Company, as issuer, New York Life Insurance Company, and NYL Investors LLC, as investment manager for New York Life Insurance and Annuity Corporation and New York Life Insurance and Annuity Corporation Institutionally Owned Life Insurance Separate Account (BOLI 30C), as purchasers (filed as Exhibit No. 99.2 to Current Report on Form 8-K file July 25, 2014, File No. 0-19271, and incorporated herein by reference).
4.4	Amended and Restated Multi-Currency Note Purchase and Private Shelf Agreement, dated as of June 18, 2015, among the Company, Prudential Investment Management, Inc., Pruco Life Insurance Company, The Prudential Insurance Company of America, Prudential Investment Japan Co., Ltd., as investment manager, and Prudential Investment Management, Inc., as sub-adviser for The Gibraltar Life Insurance Co., Ltd., Prudential Arizona Reinsurance Universal Company, as grantor, and Prudential Private Placement Investors, L.P., as investment advisor, and Prudential Private Placement Investors, Inc., as general partner to each of, The Independent Order of Foresters, Zurich American Insurance Company, Globe Life and Accident Insurance Company, Family Heritage Life Insurance Company of America, MTL Insurance Company, The Lincoln National Life Insurance Company, William Penn Life Insurance Company of New York, Farmers Insurance Exchange and Mid Century Insurance Company, as purchasers. (filed as Exhibit No. 99.1 to Current Report on Form 8-K filed June 24, 2015 and incorporated herein by reference).

10.1*	U.S. Supply Agreement, effective as of October 16, 2003, between the Company and Ortho-Clinical Diagnostics, Inc. (“Ortho”) (filed as Exhibit No. 10.7 to Annual Report on Form 10-K for the year ended December 31, 2003, File No. 0-19271 (“2003 Form 10-K”), and incorporated herein by reference).

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10.2*	Amendment No. 1 to U.S. Supply Agreement effective as of January 1, 2005, between the Company and Ortho (filed as Exhibit No. 10.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, File No. 0-19271 (“June 2005 Form 10-Q”), and incorporated herein by reference).
10.3	Amendment No. 2 to U.S. Supply Agreement effective as of October 15, 2006, between the Company and Ortho (filed as Exhibit No. 10.4 to Annual Report on Form 10-K for the year ended December 31, 2007, File No. 0-19271 (“2007 Form 10-K”), and incorporated herein by reference).
10.4*	Amendment No. 3 to U.S. Supply Agreement effective as of January 18, 2008, between the Company and Ortho (filed as Exhibit No. 10.5 to 2007 Form 10-K, and incorporated herein by reference).
10.5*	Amendment No. 4 to U.S. Supply Agreement effective as of December 28, 2011, between the Company and Ortho (filed as Exhibit No. 10.5 to Annual Report on Form 10-K for the year ended December 31, 2011, File No. 0-19271 (“2011 Form 10-K”), and incorporated herein by reference).
10.6*	Amendment No. 5 to U.S. Supply Agreement effective as of December 9, 2013, between the Company and Ortho (filed as Exhibit No. 10.6 to Annual Report on Form 10-K for the year ended December 31, 2013, File No. 0-19271 (“2013 Form 10-K”), and incorporated herein by reference).
10.7*	Amendment No. 6 to U.S. Supply Agreement effective as of January 1, 2017, between the Company and Ortho (filed as Exhibit No. 10.27 to Annual Report on Form 10-K for the year ended December 31, 2017, File No. 0-19271 (“2018 Form 10-K”), and incorporated herein by reference).
10.8*	European Supply Agreement, effective as of October 17, 2003, between the Company and Ortho (filed as Exhibit No. 10.8 to 2003 Form 10-K, and incorporated herein by reference).
10.9*	Amendment No. 1 to European Supply Agreement effective as of January 1, 2005, between the Company and Ortho (filed as Exhibit No. 10.2 to June 2005 10-Q, and incorporated herein by reference).
10.10*	Amendment No. 2 to European Supply Agreement effective as of January 18, 2008, between the Company and Ortho (filed as Exhibit No. 10.8 to 2007 Form 10-K, and incorporated herein by reference).
10.11*	Amendment No. 3 to European Supply Agreement effective as of December 28, 2011, between the Company and Ortho (filed as Exhibit No. 10.9 to 2011 Form 10-K, and incorporated herein by reference).
10.12*	Amendment No. 4 to European Supply Agreement effective as of December 9, 2013, between the Company and Ortho (filed as Exhibit No. 10.11 to 2013 Form 10-K, and incorporated herein by reference).
10.13	Amendment, Release and Settlement Agreement dated as of September 12, 2002, among the Company, IDEXX Europe B.V., and Ortho (filed as Exhibit No. 10.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, File No. 0-19271, and incorporated herein by reference).
10.14*	Supply Agreement, effective as of May 7, 2007 between the Company and Moss, Inc. (filed as Exhibit No. 10.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, File No. 0-19271 (“June 2010 Form 10-Q”), and incorporated herein by reference).
10.15**	Employment Agreement dated January 22, 2002, between the Company and Jonathan W. Ayers (filed as Exhibit No. 10.13 to Annual Report on Form 10-K for the year ended December 31, 2001, File No. 0-19271, and incorporated herein by reference).
10.16**	Amended and Restated Executive Employment Agreement dated May 26, 2013, between the Company and Jonathan W. Ayers (filed as Exhibit No. 10.2 to July 23, 2013 Form 10-Q for the quarter ended June 30, 2013, File No. 0-19271 (“June 2013 Form 10-Q”), and incorporated herein by reference).

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10.17**	Form of Executive Employment Agreement dated May 26, 2013, between the Company and each of the Company’s Executive Officers, other than the Chief Executive Officer (filed as Exhibit No. 10.3 to June 2013 Form 10-Q, and incorporated herein by reference).
10.18**	Restated Director Deferred Compensation Plan, as amended (filed as Exhibit No. 10.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, File No. 0-19271, and incorporated herein by reference).
10.19*	Restated Executive Deferred Compensation Plan, as amended (filed as Exhibit No. 10.3 to June 2010 Form 10-Q, and incorporated herein by reference).
10.20**	IDEXX Laboratories 1997 Employee Stock Purchase Plan, as amended (filed as Exhibit No. 10.2 to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015 filed July 30, 2015 and incorporated herein by reference).
10.21**	2009 Stock Incentive Plan, as amended (filed as Exhibit No. 99.1 to Registration Statement on Form S-8 filed December 30, 2013, File No. 333-193136, and incorporated herein by reference).
10.22**	2014 Incentive Compensation Plan, (filed as Exhibit No. 10.2 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, File No. 0-19271 (“June 2014 Form 10-Q”), and incorporated herein by reference).
10.23**	2018 Stock Incentive Plan, (filed as Appendix B to Proxy Statement for the 2018 Annual Meeting of Shareholders, and incorporated herein by reference).
10.24**	Form of Director Stock Option Agreement, pursuant to the 2018 Stock Incentive Plan (filed herewith).
10.25**	Form of Employee Stock Option Agreement, pursuant to the 2018 Stock Incentive Plan (filed herewith).
10.26**	Form of Employee Restricted Stock Unit Agreement pursuant to the 2018 Stock Incentive Plan (filed herewith).
10.27**	Form of Performance-Based Restricted Stock Unit Agreement pursuant to the 2018 Stock Incentive Plan (filed herewith).
10.28**	Form of High-Performer Restricted Stock Unit Agreement pursuant to the 2018 Stock Incentive Plan (filed herewith).
10.29	Second Amended and Restated Credit Agreement, dated as of December 4, 2015, among the Company, IDEXX Distribution, Inc., IDEXX Operations, Inc., OPTI Medical Systems, Inc., IDEXX Laboratories Canada Corporation and IDEXX Europe B.V., as borrowers, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Toronto agent, and J.P. Morgan Europe Limited, as London agent (filed as Exhibit No. 10.1 to the Current Report on Form 8-K filed December 8, 2015 and incorporated herein by reference).
10.30**	Retirement Agreement dated May 24, 2018 between the Company and Jacqueline L. Studer (filed as Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018, File No. 0-19271.
21.1	Subsidiaries of the Company (filed herewith)
23.1	Consent of PricewaterhouseCoopers LLP, an independent registered public accounting firm (filed herewith).

F-55

31.1	Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

101	eXtensible Business Reporting Language (XBRL) documents submitted electronically: 101.INS (XBRL Instance Document), 101.SCH (XBRL Taxonomy Extension Schema Document), 101.CAL (XBRL Calculation Linkbase Document), 101.LAB (XBRL Taxonomy Label Linkbase Document), 101.DEF (XBRL Taxonomy Definition Linkbase Document) and 101.PRE (XBRL Taxonomy Presentation Linkbase Document). The following financial information from IDEXX Laboratories Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 formatted in XBRL: (i) Consolidated Statements of Income for the years ended December 31, 2018, 2017 and 2016; (ii) Consolidated Balance Sheets at December 31, 2018 and 2017; (iii) Consolidated Statements of Changes in Equity for the years ended December 31, 2018, 2017 and 2016; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016; and (v) Notes to Consolidated Financial Statements, tagged as blocks of text.
*	Confidential treatment requested as to certain portions.
**	Management contract or compensatory arrangement required to be filed as an exhibit pursuant to Item 15(a)(3) of Form 10-K.

F-56

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	IDEXX LABORATORIES, INC.
	By: /s/ Jonathan W. Ayers
Date: February 15, 2019	Jonathan W. Ayers
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

SIGNATURE			TITLE				DATE
/s/ Jonathan W. Ayers				President, Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)				February 15, 2019
Jonathan W. Ayers
/s/ Brian P. McKeon				Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)				February 15, 2019
Brian P. McKeon
/s/ Bruce L. Claflin				Director				February 15, 2019
Bruce L. Claflin
/s/ Stuart M. Essig, PhD				Director				February 15, 2019
Stuart M. Essig
/s/ Rebecca M. Henderson, PhD				Director				February 15, 2019
Rebecca M. Henderson, PhD
/s/ Daniel M. Junius				Director				February 15, 2019
Daniel M. Junius
/s/ Lawrence D. Kingsley				Director				February 15, 2019
Lawrence D. Kingsley
/s/ M. Anne Szostak				Director				February 15, 2019
M. Anne Szostak
/s/ Sophie V. Vandebroek, PhD				Director				February 15, 2019
Sophie V. Vandebroek, PhD

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