SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM 10
General Form for Registration of Securities
Pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934
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MT Investors 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 8608 Greifensee, Switzerland
(Address of principal executive offices)
41-1-944-22-11
(Registrant's telephone number, including area code)
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Securities to be registered pursuant to Section 12(b) of the Act: NONE
Securities to be registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $.01 per share
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(Title of class)
Class C Common Stock, par value $.01 per share
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(Title of class)
MT INVESTORS INC.
REGISTRATION STATEMENT ON FORM 10
INDEX
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PAGE
ITEM 1. BUSINESS.......................................................1
ITEM 2. FINANCIAL INFORMATION.........................................12
ITEM 3. PROPERTIES....................................................26
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT..................................................27
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT..................................................28
ITEM 6. EXECUTIVE COMPENSATION........................................30
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................32
ITEM 8. LEGAL PROCEEDINGS.............................................33
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...............33
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.......................34
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE
REGISTERED..................................................35
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.....................36
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................37
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.........................37
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.............................37
SIGNATURES .........................................................38
The "Company" or "Mettler-Toledo" as used herein means the
Registrant's indirectly wholly owned subsidiary Mettler-Toledo, Inc.
and its subsidiaries, after giving effect to the acquisition of the
Mettler-Toledo Group on October 15, 1996. The Registrant has no
material assets, liabilities or operations other than those that
result from its ownership of 100% of the outstanding common stock of
Mettler-Toledo Holding Inc., the parent of Mettler-Toledo, Inc.
Mettler-Toledo[R], Mettler[R], Ingold[R], Garvens[R],
Ohaus[R], and DigiTol[R] are registered trademarks of the Company and
Brickstone[TM], Spider[TM], Mentor SC[TM], MultiRange[TM] and
TRUCKMATE[TM] are trademarks of the Company.
ITEM 1. BUSINESS
GENERAL
Mettler-Toledo is the world's largest manufacturer and
marketer of weighing instruments for use in laboratory, industrial and
food retailing applications. The Company focuses on the high
value-added segments of the weighing instruments market by providing
solutions for specific applications. The Company also manufactures and
sells certain related laboratory measurement instruments, with one of
the top three market positions worldwide in titrators, thermal
analysis systems, pH meters, and lab reactors. Mettler-Toledo services
a worldwide customer base, with 1996 net sales of $849 million, which
were derived 50% in Europe, 39% in North and South America and 11% in
Asia and other markets. For additional financial information by
geographic segment, see Note 20 to the Audited Consolidated Financial
Statements included elsewhere in this Registration Statement (the
"Audited Consolidated Financial Statements"). The Company has a global
manufacturing presence, with manufacturing facilities in Europe, the
United States and Asia.
Mettler-Toledo is the only company to offer weighing
products for laboratory, industrial and food retailing applications
throughout the world. The Company believes that in 1996, the global
market for weighing instruments for laboratory, industrial and food
retailing applications was approximately $4.5 billion and that the
Company held a market share more than two times greater than its
nearest competitor. The Company believes that in 1996, it had an
approximate 40% market share of the global market for laboratory
balances, including the largest market share in each of Europe, the
United States and Asia (excluding Japan), and one of the three leading
positions in Japan. In the industrial and food retailing market, the
Company believes it has the largest market share in Europe and in the
United States. In Asia, the Company has a substantial, rapidly growing
industrial and food retailing business supported by its established
manufacturing presence in China. The Company attributes its worldwide
market leadership position to its brand recognition, its leadership in
technological innovation, its comprehensive product range, its global
sales and service organization, its large installed base of weighing
instruments and the diversity of its revenue base.
HISTORY
The Company traces its roots to the invention of the
single-pan analytical balance by Dr. Erhard Mettler and the formation
of Mettler Instrumente AG ("Mettler") in 1945. During the 1970s and
1980s, Mettler expanded from laboratory balances into industrial and
food retailing products, and it introduced the first fully electronic
precision balance in 1973. The Toledo Scale Company ("Toledo Scale")
was founded in 1901 and developed a leading market position in the
industrial weighing market in the United States. During the 1970s,
Toledo Scale expanded into the food retailing market. In 1981, Toledo
Scale set up a joint venture in Changzhou, China, which gave it early
access to the large potential Chinese weighing market. Following the
1989 acquisition of Toledo Scale by Mettler, the name of the Company
was changed to Mettler-Toledo to reflect the combined strengths of the
two companies and to capitalize on their historic reputations for
quality and innovation. During the past 15 years, the Company has
grown through other acquisitions that complemented existing geographic
markets and product lines. In 1986, Mettler acquired the Ingold Group
of companies, manufacturers of electrodes, and Garvens Kontrollwaagen
AG, a maker of dynamic checkweighers. Toledo Scale acquired Hi-Speed
Checkweigher Co., Inc. in 1981. In 1990, the Company acquired Ohaus
Corporation, a manufacturer of laboratory balances.
The Registrant was incorporated in December 1991. It was
recapitalized in connection with the October 15, 1996 acquisition (the
"Acquisition") of the Mettler-Toledo Group from Ciba-Geigy AG
("Ciba"). See Note 1 to the Audited Consolidated Financial Statements
for further information with respect to the Acquisition. The Company
is a wholly owned subsidiary of Mettler-Toledo Holding Inc.
On May 30, 1997, the Company purchased Safeline Limited, the
world's leading supplier of metal detection systems for companies who
produce and package goods in the food, pharmaceutical, cosmetics and
other industries. See Item 1, "Business - Recent Developments."
PRODUCTS
Laboratory
The Company manufactures and markets a complete range of
laboratory balances, as well as other selected laboratory measurement
instruments, such as titrators, thermal analysis systems, pH meters
and lab reactors, for laboratory applications in research and
development, quality assurance, production and education. Laboratory
products accounted for approximately 40% of the Company's net sales in
1996 (including revenues from related after-sale service). The Company
believes that it has an approximate 40% share of the global market for
laboratory balances and is among the top three worldwide producers of
titrators, thermal analysis systems, pH meters and lab reactors. The
Company believes it has the leading market share for laboratory
balances in Europe, the United States and Asia (excluding Japan) and
one of the three leading positions in Japan.
Balances. The balance is the most common piece of equipment
in the laboratory. The Company believes that it sells the highest
performance laboratory balances available on the market, with weighing
ranges up to 32 kilograms and down to one ten-millionth of a gram. The
Mettler-Toledo name is identified worldwide with accuracy, reliability
and innovation. The Company's brand name is so well recognized that
laboratory balances are often referred to as "Mettlers." This
reputation, in management's judgment, constitutes one of the Company's
principal competitive strengths.
In order to cover a wide range of customer needs and price
points, Mettler-Toledo markets precision balances, analytical and
semimicrobalances, microbalances and ultramicrobalances in three
principal product tiers offering different levels of functionality.
High-end balances provide maximum automation of calibration,
application support and additional functions. Mid-level balances
provide a more limited but still extensive set of automated features
and software applications, while basic level balances provide simple
operations and a limited feature set. The Company also manufactures
mass comparators, which are used by weights and measures regulators as
well as laboratories to ensure the accuracy of reference weights. Due
to the wide range of functions and features offered by the Company's
products, prices vary significantly. A typical mid-range precision
balance is priced at approximately $2,500 and a typical microbalance
is priced at approximately $14,000.
The Company regularly introduces new features and updated
models in its lines of balances. For example, the Company's DeltaRange
models permit weighing of light and heavy samples on the same balance
without the need for difficult adjustments, a function particularly
useful in dispensing and formula weighing. High-end balances are
equipped with fully automatic calibration technology. These balances
are carefully calibrated many times in controlled environments, with
the results of the calibrations incorporated into built-in software,
so that adjustments to ambient temperature and humidity can
automatically be made at any time. The Company also offers universal
interfaces that offer simultaneous connection of up to five peripheral
devices. The customer can then interface one balance with, for
example, a computer for further processing of weighing data, a printer
for automatically printing results and a bar-code reader for sample
identification.
In addition to Mettler-Toledo brand products, the Company
also manufactures and sells balances under the brand name "Ohaus."
Ohaus brand products include triple-beam balances, strain gauge
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 service.
Titrators. Titrators measure the chemical composition of
samples. The Company's high-end titrators are multi-tasking models,
which can perform two determinations simultaneously. They permit high
sample throughputs and have extensive expansion capability and
flexibility in calculations, functions and parameters. Lower-range
models permit common determinations to be stored in a database for
frequent use. Titrators are used heavily in the food and beverage
industry. A typical titrator is priced at approximately $12,000.
Thermal Analysis Systems. Thermal analysis systems measure
different properties, such as weight, dimension and energy flow, at
varying temperatures. The Company's thermal analysis products include
full computer integration and a significant amount of proprietary
software. Thermal analysis systems are used primarily in the plastics
and polymer industries. A typical thermal analysis system is priced at
approximately $50,000.
pH Meters. A pH meter measures acidity in a laboratory
sample and is the second most widely used measurement instrument in
the laboratory, after the balance. The Company manufactures desktop
models and portable models. Desktop models are microprocessor-based
instruments, offering a wide range of features and self-diagnostic
functions. Portable models are waterproof, ultrasonically welded and
ergonomically designed, and permit later downloading of data to a
computer or printer using an interface kit and custom software. PH
meters are used in a wide range of industries. A typical pH meter is
priced at approximately $1,200.
Lab Reactors and Reaction Calorimeters. Lab reactors and
reaction calorimeters are used to simulate an entire chemical
manufacturing process in the laboratory before proceeding to
production, in order to ensure the safety and feasibility of the
process. The Company's products are fully computer-integrated, with a
significant software component, and offer wide flexibility in the
structuring of experimental processes. Lab reactors and reaction
calorimeters are typically used in the chemical and pharmaceutical
industries. A typical lab reactor is priced at approximately $140,000.
Electrodes. The Company manufactures electrodes for use in a
variety of laboratory instruments and in-line process applications.
Laboratory electrodes are consumable goods used in pH meters and
titrators, which may be replaced many times during the life of the
instrument. In-line process electrodes are used to monitor production
processes, for example, in the beverage industry. A typical in-line
process electrode is priced at approximately $1,600.
Other Instruments. The Company sells density and
refractometry instruments, which measure chemical concentrations in
solutions. These instruments are sourced through a marketing joint
venture with a third-party manufacturer, but are sold under the
Mettler-Toledo brand name. In addition, the Company manufactures and
sells moisture analyzers, which precisely determine the moisture
content of a sample by utilizing an infrared dryer to evaporate
moisture.
Industrial and Food Retailing
Weighing is one of the most broadly used measurement
techniques in industry and food retailing. The Company's industrial
and food retailing weighing and related products include bench and
floor scales for standard industrial applications, truck and railcar
scales for heavy industrial applications, checkweighers (which
determine the weight of goods in motion), scales for use in food
retailing establishments and specialized software systems for
industrial processes. Increasingly, many of the Company's industrial
and food retailing products can integrate weighing data into process
controls and information systems. The Company's industrial and food
retailing products are also sold to original equipment manufacturers
("OEMs"), which incorporate the Company's products into larger process
solutions and comprehensive food retailing checkout systems. At the
same time, the Company's products themselves include significant
software content and additional functions including networking,
printing and labeling capabilities, and the incorporation of other
measuring technologies such as dimensioning. The Company works with
customer segments to create specific solutions to their weighing
needs. The Company has also recently worked closely with the leading
manufacturer of postal meters to develop a new generation of postal
metering systems.
Industrial and food retailing products accounted for
approximately 60% of the Company's net sales in 1996 (including
revenues from related after-sale service). The Company believes that
it has the leading position in industrial and food retailing sales in
Europe and in the United States. In Asia, the Company has a
substantial, rapidly growing industrial and food retailing business
supported by established manufacturing capabilities in China. The
Company believes that it is the only company with a true global
presence across industrial and food retailing weighing applications.
Standard Industrial Products. The Company offers a complete
line of standard industrial scales, such as bench scales and floor
scales, for weighing loads from a few grams to loads of several
thousand kilograms in applications ranging from measuring materials in
chemical production to weighing mail and packages. Product lines
include the "Spider" range of scales, often used in receiving and
shipping departments in counting applications; "TrimWeigh" scales,
which determine whether an item falls within a specified weight range,
and are used primarily in the food industry; "Mentor SC" scales, for
counting parts; and precision scales for formulating and mixing
ingredients. The Company's "MultiRange" products include standardized
software which uses the weight data obtained to calculate other
parameters, such as price or number of pieces. The modular design of
these products facilitates the integration of the Company's weighing
equipment into a computer system performing other functions, like
inventory control or batch management. Prices vary significantly with
the size and functions of the scale, generally ranging from $1,000 to
$20,000.
Heavy Industrial Products. The Company's primary heavy
industrial products are scales for weighing trucks or railcars (i.e.,
weighing bulk goods as they enter a factory or at a toll station). The
Company's truck scales, such as the "DIGITOL TRUCKMATE," generally
have digital load cells, which offer significant advantages in
serviceability over analog load cells. Heavy industrial scales are
capable of measuring weights up to 500 tons and permit accurate
weighing under extreme environmental conditions. The Company also
offers advanced computer software that can be used with its heavy
industrial scales to permit a broad range of applications. Truck sales
prices generally range from $25,000 to $50,000.
Dynamic Checkweighing. The Company offers solutions to
checkweighing requirements in the food, pharmaceutical, chemical and
cosmetic industries, where accurate filling of packages is required,
and in the transportation and package delivery industries, where
tariffs are levied based on weight. Customizable software applications
utilize the information generated by checkweighing hardware to find
production flaws, packaging and labeling errors and nonuniform
products, as well as to sort rejects and record the results.
Mettler-Toledo checkweighing equipment can accurately determine weight
in dynamic applications at speeds of up to several hundred units per
minute. Checkweighers generally range in price from $8,000 to $40,000.
Food Retailing Products. Supermarkets, hypermarkets and
other food retail establishments make use of multiple weighing
applications for the handling of perishable goods from backroom to
checkout counter. For example, perishable goods are weighed on arrival
to determine payment to suppliers and some of these goods are
repackaged, priced and labeled for sale to customers. Other goods are
kept loose and selected by customers and either weighed at the produce
or deli counter or at the check-out counter.
The Company offers stand-alone scales for basic counter
weighing and pricing, price finding, and printing. In addition, the
Company offers network scales and software, which can integrate
backroom, counter, self-service and checkout functions, and can
incorporate weighing data into a supermarket's overall perishable
goods management system. Backroom products include dynamic weighing
products, labeling and wrapping machines, perishable goods management
and data processing systems. In some countries in Europe, the Company
also sells slicing and mincing equipment. Prices for food retailing
scales generally range from $800 to $5,000, but are often sold as part
of comprehensive weighing solutions.
Systems. The Company's systems business consists of software
applications for drum filling in the food and chemical industries and
batching systems in the glass industry. The software systems control
or modify the manufacturing process.
CUSTOMERS AND DISTRIBUTION
The Company's business is geographically diversified, with
1996 net sales derived 50% in Europe, 39% in North and South America
and 11% in Asia and other markets. The Company's customer base is also
diversified by industry and by individual customer. The Company's
largest single customer accounted for no more than 2% of 1996 net
sales.
Laboratory
Principal customers for laboratory products include
chemical, pharmaceutical and cosmetics manufacturers; food and
beverage makers; the metals, electronics, plastics, transportation,
packaging, logistics and rubber industries; the jewelry and precious
metals trade; educational institutions; and government standards labs.
Balances and pH meters are the most widely used laboratory measurement
instruments and are found in virtually every laboratory across a wide
range of industries. Other products have more specialized uses.
The Company's laboratory products are sold in more than 100
countries through a worldwide distribution network. The Company's
extensive direct distribution network and its dealer support
activities enable the Company to maintain a significant degree of
control over the distribution of its products. In markets where there
are strong laboratory distributors, such as the United States, the
Company uses them as the primary marketing channel for lower- and
mid-price point products. This strategy allows the Company to leverage
the strength of both the Mettler-Toledo brand and the laboratory
distributors' market position into sales of other laboratory
measurement instruments. The Company provides its distributors with a
significant amount of technical and sales support. High-end products
are handled by the Company's own sales force. There has been recent
consolidation among distributors in the United States market. While
this consolidation could adversely affect the Company's U.S.
distribution, the Company believes its leadership position in the
market gives it a competitive advantage when dealing with its U.S.
distributors. Asian distribution is primarily through distributors,
while European distribution is primarily through direct sales.
European and Asian distributors are generally fragmented on a
country-by-country basis. The Company negotiated a transfer of the
laboratory business in Japan from its former agent to a subsidiary of
the Company effective January 1, 1997. For this transfer a total sum
of approximately SFr. 8.0 million (approximately US$6.4 million) was
partially paid in 1996 with the remaining to be paid in 1997. In
addition, the Company began to distribute laboratory products directly
in certain other Asian countries.
Ohaus brand products are generally positioned in alternative
distribution channels to those of Mettler-Toledo brand products. In
this way, the Company is able to fill a greater number of distribution
channels and increase penetration of its existing markets. Since the
acquisition of Ohaus in 1990, the Company has expanded the Ohaus brand
beyond its historical U.S. focus. Ohaus brand products are sold
exclusively through distributors.
Industrial and Food Retailing
Customers for Mettler-Toledo industrial products include
chemical companies (e.g., formulating, filling and bagging
applications), food companies (e.g., packaging and filling
applications), electronics and metal processing companies (e.g., piece
counting and logistical applications), transportation companies (e.g.,
sorting, dimensioning and vehicle weighing applications) and auto body
paint shops, which mix paint colors based on weight. The Company's
products for these industries share similar weighing technology, and
often minor modifications of existing products can make them useful
for applications in a variety of industrial processes. The Company
also sells to OEMs which integrate weighing modules into larger
process control applications, or comprehensive packaging lines. OEM
applications often include software content and technical support, as
the Company's weighing module must communicate with a wide variety of
other process modules and data management functions. The Company's
products are also purchased by engineering firms, systems integrators
and vertical application software companies.
Customers for food retailing products include supermarkets,
hypermarkets and smaller food retailing establishments. The North
American and European markets include many large supermarket chains.
In most of the Company's markets, food retailing continues to shift to
supermarkets and hypermarkets from "mom and pop" grocery stores. While
supermarkets and hypermarkets generally buy less equipment per
customer, they tend to buy more advanced products that require more
electronic and software content. In emerging markets, however, the
highest growth is in basic scales. As with industrial products, the
Company also sells food retailing products to OEMs for inclusion in
more comprehensive checkout systems. For example, the Company's
checkout scales are incorporated into scanner-scales, which can both
weigh perishable goods and also read bar codes on other items.
Scanner-scales are in turn integrated with cash registers to form a
comprehensive checkout system.
The Company's industrial products are sold in more than 100
countries and its food retailing products in 20 countries. In the
industrial and food retailing market, the Company distributes directly
to customers (including OEMs) and through distributors. In the United
States, distributor sales slightly exceed direct sales. Distributors
are highly fragmented in the U.S., with many small "scale houses"
selling the Company's products. In Europe, direct sales predominate,
with distributors used in certain cases. As in its laboratory
distribution, the Company provides significant support to its
distributors.
SALES AND SERVICE
Market Organizations
The Company has over 30 geographically-focused market
organizations ("MOs") around the world that are responsible for all
aspects of sales and service. The MOs are local marketing and service
organizations designed to maintain close relationships with the
Company's 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 the Company's
producing organizations (described below) by providing feedback on
manufacturing and product development initiatives and relaying
innovative product and application ideas.
The Company has the only global sales and service
organization among weighing instruments manufacturers. At December 31,
1996, this organization consisted of approximately 2,800 employees in
sales, marketing and customer service (including related
administration) and after-sales technical service. This field
organization has the capability to provide service and support to the
Company's customers and distributors in virtually all major markets
across the globe. Sales managers and representatives interact across
product lines and markets in order to serve customers that have a wide
range of weighing needs, such as pharmaceutical companies that
purchase both laboratory and industrial products. The Company
classifies customers according to their potential for sales and the
appropriate distribution channel is selected to service the customer
as efficiently as possible. Larger accounts tend to have dedicated
sales representatives. Other representatives are specialized by
product line. Sales representatives call directly on end-users either
alone or, in regions where sales are made through distributors,
jointly with distributors. The Company utilizes a variety of
advertising media, including trade journals, catalogs, exhibitions and
trade shows. The Company also sponsors seminars, product
demonstrations and customer training programs. An extensive database
on markets helps the Company to gauge growth opportunities, target its
message to appropriate customer groups and monitor competitive
developments.
After-Sales Service
The Company believes that it has the largest installed base
of weighing instruments in the world. To support its installed base,
the Company employs service technicians who provide contract and
repair services in all countries in which the Company's products are
sold. Service (representing service contracts, repairs and replacement
parts) accounted for approximately 17% of the Company's total net
sales in 1996. (Service revenue is included in the laboratory and
industrial and food retailing sales percentages given above.)
Management believes that service is a key part of its product offering
and helps significantly in repeat sales. The close relationships and
frequent contact with its large customer base provide the Company with
sales opportunities and innovative product and application ideas.
Moreover, a global service network is an important factor in the
ability to expand in emerging markets. Widespread adoption of quality
laboratory and manufacturing standards and the privatization of
weights and measures certification are both favorable trends for the
Company's service business, as they tend to increase demand for
on-site calibration services.
The Company's service contracts provide for repair services
within various guaranteed response times, depending on the level of
service selected. Many contracts also include periodic calibration and
testing. Contracts are generally one year in length, but may be
longer. The Company's own employees directly provide all service on
Mettler-Toledo products. If the service contract also includes
products of other manufacturers, the Company will generally perform
calibration, testing and basic repairs directly, and contract out more
significant repair work. As application software becomes more complex,
the Company's service efforts increasingly include installation and
customer training programs as well as product service.
Warranties on Mettler-Toledo products are generally one
year. Based on past experience, the Company believes its reserves for
warranty claims are adequate.
RESEARCH AND PRODUCT DEVELOPMENT; MANUFACTURING
Producing Organizations
The Company is organized into a number of producing
organizations ("POs"), which are specialized centers responsible for
product development, research and manufacturing. At December 31, 1996,
POs included approximately 3,900 employees worldwide, and consisted of
product development teams whose members are from marketing,
development, research, manufacturing, engineering and purchasing. POs
also often seek customer input to ensure that the products developed
are tailored to market needs. The Company has organized POs in order
to reduce product development time, improve its customer focus, reduce
costs and maintain technological leadership. The POs work together to
share ideas and best practices. Some employees are in both MOs and
POs. The Company is currently implementing a number of projects that
it believes will result in increased productivity and lower costs. For
example, the Company is restructuring the order and product delivery
process in Europe to enable the Company to deliver many of its
products to its customers directly from the manufacturing facility
within several days, which minimizes the need to store products in
decentralized warehouses. In addition, the Company is centralizing its
European spare parts inventory management system.
Research and Product Development
The Company closely integrates research and development with
marketing, manufacturing and product engineering. The Company has
nearly 600 professionals in research and development and product
engineering. The Company's principal product development activities
involve applications improvements to provide enhanced customer
solutions, systems integration and product cost reduction. However,
the Company also actively conducts research in basic weighing
technologies. As part of its research and development activities, the
Company has frequent contact with university experts, industry
professionals and the governmental agencies responsible for weights
and measures. In addition, the Company's in-house development is
complemented by technology and product development alliances with
customers and OEMs.
A recent example of innovation at the Company is the
"Brickstone" technology, which eliminates many of the complex
mechanical linkages in a weighing sensor and reduces the number of
parts in the sensor from approximately 100 to approximately 50. The
Brickstone sensor permits more accurate weighing, lower manufacturing
costs and cheaper and faster design changes. Brickstone technology has
been incorporated into certain of the Company's products, and the
Company expects to expand its use to additional product lines in the
future.
The Company has been spending an increasing proportion of
its research and development budget on software development. Software
development for weighing applications includes application-specific
software, as well as software utilized in sensor mechanisms, displays,
and other common components, which can be leveraged across the
Company's broad product lines.
The Company spent $50.0 million on research and development
in 1996 (excluding research and development purchased in connection
with the Acquisition), $54.5 million in 1995 and $48.0 million in
1994, which the Company believes was more than any of its competitors.
Including costs associated with customer-specific engineering
projects, which are included in cost of sales for financial reporting
purposes, the Company spent approximately 6.6% of net sales on
research and development in 1996.
Manufacturing
The Company's manufacturing strategy is to produce directly
those components that require its specific technical competence, or
for which dependable, high-quality suppliers cannot be found. The
Company contracts out the manufacture of its other component
requirements. Consequently, much of the Company's manufacturing
capability consists of assembly of components sourced from others. The
Company utilizes a wide range of suppliers and it believes its supply
arrangements to be adequate. From time to time the Company relies on
one supplier for all of its requirements of a particular component,
but in such cases the Company believes adequate alternative sources
would be available if necessary. Supply arrangements for electronics
are generally made globally. For mechanical components, the Company
generally uses local sources to optimize materials flow.
The Company's manufacturing operations emphasize product
quality. Most of its products require very strict tolerances and exact
specifications. The Company utilizes an extensive quality control
system that is integrated into each step of the manufacturing process.
This integration permits field service technicians to trace important
information about the manufacture of a particular unit, which
facilitates repair efforts and permits fine-tuning of the
manufacturing process. Many of the Company's measuring instruments are
subjected to an extensive calibration process that allows the software
in the unit to automatically adjust for the impact of temperature and
humidity.
The Company has six manufacturing plants in the U.S. (after
giving effect to the closure of the Westerville, Ohio facility in
1996), four in Switzerland, two in Germany and two in China, of which
one is a 60% owned joint venture and the other, the Shanghai facility,
was completed and began to produce laboratory products by the end of
1996. Laboratory products are produced mainly in Switzerland and to a
lesser extent in the United States, while industrial and food
retailing products are produced in all four countries. The Company
believes its manufacturing capacity is sufficient to meet its present
and currently anticipated needs.
Backlog
Manufacturing turnaround time is generally sufficiently
short so as to permit the Company to manufacture to fill orders for
most of its products, which helps to limit inventory costs. Backlog is
therefore generally a function of requested customer delivery dates
and is typically no longer than one to two months.
EMPLOYEES
As of December 31, 1996, the Company had approximately 6,400
employees throughout the world, including more than 3,200 in Europe
and more than 2,400 in North and South America. Management believes
that its relations with employees are good. The Company has not
suffered any material employee work stoppage or strike in its
worldwide operations during the last five years. Labor unions do not
represent a meaningful number of the Company's employees
In certain of its facilities, the Company has instituted a
flexible workforce environment, in which hours vary depending on the
quantity of workload. The Company believes that this flexible working
environment enhances employees' involvement, thus increasing
productivity, and improves efficient payroll management by permitting
the Company to adjust staffing to match workload to a greater degree
without changing the size of the overall workforce.
INTELLECTUAL PROPERTY
The Company holds more than 1,150 patents and trademarks,
primarily in the United States, Switzerland, Germany and Japan and, to
a lesser extent, in China. The Company's products generally
incorporate a wide variety of technological innovations, many of which
are protected by patents and many of which are not. Moreover, products
are generally not protected as a whole by individual patents.
Accordingly, no one patent or group of related patents is material to
the Company's business. The Company also has numerous trademarks and
considers the Mettler-Toledo name and logo to be material to its
business. The Company regularly protects against infringement of its
intellectual property.
REGULATION
The Company's products are subject to regulatory standards
and approvals by weights and measures regulatory authorities in the
countries in which it sells its products. Weights and measures
regulation has been harmonized across the European Union. The
Company's food processing and food retailing products are subject to
regulation and approvals by relevant governmental agencies, such as
the United States Food and Drug Administration. Products used in
hazardous environments may also be subject to special requirements.
All of the Company's electrical components are subject to electrical
safety standards. The Company believes that it is in compliance in all
material respects with applicable regulations.
ENVIRONMENTAL MATTERS
The Company is subject to various environmental laws and
regulations in the jurisdictions in which it operates, 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. The Company wholly or partly owns, leases or holds a
direct or indirect equity interest in a number of properties and
manufacturing facilities around the world, including the United
States, Europe, Canada, Mexico, Brazil, Australia and China. The
Company, like many of its competitors, has 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.
The Company is currently involved in, or has potential
liability with respect to, the remediation of past contamination in
certain of its presently and formerly owned and leased facilities in
both the United States and abroad. In addition, certain of the
Company's 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 the Company has sent
wastes, may in the future be identified and become the subject of
remediation. Accordingly, although the Company believes that it is in
substantial compliance with applicable environmental requirements and
the Company to date has not incurred material expenditures in
connection with environmental matters, it is possible that the Company
could become subject to additional environmental liabilities in the
future that could result in a material adverse effect on the Company's
financial condition or results of operations.
The Company is involved in litigation concerning remediation
of hazardous substances at its operating facility in Landing, New
Jersey. On or about July 1988, an affiliate of Ciba ("AGP") purchased
100% of the outstanding stock of Metramatic Corporation
("Metramatic"), a manufacturer of checkweighing equipment located in
Landing, from GEI International Corporation ("GEI"). GEI agreed to
indemnify and hold harmless AGP for certain pre-closing environmental
conditions, including those resulting in cleanup responsibilities
required by the New Jersey Department of Environmental Protection
("NJDEP") pursuant to the New Jersey Environmental Cleanup
Responsibility Act ("ECRA"). ECRA is now the Industrial Site Recovery
Act. Pursuant to a 1988 NJDEP administrative consent order naming GEI
and Metramatic as respondents, GEI has spent approximately $2 million
in the performance of certain investigatory and remedial work
addressing groundwater contamination at the site. However, a final
remedy has not yet been selected by NJDEP, and, therefore, future
remedial costs are currently unknown. In 1992, GEI filed a suit
against various parties including Hi-Speed Checkweigher Co., Inc., a
wholly-owned subsidiary of the Company that currently owns the
facility, to recover certain costs incurred by GEI in connection with
the site. Based on currently available information and the Company's
rights of indemnification from GEI, the Company believes that its
ultimate allocation of costs associated with the past and future
investigation and remediation of this site will not have a material
adverse effect on the Company's financial condition or results of
operations.
In addition, the Company is aware that Toledo Scale, the
former owner of Toledo Scale or the Company has been named a
potentially responsible party under CERCLA or analogous state statutes
at the following third-party owned sites with respect to the alleged
disposal at the sites by Toledo Scale during the period it was owned
by such former owner: Granville Solvents Site, Granville, Ohio;
Aqua-Tech Environmental, Inc. Site, Greer, South Carolina; and
Seaboard Chemical Company Site, Jamestown, North Carolina. The former
owner has also been named in a lawsuit seeking contribution pursuant
to CERCLA with respect to the Caldwell Trucking Site, New Jersey based
on the alleged disposal at the site by Toledo Scale during the former
owner's period of ownership. Pursuant to the terms of the stock
purchase agreement between Mettler and the former owner of Toledo
Scale, the former owner is obligated to indemnify Mettler for various
environmental liabilities. To date, with respect to each of the
foregoing sites, the former owner has undertaken the defense and
indemnification of Toledo Scale. Based on currently available
information and the Company's contractual rights of indemnification,
the Company believes that the costs associated with the investigation
and remediation of these sites will not have a material adverse effect
on the Company's financial condition or results of operations.
COMPETITION
The markets in which the Company operates are highly
competitive. Because of the fragmentation of weighing instruments
markets, particularly the industrial and food retailing market, both
geographically and by application, the Company competes with numerous
regional or specialized competitors, many of which are
well-established in their markets. Some competitors are less leveraged
than the Company and/or are divisions of larger companies with
potentially greater financial and other resources than the Company.
Although the Company believes that it has certain competitive
advantages over its competitors, realizing and maintaining these
advantages will require continued investment by the Company in
research and development, sales and marketing and customer service and
support. The Company has, from time to time, experienced price
pressures from competitors in certain product lines and geographic
markets.
In the United States, the Company believes that the
principal competitive factors on which purchasing decisions are made
are accuracy and durability, while in Europe accuracy and service are
the most important factors. In emerging markets, where there is
greater demand for less sophisticated products, price is a more
important factor than in developed markets. Competition in the United
States laboratory market is also influenced by the presence of large
distributors through which the Company and its competitors sell many
of their products.
RECENT DEVELOPMENTS
On May 30, 1997, the Company purchased (the "Safeline
Acquisition") the entire issued share capital of Safeline Limited
("Safeline"). The purchase price (the "Purchase Price") for the
Safeline Acquisition, subject to future adjustment, was GBP 61 million
(approximately US $100 million), plus up to an additional GBP 6
million for a contingent earn-out payment. The Safeline Acquisition
was effected pursuant to the terms of a Share Sale and Purchase
Agreement (the "Purchase Agreement"), dated May 30, 1997, among the
Company's subsidiaries Safeline Holding Company and Mettler-Toledo
Inc. (a Canadian corporation), as purchasers, and Safeline Limited and
each of the sellers named therein as sellers. The terms of the
Safeline Acquisition were based upon arms' length negotiations of the
parties.
Safeline, based in Manchester, U.K., is the world's leading
supplier of metal detection systems for companies who produce and
package goods in the food, pharmaceutical, cosmetics, chemicals and
other industries. Safeline will report sales of GBP 28.6 million (US
$46.4 million) and operating profits (before non-recurring costs) of
GBP 6.7 million (US $11 million), for its fiscal year ended March 31,
1997 in accordance with UK GAAP, and such amounts are substantially
the same as those that would be obtained using US GAAP.
The source of funds for the Purchase Price was provided by GBP
13.7 million in loan notes to be retained by the sellers with the
remaining amounts provided by amounts loaned under the Amended and Restated
Credit Agreement described below.
On May 29, 1997, the Company entered into an Amended and
Restated Credit Agreement. The Company's prior credit agreement (the
"Credit Agreement") provided for term loan borrowings in an aggregate
principal amount of approximately US $147.0 million and SFr 125.0
million, that were scheduled to mature in 2002, 2003 and 2004 and a
multi-currency revolving credit facility with availability of US
$140.0 million. The revolving credit facility was scheduled to mature
under the Credit Agreement in 2002.
The Amended and Restated Credit Agreement provides for term
loan borrowings in an aggregate principal amount of approximately US
$133.8 million, SFr 171.5 million and GBP 26.7 million that are
scheduled to mature in 2002 and 2004, a Canadian revolver with
availability of CDN $26.3 million (approximately CDN $21 million of
which has been drawn) which is scheduled to mature in 2002, and a
multi-currency revolving credit facility with availability of US
$151.0 million (approximately US $25 million of which has been drawn).
The revolving credit facility is scheduled to mature in 2002. The
interest rate margin on all loans have been reduced by 75 basis points
under the Amended and Restated Credit Agreement.
ITEM 2. FINANCIAL INFORMATION
The selected historical financial information set forth
below at December 31, 1994, 1995, 1996, for the years ended December
31, 1993, 1994, 1995, and for the period from January 1, 1996 to
October 14, 1996, and for the period from October 15, 1996 to December
31, 1996 is derived from the Registrant's financial statements, which
were audited by KPMG Fides Peat, independent auditors. The financial
information for all periods prior to October 15, 1996, the date of the
Acquisition, is combined financial information of the Mettler-Toledo
Group, the Predecessor Business. The summary historical financial
information at March 31, 1997 and for the three months ended March 31,
1996 and 1997 is derived from the unaudited interim consolidated
financial statements of the Predecessor Business and of the
Registrant, which, in the opinion of management, include all
adjustments necessary for a fair presentation of the results for the
unaudited periods. Operating results for the three months ended March
31, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997. The combined historical
data of the Mettler-Toledo Group and the consolidated historical data
of the Registrant are not comparable in many respects due to the
Acquisition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations", below and the consolidated
financial statements and accompanying notes. The financial information
presented below was prepared in accordance with U.S. generally
accepted accounting principles.
<TABLE>
<CAPTION>
Predecessor MT
Predecessor Business MT Investors Inc. Business Investors Inc.
----------------------------------------- ----------------- ----------- --------------
For The Years Ended December 31, October 15 to For the three months
ended March 31,
January 1 to October 15 to Pro Forma
October 14, December 31, 1996
1993 1994 1995 1996 1996 (1)(3)(4) 1996 1997
---- ---- ---- ---- ---- --------- ---- ----
(Dollars in thousands, except per share data)
STATEMENT OF OPERATIONS DATA (2):
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ................... $728,958 $769,136 $850,415 $662,221 $ 186,912 $ 849,133 $201,373 $197,402
Cost of sales (3) ........... 443,534 461,629 508,089 395,239 136,820 499,865 120,979 114,120
Gross profit ................ 285,424 307,507 342,326 266,982 50,092 349,268 80,394 83,282
Research and development
expenses .................... 46,438 47,994 54,542 40,244 9,805 50,049 12,452 10,832
Selling, general and
administrative expenses...... 209,692 224,978 248,327 186,898 59,353 248,337 61,479 60,193
Amortization ................ 2,917 6,437 2,765 2,151 1,065 4,687 671 1,157
Purchased research and
development (4) ............. -- -- -- -- 114,070 -- -- --
Other charges (income),
net (5) .................... 18,284 (2,852) (701) 1,872 9,892 11,764 -- 11
--------- -------- -------- -------- ---------- ---------- -------- ---------
Earnings (loss) before
interest and taxes........... 8,093 30,950 37,393 35,817 (144,093) 34,431 5,792 11,089
Interest expense ............ 15,239 13,307 18,219 13,868 8,738 38,715 4,537 9,446
Financial expense (income), net (4,174) (4,864) (8,630) (3,204) 7,245 2,272 (396) 3,743
Provision for taxes ......... 3,041 8,676 8,782 10,055 (938) (738) 648 (1,087)
Minority interest ........... 1,140 347 768 637 (92) 545 74 109
--------- -------- -------- -------- ---------- ---------- -------- ---------
Net earnings (loss) ......... $ (7,153) $ 13,484 $ 18,254 $ 14,461 $(159,046) $ (6,363) $ 929 $ (1,122)
========= ======== ======== ======== ========== ========== ======== =========
Loss per common share (6):
Weighted average number
of common shares .. 2,395,993 2,438,514 2,438,514
Loss per common share . (66.38) $(2.61) $(0.46)
BALANCE SHEET DATA (2)
(at end of period):
Cash and cash equivalents .... $ 63,802 $ 41,402 $ 60,696 $ 60,696 $ 40,599
Net working capital ......... 126,065 90,740 83,947 83,947 83,947
Total assets ................ 683,198 724,094 771,888 771,888 728,891
Long-term third party debt .. 862 3,621 373,758 373,758 365,369
Net borrowing from Ciba and
affiliates (7) .............. 177,651 203,157
Other long-term liabilities (8) 83,964 84,303 96,810 96,810 92,177
Shareholder's equity (9) .... 228,194 193,254 12,426 12,426 2,982
OTHER DATA:
Depreciation and
amortization expense......... $ 29,591 $ 34,118 $ 33,363 $ 21,663 $ 8,990 $ 32,124 $ 7,230 6,978
Capital expenditures ........ 25,122 24,916 25,858 16,649 11,928 28,577 4,099 3,063
(1) Represents the unaudited pro forma statement of operations of the
Company for fiscal year 1996, assuming the Acquisition occurred on
January 1, 1996. Such pro forma statement of operations reflects (i)
the adjustment to fair value of the Company's assets and liabilities
which, on a pro forma basis would have resulted in increased
amortization of approximately $1.5 million for 1996, (ii) the
incurrence of additional debt in connection with the Acquisition which
would have resulted in a net increase in interest expense, including
amortization of debt and issuance costs and other fees of $16.1
million for 1996, (iii) the incurrence of approximately $2.3 million
annually in additional selling, general and administrative expenses as
a result of being an independent company, (iv) a decrease in the
Company's provision for income taxes of $9.9 million in 1996, and(v)
other charges of $11.8 million representing principally severance
costs for the general headcount reduction in Europe and North America,
the closure of the Company's Westerville, Ohio manufacturing facility,
and the realignment of the analytical and precision balance business
in Switzerland. The pro forma statement of operations does not reflect
the acquisition of Safeline on May 30, 1997. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Effect of Acquisition on Results of Operations."
(2) Balance sheet information at December 31, 1992 and 1993 is not
available. Income statement information for the year ended December
31, 1992 is not available, except that net sales were $769,000.
(3) In connection with the Acquisition, the Company allocated
approximately $32,200 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 period October 15, 1996 to December 31, 1996. The
charge associated with this item has been excluded from the pro forma
financial information.
(4) In conjunction with the Acquisition, the Company allocated, based
upon independent valuations, $114,070 of the purchase price to
purchased research and development in process. Such amount was
recorded as an expense in the period from October 15, 1996 to December
31, 1996. The charge associated with this item has been excluded from
the pro forma financial information.
(5) For 1993, consists primarily of costs associated with the closure
of a manufacturing facility in Cologne, Germany, and also includes the
restructuring of certain manufacturing operations and an early
retirement program in the United States. Other income for 1993, 1994
and 1995 relates primarily to gains from the sale of real property
and, in 1994, to a gain on the sale of an investment. Other charges
for the period January 1, 1996 to October 14, 1996 of $1,872 represent
employee severance of $1,545 and other exit costs of $327 associated
with the closing of its Westerville, Ohio facility. Other charges for
the period October 15, 1996 to December 31, 1996 principally represent
employee severance benefits associated with (i) the Company's general
headcount reduction programs, in Europe and North America, of $4,557
which were announced during such period, and (ii) the realignment of
the analytical and precision balance business in Switzerland of $6,205
which was internally announced in December, 1996. In connection with
such programs the Company reduced its workforce by 168 employees in
1996 and intends to further reduce its workforce by approximately 70
employees. See Note 17 to the Audited Consolidated Financial
Statements.
(6) Earnings per common share for MT Investors Inc. has been computed
using the weighted average number of outstanding common shares.
Earnings per common share for the 1996 pro forma statement of
operations has been computed assuming the common shares issued in the
Acquisition were outstanding at January 1, 1996.
(7) Includes notes payable and long-term debt payable to Ciba and
affiliates less amounts due from Ciba and affiliates. See Notes 3 and
11 to the Audited Consolidated Financial Statements.
(8) Consists primarily of obligations under various pension plans and
plans that provide post-retirement medical benefits. See Note 15 to
the Audited Consolidated Financial Statements.
(9) Shareholder's equity for the Predecessor Business consists of the
combined net assets of the Mettler-Toledo Group.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the Company's
financial condition and results of operations should be read in
conjunction with the Audited Consolidated Financial Statements and the
Unaudited Interim Audited Consolidated Financial Statements. The
Registrant has no material assets, liabilities or operations other
than those that result from its ownership of 100% of the outstanding
common stock of Mettler-Toledo Holding Inc., the parent of
Mettler-Toledo, Inc. Therefore, the analysis set forth is of the
Company.
GENERAL
The financial statements for periods ended prior to October
15, 1996 reflect the combined operations of the Mettler-Toledo Group,
while the financial statements for periods after October 15, 1996
reflect the consolidated operations of the Company after accounting
for the Acquisition using the purchase method of accounting. See Note
1 to the Audited Consolidated Financial Statements. Operating results
subsequent to the Acquisition are not comparable in many respects to
the operating results prior to the Acquisition. See "Effect of
Acquisition on Results of Operations." Financial information is
presented in accordance with U.S. generally accepted accounting
principles.
In 1996, the Company undertook several efforts to increase
productivity and lower costs. In July 1996, the Company announced the
closure of its Westerville, Ohio facility. In the fourth quarter of
1996, the Company recorded charges for a general headcount reduction
program in Europe and North America and the realignment of the
analytical and precision balance business in Switzerland. In
connection with such programs, the Company reduced its workforce by
168 employees in 1996 and intends to further reduce its workforce by
approximately 70 employees. The Company recorded costs of $11.8
million in 1996, primarily relating to severance, in connection with
these efforts.
On May 30, 1997, the Company purchased Safeline for GBP 61
million (approximately US $100 million), subject to future adjustment,
plus up to an additional GBP 6 million for a contingent earn-out
payment. The source of funds for the Safeline Acquisition was provided
by GBP 13.7 million in loan notes to be retained by the Sellers with
the remaining amounts provided by amounts loaned under the Amended and
Restated Credit Agreement. Safeline reported sales of GBP 28.6 million
(US $46.4 million) and operating profits (before non-recurring costs)
of GBP 6.7 million (US $11 million), for its fiscal year ended March
31, 1997 in accordance with UK GAAP, and management believes such
amounts are substantially the same as those that would be obtained
using US GAAP.
RESULTS OF OPERATIONS
The following table sets forth certain items in the
statements of operations as a percentage of net sales for the years
1994, 1995 for the period from January 1, 1996 to October 14, 1996,
for the period from October 15, 1996 to December 31, 1996, pro forma
for the year 1996 and for the three months ended March 31, 1996 and
1997.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
---------------------------------------------------------------------------------------
Predecessor Predecessor Predecessor Successor
For the years ended Predecessor Successor For the three months ended
December 31, For the period For the period ended March 31,
January 1, 1996 October 15, 1996 Pro Forma
1994 1995 to October 14, to December 31, 1996 (1) 1996 1997
1996 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ............................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales ........................... 60.0 59.7 59.7 73.2 58.9 60.1 57.8
------ ----- ----- ------- ----- ------ ------
Gross profit ............................ 40.0 40.3 40.3 26.8 41.1 39.9 42.2
Research and development
expenses (2) ........................ 6.3 6.4 6.1 5.2 5.9 6.2 5.5
Selling, general and administrative
expenses ............................ 29.3 29.3 28.2 31.8 29.2 30.5 30.5
Amortization ............................ 0.8 0.3 0.3 .6 .6 .3 .6
Purchased research and development ...... _ _ _ 61.0 _ _ _
Other charges (income), net ............. (0.4) (0.1) 0.3 5.3 1.4 - -
------ ----- ----- ------- ----- ------ ------
Earnings (loss) before interest and taxes 4.0% 4.4% 5.4% (77.1%) 4.1% 2.9% 5.6%
====== ===== ===== ======= ===== ====== ======
(1) Represents the unaudited pro forma statement of operations of the
Company for fiscal year 1996, assuming the Acquisition occurred on
January 1, 1996.
(2) Total research and development expenses were 7.2% in 1994, 7.3% in
1995 and 6.6% in 1996, including costs associated with
customer-specific engineering projects, which are included in cost of
sales for financial reporting purposes.
</TABLE>
Three Months Ended March 31, 1997 Compared to Three Months Ended
March 31, 1996
Net sales were $197.4 million for the three months ended
March 31, 1997, compared to $201.4 million for the corresponding
period in the prior year, a decrease of 2.0%. Net sales during the
three month period in local currencies increased by approximately 4%
but were offset by a strengthening of the U.S. dollar relative to the
local currencies of the Company's operations.
Net sales during the three month period in Europe in local
currencies decreased 1% principally as a result of weak European
economies adversely affecting sales to industrial and food retailing
customers. Net sales during the three month period in the Americas in
local currencies increased 5% principally due to improved market
conditions for sales to industrial and food retailing customers. Net
sales in the three month period in Asia and other markets in local
currencies increased 19%, primarily as a result of the establishment
of additional direct marketing and distribution in the region.
Gross profit as a percentage of net sales increased to 42.2%
for the three months ended March 31, 1997, compared to 39.9% for the
corresponding period in the prior year. These results reflect the
benefits of reduced product costs arising from the Company's research
and development efforts, ongoing productivity improvements, and the
depreciation of the Swiss franc against the Company's other principal
trading currencies. See "Effect of Currency on Results of Operations."
Selling, general and administrative expenses as a percentage
of net sales were 30.5% for the three months ended March 31, 1997 and
1996. Research and development expenses as a percentage of net sales
decreased to 5.5% for the three months ended March 31, 1997, compared
to 6.2% for the corresponding period in the prior year; however, the
local currency spending level remained relatively constant period to
period.
Earnings before interest and taxes was $11.1 million for the
three months ended March 31, 1997, compared to $5.8 million for the
corresponding period in the prior year. Interest expense increased to
$9.4 million for the three months ended March 31, 1997, compared to
$4.5 million for the corresponding period in the prior year. The
increase was principally due to additional Acquisition related debt.
Net financial expense of $3.7 million for the three months ended March
31, 1997 compared to net financial income of $0.4 million for the
corresponding period in the prior year as a result of lower interest
income and an increase in foreign currency losses.
The net loss of $1.1 million for the three months ended
March 31, 1997, compared to net earnings of $0.9 million for the
corresponding period in the prior year.
For The Period From January 1, 1996 To October 14, 1996, The
Period From October 15, 1996 to December 31, 1996 And Pro Forma
1996 Compared To Year Ended December 31, 1995
Net sales for the period from January 1, 1996 to October 14,
1996 and for the period from October 15, 1996 to December 31, 1996
were $662.2 million and $186.9 million, respectively. Pro forma 1996
net sales were virtually unchanged at $849.1 million compared to
actual net sales of $850.4 million in 1995. Net sales in local
currency increased 2.6%, excluding the impact of the reduction of the
systems business, but were offset by a strengthening of the U.S.
dollar, the Company's reporting currency, relative to the local
currencies of the Company's operations. The flat sales (pro forma) in
1996 compared to actual 1995 resulted from slightly lower sales from
products in the industrial and food retailing markets, offset by
strong performance by the product lines in the laboratory market. The
growth in the laboratory market was across substantially all product
lines and geographical regions as sales in local currency increased 7%
compared to the previous year. In particular, new product
introductions in titration, thermal and reaction calorimetry as well
as new Ohaus products for the education, laboratory and light
industrial market helped to increase laboratory market sales. The
slight decline in industrial and food retailing sales resulted from
overall weakness in the European market while the Company has been
able to retain its market share. This market weakness has persisted in
early 1997.
Net sales (pro forma) in Europe in local currency decreased
2% in 1996 compared to actual 1995 due to a weaker second half of the
year in 1996 in all major markets, and especially in key countries
such as Germany, France and the United Kingdom. Net sales (pro forma)
in the Americas in local currency increased by 5% over actual 1995 due
to growth in the United States and Latin America and double digit
expansion in laboratory measurement instruments other than balances
and in related service. Net sales (pro forma) in Asia and other
markets in local currency increased by 8% over actual 1995, primarily
as a result of significantly increased sales in the Shanghai operation
and strong sales in Japan and Australia.
Gross profit for the period from January 1, 1996 to October
14, 1996 and for the period from October 15, 1996 to December 31, 1996
was $267.0 million and $50.1 million, respectively. Pro forma gross
profit as a percentage of sales increased to 41.1% in 1996 from 40.3%
in actual 1995. The increased gross profit margin resulted principally
from operational improvements and the depreciation of the Swiss franc
against the Company's other principal trading currencies. See "Effect
of Currency on Results of Operations."
Selling, general and administrative expenses and research
and development expenses for the period from January 1, 1996 to
October 14, 1996 and for the period from October 15, 1996 to December
31, 1996 were $227.1 million and $69.2 million, respectively. Pro
forma selling, general and administrative expenses and research and
development expenses as a percentage of net sales decreased to an
aggregate of 35.1% in 1996 from 35.7% in actual 1995. The cost
decreases resulted primarily from the currency effect of the
depreciation of the Swiss franc against the Company's other major
trading currencies and the Company's cost control efforts which were
partially offset by additional selling, general and administrative
expenses the Company estimates it will incur as a result of being an
independent company which more than offset the $4.8 million of
non-recurring legal and advisory fees associated with the Acquisition.
See "Effect of Acquisition on Results of Operations."
In connection with the Acquisition, the Company allocated,
based upon independent valuations, $114.1 million of the purchase
price to purchased research and development in process. Such amount
was expensed immediately following the Acquisition.
Other charges for the period January 1, 1996 to October 14,
1996 of $1.9 million represent employee severance of $1.5 million and
other exit costs of $.3 million associated with the closing of its
Westerville, Ohio facility. Other charges for the period October 15,
1996 to December 31, 1996 principally represent employee severance
benefits associated with (i) the Company's general headcount reduction
programs, in Europe and North America, of $4.6 million which were
announced during such period, and (ii) the realignment of the
analytical and precision balance business in Switzerland of $6.2
million which was internally announced in December, 1996. In
connection with such programs the Company reduced its workforce by 168
employees in 1996 and intends to further reduce its workforce by
approximately 70 employees in 1997. The Company anticipates that as a
result of the foregoing that it will achieve cost savings in the range
of $8.3 million.
Earnings before interest and taxes for the period from
January 1, 1996 to October 14, 1996 was $35.8 million. Loss before
interest taxes and for the period from October 15, 1996 to December
31, 1996 was $144.1 million. This loss includes an expense of $114.1
million for the allocation of purchase price to in-process research
and development projects, a charge of $32.2 million for the
revaluation of inventories to fair value and $9.9 million of other
charges (an additional $1.9 million of other charges was incurred by
the Predecessor Business in 1996). Pro forma earnings before interest
and taxes would have been $34.4 million in 1996 compared to earnings
before interest and taxes of $37.4 million in actual 1995. Earnings
before amortization, interest and taxes, adjusted for non-recurring
items including the charge for in process Research and Development
($114.1 million), revaluation of inventories to fair value ($32.2
million), other charges ($11.8 million) and non-recurring legal and
advisory fees ($4.8 million) would have been $57.8 million.
Interest expense for the period from January 1, 1996 to
October 14, 1996 and for the period from October 15, 1996 to December
31, 1996 was $13.9 million and $8.7 million, respectively. Pro forma
interest expense increased to $38.7 million in 1996 from $18.2 million
in actual 1995, principally due to a higher debt level as a result of
the Acquisition. Interest expense since the Acquisition is materially
different. See "Effect of Acquisition on Results of Operations" and
"Liquidity and Capital Resources." Financial expense (income) for the
period from January 1, 1996 to October 14, 1996 and for the period
from October 15, 1996 to December 31, 1996 was $(3.2) million and $7.2
million, respectively. Pro forma financial expense (income), net
decreased to an expense of $4.0 million in 1996 from income of $2.3
million in actual 1995. The reduction resulted principally from losses
on foreign currency transactions due to the appreciation of the
dollar.
Net earnings for the period from January 1, 1996 to October
14, 1996 were $14.5 million. The net loss for the period from October
15, 1996 to December 31, 1996 was and $159.0 million. Pro forma net
loss of $6.4 million in 1996 compared to net earnings of $18.3 million
in actual 1995.
Year Ended December 31, 1995 Compared To Year Ended December 31, 1994
Net sales were $850.4 million in 1995 compared to $769.1
million in 1994, an increase of 11%. Net sales in local currency
increased 5%; the remaining 6% of the increase resulted from changes
in currency exchange rates. In 1994 the Company discontinued certain
items in its systems and laboratory measurement instruments product
lines. Excluding the effect of these discontinued items, net sales in
local currency would have increased 6%. Sales growth in local currency
reflected steady growth across all major product lines in laboratory,
industrial and food retailing markets as result of favorable economic
conditions and market share gains in selected geographic markets.
Sales were helped by the expansion of the Company's line of titrators
and the introduction of a family of standard industrial programmable
terminals for weighing instruments.
Net sales in Europe in local currency increased 7% in 1995
over 1994, consistent with the continuing recovery from the 1993
recession and market share gains in selected regions and product
lines. Southern Europe contributed significantly to the increase. Net
sales in the Americas in local currency decreased 1% in 1995 from
1994. Results in the Americas reflect reduced demand in the United
States for laboratory instruments in the wake of consolidation in the
pharmaceutical and chemical industries and unusually high demand for
retail equipment in 1994 as a result of a new labeling law that caused
food retailers to buy additional retail weighing and labeling
equipment. Net sales in Asia and other markets in local currency
increased 20% in 1995 over 1994, primarily as a result of continued
economic growth and the Company's increased market share in selected
markets. Sales were also helped by the recovery in China from the poor
market conditions of 1994.
Gross profit as a percentage of net sales increased slightly
to 40.3% in 1995 from 40.0% in 1994. These results were achieved
despite the appreciation of the Swiss franc against the Company's
other principal trading currencies, which has the effect of increasing
overall manufacturing costs due to the Company's significant
manufacturing operations in Switzerland. Improved manufacturing
productivity contributed to the increase, including the favorable
effects of the Company's mid-1994 closure of its Cologne, Germany
plant, partially offset by higher raw materials costs.
Selling, general and administrative expenses and research
and development expenses were relatively constant as a percentage of
net sales. Cost increases resulting from the currency effect of the
significant appreciation of the Swiss franc against the Company's
other major trading currencies were offset by the Company's cost
control efforts. Earnings before interest and taxes were $37.4 million
in 1995 compared to $30.9 million in 1994. If 1994 currency exchange
rates had remained in effect throughout 1995 earnings before interest
and taxes in 1995 would have been $47.4 million.
Interest expense rose to $18.2 million in 1995 from $13.3
million in 1994, an increase of 37%, principally due to higher
interest rates from the conversion of a loan from Ciba from short term
to long term. Interest expense since the Acquisition is materially
different. See "Effect of Acquisition on Results of Operations," and
"Liquidity and Capital Resources." Net financial income increased to
$8.6 million in 1995 from $4.9 million in 1994. The higher level of
financial income resulted principally from increased gain on foreign
currency transactions.
Net earnings increased to $18.3 million in 1995 from $13.5
million in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant does not have any liabilities except through
its ownership of the Company.
The Acquisition was financed principally through capital
contributions of $190 million before related expenses from the
Registrant, borrowings under the Credit Agreement of $307 million and
9 3/4% Senior Subordinated Notes due 2006 (the "Notes") of $135
million.
Prior to the Acquisition, the Company's cash and other
liquidity was used principally to fund capital expenditures, working
capital requirements, debt service and dividends to Ciba. Following
the Acquisition, the annual interest expense associated with the
borrowings under the Credit Agreement and the Notes, as well as
scheduled principal payments of term loans under the Credit Agreement,
have significantly increased the Company's liquidity requirements. See
"Effect of Acquisition on Results of Operations."
The Company's capital expenditures (pro forma) totaled $28.6
million in 1996, $25.9 million in 1995 and $24.9 million in 1994.
Capital expenditures are primarily for machinery, equipment and the
purchase and expansion of facilities, including the purchase of land
for, and construction of, the Company's Shanghai manufacturing
facility. Capital expenditures for 1997, as a percentage of sales, are
expected to remain relatively constant with historical expenditures.
In connection with the transfer of the Japanese laboratory business
from a former agent to a subsidiary of the Company, the Company will
make payments of approximately SFr. 8.0 million of which SFr. 1.0
million had been paid during 1996. See Item 1, "Business--Customers
and Distribution."
The Credit Agreement provided for term loan borrowings in an
aggregate principal amount of approximately US $147.0 million and SFr.
125.0 million that were scheduled to mature in 2002, 2003 and 2004 and
a multi-currency revolving credit facility with availability of US
$140.0 million including letter of credit and swingline subfacilities.
At December 31, 1996 approximately $75 million was available to the
Company under the revolving credit facility. The revolving credit
facility was scheduled to mature under the Credit Agreement in 2002.
The Amended and Restated Credit Agreement provides for term loan
borrowings in an aggregate principal amount of approximately US $133.8
million, SFr 171.5 million and GBP 26.7 million that are scheduled to
mature in 2002 and 2004, a Canadian revolver with availability of CDN
$26.3 million (approximately CDN $21 million of which has been drawn)
which is scheduled to mature in 2002, and a multi-currency revolving
credit facility with availability of US $151.0 million (approximately
US $25 million of which has been drawn). The revolving credit facility
is scheduled to mature in 2002. The interest rate margin on all loans
have been reduced by 75 basis points under the Amended and Restated
Credit Agreement. Under the Amended and Restated Credit Agreement,
mandatory prepayments are required to be made in certain circumstances
with the proceeds of asset sales or issuance of capital stock or
indebtedness and with certain excess cash flow. The Amended and
Restated Credit Agreement imposes certain restrictions on the Company
and its subsidiaries, including restrictions on the ability to incur
indebtedness, make investments, grant liens, sell financial assets and
engage in certain other activities. The Company must also comply with
certain financial covenants. The Amended and Restated Credit Agreement
is secured by certain assets of the Company.
The Notes will mature in 2006. The Notes may be required to
be purchased by the Company upon a Change of Control (as defined) and
in certain circumstances with the proceeds of asset sales. The Notes
are subordinated to the indebtedness under the Credit Agreement. The
indenture governing the Notes (the "Indenture") imposes certain
restrictions on the Company and its subsidiaries, including
restrictions on the ability to incur indebtedness, make investments,
grant liens and engage in certain other activities.
Under the Amended and Restated Credit Agreement and the
Indenture, Mettler-Toledo, Inc. is prohibited from paying dividends to
Mettler-Toledo Holding Inc., subject to certain limited exceptions.
The Company's obligations under the Amended and Restated Credit
Agreement and Notes is guaranteed by Mettler-Toledo Holding Inc.
At December 31, 1996, approximately $147 million of the
borrowings under the Credit Agreement and all of the borrowings under
the Notes were denominated in U.S. dollars. The balance of the
borrowings under the Credit Agreement and under local working capital
facilities were denominated in certain of the Company's other
principal trading currencies. At December 31, 1996, the Company had
$27.5 million of other long-term debt incurred by its various
operating subsidiaries primarily denominated in various currencies.
Changes in exchange rates between the currencies in which the Company
generates cash flow and the currencies in which its borrowings are
denominated will affect the Company's liquidity. See "Effect of
Currency on Results of Operations".
The Company's cash provided by operating activities declined
from $11.1 million in the three months ended March 31, 1996 to $8.1
million in the three months ended March 31, 1997. The decline resulted
principally from higher interest costs resulting from the Acquisition.
During the three months ended March 31, 1997, the Company
reduced its borrowings by $34.1 million.
At March 31, 1997, net debt was $397.5 million.
The Company continues to explore acquisitions to expand its
product portfolio and improve its distribution capabilities. In
connection with any acquisition, the Company may incur additional
indebtedness.
The Company currently believes that cash flow from operating
activities, together with borrowings available under the Credit
Agreement and local working capital facilities will be sufficient to
fund currently anticipated working capital needs and capital spending
requirements as well as debt service requirements for at least several
years, but there can be no assurance that this will be the case.
EFFECT OF CURRENCY ON RESULTS OF OPERATIONS
The Company's operations are conducted by subsidiaries in
many countries, and the results of operations and the financial
position of each of those subsidiaries is reported in the relevant
foreign currency and then translated into U.S. dollars at the
applicable foreign exchange rate for inclusion in the Company's
Audited Consolidated Financial Statements. Accordingly, the results of
operations of such subsidiaries as reported in U.S. dollars can vary
significantly as a result of changes in currency exchange rates.
Specifically, a strengthening of the U.S. dollar versus other
currencies reduces net sales and earnings as translated into U.S.
dollars while a weakening of the U.S. dollar has the opposite effect.
Swiss franc-denominated costs represent a much greater
percentage of the Company's total expenses than Swiss
franc-denominated sales represent of total sales. In general, an
appreciation of the Swiss franc versus the Company's other major
trading currencies, especially the principal European currencies has a
negative impact on the Company's results of operations and a
depreciation of the Swiss franc versus the Company's other major
trading currencies, especially the principal European currencies has a
positive impact on the Company's results of operations. The effect of
these changes generally offsets in part the effect the translation
effect on earnings before interest and taxes of changes in exchange
rate between the U.S. dollar and other currencies described in the
preceding paragraph.
EFFECT OF ACQUISITION ON RESULTS OF OPERATIONS
In connection with the Acquisition, the Company has, in
accordance with U.S. GAAP relating to purchase accounting rules,
adjusted to fair value the Company's assets and liabilities which, on
a pro forma basis, would have resulted in increased amortization of
approximately $1.5 million for 1996. In addition, as part of the
Acquisition, the Company has incurred additional debt, which would
have resulted in a net increase in interest expense, including
amortization of debt issuance costs and other fees, in the amount of
$16.1 million for 1996, on a pro forma basis. The Company estimates
that it will incur approximately $2.3 million annually in additional
selling, general and administrative expenses as a result of being an
independent company, including an annual management fee of $1.0
million to be paid to AEA Investors Inc. ("AEA Investors"). The
Acquisition would have resulted in a decrease in the Company's
provision for income taxes of $9.9 million for 1996, on a pro forma
basis. As a result of the above adjustments, on a pro forma basis, the
Company would have reported a net loss of $6.4 million in 1996, as
compared to its net loss of $5.4 million in 1995 (before giving effect
to the non-recurring charges referred to below).
The following table represents the unaudited pro forma
statement of operations of the Company after the predecessor business
for the fiscal year 1996, assuming the Acquisition occurred on January
1, 1996. This pro forma statement does not reflect the anticipated
benefits to be derived in the future from the Company's 1996 employee
reduction programs or the acquisition of Safeline on May 30, 1997.
The pro forma financial data reflects other charges in 1996
of $11.8 million representing principally severance costs for the
general headcount reduction, in Europe and North America, the closure
of the Company's Westerville, Ohio manufacturing facility, and the
realignment of the analytical and precision balance business in
Switzerland.
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED DECEMBER 31,
(Dollars in thousands, except per share data)
1996
----
<S> <C>
Net sales ........................................ $849,133
Cost of sales .................................... 499,865
--------
Gross profit ................................ 349,268
--------
Research and development ......................... 50,049
Selling, general and administrative .............. 248,337
Amortization ..................................... 4,687
Other charges (income), net ...................... 11,764
Earnings before interest and taxes .......... 34,431
Interest expense ................................. 38,715
Financial expense (income) net ................... 2,272
--------
Loss before taxes and minority interest ..... (6,556)
Provision for taxes .............................. (738)
Minority interest................................. 545
--------
Net loss .................................... $(6,363)
========
Loss per common share:
Weighted average number of common
shares ...................................... 2,438,514
Loss per common share ....................... $(2.61)
=========
</TABLE>
In addition in accordance with U.S. GAAP, the Company has
allocated a portion of the purchase price to in-process research and
development projects that have economic value and to the revaluation
of inventories to fair values. Approximately $114.1 million has been
allocated to in-process research and development and has been charged
to expense in the fourth quarter of 1996. Approximately $32.2 million
has been allocated to the revaluation of inventories to fair value.
Substantially all of such inventories were sold during the period from
October 15, 1996 to December 31, 1996. These charges are not reflected
in the above table due to their unusual, non-recurring nature.
TAXES
The Company is subject to taxation in many jurisdictions
throughout the world. The Company's 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
the Company transfers funds between jurisdictions and income is
repatriated, and future changes in law. Generally, the tax liability
for each legal entity is determined either (i) on a non-consolidated
basis or (ii) on a consolidated basis only with other entities
incorporated in the same jurisdiction, in either case without regard
to the taxable losses of non-consolidated affiliated entities. As a
result, the Company may pay income taxes in certain jurisdictions even
though the Company on an overall basis incurs a net loss for the
period.
ENVIRONMENTAL MATTERS
The Company is subject to various environmental laws and
regulations in the jurisdictions in which it operates. The Company,
like many of its competitors, has 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.
The Company does not currently anticipate any material capital
expenditures for environmental control technology. Some risk of
environmental liability is inherent in the Company's business, and
there can be no assurance that material environmental costs will not
arise in the future. However, the Company does not anticipate any
material adverse effect on its results of operations or financial
condition as a result of future costs of environmental compliance. See
Item 1, "Business--Environmental Matters."
INFLATION
Inflation can affect the costs of goods and services used by
the Company. The competitive environment in which the Company operates
limits somewhat the Company's ability to recover higher costs through
increased selling prices. Moreover, there may be differences in
inflation rates between countries in which the Company incurs the
major portion of its costs and other countries in which the Company
sells its products, which may limit the Company's ability to recover
increased costs, if not offset by future increase of selling prices.
The Company's growth strategy includes expansion in Latin America and
China, which have experienced inflationary conditions. To date,
inflationary conditions have not had a material effect on the
Company's operating results. However, as the Company's presence in
Latin America and China increases, these inflationary conditions could
have a greater impact on the Company's operating results.
SEASONALITY
The Company's business has historically experienced a slight
amount of seasonal variation, with sales in the first fiscal quarter
slightly lower than, and sales in the fourth fiscal quarter slightly
higher than, sales in the second and third fiscal quarters. This trend
has a somewhat greater effect on income from operations than on net
sales due to the effect of fixed costs.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS
The Company enters into currency forward and option
contracts primarily as a hedge against anticipated foreign currency
exposures and not for speculative purposes. Such contracts, which are
types of financial derivatives, 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 unrealized gains and losses being recognized in
financial income or expense, as appropriate.
The Company may be exposed to credit losses in the event of
nonperformance by the counterparties to its foreign currency forward
and option contracts. The Company has no reason to believe, however,
that such counterparties will not be able to fully satisfy their
obligations under these contracts. At December 31, 1996, the Company
had contracts maturing during 1997 to sell the equivalent of
approximately $135.0 million in various currencies in exchange for
Swiss francs. These contracts were used to limit its exposure to
foreign currency fluctuations on anticipated future cash flows,
primarily for the delivery of United States dollars, German marks,
French francs, British pounds and Japanese yen in exchange for Swiss
francs. At December 31, 1996, the fair value of such financial
instruments, which the Company recognized as net unrealized losses,
was approximately $5.1 million.
NEW ACCOUNTING STANDARDS
Beginning January 1, 1996 the Company adopted Financial
Accounting Standards Board's Statement of Financial Accounting
Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS
121 requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. In addition,
SFAS 121 requires that long-lived assets and certain identifiable
intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. Adoption of SFAS 121 had no
effect on the Company's financial statements.
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128, "Earnings
per Share." The Company has yet to determine the effect of this
statement on its earnings per share.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Registration Statement includes forward-looking
statements that reflect the Registrant current views with respect to
future events and financial performance, including capital
expenditures, potential cost savings from planned employee reductions
and the realignment of the analytical and precision balance business
in Switzerland, strategic plans and future cash sources and
requirements. These forward-looking statements are subject to certain
risks and uncertainties, including those identified below, which could
cause actual results to differ materially from historical results or
those anticipated. The words, "believe," "expect," "anticipate" and
similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their dates. The Registrant
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. The following risks could cause actual
results to differ materially from historical results or those
anticipated:
Effect Of Substantial Indebtedness On Operations And Liquidity
The Credit Agreement and the Indenture contain a number of
covenants that restrict the Company's operations. See "Liquidity and
Capital Resources." The Company's ability to comply with the covenants
and restrictions contained in the Credit Agreement and the Indenture
may be affected by events beyond its control, including prevailing
economic, financial and industry conditions.
The Company's high degree of leverage could have important
consequences including but not limited to the following: (i) the
Company's ability to obtain additional financing for acquisitions,
capital expenditures, working capital or general corporate purposes
may be impaired in the future; (ii) a substantial portion of the
Company's cash flow from operations must be dedicated to the payment
of principal and interest on the Notes and borrowings under the Credit
Agreement and other indebtedness, thereby reducing the funds available
to the Company for its operations and other purposes, including
investments in research and development and capital spending; (iii)
certain of the Company's borrowings are and will continue to be at
variable rates of interest, which exposes the Company to the risk of
increased interest rates; and (iv) the Company may be substantially
more leveraged than certain of its competitors, which may place the
Company at a relative competitive disadvantage and may make the
Company more vulnerable to a downturn in general economic conditions
or its business or changing market conditions and regulations.
Restrictions On Operations Under Credit Agreement And Indenture
In connection with the Acquisition, the Company incurred a
significant amount of indebtedness. At December 31, 1996, the
Company's consolidated indebtedness (excluding unused commitments) was
approximately $452.2 million and its shareholder's equity was
approximately $12.4 million. On a pro forma basis giving the effect to
the Acquisition, the Company's ratio of earnings to fixed charges for
the year ended December 31, 1996 would have been 1.5x. The Company has
additional borrowing capacity on a revolving credit basis under the
Credit Agreement and under local working capital facilities. The
Company will be required to make semiannual scheduled principal
payments on the term loans under the Credit Agreement commencing in
March 1997. The Company's ability to comply with the terms of the
Indenture and the Credit Agreement, to make cash payments with respect
to the Notes and under the Credit Agreement and to satisfy its other
debt or to refinance any of such obligations will depend on the future
performance of the Company, which, in turn, is subject to prevailing
economic and competitive conditions and certain financial, business
and other factors beyond its control.
Risk Of Currency Fluctuations
The Company is subject to risks and uncertainties resulting
from changes in currency exchange rates. For a discussion of these
risks, see "Effect of Currency on Results of Operations."
Risks Associated With International Operations
The Company does business in numerous countries, including
emerging markets in Asia and Latin America. In addition to currency
risks discussed above, the Company's international operations are
subject to the risk of new and different legal and regulatory
requirements in local jurisdictions, tariffs and trade barriers,
potential difficulties in staffing and managing local operations,
credit risk of local customers and distributors, potential
difficulties in protecting intellectual property, risk of
nationalization of private enterprises, potential imposition of
restrictions on investments, potentially adverse tax consequences,
including imposition or increase of withholding and other taxes on
remittances and other payments by subsidiaries, and local economic,
political and social conditions, including the possibility of
hyper-inflationary conditions, in certain countries. The Company plans
to increase its presence in Latin American countries and China. As a
result, inflationary conditions in these countries could have an
increasingly significant effect on the Company's operating results.
The conversion into foreign currency of funds earned in
local currency through the Company's operations in the People's
Republic of China and the repatriation of such funds require certain
governmental approvals. Failure to obtain such approvals could result
in the Company being unable to convert or repatriate earnings from its
Chinese operations, which may become an increasingly important part of
the Company's international operations.
Competition; Improvements In Technology
The markets in which the Company operates are highly
competitive. Weighing markets are fragmented both geographically and
by application, particularly the industrial and food retailing market.
As a result, the Company competes with numerous regional or
specialized competitors, many of which are well-established in their
markets. Some competitors are divisions of larger companies with
potentially greater financial and other resources than the Company.
The Company has, from time to time, experienced price pressures from
competitors in certain product lines and geographic markets.
The Company's competitors can be expected to continue to
improve the design and performance of their products and to introduce
new products with competitive price and performance characteristics.
Although the Company believes that it has certain technological and
other advantages over its competitors, realizing and maintaining these
advantages will require continued investment by the Company in
research and development, sales and marketing and customer service and
support. There can be no assurance that the Company will have
sufficient resources to continue to make such investments or that the
Company will be successful in maintaining such advantages.
Significant Sales To Pharmaceutical And Chemical Industries
The Company's products are used extensively in the
pharmaceutical and chemical industries. Consolidation in these
industries has had an adverse impact on the Company's sales in recent
years. A prolonged downturn or any additional consolidation in these
industries could adversely affect the Company's operating results.
Reliance On Key Management
Robert F. Spoerry has an employment contract with the
Company and it is anticipated that all of the key management employees
will have employment contracts with the Company. In addition, various
members of management own a portion of the shares of nonvoting capital
stock of the Registrant and will have options to purchase additional
shares of such nonvoting capital stock. Nonetheless, there is no
assurance that such individuals will remain with the Company. If, for
any reason, such key personnel do not continue to be active in the
Company's management, operations could be adversely affected. The
Company has no key man life insurance policies with respect to any of
its senior executives.
Environmental Matters
The Company is subject to various environmental laws and
regulations in the jurisdiction in which it operates. For a discussion
of risks relating to environmental matters, see "Environmental
Matters" above Item 1, "Business-Environmental Matters."
Transfer Restrictions
Transfers by current holders of the Registrant's common
stock are subject to certain restrictions and requirements pursuant to
subscription agreements entered into in connection with such holder's
purchase of such common stock. Generally, prior to transfer, a
shareholder must obtain a legal opinion stating that such transfer may
be effected without registering the common stock under the Securities
Act of 1933, as amended (the "Securities Act"). In the case of
employees of the Company, employees may not transfer shares owned by
them within three years or five years from the date of their
acquisition, as the case may be. There can be no assurance that the
value of the Company's common stock will remain stable during the time
when stockholders are unable to sell such stock. See Item 11,
"Description of Registrant's Securities to be Registered -
Restrictions on Transfer."
Voting Rights
Voting control of the Registrant is vested in holders of
Class B Common Stock. Holders of the Class A Common Stock and Class C
Common Stock registered pursuant to this Registration Statement are
not entitled to vote on any corporate matters, except as provided by
Delaware law. As a result, holders of the Class B Common Stock will be
able to elect all of the members to the Board of Directors and
determine the disposition of practically all matters submitted to a
vote of the Registrant's stockholders, including mergers and other
extraordinary transactions and the terms thereof. See Item 11,
"Description of Registrant's Securities to be Registered Restrictions
on Transfer."
No Market for Registered Securities
There is currently no trading market for the Registrant's
common stock, and the Registrant does not anticipate that there will
be such a market in the foreseeable future. Consequently, shareholders
may be unable to sell their shares of common stock once any applicable
transfer restrictions expire and the price obtainable in such sale may
be adversely affected by the lack of such trading market.
Absence of Dividends
The Registrant anticipates that all of its earnings in the
foreseeable future will be retained to finance the continued growth
and expansion of its business and has no current intention to pay cash
dividends on its common stock.
ITEM 3. PROPERTIES
The following table lists the Company's principal operating
facilities, indicating the location, primary use and whether the
facility is owned or leased.
LOCATION PRINCIPAL USE (1) OWNED/LEASED
- ------------------------------- -------------------------------- ------------
Europe:
Greifensee/Nanikon,
Switzerland............... Production, Corporate Headquarters Owned
Uznach, Switzerland....... Production Owned
Urdorf, Switzerland....... Production Owned
Schwerzenbach,
Switzerland............. Production Leased
Albstadt, Germany......... Production Owned
Giessen, Germany.......... Production Owned
Giessen, Germany.......... Sales and Service Owned
Steinbach, Germany........ Sales and Service Owned
Viroflay, France.......... Sales and Service Owned
Beersel, Belgium.......... Sales and Service Owned
Tiel, Netherlands......... Sales and Service Owned
Leicester, England........ Sales and Service Leased
Americas:
Worthington, Ohio......... Production Owned
Spartanburg,
South Carolina.......... Production Owned
Franksville, Wisconsin.... Production Owned
Ithaca, New York.......... Production Owned
Wilmington,
Massachusetts........... Production Leased
Florham Park, New Jersey.. Production Leased
Hightstown, New Jersey.... Sales and Service Owned
Burlington, Canada........ Sales and Service Owned
Mexico City, Mexico....... Sales and Service Leased
Other:
Shanghai, China........... Production Building Owned;
Land Leased
Changzhou, China (2)...... Production Building Owned;
Land Leased
Melbourne, Australia...... Sales and Service Leased
- ------------------------
(1) The Company also conducts research and development activities at
certain of the listed facilities in Switzerland, Germany, the
United States and, to a lesser extent, China.
(2) Held by a 60%-owned joint venture.
The Company believes its facilities are adequate for its
current and reasonably anticipated future needs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to
the beneficial ownership of the capital stock of the Registrant by (i)
each director of the Registrant, (ii) the Registrant's Chief Executive
Officer and the four other most highly compensated executives
(collectively, the "Named Executives") and (iii) all directors and
executive officers of the Registrant as a group:
<TABLE>
<CAPTION>
CLASS A NON-VOTING CLASS B VOTING CLASS C NON-VOTING
COMMON STOCK COMMON STOCK (1) COMMON STOCK
------------------- ------------------ -------------------
NUMBER OF % OF NUMBER OF % OF NUMBER OF % OF
NAME SHARES CLASS SHARES CLASS SHARES CLASS
- ---------------------------------------- --------- ------- --------- ------- --------- -------
DIRECTORS AND EXECUTIVE OFFICERS:
<S> <C> <C> <C> <C> <C> <C>
Robert F. Spoerry................... 26,873 1.4% 0 % 7,678 1.4%
Fred Ort............................ 4,726 * 0 * 1,350 *
Karl M. Lang........................ 4,726 * 0 * 1,350 *
Lukas Braunschweiler................ 4,726 * 0 * 1,350 *
John D. Robechek................... 4,055 * 0 * 1,159 *
Philip Caldwell (2)................. 4,644 * 0 * 3,492 *
Reginald H. Jones................... 1,161 * 70 7.0 2,472 *
John D. Macomber.................... 1,161 * 65 6.5 2,250 *
Laurence Z.Y. Moh................... 23,218 1.2 0 * 5,134 *
Thomas P. Salice (2)................ 3,701 * 0 * 36,007 6.7
Alan W. Wilkinson (2)............... 3,701 * 0 * 36,007 6.7
All directors and executive officers
as a group (14 persons (3))....... 94,075 4.94% 135 13.5% 101,501 18.85%
- ------------------------
* Less than 1%
(1) AEA Investors owns 49.0% of the Class B voting common stock of the
Registrant. AEA Investors' address is 65 East 55th Street, New York,
New York 10022.
(2) Includes shares held by, or in trust for, members of such
individual's family for which Messrs. Caldwell, Salice and Wilkinson
disclaim beneficial ownership. Does not include shares held by AEA
Investors, of which Messrs. Salice and Wilkinson are officers.
(3) Includes William Donnelly, who became Vice President, Chief
Financial Officer, Treasurer and Assistant Secretary on April 1, 1997,
and Fred Ort who ceased to be an executive officer on April 1, 1997
but who remains a non-executive officer.
</TABLE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Registrant are
set forth below. All directors hold office until the annual meeting of
stockholders 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 thereof.
NAME AGE POSITION
- ------------------------ ------- ------------------------------
Robert F. Spoerry 41 Director; President and Chief
Executive Officer
William Donnelly 35 Vice President, Chief Financial
Officer, Treasurer and
Assistant Secretary
Karl M. Lang 50 Head, Laboratory Division
Lukas Braunschweiler 41 Head, Industrial and Retail (Europe)
John D. Robechek 48 Head, Industrial and Retail (Americas)
Peter Burker 51 Head, Human Resources
Thomas Rubbe 43 Head, Logistics and Information Systems
Philip Caldwell 77 Director; Chairman of the Board
Reginald H. Jones 79 Director
John D. Macomber 69 Director
Laurence Z.Y. Moh 71 Director
Thomas P. Salice 36 Director
Alan W. Wilkinson 41 Director
Robert F. Spoerry has been President and Chief Executive
Officer of the Company since 1993. He served as Head, Industrial and
Retail (Europe) of the Company from 1987 to 1993. Mr. Spoerry has been
a Director since October 1996.
William Donnelly has been Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary of the Registrant and Chief
Financial Officer of the Company since April 1, 1997. Prior to joining
the Company, he was Group Vice President and Chief Financial Officer
and was an Executive Committee member of Elsag Bailey Process
Automation ("Elsag Bailey"), a global manufacturer of instrumentation
and analytical products, and developer of distributed control systems.
Mr. Donnelly joined Elsag Bailey in 1993 and held various senior
financial positions during that period. Prior to joining Elsag Bailey,
Mr. Donnelly was associated with the international accounting firm of
Price Waterhouse.
Karl M. Lang has been Head, Laboratory Division of the
Company since 1994. From 1991 to 1994 he was based in Japan as a
representative of senior management with responsibility for expansion
of the Asian operations.
Lukas Braunschweiler has been Head, Industrial and Retail
(Europe) of the Company since 1995. From 1992 until 1995, he held
various senior management positions with the Landis & Gyr Group, a
manufacturer of electrical meters. Prior to August 1992 he was a Vice
President in the Technology Group of Saurer Group, a manufacturer of
textile machinery.
John D. Robechek has been Head, Industrial and Retail
(Americas) of the Company and President of Mettler-Toledo, Inc., a
U.S.-based subsidiary of the Company, since 1995. From 1990 through
1994 he served as Senior Vice President and managed all of the
Company's U.S. subsidiaries.
Peter Burker has been Head, Human Resources of the Company
since 1994. From 1992 to 1994 he was Mettler-Toledo's General Manager
in Spain, and from 1989 to 1991 he headed the Company's operations in
Italy.
Thomas Rubbe has been Head, Logistics and Information
Systems of the Company since 1995. From 1990 to 1995, he was head of
Controlling, Finance and Administration with the Company's German
marketing organization.
Philip Caldwell has been a Director and Chairman of the
Board since October 1996. Mr. Caldwell has been Senior Managing
Director of Lehman Brothers Inc. and its predecessor, Shearson Lehman
Brothers Holdings Inc., since 1985. Mr. Caldwell spent 32 years at
Ford Motor Company where he was Chairman of the Board of Directors and
Chief Executive Officer from 1980 to 1985 and a Director from 1973
through 1990. Mr. Caldwell is a Director of Lehman Brothers Inc.,
Zurich Holding Company of America, Inc., Zurich Reinsurance Centre
Holdings, Inc., American Guarantee & Liability Insurance Company (a
Zurich affiliate), The Mexico Fund, Waters Corporation and Russell
Reynolds Associates, Inc. He has served as a Director of the Chase
Manhattan Bank Corporation, the Chase Manhattan Bank, N.A., Digital
Equipment Corporation, Federated Department Stores Inc., the Kellogg
Company, Shearson Lehman Brothers Holdings Inc., CasTech Aluminum
Group Inc. and Specialty Coatings International Inc.
Reginald H. Jones has been a Director since October 1996.
Mr. Jones retired as Chairman of the Board of Directors of General
Electric Company ("General Electric") in April 1981. At General
Electric, he served as Chairman of the Board of Directors and Chief
Executive Officer from December 1972 through April 1981, President
from June 1972 to December 1972 and a Director from August 1971 to
April 1981. Mr. Jones is also a Director of ASA Limited and Birmingham
Steel Corporation.
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 Textron Inc.,
Bristol-Myers Squibb Company, Xerox Corporation, Lehman Brothers
Holdings Inc. and Pilkington plc.
Laurence Za Yu Moh has been a Director since October 1996.
He is Chairman Emeritus of Universal Furniture Limited, which he
founded in 1959.
Thomas P. Salice has been a Director since October 1996. He
is a Managing Director of AEA Investors and has been associated with
AEA Investors since June 1989. Mr. Salice is also a Director of Waters
Corporation.
Alan W. Wilkinson has been a Director since October 1996. He
has been a Managing Director of AEA Investors since September 1989.
Prior to his association with AEA Investors, Mr. Wilkinson was a Vice
President in the Merchant Banking and Mergers and Acquisitions
divisions of Lehman Brothers Inc.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to or
accrued for services performed by the Named Executives for the years
ended December 31, 1995 and 1996.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------
------------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (2) COMPENSATION OPTIONS (#) COMPENSATION
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert F. Spoerry, President and Chief 1996 $ 435,135 $276,521 $8,857(3) 83,279 $ 124,431
Executive Officer................. 1995 289,343 85,871 -- 300(4) 54,346(5)
Fred Ort, Head, Finance and Control... 1996 207,221 99,325 -- 6,246 52,745
1995 227,284 69,701 -- -- 70,804(5)
Karl M. Lang, Head, Laboratory........ 1996 212,997 88,375 -- 16,656 61,901
1995 228,427 38,071 -- -- 60,321(5)
Lukas Braunschweiler, Head, Industrial 1996 210,893 66,162 -- 16,656 62,482
and Retail (Europe)............... 1995 228,427 25,381 -- --- 50,460(5)
John D. Robechek, Head, Industrial 1996 233,754 88,137 -- 16,656 6,215
and Retail (Americas)............. 1995 225,000 40,563 -- -- 6,168(6)
- ------------------------
(1) Amounts paid in Swiss francs (all amounts except those paid to Mr.
Robechek) converted to U.S. dollars at a rate of SFr 1.182 to U.S.
$1.00 for 1995 and SFr 1.2355 to U.S. $1.00 for 1996, in each case the
average exchange rate during such year.
(2) Does not include Ciba bonuses to the Named Executives for services
rendered to Ciba in connection with its efforts to sell the Company.
(3) Represents additional compensation paid to fully offset, after
payment of all taxes and social security contributions, interest
charged to Mr. Spoerry on a loan to Mr. Spoerry from Mettler-Toledo
AG, a subsidiary of the Company. See Item 13.
(4) Option to purchase the specified number of shares of Ciba common
stock at an exercise price of SFr 750 ($665 at the date of grant) per
share. The fair market value at the date of grant was SFr 764 ($678)
per share.
(5) Represents Company contributions to the Mettler-Toledo Fonds (a
Swiss pension plan similar to a defined contribution plan under U.S.
law). Fifty percent of the amount shown is a required employee
contribution under the plan which the Company has contributed on
behalf of the Named Executives, and the other 50% is a required
matching employer contribution.
(6) Includes $1,024 for the value of group life insurance over
$50,000, $4,500 for the Company's contribution to Mr. Robechek's
401(k) plan account and $644 for Mr. Robechek's profit sharing payout
under the Company's Performance Dividend Plan.
</TABLE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------
POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS EXERCISE/ PRICE APPRECIATION FOR OPTION/SAR
UNDERLYING GRANTED TO BASE TERM (2)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ---------------------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10% ($)
- ---------------------- -------------- ------------ --------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Robert F. Spoerry 83,279 29.85 100 2006 5,237,372 13,272,528
Fred Ort 6,246 2.24 100 2006 392,808 995,452
Karl M. Lang 16,656 5.97 100 2006 1,046,858 2,652,944
Lukas Braunschweiler 16,656 5.97 100 2006 1,046,858 2,652,944
John D. Robechek 16,656 5.97 100 2006 1,046,858 2,652,944
(1) All Options are to purchase shares of Class A Common Stock of the
Registrant.
(2) The assumed annual rates of appreciation over the term of the
option are set forth in accordance with rules and regulations adopted
by the Securities and Exchange Commission and do not represent the
Company's estimate of stock appreciation price.
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND OPTION/SAR VALUES AS OF DECEMBER 31, 1996
---------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT FISCAL IN-THE-MONEY OPTIONS/SARS
ACQUIRED ON VALUE YEAR-END AT FISCAL YEAR-END
EXERCISE REALIZED (#) ($) (1)
------------------------------ ---------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert F. Spoerry 0 0 0 83,279 0 0
Fred Ort 0 0 0 6,246 0 0
Karl M. Lang 0 0 0 16,656 0 0
Lukas Braunschweiler 0 0 0 16,656 0 0
John D. Robechek 0 0 0 16,656 0 0
- ------------------------
(1) There is no market value for the Class A Common Stock of the
Registrant. Estimated value, as determined by the Registrant, at
December 31, 1996 does not exceed the exercise price.
</TABLE>
EMPLOYMENT AGREEMENTS; STOCK OPTIONS; MANAGEMENT EQUITY
Mettler-Toledo AG, a subsidiary of the Company, entered into
an employment agreement (the "Agreement") with Robert F. Spoerry (the
"Executive") dated as of October 30, 1996. The Agreement provides for
annual base salary of SFr 560,000 ($435,135 at December 31, 1996),
which may be increased from time to time in accordance with the
Company's normal business practices, and for participation in the
Company's bonus plan. In addition, the Agreement provides for payment
of the amount necessary, after payment of all taxes and social
security contributions, to fully offset the interest charged to the
Executive on a certain loan to the Executive. See Item 7, "Certain
Relationships and Related Transactions" for a description of the loan.
The Agreement prohibits the Executive from competing with the Company
for a period of twenty-four months after termination of employment.
The Agreement may be terminated without cause, on thirty-six months
notice during which period the Executive is entitled to full
compensation under the Agreement.
The Company expects to negotiate new employment agreements
with the other Named Executives. Base salary of executive officers
under these agreements in the aggregate will not be materially
different from historical practice. The agreements will also include
bonuses contingent on meeting performance objectives in amounts to be
determined.
COMPENSATION OF DIRECTORS
All members of the Board of Directors of the Registrant who
are officers of the Company or employees of AEA Investors will not
receive additional compensation for being on the Board or its
committees. Mr. Caldwell purchased 2,856 shares of Class C Common
Stock and each of Messrs. Jones, Macomber and Moh purchased 1,905
shares of Class C Common Stock for being on the Board or its
committees and, in Mr. Caldwell's case, being Chairman of the Board.
RETIREMENT PLANS
Mr. Robechek is covered under two pensions plans, the
Mettler-Toledo Retirement Plan and the Mettler-Toledo Supplemental
Retirement Income Plan. Benefits under these plans are determined by
career average compensation rather than final compensation. The annual
accrual for each year under both plans is the difference of 2% of
annual compensation in a plan year and 0.6% of the lesser of annual
compensation or covered compensation (defined under the plans as the
average of the Social Security Taxable Wage Bases in effect for each
calendar year during the 35-year period ending on the last day of a
given plan year). The Mettler-Toledo Retirement Plan includes all
compensation up to the qualified plan limitations under the Internal
Revenue Code of 1986, as amended ($150,000 per year in 1996) and the
Mettler-Toledo Supplemental Retirement Income Plan pays for benefits
in excess of these limits. The accrued annual benefit payable to Mr.
Robechek under the Mettler-Toledo Retirement Plan is $45,693 and the
accrued annual benefit under the Mettler-Toledo Supplemental Plan is
$11,329, for a total annual retirement benefit of $57,022.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following directors served on the Registrant's
Compensation Committee during the fiscal year ended December 31, 1996:
Reginald H. Jones, Laurence Z. Y. Moh and Thomas P. Salice. Mr. Salice
also served as an officer of the Registrant and certain of its
subsidiaries during such fiscal year. Mr. Salice is an officer of AEA
Investors, a stockholder of the Registrant. See Item 7, "Certain
Relationships and Related Transactions" for a description of
relationships between AEA Investors and the Registrant.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AEA Investors and the Company have entered into a Management
Agreement pursuant to which AEA Investors provides management,
consulting and financial services to the Company. Services are
expected to be provided in such areas as the preparation and
evaluation of strategic, operating, financial and capital plans and
the development and implementation of compensation and other incentive
programs. Such services will be provided by the executive staff of AEA
Investors. In consideration of such services, AEA Investors is
entitled to an annual fee of $1.0 million, plus reimbursement for
certain expenses and indemnification against certain liabilities. The
agreement further provides that in the event the Company employs any
employee of AEA Investors as an officer of the Company or otherwise,
and such employment includes a substantial amount of such employee's
time, the Company will compensate such employee at a reasonable rate.
The Company believes that the terms of these management arrangements
are as favorable as could be obtained from an unaffiliated third
party. In connection with the Acquisition and in consideration of
services by AEA Investors in arranging, structuring and negotiating
the terms of the Acquisition and the related financing transactions,
the Company paid AEA Investors a transaction fee of $5.5 million and
reimbursed AEA Investors for certain related expenses.
Management and other employees of the Company have
contributed approximately $12 million of the equity of the Registrant.
For information regarding the number of shares purchased by each Named
Executive, see Item 4, "Security Ownership of Certain Beneficial
Owners and Management." Each share of Class A Common Stock was
purchased for $100 per share and each share of Class C Common Stock
was purchased for approximately $.03 per share.
On October 7, 1996, in order to fund a portion of the
purchase price for the shares purchased by Mr. Spoerry, Mettler-Toledo
AG entered into a Loan Agreement with Mr. Spoerry, in the amount of
SFr 1.0 million ($742,000 at December 31, 1996). The loan bears
interest at a rate of 5% and is payable upon demand, which may not be
made until seven years after the date of the loan.
ITEM 8. LEGAL PROCEEDINGS
The Company is subject to routine litigation incidental to
its business. The Company is currently not involved in any legal
proceeding that it believes could have a material adverse effect upon
its financial condition or results of operations. See "Environmental
Matters" under Item 1 for information concerning legal proceedings
relating to certain environmental claims.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
(a) Market Information.
There is no established trading market for any equity
securities of the Registrant. On the date hereof with respect to the
common equity of the Registrant (i) there are outstanding options or
warrants to purchase 291,488 shares of Class A Common Stock of the
Registrant, (ii) due to contractual restrictions and the limitations
of Rule 144 of the Securities Act, there are no shares that could be
sold without restriction or that the Registrant has agreed to register
under the Securities Act for sale by security holders, and (iii) there
are no shares that are being, or have been publicly proposed to be,
publicly offered by the Registrant. See Item 11, "Description of
Registrant's Securities to be Registered - Common Stock - Restrictions
on Transfer."
(b) Holders.
On the date hereof, there are approximately (i) 832 holders
of the Class A Common Stock of the Registrant, (ii) 9 holders of the
Class B Common Stock of the Registrant, and (iii) 843 holders of the
Class C Common Stock of the Registrant.
(c) Dividends.
The Registrant has never paid any dividends on its common
stock. Since the only assets of the Registrant are those resulting
from its ownership of 100% of the outstanding common stock of
Mettler-Toledo Holding Inc., which has no assets other than those
resulting from its ownership of 100% of the outstanding common stock
of Mettler-Toledo Inc., and since Mettler-Toledo, Inc. is prohibited
from paying dividends to Mettler-Toledo Holding, Inc., subject to
certain limited exceptions, the Registrant does not expect to have any
assets to distribute to its security holders in the foreseeable
future. See Item 2, "Financial Data" "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
From the date of its incorporation until the issuances of
common stock which occurred beginning in October 1996, the Registrant
issued common stock to certain members of senior management, the
investor-participants of AEA Investors and AEA Investors for
approximately $.03 per share. In connection with the Acquisition, the
Registrant effected a recapitalization pursuant to which such common
stock was converted into Class B Common Stock or Class C Common Stock,
as the case may be.
1. In October 1996, the Registrant issued 1,803,489 shares
of Class A Common Stock for an aggregate consideration of
$180,348,900, 50 shares of Class B Common Stock for an aggregate
consideration of approximately $2, and 172,376 shares of Class C
Common Stock for an aggregate consideration of approximately $5,171.
The shares were offered and sold to executive officers of the Company
and the management and investor-participants of AEA Investors in
reliance on Rule 506 of Regulation D and Section 4(2) under the
Securities Act.
2. In October 1996, the Registrant issued 8,843 shares of
Class A Common Stock for an aggregate consideration of $884,300, and
2,526 shares of Class C Common Stock for an aggregate consideration of
approximately $76. The shares were offered and sold in reliance on
Rule 701 under the Securities Act and were sold pursuant to a written
compensatory benefit plan to employees of the Registrant and its
subsidiaries.
3. In October 1996, the Registrant issued 16,578 shares of
Class A Common Stock for an aggregate consideration of $1,657,800, and
4,738 shares of Class C Common Stock for an aggregate consideration of
approximately $142. The shares were offered and sold in reliance on
Rule 903 under the Securities Act outside the United States to
employees of the Company who represented that they were non U.S.
persons.
4. In December 1996, the Registrant issued 25,750 shares of
Class A Common Stock for an aggregate consideration of $2,575,000, and
11,885 shares of Class C Common Stock for an aggregate consideration
of approximately $357. The shares were offered and sold to executive
officers of the Company and the management and investor-participants
of AEA Investors in reliance on Rule 506 of Regulation D under the
Securities Act.
5. In December 1996, the Registrant issued 8,620 shares of
Class A Common Stock for an aggregate consideration of $862,000, and
2,472 shares of Class C Common Stock for an aggregate consideration of
approximately $74. The shares were offered and sold in reliance on
Rule 701 under the Securities Act and were sold pursuant to a written
compensatory benefit plan to employees of the Registrant and its
subsidiaries.
6. In December 1996, the Registrant issued 36,499 shares of
Class A Common Stock for an aggregate consideration of $3,649,900, and
10,401 shares of Class C Common Stock for an aggregate consideration
of approximately $312. The shares were offered and sold in reliance on
Rule 903 under the Securities Act outside the United States to
employees of the Company who represented that they were non U.S.
persons.
7. In April 1997, the Registrant issued 3,000 shares of
Class A Common Stock for an aggregate consideration of $300,000, and
857 shares of Class C Common Stock for an aggregate consideration of
approximately $26. The shares were offered and sold to an executive
officer of the Company in reliance on Rule 506 of Regulation D under
the Securities Act.
The sales described in items 1, 4 and 7 were made to (i)
individuals who represented that they were accredited investors, (ii)
executive officers of the Company, or (iii) employees of AEA Investors
(who numbered fewer than 35 and) who the Company believes have
knowledge and experience in financial and business matters sufficient
to be capable of evaluating the merits and risks of purchasing the
securities issued.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The following brief description of the Registrant's capital
stock does not purport to be complete and is subject in all respects
to applicable Delaware law and to the provision of the Registrant's
Restated Certificate of Incorporation, as amended (the "Registrant's
Certificate of Incorporation") and By-Laws (the "Registrant's
By-Laws").
As of the date hereof, the authorized capital stock of the
Registrant consists of 2,778,755 shares of Common Stock, $.01 par
value, of which 2,235,896 shares are designated as Class A Common
Stock, 1,000 shares are designated as Class B Common Stock and 541,859
shares are designated as Class C Common Stock. As of the date hereof,
the Registrant had outstanding 1,902,779 shares of Class A Common
Stock, 1,000 shares of Class B Common Stock and 538,592 shares of
Class C Common Stock, and an additional 291,488 shares of Class A
Common Stock were issuable upon exercise of outstanding employee stock
options.
COMMON STOCK
Holders of common stock of the Registrant have no
preemptive, subscription or redemption rights. Except for the Class A
dividend and distribution preference and the Class B voting rights
(each as described below), the three classes of common stock of the
Registrant have identical rights under the Registrant's Certificate of
Incorporation and By-Laws.
Preference. Dividends or distributions in connection with
the liquidation, dissolution or winding up of the affairs of the
Registrant or not paid out of the current and accumulated earnings and
profits shall be paid in the following manner: First, exclusively to
the holders of the shares of Class A Common Stock, ratably to each
such holder, until the sum of all dividends and distributions to each
holder of Class A Common Stock equals $100 for each share of Class A
Common Stock held by such holder. After each holder of shares of Class
A Common Stock shall have received dividends and distributions
totaling $100, then exclusively to the holders of the shares of Class
B Common and Class C Common Stock ratably to each such holder until
the sum of all dividends and distributions to each holder of Class B
Common Stock and/or Class C Common Stock equals $100 for each share of
Class B Common Stock and/or Class C Common Stock held by such holder.
After each holder of Class B Common Stock and Class C Common Stock
shall have received such dividends and distributions, then to all
holders of Class A Common Stock, Class B Common Stock and/or Class C
Common Stock, ratably to each holder of such shares.
Voting. The entire voting power of the Registrant's common
stock is vested exclusively in the Class B Common Stock. Each holder
of shares of the Class B Common Stock shall be entitled to one vote
for each share of the Class B Common Stock.
Restrictions on Transfer. Transfers by holders of the
Registrant's common stock (the "Restricted Securities") are restricted
pursuant to subscription agreements entered into in connection with
such holder's purchase of such Restricted Securities. See Item 2,
"Financial Information - Forward Looking Statements and Associated
Risks - Transfer Restrictions."
Section 203 of the DGCL. The Registrant is a Delaware
corporation and is subject to Section 203 of the General Corporation
Law of the State of Delaware (the "DGCL"). In general, Section 203
prevents an "interested stockholder" (defined as a person who is the
owner of 15% or more of a corporation's voting stock, or who, as an
affiliate or associate of a corporation, was the owner of 15% or more
of that corporation's voting stock within the prior three years) from
engaging in a "business combination" (as defined under the DGCL) with
a Delaware corporation for three years following the date such person
became an interested stockholder unless: (i) before such person became
an interested stockholder, the board of directors of the corporation
approved the transaction or the business combination in which the
interested stockholder became an interested stockholder; (ii) upon
consummation of the transaction that resulted in the interested
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding shares
owned by persons who are both officers and directors of the
corporation and shares held by certain employee stock ownership plans
in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer); or (iii) following the
transaction in which such person became an interested stockholder, the
business combination is approved by the board of directors of the
corporation and authorized at a meeting of stockholders by the
affirmative vote of the holders of at least two-thirds of the
outstanding voting stock of the corporation not owned by the
"interested stockholder." A "business combination" generally includes
mergers, stock or assets sales and other transactions resulting in a
financial benefit to the "interested stockholders."
CERTAIN CHARTER AND BY-LAW PROVISIONS
Director's Liability. The Registrant's Certificate of
Incorporation provides that to the fullest extent permitted by the
DGCL as it currently exists or may be amended, a director of the
Registrant shall not be liable to the Registrant or its stockholders
for monetary damages for breach of fiduciary duty as a director. See
Item 12, "Indemnification of Officers and Directors."
REGISTRATION RIGHTS
Current holders of the Registrant's common stock (other than
certain members of senior management) have rights to require the
Registrant to register such shares of common stock for resale pursuant
to subscription agreements pursuant to which they acquired their
shares. If no securities of the Registrant have theretofore been sold
pursuant to a registration statement under the Securities Act, upon
the request of persons owning at least 51% of the sum of all
outstanding shares of the Class A Stock, the Class B Stock and the
Class C Stock which are then Restricted Securities, the Registrant
would be required to register the sale of such securities, subject to
certain limitations and requirements. After securities of the
Registrant have been sold pursuant to a registration statement under
the Securities Act, upon the request of persons owning at least 25% of
the sum of all outstanding shares of the Class A Stock, the Class B
Stock and the Class C Stock which are then Restricted Securities and
which have a value of at least $5,000,000, the Registrant would be
required to register the sale of such securities, subject to certain
limitations and requirements. The Registrant is not required to file
any registration statement within six months of the effective date of
any earlier registration statement and is not required to file more
than three registration statements pursuant to such requests. In
addition, under certain circumstances, should the Registrant file a
registration statement with the Securities and Exchange Commission
registering shares of the common stock of the Registrant, the owners
of Restricted Securities would be entitled to include their Restricted
Securities in such registration.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant, as a Delaware corporation, is empowered by
Section 145 of the DGCL, subject to the procedures and limitations
stated therein, to indemnify any person against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any
threatened, pending or completed action, suit or proceeding in which
such person is made or threatened to be made a party by reason of his
being or having been a director, officer, employee or agent of the
Registrant or his serving at the request of the Registrant as a
director, officer, employee or agent of another company or other
entity. The statute provides that indemnification pursuant to its
provisions is not exclusive of other rights of indemnification to
which a person may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors, or otherwise. The
Registrant's By-Laws provide for indemnification by the Registrant of
its directors and officers to the full extent authorized by the DGCL.
Pursuant to Section 145 of the DGCL, the Registrant has purchased
insurance on behalf of its present and former directors and officers
against liabilities asserted against and incurred by them in such
capacity or arising out of their status as such.
Pursuant to specific authority granted by Section 102 of the
DGCL, the Registrant's Certificate of Incorporation contains the
following provision regarding indemnification of directors:
"To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be
amended, a Director of the Corporation shall not be liable
to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a Director."
The Registrant's By-Laws contain the following provision
regarding indemnification of directors and officers:
"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."
The Registrant has entered into agreements to provide
indemnification for their directors and certain officers in addition
to the indemnification provided for in the Registrant's By-Laws. These
agreements, among other things, indemnify the directors, to the
fullest extent provided by Delaware law, for certain expenses
(including attorneys' fees), losses, claims, liabilities, judgments,
fines and settlement amounts incurred by such indemnitee in any action
or proceeding, including any action by or in the right of the
Registrant, on account of services as a director or officer of any
affiliate of the Registrant, or as a director or officer of any other
company or enterprise that the indemnitee provides services to at the
request of the Registrant.
The Management Agreement between the Company and AEA
Investors provides for indemnification of employees of AEA Investors
who serve as directors of the Registrant.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this item are set forth
on pages F-1 through F-41 and the related financial schedules are set
forth on pages S-1 through S-8.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements Filed as Part of this Report:
1. Financial Statements. See Index to Financial Statements
included on page F-1.
2. Financial Statements Schedules. See "Schedule I -
Condensed Financial Information of Registrant" and
"Schedule II - Valuation and Qualifying Accounts"
included on pages S-1 through S-8.
(b) Exhibits Filed as Part of this Report.
1. List of Exhibits. See Index of Exhibits included on
pages E-1 through E-3.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto
duly authorized.
MT Investors Inc.
(Registrant)
Date: June 30, 1997 By: /s/ William P. Donnelly
-----------------------
William P. Donnelly
Vice President, Chief Financial
Officer and Treasurer
INDEX OF EXHIBITS
-----------------
Page Number or
Exhibit No. Description Incorporation by Reference
----------- ----------- --------------------------
2.1 Stock Purchase Agreement Filed as Exhibit 2.1 to the
between AEA-MT Inc., AG fur Registration Statement, as amended,
prazisionsinstrumente and on Form S-1, of the Company (Reg.
Ciba-Geigy AG, as amended No. 33-09621) and incorporated
herein by reference.
2.2 Share Sale and Purchase Filed as Exhibit 2 to the Current
Agreement, dated May 30, Report on Form 8-K of Mettler-
1997, among Safeline Holding Toledo Holding Inc. dated June 3,
Company and Mettler-Toledo 1997 and incorporated herein by
Inc. (a Canadian reference.
corporation), Safeline
Limited and each of the
Sellers named therein
3.1.1* Restated Certificate of
Incorporation of MT Investors
Inc. dated October 11, 1996
3.1.2* Certificate of Amendment of
Restated Certificate of
Incorporation of MT Investors
Inc. dated October 15, 1996
3.1.3* Certificate of Amendment of
Restated Certificate of
Incorporation of MT Investors
Inc. dated April 1, 1997
3.2* By-laws of MT Investors Inc.
4.1 Indenture dated as of October Filed as Exhibit 4.1 to the Current
15, 1996, among MT Report on Form 8-K of Mettler-
Acquisition Corp., as Issuer, Toledo Holding Inc. dated October
Mettler-Toledo Holding Inc., 30, 1996 and incorporated herein by
as Note Guarantor, and United by reference.
States Trust Company of New
York, as Trustee
4.2 First Supplemental Indenture Filed as Exhibit 4.2 to the Current
dated as of October 15, 1996, Report on Form 8-K of Mettler-
among Mettler-Toledo, Inc., Toledo Holding Inc. dated October
Mettler-Toledo Holding Inc., 30, 1996 and incorporated herein
as Note Guarantor, and by reference.
United States Trust Company
of New York, as Trustee
10.1 Credit Agreement, dated as Filed as Exhibit 99.1 to the
of October 15, 1996, between Current Report on Form 8-K of
MT Acquisition Corp. and Mettler-Toledo Holding Inc. dated
Mettler-Toledo Holding AG, October 30, 1996 and incorporated
as borrowers, and Merrill herein by reference.
Lynch Capital Corporation,
as document agent and the
lenders party thereto
10.2 Credit Agreement Amendment Filed as Exhibit 10.2 to the Annual
No. 1 dated as of January 14, Report on Form 10-K of Mettler-
1997 between MT Acquisition, Toledo Holding Inc. dated March 31,
Mettler-Toledo Holding Inc. 1997 and incorporated herein by
and Mettler-Toledo Holding, reference.
AG, as borrowers, and Merrill
Lynch & Co., Merrill Lynch,
Pierce Fenner & Smith Inc.,
as document agent and the
lenders party thereto
10.3 Management Consulting Filed as Exhibit 10.3 to the Annual
Agreement dated as of October Report on Form 10-K of Mettler-
15, 1996 between Mettler- Toledo Holding Inc. dated March 31,
Toledo, Inc. and AEA 1997 and incorporated herein by
Investors Inc. reference.
10.4 Employment Agreement Filed as Exhibit 10.4 to the Annual
between Robert F. Spoerry and Report on Form 10-K of Mettler-
Mettler-Toledo AG, dated as Toledo Holding Inc. dated March 31,
of October 30, 1996 1997 and incorporated herein by
reference.
10.5 Loan Agreement between Robert Filed as Exhibit 10.5 to the Annual
F. Spoerry and Mettler-Toledo Report on Form 10-K of Mettler-
AG, dated as of October 7, Toledo Holding Inc. dated March 31,
1996 1997 and incorporated herein by
reference.
10.6 MT Investors Inc. Stock Option Filed as Exhibit 10.6 to the Annual
Plan Report on Form 10-K of Mettler-
Toledo Holding Inc. dated March 31,
1997 and incorporated herein by
reference.
10.7 Mettler Toledo Performance- Filed as Exhibit 10.7 to the Annual
Oriented Bonus System (POBS), Report on Form 10-K of Mettler-
effective as of 1993 Toledo Holding Inc. dated March 31,
1997 and incorporated herein by
reference.
10.8 Mettler Toledo POBS Plus -- Filed as Exhibit 10.8 to the Annual
Incentive Scheme for Senior Report on Form 10-K of Mettler-
Management of Mettler Toledo, Toledo Holding Inc. dated March 31,
dated as of November 4, 1996 1997 and incorporated herein by
reference.
10.9 Amended and Restated Credit
Agreement, dated as of October
15, 1996 between Mettler-Toledo
Inc., Mettler-Toledo Holding AG,
as Borrowers, Safeline Holding
Company as UK Borrower, Mettler-
Toledo, Inc. as Canadian Borrower
and Merrill Lynch & Co. as
Arranger and Documentation Agent,
and the Lenders thereto, Amended
and Restated as of May 29, 1996.
21.1* Subsidiaries of the Registrant
27.1 Financial Data Schedule
* Previously filed.
MT INVESTORS INC.
INDEX TO FINANCIAL STATEMENTS
Audited Consolidated Financial Statements: Page
- ----------------------------------------- ----
Independent Auditors' Report F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 F-3
Consolidated Statements of Operations for the years ended
December 31, 1994 and 1995 and for the period January 1, 1996
to October 14, 1996 and for the period October 15, 1996 to
December 31, 1996 F-5
Consolidated Statements of Changes in Net Assets / Shareholders'
Equity for the years ended December 31, 1994 and 1995 and for
the period January 1, 1996 to October 14, 1996 and for the
period October 15, 1996 to December 31, 1996 F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1994 and 1995 and for the period January 1,
1996 to October 14, 1996 and for the period October 15, 1996
to December 31, 1996 F-8
Notes to Audited Consolidated Financial Statements F-10
Unaudited Interim Consolidated Financial Statements:
Interim Consolidated Balance Sheets as of December 31, 1996
and March 31, 1997 F-34
Interim Consolidated Statements of Operations for the
three months ended March 31, 1996 and 1997 F-36
Interim Consolidated Statements of Changes in Net Assets /
Shareholders' Equity for the three months ended
March 31, 1996 and 1997 F-37
Interim Consolidated Statements of Cash Flows for the
three months ended March 31, 1996 and 1997 F-39
Notes to the Interim Consolidated Financial Statements F-40
Financial Statement Schedules:
Schedule I - Condensed Financial Information of Registrant S-1
Schedule II - Valuation and Qualifying Accounts S-8
INDEPENDENT AUDITORS' REPORT
The Board of Directors
MT Investors Inc.
We have audited the accompanying consolidated balance sheets of MT
Investors Inc. and subsidiaries (as defined in Note 1 to the Audited
Consolidated Financial Statements) as of December 31, 1995 and 1996
and the related consolidated statements of operations, net
assets/shareholders' equity and cash flows for each of the years ended
December 31, 1994 and 1995 and for the period January 1, 1996 to
October 14, 1996, the Predecessor periods, and for the period October
15, 1996 to December 31, 1996, the Successor period. In connection
with our audits of the Audited Consolidated Financial Statements, we
also have audited the financial statement schedules as listed in the
accompanying index. These Audited Consolidated Financial Statements
and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these Audited Consolidated Financial Statements and financial
statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards 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. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the Audited Consolidated Financial Statements referred
to above present fairly, in all material respects, the consolidated
financial position of MT Investors Inc. and subsidiaries as of
December 31, 1995 and 1996, and the consolidated results of their
operations and their cash flows for each of the years ended December
31, 1994 and 1995 and for the period January 1, 1996 to October 14,
1996, the Predecessor periods, and for the period October 15, 1996 to
December 31, 1996, the Successor period, in conformity with generally
accepted accounting principles in the United States of America. Also
in our opinion, the related financial statement schedules, when
considered in relation to the basic Audited Consolidated Financial
Statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
As more fully described in Note 1 to the Audited Consolidated
Financial Statements, MT Investors Inc. acquired the Mettler-Toledo
Group as of October 15, 1996 in a business combination accounted for
as a purchase. As a result of the acquisition, the Audited
Consolidated Financial Statements for the Successor period are
presented on a different basis of accounting than that of the
Predecessor periods, and therefore are not directly comparable.
KPMG Fides Peat
Zurich, Switzerland
April 18, 1997
<TABLE>
<CAPTION>
MT INVESTORS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
Predecessor Successor
----------- ------------
December 31, December 31,
1995 1996
----------- ------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 41,402 $ 60,696
Due from Ciba and affiliates 33,072 --
Trade accounts receivable, less allowances of
$9,292 in 1995 and $8,388 in 1996 159,218 151,161
Inventories 110,986 102,526
Deferred taxes 6,180 7,565
Other current assets 21,469 17,268
-------- --------
Total current assets 372,327 339,216
Property, plant and equipment, net 241,018 255,292
Excess of cost over net assets acquired, net of
accumulated amortization of $17,268 in 1995
and $982 in 1996 84,425 135,490
Long-term deferred taxes 14,312 3,916
Other assets 12,012 37,974
--------- ---------
Total assets $724,094 $771,888
========= =========
</TABLE>
<TABLE>
<CAPTION>
MT INVESTORS INC.
CONSOLIDATED BALANCE SHEETS--(Continued)
(in thousands, except per share data)
Predecessor Successor
----------- ------------
December 31, December 31,
1995 1996
------------ ------------
LIABILITIES AND NET ASSETS/SHAREHOLDERS' EQUITY
Current liabilities:
<S> <C> <C>
Trade accounts payable $ 34,389 $ 32,797
Accrued and other liabilities 107,118 115,314
Taxes payable 11,737 17,580
Deferred taxes 7,698 9,132
Bank and other loans 29,513 80,446
Notes payable to Ciba and affiliates 91,132 -
---------- --------
Total current liabilities 281,587 255,269
Long-term debt payable to Ciba and affiliates 145,097 -
Long-term debt due to third parties 3,621 373,758
Long-term deferred taxes 13,502 30,467
Other long-term liabilities 84,303 96,810
---------- --------
Total liabilities 528,110 756,304
Minority interest 2,730 3,158
Net assets/shareholders' equity:
Common stock, $0.01 par value per share:
Class A non-voting, authorized
2,233,117 shares; issued 1,899,779
at December 31, 1996 -- 19
Class B voting, authorized 1,000 shares;
issued 1,000 at December 31, 1996 -- 1
Class C non-voting, authorized
541,859 shares; issued 537,735 at -- 5
December 31, 1996
Additional paid-in capital -- 188,084
Accumulated deficit -- (159,046)
Capital employed 162,604 --
Currency translation adjustment 30,650 (16,637)
---------- --------
Total net assets/shareholders' equity 193,254 12,426
---------- --------
Commitments and contingencies
Total liabilities and net assets/shareholders' equity $724,094 $771,888
========== ========
See the accompanying notes to the Audited Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
MT INVESTORS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Predecessor Successor
------------------------------------------------ ----------------
Twelve months Twelve months For the period For the period
ended ended January 1, 1996 October 15, 1996
December 31, December 31, to October 14, to December 31,
1994 1995 1996 1996
------------------------------------------------ ----------------
<S> <C> <C> <C> <C>
Net sales $769,136 $850,415 $662,221 $ 186,912
Cost of sales 461,629 508,089 395,239 136,820
-------- -------- -------- ----------
Gross profit 307,507 342,326 266,982 50,092
Research and development 47,994 54,542 40,244 9,805
Selling, general and administrative 224,978 248,327 186,898 59,353
Amortization 6,437 2,765 2,151 1,065
Purchased research and development -- -- -- 114,070
Other charges (income), net (2,852) (701) 1,872 9,892
-------- -------- -------- ----------
Earnings (loss) before interest
and taxes 30,950 37,393 35,817 (144,093)
Interest expense 13,307 18,219 13,868 8,738
Financial expense (income), net (4,864) (8,630) (3,204) 7,245
-------- -------- -------- ----------
Earnings (loss) before taxes and
minority interest 22,507 27,804 25,153 (160,076)
Provision for taxes 8,676 8,782 10,055 (938)
Minority interest 347 768 637 (92)
-------- -------- -------- ----------
Net earnings (loss) $ 13,484 $ 18,254 $ 14,461 $(159,046)
======== ======== ========= ==========
Earnings (loss) per common share:
Weighted average number
of common shares 2,438,514 2,438,514 1,930,490 499,165
Earnings (loss) per common share $5.53 $7.49 $7.49 $ (318.62)
========= ========= ========= ==========
See the accompanying notes to the Audited Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
MT INVESTORS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS / SHAREHOLDERS' EQUITY
(in thousands, except per share data)
Predecessor
------------------------------------------
For the twelve month periods ended
December 31, 1994 and 1995 and for the
period January 1, 1996 to October 14, 1996
------------------------------------------
Currency
Capital Translation
Employed Adjustment Total
-------- ----------- -----
<S> <C> <C> <C>
Net assets at December 31, 1993 $202,643 $(9,122) $193,521
Capital transactions with Ciba and affiliates 2,002 -- 2,002
Net earnings 13,484 -- 13,484
Change in currency translation adjustment -- 19,187 19,187
-------- -------- -------
Net assets at December 31, 1994 218,129 10,065 228,194
Capital transactions with Ciba and affiliates (73,779) -- (73,779)
Net earnings 18,254 -- 18,254
Change in currency translation adjustment -- 20,585 20,585
-------- -------- -------
Net assets at December 31, 1995 162,604 30,650 193,254
Capital transactions with Ciba and affiliates (88,404) -- (88,404)
Net earnings 14,461 -- 14,461
Change in currency translation adjustment -- (6,538) (6,538)
-------- -------- -------
Net assets at October 14, 1996 $ 88,661 $24,112 $112,773
======== ======== ========
</TABLE>
See the accompanying notes to the Audited Consolidated Financial Statements
<TABLE>
<CAPTION>
MT INVESTORS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS/SHAREHOLDERS' EQUITY--(Continued)
(in thousands, except per share data)
Successor
---------------------------------------------------------------------------------------------------
For the period from October 15, 1996 to December 31, 1996
---------------------------------------------------------------------------------------------------
Common Stock
--------------------------------------------------
Class A Class B Class C Additional Currency
----------------- -------------- --------------- Paid-in Accumulated Translation
Shares Amount Shares Amount Shares Amount Capital Deficit Adjustment Total
------- ----- ------ ------ ------ ------ ---------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at October 15, 1996 -- $ -- 1,000 $ 1 -- $ -- $ -- $ -- $ -- $ 1
New issuance of shares 1,899,779 19 -- -- 537,735 5 188,084 -- -- 188,108
Net loss -- -- -- -- -- -- -- (159,046) -- (159,046)
Change in currency
translation adjustment -- -- -- -- -- -- -- -- (16,637) (16,637)
--------- ------ ----- ------ ------- ------ ---------- ---------- ----------- ---------
Balance at December 31, 1996 1,899,779 $ 19 1,000 $ 1 537,735 $ 5 $ 188,084 $ (159,046) $ (16,637) $ 12,426
========= ====== ===== ====== ======= ====== ========== ========== ========== ========
</TABLE>
See the accompanying notes to the Audited Consolidated Financial Statements
<TABLE>
<CAPTION>
MT INVESTORS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Predecessor Successor
------------------------------------------------ -----------------
Twelve months Twelve months For the period For the period
ended ended January 1, 1996 October 15, 1996
December 31, December 31, to October 14, to December 31,
1994 1995 1996 1996
------------- ------------ --------------- -----------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $13,484 $18,254 $14,461 $(159,046)
Adjustments to reconcile net
earnings (loss) to net cash
provided by operating activities:
Depreciation 27,681 30,598 19,512 7,925
Amortization 6,437 2,765 2,151 1,065
Write-off of purchased research and
development and cost of sales
associated with revaluation of
inventories -- -- -- 146,264
Net gain on disposal of long-term assets (1,396) (1,053) (768) --
Deferred taxes 740 (551) (1,934) (4,563)
Minority interest 347 768 637 (92)
Increase (decrease) in cash resulting
from changes in:
Trade accounts receivable, net (7,410) (9,979) 9,569 (10,159)
Inventories (574) (607) 1,276 3,350
Other current assets 1,636 (3,058) 14,748 (10,605)
Trade accounts payable (1,123) 1,437 (3,065) 3,415
Accruals and other liabilities, net (5,728) 13,095 5,948 32,030
--------- -------- -------- --------
Net cash provided by operating
activities 34,094 51,669 62,535 9,584
--------- -------- -------- --------
Cash flows from investing activities:
Proceeds from sale of property,
plant and equipment 12,454 4,000 1,606 736
Purchase of property, plant and equipment (24,916) (25,858) (16,649) (11,928)
Acquisition of Mettler-Toledo from Ciba -- -- -- (314,962)
Investments in other long term assets, net 162 (7,484) (1,632) 4,857
--------- -------- -------- --------
Net cash used in
investing activities (12,300) (29,342) (16,675) (321,297)
--------- -------- -------- --------
Cash flows from financing activities:
Borrowings of third party debt -- 3,983 -- 414,170
Repayments of third party debt (311) -- (13,464) --
Proceeds from issuance of common stock -- -- -- 188,108
Ciba and affiliates borrowings (repayments) (9,187) (15,693) (26,589) (184,666)
Capital transactions with Ciba and affiliates 2,002 (37,361) (7,716) (80,687)
--------- -------- -------- --------
Net cash provided by (used in)
financing activities (7,496) (49,071) (47,769) 336,925
--------- -------- -------- --------
Effect of exchange rate changes
on cash and cash equivalents 10,040 4,344 (3,394) (615)
--------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents 24,338 (22,400) (5,303) 24,597
Cash and cash equivalents:
Beginning of period 39,464 63,802 41,402 36,099
--------- -------- -------- --------
End of period $63,802 $41,402 $36,099 $60,696
========= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MT INVESTORS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS-(Continued)
(in thousands)
Predecessor Successor
------------------------------------------------ -----------------
Twelve months Twelve months For the period For the period
ended ended January 1, 1996 October 15, 1996
December 31, December 31, to October 14, to December 31,
1994 1995 1996 1996
------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C>
Supplemental disclosures of cash flow
information:
Cash paid during the year
for:
Interest $ 13,225 $ 18,927 $6,524 $17,874
Taxes 9,370 9,970 9,385 2,470
Non-cash financing and investing activities:
Due to Ciba for capital transactions -- 36,418 -- --
</TABLE>
See the accompanying notes to the Audited Consolidated Financial Statements
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands unless otherwise stated)
1. BASIS OF PRESENTATION AND ACQUISITION
MT Investors Inc. ("MT Investors") was incorporated by AEA Investors Inc.
("AEA") in December 1991. It was recapitalized to effect the
acquisition of the Mettler-Toledo Group from Ciba-Geigy AG
("Ciba") and its wholly owned subsidiary, AG fur
Prazisionsinstrumente ("AGP"). Pursuant to the terms of a stock
purchase agreement dated April 2, 1996 between MT Investors, AGP
and Ciba, on October 15, 1996 MT Investors acquired the
Mettler-Toledo Group in a transaction more fully described below.
Between the date of formation and October 15, 1996, MT Investors
had no substantive operations.
In the accompanying Audited Consolidated Financial Statements
the terms "Mettler-Toledo" or the "Company" when used in
situations pertaining to periods prior to October 15, 1996 refer
to the combined group of businesses sold by Ciba and when used in
situations pertaining to periods subsequent to October 15, 1996
refer to MT Investors Inc. and its consolidated subsidiaries. The
combined historical financial information of the business acquired
from Ciba prior to the acquisition on October 15, 1996 are
referred to as "Predecessor" while the consolidated financial
information of the Company subsequent to the date of
acquisition are referred to as "Successor."
The accompanying Audited Consolidated Financial Statements have been
prepared in accordance with United Sates generally accepted accounting
principles.
MT Investors acquired the Company on October 15, 1996 from a
subsidiary of Ciba for cash consideration of SFr. 504,996
(approximately $402,000) including dividends of SFr. 109,406
(approximately $87,100) which were paid to Ciba by the Company in
conjunction with the acquisition. In addition, the Company incurred
expenses in connection with the acquisition and related
financing of approximately $29,000, including approximately $5,500
paid to AEA, and paid approximately $185,000 to settle amounts due
to Ciba and affiliates. The Company has accounted for the
acquisition using the purchase method of accounting. Accordingly,
the costs of the acquisition were allocated to the assets acquired
and liabilities assumed based upon their respective fair values.
The excess of the cost of the acquisition over the fair value of
the net assets acquired of approximately $137,500 is being
amortized over 32 years. Because of this purchase price
allocation, the accompanying financial statements of Successor are
not directly comparable to those of the Predecessor.
The following unaudited pro forma summary presents the
consolidated results of operations of the Company as if the
acquisition had been completed as of the beginning of each of the
periods presented, after giving effect to certain adjustments,
including the depreciation and amortization of the assets acquired
based upon their fair values, increased interest expense from the
financing of the acquisition and income tax effects. The Company
allocated a portion of the purchase price to (i) in-process
research and development projects, that have economic value (see
Note 2) and (ii) the revaluation of inventories (see Note 4).
These adjustments have not been reflected in the following pro
forma summary due to their unusual and non-recurring nature.
This pro forma summary does not necessarily reflect the results
of operations as they would have been if the acquisition had been
completed as of the beginning of such periods and is not
necessarily indicative of the results which may be obtained in the
future.
<TABLE>
<CAPTION>
Pro Forma Financial Information
----------------------------------------------------
Predecessor Successor
--------------------------------- -----------------
For the period For the period
Year Ended from January 1, from October 15, 1996
December 31, 1996 to October 1996 to December
1995 14, 1996 31, 1996
------------ ---------------- -----------------
<S> <C> <C> <C>
Net sales $850,415 662,221 186,912
Net loss (5,396) (3,181) (3,182)
Loss per common share (1) N/A N/A (1.30)
- ------------------------
N/A - Not Applicable
(1) The loss per common share for the Successor has been computed assuming
the common shares issued in the Acquisition were outstanding at the
beginning of the period.
</TABLE>
The foregoing pro forma financial information does not reflect the
anticipated benefits to be derived in the future from the Company's 1996
employee reduction programs.
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Mettler-Toledo is a manufacturer and marketer of weighing instruments for
use in laboratory, industrial and food retailing applications.
The Company also manufacturers and sells certain related
laboratory measurement instruments. The Company's manufacturing
facilities are located in Switzerland, the United States, Germany
and China. The Company's principal executive offices are located
in Greifensee, Switzerland.
Principles of Consolidation
The Audited Consolidated Financial Statements include all of
the entities of the Company. All intercompany transactions and
balances have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with original
maturity dates of three months or less.
Inventories
Inventories are valued at the lower of cost or market. Cost,
which includes direct materials, labor and overhead plus indirect
overhead, is determined using the first in, first out (FIFO) or
weighted average cost methods and to a lesser extent the last in,
first out (LIFO) method.
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 years
Leasehold improvements Shorter of useful life or lease
term
Beginning January 1, 1996 the Company adopted Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." SFAS 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In addition, SFAS 121
requires that long-lived assets and certain identifiable intangibles to be
disposed of be reported at the lower of carrying amount or fair value less cost
to sell. Adoption of SFAS 121 had no material effect on the
Audited Consolidated Financial Statements.
Excess of cost over net assets acquired
The excess of purchase price over the fair value of net assets acquired,
is amortized on a straight-line basis over 32 years being the expected period
to be benefited. The Company assesses the recoverability of such amount by
determining whether the amortization of the balance over its remaining life
can be recovered from the undiscounted future operating cash flows of the
acquired operation. The amount of impairment, if any, is measured based on
projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds. The assessment of the
recoverability of the excess of cost over net assets acquired will be impacted
if estimated future operating cash flows are
not achieved.
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-(Continued)
Deferred Financing Costs
Debt financing costs, which were incurred by the Company in connection with
borrowings incurred in connection with the acquisition discussed at Note 1, are
deferred and amortized, over the life of the underlying indebtedness using the
interest method.
Taxation
The Company files its own tax returns in each jurisdiction in which it
operates. Prior to the acquisition discussed in Note 1, in certain
jurisdictions the Company filed its tax returns jointly with other Ciba
subsidiaries. The Company had a tax sharing arrangement with Ciba in these
countries to share the tax burden or benefits. Such arrangement resulted in
each company's tax burden or benefit equating to that which it would have
incurred or received if it had been filing a separate tax return.
Taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates in the respective jurisdictions in which the
Company operates that are expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred income tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
Generally, deferred taxes are not provided on the unremitted earnings of
subsidiaries outside of the United States because it is expected that these
earnings are permanently reinvested. 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.
Research and Development
Research and development costs are expensed as incurred. Research and
development costs, including customer engineering (which represents research
and development charged to customers and, accordingly, is included in cost of
sales), amounted to approximately $55,600, $62,400, $45,100 and $11,100 for the
years ended 1994 and 1995 and for the period from January 1, 1996 to October
14, 1996 and for the period from October 15, 1996 to December 31, 1996,
respectively. In connection with the acquisition discussed in Note 1 the
Company allocated, based upon independent valuations, $114,070 of the purchase
price to purchased research and development in process. Such amount was
recorded as an expense in the period from October 15, 1996 to December 31,
1996.
Currency Translation and Transactions
The reporting currency for the Audited Consolidated Financial Statements
of the Company is the United States dollar (USD). 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 USD are included in the consolidation by
translating the assets and liabilities into the reporting currency at the
exchange rates applicable at the end of the reporting year. The statements of
operations and cash flows of such non-USD functional currency operations are
translated at the monthly average exchange rates during the year. Translation
gains or losses are accumulated as a separate component of net
assets/shareholders' equity. Currency transaction gains or losses arising
from transactions of Mettler-Toledo companies in currencies other than the
functional currency are included in operations at each reporting period.
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-(Continued)
Derivative Financial Instruments
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Derivative financial
instruments in the form of currency forward and option contracts are entered
into by the Company primarily as a hedge against anticipated currency
exposures. 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 unrealized
gains and losses being recognized in financial income or expense, as
appropriate.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable,
other current assets and current liabilities approximates fair market value
because of the short term maturity of these financial instruments. It is not
practical to determine the fair value of balances with Ciba due to the related
party nature of these financial instruments. See Note 5 and Note 12 for the
fair values of the Company's derivative financial instruments and third party
debt, respectively. Other financial instruments are not significant to the
Audited Consolidated Financial Statements.
Stock Based Compensation
The Company applies Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock option plan.
Earnings per Common Share
Earnings per common share has been computed using the weighted average
number of outstanding common shares during the Successor period. Earnings per
common share for the Predecessor periods have been computed assuming the common
shares issued in the acquisition discussed in Note 1 were outstanding during
each of the periods presented.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share." The
Company has yet to determine the effect of this statement on its earnings per
share.
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 and chemical industries.
The Company performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers.
Revenue Recognition
Revenue is recognized when title to a product has transferred or services
have been rendered. Revenues from service contracts are recognized over the
contract period.
Use of Estimates
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, as well as disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those
estimates.
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
3. DUE FROM CIBA AND AFFILIATES, NET
The amount due from Ciba, net was comprised of the following:
<TABLE>
<CAPTION>
Predecessor Successor
----------- -----------
December 31, December 31,
1995 1996
---- ----
<S> <C> <C>
Cash pool deposits $ 22,239 $ --
Due from AGP, 6.5%, revolving repayment terms 10,833 --
-------- ---------
$ 33,072 $ --
======== =========
</TABLE>
Prior to the acquisition discussed in Note 1, certain Mettler-Toledo
companies participated in an arrangement with Ciba whereby excess cash was
pooled into an account maintained by Ciba. The net deposit with Ciba in
connection with this arrangement bore interest at the short-term money market
rates available to Ciba.
Prior to the acquisition Ciba also performed certain limited
administrative services on behalf of the Company. The cost of such
services, which was not charged to the Company nor included in the
Audited Consolidated Financial Statements, was not significant.
4. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
Predecessor Successor
----------- ------------
December 31, December 31,
1995 1996
---- ----
<S> <C> <C>
Raw materials and parts $ 45,523 $ 41,015
Work-in-progress 38,191 31,534
Finished goods 30,149 29,982
--------- ---------
113,863 102,531
LIFO reserve (2,877) (5)
--------- ---------
$ 110,986 $102,526
========= =========
</TABLE>
At December 31, 1995 and 1996, 8.8% and 13.2% respectively, of the
Company's inventories (certain U.S. companies only) were valued using the LIFO
method of accounting. There were no material liquidations of LIFO inventories
during the periods presented.
In connection with the acquisition discussed in Note 1, the Company
allocated approximately $32,200 of the purchase price to revalue certain
inventories (principally work-in-process and finished goods) to fair value (net
realizable value). Substantially all of such inventories were sold during the
period from October 15, 1996 to December 31, 1996.
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS
The Company may be exposed to credit losses in the event of
nonperformance by the counterparties to its currency forward and option
contracts. The Company has no reason to believe, however, that such
counterparties will not be able to fully satisfy their obligations under
these contracts.
At December 31, 1995, the Company had contracts maturing during
1996 to purchase the equivalent of approximately $23,300 and to sell the
equivalent of approximately $27,900 in various currencies. At December 31,
1996, the Company had contracts maturing during 1997 to sell the
equivalent of approximately $135,000 in various currencies in exchange
for Swiss francs. These contracts were used to limit its exposure to
currency fluctuations on anticipated future cash flows, primarily for the
delivery of United States dollars, German marks, French francs, British
pounds and Japanese yen in exchange for Swiss francs.
At December 31, 1995 and 1996, the fair value of such financial
instruments, which the Company recognized as net unrealized gains
(losses), was approximately $2,400 and $(5,100), respectively.
6. OTHER CURRENT ASSETS
Other current assets consisted of the following:
<TABLE>
<CAPTION>
Predecessor Successor
----------- ------------
December 31, December 31,
1995 1996
---- ----
<S> <C> <C>
Prepaid expenses $ 4,703 $ 5,302
Other (including in 1995 net gains
on derivative financial instruments) 16,766 11,966
-------- ---------
$ 21,469 $ 17,268
======== =========
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net, consisted of the following:
<TABLE>
<CAPTION>
Predecessor Successor
----------- ------------
December 31, December 31,
1995 1996
---- ----
<S> <C> <C>
Land $ 31,535 $ 63,514
Buildings and leasehold improvements 186,608 120,173
Machinery and equipment 237,457 75,675
Computer software 5,373 3,067
-------- --------
460,973 262,429
Less accumulated depreciation and amortization (219,955) (7,137)
-------- ---------
$241,018 $255,292
======== =========
</TABLE>
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
8. OTHER ASSETS
Other assets consisted of the following:
<TABLE>
<CAPTION>
Predecessor Successor
----------- ------------
December 31, December 31,
1995 1996
---- ----
<S> <C> <C>
Deferred financing fees, net of accumulated
amortization of $820 in 1996 $ -- $ 22,015
Bank deposits-restricted cash 4,697 5,960
Secured loans 2,911 2,805
Other 4,404 7,194
-------- ---------
$ 12,012 $ 37,974
======== =========
</TABLE>
Bank deposits-restricted cash at December 31, 1995 and 1996 principally
represented deposits collateralizing a letter of credit given by a financial
institution in connection with one of the Company's subsidiaries in the
Peoples Republic of China.
9. BANK AND OTHER LOANS
Bank and other loans consisted of the following:
<TABLE>
<CAPTION>
Predecessor Successor
----------- ------------
December 31, December 31,
1995 1996
<S> <C> <C>
Current maturities of long-term debt $ -- $ 8,968
Borrowings under revolving credit facility -- 51,928
Other short-term borrowings 19,408 19,550
Borrowings under line of credit 10,105 --
---------- ---------
$ 29,513 $ 80,446
========== =========
</TABLE>
The weighted average interest rate at December 31, 1995 on the
borrowings under the line of credit was approximately 8.0%. The weighted
average interest rate at December 31, 1996 on the borrowings under the
revolving credit facility was approximately 4.1%. The Company had available
revolving lines of credit and swingline facilities for short-term financing
of approximately $75,000 at December 31, 1996 (See Note 12).
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
10. ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities consisted of the following:
<TABLE>
<CAPTION>
Predecessor Successor
December 31, December 31,
1995 1996
------------ ------------
<S> <C> <C>
Accrued payroll and vacation $ 26,400 $ 26,239
Social benefits and payroll taxes 9,563 9,218
Severance and other cost provisions 1,890 12,783
Interest 4,731 6,858
Losses on derivative financial instruments -- 5,137
Other taxes payable 8,190 5,402
Warranty 6,420 6,803
Other liabilities 49,924 42,874
-------- --------
$107,118 $115,314
======== ========
</TABLE>
Warranties on Mettler-Toledo products are generally for one year. The
Company provides for warranty costs, which have not been significant, based
on historical experience.
11. DEBT PAYABLE TO CIBA AND AFFILIATES
The Company's debt obligations to Ciba and affiliates consisted of the
following:
Short-term borrowings are summarized as follows:
<TABLE>
<CAPTION>
Predecessor Successor
December 31, December 31,
1995 1996
---- ----
<S> <C> <C>
Unsecured notes payable:
AGP, 4.25%, due February 29,1996 $ 26,517 $ --
Due to Ciba for capital transactions 36,418 --
Other unsecured short-term debt to Ciba, varying
interest rates and maturities 28,197 --
-------- ----------
$ 91,132 $ --
======== ==========
Long-term obligations are summarized as follows:
Predecessor Successor
------------ -----------
December 31, December 31,
1995 1996
---- ----
Unsecured notes payable to Ciba and affiliates:
AGP, 8.4%, due October 14, 1996 $122,000 $ --
AGP, 6%, due October 14, 1996 20,000 --
Other unsecured long-term debt to Ciba, varying interest
rates and maturities 3,097 --
--------- -----------
$145,097 $ --
========= ===========
</TABLE>
Interest expense on debt payable to Ciba and affiliates for the years
ended December 31, 1994 and 1995 and for the period January 1, 1996 to
October 14, 1996 was $10,506, $15,693, and $10,955, respectively.
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
12. DEBT PAYABLE TO THIRD PARTIES
Long-term debt payable to third parties consist of the following:
<TABLE>
<CAPTION>
Predecessor Successor
December 31, December 31,
1995 1996
------------ ------------
<S> <C> <C>
9.75% Senior Subordinated Notes due October 1, 2006 $ - $135,000
Credit Agreement:
Term A Loans, interest at LIBOR plus 2.5%
(4.38% at December 31, 1996) payable in
quarterly installments beginning March
31, 1997 due December 31, 2002 - 92,730
Term B Loans, interest at LIBOR plus 3.00%
(8.53% at December 31, 1996) payable in
quarterly installments beginning March
31, 1997 due December 31, 2003 - 75,000
Term C(CH) and C(US) Loans, interest at
LIBOR plus 3.25% (8.78% at December 31, 1996)
payable in quarterly installments beginning
March 31, 1997 due December 31, 2004 - 72,000
Revolving credit facility - 51,928
Other 3,621 27,546
----- -------
3,621 454,204
Less current maturities - 80,446
----- -------
$3,621 $373,758
===== =======
</TABLE>
To provide a portion of the financing required for the
acquisition and for working capital and for general corporate purposes
thereafter, in October, 1996 Mettler-Toledo Holding Inc., a wholly
owned subsidiary of the Company, entered into a credit agreement with
various banks.
Loans under the credit agreement consist of: (i) Term A Loans in
an aggregate principal amount of SFr. 125,000 ($92,730 at December 31,
1996), (ii) Term B Loans in an aggregate principal amount of $75,000,
(iii) Term C(CH) loans in an aggregate principal amount of $32,000,
and (iv) Term C(US) Loans in an aggregate principal amount of $40,000
(the Term A Loans, the Term B Loans the Term C(CH) Loans and Term
C(US) Loans are referred to collectively as the "term loans"), and (v)
a multi-currency revolving credit facility that may be borrowed in an
aggregate principal amount of $140,000, and includes letter of credit
and swingline subfacilities available to certain subsidiaries (the
"revolving facility" and together with the term loans, the "credit
facilities").
Loans under the revolving facility may be repaid and reborrowed
and are due in full on February 18, 1997. The Company is required to
pay a facility fee equal to 0.05% per annum on the amount of the
revolving facility and letter of credit fees on the aggregate face
amount of letters of credit under the revolving facility. At December
31, 1996 the Company had available approximately $75,000 of additional
borrowing capacity.
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
12. DEBT PAYABLE TO THIRD PARTIES-(Continued)
The credit agreement contains covenants that, among other things,
limit the Company's ability to incur liens; merge, consolidate or
dispose of assets; make loans and investments; incur indebtedness;
engage in certain transactions with affiliates; incur certain
contingent obligations; pay dividends and other distributions; prepay
the Notes; or make capital expenditures. The credit agreement also
requires the Company to maintain a minimum net worth and a minimum
fixed charge coverage ratio, and to maintain a ratio of total debt to
EBITDA below a specified maximum.
The aggregate maturities of long-term obligations during each of
the years 1998 through 2001 are approximately $12,800, $15,600,
$19,300 and $23,000, respectively.
The estimated fair value of the Company's Senior Subordinated
Notes at December 31, 1996 was approximately $142,000. The estimated
fair value of the obligations under the credit agreement approximate
fair value due to the variable rate nature of the obligations. Fair
value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. Fair value estimates were based on the amount of future
cash flows discounted using the Company's current borrowing rate for
loans of comparable maturity. These estimates are subjective in nature
and involve uncertainties and matters of significant judgment and,
therefore, cannot be determined with precision. Changes in assumptions
could significantly affect the estimates.
13. SHAREHOLDERS' EQUITY
As of December 31, 1996, the authorized capital stock of the
Company consisted of 2,775,976 shares of Common Stock, $.01 par value
of which 2,233,117 shares were designated as Class A Common Stock,
1,000 shares were designated as Class B Common Stock and 541,859
shares were designated as Class C Common Stock. As of December 31,
1996, the Company had outstanding 1,899,779 shares of Class A Common
Stock, 1,000 shares of Class B Common Stock and 537,735 shares of
Class C Common Stock. Additionally, 333,117 shares of Class A Common
Stock are reserved for the Company's stock option plan (See Note 14).
Holders of the Company's common stock have no preemptive,
subscription or redemption rights. Except as described below, the
Company's three classes of common stock have identical rights under
the Company's Certificate of Incorporation and By-Laws.
Dividends or distributions in connection with the liquidation,
dissolution or winding up of the affairs of the Company or not paid
out of the current and accumulated earnings and profits shall be paid
in the following manner. First, exclusively to the holders of the
shares of Class A Common Stock, ratably to each such holder, until the
sum of all dividends and distributions to each holder of Class A
Common Stock equals $100 for each share of Class A Common Stock held
by such holder. After each holder of shares of Class A Common Stock
shall have received dividends and distributions totaling $100, then
exclusively to the holders of the shares of Class B Common and Class C
Common Stock ratably to each such holder until the sum of all
dividends and distributions to each holder of Class B Common Stock
and/or Class C Common Stock equals $100 for each share of Class B
Common Stock and/or Class C Common Stock held by such holder. After
each holder of Class B Common Stock and Class C Common Stock shall
have received such dividends and distributions, then to all holders of
Class A Common Stock, Class B Common Stock and/or Class C Common
Stock, ratably to each holder of such shares.
Class A and C Common Stock shareholders have no voting rights.
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
14. STOCK OPTION PLAN
Effective October 15, 1996, MT Investors adopted a stock option
plan to provide certain key employees and/or directors of the Company
additional incentive to join and/or remain in the service of the
Company as well as to maintain and enhance the long-term performance
and profitability of the Company. The plan reserves 333,117 shares of
Class A non-voting common stock of MT Investors.
Under the terms of the plan, options granted shall be
nonqualified and the exercise price, as determined by the committee,
shall not be less than 100% of the fair market value of the share of
such common stock on the date of grant. Options may not be exercised
until the fifth anniversary of the date of grant, subject to certain
acceleration clauses and expire on October 15, 2006.
Stock option activity is shown below (per share average option
price amounts in whole dollars):
<TABLE>
<CAPTION>
Option Price
-----------------------
Number Per Share Total
of Shares Average Price
--------- ------- ------
<S> <C> <C> <C>
Granted during the period October 15,
1996, to December 31, 1996 278,988 $100.00 $27,899
Exercised -- -- --
Forfeited -- -- --
------- --------- --------
Outstanding at December 31, 1996 278,988 $100.00 $27,899
======= ========= ========
Shares exerciseable at
December 31, 1996 - $ -- $ --
======= ========= ========
</TABLE>
As of the date granted, the weighted-average grant-date fair
value of the options was approximately $25.00 per share. Such
weighted-average grant-date fair value was determined using an option
pricing model assuming: (i) an expected option life of seven years,
(ii) no dividends are expected to be paid in the foreseeable future,
and (iii) a risk free interest rate of 4%.
The Company applies Accounting Standards Board Opinion No. 25 and
related interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for its stock option plan as all
options have been issued at fair market value. The Company's net loss
for the period October 15, 1996 to December 31, 1996 would not have
been materially different had compensation cost been determined
consistent with Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation".
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
15. BENEFIT PLANS
Mettler-Toledo maintains a number of retirement plans for the
benefit of its employees.
Certain companies sponsor defined contribution plans. Benefits
are determined and funded annually based upon the terms of the plans.
Contributions under these plans amounted to $9,042, $9,413, $9,484 and
$2,496 in 1994, 1995, for the period January 1, 1996 to October 14,
1996 and for the period October 15, 1996 to December 31, 1996,
respectively.
Certain companies sponsor defined benefit plans. Benefits are
also provided to employees under defined benefit plans primarily based
upon years of service and employees' compensation for certain periods
during the last years of employment.
The following table sets forth the funded status and amounts
recognized in the Audited Consolidated Financial Statements for the
Company's principal defined benefit plans at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
Predecessor Successor
------------ ---------
December 31, December 31,
1995 1996
------------ ------------
Assets exceed Accumulated Assets exceed Accumulated
accumulated benefits accumulated benefits
benefits exceed assets benefits exceed assets
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Actuarial present value of accumulated
benefit obligations:
Vested benefits $ 8,582 $90,698 $10,211 $97,639
Non-vested benefits 90 3,122 16 2,280
------- ------- ------- -------
8,672 93,820 10,227 99,919
------- ------- ------- -------
Projected benefit obligations 10,737 100,820 12,458 108,504
Plan assets at fair value 10,546 40,091 13,336 50,609
------- ------- ------- -------
Projected benefit obligations in excess
of (less than) plan assets 191 60,729 (878) 57,895
Unrecognized prior service (cost)
benefit (183) 252 -- -
Unrecognized net (losses) gains (188) (247) 22 1,479
Unrecognized transition obligations - (3,851) -- -
------- ------- ------- -------
(Prepaid) accrued pension costs $ (180) $56,883 $ (856) $59,374
======== ======= ========= =======
</TABLE>
The (prepaid) accrued pension costs are recognized in the
accompanying Audited Consolidated Financial Statements as other
long-term assets and other long term liabilities, respectively.
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
15. BENEFIT PLANS-(Continued)
The assumed discount rates and rates of increase in future
compensation level used in calculating the projected benefit
obligations vary according to the economic conditions of the country
in which the retirement plans are situated. The range of rates used
for the purposes of the above calculations are as follows:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Discount rates 6.5% to 8.0% 6.0% - 8.5%
Compensation increase rates 2.5% to 6.0% 2.0% - 6.5%
</TABLE>
The expected long term rates of return on plan assets ranged
between 9.5% and 11.0% in 1994, 9.5% and 10.0% for 1995, and 7.0% and
10.0% for 1996.
The assumptions used above have a significant effect on the
reported amounts of projected benefit obligations and net periodic
pension cost. For example, increasing the assumed discount rate would
have the effect of decreasing the projected benefit obligation and
increasing unrecognized net gains.
Increasing the assumed compensation increase rate would increase
the projected benefit obligation and decrease unrecognized net gains.
Increasing the expected long-term rate of return on investments would
decrease unrecognized net gains.
Plan assets relate principally to the Company's U.S. companies
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 all of the plans above includes the
following components:
<TABLE>
<CAPTION>
Predecessor Successor
------------------------------------------------ -----------------
Twelve months Twelve months For the period For the period
ended ended January 1, 1996 October 15, 1996
December 31, December 31, to October 14, to December 31,
1994 1995 1996 1996
------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C>
Service cost (benefits earned
during the period) $ 3,833 $ 3,668 $ 3,850 $ 1,013
Interest cost on projected benefit
obligations 6,426 7,561 6,540 1,721
Actual return on plan assets (2,725) (8,653) (6,079) (1,600)
Net amortization and deferral (170) 5,137 2,485 --
Net periodic pension expense $ 7,364 $ 7,713 $ 6,796 $ 1,134
======== ======= ======= =======
</TABLE>
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
15. BENEFIT PLANS-(Continued)
The Company's U.S. operations provide postretirement medical
benefits to their employees. Employee contributions for medical
benefits are related to employee years of service.
The following table sets forth the status of the U.S.
postretirement plans and amounts recognized in the Company's Audited
Consolidated Financial Statements at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
Predecessor Successor
----------- ---------
December 31, December 31,
1995 1996
---- ----
<S> <C> <C>
Accumulated postretirement benefit obligations:
Retired $27,682 $25,894
Fully eligible 1,196 3,033
Other 2,361 3,098
31,239 32,025
Unrecognized net loss (6,261) (540)
Unrecognized prior service benefit 692 --
Unrecognized transition obligation (1,389) --
Accrued postretirement benefit cost $24,281 $31,485
========= ========
</TABLE>
Net periodic postretirement benefit cost for the above plans
includes the following components:
<TABLE>
<CAPTION>
Predecessor Successor
------------------------------------------------ -----------------
Twelve months Twelve months For the period For the period
ended ended January 1, 1996 October 15, 1996
December 31, December 31, to October 14 to December 31,
1994 1995 1996 1996
------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C>
Service cost (benefits earned
during the period) $ 333 $ 285 $ 431 $114
Interest cost on projected benefit
obligations 2,193 2,371 1,795 472
Net amortization and deferral 82 99 343 --
-------- ------- ------- ------
Net periodic postretirement
benefit cost $2,608 $2,755 $2,569 $586
======== ======= ======= =======
</TABLE>
The accumulated postretirement benefit obligation and net
periodic postretirement benefit cost were principally determined using
discount rates of 7.3% in 1994 and 1995, and 7.6% in 1996, and health
care cost trend rates ranging from 9.5% to 12.25% in 1994, 1995, and
1996 decreasing to 5.0% in 2005.
The health care cost trend rate assumption has a significant
effect on the accumulated postretirement benefit obligation and net
periodic postretirement benefit cost. For example, in 1996 the effect
of a one-percentage-point increase in the assumed health care cost
trend rate would be an increase of $3,064 on the accumulated
postretirement benefit obligations and an increase of $71 on the
aggregate of the service and interest cost components of the net
periodic benefit cost.
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
16. TAXES
The sources of the Company's earnings (loss) before taxes and
minority interest were as follows:
<TABLE>
<CAPTION>
Predecessor
-------------------------------------------------
Twelve months Twelve months For the period
ended ended January 1, 1996
December 31, December 31, to October 14,
1994 1995 1996
-------------- --------------- ---------------
<S> <C> <C> <C>
Switzerland $ 9,855 $11,431 $21,241
Non-Switzerland 12,652 16,373 3,912
-------- ------- -------
Earnings before taxes and
minority interest $22,507 $27,804 $25,153
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Successor
----------------
For the period
October 15, 1996
to December 31,
1996
----------------
<S> <C>
United States $ (37,293)
Non-United States (122,783)
Earnings before taxes and
minority interest $(160,076)
==========
</TABLE>
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
16. TAXES-(Continued)
The provision (benefit) for taxes consists of:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Predecessor:
Year ended December 31, 1994:
Switzerland Federal $ 1,182 $ (32) $ 1,150
Switzerland Canton (State) and Local 1,215 (53) 1,162
Non-Switzerland 5,538 826 6,364
-------- ------- ------
$ 7,935 $ 741 $ 8,676
======== ======= ======
Year ended December 31, 1995:
Switzerland Federal $ 513 $ (92) $ 421
Switzerland Canton (State) and Local 481 (505) (24)
Non-Switzerland 8,339 46 8,385
-------- ------- ------
$ 9,333 $ (551) $ 8,782
======== ======= ======
For the period January 1, 1996 to October 14, 1996:
Switzerland Federal $ 2,152 $ (172) $ 1,980
Switzerland Canton (State) and Local 4,305 (344) 3,961
Non-Switzerland 5,532 (1,418) 4,114
-------- --------- -------
$ 11,989 $ (1,934) $10,055
======== ======== =======
Successor:
For the period October 15, 1996 to December 31, 1996:
United States Federal $ 475 $ (1,556) $(1,081)
United States State and Local 696 (183) 513
Non-United States 2,454 (2,824) (370)
-------- -------- -------
$ 3,625 $ (4,563) $ (938)
======== ======== =========
</TABLE>
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
16. TAXES-(Continued)
The provision for tax expense (benefit) for the years ended
December 31, 1994 and 1995 and for the period January 1, 1996 to
October 14, 1996 where the Company operated as a group of businesses
owned by Ciba differed from the amounts computed by applying the
Switzerland federal income tax rate of 9.8% to earnings before taxes
and minority interest as a result of the following:
<TABLE>
<CAPTION>
Predecessor
-----------------------------------------------------
Twelve months Twelve months For the period
ended ended January 1, 1996
December 31, December 31, to October 14,
1994 1995 1996
-------------- -------------- ---------------
<S> <C> <C> <C>
Expected tax $2,206 $2,725 $ 2,465
Switzerland Canton (state) and
local income taxes, net of
federal income tax benefit 1,048 (21) 3,573
Non-deductible intangible amortization 249 248 205
Change in valuation allowance (716) 1,603 1,235
Non-Switzerland income taxes in excess of 9.8% 5,591 4,968 2,291
Other, net 298 (741) 286
------ ------ -----
Total provision for taxes $8,676 $8,782 $10,055
====== ====== =======
</TABLE>
The provision for tax expense (benefit) for the period October
15, 1996 to December 31, 1996, subsequent to the reorganization of the
Company under MT Investors Inc. and the acquisition described in Note
1, differed from the amounts computed by applying the United States
federal income tax rate of 35% to the loss before taxes and minority
interest.
<TABLE>
<CAPTION>
Successor
----------------
For the period
October 15, 1996
to December 31,
1996
----------------
<S> <C>
Expected tax $(56,027)
United States state and local income taxes, net
of federal income tax benefit 333
Non-deductible purchased research and development 39,925
Non-deductible intangible amortization 336
Change in valuation allowance 4,662
Benefits of Non-United States income taxes less than 35% 10,037
Other, net (204)
--------
Total provision for taxes $ (938)
========
</TABLE>
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
16. TAXES-(Continued)
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities are presented below:
<TABLE>
<CAPTION>
Predecessor Successor
----------- ---------
December 31, December 31,
1995 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Inventory $ 9,706 $ 7,974
Accrued and other liabilities 6,129 7,046
Deferred loss on sale of subsidiaries 7,807 7,907
Accrued postretirement benefit costs 9,227 11,334
Accrued pension costs 6,276 7,709
Net operating loss carryforwards 10,140 15,817
Other 3,000 408
-------- ---------
Total deferred tax assets 52,285 58,195
Less valuation allowance (21,166) (46,714)
-------- ---------
Total deferred tax assets less valuation allowance 31,119 11,481
-------- ---------
Deferred tax liabilities:
Inventory 5,952 5,618
Property, plant and equipment 21,675 31,123
Other 4,200 2,858
-------- ---------
Total deferred tax liabilities 31,827 39,599
-------- ---------
Net deferred tax liability $ 708 $ 28,118
======== =========
</TABLE>
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
16. TAXES-(Continued)
The net change in the total valuation allowance, including
changes resulting from translation of such amounts from the local
functional currencies to the reporting currency and the effect of the
acquisition discussed in Note 1, for the years ended December 31, 1994
and 1995 and for the period January 1, 1996 to October 14, 1996 and
for the period October 15, 1996 to December 31, 1996 was a decrease of
$716 for the year ended December 31, 1994, an increase of $1,603 for
the year ended December 31, 1995, an increase of $1,111 for the period
January 1, 1996 to October 14, 1996 and an increase of $24,437 for the
period October 15, 1996 to December 31, 1996. Of the increase in the
valuation allowance of $24,437 during the period October 15, 1996 to
December 31, 1996, $19,882 was recognized as an increase in goodwill
resulting from the acquisition discussed in Note 1. Should a reduction
of such valuation allowance be justified in the future, the amount of
any reduction would accordingly reduce goodwill.
The Company has established valuation allowances primarily for
net operating losses, deferred losses on the sale of subsidiaries as
well as postretirement and pension costs as follows:
<TABLE>
<CAPTION>
Predecessor Successor
December 31, December 31,
1995 1996
---- ----
<S> <C> <C>
Summary of valuation allowances:
Cumulative net operating losses $10,140 $15,817
Deferred losses on sale of subsidiaries 7,807 7,907
Accrued postretirement benefit costs -- 10,786
Accrued pension costs -- 7,336
Other 3,219 4,868
-------- ---------
Total valuation allowance $21,166 $46,714
======== =========
</TABLE>
At December 31, 1996, the Company had net operating loss
carryforwards in various countries for income tax purposes of $59,076.
Of this amount, $25,131 had no expiration date, relating to
subsidiaries in Sweden, Belgium, Australia, United Kingdom, Austria,
Brazil and France. Additionally, there were operating losses at that
date in various other countries in the amount of $33,945 which expire
in varying amounts through 2011.
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. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment.
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
17. OTHER CHARGES (INCOME), NET
Other income in 1994 and 1995 primarily relates to gains from
sales of property, and in 1994 to a gain on sale of a cost basis
investment.
Other charges for the period January 1, 1996 to October 14, 1996
of $1,872 represent employee severance of $1,545 and other exit costs
of $327 associated with the closing of its Westerville, Ohio facility.
Other charges for the period October 15, 1996 to December 31, 1996
principally represent employee severance benefits associated with (i)
the Company's general headcount reduction programs, in Europe and
North America, of $4,557 which were announced during such period, and
(ii) the realignment of the analytical and precision balance business
in Switzerland of $6,205 which was internally announced in December,
1996. In connection with such programs the Company reduced its
workforce by 168 employees in 1996 and intends to further reduce its
workforce by approximately 70 employees.
18. FINANCIAL INCOME, NET
Financial income (expense) consists of the following for the
years ended December 31:
<TABLE>
<CAPTION>
Predecessor Successor
------------------------------------------------ ------------------
Twelve months Twelve months For the period For the period
ended ended ended October 15, 1996
December 31, December 31, October 14, to December 31,
1994 1995 1996 1996
------------ ------------ -------------- ----------------
<S> <C> <C> <C> <C>
Interest income $4,386 $5,388 $3,424 $ 1,079
Foreign currency transactions, net 478 3,242 (220) (8,324)
------- ------- ------- --------
Total $4,864 $8,630 $3,204 $(7,245)
======= ======= ======= ========
</TABLE>
19. 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,
1996:
1997 $11,582
1998 8,521
1999 5,494
2000 2,236
2001 1,298
Thereafter 1,447
-------
Total $30,578
=======
Rent expense for operating leases amounted to $16,493, $13,034
and $3,430 in 1995 and for the period January 1, 1996 to October 14,
1996 and for the period October 15, 1996 to December 31, 1996,
respectively.
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
19. COMMITMENTS AND CONTINGENCIES-(Continued)
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.
20. GEOGRAPHIC SEGMENT INFORMATION
The tables below shows the Company's operations by geographic
region. Transfers between geographic regions are priced to reflect
consideration of market conditions and the regulations of the
countries in which the transferring entities are located. Transfers
Earnings between Total net before Twelve months ended Net sales Net
sales by geographic sales by interest and December 31, 1994 by origin
areas origin taxes destination
<TABLE>
<CAPTION>
Transfers Earnings
between Total net before
Twelve months ended Net sales by Net sales geographic sales by interest
December 31, 1995 destination by origin areas origin and taxes
- ---------------------- ------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Switzerland (1) $ 31,992 $ 89,495 $ 133,583 $ 223,078 $ 10,516
Germany 126,527 133,772 37,056 170,828 10,034
Other Europe 215,230 192,557 776 193,333 1,665
----------- ----------- ----------- ---------- ----------
Total Europe 373,749 415,824 171,415 587,239 22,215
United States 269,034 300,244 29,877 330,121 10,111
Other Americas 56,628 33,204 64 33,268 939
----------- ----------- ----------- ---------- ----------
Total Americas 325,662 333,448 29,941 363,389 11,050
Asia and other 69,725 19,864 75 19,939 238
Eliminations -- -- (201,431) (201,431) (2,553)
----------- ----------- ----------- ---------- ----------
Totals $ 769,136 $ 739,136 $ -- $ 769,136 $ 30,950
=========== =========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Transfers Earnings
between Total net before
Twelve months ended Net sales by Net sales geographic sales by interest
December 31, 1995 destination by origin areas origin and taxes Total assets
- ---------------------- ------------ ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Switzerland (1) $ 41,820 $ 102,712 $ 159,453 $ 262,165 $ 6,316 $ 593,955
Germany 151,974 158,393 47,379 205,772 14,799 196,460
Other Europe 247,802 228,939 799 229,738 2,080 123,431
--------- --------- ---------- ---------- ---------- ---------
Total Europe 441,596 490,044 207,631 697,675 23,195 913,846
United States 263,945 298,053 29,578 327,631 7,363 257,956
Other Americas 52,966 32,732 131 32,863 950 14,474
--------- --------- ---------- ---------- ---------- ---------
Total Americas 316,911 330,785 29,709 360,494 8,313 272,430
Asia and other 91,908 29,586 97 29,683 2,331 31,777
Eliminations -- -- (237,437) (237,437) 3,554 (493,959)
--------- --------- ---------- ---------- ---------- ---------
Totals $ 850,415 $ 850,415 $ -- $ 850,415 $ 37,393 $ 724,094
========= ========= ========== ========== ========== ========
</TABLE>
MT INVESTORS INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
20. GEOGRAPHIC SEGMENT INFORMATION-(Continued)
<TABLE>
<CAPTION>
Transfers Earnings
For the period Net sales between Total net before
January 1, 1996 to by Net sales by geographic sales by interest and
October 14, 1996 destination origin areas origin taxes
- ---------------------- ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Switzerland (1) $ 32,282 $ 74,303 $ 126,423 $ 200,726 $ 17,229
Germany 104,961 114,015 35,583 149,598 9,631
Other Europe 186,823 171,061 840 171,901 1,928
------------ ------------ ------------ ----------- ----------
Total Europe 324,066 359,379 162,846 522,225 28,858
United States 217,636 246,180 22,753 268,933 8,508
Other Americas 47,473 25,925 3 25,928 618
------------ ------------ ------------ ----------- ----------
Total Americas 265,109 272,105 22,756 294,861 9,126
Asia and other 73,046 30,737 265 31,002 1,241
Eliminations -- -- (185,867) (185,867) (3,408)
------------ ------------ ------------ ----------- ----------
Totals $ 662,221 $ 662,221 $ -- $ 662,221 $ 35,817
============ ============ ============ =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Transfers Earnings
For the period Net sales between Total net before
October 15, 1996 to by Net sales by geographic sales by interest and
December 31, 1996 destination origin areas origin taxes Total assets
- ---------------------- ------------ ------------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Switzerland (1) $ 8,415 $ 15,892 $ 39,570 $ 55,462 $ (99,233) $ 432,387
Germany 29,688 29,117 10,965 40,082 (5,209) 170,845
Other Europe 58,598 59,688 485 60,173 (4,971) 126,063
----------- ----------- ----------- ----------- ----------- -----------
Total Europe 96,701 104,697 51,020 155,717 (109,413) 729,295
United States 56,405 64,109 6,731 70,840 (32,519) 477,762
Other Americas 13,436 7,371 3 7,374 (753) 17,730
----------- ----------- ------------ ----------- ----------- -----------
Total Americas 69,841 71,480 6,734 78,214 (33,327) 495,492
Asia and other 20,370 10,735 28 10,763 (1,919) 48,245
Eliminations -- -- (57,782) (57,782) 511 (501,144)
----------- ----------- ------------ ----------- ----------- -----------
Totals $ 186,912 $ 186,912 $ -- $ 186,912 $ (144,093) $ 771,888
=========== =========== ============ =========== =========== ===========
- --------------------------
(1) Includes Corporate.
(2) The effect of non-recurring acquisition charges arising from in-process
research and development projects ($114.1 million) and the revaluation of
inventories to fair value ($32.2 million) by region are as follows:
Europe $108,100
Americas 36,000
Asia/Rest of World 2,200
</TABLE>
MT INVESTORS INC.
INTERIM CONSOLIDATED BALANCE SHEETS
December 31, 1996 and March 31, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
Successor Successor
December 31, March 31,
1996 1997
(unaudited)
------------ -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 60,696 $ 40,599
Trade accounts receivable, net 151,161 152,196
Inventories 102,526 104,474
Deferred taxes 7,565 8,026
Other current assets 17,268 17,868
======= =======
Total current assets 339,216 323,163
------- -------
Property, plant and equipment, net 255,292 238,219
Excess of cost over net assets acquired, net 135,490 132,400
Long-term deferred taxes 3,916 3,720
Other assets 37,974 31,389
-------- --------
Total assets $771,888 $728,891
======== ========
</TABLE>
MT INVESTORS INC.
INTERIM CONSOLIDATED BALANCE SHEETS - (continued)
December 31, 1996 and March 31, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
Successor Successor
December 31, March 31,
1996 1997
(unaudited)
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 32,797 $ 29,888
Accrued and other liabilities 115,314 126,949
Taxes payable 17,580 16,363
Deferred taxes 9,132 8,630
Bank and other loans 80,446 54,754
-------- --------
Total current liabilities 255,269 236,584
Long-term debt due to third parties 373,758 365,369
Long-term deferred taxes 30,467 28,273
Other long-term liabilities 96,810 92,177
-------- --------
Total liabilities 756,304 722,403
======== ========
Minority interest 3,158 3,506
Shareholders' equity:
Common stock, $0.01 par value per share:
Class A non-voting, authorized
2,233,117 shares; issued 1,899,779 at December 31, 1996 and 19 19
March 31, 1997
Class B voting, authorized 1,000 shares; issued
1,000 at December 31, 1996 and March 31, 1997 1 1
Class C non-voting, authorized
541,859 shares; issued 537,735 at December 31, 1996 and 5 5
March 31, 1997
Additional paid-in capital 188,084 188,084
Accumulated deficit (159,046) (160,168)
Currency translation adjustment (16,637) (24,959)
-------- --------
Total shareholders' equity 12,426 2,982
-------- --------
Total liabilities and shareholders' equity $771,888 $728,891
======== ========
</TABLE>
See the accompanying notes to the interim consolidated financial statements
MT INVESTORS INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 1996 and 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
Predecessor Successor
March 31, March 31,
1996 1997
(unaudited) (unaudited)
----------- ----------
<S> <C> <C>
Net sales $201,373 $197,402
Cost of sales 120,979 114,120
Gross profit 80,394 83,282
-------- --------
Research and development 12,452 10,832
Selling, general and administrative 61,479 60,193
Amortization 671 1,157
Other charges, net -- 11
-------- --------
Earnings before interest
and taxes 5,792 11,089
Interest expense 4,537 9,446
Financial expense (income), net (396) 3,743
-------- --------
Earnings (loss) before taxes and
minority interest 1,651 (2,100)
Provision for taxes 648 (1,087)
Minority interest 74 109
Net earnings (loss) $ 929 $ (1,122)
======== =========
Loss per common share:
Weighted average number
of common shares -- 2,438,514
======== =========
Loss per common share -- $(0.46)
======== =========
</TABLE>
See the accompanying notes to the interim consolidated financial
statements
MT INVESTORS INC.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS / SHAREHOLDERS' EQUITY
Three months ended March 31, 1996 and 1997
(in thousands)
<TABLE>
<CAPTION>
Predecessor
---------------------------------
Three months ended March 31, 1996
---------------------------------
Currency
Capital Translation
Employed Adjustment Total
-------- ----------- --------
<S> <C> <C> <C>
Net assets at January 1, 1996 $162,604 $30,650 $193,254
Capital transactions with Ciba and affiliates 1,330 -- 1,330
Net earnings 929 -- 929
Change in currency translation adjustment -- (3,489) (3,489)
--------- ---------- --------
Net assets at March 31, 1996 $164,863 $27,161 $192,024
========= ========== ========
</TABLE>
==========================================================================
==========================================================================
MT INVESTORS INC.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS/SHAREHOLDERS'
EQUITY - (continued)
Three months ended March 31, 1996 and 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
Successor
----------------------------------------------------------------------------------------------------
Three months ended March 31, 1997
----------------------------------------------------------------------------------------------------
Common Stock Additional Currency
Class A Class B Class C Paid-in Accumulated Translation
Shares Amount Shares Amount Shares Amount Capital Deficit Adjustment Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 1,899,779 $ 19 1,000 $ 1 537,735 $ 5 $ 188,084 $ (159,046) $ (16,637) $12,426
Net loss -- -- -- -- -- -- -- (1,122) -- (1,122)
Change in currency
translation adjustment -- -- -- -- -- -- -- -- (8,322) (8,322)
--------- ----- ----- ----- ------- ----- --------- ---------- ------- ------
Balance at March 31, 1997 1,899,779 $ 19 1,000 $ 1 537,735 $ 5 $ 188,084 $ (160,168) (24,959) $ 2,982
========= ===== ===== ===== ======= ====== ========= =========== ======== =======
</TABLE>
See the accompanying notes to the interim consolidated financial statements
MT INVESTORS INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 1996 and 1997
(in thousands)
<TABLE>
<CAPTION>
Predecessor Successor
March 31, March 31,
1996 1997
(unaudited) (unaudited)
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $929 $(1,122)
Adjustments to reconcile net
earnings (loss) to net cash
provided by operating activities:
Depreciation 6,559 5,821
Amortization 671 1,157
Net gain on disposal of long-term assets (202) (53)
Deferred taxes (807) (1,446)
Minority interest 74 109
Increase (decrease) in cash resulting from changes in:
Trade accounts receivable, net (3,176) (8,557)
Inventories (684) (7,819)
Other current assets (2,690) (2,405)
Trade accounts payable 588 (1,436)
Accruals and other liabilities, net 9,860 23,832
---------- -----------
Net cash provided by operating activities 11,122 8,081
========== ===========
Cash flows from investing activities:
Proceeds from sale of property,
plant and equipment 179 431
Purchase of property, plant and equipment (4,099) (3,063)
Investments in other long term assets, net (123) (98)
---------- -----------
Net cash used in investing activities (4,043) (2,730)
========== ===========
Cash flows from financing activities:
Borrowings of third party debt 1,643 1,055
Repayments of third party debt - (23,160)
Ciba and affiliates repayments (12,748) --
Capital transactions with Ciba and affiliates (2,865) --
---------- -----------
Net cash used in financing activities (13,970) (22,105)
========== ===========
Effect of exchange rate changes
on cash and cash equivalents (1,524) (3,343)
Net decrease in cash and cash equivalents (8,415) (20,097) Cash
and cash equivalents: Beginning of period 41,402 60,696
---------- -----------
End of period $32,987 $40,599
========== ===========
</TABLE>
See the accompanying notes to the interim consolidated financial
statements
MT INVESTORS INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars unless otherwise stated)
1. BASIS OF PRESENTATION
The accompanying interim consolidated financial statements have
been prepared in accordance with United States generally accepted
accounting principles on a basis which reflects the interim
consolidated financial statements of MT Investors Inc. ("MT
Investors"). MT Investors was incorporated by AEA Investors Inc.
("AEA") in December 1991. It was recapitalized to effect the
acquisition (the "Acquisition") of the Mettler-Toledo Group from
Ciba-Geigy AG ("Ciba") and its wholly owned subsidiary, AG fr
Prezisionsinstrumente ("AGP"). Pursuant to the terms of a stock
purchase agreement dated April 2, 1996 between MT Investors, AGP and
Ciba, on October 15, 1996 MT Investors acquired the Mettler-Toledo
Group in a business combination accounted for as a purchase. Between
the date of formation and October 15, 1996, MT Investors had no
substantive operations.
In the accompanying interim consolidated financial statements the
terms "Mettler-Toledo" or the "Company" when used in situations
pertaining to periods prior to October 15, 1996 refer to the combined
group of businesses sold by Ciba and when used in situations
pertaining to periods subsequent to October 15, 1996 refer to MT
Investors and its consolidated subsidiaries. The combined historical
financial information of the business acquired from Ciba prior to the
Acquisition on October 15, 1996 are referred to as "Predecessor" while
the consolidated financial information of the Company subsequent to
the date of the Acquisition are referred to as "Successor". Because of
purchase price accounting for the Acquisition and the additional
interest expense from debt incurred to finance the Acquisition, the
accompanying interim financial statements of the Successor are not
directly comparable to those of the Predecessor.
The accompanying interim consolidated financial statements of the
Company have been prepared without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The accompanying interim consolidated financial
statements as of March 31, 1997 and for the three months ended March
31, 1996 and 1997 should be read in conjunction with the December 31,
1995 and 1996 Audited Consolidated Financial Statements and the notes
thereto included elsewhere is this Registration statement.
The accompanying unaudited interim consolidated financial
statements reflect all adjustments (consisting of only normal
recurring adjustments) which, in the opinion of management, are
necessary for a fair statement of the results of the interim periods
presented. Operating results for the three months ended March 31, 1997
are not necessarily indicative of the results to be expected for the
full year ending December 31, 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Mettler-Toledo is a manufacturer and marketer of weighing
instruments for use in laboratory, industrial and food retailing
applications. The Company also manufactures and sells certain related
laboratory measurement instruments. The Company manufacturing
facilities are located in Switzerland, the United States, Germany and
China.
Inventories
Inventories are valued at the lower of cost or market. Cost,
which includes direct materials, labor and overhead plus indirect
overhead, is determined using either the first in, first out (FIFO) or
weighted average cost method. Two companies in the U.S. use the last
in, first out (LIFO) cost method.
MT INVESTORS INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(in thousands of dollars unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Inventories - (Continued)
Inventories consisted of the following at December 31, 1996 and March 31, 1997:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
--------------- ---------------
<S> <C> <C>
Raw materials and parts $41,015 $38,795
Work in progress 31,534 33,263
Finished goods 29,982 32,433
------------ ------------
102,531 104,491
LIFO reserve
(5) (17)
------------ ------------
$102,526 $104,474
============ ============
</TABLE>
3. SUBSEQUENT EVENT
On May 30, 1997, the Company acquired Safeline Limited
("Safeline") for approximately $100 million, subject to future
adjustment, plus up to an additional $10 million for a contingent
earnout payment. Safeline, based in Manchester, U.K., is the world's
leading supplier of metal detection systems. The acquisition was
financial by amounts provided under the Amended and Restated Credit
Agreement and approximately $20 million in loan notes retained by the
sellers.
Schedule I
Schedule I - Condensed Financial Information of Registrant
MT INVESTORS INC.
BALANCE SHEET
(in thousands, except per share data)
<TABLE>
<CAPTION>
December 31,
1996
----
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 1
----------
Total current assets 1
Investment in Mettler-Toledo Holding Inc. 29,062
----------
Total assets $ 29,063
==========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C>
Shareholders' equity:
Common stock, $0.01 par value per share:
Class A non-voting, authorized
2,233,117 shares; issued 1,899,779 $ 19
Class B voting, authorized 1,000 shares; issued
1,000 1
Class C non-voting, authorized
541,859 shares; issued 537,735 5
Additional paid-in capital 188,084
Accumulated deficit (159,046)
----------
Total shareholders' equity 29,063
----------
Total liabilities and shareholders' equity $ 29,063
==========
</TABLE>
See the accompanying notes to the financial statements
MT INVESTORS INC.
STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the period
October 15, 1996
to December 31,
1996
----
<S> <C>
Equity in loss of Mettler-Toledo Holding Inc. $ (159,046)
==========
Net loss $ (159,046)
==========
Loss per common share:
Weighted average number
of common shares 499,165
Loss per common share $ (318.62)
==========
</TABLE>
See the accompanying notes to the financial statements
MT INVESTORS INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the period from October 15, 1996 to December 31, 1996
----------------------------------------------------------------------------------------------
Common Stock Additional
-------------------------------------------------------
Class A Class B Class C Paid-in Accumulated
------------------- ---------------- ----------------
Shares Amount Shares Amount Shares Amount Capital Deficit Total
--------- ------- ------- ------ ------- ------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at October 15, 1996 -- $ -- 1,000 $1 -- $ -- $ -- $ -- $ 1
New Issuance of shares 1,899,779 19 -- -- 537,735 5 188,084 -- 188,108
Net loss -- -- -- -- -- -- -- (159,046) (159,046)
--------- ---- ------ ----- ------- ----- -------- ---------- ---------
Balance at December 31, 1996 1,899,779 $19 1,000 $1 537,735 $ 5 $188,084 $(159,046) $ 29,063
========= ==== ====== ===== ======= ===== ======== ========== =========
</TABLE>
See the accompanying notes to the financial statements
MT INVESTORS INC.
STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the period
October 15, 1996
to December 31,
1996
----------
<S> <C>
Cash flows from operating activities:
Net loss $ (159,046)
Adjustments to reconcile net
loss to net cash provided
by operating activities:
Equity in loss of Mettler-Toledo Holding Inc. 159,046
------------
Net cash provided by operating activities -
------------
Cash flows from investing activities:
Investments in Mettler-Toledo Holding Inc. (188,108)
------------
Net cash used in investing activities (188,108)
------------
Cash flows from financing activities:
Proceeds from issuance of common stock 188,108
------------
Net cash provided by financing activities 188,108
------------
Net change in cash and cash equivalents -
Cash and cash equivalents:
Beginning of period 1
------------
End of period $ 1
============
</TABLE>
See the accompanying notes to the financial statements
MT INVESTORS INC.
NOTES TO THE FINANCIAL STATEMENTS
(in thousands unless otherwise stated)
1. BASIS OF PRESENTATION AND ACQUISITION
MT Investors Inc. ("MT Investors") was incorporated by AEA
Investors Inc. ("AEA") in December 1991. It was recapitalized to
effect the acquisition of the Mettler-Toledo Group from Ciba-Geigy AG
("Ciba") and its wholly owned subsidiary, AG fr Prezisionsinstrumente
("AGP"). Pursuant to the terms of a stock purchase agreement dated
April 2, 1996 between MT Investors, AGP and Ciba, on October 15, 1996
MT Investors acquired the Mettler-Toledo Group in a transaction
accounted for as a purchase. Between the date of formation and October
15, 1996, MT Investors has no substantive operations.
The accompanying financial statements have been prepared in
accordance with United Sates generally accepted accounting principles.
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.
Investment
The Company accounts for its investment in Mettler-Toledo
Holding Inc. under the equity method of accounting.
Stock Based Compensation
The Company applies Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" and related interpretations
in accounting for its stock option plan.
Earnings per Common Share Earnings per common share has been
computed using the weighted average number of outstanding common
shares during the period.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share." The Company has yet to determine the effect of this statement
on its earnings per share.
Use of Estimates The preparation of financial statements requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, as well as disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates.
MT INVESTORS INC.
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
3. SHAREHOLDERS' EQUITY
The authorized capital stock of the Company consists of 2,775,976
shares of Common Stock, $.01 par value of which 2,233,117 shares are
designated as Class A Common Stock, 1,000 shares are designated Class
B Common Stock and 541,859 shares are designated Class C Common Stock.
As of December 31, 1996, the Company had outstanding 1,899,779 shares
of Class A Common Stock, 1,000 shares of Class B Common Stock and
537,735 shares of Class C Common Stock. Additionally, 333,117 shares
of Class A Common Stock are reserved for the Company's stock option
plan (See Note 4).
Holders of the Company's common stock have no preemptive,
subscription or redemption rights. Except as described below, the
Company's three classes of common stock have identical rights under
the Company's Certificate of Incorporation and By-Laws.
Dividends or distributions in connection with the liquidation,
dissolution or winding up of the affairs of the Company or not paid
out of the current and accumulated earnings and profits shall be paid
in the following manner. First, exclusively to the holders of the
shares of Class A Common Stock, ratably to each such holder, until the
sum of all dividends and distributions to each holder of Class A
Common Stock equals $100 for each share of Class A Common Stock held
by such holder. After each holder of shares of Class A Common Stock
shall have received dividends and distributions totaling $100, then
exclusively to the holders of the shares of Class B Common and Class C
Common Stock ratably to each such holder until the sum of all
dividends and distributions to each holder of Class B Common Stock
and/or Class C Common Stock equals $100 for each share of Class B
Common Stock and/or Class C Common Stock held by such holder. After
each holder of Class B Common Stock and Class C Common Stock shall
have received such dividends and distributions, then to all holders of
Class A Common Stock, Class B Common Stock and/or Class C Common
Stock, ratably to each holder of such shares.
Class A and C Common Stock shareholders have no voting rights.
4. STOCK OPTION PLAN
Effective October 15, 1996, MT Investors adopted a stock option
plan to provide certain key employees and/or directors of the Company
additional incentive to join and/or remain in the service of the
Company as well as to maintain and enhance the long-term performance
and profitability of the Company. The plan reserves 333,117 shares of
Class A non-voting common stock of MT Investors.
Under the terms of the plan, options granted shall be
nonqualified and the exercise price, as determined by the committee,
shall not be less than 100% of the fair market value of the share of
such common stock on the date of grant. Options may not be exercised
until the fifth anniversary of the date of grant, subject to certain
acceleration clauses.
MT INVESTORS INC.
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
(in thousands unless otherwise stated)
4. STOCK OPTION PLAN-(Continued)
Stock option activity is shown below (per share average option price
amounts in whole dollars):
<TABLE>
<CAPTION>
Option Price
-------------------
Number Per Share Total
of Shares Average Price
--------- --------- -----
<S> <C> <C> <C>
Granted during the period October 15,
1996 to December 31, 1996 278,988 $100.00 $27,899
Exercised -- -- --
Forfeited -- -- --
--------- --------- -------
Outstanding at December 31, 1996 278,988 $100.00 $27,899
--------- --------- -------
Shares exerciseable at
December 31, 1996 -- $ -- $ --
========= ========= =======
</TABLE>
The Company applies Accounting Standards Board Opinion No. 25 and
related interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for its stock option plan as all
options have been issued at fair market value. The Company's net loss
for the period October 15, 1996 to December 31, 1996 would not have
been materially different had compensation cost been determined
consistent with Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation".
Schedule II
Schedule II- Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
- --------------------------- ------------------ ----------------------------- ------------- ------------
Column A Column B Column C Column D Column E
- --------------------------- ------------------ ----------------------------- ------------- ------------
Additions
-----------------------------
(1) (2)
Balance at Charged Charged to
the beginning to costs other accounts Balance at
and Deductions end of
Description of period expenses describe describe period
- --------------------------- ------------------ ------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Accounts Receivable- Note A
allowance for
doubtful
accounts:
For the period
October 15, 1996
to December 31, $9,429 $97 -- $1,138 $8,388
1996
For the period
January 1, 1996
to October 14,
1996 9,292 370 -- 233 9,429
Year ended
December 31,
1995 7,411 3,287 -- 1,406 9,292
1994 5,926 2,342 -- 857 7,411
- --------------------------- ------------- ------------------ -------------------- -------- ------------
</TABLE>
Note A
Represents excess of uncollectable balances written off
over recoveries of accounts previously written off. Additionally,
amounts are net of foreign currency translation effect of $(462),
$(409), $(375) and $(159) for the years ended 1994 and 1995 and for
the period from January 1, 1996 to October 14, 1996 and for the period
from October 15, 1996 to December 31, 1996, respectively.
