UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[ X ]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006 .

OR

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Transiton Period From __________To __________.

COMMISSION FILE NUMBER 0-19271

IDEXX LABORATORIES, INC.
(Exact name of registrant as specified in its charter)

DELAWARE		01-0393723
(State of incorporation)		(IRS Employer Identification No.)
One IDEXX Drive, Westbrook, Maine		04092
(Address of principal executive offices)		(ZIP Code)

207-856-0300

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of July 28, 2006, 31,145,400 shares of the registrant’s Common Stock, $0.10 par value, were outstanding.

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

INDEX


PART I		FINANCIAL INFORMATION	Page

	Item 1.	Financial Statements (unaudited)

		Condensed Consolidated Balance Sheets as of June 30, 2006 and
		December 31, 2005	3

		Condensed Consolidated Statements of Operations for the Three and Six Months
		Ended June 30, 2006 and 2005	4

		Condensed Consolidated Statements of Cash Flows for the Six Months
		Ended June 30, 2006 and 2005	5

		Notes to Condensed Consolidated Financial Statements	6

	Item 2.	Management’s Discussion and Analysis of Financial Condition
		and Results of Operations	18

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

	Item 4.	Controls and Procedures	32

PART II		OTHER INFORMATION

	Item 1A.	Risk Factors	32

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

	Item 4.	Submission of Matters to a Vote of Security Holders	36

	Item 6.	Exhibits	37

SIGNATURES			38

PART I FINANCIAL INFORMATION
Item 1. Financial Statements

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(Unaudited)

	June 30, 2006			December 31, 2005
ASSETS
Current Assets:
Cash and cash equivalents	$	50,023		$	67,151
Short-term investments		27,034			65,580
Accounts receivable, less reserves of $1,328 and $1,221 in 2006 and 2005,
respectively		84,473			71,688
Inventories		85,540			69,369
Deferred income taxes		15,180			13,778
Other current assets		9,544			11,679

Total current assets		271,794			299,245

Property and Equipment, at cost:
Land		6,608			1,570
Buildings and improvements		46,773			7,457
Leasehold improvements		10,471			34,645
Machinery and equipment		64,363			58,126
Office furniture and equipment		40,232			35,978
Construction in progress		4,323			5,001

		172,770			142,777
Less accumulated depreciation and amortization		83,975			77,080

Property and equipment, net		88,795			65,697

Other Long-term Assets:
Goodwill and other intangible assets, net		133,033			118,746
Other noncurrent assets, net		7,756			6,988

		140,789			125,734

TOTAL ASSETS	$	501,378		$	490,676

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	24,240		$	19,842
Accrued expenses		23,942			17,756
Accrued employee compensation and related expenses		24,631			27,550
Accrued taxes		24,196			19,960
Accrued marketing and customer programs		14,446			10,751
Warranty reserves		2,261			2,191
Notes payable		655			551
Deferred revenue		8,950			7,965

Total current liabilities		123,321			106,566

Long-term Liabilities:
Deferred tax liabilities		5,062			6,026
Notes payable		6,795			--
Warranty reserves		503			968
Deferred revenue		7,209			7,806
Other long-term liabilities		1,454			--

Total long-term liabilities		21,023			14,800

Commitments and Contingencies (Note 10)
Partner's Interest in Consolidated Subsidiary		--			300

Stockholders' Equity:
Common stock, $0.10 par value: Authorized: 120,000 and 60,000 shares in
2006 and 2005, respectively; Issued: 46,384 and 45,938 shares in 2006
and 2005, respectively		4,638			4,594
Additional paid-in capital		463,198			437,394
Deferred stock units: Issued 30 and 25 units in 2006 and 2005, respectively		1,760			1,316
Retained earnings		440,989			396,936
Accumulated other comprehensive income		3,788			866
Treasury stock, at cost: (15,198 and 14,118 shares in 2006 and 2005,
respectively)		(557,339	)		(472,096	)

Total stockholders' equity		357,034			369,010

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	501,378		$	490,676

The accompanying notes are an integral part of these condensed consolidated financial statements.

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2006			2005			2006			2005
Revenue:
Product revenue	$	136,853		$	115,353		$	255,409		$	226,512
Service revenue		54,511			45,277			104,119			86,544

		191,364			160,630			359,528			313,056
Cost of Revenue:
Cost of product revenue		57,288			50,063			106,137			98,110
Cost of service revenue		35,040			29,992			68,330			58,291

		92,328			80,055			174,467			156,401

Gross profit		99,036			80,575			185,061			156,655

Expenses:
Sales and marketing		28,679			25,848			55,617			50,918
General and administrative		20,039			15,846			39,473			30,944
Research and development		13,292			9,995			25,970			19,769

Income from operations		37,026			28,886			64,001			55,024
Interest income, net		594			871			1,363			1,374

Income before provision for income taxes and
partner's interest		37,620			29,757			65,364			56,398
Provision for income taxes		11,879			9,934			21,463			18,986
Partner's interest in loss of subsidiary		(39	)		(110	)		(152	)		(211	)

Net income	$	25,780		$	19,933		$	44,053		$	37,623

Earnings per Share:
Basic	$	0.82		$	0.61		$	1.39		$	1.15

Diluted	$	0.78		$	0.59		$	1.33		$	1.10

Weighted Average Shares Outstanding:
Basic		31,467			32,627			31,633			32,790

Diluted		33,014			34,060			33,216			34,250

The accompanying notes are an integral part of these condensed consolidated financial statements.

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

	For the Six Months Ended June 30,
	2006			2005
Cash Flows from Operating Activities:
Net income	$	44,053		$	37,623
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation and amortization		14,209			11,953
Partner's interest in loss of subsidiary		(152	)		(211	)
Provision for (recovery of) uncollectible accounts		338			(142	)
Benefit of deferred income taxes		(3,136	)		(933	)
Share-based compensation expense		5,558			--
Tax benefit from exercises of stock options		(5,935	)		3,584
Changes in assets and liabilities, net of acquisitions:
Accounts receivable		(12,059	)		(9,549	)
Inventories		(15,610	)		(5,330	)
Other assets		1,223			513
Accounts payable		4,321			1,707
Accrued liabilities		11,822			(377	)
Deferred revenue		156			(753	)

Net cash provided by operating activities		44,788			38,085

Cash Flows from Investing Activities:
Purchases of short- and long-term investments		(43,391	)		(35,500	)
Sales and maturities of short- and long-term investments		82,000			59,086
Purchases of property and equipment		(13,810	)		(10,508	)
Purchase of land and buildings		(11,521	)		--
Acquisitions of equipment leased to customers		(918	)		(1,278	)
Acquisitions of intangible assets and businesses, net of cash acquired		(8,245	)		(659	)

Net cash provided by investing activities		4,115			11,141

Cash Flows from Financing Activities:
Payment of notes payable		(647	)		(1,270	)
Purchase of treasury stock		(85,228	)		(50,391	)
Proceeds from exercises of options		13,245			9,461
Tax benefit from exercises of stock options		5,935			--

Net cash used by financing activities		(66,695	)		(42,200	)
Net effect of exchange rates on cash		664			(1,828	)

Net increase (decrease) in cash and cash equivalents		(17,128	)		5,198
Cash and cash equivalents at beginning of period		67,151			47,156

Cash and cash equivalents at end of period	$	50,023		$	52,354

Supplemental Disclosures of Cash Flow Information:
Interest paid	$	94		$	40
Income taxes paid	$	13,117		$	17,709

The accompanying notes are an integral part of these condensed consolidated financial statements.

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited, condensed consolidated financial statements of IDEXX Laboratories, Inc. (“IDEXX”, the “Company”, “we” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the requirements of Regulation S-X, Rule 10-01 for financial statements required to be filed as a part of Form 10-Q.

The accompanying interim condensed consolidated financial statements reflect, in the opinion of our management, all adjustments necessary for a fair statement of our financial position and results of operations. The condensed balance sheet data as of December 31, 2005 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. The results of operations for the three and six months ended June 30, 2006 are not necessarily indicative of the results to be expected for the full year or any future period. These financial statements should be read in conjunction with this Form 10-Q for the three and six months ended June 30, 2006, and our Annual Report on Form 10-K for the year ended December 31, 2005 filed with the Securities and Exchange Commission.

Recent Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements and prescribes a comprehensive model for the recognition, measurement, and financial statement disclosure of uncertain tax positions taken or expected to be taken in tax returns. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. Generally, a company should record the change in net assets that results from the application of FIN 48 as an adjustment to retained earnings. We are studying FIN 48 and have not yet determined the expected impact of the implementation of this pronouncement.

In June 2006, the FASB ratified the Emerging Issues Task Force (“EITF”) consensus on Issue 06-2, “Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43, Accounting for Compensated Absences” (“EITF 06-2”). EITF 06-2 requires that that the costs associated with unrestricted sabbaticals and other similar benefit arrangements should be recognized over the service period during which the employee earns the benefit. The provisions of EITF 06-2 are effective for fiscal years beginning after December 15, 2006. The provisions of EITF 06-2 shall be applied through a cumulative effect adjustment to retained earnings with the option of retrospective application. We are studying EITF 06-2 and have not yet determined the expected impact of the implementation of this pronouncement.

Note 2. Share-Based Compensation

In December 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment” (“SFAS No. 123(R)”), which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” and SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure—An Amendment of FASB No. 123” (collectively, “SFAS No. 123, as Amended”) and supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). During 2005, the FASB also issued Staff Positions No. FAS 123(R)-1, -2, -3 and -4 to provide application guidance related to SFAS No. 123(R).

SFAS No. 123(R) requires all share-based compensation to employees, including grants of stock options, to be valued at fair value on the date of grant, and to be expensed over the applicable vesting period. Prior to January 1, 2006, we measured costs related to employee share-based compensation plans in accordance with APB No. 25. Accordingly, no employee compensation cost was recognized for these plans during the three and six months ended June 30, 2005.

We adopted the provisions of SFAS No. 123(R) on January 1, 2006 and elected the modified prospective method of transition to the fair value based method of accounting for stock-based employee compensation prescribed by SFAS No. 123(R). Effective January 1, 2006, under the modified prospective method, share-based compensation expense includes expense for unvested awards at December 31, 2005 and all awards granted subsequent to December 31, 2005. Share-based compensation expense for the unvested awards outstanding at December 31, 2005 is based on the grant-date fair value previously calculated in developing the pro forma disclosures in accordance with the provisions of SFAS No. 123, as Amended.

In connection with the adoption of SFAS 123(R), we adopted the straight-line method to prospectively expense share-based awards granted subsequent to December 31, 2005. The graded-vesting, or accelerated, method has been used to record the expense for stock options granted prior to January 1, 2006.

Beginning in 2006, we modified our share-based employee compensation programs to shift from the grant of stock options and employee stock purchase rights only to the grant of a mix of restricted stock units and stock options, along with employee stock purchase rights. There were no modifications to the terms of outstanding options during 2006 or 2005.

We issue new shares of common stock to satisfy option and employee stock purchase right exercises and to settle restricted stock units and deferred stock units. At June 30, 2006, a remaining total of 743,000 shares of common stock was authorized by our shareholders and was available for future grants of share-based compensation.

Financial Impacts of Share-Based Compensation

Selected financial impacts of share-based compensation, excluding the impact of deferred stock units issued under our Director Deferred Compensation Plan or our Executive Deferred Compensation Plan that do not have vesting conditions (which are described below), are presented in the table below (in thousands, except per share amounts) :

	For the Three Months Ended June 30, 2006			For the Six Months Ended June 30, 2006
Share-based compensation expense included in cost of revenue	$	421		$	799
Share-based compensation expense included in operating expense		2,248			4,666

Total share-based compensation expense		2,669			5,465

Income tax benefit in net income for share-based compensation expense		(485	)		(948	)
Income tax benefit in net income for employees' disqualifying
dispositions of shares acquired through the exercise of stock options
and employee stock purchase rights		(2	)		(25	)

Total income tax benefit		(487	)		(973	)

Net impact of share-based compensation on net income	$	2,182		$	4,492

Net impact of share-based compensation on:
Earnings per share, basic	$	0.07		$	0.14
Earnings per share, diluted		0.07			0.14

Share-based compensation costs are classified in costs of sales and operating expenses consistently with the classification of cash compensation paid to the same employees receiving such share-based compensation. Capitalized share-based employee compensation cost at June 30, 2006 was $0.2 million, which was included in inventory on the consolidated balance sheet.

Our financial statements for periods ending prior to January 1, 2006 have not been restated. Had compensation cost for the Company’s share-based compensation for the six months ended June 30, 2005 been determined consistent with the provisions of SFAS No. 123, as Amended, the Company’s net income and net income per common share would have been reduced to the following pro forma amounts (in thousands, except per share amounts) :

	For the Three Months Ended June 30, 2005			For the Six Months Ended June 30, 2005
Net income:
As reported	$	19,933		$	37,623
Pro forma share-based employee compensation, net of tax		(2,283	)		(4,499	)

Pro forma net income		17,650			33,124

Earnings per share:
Basic: as reported	$	0.61		$	1.15
Basic: pro forma		0.54			1.01
Diluted: as reported		0.59			1.10
Diluted: pro forma		0.52			0.97

The following table represents cash proceeds from employees’ exercise of stock options and employee stock purchase rights and the total income tax benefits recognized for employees’ disqualifying dispositions of shares acquired through the exercise of stock options and employee stock purchase rights (in thousands) :

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2006		2005		2006		2005
Cash proceeds from employee stock purchases and
option exercises under all share-based payment
arrangements	$	3,249	$	6,858	$	13,245	$	9,461
Income tax benefit for employees' disqualifying
dispositions of shares acquired through the exercise
of stock options and employee stock purchase rights		1,443		2,597		6,844		3,584

Prior to the adoption of SFAS 123(R), we reported all income tax benefits resulting from the exercise of stock options as operating cash inflows in our consolidated statements of cash flows. SFAS 123(R) requires the benefits of tax deductions from the exercise of options in excess of the compensation cost for those options to be reported as financing cash inflows. FASB Staff Position (“FSP”) No. FAS 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards” provides an alternative transitional method of calculating the excess tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of SFAS 123(R). In accordance with FSP No. FAS 123(R)-3, which we elected, the full amount of tax benefits related to exercises after December 31, 2005 of employee share-based compensation awards that were fully vested as of December 31, 2005 are reported as financing cash inflows. For the six months ended June 30, 2006, $5.9 million of tax benefits were reported as financing cash inflows rather than operating cash inflows.

The fair value of options, restricted stock units, deferred stock units with vesting conditions, and employee stock purchase rights awarded during the three months ended June 30, 2006 and 2005 totaled $0.1 million and $0.7 million, respectively. The fair value of options, restricted stock units, deferred stock units with vesting conditions, and employee stock purchase rights awarded during the six months ended June 30, 2006 and 2005 totaled $11.0 million and $15.5 million, respectively. Substantially all of our planned annual share-based compensation awards were granted during the first three months of the year in 2006 and 2005. The total unrecognized compensation cost for unvested share-based compensation awards outstanding at June 30, 2006 was $21.7 million. Approximately $5.4 million is expected to be recognized in the six months ending December 31, 2006 and decreasing amounts of the total expense is expected to be recognized over the subsequent five years, resulting in a weighted average expense period of approximately 2.5 years.

Options

Option awards are granted to employees with an exercise price equal to the closing market price of our common stock at the date of grant and generally vest ratably over five years on each anniversary of the date of grant, conditional on continuous service. Options granted to non-employee directors in 2005 vest fully on the first anniversary of the date of grant. Upon any change in control of the company, 25% of the unvested stock options then outstanding will vest and become exercisable.

The use of the Black-Scholes-Merton option-pricing model, the general methods employed to develop the above-described option valuation assumptions, and the vesting conditions of option awards are consistent with prior periods. Beginning in 2006, the contractual terms of employee options were reduced from ten years to seven years and we elected to use the simplified method described in the Securities and Exchange Commission Staff Accounting Bulletin No. 107, which is based on vesting and contractual terms, to develop the expected term assumption for 2006 option awards. Additionally, beginning in 2006, share-based compensation expense is reduced for an estimate of the number of awards that are expected to be forfeited. The estimate is based on historical data and other factors, and compensation expense is adjusted for actual results.

The weighted average valuation assumptions used to determine the fair value of each option grant on the date of grant and the weighted average estimated fair values were as follows:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2006		2005			2006			2005
Expected stock price volatility		N/A		40.0	%		30.0	%		40.0	%
Expected term, in years		N/A		5.8			5.0			5.8
Risk-free interest rate		N/A		3.9	%		4.6	%		3.9	%
Weighted average fair value of options granted		N/A	$	21.00		$	26.78		$	25.17

There were no options granted during the three months ended June 30, 2006.

A summary of the status of options granted under our share-based compensation plans at June 30, 2006 and changes during the six-month period then ended are presented in the table below (in thousands, except weighted average exercise price) :

	Total					Exercisable
	Number of Options			Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
Outstanding December 31, 2005		3,747		$	35.17		1,707	$	26.64
Granted		165			76.67
Exercised		(426	)		28.32
Forfeited		(64	)		47.34

Outstanding June 30, 2006		3,422		$	37.80		1,968	$	29.84

The aggregate intrinsic value of all outstanding options and of exercisable options at June 30, 2006 was $127.7 million and $89.1 million, respectively. Intrinsic value represents the amount by which the market price of the common stock exceeded the exercise price of the options, before applicable income taxes. The closing sale price of the common stock was $75.13 and $71.98 on the last business day of the periods ended June 30, 2006 and December 31, 2005, respectively. During the three months ended June 30, 2006 and 2005, the total intrinsic value of stock options exercised was $5.0 million and $7.6 million, respectively. During the six months ended June 30, 2006 and 2005, the total intrinsic value of stock options exercised was $21.4 million and $11.5 million, respectively.

The total fair value of options vested during the three months ended June 30, 2006 and 2005 was $1.0 million and $1.4 million, respectively. The total fair value of options vested during the six months ended June 30, 2006 and 2005 was $14.3 million and $13.2 million, respectively.

The following summarizes information about all stock options issued and outstanding at June 30, 2006 (in thousands, except exercise price and per share amounts) :

				Options Outstanding						Options Exercisable
Exercise Price Range				Number Of Options		Weighted Average Exercise Price		Weighted Average Remaining Contract Life		Number of Options		Weighted Average Exercise Price
$	13.69 -	$	25.20		1,095	$	22.61		4.3		995	$	22.36
	26.63 -		34.27		986		30.60		6.0		626		29.99
	34.98 -		63.42		1,180		52.61		8.0		347		50.99
	63.43 -		76.67		161		76.67		6.6		0		N/A

$	13.69 -	$	76.67		3,422	$	37.80		6.2		1,968	$	29.84

Employee Stock Purchase Plan

For periods ended prior to July 1, 2005, in order to determine the pro forma impact under SFAS No. 123, as Amended, the fair value of the purchase rights issued under the employee stock purchase plan was estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The following weighted average assumptions were used to determine the fair value of employee purchase rights for the six-month subscription period that began January 1, 2005 and ended June 30, 2005:


Expected stock price volatility	33	%
Expected term, in years	0.5
Risk-free interest rate	3.4	%
Dividend yield	None

Effective July 1, 2005, we amended our employee stock purchase plan to eliminate the look-back option feature and to change the subscription period from six months to three months. The fair value of purchase rights under the revised program equals the 15% discount from the market price at the exercise date. During the three months ended June 30, 2006, rights to purchase 7,000 shares of common stock were granted having a weighted average fair value of $11.27 each. During the six months ended June 30, 2006, rights to purchase 17,000 shares of common stock were granted having a weighted average fair value of $12.25 each.

Restricted and Other Deferred Stock Units With Vesting Conditions

Restricted stock unit awards to employees generally vest ratably over five years on each anniversary of the date of grant, conditional on continuous service. Shares of common stock are issued to the employee upon vesting of restricted stock units. Upon any change in control of the company, 25% of the unvested restricted stock units then outstanding under the 2003 Stock Plan will vest. Deferred stock units with vesting conditions awarded to non-employee directors vest fully on the first anniversary of the date of grant. Except upon a change in control, as defined in the Director Deferred Compensation Plan, or certain limited circumstances, all deferred stock units will be exchanged for an equivalent number of shares of common stock one year following a director’s resignation or retirement. Upon a change in control, unvested deferred stock units vest immediately.

The fair values of restricted and other deferred stock units with vesting conditions are based on the closing sale price of the common stock on the date of grant. We use historical data and other factors to estimate employee termination behavior and to evaluate whether particular groups of employees have significantly different forfeiture behaviors. Share-based compensation expense is reduced for an estimate of the number of awards that are expected to be forfeited. The estimate is based on historical data and other factors, and compensation expense is adjusted for actual results.

The weighted average fair value per unit of restricted stock units granted during the six months ended June 30, 2006 was $76.67. The weighted average fair value per unit of deferred stock units with vesting conditions granted during the six months ended June 30, 2006 was $77.47. There were no restricted stock units or deferred stock units with vesting conditions granted during the three months ended June 30, 2006.

A summary of the status of restricted and other deferred stock units with vesting conditions granted under our share-based compensation plans at June 30, 2006, and changes during the period then ended, are presented in the table below (in thousands, except weighted average exercise price) :


Outstanding December 31, 2005	0
Granted	83
Exercised	--
Forfeited	(2	)

Outstanding June 30, 2006	81

The weighted average remaining contractual life of restricted stock units at June 30, 2006 was 6.6 years.

Deferred Stock Units With No Vesting Conditions

Under our Director Deferred Compensation Plan, non-employee directors may defer a portion of their cash fees in the form of vested deferred stock units, each of which represents the right to receive one unissued share of our common stock. Directors receive a number of deferred stock units equal to the amount of cash fees deferred divided by the closing sale price of the common stock on the date of deferral. Under our Executive Deferred Compensation Plan (the “Executive Plan”), certain members of our management may elect to defer a portion of their cash compensation in deferred stock units. These deferred stock units will be exchanged for a fixed number of shares of common stock on dates determined by the employee, subject to the limitations of the Executive Plan and applicable law. Except upon a change in control, as defined in the Director Deferred Compensation Plan and the Executive Plan, or certain other limited circumstances, directors and officers may not receive shares of common stock in settlement of deferred stock units earlier than one year following their resignation from the board or termination of their employment, respectively.

During the three and six months ended June 30, 2006, approximately 1,000 deferred stock units valued at less than $0.1 million and 7,000 deferred stock units valued at $0.6 million were issued, respectively. During the three and six months ended June 30, 2005, approximately 1,000 deferred stock units valued at $0.1 million and 10,000 deferred stock units valued at $0.6 million were issued, respectively.

During the three months ended June 30, 2006, approximately 2,000 shares of common stock were issued to settle deferred stock units.

Note 3. Business Acquisitions

In March 2005, we paid cash of $0.5 million to acquire certain assets of a veterinary reference laboratory located in Europe. Goodwill and other intangible assets of $0.2 million and $0.2 million, respectively, were assigned to the Companion Animal Group segment. During the full year ended December 31, 2005, we paid cash of $5.5 million and assumed liabilities of $0.7 million to acquire certain assets of veterinary reference laboratories in Europe and customer lists in the U.S. and Europe. Goodwill and other intangible assets of $2.1 million and $2.8 million, respectively, were assigned to the Companion Animal Group segment.

In September 2005, we paid cash of $2.0 million and assumed liabilities of $1.3 million to acquire the business of a Georgia-based veterinary-specific digital radiography systems company. Intangible assets of $2.5 million were assigned to the Companion Animal Group segment. We also agreed to make additional purchase price payments of up to $2.3 million, contingent on the achievement by the acquired business of certain milestones. In April 2006, we paid $0.5 million of the contingent purchase price. As of June 30, 2006, we accrued the balance of $1.8 million of the contingent purchase price. We preliminarily attributed the value received to contractual relationship intangible assets in the Companion Animal Group segment.

During the three months ended March 31, 2006, we paid cash of $0.6 million to acquire certain assets of a veterinary reference laboratory located in the United States. We also agreed to make an additional purchase price payment of up to $0.1 million, contingent on the achievement by the acquired business of certain milestones. Intangible assets other than goodwill of $0.1 million and $0.7 million were assigned to the Companion Animal Group segment during the three and six months ended June 30, 2006, respectively.

During the three months ended June 30, 2006, we paid cash of $6.8 million, in separate transactions, to acquire certain intangible assets of a veterinary practice information management software company and certain assets of a veterinary reference laboratory located in the United States, and to acquire certain intellectual property and distribution rights from a diagnostics company based in Australia. We also assumed other long-term liabilities of $1.5 million. We agreed to make additional purchase price payments of up to $2.0 million, of which $0.3 million is contingent on the achievement by certain acquired businesses of certain milestones. Intangible assets other than goodwill of $9.6 million were assigned to the Companion Animal Group segment, however, the purchase price allocations are preliminary and are subject to revision.

We previously had a 40% equity interest in a joint venture to market production animal diagnostic products in China. In April 2006, we paid $0.6 million to acquire an additional 55% equity interest in the joint venture from our partner. We also committed to pay an additional $0.2 million over two years in consideration for the additional equity. In addition, the joint venture entered into a contract with the joint venture partner where the partner will provide promotional and agency services and will receive sales commissions at rates escalating from 2.5% to 8.5% annually based on sales volume. In connection with the acquisition of the additional ownership interest, intangible assets of $0.7 million were assigned to the Food Diagnostics Group segment.

The results of operations of the acquired businesses have been included since their respective acquisition dates. Pro forma information has not been presented because such information is not material to the financial statements taken as a whole.

Note 4. Inventories

Inventories include material, labor and overhead, and are stated at the lower of cost (first-in, first-out) or market. The components of inventories were as follows (in thousands) :

	June 30, 2006		December 31, 2005
Raw materials	$	26,907	$	22,517
Work-in-process		12,093		10,583
Finished goods		46,540		36,269

	$	85,540	$	69,369

Note 5. Goodwill and Other Intangible Assets

Goodwill consisted of the following (in thousands) :

	June 30, 2006		December 31, 2005
Companion Animal Group Segment:
Veterinary reference laboratories	$	52,797	$	51,311
Pharmaceuticals		13,745		13,745
Practice information management and digital
radiography systems		1,453		1,453
Other goodwill		115		113
Water Segment:
Water testing products		16,011		15,184
Food Diagnostics Group Segment:
Production animal diagnostics		6,660		6,321

	$	90,781	$	88,127

The changes in goodwill during the three and six months ended June 30, 2006 resulted primarily from changes in foreign currency exchange rates.

Intangible assets other than goodwill consisted of the following (in thousands) :

	June 30, 2006				December 31, 2005
	Cost		Accumulated Amortization		Cost		Accumulated Amortization
Customer relationships and lists	$	18,992	$	2,603	$	15,814	$	1,878
Patented technologies		13,758		2,488		5,810		1,934
Unlicensed technologies		9,557		3,995		9,168		3,193
Licenses		4,000		1,932		3,800		1,757
Non-compete agreements and contractual rights		8,440		1,741		5,607		1,073
Tradenames and trademarks		327		63		294		39

	$	55,074	$	12,822	$	40,493	$	9,874

During the three and six months ended June 30, 2006, we recognized $12.1 million and $13.3 million, respectively, of acquired amortizable intangible assets, including $11.9 million and $13.1 million, respectively, of amortizable intangible assets that were related to business acquisitions. See Note 3 for additional information. The remaining changes in the cost of intangible assets other than goodwill during the three and six months ended June 30, 2006 resulted primarily from changes in foreign currency exchange rates.

Amortization expense of intangible assets was $1.5 million and $2.6 million for the three and six months ended June 30, 2006, respectively. Amortization expense of intangible assets was $0.9 million and $1.9 million for the three and six months ended June 30, 2005, respectively.

Note 6. Warranty Reserves

We provide for the estimated cost of product warranties in cost of product revenue at the time revenue is recognized. Our actual warranty obligation is affected by product failure rates and service costs incurred in correcting a product failure. Should actual product failure rates or service costs differ from management’s estimates, which are based on historical data, revisions to the estimated warranty liability would be required. Following is a summary of changes in accrued warranty reserve for products sold to customers for the three and six months ended June 30, 2006 and 2005 (in thousands) :

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2006			2005			2006			2005
Balance, beginning of period	$	3,008		$	3,355		$	3,159		$	3,679
Provision for warranty expense		311			805			870			1,538
Change in estimate of prior warranty expense		31			(22	)		(119	)		(230	)
Settlement of warranty liability		(586	)		(931	)		(1,146	)		(1,780	)

Balance, end of period		2,764			3,207			2,764			3,207
Long-term portion		503			818			503			818

Current portion of warranty reserves	$	2,261		$	2,389		$	2,261		$	2,389

Note 7. Income Taxes

Our effective tax rates for the three and six months ended June 30, 2006 were 31.5% and 32.8%, respectively, compared with 33.3% and 33.5% for the three and six months ended June 30, 2005, respectively. The majority of the decrease in our effective tax rates related to a reduction of previously recorded international deferred tax liabilities as a result of obtaining certain tax incentives during the quarter ended June 30, 2006. Other rate reductions resulted from the release of a valuation allowance on international deferred tax assets as a result of a subsidiary demonstrating consistent sustained profitability. These rate-reducing adjustments were partly offset by the nonrecognition, in the current period, of tax benefits on compensation expense for incentive stock options and employee stock purchase rights that were recognized in accordance with SFAS No. 123(R) effective January 1, 2006 and by the December 31, 2005 expiration of U.S. tax benefits related to the research and development expense.

Note 8. Comprehensive Income

The following is a summary of comprehensive income for the three and six months ended June 30, 2006 and 2005 (in thousands) :

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2006			2005			2006			2005
Net income	$	25,780		$	19,933		$	44,053		$	37,623
Other comprehensive income (loss):
Foreign currency translation adjustments		4,840			(5,711	)		5,198			(10,082	)
Change in fair value of foreign currency
contracts classified as hedges, net of tax		(1,584	)		1,901			(2,314	)		3,827
Change in fair market value of
investments, net of tax		18			1			38			(19	)

Comprehensive income	$	29,054		$	16,124		$	46,975		$	31,349

Note 9. Earnings per Share

The following is a reconciliation of shares outstanding for basic and diluted earnings per share (in thousands) :

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2006		2005		2006		2005
Shares Outstanding for Basic Earnings per Share:
Weighted average shares outstanding		31,435		32,603		31,603		32,769
Weighted average vested deferred stock units
outstanding		32		24		30		21

		31,467		32,627		31,633		32,790

Shares Outstanding for Diluted Earnings per Share:
Shares outstanding for basic earnings per share		31,467		32,627		31,633		32,790
Dilutive effect of options issued to employees
and directors		1,466		1,433		1,522		1,460
Dilutive effect of restricted stock units
issued to employees		74		--		56		--
Dilutive effect of nonvested deferred stock
units issued to directors		7		--		5		--

		33,014		34,060		33,216		34,250

Certain deferred stock units outstanding are included in shares outstanding for both basic and diluted earnings per share because the associated shares of our common stock are issuable for no cash consideration, the number of shares of our common stock to be issued is fixed and issuance is not contingent.

Certain options to acquire shares have been excluded from the calculation of shares outstanding for diluted earnings per share because they were anti-dilutive. The following table presents information concerning those anti-dilutive options (in thousands, except per share amounts) :

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2006		2005		2006		2005
Weighted average number of shares underlying
anti-dilutive options		176		625		161		517
Weighted average exercise price per underlying
share of anti-dilutive options	$	75.25	$	57.55	$	72.23	$	57.55

The following table presents additional information concerning the exercise prices of vested and unvested options outstanding at the end of the period (in thousands, except per share amounts) :

	June 30, 2006		June 30, 2005
Closing price per share of our common stock	$	75.13	$	62.33


Number of shares underlying options with exercise prices below the closing price		3,261		4,128
Number of shares underlying options with exercise prices equal to or above the closing price		161		--

Total number of shares underlying outstanding options		3,422		4,128

Note 10. Commitments, Contingencies and Guarantees

In May 2006, we acquired our Westbrook, Maine facility. We paid cash of $11.5 million and assumed a mortgage that had a face value of $6.5 million and a fair market value of $7.5 million. The stated interest rate of the mortgage was 9.875% and the effective interest rate was 6.05%. The mortgage is payable in equal monthly installments of approximately $0.1 million through May 1, 2015. Annual mortgage principal payments as of June 30, 2006, based on the fair market value of the mortgage at the assumption date, are as follows (in thousands) :

Years Ending December 31,	Amount
2006	$	269
2007		675
2008		717
2009		762
2010		809
Thereafter		4,218

	$	7,450

The purchase of our headquarters facility relieved us from associated future lease commitments. This transaction, partly offset by other transactions whereby we entered into facility lease agreements in the normal course of business, resulted in net reductions to the minimum annual rental obligations disclosed in our Annual Report on Form 10-K for the year ended December 31, 2005 in Note 11 to the consolidated financial statements of approximately $0.5 million in 2007 and in 2008, $0.6 million in 2009, and $1.4 million in 2010. In connection with our purchase of our Westbrook, Maine facility, we reclassified certain leasehold improvements with a historical cost of $25.8 million to buildings and improvements and to machinery and equipment.

In October 2005, our former supplier of VetAutoread™ Hematology Analyzers and consumables sold this business (including the human hematology testing products division) and we simultaneously entered into a new supply agreement for veterinary products with the acquirer of the business. Under this new supply agreement, we received fixed pricing on certain products through December 31, 2020, among other benefits. In partial consideration for this new supply agreement, we paid cash of $2.5 million to the acquirer and guaranteed the acquirer’s note (the “Note”) in the principal amount of $3.5 million given to our former supplier in partial consideration for the business. The acquirer is obligated to pay the Note through quarterly principal and interest payments through 2008 and to pay the remaining balance in 2008. We are obligated to make a second payment of $1.25 million upon the achievement of certain milestones by the acquirer, which we expect to occur in approximately 2008, and a third payment of $1.25 million twelve months later. Our obligations to make the second and third payments are subject to the acquirer’s payment of all amounts under the Note and the release of our guaranty. We recorded the fair value of the guaranty of $0.5 million and recognized the associated assets as of the effective date of the agreements. During the six months ended June 30, 2006, we reduced the fair value of the guaranty by $0.1 million as a result of the acquirer’s principal payments.

During the three months ended June 30, 2006, we incurred additional commitments to a supplier to purchase approximately $20 million of products through 2009. Should we fail to meet these purchase obligations, we are subject to penalties of ten percent of the sales value of the unpurchased quantities of products that would be required to satisfy the minimum volume commitments.

Note 11. Treasury Stock

The board of directors has authorized the repurchase of up to 16,000,000 shares of our common stock in the open market or in negotiated transactions. From the inception of the program in August 1999 to June 30, 2006, we repurchased 15,027,000 shares for $551.3 million and received 171,000 shares of stock with a market value of $6.0 million in payment for the exercise price of stock options and income taxes. At June 30, 2006, we had 973,000 shares remaining under our share repurchase authorization. Information about our repurchases is presented in the table below (in thousands, except per share amounts) :

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2006		2005		2006		2005
Number of common shares repurchased		538		367		1,079		898
Total cost of common shares repurchased	$	42,533	$	20,850	$	85,228	$	50,391
Average price paid per share	$	79.06	$	56.83	$	78.96	$	56.13

Note 12. Segment Reporting

We disclose information regarding segments in accordance with the provisions of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS No. 131”). SFAS No. 131 requires disclosures about operating segments in annual financial statements and requires selected information about operating segments in interim financial statements. It also requires related disclosures about products and services and geographic areas. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision-maker is the Chief Executive Officer.

We are organized into business units by market and customer group. Our reportable operating segments include: products and services for the veterinary market, which we refer to as our Companion Animal Group (“CAG”), water quality products (“Water”) and products for production animal health and dairy quality, which we refer to as the Food Diagnostics Group (“FDG”). CAG develops, designs, manufactures, and distributes products and performs services for veterinarians. CAG is comprised of the following product and service categories: instruments and consumables, rapid assays, reference laboratory and consulting services, practice information management systems and digital radiography, and pharmaceuticals. Water develops, designs, manufactures and distributes products to detect contaminants in water. FDG develops, designs, manufactures and distributes products to detect disease in production animals and contaminants in dairy products. Other items that are not included in our reportable segments are comprised primarily of share-based compensation costs (effective January 1, 2006), corporate research and development expenses, interest income, and interest expense. While share-based compensation costs are not allocated to our reportable segments, such costs are classified in costs of sales and operating expenses consistently with the classification of cash compensation paid to the same employees.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies in our Annual Report on Form 10-K for the year ended December 31, 2005 in Notes 2 and 18.

The following is the segment information (in thousands) :

	For the Three Months Ended June 30,
	CAG		Water		FDG		Other			Consolidated Total
2006
Revenues	$	156,903	$	15,087	$	19,374	$	--		$	191,364

Income (loss) from operations	$	29,501	$	6,817	$	4,741	$	(4,033	)	$	37,026

Interest income											594

Income before provisions for
income taxes and partner's interest											37,620
Provision for income taxes											11,879
Partner's interest in loss of subsidiary											(39	)

Net income										$	25,780


2005
Revenues	$	131,332	$	14,271	$	15,027	$	--		$	160,630

Income (loss) from operations	$	21,411	$	6,540	$	1,760	$	(825	)	$	28,886

Interest income											871

Income before provisions for
income taxes and partner's interest											29,757
Provision for income taxes											9,934
Partner's interest in loss of subsidiary											(110	)

Net income										$	19,933

	For the Six Months Ended June 30,
	CAG		Water		FDG		Other			Consolidated Total
2006
Revenues	$	296,266	$	27,153	$	36,109	$	--		$	359,528

Income (loss) from operations	$	52,105	$	11,639	$	8,412	$	(8,155	)	$	64,001

Interest income											1,363

Income before provisions for
income taxes and partner's interest											65,364
Provision for income taxes											21,463
Partner's interest in loss of subsidiary											(152	)

Net income										$	44,053


2005
Revenues	$	256,212	$	27,077	$	29,767	$	--		$	313,056

Income (loss) from operations	$	40,299	$	12,044	$	4,338	$	(1,657	)	$	55,024

Interest income											1,374

Income before provisions for
income taxes and partner's interest											56,398
Provision for income taxes											18,986
Partner's interest in loss of subsidiary											(211	)

Net income										$	37,623

Revenues by product and service categories were as follows (in thousands) :

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2006		2005		2006		2005
CAG revenue:
Instruments and consumables	$	61,211	$	53,045	$	117,031	$	105,918
Rapid assay products		32,627		27,397		58,631		52,149
Laboratory and consulting services		47,811		40,367		91,394		76,911
Practice information systems and digital radiography		10,782		7,199		20,477		14,660
Pharmaceutical products		4,472		3,324		8,733		6,574

Net CAG revenue		156,903		131,332		296,266		256,212

Net Water revenue		15,087		14,271		27,153		27,077

FDG revenue:
Production animal products		15,450		10,956		28,403		21,818
Dairy testing products		3,924		4,071		7,706		7,949

Net FDG revenue		19,374		15,027		36,109		29,767

Net revenue	$	191,364	$	160,630	$	359,528	$	313,056

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report on Form 10-Q includes or incorporates forward-looking statements about our business and expectations within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to future revenue growth rates, demand for our products, realizability of assets, warranty expense, share-based compensation expense, and competition. You can generally identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Words such as “expects,” “may,” “anticipates,” “intends,” “would,” “will,” “plans,” “believes,” “estimates,” “should,” and similar words and expressions are intended to help you identify forward-looking statements. These statements give our current expectations or forecasts of future events; are based on current estimates, projections, beliefs, and assumptions; and are not guarantees of future performance. Actual events or results may differ materially from those described in the forward-looking statements. These forward-looking statements involve a number of risks and uncertainties as more fully described under the heading “Part II, Item 1A. Risk Factors” in this Form 10-Q. The risks and uncertainties discussed herein do not reflect the potential future impact of any mergers, acquisitions or dispositions. In addition, any forward-looking statements represent our estimates only as of the day this Quarterly Report was first filed with the Securities and Exchange Commission and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates or expectations change.

Business Overview

We operate primarily through three business segments: products and services for the veterinary market, which we refer to as our Companion Animal Group (“CAG”), water quality products (“Water”) and products for production animal health and dairy quality, which we refer to as the Food Diagnostics Group (“FDG”). CAG develops, designs, manufactures, and distributes products and performs services for veterinarians. CAG is comprised of the following product and service categories: instruments and consumables, rapid assays, reference laboratory and consulting services, practice information management systems and digital radiography, and pharmaceuticals. Water develops, designs, manufactures and distributes products to detect contaminants in water . FDG develops, designs, manufactures and distributes products to detect diseases in production animals and contaminants in dairy products. Other items that are not included in our reportable segments are comprised primarily of share-based compensation costs (effective January 1, 2006), corporate research and development expenses, interest income, and interest expense.

Critical Accounting Policies and Estimates

The critical accounting policies and the significant judgments and estimates used in the preparation of our condensed consolidated financial statements for the six months ended June 30, 2006 are consistent with those discussed in our Annual Report on Form 10-K for the year ended December 31, 2005 in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates,” except as described below. Also, see Note 2 to the condensed consolidated financial statements for the period ended June 30, 2006 included in this Form 10-Q for additional discussion of share-based compensation costs.

We adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment” (“SFAS No. 123(R)”) on January 1, 2006. SFAS No. 123(R) requires all share-based compensation to employees, including grants of stock options, to be valued at fair value on the date of grant, and to be expensed over the applicable vesting period. Prior to January 1, 2006, we measured costs related to employee share-based compensation plans in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). Accordingly, no employee compensation cost was recognized for these plans during the six months ended June 30, 2005.

Effective January 1, 2006, under the modified prospective method of transition, share-based compensation expense includes expense for unvested awards at December 31, 2005 and all awards granted subsequent to December 31, 2005. Share-based compensation expense for the unvested awards outstanding at December 31, 2005 is based on the grant-date fair value previously calculated in developing the pro forma disclosures in accordance with the provisions of SFAS No. 123, as Amended.

In connection with the adoption of SFAS No. 123(R), we adopted the straight-line method to prospectively expense share-based awards granted subsequent to December 31, 2005. The graded-vesting, or accelerated, method has been used to calculate the expense for stock options granted prior to January 1, 2006. If the total fair value of share-based compensation awards, as well as other features that impact expense, including forfeitures and capitalization of costs, was consistent from year-to-year in each of the last five years and through 2010, this change in expense method from graded-vesting to straight-line expensing would yield decreasing annual expense through 2010 until awards granted prior to January 1, 2006 were fully expensed. However, the total fair value of future awards may vary significantly from past awards based on a number of factors, including our share-based award practices. Therefore, share-based compensation expense is likely to fluctuate, possibly significantly, from year to year.

Selected financial impacts of share-based compensation, excluding the impact of deferred stock units issued under our Director Deferred Compensation Plan or our Executive Deferred Compensation Plan that do not have vesting conditions (which are described in Note 2 to the condensed consolidated financial statements included in this Form 10-Q), are presented in the table below (in thousands, except per share amounts) :

	For the Three Months Ended June 30, 2006			For the Six Months Ended June 30, 2006
Share-based compensation expense included in cost of revenue	$	421		$	799
Share-based compensation expense included in operating expense		2,248			4,666

Total share-based compensation expense		2,669			5,465

Income tax benefit in net income for share-based compensation expense		(485	)		(948	)
Income tax benefit in net income for employees' disqualifying
dispositions of shares acquired through the exercise of stock options
and employee stock purchase rights		(2	)		(25	)

Total income tax benefit		(487	)		(973	)

Net impact of share-based compensation on net income	$	2,182		$	4,492

Net impact of share-based compensation on:
Earnings per share, basic	$	0.07		$	0.14
Earnings per share, diluted		0.07			0.14

We use the Black-Scholes-Merton option-pricing model to determine the fair value of options granted. Option-pricing models require the input of highly subjective assumptions, particularly for the expected stock price volatility and the expected term of options. Changes in the subjective input assumptions can materially affect the fair value estimate. Our expected stock price volatility assumptions are based on the historical volatility of our stock over periods that are similar to the expected terms of grants, and other relevant factors. Our stock price volatility has not varied significantly over the past five years. Lower estimated volatility reduces the fair value of an option. To develop the expected term assumption for 2006 option awards, we elected to use the simplified method described in the Securities and Exchange Commission Staff Accounting Bulletin No. 107, which is based on vesting and contractual terms. The application of the simplified method is allowable for options granted through December 31, 2007. We will transition to developing expected term assumptions for future awards based on historical experience and other relevant factors concerning expected employee behavior with regards to option exercise. Longer expected term assumptions increase the fair value of option awards, and therefore increase the expense recognized per award.

The weighted average valuation assumptions used to determine the fair value of each option grant on the date of grant and the weighted average estimated fair values were as follows:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2006		2005			2006			2005
Expected stock price volatility		N/A		40.0	%		30.0	%		40.0	%
Expected term, in years		N/A		5.8			5.0			5.8
Risk-free interest rate		N/A		3.9	%		4.6	%		3.9	%

There were no options granted during the three months ended June 30, 2006.

Share-based compensation expense is based on the number of awards ultimately expected to vest and is, therefore, reduced for an estimate of the number of awards that are expected to be forfeited. The forfeiture estimate is based on historical data and other factors, and compensation expense is adjusted for actual results. Changes in estimated forfeiture rates and differences between estimated forfeiture rates and actual experience may result in significant, unanticipated increases or decreases in share-based compensation expense from period to period. The termination of employment by certain employees who hold large numbers of share-based compensation instruments may also have a significant, unanticipated impact on forfeiture experience and, therefore, on share-based compensation expense.

When disqualifying dispositions of incentive stock options occur, the tax benefit related to the option fair value is recognized as either a reduction of the current period tax provision or an increase in additional paid-in capital, as required by SFAS No. 123(R) transitional accounting rules, and depending on the vesting status of awards at the SFAS No. 123(R) adoption date, and the amounts previously expensed under SFAS No. 123(R). Employees’ exercise of vested options and disposition of shares acquired is influenced by the market price of the common stock and other factors outside of our control. The timing and volume of disqualifying dispositions; the vesting status of such exercised options at the date of our adoption of SFAS No. 123(R); and the relationship between the sale price of the common stock, the option exercise price and the option fair value may have a significant, unpredictable impact on our effective tax rate. As the aggregate fair value of outstanding options that has been expensed under SFAS No. 123(R) grows, we expect to recognize increasing tax benefits in net income related to disqualifying dispositions. However, the growth of the aggregate fair value of outstanding options that has been expensed under SFAS No. 123(R) will be limited in future years as a result of changes implemented in 2006 in our share-based compensation programs, under which we have shifted from the grant of stock options only to the grant of a mix of stock options and restricted stock unit awards that have a lower aggregate fair value than was awarded in prior years. Reductions in the fair value of options outstanding are expected to reduce the variability in our effective tax rate.

Results of Operations

Three Months Ended June 30, 2006 Compared to Three Months Ended June 30, 2005

Revenue

Total Company. Revenue increased $30.7 million, or 19%, to $191.4 million from $160.6 million for the same period of the prior year. The following table presents revenue by operating segment:

For the Three Months Ended June 30,
Net Revenue (in thousands)	2006		2005		Dollar Change		Percentage Change			Percentage Change from Currency ⁽¹⁾			Percentage Change Net of Currency Effect
CAG	$	156,903	$	131,332	$	25,571		19.5	%		--	%		19.5	%
Water		15,087		14,271		816		5.7	%		0.3	%		5.4	%
FDG		19,374		15,027		4,347		28.9	%		(0.4	%)		29.3	%

Total Company	$	191,364	$	160,630	$	30,734		19.1	%		--	%		19.1	%

⁽¹⁾ Represents the percentage change in revenue attributed to the effect of changes in currency rates from the quarter ended June 30, 2005 to the quarter ended June 30, 2006.

Companion Animal Group. Revenue for CAG increased $25.6 million, or 19%, to $156.9 million from $131.3 million for the same period of the prior year. Businesses acquired since April 2005, consisting primarily of veterinary reference laboratories and a digital radiography business, contributed 2% to CAG revenue growth during the period. The following table presents revenue by product and service categories for CAG:

For the Three Months Ended June 30,
Net Revenue (in thousands)	2006		2005		Dollar Change		Percentage Change			Percentage Change from Currency ⁽¹⁾			Percentage Change Net of Currency Effect
Instruments and consumables	$	61,211	$	53,045	$	8,166		15.4	%		0.3	%		15.1	%
Rapid assay products		32,627		27,397		5,230		19.1	%		(0.1	%)		19.2	%
Laboratory and consulting services		47,811		40,367		7,444		18.4	%		(0.6	%)		19.0	%
Practice information systems and digital radiography		10,782		7,199		3,583		49.8	%		1.0	%		48.8	%
Pharmaceutical products		4,472		3,324		1,148		34.5	%		--	%		34.5	%

Net CAG Revenue	$	156,903	$	131,332	$	25,571		19.5	%		--	%		19.5	%

⁽¹⁾ Represents the percentage change in revenue attributed to the effect of changes in currency rates from the quarter ended June 30, 2005 to the quarter ended June 30, 2006.

The following revenue analysis reflects the results of operations net of the impact of currency exchange rates on sales outside the U.S.

Because our instrument consumables, rapid assay products, and pharmaceutical products are sold in the U.S. and certain other geographies by distributors, distributor purchasing dynamics have an impact on our reported sales of these products. Distributors purchase products from us and sell them to veterinary practices, who are the end users. Distributor purchasing dynamics may be affected by many factors and may be unrelated to underlying end-user demand for our products. As a result, fluctuations in distributors’ inventories may cause reported results in a period not to be representative of underlying end-user demand. Therefore, we believe it is important to track distributor sales to end users and to distinguish between the impact of end-user demand and the impact of distributor purchasing dynamics on reported revenue growth.

Where growth rates are affected by changes in end-user demand, we refer to the impact of practice-level sales on growth. Where growth rates are affected by distributor purchasing dynamics, we refer to the impact of changes in distributors’ inventories. If during the comparable period of the prior year, distributors’ inventories grew by more than those inventories grew in the current year, then changes in distributors’ inventories have a negative impact on our reported sales in the current period. Conversely, if during the comparable period of the prior year, distributors’ inventories grew by less than those inventories grew in the current year, then distributors’ inventories have a positive impact on our reported sales in the current period.

The increase in sales of instruments and consumables was due mainly to higher unit sales volume. Higher consumables sales volumes were attributable primarily to higher worldwide practice-level sales of slides used with our chemistry analyzers, with all consumables categories benefiting from the continued growth of our installed base of instruments. Increased instrument sales volume resulted mainly from sales of our VetStat™ Electrolyte and Blood Gas Analyzer, which was launched in the third quarter of 2005. The impact from changes in distributors’ inventory levels increased reported revenue growth of instruments and consumables by 1%.

The increase in sales of rapid assay products was due primarily to increased practice-level sales volume of our combination test, the SNAP ^® 3Dx ^® Canine Test, and to higher average unit sales prices of canine products, in part due to less promotional discounting. The impact from changes in distributors’ inventory levels increased reported rapid assay revenue growth by 5%.

The increase in sales of laboratory and consulting services resulted primarily from higher testing volume, the impact of price increases, and incremental sales attributable to acquisitions since April 2005. Acquired businesses contributed approximately 4% to laboratory and consulting services revenue growth during the period.

The increase in sales of practice information management systems and digital radiography resulted primarily from increased sales volume. The increase in the number of digital radiography systems sold included sales attributable to a business acquired in the third quarter of 2005, which contributed approximately 19% to practice information management systems and digital radiography revenue growth.

The increase in sales of pharmaceutical products resulted primarily from increased practice-level demand and, to a lesser extent, from price increases on certain products. We expect pharmaceutical revenue for the second half of 2006, as a percentage of 2005 revenue, to grow at a lower rate of 15% to 18%.

In December 2005, we received a letter from the U.S. Food and Drug Administration (“FDA”) stating that our new animal drug application (“NADA”) for our long-acting feline antibiotic was incomplete. After conducting a series of studies to address the issues raised by the FDA in this letter, we have decided not to continue to seek FDA approval for this NADA. We do not believe that our failure to obtain this approval will have a material effect on our results of operations. We have tested the goodwill attributable to our pharmaceutical business unit for impairment and, based on the future projections for this business including the continued prospects for applications of our proprietary delivery technologies, determined that there is no impairment of the associated goodwill.

Water. Revenue for Water increased $0.8 million, or 6%, to $15.1 million from $14.3 million for the same period of the prior year. The increase resulted primarily from higher sales volume in the Americas and Europe. Changes in currency exchange rates did not have a significant impact on Water revenue growth.

Food Diagnostics Group. Revenue for FDG increased $4.3 million, or 29%, to $19.4 million from $15.0 million for the same period of the prior year. The following table presents revenue by product and service categories for FDG:

For the Three Months Ended June 30,
Net Revenue (in thousands)	2006		2005		Dollar Change			Percentage Change			Percentage Change from Currency ⁽¹⁾			Percentage Change Net of Currency Effect
Production animal products	$	15,450	$	10,956	$	4,494			41.0	%		(0.4	%)		41.4	%
Dairy testing products		3,924		4,071		(147	)		(3.6	%)		(0.3	%)		(3.3	%)

Net FDG revenue	$	19,374	$	15,027	$	4,347			28.9	%		(0.4	%)		29.3	%

⁽¹⁾ Represents the percentage change in revenue attributed to the effect of changes in currency rates from the quarter ended June 30, 2005 to the quarter ended June 30, 2006.

The following revenue analysis reflects the results of operations net of the impact of currency exchange rates on sales outside the U.S.

The increase in sales of production animal products resulted primarily from higher worldwide livestock and poultry diagnostics sales volume, including, notably, sales in Europe of our products that test for bovine spongiform encephalopathy (“BSE”). The decrease in sales of dairy testing products resulted primarily from the divestiture of the Parallux™ product line in 2005, partly offset by higher unit sales in Asia Pacific.

Gross Profit

Total Company. Gross profit increased $18.5 million, or 23%, to $99.0 million from $80.6 million for the same period of the prior year. As a percentage of total revenue, gross profit increased to 52% from 50%.

Share-based compensation expense is not allocated to the reporting segments and therefore has been categorized as “other.” The following table presents gross profit and gross profit percentage by operating segment:

For the Three Months Ended June 30,
Gross Profit (in thousands)	2006			Percent of Sales			2005		Percent of Sales			Dollar Change			Percentage Change
CAG	$	78,131			49.8	%	$	62,825		47.8	%	$	15,306			24.4	%
Water		9,866			65.4	%		9,622		67.4	%		244			2.5	%
FDG		11,460			59.2	%		8,128		54.1	%		3,332			41.0	%
Other		(421	)		N/A			--		N/A			(421	)		N/A

Total Company	$	99,036			51.8	%	$	80,575		50.2	%	$	18,461			22.9	%

Companion Animal Group. Gross profit for CAG increased $15.3 million, or 24%, to $78.1 million from $62.8 million for the same period of the prior year primarily due to increased sales volume across the CAG product and service lines and, to a lesser extent, to an increase in the gross profit percentage to 50% from 48%. The gross profit percentage was favorably impacted by lower overall manufacturing and purchased materials costs including lower cost of slides sold for use in our VetTest ^® chemistry analyzers under the agreement with our supplier, and by relatively higher selling prices, particularly for laboratory and consulting services and rapid assay products. The increases in the gross margin percentage were partly offset by higher freight costs, including fuel surcharges by freight providers.

Water. Gross profit for Water increased $0.2 million, or 3%, to $9.9 million from $9.6 million for the same period of the prior year due primarily to increased sales volume, partly offset by a decrease in the gross profit percentage to 65% from 67%. The gross profit percentage was unfavorably impacted by higher costs for promotional product provided to customers in connection with the launch of a new product, higher manufacturing and purchased materials costs, and higher freight and distribution costs, partly offset by higher selling prices.

Food Diagnostics Group. Gross profit for FDG increased $3.3 million, or 41%, to $11.5 million from $8.1 million for the same period of the prior year due primarily to increased sales volume and, to a lesser extent, to an increase in the gross profit percentage to 59% from 54%. The gross profit percentage for the current period was favorably impacted by higher relative sales of higher margin livestock products and by lower net product costs.

Operating Expenses and Operating Income

Total Company. Total operating expenses increased $10.3 million to $62.0 million from $51.7 million for the same period of the prior year. As a percentage of revenue, operating expenses were approximately constant at 32%. The change in accounting for share-based compensation beginning January 1, 2006 resulted in an increase of $2.2 million in total company operating expenses for the current period. Share-based compensation expense is not allocated to the reporting segments and therefore has been categorized as “other.”

Operating income increased $8.1 million to $37.0 million from $28.9 million for the prior year. As a percentage of revenue, operating income increased to 19% from 18%. The change in accounting for share-based compensation beginning January 1, 2006 had a negative impact of 1% on reported operating income as a percentage of total company revenue.

The following tables present operating expenses and operating income by operating segment:

For the Three Months Ended June 30,
Operating Expenses (in thousands)	2006		Percent of Sales			2005		Percent of Sales			Dollar Change			Percentage Change
CAG	$	48,630		31.0	%	$	41,414		31.5	%	$	7,216			17.4	%
Water		3,049		20.2	%		3,082		21.6	%		(33	)		(1.1	%)
FDG		6,719		34.7	%		6,368		42.4	%		351			5.5	%
Other		3,612		N/A			825		N/A			2,787			337.8	%

Total Company	$	62,010		32.4	%	$	51,689		32.2	%	$	10,321			20.0	%

Operating Income (in thousands)	2006					2005					Dollar Change
CAG	$	29,501		18.8	%	$	21,411		16.3	%	$	8,090		37.8	%
Water		6,817		45.2	%		6,540		45.8	%		277		4.2	%
FDG		4,741		24.5	%		1,760		11.7	%		2,981		169.4	%
Other		(4,033	)	N/A			(825	)	N/A			(3,208	)	(388.8	%)

Total Company	$	37,026		19.3	%	$	28,886		18.0	%	$	8,140		28.2	%

Companion Animal Group. Operating expenses for CAG increased $7.2 million, or 17%, to $48.6 million from $41.4 million for the same period of the prior year and, as a percentage of revenue, decreased to 31% from 32%. The increase in operating expenses was attributable to an 11% ($2.5 million) increase in sales and marketing expense, a 34% ($2.4 million) increase in research and development expense, and a 19% ($2.3 million) increase in general and administrative expense. The increase in sales and marketing expense resulted primarily from higher personnel-related costs due, in part, to expanded worldwide sales, customer service and marketing headcount and, to a lesser extent, to incremental expenses associated with businesses acquired since April 2005. The increase in research and development expense resulted primarily from increased product development spending related mainly to IDEXX VetLab ^® instrumentation and, to a lesser extent, to rapid assay and digital radiography products. The increase in general and administrative expense resulted primarily from incremental expenses associated with businesses acquired since April 2005, comprised mainly of amortization expense for intangible assets acquired and incremental general and administrative expenses of a recurring nature to support the acquired businesses. To a lesser extent, higher spending on information technology, facilities, and other general support functions, and higher bad debt expense, also contributed to the increase in general and administrative expense. Increases in general and administrative expenses were partly offset by the favorable impact of changes in exchange rates on foreign currency denominated expenses.

Water. Operating expenses for Water decreased less than $0.1 million, or 1%, to $3.0 million from $3.1 million for the same period of the prior year and, as a percentage of revenue, decreased to 20% from 22%. There were no significant fluctuations in the nature and amounts of sales and marketing expense, of research and development expense, and of general and administrative expense.

Food Diagnostics Group. Operating expenses for FDG increased $0.4 million, or 6%, to $6.7 million from $6.4 million for the same period of the prior year and, as a percentage of revenue, decreased to 35% from 42%. The increase in operating expenses was attributable to a 15% ($0.4 million) increase in general and administrative expense and a 3% ($0.1 million) increase in sales and marketing expense, partly offset by a 6% ($0.1 million) decrease in research and development expense. The increase in general and administrative expense resulted primarily from the write-off of certain fixed assets in connection with a strategic decision to continue to manufacture products at our facilities outside of China, rather than in China, for distribution in China, and from higher spending on information technology, facilities, and other general support functions. Increases in general and administrative expenses were partly offset by the favorable impact of changes in exchange rates on foreign currency denominated expenses. There were no significant fluctuations in the nature and amounts of sales and marketing expense and of research and development expense.

Other. Operating expenses, consisting primarily of the company-wide share-based compensation expense and corporate research and development, increased $2.8 million, to $3.6 million from $0.8 million for the same period of the prior year. This increase is primarily due to the inclusion of share-based compensation expense of $2.2 million in the current period due to the adoption of SFAS No. 123(R) on January 1, 2006. Corporate research and development expense grew mainly due to personnel additions in 2005 to support increased long-term product development activities.

Interest Income, Net

Net interest income was $0.6 million for the three months ended June 30, 2006 compared to $0.9 million for the three months ended June 30, 2005. The decrease in net interest income was due to lower invested cash and, to a lesser extent, to interest expense incurred on the mortgage assumed in connection with the Westbrook, Maine facility purchase in May 2006, partly offset by higher effective interest rates.

Provision for Income Taxes

Our effective tax rate was 31.5% for the three months ended June 30, 2006, compared with 33.3% for the three months ended June 30, 2005. The majority of the decrease in our effective tax rate during the three months ended June 30, 2006 related to a reduction of previously recorded international deferred tax liabilities as a result of obtaining certain multi-year tax incentives during the quarter ended June 30, 2006. Other rate reductions resulted from the release of a valuation allowance on international deferred tax assets as a result of a subsidiary demonstrating consistent sustained profitability. These discrete rate-reducing adjustments totaled $1.3 million and were partly offset by the nonrecognition, in the current period, of tax benefits on compensation expense for incentive stock options and employee stock purchase rights that were recognized in accordance with SFAS No. 123(R) effective January 1, 2006 and by the December 31, 2005 expiration of U.S. tax benefits related to research and development expense. We expect our effective tax rate to be 32% to 33% for the twelve months ending December 31, 2006.

Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005

Revenue

Total Company. Revenue increased $46.5 million, or 15%, to $359.5 million from $313.1 million for the same period of the prior year. The following table presents revenue by operating segment:

For the Six Months Ended June 30,
Net Revenue (in thousands)	2006		2005		Dollar Change		Percentage Change			Percentage Change from Currency ⁽¹⁾			Percentage Change Net of Currency Effect
CAG	$	296,266	$	256,212	$	40,054		15.6	%		(1.1	%)		16.7	%
Water		27,153		27,077		76		0.3	%		(1.0	%)		1.3	%
FDG		36,109		29,767		6,342		21.3	%		(3.5	%)		24.8	%

Total Company	$	359,528	$	313,056	$	46,472		14.8	%		(1.4	%)		16.2	%

⁽¹⁾ Represents the percentage change in revenue attributed to the effect of changes in currency rates from the six months ended June 30, 2005 to the six months ended June 30, 2006.

Companion Animal Group. Revenue for CAG increased $40.1 million, or 16%, to $296.3 million from $256.2 million for the same period of the prior year. Businesses acquired since January 2005, consisting primarily of veterinary reference laboratories and a digital radiography business, contributed 2% to CAG revenue growth during the period. The following table presents revenue by product and service categories for CAG:

For the Six Months Ended June 30,
Net Revenue (in thousands)	2006		2005		Dollar Change		Percentage Change			Percentage Change from Currency ⁽¹⁾			Percentage Change Net of Currency Effect
Instruments and consumables	$	117,031	$	105,918	$	11,113		10.5	%		(1.4	%)		11.9	%
Rapid assay products		58,631		52,149		6,482		12.4	%		(0.5	%)		12.9	%
Laboratory and consulting services		91,394		76,911		14,483		18.8	%		(1.6	%)		20.4	%
Practice information systems and digital radiography		20,477		14,660		5,817		39.7	%		0.6	%		39.1	%
Pharmaceutical products		8,733		6,574		2,159		32.8	%		--	%		32.8	%

Net CAG Revenue	$	296,266	$	256,212	$	40,054		15.6	%		(1.1	%)		16.7	%

⁽¹⁾ Represents the percentage change in revenue attributed to the effect of changes in currency rates from the six months ended June 30, 2005 to the six months ended June 30, 2006.

The following revenue analysis reflects the results of operations net of the impact of currency exchange rates on sales outside the U.S.

The increase in sales of instruments and consumables was due mainly to higher unit sales volume. Higher consumables sales volumes were attributable primarily to higher worldwide practice-level sales of slides used with our chemistry analyzers and, to a lesser extent, to increased domestic practice-level sales of tubes used with our hematology analyzers, with all consumables categories benefiting from the continued growth of our installed base of instruments. To a lesser extent, higher average unit sales prices for slides also contributed to increased revenue. Increased instrument sales volume resulted, in part, from sales of our VetStat™ Electrolyte and Blood Gas Analyzer, which was launched in the third quarter of 2005. The impact from changes in distributors’ inventory levels reduced reported revenue growth of instruments and consumables by 1%.

The increase in sales of laboratory and consulting services resulted primarily from higher testing volume, and, to a lesser extent, the impact of price increases and incremental sales attributable to acquisitions since January 2005. Acquired businesses contributed approximately 4% to laboratory and consulting services revenue growth during the period.

The increase in sales of practice information management systems and digital radiography resulted primarily from increased sales volume. The increase in the number of digital radiography systems sold included sales attributable to a business acquired in the third quarter of 2005, which contributed approximately 13% to practice information management systems and digital radiography revenue growth.

Water. Revenue for Water increased $0.1 million, or less than 1%, to $27.2 million from $27.1 million for the same period of the prior year. The increase resulted primarily from higher relative sales in geographies where products are sold at higher unit prices and higher average unit sales prices in certain geographies, partly offset by lower sales volume. The unfavorable impact of currency exchange rates reduced reported Water revenue growth by 1%.

Food Diagnostics Group. Revenue for FDG increased $6.3 million, or 21%, to $36.1 million from $29.8 million for the same period of the prior year. The following table presents revenue by product and service categories for FDG:

For the Six Months Ended June 30,
Net Revenue (in thousands)	2006		2005		Dollar Change			Percentage Change			Percentage Change from Currency ⁽¹⁾			Percentage Change Net of Currency Effect
Production animal products	$	28,403	$	21,818	$	6,585			30.2	%		(3.9	%)		34.1	%
Dairy testing products		7,706		7,949		(243	)		(3.1	%)		(2.4	%)		(0.7	%)

Net FDG revenue	$	36,109	$	29,767	$	6,342			21.3	%		(3.5	%)		24.8	%

⁽¹⁾ Represents the percentage change in revenue attributed to the effect of changes in currency rates from the six months ended June 30, 2005 to the six months ended June 30, 2006.

The following revenue analysis reflects the results of operations net of the impact of currency exchange rates on sales outside the U.S.

The increase in sales of production animal products resulted primarily from higher livestock and poultry diagnostics sales volume in Europe and the Americas and, to a lesser extent, higher relative sales in geographies where products are sold at higher unit prices and higher average unit sales prices in certain geographies. Sales of our HerdChek ^® BSE test products in Europe contributed significantly to the increased sales volume of livestock diagnostics. The decrease in sales of dairy testing products resulted primarily from the divestiture of the Parallux™ product line in 2005, partly offset by higher unit sales in Asia Pacific.

Gross Profit

Total Company. Gross profit increased $28.4 million, or 18%, to $185.1 million from $156.7 million for the same period of the prior year. As a percentage of total revenue, gross profit increased to 51% from 50%.

For the Six Months Ended June 30,
Gross Profit (in thousands)	2006			Percent of Sales			2005		Percent of Sales			Dollar Change			Percentage Change
CAG	$	146,736			49.5	%	$	122,088		47.7	%	$	24,648			20.2	%
Water		17,827			65.7	%		18,099		66.8	%		(272	)		(1.5	%)
FDG		21,297			59.0	%		16,468		55.3	%		4,829			29.3	%
Other		(799	)		N/A			--		N/A			(799	)		N/A

Total Company	$	185,061			51.5	%	$	156,655		50.0	%	$	28,406			18.1	%

Companion Animal Group. Gross profit for CAG increased $24.6 million, or 20%, to $146.7 million from $122.1 million for the same period of the prior year due to increased sales volume across the CAG product and service lines and, to a lesser extent, to an increase in the gross profit percentage to 50% from 48%. The gross profit percentage was favorably impacted by lower overall manufacturing and purchased materials costs including lower cost of slides sold for use in our VetTest ^® chemistry analyzers under the agreement with our supplier, and by relatively higher selling prices, particularly for laboratory and consulting services and rapid assay products. The increases in the gross profit percentage were partly offset by higher freight costs, including fuel surcharges by freight providers.

Water. Gross profit for Water decreased $0.3 million, or 2%, to $17.8 million from $18.1 million for the same period of the prior year due primarily to a decrease in the gross profit percentage to 66% from 67%. The gross profit percentage was unfavorably impacted by higher costs for promotional product provided to customers in connection with the launch of a new product in the second quarter, increased freight and distribution costs, and higher relative sales of lower margin products, partly offset by higher average unit sales prices.

Food Diagnostics Group. Gross profit for FDG increased $4.8 million, or 29%, to $21.3 million from $16.5 million for the same period of the prior year due primarily to increased sales volume and, to a lesser extent, to an increase in the gross profit percentage to 59% from 55%. The gross profit percentage was favorably impacted by higher relative sales of higher margin livestock products, and, to a lesser extent, the absence in 2006 of certain discrete costs that occurred in 2005 and higher average unit sales prices. The discrete costs in 2005 comprised integration costs and purchase accounting impacts associated with an acquisition.

Operating Expenses and Operating Income

Total Company. Total operating expenses increased $19.4 million to $121.1 million from $101.6 million for the same period of the prior year. As a percentage of revenue, operating expenses increased to 34% from 32%. The change in accounting for share-based compensation beginning January 1, 2006 resulted in an increase of $4.7 million in total company operating expenses for the current period. Share-based compensation expense is not allocated to the reporting segments and therefore has been categorized as “other.”

Operating income increased $9.0 million to $64.0 million from $55.0 million for the prior year. As a percentage of revenue, operating income was approximately constant at 18%. The change in accounting for share-based compensation beginning January 1, 2006 had a negative impact of 2% on reported operating income as a percentage of total company revenue.

The following tables present operating expenses and operating income by operating segment:

For the Six Months Ended June 30,
Operating Expenses (in thousands)	2006		Percent of Sales			2005		Percent of Sales			Dollar Change		Percentage Change
CAG	$	94,631		31.9	%	$	81,789		31.9	%	$	12,842		15.7	%
Water		6,188		22.8	%		6,055		22.4	%		133		2.2	%
FDG		12,885		35.7	%		12,130		40.7	%		755		6.2	%
Other		7,356		N/A			1,657		N/A			5,699		343.9	%

Total Company	$	121,060		33.7	%	$	101,631		32.5	%	$	19,429		19.1	%

Operating Income (in thousands)	2006					2005					Dollar Change
CAG	$	52,105		17.6	%	$	40,299		15.7	%	$	11,806		29.3	%
Water		11,639		42.9	%		12,044		44.5	%		(405	)	(3.4	%)
FDG		8,412		23.3	%		4,338		14.6	%		4,074		93.9	%
Other		(8,155	)	N/A			(1,657	)	N/A			(6,498	)	(392.2	%)

Total Company	$	64,001		17.8	%	$	55,024		17.6	%	$	8,977		16.3	%

Companion Animal Group. Operating expenses for CAG increased $12.8 million, or 16%, to $94.6 million from $81.8 million for the same period of the prior year. As a percentage of revenue, CAG operating expenses were approximately constant at 32%. The increase in operating expenses was attributable to a 20% ($4.7 million) increase in general and administrative expense, a 31% ($4.4 million) increase in research and development expense, and a 9% ($3.7 million) increase in sales and marketing expense. The increase in general and administrative expense resulted primarily from higher spending on information technology, facilities, and other general support functions. To a lesser extent, incremental expenses associated with businesses acquired since January 2005, comprised mainly of amortization expense for intangible assets acquired and general and administrative expenses of a recurring nature to support the acquired businesses, also contributed to the increase in general and administrative expense. Increases in general and administrative expenses were partly offset by the favorable impact of changes in exchange rates on foreign currency denominated expenses. The increase in research and development expense resulted primarily from increased product development spending related primarily to IDEXX VetLab ^® instrumentation and, to a lesser extent, rapid assay, digital radiography, and pharmaceutical products. The increase in sales and marketing expense resulted primarily from higher personnel-related costs due, in part, to expanded worldwide sales, customer service and marketing headcount and, to a lesser extent, increased marketing activities to support revenue growth and from incremental expenses associated with businesses acquired since January 2005. Increases in sales and marketing expense were partly offset by the favorable impact of changes in exchange rates on foreign currency denominated expenses.

Water. Operating expenses for Water increased $0.1 million, or 2%, to $6.2 million from $6.1 million for the same period of the prior year and, as a percentage of revenue, increased to 23% from 22%. The increase was attributable primarily to a 5% ($0.1 million) increase in general and administrative expense that resulted primarily from higher spending on information technology and other corporate functions and higher compensation and consulting costs, partly offset by the favorable impact of changes in exchange rates on foreign currency denominated expenses. There were no significant fluctuations in the nature and amounts of sales and marketing expense and of research and development expense.

Food Diagnostics Group. Operating expenses for FDG increased $0.8 million, or 6%, to $12.9 million from $12.1 million for the same period of the prior year and, as a percentage of revenue, decreased to 36% from 41%. The increase in operating expenses was attributable to a 14% ($0.7 million) increase in general and administrative expense and a 5% ($0.3 million) increase in sales and marketing expense, partly offset by a 5% ($0.2 million) decrease in research and development expense. The increase in general and administrative expense resulted primarily from higher spending on information technology, facilities, and other general support functions, and, to a lesser extent, from the write-off of certain fixed assets in connection with a strategic decision to continue to manufacture products at our facilities outside of China, rather than in China, for distribution in China. Increases in general and administrative expenses were partly offset by the favorable impact of changes in exchange rates on foreign currency denominated expenses. The increase in sales and marketing expense resulted primarily from higher personnel-related costs, largely driven by personnel added in 2005 to support our HerdChek ^® BSE Antigen Test Kit, and strategic marketing activities, partly offset by the favorable impact of changes in exchange rates on foreign currency denominated expenses. The decrease in research and development expense resulted primarily from the consolidation of our European production animal business, including research and development activities, during the second half of 2005.

Other. Operating expenses, consisting primarily of the company-wide share-based compensation expense and corporate research and development, increased $5.7 million, to $7.4 million from $1.7 million for the same period of the prior year. This increase is primarily due to the inclusion of share-based compensation expense of $4.7 million in the current period due to the adoption of SFAS No. 123(R) on January 1, 2006. Corporate research and development expense grew mainly due to personnel additions in 2005 to support increased long-term product development activities.

Interest Income, Net

Net interest income was $1.4 million for the six months ended June 30, 2006 and 2005. The impact of higher effective interest rates was substantially offset by lower invested cash balances and, to a lesser extent, to interest expense incurred on the mortgage assumed in connection with the Westbrook, Maine facility purchase in May 2006.

Provision for Income Taxes

Our effective tax rate was 32.8% for the six months ended June 30, 2006, compared with 33.5% for the six months ended June 30, 2005. The majority of the decrease in our effective tax rate during the six months ended June 30, 2006 related to a reduction of previously recorded international deferred tax liabilities as a result of obtaining certain multi-year tax incentives during the quarter ended June 30, 2006. Other rate reductions resulted from the release of a valuation allowance on international deferred tax assets as a result of a subsidiary demonstrating consistent sustained profitability. These discrete rate-reducing adjustments totaled $1.3 million and were partly offset by the nonrecognition, in the current period, of tax benefits on compensation expense for incentive stock options and employee stock purchase rights that were recognized in accordance with SFAS No. 123(R) effective January 1, 2006 and by the December 31, 2005 expiration of U.S. tax benefits related to research and development expense. We expect our effective tax rate to be 32% to 33% for the twelve months ending December 31, 2006.

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements is included in Note 2(p) to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2005 and in Note 1 to the condensed consolidated financial statements included in this Form 10-Q.

Liquidity and Capital Resources

Liquidity

We fund the capital needs of our business through cash generated from operations. At June 30, 2006 and December 31, 2005, we had $77.1 million and $132.7 million of cash and cash equivalents and short-term investments, respectively, and working capital of $148.5 million and $192.7 million, respectively.

We consider the operating earnings of non-United States subsidiaries to be indefinitely invested outside the U.S. Subject to this policy, we manage our worldwide cash requirements considering available funds among all of our subsidiaries. While the repatriation of foreign earnings could have adverse tax consequences, foreign cash balances are generally available without legal restrictions to fund ordinary business operations.

We believe that current cash and cash equivalents, short-term investments and funds generated from operations will be sufficient to fund our operations, capital purchase requirements, and strategic growth needs.

Sources and Uses of Cash

Cash provided by operating activities was $44.8 million for the six months ended June 30, 2006, compared to $38.1 million for the same period in 2005. The increase in cash provided by operating activities, compared to the same period of the prior year, was due, in part, to increased cash flow from net income. The total of net income and net noncash charges was $54.9 million for the six months ended June 30, 2006, compared to $51.9 million for the same period of the prior year. During the six months ended June 30, 2006, cash decreased $10.1 million due to changes in operating assets and liabilities, compared to $13.8 million for the same period in 2005, resulting in a year-to-year change of $3.6 million. The decrease in cash used by changes in operating assets and liabilities, compared to the same period in 2005, was primarily attributable to $14.8 million of additional cash provided by an increase of accounts payable and accrued liabilities during the six months ended June 30, 2006, partly offset by $10.3 million of incremental cash used to purchase inventory. Reported cash flows from operations were negatively impacted by a change in accounting for the tax benefits from exercises of stock options and disqualifying dispositions of shares acquired in connection with our adoption of SFAS No. 123(R) on January 1, 2006, which reduced reported cash flows from operations by $5.9 million for the six months ended June 30, 2006. For the six months ended June 30, 2006, this portion of the tax benefit on exercises of stock options and disqualifying dispositions of shares was classified as a cash flow from financing activities, whereas the benefit was classified as a cash flow from operating activities in prior years.

The greater incremental increase in inventories and the incremental cash provided by accounts payable and accrued expenses were primarily due to the timing of VetTest ^® slide receipts in the first quarter of 2006. Our supplier deferred certain shipments to us of VetTest ^® slides from the fourth quarter of 2005 to the first quarter of 2006. The incremental increase in cash provided by accrued expenses was also due to the timing of estimated tax payments compared to the same period in 2005. The $2.3 million increase in depreciation and amortization was due primarily to purchases of property and equipment and intangible asset acquisitions during 2005 and the six months ended June 30, 2006.

Cash of $4.1 million was provided by investing activities for the six months ended June 30, 2006, compared to cash provided of $11.1 million for the same period in 2005. The decrease in cash provided by investing activities for 2006, compared to the same period in 2005, was primarily due to the $11.5 million in cash used for the purchase of land and buildings in 2006. Additionally, during the six months ended June 30, 2006, we used $7.6 million more cash to acquire intangible assets and businesses, compared to the same period of 2005. This incremental decrease is partially offset by the increase in cash provided by net sales of short- and long-term investments of $15.0 million.

We paid cash of $11.5 million to purchase our Westbrook, Maine facility, $13.8 million to purchase other fixed assets and $0.9 million to acquire rental instruments sold under recourse during the six months ended June 30, 2006. We anticipate total capital expenditures in 2006 of $60 to $65 million, including capital expenditures associated with the purchase of our Westbrook, Maine facility.

The board of directors has authorized the repurchase of up to 16,000,000 shares of our common stock in the open market or in negotiated transactions. At June 30, 2006, we had 973,000 shares remaining under our share repurchase authorization. See Note 11 to the condensed consolidated statements included in this Form 10-Q for additional information about our share repurchases.

Other Commitments, Contingencies and Guarantees

Significant commitments, contingencies and guarantees at June 30, 2006 are consistent with those discussed in our Annual Report on Form 10-K for the year ended December 31, 2005 in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Liquidity and Capital Resources,” and in Note 11 to the consolidated financial statements, except as described below.

In connection with our acquisition of our Westbrook, Maine facility in May 2006, we assumed a mortgage that is payable in equal monthly installments of approximately $0.1 million through May 1, 2015. Annual mortgage principal payments as of June 30, 2006, based on the fair market value of the mortgage at the assumption date, are as follows (in thousands) :

Years Ending December 31,	Amount
2006	$	269
2007		675
2008		717
2009		762
2010		809
Thereafter		4,218

	$	7,450

The purchase of our Westbrook, Maine facility relieved us from associated future lease commitments. This transaction, partly offset by other transactions whereby we entered into facility lease agreements in the normal course of business, resulted in net reductions to the minimum annual rental obligations disclosed in our Annual Report on Form 10-K for the year ended December 31, 2005 in Note 11 to the consolidated financial statements of approximately $0.5 million in 2007 and in 2008, $0.6 million in 2009, and $1.4 million in 2010.

In connection with the acquisitions of certain businesses and intangible assets during the six months ended June 30, 2006, we agreed to make additional purchase price payments of up to $2.1 million, of which $0.4 million is contingent on the achievement by certain acquired businesses of certain milestones. We also assumed other long-term liabilities of $1.5 million.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our financial market risk consists primarily of foreign currency exchange rate risk. We operate subsidiaries in 15 foreign countries and transact business in local currencies. We attempt to hedge the majority of our cash flow on intercompany sales to minimize foreign currency exposure.

The primary purpose of our foreign currency hedging activities is to protect against the volatility associated with foreign currency transactions. Corporate policy prescribes the range of allowable hedging activity. We primarily utilize forward exchange contracts with durations of less than 18 months. Gains and losses related to qualifying hedges of foreign currency from commitments or anticipated transactions are deferred in prepaid expenses or accruals, as appropriate, and are included in the basis of the underlying transaction. Our hedging strategy is consistent with prior periods. Our hedging strategy provides that we employ the full amount of our hedges for the succeeding year at the conclusion of our budgeting process for that year, which is complete by the end of the preceding year. Quarterly, we enter into contracts to hedge incremental portions of anticipated foreign currency transactions for the following year. Accordingly, our risk with respect to foreign currency exchange rate fluctuations may vary throughout each annual cycle. At June 30, 2006, we had $1.8 million in net unrealized losses on foreign exchange contracts designated as hedges recorded in other comprehensive income, which is net of $0.9 million in taxes.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining disclosure controls and procedures, as defined by the Securities and Exchange Commission in its Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Generally, these are controls and procedures designed to ensure that the information required to be disclosed in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Our chief executive officer and chief financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective to achieve their stated purpose.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended June 30, 2006 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II OTHER INFORMATION

Item 1A. Risk Factors

Our future operating results involve a number of risks and uncertainties. Actual events or results may differ materially from those discussed in this report. Factors that could cause or contribute to such differences include, but are not limited to, the factors discussed below, as well as those discussed elsewhere in this report. The risk factor entitled “Our Sales are Dependent on Distributor Purchasing Patterns” has been revised from the comparable risk factor in our Form 10-Q for the quarter ended March 31, 2006.

IDEXX’s Future Growth and Profitability Depend on Several Factors

The future success of our business depends upon our ability to successfully implement various strategies, including:

•

Developing, manufacturing and marketing new products with new features and capabilities, including pharmaceutical products; a new clinical chemistry instrument; and rapid assay, water testing and production animal diagnostic products, as well as improving and enhancing existing products;

•

Developing and implementing new technology and licensing strategies; and identifying, completing and integrating acquisitions that enhance our existing businesses or create new business areas for us;

•

Increasing the value to our customers of our companion animal products and services by enhancing the connectivity of these products, including the connectivity among the IDEXX VetLab ^® instrument suite, Cornerstone ^® practice information management system, the IDEXX-PACS™ software and IDEXX Reference Laboratories;

•

Expanding our market by expanding the installed base of our instrumentation through customer acquisition and retention and increasing use of our products by our customers;

•

Strengthening our sales and marketing activities both within the U.S. and in geographies outside of the U.S.; and

•

Reducing the costs of manufacturing our products and providing services through operating efficiencies and increased focus on quality.

However, we may not be able to successfully implement some or all of these strategies and increase or sustain our rate of growth or profitability.

Our Products and Services Are Subject to Various Government Regulations

In the U.S., the manufacture and sale of our products are regulated by agencies such as the U.S. Department of Agriculture (“USDA”), FDA and the U.S. Environmental Protection Agency (“EPA”). Most diagnostic tests for animal health applications, including our canine, feline, poultry and livestock tests, must be approved by the USDA prior to sale. Our water testing products must be approved by the EPA before they can be used by customers in the U.S. as a part of a water quality monitoring program required by the EPA. Our pharmaceutical and dairy testing products require approval by the FDA. The manufacture and sale of our products are subject to similar laws in many foreign countries. Any failure to comply with legal and regulatory requirements relating to the manufacture and sale of our products in the U.S. or in other countries could result in fines and sanctions against us or removals of our products from the market, which could have a material adverse effect on our results of operations.

We have entered into an agreement with the FDA under which we have agreed, among other things, to perform selected specified lot release and stability testing of our SNAP ^® beta-lactam dairy-testing products and to provide related data to the FDA. If the FDA were to determine that one or more lots of product failed to meet applicable criteria for product performance or stability, the FDA could take various actions, including requiring us to recall products or restricting our ability to sell these products.

Commercialization of animal health pharmaceuticals in the U.S. requires prior approval by the FDA. To obtain such approvals, we are required to submit substantial clinical, manufacturing and other data to the FDA. Regulatory approval for products submitted to the FDA may take several years and, following approval, the FDA continues to regulate all aspects of the manufacture, labeling, storage, record keeping and promotion of pharmaceutical products. Failure to obtain, or delays in obtaining, FDA approval for new pharmaceutical products would have a negative impact on our future growth.

We Purchase Materials for Our Products from a Limited Number of Sources

We currently purchase many products and materials from single sources or a limited number of sources. Some of the products that we purchase from these sources are proprietary, and, therefore, cannot be readily replaced by alternative sources. These products include our VetTest ^® Chemistry, VetAutoread™ Hematology, VetLyte ^® Electrolyte, and VetStat™ Electrolyte and Blood Gas Analyzers and related consumables; certain digital radiography system components, specifically image capture plates and readers; active ingredients for pharmaceutical products; and certain components of our SNAP ^® rapid assay devices, water testing products and LaserCyte ^® Hematology Analyzers. If we are unable to obtain adequate quantities of these products in the future, we could face cost increases or reductions or delays in product shipments, which could have a material adverse effect on our results of operations.

We currently purchase the slides sold for use in our VetTest ^® Chemistry Analyzers; our electrolyte instruments, components and consumables; and our VetAutoread™ Hematology Analyzers, components and consumables under agreements with suppliers under which we have minimum purchase obligations. If demand for any of the products purchased under these agreements is insufficient to support our minimum purchase obligations for those products, we could incur losses related to those obligations. In addition, because we purchase the products at predetermined prices, our profits on sales of these products could decline if we are unable to maintain current pricing levels for such products.

Our Biologic Products Are Complex and Difficult to Manufacture

Many of our rapid assay and production animal diagnostic products are biologics, which are products that are comprised of materials from living organisms, such as antibodies, cells and sera. Manufacturing biologic products is highly complex. Unlike products that rely on chemicals for efficacy (such as most pharmaceuticals), biologics are difficult to characterize due to the inherent variability of biological input materials. Difficulty in characterizing biological materials or their interactions creates greater risk in the manufacturing process. We attempt to mitigate risk associated with the manufacture of biologics by continuing to improve the characterization of all of our input materials, utilizing multiple vendors, manufacturing some of these materials ourselves and maintaining substantial inventories of materials that have demonstrated the appropriate characteristics. However, there can be no assurance that we will be able to maintain adequate sources of biological materials or that biological materials that we maintain in inventory will yield finished products that satisfy applicable product release criteria. Our inability to obtain necessary biological materials or to successfully manufacture biologic products that incorporate such materials could have a material adverse effect on our results of operations.

Our Success Is Heavily Dependent Upon Our Proprietary Technologies

We rely on a combination of patent, trade secret, trademark and copyright laws to protect our proprietary rights. If we do not have adequate protection of our proprietary rights, our business may be affected by competitors who develop substantially equivalent technologies that compete with us.

We cannot ensure that we will obtain issued patents, that any patents issued or licensed to us will remain valid, or that any patents owned or licensed by us will provide protection against competitors with similar technologies. Even if our patents cover products sold by our competitors, the time and expense of litigating to enforce our patent rights could be substantial, and could have a material adverse effect on our results of operations. In addition, expiration of patent rights could result in substantial new competition in the markets for products previously covered by those patent rights.

In the past, we have received notices claiming that our products infringe third-party patents and we may receive such notices in the future. Patent litigation is complex and expensive, and the outcome of patent litigation can be difficult to predict. We cannot ensure that we will win a patent litigation case or negotiate an acceptable resolution of such a case. If we lose, we may be stopped from selling certain products and/or we may be required to pay damages and/or ongoing royalties as a result of the lawsuit. Any such adverse result could have a material adverse effect on our results of operations.

Our Sales Are Dependent on Distributor Purchasing Patterns

We sell many of our products, including substantially all of the rapid assays and instrument consumables sold in the U.S., through distributors. Distributor purchasing patterns can be unpredictable and may be influenced by factors unrelated to the end-user demand for our products. In addition, our agreements with distributors may generally be terminated by the distributors for any reason on 60 days notice. Because significant product sales are made to a limited number of distributors, the loss of a distributor or unanticipated changes in the frequency, timing or size of distributor purchases, could have a negative effect on our results of operations. Our financial performance, therefore, is subject to an unexpected downturn in product demand and may be unpredictable.

Distributors of veterinary products have entered into business combinations resulting in fewer distribution companies. Consolidation within distribution channels would increase our customer concentration level, which could increase the risks described in the preceding paragraph.

Our Markets Are Competitive and Subject to Rapid and Substantial Technological Change

We face intense competition within the markets in which we sell our products and services. We expect that future competition will become even more intense, and that we will have to compete with changing and improving technologies. Some of our competitors and potential competitors, including large pharmaceutical and diagnostic companies, have substantially greater capital, manufacturing, marketing, and research and development resources than we do.

Changes in Diagnostic Testing Could Negatively Affect Our Operating Results

The market for diagnostic tests could be negatively impacted by the introduction or broad market acceptance of vaccines or preventatives for the diseases and conditions for which we sell diagnostic tests and services. Eradication or substantial declines in the prevalence of certain diseases also could lead to a decline in diagnostic testing for such diseases. Our production animal services business in particular is subject to fluctuations resulting from changes in disease prevalence and government-mandated testing programs. Such declines in diagnostic testing could have a material adverse effect on our results of operations.

International Revenue Accounts for a Significant Portion of Our Total Revenue

Some of our revenue is attributable to sales of products and services to customers outside the U.S. Various risks associated with foreign operations may impact our international sales. Possible risks include fluctuations in the value of foreign currencies, disruptions in transportation of our products, the differing product and service needs of foreign customers, difficulties in building and managing foreign operations, import/export duties and quotas, and unexpected regulatory, economic or political changes in foreign markets. Prices that we charge to foreign customers may be different than the prices we charge for the same products in the U.S. due to competitive, market or other factors. As a result, the mix of domestic and international sales in a particular period could have a material impact on our results for that period. In addition, many of the products for which our selling price may be denominated in foreign currencies are manufactured, sourced, or both, in the U.S. and our costs are incurred in U.S. dollars. We utilize nonspeculative forward currency exchange contracts to mitigate foreign currency exposure. However, an appreciation of the U.S. dollar relative to the foreign currencies in which we sell these products would reduce our operating margins.

The Loss of Our President, Chief Executive Officer and Chairman Could Adversely Affect Our Business

We rely on the management and leadership of Jonathan W. Ayers, our President, Chief Executive Officer and Chairman. We do not maintain key man life insurance coverage for Mr. Ayers. The loss of Mr. Ayers could have a material impact on our business.

We Could Be Subject to Class Action Litigation Due to Stock Price Volatility, which, if Occurs, Could Result in Substantial Costs or Large Judgments Against Us

The market for our common stock may experience extreme price and volume fluctuations, which may be unrelated or disproportionate to our operating performance or prospects. In the past, securities class action litigation has often been brought against companies following periods of volatility in the market prices of their securities. We may be the target of similar litigation in the future. Securities litigation could result in substantial costs and divert our management’s attention and resources, which could have a negative effect on our business, operating results and financial condition.

If Our Quarterly Results of Operations Fluctuate, This Fluctuation May Cause Our Stock Price to Decline, Resulting in Losses to You

Our prior operating results have fluctuated due to a number of factors, including seasonality of certain product lines; changes in our accounting estimates; the impact of acquisitions; timing of distributor purchases, product launches, research and development expenditures, litigation and claim-related expenditures; changes in competitors’ product offerings; and other matters. Similarly, our future operating results may vary significantly from quarter to quarter due to these and other factors, many of which are beyond our control. If our operating results or projections of future operating results do not meet the expectations of market analysts or investors in future periods, our stock price may fall.

Future Operating Results Could Be Materially Affected By the Resolution of Various Uncertain Tax Positions and Adversely Affected by Potential Changes to Tax Incentives

In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Significant judgment is required in determining our worldwide provision for income taxes and our income tax filings are regularly under audit by tax authorities. We believe that we have adequately accrued for all potential tax liabilities and, although we believe our tax estimates are reasonable, the final determination of tax audits could be materially different than that which is reflected in historical income tax provisions and accruals. Additionally, we benefit from certain tax incentives offered by various jurisdictions. If we are unable to meet the requirements of such incentives, our inability to use these benefits could have a material negative effect on future earnings.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended June 30, 2006, we repurchased our shares as described below:

Period		Average Price Paid per Share (b)
April 1, 2006 to April 30, 2006	120,000	$	82.76	120,000	1,390,930
May 1, 2006 to May 31, 2006	176,000		78.79	176,000	1,214,930
June 1, 2006 to June 30, 2006	242,000		77.42	242,000	972,930

Total	538,000	$	79.06	538,000	972,930

Our Board of Directors has approved the repurchase of up to 16,000,000 shares of our common stock in the open market or in negotiated transactions. The plan was approved and announced on August 13, 1999, and subsequently amended on October 4, 1999, July 21, 2000, October 20, 2003, October 12, 2004, and October 12, 2005, and does not have a specified expiration date. The repurchases made during the six months ended June 30, 2006 were made in open market transactions. There were no other repurchase plans outstanding during the six months ended June 30, 2006, and no repurchase plans expired during the period.

Item 4. Submission of Matters to a Vote of Security Holders

Our 2006 Annual Meeting of Stockholders was held on May 10, 2006.

Nominees William T. End, Barry C. Johnson, PhD and Brian P. McKeon were elected to serve as Class I Directors for three-year terms expiring in 2009. The following Class II Directors of the Company were not up for reelection in 2006 and have three-year terms that expire in 2008: Thomas Craig, Errol B. De Souza, PhD and Rebecca M. Henderson, PhD. The following Class III Directors were not up for reelection and have three-year terms that expire in 2007: Jonathan W. Ayers and Robert J. Murray.

The results of the voting at the 2006 Annual Meeting of Stockholders (pursuant to a record date of March 20, 2006) were as follows:

(1)

Election of Directors: 29,224,537 shares were voted to elect nominee William T. End as a Class I Director for a three-year term expiring in 2009 and 120,059 shares were voted to withhold authority; 29,223,829 shares were voted to elect nominee Barry C. Johnson, PhD as a Class I Director for a three-year term expiring in 2009 and 122,209 shares were voted to withhold authority; and 29,223,829 shares were voted to elect nominee Brian P. McKeon as a Class I Director for a three-year term expiring in 2009 and 120,767 share were voted to withhold authority. There were no broker non-votes on this proposal.

(2)

Approval of amendment to our Restated Certificate of Incorporation. For: 26,357,887; Against: 2,962,662; Abstain: 24,044; Broker non-votes: 0.

(3)

Ratification of PricewaterhouseCoopers LLP as Independent Public Accountants for the year ending December 31, 2006. For: 29,143,424; Against: 187,331; Abstain: 13,841; Broker non-votes: 0.

Item 6. Exhibits

(a)

Exhibits

3(i)

Restated Certificate of Incorporation, as amended.

31.1

Certification by Chief Executive Officer.

31.2

Certification by Vice President, Chief Financial Officer and Treasurer.

32.1

Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification by Vice President, Chief Financial Officer and Treasurer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	IDEXX LABORATORIES, INC.

	/s/Merilee Raines
Date: August 3, 2006	Merilee Raines Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

Exhibit Index

Exhibit No.

Description

3(i)

Restated Certificate of Incorporation, as amended.

31.1

Certification by Chief Executive Officer.

31.2

Certification by Vice President, Chief Financial Officer and Treasurer.

32.1

Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification by Vice President, Chief Financial Officer and Treasurer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 3(i)

RESTATED CERTIFICATE OF INCORPORATION

OF

IDEXX LABORATORIES, INC.

(originally AgriTech Systems, Inc.)
(Incorporated December 19, 1983)

IDEXX Laboratories, Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby integrate into this instrument all of the provisions of its certificate of incorporation now in effect and operative as a result of there having heretofore been filed with the Secretary of State of Delaware one or more certificates or other instruments pursuant to any of the sections referred to in Section 104 of the General Corporation Law of the State of Delaware and adopt this restated certificate of incorporation (the “Restated Certificate”). This Restated Certificate was duly adopted in accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware by the Board of Directors of the Corporation without a vote of the stockholders and only restates and integrates and does not further amend the provisions of the Corporation’s certificate of incorporation as theretofore amended or supplemented and there is no discrepancy between those provisions and the provisions of this Restated Certificate.

_________________

FIRST : The name of the Corporation is IDEXX LABORATORIES, INC.

SECOND : The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.

THIRD : The nature of the business or purposes to be conducted or promoted is:

To act as general or limited partner of a general or limited partnership in any business enterprise which the Corporation would have the power to conduct by itself.

To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

FOURTH : The aggregate number of shares which the Corporation shall have authority to issue is 15,500,000 of which (i) 15,000,000 shares shall be Common Stock, $0.10 par value per share (“Common Stock”), and (ii) 500,000 shares shall be Series Preferred Stock, $1.00 par value per share (“Series Preferred Stock”).

Series Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation as hereinafter provided. Any shares of Series Preferred Stock which may be redeemed, purchased or acquired by the Corporation may be reissued except as otherwise provided by law. Different series of Series Preferred Stock shall not be construed to constitute different classes of shares for the purpose of voting by classes unless expressly provided.

Authority is hereby expressly granted to the Board of Directors from time to time to issue the Series Preferred Stock in one or more series, and in connection with the creation of any such series, by resolution or resolutions providing for the issue of the shares thereof, to determine and fix such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the General Corporation Law of Delaware. Without limiting the generality of the foregoing, the resolutions providing for the issuance of any series of Series Preferred Stock may provide that such series shall be superior or rank equally or be junior to the Common Stock or any other series of Series Preferred Stock. No vote of the holders of the Common Stock or Series Preferred Stock shall be prerequisite to the issuance of any series of any shares of the Series Preferred Stock authorized by and complying with the conditions of this Restated Certificate, the right to such vote being expressly waived by all present and future holders of the capital stock of the Corporation.

FIFTH : The Corporation is to have perpetual existence.

SIXTH : In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized to make, alter or repeal the by- laws of the Corporation.

SEVENTH : Elections of directors need not be by written ballot unless the by-laws of the Corporation shall so provide.

Meetings of stockholders may be held within or outside the State of Delaware, as the by-laws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the Corporation.

EIGHTH : The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

NINTH : No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director; provided, however, that the foregoing clause shall not apply to any liability of a Director (i) for any breach of the Director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the Director derived an improper personal benefit. This Article shall not eliminate or limit the liability of a Director for any act or omission occurring prior to September 30, 1986.

TENTH : This Article is inserted for the management of the business and for the conduct of the affairs of the Corporation, and it is expressly provided that it is intended to be in furtherance and not in limitation or exclusion of the powers conferred by the statutes of the State of Delaware.

1. Number of Directors . The number of directors which shall constitute the whole Board of Directors shall be determined by resolution of a majority of the Board of Directors, but in no event shall be less than three. The number of directors may be decreased at any time and from time to time by a majority of the directors then in office, but only to eliminate vacancies existing by reason of the death, resignation, removal or expiration of the term of one or more directors. The directors shall be elected at the annual meeting of stockholders by such stockholders as have the right to vote on such election. Directors need not be stockholders of the corporation.

2. Classes of Directors . The Board of Directors shall be and is divided into three classes: Class I, Class II and Class III. No one class shall have more than one director more than any other class. If a fraction is contained in the quotient arrived at by dividing the authorized number of directors by three, then, if such fraction is one-third, the extra director shall be a member of Class I and, if such fraction is two-thirds, one of the extra directors shall be a member of Class I and the other extra director shall be a member of Class II, unless otherwise provided for from time to time by resolution adopted by a majority of the Board of Directors.

3. Election of Directors . Elections of directors need not be by written ballot except as and to the extent provided in the By-Laws of the Corporation.

4. Terms of Office . Each director shall serve for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected; provided, however, that each initial director in Class I shall serve for a term ending on the date of the annual meeting next following the end of the Corporation’s fiscal year ending December 31, 1993; each initial director in Class II shall serve for a term ending on the date of the annual meeting next following the end of the Corporation’s fiscal year ending December 31, 1992; and each initial director in Class III shall serve for a term ending on the date of the annual meeting next following the end of the Corporation’s fiscal year ending December 31, 1991.

5. Allocation of Directors Among Classes in the Event of Increases or Decreases in the Number of Directors . In the event of any increase or decrease in the authorized number of directors, (i) each director then serving as such shall nevertheless continue as director of the class of which he is a member until the expiration of his current term or his prior death, retirement or resignation and (ii) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to ensure that no one class has more than one director more than any other class. To the extent possible, consistent with the foregoing rule, any newly created directorships shall be added to those classes whose terms of office are to expire at the latest dates following such allocation, and any newly eliminated directorships shall be subtracted from those classes whose terms of office are to expire at the earliest dates following such allocation, unless otherwise provided for from time to time by resolution adopted by a majority of the directors then in office, although less than a quorum.

6. Tenure . Notwithstanding any provisions to the contrary contained herein, each director shall hold office until his successor is elected and qualified, or until his earlier death, resignation or removal.

7. Vacancies . Any vacancy in the Board of Directors, however occurring, including a vacancy resulting from an enlargement of the Board, may be filled only by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office, if applicable, and a director chosen to fill a position resulting from an increase in the number of directors shall hold office until the next election of the class for which such director shall have been chosen and until his successor is elected and qualified, or until his earlier death, resignation or removal.

8. Quorum . A majority of the total number of the whole Board of Directors shall constitute a quorum at all meetings of the Board of Directors. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each such director so disqualified; provided, however, that in no case shall less than one-third (1/3) of the number so fixed constitute a quorum. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present.

9. Action at Meeting . At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of those present shall be sufficient to take any action, unless a different vote is specified by law or the Corporation’s Certificate of Incorporation or By-Laws.

10. Removal . Any one or more or all of the directors may be removed, with or without cause, by the holders of at least seventy-five percent (75%) of the shares then entitled to vote at an election of directors.

11. Stockholder Nominations and Introduction of Business, Etc. Advance notice of stockholder nominations for election of directors and other business to be brought by stockholders before a meeting of stockholders shall be given in the manner provided in the By-Laws of the Corporation.

12. Amendments to Article . Notwithstanding any other provisions of law, this Certificate of Incorporation or the Corporation’s By-Laws, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the votes which all the stockholders would be entitled to cast at any annual election of directors or class of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article TENTH.

ELEVENTH : Until the closing of a firm commitment, underwritten public offering of the Corporation’s Common Stock (a “Public Offering”), any action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote on such action were present and voted. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Effective upon the closing of a Public Offering, stockholders of the Corporation may not take any action by written consent in lieu of a meeting. Notwithstanding any other provision of law, this Certificate of Incorporation or the Corporation’s By-laws, as amended, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the votes which all the stockholders would be entitled to cast at any annual election of directors or class of directors shall be required to amend or repeal, or to adopt any provision inconsistent with this Article ELEVENTH.

TWELFTH : Special meetings of stockholders may be called at any time by the President or by the Chairman of the Board of Directors. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting. Notwithstanding any other provision of law, this Certificate of Incorporation or the Corporation’s By-laws, as amended, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the votes which all the stockholders would be entitled to cast at any annual election of directors or class of directors shall be required to amend or repeal, or to adopt any provision inconsistent with this Article TWELFTH.

THIRTEENTH : 1. Actions, Suits and Proceedings Other than by or in the Right of the Corporation . The Corporation shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) (all such persons being referred to hereafter as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Notwithstanding anything to the contrary in this Article, except as set forth in Section 6 below, the Corporation shall not indemnify an Indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by the Indemnitee unless the initiation thereof was approved by the Board of Directors of the Corporation.

2. Actions or Suits by or in the Right of the Corporation . The Corporation shall indemnify any Indemnitee who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees) and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses (including attorneys’ fees) which the Court of Chancery of Delaware or such other court shall deem proper.

3. Indemnification for Expenses of Successful Party . Notwithstanding the other provisions of this Article, to the extent that an Indemnitee has been successful, on the merits or otherwise, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, or on appeal from any such action, suit or proceeding, he shall be indemnified against all expenses (including attorneys’ fees) actually and reasonably incurred by him or on his behalf in connection therewith. Without limiting the foregoing, if any action, suit or proceeding is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the Indemnitee did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and (v) with respect to any criminal proceeding, an adjudication that the Indemnitee had reasonable cause to believe his conduct was unlawful, the Indemnitee shall be considered for the purposes hereof to have been wholly successful with respect thereto.

4. Notification and Defense of Claim . As a condition precedent to his right to be indemnified, the Indemnitee must notify the Corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving him for which indemnity will or could be sought. With respect to any action, suit, proceeding or investigation of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee. After notice from the Corporation to the Indemnitee of its election so to assume such defense, the Corporation shall not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with such claim, other than as provided below in this Section 4. The Indemnitee shall have the right to employ his own counsel in connection with such claim, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee has been authorized by the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the Corporation and the Indemnitee in the conduct of the defense of such action or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel for the Indemnitee shall be at the expense of the Corporation, except as otherwise expressly provided by this Article. The Corporation shall not be entitled, without the consent of the Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which counsel for the Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above.

5. Advance of Expenses . Subject to the provisions of Section 6 below, in the event that the Corporation does not assume the defense pursuant to Section 4 of this Article of any action, suit, proceeding or investigation of which the Corporation receives notice under this Article, any expenses (including attorneys’ fees) incurred by an Indemnitee in defending a civil or criminal action, suit, proceeding or investigation or any appeal therefrom shall be paid by the Corporation in advance of the final disposition of such matter, provided , however , that the payment of such expenses incurred by an Indemnitee in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Article. Such undertaking may be accepted without reference to the financial ability of such person to make such repayment.

6. Procedure for Indemnification . In order to obtain indemnification or advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the Indemnitee shall submit to the Corporation a written request, including in such request such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification or advancement of expenses. Any such indemnification or advancement of expenses shall be made promptly, and in any event within 60 days after receipt by the Corporation of the written request of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the Corporation determines, by clear and convincing evidence, within such 60-day period that the Indemnitee did not meet the applicable standard of conduct set forth in Section 1 or 2, as the case may be. Such determination shall be made in each instance by (a) a majority vote of a quorum of the directors of the Corporation consisting of persons who are not at that time parties to the action, suit or proceeding in question (“disinterested directors”), (b) if no such quorum is obtainable, a majority vote of a committee of two or more disinterested directors, (c) a majority vote of a quorum of the outstanding shares of stock of all classes entitled to vote for directors, voting as a single class, which quorum shall consist of stockholders who are not at that time parties to the action, suit or proceeding in question, (d) independent legal counsel (who may be regular legal counsel to the Corporation), or (e) a court of competent jurisdiction.

7. Remedies . The right to indemnification or advances as granted by this Article shall be enforceable by the Indemnitee in any court of competent jurisdiction if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within the 60-day period referred to above in Section 6. Unless otherwise provided by law, the burden of proving that the Indemnitee is not entitled to indemnification or advancement of expenses under this Article shall be on the Corporation. Neither the failure of the Corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because the Indemnitee has met the applicable standard of conduct, nor an actual determination by the Corporation pursuant to Section 6 that the Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. The Indemnitee’s expenses (including attorneys’ fees) incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such proceeding shall also be indemnified by the Corporation.

8. Subsequent Amendment . No amendment, termination or repeal of this Article or of the relevant provisions of the General Corporation Law of Delaware or any other applicable laws shall affect or diminish in any way the rights of any Indemnitee to indemnification under the provisions hereof with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal.

9. Other Rights . The indemnification and advancement of expenses provided by this Article shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in any other capacity while holding office for the Corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of the Indemnitee. Nothing contained in this Article shall be deemed to prohibit, and the Corporation is specifically authorized to enter into, agreements with officers and directors providing indemnification rights and procedures different from those set forth in this Article. In addition, the Corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article.

10. Partial Indemnification . If an Indemnitee is entitled under any provision of this Article to indemnification by the Corporation for some or a portion of the expenses (including attorneys’ fees), judgments, fines or amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any action, suit, proceeding or investigation and any appeal therefrom but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify the Indemnitee for the portion of such expenses (including attorneys’ fees), judgments, fines or amounts paid in settlement to which the Indemnitee is entitled.

11. Insurance . The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) against any expense, liability or loss incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of Delaware.

12. Merger or Consolidation . If the Corporation is merged into or consolidated with another corporation and the Corporation is not the surviving corporation, the surviving corporation shall assume the obligations of the Corporation under this Article with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the date of such merger or consolidation.

13. Savings Clause . If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law.

14. Definitions . Terms used herein and defined in Section 145(h) and Section 145(i) of the General Corporation Law of Delaware shall have the respective meanings assigned to such terms in such Section 145(h) and Section 145(i).

15. Subsequent Legislation . If the General Corporation Law of Delaware is amended after adoption of this Article to expand further the indemnification permitted to Indemnitees, then the Corporation shall indemnify such persons to the fullest extent permitted by the General Corporation Law of Delaware, as so amended.

IN WITNESS WHEREOF, IDEXX LABORATORIES, INC. has caused this Restated Certificate to be signed by its President and attested by its Secretary this 26th day of December, 1991.



	IDEXX LABORATORIES, INC.

	By: /s/David E. Shaw
	President



ATTEST:

/s/Gail J. Hupper
Secretary

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
IDEXX LABORATORIES, INC.

IDEXX Laboratories, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY:

FIRST: At a meeting of the Board of Directors of the Corporation held pursuant to notice duly given, the Board of Directors duly adopted a resolution pursuant to Section 242 of the General Corporation Law of the State of Delaware proposing and declaring advisable the following amendment to the Restated Certificate of Incorporation (the “Certificate”) of said Corporation.

RESOLVED:

That the first paragraph of Article FOURTH of the Certificate be amended so that, as amended, said first paragraph of Article FOURTH shall read in its entirety as follows:

FOURTH :

The aggregate number of shares which the Corporation shall have authority to issue is 30,500,000 of which (i) 30,000,000 shares shall be Common Stock, $0.10 par value per share (“Common Stock”), and (ii) 500,000 shares shall be Series Preferred Stock, $1.00 par value per share (“Series Preferred Stock”).

SECOND: That the foregoing amendment to the Corporation’s Certificate was adopted by the holders of a majority of the outstanding shares of Common Stock at a Special Meeting of Stockholders held on September 24, 1993 pursuant to notice duly given.

IN WITNESS WHEREOF, said IDEXX Laboratories, Inc. has caused this Certificate to be signed by John P. Deckro, its Senior Vice President, and attested by Richard B. Thorp, its Secretary, this 24th day of September, 1993.



	IDEXX LABORATORIES, INC.

	By: /s/John P. Deckro
	John P. Deckro Senior Vice President - Finance, Chief Financial Officer and Treasurer



ATTEST:

By: /s/Richard B. Thorp
Richard B. Thorp Secretary

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
IDEXX LABORATORIES, INC.

IDEXX Laboratories, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY:

RESOLVED:

That the first paragraph of Article FOURTH of the Certificate be amended so that, as amended, said first paragraph of Article FOURTH shall read in its entirety as follows:

FOURTH :

The aggregate number of shares which the Corporation shall have authority to issue is 60,500,000 of which (i) 60,000,000 shares shall be Common Stock, $0.10 par value per share (“Common Stock”), and (ii) 500,000 shares shall be Series Preferred Stock, $1.00 par value per share (“Series Preferred Stock”).

SECOND: That the foregoing amendment to the Corporation’s Certificate was adopted by the holders of a majority of the outstanding shares of Common Stock at the Annual Meeting of Stockholders held on May 26, 1995 pursuant to notice duly given.

IN WITNESS WHEREOF, said IDEXX Laboratories, Inc. has caused this Certificate to be signed by David E. Shaw, its Chairman and Chief Executive Officer, and attested by Richard B. Thorp, its Secretary, this 26th day of May, 1995.



	IDEXX LABORATORIES, INC.

	By: /s/David E. Shaw
	David E. Shaw Chairman and Chief Executive Officer



ATTEST:

By: /s/Richard B. Thorp
Richard B. Thorp Secretary

CERTIFICATE OF DESIGNATIONS

OF

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

OF

IDEXX LABORATORIES, INC.

_________________

IDEXX Laboratories, Inc., a corporation organized and existing under the laws of the State of Delaware (hereinafter called the “Corporation”), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation at a meeting duly called and held on December 17, 1996:

RESOLVED: That pursuant to the authority granted to and vested in the Board of Directors of this Corporation (hereinafter called the “Board of Directors” or the “Board”) in accordance with the provisions of the Certificate of Incorporation, as amended, the Board of Directors hereby creates a series of Preferred Stock, $1.00 par value per share (the “Preferred Stock”), of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences and limitations thereof as follows:

Series A Junior Participating Preferred Stock:

Section 1. Designation and Amount . The shares of such series shall be designated as “Series A Junior Participating Preferred Stock” (the “Series A Preferred Stock”) and the number of shares constituting the Series A Preferred Stock shall be one hundred thousand (100,000). Such number of shares may be increased or decreased by resolution of the Board of Directors; provided , that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock.

Section 2. Dividends and Distributions .

(A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $0.10 per share (the “Common Stock”), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds of the Corporation legally available for the payment of dividends, quarterly dividends payable in cash on the last day of each fiscal quarter of the Corporation in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event the Corporation shall at any time declare or pay any dividend on the Series A Preferred Stock payable in shares of Series A Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series A Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series A Preferred Stock) into a greater or lesser number of shares of Series A Preferred Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the first sentence of this Section 2(A) shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series A Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series A Preferred Stock outstanding immediately after such event.

(B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock) and the Corporation shall pay such dividend or distribution on the Series A Preferred Stock before the dividend or distribution declared on the Common Stock is paid or set apart; provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.

Section 3. Voting Rights . The holders of shares of Series A Preferred Stock shall have the following voting rights:

(A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event the Corporation shall at any time declare or pay any dividend on the Series A Preferred Stock payable in shares of Series A Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series A Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series A Preferred Stock) into a greater or lesser number of shares of Series A Preferred Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series A Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series A Preferred Stock outstanding immediately after such event.

(B) Except as otherwise provided herein, in the Certificate of Incorporation or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

(C) (i) If at any time dividends on any Series A Preferred Stock shall be in arrears in an amount equal to six quarterly dividends thereon, the holders of the Series A Preferred Stock, voting as a separate series from all other series of Preferred Stock and classes of capital stock, shall be entitled to elect two members of the Board of Directors in addition to any Directors elected by any other series, class or classes of securities and the authorized number of Directors will automatically be increased by two. Promptly thereafter, the Board of Directors of this Corporation shall, as soon as may be practicable, call a special meeting of holders of Series A Preferred Stock for the purpose of electing such members of the Board of Directors. Said special meeting shall in any event be held within 45 days of the occurrence of such arrearage.

(ii) During any period when the holders of Series A Preferred Stock, voting as a separate series, shall be entitled and shall have exercised their right to elect two Directors, then and during such time as such right continues (a) the then authorized number of Directors shall be increased by two, and the holders of Series A Preferred Stock, voting as a separate series, shall be entitled to elect the additional Directors so provided for, and (b) each such additional Director shall not be a member of any existing class of the Board of Directors, but shall serve until the next annual meeting of stockholders for the election of Directors, or until his successor shall be elected and shall qualify, or until his right to hold such office terminates pursuant to the provisions of this Section 3(C).

(iii) A Director elected pursuant to the terms hereof may be removed with or without cause by the holders of Series A Preferred Stock entitled to vote in an election of such Director.

(iv) If, during any interval between annual meetings of stockholders for the election of Directors and while the holders of Series A Preferred Stock shall be entitled to elect two Directors, there is no such Director in office by reason of resignation, death or removal, then, promptly thereafter, the Board of Directors shall call a special meeting of the holders of Series A Preferred Stock for the purpose of filling such vacancy and such vacancy shall be filled at such special meeting. Such special meeting shall in any event be held within 45 days of the occurrence of such vacancy.

(v) At such time as the arrearage is fully cured, and all dividends accumulated and unpaid on any shares of Series A Preferred Stock outstanding are paid, and, in addition thereto, at least one regular dividend has been paid subsequent to curing such arrearage, the term of office of any Director elected pursuant to this Section 3(C), or his successor, shall automatically terminate, and the authorized number of Directors shall automatically decrease by two, the rights of the holders of the shares of the Series A Preferred Stock to vote as provided in this Section 3(C) shall cease, subject to renewal from time to time upon the same terms and conditions, and the holders of shares of the Series A Preferred Stock shall have only the limited voting rights elsewhere herein set forth.

(D) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

Section 4. Certain Restrictions .

(A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;

(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or

(iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

Section 5. Reacquired Shares . Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law.

Section 6. Liquidation, Dissolution or Winding Up .

(A) Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $1000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up.

(B) Neither the consolidation, merger or other business combination of the Corporation with or into any other corporation nor the sale, lease, exchange or conveyance of all or any part of the property, assets or business of the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 6.

(C) In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of paragraph (A) of this Section 6 shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event the Corporation shall at any time declare or pay any dividend on the Series A Preferred Stock payable in shares of Series A Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series A Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series A Preferred Stock) into a greater or lesser number of shares of Series A Preferred Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of paragraph (A) of this Section 6 shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series A Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series A Preferred Stock outstanding immediately after such event.

Section 7. Consolidation, Merger, etc. Notwithstanding anything to the contrary contained herein, in case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event the Corporation shall at any time declare or pay any dividend on the Series A Preferred Stock payable in shares of Series A Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series A Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series A Preferred Stock) into a greater or lesser number of shares of Series A Preferred Stock, then in each such case the amount set forth in the first sentence of this Section 7 with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series A Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series A Preferred Stock outstanding immediately after such event.

Section 8. No Redemption . The shares of Series A Preferred Stock shall not be redeemable.

Section 9. Rank . The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Preferred Stock issued either before or after the issuance of the Series A Preferred Stock, unless the terms of any such series shall provide otherwise.

Section 10. Amendment . At such time as any shares of Series A Preferred Stock are outstanding, the Certificate of Incorporation, as amended, of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class.

Section 11. Fractional Shares . Series A Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and have the benefit of all other rights of holders of Series A Preferred Stock.

IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its Chairman of the Board this 17th day of December, 1996.



	IDEXX LABORATORIES, INC.

	By: /s/David E. Shaw
	Chairman of the Board

CERTIFICATE OF OWNERSHIP AND MERGER

MERGING

IDETEK, INC.

WITH AND INTO

IDEXX LABORATORIES, INC.

(Pursuant to Section 253 of the General Corporation Law of the State of Delaware)

IDEXX LABORATORIES, INC., a Delaware corporation (the “Corporation”), does hereby certify:

FIRST :

That the Corporation is incorporated pursuant to the General Corporation Law of the State of Delaware.

SECOND :

That the Corporation owns more than ninety percent of the outstanding shares of each class of the capital stock of Idetek, Inc., a California corporation (“Idetek”).

THIRD :

That the Corporation by resolutions (a true copy of which is attached hereto as Exhibit A) of the Board of Directors duly adopted at a meeting held on December 17, 1996, determined, among other things, to merge Idetek with and into the Corporation upon the terms and subject to the conditions set forth in such resolutions (the “Merger”). Such resolutions have not been modified or rescinded and are in full force and effect on the date hereof.

FOURTH :

That the name of the corporation surviving the merger (the “Surviving Corporation”) is “IDEXX Laboratories, Inc.”

FIFTH :

That the Certificate of Incorporation of the Corporation shall be the Certificate of Incorporation of the Surviving Corporation.

SIXTH :

That the Merger shall become effective upon the filing of this Certificate of Ownership and Merger with the Secretary of State of the State of Delaware.

IN WITNESS WHEREOF, IDEXX Laboratories, Inc. has caused this Certificate of Ownership and Merger to be executed in its corporate name by its Secretary, on the 20 ^th day of December, 1996.



	IDEXX LABORATORIES, INC.

	By: /s/Richard B. Thorp
	Name: Richard B. Thorp Title: Secretary

EXHIBIT A
TO
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING IDETEK, INC.
WITH AND INTO IDEXX LABORATORIES, INC.

CERTIFIED RESOLUTIONS

OF THE BOARD OF DIRECTORS OF

IDEXX LABORATORIES, INC.
(hereinafter referred to as the “Company”)

NOW, THEREFORE, IT IS RESOLVED, that the Company be, and it hereby is, authorized and empowered to enter into and consummate the Merger, pursuant to which, among other things, (i) Idetek will be merged with and into the Company pursuant to Section 253 of the General Corporation Law of the State of Delaware (the “DGCL”) and Section 1108 of the General Corporation Law of the State of California (the “CGCL”); (ii) the name of the corporation surviving the Merger shall be “IDEXX Laboratories, Inc.”; and (iii) the Certificate of Incorporation of the surviving corporation shall be the Certificate of Incorporation of the Company, each of such actions being hereby approved and adopted; and it is further

RESOLVED, that the Chief Executive Officer, President, any Vice President and Secretary of the Company be, and each of them acting singly hereby is, authorized, in the name and on behalf of the Company, to execute and file, or cause to be filed, an appropriate Certificate of Ownership and Merger to effect the Merger with the Secretary of State of the State of Delaware and the Secretary of State of the State of California in accordance with the DGCL and the CGCL, respectively, and to make, execute, deliver and file at the appropriate time such other instruments and documents as may be necessary or desirable to consummate the Merger pursuant to the DGCL and the CGCL, respectively; and it is further

RESOLVED, that the Chief Executive Officer, President, any Vice President and Secretary of the Company be, and each of them acting singly hereby is, authorized and directed to take all such other actions, to cause to be prepared and filed all such documents, to make all expenditures (consistent with the existing policies of the Company) and to execute all instruments deemed by any of them to be necessary or appropriate for carrying out the intents and purposes of each and all of the foregoing resolutions; and that the performance of such acts by them shall be conclusive evidence of the approval thereof and the authority therefor by and from the Company; and it is further

RESOLVED, that any actions taken by any officer of the Company on or prior to the date of this meeting that are within the authority conferred by any of the foregoing resolutions be, and each of them hereby is, ratified, confirmed and approved in all respects as the acts and deeds of the Company.

CERTIFICATE OF OWNERSHIP AND MERGER

MERGING

ETI CORPORATION

WITH AND INTO

IDEXX LABORATORIES, INC.

(Pursuant to Section 253 of the General Corporation Law of the State of Delaware)

IDEXX LABORATORIES, INC., a Delaware corporation (the “Corporation”), does hereby certify:

FIRST :

That the Corporation is incorporated pursuant to the General Corporation Law of the State of Delaware.

SECOND :

That the Corporation owns more than ninety percent of the outstanding shares of each class of the capital stock of ETI Corporation, a Delaware corporation (“ETI”).

THIRD :

That the Corporation by resolutions (a true copy of which is attached hereto as Exhibit A) of the Board of Directors duly adopted at a meeting held on December 10, 1997, determined, among other things, to merge ETI with and into the Corporation upon the terms and subject to the conditions set forth in such resolutions (the “Merger”). Such resolutions have not been modified or rescinded and are in full force and effect on the date hereof.

FOURTH :

That the name of the corporation surviving the merger (the “Surviving Corporation”) is “IDEXX Laboratories, Inc.”

FIFTH :

That the Restated Certificate of Incorporation, as amended, of the Corporation in effect immediately prior to the Merger shall be the Certificate of Incorporation of the Surviving Corporation.

SIXTH :

That the Merger shall become effective upon the filing of this Certificate of Ownership and Merger with the Secretary of State of the State of Delaware.

IN WITNESS WHEREOF, IDEXX Laboratories, Inc. has caused this Certificate of Ownership and Merger to be executed in its corporate name by its Secretary, on the 16 ^th day of July, 1998.



	IDEXX LABORATORIES, INC.

	By: /s/Richard B. Thorp
	Name: Richard B. Thorp Title: Secretary

EXHIBIT A
TO
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING ETI CORPORATION
WITH AND INTO IDEXX LABORATORIES, INC.

CERTIFIED RESOLUTIONS

OF THE BOARD OF DIRECTORS OF

IDEXX LABORATORIES, INC.
(hereinafter referred to as the “Company”)

WHEREAS, the Board of Directors of the Company deems it advisable and in the best interests of the Company and its stockholders that the Company enter into and consummate a merger (the “Merger”) of ETI Corporation, a Delaware corporation and wholly owned subsidiary of the Company (“ETI”), Access Medical Systems, Inc., a Delaware corporation and wholly owned subsidiary of ETI (“Access”), Environetics, Inc., a Delaware corporation and wholly owned subsidiary of Access (“Environetics”), with and into the Company.

RESOLVED:

That the Company be, and it hereby is, authorized and empowered to enter into and consummate the Merger, pursuant to which, among other things, (i) ETI, Access and Environetics will be merged with and into the Company pursuant to Section 253 of the General Corporation Law of the State of Delaware (the “DGCL”); (ii) the name of the corporation surviving the Merger shall be “IDEXX Laboratories, Inc.”; and (iii) the Certificate of Incorporation of the surviving corporation shall be the Restated Certificate of Incorporation of the Company, each of such actions being hereby approved and adopted.

RESOLVED:

That the Chief Executive Officer, President, any Vice President and Secretary of the Company be, and each of them acting singly hereby is, authorized and empowered, acting in the name and on behalf of the Company, to execute and file, or cause to be filed, an appropriate Certificate of Ownership and Merger to effect the Merger with the Secretary of State of the State of Delaware in accordance with the DGCL, and to make, execute, deliver and file at the appropriate time such other instruments and documents as may be necessary or desirable to consummate the Merger pursuant to the DGCL.

RESOLVED:

That the Chief Executive Officer, President, any Vice President and Secretary of the Company be, and each of them acting singly hereby is, authorized and directed to take all such other actions, to cause to be prepared and filed all such documents, to make all expenditures (consistent with the existing policies of the Company) and to execute all instruments deemed by any of them to be necessary or appropriate for carrying out the intents and purposes of each and all of the foregoing resolutions; and that the performance of such acts by them shall be conclusive evidence of the approval thereof and the authority therefor by and from the Company.

CERTIFICATE OF AMENDMENT

TO

RESTATED CERTIFICATE OF INCORPORATION

OF

IDEXX LABORATORIES, INC.

IDEXX Laboratories, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY:

RESOLVED:

That the first paragraph of Article FOURTH of the Certificate be amended so that, as amended, said first paragraph of Article FOURTH shall read in its entirety as follows:

FOURTH:

The aggregate number of shares which the Corporation shall have authority to issue is 120,500,000 of which (i) 120,000,000 shares shall be Common Stock, $0.10 par value per share (“Common Stock”), and (ii) 500,000 shares shall be Series Preferred Stock, $1.00 par value per share (“Series Preferred Stock”).

IN WITNESS WHEREOF, said IDEXX Laboratories, Inc. has caused this Certificate to be signed by Jonathan W. Ayers, its President, Chief Executive Officer & Chairman, and attested by Conan R. Deady, its Vice President and Secretary, this 10th day of May, 2006.



	IDEXX LABORATORIES, INC.

	By: /s/Jonathan W. Ayers
	Jonathan W. Ayers President, Chief Executive Officer and Chairman



ATTEST:

By: /s/Conan R. Deady
Conan R. Deady Vice President and Secretary

CERTIFICATION

Exhibit 31.1

I, Jonathan W. Ayers, certify that:

1)	I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2006 of IDEXX Laboratories, Inc. (the “Quarterly Report”);

Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

3)	Based on my knowledge, the financial statements and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Quarterly Report, based on such evaluation; and

disclosed in this Quarterly Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 3, 2006	/s/Jonathan W. Ayers Jonathan W. Ayers President and Chief Executive Officer

CERTIFICATION

Exhibit 31.2

I, Merilee Raines, certify that:

1)	I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2006 of IDEXX Laboratories, Inc. (the “Quarterly Report”);

3)	Based on my knowledge, the financial statements and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;

5)	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 3, 2006	/s/Merilee Raines Merilee Raines Vice President, Chief Financial Officer & Treasurer

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C.

SECTION 1350

AS ADOPTED BY

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of IDEXX Laboratories, Inc. (the “Company”) for the quarter ended June 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned certifies, pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.




	/s/Jonathan W. Ayers
August 3, 2006	Jonathan W. Ayers President and Chief Executive Officer

A signed original of this written statement required by Section 906, has been provided to IDEXX Laboratories, Inc. and will be retained by IDEXX Laboratories, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C.

SECTION 1350

AS ADOPTED BY

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.




	/s/Merilee Raines
August 3, 2006	Merilee Raines Vice President, Chief Financial Officer & Treasurer

OR

207-856-0300

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

INDEX

PART I FINANCIAL INFORMATION Item 1. Financial Statements

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

Note 1. Basis of Presentation

Recent Accounting Pronouncements

Note 2. Share-Based Compensation

Financial Impacts of Share-Based Compensation

Options

Employee Stock Purchase Plan

Restricted and Other Deferred Stock Units With Vesting Conditions

Deferred Stock Units With No Vesting Conditions

Note 3. Business Acquisitions

Note 4. Inventories

Note 5. Goodwill and Other Intangible Assets

Note 6. Warranty Reserves

Note 7. Income Taxes

Note 8. Comprehensive Income

Note 9. Earnings per Share

Note 10. Commitments, Contingencies and Guarantees

Note 11. Treasury Stock

Note 12. Segment Reporting

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

 Business Overview

 Critical Accounting Policies and Estimates

 Results of Operations

Three Months Ended June 30, 2006 Compared to Three Months Ended June 30, 2005

Revenue

Gross Profit

Operating Expenses and Operating Income

Interest Income, Net

Provision for Income Taxes

Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005

Revenue

Gross Profit

Operating Expenses and Operating Income

Interest Income, Net

Provision for Income Taxes

 Recent Accounting Pronouncements

 Liquidity and Capital Resources

Liquidity

Sources and Uses of Cash

Other Commitments, Contingencies and Guarantees

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Changes in Internal Control Over Financial Reporting

PART II OTHER INFORMATION

Item 1A. Risk Factors

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 4. Submission of Matters to a Vote of Security Holders

Item 6. Exhibits

SIGNATURES

Exhibit Index

RESTATED CERTIFICATE OF INCORPORATION

OF

IDEXX LABORATORIES, INC.

(originally AgriTech Systems, Inc.) (Incorporated December 19, 1983)

CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF IDEXX LABORATORIES, INC.

CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF IDEXX LABORATORIES, INC.

CERTIFICATE OF DESIGNATIONS

OF

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

OF

IDEXX LABORATORIES, INC.

CERTIFICATE OF OWNERSHIP AND MERGER

MERGING

IDETEK, INC.

WITH AND INTO

IDEXX LABORATORIES, INC.

CERTIFICATE OF OWNERSHIP AND MERGER

MERGING

ETI CORPORATION

WITH AND INTO

IDEXX LABORATORIES, INC.

PART I FINANCIAL INFORMATION
Item 1. Financial Statements

Business Overview

Critical Accounting Policies and Estimates

Results of Operations

Recent Accounting Pronouncements

Liquidity and Capital Resources

(originally AgriTech Systems, Inc.)
(Incorporated December 19, 1983)

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
IDEXX LABORATORIES, INC.

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
IDEXX LABORATORIES, INC.