UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(MARK ONE)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
|_| TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE
REQUIRED] FOR THE TRANSITION PERIOD
FROM _______ TO _______
COMMISSION FILE NUMBER 0-22493
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METTLER-TOLEDO INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3668641
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
IM LANGACHER
P.O. BOX MT-100
CH 8606 GREIFENSEE, SWITZERLAND ----------
(Address of principal executive offices) (Zip Code)
011-41-1-944-2211
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- --------------------
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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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 such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's 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.
As of February 22, 2002 there were 44,161,792 shares of the
Registrant's 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 (based on the closing price for the Common Stock on the
New York Stock Exchange on that day) was approximately $2.019 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
DOCUMENT PART OF FORM 10-K
-------- INTO WHICH INCORPORATED
PROXY STATEMENT FOR 2002 -----------------------
ANNUAL MEETING OF STOCKHOLDERS PART III
METTLER-TOLEDO INTERNATIONAL INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
PAGE
PART I
ITEM 1. BUSINESS.....................................................1
ITEM 2. PROPERTIES...................................................23
ITEM 3. LEGAL PROCEEDINGS............................................24
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........24
SUPPLEMENTAL EXECUTIVE OFFICERS OF THE REGISTRANT.........................24
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS..................................25
ITEM 6. SELECTED FINANCIAL DATA......................................26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..........................28
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK..................................................40
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................40
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE..........................40
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...........41
ITEM 11. EXECUTIVE COMPENSATION.......................................43
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT...............................................44
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............44
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K..................................................44
SIGNATURES .............................................................45
Unless otherwise stated or where the context otherwise requires,
references herein to we, our, the "Company" or "Mettler-Toledo" refer to
Mettler-Toledo International Inc. and its direct and indirect subsidiaries.
This Annual Report on Form 10-K includes forward-looking statements
based on our current expectations and projections about future events.
These forward-looking statements are subject to a number of risks and
uncertainties which could cause our actual results to differ materially
from historical results or those anticipated and certain of which are
beyond our control. The words "believe," "expect," "anticipate" and similar
expressions identify forward-looking statements. We undertake no obligation
to publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. New risk factors
emerge from time to time and it is not possible for us to predict all such
risk factors, nor can we assess the impact of all such risk factors on our
business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in any
forward-looking statements. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements as a
prediction of actual results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Exhibit 99.1 to this
Report.
We use the following registered and unregistered trademarks, which are
found in this Report: AIRWEIGH, APPLIED SYSTEMS, ASI, AVS, AX, BERGER,
BERGER INSTRUMENTS, BOHDAN, CARGOSCAN, DELTARANGE, DIGITOL, FORMWEIGH,
FREEWEIGH, FTIR, JAGUAR, JAGXTREME, LABMAX, LUTRANA, MENTOR SC, METTLER,
METTLER-TOLEDO, MT-SHOP, MULTIMAX, MULTIRANGE, MYRIAD, OHAUS, OPRA, RAININ,
RONDO, SAFELINE, SERVICEXXL, SPIDER, TESTUT, TESTUT-LUTRANA, THORNTON,
TRIMWEIGH , TRUCKMATE, UNICORN, VIKING, VIPER, WINBRIDGE AND X-MATEPRO.
Unless otherwise indicated, industry data contained herein is derived
from publicly available industry trade journals, government reports and
other publicly available sources. We have not independently verified this
data but we believe the data is reliable. Where such sources are not
available, industry data is derived from our internal estimates, which we
believe to be reasonable, but which cannot be independently verified. As
used in this Annual Report, "$" refers to U.S. dollars, "CHF" or "SFr"
refers to Swiss francs, "(pound)" refers to British pounds sterling and
"CDN $" refers to Canadian dollars.
PART I
Item 1. BUSINESS
OVERVIEW
Mettler-Toledo is a leading global supplier of precision instruments.
We are the world's largest manufacturer of weighing instruments for use in
laboratory, industrial and food retailing applications. We also hold
top-three market positions in several related analytical instruments, and
are a leading provider of automated chemistry systems used in drug and
chemical compound discovery and development. In addition, we are the
world's largest manufacturer and marketer of metal detection and other
end-of-line inspection systems used in production and packaging. We also
derive a competitive advantage from our application-oriented software,
which processes the data captured by our instruments and integrates it into
customers' information technology systems.
We focus on the high value-added segments of our markets by providing
innovative instruments that are often integrated into application-specific
solutions for customers. We design our instruments not only to capture
valuable data but also to facilitate the processing and transfer of this
data into customers' management information systems.
COMPETITIVE STRENGTHS
We believe our franchise has a number of competitive strengths, which
allow us to compete successfully in high value-added segments:
o Worldwide Market Leadership Positions. We believe that we have a
leading position in each of our markets, and at least 80% of our
product sales are from products that are the global leaders in their
segment. In the weighing instruments market, we are the only company
to offer products for laboratory, industrial and food retailing
applications globally and we believe that we hold a market share more
than twice that of our nearest competitor. We believe that in 2001 we
had approximately 50% of the global market for laboratory balances,
including the largest market share in each of Europe, the United
States and Asia (excluding Japan), and the number two position in
Japan. In the industrial and food retailing markets, we believe we
have the largest market share in Europe and the United States. In
Asia, we have a substantial industrial and food retailing business
which has gained market share in recent years. This business is
supported by our established manufacturing presence in China. In
addition to our weighing franchise, most of our other sales come from
product lines where we hold a top-three global position.
o Global Brand and Reputation. The Mettler-Toledo brand name is
identified worldwide with accuracy, reliability and innovation.
Customers value these characteristics because most of our instruments
significantly impact customers' product quality, productivity, costs
and regulatory compliance. Furthermore, precision instruments
generally constitute a small percentage of customers' aggregate
expenditures. As a result, we believe customers focus on accuracy,
product reliability, technical innovation, service quality, reputation
and past experience when choosing precision instruments, rather than
cost alone. We have one of the strongest brand names in the
laboratory. In fact laboratory balances are often generically referred
to as "Mettlers". The strength of this brand name has allowed us to
successfully extend our laboratory balance line to include other
analytical instruments.
o Technological Innovation. We have a long and successful track record
of innovation and remain at the forefront of technological development
by focusing on the high value-added segments of our markets. We
believe that we are the global leader in our industry in providing
innovative measurement solutions to enhance our customers' processes.
Our technological innovation efforts benefit from our knowledge of
customer processes and related requirements, our manufacturing
expertise in sensor technology, precision machining and electronics,
as well as our strength in software development.
o Comprehensive, High Quality Solution Offering. We offer a more
comprehensive range of instruments and solutions than any of our key
competitors. Our broad product line addresses a wide range of
applications across and within many industries and regions. We
manufacture our products in modern facilities, most of which are ISO
9001 certified. Our broad range of high quality products and the
ability to provide integrated solutions allows us to leverage our
sales and service organization, product development activities and
manufacturing and distribution capabilities.
o Global Sales and Service. We have the only global sales and service
organization among weighing instruments manufacturers, and one of the
largest of any precision instrument company. We believe that this
capability is a major competitive advantage. At December 31, 2001,
this organization consisted of more than 4,200 employees organized
into locally based, customer-focused groups that provide prompt
service and support to our customers and distributors in virtually all
major markets around the world. The local focus of our sales and
service organization enables us to provide timely, responsive support
to our customers worldwide and provides feedback for manufacturing and
product development. When we survey our current and potential
customers on their needs, they often name service as the most
important criteria for choosing their instrument suppliers. In
addition, we believe there is a trend in many of our customer segments
to outsource service activities, which provides us a growth
opportunity for the future.
o Largest Installed Base. We believe that we have the largest installed
base of weighing instruments in the world. From this installed base,
we obtain service contracts that provide a strong, stable source of
recurring service revenue. Service revenue represented approximately
21% of net sales in 2001, of which almost half was derived solely from
service contracts and repairs with the remainder derived from the sale
of spare parts and software support. We believe that our installed
base of instruments represents a competitive advantage with respect to
repeat purchases and purchases of other instruments we offer, because
customers tend to remain with their existing suppliers. In addition,
switching to a new instrument supplier entails additional costs to the
customer for training, spare parts, service and systems integration
requirements. Close relationships and frequent contact with our broad
customer base also provide us with sales leads and new product and
application ideas.
o Geographical, Product and Customer Diversification. Our revenue base
is diversified by geographic region, product range and customer. Many
different industries, including pharmaceuticals, food processing, food
retailing and chemicals, cosmetics and logistics utilize our broad
product range. We supply customers all over the world, and our largest
single customer accounted for no more than 3% of net sales in 2001.
Our diverse revenue base reduces our exposure to regional or
industry-specific economic conditions, and our presence in many
different geographic markets, product markets and industries enhances
our attractiveness as a supplier to multinational customers. In 2001,
our sales were $1.148 billion. Of this total 44% came from Europe, 43%
from North and South America and 13% from Asia and other countries.
For additional information regarding our segment disclosure, see Note
15 to our audited consolidated financial statements.
GROWTH STRATEGIES
We believe that our growth opportunities arise from our solutions
approach to the principal challenges facing our customer base. These
include the need for increased efficiency (for example, in accelerating
time to market, achieving better yields, improving work processes and
outsourcing non-core activities), the desire to integrate information
captured by instruments into management information systems, the drive for
ever higher quality products and services, including the need to adhere to
stringent regulatory and industry standards, and the move towards
globalization in all major customer groups.
We continue to execute the business strategies that we outlined at the
time of our buy-out in 1996, which are described below. The successful
implementation of these strategies has allowed us to achieve a compound
annual sales growth rate in local currencies of 10% since 1996, and to
improve our Adjusted Operating Income (gross profit less research and
development and selling, general and administrative expenses before
amortization and non-recurring costs) from $57.8 million (6.8% of net
sales) for 1996 to $165.1 million (14.4% of net sales) for 2001. Earnings
per share increased from $0.14 in 1996 (pro forma for our buy-out) to $2.02
in 2001 before non-recurring items. Non-recurring items in 2001 comprised a
$14.6 million charge net of tax associated primarily with headcount
reductions and manufacturing transfers. In addition, our ratio of net debt
to EBITDA decreased from 4.6 in 1996 to 1.8 in 2001 and our interest
coverage increased from 2.3 to 11.4 during the same period. EBITDA
represents Adjusted Operating Income plus depreciation. We believe that
Adjusted Operating Income, earnings per share before non-recurring charges
and EBITDA provide important financial information in measuring and
comparing our operating performance. Adjusted Operating Income, earnings
per share before non-recurring charges and EBITDA are not intended to
represent operating income under U.S. GAAP and should not be considered as
alternatives to GAAP earnings (loss) as a measure of financial performance
or to GAAP cash flow as a measure of liquidity.
Our key growth strategies are as follows:
Expanding Our Technology Leadership. We attribute a significant
portion of our recent margin improvement to our research and development
efforts. We intend to continue to invest in product innovation in order to
provide technologically advanced products to our customers for existing and
new applications. Over the last three years, we have invested approximately
$178 million in research and development, and R&D spending in local
currency has grown an average of 14% over this period. While we expect R&D
spending to generally grow faster than sales, we do not expect it to
continue to grow at this rate of growth. Our research and development
efforts fall into two categories:
o technology advancements, which increase the value of our products.
These may be in the form of enhanced functionality, new
applications for our technologies, more accurate or reliable
measurement, additional software capability or automation through
robotics or other means; and
o cost reductions, which reduce the manufacturing cost of our
products through better overall design.
Our research and development efforts have contributed to a pipeline of
innovative and new products, significant reductions in product costs and
reduced time to market for our new products. Examples of recent product
introductions include:
o the MultiMaxIR, performs real-time in-situ FTIR reaction monitoring
and analysis directly in multiple vessels in a parallel synthesis
system, which enhances automated process R&D by allowing chemists
to analyze a wide range of organic chemistry;
o Optimizer (being launched in 2002), a modular process development
software platform, which uses an array at lab reactor vessels for
performing multiple chemical reactions simultaneously;
o X-matePro, a portable measuring instrument in our process analytics
business, which has interchangeable sensor modules that make it
capable of measuring up to ten different parameters at programmable
time intervals;
o the Unicorn family of products, our second-generation PC-based
network retail solution, including weighing and labeling solutions
for prepacking applications, networked counter scales and
perishable goods data management software; these solutions are
easily integrated into local networks and are designed for maximum
flexibility, and can be customized for country-specific promotions,
unique user habits, and differing preferences in data requirements;
o the Viper line of compact bench scales using MonoBloc technology,
which offer high resolution and accuracy for rugged industrial
environments;
o Rondo 60, a configurable titrator that enables titration of up to
60 samples without any user interaction, featuring a built in
keypad, removable sample racks, an automated rinsing system and an
optical beaker-recognition system, and its smaller sibling, the
Rondolino, for up to 9 samples;
o The AX64004 comparator, the first commercially available mass
comparator with a continuous weighing range of up to 64 kg and a
resolution of 0.1 mg.; and
o Airweigh, a high-performance checkweigher that weighs as many as
900 packages per minute, has an easy-to-use graphical user
interface, and stores individual product setups for fast and easy
product changeover.
Increasing our Market Share and Capitalizing on Opportunities in
Developed Markets. We recognize that to be a successful company, we must
not only develop excellent solutions, but we must market and distribute
them effectively - more effectively than our competitors. We view the key
elements of our sales and service strategy as follows:
o We utilize what we believe are the most sophisticated marketing and
sales techniques in our industry. These techniques include the
development and utilization of marketing databases. We develop
these databases to better understand the full potential of our
market by customer, location, industry, instrument and related
application. We then utilize this data to more efficiently direct
our field resources and complement our direct and distributor sales
forces with targeted mailing and telemarketing campaigns to more
fully exploit our market's potential. The transparency of the
marketplace created through these databases allows us to more
effectively identify penetration opportunities among customers and
non-customers. We have seen this strategy take hold as evidenced by
significant market share gains in certain targeted segments such as
pharmaceutical and biotech.
o With our developing E-commerce project, we plan to create a
configurable Internet portal which will allow customers, channel
partners and suppliers to customize the information presented to
them and to interact with us in the way they choose. Over time, we
will develop a knowledge base which will allow us to gain deeper
insight into our customers' patterns of behavior and give us better
market transparency. From this, we will be able to refine our
marketing efforts, gain quicker market penetration with new
products and services, and ultimately reduce our marketing costs.
o Our service capabilities stretch across the globe and include
around-the-clock availability of well-trained technicians, which is
highly valued by our customers. We believe that no other competitor
has our capabilities and that our service capabilities are a
critical success factor for us. Our value-added services encompass
maintenance, calibration, traceability of weights, certification,
asset management, software upgrades, data integration and training.
Service XXL, which we recently expanded worldwide, is a
comprehensive suite of services covering regulatory compliance for
design, manufacture, installation, operation and maintenance of our
customers' instruments.
o We also utilize a dual brand strategy for certain market segments
to improve our overall market penetration. For example, we sell
balances under the Ohaus brand name as an alternative to the
Mettler-Toledo brand name in certain distribution channels, such as
the education market.
Capitalizing on Opportunities in Emerging Markets. We believe that
emerging markets will continue to provide growth opportunities for us.
These growth opportunities are being driven primarily by economic
development and multinationals' use of additional and more sophisticated
precision instruments as they shift production to emerging markets. In
addition, we believe that over the long term, the trend toward
international quality standards, the need to upgrade mechanical scales to
electronic versions and the establishment of local production facilities by
our multinational client base will add to the opportunities in emerging
markets.
To date our emerging market expansion has primarily focused on Asia,
and we grew by approximately 18 percent in that part of the world in 2001.
In Asia (excluding Japan), we are the market leader in laboratory weighing
instruments and have a substantial industrial and food retailing business
that has gained market share in recent years. For instance, we have two
profitable operations in China: a facility that manufactures and sells
industrial and food retailing products and a facility that manufactures and
distributes laboratory products. We also have direct marketing
organizations in Taiwan, Korea, Hong Kong, Singapore, India, Thailand,
Malaysia and Eastern Europe. Beyond Asia, we are also expanding our sales
and service presence in Latin America and other emerging markets.
China represents a significant opportunity for us. Product
introductions and local market strength enabled our Chinese businesses to
post another year of double-digit sales growth in 2001. Over the past two
years, we have more than doubled the percentage of products we manufacture
in China. We want to continue leveraging our Chinese manufacturing and R&D
as a platform for low-end products, which are necessary to increase our
penetration of emerging markets. At the same time, we supply these products
to complementary channels in North America and Europe. For example, in the
near future we plan to launch Viking, a global balance targeted for the
entry-level user - one who is cost-conscious but who demands high quality.
Using the platform designed for this technology, over the next 12 months,
we will introduce a series of entry-level balances with wide-ranging
resolutions to fully cover this market segment.
Pursuing Selected Acquisition Opportunities. Acquisitions are an
integral part of our growth strategy. We believe that we have a powerful
acquisition platform in the instrument industry. Our acquisitions leverage
our global sales and service network, respected brand, extensive
distribution channels and technological leadership. We are interested in
pursuing acquisitions which have strong strategic fit - for example,
companies with complementary products that will benefit from our brand name
and global distribution channels, and companies with solutions we can
combine with our own technologies to create overall better solutions for
our customers. In addition, our acquisitions should anchor more of our
business in faster-growing markets. We are particularly attracted to the
following end markets:
o Life Sciences. The impact of scientific developments, including the
human genome project, is fundamentally changing the pharmaceutical
industry and its need for automation. In recent years, we have
acquired a variety of companies in the field of life sciences
including Bohdan, ASI, Berger, and Rainin. We offer these companies
the infrastructure to expand globally and take advantage of the
Mettler-Toledo brand name. Rainin Instrument is the leading
manufacturer of pipetting solutions used in pharmaceutical, biotech
and medical research applications. A premier company with a strong
growth rate and excellent operating margins, Rainin broadens our
market-leading offering of instruments and solutions to the life
sciences market.
o Process Analytics. Our pharmaceutical and biotech customers need to
comply with increasing quality standards. At the same time, they
are seeking in-line control instruments to improve their yields. In
December 2000 we acquired Thornton, a leader in pure and ultra-pure
industrial water monitoring instrumentation used in semi-conductor,
micro-electronics, pharmaceutical and biotech applications. Their
conductivity technology and know-how are complementary to our
strength in pH and oxygen measurements. With a broader technology
offering, we are better able to serve our expanded customer base.
o Packaging Control Systems. Increasing safety and consumer
protection requirements are driving the need for more and more
sophisticated end-of-line inspection systems. We are the world's
leading provider of metal detectors and checkweighers, which, when
combined with our application-specific software packages, provide
food and drug packaging lines an integrated solution to check the
quality and quantity of their packages. In 2000, we acquired AVS,
which allowed us to add x-ray-based vision technology to our
offering.
o Transportation and Logistics. The effects of globalization, the
move to just-in-time processes, and e-commerce are all causing our
customers to invest in our weighing and dimensioning solutions. Our
customers are the major express carriers, freight forwarders,
third-party logistic entities and warehousing and distribution
companies. We are currently the leading supplier of automatic
identification and data capture solutions which incorporate
weighing and dimensioning technology to optimize the shipment and
tracking of packages worldwide. In 2000, we announced that we would
acquire full ownership of our Cargoscan subsidiary, the premier
provider of dimensioning technology.
These are not the only opportunities and end markets we are focusing
on. We are also alert for opportunities to expand our solution scope,
particularly by adding more application-specific software, and to
consolidate fragmented markets or expand geographically. Finally, once we
have made these acquisitions, we will continue to invest in them in order
to realize and expand the value they offer.
Re-engineering and Cost Savings. We have improved our profitability in
recent years partly through a series of initiatives aimed at reducing our
cost structure. We plan to undertake similar initiatives in the future with
the goal of further improving our operating margins. These initiatives
include:
o Continuing to leverage our Chinese manufacturing and R&D as a
platform for low-end products, which are necessary to increase our
penetration of emerging markets. We are also transferring
production of many of our low-end products from Europe and North
America to China - the most recent example being our Ohaus
electronic laboratory balances and our shipping scales. We now have
almost 700 employees in China, including approximately 110 R&D
professionals.
o The first wave of our procurement initiative, launched in 1999, has
brought us substantial cost savings. Our global procurement
initiative aims to reduce our supplier base to a select group of
high-quality suppliers from all parts of the world. By doing so, we
believe we can ensure maximum cost effectiveness and improve the
quality of our product and processes. We are well into the second
phase of this initiative and expect to continue to improve
operating margins through a more effective procurement effort over
the coming years.
o Opportunities in our service business. We have approximately 2,000
employees worldwide engaged in service. We have instituted a
four-phase services cost-productivity plan, which we expect to
enhance operating margin profit over its three-year implementation,
by exploiting available technology and best practices.
o We are taking advantage of the globalization of our customer base
and the harmonization of regulatory standards worldwide to
standardize our product lines on a global basis and streamline our
organizational structure. As much as possible, we will harmonize
our product lines worldwide. With global standardized offerings,
our sales and service professionals will require less frequent
training and reduced parts inventory. R&D resources will be
re-deployed for new value-added products, allowing us to gain
incremental growth. In addition, consolidated operations will
produce significant savings and more efficient use of invested
capital.
We believe that these initiatives and others will place us in a
position to build on our recent improvement in profitability. Furthermore,
we believe that we can leverage our existing infrastructure, particularly
our recent investments in Asia, to obtain continued sales growth without
significant additions to our overall cost base.
INSTRUMENTS AND SOLUTIONS
LABORATORY INSTRUMENTS
Laboratory Balances. The balance is the most common piece of equipment
in the laboratory. We believe that we sell the highest performance
laboratory balances available on the market, with weighing ranges from one
ten-millionth of a gram up to 32 kilograms. Our brand name is so well
recognized that laboratory balances are often generically referred to as
"Mettlers." The Mettler-Toledo name is identified worldwide with accuracy,
reliability and innovation. In our judgment, this reputation constitutes
one of our principal competitive strengths.
To meet our customer needs, we seek to connect and integrate our
instruments to customers' information management systems. Many of our
instruments operate on standard PC platforms and operating systems.
To cover a wide range of customer needs and price points, we market
laboratory balances in three principal product tiers offering different
levels of functionality. In certain markets, we now also offer a fourth
level of basic balances. High-end balances provide maximum automation of
calibration, application support and additional functions. Mid-level
balances provide a more limited but still extensive set of automated
features and software applications. Basic level balances provide simple
operations and a limited feature set. We also manufacture mass comparators,
which are used by weights and measures regulators as well as laboratories
to ensure the accuracy of reference weights. Due to the wide range of
functions and features offered by our products, prices vary significantly.
A typical mid-range precision balance is priced at approximately $2,500 and
a typical microbalance is priced at approximately $14,000.
In addition to Mettler-Toledo branded products, we also manufacture
and sell balances under the brand name "Ohaus." Ohaus branded products
include mechanical balances and electronic balances for the educational
market and other markets in which customers are interested in lower cost, a
more limited set of features and less comprehensive support and service.
Pipettes. Pipettes are used for measuring and dispensing small volumes
of liquids in laboratories. They are among the most widely used instruments
in the rapidly growing life science market. In late 2001, we acquired
Rainin Instrument, a premier provider of pipetting solutions. Rainin
invented electronic pipettes in 1984 and holds more than 20 patents on
ergonomically advanced electronic and manual pipettes. Based in Emeryville,
California, Rainin develops, manufactures and distributes advanced
pipettes, tips and accessories, including single- and multi-channel manual
and electronic pipettes. Rainin's principal end markets are pharmaceutical,
biotech and medical research. A typical manual single-channel pipette is
priced at approximately $245, and manual multichannel pipettes are priced
from $495 to $695 depending on the number of channels and volume range. A
typical electronic single-channel pipette is priced at approximately $395,
and electronic multichannel pipettes are priced from $795 to $995 depending
on the number of channels and volume range.
Titrators. Titrators measure the chemical composition of samples. Our
high-end titrators are multi-tasking models, which can perform two
determinations simultaneously on multiple vessels. Titrators are often used
in integrated systems. They permit high sample throughputs and have
extensive expansion capability and flexibility in calculations, functions
and parameters. Most models, including those in the lower-range, permit
common determinations to be stored in a database for frequent use.
Titrators are used heavily in the food and beverage industry. Titrators are
priced between $5,000 and $15,000, with a typical titrator being priced at
approximately $12,000. Multi-module systems range up to $30,000.
To enhance efficiency, we recently introduced a revolutionary series
of titration automators that eliminate the manual aspects of preparing
samples, cleaning electrodes, removing titrated solutions, recording data
and much more. Their capabilities range from automating small-batch
titrations up to the first plug and play automation of Karl Fischer
titration, which determines the water content of substances.
LabX, our recently launched PC-based enterprise software suite,
manages and analyzes the data titrators generate. Based on the Windows 2000
global standard, LabX provides full network capability; has efficient,
intuitive protocols; and enables customers to comply with the U.S. Food and
Drug Administration's traceability requirements for electronically stored
data. Soon, LabX will also be available for other instruments including our
balances and pH meters.
Thermal Analysis Systems. Thermal analysis systems measure materials
properties as a function of temperature, such as weight, dimension, energy
flow and viscoelastic properties. Our thermal analysis products include
full computer integration and a significant amount of proprietary software.
Thermal analysis systems are used in nearly every industry, but primarily
in the plastics and polymer industries and increasingly in the
pharmaceutical industry. A typical thermal analysis system with one
measuring module is priced at approximately $50,000. Prices for
multi-module systems range up to $200,000.
Other Analytical Instruments. The pH meters we offer measure acidity
in laboratory samples, and are the second most widely used measurement
instruments in the laboratory, after the balance. Data collected from our
pH meters can be downloaded to a computer or printer using an interface kit
and custom software. We sell density and refractometry instruments, which
measure chemical concentrations in solutions. These instruments are sourced
through a marketing arrangement with a third-party manufacturer, but are
sold under the Mettler-Toledo brand name. 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.
DRUG DISCOVERY SOLUTIONS (AUTOCHEM)
Our pharmaceutical and biotechnology customers are all too aware of
the time and costs involved in drug research and development. The mission
of our drug discovery group is to provide our customers with integrated
solutions that enable chemists to increase their productivity and
accelerate the drug discovery process.
The number of drug targets and potential lead compounds has increased
significantly as a result of combinatorial chemistry techniques,
high-throughput screening methods and the initial findings of the human
genome project. The increasing number of targets and compounds has created
severe bottlenecks in the drug discovery process. We believe that our
portfolio of integrated technologies can bring significant efficiencies to
the drug discovery process, enabling our customers to create larger numbers
of higher quality candidate compounds and bring them to market faster.
Our current drug discovery solution offering is focused on key aspects
of the lead identification, lead optimization, and process development
phases of the drug R&D process. Our overall value proposition is to speed
up these phases by offering systems which perform the many tasks which a
chemist has to perform, in parallel and fully automated. Within our drug
discovery group, the Discovery team focuses on lead identification and
optimization, and the Reaction Engineering team focuses on process research
and development.
Discovery. The Discovery business offers the following solutions to
combinatorial and medicinal chemists working on lead identification and
optimization:
o the Mini-Block manual parallel synthesizer, which has become a
standard tool among medicinal chemists for chemistry development
and lead optimization
o the Discoverer automated synthesizer, capable of extremely
sophisticated chemistry
o the Myriad Core System, the top-of the range automated parallel
synthesizer, capable of producing hundreds of thousands of new drug
candidates per year
o automated workstations for reagent preparation, weighing, labeling
and dispensing to support the synthesis process
o the ALLEX automated liquid/liquid extraction system for cleaning up
synthesis products
o Berger's supercritical fluid chromatographs, which are capable of
analyzing and purifying synthesis products in a fraction of the
time of conventional HPLC instruments, and
o the FlexiWeigh automated solids dispensing system, which eliminates
the bottleneck from manually handling powder-like substances.
Reaction Engineering. Our Reaction Engineering business offers
products to help speed up process research and development as well as
product development and scale-up. Automatic lab reactors and reaction
calorimeters simulate chemical manufacturing processes in the laboratory.
Customers use the simulation tests before proceeding to production, in
order to test the safety and feasibility of new processes. Our products are
fully computer-integrated, with comprehensive data analysis software.
o Optimizer (a new product being launched in 2002) is a modular
process development software platform, which includes an array of
lab reactor vessels for performing multiple chemical reactions
simultaneously. These can be integrated with real-time analytical
techniques to allow customers to run multiple investigations
simultaneously
o the Multimax and Labmax automated laboratory reactors, with four
and one separately-controlled reactors respectively, which are used
in process optimization to find the precise reaction parameters to
make larger quantities of the drug candidate
o the RC-1, which combines a laboratory reactor with calorimetry and
is used to ensure the process is economical as well as safe as the
manufactured quantities are scaled up
o the React-IR 4000 in-situ infrared analyzer, which can be used with
the laboratory reactors to monitor the chemistry in real-time
o React-IR MP and Process-IR, which are hardened infrared analyzers
used in scale-up applications and production, and
o Lasentec computer-controlled laser probes for real-time
crystallization monitoring, which helps pharmaceutical scientists
to monitor and optimize the formation of solid drug products during
the production process.
We continue to pursue opportunities that will enable us to extend our
drug discovery and development solutions by internal research and
development and by acquiring businesses that have technologies and
capabilities complementary to ours. In particular, we recognize the
importance of software as an integral part of any solution offering.
Effective integration of automation instruments with data recording and
analysis software represents an attractive solution to our customers. We
believe that our drug discovery group is well positioned to support and
grow with the pharmaceutical and biotechnology industries in their exciting
challenge to discover and develop new drugs.
PROCESS ANALYTICS
Our process analytics business provides instruments for the in-line
measurement of liquid parameters in the production process of
pharmaceutical and biotech companies. In the ongoing quest to improve
product quality and production efficiency, manufacturers are adopting
sensor technologies for in-line process control. Our process analytics
business is the leading supplier of pH and oxygen measurement instruments
used in bio-pharmaceutical manufacturing, and is well positioned to
accelerate its growth in this market. In late 2000 we expanded our
technology offering in process analytics to include Thornton's conductivity
technology and know-how in determining water purity.
More than half of our process analytics sales are to the
pharmaceutical and biotech markets. 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. Our
in-line process analytics solutions help these customers ensure
reproducible and consistent product quality, while ensuring compliance
within relevant regulatory standards.
INDUSTRIAL INSTRUMENTS
Industrial Scales and Balances. We offer a complete 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 product lines include the Viper and Spider range of
scales, often used in receiving and shipping departments in counting
applications; TrimWeigh scales, which determine whether an item falls
within a specified weight range, and are used primarily in the food
industry; Mentor SC scales, for counting parts; and precision scales for
formulating and mixing ingredients. Prices vary significantly with the size
and functions of the scale, generally ranging from $1,000 to $20,000.
We have supplemented our broad product offering through products
jointly specified and developed by our Chinese and American operations. The
high quality, timely delivery, and full range of capabilities we get from
our Chinese operations allow us to match our manufacturing resources to the
needs of the various brands and channels we manage in a wide range of
geographies.
Our development efforts continue to be focused on understanding
"customer drivers" - those strategic issues that cause a customer to make a
buying decision. By aligning our solutions to those drivers, we can meet
our customers' expectations and continue to grow within this key business
segment.
Industrial Terminals. Our latest industrial scale terminal is the
JagXtreme, which is our fastest, most powerful scale terminal ever. It
harnesses the power and flexibility of the internet to help integrate and
control information, equipment management, and automation in manufacturing
processes. The JagXtreme terminal is two and a half times faster than our
industry-leading Jaguar terminal - but it works like a Jaguar terminal so
there is little training time required. It allows users to download
programs or access setup data from across the plant - or across the globe.
The JagXtreme terminal can also maximize up time by dispatching emails when
the unit needs service - and minimize down time through predictive rather
than reactive maintenance. The JagXtreme terminal can serve up data across
the web through an internet browser. It also provides users with the tools
to design their own user interface. We continued JagXtreme's global
introduction throughout 2001. For the fifth year in a row, the readers of
"Control" magazine recognized our Jaguar and JagXtreme as their choice for
best in the Weighing System/Load Cell category by a margin of two to one
over the next supplier. JagXtreme's preventative and predictive maintenance
capabilities continue to set the standard for remote diagnostics within a
weighing terminal. Prices for industrial weighing terminals vary
significantly based on functionality of the application, generally ranging
from $500 to $10,000.
Transportation / Shipping and Logistics. Companies are increasingly
conducting business across geographic boundaries, and
transportation/logistics suppliers are instrumental in supporting those
efforts. Speed is also critical, as evidenced by the growth in e-commerce
and just-in-time methods. Customers are seeking solutions to speed
throughput, lower costs, increase revenue and ensure first-rate service to
their own customers. We are addressing those needs as the leading global
supplier of automatic identification and data capture solutions, which
integrate in-motion weighing, dimensioning and identification technologies.
With these solutions, companies such as FedEx can measure the weight and
cubic volume of packages for appropriate billing, logistics and quality
control. Our solutions also integrate into information systems that allow
customers to track the progress of packages via the Internet. Prices for
integrated dimensioning/weighing systems range from $5,000 to $20,000.
We believe our solutions provide our customers with greater accuracy
and higher throughput than competitors' products. Based on a thorough
understanding of customer processes, we can match our solutions precisely
to customer needs. Our global presence gives us the ability to provide
world-class service in most major locations around the world. What's more,
our technical knowledge of local weights and measures regulations and our
application know-how result in effective installations and provides ongoing
support for customers.
Our partnership with DHL Worldwide Express illustrates the advantages
we bring. Covering much of DHL's extensive network in 220 countries and
territories around the world, we deliver beginning-to-end services - making
DHL's assets as efficient as they can be within each location. That
includes product consultation, installation, local governmental
certification, preventative maintenance and responsive emergency service.
We learn each location's processes thoroughly, then design a solution that
meets DHL's globally defined quality standards yet is flexible for local
requirements.
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). Our vehicle scales, such as
the DigiTol TRUCKMATE, generally have digital load cells, which offer
significant advantages in serviceability over analog load cells. Heavy
industrial scales are capable of measuring weights up to 500 tons either
statically or, in some cases, in-motion, and permit accurate weighing under
extreme environmental conditions. We also offer advanced computer software,
such as WinBridge and our newest offering, OverDrive, that can be used with
our heavy industrial scales to facilitate a broad range of customer
solutions. Our WinBridge and OverDrive software provides a complete system
for managing vehicle transaction processing. Vehicle scale prices generally
range from $20,000 to $50,000.
PACKAGING CONTROL SYSTEMS
Dynamic Checkweighers. We are the world's leading provider of metal
detectors, checkweighers and x-ray visioning, which, when combined with our
application-specific software packages, provide food and drug packaging
lines an integrated solution to check the quality and quantity of their
packages. We offer solutions to checkweighing requirements in the food
processing, pharmaceutical, chemicals and cosmetic industries, where
customers are required to accurately measure portions for packaging. We
also offer checkweighing solutions to the transportation and package
delivery industries, where tariffs are levied based on weight. Recently, we
added automated combination weighing to our offering, which allows
customers to fill or sort discrete food items accurately and quickly,
thereby enhancing yield and productivity.
Customizable software applications utilize the information generated
by checkweighing hardware to find production flaws, packaging and labeling
errors and nonuniform products, as well as to sort rejects and record the
results. We recently unveiled a new generation of Freeweigh.net, our
widely-used 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. Our
checkweighing equipment and software can accurately determine weight in
dynamic applications at speeds of up to several hundred units per minute.
Checkweighers generally range in price from $8,000 to $40,000.
End-of-line Inspection Solutions. Increasing safety and consumer
protection requirements are driving the need for more and more
sophisticated end-of-line inspection systems. As the leading global
provider in end-of-line metal detection, we help ensure the quality of
package contents; and our X-ray technology checks for non-metallic
contamination. These high throughput solutions incorporate sensor
technologies and software to assist customers in fulfilling validation
requirements and in improving their quality and yield. Metal detectors
provide manufacturers with vital protection against metal contamination
arising from their own production processes or from using contaminated raw
materials. Metal detectors are most commonly used with X-ray-based vision
inspection and checkweighers as components of integrated packaging lines in
the food processing, pharmaceutical and other industries. Prices for metal
detection systems generally range from $5,000 to $20,000.
RETAIL WEIGHING SOLUTIONS
Retail Scale Systems and Prepackaging Systems. Supermarkets,
hypermarkets and other food retail establishments make use of multiple
weighing applications for the full handling of perishable goods. For
example, perishable goods are weighed on arrival to determine payment to
suppliers and some of these goods are repackaged, priced and labeled for
sale to customers. Other goods are kept loose and selected by customers and
either weighed at the produce or delicatessen counter or at the checkout
counter. We offer stand-alone scales for basic counter weighing and
pricing, price finding, and printing. In addition, we offer network scales
and software, which can integrate backroom, counter, self-service and
checkout functions, and can incorporate weighing data into a supermarket's
overall perishable goods management system.
Our OPRA retail scale, a key element of our perishable goods
management solution, is the first Internet-enabled weighing instrument in
the industry. OPRA enables customers to remotely manage pricing, run
promotions, support frequent-shopper programs, download software, manage
inventory and more. Our equipment can also accommodate required
dual-currency displays and, through its Internet capabilities, can
automatically adjust for conversion to the euro. Backroom products include
dynamic weighing products, labeling and wrapping machines, perishable goods
management and data processing systems. In some countries in Europe, we
also sell slicing and mincing equipment. Prices for food retailing scales
generally range from $500 to $5,000, but are often sold as part of
comprehensive weighing solutions.
Our innovative Unicorn products are a single-platform, PC-based
solution for the management of perishable goods that can be configured for
global needs, yet still adapted to local differences. The Unicorn family of
products includes weighing and labeling solutions for prepacking
applications, networked counter scales and perishable goods data management
software. It is a genuinely global product, providing flexibility,
modularity and identical hardware and software platforms everywhere.
Unicorn's principal benefit is its connectivity. Through intranets and
the Internet, our customers can, on a global basis, seamlessly communicate
with central back-offices - maximizing inventory-management efficiency,
updating pricing and adding or eliminating products and remotely manage
online servicing.
Unicorn is designed for optimum flexibility in adapting to local
differences. Easily integrated into local networks, its platform can be
customized for country-specific promotions, unique user habits, differing
preferences in data requirements and more. With Unicorn, we leverage our
global investments in R&D, manufacturing, and sales and service training.
It is the solutions platform on which we will continue to profitably grow
our leading global position in retail.
CUSTOMERS AND DISTRIBUTION
Our business is geographically diversified, with sales in 2001 derived
44% from Europe, 43% from North and South America and 13% from Asia and
other countries. Our customer base is also diversified by industry and by
individual customer. Our largest single customer accounted for no more than
3% of 2001 net sales.
Principal customers for our solutions include companies in the
following key end markets: the life science industry (pharmaceutical and
biotech companies, as well as independent research organizations), food
processors, packagers and retailers, specialty chemicals and cosmetics
companies, the transportation and logistics industry, the metals industry,
the electronics industry and the academic market.
Our laboratory products are sold through a worldwide distribution
network. Our extensive direct distribution network and our dealer support
activities enable us to maintain a significant degree of control over the
distribution of our products. Mid to high-end products in the United States
are handled by our own sales force. We sell laboratory products in Asia
through our own sales force and distributors, and in Europe primarily
through direct sales. European and Asian distributors are generally
fragmented on a country-by-country basis.
Ohaus branded laboratory balances are generally positioned in
alternative distribution channels to those of Mettler-Toledo branded
products. This means that we can fill a greater number of distribution
channels and increase penetration of our existing markets. Since acquiring
Ohaus in 1990, we have expanded this brand beyond its historical U.S.
focus. Ohaus branded products are sold exclusively through distributors.
In the industrial and food retailing market, we sell both directly to
customers (including OEMs) and through distributors. In the United States,
direct sales exceed distribution sales and in Europe, direct sales
predominate, with distributors used in certain cases. We sell products in
Asia primarily through distributors, except in China where we sell products
through our own sales force and distributors. Where we use distributors, we
seek to provide them with significant support.
We also offer customers the ability to shop online for basic
instruments with global appeal, such as balances, pipettes, pH meters,
electrodes, titrators and density meters. Launched in mid-1999,
www.MT-Shop.com presents customers with unique options, including the
ability to customize a product down to a specific color or design motif.
Users also can access the site in multiple languages. Our virtual shop is
aimed principally at small start-up companies and individual scientists -
segments of the market that previously were difficult to reach
cost-effectively. The site is expected to increase brand awareness and
market penetration with these new target groups.
SALES AND SERVICE
MARKET ORGANIZATIONS
We have a host of geographically focused market organizations ("MOs")
around the world that are responsible for all aspects of our sales and
service. The MOs are local marketing and service organizations designed to
maintain close relationships with our customer base. Each MO has the
flexibility to adapt its marketing and service efforts to account for
different cultural and economic conditions. MOs also work closely with our
producing organizations (described below) by providing feedback on
manufacturing and product development initiatives and relaying innovative
product and application ideas.
We have the only global sales and service organization among weighing
instruments manufacturers. At December 31, 2001, our sales and services
group consisted of more than 4,200 employees in sales, marketing and
customer service (including related administration) and after-sales
technical service. This field organization has the capability to provide
service and support to our customers and distributors in virtually all
major markets across the globe.
Sales managers and representatives interact across product lines and
markets in order to serve customers that have a wide range of instrument
needs, such as pharmaceutical companies that purchase both laboratory and
industrial products. We classify customers according to their potential for
sales and the appropriate distribution channel is selected to service the
customer as efficiently as possible. Larger accounts tend to have dedicated
sales representatives. Other representatives specialize by product line.
Sales representatives call directly on end-users either alone or, in
regions where sales are made through distributors, jointly with
distributors.
We utilize a variety of advertising media, including trade journals,
catalogs, exhibitions and trade shows. In addition, we also sponsor
seminars, product demonstrations and customer training programs. We utilize
sophisticated marketing techniques in our sales efforts. These techniques
include the development and utilization of marketing databases. We develop
these databases to better understand the full potential of our market by
customer, location, industry, instruments and related application. We then
utilize this data to more efficiently direct our field resources and
complement our direct and distributor sales forces with targeted mailing
and telemarketing campaigns to more fully exploit our market's potential.
We also utilize a dual brand strategy for certain market segments to
improve our overall market penetration. For example, we sell laboratory
balances under the Ohaus brand name as an alternative to the Mettler-Toledo
brand name in certain distribution channels.
We use the Mettler-Toledo Web site, www.mt.com, to provide current and
prospective customers and other audiences with the information they need in
a convenient manner. With several thousand pages of information, our Web
site has become a principal source of answers for customers' questions on
many laboratory, industrial and food retailing processes.
In addition, we use the information gained through visits to our sites
to make our marketing messages even more relevant to customers. This
includes employing one-to-one marketing techniques.
SERVICE
We believe service capabilities are a critical success factor in our
business. Through our own dedicated service technicians, we provide
contract and repair services in all countries in which our products are
sold. This global service network also is 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, and our contract and
repair services generate significant revenues. In 2001, service
(representing service contracts, repairs, software support and
replacement parts) accounted for approximately 21% of our total net sales.
Beyond revenue opportunities, service is a key part of our product
offering and helps significantly in generating repeat sales. The close
relationships and frequent contact with our large customer base provides us
with sales opportunities and innovative product and application ideas. Our
sales organization works closely with customers to define the optimal
services bundle. Our service team recently expanded worldwide ServiceXXL,
our comprehensive suite of services covering regulatory compliance for
design, manufacture, installation, operation and maintenance of customers'
instruments.
Our service contracts provide for these value-added services, as well
as for repair services, within various guaranteed response times, depending
on the level of service selected. Contracts are generally one year in
length, but may be longer. If the service contract also includes products
of other manufacturers, we will generally perform calibration, testing and
basic repairs directly, and contract out more significant repair work. As
application software becomes more complex, our service efforts increasingly
include installation and customer training programs as well as product
service.
RESEARCH AND DEVELOPMENT; MANUFACTURING
PRODUCING ORGANIZATIONS
Our product development, research and manufacturing efforts are
organized into a number of producing organizations ("POs"). POs are product
development teams comprised of personnel from our marketing, development,
research, manufacturing, engineering and purchasing departments. POs often
seek customer input to ensure that the products developed are tailored to
market needs. We have organized our POs to reduce product development time,
improve customer focus, reduce costs and maintain technological leadership.
The POs work together to share ideas and best practices, and some employees
are in both MOs and POs.
RESEARCH AND DEVELOPMENT
We attribute a significant portion of our recent margin improvement to
our research and development efforts. We intend to continue to invest in
product innovation in order to provide technologically advanced products to
our customers for existing and new applications. Over the last three years,
we have invested more than $178 million in research and development. In
2001, we spent approximately 5.6% of net sales on research and development.
Our research and development efforts fall into two categories:
o technology advancements, which increase the value of our products.
These may be in the form of enhanced functionality, new
applications for our technologies, more accurate or reliable
measurement, additional software capability or automation through
robotics or other means, and
o cost reductions, which reduce the manufacturing cost of our
products through better overall design.
We have devoted an increasing proportion of our research and
development budget to software development. This includes
application-specific software, as well as software utilized in sensor
mechanisms, displays and other common components, which can be leveraged
across our broad product lines.
We closely integrate research and development with marketing,
manufacturing and product engineering. We have over 750 professionals in
research and development and product engineering. As part of our research
and development activities, we have frequent contact with university
experts, industry professionals and the governmental agencies responsible
for weights and measures, analytical instruments and metal detectors. In
addition, our in-house development is complemented by technology and
product development alliances with customers and original equipment
manufacturers.
MANUFACTURING
We manufacture some of our own components, usually components that
contain proprietary technology. However, when outside manufacturing is more
efficient, we contract with others for certain components and in turn use
these components in our own manufacturing processes. We use a wide range of
suppliers and we believe our supply arrangements to be adequate. From time
to time we rely on a single supplier for all of our requirements of a
particular component. Even then, adequate alternative sources are generally
available if necessary. Supply arrangements for electronics are generally
made globally. For mechanical components, we generally use local sources to
optimize materials flow.
We strive to 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. This integration
permits field service technicians to trace important information about the
manufacture of a particular unit, which facilitates repair efforts and
permits fine-tuning of the manufacturing process. Many of our measuring
instruments are subjected to an extensive calibration process that allows
the software in the unit to automatically adjust for the impact of
temperature and humidity.
We are a worldwide manufacturer, with manufacturing plants in the
United States, Switzerland, Germany, the United Kingdom, France and China.
Laboratory products are produced mainly in Switzerland and to a lesser
extent in the United States and China, while industrial and food retailing
products are produced worldwide. Most of our manufacturing facilities have
achieved ISO 9001 certification. We believe that our manufacturing capacity
is sufficient to meet our present and currently anticipated needs.
BACKLOG
Manufacturing turnaround time is generally sufficiently short so as to
permit us to manufacture to fill orders for most of our products, which
helps to limit inventory costs. Backlog is therefore generally a function
of requested customer delivery dates and is typically no longer than one to
two months.
EMPLOYEES
As of December 31, 2001, we had approximately 8,500 employees
throughout the world, including approximately 4,400 in Europe, 2,900 in
North and South America, and 1,200 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. Labor unions
do not represent a meaningful number of our employees.
In certain of our facilities, we have a flexible workforce
environment, in which hours vary depending on the workload. This flexible
working environment enhances employees' involvement, thus increasing
productivity. It also improves efficient payroll management by permitting
us to adjust staffing to match workload to a greater degree without
changing the size of the overall workforce.
INTELLECTUAL PROPERTY
We hold approximately 1,500 patents and trademarks, primarily in the
United States, Switzerland, Germany, the United Kingdom, France, Japan and
China. Our products generally incorporate a wide variety of technological
innovations, some of which are protected by patents and some of which are
not. 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. 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 food processing and
food retailing products are subject to regulation and approvals by relevant
governmental agencies, such as the United States Food and Drug
Administration. Products used in hazardous environments may also be subject
to special requirements. 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.
ENVIRONMENTAL MATTERS
We are subject to a variety of environmental laws and regulations in
the jurisdictions in which we operate, including provisions 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 wholly or partly own, lease or
hold a direct or indirect equity interest in a number of properties and
manufacturing facilities around the world, including North and South
America, Europe, Australia and China. 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 in both the
United States and abroad.
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. 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 such 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.
We, or in some cases the former owner of Toledo Scale, have been named
a potentially responsible party under CERCLA or analogous state statutes at
the following third-party owned sites with respect to the alleged disposal
at the sites by Toledo Scale during the period before we owned it:
Granville Solvents Site, Granville, Ohio; Aqua-Tech Environmental, Inc.
Site, Greer, South Carolina; and Seaboard Chemical Company Site, Jamestown,
North Carolina. Pursuant to the terms of the stock purchase agreement
between us and the former owner of Toledo Scale, the former owner is
obligated to indemnify us for various environmental liabilities. To date,
with respect to each of the foregoing sites, the former owner has
undertaken the defense and indemnification of Toledo Scale. In addition,
our subsidiary, Hi-Speed Checkweigher, is subject to an Administrative
Consent Order ("ACO") from the New Jersey Department of Environmental
Protection that provides for the remediation of the former GEI site in
Landing, New Jersey. However, under the terms of the stock purchase
agreement between GEI and Hi-Speed, GEI assumed all responsibility for the
ACO. To date, GEI has performed and paid for the action required by the
ACO. Based on currently available information and given our contractual
rights of indemnification, we believe that the costs associated with the
investigation and remediation of these sites will not have a material
adverse effect on our financial condition or results of operations.
COMPETITION
Our markets are highly competitive. Furthermore, weighing instruments
markets are fragmented both geographically and by application, particularly
the industrial and food retailing weighing instruments market. 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 own. 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. In any event, 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 that the principal competitive factors in our U.S. markets
for purchasing decisions are accuracy and durability, while in Europe
accuracy and service are the most important factors. In emerging markets,
where there is greater demand for less sophisticated products, price is a
more important factor than in developed markets. Competition in the United
States laboratory market is also influenced by the presence of large
distributors that sell not only our products but those of our competitors
as well.
HISTORY
Mettler-Toledo International Inc. was incorporated as a Delaware
Corporation in December 1991 and was recapitalized in connection with the
October 15, 1996 acquisition of the Mettler-Toledo group of companies from
Ciba-Geigy. In the acquisition, we paid cash consideration of approximately
SFr 505.0 million (approximately $402.0 million at October 15, 1996),
including dividends of approximately SFr 109.4 million (approximately $87.1
million at October 15, 1996), paid approximately $185.0 million to settle
amounts due to Ciba-Geigy and its affiliates and incurred expenses in
connection with the acquisition and related financing of approximately
$29.0 million. We financed the acquisition primarily with (i) borrowings
under a credit agreement in the amount of $307.0 million, (ii) the issuance
of $135.0 million of senior subordinated notes and (iii) an equity
contribution of $190.0 million primarily from AEA Investors Inc., its
shareholder-investors and our executive officers and other employees.
Following the completion of our initial public offering in November 1997,
management, employees and Company-sponsored benefit funds held
approximately 18% of the Company's shares on a fully diluted basis.
In May 1997, we acquired Safeline Limited for (pound)63.7 million
(approximately $104.4 million at May 30, 1997). Safeline is the world's
largest manufacturer and marketer of metal detection systems for companies
that produce and package goods in the food processing, pharmaceutical,
cosmetics, chemicals and other industries.
In November 1997, we completed our initial public offering of
7,666,667 shares of common stock at a per share price of $14.00. The
offering raised net proceeds of approximately $97.3 million. Concurrently
with the offering, we refinanced our prior credit facility and used
proceeds from the refinancing and the offering to repay the senior
subordinated notes of our wholly owned subsidiary, Mettler-Toledo, Inc.
In November 2001, we acquired Rainin Instrument, the leading
manufacturer of pipetting solutions used in pharmaceutical, biotech and
medical research applications for $294.2 million, of which approximately
one-half was paid in cash and one-half in shares of common stock.
Item 2. PROPERTIES
The following table lists our principal manufacturing facilities,
indicating the location and whether the facility is owned or leased. Our
Greifensee, Switzerland facility also serves as our worldwide headquarters
and our Columbus, Ohio, facility serves as our North American headquarters.
We believe our facilities are adequate for our current and reasonably
anticipated future needs.
LOCATION OWNED/LEASED
- -------- ------------
Europe:
Greifensee/Nanikon, Switzerland........ Owned
Uznach, Switzerland.................... Owned
Urdorf, Switzerland.................... Owned
Schwerzenbach, Switzerland............. Leased
Albstadt, Germany...................... Owned
Giesen, Germany........................ Owned
Bethune, France........................ Leased
Manchester, England.................... Leased
Royston, England....................... Leased
Americas:
Columbus, Ohio......................... Leased
Worthington, Ohio...................... Owned
Oakland, California ................... Leased
Spartanburg, South Carolina............ Owned
Ithaca, New York....................... Owned
Woburn, Massachusetts.................. Leased
Millersville, Maryland................. Leased
Tampa, Florida......................... Leased
Vernon Hills, Illinois................. Leased
Other:
Shanghai, China............................ Building Owned;
Land Leased
Changzhou, China........................... Building Owned;
Land Leased
Mumbai, India.............................. Leased
ITEM 3. LEGAL PROCEEDINGS
Routine litigation is incidental to our business. Nevertheless, we are
not currently involved in any legal proceeding which we believe could have
a material adverse effect upon our financial condition or results of
operations. See "Environmental Matters" under Part I, Item 1 for
information concerning legal proceedings relating to certain environmental
claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
SUPPLEMENTAL EXECUTIVE OFFICERS OF THE REGISTRANT
See Part III, Item 10 of this annual report on Form 10-K for
information about Executive Officers of the Registrant.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
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.
COMMON STOCK
PRICE RANGE
------------
HIGH LOW
---- ---
2001
Fourth Quarter $51.98 $39.98
Third Quarter $49.20 $37.00
Second Quarter $52.20 $37.95
First Quarter $53.92 $36.50
2000
Fourth Quarter $56.00 $39.50
Third Quarter $48.81 $37.75
Second Quarter $45.75 $30.00
First Quarter $44.50 $31.81
HOLDERS
At February 22, 2002 there were 246 holders of record of common stock
and 44,161,792 shares of common stock outstanding. The number of holders of
record excludes beneficial owners of common stock held in street name.
DIVIDEND POLICY
We have never paid any dividends on our common stock and we do not
anticipate paying any cash dividends on the common stock in the foreseeable
future. The current policy of our Board of Directors is to retain earnings
to finance the operations and expansion of our business. Moreover, our
credit agreement restricts our ability to pay dividends. Any future
determination to pay dividends will depend on our results of operations,
financial condition, capital requirements, contractual restrictions and
other factors deemed relevant by our Board of Directors.
ITEM 6. SELECTED FINANCIAL DATA
The selected historical financial information set forth below at
December 31 and for the years then ended is derived from our consolidated
financial statements. The financial information presented below, in
thousands except per share data, was prepared in accordance with generally
accepted accounting principles in the United States of America ("U.S.
GAAP").
2001 2000 1999 1998 1997
------------ ------------ ------------ ------------ ---------------
STATEMENT OF OPERATIONS DATA:
Net sales ...................................... $ 1,148,022 $ 1,095,547 $ 1,065,473 $ 935,658 $ 878,415
Cost of sales .................................. 619,140 600,185 585,007(a) 520,190 493,480(c)
------------ ------------ ------------ ------------ ------------
Gross profit ................................... 528,882 495,362 480,466 415,468 384,935
Research and development ....................... 64,627 56,334 57,393 48,977 47,551
Selling, general and administrative ............ 299,191 296,187 300,389 265,511 260,397
Amortization ................................... 14,114 11,564 10,359 7,634 6,222
Purchased research and development ............. -- -- -- 9,976(b) 29,959(d)
Interest expense ............................... 17,162 20,034 21,980 22,638 35,924
Other charges, net (f) ......................... 15,354 2,638 10,468 1,197 10,834
Earnings (loss) before taxes, minority ------------ ------------ ------------ ------------ ------------
interest and extraordinary items.............. 118,434 108,605 79,877 59,535 (5,952)
Provision for taxes ............................ 46,170 38,510 31,398 20,999 17,489
Minority interest .............................. -- (24) 378 911 468
------------ ------------ ------------ ------------ ------------
Earnings (loss) before extraordinary items...... 72,264 70,119 48,101 37,625 (23,909)
Extraordinary items - debt extinguishments -- -- -- -- (41,197)(e)
------------ ------------ ------------ ------------ ------------
Net earnings (loss) ............................ $ 72,264 $ 70,119 $ 48,101 $ 37,625 $ (65,106)
============ ============ ============ ============ ============
Basic earnings (loss) per common share:
Net earnings (loss) before
extraordinary items......................... $ 1.78 $ 1.80 $ 1.25 $ 0.98 $ (0.76)
Extraordinary items .......................... -- -- -- -- (1.30)
------------ ------------ ------------ ------------ ------------
Net earnings (loss) .......................... $ 1.78 $ 1.80 $ 1.25 $ 0.98 $ (2.06)
============ ============ ============ ============ =============
Weighted average number of common shares...... 40,609,716 38,897,879 38,518,084 38,357,079 31,617,071
Diluted earnings (loss) per common share:
Net earnings (loss) before extraordinary
items....................................... $ 1.68 $ 1.66 $ 1.16 $ 0.92 $ (0.76)
Extraordinary items .......................... -- -- -- -- (1.30)
------------ ------------ ------------- ------------ --------------
Net earnings (loss) .......................... $ 1.68 $ 1.66 $ 1.16 $ 0.92 $ (2.06)
============ ============ ============ ============ ==============
Weighted average number of common shares...... 42,978,895 42,141,548 41,295,757 40,682,211 31,617,071
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents ...................... $ 27,721 $21,725 $17,179 $21,191 23,566
Working capital ................................ 106,689 103,021 81,470 90,042 79,163
Total assets ................................... 1,189,412 887,582 820,973 820,441 749,313
Long-term debt ................................. 309,479 237,807 249,721 340,246 340,334
Other non-current liabilities (g) .............. 119,108 95,843 100,334 103,201 91,011
Shareholders' equity ........................... 388,184 178,840 112,015 53,835 25,399
(Footnotes on next page)
(Footnotes from previous page)
- --------------------------
(a) In connection with acquisitions in 1999, including the acquisition of
the Testut-Lutrana group, we allocated $998 of the purchase price to
revalue certain inventories (principally work-in-progress and finished
goods) to fair value (net realizable value). Substantially all such
inventories were sold during the second quarter of 1999.
(b) In connection with the Bohdan acquisition, we allocated $9,976 of the
purchase price to purchased research and development in process. This
amount was recorded as an expense immediately following the Bohdan
acquisition.
(c) In connection with the Safeline acquisition, we allocated $2,054 of
the purchase price to revalue certain inventories (principally
work-in-progress and finished goods) to fair value (net realizable
value). Substantially all such inventories were sold during the second
quarter of 1997.
(d) In connection with the Safeline acquisition, we allocated $29,959 of
the purchase price to purchased research and development in process.
This amount was recorded as an expense immediately following the
Safeline acquisition.
(e) Represents charges for the write-off of capitalized debt issuance fees
and related expenses associated with our previous credit facilities.
The amount also includes the prepayment premium on the senior
subordinated notes which were repurchased and the write-off of the
related capitalized debt issuance fees.
(f) Other charges, net generally includes interest income, foreign
currency transactions, (gains) losses from sales of assets and other
items. The 2001 amount also includes a charge of $15,196 primarily
related to headcount reductions and manufacturing transfers. The 2000
amount includes a charge of $1,425 related to the close-down and
consolidation of operations. The 1999 amount includes a gain on an
asset sale of approximately $3,100, a charge of $8,007 to transfer
production lines from the Americas to China and Europe and the closure
of facilities and losses of approximately $4,100 in connection with
the exit from our glass batching business based in Belgium. For the
years ended December 31, 1999 and 1998, the amount shown also includes
$825 and $650, respectively, of expenses incurred on behalf of certain
selling shareholders in connection with secondary offerings. For the
year ended December 31, 1997, the amount shown includes a
restructuring charge of $6,300 to consolidate three facilities in
North America.
(g) Consists primarily of obligations under various pension plans and
plans that provide postretirement medical benefits. See Note 11 to the
audited consolidated financial statements included herein.
ITEM 7. MANAGEMENT'S 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 in conjunction with our audited
consolidated financial statements.
OVERVIEW
We operate a global business, with net 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 solution offering, the quality of our global sales and
service network, our continued investment in product development, our
pursuit of technology leadership and our focus on capitalizing on
opportunities in developed and emerging markets. While all of our
businesses have significant strategic links in terms of technology or
customer base, we have a geographically diverse business that serves
customers in relatively healthy and stable end markets, including the
pharmaceutical, biotech and food industries.
Our financial information is presented in accordance with generally
accepted accounting principles in the United States of America ("U.S.
GAAP").
Net sales in local currency increased 7% in 2001, 9% in 2000, and 16%
in 1999. The strengthening of the U.S. dollar versus our major trading
currencies reduced U.S. dollar-reported sales growth in each year. Net
sales in U.S. dollars increased 5% in 2001, 3% in 2000, and 14% in 1999. In
2001, we had local currency sales growth of 10% in Europe, 1% in the
Americas and 18% in Asia and other markets.
We believe our sales growth over the next several years will come
primarily from our solutions approach to the principal challenges facing
our customer base. These include the need for increased efficiency (for
example, in accelerating time to market for new products, achieving better
yields, improving work processes and outsourcing non-core activities), the
desire to integrate information captured by instruments into management
information systems, the drive for ever higher quality of our customers'
products and services, including the need to adhere to stringent regulatory
and industry standards, and the move towards globalization in all major
customer groups.
Acquisitions are also an integral part of our growth strategy. Our
acquisitions leverage our global sales and service network, respected
brand, extensive distribution channels and technological leadership. We are
particularly attracted to acquisitions that leverage these attributes or
increase our solutions capability (for example, software acquisitions). In
addition, we continue to focus on the following end markets: drug
discovery, process analytics, food and drug packaging and transportation
and logistics.
We increased our Adjusted Operating Income (gross profit less research
and development and selling, general and administrative expenses before
amortization and non-recurring costs) as a percentage of net sales from
11.6% in 1999 to 14.4% in 2001. This improved performance was achieved
while we continued to invest in product development and in our distribution
and manufacturing infrastructure. We believe that a significant portion of
the increase in our Adjusted Operating Income resulted from our strategy to
reduce costs, re-engineer our operations and focus on the highest
value-added segments of the markets in which we compete. We believe that
Adjusted Operating Income provides important financial information in
measuring and comparing our operating performance. Adjusted Operating
Income is not intended to represent operating income under U.S. GAAP and
should not be considered as an alternative to net earnings as an indicator
of our performance.
RECENT ACQUISITIONS
We have completed several acquisitions in the last few years,
including the following:
In November 2001, we acquired Rainin Instrument, LLC, based in
California, USA. Rainin is the leading manufacturer of pipetting solutions
used in pharmaceutical, biotech and medical research applications. Rainin
has a market leadership position in North America, a truly differentiating
technology and a broad patent portfolio in areas like electronic pipetting,
ergonomic designs for pipettes and tip designs. This acquisition further
broadens our offering of instruments and solutions to the life sciences
market and positions us to bring greater value to our customers. Assuming
we acquired Rainin as of the beginning of 2001, the acquisition would have
added additional sales of approximately $65 million, Adjusted Operating
Income of approximately $20 million, and diluted earnings per share of
negative $0.01 per share on a pro forma basis.
In 2000, we acquired Thornton Inc. based in Massachusetts, USA.
Thornton is the leader in pure and ultra-pure industrial water monitoring
instrumentation used in semi-conductor, micro-electronics, pharmaceutical,
and biotech applications. We believe the acquisition of Thornton is an
excellent strategic move to expand our process analytics business and gain
access to new markets. Its conductivity technology and know-how are
complementary to our strength in pH and oxygen measurements. With a broader
technology offering, we are better able to serve our expanded customer
base.
In 1999, we acquired the Testut-Lutrana group, a leading manufacturer
and marketer of industrial and retail weighing instruments in France with
annual sales of approximately $50 million. We believe this acquisition is
an excellent strategic fit given Testut-Lutrana's extensive sales and
service network in France and excellent brand recognition. By virtue of
this acquisition, we assumed the leading position in food retail weighing
in Europe and are well positioned to meet the rapidly changing demands of
our European customer base.
In 1999, we also signed an agreement to convert our 60% subsidiary in
Changzhou, China, into a legal structure that provides us with full
control. Through this change in ownership, we are able to fully leverage
this low-cost manufacturing base for international markets. This move
underscores our strategic commitment to Asia and our belief in the
fundamental growth factors for the region.
Since the time of its buy-out in 1996, the Company has recorded
charges in 1996, 1997 and 1998 for purchased research and development for
products that were being developed that had not established technological
feasibility as of the date of the acquisition and, if unsuccessful, had no
alternative future use in research and development activities or otherwise.
These research and development projects related to several projects at the
Company at the time of its buy-out, Safeline metal detection projects and
Bohdan Automation. These purchased research and development projects have
been completed, and there have been no material differences between actual
and projected results. Assumptions taken at the time of these acquisitions
continue to appear reasonable based upon actual results, and in no cases
have there been significant shortfalls to the Company's original
projections.
COST REDUCTION PROGRAMS
As further described in Note 13 to our Consolidated Financial
Statements, as part of our efforts to reduce costs, we recorded a charge in
2001 of $15.2 million associated primarily with headcount reductions and
manufacturing transfers. In 2000, we recorded a charge of $1.4 million
related to the close-down and consolidation of operations. In light of our
intention to continue to develop China as a low-cost manufacturing resource
and to seek other manufacturing cost-saving opportunities, we also recorded
a charge of $8.0 million in 1999 associated with the transfer of production
lines from the Americas to China and Europe and the closure of facilities.
These charges relate primarily to severance and other related benefits and
costs of exiting facilities, including lease termination costs and the
write-down of impaired assets, and are expected to be completed during the
first quarter of 2002. During 1999, we also exited our glass batching
business based in Belgium. In this respect, we incurred losses of $4.1
million during 1999 primarily for severance and other costs of exiting this
business. We completed our exit of the glass batching business by the end
of 1999.
As part of our ongoing cost saving programs, we have launched an
initiative to improve our procurement of materials and services. The
initiative is intended to eliminate price differences between units,
leverage potential opportunities to increase buying power, and establish
worldwide sourcing arrangements. We estimate that we are currently
receiving annualized savings of between $10 to $14 million from this
project.
RESULTS OF OPERATIONS
The following table sets forth certain items from our consolidated
statements of operations for the years ended December 31, 2001, 2000 and
1999 (amounts in thousands).
2001 2000 1999 (a)
---- ---- --------
Net sales.............................. $1,148,022 $1,095,547 $1,065,473
Cost of sales.......................... 619,140 600,185 585,007
---------- ---------- ----------
Gross profit........................... 528,882 495,362 480,466
Research and development............... 64,627 56,334 57,393
Selling, general and administrative.... 299,191 296,187 300,389
Amortization........................... 14,114 11,564 10,359
Interest expense....................... 17,162 20,034 21,980
Other charges, net (b)................. 15,354 2,638 10,468
---------- ---------- ----------
Earnings before taxes and minority interest $ 118,434 $ 108,605 $ 79,877
=========== ========== ==========
Adjusted Operating Income (c).......... $ 165,064 $ 142,841 $ 123,682
=========== ========== ==========
(a) In connection with acquisitions in 1999, including the acquisition of
the Testut-Lutrana group, we allocated $998 of the purchase price to
revalue certain inventories (principally work-in-progress and finished
goods) to fair value (net realizable value). Substantially all such
inventories were sold during the second quarter of 1999.
(b) Other charges, net generally includes interest income, foreign
currency transactions, (gains) losses from sales of assets and other
items. The 2001 amount also includes a charge of $15,196 related
primarily to headcount reductions and manufacturing transfers. The
2000 amount includes a charge of $1,425 related to the close-down and
consolidation of operations. The 1999 amount includes a gain on an
asset sale of approximately $3,100, a charge of $8,007 to transfer
production lines from the Americas to China and Europe and the closure
of facilities and losses of approximately $4,100 in connection with
the exit from our glass batching business based in Belgium. For the
year ended December 31, 1999, the amount shown also includes $825 of
expenses incurred on behalf of certain selling shareholders in
connection with our secondary offering in 1999.
(c) Adjusted Operating Income is defined as operating income (gross profit
less research and development and selling, general and administrative
expenses) before amortization and non-recurring costs. Non-recurring
costs that have been excluded are the costs set forth in Note (a)
above. We believe that Adjusted Operating Income provides important
financial information in measuring and comparing our operating
performance. Adjusted Operating Income is not intended to represent
operating income under U.S. GAAP and should not be considered as an
alternative to net earnings as an indicator of our operating
performance.
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000
Net sales were $1,148.0 million for the year ended December 31, 2001,
compared to $1,095.5 million in the prior year. This reflected an increase
of 7% in local currencies during 2001. Results for 2001 were negatively
impacted by the strengthening of the U.S. dollar against other currencies.
Net sales in U.S. dollars during 2001 increased 5%.
Net sales by geographic customer location were as follows: Net sales
in Europe increased 10% in local currencies during 2001 versus the prior
year principally due to strong results in our retail product lines related
to the introduction of the euro currency, offset in part by a weakening in
our industrial product lines during the second half of the year. Net sales
in local currencies during 2001 in the Americas increased 1%. Net sales in
Asia and other markets increased 18% in local currencies during 2001. The
results of our business in Asia and other markets during 2001 reflect
particularly strong sales performance in China and Japan.
Net sales growth in the Americas was lower than Europe and Asia and
other markets primarily due to a deterioration in economic conditions. To
the extent that economic conditions significantly deteriorate in the
Americas or other parts of the world, our sales growth and profitability
may be adversely affected.
As previously mentioned, we acquired Rainin Instrument in November
2001. Assuming we had acquired Rainin at the beginning of 2000, the
acquisition would have added approximately $65 million of sales to both
2000 and 2001 on a pro forma basis. In total, acquisitions added
approximately 2% to 2001 sales growth.
Gross profit as a percentage of net sales was 46.1% for 2001 and 45.2%
for 2000. This increase is primarily related to benefits from various cost
saving initiatives.
Research and development expenses as a percentage of net sales were
5.6% for 2001, compared to 5.1% for the prior year. We continue to make
significant investments in research and development, which increased 16% in
local currencies in 2001.
Selling, general and administrative expenses as a percentage of net
sales decreased to 26.1% for 2001, compared to 27.1% for the prior year, in
part due to lower distribution costs associated with changes in our sales
mix.
Adjusted Operating Income increased 16% to $165.1 million, or 14.4% of
net sales, for 2001, compared to $142.8 million, or 13.0% of net sales, for
the prior year. The increased operating profit reflected the benefits of
higher sales levels and our continuous efforts to improve productivity. We
believe that Adjusted Operating Income provides important financial
information in measuring and comparing our operating performance. Adjusted
Operating Income is not intended to represent operating income under U.S.
GAAP and should not be considered as an alternative to net earnings as an
indicator of our performance.
Interest expense decreased to $17.2 million for 2001, compared to
$20.0 million for the prior year. The decrease was principally due to
reduced debt levels throughout the year.
Other charges, net were $15.4 million for 2001, compared to other
charges, net of $2.6 million for the prior year. The 2001 amount includes a
charge of $15.2 million ($14.6 million after tax) primarily associated with
headcount reductions and manufacturing transfers. The 2000 amount includes
a charge of $1.4 million related to the close-down and consolidation of
operations.
Our effective tax rate of 35% before non-recurring items in 2001 was
consistent with the previous year.
Net earnings were $86.9 million in 2001, compared to $71.5 million in
2000, before the previously mentioned charges associated with headcount
reductions and manufacturing transfers of $14.6 million in 2001 and $1.4
million in 2000. This represents an increase in net earnings of 21%.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Net sales were $1,095.5 million for the year ended December 31, 2000,
compared to $1,065.5 million in the prior year. This reflected an increase
of 9% in local currencies during 2000. Results for 2000 were negatively
impacted by the strengthening of the U.S. dollar against other currencies.
Net sales in U.S. dollars during 2000 increased 3%.
Net sales by geographic customer location were as follows: Net sales
in Europe increased 11% in local currencies during 2000, versus the prior
year. The increase reflected organic growth in our business and the effect
of the Testut-Lutrana acquisition. Net sales in local currencies during
2000 in the Americas increased 6%. Net sales in Asia and other markets
increased 13% in local currencies during 2000. The results of our business
in Asia and other markets during 2000 reflect strong sales performance in
China and Japan.
The operating results for Testut-Lutrana (which were included in our
results from May 1, 1999) would have had the effect of increasing our net
sales by an additional $16.3 million in 1999.
Gross profit as a percentage of net sales was 45.2% for 2000 and 1999,
before non-recurring acquisition costs in 1999. During 2000, we experienced
an increase in certain raw material costs, including electronics.
Research and development expenses as a percentage of net sales were
5.1% for 2000, compared to 5.4% for the prior year. This decrease is the
result of exchange rate movements.
Selling, general and administrative expenses as a percentage of net
sales decreased to 27.1% for 2000, compared to 28.2% for the prior year.
Adjusted Operating Income increased 15% to $142.8 million, or 13.0% of
net sales, for 2000, compared to $123.7 million, or 11.6% of net sales, for
the prior year. The 1999 period excludes the previously noted non-recurring
acquisition charge of $1.0 million for the revaluation of inventories to
fair value. The increased operating profit reflected the benefits of higher
sales levels and our continuous efforts to improve productivity. We believe
that Adjusted Operating Income provides important financial information in
measuring and comparing our operating performance. Adjusted Operating
Income is not intended to represent operating income under U.S. GAAP and
should not be considered as an alternative to net earnings as an indicator
of our performance.
Interest expense decreased to $20.0 million for 2000, compared to
$22.0 million for the prior year. The decrease was principally due to
reduced debt levels.
Other charges, net were $2.6 million for 2000, compared to other
charges, net of $10.5 million for the prior year. The 2000 amount includes
a charge of $1.4 million related to the close-down and consolidation of
operations. The 1999 amount also included a gain on an asset sale of $3.1
million, charges of $8.0 million regarding the transfer of production lines
from the Americas to China and Europe and the closure of facilities, losses
of $4.1 million to exit our glass batching business based in Belgium and a
charge of $0.8 million relating to the secondary offering completed in
1999.
Our effective tax rate of 35% before non-recurring items in 2000 was
consistent with the previous year.
Net earnings were $71.5 million in 2000, compared to $57.9 million in
1999, before the $1.4 million charge to close down and consolidate
operations in 2000, and expenses for the secondary offering, acquisition
charges and the $8.0 million charge to transfer production lines from the
Americas to China and Europe and the closure of facilities in 1999. This
represents an increase of 23%.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totalled $101.6 million in 2001,
compared to $84.7 million in 2000 and $91.3 million in 1999. The increase
in 2001 resulted principally from increased Adjusted Operating Income and
improved working capital management. The decrease in 2000 from 1999
resulted principally from a one-time payment of $4.2 million associated
with an early retirement plan from previous years, as well as an increase
in inventory levels associated with product introductions, production
transfers and increased safety stocks of electronics. In 1999, we also
increased our accounts payable terms with many suppliers to improve our
working capital efficiency. This resulted in an increase in cash provided
by operating activities of $16.2 million in 1999. We maintained these
payment terms in 2000, and therefore, accounts payables were not a source
of cash in 2000. Cash provided by operating activities includes payments
for restructuring, certain acquisition integration activities and a
one-time payment in 2000 associated with an early retirement plan from
previous years. These amounts totalled $10.7 million, $10.3 million and
$5.9 million in 2001, 2000 and 1999, respectively. Excluding these amounts,
cash provided by operating activities totalled $112.3 million in 2001,
compared to $95.0 million in 2000 and $97.2 million in 1999.
During 2001, we spent approximately $309.8 million on acquisitions,
including the issuance of shares of $144.3 million and additional
consideration related to earn-out periods associated with acquisitions
consummated in prior years. The cash portion of these purchases were funded
from cash generated from operations and additional borrowings. We continue
to explore potential acquisitions. In connection with any acquisition, we
may incur additional indebtedness. In addition, we may make additional
earn-out payments relating to certain of these and previous year
acquisitions in the future, including up to $60 million for Rainin. Up to
half of any additional contingent payment for Rainin may be paid in shares
of our common stock and the remainder will be paid in cash.
Capital expenditures are a significant use of funds and are made
primarily for machinery, equipment and the purchase and expansion of
facilities. Our capital expenditures totalled $33.2 million in 2001, $29.3
million in 2000 and $29.2 million in 1999. We expect capital expenditures
to increase as our business grows, and fluctuate as currency exchange rates
change. We also expect capital expenditures to increase between $5 to $10
million in 2002 principally due to spending associated with Rainin's new
facility in California, USA.
At December 31, 2001, our consolidated debt, net of cash, was $332.0
million. We had borrowings of $332.8 million under our credit agreement and
$26.9 million under various other arrangements as of December 31, 2001. Of
our credit agreement borrowings, approximately $94.4 million was borrowed
as term loans scheduled to mature in 2004 and $238.4 million was borrowed
under a multi-currency revolving credit facility. At December 31, 2001, we
had $162.2 million of availability remaining under the revolving credit
facility.
At December 31, 2001, approximately $278.5 million of the borrowings
under the credit agreement and local working capital facilities were
denominated in U.S. dollars. The balance of the borrowings under the credit
agreement and local working capital facilities were denominated in certain
of our other principal trading currencies amounting to approximately $81.2
million at December 31, 2001. 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.
Under the credit agreement, amounts outstanding under the term loans
are payable in quarterly installments. In addition, the credit agreement
obligates us to make mandatory prepayments in certain circumstances with
the proceeds of asset sales or issuance of capital stock or indebtedness
and with certain excess cash flow. The credit agreement imposes certain
restrictions on us and our subsidiaries, including restrictions and
limitations on the ability to pay dividends to our shareholders, incur
indebtedness, make investments, grant liens, sell financial assets and
engage in certain other activities. We must also comply with several
financial and other covenants, including requirements that we maintain the
following criteria as specifically defined in our credit agreement:
o a fixed charge coverage ratio (the ratio of EBITDA less capital
expenditures to interest expense) of 3.25:1 (at December 31,
2001, this ratio was more than 8.5:1);
o a debt to EBITDA ratio of no more than 4:1 (at December 31, 2001,
this ratio was less than 2:1); and
o a minimum net worth (as specifically defined in the credit
agreement) of at least $300 million (at December 31, 2001, we
exceeded the minimum by more than 2.5 times)
A deterioration in our financial performance could result in a breach
of these covenants and trigger the lenders' right to require immediate
repayment of all or part of the indebtedness.
However at December 31, 2001, the Company is in compliance with all
covenants set forth in its credit facility and other indentures. In
addition, the Company does not have any downgrade triggers that would
accelerate the maturity dates of its debt.
The interest rates for our borrowings under the credit agreement are
based in part on our credit rating. For so long as Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc., rates our
debt at "BBB-" or above and Moody's Investors Service Inc. rates our debt
at "Baa3" or above, the applicable interest rates are determined from a
grid that sets out the interest rates for each rating grade. However, if
our credit rating falls below "BBB-" or "Baa3" then the applicable interest
rates are set by reference to a separate grid in which interest rate levels
are determined by our debt to EBITDA ratio. We estimate that if our credit
rating was reduced to below investment grade our interest expense would
increase by approximately $0.7 million per year.
The following summarizes certain of our contractual obligations at
December 31, 2001 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. During the
ordinary course of business we enter into contracts to purchase raw
materials and components for manufacture. In general these commitments do
not extend for more than a few months.
Payments due by period
Total Less than 1 year 1-3 years 4-5 years After 5 years
----- ---------------- --------- --------- -------------
Long-term debt(a) $332,813 $31,455 $301,358 $ - $ -
Non-cancelable operating leases(b) 58,721 15,624 21,834 12,533 8,730
-------- ------- -------- ------- ------
Total $391,534 $47,079 $323,192 $12,533 $8,730
======== ======= ======== ======= ======
(a) As described in Note 8 to the Consolidated Financial Statements.
(b) As described in Note 14 to the Consolidated Financial Statements.
We currently believe that cash flow from operating activities,
together with borrowings available under the credit agreement and local
working capital facilities, will be sufficient to fund currently
anticipated working capital needs and capital spending requirements as well
as debt service requirements for at least several years, but there can be
no assurance that this will be the case.
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 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. In recent years, the Swiss franc and other
European currencies have generally moved in a consistent manner versus the
U.S. dollar. Therefore, because the two effects previously described have
offset each other, our operating profits have not been materially affected
by movements in the U.S. dollar exchange rate versus European currencies.
However, there can be no assurance that these currencies will continue to
move in a consistent manner in the future. We estimate that a one percent
strengthening of the Swiss franc against the euro would result in a
decrease in our earnings before tax of $0.8 million to $1.2 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.
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 and repatriate
income, 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. As a result, we
may pay income taxes to certain jurisdictions even though on an overall
basis we incur a net loss for the period.
ENVIRONMENTAL MATTERS
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 capital and operating expenditures in complying with
environmental laws and regulations both in the United States and abroad. We
are currently involved in, or have potential liability with respect to, the
remediation of past contamination in facilities both in the United States
and abroad. In addition, some of these facilities have or had 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. Such 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.
INFLATION
Inflation can affect the costs of goods and services that we use. 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, Latin America and Eastern Europe, which have
experienced inflationary conditions. To date, inflationary conditions have
not had a material effect on our operating results. However, if our
presence in China, Latin America and Eastern Europe increases, these
inflationary conditions could have a greater impact on our operating
results.
SEASONALITY
Our business has historically experienced a slight amount of seasonal
variation, with sales in the first quarter slightly lower than, and sales
in the fourth quarter slightly higher than, sales in the second and third
quarters. This trend has a somewhat greater effect on income from
operations than on net sales because fixed costs are spread evenly across
all quarters.
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 hedge
short-term intercompany balances with our foreign businesses. Such
contracts limit our exposure to both favorable and unfavorable currency
fluctuations. A sensitivity analysis to changes in the U.S. dollar and
Swiss franc on these foreign currency-denominated contracts indicates that
if the U.S. dollar and Swiss franc uniformly worsened by 10% against all of
our currency exposures, the fair value of these instruments would decrease
by $5.3 million at December 31, 2001, as compared with $1.2 million at
December 31, 2000. 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 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 in order to
limit our exposure to increases in interest rates. These contracts are more
fully described in Note 5 to our audited consolidated financial statements.
Based on our agreements outstanding at December 31, 2001, a 100 basis point
increase in interest rates would result in an increase in the net aggregate
market value of these instruments of $6.0 million, as compared with $0.8
million at December 31, 2000. Conversely, a 100 basis point decrease in
interest rates would result in a $6.0 million net reduction in the net
aggregate market value of these instruments, as compared with $0.7 million
at December 31, 2000. Any change in fair value would not affect our
Consolidated Statement of Operations unless such agreements and the
variable rate debt they hedge were prematurely settled.
We have designated certain of our Swiss franc debt as a hedge of our
net investments. A sensitivity analysis to changes in the U.S. dollar on
such debt at December 31, 2001 indicates that if the U.S. dollar weakened
by 10% against the Swiss franc, the fair value of such debt would increase
by $3.8 million, as compared with $9.7 million at December 31, 2000. Any
changes in fair value of the debt are recorded in comprehensive income and
offset the impact on comprehensive income of foreign exchange changes on
the net investments they hedge.
CRITICAL ACCOUNTING POLICIES
Management's discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial
statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an ongoing basis, we
evaluate our estimates, including those related to bad debts, inventories,
intangible assets, pensions and other post-retirement benefits, income
taxes, and contingencies and litigation. 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
consolidated financial statements. For a detailed discussion on the
application of these and other accounting policies, see Note 1 in our
Consolidated Financial Statements.
- - Accounts receivables. We maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers to make
required payments. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.
- - Inventory. We record our inventory at the lower of cost or market. The
estimated market value is based on assumptions for future demand and
related pricing. If actual market conditions are less favorable than those
projected by management, reductions in the value of inventory may be
required.
- - Acquired intangibles. 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.
- - Deferred tax assets. 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 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.
NEW ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141 ("SFAS 141"),
"Business Combinations" and No. 142 ("SFAS 142"), "Goodwill and Other
Intangible Assets." SFAS 141 prospectively prohibits the pooling of
interest method of accounting for business combinations initiated after
June 30, 2001 and also provides new criteria for recognizing acquired
intangible assets separately from goodwill. SFAS 142, effective for fiscal
years beginning after December 15, 2001, requires that goodwill no longer
be amortized to earnings, but instead be reviewed for impairment under SFAS
142 upon initial adoption of the Statement and on an annual basis going
forward. In addition, any goodwill resulting from acquisitions completed
after June 30, 2001 is not amortized. We estimate the adoption of these
Statements will increase our net earnings by $6.5 million and our diluted
earnings per share by $0.15 per share on an annual basis, or $0.14 per
share adjusting for additional shares issued in connection with our
acquisition of Rainin. We estimate the adoption of these Statements would
have had the following effects on our quarterly financial results for the
year ended December 31, 2001:
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
Net earnings:
Reported $ 14,498 $ 6,682 $ 20,384 $ 30,700 $72,264
Goodwill amortization 1,607 1,602 1,668 1,658 6,535
-------- ------- -------- -------- -------
Adjusted $ 16,105 $ 8,284 $ 22,052 $ 32,358 $78,799
======== ======= ======== ======== =======
Diluted earnings per
share:
Reported $0.34 $0.16 $0.48 $0.69 $1.68
Goodwill amortization 0.03 0.04 0.04 0.04 0.15
-------- ------- -------- -------- -------
Adjusted $0.37 $0.20 $0.52 $0.73 $1.83
======== ======= ======== ======== =======
SFAS 142 requires that goodwill be tested annually for impairment
using a two-step process. The first step is to identify a potential
impairment and, in transition, this step must be measured as of the
beginning of the fiscal year. However, a company has six months from the
date of adoption to complete the first step. We expect to complete that
first step of the goodwill impairment test during the first quarter of
2002. The second step of the goodwill impairment test measures the amount
of the impairment loss (measured as of the beginning of the year of
adoption), if any, and must be completed by the end of the company's fiscal
year. Intangible assets deemed to have an indefinite life will be tested
for impairment using a one-step process which compares the fair value to
the carrying amount of the asset as of the beginning of the fiscal year,
and pursuant to the requirements of SFAS 142 will be completed during the
first quarter of 2002. Any impairment loss resulting from the transitional
impairment tests will be reflected as the cumulative effect of a change in
accounting principle in the first quarter 2002. We have not yet determined
what effect these impairment tests will have on our earnings and financial
position.
In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"). SFAS 144 supersedes Statement of Financial Accounting
Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" ("SFAS 121") and amends Accounting
Principles Bulletin Opinion No. 30, "Reporting Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business". SFAS 144
develops one accounting model for long-lived assets that are disposed of by
sales, based on the model previously developed in SFAS 121. This Statement
also makes changes to the manner in which amounts from discontinued
operations are measured and expands the scope of the components of an
entity that qualify for discontinued operations treatment. This Statement
is effective for fiscal years beginning after December 31, 2001. We have
not fully evaluated the impact of adopting this Statement on our
consolidated financial statements.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This annual report includes forward-looking statements based on our
current expectations and projections about future events, including:
strategic plans; potential growth, including penetration of developed
markets, use of e-commerce capabilities and opportunities in emerging
markets; planned research and development efforts, product introductions
and innovation; meeting customer expectations; planned operational changes,
including productivity improvements; euro conversion issues; future
financial performance, including expected capital expenditures; research
and development expenditures; potential acquisitions; impact of completed
acquisitions; future cash sources and requirements; liquidity; impact of
environmental costs; and potential cost savings, including from our
procurement initiative.
These forward-looking statements are subject to a number of risks and
uncertainties, including those identified in Exhibit 99.1 to our Annual
Report on Form 10-K, which could cause our actual results to differ
materially from historical results or those anticipated and certain of
which are beyond our control. The words "believe," "expect," "anticipate"
and similar expressions identify forward-looking statements. We undertake
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. New
risk factors emerge from time to time and it is not possible for us to
predict all such risk factors, nor can we assess the impact of all such
risk factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Discussion of this item is on page 37 of Management's 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 on pages
F-1 through F-27 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.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are set forth
below. All directors hold office until the annual meeting of shareholders
following their election or until their successors are duly elected and
qualified. Officers are appointed by the Board of Directors and serve at
the discretion of the Board.
NAME AGE POSITION
- ---- --- --------
Robert F. Spoerry 46 President, Chief Executive Officer
and Chairman of the Board of Directors
William P. Donnelly 40 Chief Financial Officer (1)
Lukas Braunschweiler 45 Head of Laboratory and Head of Packaging
Industry
Peter Burker 56 Head of Human Resources
Olivier A. Filliol 35 Head of Process Analytics
Jean-Lucien Gloor 49 Head of Information Systems and Logistics
Timothy P. Haynes 37 Head of Retail
Karl M. Lang 55 Head of Asia/Pacific
Urs Widmer 51 Head of Industrial
Philip Caldwell 82 Director
John T. Dickson 56 Director
Philip H. Geier 67 Director
Reginald H. Jones 84 Director
John D. Macomber 74 Director
George M. Milne 58 Director
Thomas P. Salice 42 Director
____________________________________________________________________________
(1) The Company recently announced that Mr. Donnelly will assume the
position of Head of Packaging Industry, and that Dennis Braun will
join the Company in March 2002 as Chief Financial Officer. Before
joining the Company, Dennis Braun, age 37, was with
PricewaterhouseCoopers LLP, as a partner in the Audit & Business
Advisory Services group since 1999. Mr. Braun had been with
PricewaterhouseCoopers since 1986, except for a period in 1996 and
1997 when he obtained a Masters in Business Administration.
Robert F. Spoerry has been President and Chief Executive Officer of
the Company since 1993. He served as Head of Industrial and Retail (Europe)
of the Company from 1987 to 1993. Mr. Spoerry has been a Director since
October 1996. Mr. Spoerry has been Chairman of the Board of Directors since
May 1998.
William P. Donnelly has been Chief Financial Officer of the Company
since 1997. From 1993 until joining the Company, he held various senior
financial and management positions, including most recently Group Vice
President and Chief Financial Officer with Elsag Bailey Process Automation,
a global manufacturer of instrumentation and analytical products and
developer of distributed control systems. The Company recently announced
that Mr. Donnelly is leaving the position of Chief Financial Officer
effective March 2002. After a transition period with the new Chief
Financial Officer, Dennis Braun, Mr. Donnelly will assume the position of
Head of Packaging Industry.
Lukas Braunschweiler has been Head of Laboratory Division and Head of
Packaging Industry Division since October 2001. From 1999 to 2001 he has
served as Head of Industrial and Retail of the Company. From 1995 to 1999
he served as Head of Industrial and Retail (Europe). From 1992 until 1995
he held various senior management positions with the Landis & Gyr Group, a
manufacturer of electrical meters. Prior to 1992, he was a Vice President
in the Technology Group of Saurer Group, a manufacturer of textile
machinery.
Peter Burker has been Head of Human Resources of the Company since
1994. From 1992 to 1994 he was the Company's General Manager in Spain, and
from 1989 to 1991 he headed the Company's operations in Italy.
Olivier A. Filliol has been Head of Process Analytics of the Company
since June 1999. From June 1998 to June 1999 he served as General Manager
of Hi-Speed Checkweigher Inc., a Company subsidiary in New York. From 1994
to April 1998, he was a Strategy Consultant with the international
consulting firm Bain & Company working in the Geneva, Paris, London and
Sydney offices.
Jean-Lucien Gloor has been Head of Information Systems and Logistics
and Chief Information Officer of the Company since March 2001. From 1999
until joining the Company, he served as Head of Central Server Platforms at
Credit Suisse, one of the leading Swiss banks. Prior to 1999, he held
various senior information systems positions during fifteen years with The
Dow Chemical Company.
Timothy P. Haynes has been Head of Retail of the Company since October
2001. From 1999 to 2001 he served as Business Unit Leader for the Company's
Transport, Shipping, Mail and Components business. From 1992 to 1999 he
held various management positions at Emerson Electric in their process
control and measurement businesses, including from 1997 to 1999 Vice
President of Marketing and Product Development in their Process Analytic
Division.
Karl M. Lang has been Head of Asia / Pacific of the Company since
January 2000. From 1994 to January 2000 he served as Head of Laboratory.
From 1991 to 1994 he was based in Japan as a representative of senior
management with responsibility for expansion of the Asian operations.
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 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.
Philip Caldwell has been a Director since October 1996. Prior to May
1998, Mr. Caldwell served as Chairman of the Board of Directors. Mr.
Caldwell spent 32 years at Ford Motor Company, where he served as Chairman
of the Board of Directors and Chief Executive Officer from 1980 to 1985 and
a Director from 1973 to 1990. He served as a Director and Senior Managing
Director of Lehman Bros. Inc. and its predecessor, Shearson Lehman Brothers
Holdings, Inc., from 1985 to February 1998. Mr. Caldwell is also a Director
of the Mexico Fund, Russell Reynolds Associates, Inc. and Waters
Corporation. He has served as a Director of the Chase Manhattan Bank, N.A.,
the Chase Manhattan Corp., Digital Equipment Corporation, Federated
Department Stores Inc., Kellogg Company, CasTech Aluminum Group Inc.,
Specialty Coatings International Inc., American Guarantee & Liability
Insurance Company, Zurich Holding Company of America, Inc., and Zurich
Reinsurance Centre Holdings, Inc.
John T. Dickson has been a Director since March 2000. Mr. Dickson is
Chief Executive Officer and President of Agere Systems Inc, the former
Microelectronics Group of Lucent, a position he has held since March 2001.
Mr. Dickson joined the Microelectronics and Communications Technologies
Group of Lucent Technologies in 1993. He served as Chief Executive Officer
of the Microelectronics Group since January 1998 and Executive Vice
President of Lucent Technologies since 1999. Mr. Dickson is also a Director
of the Semiconductor Industry Association and a member of the Board of
Trustees of Lehigh Valley Health Network.
Philip H. Geier has been a Director since July 2001. Mr. Geier was
Chairman of the Board and Chief Executive Officer of the Interpublic Group
of Companies, Inc. from 1980 to 2000 and was a Director of Interpublic
since 1975. Mr. Geier is a Director of AEA Investors Inc., Crossair Ltd.,
Fiduciary Trust Company International and Foot Locker, Inc.
Reginald H. Jones has been a Director since October 1996. Mr. Jones
retired as Chairman of the Board of Directors of General Electric Company
("General Electric") in April 1981. At General Electric, he served as
Chairman of the Board of Directors and Chief Executive Officer from
December 1972 through April 1981, President from June 1972 to December 1972
and a Director from August 1971 to April 1981.
John D. Macomber has been a Director since October 1996. He has been a
principal of JDM Investment Group since 1992. He was Chairman and President
of the Export-Import Bank of the United States (an agency of the U.S.
Government) from 1989 to 1992. From 1973 to 1986 Mr. Macomber was Chairman
and Chief Executive Officer of Celanese Corporation. Prior to that, Mr.
Macomber was a Senior Partner of McKinsey & Company. Mr. Macomber is also a
Director of AEA Investors Inc., Lehman Brothers Holdings Inc., Mirror
Woulds Technology, Sovereign Specialty Chemicals, Inc. and Textron Inc.
George M. Milne, Jr., Ph.D., has been a Director since September 1999.
Mr. Milne is Executive Vice President, Pfizer Global Research and
Development and President, Worldwide Strategic and Operations Management.
In this position he holds global responsibility for PGRD's Strategic
Management, Strategic Alliance Collaborations, Finance, Information
Technology, Licensing, Intellectual Property, Site Operations Management
and Veterinary Medicine R&D. Dr. Milne is a member of the Pfizer Management
Council. He was appointed Senior Vice President in 1988 and President of
Central Research in 1993 with global responsibility for Human and
Veterinary Medicine R&D.
Thomas P. Salice has been a Director since October 1996. Mr. Salice is
President and Chief Executive Officer of AEA Investors Inc. and has been
associated with AEA Investors Inc. since June 1989. Mr. Salice is also a
Director of Waters Corporation and Sovereign Specialty Chemicals, Inc.
Item 11. EXECUTIVE COMPENSATION
The information appearing in the sections captioned "Board of
Directors Information," "Executive Compensation" and "Compensation
Committee Interlocks and Insider Participation" in the Registrant's Proxy
Statement for the 2002 Annual Meeting of Stockholders (the "2002 Proxy
Statement") is incorporated by reference herein.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing in the section "Share Ownership" in the 2002
Proxy Statement is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of this Report:
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 Index of Exhibits included
on page E-1.
(b) Reports on Form 8-K:
DATE FILED ITEMS REPORTED
---------- --------------
October 15, 2001 Definitive agreement to acquire Rainin
Instrument, LLC
November 28, 2001 Completion of the acquisition of Rainin
Instrument, LLC
December 21, 2001 Financial statements of Rainin Instrument
Company, Inc. (the predecessor to Rainin
Instrument, LLC) and Pro Forma Combined
Financial Statements.
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: March 4, 2002 By: /s/ ROBERT F. SPOERRY
---------------------
Robert F. Spoerry
Chairman of the Board,
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 and in the capacities and on
the dates indicated.
Signature Title Date
--------- ----- ----
Chairman of the Board,
President and
/s/ ROBERT F. SPOERRY Chief Executive Officer March 4, 2002
- ------------------------------------------
Robert F. Spoerry
Vice President and
Chief Financial Officer
(Principal financial and accounting
/s/ WILLIAM P. DONNELLY officer) March 4, 2002
- ------------------------------------------
William P. Donnelly
/s/ PHILIP CALDWELL Director March 4, 2002
- ------------------------------------------
Philip Caldwell
/s/ JOHN T. DICKSON Director March 4, 2002
- ------------------------------------------
John T. Dickson
Director
- ------------------------------------------
Philip H. Geier
/s/ REGINALD H. JONES Director March 4, 2002
- ------------------------------------------
Reginald H. Jones
/s/ JOHN D. MACOMBER Director March 4, 2002
- ------------------------------------------
John D. Macomber
/s/ GEORGE M. MILNE Director March 4, 2002
- ------------------------------------------
George M. Milne
/s/ THOMAS P. SALICE Director March 4, 2002
- ------------------------------------------
Thomas P. Salice
EXHIBIT PAGE NUMBER OR
NO. DESCRIPTION INCORPORATION BY REFERENCE
--- ----------- --------------------------
3.1 Amended and Restated Certificate of Filed as Exhibit 3.1 to the Annual Report on
Incorporation of the Company Form 10-K of the Company dated March 13,
1998 and incorporated herein by reference
3.2 Amended By-laws of the Company, effective Filed as Exhibit 3.2 to the Annual Report on Form
February 3, 2000 10-K of the Company dated March 24, 2000 and
incorporated herein by reference
4.1 Specimen Form of the Company's Stock Filed as Exhibit 4.3 to the Registration Statement,
Certificate as amended, on Form S-1 of the Company (Reg. No.
333-35597) and incorporated herein by reference
10.1 Employment Agreement between Robert F. Spoerry Filed as Exhibit 10.4 to the Annual Report on Form
and Mettler-Toledo AG, dated as of October 30, 10-K of Mettler-Toledo Holding Inc. dated March 31,
1996 1997 and incorporated herein by reference
10.2 Employment Agreement between Lukas Filed as Exhibit 10.2 to the Annual Report on Form
Braunschweiler and Mettler-Toledo GmbH dated 10-K of the Company dated March 13, 1998 and
as of November 10, 1997 incorporated herein by reference
10.3 Employment Agreement between William P. Filed as Exhibit 10.3 to the Annual Report on Form
Donnelly and Mettler-Toledo GmbH dated as of 10-K of the Company dated March 13, 1998 and
November 10, 1997 incorporated herein by reference
10.4 Employment Agreement between Karl M. Lang and Filed as Exhibit 10.4 to the Annual Report on Form
Mettler-Toledo GmbH dated as of November 10, 10-K of the Company dated March 13, 1998 and
1997 incorporated herein by reference
10.5 Loan Agreement between Robert F. Spoerry and Filed as Exhibit 10.5 to the Annual Report on Form
Mettler-Toledo AG, dated as of October 7, 1996 10-K of Mettler-Toledo Holding Inc. dated March 31,
1997 and incorporated herein by reference
10.6 Regulations of the Performance Oriented Bonus Filed as Exhibit 10.7 to the Annual Report on Form
System (POBS) - Incentive System for the 10-K of the Company dated March 18, 1999 and
Management of Mettler Toledo, effective as of incorporated herein by reference
November 5, 1998
10.7 Regulations of the POBS Plus - Incentive Filed as Exhibit 10.7 to the Annual Report on Form
Scheme for Senior Management of Mettler 10-K of the Company dated March 24, 2000 and
Toledo, effective as of March 14, 2000 incorporated herein by reference
10.8 Credit Agreement, dated as of November 19, Filed as Exhibit 10.9 to the Annual Report on Form
1997, between Mettler-Toledo International 10-K of the Company dated March 13, 1998 and
Inc., as Guarantor, Mettler-Toledo, Inc., incorporated herein by reference
Mettler-Toledo AG, as Borrowers, Safeline
Holding Company as UK Borrower,
Mettler-Toledo, Inc., as Canadian Borrower and
Merrill Lynch & Co. as Arranger and
Documentation Agent, and the Lenders thereto
10.9 Amendment No.1, dated as of September 30, Filed as Exhibit 10 to the Quarterly Report on Form
1998, to the Second Amended and Restated 10-Q of the Company, dated November 16, 1998 and
Credit Agreement, dated as of November 19, incorporated herein by reference
1997
10.10 1997 Amended and Restated Stock Option Plan Filed as Exhibit 10.10 to the Registration
Statement on Form S-1 of the Company (Reg. No.
333-35597) and incorporated herein by reference)
10.11 Amendment to the 1997 Amended and Restated Filed as Exhibit 10 to the Quarterly Report on Form
Stock Option Plan 10-Q of the Company dated August 15, 2000 and
incorporated herein by reference
10.12 Employment Agreement between Peter Burker and Filed as Exhibit 10.11 to the Annual Report on Form
Mettler-Toledo GmbH dated as of November 10, 10-K of the Company dated March 24, 2000 and
1997 incorporated herein by reference
10.13 Employment Agreement between Daniel G. Filed as Exhibit 10.12 to the Annual Report on Form
Schillinger and Mettler-Toledo GmbH dated as of 10-K of the Company dated March 24, 2000 and
January 1, 2000 incorporated herein by reference
10.14 Regulations of the POBS PLUS - Incentive Filed as Exhibit 10.13 to the Annual Report on Form
Scheme for Members of the Group Management of 10-K of the Company dated March 24, 2000 and
Mettler Toledo, effective as of March 7, 2000 incorporated herein by reference
10.15 Employment Agreement between Jean-Lucien Gloor Filed as Exhibit 10.15 to the Annual Report on Form
and Mettler-Toledo GmbH dated as of March 1, 10-K of the Company dated March 22, 2001 and
2001 incorporated herein by reference
10.16* Employment Agreement between Olivier A. Page 76
Filliol and Mettler-Toledo GmbH dated as of
May 21, 2001
10.17* Employment Agreement between Timothy P. Haynes Page 78
and Mettler-Toledo GmbH dated as of December
11, 2001
10.18* Employment Agreement between Urs Widmer and Page 81
Mettler-Toledo GmbH dated as of May 11, 2001
10.19 Purchase Agreement among the Company, Mettler- Filed as Exhibit 2.1 to the Current Report on
Toledo, Inc. and Rainin Instrument Company, Form 8-K dated November 28, 2001 and incorporated
Inc. dated as of October 13, 2001. herein by reference.
21* Subsidiaries of the Company Page 83
23.1* Consent of PricewaterhouseCoopers AG Page 87
99.1* Factors Affecting Our Future Operating Results Page 88
- ---------------
* FILED HEREWITH
METTLER-TOLEDO INTERNATIONAL INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Accountants........................................................... F-2
Consolidated Balance Sheets as of December 31, 2001 and 2000................................ F-3
Consolidated Statements of Operations
for the years ended December 31, 2001, 2000 and 1999.................................... F-4
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 2001, 2000 and 1999.................................... F-5
Consolidated Statements of Cash Flows
for the years ended December 31, 2001, 2000 and 1999.................................... F-6
Notes to Consolidated Financial Statements.................................................. F-7
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Mettler-Toledo International Inc.
In our opinion, the consolidated financial statements listed in the index
under Item 14(a)(1) on page 44 present fairly, in all material respects,
the financial position of Mettler-Toledo International Inc. and its
subsidiaries at December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the
financial statement schedule listed in the index under Item 14 (a) (2) on
page 44 presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits
of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
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. We believe that our audits provide a
reasonable basis for our opinion.
PricewaterhouseCoopers AG
Zurich, Switzerland
February 7, 2002
METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2001 2000
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 27,721 $21,725
Trade accounts receivable, less allowances of $9,450 in 2001 and
$9,097 in 2000....................................................... 227,295 212,570
Inventories, net........................................................ 145,621 141,677
Other current assets and prepaid expenses............................... 31,121 47,367
----------- ------------
Total current assets.................................................. 431,758 423,339
Property, plant and equipment, net......................................... 192,272 199,388
Excess of cost over net assets acquired, net of accumulated amortization
of $39,724 in 2001 and $29,664 in 2000.................................. 384,947 228,035
Other intangible assets ................................................... 126,524 -
Other non-current assets .................................................. 53,911 36,820
----------- ------------
Total assets.......................................................... $1,189,412 $887,582
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable.................................................. $ 66,327 $80,513
Accrued and other liabilities........................................... 111,284 97,575
Accrued compensation and related items.................................. 47,702 51,968
Taxes payable........................................................... 72,035 68,537
Short-term borrowings and current maturities of long-term debt.......... 50,239 50,560
----------- ------------
Total current liabilities............................................. 347,587 349,153
Long-term debt............................................................. 309,479 237,807
Non-current deferred taxes................................................. 25,053 25,939
Other non-current liabilities.............................................. 119,109 95,843
----------- ------------
Total liabilities..................................................... 801,228 708,742
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 44,145,742 in 2001 and 39,372,873 in 2000...................... 441 393
Additional paid-in capital.............................................. 455,684 294,558
Retained earnings / (accumulated deficit)............................... 3,957 (68,307)
Accumulated other comprehensive loss.................................... (71,898) (47,804)
----------- ------------
Total shareholders' equity ........................................... 388,184 178,840
Commitments and contingencies..............................................
----------- ------------
Total liabilities and shareholders' equity ........................... $1,189,412 $887,582
=========== ============
The accompanying notes are an integral part of these consolidated financial statements.
METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2001 2000 1999
---------- ----------- ----------
Net sales.................................. $1,148,022 $1,095,547 $1,065,473
Cost of sales.............................. 619,140 600,185 585,007
---------- ----------- ----------
Gross profit........................... 528,882 495,362 480,466
Research and development................... 64,627 56,334 57,393
Selling, general and administrative........ 299,191 296,187 300,389
Amortization............................... 14,114 11,564 10,359
Interest expense........................... 17,162 20,034 21,980
Other charges, net......................... 15,354 2,638 10,468
---------- ----------- ----------
Earnings before taxes and minority
interest............................ 118,434 108,605 79,877
Provision for taxes........................ 46,170 38,510 31,398
Minority interest.......................... - (24) 378
---------- ----------- ----------
Net earnings........................... $72,264 $70,119 $48,101
========== =========== ==========
Basic earnings per common share:
Net earnings........................... $1.78 $1.80 $1.25
Weighted average number of common shares 40,609,716 38,897,879 38,518,084
Diluted earnings per common share:
Net earnings........................... $1.68 $1.66 $1.16
Weighted average number of common shares 42,978,895 42,141,548 41,295,757
The accompanying notes are an integral part of these consolidated financial statements.
METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
RETAINED ACCUMULATED
COMMON STOCK ADDITIONAL EARNINGS/ OTHER
----------------------- PAID-IN (ACCUMULATED COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT) INCOME (LOSS) TOTAL
-------- --------- ------------ ------------ --------------- -------
Balance at December 31, 1998....... 38,400,363 $384 $285,161 $(186,527) $(45,183) $53,835
Exercise of stock options.......... 274,405 2 2,931 - - 2,933
Comprehensive income:
Net earnings.................... - - - 48,101 - 48,101
Change in currency translation
adjustment................... - - - - 2,387 2,387
Minimum pension liability
adjustment................... - - - - 4,759 4,759
--------
Comprehensive income............... 55,247
---------- ------- -------- ---------- --------- --------
Balance at December 31, 1999....... 38,674,768 $386 $288,092 $(138,426) $(38,037) $112,015
Exercise of stock options.......... 698,105 7 6,466 - - 6,473
Comprehensive income:
Net earnings.................... - - - 70,119 - 70,119
Change in currency translation
adjustment................... - - - - (9,767) (9,767)
--------
Comprehensive income............... 60,352
------------ ------- -------- ---------- --------- --------
Balance at December 31, 2000....... 39,372,873 $393 $294,558 $(68,307) $(47,804) $178,840
Issuance of shares................. 3,388,132 34 144,300 - - 144,334
Exercise of stock options.......... 1,384,737 14 16,826 - - 16,840
Comprehensive income:
Net earnings.................... - - - 72,264 - 72,264
Unrealized loss on cash flow
hedging arrangements......... - - - - (1,591) (1,591)
Change in currency translation
adjustment................... - - - - (2,494) (2,494)
Minimum pension liability adjustment - - - - (20,009) (20,009)
--------
Comprehensive income............... 48,170
------------ ------- -------- ---------- --------- --------
Balance at December 31, 2001....... 44,145,742 $441 $455,684 $ 3,957 $(71,898) $388,184
============ ======= ======== ========== ========= ========
The accompanying notes are an integral part of these consolidated financial statements.
METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS)
2001 2000 1999
---------- ---------- ----------
Cash flows from operating activities:
Net earnings............................................ $72,264 $70,119 $48,101
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation......................................... 22,858 21,690 24,940
Amortization......................................... 14,114 11,564 10,359
Other................................................ 1,055 1,890 (3,529)
Increase (decrease) in cash resulting from changes in:
Trade accounts receivable, net....................... (11,502) (12,437) (19,437)
Inventories.......................................... 3,531 (17,274) (9,540)
Other current assets................................. 570 (1,778) 11,363
Trade accounts payable............................... (14,825) (2,958) 16,239
Accruals and other liabilities....................... 13,507 (a) 13,898 (a) 12,844 (a)
-------- ------- -------
Net cash provided by operating activities.......... 101,572 84,714 91,340
-------- ------- -------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment..... 3,518 1,468 10,151
Purchase of property, plant and equipment............... (33,228) (29,304) (29,188)
Acquisitions, net of seller financings.................. (165,471) (b) (26,377) (b) (18,468)(b)
-------- ------- -------
Net cash used in investing activities.............. (195,181) (54,213) (37,505)
-------- ------- -------
Cash flows from financing activities:
Proceeds from borrowings................................ 188,448 29,239 20,640
Repayments of borrowings................................ (105,062) (61,617) (80,393)
Proceeds from options exercised......................... 16,840 6,473 2,592
-------- ------- -------
Net cash provided by (used in) financing activities 100,226 (25,905) (57,161)
-------- ------- -------
Effect of exchange rate changes on cash and cash equivalents (621) (50) (686)
-------- ------- -------
Net increase (decrease) in cash and cash equivalents....... 5,996 4,546 (4,012)
-------- ------- -------
Cash and cash equivalents:
Beginning of period..................................... 21,725 17,179 21,191
-------- ------- -------
End of period........................................... $ 27,721 $21,725 $17,179
======== ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.............................................. $15,504 $20,014 $21,642
Taxes................................................. $26,838 $16,523 $25,952
Non-cash financing and investing activities:
Issuance of common stock on acquisitions................ $144,334 - -
Seller financings on acquisitions....................... - $27,638 -
(a) Accruals and other liabilities include payments for restructuring, certain
acquisition integration activities and a one-time payment in 2000
associated with an early retirement plan from previous years. These amounts
totalled $10.7 million, $10.3 million and $5.9 million in 2001, 2000 and
1999, respectively.
(b) Amounts paid for acquisitions including the issuance of common stock,
seller financing, assumed debt and working capital retained by sellers were
$309.8 million, $55.5 million and $20.5 million in 2001, 2000 and 1999,
respectively.
The accompanying notes are an integral part of these consolidated financial statements.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS UNLESS OTHERWISE STATED)
1. BUSINESS DESCRIPTION AND BASIS OF PRESENTATION
Mettler-Toledo International Inc. ("Mettler-Toledo" or the "Company")
is a global manufacturer and marketer of precision instruments, including
weighing and certain analytical and measurement technologies, for use in
laboratory, industrial and food retailing applications. The Company is also
a leading provider of automated chemistry solutions used in drug and
chemical compound discovery and development. The Company's primary
manufacturing facilities are located in Switzerland, the United States,
Germany, the United Kingdom, France and China. The Company's principal
executive offices are located in Greifensee, Switzerland.
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States of
America ("U.S. GAAP") and include all entities in which the Company has
control, including its majority owned subsidiaries. Certain amounts in the
prior period financial statements have been reclassified to conform with
current year presentation.
All intercompany transactions and balances have been eliminated.
Investments in which the Company has voting rights between 20% to 50% are
accounted for using the equity method of accounting.
The preparation of financial statements 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.
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.
Inventories
Inventories are valued at the lower of cost or market. Cost, which
includes direct materials, labor and overhead plus indirect overhead, is
determined using the first in, first out (FIFO) or weighted average cost
methods.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is 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", the
Company expenses all costs incurred in the preliminary project stage and
capitalizes certain direct costs associated with the development and
purchase of internal-use software within other non-current assets.
Capitalized costs are amortized on a straight-line basis over the estimated
useful lives of the software, generally not exceeding five years.
The Company reviews its property, plant and equipment for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. An impairment loss would be
recognized when estimated future cash flows expected to result from the use
of the asset and its eventual disposition are less than its carrying
amount.
Excess of Cost over Net Assets Acquired and Other Intangible Assets
The excess of purchase price over the fair value of net assets
acquired and other intangible assets are amortized on a straight-line basis
over the expected period to be benefited. The Company assesses the
recoverability of such amounts by determining whether the amortization of
the balance over its remaining life can be recovered from the undiscounted
future operating cash flows of the acquired operations.
Taxation
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 credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates in
the respective jurisdictions in which the Company operates that are
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. In assessing the
realizability of 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.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
Generally, deferred taxes are not provided on the unremitted earnings
of subsidiaries outside of the United States because it is expected that
these earnings are permanently reinvested and such determination is not
practicable. Such earnings may become taxable upon the sale or liquidation
of these subsidiaries or upon the remittance of dividends. Deferred taxes
are provided in situations where the Company's subsidiaries plan to make
future dividend distributions.
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 Company's
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.
Revenue Recognition
Revenue is recognized when title to a product has transferred and any
significant customer obligations have been fulfilled. Revenues from service
contracts are recognized ratably over the contract period.
Research and Development
Research and development costs are expensed as incurred.
Earnings per Common Share
As described in Note 10, in accordance with the treasury stock method,
the Company has included 2,369,179 and 3,243,669 equivalent shares relating
to 4,379,575 outstanding options to purchase shares of common stock in the
calculation of diluted weighted average number of common shares for years
ending December 31, 2001 and 2000, respectively.
Derivative Financial Instruments
The Company adopted Statement of Financial Accounting Standards No.
133 "Accounting for Derivative Instruments and Hedging Activities", as
amended, on January 1, 2001. This Statement establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred
to as derivatives), and for hedging activities. It requires that an entity
recognizes all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. The
cumulative effect of adopting SFAS 133 as of January 1, 2001 was not
material to the Company's consolidated financial statements.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. As described more
fully in Note 5 below, the Company enters into foreign currency forward
contracts to hedge short-term intercompany transactions with its foreign
businesses. Such contracts limit the Company's exposure to both favorable
and unfavorable currency fluctuations. These contracts are adjusted to
reflect market values as of each balance sheet date, with the resulting
changes in fair value being recognized in other charges, net.
The Company also enters into certain interest rate swap and cap
agreements in order to reduce its exposure to changes in interest rates.
The differential paid or received on interest rate swap agreements is
recognized as interest expense over the life of the agreements as incurred.
The fair value of outstanding interest rate swap and cap agreements that
are effective cash flow hedges at December 31, 2001 are included in the
Company's Consolidated Statement of Shareholders' Equity.
The Company has designated certain of its Swiss franc debt as a hedge
of its net investments. Any changes in fair value of the debt are recorded
in comprehensive income (loss) and offset the net investments they hedge.
Stock Based Compensation
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for its stock option plan.
Concentration of Credit Risk
The Company's revenue base is widely diversified by geographic region
and by individual customer. The Company's products are utilized in many
different industries, although extensively in the pharmaceutical, food and
beverage, transportation and logistics and chemicals industries. The
Company performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers.
3. BUSINESS COMBINATIONS
During 2001, the Company spent approximately $309.8 million on
acquisitions, including the issuance of shares and additional consideration
related to earn-out periods associated with acquisitions consummated in
prior years. The Company accounted for the acquisition payments using the
purchase method of accounting. The Company may be required to make
additional earn-out payments based upon the achievement of certain
financial performance levels relating to certain of these acquisitions in
the future. The fair value of any earn-out payments will be recorded as
additional consideration of the acquired enterprise and recorded as
goodwill and evaluated for impairment, when such payments are deemed
issuable to the sellers.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
3. BUSINESS COMBINATIONS - (CONTINUED)
In November 2001, the Company acquired the issued and outstanding
membership units of Rainin Instrument, LLC. for approximately $294.2
million. Rainin is a developer and manufacturer of pipetting solutions used
in pharmaceutical, biotechnology and medical research applications. As a
result of the acquisition the Company is expected to be the leading
provider of pipetting solutions in North America.
The aggregate purchase price for Rainin was $294.2 million, including
$149.9 million of cash and the issuance of common stock valued at $144.3
million, plus an additional contingent payment, if any, of up to $60
million. The value of 3,388,132 common shares issued was determined based
on the average five days closing price of Mettler-Toledo common shares
before the announcement of the transaction. Up to half of any additional
contingent payment may be paid in shares of the Company's common stock and
the remainder will be paid in cash.
The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition.
Current assets.......................................... $ 22,653
Property, plant and equipment........................... 4,168
Intangible assets....................................... 127,074
Goodwill................................................ 148,624
--------
Total assets acquired ................................ 302,519
Current liabilities..................................... 8,228
Non-current liabilities................................. 57
--------
Total liabilities assumed............................. 8,285
--------
Net assets acquired................................... $294,234
========
The identifiable intangible assets are amortized on a straight-line
basis over periods ranging from 11 to 45 years, and the annual aggregate
amortization expense is estimated at $3.1 million. The identifiable
intangible assets include customer relationships of $67.4 million,
tradename of $22.4 million, intellectual property license of $19.9 million
and technology and patents of $17.4 million. The $148.6 million of goodwill
was assigned to the company's Principal U.S. Operations segment and is
expected to be fully deductible for tax purposes. This goodwill and certain
intangible assets with indefinite useful lives approximating $42.3 million
are not subject to amortization in accordance with current generally
accepted accounting principles.
The following summarized unaudited pro forma information assumes the
acquisition of Rainin occurred on January 1, 2000. The pro forma data
reflects adjustments directly related to the acquisition, and does not
include adjustments that may arise as a consequence of the acquisition.
Accordingly, the unaudited pro forma information does not purport to be
indicative of what the Company's combined results of operations would
actually have been had the acquisition occurred on January 1, 2000 or to
project the Company's combined results of operations for any future
periods.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
3. BUSINESS COMBINATIONS - (CONTINUED)
Year ended December 31:
2001 2000
---------- ----------
Net sales:
As reported........................................ $1,148,022 $1,095,547
Pro forma.......................................... 1,212,587 1,159,129
========== ==========
Net earnings:
As reported........................................ $72,264 $70,119
Pro forma.......................................... 76,561 71,980
====== ======
Basic earnings per common share:
As reported........................................ $1.78 $1.80
Pro forma.......................................... 1.76 1.70
====== ======
Diluted earnings per common share:
As reported........................................ $1.68 $1.66
Pro forma.......................................... 1.67 1.58
==== ====
During 2000, the Company spent approximately $55.5 million on
acquisitions, including the acquisition of Thornton Inc., approximately
$10.2 million of additional consideration related to earn-out periods
associated with acquisitions consummated in prior years, seller financing
of $27.6 million and working capital retained by sellers that has been
excluded from the purchase price allocation. Thornton is the market leader
in pure and ultra-pure industrial water monitoring instrumentation used in
semi-conductor, micro-electronics, pharmaceutical and biotech applications.
The Company accounted for the acquisition payments using the purchase
method of accounting. The Company may be required to make additional
earn-out payments based upon the achievement of certain financial
performance levels relating to certain of these acquisitions in the future.
The fair value of any earn-out payments will be recorded as additional
consideration of the acquired enterprise and recorded as goodwill and
evaluated for impairment, when such payments are deemed issuable to the
sellers.
During 1999, the Company spent approximately $20.5 million on
acquisitions including the net assets of the Testut-Lutrana group, a
leading manufacturer and marketer of industrial and retail weighing
instruments in France. This amount includes approximately $2.0 million of
working capital retained by sellers that has been excluded from the
purchase price allocation. The Company accounted for the acquisitions using
the purchase method of accounting. Accordingly, the costs of the
acquisitions were allocated to the assets acquired and liabilities assumed
based upon their respective fair values. In this respect, the Company
allocated $1.0 million of the purchase price to revalue certain finished
goods inventories to fair value. Substantially all of such inventories were
sold in 1999.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
4. INVENTORIES, NET
Inventories, net consisted of the following at December 31:
2001 2000
-------- --------
Raw materials and parts......................................... $ 70,392 $ 67,379
Work-in-progress................................................ 28,433 37,289
Finished goods.................................................. 46,796 37,009
-------- --------
$145,621 $141,677
======== ========
5. FINANCIAL INSTRUMENTS
At December 31, 2001, the Company had certain interest rate swap
agreements outstanding that fix the variable interest obligation associated
with CHF 50 million of Swiss franc-based debt and $260 million of USD-based
debt. Certain of these agreements have forward starting dates commencing in
2002, with various maturities beginning in 2003. The fixed rates associated
with the swap of Swiss franc debt are approximately 3.6%, while the rates
associated with the USD are approximately 4.0% plus the Company's normal
interest margin. The swaps are effective at three-month LIBOR rates. At
December 31, 2001 and 2000, the fair market value of such financial
instruments was approximately $(1.7) million and $(0.5) million,
respectively.
At December 31, 2001, the Company had outstanding foreign currency
forward contracts in the amount of $47.8 million. The purpose of these
contracts is to hedge short-term intercompany balances with its foreign
businesses. The fair value of these contracts was not materially different
from the carrying value at December 31, 2001 and 2000, 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 has no reason to believe that such
counterparties will not be able to fully satisfy their obligations under
these contracts.
The fair values of all derivative financial instruments are estimated
based on current settlement prices of comparable contracts obtained from
dealer quotes. The values represent the estimated amount the Company would
pay or receive to terminate the agreements at the reporting date, taking
into account current creditworthiness of the counterparties.
6. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net, consisted of the following at
December 31:
2001 2000
-------- --------
Land................................................... $ 38,690 $ 40,580
Buildings and leasehold improvements................... 102,308 105,937
Machinery and equipment................................ 155,777 133,072
Computer software...................................... 4,673 5,387
-------- --------
301,448 284,976
Less accumulated depreciation and amortization......... (109,176) (85,588)
-------- --------
$192,272 $199,388
======== ========
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
7. SHORT-TERM BORROWINGS AND CURRENT MATURITIES OF LONG-TERM DEBT
Short-term borrowings and current maturities of long-term debt
consisted of the following for the years ended December 31:
2001 2000
-------- --------
Current maturities of long-term debt..................... $31,455 $31,900
Other short-term borrowings.............................. 18,784 18,660
-------- --------
$50,239 $50,560
======== =======
8. LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
2001 2000
--------- ---------
Credit Agreement Borrowings:
Term A USD Loans, interest at LIBOR plus 0.45% (2.35% at December 31,
2001) payable in quarterly installments due May 19, 2004........ $ 52,065 $ 69,420
Term A CHF Loans, interest at LIBOR plus 0.45% (2.33% at December 31,
2001) payable in quarterly installments due May 19, 2004........ 26,183 36,245
Term A GBP Loans, interest at LIBOR plus 0.45% (4.56% at December 31,
2001) payable in quarterly installments due May 19, 2004........ 16,106 22,096
Revolving credit facilities....................................... 238,459 109,907
Other............................................................... 26,905 50,699
--------- ---------
359,718 288,367
Less current maturities............................................. (50,239) (50,560)
--------- ---------
$ 309,479 $ 237,807
========= =========
The Company has a multi-currency $400.0 million revolving credit
facility and a CDN $26.3 million Canadian revolving credit facility under
its credit agreement. Loans under these revolving credit facilities may be
repaid and reborrowed and are due in full on May 19, 2004. At December 31,
2001, the Company had $162.2 million of additional borrowing capacity under
its credit agreement. The Company has the ability to refinance its
short-term borrowings through its revolving facilities for an uninterrupted
period extending beyond one year. Accordingly, approximately $208 million
of the Company's short-term borrowings at December 31, 2001 have been
reclassified to long-term.
The aggregate maturities of the Company's term loan obligations during
the years 2003 and 2004 are approximately $35.9 million and $27.0 million,
respectively.
The Company is required to pay a facility fee based in part on its
credit rating. The facility fee at December 31, 2001 was equal to 0.15%. At
December 31, 2001, borrowings under the Company's revolving facilities
carried an interest rate of LIBOR plus 0.3%. The Company's weighted average
interest rate for the year ended December 31, 2001 was approximately 6.0%.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
8. LONG-TERM DEBT - (CONTINUED)
The Company's credit agreement contains covenants, including
limitations on the Company's ability to pay dividends to shareholders,
incur indebtedness, make investments, grant liens, sell financial assets
and engage in certain other activities. The credit agreement also requires
the Company to maintain a minimum net worth, a minimum fixed charge
coverage ratio, and a ratio of total debt to EBITDA below a specified
maximum.
The carrying value of the Company's obligations under its credit
agreement approximates fair value due to the variable rate nature of the
obligations.
9. SHAREHOLDERS' EQUITY
Common Stock
The number of authorized shares of the Company's common stock is
125,000,000 shares with a par value of $0.01 per share. Holders of the
Company's common stock are entitled to one vote per share. At December 31,
2001, 6,446,849 shares of the Company's common stock were reserved for
grant pursuant to the Company's stock option plan.
Preferred Stock
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 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.
10. STOCK OPTION PLAN
The Company's stock option plan provides certain key 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.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
10. STOCK OPTION PLAN - (CONTINUED)
Under the terms of the plan, options granted shall be nonqualified and
the exercise price shall not be less than the fair market value of the
common stock on the date of grant. Options vest equally over a five-year
period from the date of grant.
Stock option activity is shown below:
Weighted Average
Number of Options Exercise Price
----------------- --------------
Outstanding at December 31, 1998 4,871,842 $11.30
Granted................................................. 647,500 28.56
Exercised............................................... (274,405) (8.87)
Forfeited............................................... (209,290) (13.74)
--------- -------
Outstanding at December 31, 1999........................ 5,035,647 $13.45
Granted................................................. 887,000 43.72
Exercised............................................... (698,105) (10.68)
Forfeited............................................... (50,765) (13.12)
--------- -------
Outstanding at December 31, 2000........................ 5,173,777 $19.02
Granted................................................. 901,000 45.09
Exercised............................................... (1,384,737) (12.02)
Forfeited............................................... (310,465) (30.44)
--------- -------
Outstanding at December 31, 2001........................ 4,379,575 $25.79
========= =======
Options exercisable at December 31, 2001................ 2,112,471 $14.29
========= =======
At December 31, 2001, 2,120,508 options were available for grant.
The following table details the weighted average remaining contractual
life of options outstanding at December 31, 2001 by range of exercise prices:
Remaining Contractual
Number of Options Weighted Average Life of Options Options
Outstanding Exercise Price Outstanding Exercisable
----------- -------------- ----------- -----------
1,476,057 $ 7.95 4.8 1,413,157
395,718 $15.92 5.8 255,014
887,000 $25.71 5.8 317,700
245,800 $35.69 7.4 8,800
1,375,000 $46.08 9.2 117,800
--------- --- ---------
4,379,575 6.5 2,112,471
========= =========
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
10. STOCK OPTION PLAN - (CONTINUED)
As of the date granted, the weighted average grant-date fair value of
the options granted during the years ended December 31, 2001, 2000 and 1999
was approximately $16.72, $18.31 and $12.31 per share, respectively. Such
weighted average grant-date fair value was determined using an option
pricing model that incorporated the following assumptions:
2001 2000 1999
---- ---- ----
Risk-free interest rate.............. 4.3% 5.0% 6.3%
Expected life in years............... 4 4 4
Expected volatility.................. 40% 46% 45%
Expected dividend yield.............. -- -- --
The Company applies Accounting Standards Board Opinion No. 25 and
related interpretations in accounting for its plan. Had compensation cost
for the Company's stock option plan been determined based upon the fair
value of such awards at the grant date, consistent with the methods of
Statement of Financial Accounting Standards No. 123 "Accounting for Stock
Based Compensation," the Company's net earnings and basic and diluted net
earnings per common share for the years ended December 31 would have been
as follows:
2001 2000 1999
------- ------- ------
Net earnings:
As reported........................................ $72,264 $70,119 $48,101
Pro forma.......................................... 67,348 66,425 45,847
======= ======= =======
Basic earnings per common share:
As reported........................................ $1.78 $1.80 $1.25
Pro forma.......................................... 1.66 1.71 1.19
==== ===== =====
Diluted earnings per common share:
As reported........................................ $1.68 $1.66 $1.16
Pro forma.......................................... 1.57 1.58 1.11
===== ===== =====
11. BENEFIT PLANS
Mettler-Toledo maintains a number of retirement and other
post-retirement employee benefit plans.
Certain companies 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 $2.6 million for the years
ended December 31, 2001 and 2000, and $2.8 million for the year ended
December 31, 1999, respectively.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
11. BENEFIT PLANS - (CONTINUED)
Certain companies 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. The
Company's U.S. operations also provide postretirement medical benefits to
their employees. Contributions for medical benefits are related to employee
years of service.
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 Company's principal defined
benefit plans and postretirement plans at December 31, 2001 and 2000:
Pension Benefits Other Benefits
------------------------- -----------------------
2001 2000 2001 2000
--------- --------- -------- --------
Change in benefit obligation:
Benefit obligation at beginning of year...... $ 394,037 $ 394,250 $ 33,380 $ 35,464
Service cost, gross.......................... 18,671 19,250 495 461
Interest cost................................ 19,995 18,572 2,480 2,460
Actuarial (gains) losses..................... 18,132 (12,694) 4,833 (2,577)
Plan amendments and other.................... 1,079 151 (1,797) -
Benefits paid................................ (20,066) (18,013) (2,549) (2,426)
Impact of foreign currency................... (13,361) (7,479) (3) (2)
-------- --------- -------- --------
Benefit obligation at end of year............ 418,487 394,037 36,839 33,380
-------- --------- -------- --------
Change in plan assets:
Fair value of plan assets at beginning of
year....................................... 384,085 368,674 - -
Actual return on plan assets................. (9,450) 18,244 - -
Employer contributions....................... 9,711 14,611 2,549 2,426
Plan participants' contributions............. 4,630 4,236 - -
Benefits paid................................ (20,066) (18,013) (2,549) (2,426)
Impact of foreign currency................... (11,738) (3,667) - -
-------- --------- -------- --------
Fair value of plan assets at end of year..... 357,172 384,085 - -
-------- --------- -------- --------
Funded status................................ (61,315) (9,952) (36,839) (33,380)
Unrecognized net actuarial (gain) loss....... 14,589 (37,826) 2,714 594
-------- --------- -------- --------
Net amount recognized........................ $ (46,726) $ (47,778) $ (34,125) $ (32,786)
========= ========= ========= =========
Amounts recognized in the Consolidated Balance Sheets consist of:
Pension Benefits Other Benefits
------------------------- -----------------------
2001 2000 2001 2000
--------- --------- -------- --------
Other non-current assets..................... $ 7,621 $ 6,881 $ - $ -
Other non-current liabilities................ (74,356) (54,659) (34,125) (32,786)
Accumulated other comprehensive income....... 20,009 - - -
-------- --------- -------- --------
Net amount recognized........................ $ (46,726) $ (47,778) $ (34,125) $(32,786)
======== ======== ========= ========
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
11. BENEFIT PLANS - (CONTINUED)
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 Company's U.S. plans are as follows:
2001 2000 1999
--------- ------- -------
Discount rate................................................ 7.5% 7.8% 7.8%
Compensation increase rate................................... 4.0% 5.0% 5.0%
Expected long-term rate of return on plan assets............. 9.5% 9.5% 9.5%
Plan assets relate principally to the Company's U.S. and Swiss
companies and consist of equity investments, obligations of the U.S.
Treasury or other governmental agencies, and other interest-bearing
investments.
At December 31, 2001, the fair value of plan assets and the total
projected benefit obligation for the Company's non-U.S. defined benefit
plans were $350.6 million and $302.7 million, respectively. Actuarial
assumptions for these plans ranged from 3.75% to 8.5% for the discount
rate, 2.0% to 6.5% for the compensation increase rate and 5.0% to 9.5% for
the expected long-term rate of return on plan assets for the years ended
December 31, 2001, 2000 and 1999.
Net periodic pension cost for the defined benefit plans includes the
following components for the year ended December 31:
2001 2000 1999
-------- -------- -------
Service cost, net...................... $ 14,276 $ 15,438 $16,842
Interest cost on projected benefit
obligations.......................... 19,995 18,572 18,680
Expected return on plan assets......... (23,857) (22,491) (22,420)
Recognition of actuarial losses........ (726) 19 394
-------- -------- -------
Net periodic pension cost.............. $ 9,688 $ 11,538 $13,496
======== ======== =======
Net periodic postretirement benefit cost for the U.S. postretirement
plans includes the following components for the year ended December 31:
2001 2000 1999
-------- -------- -------
Service cost.......................... $ 495 $ 461 $ 624
Interest cost on projected benefit
obligations......................... 2,480 2,460 2,489
Recognition of actuarial losses....... - - 189
Net amortization and deferral......... - - 21
-------- -------- -------
Net periodic postretirement benefit cost $ 2,975 $ 2,921 $ 3,323
======== ======== =======
The accumulated postretirement benefit obligation and net periodic
postretirement benefit cost were principally determined using discount
rates of 7.5% in 2001, 7.8% in 2000 and 7.2% in 1999 and health care cost
trend rates ranging from 7.0% to 10.0% in 2001, 2000 and 1999, decreasing
to 4.5% in 2006.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
11. BENEFIT PLANS - (CONTINUED)
The health care cost trend rate assumption has a significant effect on
the accumulated postretirement benefit obligation and net periodic
postretirement benefit cost. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:
One-Percentage- One-Percentage-
Point Increase Point Decrease
----------------- ---------------
Effect on total of service and interest cost components.............. $ 284 $ (258)
Effect on postretirement benefit obligation.......................... $3,067 $ (2,831)
12. TAXES
The sources of the Company's earnings before taxes and minority
interest were as follows for the year ended December 31:
2001 2000 1999
----------- --------- ---------
United States.................................... $ (3,202) $ 13,670 $(1,906)
Non-United States................................ 121,636 94,935 81,783
--------- --------- -------
Earnings before taxes and minority interest...... $ 118,434 $ 108,605 $79,877
========= ========= =======
The provision for taxes consists of:
Adjustments
to
Current Deferred Goodwill Total
------- -------- -------- -----
Year ended December 31, 2001:
United States federal............................ $ 129 $ 214 $ - $ 343
State and local.................................. 553 - - 553
Non-United States................................ 42,564 1,749 961 45,274
-------- ------ ------ -------
$ 43,246 $1,963 $ 961 $46,170
======== ====== ====== =======
Adjustments
to
Current Deferred Goodwill Total
------- -------- -------- -----
Year ended December 31, 2000:
United States federal............................ $ 381 $ (601) $ - $ (220)
State and local.................................. 519 - - 519
Non-United States................................ 36,123 1,052 1,036 38,211
-------- ------ ------ -------
$ 37,023 $ 451 $1,036 $38,510
======== ====== ====== =======
Adjustments
to
Current Deferred Goodwill Total
------- -------- -------- -----
Year ended December 31, 1999:
United States federal............................ $ (17) $ - $ - $ (17)
State and local.................................. 494 - - 494
Non-United States................................ 32,557 (10,260) 8,624 30,921
-------- ------ ------ -------
$ 33,034 $(10,260) $8,624 $31,398
======== ======== ====== =======
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
12. TAXES - (CONTINUED)
The adjustments to goodwill during the years ending December 31, 2001,
2000 and 1999 relate to tax benefits utilized that were not previously
recognized in the purchase price allocation pertaining to previous
acquisitions.
The provision for tax expense for the years ended December 31, 2001,
2000 and 1999 differed from the amounts computed by applying the United
States federal income tax rate of 35% to the earnings before taxes and
minority interest as a result of the following:
2001 2000 1999
-------- ------- --------
Expected tax......................................... $41,453 $38,012 $27,957
United States state and local income taxes, net of
federal income tax benefit....................... 553 519 494
Non-deductible intangible amortization............... 2,222 2,227 2,254
Change in valuation allowance........................ 1,288 (3,065) (983)
Other non-United States income taxes at other than a 373 455 1,165
35% rate.........................................
Other, net........................................... 281 362 511
-------- ------- --------
Total provision for taxes............................ $46,170 $38,510 $31,398
======= ======= =======
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:
2001 2000
------- -------
Deferred tax assets:
Inventory............................................ $ 4,132 $ 2,042
Accrued and other liabilities........................ 20,339 20,466
Deferred losses...................................... 2,099 6,524
Accrued postretirement benefit and pension costs..... 27,928 19,451
Net operating loss carryforwards..................... 30,317 16,499
Other................................................ 4,065 1,942
------- -------
Total deferred tax assets................................ 88,880 66,924
Less valuation allowance................................. (71,081) (49,027)
------- -------
Total deferred tax assets less valuation allowance....... 17,799 17,897
------- -------
Deferred tax liabilities:
Inventory............................................ 1,689 1,640
Property, plant and equipment........................ 21,863 16,259
Other................................................ 5,132 8,221
------- -------
Total deferred tax liabilities........................... 28,684 26,120
------- -------
Net deferred tax liability............................... $10,885 $ 8,223
======= =======
The Company has established valuation allowances primarily for net
operating losses, deferred losses as well as postretirement and pension costs as
follows as of December 31:
2001 2000
------- -------
Summary of valuation allowances:
Cumulative net operating losses....................... $25,762 $13,923
Deferred loss......................................... 2,099 6,524
Accrued postretirement and pension benefit costs...... 22,880 12,765
Other................................................. 20,340 15,815
------- -------
Total valuation allowance................................. $71,081 $49,027
======= =======
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
12. TAXES - (CONTINUED)
The Company has recorded valuation allowances related to its deferred
income tax assets due to the uncertainty of the ultimate realization of
future benefits from such assets. The 2001 net change in the valuation
allowance is primarily attributable to the changes as enumerated above that
are related to the increased uncertainty of the realization potential
and/or increases in associated deferred tax assets.
The potential decrease or increase of the valuation allowance in the
near term is dependent on the future realizability of the deferred tax
assets that are affected by the future profitability of operations in
various worldwide jurisdictions, but primarily in the United States. A
valuation allowance has been provided on the Company's net deferred tax
assets related to its United States operations because of the uncertainty
regarding their realizability due to the expectation that deductions from
future employee stock option exercises and related tax deductions will
exceed future taxable income. Deferred tax assets of $19.3 million at
December 31, 2001 pertain to net operating loss carryforwards resulting
from the exercise of certain employee stock options. When recognized, the
tax benefit of these losses will be recorded in shareholders' equity.
The total valuation allowances relating to acquired businesses amount
to $14.3 million and $15.5 million at December 31, 2001 and 2000,
respectively. The reduction for the current year is primarily attributable
to the utilization of net operating losses and the expiration of the useful
life of various deferred tax assets. Future reductions of these valuation
allowances will continue to be credited to goodwill when realized.
At December 31, 2001, for U.S. federal income tax purposes, the
Company had net operating loss carryforwards of $62.6 million that expire
in various amounts through 2021 and other tax credits of $0.4 million that
have no expiration. The Company has various U.S. state net operating losses
and various foreign operating losses that expire in varying amounts through
2021.
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 an adverse material impact on the
Company's consolidated results of operations or financial position.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
13. OTHER CHARGES, NET
Other charges, net consists primarily of foreign currency
transactions, interest income, charges related to the Company's
cost-reduction programs and gains on the sale of property, plant and
equipment.
As part of its efforts to reduce costs, the Company recorded charges
of approximately $15.2 million, $1.4 million, and $8.0 million in 2001,
2000 and 1999, respectively, associated primarily with headcount reductions
and manufacturing transfers in 2001, the close-down and consolidation of
operations in 2000, and the transfer of production lines from the Americas
to China and Europe, and the closure of facilities in 1999. The charges
comprised primarily severance and other related benefits and costs of
exiting facilities, including lease termination costs and the write-down of
impaired assets.
The Company also incurred losses of $4.1 million during 1999 in
connection with the exit from its glass batching business based in Belgium.
This amount primarily comprised severance and other costs of exiting this
business. The Company completed its exit of this business by the end of
1999. These losses were offset by a gain of $3.1 million recorded in
connection with an asset sale.
A roll-forward of the Company's accrual for restructuring activities follows:
Employee Asset Lease
related write-downs termination Other Total
------- ----------- ----------- ----- -----
For the year ended December 31, 2001 (a) (b) (c) (d)
Beginning of period.......................... $ 2,141 $ - $ 779 $ 60 $ 2,980
Restructuring expense........................ 8,848 4,721 464 1,163 15,196
Cash payments................................ (6,856) - (964) (899) (8,719)
Increase in retirement benefit obligation.... (2,114) - - - (2,114)
Non-cash write-downs of impaired assets...... - (4,721) - - (4,721)
Impact of foreign currency................... (18) - - - (18)
------- --------- ------- ------ --------
End of period................................ $ 2,001 $ - $ 279 $ 324 $ 2,604
======= ========= ======= ====== ========
(a) Employee related costs include severance and early retirement costs
for 350 employees, of which most employees had been terminated as of
December 31, 2001. These employees include positions primarily in
manufacturing, as well as administrative and other personnel,
primarily at the Company's Principal U.S. Operations. The remaining
employee terminations and related cash outflows are expected to be
completed during the first quarter of 2002.
The increase in the Company's retirement benefit obligation represents
enhanced early retirement benefits provided to terminated employees.
(b) The asset impairments primarily relate to plant and equipment, and
production component disposals resulting from the exit of certain
manufacturing facilities. Fair value of these assets was determined on
the basis of their net realizable value on disposal. Substantially all
of the impaired assets were physically disposed as of December 31,
2001.
(c) Lease termination costs primarily relate to the early termination of
leases on vacated property.
(d) Other costs include expenses associated with equipment dismantling and
disposal, legal costs and other exit costs.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
14. COMMITMENTS AND CONTINGENCIES
Operating Leases
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, 2001:
2002................................... $ 15,624
2003................................... 12,232
2004................................... 9,602
2005................................... 7,017
2006................................... 5,516
Thereafter............................. 8,730
--------
Total................................ $ 58,721
--------
Rent expense for operating leases amounted to $20.0 million, $21.2
million and $18.5 million for the years ended December 31, 2001, 2000 and
1999, respectively.
Legal
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 Company's financial condition or results of
operations.
15. SEGMENT REPORTING
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 and meet the aggregation criteria of SFAS
131. The Company has determined that there are five reportable segments:
Principal U.S. Operations, Principal Central European Operations, Swiss R&D
and Manufacturing Operations, Other Western European Operations and Other.
Principal U.S. Operations represent certain of the Company's marketing and
producing organizations located in the United States. Principal Central
European Operations primarily include the Company's German marketing and
producing organizations that primarily serve the German market and, to a
lesser extent, Europe. Swiss R&D and Manufacturing Operations consist of
the organizations located in Switzerland 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. Other Western European Operations
include the Company's market organizations in Western Europe that are not
included in Principal Central European Operations. The Company's market
organizations are geographically focused and are responsible for all
aspects of the Company's sales and service. Operating segments that exist
outside these reportable segments are included in Other.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
15. SEGMENT REPORTING - (CONTINUED)
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 adjusted operating income (gross
profit less research and development and selling, general and
administrative expenses before amortization and non-recurring costs).
Intersegment 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 Company's operating segments:
Principal Other
Principal Central Swiss R&D Western Eliminations
For the year ended U.S. European and Mfg. European and
December 31, 2001 Operations Operations Operations Operations Other(a) Corporate(b) Total
- --------------------------- ---------- ---------- ---------- ---------- --------- ----------- ------------
Net sales to external
customers............... $ 362,855 $ 185,606 $ 24,044 $ 269,733 $ 305,784 $ - $ 1,148,022
Net sales to other
segments................ 32,507 60,886 149,496 44,616 149,872 (437,377) -
--------- --------- --------- --------- --------- ---------- -----------
Total net sales............ $ 395,362 $ 246,492 $ 173,540 $ 314,349 $ 455,656 $(437,377) $ 1,148,022
========= ========= ========= ========= ========= ========== ===========
Adjusted operating income.. $ 31,074 $ 30,432 $ 40,883 $ 27,517 $ 46,435 $ (11,277) $ 165,064
Depreciation............... 6,762 2,283 1,880 2,962 8,520 451 22,858
Total assets............... 585,357 144,967 226,790 183,120 712,851 (663,673) 1,189,412
Purchase of property, plant
and equipment............ 7,007 4,386 3,178 3,498 8,783 6,376 33,228
Principal Other
Principal Central Swiss R&D Western Eliminations
For the year ended U.S. European and Mfg. European and
December 31, 2000 Operations Operations Operations Operations Other(a) Corporate(b) Total
- --------------------------- ---------- ---------- ---------- ---------- --------- ----------- ------------
Net sales to external
customers................ $ 367,738 $ 177,912 $ 26,974 $ 256,257 $ 266,666 $ - $ 1,095,547
Net sales to other
segments................. 33,528 53,563 148,158 41,896 120,730 (397,875) -
--------- --------- --------- --------- --------- ---------- -----------
Total net sales............ $ 401,266 $ 231,475 $ 175,132 $ 298,153 $ 387,396 $(397,875) $ 1,095,547
========= ========= ========= ========= ========= ========== ===========
Adjusted operating income.. $ 38,414 $ 22,881 $ 38,313 $ 21,979 $ 32,231 $ (10,977) $ 142,841
Depreciation............... 6,692 2,364 1,962 2,803 7,488 381 21,690
Total assets............... 242,878 138,957 199,067 152,816 661,740 (507,876) 887,582
Purchase of property, plant
and equipment............ 6,289 3,123 3,068 4,226 10,798 1,800 29,304
Principal Other
Principal Central Swiss R&D Western Eliminations
For the year ended U.S. European and Mfg. European and
December 31, 1999 Operations Operations Operations Operations Other(a) Corporate(b) Total
- --------------------------- ---------- ---------- ---------- ---------- --------- ----------- ------------
Net sales to external
customers................ $ 356,400 $ 184,021 $ 23,832 $ 267,426 $ 233,794 $ - $ 1,065,473
Net sales to other
segments................. 46,310 58,094 154,931 20,229 111,284 (390,848) -
--------- --------- --------- --------- --------- --------- -----------
Total net sales............ $ 402,710 $ 242,115 $ 178,763 $ 287,655 $ 345,078 $(390,848) $ 1,065,473
========= ========= ========= ========= ========= ========= ===========
Adjusted operating income.. $ 37,255 $ 23,070 $ 32,992 $ 25,024 $ 30,138 $ (24,797) $ 123,682
Depreciation............... 7,807 2,912 2,748 3,176 7,903 394 24,940
Total assets............... 217,202 139,726 158,160 146,955 624,528 (465,598) 820,973
Purchase of property, plant
and equipment............ 7,588 2,051 2,322 4,140 10,548 2,539 29,188
(a) Other includes reporting units in Asia, Eastern Europe, Latin America and
segments from other countries that do not meet the aggregation criteria
of SFAS 131.
(b) Eliminations and Corporate includes the elimination of intersegment
transactions as well as certain corporate expenses, intercompany
investments and certain goodwill, which are not included in the Company's
operating segments.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
15. SEGMENT REPORTING - (CONTINUED)
A reconciliation of adjusted operating income to earnings before taxes
and minority interest for the year ended December 31 follows:
2001 2000 1999
---- ---- ----
Adjusted operating income............. $ 165,064 $ 142,841 $ 123,682
Amortization.......................... 14,114 11,564 10,359
Interest expense...................... 17,162 20,034 21,980
Other charges, net.................... 15,354 2,638 10,468
Revaluation of acquisition inventories -- -- 998
Earnings before taxes and minority --------- --------- ---------
interest............................ $ 118,434 $ 108,605 $ 79,877
========= ========= =========
The Company sells precision instruments, including weighing
instruments and certain analytical and measurement technologies, and
related after-market support to a variety of customers and industries. None
of these customers account for more than 3% of net sales. After-market
support revenues are primarily derived from parts and services such as
calibration, certification and repair, much of which is provided under
contracts. A breakdown of the Company's sales by product category for the
years ended December 31 follows:
2001 2000 1999
--------- ---------- ----------
Weighing-related instruments..... $ 634,834 $ 624,510 $ 618,716
Non-weighing instruments......... 271,519 237,501 226,434
After-market..................... 241,669 233,536 220,323
--------- ---------- ----------
Total net sales.................. $1,148,022 $1,095,547 $1,065,473
========== ========== ==========
The breakdown of net sales by geographic customer destination and
property, plant and equipment, net for the year ended December 31 is as
follows:
Property, plant and
Net sales equipment, net
---------------------------------------- ----------------------
2001 2000 1999 2001 2000
---------- ---------- --------- --------- ---------
United States....... $ 417,886 $ 411,484 $ 386,452 $ 41,543 $ 41,050
Other Americas...... 74,020 76,522 74,701 2,157 2,222
---------- ---------- ---------- --------- ---------
Total Americas...... 491,906 488,006 461,153 43,700 43,272
Germany............. 130,641 122,570 132,302 22,920 22,504
France.............. 104,206 97,345 94,557 5,606 5,863
United Kingdom...... 44,689 44,927 44,105 5,806 6,037
Switzerland......... 45,437 45,308 42,530 92,707 99,627
Other Europe........ 185,961 168,040 174,497 5,239 5,985
---------- ---------- ---------- --------- ---------
Total Europe........ 510,934 478,190 487,991 132,278 140,016
Rest of World....... 145,182 129,351 116,329 16,294 16,100
---------- ---------- ---------- --------- ---------
Totals.............. $1,148,022 $1,095,547 $1,065,473 $ 192,272 $ 199,388
========== ========== ========== ========= =========
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS UNLESS OTHERWISE STATED)
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for the years ended December 31, 2001 and
2000 are as follows:
First Second Third Fourth
Quarter Quarter (a) Quarter Quarter (a)
------- ----------- ------- -----------
2001
Net sales ........................ $ 265,644 $ 279,033 $ 285,064 $ 318,281
Gross profit...................... 118,310 126,849 131,024 152,699
Net earnings...................... $ 14,498 $ 6,682 $ 20,384 $ 30,700
Basic earnings per common share.... $0.37 $0.17 $0.51 $0.72
Diluted earnings per common share.. $0.34 $0.16 $0.48 $0.69
Market price per share: $53.92 $52.20 $49.20 $51.98
High............................ $36.50 $37.95 $37.00 $39.98
Low.............................
2000
Net sales ........................ $ 259,116 $ 268,558 $ 270,003 $ 297,870
Gross profit...................... 114,241 119,586 120,684 140,851
Net earnings...................... $ 11,754 $ 17,931 $ 17,134 $ 23,300
Basic earnings per common share.... $0.30 $0.46 $0.44 $0.59
Diluted earnings per common share.. $0.28 $0.43 $0.41 $0.55
Market price per share:
High............................ $44.50 $45.75 $48.81 $56.00
Low............................. $31.81 $30.00 $37.75 $39.50
(a) The financial data for the second quarter of 2001 includes a charge of
$14.6 million primarily related to headcount reductions and
manufacturing transfers (Note 13). The financial data for the fourth
quarter of 2000 includes a charge of $1.4 million related to the
close-down and consolidation of operations.
SCHEDULE II- VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
- -------------------------------- ---------------- ---------------------------------- ---------------- -----------------
Column A Column B Column C Column D Column E
- -------------------------------- ---------------- ---------------------------------- ---------------- -----------------
Additions
----------------------------------
(1) (2)
Balance at Charged Charged to
the beginning to costs and Other accounts -Deductions- Balance at
Description of period Expenses Describe Describe end of period
- -------------------------------- ---------------- ----------------- ---------------- ---------------- -----------------
Note (A)
Accounts Receivable- allowance for doubtful accounts:
Year ended
December 31, 2001 9,097 996 - 643 9,450
Year ended
December 31, 2000 9,827 1,008 - 1,738 9,097
Year ended
December 31, 1999 9,443 1,867 - 1,483 9,827
- -------------------------------- ---------------- ----------------- ---------------- ---------------- -----------------
Note A
Represents excess of uncollectable balances written off over recoveries of
accounts previously written off. Additionally, amounts are net of foreign
currency translation effect of $(244), $(253) and $(691) for the years
ended December 31, 2001, 2000, and 1999, respectively.