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IDEXX response to SEC June 6, 2007

June 6, 2007

Jim B. Rosenberg

Senior Assistant Chief Accountant

Division of Corporation Finance

United States Securities and Exchange Commission

            Re:

            IDEXX Laboratories, Inc.

            Form 10-K for Fiscal Year Ended December 31, 2006, Filed on March 1, 2007

            Form 10-Q for Fiscal Quarter Ended March 31, 2007, Filed on May 2, 2007

            File No. 000-19271

Dear Mr. Rosenberg:

Please see our responses below to your letter dated May 22, 2007. Each of our responses is preceded by a reproduction of the corresponding numbered Staff comments.

In connection with responding to your comments, we acknowledge that:

            •

            We, the Company, are responsible for the adequacy and accuracy of the disclosure in the filings;

            •

            Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

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            We, the Company, may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Form 10-K December 31, 2006

Item 7.  Management’s Discussion and Analyses of Financial Condition and Results of Operations, page 20

Comment:

            1.

            The company reiterated here the policy notes included in the financial statements.  Critical Accounting Policies should supplement, not duplicate, the accounting policies disclosed in the notes to the financial statements.  Please provide us in a disclosure-type format the company’s analysis of the judgments and uncertainties involved in applying these accounting principles at a given time, and the potential impact on your financial statements of the

Mr. Jim B. Rosenberg

United States Securities and Exchange Commission

June 6, 2007

Page 2

variability that is reasonably likely to result from their application over time.  Disclosures explaining the likelihood that any materially different amounts would be reported under different conditions, using different assumptions is consistent with the objective of Management’s Discussion and Analysis.  See Release 33-8350.

Response:

We acknowledge the Commission guidance regarding the presentation of critical accounting policies. Below is a revised disclosure regarding our critical accounting policies as of December 31, 2006. We will include a similar expanded disclosure of our critical accounting policies in our periodic filings with the SEC for 2007, beginning with the Form 10-Q for the quarterly period ending June 30, 2007.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Note 2 to the consolidated
financial statements for the year ended December 31, 2006 included in our Annual Report on Form 10-K for the year ended December 31, 2006 describes the significant accounting policies used in preparation of these financial statements.

We believe the following critical accounting estimates and assumptions may have a material impact on reported financial condition and operating performance and involve significant levels of judgment to account for highly uncertain matters or are susceptible to significant change.

Revenue Recognition

Customer Programs. We record estimated reductions to revenue in connection with customer marketing programs and incentive offerings, which may give customers credits or award points. Award points may be applied to trade receivables owed to us and/or toward future purchases of our products or services. We establish accruals for estimated revenue reductions attributable to customer programs and incentive offerings for each program based on numerous factors, including:

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            forecasted purchasing patterns of those enrolled in the program based on historical experience with similar programs, current sales trends and market analyses;

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            inventory levels of eligible products in the distribution channel; and

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            estimated number of participants that will ultimately reach volume purchase thresholds.

Revenue reductions are recorded quarterly based on issuance of credits, points earned but not yet issued, and estimates of credits and points to be earned in the future based on current revenue. In our analysis, we utilize data supplied from distributors and collected in-house that details the volume of qualifying products purchased as well as price paid per clinic (“practice-level sales data”).

Mr. Jim B. Rosenberg

United States Securities and Exchange Commission

June 6, 2007

Page 3

Our two most significant customer programs are Practice Developer®   and SNAP up the SavingsTM (“SUTS”).  For the years ended December 31, 2006 and 2005 we recorded revenue reductions of $5.1 million and $4.8 million, respectively, related to our Practice Developer® program and $4.9 million and $5.1 million, respectively, related to our SUTS program. As of December 31, 2006 and 2005 the accrued revenue reductions were $10.4 million and $7.1million, respectively, for the Practice Developer®program and $1.4 million for both years for the SUTS program.  The income statement impact of year-to-year changes in estimates related to these programs was not material in either year.

Our Practice Developer® program is a Companion Animal Group awards program that permits customers to earn points by purchasing quarterly minimums in certain product and service categories, including IDEXX Reference Laboratories, VetTest® slides, LaserCyte® tubes, Feline SNAP® tests and Canine SNAP® tests.  Points may then be applied against the purchase price for IDEXX products and services purchased in the future.  SUTS is our volume incentive program for selected SNAP® tests that provides customers with benefits in the form of (1) discounts off invoice at the time of purchase and (2) points under the Practice Developer® program awarded at the end of the SUTS program year (August 30) based on total purchase volume of qualified products during the year.

For the Practice Developer program, we reduce revenue assuming all points granted will result in future credits because the historical forfeitures have been de minimis. The accrued revenue reduction is calculated each quarter based on sales to end users during the quarter by either us or our distributors and on our estimate of future points to be issued upon sale of applicable product inventories held by distributors at the quarter end. On November 30 of each year, unused points granted before January 1 of the prior year expire and are accounted for as a favorable change in estimate.

Under the SUTS program, the discount ultimately received by a customer will depend on the volume of products purchased by the customer, either from us or our distributors, over the entire program period.  Because at any time during the period we cannot be certain what discount level each customer ultimately will be entitled to, at the beginning of the period we develop a program model that forecasts a per test discount for all tests sold over the program period based on program enrollee purchasing patterns, historical experience with similar programs, current sales trends, and marketing analysis.  The per test discount is adjusted quarterly during the program year based on our experience with the program and finalized when the program year ends in August.  The accrued revenue reduction is calculated each quarter by applying the applicable per test discount to sales to end
users during the quarter by either us or our distributors. The accrued revenue reduction also includes our estimate of future points to be issued upon sale of applicable product inventories held by distributors at the quarter end.

If the per test factor used to determine the revenue reduction under the SUTS program were to increase or decrease by 10% per test, we would be required to further reduce revenue or increase revenue, as the case may be, by $0.2 million.

Doubtful Accounts.  We recognize revenue only in those situations where collection from the customer is reasonably assured. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We base our estimates on detailed analysis of specific customer situations and a percentage of our accounts receivable by aging category. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances might be required. Account balances are charged off against the allowance when we believe it is probable the receivable will not be recovered.  Write-offs of customer accounts for the years ended December 31, 2005 and 2006 were $0.4 million and $0.5 million, respectively.

Inventory Valuation

We write down inventory for estimated obsolescence when warranted by estimates of future demand and market conditions. If actual market conditions are less favorable than those we estimated,

Mr. Jim B. Rosenberg

United States Securities and Exchange Commission

June 6, 2007

Page 4

additional inventory write-downs may be required, which would have a negative effect on results of operations. Certain major components of inventory for which we have made critical valuation judgments are discussed in more detail below.

LaserCyte® Hematology Analyzer.  At December 31, 2006, $1.7 million of inventory associated with our LaserCyte® hematology instrument required rework before it could be used to manufacture finished goods, which was net of $0.9 million of write-downs for inventory estimated to be obsolete. We determined obsolescence based on our estimate of the costs to rework inventory and the probability of success, primarily based on historical experience. We expect to fully realize our net investment in inventory. However, if we are unsuccessful reworking this inventory, if we revise our judgment of our ability to successfully rework inventory due to new experience in reworking this inventory, or if we alter the design of this product, we may be required to write off some or all of the remaining associated inventory.

Nitazoxanide.  At December 31, 2006, our inventories included $9.3 million of inventory associated with Navigator®, our nitazoxanide product for the treatment of equine protozoal myeloencephalitis. This inventory consisted of $0.2 million of finished goods and $9.1 million of active ingredient and other raw materials. We have an agreement with our supplier of nitazoxanide under which the supplier agreed until 2017 to replace any expiring inventory of nitazoxanide with longer-dated material. We believe that this agreement has substantially mitigated the risk that we would be required to write down nitazoxanide inventory due to its anticipated expiration prior to sale. However, if actual market conditions or our market share through 2025 are less than we estimate, we may be required to write off some of the associated inventory. For
example, if we sell approximately 50% fewer units through 2025 than we estimate, we would have approximately $5 million of excess inventory that we would be required to write off.

Valuation of Goodwill and Other Intangible Assets

A significant portion of the purchase prices for acquired businesses is assigned to intangible assets. Intangible assets other than goodwill are initially valued at the lesser of fair value or, if applicable, fair value proportionately reduced by the excess of the fair value of acquired net assets over the purchase price (collectively, “fair value”) of the acquired business. If a market value is not readily available, the fair value of the intangible asset is estimated based on discounted cash flows using market participant assumptions, which are assumptions that are not specific to IDEXX. The selection of appropriate valuation methodologies and the estimation of discounted cash flows require significant assumptions about the timing and amounts of future cash flows, risks, appropriate discount rates, and the useful lives of intangible assets. When deemed
appropriate by management, we utilize independent valuation experts to advise and assist us in allocating the purchase prices for acquired businesses to the fair values of the identified intangible assets and in determining appropriate amortization methods and periods for those intangible assets. Goodwill is initially valued based on the excess of the purchase price of a business combination over the fair values of acquired net assets.

We assess goodwill for impairment annually and whenever events or circumstances indicate an impairment may exist, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). For impairment testing, the fair values of the reporting units that include goodwill are estimated using a discounted cash flow approach. The cash flows used contain our best estimates, using appropriate and customary assumptions and projections at the time. No impairments were identified as a result of the annual or event-driven reviews during the years ended December 31, 2006, 2005 or 2004.

Changes in forecast cash flows or the discount rate would affect the estimated fair values of reporting units and could result in a goodwill impairment charge in a future period. However, a 25% decrease in the current estimated fair value of any of our reporting units would not result in a goodwill impairment charge for any of our reporting units that include goodwill. Because our pharmaceutical

Mr. Jim B. Rosenberg

United States Securities and Exchange Commission

June 6, 2007

Page 5

business is still substantially in an investment stage, the determination of the fair value of this business unit requires significant assumptions about the timing and amounts of the unit’s future cash flows, including assumptions about the markets for our products and proprietary technologies, the future success of research and development activities, the attainment and timing of regulatory approvals to manufacture and sell new products, the introduction and success of competitive products by other market participants, and other business risks. We believe that the goodwill attributable to our pharmaceutical business of $13.7 million was not impaired at December 31, 2006. However, significant changes in our assumptions and estimates due to new information, or actual results that are below our expectations, could result in an impairment in the future of some or all of the goodwill
attributable to our pharmaceutical products business.

We assess the realizability of intangible assets other than goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). If an impairment review is triggered, we evaluate the carrying value of intangible assets based on estimated undiscounted