Mettler-Toledo International Inc. 10-K
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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(Mark
One)
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the
fiscal year ended December 31, 2007
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OR
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the
transition period
from to
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Commission file
number 1-13595
Mettler-Toledo
International Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
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13-3668641
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(State or other jurisdiction
of
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(I.R.S. Employer
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incorporation or
organization)
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Identification
No.)
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Im
Langacher, P.O. Box MT-100
CH 8606 Greifensee, Switzerland
and
1900 Polaris Parkway
Columbus, OH 43240
(Address of principal executive
offices) (Zip Code)
+41-44-944-22-11
and 1-614-438-4511
(Registrants telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Each
Exchange on Which Registered
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Common Stock, $0.01 par value
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New York Stock Exchange
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Preferred Stock Purchase Rights
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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 þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405) is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. Yes o No þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated flier, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act, (Check one):
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Large accelerated
flier þ
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Accelerated
filer o
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Non-accelerated
filer o
(Do not check if a smaller reporting company)
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Smaller reporting
company o
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12 b-2 of the
Act). Yes o No þ
As of February 1, 2008 there were 35,283,583 shares of
the registrants Common Stock, $0.01 par value per
share, outstanding. The aggregate market value of the shares of
Common Stock held by non-affiliates of the registrant on
June 30, 2007 (based on the closing price for the Common
Stock on the New York Stock Exchange as of the last business day
of the registrants most recently completed second fiscal
quarter, June 30, 2007) was approximately
$3.6 billion. For purposes of this computation, shares held
by affiliates and by directors of the registrant have been
excluded. Such exclusion of shares held by directors is not
intended, nor shall it be deemed, to be an admission that such
persons are affiliates of the registrant.
Documents Incorporated by Reference
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Document
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Part of Form 10-K
Into Which Incorporated
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Certain Sections of the Proxy Statement for 2008 Annual Meeting
of Shareholders
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Part III
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METTLER-TOLEDO
INTERNATIONAL INC.
ANNUAL REPORT ON
FORM 10-K
FOR THE FISCAL Year
Ended December 31, 2007
1
DISCLAIMER
Some of the statements in this annual report and in documents
incorporated by reference constitute forward-looking
statements within the meaning of Section 27A of the
U.S. Securities Act of 1933 and Section 21E of the
U.S. Securities Exchange Act of 1934. These statements
relate to future events or our future financial performance,
including, but not limited to, strategic plans, potential growth
opportunities in both developed markets and emerging markets,
impact of inflation, currency and interest rate fluctuations,
planned research and development efforts, product introductions
and innovation, manufacturing capacity, adequacy of facilities,
anticipated customer spending pattern and levels, expected
customer demand, meeting customer expectations, planned
operational changes and productivity improvements, effect of
changes in internal control over financial reporting, research
and development expenditures, competitors product
development, levels of competitive pressure, expected capital
expenditures, future cash sources and requirements, liquidity,
value of inventories, impact of long-term incentive plans,
expected pension and other benefits contributions and payments,
expected tax treatment and assessment, impact of taxes and
changes in tax benefits, expected compliance with laws, changes
in laws and regulations, impact of environmental costs, expected
trading volume and value of stocks and options, impact of
issuance of preferred stock, expected cost savings, impact of
legal proceedings, satisfaction of contractual obligations by
counterparties, benefits and other effects of completed or
future acquisitions, which involve known and unknown risks,
uncertainties and other factors that may cause our or our
businesses actual results, levels of activity, performance
or achievements to be materially different from those expressed
or implied by any forward-looking statements. In some cases, you
can identify forward-looking statements by terminology such as
may, will, could,
would, should, expect,
plan, anticipate, intend,
believe, estimate, predict,
potential or continue or the negative of
those terms or other comparable terminology. These statements
are only predictions. Actual events or results may differ
materially because of market conditions in our industries or
other factors. Moreover, we do not, nor does any other person,
assume responsibility for the accuracy and completeness of those
statements. Unless otherwise required by applicable laws, we
disclaim any intention or obligation to publicly update or
revise any of the forward-looking statements after the date of
this annual report to conform them to actual results, whether as
a result of new information, future events or otherwise. All of
the forward-looking statements are qualified in their entirety
by reference to the factors discussed under the captions
Factors affecting our future operating results in
the Business and Managements Discussion
and Analysis of Financial Condition and Results of
Operations sections of this annual report, which describe
risks and factors that could cause results to differ materially
from those projected in those forward-looking statements.
We caution the reader that the above list of risks and
factors that may affect results addressed in the forward-looking
statements may not be exhaustive. Other sections of this annual
report and other documents incorporated by reference may
describe additional risks or factors that could adversely impact
our business and financial performance. We operate in a
continually changing business environment, and new risk factors
emerge from time to time. Management cannot predict these new
risk factors, nor can it assess the impact, if any, of these new
risk factors on our businesses or the extent to which any
factor, or combination of factors, may cause actual results to
differ materially from those projected in any forward-looking
statements. Accordingly, forward-looking statements should not
be relied upon as a prediction of actual results.
2
PART I
We are a leading global supplier of precision instruments and
services. We have strong leadership positions in all of our
businesses and believe we hold global number one market
positions in a majority of them. Specifically, we are the
largest provider of weighing instruments for use in laboratory,
industrial and food retailing applications. We are also a
leading provider of analytical instruments for use in life
science, reaction engineering and real-time analytic systems
used in drug and chemical compound development, and process
analytics instruments used for in-line measurement in production
processes. In addition, we are the largest supplier of
end-of-line inspection systems used in production and packaging
for food, pharmaceutical and other industries.
Our business is geographically diversified, with net sales in
2007 derived 43% from Europe, 38% from North and South America
and 19% from Asia and other countries. Our customer base is also
diversified by industry and by individual customer.
Mettler-Toledo International Inc. was incorporated as a Delaware
corporation in 1991 and became a publicly traded company with
its initial public offering in 1997. In 2001, we acquired Rainin
Instrument, a leading manufacturer of pipetting solutions used
in pharmaceutical, biotech and medical research applications.
Business
Segments
We have five reportable segments: U.S. Operations, Swiss
Operations, Western European Operations, Chinese Operations and
Other. See Note 15 to the audited consolidated financial
statements and Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations under
Results of Operations by Operating
Segment included herein for detailed results by segment
and geographic region.
We manufacture a wide variety of precision instruments and
provide value-added services to our customers. Our principal
products and principal services are set forth below. We have
followed this description of our products and services with
descriptions of our customers and distribution, sales and
service, research and development, manufacturing and certain
other matters. These descriptions apply to substantially all of
our products and related segments.
Laboratory
Instruments
We make a wide variety of precision laboratory instruments,
including laboratory balances, pipettes, titrators, thermal
analysis systems and other analytical instruments. The
laboratory instruments business accounted for approximately 44%
of our net sales in 2007 and 2006 and 45% in 2005.
Laboratory
Balances
Our laboratory balances have weighing ranges from one
ten-millionth of a gram up to 64 kilograms. To cover a wide
range of customer needs and price points, we market our balances
in a range of product tiers offering different levels of
functionality. Based on the same technology platform, we also
manufacture mass comparators, which are used by weights and
measures regulators as well as laboratories to ensure the
accuracy of reference weights. Laboratory balances are primarily
used in the pharmaceutical, food, chemical, cosmetics and other
industries.
Pipettes
Pipettes are used in laboratories for dispensing small volumes
of liquids. We operate our pipette business with the Rainin
brand name. Rainin develops, manufactures and distributes
advanced pipettes, tips and accessories, including single and
multi-channel manual and electronic pipettes. Rainin maintains
service centers in the key markets where customers periodically
send their pipettes for certified recalibrations. Rainins
principal end markets are pharmaceutical, biotech and academia.
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Analytical
Instruments
Titrators measure the chemical composition of samples and are
used in environmental and research laboratories as well as in
quality control labs in the pharmaceutical, food and beverage
and other industries. Our high-end titrators are multi-tasking
models, which can perform two determinations simultaneously on
multiple vessels. Our offering includes robotics to automate
routine work in quality control applications.
Thermal analysis systems measure material properties as a
function of temperature, such as weight, dimension, energy flow
and viscoelastic properties. Thermal analysis systems are used
in nearly every industry, but primarily in the plastics and
polymer industries and increasingly in the pharmaceutical
industry.
pH meters measure acidity in laboratory samples. We also sell
density and refractometry instruments, which measure chemical
concentrations in solutions. In addition, we manufacture and
sell moisture analyzers, which precisely determine the moisture
content of a sample by utilizing an infrared dryer to evaporate
moisture.
Laboratory
Software
LabX, our PC-based laboratory software platform, manages and
analyzes data generated by our balances, titrators, pH meters,
moisture analyzers and other analytical instruments. LabX
provides full network capability, has efficient, intuitive
protocols, and enables customers to collect and archive data in
compliance with the U.S. Food and Drug
Administrations traceability requirements for
electronically stored data (also known as 21 CFR
Part 11).
Automated
Chemistry Solutions
Our current automated chemistry solutions focus on selected
applications in the chemical and drug discovery process. Our
automated lab reactors and in situ analysis systems are
considered integral to the process development and
scale-up
activities of our customers. Our on-line measurement
technologies based on infrared and laser light scattering
enables customers to monitor chemical reactions and
crystallization processes in real time in the lab and plant. We
believe that our portfolio of integrated technologies can bring
significant efficiencies to the development process, enabling
our customers to bring new chemicals and drugs to market faster.
Process
Analytics
Our process analytics business provides instruments for the
in-line measurement of liquid parameters used primarily in the
production process of pharmaceutical, biotech, beverage,
microelectronics, chemical and refining companies. Approximately
half of our process analytics sales are to the pharmaceutical
and biotech markets, where our customers need fast and secure
scale-up and
production that meets the validation processes required for GMP
(Good Manufacturing Processes) and other regulatory standards.
We are a leading solution provider for liquid analytical
measurement to control and optimize production processes. Our
solutions include sensor technology for measuring pH, dissolved
oxygen, carbon dioxide, conductivity, turbidity, ozone and total
organic carbons and automated systems for calibration and
cleaning of measurement points. Intelligent sensor diagnostics
capabilities enable improved asset management solutions for our
customers to reduce process downtime and maintenance costs. Our
instruments offer leading multi-parameter capabilities and
plant-wide control system integration, which are key for
integrated measurement of multiple parameters to secure
production quality and efficiency. With a worldwide network of
specialists, we support customers in critical process
applications, compliance and systems integration questions.
Industrial
Instruments
We manufacture numerous industrial weighing instruments and
related terminals and offer dedicated software solutions for the
pharmaceutical, chemical, food and other industries. In
addition, we manufacture metal detection and other end-of-line
inspection systems used in production and packaging. We supply
automatic identification and data capture solutions, which
integrate in-motion weighing, dimensioning and
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identification technologies for transport, shipping and
logistics customers. We also offer heavy industrial scales and
related software. The industrial instruments business accounted
for approximately 43% of our net sales in 2007 and 42% in both
2006 and 2005.
Industrial
Weighing Instruments
We offer a comprehensive line of industrial scales and balances,
such as bench scales and floor scales, for weighing loads from a
few grams to several thousand kilograms in applications ranging
from measuring materials in chemical production to weighing mail
and packages. Our products are used in a wide range of
applications, such as counting applications and in formulating
and mixing ingredients.
Industrial
Terminals
Our industrial scale terminals collect data and integrate it
into manufacturing processes, helping to automate them. Our
terminals allow users to remotely download programs or access
setup data and can minimize downtime through predictive rather
than reactive maintenance.
Transportation
and Logistics
We are a leading global supplier of automatic identification and
data capture solutions, which integrate in-motion weighing,
dimensioning and identification technologies. With these
solutions, customers can measure the weight and cubic volume of
packages for appropriate billing, logistics and quality control.
Our solutions also integrate into customers information
systems.
Vehicle Scale
Systems
Our primary heavy industrial products are scales for weighing
trucks or railcars (i.e., weighing bulk goods as they enter or
leave a factory or at a toll station). Heavy industrial scales
are capable of measuring weights up to 500 tons and permit
accurate weighing under extreme environmental conditions. We
also offer advanced computer software that can be used with our
heavy industrial scales to facilitate a broad range of customer
solutions and provides a complete system for managing vehicle
transaction processing.
Industrial
Software
We offer software that can be used with our industrial
instruments. Examples include FreeWeigh.Net, statistical quality
control software, Formweigh.Net, our formulation/batching
software and OverDrive. FreeWeigh.Net and Formweigh.Net provide
full network capability and enable customers to collect and
archive data in compliance with 21 CFR Part 11.
Product
Inspection
Increasing safety and consumer protection requirements are
driving the need for more sophisticated end-of-line inspection
systems (e.g., for use in food processing and packaging,
pharmaceutical and other industries). We are a leading global
provider of metal detectors, x-ray visioning equipment and
checkweighers that are used in these industries. Metal detectors
are most commonly used to detect fine particles of metal that
may be contained in raw materials or may be generated by the
manufacturing process itself. X-ray-based vision inspection
helps detect non-metallic contamination, such as glass, stones
and pits, which enter the manufacturing process for similar
reasons. Our x-ray systems can also detect metal in metallized
containers and can be used for mass control. Checkweighers are
used to control the filling content of packaged goods such as
food, pharmaceuticals and cosmetics. Both x-ray and metal
detection systems may be used together with checkweighers as
components of integrated packaging lines. FreeWeigh.Net is our
statistical and quality control software that optimizes package
filling, monitors weight-related data and integrates it in real
time into customers enterprise resource planning
and/or
process control systems.
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Retail Weighing
Solutions
Supermarkets, hypermarkets and other food retail businesses make
use of multiple weighing and food labeling solutions for
handling fresh goods (such as meats, vegetables, fruits and
cheeses). We offer stand-alone scales for basic counter weighing
and pricing, price finding and printing. In addition, we offer
networked scales and software, which can integrate backroom,
counter, self-service and checkout functions and can incorporate
fresh goods item data into a supermarkets overall food
item and inventory management system. Customer benefits are in
the areas of pricing, merchandising, inventory management and
regulatory compliance. The retail business accounted for
approximately 13% of our net sales in 2007, 14% in 2006 and 13%
in 2005.
Retail
Software
Our subsidiary SofTechnics provides retail software for in-store
item and inventory management solutions. SofTechnics
offering complements our retail weighing solutions to food
retailers by providing the full scope of real-time item
management. Retailers can then match local store inventory
levels with local customer demand. Our instruments have been
expanded to allow in-store marketing which permits customer to
make more decisions at the point of sale.
Customers and
Distribution
Our principal customers include companies in the following key
end markets: the life science industry (pharmaceutical and
biotech companies, as well as independent research
organizations); food and beverage producers; food retailers;
chemical, specialty chemicals and cosmetics companies; the
transportation and logistics industry; the metals industry; the
electronics industry; and the academic community.
Our products are sold through a variety of distribution
channels. Generally, more technically sophisticated products are
sold through our direct sales force, while less complicated
products are sold through indirect channels. Our sales through
direct channels exceed our sales through indirect channels. A
significant portion of our sales in the Americas is generated
through the indirect channels, including sales of our
Ohaus branded products. Ohaus branded products
target markets in which customers are interested in lower cost,
a more limited set of features and less comprehensive support
and service such as the educational market. We have a
diversified customer base, with no single customer accounting
for more than 2% of 2007 net sales.
Sales and
Service
Market
Organizations
We maintain geographically focused market organizations around
the world that are responsible for all aspects of our sales and
service. The market organizations are local marketing and
service organizations designed to maintain close relationships
with our customers. Each market organization has the flexibility
to adapt its marketing and service efforts to account for
different cultural and economic conditions. Market organizations
also work closely with our producing organizations (described
below) by providing feedback on manufacturing and product
development initiatives and relaying new product and application
ideas.
We have one of the largest and broadest global sales and service
organizations among precision instrument manufacturers. At
December 31, 2007, our sales and services group consisted
of over 5,400 employees in sales, marketing and customer
service (including related administration) and post-sales
technical service, located in 35 countries. This field
organization has the capability to provide service and support
to our customers and distributors in major markets across the
globe. This is important because our customers increasingly seek
to do business with a consistent global approach.
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Service
Our service business remains successful with a focus on repair
and maintenance as well as further expansion of our offerings to
include value-added services for a range of market needs,
including regulatory compliance. We have a unique offering to
our pharmaceutical customers in promoting use of our instruments
in compliance with FDA regulations and we can provide these
services regardless of the customers location around the
world. This global service network is also an important factor
in our ability to expand in emerging markets. We estimate that
we have the largest installed base of weighing instruments in
the world. Service (representing service contracts, repairs and
replacement parts) accounted for approximately 23% of our total
net sales in 2007, 2006 and 2005. A significant portion of this
amount is derived from the sale of replacement parts.
Beyond revenue opportunities, we believe service is a key part
of our solution offering and helps significantly in customer
retention. The close relationships and frequent contact with our
large customer base provides us with sales opportunities and
innovative product and application ideas.
Research and
Development and Manufacturing
Producing
Organizations
Our research, product development and manufacturing efforts are
organized into a number of producing organizations. Our focused
producing organizations help reduce product development time and
costs, improve customer focus and maintain technological
leadership. The producing organizations work together to share
ideas and best practices, and there is a close interface and
coordinated customer interaction among marketing organizations
and producing organizations.
Research and
Development
We continue to invest in product innovation to provide
technologically advanced products to our customers for existing
and new applications. Over the last three years, we have
invested $257.1 million in research and development
($92.4 million in 2007, $82.8 million in 2006 and
$81.9 million in 2005). In 2007, we spent approximately
5.1% of net sales on research and development. Our research and
development efforts fall into two categories:
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technology advancements, which generate new products and
increase the value of our products. These advancements may be in
the form of enhanced or new functionality, new applications for
our technologies, more accurate or reliable measurement,
additional software capability or automation through robotics or
other means, which allows us to design products more specific to
the needs of the industries the company serves, and
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cost reductions, which reduce the manufacturing cost of our
products through better overall design.
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We continue to devote an increasing proportion of our research
and development budget to software development. This includes
software to process the signals captured by the sensors of our
instruments, application-specific software and software that
connects our solutions into customers existing IT systems.
We closely integrate research and development with marketing,
manufacturing and product engineering. We have over
900 employees in research and development and product
engineering.
Manufacturing
We are a worldwide manufacturer, with facilities principally
located in China, Germany, Switzerland, the United Kingdom and
the United States. Laboratory instruments are produced mainly in
Switzerland and to a lesser extent in the United States and
China, while our remaining products are manufactured worldwide.
We emphasize product quality in our manufacturing operations,
and most of our products require very strict tolerances and
exact specifications. We use an extensive quality control system
that is integrated into each step of the manufacturing process.
All major manufacturing facilities have achieved ISO 9001
certification. We believe that our manufacturing capacity is
sufficient to meet our present and currently anticipated demand.
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We generally manufacture only critical components, which are
components that contain proprietary technology. When outside
manufacturing is more efficient, we contract with other
manufacturers for certain nonproprietary components. We use a
wide range of suppliers. We believe our supply arrangements are
adequate and that there are no material constraints on the
sources and availability of materials. From time to time we may
rely on a single supplier for all of our requirements of a
particular component. Supply arrangements for electronic
components are generally made globally.
Backlog;
Seasonality
Our manufacturing turnaround time is generally short, which
permits us to manufacture orders to fill for most of our
products. Backlog is generally a function of requested customer
delivery dates and is typically no longer than one to two months.
Our business has historically experienced a slight amount of
seasonal variation, particularly the high-end laboratory
instruments business. Traditionally, sales in the first quarter
are slightly lower than, and sales in the fourth quarter are
slightly higher than sales in the second and third quarters.
Fourth quarter sales have historically generated approximately
27% to 30% of our net sales. This trend has a somewhat greater
effect on income from operations than on net sales because fixed
costs are spread evenly across all quarters.
Employees
As of December 31, 2007, we had approximately
9,500 employees throughout the world, including
approximately 4,200 in Europe, 3,000 in North and South America
and 2,300 in Asia and other countries.
We believe our employee relations are good, and we have not
suffered any material employee work stoppage or strike during
the last five years, except for a strike in early 2003 at our
Bethune, France facility, which has been closed. Labor unions do
not represent a meaningful number of our employees.
Intellectual
Property
We hold over 2,000 patents and trademarks, primarily in the
United States, Switzerland, Germany, the United Kingdom, France,
Japan, China and India. Our products generally incorporate a
wide variety of technological innovations, some of which are
protected by patents of various durations. Products are
generally not protected as a whole by individual patents, and as
a result, no one patent or group of related patents is material
to our business. We have numerous trademarks, including the
Mettler-Toledo name and logo, which are material to our
business. We regularly protect against infringement of our
intellectual property.
Regulation
Our products are subject to various regulatory standards and
approvals by weights and measures regulatory authorities. All of
our electrical components are subject to electrical safety
standards. We believe that we are in compliance in all material
respects with applicable regulations.
Approvals are required to ensure our instruments do not
impermissibly influence other instruments and are themselves not
affected by other instruments. In addition, some of our products
are used in legal for trade applications, in which
prices based on weight are calculated and for which specific
weights and measures approvals are required. Although there are
a large number of regulatory agencies across our markets, there
is an increasing trend toward harmonization of standards, and
weights and measures regulation is harmonized across the
European Union.
Our products may also be subject to special requirements
depending on the end-user and market. For example, laboratory
customers are typically subject to Good Laboratory Practices
(GLP), industrial customers to Good Manufacturing Practices
(GMP) and pharmaceutical customers to U.S. Food and Drug
Administration (FDA) regulations, and customers in food
processing industries may be subject to Hazard Analysis and
Critical Control Point (HACCP) regulations. Products used in
hazardous environments may also be subject to special
requirements.
8
Environmental
Matters
We are subject to environmental laws and regulations in the
jurisdictions in which we operate. We own or lease a number of
properties and manufacturing facilities around the world. Like
many of our competitors, we have incurred, and will continue to
incur, capital and operating expenditures and other costs in
complying with such laws and regulations.
We are currently involved in, or have potential liability with
respect to, the remediation of past contamination in certain of
our facilities. Our former subsidiary Mettler-Toledo Hi-Speed,
Inc. (Hi-Speed) was one of two private parties
ordered to perform certain ground water contamination monitoring
under an administrative consent order that the New Jersey
Department of Environmental Protection (NJDEP)
signed on June 13, 1988 with respect to certain property in
Landing, New Jersey. GEI International Corporation
(GEI) is the other ordered party. GEI has failed to
fulfill its obligations under the NJDEP consent order, and NJDEP
has agreed with Hi-Speed that the residual ground water
contaminants can be monitored through the establishment of a
Classification Exception Area and concurrent Well Restriction
Area for the site. The NJDEP does not view these vehicles as
remedial measures, but rather as institutional
controls that must be adequately maintained and
periodically evaluated. We estimate that the costs of compliance
associated with monitoring ground water contamination levels at
the site will be approximately $0.5 million in the coming
years.
In addition, certain of our present and former facilities have
or had been in operation for many decades and, over such time,
some of these facilities may have used substances or generated
and disposed of wastes which are or may be considered hazardous.
It is possible that these sites, as well as disposal sites owned
by third parties to which we have sent wastes, may in the future
be identified and become the subject of remediation. Although we
believe that we are in substantial compliance with applicable
environmental requirements and, to date, we have not incurred
material expenditures in connection with environmental matters,
it is possible that we could become subject to additional
environmental liabilities in the future that could have a
material adverse effect on our financial condition, results of
operations or cash flows.
Competition
Our markets are highly competitive. Many of the markets in which
we compete are fragmented both geographically and by
application, particularly the industrial and food retailing
markets. As a result, we face numerous regional or specialized
competitors, many of which are well established in their
markets. For example, some of our competitors are divisions of
larger companies with potentially greater financial and other
resources than our own. In addition, some of our competitors are
domiciled in emerging markets and may have a lower cost
structure than ours. We are confronted with new competitors in
emerging markets, who although relatively small in size today,
could become larger companies in their home markets. Given the
sometimes significant growth rates of these emerging markets,
and in light of their cost advantage over developed markets,
emerging market competitors could become more significant global
competitors. Taken together, the competitive forces present in
our markets can impair our operating margins in certain product
lines and geographic markets.
We expect our competitors to continue to improve the design and
performance of their products and to introduce new products with
competitive prices. Although we believe that we have
technological and other competitive advantages over many of our
competitors, we may not be able to realize and maintain these
advantages. These advantages include our worldwide market
leadership positions; our global brand and reputation; our track
record of technological innovation; our comprehensive,
high-quality solution offering; our global sales and service
offering; our large installed base of weighing instruments; and
the diversification of our revenue base by geographic region,
product range and customer. To remain competitive, we must
continue to invest in research and development, sales and
marketing and customer service and support. We cannot be sure
that we will have sufficient resources to continue to make these
investments or that we will be successful in identifying,
developing and maintaining any competitive advantages.
We believe the principal competitive factors in developed
markets for purchasing decisions are the product itself,
application support, service support and price. In emerging
markets, where there is greater
9
demand for less sophisticated products, price is a more
important factor than in developed markets. Competition in the
U.S. laboratory market is also influenced by the presence
of large distributors that sell not only our products but those
of our competitors as well.
Company Website
and Information
Our website can be found on the Internet at www.mt.com.
The website contains information about us and our operations.
Copies of each of our filings with the SEC on
Form 10-K,
Form 10-Q,
Form 8-K
and Schedule 14A and all amendments to those reports can be
viewed and downloaded free of charge when they are filed with
the SEC by accessing www.mt.com, clicking on About Us,
Investor Relations and then clicking on SEC Filings.
These filings may also be read and copied at the SECs
Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Information on the operation of the
Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330.
The SEC maintains a website at
http://www.sec.gov
that contains reports, proxy and information statements and
other information regarding issuers that file electronically
with the SEC.
Our website also contains copies of the following documents that
can be downloaded free of charge:
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Corporate Governance Guidelines
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Audit Committee Charter
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Compensation Committee Charter
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Nominating and Corporate Governance Committee Charter
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Code of Conduct
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Any of the above documents, and any of our reports on
Form 10-K,
Form 10-Q,
Form 8-K
and Schedule 14A and all amendments to those reports can
also be obtained in print, free of charge by sending a written
request to our Investor Relations Department:
Investor Relations
Mettler-Toledo International Inc.
1900 Polaris Parkway
Columbus, OH 43240 U.S.A.
Phone: +1 614 438 4748
Fax: +1 614 438 4646
E-mail:
mary.finnegan@mt.com
10
Factors Affecting
Our Future Operating Results
We are subject to
certain risks associated with our international operations and
fluctuating conditions in emerging markets.
We conduct business in many countries, including emerging
markets in Asia, Latin America and Eastern Europe, and these
operations represent a significant portion of our sales and
earnings. For example, our Chinese operations account for
$168.3 million of sales to external customers and
$57.5 million of segment profit. In addition to the
currency risks discussed below, international operations pose
other substantial risks and problems for us. For instance,
various local jurisdictions in which we operate may revise or
alter their respective legal and regulatory requirements. In
addition, we may encounter one or more of the following
obstacles or risks:
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tariffs and trade barriers;
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difficulties in staffing and managing local operations
and/or
mandatory salary increases for local employees;
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credit risks arising from financial difficulties facing local
customers and distributors;
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difficulties in protecting intellectual property;
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nationalization of private enterprises may result in the
confiscation of assets as we hold significant assets around the
world in the form of property, plant and equipment, inventory
and accounts receivable, as well as $58.1 million of cash
at December 31, 2007 in our Chinese subsidiaries;
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restrictions on investments
and/or
limitations regarding foreign ownership;
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adverse tax consequences, including tax disputes, imposition or
increase of withholding and other taxes on remittances and other
payments by subsidiaries; and
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other uncertain local economic, political and social conditions,
including hyper-inflationary conditions or periods of low or no
productivity growth.
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We must also comply with a variety of regulations regarding the
conversion and repatriation of funds earned in local currencies.
For example, converting earnings from our operations in China
into other currencies and repatriating these funds require
governmental approvals. If we cannot comply with these or other
applicable regulations, we may face increased difficulties in
utilizing cash flow generated by these operations outside of
China.
Economic conditions in emerging markets have from time to time
deteriorated significantly, and some emerging markets are
experiencing recessionary trends, severe currency devaluations
and inflationary prices. Moreover, economic problems in
individual markets can spread to other economies, adding to the
adverse conditions we may face in emerging markets. We remain
committed to emerging markets, particularly those in Asia, Latin
America and Eastern Europe. However, we expect the fluctuating
economic conditions will affect our results of operations in
these markets for the foreseeable future.
The majority of
our business is derived from companies in developed countries.
Economic downturns or recessions in these countries would likely
adversely affect our operating results.
Although the percentage of our sales coming from emerging
markets is growing, the majority of our business is still
derived from companies in developed countries. Because our
customers often decrease or delay capital expenditures in
difficult economic times, economic downturns or recessions in
developed countries would likely adversely affect our operating
results. Customers may also purchase lower-cost products made by
competitors and not resume purchasing our products even after
economic conditions improve. These conditions would reduce our
revenues and profitability.
11
We operate in
highly competitive markets, and it may be difficult to preserve
operating margins, gain market share and maintain a
technological advantage.
Our markets are highly competitive. Many of the markets in which
we compete are fragmented both geographically and by
application, particularly the industrial and food retailing
markets. As a result, we face numerous regional or specialized
competitors, many of which are well established in their
markets. In addition, some of our competitors are divisions of
larger companies with potentially greater financial and other
resources than our Company. Some of our competitors are
domiciled or operate in emerging markets and may have a lower
cost structure than ours. We are confronted with new competitors
in emerging markets, who although relatively small in size
today, could become larger companies in their home markets.
Given the sometimes significant growth rates of these emerging
markets, and in light of their cost advantage over developed
markets, emerging market competitors could become more
significant global competitors. Taken together, the competitive
forces present in our markets can impair our operating margins
in certain product lines and geographic markets. We expect our
competitors to continue to improve the design and performance of
their products and to introduce new products with competitive
prices. Although we believe that we have certain technological
and other advantages over our competitors, we may not be able to
realize and maintain these advantages.
Our product
development efforts may not produce commercially viable products
in a timely manner.
We must introduce new products and enhancements in a timely
manner, or our products could become technologically obsolete
over time, which would harm our operating results. To remain
competitive, we must continue to make significant investments in
research and development, sales and marketing and customer
service and support. We cannot be sure that we will have
sufficient resources to continue to make these investments. In
developing new products, we may be required to make substantial
investments before we can determine their commercial viability.
As a result, we may not be successful in developing new products
and we may never realize the benefits of our research and
development activities.
Our ability to
deliver products and services may be disrupted.
An interruption in our business due to events such as natural
disasters, pandemics or other health crises, fires, explosions
or issues with the supply chain may cause us to temporarily be
unable to deliver products or services to our customers. It may
be expensive to resolve these issues, even though some of these
risks are covered by insurance policies. More importantly,
customers may switch to competitors and may not return to us
even if we resolve the interruption.
A prolonged
downturn or additional consolidation in the pharmaceutical,
food, food retailing and chemicals industries could adversely
affect our operating results.
Our products are used extensively in the pharmaceutical, food
and beverage and chemical industries. Consolidation in the
pharmaceutical and chemicals industries hurt our sales in prior
years. A prolonged downturn or additional consolidation in any
of these industries could adversely affect our operating
results. In addition, the capital spending policies of our
customers in these industries are based on a variety of factors
we cannot control, including the resources available for
purchasing equipment, the spending priorities among various
types of equipment and policies regarding capital expenditures.
Any decrease or delay in capital spending by our customers would
cause our revenues to decline and could harm our profitability.
We may face risks
associated with future acquisitions.
We may pursue acquisitions of complementary product lines,
technologies or businesses. Acquisitions involve numerous risks,
including difficulties in the assimilation of the acquired
operations, technologies and products; diversion of
managements attention from other business concerns; and
potential departures of key employees of the acquired company.
If we successfully identify acquisitions in the future,
completing such acquisitions may result in new issuances of our
stock that may be dilutive to current owners, increases in our
12
debt and contingent liabilities and additional amortization
expenses related to intangible assets. Any of these
acquisition-related risks could have a material adverse affect
on our profitability.
Larger companies have identified life sciences and instruments
as businesses they will consider entering, which could change
the competitive dynamics of these markets. In addition, we may
not be able to identify, successfully complete or integrate
potential acquisitions in the future. However, even if we can do
so, we cannot be sure that these acquisitions will have a
positive impact on our business or operating results.
If we cannot
protect our intellectual property rights, or if we infringe or
misappropriate the proprietary rights of others, our operating
results could be harmed.
Our success depends on our ability to obtain and enforce patents
on our technology, maintain our trademarks and protect our trade
secrets. Our patents may not provide complete protection, and
competitors may develop similar products that are not covered by
our patents. Our patents may also be challenged by third parties
and invalidated or narrowed. Competitors sometimes seek to take
advantage of our trademarks or brands in ways that may create
customer confusion or weaken our brand. Although we take
measures to protect confidential information, improper use or
disclosure of our trade secrets may still occur.
We may be sued for infringing on the intellectual property
rights of others. The cost of any litigation could affect our
profitability regardless of the outcome, and management
attention could be diverted. If we are unsuccessful in such
litigation, we may have to pay damages, stop the infringing
activity
and/or
obtain a license. If we fail to obtain a required license, we
may be unable to sell some of our products, which could result
in a decline in our revenues.
Departures of key
employees could impair our operations.
We generally have employment contracts with each of our key
employees. Our executive officers own shares of our common stock
and/or have
options to purchase additional shares. Nevertheless, such
individuals could leave the Company. If any key employees
stopped working for us, our operations could be harmed.
Important R&D personnel may leave and join competitors,
which could substantially delay or hinder ongoing development
projects. We have no key man life insurance policies with
respect to any of our senior executives.
We may be
adversely affected by environmental laws and
regulations.
We are subject to various environmental laws and regulations,
including those relating to air emissions, wastewater
discharges, the handling and disposal of solid and hazardous
wastes and the remediation of contamination associated with the
use and disposal of hazardous substances.
We incur expenditures in complying with environmental laws and
regulations. We are currently involved in, or have potential
liability with respect to, the remediation of past contamination
in various facilities. In addition, some of our facilities are
or have been in operation for many decades and may have used
substances or generated and disposed of wastes that are
hazardous or may be considered hazardous in the future. These
sites and disposal sites owned by others to which we sent waste
may in the future be identified as contaminated and require
remediation. Accordingly, it is possible that we could become
subject to additional environmental liabilities in the future
that may harm our results of operations or financial condition.
We may be
adversely affected by failure to comply with regulations of
governmental agencies or by the adoption of new
regulations.
Our products are subject to regulation by governmental agencies.
These regulations govern a wide variety of activities relating
to our products, from design and development, to product safety,
labeling, manufacturing, promotion, sales and distribution. If
we fail to comply with these regulations, or if new regulations
are adopted that substantially change existing practice or
impose new burdens, we may have to recall products and cease
their manufacture and distribution. In addition, we could be
subject to fines or criminal prosecution.
13
We may experience
impairments of goodwill or other intangible assets.
As of December 31, 2007, our consolidated balance sheet
included goodwill of $440.8 million and other intangible
assets of $100.0 million.
Our business acquisitions typically result in goodwill and other
intangible assets, which affect the amount of future period
amortization expense and possible impairment expense that we
might incur. The determination of the value of such intangible
assets requires management to make estimates and assumptions
that affect our consolidated financial statements.
In accordance with SFAS No. 142, Goodwill and
Other Intangible Assets (SFAS 142), our
goodwill and indefinite-lived intangible assets are not
amortized, but are evaluated for impairment annually in the
fourth quarter, or more frequently if events or changes in
circumstances indicate that an asset might be impaired. The
evaluation is based on valuation models that estimate fair value
based on expected future cash flows and profitability
projections. In preparing the valuation models we consider a
number of factors, including operating results, business plans,
economic conditions, future cash flows, and transactions and
market place data. There are inherent uncertainties related to
these factors and our judgment in applying them to the
impairment analyses. The significant estimates and assumptions
within our fair value models include sales growth, controllable
cost growth, perpetual growth, effective tax rates and discount
rates. Our assessments to date have indicated that there has
been no impairment of these assets.
Should any of these estimates or assumptions change, or should
we incur lower-than-expected operating performance or cash
flows, we may experience a triggering event that requires a new
fair value assessment for our reporting units, possibly prior to
the required annual assessment. These types of events and
resulting analysis could result in impairment charges for
goodwill and other indefinite-lived intangible assets if the
fair value estimate declines below the carrying value.
Our amortization expense related to intangible assets with
finite lives may materially change should our estimates of their
useful lives change.
Unanticipated
changes in our tax rates or exposure to additional income tax
liabilities could impact our profitability.
We are subject to income taxes in both the United States and
various other foreign jurisdictions, and our domestic and
international tax liabilities are subject to allocation of
expenses among different jurisdictions. Our effective tax rates
could be adversely affected by: changes in the mix of earnings
by jurisdiction, changes in tax laws or tax rates, changes in
the valuation of deferred tax assets and liabilities and
material adjustments from tax audits.
In particular, the carrying value of deferred tax assets, which
are predominantly in the U.S., is dependent upon our ability to
generate future taxable income in the U.S. In addition, the
amount of income taxes we pay is subject to ongoing audits in
various jurisdictions and a material assessment by a governing
tax authority could affect our profitability.
Currency
fluctuations affect our operating profits.
Because we conduct operations in many countries, our operating
income can be significantly affected by fluctuations in currency
exchange rates. Swiss franc-denominated expenses represent a
much greater percentage of our total operating expenses than
Swiss franc-denominated sales represent of our total net sales.
In part, this is because most of our manufacturing costs in
Switzerland relate to products that are sold outside
Switzerland. Moreover, a substantial percentage of our research
and development expenses and general and administrative expenses
are incurred in Switzerland. Therefore, if the Swiss franc
strengthens against all or most of our major trading currencies
(e.g., the U.S. dollar, the euro, other major
European currencies, the Chinese yuan and the Japanese yen), our
operating profit is reduced. We also have significantly more
sales in European currencies (other than the Swiss franc) than
we have expenses in those currencies. Therefore, when European
currencies weaken against the U.S. dollar and the Swiss
franc, it also decreases our operating profits. Accordingly, the
Swiss franc exchange rate to the euro is an important
14
cross-rate monitored by the Company. We estimate that a 1%
strengthening of the Swiss franc against the euro would result
in a decrease in our earnings before tax of approximately
$1.1 million on an annual basis. In addition to the effects
of exchange rate movements on operating profits, our debt levels
can fluctuate due to changes in exchange rates, particularly
between the U.S. dollar and the Swiss franc. Based on our
outstanding debt at December 31, 2007, we estimate that a
10% weakening of the U.S. dollar against the currencies in
which our debt is denominated would result in an increase of
approximately $12.4 million in the reported
U.S. dollar value of the debt.
We have
substantial debt and we may incur substantially more debt, which
could affect our ability to meet our debt obligations and may
otherwise restrict our activities.
We have substantial debt and we may incur substantial additional
debt in the future. As of December 31, 2007, we had total
indebtedness of approximately $315.4 million, net of cash
of $81.2 million. We are also permitted by the terms of our
debt instruments to incur substantial additional indebtedness,
subject to the restrictions therein.
Our debt could have important consequences. For example, it
could make it more difficult for us to satisfy our obligations
under our debt instruments; require us to dedicate a substantial
portion of our cash flow to payments on our indebtedness, which
would reduce the amount of cash flow available to fund working
capital, capital expenditures, product development and other
corporate requirements; increase our vulnerability to general
adverse economic and industry conditions, including changes in
raw material costs; limit our ability to respond to business
opportunities; limit our ability to borrow additional funds,
which may be necessary; and subject us to financial and other
restrictive covenants, which, if we fail to comply with these
covenants and our failure is not waived or cured, could result
in an event of default under our debt.
The agreements
governing our debt impose restrictions on our
business.
The indenture governing our senior notes and the agreements
governing our credit facility contain covenants imposing various
restrictions on our business. These restrictions may affect our
ability to operate our business and may limit our ability to
take advantage of potential business opportunities as they
arise. The restrictions these covenants place on us include
limitations on our ability to enter into sale and leaseback
arrangements; incur liens; and consolidate, merge, sell or lease
all or substantially all of our assets. Our credit facility also
requires us to meet certain financial ratios.
Our ability to comply with these agreements may be affected by
events beyond our control, including prevailing economic,
financial and industry conditions, and are subject to the risks
in this section. The breach of any of these covenants or
restrictions could result in a default under the indenture
governing the senior notes
and/or under
our credit facility. An event of default under our credit
facility would permit our lenders to declare all amounts
borrowed from them to be immediately due and payable.
Acceleration of our other indebtedness may cause us to be unable
to make interest payments on the senior notes and repay the
principal amount of the senior notes.
Our ability to
generate cash depends on factors beyond our control.
Our ability to make payments on our debt and to fund planned
capital expenditures and research and development efforts will
depend on our ability to generate cash in the future. This, to
an extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors,
including those described in this section, that are beyond our
control.
We cannot ensure that our business will generate sufficient cash
flow from operations or that future borrowings will be available
to us under our credit facility in an amount sufficient to
enable us to pay our debt or to fund our other liquidity needs.
We may need to refinance all or a portion of our indebtedness on
or before maturity. We cannot ensure that we will be able to
refinance any of our debt, including our credit facility and the
senior notes, on commercially reasonable terms or at all.
15
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Item 1B.
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Unresolved
Staff Comments
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None.
The following table lists our principal facilities, indicating
the location and whether the facility is owned or leased. The
properties listed below serve primarily as manufacturing
facilities and also typically have a certain amount of space for
service, sales and marketing and administrative activities. Our
Greifensee, Switzerland facility also serves as our worldwide
headquarters and our Columbus, Ohio facility serves as our North
American headquarters. The facility in Giessen, Germany is used
primarily for sales and marketing. We believe our facilities are
adequate for our current and reasonably anticipated future needs.
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Location
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Owned/Leased
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Business Segment
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Europe:
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Greifensee/Nanikon, Switzerland
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Owned
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Swiss Operations
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Uznach, Switzerland
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Owned
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Swiss Operations
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Urdorf, Switzerland
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Owned
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Swiss Operations
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Schwerzenbach, Switzerland
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Leased
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Swiss Operations
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Albstadt, Germany
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Owned
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Western European Operations
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Giessen, Germany
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Owned
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Western European Operations
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Manchester, England
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Leased
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Western European Operations
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Oslo, Norway
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Leased
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Western European Operations
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Americas:
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Columbus, Ohio
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Leased
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U.S. Operations
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Worthington, Ohio
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Owned
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U.S. Operations
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Oakland, California
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Leased
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U.S. Operations
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Ithaca, New York
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Owned
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U.S. Operations
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Tampa, Florida
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Leased
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U.S. Operations
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Other:
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Shanghai, China
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Building Owned;
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Chinese Operations
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Land Leased
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Changzhou, China (three facilities)
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Buildings Owned;
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Chinese Operations
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Land Leased
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Item 3.
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Legal
Proceedings
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We are not currently involved in any legal proceeding which we
believe could have a material adverse effect upon our financial
condition, results of operations or cash flows. See the
disclosure above under Environmental Matters.
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Item 4.
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Submission
of Matters to a Vote of Security Holders
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No matters were submitted to a vote of security holders during
the fourth quarter of 2007.
Executive
Officers of the Registrant
See Part III, Item 10 of this annual report for
information about our executive officers.
16
PART II
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Item 5.
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Market
for the Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
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Market
Information for Common Stock
Our common stock is traded on the New York Stock Exchange under
the symbol MTD. The following table sets forth on a
per share basis the high and low sales prices for consolidated
trading in our common stock as reported on the New York Stock
Exchange Composite Tape for the quarters indicated.
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Common Stock
Price Range
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High
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Low
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2007
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Fourth Quarter
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$
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118.54
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$
|
102.32
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Third Quarter
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$
|
103.19
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$
|
86.59
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Second Quarter
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|
$
|
101.76
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$
|
89.94
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First Quarter
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|
$
|
91.61
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$
|
77.78
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2006
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Fourth Quarter
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$
|
80.80
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$
|
66.00
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Third Quarter
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$
|
66.15
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|
$
|
56.70
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Second Quarter
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|
$
|
68.34
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|
$
|
58.50
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First Quarter
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|
$
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61.90
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|
$
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55.62
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Holders
At February 1, 2008, there were 213 holders of record of
common stock and 35,283,583 shares of common stock
outstanding. We estimate we have approximately 33,000 beneficial
owners of common stock.
Dividend
Policy
Historically we have not paid dividends on our common stock.
However, we will evaluate this policy on a periodic basis taking
into account our results of operations, financial condition,
capital requirements, including potential acquisitions, our
share buyback program, the taxation of dividends to our
shareholders, and other factors deemed relevant by our Board of
Directors.
17
Share Performance
Graph
The following graph compares the cumulative total returns
(assuming reinvestment of dividends) on $100 invested on
December 31, 2002 through December 31, 2007 in our
common stock, the Standard & Poors 500 Composite
Stock Index (S&P 500 Index) and the SIC Code 3826
Index Laboratory Analytical Instruments.
Historically, we have not paid dividends on our common stock.
However, the Company will evaluate this policy on a periodic
basis taking into account our results of operations, financial
condition, capital requirements, including potential
acquisitions, our share buyback program, the taxation of
dividends to our shareholders, and other factors deemed relevant
by our Board of Directors.
Comparison of
Cumulative Total Return Among Mettler-Toledo International Inc.,
the
S&P 500 Index and SIC Code 3826 Index
Laboratory Analytical Instruments
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|
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12-31-02
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12-31-03
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|
12-31-04
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|
|
12-31-05
|
|
|
12-31-06
|
|
|
12-31-07
|
Mettler-Toledo
|
|
|
$
|
100
|
|
|
|
$
|
132
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|
|
|
$
|
160
|
|
|
|
$
|
172
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|
|
|
$
|
246
|
|
|
|
$
|
355
|
|
S&P 500 Index
|
|
|
$
|
100
|
|
|
|
$
|
129
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|
|
|
$
|
143
|
|
|
|
$
|
150
|
|
|
|
$
|
173
|
|
|
|
$
|
183
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|
SIC Code 3826 Index
|
|
|
$
|
100
|
|
|
|
$
|
146
|
|
|
|
$
|
169
|
|
|
|
$
|
173
|
|
|
|
$
|
219
|
|
|
|
$
|
280
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|
|
|
|
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|
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|
|
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|
Purchases of
Equity Securities by the Issuer and Affiliated
Purchasers
Issuer Purchases
of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Number
(or
|
|
|
|
|
|
|
|
|
|
Total Number
of
|
|
|
Approximate
Dollar
|
|
|
|
|
|
|
|
|
|
Shares Purchased
as
|
|
|
Value in
Thousands) of
|
|
|
|
|
|
|
|
|
|
Part of
Publicly
|
|
|
Shares that may
yet be
|
|
|
|
Total Number
of
|
|
|
Average Price
Paid
|
|
|
Announced Plans
or
|
|
|
Purchased under
the
|
|
Period
|
|
Shares
Purchased
|
|
|
per
Share
|
|
|
Programs
|
|
|
Plans or
Programs
|
|
|
October 1 to
October 31, 2007
|
|
|
185,000
|
|
|
$
|
104.38
|
|
|
|
185,000
|
|
|
|
97,312
|
|
November 1
to November 30, 2007
|
|
|
144,200
|
|
|
|
113.09
|
|
|
|
144,200
|
|
|
|
681,001
|
|
December 1
to December 31, 2007
|
|
|
345,000
|
|
|
|
115.68
|
|
|
|
345,000
|
|
|
|
641,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
674,200
|
|
|
$
|
112.02
|
|
|
|
674,200
|
|
|
|
641,085
|
|
We have a share repurchase program that was announced in
February 2004. Under the program, we have been authorized to buy
back up to $1.5 billion of the Companys common
shares. We have purchased 13.0 million common shares since
the inception of the program through December 31, 2007, at
a total cost of
18
$858.9 million. As of December 31, 2007, there was
$641.1 million remaining authorized for repurchases under
the plan by December 31, 2010. The share repurchases are
expected to be funded from existing cash balances, borrowings
under existing credit arrangements or cash generated from
operating activities. Repurchases will be made through open
market transactions, and the timing will depend on the level of
acquisition activity, business and market conditions, the stock
price, trading restrictions and other factors.
During the years ended December 31, 2007 and 2006, we spent
$324.6 million and $265.9 million on the repurchase of
3,384,731 shares and 4,141,559 shares at an average
price per share of $95.88 and $64.18, respectively.
|
|
Item 6.
|
Selected
Financial Data
|
The selected historical financial information set forth below as
of December 31 and for the years then ended is derived from our
audited consolidated financial statements. The financial
information presented below, in thousands except share data, was
prepared in accordance with accounting principles generally
accepted in the United States of America
(U.S. GAAP).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Statement of
Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,793,748
|
|
|
$
|
1,594,912
|
|
|
$
|
1,482,472
|
|
|
$
|
1,404,454
|
|
|
$
|
1,304,431
|
|
Cost of sales
|
|
|
897,567
|
|
|
|
804,480
|
|
|
|
752,153
|
|
|
|
722,047
|
|
|
|
686,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
896,181
|
|
|
|
790,432
|
|
|
|
730,319
|
|
|
|
682,407
|
|
|
|
618,176
|
|
Research and development
|
|
|
92,378
|
|
|
|
82,802
|
|
|
|
81,893
|
|
|
|
83,217
|
|
|
|
78,003
|
|
Selling, general and administrative
|
|
|
529,126
|
|
|
|
481,709
|
|
|
|
441,702
|
|
|
|
419,780
|
|
|
|
372,822
|
|
Amortization
|
|
|
11,682
|
|
|
|
11,503
|
|
|
|
11,436
|
|
|
|
12,256
|
|
|
|
11,724
|
|
Interest expense
|
|
|
21,003
|
|
|
|
17,492
|
|
|
|
14,880
|
|
|
|
12,888
|
|
|
|
14,153
|
|
Other (income)/charges,
net(a)
|
|
|
(875
|
)
|
|
|
(7,921
|
)
|
|
|
20,224
|
|
|
|
42
|
|
|
|
4,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before taxes and minority interest
|
|
|
242,867
|
|
|
|
204,847
|
|
|
|
160,184
|
|
|
|
154,224
|
|
|
|
136,911
|
|
Provision for
taxes(b)
|
|
|
64,360
|
|
|
|
47,315
|
|
|
|
51,282
|
|
|
|
46,267
|
|
|
|
41,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
178,507
|
|
|
$
|
157,532
|
|
|
$
|
108,902
|
|
|
$
|
107,957
|
|
|
$
|
95,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
4.82
|
|
|
$
|
3.93
|
|
|
$
|
2.58
|
|
|
$
|
2.44
|
|
|
$
|
2.15
|
|
Weighted average number of common shares
|
|
|
37,025,209
|
|
|
|
40,065,951
|
|
|
|
42,207,777
|
|
|
|
44,237,214
|
|
|
|
44,473,913
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
4.70
|
|
|
$
|
3.86
|
|
|
$
|
2.52
|
|
|
$
|
2.37
|
|
|
$
|
2.11
|
|
Weighted average number of common shares
|
|
|
37,952,923
|
|
|
|
40,785,708
|
|
|
|
43,285,121
|
|
|
|
45,483,969
|
|
|
|
45,508,847
|
|
Balance Sheet
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
81,222
|
|
|
$
|
151,269
|
|
|
$
|
324,578
|
|
|
$
|
67,176
|
|
|
$
|
45,116
|
|
Working
capital(c)
|
|
|
165,784
|
|
|
|
144,084
|
|
|
|
128,970
|
|
|
|
143,848
|
|
|
|
150,789
|
|
Total assets
|
|
|
1,678,214
|
|
|
|
1,587,085
|
|
|
|
1,669,773
|
|
|
|
1,480,072
|
|
|
|
1,387,276
|
|
Long-term debt
|
|
|
385,072
|
|
|
|
345,705
|
|
|
|
443,795
|
|
|
|
196,290
|
|
|
|
223,239
|
|
Other non-current
liabilities(d)
|
|
|
162,583
|
|
|
|
143,526
|
|
|
|
135,160
|
|
|
|
132,723
|
|
|
|
135,613
|
|
Shareholders
equity(e)
|
|
|
581,286
|
|
|
|
630,862
|
|
|
|
659,002
|
|
|
|
720,886
|
|
|
|
653,996
|
|
|
|
|
(a) |
|
Other (income)/charges, net consists primarily of interest
income, (gains) losses from foreign currency transactions, and
other items. The 2005 amount includes a $21.8 million
one-time litigation charge |
19
|
|
|
|
|
related to a $19.9 million non-cash write-off of an
intellectual property license and $1.9 million of related
legal costs. The 2003 amount includes a charge of
$5.4 million related to the final union settlement on the
closure of our French manufacturing facility. |
|
(b) |
|
The provision for taxes for 2007 includes $1.1 million
of discrete tax items recorded during the Companys third
quarter. The discrete items include a benefit of
$3.4 million related to the favorable resolution of certain
tax matters and other adjustments related to prior years, which
was partially offset by a charge of $2.3 million primarily
related to a tax law change in Germany. |
|
|
|
The provision for taxes for 2006 includes net tax benefits
related to a legal reorganization that resulted in a reduction
of the estimated annual effective tax rate from 30% to 27% and
$8.0 million net of discrete tax items. The discrete items
include a benefit of $2.9 million, net, associated with the
legal reorganization and a benefit of $5.1 million from a
favorable tax law change. The 2005 amount includes a net tax
charge of $5.4 million related to earnings repatriation
associated with the American Jobs Creation Act
($13.1 million) offset in part by the favorable resolution
of certain tax contingencies ($7.7 million). See Note 12 to
the audited consolidated financial statements included in
Item 8. |
|
(c) |
|
Working capital represents total current assets net of cash,
less total current liabilities net of short-term borrowings and
current maturities of long-term debt. |
|
(d) |
|
Other non-current liabilities consist of pension and other
post-retirement liabilities, plus certain other non-current
liabilities. See Note 11 to the audited consolidated
financial statements included in Item 8. |
|
(e) |
|
No dividends were paid during the five-year period ended
December 31, 2007. |
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
The following discussion and analysis of our financial
condition and results of operations should be read together with
our audited consolidated financial statements.
Overview
We operate a global business, with sales that are diversified by
geographic region, product range and customer. We hold leading
positions worldwide in many of our markets and attribute this
leadership to several factors, including the strength of our
brand name and reputation, our comprehensive offering of
innovative instruments and solutions, and the breadth and
quality of our global sales and service network.
Net sales in U.S. dollars increased by 12% and 8% in 2007
and 2006, respectively. Excluding the effect of currency
exchange rate fluctuations, or in local currencies, net sales
increased 8% and 7% in 2007 and 2006, respectively. We enjoyed a
strong world economy in 2007 with favorable market conditions in
Europe, continued solid growth in the United States and
generally strong demand in most Asian countries.
In respect to our end-user markets, we experienced improved
results during 2007 in our laboratory-related end-user markets,
such as pharmaceutical and biotech customers as well as the
laboratories of chemical companies, food and beverage companies
and universities. We believe that the long-term fundamentals of
the pharmaceutical and biotech markets are particularly
attractive and our solutions assist these companies in enhancing
their productivity as they meet the challenges of new drug
approval activity, heightened price regulation and industry
consolidation.
In our industrial markets, the principal growth driver in recent
years has been increased investment in China related to
increasing production capacity for the domestic and export
markets. Although this provides a significant opportunity for
our Chinese operations, this manufacturing shift has a negative
impact on certain of our industrial end user markets in the
U.S. and Europe. However despite this challenge, our
U.S. and European industrial end-user markets experienced
solid sales growth during 2007.
In our food retail end markets, we faced difficult comparisons
in both Europe and the U.S. related to previous year
project activity. Traditionally the spending levels in this
sector have experienced more volatility than our other customer
sectors. Increased spending in the past has come from events
such as Y2K and the introduction of the euro currency. Similar
to our industrial business, China also provides growth as the
expansion of its local economy is creating a significant number
of new retail stores each year.
20
In 2008, we expect to continue to pursue the overall business
growth strategies which we have followed in recent years:
Gaining Market Share. Our global sales and
marketing initiative, Spinnaker, continues to be an
important growth strategy. We aim to achieve above market sales
growth by improving the productivity and effectiveness of our
global sales and marketing processes. While this initiative is
broad based, efforts to improve these processes include
increased segment marketing and leads generation activities, the
implementation of more effective pricing strategies and
processes and other sales and marketing topics. Our
comprehensive service offering also helps us further penetrate
developed markets. We estimate that we have the largest
installed base of weighing instruments in the world. In addition
to traditional repair and maintenance, our service offerings
continue to expand into value-added services for a range of
market needs, including regulatory compliance.
Expanding Emerging Markets. Emerging markets,
comprising Asia (excluding Japan), Eastern Europe, Latin
America, the Middle East and Africa, account for approximately
25% of our total net sales. We have a two-pronged strategy in
emerging markets: first, to capitalize on growth opportunities
in these markets and second, to leverage our low-cost
manufacturing operations in China. We have a 20 year track
record in China, and our sales in Asia have grown more than 15%
in local currency since 1999. We have broadened our product
offering to the Asian markets and are benefiting as
multinational customers shift production to China. We are also
experiencing rapid growth in India from increased life science
research activities, as well as our acquisition of our
distribution channel for laboratory products in 2005. In
addition, Russia continues to be an important growth driver due
in part to the expansion of its local economy. To reduce costs,
we are also shifting more of our manufacturing to China where
our three facilities manufacture for the local markets as well
as for export.
Extending Our Technology Lead. We continue to
focus on product innovation. In the last three years, we spent
between 5.1% and 5.5% of net sales on research and development.
We seek to drive shorter product life cycles, as well as improve
our product offerings and their capabilities with additional
integrated technologies and software. In addition, we aim to
create value for our customers by having an intimate knowledge
of their processes via our significant installed product base.
Maintaining Cost Leadership. We continue to
strive to improve our margins by reducing our cost structure. As
previously mentioned, shifting production to China has been an
important component of our cost savings initiatives. We have
also implemented global procurement and supply chain management
programs over the last several years aimed at lowering supply
costs. Our cost leadership initiatives are also focused on
continuously improving our invested capital efficiency, such as
reducing our working capital levels and ensuring appropriate
returns on our expenditures.
Pursuing Strategic Acquisitions. While we have
not completed a significant acquisition since 2001, acquisitions
remain part of our growth strategy. We seek to pursue
acquisitions that may leverage our global sales and service
network, respected brand, extensive distribution channels and
technological leadership. We have identified life sciences,
product inspection and process analytics as three key areas for
acquisitions.
Results of
Operations Consolidated
Net
sales
Net sales were $1,793.7 million for the year ended
December 31, 2007, compared to $1,594.9 million in
2006 and $1,482.5 million in 2005. This represents
increases in 2007 and 2006 of 12% and 8% in U.S. dollars
and 8% and 7% in local currencies, respectively.
In 2007, our net sales by geographic destination increased in
local currencies by 6% in the Americas, 6% in Europe and 16% in
Asia/Rest of World. A discussion of sales by operating segment
is included below.
As described in Note 15 to our consolidated financial
statements, our net sales comprise product sales of precision
instruments and related services. Service revenues are primarily
derived from regulatory
21
compliance qualification, calibration, certification and repair
services, much of which is provided under contracts, as well as
sales of spare parts.
Net sales of products increased in 2007 and 2006 by 13% and 8%
in U.S. dollars and by 8% and 7% in local currencies,
respectively. Service revenue (including spare parts) increased
in 2007 and 2006 by 11% and 8% in U.S. dollars and by 6%
and 7% in local currencies, respectively.
Net sales of our laboratory-related products increased by 7% in
local currencies during 2007 principally driven by strong growth
across most product categories, especially analytical
instruments and process analytics. Our laboratory-related
product sales were also reduced by 1% during 2007 due to product
line exits.
Net sales of our industrial-related products increased by 10% in
local currencies during 2007. We experienced strong sales growth
in our product inspection products, especially x-ray products.
We also benefited from solid sales growth in our core industrial
products throughout most geographies, particularly China.
In our food retailing markets, net sales increased by 3% in
local currencies during 2007 over the previous year due to
increased sales in Asia and the Americas. European sales were
flat versus the previous year due to difficult comparisons
associated with strong project activity during 2006. The food
retailing markets also continue to experience improved growth of
software solutions.
Gross
profit
Gross profit as a percentage of net sales was 50.0% for 2007,
compared to 49.6% for 2006 and 49.3% for 2005.
Gross profit as a percentage of net sales for products was 53.8%
for 2007, compared to 53.3% for 2006 and 53.2% for 2005. Gross
profit as a percentage of net sales for services (including
spare parts) was 36.9% for 2007, compared to 36.9% for 2006 and
36.0% for 2005.
The increase in gross profit reflects several factors, including
increased sales volume leveraging our fixed production costs,
partially offset by increased product costs, most notably steel
prices.
Research and
development and selling, general and administrative
expenses
Research and development expenses as a percentage of net sales
were 5.1% for 2007, 5.2% for 2006 and 5.5% in 2005. Research and
development expenses increased by 7% in 2007 and increased by 1%
in 2006 in local currencies. Our research and development
spending levels reflect increased research and development
investments.
Selling, general and administrative expenses as a percentage of
net sales decreased to 29.5% for 2007, compared to 30.2% for
2006 and 29.8% for 2005. Selling, general and administrative
expenses increased by 5% in 2007 and 9% in 2006 in local
currencies. This is primarily due to continued sales and
marketing investments, especially in China and other emerging
market countries, as well as higher performance-related
compensation costs. These increases are partly offset by savings
from our cost reduction initiatives implemented during the
second half of 2006.
Other (income)
charges, net
Other (income) charges, net consisted of other income, net of
$0.9 million in 2007 and $7.9 million in 2006,
compared to other charges, net of $20.2 million in 2005.
Other (income) charges, net consisted primarily of interest
income, (gains) losses from foreign currency transactions and
other items. The decrease in other charges (income), net for
2007 compared to the prior year is due to lower interest income
associated with the decrease in cash balances resulting from
share repurchases. In 2006, other (income) charges, net included
increased interest income associated with higher cash balances
in the U.S. as a result of our foreign earnings
repatriation during 2005 associated with the American Jobs
Creation Act of 2004. During 2005, other (income) charges, net
included a $21.8 million charge related to litigation. We
wrote off a $19.9 million intangible asset relating to an
intellectual property license that was subject to litigation
with the grantor in
22
June 2005. This license granted one of our wholly owned
subsidiaries exclusive rights to distribute certain third-party
manufactured pipettes in the United States. A judgment entered
on June 6, 2005 terminated the license agreement and
awarded damages to the other party. We also incurred
$1.9 million of related legal costs during 2005, which
included damages of $0.6 million. The damages of
$0.6 million were subsequently reversed during 2006.
Interest expense
and taxes
Interest expense was $21.0 million for 2007, compared to
$17.5 million for 2006 and $14.9 million for 2005. The
increase in 2007 is due to higher average borrowing rates offset
in part by reduced average borrowings versus 2006. The increase
in 2006 and 2005 was principally due to higher average
borrowings over the prior year due to our increased debt balance
in Europe as a result of our foreign earnings repatriation
during 2005 associated with the American Jobs Creation Act of
2004.
During the third quarter of 2007, we recorded certain discrete
tax items which resulted in a net tax benefit of
$1.1 million. The discrete items include a benefit of
$3.4 million related to a favorable resolution of certain
tax matters and other adjustments related to prior years, which
were partially offset by a charge of $2.3 million primarily
due to a tax law change in Germany.
During the third quarter of 2006, we implemented a legal
reorganization that resulted in a reduction of the estimated
annual effective tax rate before discrete items from 30% to 27%.
In addition to the change in our annual effective tax rate, we
recorded three discrete tax items: a charge of
$10.5 million related to the establishment of a valuation
allowance on foreign tax credit carryforwards, a benefit of
$13.4 million associated with a reduction of a liability
previously established for estimated costs to repatriate
unremitted earnings of foreign subsidiaries, and a favorable tax
law change resulting in a benefit of $5.1 million.
Pursuant to the American Jobs Creation Act of 2004, we
repatriated $396 million of cash during 2005 that was
generated over time by our foreign operations. As a result of
this repatriation, we recorded additional income tax expense of
$13.1 million. This amount reflected the federal tax impact
in the United States (including certain state taxes) of
$12.3 million, foreign withholding taxes of
$2.0 million and a net decrease of $1.2 million of
deferred tax liabilities associated with the reassessment of
pre-existing and future dividend repatriations. In addition, we
recorded tax benefits of $7.7 million related to a
favorable resolution of certain tax matters. Our tax rate for
2005 also included a tax benefit associated with the previously
described litigation.
Our annual effective tax rate was 27%, 23% and 32% for 2007,
2006 and 2005, respectively. The previously described discrete
tax items had the effect of lowering our annual effective tax
rate by 4% in 2006, and raising it by 2% in 2005.
Results of
Operations by Operating Segment
The following is a discussion of the financial results of our
operating segments. We currently have five reportable segments:
U.S. Operations, Swiss Operations, Western European
Operations, Chinese Operations and Other. A more detailed
description of these segments is outlined in Note 15 to our
consolidated financial statements.
U.S. Operations
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in
%(1)
|
|
Increase in
%(1)
|
|
|
2007
|
|
2006
|
|
2005
|
|
2007 vs.
2006
|
|
2006 vs.
2005
|
|
Net sales
|
|
$
|
671,689
|
|
|
$
|
637,418
|
|
|
$
|
610,599
|
|
|
|
5
|
%
|
|
|
4
|
%
|
Net sales to external customers
|
|
$
|
614,735
|
|
|
$
|
586,069
|
|
|
$
|
560,238
|
|
|
|
5
|
%
|
|
|
5
|
%
|
Segment profit
|
|
$
|
104,913
|
|
|
$
|
89,384
|
|
|
$
|
79,448
|
|
|
|
17
|
%
|
|
|
13
|
%
|
|
|
|
(1) |
|
Represents U.S. dollar growth for net sales and segment
profit. |
23
The increase in total net sales during 2007 reflects growth
across most product lines, particularly our laboratory-related
and industrial-related products. Our laboratory-related and
industrial-related products experienced especially strong growth
in analytical instruments and product inspection, respectively.
Net sales were reduced by 1% related to product line exits.
Segment profit increased by $15.5 million in our
U.S. Operations segment during 2007, compared to an
increase of $9.9 million during 2006. The increase in
segment profit in 2007 was primarily due to increased sales
volume, leveraging our fixed production costs and benefits of
our cost reduction initiatives. Segment profit also benefited
from the resolution of two legal matters, which were partially
offset by a $1.1 million loss on the sale of a product line.
Swiss Operations
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in
%(1)
|
|
Increase in
%(1)
|
|
|
2007
|
|
2006
|
|
2005
|
|
2007 vs.
2006
|
|
2006 vs.
2005
|
|
Net sales
|
|
$
|
391,042
|
|
|
$
|
340,849
|
|
|
$
|
324,901
|
|
|
|
15
|
%
|
|
|
5
|
%
|
Net sales to external customers
|
|
$
|
109,867
|
|
|
$
|
96,311
|
|
|
$
|
88,138
|
|
|
|
14
|
%
|
|
|
9
|
%
|
Segment profit
|
|
$
|
81,158
|
|
|
$
|
70,083
|
|
|
$
|
65,471
|
|
|
|
16
|
%
|
|
|
7
|
%
|
|
|
|
(1) |
|
Represents U.S. dollar growth for net sales and segment
profit. |
Total net sales in local currency increased by 11% in 2007 and
6% in 2006. Net sales to external customers in local currency
increased by 9% in 2007 and increased by 10% in 2006. The
increase in sales to external customers during 2007 relates to
continued growth in our laboratory-related products. We also
continue to experience strong export sales growth to emerging
markets.
Segment profit increased by $11.1 million in our Swiss
Operations segment during 2007, compared to an increase of
$4.6 million during 2006. The increase in segment profit in
2007 is primarily due to increased sales volume, favorable
product mix, and favorable currency translation fluctuations,
partially offset by increased research and development and sales
and marketing investments.
Western European
Operations (amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in
%(1)
|
|
Increase in
%(1)
|
|
|
2007
|
|
2006
|
|
2005
|
|
2007 vs.
2006
|
|
2006 vs.
2005
|
|
Net sales
|
|
$
|
691,736
|
|
|
$
|
607,836
|
|
|
$
|
577,582
|
|
|
|
14
|
%
|
|
|
5
|
%
|
Net sales to external customers
|
|
$
|
614,268
|
|
|
$
|
538,953
|
|
|
$
|
508,289
|
|
|
|
14
|
%
|
|
|
6
|
%
|
Segment profit
|
|
$
|
58,497
|
|
|
$
|
50,635
|
|
|
$
|
45,466
|
|
|
|
16
|
%
|
|
|
11
|
%
|
|
|
|
(1) |
|
Represents U.S. dollar growth for net sales and segment
profit. |
Total net sales in local currency increased by 6% in 2007 and 5%
in 2006. Net sales to external customers in local currency
increased by 5% in 2007 and 5% in 2006. The 2007 increase is
primarily due to strong sales growth in our product inspection,
laboratory-related and core industrial products due to benefits
from our sales and marketing initiatives as well as improved
market conditions, offset in part by a decline in food retailing
products related to strong customer project activity in the
prior year.
Segment profit increased by $7.9 million in our Western
European Operations segment during 2007, compared to an increase
of $5.2 million in 2006. The increase in segment profit in
2007 is principally a result of increased sales volume
leveraging our fixed production costs, favorable product mix,
favorable currency translation fluctuations and benefits of our
cost reduction initiatives, partially offset by charges
associated with cost reduction initiatives.
24
Chinese
Operations (amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in
%(1)
|
|
Increase in
%(1)
|
|
|
2007
|
|
2006
|
|
2005
|
|
2007 vs.
2006
|
|
2006 vs.
2005
|
|
Net sales
|
|
$
|
254,510
|
|
|
$
|
201,431
|
|
|
$
|
174,909
|
|
|
|
26
|
%
|
|
|
15
|
%
|
Net sales to external customers
|
|
$
|
168,261
|
|
|
$
|
132,710
|
|
|
$
|
116,912
|
|
|
|
27
|
%
|
|
|
14
|
%
|
Segment profit
|
|
$
|
57,481
|
|
|
$
|
45,160
|
|
|
$
|
40,245
|
|
|
|
27
|
%
|
|
|
12
|
%
|
|
|
|
(1) |
|
Represents U.S. dollar growth for net sales and segment
profit. |
Total net sales in local currency increased by 21% in 2007 and
12% in 2006. Net sales to external customers in local currency
increased by 21% in 2007 and 10% in 2006. These increases were
due to continued sales growth for all product lines, in
particular industrial-related products.
Segment profit increased by $12.3 million in our Chinese
Operations segment during 2007, compared to an increase of
$4.9 million in 2006. The increase in segment profit in
2007 is primarily due to the continued improvement in sales
volume, partially offset by continued investments in sales and
marketing and research and development. Our Chinese operations
also benefited from a gain associated with an asset sale.
Other (amounts in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in
%(1)
|
|
Increase in
%(1)
|
|
|
2007
|
|
2006
|
|
2005
|
|
2007 vs.
2006
|
|
2006 vs.
2005
|
|
Net sales
|
|
$
|
290,330
|
|
|
$
|
240,869
|
|
|
$
|
209,454
|
|
|
|
21
|
%
|
|
|
15
|
%
|
Net sales to external customers
|
|
$
|
286,617
|
|
|
$
|
240,869
|
|
|
$
|
208,895
|
|
|
|
19
|
%
|
|
|
15
|
%
|
Segment profit
|
|
$
|
29,887
|
|
|
$
|
21,412
|
|
|
$
|
14,745
|
|
|
|
40
|
%
|
|
|
45
|
%
|
|
|
|
(1) |
|
Represents U.S. dollar growth for net sales and segment
profit. |
Total net sales in local currency increased by 15% in 2007 and
14% in 2006. Net sales to external customers in local currency
increased 13% in 2007 and 14% in 2006. This performance reflects
increased sales growth across most product lines in our Other
Asian Pacific, Eastern European and Other North American markets.
Segment profit increased by $8.5 million in our Other
segment during 2007, compared to an increase of
$6.7 million during 2006. Segment profit increased during
2007 primarily due to strong sales volume and benefits from our
cost reduction programs, partially offset by costs associated
with a contractual termination.
Liquidity and
Capital Resources
Liquidity is our ability to generate sufficient cash flows from
operating activities to meet our obligations and commitments. In
addition, liquidity includes the ability to obtain appropriate
financing. Currently, our financing requirements are primarily
driven by working capital requirements, capital expenditures,
share repurchases and acquisitions. In 2005, we increased our
debt balance in Europe and our cash balance in the United States
as a result of our foreign earnings repatriation associated with
the American Jobs Creation Act of 2004.
Cash provided by operating activities totaled
$228.2 million in 2007, compared to $191.6 million in
2006 and $177.1 million in 2005. The increase in 2007
resulted principally from improved operating results and a
reduction in tax payments which included a $6 million tax
refund, offset in part by approximately $9 million of
higher payments related to 2007 performance-related compensation
incentives (bonus payments) compared to the corresponding period
in 2006. We also made a $8 million voluntary incremental
pension contribution to our U.S. plan in 2007 compared to a
$6 million contribution to our U.K. plan in 2006. The
increase in 2006, as compared to 2005, resulted principally from
improved operating results and reduced inventory levels, which
was offset in part by a $6 million voluntary incremental
pension contribution to our U.K. pension plan. Similarly to
previous years, we expect to make normal employer pension
contributions of approximately $17.8 million in 2008.
25
Capital expenditures are made primarily for investments in
information systems and technology, machinery, equipment and the
purchase and expansion of facilities. Our capital expenditures
totaled $47.5 million in 2007, $34.3 million in 2006
and $32.5 million in 2005. We expect capital expenditures
to increase as our business grows and to fluctuate as currency
exchange rates change. Our capital expenditures in 2007 included
$7.1 million of investments related to our new Chinese
facility, compared to $6.4 million in 2006. In 2007,
capital expenditures also included $5 million of software
licenses relating to investments in corporate information
technology systems.
We continue to explore potential acquisitions. In connection
with any acquisition, we may incur additional indebtedness.
Credit
Agreement
In November 2005, we entered into an amended and restated credit
agreement (the Credit Agreement). The
$450 million Credit Agreement is provided by a group of
financial institutions and has a maturity date of
November 5, 2010. It is not subject to any scheduled
principal payments. Borrowings under the Credit Agreement bear
interest at current market rates plus a margin based on our
senior unsecured credit ratings (currently BBB by
Standard & Poors and Baa3 by
Moodys) and is currently set at LIBOR plus 0.375%. We must
also pay facility fees that are tied to our credit ratings. The
Credit Agreement contains covenants, including maintaining a
ratio of debt to earnings before interest, tax, depreciation and
amortization of less than 3.25 to 1.0 and an interest coverage
ratio of more than 3.5 to 1.0. The Credit Agreement also places
certain limitations on us, including limiting the ability to
grant liens or incur debt at a subsidiary level. In addition,
the Credit Agreement has several events of default, including
upon a change of control. As of December 31, 2007,
approximately $216.8 million was available under the
facility. The Credit Agreement is unsecured. We incurred fees of
approximately $0.9 million in conjunction with amending and
restating the Credit Agreement which are amortized to interest
expense through 2010.
Senior
Notes
In November 2003, we issued $150 million of 4.85% unsecured
Senior Notes due November 15, 2010. The Senior Notes rank
equally with all our unsecured and unsubordinated indebtedness.
Interest is payable semi-annually in May and November. Discount
and issuance costs approximated $1.2 million and are being
amortized to interest expense over the seven-year term of the
Senior Notes.
At our option, the Senior Notes may be redeemed in whole or in
part at any time at a redemption price equal to the greater of:
|
|
|
|
|
the principal amount of the Senior Notes, or
|
|
|
|
the sum of the present values of the remaining scheduled
payments of principal and interest thereon discounted to the
redemption date on a semi-annual basis at a comparable treasury
rate plus a margin of 0.20%.
|
The Senior Notes contain limitations on our ability to incur
liens and enter into sale and leaseback transactions exceeding
10% of our consolidated net worth.
26
Our short-term borrowings and long-term debt consisted of the
following at December 31, 2007 (amounts in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Principal
|
|
|
|
|
|
|
U.S.
Dollar
|
|
|
Trading
Currencies
|
|
|
Total
|
|
|
$150 million Senior Notes (net of unamortized discount)
|
|
$
|
150,474
|
|
|
$
|
|
|
|
$
|
150,474
|
|
$450 million Amended Credit Agreement
|
|
|
134,199
|
|
|
|
88,733
|
|
|
|
222,932
|
|
Other local arrangements (long-term)
|
|
|
|
|
|
|
11,666
|
|
|
|
11,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
284,673
|
|
|
|
100,399
|
|
|
|
385,072
|
|
Other local arrangements (short-term)
|
|
|
|
|
|
|
11,570
|
|
|
|
11,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
284,673
|
|
|
$
|
111,969
|
|
|
$
|
396,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in exchange rates between the currencies in which we
generate cash flow and the currencies in which our borrowings
are denominated affect our liquidity. In addition, because we
borrow in a variety of currencies, our debt balances fluctuate
due to changes in exchange rates.
At December 31, 2007, we were in compliance with all
covenants set forth in our Amended Credit Agreement and Senior
Notes. In addition, we do not have any downgrade triggers
relating to ratings from rating agencies that would accelerate
the maturity dates of our debt.
We currently believe that cash flow from operating activities,
together with liquidity available under our Amended Credit
Agreement and local working capital facilities, will be
sufficient to fund currently anticipated working capital needs
and capital spending requirements for at least the next several
years.
Contractual
Obligations
The following summarizes certain of our contractual obligations
at December 31, 2007 and the effect such obligations are
expected to have on our liquidity and cash flow in future
periods. We do not have significant outstanding letters of
credit or other financial commitments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by
Period
|
|
|
|
Total
|
|
|
Less than
1 Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
After
5 Years
|
|
|
Short and long-term debt
|
|
$
|
396,642
|
|
|
$
|
11,570
|
|
|
$
|
385,072
|
|
|
$
|
|
|
|
$
|
|
|
Interest expense on long-term debt
|
|
|
46,051
|
|
|
|
15,902
|
|
|
|
29,273
|
|
|
|
876
|
|
|
|
|
|
Non-cancelable operating leases
|
|
|
79,223
|
|
|
|
22,939
|
|
|
|
29,361
|
|
|
|
15,176
|
|
|
|
11,747
|
|
Pension funding
|
|
|
17,812
|
|
|
|
17,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase obligations
|
|
|
70,460
|
|
|
|
55,189
|
|
|
|
7,636
|
|
|
|
3,908
|
|
|
|
3,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
610,188
|
|
|
$
|
123,412
|
|
|
$
|
451,342
|
|
|
$
|
19,960
|
|
|
$
|
15,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition to the above table, we also have liabilities for
income taxes, pension and post-retirement funding. However we
cannot determine the timing or the amounts for periods beyond
2007 for income taxes and beyond 2008 for pension and
post-retirement funding.
We have purchase commitments for materials, supplies, services
and fixed assets in the normal course of business. Due to the
proprietary nature of many of our materials and processes,
certain supply contracts contain penalty provisions. We do not
expect potential payments under these provisions to materially
affect results of operations or financial condition. This
conclusion is based upon reasonably likely outcomes derived by
reference to historical experience and current business plans.
27
Share Repurchase
Program
We have a share repurchase program that was announced in 2004.
Under the program, we have been authorized to buy back up to
$1.5 billion of the Companys common shares. As of
December 31, 2007, there were $641.1 million of
remaining common shares authorized to be repurchased under the
plan by December 31, 2010. The share repurchases are
expected to be funded from cash balances, borrowings and cash
generated from operating activities. Repurchases will be made
through open market transactions, and the timing will depend on
the level of acquisition activity, business and market
conditions, the stock price, trading restrictions and other
factors. We have purchased 13.0 million shares since the
inception of the program through December 31, 2007.
During the years ended December 31, 2007 and 2006, we spent
$324.6 million and $265.9 million on the repurchase of
3,384,731 shares and 4,141,559 shares at an average
price per share of $95.88 and $64.18, respectively. An
additional $5.2 million and $5.4 million relating to
the settlement of shares repurchased as of December 31,
2007 and 2006 were cash settled during 2008 and 2007,
respectively. We reissued 567,205 shares and
1,152,892 shares held in treasury for the exercise of stock
options during 2007 and 2006, respectively.
Off-Balance Sheet
Arrangements
Currently, we have no off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on
our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material.
Effect of
Currency on Results of Operations
Because we conduct operations in many countries, our operating
income can be significantly affected by fluctuations in currency
exchange rates. Swiss franc-denominated expenses represent a
much greater percentage of our operating expenses than Swiss
franc-denominated sales represent of our net sales. In part,
this is because most of our manufacturing costs in Switzerland
relate to products that are sold outside Switzerland. Moreover,
a substantial percentage of our research and development
expenses and general and administrative expenses are incurred in
Switzerland. Therefore, if the Swiss franc strengthens against
all or most of our major trading currencies (e.g., the
U.S. dollar, the euro, other major European currencies, the
Chinese yuan and the Japanese yen), our operating profit is
reduced. We also have significantly more sales in European
currencies (other than the Swiss franc) than we have expenses in
those currencies. Therefore, when European currencies weaken
against the U.S. dollar and the Swiss franc, it also
decreases our operating profits. Accordingly, the Swiss franc
exchange rate to the euro is an important cross-rate that we
monitor. We estimate that a 1% strengthening of the Swiss franc
against the euro would result in a decrease in our earnings
before tax of $1.1 million to $1.3 million on an
annual basis. In addition to the effects of exchange rate
movements on operating profits, our debt levels can fluctuate
due to changes in exchange rates, particularly between the
U.S. dollar and the Swiss franc. Based on our outstanding
debt at December 31, 2007, we estimate that a 10% weakening
of the U.S. dollar against the currencies in which our debt
is denominated would result in an increase of approximately
$12.4 million in the reported U.S. dollar value of the
debt.
Taxes
We are subject to taxation in many jurisdictions throughout the
world. Our effective tax rate and tax liability will be affected
by a number of factors, such as the amount of taxable income in
particular jurisdictions, the tax rates in such jurisdictions,
tax treaties between jurisdictions, the extent to which we
transfer funds between jurisdictions, earnings repatriations
between jurisdictions and changes in law. Generally, the tax
liability for each taxpayer within the group is determined
either (i) on a non-consolidated/non-combined basis or
(ii) on a consolidated/combined basis only with other
eligible entities subject to tax in the same jurisdiction, in
either case without regard to the taxable losses of
non-consolidated/non-combined affiliated legal entities.
28
Environmental
Matters
We are subject to environmental laws and regulations in the
jurisdictions in which we operate. We own or lease a number of
properties and manufacturing facilities around the world. Like
many of our competitors, we have incurred, and will continue to
incur, capital and operating expenditures and other costs in
complying with such laws and regulations.
We are currently involved in, or have potential liability with
respect to, the remediation of past contamination in certain of
our facilities in both the United States and abroad. Our former
subsidiary, Hi-Speed, was one of two private parties ordered to
perform certain ground water contamination monitoring under an
administrative consent order that NJDEP signed on June 13,
1988 with respect to certain property in Landing, New Jersey.
GEI is the other ordered party. GEI has failed to fulfill its
obligations under the NJDEP consent order, and NJDEP has agreed
with Hi-Speed that the residual ground water contaminants can be
monitored through the establishment of a Classification
Exception Area and concurrent Well Restriction Area for the
site. The NJDEP does not view these vehicles as remedial
measures, but rather as institutional controls that
must be adequately maintained and periodically evaluated. We
estimate that the costs of compliance associated with monitoring
ground water contamination levels at the site will be
approximately $0.5 million in the coming years.
In addition, certain of our present and former facilities have
or had been in operation for many decades and, over such time,
some of these facilities may have used substances or generated
and disposed of wastes which are or may be considered hazardous.
It is possible that these sites, as well as disposal sites owned
by third parties to which we have sent wastes, may in the future
be identified and become the subject of remediation.
Accordingly, although we believe that we are in substantial
compliance with applicable environmental requirements and to
date we have not incurred material expenditures in connection
with environmental matters, it is possible that we could become
subject to additional environmental liabilities in the future
that could result in a material adverse effect on our financial
condition or results of operations or cash flows.
Inflation
Inflation can affect the costs of goods and services that we
use, including raw materials to manufacture our products. The
competitive environment in which we operate limits somewhat our
ability to recover higher costs through increased selling prices.
Moreover, there may be differences in inflation rates between
countries in which we incur the major portion of our costs and
other countries in which we sell products, which may limit our
ability to recover increased costs. We remain committed to
operations in China and Eastern Europe, which have experienced
inflationary conditions. To date, inflationary conditions have
not had a material effect on our operating results. However, as
our presence in China and Eastern Europe increases, these
inflationary conditions could have a greater impact on our
operating results.
Quantitative and
Qualitative Disclosures about Market Risk
We have only limited involvement with derivative financial
instruments and do not use them for trading purposes.
We have entered into foreign currency forward contracts to
economically hedge short-term intercompany balances with our
international businesses on a monthly basis. Such contracts
limit our exposure to both favorable and unfavorable currency
fluctuations. The fair value of these contracts was a
$0.6 million gain and a $0.2 million gain at
December 31, 2007 and 2006, respectively. A sensitivity
analysis to changes on these foreign currency-denominated
contracts indicates that if the primary currency
(U.S. dollar, Swiss franc and British pound) declined by
10%, the fair value of these instruments would decrease by
$1.6 million at December 31, 2007, as compared with a
decrease of $3.5 million at December 31, 2006. Any
resulting changes in fair value would be offset by changes in
the underlying hedged balance sheet position. The sensitivity
analysis assumes a parallel shift in foreign currency exchange
rates. The assumption that exchange rates change in parallel
fashion may overstate the impact of changing exchange rates on
assets and liabilities
29
denominated in a foreign currency. We also have other currency
risks as described under Effect of Currency on Results of
Operations.
We have entered into certain interest rate swap agreements.
These contracts are more fully described in Note 4 to our
audited consolidated financial statements. The fair value of
these contracts was a $0.6 million gain at
December 31, 2007 and a $0.4 million loss at
December 31, 2006. Based on our agreements outstanding at
December 31, 2007, a 100-basis-point increase in interest
rates would result in a decrease in the net aggregate market
value of these instruments of $0.8 million, as compared
with a decrease of $1.0 million at December 31, 2006.
Conversely, a 100-basis-point decrease in interest rates would
result in a $0.9 million increase in the net aggregate
market value of these instruments at December 31, 2007, as
compared with a net increase of $1.1 million at
December 31, 2006. Any change in fair value would not
affect our consolidated statement of operations unless such
agreements and the debt they hedge were prematurely settled.
Critical
Accounting Policies
Managements discussion and analysis of our financial
condition and results of operations is based upon our audited
consolidated financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these
consolidated 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, including those related to pensions and
other post-retirement benefits, inventories, intangible assets,
income taxes, revenue and warranty costs. We base our estimates
on historical experience and on various other assumptions that
are believed 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 under different assumptions or conditions.
We believe the following critical accounting policies affect our
more significant judgments and estimates used in the preparation
of our audited consolidated financial statements. For a detailed
discussion on the application of these and other accounting
policies, see Note 2 to our audited consolidated financial
statements.
Employee benefit
plans
The net periodic pension cost for 2007 and projected benefit
obligation as of December 31, 2007 were $0.8 million
and $107.2 million, respectively, for our U.S. pension
plans and $8.2 million and $605.3 million,
respectively, for our international pension plans. The net
periodic post-retirement cost for 2007 and expected
postretirement benefit obligation as of December 31, 2007
for our U.S. post-retirement medical benefit plan were
$0.8 million and $22.0 million, respectively.
Pension and post-retirement benefit plan expense and obligations
are developed from assumptions utilized in actuarial valuations.
The most significant of these assumptions include the discount
rate and expected return on plan assets. In accordance with
U.S. GAAP, actual results that differ from the assumptions
are accumulated and deferred over future periods. While
management believes the assumptions used are appropriate,
differences in actual experience or changes in assumptions may
affect our plan obligations and future expense.
The expected rates of return on the various defined benefit
pension plans assets are based on the asset allocation of
each plan and the long-term projected return of those assets,
which represent a diversified mix of U.S. and international
corporate equities and government and corporate debt securities.
In April 2002, we froze our U.S. defined benefit pension
plan and discontinued our retiree medical program for certain
current and all future employees. Consequently, no significant
future service costs will be incurred on these plans. For 2007,
the weighted average return on assets assumption was 8.5% for
the U.S. plan and 5.2% for the international plans. A
change in the rate of return of 1% would impact annual benefit
plan expense by approximately $5.3 million after tax.
30
The discount rates for defined benefit and post-retirement plans
are set by benchmarking against high-quality corporate bonds.
For 2007, the average discount rate assumption was 6.25% for the
U.S. plans and 3.90% for the international plans,
representing a weighted average of local rates in countries
where such plans exist. A decrease in the discount rate of 1%
would impact annual benefit plan expense by approximately
$2.7 million after tax.
In 2007 and 2006, we made voluntary incremental funding payments
of $7.7 million and $6.0 million, respectively, to
reduce the underfunded status of our U.S. and U.K. pension
plans. In the future, we may make additional mandatory or
discretionary contributions to our plan or we could be required
to make additional cash funding payments.
Equity
compensation
We also have an equity incentive plan that provides for the
grant of stock options, restricted stock, restricted stock units
and other equity-based awards which, as of January 1, 2006,
are accounted for and recognized in the consolidated statement
of operations based on the grant-date fair value of the award
under SFAS No. 123R, Share-Based Payment
(SFAS 123R). Prior to January 1, 2006,
these equity awards were accounted for under the intrinsic value
method pursuant to Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to
Employees and related interpretations. Note 10 to the
audited consolidated financial statements provides supplemental
information, including pro forma earnings and earnings per
share, as if we had accounted for options based on the fair
value method prescribed by SFAS No. 123,
Accounting for Stock-Based Compensation. These
methodologies yield an estimate of fair value based in part on a
number of management estimates, the most significant of which
include future volatility and estimated option lives. Changes in
these assumptions could significantly impact the estimated fair
value of stock options.
Inventory
As of December 31, 2007, inventories were
$173.7 million.
We record our inventory at the lower of cost or net realizable
value. Cost, which includes direct materials, labor and
overhead, is generally determined using the first in, first out
(FIFO) method. The estimated net realizable value is based on
assumptions for future demand and related pricing. Adjustments
to the cost basis of our inventory are made for excess and
obsolete items based on usage, orders and technological
obsolescence. If actual market conditions are less favorable
than those projected by management, reductions in the value of
inventory may be required.
Goodwill and
other intangible assets
As of December 31, 2007, our consolidated balance sheet
included goodwill of $440.8 million and other intangible
assets of $100.0 million.
Our business acquisitions typically result in goodwill and other
intangible assets, which affect the amount of future period
amortization expense and possible impairment expense that we
will incur. The determination of the value of such intangible
assets requires management to make estimates and assumptions
that affect our consolidated financial statements.
In accordance with SFAS No. 142, Goodwill and
Other Intangible Assets (SFAS 142), our
goodwill and indefinite-lived intangible assets are not
amortized, but are evaluated for impairment annually in the
fourth quarter, or more frequently if events or changes in
circumstances indicate that an asset might be impaired. The
evaluation is based on valuation models that estimate fair value
based on expected future cash flows and profitability
projections. In preparing the valuation models, we consider a
number of factors, including operating results, business plans,
economic conditions, future cash flows and transactions and
market place data. There are inherent uncertainties related to
these factors and our judgment in applying them to the
impairment analyses. The most significant of these estimates and
assumptions within our fair value models include estimated cash
flows resulting from estimates of sales growth and controllable
cost growth, perpetual
31
growth, effective tax rates and discount rates. Our assessments
to date have indicated that there has been no impairment of
these assets.
Should any of these estimates or assumptions in the preceding
paragraphs change, or should we incur lower than expected
operating performance or cash flows, we may experience a
triggering event that requires a new fair value assessment for
our reporting units, possibly prior to the required annual
assessment. These types of events and resulting analysis could
result in impairment charges for goodwill and other
indefinite-lived intangible assets if the fair value estimate
declines below the carrying value.
Our amortization expense related to intangible assets with
finite lives may materially change should our estimates of their
useful lives change.
As of December 31, 2004, our intangible assets included a
$19.9 million indefinite life intangible asset relating to
an intellectual property license. This license was previously
subject to litigation with the grantor, and on June 6,
2005, we were ordered to pay $0.6 million in damages and
the respective intellectual property license was terminated. Due
to the cancellation of the license, we concluded that the
intangible asset had no future benefit and as such, during the
second quarter of 2005, we wrote off the total value of the
asset, $19.9 million ($12 million after tax). This
charge has been included as a component of Other (income)
charges, net within the Statement of Operations. The damages of
$0.6 million were subsequently reversed during 2006.
Income
taxes
Income tax expense and deferred tax assets and liabilities
reflect managements assessment of actual future taxes to
be paid on items in the consolidated financial statements. We
record a valuation allowance to reduce our deferred tax assets
to the amount that is more likely than not to be realized. While
we have considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for the
valuation allowance, in the event we were to determine that we
would be able to realize our deferred tax assets in the future
in excess of the net recorded amount, an adjustment to the
deferred tax asset would increase income, equity or goodwill in
the period such determination was made. Likewise, should we
determine that we would not be able to realize all or part of
the net deferred tax asset in the future, an adjustment to the
deferred tax asset would be charged to income in the period such
determination was made.
We have undistributed earnings of
non-U.S. subsidiaries
and currently believe that there will be no cost associated with
the repatriation of such foreign earnings.
The significant assumptions and estimates described in the
preceding paragraphs are important contributors to our ultimate
effective tax rate for each year in addition to our income mix
from geographical regions. If any of our assumptions or
estimates were to change, or should our income mix from our
geographical regions change, our effective tax rate could be
materially affected. Based on earnings before taxes of
$242.9 million for the year ended December 31, 2007,
each increase of $2.4 million in tax expense would increase
our effective tax rate by 1%.
Revenue
recognition
Revenue is recognized when title to a product has transferred
and any significant customer obligations have been fulfilled.
Standard shipping terms are generally FOB shipping point in most
countries and, accordingly, title transfers upon shipment. In
countries where title cannot legally transfer before delivery,
we defer revenue recognition until delivery has occurred. Other
than a few small software applications, we do not sell software
products without the related hardware instrument as the software
is embedded in the instrument. Our typical solution requires no
significant production, modification or customization of the
hardware or software that is essential to the functionality of
the products. To the extent our solutions have a post shipment
obligation, such as customer acceptance, revenue is deferred
until the obligation has been completed. In addition, we also
defer revenue where installation is required, unless such
installation is perfunctory. We also generally maintain the
right to accept or reject a product return in our terms and
conditions and we also maintain accruals for outstanding
credits. Distributor discounts are offset against
32
revenue at the time such revenue is recognized. Revenues from
service contracts are recognized ratably over the contract
period. Shipping and handling costs charged to customers are
included in total net sales and the associated expense is
recorded in cost of sales for all periods presented.
Warranty
We generally offer one-year warranties on most of our products.
Product warranties are recorded at the time revenue is
recognized for certain product shipments. While we engage in
extensive product quality programs and processes, our warranty
obligation is affected by product failure rates, material usage
and service costs incurred in correcting a product failure. If
we experience claims or significant cost changes in material,
freight and vendor charges, our cost of goods sold could be
affected.
New Accounting
Pronouncements
See Note 2 to the audited consolidated financial statements.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
Discussion of this item is included in Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
The financial statements required by this item are set forth
starting on
page F-1
and the related financial schedule is set forth on
page S-1.
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
33
|
|
Item 9A.
|
Controls
and Procedures
|
Conclusions
Regarding the Effectiveness of Disclosure Controls and
Procedures and Changes in Internal Control over Financial
Reporting
Our management carried out an evaluation of the effectiveness of
our disclosure controls and procedures as of the end of the
period covered by this annual report under the supervision and
with the participation of our disclosure committee, our Chief
Financial Officer and Chief Executive Officer. Based upon that
evaluation, our Chief Financial Officer and Chief Executive
Officer concluded that our disclosure controls and procedures
are effective in permitting us to comply with our disclosure
obligations and ensure that the material information required to
be disclosed is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the
SEC. There were no changes in our internal control over
financial reporting during the quarter ended December 31,
2007 that have materially affected, or are reasonably likely to
materially affect, our control over financial reporting.
Managements
Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Our internal
control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of
financial reporting and the preparation of the Companys
financial statements for external reporting purposes in
accordance with accounting principles generally accepted in the
United States of America.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Management assessed the effectiveness of the Companys
internal control over financial reporting as of
December 31, 2007. In making this assessment, we used the
criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal
Control Integrated Framework. Based on our
assessment, we concluded that, as of December 31, 2007, the
Companys internal control over financial reporting is
effective.
PricewaterhouseCoopers, LLP, an independent registered public
accounting firm that audited the financial statements included
in this Report on
Form 10-K,
has issued an attestation report on our internal control over
financial reporting which appears on
page F-2.
|
|
Item 9B.
|
Other
Information
|
None.
34
PART III
|
|
Item 10.
|
Directors,
Executive Officers of the Registrant and Corporate
Governance
|
The executive officers of the Company are set forth below.
Officers are appointed by the Board of Directors and serve at
the discretion of the Board.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Robert F.
Spoerry(1)
|
|
|
52
|
|
|
Executive Chairman of the Board of Directors
|
Olivier A.
Filliol(1)
|
|
|
41
|
|
|
President and Chief Executive Officer
|
William P. Donnelly
|
|
|
46
|
|
|
Chief Financial Officer
|
Peter Bürker
|
|
|
62
|
|
|
Head of Human Resources
|
Thomas Caratsch
|
|
|
49
|
|
|
Head of Laboratory
|
Hans-Peter von Arb
|
|
|
53
|
|
|
Head of Retail
|
Joakim Weidemanis
|
|
|
38
|
|
|
Head of Product Inspection
|
Urs Widmer
|
|
|
57
|
|
|
Head of Industrial
|
|
|
|
(1) |
|
Effective as of January 1, 2008 |
Robert F. Spoerry
has been a Director since October 1996.
Mr. Spoerry has been Executive Chairman of the Board of
Directors since January 1, 2008 and served as President and
Chief Executive Officer of the Company from 1993 to 2007. He
also served as Head of Industrial and Retail (Europe) of the
Company from 1987 to 1993. Mr. Spoerry has been Chairman of
the Board of Directors since May 1998.
Olivier A.
Filliol has been President and Chief Executive
Officer of the Company since January 1, 2008.
Mr. Filliol served as Head of Global Sales, Service and
Marketing of the Company from April 2004 to December 2007, and
Head of Process Analytics of the Company from June 1999 to
December 2007. From June 1998 to June 1999 he served as General
Manager of the Companys U.S. checkweighing
operations. Prior to joining the Company, he was a Strategy
Consultant with the international consulting firm
Bain & Company working in the Geneva, Paris and Sydney
offices.
William P.
Donnelly has been Chief Financial Officer of the
Company since August 2004. From July 2002 to August 2004, he was
Head of Product Inspection and the Companys pipette
business, and he was Chief Financial Officer of the Company from
1997 to July 2002.
Peter Bürker
has been Head of Human Resources of the Company since
1995. From 1992 to 1994 he was the Companys General
Manager in Spain, and from 1989 to 1991 he headed the
Companys operations in Italy.
Thomas Caratsch
has been Head of Laboratory of the Company since
December 2007. From October 2007 to December 2007 he served as
the Head of Business Development. Prior to joining the Company
in October 2007 he held various management positions with
Hoffmann La Roche from 1987 to March 2007, including Head
of Disetronic Medical Systems AG from January 2003 to August
2006.
Hans-Peter von
Arb has been Head of Retail of the Company since June
2006. From 2001 until June 2006, he served as the Head of the
Companys Load Cell Competence Center. From 1996 to 2000 he
held various management positions with the Company in
Switzerland and Germany. Prior to joining the Company in 1996 he
worked in the field of industrial laser systems.
Joakim Weidemanis
has been Head of Product Inspection of the Company
since January 2006. From August 2005 to January 2006, he served
as Head of Business Development of the Product Inspection
Division. Prior to joining the Company, he held various
management positions at ABB, including from July 2000 to August
2005 when he served as President of the North American water
metering systems business and from early 2004 as the Head of the
global water metering division that became Elster Water Metering
Systems.
Urs Widmer
has been Head of Industrial since 1999. From 1984 to
1999 he served in various management functions within the
Company, including most recently Head of Standard Industrial
(Europe) from 1995 to
35
1999. Prior to 1984 he held various management positions with
Siemens, a global manufacturer of solutions for information and
communications, automation and control, power and transportation.
CEO and CFO
Certifications
Our CEO submits an annual written affirmation to the New York
Stock Exchange (NYSE) certifying the Companys compliance
with NYSE listing rules. The most recent annual affirmation was
submitted in 2007.
Our CEO and CFO also provide certifications pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 in connection
with our quarterly and annual financial statement filings with
the Securities and Exchange Commission. The certifications
relating to this annual report are attached as
Exhibits 31.1 and 31.2.
The remaining information called for by this item is
incorporated by reference from the discussion in the sections
Proposal One: Election of Directors,
Board of Directors General Information,
Board of Directors Operation and
Additional Information Section 16(a)
Beneficial Ownership Reporting Compliance in the 2008
Proxy Statement.
|
|
Item 11.
|
Executive
Compensation
|
The information appearing in the sections captioned Board
of Directors General Information
Director Compensation, Compensation Discussion and
Analysis, Compensation Committee Report and
Additional Information Compensation Committee
Interlocks and Insider Participation in the 2008 Proxy
Statement is incorporated by reference herein.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information appearing in the sections Share
Ownership and Securities Authorized for Issuance
under Equity Compensation Plans as of December 31,
2007 in the 2008 Proxy Statement is incorporated by
reference herein.
|
|
Item 13.
|
Certain
Relationships and Related Transactions and Director
Independence
|
Certain
Relationships and Related Transactions None.
Director Independence The information in the section
Board of Directors General
Information Independence of the Board in the
2008 Proxy Statement is incorporated by reference herein.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
Information appearing in the section Audit Committee
Report in the 2008 Proxy Statement is hereby incorporated
by reference.
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
(a) Exhibits, Financial Statements and Schedules:
1. Financial Statements. See Index to Consolidated
Financial Statements included on
page F-1.
2. Financial Statement Schedule. See
Schedule II, which is included on
page S-1.
3. List of Exhibits. See Exhibit Index included
on
page E-1.
36
SIGNATURES
Pursuant to the requirements of Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Mettler-Toledo International Inc.
(Registrant)
Date: February 15, 2008
|
|
|
|
By:
|
/s/ Olivier
A. Filliol
|
Olivier A. Filliol
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this Annual Report on
Form 10-K
has been signed below by the following persons on behalf of the
registrant as of the date set out above and in the capacities
indicated.
|
|
|
|
|
Signature
|
|
Title
|
|
/s/ Olivier
Filliol
Olivier
A. Filliol
|
|
President and Chief Executive Officer
|
/s/ William
P. Donnelly
William
P. Donnelly
|
|
Group Vice President and Chief Financial Officer
(Principal financial and accounting officer)
|
/s/ Wah-Hui
Chu
Wah-Hui
Chu
|
|
Director
|
/s/ Francis
A. Contino
Francis
A. Contino
|
|
Director
|
/s/ John
T. Dickson
John
T. Dickson
|
|
Director
|
/s/ Philip
H. Geier
Philip
H. Geier
|
|
Director
|
/s/ Hans
Ulrich Maerki
Hans
Ulrich Maerki
|
|
Director
|
/s/ George
M. Milne
George
M. Milne
|
|
Director
|
/s/ Thomas
P. Salice
Thomas
P. Salice
|
|
Director
|
/s/ Robert
F. Spoerry
Robert
F. Spoerry
|
|
Director
|
37
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of the
Company(1)
|
|
3
|
.2
|
|
Amended By-laws of the Company, effective as of February 8,
2007(14)
|
|
4
|
.6
|
|
Rights Agreement dated as of August 26, 2002 between the
Company and Mellon Investor Services LLC, as Rights Agent, which
includes as Exhibit A thereto, the Certificate of
Designation, as Exhibit B thereto, the Form of Rights
Certificate, and as Exhibit C thereto, the Summary of
Rights to Purchase Preferred
Shares(9)
|
|
10
|
.10
|
|
Amended and Restated Credit Agreement, dated as of
November 7,
2005(2)
|
|
10
|
.11
|
|
Indenture, dated as of November 12,
2003(11)
|
|
10
|
.20
|
|
1997 Amended and Restated Stock Option
Plan(3)
|
|
10
|
.21
|
|
Amendment to the 1997 Amended and Restated Stock Option
Plan(4)
|
|
10
|
.22
|
|
Mettler-Toledo International Inc. 2004 Equity Incentive
Plan(12)
|
|
10
|
.23
|
|
Mettler-Toledo International Inc. 2007 Share Plan,
effective February 7, 2008*
|
|
10
|
.31
|
|
Regulations of the Performance Oriented Bonus System
(POBS) Incentive System for the Management of
Mettler Toledo, effective as of November 5,
1998(5)
|
|
10
|
.32
|
|
Regulations of the POBS PLUS Incentive Scheme for
Senior Management of Mettler Toledo, effective as of
March 14,
2000(6)
|
|
10
|
.33
|
|
Regulations of the POBS PLUS Incentive Scheme for
Members of the Group Management of Mettler Toledo, effective as
of March 7,
2000(6)
|
|
10
|
.51
|
|
Employment Agreement between Robert Spoerry and Mettler-Toledo
International Inc., dated as of November 1,
2007(7)
|
|
10
|
.52
|
|
Employment Agreement between William Donnelly and Mettler-Toledo
GmbH, dated as of November 10,
1997(1)
|
|
10
|
.53
|
|
Employment Agreement between Olivier Filliol and Mettler-Toledo
International Inc., dated as of November 1,
2007(7)
|
|
10
|
.54
|
|
Employment Agreement between Urs Widmer and Mettler-Toledo
International Inc., dated as of May 11,
2001(8)
|
|
10
|
.55
|
|
Employment Agreement between Joakim Weidemanis and
Mettler-Toledo International Inc., dated as of May 23,
2005(13)
|
|
10
|
.56
|
|
Employment Agreement between Hans-Peter von Arb and
Mettler-Toledo International Inc., dated as of April 11,
2006(13)
|
|
10
|
.57*
|
|
Employment Agreement between Thomas Caratsch and Mettler-Toledo
International Inc. dated as of December 4, 2007
|
|
10
|
.58*
|
|
Form of Tax Equalization Agreement between
Messrs. Bürker, Filliol, Lang, Lüthi, Spoerry,
von Arb and Widmer and Mettler-Toledo International Inc., dated
October 10, 2007
|
|
21
|
*
|
|
Subsidiaries of the Company
|
|
23
|
.1*
|
|
Consent of PricewaterhouseCoopers LLP
|
|
31
|
.1*
|
|
Certification of the Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31
|
.2*
|
|
Certification of the Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32
|
*
|
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
(1) |
|
Incorporated by reference to the Companys Report on
Form 10-K
dated March 13, 1998 |
|
(2) |
|
Incorporated by reference to the Companys Report on
Form 8-K
dated November 8, 2005 |
|
(3) |
|
Incorporated by reference to the Companys Registration
Statement on
Form S-1
(Reg.
No. 333-35597) |
|
(4) |
|
Incorporated by reference to the Companys Report on
Form 10-Q
dated August 15, 2000 |
|
(5) |
|
Incorporated by reference to the Companys Report on
Form 10-K
dated March 18, 1999 |
|
(6) |
|
Incorporated by reference to the Companys Report on
Form 10-K
dated March 24, 2000 |
E-1
|
|
|
(7) |
|
Incorporated by reference to the Companys Report on
Form 8-K
dated November 1, 2007 |
|
(8) |
|
Incorporated by reference to the Companys Report on
Form 10-K
dated March 4, 2002 |
|
(9) |
|
Incorporated by reference to the Companys Registration
Statement on
Form 8-K/A
filed on August 29, 2002 |
|
(10) |
|
Incorporated by reference to the Companys Report on
Form 10-Q
dated August 4, 2003 |
|
(11) |
|
Incorporated by reference to the Companys Report on
Form 10-K
dated March 15, 2004 |
|
(12) |
|
Incorporated by reference to the Companys Form DEF
14-A filed
March 29, 2004 |
|
(13) |
|
Incorporated by reference to the Companys Report on
Form 10-Q
dated July 28, 2006 |
|
(14) |
|
Incorporated by reference to the Companys Report on
Form 10-K
dated February 16, 2007 |
|
* |
|
Filed herewith |
E-2
METTLER-TOLEDO
INTERNATIONAL INC.
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
F-2
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
|
|
|
F-8
|
|
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of Mettler-Toledo International Inc.
In our opinion, the consolidated financial statements listed in
the index appearing on
page F-1
present fairly, in all material respects, the financial position
of Mettler-Toledo International Inc. and its subsidiaries at
December 31, 2007 and 2006, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 2007 in conformity with accounting
principles generally accepted in the United States of America.
In addition, in our opinion, the financial statement schedules
appearing on
page S-1
present fairly, in all material respects, the information set
forth therein when read in conjunction with the related
consolidated financial statements. Also in our opinion, the
Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2007,
based on criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for these financial
statements and financial statement schedules, for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting appearing under Item 9A. Our
responsibility is to express opinions on these financial
statements, on the financial statement schedules, and on the
Companys internal control over financial reporting based
on our integrated audits. We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement and
whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
As described in Note 10 to the consolidated financial
statements, effective January 1, 2006 the Company changed
the manner in which it accounts for share-based compensation. As
described in Note 11, at December 31, 2006, the
Company changed the manner in which it records the funded status
of its defined benefit pension and other postretirement plans.
In addition, as described in Note 12 effective
January 1, 2007 the Company changed the manner in which it
accounts for uncertain tax positions.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
F-2
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers
LLP
PricewaterhouseCoopers LLP
Columbus, Ohio
February 13, 2008
F-3
METTLER-TOLEDO
INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
1,387,519
|
|
|
$
|
1,230,360
|
|
|
$
|
1,144,309
|
|
Service
|
|
|
406,229
|
|
|
|
364,552
|
|
|
|
338,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
|
1,793,748
|
|
|
|
1,594,912
|
|
|
|
1,482,472
|
|
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
|
641,232
|
|
|
|
574,550
|
|
|
|
535,626
|
|
Service
|
|
|
256,335
|
|
|
|
229,930
|
|
|
|
216,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
896,181
|
|
|
|
790,432
|
|
|
|
730,319
|
|
Research and development
|
|
|
92,378
|
|
|
|
82,802
|
|
|
|
81,893
|
|
Selling, general and administrative
|
|
|
529,126
|
|
|
|
481,709
|
|
|
|
441,702
|
|
Amortization
|
|
|
11,682
|
|
|
|
11,503
|
|
|
|
11,436
|
|
Interest expense
|
|
|
21,003
|
|
|
|
17,492
|
|
|
|
14,880
|
|
Other (income) charges, net
|
|
|
(875
|
)
|
|
|
(7,921
|
)
|
|
|
20,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before taxes
|
|
|
242,867
|
|
|
|
204,847
|
|
|
|
160,184
|
|
Provision for taxes
|
|
|
64,360
|
|
|
|
47,315
|
|
|
|
51,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
178,507
|
|
|
$
|
157,532
|
|
|
$
|
108,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
4.82
|
|
|
$
|
3.93
|
|
|
$
|
2.58
|
|
Weighted average number of common shares
|
|
|
37,025,209
|
|
|
|
40,065,951
|
|
|
|
42,207,777
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
4.70
|
|
|
$
|
3.86
|
|
|
$
|
2.52
|
|
Weighted average number of common and common equivalent shares
|
|
|
37,952,923
|
|
|
|
40,785,708
|
|
|
|
43,285,121
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
METTLER-TOLEDO
INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
As of December 31
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
81,222
|
|
|
$
|
151,269
|
|
Trade accounts receivable, less allowances of $8,804 in 2007 and
$7,073 in 2006
|
|
|
354,596
|
|
|
|
306,879
|
|
Inventories
|
|
|
173,725
|
|
|
|
148,372
|
|
Current deferred tax assets, net
|
|
|
37,643
|
|
|
|
33,054
|
|
Other current assets and prepaid expenses
|
|
|
36,023
|
|
|
|
30,196
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
683,209
|
|
|
|
669,770
|
|
Property, plant and equipment, net
|
|
|
249,605
|
|
|
|
229,138
|
|
Goodwill
|
|
|
440,767
|
|
|
|
432,871
|
|
Other intangible assets, net
|
|
|
100,020
|
|
|
|
102,750
|
|
Non-current deferred tax assets, net
|
|
|
65,129
|
|
|
|
69,083
|
|
Other non-current assets
|
|
|
139,484
|
|
|
|
83,473
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,678,214
|
|
|
$
|
1,587,085
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
127,109
|
|
|
$
|
95,971
|
|
Accrued and other liabilities
|
|
|
73,661
|
|
|
|
71,209
|
|
Accrued compensation and related items
|
|
|
130,140
|
|
|
|
110,644
|
|
Deferred revenue and customer prepayments
|
|
|
52,703
|
|
|
|
41,553
|
|
Taxes payable
|
|
|
42,438
|
|
|
|
49,607
|
|
Current deferred tax liabilities
|
|
|
10,152
|
|
|
|
5,433
|
|
Short-term borrowings
|
|
|
11,570
|
|
|
|
9,962
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
447,773
|
|
|
|
384,379
|
|
Long-term debt
|
|
|
385,072
|
|
|
|
345,705
|
|
Non-current deferred tax liabilities
|
|
|
101,500
|
|
|
|
82,613
|
|
Other non-current liabilities
|
|
|
162,583
|
|
|
|
143,526
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,096,928
|
|
|
|
956,223
|
|
Commitments and contingencies (Note 14)
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value per share; authorized
10,000,000 shares
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value per share; authorized
125,000,000 shares; issued 44,786,011 and
44,786,011 shares, outstanding 35,638,483 and
38,430,124 shares at December 31, 2007 and 2006,
respectively
|
|
|
448
|
|
|
|
448
|
|
Additional paid-in capital
|
|
|
548,378
|
|
|
|
528,863
|
|
Treasury stock at cost (9,147,528 shares in 2007 and
6,355,887 shares in 2006)
|
|
|
(662,393
|
)
|
|
|
(374,819
|
)
|
Retained earnings
|
|
|
652,236
|
|
|
|
493,691
|
|
Accumulated other comprehensive income (loss)
|
|
|
42,617
|
|
|
|
(17,321
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
581,286
|
|
|
|
630,862
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
1,678,214
|
|
|
$
|
1,587,085
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
METTLER-TOLEDO
INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND
COMPREHENSIVE INCOME
For the years ended December 31
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Treasury
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stock
|
|
|
Earnings
|
|
|
Income
(Loss)
|
|
|
Total
|
|
|
Balance at December 31, 2004
|
|
|
43,366,139
|
|
|
$
|
448
|
|
|
$
|
476,704
|
|
|
$
|
(67,404
|
)
|
|
$
|
308,173
|
|
|
$
|
2,965
|
|
|
$
|
720,886
|
|
Exercise of stock options
|
|
|
1,267,132
|
|
|
|
|
|
|
|
(34,704
|
)
|
|
|
61,671
|
|
|
|
|
|
|
|
|
|
|
|
26,967
|
|
Repurchases of common stock
|
|
|
(3,229,200
|
)
|
|
|
|
|
|
|
|
|
|
|
(164,592
|
)
|
|
|
|
|
|
|
|
|
|
|
(164,592
|
)
|
Tax benefit resulting from exercise of certain employee stock
options
|
|
|
|
|
|
|
|
|
|
|
15,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,129
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,902
|
|
|
|
|
|
|
|
108,902
|
|
Change in currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,473
|
)
|
|
|
(37,473
|
)
|
Minimum pension liability adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,817
|
)
|
|
|
(10,817
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
41,404,071
|
|
|
$
|
448
|
|
|
$
|
457,129
|
|
|
$
|
(170,325
|
)
|
|
$
|
417,075
|
|
|
$
|
(45,325
|
)
|
|
$
|
659,002
|
|
Exercise of stock options and restricted stock units
|
|
|
1,166,612
|
|
|
|
|
|
|
|
|
|
|
|
61,388
|
|
|
|
(30,956
|
)
|
|
|
|
|
|
|
30,432
|
|
Common stock issued as equity compensation
|
|
|
1,000
|
|
|
|
|
|
|
|
8
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
61
|
|
Repurchases of common stock
|
|
|
(4,141,559
|
)
|
|
|
|
|
|
|
|
|
|
|
(265,935
|
)
|
|
|
|
|
|
|
|
|
|
|
(265,935
|
)
|
Reclassification related to treasury stock reissuances
|
|
|
|
|
|
|
|
|
|
|
49,960
|
|
|
|
|
|
|
|
(49,960
|
)
|
|
|
|
|
|
|
|
|
Tax benefit resulting from exercise of certain employee stock
options
|
|
|
|
|
|
|
|
|
|
|
13,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,527
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
8,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,239
|
|
Adoption of SFAS 158, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,638
|
|
|
|
19,638
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
157,532
|
|
|
|
|
|
|
|
157,532
|
|
Change in currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,570
|
|
|
|
10,570
|
|
Pension adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,204
|
)
|
|
|
(2,204
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
38,430,124
|
|
|
$
|
448
|
|
|
$
|
528,863
|
|
|
$
|
(374,819
|
)
|
|
$
|
493,691
|
|
|
$
|
(17,321
|
)
|
|
$
|
630,862
|
|
Exercise of stock options and restricted stock units
|
|
|
593,090
|
|
|
|
|
|
|
|
|
|
|
|
37,025
|
|
|
|
(15,851
|
)
|
|
|
|
|
|
|
21,174
|
|
Repurchases of common stock
|
|
|
(3,384,731
|
)
|
|
|
|
|
|
|
|
|
|
|
(324,599
|
)
|
|
|
|
|
|
|
|
|
|
|
(324,599
|
)
|
Tax benefit resulting from exercise of certain employee stock
options
|
|
|
|
|
|
|
|
|
|
|
11,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,373
|
|
Stock based compensation
|
|
|
|
|
|
|
|
|
|
|
8,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,142
|
|
Adoption of FIN 48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,111
|
)
|
|
|
|
|
|
|
(4,111
|
)
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178,507
|
|
|
|
|
|
|
|
178,507
|
|
Change in currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,941
|
|
|
|
27,941
|
|
Pension adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,997
|
|
|
|
31,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
238,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
35,638,483
|
|
|
$
|
448
|
|
|
$
|
548,378
|
|
|
$
|
(662,393
|
)
|
|
$
|
652,236
|
|
|
$
|
42,617
|
|
|
$
|
581,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
METTLER-TOLEDO
INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
178,507
|
|
|
$
|
157,532
|
|
|
$
|
108,902
|
|
Adjustments to reconcile net earnings to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
26,664
|
|
|
|
26,069
|
|
|
|
25,977
|
|
Amortization
|
|
|
11,682
|
|
|
|
11,503
|
|
|
|
11,436
|
|
Deferred taxes
|
|
|
22,234
|
|
|
|
7,365
|
|
|
|
10,962
|
|
Excess tax benefits from share-based payment arrangements
|
|
|
(9,573
|
)
|
|
|
(11,336
|
)
|
|
|
|
|
Share-based compensation
|
|
|
8,142
|
|
|
|
8,239
|
|
|
|
|
|
Other
|
|
|
(703
|
)
|
|
|
(1,001
|
)
|
|
|
20,057
|
|
Increase (decrease) in cash resulting from changes in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
(28,161
|
)
|
|
|
(20,066
|
)
|
|
|
(18,377
|
)
|
Inventories
|
|
|
(13,522
|
)
|
|
|
11,379
|
|
|
|
(5,171
|
)
|
Other current assets
|
|
|
(8,959
|
)
|
|
|
2,594
|
|
|
|
2,790
|
|
Trade accounts payable
|
|
|
26,404
|
|
|
|
1,958
|
|
|
|
9,409
|
|
Taxes payable
|
|
|
(4,199
|
)
|
|
|
(19,568
|
)
|
|
|
3,056
|
|
Accruals and other
|
|
|
19,701
|
|
|
|
16,898
|
|
|
|
8,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
228,217
|
|
|
|
191,566
|
|
|
|
177,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of property, plant and equipment
|
|
|
6,263
|
|
|
|
4,181
|
|
|
|
1,423
|
|
Purchase of property, plant and equipment
|
|
|
(47,545
|
)
|
|
|
(34,329
|
)
|
|
|
(32,498
|
)
|
Acquisitions
|
|
|
(106
|
)
|
|
|
(790
|
)
|
|
|
(4,087
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(41,388
|
)
|
|
|
(30,938
|
)
|
|
|
(35,162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
132,298
|
|
|
|
119,989
|
|
|
|
667,901
|
|
Repayments of borrowings
|
|
|
(102,199
|
)
|
|
|
(234,602
|
)
|
|
|
(414,578
|
)
|
Proceeds from exercise of stock options
|
|
|
21,217
|
|
|
|
30,453
|
|
|
|
27,007
|
|
Repurchases of common stock
|
|
|
(324,870
|
)
|
|
|
(264,640
|
)
|
|
|
(161,832
|
)
|
Excess tax benefits from share-based payment arrangements
|
|
|
9,573
|
|
|
|
11,336
|
|
|
|
|
|
Refinancing fees
|
|
|
|
|
|
|
|
|
|
|
(760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(263,981
|
)
|
|
|
(337,464
|
)
|
|
|
117,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
7,105
|
|
|
|
3,527
|
|
|
|
(2,233
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(70,047
|
)
|
|
|
(173,309
|
)
|
|
|
257,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
151,269
|
|
|
|
324,578
|
|
|
|
67,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
81,222
|
|
|
$
|
151,269
|
|
|
$
|
324,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
19,895
|
|
|
$
|
16,845
|
|
|
$
|
13,594
|
|
Taxes
|
|
$
|
31,422
|
|
|
$
|
48,151
|
|
|
$
|
37,263
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands,
except share data, unless otherwise stated)
1. BUSINESS
DESCRIPTION AND BASIS OF PRESENTATION
Mettler-Toledo International Inc. (Mettler-Toledo or
the Company) is a leading global supplier of
precision instruments and services. The Company manufactures
weighing instruments for use in laboratory, industrial,
packaging, logistics and food retailing applications. The
Company also manufactures several related analytical instruments
and provides automated chemistry solutions used in drug and
chemical compound discovery and development. In addition, the
Company manufactures metal detection and other
end-of-line
inspection systems used in production and packaging and provides
solutions for use in certain process analytics applications. The
Companys primary manufacturing facilities are located in
China, Germany, Switzerland, the United Kingdom and the United
States. The Companys principal executive offices are
located in Greifensee, Switzerland and Columbus, Ohio.
The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America (U.S. GAAP) and
include all entities in which the Company has control, which are
its majority-owned subsidiaries.
The preparation of financial statements in conformity with
U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, as well as disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
periods. Actual results may differ from those estimates.
All intercompany transactions and balances have been eliminated.
|
|
2.
|
SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
|
|
|
|
Cash and Cash
Equivalents
|
Cash and cash equivalents include highly liquid investments with
original maturity dates of three months or less. The carrying
value of these cash equivalents approximates fair value.
|
|
|
Trade Accounts
Receivable
|
Trade accounts receivable are recorded at the invoiced amount
and do not bear interest. The allowance for doubtful accounts
represents the Companys best estimate of probable credit
losses in its existing trade accounts receivable. The Company
determines the allowance based upon a review of both specific
accounts for collection and the age of the accounts receivable
portfolio.
Inventories are valued at the lower of cost or net realizable
value. Cost, which includes direct materials, labor and
overhead, is generally determined using the first in, first out
(FIFO) method. The estimated net realizable value is based on
assumptions for future demand and related pricing. Adjustments
to the cost basis of our inventory are made for excess and
obsolete items based on usage, orders and technological
obsolescence. If actual market conditions are less favorable
than those projected by management, reductions in the value of
inventory may be required.
F-8
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
|
|
|
a) Property,
Plant and Equipment
|
Property, plant and equipment are stated at cost less
accumulated depreciation. Repair and maintenance costs are
charged to expense as incurred. Depreciation and amortization
are charged on a straight-line basis over the estimated useful
lives of the assets as follows:
|
|
|
Buildings and improvements
|
|
15 to 50 years
|
Machinery and equipment
|
|
3 to 12 years
|
Computer software
|
|
3 to 5 years
|
Leasehold improvements
|
|
Shorter of useful life or lease term
|
In accordance with Statement of Position
98-1,
Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use
(SOP 98-1),
the Company expenses all internal-use software costs incurred in
the preliminary project stage and capitalizes certain direct
costs associated with the development and purchase of
internal-use software within property, plant and equipment.
Capitalized costs are amortized on a straight-line basis over
the estimated useful lives of the software, generally not
exceeding five years.
|
|
|
c) Goodwill
and Other Intangible Assets
|
In accordance with SFAS No. 142, Goodwill and
Other Intangible Assets (SFAS 142),
goodwill, representing the excess of purchase price over the net
asset value of companies acquired, and indefinite-lived
intangible assets are not amortized, but are reviewed for
impairment annually in the fourth quarter, or more frequently if
events or changes in circumstances indicate that an asset might
be impaired. The annual evaluation is based on valuation models
that estimate fair value based on expected future cash flows and
profitability projections.
Other intangible assets also include definite-lived assets which
are subject to amortization. Where applicable, amortization is
charged on a straight-line basis over the expected period to be
benefited. The straight-line method of amortization reflects an
appropriate allocation of the cost of the intangible assets to
earnings in proportion to the amount of economic benefits
obtained by the Company in each reporting period. The Company
assesses the recoverability of other intangible assets subject
to amortization in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS 144).
|
|
|
Accounting for
Impairment of Long-Lived Assets
|
In accordance with SFAS 144, the Company assesses the need
to record impairment losses on long-lived assets with finite
lives when events or changes in circumstances indicate that the
carrying amount of assets may not be recoverable. An impairment
loss would be recognized when future estimated undiscounted cash
flows expected to result from use of the asset are less than the
assets carrying value, with the loss measured at fair
value based on discounted expected cash flows.
The Company files tax returns in each jurisdiction in which it
operates. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax
F-9
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates in the respective jurisdictions
in which the Company operates. In assessing the ability to
realize deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred
tax assets will not be realized.
Deferred taxes are not provided on the unremitted earnings of
subsidiaries outside of the United States when it is expected
that these earnings are permanently reinvested. Such earnings
may become taxable upon the sale or liquidation of these
subsidiaries or upon the remittance of dividends. Deferred taxes
are provided when the Company no longer considers subsidiary
earnings to be permanently invested, such as in situations where
the Companys subsidiaries plan to make future dividend
distributions.
The Company recognizes accrued amounts of interest and penalties
related to its uncertain tax positions as part of income tax
expense within its consolidated statement of operations.
|
|
|
Currency
Translation and Transactions
|
The reporting currency for the consolidated financial statements
of the Company is the U.S. dollar. The functional currency
for the Companys operations is generally the applicable
local currency. Accordingly, the assets and liabilities of
companies whose functional currency is other than the
U.S. dollar are included in the consolidated financial
statements by translating the assets and liabilities into the
reporting currency at the exchange rates applicable at the end
of the reporting period. The statements of operations and cash
flows of such
non-U.S. dollar
functional currency operations are translated at the monthly
average exchange rates during the year. Translation gains or
losses are accumulated in other comprehensive income (loss) in
the consolidated statements of shareholders equity.
Transaction gains and losses are included as a component of net
earnings.
Revenue is recognized when title to a product has transferred
and any significant customer obligations have been fulfilled.
Standard shipping terms are generally FOB shipping point in most
countries and, accordingly, title transfers upon shipment. In
countries where title cannot legally transfer before delivery,
we defer revenue recognition until delivery has occurred. Other
than a few small software applications, we do not sell software
products without the related hardware instrument as the software
is embedded in the instrument. The Companys products
typically require no significant production, modification or
customization of the hardware or software that is essential to
the functionality of the products. To the extent the
Companys solutions have a post shipment obligation, such
as customer acceptance, revenue is deferred until the obligation
has been completed. In addition, we also defer revenue where
installation is required, unless such installation is deemed
perfunctory. We also generally maintain the right to accept or
reject a product return in our terms and conditions and we also
maintain accruals for outstanding credits. Distributor discounts
are offset against revenue at the time such revenue is
recognized. Revenues from service contracts are recognized
ratably over the contract period. Shipping and handling costs
charged to customers are included in total net sales and the
associated expense is recorded in cost of sales for all periods
presented.
Research and development costs primarily consist of salaries,
consulting and other costs. The Company expenses these costs as
incurred.
F-10
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
The Company generally offers one-year warranties on most of its
products. Product warranties are recorded at the time revenue is
recognized for certain product shipments. While the Company
engages in extensive product quality programs and processes, our
warranty obligation is affected by product failure rates,
material usage and service costs incurred in correcting a
product failure.
|
|
|
Earnings per
Common Share
|
In accordance with the treasury stock method, the Company has
included 927,714, 719,757 and 1,077,344 equivalent shares in the
calculation of diluted weighted average number of common shares
for the years ending December 31, 2007, 2006 and 2005,
respectively, relating to outstanding stock options and
restricted stock units.
Outstanding options to purchase 146,125, 416,375 and
127,125 shares of common stock for the years ending
December 31, 2007, 2006 and 2005, respectively, have been
excluded from the calculation of diluted weighted average number
of common and common equivalent shares as such options would be
anti-dilutive.
|
|
|
Equity-Based
Compensation
|
The Company applies the fair value methodology under Statement
of Financial Accounting Standards No. 123R,
Share-Based Compensation
(SFAS 123R), and related interpretations in
accounting for its equity-based compensation plan.
|
|
|
Derivative
Financial Instruments
|
The Company has only limited involvement with derivative
financial instruments and does not use them for trading
purposes. As described more fully in Note 4, the Company
enters into foreign currency forward exchange contracts to
economically hedge certain short-term intercompany balances
involving its international businesses. Such contracts limit the
Companys exposure to currency fluctuations on the items
they hedge. These contracts are adjusted to fair market value as
of each balance sheet date, with the resulting changes in fair
value being recognized in the appropriate financial statement
caption in the income statement consistent with the underlying
hedged item.
The Company also enters into certain interest rate swap
agreements in order to manage its exposure to changes in
interest rates. The differential paid or received on interest
rate swap agreements is recognized in interest expense over the
life of the agreements as incurred. The Companys fixed to
floating interest rate swap agreements are accounted for as fair
value hedges. The change in fair value of outstanding interest
rate swap agreements that are effective as fair value hedges is
recognized in earnings as incurred and is offset by the change
in fair value of the hedged item.
|
|
|
New Accounting
Pronouncements
|
In September 2006, the Financial Accounting Standards Board
(FASB) issued FASB Statement No. 157,
Fair Value Measurements (SFAS 157)
which clarifies how companies are required to use a fair value
measure for recognition or disclosure. SFAS 157 establishes
a common definition of fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value
measurements. The Statement will be effective for financial
statements issued by the Company beginning January 1, 2008
and for the interim periods within 2008. In January 2008 the
FASB issued FASB Staff Position
FAS 157-b,
Effective Date of FASB Statement No. 157
(FSP 157-b). FSP 157-b delays the
effective date of SFAS 157, Fair Value Measurements,
for all nonfinancial assets and nonfinancial liabilities,
except those that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least
annually) until fiscal years beginning after
F-11
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
November 15, 2008, and interim periods within those fiscal
years. The Company does not believe that the adoption of
SFAS 157 or FSP 157-b will have a material impact on
its consolidated results of operations or financial position.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS 159). SFAS 159
permits companies to elect on an
instrument-by-instrument
basis to fair value certain financial assets and financial
liabilities with changes in fair value recognized in earnings as
they occur. The election to fair value is generally irrevocable.
The Statement will be effective for the Company beginning
January 1, 2008. The Company has elected not to take the
fair value option allowable under this Statement.
In December 2007, the FASB issued FASB Statement No. 141R,
Business Combinations (SFAS 141R).
SFAS 141R establishes principles and requirements for how
the acquirer recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, and
any noncontrolling interest in the acquiree, measures the
goodwill acquired in the business combination or a gain from a
bargain purchase and what information to disclose to enable
users of the financial statements to evaluate the nature and
financial effects of the business combination. SFAS 141R
will be effective for the Company beginning after
January 1, 2009 and will impact business combination
transactions that close subsequent to that date.
Inventory consisted of the following at December 31:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Raw materials and parts
|
|
$
|
90,778
|
|
|
$
|
81,596
|
|
Work-in-progress
|
|
|
21,067
|
|
|
|
18,163
|
|
Finished goods
|
|
|
61,880
|
|
|
|
48,613
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
173,725
|
|
|
$
|
148,372
|
|
|
|
|
|
|
|
|
|
|
In November 2003, the Company issued $150 million of
seven-year Senior Notes (the Senior Notes). In
connection with this issuance, the Company entered into an
interest rate swap agreement, designated as a fair value hedge,
which changes the fixed interest obligation associated with
$30 million of the Senior Notes into a floating rate. This
agreement has a maturity date of November 15, 2010. Under
the swap, the Company will receive a fixed interest rate of
4.85% (i.e., the same rate as the Senior Notes) and pay interest
at a rate of LIBOR plus 0.22%. At December 31, 2007 and
2006, the fair value of the swap was a gain of approximately
$0.6 million and a loss of $0.4 million, respectively.
At December 31, 2007, the Company had outstanding foreign
currency forward contracts with notional amounts of
$67.6 million, in order to economically hedge short-term
intercompany balances with its foreign businesses. The fair
value of these contracts was a $0.6 million gain and a
$0.2 million gain as of December 31, 2007 and 2006,
respectively.
The Company may be exposed to credit losses in the event of
nonperformance by the counterparties to its derivative financial
instrument contracts. Counterparties are established banks and
financial institutions with high credit ratings. The Company
believes that such counterparties will be able to fully satisfy
their obligations under these contracts.
F-12
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
The fair values of all derivative financial instruments are
estimated based on current settlement prices obtained from
dealer quotes. The values represent the estimated amount the
Company would pay or receive to terminate the agreements at the
balance sheet date.
|
|
5.
|
PROPERTY, PLANT
AND EQUIPMENT, NET
|
Property, plant and equipment, net, consisted of the following
at December 31:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Land
|
|
$
|
57,191
|
|
|
$
|
52,920
|
|
Building and leasehold improvements
|
|
|
166,652
|
|
|
|
147,392
|
|
Machinery and equipment
|
|
|
260,788
|
|
|
|
237,959
|
|
Computer software
|
|
|
4,395
|
|
|
|
4,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
489,026
|
|
|
|
442,608
|
|
Less accumulated depreciation and amortization
|
|
|
(239,421
|
)
|
|
|
(213,470
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
249,605
|
|
|
$
|
229,138
|
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
GOODWILL AND
OTHER INTANGIBLE ASSETS
|
The following table shows the changes in the carrying amount of
goodwill for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Balance at beginning of year
|
|
$
|
432,871
|
|
|
$
|
423,048
|
|
Goodwill acquired
|
|
|
30
|
|
|
|
790
|
|
Foreign currency translation and other
|
|
|
7,866
|
|
|
|
9,033
|
|
|
|
|
|
|
|
|
|
|
Balance at year end
|
|
$
|
440,767
|
|
|
$
|
432,871
|
|
|
|
|
|
|
|
|
|
|
In accordance with SFAS 142, goodwill and indefinite-lived
assets are reviewed for impairment on an annual basis in the
fourth quarter. The Company completed its impairment review
under SFAS 142 and determined that, through
December 31, 2007, there had been no impairment of these
assets.
The components of other intangible assets as of December 31 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Gross
|
|
|
Accumulated
|
|
|
Gross
|
|
|
Accumulated
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amortization
|
|
|
Customer relationships
|
|
$
|
73,946
|
|
|
$
|
(11,363
|
)
|
|
$
|
73,340
|
|
|
$
|
(9,166
|
)
|
Proven technology and patents
|
|
|
32,079
|
|
|
|
(18,077
|
)
|
|
|
30,691
|
|
|
|
(15,538
|
)
|
Tradename (finite life)
|
|
|
1,655
|
|
|
|
(654
|
)
|
|
|
1,539
|
|
|
|
(550
|
)
|
Tradename (indefinite life)
|
|
|
22,434
|
|
|
|
|
|
|
|
22,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
130,114
|
|
|
$
|
(30,094
|
)
|
|
$
|
128,004
|
|
|
$
|
(25,254
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The annual aggregate amortization expense based on the current
balance of other intangible assets is estimated at
$4.6 million for 2008 to 2010, $4.3 million for 2011
and $4.0 million for 2012. The non-indefinite-lived
intangible assets are amortized on a straight-line basis over
periods ranging from 7 to 45 years. The straight-line
method of amortization reflects an appropriate allocation of the
cost of the intangible assets to
F-13
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
earnings in proportion to the amount of economic benefits
obtained by the Company in each reporting period.
The Company had amortization expense associated with the above
intangible assets of $4.5 million, $4.5 million and
$4.1 million for the years ended December 31, 2007,
2006 and 2005, respectively.
In addition to the above amortization, the Company recorded
amortization expense associated with capitalized software of
$7.2 million, $7.0 million and $7.3 million for
the years ended December 31, 2007, 2006 and 2005,
respectively.
The Companys accrual for product warranties is included in
accrued and other liabilities in the consolidated balance sheet.
Changes to the Companys accrual for product warranties for
the years ended December 31, 2007 and 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Balance at beginning of year
|
|
$
|
10,977
|
|
|
$
|
10,732
|
|
Accruals for warranties
|
|
|
14,883
|
|
|
|
13,247
|
|
Foreign currency translation
|
|
|
1,010
|
|
|
|
635
|
|
Payments/utilizations
|
|
|
(13,921
|
)
|
|
|
(13,637
|
)
|
|
|
|
|
|
|
|
|
|
Balance at year end
|
|
$
|
12,949
|
|
|
$
|
10,977
|
|
|
|
|
|
|
|
|
|
|
Debt consisted of the following at December 31:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
$150 million Senior Notes, interest at 4.85%, due
November 15, 2010
|
|
$
|
150,574
|
|
|
$
|
149,557
|
|
Less: unamortized discount
|
|
|
(100
|
)
|
|
|
(137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
150,474
|
|
|
|
149,420
|
|
Revolving credit facilities, interest at LIBOR plus 0.375%
|
|
|
222,932
|
|
|
|
185,295
|
|
Other local arrangements
|
|
|
23,236
|
|
|
|
20,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
396,642
|
|
|
|
355,667
|
|
Less: current portion
|
|
|
(11,570
|
)
|
|
|
(9,962
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
385,072
|
|
|
$
|
345,705
|
|
|
|
|
|
|
|
|
|
|
In November 2005, we entered into an amended and restated credit
agreement (the Credit Agreement). The
$450 million Amended Credit Agreement is provided by a
group of financial institutions and has a maturity date of
November 5, 2010. It is not subject to any scheduled
principal payments. Borrowings under the Credit Agreement bear
interest at current market rates plus a margin based on our
senior unsecured credit ratings (currently BBB by
Standard & Poors and Baa3 by
Moodys) and is currently set at LIBOR plus 0.375%. We must
also pay facility fees that are tied to our credit ratings. The
Credit Agreement contains covenants, for which the Company was
in compliance as of December 31, 2007, including
maintaining a ratio of debt to earnings before interest, tax,
depreciation and amortization of less than 3.25 to 1.0 and an
interest coverage ratio of more than 3.5 to 1.0. The Credit
Agreement also places certain limitations on us, including
F-14
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
limiting the ability to grant liens or incur debt at a
subsidiary level. In addition, the Credit Agreement has several
events of default, including upon a change of control. The
borrowings under the Credit Agreement have been classified as
long-term debt in accordance with the Companys intent and
ability to refinance such obligations on a long-term basis. As
of December 31, 2007, approximately $216.8 million was
available under the facility. The Credit Agreement is unsecured.
The Company incurred fees of approximately $0.9 million in
conjunction with amending and restating the Credit Agreement
which are being amortized to interest expense through 2010.
In November 2003, the Company issued $150 million of 4.85%
unsecured Senior Notes due November 15, 2010. The Senior
Notes rank equally with all our unsecured and unsubordinated
indebtedness. Interest is payable semi-annually in May and
November. Discount and issuance costs approximated
$1.2 million and are being amortized to interest expense
over the seven-year term of the Senior Notes. At the
Companys option, the Senior Notes may be redeemed in whole
or in part at any time at a redemption price equal to the
greater of:
|
|
|
|
|
the principal amount of the Senior Notes, or
|
|
|
|
the sum of the present values of the remaining scheduled
payments of principal and interest thereon discounted to the
redemption date on a semi-annual basis at a comparable treasury
rate plus a margin of 0.20%.
|
The Senior Notes contain limitations on the ability to incur
liens and enter into sale and leaseback transactions exceeding
10% of the Companys consolidated net worth.
During 2006, a wholly owned subsidiary of the Company issued and
sold $10 million of redeemable equity instruments to one of
the Companys
non-U.S. sponsored
defined benefit plans. These instruments are redeemable
beginning in July 2011 and, as such, are classified as long-term
debt on the Companys Consolidated Balance Sheet.
The Companys weighted average interest rate for the years
ended December 31, 2007 and 2006 was approximately 6% and
4% respectively. The carrying value of the Companys debt
obligations approximates fair value.
The number of authorized shares of the Companys common
stock is 125,000,000 shares with a par value of $0.01 per
share. Holders of the Companys common stock are entitled
to one vote per share. At December 31, 2007,
5,112,020 shares of the Companys common stock were
reserved for issuance pursuant to the Companys stock
option plans.
The Board of Directors, without further shareholder
authorization, is authorized to issue up to
10,000,000 shares of preferred stock, par value $0.01 per
share in one or more series and to determine and fix the rights,
preferences and privileges of each series, including dividend
rights and preferences over dividends on the common stock and
one or more series of the preferred stock, conversion rights,
voting rights (in addition to those provided by law), redemption
rights and the terms of any sinking fund therefore, and
F-15
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
rights upon liquidation, dissolution or winding up, including
preferences over the common stock and one or more series of the
preferred stock. The issuance of shares of preferred stock, or
the issuance of rights to purchase such shares, may have the
effect of delaying, deferring or preventing a change in control
of the Company or an unsolicited acquisition proposal.
In 2007 and 2006, the Company granted 43,885 and 61,100,
respectively, restricted stock units to certain employees and
directors. The grant-date fair value of the restricted stock
units granted in 2007 and 2006 was $105.11 and $68.06 per unit,
respectively, and the restricted units vest ratably over a
five-year period. The total fair value of the restricted stock
units on the date of grant for 2007 and 2006 of
$4.6 million and $4.2 million, respectively, will be
recorded as compensation expense ratably over the vesting
period. Approximately $1.7 million and $0.9 million of
compensation expense was recognized during the years ended
December 31, 2007 and 2006, respectively.
On August 26, 2002, the Board of Directors adopted a
Shareholder Rights Plan under which the Company declared a
non-cash dividend of one right for each outstanding share of
common stock. The Rights, which expire on September 5,
2012, entitle stockholders to buy one one-thousandth of a share
of preferred stock at an exercise price of $150. The Rights were
distributed to those stockholders of record as of close of
business on September 5, 2002 and are attached to all
certificates representing those shares of common stock.
The Rights Plan provides that should any person or group
acquire, or announce a tender or exchange offer for 15% or more
of the Companys common stock, each Right, other than
Rights held by the acquiring person or group, would entitle its
holder to purchase a number of shares of the Companys
common stock for 50% of its then-current market value. Unless a
15% acquisition has occurred, the Rights may be redeemed by the
Board of Directors of the Company at any time. The Rights Plan
will not be triggered by a tender or exchange offer for all
outstanding shares of the Company at a price and on terms that
the Companys Board of Directors determines to be adequate
and in the best interest of the Company and its stockholders.
The Rights Plan exempts any stockholder that beneficially owned
15% or more of the Companys common stock as of
August 26, 2002. However, the Rights will become
exercisable if, at any time after August 26, 2002, any of
these stockholders acquire additional shares of the
Companys common stock in an amount which is greater than
2% of the Companys outstanding common stock.
The Company has a share repurchase program that was announced in
2004. Under the program, the Company has been authorized to buy
back up to $1.5 billion of common shares. As of
December 31, 2007, there were $641.1 million of
remaining common shares authorized to be repurchased under the
plan by December 31, 2010. The share repurchases are
expected to be funded from cash balances, borrowings and cash
generated from operating activities. Repurchases will be made
through open market transactions, and the timing will depend on
the level of acquisition activity, business and market
conditions, the stock price, trading restrictions and other
factors. The Company has purchased 13.0 million shares
since the inception of the program through December 31,
2007.
During the years ended December 31, 2007 and 2006, the
Company spent $324.6 million and $265.9 million on the
repurchase of 3,384,731 shares and 4,141,559 shares at
an average price per share of $95.88 and $64.18, respectively.
$5.2 million and $5.4 million relating to the
settlement of shares repurchased as of December 31, 2007
and 2006 were cash settled during 2008 and 2007, respectively.
The Company reissued
F-16
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
567,205 shares and 1,152,892 shares held in treasury
for the exercise of stock options during 2007 and 2006,
respectively. In connection with prior reissuances, during 2006,
the Company has reclassified amounts within stockholders
equity to reflect the differential between treasury stock cost
and option proceeds as part of retained earnings rather than
additional paid-in capital.
|
|
|
Accumulated Other
Comprehensive Income (Loss)
|
Accumulated other comprehensive income (loss) consisted of the
following at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Currency translation adjustment
|
|
$
|
34,969
|
|
|
$
|
7,028
|
|
|
$
|
(3,542
|
)
|
Pension and post-retirement benefit related items
|
|
|
6,411
|
|
|
|
(42,914
|
)
|
|
|
(61,860
|
)
|
Deferred taxes on pension and post-retirement benefit related
items
|
|
|
1,237
|
|
|
|
18,565
|
|
|
|
20,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive income (loss)
|
|
$
|
42,617
|
|
|
$
|
(17,321
|
)
|
|
$
|
(45,325
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
EQUITY INCENTIVE
PLAN
|
The Companys equity incentive plan provides employees and
directors of the Company additional incentive to join
and/or
remain in the service of the Company as well as to maintain and
enhance the long-term performance and profitability of the
Company. The Companys 2004 equity incentive plan was
approved by shareholders on May 6, 2004 and provides that
3.5 million shares of common stock, plus any options
outstanding under the Companys prior option plan that
terminate without being exercised, may be the subject of awards.
Of the 3.5 million shares of common stock available for
awards, up to 2.1 million shares may be issued in the form
of restricted stock or restricted stock units. The plan provides
for the grant of options, restricted stock, restricted stock
units and other equity-based awards. The exercise price of
options granted shall not be less than the fair market value of
the common stock on the date of the award. Options generally
vest equally over a five-year period from the date of grant and
have a maximum term of up to 10 years and six months.
Restricted units vest equally over a five-year period from the
date of grant. During 2005, the compensation committee of the
Board of Directors determined to grant restricted share units to
participating managers and non-qualified stock options to
executive officers.
On January 1, 2006, the Company adopted SFAS 123R and
Staff Accounting Bulletin (SAB) No. 107,
Share-Based Payments, applying the modified
prospective method. SFAS 123R requires all share-based
compensation arrangements granted to employees, including stock
option grants, to be recognized in the consolidated statement of
operations based on the grant date fair value of the award over
the period during which an employee is required to provide
service in exchange for the award. Under the modified
prospective method, the Company is required to record
share-based compensation expense for all awards granted after
the date of adoption and for the unvested portion of previously
granted awards outstanding as of the date of adoption.
Share-based compensation expense is recorded within selling,
general and administrative in the consolidated statement of
operations with a corresponding offset to additional paid-in
capital in the
F-17
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
consolidated balance sheet. Prior year amounts have not been
restated. The effect on net earnings and net earnings per share
for year ended December 31, 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Share-based compensation by award type:
|
|
|
|
|
|
|
|
|
Stock options
|
|
$
|
6,469
|
|
|
$
|
7,355
|
|
Restricted stock units
|
|
|
1,673
|
|
|
|
884
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation
|
|
|
8,142
|
|
|
|
8,239
|
|
Tax effect on share-based compensation
|
|
|
(2,707
|
)
|
|
|
(2,716
|
)
|
|
|
|
|
|
|
|
|
|
Effect on net earnings
|
|
$
|
5,435
|
|
|
$
|
5,523
|
|
|
|
|
|
|
|
|
|
|
Effect on net earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.15
|
|
|
$
|
0.14
|
|
Diluted
|
|
$
|
0.14
|
|
|
$
|
0.14
|
|
The fair values of stock options granted were calculated using
the Black-Scholes pricing model. The aggregate intrinsic value
of an option is the amount by which the fair value of the
underlying stock exceeds its exercise price. The following table
summarizes all stock option activity from December 31, 2006
through December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Weighted
Average
|
|
|
Aggregate
Intrinsic
|
|
|
|
Options
|
|
|
Exercise
Price
|
|
|
Value (In
millions)
|
|
|
Outstanding at December 31, 2006
|
|
|
3,026,085
|
|
|
$
|
45.05
|
|
|
$
|
102.3
|
|
Granted
|
|
|
228,800
|
|
|
|
104.91
|
|
|
|
|
|
Exercised
|
|
|
(567,205
|
)
|
|
|
37.33
|
|
|
|
|
|
Forfeited
|
|
|
(153,000
|
)
|
|
|
51.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2007
|
|
|
2,534,680
|
|
|
$
|
51.78
|
|
|
$
|
157.2
|
|
Options exercisable at December 31, 2007
|
|
|
1,552,580
|
|
|
$
|
42.74
|
|
|
$
|
110.3
|
|
The following table details the weighted average remaining
contractual life of options outstanding at December 31,
2007 by range of exercise prices:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
Contractual
|
|
|
|
|
Number of
Options
|
|
|
Weighted
Average
|
|
|
Life of
Options
|
|
|
Options
|
|
Outstanding
|
|
|
Exercise
Price
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
|
86,550
|
|
|
$
|
28.46
|
|
|
|
3.1
|
|
|
|
71,650
|
|
|
719,160
|
|
|
|
36.19
|
|
|
|
5.5
|
|
|
|
644,760
|
|
|
842,670
|
|
|
|
46.81
|
|
|
|
5.6
|
|
|
|
636,070
|
|
|
657,500
|
|
|
|
59.77
|
|
|
|
8.7
|
|
|
|
200,100
|
|
|
228,800
|
|
|
|
104.91
|
|
|
|
9.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,534,680
|
|
|
|
|
|
|
|
6.7
|
|
|
|
1,552,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of the date granted, the weighted average grant-date fair
value of the options granted during the years ended
December 31, 2007, 2006 and 2005 was approximately $31.80,
$21.32 and $16.15, respectively. Such
F-18
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
weighted average grant-date fair value was determined using an
option pricing model that incorporated the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Risk-free interest rate
|
|
|
4.03
|
%
|
|
|
4.60
|
%
|
|
|
4.50
|
%
|
Expected life in years
|
|
|
5
|
|
|
|
5
|
|
|
|
5
|
|
Expected volatility
|
|
|
25
|
%
|
|
|
25
|
%
|
|
|
25
|
%
|
Expected dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
The total intrinsic value of options exercised during the years
ended December 31, 2007, 2006 and 2005 was approximately
$35.8 million, $44.0 million and $42.8 million,
respectively.
The total fair value of options vested during the years ended
December 31, 2007, 2006 and 2005 was approximately
$7.0 million, $7.8 million and $8.2 million,
respectively.
The following table summarizes all restricted stock unit
activity from December 31, 2006 through December 31,
2007:
|
|
|
|
|
|
|
|
|
|
|
Number of
Restricted
|
|
|
Aggregate
Intrinsic
|
|
|
|
Stock
Units
|
|
|
Value (In
millions)
|
|
|
Outstanding at December 31, 2006
|
|
|
119,980
|
|
|
$
|
9.5
|
|
Granted
|
|
|
43,885
|
|
|
|
|
|
Vested
|
|
|
(25,885
|
)
|
|
|
|
|
Forfeited
|
|
|
(5,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2007
|
|
|
131,985
|
|
|
$
|
15.0
|
|
The total fair value of restricted stock units vested during the
years ended December 31, 2007, 2006 and 2005 was
approximately $1.8 million, $0.9 million and
$0.1 million, respectively.
At December 31, 2007, a total of 2,445,155 shares of
common stock were available for grant in the form of stock
options or restricted stock units, of which up to a total of
1,927,210 were available for grant as restricted stock units.
As of December 31, 2007, the unrecorded deferred
share-based compensation balance related to both stock options
and restricted stock units was $27.2 million and will be
recognized using a straight-line method over an estimated
weighted average amortization period of 2.4 years.
Prior to January 1, 2006, the Company applied the intrinsic
valuation methodology under Accounting Principles Board Opinion
No. 25 and related interpretations in accounting for its
share-based compensation plan. Had compensation cost for the
Companys share-based plan been determined based upon the
fair value of such awards at the grant date, consistent with the
methods of SFAS 123, the Companys net earnings and
F-19
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
basic and diluted net earnings per common share for the year
ended December 31, 2005 would have been as follows:
|
|
|
|
|
|
|
2005
|
|
|
Net earnings:
|
|
|
|
|
As reported
|
|
$
|
108,902
|
|
Compensation expense, net of tax benefit
|
|
|
(6,277
|
)
|
|
|
|
|
|
Pro forma
|
|
$
|
102,625
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
As reported
|
|
$
|
2.58
|
|
Compensation expense
|
|
|
(0.15
|
)
|
|
|
|
|
|
Pro forma
|
|
$
|
2.43
|
|
|
|
|
|
|
Weighted average number of common shares
|
|
|
42,207,777
|
|
Diluted earnings per common share:
|
|
|
|
|
As reported
|
|
$
|
2.52
|
|
Compensation expense
|
|
|
(0.14
|
)
|
|
|
|
|
|
Pro forma
|
|
$
|
2.38
|
|
|
|
|
|
|
Weighted average number of common and common equivalent shares
|
|
|
43,122,131
|
|
Mettler-Toledo maintains a number of retirement and other
post-retirement employee benefit plans.
Certain subsidiaries sponsor defined contribution plans.
Benefits are determined and funded annually based upon the terms
of the plans. Amounts recognized as cost under these plans
amounted to $13.8 million, $11.1 million and
$9.2 million for the years ended December 31, 2007,
2006 and 2005, respectively.
Certain subsidiaries sponsor defined benefit plans. Benefits are
provided to employees primarily based upon years of service and
employees compensation for certain periods during the last
years of employment. Prior to 2002, the Companys
U.S. operations also provided post-retirement medical
benefits to their employees. Contributions for medical benefits
are related to employee years of service.
F-20
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
The Company uses a measurement date of September 30 and December
31 for its defined benefit pension and other benefit plans. The
following table sets forth the change in benefit obligation, the
change in plan assets, the funded status and amounts recognized
in the consolidated financial statements for the Companys
defined benefit plans and post-retirement plans at
December 31, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension
Benefits
|
|
|
Non-U.S. Pension
Benefits
|
|
|
Other
Benefits
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
113,210
|
|
|
$
|
115,904
|
|
|
$
|
569,699
|
|
|
$
|
479,254
|
|
|
$
|
23,923
|
|
|
$
|
25,232
|
|
Service cost, gross
|
|
|
679
|
|
|
|
660
|
|
|
|
23,127
|
|
|
|
19,250
|
|
|
|
405
|
|
|
|
253
|
|
Interest cost
|
|
|
6,358
|
|
|
|
6,227
|
|
|
|
19,090
|
|
|
|
16,453
|
|
|
|
1,322
|
|
|
|
1,321
|
|
Actuarial (gains) losses
|
|
|
(7,708
|
)
|
|
|
(4,067
|
)
|
|
|
(38,769
|
)
|
|
|
29,040
|
|
|
|
(1,784
|
)
|
|
|
(998
|
)
|
Plan amendments and other
|
|
|
|
|
|
|
|
|
|
|
220
|
|
|
|
3,319
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(5,334
|
)
|
|
|
(5,514
|
)
|
|
|
(17,325
|
)
|
|
|
(20,754
|
)
|
|
|
(1,584
|
)
|
|
|
(1,885
|
)
|
Impact of foreign currency
|
|
|
|
|
|
|
|
|
|
|
49,242
|
|
|
|
43,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$
|
107,205
|
|
|
$
|
113,210
|
|
|
$
|
605,284
|
|
|
$
|
569,699
|
|
|
$
|
22,282
|
|
|
$
|
23,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
100,799
|
|
|
$
|
97,980
|
|
|
$
|
519,907
|
|
|
$
|
439,037
|
|
|
$
|
|
|
|
$
|
|
|
Actual return on plan assets
|
|
|
12,899
|
|
|
|
8,292
|
|
|
|
20,517
|
|
|
|
44,069
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
44
|
|
|
|
41
|
|
|
|
22,306
|
|
|
|
13,501
|
|
|
|
1,584
|
|
|
|
1,885
|
|
Plan participants contributions
|
|
|
|
|
|
|
|
|
|
|
7,434
|
|
|
|
6,165
|
|
|
|
116
|
|
|
|
119
|
|
Benefits paid
|
|
|
(5,334
|
)
|
|
|
(5,514
|
)
|
|
|
(17,325
|
)
|
|
|
(20,754
|
)
|
|
|
(1,700
|
)
|
|
|
(2,004
|
)
|
Impact of foreign currency
|
|
|
|
|
|
|
|
|
|
|
44,732
|
|
|
|
37,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
$
|
108,408
|
|
|
$
|
100,799
|
|
|
$
|
597,571
|
|
|
$
|
519,907
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
1,203
|
|
|
$
|
(12,411
|
)
|
|
$
|
(7,713
|
)
|
|
$
|
(49,792
|
)
|
|
$
|
(22,282
|
)
|
|
$
|
(23,923
|
)
|
Net actuarial (gain) loss
|
|
|
19,379
|
|
|
|
33,755
|
|
|
|
(21,593
|
)
|
|
|
12,529
|
|
|
|
(4,197
|
)
|
|
|
(3,370
|
)
|
Post-measurement date contributions
|
|
|
7,711
|
|
|
|
10
|
|
|
|
|
|
|
|
5,566
|
|
|
|
327
|
|
|
|
376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
28,293
|
|
|
$
|
21,354
|
|
|
$
|
(29,306
|
)
|
|
$
|
(31,697
|
)
|
|
$
|
(26,152
|
)
|
|
$
|
(26,917
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the consolidated balance sheets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension
Benefits
|
|
|
Non-U.S. Pension
Benefits
|
|
|
Other
Benefits
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Other non-current assets
|
|
$
|
10,051
|
|
|
$
|
|
|
|
$
|
97,504
|
|
|
$
|
32,846
|
|
|
$
|
|
|
|
$
|
|
|
Pension and other post-retirement liabilities
|
|
|
(1,137
|
)
|
|
|
(12,401
|
)
|
|
|
(105,217
|
)
|
|
|
(99,647
|
)
|
|
|
(21,955
|
)
|
|
|
(23,547
|
)
|
Accumulated other comprehensive loss
|
|
|
19,379
|
|
|
|
33,755
|
|
|
|
(21,593
|
)
|
|
|
35,104
|
|
|
|
(4,197
|
)
|
|
|
(3,370
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
28,293
|
|
|
$
|
21,354
|
|
|
$
|
(29,306
|
)
|
|
$
|
(31,697
|
)
|
|
$
|
(26,152
|
)
|
|
$
|
(26,917
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-21
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
The prepaid pension asset is recorded in other non-current
assets on the consolidated balance sheet. The short-term and
long-term portion of the accrued pension liability is recorded
on the consolidated balance sheet within accrued compensation
and related items and other non-current liabilities,
respectively. The current portion of the accrued pension and
other postretirement liabilities at December 31, 2007 and
2006 was $0.1 million in both years for the
U.S. defined benefit pension plan, $5.7 million and
$2.8 million, respectively, for the
non-U.S. plans
and $2.2 million and $2.3 million, respectively, for
the U.S. post-retirement plans. The long-term portion of
the accrued pension liabilities and other post-retirement
liabilities at December 31, 2007 and 2006 was
$1.0 million and $12.3 million, respectively, for the
U.S. defined benefit pension plan, $99.5 million and
$96.8 million, respectively, for the
non-U.S. plans
and $19.7 million and $21.2 million, respectively, for
the U.S. post-retirement plans.
The following amounts have been recognized in Accumulated Other
Comprehensive Income, before taxes, at December 31, 2007
and have not yet been recognized as a component of net periodic
pension cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension
|
|
|
Non-U.S.
|
|
|
|
|
|
|
Benefits
|
|
|
Pension
Benefits
|
|
|
Other
Benefits
|
|
|
Prior service cost, net
|
|
$
|
|
|
|
$
|
(6,121
|
)
|
|
$
|
(2,824
|
)
|
Actuarial (gains)/losses
|
|
|
19,379
|
|
|
|
(15,573
|
)
|
|
|
(1,373
|
)
|
Transition obligations/(assets)
|
|
|
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
19,379
|
|
|
|
(21,593
|
)
|
|
|
(4,197
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accumulated benefit obligations at December 31, 2007
and 2006 were $107.2 million and $113.2 million,
respectively, for the U.S. defined benefit pension plan and
$530.7 million and $497.7 million, respectively, for
all
non-U.S. plans.
Certain of the plans included within
non-U.S. Pension
Benefits have benefit obligations which exceed the fair value of
plan assets. The projected benefit obligation, the accumulated
benefit obligation and fair value of assets of these plans as of
December 31, 2007 were $138.3 million,
$126.4 million and $31.6 million, respectively.
The assumed discount rates and rates of increase in future
compensation levels used in calculating the projected benefit
obligations vary according to the economic conditions of the
country in which the retirement plans are situated. The weighted
average rates used for the purposes of the Companys plans
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
Non-U.S.
|
|
|
2007
|
|
2006
|
|
2005
|
|
2007
|
|
2006
|
|
2005
|
|
Discount rate
|
|
|
6.25
|
%
|
|
|
5.75
|
%
|
|
|
5.50
|
%
|
|
|
3.90
|
%
|
|
|
3.30
|
%
|
|
|
3.30
|
%
|
Compensation increase rate
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
2.35
|
%
|
|
|
2.10
|
%
|
|
|
2.30
|
%
|
The assumed discount rates, rates of increase in future
compensation levels and the long-term rate of return used in
calculating the net periodic pension cost vary according to the
economic conditions of the country in which the retirement plans
are situated. The weighted average rates used for the purposes
of the Companys plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Discount rate
|
|
|
5.75
|
%
|
|
|
5.50
|
%
|
|
|
5.75
|
%
|
|
|
3.90
|
%
|
|
|
3.30
|
%
|
|
|
3.30
|
%
|
Compensation increase rate
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
2.35
|
%
|
|
|
2.10
|
%
|
|
|
2.30
|
%
|
Expected long-term rate of return on plan assets
|
|
|
8.50
|
%
|
|
|
8.50
|
%
|
|
|
8.50
|
%
|
|
|
5.15
|
%
|
|
|
5.10
|
%
|
|
|
5.20
|
%
|
F-22
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
Net periodic pension cost for the defined benefit plans includes
the following components for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Service cost, net
|
|
$
|
679
|
|
|
$
|
660
|
|
|
$
|
635
|
|
|
$
|
15,627
|
|
|
$
|
13,009
|
|
|
$
|
12,607
|
|
Interest cost on projected benefit obligations
|
|
|
6,358
|
|
|
|
6,227
|
|
|
|
6,030
|
|
|
|
19,090
|
|
|
|
16,453
|
|
|
|
17,241
|
|
Expected return on plan assets
|
|
|
(8,289
|
)
|
|
|
(8,047
|
)
|
|
|
(7,612
|
)
|
|
|
(27,432
|
)
|
|
|
(23,722
|
)
|
|
|
(22,216
|
)
|
Recognition of actuarial losses (gains)
|
|
|
2,058
|
|
|
|
2,583
|
|
|
|
2,407
|
|
|
|
889
|
|
|
|
371
|
|
|
|
(1,035
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
806
|
|
|
$
|
1,423
|
|
|
$
|
1,460
|
|
|
$
|
8,174
|
|
|
$
|
6,111
|
|
|
$
|
6,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic post-retirement benefit cost for the
U.S. post-retirement plans includes the following
components for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Service cost
|
|
$
|
405
|
|
|
$
|
253
|
|
|
$
|
211
|
|
Interest cost on projected benefit obligations
|
|
|
1,322
|
|
|
|
1,321
|
|
|
|
1,431
|
|
Net amortization and deferral
|
|
|
(957
|
)
|
|
|
(958
|
)
|
|
|
(958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic post-retirement benefit cost
|
|
$
|
770
|
|
|
$
|
616
|
|
|
$
|
684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amounts remaining in Accumulated Other Comprehensive Income
that are expected to be recognized as a component of net
periodic pension cost during 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension
|
|
|
Non-U.S.
|
|
|
|
|
|
|
Benefits
|
|
|
Pension
Benefits
|
|
|
Other
Benefits
|
|
|
Prior service cost, net
|
|
$
|
|
|
|
$
|
(493
|
)
|
|
$
|
(957
|
)
|
Actuarial (gains)/losses
|
|
|
791
|
|
|
|
1,016
|
|
|
|
|
|
Transition obligations
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
791
|
|
|
$
|
573
|
|
|
$
|
(957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The projected post-retirement benefit obligation was principally
determined using discount rates of 6.25% in 2007, 5.75% in 2006
and 5.50% in 2005 and net periodic post-retirement benefit cost
was principally determined using discount rates of 5.75% in
2007, 5.50% in 2006 and 5.75% in 2005 and health care cost trend
rates ranging from 8.0% to 11% in 2007, 8.5% to 12% in 2006 and
9% to 12.0% in 2005, decreasing to 5.0% in 2011.
The health care cost trend rate assumption has a significant
effect on the accumulated post-retirement benefit obligation and
net periodic post-retirement benefit cost. A
one-percentage-point change in assumed health care cost trend
rates would have the following effects:
|
|
|
|
|
|
|
|
|
|
|
One-Percentage-Point
|
|
One-Percentage-Point
|
|
|
Increase
|
|
Decrease
|
|
Effect on total of service and interest cost components
|
|
$
|
150
|
|
|
$
|
(134
|
)
|
Effect on post-retirement benefit obligation
|
|
$
|
1,756
|
|
|
$
|
(1,571
|
)
|
Plan assets relate principally to the Companys
U.S. and Swiss subsidiaries and consist of equity
investments, obligations of the U.S. Treasury or other
governmental agencies, and other interest-bearing
F-23
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
investments. Actual and target asset allocations in the
Companys pension plans at December 31, 2007 and 2006
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
|
Target
|
|
|
2007
|
|
|
2006
|
|
|
Target
|
|
|
2007
|
|
|
2006
|
|
|
Debt securities
|
|
|
30-40
|
%
|
|
|
37
|
%
|
|
|
34
|
%
|
|
|
40-60
|
%
|
|
|
46
|
%
|
|
|
53
|
%
|
Equity securities
|
|
|
60-70
|
%
|
|
|
63
|
%
|
|
|
66
|
%
|
|
|
30-50
|
%
|
|
|
47
|
%
|
|
|
41
|
%
|
Real estate and other
|
|
|
0-5
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
5-15
|
%
|
|
|
7
|
%
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment policies and strategies for each of the
Companys pension plans are determined periodically by
pension trustees for each plan, having regard for the potential
risks and returns offered by investment in the various assets
available. Target asset allocation and investment return
criteria are established by the trustees with the overriding
objective of stable earnings growth. Actual results are
monitored against those targets and the trustees are required to
report to the members of each plan, including an analysis of
investment performance on an annual basis at a minimum.
Day-to-day
asset management is typically performed by a third-party asset
management company, reporting to the pension trustees. The
long-term rate of return on plan asset assumptions used to
determine pension expense under U.S. GAAP are generally
based on historical investment performance and the target
investment return criteria for the future determined by the
trustees.
The following benefit payments, which reflect expected future
service as appropriate, are expected to be paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension
|
|
|
Non-U.S.
|
|
|
|
|
|
Other Benefits
Net of
|
|
|
|
Benefits
|
|
|
Pension
Benefits
|
|
|
Other Benefits
Gross
|
|
|
Subsidy
|
|
|
2008
|
|
$
|
5,523
|
|
|
$
|
16,500
|
|
|
$
|
2,557
|
|
|
$
|
2,217
|
|
2009
|
|
|
5,693
|
|
|
|
18,463
|
|
|
|
2,617
|
|
|
|
2,261
|
|
2010
|
|
|
5,802
|
|
|
|
18,989
|
|
|
|
2,651
|
|
|
|
2,278
|
|
2011
|
|
|
6,017
|
|
|
|
20,199
|
|
|
|
2,629
|
|
|
|
2,247
|
|
2012
|
|
|
6,252
|
|
|
|
22,726
|
|
|
|
2,595
|
|
|
|
2,208
|
|
2013 - 2017
|
|
|
35,944
|
|
|
|
132,796
|
|
|
|
12,039
|
|
|
|
10,228
|
|
The Company made voluntary incremental pension contributions of
$7.7 million in 2007 and $6.0 million in 2006 to
certain underfunded pension plans. The Company does not expect
to receive any refunds from its benefit plans during 2008.
In 2008, the Company expects to make normal employer pension
contributions of approximately $15.6 million to its
non-U.S. pension
plans and normal employer contributions of approximately
$2.2 million to its U.S. post-retirement medical plan.
The sources of the Companys earnings (losses) before taxes
were as follows for the years ending December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
United States
|
|
$
|
41,970
|
|
|
$
|
31,889
|
|
|
$
|
(1,955
|
)
|
Non-United
States
|
|
|
200,897
|
|
|
|
172,958
|
|
|
|
162,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before taxes
|
|
$
|
242,867
|
|
|
$
|
204,847
|
|
|
$
|
160,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-24
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
The provisions for taxes consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
Deferred
|
|
|
Total
|
|
|
Year ended December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States federal
|
|
$
|
|
|
|
$
|
15,362
|
|
|
$
|
15,362
|
|
State and local
|
|
|
1,040
|
|
|
|
(500
|
)
|
|
|
540
|
|
Non-United
States
|
|
|
41,086
|
|
|
|
7,372
|
|
|
|
48,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
42,126
|
|
|
$
|
22,234
|
|
|
$
|
64,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States federal
|
|
$
|
|
|
|
$
|
9,798
|
|
|
$
|
9,798
|
|
State and local
|
|
|
738
|
|
|
|
(491
|
)
|
|
|
247
|
|
Non-United
States
|
|
|
39,212
|
|
|
|
(1,942
|
)
|
|
|
37,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
39,950
|
|
|
$
|
7,365
|
|
|
$
|
47,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States federal
|
|
$
|
4,442
|
|
|
$
|
17,511
|
|
|
$
|
21,953
|
|
State and local
|
|
|
1,473
|
|
|
|
(2,137
|
)
|
|
|
(664
|
)
|
Non-United
States
|
|
|
33,040
|
|
|
|
(3,047
|
)
|
|
|
29,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
38,955
|
|
|
$
|
12,327
|
|
|
$
|
51,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The provisions for tax expense for the years ending
December 31, 2007, 2006 and 2005 differed from the amounts
computed by applying the United States federal income tax rate
of 35% to the earnings before taxes as a result of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Expected tax
|
|
$
|
85,003
|
|
|
$
|
71,696
|
|
|
$
|
56,064
|
|
United States state and local income taxes, net of federal
income tax benefit
|
|
|
540
|
|
|
|
247
|
|
|
|
(1,574
|
)
|
Change in valuation allowance
|
|
|
|
|
|
|
10,860
|
|
|
|
160
|
|
Special foreign earnings repatriations and audit settlements
|
|
|
|
|
|
|
|
|
|
|
5,411
|
|
Other
non-United
States income taxes at other than a 35% rate
|
|
|
(23,430
|
)
|
|
|
(17,700
|
)
|
|
|
(9,428
|
)
|
Release of unremitted foreign earnings liability
|
|
|
|
|
|
|
(13,450
|
)
|
|
|
|
|
Foreign jurisdiction tax law change
|
|
|
1,575
|
|
|
|
(5,050
|
)
|
|
|
|
|
Other, net
|
|
|
672
|
|
|
|
712
|
|
|
|
649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision for taxes
|
|
$
|
64,360
|
|
|
$
|
47,315
|
|
|
$
|
51,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-25
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities are presented below at December 31:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Inventory
|
|
$
|
14,925
|
|
|
$
|
14,170
|
|
Accrued and other liabilities
|
|
|
36,065
|
|
|
|
31,079
|
|
Accrued post-retirement benefit and pension costs
|
|
|
25,964
|
|
|
|
36,237
|
|
Net operating loss and tax credit carryforwards
|
|
|
41,439
|
|
|
|
48,445
|
|
Other
|
|
|
8,201
|
|
|
|
4,162
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
126,594
|
|
|
|
134,093
|
|
Less valuation allowance
|
|
|
(23,822
|
)
|
|
|
(31,956
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets less valuation allowance
|
|
|
102,772
|
|
|
|
102,137
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Inventory
|
|
|
3,122
|
|
|
|
2,506
|
|
Property, plant and equipment
|
|
|
37,809
|
|
|
|
35,617
|
|
Rainin intangibles amortization
|
|
|
25,760
|
|
|
|
19,054
|
|
Prepaid post-retirement benefit and pension costs
|
|
|
21,971
|
|
|
|
22,184
|
|
Other
|
|
|
19,643
|
|
|
|
8,685
|
|
International earnings
|
|
|
3,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
111,652
|
|
|
|
88,046
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset (liability)
|
|
$
|
(8,880
|
)
|
|
$
|
14,091
|
|
|
|
|
|
|
|
|
|
|
On January 1, 2007, the Company adopted FASB Interpretation
No. 48, Accounting for Uncertainty in Income
Taxes an interpretation of FASB Statement
No. 109 (FIN 48). FIN 48
prescribes a recognition threshold and measurement process for
recording in the financial statements uncertain tax positions
taken or expected to be taken in a tax return. Additionally,
FIN 48 provides guidance regarding uncertain tax positions
relating to derecognition, classification, interest and
penalties, accounting in interim periods, disclosure and
transition. As of the date of adoption, the Company recognized a
$4.1 million increase in the liability for unrecognized tax
benefits with a corresponding reduction in retained earnings.
The Companys total balance of unrecognized tax benefits as
of January 1, 2007 was $24.4 million.
A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows:
|
|
|
|
|
Unrecognized tax benefits at January 1, 2007
|
|
$
|
24,363
|
|
Increases related to prior year tax positions
|
|
|
860
|
|
Decreases related to prior year tax positions
|
|
|
(2,313
|
)
|
Increases related to current tax positions
|
|
|
3,046
|
|
Foreign currency translation increases to prior year tax
positions
|
|
|
947
|
|
Decreases relating to taxing authority settlements
|
|
|
|
|
Decreases resulting from a lapse of the applicable statute of
limitations
|
|
|
(116
|
)
|
|
|
|
|
|
Unrecognized tax benefits at December 31, 2007
|
|
$
|
26,787
|
|
|
|
|
|
|
Included in the unrecognized tax benefits balance at
December 31, 2007 is $23.2 million of unrecognized tax
benefits that if recognized would reduce the Companys tax
rate. The Company recognizes accrued
F-26
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
amounts of interest and penalties related to its uncertain tax
positions as part of its income tax expense within its
consolidated statement of operations. The amount of accrued
interest and penalties included within other non-current
liabilities within the Companys consolidated balance sheet
as of December 31, 2007 was $2.3 million.
The Company believes that it is reasonably possible that the
unrecognized tax benefit balance could change over the next
12 months, primarily related to potential disputes raised
by the taxing authorities over income and expense recognition.
An estimate of the range of these increases cannot currently be
made. However, the Company does not expect a change would have a
material impact on its financial position, results of operations
or cash flows.
The Company has recorded valuation allowances related to certain
of its deferred income tax assets due to the uncertainty of the
ultimate realization of future benefits from such assets. The
potential decrease or increase of the valuation allowance in the
near term is dependent on the future ability of the Company to
realize the deferred tax assets that are affected by the future
profitability of operations in various worldwide jurisdictions.
The $8.1 million decrease in the total valuation allowance
during 2007 is primarily attributable to $4.8 million
related to the expiration or utilization of tax loss
carryforwards and $3.3 million related to the adoption of
FIN 48. During 2006, the Company incurred a
$10.5 million charge related to the establishment of a
valuation allowance for foreign tax credit carryforwards
described below. $2.7 million of the Companys total
valuation allowance will be credited to shareholders
equity if and when realized.
At December 31, 2007, the Company has various
U.S. state net operating losses and various foreign net
operating losses that have various expiration periods.
The Company plans to repatriate earnings from China,
Switzerland, the United Kingdom and certain other countries in
future years. All other undistributed earnings are considered to
be permanently reinvested. The Company currently believes that
there will be no additional cost associated with the
repatriation of such foreign earnings other than withholding
taxes.
During the third quarter of 2007, the Company recorded certain
discrete tax items which resulted in a net tax benefit of
$1.1 million. The discrete items include a benefit of
$3.4 million related to a favorable resolution of certain
tax matters and other adjustments related to prior years, which
were partially offset by a charge of $2.3 million primarily
due to a tax law change in Germany.
During 2006, the Company implemented a legal reorganization that
resulted in a reduction of the estimated annual effective tax
rate before discrete items from 30% to 27%. In addition to the
change in the Companys annual effective tax rate, the
Company recorded three discrete tax items: a charge of
$10.5 million related to the establishment of a valuation
allowance on foreign tax credit carryforwards, a benefit of
$13.4 million associated with a reduction of a liability
previously established for estimated costs to repatriate
unremitted earnings of foreign subsidiaries and a favorable tax
law change resulting in a benefit of $5.1 million.
As a result of the American Jobs Creation Act of 2004, the
Company repatriated $396 million of cash during 2005 that
had been generated over time by its foreign operations. As a
result of this repatriation, the Company recorded additional
income tax expense of $13.1 million during 2005. This
amount reflects the federal tax impact in the United States
(including certain state taxes) of $12.3 million, foreign
withholding taxes of $2.0 million and a net decrease of
$1.2 million of deferred tax liabilities associated with
the reassessment of pre-existing and future dividend
repatriations. In addition, the Company recorded tax benefits of
$7.7 million during 2005 related to a favorable resolution
of certain tax matters.
As of December 31, 2007, the major jurisdictions for which
the Company is subject to examinations are Germany for years
after 2002, the United States after 2003, France and Switzerland
after 2004, the United
F-27
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
Kingdom after 2005 and China after 2006. Additionally, the
Company is currently under examination in various taxing
jurisdictions in which it conducts business operations. While
the Company has not yet received any material assessments from
these taxing authorities, the Company believes that adequate
amounts of taxes and related interest and penalties have been
provided for any adverse adjustments as a result of these
examinations and that the ultimate outcome of these examinations
will not result in a material impact on the Companys
consolidated results of operations or financial position.
|
|
13.
|
OTHER (INCOME)
CHARGES, NET
|
Other (income) charges, net consists primarily of interest
income, (gains) losses from foreign currency transactions and
other items.
In 2005, other (income) charges, net included a
$21.8 million charge related to litigation. In 2005, the
Company wrote-off a non-cash $19.9 million
($12 million after tax) intangible asset relating to an
intellectual property license that was subject to litigation
with the grantor which is included as a component of Other and
Deferred taxes in the interim consolidated statements of cash
flows. This license enabled a wholly owned subsidiary of the
Company exclusive rights to distribute certain third-party
manufactured pipettes in the United States. A judgment entered
on June 6, 2005 terminated the license agreement and
awarded damages to the other party. The Company also incurred
$1.9 million of related legal costs during 2005, which
includes damages of $0.6 million due to the grantor. The
damages of $0.6 million were subsequently reversed during
2006.
|
|
14.
|
COMMITMENTS AND
CONTINGENCIES
|
The Company leases certain of its facilities and equipment under
operating leases. The future minimum lease payments under
non-cancelable operating leases are as follows at
December 31, 2007:
|
|
|
|
|
2008
|
|
$
|
22,939
|
|
2009
|
|
|
16,776
|
|
2010
|
|
|
12,585
|
|
2011
|
|
|
8,591
|
|
2012
|
|
|
6,585
|
|
Thereafter
|
|
|
11,747
|
|
|
|
|
|
|
Total
|
|
$
|
79,223
|
|
|
|
|
|
|
Rent expense for operating leases amounted to
$32.9 million, $31.2 million and $30.7 million
for the years ended December 31, 2007, 2006 and 2005,
respectively.
The Company is party to various legal proceedings, including
certain environmental matters, incidental to the normal course
of business. Management does not expect that any of such
proceedings will have a material adverse effect on the
Companys financial condition or results of operations.
Operating segments are the individual reporting units within the
Company. These units are managed separately, and it is at this
level where the determination of resource allocation is made.
The units have been aggregated based on operating segments in
geographic regions that have similar economic characteristics
F-28
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
and meet the aggregation criteria of SFAS No. 131,
Disclosures about Segments of an Enterprise and Related
Information (SFAS 131). The Company has
determined there are five reportable segments:
U.S. Operations, Swiss Operations, Western European
Operations, Chinese Operations and Other.
U.S. Operations represent certain of the Companys
marketing and producing organizations located in the United
States. Western European Operations include the Companys
marketing and producing organizations in Western Europe,
excluding operations located in Switzerland. Swiss Operations
include marketing and producing organizations located in
Switzerland as well as extensive R&D operations that are
responsible for the development, production and marketing of
precision instruments, including weighing, analytical and
measurement technologies for use in a variety of industrial and
laboratory applications. Chinese Operations represent the
Companys marketing and producing organizations located in
China. The Companys market organizations are
geographically focused and are responsible for all aspects of
the Companys sales and service. Operating segments that
exist outside these reportable segments are included in Other.
The accounting policies of the operating segments are the same
as those described in the summary of significant accounting
policies. The Company evaluates performance based on segment
profit for segment reporting (gross profit less research and
development, selling, general and administrative expenses and
restructuring charges, before amortization, interest expense and
other charges (income) and taxes). Inter-segment sales and
transfers are priced to reflect consideration of market
conditions and the regulations of the countries in which the
transferring entities are located. The following tables show the
operations of the Companys operating segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales to
|
|
|
Net Sales to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of,
|
|
|
|
|
For the Year
Ended
|
|
External
|
|
|
Other
|
|
|
Total Net
|
|
|
Segment
|
|
|
|
|
|
|
|
|
Property Plant
|
|
|
|
|
December 31,
2007
|
|
Customers
|
|
|
Segments
|
|
|
Sales
|
|
|
Profit
|
|
|
Depreciation
|
|
|
Total
Assets
|
|
|
and
Equipment
|
|
|
Goodwill
|
|
|
U.S. Operations
|
|
$
|
614,735
|
|
|
$
|
57,134
|
|
|
$
|
671,869
|
|
|
$
|
104,913
|
|
|
$
|
6,881
|
|
|
$
|
868,202
|
|
|
$
|
(7,258
|
)
|
|
$
|
272,572
|
|
Swiss Operations
|
|
|
109,867
|
|
|
|
281,175
|
|
|
|
391,042
|
|
|
|
81,158
|
|
|
|
7,805
|
|
|
|
537,360
|
|
|
|
(7,780
|
)
|
|
|
25,126
|
|
Western European Operations
|
|
|
614,268
|
|
|
|
77,468
|
|
|
|
691,736
|
|
|
|
58,497
|
|
|
|
6,044
|
|
|
|
945,677
|
|
|
|
(7,406
|
)
|
|
|
122,530
|
|
Chinese Operations
|
|
|
168,261
|
|
|
|
86,249
|
|
|
|
254,510
|
|
|
|
57,481
|
|
|
|
3,251
|
|
|
|
174,867
|
|
|
|
(11,918
|
)
|
|
|
1,969
|
|
Other(a)
|
|
|
286,617
|
|
|
|
3,713
|
|
|
|
290,330
|
|
|
|
29,887
|
|
|
|
2,068
|
|
|
|
165,611
|
|
|
|
(3,852
|
)
|
|
|
18,570
|
|
Eliminations and
Corporate(b)
|
|
|
|
|
|
|
(505,739
|
)
|
|
|
(505,739
|
)
|
|
|
(57,259
|
)
|
|
|
615
|
|
|
|
(1,013,503
|
)
|
|
|
(9,331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,793,748
|
|
|
$
|
|
|
|
$
|
1,793,748
|
|
|
$
|
274,677
|
|
|
$
|
26,664
|
|
|
$
|
1,678,214
|
|
|
$
|
(47,545
|
)
|
|
$
|
440,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales to
|
|
|
Net Sales to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of
|
|
|
|
|
For the Year
Ended
|
|
External
|
|
|
Other
|
|
|
Total Net
|
|
|
Segment
|
|
|
|
|
|
|
|
|
Property Plant
|
|
|
|
|
December 31,
2006
|
|
Customers
|
|
|
Segments
|
|
|
Sales
|
|
|
Profit
|
|
|
Depreciation
|
|
|
Total
Assets
|
|
|
and
Equipment
|
|
|
Goodwill
|
|
|
U.S. Operations
|
|
$
|
586,069
|
|
|
$
|
51,349
|
|
|
$
|
637,418
|
|
|
$
|
89,384
|
|
|
$
|
6,959
|
|
|
$
|
818,841
|
|
|
$
|
(7,497
|
)
|
|
$
|
272,620
|
|
Swiss Operations
|
|
|
96,311
|
|
|
|
244,538
|
|
|
|
340,849
|
|
|
|
70,083
|
|
|
|
7,632
|
|
|
|
431,542
|
|
|
|
(5,071
|
)
|
|
|
23,820
|
|
Western European Operations
|
|
|
538,953
|
|
|
|
68,883
|
|
|
|
607,836
|
|
|
|
50,635
|
|
|
|
5,490
|
|
|
|
887,866
|
|
|
|
(6,506
|
)
|
|
|
116,771
|
|
Chinese Operations
|
|
|
132,710
|
|
|
|
68,721
|
|
|
|
201,431
|
|
|
|
45,160
|
|
|
|
3,294
|
|
|
|
138,853
|
|
|
|
(8,723
|
)
|
|
|
1,887
|
|
Other(a)
|
|
|
240,869
|
|
|
|
|
|
|
|
240,869
|
|
|
|
21,412
|
|
|
|
1,901
|
|
|
|
140,177
|
|
|
|
(2,444
|
)
|
|
|
17,773
|
|
Eliminations and
Corporate(b)
|
|
|
|
|
|
|
(433,491
|
)
|
|
|
(433,491
|
)
|
|
|
(50,753
|
)
|
|
|
793
|
|
|
|
(830,194
|
)
|
|
|
(4,088
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,594,912
|
|
|
$
|
|
|
|
$
|
1,594,912
|
|
|
$
|
225,921
|
|
|
$
|
26,069
|
|
|
$
|
1,587,085
|
|
|
$
|
(34,329
|
)
|
|
$
|
432,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-29
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales to
|
|
|
Net Sales to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of
|
|
|
|
|
For the Year
Ended
|
|
External
|
|
|
Other
|
|
|
Total Net
|
|
|
Segment
|
|
|
|
|
|
|
|
|
Property Plant
|
|
|
|
|
December 31,
2005
|
|
Customers
|
|
|
Segments
|
|
|
Sales
|
|
|
Profit
|
|
|
Depreciation
|
|
|
Total
Assets
|
|
|
and
Equipment
|
|
|
Goodwill
|
|
|
U.S. Operations
|
|
$
|
560,238
|
|
|
$
|
50,361
|
|
|
$
|
610,599
|
|
|
$
|
79,448
|
|
|
$
|
7,058
|
|
|
$
|
904,758
|
|
|
$
|
(12,056
|
)
|
|
$
|
272,683
|
|
Swiss Operations
|
|
|
88,138
|
|
|
|
236,763
|
|
|
|
324,901
|
|
|
|
65,471
|
|
|
|
7,777
|
|
|
|
348,799
|
|
|
|
(4,739
|
)
|
|
|
22,666
|
|
Western European Operations
|
|
|
508,289
|
|
|
|
69,293
|
|
|
|
577,582
|
|
|
|
45,466
|
|
|
|
5,548
|
|
|
|
801,900
|
|
|
|
(5,192
|
)
|
|
|
107,306
|
|
Chinese Operations
|
|
|
116,912
|
|
|
|
57,997
|
|
|
|
174,909
|
|
|
|
40,245
|
|
|
|
3,110
|
|
|
|
114,481
|
|
|
|
(3,326
|
)
|
|
|
1,833
|
|
Other(a)
|
|
|
208,895
|
|
|
|
559
|
|
|
|
209,454
|
|
|
|
14,745
|
|
|
|
1,646
|
|
|
|
118,793
|
|
|
|
(2,369
|
)
|
|
|
18,560
|
|
Eliminations and
Corporate(b)
|
|
|
|
|
|
|
(414,973
|
)
|
|
|
(414,973
|
)
|
|
|
(38,651
|
)
|
|
|
838
|
|
|
|
(618,958
|
)
|
|
|
(4,816
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,482,472
|
|
|
$
|
|
|
|
$
|
1,482,472
|
|
|
$
|
206,724
|
|
|
$
|
25,977
|
|
|
$
|
1,669,773
|
|
|
$
|
(32,498
|
)
|
|
$
|
423,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Other includes reporting units in Eastern Europe, Latin
America and segments from other countries. |
|
(b) |
|
Eliminations and Corporate includes the elimination of
inter-segment transactions as well as certain corporate expenses
and intercompany investments, which are not included in the
Companys operating segments. |
Reconciliation of earnings before tax to segment profit follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Earnings before taxes
|
|
$
|
242,867
|
|
|
$
|
204,847
|
|
|
$
|
160,184
|
|
Amortization
|
|
|
11,682
|
|
|
|
11,503
|
|
|
|
11,436
|
|
Interest expense
|
|
|
21,003
|
|
|
|
17,492
|
|
|
|
14,880
|
|
Other (income) charges, net
|
|
|
(875
|
)
|
|
|
(7,921
|
)
|
|
|
20,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit
|
|
$
|
274,677
|
|
|
$
|
225,921
|
|
|
$
|
206,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company sells precision instruments, including weighing
instruments and certain analytical and measurement technologies,
and related services to a variety of customers and industries.
None of these customers account for more than 2% of net sales.
Service revenues are primarily derived from sales of spare parts
and services such as calibration, certification and repair, much
of which is provided under contracts. A breakdown of the
Companys sales by category for the years ended December 31
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Weighing-related instruments
|
|
$
|
883,266
|
|
|
$
|
758,882
|
|
|
$
|
703,581
|
|
Non-weighing instruments
|
|
|
504,253
|
|
|
|
471,478
|
|
|
|
440,728
|
|
Service
|
|
|
406,229
|
|
|
|
364,552
|
|
|
|
338,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
$
|
1,793,748
|
|
|
$
|
1,594,912
|
|
|
$
|
1,482,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-30
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
In certain circumstances, our operating segments sell directly
into other geographies. A breakdown of net sales to external
customers by geographic customer destination and property, plant
and equipment, net for the year ended December 31 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, Plant
and
|
|
|
|
Net
Sales
|
|
|
Equipment,
Net
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
United States
|
|
$
|
559,723
|
|
|
$
|
535,654
|
|
|
$
|
513,102
|
|
|
$
|
34,456
|
|
|
$
|
36,111
|
|
Other Americas
|
|
|
121,110
|
|
|
|
105,588
|
|
|
|
94,240
|
|
|
|
3,649
|
|
|
|
2,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Americas
|
|
|
680,833
|
|
|
|
641,242
|
|
|
|
607,342
|
|
|
|
38,105
|
|
|
|
38,533
|
|
Germany
|
|
|
159,182
|
|
|
|
148,003
|
|
|
|
140,877
|
|
|
|
34,039
|
|
|
|
30,773
|
|
France
|
|
|
129,449
|
|
|
|
114,065
|
|
|
|
108,352
|
|
|
|
6,284
|
|
|
|
5,301
|
|
United Kingdom
|
|
|
66,710
|
|
|
|
60,026
|
|
|
|
59,210
|
|
|
|
117,751
|
|
|
|
7,363
|
|
Switzerland
|
|
|
58,126
|
|
|
|
54,779
|
|
|
|
52,431
|
|
|
|
7,035
|
|
|
|
110,477
|
|
Other Europe
|
|
|
348,180
|
|
|
|
289,865
|
|
|
|
256,909
|
|
|
|
8,367
|
|
|
|
7,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Europe
|
|
|
761,647
|
|
|
|
666,738
|
|
|
|
617,779
|
|
|
|
173,476
|
|
|
|
161,443
|
|
China
|
|
|
162,751
|
|
|
|
129,682
|
|
|
|
114,782
|
|
|
|
35,500
|
|
|
|
26,781
|
|
Rest of World
|
|
|
188,517
|
|
|
|
157,250
|
|
|
|
142,569
|
|
|
|
2,524
|
|
|
|
2,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Asia/Rest of World
|
|
|
351,268
|
|
|
|
286,932
|
|
|
|
257,351
|
|
|
|
38,024
|
|
|
|
29,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,793,748
|
|
|
$
|
1,594,912
|
|
|
$
|
1,482,472
|
|
|
$
|
249,605
|
|
|
$
|
229,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-31
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
|
|
16.
|
QUARTERLY
FINANCIAL DATA (UNAUDITED)
|
Quarterly financial data for the years ended December 31,
2007 and 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
387,764
|
|
|
$
|
430,544
|
|
|
$
|
442,600
|
|
|
$
|
532,840
|
|
Gross profit
|
|
|
191,479
|
|
|
|
215,093
|
|
|
|
219,009
|
|
|
|
270,600
|
|
Net earnings
|
|
$
|
30,430
|
|
|
$
|
41,031
|
|
|
$
|
43,772
|
|
|
$
|
63,274
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
0.80
|
|
|
$
|
1.10
|
|
|
$
|
1.19
|
|
|
$
|
1.76
|
|
Weighted average number of common shares
|
|
|
38,065,483
|
|
|
|
37,454,360
|
|
|
|
36,650,215
|
|
|
|
35,930,778
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
0.78
|
|
|
$
|
1.07
|
|
|
$
|
1.16
|
|
|
$
|
1.72
|
|
Weighted average number of common shares
|
|
|
38,931,681
|
|
|
|
38,409,325
|
|
|
|
37,597,020
|
|
|
|
36,873,667
|
|
Market price per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
91.61
|
|
|
$
|
101.76
|
|
|
$
|
103.19
|
|
|
$
|
118.54
|
|
Low
|
|
$
|
77.78
|
|
|
$
|
89.94
|
|
|
$
|
86.59
|
|
|
$
|
102.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
346,160
|
|
|
$
|
389,157
|
|
|
$
|
397,318
|
|
|
$
|
462,277
|
|
Gross profit
|
|
|
170,340
|
|
|
|
192,435
|
|
|
|
194,057
|
|
|
|
233,600
|
|
Net earnings
|
|
$
|
23,715
|
|
|
$
|
34,757
|
|
|
$
|
47,040
|
|
|
$
|
52,020
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
0.58
|
|
|
$
|
0.86
|
|
|
$
|
1.18
|
|
|
$
|
1.34
|
|
Weighted average number of common shares
|
|
|
41,050,849
|
|
|
|
40,535,389
|
|
|
|
39,795,452
|
|
|
|
38,882,113
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
0.57
|
|
|
$
|
0.84
|
|
|
$
|
1.16
|
|
|
$
|
1.31
|
|
Weighted average number of common shares
|
|
|
41,774,068
|
|
|
|
41,237,812
|
|
|
|
40,455,687
|
|
|
|
39,675,263
|
|
Market price per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
61.90
|
|
|
$
|
68.34
|
|
|
$
|
66.15
|
|
|
$
|
80.80
|
|
Low
|
|
$
|
55.62
|
|
|
$
|
58.50
|
|
|
$
|
56.70
|
|
|
$
|
66.00
|
|
F-32
METTLER-TOLEDO
INTERNATIONAL INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands,
except share data, unless otherwise stated)
Schedule II
Valuation and Qualifying Accounts (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Column
A
|
|
Column
B
|
|
|
Column
C
|
|
|
Column
D
|
|
|
Column
E
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
Balance at the
|
|
|
(1)
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
Beginning of
|
|
|
Charged to
|
|
|
Charged to
|
|
|
|
|
|
Balance at End
|
|
Description
|
|
Period
|
|
|
Costs and
Expenses
|
|
|
Other
Accounts
|
|
|
-Deductions-
|
|
|
of
Period
|
|
|
|
|
|
|
|
|
|
|
|
Note (A)
|
|
|
Note (B)
|
|
|
|
|
|
Accounts Receivableallowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007
|
|
|
7,073
|
|
|
|
461
|
|
|
|
651
|
|
|
|
(619
|
)
|
|
|
8,804
|
|
Year ended December 31, 2006
|
|
|
7,897
|
|
|
|
961
|
|
|
|
394
|
|
|
|
2,179
|
|
|
|
7,073
|
|
Year ended December 31, 2005
|
|
|
9,759
|
|
|
|
1,034
|
|
|
|
(498
|
)
|
|
|
2,398
|
|
|
|
7,897
|
|
Deferred tax valuation allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007
|
|
|
31,956
|
|
|
|
348
|
|
|
|
(3,348
|
)
|
|
|
5,134
|
|
|
|
23,822
|
|
Year ended December 31, 2006
|
|
|
25,160
|
|
|
|
11,877
|
|
|
|
|
|
|
|
5,081
|
|
|
|
31,956
|
|
Year ended December 31, 2005
|
|
|
25,000
|
|
|
|
160
|
|
|
|
|
|
|
|
|
|
|
|
25,160
|
|
Note (A)
For accounts receivable, amount primarily comprises currency
translation adjustments.
For deferred tax valuation allowance, amount relates to adoption
of FIN 48.
Note (B)
For accounts receivable in 2007, amount represents recoveries of
accounts previously written off in excess of uncollectible
balances.
For accounts receivable in 2006 and 2005, amount represents
excess of uncollectible balances written off over recoveries of
accounts previously written off.
For deferred tax valuation allowance, reductions relate to tax
credit and tax loss carryforwards.
S-1