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 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 our CAG Reference Laboratories. We have transitioned the responsibility for these diagnostic services from our CAG segment 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 years ended December 31, 2014 and 2013 have been retrospectively revised in this Annual Report on Form 10-K to reflect this change in the composition of our reportable segments. Revenue related to these livestock diagnostic services was $13.8 million and $9.9 million for the years ended December 31, 2014 and 2013, respectively.

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 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, 2015, 2014 and 2013.

Certain costs are not allocated to our operating segments and are instead reported under the caption “Unallocated Amounts.” Our business segments generally have limited control over the timing and amount of these expenses. The major categories of these costs include:

Gross Profit:

The capitalization of variances between standard and actual manufacturing costs to adjust the timing of expense recognition from when the variance is created to the period in which the related inventory is sold.

Operating Expenses:

Costs that do not align with one of our existing operating segments or are cost prohibitive to allocate, primarily our R&D function, regional or country expenses and certain foreign currency revaluation gains/losses on monetary balances in currencies other than our subsidiaries’ functional currency.

Corporate support function costs (such as information technology, facilities, human resources, finance and legal), health benefits and incentive compensation, which are charged to our business segments at pre-determined budgeted amounts or rates. Differences from pre-determined budgeted amounts or rates are captured within our Unallocated Segment.

Unusual or extraordinary items.

Below is our segment information (in thousands):



For the Years Ended December 31,
	CAG		Water		LPD		Other		Unallocated Amounts		Consolidated Total
2015
Revenue	$	1,356,287	$	96,884	$	127,143	$	21,578	$	-	$	1,601,892

Income (loss) from operations	$	231,642	$	44,584	$	24,397	$	156	$	(867)	$	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 income 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

2014
Revenue	$	1,223,064	$	94,725	$	141,179	$	26,839	$	-	$	1,485,807

Income (loss) from operations	$	203,536	$	39,262	$	33,788	$	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	$	1,140,292	$	87,959	$	123,688	$	25,119	$	-	$	1,377,058

Income (loss) from operations	$	212,558	$	37,321	$	20,246	$	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

__________

(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, 2015, 2014 and 2013.

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



	For the Years Ended December 31,
		2015		2014		2013
CAG segment revenue:
CAG Diagnostics recurring revenue:	$	1,146,527	$	1,039,252	$	964,009
VetLab consumables		396,526		341,407		312,457
VetLab service and accessories		55,176		53,006		50,675
Rapid assay products		182,670		165,647		169,547
Reference laboratory diagnostic and consulting services		512,155		479,192		431,330
CAG Diagnostics capital instruments		99,001		79,993		83,492
Customer information management and diagnostic imaging systems		110,759		103,819		92,791
CAG segment revenue		1,356,287		1,223,064		1,140,292

Water segment revenue		96,884		94,725		87,959
LPD segment revenue		127,143		141,179		123,688
Other segment revenue		21,578		26,839		25,119

Total revenue	$	1,601,892	$	1,485,807	$	1,377,058

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



	For the Years Ended December 31,
		2015		2014		2013
Americas
United States	$	980,281	$	848,928	$	802,345
Canada		69,303		69,743		69,947
Latin America		34,725		34,086		26,893
		1,084,309		952,757		899,185

Europe, the Middle East and Africa
Germany		73,395		85,189		78,109
United Kingdom		74,879		74,131		65,027
France		46,972		53,322		49,093
Italy		25,903		28,794		26,443
Spain		19,998		21,566		20,194
Switzerland		15,631		14,544		12,246
Netherlands		11,645		10,643		9,352
Other		79,910		78,201		66,221
		348,333		366,390		326,685
Asia Pacific Region
Australia		49,274		58,448		53,063
Japan		43,171		44,132		44,869
China		40,619		34,674		29,044
Other		36,186		29,406		24,212
		169,250		166,660		151,188
Total	$	1,601,892	$	1,485,807	$	1,377,058

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,
		2015		2014
Americas
United States	$	285,391	$	262,475
Brazil		8,404		3,206
Canada		1,796		2,270
		295,591		267,951
Europe, the Middle East and Africa
United Kingdom		13,269		14,366
Germany		5,159		4,836
Netherlands		4,425		3,456
France		2,679		3,172
Switzerland		2,831		2,631
Other		2,047		1,674
		30,410		30,135
Asia Pacific Region
Japan		2,210		2,204
Australia		2,135		1,789
Other		2,680		1,508
		7,025		5,501
Total	$	333,026	$	303,587