NOTE 14. SEGMENT REPORTING

Prior to January 1, 2013, we operated primarily through three business segments: diagnostic and information technology-based products and services for the veterinary market, which we continue to refer to as CAG; water quality products (“Water”); and diagnostic products for livestock and poultry health, which we referred to as Livestock and Poultry Diagnostics. We also operated two smaller operating segments that comprised products for milk quality and safety (“Dairy”) and products for the human point-of-care medical diagnostics market (“OPTI Medical”). Financial information about our Dairy and OPTI Medical operating segments was combined and presented with our remaining pharmaceutical product line and our out-licensing arrangements in an “Other” category because they did not meet the quantitative or qualitative thresholds for reportable segments.

In 2013, we combined the management of our Livestock and Poultry Diagnostics and Dairy lines of business into our LPD segment to more effectively realize the market synergies between the product lines and to achieve operational efficiencies. Our OPTI Medical operating segment remains combined and presented with our remaining pharmaceutical product line and our out-licensing arrangements in an “Other” category because they do not meet the quantitative or qualitative thresholds for reportable segments. The segment income (loss) from operations discussed within this report for the years ended December 31, 2012 has been retrospectively revised to reflect this change in the composition of our 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 operating 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 bioresearch 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 that are used to manage the health status of livestock and poultry, to improve bovine reproductive efficiency, and to ensure the quality and safety of milk and food. OPTI Medical develops, designs, manufactures and distributes point-of-care electrolyte and blood gas analyzers and related consumable products for the human medical diagnostics market.

The accounting policies of our segments are the same as those described in the summary of significant accounting policies in Note 2 except for inventories, as discussed below. Intersegment revenues, which are not included in the table below, were not material for the years ended December 31, 2014, 2013 and 2012.

Items that are not allocated to our operating segments are as follows: a portion of corporate support function and personnel-related expenses; certain manufacturing costs; corporate research and development expenses that do not align with one of our existing business or service categories; the difference between estimated and actual share-based compensation expense; and certain foreign currency exchange gains and losses. These amounts are shown under the caption “Unallocated Amounts.”

We estimate our share-based compensation expense, corporate support function expenses and certain personnel-related costs and allocate the estimated expenses to the operating segments. This allocation differs from actual expense and consequently yields a difference that is reported under the caption “Unallocated Amounts.”

With respect to manufacturing costs, the costs reported in our operating segments include our standard cost for products sold and any variances from standard cost for products purchased or manufactured within the period. We capitalize these variances for inventory on hand at the end of the period to record inventory in accordance with U.S. GAAP. We then record these variances as cost of product revenue as that inventory is sold. The impact to cost of product revenue resulting from this variance capitalization and subsequent recognition is reported within the caption “Unallocated Amounts.”

Additionally, in certain geographies where we maintain inventories in currencies other than the U.S. dollar, the product costs reported in our operating segments include our standard cost for products sold, which is stated at the budgeted currency exchange rate from the beginning of the fiscal year. In these geographies, the variances from standard cost for products sold related to changes in currency exchange rates are reported within the caption “Unallocated Amounts.”

Below is our segment information (in thousands):



For the Years Ended December 31,
	CAG		Water		LPD		Other		Unallocated Amounts		Consolidated Total
2014
Revenue	$	1,236,855	$	94,725	$	127,388	$	26,839	$	-	$	1,485,807

Income (loss) from operations	$	213,109	$	39,262	$	24,215	$	2,479	$	(18,810)	$	260,255
Interest expense, net												(13,700)
Income before provision for income taxes												246,555
Provision for income taxes												64,604
Net income												181,951
Less: Net income attributable to noncontrolling interest												45
Net income attributable to IDEXX Laboratories, Inc. stockholders											$	181,906

Depreciation and amortization	$	48,740	$	2,553	$	5,144	$	2,451	$	-	$	58,888
Expenditures for long-lived assets (1)	$	49,270	$	2,499	$	4,025	$	4,729	$	-	$	60,523

2013
Revenue	$	1,150,169	$	87,959	$	113,811	$	25,119	$	-	$	1,377,058

Income (loss) from operations	$	218,645	$	37,321	$	14,159	$	2,405	$	(5,768)	$	266,762
Interest expense, net												(3,501)
Income before provision for income taxes												263,261
Provision for income taxes												75,467
Net income												187,794
Less: Net loss attributable to noncontrolling interest												(6)
Net income attributable to IDEXX Laboratories, Inc. stockholders											$	187,800

Depreciation and amortization	$	45,079	$	2,470	$	4,906	$	2,141	$	-	$	54,596
Expenditures for long-lived assets (1)	$	66,134	$	3,254	$	5,569	$	2,655	$	-	$	77,612

2012
Revenue	$	1,072,211	$	84,680	$	111,308	$	25,139	$	-	$	1,293,338

Income (loss) from operations	$	203,236	$	37,687	$	20,808	$	2,902	$	(2,070)	$	262,563
Interest expense, net												(1,946)
Income before provision for income taxes												260,617
Provision for income taxes												82,330
Net income												178,287
Less: Net income attributable to noncontrolling interest												20
Net income attributable to IDEXX Laboratories, Inc. stockholders											$	178,267

Depreciation and amortization	$	43,042	$	2,358	$	4,943	$	2,065	$	-	$	52,408
Expenditures for long-lived assets (1)	$	47,531	$	2,099	$	5,767	$	2,221	$	-	$	57,618

__________

(1) Expenditures for long-lived assets exclude expenditures for intangible assets. See Note 3 for information regarding acquisitions of intangible assets during the years ended December 31, 2014, 2013 and 2012.

Revenue by product and service categories was as follows (in thousands):



	For the Years Ended December 31,
		2014		2013		2012
CAG segment revenue:
CAG Diagnostics recurring revenue:	$	1,053,410	$	973,886	$	896,449
VetLab consumables		341,397		312,457		278,818
VetLab service and accessories		53,383		50,675		48,056
Rapid assay products		165,647		169,547		162,232
Reference laboratory diagnostic and consulting services		492,983		441,207		407,343
CAG Diagnostics capital instruments		79,626		83,492		90,177
Customer information management and digital imaging systems		103,819		92,791		85,585
CAG segment revenue		1,236,855		1,150,169		1,072,211

Water segment revenue		94,725		87,959		84,680
LPD segment revenue		127,388		113,811		111,308
Other segment revenue		26,839		25,119		25,139

Total revenue	$	1,485,807	$	1,377,058	$	1,293,338

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



	For the Years Ended December 31,
		2014		2013		2012
Americas
United States	$	848,928	$	802,345	$	759,419
Canada		69,743		69,947		66,405
Latin America		34,086		26,893		22,901
		952,757		899,185		848,725

Europe, the Middle East and Africa
Germany		85,189		78,109		72,983
United Kingdom		74,131		65,027		64,412
France		53,322		49,093		45,927
Italy		28,794		26,443		24,625
Spain		21,566		20,194		19,776
Switzerland		14,544		12,246		12,967
Other		88,844		75,573		59,948
		366,390		326,685		300,638
Asia Pacific Region
Australia		58,448		53,063		50,658
Japan		44,132		44,869		49,204
China		34,674		29,044		24,628
Other		29,406		24,212		19,485
		166,660		151,188		143,975
Total	$	1,485,807	$	1,377,058	$	1,293,338

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,		December 31,
		2014		2013
Americas
United States	$	262,475	$	245,511
Brazil		3,206		869
Canada		2,270		2,114
		267,951		248,494
Europe, the Middle East and Africa
United Kingdom		14,366		12,959
Germany		4,836		5,733
France		3,172		3,127
Netherlands		3,456		2,956
Switzerland		2,631		3,076
Other		1,674		1,190
		30,135		29,041
Asia Pacific Region
Japan		2,204		690
Australia		1,789		1,801
Other		1,508		1,188
		5,501		3,679
Total	$	303,587	$	281,214