SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998,
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO
----------------
Commission File Number 1-13595
Mettler-Toledo International Inc.
- ---------------------------------------------------------------
(Exact name of registrant as specified in its
charter)
Delaware 13-3668641
(State or other jurisdiction of (IRS Employer Identification No.)
- -----------------------------------------
Incorporation or organization)
- -----------------------------------------
Im Langacher, P.O. Box MT-100
- -----------------------------------------
CH 8606 Greifensee, Switzerland
- -----------------------------------------
(Address of principal executive offices) (Zip Code)
- -----------------------------------------
- -----------------------------------------
41-1-944-22-11
- ---------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No____
The Registrant has 38,355,926 shares of Common Stock outstanding at September
30, 1998.
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Interim Consolidated Financial Statements:
Interim Consolidated Balance Sheets as of December 31, 1997 3
and September 30, 1998
Interim Consolidated Statements of Operations for the nine 4
months ended September 30, 1997 and 1998
Interim Consolidated Statements of Operations for the three 5
months ended September 30, 1997 and 1998
Interim Consolidated Statements of Shareholders' Equity 6
for the nine months ended September 30, 1997 and 1998
Interim Consolidated Statements of Cash Flows for the nine 7
months ended September 30, 1997 and 1998
Notes to the Interim Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition 11
and Results of Operations
Item 3. Quantitive and Qualitative Disclosures About Market Risk 20
Part II. OTHER INFORMATION 20
Item 1. Legal Proceedings 20
Item 2. Changes in Securities and Use of Proceeds 20
Item 3. Default upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signature 21
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED BALANCE SHEETS
As of December 31, 1997 and September 30, 1998
(In thousands, except per share data)
December 31, September 30,
1997 1998
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $23,566 $15,604
Trade accounts receivable, net 153,619 164,923
Inventories 101,047 109,970
Deferred taxes 7,584 8,930
Other current assets and prepaid expenses 24,066 21,788
-------- --------
Total current assets 309,882 321,215
Property, plant and equipment, net 235,262 228,796
Excess of cost over net assets acquired, net 183,318 190,997
Non-current deferred taxes 5,045 5,232
Other assets 15,806 17,981
-------- --------
Total assets $749,313 $764,221
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $39,342 $37,187
Accrued and other liabilities 80,844 85,681
Accrued compensation and related items 43,214 43,836
Taxes payable 33,267 33,895
Deferred taxes 10,486 10,516
Short-term borrowings and current maturities
of long-term debt 56,430 58,201
-------- --------
Total current liabilities 263,583 269,316
Long-term debt 340,334 320,193
Non-current deferred taxes 25,437 26,332
Other non-current liabilities 91,011 101,984
-------- --------
Total liabilities 720,365 717,825
Minority interest 3,549 3,492
Shareholders' equity:
Preferred stock, $0.01 par value per share;
authorized 10,000,000 shares - -
Common stock, $0.01 par value per share;
authorized 125,000,000 shares: issued
38,355,926 shares at September 30, 1998
and 38,336,014 shares at
December 31, 1997 (excluding 64,467 shares
held in treasury) 383 384
Additional paid-in capital 284,630 284,787
Accumulated deficit (224,152) (203,387)
Accumulated other comprehensive loss (35,462) (38,880)
-------- --------
Total shareholders' equity 25,399 42,904
Commitments and contingencies
-------- --------
Total liabilities and shareholders' equity $749,313 $764,221
======== ========
See the accompanying notes to the interim consolidated financial statements
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
Nine months ended September 30, 1997 and 1998
(In thousands, except per share data)
September 30, September 30,
1997 1998
(unaudited) (unaudited)
Net sales $633,743 $669,747
Cost of sales 359,080 374,594
---------- ---------
Gross profit 274,663 295,153
Research and development 34,494 33,551
Selling, general and administrative 189,594 192,844
Amortization 4,449 5,473
Purchased research and development 29,959 9,976
Interest expense 28,199 17,153
Other charges, net 7,316 1,606
---------- ---------
Earnings (loss) before taxes,
minority interest and extraordinary item (19,348) 34,550
Provision for taxes 7,296 13,552
Minority interest 375 233
---------- ---------
Earnings (loss) before extraordinary item (27,019) 20,765
Extraordinary item - debt extinguishment (9,552) -
---------- ---------
Net earnings (loss) $(36,571) $20,765
========== =========
Basic earnings (loss) per common share:
Net earnings (loss) before extraordinary item $(0.88) $0.54
Extraordinary item (0.31) -
---------- ----------
Net earnings (loss) $(1.19) $0.54
========== ==========
Weighted average number of common shares 30,686,189 38,342,651
Diluted earnings (loss) per common share:
Net earnings (loss) before extraordinary item $(0.88) $0.51
Extraordinary item (0.31) -
---------- ----------
Net earnings (loss) $(1.19) $0.51
========== ==========
Weighted average number of common shares 30,686,189 40,619,050
See the accompanying notes to the interim consolidated financial statements
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended September 30, 1997 and 1998
(In thousands, except per share data)
September 30, September 30,
1997 1998
(unaudited) (unaudited)
Net sales $215,929 $225,646
Cost of sales 121,564 126,767
---------- ---------
Gross profit 94,365 98,879
Research and development 12,050 11,536
Selling, general and administrative 63,243 63,301
Amortization 2,116 1,854
Purchased research and development - 9,976
Interest expense 9,029 5,370
Other charges, net 5,125 836
---------- ---------
Earnings before taxes and minority interest 2,802 6,006
Provision for taxes 2,959 3,334
Minority interest 127 142
---------- ---------
Net earnings (loss) $(284) $2,530
========== =========
Basic earnings (loss) per common share:
Net earnings (loss) $(0.01) $0.07
Weighted average number of common shares 30,670,134 38,355,926
Diluted earnings (loss) per common share:
Net earnings (loss) $(0.01) $0.06
Weighted average number of common shares 30,670,134 40,616,526
See the accompanying notes to the interim consolidated financial statements
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Nine months ended September 30, 1997 and 1998
(In thousands, except share data)
<TABLE>
<CAPTION>
Common Stock Accumulated
All Classes Additional Other
--------------------- Paid-in Accum. Comprehensive
Shares Amount Capital Deficit Loss Total
---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 2,438,514 $25 $188,084 $(159,046) $(16,637) $12,426
New issuance of Class A
and C shares 3,857 - 300 - - 300
Purchase of Class A
and C treasury stock (5,123) - (398) - - (398)
Comprehensive loss:
Net loss - - - (36,571) - (36,571)
Change in currency
translation adjustment - - - - (12,018) (12,018)
---------
Comprehensive loss (48,589)
---------- ---------- ---------- ---------- ----------- ----------
Balance at September 30, 1997 2,437,248 $25 $187,986 $(195,617) $(28,655) $(36,261)
========== ========== ========== ========== =========== ==========
Balance at December 31, 1997 38,336,014 $383 $284,630 $(224,152) $(35,462) $25,399
Exercise of stock options 19,912 1 157 - - 158
Comprehensive income:
Net earnings - - - 20,765 - 20,765
Change in currency
translation adjustment - - - - (3,418) (3,418)
---------
Comprehensive income 17,347
---------- ---------- ---------- ---------- ----------- ----------
Balance at September 30, 1998 38,355,926 $384 $284,787 $(203,387) $(38,880) $42,904
========== ========== ========== ========== =========== ==========
See the accompanying notes to the interim consolidated financial statements
</TABLE>
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1997 and 1998
(In thousands)
September 30, September 30,
1997 1998
(unaudited) (unaudited)
Cash flows from operating activities:
Net earnings (loss) $(36,571) $20,765
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation 17,784 18,022
Amortization 4,449 5,473
Charges for purchased research and
development and cost of sales associated
with revaluation of inventories 32,013 9,976
Extraordinary item - debt extinguishment 9,552 -
Net gain on disposal of long-term assets (126) (2,495)
Deferred taxes (6,804) (883)
Minority interest 375 233
Increase (decrease) in cash resulting from changes in:
Trade accounts receivable, net (920) (5,681)
Inventories (4,715) (4,170)
Other current assets (3,404) 3,040
Trade accounts payable (7,344) (3,468)
Accruals and other liabilities, net 25,987 (2,272)
-------- --------
Net cash provided by operating activities 30,276 38,540
-------- --------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 15,913 15,938
Purchase of property, plant and equipment (13,299) (17,348)
Acquisitions (74,908) (14,945)
Other investing activities (6,679) (885)
-------- --------
Net cash used in investing activities (78,973) (17,240)
-------- --------
Cash flows from financing activities:
Proceeds from borrowings 314,657 20,035
Repayments of borrowings (289,392) (49,513)
New issuance of shares 300 158
Purchase of treasury stock (398) -
-------- --------
Net cash provided by (used in)
financing activities 25,167 (29,320)
-------- --------
Effect of exchange rate changes on cash and cash
equivalents (4,008) 58
-------- --------
Net decrease in cash and cash equivalents (27,538) (7,962)
Cash and cash equivalents:
Beginning of period 60,696 23,566
-------- -------
End of period $33,158 $15,604
======== =======
See the accompanying notes to the interim consolidated financial statements
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(In thousands unless otherwise stated)
1. BASIS OF PRESENTATION
Mettler-Toledo International Inc. ("Mettler-Toledo" or the "Company") is a
global supplier of precision instruments and 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 analytical
and measurement technologies. The Company's manufacturing facilities are located
in Switzerland, the United States, Germany, the United Kingdom and China. The
Company's principal executive offices are located in Greifensee, Switzerland.
The accompanying interim consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States of
America on a basis which reflects the interim consolidated financial statements
of the Company. The interim consolidated financial statements 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 interim consolidated financial statements as of September 30,
1998 and for the nine and three month periods ended September 30, 1997 and 1998
should be read in conjunction with the December 31, 1996 and 1997 consolidated
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
The accompanying 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 nine and three month
periods ended September 30, 1998 are not necessarily indicative of the results
to be expected for the full year ending December 31, 1998.
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.
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 methods and to a
lesser extent the last in, first out (LIFO) method.
Inventories consisted of the following at December 31, 1997 and
September 30, 1998:
December 31, September 30,
1997 1998
----------- ------------
Raw materials and parts $42,435 $42,726
Work in progress 29,746 34,940
Finished goods 28,968 32,357
----------- -----------
101,149 110,023
LIFO reserve (102) (53)
----------- -----------
$101,047 $109,970
=========== ===========
Earnings (Loss) Per Common Share
Effective December 31, 1997, the Company adopted the Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share". Accordingly,
basic and diluted earnings (loss) per common share data for each period
presented have been determined in accordance with the provisions of SFAS 128. In
accordance with the treasury stock method, the Company has included 2,276,399
and 2,260,600 equivalent shares related to 4,282,718 outstanding options to
purchase shares of common stock, as described in Note 11 in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, in the calculation of
diluted weighted average number of common shares for the nine and three month
periods ended September 30, 1998, respectively. Such common stock equivalents
were not included in the computation of diluted loss per common share for the
periods ended September 30, 1997, as the effect is antidilutive. The Company
retroactively adjusted its weighted average common shares for the purpose of the
basic and diluted loss per common share computations for the 1997 periods
pursuant to SFAS 128 and Securities and Exchange Commission Staff Accounting
Bulletin No. 98 issued in February 1998.
Reporting Comprehensive Income
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS 130
requires that changes in the amounts of certain items, including foreign
currency translation adjustments, be shown in the financial statements. The
Company has displayed comprehensive income and its components in the Interim
Consolidated Statements of Shareholders' Equity. Prior year financial statements
have been restated to reflect the application of SFAS 130 as required by the
standard. The adoption of SFAS 130 did not have a material effect on the
Company's consolidated financial statements.
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
3. Business Combination
In July 1998, the Company acquired Bohdan Automation Inc., a leading supplier of
laboratory automation and automated synthesis products. The Company incurred a
charge of $10.0 million immediately following the acquisition based upon an
independent valuation for purchased research and development costs for products
being developed that have not established technological feasibility as of the
date of the acquisition which, if unsuccessful, have no alternative future use
in research and development activities or otherwise. The independent valuation
of the purchased research and development costs has been based upon a "stage
completion" approach to allocate value associated with the research and
development projects between the completed portion and the portion to be
completed by the Company. The "stage completion" approach is consistent with
recent guidance provided in a letter from the SEC Chief Accountant to the AICPA
SEC Regulations Committee. The Company believes the independent valuation for
purchased research and development costs was calculated in accordance with
Statement of Financial Accounting Standards No. 2, "Accounting for Research and
Development Costs", as interpreted by FASB Interpretation No. 4 and recent SEC
guidance. The Company expects that the projects underlying these research and
development efforts will be substantially complete over the next two years.
4. Financial Instruments
The Company has continued to designate certain of its Swiss franc debt as a
hedge of its net asset positions in Swiss francs. In this respect, during 1998
the Company has also entered into certain forward contracts maturing in October
1998 to sell SFr 61.4 million (approximately $44.6 million at September 30,
1998). Any changes in the fair value of the forward contracts and the debt are
recorded in comprehensive income and offset changes in the translated value of
the net assets which they hedge.
<PAGE>
Item 2. 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 Unaudited Interim
Consolidated Financial Statements included herein.
General
The accompanying interim consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States of
America on a basis which reflects the interim consolidated financial statements
of Mettler-Toledo. Operating results for the nine and three month periods ended
September 30, 1998 are not necessarily indicative of the results to be expected
for the full year ending December 31, 1998.
In July 1998, the Company acquired Bohdan Automation Inc., a leading supplier of
laboratory automation and automated synthesis products. The Company incurred a
charge of $10.0 million immediately following the acquisition based upon an
independent valuation for purchased research and development costs for products
being developed that have not established technological feasibility as of the
date of the acquisition which, if unsuccessful, have no alternative future use.
The Company expects that the projects underlying these research and development
efforts will be substantially complete over the next two years.
In the second quarter of 1998, the Company filed a registration statement
covering shares of its common stock sold by certain selling stockholders which
was declared effective on June 29, 1998 by the U.S. Securities and Exchange
Commission (the "Secondary Offering"). Pursuant to this registration statement
the sale of 11,464,400 shares, including the underwriters' over-allotment
option, was completed in July 1998. No directors, executive officers or other
employees sold shares and the Company did not sell shares or receive proceeds,
in the Secondary Offering. The Company incurred a charge of $0.7 million in
conjunction with the Secondary Offering during the second quarter of 1998.
During the fourth quarter of 1997, the Company completed its initial public
offering of 7,666,667 shares of Common Stock, including the underwriters'
over-allotment option, (the "Offering") at a per share price equal to $14.00.
The Offering raised net proceeds, after underwriters' commission and expenses,
of approximately $97.3 million. In connection with the Offering, the Company
effected a merger by and between it and its direct wholly owned subsidiary,
Mettler-Toledo Holding Inc., whereby Mettler-Toledo Holding Inc. was merged with
and into the Company (the "Merger"). In connection with the Merger, all classes
of the Company's previous outstanding common stock were converted into
30,669,347 shares of a single class of Common Stock. Concurrently with the
Offering, the Company entered into a bank credit agreement (the "Credit
Agreement"), borrowings from which, along with the proceeds from the Offering,
were used to repay substantially all of the Company's then existing debt
(collectively, the "Refinancing"). The Company also terminated its management
consulting agreement with AEA Investors Inc.
On May 30, 1997, the Company acquired Safeline Limited. The purchase price was
(pound)63.7 million (approximately $104.4 million at May 30, 1997), including a
post-closing adjustment of (pound)1.9 million which was paid in October 1997 and
an earn-out of (pound)0.8 million which was paid in June 1998. Safeline, based
in Manchester, U.K., is the world's largest manufacturer and marketer of metal
detection systems for companies that produce and package goods in the food
processing, pharmaceutical, cosmetics, chemicals and other industries.
Safeline's metal detectors can also be used in conjunction with the Company's
checkweighing products for important quality and safety checks in these
industries. The Safeline Acquisition was financed by borrowings under the
Company's then-existing credit facility together with the issuance of
(pound)13.7 million (approximately $22.4 million at May 30, 1997) of seller loan
notes which mature May 30, 1999. At September 30, 1998 (pound)4.5 million
(approximately $7.6 million at September 30, 1998) remained outstanding under
the seller loan notes.
Recently, economic conditions in emerging markets have deteriorated
significantly and some emerging markets are experiencing recessionary trends,
severe currency devaluations and inflationary prices. Moreover, economic
problems in individual markets are increasingly spreading to other economies,
adding to the adverse conditions facing nearly all emerging markets. The Company
remains committed to emerging markets, particularly those in Asia, Latin America
and Eastern Europe. The Company believes emerging markets will provide
opportunities for growth in the long term based upon the movement toward
international quality standards, the need to upgrade mechanical scales to
electronic versions and the establishment of local production facilities by the
Company's multinational client base. However, the Company expects current
economic conditions will affect its financial results in these markets for the
foreseeable future.
Results of Operations
Net sales were $669.7 million and $225.6 million for the nine and three month
periods ended September 30, 1998 compared to $633.7 million and $215.9 million
for the corresponding periods in the prior year. This reflected increases of 8%
and 5% in local currency (5% for the nine month period absent the Safeline
Acquisition) for the nine and three month periods, respectively. Results during
the nine month period were negatively impacted by the strengthening of the U.S.
dollar against other currencies. Net sales in U.S. dollars during the nine and
three month periods increased 6% and 5%, respectively.
Net sales in Europe increased 12% and 10% in local currencies during the nine
and three month periods ended September 30, 1998, respectively, versus the
corresponding periods in the prior year. The Company has continued to experience
favorable sales trends in Europe, which began in the second half of 1997, as a
result of the strengthening of the European economy. Net sales in local
currencies during the nine and three month periods in the Americas increased 10%
and 7%, respectively, due to improved market conditions across most product
lines, offset in part by weakness in Latin America particularly in the third
quarter. Net sales in local currencies in the nine and three month periods in
Asia and other markets decreased 8% and 14%, respectively. The sales decline in
Asia for the nine months ending September 30, 1998 results in part from a
decline in net sales throughout the period in Southeast Asia and Korea. In
addition, during the three months ending September 30, 1998, the Company has
also experienced a decline in net sales in Japan. The Company's sales and
operating results in Asia and other emerging markets have deteriorated due to
poor economic conditions. These results in U.S. dollar terms have also been
affected by severe currency devaluations. The Company anticipates that market
conditions in Asia and other emerging markets will continue to adversely affect
sales and that margins in that region will be reduced. The Company believes that
its sales growth on a U.S. dollar basis was reduced by 1 to 2 percentage points
for the nine months ended September 30, 1998 as a result of these poor economic
conditions and devaluations.
The operating results for Safeline (which were included in the Company's results
from May 31, 1997) would have had the effect of increasing the Company's net
sales by an additional $19.0 million for the nine month period ended September
30, 1997, if included from January 1, 1997. Additionally, Safeline's operating
results during the same period would have increased the Company's Adjusted
Operating Income (gross profit less research and development and selling,
general and administrative expenses before amortization and non-recurring costs)
by $4.4 million.
Gross profit as a percentage of net sales increased to 44.1% for the nine months
ended September 30, 1998, compared to 43.3% for the nine months ended September
30, 1997. Gross profit as a percentage of net sales increased to 43.8% for the
three months ended September 30, 1998, compared to 43.7% for the corresponding
period in the prior year. The 1997 nine month period includes a $2.1 million
non-cash charge associated with the excess of fair value over historical cost
for inventories acquired in the Safeline acquisition.
Research and development expenses as a percentage of net sales decreased to 5.0%
and 5.1% for the nine and three months ended September 30, 1998, respectively,
compared to 5.4% and 5.6% for the respective corresponding periods in the prior
year. However, the local currency spending level remained relatively constant
for the nine month period.
Selling, general and administrative expenses as a percentage of net sales
decreased to 28.8% for the nine months ended September 30, 1998, compared to
29.9% for the corresponding period in the prior year. Selling, general and
administrative expenses as a percentage of sales decreased to 28.1% for the
three months ended September 30, 1998, compared to 29.3% for the three months
ended September 30, 1997. These decreases primarily reflect the benefits of
ongoing cost efficiency programs.
Adjusted Operating Income was $68.8 million, or 10.3% of sales, for the nine
months ended September 30, 1998 compared to $52.6 million, or 8.3% of sales, for
the corresponding period in the prior year, an increase of 30.6%. Adjusted
Operating Income was $24.0 million, or 10.7% of sales, for the three months
ended September 30, 1998 compared to $19.1 million, or 8.8% of sales, for the
three months ended September 30, 1997, an increase of 26.1%. The 1997 nine month
period excludes the previously noted charge of $2.1 million for the revaluation
of inventories to fair value in connection with the Safeline acquisition.
Interest expense decreased to $17.2 million and $5.4 million for the nine and
three month periods ended September 30, 1998, compared to $28.2 million and $9.0
million for the corresponding periods in the prior year. The decreases were
principally due to benefits received from the Offering, the Refinancing and cash
flow provided by operations.
Other charges, net of $1.6 million and $0.8 million for the nine and three month
periods ended September 30, 1998 compared to other charges, net of $7.3 million
and $5.1 million for the corresponding periods in the prior year, respectively.
The 1998 nine month amount includes a one-time charge of $0.7 million relating
to the Secondary Offering. The 1998 nine month amount also includes gains on
asset sales offset by other charges. The 1997 period includes restructuring
related charges of $3.3 million and other charges of $3.5 million ($2.9 million
after tax) and $0.2 million for the nine and three month periods ended September
30, 1997, respectively, relating to (i) certain derivative financial instruments
acquired in 1996 and closed in 1997 and (ii) foreign currency exchange losses
resulting from certain unhedged bank debt denominated in foreign currencies.
Such derivative financial instruments and such unhedged bank debt are no longer
held pursuant to current Company policy.
The provision for taxes is based upon the Company's estimated annual effective
tax rate for the related period. During the three month period ended September
30, 1998 the Company has lowered its estimated annual effective tax rate to
approximately 30% for the full year 1998, before purchased research and
development costs that are non-deductible. This change in estimate had the
effect of decreasing the provision for taxes by approximately $1.5 million
during the three month period ended September 30, 1998. The estimated annual
effective tax rate for 1998 also includes a benefit of approximately 5
percentage points based upon a change in Swiss tax law which will only benefit
the 1998 period.
The extraordinary loss of $9.6 million in the nine month period ended September
30, 1997 represents charges for the write-off of capitalized debt issuance fees
and related expenses associated with a previous credit facility.
Net earnings excluding the expenses for purchased research and development and
the Secondary Offering were $31.4 million and $12.5 million for the nine and
three month periods ended September 30, 1998, respectively, compared to net
earnings before non-recurring items of $10.5 million and $3.2 million for the
corresponding periods in the prior year. Such non-recurring items in 1997
include the previously mentioned charges for purchased research and development,
the revaluation of inventories to fair value, restructuring, losses relating to
derivative financial instruments and unhedged bank debt denominated in foreign
currencies, and the extraordinary item - debt extinguishment. Including these
items, the net earnings for the nine and three month periods ended September 30,
1998 were $20.8 million and $2.5 million, respectively, compared with net losses
in the comparable 1997 periods of $36.6 million and $0.3 million, respectively.
Liquidity and Capital Resources
The Credit Agreement provides for term loan borrowings in aggregate principal
amounts of $95.9 million, SFr 80.7 million (approximately $58.1 million at
September 30, 1998) and (pound)20.4 million (approximately $34.9 million
at September 30, 1998) that are scheduled to mature in 2004, a Canadian revolver
with availability of CDN $26.3 million which is scheduled to mature in 2004,
and a multi-currency revolving credit facility with availability of $400.0
million which is also scheduled to mature in 2004. At September 30,
1998, the Company had borrowings of $351.5 million under the Credit Agreement
and $26.9 million under various other arrangements. The Company's total
availability under the multi-currency revolving credit facility and the
Canadian revolver was $239.2 million as of September 30, 1998. Under the Credit
Agreement, amounts outstanding under the term loans amortize in quarterly
installments. In addition, the Credit Agreement obligates the Company to make
mandatory prepayments in certain circumstances with the proceeds of asset sales
or issuance of capital stock or indebtedness and with certain excess cash flow.
The Credit Agreement imposes certain restrictions on 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 Credit Agreement is secured by certain assets of the
Company. The Credit Agreement restricts the Company's ability to pay
dividends to its shareholders.
At September 30, 1998, approximately $111.6 million of the borrowings under the
Credit Agreement 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
amounting to approximately $266.8 million at September 30, 1998. 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. In addition, because the Company borrows in a variety of
currencies, its debt balances in U.S. dollars will fluctuate due to changes in
exchange rates. See "Effect of Currency Fluctuations" below.
The Company's cash provided by operating activities increased from $30.3 million
in the nine months ended September 30, 1997 to $38.5 million in the nine months
ended September 30, 1998. The increase resulted principally from improved
Adjusted Operating Income and lower interest costs resulting from the Offering,
the Refinancing and reduced debt levels.
At September 30, 1998, consolidated debt, net of cash, was $362.8 million.
The Company continues to explore potential acquisitions to expand its product
portfolio and improve its distribution capabilities. In connection with any
acquisition, the Company may incur additional indebtedness.
During the nine months ended September 30, 1998, the Company spent approximately
$15.0 million in cash on acquisitions. These purchases were funded from cash
generated from operations and additional borrowings. The Company may be
required to make additional earn-out payments relating to certain of these
acquisitions in the future.
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 Fluctuations
Because the Company conducts operations in many countries, its operating income
can be significantly affected by fluctuations in currency exchange rates. Swiss
franc-denominated expenses represent a much greater percentage of the Company's
operating expenses than Swiss franc-denominated sales represent of total net
sales. In part, this is because most of the Company's manufacturing costs in
Switzerland relate to products that are sold outside of Switzerland. Moreover, a
substantial percentage of the Company's research and development expenses and
general and administrative expenses are incurred in Switzerland. Therefore, if
the Swiss franc strengthens against the Company's major trading currencies
(e.g., the U.S. dollar, the Euro, other major European currencies and the
Japanese Yen) the Company's operating profit is adversely affected. The Company
also has significantly more sales in European currencies (other than the Swiss
franc) than the Company does expenses. Therefore, when European currencies
weaken against the U.S. dollar and the Swiss franc, it decreases the Company's
operating profits. In recent years, the Swiss franc and other European
currencies have generally moved in a consistent manner versus the U.S. dollar.
Therefore, the Company's operating profits have not been materially affected by
movements in the U.S. dollar exchange rate versus European currencies. In
addition to the effects of exchange rate movements on operating profits, the
Company's debt levels can fluctuate due to changes in exchange rates,
particularly between the U.S. dollar and the Swiss franc.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ( "SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
Management has not determined the effect of the adoption of SFAS 133.
Recent SEC Announcements
On September 28, 1998, the SEC Chairman raised the concern that U.S. reporting
companies were classifying an ever-growing portion of the acquisition price for
acquisitions as purchased in-process research and development. The SEC Chief
Accountant has also written a letter to the AICPA SEC Regulations Committee to
express concerns regarding purchased in-process research and development.
Amongst other items, the Chief Accountant's letter has provided guidance upon a
stage completion approach to allocate value associated with the research and
development projects between the completed portion at the date of acquisition,
and the portion to be completed by the acquirer. Purchased in-process research
and development represents the value assigned in a purchase business combination
to research and development projects of the acquired business that were
commenced but not yet completed at the date of acquisition and which, if
unsuccessful, have no alternative future use in research and development
activities or otherwise. In accordance with Statement of Financial Accounting
Standards No. 2, "Accounting for Research and Development Costs", as interpreted
by FASB Interpretation No. 4, amounts assigned to purchased in-process research
and development meeting the above criteria must be charged to expense at the
date of consummation of the purchase business combination. The Company has
recorded a charge for purchased in-process research and development in the third
quarter of 1998 relating to the acquisition of Bohdan Automation Inc. The
Company believes that this charge was calculated in accordance with U.S. GAAP
and recent SEC guidance. However, if the SEC were to adopt a different standard
on a retroactive basis than that applied by the Company or object to the
Company's application of the recent SEC guidance, the Company could be required
to restate its earnings. Moreover, any adjustment could result in earnings in
the future being reduced by additional goodwill amortization. The Company
recorded similar charges in its 1996 and 1997 consolidated financial statements
relating to prior acquisitions. These consolidated financial statements were
audited by its independent accountants.
Year 2000 Issue
The Company has in place detailed programs to address Year 2000 readiness
internally and with certain suppliers. The Year 2000 issue is the result of
computer logic that was written using two digits rather than four to define the
applicable year. Any computer logic that processes date-sensitive information
may recognize dates using "00" as the year 1900 rather than the year 2000,
which could result in miscalculations or system or equipment failures.
Pursuant to the Company's readiness programs, all major categories of
information technology systems and non-information technology systems (i.e.,
equipment with embedded microprocessors) in use by the Company, including
manufacturing, sales, financial and human resources, are being inventoried and
assessed. In addition, plans have been developed for the required systems
modifications or replacements. With respect to its information technology
systems, the Company has completed the entire assessment phase and most of the
remediation phase. The remediation phase has been completed for most major
facilities with the exception of facilities in Spain, Sweden and certain U.S.
and German facilities. With respect to its non-information technology systems,
the Company has completed the assessment phase and nearly all of the remediation
phase. Selected areas, both internal and external, will be tested to assure the
integrity of the Company's remediation programs. The testing is expected to be
completed by September 1999. The Company plans to have all internal
mission-critical information technology and non-information technology systems
Year 2000 compliant by September 1999.
The Company has also reviewed its products, including products sold in recent
years, to determine if they are Year 2000 compliant. In its current product line
the Company believes that most of its products are Year 2000 compliant. For
products currently in use, the Company is reviewing the risks by product item
with many customers and in many instances has suggested that the customer
replace the older product.
The Company is also communicating with its major suppliers to assess the
potential impact on the Company's operations if those parties fail to become
Year 2000 compliant in a timely manner. While this process is not yet complete,
based upon responses to date, it appears that many of those suppliers have only
indicated that they have in place Year 2000 readiness programs, without
specifically confirming that they will be Year 2000 compliant in a timely
manner. Risk assessment, readiness evaluation, action plans and contingency
plans related to the Company's significant suppliers are expected to be
completed by September 1999.
The costs incurred to date related to its Year 2000 activities have not been
material to the Company, and, based upon current estimates, the Company does not
believe that the total cost of its Year 2000 readiness programs will have a
material adverse impact on the Company's results of operations or financial
condition. The total costs are not easy to quantify since many of the steps the
Company is taking relate to ongoing systems updating, a small component of which
relates to Year 2000 compliance. In certain instances, the Company has
accelerated such updates. As a result of its ongoing systems updating, the
Company does not expect to realize a significant reduction in related
expenditures once the work on Year 2000 compliance is completed.
The Company's readiness programs also include the development of contingency
plans to protect its business and operations from Year 2000-related
interruptions. These plans are expected to be complete by September 1999 and, by
way of examples, are expected to include back-up procedures, identification of
alternate suppliers, where possible, and increases in safety inventory levels.
Based upon the Company's current assessment of its non-information technology
systems, the Company does not believe it necessary to develop an extensive
contingency plan for those systems. There can be no assurances, however, that
any of the Company's contingency plans will be sufficient to handle all problems
or issues which may arise.
The Company believes that it is taking reasonable steps to identify or remediate
and address those matters that could cause serious interruptions in its business
and operations due to Year 2000 issues. However, delays in the implementation of
new systems, a failure to fully identify all Year 2000 dependencies in the
Company's systems and in the systems of its suppliers of components, customers
and financial institutions, a failure of such third parties to adequately
address their respective Year 2000 issues, or a failure of a contingency plan
could have a material adverse effect on the Company's business, financial
condition and results of operations. For example, the Company would experience a
material adverse impact on its business if significant suppliers of components
were unable to deliver on a timely basis, if major utilities failed, causing the
Company to lose production capabilities or limit other operations, a significant
portion of the Company's billing system was not functioning causing a working
capital deficit or if costs increased from warranty claims or customer claims of
product liability.
The statements set forth herein concerning Year 2000 issues which are not
historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. In particular, the costs associated with the
Company's Year 2000 programs and the time-frame in which the Company plans to
complete Year 2000 modifications are based upon management's best estimates.
These estimates were derived from internal assessments and assumptions of future
events. These estimates may be adversely affected by the continued availability
of personnel and system resources, and by the failure of significant third
parties to properly address Year 2000 issues. Therefore, there can be no
guarantee that any estimates, or other forward-looking statements will be
achieved, and actual results could differ significantly from those contemplated.
European Monetary Union
Within Europe, the European Economic and Monetary Union (the "EMU") will
introduce a new currency, the Euro, on January 1, 1999. The new currency is in
response to the EMU's policy of economic convergence to harmonize trade policy,
eliminate business costs associated with currency exchange and to promote the
free flow of capital, goods and services. Switzerland is not part of the EMU.
On January 1, 1999, the participating countries are scheduled to adopt the Euro
as their local currency, initially available for currency trading on currency
exchanges and noncash (banking) transactions. The existing local currencies, or
legacy currencies, will remain legal tender through January 1, 2002. Beginning
on January 1, 2002, Euro-denominated bills and coins will be issued for cash
transactions. For a period of six months from this date, both legacy currencies
and the Euro will be legal tender. On or before July 1, 2002, the participating
countries will withdraw all legacy currency and use exclusively the Euro.
The Company has recognized the introduction of the Euro as a significant event
with potential implications for existing operations. Currently, the Company
operates in all of the participating countries in the EMU. The Company expects
nonparticipating European Union countries, such as Great Britain, where the
Company also has operations, may eventually join the EMU.
The Company has committed resources to conduct risk assessments and to take
corrective actions, where required, to ensure the Company is prepared for the
introduction of the Euro. The Company has undertaken a review of the Euro
implementation and has concentrated on areas such as operations, finance,
treasury, legal, information management, procurement and others, both in
participating and nonparticipating European Union countries where the Company
operates. Also, a review of existing legacy accounting and business systems and
other business assets have been reviewed for Euro compliance, including
assessing any risks from third parties. Progress regarding Euro implementation
is reported periodically to management.
Because of the staggered introduction of the Euro regarding noncash and cash
transactions, the Company has developed its plans to address its accounting and
business systems first and its business assets second. The Company expects to be
Euro compliant within its accounting and business systems by the end of 1999 and
compliant within its other business assets prior to the introduction of the Euro
bills and coins. Compliance in participating and nonparticipating countries will
be achieved primarily through upgraded systems, which were previously planned to
be upgraded. Remaining systems will be modified to achieve compliance. The
Company does not currently expect to experience any significant operational
disruptions or to incur any significant costs, including any currency risk,
which could materially affect the Company's liquidity or capital resources. The
Company is preparing plans to address issues within the transitional period when
both legacy and Euro currencies may be tendered.
The Company is reviewing its pricing strategy throughout Europe due to the
increased price transparency created by the Euro and is attempting to adjust
prices in some of its markets. The Company is also encouraging its suppliers,
even in Switzerland, to commerce in Euro. The Company does not believe that
the effect of these adjustments will be material.
The Company has a disproportionate amount of its costs in Swiss francs relative
to sales. Historically, the potential currency impact has been muted because
currency fluctuations between the Swiss franc and other major European
currencies have not been significant and there is greater balance between total
European (including Swiss) sales and costs. However, if there is a significant
weakening of the Euro against the Swiss franc, the Company's financial
performance could be harmed.
The statements set forth herein concerning the introduction of the Euro issues
which are not historical facts are forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially from
those in the forward-looking statements. In particular, the costs associated
with the Company's Euro programs and the time-frame in which the Company plans
to complete Euro modifications are based upon management's best estimates. These
estimates were derived from internal assessments and assumptions of future
events. There can be no guarantee that any estimates, or other forward-looking
statements will be achieved, and actual results could differ significantly from
those contemplated.
Cautionary Statement
This Quarterly Report on Form 10-Q includes forward-looking statements that
reflect the Company's current views with respect to future events and financial
performance, including plans and readiness relating to Year 2000 issues and the
Euro introduction, estimated effective tax rates, research and development
expenditures, potential future growth, including potential penetration of
developed markets and potential growth opportunities in emerging markets,
potential future acquisitions, strategic plans and future cash sources and
requirements. 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 Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise. These forward-looking statements are subject to a number of
risks and uncertainties, including the risk of substantial indebtedness on
operations and liquidity, risks associated with currency fluctuations, risks
associated with international operations, highly competitive markets and
technological developments, risks relating to downturns or consolidation
affecting the Company's customers, risks relating to future acquisitions, risks
associated with reliance on key management, uncertainties associated with
environmental matters, risks relating to restrictions on payment of dividends
and risks relating to certain anti-takeover provisions, which could cause actual
results to differ materially from historical results or those anticipated. For a
more detailed discussion of these factors, see the Mettler-Toledo International
Inc. Annual Report on Form 10-K for the year ended December 31, 1997.
The risks included herein and in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997 are not exhaustive. Other sections of this
report and the Company's Annual Report may include additional factors which
could adversely impact the Company's business and financial performance.
Moreover, the Company operates in a very competitive and rapidly changing
environment. New risk factors emerge from time to time and it is not possible
for management to predict all such risk factors, nor can it assess the impact of
all such risk factors on the Company's business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results.
Investors should also be aware that while the Company does, from time to time,
communicate with securities analysts, it is against the Company's policy to
disclose to them any material non-public information or other confidential
commercial information. Accordingly, shareholders should not assume that the
Company agrees with any statement or report issued by any analyst irrespective
of the content of the statement or report issued by any analyst irrespective of
the content of the statement or report. To the extent that reports issued by
securities analysts contain any projections, forecasts or opinions, such reports
are not the responsibility of the Company.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk Not
applicable
Part II. OTHER INFORMATION
Item 1. Legal Proceedings Not applicable
Item 2. Changes in Securities and Use of Proceeds Not applicable
Item 3. Defaults Upon Senior Securities Not applicable
Item 4. Submission of Matters to a Vote of Security Holders Not applicable
Item 5. Other information Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10. Amendment No. 1, dated as of September 30, 1998, to the
Second Amended
and Restated Credit Agreement, dated as of November 19, 1997
11. Statement Regarding Computation of Per Share Earnings
27. Financial Data Schedule
(b) Reports on Form 8-K - None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Mettler-Toledo International Inc.
Date: November 16, 1998 By: /s/ William P. Donnelly
William P. Donnelly
Vice President and
Chief Financial Officer
Exhibit 11
Statement Regarding Computation of Per Share Earnings
Nine Months Nine Months
Ended Ended
September 30, September 30,
1997 1998
----------- ------------
Earnings (loss) before extraordinary item $(27,019) $20,765
Extraordinary item (9,552) -
---------- ----------
Net earnings (loss) $(36,571) $20,765
========== ==========
Basic earnings (loss) per common share:
Earnings (loss) before extraordinary item $(0.88) $0.54
Extraordinary item (0.31) -
---------- ----------
Net earnings (loss) $(1.19) $0.54
========== ==========
Weighted average number of common shares 30,686,189 38,342,651
Diluted earnings (loss) per common share:
Earnings (loss) before extraordinary item $(0.88) $0.51
Extraordinary item (0.31) -
---------- ----------
Net earnings (loss) $(1.19) $0.51
========== ==========
Weighted average number of common shares 30,686,189 40,619,050
Calculation of basic weighted average number of common shares (a):
For the nine months ended September 30, 1997 and 1998
Weighted average shares for Q1 30,686,065 38,336,014
Weighted average shares for Q2 30,702,367 38,336,014
Weighted average shares for Q3 30,670,134 38,355,926
---------- ----------
Weighted average shares for the
nine months ended September 30,
1997 and 1998 30,686,189 38,342,651
========== ==========
Calculation of diluted weighted average number of common shares (a):
For the nine months ended September 30, 1997 and 1998
Weighted average shares for Q1 30,686,065 40,600,109
Weighted average shares for Q2 30,702,367 40,640,516
Weighted average shares for Q3 30,670,134 40,616,526
---------- ----------
Weighted average shares for the
nine months ended September 30,
1997 and 1998 30,686,189 40,619,050
========== ==========
(a) The calculation of the weighted average number of common shares for the 1997
periods assumes that the previously existing Class A, B and C common shares
have been converted into the Company's common stock in connection with the
reorganization of the Company as described in Note 10 to the consolidated
financial statements in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997
<CASH> 15,604 32,858
<SECURITIES> 0 0
<RECEIVABLES> 174,046 155,759
<ALLOWANCES> 9,123 6,933
<INVENTORY> 109,970 106,129
<CURRENT-ASSETS> 321,215 321,142
<PP&E> 284,772 268,308
<DEPRECIATION> 55,976 34,827
<TOTAL-ASSETS> 764,221 768,275
<CURRENT-LIABILITIES> 269,316 255,441
<BONDS> 0 0
0 0
0 0
<COMMON> 384 25
<OTHER-SE> 42,520 (36,286)
<TOTAL-LIABILITY-AND-EQUITY> 764,221 768,177
<SALES> 669,747 633,743
<TOTAL-REVENUES> 669,747 633,743
<CGS> 374,594 359,080
<TOTAL-COSTS> 374,594 359,080
<OTHER-EXPENSES> 241,801 264,945
<LOSS-PROVISION> 1,649 867
<INTEREST-EXPENSE> 17,153 28,199
<INCOME-PRETAX> 34,550 (19,348)
<INCOME-TAX> 13,552 7,296
<INCOME-CONTINUING> 20,765 (27,019)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 (9,552)
<CHANGES> 0 0
<NET-INCOME> 20,765 (36,571)
<EPS-PRIMARY> 0.54 (1.19)
<EPS-DILUTED> 0.51 (1.19)
<FN>
Depreciation represents accumulated depreciation and not depreciation expense in
EDGAR filing terminology.
</FN>
</TABLE>
AMENDMENT NO. 1
AMENDMENT NO. 1 (this "Amendment"), dated as of September 30, 1998,
to that certain Second Amended and Restated Credit Agreement, dated as of
November 19, 1997 (as amended, modified or supplemented to the date hereof, the
"Credit Agreement"), among METTLER-TOLEDO INTERNATIONAL INC., a Delaware
corporation (together with its successors, "Holding"); METTLER-TOLEDO, INC., a
Delaware corporation (together with its successors, "US Borrower");
METTLER-TOLEDO HOLDING AG, a corporation organized under the laws of
Switzerland, (together with its successors, "CH Borrower" and, together with US
Borrower, the "Borrowers"); SAFELINE HOLDING COMPANY, an unlimited liability
company organized under the laws of the United Kingdom ("UK Borrower");
METTLER-TOLEDO INC., a Canadian corporation ("Canadian Borrower"); the several
SUBSIDIARY SWING LINE BORROWERS named therein; the several financial
institutions from time to time party thereto (the "Lenders"); MERRILL LYNCH &
CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Arranger and
Documentation Agent, THE BANK OF NOVA SCOTIA, as Administrative Agent, CREDIT
SUISSE FIRST BOSTON, as a co-agent and as a Swing-Line Lender, ABN AMRO BANK,
BANK OF TOKYO-MITSUBISHI TRUST COMPANY, BANKERS TRUST COMPANY, COMPAGNIE
FINANCIERE DE CIC ET DE L'UNION EUROPEENNE, GOLDMAN SACHS CREDIT PARTNERS L.P.,
THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY AND SOCIETE GENERAL (each a co-agent
and, together with Credit Suisse First Boston in its capacity as a co-agent, the
"Co-Agents"). Capitalized terms used and not otherwise defined herein shall have
the meanings assigned to those terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS the Borrowers, UK Borrower, Canadian Borrower, the
Subsidiary Swing Line Borrowers and the Lenders wish to amend the Credit
Agreement pursuant to Section 11.1 of the Credit Agreement as herein provided;
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION ONE - AMENDMENTS.
1.1 (a) Section 1.1 is amended by
(1) replacing subsection (a)(v)(5) of the definition of "EBITDA"
with the following:
"any non-recurring cash charges incurred in connection
with any Acquisition by US Borrower or any Subsidiary (other
than the M-T Acquisition or the Safeline Acquisition)
occurring after the Second Amendment and Restatement Date in
an amount not to exceed U.S. $15.0 million per Acquisition
and U.S. $35.0 million in the aggregate,"; and
(2) replacing "U.S. $50.0 million" in the definition of "Swing Line
Commitment" with "U.S. $75.0 million".
(b) Section 2.1(d) is amended by replacing "(the "UK Borrower
Sublimit")" in clause (5) thereof with the following:
"plus the amount invested by UK Borrower pursuant to Section 8.4(x)
(together, the "UK Borrower Sublimit")".
(c) Section 2.3(d) is amended by replacing the word "four" in
the last sentence thereof with the word "six".
(d) Section 2.5(e) is amended by inserting after the first sentence
thereof the following:
"The Euro unit shall be an Agreed Alternative Currency.".
(e) Section 2.16(a) is amended by replacing "U.S. $50.0
million" with "U.S. $75.0 million" and by replacing the
last sentence thereof with the following:
"Notwithstanding any provision in the Credit Agreement to the
contrary, all Swing Line Loans made in U.S. Dollars shall bear
interest based on the Alternate Base Rate or such other rate as may
be agreed to in writing by the Borrower and the US Swing Line
Lender."
(f) Section 7.11 is amended by deleting from the second
sentence thereof "up to U.S. $100.0 million thereof may be used
(g) Section 7.12(B) is amended by:
(1) replacing "U.S. $1.0 million" with "U.S. $5.0 million"; and
(2) inserting immediately before clause (i) thereof the following:
", in each case within 60 days after such creation or
acquisition,".
(h) Section 7.14 is amended by replacing "as soon as reasonably
practicable" with "within 60 days".
(i) Section 7.20 is amended by inserting immediately before clause
thereof the following: ", in each case within 60 days of such
creation or acquisition,".
(j) Section 8.1(v) is amended by replacing "subsection 8.5(n)" with
"subsection 8.5(g)(ii)".
(k) Section 8.4(f) is amended by:
(1) inserting the word "and" immediately before clause (ii)
thereof;
(2) replacing "U.S. $10.0 million" with "U.S.
$25.0 million" in clause (ii) thereof; and
(3) deleting clause (iii) thereof and the word "and"
immediately prior to clause (iii).
(l) Section 8.4(p) is deleted and replaced with the following:
"Investments (including Intercompany Indebtedness and Guaranty
Obligations) by US Borrower or any Subsidiary in any Subsidiary which is
not a Qualified Subsidiary Guarantor or which is not a Wholly-Owned
Subsidiary of US Borrower and not otherwise permitted by subsections (e),
(q), (v) and (w) of this Section 8.4, not to exceed an aggregate amount
outstanding at any time (net of returns, dividends in cash, net cash
proceeds on sale or other cash realizations thereof), when combined with
Investments made pursuant to Section 8.4(e), of the Dollar Equivalent
amount of U.S. $35.0 million; provided, however, that upon request of the
Required Lenders, all such Intercompany Indebtedness shall be evidenced by
subordinated promissory notes in form, and shall be pledged to the
Administrative Agent pursuant to documentation, reasonably satisfactory to
the Required Lenders;".
(m) Section 8.5(g) is amended by inserting "(i)" at the
beginning thereof, by replacing "subsection 8.5(n)
below" with "clause (ii) hereof", and by inserting the
following at the end of the Section:
"and (ii) Indebtedness of the Chinese Subsidiaries pursuant to local
working capital facilities and other Indebtedness not to exceed in the
aggregate at any time outstanding for all Chinese Subsidiaries the Dollar
Equivalent amount of U.S. $15.0 million; provided, however, that such
amount may be increased by an amount up to U.S. $10.0 million so long as a
corresponding reduction is made to the amount available under clause (i)
hereof".
(n) Section 8.5 (h) is amended by replacing "U.S. $10.0
million" with "U.S. $20.0 million".
(o) Section 8.5(l) is amended by replacing "U.S. $10.0 million"
with "U.S. $20.0 million".
(p) The word "and" is inserted at the end of Section 8.5(m), and
Section 8.5(n) is deleted.
(q) Section 8.22 is amended by deleting clause (i) thereof and
renumbering clauses (ii)-(iv) as new clauses (i)-(iii), and by
inserting at the beginning of new clause (i) and at the
beginning of new clause (ii) thereof the following:
"within 60 days after such establishment, creation or acquisition,".
SECTION TWO - CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT.
2.1. The amendments provided for in Section One hereof shall become
effective on the date on which the Administrative Agent shall have received duly
executed counterparts hereof from the Borrowers, UK Borrower, Canadian Borrower,
the Subsidiary Swing Line Borrowers and the Required Lenders. The effectiveness
of this Amendment (other than Section Four) is conditioned upon the accuracy of
the representations and warranties set forth in Section Three.
SECTION THREE - REPRESENTATIONS AND WARRANTIES.
3.1. In order to induce the Lenders to enter into this Amendment, the
Borrowers, UK Borrower, Canadian Borrower and the Subsidiary Swing Line
Borrowers represent and warrant to the Administrative Agent and each of the
Lenders that after giving effect to this Amendment, (i) no Unmatured Event of
Default or Event of Default has occurred and is continuing; and (ii) all of the
representations and warranties in the Credit Agreement after giving effect to
this Amendment are true and correct in all material respects on and as of the
date hereof unless such representation and warranty expressly indicates that it
is being made as of another date, in which case such representation and warranty
was true and correct as of such date. Holding, the Borrowers, UK Borrower,
Canadian Borrower and the Subsidiary Swing Line Borrowers further represent and
warrant (which representations and warranties shall survive the execution and
delivery hereof) to the Administrative Agent and each Lender that:
(i) Each Credit Agreement Loan Party has full corporate or other
power and authority, legal right to execute, deliver and perform its obligations
under this Amendment and has taken all actions necessary to authorize the
execution, delivery and performance of its obligations under this Amendment;
(ii) No consent of any person other than the Lenders, and no
consent, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority is
required in connection with the execution, delivery, performance of any Credit
Agreement Loan Party's obligations, validity or enforceability of this
Amendment;
(iii) This Amendment has been duly executed and delivered on
behalf of each Credit Agreement Loan Party by a duly authorized officer of the
respective Credit Agreement Loan Party and constitutes a legal, valid and
binding obligation of each Credit Agreement Loan Party enforceable in accordance
with its terms, except as the enforceability thereof may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally; and
(iv) The execution, delivery and performance of this Amendment
will not violate any requirement of law or Contractual Obligation of any Credit
Agreement Loan Party.
SECTION FOUR - MISCELLANEOUS.
4.1. Except as herein expressly amended, waived or consented to, the
Credit Agreement and all other agreements, documents, instruments and
certificates executed in connection therewith are ratified and confirmed in all
respects and shall remain in full force and effect in accordance with their
respective terms.
4.2. All references to the Credit Agreement contained in any of the
Basic Documents shall mean the Credit Agreement as amended hereby, and as the
same may at any time be amended, amended and restated, supplemented or otherwise
modified from time to time and as in effect.
4.3 This Amendment may be executed by the parties hereto in one or
more counterparts, each of which shall be an original and all of which shall
constitute one and the same agreement.
4.4. Each of the Credit Agreement Loan Parties agree to reimburse
the Administrative Agent and the Arranger and Documentation Agent for their
out-of-pocket expenses in connection with this Amendment, including the
reasonable fees, charges and disbursements of Cahill Gordon & Reindel, counsel
for the Administrative Agent and the Arranger and Documentation Agent.
4.5. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS.
[Remainder of Page Intentionally Left Blank]
S-14
S-1
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
METTLER-TOLEDO, INC.,
as a Borrower
By: /s/ William P. Donnelly
Name: William P. Donnelly
Title:
METTLER-TOLEDO HOLDING AG,
as a Borrower
By: /s/ William P. Donnelly
Name: William P. Donnelly
Title:
METTLER-TOLEDO INTERNATIONAL INC.,
as Guarantor
By: /s/ William P. Donnelly
Name: William P. Donnelly
Title:
SAFELINE HOLDING COMPANY,
as UK Borrower and as a
Subsidiary Swing Line Borrower
By: /s/ William P. Donnelly
Name: William P. Donnelly
Title:
METTLER-TOLEDO INC.,
as Canadian Borrower
By: /s/ William P. Donnelly
Name: William P. Donnelly
Title:
METTLER-TOLEDO MANAGEMENT
HOLDING DEUTSCHLAND GMBH,
as a Subsidiary Swing Line
Borrower
By: /s/ William P. Donnelly
Name: William P. Donnelly
Title:
METTLER-TOLEDO S.A., VEROFLAY,
as a Subsidiary Swing Line
Borrower
By: /s/ William P. Donnelly
Name: William P. Donnelly
Title:
METTLER-TOLEDO K.K., TAKARAZUKA,
as a Subsidiary Swing Line
Borrower
By: /s/ William P. Donnelly
Name: William P. Donnelly
Title:
METTLER-TOLEDO GMBH, GREIFENSEE,
as a Subsidiary Swing Line
Borrower
By: /s/ William P. Donnelly
Name: William P. Donnelly
Title:
METTLER-TOLEDO LTD., LEICESTER
as a Subsidiary Swing Line
Borrower
By: /s/ William P. Donnelly
Name: William P. Donnelly
Title:
SAFELINE LIMITED,
as a Subsidiary Swing Line
Borrower
By: /s/ William P. Donnelly
Name: William P. Donnelly
Title:
MERRILL LYNCH & CO., MERRILL
LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
as Arranger and Documentation
Agent
By: /s/ Christopher Birosak
Name: Christopher Birosak
Title: Managing Director
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By: /s/ J.R. Trimble
Name: J.R. Trimble
Title: Senior Relationship Manager
THE BANK OF NOVA SCOTIA,
as Canadian Agent
By: /s/ J.R. Trimble
Name: J.R. Trimble
Title: Senior Relationship Manager
CREDIT SUISSE FIRST BOSTON,
as Co-Agent
By: /s/
Name:
Title:
By: /s/
Name:
Title
ABN AMRO BANK N.V.,
as Co-Agent
By: /s/ Louis K. McLinden, Jr.
Name: Louis K. McLinden, Jr.
Title: Vice President
By: /s/ Christopher S. Helueci
Name: Christopher S. Helueci
Title: Vice President
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY,
as Co-Agent
By: /s/ Paul P. Malecki
Name: Paul P. Malecki
Title: Vice President
BANKERS TRUST COMPANY,
as Co-Agent
By: /s/ Anthony LaCrippo
Name: Anthony LaCrippo
Title: Vice President
COMPAGNIE FINANCIERE DE CIC
ET DE L'UNION EUROPEENNE,
as Co-Agent
By: /s/ Sean Mounier
Name: Sean Mounier
Title: First Vice President
By: /s/ Anthony Rock
Name: Anthony Rock
Title: Vice President
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Co-Agent
By: _____________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY,
as Co-Agent
By: /s/ Takuya Honjo
Name: Takuya Honjo
Title: Senior Vice President
SOCIETE GENERALE,
as Co-Agent
By: /s/ Eric Siebert
Name: Eric Siebert
Title: Director
BAYERISCHE HYPO-UND VEREINSBANK AG,
as a Lender
By: /s/ Hans Dick
Name: Hans Dick
Title: Vice President
By: /s/ Steven Simons
Name: Steven Simons
Title: Assistant Vice President
DG BANK DEUTSCHE GENOSSENSHAFTSBANK AG,
as a Lender
By: /s/ Sabine Wendt
Name: Sabine Wendt
Title: Assistant Vice President
By: /s/ Karen A. Brinkman
Name: Karen A. Brinkman
Title: Vice President
BANKERS TRUST COMPANY,
as a Lender
By: _____________________
Name:
Title:
NATEXIS BANQUE BFCE,
as a Lender
By: _____________________
Name:
Title:
THE FUJI BANK AND TRUST COMPANY,
as a Lender
By: /s/ Toshiaki Yakura
Name: Toshiaki Yakura
Title: Executive Vice President
THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY,
as a Lender
By: /s/ Takuya Honjo
Name: Takuya Honjo
Title: Senior Vice President
MERRILL LYNCH CAPITAL CORPORATION,
as a Lender
By: /s/ Christopher Birosak
Name: Christopher Birosak
Title: Vice President
GOLDMAN SACHS INTERNATIONAL BANK,
as a Lender
By: /s/ Stephen B. King
Name: Stephen B. King
Title: Authorized Signatory
CREDITANSTALT CORPORATE FINANCE INC.,
as a Lender
By: _____________________
Name:
Title:
By: _____________________
Name:
Title:
LTCB TRUST COMPANY,
as a Lender
By: /s/ Koji Sasayama
Name: Kojy Sasayama
Title: Senior Vice President
COMPAGNIE FINANCIERE DE CIC
ET DE UNION EUROPEENNE,
as a Lender
By: _____________________
Name:
Title:
By: _____________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
as a Lender
By: _____________________
Name:
Title:
COMMERZBANK AG, NEW YORK BRANCH
and/or GRAND CAYMAN BRANCHES,
as a Lender
By: /s/ Andreas Schwung
Name: Andreas Schwung
Title: Vice President
By: /s/ David A. Wagner
Name: David A. Wagner
Title: Assistant Treasurer
NATIONAL CITY BANK,
as a Lender
By: /s/ Lisa Lisi
Name: Lisa Lisi
Title: Assistant Vice President
ROYAL BANK OF SCOTLAND PLC,
as a Lender
By: /s/ Scott Barton
Name: Scott Barton
Title: Vice President
WESTDEUTSCHE GIROZENTRALE LANDESBANK,
as a Lender
By: /s/ Kheil A. McIntyre
Name: Kheil A. McIntyre
Title: Vice President
By: /s/ Walter T. Duffy III
Name: Walter T. Duffy III
Title: Associate
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY,
as a Lender
By: /s/ Paul P. Malecki
Name: Paul P. Malecki
Title: Vice President
THE BANK OF NOVA SCOTIA,
as a Lender
By: _____________________
Name:
Title:
SOCIETE GENERALE,
as a Lender
By: /s/ Eric Siebert
Name: Eric Siebert
Title: Director
CRESTAR BANK,
as a Lender
By: /s/ Bergmann
Name: Bergmann
Title: Vice President
CREDIT AGRICOLE INDOSUEZ,
as a Lender
By: /s/ David Bouhl
Name: David Bouhl, F.V.P.
Title: Head of Corporate Banking
Chicago
By: /s/ Dean Balice
Name: Dean Balice
Title: Senior Vice President, Branch
Manager
THE SUMITOMO BANK LTD.
CHICAGO BRANCH,
as a Lender
By: /s/ John H. Kemper
Name: John H. Kemper
Title: Senior Vice President
ABN AMRO BANK N.V.,
as a Lender
By: /s/ Louis K. McLinden, Jr.
Name: Louis K. McLinden, Jr.
Title: Vice President
By: /s/ Christopher S. Helueci
Name: Christopher S. Helueci
Title: Vice President
MERITA BANK LTD, NEW YORK BRANCH,
as a Lender
By: /s/ Frank Maffei
Name: Frank Maffei
Title: Vice President
By: /s/ Paul Brooks
Name: Paul Brooks
Title: Vice President
THE MITSUBISHI TRUST AND
BANKING CORPORATION,
as a Lender
By: _____________________
Name:
Title:
THE HUNTINGTON NATIONAL BANK,
as a Lender
By: /s/ Morey J. Cracolice
Name: Morey J. Cracolice
Title: Vice President
BANQUE PARIBAS,
as a Lender
By: /s/ Diane P. Hollowski
Name: Diane P. Hollowski
Title: Vice President
By: /s/ Maria Santangelo
Name: Maria Santangelo
Title: Vice President
CREDIT SUISSE FIRST BOSTON,
as a Lender
By: /s/ Karl Studer
Name: Karl Studer
Title: Director
By: /s/
Name:
Title:
AMSOUTH BANK,
as a Lender
By: /s/ Bryan Grantham
Name: Bryan Grantham
Title: Commercial Banking Officer
DLJ CAPITAL FUNDING, INC.,
as a Lender
By: /s/ Thomas C. Hendrick
Name: Thomas C. Hendrick
Title: Managing Director
MICHIGAN NATIONAL BANK,
as a Lender
By: /s/ Neran Shaya
Name: Neran Shaya
Title: Relationship Manager
STAR BANK, NATIONAL ASSOCIATION,
as a Lender
By: /s/ Mark A. Whitson
Name: Mark A. Whitson
Title: Vice President
