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Segment Reporting
 9 Months Ended
Sep. 30, 2015
Segment Reporting [Abstract]  
Segment Reporting

 

Note 16.     Segment Reporting 

  

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 diagnostic and information technology-based products and services for the veterinary market, which we refer to as the Companion Animal Group (“CAG”), water quality products (“Water”) and diagnostic tests for livestock and poultry health and to ensure the quality and safety of milk and food, which we refer to as Livestock, Poultry and Dairy (“LPD”). Our Other operating segment combines and presents products for the human point-of-care medical diagnostics market with our pharmaceutical product line and our out-licensing arrangements because they do not meet the quantitative or qualitative thresholds for reportable segments.

 

Prior to January 1, 2015, our CAG segment included certain livestock testing services processed within and managed by our CAG Reference Laboratories. We have transitioned the responsibility for these diagnostic services to our LPD segment to more effectively align our business with the nature and customers of these livestock services. Segment revenue and income from operations for the three and nine months ended September 30, 2014 has been retrospectively revised in this Quarterly Report on Form 10-Q to reflect this change in the composition of our reportable segments. Revenue related to these livestock testing services was $3.4 million and $10.8 million for the three and nine months ended September 30, 2014, respectively.

 

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; certain foreign currency exchange gains and losses; and certain unusual or infrequent items. 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.”

 

We recorded an  $8.2 million impairment charge related to internally-developed software not yet placed into service within Unallocated Amounts operating expenses during the three months ended September 30, 2015 as a result of a strategic shift to refocus our development efforts within our information management business. 

The following is a summary of segment performance for the three and nine months ended September 30, 2015 and 2014 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30,

 

 

 

 

CAG

 

Water

 

LPD

 

Other

 

Unallocated Amounts

 

Consolidated Total

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$
344,081 

 

$
25,957 

 

$
30,448 

 

$
5,901 

 

$

 -

 

$
406,387 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$
61,541 

 

$
12,408 

 

$
5,562 

 

$
635 

 

$
(8,251)

 

$
71,895 

 

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(7,066)

 

Income before provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
64,829 

 

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
20,600 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
44,229 

 

Less: Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
6 

 

Net income attributable to IDEXX  Laboratories, Inc. stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$
44,223 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$
317,309 

 

$
25,747 

 

$
33,063 

 

$
7,404 

 

$

 -

 

$
383,523 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$
60,176 

 

$
11,367 

 

$
6,319 

 

$
794 

 

$
(6,467)

 

$
72,189 

 

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(3,981)

 

Income before provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
68,208 

 

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
16,045 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
52,163 

 

Less: Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
21 

 

Net income attributable to IDEXX  Laboratories, Inc. stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$
52,142 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended September30,

 

 

 

 

CAG

 

Water

 

LPD

 

Other

 

Unallocated Amounts

 

Consolidated Total

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$
1,020,232 

 

$
72,706 

 

$
93,777 

 

$
15,492 

 

$

 -

 

$
1,202,207 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$
181,845 

 

$
33,821 

 

$
17,408 

 

$
204 

 

$
(277)

 

$
233,001 

 

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(19,645)

 

Income before provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
213,356 

 

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
65,611 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
147,745 

 

Less: Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
16 

 

Net income attributable to IDEXX  Laboratories, Inc. stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$
147,729 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$
938,166 

 

$
71,655 

 

$
104,581 

 

$
19,446 

 

$

-

 

$
1,133,848 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$
181,104 

 

$
29,547 

 

$
25,385 

 

$
1,134 

 

$
(11,716)

 

$
225,454 

 

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(8,761)

 

Income before provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
216,693 

 

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
60,693 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
156,000 

 

Less: Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
55 

 

Net income attributable to IDEXX  Laboratories, Inc. stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$
155,945 

 

 

The following is a summary of revenue by product and service category for the three and nine months ended September 30, 2015 and 2014 (in thousands): 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

September 30,

 

September 30,

 

 

 
2015 

 

 
2014 

 

 
2015 

 

 
2014 

CAG segment revenue:

 

 

 

 

 

 

 

 

 

 

 

 

CAG Diagnostics recurring revenue:

 

$
290,502 

 

$
274,367 

 

$
869,413 

 

$
807,193 

IDEXX VetLab® consumables

 

 
98,957 

 

 
90,975 

 

 
298,093 

 

 
264,410 

VetLab service and accessories

 

 
13,675 

 

 
13,537 

 

 
41,223 

 

 
40,036 

Rapid assay products

 

 
47,534 

 

 
46,777 

 

 
143,353 

 

 
139,328 

Reference laboratory diagnostic and consulting services

 

 
130,336 

 

 
123,078 

 

 
386,744 

 

 
363,419 

CAG Diagnostics capital - instruments

 

 
25,989 

 

 
18,215 

 

 
70,166 

 

 
55,799 

Customer information management and digital imaging systems

 

 
27,590 

 

 
24,727 

 

 
80,653 

 

 
75,174 

CAG segment revenue

 

 
344,081 

 

 
317,309 

 

 
1,020,232 

 

 
938,166 

 

 

 

 

 

 

 

 

 

 

 

 

 

Water segment revenue

 

 
25,957 

 

 
25,747 

 

 
72,706 

 

 
71,655 

LPD segment revenue

 

 
30,448 

 

 
33,063 

 

 
93,777 

 

 
104,581 

Other segment revenue

 

 
5,901 

 

 
7,404 

 

 
15,492 

 

 
19,446 

Total revenue

 

$
406,387 

 

$
383,523 

 

$
1,202,207 

 

$
1,133,848