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, 2002
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 1-13595
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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
Preferred Stock Purchase Rights 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.
Yes X No
----- -----
Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12 b-2 of the Act).
Yes X No
----- -----
As of March 10, 2003 there were 44,389,112 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 as of the last business day of the registrant's most
recently completed second fiscal quarter June 30, 2002) was approximately
$1.6 billion. For purposes of this computation, shares held by affiliates
and by directors of the Registrant have been excluded. Such exclusion of
shares held by directors is not intended, nor shall it be deemed, to be an
admission that such persons are affiliates of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT PART OF FORM 10-K
-------- INTO WHICH INCORPORATED
PROXY STATEMENT FOR 2003 -----------------------
ANNUAL MEETING OF STOCKHOLDERS PART III
METTLER-TOLEDO INTERNATIONAL INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
PAGE
PART I
Item 1. BUSINESS...........................................................1
Item 2. PROPERTIES........................................................11
Item 3. LEGAL PROCEEDINGS.................................................12
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............12
EXECUTIVE OFFICERS OF THE REGISTRANT..............................12
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS...........................................................13
Item 6. SELECTED FINANCIAL DATA...........................................15
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.............................................16
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........29
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................29
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE..............................................29
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................30
Item 11. EXECUTIVE COMPENSATION............................................32
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT....33
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................33
PART IV
Item 14. CONTROLS AND PROCEDURES...........................................33
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K...............................................................33
SIGNATURES..................................................................34
CERTIFICATIONS..............................................................35
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 and opportunities in emerging markets; planned research and
development efforts, product introductions and innovation; meeting customer
expectations; planned operational changes, including productivity
improvements; 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.
These forward-looking statements are subject to a number of risks and
uncertainties, including those identified in Exhibit 99.1 to this annual
report, 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.
PART I
Item 1. BUSINESS
Mettler-Toledo International Inc. ("Mettler-Toledo" or the "Company")
is a leading global supplier of precision instruments and services. We are
the world's largest manufacturer of weighing instruments for use in
laboratory, process analytics, industrial, packaging 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.
Our business is geographically diversified, with sales in 2002 derived
40% from Europe, 47% from North and South America and 13% from Asia and
other countries. Our customer base is also diversified by industry and by
individual customer. Financial information about our segments for the last
three fiscal years is located in the Notes to the Audited Consolidated
Financial Statements attached to this annual report. Because our principal
products produced and services rendered are offered in each segment,
separate analysis of products and services by segment would not provide
materially different information. A breakdown of our sales by product
category, as well as by geographic customer destination, is shown in Note
16 of the Notes to the audited consolidated financial statements.
Mettler-Toledo International Inc. was incorporated as a Delaware
corporation in December 1991 and became a publicly traded company with its
initial public offering in November 1997. In November 2001, we acquired
Rainin Instrument, a leading manufacturer of pipetting solutions used in
pharmaceutical, biotech and medical research applications.
LABORATORY INSTRUMENTS
We make a wide variety of precision laboratory instruments, including
laboratory balances, pipettes, titrators, thermal analysis systems and
other analytical instruments. The laboratory instruments business accounted
for approximately 40% of our net sales in 2002.
Laboratory Balances. The balance is the most frequently used
instrument in the laboratory and the Mettler-Toledo name is identified
worldwide with accuracy, reliability and innovation. The weighing step is
one of the most critical steps in the research process. Our balances have
weighing ranges from one ten-millionth of a gram up to 32 kilograms. 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
a range of product tiers offering different levels of functionality. In
certain markets, we now also offer a low-end entry level balance. We also
manufacture mass comparators, which are used by weights and measures
regulators as well as laboratories to ensure the accuracy of reference
weights.
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 the third most widely used instrument in
laboratories and are used for dispensing small volumes of liquids. In late
2001, we acquired Rainin Instrument, a premier provider of pipetting
solutions based in Oakland, 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.
Titrators. Titrators measure the chemical composition of samples and
are heavily used in the food and beverage industry. Our high-end titrators
are multi-tasking models, which can perform two determinations
simultaneously on multiple vessels. Titrators are often used in integrated
systems.
Thermal Analysis Systems. Thermal analysis systems measure material
properties as a function of temperature, such as weight, dimension, energy
flow and viscoelastic properties. Thermal analysis systems are used in
nearly every industry, but primarily in the plastics and polymer industries
and increasingly in the pharmaceutical industry.
Other Analytical Instruments. pH meters measure acidity in laboratory
samples, and are the second most widely used measurement instruments in the
laboratory after the balance. We sell density and refractometry
instruments, which measure chemical concentrations in solutions. In
addition, we manufacture and sell moisture analyzers, which precisely
determine the moisture content of a sample by utilizing an infrared dryer
to evaporate moisture.
LabX, our PC-based software platform, manages and analyzes data
generated by our laboratory instruments, and is being expanded to include
other instruments. LabX provides full network capability, has efficient,
intuitive protocols, and enables customers to collect and archive data, and
also complies with the U.S. Food and Drug Administration's traceability
requirements for electronically stored data, also known as 21 CFR part 11.
Drug Discovery Solutions (Automated Chemistry). Our pharmaceutical and
biotechnology customers are all too aware of the time and costs involved in
drug research and development. 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 offerings are focused on key aspects of
process development, as well as on lead identification and lead
optimization. Our automated lab reactors and reaction calorimeters are
integral to the process research and development and scale-up activities of
our customers. We offer a range of technologies including automated
synthesizers to support chemists working on lead identification and
optimization, automated workstations that support the synthesis process,
and systems for cleaning up and purifying synthesis products.
INDUSTRIAL INSTRUMENTS
We make numerous industrial weighing instruments, as well as related
terminals. We supply automatic identification and data capture solutions,
which integrate in-motion weighing, dimensioning and identification
technologies for transport, shipping and logistics customers. We also offer
heavy industrial scales and related software. The industrial instruments
business accounted for approximately 29% of our net sales in 2002.
Industrial Weighing Instruments. 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 products are used in a wide range of
applications, such as counting applications, formulating and mixing
ingredients, or for checking the accuracy of the filling of packaged goods.
Industrial Terminals. Our industrial scale terminals integrate data
collected and control and automate manufacturing processes. They allow
users to remotely download programs or access setup data and can minimize
down time through predictive rather than reactive maintenance.
Transportation / Shipping and Logistics. We are the leading global
supplier of automatic identification and data capture solutions, which
integrate in-motion weighing, dimensioning and identification technologies.
With these solutions, customers can measure the weight and cubic volume of
packages for appropriate billing, logistics and quality control. Our
solutions also integrate into customers' information systems.
Vehicle Scale Systems. Our primary heavy industrial products are
scales for weighing trucks or railcars (i.e., weighing bulk goods as they
enter or leave a factory or at a toll station). Heavy industrial scales are
capable of measuring weights up to 500 tons and permit accurate weighing
under extreme environmental conditions. We also offer advanced computer
software, including WinBridge and OverDrive, that can be used with our
heavy industrial scales to facilitate a broad range of customer solutions
and provides a complete system for managing vehicle transaction processing.
Industrial Software. We offer a wide range of software that can be
used with our industrial instruments. Examples include WinBridge and
OverDrive mentioned above and Formweigh, our formulation/batching software.
In addition, our Q.i365 software controls batching processes by monitoring
the material transfer control process. Q.i365 also provides statistical,
diagnostic and operational information for asset management, process
control and database applications.
RETAIL WEIGHING SOLUTIONS
Supermarkets, hypermarkets and other food retail organizations make
use of multiple weighing applications for the full handling of fresh goods
(such as meat, vegetables, fruits, cheese, etc.). 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 fresh goods management system.
The retail business accounted for approximately 14% of our net sales in
2002.
Retail Software. In March 2002 we acquired SofTechnics Inc, based in
Texas, USA. SofTechnics is a leading provider of in-store retail item
management software solutions. SofTechnics provides a key building block in
our solution offering to food retailers. Its software provides the full
scope of real-time item management, thereby allowing retailers to match
local store inventory levels with local customer demand. SofTechnics
strongly complements our leadership position in solutions for the
management of fresh goods. In addition to cross-selling benefits, we will
be able to offer an integrated data management solution in the future.
PACKAGING CONTROL SYSTEMS
Increasing safety and consumer protection requirements are driving the
need for more and more sophisticated end-of-line inspection systems (e.g.,
for use in food processing and packaging, and pharmaceutical and other
industries). We are the world's leading provider of metal detectors, x-ray
visioning equipment and checkweighers. Metal detectors are most commonly
used to detect fine particles of metal that may be contained in raw
materials or may be generated by the manufacturing process itself.
X-ray-based vision inspection helps detect non-metallic contamination, such
as glass, stones and pits, which come into the manufacturing process for
similar reasons. Both systems may be used together with checkweighers as
components of integrated packaging lines. Freeweigh.net, is our statistical
and quality control software that optimizes package filling, monitors
weight-related data and integrates it in real time into customers'
enterprise resource planning and/or process control systems. The packaging
business accounted for approximately 12% of our net sales in 2002.
PROCESS ANALYTICS
Our process analytics business provides instruments for the in-line
measurement of liquid parameters used primarily in the production process
of pharmaceutical and biotech companies. We are the leading supplier of pH
and oxygen measurement instruments used in bio-pharmaceutical
manufacturing. 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, where our customers need fast
and secure scale-up and production that meets the validation processes
required for GMP (Good Manufacturing Processes) and other regulatory
standards. The process analytics business accounted for approximately 5% of
our net sales in 2002.
CUSTOMERS AND DISTRIBUTION
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
packagers and food producers, food retailers, the beverage industry,
specialty chemicals and cosmetics companies, the transportation and
logistics industry, the metals industry, the electronics industry and the
academic market.
Our products are sold through a variety of distribution channels.
Generally, more technically sophisticated products are sold through our
direct sales force, while less complicated products are sold through
indirect channels. Our sales through direct channels exceed our sales
through indirect channels. A significant portion of our sales in the
Americas is generated through the indirect channels. We have a diversified
customer base as evidenced by the fact that our largest single customer
accounted for no more than 3% of 2002 net sales.
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 what we believe is the largest and broadest global sales and
service organization among precision instrument manufacturers. At December
31, 2002, our sales and services group consisted of more than 4,380
employees in sales, marketing and customer service (including related
administration) and post-sales technical service, located in 37 countries.
This field organization has the capability to provide service and support
to our customers and distributors in major markets across the globe. This
is important because our customers are seeking to do more and more business
with a consistent global approach.
SERVICE
We have expanded our service business from one centered on
calibration, repair and maintenance to one driven by regulatory compliance
and other value-added services, which we call Service XXL. We have a unique
offering to our pharma customers in assuring that our instruments are used
in compliance with FDA regulations and we can provide these services
regardless of the customer's location throughout the world. 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. In 2002, service (representing service
contracts, repairs and replacement parts) accounted for approximately 21%
of our total net sales. More than half of this amount is derived from
replacement parts.
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.
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. Our
focused POs help reduce product development time, improve customer focus,
reduce costs and maintain technological leadership. The POs work together
to share ideas and best practices, and there is a close interface among MOs
and POs.
RESEARCH AND DEVELOPMENT
We attribute a significant portion of our recent margin improvement to
investments in 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 $191 million in research
and development (2002: $70.6 million; 2001: $64.6 million; 2000: $56.3
million). In 2002, we spent approximately 5.8% 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 software to
process the signals captured by the sensors of our instruments,
application-specific software, and software that connects our solutions
into customers' IT systems. We closely integrate research and development
with marketing, manufacturing and product engineering. We have over 800
employees in research and development and product engineering.
MANUFACTURING
We generally manufacture only critical components ourselves, usually
components that contain proprietary technology. When outside manufacturing
is more efficient, we contract with others for certain components. We use a
wide range of suppliers. We believe our supply arrangements to be adequate
and that there are no material constraints on the sources and availability
of materials. From time to time we rely on a single supplier for all of our
requirements of a particular component. Supply arrangements for electronics
are generally made globally.
We are a worldwide manufacturer, with facilities in the United States,
Switzerland, Germany, the United Kingdom and China. Laboratory instruments
are produced mainly in Switzerland and to a lesser extent in the United
States and China, while our remaining products are produced worldwide. We
emphasize product quality in our manufacturing operations, and most of our
products require very strict tolerances and exact specifications. We use an
extensive quality control system that is integrated into each step of the
manufacturing process. All major manufacturing facilities have achieved ISO
9001 certification. We believe that our manufacturing capacity is
sufficient to meet our present and currently anticipated needs.
BACKLOG; SEASONALITY
Our 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.
Our business has historically experienced a slight amount of seasonal
variation, particularly the high-end laboratory instruments business.
Traditionally, sales in the first quarter are slightly lower than, and
sales in the fourth quarter are slightly higher than, sales in the second
and third quarters. Fourth quarter sales have historically generated
approximately 27-28% of our sales. This trend has a somewhat greater effect
on income from operations than on net sales because fixed costs are spread
evenly across all quarters.
EMPLOYEES
As of December 31, 2002, we had approximately 8,500 employees
throughout the world, including approximately 4,300 in Europe, 3,000 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, except for a
strike in early 2003 at our Bethune, France facility, which is being
closed. Labor unions do not represent a meaningful number of our employees.
INTELLECTUAL PROPERTY
We hold over 1,700 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. All of our electrical
components are subject to electrical safety standards. We believe that we
are in compliance in all material respects with applicable regulations.
Approvals are required to ensure our instruments do not impermissibly
influence other instruments, and are themselves not affected by other
instruments. In addition, some of our products are used in "legal for
trade" applications, in which prices based on weight are calculated, and
for which specific weights and measures approvals are required. Although
there are a large number of regulatory agencies across our markets, there
is an increasing trend toward harmonization of standards, and weights and
measures regulation is harmonized across the European Union.
Our products may also be subject to special requirements depending on
the end-user and market. For example, laboratory customers are typically
subject to Good Laboratory Practices (GLP), industrial customers to Good
Manufacturing Practices (GMP), pharmaceutical customers to U.S. Food and
Drug Administration (FDA) regulations, and customers in food processing
industries may be subject to Hazard Analysis and Critical Control Point
(HACCP) regulations. Products used in hazardous environments may also be
subject to special requirements.
ENVIRONMENTAL MATTERS
We are subject to a variety of environmental laws and regulations in
the jurisdictions in which we operate. We own or lease a number of
properties and manufacturing facilities around the world. Like many of our
competitors, we have incurred, and will continue to incur, capital and
operating expenditures and other costs in complying with such laws and
regulations 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. Our subsidiary, High-Speed Checkweigher,
is subject to an Administrative Consent Order from the New Jersey
Department of Environmental Protection that provides for the remediation of
a former manufacturing site in Landing, New Jersey. Under the terms of the
stock purchase agreement between GEI International Corporation and the
predecessor to Hi-Speed, GEI assumed all responsibility for the
Administrative Consent Order and to date has performed and paid for all
action it requires. 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.
COMPETITION
Our markets are highly competitive. Weighing instruments markets are
fragmented both geographically and by application, particularly the
industrial and food retailing weighing instruments markets. As a result, we
face numerous regional or specialized competitors, many of which are well
established in their markets. In addition, some of our competitors are
divisions of larger companies with potentially greater financial and other
resources than our 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. These advantages include our worldwide
market leadership positions; our global brand and reputation; our track
record of technological innovation; our comprehensive, high-quality
solution offering; our global sales and service offering; our large
installed base of weighing instruments; and the fact that our revenue base
is diversified by geographic region, product range, and customer. To remain
competitive, we must continue to invest in research and development, sales
and marketing and customer service and support. We cannot be sure that we
will have sufficient resources to continue to make these investments or
that we will be successful in identifying, developing and maintaining any
competitive advantages.
We believe that the principal competitive factors in developed markets
for purchasing decisions are the product itself, application support,
service support, and price. In emerging markets, where there is greater
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.
COMPANY WEBSITE AND INFORMATION
Our website can be found on the Internet at www.mt.com. The website
contains information about us and our operations. Copies of each of our
filings with the SEC on Form 10-K, Form 10-Q and Form 8-K and all
amendments to those reports can be viewed and downloaded free of charge
when they are filed with the SEC by accessing www.mt.com, clicking on
Investor Relations and then clicking on SEC Filings.
Our website also contains copies of the following documents that can
be downloaded free of charge:
o Corporate Governance Guidelines
o Audit Committee Charter
o Compensation Committee Charter
o Nominating and Corporate Governance Committee Charter
o Code of Conduct
Any of the above documents, and any of our reports on Form 10-K, Form
10-Q and Form 8-K and all amendments to those reports, can also be obtained
in print by sending a written request to our Investor Relations Department:
Investor Relations
Mettler-Toledo, Inc.
1900 Polaris Parkway
Columbus, OH 43240
U.S.A.
Phone: +1 614 438 4748
Fax: +1 614 438 4646
E-mail: mary.finnegan@mt.com
APPROVAL OF NON-AUDIT SERVICES
Starting in November 2002, the Audit Committee of the Board of
Directors agreed to approve all non-audit services to be provided by our
independent auditors, PriceWaterhouseCoopers. The Audit Committee has
delegated authority to the Chairman of the Committee to approve such
services. The Audit Committee has also pre-approved certain categories of
non-audit services for amounts less than $100,000, including assistance
with SEC and other regulatory filings, tax consulting, acquisition support
and benefits plan compliance and design.
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
Giessen, Germany....................... Owned
Manchester, England.................... Leased
Americas:
Columbus, Ohio......................... Leased
Worthington, Ohio...................... Owned
Oakland, California ................... Leased
Ithaca, New York....................... Owned
Woburn, Massachusetts.................. Leased
Millersville, Maryland................. Leased
Tampa, Florida......................... Leased
Vernon Hills, Illinois................. Leased
Redmond, Washington.................... Leased
Other:
Shanghai, China............................. Building Owned; Land Leased
Changzhou, China (two facilities)........... Buildings Owned; Land 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.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
See Part III, Item 10 of this annual report for information about our
executive officers.
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
------ ------
2002
Fourth Quarter $37.04 $25.41
Third Quarter $36.87 $24.85
Second Quarter $45.74 $35.65
First Quarter $51.85 $42.80
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
HOLDERS
At March 10, 2003 there were 234 holders of record of common stock
and 44,389,112 shares of common stock outstanding. The number of holders of
record excludes beneficial owners of common stock held in street name.
DIVIDEND POLICY
Historically we have not paid dividends on our common stock. However,
we will evaluate this policy on a periodic basis taking into account our
results of operations, financial condition, capital requirements, including
potential acquisitions, contractual restrictions, including those in our
credit facility, if any, the taxation of dividends to our shareholders, and
other factors deemed relevant by our Board of Directors.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2002
Number of securities to Weighted-average Number of securities remaining
be issued upon exercise exercise price of available for future issuance
of outstanding options, outstanding options, under equity compensation
warrants and rights warrants and rights plans (excluding securities
Plan Category reflected in column (a))
(a) (b) (c)
----------------------- -------------------- ------------------------------
Equity compensation plans
approved by security holders 4,799,773 $27.65 1,407,998
Equity compensation plans
not approved by security
holders - - -
---------------- ----------- ----------------
Total 4,799,773 $27.65 1,407,998
================ =========== ================
We do not have any equity compensation plans that have not been
approved by our shareholders that are required to be disclosed in this
annual report on Form 10-K or our proxy statement.
Further details in relation to our stock option plan are given in Note
11 to the audited consolidated financial statements included herein.
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 audited
consolidated financial statements. The financial information presented
below, in thousands except share data, was prepared in accordance with
generally accepted accounting principles in the United States of America
("U.S. GAAP").
2002 (g) 2001 (g) 2000 1999 1998
----------- ----------- ----------- ----------- -----------
Statement of Operations Data:
Net sales........................... $1,213,707 $1,148,022 $1,095,547 $1,065,473 $935,658
Cost of sales....................... 645,970 619,140 600,185 585,007 520,190
---------- ---------- ---------- ---------- --------
Gross profit........................ 567,737 528,882 495,362 480,466 415,468
Research and development............ 70,625 64,627 56,334 57,393 48,977
Selling, general and administrative. 331,959 299,191 296,187 300,389 265,511
Amortization........................ 9,332 14,114 11,564 10,359 7,634
Purchased research and development.. - - - - 9,976(b)
Interest expense.................... 17,209 17,162 20,034 21,980 22,638
Other charges, net (c).............. 28,202 15,354 2,614 10,468 1,197
---------- ---------- ---------- ---------- --------
Earnings before taxes and minority
interest.......................... 110,410 118,434 108,629 79,877 59,535
Provision for taxes ................ 9,989(d) 46,170 38,510 31,398 20,999
Minority interest................... - - - 378 911
---------- ---------- ---------- ---------- --------
Net earnings (h).................... $ 100,421 $ 72,264 $ 70,119 $ 48,101 $ 37,625
========== ========== ========== ========== ========
Basic earnings per common share:
Net earnings ..................... $ 2.27 $ 1.78 $ 1.80 $ 1.25 $ 0.98
Weighted average number of common
shares............................ 44,280,605 40,609,716 38,897,879 38,518,084 38,357,079
Diluted earnings per common share:
Net earnings ..................... $ 2.21 $ 1.68 $ 1.66 $ 1.16 $ 0.92
Weighted average number of common
shares............................ 45,370,053 42,978,895 42,141,548 41,295,757 40,682,211
Balance Sheet Data :
Cash and cash equivalents........... $ 31,427 $ 27,721 $ 21,725 $ 17,179 $ 21,191
Working capital (e)................. 127,214 106,689 103,021 81,470 90,042
Total assets........................ 1,303,393 1,189,412 887,582 820,973 820,441
Long-term debt...................... 262,093 309,479 237,807 249,721 340,246
Other non-current liabilities (f)... 133,600 119,109 95,843 100,334 103,201
Shareholders' equity................ 502,386 388,184 178,840 112,015 53,835
(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) Other charges, net generally includes interest income, foreign
currency transactions, (gains) losses from sales of assets and other
items. The 2002 and 2001 amounts also include charges of $28,661 and
$15,196 respectively, 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.
(d) The provision for taxes for 2002 includes a benefit of $23,135 related
to the completion of our tax restructuring program and related tax
audits.
(e) Working capital represents total current assets net of cash, less
total current liabilities net of short-term borrowings and current
maturities of long-term debt.
(f) Other non-current liabilities consists primarily of obligations under
various pension plans and plans that provide post-retirement medical
benefits. See Note 12 to the audited consolidated financial statements
included herein.
(g) Includes the results of the Rainin acquisition from November 2001.
(h) No dividends were paid during the five-year period ended December 31,
2002.
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 together 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.
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 3% in 2002, 7% in 2001, and 9%
in 2000. The fluctuation of the U.S. dollar versus our major trading
currencies increased U.S. dollar-reported sales growth in 2002 and reduced
U.S. dollar-reported sales growth in 2001 and 2000. Net sales in U.S.
dollars increased 6% in 2002, 5% in 2001, and 3% in 2000. In 2002, we had
local currency sales growth of 16% in the Americas and 10% in Asia and
other markets, partially offset by a decline of 10% in Europe.
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. 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, interest expense and non-recurring costs) as a percentage of
net sales from 13.0% in 2000 to 13.6% in 2002, or 14.4% on a constant
currency basis. 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 on an ongoing basis, and as such is used as an
important performance measurement by management. 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 March 2002, we acquired SofTechnics Inc, based in Texas, USA.
SofTechnics is a leading provider of in-store retail item management
software solutions. SofTechnics provides a key building block in our
solution offering to food retailers. Its software provides the full scope
of real-time item management, thereby allowing retailers to match local
store inventory levels with local customer demand. SofTechnics strongly
complements our leadership position in solutions for the management of
fresh goods. In addition to gaining cross-selling benefits, we will be able
to offer an integrated data management solution in the future.
In November 2001, we acquired Rainin Instrument, LLC, based in
California, USA. Rainin is a 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 sales of approximately $65 million, Adjusted Operating Income of
approximately $20 million, and diluted earnings per share of negative $0.01
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 semiconductor, microelectronics, 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 will be better able to serve our expanded customer
base.
In 1998, we recorded charges 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
Bohdan Automation. These purchased research and development projects have
been completed, and there have been no material differences between actual
and projected results.
COST REDUCTION PROGRAMS
As further described in Note 14 to our audited consolidated financial
statements, in June 2002, the Company's management approved restructuring
plans to exit manufacturing facilities in France and the United States, and
reduce our expense structure. As part of these efforts to reduce costs, we
recorded a charge of $28.7 million ($20.1 million after tax) during the
year ended December 31, 2002. The charge comprised involuntary employee
separation benefits, write-downs of impaired assets to be disposed and
other exit costs. We expect to involuntarily terminate approximately net
300 employees in targeted manufacturing and administrative areas and to
substantially complete the manufacturing consolidation by the end of 2003.
These employees include positions primarily in manufacturing as well as
administrative and other personnel, primarily at our Principal U.S. and
Other Western European Operations. As a result of these actions, we expect
to eliminate approximately $15 million to $20 million of costs from the
business. We estimate that approximately $4 million to $6 million of these
savings were realized in 2002, with a further $7 million to $8 million
expected in 2003 and the remainder in 2004.
In 2001 we recorded a charge of $15.2 million associated primarily
with headcount reductions and manufacturing transfers. This charge relates
primarily to severance and other related benefits and costs of exiting
facilities, including lease termination costs and the write-down of
impaired assets. In 2000, we recorded a charge of $1.4 million related to
the close-down and consolidation of operations.
RESULTS OF OPERATIONS
The following table sets forth certain items from our consolidated
statements of operations for the years ended December 31, 2002, 2001 and
2000 (amounts in thousands).
2002 2001 2000
---- ---- ----
Net sales.............................. $1,213,707 $1,148,022 $1,095,547
Cost of sales.......................... 645,970 619,140 600,185
---------- ---------- ----------
Gross profit........................... 567,737 528,882 495,362
Research and development............... 70,625 64,627 56,334
Selling, general and administrative.... 331,959 299,191 296,187
Amortization........................... 9,332 14,114 11,564
Interest expense....................... 17,209 17,162 20,034
Other charges, net (a)................. 28,202 15,354 2,614
--------- --------- ---------
Earnings before taxes.................. $ 110,410 $ 118,434 $ 108,629
--------- --------- ---------
Net earnings........................... $ 100,421 $ 72,264 $ 70,119
========= ========= =========
Adjusted Operating Income (b).......... $ 165,153 $ 165,064 $ 142,841
========= ========= =========
(a) Other charges, net generally includes interest income, foreign
currency transactions, (gains) losses from sales of assets and other
items. The 2002 and 2001 amounts also include charges of $28,661 and
$15,196 respectively, 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.
(b) Adjusted Operating Income is defined as operating income (gross
profit less research and development and selling, general and
administrative expenses) before amortization, interest expense 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 on an ongoing
basis, and as such is used as an important performance measurement by
management. 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, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001
Net sales were $1,213.7 million for the year ended December 31, 2002,
compared to $1,148.0 million in the prior year. This reflected an increase
of 3% in local currencies during 2002. Results for 2002 were positively
impacted by the weakening of the U.S. dollar against other currencies. Net
sales in U.S. dollars during 2002 increased 6%. We experienced a sharp
decline in sales of our European retail products in 2002 as a result of the
product conversions required in 2001 prior to the introduction of the euro
currency. Excluding the impact of European retail products in both 2002 and
2001, consolidated local currency sales growth would be 9% for the year
ended December 31, 2002.
Net sales by geographic customer location were as follows: Net sales
in Europe decreased 10% in local currencies during 2002 versus the prior
year, reflecting weak sales performance across several product lines,
particularly in Germany and France. Excluding the impact of European retail
products in both 2002 and 2001, European local currency sales decreased 1%
for the year ended December 31, 2002. Net sales in local currencies during
2002 in the Americas increased 16% principally due to the acquisition of
Rainin Instrument in November 2001. Approximately 86% of Rainin's
operations are based in the Americas, with 7% each in Asia and Europe. Net
sales in Asia and other markets increased 10% in local currencies during
2002. The results of our business in Asia and other markets during 2002
reflect particularly strong sales performance in China.
As previously mentioned, we acquired Rainin Instrument in November
2001. Assuming we had acquired Rainin at the beginning of 2001, the
acquisition would have added approximately $65 million of sales and $20
million of Adjusted Operating Income to 2001 on a pro forma basis.
Our sales decline in Europe was primarily due to a decrease in sales
of our European retail products after the introduction of the euro
currency, as well as a deterioration in economic conditions, particularly
in Germany and France. In the Americas, there has been no sign to date of a
significant economic recovery benefiting the markets for most of our
products. To the extent that economic conditions significantly deteriorate
in these or other parts of the world, our sales growth and profitability
may be adversely affected.
Gross profit as a percentage of net sales was 46.8% for 2002 and 46.1%
for 2001. This increase is primarily related to benefits from various cost
saving initiatives.
Research and development expenses as a percentage of net sales were
5.8% for 2002, compared to 5.6% for the prior year. We continue to make
significant investments in research and development, which increased 5% in
local currencies in 2002.
Selling, general and administrative expenses as a percentage of net
sales increased to 27.4% for 2002, compared to 26.1% for the prior year,
primarily due to changes in our sales mix and our reduced sales volume in
Europe. After adjusting for acquisitions and unfavorable foreign currency
effects, selling, general and administrative expenses increased 2% in the
year ended December 31, 2002.
Adjusted Operating Income was $165.2 million, or 13.6% of net sales,
for 2002, compared to $165.1 million, or 14.4% of net sales, for the prior
year. The reduced operating margin percentage is due to the combination of
two foreign exchange impacts. First, is the currency translation impact
resulting in higher reported U.S. dollar sales due to weaker U.S. dollar
exchange rates and second, an unfavorable impact on pre-tax earnings of
approximately $4.3 million, due primarily to the strengthening of the Swiss
franc against the euro and U.S. dollar. Adjusting for these items on a
constant currency basis would result in Adjusted Operating Income of
approximately 14.4% of net sales for the year ended December 31, 2002. Our
2002 Adjusted Operating Income increased $37.7 million in our Principal
U.S. Operations due primarily to the Rainin acquisition and improvements in
service profitability. Adjusted Operating Income declined significantly in
Europe due to the aforementioned volume impact on European retail after the
introduction of the euro currency in 2001. In Asia and other markets,
Adjusted Operating Income increased due to continued growth in China
partially offset by declines in other regions. We believe that Adjusted
Operating Income provides important financial information in measuring and
comparing our operating performance on an ongoing basis, and as such is
used as an important performance measurement by management. 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 remained at $17.2 million for 2002, as the reduced
interest rates were offset by higher average borrowings during 2002 to fund
the Rainin acquisition.
Other charges, net were $28.2 million for 2002, compared to other
charges, net of $15.4 million for the prior year. The 2002 and 2001 amounts
include charges of $28.7 million ($20.1 million after tax) and $15.2
million ($14.6 million after tax), respectively, primarily associated with
headcount reductions and manufacturing transfers.
Our effective tax rate before non-recurring items for the year ended
December 31, 2002 was approximately 30% compared with 35% in 2001. This
reduction reflects the effects of a restructuring of our European
operations and other tax initiatives. In addition, we recorded a one-time
benefit of $23.1 million during the second quarter of 2002 related to the
completion of a tax restructuring program and related tax audits.
During the fourth quarter of 2002, we began a program of repatriating
foreign subsidiary earnings to the United States in a tax efficient manner.
This program resulted in a repatriation of $85 million of foreign earnings
during 2002. In addition, this program will result in the repatriation of
$180 million of foreign earnings over the next few years. The 2002
repatriation of $85 million created additional U.S. taxable income
resulting in the utilization of certain historical tax attributes related
to our U.S. operations and release of the related U.S. federal deferred tax
valuation allowance. The tax effects related to the future repatriation of
$180 million were also accrued and included the establishment of other tax
attributes related to our U.S. operations.
Net earnings were $100.4 million for the year ended December 31, 2002
compared to net earnings of $72.3 million in the prior year. Excluding the
effect of the previously mentioned charge associated with headcount
reductions and manufacturing transfers and the one-time tax benefit, net
earnings were $97.3 million for the year ended December 31, 2002. This
compares to net earnings of $86.9 million in the prior year before the
prior year restructuring charge. Adjusting for the adoption of SFAS 142,
net earnings before restructuring charges and the one-time tax benefit for
the year ended December 31, 2002 increased 4%.
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%. We experienced a sharp
increase in sales of our European retail products as a result of the
product conversions required in 2001 prior to the introduction of the euro
currency. Excluding the impact of European retail products in both 2001 and
2000, consolidated local currency sales growth would be 4% for the year
ended December 31, 2001.
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. Excluding the impact of European
retail products in both 2001 and 2000, European local currency sales
increased 4% for the year ended December 31, 2001. 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.
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. Our 2001 Adjusted Operating Income increased significantly
in Europe due to the favorable impact of the euro currency conversion, but
was partially offset by a decline in the Principal U.S. Operations. In Asia
and other markets, Adjusted Operating Income benefited from stronger sales
and improved manufacturing productivity in China. We believe that Adjusted
Operating Income provides important financial information in measuring and
comparing our operating performance on an ongoing basis, and as such is
used as an important performance measurement by management. 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 $72.3 million for the year ended December 31, 2001
compared to net earnings of $70.1 million in the prior year. Excluding the
effect of the previously mentioned charge associated with headcount
reductions and manufacturing transfers, net earnings were $86.9 million for
the year ended December 31, 2002. This compares to net earnings of $71.5
million in the prior year before the prior year restructuring charge. This
represents an increase in net earnings of 21%.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is our ability to generate sufficient cash flows from
operating activities to meet our obligations and commitments. In addition,
liquidity includes the ability to obtain appropriate financing. Therefore,
liquidity cannot be considered separately from capital resources that
consist of current and potentially available funds for use in achieving
long-range business objectives and meeting debt service commitments.
Currently, our liquidity needs arise primarily from: debt service on
indebtedness; working capital requirements; capital expenditures; and
acquisitions.
Cash provided by operating activities totalled $115.4 million in 2002,
compared to $101.6 million in 2001 and $84.7 million in 2000. The increase
in 2002 resulted principally from improved working capital management.
Included in 2002 cash provided by operating activities is an extra
contribution of $19 million to the U.S. pension plan. As a result, we have
no significant required contributions to our U.S. plan in the next two
years. 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 $11.1 million, $10.7 million and $10.3
million in 2002, 2001 and 2000, respectively. Excluding these amounts, cash
provided by operating activities totalled $126.7 million in 2002, compared
to $112.3 million in 2001 and $95.0 million in 2000.
During 2002, we spent approximately $21.3 million on acquisitions,
including additional consideration related to earn-out periods associated
with acquisitions consummated in prior years. The cash portions 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,
the terms of certain of our acquisitions in 2002 and earlier years provide
for possible additional earn-out payments. Although we do not currently
believe we will make any material payments relating to such earn-outs, the
maximum amount potentially payable in cash is $74 million, including up to
$30 million for Rainin based on operating profits through March 31, 2003.
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 2002, $33.2
million in 2001 and $29.3 million in 2000. Capital expenditures in 2002
include spending of $8.3 million associated with Rainin's new facility in
California. We also expect capital expenditures to increase between $2
million and $5 million in 2003, principally due to spending associated with
manufacturing transfers to China. We expect capital expenditures to
increase as our business grows, and to fluctuate as currency exchange rates
change.
We expect the 2002 restructuring charge of $28.7 million to result in
cash outlays of approximately $20.2 million, of which $10.3 million had
been incurred as of December 31, 2002 and the remainder of which will be
substantially incurred during 2003.
At December 31, 2002, our consolidated debt, net of cash, was $281.2
million. We had borrowings of $292.1 million under our credit agreement and
$20.6 million under various other arrangements as of December 31, 2002. Of
our credit agreement borrowings, approximately $67.6 million was borrowed
as term loans scheduled to mature in May, 2004 and $224.5 million was
borrowed under a multi-currency revolving credit facility. At December 31,
2002, we had $185.6 million of availability remaining under the revolving
credit facility.
At December 31, 2002, approximately $194.9 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 $117.8
million at December 31, 2002. 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,
2002, this ratio was more than 9:1);
o a debt to EBITDA ratio of no more than 4:1 (at December 31, 2002,
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, 2002, we
exceeded the minimum by more than 3 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.
At December 31, 2002, we are in compliance with all covenants set
forth in our credit facility and other indentures. In addition, we do not
have any downgrade triggers that would accelerate the maturity dates of our
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, our current ratings, 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 $0.6 million per year.
We plan to implement a new credit agreement on or before the
expiration of the current facility in 2004.
The following summarizes certain of our contractual obligations at December
31, 2002 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 production
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 3-5 years After 5 years
----- ---------------- --------- --------- -------------
Long-term debt(a) $292,091 $38,646 $253,445 $ - $ -
Non-cancelable operating leases(b) 91,341 20,785 26,659 15,742 28,155
-------- ------- -------- -------- ---------
Total $383,432 $59,431 $280,104 $ 15,742 $ 28,155
======== ======= ======== ======== =========
(a) As described in Notes 8 and 9 to the audited consolidated financial
statements.
(b) As described in Note 15 to the audited consolidated financial
statements.
We currently believe that cash flow from operating activities,
together with liquidity available under the existing credit agreement or a
renegotiated 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. During 2000 and prior 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 were not
materially affected by movements in the U.S. dollar exchange rate versus
European currencies. However, as evidenced in 2002 and 2001, there can be
no assurance that these currencies will continue to move in a consistent
manner in the future. In 2002, we estimate that the unfavorable impact due
primarily to the strengthening of the Swiss franc was approximately $4.3
million. 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, earnings
repatriations between jurisdictions and changes in law. Generally, the tax
liability for each taxpayer within the group is determined either (i) on a
non-consolidated/non-combined basis or (ii) on a consolidated/combined
basis only with other eligible entities subject to tax in the same
jurisdiction, in either case without regard to the taxable losses of
non-consolidated/non-combined affiliated legal entities. 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.
Our effective tax rate before non-recurring items for the year ended
December 31, 2002 was approximately 30% compared with 35% in 2001. This
reduction reflects the effects of a restructuring of our European
operations and other tax initiatives. In addition, we recorded a one-time
benefit of $23.1 million during the second quarter of 2002 related to the
completion of a tax restructuring program and related tax audits.
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, as our
presence in China, Latin America and Eastern Europe increases, these
inflationary conditions could have a greater impact on our operating
results.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have only limited involvement with derivative financial instruments
and do not use them for trading purposes.
We have entered into foreign currency forward contracts to
economically hedge short-term intercompany balances with our 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 $2.9 million at December 31, 2002, as compared with $5.3
million at December 31, 2001. 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.
The market value of these contracts as at December 31, 2002 and 2001 was
negative $4.4 million and negative $1.7 million, respectively. Based on our
agreements outstanding at December 31, 2002, a 100 basis point increase in
interest rates would result in an increase in the net aggregate market
value of these instruments of $1.4 million, as compared with $6.0 million
at December 31, 2001. Conversely, a 100 basis point decrease in interest
rates would result in a $1.4 million net reduction in the net aggregate
market value of these instruments, as compared with $6.0 million at
December 31, 2001. 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, 2002 indicates that if the U.S. dollar weakened
by 10% against the Swiss franc, the fair value of such debt would increase
by $7.3 million, as compared with $3.8 million at December 31, 2001. Any
foreign exchange translation gains and losses arising from debt qualifying
as a non-derivative hedging instrument are recorded in comprehensive income
and offset the impact on comprehensive income of foreign exchange
translation gains and losses related to the hedged net investments.
CRITICAL ACCOUNTING POLICIES
Management's discussion and analysis of our financial condition and
results of operations are based upon our audited 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, revenue, 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 2 to our
consolidated financial statements.
- - Retirement plans. Pension and post-retirement benefit plan expense and
obligations are developed from assumptions in actuarial valuations. These
assumptions include discount rate and expected return on plan assets. In
accordance with U.S. generally accepted accounting principles, actual
results that differ from the assumptions are accumulated and amortized over
future periods. While management believes the assumptions used are
appropriate, differences in actual experience or changes in assumptions may
affect our plan obligations and future expense. In 2002, we adjusted the
expected long-term rate of return on U.S. pension plan assets to 8.5% down
from 9.5%, and adjusted the discount rate used for all U.S. pension and
post-retirement plans to 7.0% from 7.5%. In April 2002, we froze our U.S.
pension plan and discontinued our U.S. retiree medical program for certain
current and all future employees. Consequently, no significant future
service costs will be incurred on these plans. As a net result of these
changes, consolidated recurring pension and post-retirement expense in 2003
is expected to decrease by approximately $0.6 million. In December 2002, we
made a $19 million payment to reduce the underfunded status of the U.S.
pension plan. However, if the equity markets continue recent trends, we
could be required to make additional cash funding payments or adjust the
$33.9 million additional minimum pension liability recorded at December 31,
2002.
- - Inventory. We record our inventory at the lower of cost or net realizable
value. 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. Excess and obsolete reserves are established based on forecast
usage, orders and technological obsolescence.
- - 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.
- - Income taxes. Income tax expense and deferred tax assets and liabilities
reflect management's assessment of actual future taxes to be paid on items
reflected in the financial statements. We record a valuation allowance to
reduce our deferred tax assets to the amount that is more likely than not
to be realized. While we have considered future taxable income and ongoing
prudent and feasible tax planning strategies in assessing the need for the
valuation allowance, in the event we were to determine that we would be
able to realize our deferred tax assets in the future in excess of the net
recorded amount, an adjustment to the deferred tax asset would increase
income 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. In
2002, provisions were made for U.S. income taxes on certain undistributed
earnings of non-U.S. subsidiaries as a decision was made to repatriate
these earnings rather than permanently reinvest them.
- - Revenue recognition. Revenue is recognized when title to a product has
transferred and any significant customer obligations have been fulfilled.
Other than a few small software applications, Mettler-Toledo does not sell
its software products without the related hardware instrument as the
software is embedded in the instrument. The Company's typical solution
requires no significant production, modification or customization of the
hardware or software that is essential to the functionality of the
products. Revenues from service contracts are recognized ratably over the
contract period.
NEW ACCOUNTING STANDARDS
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"). SFAS 146
addresses financial accounting and reporting for costs associated with exit
or disposal activities and nullifies Emerging Issues Task Force Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The provisions of SFAS 146 are effective for exit or
disposal activities that are initiated after December 31, 2002.
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 and opportunities in emerging markets; planned research and
development efforts, product introductions and innovation; meeting customer
expectations; planned operational changes, including productivity
improvements; 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.
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 26 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-30 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 47 President, Chief Executive Officer and Chairman
of the Board of Directors
Dennis W. Braun 38 Chief Financial Officer (1)
Peter Burker 57 Head of Human Resources
William P. Donnelly 41 Head of Packaging Industry
Olivier A. Filliol 36 Head of Process Analytics
Jean-Lucien Gloor 50 Head of Information Systems and Logistics
Timothy P. Haynes 38 Head of Retail
Karl M. Lang 56 Head of Asia/Pacific
Beat E. Luthi 41 Head of Laboratory (2)
Urs Widmer 52 Head of Industrial
Philip Caldwell 83 Director
John T. Dickson 57 Director
Philip H. Geier 68 Director
John D. Macomber 75 Director
Hans Ulrich Maerki 56 Director
George M. Milne 59 Director
Thomas P. Salice 43 Director
- ------------------------------------------------------------------------
(1) Since July 2002. Mr. Donnelly was Chief Financial Officer through June
2002.
(2) Since March 2003.
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.
Dennis W. Braun has been Chief Financial Officer of the Company since
July 2002. From 1986 until joining the Company, he held various positions
within the public accounting firm PricewaterhouseCoopers LLP, except for a
period between 1996 and 1997 when he obtained his M.B.A. degree from
Harvard Business School. From 1999 to March 2002, Mr. Braun was a partner
in PricewaterhouseCoopers' Audit & Business Advisory Services practice.
Peter Burker has been Head of Human Resources of the Company since
1995. 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.
William P. Donnelly has been Head of Packaging Industry since March
2002. He was Chief Financial Officer of the Company from 1997 to July 2002.
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. Prior to
joining the Company, 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. Prior to joining the
Company, 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.
Beat E. Luthi has been Head of Laboratory of the Company since March
2003. From 1998 until joining the Company, he served as Chief Executive
Officer of Feintool International Holding, a Swiss public company. Feintool
is a global technology and systems provider in fineblanking/forming and
assembly/automation as well as a global supplier of metal and plastic
components. From 1990 to 1998 he held various management positions with the
Company in Switzerland.
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 1979 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.
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., Alcon, Inc.,
Fiduciary Trust Co. International, Foot Locker, Inc. and Swiss
International Airlines.
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
Worlds Technology, Sovereign Specialty Chemicals, Inc. and Textron Inc.
Hans Ulrich Maerki has been a Director since September 2002. Mr.
Maerki is Chairman of IBM Europe/Middle East/Africa, a position he has held
since August 2001, and a member of the World Wide Management Council of IBM
Corporation. From 1996 to July 1991, Mr. Maerki was General Manager of IBM
Global Services, Europe/Middle East/Africa. Mr. Maerki has been with IBM in
various positions since 1973. Mr. Maerki is a member of the Board of
Trustees of the International Institute for Management Development (IMD)
and a member of the Corporate Social Responsibility Europe Advisory Board.
Mr. Maerki is also a Director of ABB Ltd. and Mikron Holding AG.
George M. Milne, Jr., Ph.D., has been a Director since September 1999.
From 1970 to July 2002, Mr. Milne held various management positions with
Pfizer Corporation, including most recently Executive Vice President,
Pfizer Global Research and Development and President, Worldwide Strategic
and Operations Management. Dr. Milne was also a Senior Vice President of
Pfizer Inc. and a member of the Pfizer Management Council. He was President
of Central Research from 1993 to July 2002 with global responsibility for
Pfizer's Human and Veterinary Medicine Research and Development. Mr. Milne
is also a director of Athersys, Inc. and Charles River Laboratories, Inc.
Thomas P. Salice has been a Director since October 1996. Mr. Salice is
Vice Chairman of AEA Investors Inc. and has been associated with AEA
Investors Inc. since June 1989. Mr. Salice is also a Director of Marbo,
Inc., Sovereign Specialty Chemicals, Inc. and Waters Corporation.
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 our Proxy Statement for
the 2003 Annual Meeting of Stockholders (the "2003 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 2003
Proxy Statement is incorporated by reference herein.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
Item 14. CONTROLS AND PROCEDURES
Within 90 days prior to the filing of this report, we carried out an
evaluation of the effectiveness of our disclosure controls and procedures
under the supervision and with the participation of our disclosure
committee, the CFO and CEO. The CFO and CEO concluded that our disclosure
controls and procedures are effective in permitting us to comply with our
disclosure obligations.
Since the date of our evaluation, we have not made significant changes
to our internal controls or other factors that could significantly affect
these controls, nor have we taken any corrective actions with regard to
significant deficiencies and material weaknesses.
Item 15. 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:
None filed.
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 14, 2003 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 as of the date set out above
and in the capacities indicated.
Signature Title
--------- -----
Chairman of the Board,
President and
/s/ ROBERT F. SPOERRY Chief Executive Officer
- ------------------------------------------
Robert F. Spoerry
Vice President and
Chief Financial Officer
(Principal financial and accounting
/s/ DENNIS W. BRAUN officer)
- ------------------------------------------
Dennis W. Braun
/s/ PHILIP CALDWELL Director
- ------------------------------------------
Philip Caldwell
/s/ JOHN T. DICKSON Director
- ------------------------------------------
John T. Dickson
/s/ PHILIP H. GEIER Director
- ------------------------------------------
Philip H. Geier
/s/ JOHN D. MACOMBER Director
- ------------------------------------------
John D. Macomber
/s/ HANS ULRICH MAERKI Director
- ------------------------------------------
Hans Ulrich Maerki
/s/ GEORGE M. MILNE Director
- ------------------------------------------
George M. Milne
/s/ THOMAS P. SALICE Director
- ------------------------------------------
Thomas P. Salice
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert F. Spoerry, certify that:
(1) I have reviewed this annual report on Form 10-K of Mettler-Toledo
International Inc.;
(2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
(4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
(5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons with
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data, and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
(6) The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: March 14, 2003
/s/ Robert F. Spoerry
- ---------------------
Robert F. Spoerry
Chief Executive Officer
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Dennis W. Braun, certify that:
(1) I have reviewed this annual report on Form 10-K of Mettler-Toledo
International Inc.;
(2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
(4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
(5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons with
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data, and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
(6) The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: March 14, 2003
/s/ Dennis W. Braun
- -------------------
Dennis W. Braun
Chief Financial Officer
Exhibit Description
3.1 Amended and Restated Certificate of Incorporation of the
Company (1)
3.2* Amended By-laws of the Company, effective February 6, 2003
4.6 Rights Agreement dated as of August 26, 2002 between the
Company and Mellon Investor Services LLC, as Rights Agent,
which includes as Exhibit A thereto, the Certificate of
Designation, as Exhibit B thereto, the Form of Rights
Certificate, and as Exhibit C thereto, the Summary of Rights
to Purchase Preferred Shares (11).
10.10 Credit Agreement, dated as of November 19, 1997 (1)
10.11 Amendment No.1 to the Credit Agreement, dated as of September
30, 1998 (3)
10.12* Amendment No. 2 to the Credit Agreement, dated as of June 4,
2001
10.20 1997 Amended and Restated Stock Option Plan (4)
10.21 Amendment to the 1997 Amended and Restated Stock Option Plan
(5)
10.31 Regulations of the Performance Oriented Bonus System (POBS) -
Incentive System for the Management of Mettler Toledo,
effective as of November 5, 1998 (6)
10.32 Regulations of the POBS Plus - Incentive Scheme for Senior
Management of Mettler Toledo, effective as of March 14, 2000
(7)
10.33 Regulations of the POBS PLUS - Incentive Scheme for Members of
the Group Management of Mettler Toledo, effective as of March
7, 2000 (7)
10.41 Employment Agreement between Robert Spoerry and Mettler-Toledo
AG, dated as of October 30, 1996 (8)
10.42* Indemnification Agreement between Robert Spoerry and
Mettler-Toledo International Inc., dated June 6, 2002
10.43 Employment Agreement between Dennis Braun and Mettler-Toledo
International Inc., dated as of June 12, 2002 (2)
10.44 Employment Agreement between William Donnelly and
Mettler-Toledo GmbH, dated as of November 10, 1997 (1)
10.45 Employment Agreement between Olivier Filliol and
Mettler-Toledo GmbH, dated as of May 21, 2001 (9)
10.46* Indemnification Agreement between Olivier Filliol and
Mettler-Toledo International Inc., dated June 6, 2002
10.47 Employment Agreement between Karl Lang and Mettler-Toledo
Inc., dated as of November 10, 1997 (1)
10.48* Indemnification Agreement between Karl Lang and Mettler-Toledo
International Inc., dated June 6, 2002
10.5 Purchase Agreement among the Company, Mettler-Toledo, Inc. and
Rainin Instrument Company, Inc., dated as of October 13, 2001
(10)
21* Subsidiaries of the Company
23.1* Consent of PricewaterhouseCoopers
99.1* Factors Affecting our Future Operating Results
99.2* Certification Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
- ---------------------------
(1) Incorporated by reference to the Company's Report on Form 10-K
dated March 13, 1998
(2) Incorporated by reference to the Company's Report on Form 10-Q
dated August 12, 2002
(3) Incorporated by reference to the Company's Report on Form 10-Q
dated November 16, 1998
(4) Incorporated by reference to the Company's Registration Statement
on Form S-1 (Reg. No. 333-35597)
(5) Incorporated by reference to the Company's Report on Form 10-Q
dated August 15, 2000
(6) Incorporated by reference to the Company's Report on Form 10-K
dated March 18, 1999
(7) Incorporated by reference to the Company's Report on Form 10-K
dated March 24, 2000
(8) Incorporated by reference to the Company's Report on Form 10-K
dated March 31, 1997
(9) Incorporated by reference to the Company's Report on Form 10-K
dated March 4, 2002
(10) Incorporated by reference to the Company's Report on Form 8-K
dated November 28, 2001
(11) Incorporated by reference to the Company's Registration Statement
on Form 8-K/A filed on August 29, 2002
* Filed herewith
METTLER-TOLEDO INTERNATIONAL INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Accountants.................................... F-2
Consolidated Statements of Operations
for the years ended December 31, 2002, 2001 and 2000............. F-3
Consolidated Balance Sheets as of December 31, 2002 and 2001......... F-4
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 2002, 2001 and 2000............. F-5
Consolidated Statements of Cash Flows
for the years ended December 31, 2002, 2001 and 2000............. F-6
Notes to the 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 15(a)(1) on page 33 present fairly, in all material respects,
the financial position of Mettler-Toledo International Inc. and its
subsidiaries at December 31, 2002 and December 31, 2001, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 2002 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 15
(a) (2) on page 33 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
March 14, 2003
METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS, EXCEPT SHARE DATA)
2002 2001 2000
------ ------ ------
Net sales........................................ $1,213,707 $1,148,022 $1,095,547
Cost of sales.................................... 645,970 619,140 600,185
---------- ---------- ----------
Gross profit................................. 567,737 528,882 495,362
Research and development......................... 70,625 64,627 56,334
Selling, general and administrative.............. 331,959 299,191 296,187
Amortization..................................... 9,332 14,114 11,564
Interest expense................................. 17,209 17,162 20,034
Other charges, net............................... 28,202 15,354 2,614
---------- ---------- ----------
Earnings before taxes........................ 110,410 118,434 108,629
Provision for taxes.............................. 9,989 46,170 38,510
---------- ---------- ----------
Net earnings................................. $ 100,421 $ 72,264 $ 70,119
========== ========== ==========
Basic earnings per common share:
Net earnings................................. $2.27 $1.78 $1.80
Weighted average number of common shares..... 44,280,605 40,609,716 38,897,879
Diluted earnings per common share:
Net earnings................................. $2.21 $1.68 $1.66
Weighted average number of common shares..... 45,370,053 42,978,895 42,141,548
The accompanying notes are an integral part of these consolidated
financial statements.
METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31
(IN THOUSANDS, EXCEPT SHARE DATA)
2002 2001
------ ------
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 31,427 $ 27,721
Trade accounts receivable, less allowances of $10,916 in 2002 and $9,450 in 231,673 227,295
2001..................................................................
Inventories, net........................................................ 150,441 145,621
Current deferred tax assets, net........................................ 33,583 8,862
Other current assets and prepaid expenses............................... 28,603 22,259
---------- ----------
Total current assets.................................................. 475,727 431,758
Property, plant and equipment, net......................................... 217,754 192,272
Goodwill, net of accumulated amortization
of $43,337 in 2002 and $39,724 in 2001.................................. 408,351 384,947
Other intangible assets, net .............................................. 129,441 126,524
Other non-current assets .................................................. 72,120 53,911
---------- ----------
Total assets.......................................................... $1,303,393 $1,189,412
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable................................................. $ 73,072 $ 66,327
Accrued and other liabilities........................................... 130,490 111,284
Accrued compensation and related items.................................. 47,013 47,702
Taxes payable........................................................... 66,511 72,035
Short-term borrowings and current maturities of long-term debt......... 50,578 50,239
---------- ----------
Total current liabilities............................................. 367,664 347,587
Long-term debt............................................................. 262,093 309,479
Non-current deferred taxes................................................. 37,650 25,053
Other non-current liabilities.............................................. 133,600 119,109
---------- ----------
Total liabilities.................................................... 801,007 801,228
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 44,384,820 in 2002 and 44,145,742 in 2001..................... 444 441
Additional paid-in capital.............................................. 459,213 455,684
Retained earnings....................................................... 104,378 3,957
Accumulated other comprehensive loss.................................... (61,649) (71,898)
---------- ----------
Total shareholders' equity ........................................... 502,386 388,184
Commitments and contingencies.............................................. - -
---------- ----------
Total liabilities and shareholders' equity ........................... $1,303,393 $1,189,412
========== ==========
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 SHARE DATA)
RETAINED ACCUMULATED
COMMON STOCK ADDITIONAL EARNINGS/ OTHER
------------------------ PAID-IN (ACCUMULATED COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT) INCOME (LOSS) TOTAL
---------- -------- ---------- ------------ ------------- --------
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:
- - - 70,119 - 70,119
Net earnings....................
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
Exercise of stock options.......... 239,078 3 3,529 - - 3,532
Comprehensive income:
Net earnings.................... - - - 100,421 - 100,421
Unrealized loss on cash flow
hedging arrangements......... - - - - (2,805) (2,805)
Change in currency translation
adjustment................... - - - - 26,933 26,933
Minimum pension liability
adjustment(a)................... - - - - (13,879) (13,879)
--------
Comprehensive income............... 110,670
---------- -------- ---------- ----------- ------------- --------
Balance at December 31, 2002....... 44,384,820 $444 $459,213 $104,378 $(61,649) $502,386
========== ======== ========== =========== ============= ========
(a) The minimum pension liability adjustment is net of deferred tax
benefits of $6,650.
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)
2002 2001 2000
------ ------ ------
Cash flows from operating activities:
Net earnings............................................. $100,421 $ 72,264 $ 70,119
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation........................................ 25,392 22,858 21,690
Amortization........................................ 9,332 14,114 11,564
Other............................................... 2,950 1,055 1,890
Increase (decrease) in cash resulting from changes in:
Trade accounts receivable, net...................... 13,663 (11,502) (12,437)
Inventories......................................... 7,378 3,531 (17,274)
Other current assets................................ 6,061 570 (1,778)
Trade accounts payable.............................. 919 (14,825) (2,958)
Taxes payable....................................... (13,340) 15,937 16,979
Accruals and other liabilities...................... (37,366) (a) (2,430) (a) (3,081) (a)
----------- ---------- -----------
Net cash provided by operating activities......... 115,410 101,572 84,714
---------- --------- -----------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment.... 1,995 3,518 1,468
Purchase of property, plant and equipment.............. (33,157) (33,228) (29,304)
Acquisitions, net of seller financings................. (21,305) (b) (165,471) (b) (26,377) (b)
----------- ---------- ----------
Net cash used in investing activities............. (52,467) (195,181) (54,213)
----------- ---------- ----------
Cash flows from financing activities:
Proceeds from borrowings............................... 81,425 188,448 29,239
Repayments of borrowings............................... (142,609) (105,062) (61,617)
Proceeds from options exercised........................ 3,532 16,840 6,473
---------- --------- ----------
Net cash provided by (used in) financing (57,652) 100,226 (25,905)
----------- --------- -----------
activities......................................
Effect of exchange rate changes on cash and cash (1,585) (621) (50)
----------- ---------- ----------
equivalents............................................
Net increase in cash and cash equivalents................. 3,706 5,996 4,546
---------- --------- ----------
Cash and cash equivalents:
Beginning of period.................................... 27,721 21,725 17,179
---------- --------- ----------
End of period.......................................... $ 31,427 $ 27,721 $ 21,725
========== ========= ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest............................................. $ 16,249 $ 15,504 $ 20,014
Taxes................................................ $ 31,387 $ 26,838 $ 16,523
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 totaled $11.1 million, $10.7 million and $10.3 million
in 2002, 2001 and 2000, respectively. 2002 also includes a $19.0
million incremental contribution to the U.S. pension plan.
(b) Amounts paid for acquisitions including the issuance of common stock,
seller financing, assumed debt and working capital retained by sellers
were $21.3 million, $309.8 million and $55.5 million in 2002, 2001 and
2000, 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 leading global supplier of precision instruments and services. The
Company is the world's largest manufacturer of weighing instruments for use
in laboratory, process analytics, industrial, packaging and food retailing
applications. The Company also holds top-three market positions in several
related analytical instruments, and is a leading provider of automated
chemistry solutions used in drug and chemical compound discovery and
development. In addition, the Company is the world's largest manufacturer
and marketer of metal detection and other end-of-line inspection systems
used in production and packaging. The Company's primary manufacturing
facilities are located in Switzerland, the United States, Germany, the
United Kingdom 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 in conformity with generally
accepted accounting principles 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 net realizable value.
Cost, which includes direct materials, labor and overhead, is generally
determined using the first in, first out (FIFO) method. Excess and obsolete
reserves are established based on forecast usage, orders and technological
obsolescence.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Long-Lived Assets
a) 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
b) Capitalized Software
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 internal-use software costs incurred in the
preliminary project stage and capitalizes certain direct costs associated
with the development and purchase of internal-use software within property,
plant and equipment. Capitalized costs are amortized on a straight-line
basis over the estimated useful lives of the software, generally not
exceeding five years.
c) Goodwill and Other Intangible Assets
In accordance with SFAS 142, goodwill, representing the excess of
purchase price over the net asset value of companies acquired, is reviewed
for impairment on an annual basis in the fourth quarter. Other intangible
assets are amortized on a straight-line basis over the expected period to
be benefited. The Company assesses the recoverability of other intangible
assets subject to amortization by determining whether the sum of the
undiscounted future operating cash flows exceed the unamortized balance.
Accounting for Impairment of Long-lived Assets
In accordance with SFAS 144, the Company assesses the need to record
impairment losses on long-lived assets when events or changes in
circumstances indicate that the carrying amount of assets may not be
recoverable. An impairment loss would be recognized when future estimated
undiscounted cash flows expected to result from use of the asset are less
than the asset's carrying value with the loss measured at fair value based
on discounted expected cash flows.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)
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. 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.
Deferred taxes are not provided on the unremitted earnings of
subsidiaries outside of the United States when it is expected that these
earnings are permanently reinvested. Such earnings may become taxable upon
the sale or liquidation of these subsidiaries or upon the remittance of
dividends. Deferred taxes are provided 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. Typically,
Mettler-Toledo does not sell its software products without the related
hardware instrument as the software is embedded in the instrument. The
Company's typical solution requires no significant production, modification
or customization of the hardware or software that is essential to the
functionality of the products. Revenues from service contracts are
recognized ratably over the contract period.
Research and Development
Research and development costs are expensed as incurred.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
Earnings per Common Share
In accordance with the treasury stock method, the Company has included
1,089,448, 2,369,179 and 3,243,669 equivalent shares in the calculation of
diluted weighted average number of common shares for the years ending
December 31, 2002, 2001 and 2000, respectively, relating to outstanding
stock options. Outstanding options of 1,360,600, 354,250 and 0 for the
years ending December 31, 2002, 2001 and 2000, respectively, have been
excluded from the calculation of diluted weighted average number of common
shares on the grounds that such options would be anti-dilutive.
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
recognize 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.
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, the Company enters into foreign currency forward contracts
to economically 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 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 agreements that are effective cash flow
hedges at December 31, 2002 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 translation impact of
designated net investments they hedge.
Stock Based Compensation
The Company applies the intrinsic valuation methodology under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its stock option
plan.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)
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.
New Accounting Pronouncements
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"). SFAS 146
addresses financial accounting and reporting for costs associated with exit
or disposal activities and nullifies Emerging Issues Task Force Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The provisions of SFAS 146 are effective for exit or
disposal activities that are initiated after December 31, 2002.
3. BUSINESS COMBINATIONS
During 2002, the Company spent approximately $21.3 million on
acquisitions, including the acquisition of SofTechnics Inc. and
approximately $4.2 million of additional consideration related to earn-out
periods associated with acquisitions consummated in prior years.
SofTechnics is a leading provider of in-store retail item management
software solutions. Goodwill recognized in connection with these
acquisition payments totaled $18.8 million, which is primarily included in
the Company's Principal U.S. Operations segment. The Company accounted for
the acquisition payments using the purchase method of accounting.
Rainin Acquisition
In November 2001, the Company acquired the issued and outstanding
membership units of Rainin Instrument, LLC. for approximately $294.2
million. Rainin develops, manufactures and distributes advanced pipettes,
tips and accessories, including single- and multi-channel manual and
electronic pipettes. 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 the potential for an additional contingent payment, of up to
$60 million. 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
and will be treated as additional purchase price.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
3. BUSINESS COMBINATIONS - (CONTINUED)
Rainin Acquisition - (continued)
The following table summarizes the estimated fair values of the Rainin
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 non-indefinite lived identifiable intangible assets are amortized
on a straight-line basis over periods ranging from 11 to 45 years. 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 primarily 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.
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
==== ====
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
3. BUSINESS COMBINATIONS - (CONTINUED)
Other Acquisitions
During 2001, the Company spent a further $15.6 million on other
acquisitions, including approximately $9.3 million additional consideration
related to earn-out periods associated with acquisitions consummated in
prior years. Goodwill recognized in connection with these acquisition
payments totaled $21.3 million, which is primarily included in the
Company's Principal U.S. Operations segment. The Company accounted for the
acquisition payments using the purchase method of accounting.
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
semiconductor, microelectronics, pharmaceutical and biotech applications.
Goodwill recognized in connection with these acquisition payments totaled
$47.8 million, which is primarily included in the Company's Principal U.S.
Operations, Other Western European Operations and Other Operations
segments. The Company accounted for the acquisition payments using the
purchase method of accounting.
The terms of certain of our acquisitions in 2002 and earlier years
provide for possible additional earn-out payments. Although we do not
currently believe we will make any material payments relating to such
earn-outs, the maximum amount potentially payable in cash is approximately
$74 million, including up to $30 million for Rainin, based on operating
profits through March 31, 2003. Any additional earn-out payments incurred
will be treated as additional purchase price and accounted for using the
purchase method of accounting.
4. INVENTORIES, NET
Inventories, net consisted of the following at December 31:
2002 2001
--------- --------
Raw materials and parts......................... $ 73,667 $ 70,392
Work-in-progress................................ 33,683 28,433
Finished goods.................................. 43,091 46,796
--------- --------
$ 150,441 $145,621
========= ========
5. FINANCIAL INSTRUMENTS
At December 31, 2002, 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 $155 million of USD-based
debt. These agreements have various maturities through 2004. 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, 2002 and 2001, the fair market value of such
financial instruments was approximately negative $4.4 million and negative
$1.7 million, respectively.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
5. FINANCIAL INSTRUMENTS - (CONTINUED)
At December 31, 2002, the Company had outstanding foreign currency
forward contracts in the amount of $58 million. The purpose of these
contracts is to economically hedge short-term intercompany balances with
its foreign businesses. These agreements have various maturities through
January 2003. The fair value of these contracts was not materially
different from the carrying value at December 31, 2002 and 2001,
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:
2002 2001
-------- --------
Land.................................................. $ 45,421 $ 38,690
Buildings and leasehold improvements.................. 128,711 102,308
Machinery and equipment............................... 193,802 155,777
Computer software..................................... 4,934 4,673
-------- --------
372,868 301,448
Less accumulated depreciation and amortization........ (155,114) (109,176)
--------- ---------
$217,754 $192,272
======== ========
7. GOODWILL AND OTHER INTANGIBLE ASSETS
As of January 1, 2002 the Company has adopted Statement of Financial
Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible
Assets", effective for fiscal years beginning after December 15, 2001. This
Statement requires that goodwill no longer be amortized to earnings, but
instead be reviewed for impairment upon initial adoption of SFAS 142 and on
an annual basis going forward. Other intangible assets with finite lives
will continue to be amortized over their useful lives. Under the transition
provisions of SFAS 142, there was no impairment of goodwill and indefinite
lived intangible assets at January 1, 2002. We estimate that application of
the non-amortization provisions of SFAS 142 would have increased our net
earnings for 2001 by $6.5 million and our diluted earnings per share by
$0.14, adjusting for additional shares issued in connection with our
acquisition of Rainin Instrument LLC.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
7. GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
The reconciliations of reported net earnings to adjusted net earnings
before amortization of goodwill for the years ended December 31 are as
follows:
2002 2001
---- ----
Net earnings:
Reported................................. $100,421 $ 72,264
Goodwill amortization.................... - 6,535
-------- --------
Adjusted................................. $100,421 $ 78,799
======== ========
Basic earnings per share:
Reported................................. $ 2.27 $ 1.78
Goodwill amortization (a)............... - 0.15
-------- --------
Adjusted................................. $ 2.27 $ 1.93
======== ========
Diluted earnings per share:
Reported................................. $ 2.21 $ 1.68
Goodwill amortization (a)............... - 0.14
-------- --------
Adjusted................................. $ 2.21 $ 1.82
======== ========
(a) Adjusted for additional shares issued in connection with our
acquistion of Rainin.
The following table shows the changes in the carrying amount of
goodwill for the years ended December 31:
2002 2001
---- ----
Balance at beginning of year.............. $384,947 $228,035
Goodwill acquired - Principal U.S. Operations 18,762 169,868
Amotization charge for the year........... - (10,054)
Acquisition related tax assets realized... (9,488) (961)
Effect of changes in foreign currency..... 14,130 (1,941)
-------- --------
Balance at end of year.................... $408,351 $384,947
======== ========
SFAS 142 requires that goodwill and indefinite lived assets be subject
to annual impairment tests using a two-step process. The first step is to
determine if an impairment exists, and if so the second step measures the
amount of impairment based on fair value. The Company has completed its
impairment review under SFAS 142 as of December 31, 2002 and has determined
that there is no impairment.
The components of other intangible assets as of December 31, are as
follows:
2002 2001
---- ----
Gross Accumulated Gross Accumulated
amount amortization amount amortization
------ ------------ ------ ------------
Customer relationships........... $ 70,955 $ (1,839) $ 67,383 $ (268)
Tradename........................ 23,327 (37) 22,434 -
Perpetual intellectual property
license........................ 19,905 - 19,905 -
Proven technology and patents.... 19,138 (2,008) 17,352 (282)
--------- --------- --------- ----------
$ 133,325 $ (3,884) $127,074 $ (550)
========= ========== ========= ==========
Other intangible assets substantially relate to the acquisition of
Rainin Instrument. The annual aggregate amortization expense based on the
current balance of other intangible assets for each of the next five years
is estimated at $3.4 million.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
8. SHORT-TERM BORROWINGS AND CURRENT MATURITIES OF LONG-TERM DEBT
Short-term borrowings and current maturities of long-term debt
consisted of the following at December 31:
2002 2001
------ ------
Current maturities of long-term debt......... $38,646 $31,455
Other short-term borrowings.................. 11,932 18,784
------- -------
$50,578 $50,239
======= =======
9. LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
2002 2001
-------- --------
Credit Agreement Borrowings:
Term A USD Loans, interest at LIBOR plus 0.45% (1.85% at December 31,
2002) payable in quarterly installments due May 19, 2004............. $ 34,709 $ 52,065
Term A CHF Loans, interest at LIBOR plus 0.45% (1.12% at December 31,
2002) payable in quarterly installments due May 19, 2004............. 21,050 26,183
Term A GBP Loans, interest at LIBOR plus 0.45% (4.48% at December 31,
2002) payable in quarterly installments due May 19, 2004............. 11,865 16,106
Revolving credit facilities, interest at LIBOR plus 0.3% .............. 224,467 238,459
Other.................................................................... 20,580 26,905
--------- ---------
312,671 359,718
Less current maturities.................................................. (50,578) (50,239)
--------- ---------
$ 262,093 $ 309,479
========= =========
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,
2002, the Company had $185.6 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 $192 million
of the Company's short-term borrowings at December 31, 2002 have been
reclassified to long-term.
The aggregate maturity of term loan obligations for 2004 is $29.0
million.
The Company is required to pay a facility fee based in part on our
credit rating. The facility fee at December 31, 2002 was equal to 0.15%. At
December 31, 2002, 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, 2002 was approximately 5.1%.
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.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
9. LONG-TERM DEBT - (CONTINUED)
The carrying value of the Company's obligations under its credit
agreement approximates fair value due to the variable rate nature of the
obligations.
10. 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,
2002, 1,407,998 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.
Shareholder Rights Plan
On August 26, 2002 the Board of Directors adopted a Shareholder Rights
Plan under which the Company declared a non-cash dividend of one right for
each outstanding share of common stock. The Rights, which expire on
September 5, 2012, entitle stockholders to buy one one-thousandth of a
share of preferred stock at an exercise price of $150. The Rights were
distributed to those stockholders of record as of close of business on
September 5, 2002 and are attached to all certificates representing those
shares of common stock.
The Rights Plan provides that should any person or group acquire, or
announce a tender or exchange offer for 15% or more of the Company's common
stock, each Right, other than Rights held by the acquiring person or group,
would entitle its holder to purchase a number of shares of the Company's
common stock for 50% of its then-current market value. Unless a 15%
acquisition has occurred, the Rights may be redeemed by the Board of
Directors of the Company at any time. The Rights Plan will not be triggered
by a tender or exchange offer for all outstanding shares of the Company at
a price and on terms that the Company's Board of Directors determines to be
adequate and in the best interest of the Company and its stockholders.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
10. SHAREHOLDERS' EQUITY (CONTINUED)
The Rights Plan exempts any stockholder that beneficially owned 15% or
more of the Company's common stock as of August 26, 2002. However, the
Rights will become exercisable if, at any time after August 26, 2002, any
of these stockholders acquire additional shares of the Company's common
stock in an amount which is greater than 2% of the Company's outstanding
common stock.
Comprehensive Income
Accumulated other comprehensive income consisted of the following at
December 31:
2002 2001 2000
-------- --------- ---------
Currency translation adjustment....................... $(23,365) $(50,298) $(47,804)
Unrealized gain / (loss) on cash flow hedging
arrangements........................................ (4,396) (1,591) -
Additional minimum pension liability.................. (40,538) (20,009) -
Deferred tax on additional minimum pension liability.. 6,650 - -
--------- --------- ---------
Total accumulated other comprehensive loss............ $(61,649) $(71,898) $(47,804)
========= ========= =========
11. 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. 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 and
have a maximum term of 10 years.
Stock option activity is shown below:
Weighted Average
Number of Options Exercise Price
----------------- ----------------
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
Granted................................................. 912,250 35.21
Exercised............................................... (239,078) (14.77)
Forfeited............................................... (252,974) (34.97)
--------- ---------
Outstanding at December 31, 2002........................ 4,799,773 $ 27.65
========= =========
Options exercisable at December 31, 2000................ 2,700,697 $ 11.14
Options exercisable at December 31, 2001................ 2,112,471 $ 14.29
Options exercisable at December 31, 2002................ 2,620,713 $ 18.34
========= =========
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
11. STOCK OPTION PLAN - (CONTINUED)
At December 31, 2002, 1,407,998 options were available for grant.
The following table details the weighted average remaining contractual
life of options outstanding at December 31, 2002 by range of exercise
prices:
Remaining Contractual
Number of Options Weighted Average Life of Options Options
Outstanding Exercise Price Outstanding Exercisable
----------- -------------- ----------- -----------
1,346,090 $ 7.95 3.8 1,346,090
319,083 $ 15.92 4.8 318,403
847,000 $ 25.87 5.1 542,480
834,650 $ 34.10 9.6 42,560
1,452,950 $ 45.81 8.3 371,180
--------- --- ---------
4,799,773 6.5 2,620,713
========= =========
As of the date granted, the weighted average grant-date fair value of
the options granted during the years ended December 31, 2002, 2001 and 2000
was approximately $11.20, $16.72 and $18.31 per share, respectively. Such
weighted average grant-date fair value was determined using an option
pricing model that incorporated the following assumptions:
2002 2001 2000
----- ----- ----
Risk-free interest rate.............. 3.0% 4.3% 5.0%
Expected life in years............... 4 4 4
Expected volatility.................. 35% 40% 46%
Expected dividend yield.............. - - -
The Company applies the intrinsic valuation methodology under
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:
2002 2001 2000
------ ------ ------
Net earnings:
As reported........................................ $100,421 $72,264 $70,119
Pro forma.......................................... 94,612 67,348 66,425
========= ======= =========
Basic earnings per common share:
As reported........................................ $2.27 $1.78 $1.80
Pro forma.......................................... 2.14 1.66 1.71
==== ==== ====
Diluted earnings per common share:
As reported........................................ $2.21 $1.68 $1.66
Pro forma.......................................... 2.09 1.57 1.58
==== ==== ====
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
12. BENEFIT PLANS
Mettler-Toledo maintains a number of retirement and other post-
retirement employee benefit plans.
Certain subsidiaries sponsor defined contribution plans. Benefits are
determined and funded annually based upon the terms of the plans. Amounts
recognized as cost under these plans amounted to $3.3 million for the year
ended December 31, 2002 and $2.6 million for the years ended December 31,
2001 and 2000, respectively.
Certain subsidiaries sponsor defined benefit plans. Benefits are
provided to employees primarily based upon years of service and employees'
compensation for certain periods during the last years of employment. The
Company's U.S. operations also provide post-retirement medical benefits to
their employees. Contributions for medical benefits are related to employee
years of service.
As described in Note 14, during the year ended December 31, 2002 the
Company revised its U.S. defined benefit pension plan to freeze the
benefits for current participants and to discontinue the plan for all
future employees, resulting in an expense of $1.1 million. In addition, the
Company's U.S. retiree medical program was also discontinued during 2002
for certain current and all future active employees resulting in a
curtailment gain of $1.3 million.
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 defined benefit plans
and post-retirement plans at December 31, 2002 and 2001:
U.S. Pension Non-U.S. Other Benefits
Benefits Pension Benefits
2002 2001 2002 2001 2002 2001
---- ---- ---- ---- ---- ----
Change in benefit obligation:
Benefit obligation at beginning of
year................................ $ 83,164 $ 74,652 $335,323 $319,385 $36,839 $ 33,380
Service cost, gross................... 2,033 3,487 18,834 15,184 324 495
Interest cost......................... 6,167 5,596 17,386 14,399 2,551 2,480
Actuarial (gains) losses.............. 4,540 2,983 (18,385) 15,149 (3,601) 4,833
Plan amendments and other............. (2,051) 673 1,387 406 - (1,797)
Benefits paid......................... (4,604) (4,227) (15,034) (15,839) (2,810) (2,549)
Impact of foreign currency............ - - 64,546 (13,361) - (3)
-------- -------- -------- -------- ------- --------
Benefit obligation at end of year..... $ 89,249 $ 83,164 $404,057 $335,323 $33,303 $ 36,839
-------- -------- -------- -------- ------- --------
Change in plan assets:
Fair value of plan assets at
beginning of year................... $ 54,555 $ 69,931 $302,617 $314,154 $ - $ -
Actual return on plan assets.......... (5,397) (12,840) (8,256) 3,390 - -
Employer contributions................ 2,613 1,691 10,882 8,020 2,810 2,549
Plan participants' contributions...... - - 5,557 4,630 - -
Benefits paid......................... (4,604) (4,227) (15,034) (15,839) (2,810) (2,549)
Impact of foreign currency............ - - 59,314 (11,738) - -
Fair value of plan assets at end -------- -------- -------- --------- ------- -------
of year............................. $ 47,167 $ 54,555 $355,080 $302,617 $ - $ -
-------- -------- -------- -------- ------- --------
Funded status......................... (42,082) (28,609) (48,977) (32,706) (33,303) (36,839)
Unrecognized net actuarial (gain)
loss................................ 33,302 22,626 806 (9,062) 77 2,714
Post-measurement date contributions... 19,007 1,025 - - - -
-------- -------- -------- -------- ------- --------
Net amount recognized................. $ 10,227 $ (4,958) $(48,171) $(41,768) $(33,226) $(34,125)
======== ======== ======== ======== ======= ========
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
12. BENEFIT PLANS - (CONTINUED)
Amounts recognized in the consolidated balance sheets consist of:
U.S. Pension Non-U.S. Other Benefits
Benefits Pension
Benefits
2002 2001 2002 2001 2002 2001
---- ---- ---- ---- ---- ----
Other non-current assets................. $ - $ - $ 11,730 $ 7,621 $ - $ -
Other non-current liabilities............ (23,078) (24,935) (67,134) (49,421) (33,226) (34,125)
Accumulated other comprehensive loss..... 33,305 19,977 7,233 32 - -
------- ------- -------- --------- --------- --------
Net amount recognized.................... $10,227 $(4,958) $(48,171) $(41,768) $(33,226) $(34,125)
======= ======== ========= ========= ========= =========
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 plans are as follows:
U.S. Non-U.S.
--------------------------- ----------------------------
2002 2001 2000 2002 2001 2000
---- ----- ---- ---- ---- ----
Discount rate................................. 7.0% 7.5% 7.8% 4.5% 4.7% 4.8%
Compensation increase rate.................... n/a 4.0% 5.0% 2.5% 2.9% 3.0%
Expected long-term rate of return on plan
assets...................................... 8.5% 9.5% 9.5% 6.1% 6.1% 5.7%
Plan assets relate principally to the Company's U.S. and Swiss
subsidiaries and consist of equity investments, obligations of the U.S.
Treasury or other governmental agencies, and other interest-bearing
investments.
Net periodic pension cost for the defined benefit plans includes the
following components for the year ended December 31:
U.S. Non-U.S.
--------------------------- ----------------------------
2002 2001 2000 2002 2001 2000
----- ----- ---- ----- ---- -----
Service cost, net........................... $ 897 $ 3,487 $ 3,331 $13,982 $ 10,789 $ 12,107
Interest cost on projected benefit
obligations............................... 6,167 5,596 5,305 17,386 14,399 13,267
Expected return on plan assets.............. (5,196) (6,484) (6,048) (21,662) (17,373) (16,443)
Impact of plan freeze....................... 1,136 - - - - -
Impact of early retirement.................. 1,615 1,013 - - - -
Recognition of actuarial losses (gains)..... 791 5 5 333 (731) 14
------- ------- ------- ------- --------- -------
Net periodic pension cost................... $ 5,410 $ 3,617 $ 2,593 $10,039 $ 7,084 $ 8,945
======= ======= ======= ======= ========= =======
Net periodic post-retirement benefit cost for the U.S. post-retirement
plans includes the following components for the year ended December 31:
2002 2001 2000
------ ------ ------
Service cost............................... $ 324 $ 495 $ 461
Interest cost on projected benefit
obligations.............................. 2,551 2,480 2,460
Curtailment gain on plan freeze............ (1,334) - -
Impact of early retirement................. 365 - -
Net amortization and deferral.............. (209) - -
-------- ------- --------
Net periodic post-retirement benefit cost.. $ 1,697 $ 2,975 $ 2,921
======== ======= ========
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
12. BENEFIT PLANS - (CONTINUED)
The accumulated post-retirement benefit obligation and net periodic
post-retirement benefit cost were principally determined using discount
rates of 7.0% in 2002, 7.5% in 2001 and 7.8% in 2000 and health care cost
trend rates ranging from 9% to 14% in 2002, and from 10% to 15% in 2001 and
2000, decreasing to 4.5% in 2008.
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.............. $ 212 $ (198)
Effect on post-retirement benefit obligation......................... $ 3,034 $ (2,803)
13. TAXES
The sources of the Company's earnings before taxes were as follows for
the years ending December 31:
2002 2001 2000
------------- ------------- -------------
United States.................................... $ 29,669 $ (3,202) $ 13,670
Non-United States................................ 80,741 121,636 94,959
-------- --------- ---------
Earnings before taxes............................ $110,410 $ 118,434 $ 108,629
======== ========= =========
The provisions for taxes consist of:
Adjustments
to
Current Deferred Goodwill Total
------- -------- -------- -----
Year ended December 31, 2002:
United States federal............................ $ 14,291 $ (12,517) $ 9,488 $ 11,262
State and local.................................. 539 - - 539
Non-United States................................ 120 (1,932) - (1,812)
-------- ---------- -------- ---------
$ 14,950 $ (14,449) $ 9,488 $ 9,989
======== ========== ======== =========
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
======== ======== ======== =======
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
13. TAXES - (continued)
During 2002, the Company recorded a one-time benefit of $23.1 million
related to the completion of a tax restructuring program and related
audits.
The adjustments to goodwill during the years ending December 31, 2002,
2001 and 2000 relate to tax benefits utilized that were not previously
recognized in the purchase price allocation pertaining to previous
acquisitions.
The provisions for tax expense for the years ending December 31, 2002,
2001 and 2000 differed from the amounts computed by applying the United
States federal income tax rate of 35% to the earnings before taxes as a
result of the following:
2002 2001 2000
---------- ---------- ---------
Expected tax............................................... $ 38,643 $41,453 $38,020
United States state and local income taxes, net of
federal income tax benefit............................... 350 553 519
Non-deductible intangible amortization..................... - 2,222 2,227
Change in valuation allowance.............................. 6,751 1,288 (3,065)
Tax restructuring program and audit settlements............ (23,135) - -
Other non-United States income taxes at other than a
35% rate............................................... (13,499) 373 455
Other, net................................................. 879 281 354
-------- ------- -------
Total provision for taxes.................................. $ 9,989 $46,170 $38,510
======== ======= =======
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:
2002 2001
---------- ----------
Deferred tax assets:
Inventory............................................ $ 497 $ 4,132
Accrued and other liabilities........................ 29,931 20,339
Deferred losses...................................... 2,099 2,099
Accrued post-retirement benefit and pension costs.... 28,304 27,928
Net operating loss and tax credit carryforwards...... 60,935 30,317
Other................................................ 4,508 4,065
------- -------
Total deferred tax assets................................ 126,274 88,880
Less valuation allowance................................. (68,344) (71,081)
------- -------
Total deferred tax assets less valuation allowance....... 57,930 17,799
------- -------
Deferred tax liabilities:
Inventory............................................ 1,510 1,689
Property, plant and equipment........................ 16,976 20,837
Rainin intangibles amortization...................... 6,283 1,026
Other................................................ 13,482 5,132
International earnings............................... 3,815 -
------- --------
Total deferred tax liabilities........................... 42,066 28,684
------- --------
Net deferred tax asset/(liability)....................... $15,864 $(10,885)
======= ========
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
13. TAXES - (continued)
The summary of total valuation allowances is as follows at December
31:
2002 2001
---------- ----------
Summary of valuation allowances:
Cumulative net operating loss and tax credit carryforwards...... $ 60,935 $25,762
Deferred loss................................................... 2,099 2,099
Accrued post-retirement and pension benefit costs............... - 22,880
Other........................................................... 5,310 20,340
--------- -------
Total valuation allowance........................................... $ 68,344 $71,081
========= =======
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 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. The 2002
net change in the valuation allowance includes the release of the valuation
allowance attributable to deferred tax assets associated with temporary
differences and net operating loss carryforwards and the establishment of a
valuation allowance on U.S. foreign tax credits created in 2002 pursuant to
the Company's plan of foreign earnings repatriations. A valuation allowance
of $20.5 million at December 31, 2002 pertaining to foreign tax credit
carryforwards resulted from the exercise of certain employee stock options.
When recognized, the tax benefit of these credits will be recorded in
shareholders' equity.
The total valuation allowances relating to acquired businesses amount
to $4.9 million and $14.3 million at December 31, 2002 and 2001,
respectively. The reduction for the current year is primarily attributable
to the release of U.S. federal deferred tax assets associated with
post-retirement benefit liabilities. Future reductions of these valuation
allowances will continue to be credited to goodwill when realized.
At December 31, 2002, for U.S. federal income tax purposes, the
Company had net operating loss carryforwards of $3.1 million that expire in
various amounts through 2018 and foreign tax credits of $48 million that
will expire in various amounts through 2007. The Company has various U.S.
state net operating losses and various foreign net operating losses that
expire in varying amounts through 2022.
During 2002 the Company undertook a plan to repatriate in future years
$180 million of previously unremitted earnings of foreign subsidiaries.
Accordingly, a deferred tax liability of $3.8 million was established in
the current financial statements to account for the incremental tax costs
associated with the planned repatriation. In conjunction with this plan,
$85 million of foreign subsidiary earnings were repatriated to the United
States during 2002, the effects of which are included in the 2002 financial
statements. No deferred tax liability has been recognized on the residual
unremitted earnings approximating $140 million, as such earnings have been
permanently reinvested in the business.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
13. TAXES - (CONTINUED)
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.
14. OTHER CHARGES, NET
Other charges, net consists primarily of charges related to the
Company's cost-reduction programs and gains on the sale of property, plant
and equipment.
In June 2002, the Company's management approved restructuring plans to
exit manufacturing facilities in France and the United States, and reduce
the Company's expense structure. As part of these efforts to reduce costs,
the Company recorded a charge of $28.7 million ($20.1 million after tax)
during the year ended December 31, 2002. This charge was comprised of
restructuring liabilities of $24.3 million and related asset impairments of
$4.4 million. In total, the Company expects this restructuring plan to
result in cash outlays of approximately $20.2 million and non-cash items of
$8.5 million. The charge comprised involuntary employee separation
benefits, write-downs of impaired assets to be disposed and other exit
costs. The Company expects to involuntarily terminate approximately net 300
employees in targeted manufacturing and administrative areas and to
substantially complete the manufacturing consolidation by the end of 2003.
Under U.S. GAAP, the charge related to the exit of the Company's French
manufacturing facility was limited to the contractual minimum in the second
quarter of 2002. This amount is subject to adjustment based on final
settlement of the social plan being negotiated with the French union
workers' council. The asset impairments of $4.4 million primarily relate to
plant and equipment 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 will be physically disposed by the end of 2003.
As part of this restructuring program, the Company revised its U.S.
defined benefit pension plan to freeze the benefits for current
participants and to discontinue the plan for all future employees,
resulting in an expense of $1.1 million. In addition, the Company's U.S.
retiree medical program was also discontinued for certain current and all
future active employees resulting in a curtailment gain of $1.3 million.
As part of its efforts to reduce costs, the Company recorded charges of
approximately $15.2 million, and $1.4 million in 2001 and 2000,
respectively, associated primarily with headcount reductions and
manufacturing transfers in 2001, and the close-down and consolidation of
operations in 2000. 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.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
14. OTHER CHARGES, NET - (CONTINUED)
A roll-forward of the Company's accrual for restructuring activities
follows:
Employee Lease
related(a) termination(b) Other(c) Total
------- ----------- ----- -----
Balance at December 31, 2000.................. $ 2,141 $ 779 $ 60 $ 2,980
Restructuring expense......................... 8,848 464 1,163 10,475
Cash payments................................. (6,856) (964) (899) (8,719)
Increase in retirement benefit obligation..... (2,114) - - (2,114)
Impact of foreign currency.................... (18) - - (18)
-------- ------- ------ --------
Balance at December 31, 2001.................. $ 2,001 $ 279 $ 324 $ 2,604
Restructuring expense......................... 21,967 2,051 283 24,301
Cash payments................................. (9,660) (433) (238) (10,331)
Increase in retirement benefit obligation..... (3,850) - - (3,850)
Impact of foreign currency.................... 1,345 135 51 1,531
-------- ------- ------ --------
Balance at December 31, 2002.................. $ 11,803 $ 2,032 $ 420 $ 14,255
======== ======= ====== ========
(a) Employee related costs in 2002 include severance, medical and early
retirement costs for approximately net 300 employees, of which 190
employees had been terminated as of December 31, 2002. These
employees include positions primarily in manufacturing, as well as
administrative and other personnel, primarily at the Company's
Principal U.S. and Other Western European Operations. The remaining
employee terminations and related cash outflows are expected to be
completed by the end of 2003.
Employee related costs in 2001 include severance and early
retirement costs for 350 employees. These employees include
positions primarily in manufacturing, as well as administrative and
other personnel, primarily at the Company's Principal U.S.
Operations. The employee terminations and related cash outflows were
completed during the first quarter of 2002.
The increases in the Company's retirement benefit obligation
represent enhanced early retirement benefits provided to impacted
employees.
(b) Lease termination costs primarily relate to the early termination of
leases on vacated property, primarily at the Company's Principal
U.S. and Other Western European Operations.
(c) Other costs include expenses associated with equipment dismantling
and disposal, and other exit costs.
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
15. 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, 2002:
2003................................... $20,785
2004................................... 15,807
2005................................... 10,852
2006................................... 8,727
2007................................... 7,015
Thereafter............................. 28,155
------
Total................................ $91,341
=======
Rent expense for operating leases amounted to $24.7 million, $20.0
million and $21.2 million for the years ended December 31, 2002, 2001 and
2000, 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.
16. 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)
16. 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, interest expense 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, 2002 Operations Operations Operations Operations Other(a) Corporate(b) Total
- ------------------------------- ---------- ---------- ---------- ---------- -------- ------------ -----
Net sales to external
customers.................... $ 441,898 $ 158,232 $ 49,632 $ 264,683 $ 299,262 $ - $1,213,707
Net sales to other segments.... 33,373 54,830 178,716 36,578 72,369 (375,866) -
--------- --------- ---------- ---------- -------- ---------- ----------
Total net sales................ $ 475,271 $ 213,062 $ 228,348 $ 301,261 $ 371,631 $ (375,866) $1,213,707
========= ========= ========== ========== ======== ========== ==========
Adjusted operating income...... $ 68,817 $ 16,143 $ 47,242 $ 15,106 $ 30,947 $ (13,102) $ 165,153
Depreciation................... 8,457 2,607 5,916 3,195 4,622 595 25,392
Total assets................... 906,546 156,612 500,597 193,192 1,059,461 (1,513,015) 1,303,393
Purchase of property, plant
and equipment.............. 14,480 2,908 4,905 2,156 5,974 2,734 33,157
Goodwill................... 201,663 23,607 21,512 76,184 85,385 - 408,351
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 $ 51,300 $ 269,733 $ 278,528 $ - $1,148,022
Net sales to other segments.... 32,507 60,886 190,485 44,616 79,549 (408,043) -
--------- --------- ---------- ---------- --------- ---------- ----------
Total net sales................ $ 395,362 $ 246,492 $ 241,785 $ 314,349 $ 358,077 $ (408,043) $1,148,022
========= ========= ========== ========== ========= ========== ==========
Adjusted operating income...... $ 31,074 $ 30,432 $ 56,999 $ 27,517 $ 30,319 $ (11,277) $ 165,064
Depreciation................... 6,762 2,283 5,769 2,962 4,631 451 22,858
Total assets................... 585,357 144,967 381,873 183,120 557,768 (663,673) 1,189,412
Purchase of property, plant
and equipment................ 7,007 4,386 5,980 3,498 5,981 6,376 33,228
Goodwill................... 187,565 21,100 19,205 77,982 79,095 - 384,947
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 $ 48,140 $ 256,257 $ 245,500 $ - $1,095,547
Net sales to other segments.... 33,528 53,563 177,237 41,896 69,738 (375,962) -
--------- ---------- ---------- ---------- --------- ---------- ----------
Total net sales................ $ 401,266 $ 231,475 $ 225,377 $ 298,153 $ 315,238 $ (375,962) $1,095,547
========= ========== ========== ========== ========= ========== ==========
Adjusted operating income...... $ 38,414 $ 22,881 $ 45,609 $ 21,979 $ 24,935 $ (10,977) $ 142,841
Depreciation................... 6,692 2,364 5,685 2,803 3,765 381 21,690
Total assets................... 242,878 138,957 346,561 152,816 514,246 (507,876) 887,582
Purchase of property, plant
and equipment................ 6,289 3,123 7,689 4,226 6,177 1,800 29,304
(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)
16. SEGMENT REPORTING -(CONTINUED)
A reconciliation of adjusted operating income to earnings before taxes
for the year ended December 31 follows:
2002 2001 2000
----- ----- -----
Adjusted operating income......... $ 165,153 $ 165,064 $ 142,841
Amortization...................... 9,332 14,114 11,564
Interest expense.................. 17,209 17,162 20,034
Other charges, net................ 28,202 15,354 2,614
--------- --------- ---------
Earnings before taxes............. $ 110,410 $ 118,434 $ 108,629
========= ========= =========
The Company sells precision instruments, including weighing
instruments and certain analytical and measurement technologies, and
related post-sales support to a variety of customers and industries. None
of these customers account for more than 3% of net sales. Post-sales
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:
2002 2001 2000
----- ----- -----
Weighing-related instruments..... $ 594,465 $ 634,834 $ 624,510
Non-weighing instruments......... 359,616 271,519 237,501
Post-sales support............... 259,626 241,669 233,536
---------- ---------- ----------
Total net sales.................. $1,213,707 $1,148,022 $1,095,547
========== ========== ==========
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
----------------------------------------- -----------------------
2002 2001 2000 2002 2001
---------- ----------- ------------ ---------- ---------
United States....... $ 494,913 $ 417,886 $ 411,484 $ 46,650 $ 41,543
Other Americas...... 72,754 74,020 76,522 1,859 2,157
---------- ----------- ------------ --------- ---------
Total Americas...... 567,667 491,906 488,006 48,509 43,700
Germany............. 104,311 130,641 122,570 26,842 22,920
France.............. 90,046 104,206 97,345 5,497 5,606
United Kingdom...... 47,228 44,689 44,927 5,156 5,806
Switzerland......... 46,274 45,437 45,308 108,249 92,707
Other Europe........ 197,225 185,961 168,040 5,930 5,239
---------- ----------- ------------ --------- ---------
Total Europe........ 485,084 510,934 478,190 151,674 132,278
Rest of World....... 160,956 145,182 129,351 17,571 16,294
---------- ----------- ------------ --------- ---------
Totals.............. $1,213,707 $ 1,148,022 $ 1,095,547 $ 217,754 $ 192,272
========== =========== ============ ========= =========
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for the years ended December 31, 2002 and
2001 are as follows:
First Second Third Fourth
Quarter Quarter(a) Quarter Quarter
------------ ------------- ------------ ------------
2002
Net sales ......................... $ 272,957 $ 296,454 $ 306,990 $337,306
Gross profit....................... 125,137 141,082 142,923 158,595
Net earnings....................... $ 18,674 $ 27,478 $ 22,977 $ 31,292
Basic earnings per common share:
Net earnings.................... $0.42 $0.62 $0.52 $0.71
Weighted average number of
common shares................. 44,173,850 44,208,274 44,355,475 44,384,820
Diluted earnings per common share:
Net earnings.................... $0.41 $0.61 $0.51 $0.69
Weighted average number of
common shares................. 45,517,058 45,409,690 45,235,544 45,317,919
Market price per share:
High............................ $51.85 $45.74 $36.87 $37.04
Low............................. $42.80 $35.65 $24.85 $25.41
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:
Net earnings.................... $0.37 $0.17 $0.51 $0.72
Weighted average number of
common shares................. 39,716,936 40,112,438 40,157,813 42,451,676
Diluted earnings per common share:
Net earnings.................... $0.34 $0.16 $0.48 $0.69
Weighted average number of
common shares................. 42,539,345 42,472,310 42,463,944 44,441,101
Market price per share:
High............................ $53.92 $52.20 $49.20 $51.98
Low............................. $36.50 $37.95 $37.00 $39.98
(a) The financial data for the second quarters of 2002 and 2001
include charges of $28.7 million ($20.1 million after tax) and
$15.2 million ($14.6 million after tax), respectively, primarily
related to headcount reductions and manufacturing transfers (Note
14). The financial data for the second quarter of 2002 also
includes a benefit of $23.1 million related to tax restructuring
activities and the completion of related tax audits.
SCHEDULE II- VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
- -------------------------------- ---------------- ---------------------------------- ---------------- -----------------
Column A Column B Column C Column D Column E
- -------------------------------- ---------------- ---------------------------------- ---------------- -----------------
Additions
----------------------------------
(1) (2)
Balance at Charged
the beginning to costs and Charged to Balance at
Description of period expenses Other accounts -Deductions- end of period
- -------------------------------- ---------------- ----------------- ---------------- ---------------- -----------------
Note (A)
Accounts Receivable-
allowance for doubtful
accounts:
Year ended
December 31, 2002 9,450 778 - (688) 10,916
Year ended
December 31, 2001 9,097 996 - 643 9,450
Year ended
December 31, 2000 9,827 1,008 - 1,738 9,097
Deferred Tax valuation
allowance:
Year ended
December 31, 2002 71,081 6,751 - 9,488 68,344
Year ended
December 31, 2001 49,027 1,288 21,727 961 71,081
Year ended
December 31, 2000 53,128 (3,065) - 1,036 49,027
- -------------------------------- ---------------- ----------------- ---------------- ---------------- -----------------
Note A
For accounts receivable represents excess of uncollectible balances
written off over recoveries of accounts previously written off.
Additionally, amounts are net of foreign currency translation effect
of $775, $(244) and $(253) for the years ended December 31, 2002,
2001, and 2000, respectively. For deferred tax valuation allowance
represents tax benefits utilized that were not previously recognized
in the purchase price allocation pertaining to previous acquisitions.
EXHIBIT 3.2
AMENDED BY-LAWS
OF
METTLER-TOLEDO INTERNATIONAL INC.
ARTICLE I
Stockholders
SECTION 1. Annual Meeting. The annual meeting of the stockholders of
the Corporation shall be held on such date, at such time and at such place
within or without the State of Delaware as may be designated by the Board
of Directors, for the purpose of electing Directors and for the transaction
of such other business as may be properly brought before the meeting.
SECTION 2. Special Meetings. Except as otherwise provided in the
Certificate of Incorporation, a special meeting of the stockholders of the
Corporation may be called at any time by the Board of Directors, the
Chairman of the Board or the President and shall be called by the Chairman
of the Board, the President or the Secretary at the request in writing of
stockholders holding together at least fifty percent of the number of
shares of stock outstanding and entitled to vote at such meeting. Any
special meeting of the stockholders shall be held on such date, at such
time and at such place within or without the State of Delaware as the Board
of Directors or the officer calling the meeting may designate. At a special
meeting of the stockholders, no business shall be transacted and no
corporate action shall be taken other than that stated in the notice of the
meeting unless all of the stockholders are present in person or by proxy,
in which case any and all business may be transacted at the meeting even
though the meeting is held without notice.
SECTION 3. Notice of Meetings. Except as otherwise provided in these
BY-LAWS or by law, a written notice of each meeting of the stockholders
shall be given not less than ten (10) nor more than sixty (60) days before
the date of the meeting to each stockholder of the Corporation entitled to
vote at such meeting at his address as it appears on the records of the
Corporation. The notice shall state the place, date and hour of the meeting
and, in the case of a special meeting, the purpose or purposes for which
the meeting is called.
SECTION 4. Quorum. At any meeting of the stockholders, the holders of
a majority in number of the total outstanding shares of stock of the
Corporation entitled to vote at such meeting, present in person or
represented by proxy, shall constitute a quorum of the stockholders for all
purposes, unless the representation of a larger number of shares shall be
required by law, by the Certificate of Incorporation or by these By-Laws,
in which case the representation of the number of shares so required shall
constitute a quorum; provided that at any meeting of the stockholders at
which the holders of any class of stock of the Corporation shall be
entitled to vote separately as a class, the holders of a majority in number
of the total outstanding shares of such class, present in person or
represented by proxy, shall constitute a quorum for purposes of such class
vote unless the representation of a larger number of shares of such class
shall be required by law, by the Certificate of Incorporation or by these
By-Laws.
SECTION 5. Adjourned Meetings. Whether or not a quorum shall be
present in person or represented at any meeting of the stockholders, the
holders of a majority in number of the shares of stock of the Corporation
present in person or represented by Proxy and entitled to vote at such
meeting may adjourn from time to time; provided, however, that if the
holders of any class of stock of the Corporation are entitled to vote
separately as a class upon any matter at such meeting, any adjournment of
the meeting in respect of action by such class upon such matter shall be
determined by the holders of a majority of the shares of such class present
in person or represented by proxy and entitled to vote at such meeting.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced
at the meeting at which the adjournment is taken. At the adjourned meeting
the stockholders, or the holders of any class of stock entitled to vote
separately as a class, as the case may be, may transact any business which
might have been transacted by them at the original meeting. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at
the adjourned meeting.
SECTION 6. Organization. The Chairman of the Board or, in his absence,
the President shall call all meetings of the stockholders to order, and
shall act as Chairman of such meetings. In the absence of the Chairman of
the Board and the President, the holders of a majority in number of the
shares of stock of the Corporation present in person or represented by
proxy and entitled to vote at such meeting shall elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all
meetings of the stockholders; but in the absence of the Secretary, the
Chairman may appoint any person to act as Secretary of the meeting. It
shall be the duty of the Secretary to prepare and make, at least ten days
before every meeting of stockholders, a complete list of stockholders
entitled to vote at such meeting, arranged in alphabetical order and
showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open, either at a place
within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting or, if not so specified, at the
place where the meeting is to be held, for the ten days next preceding the
meeting, to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, and shall be produced and kept
at the time and place of the meeting during the whole time thereof and
subject to the inspection of any stockholder who may be present.
SECTION 7. Voting. Except as otherwise provided in the Certificate of
Incorporation or by law, each stockholder shall be entitled to one vote for
each share of the capital stock of the Corporation registered in the name
of such stockholder upon the books of the Corporation. Each stockholder
entitled to vote at meeting of stockholders or to express consent or
dissent to corporate action in writing without a meeting may authorize
another person or persons to act for him by proxy, but no such proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. When directed by the presiding officer or
upon the demand of any stockholder, the vote upon any matter before a
meeting of stockholders shall be by ballot. Except as otherwise provided by
law or by the Certificate of Incorporation, Directors shall be elected by a
plurality of the votes cast at a meeting of stockholders by the
stockholders entitled to vote in the election and, whenever any corporate
action, other than the election of Directors is to be taken, it shall be
authorized by a majority of the votes cast at a meeting of stockholders by
the stockholders entitled to vote thereon.
Shares of the capital stock of the Corporation belonging to the
Corporation or to another corporation, if a majority of the shares entitled
to vote in the election of directors of such other corporation is held,
directly or indirectly, by the Corporation, shall neither be entitled to
vote nor be counted for quorum purposes.
SECTION 8. Inspectors. When required by law or directed by the
presiding officer or upon the demand of any stockholder entitled to vote,
but not otherwise, the polls shall be opened and closed, the proxies and
ballots shall be received and taken in charge, and all questions touching
the qualification of voters, the validity of proxies and the acceptance or
rejection of votes shall be decided at any meeting of the stockholders by
two or more Inspectors who may be appointed by the Board of Directors
before the meeting, or if not so appointed, shall be appointed by the
presiding officer at the meeting. If any person so appointed fails to
appear or act, the vacancy may be filled by appointment in like manner.
SECTION 9. Consent of Stockholder in Lieu of Meeting. Any action
required or permitted to be taken by the Corporation's stockholders may not
be effected by consent in writing.
SECTION 10. Advance Notice Provisions for Election of Directors. Only
persons who are nominated in accordance with the following procedures shall
be eligible for election as directors of the Corporation. Nominations of
persons for election to the Board of Directors may be made at any annual
meeting of stockholders, or at any special meeting of stockholders called
for the purpose of electing directors, (a) by or at the direction of the
Board of Directors (or any duly authorized committee thereof) or (b) by any
stockholder of the Corporation (i) who is a stockholder of record on the
date of the giving of the notice provided for in this Section 10 and on the
record date for the determination of stockholders entitled to vote at such
meeting and (ii) who complies with the notice procedures set forth in this
Section 10.
In addition to any other applicable requirements, for a nomination to
be made by a stockholder such stockholder must have given timely notice
thereof in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of
the Corporation (a) in the case of an annual meeting, not less than sixty
(60) days nor more than ninety (90) days prior to the date of the annual
meeting; provided, however, that in the event that less than seventy (70)
days notice or prior public disclosure of the date of the annual meeting is
given or made to stockholders, notice by the stockholder in order to be
timely must be so received not later than the close of business on the
tenth (10th) day following the day on which such notice of the date of the
annual meeting was mailed or such public disclosure of the date of the
annual meeting was made, whichever first occurs; and (b) in the case of a
special meeting of stockholders called for the purpose of electing
directors, not later than the close of business on the tenth (10th) day
following the day on which notice of the date of the special meeting was
mailed or public disclosure of the date of the special meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth (a) as to each person whom the stockholder proposes to
nominate for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class or series and number of shares of
capital stock of the Corporation which are owned beneficially or of record
by the person and (iv) any other information relating to the person that
would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for
election of directors pursuant to Section 14 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder; and (b) as to the stockholder giving the notice (i)
the name and record address of such stockholder, (ii) the class or series
and number of shares of capital stock of the Corporation which are owned
beneficially or of record by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by
proxy, at the meeting to nominate the persons named in its notice and (v)
any other information relating to such stockholder that would be required
to be disclosed in a proxy statement or other filings required to be made
in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written
consent of each proposed nominee to being named as a nominee and to serve
as a director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in
this Section 10. If the Chairman of the meeting determines that a
nomination was not made in accordance with the foregoing procedures, the
Chairman shall declare to the meeting that the nomination was defective and
such defective nomination shall be disregarded.
SECTION 11. Advance Notice Provisions for Business to be Transacted at
Annual Meeting. No business may be transacted at an annual meeting of
stockholders, other than business that is either (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors (or any duly authorized committee thereof), (b)
otherwise properly brought before the annual meeting by or at the direction
of the Board of Directors (or any duly authorized committee thereof) or (c)
otherwise properly brought before the annual meeting by any stockholder of
the Corporation (i) who is a stockholder of record on the date of the
giving of the notice provided for in this Section 11 and on the record date
for the determination of stockholders entitled to vote at such annual
meeting and (ii) who complies with the notice procedures set forth in this
Section 11.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to
the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of
the Corporation not less than sixty (60) days nor more than ninety (90)
days prior to the date of the annual meeting; provided, however, that in
the event that less than seventy (70) days notice or prior public
disclosure of the date of the annual meeting is given or made to
stockholders, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the annual meeting
was mailed or such public disclosure of the date of the annual meeting was
made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth as to each matter such stockholder proposes to bring before
the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and record address of such
stockholder, (iii) the class or series and number of shares of capital
stock of the Corporation which are owned beneficially or of record by such
stockholder, (iv) a description of all arrangements or understandings
between such stockholder and any other person or persons (including their
names) in connection with the proposal of such business by such stockholder
and any material interest of such stockholder in such business and (v) a
representation that such stockholder intends to appear in person or by
proxy at the annual meeting to bring such business before the meeting.
No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 11, provided, however that, once
business has been properly brought before the annual meeting in accordance
with such procedures, nothing in this Section 11 shall be deemed to
preclude discussion by any stockholder of any such business. If the
Chairman of an annual meeting determines that business was not properly
brought before the annual meeting in accordance with the foregoing
procedures, the Chairman shall declare to the meeting that the business was
not properly brought before the meeting and such business shall not be
transacted.
SECTION 12. Order of Business. The order of business at all meetings
of the stockholders shall be determined by the Chairman of the meeting.
ARTICLE II
Board of Directors
SECTION 1. Number and Term of Office. The business and affairs of the
Corporation shall be managed by or under the direction of eight (8)
Directors, who need not be stockholders of the Corporation. The Directors
shall, except as hereinafter otherwise provided for filling vacancies, be
elected at the annual meeting of stockholders, and shall hold office until
their respective successors are elected and qualified or until their
earlier resignation or removal. The number of Directors may be altered from
time to time by amendment of these By-Laws.
SECTION 2. Removal, Vacancies and Additional Directors. The
stockholders may, at any special meeting the notice of which shall state
that it is called for that purpose, remove, with or without cause, any
Director and fill the vacancy; provided that whenever any Director shall
have been elected by the holders of any class of stock of the Corporation
voting separately as a class under the provisions of the Certificate of
Incorporation, such Director may be removed and the vacancy filled only by
the holders of that class of stock voting separately as a class. Vacancies
caused by any such removal and not filled by the stockholders at the
meeting at which such removal shall have been made, or any vacancy caused
by the death or resignation of any Director or for any other reason, and
any newly created directorship resulting from any increase in the
authorized number of Directors, may be filled by the affirmative vote of a
majority of the Directors then in office, although less than a quorum, and
any Director so elected to fill any such vacancy or newly created
directorship shall hold office until his successor is elected and qualified
or until his earlier resignation or removal.
When one or more Directors shall resign effective at a future date, a
majority of Directors then in office, including those who have so resigned,
shall have power to fill such vacancy or vacancies, the vote thereon to
take effect when such resignation or resignations shall become effective,
and each Director so chosen shall hold office as herein provided in
connection with the filling of other vacancies.
SECTION 3. Place of Meeting. The Board of Directors may hold its
meetings in such place or places in the State of Delaware or outside the
State of Delaware as the Board from time to time shall determine.
SECTION 4. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as the Board from time to
time by resolution shall determine. No notice shall be required for any
regular meeting of the Board of Directors; but a copy of every resolution
fixing or changing the time or place of regular meetings shall be mailed to
every Director at least five days before the first meeting held in
pursuance thereof.
SECTION 5. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by direction of the Chairman of the
Board, the President or by any two of the Directors then in office.
Notice of the day, hour and place of holding of each special meeting
shall be given by mailing the same at least two days before the meeting or
by causing the same to be delivered personally or transmitted by telegraph,
facsimile, telex or sent by certified, registered or overnight mail at
least one day before the meeting to each Director. Unless otherwise
indicated in the notice thereof, any and all business other than an
amendment of these By-Laws may be transacted at any special meeting, and an
amendment of these By-Laws may be acted upon if the notice of the meeting
shall have stated that the amendment of these By-Laws is one of the
purposes of the meeting. At any meeting at which every Director shall be
present, even though without any notice, any business may be transacted,
including the amendment of these By-Laws.
SECTION 6. Quorum. Subject to the provisions of Section 2 of this
Article II, a majority of the members of the Board of Directors in office
(but in no case less than one-third of the total number of Directors nor
less than two Directors) shall constitute a quorum for the transaction of
business and the vote of the majority of the Directors present at any
meeting of the Board of Directors at which a quorum is present shall be the
act of the Board of Directors, If at any meeting of the Board there is less
than a quorum present, a majority of those present may adjourn the meeting
from time to time.
SECTION 7. Organization. The Chairman of the Board or, in his absence,
the President shall preside at all meetings of the Board of Directors. In
the absence of the Chairman of the Board and the President, a Chairman
shall be elected from the Directors present. The Secretary of the
Corporation shall act as Secretary of all meetings of the Directors; but in
the absence of the Secretary, the Chairman may appoint any person to act as
Secretary of the meeting.
SECTION 8. Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees,
each committee to consist of one or more of the Directors of the
Corporation. The Board may designate one or more Directors as alternate
members of any committee, who may replace any absent or disqualified member
at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided by resolution passed by a
majority of the whole Board, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
the affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange
of all or substantially all of the Corporations property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending these By-Laws; and unless such
resolution, these By-Laws, or the Certificate of Incorporation expressly so
provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock.
SECTION 9. Conference Telephone Meetings. Unless otherwise restricted
by the Certificate of Incorporation or by these By-Laws, the members of the
Board of Directors or any committee designated by the Board, may
participate in a meeting of the Board or such committee, as the case may
be, by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each
other, and such participation shall constitute presence in person at such
meeting.
SECTION 10. Consent of Directors or Committee in Lieu of Meeting.
Unless otherwise restricted by the Certificate of Incorporation or by these
By-Laws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a
meeting if all members of the Board or committee, as the case may be,
consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the Board or committee, as the case may be.
ARTICLE III
Officers
SECTION 1. Officers. The officers of the Corporation shall be a
Chairman of the Board, a President, one or more Vice Presidents, a Chief
Financial Officer, a Secretary and a Treasurer, and such additional
officers, if any, as shall be elected by the Board of Directors pursuant to
the provisions of Section 7 of this Article III. The Chairman of the Board,
the President, one or more Vice Presidents, a Chief Financial Officer, the
Secretary and the Treasurer shall be elected by the Board of Directors at
its first meeting after each annual meeting of the stockholders. The
failure to hold such election shall not of itself terminate the term of
office of any officer. All officers shall hold office at the pleasure of
the Board of Directors. Any officer may resign at any time upon written
notice to the Corporation. Officers may, but need not, be Directors. Any
number of offices may be held by the same person.
All officers, agents and employees shall be subject to removal, with
or without cause, at any time by the Board of Directors. The removal of an
officer without cause shall be without prejudice to his contract rights, if
any. The election or appointment of an officer shall not of itself create
contract rights. All agents and employees other than officers elected by
the Board of Directors shall also be subject to removal, with or without
cause, at any time by the officers appointing them.
Any vacancy caused by the death of any officer, his resignation, his
removal, or otherwise, may be filled by the Board of Directors, and any
officer so elected shall hold office at the pleasure of the Board of
Directors.
In addition to the powers and duties of the officers of the
Corporation as set forth in these By-Laws, the officers shall have such
authority and shall perform such duties as from time to time may be
determined by the Board of Directors.
SECTION 2. Powers and Duties of the Chairman of the Board, The
Chairman of the Board shall preside at all meetings of the stockholders and
at all meetings of the Board of Directors and shall have such other powers
and perform such other duties as may from time to time be assigned to him
by these By-Laws or by the Board of Directors.
SECTION 3. Powers and Duties of the President. The President shall be
the chief executive officer of the Corporation and, subject to the control
of the Board of Directors and the Chairman of the Board, shall have general
charge and control of all its operations and shall perform all duties
incident to the office of President. In the absence of the Chairman of the
Board, he shall preside at all meetings of the stockholders and at all
meetings of the Board of Directors and shall have such other powers and
perform such other duties as may from time to time be assigned to him by
these By-Laws or by the Board of Directors or the Chairman of the Board.
SECTION 4. Powers and Duties of the Vice Presidents. Each Vice
President shall perform all duties incident to the office of Vice President
and shall have such other powers and perform such other duties as may from
time to time be assigned to him by these By-Laws or by the Board of
Directors, the Chairman of the Board or the President.
SECTION 5. Powers and Duties of the Chief Financial Officer. The Chief
Financial Officer shall be the principal financial officer of the
Corporation, and shall be in charge of, and have control over, all
financial accounting and tax matters regarding the Corporation. The Chief
Financial Officer shall have such other powers and perform such other
duties as may from time to time be assigned to him by these By-Laws or by
the Board of Directors, the Chairman of the Board or the President.
SECTION 6. Powers and Duties of the Secretary. The Secretary shall
keep the minutes of all meetings of the Board of Directors and the minutes
of all meetings of the stockholders in books provided for that purpose; he
shall attend to the giving or serving of all notices of the Corporation; he
shall have custody of the corporate seal of the Corporation and shall affix
the same to such documents and other papers as the Board of Directors, the
Chairman of the Board or the President shall authorize and direct; he shall
have charge of the stock certificate books, transfer books and stock
ledgers and such other books and papers as the Board of Directors, the
Chairman of the Board or the President shall direct, all of which shall at
reasonable times be open to the examination of any Director, upon
application, at the office of the Corporation during business hours; and he
shall perform duties incident to the office of Secretary and shall also
have such other powers and shall perform such other duties as may from time
to time be assigned to him by these By-Laws or the Board of Directors, the
Chairman of the Board or the President.
SECTION 7. Powers and Duties of the Treasurer. The Treasurer shall act
at the direction of the Chief Financial Officer. At the direction of the
Chief Financial Officer, the Treasurer shall have custody of, and when
proper shall pay out, disburse or otherwise dispose of, all funds and
securities of the Corporation which may have come into his hands; he may
endorse on behalf of the Corporation for collection checks, notes and other
obligations and shall deposit the same to the credit of the Corporation in
such bank or banks or depository or depositories as the Board of Directors
may designate; he shall enter or cause to be entered regularly in the books
of the Corporation kept for the purpose full and accurate accounts of all
moneys received or paid or otherwise disposed of by him and whenever
required by the Board of Directors, or the President or Chief Financial
Officer shall render statements of such accounts; he shall, at all
reasonable times, exhibit his books and accounts to any Director of the
Corporation upon application at the office of the Corporation during
business hours; and he shall perform all duties incident to the office of
Treasurer and shall also have such other powers and shall perform such
other duties as may from time to time be assigned to him by these By-Laws
or by the Board of Directors, the Chairman of the Board, or the President
or the Chief Financial Officer.
SECTION 8. Additional Officers. The Board of Directors may from time
to time elect such other officers (who may but need not be Directors),
including a Controller, Assistant Treasurers, Assistant Secretaries and
Assistant Controllers, as the Board may deem advisable and such officers
shall have such authority and shall perform such duties as may from time to
time be assigned to them by the Board of Directors, the Chairman of the
Board or the President.
The Board of Directors may from time to time by resolution delegate to
any Assistant Treasurer or Assistant Treasurers any of the powers or duties
herein assigned to the Treasurer; and may similarly delegate to any
Assistant Secretary or Assistant Secretaries any of the powers or duties
herein assigned to the Secretary.
SECTION 9. Giving of Bond by Officers. All officers of the
Corporation, if required to do so by the Board of Directors, shall furnish
bonds to the Corporation for the faithful performance of their duties, in
such penalties and with such conditions and security as the Board shall
require.
SECTION 10. Voting Upon Stocks. Unless otherwise ordered by the Board
of Directors, the Chairman of the Board, the President or any Vice
President shall have full power and authority on behalf of the Corporation
to attend and to act and to vote, or in the name of the Corporation to
execute proxies to vote, at any meetings of stockholders of any corporation
in which the Corporation may hold stock, and at any such meetings shall
possess and may exercise, in person or by proxy, any and all rights, powers
and privileges incident to the ownership of such stock. The Board of
Directors may from time to time, by resolution, confer like powers upon any
other person or persons.
SECTION 11. Compensation of Officers. The officers of the Corporation
shall be entitled to receive such compensation for their services as shall
from time to time be determined by the Board of Directors.
ARTICLE IV
Stock-Seal-Fiscal Year
SECTION 1. Certificates For Shares of Stock. The certificates for
shares of stock of the Corporation shall be in such form, not inconsistent
with the Certificate of Incorporation, as shall be approved by the Board of
Directors. All certificates shall be signed by the Chairman of the Board,
the President or a Vice President and by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and shall not be
valid unless so signed.
In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of
the Corporation, whether because of death, resignation or otherwise, before
such certificate or certificates shall have been delivered by the
Corporation, such certificate or certificates may nevertheless be issued
and delivered as though the person or persons who signed such certificate
or certificates had not ceased to be such officer or officers of the
Corporation.
All certificates for shares of stock shall be consecutively numbered
as the same are issued. The name of the person owning the shares
represented thereby with the number of such shares and the date of issue
thereof shall be entered on the books of the Corporation.
Except as hereinafter provided, all certificates surrendered to the
Corporation for transfer shall be canceled, and no new certificates shall
be issued until former certificates for the same number of shares have been
surrendered and canceled.
SECTION 2. Lost, Stolen or Destroyed Certificates. Whenever person
owning a certificate for shares of stock of the Corporation alleges that it
has been lost stolen or destroyed, he shall in the office of the
Corporation an affidavit setting forth, to the best of his knowledge and
belief, the time, place and circumstances of the loss, theft or
destruction, and, if required by the Board of Directors, a bond of
indemnity or other indemnification sufficient in the opinion of the Board
of Directors to indemnify the Corporation and its agents against any claim
that may be made against it or them on account of the alleged loss, theft
or destruction of any such certificate or the issuance of a new certificate
in replacement therefore. Thereupon the Corporation may cause to be issued
to such person a new certificate in replacement for the certificate alleged
to have been lost, stolen or destroyed. Upon the stub of every new
certificate so issued shall be noted the fact of such issue and the number,
date and the name of the registered owner of the lost, stolen or destroyed
certificate in lieu of which the new certificate is issued.
SECTION 3. Transfer of Shares. Shares of stock of the Corporation
shall be transferred on the books of the Corporation by the holder thereof,
in person or by his attorney duly authorized in writing, upon surrender and
cancellation of certificates for the number of shares of stock to be
transferred, except as provided in the preceding section.
SECTION 4. Regulations. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates for shares
of stock of the Corporation.
SECTION 5. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of
stock Or for the purpose of any other lawful action, as the case may be,
the Board of Directors may fix, in advance, a record date, which shall not
be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; the record
date for determining stockholders entitled to express consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is necessary, shall be the day on which the first written consent
is expressed; and the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 6. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors shall have power to declare and pay
dividends upon shares of stock of the Corporation, but only out of funds
available f6r the payment of dividends as provided by law.
Subject to the provisions of the Certificate of Incorporation, any
dividends declared upon the stock of the Corporation shall be payable on
such date or dates as the Board of Directors shall determine. If the date
fixed for the payment of any dividend shall in any year fall upon a legal
holiday, then the dividend payable on such date shall be paid on the next
day not a legal holiday.
SECTION 7. Corporate Seal. The Board of Directors shall provide a
suitable seal, containing the name of the Corporation, which seal shall be
kept in the custody of the Secretary. A duplicate of the seal may be kept
and be used by any officer of the Corporation designated by the Board of
Directors, the Chairman of the Board or the President.
SECTION 8. Fiscal Year. The fiscal year of the Corporation shall be
such fiscal year as the Board of Directors from time to time by resolution
shall determine.
ARTICLE V
Miscellaneous Provisions
SECTION 1. Checks, Notes, Etc. All checks, drafts, bills of exchange,
acceptances, notes or other obligations or orders for the payment of money
shall be signed and, if so required by the Board of Directors,
countersigned by such officers of the Corporation and/or other persons as
the Board of Directors from time to time shall designate.
Checks, drafts, bills of exchange, acceptances, notes, obligations and
orders for the payment of money made payable to the Corporation may be
endorsed for deposit to the credit of the Corporation with a duly
authorized depository by the Treasurer, or otherwise as the Board of
Directors may from time to time, by resolution, determine.
SECTION 2. Loans. No loans and no renewals of any loans shall be
contracted on behalf of the Corporation except as authorized by the Board
of Directors. When authorized so to do, any officer or agent of the
Corporation may effect loans and advances for the Corporation from any
bank, trust company or other institution or from any firm, corporation or
individual, and for such loans and advances may make, execute and deliver
promissory notes, bonds or other evidences of indebtedness of the
Corporation. When authorized so to do, any officer or agent of the
Corporation may pledge, hypothecate or transfer, as security for the
payment of any and all loans, advances, indebtedness and liabilities of the
Corporation, any and all stocks, securities and other personal property at
any time held by the Corporation, and to that end may endorse, assign and
deliver the same. Such authority may be general or confined to specific
instances.
SECTION 3. Waivers of Notice. Whenever any notice whatever is required
to be given by law, by the Certificate of Incorporation or by these By-Laws
to any person or persons, a waiver thereof in writing, signed by the person
or persons entitled to the notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
SECTION 4. Offices Outside of Delaware. Except as otherwise required
by the laws of the State of Delaware, the Corporation may have an office or
offices and keep its books, documents and papers outside of the State of
Delaware at such place or places as from time to time may be determined by
the Board of Directors, the Chairman of the Board or the President.
SECTION 5. Indemnification of Directors Officers and Employees. The
Corporation shall indemnify to the full extent authorized by law any person
made or threatened to be made a party to an action, suit or proceeding,
whether criminal, civil, administrative or investigative, by reason of the
fact that he, his testator or intestate is or was a director, officer,
employee or agent of the Corporation or is or was serving, at the request
of the Corporation, as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise.
ARTICLE VI
Amendments
These By-Laws and any amendment thereof may be altered, amended or
repealed, or new By-Laws may be adopted, by the Board of Directors at any
regular or special meeting by the affirmative vote of a majority of all of
the members of the Board, provided in the case of any special meeting at
which all of the members of the Board are not present, that the notice of
such meeting shall have stated that the amendment of these By-Laws was one
of the purposes of the meeting; but these By-Laws and any amendment
thereof, including the By-Laws adopted by the Board of Directors, may be
altered, amended or repealed and other By-Laws may be adopted by the
holders of a majority of the total outstanding stock of the Corporation
entitled to vote at any annual meeting or at any special meeting, provided,
in the case of any special meeting, that notice of such proposed
alteration, amendment, repeal or adoption is included in the notice of the
meeting.
[Adopted by the Board of Directors on February 6, 2003]