The Whitman Investment Company March 1st, 2017 Introduction The Whitman Investment Company

1 March 2017 Stock Pitch Idexx Laboratories NASDAQ: IDXX $144.94

Key Financials Market Cap: $12.76B Price/Earnings: 59.4 (37.5) 1 March 2017 Key Financials Market Cap: $12.76B Price/Earnings: 59.4 (37.5) EV/EBITDA: 31.23 Price/Book: 232.5 (3.5) Annual Rev. Growth (yoy): 8.00% Debt to Equity Ratio: 5.48 Quarterly Revenue Growth (yoy): 10.80% Operating Margin: 19.85% Return on Equity: -205.2% (8.9%) Return on Assets: 14.66% (3.8%) Earnings Per Share (EPS): 2.44 Total Revenue (2016): $1.78B

Management Discussion 1 March 2017 Management Discussion Strong presence in international markets 39% of 2016 revenue from services and goods provided Revenue is highly concentrated on Companion Animal Group (CAG) with $1,522,689,000 of 2016 revenue Total company revenue in 2016: $1,775,423,000 Nearly 85% of CAG revenue is recurring revenue from diagnostics products Revenue from LPD segment has been declining over past few years, but the revenue from CAG and Water has increased strongly Research and Development expenditures hover around $100 million each year (~6% of revenue) The company feels that failure to differentiate products and advance them will lead to lost customers and revenue Customer retention rating is approximately 99% Organic growth rate 7%-11% over 2011-2015 Quinn

Management Discussion (Continued) 1 March 2017 Management Discussion (Continued) Idexx has interest rates around 2.66% $800 million of the debt has an interest rate of 1.95% Idexx has been borrowing money to buy back shares Share buyback program has been active since 1999 65 million shares were authorized for buyback. Approximately 3.7 million remain Idexx currently has 85 million shares on the market ~116.8% of operating cash flow spent on buybacks in last 10 years Idexx spends more than 2x as much money on buyback than it does R&D and capex combined Four patents expiring in the next few years Two of these are concerning Short-term debt is $611 million (due within 12 months) Cash, cash equivalents, and marketable securities total $391.8 million Average payoff to investors: 2% over last 10 years Average interest rate: 2.66% Nikolay

Share Buy-Back Program A company buys it own shares on the open market raising the share price (via increased demand) Decreases number of shares so every share gets a bigger cut of the profits Idexx is spending, on average over 100% of their operating cash flows on their share buyback program Share Buy-Back as a % of Operating Cash Flow 10 year Avg. 2016-12 2015-12 2014-12 2013-12 2012-12 2011-12 2010-12 2009-12 2008-12 2007-12 116.8% 90.75% 186.1% 261.8% 149.5% 57.39% 115.8% 79.89% 47.43% 92.31% 87.41% Matt Levy

Possible Debt Problems They are borrowing money to cover day to day expenses, as well as, pay a part of the share buyback program Millions of $ 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Mean Geo. Mean total debt ($) 1204 1170 899 428 214 247 133 124 156 79 Debt growth rate 2.91% 30.14% 110.05% 100% -13.36% 85.71% 7.26% -20.51% 97.47% 44.41% rolling 5 yr avg 45.95% 12’-16’ 62.51% 11’-15’ 57.93% 10’-14 31.82% 09’-13’ 31.31% 08’-12’ 45.90% 44.05% EBITDA $ 432 371 321 323 317 286 251 226 224 180 EBITDA growth rate 16.44% 15.58% -0.62% 1.89% 10.84% 13.94% 11.06% 0.89% 24.44% 10.50% 8.83% 8.33% 7.42% 7.73% 12.24% 8.91% 8.76% Tom

Debt Debt EBITDA Debt growth rate EBITDA growth rate Debt/EBITDA 2016 1204.00 432.00 1.4405 1.0876 2.79 2017 1734.36 469.84 3.69 2018 2498.35 511.00 4.89 2019 3598.87 555.77 6.48 2020 5184.17 604.45 8.58 2021 7467.80 657.40 11.36 2022 10757.37 714.99 15.05 2023 15495.99 777.62 19.93 2024 22321.97 845.74 26.39 2025 32154.80 919.83 34.96 2026 46318.99 1000.40 46.30 Debt Section 6.7 Financial Covenants. (a) The Administrative Borrower will not permit the Consolidated Leverage Ratio as of the last day of any Reference Period to be greater than 3.50:1.00. (d) any Borrower or any Loan Party shall fail to observe or perform any covenant, condition or agreement If any of the following events (“Events of Default”) shall occur: ... then, and in every such event (other than an event with respect to the any Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Administrative Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, (including the Swingline Commitments and the Letter of Credit Commitments), and thereupon the Commitments shall terminate immediately, (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of each Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind Matt Hill

DCF Discounted Cash Flow Looks at a business's current cash flow and projects it into the future Takes into account their growth rate and cost of capital (WACC) g = terminal growth rate CFn + ------ r - g Sawyer

WACC Equity Cost Debt Cost Take a weighted average of these two Risk-Free Rate of Return + Beta of the Company * (Expected Return of the Market - Risk-Free Rate of Return) Risk-Free return = 10 year treasury Beta = volatility of the company relative to the market (usually the S&P 500) Debt Cost Coupon rate or Yield To Maturity (YTM) of outstanding bonds Take a weighted average of these two market cap equity cost Debt debt cost capital equity weight Debt Weight WACC WACC % growth $12.6 7.8466% $1.204B 2.66% 1$3.804B 91.277% 8.722% 7.394 0.073942191 8% Jimmy Jacobson

Equity Cost Equity Cost = risk free rate of return +(beta *(expected market return- risk free rate of return)) Risk free rate of return = yield on US treasuries Beta = volatility of said company relative to the market (usually the S&P 500) Expected market return = expected return of the market over the next 12 months (use S&P 500 historical annualized returns)

Debt Cost Weighted average cost of debt For all outstanding bonds Interest on bonds (as a %) * [$ amount of bond / all debt] Sum up results for all bonds Alternatively you can use Yield To Maturity

Weight Capital Costs

Cash Flow Growth Rate Growth rate Rolling Mean 9.02% Rolling GeoMean8% 2016 2015 2014 2013 2012 2011 2010 2009 2008 Average OCF growth 55.09% -8.47% -4.07% 6.96% 4.07% 23.46% 2.29% 22.38% 5.93% 11.96% rolling 5 yr OCF growth 10.72% 4.39% 6.54% 11.83% 11.63% Sawyer

Terminal value Last year of cash flow/ (WACC-growth rate)

Final notes Add back cash and equivalents and non-operating assets Subtract debt

Idexx DCF 27.62% upside from current price Start growth WACC total year 1 335,000,000.00 1.08 1.073942191 311,934,853.58 year 2 361,800,000.00 1.153351829 313,694,391.37 year 3 390,744,000.00 1.23863319 315,463,854.22 year 4 422,003,520.00 1.330220441 317,243,298.12 year 5 455,763,801.60 1.428579855 319,032,779.37 TV 492,224,905.73 0.04 14,501,860,251.82 Total 16,079,229,428.48* 27.62% upside from current price 20% upside taking into account debt and cash Sawyer

Alternate DCF WACC falls from 7.4% to 6.4% Start growth WACC total year 1 335,000,000.00 1.08 1.063 315,145,813.73 year 2 361,800,000.00 1.153351829 313,694,391.37 year 3 390,744,000.00 1.23863319 315,463,854.22 year 4 422,003,520.00 1.330220441 317,243,298.12 year 5 455,763,801.60 1.428579855 319,032,779.37 TV 492,224,905.73 0.04 21,401,082,857.74 Total 22,981,662,994.55

Alternate DCF 2 Terminal growth rate falls from 4% to 3% Start growth WACC total year 1 335,000,000.00 1.08 1.073942191 311,934,853.58 year 2 361,800,000.00 1.153351829 313,694,391.37 year 3 390,744,000.00 1.23863319 315,463,854.22 year 4 422,003,520.00 1.330220441 317,243,298.12 year 5 455,763,801.60 1.428579855 319,032,779.37 TV 492,224,905.73 0.03 11,201,646,941.81 Total 12,779,016,118.46

1 March 2017 Valuation Target Price $173.43 Tom

Conclusion/ Your Thesis 1 March 2017 Don’t buy this. JP Morgan has a large stake in Idexx and is giving Idexx the means to inflate their own price Current operations are not sustainable No way stock price doesn’t crash Tom