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What changed in Idexx Laboratories's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Idexx Laboratories's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+375 added−386 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-16)

Top changes in Idexx Laboratories's 2023 10-K

375 paragraphs added · 386 removed · 306 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

77 edited+21 added−13 removed67 unchanged
Biggest changeOur 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 require compliance with the RoHS Directive, the EMC Directive, and other safety requirements.
Biggest changeOther 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 EU Medical Device Regulation or In Vitro Diagnostic Medical Device Regulation, which are both strictly applicable to human use products.
We are steadfast in our focus on cultivating the diverse leaders of tomorrow and making career development opportunities more accessible across the company. Much of training programs are 100% virtual and available in multiple languages. Our career development programs are designed to build capabilities and enable career progression.
We are steadfast in our focus on cultivating the diverse leaders of tomorrow and making career development opportunities more accessible across the company. Much of our training programs are 100% virtual and available in multiple languages. Our career development programs are designed to build capabilities and enable career progression.
These OPTI analyzers are used primarily 9 in emergency rooms, operating rooms, cardiac monitoring areas, and other locations where time-critical diagnostic testing is performed within the hospital setting. The OPTI CCA-TS2 analyzer runs whole blood, plasma, and serum samples on single-use disposable cassettes that contain various configurations of analytes.
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. The OPTI CCA-TS2 analyzer runs whole blood, plasma, and serum samples on single-use disposable cassettes that contain various configurations of analytes.
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 is a USDA-permitted site, and has been approved by APHIS to manufacture USDA-licensed products. Water testing products . Our water tests are generally not subject to formal premarket regulatory approval.
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 is a USDA-permitted site, and has been approved by APHIS to manufacture specified USDA-licensed products. Water testing products . Our water tests are generally not subject to formal premarket regulatory approval.
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 for our in-clinic analyzer suite.
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 for our in-clinic analyzer suite. Integrated Diagnostic Information Management .
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 6 in diagnosing physiologic conditions. We actively sell the Catalyst One Chemistry analyzer. We continue to support our Catalyst Dx and VetTest Chemistry analyzers.
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 actively sell the Catalyst One Chemistry analyzer. We continue to support our Catalyst Dx and VetTest Chemistry analyzers.
Our competitors in the diagnostic imaging systems sector include Sound-Eklin, Antech Diagnostics, FUJIFILM, and Heska. 12 • Human point-of-care medical diagnostic products . 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.
Our competitors in the diagnostic imaging systems sector include Sound-Eklin, Antech Diagnostics, FUJIFILM, and Heska. • Human point-of-care medical diagnostic products . 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.
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, 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 14 harm.
We believe that these capabilities, enabled by the use of IDEXX products and services, improve the effectiveness and financial health of the veterinary practice. 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 .
We believe that these capabilities, enabled by the use of IDEXX products and services, improve the effectiveness and financial health of the veterinary practice. 8 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 .
We also support 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 also support 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. 6 Hematology .
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 EU Medical Devices Regulation and In Vitro Diagnostic Devices Regulation. Human COVID-19 test products .
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 EU Medical Device Regulation and In Vitro Diagnostic Medical Devices Regulation. Human COVID-19 test products .
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.
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 13 proposed approval in the Federal Register before final approval.
Our Other operating segment combines and presents our human medical diagnostic products and services business with our out-licensing arrangements because they do not meet the quantitative or qualitative thresholds for reportable segments.
Our Other operating segment combines and presents our human medical diagnostic products business with our out-licensing arrangements because they do not meet the quantitative or qualitative thresholds for reportable segments.
This Integrated Management System includes strict manufacturing processes and procedures, employee training, ongoing process 11 improvement, product quality risk management procedures, incident investigation and corrective action procedures, and internal and third-party auditing.
This Integrated Management System includes strict manufacturing processes and procedures, employee training, ongoing process improvement, product quality risk management procedures, incident investigation and corrective action procedures, and internal and third-party auditing.
Our competitors include highly-focused smaller companies and multibillion-dollar companies with small livestock and poultry diagnostics and water testing solution franchises. • Veterinary Software, Services and Diagnostic Imaging Systems .
Our competitors include highly-focused smaller companies and multibillion-dollar companies with livestock and poultry diagnostics and water testing solution franchises. • Veterinary Software, Services and Diagnostic Imaging Systems .
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.
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 product serial be submitted for test review before release to customers.
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.
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.
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 chemistry slides from Ortho to the extent Ortho is able to supply those requirements.
Certain Catalyst chemistry slides are supplied by Ortho under supply agreements that are currently set to expire in December of 2033. We are required to purchase all of our requirements for our current menu of Catalyst chemistry slides from Ortho to the extent Ortho is able to supply those requirements.
Our manufacturing and distribution facilities in Westbrook, Maine; Memphis, Tennessee; and the Netherlands, Switzerland, France and the United Kingdom are certified to the ISO 9001 quality standard, and certain of our other facilities are certified to the environmental (ISO 14001) and testing and calibration laboratory (ISO 17025) quality standards.
Our manufacturing and distribution facilities in Westbrook, Maine; Roswell, Georgia; Memphis, Tennessee; and the Netherlands, Switzerland, France, and the United Kingdom are certified to the ISO 9001 quality standard, and certain of our other facilities are certified to the environmental (ISO 14001) and testing and calibration laboratory (ISO 17025) quality standards.
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 principal products are the Colilert, Colilert-18, and Colisure tests, which detect the presence of total coliforms and E. col i 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.
The principal canine SNAP rapid assay tests include SNAP 4Dx Plus, which tests for the six vector-borne diseases causing pathogens, including Lyme disease as well as canine heartworm, and SNAP Heartworm RT, which tests for heartworm.
The principal canine SNAP rapid assay tests include SNAP 4Dx Plus, which tests for the seven vector-borne diseases causing pathogens, including Lyme disease as well as canine heartworm, and SNAP Heartworm RT, which tests for heartworm.
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 .
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. In-Clinic Diagnostic Solutions .
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.
References to our website in this Annual Report on Form 10-K are inactive textual references only and the content of our website, including our Corporate Responsibility Report, should not be deemed incorporated by reference for any purpose.
Maine’s statute requires that effective as of January 1, 2023, manufacturers of products with intentionally-added PFAS report the presence of such substances, and specifies that (subject to certain exceptions to be promulgated by the Maine Department of Environmental Protection) no product containing intentionally-added PFAS may be sold in Maine after January 1, 2030.
Maine’s statute requires that by January 1, 2025, manufacturers of products with intentionally-added PFAS report the presence of such substances, and specifies that (subject to certain exceptions to be promulgated by the Maine Department of Environmental Protection) no product containing intentionally-added PFAS may be sold in Maine after January 1, 2030.
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.
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. IDEXX also offers the following products: Enterolert .
Veterinary diagnostic products . Our veterinary diagnostic products including instruments, such as Catalyst One and ProCyte One, as well as their corresponding consumables, are veterinary medical devices regulated by the FDA under the Food, Drug and Cosmetics Act (the “FDC Act”). Other FDA regulated products include our rapid assay products such as SNAP devices and ELISA plates.
Veterinary diagnostic products . Our veterinary diagnostic products including instruments, such as Catalyst One and ProCyte One, as well as their corresponding consumables, are veterinary medical devices under the jurisdiction of the FDA under the Food, Drug and Cosmetics Act (the “FDC Act”). Other products under FDA jurisdiction include our rapid assay products such as SNAP devices and ELISA plates.
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. 16
In addition, copies of our reports filed electronically with or furnished electronically to 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. 17
In the U.S., a number of states, including Maine, where we manufacture many of our products, have also developed product reporting and/or phase-out requirements.
In addition, a number of states, including Maine, where we manufacture many of our products, have also developed product reporting and/or phase-out requirements.
Additional information about our products and services can be found on our website. Information contained on or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this annual report or any other filing we make with the SEC.
Information contained on or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this Annual Report on Form 10-K or any other filing we make with the SEC.
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.
Our Enterolert products detect the presence of enterococci in drinking, waste, and recreational waters. Enterococc i, 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.
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 FDC Act, and more specifically, are sold and distributed pursuant to FDA Emergency Use Authorization.
During 2022, OPTI manufactured, sold, and distributed 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 FDC Act, and more specifically, are sold and distributed pursuant to FDA Emergency Use Authorization.
PFAS (per- and polyfluoroalkyl substances), which may be contained in certain IDEXX products, are a subject of increasing regulatory attention. Both the EPA and the European Union have proposed draft regulations regarding PFAS, which include restrictions, data gathering and/or phase-out requirements.
PFAS (per- and polyfluoroalkyl substances), which may be contained in certain IDEXX products, are a subject of increasing regulatory attention. The European Union had proposed draft regulations regarding PFAS, which include restrictions and/or phase-out requirements.
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.
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 a sales presence in the U.S. and in major regions worldwide including Africa, Asia Pacific, Canada, Europe, and Latin America.
We regularly conduct company-wide employee surveys through a third party to collect employee input on our culture, their experiences, and workplace conditions. These survey results provide insights that help us to improve employee engagement. Our most recent global employee survey received a high level of response and indicated an 84% engagement level.
We regularly conduct company-wide employee surveys through a third party to collect employee input on our culture, their experiences, and workplace conditions. These survey results provide insights that help us to improve employee engagement. Our most recent global employee survey received a high level of response and we maintained a strong level of engagement, consistent with prior years.
We also encourage employees to enhance their career development through job-related courses and degree programs. Employee Turnover and Engagement . We monitor employee turnover and engagement to identify opportunities to strengthen our approach to human capital management. During 2022, our overall voluntary employee turnover rate was 13.3%. Our voluntary turnover among managerial employees was 6.6%.
We also encourage employees to enhance their career development through job-related courses and degree programs. Employee Turnover and Engagement . We monitor employee turnover and engagement to identify opportunities to strengthen our approach to human capital management. During 2023, our overall voluntary employee turnover rate was approximately 10%. Our voluntary turnover among managerial employees was approximately 4.5%.
We have applied for an extension for compliance with the reporting requirement. 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 U.S.
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 U.S.
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, and Bile Acid slides), VetTest slides, VetLyte consumables, LaserCyte Dx consumables, VetAutoread and ProCyte Dx analyzers and consumables, SediVue Dx urinalysis instruments and consumables, and certain components of our internally manufactured analyzers.
Significant products supplied by sole and single-source providers include certain Catalyst Dx and Catalyst One consumables (other than electrolyte consumables and the fructosamine, thyroxine, canine C-reactive protein, progesterone, SDMA, and Bile Acid slides), LaserCyte Dx consumables, ProCyte Dx analyzers and consumables, SediVue Dx urinalysis instruments and consumables, and certain components of our internally manufactured analyzers.
We also compete in certain international geographies with Zoetis, Fujifilm Holdings Corporation, Samsung Electronics, Arkray, Inc., Heska, Antech Diagnostics, Mindray, and BioNote, Inc. • Water, livestock, poultry, and dairy testing products.
We also compete in certain international geographies with Zoetis Inc.; Mars, Incorporated brands including Heska, Antech Diagnostics, Scil, and Asia Veterinary Diagnostics; Fujifilm Holdings Corporation; Samsung Electronics, Arkray, Inc.; Mindray; and BioNote, Inc. 12 • Water, livestock, poultry, and dairy testing products.
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 .
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. Outside Reference Laboratory Diagnostic and Consulting Services .
Risk Factors.” Product quality and safety . We believe that product quality and safety are essential to our business. We conduct our operations within an Integrated Management System, which encompasses our Quality Assurance program, to help ensure compliance with applicable regulations, product safety requirements and standards, and customer requirements.
We conduct our operations within an Integrated Management System, which encompasses our Quality Assurance program, to help ensure compliance with applicable regulations, product safety requirements and standards, and customer requirements.
As of December 31, 2022, we had approximately 10,780 regular full-time and part-time employees, with underrepresented minorities representing an estimated 23.7% of our U.S. employees, as follows: Self-Identified Racial or Ethnic Background (1) Black/African American 8.7 % Asian 6.5 % Hispanic/Latinx 6.1 % Other (2) 2.1 % White 75.5 % (1) Data regarding racial and ethnic background are based on self-identification by our U.S. employees; underrepresented minorities is defined as Black/African American, Asian, Hispanic/Latinx and Other.
As of December 31, 2023, we had approximately 11,000 regular full-time and part-time employees, with underrepresented minorities representing an estimated 24.4% of our U.S. employees, as follows: Self-Identified Racial or Ethnic Background (1) Black/African American 9.2 % Asian 6.7 % Hispanic/Latinx 6.2 % Other (2) 2.3 % White 74.4 % (1) Data regarding racial and ethnic background are based on self-identification by our U.S. employees; underrepresented minorities is defined as Black/African American, Asian, Hispanic/Latinx and Other.
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.
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.
Outside Reference Laboratory Diagnostic and Consulting Services . We offer commercial reference laboratory diagnostic and consulting services to veterinarians in many developed geographies worldwide, including customers in the U.S., Europe, Canada, Australia, Japan, New Zealand, South Africa, South Korea, and Brazil, through a network of approximately 80 laboratories.
We offer commercial reference laboratory diagnostic and consulting services to veterinarians in many developed geographies worldwide, including customers in the U.S., Europe, Canada, Australia, Japan, New Zealand, South Africa, and South Korea, through a network of approximately 80 laboratories. Customers use our services by submitting samples by courier or overnight delivery to one of our facilities.
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.
IDEXX Web PACS uses proprietary AI capabilities to enable optimal sharing, analysis, and storage of diagnostic images. 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.
Some of our products, including some of our Companion Animal products, may be subject to pending restriction of microplastics pursuant to REACH. In the U.S., the EPA regulates chemical use similarly to the European Union.
As part of the microplastics restrictions pursuant to REACH, some of our products, including Companion Animal products, may be subject to derogation, such as labeling and reporting. In the U.S., the EPA regulates chemical use similarly to the European Union.
Our major competitors in most geographic locations in North America are Antech Diagnostics, a Mars Petcare brand of Mars, Incorporated; Zoetis Inc. (including its wholly-owned subsidiary Abaxis, Inc.); Heska Corporation, and Samsung Electronics Co., Ltd.
Our major competitors in most geographic locations in North America are Mars, Incorporated brands Antech Diagnostics and Heska; and Zoetis Inc. (including its wholly-owned subsidiary Abaxis, Inc.).
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. 14 HUMAN CAPITAL As innovation and customer focus are important 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 by: • Building and sustaining an inclusive, ethical culture that values diversity, equity, and inclusion (“DEI”); • Offering competitive and locally relevant compensation and benefits; and • Providing growth and development opportunities.
Risk Factors.” HUMAN CAPITAL As innovation and customer focus are important 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 by: • Building and sustaining an inclusive, ethical culture that values diversity, equity, and inclusion (“DEI”); • Offering competitive and locally relevant compensation and benefits; and • Providing growth and development opportunities.
In addition, all employees have access to financial education and our employees, their spouses and adult dependents in North America, can engage with a financial coach for help reaching their personal financial goals.
In addition, all employees have access to financial education and our employees, their spouses, and adult dependents in North America, can engage with a financial coach for help reaching their personal financial goals. We continue to strengthen our approach to maximize the contributions of all through our commitment to flexible work options.
Before these products 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 Chemists Research Institute (“AOAC RI”).
Before these products 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 Chemists Research Institute (“AOAC RI”). While some foreign countries accept AOAC RI certification as part of their regulatory approval process, many countries have separate regulatory processes.
Most countries in which we sell our products impose similar registrations and/or certification requirements. The European Union was among the first to regulate and restrict the use of certain substances that we currently use in our products.
However, these systems are required to meet CE certification, which require compliance with the RoHS Directive, the EMC Directive, and other safety requirements. Most countries in which we sell our products impose similar registrations and/or certification requirements. The European Union was among the first to regulate and restrict the use of certain substances that we currently use in our products.
Other - Our Other operating segment combines and presents our human medical diagnostic products and services business (“OPTI Medical”) with our out-licensing arrangements because they do not meet the quantitative or qualitative thresholds for reportable segments. OPTI Medical.
Our primary product lines are SNAP Beta-Lactam ST and SNAPduo ST Plus, which detect certain beta-lactam and tetracycline antibiotic residues. 9 Other - Our Other operating segment combines and presents our human medical diagnostic products and services business (“OPTI Medical”) with our out-licensing arrangements because they do not meet the quantitative or qualitative thresholds for reportable segments. OPTI Medical.
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.
We continue to offer consumables to support analyzers that are not actively marketed including the LaserCyte Dx and IDEXX VetAutoread hematology analyzers. 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.
We leverage the insights gained from the survey to develop a roadmap for improving engagement and retention. 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.
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.
Our research and development expenses, which consist of salaries, employee benefits, certain licensing agreements, materials and external consulting and development costs, were $254.8 million for the year ended December 31, 2022, or 7.6% of our consolidated revenue, $161.0 million for the year ended December 31, 2021, or 5.0% of our consolidated revenue and $141.2 million for the year ended December 31, 2020, or 5.2% of our consolidated revenue.
Our research and development expenses, which consist of salaries, employee benefits, certain licensing agreements, materials and external consulting and development costs, were $191.0 million for the year ended December 31, 2023, or 5.2% of our consolidated revenue, $254.8 million for the year ended December 31, 2022, or 7.6% of our consolidated revenue and $161.0 million for the year ended December 31, 2021, or 5.0% of our consolidated revenue. 10 PATENTS AND LICENSES We actively seek to obtain patent protection in the U.S. and other countries for inventions covering our products and technologies.
These products are also subject to the regulations governing the manufacturing and marketing of medical devices in other countries in which they are sold, including the EU Medical Devices Regulation and In Vitro Diagnostic Devices Regulations. Other Chemical, Environmental, and Human Health Safety Regulations .
These products are also subject to the regulations governing the manufacturing and marketing of medical devices in other countries in which they are sold, including the EU Medical Device Regulation and In Vitro Diagnostic Medical Devices Regulation. As of the first quarter of 2023, we are not actively marketing or promoting these products and services.
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. Refer to “Part I, Item 1A.
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. Refer to “Part I, Item 1A. Risk Factors.” Product quality and safety . We believe that product quality and safety are essential to our business.
In addition, as of December 31, 2022, women represented 58% of our global employee population and were represented in leadership as follows: Percentage who self- identify as women Global People Managers 49.2 % Global Senior Leadership Team (1) 34.2 % Global Senior Executive Team (2) 21.1 % (1) Global Senior Leaders are employees in compensation grades considered Director or above.
(2) Other is defined as American Indian, Alaska Native, Native Hawaiian/Other Pacific Islander, and two or more races. 15 In addition, as of December 31, 2023, women represented 58.5% of our global employee population and were represented in leadership as follows: Percentage who self- identify as women Global People Managers 49.4 % Global Senior Leadership Team (1) 36.7 % Global Senior Executive Team (2) 18.8 % (1) Global Senior Leaders are employees in compensation grades considered Director or above.
We offer fair, competitive compensation and a wide array of competitive and locally relevant benefits (which vary by country and region) that support our employees’ overall well-being, including comprehensive health and welfare insurance; generous time-off and leave; retirement and financial support. We provide free counseling for employees and their dependents globally through our mental wellness partner and Employee Assistance Program.
We offer fair, competitive compensation and a wide array of competitive and locally relevant benefits (which vary by country and region) that support our employees’ overall well-being, including comprehensive health and welfare insurance; generous time-off and leave; retirement and financial support. We have recognition programs for the purpose of acknowledging the achievements of individual and team performance.
We promote a positive workplace environment and build a collaborative culture through in-person and virtual events, including town halls, in-office celebrations, and employee-led communities. We monitor the state of the pandemic to ensure the continued safety and health of our employees. Ensuring the health, safety, and well-being of our employees is a top priority at IDEXX.
We strive to build a collaborative culture through in-person and virtual events, including town halls, in-office celebrations, and employee-led communities. Ensuring the health, safety, and well-being of our employees is a top priority at IDEXX. We provide our employees with the training, tools, and resources they need to safeguard their health and we empower them to put safety first.
Important patents and licenses include those related to: • Catalyst consumables that began to expire in 2020 and will continue into 2035; • Catalyst instruments that expire beginning in 2026 and will continue into 2032; • 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. 10 While we consider these 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.
Important patents and licenses include those related to: • Catalyst consumables that began to expire in 2020 and will continue into 2035; • Catalyst instruments that expire beginning in 2026 and will continue into 2032; • 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.
We also sell our Alertys Ruminant Pregnancy Test, Rapid Visual Pregnancy Test and Alertys On-Farm Pregnancy Test for cattle, which can detect pregnancy 28 days after breeding using whole blood samples. 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.
We also sell our Alertys Ruminant Pregnancy Test, Rapid Visual Pregnancy Test and Alertys On-Farm Pregnancy Test for cattle, which can detect pregnancy 28 days after breeding using whole blood samples. We also offer herd health screening services to livestock veterinarians and producers. Dairy products .
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.
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.
We sell diagnostic tests, services and related instrumentation that are used to manage the health status of livestock and poultry, to improve producer efficiency. Our livestock and poultry diagnostic products are purchased by government and private laboratories that provide testing services to livestock veterinarians, producers, and processors, and also directly by livestock veterinarians and producers.
Livestock, Poultry, Herd Health Screening and Production Management . Our livestock and poultry diagnostic products are purchased by government and private laboratories that provide testing services to livestock veterinarians, producers, and processors, and also directly by livestock veterinarians and producers.
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 producer efficiency, and to ensure the quality and safety of milk. Livestock, Poultry, Heard Health Screening and Production Management .
We also offer the IDEXX Tecta System, which is an instrument that automates several steps in water testing workflow. 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 producer efficiency, and to ensure the quality and safety of milk.
The percentages provided do not add up to 100% because some U.S. employees declined to specify race and/or ethnicity. (2) Other is defined as American Indian, Alaska Native, Native Hawaiian/Other Pacific Islander, and two or more races.
The percentages provided do not add up to 100% because some U.S. employees declined to specify race and/or ethnicity.
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 ezyVet, Cornerstone, Animana, IDEXX Neo, DVMAX, and certain third-party practice management systems, and VetRadar provides workflow capability for ezyVet.
Our SmartFlow cloud offering works in conjunction with major veterinary practice management systems, including ezyVet, Cornerstone, Animana, IDEXX Neo, DVMAX, and certain third-party practice management systems, and VetRadar provides workflow capability for ezyVet. Client marketing and wellness plan management .
Refer to “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.
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.
Our practice information management systems offerings include cloud-based ezyVet, Animana, IDEXX Neo, and Cornerstone Cloud, and on-premise Cornerstone and DVMAX. To support the software system needs of practices, IDEXX provides integrated services including: Payment Solutions, Data Backup & Recovery, and Practice Supplies. Software applications that extend workflow capabilities for practices and groups .
Our practice management systems offerings include cloud-based ezyVet, Animana, IDEXX Neo, and on-premises Cornerstone. To support the software system needs of practices, IDEXX provides integrated services including Payment Solutions, Data Backup & Recovery, and Practice Supplies. Third-party integrations strengthen our practice management systems value proposition by improving user workflows and can quickly add new functionality to the practice management systems.
New OPTI products fall into FDA classifications that require notification of and review by the FDA via a 510(k) application before marketing or sale of such 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 via a 510(k) application before marketing or sale of such products.
BVDV is a common and contagious viral infection that suppresses the immune system, making the animal susceptible to a host of other infections, and 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 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, and impacting beef and dairy production yields as a result.
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.
VetConnect PLUS is a cloud-based technology that enables veterinarians to access and analyze patients’ data from all of IDEXX’s diagnostic modalities.
We also provide human testing solutions for the detection of SARS-CoV-2, the virus that causes COVID-19, as well as influenza A and B. 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, which are included in the Other segment.
We own certain drug delivery technology intellectual property, that we continue to seek to commercialize through agreements with third parties, such as pharmaceutical companies, which are included in the Other segment. Additional information about our products and services can be found on our website.
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.
The agreements also prohibit Ortho from promoting and selling these chemistry slides in the veterinary sector, excluding the EU, other than to IDEXX. 11 We purchase other analyzers and consumables under supply agreements with terms extending through 2034, which in some cases may be extended at our option.
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.
These complex regulatory requirements create risk to IDEXX’s ability to market and sell our products, our business, and our financial performance. 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.
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 sector, excluding the EU, other than to IDEXX.
The agreements provide for pricing based on purchase volumes and a fixed annual inflationary adjustment.
Development or acquisition of new products and technologies may subject us to additional areas of government regulation.
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.
While some foreign countries accept AOAC RI certification 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 by the FDA as Class I and/or Class II medical devices, and their design, manufacture, and marketing are regulated by the FDA.
Our OPTI instrument systems are classified by the FDA 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.
Removed
While we currently do not sell the LaserCyte Dx hematology analyzer and the IDEXX VetAutoread hematology analyzer, we continue to support these analyzers. Rapid Assay .
Added
Certain of these in-clinic analyzers, including the Catalyst One Chemistry analyzer, ProCyte One hematology analyzer, SediVue Dx analyzer, and IDEXX inVue Dx cellular analyzer, utilize proprietary artificial intelligence (“AI”) capabilities in their image capture systems to analyze samples.
Removed
During the third quarter of 8 2022, we acquired TECTA-PDS, a Canadian-based water testing company with customers in more than 50 countries. Through this acquisition, we are able to provide an automated rapid microbiology monitoring system to detect total coliforms and E. coli or enterococci in water.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeExamples of laws and regulations that have impacted and could, in the future, impact our business include: • The California Consumer Privacy Act, as amended by the California Privacy Rights Act (“CPRA”), as well as any similar U.S. state laws that may apply to our business operations within a respective state and/or a U.S. federal privacy law that may be passed in the future, all of which may have conflicting requirements that would make compliance challenging.
Biggest changeExamples of laws and regulations that have impacted and could, in the future, impact our business include (but are not limited to): • The California Consumer Privacy Act, as amended by the California Privacy Rights Act (“CPRA”), as well as other similar U.S. state laws that may apply to our business operations within a respective state and/or a U.S. federal privacy law that may be passed in the future, all of which may have conflicting requirements that would make compliance challenging. • The European Union’s General Data Protection Regulation (“GDPR”) and similar requirements adopted by the United Kingdom (“UK”) following the UK’s withdrawal from the European Union (“EU”) and the European Economic Area (“EEA”), which impose stringent operational requirements for controllers and processors of personal data of individuals in the EEA and UK. • The China Personal Information Protection Law, the Brazilian General Data Protection Law, the South African Protection of Personal Information Act, the Amendments to the Japanese Act on the Protection of Personal Information, the New Zealand Privacy Act, and the India Digital Personal Data Protection Act.
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 other consolidators. A similar trend exists in other regions such as Canada, Europe, Australia, New Zealand, China, and Brazil.
Major corporate hospital owners in the U.S. include Mars, Incorporated (owner of Banfield Pet Hospitals, Blue Pearl Veterinary Partners, and VCA Inc.), and National Veterinary Associates, and are joined by dozens of other consolidators. A similar trend exists in other regions such as Canada, Europe, Australia, New Zealand, China, and Brazil.
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.
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 security, confidentiality, availability and integrity of data and information.
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 or cost of capital, 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 sectors 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 and credit markets, which may experience extreme volatility that, in some cases, is unrelated or disproportionate to the operating performance of particular companies. 30
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 or cost of capital, 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 sectors 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 and credit markets, which may experience extreme volatility that, in some cases, is unrelated or disproportionate to the operating performance of particular companies. 32
Failure to meet environmental, social and governance (“ESG”) regulations, standards, or expectations or to achieve our ESG goals or targets could adversely affect our business, results of operations, financial condition, or stock price U.S. and international regulators, as well as our investors, customers, employees, and other stakeholders are increasingly focused on ESG matters, including climate-related issues; diversity, equity, and inclusion; human capital matters; and responsible sourcing, human rights, and supply chain.
Failure to meet environmental, social and governance (“ESG”) regulations, standards, or expectations or to achieve our ESG goals or targets could adversely affect our business, results of operations, financial condition, reputation, or stock price U.S. and international regulators, as well as our investors, customers, employees, and other stakeholders, are increasingly focused on ESG matters, including climate-related issues; diversity, equity, and inclusion; human capital matters; and responsible sourcing, human rights, and supply chain.
Furthermore, an 21 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.
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.
Even if our patents 20 cover products or services 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 for products or services previously covered by those patent rights.
Even if our patents cover products or services 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 for products or services previously covered by those patent rights.
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 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 computing and storage.
Economic weakness in any of our significant geographies could cause pet owners in those regions 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.
Economic weakness in any of our significant geographies could cause pet owners in those regions to forgo or defer 27 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.
Significant judgment 28 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.
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.
Any redesign or reformulation, change in our suppliers, or restrictions in our 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.
Any redesign or reformulation, change in our suppliers, restrictions in our supply of parts and components, or relocation 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.
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 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, compared to comparable prior periods, could negatively impact our revenue growth rates.
While we have taken, and may take further, actions intended to align our corporate structure and intercompany relationships with supporting our growth in international markets and maintaining operational and tax efficiency and continue to consider all of these developments within our overall tax strategy, changes in tax law in the U.S. and other countries in which we operate or have a presence may materially and adversely impact our income tax liability, provision for income taxes, effective tax rate and results of operation, and there can be no assurance that any actions we take to maintain operational and tax efficiency will effectively mitigate these impacts.
While we have taken, and may take further, actions intended to align our corporate structure and intercompany relationships with supporting our growth in international geographies and maintaining operational and tax efficiency and continue to consider all of these developments within our overall tax strategy, changes in tax law in the U.S. and other countries in which we operate or have a presence may materially and adversely impact our income tax liability, provision for income taxes, effective tax rate and results of operation, and there can be no assurance that any actions we take to maintain operational and tax efficiency will effectively mitigate these impacts.
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.
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 23 decline in testing. Changes in accepted medical protocols regarding the diagnosis of certain diseases and conditions could have a similar effect.
Furthermore, 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 has given, and in the future may give, rise to notification obligations to individuals, regulators, customers, employees, and others, and could result in governmental actions or private claims or proceedings, any of 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 differentiated technologies and have a material adverse effect on our business, financial condition, results of operations or prospects.
Furthermore, 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 has given, and in the future may give, rise to notification obligations to individuals, regulators, customers, employees, and others, and could result in governmental actions or private claims or proceedings, any of 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 differentiated technologies and have a material adverse effect on the Company, our business strategy, financial condition, results of operations or prospects.
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.
Similarly, our future operating results may vary 31 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.
Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results, and stock price. RISKS RELATED TO OUR BUSINESS AND INDUSTRY Because our business lines are highly attractive, they are also highly competitive.
Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results, prospects, and stock price. RISKS RELATED TO OUR BUSINESS AND INDUSTRY Because our business lines are highly attractive, they are also highly competitive.
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 26 cause veterinarians to defer purchasing capital items such as our instruments and systems.
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.
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.
In addition, under some contracts with suppliers we have minimum purchase obligations, and our failure to satisfy those obligations may result in 19 loss of some or all of our rights under these contracts or require us to compensate the supplier.
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 and/or productivity delays, other detrimental impacts on our operations or ability to provide products and services to our customers, the compromise or misappropriation 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, financial condition, or prospects.
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 and/or productivity delays, other detrimental impacts on our operations or ability to provide products and services to our customers, the compromise, misappropriation and/or unauthorized acquisition or disclosure 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 business strategy, competitive position, results of operations, cash flows, financial condition, or prospects.
Further, our information systems and our business partners’ and suppliers’ information systems have experienced, and will likely continue to experience, attacks by hackers and other security breaches, including, among other things, computer viruses and malware, ransomware, denial of service actions, the compromise or misappropriation of confidential or otherwise protected information 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.
Further, our information systems and our business partners’ and suppliers’ information systems have experienced, and will likely continue to experience, attacks by hackers and other security breaches, including, among other things, computer viruses and malware, ransomware, denial of service actions, the compromise, misappropriation and/or unauthorized acquisition or disclosure of confidential or otherwise protected information 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.
Various risks associated with foreign operations may impact our international sales and operations, 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, capital controls, tariffs, duties, and regulatory and licensing requirements; natural and other disasters; public health issues (such as outbreaks, epidemics, or the prospect of a pandemic); ongoing instability or changes in a country’s or region’s regulatory, economic, or political conditions, including inflation, recession, interest rate fluctuations, and actual or anticipated military or political conflicts; geopolitical crises, including terrorism, war, armed conflict or civil or military unrest (such as the current war between Russia and Ukraine); other unfavorable geopolitical conditions; security concerns; and local business and cultural factors that differ from our normal 25 standards and practices, including business practices prohibited by the Foreign Corrupt Practices Act and other anti-corruption laws and regulations.
Various risks associated with foreign operations may impact our international sales and operations, 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, capital controls, tariffs, duties, and regulatory and licensing 26 requirements; natural and other disasters; public health issues (such as outbreaks, epidemics, or the prospect of a pandemic); ongoing instability or changes in a country’s or region’s regulatory, economic, or political conditions, including inflation, recession, interest rate fluctuations, and actual or anticipated military or political conflicts; geopolitical crises, including terrorism, war, armed conflict, or civil or military unrest; 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.
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 18 and single-source suppliers are unable to obtain the components or other materials required to manufacture the products, we may be unable to supply our customers, 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.
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 our customers, which could have a material adverse effect on our results of operations and damage our reputation, and any longer-term disruptions could potentially result in the permanent loss of customers, which could reduce our recurring revenues and long-term profitability.
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.
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 and our reputation.
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.
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 geographies 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.
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.
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 or reputational effects of being out of the market for the period of any interruption in operations.
Strengthening of the rate of exchange for the U.S. dollar has a negative effect on our business We are a global business, with 35% of our revenue during the year ended December 31, 2022, attributable to sales of products and services to customers outside of the U.S.
Strengthening of the rate of exchange for the U.S. dollar has a negative effect on our business We are a global business, with 35% of our revenue during the year ended December 31, 2023, attributable to sales of products and services to customers outside of the U.S.
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.
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 geographies.
In addition, if we fail to comply with applicable ESG regulations, or our ESG practices do not meet evolving investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees, and our attractiveness as an investment, business partner, acquiror or product or service provider could be negatively impacted, which could adversely affect our business, results of operations, financial condition, or stock price.
In addition, if we fail to comply with applicable ESG regulations, or our ESG practices do not meet evolving investor, customer or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees, our relationships with some customers, and our attractiveness as an investment, business partner, acquiror or product or service provider could be negatively impacted, which could adversely affect our business, results of operations, financial condition, reputation, or stock price.
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 our customers with these products, which would have an adverse effect on our results of operations.
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 our customers with these products, which would have an adverse effect on our results of operations and damage our reputation.
For the year ended December 31, 2022, 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 23% for the year ended December 31, 2021, and 21% for the year ended December 31, 2020.
For the year ended December 31, 2023, approximately 21% of our consolidated revenue was derived from products manufactured or sourced in U.S. dollars and sold internationally in local currencies, compared to 21% for the year ended December 31, 2022, and 23% for the year ended December 31, 2021.
Other potential physical impacts due to climate change include reduced access to high-quality water in certain regions and the loss of biodiversity, which could impact future product development. These risks could disrupt our operations and supply chain, which may result in increased costs.
Other potential physical impacts due to climate change include reduced access to high-quality water in certain regions and the loss of biodiversity, which could impact future product development. These risks could disrupt our operations and supply chain, which may result in increased costs, or adversely affect our revenues.
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.
In addition, we currently purchase many products, components, and materials from sole or single sources, such as Ortho. Some of these products are proprietary and, therefore, cannot be readily or easily replaced by alternative sources.
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.
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 reference laboratories in multiple locations, including Memphis, Tennessee; Kornwestheim, Germany; West Sacramento, California; Elmhurst, Illinois; North Grafton, Massachusetts; Brisbane, Australia; Markham, Ontario; Wetherby, U.K.; and Tokyo, Japan.
Since our business is global in nature, geopolitical risks and other risks associated with doing business internationally could negatively affect our business, financial condition, and operating results For the year ended December 31, 2022, approximately 35% of our overall revenue and approximately 32%, 86% and 51% of our CAG, LPD, and Water revenues, respectively, were attributable to sales of products and services to customers outside the U.S.
Since our business is global in nature, geopolitical risks and other risks associated with doing business internationally could negatively affect our business, financial condition, and operating results For the year ended December 31, 2023, approximately 35% of our overall revenue and approximately 32%, 84% and 50% of our CAG, LPD, and Water revenues, respectively, were attributable to sales of products and services to customers outside the U.S.
While we believe that our offerings are competitively differentiated due to our innovative 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.
While we believe that our offerings are competitively differentiated due to our innovative products and services 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 22 vertical integration among our customers) would not have a negative impact on our ability to compete successfully.
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.
Interruption of operations at any of our facilities, including the ones described above, due to the occurrence of one or more of the events described above could have an adverse effect on our results of operations.
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 or improved innovative 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; • Developing and introducing new or improved innovative, data-insightful software solutions that enable our veterinary customers to improve practice management and efficiency, staff productivity, and client communications and that increase the value to our veterinary customers of our other companion animal products and services by enhancing the integration of the information and transactions of these products and services and supporting the interpretation and management of diagnostic information derived from these products and services; • 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; • Providing our veterinary customers with the medical and business tools, information, and resources that enable them to grow their practices and increase utilization of our diagnostic products and services, through increased pet visits, use of preventive care protocols, enhanced practice of real-time care, and improved practice efficiency; • 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 regions 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, as well as public health issues, including pandemics, such as the COVID-19-related pandemic impacts on the workforce; • Strengthening our sales and marketing activities to continue to grow our profitability both in and outside the U.S.; • Identifying, completing, and integrating acquisitions that enhance our existing businesses, create new businesses for us or expand the geographic areas in which we do business; 17 • 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.
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 or improved innovative 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; • Developing and introducing new or improved innovative, data-insightful software solutions that enable our veterinary customers to improve practice management and efficiency, staff productivity, and client communications and that increase the value to our veterinary customers of our other companion animal products and services by enhancing the integration of the information and transactions of these products and services and supporting the interpretation and management of diagnostic information derived from these products and services; • Maintaining premium pricing, including by effectively implementing price increases, for our 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; • Providing our veterinary customers with the medical and business tools, information, and resources that enable them to grow their practices and increase utilization of our diagnostic products and services, through increased pet visits, use of preventive care protocols, enhanced practice of real-time care, and improved practice efficiency; • 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 regions 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; • Strengthening our sales and marketing activities to continue to grow our profitability both in and outside the U.S.; • Identifying, completing, and integrating acquisitions that enhance our existing businesses, create new businesses for us or expand the geographic areas in which we do business; 18 • Continuing to incorporate AI, machine learning, and automation into our products and services and associated business processes, such as customer support and software development; • 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.
We are subject to risks associated with public health issues, including pandemics, which could have a material adverse effect on our financial condition and results of operations We are subject to risks associated with public health issues, including the COVID-19 pandemic and other events beyond our control.
We are subject to risks associated with public health issues, including pandemics, which could have a material adverse effect on our financial condition and results of operations We are subject to risks associated with public health issues, including pandemics and other events beyond our control.
Economic weakness may also reduce demand for our companion animal, water, livestock, poultry, and dairy products and services, and public health-related guidance and directives, including stay-at-home orders that may be further deployed to combat public health issues, 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.
Economic weakness may also reduce demand for our companion animal, water, livestock, poultry, and dairy products and services, and public health-related guidance and directives, including stay-at-home orders that may be deployed to combat public health issues, and severe weather conditions 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.
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 customer acceptance.
While an important aspect of our strategy is to continue, on a cost-effective and timely basis, to enhance our existing products and services (including through the incorporation of AI capabilities) and to develop and introduce new and innovative products and services, there can be no assurance that we will be able to successfully develop or introduce such products and services or that those products or services will be superior to our competitors’ products or services or otherwise achieve customer acceptance.
In extreme situations, compliance with these laws, 19 directives and regulations may require us to eliminate or discontinue the use of a part or component in one or more products, but the redesign or reformulation of such products without such parts or components may not be possible.
In extreme situations, compliance with these laws, directives and regulations may require us to eliminate or discontinue the use of a part or component in one or more products, but the redesign or reformulation of such products without such parts or components may not be possible, or cause us to relocate the production of certain products.
Given our commitment to ESG, we have publicly established certain ESG goals and targets. Our ability to achieve any ESG goal or target is subject to numerous risks, many of which are outside of our control and depend in part on third-party performance or data, and there can be no assurance that we will achieve them.
We have publicly established certain ESG goals and targets aligned with our business strategy. Our ability to achieve any ESG goal or target is subject to numerous risks, many of which are outside of our control and depend in part on third-party performance or data, and there can be no assurance that we will achieve them.
We, and some of our third-party vendors, have experienced cybersecurity attacks in the past and will likely experience further attacks in the future, potentially with more frequency. To our knowledge, none have resulted in any material adverse impact to our business or operations.
We, and some of our third-party vendors, have experienced cybersecurity attacks in the past and will likely experience further attacks in the future, potentially with more frequency. To our knowledge, none have resulted in any material adverse impact to the Company, our business strategy, results of operations or financial condition.
We manufacture many of our significant companion animal products, including our rapid assay products and certain instruments and consumables, 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 manufacture many of our significant companion animal products, including our rapid assay products and certain instruments and consumables, many of our water testing products and certain of our livestock, poultry, and dairy testing products in Southern Maine. Certain of our companion animal products, as well as our human point-of-care products, are manufactured in Roswell, Georgia.
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.
New or existing competitors may introduce new, innovative, and competitive products and services more quickly, successfully and effectively, and these products and services 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.
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.
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 or successfully incorporate AI capabilities into our products, services or associated business processes.
New competitors may emerge 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 competitors may emerge through the development of innovative new technology (such as the use of AI and machine learning), the acquisition of rights to use existing technologies or the use of existing technologies when patents protecting such existing technologies expire.
For example, the state of Maine requires reporting of intentionally-added PFAS in products, and the sale in Maine of any product containing intentionally-added PFAS will be prohibited after January 1, 2030 (subject to certain exceptions to be promulgated by the Maine Department of Environmental Protection).
For example, current law in Maine will require reporting of intentionally-added PFAS in products beginning in January 2025, and the sale in Maine of any product containing intentionally-added PFAS will be prohibited after 20 January 1, 2030 (subject to certain exceptions to be promulgated by the Maine Department of Environmental Protection).
Any transfers by us or our vendors of personal data are subject to potential regulatory scrutiny and may increase our exposure under the GDPR and similar laws which contain cross-border personal data transfer heightened requirements and restrictions.
Any transfers by us or our vendors of personal data are subject to potential regulatory scrutiny and may increase our exposure under the GDPR, UK GDPR, and similar laws which contain cross-border personal data transfer heightened requirements and restrictions (such as the new Chinese government standard contract for cross-border personal data transfers).
Privacy 27 Shield Frameworks, calling into question data transfers carried out under the European Commission's Standard Contractual Clauses (“SCCs”), which has created challenges for our transfer of personal data from the EEA, EU, and/or Switzerland to the U.S. and other third countries.
Privacy Shield Frameworks, calling into question data transfers carried out under the European Commission's (“EC”) Standard Contractual Clauses (“SCCs”), which has created challenges for our transfer of personal data from the EEA, EU, and/or Switzerland to the U.S. and other third countries. Although the EC adopted an adequacy decision for the newly-authorized EU-U.S. Data Privacy Framework (“EU-U.S.
For more information regarding data and information privacy and protection risks, refer to “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. 24 Factors and events beyond our control could disrupt our operations, supply chain, and logistics network 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); civil or military unrest; geopolitical conditions and developments; war, terrorism, armed conflict, or other man-made disasters (including cyber-war, cyber terrorism, or state-sponsored attacks arising out of the war between Russia and Ukraine); inflationary pressures, such as those the market is currently experiencing, which may increase costs for materials and finished goods; adverse or uncertain macroeconomic conditions, including fears of a global economic downturn or recession; increases in wages that drive up prices; rising interest rates; workforce disruptions; labor shortages or stoppages; the imposition of regulations, trade protection measures, tariffs, duties, import/export restrictions, quotas or embargoes on key components; transportation failures affecting the supply and shipment of materials and finished goods; and the unavailability of raw materials.
Factors and events beyond our control could disrupt our operations, supply chain, and logistics network 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); civil or military unrest; geopolitical conditions and developments; war, terrorism, armed conflict, or other man-made disasters (including cyberwar, cyberterrorism, or state-sponsored attacks); inflationary pressures, which may increase costs for materials and finished goods; adverse or uncertain macroeconomic conditions, including fears of a global economic downturn or recession; increases in wages that drive up prices; rising interest rates; workforce disruptions; labor shortages or stoppages; the imposition of regulations, trade protection measures, tariffs, duties, import/export restrictions, quotas or embargoes on key components; transportation failures affecting the supply and shipment of materials and finished goods; and the unavailability of raw materials.
Additional countries in which we operate are considering adopting or expanding laws and regulations regarding personal data. An additional area of complexity concerns the restrictions on transfers of personal data from certain countries to others. For example, in July 2020 the Court of Justice of the European Union invalidated the EU-U.S. and Swiss-U.S.
An additional area of complexity concerns the restrictions on transfers of personal data from certain countries to others. For example, in July 2020 the Court of Justice of the European Union (“CJEU”) invalidated the EU-U.S. and Swiss-U.S.
Any of these could negatively impact our business. Our success is heavily dependent on our continued differentiated 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 differentiated product and service offerings and to develop and introduce new and innovative differentiated products and services.
Our success is heavily dependent on our continued differentiated 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 differentiated product and service offerings, to continue to incorporate AI, machine learning and automation into our products and services and associated business processes and to develop and introduce new and innovative differentiated products and services.
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, and we expect that future competition will become even more intense as new products, services and technologies become available and new competitors enter the space.
Increased competition from and technological advances by our competitors could negatively affect our operating results We face intense competition, and we expect that future competition will become even more intense as new products, services and technologies become available, the use of AI and machine learning expands, and new competitors enter the space.
Increased frequency and severity of extreme weather events could impact our suppliers, manufacturing locations, logistics, and/or customers in the short term. Such impacts include losses incurred as a result of physical damage to facilities, loss or spoilage of inventory, and business interruption caused by such natural disasters and extreme weather events.
Increased frequency and severity of extreme weather events could adversely impact our suppliers, manufacturing locations, logistics, and/or customers. Such impacts may include losses incurred as a result of physical damage to facilities, loss or spoilage of inventory, and business interruption and disruption (e.g., decrease in companion animal clinical visits and diagnostic utilization).
While we largely avoided any significant disruption to the business as a result of the COVID-19 pandemic, a future public health issue, pandemic or outbreak of COVID-19 could lead to delays in the manufacturing and supply of products, which could have a material adverse effect on our business and results of operations.
These disruptions could also cause economic slowdowns or increased economic uncertainty. A future public health issue, pandemic, or outbreak of COVID-19 could lead to delays in the manufacturing and supply of products, which could have a material adverse effect on our business and results of operations.
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. Refer to “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.
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. Refer to “Part II, Item 7A.
The continued use of remote working and hybrid work-from-home arrangements may additionally result in some increased risk of attacks associated with a number of our employees 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, such as IDEXX.
The continued use of remote working and hybrid work-from-home arrangements may additionally result in some increased risk of attacks associated with a number of our employees accessing our data and systems remotely.
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. 22 Our limited experience and small scale in the human point-of-care and related human laboratory diagnostics sector could inhibit our success in this sector We have limited experience in the human point-of-care and related human laboratory medical diagnostics sector, and we operate at a small scale in this area.
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 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.
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. Specifically, many jurisdictions have committed to adopting the Organisation for Economic Co-operation and Development (“OECD”) Pillar Two Global Minimum Tax.
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. 29 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.
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.
Moreover, any future public health issue such as a resurgence in COVID-19 infections, including due to new variants of the virus for which current vaccines may not be effective, could result in the imposition of new governmental restrictions, quarantine requirements or other measures to slow the spread of the virus, which could result in closures or other restrictions that significantly disrupt our operations or those of our third-party distributors, suppliers or other service providers, or otherwise adversely affect our customers’ businesses or operations, or result in economic weakness or slowdowns in one or more of our key geographies, any of which could adversely affect our financial condition. 23 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.
Moreover, any future public health issue such as a resurgence in COVID-19 infections, including due to new variants of the virus for which current vaccines may not be effective, could result in the imposition of new governmental restrictions, quarantine requirements or other measures to slow the spread of the virus, which could result in closures or other restrictions that significantly disrupt our operations or those of our third-party distributors, suppliers or other service providers, or otherwise adversely affect our customers’ businesses or operations, or result in economic weakness or slowdowns in one or more of our key geographies, any of which could adversely affect our financial condition.
While we maintain a program to monitor, assess, and comply with applicable global data privacy laws, 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.
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 could be deemed to be inconsistent with our current global privacy policy and data protection practices. 28 While we maintain a program to monitor, assess, and comply with applicable global data privacy laws, 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.
Regulators in the U.S., Europe and elsewhere are considering or have proposed or adopted various laws, directives or regulations regarding ESG matters, which include specific, target-driven disclosure requirements or obligations. Furthermore, our investors and other stakeholders have additional (and sometimes different) ESG expectations for companies such as IDEXX.
Regulators in the U.S., Europe, and elsewhere are considering or have proposed or adopted various laws, directives or regulations regarding ESG matters, which include specific, target-driven disclosure requirements or obligations, including the EU Corporate Sustainability Reporting Directive and the proposed EU Corporate Sustainability Due Diligence Directive.
Meeting these emerging and evolving regulations, standards and expectations will require us to make investments, incur compliance costs and create new practices, processes, and procedures.
Furthermore, our investors, customers and other stakeholders have additional (and sometimes different) ESG expectations for companies such as IDEXX. Meeting these emerging and evolving regulations, standards and expectations will require us to make investments, incur compliance costs and create new practices, processes, and 29 procedures.
For more information about the risks related to the protection of our proprietary rights in our products and services, refer to “Our success is heavily dependent on our continued differentiated product and service innovation” below. We are also subject to a variety of federal, state, local, and international laws and regulations governing our global business practices.
For more information about the risks related to the protection of our proprietary rights in our products and services, refer to “Our success is heavily dependent on our continued differentiated product and service innovation” below. There has been a recent focus on laws and regulations related to artificial intelligence, including the current U.S. presidential administration, the U.S.
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 and could otherwise materially adversely affect our business, reputation, results of operations, and financial condition.
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 and could otherwise materially adversely affect our business, reputation, results of operations, and financial condition. 24 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.
Our foreign currency hedging activities (refer to “Part II, Item 8. Financial Statements and Supplementary Data, Note 19.
Quantitative and Qualitative Disclosures About Market Risk” included in this Annual Report on Form 10-K for additional information regarding currency impact. 30 Our foreign currency hedging activities (refer to “Part II, Item 8. Financial Statements and Supplementary Data, Note 19.
Pet owners generally pay cash out of pocket for health care services for their pets from veterinary practices. The ongoing impacts of the global COVID-19 pandemic, inflation, rising interest rates, fear of a global economic downturn or recession and other economic factors, have increased economic uncertainty and caused economic slowdowns that may continue or recur.
Pet owners generally pay cash out of pocket for health care services for their pets from veterinary practices.
Removed
This sector differs in many respects from the veterinary diagnostic sector. 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.
Added
Issues in the use of AI in our product offerings may result in reputational harm or liability We have built, and expect to continue to build, AI into many of our product and service offerings, and we expect this element of our business to grow.
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Our limited experience and small scale in the human point-of-care and laboratory medical diagnostics sector could negatively affect our ability to successfully manage the risks and features of this sector that differ from the veterinary diagnostic sector.
Added
We envision a future in which responsible AI operating in our devices, applications, and the cloud, helps our customers be more productive in their business activities and interactions with consumers. As with many disruptive innovations, AI presents risks and challenges that could affect its adoption, and therefore our business. AI algorithms and models may be flawed.
Removed
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 sector comparable to the results we have achieved in the veterinary diagnostic sector.
Added
Datasets may be insufficient or contain information that is non-representative, infringing, or otherwise subject to legal challenge.
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These disruptions could also cause economic slowdowns or increased economic uncertainty.
Added
Potential government regulation related to AI use may also foreclose certain areas of AI use, cause us to modify how we use AI, and increase the burden and cost of research and development in this area, and failure to properly remediate AI usage issues may cause public confidence in AI to be undermined, which could slow adoption of AI in our offerings.
Removed
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 could be deemed to be inconsistent with our current global privacy policy and data protection practices.
Added
The rapid evolution of AI will require the application of resources to develop, test, and maintain our products and services to help ensure that AI is implemented in a manner to minimize unintended, harmful impact and to comply with applicable law.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePrimary Facility Locations Location Functions Own/Lease Westbrook, Maine Worldwide Headquarters, principal executive offices Own Hoofddorp, Netherlands Distribution center, warehousing, International administrative offices Lease Memphis, Tennessee Distribution Center and Reference Lab Lease Kornwestheim, Germany Reference Lab Own Wetherby, United Kingdom Reference Lab Lease Newmarket, United Kingdom Water manufacturing Lease Bern, Switzerland LPD manufacturing Lease Montpellier, France LPD manufacturing Lease Roswell, Georgia OPTI Medical manufacturing 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.
Biggest changePrimary Facility Locations Location Functions Own/Lease Westbrook, Maine Worldwide Headquarters, principal executive offices Own Hoofddorp, Netherlands Distribution center, warehousing, International administrative offices Lease Baar, Switzerland EMEA administrative offices Lease Scarborough, Maine Water, LPD and Supply Chain Own Memphis, Tennessee Distribution Center and Reference Lab Lease North Grafton, Massachusetts Reference Lab Own West Sacramento, California Reference Lab Own Kornwestheim, Germany Reference Lab Own Wetherby, United Kingdom Reference Lab Lease Newmarket, United Kingdom Water manufacturing Lease Bern, Switzerland LPD manufacturing Lease Montpellier, France LPD manufacturing Lease Roswell, Georgia OPTI Medical manufacturing 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, Asia, and South Africa.
Removed
We are also in the process of completing the construction of a new facility located in Scarborough, Maine to support the growth of our Water and LPD lines of business. The construction of this facility is expected to be completed in 2023.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePurchases of Equity Securities by the Issuer During the three months ended December 31, 2022, 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, 2022 to October 31, 2022 186,797 $ 339.26 186,797 3,041,892 November 1, 2022 to November 30, 2022 12,650 $ 388.07 12,650 3,029,242 December 1, 2022 to December 31, 2022 123 $ 439.17 — 3,029,242 Total 199,570 (2) 199,447 3,029,242 (1) As of December 31, 2022, 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.
Biggest changePurchases of Equity Securities by the Issuer During the three months ended December 31, 2023, 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, 2023 to October 31, 2023 27,000 $ 404.85 27,000 2,936,817 November 1, 2023 to November 30, 2023 62,509 $ 426.15 62,509 2,874,308 December 1, 2023 to December 31, 2023 141 $ 482.60 — 2,874,308 Total 89,650 (2) 89,509 2,874,308 (1) As of December 31, 2023, 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.
During the year ended December 31, 2022, we repurchased approximately 2.0 million shares of our common stock in transactions made pursuant to our repurchase program and received approximately 0.02 million shares of our 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.
During the year ended December 31, 2023, we repurchased approximately 0.2 million shares of our common stock in transactions made pursuant to our repurchase program and received approximately 0.02 million shares of our 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.
Refer to “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, 2022, included in this Annual Report on Form 10-K for further information. 32 Dividends We have never declared or paid any cash dividends on our common stock.
Refer to “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, 2023, included in this Annual Report on Form 10-K for further information. 36 Dividends We have never declared or paid any cash dividends on our common stock.
This graph assumes the investment of $100 on December 31, 2017, 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 2017 to 2022.
This graph assumes the investment of $100 on December 31, 2018, 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 2018 to 2023.
There were no other repurchase programs outstanding during the three months ended December 31, 2022, and no repurchase programs expired during the period.
There were no other repurchase programs outstanding during the three months ended December 31, 2023, and no repurchase programs expired during the period.
(2) During the three months ended December 31, 2022, we received 742 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.
(2) During the three months ended December 31, 2023, we received 141 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.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is quoted on the NASDAQ Global Select Market under the symbol IDXX. Holders of Common Stock As of February 10, 2023, there were 390 holders of record of our common stock.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is quoted on the NASDAQ Global Select Market under the symbol IDXX. Holders of Common Stock As of February 12, 2024, there were 362 holders of record of our common stock.
Historic stock price performance should not be relied on as being indicative of future stock price performance. 2017 2018 2019 2020 2021 2022 IDEXX Laboratories, Inc. $100.00 $118.95 $166.98 $319.65 $421.06 $260.88 NASDAQ Index $100.00 $97.16 $132.81 $192.47 $235.15 $158.65 S&P 500 Index $100.00 $93.76 $120.84 $140.49 $178.27 $143.61 S&P 500 Health Care Index $100.00 $106.47 $128.64 $145.93 $184.07 $180.47
Historic stock price performance should not be relied on as being indicative of future stock price performance. 2018 2019 2020 2021 2022 2023 IDEXX Laboratories, Inc. $100.00 $140.38 $268.72 $353.97 $219.31 $298.38 NASDAQ Index $100.00 $136.69 $198.10 $242.03 $163.28 $236.17 S&P 500 Index $100.00 $131.49 $155.68 $200.37 $164.08 $207.21 S&P 500 Health Care Index $100.00 $120.82 $137.07 $172.89 $169.51 $172.99

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeUnless 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. 43 Twelve Months Ended December 31, 2022, Compared to Twelve Months Ended December 31, 2021 Total Company The following table presents revenue by operating segment by U.S. and non-U.S., or international geographies: For the Years Ended December 31, Net Revenue (dollars in thousands) 2022 2021 Dollar Change Reported Revenue Growth (1) Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth (1) CAG $ 3,058,793 $ 2,889,960 $ 168,833 5.8 % (3.3 %) 0.7 % 8.4 % United States 2,073,222 1,881,887 191,335 10.2 % — 0.9 % 9.3 % International 985,571 1,008,073 (22,502) (2.2 %) (9.2 %) 0.3 % 6.7 % Water $ 155,720 $ 146,505 $ 9,215 6.3 % (4.0 %) 0.5 % 9.7 % United States 76,875 70,654 6,221 8.8 % — — 8.8 % International 78,845 75,851 2,994 3.9 % (7.8 %) 1.1 % 10.6 % LPD $ 122,607 $ 135,887 $ (13,280) (9.8 %) (5.8 %) — (4.0 %) United States 16,633 15,626 1,007 6.4 % — — 6.4 % International 105,974 120,261 (14,287) (11.9 %) (6.4 %) — (5.4 %) Other $ 30,204 $ 43,008 $ (12,804) (29.8 %) 0.2 % — (30.0 %) Total Company $ 3,367,324 $ 3,215,360 $ 151,964 4.7 % (3.4 %) 0.7 % 7.4 % United States 2,182,959 1,995,683 187,276 9.4 % — 0.8 % 8.5 % International 1,184,365 1,219,677 (35,312) (2.9 %) (8.7 %) 0.3 % 5.5 % (1) Reported revenue growth and organic revenue growth may not recalculate due to rounding.
Biggest changeUnless 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. 47 Twelve Months Ended December 31, 2023, Compared to Twelve Months Ended December 31, 2022 Total Company The following table presents revenue by operating segment by U.S. and non-U.S., or international geographies: For the Years Ended December 31, Net Revenue (dollars in thousands) 2023 2022 Dollar Change Reported Revenue Growth (1) Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth (1) CAG $ 3,352,356 $ 3,058,793 $ 293,563 9.6 % (0.2 %) — 9.8 % United States 2,282,507 2,073,222 209,285 10.1 % — — 10.1 % International 1,069,849 985,571 84,278 8.6 % (0.6 %) — 9.1 % Water $ 168,149 $ 155,720 $ 12,429 8.0 % (0.3 %) 1.1 % 7.2 % United States 83,838 76,875 6,963 9.1 % — 0.5 % 8.5 % International 84,311 78,845 5,466 6.9 % (0.6 %) 1.6 % 5.9 % LPD $ 121,659 $ 122,607 $ (948) (0.8 %) — — (0.8 %) United States 18,961 16,633 2,328 14.0 % — — 14.0 % International 102,698 105,974 (3,276) (3.1 %) 0.1 % — (3.1 %) Other $ 18,789 $ 30,204 $ (11,415) (37.8 %) — — (37.8 %) Total Company $ 3,660,953 $ 3,367,324 $ 293,629 8.7 % (0.2 %) 0.1 % 8.8 % United States 2,391,427 2,182,959 208,468 9.5 % — — 9.5 % International 1,269,526 1,184,365 85,161 7.2 % (0.5 %) 0.1 % 7.6 % (1) Reported revenue growth and organic revenue growth may not recalculate due to rounding.
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.
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 sales mix of recurring and non-recurring revenues in a particular period will impact our gross margins. Diagnostic Capital Revenue.
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. Comparisons to Prior Periods . Our fiscal years end on December 31.
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. Comparisons to Prior Periods . Our fiscal years end on December 31.
The obligations under the senior notes may be accelerated upon the occurrence of an event of default under the applicable Senior Note Agreements, 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, 53 bankruptcy and insolvency-related defaults, defaults relating to judgments, certain events related to employee pension benefit plans under ERISA, the failure to pay specified indebtedness, and cross-acceleration to specified indebtedness.
The obligations under the senior notes may be accelerated upon the occurrence of an event of default under the applicable Senior Note Agreements, 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 ERISA, the failure to pay specified indebtedness, and cross-acceleration to specified indebtedness.
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.
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, 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.
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.
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, 40 storing, and sharing multi-modality diagnostic images. We derive relatively higher margins from our subscription-based products.
Our Other operating segment combines and presents our human medical diagnostic products and services business (“OPTI Medical”) with our out-licensing arrangements because they do not meet the quantitative or qualitative thresholds for reportable segments. Refer to “Part II, Item 8. Financial Statements and Supplementary Data, Note 3. Revenue Recognition and Note 17.
Our Other operating segment combines and presents our human medical diagnostic products and services business (“OPTI Medical”) with our out-licensing arrangements because they do not meet the quantitative or qualitative thresholds for reportable segments. Refer to “Part II, Item 8. Financial Statements and Supplementary Data, Note 3. Revenue and Note 17.
If these up-front incentives are 38 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.
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.
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.
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 diagnostic testing purposes.
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.
As a 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.
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.
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 arrangement.
Pet Health Network Pro online client communication and education service complements the entire IDEXX 36 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.
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.
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.
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 43 determination was made.
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.
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 compared to reductions in the current or prior periods.
On October 20, 2022, pursuant to the terms of the Credit Facility, the term lenders thereunder provided us, as borrower, an incremental term loan in an aggregate principal amount of $250 million (the “Term Loan”). The Term Loan matures on October 20, 2025.
On October 20, 2022, pursuant to the terms of the Credit Facility, the term lenders thereunder provided us, as borrower, an incremental term loan in an aggregate principal amount of $250.0 million (the “Term Loan”). The Term Loan matures on October 20, 2025.
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.
Similar to our veterinary instruments and 41 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.
Although we have several patents and licenses of patents and technologies from third parties that expired during 2022, and several that are expected to expire in 2023 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.
Although we have several patents and licenses of patents and technologies from third parties that expired during 2023, and several that are expected to expire in 2024 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.
We allocate total consideration to identified performance obligations, including the customer’s right to earn rebates on future purchases, which is deferred and subsequently recognized upon the purchase of products and services, partly offsetting 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.
We allocate total consideration to identified performance obligations, including the customer’s right to earn rebates on future purchases, which is deferred and subsequently recognized upon the purchase of products and services, partly offsetting 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 arrangements.
We further augment our product development and customer service efforts with sales and 35 marketing programs that enhance medical awareness and understanding regarding certain diseases and the importance of diagnosti c testing. The prevalence of in-clinic testing, as opposed to outside reference laboratories such as IDEXX Reference Laboratories, may vary by region.
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 diagnosti c testing. 39 The prevalence of in-clinic testing, as opposed to outside reference laboratories such as IDEXX Reference Laboratories, may vary by region.
Our portfolio of practice management offerings is designed to serve the full range of customers primarily within the North American, Australian, New Zealand, and European regions. Cornerstone, ezyVet, Animana, IDEXX Neo, and DVMAX practice management systems provide superior integrated information solutions, backed by exceptional customer support and education.
Our portfolio of practice management offerings is designed to serve the full range of customers primarily within the North American, Australian, New Zealand, and European regions. Cornerstone, ezyVet, Animana, IDEXX Neo, and DVMAX practice management systems provide integrated information solutions, backed by customer support and education.
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.
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. 56 Investing Activities .
The discussion of our financial condition and results of operations and liquidity and capital resources for the year ended December 31, 2020, and year-over-year comparisons between 2021 and 2020, is included in our Annual Report on Form 10-K for the year ended December 31, 2021, within Item 7.
The discussion of our financial condition and results of operations and liquidity and capital resources for the year ended December 31, 2021, and year-over-year comparisons between 2022 and 2021, is included in our Annual Report on Form 10-K for the year ended December 31, 2022, within Item 7.
Segment Reporting” to the consolidated financial statements for the year ended December 31, 2022, 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.
Segment Reporting” to the consolidated financial statements for the year ended December 31, 2023, 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.
Conversely, if 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.
Conversely, if during a quarter or 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.
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.
The net effects 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.
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, 2022, we were in compliance with the covenants of the Senior Note Agreements.
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. As of December 31, 2023, we were in compliance with the covenants of the Senior Note Agreements and Credit Facility.
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.
Our Cornerstone and DVMAX customer base continues to be an important driver of growth through diagnostic integrations and 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.
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 timing and amount of revenue recognition as described above.
Additionally, certain customer arrangements 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 arrangements. Differences between estimated and actual customer purchases may impact the timing and amount of revenue recognition as described above.
IDEXX Web PACS is integrated with Cornerstone, ezyVet, IDEXX Neo, DVMAX, and IDEXX VetConnect PLUS to provide centralized access to diagnostic imaging results alongside patient diagnostic results from any internet connected device.
IDEXX Web PACS is integrated with Cornerstone, ezyVet, IDEXX Neo, DVMAX, and IDEXX VetConnect PLUS to provide centralized access to diagnostic imaging results alongside patient diagnostic results from any internet connected device. Systems and hardware .
Refer to “Part II, Item 8. Financial Statements and Supplementary Data, Note 13. Debt for more information about our Credit Facility and for more information on our repayment of our Senior Notes.
Refer to “Part II, Item 8. Financial Statements and Supplementary Data, Note 13. Debt” for more information about our Credit Facility and for more information on our repayment of our Senior Notes.
For the year ended December 31, 2022, recurri ng diagnostic revenue, which is both highly durable and profitable, accounted for approximately 79% 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.
For the year ended December 31, 2023, recurri ng diagnostic revenue, which is both highly durable and profitable, accounted for approximately 80% 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.
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.
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 arrangements.
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, 2022, included in this Annual Report on Form 10-K, respectively. Financial Covenant .
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, 2023, included in this Annual Report on Form 10-K, respectively. 58 Financial Covenant .
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. Under the $1.25 billion Credit Facility, the $1.0 billion unsecured credit line matures on December 9, 2026 and requires no scheduled prepayments before that date.
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. Under the $1.25 billion Credit Facility, the $1.0 billion unsecured credit line matures on December 9, 2026 and requires no scheduled prepayments before that date.
For the year ended December 31, 2022, 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 23% for the year ended December 31, 2021 and 21% for the year ended December 31, 2020.
For the year ended December 31, 2023, approximately 21% of our consolidated revenue was derived from products manufactured or sourced in U.S. dollars and sold internationally in local currencies, compared to 21% for the year ended December 31, 2022, and 23% for the year ended December 31, 2021.
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. As of December 31, 2022, current liabilities include $579.0 million outstanding borrowing on our Credit Facility and the current portion of long-term debt of $75.0 million recorded as current liabilities.
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. As of December 31, 2023, current liabilities include $250.0 million outstanding borrowing on our Credit Facility and the current portion of long-term debt of $75.0 million recorded as current liabilities.
Our net liability for uncertain tax positions was $25.8 million as of December 31, 2022, and $25.5 million as of December 31, 2021, which includes estimated interest expense and penalties. Refer to “Part II, Item 8. Financial Statements and Supplementary Data, Note 14. Income Taxes” in the accompanying Notes to consolidated financial statements for more information.
Our net liability for uncertain tax positions was $25.0 million as of December 31, 2023, and $25.8 million as of December 31, 2022, which includes estimated interest expense and penalties. Refer to “Part II, Item 8. Financial Statements and Supplementary Data, Note 14. Income Taxes” in the accompanying Notes to consolidated financial statements for more information.
Revenue Recognition” to the consolidated financial statements for the year ended December 31, 2022, 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 where customers purchase combinations of IDEXX products and services.
Revenue” to the consolidated financial statements for the year ended December 31, 2023, 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 where customers purchase combinations of IDEXX products and services.
Our proactive approach to managing our operational processes, including forward planning with a focus on working closely with our suppliers and logistics partners, has enabled us to maintain continued high levels of product and service availability and customer service.
Our proactive approach to managing our operational processes, including forward planning with a focus on working closely with our suppliers and logistics partners, enables us to maintain continued high levels of product and service availability and customer service.
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.
If during a quarter or 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.
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.
We 42 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 arrangements.
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.
Our digital radiography systems enable low-dose radiation image capture without sacrificing clear, high-quality diagnostic images, reducing the risk posed by excess radiation exposure for veterinary professionals. Recurring Revenue .
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 business acquisitions. At December 31, 2022, we had $112.5 million of cash and cash equivalents, as compared to $144.5 million on December 31, 2021.
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 business acquisitions. At December 31, 2023, we had $453.9 million of cash and cash equivalents, compared to $112.5 million on December 31, 2022.
We also have purchase obligations that include 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, 2022, we had approximately $232.4 million in purchase obligations due in 2023.
We also have purchase obligations that include 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, 2023, we had approximately $196.3 million in purchase obligations due in 2024.
Accordingly, we did not record any liabilities for these obligations at December 31, 2022 and 2021, and do not anticipate any future payments for these guarantees. As of December 31, 2022, our remaining obligation associated with the deemed repatriation tax resulting from the Tax Cut and Jobs Act of 2017 is $27.0 million.
Accordingly, we did not record any liabilities for these obligations at December 31, 2023 and 2022, and do not anticipate any future payments for these guarantees. As of December 31, 2023, our remaining obligation associated with the deemed repatriation tax resulting from the Tax Cut and Jobs Act of 2017 is $21.8 million.
If a customer breaches their 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.
If a customer breaches their agreement, they are required to refund all or a portion of the up-front consideration, or make other repayments, remedial actions, or both.
Differences between estimated and actual customer purchases may impact the timing and amount of revenue recognition during the term of the customer contract, and a 10% change in these estimates would have increased or reduced contract assets and cumulative revenue related to these programs by approximately $4.3 million at December 31, 2022.
Differences between estimated and actual customer purchases may impact the timing and amount of revenue recognition during the term of the customer arrangement, and a 10% change in these estimates would have increased or reduced contract assets and cumulative recognized revenue related to these programs by approximately $5.5 million at December 31, 2023.
Differences between estimated and actual customer purchases may impact the timing and amount of revenue recognition during the term of the customer contract, and a 10% change in these estimates would have increased or reduced deferred revenue and cumulative revenue related to these programs by approximately $1.1 million at December 31, 2022.
Differences between estimated and actual customer purchases may impact the timing and amount of revenue recognition during the term of the customer arrangement, and a 10% change in these estimates would have increased or reduced cumulative recognized revenue related to these programs by approximately $1.3 million at December 31, 2023.
We believe that building and maintaining a well-managed and disciplined infrastructure have helped minimize impacts of the current supply chain constraints, including product and component availability issues, logistics challenges, including extended shipping periods and delays, and inflationary pressures that are currently occurring worldwide.
We believe that building and maintaining a well-managed and disciplined infrastructure have helped minimize impacts of supply chain constraints, including product and component availability issues, logistics challenges, including extended shipping periods and delays, and inflationary pressures.
Our purchase obligations beyond 2023 are approximately $50.4 million. These purchase obligation amounts do not include amounts recorded in accounts payable as of December 31, 2022. The expected timing of payments of our purchase obligations is estimated based on current information.
Our purchase obligations beyond 2024 are approximately $55.2 million. These purchase obligation amounts do not include amounts recorded in accounts payable as of December 31, 2023. The expected timing of payments of our purchase obligations is estimated based on current information.
Total Company Revenue . The increase in organic revenue reflects higher realized prices and continued demand for companion animal diagnostics globally, supported by higher CAG Diagnostics recurring revenue, primarily in the U.S. Increases in our subscription-based veterinary software and diagnostic imaging services also contributed to higher revenue for the year.
Total Company Revenue . The increase in organic revenue reflects benefits from higher realized prices and continued demand for companion animal diagnostics globally, supported by increases in CAG Diagnostics recurring revenues. Increases in our veterinary software and diagnostic imaging services recurring revenue also contributed to higher revenue supported by demand for subscription-based software.
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.
Repurchases of our common stock vary depending upon the level of other investing and deployment activities, as well as share price and prevailing interest rates. 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.
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, 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.
Differences between estimated and actual customer rebates may impact the timing and amount of revenue recognition during the term of the customer contract, and a 10% change in these estimates would have increased or reduced deferred revenue and cumulative revenue related to these programs by approximately $2.8 million at December 31, 2022.
Differences between estimated and actual customer rebates may impact the timing and amount of revenue recognition during the term of the customer arrangement, and a 10% change in these estimates would have increased or reduced deferred revenue and cumulative recognized revenue related to these programs by approximately $0.1 million at December 31, 2023.
We also had an increase in taxes paid during 2022, primarily due to changes imposed by the 2017 Tax Cuts and Jobs Act, including the relevant provision that requires U.S. research and development expenditures incurred after January 1, 2022, to be capitalized and amortized over a five-year period.
We also made higher tax payments during 2022, primarily due to changes imposed by the 2017 Tax Cuts and Jobs Act, including the relevant provision that requires U.S. research and development expenditures incurred after January 1, 2022 to be capitalized and amortized over a five-year period.
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.
We market our Animana offering to customers primarily throughout Europe. 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 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.
Our customer commitment arrangements that include free or discounted instruments and systems, such as our IDEXX 360 program, provide customers with free or discounted instruments or systems upon entering into multi-year arrangements to purchase annual minimum amounts of products and services.
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 effectiveness and profitability. We market Cornerstone, ezyVet, IDEXX Neo, and DVMAX practice management systems to customers primarily in North America, Australia, and New Zealand. We market our Animana offering to customers primarily throughout Europe.
These practice management systems support the veterinarian’s ability to practice better medicine and achieve the practice’s business objectives, including a quality client experience, staff efficiency and practice effectiveness and profitability. We market Cornerstone, ezyVet, IDEXX Neo, and DVMAX practice management systems to customers primarily in North America, Australia, and New Zealand.
Business, Marketing and Distribution” included in this Annual Report on Form 10-K for additional information regarding distribution channels. Currency Impact .
Business, Marketing and Distribution” included in this Annual Report on Form 10-K for additional information regarding distribution channels. Effects of Patent Expiration .
Below is a table showing active installed base units of our premium diagnostic instruments as of the years ended December 31, 2022, 2021, and 2020: (units in thousands) Installed Base Instrument December 31, 2022 December 31, 2021 December 31, 2020 Catalyst 63.1 56.6 49.7 Premium Hematology 43.1 38.2 34.6 SediVue 15.6 13.2 10.7 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.
Many instruments are placed through our customer commitment arrangements in exchange for multi-year customer commitments to purchase recurring products and services. 38 Below is a table showing active installed base units of our premium diagnostic instruments as of the years ended December 31, 2023, 2022, and 2021: (units in thousands) Installed Base Instrument December 31, 2023 December 31, 2022 December 31, 2021 Catalyst 69.1 63.1 56.6 Premium Hematology 47.8 43.1 38.2 SediVue 18.1 15.6 13.2 Our long-term success in the continuing growth of our CAG recurring diagnostic products 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 annual price increases based on our differentiated products and the growing value of our diagnostic offering.
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.
Our rebate arrangements provide customers the opportunity to earn future rebates based on the volume of products and services they purchase over the term of the arrangement.
Gross profit increased due to higher sales volumes and a 70 basis point increase in the gross profit margin. The impact from foreign currency movements increased the gross profit margin by approximately 50 basis points, primarily from the impact of hedge gains in the current year as compared to hedge losses in the prior year.
Gross profit increased due to higher pricing and sales volumes, which supported a 30 basis point increase in the gross profit margin. The impact from foreign currency movements decreased the gross profit margin by approximately 60 basis points, primarily from the impact of lower hedge gains in the current year compared to the prior year.
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.
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.
The following table presents additional key information concerning working capital: For the Three Months Ended December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 Days sales outstanding (1) 43.4 43.4 43.2 42.0 42.4 Inventory turns (2) 1.3 1.3 1.5 1.6 2.0 (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.
The currency control restricted cash is generally available for use within the country where it is held. 55 The following table presents additional key information concerning working capital: For the Three Months Ended December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 Days sales outstanding (1) 46.1 45.6 43.9 42.9 43.4 Inventory turns (2) 1.3 1.3 1.3 1.3 1.3 (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.
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.
Up-front incentives to customers are not made in exchange for distinct goods or services and are capitalized as consideration paid to customers (previously referred to 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 arrangement.
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.
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.
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.
Our customer commitment arrangements that include up-front consideration paid to customers provide customers with incentives in the form of IDEXX Points or, from time to time, cash, upon entering into multi-year arrangements to purchase annual minimum amounts of future products or services.
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 40 jurisdiction.
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.
This projected 1% increase in the effective tax rate, over the full year 2022 effective tax rate, is primarily due to lower estimated tax benefits from share-based compensation. 50 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.
This projected increase in the effective tax rate over the full year 2023 effective tax rate, is primarily due to the non-recurring reductions in our December 31, 2023, effective tax rate associated with the release of valuation allowances. 54 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 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 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. Our large practice management systems installed base provides access to veterinary channel transaction activity, enabling a syndicated data offering.
At December 31, 2021, we had $73.5 million in outstanding under the Credit Facility. The general availability of funds under the Credit Facility was further reduced by $1.5 million for letters of credit that were issued primarily in connection with our workers' compensation policy at December 31, 2022 and $1.4 million at December 31, 2021.
The general availability of funds under the Credit Facility was further reduced by $1.5 million for letters of credit that were issued primarily in connection with our workers' compensation policy at December 31, 2023, and 2022. The Credit Facility contains affirmative, negative, and financial covenants customary for financings of this type.
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.
Although this data is a limited sample, and may be susceptible to short-term impacts, 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. 45 Economic conditions can also affect the purchasing decisions of our Water and LPD business customers.
Gross Profit . Gross profit for Water increased due to higher sales volumes and a 160 basis point increase in the gross profit margin, which reflected a 210 basis point increase due to foreign currency movements, primarily from the impact of hedge gains in the current year compared to hedge losses in the prior year.
Gross profit increased primarily due to higher pricing and sales volumes, which supported a 60 basis point increase in the gross profit margin. The impact from foreign currency movements decreased the gross profit margin by approximately 40 basis points, primarily from the impact of lower hedge gains in the current year compared to the prior year.
Decreases in the gross profit margin were primarily due to higher product costs and higher distribution and freight costs, partially offset by higher realized prices. Operating Expenses . Sales and marketing expense increased p rimarily due to higher personnel-related and travel costs.
Excluding the impact of foreign currency movements, the increase in the gross profit margin was primarily due to higher realized prices, partially offset by higher product costs. Operating Expenses . Sales and marketing expense increased p rimarily due to higher personnel-related and travel costs. General and administrative expense increased primarily due to higher personnel-related costs.
The increase of cash used for other assets and liabilities was primarily due to lower non-cash operating expenses recorded as accrued liabilities, primarily for personnel-related costs, as compared to the same period in the prior year, partially offset by accrued research and development investments in the current year.
The decrease of cash used for other assets and liabilities was primarily due to higher non-cash operating expenses recorded as accrued liabilities for personnel-related costs and lower annual employee incentive program payments in the current year, and lower tax payments in the current year, compared to the same period in the prior year.
Investing Activities . Cash used by investing activities was $195.4 million during 2022 as compared to $293.0 million used during 2021.
Cash used by investing activities was $125.3 million during 2023, compared to $195.4 million used during 2022.
RECENT ACCOUNTING PRONOUNCEMENTS Refer to “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, 2022, included in this Annual Report on Form 10-K for a complete discussion of recent accounting pronouncements adopted and not adopted.
Summary of Significant Accounting Policies (v) and (w)” to the consolidated financial statements for the year ended December 31, 2023, included in this Annual Report on Form 10-K for a complete discussion of recent accounting pronouncements adopted and not adopted. 44 RESULTS OF OPERATIONS AND TRENDS Effects of Certain Factors on Results of Operations CAG Trends .
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.
Recurring reference laboratory diagnostic and consulting revenues have also increased as a result of our customer commitment arrangements, and customer gains from reference laboratory acquisitions, customer list acquisitions, and the opening of new reference laboratories, including laboratories that are co-located with large practice customers. Veterinary Software, Services and Diagnostic Imaging Systems .
Our total capital expenditure plan for 2023 is estimated to be approximately $180.0 million, which includes capital investments in manufacturing and operations facilities to support growth, as well as investments in customer-facing software. 52 Financing Activities . Cash used by financing activities was $370.9 million during 2022, as compared to $697.4 million used during 2021.
Our total capital expenditure plan for 2024 is estimated to be approximately $180.0 million, which includes capital investments in manufacturing and operations facilities to support growth, as well as investments in customer-facing software.
Our prior overpayments continued to satisfy our installment obligations through 2022. In 2023, our installment obligation will exceed our remaining overpayment and we will be required to remit the balance due on the installment. Our final installment will be paid in 2025. For information on our unrecognized tax benefits, refer to “Part II, Item 8.
Prior to 2023, our prior overpayments satisfied our installment obligations. In 2023, our installment obligation exceeded our remaining overpayment and payment was remitted for the balance due on the installment. Our final installment will be paid in 2025. For information on our unrecognized tax benefits, refer to “Part II, Item 8. Financial Statements and Supplementary Data, Note 14.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

17 edited+2 added−3 removed14 unchanged
Biggest changeThe 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: For the Year Ended (in thousands, except per share amounts) 2022 2021 2020 Revenue (decrease) increase $ (108,812) $ 46,001 $ 1,301 Operating profit (decrease) increase, excluding hedge activity and exchange impacts on settlement of foreign currency denominated transactions $ (56,420) $ 28,557 $ 887 Hedge gains (losses) - current period 25,733 (7,121) 829 Exchange (losses) gains on settlements of foreign currency denominated transactions - current period (3,408) (2,111) 699 Operating profit (decrease) increase - current period $ (34,095) $ 19,325 $ 2,415 Hedge losses (gains) - prior period 7,121 (829) (10,628) Exchange losses (gains) on settlement of foreign currency denominated transactions - prior period 2,111 (699) 1,116 Operating profit (decrease) increase - as compared to prior period $ (24,863) $ 17,797 $ (7,097) Diluted earnings per share (decrease) increase - as compared to prior period $ (0.22) $ 0.16 $ (0.06) At our current foreign exchange rate assumptions, we anticipate the effect of a stronger U.S. dollar will have an unfavorable effect on our operating results by decreasing our revenues, operating profit, and diluted earnings per share in the year ended December 31, 2023, by approximately $16 million, $25 million, and $0.23 per share, respectively.
Biggest changeThe following table presents the estimated foreign currency exchange impact on our revenues, operating profit, and diluted earnings per share for the current period and compared to the respective prior-year period: For the Years Ended December 31, (in thousands, except per share amounts) 2023 2022 2021 Revenue (decrease) increase $ (4,603) $ (108,812) $ 46,001 Operating profit (decrease) increase, excluding hedge activity and exchange impacts on settlement of foreign currency denominated transactions $ (5,489) $ (56,420) $ 28,557 Hedge gains (losses) - current period 3,512 25,733 (7,121) Exchange (losses) on settlements of foreign currency denominated transactions - current period (1,078) (3,408) (2,111) Operating profit (decrease) increase - current period $ (3,055) $ (34,095) $ 19,325 Hedge (gains) losses - prior period (25,733) 7,121 (829) Exchange losses (gains) on settlement of foreign currency denominated transactions - prior period 3,408 2,111 (699) Operating profit (decrease) increase - compared to prior period $ (25,380) $ (24,863) $ 17,797 Diluted earnings per share (decrease) increase - compared to prior period $ (0.24) $ (0.22) $ 0.16 At our current foreign exchange rate assumptions, we anticipate year-over-year changes will reduce our revenues, and increase our operating profit and diluted earnings per share in the year ended December 31, 2024, by approximately $1 million, $2 million, and $0.02 per share, respectively.
We target to hedge approximately 75% to 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 target to hedge approximately 75% to 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 in emerging markets where it is not practical to hedge.
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.
If a hedging instrument qualifies for hedge accounting, changes in the fair value of the hedging 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 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.
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, well-capitalized multinational financial institutions and we do not hold or engage in transactions involving derivative instruments for purposes other than risk management.
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, 2022.
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, 2023.
Although the Credit Facility does not mature until December 9, 2026, all individual borrowings under the terms of the Credit Facility have a stated term between 1 and 180 days, including the $250 million Term Loan that matures on October 20, 2025. The variable rates are based on SOFR, with rolling maturities of 1 and 3 month increments.
Although the Credit Facility does not mature until December 9, 2026, all individual borrowings under the terms of the Credit Facility have a stated term between 1 and 180 days, including the $250.0 million Term Loan that matures on October 20, 2025. The variable rates are based on SOFR, with rolling maturities of one and three month increments.
The foreign currency exchange impacts on our revenue and operating income will be different from our 2023 estimates if actual foreign exchange rates are different from our assumptions.
The foreign currency exchange impacts on our revenue and operating income will be different from our 2024 estimates if actual foreign exchange rates are different from our assumptions.
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 $12 million and operating income by approximately $3 million to $4 million, net of hedge positions. 56 The primary purpose of our foreign currency hedging activities is to protect against the volatility associated with foreign currency transactions.
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 $13 million and operating income by approximately $4 million, net of hedge positions. 61 The primary purpose of our foreign currency hedging activities is to protect against the volatility associated with foreign currency transactions.
As a result, no significant ineffectiveness has resulted or been recorded through the statements of income for the years ended December 31, 2022, 2021, and 2020. 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.
As a result, no significant ineffectiveness has resulted or been recognized in the statements of income for the years ended December 31, 2023, 2022, and 2021. 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.
Any price increases we may impose may lead to declines in sales volume or sector share, if competitors do not similarly adjust their prices, or customers refuse to purchase at the higher prices.
Any price increases we may impose may lead to declines in sales volume or loss of business, if competitors do not similarly adjust their prices, or customers refuse to purchase at the higher prices.
The notional amount of foreign currency exchange contracts to hedge forecasted intercompany purchases and sales totaled $258.2 million at December 31, 2022, and $286.7 million at December 31, 2021. At December 31, 2022, we had $0.8 million of net unrealized gains on foreign currency exchange contracts recorded in accumulated other comprehensive loss, net of related tax.
The notional amount of foreign currency exchange contracts to hedge forecasted intercompany purchases and sales totaled $294.0 million at December 31, 2023, and $258.2 million at December 31, 2022. At December 31, 2023, we had $2.4 million of net unrealized losses on foreign currency exchange contracts recorded in accumulated other comprehensive loss, net of related tax.
For the year ended December 31, 2022, approximatel y 21% o f our consolidated revenue was derived from products manufactured or sourced in U.S. dollars and sold internationally in local currencies, as compared to 23% and 21% for the years ended December 31, 2021 and 2020, respectively.
For the year ended December 31, 2023, approximatel y 21% o f our consolidated revenue was derived from products manufactured or sourced in U.S. dollars and sold internationally in local currencies, compared to 21% and 23% for the years ended December 31, 2022 and 2021, respectively. The functional currency of most of our subsidiaries is their local currency.
This unfavorable impact includes net year-over-year impacts of foreign currency hedging activity, which is expected to decrease total company operating profit by approximately $18 million and diluted earnings per share by $0.17 during the year ending December 31, 2023.
These favorable impacts to our operating profit and diluted earnings per share includes net year-over-year impacts of foreign currency hedging activity, which is expected to increase total company operating profit by approximately $2 million and diluted earnings per share by $0.02 during the year ending December 31, 2024.
Summary of Significant Accounting Policies.” Interest Rate Risk and Effects of Inflation We have a Credit Facility with a syndicate of multinational banks, which matures on December 9, 2026, and requires no scheduled prepayments before that date.
Financial Statements and Supplementary Data, Note 2. Summary of Significant Accounting Policies.” Interest Rate Risk and Effects of Inflation We incur interest expense on our borrowings outstanding on our Senior Notes at a fixed rate. We have a Credit Facility with a syndicate of multinational banks, which matures on December 9, 2026, and requires no scheduled prepayments before that date.
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.
Risk Factors: “ Since our business is global in nature, geopolitical risks and other risks associated with doing business internationally could negatively affect our business, financial condition, and 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.
The above estimate assumes that the value of the U.S. dollar relative to other currencies will reflect the euro at $1.06, the British pound at $1.19, the Canadian dollar at $0.73, and the Australian dollar at $0.68; and the Japanese yen at ¥135, the Chinese renminbi at RMB 6.88, and the Brazilian real at R$5.30 to the U.S. dollar for the full year of 2023.
The above estimate assumes that the value of the U.S. dollar relative to other currencies will reflect the euro at $1.08, the British pound at $1.25, the Canadian dollar at $0.74, the Australian dollar at $0.66; the Japanese yen at ¥147, the Chinese renminbi at RMB 7.23, and the Brazilian real at R$4.95 to the U.S. dollar for the full year of 2024.
During 2023, we expect to continue to face higher costs for labor, commodities, energy, and transportation, as well as increased prices from suppliers. We may not be able to offset these higher costs through productivity initiatives and price increases, which may materially and adversely affect our business, results of operations, and financial condition.
We may not be able to offset these higher costs through productivity initiatives and price increases, which may materially and adversely affect our business, results of operations, and financial condition.
Removed
The functional currency of most of our subsidiaries is their local currency, except six of our foreign subsidiaries where the functional currency is the U.S. dollar.
Added
We entered into an interest rate swap to manage the effect of variable interest obligations on amounts borrowed under the terms of the Credit Facility. Beginning on March 31, 2023, the variable interest rate associated with $250.0 million of borrowings outstanding under the Credit Facility became effectively fixed at 3.9%, plus the applicable credit spread, through October 20, 2025.
Removed
At December 31, 2022, we had $579.0 million of borrowings outstanding under the Credit Facility. As of December 31, 2022, based on our gross leverage ratio, our borrowing costs under the Credit Facility were approximately 3.1%.
Added
Borrowings outstanding under the Credit Facility at December 31, 2023, were $250.0 million. 62 During 2023, we experienced inflationary pressure on our operating costs. During 2024, we expect to continue to face higher costs for labor, commodities, energy, and transportation, as well as increased prices from suppliers.
Removed
Based on the amount outstanding under our Credit Facility as of December 31, 2022, an increase in SOFR of 1% would increase interest expense by approximately $5.8 million on an annual basis. 57 During 2022, we experienced inflationary pressure on our operating costs.

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