IDEXX LABORATORIES, INC.
2020 Annual Report
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________.
COMMISSION FILE NUMBER: 0-19271
IDEXX LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation
or organization)
One IDEXX Drive
(Address of principal executive offices)
Westbrook, Maine
01-0393723
(IRS Employer Identification No.)
04092
(ZIP Code)
207-556-0300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.10 par value per share
Trading Symbol(s)
IDXX
Name of each exchange on which registered
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging
growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
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☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Based on the closing sale price on June 30, 2020 of the registrant’s Common Stock, the last business day of the registrant’s most recently completed
second fiscal quarter, as reported by the NASDAQ Global Select Market, the aggregate market value of the voting stock held by non-affiliates of the
registrant was $27,735,989,165. For these purposes, the registrant considers its directors and executive officers to be its only affiliates.
The number of shares outstanding of the registrant’s Common Stock was 85,426,080 on February 9, 2021.
Part III—Specifically identified portions of the Company’s definitive Proxy Statement to be filed in connection with the Company’s 2021 annual
meeting of stockholders (the “2021 Annual Meeting”), to be held on May 12, 2021, are incorporated herein by reference.
DOCUMENTS INCORPORATED BY REFERENCE
GLOSSARY OF TERMS AND SELECTED ABBREVIATIONS
Term/Abbreviation
Definition
AOCI
ASC
ASU 2016-13
CAG
cGMP
Clinical visits
Credit Facility
EMA
EPA
EPS
EU
EURIBOR
FASB
FDA
Accumulated other comprehensive income or loss
Accounting Standards Codification
ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments
Companion Animal Group, a reporting segment that provides veterinarians diagnostic products and services
and information management solutions that enhance the health and well-being of pets.
The FDA’s current Good Manufacturing Practice regulations.
The reason for the visit involves an interaction between a clinician and a pet, including wellness and non-
wellness visit types.
Our $1 billion three-year unsecured revolving credit facility under an amended and restated credit
agreement that was executed in April 2020, also referred to as line of credit.
Extended maintenance agreements
U.S. Environmental Protection Agency
Earnings per share, if not specifically stated, EPS refers to earnings per share on a diluted basis.
European Union
Interest rate used in lending between banks on the European Union interbank market and also used as a
reference for setting the interest rate on other loans.
U.S. Financial Accounting Standards Board
U.S. Food and Drug Administration
Instrument rebate programs
IVLS
Our customer instrument rebate programs, previously referred to as IDEXX Instrument Marketing
Programs, which require an instrument purchase and provide customers the opportunity to earn future
rebates based on the volume of products and services they purchase over the term of the program.
IDEXX VetLab Station, connects and integrates the diagnostic information from all the IDEXX VetLab
analyzers and thus provides reference laboratory information management system capability.
Kits and consumables
Rapid assay kits and IDEXX VetLab consumables
LIBOR
LPD
Non-wellness visits
OCI
OPTI Medical
Organic revenue growth
Ortho
Prime rate
London Interbank Offered Rate, current benchmark interest rate used between banks and used to set interest
rates on loans.
Livestock, Poultry and Dairy, a reporting segment that provides diagnostic products and services for
livestock and poultry health and ensures the quality and safety of milk and improves producer efficiency.
Patient visits where the reason for the visit is sickness, procedure, or monitoring.
Other comprehensive income or loss
OPTI Medical Systems, Inc., a wholly-owned subsidiary of IDEXX Laboratories Inc., located in Roswell,
Georgia. This business provides point-of-care and laboratory diagnostics (including electrolyte and blood
gas analyzers and related consumable products) for the human medical diagnostics market, as well as
COVID-19 testing products and services. The Roswell facility also manufactures electrolytes slides
(instrument consumables) to run Catalyst One®, Catalyst Dx®, and blood gas analyzers and consumables for
the veterinary market; also referred to as OPTI.
A non-GAAP financial measure that represents the percentage change in revenue, as compared to the same
period for the prior year, net of the effect of changes in foreign currency exchange rates, certain business
acquisitions and divestitures. Organic revenue growth should be considered in addition to, and not as a
replacement for or as a superior measure to, revenues reported in accordance with U.S. GAAP, and may not
be comparable to similarly titled measures reported by other companies.
Ortho Clinical Diagnostics, Inc., a supplier of dry slide consumables used in our Catalyst One and Catalyst
Dx Chemistry Analyzers and VetTest Chemistry Analyzer.
The prime rate is an interest rate determined by individual banks. It is often used as a reference rate for
many types of loans.
Up-Front customer loyalty
programs
Our up-front loyalty programs provide customers with incentives in the form of cash payments or IDEXX
Points upon entering into multi-year agreements to purchase annual minimum amounts of future products or
services.
PACS
R&D
Reagent rentals
Picture archiving and communication software, our software solution for accessing, storing, and sharing
diagnostic images.
Research and Development
Instruments being placed at customer sites at little or no cost in exchange for a long-term customer
commitment to purchase instrument consumables.
2
Reported revenue growth
The percentage change in revenue reported in accordance with U.S. GAAP, as compared to the same period
in the prior year.
S&P
Standard & Poor’s
S&P 500 Health Care Index
The index for the S&P 500 Health Care (U.S. companies) measures the performance of companies that are
classified as members in the Global Industry Classification Standard of health care services sub-industry.
S&P 500 Index
SaaS
SDMA
SEC
The S&P 500 Index is a U.S. stock market index based on the market capitalization of 500 large companies
having common stock listed on the New York Stock Exchange or NASDAQ, including IDEXX.
Software-as-a-service
Symmetrical dimethyl arginine, a biomarker that detects kidney disease.
U.S. Securities and Exchange Commission
Senior Note Agreements
Note purchase agreements for the private placement of senior notes, referred to as senior notes or long-term
debt.
T4
U.S. GAAP
USDA
Thyroxine, a hormone produced by the thyroid gland, tested to indicate thyroid health.
Accounting principles generally accepted in the United States of America
United States Department of Agriculture
Volume commitment programs
Programs that provide customers with a free or discounted instrument or system upon entering into multi-
year agreements to purchase annual minimum amounts of products and services, such as our IDEXX 360
program.
Water
Wellness visits
Water, a reporting segment that provides water microbiology testing products.
Patient visits where the reason for the visit is an annual exam, vaccination, or routine check-up.
3
IDEXX LABORATORIES, INC.
Annual Report on Form 10-K
Table of Contents
PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item No.
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Item 10
Item 11
Item 12
Item 13
Item 14
Item 15
Item 16
Exhibits, Financial Statement Schedules
Form 10-K Summary
PART IV
Financial Statements and Supplementary Data – Index to Consolidated Financial Statements
Exhibit Index
Signatures
Page No.
6
17
30
30
30
30
31
32
33
59
61
61
61
62
63
63
63
63
63
64
64
F-1
4
The terms “IDEXX,” “Company,” “registrant,” “we,” “us,” and “our” included in this Annual Report on Form 10-K
mean IDEXX Laboratories, Inc. and all subsidiaries that are consolidated under U.S. GAAP.
We have included certain terms and abbreviations used throughout this Annual Report on Form 10-K in the "Glossary
of Terms and Selected Abbreviations.”
Our name, logo and the following terms used in this Annual Report on Form 10-K are either registered trademarks or
trademarks of IDEXX Laboratories, Inc. in the United States and/or other countries: 4Dx®, Animana® Veterinary Software,
Catalyst Dx®, Catalyst One®, Coag Dx™, Colilert®, Colisure®, Cornerstone®, DVMAX®, Enterolert®, Feline Triple®, Filta-
Max®, Filta-Max xpress®, IDEXX I-Vision CR®, IDEXX I-Vision DR®, IDEXX I-Vision Mobile™, IDEXX ImageBank™
IDEXX Neo®, IDEXX-PACS™, IDEXX SDMA®, IDEXX VetLab®, LaserCyte®, LaserCyte® Dx, OPTI®, Pet Health Network®,
Petly® Plans, Practice Profile™, ProCyte Dx®, Pseudalert®, Quanti-Tray®, rVetLink®, SediVue Dx®, SNAP®, SNAPduo®, SNAP
Pro®, SNAP®
VetLyte®, VetStat®, and VetTest®. VetAutoread is a trademark of QBC Diagnostics.
fPL™, SNAPshot Dx®, IDEXX VetAutoread™, VetConnect®, IDEXX VetLab®
UA™, VetLINK®,
cPL™, SNAP®
,
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K for the year ended December 31, 2020, contains statements which, to the extent
they are not statements of historical fact, constitute “forward-looking statements.” Such forward-looking statements about our
business and expectations within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), include statements relating to the impact of the COVID-19 pandemic; future revenue growth rates; future tax benefits;
the impact of tax legislation and regulatory action; business trends, earnings and other measures of financial performance; the
effect of economic downturns on our business performance; the projected effect of patent and license expirations; the projected
impact of foreign currency exchange rates and hedging activities; demand for our products; realizability of assets; future cash
flow and uses of cash; future repurchases of common stock; future levels of indebtedness and capital spending; interest
expense; warranty expense; share-based compensation expense; the adoption and projected impact of new accounting
standards; future commercial efforts; future product launches; projected cost and completion of capital investments; and
competition. Forward-looking statements can be identified by the use of words such as “expects,” “may,” “anticipates,”
“intends,” “would,” “will,” “plans,” “believes,” “estimates,” “should,” “project,” and similar words and expressions. These
forward-looking statements are intended to provide our current expectations or forecasts of future events, are based on current
estimates, projections, beliefs, and assumptions, and are not guarantees of future performance. Actual events or results may
differ materially from those described in the forward-looking statements. These forward-looking statements involve a number
of risks and uncertainties, including, among other things, the matters described under the headings "Business," "Risk Factors,"
"Legal Proceedings," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and
"Quantitative and Qualitative Disclosures About Market Risk" in this Annual Report on Form 10-K. Any forward-looking
statements represent our estimates only as of the day this Annual Report on Form 10-K was first filed with the Securities and
Exchange Commission (“SEC”) and should not be relied upon as representing our estimates as of any subsequent date. From
time to time, oral or written forward-looking statements may also be included in other materials released to the public and they
are subject to the risks and uncertainties described or cross-referenced in this section. While we may elect to update forward-
looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates or
expectations change.
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ITEM 1.
BUSINESS
COMPANY OVERVIEW
PART I
IDEXX was incorporated in Delaware in 1983. We develop, manufacture, and distribute products and provide services
primarily for the companion animal veterinary, livestock and poultry, dairy and water testing markets. We also provide point-
of-care and laboratory diagnostics for the human medical diagnostic market. Our primary products and services are:
•
•
•
•
•
•
•
Point-of-care veterinary diagnostic products, comprised of instruments, consumables, and rapid assay test kits;
Veterinary reference laboratory diagnostic and consulting services;
Practice management, and diagnostic imaging systems and services used by veterinarians;
Health monitoring, biological materials testing, laboratory diagnostic instruments, and services used by the
biomedical research community;
Diagnostic, health-monitoring products for livestock, poultry, and dairy;
Products that test water for certain microbiological contaminants; and
Point-of-care electrolytes and blood gas analyzers and SARS-CoV-2 RT-PCR (COVID-19 test) used in the human
diagnostics market.
Our Purpose is to be a great company that creates exceptional long-term value for our customers, employees, and
stockholders by enhancing the health and well-being of pets, people, and livestock.
DESCRIPTION OF BUSINESS BY SEGMENT
We operate primarily through three business segments: Companion Animal Group, Water quality products, and
Livestock, Poultry and Dairy. Our Other operating segment combines and presents our products and services for the human
medical diagnostics market with our out-licensing arrangements because they do not meet the quantitative or qualitative
thresholds for reportable segments.
Companion Animal Group (“CAG”) - Diagnostic and information management-based products and services for the
veterinary market, including in-clinic diagnostic solutions, outside reference laboratory services, and veterinary software and
services.
CAG Diagnostics
We provide diagnostic capabilities that meet veterinarians’ diverse needs through a variety of modalities, including in-
clinic diagnostic solutions and outside reference laboratory services. Regardless of modality utilized, veterinarians are provided
with clinically relevant data which is integrated within our information management technologies. The result is a
comprehensive view of patient diagnostic information that is easily accessible by both the veterinarian and pet owner.
Integrated Diagnostic Information Management. VetConnect PLUS is a cloud-based technology that enables
veterinarians to access and analyze patients’ data from all of IDEXX’s diagnostic modalities. These integrated diagnostic results
provide the veterinarian with a visualization of patient-specific testing results, allowing the veterinarian to easily see and trend
diagnostic results, enabling greater medical insight and enhanced decision-making. In addition, VetConnect PLUS provides
instant mobile or browser-based access to results, which can be printed or emailed to pet owners and other veterinarians.
In-Clinic Diagnostic Solutions. Our in-clinic diagnostic solutions are comprised of our IDEXX VetLab suite of in-
clinic chemistry, hematology, immunoassay, urinalysis, and coagulation analyzers, as well as associated proprietary
consumable products that provide real-time reference lab quality diagnostic results. Our in-clinic diagnostic solutions also
include a broad range of single-use, IDEXX SNAP rapid assay test kits that provide quick, accurate, and convenient point-of-
care diagnostic test results for a variety of companion animal diseases and health conditions. Additionally, we offer extended
maintenance agreements in connection with the sale of our instruments.
6
Blood and Urine Chemistry. We have three blood and urine chemistry analyzers that are used by veterinarians
to measure levels of certain enzymes and other substances in blood or urine for monitoring health status and assisting
in diagnosing physiologic conditions. We currently sell two of these chemistry analyzers, the Catalyst One Chemistry
analyzer and the VetTest Chemistry analyzer. We continue to support our Catalyst Dx Chemistry analyzer, previously
sold as part of the Catalyst platform. We also have two other chemistry analyzers, the VetLyte Electrolyte analyzer and
the VetStat Electrolyte and Blood Gas analyzer. Sales of consumables to customers who use our chemistry analyzers
provide the majority of our instrument consumables revenues from our installed base of IDEXX VetLab instruments.
Hematology. We sell five hematology analyzers that assess the cellular components of blood, including red
blood cells, white blood cells, and platelets (also called a complete blood count). These analyzers include the
ProCyte Dx hematology analyzer, the LaserCyte Dx hematology analyzer; and the IDEXX VetAutoread
hematology analyzer. We also sell the Coag Dx analyzer, which permits the detection and diagnosis of blood clotting
disorders. During 2020, we introduced and began selling our new ProCyte One analyzer and will begin delivery of
these analyzers in 2021.
Rapid Assay. The SNAP rapid assays are single-use, handheld test kits that can work without the use of
instrumentation, although many kits may also be activated with results automatically captured and interpreted by the
SNAP Pro Analyzer. This device improves medical care by allowing veterinarians to share the test results with the pet
owner on the SNAP Pro Analyzer screen, or via VetConnect PLUS. Our SNAPshot Dx analyzer can run multiple
patient samples at once. The principal canine SNAP rapid assay tests include SNAP 4Dx Plus, which tests for the six
vector-borne diseases including Lyme disease as well as canine heartworm and SNAP Heartworm RT, which tests for
heartworm. Sales of our canine vector-borne disease tests are greater in the first half of our fiscal year due to
seasonality of disease testing in the veterinary practices in the Northern Hemisphere. The principal feline SNAP rapid
assay tests include SNAP Feline Triple, which tests for feline immunodeficiency virus (“FIV”) (which is similar to the
virus that leads to AIDS in humans) and SNAP FIV/FeLV Combo Test, which tests for FIV and Feline leukemia
virus ("FeLV").
Urinalysis. The SediVue Dx analyzer is designed to provide automated real-time results in a fraction of the
time of manual microscope analysis, which allows veterinary staff to perform a urine sediment analysis in
approximately 3 minutes. The IDEXX VetLab UA analyzer provides rapid, automated capture of semi-quantitative
chemical urinalysis from IDEXX UA strips and is validated specifically for veterinary use.
IDEXX VetLab Station. The IDEXX VetLab Station (“IVLS”) connects and integrates the diagnostic
information from all the IDEXX VetLab analyzers, and thus, provides reference laboratory information management
system capability. IVLS also sends all results created on connected instruments instantly to VetConnect PLUS. We sell
IVLS as an integral component of the Catalyst One, Catalyst Dx, LaserCyte, LaserCyte Dx and ProCyte Dx analyzers,
SNAP Pro Analyzer, SNAPshot Dx analyzer and also as a standalone hardware platform.
Outside Reference Laboratory Diagnostic and Consulting Services. We offer commercial reference laboratory
diagnostic and consulting services to veterinarians in many developed markets worldwide, including customers in the U.S.,
Europe, Canada, Australia, Japan, New Zealand, South Africa, South Korea, and Brazil, through a network of over 80
laboratories. Customers use our services by submitting samples by courier or overnight delivery to one of our facilities. Most
test results have same-day or next-day turnaround times. Our diagnostic laboratory business also provides health monitoring
and diagnostic testing services to biomedical research customers in North America, Europe, and Asia.
Our reference laboratories offer a large selection of tests and diagnostic panels to detect a number of disease states and
other conditions in animals, including all tests that can be run in-clinic at the veterinary practice with our instruments or rapid
assays. This menu of tests also includes a number of specialized and proprietary tests that we have developed that allow
practitioners to diagnose increasingly relevant diseases and conditions in dogs and cats, including parasites, heart disease,
allergies, pancreatitis, diabetes, and infectious diseases.
Additionally, we provide specialized veterinary consultation, telemedicine, and advisory services, including radiology,
cardiology, internal medicine, and ultrasound consulting. These services enable veterinarians to obtain readings and
interpretations of test results transmitted by telephone and over the Internet.
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Veterinary Software and Services & Diagnostic Imaging Systems
Veterinary Software and Services. We develop, market, and sell a portfolio of software and services for independent
veterinary clinics and corporate groups. This portfolio includes:
Practice management systems. Software, hardware, and integrated services that run key functions of
veterinary clinics, including managing patient electronic health records, scheduling, client communication, billing, and
inventory management. Our principal practice management systems are Cornerstone (on-premise), IDEXX Neo
(cloud-based), DVMAX (on-premise), and IDEXX Animana (cloud-based, available in Europe). To support the
software system needs of practices, IDEXX provides integrated services including: Hardware, Payment Solutions,
Data Backup & Recovery, and Practice Supplies.
Software applications that extend workflow capabilities for practices and groups. We are able to improve
overall patient management and workflow optimization through coordination and tracking of every step of a patient
during a hospital stay. Our SmartFlow cloud offering works in conjunction with major veterinary practice management
systems, including IDEXX Cornerstone, DVMAX, IDEXX Animana, IDEXX Neo, and certain third-party practice
management systems.
Client marketing and wellness plan management. In addition, we offer cloud-based client communication (Pet
Health Network Pro and Pet Health Network 3D) and preventive care plan management software (Petly Plans)
designed to strengthen the relationship between the veterinarian and the pet owner. To support the communication
needs between general practices and specialty referral practices, IDEXX offers rVetLink software. Lastly, IDEXX
Enterprise provides centralized management and reporting capabilities for groups of veterinary practices.
Diagnostic Imaging Systems. Our diagnostic imaging systems capture radiographic images in digital form, replacing
traditional x-ray film and the film development process, which generally requires the use of hazardous chemicals and
darkrooms. We market and sell four diagnostic imaging systems primarily used in small animal veterinary applications: the
IDEXX ImageVue DR50, the IDEXX ImageVue DR40, the IDEXX ImageVue DR30, and the IDEXX ImageVue CR20.
Our diagnostic imaging systems employ picture archiving and communication system (“PACS”) software called
IDEXX-PACS, which facilitates radiographic image capture and review. IDEXX Web PACS is our cloud-based software-as-a-
service (“SaaS”) offering for viewing, accessing, storing, and sharing multi-modality diagnostic images. IDEXX Web PACS is
integrated with Cornerstone, IDEXX Neo, IDEXX DVMAX, and IDEXX VetConnect PLUS to provide centralized access to
diagnostic imaging results alongside patient diagnostic results from any internet connected device.
IDEXX I-Vision Mobile is a software application that allows veterinarians with IDEXX digital radiography systems
the ability to request, view and send images using an iPad® mobile tablet. This application integrates with our IDEXX-PACS
software.
We believe that the breadth of our full diagnostic solution, including novel products and services developed and made
available only by IDEXX, as well as the seamless software integration of our offering provide a unique competitive advantage
by giving veterinarians the tools and services to offer advanced veterinary medical care. We believe that with the use of our
products and services, veterinary practices significantly improve the quality of veterinary care provided to their patients,
increase staff efficiencies, and effectively communicate the value of this medical care to the pet owner. We believe that these
capabilities, enabled by the use of IDEXX products and services, improve the financial health of the veterinary practice.
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Water quality products (“Water”) - Water provides innovative testing solutions for easy, rapid and accurate detection and
quantification of various microbiological parameters in water.
Water testing. Our principal products are the Colilert, Colilert-18, and Colisure tests, which detect the presence of total
coliforms and E. coli in water. These organisms are broadly used as microbial indicators for potential fecal contamination in
water. Our products utilize nutrient-indicators that produce a change in color or fluorescence when metabolized by target
microbes in the sample. Our water tests are used by government laboratories, water utilities and private certified laboratories to
test drinking water in compliance with regulatory standards, including U.S. Environmental Protection Agency (“EPA”)
standards. The tests also are used in evaluating water used in production processes (for example, in beverage and
pharmaceutical applications) and in evaluating bottled water, recreational water, wastewater, and water from private wells.We
also sell consumables, parts, and accessories to be used with many of our water testing products.
Enterolert. Our Enterolert products detect the presence of enterococci in drinking, waste, and recreational
waters. Enterococci, bacteria normally found in human and animal waste, are organisms broadly used as microbial
indicators for potential fecal contamination in water.
Pseudalert. Our Pseudalert products detect the presence of Pseudomonas aeruginosa in pool, spa, and bottled
water. Pseudomonas aeruginosa is a pathogen that can cause “hot-tub rash,” “swimmer’s ear”, and potentially fatal
infections in individuals with weakened immune systems.
Filta-Max and Filta-Max xpress. Our Filta-Max and Filta-Max xpress products are used in the detection of
Cryptosporidium and Giardia in water. Cryptosporidium and Giardia are parasites that can cause potentially fatal
gastrointestinal illness if ingested. We also distribute certain water testing kits manufactured by Thermo Fisher
Scientific, Inc. that complement our Cryptosporidium and Giardia testing products.
Legiolert. Our Legiolert product is a simple culture method test for the detection of Legionella pneumophila,
the most common Legionella species in water and the primary cause of Legionnaires’ disease. The Legiolert test is
designed to be used on potable or non-potable water sources with results in seven days.
Quanti-Tray products. Our Quanti-Tray products, when used in conjunction with our Colilert, Colilert-18,
Colisure, Enterolert, Pseudalert, Heterotrophic Plate Count ("HPC") or Legiolert products, provide users quantitative
measurements of microbial contamination rather than a presence/absence indication. Our Quanti-Tray Sealer PLUS,
and Quanti-Tray Sealer 2X are used with the Quanti-Tray products for the determination of bacterial density in water
samples. Our SimPlate for HPC product detects the total number of the most common bacteria in a water sample.
Livestock, Poultry and Dairy (“LPD”) - LPD provides diagnostic tests, services, and related instrumentation that are used to
manage the health status of livestock and poultry, to improve dairy efficiency, and to ensure the quality and safety of milk.
Livestock, Poultry and Heard Health Screening. We sell diagnostic tests, services and related instrumentation that are
used to manage the health status of livestock and poultry, to improve producer efficiency, and to ensure the quality and safety
of milk. Our livestock and poultry diagnostic products are purchased by government and private laboratories that provide
testing services to livestock veterinarians, producers, and processors. Our herd health screening services are offered to livestock
veterinarians and producers. Our principal livestock and poultry diagnostic products include tests for Bovine Viral Diarrhea
Virus (“BVDV”), Porcine Reproductive and Respiratory Syndrome (“PRRS”), and African Swine Fever ("ASFV"). BVDV is a
common and contagious viral infection that suppresses the immune system, making the animal susceptible to a host of other
infections, impacting beef and dairy production yields as a result. PRRS is a contagious virus causing reproductive problems
and respiratory diseases in swine, leading to increased piglet mortality, reduced growth, and vulnerability to secondary
infections. Our RealPCR ASFV Test is a real-time polymerase chain reaction ("PCR") assay that provides early and accurate
detection of ASFV supporting prevention, control, and eradication programs by veterinarians and producers.
Dairy products. Our principal dairy products use our SNAP test platform and are used by dairy producers and
processors worldwide to detect antibiotic drug residue in milk. Our primary product lines are SNAP Beta-Lactam ST and
SNAPduo Beta-Tetra ST, which detect certain beta lactam and tetracycline antibiotic residues. We also sell SNAP tests for the
detection of certain other contaminants in milk, such as Aflatoxin M1.
Other - Our Other operating segment combines and presents our products and services for the human medical diagnostics
market (“OPTI Medical”) with our out-licensing arrangements because they do not meet the quantitative or qualitative
thresholds for reportable segments.
9
OPTI Medical. Through OPTI Medical, we sell point-of-care analyzers and related consumables for use in human
medical hospitals and clinics to measure electrolytes, blood gases, acid-base balance, glucose, lactate, blood urea nitrogen and
ionized calcium, and to calculate other parameters such as base excess and anion gap. These OPTI analyzers are used primarily
in emergency rooms, operating rooms, cardiac monitoring areas and other locations where time-critical diagnostic testing is
performed within the hospital setting. Our OPTI CCA-TS2 Blood Gas and Electrolyte analyzer contains many new features
relative to previous generation blood gas analyzers including customized work flows, faster time to result, improved
communication, and a multi-level electronic control. Similar to our earlier generation OPTI CCA and OPTI Touch Electrolyte
analyzers, the OPTI CCA-TS2 runs whole blood, plasma, and serum samples on single-use disposable cassettes that contain
various configurations of analytes.
Through OPTI Medical we also provide human COVID-19 testing products and laboratory services. On May 7, 2020,
we announced that OPTI Medical was granted by the United States Food and Drug Administration ("FDA") an Emergency Use
Authorization ("EUA") for the OPTI SARS-CoV-2 RT-PCR laboratory test kit for the detection of SARS-CoV-2, the virus that
causes COVID-19. On June 5, 2020 OPTI Medical announced that it has received the CE mark certification in the European
Union for its OPTI SARS-CoV-2 RT-PCR laboratory test kit. Additionally, the FDA has granted EUA for the new OPTI DNA/
RNA Magnetic Bead Kit for nucleic acid extraction from respiratory samples to be used with the OPTI SARS-CoV-2 RT-PCR
test kit, which enables OPTI Medical Systems to provide laboratories with a complete OPTI Medical Systems-manufactured
workflow solution for COVID-19 testing. We also provide human COVID-19 testing laboratories services to the Maine Center
for Disease Control and Prevention in support of their COVID-19 testing program.
Other Activities. We own certain drug delivery technology intellectual property, that we continue to seek to
commercialize through agreements with third parties, such as pharmaceutical companies, that are included in the Other
segment.
Additional information about of our products and services can be found on our website.
MARKETING AND DISTRIBUTION
We market, sell, and service our products worldwide through our marketing, customer service, sales, and technical
service groups, as well as through independent distributors and other resellers. We maintain sales offices outside the U.S. in all
major regions including Africa, Asia Pacific, Canada, Europe, Middle East, and Latin America.
Generally, we select the appropriate distribution channel for our products based on the type of product, technical
service requirements, number and concentration of customers, regulatory requirements, and other factors. We market our
companion animal diagnostic products to veterinarians directly in the U.S. Outside the U.S., we sell our companion animal
diagnostic products through our direct sales force and, in certain countries, through distributors and other resellers. We sell our
veterinary reference laboratory diagnostic and consulting services worldwide, generally through our direct sales force. We
market our diagnostic imaging products primarily through our direct sales force in the U.S. and Canada. We market our
software products primarily through our direct sales force in the U.S., Canada, Europe, and Australia. We market our Water and
LPD products primarily through our direct sales force in the U.S. and Canada. Outside the U.S. and Canada, we market these
products through our direct sales force and, in certain countries, through selected independent distributors. We sell our OPTI
products and services both directly and through independent human medical product distributors.
RESEARCH AND DEVELOPMENT
Our business includes the development and introduction of new products and services and may involve entry into new
business areas. We maintain active research and development programs in each of our business segments. Our research and
development expenses, which consist of salaries, employee benefits, materials and external consulting and development costs,
were $141.2 million for the year ended December 31, 2020, or 5.2% of our consolidated revenue, $133.2 million for the year
ended December 31, 2019, or 5.5% of our consolidated revenue and $117.9 million for the year ended December 31, 2018, or
5.3% of our consolidated revenue.
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PATENTS AND LICENSES
We actively seek to obtain patent protection in the U.S. and other countries for inventions covering our products and
technologies. We also license patents and technologies from third parties. Patents and licenses of patents and technologies from
third parties are considered important to the Company based on a variety of factors, including providing protection for the
Company’s inventions and other proprietary intellectual property; affording protection from competitors in certain markets;
enabling the use of more effective and efficient technologies in the development and production of our products and offerings;
strengthening our reputation and standing among customers, employees and key suppliers; and acting as a deterrent against
counterfeiters, imitators and other copiers of technologies.
Important patents and licenses include:
•
•
•
•
•
•
•
An exclusive license from Cornell University to patents covering methods for detecting BVDV that started to expire
in 2017 and will continue into 2022;
Patents relating to reagents and methods for the detection of Anaplasma phagocytophilum utilized in certain of our
SNAP products that started to expire in 2017 and will continue into 2022;
Patents relating to reagents and methods for the detection of Ehrlichia canis utilized in certain of our SNAP products
that began to expire in 2019 and will continue into 2022;
Patents concerning Catalyst consumables that expire beginning in 2020 and will continue into 2035;
Patents concerning Catalyst instruments that expire beginning in 2026 and will continue into 2032;
Patents relating to reagents and methods for the detection of canine pancreatic lipase that expire in 2026; and
Patents relating to reagents and methods for the detection of SDMA that expire beginning in 2029 and will continue
into 2037.
While we consider these proprietary technology rights to be important to us, a range of factors help to mitigate the
future effects of patent and license expiration on our results of operations and financial position. These factors include
publications, including peer-reviewed third-party studies, that demonstrate the accuracy of our products; our brand strength and
reputation in the marketplace; the breadth, quality and integration of our product offerings; our existing customer relationships
and our customer support; our sales force; our online ordering platform that enables direct ordering of (including establishing
automatic reorder schedules for) our consumables, tests and other products by our customers; the applicable regulatory approval
status for certain products; our continued investments in innovative product improvements that often result in new technologies
and/or additional patents; our investment in diagnostic innovations that results in new product offerings that often are patentable
and that expand the test menu for our in-clinic instruments and/or reference laboratory business; and our significant know-how,
scale and investments related to manufacturing processes of associated product offerings and certain supply arrangements for
consumables that are compatible with our instruments. Although we have several patents and licenses of patents and
technologies from third parties that expired during 2020, and are expected to expire in 2021 and beyond, the expiration of these
patents, individually or in the aggregate, is not expected to have a material effect on the Company’s financial position or future
operations. In addition, we already face notable competition in certain areas as other companies have been successful in
bringing competitive products to market, despite the protections afforded by these proprietary technology rights.
To the extent some of our products may now, or in the future, embody technologies protected by patents, copyrights,
or trade secrets of others, we may be required to obtain licenses to such technologies in order to continue to sell our products.
These licenses may not be available on commercially reasonable terms or at all. Our failure to obtain any such licenses may
delay or prevent the sale of certain new or existing products. See “Part I, Item 1A. Risk Factors.”
PRODUCTION AND SUPPLY
Many of the instruments that we sell are manufactured by third parties. We rely on third parties in our supply chain to
supply us, and our direct suppliers, with certain important components, raw materials and consumables used in or with our
products. In some cases, these third parties are sole or single source suppliers. From time to time, we seek to qualify alternative
suppliers.
Instruments and consumables. Significant products supplied by sole and single source providers include certain
Catalyst Dx and Catalyst One consumables (other than electrolyte consumables and the fructosamine, T4, CRP, progesterone,
and SDMA slides), VetTest slides, VetLyte consumables, LaserCyte Dx consumables, VetAutoread and ProCyte Dx analyzers
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and consumables, SediVue Dx urinalysis instruments and consumables, and certain components of our internally manufactured
analyzers.
VetTest and certain Catalyst chemistry slides are supplied by Ortho under supply agreements that are currently set to
expire in December of 2031. We are required to purchase all of our requirements for our current menu of Catalyst and VetTest
chemistry slides from Ortho to the extent Ortho is able to supply those requirements. The agreements provide for pricing based
on purchase volumes and a fixed annual inflationary adjustment. The agreements also prohibit Ortho from promoting and
selling these chemistry slides in the veterinary market, excluding the EU, other than to IDEXX.
We purchase other analyzers and consumables under supply agreements with terms extending through 2034, which in
some cases may be extended at our option. We have minimum purchase obligations under some of these agreements, and our
failure to satisfy these obligations may result in loss of some or all of our rights under these agreements. See “Part I, Item 1A.
Risk Factors.”
Other components. We purchase certain other products, raw materials, and components from sole and single source
suppliers. These products include certain diagnostic imaging systems and certain components used in our SNAP rapid assay and
dairy devices, livestock, and poultry testing kits and water testing products.
We have been successful in ensuring an uninterrupted supply of products purchased from sole and single source
suppliers. However, there can be no assurance that uninterrupted supply can be maintained if these agreements terminate for
any reason or our suppliers otherwise are unable to satisfy our requirements for products. See “Part I, Item 1A. Risk Factors.”
BACKLOG
We do not generally maintain a significant backlog of orders and believe that our backlog at any particular date
historically has not been indicative of future sales.
COMPETITION
We compete with many companies ranging from large human and animal health pharmaceutical and medical
diagnostics companies to small businesses focused on animal health. Our companion animal veterinary diagnostic products and
services compete with both reference laboratory service and in-clinic product providers. Our competitors vary in our different
markets. In some markets, academic institutions, governmental agencies, and other public and private research organizations
conduct research activities and may commercialize products or services which could compete with our products, on their own
or through joint ventures. Several of our direct and potential competitors have substantially greater financial and managerial
resources than us, as well as greater experience in manufacturing, marketing, research and development, and obtaining
regulatory approvals than we do. For more information on risks related to our competition, see “Part I, Item 1A. Risk Factors."
Competitive factors in our different business areas are detailed below:
•
Companion animal diagnostic offerings. We compete primarily on the basis of ease of use and speed of our
products, diagnostic accuracy, product quality, breadth of our product line and services, unique product innovations,
fully integrated technology, information management capability, availability of medical consultation, effectiveness
of our sales and distribution channels, quality of our technical and customer service, and our pricing relative to the
value of our products and services in comparison with competitive products and services. Our major competitors in
most geographic locations in North America are Antech Diagnostics, a unit of VCA Inc., a division of Mars,
Incorporated; Zoetis Inc. (including its wholly-owned subsidiary Abaxis, Inc.); Heska Corporation; Samsung
Electronics Co., Ltd., and FUJIFILM North America Corporation. We also compete in certain international markets
with Zoetis, Fujifilm Holdings Corporation, Samsung Electronics, Arkray, Inc., Heska, Mindray and BioNote, Inc.
• Water, livestock, poultry, and dairy testing products. We compete primarily on the basis of the ease of use, speed,
accuracy, product quality and other performance characteristics of our products and services (including unique
tests), the breadth of our product line and services, the effectiveness of our sales and distribution channels, the
quality of our technical and customer service, our ability to receive regulatory approvals from governing agencies
and our pricing relative to the value of our products in comparison with competitive products and services. Our
competitors include highly focused smaller companies and multibillion-dollar companies with small livestock and
poultry diagnostics and water testing solution franchises.
12
•
•
Veterinary Software, Services and Diagnostic Imaging Systems. We compete primarily on the basis of functionality,
connectivity to equipment and other systems, performance characteristics, effectiveness of our implementation,
training process and customer service, information handling capabilities, advances in technologies and our pricing
relative to the value of our products and services. We sell these products primarily in North America and Europe.
Our largest competitor in North America and the U.K. is Covetrus, Inc., which offers several systems and leverages
its animal health distribution business in sales and service. We also compete with numerous focused smaller
companies throughout the markets in which we offer veterinary software, including those offering cloud-based
solutions. Our competitors in the diagnostic imaging systems market include Sound-Eklin, Antech Diagnostics,
FUJIFILM, and Heska.
Human point-of-care medical diagnostics market. We compete primarily on the basis of the ease of use, menu,
convenience, international distribution and service, instrument reliability, and our pricing relative to the value of our
products. We compete primarily with large human medical diagnostics companies such as Radiometer A/S, Siemens
Medical Solutions Diagnostics, Instrumentation Laboratory Company, Abbott Diagnostics, a division of Abbott
Laboratories and Roche Diagnostics Corporation. We also compete with a number of companies around the world
that produce human COVID-19 testing.
GOVERNMENT REGULATION
Many of our products are subject to comprehensive regulation by U.S. and foreign regulatory agencies that relate to,
among other things, product approvals, product registrations, manufacturing, import, export, distribution, marketing and
promotion, labeling, recordkeeping, testing, quality, storage, product disposal, environmental compliance, and workplace
safety. The following is a description of the principal regulations affecting our businesses.
Veterinary diagnostic products. These products include our diagnostic test kits for companion and food animal
infectious diseases, including most of our livestock and poultry products and our rapid assay products. These products are
licensed and regulated in the U.S. by the Center for Veterinary Biologics within the United States Department of Agriculture
(“USDA”) Animal and Plant Health Inspection Service (“APHIS”). These products must be approved by APHIS before they
may be sold in and from the U.S. The APHIS regulatory approval process involves the submission of product validation data,
including manufacturing process and facility documentation. Following regulatory licensure to market a product, APHIS
requires that each lot of product be submitted for test review before release to customers. In addition, APHIS requires special
approval to market products where test results are used in part for government-mandated disease management programs. A
number of foreign governments accept APHIS approval to support product registration for sale, distribution, and use within
their countries. However, compliance with extensive country-specific regulatory processes is required in connection with
importing and marketing diagnostic products in Japan, Germany, Canada, Brazil, the Netherlands, China, and many other
countries. We are also required to have a facility license from APHIS to manufacture USDA-licensed products. We have a
facility license for our manufacturing facility in Westbrook, Maine which also covers our distribution center in Memphis,
Tennessee. Our LPD manufacturing facility in Montpellier, France has been approved by APHIS and we have a permit to
import one LPD product manufactured in Montpellier, France to the U.S. for distribution.
Our veterinary diagnostic slide and instrument systems, including T4, fructosamine, progesterone, CRP, and SDMA,
are veterinary medical devices regulated by the FDA under the Food, Drug and Cosmetics Act (the “FDC Act”). Other FDA
regulated products include our non-licensed Rapid Assay products such as SNAP Pancreatic Lipase, Cortisol, Bile Acid, Foal
IgG, and ProBNP. While the sale of these products does not require premarket approval by the FDA and does not subject us to
FDA inspections or the FDA’s current Good Manufacturing Practices regulations (“cGMP”), the FDC Act specifies that these
products must not be adulterated, mislabeled, or misbranded.
Water testing products. Our water tests are not subject to formal premarket regulatory approval. However, before a test
can be used as part of a water quality monitoring program in the U.S. that is regulated by the EPA, the test must first be
approved by the EPA. The EPA approval process involves submission of extensive product performance data in accordance
with an EPA-approved protocol, evaluation of the data by the EPA and publication for public comment of any proposed
approval in the Federal Register before final approval. Our Colilert, Colilert-18, Colisure, Quanti-Tray, Filta-Max xpress,
Enterolert and SimPlate for heterotrophic plate counts products have been approved by the EPA for use under various
regulatory programs. Water testing products are subject to similarly extensive regulatory processes in other countries around the
world.
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Dairy testing products. Dairy products used in National Conference on Interstate Milk Shipments (“NCIMS”) milk-
monitoring programs in the U.S. are regulated by the FDA as veterinary medical devices. However, before products requiring
FDA approval can be sold in the U.S., performance data must be submitted in accordance with an FDA-approved protocol
administered by an independent body, such as the Association of Analytical Communities Research Institute (“AOAC RI”).
Following approval of a product by the FDA, the product must also be approved by NCIMS, an oversight body that includes
state, federal and industry representatives. Our SNAP Beta-Lactam antibiotic residue test product has been approved by the
FDA, NCIMS and AOAC RI for sale in the U.S. While some foreign countries accept AOAC RI approval as part of their
regulatory approval process, many countries have separate regulatory processes.
Human point-of-care electrolyte and blood gas analyzers. Our OPTI instrument systems are classified as Class I and/or
Class II medical devices, and their design, manufacture and marketing are regulated by the FDA. Accordingly, we must comply
with cGMP in the manufacture of our OPTI products. The FDA’s Quality System regulations further set forth standards for
product design and manufacturing processes, require the maintenance of certain records and provide for inspections of our
facilities by the FDA. New OPTI products fall into FDA classifications that require notification of and review by the FDA
before marketing, and which are submitted as a 510(k) application. These OPTI products are also subject to the regulations
governing the manufacture and marketing of medical devices in other countries in which they are sold, including the In Vitro
Diagnostic Regulation in Europe which imposes stricter requirements for the marketing and sale of In Vitro Diagnostics.
Human COVID-19 test products. OPTI manufactures, sells and distributes PCR and antibody ELISA test kits for the
detection of the virus that causes COVID-19. These test kits are subject to regulation by the FDA pursuant to the U.S. Federal
Food, Drug and Cosmetic Act, and more specifically, are sold and distributed pursuant to FDA Emergency Use Authorization.
These products are also subject to the European Medical Device Directives which requires CE-IVD marking, and regulations
governing the manufacture and marketing of medical devices in other countries in which they are sold.
Other Environmental Regulations. All IDEXX products must comply with applicable global product regulations,
including those governing consumer product safety and materials requirements such as the Europeans Union's Electromagnetic
Compatibility ("EMC") Directive, the European Regulation for Registration, Evaluation, Authorization and Restriction of
Chemical Substances ("REACH"), the Restriction of Hazardous Substances ("RoHS") Directive, and the Waste Electrical and
Electronic Equipment ("WEEE") Directive. These complex regulatory requirements create risk to IDEXX’s ability to market
and sell our products, our business and our financial performance. For more information about the risks associated with various
U.S. and foreign government regulation, see "Various U.S. and foreign government regulations could limit or delay our ability
to market and sell our products or otherwise negatively impact our business" under "Part I, Item 1A. Risk Factors."
In the European Union, our analyzers and certain associated equipment are subject to the requirements of the RoHS
Directive, which regulates and restricts certain hazardous substances in electrical and electronic equipment. Other countries,
including China, Russia, the United Arab Emirates, and Turkey have implemented or anticipate implementing regulatory
regimes similar to the RoHS Directive. Our veterinary diagnostic instrument systems are not subject to regulation under the
European Medical Device Directive or the In Vitro Diagnostic Directive, which are both strictly applicable to human use
products. However, these systems are required to meet CE certification, which required compliance with the RoHS Directive,
the EMC Directive, and other safety requirements. Similar requirements are specified by most counties in which we sell our
products and are subject to increasing harmonization globally.
The European Union was among the first to regulate and restrict the use of certain substances that we currently use in
our products. These requirements include the Biocidal Products Regulation, which requires the use of approved biocides in our
products prior to being exported to the European Union, and REACH, which regulates and restricts the use of certain chemicals
in the European Union. Compliance with these regulations (and similar regulations that have been or may be adopted
elsewhere, such as Turkey, Korea, and other countries) may require registration of the applicable substances or the redesign or
reformulation of our products. Some of our products, including some of our Companion Animal products, may be subject to
pending restriction of microplastics pursuant to REACH.
In the US, the EPA regulates chemical use similarly to the EU. In addition, certain states have their own chemical
regulations, such as California's Proposition 65, which requires businesses to provide warnings to California residents about
significant risk of exposures to chemicals in products that are known to cause cancer, birth defects or other reproductive harm.
In addition to the foregoing, our business is generally subject to various U.S. and foreign regulatory authorities,
including the U.S. Federal Trade Commission (the “FTC”) and other anti-competition authorities, and we are also subject to
anti-bribery and anti-corruption laws, such as the Foreign Corrupt Practices Act, import and export laws and regulations,
including U.S. import and export control and sanctions laws, and laws and regulations governing the collection, use, retention,
14
sharing and security of data. Development or acquisition of new products and technologies may subject us to additional areas of
government regulation. These may involve medical device, water-quality and other regulations of the FDA, the EPA, the
USDA, the FTC, and other federal agencies, as well as state, local and foreign governments.
HUMAN CAPITAL
As innovation and customer focus are key parts of our strategy to create long-term value, we aim to attract, motivate,
develop, and retain talented employees at all levels who are aligned with and passionate about our Purpose. We believe that
finding, developing and retaining a world-class global workforce requires that we build and sustain an inclusive, ethical culture
that values diversity, equity and inclusion; offers competitive and locally relevant compensation and benefits; and provides
growth and development opportunities.
Because our strategy includes developing strong, deep relationships with our veterinary customers, we have focused on
growing our global companion animal diagnostics field-based organization. Since 2011, we have grown that organization
almost 2.5 times, creating a world-class and experienced companion animal diagnostics field-based professional organization.
Diversity, Equity, and Inclusion. Through diversity, equity, and inclusion ("DEI") efforts, we strive to ensure our
global workplaces are dynamic, supportive of all our employees, and representative of our customers and communities. We
believe that DEI is an essential driver of our innovation and success. Diverse talent is the foundation of a healthy and strong
business. Our global recruiting team connects our sourcing strategies with diversified talent channels and adopts core
competencies that focus on valuing differences, to attract candidates with different backgrounds, ideas, and experiences who
will help enrich our culture. Our entrepreneurial and collaborative spirit is enhanced when many different people, perspectives,
and backgrounds are aligned toward achieving our Purpose.
As of December 31, 2020, we had approximately 9,300 regular full-time and part-time employees, with women
representing 57% of our employees, and underrepresented minorities in the U.S. (defined as those who self-identify as Black/
African American, Asian, Hispanic/Latinx, Native American, Pacific Islander and/or two or more races) representing an
estimated 22% of our U.S. employees. As of December 31, 2020, our global senior leadership team is 30% female, while global
senior executives are 25% female. During 2020, our voluntary employee turnover rate was approximately 8%. In addition, we
contract with a number of temporary and contract employees. We employ inclusive recruitment practices to source diverse
candidates and mitigate potential bias.
We also help drive diversity across our industry by actively supporting our customers, suppliers, educational
institutions, community partners, and peers as they work to improve diversity, equity, and inclusion in their own workplaces,
policies and practices.
Compensation, Benefits and Well-being. We offer fair, competitive compensation and benefits that support our
employees’ overall well-being. To ensure alignment with our short- and long-term objectives, our compensation programs for
all employees include base pay, short-term incentives, and opportunities for long-term incentives. We offer a wide array of
competitive and locally relevant benefits (which vary by country and region) including comprehensive health and welfare
insurance, generous time-off and leave, and retirement and financial support. We provide emotional well-being services through
our Employee Assistance Program and a variety of interactive resources as well as lifestyle coaching, a global well-being
speaker series, and ergonomic programs that help support employees’ physical well-being. In addition, a majority of our
employees have access to financial education and our U.S. employees can engage with a financial wellness coach for further
tools and resources to reach their personal financial goals.
In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best
interest of our employees as well as the communities in which we operate. This includes having the vast majority of our
employees work from home, while implementing additional safety measures for employees continuing critical on-site work. We
have also provided a work-from-home fund to assist employees in that transition and added several company-wide paid days off
and caregiving support to help employees balance their work and life responsibilities.
Growth and Development. We are steadfast in our focus on cultivating the diverse leaders of tomorrow and making
career development opportunities more accessible across the global organization. Our training is 100% virtual and available in
multiple languages. Our career development programs are designed to build capabilities and enable career progression. We also
encourage our employees to enhance their career development through job-related courses and degree programs.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE
During 2020, we established the IDEXX Foundation, a donor-advised fund administered by a national donor-advised
fund program, with a contribution of $10 million, to support activities aligned with our Purpose. Our most recent Corporate
Responsibility Report is available on our website and features examples of our ESG activities, performance metrics, and goals
for the next few years.
AVAILABLE INFORMATION
Our principal executive offices are located at One IDEXX Drive, Westbrook, Maine 04092, our telephone number is
207-556-0300, and our internet address is www.idexx.com. References to our website in this Annual Report on Form 10-K are
inactive textual references only and the content of our website should not be deemed incorporated by reference for any purpose.
We make available free of charge at www.idexx.com our Annual Report on Form 10-K, Quarterly Reports on Form
10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of
the Exchange Act as soon as reasonably practicable after we file such information with, or furnish it to, the SEC. In addition,
copies of our reports filed electronically with the SEC may be accessed at www.sec.gov.
Our Corporate Governance Guidelines and our Code of Ethics are also available on our website at www.idexx.com.
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ITEM 1A.
RISK FACTORS
You should consider carefully the risks and uncertainties described below in addition to the other information included
or incorporated by reference in this Annual Report on Form 10-K in evaluating our company and our business. Our future
operating results involve a number of risks and uncertainties and actual events or results may differ materially from those
discussed in this Annual Report on Form 10-K. Factors that could cause or contribute to such differences include, but are not
limited to, the factors discussed below, as well as those factors discussed elsewhere herein. Any of these factors, in whole or in
part, could materially and adversely affect our business, financial condition, operating results and stock price.
RISK RELATED TO THE COVID-19 PANDEMIC
The effects of the ongoing COVID-19 pandemic could have a material adverse impact on our business, results of
operations, liquidity, financial condition, and stock price.
The ongoing COVID-19 pandemic has increased economic uncertainty, caused economic slowdowns that may
continue or recur and disrupted business activity. If weakened economic conditions reduce our customers' ability or willingness
to pay for our products and service or our suppliers' ability to provide products and services to us, then our business, results of
operation, liquidity, financial condition, and stock price could be negatively impacted, and these impacts could be material.
The spread of COVID-19 has caused us to modify aspects of our business practices (including the management of and
access to our facilities, employee remote work locations, and employee travel), and we may take further actions, as may be
required by federal, state, and local governments or as we determine to be in the best interests of our employees and customers.
Such actions may disrupt our supply chain, operations, facilities, and employee workforce, which could negatively affect our
employees' efficiency and productivity; our development and introduction of innovative new products and services; our ability
to manufacture, market and sell our products and services; and our financial performance. In addition, the social distancing
procedures and guidelines, including stay-at-home orders that may be further deployed to combat the spread of COVID-19, and
possible higher infection rates could result in a decrease in companion animal clinical visits, the delay of elective procedures
and wellness visits and disruption of veterinary clinic operations, all of which would have a negative effect on veterinary
service providers and result in declines in demand for our CAG products and services, which represented 88% of our 2020
consolidated revenues. If stay-at-home orders are re-implemented periodically to combat the spread of COVID-19, particularly
in the United States, the negative impact on veterinary service providers and their businesses, and correspondingly on demand
for our CAG products and services, may be material.
Weakened economic conditions caused by the effects of the COVID-19 pandemic have reduced, and may further
reduce, demand for our water testing products, livestock and poultry diagnostic tests and dairy products due to reduced testing
or disruptions in livestock, poultry, dairy, or other food supply and distribution chains and markets that could negatively impact
the related production markets. If economic slowdowns continue or recur, the decline in our customers' demand for our water
testing products, livestock and poultry diagnostic tests and dairy products may be significant.
In the second quarter of 2020, we began selling our new OPTI COVID-19 human PCR test products and services, and
these sales were the primary contributor to our Other segment's revenue growth in 2020. The future demand for these products
and services, (and our other COVID-19-related products and services) is difficult to project given the uncertain nature of the
COVID-19 pandemic, including short-term project commitments, available PCR testing capacity, alternative suppliers and the
potential impact of vaccinations and other treatments, and there can be no assurance that sales of this product (and our other
COVID-19-related products and services) will continue.
While demand for our CAG products and services recovered in the latter half of 2020, this recovery was due in part to
pent-up demand following a period during which access to veterinary clinics was constrained due to governmental policies.
Demand also increased in the second half of 2020 driven by other factors, including an increase in pet ownership and higher
levels of diagnostic test frequency and utilization, which may have been aided by factors related to the pandemic. There can be
no assurance that this increased demand will be sustained, and the environment remains uncertain. The degree to which the
COVID-19 pandemic ultimately impacts our business, results of operations, liquidity, financial condition and stock price
depends on future developments that are unpredictable and most of which are outside of our control, including the duration,
scope and severity of the pandemic, the availability and effectiveness of vaccinations and other treatment, related governmental
advisories and restrictions to contain COVID-19, and how quickly economic conditions improve once the COVID-19 pandemic
subsides. There can be no assurance that we will be able to prevent or mitigate any or all of the COVID-19 near- or long-term
adverse impacts, which could be material.
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RISKS RELATED TO OUR BUSINESS AND INDUSTRY
Because our business lines are highly attractive, they are also highly competitive. Our failure to successfully
execute certain strategies within this competitive environment could have a material negative impact on our future
growth and profitability
The companion animal healthcare industry is highly competitive, and we anticipate increasing levels of competition
from both existing competitors and new market entrants given our performance and the market’s strong growth and returns. Our
ability to maintain or enhance our growth rates and our profitability depends on our successful execution of many elements of
our strategy, including:
•
•
•
Developing, manufacturing, and marketing innovative new or improved and cost competitive in-clinic laboratory
analyzers that drive sales of IDEXX VetLab instruments, grow our installed base of instruments and increase demand for
related recurring sales of consumable products, services, and accessories;
Developing and introducing new proprietary diagnostic tests and services for both our reference laboratories and in-clinic
applications that provide valuable medical information to our customers and effectively differentiate our products and
services from those of our competitors;
Increasing the value to our customers of our companion animal products and services by enhancing the integration of the
information and transactions of these products and the management of diagnostic information derived from our products;
• Maintaining premium pricing, including by effectively implementing price increases, for our differentiated products and
services through, among other things, effective communication and promotion of the value of our products and services
in an environment where many of our competitors promote, market, and sell lesser offerings at prices lower than ours;
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Providing our veterinary customers with the medical and business tools, information, and resources that enable them to
grow their practices and the utilization of our diagnostic products and services, through increased pet visits, use of
preventive care protocols and enhanced practice of real-time care;
Achieving cost improvements in our worldwide network of reference laboratories by implementing global best practices,
including lean processing techniques, incorporating technological enhancements, including laboratory automation and a
global laboratory information management system, employing purchasing strategies to maximize leverage of our global
scale, increasing the leverage of existing infrastructure and consolidating testing in high volume laboratory hubs;
Achieving cost improvements in the manufacture and service of our in-clinic laboratory analyzers by employing the
benefits of economies of scale in both negotiating supply contracts and leveraging manufacturing overhead, and by
improving reliability of our instruments;
Continuing to expand, develop, and advance the productivity of our companion animal diagnostic sales, marketing,
customer support and logistics organizations in the U.S. and international markets in support of, among other things, our
all-direct sales strategies;
Attracting, developing, and retaining key leadership and talent necessary to support all elements of our strategy, which is
challenging due to the increasingly competitive and tight labor markets in which we operate;
Expanding our served market and growing our market share by strengthening our sales and marketing activities both
within the U.S. and in geographies outside of the U.S.;
Identifying, completing, and integrating acquisitions that enhance our existing businesses or create new business or
geographic areas for us;
Developing and implementing new technology and licensing strategies; and
Continuing to effectively manage our growth and expansion on a global scale through, among other things, designing
and implementing cost-effective improvements to our processes, procedures, and infrastructure.
If we are unsuccessful in implementing and executing on some or all of these strategies, our rate of growth or
profitability may be negatively impacted.
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Our dependence on third-party suppliers could limit our ability to sell certain products or negatively affect our
operating results
We rely on third-party suppliers to provide components and raw materials (including biological materials) for our
manufactured products, manufacture some of the products that we sell, and perform certain services, including package-
delivery services. Actions taken by third-party suppliers in operating their business, as well as any disruptions to their business
operations (or their supplier's business operations), could disrupt our supply chain or operations and materially negatively
impact our ability to supply the market, substantially decrease sales, lead to higher costs, and damage our reputation with our
customers. Longer-term disruptions could potentially result in the permanent loss of our customers, which could reduce our
recurring revenues and long-term profitability. For examples of some of the events that could result in disruption to our supply
chain or operations, and negatively impact our operating results, see “We are increasingly dependent on the continuous and
reliable operation of our information technology systems, and a disruption of these systems or significant security breaches
could adversely affect our business” and "Factors and events beyond our control, including natural and other disasters and
climate change-related events, could disrupt our operations or our supply chain and adversely affect our business" below.
In addition, we currently purchase many products, components, and materials from sole or single sources. Some of
these products are proprietary and, therefore, cannot be readily or easily replaced by alternative sources. These products,
components, and materials are used in a majority of our instruments, including our Catalyst Dx, Catalyst One, and ProCyte Dx;
consumables and accessories used in our instruments; livestock and poultry diagnostic tests, dairy testing products, and water
testing products. Even if products, components, and materials were to become available to us from alternative suppliers, we
likely would incur additional costs and delays in identifying or qualifying replacement materials and there can be no assurance
that replacements would be available to us on acceptable terms, or at all. In certain cases, we may be required to obtain
regulatory approval to use alternative suppliers, and this process of approval could delay production of our products or
development of product candidates indefinitely.
We seek to mitigate sole and single source suppliers risks on a risk-prioritized basis and in a variety of ways,
including, when possible, by identifying and qualifying alternative suppliers, developing applicable in-house manufacturing
capabilities and expertise, and entering into escrow arrangements for manufacturing information for certain single or sole-
sourced products. We also seek to enter into long-term contracts that provide for an uninterrupted supply of products at
predictable or fixed prices. However, there can be no assurance that we will successfully implement any of these mitigating
activities or that, if implemented, any of them will be effective in preventing any delay or other disruption in our ability to
supply the market. In addition, suppliers may decline to enter into long-term contracts for any number of reasons, which would
require us to purchase products, components, or raw materials via short-term contracts or on a purchase order basis. There can
be no assurance that suppliers with which we do not have long-term contracts will continue to supply our requirements, will
always fulfill their obligations under those contracts, or will not experience disruptions in their ability to supply our
requirements. In cases where we purchase sole and single source products, components, or raw materials under purchase orders,
we are more susceptible to unanticipated cost increases or changes in other terms of supply. In addition, under some contracts
with suppliers we have minimum purchase obligations, and our failure to satisfy those obligations may result in loss of some or
all of our rights under these contracts or require us to compensate the supplier. If we are unable to obtain adequate quantities of
products, components, or raw materials in the future from sole and single source suppliers, or if such sole and single source
suppliers are unable to obtain the components or other materials required to manufacture the products, we may be unable to
supply the market, which could have a material adverse effect on our results of operations, and any longer-term disruptions
could potentially result in the permanent loss of customers, which could reduce our recurring revenues and long-term
profitability.
Our biologic products are complex and difficult to manufacture, which could negatively affect our ability to
supply the market
Many of our rapid assay, livestock and poultry diagnostic, water and dairy products are biologic products that include
biological materials, such as antibodies, cells, and sera. Manufacturing biologic products is highly complex due to the inherent
variability of biological materials and the difficulty of controlling the interactions of these materials with other components of
the products, samples, and the environment. There can be no assurance that we will be able to maintain adequate sources of
biological materials or that we will be able to consistently manufacture biologic products that satisfy applicable product release
criteria and regulatory requirements. Further, products that meet release criteria at the time of manufacture may fall out of
specification while in customer inventory, which could require us to incur expenses associated with recalling products and
providing customers with new products, either of which could damage customer relations. Our inability to produce or obtain
necessary biological materials or to successfully manufacture biologic products that incorporate such materials could result in
our inability to supply the market with these products, which would have an adverse effect on our results of operations.
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Various U.S. and foreign government regulations could limit or delay our ability to market and sell our
products or otherwise negatively impact our business
As a global business, we sell products and services in more than 175 countries and operate in an increasingly complex
legal and regulatory environment. In the U.S., the manufacture and sale of certain of our products are regulated by agencies
such as the USDA, the FDA, and the EPA. Our diagnostic tests for animal health applications that involve the detection of
infectious diseases, including most rapid assay canine and feline SNAP tests and livestock and poultry diagnostic tests, must be
approved by the USDA prior to sale in the U.S. Our dairy testing products as well as the manufacture and sale of our OPTI line
of human point-of-care electrolytes and blood gas analyzers require approval by the FDA before they may be sold
commercially in the U.S., and our OPTI PCR test kits for the detection of the virus that causes COVID-19, are subject to
regulation by the FDA and sold and distributed pursuant to Emergency Use Authorizations issued by the FDA. Our water
testing products must be approved by the EPA, as a part of a water quality monitoring program required by the EPA, before
they can be used by customers in the U.S. Delays in obtaining regulatory approvals for new products or product upgrades, or
any termination, revision or revocation of an Emergency Use Authorization for our test kits, could have a negative impact on
our growth and profitability.
The manufacture, import, and sale of our products, as well as our research and development processes, are subject to
similar and sometimes more stringent laws in many foreign countries. For example, the European Union regulates the use of
certain substances that we currently use in our products or processes. These regulations include the Biocidal Products
Regulation, which requires the use of approved biocides in our products prior to being manufactured, used, or sold in the
European Union; the European Regulation for Registration, Evaluation, Authorization and Restriction of Chemical Substances,
or REACH, which regulates and restricts the use of certain chemicals in the European Union; the Restriction of Hazardous
Substances("RoHS") Directive, which regulates and restricts certain hazardous substances in electrical and electronic
equipment; the Electromagnetic Compatibility Directive; and the Waste Electrical and Electronic Equipment Directive.
Compliance with these and similar regulations in the U.S. and abroad may require registration of the applicable
substances or the redesign or reformulation of our products and may reduce or eliminate the availability of certain parts and
components used in our products and services in the event our suppliers are unable to comply with the applicable regulations in
a timely and cost-effective manner. Any redesign or reformulation or restricted supply of parts and components may negatively
affect the availability or performance of our products and services, add testing lead-times for products and reformulated
products, reduce our margins, result in additional costs, or have other similar effects. In addition, the costs to comply with these
regulations may be significant. Any of these could adversely affect our business, financial condition, or results of operations.
These legal and regulatory requirements are complex and subject to change, and we continue to evaluate their impact.
In addition, some foreign governments require us to register our products before they can be distributed or sold, and
these product registration requirements, which vary among the applicable jurisdictions and change from time to time, are often
complex and require us to engage in lengthy and costly processes and provide confidential, proprietary information about those
products to foreign regulatory agencies. For example, compliance with extensive country-specific regulatory processes is
required in connection with importing and marketing our diagnostic products in Japan, Germany, Canada, Brazil, the
Netherlands, China, and many other countries. There can be no assurance that we will be able to obtain or maintain any product
registration required by one or more foreign governments. Any inability to obtain or maintain a required product registration in
a jurisdiction could adversely affect our ability to market and sell the applicable product in that jurisdiction, which could have a
negative effect on our business, financial condition and results of operations. There can also be no assurance that confidential,
proprietary information provided to foreign regulatory agencies may not be accessed by unauthorized persons or otherwise
stolen, which could negatively impact our ability to protect our proprietary rights in our innovative products and our future
success. For more information about the risks related to the protection of our proprietary rights in our products and services, see
"Our success is heavily dependent on our continued proprietary product and service innovation" below.
We are also subject to a variety of federal, state, local, and international laws and regulations governing, as well as
legal and political environments that vary broadly regarding, among other things, the importation and exportation of products;
our global business practices, such as anti-corruption, anti-money laundering, and anti-competition laws; and immigration and
travel restrictions. These legal, regulatory, and political requirements and environments differ among jurisdictions around the
world and are rapidly changing and increasingly complex. The costs associated with compliance with these legal and regulatory
requirements and adjusting to changing legal and political environments are significant and likely to increase in the future.
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Any failure by us to comply with applicable legal and regulatory requirements, or to adjust to changing legal and
political environments, could result in fines, penalties, and sanctions; product recalls; suspensions or discontinuations of, or
limitations or restrictions on, our ability to design, manufacture, market, import, export or sell our products; and damage to our
reputation. Any of these could negatively impact our business.
Our success is heavily dependent on our continued proprietary product and service innovation
We believe our future success significantly depends on our ability to continue, on a cost-effective and timely basis, to
enhance our existing proprietary product and service offerings and to develop and introduce new and innovative proprietary
products and services. As a result, we invest substantial funds and efforts into R&D, investigating new products and
technologies being developed by third parties and obtaining certain such new products and technologies through licenses or
acquisitions. There can be no assurance that our R&D, licensing, or acquisition efforts will achieve expected results, when or
whether any of our products or services now under development will be launched, or whether we may be able to develop,
license or otherwise acquire new products or technologies. We also cannot predict whether any product or service offering,
once launched, will achieve market acceptance or achieve sales and revenue consistent with our expectations.
We rely on a combination of patent, trade secret, trademark, and copyright laws to protect our proprietary rights. We
also license patents and technologies from third parties to enable the use of third-party technologies in the development and
production of our products and offerings. If we do not have adequate protection of our proprietary rights or are unable to license
third-party patents and technologies on reasonable terms, our business may be adversely affected by competitors who utilize
substantially equivalent technologies that compete with us.
We cannot ensure that we will obtain issued patents, that any patents issued or licensed to us will remain valid, or that
any patents owned or licensed by us will provide protection against competitors with similar technologies. Even if our patents
cover products sold by our competitors, the time and expense of litigating to enforce our patent rights could be substantial and
could have an adverse effect on our results of operations. In addition, expiration of patent rights could result in substantial new
competition in the markets for products previously covered by those patent rights.
In the past, we have received notices claiming that our products infringe third-party patents and we may receive such
notices in the future. Patent litigation is complex and expensive, and the outcome of patent litigation can be difficult to predict.
We cannot ensure that we will win a patent litigation case or negotiate an acceptable resolution of such a case. If we lose, we
may be prohibited from selling certain products and/or we may be required to pay damages and/or ongoing royalties as a result
of the lawsuit. Any such result could have an adverse effect on our results of operations.
Increased competition from and technological advances by our competitors could negatively affect our
operating results
We face intense competition within the markets in which we sell our products and services, and we expect that future
competition will become even more intense as new products, services and technologies become available and new competitors
enter the market. Our competitors in the veterinary diagnostic market in the United States and abroad include companies that
develop, manufacture, and sell veterinary diagnostic tests and commercial veterinary reference laboratories, certain large and
well-funded animal health pharmaceutical companies, as well as corporate hospital chains that operate reference laboratories
that serve both their hospitals and unaffiliated hospitals, such as VCA Inc., which is wholly owned by Mars, Incorporated,
another operator of corporate hospital chains. Consolidation among our competitors and our customers may intensify the
competition we face. While we believe that our offerings are competitively differentiated due to our proprietary products and
services (such as the IDEXX SDMA test and VetConnect Plus) that offer an integrated, comprehensive diagnostic solution and
the quality of our technical and customer service, there can be no assurance that increased consolidation among our competitors
or customers (as well as any resulting reference laboratory vertical integration among our customers) would not have a negative
impact on our ability to compete successfully. For more information regarding the risks presented by consolidation and
reference laboratory vertical integration among our customers, see “Consolidation in our customer base, including through
increased corporate hospital ownership, and prevalence of buying consortiums could negatively affect our business” below.
Competition could negatively affect our sales and profitability in a number of ways. New competitors may enter our
markets through the development of innovative new technology, the acquisition of rights to use existing technologies or the use
of existing technologies when patents protecting such existing technologies expire. New or existing competitors may introduce
new, innovative, and competitive products and services, which could be superior, or be perceived by our customers to be
superior, to our products and services or lead to the obsolescence of one or more of our products or services. Business
combinations and mergers among our competitors may result in competitors that are better positioned to create, market, and sell
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more compelling product and service offerings. While an important aspect of our strategy is to continue, on a cost-effective and
timely basis, to enhance our existing products and services and to develop and introduce new and innovative products and
services, there can be no assurance that we will be able to successfully develop such products and services or that those
products or services will be superior to our competitors’ products or services or otherwise achieve market acceptance. Some of
our competitors and potential competitors may choose to differentiate themselves by offering products and services perceived in
the eyes of customers as similar, at substantially lower sales prices, which could have an adverse effect on our results of
operations through loss of market share or a decision to lower our own sales prices to remain competitive. In addition, our
ability to attract and retain customers depends on the effectiveness of our customer marketing and incentive programs and
multiple competitors could bundle product and service offerings through co-marketing or other arrangements, which could
enhance their ability to compete with our broad product and service offering. Certain of our competitors and potential
competitors, including large diagnostic and pharmaceutical companies, also have substantially greater financial and managerial
resources than us, as well as greater experience in manufacturing, marketing, research and development, and obtaining
regulatory approvals than we do.
Consolidation in our customer base, including through increased corporate hospital ownership, and prevalence
of buying consortiums could negatively affect our business
Veterinarians are our primary customers for our CAG products and services, and the veterinary services industry in the
U.S. and abroad has been consolidating at an accelerating rate in recent years. In the United States, the number of owners of
veterinary hospitals has been declining, and an increasing percentage of veterinary hospitals are owned by corporations that are
in the business of acquiring veterinary hospitals and/or opening new veterinary hospitals nationally or regionally. Major
corporate hospital owners in the U.S. include Mars, Incorporated (owner of Banfield Pet Hospitals, Blue Pearl Veterinary
Partners, Pet Partners and VCA Inc.), and National Veterinary Associates, and are joined by dozens of smaller consolidators. A
similar trend exists in other regions such as Canada, Europe, Australia, New Zealand, China, and Brazil. Furthermore, an
increasing percentage of individually-owned veterinary hospitals in the U.S. are participating in buying consortiums. Corporate
owners of veterinary hospitals and buying consortiums often seek to improve profitability by leveraging the buying power they
derive from their scale to obtain favorable pricing from suppliers, which could have a negative impact on our profitability and
results of operations. While we have strong supplier relationships with several corporate hospital groups and buying
consortiums, decisions by larger corporate owners and buying consortiums to shift their purchasing of products and services
away from us and to a competitor would have a negative impact on our results of operations. In addition, certain corporate
owners also operate reference laboratories that serve both their hospitals and unaffiliated hospitals. Any hospitals acquired by
these companies generally attempt to shift all or a large portion of their testing to the reference laboratories operated by these
companies, and there can be no assurance that hospitals that otherwise become affiliated with these companies would not shift
all or a portion of their testing to such reference laboratories. Furthermore, because these companies compete with us in the
reference laboratory services marketplace, hospitals acquired by these companies or those that establish other affiliations with
these companies may cease to be customers or potential customers of our other companion animal products and services, which
would cause our sales of these products and services to decline.
Changes in testing patterns could negatively affect our operating results
The market for our companion animal, livestock and poultry diagnostic tests and our dairy and water testing products
could be negatively impacted by a number of factors impacting testing practices. The introduction or broad market acceptance
of vaccines or preventatives for the diseases and conditions for which we sell diagnostic tests and services could result in a
decline in testing. Changes in accepted medical protocols regarding the diagnosis of certain diseases and conditions could have
a similar effect. Eradication or substantial declines in the prevalence of certain diseases also could lead to a decline in
diagnostic testing for such diseases. Our livestock and poultry products business in particular is subject to fluctuations resulting
from changes in disease prevalence. The outbreak of certain diseases (such as African swine fever) among livestock or poultry,
or the adverse impact of climate change-related events (such as hurricanes, earthquakes, fires, and floods), could lead to the
widespread death or precautionary destruction of such animals in the affected regions, reducing herd or flock sizes, which could
reduce the demand for our testing products for such animals. Changes in government regulations or in the availability of
government funds available for monitoring programs could negatively affect sales of our products that are driven by
compliance testing, such as our livestock and poultry, dairy and water products. In addition, changes and trends in local dairy,
poultry, or other food markets around the world could negatively affect the related production markets resulting in a decline in
demand for our testing products. Weakened economic conditions caused by the effects of the ongoing COVID-19 pandemic
have reduced, and may further reduce, demand for our water testing products, livestock and poultry diagnostic tests and dairy
products, and COVID-19-related social distancing procedures and guidelines, including stay-at-home orders that may be further
deployed to combat the spread of COVID-19, and possible higher infection rates could result in a decrease in companion animal
clinical visits, the delay of elective procedures and wellness visits and disruption of veterinary clinic operations, all of which
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would have a negative effect on veterinary service providers and result in declines in demand for our CAG products and
services. Declines in testing for any reason, including the reasons described above, along with lost opportunities associated with
a reduction in veterinary visits, could have an adverse effect on our results of operations.
We sell many products through distributors, which presents risks that could negatively affect our
operating results
Some of our product sales in international markets occur through third-party distributors. As a result, we are dependent
on these distributors to promote and create demand for our products. Our distributors often offer products from several different
companies, including our competitors, and may promote our competitors’ products over our own products. We have limited
ability, if any, to cause our distributors to devote adequate resources to promoting, marketing, selling, and supporting our
products or to maintain certain inventory levels, and changes in our distributors’ inventory levels, as compared to comparable
prior periods, could negatively impact our revenue growth rates. We cannot assure you that we will be successful in
maintaining and strengthening our relationships with our distributors or establishing relationships with new distributors who
have the ability to market, sell and support our products effectively. We may rely on one or more key distributors for a product
or a region, and the loss of these distributors could reduce our revenue. Distributors may face financial difficulties, including
bankruptcy, which could harm our collection of accounts receivable and financial results. While we maintain a rigorous
distribution compliance program, violations of anti-corruption or similar laws by our distributors could have a material impact
on our business and reputation, and any termination of a distributor relationship may result in increased competition in the
applicable jurisdiction. Failure to manage the risks associated with our use of distributors outside of the U.S. may reduce sales,
increase expenses, and weaken our competitive position, any of which could have a negative effect on our operating results.
Our limited experience and small scale in the human point-of-care and laboratory diagnostics market could
inhibit our success in this market
We have limited experience in the human point-of-care and laboratory medical diagnostics market and we operate at a
small scale in this market. This market differs in many respects from the veterinary diagnostic market. Significant differences
include the impact of third-party reimbursement on diagnostic testing, more extensive regulation, greater product liability risks,
larger competitors, a more segmented customer base and more rapid technological innovation. Our limited experience and small
scale in the human point-of-care and laboratory medical diagnostics market could negatively affect our ability to successfully
manage the risks and features of this market that differ from the veterinary diagnostic market. There can be no assurance that
we will be successful in achieving growth and profitability in the human point-of-care and laboratory medical diagnostics
market comparable to the results we have achieved in the veterinary diagnostic market.
GENERAL RISKS
We depend on key leadership and talent to succeed and compete effectively
Our continued success is substantially dependent on our ability to attract, develop, and retain highly capable and
skilled senior leadership and other key personnel. As we continue to grow our business, expand our geographic scope, and
develop and offer innovative, new products and services, we require the organizational talent necessary to ensure effective
succession for our senior leadership and other key personnel. Competition for experienced leaders and employees, particularly
for persons with specialized skills, can be intense. Our ability to recruit and retain such talent will depend on a number of
factors, including compensation and benefits, work location, work environment and development opportunities. The loss of the
services of, or our failure to recruit or develop and implement effective succession plans for, our senior leadership or other key
personnel may significantly delay or prevent the achievement of our strategic objectives, disrupt our operations, and adversely
affect our business and our future success. In addition, even if we effectively develop and implement succession plans and
make key leadership transitions, we cannot provide assurances as to whether we may experience management or other
challenges in connection with any of those leadership transitions that could adversely affect our future success.
We are increasingly dependent on the continuous and reliable operation of our information technology systems,
and a disruption of these systems or significant security breaches could adversely affect our business.
We rely on our information systems, as well as our third-party business partners’ and suppliers’ information systems,
to provide access to our web-based products and services, keep financial records, analyze results of operations, process
customer orders, manage inventory, process shipments to customers, store confidential or proprietary information and operate
other critical functions. Although we maintain security policies, employ system backup measures and engage in redundancy
planning and processes, such policies, measures, planning and processes, as well as our current disaster recovery plans, may be
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ineffective or inadequate to address all eventualities. Further, our information systems and our business partners' and suppliers'
information systems may be vulnerable to attacks by hackers and other security breaches, including, among other things,
computer viruses and malware, denial of service actions, misappropriation of data and similar events through the internet
(including via devices and applications connected to the internet), and through email attachments and persons with access to
these information systems, such as our employees or third parties with whom we do business. Due to governmental mandates
and recommended safety measures to control the spread of COVID-19, we modified aspects of our business practices. This has
resulted in a greater number of our employees working remotely for extended periods of time, which may result in some
increased risk of vulnerability or attacks associated with additional individuals accessing our data and systems remotely. In
addition, security industry experts and government officials have warned about the risks of hackers and cybersecurity attacks
targeting U.S. organizations conducting COVID-19 related research, such as IDEXX.
As information systems and the use of software and related applications by us, our business partners, suppliers, and
customers become more cloud-based and connected to the “Internet of Things,” which is inherently susceptible to cyberattacks,
there has been an increase in global cybersecurity vulnerabilities and threats, including more sophisticated and targeted cyber-
related attacks that pose a risk to the security of our information systems and networks and the confidentiality, availability and
integrity of data and information. We process credit card payments electronically over secure networks and also offer products
and services that connect to and are part of the “Internet of Things,” such as our connected devices (e.g., IDEXX VetLab
instruments). Any such attack or breach could compromise our networks and the information stored thereon could be accessed,
publicly disclosed, lost, or stolen. While we have implemented network security and internal control measures, especially for
the purpose of protecting our connected products and services from cyberattacks, and invested in our data and information
technology infrastructure, there can be no assurance that these efforts will prevent a system disruption, attack, or security breach
and, as such, the risk of system disruptions and security breaches from a cyberattack remains.
We, and some of our third party vendors, have experienced cybersecurity attacks in the past and may experience
further attacks in the future, potentially with more frequency. To our knowledge, most of these attacks have been unsuccessful,
and none have resulted in any material adverse impact to our business or operations. We have adopted measures to mitigate
potential risks associated with information technology disruptions and cybersecurity threats; however, given the
unpredictability of the timing, nature and scope of such disruptions and the evolving nature of cybersecurity threats, which vary
in technique and sources, if we or our business partners or suppliers were to experience a system disruption, attack or security
breach that impacts any of our critical functions, or our customers were to experience a system disruption, attack or security
breach via any of our connected products and services, we could potentially be subject to production downtimes, operational
delays, other detrimental impacts on our operations or ability to provide products and services to our customers, the
compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other
manipulation or improper use of our systems or networks, financial losses and additional costs from remedial actions, repairs to
infrastructure, physical systems or data processing systems, increased cybersecurity and information technology protection
costs, loss of business or potential liability, and/or damage to our reputation, any of which could have a material adverse effect
on our competitive position, results of operations, cash flows or financial condition. Our customers could also face negative
consequences such as the compromises of sensitive or critical information or systems. Furthermore, any access to, public
disclosure of, or other loss of data or information (including any of our confidential or proprietary information or personal data
or information) as a result of an attack or security breach could result in governmental actions or private claims or proceedings,
which could damage our reputation, cause a loss of confidence in our products and services, damage our ability to develop (and
protect our rights to) our proprietary technologies and have a material adverse effect on our business, financial condition, results
of operations or prospects. For more information regarding data and information privacy and protection risks, see “Our
operations and reputation may be impaired if we, our products, or our services do not comply with our global privacy policy or
evolving laws and regulations regarding data privacy and protection” below.
Factors and events beyond our control, including natural and other disasters and climate change-related events,
could disrupt our operations or our supply chain and adversely affect our business
Our business and results of operations could be negatively affected by certain factors and events beyond our control,
such as natural disasters, severe weather conditions and/or climate change-related events (such as hurricanes, earthquakes, fires,
and floods); public health issues (such as outbreaks, epidemics, or pandemics, including the ongoing COVID-19 pandemic);
civil unrest; geopolitical conditions and developments (such as the United Kingdom’s exit from the European Union); war,
terrorism, or other man-made disasters; increases in wages that drive up prices; the imposition of regulations, trade protection
measures, tariffs, duties, import/export restrictions, quotas or embargoes on key components; labor stoppages; transportation
failures affecting the supply and shipment of materials and finished goods; the unavailability of raw materials; Any of these
events could result in, among other things, damage to or the temporary closure of one or more of our manufacturing or
distribution facilities or reference laboratories (damage to one of our facilities or the manufacturing equipment we use could be
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costly and may require substantial lead-time to repair or replace); damage to or closure of one or more facilities of our third-
party business partners or suppliers on which we rely; a temporary lack of an adequate work force in one or more markets; an
interruption in power supply; a temporary or long-term disruption in our supply chain (including a disruption to our ability to
obtain critical components for the manufacture of our products); a temporary disruption in our ability to deliver (or delays in the
delivery of) our products or services; and short- or long-term damage to our customers’ businesses (which would adversely
impact customer demand for our products and services). For more information regarding the risks presented by disruption to
our suppliers’ operations and supply chain, see “Our dependence on suppliers could limit our ability to sell certain products or
negatively affect our operating results” above.
We manufacture many of our significant companion animal products, including our rapid assay devices and certain
instruments, many of our water testing products and certain of our livestock, poultry, and dairy testing products, at a single
facility in Westbrook, Maine. Certain of our companion animal products, as well as our human point-of-care products, are
manufactured in Roswell, Georgia. We also manufacture certain of our livestock and poultry testing products in Bern,
Switzerland and Montpellier, France. In addition, we maintain major distribution facilities in North America and in the
Netherlands and major reference laboratories in Memphis, Tennessee; Kornwestheim, Germany; Sacramento, California;
Elmhurst, Illinois; North Grafton, Massachusetts; East Brisbane, Australia; Markham, Ontario; Wetherby, U.K.; and Tokyo,
Japan. Interruption of operations at any of these facilities due to the occurrence of one or more of the events described above
could have an adverse effect on our results of operations.
While we maintain plans to continue business under such circumstances, there can be no assurance that such plans will
be successful in fully or partially mitigating the effects of such events. We also maintain property and business interruption
insurance to insure against the financial impact of certain events of this nature. However, this insurance may be insufficient to
compensate us for the full amount of any losses that we may incur. In addition, such insurance will not compensate us for
potential long-term competitive effects of being out of the market for the period of any interruption in operations.
Risks associated with doing business internationally could negatively affect our operating results
For the year ended December 31, 2020, approximately 38% of our overall revenue and approximately 90% of our LPD
revenue was attributable to sales of products and services to customers outside the U.S. Although we intend to continue to
expand our international operations and business, we may not be able to successfully promote, market, import, export, sell or
distribute our products and services outside the U.S. Various risks associated with foreign operations may impact our
international sales, including, but not limited to, disruptions in transportation of our products or our supply chain; fluctuations
in oil prices; increased border protection and restriction on travel; the differing product and service needs of foreign customers;
difficulties in building, staffing and managing foreign operations (including a geographically dispersed workforce); differing
protection of intellectual property; trade protection measures, quotas, embargoes, import/export restrictions, tariffs, duties, and
regulatory and licensing requirements; natural and other disasters; public health issues (such as outbreaks, epidemics, the
ongoing COVID-19 pandemic, or the prospect of a pandemic); ongoing instability or changes in a country’s or region’s
regulatory, economic or political conditions, including as a result of the United Kingdom’s exit from the European Union; other
unfavorable geopolitical conditions; security concerns; and local business and cultural factors that differ from our normal
standards and practices, including business practices prohibited by the Foreign Corrupt Practices Act and other anti-corruption
laws and regulations.
In addition, to market and sell many of our products outside the U.S., we are subject to product approval and
registration requirements that often require us to provide confidential, proprietary information about those products to foreign
regulatory agencies. There can be no assurance that the confidential, proprietary information provided to foreign regulatory
agencies to comply with product approval and registration requirements may not be accessed by unauthorized persons or
otherwise stolen, which could negatively affect our ability to protect our proprietary rights in our innovative products and our
future success. We also may forgo marketing and selling some of our products in certain foreign jurisdictions due to the risk of
intellectual property theft, which could negatively affect our ability to expand our international operations and business. For
more information about the risks related to the protection of our proprietary rights in our products and services, see "Our
success is heavily dependent on our continued proprietary product and service innovation" below.
Further, prices that we charge to foreign customers may be different than the prices we charge for the same products in
the U.S. due to competitive, market or other factors, or changes in foreign currency exchange rates. Our results of operations
are also susceptible to changes in foreign currency exchange rates. As a result, the mix of domestic and international sales in a
particular period could have an adverse impact on our results of operations for that period.
25
Our operations and reputation may be impaired if we, our products, or our services do not comply with our
global privacy policy or evolving laws and regulations regarding data privacy and protection
The nature of our business involves the receipt, storage and use of information, including personal data, about our
customers, pet owners, suppliers, and employees. We collect and use personal data in a variety of ways. We offer products and
services that collect and use personal data, including veterinary practice management systems, online customer communication
tools and services, VetConnect PLUS, and two-way integration technology. Some of these products and services rely on third-
party providers for cloud storage. We also engage in e-commerce through various websites and collect contact and other
personal data from our customers and website visitors. In addition, we transfer information, including personal data, among
IDEXX, our subsidiaries and third parties with which we have commercial relations for business purposes. Our collection,
protection, security, retention, storage, disclosure, sharing and use of personal data described above are subject to expanding
and increasingly complex laws and regulations in the U.S. and abroad. In addition, these laws and regulations continue to
develop and are subject to frequent revisions (and generally have become more stringent over time), are subject to differing
interpretations, may be applied inconsistently from jurisdiction to jurisdiction and may be inconsistent with our current global
privacy policy and data protection practices. Compliance with these evolving requirements can be costly, require us to change
our business practices in a manner adverse to our business or delay or impede the development and offering of innovative
products and services. Additionally, public perception and standards related to the privacy of personal data can shift rapidly, in
ways that may affect our reputation or influence regulators in the U.S. and abroad to expand or adopt more stringent regulations
and laws. Examples of laws and regulations that have impacted or could impact our business include:
•
•
•
•
The California Consumer Privacy Act (“CCPA”), which became effective in January 2020, gives California residents,
among other things, expanded rights to access and delete their personal information, opt out of certain personal
information sharing, and receive detailed information about how their personal information is used. The CCPA
provides for civil penalties for violations, as well as a private right of action for data breaches. Moreover, a new
privacy law, the California Privacy Rights Act, which is scheduled to take effect on January 1, 2023 (with a lookback
to January 1, 2022), will significantly modify the CCPA, and will impose additional data protection obligations on
companies such as ours doing business in California. Similar laws have been proposed in other states and at the federal
level, and if passed, such laws may have potentially conflicting requirements that would make compliance challenging.
The effects of the CCPA and other similar laws may require us to modify our data processing practices and policies
and to incur substantial costs and expenses to comply.
The European Union's General Data Protection Regulation ("GDPR"), which became effective in May 2018, imposes
stringent operational requirements for controllers and processors of personal data of individuals in the EEA, and
noncompliance can trigger fines of up to the greater of €20 million or 4% of global annual revenues.
In July 2020, the Court of Justice of the European Union invalidated the EU-U.S. and Swiss-U.S. Privacy Shields
calling into question data transfers carried out under the European Commission's Standard Contractual Clauses, which
has created compliance challenges for our transfer of personal data from the EEA, UK and/or Switzerland to the U.S.
and other third countries. Similar laws have been proposed or passed in other countries, which may create additional
compliance challenges for cross-border transfers of personal data.
Following the United Kingdom’s withdrawal from the EEA and the EU on December 31, 2020, we became subject to
the GDPR as incorporated into the United Kingdom law, and noncompliance can trigger fines of up to the greater of
£17.5 million or 4% of global turnover. In addition, because the European Commission has not yet made an adequacy
determination regarding the United Kingdom's data privacy protection, lawful transfers of personal data between these
jurisdictions remain unclear. The Brexit Trade and Cooperation Agreement (TCA) has established a four- to six-month
grace period during which transfers of personal data from the EU to the UK can continue without additional
safeguards, provided that the UK maintains its pre-TCA data protection laws. During this time, the European
Commission may adopt a UK adequacy decision which organizations can then rely on for EU to UK personal data
transfers but, if no UK adequacy decision is adopted, the UK will be considered a third country at the end of the grace
period and we will be required to implement additional safeguards for personal data transfers.
•
The Brazilian General Data Protection Law (“LGPD”), which became effective in September 2020, and the South
African Protection of Personal Information Act, which became effective in July 2020 (with a one-year grace period
until June 30, 2021), are examples of other non-U.S. data privacy-related laws to which we are subject.
While we have policies and procedures in place to comply with all applicable privacy-related laws and regulations
(including the GDPR, CCPA and LGPD), as well as our contractual obligations, any failure or perceived failure by us, the third
26
parties with whom we work or our products and services to so comply could result in damage to our reputation or legal
proceedings or actions against us by governmental entities or others, any of which could have an adverse effect on our business.
In addition, concerns about our practices with regard to the collection, use, retention, disclosure, or security of personal data or
other privacy-related matters, even if unfounded and even if we are in compliance with applicable laws and regulations, could
damage our reputation and harm our business.
Future operating results could be negatively affected by changes in tax rates, the adoption of new U.S. or
international tax legislation or exposure to additional tax liabilities
The nature of our global operations subjects us to local, state, regional and federal tax laws in jurisdictions around the
world. Our future tax expense could be affected by changes in the mix of earnings in countries with differing statutory tax rates,
changes in the valuation of deferred tax assets and liabilities or changes in tax laws or their interpretation. Additionally, tax
rules governing cross-border activities are continually subject to modification as a result of both coordinated actions by
governments and unilateral measures designed by individual countries, both intended to tackle concerns over base erosion and
profit shifting ("BEPS") and perceived international tax avoidance techniques.
We have received a tax ruling from the Netherlands that documents our mutual understanding of how existing tax laws
apply to our circumstances. This ruling expires as of December 31, 2022, and we have been informed that it will not be
renewed due to changes to the advance ruling policy in the Netherlands. While the absence of an advance agreement does not
preclude our ability to continue to apply existing tax laws in the same manner as allowed by the existing ruling, the lack of such
agreement creates uncertainty as to our future tax rate. Further, the Netherlands has recently announced proposals to modify
existing rules that, if enacted, could eliminate the benefits to which this ruling applies. We continue to consider these
developments within our overall tax strategy.
Additionally, the European Commission has opened formal investigations into specific tax rulings granted by several
countries to specific taxpayers and several are in various stages of litigation. While we believe that our rulings are different than
those being discussed, the ultimate resolution of such activities cannot be predicted and could also have an adverse impact on
future operating results.
Our income tax filings are regularly under audit by various tax authorities, and the final determination of tax audits
could be materially different from that which is reflected in historical income tax provisions and accruals. Significant judgment
is required in determining our worldwide provision for income taxes. We regularly assess our exposures related to our
worldwide provision for income taxes to determine the adequacy of our provision for taxes. Any reduction in these contingent
liabilities or additional assessments would increase or decrease income, respectively, in the period such determination is made.
A weak worldwide economy could result in reduced demand for our products and services or increased
customer credit risk
A substantial percentage of our sales are made worldwide to the companion animal veterinary market. Demand for our
companion animal diagnostic products and services is driven in part by the number of patient visits to veterinary hospitals and
the practices of veterinarians with respect to the recommendations for diagnostic testing, as well as pet owner compliance with
these recommendations. Pet owners generally pay cash out of pocket for health care services for their pets from veterinary
practices. The ongoing COVID-19 global pandemic has increased economic uncertainty and caused economic slowdowns that
may continue or recur. Economic weakness in our significant markets could cause pet owners to forgo or defer visits to
veterinary hospitals or affect their willingness to approve certain diagnostic tests, comply with a treatment plan or, even more
fundamentally, continue to own a pet. In addition, concerns about the financial resources of pet owners could cause
veterinarians to be less likely to recommend certain diagnostic tests, and concerns about the economy may cause veterinarians
to defer purchasing capital items such as our instruments and systems. These conditions, if they continue, could result in a
decrease in sales or decrease in sales growth, of diagnostic products and services, which could have an adverse effect on our
results of operations.
Demand for our water products is driven in part by the availability of funds at government laboratories, water utilities
and private certified laboratories that utilize our products. Availability of funds also affects demand by government laboratories
and cattle, swine and poultry producers that utilize our livestock and poultry diagnostic products, and by users of our human
diagnostic products and services. Economic weakness in our markets related to the ongoing COVID-19 global pandemic has
caused and could continue to cause our customers to reduce their investment in such testing, which could have an adverse effect
on our results of operations.
27
In all of our markets, a weak economy may also cause deterioration in the financial condition of our distributors and
customers, which could inhibit their ability to pay us amounts owed for products delivered or services provided in a timely
fashion or at all.
Strengthening of the rate of exchange for the U.S. dollar has a negative effect on our business
We are a global business, with 38% of our revenue during the year ended December 31, 2020, attributable to sales of
products and services to customers outside of the U.S. Any strengthening of the rate of exchange for the U.S. dollar against
foreign currencies, and in particular the euro, British pound, Canadian dollar, Chinese renminbi, Japanese yen, Australian dollar
and Brazilian real, adversely affects our results, as it reduces the dollar value of sales and profits that are made in those
currencies. The strengthening of the U.S. dollar has a greater adverse effect on the profits from products manufactured or
sourced in U.S. dollars that are exported to international markets and a lesser effect on profits from foreign sourced products
and services due to a natural hedge from international expenses denominated in the corresponding foreign currencies.
For the year ended December 31, 2020, approximately 21% of our consolidated revenue was derived from products
manufactured or sourced in U.S. dollars and sold internationally in local currencies, as compared to 22% for both years ended
December 31, 2019 and 2018. A strengthening U.S. dollar could also negatively impact the ability of customers outside the
U.S. to pay for purchases denominated in U.S. dollars as well as affect our overall competitiveness in international markets. The
accumulated impacts from any continued, longer-term growth in the value of the U.S. dollar against foreign currencies may
have a material adverse effect on our operating results. See “Part II, Item 7A. Quantitative and Qualitative Disclosures About
Market Risk” included in this Annual Report on Form 10-K for additional information regarding currency impact. In addition,
there has been, and may continue to be, volatility in currency exchange rates as a result of the United Kingdom’s withdrawal
from the European Union, especially between the U.S. dollar and the British pound.
Our foreign currency hedging activities (see "Part II, Item 8. Financial Statements and Supplementary Data, Note 19.
Hedging Instruments" in the accompanying Notes to consolidated financial statements), which are designed to minimize and
delay, but not to eliminate, the effects of foreign currency fluctuations, may not sufficiently offset the adverse financial effect of
unfavorable movements in foreign exchange rates on our financial results over the limited time the hedges are in place. In
addition, our hedging activities involve costs and risks, such as transactions costs and the risk that our hedging counterparties
will default on their obligations.
We primarily hedge intercompany product purchases and sales denominated in the euro, British pound, Canadian
dollar, Japanese yen, and Australian dollar. Other foreign currency exposures related to foreign sourced services and emerging
markets may not be practical to hedge. In certain cases, these exposures are not offset by foreign currency denominated costs.
As we primarily use foreign currency exchange contracts with durations of less than 24 months and enter into contracts to
hedge incremental portions of anticipated foreign currency transactions on a quarterly basis for the current and following year,
the effectiveness of our foreign currency hedging activities to offset longer-term appreciation in the value of the U.S. dollar
against non-U.S. currencies may be limited. Factors that could affect the effectiveness of our hedging activities include
accuracy of sales and other forecasts, volatility of currency markets, and the cost and availability of hedging instruments. Since
our hedging activities are designed to minimize volatility, they not only temporarily reduce the negative impact of a stronger
U.S. dollar, but they also temporarily reduce the positive impact of a weaker U.S. dollar. Our future financial results could be
significantly affected by a strengthening value of the U.S. dollar in relation to the foreign currencies in which we conduct
business. The degree to which our financial results are affected for any given time period will depend in part upon our hedging
activities.
Restrictions in our debt agreements or our inability to obtain financing on favorable terms may increase our
cost of borrowing and limit our activities
Our ability to make scheduled payments and satisfy our other obligations under our Credit Facility and senior notes
depends on our future operating performance and on economic, financial, competitive, and other factors beyond our control.
Our business may not generate sufficient cash flows to meet these obligations or generate sufficient levels of earnings to satisfy
the applicable affirmative, negative, and financial covenants. Our failure to comply with these covenants and the other terms of
the Credit Facility and senior notes could result in an event of default and acceleration of our obligations under these
agreements, which may require us to seek additional financing or restructure existing debt on unfavorable terms. In addition,
adverse changes in credit markets could increase our cost of borrowing and make it more difficult for us to obtain financing,
which could limit our ability to execute certain strategies and have an adverse effect on our revenue growth and profitability.
28
Our senior notes include provisions which stipulate a prepayment penalty for which we will be obligated in the event
that we elect to repay the notes prior to their stated maturity dates. Should we elect to repay some or all of the outstanding
principal balance on our senior notes, the prepayment penalty we incur could adversely affect our results of operations and cash
flows.
We fund our operations, capital purchase requirements and strategic growth needs through cash on hand, funds
generated from operations, amounts available under our Credit Facility and senior note financings. If we are unable to obtain
financing on favorable terms, we could face restrictions that would limit our ability to execute certain strategies, which could
have an adverse effect on our revenue growth and profitability.
Borrowings under our Credit Facility bear interest at variable rates, including rates based on the London Interbank
Offered Rate (LIBOR), exposing us to interest rate risk. If interest rates were to increase, our debt service obligations under our
variable-rate Credit Facility would increase even if the principal amount borrowed remained the same. Our Credit Facility
includes a provision for the determination of a benchmark replacement rate as a successor to the LIBOR rate.
RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES
Fluctuations in our quarterly or annual results may cause our stock price to decline
Our prior operating results have fluctuated due to a number of factors, many of which are beyond our control,
including seasonality of certain product lines; changes in our accounting estimates; the impact of acquisitions; timing of
distributor purchases product launches, operating expenditures, and customer marketing and incentive programs; changes in the
number and type of competitors and their product offerings; changes in our sales and distribution model; changes in the
economy affecting consumer spending; and other matters. Similarly, our future operating results may vary significantly from
quarter to quarter or year to year due to these and other factors. If our operating results or projections of future operating results
do not meet the expectations of securities analysts or investors in future periods, our stock price may fall.
The market price of our common stock may be highly volatile, and you may not be able to resell your shares at
or above the price you paid
The trading price of our common stock may be volatile. Securities markets worldwide experience significant price and
volume fluctuations. This market volatility, as well as other general economic, market or political conditions, could reduce the
market price of our common stock rapidly and unexpectedly, in spite of our operating performance. Factors that may impact the
market price of our common stock include the factors described in this “Risk Factors” section and elsewhere in this Form 10-K,
as well as:
•
•
•
•
•
Our stock repurchase program and changes in our capital structure, including the issuance of additional debt;
Public announcements (including the timing of these announcements) regarding our business, financial performance and
prospects or new products or services, product enhancements or technological advances by our competitors or us;
Trading activity in our stock, including portfolio transactions in our stock by us, our executive officers and directors, and
significant stockholders; trading activity that results from the ordinary course rebalancing of stock indices in which we
may be included, such as the S&P 500 Index; trading activity related to our inclusion in, or removal from, any stock
indices; and short-interest in our common stock, which could be significant from time to time;
Investor perception of us and the industry and markets in which we operate, including changes in earnings estimates or
buy/sell recommendations by securities analysts; and whether or not we meet earnings estimates of securities analysts
who follow us; and
General financial, domestic, international, economic, and market conditions, including overall fluctuations in the U.S.
equity markets, which may experience extreme volatility that, in some cases, is unrelated or disproportionate to the
operating performance of particular companies.
29
ITEM 1B.
UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
PROPERTIES
Our worldwide headquarters is located in Westbrook, Maine where we engage in manufacturing, research and
development, marketing, sales, and general and administrative support functions. Our Hoofddorp, Netherlands location includes
distribution, warehousing, and office space.
Primary Facility Locations
Location
Westbrook, Maine
Hoofddorp, Netherlands
Memphis, Tennessee
Kornwestheim, Germany
Wetherby, United Kingdom
Newmarket, United Kingdom
Bern, Switzerland
Montpellier, France
Roswell, Georgia
Functions
United States Headquarters
European Headquarters
Distribution Center and Reference Lab
Reference Lab
Reference Lab
Water manufacturing
LPD manufacturing
LPD manufacturing
OPTI Medical manufacturing
Own/Lease
Own
Lease
Lease
Own
Lease
Lease
Lease
Lease
Lease
Including the locations above, we have over 50 reference laboratories throughout the United States and over 25
reference laboratories internationally, including locations in Europe, Canada, Australia, New Zealand, Brazil, Asia, and South
Africa. The majority of our reference laboratories are leased, with the remainder being owned. We also lease space in various
locations worldwide for administrative support, manufacturing, sales, distribution, and storage. We believe that our leased and
owned properties are generally in good condition, are well-maintained, and are generally suitable and adequate to carry on our
business. A detailed listing of all our locations can be found on our website.
ITEM 3.
LEGAL PROCEEDINGS
Due to the nature of our activities, we are at times subject to pending and threatened legal actions that arise out of the
ordinary course of business. In the opinion of management, based in part upon advice of legal counsel, the disposition of any
such currently pending or threatened matters is not expected to have a material effect on our results of operations, financial
condition, or cash flows. However, the results of legal actions cannot be predicted with certainty. Therefore, it is possible that
our results of operations, financial condition or cash flows could be materially adversely affected in any particular period by the
unfavorable resolution of one or more legal actions.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
30
PART II
ITEM 5.
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
Market Information
Our common stock is quoted on the NASDAQ Global Select Market under the symbol IDXX.
Holders of Common Stock
As of February 9, 2021, there were 395 holders of record of our common stock. Because the majority of our common
stock is held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of
stockholders represented by these record holders.
Purchases of Equity Securities by the Issuer
During the three months ended December 31, 2020, we repurchased shares of common stock as described below:
Period
Total Number of
Shares Purchased
(a)
Average Price Paid
per Share
(b)
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)
(c)
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs (1)
(d)
October 1, 2020 to October 31, 2020
November 1, 2020 to November 30, 2020
December 1, 2020 to December 31, 2020
Total
$
—
$
26,120
1,004
$
27,124 (2) $
—
424.82
476.53
426.73
—
—
—
—
6,275,912
6,275,912
6,275,912
6,275,912
(1) As of December 31, 2020, our Board of Directors had approved the repurchase of up to 73 million shares of our
common stock in the open market or in negotiated transactions pursuant to the Company’s share repurchase program. The
program was approved and announced on August 13, 1999, and the maximum number of shares that may be purchased under
the program has been increased by the Board of Directors on numerous occasions. There is no specified expiration date for this
repurchase program. There were no other repurchase programs outstanding during the three months ended December 31, 2020,
and no repurchase programs expired during the period.
(2) During the three months ended December 31, 2020, we received 27,124 shares of our common stock that were
surrendered by employees in payment for the required withholding taxes due on the vesting of restricted stock units and
settlement of deferred stock units. In the above table, these shares are included in columns (a) and (b) but excluded from
columns (c) and (d). These shares do not reduce the number of shares that may yet be purchased under the repurchase program.
During the year ended December 31, 2020, we repurchased approximately 0.7 million shares of our common stock in
transactions made pursuant to our repurchase program and received approximately 0.06 million shares of common stock that
were surrendered by employees in payment for the minimum required withholding taxes due on the vesting of restricted stock
units and settlement of deferred stock units. Due to the uncertainty of the duration and magnitude of the COVID-19 pandemic
and its impacts during 2020, we suspended our open market share repurchase activity beginning in the first quarter of 2020. The
existing share repurchase program continues to be authorized by our Board of Directors and we have resumed share repurchases
during the first quarter of 2021. See "Part II, Item 8. Financial Statements and Supplementary Data, Note 20. Repurchases of
Common Stock" to the consolidated financial statements for the year ended December 31, 2020, included in this Annual Report
on Form 10-K for further information.
31
Dividends
We have never declared or paid any cash dividends on our common stock. From time to time our Board of Directors
may consider the declaration of a dividend. However, we have no intention to declare or pay a dividend at this time.
Stock Performance
This graph compares our total stockholder returns, the Total Return for the Standard & Poor’s (“S&P”) 500 Index, the
Total Return for the S&P 500 Health Care Index, and the Total Return for the NASDAQ Stock Market Index (U.S. Companies)
(the “NASDAQ Index”) prepared by the Center for Research in Security Prices. This graph assumes the investment of $100 on
December 31, 2015, in IDEXX’s common stock, the S&P 500 Index, the S&P 500 Health Care Index, and the NASDAQ Index
and assumes dividends, if any, are reinvested. Measurement points are the last trading days of the years ended December 2015
to 2020.
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
12/31/2020
IDEXX Laboratories, Inc.
NASDAQ Index
S&P 500 Index
S&P 500 Health Care Index
$100.00
$100.00
$100.00
$100.00
$160.82
$108.87
$111.96
$97.31
$214.45
$141.13
$136.40
$118.79
$255.10
$137.12
$130.42
$126.47
$358.10
$187.44
$171.49
$152.81
$685.50
$271.64
$203.04
$173.36
ITEM 6.
SELECTED FINANCIAL DATA
The Company has applied the amendment to Regulation S-K Item 301 which became effective on February 10, 2021.
32
ITEM 7.
OF OPERATIONS
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with the consolidated financial statements and related notes appearing elsewhere in this Annual Report on
Form 10‑K. The discussion of our financial condition and results of operations and liquidity and capital resources for the year
ended December 31, 2018, is included in our Annual Report on Form 10-K for the year ended December 31, 2019, within Item
7. Management's Discussion and Analysis of Financial Condition and Results of Operations, and is incorporated by
reference herein.
We have included certain terms and abbreviations used throughout this Annual Report on Form 10-K in the "Glossary
of Terms and Selected Abbreviations.”
Description of Business Segments. We operate primarily through three business segments: diagnostic and information
management-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 producer efficiency, which we refer to as Livestock, Poultry and Dairy (“LPD”). Our
Other operating segment combines and presents our products and services for the human medical diagnostics market (“OPTI
Medical”) with our out-licensing arrangements because they do not meet the quantitative or qualitative thresholds for reportable
segments. See "Part II, Item 8. Financial Statements and Supplementary Data, Note 3. Revenue Recognition and Note 17.
Segment Reporting" to the consolidated financial statements for the year ended December 31, 2020, included in this Annual
Report on Form 10-K for financial information about our segments, including our product and service categories, and our
geographic areas.
The following is a discussion of the strategic and operating factors that we believe have the most significant effect on
the performance of our business.
Companion Animal Group
Our strategy is to provide veterinarians with both the highest quality diagnostic information to support more advanced
medical care and information management solutions that help demonstrate the value of diagnostics to pet owners and enable
efficient practice management. By doing so, we are able to build a mutually successful relationship with our veterinarian
customers based on healthy pets, loyal customers and expanding practice revenues.
CAG Diagnostics. We provide diagnostic capabilities that meet veterinarians’ diverse needs through a variety of
modalities including in-clinic diagnostic solutions and outside reference laboratory services. Veterinarians that utilize our full
line of diagnostic modalities obtain a single view of a patient’s diagnostic results, which allows them to track and evaluate
trends and achieve greater medical insight.
Our diagnostic capabilities generate both recurring and non-recurring revenues. Revenues related to capital placements
of our in-clinic IDEXX VetLab suite of instruments and our SNAP Pro Analyzer are non-recurring in nature in that they are
sold to a particular customer only once. Revenues from the associated proprietary IDEXX VetLab consumables, SNAP rapid
assay test kits, reference laboratory and consulting services, and extended maintenance agreements and accessories related to
our IDEXX VetLab instruments and our SNAP Pro Analyzer are recurring in nature, in that they are regularly purchased by our
customers, typically as they perform diagnostic testing as part of ongoing veterinary care services. Our recurring revenues, most
prominently IDEXX VetLab consumables and rapid assay test kits, have significantly higher gross margins than those provided
by our instrument sales. Therefore, the mix of recurring and non-recurring revenues in a particular period will impact our
gross margins.
Diagnostic Capital Revenue. Revenues related to the placement of the IDEXX VetLab suite of instruments are non-
recurring in nature, in that the customer will buy an instrument once over its respective product life cycle, but will purchase
consumables for that instrument on a recurring basis as they use that instrument for testing purposes. During the early stage of
an instrument’s life cycle, we derive relatively greater revenues from instrument placements, while consumable sales become
relatively more significant in later stages as the installed base of instruments increases and instrument placement revenues begin
to decline. In the early stage of an instrument’s life cycle, placements are made primarily through sales transactions. As the
market for the product matures, an increasing percentage of placements are made in transactions, sometimes referred to as
volume commitments, such as our IDEXX 360 program, or reagent rentals, in which instruments are placed at customer sites at
little or no cost in exchange for a multi-year customer commitment to purchase recurring products and services.
33
We place our Catalyst chemistry analyzers and VetTest instruments through sales, leases, rental, and other programs.
As of December 31, 2020, our Catalyst and VetTest chemistry analyzers provided for a combined active installed base of
approximately 59,600 units globally, as compared to approximately 56,200 units in 2019 and approximately 50,800 units in
2018. As of December 31, 2020, our premium Catalyst chemistry analyzers provided for an active installed base of
approximately 49,600 units globally, as compared to approximately 43,900 units in 2019 and approximately 37,000 units in
2018. A majority of our Catalyst chemistry analyzer placements were to customers that are new to IDEXX, including customers
who had been using instruments from one of our competitors, sometimes referred to as competitive accounts. Generally,
placement of an instrument with a new or competitive account has the highest economic value as the entire consumable stream
associated with that placement represents incremental recurring revenue, whereas the consumable stream associated with a
Catalyst placement at a VetTest customer substitutes a Catalyst consumable stream for a VetTest consumable stream. We have
found that the consumables revenues increase when a customer upgrades from a VetTest analyzer to a Catalyst analyzer due to
the superior test menu capability, flexibility, and ease of use of the Catalyst analyzers, which leads to additional testing by the
customer. As we continue to experience growth in placements of Catalyst analyzers and in sales of related consumables, we
expect this growth to be partly offset by a decline in placements of VetTest analyzers and in sales of related consumables.
We place our ProCyte Dx, LaserCyte Dx and VetAutoread hematology analyzers through multiple sales programs as
well. As of December 31, 2020, these hematology analyzers provided for a combined active installed base of approximately
41,200 units, as compared to 38,200 units in 2019 and 35,900 units in 2018. As of December 31, 2020, our premium ProCyte
Dx and LaserCyte Dx hematology analyzers provided for an active installed base of approximately 34,600 units globally, as
compared to approximately 31,500 units in 2019 and approximately 29,000 units in 2018. A majority of our ProCyte analyzer
placements were made to new or competitive accounts. We also continue to place a substantial number of LaserCyte Dx
instruments, both new and recertified, as trade-ups from the VetAutoread analyzer and at new and competitive accounts. During
2020, we introduced and began selling our new ProCyte One analyzer and will begin delivery of these analyzers in 2021. As we
continue to experience growth in placements of ProCyte analyzers and in sales of related consumables, we expect this growth
to be partly offset by a decline in placements of LaserCyte Dx and VetAutoread analyzers and a decrease in the
associated recurring revenue stream.
As of December 31, 2020, our premium SediVue Dx analyzers provided for an active installed base of nearly10,700
units globally, as compared to approximately 8,900 units in 2019 and approximately 6,600 units in 2018. This instrument and
single-use consumable system provides a highly accurate way to automate the process of examining urine under a microscope.
We provide customers with SediVue Dx consumables that are charged upon utilization, which we refer to as pay-per-run, as
compared to other instruments where we charge upon shipment of consumables.
We seek to enhance the attractiveness and customer loyalty of our SNAP rapid assay tests, including by providing the
SNAP Pro Analyzer, which activates SNAP tests, properly times the run, captures, and saves images of the results and, in
conjunction with IVLS, records invoice charges in the patient record. Our ProRead software interprets results of the SNAP Pro
Analyzer. These features promote practice efficiency by eliminating manual entry of test results in patient records and also
helps ensure that the services are recorded and accurately invoiced. In addition, SNAP Pro Analyzer results can be shared with
pet owners on the SNAP Pro screen or, in conjunction with IVLS, via VetConnect PLUS. We also sell the SNAPshot Dx,
which automatically reads certain SNAP test results and, in conjunction with IVLS, records those results in the electronic
medical record. We continue to work on enhancing the functionality of our analyzers to read the results of additional tests from
our canine and feline family of rapid assay products.
Our long-term success in the continuing growth of our CAG recurring diagnostic product and services is dependent
upon: growing volumes at existing customers by increasing their utilization of existing and new test offerings, acquiring new
customers, maintaining high customer loyalty and retention, and realizing modest annual price increases based on our
differentiated products and the growing value of our diagnostic offering. We continuously seek opportunities to enhance the
care that veterinary professionals give to their patients and clients through supporting the implementation of real-time care
testing work flows, which is performing tests and sharing test results with the client at the time of the patient visit. Our latest
generation of chemistry and hematology instruments demonstrates this commitment by offering enhanced ease of use, faster
time to results, broader test menu and connectivity to various information technology platforms that enhance the value of the
diagnostic information generated by the instruments. In addition, we provide marketing tools and customer support that help
drive efficiencies in veterinary practice processes and allow practices to increase the number of clients they see on a daily basis.
With all of our instrument product lines, we seek to differentiate our products from our competitors’ products based on
time-to-result, ease-of-use, throughput, breadth of diagnostic menu, flexibility of menu selection, accuracy, reliability, ability to
handle compromised samples, analytical capability of diagnostics software, integration with the IVLS and VetConnect PLUS,
34
client communications capabilities, education and training, and superior sales and customer service. Our success depends, in
part, on our ability to differentiate our products in a way that justifies a premium price.
Recurring Diagnostic Revenue. Revenues from our proprietary IDEXX VetLab consumable products, our SNAP rapid
assay test kits, outside reference laboratory and consulting services, and extended maintenance agreements and accessories
related to our CAG Diagnostics instruments are considered recurring in nature. For the year ended December 31, 2020,
recurring diagnostic revenue, which is both highly durable and profitable, accounted for approximately 78% of our
consolidated revenue.
Our in-clinic diagnostic solutions, consisting of our IDEXX VetLab consumable products and SNAP rapid assay test
kits, provide real-time reference lab quality diagnostic results for a variety of companion animal diseases and health conditions.
Our outside reference laboratories provide veterinarians with the benefits of a more comprehensive list of diagnostic tests and
access to consultations with board-certified veterinary specialists and pathologists, combined with the benefit of same-day or
next-day turnaround times.
We derive substantial revenues and margins from the sale of consumables that are used in IDEXX VetLab instruments
and the multi-year consumable revenue stream is significantly more valuable than the placement of the instrument. Our strategy
is to increase diagnostic testing within veterinary practices by placing IDEXX VetLab instruments and increasing instrument
utilization of consumables. Utilization can increase due to a greater number of patient samples being run or to an increase in the
number of tests being run per patient sample. Our strategy is to increase both drivers. To increase utilization, we seek to educate
veterinarians about best medical practices that emphasize the importance of chemistry, hematology, and urinalysis testing for a
variety of diagnostic purposes, as well as by introducing new testing capabilities that were previously not available to
veterinarians.
Our in-clinic diagnostic solutions also include SNAP rapid assay tests that address important medical needs for
particular diseases prevalent in the companion animal population. We seek to differentiate these tests from those of other in-
clinic test providers and reference laboratory diagnostic service providers based on critically important sensitivity and
specificity, as demonstrated by peer-reviewed third-party research, as well as overall superior performance and ease of use by
providing our customers with combination tests that test a single sample for up to six diseases at once, including the ability to
utilize our SNAP Pro Analyzer. We further augment our product development and customer service efforts with sales and
marketing programs that enhance medical awareness and understanding regarding certain diseases and the importance of
diagnostic testing.
We believe approximately half of all diagnostic testing by U.S. veterinarians is provided by outside reference
laboratories such as IDEXX Reference Laboratories. In certain markets outside the U.S., the prevalence of in-clinic testing may
vary, and a greater or lesser percentage of diagnostic testing may be performed in reference laboratories. We attempt to
differentiate our reference laboratory testing services from those of competitive reference laboratories and competitive in-clinic
offerings primarily on the basis of a unique and proprietary test menu, technology employed, quality, turnaround time, customer
service and tools such as VetConnect PLUS that demonstrate the complementary manner in which our laboratory services work
with our in-clinic offerings.
Profitability in our lab business is supported, in part, by our expanding business scale globally. Profit improvements
also reflect benefits from price increases and our ability to achieve operational efficiencies. When possible, we utilize core
reference laboratories to service samples from other states or countries, expanding our customer reach without an associated
expansion in our reference laboratory footprint. New laboratories may operate at a loss until testing volumes achieve sufficient
scale. Acquired laboratories frequently operate less profitably than our existing laboratories and acquired laboratories may not
achieve the profitability of our existing laboratory network for several years until we complete the implementation of operating
improvements and efficiencies. Therefore, in the short term, new and acquired reference laboratories generally may have a
negative effect on our operating margin.
Recurring reference lab revenue growth is achieved both through increased testing volumes with existing customers
and through the acquisition of new customers, net of customer losses. We believe the increased number of customer visits by
our sales professionals as a result of the growth in our field sales organization has led to increased reference laboratory
opportunities with customers who already use one of our in-clinic diagnostic modalities. In recent years, recurring reference
laboratory diagnostic and consulting revenues have also been increased through reference laboratory acquisitions, customer list
acquisitions, the opening of new reference laboratories, including laboratories that are co-located with large practice customers,
and as a result of our up-front customer loyalty programs and our volume commitment programs. Our up-front customer loyalty
programs are associated with customer acquisitions and retention and provide incentives to customers in the form of cash
35
payments or IDEXX Points upon entering multi-year contractual agreements to purchase annual minimum amounts of products
or services, including reference laboratory services. Our volume commitment programs, such as IDEXX 360, provide
customers with a free or discounted instrument or system upon entering into multi-year agreements to purchase annual
minimum amounts of products and services.
Veterinary Software, Services and Diagnostic Imaging Systems. Our portfolio of practice management offerings is
designed to serve the full range of customers within the North American, Australian, and European markets. Cornerstone,
DVMAX, IDEXX Animana and IDEXX Neo practice management systems provide superior integrated information solutions,
backed by exceptional customer support and education. These practice management systems allow the veterinarian to practice
better medicine and achieve the practice’s business objectives, including a quality client experience, staff efficiency and
practice profitability. We market Cornerstone, DVMAX and IDEXX Neo practice management systems to customers primarily
in North America and Australia. We market our IDEXX Animana offering to customers primarily throughout Europe.
IDEXX Animana and IDEXX Neo practice management systems are subscription-based SaaS offerings designed to
provide flexible pricing and a durable, recurring revenue stream, while utilizing cloud technology instead of a client server
platform. While we continue to develop, sell, and support our licensed-based Cornerstone and DVMAX software, we are
growing our installed base of subscription-based practice management offerings for new customers of IDEXX practice
management systems. We believe that once established, this subscription-based model will provide higher profitability as
compared to the historical license-based placements. Our Cornerstone and DVMAX customer base continues to be an important
driver of growth through enhanced diagnostic integrations and high value add-on subscription services, such as Pet Health
Network Pro, Petly Plans, and credit card processing, and we continue to make investments to enhance the customer experience
of all of our license-based software offerings. We also offer rVetLink, a comprehensive referral management solution for
specialty care hospitals that streamlines the referral process between primary care and specialty care veterinarians. rVetLink’s
cloud technology integrates with major specialty hospital management systems, including Cornerstone Software and
DVMAX Software.
We differentiate our practice management systems through enhanced functionality, ease of use, and embedded
integration with in-clinic IDEXX VetLab instruments and outside reference laboratory test results. Our client communication
services create more meaningful pet owner experiences through personalized communication. With our SmartFlow cloud
technology, we are able to improve overall patient management through coordination and tracking of every step in a patient
workflow. Pet Health Network Pro online client communication and education service complements the entire IDEXX product
offering by educating pet owners and building loyalty through engaging the pet owner before, during and after the visit, thereby
building client loyalty and driving more patient visits.
Our diagnostic imaging systems offer a convenient radiographic solution that provides superior image quality and the
ability to share images with clients virtually anywhere. IDEXX imaging software enables enhanced diagnostic features and
streamlined integration with our other products and services. Our digital radiography systems, enables low-dose radiation image
capture without sacrificing clear, high-quality diagnostic images, reducing the risk posed by excess radiation exposure for
veterinary professionals. Placements of imaging systems are important to the growth of revenue streams that are recurring in
nature, including extended maintenance agreements and IDEXX Web PACS, which is our cloud-based SaaS offering for
viewing, accessing, storing, and sharing multi-modality diagnostic images. We derive relatively higher margins from our
subscription-based products. IDEXX Web PACS is integrated with Cornerstone, IDEXX Neo and IDEXX VetConnect PLUS
to provide centralized access to diagnostic imaging results alongside patient diagnostic results from any internet
connected device.
Water
Our strategy in the water testing business is to develop, manufacture, market and sell proprietary products that test
primarily for the presence of microbial contamination in water matrices, including drinking water supplies, with superior
performance, supported by exceptional customer service. Our customers primarily consist of water utilities, government
laboratories and private certified laboratories that highly value strong relationships and customer support. We expect that future
growth in this business will be partially dependent on our ability to increase international sales. Growth also will be dependent
on our ability to enhance and broaden our product line. Most water microbiological testing is driven by regulation, and, in many
countries, a test may not be used for compliance testing unless it has been approved by the applicable regulatory body and
integrated into customers’ testing protocols. As a result, we maintain an active regulatory program that involves applying for a
growing number of regulatory approvals in a number of countries, primarily in Europe. Further, we seek to receive regulatory
approvals from governing agencies as a means to differentiate our products from the competition.
36
Livestock, Poultry and Dairy
We develop, manufacture, market and sell a broad range of tests and perform services for various livestock diseases
and conditions, and have active research and development and in-licensing programs in this area. Our strategy is to offer
proprietary tests with superior performance characteristics for use in government programs to control or eradicate disease and
disease outbreaks and in livestock and poultry producers’ disease, reproductive, and herd health and production management
programs. Disease outbreaks are episodic and unpredictable, and certain diseases that are prevalent at one time may be
substantially contained or eradicated at a later time. In response to outbreaks, testing initiatives may lead to exceptional demand
for certain products in certain periods. Conversely, successful eradication programs may result in significantly decreased
demand for certain products. In addition, increases in government funding may lead to increased demand for certain products
and budgetary constraints may lead to decreased demand for certain products. As result, the performance in certain sectors of
this business can fluctuate.
Our strategy in the dairy testing business is to develop, manufacture and sell antibiotic residue and contaminant testing
products that satisfy applicable regulatory requirements or dairy processor standards for testing of milk and provide reliable
field performance. The manufacture of these testing products leverages the SNAP platform and production assets that also
support our rapid assay business, which also leverages the SNAP platform. The dairy SNAP products incorporate customized
reagents for antibiotic and contaminant detection. To successfully increase sales of dairy testing products, we believe that we
need to increase penetration in dairy processors and develop product line enhancements and extensions. Our Rapid Visual
Pregnancy Test for cattle can detect pregnancy 28 days after breeding. This test provides a quick and accurate identifier using
whole blood samples.
Other
OPTI Medical. Our strategy in the OPTI Medical business for the human market is to develop, manufacture, and sell
electrolyte and blood gas analyzers, and related consumable products for the medical point-of-care diagnostics market
worldwide, with a focus on small to mid-sized hospitals. We seek to differentiate our products based on ease of use,
convenience, international distribution and service and instrument reliability. Similar to our veterinary instruments and
consumables strategy, a substantial portion of the revenues from this product line is derived from the sale of consumables for
use on the installed base of electrolyte and blood gas analyzers. During the early stage of an instrument’s life cycle, relatively
greater revenues are derived from instrument placements, while consumable sales become relatively more significant in later
stages as the installed base of instruments increases and instrument placement revenues begin to decline. Our long-term success
in this area of our business is dependent upon new customer acquisition, customer retention and increased customer utilization
of existing and new assays introduced on these instruments.
During 2020, we introduced the OPTI SARS-CoV-2 RT-PCR test kit for COVID-19 testing. A significant portion of
the growth in our OPTI Medical business was from revenue generated from the test kits and related laboratory services. The
future demand for this product is difficult to project given the uncertain nature of the COVID-19 pandemic, including short-
term project commitments, available PCR testing capacity, alternative suppliers, and the potential impact of vaccinations and
other treatments.
Our facility in Roswell, Georgia develops and manufactures the OPTI product lines using the same or similar
technology to support the electrolyte needs of the veterinary market. We leverage this facility’s know-how, intellectual
property, and manufacturing capability to continue to expand the menu and instrument capability of the VetStat and Catalyst
platforms for veterinary applications, while reducing our cost of consumables by leveraging experience and economies of scale.
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 were previously 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 included costs primarily consisting 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. These management reporting changes did not have a material impact to our segment results of operations for
the years ended December 31, 2019 and 2018.
37
The following tables reflect adjustments to previously reported costs in our Unallocated segment, that are now
allocated to our CAG, Water, LPD and Other segments:
For the year ended December 31, 2019:
(in thousands)
Cost of sales
Gross profit
Operating Expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Income from operations
CAG
Water
LPD
Other
Unallocated
(247) $
247
(11) $
11
(14) $
14
(6) $
6
278
(278)
(239) $
13,004
16,479
29,244
(28,997) $
(11) $
501
33
523
(512) $
(13) $
625
41
653
(639) $
— $
1,363
—
1,363
(1,357) $
263
(15,493)
(16,553)
(31,783)
31,505
$
$
$
For the year ended December 31, 2018:
(in thousands)
Cost of sales
Gross profit
Operating Expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Income from operations
CAG
Water
LPD
Other
Unallocated
$
$
$
(1,540) $
1,540
(574) $
3,316
15,658
18,400
(16,860) $
(69) $
69
(25) $
66
(4)
37
32 $
(87) $
87
(32) $
81
(4)
45
42 $
(35) $
35
1,731
(1,731)
— $
1,145
—
1,145
(1,110) $
631
(4,608)
(15,650)
(19,627)
17,896
38
The following tables reflect the impact to previously reported segment gross profit margin, operating income margin
and operating expenses as a percentage of revenue, due to the allocation of these costs to our CAG, Water, LPD and Other
segments:
For the year ended December 31, 2019:
Cost of sales
Gross profit
Operating Expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Income from operations
For the year ended December 31, 2018:
Cost of sales
Gross profit
Operating Expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Income from operations
CAG
Water
LPD
Other
— %
— %
— %
0.6 %
0.8 %
1.4 %
(1.4) %
— %
— %
— %
0.4 %
— %
0.4 %
(0.4) %
— %
— %
— %
0.5 %
— %
0.5 %
(0.5) %
— %
— %
— %
6.1 %
— %
6.1 %
(6.1) %
CAG
Water
LPD
Other
(0.1) %
0.1 %
— %
0.2 %
0.8 %
1.0 %
(0.9) %
(0.1) %
0.1 %
— %
0.1 %
— %
— %
— %
(0.1) %
0.1 %
— %
0.1 %
— %
— %
— %
(0.2) %
0.2 %
— %
5.2 %
— %
5.2 %
(5.0) %
39
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
The discussion and analysis of our financial condition and results of operations is based upon the consolidated
financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on
historical experience and on various assumptions that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates. See "Part II, Item 8. Financial Statements and Supplementary Data,
Note 2. Summary of Significant Accounting Policies" to the consolidated financial statements included in this Annual Report
on Form 10-K for a description of the significant accounting policies used in preparation of these consolidated financial
statements.
We believe the following critical accounting estimates and assumptions may have a material impact on reported
financial condition and operating performance and involve significant levels of judgment to account for highly uncertain
matters or are susceptible to significant change.
Revenue Recognition
See "Part II, Item 8. Financial Statements and Supplementary Data, Note 3. Revenue Recognition" to the consolidated
financial statements for the year ended December 31, 2020, included in this Annual Report on Form 10-K for additional
information about our revenue recognition policy and criteria for recognizing revenue.
We enter into contracts with multiple performance obligations where customers purchase a combination of IDEXX
products and services. Determining whether products and services are considered distinct performance obligations that should
be accounted for separately requires judgment. We determine the transaction price for a contract based on the total
consideration we expect to receive in exchange for the transferred goods or services. To the extent the transaction price includes
variable consideration, such as volume rebates or expected price adjustments, we apply judgment in constraining the estimated
variable consideration due to factors that may cause reversal of revenue recognized. We evaluate constraints based on our
historical and projected experience with similar customer contracts.
We allocate revenue to each performance obligation in proportion to the relative standalone selling prices and
recognize revenue when control of the related goods or services is transferred for each obligation. We utilize the observable
standalone selling price when available, which represents the price charged for the performance obligation when sold
separately. When standalone selling prices for our products or services are not directly observable we determine the standalone
selling prices using relevant information available and apply suitable estimation methods including, but not limited to, the cost
plus a margin approach.
Our up-front loyalty programs provide customers with incentives in the form of cash payments or IDEXX Points upon
entering into multi-year agreements to purchase annual minimum amounts of future products or services. If a customer breaches
its agreement, they are required to refund all or a portion of the up-front cash or IDEXX Points, or make other repayments,
remedial actions, or both. Up-front incentives to customers in the form of cash or IDEXX Points are not made in exchange for
distinct goods or services and are capitalized as customer acquisition costs within other current and long-term assets, which are
subsequently recognized as a reduction to revenue over the term of the customer agreement. If these up-front incentives are
subsequently utilized to purchase instruments, we allocate total consideration, including future committed purchases less up-
front incentives and estimates of expected price adjustments, based on relative standalone selling prices to identified
performance obligations and recognize instrument revenue and cost at the time of installation and customer acceptance. We
estimate, based on historical experience, and apply judgment to predict the amounts of future customer purchases and expected
price adjustments related to these multi-year agreements. Differences between estimated and actual customer purchases may
impact the amount and timing of revenue recognition and a 10% change in these estimates would have increased or reduced
other assets and cumulative revenue related to these programs by approximately $1.5 million at December 31, 2020.
Our volume commitment programs, such as our IDEXX 360 program, provide customers with free or discounted
instruments or systems upon entering into multi-year agreements to purchase annual minimum amounts of products and
services. We allocate total consideration, including future committed purchases and expected price adjustments, based on
relative standalone selling prices to identified performance obligations and recognize instrument revenue and cost at the time of
installation and customer acceptance in advance of billing the customer, which is also when the customer obtains control of the
instrument based on legal title transfer. Our right to future consideration related to instrument revenue is recorded as a contract
40
asset within other current and long-term assets. The contract asset is transferred to accounts receivable when customers are
billed for future products and services over the term of the contract. We estimate, based on historical experience, and apply
judgment to predict the amounts of future customer purchases and expected price adjustments related to these multi-year
agreements. Differences between estimated and actual customer purchases may impact the amount and timing of revenue
recognition and a 10% change in these estimates would have increased or reduced contract assets and cumulative revenue
related to these programs by approximately $3.1 million at December 31, 2020.
Our instrument rebate programs require an instrument purchase and provide customers the opportunity to earn future
rebates based on the volume of products and services they purchase over the term of the program. We account for the
customer’s right to earn rebates on future purchases as a separate performance obligation and determine the standalone selling
price based on an estimate of rebates the customer will earn over the term of the program. Total consideration allocated to
identified performance obligations is limited to goods and services that the customer is presently obligated to purchase and does
not include estimates of future purchases that are optional. We allocate total consideration to identified performance
obligations, including a customer’s right to earn rebates on future purchases, which is deferred and recognized upon the
purchase of future products and services, partly offsetting future rebates as they are earned. We estimate, based on historical
experience, and apply judgment to predict the amounts of future customer rebates related to these multi-year agreements.
Differences between estimated and actual customer rebates may impact the amount and timing of revenue recognition and a
10% change in these estimates would have increased or reduced deferred revenue and cumulative revenue related to these
programs by approximately $1.8 million at December 31, 2020.
Future market conditions and changes in product offerings may cause us to change marketing strategies to increase or
decrease customer incentive offerings, possibly resulting in incremental reductions of revenue in future periods as compared to
reductions in the current or prior periods. Additionally, certain customer programs require us to estimate, based on historical
experience, and apply judgment to predict the amounts of future customer purchases, customer rebates and other incentive
payments, and price adjustments related to multi-year agreements. Differences between estimated and actual customer
purchases may impact the amount and timing of revenue recognition as described above.
Valuation of Goodwill and Other Intangible Assets
A significant portion of the purchase price for acquired businesses is generally assigned to intangible assets. Intangible
assets other than goodwill are initially valued at fair value. If a quoted price in an active market for the identical asset is not
readily available at the measurement date, the fair value of the intangible asset is estimated based on discounted cash flows
using market participant assumptions, which are assumptions that are not specific to IDEXX. The selection of appropriate
valuation methodologies and the estimation of discounted cash flows require significant assumptions about the timing and
amounts of future cash flows, risks, appropriate discount rates, and the useful lives of intangible assets. When significant, we
typically utilize independent valuation experts to advise and assist us in determining the fair values of the identified intangible
assets acquired in connection with a business acquisition and in determining appropriate amortization methods and periods for
those intangible assets. Goodwill is initially valued based on the excess of the purchase price of a business combination over the
fair value of acquired net assets recognized and represents the future economic benefits arising from other assets acquired that
could not be separately identified and recognized.
We assess goodwill for impairment annually, at the reporting unit level, in the fourth quarter and whenever events or
circumstances indicate impairment may exist. An impairment charge is recorded for the amount, if any, by which the carrying
amount of goodwill exceeds its implied fair value. Our reporting units are the individual product and service categories that
comprise our CAG operating segment, our Water and LPD operating segments and goodwill remaining from the restructuring
of our pharmaceutical business in the fourth quarter of 2008. A substantial portion of the goodwill remaining from the
pharmaceutical business, included in our “Other Segment”, is associated with intellectual property that has been, or that we
expect to be, licensed to third parties. Realization of this goodwill is dependent upon the success of those third parties in
developing and commercializing products, which will result in our receipt of royalties and other payments.
As part of our goodwill testing process, we evaluate factors specific to a reporting unit as well as industry and
macroeconomic factors that are reasonably likely to have a material impact on the fair value of a reporting unit. Examples of the
factors considered in assessing the fair value of a reporting unit include: the results of the most recent impairment test, the
competitive environment, the regulatory environment, the effects of the ongoing COVID-19 pandemic, anticipated changes in
product or labor costs, revenue growth trends, the consistency of operating margins and cash flows and current and long-range
financial forecasts. The long-range financial forecasts of the reporting units, which are based upon management’s long-term
view of our markets, are used by senior management and the Board of Directors to evaluate operating performance.
41
In the fourth quarters of 2020 and 2019, we elected to bypass the qualitative approach that allows the assessment of
qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying
amount and instead proceeded directly to assessing the fair value of all of our reporting units and comparing the fair value of
each reporting unit to the carrying value to determine if any impairment exists.
We estimate the fair values of applicable reporting units using an income approach based on discounted forecasted
cash flows. We make significant assumptions about the extent and timing of future cash flows, growth rates and discount rates.
Model assumptions are based on our projections and best estimates, using appropriate and customary market participant
assumptions. In addition, we make certain assumptions in allocating shared assets and liabilities to individual reporting units in
determining the carrying value of each reporting unit. To validate the reasonableness of our reporting units' estimated fair
values, we reconcile the aggregate fair values of our reporting units to our total market capitalization. Valuation assumptions
reflect our projections and best estimates, based on significant assumptions about the extent and timing of future cash flows,
growth rates and discount rates.
The results of our most recent goodwill impairment test in the fourth quarter of 2020, indicated an excess of estimated
fair value over the carrying amount for each of our reporting units with a minimum of approximately 100% and an weighted
average of approximately 1,250% in total. The majority of our goodwill is related to our CAG Diagnostics reporting units with
an weighted average of approximately 1,300% excess of estimated fair value over the carrying amount, including our Reference
Laboratory Diagnostic and Consulting Services, Rapid Assay Products, and IDEXX VetLab Consumables, Instruments,
Services and Accessories.
We also maintain approximately $46 million of goodwill associated with our Veterinary Software and Services
reporting unit, which is primarily comprised of recent acquisitions of early-stage software companies that expand our suite of
technology applications for the veterinary profession, including SaaS-based practice management systems, applications that
extend workflow capabilities, client marketing, wellness plan management and other connectivity and communication needs.
These software applications continue to be in the earlier stages of commercial development, and therefore our Veterinary
Software and Services reporting unit has a relatively lower excess of estimated fair value over the carrying amount, as indicated
by the results of our most recent goodwill impairment test, which indicated approximately $325 million and 350% of the
reporting unit’s carrying value. Realization of this goodwill is dependent on our successful commercialization of these early-
stage software applications.
Additionally, we maintain approximately $6.5 million of goodwill associated with our remaining pharmaceutical
intellectual property, out-licensing arrangements, and certain retained drug delivery technologies (collectively “Pharmaceutical
Activities”) that we seek to commercialize through arrangements with third parties. Currently, our primary support for the
carrying value of this goodwill is royalty revenue associated with the commercialization of certain intellectual property. There
is no guarantee that we will be able to maintain or increase revenues from our remaining Pharmaceutical Activities. The results
of our goodwill impairment test for these Pharmaceutical Activities indicate an excess of estimated fair value over the carrying
amount of this reporting unit by approximately $6.4 million and approximately 100% of the reporting unit’s carrying value.
While we believe that the assumptions used to determine the estimated fair values of each of our reporting units are
reasonable, a change in assumptions underlying these estimates could result in a material negative effect on the estimated fair
value of the reporting units. Our fair value estimate assumes the achievement of future financial results contemplated in our
forecasted cash flows, and there can be no assurance that we will realize that value. We use forecasts to estimate future cash
flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlooks for our
reporting units. Actual results may differ from those assumed in our forecasts. The discount rate is based on a weighted average
cost of capital derived from industry peers. Changes in market conditions, interest rates, growth rates, tax rates, costs, pricing,
or the discount rate would affect the estimated fair values of our reporting units and could result in a goodwill impairment
charge in a future period. No goodwill impairments were identified during the years ended December 31, 2020, 2019 and 2018.
A prolonged economic downturn in the U.S. or internationally resulting in lower long-term growth rates and reduced
long-term profitability may reduce the fair value of our reporting units. Industry specific events or circumstances could have a
negative impact on our reporting units and may also reduce the fair value of our reporting units. Should such events occur, and
it becomes more likely than not that a reporting unit’s fair value has fallen below its carrying value, we will perform an interim
goodwill impairment test, in addition to the annual impairment test. Future impairment tests may result in an impairment of
goodwill, depending on the outcome of future impairment tests. An impairment of goodwill would be reported as a non-cash
charge to earnings.
42
We assess the realizability of intangible assets whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. If an impairment review is triggered, we evaluate the carrying value of intangible assets, other
than goodwill, based on estimated undiscounted future cash flows over the remaining useful life of the primary asset of the
asset group and compare that value to the carrying value of the asset group. The asset group is the lowest level for which
identifiable cash flows associated with the intangible asset are largely independent. The cash flows that are used contain our
best estimates, using appropriate and customary assumptions and projections at the time. If the net carrying value of the asset
group exceeds the related estimated undiscounted future cash flows, an impairment to adjust the intangible asset to its fair value
would be reported as a non-cash charge to earnings. If necessary, we would calculate the fair value of an intangible asset using
the present value of the estimated future cash flows to be generated by the intangible asset and applying a risk-adjusted discount
rate. The amount of impairment for the year ended December 31, 2020 was immaterial. We had no impairments of our
intangible assets during the years ended December 31, 2019 and 2018.
Income Taxes
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes.
Under this approach, deferred taxes represent the estimated future tax effects of temporary differences between book and tax
treatment of assets and liabilities and carryforwards to the extent they are realizable.
On a quarterly basis, we assess our current and projected earnings by jurisdiction to determine whether or not our
earnings during the periods when the temporary differences become deductible will be sufficient to realize the related future tax
benefits. Should we determine that we would not be able to realize all or part of our net deferred tax asset in a particular
jurisdiction in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination
was made.
For those jurisdictions where tax carryforwards are likely to expire unused or the projected operating results indicate
that realization is not more likely than not, a valuation allowance is recorded to offset the deferred tax asset within that
jurisdiction. In assessing the need for a valuation allowance, we consider future taxable income and ongoing prudent and
feasible tax planning strategies. In the event that we determine that we would be able to realize our deferred tax assets in the
future in excess of the net recorded amount, a reduction of the valuation allowance would increase income in the period such
determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax
asset in the future, a reduction to the deferred tax asset would be charged against income in the period such determination was
made.
Our net taxable temporary differences and tax carryforwards are recorded using the enacted tax rates expected to apply
to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. Should the
expected applicable tax rates change in the future, an adjustment to our deferred taxes would be credited or charged, as
appropriate, to income in the period such determination was made.
We periodically assess our exposures related to our worldwide provision for income taxes and believe that we have
appropriately accrued taxes for contingencies. Any reduction of these contingent liabilities or additional assessment would
increase or decrease income, respectively, in the period such determination was made.
We record a liability for uncertain tax positions that do not meet the more likely than not standard as prescribed by the
authoritative guidance for income tax accounting. We record tax benefits for only those positions that we believe will more
likely than not be sustained. For positions that we believe that it is more likely than not that we will prevail, we record a benefit
considering the amounts and probabilities that could be realized upon ultimate settlement. If our judgment as to the likely
resolution of the uncertainty changes, if the uncertainty is ultimately settled or if the statute of limitation related to the
uncertainty expires, the effects of the change would be recognized in the period in which the change, resolution or expiration
occurs. Our net liability for uncertain tax positions was $26.0 million as of December 31, 2020, and $29.7 million as of
December 31, 2019, which includes estimated interest expense and penalties. See "Part II, Item 8. Financial Statements and
Supplementary Data, Note 14. Income Taxes" in the accompanying Notes to consolidated financial statements for more
information.
43
RECENT ACCOUNTING PRONOUNCEMENTS
See "Part II, Item 8. Financial Statements and Supplementary Data, Note 2. Summary of Significant Accounting
Policies (v) and (w)" to the consolidated financial statements for the year ended December 31, 2020, included in this Annual
Report on Form 10-K for a complete discussion of recent accounting pronouncements adopted and not adopted.
RESULTS OF OPERATIONS AND TRENDS
Effects of Certain Factors on Results of Operations
Market Trends and COVID-19 Pandemic Impact. The primary impacts of the COVID-19 pandemic have been seen in
our CAG business. While veterinary care is widely recognized as an “essential” service, stay-at-home policies deployed to
combat the spread of COVID-19 constrained visits to veterinary practices significantly in late March 2020 through early April
2020, pressuring diagnostic testing volumes. Restrictions on sales professionals’ access to veterinary clinics also contributed to
deferrals on new CAG instrument placements.
As stay-at-home policies were relaxed, there was a sharp rebound in clinical visit activity which accelerated through
the second quarter of 2020, and continued through the second half of 2020. Weekly U.S. companion animal practice data
showed improvement in same-store clinical visits trends since mid-April 2020 and solid CAG market momentum has continued
in early 2021.
Companion animal market improvement trends globally have supported a strong recovery in demand for CAG
diagnostic products and services. Global CAG Diagnostics recurring revenues declined approximately 16% in April 2020,
followed by increases of approximately 8% in May 2020, 30% in June 2020, 24% in July 2020, and approximately 20% for the
remainder of the third and fourth quarter of 2020.
While these trends are encouraging, potential effects related to ongoing COVID-19 case management efforts are
challenging to predict and may pressure future revenues should enhanced social distancing policies and higher infection rates
impact veterinary clinic operations in certain regions.
We have also seen impacts from the COVID-19 pandemic on Water testing volumes. There was some disruption to
compliance Water testing early in the second quarter of 2020 related to business lockdown effects, as well as beach and pool
closures, which has since had a solid recovery. Approximately 20% of our Water revenues are related to non-compliance
testing, which has seen declines related to reduced overall business activity and prioritization of laboratory spending. We
anticipate that near-to-moderate-term demand for non-compliance testing will continue to be impacted by pandemic and related
economic pressures.
In managing our businesses, we continue to provide high levels of service delivery and product support for customers
during this time and maintain high health and safety standards to protect our employees and ensure business continuity. In an
effort to continue to protect the health and safety of our workforce and their families and our communities, the majority of our
employees continue to work remotely and travel remains highly restricted. We have introduced new employee benefits to
support remote workers.
Human COVID-19 Testing. On May 7, 2020, we announced that OPTI Medical was granted by the United States Food
and Drug Administration ("FDA") an Emergency Use Authorization ("EUA") for the OPTI SARS-CoV-2 RT-PCR laboratory
test kit for the detection of SARS-CoV-2, the virus that causes COVID-19. On June 5, 2020 OPTI Medical announced that it
has received the CE mark certification in the European Union for its OPTI SARS-CoV-2 RT-PCR laboratory test kit.
Additionally, the FDA has granted EUA for the new OPTI DNA/RNA Magnetic Bead Kit for nucleic acid extraction from
respiratory samples to be used with the OPTI SARS-CoV-2 RT-PCR test kit, which enables OPTI Medical Systems to provide
laboratories with a complete OPTI Medical Systems-manufactured workflow solution for COVID-19 testing. We also provide
human COVID-19 testing laboratories services to the Maine Center for Disease Control and Prevention in support of their
COVID-19 testing program. These products and services are included within our OPTI Medical business in our Other segment
and are the primary driver of growth in that segment.
Distributor Purchasing and Inventories. When selling our products through distributors, changes in distributors’
inventory levels can impact our reported sales, and these changes may be affected by many factors, which may not be directly
related to underlying demand for our products by veterinary practices, which are the end users. If during the current year,
distributors’ inventories grew by less than those inventories grew in the comparable period of the prior year, then changes in
distributors’ inventories would have an unfavorable impact on our reported sales growth in the current period. Conversely, if
44
during the current year, distributors’ inventories grew by more than those inventories grew in the comparable period of the prior
year, then changes in distributors’ inventories would have a favorable impact on our reported sales growth in the current
period.
In certain countries, we sell our products through third-party distributors and may be unable to obtain data for sales to
end users. We do not believe the impact of changes in these distributors’ inventories had or would have a material impact on
our growth rates. See “Part I, Item 1. Business, Marketing and Distribution” included in this Annual Report on Form 10-K for
additional information regarding distribution channels.
Currency Impact. For the year ended December 31, 2020, approximately 21% of our consolidated revenue was derived
from products manufactured or sourced in U.S. dollars and sold internationally in local currencies, as compared to 22% for both
years ended December 31, 2019 and 2018. Strengthening of the rate of exchange for the U.S. dollar relative to other currencies
has a negative impact on our revenues derived in currencies other than the U.S. dollar and on profits of products manufactured
or purchased in U.S. dollars and sold internationally, and a weakening of the U.S. dollar has the opposite effect. Similarly, to
the extent that the U.S. dollar is stronger in current or future periods relative to the exchange rates in effect in the corresponding
prior periods, our growth rate will be negatively affected. The impact of foreign currency denominated operating expenses and
foreign currency denominated supply contracts partly offsets this exposure. Additionally, our designated hedges of
intercompany inventory purchases and sales help delay the impact of certain exchange rate fluctuations on non-U.S.
denominated revenues. See “Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk” included in this
Annual Report on Form 10-K for additional information regarding currency impact. Our future income tax expense could also
be affected by changes in the mix of earnings, including as a result of changes in the rate of exchange for the U.S. dollar relative
to currencies in countries with differing statutory tax rates. See “Part I, Item 1A. Risk Factors” included in this Annual Report
on Form 10-K for additional information regarding tax impacts.
Effects of Economic Conditions. Pet owners generally pay cash out of pocket for health care services for their pets
from veterinary practices. Demand for our products and services is vulnerable to changes in the economic environment,
including slow economic growth, high unemployment, and credit availability. Negative or cautious consumer sentiment can
lead to reduced or delayed consumer spending, resulting in a decreased number of patient visits to veterinary clinics.
Unfavorable economic conditions can impact sales of instruments, diagnostic imaging and practice management systems, which
are larger capital purchases for veterinarians. Additionally, economic turmoil can cause our customers to remain sensitive to the
pricing of our products and services. In the U.S., we monitor patient visits and clinic revenue data provided by a subset of our
CAG customers. Although this data is a limited sample and susceptible to short-term impacts such as weather, which may affect
the number of patient visits in a given period, we believe that this data provides a fair and meaningful long-term representation
of the trend in patient visit activity in the U.S., providing us insight regarding demand for our products and services.
Economic conditions can also affect the purchasing decisions of our Water and LPD business customers. Water testing
volumes may be susceptible to declines in discretionary testing for existing home and commercial sales and in mandated testing
as a result of decreases in home and commercial construction. Testing volumes may also be impacted by severe weather
conditions such as drought. In addition, fiscal difficulties can also reduce government funding for water and herd health
screening services.
We believe that the diversity of our products and services and the geographic diversity of our markets partially
mitigate the potential effects of the economic environment and negative consumer sentiment on our revenue growth rates.
Effects of Patent Expiration. Although we have several patents and licenses of patents and technologies from third
parties that expired during 2020, and several that are expected to expire in 2021 and beyond, the expiration of these patents or
licenses, individually or in the aggregate, is not expected to have a material effect on our financial position or future operations
due to a range of factors as described in "Part I, Item 1. Business, Patents and Licenses”.
Non-GAAP Financial Measures. The following revenue analysis and discussion focuses on organic revenue growth,
and references in this analysis and discussion to “revenue,” “revenues” or “revenue growth” are references to “organic revenue
growth.” Organic revenue growth is a non-GAAP financial measure and represents the percentage change in revenue during the
current year, as compared to the same period for the prior year, net of the effect of changes in foreign currency exchange rates,
certain business acquisitions, and divestitures. Organic revenue growth should be considered in addition to, and not as a
replacement for, or as a superior measure to, revenues reported in accordance with U.S. GAAP, and may not be comparable to
similarly titled measures reported by other companies. Management believes that reporting organic revenue growth provides
useful information to investors by facilitating easier comparisons of our revenue performance with prior and future periods and
to the performance of our peers.
45
We exclude from organic revenue growth the effect of changes in foreign currency exchange rates because changes in
foreign currency exchange rates are not under management’s control, are subject to volatility and can obscure underlying
business trends. We calculate the impact on revenue resulting from changes in foreign currency exchange rates by applying the
difference between the weighted average exchange rates during the current year period and the comparable prior year period to
foreign currency denominated revenues for the prior year period.
We also exclude from organic revenue growth the effect of certain business acquisitions and divestitures because the
nature, size and number of these transactions can vary dramatically from period to period, and because they either require or
generate cash as an inherent consequence of the transaction, and therefore can also obscure underlying business and
operating trends. We consider acquisitions to be a business when all three elements of inputs, processes and outputs are present,
consistent with ASU 2017-01, “Business Combinations: (Topic 805) Clarifying the Definition of a Business.” In a business
combination, if substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or group of
similar identifiable assets, we do not consider these assets to be a business. A typical acquisition that we do not consider a
business is a customer list asset acquisition, which does not have all elements necessary to operate a business, such as
employees or infrastructure. We believe the efforts required to convert and retain these acquired customers are similar in nature
to our existing customer base and therefore are included in organic revenue growth.
We also use Adjusted EBITDA, gross debt, net debt, gross debt to Adjusted EBITDA ratio and net debt to Adjusted
EBITDA ratio, all of which are non-GAAP financial measures that should be considered in addition to, and not as a
replacement for, financial measures presented according to U.S. GAAP. Management believes that reporting these non-GAAP
financial measures provides supplemental analysis to help investors further evaluate our business performance and available
borrowing capacity under our Credit Facility.
CEO Transition. In the fourth quarter of 2019, Jonathan (Jay) Mazelsky was appointed our President and Chief
Executive Officer, while Jonathan W. Ayers, our former Chairman of the Board, President and Chief Executive Officer stepped
down as Chairman of the Board, ceased to be an employee of the Company and transitioned to the role of external Senior
Advisor to the Company and a director on our Board. In connection with the foregoing, Mr. Ayers and IDEXX entered into a
mutual separation agreement that provided for severance payments in accordance with the terms of his pre-existing employment
agreement and modified his outstanding stock options. As a result, we recognized a charge to operating income of
approximately $13.4 million in the fourth quarter of 2019, representing the cost of the severance and an acceleration of the cost
of the equity awards, which was partially offset by a reduction to our provision for income taxes of approximately $1.2 million,
resulting in a total charge to net income of approximately $12.2 million, net of tax impacts.
Comparisons to Prior Periods. Our fiscal years end on December 31. Unless otherwise stated, the analysis
and discussion of our financial condition, results of operations and liquidity, including references to growth and organic growth
and increases and decreases, are being compared to the equivalent prior year period.
46
Twelve Months Ended December 31, 2020, Compared to Twelve Months Ended December 31, 2019
Total Company
The following table presents revenue by operating segment by U.S. markets and non-U.S., or international markets:
For the Years Ended
December 31,
Net Revenue
(dollars in thousands)
2020
2019
Dollar
Change
Reported
Revenue
Growth (1)
Percentage
Change
from
Currency
Percentage
Change
from
Acquisitions
Organic
Revenue
Growth (1)
CAG
United States
International
Water
United States
International
LPD
United States
International
$ 2,385,765 $ 2,119,183 $
1,593,855
791,910
1,410,278
708,905
266,582
183,577
83,005
$
128,625 $
132,850 $
62,083
66,542
62,673
70,177
$
145,845 $
132,635 $
14,533
131,312
14,230
118,405
(4,225)
(590)
(3,635)
13,210
303
12,907
12.6%
13.0%
11.7%
(3.2%)
(0.9%)
(5.2%)
10.0%
2.1%
10.9%
0.2%
—
0.5%
(1.6%)
—
(3.0%)
(1.1%)
—
(1.2%)
Other
$
46,420 $
22,240 $
24,180
108.7%
—
0.5 %
0.8 %
—
—
—
—
—
—
—
—
Total Company
United States
International
$ 2,706,655 $ 2,406,908 $
1,691,224
1,015,431
1,495,516
911,392
299,747
195,708
104,039
12.5%
13.1%
11.4%
—
—
(0.1%)
0.5 %
0.8 %
—
(1) Reported revenue growth and organic revenue growth may not recalculate due to rounding.
11.9%
12.2%
11.2%
(1.6%)
(0.9%)
(2.2%)
11.0%
2.1%
12.1%
108.7%
12.0%
12.3%
11.5%
Total Company Revenue. In our CAG business, we experienced significant pressure on testing volumes in the first half
of the year, specifically in late-March through mid-April related to COVID-19 social distancing procedures and guidelines. We
then experienced a sharp recovery in market demand for companion animal diagnostics globally, including high levels of
growth in testing volumes beginning in June 2020 through the fourth quarter, supported by pent-up demand for wellness and
non-wellness testing as social distancing procedures and guidelines were eased during the third quarter, as well as higher
clinical visits related to new patients. In our LPD business, the increased demand for swine testing in China was partially offset
by lower herd health screening revenue. Lower revenues in our Water business are primarily the result of the COVID-19
pandemic, due to lower demand for non-compliance testing. The impact of currency movements on revenue was immaterial.
47
The following table presents our total Company results of operations:
Total Company - Results of Operations
(dollars in thousands)
2020
Percent of
Revenue
2019
Percent of
Revenue
Amount
Percentage
For the Years Ended December 31,
Change
Revenues
Cost of revenue
Gross profit
Operating Expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Income from operations
$ 2,706,655
1,135,615
1,571,040
$ 2,406,908
1,041,359
58.0 % 1,365,549
$ 299,747
94,256
205,491
56.7 %
434,435
300,832
141,249
876,516
$ 694,524
418,193
16.1 %
261,317
11.1 %
133,193
5.2 %
32.4 %
812,703
25.7 % $ 552,846
16,242
17.4 %
39,515
10.9 %
8,056
5.5 %
33.8 %
63,813
23.0 % $ 141,678
12.5 %
9.1 %
15.0 %
3.9 %
15.1 %
6.0 %
7.9 %
25.6 %
Gross Profit. Gross profit increased due to higher sales volumes and a 130 basis point increase in the gross profit
margin. The increase in the gross profit margin was driven by several factors, including the mix benefit from strong IDEXX
VetLab consumable and lower CAG Diagnostics instrument revenue, productivity and volume leverage in our reference
laboratories, the net benefit of price increases, as well as the benefit from OPTI COVID-19 PCR testing. Lower product costs
from volume leverage in our LPD segment also contributed favorably to our gross profit margin. These favorable factors were
offset by the incremental investments in reference laboratory capacity and systems, including acquisitions. The impact from
foreign currency movements decreased the gross profit margin by approximately 40 basis points, including the impact of hedge
gains in the current year, as compared to higher hedge gains in the prior year.
Operating Expenses. The increase in sales and marketing expense was primarily due to increased personnel-related
costs related to our expanded global commercial infrastructure, partially offset by cost containment efforts implemented in
response to the COVID-19 pandemic, including travel restrictions and temporary compensation and benefit reductions. The
increase in general and administrative expense was primarily due to an accrual related to an ongoing litigation matter and a
charitable donation, as well as increases in bad debt reserves and higher facilities costs. These increases were partially offset by
the absence of CEO separation costs incurred in the prior year, as well as temporary cost containment efforts and prudent
expense management across our business segments. The increase in research and development expense was primarily due to
higher personnel-related costs, as well as new product development costs, partially offset by temporary cost containment
efforts. The overall change in currency exchange rates resulted in a decrease in operating expenses by less than 1%.
48
Companion Animal Group
The following table presents revenue by product and service category for CAG: □
For the Years Ended
December 31,
Net Revenue
(dollars in thousands)
2020
2019
Dollar
Change
Reported
Revenue
Growth (1)
Percentage
Change
from
Currency
Percentage
Change
from
Acquisitions
Organic
Revenue
Growth (1)
CAG Diagnostics recurring
revenue:
IDEXX VetLab
consumables
Rapid assay products
Reference laboratory
diagnostic and
consulting services
CAG Diagnostics
services and accessories
CAG Diagnostics capital -
instruments
Veterinary software,
services and diagnostic
imaging systems
$ 2,113,839 $ 1,828,329 $
285,510
15.6%
0.1%
0.6%
14.8%
824,376
253,018
693,360
232,149
131,016
20,869
18.9%
9.0%
0.1%
(0.2%)
—
—
18.8%
9.2%
946,268
822,497
123,771
15.0%
0.3%
1.4%
13.4%
90,177
80,323
9,854
12.3%
—
108,950
132,685
(23,735)
(17.9%)
0.4%
—
—
12.3%
(18.2%)
Net CAG revenue
$ 2,385,765 $ 2,119,183 $
162,976
158,169
4,807
266,582
3.0%
12.6%
—
0.2%
—
0.5%
3.0%
11.9%
(1) Reported revenue growth and organic revenue growth may not recalculate due to rounding.
CAG Diagnostics Recurring Revenue. During the first half of the year we experienced significant pressure on testing
volumes, specifically in late-March through mid-April related to COVID-19 social distancing procedures and guidelines. We
then experienced a sharp recovery in market demand for companion animal diagnostics globally, including high levels of
growth in testing volumes beginning in June 2020 through the fourth quarter, supported by pent-up demand for wellness and
non-wellness testing as social distancing procedures and guidelines were eased during the third quarter, as well as higher
clinical visits related to new patients. The increase in CAG Diagnostics recurring revenue was primarily due to increased
volumes in IDEXX VetLab consumables and reference laboratory diagnostic services, and to a lesser extent, higher realized
prices.
The increase in IDEXX VetLab consumables revenue was primarily due to higher sales volumes for our Catalyst
consumables, and to a lesser extent, ProCyte Dx consumables. These increases were supported by an expansion of our
instruments installed base, growth in testing by new and existing customers, our expanded menu of available tests, and to a
lesser extent, benefits from higher average unit sales prices.
The increase in rapid assay revenue resulted from higher SNAP 4Dx Plus and Feline Triple sales volumes, as well as
higher realized prices. Rapid assay testing is relatively more dependent on wellness visits, which were impacted more severely
by COVID-19 stay-at-home policies and procedures, specifically in the second quarter of 2020, however we saw a sharp
rebound in rapid assay testing volumes in the third and fourth quarters of 2020, consistent with a broader U.S. market recovery
for wellness and non-wellness testing.
The increase in reference laboratory diagnostic and consulting services revenue was primarily due to the impact of
higher testing volumes, most prominently in the U.S., as well as higher average unit sales prices. Sales growth internationally
was driven by strong growth in Europe, Canada, Australia and Japan. Acquisitions increased revenue by 1.4%.
CAG Diagnostic services and accessories revenue growth was primarily a result of the increase in our active installed
base of instruments.
CAG Diagnostics Capital – Instruments Revenue. The decrease in CAG Diagnostics capital instrument revenue was
primarily due to the impacts of the COVID-19 pandemic, including restrictions on our sales professionals' access to clinics and
certain customers deferring new purchase decisions.
49
Veterinary Software, Services, and Diagnostic Imaging Systems Revenue. The increase in revenue was primarily due
to increased veterinary software and diagnostic imaging subscription-based services due to the increases in our active installed
base and to a lesser extent, higher realized prices on these service offerings. These factors were partially offset by impacts of the
COVID-19 pandemic on new diagnostic imaging placements, including restrictions on our sales professionals’ access to clinics
and certain customers deferring purchase decisions, which began to occur in mid-March of 2020.
The following table presents the CAG segment results of operations:
Results of Operations
(dollars in thousands)
Revenues
Cost of revenue
Gross profit
Operating Expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Income from operations
For the Years Ended December 31,
Change
2020
Percent of
Revenue
2019
Percent of
Revenue
Amount
Percentage
$ 2,385,765
1,022,579
1,363,186
$ 2,119,183
938,176
57.1 % 1,181,007
$ 266,582
84,403
182,179
55.7 %
396,792
269,464
122,043
788,299
$ 574,887
378,063
16.6 %
225,798
11.3 %
114,541
5.1 %
33.0 %
718,402
24.1 % $ 462,605
18,729
17.8 %
43,666
10.7 %
7,502
5.4 %
33.9 %
69,897
21.8 % $ 112,282
12.6 %
9.0 %
15.4 %
5.0 %
19.3 %
6.5 %
9.7 %
24.3 %
Gross Profit. Gross profit increased primarily due to higher sales volumes, as well as a 140 basis point increase in the
gross profit margin. The increase in gross profit margin was primarily due to productivity and volume leverage gains in our
reference laboratories and the mix benefits from higher growth in IDEXX VetLab consumable revenue and lower CAG
Diagnostics instrument revenue, as well as the net benefit of price increases in our CAG Diagnostics recurring revenue
portfolio. These favorable factors were partially offset by incremental investments in reference laboratory capacity and systems,
including acquisitions. The impact from foreign currency movements decreased the gross profit margin by approximately 25
basis points, including the impact of lower hedge gains in the current year, compared to higher hedge gains in the prior year.
Operating Expenses. The increase in sales and marketing expense was primarily due to increased personnel-related
costs related to our global commercial infrastructure, partially offset by our cost containment efforts implemented in response to
the COVID-19 pandemic, including travel restrictions and temporary compensation and benefit reductions. The increased in
general and administrative was primarily due to an accrual related to an ongoing litigation matter and a charitable donation, as
well as bad debt and higher facilities costs, partially offset by the absence of CEO separation costs incurred in the prior year, as
well as temporary cost containment efforts and prudent expense management across our business segments. The increase in
research and development expense was primarily due to increased personnel-related costs, partially offset by temporary cost
containment initiatives. The impact of currency movements on expenses were immaterial.
50
Water
The following table presents the Water segment results of operations:
Results of Operations
(dollars in thousands)
Revenues
Cost of revenue
Gross profit
Operating Expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Income from operations
For the Years Ended December 31,
Change
2020
Percent of
Revenue
2019
Percent of
Revenue
Amount
Percentage
$ 128,625
38,245
90,380
$ 132,850
36,904
95,946
70.3 %
$
72.2 %
(4,225)
1,341
(5,566)
15,046
12,595
3,872
31,513
58,867
$
11.7 %
9.8 %
3.0 %
24.5 %
45.8 % $
15,969
13,889
4,165
34,023
61,923
12.0 %
10.5 %
3.1 %
25.6 %
46.6 % $
(923)
(1,294)
(293)
(2,510)
(3,056)
(3.2) %
3.6%
(5.8) %
(5.8) %
(9.3) %
(7.0) %
(7.4) %
(4.9) %
Revenue. The decrease in revenue was primarily due to the impact of the COVID-19 pandemic, primarily from
reductions in non-compliance testing in the last three quarters of 2020, partially offset by higher sales volumes of our Colilert
test products and related accessories used in coliform and E. coli testing during the first quarter of 2020, as well as the benefit
of price increases. The impact of currency movements decreased revenue by approximately 1.6%.
Gross Profit. Gross profit for Water decreased due to lower sales volumes as well as a 190 basis point decrease in the
gross profit margin, primarily due to a 140 basis point reduction from foreign currency movements, including the impact of
lower hedge gains in the current year compared the higher gains in the prior year, as well as higher distribution and freight costs
and higher product costs. These reductions in the gross profit margin were partially offset by the net benefits of price increases.
Operating Expenses. Overall operating expenses were lower primarily as a result of cost containment efforts
implemented in response to the COVID-19 pandemic, including temporary compensation and benefit reductions and travel
restrictions. The overall change in currency exchange rates resulted in a decrease in operating expenses of approximately 1.5%.
51
Livestock, Poultry and Dairy
The following table presents the LPD segment results of operations:
Results of Operations
(dollars in thousands)
Revenues
Cost of revenue
Gross profit
Operating Expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Income from operations
For the Years Ended December 31,
Change
2020
Percent of
Revenue
2019
Percent of
Revenue
Amount
Percentage
$ 145,845
56,643
89,202
$ 132,635
54,131
78,504
61.2 %
$
59.2 %
13,210
2,512
10,698
10.0%
4.6%
13.6%
20,655
17,061
11,478
49,194
40,008
$
14.2 %
11.7 %
7.9 %
33.7 %
27.4 % $
22,795
18,276
12,698
53,769
24,735
17.2 %
13.8 %
9.6 %
40.5 %
18.6 % $
(2,140)
(1,215)
(1,220)
(4,575)
15,273
(9.4%)
(6.6%)
(9.6%)
(8.5%)
61.7%
Revenue. The increase in LPD revenue was primarily due to the continued demand for swine testing in China to
support the rebuilding of swine herds following the African Swine Fever outbreak. These increases were offset by decreased
herd health screening, which reflects comparisons to a strong prior year and lower imports into China. The unfavorable impact
of foreign currency movements decreased revenue 1.1%.
Gross Profit. The increase in LPD gross profit was primarily due to higher sales volume and a 200 basis point increase
in the gross profit margin. The increase in the gross profit margin is primarily due to favorable product costs from volume
leverage, offset by the impact from foreign currency movements which decreased gross profit margin by approximately 180
basis points, including the impact of lower hedge gains in the current year compared to higher gains in the prior year.
Operating Expenses. Overall operating expenses were lower primarily as a result of cost containment efforts
implemented in response to the COVID-19 pandemic, including temporary compensation and benefit reductions and travel
restrictions. Sales and marketing and general and administrative expenses decreased primarily from reduced travel and
personnel-related costs, partially offset by higher bad debt reserves and an impairment of an intangible asset associated with our
food safety and dairy business. The decrease in research and development expense was primarily due to leveraging LPD
personnel to support our human COVID-19 testing initiative and lower project costs, partially offset by increased third-party
development costs. The overall change in currency exchange rates resulted in a decrease in operating expenses of
approximately 1.5%.
52
Other
The following table presents the Other results of operations:
Results of Operations
(dollars in thousands)
Revenues
Cost of revenue
Gross profit
Operating Expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Income from operations
For the Years Ended December 31,
Change
2020
Percent of
Revenue
2019
Percent of
Revenue
Amount
Percentage
$
46,420
18,148
28,272
$
60.9 %
22,240
12,148
10,092
$
45.4 %
24,180
6,000
18,180
108.7%
49.4%
180.1%
1,942
1,712
3,856
7,510
20,762
$
4.2 %
3.7 %
8.3 %
16.2 %
44.7 % $
1,366
3,354
1,789
6,509
3,583
6.1 %
15.1 %
8.0 %
29.3 %
16.1 % $
576
(1,642)
2,067
1,001
17,179
42.2%
(49.0%)
115.5%
15.4%
479.5%
Revenue. The increase in Other revenue was primarily due to our new OPTI COVID-19 PCR testing products and
services, which were introduced in the second quarter of 2020. The future demand for this product is difficult to project given
the uncertain nature of the COVID-19 pandemic, including short-term project commitments, available PCR testing capacity,
alternative suppliers, and the potential impact of vaccinations and other treatments. The impact of currency movements on
revenue was immaterial.
Gross Profit. The increase in gross profit was primarily due to sales volumes of our new OPTI COVID-19 PCR testing
products and laboratory services. The gross profit margin increased 1,550 basis points primarily due to favorable product mix
from OPTI COVID-19 PCR testing and, to a lesser extent the net benefit of price increases in our core OPTI products, partially
offset by higher product costs in our other OPTI products. The overall change in currency exchange rates had an immaterial
impact on gross profit.
Operating Expenses. The increase in sales and marketing expense was primarily due to higher personnel-related costs
associated with our new OPTI COVID-19 PCR testing initiative. The decrease in general and administrative expense was
primarily due to lower foreign exchange losses on settlements of foreign currency denominated transactions, as compared to the
prior year, for all operating segments, which are reported within our Other segment, partially offset by an increase in costs
associated with our COVID-19 PCR testing. The increase in research and development cost was primarily due to higher
personnel-related and project costs associated with the development of the OPTI COVID-19 PCR test.
Non-Operating Items
Interest Expense. Interest expense was $33.1 million for the year ended December 31, 2020, as compared to $31.1
million for the prior year. The increase in interest expense was primarily due to lower capitalized interest related compared to
prior year, as the expansion of our Westbrook, Maine headquarters and relocation of our core reference laboratory in Germany,
was completed in 2020.
Provisions for Income Taxes. Our effective income tax rate was 12.1% for the year ended December 31, 2020, and
18.1% for the year ended December 31, 2019. Our effective income tax rate for the year ended December 31, 2020, was lower
primarily due to the one-time positive impact related to the enactment of tax reform in Switzerland due to recording a deferred
tax asset related to the transitional benefits, as well as higher tax benefits related to share-based compensation.
53
LIQUIDITY AND CAPITAL RESOURCES
We fund the capital needs of our business through cash on hand, funds generated from operations, proceeds from long-
term senior note financings, and amounts available under our Credit Facility. We generate cash primarily through the payments
made by customers for our diagnostic products and services, consulting services, and other various systems and services
provided to the animal veterinary, livestock, poultry, dairy, and water testing markets. Our cash disbursements are primarily
related to compensation and benefits for our employees, inventory and supplies, taxes, research and development, capital
expenditures, rents, occupancy-related charges, interest expense, and acquisitions. At December 31, 2020, we had $383.9
million of cash and cash equivalents, as compared to $90.3 million on December 31, 2019. Working capital, including our
Credit Facility, totaled $480.0 million at December 31, 2020, as compared to negative $45.7 million at December 31, 2019.
Additionally, at December 31, 2020, we had remaining borrowing availability of $998.6 million under our $1 billion Credit
Facility, which was expanded in April 2020, from $850 million, and extended through April 2023. Also in April 2020, we
further enhanced our liquidity and financial flexibility by issuing $200 million in 10-year, 2.50% fixed-rate senior notes. We
believe that, if necessary, we could obtain additional borrowings to fund our growth objectives. We further believe that current
cash and cash equivalents, funds generated from operations, and committed borrowing availability will be sufficient to fund our
operations, capital purchase requirements, and anticipated growth needs for the next twelve months. We believe that these
resources, coupled with our ability, as needed, to obtain additional financing, will also be sufficient to fund our business as
currently conducted for the foreseeable future. We may enter into new financing arrangements or refinance or retire existing
debt in the future depending on market conditions. Should we require more capital in the U.S. than is generated by our
operations, for example to fund significant discretionary activities, we could elect to raise capital in the U.S. through the
incurrence of debt or equity issuances, which we may not be able to complete on favorable terms or at all. In addition, these
alternatives could result in increased interest expense or other dilution of our earnings.
We manage our worldwide cash requirements considering available funds among all of our subsidiaries. Our foreign
cash and cash equivalents are generally available without restrictions to fund ordinary business operations outside the U.S.
The following table presents cash, cash equivalents and marketable securities held domestically, and by our foreign
subsidiaries:
Cash and cash equivalents
(dollars in millions)
U.S.
Foreign
Total
Total cash, cash equivalents and marketable securities held in U.S. dollars by our foreign
subsidiaries
For the Years Ended December 31,
2020
2019
$
$
$
248.4 $
135.5
383.9 $
1.1
89.2
90.3
18.0 $
6.5
Of the $383.9 million of cash and cash equivalents held as of December 31, 2020, greater than 99% was held as bank
deposits. Of the $90.3 million of cash and cash equivalents held as of December 31, 2019, greater than 99% was held as bank
deposits.
The following table presents additional key information concerning working capital:
For the Three Months Ended
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
Days sales outstanding (1)
Inventory turns (2)
42.2
2.1
41.5
1.9
44.4
1.6
41.5
1.9
40.5
2.2
(1) Days sales outstanding represents the average of the accounts receivable balances at the beginning and end of each quarter divided by revenue for that
quarter, the result of which is then multiplied by 91.25 days.
(2) Inventory turns represent inventory-related cost of product revenue for the 12 months preceding each quarter-end divided by the average inventory
balances at the beginning and end of each quarter.
54
Sources and Uses of Cash
The following table presents cash provided (used):
(in thousands)
Net cash provided by operating activities
Net cash used by investing activities
Net cash used by financing activities
Net effect of changes in exchange rates on cash
Net change in cash and cash equivalents
For the Years Ended December 31,
2019
2020
Dollar Change
$
$
648,063 $
(109,376)
(248,416)
3,331
293,602 $
459,158 $
(205,528)
(286,409)
(689)
(33,468) $
188,905
96,152
37,993
4,020
327,070
Operating Activities. The increase in cash provided by operating activities of $188.9 million during 2020 as compared
to 2019, was primarily due to the increase in net income and changes in operating assets and liabilities, offset by a decrease in
adjustments to reconcile net income to net cash provided by operating activities. The decrease in adjustments to reconcile net
income to net cash provided by operating activities was primarily due to higher deferred tax benefits related to the enactment of
tax reform in Switzerland in the current year and a decrease in share-based compensation expense related to CEO transition
costs in the prior year, offset by increased depreciation and amortization expenses, primarily related to the completion of our
major facilities projects early in 2020.
The following table presents cash flows from changes in operating assets and liabilities:
(in thousands)
Accounts receivable
Inventories
Accounts payable
Deferred revenue
Other assets and liabilities
For the Years Ended December 31,
2020
2019
Dollar Change
$
(60,722) $
(18,885)
981
(13,373)
60,238
(22,472) $
(37,306)
1,957
(12,360)
(34,788)
(38,250)
18,421
(976)
(1,013)
95,026
Total change in cash due to changes in operating assets and liabilities
$
(31,761) $
(104,969) $
73,208
Cash used due to changes in operating assets and liabilities during the year ended December 31, 2020, as compared to
the same period in the prior year, decreased approximately $73.2 million. The change in other assets and liabilities was due to
higher accrued liabilities, including an accrued charge related to an ongoing litigation matter, higher accrued personnel-related
costs related to higher incentives and delayed employer payroll taxes under the COVID-19 stimulus guidance, as well as lower
investments in customer volume commitment programs to support instrument placements. Additionally, lower increases in
inventory, as compared to the prior year, due to demand levels, contributed to lower cash used compared to the same period in
the prior year. These factors were partially offset by increases in accounts receivable related to high levels of revenue growth.
We have historically experienced proportionally lower net cash flows from operating activities during the first quarter
and proportionally higher cash flows from operating activities for the remainder of the year and for the annual period driven
primarily by payments related to annual employee incentive programs in the first quarter following the year for which the
bonuses were earned.
Investing Activities. Cash used by investing activities was $109.4 million during 2020 as compared to $205.5 million
used during 2019. The decrease in cash used by investing activities during 2020 as compared to 2019 was primarily due to the
completion of our long-term major facilities projects during 2020 and less cash used for acquisition compared to the prior year.
These decreases in cash used were partially offset by the purchase of one of our reference laboratory facilities that was
previously leased.
Our total capital expenditure plan for 2021 is estimated to be approximately $120 million to $140 million, which
includes capital investments in manufacturing and reference laboratory buildings and equipment, investments in internal use
software and information technology infrastructure.
55
Financing Activities. Cash used by financing activities was $248.4 million during 2020 as compared to $286.4 million
used during 2019. The decrease in cash used by financing activities during 2020 as compared to 2019 was due the decrease in
repurchases of our common stock and the issuance of senior notes, partially offset by the increase in repayments on our Credit
Facility.
Cash used to repurchase shares of our common stock decreased by $118.8 million during 2020, as compared to 2019.
From the inception of our share repurchase program in August 1999 to December 31, 2020, we have repurchased 66.7 million
shares for $4.3 billion. During 2020, we purchased 0.7 million shares for an aggregate cost of $179.6 million, as compared to
purchases of 1.22 million shares for an aggregate cost of $303.8 million during 2019. Due to the uncertainty of the duration and
magnitude of the COVID-19 pandemic and its impacts during 2020, we suspended our open market share repurchase activity
beginning in the first quarter of 2020. The existing share repurchase program continues to be authorized by our Board of
Directors and we have resumed share repurchases during the first quarter of 2021. We believe that the repurchase of our
common stock is a favorable means of returning value to our stockholders and we also repurchase our stock to offset the
dilutive effect of our share-based compensation programs. Repurchases of our common stock may vary depending upon the
level of other investing activities and the share price. See "Part II, Item 8. Financial Statements and Supplementary Data, Note
20. Repurchases of Common Stock" to the consolidated financial statements included in this Annual Report on Form 10-K for
additional information about our share repurchases.
The $1.0 billion unsecured revolving Credit Facility matures on April 14, 2023 and requires no scheduled prepayments
before that date. Amounts borrowed under the terms of the Credit Facility are reflected in the current liabilities section in the
accompanying consolidated balance sheets. Applicable interest rates on borrowings under the Credit Facility are based on the
prevailing LIBOR, Canadian Dollar Rate, or EURIBOR, but not less than 1.0%, plus a credit spread ranging from 1.375% to
2.00%, based on our gross leverage ratio. The Credit Facility also allows for borrowings based on the prevailing Prime rate, but
not less than 2.00%, plus a credit spread from 0.375% to 1.00%. Under the Credit Facility, we also pay quarterly commitment
fees ranging from 0.2% to 0.375%, based on our leverage ratio, on any unused commitment.
Under the Credit Facility, the net repayment and borrowing activity resulted in increased cash used of $179.4 million
during 2020, as compared to 2019. At December 31, 2020, we had no borrowings outstanding under the Credit Facility. At
December 31, 2019, we had $288.8 million outstanding under the Credit Facility. The general availability of funds under the
Credit Facility was further reduced by $1.4 million for letters of credit that were issued in connection with claims under our
workers' compensation policy at December 31, 2020 and 2019, respectively. The Credit Facility contains affirmative, negative,
and financial covenants customary for financings of this type. The negative covenants include restrictions on liens, indebtedness
of subsidiaries of the Company, fundamental changes, investments, transactions with affiliates, and certain restrictive
agreements and violations of laws and regulations. The financial covenant is a consolidated leverage ratio test that requires our
ratio of debt to earnings before interest, taxes, depreciation, amortization, and share-based compensation not to exceed 3.5-to-1.
At December 31, 2020, we were in compliance with the covenants of the Credit Facility. The obligations under the Credit
Facility may be accelerated upon the occurrence of an event of default under the Credit Facility, which includes customary
events of default including payment defaults, defaults in the performance of the affirmative, negative and financial covenants,
the inaccuracy of representations or warranties, bankruptcy and insolvency related defaults, defaults relating to judgments,
certain events related to employee pension benefit plans under the Employee Retirement Income Security Act of 1974,
("ERISA"), the failure to pay specified indebtedness, cross-acceleration to specified indebtedness and a change of control
default.
See "Part II, Item 8. Financial Statements and Supplementary Data, Note 13 Debt" for additional information about our
Credit Facility, Senior Notes, and Senior Note Agreements.
Effect of currency translation on cash. The net effect of changes in foreign currency exchange rates are related to
changes in exchange rates between the U.S. dollar and the functional currencies of our foreign subsidiaries. These changes will
fluctuate each year as the value of the U.S. dollar relative to the value of the foreign currencies change. A currency’s value
depends on many factors, including interest rates, and the country’s debt levels and strength of economy.
Off-Balance Sheet Arrangements. We have no off-balance sheet arrangements or variable interest entities except for
letters of credit and third-party guarantees, as reflected in "Part II, Item 8. Financial Statements and Supplementary Data, Note
13 Debt" and "Part II, Item 8. Financial Statements and Supplementary Data. Note 16. Commitments, Contingencies and
Guarantees" to the consolidated financial statements for the year ended December 31, 2020, included in this Annual Report on
Form 10-K, respectively.
56
Financial Covenant. The financial covenant is a consolidated leverage ratio test that requires our ratio of debt to
earnings before interest, taxes, depreciation, amortization, and share-based compensation, as defined in the Senior Note
Agreements and Credit Facility, not to exceed 3.5-to-1. At December 31, 2020, we were in compliance with the covenants of
the Senior Note Agreements. The following details our consolidated leverage ratio calculation:
(in thousands)
Trailing 12 Months Adjusted EBITDA:
Net income attributable to stockholders
Interest expense
Provision for income taxes
Depreciation and amortization
Acquisition-related expense
Share-based compensation expense
Extraordinary and other non-recurring non-cash charges
Adjusted EBITDA
(in thousands)
Debt to Adjusted EBITDA Ratio:
Line of credit
Current and long-term portion of long-term debt
Total debt
Acquisition-related consideration payable
Financing leases
Deferred financing costs
Gross debt
Gross debt to Adjusted EBITDA ratio
Cash and cash equivalents
Net debt
Net debt to Adjusted EBITDA ratio
Commitments, Contingencies and Guarantees
Twelve months ended
December 31, 2020
$
$
581,776
33,125
79,854
95,998
1,281
30,951
2,501
825,486
Twelve months ended
December 31, 2020
$
$
$
$
—
908,480
908,480
1,500
26
645
910,651
1.10
(383,928)
526,723
0.64
For more information regarding our commitments, contingencies and guarantees, see "Part II, Item 8. Financial
Statements and Supplementary Data, Note 16. Commitments, Contingencies and Guarantees".
For more information on our future lease payments, see "Part II, Item 8. Financial Statements and Supplementary
Data, Note 8. Leases" for our minimum lease payment schedule. The expected timing of payments of our leases may be
different in future years, depending on decisions to extend lease terms and/or enter into additional leases in the preceding years.
For more information on our repayment of our Senior Notes, see "Part II, Item 8. Financial Statements and
Supplementary Data, Note 13. Debt".
We also have purchase obligations that including agreements and purchase orders to purchase goods or services that
are contractually enforceable and that specify all significant terms, including fixed or minimum quantities, pricing and
approximate timing of purchases. As of December 31, 2020, we have $235.6 million in purchase obligations due in 2021. Our
purchase obligations beyond 2021 are approximately $85.9 million. Expected timing of payments of our purchase obligations is
estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the time
of receipt of goods or services, or changes to agreed-upon amounts for some obligations.
57
Additionally, we have agreements with third parties that we have entered into in the ordinary course of business under
which we are obligated to indemnify such third parties for and against various risks and losses. The precise terms of such
indemnities vary with the nature of the agreement. In many cases, we limit the maximum amount of our indemnification
obligations, but in some cases those obligations may be theoretically unlimited. We have not incurred material expenses in
discharging any of these indemnification obligations, and based on our analysis of the nature of the risks involved, we believe
that the fair value of these agreements is minimal. Accordingly, we did not record any liabilities for these obligations at
December 31, 2020 and 2019, and do not anticipate any future payments for these guarantees.
As of December 31, 2020, our remaining obligation associated with the deemed repatriation tax resulting from the Tax
Cut and Jobs Act of 2017 is $23.2 million, which is expected to be paid in installments through 2025. For information on our
unrecognized tax benefits, see "Part II, Item 8. Financial Statements and Supplementary Data, Note 14. Income Taxes".
58
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk consists primarily of foreign currency exchange risk and interest rate risk. Our functional currency is
the U.S. dollar and our primary manufacturing operations and inventory supply contracts are in the U.S. or in U.S. dollars, but
we distribute our products worldwide both through direct export and through our foreign subsidiaries. Our primary foreign
currency transaction risk consists of intercompany purchases and sales of products and we attempt to mitigate this risk through
our hedging program described below. For the year ended December 31, 2020, approximately 21% of our consolidated revenue
was derived from products manufactured or sourced in U.S. dollars and sold internationally in local currencies, as compared to
22% for the years ended December 31, 2019, and 2018, respectively. The functional currency of most of our subsidiaries is
their local currency, except four of our foreign subsidiaries where the functional currency is the U.S. dollar.
Our foreign currency exchange impacts are comprised of three components: 1) local currency revenues and expenses;
2) the impact of hedge contracts; and 3) intercompany and monetary balances for our subsidiaries that are denominated in a
currency that is different from the functional currency used by each subsidiary. Based on projected revenues and expenses for
2021, excluding the impact of intercompany and trade balances denominated in currencies other than the functional subsidiary
currencies, a 1% strengthening of the U.S. dollar would reduce revenue by approximately $11 million and operating income by
approximately $5.5 million. Additionally, we project our foreign currency hedge contracts in place as of December 31, 2020,
would provide incremental offsetting gains of approximately $2 million. The impact of the intercompany and monetary
balances referred to in the third component above have been excluded, as they are transacted at multiple times during the year
and we are not able to reliably forecast the impact that changes in exchange rates would have.
At our current foreign exchange rate assumptions, we anticipate the effect of a weaker U.S. dollar will have a
favorable effect on our operating results by increasing our revenues by 1.5% to 2.0% and increasing our diluted earnings per
share by approximately $0.14 for the year ending December 31, 2021. This favorable impact includes foreign currency hedging
activity, which is expected to decrease total company operating profit by approximately $8 million and diluted earnings per
share by $0.07 during the year ending December 31, 2021. The actual impact of changes in the value of the U.S. dollar against
foreign currencies in which we transact may materially differ from our expectations described above. The above estimate
assumes that the value of the U.S. dollar relative to other currencies will reflect the euro at $1.19, the British pound at $1.34, the
Canadian dollar at $0.77, and the Australian dollar at $0.76; and the Japanese yen at ¥105, the Chinese renminbi at RMB 6.57,
and the Brazilian real at R$5.36 to the U.S. dollar for the full year of 2021.
The following table presents the estimated foreign currency exchange impact on our revenues, operating profit, and
diluted earnings per share for the current period and as compared to the respective prior-year period:
(in thousands, except per share amounts)
Revenue impact
Operating profit impact, excluding hedge activity and exchange impacts on
settlement of foreign currency denominated transactions
Hedge gains (losses) - current period
Exchange gains (losses) on settlements of foreign currency denominated
transactions - current period
Operating profit impact - current period
Hedge (gains) losses - prior period
Exchange losses on settlement of foreign currency denominated transactions - prior
period
Operating profit impact - as compared to prior period
Diluted earnings per share impact - as compared to prior period
2020
For the Year Ended
2019
2018
1,301 $
(38,624) $
13,623
887 $
(18,989) $
829
10,628
699
2,415 $
(1,116)
(9,477) $
(10,628)
976
1,116
(7,097) $
3,158
(5,343) $
6,311
(976)
(3,158)
2,177
(27)
(893)
1,257
(0.06) $
(0.05) $
0.01
$
$
$
$
$
59
The primary purpose of our foreign currency hedging activities is to protect against the volatility associated with
foreign currency transactions. We also utilize natural hedges to mitigate our transaction and commitment exposures. Our
corporate policy prescribes the range of allowable hedging activity. We enter into foreign currency exchange contracts with
large multinational financial institutions and we do not hold or engage in transactions involving derivative instruments for
purposes other than risk management. Our accounting policies for these contracts are based on our designation of such
instruments as hedging transactions. If a hedging instrument qualifies for hedge accounting, changes in the fair value of the
derivative instrument from the effective portion of the hedge are deferred in accumulated other comprehensive income, net of
tax, and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. We
immediately record in earnings the extent to which a hedge instrument is not effective in achieving offsetting changes in fair
value. We primarily utilize foreign currency exchange contracts with durations of less than 24 months.
Our subsidiaries enter into foreign currency exchange contracts to manage the exchange risk associated with their
forecasted intercompany inventory purchases and sales for the next year. From time to time, we may also enter into other
foreign currency exchange contracts or foreign-denominated debt issuances to minimize the impact of foreign currency
fluctuations associated with specific balance sheet exposures, including net investments in certain foreign subsidiaries. See
"Part II, Item 8. Financial Statements and Supplementary Data, Note 19. Hedging Instruments" to the consolidated financial
statements of this Annual Report on Form 10-K for details regarding euro-denominated notes that we designated as a hedge of
our euro net investment in certain foreign subsidiaries.
Our foreign currency hedging strategy is consistent with prior periods and there were no material changes in our
market risk exposure during the year ended December 31, 2020. We enter into foreign currency exchange contracts designated
as cash flow hedges for amounts that are less than the full value of forecasted intercompany purchases and sales and for
amounts that are equivalent to, or less than, other significant transactions. As a result, no significant ineffectiveness has resulted
or been recorded through the statements of income for the years ended December 31, 2020, 2019 and 2018. Our hedging
strategy related to intercompany inventory purchases and sales is to employ the full amount of our hedges for the succeeding
year at the conclusion of our budgeting process for that year. Quarterly, we enter into contracts to hedge incremental portions of
anticipated foreign currency transactions for the current and following year. Accordingly, our risk with respect to foreign
currency exchange rate fluctuations may vary throughout each annual cycle.
We enter into hedge agreements where we believe we have meaningful exposure to foreign currency exchange risk,
with the exception of certain emerging markets where it is not practical to hedge our exposure. We target to hedge
approximately 85% of the estimated exposure from intercompany product purchases and sales denominated in the euro, British
pound, Canadian dollar, Japanese yen, and Australian dollar. We will continue to assess the reasonableness of increasing our
hedge exposure to our long-term level during 2021. We have additional unhedged foreign currency exposures related to foreign
services and emerging markets where it is not practical to hedge. The notional amount of foreign currency exchange contracts
to hedge forecasted intercompany purchases and sales totaled $202.7 million at December 31, 2020, and $210.9 million at
December 31, 2019. At December 31, 2020, we had $12.1 million of net unrealized losses on foreign currency exchange
contracts recorded in accumulated other comprehensive loss, net of related tax. For more information on our hedge agreements
see "Part II, Item 8. Financial Statements and Supplementary Data, Note 19. Hedging Instruments."
We have a Credit Facility with a syndicate of multinational banks, which matures on April 14, 2023, and requires no
scheduled prepayments before that date. Although the Credit Facility does not mature until April 14, 2023, all individual
borrowings under the terms of the Credit Facility have a stated term between 30 and 180 days. At December 31, 2020, we had
no borrowings outstanding under the Credit Facility. As of December 31, 2020, based on our gross leverage ratio, our
borrowing costs under the Credit Facility would have been approximately 2.5%.
For additional information, see "Part I, Item 1A. Risk Factors; Risks associated with doing business internationally
could negatively affect our operating results and Strengthening of the rate of exchange for the U.S. dollar has a negative effect
on our business," and "Part II, Item 8. Financial Statements and Supplementary Data, Note 2. Summary of Significant
Accounting Policies."
60
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this report commencing on page F-1.
ITEM 9.
FINANCIAL DISCLOSURE
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
Not applicable.
ITEM 9A.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining disclosure controls and procedures, as defined by the
SEC in its Rules 13a-15(e) and 15d-15(e) under the Exchange Act. The term “disclosure controls and procedures,” as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of an issuer that are designed to
ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms. Disclosure
controls and procedures include controls and procedures designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s
management, including its principal executive and principal financial officers, as appropriate to allow timely decisions
regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment
in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure
controls and procedures at December 31, 2020, our chief executive officer and chief financial officer have concluded that, as of
such date, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.
Report of Management on Internal Control Over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with U.S. GAAP and includes those policies and procedures that:
•
•
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and directors of the Company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In
addition, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate
because of changes in conditions and that the degree of compliance with the policies and procedures may deteriorate.
We conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, we concluded that, at December 31, 2020, our internal control over financial reporting
was effective.
The effectiveness of the Company's internal control over financial reporting at December 31, 2020, has been audited
by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears
herein.
61
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the three months ended December 31, 2020, that materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial reporting.
Certifications
The certifications with respect to disclosure controls and procedures and internal control over financial reporting of the
Company’s chief executive officer and chief financial officer are attached as Exhibits 31.1 and 31.2 to this Annual Report on
Form 10-K.
ITEM 9B.
OTHER INFORMATION
Not applicable.
62
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The information required by this Item with respect to Directors, executive officers, compliance with Section 16(a) of
the Exchange Act, our code of ethics and corporate governance is omitted from this Annual Report on Form 10-K and, pursuant
to Regulation 14A of the Exchange Act, is incorporated herein by reference from the sections entitled “Corporate Governance -
Proposal One - Election of Directors,” “Executive Officers,” “Stock Ownership Information - Delinquent Section 16(a)
Reports,” “Corporate Governance – Corporate Governance Guidelines and Code of Ethics” and “Corporate Governance –Board
Committees” in the Company’s definitive Proxy Statement with respect to its 2021 Annual Meeting, which Proxy Statement
will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item is omitted from this Annual Report on Form 10-K and, pursuant to Regulation
14A of the Exchange Act, is incorporated herein by reference from the sections entitled “Executive Compensation –
Compensation Discussion and Analysis,” “Executive Compensation – Executive Compensation Tables,” “Executive
Compensation – Potential Payments Upon Termination or Change-in-Control,” “Corporate Governance –Board Committees –
Compensation Committee – Compensation Committee Interlocks and Insider Participation” and “Compensation Committee
Report” in the Company’s definitive Proxy Statement with respect to its 2021 Annual Meeting, which Proxy Statement will be
filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
ITEM 12.
RELATED STOCKHOLDER MATTERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
The information required by this Item with respect to Item 201(d) of Regulation S-K is omitted from this Annual
Report on Form 10-K and, pursuant to Regulation 14A of the Exchange Act, is incorporated herein by reference from the
section entitled “Equity Compensation Plan Information” in the Company’s definitive Proxy Statement with respect to its 2021
Annual Meeting, which Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by
this Annual Report on Form 10-K. The information required by this Item with respect to Item 403 of Regulation S-K is omitted
from this Annual Report on Form 10-K and, pursuant to Regulation 14A of the Exchange Act, is incorporated herein by
reference from the sections entitled “Stock Ownership Information” in the Company’s definitive Proxy Statement with respect
to its 2021 Annual Meeting, which Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year
covered by this Annual Report on Form 10-K.
ITEM 13.
INDEPENDENCE
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
The information required by this Item is omitted from this Annual Report on Form 10-K and, pursuant to Regulation
14A of the Exchange Act, is incorporated herein by reference from the sections entitled “Corporate Governance – Related
Person Transactions” and “Corporate Governance – Director Independence” in the Company’s definitive Proxy Statement with
respect to its 2021 Annual Meeting, which Proxy Statement will be filed with the SEC within 120 days after the end of the
fiscal year covered by this Annual Report on Form 10-K.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is omitted from this Annual Report on Form 10-K and, pursuant to Regulation
14A of the Exchange Act, is incorporated herein by reference from the section entitled “Audit Committee Matters - Independent
Auditors’ Fees” in the Company’s definitive Proxy Statement with respect to its 2021 Annual Meeting, which Proxy Statement
will be filed with the SEC within 120 days after the end of the fiscal year covered by this report.
63
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
PART IV
The following documents are filed as part of this Form 10-K:
(a) (1) and (a) (2)
The financial statements set forth in the Index to Consolidated Financial Statements and the
Consolidated Financial Statement Schedule are filed as a part of this Annual Report on Form 10-K
commencing on page F-1.
(a)(3) and (b)
The exhibits listed in the accompanying Exhibit Index are filed as part of this Annual Report on
Form 10-K and either filed herewith or incorporated by reference herein, as applicable.
ITEM 16. FORM 10-K SUMMARY
None.
64
FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Income for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2020, 2019 and
2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
Page No.
F-2
F-4
F-5
F-6
F-7
F-8
F-9
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of IDEXX Laboratories, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of IDEXX Laboratories, Inc. and its subsidiaries (the
“Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income,
stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2020, including the
related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal
control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Changes in Accounting Principles
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for
leases in 2019 and the manner in which it accounts for revenues from contracts with customers in 2018.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in the Report of Management on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to
express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
F-2
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition Relating to Customer Commitment Programs
As described in Note 3 to the consolidated financial statements, the Company recognized revenue associated with instruments
totaling $109.0 million for the year ended December 31, 2020, the majority of which were sales under customer commitment
programs. The Company enters into contracts with multiple performance obligations where customers purchase a combination
of the Company’s products and services. The Company offers customer incentives through its various customer commitment
programs. These customer commitment programs provide customers with a free or discounted instrument or system, upon
entering into multi-year agreements to purchase annual minimum amounts of future products or services. Management
determines the transaction price for a contract based on the total consideration expected to be received in exchange for the
transferred goods or services. To the extent the transaction price includes variable consideration, such as volume rebates or
expected price adjustments, management applies judgment in estimating variable consideration based on the Company’s
historical and projected experience with similar customer contracts. Management monitors customer purchases over the term of
the agreement and reviews estimates of variable consideration.
The principal considerations for our determination that performing procedures over revenue recognition relating to the customer
commitment program is a critical audit matter are the significant judgment by management in estimating the amount of variable
consideration included in the transaction price, which in turn led to significant auditor judgment, subjectivity, effort and
complexity in assessing audit evidence in performing procedures to evaluate the amount of variable consideration included in
the transaction price and significant assumptions related to forecasted product purchases.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
revenue recognition process and customer commitment programs, including controls over the estimation of the amount of
variable consideration included in the transaction price. These procedures also included, among others, (i) examining contracts
on a test basis, (ii) testing management’s process for estimating the amount of variable consideration included in the transaction
price, (iii) testing the completeness and accuracy of historical sales data and (iv) evaluating the significant assumptions used by
management related to the forecasted purchase of products. Evaluating management’s assumptions related to forecasted
product purchases involved evaluating whether the assumptions used by management were reasonable by comparing the
forecasted product purchases to historical sales data.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 12, 2021
We have served as the Company’s auditor since 2002.
F-3
IDEXX LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
ASSETS
Current Assets:
Cash and cash equivalents
Accounts receivable, net of reserves of $6,784 in 2020 and $3,581 in 2019
Inventories
Other current assets
Total current assets
Long-Term Assets:
Property and equipment, net
Operating lease right-of-use assets
Goodwill
Intangible assets, net
Other long-term assets
Total long-term assets
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
Accrued liabilities
Line of credit
Current portion of long-term debt
Current portion of deferred revenue
Total current liabilities
Long-Term Liabilities:
Deferred income tax liabilities
Long-term debt, net of current portion
Long-term deferred revenue, net of current portion
Long-term operating lease liabilities
Other long-term liabilities
Total long-term liabilities
Total liabilities
Commitments and Contingencies (Note 16)
Stockholders’ Equity:
December 31, 2020
December 31, 2019
$
$
$
383,928 $
331,429
209,873
137,508
1,062,738
555,167
91,171
243,347
52,543
289,595
1,231,823
2,294,561 $
74,558 $
415,648
—
49,988
42,567
582,761
11,707
858,492
46,163
77,039
85,604
1,079,005
1,661,766
90,326
269,312
195,019
124,982
679,639
533,845
80,607
239,724
58,468
240,192
1,152,836
1,832,475
72,172
322,938
288,765
—
41,462
725,337
33,024
698,910
48,743
67,472
81,164
929,313
1,654,650
Common stock, $0.10 par value: Authorized: 120,000 shares; Issued: 106,457 shares
in 2020 and 105,711 shares in 2019; Outstanding: 85,449 shares in 2020 and 85,471
shares in 2019
Additional paid-in capital
Deferred stock units: Outstanding: 87 units in 2020 and 143 units in 2019
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost: 21,008 shares in 2020 and 20,240 shares in 2019
Total IDEXX Laboratories, Inc. stockholders’ equity
Noncontrolling interest
Total stockholders’ equity
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
The accompanying notes are an integral part of these consolidated financial statements.
10,646
1,294,849
4,503
2,175,595
(53,615)
(2,799,890)
632,088
707
632,795
2,294,561 $
10,571
1,213,517
4,462
1,595,648
(46,182)
(2,600,543)
177,473
352
177,825
1,832,475
F-4
IDEXX LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
For the Years Ended December 31,
2019
2018
2020
Revenue:
Product revenue
Service revenue
Total revenue
Cost of Revenue:
Cost of product revenue
Cost of service revenue
Total cost of revenue
Gross profit
Expenses:
Sales and marketing
General and administrative
Research and development
Income from operations
Interest expense
Interest income
Income before provision for income taxes
Provision for income taxes
Net income
Less: Net income attributable to noncontrolling interest
Net income attributable to IDEXX Laboratories, Inc. stockholders
Earnings per Share:
Basic
Diluted
Weighted Average Shares Outstanding:
Basic
Diluted
$
1,586,809 $
1,119,846
2,706,655
1,423,144 $
983,764
2,406,908
1,322,683
890,559
2,213,242
557,795
577,820
1,135,615
1,571,040
506,202
535,157
1,041,359
1,365,549
494,889
476,811
971,700
1,241,542
434,435
300,832
141,249
694,524
(33,125)
586
661,985
79,854
582,131
355
581,776 $
418,193
261,317
133,193
552,846
(31,055)
427
522,218
94,426
427,792
72
427,720 $
6.82 $
6.71 $
4.97 $
4.89 $
85,342
86,722
86,115
87,542
387,406
244,938
117,863
491,335
(34,744)
1,151
457,742
80,695
377,047
16
377,031
4.34
4.26
86,864
88,470
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-5
IDEXX LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Unrealized gain (loss) on Euro-denominated notes, net of tax expense
(benefit) of $(2,325) in 2020, $564 in 2019 and $1,148 in 2018
Unrealized gain (loss) on investments, net of tax expense (benefit) of
$(120) in 2020, $84 in 2019 and $(40) in 2018
Unrealized gain (loss) on derivative instruments:
Unrealized gain (loss) on foreign currency exchange contracts,
net of tax expense (benefit) of $(2,013) in 2020, $362 in 2019
and $2,529 in 2018
Unrealized gain (loss) on cross currency swaps, net of tax
expense of $(1,774) in 2020, $664 in 2019 and $323 in 2018
Less: reclassification adjustment for (gains) losses included in net
income, net of tax (expense) benefit of $(158) in 2020, $(2,467)
in 2019 and $187 in 2018
Unrealized (loss) gain on derivative instruments
Other comprehensive loss, net of tax
Comprehensive income
Less: comprehensive income attributable to noncontrolling interest
Comprehensive income attributable to IDEXX Laboratories, Inc.
$
For the Years Ended December 31,
2019
2020
2018
$
582,131 $
427,792 $
377,047
(1,590)
(21,911)
15,151
(7,378)
(382)
(8,527)
(5,626)
1,790
267
1,196
2,107
(671)
(14,824)
(7,433)
574,698
355
574,343 $
(8,161)
(4,858)
(4,391)
423,401
72
423,329 $
3,917
(135)
10,659
1,360
789
12,808
(5,321)
371,726
16
371,710
The accompanying notes are an integral part of these consolidated financial statements.
F-6
IDEXX LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except per share amounts)
Common Stock
Number
of Shares
$0.10
Par
Value
Additional
Paid-in
Capital
Deferred
Stock
Units
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Noncontrolling
Interest
Total
Stockholders’
Equity
(Deficit)
Balance December 31, 2017
104,275
$ 10,428
$ 1,073,931
$
5,988
$ 803,545
$
(36,470) $ (1,911,528) $
264
$
(53,842)
Cumulative effect of
accounting changes from
adoption of ASU 2014-09 and
ASU 2016-06
Net income
Other comprehensive loss, net
Repurchases of common stock,
net
Common stock issued under
stock plans,net
Deferred stock units activity
Share-based compensation
cost
—
—
—
—
812
—
—
—
—
—
—
81
—
—
—
—
—
—
—
—
—
—
39,756
(2,092)
(385)
24,914
385
243
(12,648)
377,031
—
—
—
—
—
—
—
(5,321)
—
—
—
—
—
—
—
(377,371)
—
—
—
—
16
—
—
—
—
—
Balance December 31, 2018
105,087
$ 10,509
$ 1,138,216
$
4,524
$ 1,167,928
$
(41,791) $ (2,288,899) $
280
$
Net income
Other comprehensive loss, net
Repurchases of common stock,
net
Common stock issued under
stock plans, net
Deferred stock units activity
Share-based compensation
cost
—
—
—
624
—
—
—
—
—
62
—
—
—
—
—
—
—
—
36,551
(324)
(590)
324
39,074
204
427,720
—
—
—
—
—
—
(4,391)
—
—
—
—
—
—
(311,644)
—
—
—
72
—
—
—
—
—
(12,648)
377,047
(5,321)
(377,371)
37,745
—
25,157
(9,233)
427,792
(4,391)
(311,644)
36,023
—
39,278
Balance December 31, 2019
105,711
$ 10,571
$ 1,213,517
$
4,462
$ 1,595,648
$
(46,182) $ (2,600,543) $
352
$
177,825
Cumulative effect of
accounting changes (Note 2)
Net income
Other comprehensive loss, net
Repurchases of common stock,
net
Common stock issued under
stock plans, net
Deferred stock units activity
Share-based compensation
cost
—
—
—
—
746
—
—
—
—
—
—
75
—
—
—
—
—
—
—
—
—
—
51,368
(894)
(946)
894
30,858
93
(1,829)
581,776
—
—
—
—
—
—
—
(7,433)
—
—
—
—
—
—
—
(199,347)
—
—
—
—
355
—
—
—
—
—
(1,829)
582,131
(7,433)
(199,347)
50,497
—
30,951
Balance December 31, 2020
106,457
$ 10,646
$ 1,294,849
$
4,503
$ 2,175,595
$
(53,615) $ (2,799,890) $
707
$
632,795
The accompanying notes are an integral part of these consolidated financial statements.
F-7
IDEXX LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Years Ended December 31,
2019
2018
2020
Cash Flows from Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
$
582,131 $
427,792 $
377,047
Depreciation and amortization
Impairment charge
Provision for uncollectible accounts
(Benefit of) provision for deferred income taxes
Share-based compensation expense
Other
Changes in assets and liabilities:
Accounts receivable
Inventories
Accounts payable
Deferred revenue
Other assets and liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities:
Purchases of property and equipment
Purchases of marketable securities
Proceeds from the sale and maturities of marketable securities
Acquisitions of intangible assets and equity investments
Acquisitions of businesses, net of cash acquired
Net cash (used) provided by investing activities
Cash Flows from Financing Activities:
95,998
2,501
4,946
(38,082)
30,951
1,379
(60,722)
(18,885)
981
(13,373)
60,238
648,063
(106,958)
—
—
(918)
(1,500)
(109,376)
88,011
968
662
6,162
39,278
1,254
(22,472)
(37,306)
1,957
(12,360)
(34,788)
459,158
(154,969)
—
—
(255)
(50,304)
(205,528)
Repayment on revolving credit facilities, net
Issuance of senior notes
Debt issuance costs
Repurchases of common stock, net
Proceeds from exercises of stock options and employee stock purchase plans
Payment of acquisition-related contingent consideration
Shares withheld for statutory tax withholding on restricted stock
Net cash used by financing activities
Net effect of changes in exchange rates on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
(289,625)
200,000
(5,025)
(182,815)
51,328
(1,676)
(20,603)
(248,416)
3,331
293,602
90,326
383,928 $
(110,275)
100,000
(154)
(301,658)
36,106
(2,375)
(8,053)
(286,409)
(689)
(33,468)
123,794
90,326 $
$
The accompanying notes are an integral part of these consolidated financial statements.
83,178
2,629
1,609
1,209
25,157
895
(18,401)
(25,623)
(166)
(7,719)
(39,731)
400,084
(115,751)
(87)
284,125
(7,185)
(22,500)
138,602
(256,040)
—
—
(369,319)
38,201
(1,266)
(9,375)
(597,799)
(4,768)
(63,881)
187,675
123,794
F-8
IDEXX LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements of IDEXX Laboratories, Inc. and its subsidiaries have been
prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and with
the requirements of Regulation S-X.
These statements include the accounts of IDEXX Laboratories, Inc., and our wholly-owned and majority-owned
subsidiaries (“IDEXX,” the “Company,” “we” or “our”). We do not have any variable interest entities for which we are the
primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.
We have included certain terms and abbreviations used throughout this Annual Report on Form 10-K in the "Glossary
of Terms and Selected Abbreviations.”
We develop, manufacture, and distribute products and provide services primarily for the companion animal veterinary,
livestock and poultry, dairy and water testing markets. We also sell a line of portable electrolytes and blood gas analyzers and
SARS-CoV-2 RT-PCR (COVID-19 test) used in the human diagnostics market. Our principal line of business, which we refer
to as our Companion Animal Group (“CAG”) operating segment, provides diagnostic capabilities and information management
solutions for the veterinary market as well as biological materials testing and services for the bioresearch market. Our principal
markets for these products and services are the United States (“U.S.”), Europe, Japan, China, and Australia, but we also sell to
customers and distributors in many other countries around the world. Our Water operating segment provides innovative testing
solutions for the quality and safety of water in our principal markets of the U.S. and Europe, but we also sell to customers in
many other countries around the world. Our Livestock, Poultry and Dairy (“LPD”) operating segment provides diagnostic tests
and related instrumentation and performs services that are used to manage the health status of livestock and poultry, to improve
producer efficiency, and to ensure the quality and safety of milk and food. Our principal markets for these products and services
are Europe, China, and Australia but we also sell to customers in many other countries around the world. We also operate a
smaller operating segment that comprises products and services for the human medical diagnostics market (“OPTI Medical”).
Financial information about our OPTI Medical operating segment is combined and presented with our out-licensing
arrangements remaining from our pharmaceutical business in an “Other” category because they do not meet the quantitative or
qualitative thresholds for reportable segments. See "Note 3. Revenue Recognition" for additional information regarding
disaggregated revenue by segment and major product and service categories and geographical areas. See "Note 17. Segment
Reporting " for additional information regarding our reportable operating segments.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Estimates
The preparation of these consolidated financial statements in accordance with U.S. GAAP requires management to
make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related
disclosures. On an ongoing basis, we evaluate these estimates, including those related to reserves for accounts receivable;
goodwill and other intangible assets; income taxes; inventory valuation; revenue recognition, product returns, customer
programs and multiple element arrangements; share-based compensation; warranty reserves; self-insurance reserves; fair value
measurements and loss contingencies. We accrue contingent liabilities when it is probable that future expenditures will be made
and such expenditures can be reasonably estimated. We base our estimates on historical experience and on various other
assumptions, such as the economic impact of the COVID-19 pandemic, that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Furthermore, as the impact of the COVID-19 pandemic continues to develop, many
of these estimates could require increased judgment and carry a higher degree of variability and volatility, and may change
materially in future periods. Actual results could differ materially from these estimates.
(b)
Cash and Cash Equivalents
We consider all highly liquid investments with original maturities of ninety days or less to be cash equivalents. Cash
and cash equivalents consist primarily of demand deposits, money market funds and short duration agency bonds and
commercial paper as described above. There is no restricted cash on our consolidated balance sheet for the years ended
December 31, 2020, and 2019.
F-9
(c)
Inventories – See Note 7
(d)
Property and Equipment – See Note 9
(e)
Goodwill and Other Intangible Assets – See Note 11
(f)
Warranty Reserves
We provide a standard twelve-month warranty on all instruments sold. We recognize the cost of instrument warranties
in cost of product revenue at the time revenue is recognized based on the estimated cost to repair the instrument over its
warranty period. Cost of product revenue reflects not only estimated warranty expense for instruments sold in the current
period, but also any changes in estimated warranty expense for the portion of the aggregate installed base that is under
warranty. Estimated warranty expense is based on a variety of inputs, including historical instrument performance in the
customers’ environment, historical and estimated costs incurred in servicing instruments and projected instrument reliability.
Should actual service rates or costs differ from our estimates, revisions to the estimated warranty liability would be required.
The liability for warranties is included in accrued liabilities in the accompanying consolidated balance sheets. The amount of
warranty reserve during the years ended December 31, 2020 and 2019, was not material.
(g)
(h)
Income Taxes – See Note 14
Taxes Remitted to Governmental Authorities by IDEXX on Behalf of Customer
We calculate, collect from our customers, and remit to governmental authorities sales, value-added and excise taxes
assessed by governmental authorities in connection with revenue-producing transactions with our customers. We report these
taxes on a net basis and do not include these tax amounts in revenue or cost of product or service revenue.
(i)
(j)
Revenue Recognition – See Note 3
Research and Development Costs
Research and development costs, which consist of salaries, employee benefits, materials and external consulting and
product development costs, are expensed as incurred. We evaluate our research and development costs for capitalization after
the technological feasibility has been established for software and products containing software to be sold, however no costs
were capitalized during the years ended December 31, 2020, 2019 and 2018. Software developed to deliver hosted services to
our customers has been designated as internal use and we capitalize certain costs incurred in connection with developing or
obtaining software designated for internal use based on three distinct stages of development. See "Note 9. Property and
Equipment, Net" for further information on internal use software.
(k)
Advertising Costs
Advertising costs, which are recognized as sales and marketing expense in the period in which they are incurred, were
$1.4 million, $1.5 million, and $1.8 million for the years ended December 31, 2020, 2019 and 2018, respectively.
(l)
Legal Costs
Legal costs are considered period costs and accordingly are expensed in the year services are provided.
(m)
Share-Based Compensation – See Note 5
(n)
(o)
(p)
Self-Insurance Accruals – See Note 16
Leases – See Note 8
Earnings per Share – See Note 15
F-10
(q)
Foreign Currency
The functional currency of all except four of our subsidiaries is their local currency. Assets and liabilities of these
foreign subsidiaries are translated to the U.S. dollar using the exchange rate in effect at the balance sheet date. Revenue and
expense accounts are translated to the U.S. dollar using the exchange rate at the date which those elements are recognized, and
where it is impractical to do so, an average exchange rate in effect during the period is used to translate those elements.
Cumulative translation gains and losses are shown in the accompanying consolidated balance sheets as a separate component of
accumulated other comprehensive income (“AOCI”).
Revenues and expenses denominated in a currency other than the respective subsidiary’s functional currency are
recorded at the current exchange rate when the transaction is recognized. Monetary assets and liabilities denominated in a
currency other than the respective subsidiary’s functional currency are remeasured at each balance sheet date using the
exchange rate in effect at each balance sheet date. These foreign currency gains and losses are included in general and
administrative expenses within our Other segment. We recognized aggregate foreign currency gains of $0.6 million, and losses
of $1.1 million and $3.1 million for the years ended December 31, 2020, 2019, and 2018, respectively.
(r)
(s)
(t)
Hedging Instruments – See Note 19
Fair Value Measurements – See Note 18
Comprehensive Income
We report all changes in equity, including net income and transactions or other events and circumstances from non-
owner sources during the period in which they are recognized. We have chosen to present comprehensive income, which
encompasses net income, foreign currency translation adjustments, gains and losses on our net investment hedges and the
difference between the cost and the fair market value of investments in debt and equity securities, and forward currency
exchange contracts, in the consolidated statements of comprehensive income. See "Note 21. Accumulated Other
Comprehensive Income" for information about the effects on net income of significant amounts reclassified out of each
component of AOCI for the years ended December 31, 2020, 2019 and 2018.
(u)
Concentrations of Risk
Financial Instruments. Financial instruments that potentially subject us to concentrations of credit risk are principally
cash, cash equivalents, accounts receivable and derivatives. To mitigate such risk with respect to cash and cash equivalents, we
place our cash with highly-rated financial institutions, in non-interest bearing accounts that are insured by the U.S. government
and money market funds invested in government securities. Concentration of credit risk with respect to accounts receivable is
limited to certain customers to whom we make substantial sales. To reduce risk, we routinely assess the financial strength of our
most significant customers and monitor the amounts owed to us, taking appropriate action when necessary. As a result, we
believe that accounts receivable credit risk exposure is limited. We maintain an allowance for doubtful accounts, but historically
have not experienced any material losses related to an individual customer or group of customers in any particular industry or
geographic area.
To mitigate concentration of credit risk with respect to derivatives we enter into transactions with highly-rated
financial institutions, enter into master netting arrangements with counterparties to our derivative transactions and frequently
monitor the credit worthiness of our counterparties. Our master netting arrangements reduce our exposure in that they permit
outstanding receivables and payables with the counterparties to our derivative transactions to be offset in the event of default.
We have not incurred such losses and consider the risk of counterparty default to be minimal.
Inventory. If we are unable to obtain adequate quantities of the inventory we need to sell our products, we could face
cost increases or delays or discontinuations in product shipments, which could have a material adverse effect on our results of
operations. Many of the third parties that provide us with the instruments we sell as well as certain components, raw materials
and consumables used in or with our products are sole or single source suppliers. Some of the products that we purchase from
these sources are proprietary or complex in nature, and, therefore, cannot be readily or easily replaced by alternative sources.
F-11
(v)
New Accounting Pronouncements Adopted
We adopted ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)," as of January 1, 2018, using the
modified retrospective method for all contracts not completed as of the date of adoption.
We adopted ASU 2016-02, "Leases (Topic 842)," as of January 1, 2019, using the optional transition method that
allows for a cumulative-effect adjustment in the period of adoption and did not restate prior periods.
We adopted ASU 2018-13, "Fair Value Measurement (Topic 820)," as of January 1, 2020, which modifies the
disclosure requirements on fair value measurements under ASC Topic No. 820, Fair Value Measurement, as amended (“ASC
820”). ASU 2018-13 removes (a) the prior requirement to disclose the amount and reason for transfers between Level 1 and
Level 2 of the fair value hierarchy contained in ASC 820, (b) the policy for timing of transfers between levels, and (c) the
valuation processes used for Level 3 fair value measurements. ASU 2018-13 also adds, among other things, a requirement to
disclose the range and weighted average of significant unobservable inputs used in Level 3 fair value measurements. The
adoption did not have a material impact on our consolidated financial statements.
We adopted ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments,” effective January 1, 2020, using the modified retrospective transition method. This ASU amends the
impairment model to utilize an expected loss methodology in place of the incurred loss methodology for financial instruments,
including trade receivables and leased equipment. The amendment requires entities to consider a broader range of information
to estimate expected credit losses, which may result in earlier recognition of losses. We recorded a non-cash cumulative effect
adjustment to retained earnings of $1.8 million, net of $0.6 million of income taxes, on our opening consolidated balance sheet
as of January 1, 2020. This adjustment, before the impact of income taxes, was comprised of $2.3 million related to our contract
assets and sales-type leases, and $0.2 million related to accounts receivable. See Note 6. Credit Losses, for more information on
our presentation of credit losses.
(w)
New Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes.” The new guidance is intended to simplify the accounting for income taxes by removing certain exceptions and
by updating accounting requirements around goodwill recognized for tax purposes and the allocation of current and deferred tax
expense among legal entities, among other minor changes. ASU 2019-12 is effective for fiscal years beginning after December
15, 2020, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of
ASU 2019-12 to have a material impact on our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial
Reporting.” ASU 2020-04 is intended to provide optional expedients and exceptions to the U.S. GAAP guidance on contract
modifications and hedge accounting to ease the financial reporting burdens related to the discontinuation of the London
Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The FASB also issued ASU
2021-01, "Reference Rate Reform (Topic 848): Scope", in January 2021. It clarifies that certain optional expedients and
exceptions apply to derivatives that are affected by the discounting transition. The amendments in this ASU affect the guidance
in ASU No. 2020-04 and are effective in the same timeframe as ASU 2020-04. The relief offered by this guidance, if adopted,
is available to companies for the period March 12, 2020 through December 31, 2022. Our Credit Facility includes a provision
for the determination of a benchmark replacement rate as a successor to the LIBOR rate, therefore we do not expect the
discontinuation of LIBOR to have an impact on our consolidated financial statements.
F-12
NOTE 3. REVENUE RECOGNITION
Our revenue is recognized when, or as, performance obligations under the terms of a contract are satisfied, which
occurs when control of the promised products or services is transferred to a customer. We exclude sales, use, value-added, and
other taxes we collect on behalf of third parties from revenue. Revenue is measured as the amount of consideration we expect to
receive in exchange for transferring products or services to a customer. To accurately present the consideration received in
exchange for promised products or services, we apply the five-step model outlined below:
Identification of a contract or agreement with a customer
Identification of our performance obligations in the contract or agreement
1.
2.
3. Determination of the transaction price
4. Allocation of the transaction price to the performance obligations
5. Recognition of revenue when, or as, we satisfy a performance obligation
We enter into contracts that can include various combinations of products and services, which are generally capable of
being distinct and accounted for as separate performance obligations. The timing of revenue recognition, billings, and cash
collections results in accounts receivable, lease receivables, and contract assets as a result of revenue recognized in advance of
billings (included within other assets), and contract liabilities or deferred revenue as a result of receiving consideration in
advance of revenue recognition within our consolidated balance sheet. Our general payment terms range from 30 to 60 days,
with exceptions in certain geographies. Below is a listing of our major categories of revenue for our products and services:
Diagnostic Products and Accessories. Diagnostic products and accessories revenues, including IDEXX VetLab®
consumables and accessories, rapid assay, LPD, Water, and OPTI testing products, are predominantly recognized and invoiced
at the time of shipment, which is when the customer obtains control of the product based on legal title transfer and we have the
right to payment. We also provide customers with certain consumables that are recognized upon utilization by the customer,
which is when we have the right to payment and the risks and rewards of ownership transfer. Shipping costs reimbursed by the
customer are included in revenue and cost of sales. As a practical expedient, we do not account for shipping activities as a
separate performance obligation.
Laboratory Diagnostic and Consulting Services. Laboratory diagnostic and consulting services revenues are
recognized and invoiced when the laboratory diagnostic service is performed.
Instruments, Software and Systems. CAG Diagnostics capital instruments, veterinary software and diagnostic imaging
systems revenues are recognized and invoiced when the customer obtains control of the products based on legal title transfer
and we have the right to payment, which generally occurs at the time of installation and customer acceptance. Our instruments,
software, and systems are often included in one of our significant customer programs, as further described below. For
veterinary software systems that include multiple performance obligations, such as perpetual software licenses and computer
hardware, we allocate revenue to each performance obligation based on estimates of the price that we would charge the
customer for each promised product or service if it were sold on a standalone basis.
Lease Revenue. Revenues from instrument rental agreements and reagent rental programs are recognized either as
operating leases on a ratable basis over the term of the agreement or as sales-type leases at the time of installation and customer
acceptance. Customers typically pay for the right to use instruments under rental agreements in equal monthly amounts over the
term of the rental agreement. Our reagent rental programs provide our customers the right to use our instruments upon entering
into agreements to purchase specified amounts of consumables, which are considered embedded leases. For some agreements,
the customers are provided with the right to purchase the instrument at the end of the lease term. Lease revenues from these
agreements are presented in product revenue on our consolidated income statement. Lease revenue was approximately $17.5
million for the year ended December 31, 2020, as compared to $20.8 million for the year ended December 31, 2019, including
both operating leases and sales-type leases under ASC 842, Leases, for leases entered into after January 1,2019, and ASC 840,
Leases, for leases entered into prior to 2019. See below for revenue recognition under our reagent rental programs.
Extended Warranties and Post-Contract Support. CAG Diagnostics capital instruments and diagnostic imaging
systems extended warranties typically provide customers with continued coverage for a period of one to five years beyond the
first-year standard warranty. Customers can either pay in full for the extended warranty at the time of instrument or system
purchase or can be billed on a quarterly basis over the term of the contract. We recognize revenue associated with extended
warranties over time on a ratable basis using a time elapsed measure of performance over the contract term, which
approximates the expected timing in which applicable services are performed.
F-13
Veterinary software post-contract support provides customers with access to technical support when and as needed
through access to call centers and online customer assistance. Post-contract support contracts typically have a term of 12
months and customers are billed for post-contract support in equal quarterly amounts over the term. We recognize revenue for
post-contract support services over time on a ratable basis using a time elapsed measure of performance over the contract term,
which approximates the expected timing in which applicable services are performed.
On December 31, 2019, our deferred revenue related to extended warranties and post-contract support was $38.0
million, of which approximately $22.0 million was recognized during the year ended December 31, 2020. Furthermore, as a
result of new agreements, our deferred revenue related to extended warranties and post-contract support was $35.1
million at December 31, 2020. We do not disclose information about remaining performance obligations that are part of
contracts with an original expected duration of one year or less and do not adjust for the effect of the financing components
when the period between customer payment and revenue recognition is one year or less. Deferred revenue related to extended
warranties and post-contract support with an original duration of more than one year was $20.7 million at December 31, 2020,
of which approximately 43%, 32%, 17%, 6%, and 2% are expected to be recognized during 2021, 2022, 2023, 2024, and
thereafter, respectively. Additionally, we have determined these agreements do not include a significant financing component.
SaaS Subscriptions. We offer a variety of veterinary software and diagnostic imaging SaaS subscriptions including
IDEXX Neo, Animana, Pet Health Network Pro, Petly Plans, Web PACS, rVetLink, and SmartFlow. We recognize revenue for
our SaaS subscriptions over time on a ratable basis over the contract term, beginning on the date our service is made available
to the customer. Our subscription contracts vary in term from monthly to two years. Customers typically pay for our
subscription contracts in equal monthly amounts over the term of the agreement. Deferred revenue related to our SaaS
subscriptions is not material.
Contracts with Multiple Performance Obligations. We enter into contracts with multiple performance obligations
where customers purchase a combination of IDEXX products and services. Determining whether products and services are
considered distinct performance obligations that should be accounted for separately requires significant judgment. We
determine the transaction price for a contract based on the total consideration we expect to receive in exchange for the
transferred goods or services. To the extent the transaction price includes variable consideration, such as volume rebates or
expected price adjustments, we apply judgment in constraining the estimated variable consideration due to factors that may
cause reversal of revenue recognized. We evaluate constraints based on our historical and projected experience with similar
customer contracts.
We allocate revenue to each performance obligation in proportion to the relative standalone selling prices and
recognize revenue when transfer of the related goods or services has occurred for each obligation. We utilize the observable
standalone selling price when available, which represents the price charged for the performance obligation when sold
separately. When standalone selling prices for our products or services are not directly observable we determine the standalone
selling prices using relevant information available and apply suitable estimation methods including, but not limited to, the cost
plus a margin approach. We recognize revenue as each performance obligation is satisfied, either at a point in time or over time,
as described in the revenue categories above. We do not disclose information about remaining performance obligations that are
part of contracts with an original expected duration of one year or less.
The following customer programs represent our most significant customer contracts which contain multiple
performance obligations:
Customer Commitment Programs. We offer customer incentives upon entering into multi-year agreements to
purchase annual minimum amounts of products and services.
Up-Front Customer Loyalty Programs. Our up-front loyalty programs provide customers with
incentives in the form of cash payments or IDEXX Points upon entering into multi-year agreements to
purchase annual minimum amounts of future products or services. If a customer breaches its agreement, they
are required to refund all or a portion of the up-front cash or IDEXX Points, or make other repayments,
remedial actions, or both. Up-front incentives to customers in the form of cash or IDEXX Points are not made
in exchange for distinct goods or services and are capitalized as customer acquisition costs within other
current and long-term assets, which are subsequently recognized as a reduction to revenue over the term of
the customer agreement. If these up-front incentives are subsequently utilized to purchase instruments, we
allocate total consideration, including future committed purchases less up-front incentives and estimates of
expected price adjustments, based on relative standalone selling prices to identified performance obligations
and recognize instrument revenue and cost at the time of installation and customer acceptance. To the extent
F-14
invoiced instrument revenue exceeds recognized instrument revenue, we record deferred revenue as a contract
liability, which is subsequently recognized upon the purchase of products and services over the term of the
contract. We have determined these agreements do not include a significant financing component. Differences
between estimated and actual customer purchases may impact the amount and timing of revenue recognition.
On December 31, 2019, our capitalized customer acquisition costs were $137.4 million, of which
approximately $39.3 million were recognized as a reduction of revenue during the year ended December 31,
2020. Furthermore, as a result of new up-front customer loyalty payments, net of subsequent recognition, our
capitalized customer acquisition costs were $148.1 million at December 31, 2020. We monitor customer
purchases over the term of their agreement to assess the realizability of our capitalized customer acquisition
costs and review estimates of variable consideration. Impairments, revenue adjustments that relate to
performance obligations satisfied in prior periods, and contract modifications during the years
ended December 31, 2020 and 2019, were not material.
Volume Commitment Programs. Our volume commitment programs, such as our IDEXX 360
program, provide customers with a free or discounted instrument or system upon entering into multi-year
agreements to purchase annual minimum amounts of products and services. We allocate total consideration,
including future committed purchases and expected price adjustments, based on relative standalone selling
prices to identified performance obligations and recognize instrument revenue and cost at the time of
installation and customer acceptance in advance of billing the customer, which is also when the customer
obtains control of the instrument based on legal title transfer. Our right to future consideration related to
instrument revenue is recorded as a contract asset within other current and long-term assets. The contract
asset is transferred to accounts receivable when customers are billed for products and services over the term
of the contract. We have determined these agreements do not include a significant financing component.
Differences between estimated and actual customer purchases may impact the amount and timing of revenue
recognition.
On December 31, 2019, our volume commitment contract assets were $83.9 million, of which
approximately $18.3 million were reclassified to accounts receivable when customers were billed for related
products and services during the year ended December 31, 2020. Furthermore, as a result of new placements
under volume commitment programs, net of subsequent amounts reclassified to accounts receivable, and
allowances established for credit losses, our contract assets were $115.5 million at December 31, 2020. We
monitor customer purchases over the term of their agreement to assess the realizability of our contract assets
and review estimates of variable consideration. Impairments, revenue adjustments that relate to performance
obligations satisfied in prior periods, and contract modifications during the years ended December 31, 2020
and 2019, were not material.
For our up-front customer loyalty and volume commitment programs, we estimate future revenues related to
multi-year agreements to be approximately $2.2 billion, of which approximately 26%, 24%, 21%, 16%, and 13% are
expected to be recognized during 2021, 2022, 2023, 2024, and thereafter, respectively. These future revenues relate to
performance obligations not yet satisfied, for which customers have committed to purchase goods and services, net of
the expected revenue reductions from customer acquisition costs and expected price adjustments, and as a result, are
lower than stated contractual commitments by our customers.
Instrument Rebate Programs. Our instrument rebate programs require an instrument purchase and provide
customers the opportunity to earn future rebates based on the volume of products and services they purchase over the
term of the program. We account for the customer’s right to earn rebates on future purchases as a separate performance
obligation and determine the standalone selling price based on an estimate of rebates the customer will earn over the
term of the program. Total consideration allocated to identified performance obligations is limited to goods and
services that the customer is presently obligated to purchase and does not include estimates of future purchases that are
optional. We allocate total consideration to identified performance obligations, including the customer’s right to earn
rebates on future purchases, which is deferred and recognized upon the purchase of future products and services, partly
offsetting future rebates as they are earned.
On December 31, 2019, our deferred revenue related to instrument rebate programs was $49.1 million, of
which approximately $16.3 million were recognized when customers purchased eligible products and services and
earned rebates during the year ended December 31, 2020. Furthermore, as a result of new instrument purchases under
rebate programs, net of subsequent recognition, our deferred revenue was $39.3 million at December 31, 2020, of
F-15
which approximately 36%, 27%, 18%, 11%, and 8% are expected to be recognized during 2021, 2022, 2023, 2024,
and thereafter, respectively.
Reagent Rental Programs. Our reagent rental programs provide our customers the right to use our instruments
upon entering into multi-year agreements to purchase annual minimum amounts of consumables. These types of
agreements include an embedded lease for the right to use our instrument and we determine the amount of lease
revenue allocated to the instrument based on relative standalone selling prices. We evaluate the terms of these
embedded leases to determine classification as either a sales-type lease or an operating lease.
Sales-type Reagent Rental Programs. Our reagent rental programs that effectively transfer control of
instruments to our customers are classified as sales-type leases and we recognize instrument revenue and cost
in advance of billing the customer, at the time of installation and customer acceptance. Our right to future
consideration related to instrument revenue is recorded as a lease receivable within other current and long-
term assets, and is transferred to accounts receivable when customers are billed for products and services over
the term of the contract. On December 31, 2019, our lease receivable assets were $7.2 million, of which
approximately $1.4 million was reclassified to accounts receivable when customers were billed for related
products and services during the year ended December 31, 2020. Furthermore, as a result of new placements
under sales-type reagent rental programs, net of subsequent amounts reclassified to accounts receivable, and
allowances established for credit losses, our lease receivable assets were $11.1 million at December 31, 2020.
The impacts of discounting and unearned income at December 31, 2020, were not material. Profit and loss
recognized at the commencement date and interest income during the year ended December 31, 2020, were
not material. We monitor customer purchases over the term of their agreement to assess the realizability of
our lease receivable assets. Impairments during the year ended December 31, 2020, were not material.
Operating-type Reagent Rental Programs. Our reagent rental programs that do not effectively
transfer control of instruments to our customers are classified as operating leases and we recognize instrument
revenue and costs ratably over the term of the agreement. The cost of the instrument is capitalized within
property and equipment.
We estimate future revenue to be recognized related to our reagent rental programs of approximately $24.8
million, of which approximately 41%, 27%, 16%, 9%, and 7% are expected to be recognized during 2021, 2022, 2023,
2024, and thereafter, respectively. These future revenues relate to performance obligations not yet satisfied for which
customers have committed to future purchases, net of any expected price adjustments, and as a result, may be lower
than stated contractual commitments by our customers.
Other Customer Incentive Programs. Certain agreements with customers include discounts or rebates on the
sale of products and services applied retrospectively, such as volume rebates achieved by purchasing a specified
purchase threshold of goods and services. We account for these discounts as variable consideration and estimate the
likelihood of a customer meeting the threshold in order to determine the transaction price using the most predictive
approach. We typically use the most-likely-amount method, for incentives that are offered to individual customers, and
the expected-value method, for programs that are offered to a broad group of customers. Revenue adjustments that
relate to performance obligations satisfied in prior periods during the years ended December 31, 2020 and 2019, were
not material. Refund obligations related to customer incentive programs are recorded in accrued liabilities for the
actual issuance of incentives, incentives earned but not yet issued and estimates of incentives to be earned in the future.
Program Combinations. At times, we combine elements of our significant customer programs within a single
customer contract. We separate each significant program element and include the contract assets, customer acquisition
costs, deferred revenues and estimated future revenues within the most relevant program disclosures above. Each
customer contract is presented as a net contract asset or net contract liability on our consolidated balance sheet.
IDEXX Points. IDEXX Points may be applied to trade receivables due to us, converted to cash, or applied against the
purchase price of IDEXX products and services. We consider IDEXX Points equivalent to cash. IDEXX Points that have not
yet been used by customers are included in accrued liabilities until utilized or expired. Breakage is not material because
customers can apply IDEXX Points to trade receivables at any time.
Accounts Receivable. We recognize revenue when it is probable that we will collect substantially all of the
consideration to which we will be entitled, based on the customer’s intent and ability to pay the promised consideration. We
apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the
F-16
customer’s historical payment experience or, in the case of a new customer, published credit and financial information
pertaining to the customer. We have no significant customers that accounted for greater than 10% of our consolidated revenues
and we have no concentration of credit risk as of December 31, 2020.
Disaggregated Revenues. We present disaggregated revenue for our CAG segment based on major product and service
categories. Our Water segment is comprised of a single major product category. Although our LPD segment does not meet the
quantitative requirements to be reported as a separate segment, we believe it is important to disaggregate these revenues as a
major product and service category separately from our Other reportable segment given its distinct markets, and therefore we
have elected to report LPD as a reportable segment.
The following table presents disaggregated revenue by major product and service categories:
(in thousands)
CAG segment revenue:
CAG Diagnostics recurring revenue:
IDEXX VetLab consumables
Rapid assay products
Reference laboratory diagnostic and consulting services
CAG Diagnostics services and accessories
CAG Diagnostics capital - instruments
Veterinary software, services and diagnostic imaging systems
CAG segment revenue
Water segment revenue
LPD segment revenue
Other segment revenue
Total revenue
For the Years Ended December 31,
2019
2018
2020
$
2,113,839 $
824,376
253,018
946,268
90,177
108,950
162,976
2,385,765
1,828,329 $
693,360
232,149
822,497
80,323
132,685
158,169
2,119,183
128,625
145,845
46,420
132,850
132,635
22,240
1,654,530
617,237
217,541
746,794
72,958
134,264
146,634
1,935,428
125,198
130,581
22,035
$
2,706,655 $
2,406,908 $
2,213,242
Revenue by principal geographic area, based on customers’ domiciles, was as follows:
(in thousands)
Americas
United States
Canada
Latin America
Europe, the Middle East and Africa
Germany
United Kingdom
France
Italy
Spain
Switzerland
Netherlands
Other
Asia Pacific Region
Australia
Japan
China
Other
Total
For the Years Ended December 31,
2019
2018
2020
$
1,691,224 $
107,398
51,863
1,850,485
1,495,516 $
99,550
56,515
1,651,581
1,357,909
94,206
50,969
1,503,084
119,353
90,156
74,814
42,817
39,265
24,850
23,461
148,049
562,765
104,081
90,969
64,767
39,725
36,439
20,855
19,397
122,206
498,439
100,459
87,807
60,319
36,956
33,687
19,875
18,090
114,877
472,070
79,629
74,725
70,845
68,206
293,405
2,706,655 $
71,069
67,246
57,518
61,055
256,888
2,406,908 $
63,386
60,213
57,621
56,868
238,088
2,213,242
$
F-17
Costs to Obtain a Contract. We capitalize sales commissions and the related fringe benefits earned by our sales force
when considered incremental and recoverable costs of obtaining a contract. Our contracts include performance obligations
related to various goods and services, some of which are satisfied at a point in time and others over time. Commission costs
related to performance obligations satisfied at a point in time are expensed at the time of sale, which is when revenue is
recognized. Commission costs related to long-term service contracts and performance obligations satisfied over time, including
extended warranties and SaaS subscriptions, are deferred and recognized on a systematic basis that is consistent with the
transfer of the goods or services to which the asset relates. We apply judgment in estimating the amortization period, which
ranges from 3 to 7 years, by taking into consideration our customer contract terms, history of renewals, expected length of
customer relationship, as well as the useful life of the underlying technology and products. Amortization expense is included in
sales and marketing expenses in the accompanying consolidated statements of income. Deferred commission costs are
periodically reviewed for impairment.
On December 31, 2019, our deferred commission costs, included within other assets, were $15.6 million, of which
approximately $5.2 million of commission expense were recognized during the year ended December 31, 2020. Furthermore, as
a result of commissions related to new extended warranties and SaaS subscriptions, net of subsequent recognition, our deferred
commission costs were $17.5 million at December 31, 2020. Impairments of deferred commission costs during the years
ended December 31, 2020 and 2019, were not material.
NOTE 4. ACQUISITIONS AND INVESTMENTS
We believe that our acquisitions of businesses and other assets enhance our existing businesses by either expanding
our geographic range and customer base or expanding our existing product lines.
During the fourth quarter of 2019 we acquired the assets of a multi-site reference laboratory business in the mid-west
of the U.S. for $50.0 million in cash. This acquisition expands our national reference laboratory presence in the U.S., and was
accounted for as a business combination. We finalized the valuation of the fair value of the assets acquired during the first
quarter of 2020. The fair value of the assets acquired consists of $26.9 million in intangible assets, primarily for customer
relationships, with a weighted average life of 13.8 years, $0.2 million of tangible assets, and $22.9 million of goodwill,
representing synergies within our reference laboratory portfolio. The goodwill is expected to be deductible for income tax
purposes. Pro forma information has not been presented for this acquisition because such information is not material to the
financial statements. The results of operations have been included in our CAG segment since the acquisition date. The
acquisition expenses incurred were not material.
During the third quarter of 2018, we acquired substantially all of the assets of a software company for $25.0 million.
This acquisition expands the IDEXX suite of veterinary software offerings and further underscores our commitment to
investing in software innovations that advance the veterinary profession. This acquisition was accounted for as a business
combination. The fair value of the assets acquired consist of $2.6 million in technology intangible assets, $2.4 million in
customer relationship intangible assets, $0.3 million of net liabilities, and $20.3 million of goodwill, representing synergies
with our current software product offerings. The goodwill is expected to be deductible for income tax purposes. Pro forma
information has not been presented for this acquisition because such information is not material to the financial statements. The
results of operations have been included in our CAG segment since the acquisition date. The acquisition expenses incurred were
not material.
NOTE 5. SHARE-BASED COMPENSATION
We provide for various forms of share-based compensation awards to our employees and non-employee directors. Our
share-based compensation plans allow for the issuance of a mix of stock options, restricted stock, stock appreciation rights,
employee stock purchase rights and other stock unit awards. With the exception of stock options, the fair value of our awards is
equal to the closing stock price of IDEXX common stock on the date of grant. We calculate the fair value of our stock option
awards using the Black-Scholes-Merton option-pricing model. For stock options, restricted stock units (“RSUs”), and deferred
stock units (“DSUs”), share-based compensation expense is recognized net of estimated forfeitures, on a straight-line basis over
the requisite service period of the award for stock options. For performance-based restricted stock units (“PBRSUs”), share-
based compensation expense is recognized net of estimated forfeitures, on a grade-vesting methodology over the requisite
service period.
F-18
Stock options permit a holder to buy IDEXX stock upon vesting at the stock option exercise price set on the day of
grant. An RSU is an agreement to issue shares of IDEXX stock at the time of vesting. A PBRSU is an agreement to issue shares
of IDEXX stock at the time of vesting upon successful completion of certain performance goals. DSUs are granted under our
Executive Deferred Compensation Plan (the “Executive Plan”) and non-employee Director Deferred Compensation Plan (the
“Director Plan”). DSUs may or may not have vesting conditions depending on the plan under which they are issued. We did not
issue any restricted stock or stock appreciation rights during the years ended December 31, 2020, 2019 and 2018, nor were any
restricted stock or stock appreciation rights outstanding as of those years ended.
We primarily issue shares of common stock to satisfy stock option exercises and employee stock purchase rights and
to settle RSUs, PBRSUs, and DSUs. We issue shares of treasury stock to settle certain RSUs and upon the exercise of certain
stock options, which were not material for the years ended December 31, 2020, 2019 and 2018. The number of shares of
common stock and treasury stock issued are equivalent to the number of awards exercised or settled.
With the exception of employee stock purchase rights, equity awards are issued to employees and non-employee
directors under the 2018 Stock Incentive Plan (the "2018 Stock Plan"). Our Board of Directors has authorized the issuance of
7.5 million shares of our common stock under the 2018 Stock Plan. Any shares that are subject to awards of stock options or
stock appreciation rights will be counted against the share limit as one share for every share granted. Any shares that are issued
other than stock options and stock appreciation rights will be counted against the share limit as 2.4 shares for every share
granted. If any shares issued under our prior plans are forfeited, settled for cash, or expire, these shares, to the extent of such
forfeiture, cash settlement or expiration, will again be available for issuance under the 2018 Stock Plan. As of December 31,
2020, there were approximately 6.5 million remaining shares available for issuance under the 2018 Stock Plan.
Share-Based Compensation
Share-based compensation costs are classified in the consolidated financial statements consistent with the classification
of cash compensation paid to the employees receiving such share-based compensation. The following is a summary of share-
based compensation costs and related tax benefits recorded in our consolidated statements of income:
(in thousands)
For the Years Ended December 31,
2019
2018
2020
Share-based compensation expense included in cost of revenue
Share-based compensation expense included in operating expenses
$
3,415 $
27,536
2,681 $
36,597
Total share-based compensation expense included in consolidated statements
of income
Income tax benefit resulting from share-based compensation expense
Net share-based compensation expense included in consolidated statements of
income, excluding tax benefit from settlement of share-based awards
Income tax benefit resulting from settlement of share-based awards
Net expense (benefit) related to share-based compensation arrangements
included in consolidated statements of income
30,951
(3,965)
26,986
(38,981)
39,278
(4,861)
34,417
(19,140)
2,816
22,341
25,157
(4,190)
20,967
(21,496)
$
(11,995) $
15,277 $
(529)
In the fourth quarter of 2019, we entered into a mutual separation agreement with our former CEO, pursuant to which
Mr. Ayers’s outstanding stock options were modified, resulting in a share-based compensation expense of approximately $10.9
million, primarily representing an acceleration of the cost of the equity awards. This expense was partially offset by a reduction
to our provision for income taxes of approximately $0.8 million. Other than the modification to Mr. Ayers's stock options, as
described above, there were no other material modifications to the terms of outstanding options, RSUs, PBRSUs, or DSUs
during the years ended December 31, 2020, 2019 or 2018.
Share-based compensation expense is reduced for an estimate of the number of awards that are expected to be
forfeited. We use historical data and other factors to estimate expected employee terminations and to evaluate whether
particular groups of employees have significantly different forfeiture expectations.
The total unrecognized compensation expense, net of estimated forfeitures, for unvested share-based compensation
awards at December 31, 2020, was $57.4 million, which will be recognized over a weighted average period of approximately
1.5 years.
F-19
Stock Options
Prior to December 4, 2019, all options granted to employees primarily vest ratably over five years on each anniversary
of the date of grant. Options granted to non-employee directors vest fully on the first anniversary of the date of grant. Employee
grants after December 4, 2019, will vest ratably over 4 years. Vesting of option awards issued is conditional based on
continuous service. Options granted after May 8, 2013 have a contractual term of ten years and options granted between
January 1, 2006 and May 8, 2013 had contractual terms of seven years. Upon any change in control of the company, 25% of the
unvested stock options then outstanding will vest and become exercisable. However, if the acquiring entity does not assume
outstanding options, then all options will vest immediately prior to the change in control.
We use the Black-Scholes-Merton option-pricing model to determine the fair value of options granted. Option-pricing
models require the input of highly subjective assumptions, particularly for the expected stock price volatility and the expected
term of options. Changes in the subjective input assumptions can affect the fair value estimate. Our expected stock price
volatility assumptions are based on the historical volatility of our stock over periods that are similar to the expected terms of
grants and other relevant factors. We derive the expected term based on historical experience and other relevant factors
concerning expected employee behavior with regard to option exercise. The risk-free interest rate is based on U.S. Treasury
yields for a maturity approximating the expected term calculated at the date of grant. We have never paid any cash dividends on
our common stock and we have no intention to pay a dividend at this time; therefore, we assume that no dividends will be paid
over the expected terms of option awards.
We determine the assumptions used in the valuation of option awards as of the date of grant. Differences in the
expected stock price volatility, expected term or risk-free interest rate may necessitate distinct valuation assumptions at those
grant dates. As such, we may use different assumptions for options granted throughout the year. The weighted averages of the
valuation assumptions used to determine the fair value of each option award on the date of grant and the weighted average
estimated fair values were as follows:
For the Years Ended December 31,
2019
2018
2020
Share price at grant
Share exercise price
Expected stock price volatility
Expected term, in years
Risk-free interest rate
Weighted average fair value of options granted
$
$
291.14
291.14
$
$
218.66
220.88
$
$
179.56
179.56
27 %
6.0
1.4 %
26 %
6.0
2.4 %
24 %
5.8
2.7 %
$
84.92
$
65.53
$
52.99
A summary of the status of options granted under our share-based compensation plans at December 31, 2020, and
changes during the year then ended, are presented in the table below:
Number of
Options (000)
Weighted
Average Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value
($000)
Outstanding as of December 31, 2019
Granted
Exercised
Forfeited
Outstanding as of December 31, 2020
2,311 $
220 $
(562) $
(16) $
1,953 $
117.13
291.14
71.65
180.78
149.32
6.3
$
684,571
Fully vested as of December 31, 2020
1,057 $
106.91
5.3
$
415,229
Fully vested and expected to vest as of December 31,
2020
1,933 $
148.61
6.3
$
678,994
The total fair value of options vested was $14.6 million, $12.2 million, and $10.5 million during the years ended
December 31, 2020, 2019 and 2018, respectively.
F-20
Intrinsic value of stock options exercised represents the amount by which the market price of the common stock
exceeded the exercise price, before applicable income taxes. The total intrinsic value of stock options exercised was $163.0
million, $83.7 million, and $87.1 million during the years ended December 31, 2020, 2019 and 2018, respectively.
Restricted Stock Units
Prior to December 4, 2019, the majority of RSUs, including our PBRSUs, granted to employees vest ratably over five
years on each anniversary of the date of grant. Employee grants after December 4, 2019, will vest ratably over 4 years. PBRSUs
granted to employees vest based on meeting performance goals set on the day of grant. RSUs granted to non-employee directors
vest fully on the first anniversary of the date of grant. Vesting as it relates to RSUs and PBRSUs issued is conditional based on
continuous service. Upon any change in control of the company, 25 percent of the unvested RSUs and PBRSUs then
outstanding will vest, provided, however, that if the acquiring entity does not assume the RSUs and PBRSUs, then all such units
will vest immediately prior to the change in control. At time of grant, we assume all PBRSUs will meet performance goals to
vest.
A summary of the status of RSUs and PBRSUs granted under our share-based compensation plans at December 31,
2020, and changes during the period then ended, are presented in the table below:
Nonvested as of December 31, 2019
Granted
Vested
Forfeited
Nonvested as of December 31, 2020
Expected to vest as of December 31, 2020
Number of Units
(000)
Weighted
Average Grant-
Date Fair Value
258 $
65 $
(94) $
(11) $
218 $
150.50
291.30
124.60
178.95
202.47
208 $
201.64
The total fair value of RSUs and PBRSUs vested was $27.9 million, $23.8 million, and $24.5 million during the years
ended December 31, 2020, 2019 and 2018, respectively. The aggregate intrinsic value of nonvested RSUs and PBRSUs as of
December 31, 2020, which is equal to the fair value of IDEXX’s common stock as of December 31, 2020, multiplied by the
number of nonvested units as of December 31, 2020, was $108.8 million.
Deferred Stock Units
Under our Director Plan, non-employee directors may defer a portion of their cash fees in the form of vested DSUs.
Prior to 2014, certain members of our management could elect to defer a portion of their cash compensation in the form of
vested deferred stock units under our Executive Plan. Each DSU represents the right to receive one unissued share of our
common stock. These recipients receive a number of DSUs equal to the amount of cash fees or compensation deferred divided
by the closing sale price of the common stock on the date of deferral. Also, under the Director Plan, non-employee directors are
awarded annual grants of DSUs that vest fully on the first anniversary of the date of grant. Vesting for these annual DSU grants
is conditional based on continuous service. Vested DSUs are distributed as shares of common stock on the distribution date
elected by the participant and pursuant to the terms of the Director or Executive Plan, as applicable.
There were approximately 87,000 and 143,000 vested DSUs outstanding under our share-based compensation plans as
of December 31, 2020 and 2019, respectively. During 2020, approximately 59,000 DSUs were distributed as shares of common
shares to our former CEO in accordance with the terms of the Executive Plan and the deferral elections he previously made.
Unvested DSUs as of December 31, 2020 and 2019, were not material.
Employee Stock Purchase Rights
Employee stock purchase rights are issued under the 1997 Employee Stock Purchase Plan, under which we reserved
and may issue up to an aggregate of 4.7 million shares of common stock in periodic offerings. Under this plan, stock is sold to
employees at a 15% discount off the closing price of the stock on the last day of each quarter. The dollar value of this discount
is equal to the fair value of purchase rights recognized as share-based compensation. We issued approximately 39,000, 47,000,
and 52,000 shares of common stock in connection with the Employee Stock Purchase Plan during the years ended December
F-21
31, 2020, 2019 and 2018, respectively. As of December 31, 2020, there were approximately 1.1 million remaining shares
available for issuance under the 1997 Employee Stock Purchase Plan.
NOTE 6. CREDIT LOSSES
We are exposed to credit losses primarily through our sales of products and services to our customers. We maintain
allowances for credit losses for potentially uncollectible receivables. We base our estimates on a detailed analysis of specific
customer situations and a percentage of our accounts receivable by aging category. Historical credit loss experience provides
the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in
current economic conditions. See Note 2. Accounting Policies, for more information on our adoption of ASU 2016-13 on
January 1, 2020, using the modified retrospective transition method.
Additional allowances may be required if either the financial condition of our customers was to deteriorate, or a
strengthening U.S. dollar impacts the ability of foreign customers to make payments to us on their U.S. dollar-denominated
purchases. We monitor our ongoing credit exposure through active review of counterparty balances against contract terms and
due dates. Our activities include timely account reconciliations, dispute resolution and payment confirmations. We may employ
collection agencies and legal counsel to pursue recovery of defaulted receivables.
Account balances are charged off against the allowance when we believe it is probable the receivable will not be
recovered. We may require collateralized asset support or a prepayment to mitigate credit risk. We do not have any off-balance
sheet credit exposure related to our customers.
Accounts Receivable
The allowance for credit losses associated with accounts receivable was $6.8 million and $3.6 million at December 31,
2020 and December 31, 2019, respectively. Accounts receivable reflected on the balance sheet is net of this reserve. Based on
an aging analysis, at December 31, 2020, approximately 88% of our accounts receivable had not yet reached the invoice due
date and approximately 12% was considered past due, of which approximately 1.5% was greater than 60 days past due. At
December 31, 2019, approximately 84% of our accounts receivable had not yet reached the invoice due date and approximately
16% was considered past due, of which approximately 1.5% was greater than 60 days past due. Write-offs and recoveries
related to credit losses during the years ended December 31, 2020, 2019, and 2018 were not material.
Contract assets and lease receivables
The allowance for credit losses associated with the contract assets and lease receivables was $3.7 million at December
31, 2020. The assets reflected on the balance sheet are net of these reserves. Historically, we have experienced low credit loss
rates on our customer commitment programs and lease receivables. We apply judgment in determining the customer’s ability
and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the
case of a new customer, published credit and financial information pertaining to the customer. Write-offs and recoveries related
to credit losses during the years ended December 31, 2020, 2019, and 2018 were not material.
NOTE 7. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Net realizable value is the
estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and
transportation. We write down the carrying value of inventory for estimated obsolescence by an amount equal to the difference
between the cost of inventory and the estimated market value when warranted based on assumptions of future demand, market
conditions, remaining shelf life, or product functionality. If actual market conditions or results of estimated functionality are
less favorable than those we estimated, additional inventory write-downs may be required, which would have a negative effect
on results of operations.
Unpaid inventory reflected within accounts payable in our consolidated balance sheets was $45.6 million, $39.5
million, and $41.3 million at December 31, 2020, 2019 and 2018, respectively.
F-22
The components of inventories are as follows:
(in thousands)
Raw materials
Work-in-process
Finished goods
Inventories
NOTE 8. LEASES
December 31,
2020
December 31,
2019
$
$
45,986 $
20,374
143,513
209,873 $
41,202
20,077
133,740
195,019
The majority of our facilities are occupied under operating lease arrangements with various expiration dates through
2067, some of which include options to extend the life of the lease, and some of which include options to terminate the lease
within 1 year. In certain instances, we are responsible for the real estate taxes and operating expenses related to these
facilities. Additionally, we enter into operating leases for certain vehicles and office equipment in the normal course of
business. We determine the expected term of any executed agreements using the non-cancelable lease term plus any renewal
options by which the failure to renew imposes a penalty in such amount that renewal is reasonably assured. The derived
expected term is then used in the determination of a financing or operating lease and in the calculation of straight-line rent
expense. Rent escalations are considered in the calculation of minimum lease payments in our capital lease tests and in
determining straight-line rent expense for operating leases. Minimum lease payments include the fixed lease component of the
agreement, as well as fixed rate increases that are initially measured at the lease commencement date. Variable lease payments
based on an index, payments associated with non-lease components and short-term rentals (leases with terms less than 12
months) are expensed as incurred. Consideration is allocated to the lease and non-lease components based on the estimated
standalone prices.
We determine if an arrangement is a lease at its inception. Operating leases are included in operating lease right-of-use
assets, accrued liabilities, and long-term operating lease liabilities in our consolidated balance sheets. Our financing leases are
not material to the financial statements.
Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our
obligation to make lease payments arising from the lease. Operating lease liabilities and right-of-use assets are recognized at
commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an
explicit rate, we use our incremental borrowing rate based on the information available at the commencement date in
determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease when it is
reasonably certain that we will exercise that option. Rent expense for lease payments is recognized on a straight-line basis over
the lease term. The operating lease right-of-use assets also includes any rent prepayments, lease incentives upon receipt, and
straight-line rent expense impacts, which represent the differences between our operating lease liabilities and right-of-use
assets.
F-23
Maturities of operating lease liabilities are as follows:
(in thousands)
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less imputed interest
Total lease liability (current and long-term)
December 31,
2020
$
$
20,187
18,698
13,556
9,810
8,129
39,224
109,604
(14,832)
94,772
Total minimum future lease payments of approximately $8.0 million for leases that have not commenced as of
December 31, 2020 are not included in the consolidated financial statements, as we do not yet control the underlying assets.
These leases are expected to commence during 2021 with lease terms of approximately 4 to 13 years.
(in thousands, except lease term and discount rate)
Weighted average remaining lease term - operating leases
December 31,
2020
December 31,
2019
10.3 years
10.3 years
Weighted average discount rate - operating leases
2.9 %
3.5 %
Expenses incurred related to operating leases, excluding variable and short-term leases were approximately $21.7
million and $21.1 million during the year ended December 31, 2020 and 2019, respectively. Total expenses incurred related to
operating leases, including variable rent and short-term leases, were approximately $24.5 million, $23.8 million, and $25.2
million for the years ended December 31, 2020, 2019 and 2018, respectively.
Supplemental cash flow information for leases is as follows:
(in thousands)
For the Years Ended
December 31,
2020
2019
Cash paid for amounts included in the measurement of operating lease liabilities
Right-of-use assets obtained in exchange for operating lease obligations, net of early
lease terminations
$
$
19,619 $
20,008
26,807 $
13,399
F-24
NOTE 9. PROPERTY AND EQUIPMENT, NET
Property and equipment are stated at cost, net of accumulated depreciation and amortization. The costs of additions
and improvements are capitalized, while maintenance and repairs are charged to expense as incurred. When an item is sold or
retired, the cost and related accumulated depreciation are relieved, and the resulting gain or loss, if any, is recognized in the
consolidated statements of income. We evaluate our property and equipment for impairment periodically or as changes in
circumstances or the occurrence of events suggest the remaining value is not recoverable from future cash flows. If the carrying
value of our property and equipment is impaired, an impairment charge is recorded for the amount by which the carrying value
of the property and equipment exceeds its fair value. We provide for depreciation and amortization primarily using the straight-
line method by charges to the consolidated statements of income in amounts that allocate the cost of property and equipment
over their estimated useful lives as follows:
Asset Classification
Land improvements
Buildings and improvements
Leasehold improvements
Machinery and equipment
Office furniture and equipment
Computer hardware and software
Estimated Useful Life
15 to 20 years
10 to 40 years
Shorter of remaining lease term or useful life
of improvements
3 to 8 years
3 to 7 years
3 to 7 years
We capitalize interest on the acquisition and construction of significant assets that require a substantial period of time
to be made ready for use. The capitalized interest is included in the cost of the completed asset and depreciated over the asset’s
estimated useful life. The amount of interest capitalized during the years ended December 31, 2020 and 2019 was not material.
We capitalize certain costs incurred in connection with developing or obtaining software designated for internal use
based on three distinct stages of development. Qualifying costs incurred during the application development stage, which
consist primarily of internal payroll and direct fringe benefits and external direct project costs, including labor and travel, are
capitalized and amortized on a straight-line basis over the estimated useful life of the asset. Costs incurred during the
preliminary project and post-implementation and operation phases are expensed as incurred. These costs relate primarily to the
determination of performance requirements, data conversion and training. Software developed to deliver hosted services to our
customers has been designated as internal use.
Property and equipment, net, consisted of the following:
(in thousands)
Land and improvements
Buildings and improvements
Leasehold improvements
Machinery and equipment
Office furniture and equipment
Computer hardware and software
Construction in progress
Less accumulated depreciation and amortization
Total property and equipment, net
December 31,
2020
December 31,
2019
$
$
13,982 $
319,384
82,459
353,301
67,527
265,664
39,764
1,142,081
586,914
555,167 $
8,725
249,918
74,602
322,814
53,210
240,406
103,200
1,052,875
519,030
533,845
F-25
Below are the amounts of depreciation and amortization of property and equipment, capitalized computer software for
internal use, unpaid property and equipment reflected in accounts payable and accrued expenses, and rental and reagent rental
program instruments transferred from inventory to property and equipment:
(in thousands)
For the Years Ended December 31,
2019
2018
2020
Depreciation and amortization expense
Capitalized computer software developed for internal use
Unpaid property and equipment, reflected in accounts payable and accrued
liabilities
Rental and operating-type reagent rental program instruments transferred from
inventory to property and equipment (Note 3)
$
$
$
$
86,095 $
18,472 $
78,495 $
20,130 $
74,208
17,115
13,343 $
24,688 $
17,894
9,645 $
14,498 $
20,360
NOTE 10. OTHER CURRENT AND LONG-TERM ASSETS
Other current assets consisted of the following:
(in thousands)
Customer acquisition costs
Prepaid expenses
Contract assets, net
Taxes receivable
Deferred sales commissions
Other
Other current assets
Other long-term assets consisted of the following:
(in thousands)
Customer acquisition costs
Contract assets, net
Deferred income taxes
Investment in long-term product supply arrangements
Deferred sales commissions
Taxes receivable
Other
Other long-term assets
December 31,
2020
December 31,
2019
43,751 $
34,556
23,837
19,476
5,738
10,150
137,508 $
39,329
31,992
17,659
20,516
5,202
10,284
124,982
December 31,
2020
December 31,
2019
104,369 $
91,681
31,549
12,065
11,719
6,329
31,883
289,595 $
98,117
66,226
8,100
13,657
10,442
14,960
28,690
240,192
$
$
$
$
NOTE 11. GOODWILL AND INTANGIBLE ASSETS, NET
A significant portion of the purchase price for acquired businesses is generally assigned to intangible assets. Intangible
assets other than goodwill are initially valued at fair value. If a quoted price in an active market for the identical asset is not
readily available at the measurement date, the fair value of the intangible asset is estimated based on discounted cash flows
using market participant assumptions, which are assumptions that are not specific to IDEXX. The selection of appropriate
valuation methodologies and the estimation of discounted cash flows require significant assumptions about the timing and
amounts of future cash flows, risks, appropriate discount rates, and the useful lives of intangible assets. When significant, we
utilize independent valuation experts to advise and assist us in determining the fair values of the identified intangible assets
acquired in connection with a business acquisition and in determining appropriate amortization methods and periods for those
intangible assets. Goodwill is initially valued based on the excess of the purchase price of a business combination over the fair
value of acquired net assets recognized and represents the future economic benefits arising from other assets acquired that could
not be separately identified and recognized.
F-26
Our business combinations regularly include contingent consideration arrangements that require additional
consideration to be paid based on the achievement of established objectives, most commonly related to the retention or growth
of the customer base during the post-combination period. We assess contingent consideration to determine if it is part of the
business combination or if it should be accounted for separately from the business combination in the post-combination period.
Contingent consideration is recognized at its fair value on the acquisition date. A liability resulting from contingent
consideration is remeasured to fair value at each reporting date until the contingency is resolved, with changes in fair value
recognized in earnings. Changes in fair value of contingent consideration and differences arising upon settlement were not
material during the years ended December 31, 2020, 2019 and 2018.
We assess goodwill for impairment annually, at the reporting unit level, in the fourth quarter and whenever events or
circumstances indicate impairment may exist. In evaluating goodwill for impairment, we have the option to first assess the
qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying
amount as a basis for determining whether it is necessary to perform the goodwill impairment test. The more likely than not
threshold is defined as having a likelihood of more than 50%. If, after assessing the totality of events or circumstances, we
determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we would assess
the fair value of all of our reporting units and compare the fair value of the reporting unit to its carrying value to determine if
the carrying value exceeds its fair value, and if a goodwill impairment loss should be recognized. In contrast, we can opt to
bypass the qualitative assessment for any reporting unit in any period and proceed directly to assessing the fair value of all of
our reporting units and compare the fair value of the reporting unit to carrying value to determine if any impairment exists.
Doing so does not preclude us from performing the qualitative assessment in any subsequent period.
In the fourth quarter of 2020, we elected to bypass the qualitative approach that allows the assessment of qualitative
factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount and
instead proceeded directly to assessing the fair value of all of our reporting units and comparing the fair values of each
reporting unit to the carrying values to determine if any impairment exists. We estimate the fair values of applicable reporting
units using an income approach based on discounted forecasted cash flows. We make significant assumptions about the extent
and timing of future cash flows, growth rates and discount rates. Model assumptions are based on our projections and best
estimates, using appropriate and customary market participant assumptions. In addition, we make certain assumptions in
allocating shared assets and liabilities to individual reporting units in determining the carrying value of each reporting unit.
Changes in forecasted cash flows or the discount rate would affect the estimated fair values of our reporting units and could
result in a goodwill impairment loss in a future period.
No goodwill impairments were identified during the years ended December 31, 2020, 2019 or 2018, and no
accumulated impairment losses are recorded.
We assess the realizability of intangible assets other than goodwill whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. If an impairment review is triggered, we evaluate the carrying value of
intangible assets based on estimated undiscounted future cash flows over the remaining useful life of the primary asset of the
asset group and compare that value to the carrying value of the asset group. The asset group is the lowest level for which
identifiable cash flows associated with the intangible asset are largely independent. The cash flows that are used contain our
best estimates, using appropriate and customary assumptions and projections at the time. If the net carrying value of an
intangible asset exceeds the related estimated undiscounted future cash flows, an impairment loss to adjust the intangible asset
to its fair value would be reported as a non-cash charge to earnings. If necessary, we would calculate the fair value of an
intangible asset using the present value of the estimated future cash flows to be generated by the intangible asset, and applying a
risk-adjusted discount rate. The amount of impairment for the year ended December 31, 2020 was immaterial. We had no
impairments of our intangible assets during the years ended December 31, 2019, and 2018.
F-27
The changes in the carrying amount of goodwill for the years ended December 31, 2020, 2019 and 2018, were as
follows:
(in thousands)
Balance as of December 31, 2017
Business combinations
Impact of changes in foreign currency
exchange rates
Balance as of December 31, 2018
Business combinations
Impact of changes in foreign currency
exchange rates
Balance as of December 31, 2019
Business combinations
Acquisition adjustment
Impact of changes in foreign currency
exchange rates
Balance as of December 31, 2020
$
$
$
$
CAG
Water
LPD
Other
Consolidated
Total
166,236 $
20,282
11,951 $
—
15,155 $
—
6,531 $
—
199,873
20,282
(4,132)
182,386 $
24,826
138
207,350 $
220
(1,900)
(730)
11,221 $
—
390
11,611 $
—
—
(804)
14,351 $
—
(119)
14,232 $
—
—
—
6,531 $
—
—
6,531 $
—
—
(5,666)
214,489
24,826
409
239,724
220
(1,900)
4,724
210,394 $
412
12,023 $
167
14,399 $
—
6,531 $
5,303
243,347
See "Note 4. Acquisitions and Investments" for information regarding goodwill and other intangible assets recognized
in connection with the acquisition of businesses and other assets during the years ended December 31, 2020, 2019 and 2018.
We provide for amortization primarily using the straight-line method by charges to income in amounts that allocate the
intangible assets over their estimated useful lives as follows:
Asset Classification
Estimated Useful Life
Customer-related intangible assets (1)
Product rights (2)
Noncompete agreements
3 to 17 years
5 to 15 years
3 to 5 years
(1) Customer-related intangible assets are comprised of customer lists and customer relationships acquired from third parties.
(2) Product rights comprise certain technologies, intellectual property, licenses, and trade names acquired from third parties.
Intangible assets other than goodwill consisted of the following:
(in thousands)
Customer-related intangible assets (1)
Product rights (2)
Noncompete agreements
$
December 31, 2020
Accumulated
Amortization
December 31, 2019
Accumulated
Amortization
Cost
80,810 $
15,150
1,250
$
97,210 $
32,838 $
11,609
220
44,667 $
Net
47,972 $
3,541
1,030
52,543 $ 115,601 $
Cost
99,301 $
16,130
170
46,801 $
10,214
118
57,133 $
Net
52,500
5,916
52
58,468
The above table excludes fully amortized intangible assets for the periods presented.
(1) Customer-related intangible assets are comprised of customer lists and customer relationships acquired from third parties.
(2) Product rights comprise certain technologies, intellectual property, licenses, and trade names acquired from third parties.
Amortization expense of intangible assets other than goodwill was $9.8 million, $9.4 million, and $8.9 million for the
years ended December 31, 2020, 2019 and 2018, respectively.
F-28
At December 31, 2020, the aggregate amortization expense associated with intangible assets is estimated to be as
follows for each of the next five years and thereafter:
(in thousands)
2021
2022
2023
2024
2025
Thereafter
Amortization
Expense
$
$
8,648
7,415
5,647
4,684
4,210
21,939
52,543
NOTE 12. ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES
Accrued liabilities consisted of the following:
(in thousands)
Accrued employee compensation and related expenses
Accrued expenses (Note 16)
Accrued customer incentives and refund obligations
Accrued taxes
Current lease liabilities
Accrued liabilities
Other long-term liabilities consisted of the following:
(in thousands)
Accrued taxes
Other accrued long-term expenses
Other long-term liabilities
NOTE 13. DEBT
Credit Facility
December 31,
2020
December 31,
2019
167,649 $
112,526
75,064
42,676
17,733
415,648 $
127,174
86,296
63,079
31,108
15,281
322,938
December 31,
2020
December 31,
2019
60,313 $
25,291
85,604 $
67,463
13,701
81,164
$
$
$
$
On April 14, 2020, we, along with IDEXX Distribution, Inc., IDEXX Operations, Inc., OPTI Medical Systems,
Inc.,IDEXX Laboratories Canada Corporation, IDEXX Europe B.V., and IDEXX Holding B.V., our wholly-owned
subsidiaries(whether directly or indirectly held) (collectively, the “Borrowers”), entered into a third amended and restated credit
agreement (the “Credit Agreement”) relating to a three-year unsecured revolving credit facility in the principal amount of
$1 billion, among the Borrowers, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, JPMorgan
Chase Bank, N.A., Toronto Branch, as Toronto agent, and the other parties thereto.
The Credit Agreement amends and restates that certain second amended and restated credit agreement, dated as of
December 4, 2015, (which provided for a $850 million five-year unsecured revolving credit facility) to extend the maturity to
April 14, 2023 and to increase the aggregate commitments available for borrowing by the Borrowers to $1 billion with the
option to increase the aggregate commitments by $250 million, for an aggregate maximum of up to $1.25 billion, subject to the
Borrowers obtaining commitments from existing or new lenders and satisfying other conditions specified in the Credit
Agreement.
Although the Credit Facility does not mature until April 14, 2023, all individual borrowings under the terms of the
Credit Facility with an interest rate based on a LIBOR, EURIBOR, or Canadian Dollar rate (as selected by the Borrower) have a
stated term between 30 and 180 days. At the end of each term, the obligation is either repaid or rolled over into a new
F-29
borrowing, or replaced by a borrowing based on a published prime rate (where interest is then paid quarterly). The Credit
Facility contains a subjective material adverse event notification clause, which allows the debt holders to call the loans under
the Credit Facility if we fail to provide prompt written notice to the syndicate of such an event. Based on the stated term and the
existence of the subjective material adverse event clause, this Credit Facility is reflected in the current liabilities section of our
consolidated balance sheets.
At December 31, 2020, we had no outstanding borrowings under our Credit Facility, however based on our gross
leverage ratio, our borrowing costs would have been approximately 2.5%. At December 31, 2019, we had $288.8
million outstanding under our Credit Facility with a weighted average effective interest rate 2.78%. The funds available under
the Credit Facility reflect a further reduction due to the issuance of letters of credit, which were issued in connection with our
workers’ compensation policy, for $1.4 million in December 31, 2020, and December 31, 2019.
Applicable interest rates on borrowings under the Credit Facility are based on the prevailing LIBOR, Canadian Dollar
Rate, or EURIBOR, but not less than 1.0%, plus a credit spread ranging from 1.375% to 2.00%, based on our gross leverage
ratio. The Credit Facility also allows for borrowings based on the prevailing Prime rate, but not less than 2.00%, plus a credit
spread from 0.375% to 1.00%. Under the Credit Facility, we also pay quarterly commitment fees ranging from 0.2% to 0.375%,
based on our leverage ratio, on any unused commitment.
The obligations under the Credit Facility may be accelerated upon the occurrence of an event of default under the
Credit Facility, which includes customary events of default including payment defaults, defaults in the performance of the
affirmative, negative and financial covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency
related defaults, defaults relating to judgments, certain events related to employee pension benefit plans under the Employee
Retirement Income Security Act of 1974, the failure to pay specified indebtedness, cross-acceleration to specified indebtedness
and a change of control default. The Credit Facility contains affirmative, negative, and financial covenants customary for
financings of this type. The negative covenants include restrictions on liens, indebtedness of subsidiaries of the Company,
fundamental changes, investments, transactions with affiliates and certain restrictive agreements. The sole financial covenant is
a consolidated leverage ratio test that requires our ratio of debt to earnings before interest, taxes, depreciation, amortization, and
share-based compensation defined as the consolidated leverage ratio under the terms of the Credit Facility, not to exceed 3.5-
to-1. At December 31, 2020, we were in compliance with the covenants of the Credit Facility.
Senior Notes
The following describes all of our currently outstanding unsecured senior notes issued and sold in private placements
(collectively, the "Senior Notes"):
(Principal Amount in thousands)
Issue Date
Due Date
Series
12/11/2013
12/11/2023
2023 Series A Notes
12/11/2013
12/11/2025
2025 Series B Notes
9/4/2014
9/4/2026
2026 Senior Notes
7/21/2014
7/21/2021
2021 Series A Notes
7/21/2014
7/21/2024
2024 Series B Notes
6/18/2015
6/18/2025
2025 Series C Notes
2/12/2015
2/12/2022
2022 Series A Notes
2/12/2015
2/12/2027
2027 Series B Notes
Principal
Amount
Coupon
Rate
Senior Note Agreement
$
$
$
$
$
€
$
$
75,000
75,000
75,000
50,000
75,000
3.94 % NY Life 2013 Note Agreement
4.04 % NY Life 2013 Note Agreement
3.72 % NY Life 2014 Note Agreement
3.32 % Prudential 2015 Amended Agreement
3.76 % Prudential 2015 Amended Agreement
88,857
1.785 % Prudential 2015 Amended Agreement
75,000
75,000
3.25 % MetLife 2014 Note Agreement
3.72 % MetLife 2014 Note Agreement
3/14/2019
3/14/2029
2029 Series C Notes
$ 100,000
4.19 % MetLife 2014 Note Agreement
4/2/2020
4/2/2030
MetLife 2030 Series D Notes
$ 125,000
2.50 % MetLife 2014 Note Agreement
4/14/2020
4/14/2030
Prudential 2030 Series D Notes
$
75,000
2.50 % Prudential 2015 Amended Agreement
F-30
The following narrative represents our Senior Note activity:
NY Life 2013 and 2014 Note Agreements, Including Amendments
In December 2013, we issued and sold through a private placement an aggregate principal amount of $150 million of
unsecured senior notes consisting of $75 million of 3.94% Series A Senior Notes due December 11, 2023 (the “2023 Series A
Notes”) and $75 million of 4.04% Series B Senior Notes due December 11, 2025 (the “2025 Series B Notes”) under a Note
Purchase Agreement among the Company, New York Life Insurance Company and the accredited institutional purchasers
named therein (as amended on April 10, 2020, the “NY Life 2013 Note Agreement”).
In September 2014, we issued and sold through a private placement an aggregate principal amount of $75 million of
unsecured 3.72% senior notes due September 4, 2026 (the “2026 Senior Notes”) under a Note Purchase Agreement dated as of
July 22, 2014, among the Company, New York Life Insurance Company and the accredited institutional purchasers named
therein (as amended April 10, 2020, the “NY Life 2014 Note Agreement”).
On April 10, 2020, we amended the NY Life 2013 Note Agreement and the NY Life 2014 Note Agreement by
entering into two Amendments to Note Purchase Agreement with New York Life Insurance Company and the other parties
thereto, which modified several defined terms, schedules and covenant baskets in the NY Life 2013 Agreement and the NY
Life 2014 Note Agreement to create additional operating flexibility, and in particular to align such provisions with similar
modifications we made substantially concurrently in our other debt facilities.
Prudential 2015 Amended Agreement, Including Amendments
In July 2014, we issued and sold through a private placement an aggregate principal amount of $125 million of
unsecured senior notes consisting of $50 million of 3.32% Series A Senior Notes due July 21, 2021 (the “2021 Series A Notes”)
and $75 million of 3.76% Series B Senior Notes due July 21, 2024 (the “2024 Series B Notes”) under a Note Purchase and
Private Shelf Agreement among the Company, Prudential Investment Management, Inc. (“Prudential”) and the accredited
institutional purchasers named therein (the “Prudential 2014 Note Agreement”).
In June 2015, we entered into an Amended and Restated Multi-Currency Note Purchase and Private Shelf Agreement
(the “Original Prudential 2015 Amended Agreement"), among the Company, Prudential, and the accredited institutional
purchasers named therein, which amends and restates the Prudential 2014 Note Agreement. Pursuant to the Original Prudential
2015 Amended Agreement, we issued and sold through an aggregated private placement an aggregate principal amount of
€88.9 million of unsecured 1.785% Series C Senior Notes due June 18, 2025 (the “2025 Series C Notes”).
On May 9, 2019, we entered into the Amendment to Note Purchase and Private Shelf Agreement (the "Prudential First
Amendment") with Prudential and the other parties thereto, which amended certain reporting provisions in the Original
Prudential 2015 Amended Agreement.
On April 10, 2020, we entered into the Second Amendment to the Prudential 2015 Amended Agreement (the
“Prudential Second Amendment”), in order to (i) increase the facility size to $425 million, (ii) extend the facility issuance
period to April 10, 2023, (iii) make various implementing and administrative changes in order to facilitate a $75 million notes
issuance on April 14, 2020, (iv) allow the amount available to be issued under the facility to equal $425 million less the amount
of notes outstanding from time to time during the issuance period and (v) modify several defined terms, schedules and covenant
baskets in the Original Prudential 2015 Amended Agreement, as amended by the Prudential First Amendment, to create
additional operating flexibility, and in particular to align such provisions with similar modifications we made substantially
concurrently in our other debt facilities. We refer to the Original Prudential 2015 Agreement, as amended by the Prudential
First Amendment and the Prudential Second Amendment, as the "Prudential 2015 Amended Agreement."
On April 14, 2020, we issued and sold to Prudential and other purchasers $75 million of our unsecured senior notes
(the “Prudential 2030 Series D Notes”) pursuant to the Prudential Second Amendment. The entire outstanding balance of the
Prudential 2030 Series D Notes is due and payable on April 14, 2030, and the Prudential 2030 Series D Notes bear interest at
the rate of 2.50% per annum. We used the proceeds received from the Prudential 2030 Series D Notes for general corporate
purposes.
F-31
MetLife 2014 Note Agreement, Including Amendments
We entered into a Multicurrency Note Purchase and Private Shelf Agreement, dated as of December 19, 2014 (the
"Original MetLife 2014 Note Agreement"), among the Company, Metropolitan Life Insurance Company (“MetLife”) and the
accredited institutional purchasers named therein pursuant to which we agreed to issue and sell an aggregate principal amount
of $150 million of unsecured senior notes consisting of $75 million of our 3.25% Series A Senior Notes having a seven-year
term (the "2022 Series A Notes"), and $75 million of our 3.72% Series B Senior Notes having a twelve-year term ("2027 Series
B Notes"). The issuance, sale and purchase of these notes occurred in February 2015.
On March 14, 2019, we amended the Original MetLife 2014 Note Agreement. Pursuant to the Original MetLife 2014
Note Agreement, as so amended, we issued and sold through a private placement an aggregate principal amount of $100 million
of unsecured senior notes at a 4.19% per annum rate, due March 14, 2029 (the "2029 Series C Notes").
On March 23, 2020, we entered into the Second Amendment to the Original MetLife 2014 Note Agreement (the
“MetLife Second Amendment”), in order to (i) increase the facility size from $150 million to $300 million, (ii) extend the
facility issuance period to December 20, 2022, (iii) make various implementing and administrative changes in order to facilitate
a $125 million notes issuance on April 2, 2020 and (iv) allow the amount available to be issued under the facility to equal
$300 million, less the amounts outstanding on 2029 Series C Notes and MetLife 2030 Series D Notes.
On April 2, 2020, we issued and sold to MetLife and other purchasers $125 million of our unsecured senior notes (the
“MetLife 2030 Series D Notes”) pursuant to the MetLife Second Amendment. The entire outstanding principal balance of the
MetLife 2030 Series D Notes is due and payable on April 2, 2030, and the MetLife 2030 Series D Notes bear interest at the rate
of 2.50% per annum. We used the proceeds received from the MetLife 2030 Series D Notes for general corporate purposes.
We refer to the Original MetLife 2014 Agreement, as so amended, as the "MetLife 2014 Agreement," and together
with the NY Life 2013 Note Agreement, NY Life 2014 Note Agreement, and Prudential 2015 Amended Note Agreement,
collectively, as the "Senior Note Agreements."
Senior Note Agreements
The Senior Note Agreements contain affirmative, negative, and financial covenants customary for agreements of this
type. The negative covenants include restrictions on liens, indebtedness of our subsidiaries, priority indebtedness, fundamental
changes, investments, transactions with affiliates, certain restrictive agreements, and violations of laws and regulations. The
sole financial covenant is a consolidated leverage ratio test that requires our ratio of debt to earnings before interest, taxes,
depreciation, amortization, and share-based compensation, as defined in the Senior Note Agreements, not to exceed 3.5-to-1. At
December 31, 2020, we were in compliance with the covenants of the Senior Note Agreements.
Should we elect to prepay the Senior Notes, such aggregate prepayment will include the applicable make-whole
amount(s), as defined within the applicable Senior Note Agreements. Additionally, in the event of a change in control of the
Company or upon the disposition of certain assets of the Company the proceeds of which are not reinvested (as defined in the
Senior Note Agreements), we may be required to prepay all or a portion of the Senior Notes. The obligations under the Senior
Notes may be accelerated upon the occurrence of an event of default under the applicable Senior Note Agreement, each of
which includes customary events of default including payment defaults, defaults in the performance of the affirmative, negative
and financial covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency related defaults, defaults
relating to judgments, certain events related to employee pension benefit plans under the Employee Retirement Income Security
Act of 1974, the failure to pay specified indebtedness and cross-acceleration to specified indebtedness. We used the net
proceeds from the issuances and sale of the Senior Notes for general corporate purposes.
F-32
Annual principal payments on long-term debt at December 31, 2020, are as follows:
(in thousands)
Years Ending December 31,
2021
2022
2023
2024
2025
Thereafter
Amount
50,000
75,000
75,000
75,000
184,125
450,000
909,125
$
$
Total interest paid on all debt (including our Credit Facility) for the years ended December 31, 2020, 2019 and 2018,
was $32.4 million, $29.7 million, and $34.7 million, respectively.
NOTE 14. INCOME TAXES
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes.
Under this approach, deferred taxes represent the estimated future tax effects of temporary differences between book and tax
treatment of assets and liabilities and carryforwards to the extent they are realizable. We record a valuation allowance to reduce
our deferred tax assets to the amount that is more likely than not to be realized. While we consider future taxable income and
ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance, in the event we determine
that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, a reduction of the
valuation allowance would increase income in the period such determination was made. Likewise, should we determine that we
would not be able to realize all or part of our net deferred tax asset in the future, a reduction to the deferred tax asset would be
charged to income in the period such determination was made.
We record a liability for uncertain tax positions that do not meet the more likely than not standard as prescribed by the
authoritative guidance for income tax accounting. We record tax benefits for only those positions that we believe will more
likely than not be sustained. Unrecognized tax benefits are the differences between tax positions taken, or expected to be taken,
in tax returns, and the benefits recognized for accounting purposes. We classify uncertain tax positions as long-term liabilities.
Significant judgment is required in determining our worldwide provision for income taxes and our income tax filings
are regularly under audit by tax authorities. Any audit result differing from amounts recorded would increase or decrease
income in the period that we determine such adjustment is likely. Interest expense and penalties associated with the
underpayment of income taxes are included in income tax expense.
Earnings before income taxes were as follows:□
(in thousands)
Domestic
International
For the Years Ended December 31,
2019
2018
2020
$
$
483,694 $
178,291
661,985 $
377,964 $
144,254
522,218 $
337,437
120,305
457,742
F-33
The provision (benefit) for income taxes comprised the following:
(in thousands)
Current
Federal
State
International
Deferred
Federal
State
International
For the Years Ended December 31,
2019
2018
2020
$
$
72,921 $
17,346
26,301
116,568
(14,126)
(2,863)
(19,725)
(36,714)
79,854 $
52,194 $
11,967
24,239
88,400
4,826
269
931
6,026
94,426 $
47,130
10,415
22,015
79,560
3,970
(937)
(1,898)
1,135
80,695
The provision for income taxes differs from the amounts computed by applying the statutory federal income tax rate as
follows:□
For the Years Ended December 31,
2019
2018
2020
U.S. federal statutory rate
State income tax, net of federal tax benefit
Taxation on international earnings
Foreign derived intangible income
Share-based compensation from settlements
Research and development credit
Impact of Switzerland tax reform
State income tax carryforwards
Other, net
Effective tax rate
21.0 %
2.4
(1.0)
(1.1)
(5.9)
(0.8)
(3.3)
—
0.8
12.1 %
21.0 %
2.3
(1.1)
(1.1)
(3.6)
(0.8)
—
—
1.4
18.1 %
21.0 %
2.6
(0.8)
(1.3)
(4.7)
(0.9)
—
(0.2)
1.9
17.6 %
Our effective income tax rate was 12.1% for the year ended December 31, 2020, and 18.1% for the year ended
December 31, 2019. Our effective income tax rate for the year ended December 31, 2020 was lower primarily due to the one-
time positive impact related to the enactment of tax reform in Switzerland due to recording a deferred tax asset related to the
transitional benefits, as well as higher tax benefits related to share-based compensation.
Our effective income tax rate was 18.1% for the year ended December 31, 2019, and 17.6% for the year ended
December 31, 2018. Our effective income tax rate for the year ended December 31, 2019, was higher primarily due to lower tax
benefits related to share-based compensation, partially offset by a nonrecurring item recorded in the first quarter of 2018, that
resulted from the 2017 Tax Cut and Jobs Act.
Income taxes paid, net of refunds received, for the periods ended December 31, 2020, 2019 and 2018 were $110.7
million, $88.0 million, and $69.7 million, respectively.
We have received a tax ruling from the Netherlands that documents our mutual understanding of how existing tax laws
apply to our circumstances. This ruling expires as of December 31, 2022, and we have been informed that it will not be
renewed due to changes to the advance ruling policy in the Netherlands. While the absence of an advance agreement does not
preclude our ability to continue to apply existing tax laws in the same manner as allowed by the existing ruling, the lack of such
agreement creates uncertainty as to our future tax rate. Further, the Netherlands has recently announced proposals to modify
existing rules that, if enacted, could eliminate the benefits to which this ruling applies. We continue to consider these
developments within our overall tax strategy. Primarily as a result of this tax ruling, our net income was higher by $14.2
million, $13.7 million, and $9.2 million for the years ended December 31, 2020, 2019, and 2018, respectively. The benefits
from our tax rulings are reflected within the overall benefits received from taxation on international earnings in the table above.
F-34
The components of the net deferred tax assets (liabilities) included in the accompanying consolidated balance sheets
are as follows:
(in thousands)
Assets
Accrued expenses
Accounts receivable reserves
Deferred revenue
Inventory basis differences
Property-based differences
Intangible asset basis differences
Share-based compensation
Other
Net operating loss carryforwards
Tax credit carryforwards
Unrealized losses on foreign currency exchange contracts and investments
Total assets
Valuation allowance
Total assets, net of valuation allowance
Liabilities
Customer acquisition costs
Property-based differences
Intangible asset basis differences
Other
Unrealized gains on foreign currency exchange contracts and investments
Total liabilities
Net deferred tax assets (liabilities)
December 31, 2020 December 31, 2019
$
46,830 $
2,505
7,629
4,272
14,865
51,319
10,011
1,484
5,427
13,385
5,060
162,787
(40,262)
122,525
(34,449)
(49,547)
(16,134)
(2,241)
(312)
(102,683)
$
19,842 $
25,296
617
6,073
3,315
3,113
—
10,593
1,160
4,045
12,276
20
66,508
(9,454)
57,054
(28,519)
(33,802)
(14,513)
(3,961)
(1,183)
(81,978)
(24,924)
As of December 31, 2020, we record valuation allowances against certain deferred tax assets related to temporary
differences, including intangible asset basis differences and net operating loss (“NOL”) and tax credit carryforwards, as it is
more likely than not that they will not be realized or utilized within the carryforward period.
The following table summarizes the changes in valuation allowance for deferred tax assets:
(in thousands)
Balance at beginning of year
Charges to costs and expense
Write-off/cash payments
Foreign currency translation
Balance at the end of the year
For the Years Ended December 31,
2019
2018
2020
$
$
9,454 $
31,076
(34)
(234)
40,262 $
6,212 $
3,489
(226)
(21)
9,454 $
6,211
402
—
(401)
6,212
As of December 31, 2020, we have NOL’s in certain state and international jurisdictions of approximately $23.1
million available to offset future taxable income. Most of these NOL’s will expire at various dates between 2022 and 2027 and
the remainder have indefinite lives.
F-35
The following table summarizes the changes in unrecognized tax positions:
(in thousands)
For the Years Ended December 31,
2019
2018
2020
Total amounts of unrecognized tax benefits, beginning of period
$
26,841 $
24,247 $
21,417
Gross (decreases) increases in unrecognized tax positions as a result of tax
positions taken during a prior period
Gross increases in unrecognized tax positions as a result of tax positions taken
in the current period
Decreases in unrecognized tax positions relating to settlements with taxing
authorities
Decreases in unrecognized tax positions as a result of a lapse of the applicable
statutes of limitations
Total amounts of unrecognized tax benefits, end of period
(1,755)
(276)
2,991
4,199
4,083
(6,446)
—
461
—
(355)
22,484 $
(1,213)
26,841 $
(622)
24,247
$
The total amount of unrecognized tax benefits at December 31, 2020 and December 31, 2019, was $22.5 million and
$26.8 million, respectively. Of the total unrecognized tax benefits at December 31, 2020 and 2019, $21.8 million and $21.2
million, respectively, comprise unrecognized tax positions that would, if recognized, affect our effective tax rate.
During the years ended December 31, 2020, 2019 and 2018, we recorded interest expense and penalties of $1.3
million, $1.8 million, and $1.2 million, respectively, as income tax expense in our consolidated statement of income. At
December 31, 2020, 2019, and 2018 we had $3.6 million, $3.6 million, and $2.1 million, respectively, of estimated interest
expense and penalties accrued in our consolidated balance sheets.
In the ordinary course of our business, our income tax filings are regularly under audit by tax authorities. While we
believe we have appropriately provided for all uncertain tax positions, amounts asserted by taxing authorities could be greater
or less than our accrued position. Accordingly, additional provisions on income tax matters, or reductions of previously accrued
provisions, could be recorded in the future as we revise our estimates due to changing facts and circumstances or the underlying
matters are settled or otherwise resolved. We are currently under tax examinations in various jurisdictions. We anticipate that
these examinations will be concluded within the next two years. With few exceptions, we are no longer subject to income tax
examinations in any jurisdiction in which we conduct significant taxable activities for years before 2015.
NOTE 15. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income attributable to our stockholders by the weighted average
number of shares of common stock and vested deferred stock units outstanding during the year. The computation of diluted
earnings per share is similar to the computation of basic earnings per share, except that the denominator is increased for the
assumed exercise of dilutive options and assumed issuance of unvested restricted stock units and unvested deferred stock units
using the treasury stock method unless the effect is anti-dilutive. The treasury stock method assumes that proceeds, including
cash received from the exercise of employee stock options and the total unrecognized compensation expense for unvested
share-based compensation awards, would be used to purchase our common stock at the average market price during the
period. Vested deferred stock units outstanding are included in shares outstanding for basic and diluted earnings per share
because the associated shares of our common stock are issuable for no cash consideration, the number of shares of our common
stock to be issued is fixed and issuance is not contingent. See "Note 5. Share-Based Compensation" for additional information
regarding deferred stock units.
The following is a reconciliation of weighted average shares outstanding for basic and diluted earnings per share:
(in thousands)
For the Years Ended December 31,
2019
2018
2020
Shares outstanding for basic earnings per share:
85,342
86,115
86,864
Shares outstanding for diluted earnings per share:
Shares outstanding for basic earnings per share
Dilutive effect of share-based payment awards
85,342
1,380
86,722
86,115
1,427
87,542
86,864
1,606
88,470
F-36
Certain options to acquire shares have been excluded from the calculation of shares outstanding for diluted earnings
per share because they were anti-dilutive. The following table presents information concerning those anti-dilutive options:
(in thousands)
For the Years Ended December 31,
2019
2018
2020
Weighted average number of shares underlying anti-dilutive options
206
200
287
NOTE 16. COMMITMENTS, CONTINGENCIES AND GUARANTEES
Commitments
See "Note 8. Leases" for more information regarding our lease commitments.
We are required to annually purchase a minimum amount of inventory from certain suppliers. Through 2025, we have
a total of $4.0 million in minimum purchase commitments under these arrangements.
Contingencies
We are subject to claims that may arise in the ordinary course of business, including with respect to actual and
threatened litigation and other matters. We accrue for loss contingencies when it is probable that future expenditures will be
made, and such expenditures can be reasonably estimated. However, the results of legal actions cannot be predicted with
certainty, and therefore our actual losses with respect to these contingencies could exceed our accruals. Except for the litigation
matter described below, at December 31, 2020, our accruals with respect to actual and threatened litigation were not material.
We are a defendant in an ongoing litigation matter involving an alleged breach of contract for underpayment of royalty
payments made from 2004 through 2017 under an expired patent license agreement. The plaintiff has asserted a claim of
approximately $50 million, inclusive of interest, alleging that the incorrect royalty provision was applied to certain licensed
products and services throughout the agreement term and that royalties were also due on non-licensed diagnostic services that
were provided concurrently with licensed services. The trial court has ruled in favor of the plaintiff in this matter and we are
appealing the judgment and continue to vigorously defend ourselves against the plaintiff’s allegations. While we believe the
claim is without merit, litigation is inherently unpredictable and there can be no assurance that we will prevail in this matter.
We have established an accrual of $27.5 million related to this ongoing matter, which represents the amount of a possible loss
that we have determined to be probable and estimable. The actual cost of resolving this matter may be higher or lower than the
amount we have accrued.
We self-insure costs associated with health, workers’ compensation, auto, and general welfare claims incurred by our
U.S. and Canadian employees up to certain limits. Insurance companies provide insurance for claims above these limits. Claim
liabilities are recorded for estimates of the loss that we will ultimately incur on reported claims, as well as estimates of claims
that have been incurred but not yet reported. Such liabilities are based on individual coverage, the average time from when a
claim is incurred to the time it is paid and judgments about the present and expected levels of claim frequency and severity.
Estimated claim liabilities could be significantly affected if future occurrences and claims differ from these assumptions and
historical trends. Estimated claim liabilities are included in accrued liabilities in the accompanying consolidated balance sheets.
Under our current employee healthcare insurance policy for U.S. employees, we retain claims liability risk per incident
up to $1 million per year in 2020, 2019, and 2018. We recognized U.S. employee healthcare claim expense of $59.5 million,
$59.3 million, and $52.7 million for the years ended December 31, 2020, 2019, and 2018, respectively, which represents actual
claims paid and an estimate of our liability for the uninsured portion of employee healthcare obligations that have been incurred
but not paid. Should employee health insurance claims exceed our estimated liability, we would have further obligations. Our
estimated liability for healthcare claims that have been incurred but not paid as of December 31, 2020 and 2019, was
approximately $5.5 million and $5.0 million, respectively.
Workers’ compensation and automobile claim expenses recognized during the years ended December 31, 2020, 2019
and 2018 and our respective liability for such claims as of December 31, 2020, 2019 and 2018 were not material. For the years
ended on or prior to December 31, 2017, based on our retained claim liability per incident and our aggregate claim liability per
year, our maximum liability in excess of the amounts deemed probable and previously recognized is not material as of
F-37
December 31, 2020. As of December 31, 2020, we had outstanding letters of credit totaling $1.4 million to the insurance
companies as security for the claims in connection with these policies.
We have entered into an employment agreement with our chief executive officer whereby payment may be required if
we terminate his employment without cause other than following a change in control. The amount payable is based upon the
executive’s salary at the time of termination and the cost to us of continuing to provide certain benefits. Had this officer been
terminated without cause at December 31, 2020, other than following a change in control, we would have had an obligation for
salaries and benefits of approximately $1.7 million under such agreement. In addition, the agreement provides for continued
vesting of his outstanding equity awards for a period of two years, which would accelerate approximately $5.6 million of share-
based compensation expense as of December 31, 2020.
We have entered into employment agreements with each of our officers that require us to make certain payments in the
event the officer’s employment is terminated under certain circumstances within a certain period following a change in control.
The amount payable by us under each of these agreements is based on the officer’s salary and bonus history at the time of
termination and the cost to us of continuing to provide certain benefits. Had all of our officers been terminated in qualifying
terminations following a change in control at December 31, 2020, we would have had aggregate obligations of approximately
$37.7 million under these agreements. These agreements also provide for the acceleration of the vesting of all stock options and
restricted stock units upon any qualifying termination following a change in control. At this time, we believe the likelihood of
terminations as a result of the scenarios described is remote, and therefore, we have not accrued for such loss contingencies.
From time to time, we have received notices alleging that our products infringe third-party proprietary rights, although
we are not aware of any pending litigation with respect to such claims. Patent litigation frequently is complex and expensive,
and the outcome of patent litigation can be difficult to predict. There can be no assurance that we will prevail in any
infringement proceedings that may be commenced against us. If we lose any such litigation, we may be stopped from selling
certain products and/or we may be required to pay damages as a result of the litigation.
Guarantees
We enter into agreements with third parties in the ordinary course of business under which we are obligated to
indemnify such third parties for and against various risks and losses. The precise terms of such indemnities vary with the nature
of the agreement. In many cases, we limit the maximum amount of our indemnification obligations, but in some cases those
obligations may be theoretically unlimited. We have not incurred material expenses in discharging any of these indemnification
obligations, and based on our analysis of the nature of the risks involved, we believe that the fair value of potential
indemnification under these agreements is minimal. Accordingly, we have recorded no liabilities for these obligations at
December 31, 2020 and 2019.
When acquiring a business, we sometimes assume liability for certain events or occurrences that took place prior to the
date of acquisition. As of December 31, 2020 and 2019, we do not have any material pre-acquisition liabilities recorded.
F-38
NOTE 17. 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 improve producer efficiency, which we
refer to as LPD. Our Other operating segment combines and presents products for the human medical diagnostics market with
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 (the "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:
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
biomedical analytics 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 producer efficiency, and to ensure the quality and safety of
milk and improve producer efficiency. OPTI Medical manufactures and distributes diagnostic products and provide services for
the human medical diagnostics market.
Intersegment revenues, which are not included in the table below, were not material for the years ended December 31,
2020, 2019 and 2018.
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 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. These
management reporting changes did not have a material impact to our segment results of operations for the years ended
December 31, 2019 and 2018.
F-39
The following tables reflect adjustments to previously reported costs in our Unallocated segment, that are now
allocated to our CAG, Water, LPD and Other segments:
For the year ended December 31, 2019:
(in thousands)
Cost of sales
Gross profit
Operating Expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Income from operations
CAG
Water
LPD
Other
Unallocated
(247) $
247
(11) $
11
(14) $
14
(6) $
6
278
(278)
(239) $
13,004
16,479
29,244
(28,997) $
(11) $
501
33
523
(512) $
(13) $
625
41
653
(639) $
— $
1,363
—
1,363
(1,357) $
263
(15,493)
(16,553)
(31,783)
31,505
$
$
$
For the year ended December 31, 2018:
(in thousands)
Cost of sales
Gross profit
Operating Expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Income from operations
CAG
Water
LPD
Other
Unallocated
$
$
$
(1,540) $
1,540
(574) $
3,316
15,658
18,400
(16,860) $
(69) $
69
(25) $
66
(4)
37
32 $
(87) $
87
(32) $
81
(4)
45
42 $
(35) $
35
1,731
(1,731)
— $
1,145
—
1,145
(1,110) $
631
(4,608)
(15,650)
(19,627)
17,896
F-40
The following tables reflect the impact to previously reported segment gross profit margin, operating income margin
and operating expenses as a percentage of revenue, due to the allocation of these costs to our CAG, Water, LPD and Other
segments:
For the year ended December 31, 2019:
Cost of sales
Gross profit
Operating Expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Income from operations
For the year ended December 31, 2018:
Cost of sales
Gross profit
Operating Expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Income from operations
CAG
Water
LPD
Other
— %
— %
— %
0.6 %
0.8 %
1.4 %
(1.4) %
— %
— %
— %
0.4 %
— %
0.4 %
(0.4) %
— %
— %
— %
0.5 %
— %
0.5 %
(0.5) %
— %
— %
— %
6.1 %
— %
6.1 %
(6.1) %
CAG
Water
LPD
Other
(0.1) %
0.1 %
— %
0.2 %
0.8 %
1.0 %
(0.9) %
(0.1) %
0.1 %
— %
0.1 %
— %
— %
— %
(0.1) %
0.1 %
— %
0.1 %
— %
— %
— %
(0.2) %
0.2 %
— %
5.2 %
— %
5.2 %
(5.0) %
F-41
The following is a summary of segment performance:
$
$
$
$
$
$
$
$
(in thousands)
2020
Revenue
Income from operations
Interest expense, net
Income before provision for income taxes
Provision for income taxes
Net income
Less: Net income attributable to noncontrolling
interest
Net income attributable to IDEXX Laboratories, Inc.
stockholders
Depreciation and amortization
2019
Revenue
Income from operations
Interest expense, net
Income before provision for income taxes
Provision for income taxes
Net income
Less: Net income attributable to noncontrolling
interest
Net income attributable to IDEXX Laboratories, Inc.
stockholders
Depreciation and amortization
2018
Revenue
Income from operations
Interest expense, net
Income before provision for income taxes
Provision for income taxes
Net income
Less: Net income attributable to noncontrolling
interest
Net income attributable to IDEXX Laboratories, Inc.
stockholders
For the Years Ended December 31,
CAG
Water
LPD
Other
Consolidated
Total
2,385,765 $
128,625 $
145,845 $
46,420 $
2,706,655
574,887 $
58,867 $
40,008 $
20,762 $
694,524
(32,539)
661,985
79,854
582,131
355
84,697 $
2,630 $
4,070 $
4,601 $
95,998
$
581,776
2,119,183 $
132,850 $
132,635 $
22,240 $
2,406,908
462,605 $
61,923 $
24,735 $
3,583 $
552,846
(30,628)
522,218
94,426
427,792
72
77,620 $
2,794 $
4,007 $
3,590 $
88,011
$
427,720
1,935,428 $
125,198 $
130,581 $
22,035 $
2,213,242
412,623 $
56,639 $
19,454 $
2,619 $
491,335
(33,593)
457,742
80,695
377,047
16
$
377,031
Depreciation and amortization
$
72,789 $
2,592 $
4,094 $
3,703 $
83,178
See "Note 3. Revenue Recognition" for a summary of disaggregated revenue by reportable segment and by major
product and service category for the years ended December 31, 2020, 2019 and 2018.
F-42
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)
Americas
United States
Brazil
Canada
Europe, the Middle East and Africa
Germany
United Kingdom
Netherlands
France
Switzerland
Other
Asia Pacific Region
Japan
Australia
Other
Total
December 31, 2020 December 31, 2019
$
$
412,700 $
20,797
4,993
438,490
67,354
10,191
15,267
2,062
3,743
3,668
102,285
4,503
3,304
6,585
14,392
555,167 $
401,248
22,274
7,784
431,306
52,032
12,114
13,586
2,061
3,508
3,395
86,696
5,409
4,088
6,346
15,843
533,845
NOTE 18. FAIR VALUE MEASUREMENTS
U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. U.S. GAAP requires an entity to maximize the use of
observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.
We have certain financial assets and liabilities that are measured at fair value on a recurring basis, certain nonfinancial
assets and liabilities that may be measured at fair value on a non-recurring basis and certain financial assets and liabilities that
are not measured at fair value in our consolidated balance sheets but for which we disclose the fair value. The fair value
disclosures of these assets and liabilities are based on a three-level hierarchy, which is defined as follows:
Level 1
Level 2
Level 3
Quoted prices in active markets for identical assets or liabilities that the entity can access at the
measurement date.
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities.
Unobservable inputs that are supported by little or no market activity and that are significant to the
fair value of the assets or liabilities.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is
significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement
in its entirety requires judgment and considers factors specific to the asset or liability. We did not have any transfers between
Level 1 and Level 2 or transfers in or out of Level 3 of the fair value hierarchy during the years ended December 31, 2020 and
2019.
Our cross currency swap contracts are measured at fair value on a recurring basis in our accompanying consolidated
balance sheets. We measure the fair value of our cross currency swap contracts classified as derivative instruments using
prevailing market conditions as of the close of business on each balance sheet date. The product of this calculation is then
adjusted for counterparty risk.
Our foreign currency exchange contracts are measured at fair value on a recurring basis in our accompanying
consolidated balance sheets. We measure the fair value of our foreign currency exchange contracts classified as derivative
F-43
instruments using an income approach, based on prevailing market forward rates less the contract rate multiplied by the notional
amount. The product of this calculation is then adjusted for counterparty risk.
The amounts outstanding under our unsecured revolving credit facility ("Credit Facility" or “line of credit”) and senior
notes (“long-term debt”) are measured at carrying value in our accompanying consolidated balance sheets though we disclose
the fair value of these financial instruments. We determine the fair value of the amount outstanding under our Credit Facility
and long-term debt using an income approach, utilizing a discounted cash flow analysis based on current market interest rates
for debt issues with similar remaining years to maturity, adjusted for applicable credit risk. Our Credit Facility and long-term
debt are valued using Level 2 inputs. The estimated fair value of our Credit Facility approximates its carrying value. At
December 31, 2020, the estimated fair value and carrying value of our long-term debt were $1.0 billion and $909.1 million,
respectively. At December 31, 2019, the estimated fair value and carrying value of our long-term debt were $753.6 million and
$699.4 million, respectively.
The following tables set forth our assets and liabilities that were measured at fair value on a recurring basis by level
within the fair value hierarchy:
(in thousands)
As of December 31, 2020
Assets
Money market funds (1)
Equity mutual funds (2)
Foreign currency exchange contracts (3)
Liabilities
Cross currency swaps (3)
Foreign currency exchange contracts (3)
Deferred compensation (4)
(in thousands)
As of December 31, 2019
Assets
Money market funds (1)
Equity mutual funds (2)
Cross currency swaps (3)
Foreign currency exchange contracts (3)
Liabilities
Foreign currency exchange contracts (3)
Deferred compensation (4)
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance at
December 31,
2020
$
$
$
$
$
$
76 $
1,145 $
— $
— $
— $
1,145 $
— $
— $
125 $
2,841 $
12,373 $
— $
— $
— $
— $
— $
— $
— $
76
1,145
125
2,841
12,373
1,145
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance at
December 31,
2019
$
$
$
$
$
$
71 $
1,676 $
— $
— $
— $
— $
4,559 $
1,791 $
— $
2,886 $
1,676 $
— $
— $
— $
— $
— $
— $
— $
71
1,676
4,559
1,791
2,886
1,676
(1) Money market funds with an original maturity of less than ninety days are included within cash and cash equivalents. The remaining balance of cash
and cash equivalents as of December 31, 2020, and December 31, 2019, consisted of demand deposits.
(2) Equity mutual funds relate to a deferred compensation plan that was assumed as part of a previous business combination. This amount is included
within other long-term assets. See footnote (4) below for a discussion of the related deferred compensation liability.
(3) Cross currency swaps and foreign currency exchange contracts are included within other current assets; other long-term assets; accrued liabilities; or
other long-term liabilities depending on the gain (loss) position and anticipated settlement date.
(4) A deferred compensation plan assumed as part of a previous business combination is included within accrued liabilities and other long-term liabilities.
The fair value of our deferred compensation plan is indexed to the performance of the underlying equity mutual funds discussed in footnote (2) above.
F-44
The estimated fair values of certain financial instruments, including cash and cash equivalents, accounts receivable and
accounts payable, approximate carrying value due to their short maturity.
NOTE 19. HEDGING INSTRUMENTS
Disclosure within this note is presented to provide transparency about how and why we use derivative and non-
derivative instruments (collectively “hedging instruments”), how the instruments and related hedged items are accounted for,
and how the instruments and related hedged items affect our financial position, results of operations and cash flows.
We are exposed to certain risks related to our ongoing business operations. The primary risk that we currently manage
by using hedging instruments is foreign currency exchange risk. We may also enter into interest rate swaps to minimize the
impact of interest rate fluctuations associated with borrowings under our variable-rate Credit Facility.
Our subsidiaries enter into foreign currency exchange contracts to manage the exchange risk associated with their
forecasted intercompany inventory purchases and sales for the next year. From time to time, we may also enter into other
foreign currency exchange contracts, cross currency swaps or foreign-denominated debt issuances to minimize the impact of
foreign currency fluctuations associated with specific balance sheet exposures, including net investments in certain foreign
subsidiaries.
The primary purpose of our foreign currency hedging activities is to protect against the volatility associated with
foreign currency transactions, including transactions denominated in euro, British pound, Japanese yen, Canadian dollar, and
Australian dollar. We also utilize natural hedges to mitigate our transaction and commitment exposures. Our corporate policy
prescribes the range of allowable hedging activity. We enter into foreign currency exchange contracts with well-capitalized
multinational financial institutions, and we do not hold or engage in transactions involving hedging instruments for purposes
other than risk management. Our accounting policies for these contracts are based on our designation of such instruments as
hedging transactions.
We recognize all hedging instruments on the balance sheet at fair value at the balance sheet date. Instruments that do
not qualify for hedge accounting treatment must be recorded at fair value through earnings. To qualify for hedge accounting
treatment, cash flow and net investment hedges must be highly effective in offsetting changes to expected future cash flows or
fair value on hedged transactions. If the instrument qualifies for hedge accounting, changes in the fair value of the hedging
instrument from the effective portion of the hedge are deferred in AOCI, net of tax, and reclassified into earnings in the same
period or periods during which the hedged transaction affects earnings. We immediately record in earnings the extent to which
a hedging instrument is not effective in achieving offsetting changes in fair value. We de-designate hedging instruments from
hedge accounting when the likelihood of the hedged transaction occurring becomes less than probable. For de-designated
instruments, the gain or loss from the time of de-designation through maturity of the instrument is recognized in earnings. Any
gain or loss in AOCI at the time of de-designation is reclassified into earnings in the same period or periods during which the
hedged transaction affects earnings. See “Note 21. Accumulated Other Comprehensive Income” for further information
regarding the effect of hedging instruments on the consolidated statements of income for the years ended December 31, 2020,
2019 and 2018.
We enter into master netting arrangements with the counterparties to our derivative transactions which permit certain
outstanding receivables and payables to be offset in the event of default. Our derivative contracts do not require either party to
post cash collateral. We elect to present our derivative assets and liabilities in the accompanying consolidated balance sheets on
a gross basis. All cash flows related to our foreign currency exchange contracts are classified as operating cash flows, which is
consistent with the cash flow treatment of the underlying items being hedged.
See "Note 18. Fair Value Measurements" for additional information regarding the fair value of our derivative
instruments and "Note 21. Accumulated Other Comprehensive Income" for additional information regarding the effect of
derivative instruments designated as cash flow hedges on the consolidated statements of income.
Cash Flow Hedges
We have designated our foreign currency exchange contracts as cash flow hedges as these derivative instruments
mitigate the exposure to variability in the cash flows of forecasted transactions attributable to foreign currency exchange.
Unless noted otherwise, we have also designated our derivative instruments as qualifying for hedge accounting treatment.
F-45
We did not de-designate any instruments from hedge accounting treatment during the years ended December 31, 2020,
2019 and 2018. Gains and losses related to hedge ineffectiveness recognized in earnings during the years ended December 31,
2020, 2019 and 2018 were not material. At December 31, 2020, the estimated amount of net losses, net of tax, which are
expected to be reclassified out of AOCI and into earnings within the next twelve months is $9.9 million if exchange rates do not
fluctuate from the levels at December 31, 2020.
We target to hedge approximately 85% of the estimated exposure from intercompany product purchases and sales
denominated in the euro, British pound, Canadian dollar, Japanese yen, and Australian dollar. We have additional unhedged
foreign currency exposures related to foreign services and emerging markets where it is not practical to hedge. We primarily
utilize foreign currency exchange contracts with durations of less than 24 months. Quarterly, we enter into contracts to hedge
incremental portions of anticipated foreign currency transactions for the current and following year. As a result, our risk with
respect to foreign currency exchange rate fluctuations and the notional value of foreign currency exchange contracts may vary
throughout the year. The U.S. dollar is the currency purchased or sold in all of our foreign currency exchange contracts. The
notional amount of foreign currency exchange contracts to hedge forecasted intercompany inventory purchases and sales totaled
$202.7 million, and $210.9 million at December 31, 2020 and 2019, respectively.
The following table presents the effect of cash flow hedge accounting on our consolidated statements of income and
comprehensive income, and provides information regarding the location and amounts of pretax gains or losses of derivatives:
(in thousands)
Years Ended December 31,
2019
2018
2020
Financial statement line items in which effects of cash
flow hedges are recorded
Foreign exchange contracts
Amount of gain (loss) reclassified from accumulated
other comprehensive income into income
Net Investment Hedges, Euro-Denominated Notes
Cost of revenue
$
1,135,615 $
1,041,359 $
971,700
$
829 $
10,628 $
(976)
In June 2015, we issued and sold through a private placement an aggregate principal amount of €88.9 million in euro-
denominated 1.785% Series C Senior Notes due June 18, 2025. We have designated these euro-denominated notes as a hedge of
our euro net investment in certain foreign subsidiaries to reduce the volatility in stockholders’ equity caused by changes in
foreign currency exchange rates in the euro relative to the U.S. dollar. As a result of this designation, gains and losses from the
change in translated U.S. dollar value of these euro-denominated notes are recorded in AOCI rather than to earnings. We
recorded a loss of $7.4 million and gains of $1.8 million and $3.9 million, net of tax, within AOCI as a result of this net
investment hedge for the years ended December 31, 2020, 2019, and 2018, respectively. The related cumulative unrealized gain
recorded at December 31, 2020, will not be reclassified in earnings until the complete or substantially complete liquidation of
the net investment in the hedged foreign operations or all or a portion of the hedge no longer qualifies for hedge accounting
treatment. See "Note 13. Debt" to the consolidated financial statements included in this Annual Report on Form 10-K for
further information regarding the issuance of these euro-denominated notes.
Net Investment Hedges, Cross Currency Swaps
We have entered into several cross currency swap contracts as a hedge of our net investment in foreign operations to
offset foreign currency translation gains and losses on the net investment. These cross currency swaps have maturity dates
beginning on June 30, 2023, through June 18, 2025. At maturity of the cross currency swap contracts, we will deliver the
notional amounts of €90.0 million and will receive approximately $104.5 million from the counterparties on June 30, 2023, and
we will deliver the notional amount of €15.0 million and will receive approximately $17.5 million from the counterparties on
June 18, 2025. The change in fair value of the cross currency swap contracts are recorded in AOCI and will be reclassified to
earnings when the foreign subsidiaries are sold or substantially liquidated. We recorded a loss of $5.6 million, a gain of $2.1
million, and a gain of $1.4 million, net of tax, within AOCI as a result of these net investment hedges, during the years
ended December 31, 2020. 2019, and 2018, respectively. We will receive quarterly interest payments from the counterparties
based on a fixed interest rate until maturity of the cross currency swaps. This interest rate component is excluded from the
assessment of hedge effectiveness and, thus is recognized as a reduction to interest expense over the life of the hedge
instrument. We recognized approximately $2.7 million and $2.4 million related to the excluded component as a reduction of
interest expense for the years ended December 31, 2020 and 2019, respectively.
F-46
Fair Values of Hedging Instruments Designated as Hedges in Consolidated Balance Sheets
The fair values of hedging instruments, and their respective classification on the consolidated balance sheets, and
amounts subject to offset under master netting arrangements consisted of the following derivative instruments, unless otherwise
noted:
(in thousands)
Hedging Assets
December 31, 2020 December 31, 2019
Derivatives and non-derivatives designated as hedging
instruments
Foreign currency exchange contracts
Balance Sheet
Classification
Other current assets
$
125 $
Cross currency swaps
Total derivative instruments presented as hedge instruments on the
balance sheet
Gross amounts subject to master netting arrangements not offset on
the balance sheet
Net amount
(in thousands)
Other long-term
assets
—
125
(125)
— $
$
1,791
4,559
6,350
(1,354)
4,996
Hedging Liabilities
December 31, 2020 December 31, 2019
Derivatives and non-derivatives designated as hedging
instruments
Foreign currency exchange contracts
Balance Sheet
Classification
Accrued liabilities
$
12,373 $
Cross currency swaps
Total derivative instruments presented as cash flow hedges on the
balance sheet
Non-derivative foreign currency denominated debt designated as
net investment hedge on the balance sheet (1)
Total hedging instruments presented on the balance sheet
Gross amounts subject to master netting arrangements not offset on
the balance sheet
Net amount
Other long-term
liabilities
Long-term debt
2,841
15,214
109,125
124,339
$
(125)
124,214 $
2,886
—
2,886
99,422
102,308
(1,354)
100,954
(1) Amounts represent reported carrying amounts of our foreign currency denominated debt. See "Note 18. Fair Value Measurements" for information
regarding the fair value of our long-term debt.
NOTE 20. REPURCHASES OF COMMON STOCK
As of December 31, 2020, our Board of Directors has authorized the repurchase of up to 73.0 million shares of our
common stock in the open market or in negotiated transactions pursuant to the Company’s share repurchase program. We
believe that the repurchase of our common stock is a favorable means of returning value to our stockholders, and we also
repurchase to offset the dilutive effect of our share-based compensation programs. Repurchases of our common stock may vary
depending upon the level of other investing activities and the share price. As of December 31, 2020, there are approximately 6.3
million remaining shares available for repurchase under this authorization.
We primarily acquire shares by repurchases in the open market. However, we also acquire shares that are surrendered
by employees in payment for the minimum required statutory withholding taxes due on the vesting of restricted stock units and
the settlement of deferred stock units, otherwise referred to herein as employee surrenders. We issue shares of treasury stock
upon the vesting of certain restricted stock units and upon the exercise of certain stock options. The number of shares of
treasury stock issued during the years ended December 31, 2020, 2019 and 2018, was not material.
F-47
The following is a summary of our open market common stock repurchases, reported on a trade date basis, and shares
acquired through employee surrenders:
(in thousands, except per share amounts)
For the Years Ended December 31,
2019
2018
2020
Shares repurchased in the open market
Shares acquired through employee surrenders for statutory tax withholding
Total shares repurchased
721
58
779
1,215
39
1,254
Cost of shares repurchased in the open market
Cost of shares for employee surrenders
Total cost of shares
Average cost per share - open market repurchases
Average cost per share - employee surrenders
Average cost per share - total
$
$
$
$
$
179,623 $
20,603
200,226 $
303,838 $
8,054
311,892 $
249.20 $
354.98 $
257.08 $
249.84 $
210.10 $
248.62 $
1,773
52
1,825
368,691
9,375
378,066
207.92
182.18
207.19
F-48
NOTE 21. ACCUMULATED OTHER COMPREHENSIVE INCOME
The changes in AOCI, net of tax, consisted of the following:
For the Years Ended December 31, 2020 and 2019
Unrealized (Loss)
Gain on Cash
Flow Hedges, Net
of Tax
Unrealized (Loss) Gain on
Net Investment Hedges,
Net of Tax
(in thousands)
Balance as of December 31, 2018
Other comprehensive income (loss)
before reclassifications
Amounts reclassified from
accumulated other comprehensive
income
Balance as of December 31, 2019
Other comprehensive (loss) income
before reclassifications
Amounts reclassified from
accumulated other comprehensive
income
Balance as of December 31, 2020
Unrealized
(Loss) Gain
on
Investments,
Net of Tax
Foreign Currency
Exchange
Contracts
Euro-
Denominated
Notes
Cross
Currency
Swaps
Cumulative
Translation
Adjustment
Total
$
(157) $
6,229 $
(394) $
1,360 $
(48,829) $
(41,791)
267
—
110
1,196
1,790
2,107
(1,590)
3,770
(8,161)
(736)
—
1,396
—
3,467
—
(8,161)
(50,419)
(46,182)
(382)
(8,527)
(7,378)
(5,626)
15,151
(6,762)
—
(671)
—
—
—
(671)
$
(272) $
(9,934) $
(5,982) $
(2,159) $
(35,268) $
(53,615)
The following table presents components and amounts reclassified out of AOCI to net income:
(in thousands)
Affected Line Item in the
Statements of Income
Amounts Reclassified from AOCI for the Years
Ended December 31,
2019
2018
2020
Gains (losses) on derivative instruments
included in net income:
Foreign currency exchange contracts
NOTE 22. PREFERRED STOCK
Cost of revenue
Tax expense (benefit)
Gains (losses), net of tax
$
$
829 $
158
671 $
10,628 $
2,467
8,161 $
(976)
(187)
(789)
Our Board of Directors is authorized, subject to any limitations prescribed by law, without further stockholder
approval, to issue from time to time up to 500,000 shares of Preferred Stock, $1.00 par value per share (“Preferred Stock”), in
one or more series. Each such series of Preferred Stock shall have such number of shares, designations, preferences, voting
powers, qualifications and special or relative rights or privileges as shall be determined by the Board of Directors, which may
include, among others, dividend rights, voting rights, redemption and sinking fund provisions, liquidation preferences,
conversion rights and preemptive rights. There are no shares of Preferred Stock outstanding as of December 31, 2020 and 2019.
F-49
NOTE 23. IDEXX RETIREMENT AND INCENTIVE SAVINGS PLAN
We have established the IDEXX Retirement and Incentive Savings Plan (the “401(k) Plan”). U.S. employees eligible
to participate in the 401(k) Plan may contribute specified percentages of their salaries. We match a portion of these
contributions, not to exceed 5% of participants’ eligible compensation. We matched $23.4 million, $21.1 million, and $19.0
million for the years ended December 31, 2020, 2019 and 2018, respectively. In addition, we may make contributions to the
401(k) Plan at the discretion of the Board of Directors. There were no discretionary contributions in 2020, 2019 or 2018.
We also have established defined contribution plans for regional employees in Europe and in Canada. With respect to
these plans, our contributions over the past three years have not been material.
F-50
Exhibit No.
Description
EXHIBIT INDEX
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
Restated Certificate of Incorporation of the Company, as amended (filed as Exhibit No. 3(i) to Quarterly
Report on Form 10-Q for the quarter ended June 30, 2006, File No. 0-19271, and incorporated herein by
reference).
Amended and Restated By-Laws of the Company (filed as Exhibit No. 3.1 to Current Report on Form 8-K
filed December 12, 2017, File No. 0-19271, and incorporated herein by reference).
Description of the Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of
1934 (filed as Exhibit 4.1 to Annual Report on Form 10-K for the year ended December 31, 2019, File No.
0-19271 ("2019 Form 10-K"), and incorporated herein by reference).
Note Purchase Agreement, dated as of December 11, 2013, among the Company, as issuer, New York Life
Insurance Company, New York Life Insurance and Annuity Corporation and New York Life Insurance and
Annuity Corporation Institutionally Owned Life Insurance Separate Account (BOLI 30C), as purchasers
(filed as Exhibit No. 99.1 to Current Report on Form 8-K filed December 12, 2013, File No. 0-19271, and
incorporated herein by reference).
Note Purchase and Private Shelf Agreement, dated as of July 21, 2014, among the Company, as issuer,
Prudential Investment Management, Inc., Pruco Life Insurance Company, The Prudential Insurance
Company of America, The Gibraltar Life Insurance Co., Ltd., PAR U Hartford Life Insurance Comfort Trust,
The Independent Order of Foresters, Zurich American Insurance Company, Globe Life and Accident
Insurance Company, Family Heritage Life Insurance Company of America, MTL Insurance Company, The
Lincoln National Life Insurance Company, William Penn Life Insurance Company of New York, Farmers
Insurance Exchange and Mid Century Insurance Company, as purchasers (filed as Exhibit No. 99.1 to
Current Report on Form 8-K Filed July 25, 2014, File No. 0-19271, and incorporated herein by reference).
Note Purchase Agreement, dated as of July 22, 2014, among the Company, as issuer, New York Life
Insurance Company, New York Life Insurance and Annuity Corporation and New York Life Insurance and
Annuity Corporation Institutionally Owned Life Insurance Separate Account (BOLI 30C), as purchasers
(filed as Exhibit No. 99.2 to Current Report on Form 8-K file July 25, 2014, File No. 0-19271, and
incorporated herein by reference).
Amendment to Note Purchase Agreement, dated as of April 10, 2020, among the Company, as issuer, New
York Life Insurance Company, New York Life Insurance and Annuity Corporation and New York Life
Insurance and Annuity Corporation Institutionally Owned Life Insurance Separate Account (BOLI 30C), as
purchasers (filed as Exhibit 10.4 to Current Report on Form 8-K filed April 16, 2020, File No. 0-19271, and
incorporated herein by reference).
Amendment to Note Purchase Agreement, dated as of April 10, 2020, among the Company, as issuer, New
York Life Insurance Company, New York Life Insurance and Annuity Corporation and New York Life
Insurance and Annuity Corporation Institutionally Owned Life Insurance Separate Account (BOLI 30C), as
purchasers (filed as Exhibit 10.5 to Current Report on Form 8-K filed April 16, 2020, File No. 0-19271, and
incorporated herein by reference).
Amended and Restated Multi-Currency Note Purchase and Private Shelf Agreement, dated as of June 18,
2015, among the Company, Prudential Investment Management, Inc., Pruco Life Insurance Company, The
Prudential Insurance Company of America, The Gibraltar Life Insurance Co., Ltd., PAR U Hartford Life
Insurance Comfort Trust, The Independent Order of Foresters, Zurich American Insurance Company, Globe
Life and Accident Insurance Company, Family Heritage Life Insurance Company of America, MTL
Insurance Company, The Lincoln National Life Insurance Company, William Penn Life Insurance Company
of New York, Farmers Insurance Exchange, Mid Century Insurance Company and Farmers New World Life
Insurance Company, as purchasers (filed as Exhibit No. 99.1 to Current Report on Form 8-K filed June 24,
2015, File No. 0-19271, and incorporated herein by reference).
Amendment to Amended and Restated Multi-Currency Note Purchase and Private Shelf Agreement, dated as
of May 9, 2019, among the Company, as issuer, each of the Subsidiary Guarantors (as defined therein),
Prudential and each of the holders of the Notes (as defined therein) (filed as Exhibit 10.2 to Current Report
on Form 8-K filed April 16, 2020, File No. 0-19271, and incorporated herein by reference).
F-51
4.9
4.10
4.11
4.12
10.1*
10.2*
10.3
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
Second Amendment to Amended and Restated Multi-Currency Note Purchase and Private Shelf Agreement,
dated as of April 10, 2020, among the Company, as issuer, each of the Subsidiary Guarantors (as defined
therein), Prudential and each of the holders of the Notes (as defined therein) (filed as Exhibit 10.3 to Current
Report on Form 8-K filed April 16, 2020, File No. 0-19271, and incorporated herein by reference).
Multicurrency Note Purchase and Private Shelf Agreement, dated as of December 19, 2014, among the
Company, as issuer, and Metropolitan Life Insurance Company, MetLife Insurance Company USA, Symetra
Life Insurance Company, MetLife Insurance K.K., AXIS Reinsurance Company, and Union Fidelity Life
Insurance Company, as purchasers (filed as Exhibit 10.1 to Current Report on Form 8-K filed March 15,
2019, File No. 0-19271, and incorporated herein by reference).
First Amendment to Multicurrency Note Purchase and Private Shelf Agreement, dated March 14, 2019,
among the Company, as issuer, and IDEXX Distribution, Inc., IDEXX Operations, Inc., and OPTI Medical
Systems, Inc., each as a subsidiary guarantor, and Metropolitan Life Insurance Company, MetLife
Reinsurance Company of Bermuda, Ltd., Brighthouse Life Insurance Company, Symetra Life Insurance
Company, and AXIS Reinsurance Company (filed as Exhibit 10.2 to Current Report on Form 8-K filed
March 15, 2019, File No. 0-19271, and incorporated herein by reference).
Second Amendment to Multicurrency Note Purchase and Private Shelf Agreement, dated March 23, 2020,
among the Company, as issuer, each of the Subsidiary Guarantors (as defined therein), Metropolitan Life
Insurance Company and each of the holders of the Notes (as defined therein) (filed as Exhibit 10.1 to Current
Report on Form 8-K filed March 27, 2020, File No. 0-19271, and incorporated herein by reference).
U.S. Supply Agreement, effective as of October 16, 2003, among IDEXX Operations, Inc., the Company and
Ortho-Clinical Diagnostics, Inc. (“Ortho”) (filed as Exhibit No. 10.7 to Annual Report on Form 10-K for the
year ended December 31, 2003, File No. 0-19271 (“2003 Form 10-K”), and incorporated herein by
reference).
Amendment No. 1 to U.S. Supply Agreement effective as of January 1, 2005, among IDEXX Operations,
Inc., the Company and Ortho (filed as Exhibit No. 10.1 to Quarterly Report on Form 10-Q for the quarter
ended June 30, 2005, File No. 0-19271 (“June 2005 Form 10-Q”), and incorporated herein by reference).
Amendment No. 2 to U.S. Supply Agreement effective as of October 15, 2006, among IDEXX Operations,
Inc., the Company and Ortho (filed as Exhibit No. 10.4 to Annual Report on Form 10-K for the year ended
December 31, 2007, File No. 0-19271 (“2007 Form 10-K”), and incorporated herein by reference).
Amendment No. 3 to U.S. Supply Agreement effective as of January 18, 2008, among IDEXX Operations,
Inc., the Company and Ortho (filed as Exhibit No. 10.5 to 2007 Form 10-K, and incorporated herein by
reference).
Amendment No. 4 to U.S. Supply Agreement effective as of December 28, 2011, among IDEXX Operations,
Inc., the Company and Ortho (filed as Exhibit No. 10.5 to Annual Report on Form 10-K for the year ended
December 31, 2011, File No. 0-19271 (“2011 Form 10-K”), and incorporated herein by reference).
Amendment No. 5 to U.S. Supply Agreement effective as of December 9, 2013, among IDEXX Operations,
Inc., the Company and Ortho (filed as Exhibit No. 10.6 to Annual Report on Form 10-K for the year ended
December 31, 2013, File No. 0-19271 (“2013 Form 10-K”), and incorporated herein by reference).
Amendment No. 6 to U.S. Supply Agreement effective as of January 1, 2017, among IDEXX Operations,
Inc., the Company and Ortho (filed as Exhibit No. 10.27 to Annual Report on Form 10-K for the year ended
December 31, 2017, File No. 0-19271, and incorporated herein by reference).
European Supply Agreement, effective as of October 17, 2003, among IDEXX Europe B.V., the Company
and Ortho (filed as Exhibit No. 10.8 to 2003 Form 10-K, and incorporated herein by reference).
Amendment No. 1 to European Supply Agreement effective as of January 1, 2005, among IDEXX Europe
B.V., the Company and Ortho (filed as Exhibit No. 10.2 to June 2005 Form 10-Q, and incorporated herein by
reference).
F-52
10.10*
10.11*
10.12*
10.13
10.14
10.15*
10.16**
10.17**
Amendment No. 2 to European Supply Agreement effective as of January 18, 2008, among IDEXX Europe
B.V., the Company and Ortho (filed as Exhibit No. 10.8 to 2007 Form 10-K, and incorporated herein by
reference).
Amendment No. 3 to European Supply Agreement effective as of December 28, 2011, among IDEXX
Europe B.V., the Company and Ortho (filed as Exhibit No. 10.9 to 2011 Form 10-K, and incorporated herein
by reference).
Amendment No. 4 to European Supply Agreement effective as of December 9, 2013, among IDEXX Europe
B.V., the Company and Ortho (filed as Exhibit No. 10.11 to 2013 Form 10-K, and incorporated herein by
reference).
Amendment, Release and Settlement Agreement dated as of September 12, 2002, among the Company,
IDEXX Europe B.V., and Ortho (filed as Exhibit No. 10.1 to Quarterly Report on Form 10-Q for the quarter
ended September 30, 2002, File No. 0-19271, and incorporated herein by reference).
Waiver to U.S. Supply Agreement, effective as of October 16, 2003, as amended, among IDEXX Operations,
Inc., the Company and Ortho-Clinical Diagnostics, Inc. dated as of April 7, 2020 (filed as Exhibit 10.1
Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, File No. 0-19271, and incorporated
herein by reference).
Letter Agreement between Ortho-Clinical Diagnostics, Inc. and IDEXX Operations, Inc. and IDEXX Europe
B.V. dated as of July 10, 2020 (filed as Exhibit 10.1 to Quarterly Report on Form 10-Q filed October 29,
2020, File No. 0-19271, and incorporated herein by reference).
Form of Executive Employment Agreement dated May 26, 2013, between the Company and each of the
Company’s Executive Officers, other than the Chief Executive Officer (filed as Exhibit No. 10.3 to June
2013 Form 10-Q, and incorporated herein by reference).
Restated Director Deferred Compensation Plan, as amended (filed as Exhibit No. 10.1 to Quarterly Report on
Form 10-Q for the quarter ended September 30, 2010, File No. 0-19271, and incorporated herein by
reference).
10.18
Restated Executive Deferred Compensation Plan, as amended (filed as Exhibit No. 10.3 to Quarterly Report
on Form 10-Q for the quarter ended June 30, 2010, File No. 0-19271, and incorporated herein by reference).
10.19**
IDEXX Laboratories, Inc. 1997 Employee Stock Purchase Plan, as amended (filed herewith).
10.20**
10.21**
2009 Stock Incentive Plan, as amended (filed as Exhibit No. 99.1 to Registration Statement on Form S-8 filed
December 30, 2013, File No. 333-193136, and incorporated herein by reference).
2018 Stock Incentive Plan (filed as Appendix B to the Definitive Proxy Statement on Schedule 14A for the
2018 Annual Meeting of Stockholders filed on March 28, 2018, and incorporated herein by reference).
10.22**
Summary of Executive Incentive Plan (filed herewith).
10.23**
10.24**
10.25**
10.26**
Form of Director Stock Option Agreement (filed as Exhibit 10.24 to Annual Report on Form 10-K for the
year ended December 31, 2018, File No. 0-19271, and incorporated herein by reference).
Form of Director Restricted Stock Unit (filed as Exhibit 10.24 to 2019 Form 10-K, and incorporated herein
by reference).
Form of Employee Stock Option Agreement for grants in 2010 to 2015 (filed as Exhibit 10.21 to Annual
Report on Form 10-K for the year ended December 31, 2009, File No. 0-19271, and incorporated herein by
reference).
Form of Employee Stock Option Agreement for grants in 2016 and 2017 (filed as Exhibit 10.20 to Annual
Report on Form 10-K for the year ended December 31, 2015, File No. 0-19271, and incorporated by
reference herein).
F-53
10.27**
10.28**
10.29**
10.30**
10.31**
10.32**
10.33**
10.34
10.35**
10.36**
10.37**
10.38**
21
23
31.1
31.2
Form of Employee Stock Option Agreement for grants in 2018 and 2019 (filed as Exhibit 10.25 to Annual
Report on Form 10-K for the year ended December 31, 2018, File No. 0-19271 ("2018 Form 10-K"), and
incorporated by reference herein).
Form of Employee Stock Option Agreement for grants beginning in 2020 (filed as Exhibit 10.28 to 2019
Form 10-K, and incorporated herein by reference).
Form of Employee Restricted Stock Unit Agreement for grants in 2015 (filed as Exhibit 10.24 to Annual
Report on Form 10-K for the year ended December 31, 2009, File No. 0-19271, and incorporated herein by
reference).
Form of Employee Restricted Stock Unit Agreement for grants in 2016 and 2017 (filed as Exhibit 10.22 to
Annual Report on Form 10-K for the year ended December 31, 2015, File No. 0-19271, and incorporated
herein by reference).
Form of Employee Restricted Stock Unit Agreement for grants in 2018 and 2019 (filed as Exhibit 10.26 to
2018 Form 10-K, and incorporated herein by reference).
Form of Employee Restricted Stock Unit for grants beginning in 2020 (filed as Exhibit 10.32 to 2019 Form
10-K, and incorporated herein by reference).
Form of Employee Performance-Based Restricted Stock Unit Agreement (filed as Exhibit 10.27 to 2018
Form 10-K, and incorporated herein by reference).
Third Amended and Restated Credit Agreement, dated as of April 14, 2020, among the Company, IDEXX
Distribution, Inc., IDEXX Operations, Inc., OPTI Medical Systems, Inc., IDEXX Laboratories Canada
Corporation, IDEXX Europe B.V., and IDEXX Holding B.V., as borrowers, the lenders party thereto,
JPMorgan Chase Bank, N.A., as administrative agent, JPMorgan Chase Bank, N.A., Toronto Branch, as
Toronto agent, and the other parties thereto (filed as Exhibit 10.6 to Current Report on Form 8-K filed April
16, 2020, File No. 0-19271, and incorporated herein by reference).
Mutual Separation Agreement, dated October 23, 2019, by and between the Company and Mr. Jonathan W.
Ayers (filed as Exhibit 10.1 to Current Report on Form 8-K filed October 24, 2019, File No. 0-19271, and
incorporated herein by reference).
Senior Advisory Agreement, dated October 23, 2019, by and between the Company. and Mr. Jonathan W.
Ayers (filed as Exhibit 10.2 to Current Report on Form 8-K filed October 24, 2019, File No. 0-19271, and
incorporated herein by reference).
Amendment to Senior Advisory Agreement, dated April 14, 2020, by and between the Company and Mr.
Jonathan W. Ayers (filed as Exhibit 10.2 to Quarterly Report on Form 10-Q filed April 30, 2020, File No.
0-19271, and incorporated herein by reference).
Second Amended and Restated Employment Agreement, dated October 23, 2019, by and between the
Company and Jonathan (Jay) Mazelsky (filed as Exhibit 10.3 to Current Report on Form 8-K filed October
24, 2019, File No. 0-19271, and incorporated herein by reference).
Subsidiaries of the Company (filed herewith).
Consent of PricewaterhouseCoopers LLP, an independent registered public accounting firm (filed herewith).
Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
F-54
32.1
32.2
101
104
*
**
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
The following financial and related information from IDEXX Laboratories, Inc.’s Annual Report on Form
10-K for the fiscal year ended December 31, 2020, formatted in Inline eXtensible Business Reportable
Language (iXBRL) includes: (i) the Consolidated Balance Sheet; (ii) the Consolidated Statement of Income;
(iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statement of Changes in
Stockholders' Equity (Deficit); (v) the Consolidated Statement of Cash Flows; and, (vi) Notes to
Consolidated Financial Statements.
The cover page from the Company's Annual Report of Form 10-K for the fiscal year ended December 31,
2020, formatted in Inline XBRL and contained in Exhibit 101.
Confidential treatment requested as to certain portions.
Management contract or compensatory arrangement required to be filed as an exhibit pursuant to Item
15(a)(3) of Form 10-K.
F-55
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 12, 2021
IDEXX LABORATORIES, INC.
By: /s/ Jonathan J. Mazelsky
Jonathan J. Mazelsky
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE
TITLE
DATE
/s/ Jonathan J. Mazelsky
Jonathan J. Mazelsky
/s/ Brian P. McKeon
Brian P. McKeon
/s/ Lawrence D. Kingsley
Lawrence D. Kingsley
/s/ Jonathan W. Ayers
Jonathan W. Ayers
/s/ Asha S. Collins, PhD
Asha S. Collins, PhD
/s/ Bruce L. Claflin
Bruce L. Claflin
/s/ Stuart M. Essig, PhD
Stuart M. Essig, PhD
/s/ Rebecca M. Henderson, PhD
Rebecca M. Henderson, PhD
/s/ Daniel M. Junius
Daniel M. Junius
/s/ Sam A. Samad
Sam A. Samad
/s/ M. Anne Szostak
M. Anne Szostak
/s/ Sophie V. Vandebroek, PhD
Sophie V. Vandebroek, PhD
President, Chief Executive Officer and
Director (Principal Executive Officer)
February 12, 2021
Executive Vice President, Chief Financial
Officer and Treasurer (Principal Financial
and Accounting Officer)
February 12, 2021
Non-Executive Board Chair
February 12, 2021
Director
Director
Director
Director
Director
Director
Director
Director
Director
F-56
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
Form 10-K
A copy of our Annual Report on Form 10-K for the
fiscal year ended December 31, 2020 (“2020 10-K”)
is included as part of this 2020 Annual Report, has
been furnished to all shareholders together with the
proxy statement for the 2021 Annual Meeting of
Shareholders, which is scheduled to be held on May
12, 2021, and is incorporated herein by reference.
Additionally, copies of the 2020 10-K are available
without charge on the internet by visiting the EDGAR
section of the Securities and Exchange Commission
(SEC) website (www.sec.gov/edgar.shtml) or the
Investors section of our website www.idexx.com. We
will also provide a copy of the 2020 10-K without
charge, upon written request from shareholders to
Investor Relations at the address provided below.
The copy of the 2020 10-K that is included as
part of this 2020 Annual Report is not
accompanied by the exhibits that were filed with
the SEC. These exhibits are accessible on the
internet by visiting the EDGAR section of the
SEC website (www.sec.gov/edgar.shtml) or the
Investors section of our website www.idexx.com.
We will furnish any printed copies of the exhibits to
those shareholders who request copies upon
payment to the Company of its reasonable expenses
in furnishing the exhibits. Requests for copies of the
exhibits should be made to Investor Relations at the
address provided below.
Investor Relations
IDEXX Laboratories, Inc.
One IDEXX Drive
Westbrook, Maine 04092
Tel: 207-556-8155
Email: investorrelations@idexx.com
Quarterly Reports and Proxy Statements
Our Quarterly Reports on Form 10-Q and proxy
statements can be obtained on the internet by
visiting the EDGAR section of the SEC website
(www.sec.gov/edgar.shtml) or via the Investors
section of our website www.idexx.com or by
contacting Investor Relations.
2021 Annual Meeting of Shareholders
May 12, 2021, 10:00 a.m., Eastern time
Virtual meeting only via webcast at
www.virtualshareholdermeeting.com/IDXX2021
Common Stock Listing
NASDAQ Global Select Market
Trading Symbol: IDXX
Transfer Agent and Registrar
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, New York 11219
Tel: 800-937-5449
Outside U.S. and Canada: +1-718-921-8124
Email: info@astfinancial.com
Corporate Offices
IDEXX Laboratories, Inc.
One IDEXX Drive
Westbrook, Maine 04092
Tel: 207-556-0300
www.idexx.com
References to websites are inactive textual
references only and the contents of our website are
not incorporated by reference into this 2020 Annual
Report for any purpose.