Segment Reporting

3 Months Ended

Mar. 31, 2020

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 (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM 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 products and services for livestock and poultry health and to ensure the quality and safety of milk and improve dairy efficiency, which we refer to as Livestock, Poultry and Dairy (“LPD”). Our Other operating segment combines and presents products for the human medical diagnostics ("OPTI Medical") market with our out-licensing arrangements. Assets are not allocated to segments for internal reporting purposes.

Effective January 1, 2020, 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 costs that previously were not allocated to our segments. Prior to January 1, 2020, certain costs were not allocated to our operating segments and were instead reported under the caption “Unallocated Amounts”. These costs primarily consist of our R&D function, regional or country expenses and unusual items. Corporate support function costs (such as information technology, facilities, human resources, finance and legal), health benefits and incentive compensation were charged to our business segments at pre-determined budgeted amounts or rates. Beginning January 1, 2020, the segments will reflect these actual costs allocated to the segment based on various allocation methods, including revenue and headcount. Foreign exchange losses on settlements of foreign currency denominated transactions are not allocated to our operating segments and are instead reported within our Other reporting segment.

The following table reflects adjustments to previously reported costs in our Unallocated segment, that are now allocated to our CAG, Water, LPD and Other segments for the three months ended March 31, 2019:



(in thousands)
	CAG			Water			LPD			Other			Unallocated

Cost of sales	$	(182	)	$	(8	)	$	(10	)	$	(4	)	$	204
Gross profit	182			8			10			4			(204		)

Operating Expenses:
Sales and marketing	$	129		$	6		$	7		$	—		$	(142	)
General and administrative	(202		)	(40		)	(47		)	215			74
Research and development	3,558			9			11			—			(3,578		)
Total operating expenses	3,485			(25		)	(29		)	215			(3,646		)
Income from operations	$	(3,303	)	$	33		$	39		$	(211	)	$	3,442

The following is a summary of segment performance:



(in thousands)	For the Three Months Ended March 31,
	CAG		Water		LPD		Other		Consolidated Total
2020
Revenue	$	551,996	$	34,149	$	34,154	$	6,037	$	626,336

Income from operations	$	118,659	$	15,882	$	9,663	$	121	$	144,325
Interest expense, net									(7,552		)
Income before provision for income taxes									136,773
Provision for income taxes									24,917
Net income									111,856
Less: Net income attributable to noncontrolling interest									29
Net income attributable to IDEXX Laboratories, Inc. stockholders									$	111,827

2019
Revenue	$	508,918	$	30,310	$	31,506	$	5,322	$	576,056

Income from operations	$	111,719	$	13,815	$	6,289	$	1,315	$	133,138
Interest expense, net									(8,346		)
Income before provision for income taxes									124,792
Provision for income taxes									22,083
Net income									102,709
Less: Net income attributable to noncontrolling interest									28
Net income attributable to IDEXX Laboratories, Inc. stockholders									$	102,681

See “Note 3. Revenue Recognition” for a summary of disaggregated revenue by reportable segment and by major product and service category for the three months ended March 31, 2020 and 2019.