NOTE 15. 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 pharmaceutical intellectual property and 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 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 and performs services 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, 2017, 2016 and 2015.

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.

Effective January 1, 2016, we modified our management reporting to the Chief Operating Decision Maker to provide a more comprehensive view of the performance of our operating segments by including the capitalization and subsequent recognition of variances between standard and actual manufacturing costs, which adjusts the timing of cost recognition from when the variance is created to the period in which the related inventory is sold. Prior to January 1, 2016, the capitalization and subsequent recognition of these variances were not allocated to our operating segments and were instead reported under the caption “Unallocated Amounts”.

Below is our segment information (in thousands):



For the Years Ended December 31,
	CAG		Water		LPD		Other		Unallocated Amounts		Consolidated Total
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

2015
Revenue	$	1,356,287	$	96,884	$	127,143	$	21,578	$	-	$	1,601,892

Income (loss) from operations	$	233,319	$	44,752	$	27,157	$	(137)	$	(5,179)	$	299,912
Interest expense, net												(26,771)
Income before provision for income taxes												273,141
Provision for income taxes												81,006
Net income												192,135
Less: Net loss attributable to noncontrolling interest												57
Net income attributable to IDEXX Laboratories, Inc. stockholders											$	192,078

Depreciation and amortization	$	60,715	$	3,188	$	4,367	$	686	$	-	$	68,956
Expenditures for long-lived assets (1)	$	69,371	$	2,781	$	9,110	$	1,659	$	-	$	82,921

__________

(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, 2017, 2016 and 2015.

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



	For the Years Ended December 31,
		2017		2016		2015
CAG segment revenue:
CAG Diagnostics recurring revenue:	$	1,451,701	$	1,281,262	$	1,147,026
IDEXX VetLab consumables		518,774		451,456		396,526
Rapid assay products		205,309		189,122		182,670
Reference laboratory diagnostic and consulting services		660,142		581,067		512,155
CAG Diagnostics service and accessories		67,476		59,617		55,675
CAG Diagnostics capital - instruments		119,963		121,191		98,502
Veterinary software, services and diagnostic imaging systems		131,713		120,236		110,759
CAG segment revenue		1,703,377		1,522,689		1,356,287

Water segment revenue		114,395		103,579		96,884
LPD segment revenue		128,481		126,491		127,143
Other segment revenue		22,805		22,664		21,578

Total revenue	$	1,969,058	$	1,775,423	$	1,601,892

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



	For the Years Ended December 31,
		2017		2016		2015
Americas
United States	$	1,203,547	$	1,089,595	$	980,281
Canada		83,818		74,923		69,303
Latin America		46,893		38,872		34,725
		1,334,258		1,203,390		1,084,309

Europe, the Middle East and Africa
Germany		88,328		80,156		73,395
United Kingdom		80,149		77,671		74,879
France		55,993		51,204		46,972
Italy		31,889		28,907		25,903
Spain		28,866		24,268		19,998
Switzerland		17,913		16,361		15,631
Netherlands		15,877		14,049		11,645
Other		100,409		83,147		79,910
		419,424		375,763		348,333
Asia Pacific Region
Australia		56,994		52,871		49,274
China		55,810		48,257		40,619
Japan		53,344		51,544		43,171
Other		49,228		43,598		36,186
		215,376		196,270		169,250
Total	$	1,969,058	$	1,775,423	$	1,601,892

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,
		2017		2016
Americas
United States	$	310,696	$	298,944
Brazil		17,030		17,910
Canada		2,238		1,977
		329,964		318,831
Europe, the Middle East and Africa
United Kingdom		11,528		9,127
Germany		7,522		5,040
Netherlands		8,225		5,948
France		2,305		2,428
Switzerland		1,755		2,450
Other		3,838		3,490
		35,173		28,483
Asia Pacific Region
Japan		4,065		2,469
Australia		4,426		4,185
Other		5,468		3,454
		13,959		10,108
Total	$	379,096	$	357,422