As filed with the Securities and Exchange Commission on May 6, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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METTLER-TOLEDO INTERNATIONAL INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3596 13-3668641
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
IM LANGACHER WILLIAM P. DONNELLY
P.O. BOX MT-100 METTLER-TOLEDO INTERNATIONAL INC.
CH 8606 GREIFENSEE, SWITZERLAND PARK AVENUE TOWER
011-41-944-22-11 65 EAST 55TH STREET, 27TH FLOOR
(ADDRESS, INCLUDING ZIP CODE, AND NEW YORK, NY 10022
TELEPHONE NUMBER, INCLUDING AREA CODE, (212) 644-5900
OF REGISTRANT'S PRINCIPAL EXECUTIVE (NAME, ADDRESS, INCLUDING ZIP CODE,
OFFICES) AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
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Copies to:
TIMOTHY E. PETERSON, ESQ. JAMES C. SCOVILLE, ESQ.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON DEBEVOISE & PLIMPTON
4 CHISWELL STREET 875 THIRD AVENUE
LONDON, EC1Y 4UP, ENGLAND NEW YORK, NEW YORK 10022
(011-44-171) 972-9600 (212) 909-6000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. |_|
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. |_|
______________________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| ______________________
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. |X|
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
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PROPOSED PROPOSED
TITLE OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) AGGREGATE REGISTRATION
OFFERING FEE(2)
PRICE(1)(2)
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<S> <C> <C> <C> <C>
Common Stock $.01
par value.......... 16,962,500 $19.78 $335,518,250 $98,978
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(1) Includes shares of Common Stock that may be sold pursuant to the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), using the average of the high and low prices
reported on the New York Stock Exchange on May 4, 1998.
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</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
[RED HERRING]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This Prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to the registration or qualification under the securities
laws of any such State.
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EXPLANATORY NOTE
This registration statement contains two forms of Prospectus: one to
be used in connection with a United States and Canadian offering of the
registrant's Common Stock (the "U.S. Prospectus") and one to be used in
connection with a concurrent international offering of the Common Stock
(the "International Prospectus", and together with the U.S. Prospectus, the
"Prospectuses"). The International Prospectus will be identical to the U.S.
Prospectus except that it will have a different front cover page,
underwriting section and back cover page. The U.S. Prospectus is included
herein and is followed by the alternate pages to be used in the
International Prospectus. The front cover page, underwriting section and
back cover page for the International Prospectus included herein have all
been labeled "Alternate Page for International Prospectus."
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 6, 1998
PROSPECTUS [LOGO]
14,750,000 SHARES
METTLER-TOLEDO INTERNATIONAL INC.
COMMON STOCK
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All of the 14,750,000 shares of Common Stock of Mettler-Toledo
International Inc. ("Mettler-Toledo" or the "Company") offered hereby are
being sold by certain shareholders (the "Selling Shareholders") of the
Company. See "Principal and Selling Shareholders." The Company is not
selling shares of Common Stock in this Offering and will not receive any of
the proceeds from the sale of Common Stock offered hereby.
Of the 14,750,000 shares of Common Stock offered hereby, 11,800,000
shares are being offered for sale initially in the United States and Canada
by the U.S. Underwriters and 2,950,000 shares are being offered for sale
initially in a concurrent offering outside the United States and Canada by
the International Managers. The initial public offering price and the
underwriting discount per share will be identical for both Offerings. See
"Underwriting."
The Common Stock is listed on the New York Stock Exchange under the
symbol "MTD." On May 5, 1998, the last sale price of the Common Stock as
reported on the New York Stock Exchange was $20 per share. See "Price Range
of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON
STOCK OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) SELLING SHAREHOLDERS(2)
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Per Share........ $ $ $
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Total(3)......... $ $ $
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(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) The Company has agreed to pay certain expenses of the Selling
Shareholders estimated at $________.
(3) The Selling Stockholders have granted the International Managers and
the U.S. Underwriters options to purchase up to an additional 442,500
shares and 1,770,000 shares of Common Stock, respectively, in each
case exercisable within 30 days after the date hereof, solely to cover
over-allotments, if any. If such options are exercised in full, the
total Price to Public, Underwriting Discount and Proceeds to Selling
Shareholders will be $______, $ ______ and $______, respectively. See
"Underwriting."
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The shares of Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them,
subject to approval of certain legal matters by counsel for the
Underwriters and certain other conditions. The Underwriters reserve the
right to withdraw, cancel or modify such offer and to reject orders in
whole or in part. It is expected that delivery of the shares of Common
Stock will be made in New York, New York on or about , 1998.
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MERRILL LYNCH & CO.
BT ALEX. BROWN
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
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The date of this Prospectus is , 1998.
[PICTURES OF PRODUCTS WITH CAPTIONS:]
This Prospectus contains forward-looking statements. These statements
are subject to a number of risks and uncertainties, certain of which are
beyond the Company's control. See "Risk Factors-Forward-Looking Statements
and Associated Risks" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Certain persons participating in the Offerings may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Such transactions may include stabilizing, the purchase of
Common Stock to cover syndicate short positions and the imposition of
penalty bids. For a description of these activities, see "Underwriting."
Mettler-Toledo (Registered), Mettler (Registered), Ingold
(Registered), Garvens (Registered), Ohaus (Registered), DigiTol
(Registered) and Safeline (Registered) are registered trademarks of the
Company and MonoBloc (Trademark), Spider (Trademark), Mentor SC
(Trademark), MultiRange (Trademark), TRUCKMATE (Trademark), Signature
(Trademark) and Powerphase (Trademark) are trademarks of the Company.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial
statements, including the related notes, appearing elsewhere in this
Prospectus. Unless otherwise indicated, industry data contained herein is
derived from publicly available industry trade journals, government reports
and other publicly available sources, which the Company has not
independently verified but which the Company believes to be reliable, and
where such sources are not available, from Company estimates, which the
Company believes to be reasonable, but which cannot be independently
verified. As used in this Prospectus, "$" refers to U.S. dollars, "SFr"
refers to Swiss francs, "(pound)" refers to British pounds sterling and
"CDN" refers to Canadian dollars. Unless otherwise stated or where the
context otherwise requires, (i) references herein to the "Company" or
"Mettler-Toledo" refer to Mettler-Toledo International Inc. and its direct
and indirect subsidiaries and (ii) all information herein assumes no
exercise of the Underwriters' over-allotment options.
THE COMPANY
GENERAL
Mettler-Toledo is a leading global supplier of precision instruments.
The Company is the world's largest manufacturer and marketer of weighing
instruments for use in laboratory, industrial and food retailing
applications. In addition, the Company holds one of the top three market
positions in several related analytical instruments such as titrators,
thermal analysis systems, pH meters, automatic lab reactors and electrodes.
Through its 1997 acquisition (the "Safeline Acquisition") of Safeline
Limited ("Safeline"), the Company is also 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. The Company focuses on high value-added segments of
its markets by providing innovative instruments, by integrating these
instruments into application-specific solutions for customers, and by
facilitating the processing of data gathered by its instruments and the
transfer of this data to customers' management information systems.
Mettler-Toledo services a worldwide customer base through its own sales and
service organization and has a global manufacturing presence in Europe, the
United States and Asia. The Company generated 1997 net sales of $878.4
million which were derived 45% in Europe, 42% in North and South America
and 13% in Asia and other markets.
The Company believes that in 1997 the global market for the Company's
products and services was approximately $6.0 billion. Weighing instruments
are among the most broadly used measuring devices, and their results are
often used as the basis of commercial transactions. Analytical instruments
are critical to the research and development and quality control efforts of
end-users, while metal detection systems provide important quality and
safety checks in production and packaging. The Company's products are used
in laboratories as an integral part of research and quality control
processes, in industry for various manufacturing processes such as quality
control, materials preparation, filling, counting and dimensioning, and in
food retailing for preparation, portioning and inventory control. Customers
include pharmaceutical, biotechnology, chemicals, cosmetics, food and
beverage, metals, electronics, logistics, transportation and food retailing
businesses, as well as schools, universities and government standards
laboratories.
MARKET LEADERSHIP
The Company believes that it maintains a leading position in each of
its markets. In the weighing instruments market, Mettler-Toledo is the only
company to offer products for laboratory, industrial and food retailing
applications throughout the world and believes that it holds a market share
more than two times greater than that of its nearest competitor. The
Company believes that in 1997 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 the
number two position 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 also holds one of the top
three global market positions in several analytical instruments such as
titrators, thermal analysis systems, electrodes, pH meters and automatic
lab reactors. The Company recently enhanced its leading positions in
precision instruments through the addition of Safeline's market leading
metal detection products, which can be used in conjunction with the
Company's checkweighing instruments for important quality and safety checks
in the food processing, pharmaceutical, cosmetics, chemicals and other
industries. Mettler-Toledo attributes its worldwide market leadership
positions to the following competitive strengths:
Global Brand and Reputation. The Mettler-Toledo brand name is
identified worldwide with accuracy, reliability and innovation. Customers
value these characteristics because precision instruments, particularly
weighing and analytical instruments, significantly impact customers'
product quality, productivity, costs and regulatory compliance.
Furthermore, precision instruments generally constitute a small percentage
of customers' aggregate expenditures. As a result, the Company believes
customers tend to emphasize accuracy, product reliability, technical
innovation, service quality, reputation and past experience with a
manufacturer's products when making their purchasing decisions for weighing
and other precision instruments and experience high switching costs if they
attempt to change vendors. A recent independent survey concluded that
"Mettler-Toledo" was one of the three most recognized brand names in the
laboratory. The Company's brand name is so well recognized that laboratory
balances are often generically referred to as "Mettlers." The strength of
this brand name has allowed the Company to successfully extend its
laboratory product line to include titrators, thermal analysis systems,
electrodes, pH meters and automatic lab reactors.
Technological Innovation. Mettler-Toledo has a long and successful
track record of innovation, as demonstrated by the invention of the
single-pan analytical balance in 1945 and the introduction of the first
fully electronic precision balance in 1973. The Company has continued to be
at the forefront of technology with recent innovations in both weighing and
related instrumentation, including its new digital load cell, its ID 20
terminal (the first personal computer interface to be certified by weights
and measures regulators), its MonoBloc weighing sensor technology, its GOBI
moisture determination instrument, a new automatic lab reactor, the Zero
Metal-Free Zone metal detector and its new PILAR (Parallel Infrared Laser
Array) dimensioning equipment. As with many of the Company's recent
innovations, the Company's new MonoBloc weighing sensor technology provides
greater accuracy, while also significantly reducing manufacturing costs and
the time and expense of design changes by reducing from approximately 100
to approximately 50 the number of parts in the sensor. The Company believes
it is the global leader in its industry in providing innovative
instruments, in integrating its instruments into application-specific
solutions for customers, and in facilitating the processing of data
gathered by its instruments and the transfer of this data to customers'
management information systems. Mettler-Toledo's technological innovation
efforts benefit from the Company's manufacturing expertise in sensor
technology, precision machining and electronics, as well as its strength in
software development.
Comprehensive, High Quality Product Range. Mettler-Toledo manufactures
a more comprehensive range of weighing instruments than any of its
competitors. The Company's broad product line addresses a wide range of
weighing applications across and within many industries and regions.
Furthermore, the Company's analytical instruments and metal detection
systems complement its weighing products, enabling the Company to offer
integrated solutions. The Company manufactures its products in its modern
manufacturing facilities, most of which are ISO 9001 certified.
Mettler-Toledo's broad range of high quality products and the ability to
provide integrated solutions allows the Company to leverage its sales and
service organization, product development activities and manufacturing and
distribution capabilities.
Global Sales and Service. The Company has the only global sales and
service organization among weighing instruments manufacturers. At March 31,
1998, this organization consisted of approximately 3,100 employees
organized into locally-based, customer-focused groups that provide prompt
service and support to the Company's customers and distributors in
virtually all major markets around the world. The local focus of the
Company's sales and service organization enables the Company to provide
timely, responsive support to customers worldwide and provides feedback for
manufacturing and product development. This global infrastructure also
allows the Company to capitalize on growth opportunities in emerging
markets.
Largest Installed Base. The Company believes that it has the largest
installed base of weighing instruments in the world. From this installed
base, the Company obtains service contracts which provide a strong, stable
source of recurring service revenue. Service revenue represented
approximately 16% of net sales in 1997, of which approximately 9% is
derived solely from service contracts and repairs with the remainder
derived from the sale of spare parts. The Company believes that its
installed base of weighing instruments represents a competitive advantage
with respect to repeat purchases and purchases of related analytical
instruments and metal detection systems, because customers tend to remain
with an existing supplier that can provide accurate and reliable products
and related services. In addition, switching to a new instrument supplier
entails additional costs to the customer for training, spare parts, service
and systems integration requirements. Close relationships and frequent
contact with its broad customer base also provide the Company with sales
leads and new product and application ideas.
Geographical, Product and Customer Diversification. The Company's
revenue base is diversified by geographic region, product range and
customer. The Company's broad range of product offerings is utilized in
many different industries, including, among others, chemicals,
pharmaceuticals, food processing, food retailing and transportation. The
Company supplies customers in over 100 countries, and no one customer
accounted for more than 2.6% of 1997 net sales. The Company's diverse
revenue base reduces its exposure to regional or industry-specific economic
conditions, and its presence in many different geographic markets, product
markets and industries enhances its attractiveness as a supplier to
multinational customers.
GROWTH STRATEGY
Prior to its acquisition on October 15, 1996 (the "Acquisition") in a
transaction sponsored by management and AEA Investors Inc. ("AEA
Investors"), Mettler-Toledo operated as a division of Ciba-Geigy AG
("Ciba"). In connection with the Acquisition, Mettler-Toledo began
implementing a strategy to enhance its position as global market leader by
accelerating new product introductions, capitalizing on market
opportunities, focusing on expansion in emerging markets, pursuing selected
acquisitions and reengineering its operations in order to reduce its
overall cost structure. These initiatives have contributed to an
improvement in operating income (gross profit less research and development
and selling, general and administrative expenses) before amortization and
non-recurring costs ("Adjusted Operating Income") from $39.5 million (4.6%
of net sales) for 1995 to $81.5 million (9.3% of net sales) for 1997.
Adjusted Operating Income increased from $12.3 million (6.2% of net sales)
for the three months ended March 31, 1997 to $18.7 million (8.7% of net
sales) for the three months ended March 31, 1998, an increase of 52.6%.
New Product Introductions. The Company intends to continue to invest
in product innovation in order to provide technologically advanced products
to its customers for existing and new applications. Over the last three
calendar years, the Company invested more than $150 million in research and
development and customer engineering, which has resulted in a pipeline of
innovative and new products, significant reductions in product costs and
reduced time to market for new products. Examples of recent or upcoming
product introductions include: industrial and retail products that apply
open-system architecture, a higher performance titrator, a higher
performance modular thermal analysis system, a new density and
refractometry measurement technology, a fully integrated metal detector and
checkweigher, and the first Chinese-designed and manufactured laboratory
balance. In addition, the Company is also focused on innovations that
reduce manufacturing costs. For example, the Company is extending the
utilization of its high-accuracy, low-cost MonoBloc weighing sensor
technology through much of its weighing instrument product line. The
Company attributes a significant portion of its recent margin improvement
to its research and development efforts.
Capitalize on Market Opportunities. Mettler-Toledo believes it is well
positioned to capitalize on potential market opportunities including: (i)
the integration of precision measurement instruments into data management
software systems to automate processes and/or improve process control; (ii)
the development of integrated solutions that combine measurement
instruments and related technologies directly into manufacturing processes;
(iii) the harmonization of national weighing standards among countries,
particularly in the European Union; and (iv) the standardization of
manufacturing and laboratory practices through programs such as ISO 9001,
Good Laboratory Practices and Good Manufacturing Practices. The Company
believes that these trends, together with the Company's brand name, global
presence and the pipeline of planned new products, will allow it to
increase its penetration of developed markets such as Europe, the United
States and Japan.
Further Expansion in Emerging Markets. The Company believes that
global recognition of the Mettler-Toledo brand name and the Company's
global sales, service and manufacturing capabilities position it to take
advantage of continued growth opportunities in emerging markets. These
growth opportunities have been driven by economic development and global
manufacturers' utilization of additional and more sophisticated precision
measurement instruments as they shift production to these markets. The
primary focus to date of the Company's emerging market expansion has been
in Asia. In Asia (excluding Japan), the Company is the market leader in
laboratory weighing instruments and has substantial and rapidly growing
industrial and food retailing businesses. The Company maintains two
profitable operations in China: first, a 60% owned joint venture which
manufactures and sells industrial and food retailing products and, second,
a wholly owned facility which manufactures and distributes laboratory
products. Both of these operations serve the domestic and export markets.
The Company has opened direct marketing organizations in Taiwan, Korea,
Hong Kong, Thailand, Malaysia and Eastern Europe. The Company's net sales
in Southeast Asia and Korea collectively represented approximately 3% of
the Company's net sales for 1997. The Company is also expanding its sales
and service presence in Latin America and other emerging markets. The
Company believes Asia and other emerging markets will continue to 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. The Company believes that its
brand name, its global marketing and manufacturing infrastructure and its
already substantial sales in Asia, Latin America and Eastern Europe
position it to take advantage of these growth opportunities.
Pursue Selected Acquisition Opportunities. Mettler-Toledo plans to
actively pursue additional complementary product lines and distribution
channels. In the laboratory market, the Company intends to leverage its
existing laboratory distribution system through the acquisition of
complementary product lines and the development of integrated laboratory
solutions. In the industrial and food retailing markets, the Company plans
to pursue the acquisition of related products and technologies that allow
for the integration of weighing with other customer operations and
information systems. The Company began implementing this strategy through
the May 1997 acquisition of Safeline, which is the world's leading supplier
of metal detection systems for companies that produce and package goods in
the food processing, pharmaceutical, cosmetics, chemicals and other
industries. Safeline's metal detection systems enable the Company to offer
integrated solutions for quality control and data management to these
industries. The Company believes that by taking advantage of its brand name
and global sales and service organization it can expand the distribution of
acquired product lines and operate acquired businesses more effectively.
Reengineering and Cost Reductions. The Company's recent increase in
profitability has been achieved in part through: (i) focusing research and
development efforts on product cost reductions; (ii) achieving greater
flexibility in, and a targeted reduction of, the Company's workforce,
including a planned further reduction of approximately 70 personnel in
1998; (iii) consolidating manufacturing facilities, including the closure
of the Westerville, Ohio facility; and (iv) moving production to lower-cost
manufacturing facilities. The Company has also started implementing a
number of additional operational changes such as the restructuring of its
ordering process, product delivery and parts inventory management in
Europe, the consolidation of worldwide precision balance manufacturing, the
realignment of industrial product manufacturing in Europe and the
consolidation of the Company's North American laboratory, industrial and
food retailing businesses into a single marketing organization. The Company
believes that these new initiatives, as well as its continuing efforts to
reduce product costs through research and development and the move of
production to lower-cost manufacturing facilities, will place the Company
in a position to build on its recent improvement in profitability.
Furthermore, the Company believes that it can leverage its existing
infrastructure, particularly the recent investments made in Asia, to obtain
continued sales growth without significant additions to its overall cost
base.
ACQUISITION AND SAFELINE ACQUISITION
Acquisition. On October 15, 1996, the Company acquired the
Mettler-Toledo Group from Ciba in a transaction sponsored by management and
AEA Investors. As of March 31, 1998, approximately 1,000 of the Company's
employees, including executive officers, key management employees and
Company sponsored pension funds, owned at least 2,875,000 shares of Common
Stock and held options to purchase 4,408,740 additional shares of Common
Stock, collectively representing on a fully diluted basis an aggregate
ownership interest of approximately 18%. See "Management" and "Principal
and Selling Shareholders."
Safeline Acquisition. On May 30, 1997, the Company acquired Safeline
for (pound)61.0 million (approximately $100.0 million at May 30, 1997) plus
up to an additional (pound)6.0 million (approximately $10.0 million at May
30, 1997) for a contingent earn-out payment. In October 1997, the Company
made an additional payment, representing a post-closing adjustment, of
(pound)1.9 million (approximately $3.1 million at October 3, 1997). Such
amount has been accounted for as additional purchase price. 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.
INITIAL PUBLIC OFFERING AND REFINANCING
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 "IPO"), at a per share price equal
to $14.00. The IPO raised net proceeds, after underwriters' commission and
expenses, of approximately $97.3 million. In connection with the IPO, 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 IPO, the Company refinanced its existing
credit facility by entering into a new credit facility (the "Credit
Agreement"), borrowings from which, along with the proceeds from the IPO,
were used to repay substantially all of the Company's then existing debt,
including all of the 9 3/4% Senior Subordinated Notes due 2006 (the
"Notes") of the Company's wholly owned subsidiary, Mettler-Toledo, Inc.
(collectively, the "Refinancing"). In connection with the Refinancing, the
Company recorded an extraordinary charge of $31.6 million, net of tax,
principally for prepayment premiums on certain debt repaid and for the
write-off of existing deferred financing fees. At March 31, 1998 the
Company had borrowings of $374.2 million. Of these borrowings, $191.4
million are in the form of a term loan and the remainder are outstanding
under a revolving credit facility and various other arrangements. The
Company's revolving credit facility commitment increased from $170.0
million to $420.0 million under the Credit Agreement, including a $100.0
million acquisition facility commitment.
THE OFFERINGS
The offering of 11,800,000 shares of the Company's Common Stock, par
value $.01 per share, in the United States and Canada (the "U.S. Offering")
and the offering of 2,950,000 shares of the Common Stock outside the United
States and Canada (the "International Offering") are collectively referred
to herein as the "Offerings."
Common Stock Offered by the
Selling Shareholders (1)
U.S. Offering............... 11,800,000 shares
International Offering....... 2,950,000 shares
Common Stock Outstanding Before and
After the Offerings (2).......... 38,336,014 shares
Use of Proceeds.................... All of the Common Stock offered
hereby is being sold by the
Selling Shareholders. The Company
will not receive any proceeds
from the sale of the shares
offered hereby.
New York Stock Exchange Symbol..... "MTD"
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(1) Excludes 2,212,500 shares which are subject to the over-allotment
options granted by the Selling Shareholders to the Underwriters in
connection with the Offerings.
(2) Excludes 4,408,740 shares that may be issued upon the exercise of
outstanding options granted pursuant to the Company's Stock Option
Plan (the "Stock Plan").
RISK FACTORS
Prospective purchasers of the Common Stock should carefully consider
all of the information contained in this Prospectus before making an
investment in the Common Stock. In particular, prospective purchasers
should carefully consider the factors set forth herein under "Risk
Factors." These risks include: the effect of the Company's substantial
indebtedness on operations and liquidity; risks associated with currency
fluctuations; risks associated with international operations; risks
associated with competition and improvements in technology by competitors;
risks due to significant sales to the pharmaceutical and chemicals
industries; risks relating to future acquisitions; risks associated with
reliance on key management; risks of liability under environmental laws;
potentially adverse effect on stock price due to shares eligible for future
sale; restrictions on payment of dividends; and certain anti-takeover
provisions in the Company's certificate of incorporation.
SUMMARY FINANCIAL INFORMATION
The summary historical financial information set forth below for the
years ended December 31, 1993, 1994 and 1995, for the period from January
1, 1996 to October 14, 1996, for the period from October 15, 1996 to
December 31, 1996 and for the year ended December 31, 1997 is derived from
the Company'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, 1998 and for the
three months ended March 31, 1997 and 1998 is derived from the unaudited
interim consolidated financial statements of the Company, 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, 1998 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1998. The
combined historical data of the Predecessor Business and the consolidated
historical data of the Company are not comparable in many respects due to
the Acquisition and the Safeline Acquisition. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and accompanying notes included herein.
The financial information presented below was prepared in accordance with
U.S. generally accepted accounting principles ("U.S. GAAP").
<TABLE>
<CAPTION>
Predecessor Business Mettler-Toledo International Inc.
----------------------------------------------------- ---------------------------------------------
Jan. 1, Oct. 15, 1996 Three Months Ended
Year Ended December 31, to to Pro forma Year Ended March 31,
------------------------- Oct. 14, Dec. 31, (a)(b)(c) December 31, --------------------
1993 1994 1995 1996 1996 (d)(e) 1997 1997 1998
---- ---- ---- ---- ---- ------ ---- ---- ----
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net Sales ......... $ 728,958 $ 769,136 $ 850,415 $ 662,221 $ 186,912 $889,567 $ 878,415 $ 197,402 $ 215,655
Cost of Sales ..... 443,534 461,629 508,089 395,239 136,820(b) 523,783 493,480(d) 114,120 121,048
------------ --------- --------- --------- --------- -------- --------- ---------- ---------
Gross profit ...... 285,424 307,507 342,326 266,982 50,092 365,784 384,935 83,282 94,607
Research and
development ...... 46,438 47,994 54,542 40,244 9,805 50,608 47,551 10,832 10,795
Selling,
general and
administrative ... 209,692 224,978 248,327 186,898 59,353 252,085 260,397 60,193 65,112
Amortization ...... 2,917 6,437 2,765 2,151 1,065 6,526 6,222 1,157 1,818
Purchased research
and development .. -- -- -- -- 114,070(c) -- 29,959(e) -- --
Interest expense .. 15,239 13,307 18,219 13,868 8,738 30,007 35,924 9,446 5,879
Other charges
(income),
net(f) ........... 14,110 (7,716) (9,331) (1,332) 17,137 14,036 10,834 3,754 454
------------ --------- --------- --------- --------- -------- --------- ---------- ---------
Earnings (loss)
before taxes,
minority
interest and
extraordinary
items............. (2,972) 22,507 27,804 25,153 (160,076) 12,522 (5,952) (2,100) 10,549
Provision for
taxes ............ 3,041 8,676 8,782 10,055 (938) 6,956 17,489 (1,087) 3,692
Minority
interest ......... 1,140 347 768 637 (92) 593 468 109 19
------------ --------- --------- --------- --------- -------- --------- ---------- ---------
Earnings (loss)
before
extraordinary
items ............ (7,153) 13,484 18,254 14,461 (159,046) 4,973 (23,909) (1,122) 6,838
Extraordinary
items-debt
extinguishments .. -- -- -- -- -- (41,197)(g) -- --
------------ --------- --------- --------- --------- -------- --------- ---------- ---------
Net earnings
(loss) ........... $ (7,153) $ 13,484 $ 18,254 $ 14,461 $(159,046) $ 4,973 $ (65,106) $ (1,122) $ 6,838
============ ========= ========= ========= ========= ======== ========= ========== =========
Diluted earnings
(loss) per common
share(h):
Earnings (loss)
per common
share before
extraordinary
items ......... $ (5.18) $ (0.76) $ (0.04) $ 0.17
Extraordinary
items ......... -- (1.30) -- --
--------- ---------- ---------- ---------
Earnings (loss)
per common
share ......... $ (5.18) $ (2.06) $ (0.04) $ 0.17
========= ========== ========== ==========
Weighted average
number of common
shares ........... 30,686,065 31,617,071 30,686,065 40,600,109
OTHER DATA:
Local currency net
sales growth(i) .. 7% 6% 3% 11% 4% 14%
Gross profit before
non-recurring
costs as a
percentage of
net sales(j) ..... 39.2% 40.0% 40.3% 40.3% 44.0% 41.1% 44.1% 42.2% 43.9%
Adjusted Operating
Income(k) ........ $ 29,294 $ 34,535 $ 39,457 $ 39,840 $ 17,912 $ 67,875 $ 81,541 $ 12,257 $ 18,700
Adjusted Operating
Income as a
percentage of
net sales(k) ..... 4.0% 4.5% 4.6% 6.0% 9.6% 7.6% 9.3% 6.2% 8.7%
Depreciation and
amortization
expense .......... $ 29,591 $ 34,118 $ 33,363 $ 21,663 $ 8,990 $ 34,393 $ 31,835 $ 6,978 $ 7,695
Capital
expenditures ..... 25,122 24,916 25,858 16,649 11,928 29,417 22,251 3,063 7,417
March 31,
BALANCE SHEET DATA: 1998
Working capital................................................................................................... $ 77,503
Total assets...................................................................................................... 735,138
Long-term debt.................................................................................................... 319,207
Other non-current liabilities (l)................................................................................. 91,181
Shareholders' equity.............................................................................................. 33,926
- ------------------------------
<FN>
(a) Represents the unaudited pro forma consolidated statement of
operations of the Company for fiscal year 1996, assuming the
Acquisition, the Safeline Acquisition, the IPO and the Refinancing
occurred on January 1, 1996. The 1996 pro forma data includes certain
adjustments to historical results to reflect: (i) an increase in
interest expense resulting from acquisition-related borrowings, which
expense has been partially offset by reduced borrowings following
application of IPO proceeds and a lower effective interest rate
following the Refinancing, (ii) an increase in amortization of
goodwill and other intangible assets following the Acquisition and the
Safeline Acquisition, and (iii) changes to the provision for taxes to
reflect the Company's estimated effective income tax rate at a stated
level of pro forma earnings before tax for the year ended December 31,
1996. Certain other one-time charges incurred during 1996 have not
been excluded from the unaudited pro forma consolidated statement of
operations for the year ended December 31, 1996. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."
(b) In connection with the Acquisition, the Company allocated $32,194 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 charges associated with
this revaluation have been excluded from the 1996 pro forma financial
information.
(c) 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. This amount was recorded as an
expense immediately following the Acquisition. This expense has been
excluded from the 1996 pro forma financial information.
(d) In connection with the Safeline Acquisition, the Company allocated
$2,054 of the purchase price to revalue certain inventories
(principally work-in-progress and finished goods) to fair value (net
realizable value). Substantially all such inventories were sold during
the second quarter of 1997. The charges associated with this
revaluation have been excluded from the 1996 pro forma financial
information.
(e) In conjunction with the Safeline Acquisition, the Company allocated,
based upon independent valuations, $29,959 of the purchase price to
purchased research and development in process. This amount was
recorded as an expense immediately following the Safeline Acquisition.
This expense has been excluded from the 1996 pro forma financial
information.
(f) Other charges (income), net generally includes interest income,
foreign currency transactions (gains) losses, (gains) losses from
sales of assets and other charges (income). In 1993, the amount shown
includes costs associated with the closure of a manufacturing facility
in Cologne, Germany, the restructuring of certain manufacturing
operations and an early retirement program in the United States. For
the period January 1, 1996 to October 14, 1996, the amount shown
includes employee severance and other exit costs associated with the
closing of the Company's Westerville, Ohio facility. For the period
October 15, 1996 to December 31, 1996, the amount shown includes
employee severance benefits associated with the Company's general
headcount reduction programs in Europe and North America and the
realignment of the analytical and precision balance business in
Switzerland. For the year ended December 31, 1997, the amount shown
includes a restructuring charge of $6,300 to consolidate three
facilities in North America. See Note 14 to the audited consolidated
financial statements (the "Audited Consolidated Financial Statements")
included herein.
(g) Represents charges for the write-off of capitalized debt issurance
fees and related expenses associated with the Company's previous
credit facilities as well as the prepayment premium on the Notes and
the write-off of the related capitalized debt issuance fees.
(h) Effective December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"). Accordingly, basic and diluted loss per common share data for
each period presented have been determined in accordance with the
provisions of SFAS 128.
(i) Local currency net sales growth is adjusted for the exit from certain
systems businesses. Pro forma 1996 local currency net sales growth
assumes that the Safeline Acquisition occurred on January 1, 1995. For
1997, local currency net sales increased 7% absent the Safeline
Acquisition. For the three months ended March 31, 1998, local
currency net sales increased 7% absent the Safeline Acquisition.
(j) Non-recurring costs represent costs associated with selling
inventories revalued to fair value in connection with the Acquisition
and the Safeline Acquisition. See Notes (b) and (d) above.
(k) Adjusted Operating Income is defined as operating income (gross profit
less research and development and selling, general and administrative
expenses) before amortization and non-recurring costs. Non-recurring
costs which have been excluded are the costs set forth in Note (j)
above and for the period from October 15, 1996 to December 31, 1996,
and in pro forma 1996, advisory fees associated with the
reorganization of the Company's structure of approximately $4,800.
Non-recurring costs in 1997 includes a charge of $2,500 in connection
with the termination of the Company's management services agreement
with AEA Investors.
(l) Consists primarily of obligations under various pension plans and
plans that provide post-retirement medical benefits. See Note 12 to
the Audited Consolidated Financial Statements included herein.
</FN>
</TABLE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following risk factors
before purchasing the Common Stock offered hereby. This Prospectus contains
forward-looking statements. These statements are subject to a number of
risks and uncertainties, certain of which are beyond the Company's control.
See "-Forward-Looking Statements and Associated Risks" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
EFFECT OF SUBSTANTIAL INDEBTEDNESS ON OPERATIONS AND LIQUIDITY
In connection with the Acquisition and the Safeline Acquisition, the
Company incurred a significant amount of indebtedness. At March 31, 1998,
the Company's consolidated indebtedness (excluding unused commitments) was
$374.2 million. As of March 31, 1998, the Company had additional borrowing
capacity of approximately $240.0 million on a revolving credit basis under
the Credit Agreement and under local working capital facilities for
acquisitions and other purposes. The Company is required to make scheduled
principal payments on the term loans under the Credit Agreement. The
Company's ability to comply with the terms of the Credit Agreement and its
other debt obligations to make cash payments with respect to such
obligations 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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
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
borrowings under the Credit Agreement and the Company's 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.
The Credit Agreement and the Company's other debt obligations contain
a number of covenants that, among other things, restrict the ability of the
Company to incur additional indebtedness, dispose of certain assets, make
capital expenditures and otherwise restrict corporate activities. The
Company's ability to comply with such covenants may be affected by events
beyond its control, including prevailing economic, financial and industry
conditions. A failure to comply with the covenants and restrictions
contained in the Credit Agreement, the Company's other debt obligations or
any agreements with respect to any additional financing could result in an
event of default under its debt agreements.
RISKS ASSOCIATED WITH CURRENCY FLUCTUATIONS
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. Some of the Company's manufacturing costs in
Switzerland relate to products that are sold outside of Switzerland,
including many technologically sophisticated products requiring highly
skilled personnel. Moreover, a substantial percentage of the Company's
research and development expenses and general and administrative expenses
are incurred in Switzerland. Appreciation of the Swiss franc against the
Company's major trading currencies (i.e., the U.S. dollar, certain major
European currencies and the Japanese yen) has a negative impact on the
Company's income from operations, whereas depreciation of the Swiss franc
has a positive impact.
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 currency exchange
rate for inclusion in the Company's consolidated financial statements. As
exchange rates between these foreign currencies and the U.S. dollar
fluctuate, the translation effect of such fluctuations may have a material
adverse effect on the Company's results of operations or financial position
as reported in U.S. dollars. However, the effect of these changes on income
from operations generally offsets in part the effect on income from
operations of changes in the exchange rate between the Swiss franc and
other currencies described in the preceding paragraph.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company does business in numerous countries, including emerging
markets in Asia, Latin America and Eastern Europe. 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 is
increasing its presence in China, Latin America and Eastern Europe. As a
result, inflationary conditions in these countries could have an
increasingly significant effect on the Company's operating results.
Recently, growth in net sales in Southeast Asia and Korea (which
collectively represented approximately 3% of the Company's total net sales
in 1997) has slowed and the Company anticipates this trend to continue for
the near term.
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 instruments 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 respective
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 the
continued productive 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 CHEMICALS INDUSTRIES
The Company's products are used extensively in the pharmaceutical and
chemicals industries. Consolidation in these industries has had an adverse
impact on the Company's sales in prior years. A prolonged downturn or any
additional consolidation in these industries could adversely affect the
Company's operating results.
RISKS RELATING TO FUTURE ACQUISITIONS
The Company may in the future pursue acquisitions of complementary
product lines, technologies or businesses. Future acquisitions by the
Company may result in potentially dilutive issuances of equity securities,
the incurrence of debt and contingent liabilities and amortization expenses
related to goodwill and other intangible assets, which could materially
adversely affect the Company's profitability. In addition, acquisitions
involve numerous risks, including difficulties in the assimilation of the
operations, technologies and products of the acquired companies, the
diversion of management's attention from other business concerns and the
potential loss of key employees of the acquired company. There are
currently no understandings or agreements with respect to any material
acquisition, nor can there be any assurances that the Company will be able
to identify and successfully complete and integrate potential acquisitions
in the future. In the event that any such acquisition does occur, however,
there can be no assurance as to the effect thereof on the Company's
business or operating results.
RELIANCE ON KEY MANAGEMENT
Robert F. Spoerry, the Company's Chief Executive Officer, and each of
the other key management employees of the Company have employment contracts
with the Company. In addition, various members of management own a portion
of the shares of Common Stock of the Company and have options to purchase
additional shares of such Common Stock. See "Principal and Selling
Shareholders." 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 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, 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, 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
results of operations or financial condition. See "Business--Environmental
Matters."
POTENTIAL ADVERSE EFFECT ON MARKET PRICE DUE TO SHARES ELIGIBLE FOR FUTURE
SALE
Sales of a substantial number of shares of Common Stock in the public
market or the perception that such sales could occur could adversely affect
prevailing market prices for the Common Stock. As of March 31, 1998, the
Company had outstanding 38,336,014 shares of Common Stock. All shares of
Common Stock are freely tradeable without restriction under the Securities
Act of 1933, as amended (the "Securities Act"), except to the extent such
shares are subject to the agreement with the Underwriters described below
and for any such shares which are held by an "affiliate" of the Company. In
connection with the Offerings, the Company, the Company's executive
officers and directors and existing shareholders of the Company holding in
the aggregate _____ shares of Common Stock will agree not to dispose of any
shares of Common Stock for a period of 90 days from the date of this
Prospectus without the consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") on behalf of the Underwriters subject to
certain exceptions. Upon expiration of the lockup period, all shares will
be eligible for sale in the public market, with shares held by "affiliates"
(as such term is defined under the Securities Act) of the Company subject
to compliance with the volume limitations and other restrictions of Rules
144 and 145 under the Securities Act. In addition, the Company will be
filing a registration statement under the Securities Act covering the sale
of shares of Common Stock reserved for issuance or sale under the Company's
Stock Plan. As of March 31, 1998, there were outstanding options to
purchase a total of 4,408,740 shares of Common Stock. The sale of such
shares could have an adverse effect on the Company's ability to raise
equity capital in the public markets. See "Shares Eligible for Future
Sale."
RESTRICTIONS ON PAYMENT OF DIVIDENDS; ABSENCE OF DIVIDENDS
The Credit Agreement restricts, among other things, the ability of the
Company to pay dividends. The Company does not anticipate paying any cash
dividends on the Common Stock in the foreseeable future. See "Dividend
Policy."
CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's amended and restated certificate of incorporation (the
"Amended and Restated Certificate of Incorporation") and amended by-laws
(the "Amended By-laws") contain certain provisions that could make more
difficult the acquisition of the Company by means of a tender offer, proxy
contest or otherwise. The Amended and Restated Certificate of Incorporation
authorizes the issuance of preferred stock without shareholder approval and
upon such terms as the Board of Directors may determine. The rights of the
holders of Common Stock are subject to, and may be adversely affected by,
the rights of holders of preferred stock that may be issued in the future.
In addition, the Amended By-laws contain advance notice procedures for
shareholders to nominate candidates for election as directors and for
shareholders to submit proposals for consideration at shareholder meetings.
Under certain circumstances, Section 203 of the Delaware General
Corporation Law makes it more difficult for an "interested stockholder"
(generally a 15% stockholder) to effect various business combinations with
a corporation for a three-year period.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Prospectus includes forward-looking statements that reflect the
Company's current views with respect to future events and financial
performance, including capital expenditures, planned product introductions,
research and development expenditures, potential future growth, including
potential penetration of developed markets and potential growth
opportunities in emerging markets, potential future acquisitions, potential
cost savings from planned employee reductions and restructuring programs,
estimated proceeds from and timing of asset sales, planned operational
changes and research and development efforts, strategic plans and future
cash sources and requirements. These forward-looking statements are subject
to certain risks and uncertainties, including those identified in "Risk
Factors," 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 Company undertakes no
obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
THE COMPANY
GENERAL
Mettler-Toledo is a leading global supplier of precision instruments.
The Company is the world's largest manufacturer and marketer of weighing
instruments for use in laboratory, industrial and food retailing
applications. In addition, the Company holds one of the top three market
positions in several related analytical instruments such as titrators,
thermal analysis systems, pH meters, automatic lab reactors and electrodes.
Through its recent acquisition of Safeline, the Company is also 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. The Company focuses on high
value-added segments of its markets by providing innovative instruments, by
integrating these instruments into application-specific solutions for
customers, and by facilitating the processing of data gathered by its
instruments and the transfer of this data to customers' management
information systems. Mettler-Toledo services a worldwide customer base
through its own sales and service organization and has a global
manufacturing presence in Europe, the United States and Asia. The Company
generated 1997 net sales of $878.4 million which were derived 45% in
Europe, 42% in North and South America and 13% in Asia and other markets.
The mailing address of the Company's principal executive offices is Im
Langacher, P.O. Box MT-100, CH-8606, Greifensee, Switzerland. Its telephone
number is 41-1-944-22-11.
ACQUISITION AND SAFELINE ACQUISITION
Acquisition. The Company was incorporated in December 1991. It was
recapitalized in connection with the October 15, 1996 acquisition of the
Mettler-Toledo Group from Ciba in a transaction sponsored by management and
AEA Investors. The Company paid cash consideration of approximately SFr
505.0 million (approximately $402.0 million at October 15, 1996), including
dividends of approximately SFr 109.4 million (approximately $87.1 million
at October 15, 1996), paid approximately $185.0 million to settle amounts
due to Ciba and its affiliates and incurred expenses in connection with the
Acquisition and related financing of approximately $29.0 million. The
Company primarily financed the Acquisition with (i) borrowings under a
credit agreement in the amount of $307.0 million, (ii) the issuance of
$135.0 million of the Notes and (iii) an equity contribution of $190.0
million primarily from AEA Investors, its shareholder-investors and
executive officers and other employees of the Company.
Safeline Acquisition. On May 30, 1997, the Company acquired Safeline
for (pound)61.0 million (approximately $100.0 million at May 30, 1997) plus
up to an additional (pound)6.0 million (approximately $10.0 million at May
30, 1997) for a contingent earn-out payment. In October 1997, the Company
made an additional payment, representing a post-closing adjustment, of
(pound)1.9 million (approximately $3.1 million at October 3, 1997). Such
amount has been accounted for as additional purchase price. 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.
INITIAL PUBLIC OFFERING AND REFINANCING
During the fourth quarter of 1997, the Company completed its IPO of
7,666,667 shares of Common Stock, including the underwriters'
over-allotment option, at a per share price equal to $14.00. The IPO raised
net proceeds, after underwriters' commission and expenses, of approximately
$97.3 million. Concurrently with the IPO, the Company effected the Merger
and the Refinancing. In connection with the Refinancing, the Company
recorded an extraordinary charge of $31.6 million, net of tax, principally
for prepayment premiums on certain debt repaid and for the write-off of
existing deferred financing fees. At March 31, 1998 the Company had
borrowings of $374.2 million. Of these borrowings, $191.4 million are in
the form of a term loan and the remainder are outstanding under a revolving
credit facility and various other arrangements. The Company's revolving
credit facility commitment increased from $170.0 million to $420.0 million
under the Credit Agreement, including a $100.0 million acquisition facility
commitment.
USE OF PROCEEDS
All of the Common Stock offered hereby is being sold by the Selling
Shareholders. The Company will not receive any proceeds from the sale of
the Common Stock offered hereby. See "Principal and Selling Shareholders."
DIVIDEND POLICY
The Company has never paid any dividends on its common stock and does
not anticipate paying any cash dividends on the Common Stock in the
foreseeable future. The current policy of the Company's Board of Directors
is to retain earnings to finance the operations and expansion of the
Company's business. In addition, the Company's Credit Agreement restricts
the Company's ability to pay dividends to its shareholders. Any future
determination to pay dividends will depend on the Company's results of
operations, financial condition, capital requirements, contractual
restrictions and other factors deemed relevant by the Board of Directors.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources."
PRICE RANGE OF COMMON STOCK
The Company's Common Stock began trading on the New York Stock
Exchange on November 14, 1997 under the symbol "MTD." The following table
sets forth on a per share basis the high and low sales prices for
consolidated trading in the Common Stock as reported on the New York Stock
Exchange Composite Tape for the quarters indicated.
Common Stock Price Range
-------------------------
High Low
1997
Fourth Quarter (beginning November 14, 1997) ... $18 3/4 $14 1/16
1998
First Quarter .................................. 22 3/8 16 9/16
Second Quarter (through May _____, 1998).......
For a recent reported last sale price for the Common Stock, see the
cover page of this Prospectus.
As of ________, 1998, there were ______ holders of record of the
Company's Common Stock, which excludes beneficial owners of Common Stock
held in "street name."
CAPITALIZATION
The following table sets forth the short-term debt and capitalization
of the Company at March 31, 1998. The information presented below should be
read in conjunction with the Consolidated Financial Statements and the
related notes thereto and "Management's Discussion and Analysts of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
MARCH 31,
1998
(DOLLARS IN
THOUSANDS,
EXCEPT PER SHARE
DATA)
Short-term debt, including current maturities of
long-term debt (a):
Short-term portion of term loans under credit agreements .. $ 15,866
Revolving credit facility under credit agreements (b)...... 29,156
Other short-term borrowings 9,930
---------
Total short-term debt .................................. $ 54,952
=========
Long-term debt (a):
Revolving credit facility under credit agreements (b)...... $ 127,732
Term loans under credit agreements ........................ 175,514
Other long-term debt ...................................... 15,961
---------
Total long-term debt ................................... 319,207
Shareholders' equity:
Common stock, par value $0.01, authorized 125,000,000
shares; issued 38,336,014 (excluding 64,467 shares
held in treasury) (c) ................................... 383
Additional paid-in capital ................................ 284,630
Accumulated deficit ....................................... (217,314)
Accumulated other comprehensive loss ...................... (33,773)
---------
Total shareholders' equity ............................. 33,926
---------
Total capitalization ................................ $ 353,133
=========
- ---------
(a) At March 31, 1998, the Company and its subsidiaries had total
availability of approximately $240,000 (including a $100,000
acquisition facility) under the revolving credit facility of the
Credit Agreement and local working capital facilities.
(b) The Company has the ability to refinance its short-term borrowings
under its revolving facility for an uninterrupted period extending
beyond one year. Accordingly, $127,732 of the Company's short-term
borrowings at March 31, 1998 have been reclassified to long-term.
(c) Does not include shares of Common Stock that may be issued upon
exercise of options granted pursuant to the Stock Plan.
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected historical financial information set forth below at
December 31, 1994, 1995, 1996 and 1997, for the years ended December 31,
1993, 1994 and 1995, for the period from January 1, 1996 to October 14,
1996, for the period from October 15, 1996 to December 31, 1996, and for
the year ended December 31, 1997 is derived from the Company'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 selected historical
financial information at March 31, 1997 and 1998 and for the three months
then ended is derived from the unaudited interim consolidated financial
statements of the Company, 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,
1998 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1998. The combined historical data of the
Predecessor Business and the consolidated historical data of the Company
are not comparable in many respects due to the Acquisition and the Safeline
Acquisition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial
Statements and accompanying notes included elsewhere in this Prospectus.
The financial information presented below was prepared in accordance with
U.S. GAAP.
<TABLE>
<CAPTION>
Predecessor Business Mettler-Toledo International Inc.
---------------------------------------- ---------------------------------------------------
January 1 October 15
to to Year Ended Three Months Ended
Year Ended December 31, October 14, December 31, December 31, March 31,
1993 1994 1995 1996 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ---- ----
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales ..................... $ 728,958 $ 769,136 $ 850,415 $ 662,221 $ 186,912 $ 878,415 $ 197,402 $ 215,655
Cost of sales ................. 443,534 461,629 508,089 395,239 136,820(a) 493,480(c) 114,120 121,048
--------- --------- --------- --------- ---------- ---------- ---------- ----------
Gross profit .................. 285,424 307,507 342,326 266,982 50,092 384,935 83,282 94,607
Research and development ...... 46,438 47,994 54,542 40,244 9,805 47,551 10,832 10,795
Selling, general and .......... 209,692 224,978 248,327 186,898 59,353 260,397 60,193 65,112
administrative
Amortization .................. 2,917 6,437 2,765 2,151 1,065 6,222 1,157 1,818
Purchased research and ........ -- -- -- -- 114,070(b) 29,959(d) -- --
development
Interest expense .............. 15,239 13,307 18,219 13,868 8,738 35,924 9,446 5,879
Other charges (income),
net(e) ...................... 14,110 (7,716) (9,331) (1,332) 17,137 10,834 3,754 454
--------- --------- --------- --------- ---------- ---------- ---------- ----------
Earnings (loss) before taxes,
minority interest and ..... (2,972) 22,507 27,804 25,153 (160,076) (5,952) (2,100) 10,549
extraordinary items
Provision for taxes ........... 3,041 8,676 8,782 10,055 (938) 17,489 (1,087) 3,692
Minority interest ............. 1,140 347 768 637 (92) 468 109 19
--------- --------- --------- --------- ---------- ---------- ---------- ----------
Earnings (loss) before
extraordinary ............. (7,153) 13,484 18,254 14,461 (159,046) (23,909) (1,122) 6,838
items
Extraordinary items-debt
extinguishments ........... -- -- -- -- -- (41,197)(f) -- --
--------- --------- --------- --------- ---------- ---------- ---------- ----------
Net earnings (loss) ........... $ (7,153) $ 13,484 $ 18,254 $ 14,461 $ (159,046) $ (65,106) $ (1,122) $ 6,838
========= ========= ========= ========= ========== ========== ========== ==========
Basic earnings (loss) per
common share(g):
Earnings (loss) per
common share
before extraordinary
items.................... $ (5.18) $ (0.76) $ (0.04) $ 0.18
Extraordinary items ....... -- (1.30) -- --
---------- ---------- ---------- ----------
Earnings (loss) per
common share ............ $ (5.18) $ (2.06) $ (0.04) $ 0.18
========== ========== ========== ==========
Weighted average
number of common
share.................... 30,686,065 31,617,071 30,686,065 38,336,014
Diluted earnings (loss) per
common share(g):
Earnings (loss) per common
share before
extraordinary items..... $ (5.18) $ (0.76) $ (0.04) $ 0.17
Extraordinary items ....... -- (1.30) -- --
---------- ---------- ---------- ----------
Earnings (loss) per common
share .................. $ (5.18) $ (2.06) $ (0.04) $ 0.17
========== ========== ========== ==========
Weighted average number of
common share ........... 30,686,065 31,617,071 30,686,065 40,600,109
BALANCE SHEET DATA (AT END OF
PERIOD)(h):
Cash and cash equivalents ..... $ 63,802 $ 41,402 $ 60,969 $ 23,566 $ 40,599 $ 21,303
Working capital ............... 132,586 136,911 103,697 79,163 100,734 77,503
Total assets .................. 683,198 724,094 771,888 749,313 728,891 735,138
Long-term debt ................ 862 3,621 373,758 340,334 365,369 319,207
Net borrowing from Ciba and ... 177,651 203,157 -- -- -- --
affiliates(i)
Other non-current
liabilities(j) .............. 83,964 84,303 96,810 91,011 92,177 91,181
Shareholders' equity(k) ....... 228,194 193,254 12,426 25,399 2,982 33,926
- -------------------------------------
<FN>
(a) In connection with the Acquisition, the Company allocated $32,194 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.
(b) In connection with the Acquisition, the Company allocated, based upon
independent valuations, $114,070 of the purchase price to purchased
research and development in process. This amount was recorded as an
expense immediately following the Acquisition.
(c) In connection with the Safeline Acquisition, the Company allocated
$2,054 of the purchase price to revalue certain inventories
(principally work-in-progress and finished goods) to fair value (net
realizable value). Substantially all such inventories were sold during
the second quarter of 1997.
(d) In connection with the Safeline Acquisition, the Company allocated,
based upon independent valuations, $29,959 of the purchase price to
purchased research and development in process. This amount was
recorded as an expense immediately following the Safeline Acquisition.
(e) Other charges (income), net generally includes interest income,
foreign currency transactions (gains) losses, (gains) losses from
sales of assets and other charges (income). In 1993, the amount shown
includes costs associated with the closure of a manufacturing facility
in Cologne, Germany, the restructuring of certain manufacturing
operations and an early retirement program in the United States. For
the period January 1, 1996 to October 14, 1996, the amount shown
includes employee severance and other exit costs associated with the
closing of the Company's Westerville, Ohio facility. For the period
October 15, 1996 to December 31, 1996, the amount shown includes
employee severance benefits associated with the Company's general
headcount reduction programs, in Europe and North America and the
realignment of the analytical and precision balance business in
Switzerland. For the year ended December 31, 1997, the amount shown
includes a restructuring charge of $6,300 to consolidate three
facilities in North America. See Note 14 to the Consolidated Financial
Statements included herein.
(f) Represents charges for the write-off of capitalized debt issuance fees
and related expenses associated with the Company's previous credit
facilities as well as the prepayment premium on the Notes and the
write-off of the related capitalized debt issuance fees.
(g) Effective December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"). Accordingly, basic and diluted loss per common share data for
each period presented have been determined in accordance with the
provisions of SFAS 128.
(h) Balance sheet information at December 31, 1993 is not available.
(i) Includes notes payable and long-term debt payable to Ciba and
affiliates less amounts due from Ciba and affiliates.
(j) Consists primarily of obligations under various pension plans and
plans that provide post-retirement medical benefits. See Note 12 to
the Consolidated Financial Statements included herein.
(k) Shareholders' equity for the Predecessor Business consists of the
combined net assets of the Mettler-Toledo Group.
</FN>
</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
consolidated financial statements (the "Interim Consolidated Financial
Statements") included herein.
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 and the Safeline Acquisition are not comparable in many
respects to the operating results prior to the Acquisition and the Safeline
Acquisition. Financial information is presented in accordance with
generally accepted accounting principles in the United States of America.
The Company operates a global business, with net sales that are
diversified by geographic region, product range and customer. The Company
believes that it has achieved its market leadership positions through its
continued investment in product development, the maintenance and, in some
instances, expansion, of its existing position in established markets and
its pursuit of new markets. Net sales in local currency (adjusted for the
exit in 1996 and 1995 from certain systems businesses) have increased in
both the laboratory and industrial and food retailing product lines,
increasing by 11% in 1997 and by 3% and 6% in 1996 and 1995, respectively.
More recently, during the period ended March 31, 1998, net sales in local
currency increased by 14% compared to the corresponding period in 1997.
Similarly net sales in U.S. dollars increased 9% for the first three months
of 1998 compared to the first three months of 1997. For the full year in
1997, net sales in U.S. dollars increased by 3%, as the strengthening of
the U.S. dollar versus the Company's major trading currencies reduced U.S.
dollar reported sales. Net sales in U.S. dollars were unchanged in 1996 and
increased by 11% in 1995. The Company's growth in 1997 and 1998 reflects
favorable sales trends in Europe, which began in the second half of 1997.
In addition, the Company has also benefited from recent investments to
establish distribution and manufacturing infrastructure in certain emerging
markets, particularly in Asia. For 1997, net sales in Asia and other
emerging markets increased by 30% over the prior year, despite the
weakening economic conditions in Asia. As a result of these weakening
economic conditions net sales in Asia and other emerging markets in local
currency decreased by 3% for the first three months of 1998 compared to the
first three months of 1997 primarily as a result of a decline in net sales
in Southeast Asia and Korea (which collectively represented approximately
3% of the Company's total net sales for 1997). However, the Company
believes Asia and other emerging markets will continue to provide
opportunities for growth in the long term. The Company believes that its
growth over the next several years will come primarily from (i) the needs
of customers in developed markets to continue to automate their research
and development and manufacturing processes, (ii) the needs of customers in
emerging markets to continue modernizing these same processes through the
use of increasingly sophisticated instruments, and (iii) the pursuit of the
Company's acquisition strategy.
The Company increased its gross profit margin before non-recurring
acquisition costs from 40.3% in 1995 to 44.1% in 1997 and increased its
Adjusted Operating Income (gross profit less research and development and
selling, general and administrative expenses before amortization and
non-recurring costs) as a percentage of net sales from 4.6% in 1995 to 9.3%
in 1997. During the first three months of 1998, the Company increased its
gross profit margin to 43.9% compared to 42.2% for the first three months
of 1997. Similarly, Adjusted Operating Income as a percentage of net sales
improved from 6.2% during the first three months of 1997 to 8.7% for the
first three months of 1998. These increases were achieved despite the
Company's continued investments in product development and in its
distribution and manufacturing infrastructure. The Company believes that a
significant portion of these increases can be attributed to its strategy to
reduce costs and reengineer its operations. This strategy has a number of
key elements, such as ongoing efforts to direct more of its research and
development activities to the reduction of product costs, to reengineer
manufacturing, distribution, sales and administrative processes, and to
consolidate operations and re-deploy resources to lower cost facilities.
Examples of recent efforts to implement the different elements of this
strategy include the introduction of several products in 1997 with
significantly reduced manufacturing costs compared to their predecessors,
the closure of the Westerville, Ohio manufacturing facility in 1996,
completion of a targeted workforce reduction of approximately 170
personnel, the consolidation of three North American facilities as
described below and the opening of a new laboratory manufacturing facility
in Shanghai, China in 1997 with significant production and research and
development capabilities. The Company is currently implementing several
additional reengineering and cost reduction projects, including the
consolidation of worldwide precision balance manufacturing, the
restructuring of its ordering process, product delivery and parts inventory
management in Europe, the realignment of industrial product manufacturing
in Europe and the consolidation of the Company's North American laboratory,
industrial and food retailing businesses into a single marketing
organization.
On May 30, 1997, the Company acquired Safeline for (pound)61.0 million
(approximately $100.0 million at May 30, 1997) plus up to an additional
(pound)6.0 million (approximately $10.0 million at May 30, 1997) for a
contingent earn-out payment. In October 1997, the Company made an
additional payment, representing a post-closing adjustment, of (pound)1.9
million (approximately $3.1 million at October 3, 1997). Such amount has
been accounted for as additional purchase price. 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. From 1992 to 1996, Safeline's sales increased at a
compounded annual growth rate of approximately 30%, in part due to the
introduction of new products such as the first digital electronic and Zero
Metal-Free Zone metal detectors. Safeline had net sales and Adjusted
Operating Income of $40.4 million and $9.9 million, respectively, for the
year ended December 31, 1996. 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 March 31, 1998,
(pound)4.5 million (approximately $7.5 million at March 31, 1998) remained
outstanding under the seller loan notes.
In 1997, the Company recorded restructuring charges totaling
approximately $6.3 million in connection with the consolidation of three
facilities in North America. Such charges were comprised primarily of
severance and other related benefits and costs of exiting facilities,
including lease termination costs and write-down of existing assets to
their expected net realizable value. The Company expects these actions will
be substantially completed during 1998 and that the two owned facilities
will be sold thereafter. In connection with the closure of these
facilities, the Company expects to terminate approximately 70 employees.
The Company is undertaking these actions as part of its efforts to reduce
costs through reengineering. When complete, these actions will enable the
Company to close certain operations and realize cost savings estimated at
approximately $2.5 million on an annual basis. The Company also estimates
that it will receive, after 1998, upon the sale of the two facilities which
the Company owns proceeds in excess of $5.0 million. The Company believes
that the fair market value of these facilities approximates their
respective book values.
During the fourth quarter of 1997, the Company completed its IPO of
7,666,667 shares of Common Stock, including the underwriters'
over-allotment option, at a per share price equal to $14.00. The IPO raised
net proceeds, after underwriters' commission and expenses, of approximately
$97.3 million. In connection with the IPO, the Company effected the Merger
and the Refinancing. In connection with the Refinancing, the Company
recorded an extraordinary charge of $31.6 million, net of tax, principally
for prepayment premiums on certain debt repaid and for the write-off of
existing deferred financing fees. The Company also incurred a non-recurring
termination fee of $2.5 million in connection with the termination of its
management consulting agreement with AEA Investors Inc. (the "Termination
Fee").
RESULTS OF OPERATIONS
The following table sets forth certain items from the consolidated
statements of operations for the year ended December 31, 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, actual
for the year ended December 31, 1997 and actual for the three months ended
March 31, 1997 and 1998. The pro forma 1996 information gives effect to the
Acquisition, the Safeline Acquisition, the IPO and the Refinancing as if
such transactions had occurred on January 1, 1996, and does not purport to
represent the Company's actual results if such transactions had occurred on
such date. The pro forma 1996 information reflects the historical results
of operations of the Predecessor Business for the period from January 1,
1996 to October 14, 1996 and the historical results of operations of the
Company for the period from October 15, 1996 to December 31, 1996, together
with certain pro forma adjustments as described below. The consolidated
statement of operations data for the year ended December 31, 1997 include
Safeline results from May 31, 1997. The pro forma 1996 information includes
Safeline's historical results of operations for all of 1996. The pro forma
information is presented in order to facilitate management's discussion and
analysis.
<TABLE>
<CAPTION>
PREDECESSOR BUSINESS METTLER-TOLEDO INTERNATIONAL INC.
----------------------------------- ---------------------------------------------
JAN. 1, OCT. 15, 1996
YEAR ENDED 1996 TO 1996 TO PRO FORMA YEAR ENDED THREE MONTHS ENDED
DEC. 31, OCT. 14, DEC. 31, (A)(B) DEC. 31, MARCH 31,
1995 1996 1996(B)(C) (C)(D)(E) 1997(B)(C) 1997 1998
---- ---- ---------- --------- ---------- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ................................... $ 850,415 $ 662,221 $ 186,912 $889,567 $ 878,415 $ 197,402 $215,655
Cost of sales ............................... 508,089 395,239 136,820 523,783 493,480 114,120 121,048
--------- --------- --------- -------- --------- --------- --------
Gross profit ................................ 342,326 266,982 50,092 365,784 384,935 83,282 94,607
Research and development .................... 54,542 40,244 9,805 50,608 47,551 10,832 10,795
Selling, general and
administrative ............................ 248,327 186,898 59,353 252,085 260,397 60,193 65,112
Amortization ................................ 2,765 2,151 1,065 6,526 6,222 1,157 1,818
Purchased research and
development ............................... -- -- 114,070 -- 29,959 -- --
Interest expense ............................ 18,219 13,868 8,738 30,007 35,924 9,446 5,879
Other charges (income), net(f) ............. (9,331) (1,332) 17,137 14,036 10,834 3,754 454
--------- --------- --------- -------- --------- --------- --------
Earnings (loss) before taxes,
minority
interest and extraordinary
items ..................................... $ 27,804 $ 25,153 $(160,076) $ 12,522 $ (5,952) $ (2,100) $ 10,549
========= ========= ========= ======== ========= ========= ========
Adjusted Operating Income(g) ................ $ 39,457 $ 39,840 $ 17,912 $ 67,875 $ 81,541 $ 12,257 $ 18,700
========= ========= ========= ======== ========= ========= ========
- ------------------
<FN>
(a) In giving effect to the Acquisition, the Safeline Acquisition, the IPO
and the Refinancing, the 1996 pro forma data includes certain
adjustments to historical results to reflect: (i) an increase in
interest expense resulting from acquisition-related borrowings, which
expense has been partially offset by reduced borrowings following
application of IPO proceeds and a lower effective interest rate
following the Refinancing, (ii) an increase in amortization of
goodwill and other intangible assets following the Acquisition and the
Safeline Acquisition, and (iii) changes to the provision for taxes to
reflect the Company's estimated effective income tax rate at a stated
level of pro forma earnings before tax for the year ended December 31,
1996.
(b) In connection with the Acquisition and the Safeline Acquisition, the
Company allocated $32,194 and $2,054, respectively, of the purchase
prices to revalue certain inventories (principally work-in-progress
and finished goods) to fair value (net realizable value).
Substantially all such inventories revalued in connection with the
Acquisition were sold during the period October 15, 1996 to December
31, 1996, and substantially all such inventories revalued in
connection with the Safeline Acquisition were sold in the second
quarter of 1997. The expense related to inventory revalued in
connection with the Acquisition has been excluded from the 1996 pro
forma information.
(c) In conjunction with the Acquisition and the Safeline Acquisition, the
Company allocated, based upon independent valuations, $114,070 and
$29,959, respectively, of the purchase prices to purchased research
and development in process. These amounts were expensed immediately
following the Acquisition and the Safeline Acquisition, respectively.
The amounts related to the Acquisition have been excluded from the
1996 pro forma information.
(d) Certain one-time charges incurred during 1996 have not been excluded
from the 1996 pro forma information. These charges consist of certain
non-recurring items for (i) advisory fees associated with the
reorganization of the Company's structure of approximately $4,800 and
(ii) restructuring charges of approximately $12,600.
(e) Selling, general and administrative expense has been adjusted to
eliminate the AEA Investors annual management fee of $1,000, payment
of which was discontinued upon consummation of the IPO.
(f) Other charges (income), net generally includes interest income,
foreign currency transactions (gains) losses, (gains) losses from
sales of assets and other charges (income). For the period January 1,
1996 to October 14, 1996 the amount shown includes employee severance
and other exit costs associated with the closing of its Westerville,
Ohio facility. For the period October 15, 1996 to December 31, 1996
the amount shown includes employee severance benefits associated with
the Company's general headcount reduction programs in Europe and North
America, and the realignment of the analytical and precision balance
business in Switzerland. For the year ended December 31, 1997 the
amount shown includes a restructuring charge of $6,300 to consolidate
three facilities in North America. See Note 14 to the Consolidated
Financial Statements included herein.
(g) Adjusted Operating Income is operating income (gross profit less
research and development and selling, general and administrative
expenses) before amortization and non-recurring costs. Non-recurring
costs which have been excluded are those costs associated with selling
inventories revalued to fair value in connection with the Acquisition
and the Safeline Acquisition, fees associated with the termination of
the Company's management consulting agreement with AEA Investors at
the time of the IPO of $2,500 in 1997 and advisory fees associated
with the reorganization of the Company's structure of approximately
$4,800 in 1996.
</FN>
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31,
1997
Net sales were $215.7 million for the three months ended March 31,
1998 compared to $197.4 million for the corresponding period in the prior
year. This reflected an increase of 14% in local currency (7% absent the
Safeline Acquisition). Results were negatively impacted by the
strengthening of the U.S. dollar against other currencies. Net sales in
U.S. dollars during the three month period increased 9%.
Net sales in Europe increased 17% in local currencies during the three
months ended March 31, 1998 versus the corresponding period 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 three-month period in the Americas increased 16% principally due to
improved market conditions for sales to industrial and food retailing
customers. Net sales in local currencies in the three month period in Asia
and other markets decreased 3%. The Company's business in Asia has
deteriorated in the three months ending March 31, 1998 primarily as a
result of a decline in net sales in Southeast Asia and Korea (which
collectively represented approximately 3% of the Company's total net sales
for 1997). The Company anticipates that market conditions in Asia will
adversely affect sales in 1998 and that margins in that region will be
reduced. The Company believes Asia and other emerging markets will continue
to 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.
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 $11.0 million for the three months
ended March 31, 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
$2.4 million.
Gross profit as a percentage of net sales increased to 43.9% for the
three months ended March 31, 1998, compared to 42.2% for the corresponding
period in the prior year. The improved gross profit percentage reflects the
benefits of reduced product costs arising from the Company's research and
development efforts and ongoing productivity improvements.
Research and development expenses as a percentage of net sales
decreased to 5.0% for the three months ended March 31, 1998, compared to
5.5% for the corresponding period in the prior year; however, the local
currency spending level remained relatively constant period to period.
Selling, general and administrative expenses as a percentage of net
sales decreased to 30.2% for the three months ended March 31, 1998,
compared to 30.5% for the corresponding period in the prior year. This
decrease primarily reflects the benefits of ongoing cost efficiency
programs.
Adjusted Operating Income was $18.7 million, or 8.7% of sales, for the
three months ended March 31, 1998 compared to $12.3 million, or 6.2% of
sales, for the three months ended March 31, 1997, an increase of 52.6%.
Interest expense decreased to $5.9 million for the three months ended
March 31, 1998, compared to $9.4 million for the corresponding period in
the prior year. The decrease was principally due to benefits received from
the IPO, the Refinancing and cash flow provided by operations.
Other charges, net of $0.5 million for the three months ended March
31, 1998 compared to other charges, net of $3.8 million for the
corresponding period in the prior year. The 1998 amount includes gains on
asset sales and interest income, offset by other charges. The 1997 period
includes $4.8 million ($4.0 million after tax) 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 projected annual
effective tax rate for the related period. The decrease in the projected
annual effective tax rate from 1997 to 1998 includes a benefit of
approximately 5 percentage points based upon a change in Swiss tax law
which will only benefit the 1998 period.
The net earnings of $6.8 million for the three months ended March 31,
1998 compared to net loss of $1.1 million for the corresponding period of
the prior year.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO PRO FORMA YEAR ENDED DECEMBER 31,
1996
Net sales were $878.4 million for 1997, compared to pro forma 1996 net
sales of $889.6 million. As previously described, pro forma 1996 includes a
full year of Safeline's operating results, while 1997 only includes the
operating results of Safeline from May 31, 1997. Net sales in local
currencies during the year increased 11% (excluding Safeline results from
pro forma 1996) and 7% (excluding Safeline results from both pro forma 1996
and actual 1997).
Net sales in local currencies in 1997 in Europe increased 6% as
compared to net sales in local currencies in pro forma 1996 (excluding
Safeline results from pro forma 1996). Net sales in local currencies during
1997 in the Americas increased 11%, principally due to improved market
conditions for sales to industrial and food retailing customers. Net sales
in local currencies in 1997 in Asia and other markets increased 30%,
primarily as a result of the establishment of additional direct marketing
and distribution in the region. During the six months ended December 31,
1997, sales trends in Europe were more favorable compared to sales trends
in the first two quarters of 1997. Overall, the Company's business in Asia
and other markets has remained solid. However, growth in net sales in
Southeast Asia and Korea (which collectively represent approximately 3% of
the Company's total net sales for 1997) slowed.
The operating results for Safeline (which as previously noted were
included in the Company's results from May 31, 1997) had the effect of
increasing the Company's net sales by $28.5 million for 1997. Additionally,
Safeline's operating results had the effect of increasing the Company's
Adjusted Operating Income by $7.1 million for the same period. The Company
recorded non-cash purchase accounting adjustments for purchased research
and development ($30.0 million) and the sale of inventories revalued to
fair value ($2.1 million) during such period.
Gross profit before non-recurring acquisition costs as a percentage of
net sales increased to 44.1% for 1997, compared to 41.1% for pro forma
1996. Gross profit in 1997 includes the previously noted $2.1 million
non-cash charge associated with the excess of the fair value over the
historic value of inventory acquired in the Safeline Acquisition. The
improved gross profit percentage reflects 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.
Research and development expenses as a percentage of net sales
decreased to 5.4% for 1997, compared to 5.7% for pro forma 1996; however,
the local currency spending level remained relatively constant period to
period.
Selling, general and administrative expenses as a percentage of net
sales increased to 29.6% for 1997, compared to 28.3% for pro forma 1996.
This increase is primarily a result of establishing additional direct
marketing and distribution in Asia.
Adjusted Operating Income was $81.5 million, or 9.3% of net sales in
1997 compared to $67.9 million, or 7.6% of net sales in pro forma 1996, an
increase of 20.1% (28.4% excluding Safeline results from both pro forma
1996 and actual 1997). The 1997 period excludes non-recurring costs of $2.1
million for the revaluation of inventories to fair value in connection with
the Safeline Acquisition and $2.5 million for the Termination Fee.
As previously noted, in connection with the Safeline Acquisition,
$30.0 million of the purchase price was attributed to purchased research
and development in process. Such amount was expensed immediately following
the Safeline Acquisition. The technological feasibility of the products
being developed had not been established as of the date of the Safeline
Acquisition. The Company expects that the projects underlying these
research and development efforts will be substantially complete over the
next two years.
Interest expense was $35.9 million for 1997, compared to $30.0 million
for pro forma 1996. The difference is principally due to the fact that the
pro forma 1996 information reflects a full year of the benefits of reduced
borrowing costs in connection with the Company's IPO and Refinancing which
occurred in November 1997.
Other charges, net of $10.8 million for 1997 includes restructuring
related charges of approximately $6.3 million and other charges of
approximately $3.5 million relating to (i) certain financial 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 decrease compared to other charges, net of $14.0 million for
pro forma 1996 is principally a result of lower restructuring related
charges in 1997 compared to pro forma 1996 ($6.3 million versus $12.6
million).
The significant increase in the Company's effective tax rate in 1997
was primarily attributable to the nondeductibility of goodwill and
purchased research and development charges incurred in connection with the
Safeline Acquisition.
Net earnings before non-recurring items were $19.1 million in 1997.
Such non-recurring items in 1997 include the previously mentioned charges
for purchased research and development, the revaluation of inventories to
fair value, the Termination Fee, the restructuring of North American
operations and losses relating to derivative financial instruments and
unhedged bank debt denominated in foreign currencies. Including these
charges of $43.0 million after taxes, the net loss before extraordinary
items was $23.9 million for 1997 compared to net earnings of $5.0 million
for pro forma 1996.
The extraordinary loss of $41.2 million in 1997 represents charges for
the early repayment premium on the senior subordinated notes and the
write-off of capitalized debt issuance fees associated with the senior
subordinated notes and previous credit facilities. See "--Liquidity and
Capital Resources."
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
$889.6 million, or $849.1 million excluding Safeline results, compared to
actual net sales of $850.4 million in 1995. Net sales (pro forma excluding
Safeline) in local currency increased 3%, excluding the impact of
reductions 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 excluding
Safeline) 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 (excluding Safeline)
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 where the Company has been able to retain its market share.
This market weakness has persisted in early 1997.
Net sales (pro forma excluding Safeline) 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 excluding
Safeline) 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 excluding Safeline) 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 1996 gross profit was
$365.8 million or $349.3 million (excluding Safeline results). This
compares to $342.3 million in actual 1995. 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 1996 selling,
general and administrative and research and development expenses totaled
$302.7 million or $296.1 million excluding Safeline. This compares to
$302.9 million in actual 1995. Pro forma selling, general and
administrative expenses and research and development expenses as a
percentage of net sales decreased to an aggregate of 34.0% in 1996 from
35.6% 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. These cost decreases were partially offset by non-recurring legal
and advisory fees of $4.8 million.
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.
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 $30.0 million in 1996 from $18.2 million in actual 1995,
principally due to a higher debt level as a result of the Acquisition and
the Safeline Acquisition. Interest expense since the Acquisition and the
Safeline Acquisition is materially different. See "-Liquidity and Capital
Resources."
Other income, net for the period January 1, 1996 to October 14, 1996
of $1.3 million includes interest income of $3.4 million and severance and
other exit costs of $1.9 million associated with the closing of its
Westerville, Ohio facility. Other charges, net for the period October 15,
1996 to December 31, 1996 of $17.1 million principally represent (i) losses
on foreign currency transactions of $8.3 million of which $5.7 million were
incurred in connection with the Acquisition, (ii) employee severance
benefits associated with the Company's general headcount reduction programs
in Europe and North America of $4.6 million which were announced during
such period, and (iii) 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 approximately 170 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 it will achieve cost
savings consisting primarily of lower employee salary and benefit costs and
fixed manufacturing costs. In addition, at the time of the Acquisition, the
Company estimated it would incur additional selling, general and
administrative expenses of $1.3 million annually as a result of the
Acquisition.
Earnings before taxes and minority interest for the period from
January 1, 1996 to October 14, 1996 was $25.2 million. Loss before taxes
and minority interest for the period from October 15, 1996 to December 31,
1996 was $160.1 million. This loss includes non-recurring costs of $114.1
million for the allocation of purchase price to in-process research and
development projects, $32.2 million for the revaluation of inventories to
fair value, $9.9 million of other charges (an additional $1.9 million of
other charges was incurred by the Predecessor Business in 1996) and $4.8
million for non-recurring legal and advisory fees. Pro forma earnings
before taxes and minority interest would have been $12.5 million in 1996.
Pro Forma Adjusted Operating Income would have been $67.9 million in 1996,
or $58.0 million (excluding Safeline), compared to $39.5 million in actual
1995.
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 $159.0 million. Pro forma net earnings of $5.0
million in 1996 compared to net earnings of $18.3 million in actual 1995.
LIQUIDITY AND CAPITAL RESOURCES
In November 1997, the Company refinanced its previous credit agreement
and purchased all of its 9 3/4% Senior Subordinated Notes due 2006 (the
"Notes") pursuant to a tender offer with proceeds from the IPO and
additional borrowings under the Credit Agreement. The Notes were originally
issued in October 1996 at the time of the Acquisition.
The Credit Agreement provides for term loan borrowings in aggregate
principal amounts of $99.7 million, SFr 83.9 million (approximately $55.9
million at March 31, 1998) and (pound)21.3 million (approximately $35.8
million at March 31, 1998) that are scheduled to mature in 2004, a Canadian
revolver with availability of CDN $26.3 million (approximately CDN $19.5
million of which was drawn as of March 31, 1998) which is scheduled to
mature in 2004, and a multi-currency revolving credit facility with
availability of $400.0 million (approximately $240.0 million of which was
available at March 31, 1998) which is also scheduled to mature in 2004. The
Company had borrowings of $348.3 million under the Credit Agreement and
$25.9 million under various other arrangements as of March 31, 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 imposes
certain restrictions on the Company's ability to pay dividends to its
shareholders.
In connection with the Refinancing, the Company recorded an
extraordinary charge amounting to $31.6 million, principally for prepayment
premiums on its Notes and the write-off of capitalized debt issuance fees.
In addition, with the May 29, 1997 refinancing of its previous credit
facility, the Company recorded an extraordinary charge of $9.6 million,
representing a charge for the write-off of capitalized debt issuance fees
and related expenses associated with the previous credit facility.
At March 31, 1998, approximately $106.7 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 also denominated in certain of the Company's other
principal trading currencies amounting to approximately $267.5 million at
March 31, 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 will
fluctuate due to changes in exchange rates. See "--Effect of Currency on
Results of Operations."
The Acquisition was financed principally through capital contributions
of $190.0 million before related expenses from the Company, borrowings
under a previous credit agreement of $307.0 million and $135.0 million from
the issuance of the Notes. The Safeline Acquisition was financed by
borrowings under the Company's then-existing credit facility together with
the issuance of (pound)13.7 million ($22.4 million at May 30, 1997) of
seller loan notes which mature May 30, 1999.
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
and the Safeline Acquisition, the annual interest expense associated with
increased borrowings, as well as scheduled principal payments of term loans
under the Credit Agreement, have significantly increased the Company's
liquidity requirements.
The Company's capital expenditures totaled $25.9 million in 1995,
$29.4 million in pro forma 1996 and $22.3 million in actual 1997. 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 1998 are expected to increase over 1997 levels, but should
remain consistent with earlier periods.
The Company's cash provided by operating activities increased from
$8.1 million in the three months ended March 31, 1997 to $12.2 million in
the three months ended March 31, 1998. The increase resulted principally
from improved Adjusted Operating Income and lower interest costs resulting
from the IPO and Refinancing. For the year ended December 31, 1997 cash
provided by operating activities was $55.6 million in 1997 as compared to
$62.5 million for the period January 1, 1996 to October 14, 1996 and $9.6
million for the period October 15, 1996 to December 31, 1996. The 1997
results include higher interest costs resulting from the Acquisition and
the Safeline Acquisition.
At March 31, 1998, consolidated debt, net of cash, was $352.9 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.
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 are 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 consolidated financial statements.
Accordingly, the results of operations of such subsidiaries as reported in
U.S. dollars can vary 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, whereas 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 translation effect on earnings before
interest and taxes of changes in exchange rates between the U.S. dollar and
other currencies described in the preceding paragraph.
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/combined basis or (ii) on a consolidated/combined
basis only with other eligible entities subject to tax in the same
jurisdiction, in either case without regard to the taxable losses of
non-consolidated/combined affiliated entities. As a result, the Company may
pay income taxes to 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.
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 China, Latin America and Eastern Europe, 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 China, Latin America and Eastern Europe
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
Prior to 1997, the Company entered 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. At December 31, 1997, all remaining derivative
instruments met the requirements of hedge accounting.
During 1997, the Company entered into certain interest rate swap and
cap agreements. See Note 5 to the Audited Consolidated Financial Statements
included herein. The Company has not entered any such agreements during
1998.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosures about Segments of an Enterprise and Related Information." This
Statement will change the way public companies report information about
segments of their business in annual financial statements and requires them
to report selected financial information in their quarterly reports issued
to shareholders. It also requires entity-wide disclosures about products
and services an entity provides, the material countries in which it holds
assets and reports revenues, and its major customers. The Statement is
effective for fiscal years beginning after December 15, 1997. Management
has not determined the effect of the adoption of SFAS 131.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Opinion ("SOP") 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." This SOP
provides guidance on accounting for the costs of computer software
developed or obtained for internal use. This SOP requires entities to
capitalize certain internal-use software costs once certain criteria are
met, and is effective for financial statements for fiscal years beginning
after December 15, 1998. Management has not determined the effect of the
adoption of SOP 98-1.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Prospectus includes forward-looking statements that reflect the
Company's current views with respect to future events and financial
performance, including capital expenditures, planned product introductions,
research and development expenditures, potential future growth, including
potential penetration of developed markets and potential growth
opportunities in emerging markets, potential future acquisitions, potential
cost savings from planned employee reductions and restructuring programs,
estimated proceeds from and timing of asset sales, planned operational
changes and research and development efforts, strategic plans and future
cash sources and requirements. These forward-looking statements are subject
to a number of risks and uncertainties, including those identified in "Risk
Factors," 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 Company undertakes no
obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
INDUSTRY
GENERAL
The Company believes that in 1997 the global market for the Company's
products and services was approximately $6.0 billion. Weighing instruments
are among the most broadly used measuring devices, and their results are
often used as the basis of commercial transactions. Analytical instruments
are critical to the research and development and quality control efforts of
end-users, while metal detection systems provide important quality and
safety checks for companies that produce and package goods in the food
processing, pharmaceutical, cosmetics, chemicals and other industries. The
Company's products are used in laboratories as an integral part of the
research and quality control processes, in industry for various
manufacturing processes such as quality control, materials preparation,
filling, counting and dimensioning, and in food retailing for preparation,
portioning and inventory control. Customers include pharmaceutical,
biotechnology, chemicals, cosmetics, food and beverage, metals,
electronics, logistics, transportation and food retailing businesses, as
well as schools, universities and government standards laboratories. The
Company does not manufacture or sell household weighing products, bulkweigh
fillers or continuous weighing products, and those markets are not
discussed herein.
Weighing instruments often comprise a relatively small component of a
customer's aggregate expenditures but perform important functions in
quality control, process control and research and can improve productivity.
As a result, the Company believes customers tend to emphasize accuracy,
product reliability, technical innovation, service quality, reputation and
past experience with a manufacturer's products when making their purchasing
decisions for weighing and other precision instruments. Weighing equipment
manufacturers also provide a significant amount of service and support to
their customers, including repair, calibration, certification and
preventive maintenance, which generate recurring revenues. The Company
believes that customers often continue to purchase from their existing
vendor due to the additional costs for training, spare parts, service and
systems integration associated with switching to or adding other brands of
weighing equipment to their operations. The market for weighing
instruments, particularly those used in industrial and food retailing
applications, has traditionally been fragmented both geographically and by
type of application. Many manufacturers have a strong market position in
their home countries but a much smaller presence in other markets.
Similarly, manufacturers have tended to be focused on a particular
application or group of applications.
The Company believes that the developed markets (Europe, North America
and Japan) that it serves have recently experienced modest growth rates in
demand for weighing instruments. Laboratory market growth has been
influenced by demand in the principal end-user industries and customer
replacement of older products with new products designed to be integrated
into an automated laboratory environment. In the industrial and food
retailing market, growth has been driven by the increasing use of weighing
applications in the control and regulation of manufacturing and logistics
processes, customers' needs to upgrade to network-ready weighing equipment,
and general growth in end-user industries. Emerging markets, such as Asia
(excluding Japan), have experienced higher growth rates than the overall
market. Growth in these markets has come from the establishment and growth
of industries requiring additional and more sophisticated weighing
instruments and systems.
End-users of laboratory analytical instruments require exceptionally
high levels of performance and reliability due to the application of these
instruments in critical steps of research and development and quality
control. In addition, analytical instruments in most cases constitute a
small percentage of customers' aggregate expenditures, are material to
customers' development efforts and can have a significant impact on users'
overall productivity. As a result, the Company believes reputation,
technical leadership, service and proven results are critical to end-user
decisions to choose an equipment supplier. In many cases, once a
manufacturer's equipment is adopted in the laboratory and test methods are
established using a particular instrument, the costs and/or risks of
switching to a different manufacturer of instruments can be high. Customers
are therefore reluctant to switch suppliers and are more likely to buy
replacement products from the manufacturer of the initial system, which
leads to stable customer relationships and a potential recurring revenue
stream for the vendor. The Company believes that there are significant
potential growth opportunities in its analytical instruments markets,
including: growth in end-use markets such as pharmaceuticals, food and
beverage, consumer products, environmental testing and chemicals; increased
research and development spending in major customer segments such as the
pharmaceutical and biotech industries; and increased customer emphasis on
productivity and automation.
The end-users of metal detection equipment are typically companies in
the food processing, pharmaceutical, cosmetics, chemicals and other
industries that must ensure that their products are free from contamination
by metal particles. Selling product that is contaminated by metal can have
severe consequences for these companies, resulting in potential litigation
and product recalls. Consequently, the Company believes that purchasers of
metal detectors value accuracy and stability of their detectors. The
Company believes that there is also a high degree of brand loyalty from
customers, as switching brands requires retraining line operators in the
use of new equipment and altering quality assurance and calibration
routines. The Company believes these characteristics lead to a high level
of recurring and follow-on revenues from existing customers. The Company
believes that in developed markets, demand for metal detectors is
experiencing substantial growth as a result of both increasing consumer and
regulatory focus on product safety. Furthermore, the Company believes
exports of food products to industrialized nations from lesser developed
countries will contribute to growth in demand for metal detectors in
emerging markets.
INDUSTRY TRENDS
Over the last five years, the markets for the Company's precision
instruments have experienced increasing customer demand for products with
sophisticated data handling and storage capabilities that can be integrated
into management information systems. In the laboratory market, weighing and
analytical instruments are now capable of storing a large number of
results, performing statistical analyses and transmitting results to
computers and laboratory information management systems. Laboratory
customers have also demanded instruments that improve research productivity
by adding automation. For example, titrators have been increasingly paired
with auto-samplers, which allow a technician to set up dozens of samples
for testing automatically. The industrial and food retailing market has
experienced a similar trend, as small groceries are replaced by
supermarkets and hypermarkets. Retail counter-top scales (for the weighing
of perishable goods) now include database and network functions. This
enables the scale to download price information from the store's master
price database and provide information on sales by article, which can be
integrated into the store's inventory control system. The store's master
ordering system is then able to calculate shrinkage and store inventory
levels based on the weight of goods processed and automatically reorder
perishable goods via electronic data interchange when inventory levels
reach a pre-set reorder point. In manufacturing, weighing instruments also
have become integrated into manufacturing plants' information systems as
the primary means for the tracking and control of inventory. As they have
become more integrated into the manufacturing process, weighing instruments
also have been combined with dimensioning equipment as well as with
multiple input/output devices: bar-code readers, printers and data-storage
devices. Similarly, metal detection systems can be integrated with
checkweighers to provide important safety and quality checks of consumer
products and are linked to customers' management information systems to
provide key process control data.
Another trend in the weighing instruments market is regional and
global harmonization of weighing and measurement standards. Weights and
measures were historically regulated at the national level. As a result,
products had to meet numerous different national regulatory requirements.
More recently, certain European national requirements have been harmonized
by the European Union, and many other national requirements have been
harmonized by the Organisation Internationale de Metrologie Legale, which
sets international weights and measures standards. Harmonization has
facilitated the ability of multinational weighing instrument manufacturers
to manufacture products that meet all relevant regulatory requirements and
the development of broader-based markets for their product lines. In recent
years, some governments have begun to privatize the inspection of weighing
instruments used in commercial transactions. ISO-certified manufacturers of
weighing instruments, such as Mettler-Toledo, whose after-sales service
technicians already perform similar services for customers, are well
situated to take over the inspection process from governments wishing to
privatize this function.
As laboratory and manufacturing requirements and standards become more
widely adopted, the accuracy of weighing instruments, analytical
instruments and metal detection systems and the ability to certify the
accuracy of results become increasingly important to purchasers. For
example, ISO 9001 standards and Good Laboratory Practices and Good
Manufacturing Practices, which are voluntarily adopted by participating
companies, require the development of compliance procedures that must be
adhered to throughout the relevant laboratory or production process. These
procedures include periodic calibration and certification of measurement
instruments. Certified instruments must be utilized throughout the process,
and each step in the process must be accurately recorded in accordance with
specified procedures so that results can be accurately traced and
reproduced. An example of this trend is the increasing adoption of ISO 9001
quality guidelines by food processors, which require all production
processes to be properly monitored for contamination by metal and other
foreign substances.
BUSINESS
GENERAL
Mettler-Toledo is a leading global supplier of precision instruments.
The Company is the world's largest manufacturer and marketer of weighing
instruments for use in laboratory, industrial and food retailing
applications. In addition, the Company holds one of the top three market
positions in several related analytical instruments such as titrators,
thermal analysis systems, pH meters, automatic lab reactors and electrodes.
Through its 1997 acquisition of Safeline, the Company is also 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. The Company focuses on high
value-added segments of its markets by providing innovative instruments, by
integrating these instruments into application-specific solutions for
customers, and by facilitating the processing of data gathered by its
instruments and the transfer of this data to customers' management
information systems. Mettler-Toledo services a worldwide customer base
through its own sales and service organization and has a global
manufacturing presence in Europe, the United States and Asia. The Company
generated 1997 net sales of $878.4 million which were derived 45% in
Europe, 42% in North and South America and 13% in Asia and other markets.
For additional financial information by geographic segment, see Note 16 to
the Audited Consolidated Financial Statements included elsewhere in this
Prospectus.
HISTORY
The Company traces its roots to the invention of the single-pan
analytical balance by Dr. Erhard Mettler and the formation of Mettler
Instruments 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. 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 the
Company's existing geographic markets and products. 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., in 1981. In 1990, the Company acquired
Ohaus Corporation, a manufacturer of laboratory balances.
The Company was incorporated in December 1991, and was recapitalized
in connection with the October 15, 1996 acquisition of the Mettler-Toledo
Group from Ciba in a transaction sponsored by management and AEA Investors.
See Note 1 to the Audited Consolidated Financial Statements included herein
for further information with respect to the Acquisition. On May 30, 1997,
the Company purchased Safeline, the world's leading supplier of metal
detection systems for companies that produce and package goods in the food
processing, pharmaceutical, cosmetics, chemicals and other industries.
In November 1997, the Company completed its initial public offering of
shares of its Common Stock at a price per share equal to $14.00. The IPO,
in which 7,666,667 shares (including the underwriters' over-allotment
option) were sold, raised net proceeds, after underwriters' commission and
expenses, of approximately $97.3 million. The net proceeds from the IPO,
together with additional borrowings under the Company's Credit Agreement,
were used to repurchase the Notes and to pay related premiums and fees and
expenses.
MARKET LEADERSHIP
The Company believes that it maintains a leading position in each of
its markets. In the weighing instruments market, Mettler-Toledo is the only
company to offer products for laboratory, industrial and food retailing
applications throughout the world and believes that it holds a market share
more than two times greater than that of its nearest competitor. The
Company believes that in 1997 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 the
number two position in Japan. In the industrial and food retailing markets,
the Company believes it has the largest market share in Europe and the
United States. In Asia, Mettler-Toledo has substantial, rapidly growing
industrial and food retailing businesses supported by an established
manufacturing presence in China. The Company also holds one of the top
three global market positions in several analytical instruments such as
titrators, thermal analysis systems, electrodes, pH meters and automatic
lab reactors. The Company recently enhanced its leading positions in
precision instruments through the addition of Safeline's market leading
metal detection products, which can be used in conjunction with the
Company's checkweighing instruments for important quality and safety checks
in the food processing, pharmaceutical, cosmetics, chemicals and other
industries. Mettler-Toledo attributes its worldwide market leadership
positions to the following competitive strengths:
Global Brand and Reputation. The Mettler-Toledo brand name is
identified worldwide with accuracy, reliability and innovation. Customers
value these characteristics because precision instruments, particularly
weighing and analytical instruments, significantly impact customers'
product quality, productivity, costs and regulatory compliance.
Furthermore, precision instruments generally constitute a small percentage
of customers' aggregate expenditures. As a result, the Company believes
customers tend to emphasize accuracy, product reliability, technical
innovation, service quality, reputation and past experience with a
manufacturer's products when making their purchasing decisions for weighing
and other precision instruments and experience high switching costs if they
attempt to change vendors. A recent independent survey concluded that
"Mettler-Toledo" was one of the three most recognized brand names in the
laboratory. The Company's brand name is so well recognized that laboratory
balances are often generically referred to as "Mettlers." The strength of
this brand name has allowed the Company to successfully extend its
laboratory product line to include titrators, thermal analysis systems,
electrodes, pH meters and automatic lab reactors.
Technological Innovation. Mettler-Toledo has a long and successful
track record of innovation, as demonstrated by the invention of the
single-pan analytical balance in 1945 and the introduction of the first
fully electronic precision balance in 1973. The Company has continued to be
at the forefront of technology with recent innovations in both weighing and
related instrumentation, including its new digital load cell, its ID 20
terminal (the first personal computer interface to be certified by weights
and measures regulators), its MonoBloc weighing sensor technology, its GOBI
moisture determination instrument, a new automatic lab reactor, the Zero
Metal-Free Zone metal detector and its new PILAR (Parallel Infrared Laser
Array) dimensioning equipment. As with many of the Company's recent
innovations, the Company's new MonoBloc weighing sensor technology provides
greater accuracy while also significantly reducing manufacturing costs and
the time and expense of design changes by reducing from approximately 100
to approximately 50 the number of parts in the sensor. The Company believes
it is the global leader in its industry in providing innovative
instruments, in integrating its instruments into application-specific
solutions for customers, and in facilitating the processing of data
gathered by its instruments and the transfer of this data to customers'
management information systems. Mettler-Toledo's technological innovation
efforts benefit from the Company's manufacturing expertise in sensor
technology, precision machining and electronics, as well as its strength in
software development.
Comprehensive, High Quality Product Range. Mettler-Toledo manufactures
a more comprehensive range of weighing instruments than any of its
competitors. The Company's broad product line addresses a wide range of
weighing applications across and within many industries and regions.
Furthermore, the Company's analytical instruments and metal detection
systems complement its weighing products, enabling the Company to offer
integrated solutions. The Company manufactures its products in its modern
manufacturing facilities, most of which are ISO 9001 certified.
Mettler-Toledo's broad range of high quality products and the ability to
provide integrated solutions allows the Company to leverage its sales and
service organization, product development activities and manufacturing and
distribution capabilities.
Global Sales and Service. The Company has the only global sales and
service organization among weighing instruments manufacturers. At March 31,
1998, this organization consisted of approximately 3,100 employees
organized into locally-based, customer-focused groups that provide prompt
service and support to the Company's customers and distributors in
virtually all major markets around the world. The local focus of the
Company's sales and service organization enables the Company to provide
timely, responsive support to customers worldwide and provides feedback for
manufacturing and product development. This global infrastructure also
allows the Company to capitalize on growth opportunities in emerging
markets.
Largest Installed Base. The Company believes that it has the largest
installed base of weighing instruments in the world. From this installed
base, the Company obtains service contracts which provide a strong, stable
source of recurring service revenue. Service revenue represented
approximately 16% of net sales in 1997, of which approximately 9% is
derived from service contracts and repairs with the remainder derived from
the sale of spare parts. The Company believes that its installed base of
weighing instruments represents a competitive advantage with respect to
repeat purchases and purchases of related analytical instruments and metal
detection systems, because customers tend to remain with an existing
supplier that can provide accurate and reliable products and related
services. In addition, switching to a new instrument supplier entails
additional costs to the customer for training, spare parts, service and
systems integration requirements. Close relationships and frequent contact
with its broad customer base also provide the Company with sales leads and
new product and application ideas.
Geographical, Product and Customer Diversification. The Company's
revenue base is diversified by geographic region, product range and
customer. The Company's broad range of product offerings is utilized in
many different industries, including, among others, chemicals,
pharmaceuticals, food processing, food retailing and transportation. The
Company supplies customers in over 100 countries, and no one customer
accounted for more than 2.6% of 1997 net sales. The Company's diverse
revenue base reduces its exposure to regional or industry-specific economic
conditions, and its presence in many different geographic markets, product
markets and industries enhances its attractiveness as a supplier to
multinational customers.
GROWTH STRATEGY
Prior to its acquisition on October 15, 1996 in a transaction
sponsored by management and AEA Investors, Mettler-Toledo operated as a
division of Ciba. In connection with the Acquisition, Mettler-Toledo began
implementing a strategy to enhance its position as global market leader by
accelerating new product introductions, capitalizing on market
opportunities, focusing on expansion in emerging markets, pursuing selected
acquisitions and reengineering its operations in order to reduce its
overall cost structure. These initiatives have contributed to an
improvement in Adjusted Operating Income from $39.5 million (4.6% of net
sales) for 1995 to $81.5 million (9.3% of net sales) for 1997. Adjusted
Operating Income increased from $12.3 million (6.2% of net sales) for the
three months ended March 31, 1997 to $18.7 million (8.7% of net sales) for
the three months ended March 31, 1998, an increase of 52.6%.
New Product Introductions. The Company intends to continue to invest
in product innovation in order to provide technologically advanced products
to its customers for existing and new applications. Over the last three
calendar years, the Company invested more than $150 million in research and
development and customer engineering, which has resulted in a pipeline of
innovative and new products, significant reductions in product costs and
reduced time to market for new products. Examples of recent or upcoming
product introductions include: industrial and retail products that apply
open-system architecture, a higher performance titrator, a higher
performance modular thermal analysis system, a new density and
refractometry measurement technology, a fully integrated metal detector and
checkweigher and the first Chinese-designed and manufactured laboratory
balance. In addition, the Company is also focused on innovations that
reduce manufacturing costs. For example, the Company is extending the
utilization of its high-accuracy, low-cost MonoBloc weighing sensor
technology through much of its weighing instrument product line. The
Company attributes a significant portion of its recent margin improvement
to its research and development efforts.
Capitalize on Market Opportunities. Mettler-Toledo believes it is well
positioned to capitalize on potential market opportunities including: (i)
the integration of precision measurement instruments into data management
software systems to automate processes and/or improve process control; (ii)
the development of integrated solutions that combine measurement
instruments and related technologies directly into manufacturing processes;
(iii) the harmonization of national weighing standards among countries,
particularly in the European Union; and (iv) the standardization of
manufacturing and laboratory practices through programs such as ISO 9001,
Good Laboratory Practices and Good Manufacturing Practices. The Company
believes that these trends, together with the Company's brand name, global
presence and the pipeline of planned new products, will allow it to
increase its penetration of developed markets such as Europe, the United
States and Japan.
Further Expansion in Emerging Markets. The Company believes that
global recognition of the Mettler-Toledo brand name and the Company's
global sales, service and manufacturing capabilities position it to take
advantage of continued growth opportunities in emerging markets. These
growth opportunities have been driven by economic development and global
manufacturers' utilization of additional and more sophisticated precision
measurement instruments as they shift production to these markets. The
primary focus to date of the Company's emerging market expansion has been
in Asia. In Asia (excluding Japan), the Company is the market leader in
laboratory weighing instruments and has substantial and rapidly growing
industrial and food retailing businesses. The Company maintains two
profitable operations in China: first, a 60% owned joint venture which
manufactures and sells industrial and food retailing products and, second,
a wholly owned facility which manufactures and distributes laboratory
products. Both of these operations serve the domestic and export markets.
The Company has opened direct marketing organizations in Taiwan, Korea,
Hong Kong, Thailand, Malaysia and Eastern Europe. The Company's net sales
in Southeast Asia and Korea collectively represented approximately 3% of
the Company's total net sales for 1997. The Company is also expanding its
sales and service presence in Latin America and other emerging markets. The
Company believes Asia and other emerging markets will continue to provide
opportunities for growth in the long term based upon the movement toward
international quality standards, the need to upgrade mechanical sales to
electronic versions and the establishment of local production facilities by
the Company's multinational client base. The Company believes that its
brand name, its global marketing and manufacturing infrastructure and its
already substantial sales in Asia, Latin America and Eastern Europe
position it to take advantage of these growth opportunities.
Pursue Selected Acquisition Opportunities. Mettler-Toledo plans to
actively pursue additional complementary product lines and distribution
channels. In the laboratory market, the Company intends to leverage its
existing laboratory distribution system through the acquisition of
complementary product lines and the development of integrated laboratory
solutions. In the industrial and food retailing markets, the Company plans
to pursue the acquisition of related products and technologies that allow
for the integration of weighing with other customer operations and
information systems. The Company began implementing this strategy through
the May 1997 acquisition of Safeline, which is the world's leading supplier
of metal detection systems for companies that produce and package goods in
the food processing, pharmaceutical, cosmetics, chemicals and other
industries. Safeline's metal detection systems enable the Company to offer
integrated solutions for quality control and data management to these
industries. The Company believes that by taking advantage of its brand name
and global sales and service organization it can expand the distribution of
acquired product lines and operate acquired businesses more effectively.
Reengineering and Cost Reductions. The Company's recent increase in
profitability has been achieved in part through: (i) focusing research and
development efforts on product cost reductions; (ii) achieving greater
flexibility in, and a targeted reduction of, the Company's workforce,
including a planned further reduction of approximately 70 personnel in
1998; (iii) consolidating manufacturing facilities, including the closure
of the Westerville, Ohio facility; and (iv) moving production to lower-cost
manufacturing facilities. The Company has also started implementing a
number of additional operational changes such as the restructuring of its
ordering process, product delivery and parts inventory management in
Europe, the consolidation of worldwide precision balance manufacturing, the
realignment of industrial product manufacturing in Europe and the
consolidation of the Company's North American laboratory, industrial and
food retailing businesses into a single marketing organization. The Company
believes that these new initiatives, as well as its continuing efforts to
reduce product costs through research and development and the move of
production to lower-cost manufacturing facilities, will place the Company
in a position to build on its recent improvement in profitability.
Furthermore, the Company believes that it can leverage its existing
infrastructure, particularly the recent investments made in Asia, to obtain
continued sales growth without significant additions to its overall cost
base.
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, electrodes, pH meters and
automatic lab reactors, for laboratory applications in research and
development, quality assurance, production and education. Laboratory
products accounted for approximately 38% of the Company's net sales in 1997
(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 producers worldwide of titrators,
thermal analysis systems, electrodes, pH meters and automatic lab reactors.
The Company believes it has the leading market share for laboratory
balances in each of Europe, the United States and Asia (excluding Japan)
and the number two position 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 generically 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, 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 branded products, the Company also
manufactures and sells balances under the brand name "Ohaus." Ohaus branded
products include mechanical balances and electronic balances for the
educational market and other markets in which customers are interested in
lower cost, a more limited set of features and less comprehensive support
and service.
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.
Automatic Lab Reactors and Reaction Calorimeters. Automatic 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. Automatic 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 $160.
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 instruments are among the most broadly used measurement
devices 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), metal detectors, dimensioning equipment and scales for use in
food retailing establishments and specialized software systems for
industrial and perishable goods management 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 62%
of the Company's net sales in 1997 (including revenues from related
after-sale service). The Company believes that it has the largest market
share in the industrial and food retailing market in each of Europe and in
the United States. In Asia, the Company has a substantial, rapidly growing
industrial and food retailing business supported by an established
manufacturing presence 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
scale prices generally range from $20,000 to $50,000.
Dynamic Checkweighing. The Company offers solutions to checkweighing
requirements in the food processing, pharmaceutical, chemicals 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.
Metal Detection Systems. Metal detection systems control the removal
of product that is identified as contaminated by metal during the
manufacturing process in the food processing, pharmaceutical, cosmetics,
chemicals and other industries. Metal detectors therefore provide
manufacturers with vital protection against metal contamination arising
from their own production processes or from use of contaminated raw
materials. Metal detectors are most commonly utilized in conjunction with
checkweighers as components of integrated packaging lines in the food
processing, pharmaceutical and other industries. Prices for metal detection
systems generally range from $5,000 to $20,000.
Dimensioning Equipment. The Company recently introduced automated
dimensioning equipment that is utilized in the shipping industry to measure
package volumes. These products employ a patented Parallel Infrared Laser
Array ("PILAR") technology and are integrated with industrial scales to
combine volume-based and weight-based tariff calculations. Prices for
integrated dimensioning/weighing systems range from $5,000 to $20,000.
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 delicatessen counter or at the checkout
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 1997 net
sales derived 45% in Europe, 42% in North and South America and 13% 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 2.6% of 1997 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. In addition, the
Company began to distribute laboratory products directly in certain other
Asian countries.
Ohaus branded products are generally positioned in alternative
distribution channels to those of Mettler-Toledo branded 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 branded 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),
pharmaceutical companies (e.g., formulating and filling 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 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 the Company's modules into
larger process control applications, or comprehensive packaging lines. OEM
applications often include software content and technical support, as the
Company's modules 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 metal detection systems are typically food processing,
pharmaceutical, cosmetics and chemicals manufacturers who must ensure that
their products are free from contamination by metal particles. Selling
product that is contaminated by metal can have severe consequences for
these companies, resulting in potential litigation and product recalls.
Metal detection systems are most commonly utilized in conjunction with
checkweighers as components of integrated packaging lines as important
safety checks before food and other products are delivered to customers.
Other applications of metal detection systems include pipeline detectors
for dairy and other liquids, gravity fall systems for grains and sugar and
throat detection systems for raw material monitoring.
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, direct sales slightly
exceed distribution sales. Distributors are highly fragmented in the U.S.
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 the
Company's 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 March 31, 1998, this organization
consisted of approximately 3,100 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 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 16% of the Company's total net sales in 1997
(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 generating
repeat sales. Moreover, the Company believes that it has the largest
installed base of weighing instruments in the world. The close
relationships and frequent contact with its large customer base provide the
Company with sales opportunities and innovative product and application
ideas. A global service network also 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 represent 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 the Company's
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 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 March 31, 1998, POs included approximately
3,800 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, analytical instruments and metal detectors. 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 MonoBloc weighing
sensor 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 MonoBloc sensor permits more
accurate weighing, lower manufacturing costs and cheaper and faster design
changes. MonoBloc technology has been incorporated into certain of the
Company's products, and the Company is extending the utilization of its
MonoBloc technology through much of its weighing instrument product lines.
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 has spent more than $150 million on research and
development during the last three fiscal years (excluding research and
development purchased in connection with the Acquisition and the Safeline
Acquisition). Including costs associated with customer-specific engineering
projects, which are included in cost of sales for financial reporting
purposes, the Company spent approximately 5.7% of net sales on research and
development in 1997.
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 seven manufacturing plants in the U.S., four in
Switzerland, two in Germany, one in the U.K. and two in China, of which one
is a joint venture in which the Company owns a 60% interest and the other,
the Shanghai facility, was completed and commenced production of laboratory
products at the end of 1996. Laboratory products are produced mainly in
Switzerland and to a lesser extent in the United States and China, while
industrial and food retailing products are produced in all five countries.
The Company's metal detectors are produced in the U.K. The Company has
manufacturing expertise in sensor technology, precision machining and
electronics, as well as strength in software development. Furthermore, most
of the Company's manufacturing facilities have achieved ISO 9001
certification. 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 March 31, 1998, the Company had approximately 6,900 employees
throughout the world, including more than 3,500 in Europe, more than 2,600
in North and South America, and approximately 800 in Asia and other
countries. 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 1,100 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, implementation of a final
remedy has not yet been completed, 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; Seaboard Chemical Company Site, Jamestown, North Carolina;
and the Stickney and Tyler Landfills in Toledo, Ohio. 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 or
taken steps to undertake 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 fragmented nature of certain of the Company's weighing
instruments markets, particularly the industrial and food retailing
weighing instruments 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 in its markets 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.
YEAR 2000 COMPLIANCE
Where necessary, the Company is in the process of modifying,
upgrading, or replacing its computer software applications and internal
information systems to accommodate the "year 2000" dating changes necessary
to permit correct recording of year dates for 2000 and later years. The
Company does not expect that the cost of its year 2000 compliance program
will be material to its business, financial condition or results of
operations. The Company believes that it will be able to achieve compliance
by the end of 1999, and does not currently anticipate any material
disruption in its operations as the result of any failure by the Company to
be in compliance. If any of the Company's significant suppliers or
customers do not successfully and timely achieve year 2000 compliance, the
Company's business or operations could be adversely affected.
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 Owned
Headquarters
Uznach, Switzerland......... Production Owned
Urdorf, Switzerland......... Production Owned
Schwerzenbach, Switzerland.. Production Leased
Albstadt, Germany........... Production Owned
Giesen, 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
Manchester, England......... Production, Sales and Leased
Service
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
Tampa, Florida.............. Production, Sales and Leased
Service
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 joint venture in which the Company owns a 60% interest.
The Company believes its facilities are adequate for its current and
reasonably anticipated future needs.
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" for
information concerning legal proceedings relating to certain environmental
claims.
The Company has received a Notice of Proposed Adjustment from the
Internal Revenue Service disallowing $20.4 million of intercompany interest
deductions taken by the Company in its 1994 and 1995 tax returns when the
Company was a subsidiary of Ciba. The Company is indemnified under the
acquisition agreement with Ciba against any loss that may arise from the
proposed adjustment. However, the Company believes that such deductions
were properly made and intends to assist Ciba in contesting the proposed
adjustment.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are set forth
below. All directors hold office until the annual meeting of shareholders
following their election or until their successors are duly elected and
qualified. Officers are appointed by the Board of Directors and serve at
the discretion thereof.
NAME AGE POSITION
Philip Caldwell 78 Chairman of the Board of Directors
Robert F. Spoerry 42 President, Chief Executive Officer
and Director; Chairman-elect
of the Board of Directors
William P. Donnelly 36 Vice President, Chief Financial
Officer and Assistant Secretary
Karl M. Lang 51 Head, Laboratory Division
Lukas Braunschweiler 41 Head, Industrial and Retail (Europe)
John D. Robechek 49 Head, Industrial and Retail
(Americas)
Peter Burker 52 Head, Human Resources
Thomas Rubbe 43 Head, Logistics and Information
Systems
Reginald H. Jones 80 Director
John D. Macomber 70 Director
John M. Manser 50 Director
Laurence Z. Y. Moh 72 Director
Thomas P. Salice 37 Director
Philip Caldwell has been Chairman of the Board of Directors since
October 1996. Effective May 18, 1998, Mr. Caldwell will no longer serve as
Chairman but will remain a director. Mr. Caldwell spent 32 years at Ford
Motor Company, where he served as Chairman of the Board of Directors and
Chief Executive Officer from 1980 to 1985 and a Director from 1973 to 1990.
He served as a Director and Senior Managing Director of Lehman Brothers
Inc. and its predecessor, Shearson Lehman Brothers Holdings, Inc. from 1985
to February 1998. Mr. Caldwell is also a Director of Waters Corporation,
Zurich Holding Company of America, Inc., American Guarantee & Liability
Insurance Company, The Mexico Fund and Russell Reynolds Associates, Inc. He
has served as a Director of the Chase Manhattan 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., Specialty Coatings International Inc., and
Zurich Reinsurance Centre Holdings, Inc.
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. Effective May 18, 1998, Mr. Spoerry will assume the
additional office of Chairman of the Board of Directors.
William P. Donnelly has been Vice President, Chief Financial Officer
and Assistant Secretary of the Company since April 1, 1997. From 1993 until
joining the Company, he held various senior financial and management
positions, including most recently Group Vice President and Chief Financial
Officer, with Elsag Bailey Process Automation, a global manufacturer of
instrumentation and analytical products, and developer of distributed
control systems. Prior to 1993, 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.
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., Pilkington plc and Brown Group, Inc.
John M. Manser has been a Director since August 1997. He is the
Treasurer of the Worldwide Life Science Group of Novartis, which has its
headquarters in Switzerland. He has been with Novartis (and its predecessor
Ciba-Geigy) since 1981.
Laurence Z. Y. Moh has been a Director since October 1996. At present,
he is Chairman and CEO of Plantation Timber Products Limited (CHINA), which
he founded in 1996. He is Chairman Emeritus of Universal Furniture Limited,
which he founded in 1959.
Thomas P. Salice has been a Director since October 1996. Mr. Salice 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.
EXECUTIVE COMPENSATION
The following table sets forth for the years ended December 31, 1997,
1996 and 1995 the compensation paid to or accrued for services performed by
the Chief Executive Officer, each of the four other most highly compensated
executive officers of the Company who were serving as executive officers at
December 31, 1997 and one other highly compensated employee who is no
longer an executive officer (collectively, the "Named Executive Officers").
<TABLE>
SUMMARY COMPENSATION TABLE(1)
<CAPTION>
Long Term
Annual Compensation 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 ............................ 1997 $386,074 $427,113 $36,212(3) 125,839 $112,816(5)
President and Chief Executive 1996 435,135 276,521 8,857(3) 1,047,976 124,431(5)
Officer 1995 289,343 85,871 -- 300(4) 54,346(5)
William P. Donnelly (6) ...................... 1997 124,095 208,464 18,614(7) 195,050 36,768(5)
Chief Financial Officer 1996 -- -- -- -- --
1995 -- -- -- -- --
Karl M. Lang ................................. 1997 170,424 134,209 -- 37,751 55,319(5)
Head, Laboratory 1996 212,997 88,375 -- 209,597 61,901(5)
1995 228,427 38,071 -- -- 60,321(5)
Lukas Braunschweiler ......................... 1997 168,218 201,676 -- 37,751 49,145(5)
Head, Industrial and 1996 210,893 66,162 -- 209,597 62,482(5)
Retail (Europe) 1995 228,427 25,381 -- -- 50,460(5)
John D. Robechek ............................. 1997 220,000 193,886 -- 37,751 7,754(8)
Head, Industrial and Retail 1996 233,754 88,137 -- 209,597 6,215(8)
(Americas) 1995 225,000 40,563 -- -- 6,168(8)
Fred Ort ..................................... 1997 164,633 177,061 -- -- 55,452(5)
Corporate Controller 1996 207,221 99,325 -- 78,599 52,745(5)
1995 227,284 69,701 -- -- 70,804(5)
- ---------
<FN>
(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 $1.00
for 1995, SFr 1.2355 to $1.00 for 1996 and SFr 1.4505 to $1.00 for
1997, in each case the average exchange rate during such year.
(2) Does not include Ciba bonuses to Messrs. Spoerry, Braunschweiler,
Lang, Robechek and Ort 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 GmbH, a
subsidiary of the Company. See "Certain Relationships and Related
Transactions."
(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 Executive Officers, and the other 50% is a required matching
employer contribution.
(6) Mr. Donnelly's employment commenced on April 1, 1997.
(7) Represents allowances associated with Mr. Donnelly's status as an
expatriate in Switzerland.
(8) Includes: (i) the value of group life insurance over $50,000 of $1,024
for 1995, $1,071 for 1996 and $1,036 in 1997; (ii) the Company's
contribution to Mr. Robechek's 401(k) plan account of $4,500 in 1995
and 1996 and $4,750 in 1997; and (iii) Mr. Robechek's profit sharing
payout under the Company's Performance Dividend Plan of $644 in 1995
and 1996 and $1,968 in 1997.
</FN>
</TABLE>
STOCK OPTIONS
The following table sets forth information concerning the grant of
stock options under the Company's Stock Plan to the individuals named in
the Summary Compensation Table.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
% of Total Potential Realizable Value
Number of Options/SARs at Assumed Annual Rates
Securities Granted to Exercise/ of Stock Price
Underlying Employees Base Appreciation for
Options/SARs in Fiscal Price Expiration Option/SAR Term(1)
Name Granted Year ($/Sh) Date 5%($) 10%($)
------- ---- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Robert F. Spoerry ............ 125,839 12.23 15.89 2007 1,257,526 3,186,818
William P. Donnelly .......... 37,751 3.67 15.89 2007 377,251 956,028
157,299 15.29 7.95 2007 786,450 1,993,018
Karl M. Lang ................. 37,751 3.67 15.89 2007 377,251 956,028
Lukas Braunschweiler ......... 37,751 3.67 15.89 2007 377,251 956,028
John D. Robechek ............. 37,751 3.67 15.89 2007 377,251 956,028
Fred Ort ..................... -- -- -- -- -- --
- -----------
<FN>
(1) 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.
</FN>
</TABLE>
OPTION EXERCISE TABLE
No options to purchase Common Stock were exercised by the Named
Executive Officers in 1997. The following table sets forth information with
respect to the aggregate number of unexercised options to purchase Common
Stock granted to the Named Executive Officers and held by them as of
December 31, 1997, and the value of unexercised in-the-money options (i.e.,
options that had a positive spread between the exercise price and the fair
market value of the Common Stock) as of December 31, 1997.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND OPTION/SAR VALUES AS OF DECEMBER 31, 1997
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired on Value Options/SARs at Fiscal In-The-Money Options/SARs
Exercise Realized Year-End (#) at Fiscal Year-End ($)(1)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- --- --- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Robert F. Spoerry ....... 0 0 209,595 964,220 $1,949,234 $7,968,084
William P. Donnelly ..... 0 0 0 195,050 0 1,514,222
Karl M. Lang ............ 0 0 41,919 205,429 389,847 1,610,747
Lukas Braunschweiler .... 0 0 41,919 205,429 389,847 1,610,747
John D. Robechek ........ 0 0 41,919 205,429 389,847 1,610,747
Fred Ort ................ 0 0 15,719 62,880 146,187 584,784
- -----------
<FN>
(1) Sets forth values for "in the money" options that represent the
positive spread between the respective exercise/base prices of
outstanding stock options and the closing price of $17.25 per share at
December 31, 1997, as reported on the New York Stock Exchange.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
Mettler-Toledo GmbH, 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 (approximately $386,074 at December 31,
1997), 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 "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.
Mettler-Toledo GmbH, a subsidiary of the Company, also entered into
employment agreements with Lukas Braunschweiler, William P. Donnelly and
Karl Lang, and Mettler-Toledo, Inc., a subsidiary of the Company, entered
into an employment agreement with John D. Robechek. The employment
agreements provide for a base salary subject to adjustment and
participation in the Company's bonus plan and participation in the
Company's other employee benefit plans. Each agreement prohibits the
executive from competing with the Company for a period of twelve months
after termination of employment. Each agreement may be terminated without
cause, on twelve months notice during which period the executive is
entitled to full compensation under the agreement.
DIRECTORS' COMPENSATION
Members of the Board of Directors of the Company who are officers of
the Company or employees of AEA Investors have not received additional
compensation for being on the Board or its committees. The non-executive
directors were given a one-time opportunity to purchase stock in the
Company upon their election to the Board. Mr. Caldwell purchased 35,940
shares of common stock and each of Messrs. Jones, Macomber and Moh
purchased 23,972 shares of common stock. Members of the Board of Directors
of the Company have received reimbursement for traveling costs and other
out-of-pocket expenses incurred in attending board and committee meetings.
Effective May 18, 1998, members of the Board of Directors who are not
employees of the Company will receive an annual fee of $17,500 (payable
quarterly in advance), $1,000 for each Board meeting attended and $500 for
each meeting of a committee of the Board attended, plus reimbursement for
traveling costs and other out-of-pocket expenses incurred in attending such
meetings. In addition, each member of the Board of Directors who is not an
employee of the Company will receive a stock option grant of 1,000 shares
of the Company's Common Stock per year.
RETIREMENT PLANS
Mr. Robechek is covered under two pension 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 ($160,000 per year in 1997), 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 $48,717 and the accrued annual
benefit under the Mettler-Toledo Supplemental Plan is $14,292, for a total
annual retirement benefit of $63,009.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following directors served on the Company's Compensation Committee
during the fiscal year ended December 31, 1997: Reginald H. Jones, Laurence
Z. Y. Moh and Thomas P. Salice. Mr. Salice also served as an officer of the
Company and certain of its subsidiaries during such fiscal year. Mr. Salice
is an officer of AEA Investors, a shareholder of the Company. AEA Investors
provided certain management, consulting and financial services to the
Company for professional service fees and was reimbursed for out-of-pocket
expenses. In the fiscal year ended December 31, 1997, payments for such
management fee and reimbursement for expenses totaled approximately $1
million. Such services included, but were not necessarily limited to,
advice and assistance concerning the strategy, planning and financing of
the Company, as needed from time to time. Such arrangement with AEA
Investors was terminated in November 1997 and AEA Investors was paid a
termination fee of $2.5 million in connection therewith. The Company
receives the benefit of volume discounts for certain office services and
supplies made available to various companies associated with AEA Investors
pursuant to arrangements managed by a subsidiary of AEA Investors. Mr.
Salice currently is a director of Mettler-Toledo and a Managing Director of
AEA Investors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At the time of the Acquisition, AEA Investors and the Company entered
into a management agreement (the "Management Agreement") pursuant to which
AEA Investors provided management, consulting and financial services to the
Company. Such services included 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. The services were provided by the executive staff of AEA
Investors. In consideration of such services, AEA Investors received an
annual fee of $1.0 million, plus reimbursement for certain expenses and
indemnification against certain liabilities. The Company believes that the
terms of these management arrangements were as favorable as could be
obtained from an unaffiliated third party. The Management Agreement was
terminated upon consummation of the IPO. In consideration of services by
AEA Investors in arranging, structuring and negotiating the terms of the
Acquisition, the Company paid AEA Investors transaction fees of $5.5
million and reimbursed AEA Investors for certain related expenses. In
connection with the termination of the Management Agreement, the Company
paid AEA Investors $2.5 million and reimbursed AEA Investors for certain
related expenses.
Management and other employees of the Company have contributed
approximately $20 million of the equity of the Company. For information
regarding the number of shares owned each Named Executive Officer, see
"Principal and Selling Shareholders."
On October 7, 1996, in order to fund a portion of the purchase price
for the shares purchased by Mr. Spoerry, Mettler-Toledo GmbH entered into a
loan agreement with Mr. Spoerry, in the amount of SFr 1.0 million
(approximately $689,417 at December 31, 1997). 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.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock immediately prior to the
Offerings and as adjusted to reflect the sale of the shares of Common Stock
pursuant to the Offerings, by (a) each person who is known to the Company
to be the beneficial owner of more than five percent of the Company's
Common Stock, (b) each director of the Company, (c) each of the Named
Executive Officers, (d) all directors and executive officers of the Company
as a group and (e) each other Selling Shareholder participating in the
Offerings. Except as otherwise indicated, the persons or entities listed
below have sole voting and investment power with respect to all shares of
Common Stock owned by them, except to the extent such power may be shared
with a spouse.
SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
THE OFFERINGS NUMBER OF THE OFFERINGS(1)
------------------ SHARES ------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT(2) OFFERED NUMBER PERCENT
- ------------------------ ------ ---------- ------- ------ -------
5% SHAREHOLDERS:
Finlayson Fund
Investments PTE LTD
Temasek Holdings
(Private) Limited
8 Shenton Way
#38-03 Treasury Building
Singapore 0106 ............ 2,900,921 7.57%
National Union Fire
Insurance Company of
Pittsburgh, PA
c/o AIG Global
Investment Corp.
175 Water Street-24th
Floor
New York, NY 10038......... 2,239,611 5.84%
DIRECTORS:
Philip Caldwell(3) ....... 102,383 *
Robert F. Spoerry(4) ..... 697,718 1.81%
Reginald H. Jones ........ 46,598 *
John D. Macomber ......... 43,742 *
John M. Manser ........... -- *
Laurence Z. Y. Moh ....... 356,779 *
Thomas P. Salice(3) ...... 608,558 1.59%
NAMED EXECUTIVE OFFICERS:
William P. Donnelly(3)(5). 92,995 *
Karl M. Lang(6) .......... 121,379 *
Lukas Braunschweiler(7)... 118,379 *
John D. Robechek(3)(8) ... 107,532 *
All directors and
executive officers as
a Group (14 persons)(9) 2,604,410 6.72%
OTHER SELLING STOCKHOLDERS:
-- other Selling
Stockholders, each of
whom is selling less
than 150,000 shares in
the Offerings or
beneficially owns less
than 1% of the
outstanding Common
Stock prior to the
Offerings................
- ---------
[FN]
* The percentage of shares of Common Stock beneficially owned does not
exceed one percent of the outstanding shares of Common Stock.
(1) Assumes no exercise of the Underwriters' over-allotment options.
(2) Calculations of percentage of beneficial ownership are based on
38,336,014 shares of Common Stock outstanding prior to the Offerings.
Calculations assume the exercise by only the named shareholder of all
options for the purchase of Common Stock held by such shareholder
which are exercisable within 60 days of the date hereof.
(3) Includes shares held by, or in trust for, members of such individual's
family for which Messrs. Caldwell, Donnelly, Salice and Robechek
disclaim beneficial ownership. Does not include shares held by AEA
Investors, of which Mr. Salice is an officer.
(4) Mr. Spoerry is also a Named Executive Officer. Includes 209,595 shares
of Common Stock issuable upon exercise of options that are exercisable
within 60 days from the date hereof.
(5) Includes 31,459 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from the date hereof.
(6) Includes 41,919 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from the date hereof.
(7) Includes 41,919 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from the date hereof.
(8) Includes 41,919 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from the date hereof.
(9) Includes Fred Ort, who ceased to be an executive officer on April 1,
1997.
</FN>
DESCRIPTION OF CREDIT AGREEMENT
The following statements are brief summaries of certain provisions of
the Credit Agreement. A copy of the Credit Agreement is incorporated by
reference as exhibits to the Registration Statement of which this
Prospectus is a part. The following description does not purport to be
complete and is subject in all respects to applicable Delaware law and to
the provisions of the Credit Agreement.
General
The Credit Agreement provides for a variety of floating rate loans
with interest based on LIBOR. The Company's wholly owned subsidiaries
Mettler-Toledo, Inc. ("M-T, Inc."), Mettler-Toledo Holding AG,
Mettler-Toledo (Canada) Inc. and Safeline Holding Company are borrowers
under the Credit Agreement, and the Company is a guarantor under the Credit
Agreement. As of March 31, 1998, the Company had borrowings under the
Credit Agreement of $348.3 million and borrowings of $25.9 million under
various other credit arrangements. Of the borrowings under the Credit
Agreement, $191.4 million are in the form of a term loan and the remainder
are outstanding under a revolving credit facility. The Company's revolving
credit facility commitment increased from $170.0 million to $420.0 million
under the Credit Agreement, including a $100.0 million acquisition facility
commitment. Merrill Lynch served as the Arranger and Documentation Agent
and an affiliate of Credit Suisse First Boston Corporation served as
co-agent in connection with the Company's previous credit facility in
November 1996 and May 1997 and acted in similar roles in connection with
the Credit Agreement. See "Underwriting."
Maturity, Amortization and Mandatory Prepayments
The term loans and the revolving credit facility will mature in May
2004. Beginning in 1998, amounts outstanding under the term loan will
amortize on a quarterly basis in annual amounts ranging from $15.0 million
to a maximum of $40.0 million.
The term loans will be subject to mandatory prepayments in an amount
equal to, subject to certain exceptions, (i) 75% of annual Excess Cash Flow
(as defined in the Credit Agreement), (ii) the net proceeds received from
certain sales of assets, (iii) the net proceeds from the issuance of debt,
and (iv) 50% of the net proceeds from the issuance of equity.
Security and Guarantees
The obligations of the Mettler-Toledo Holding AG under the New Credit
Agreement are (i) secured by a first priority security interest in all of
the material assets of the Mettler-Toledo Holding AG, (ii) guaranteed, to
the extent permitted by applicable law by all of the direct and indirect
subsidiaries of the Mettler-Toledo Holding AG, with certain exceptions, and
each such guarantee is, to the extent permitted by applicable law and with
certain exceptions, secured by a first priority security interest in all of
the material assets of each such guarantor, and (iii) guaranteed by the
Company and its direct and indirect U.S. subsidiaries, and each such
guarantee will be secured by a first priority security interest in all of
the material assets of each such guarantor, except that each such guarantor
has pledged only 65% of the stock of any non-U.S. subsidiary held by it.
The obligations of M-T, Inc. under the Credit Agreement are (i) secured by
a first priority security interest in all of the material assets of M-T,
Inc., except that M-T, Inc. has pledged only 65% of the stock of each
non-U.S. subsidiary held by it, (ii) guaranteed by each direct and indirect
U.S. subsidiary of M-T, Inc., and each such guarantee is secured by a first
priority security interest in all of the material assets of each such
guarantor, and (iii) guaranteed by the Company, and such guarantee is
secured by a first priority security interest in all of the stock of M-T,
Inc. held by the Company. The obligations of Safeline Holding Company are
also secured by limited guarantees and pledges.
Covenants and Events of Default
The Credit Agreement contains covenants that, among other things,
limit the Company's and its subsidiaries' 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; 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 Credit Agreement contains customary events of default, including,
without limitation, nonpayment of principal, interest, fees or other
amounts when due; violation of covenants; breach of any representation or
warranty; cross-default and cross-acceleration; Change in Control (as
defined in the Credit Agreement); bankruptcy events; material judgments;
certain ERISA matters; and invalidity of loan documents or security
interests.
DESCRIPTION OF CAPITAL STOCK
The following statements are brief summaries of certain provisions
with respect to the Company's capital stock which are contained in the
Amended and Restated Certificate of Incorporation and Amended By-laws,
copies of which are incorporated by reference as exhibits to the
Registration Statement of which this Prospectus is a part. The following
description does not purport to be complete and is subject in all respects
to applicable Delaware law and to the provisions of the Amended and
Restated Certificate of Incorporation and Amended By-laws.
The authorized capital stock of the Company consists of 125,000,000
shares of Common Stock, par value $.01 per share, and 10,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"). As of
March 31, 1998, there were 38,336,014 shares of Common Stock outstanding,
4,408,740 shares of Common Stock issuable upon exercise of outstanding
options and no shares of Preferred Stock outstanding. As of March 5, 1998,
there were 867 holders of record of the Company's Common Stock.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held
of record on all matters to be submitted to a vote of the shareholders
(including the election of directors) and have no preemptive, subscription
or redemption rights. Holders of Common Stock do not have cumulative voting
rights, and therefore holders of a majority of the shares voting for the
election of directors can elect all of the directors. In such event, the
holders of the remaining shares will not be able to elect any directors.
Subject to preferences that may be applicable to any outstanding
shares of Preferred Stock, holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
Board of Directors of the Company out of funds legally available therefor.
All outstanding shares of Common Stock are, fully paid and nonassessable.
In the event of any liquidation, dissolution or winding-up of the affairs
of the Company, holders of Common Stock will be entitled to share ratably
in the assets of the Company remaining after payment or provision for
payment of all of the Company's debts and obligations and liquidation
payments to holders of outstanding shares of Preferred Stock.
PREFERRED STOCK
The Board of Directors, without further shareholder authorization, is
authorized to issue shares of Preferred Stock in one or more series and to
determine and fix the rights, preferences and privileges of each series,
including dividend rights and preferences over dividends on the Common
Stock and one or more series of the Preferred Stock, conversion rights,
voting rights (in addition to those provided by law), redemption rights and
the terms of any sinking fund therefor, and rights upon liquidation,
dissolution or winding up, including preferences over the Common Stock and
one or more series of the Preferred Stock. Although the Company has no
present plans to issue any shares of Preferred Stock, the issuance of
shares of Preferred Stock, or the issuance of rights to purchase such
shares, may have the effect of delaying, deferring or preventing a change
in control of the Company or an unsolicited acquisition proposal.
CERTAIN PROVISIONS OF THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION, AMENDED BY-LAWS AND DELAWARE LAW
The Amended and Restated Certificate of Incorporation, Amended By-laws
and Delaware law contain provisions that could make more difficult the
acquisition of the Company by means of a tender offer, a proxy contest or
otherwise. Such provisions could have the effect of discouraging open
market purchases of the Common Stock because they may be considered
disadvantageous by a shareholder who desires to participate in a business
combination or elect a new director.
Section 203 of Delaware Law. The Company is a Delaware corporation and
is subject to Section 203 ("Section 203") of the Delaware General
Corporation Law (the "DGCL"). In general, Section 203 prevents an
"interested stockholder" (defined as a person who, together with affiliates
and associates, beneficially owns, or if an affiliate or associate of the
corporation did beneficially own within the last three years, 15% or more
of a corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with a Delaware corporation for three years
following the time 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 in which the interested
stockholder became an interested stockholder or approved the business
combination; (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
asset sales involving 10% or more of the market value of the corporation's
assets or stock, certain stock transactions and certain other transactions
resulting in a financial benefit to the interested stockholder or an
increase in their proportionate share of any class or series of a
corporation. The existence of Section 203 of the DGCL could have the effect
of discouraging an acquisition of the Company or stock purchasers in
furtherance of an acquisition.
Limitation on Directors' Liabilities and Indemnification. The Amended
and Restated Certificate of Incorporation provides that to the fullest
extent permitted by the DGCL as it currently exists, a director of the
Company shall not be liable to the Company or its shareholders for monetary
damages for breach of fiduciary duty as a director. Under the current DGCL,
liability of a director may not be limited (i) for any breach of the
director's duty of loyalty to the Company or its shareholders, (ii) for
acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law, (iii) in respect of certain unlawful
dividend payments or stock redemptions or repurchases and (iv) for any
transaction from which the director derives an improper personal benefit.
The effect of this provision of the Company's Amended and Restated
Certificate of Incorporation is to eliminate the rights of the Company and
its shareholders (through shareholders' derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of the
fiduciary duty of care as director (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described
in clauses (i) through (iv) above. The provision does not exonerate the
directors from liability under federal securities laws or limit or
eliminate the rights of the Company or any stockholder to seek non-monetary
relief such as an injunction or rescission in the event of a breach of a
director's duty of care. In addition, the Amended By-laws provide that the
Company shall indemnify its directors, officers, employees and agents to
the fullest extent permitted by DGCL.
Advance Notice for Shareholder Nomination of Directors and Shareholder
Proposals. The Amended By-laws establish an advance notice procedure with
regard to the nomination, other than by or at the direction of the Board of
Directors or a committee thereof, of candidates for election as directors
(the "Nomination Procedure") and with regard to other matters to be brought
by shareholders before an annual meeting of shareholders of the Company
(the "Business Procedure").
The Nomination Procedure requires that a shareholder give prior
written notice, in proper form, of a planned nomination for the Board of
Directors to the Secretary of the Company. The requirements as to the form
and timing of that notice are specified in the Amended By-laws. If the
Chairman of the Board of Directors determines that a person was not
nominated in accordance with the Nomination Procedure, such person will not
be eligible for election as a director.
Under the Business Procedure, a shareholder seeking to have any
business conducted at an annual meeting must give prior written notice, in
proper form, to the Secretary of the Company. The requirements as to the
form and timing of that notice are specified in the Amended By-laws. If the
Chairman of the Board of Directors determines that the other business was
not properly brought before such meeting in accordance with the Business
Procedure, such business will not be conducted at such meeting.
Although the Amended By-laws do not give the Board of Directors any
power to approve or disapprove shareholder nominations for the election of
directors or of any business desired by shareholders to be conducted at an
annual meeting, the Amended By-laws (i) may have the effect of precluding a
nomination for the election of directors or precluding the conduct of
business at a particular annual meeting if the proper procedures are not
followed or (ii) may discourage or deter a third party from conducting a
solicitation of proxies to elect its own slate of directors or otherwise
attempting to obtain control of the Company, even if the conduct of such
solicitation or such attempt might be beneficial to the Company and its
shareholders.
REGISTRATION RIGHTS
Holders of the Company's Common Stock that purchased shares prior to
the IPO have rights to require the Company to register such shares of
Common Stock for resale pursuant to subscription agreements pursuant to
which they acquired their shares. Upon the request of persons owning at
least 25% of the sum of all outstanding shares of Common Stock which are
then "restricted securities" (as defined by Rule 144 under the Securities
Act) and which have a value of at least $5,000,000, the Company is required
to register the sale of such securities, subject to certain limitations and
requirements. The Company 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 Company file a registration statement
with the Securities and Exchange Commission registering shares of the
Common Stock of the Company, the owners of restricted securities would be
entitled to include their restricted securities in such registration.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services L.L.C.
SHARES ELIGIBLE FOR FUTURE SALE
As of March 31, 1998, the Company has 38,336,014 shares of Common
Stock outstanding. Except to the extent such shares are subject to the
agreement with the Underwriters described below, shares of Common Stock are
freely tradable without restriction or further registration under the
Securities Act, unless held by an "affiliate" of the Company as that term
is defined in the Securities Act, which shares will be subject to the
resale limitations of Rules 144 and 145.
In general, under Rules 144 and 145 as currently in effect, a
shareholder (or shareholders whose shares are aggregated) who is an
"affiliate" of the Company is entitled to sell within any three-month
period a number of shares that does not exceed the greater of one percent
of the outstanding Common Stock or the average weekly trading volume in the
Common Stock during the four calendar weeks preceding the date on which
notice of such sale is filed pursuant to Rule 144. The holder may only sell
such shares through unsolicited brokers' transactions. Sales under Rules
144 and 145 are also subject to certain provisions regarding the manner of
sale, notice requirements and the availability of current public
information about the Company. A shareholder (or shareholders whose shares
are aggregated) who is not an affiliate of the Company for at least 90 days
prior to a proposed transaction is entitled to sell such shares under Rule
144 without regard to the limitations described above. Holders which were
affiliates of the Company at the time of the Merger may sell free of
restrictions one year from the date of the Merger.
Notwithstanding the foregoing, in connection with the Offerings, the
Company, the Company's executive officers and directors and existing
shareholders of the Company holding in the aggregate ___ shares of Common
Stock will agree, subject to certain exceptions, not to directly or
indirectly (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase any option or contract to sell, grant any option,
right or warrant for the sale of, or otherwise dispose of or transfer any
shares of Common Stock or any securities convertible into or exchangeable
or exercisable for Common Stock, or file any registration statement under
the Securities Act with respect to any of the foregoing or (ii) enter into
any swap or other agreement or any transaction that transfers, in whole or
in part, directly or indirectly, the economic consequence of ownership of
the Common Stock whether any such swap or transaction is to be settled by
delivery of Common Stock or other securities, in cash or otherwise, without
the prior written consent of Merrill Lynch on behalf of the Underwriters
for a period of 90 days after the date of this Prospectus, other than (i)
the sale to the Underwriters of the shares of Common Stock in connection
with the Offerings, (ii) upon the exercise of outstanding stock options,
(iii) the issuance of options pursuant to the Stock Plan, or (iv) the
filing of a registration statement on Form S-8 under the Securities Act
relating to Common Stock of the Company issued pursuant to the Company's
Stock Plan.
The Company will be filing a registration statement on Form S-8 under
the Securities Act to register approximately 6,400,000 shares of Common
Stock which are reserved for issuance under the Company's Stock Plan. The
Form S-8 will include, in some cases, shares for which an exemption under
Rule 144 or Rule 701 would also be available, thus permitting the resale of
shares issued under the Stock Plan by non-affiliates in the public market,
without restriction under the Securities Act. Such registration statement
is expected to become effective immediately upon filing whereupon shares
registered thereunder will become eligible for sale in the public market,
subject to vesting and, in certain cases, subject to the lock-up agreements
described above. At the date of this Prospectus, options to purchase
4,408,740 shares of Common Stock are outstanding under the Stock Plan.
CERTAIN UNITED STATES FEDERAL TAX
CONSIDERATIONS FOR NON-UNITED STATES HOLDERS
The following is a general discussion of certain U.S. federal income
and estate tax consequences of the ownership and disposition of Common
Stock applicable to Non-U.S. Holders of such Common Stock. A "Non-U.S.
Holder" is a person other than (i) an individual who is a citizen or
resident of the United States, (ii) a corporation, partnership or other
entity created or organized in the United States or under the laws of the
United States or of any state (other than any partnership treated as
foreign under U.S. Treasury regulations), (iii) an estate whose income is
includable in gross income for United States federal income tax purposes
regardless of source, or (iv) a trust subject to the primary supervision of
a court within the United States and the control of one or more U.S.
persons.
An individual may, subject to certain exceptions, be deemed to be a
resident alien (as opposed to a non-resident alien) by virtue of being
present in the United States for at least 31 days in the calendar year and
for an aggregate of at least 183 days during a three-year period ending in
the current calendar year (counting for such purposes all of the days
present in the current year, one-third of the days present in the
immediately preceding year, and one-sixth of the days present in the second
preceding year). Resident aliens are subject to tax as if they were U.S.
citizens.
This discussion does not consider specific facts and circumstances
that may be relevant to a particular Non-U.S. Holder's tax position
(including the fact that in the case of a Non-U.S. Holder that is a
partnership, the U.S. tax consequences of holding and disposing of shares
of Common Stock may be affected by certain determinations made at the
partner level) and does not consider U.S. state and local or non-U.S. tax
consequences. This discussion also does not consider the tax consequences
for any person who is a shareholder, partner or beneficiary of a holder of
the Common Stock. Further, it does not consider Non-U.S. Holders subject to
special tax treatment under the federal tax laws (including but not limited
to banks and insurance companies, dealers in securities and holders of
securities held as part of a "straddle," "hedge," or "conversion
transaction"). The following discussion is based on provisions of the U.S.
Internal Revenue Code of 1986, as amended (the "Code"), the applicable
Treasury regulations promulgated and proposed thereunder, and
administrative and judicial interpretations as of the date hereof, all of
which are subject to change either retroactively or prospectively. The
following summary is included herein for general information. ACCORDINGLY,
EACH PROSPECTIVE NON-U.S. HOLDER IS URGED TO CONSULT A TAX ADVISOR WITH
RESPECT TO THE U.S. FEDERAL TAX CONSEQUENCES OF HOLDING AND DISPOSING OF
COMMON STOCK, AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS
OF ANY U.S. STATE, LOCAL OR OTHER U.S. OR NON-U.S. TAXING JURISDICTION.
DIVIDENDS
In general, dividends paid to a Non-U.S. Holder of Common Stock will
be subject to withholding of U.S. federal income tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. Non-U.S.
Holders should consult their tax advisors regarding their entitlement to
benefits under a relevant income tax treaty.
Dividends that are effectively connected with a Non-U.S. Holder's
conduct of a trade or business in the United States or, if an income tax
treaty applies, attributable to a permanent establishment, or, in the case
of an individual, a "fixed base," in the United States ("U.S. trade or
business income") are generally subject to U.S. federal income tax on a net
income basis at regular graduated rates, but are not generally subject to
the 30% withholding tax if the Non-U.S. Holder files the appropriate U.S.
Internal Revenue Service ("IRS") form with the payor (which form, under
U.S. Treasury regulations generally effective for payments made after
December 31, 1999 (the "Final Regulations"), will require the Non-U.S.
Holder to provide a U.S. taxpayer identification number). Any U.S. trade or
business income received by a Non-U.S. Holder that is a corporation may
also, under certain circumstances, be subject to an additional "branch
profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
Under currently applicable U.S. Treasury regulations, dividends paid
to an address in a foreign country are presumed (absent actual knowledge to
the contrary) to be paid to a resident of such country for purposes of the
withholding discussed above and for purposes of determining the
applicability of a tax treaty rate. Under the Final Regulations, however, a
Non-U.S. Holder of Common Stock who wishes to claim the benefit of an
applicable treaty rate generally will be required to satisfy applicable
certification and other requirements. In addition, under the Final
Regulations, in the case of Common Stock held by a foreign partnership, (x)
the certification requirement will generally be applied to the partners of
the partnership and (y) the partnership will be required to provide certain
information, including a United States taxpayer identification number. The
Final Regulations also provide look-through rules for tiered partnerships.
A Non-U.S. Holder of Common Stock that is eligible for a reduced rate
of U.S. withholding tax pursuant to an income tax treaty may obtain a
refund of any excess amounts withheld by filing an appropriate claim for a
refund with the IRS.
DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. federal income
tax in respect of gain recognized on a disposition of Common Stock unless:
(i) the gain is U.S. trade or business income (in which case, the branch
profits tax described above may also apply to a corporate Non-U.S. Holder),
(ii) the Non-U.S. Holder is an individual who holds the Common Stock as a
capital asset within the meaning of Section 1221 of the Code, is present in
the United States for 183 or more days in the taxable year of the
disposition and meets certain other requirements, (iii) the Non-U.S. Holder
is subject to tax pursuant to the provision of the U.S. tax law applicable
to certain United States expatriates or (iv) the Company is or has been a
"U.S. real property holding corporation" for federal income tax purposes at
any time during the shorter of the five-year period ending on the date of
disposition and such period that the Common Stock was held. The tax with
respect to stock in a "U.S. real property holding corporation" does not
apply to a Non-U.S. Holder whose holdings, direct and indirect, at all
times during the applicable period, constitute 5% or less of the Common
Stock, provided that the Common Stock is regularly traded on an established
securities market. Generally, a corporation is a "U.S. real property
holding corporation" if the fair market value of its "U.S. real property
interests" equals or exceeds 50% of the sum of the fair market value of its
worldwide real property interests plus its other assets used or held for
use in a trade or business. The Company is not, and does not anticipate
becoming, a "U.S. real property holding corporation" for U.S. federal
income tax purposes.
FEDERAL ESTATE TAXES
Common Stock owned or treated as owned by an individual who is a
Non-U.S. Holder at the time of death will be included in the individual's
gross estate for U.S. federal estate tax purposes, unless an applicable
estate tax treaty provides otherwise. Such individual's estate may be
subject to U.S. federal estate tax on the property includable in the gross
estate for U.S. federal estate tax purposes.
U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
Under U.S. Treasury Regulations, the Company may be required to report
annually to the IRS and to each Non-U.S. Holder the amount of dividends
paid to such holder and any tax withheld with respect to such dividends.
The information reporting requirements apply regardless of whether
withholding is required. Copies of the information returns reporting such
dividends and withholding may also be made available to the tax authorities
in the country in which the Non U.S.-Holder is a resident under the
provisions of an applicable income tax treaty or agreement.
Under certain circumstances, the IRS requires "information reporting"
and "backup withholding" at a rate of 31% with respect to certain payments
on Common Stock. Under currently applicable law, Non-U.S. Holders of Common
Stock generally will be exempt from IRS reporting requirements and U.S.
backup withholding with respect to dividends payable on Common Stock. Under
the Final Regulations, however, a Non-U.S Holder of Common Stock that fails
to certify its Non-U.S. Holder status in accordance with the requirements
of the Final Regulations may be subject to U.S. backup withholding at a
rate of 31% on payments of dividends.
The payment of the proceeds of the disposition of Common Stock by a
holder to or through the U.S. office of a broker or through a non-U.S.
branch of a U.S. broker generally will be subject to information reporting
and backup withholding at a rate of 31% unless the holder either certifies
its status as a Non-U.S. Holder under penalties of perjury or otherwise
establishes an exemption. The payment of the proceeds of the disposition by
a Non-U.S. Holder of Common Stock to or through a non-U.S. office of a
non-U.S. broker will not be subject to backup withholding or information
reporting unless the non-U.S. broker has certain U.S. relationships. In the
case of the payment of proceeds from the disposition of Common Stock
effected by a foreign office of a broker that is a U.S. person or a "U.S.
related person," existing regulations require information reporting on the
payment unless the broker receives a statement from the owner, signed under
penalty of perjury, certifying its non-U.S. status or the broker has
documentary evidence in its files as to the Non-U.S. Holder's foreign
status and the broker has no actual knowledge to the contrary. For this
purpose, a "U.S. related person" is (i) a "controlled foreign corporation"
for U.S. federal income tax purposes or (ii) a foreign person 50% or more
of whose gross income from all sources for the three-year period ending
with the close of its taxable year preceding the payment (or for such part
of the period that the broker has been in existence) is derived from
activities that are effectively connected with the conduct of a U.S. trade
or business.
Any amounts withheld under the backup withholding rules from a payment
to a Non-U.S. Holder will be refunded (or credited against the holder's
U.S. federal income tax liability, if any) provided that the required
information is furnished to the IRS.
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
BT Alex. Brown Incorporated, Credit Suisse First Boston Corporation,
Goldman, Sachs & Co. and Smith Barney Inc. are acting as Underwriters (the
"U.S. Underwriters") for the Offering. Subject to the terms and conditions
set forth in a U.S. purchase agreement (the "U.S. Purchase Agreement")
among the Company, the Selling Shareholders and the U.S. Underwriters, and
concurrently with the sale of 2,950,000 shares of Common Stock to the
International Managers (as defined below), the Selling Shareholders have
agreed to sell to the U.S. Underwriters, and each of the U.S. Underwriters
severally and not jointly has agreed to purchase from the Selling
Shareholders the number of shares of Common Stock set forth opposite its
name below.
NUMBER OF
U.S. UNDERWRITER SHARES
---------------- ---------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..........................................
BT Alex. Brown Incorporated....................................
Credit Suisse First Boston Corporation.........................
Goldman, Sachs & Co. ..........................................
Smith Barney Inc. ............................................. ----------
Total................................................. 11,800,000
==========
The Company and the Selling Shareholders have also entered into an
international purchase agreement (the "International Purchase Agreement")
with certain underwriters outside the United States and Canada (the
"International Managers" and, together with the U.S. Underwriters, the
"Underwriters") for whom Merrill Lynch International, BT Alex. Brown
International, a Division of Bankers Trust International PLC, Credit Suisse
First Boston (Europe) Limited, Goldman Sachs International and Smith Barney
Inc. are acting as lead managers (the "Lead Managers"). Subject to the
terms and conditions set forth in the International Purchase Agreement, and
concurrently with the sale of 11,800,000 shares of Common Stock to the U.S.
Underwriters pursuant to the U.S. Purchase Agreement, the Selling
Shareholders have agreed to sell to the International Managers, and the
International Managers severally have agreed to purchase from the Selling
Shareholders, an aggregate of 2,950,000 shares of Common Stock. The initial
public offering price per share and the total underwriting discount per
share of Common Stock are identical under the U.S. Purchase Agreement and
the International Purchase Agreement.
In the U.S. Purchase Agreement and the International Purchase
Agreement, the several U.S. Underwriters and the several International
Managers, respectively, have agreed, subject to the terms and conditions
set forth therein, to purchase all of the shares of Common Stock being sold
pursuant to each such agreement if any of the shares of Common Stock being
sold pursuant to such agreement are purchased. Under certain circumstances,
under the U.S. Agreement and the International Purchase Agreement, the
commitments of non-defaulting Underwriters may be increased. The closings
with respect to the sale of shares of Common Stock to be purchased by the
U.S. Underwriters and the International Managers are conditioned upon one
another.
The U.S. Underwriters have advised the Company and the Selling
Shareholders that the U.S. Underwriters propose initially to offer the
shares of Common Stock to the public at the initial public offering price
set forth on the cover page of this Prospectus, and to certain dealers at
such price less a concession not in excess of $________ per share of Common
Stock. The U.S. Underwriters may allow, and such dealers may reallow, a
discount not in excess of $________ per share of Common Stock on sales to
certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.
The Selling Shareholders have granted options to the U.S.
Underwriters, exercisable for 30 days after the date of this Prospectus, to
purchase up to an aggregate of 1,770,000 additional shares of Common Stock
at the initial public offering price set forth on the cover page of this
Prospectus, less the underwriting discount. The U.S. Underwriters may
exercise these options solely to cover over-allotments, if any, made on the
sale of the Common Stock offered hereby. To the extent that the U.S.
Underwriters exercise these options, each U.S. Underwriter will be
obligated, subject to certain conditions, to purchase a number of
additional shares of Common Stock proportionate to such U.S. Underwriter's
initial amount reflected in the foregoing table. The Selling Shareholders
also have granted options to the International Managers, exercisable for 30
days after the date of this Prospectus, to purchase up to an aggregate of
442,500 additional shares of Common Stock to cover over-allotments, if any,
on terms similar to those granted to the U.S. Underwriters.
The Company, the Company's executive officers and directors and
certain existing shareholders of the Company holding in the aggregate ___
shares of Common Stock will agree, subject to certain exceptions, not to
directly or indirectly (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant for the sale of or otherwise dispose of
or transfer any shares of Common Stock or securities convertible into or
exchangeable or exercisable for Common Stock, whether now owned or
thereafter acquired by the person executing the agreement or with respect
to which the person executing the agreement thereafter acquires the power
of disposition, or file a registration statement under the Securities Act
with respect to the foregoing or (ii) enter into any swap or other
agreement that transfers, in whole or in part, the economic consequence of
ownership of the Common Stock whether any such swap or transaction is to be
settled by delivery of Common Stock or other securities, in cash or
otherwise, without the prior written consent of Merrill Lynch on behalf of
the Underwriters for a period of 90 days after the date of this Prospectus.
See "Shares Eligible for Future Sale."
The U.S. Underwriters and the International Managers have entered into
an intersyndicate agreement (the "Intersyndicate Agreement") that provides
for the coordination of their activities. Pursuant to the Intersyndicate
Agreement, the U.S. Underwriters and the International Managers are
permitted to sell shares of Common Stock to each other for purposes of
resale at the initial public offering price, less an amount not greater
than the selling concession. Under the terms of the Intersyndicate
Agreement, the U.S. Underwriters and any dealer to whom they sell shares of
Common Stock will not offer to sell or sell shares of Common Stock to
persons who are non-U.S. or non-Canadian persons or to persons they believe
intend to resell to persons who are non-U.S. or non-Canadian persons, and
the International Managers and any dealer to whom they sell shares of
Common Stock will not offer to sell or sell shares of Common Stock to U.S.
persons or to Canadian persons or to persons they believe intend to resell
to U.S. or Canadian persons, except in the case of transactions pursuant to
the Intersyndicate Agreement.
The Company and the Selling Shareholders have agreed to indemnify the
U.S. Underwriters and the International Managers against certain
liabilities, including certain liabilities under the Securities Act, or to
contribute to payments the U.S. Underwriters and the International Managers
may be required to make in respect thereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the
Underwriters and certain selling group members to bid for and purchase the
Common Stock. As an exception to these rules, the U.S. Underwriters are
permitted to engage in certain transactions that stabilize the price of the
Common Stock. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offerings, i.e., if they sell more shares of Common
Stock than are set forth on the cover page of this Prospectus, the U.S.
Underwriters may reduce that short position by purchasing Common Stock in
the open market. The U.S. Underwriters may also elect to reduce any short
position by exercising all or part of the over-allotment option described
above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Underwriters purchase shares of Common Stock in the open market to reduce
the Underwriters' short position or to stabilize the price of the Common
Stock, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares as part of the
Offerings.
In general, purchases of a security for the purpose of stabilization
or to reduce a short position could cause the price of the security to be
higher than it might be in the absence of such purchases. The imposition of
a penalty bid might also have an effect on the price of the Common Stock to
the extent that it discourages resales of the Common Stock.
None of the Company, the Selling Shareholders nor any of the
Underwriters makes any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on
the price of the Common Stock. In addition, none of the Company, the
Selling Shareholders nor any of the Underwriters makes any representation
that the U.S. Representatives will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
The Underwriters have from time to time provided investment banking
financial advisory services to the Company and AEA Investors and its
affiliates, for which they have received customary compensation, and may
continue to do so in the future. Merrill Lynch served as lead manager and
Credit Suisse First Boston Corporation served as a co-manager of the
offering of the Notes in October 1996, Merrill Lynch served as the Arranger
and Documentation Agent and an affiliate of Credit Suisse First Boston
served as co-agent in connection with the Company's previous credit
facility and the Credit Agreement for which they received customary
compensation. An affiliate of Credit Suisse First Boston Corporation and
Merrill Lynch and its affiliates were lenders under the Company's previous
credit facility and are lenders under the Credit Agreement. Merrill Lynch,
BT Alex. Brown Incorporated, Credit Suisse First Boston Corporation and
Goldman, Sachs & Co. and certain of their affiliates acted as underwriters
in connection with the IPO.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon for the Company by Fried, Frank, Harris,
Shriver & Jacobson (a partnership including professional corporations),
London, England. Certain legal matters relating to the Offerings will be
passed upon for the Underwriters by Debevoise & Plimpton, New York, New
York. A partnership in which partners of Fried, Frank, Harris, Shriver &
Jacobson are partners is a shareholder of the Company.
INDEPENDENT AUDITORS
The consolidated financial statements of Mettler-Toledo International
Inc. and subsidiaries (as defined in Note 1 to the Audited Consolidated
Financial Statements) as of December 31, 1996 and 1997 and for the year
ended December 31, 1995, for the period January 1, 1996 to October 14,
1996, for the period October 15, 1996 to December 31, 1996 and for the year
ended December 31, 1997, included herein and incorporated in this
Prospectus by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997, have been audited by KPMG Fides Peat,
independent auditors, as set forth in their reports appearing elsewhere and
have been so included and incorporated in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-3 with respect to the Common Stock offered hereby under the
Securities Act. This Prospectus, which constitutes part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement, certain items of which are omitted as permitted by
the rules and regulations of the Commission. For further information
pertaining to the Company and the Common Stock offered hereby, reference is
made to the Registration Statement, including the exhibits thereto and the
financial statements, notes and schedules filed as a part thereof.
Statements contained in this Prospectus regarding the contents of any
contract or other document referred to herein or therein are not
necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being qualified in
all respects by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and, in accordance therewith,
files reports, proxy statements and other information with the Commission.
Such reports, proxy statements and other information, as well as the
Registration Statement and the exhibits and schedules thereto, may be
inspected, without charge, at the public reference facility maintained by
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at
Seven World Trade Center, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Such materials can also be inspected at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York,
New York 10005 or on the Commission's site on the Internet at
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act (File No. 0-22493) are incorporated herein by
reference:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1997;
(2) The Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1998. All other documents filed by the Company with
the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by
reference herein and to be a part hereof from the respective dates of the
filing of such reports and documents; and
(3) The description of the Common Stock contained in the Company's
Registration Statement, as amended, on Form S-1 (Reg. No. 333-35597) filed
with the Commission on November 10, 1997.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extend that a statement
contained herein or in any other subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to any person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or
oral request of such person, a copy of any and all information incorporated
by reference in this Prospectus, other than exhibits to such information
(unless such exhibits are specifically incorporated by reference in such
documents). Such requests should be directed to Mary Finnegan,
Mettler-Toledo International Inc., Im Langacher, P.O. Box MT-100, CH8606
Greifensee, Switzerland (telephone 011-41-1-944-22-11).
METTLER-TOLEDO INTERNATIONAL INC.
(FORMERLY "MT INVESTORS INC.")
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report ......................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997 ......... F-3
Consolidated Statements of Operations for the year ended December 31,
1995 and for the period January 1, 1996 to October 14, 1996 and for
the period October 15, 1996 to December 31, 1996 and for the year
ended December 31, 1997 ........................................... F-4
Consolidated Statements of Changes in Net Assets / Shareholders'
Equity for the year ended December 31, 1995 and for the period
January 1, 1996 to October 14, 1996 and for the period October 15,
1996 to December 31, 1996 and for the year ended
December 31, 1997 ................................................. F-5
Consolidated Statements of Cash Flows for the year ended December 31,
1995 and for the period January 1, 1996 to October 14, 1996 and for
the period October 15, 1996 to December 31, 1996 and for the year
ended December 31, 1997 ........................................... F-6
Notes to Consolidated Financial Statements ........................... F-7
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS:
Interim Consolidated Balance Sheets as of December 31, 1997 and
March 31, 1998 .................................................... F-26
Interim Consolidated Statements of Operations for the three months
ended March 31, 1997 and 1998 ..................................... F-27
Interim Consolidated Statements of Shareholders' Equity for the three
months ended March 31, 1997 and 1998 ............................... F-28
Interim Consolidated Statements of Cash Flows for the three months
ended March 31, 1997 and 1998 ..................................... F-29
Notes to the Interim Consolidated Financial Statements ............... F-30
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Mettler-Toledo International Inc.
We have audited the accompanying consolidated balance sheets of
Mettler-Toledo International Inc. (formerly "MT Investors Inc.") and
subsidiaries (as defined in Note 1 to the consolidated financial
statements) as of December 31, 1996 and 1997, and the related consolidated
statements of operations, net assets / shareholders' equity and cash flows
for the year ended December 31, 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, and for the year ended December 31, 1997, the
Successor periods. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Mettler-Toledo International Inc. and subsidiaries as of
December 31, 1996 and 1997, and the consolidated results of their
operations and their cash flows for the year ended December 31, 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, and for
the year ended December 31, 1997, the Successor periods, in conformity with
generally accepted accounting principles in the United States of America.
As more fully described in Note 1 to the consolidated financial statements,
Mettler-Toledo International 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 consolidated financial statements for the
Successor periods 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
February 6, 1998
METTLER-TOLEDO INTERNATIONAL INC.
(FORMERLY "MT INVESTORS INC.")
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SUCCESSOR SUCCESSOR
--------- ---------
DECEMBER DECEMBER
31, 31,
1996 1997
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents ......................... $ 60,696 $ 23,566
Trade accounts receivable, less allowances of
$8,388 in 1996 and $7,669 in 1997 ................ 151,161 153,619
Inventories ....................................... 102,526 101,047
Deferred taxes .................................... 7,565 7,584
Other current assets and prepaid expenses ......... 17,268 24,066
--------- ---------
Total current assets ............................. 339,216 309,882
Property, plant and equipment, net .................. 255,292 235,262
Excess of cost over net assets acquired, net of
accumulated amortization of $982 in 1996 and
$6,427 in 1997 .................................... 135,490 183,318
Non-current deferred taxes .......................... 3,916 5,045
Other assets ........................................ 37,974 15,806
--------- ---------
Total assets ..................................... $ 771,888 $ 749,313
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable ............................ $ 32,797 $ 39,342
Accrued and other liabilities ..................... 79,857 80,844
Accrued compensation and related items ............ 35,457 43,214
Taxes payable ..................................... 17,580 33,267
Deferred taxes .................................... 9,132 10,486
Short-term borrowings and current maturities of
long-term debt................................... 80,446 56,430
--------- ---------
Total current liabilities ........................ 255,269 263,583
Long-term debt ...................................... 373,758 340,334
Non-current deferred taxes .......................... 30,467 25,437
Other non-current liabilities ....................... 96,810 91,011
--------- ---------
Total liabilities ................................ 756,304 720,365
Minority interest ................................... 3,158 3,549
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 38,336,014 (excluding
64,467 shares held in treasury) at
December 31, 1997 ................................ -- 383
Class A, B and C common stock, $0.01 par value per
share; authorized 2,775,976 shares; issued
2,438,514 at December 31, 1996 ................... 25 --
Additional paid-in capital ........................ 188,084 284,630
Accumulated deficit ............................... (159,046) (224,152)
Currency translation adjustment ................... (16,637) (35,462)
--------- ---------
Total shareholders' equity ....................... 12,426 25,399
Commitments and contingencies .......................
Total liabilities and shareholders' equity .......... $ 771,888 $ 749,313
========= =========
See the accompanying notes to the consolidated financial statements
METTLER-TOLEDO INTERNATIONAL INC.
(FORMERLY "MT INVESTORS INC.")
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PREDECESSOR SUCCESSOR
--------------------- -----------------------
FOR THE FOR THE
PERIOD PERIOD
YEAR JANUARY 1, OCTOBER 15, YEAR
ENDED 1996 1996 ENDED
DECEMBER TO OCTOBER TO DECEMBER DECEMBER
31, 1995 14, 1996 31, 1996 31, 1997
-------- -------- -------- --------
Net sales ...................... $ 850,415 $ 662,221 $ 186,912 $ 878,415
Cost of sales .................. 508,089 395,239 136,820 493,480
---------- --------- ---------- ----------
Gross profit ................ 342,326 266,982 50,092 384,935
Research and development ....... 54,542 40,244 9,805 47,551
Selling, general and
administrative ................ 248,327 186,898 59,353 260,397
Amortization ................... 2,765 2,151 1,065 6,222
Purchased research and
development ................... -- -- 114,070 29,959
Interest expense ............... 18,219 13,868 8,738 35,924
Other charges (income), net .... (9,331) (1,332) 17,137 10,834
---------- --------- ---------- ----------
Earnings (loss) before
taxes, minority interest
and extraordinary items ... 27,804 25,153 (160,076) (5,952)
Provision for taxes ............ 8,782 10,055 (938) 17,489
Minority interest .............. 768 637 (92) 468
---------- --------- ---------- ----------
Net earnings (loss)
before extraordinary
items ..................... 18,254 14,461 (159,046) (23,909)
Extraordinary items-debt
extinguishments, net of tax . -- -- -- (41,197)
---------- --------- ---------- ----------
Net earnings (loss) ..... $ 18,254 $ 14,461 $ (159,046) $ (65,106)
========== ========= ========== ==========
Basic and diluted loss per
common share:
Loss before extraordinary
items..................... $ (5.18) $ (0.76)
Extraordinary items......... -- (1.30)
---------- ----------
Net loss.................... $ (5.18) $ (2.06)
========== ==========
Weighted average number
of common shares ............. 30,686,065 31,617,071
See the accompanying notes to the consolidated financial statements
METTLER-TOLEDO INTERNATIONAL INC.
(FORMERLY "MT INVESTORS INC.")
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS / SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PREDECESSOR
-----------------------------------------
YEAR ENDED DECEMBER 31, 1995 AND FOR THE
PERIOD JANUARY 1, 1996 TO
OCTOBER 14, 1996
-----------------------------------------
CURRENCY
CAPITAL TRANSLATION
EMPLOYED ADJUSTMENT TOTAL
-------- ---------- -----
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>
<CAPTION>
SUCCESSOR
---------------------------------------------------------------------------------------
FOR THE PERIOD FROM OCTOBER 15, 1996 TO DECEMBER 31, 1996 AND FOR
THE YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------------------------------
COMMON STOCK ADDITIONAL CURRENCY
ALL CLASSES PAID-IN ACCUMULATED TRANSLATION
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT TOTAL
------ ------ ------- ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at October 15, 1996 ........... 1,000 $ 1 $ -- $ -- $ -- $ 1
New issuance of Class A and
C shares ........................... 2,437,514 24 188,084 -- -- 188,108
Net loss .............................. -- -- -- (159,046) -- (159,046)
Change in currency
translation adjustment ............. -- -- -- -- (16,637) (16,637)
----------- ----- --------- --------- -------- ---------
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) (1) (668) -- -- (669)
Common stock conversion ............... 28,232,099 282 (282) -- -- --
Proceeds from stock offering .......... 7,666,667 77 97,196 -- -- 97,273
Net loss .............................. -- -- -- (65,106) -- (65,106)
Change in currency
translation adjustment ............ -- -- -- -- (18,825) (18,825)
----------- ----- --------- --------- -------- ---------
Balance at December 31, 1997 ......... 38,336,014 $ 383 $ 284,630 $(224,152) $(35,462) $ 25,399
=========== ===== ========= ========= ======== =========
</TABLE>
See the accompanying notes to the consolidated financial statements
METTLER-TOLEDO INTERNATIONAL INC.
(FORMERLY "MT INVESTORS INC.")
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
----------------------------- -------------------------------
FOR THE PERIOD FOR THE PERIOD
YEAR ENDED JANUARY 1, 1996 OCTOBER 15, 1996 YEAR ENDED
DECEMBER 31, TO OCTOBER 14, TO DECEMBER 31, DECEMBER 31,
1995 1996 1996 1997
------------ -------------- ---------------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) ........................................... $ 18,254 $ 14,461 $(159,046) $ (65,106)
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation ............................................... 30,598 19,512 7,925 25,613
Amortization ............................................... 2,765 2,151 1,065 6,222
Write-off of purchased research and
development and cost of sales associated
with revaluation of inventories .......................... -- -- 146,264 32,013
Extraordinary items ........................................ -- -- -- 41,197
Net loss (gain) on disposal of long-term assets ............ (1,053) (768) -- 33
Deferred taxes and adjustments to goodwill ................. (551) (1,934) (4,563) (4,244)
Minority interest .......................................... 768 637 (92) 468
Increase (decrease) in cash resulting from changes in:
Trade accounts receivable, net ........................ (9,979) 9,569 (10,159) (8,113)
Inventories ........................................... (607) 1,276 3,350 (2,740)
Other current assets .................................. (3,058) 14,748 (10,605) (7,177)
Trade accounts payable ................................ 1,437 (3,065) 3,415 4,936
Accruals and other liabilities, net ................... 13,095 5,948 32,030 32,547
-------- -------- --------- ---------
Net cash provided by operating
activities ....................................... 51,669 62,535 9,584 55,649
-------- -------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of property, plant and
equipment .................................................. 4,000 1,606 736 15,913
Purchase of property, plant and equipment ..................... (25,858) (16,649) (11,928) (22,251)
Acquisition of Mettler-Toledo from Ciba ....................... -- -- (314,962) --
Acquisition, net of seller financing .......................... -- -- -- (80,469)
Other investing activities .................................... (7,484) (1,632) 4,857 (9,184)
-------- -------- --------- ---------
Net cash used in investing
activities ....................................... (29,342) (16,675) (321,297) (95,991)
-------- -------- --------- ---------
Cash flows from financing activities:
Proceeds from borrowings ...................................... 3,983 -- 414,170 614,245
Repayments of borrowings ...................................... -- (13,464) -- (703,201)
Proceeds from issuance of common stock ........................ -- -- 188,108 97,573
Purchase of treasury stock .................................... -- -- -- (669)
Ciba and affiliates borrowings (repayments) ................... (15,693) (26,589) (184,666) --
Capital transactions with Ciba and affiliates ................. (37,361) (7,716) (80,687) --
-------- -------- --------- ---------
Net cash provided by (used in)
financing activities ............................. (49,071) (47,769) 336,925 7,948
-------- -------- --------- ---------
Effect of exchange rate changes on cash and cash
equivalents ................................................... 4,344 (3,394) (615) (4,736)
-------- -------- --------- ---------
Net increase (decrease) in cash and cash
equivalents ................................................... (22,400) (5,303) 24,597 (37,130)
-------- -------- --------- ---------
Cash and cash equivalents:
Beginning of period ........................................... 63,802 41,402 36,099 60,696
-------- -------- --------- ---------
End of period ................................................. $ 41,402 $ 36,099 $ 60,696 $ 23,566
======== ======== ========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ................................................... $ 18,927 $ 6,524 $ 17,874 $ 38,345
Taxes ...................................................... 9,970 9,385 2,470 6,140
Non-cash financing and investing activities:
Due to Ciba for capital transactions .......................... 36,418 -- -- --
Seller financing on acquisition ............................... -- -- -- 22,514
</TABLE>
See the accompanying notes to the consolidated financial statements
METTLER-TOLEDO INTERNATIONAL INC.
(FORMERLY "MT INVESTORS INC.")
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS UNLESS OTHERWISE STATED)
1. BUSINESS DESCRIPTION AND BASIS OF PRESENTATION
Mettler-Toledo International Inc. ("Mettler Toledo," the "Company" or
"Successor"), formerly MT Investors Inc., 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 Company was incorporated by AEA Investors Inc. ("AEA") and
recapitalized to effect the acquisition (the "Acquisition") of the
Mettler-Toledo Group ("Predecessor") from Ciba-Geigy AG ("Ciba") and its
wholly owned subsidiary, AG fur Prazisionsinstrumente ("AGP") on October
15, 1996. The Company acquired the Mettler-Toledo Group 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
Investors, 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.
In connection 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. Additionally, 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. 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 the Successor are not directly comparable to those of the
Predecessor.
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States of
America and include all entities in which the Company has control,
including its majority owned subsidiaries. All intercompany transactions
and balances have been eliminated. Investments in which the Company has
voting rights between 20% to 50% are generally accounted for using the
equity method of accounting. Certain amounts in the prior period financial
statements have been reclassified to conform with current year
presentation.
The combined financial statements of the Predecessor include the
combined historical assets and liabilities and combined results of
operations of the Mettler-Toledo Group. All intergroup transactions have
been eliminated as part of the combination process.
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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with
original maturity dates of three months or less.
Inventories
Inventories are valued at the lower of cost or market. Cost, which
includes direct materials, labor and overhead plus indirect overhead, is
determined using the first in, first out (FIFO) or weighted average cost
methods 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 to 5 years
Leasehold improvements Shorter of useful life or lease
term
Beginning January 1, 1996 the Company adopted 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 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 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.
Deferred Financing Costs
Debt financing costs are deferred and amortized over the life of the
underlying indebtedness using the interest method.
Taxation
The Company files 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.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates in the
respective jurisdictions in which the Company operates that are expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. In assessing the realizability of
deferred tax assets, management considers whether it is more likely than
not that some portion or all of the deferred tax assets will not be
realized.
Generally, deferred taxes are not provided on the unremitted earnings
of subsidiaries outside of the United States because it is expected that
these earnings are permanently reinvested and such determination is not
practicable. Such earnings may become taxable upon the sale or liquidation
of these subsidiaries or upon the remittance of dividends. Deferred taxes
are provided in situations where the Company's subsidiaries plan to make
future dividend distributions.
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 $62,400, $45,100, $11,100 and
$50,200 for the year ended December 31, 1995, for the period from January
1, 1996 to October 14, 1996, for the period from October 15, 1996 to
December 31, 1996 and for the year ended December 31, 1997, respectively.
Currency Translation and Transactions
The reporting currency for the 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.
The Company has designated certain of its Swiss franc debt as a hedge
of its net investments. Any gains and losses due to changes on the debt are
recorded to currency translation adjustment and offset the net investments
which they hedge.
Derivative Financial Instruments
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company enters
into foreign currency forward contracts to hedge short-term intercompany
transactions with its foreign businesses. Such contracts limit the
Company's exposure to both favorable and unfavorable currency fluctuations.
These contracts are adjusted to reflect market values as of each balance
sheet date, with the resulting unrealized gains and losses being recognized
in other charges (income), net.
The Company enters into certain interest rate cap and swap agreements
in order to reduce its exposure to changes in interest rates. The
differential paid or received on interest rate swap agreements is
recognized over the life of the agreements. Realized and unrealized gains
on interest rate cap agreements are recognized as adjustments to interest
expense as incurred.
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.
Loss per Common Share
Effective December 31, 1997, the Company adopted the Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
Accordingly, basic and diluted loss per common share data for each period
presented have been determined in accordance with the provisions of SFAS
128. Outstanding options to purchase shares of common stock, as described
in Note 11, were not included in the computation of diluted loss per common
share for the periods ended December 31, 1996 and 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 1996 and 1997 periods pursuant to SFAS 128 and
Securities and Exchange Commission Staff Accounting Bulletin No. 98 issued
in February 1998.
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.
3. BUSINESS COMBINATIONS
On May 30, 1997, the Company purchased the entire issued share capital
of Safeline Limited ("Safeline"), a manufacturer of metal detection systems
based in Manchester in the United Kingdom, for approximately (pound)61,000
(approximately $100,000), plus up to an additional (pound)6,000
(approximately $10,000) for a contingent earn-out payment. In October 1997,
the Company made an additional payment, representing a post-closing
adjustment, of (pound)1,900 (approximately $3,100). Such amount has been
accounted for as additional purchase price. Under the terms of the
agreement the Company paid approximately (pound)47,300 (approximately
$77,400) of the purchase price in cash, provided by amounts loaned under
its Credit Agreement, with the remaining balance of approximately
(pound)13,700 (approximately $22,400) paid in the form of seller loan notes
which mature May 30, 1999. In connection with the acquisition the Company
incurred expenses of approximately $2,200 which have been accounted for as
part of the purchase price.
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. Approximately $30,000 of the purchase price was
attributed to purchased research and development in process. Such amount
was expensed immediately in the second quarter of 1997. The technological
feasibility of the products being developed had not been established as of
the date of the acquisition. The Company expects that the projects
underlying these research and development efforts will be substantially
complete over the next two years. In addition, the Company allocated
approximately $2,100 of the purchase price to revalue certain finished
goods inventories to fair value. Substantially all of such inventories were
sold in the second quarter of 1997. The excess of the cost of the
acquisition over the fair value of the net assets acquired of approximately
$65,000 is being amortized over 30 years. The results of operations and
cash flows of Safeline have been consolidated with those of the Company
from the date of the acquisition.
The following unaudited pro forma summary presents the consolidated
results of operations of the Company as if the Acquisition (see Note 1) and
Safeline acquisition had been completed as of the beginning of each of the
periods presented, after giving effect to certain adjustments, including
Safeline's historical results of operations prior to the acquisition date,
depreciation and amortization of the assets acquired based upon their fair
values, increased interest expense from the financing of the acquisitions
and income tax effects. The Company allocated a portion of the purchase
prices to (i) in-process research and development projects, that have
economic value and (ii) the revaluation of inventories. 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 acquisitions 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.
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
--------------------------------------
PREDECESSOR SUCCESSOR
----------- -------------------------
FOR THE FOR THE
PERIOD PERIOD
JANUARY 1, OCTOBER 15,
1996 TO 1996 TO YEAR ENDED
OCTOBER DECEMBER DECEMBER
14, 1996 31, 1996 31, 1997
-------- -------- --------
Net sales ....................... $ 694,231 $ 195,336 $ 897,448
Earnings (loss) before
extraordinary items ............ 826 (2,128) 9,565
Net earnings (loss) ............. $ 826 $ (2,128) $ (31,632)
========= ========= =========
Basic and diluted loss per
common share ................... $ (0.07) $ (1.00)
========= =========
4. INVENTORIES
Inventories consisted of the following:
Successor
---------------------------
December December
31, 1996 31, 1997
-------- --------
Raw materials and parts ............... $ 41,015 $ 42,435
Work-in-progress ...................... 31,534 29,746
Finished goods ........................ 29,982 28,968
--------- ---------
102,531 101,149
LIFO reserve .......................... (5) (102)
--------- ---------
$ 102,526 $ 101,047
========= =========
At December 31, 1996 and 1997, 13.2% and 12.7%, 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.
5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS
At December 31, 1996, the Company had forward 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.
In July 1997, the Company entered into three year interest rate cap
agreements to limit the impact of increases in interest rates on its U.S.
dollar based debt. These agreements "cap" the effects of an increase in
three month LIBOR above 8.5%. In addition, the Company has entered into
three year interest rate swap agreements which swap the interest obligation
associated with $100,000 of U.S. dollar based debt from variable to fixed.
The fixed rate associated with the swap is 6.09% plus the Company's normal
interest margin. The swap is effective at three month LIBOR rates up to
7.00%.
In August 1997, the Company entered into certain three year interest
rate swap agreements that fix the interest obligation associated with SFr.
112,500 of Swiss franc based debt at rates varying between 2.17% and 2.49%
plus the Company's normal interest margin. The swaps are effective at one
month LIBOR rates up to 3.5%.
The Company may be exposed to credit losses in the event of
nonperformance by the counterparties to its derivative financial instrument
contracts. Counterparties are established banks and financial institutions
with high credit ratings. The Company has no reason to believe that such
counterparties will not be able to fully satisfy their obligations under
these contracts.
At December 31, 1996 and 1997, the fair value of such financial
instruments was approximately $(5,100) and $(1,064), respectively. The fair
values of all derivative financial instruments are estimated based on
current settlement prices of comparable contracts obtained from dealer
quotes. The values represent the estimated amount the Company would pay to
terminate the agreements at the reporting date, taking into account current
creditworthiness of the counterparties.
6. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net, consisted of the following:
Successor
---------------------
December December
31, 1996 31, 1997
-------- --------
Land .................................. $ 63,514 $ 58,226
Buildings and leasehold improvements .. 120,173 111,065
Machinery and equipment ............... 75,675 93,418
Computer software ..................... 3,067 3,948
--------- ---------
262,429 266,657
Less accumulated depreciation and
amortization ........................ (7,137) (31,395)
--------- ---------
$ 255,292 $ 235,262
========= =========
7. OTHER ASSETS
Other assets include deferred financing fees of $22,015 and $4,101,
net of accumulated amortization of $820 and $76 at December 31, 1996 and
1997, respectively. During 1997, the Company wrote off deferred financing
costs associated with its previous credit facilities and its Senior
Subordinated Notes as further discussed in Note 9. Also included in other
assets are restricted bank deposits of $5,960 and $1,756 at December 31,
1996 and 1997, respectively. Other assets at December 31, 1996 and 1997
also included a loan due from the Company's Chief Executive Officer of
approximately $740 and $690, respectively. Such loan bears an interest rate
of 5% and is payable upon demand, which may not be made until 2003.
8. SHORT-TERM BORROWINGS AND CURRENT MATURITIES OF LONG-TERM DEBT
Short-term borrowings and current maturities of long-term debt
consisted of the following:
Successor
---------------------
December December
31, 1996 31, 1997
-------- --------
Current maturities of long-term debt .... $ 8,968 $14,915
Borrowings under revolving credit
facility ............................... 51,928 33,320
Other short-term borrowings ............. 19,550 8,195
------- -------
$80,446 $56,430
======= =======
9. LONG-TERM DEBT
Long-term debt consisted of the following:
Successor
------------------
December December
31, 1996 31, 1997
-------- --------
9.75% Senior Subordinated Notes due
October 1, 2006 ................................... $135,000 $ --
Credit Agreement:
Term A USD Loans, interest at LIBOR plus 1.125%
(7.03% at December 31, 1997) payable in
quarterly installments beginning March 31,
1998 due May 19, 2004 ............................ -- 101,573
Term A SFr. Loans, interest at LIBOR plus
1.125% (2.57% at December 31, 1997) payable in
quarterly installments beginning March 31,
1998 due May 19, 2004 ............................ -- 58,991
Term A GBP Loans, interest at LIBOR plus 1.125%
(8.71% at December 31, 1997) payable in
quarterly installments beginning March 31,
1998 due May 19, 2004 ............................ -- 36,198
Seller Notes, interest at LIBOR plus 0.26%
(7.84% at December 31, 1997) due in full
May 30, 1999 ..................................... -- 22,946
Term A SFr. 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 USD 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 USD 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 facilities ....................... 51,928 160,862
Other ............................................... 27,546 16,194
-------- --------
454,204 396,764
Less current maturities ............................. 80,446 56,430
-------- --------
$373,758 $340,334
======== ========
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.
At December 31, 1996, loans under the credit agreement consisted 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 loans in an aggregate principal amount of $72,000
and (iv) a multi-currency revolving credit facility in an aggregate
principal amount of $140,000, which included letter of credit and swingline
subfacilities available to certain subsidiaries.
On May 29, 1997, the Company refinanced its previous credit facility
and entered into a new credit facility. This credit facility provided for
term loan borrowings in an aggregate principal amount of approximately
$133,800, SFr. 171,500 and (pound)26,700, that were scheduled to mature
between 2002 and 2004, a Canadian revolving credit facility with
availability of CDN $26,300 and a multi-currency revolving credit facility
with availability of $151,000. The revolving credit facilities were
scheduled to mature in 2002. The Company recorded an extraordinary loss of
approximately $9,600 representing a charge for the write-off of capitalized
debt issuance fees and related expenses associated with the Company's
previous credit facility.
On November 19, 1997, in connection with the initial public offering,
the Company refinanced its existing credit facility by entering into a new
credit facility (the "Credit Agreement") with certain financial
institutions. At December 31, 1997, loans under the Credit Agreement
consisted of: (i) Term A Loans in aggregate principal amount of $101,573,
SFr. 85,467 ($58,991 at December 31, 1997) and (pound)21,661 ($36,198 at
December 31, 1997); (ii) a Canadian revolving credit facility with
availability of CDN $26,300 and (iii) a multi-currency revolving credit
facility in an aggregate principal amount of $400,000 including a $100,000
acquisition facility.
Concurrent with the initial public offering and refinancing, the
Company consummated a tender offer to repurchase the Senior Subordinated
Notes. The aggregate purchase price in connection with the tender offer was
approximately $152,500. In connection with the refinancing and the note
repurchase, the Company recorded an extraordinary loss of $31,600
representing primarily the premium paid in connection with the early
extinguishment of the notes of $17,900 and the write-off of capitalized
debt issuance fees associated with the Senior Subordinated Notes and the
Company's previous credit facility.
The Company's weighted average interest rate at December 31, 1997 was
approximately 6.3%.
Loans under the Credit Agreement may be repaid and reborrowed and are
due in full on May 19, 2004. The Company is required to pay a facility fee
based upon certain financial ratios 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. The facility fee at
December 31, 1997 was equal to 0.3%. At December 31, 1997, the Company had
available approximately $220,000 of additional borrowing capacity under its
Credit Agreement. The Company has the ability to refinance its short-term
borrowings through its revolving facility for an uninterrupted period
extending beyond one year. Accordingly, approximately $128,000 of the
Company's short-term borrowings at December 31, 1997 have been reclassified
to long-term. At December 31, 1997, borrowings under the Company's
revolving facility carried an interest rate of LIBOR plus 0.825%.
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; or make certain 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 1999 through 2002 are approximately $42,748, $32,691, $34,531 and
$34,531, respectively.
The estimated fair value of the Company's obligations under the Credit
Agreement approximate fair value due to the variable rate nature of the
obligations.
10. SHAREHOLDERS' EQUITY
Common Stock
At 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. All general voting power was vested in the holders of
the Class B common stock. At 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.
In November 1997, pursuant to a merger with its wholly owned
subsidiary Mettler-Toledo Holding Inc., each share of the Company's
existing Class A, Class B and Class C common stock converted into 12.58392
shares of common stock and increased the number of authorized shares to
125,000,000 shares with a par value of $0.01 per share. Concurrent
therewith, the Company completed an underwritten initial public offering of
7,666,667 shares at a public offering price of $14.00 per share. The net
proceeds from the offerings of approximately $97,300 were used to repay a
portion of the Company's 9.75% Senior Subordinated Notes (see Note 9). As
part of the offering the Company sold approximately 287,000 shares of its
common stock to Company sponsored benefit plans at the public offering
price. Holders of the Company's common stock are entitled to one vote per
share.
At December 31, 1997, 6,368,445 shares of the Company's common stock
were reserved for the Company's stock option plan.
Preferred Stock
The Board of Directors, without further shareholder authorization, is
authorized to issue up to 10,000,000 shares of preferred stock, par value
$0.01 per share in one or more series and to determine and fix the rights,
preferences and privileges of each series, including dividend rights and
preferences over dividends on the common stock and one or more series of
the preferred stock, conversion rights, voting rights (in addition to those
provided by law), redemption rights and the terms of any sinking fund
therefor, and rights upon liquidation, dissolution or winding up, including
preferences over the common stock and one or more series of the preferred
stock. The issuance of shares of preferred stock, or the issuance of rights
to purchase such shares, may have the effect of delaying, deferring or
preventing a change in control of the Company or an unsolicited acquisition
proposal.
11. STOCK OPTION PLAN
Effective October 15, 1996, the Company 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.
Under the terms of the plan, options granted shall be nonqualified and
the exercise price shall not be less than 100% of the fair market value of
the common stock on the date of grant. Options vest equally over a five
year period from the date of grant.
Stock option activity is shown below:
Weighted
-Average
Number of Exercise
Shares Price
--------- ---------
Granted during the period October 15,
1996 to December 31, 1996 ........................ 3,510,747 $ 7.95
Exercised ......................................... -- --
Forfeited ......................................... -- --
--------- ---------
Outstanding at December 31, 1996 .................. 3,510,747 $ 7.95
Granted ........................................... 1,028,992 14.68
Exercised ......................................... -- --
Forfeited ......................................... (130,999) (7.95)
--------- ---------
Outstanding at December 31, 1997 .................. 4,408,740 $ 9.75
========= =========
Shares exercisable at December 31, 1997 ........... 675,950 $ 7.95
========= =========
At December 31, 1997, there were 3,537,047 and 871,693 options
outstanding to purchase shares of common stock with exercise prices of
$7.95 and $15.89, respectively. The weighted-average remaining contractual
life of such options was 8.7 and 9.7 years, respectively.
As of the date granted, the weighted-average grant-date fair value of
the options granted during the period from October 15, 1996 to December 31,
1996 and for the year ended December 31, 1997 was approximately $1.99 and
$3.37 per share, respectively. Such weighted-average grant-date fair value
was determined using an option pricing model which incorporated the
following assumptions:
Successor
----------------------------
For the period
October 15,1996 Year ended
to December December
31,1996 31, 1997
----------------- ----------
Risk-free interest rate ...................... 4.0% 5.4%
Expected life, in years ...................... 7 4
Expected volatility .......................... -- 26%
Expected dividend yield ...................... -- --
The Company applies Accounting Standards Board Opinion No. 25 and
related interpretations in accounting for its plans. Had compensation cost
for the Company stock option plan been determined based upon the fair value
of such awards at the grant date, consistent with the methods of Statement
of Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation" ("SFAS 123"), the Company's net loss and basic and diluted
net loss per common share for the twelve months ended December 31, 1997
would have been as follows:
Net loss:
As reported $ (65,106)
Pro forma (66,417)
==========
Basic and diluted loss per common share:
As reported $ (2.06)
Pro forma (2.10)
==========
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 SFAS 123.
12. 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 $9,413, $9,484, $2,496 and
$8,925 in 1995, for the period January 1, 1996 to October 14, 1996, for the
period October 15, 1996 to December 31, 1996 and for the year ended
December 31, 1997, respectively.
Certain companies sponsor defined benefit plans. Benefits are provided
to employees primarily based upon years of service and employees'
compensation for certain periods during the last years of employment. The
following table sets forth the funded status and amounts recognized in the
consolidated financial statements for the Company's principal defined
benefit plans at December 31, 1996 and 1997:
Successor
------------------------------------------------
December 31, December 31,
1996 1997
------------------------ -----------------------
Assets Accumulated Assets Accumulated
exceed benefits exceed benefits
accumulated exceed accumulated exceed
benefits assets benefits assets
----------- ----------- ----------- -----------
Actuarial present value
of accumulated benefit
obligations:
Vested benefits ......... $ 10,211 $ 97,639 $ 11,712 $ 98,974
Non-vested benefits ..... 16 2,280 20 3,574
-------- -------- --------- --------
10,227 99,919 11,732 102,548
-------- -------- --------- --------
Projected benefit
obligations ............... 12,458 108,504 13,350 111,608
Plan assets at fair
value ..................... 13,336 50,609 14,899 58,176
-------- -------- --------- --------
Projected benefit
obligations in excess
of (less than) plan
assets ................... (878) 57,895 (1,549) 53,432
Unrecognized net
(losses) gains ............ 22 1,479 544 561
-------- -------- --------- --------
(Prepaid) accrued
pension costs ............. $ (856) $ 59,374 $ (1,005) $ 53,993
======== ======== ========= ========
The (prepaid) accrued pension costs are recognized in the accompanying
consolidated financial statements as other long-term assets and other long
term liabilities, respectively.
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:
1996 1997
------------ ------------
Discount rate ....................... 6.0% to 8.5% 6.0% to 8.5%
Compensation increase rate .......... 2.0% to 6.5% 2.0% to 6.5%
The expected long term rates of return on plan assets ranged between
9.5% and 10.0% for 1995, 7.0% and 10.0% for 1996, and 6.0% and 9.5% in
1997. 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:
Predecessor Successor
--------------------- ---------------------
For the
period For the
Year January period Year
ended 1, 1996 October 15 ended
December to October to December December
31, 1995 14, 1996 31, 1996 31, 1997
-------- -------- -------- --------
Service cost (benefits
earned during
the period) ................. $ 3,668 $ 3,850 $ 1,013 $ 5,655
Interest cost on
projected benefit
obligations ................. 7,561 6,540 1,721 8,020
Actual gain on plan
assets ...................... (8,653) (6,079) (1,600) (8,543)
Net amortization and
deferral .................... 5,137 2,485 -- 2,516
------- --------- --------- -------
Net periodic pension
expense ..................... $ 7,713 $ 6,796 $ 1,134 $ 7,648
======= ========= ========= =======
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:
Successor
---------------------
December December
31, 1996 31, 1997
-------- --------
Accumulated postretirement benefit
obligations:
Retired ............................. $ 25,894 $ 26,702
Fully eligible ...................... 3,033 4,154
Other ............................... 3,098 5,256
-------- --------
32,025 36,112
Unrecognized net loss ................. (540) (4,465)
-------- --------
Accrued postretirement benefit cost ... $ 31,485 $ 31,647
======== ========
Net periodic postretirement benefit cost for the above plans includes
the following components:
Predecessor Successor
--------------------- -----------------------
For the For the
period period
Year January 1, October 15,
ended 1996 to 1996 to Year ended
December October December December
31, 1995 14, 1996 31, 1996 31, 1997
-------- -------- -------- --------
Service cost (benefits
earned during
the period) ................ $ 285 $ 431 $114 $ 440
Interest cost on projected
benefit obligations ........ 2,371 1,795 472 2,296
Net amortization and
deferral .................... 99 343 -- 33
--------- --------- ---- ---------
Net periodic
postretirement benefit
cost ....................... $ 2,755 $ 2,569 $586 $ 2,769
========= ========= ==== =========
The accumulated postretirement benefit obligation and net periodic
postretirement benefit cost were principally determined using discount
rates of 7.3% in 1995, 7.6% in 1996 and 7.0 % in 1997 and health care cost
trend rates ranging from 9.5% to 12.25% in 1995, 1996 and 1997 decreasing
to 5.0% in 2006.
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 1997 the effect of a
one-percentage-point increase in the assumed health care cost trend rate
would be an increase of $3,611 on the accumulated postretirement benefit
obligations and an increase of $464 on the aggregate of the service and
interest cost components of the net periodic benefit cost.
13. TAXES
The sources of the Company's earnings (loss) before taxes, minority
interest and extraordinary items were as follows:
Predecessor
-------------------------
For the
period
January 1,
Year ended 1996 to
December 31, October 14,
1995 1996
---- ----
Switzerland ....................................... $11,431 $21,241
Non-Switzerland ................................... 16,373 3,912
------- -------
Earnings before taxes, minority interest and
extraordinary items ............................. $27,804 $25,153
======= =======
Successor
-------------------------
For the
period
October 15, Year
1996 to ended
December December
31, 1996 31, 1997
-------- --------
United States ................................ $ (37,293) $(14,178)
Non-United States ............................ (122,783) 8,226
--------- --------
Loss before taxes, minority interest and
extraordinary items ......................... $(160,076) $ (5,952)
========= ========
The provision (benefit) for taxes consists of:
Adjustments
to
Predecessor: Current Deferred Goodwill Total
------- -------- -------- -----
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
======== ======= ======= ========
Adjustments
to
Successor: Current Deferred Goodwill Total
------- -------- -------- -----
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)
======== ======== ====== ========
Adjustments
to
Current Deferred Goodwill Total
------- -------- -------- -----
Year ended December 31, 1997:
United States Federal ...... $ -- $ (351) $ -- $ (351)
State and Local ............ 466 (41) 107 532
Non-United States .......... 12,779 2,600 1,929 17,308
-------- -------- ------ --------
$ 13,245 $ 2,208 $2,036 $ 17,489
======== ======== ====== ========
The adjustments to goodwill during the year ending December 31, 1997
relate to tax benefits received on amounts which were included in the
purchase price allocation pertaining to the Acquisition of the Company
described in Note 1.
The provision for tax expense for the year ended December 31, 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:
Predecessor
---------------------------
For the
period
January 1,
Year ended 1996 to
December 31, October 14,
1995 1996
---- ----
Expected tax ................................... $ 2,725 $ 2,465
Switzerland Canton (state) and local
income taxes, net of federal
income tax benefit ........................... (21) 3,573
Non-deductible intangible amortization ......... 248 205
Change in valuation allowance .................. 1,603 1,235
Non-Switzerland income taxes in
excess of 9.8% ................................ 4,968 2,291
Other, net ..................................... (741) 286
-------- --------
Total provision for taxes ...................... $ 8,782 $ 10,055
======== ========
The provision for tax expense (benefit) for the period October 15,
1996 to December 31, 1996 and for the year ended December 31, 1997,
subsequent to 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, minority interest and extraordinary items as
a result of the following:
Successor
-------------------------
For the
period
October 15,
1996 to Year ended
December December
31, 1996 31, 1997
-------- --------
Expected tax .................................. $(56,027) $ (2,083)
United States state and local income
taxes, net of federal
income tax benefit ......................... 333 276
Non-deductible purchased research and
development ................................ 39,925 10,486
Non-deductible intangible amortization ........ 336 2,073
Change in valuation allowance ................. 4,662 263
Non-United States income taxes at other
than a 35% rate ............................ 10,037 5,545
Other, net .................................... (204) 929
-------- --------
Total provision, for taxes .................... $ (938) $ 17,489
======== ========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below:
Successor
----------------------
December December
31, 1996 31, 1997
-------- --------
Deferred tax assets:
Inventory ..................................... $ 7,974 $ 7,552
Accrued and other liabilities .............. 7,046 9,278
Deferred loss on sale of subsidiaries ...... 7,907 7,907
Accrued postretirement benefit and
pension costs ............................. 19,043 19,161
Net operating loss carryforwards ........... 15,817 27,345
Other ..................................... 408 678
-------- --------
Total deferred tax assets ..................... 58,195 71,921
Less valuation allowance ...................... (46,714) (59,292)
-------- --------
Total deferred tax assets less valuation
allowance .................................... 11,481 12,629
-------- --------
Deferred tax liabilities:
Inventory .................................. 5,618 6,177
Property, plant and equipment .............. 31,123 24,081
Other ...................................... 2,858 5,665
-------- --------
Total deferred tax liabilities ................ 39,599 35,923
-------- --------
Net deferred tax liability .................... $ 28,118 $ 23,294
======== ========
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:
Successor
--------------------------
December 31, December 31,
1996 1997
---- ----
Summary of valuation allowances:
Cumulative net operating losses ............... $15,817 $27,345
Deferred loss on sale of subsidiaries ......... 7,907 7,907
Accrued postretirement and pension
benefit costs ................................ 18,122 17,104
Other ......................................... 4,868 6,936
------- -------
Total valuation allowance ....................... $46,714 $59,292
======= =======
The total valuation allowances relating to acquired businesses amount
to $38,785 and $35,524 at December 31, 1996 and 1997, respectively. Future
reductions of these valuation allowances will be credited to goodwill.
At December 31, 1997, the Company had net operating loss carryforwards
for income tax purposes of (i) $45,939 related to U.S. Federal net
operating losses of which $4,376 expires in 2011 and $41,563 expires in
2012, (ii) $51,832 related to U.S. State net operating losses which expire
in varying amounts through 2012, (iii) $15,595 related to foreign net
operating losses with no expiration date and (iv) $14,205 related to
foreign net operating losses which expire in varying amounts through 2003.
14. OTHER CHARGES (INCOME), NET
Other charges (income), net consists primarily of foreign currency
transactions, interest income and charges related to the Company's
restructuring programs. Foreign currency transactions, net for the year
ended December 31, 1995, for the period January 1, 1996 to October 14,
1996, for the period October 15, 1996 to December 31, 1996 and for the year
ended December 31, 1997 were $(3,242), $(220), $8,324 and $4,235,
respectively. Interest income for the year ended December 31, 1995, for the
period January 1, 1996 to October 14, 1996, for the period October 15, 1996
to December 31, 1996 and for the year ended December 31, 1997 was $(5,388),
$(3,424), $(1,079) and $(1,832), respectively.
Severance and other exit costs 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. Severance costs 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 announced in December 1996. In connection with such
programs the Company reduced its workforce by 168 employees in 1996.
The Company recorded further restructuring charges of $6,300 during
1997. Such charges are in connection with the closure of three facilities
in North America and are comprised primarily of severance and other related
benefits and costs of exiting facilities, including lease termination costs
and write-down of existing assets to their expected net realizable value.
In connection with the closure of these facilities, the Company expects to
involuntarily terminate approximately 70 employees. The Company is
undertaking these actions as part of its efforts to reduce costs through
reengineering.
A rollforward of the components of the Company's accrual for
restructuring activities is as follows:
Balance at December 31, 1996 ........................ $ 10,762
1997 Activities:
Restructuring accrual for North American
operations .................................... 6,300
Reductions in workforce and other cash outflows . (7,182)
Non-cash write-downs of property, plant and
equipment ..................................... (540)
Impact of foreign currency ...................... (582)
--------
Balance at December 31, 1997 ........................ $ 8,758
========
The Company's accrual for restructuring activities of $8,758 at
December 31, 1997 primarily consisted of $6,544 for severance and other
related benefits with the remaining balance for lease termination and other
costs of exiting facilities. Such programs are expected to be substantially
complete in 1998.
15. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases certain of its facilities and equipment under
operating leases. The future minimum lease payments under non-cancelable
operating leases are as follows at December 31, 1997:
1998....................... $12,006
1999....................... 8,565
2000....................... 5,771
2001....................... 4,023
2002....................... 3,296
Thereafter................. 1,856
-------
Total.................... $35,517
=======
Rent expense for operating leases amounted to $13,034, $3,430 and
$16,420 for the period January 1, 1996 to October 14, 1996, for the period
October 15, 1996 to December 31, 1996 and for the year ended December 31,
1997, respectively.
Legal
The Company is party to various legal proceedings, including certain
environmental matters, incidental to the normal course of business.
Management does not expect that any of such proceedings will have a
material adverse effect on the Company's financial condition or results of
operations.
16. GEOGRAPHIC SEGMENT INFORMATION
The tables below show 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.
Twelve months Transfers Total Earnings
ended Net Net between net (loss)
December sales by sales by geographic sales by before
31, 1995 destination origin areas origin taxes
- ----------------- ----------- --------- ------------ ---------- ---------
Switzerland (1) .. $ 41,820 $102,712 $ 159,453 $ 262,165 $ 11,431
Germany .......... 151,974 158,393 47,379 205,772 9,626
Other Europe ..... 247,802 228,939 799 229,738 1,780
-------- -------- --------- --------- --------
Total Europe ..... 441,596 490,044 207,631 697,675 22,837
United States .... 263,945 298,053 29,578 327,631 (1,353)
Other Americas ... 52,966 32,732 131 32,863 905
-------- -------- --------- --------- --------
Total Americas ... 316,911 330,785 29,709 360,494 (448)
Asia and other ... 91,908 29,586 97 29,683 1,861
Eliminations ..... -- -- (237,437) (237,437) 3,554
-------- -------- --------- --------- --------
Totals ........... $850,415 $850,415 $ -- $ 850,415 $ 27,804
======== ======== ========= ========= ========
For the period
January 1, Transfers Total Earnings
1996 to Net Net between net (loss)
October sales by sales by geographic sales by before
14, 1996 destination origin areas origin taxes
- ----------------- ----------- --------- ------------ --------- --------
Switzerland (1) . $ 32,282 $ 74,303 $ 126,423 $ 200,726 $ 21,241
Germany ......... 104,961 114,015 35,583 149,598 8,292
Other Europe .... 186,823 171,061 840 171,901 591
-------- -------- --------- --------- --------
Total Europe .... 324,066 359,379 162,846 522,225 30,124
United States ... 217,636 246,180 22,753 268,933 (1,577)
Other Americas .. 47,473 25,925 3 25,928 1,078
-------- -------- --------- --------- --------
Total Americas .. 265,109 272,105 22,756 294,861 (499)
Asia and other .. 73,046 30,737 265 31,002 686
Eliminations .... -- -- (185,867) (185,867) (5,158)
-------- -------- --------- --------- --------
Totals .......... $662,221 $662,221 $ -- $ 662,221 $ 25,153
======== ======== ========= ========= ========
<TABLE>
<CAPTION>
For the period
October 15, Net Net Transfers Total Earnings
1996 to sales sales between net (loss)
December 31, by by geographic sales by before Total
1996 destination origin areas origin taxes(2) Assets
- ----------------- ----------- -------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Switzerland (1) . $ 8,415 $ 15,892 $ 39,570 $ 55,462 $(108,865) $ 432,387
Germany ......... 29,688 29,117 10,965 40,082 (6,041) 170,845
Other Europe .... 58,598 59,688 485 60,173 (5,809) 126,063
-------- -------- -------- --------- --------- ---------
Total Europe .... 96,701 104,697 51,020 155,717 (120,715) 729,295
United States ... 56,405 64,109 6,731 70,840 (37,293) 477,762
Other Americas .. 13,436 7,371 3 7,374 (446) 17,730
-------- -------- -------- --------- --------- ---------
Total Americas .. 69,841 71,480 6,734 78,214 (37,739) 495,492
Asia and other .. 20,370 10,735 28 10,763 (2,267) 48,245
Eliminations .... -- -- (57,782) (57,782) 645 (501,144)
-------- -------- -------- --------- --------- ---------
Totals .......... $186,912 $186,912 $ -- $ 186,912 $(160,076) $ 771,888
======== ======== ======== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Twelve months Net Net Transfers Total Earnings
ended sales sales between net (loss)
December 31, by by geographic sales by before Total
1997 destination origin areas origin taxes(2) Assets
- ----------------- ----------- -------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Switzerland (1) . $ 34,555 $ 69,700 $ 186,292 $ 255,992 $ 31,621 $ 430,436
Germany ......... 115,665 123,382 51,502 174,884 5,519 144,660
Other Europe .... 245,945 232,105 10,857 242,962 (16,441) 337,720
-------- -------- --------- --------- -------- ---------
Total Europe .... 396,165 425,187 248,651 673,838 20,699 912,816
United States ... 297,688 335,630 32,009 367,639 (14,176) 589,775
Other Americas .. 71,403 37,330 165 37,495 (3,245) 32,941
-------- -------- --------- --------- -------- ---------
Total Americas .. 369,091 372,960 32,174 405,134 (17,421) 622,716
Asia and other .. 113,159 80,268 1,834 82,102 1,413 63,453
Eliminations .... -- -- (282,659) (282,659) (10,643) (849,672)
-------- -------- --------- --------- -------- ---------
Totals .......... $878,415 $878,415 $ -- $ 878,415 $ (5,952) $ 749,313
======== ======== ========= ========= ======== =========
</TABLE>
(1) Includes Corporate.
(2) The effect of non-recurring Acquisition charges arising from
in-process research and development projects ($114,100) and the
revaluation of inventories to fair value ($32,200) by region are as
follows:
Europe ............................... $108,100
Americas ............................. 36,000
Asia/Rest of World ................... 2,200
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for the years 1996 and 1997 are as follows:
FIRST SECOND THIRD FOURTH
QUARTER QUARTER(1) QUARTER QUARTER(2)
------- ---------- ------- ----------
1996
Net sales .............. $ 201,373 $ 222,429 $ 200,391 $ 224,940
Gross profit ........... 80,394 91,204 79,013 66,463
Net income (loss) ...... 929 9,078 3,129 (157,721)
========== ========== ========== ==========
1997
Net sales .............. $ 197,402 $ 220,412 $ 215,929 $ 244,672
Gross profit ........... 83,282 97,016 94,365 110,272
Net income (loss)
before extraordinary
items ................. (1,122) (25,613) (284) 3,110
Extraordinary items .... -- (9,552) -- (31,645)
---------- ---------- ---------- ----------
Net income (loss) ...... $ (1,122) $ (35,165) $ (284) $ (28,535)
========== ========== ========== ==========
Basic earnings (loss)
per common share:
Earnings (loss) before
extraordinary items... $ (0.04) $ (0.84) $ (0.01) $ 0.09
Extraordinary items.... -- (0.31) -- (0.88)
---------- ---------- ---------- ----------
Net loss .............. $ (0.04) $ (1.15) $ (0.01) $ (0.83)
========== ========== ========== ==========
Diluted earnings
(loss) per common
share:
Earnings (loss) before
extraordinary items.. $ (0.04) $ (0.84) $ (0.01) $ 0.09
Extraordinary items.... -- (0.31) -- (0.92)
---------- ---------- ---------- ----------
Net loss ............. $ (0.04) $ (1.15) $ (0.01) $ (0.79)
========== ========== ========== ==========
Market price per
share: (3)
High ................. -- -- -- $ 18 3/4
Low .................. -- -- -- $ 14 1/16
(1) The financial data for the second quarter of 1997 includes charges in
connection with the Safeline Acquisition, as discussed in Note 3, for
the sale of inventories revalued to fair value of $2,054 and
in-process research and development of $29,959. The second quarter
also includes extraordinary charges for the write-off of capitalized
debt issuance fees of $9,552 as discussed in Note 9.
(2) The financial data for the fourth quarter of 1996 represents the
Company's combined results of operations for the period from October
1, 1996 to October 14, 1996 and for the period from October 15, 1996
to December 31, 1996. The period from October 15, 1996 to December 31,
1996 includes charges in connection with the Acquisition, as discussed
in Note 1, for the sale of inventories revalued to fair value of
$32,194 and in-process research and development of $114,070. The
fourth quarter 1997 data includes charges for the early extinguishment
of debt and the write-off of capitalized debt issuance fees totaling
$31,645 as further discussed in Note 9.
(3) The Company's shares began trading on the New York Stock Exchange on
November 14, 1997.
METTLER-TOLEDO INTERNATIONAL INC.
(FORMERLY "MT INVESTORS INC.")
INTERIM CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER MARCH
31, 1997 31,1998
-------- -----------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 23,566 $ 21,303
Trade accounts receivable, net 153,619 152,396
Inventories 101,047 101,020
Deferred taxes 7,584 7,628
Other current assets and prepaid expenses 24,066 24,602
--------- ---------
Total current assets 309,882 306,949
Property, plant and equipment, net 235,262 224,230
Excess of cost over net assets acquired, net 183,318 182,323
Non-current deferred taxes 5,045 5,228
Other assets 15,806 16,408
--------- ---------
Total assets $ 749,313 $ 735,138
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 39,342 $ 32,166
Accrued and other liabilities 80,844 94,389
Accrued compensation and related items 43,214 38,938
Taxes payable 33,267 32,557
Deferred taxes 10,486 10,093
Short-term borrowings and current maturities of
long-term debt 56,430 54,952
--------- ---------
Total current liabilities 263,583 263,095
Long-term debt 340,334 319,207
Non-current deferred taxes 25,437 24,142
Other non-current liabilities 91,011 91,181
--------- ---------
Total liabilities 720,365 697,625
Minority interest 3,549 3,587
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 38,336,014 shares (excluding
64,467 shares held in treasury) 383 383
Additional paid-in capital 284,630 284,630
Accumulated deficit (224,152) (217,314)
Accumulated other comprehensive income (35,462) (33,773)
--------- ---------
Total shareholders' equity 25,399 33,926
Commitments and contingencies
Total liabilities and shareholders' equity $ 749,313 $ 735,138
========= =========
See the accompanying notes to the interim consolidated financial statements
METTLER-TOLEDO INTERNATIONAL INC.
(FORMERLY "MT INVESTORS INC.")
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, MARCH 31,
1997 1998
---- ----
(UNAUDITED) (UNAUDITED)
Net sales $ 197,402 $ 215,655
Cost of sales 114,120 121,048
------------ -----------
Gross profit 83,282 94,607
Research and development 10,832 10,795
Selling, general and administrative 60,193 65,112
Amortization 1,157 1,818
Interest expense 9,446 5,879
Other charges, net 3,754 454
------------ -----------
Earnings (loss) before taxes and
minority interest (2,100) 10,549
Provision (benefit) for taxes (1,087) 3,692
Minority interest 109 19
------------ -----------
Net earnings (loss) $ (1,122) $ 6,838
============ ===========
Basic earnings (loss) per common share:
Net earnings (loss) $ (0.04) $ 0.18
Weighted average number of common shares 30,686,065 38,336,014
Diluted earnings (loss) per common shares:
Net earnings (loss) $ (0.04) $ 0.17
Weighted average number of common shares 30,686,065 40,600,109
See the accompanying notes to the interim consolidated financial statements
<TABLE>
METTLER-TOLEDO INTERNATIONAL INC.
(FORMERLY "MT INVESTORS INC.")
INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
ALL CLASSES PAID-IN ACCUMULATED COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT INCOME 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
Comprehensive income
Net loss -- -- -- (1,122) -- (1,122)
Change in currency
translation adjustment -- -- -- -- (8,322) (8,322)
Comprehensive income (9,444)
----------- ------ ---------- ----------- ---------- ----------
Balance at March 31, 1997 2,438,514 $ 25 $ 188,084 $ (160,168) $ (24,959) $ 2,982
=========== ====== ========== =========== ========== ==========
Balance at December 31, 1997 38,336,014 $ 383 $ 284,630 $ (224,152) $ (35,462) $ 25,399
Comprehensive income
Net earnings -- -- -- 6,838 -- 6,838
Change in currency
translation adjustment -- -- -- -- 1,689 1,689
----------- ------ ---------- ----------- ---------- ----------
Comprehensive income 8,527
Balance at March 31, 1998 38,336,014 $ 383 $ 284,630 $ (217,314) $ (33,773) $ 33,926
=========== ====== ========== =========== ========== ==========
</TABLE>
See the accompanying notes to the interim consolidated financial statements
METTLER-TOLEDO INTERNATIONAL INC.
(FORMERLY "MT INVESTORS INC.")
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(IN THOUSANDS)
MARCH 31, MARCH 31,
1997 1998
---- ----
(UNAUDITED) (UNAUDITED)
Cash flow from operating activities:
Net earnings (loss) $ (1,122) $ 6,838
Adjustments to reconcile net
earnings (loss) to net cash
provided by operating activities:
Depreciation 5,821 5,877
Amortization 1,157 1,818
Net gain on disposal of long-term
assets (53) (2,142)
Deferred taxes (1,446) (611)
Minority interest 109 19
Increase (decrease) in cash
resulting from changes in:
Trade accounts receivable, net (8,557) (164)
Inventories (7,819) (1,121)
Other current assets (2,405) (2,247)
Trade accounts payable (1,436) (6,729)
Accruals and other liabilities, net 23,832 10,623
-------- --------
Net cash provided by
operating activities 8,081 12,161
-------- --------
Cash flows from investing activities:
Proceeds from sale of property,
plant and equipment 431 12,183
Purchase of property, plant and
equipment (3,063) (7,417)
Acquisitions -- (2,573)
Other investing activities (98) --
-------- --------
Net cash provided by (used
in) investing activities (2,730) 2,193
-------- --------
Cash flows from financing activities:
Proceeds from borrowings 1,055 3,447
Repayments of borrowings (23,160) (19,922)
-------- --------
Net cash used in financing
activities (22,105) (16,475)
-------- --------
Effect of exchange rate changes on cash
and cash equivalents (3,343) (142)
-------- --------
Net decrease in cash and cash equivalents (20,097) (2,263)
Cash and cash equivalents:
Beginning of period 60,696 23,566
======== ========
End of period $ 40,599 $ 21,303
======== ========
See the accompanying notes to the interim consolidated financial statements
METTLER-TOLEDO INTERNATIONAL INC.
(FORMERLY "MT INVESTORS 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"),
formerly MT Investors Inc., 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 U.K. and China. The Company's
principal executive offices are located in Greifensee, Switzerland.
The Company was incorporated by AEA Investors Inc. ("AEA") and
recapitalized to effect the acquisition (the "Acquisition") of the
Mettler-Toledo Group from Ciba-Geigy AG ("Ciba") and its wholly owned
subsidiary, AG fur Prazisionsinstrumente ("AGP") on October 15, 1996. 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 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 March 31, 1998 and for the three
month periods ended March 31, 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 three months ended
March 31, 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.
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 March
31, 1998:
December 31, March 31,
1997 1998
--------- ---------
Raw materials and parts $ 42,435 $ 39,760
Work in progress 29,746 32,602
Finished goods 28,968 28,763
--------- ---------
101,149 101,125
LIFO reserve (102) (105)
========= =========
$ 101,047 $ 101,020
========= =========
EARNINGS (LOSS) PER COMMON SHARE
Effective December 31, 1997, the Company adopted the Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
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 2,264,095 equivalent shares related to 4,408,740
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 period ended March 31, 1998. Such common stock
equivalents were not included in the computation of diluted loss per common
share for the period ended March 31, 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 period 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.
- ---------------------------------------- -------------------------------------
NO DEALER, SALESPERSON OR OTHER 14,750,000
INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE SHARES
ANY INFORMATION OR TO MAKE ANY [LOGO]
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE
OFFERING COVERED BY THIS PROSPECTUS. METTLER-TOLEDO
IF GIVEN OR MADE, SUCH INFORMATION OR INTERNATIONAL INC.
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING SHAREHOLDERS OR
THE UNDERWRITERS. THIS PROSPECTUS DOES COMMON STOCK
NOT CONSTITUTE AN OFFER TO SELL, OR A ------------
SOLICITATION OF AN OFFER TO BUY, THE PROSPECTUS
COMMON STOCK IN ANY JURISDICTION ------------
WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS
OR IN THE AFFAIRS OF THE COMPANY SINCE MERRILL LYNCH & CO.
THE DATE HEREOF.
BT ALEX. BROWN
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
-----------------------
SALOMON SMITH BARNEY
TABLE OF CONTENTS
PAGE
Prospectus Summary................3 __, 1998
Risk Factors.....................11
The Company......................14
Use Of Proceeds..................15
Dividend Policy..................15
Price Range Of Common Stock......16
Capitalization...................16
Management's Discussion And
Analysis Of Financial Condition
And Results Of Operations.....20
Industry.........................30
Business.........................32
Management.......................47
Certain Relationships And Related
Transactions..................52
Principal And Selling
Shareholders..................53
Description Of Credit Agreement..55
Description Of Capital Stock.....56
Shares Eligible For Future Sale..58
Certain United States Federal Tax
Considerations For Non-United
States Holders................59
Underwriting.....................62
Legal Matters....................65
Independent Auditors.............65
Available Information............65
Incorporation Of Certain Documents
By Reference..................66
Index To Consolidated Financial
Statements....................F-1
- ---------------------------------------- -------------------------------------
[RED HERRING]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This Prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to the registration or qualification under the securities
laws of any such State.
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 6, 1998
PROSPECTUS [LOGO]
14,750,000 SHARES
METTLER-TOLEDO INTERNATIONAL INC.
COMMON STOCK
--------------
All of the 14,750,000 shares of Common Stock of Mettler-Toledo
International Inc. ("Mettler-Toledo" or the "Company") offered hereby are
being sold by certain shareholders (the "Selling Shareholders") of the
Company. See "Principal and Selling Shareholders." The Company is not
selling shares of Common Stock in this Offering and will not receive any of
the proceeds from the sale of Common Stock offered hereby.
Of the 14,750,000 shares of Common Stock offered hereby, 2,950,000
shares are being offered for sale initially outside the United States and
Canada by the International Managers and 11,800,000 shares are being
offered for sale initially in a concurrent offering in the United States
and Canada by the U.S. Underwriters. The initial public offering price and
the underwriting discount per share will be identical for both Offerings.
See "Underwriting."
The Common Stock is listed on the New York Stock Exchange under the
symbol "MTD." On May 5, 1998, the last sale price of the Common Stock as
reported on the New York Stock Exchange was $20 per share. See "Price Range
of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON
STOCK OFFERED HEREBY.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
============================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) SELLING SHAREHOLDERS(2)
- ----------------------------------------------------------------------------
Per Share........ $ $ $
- ----------------------------------------------------------------------------
Total(3)......... $ $ $
============================================================================
(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) The Company has agreed to pay certain expenses of the Selling
Shareholders estimated at $_______.
(3) The Selling Stockholders have granted the U.S. Underwriters and the
International Managers options to purchase up to an additional ______
shares and ______ shares of Common Stock, respectively, in each case
exercisable within 30 days after the date hereof, solely to cover
over-allotments, if any. If such options are exercised in full, the
total Price to Public, Underwriting Discount and Proceeds to Company
will be $______, $ ______ and $______, respectively. See
"Underwriting."
--------------
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
The shares of Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them,
subject to approval of certain legal matters by counsel for the
Underwriters and certain other conditions. The Underwriters reserve the
right to withdraw, cancel or modify such offer and to reject orders in
whole or in part. It is expected that delivery of the shares of Common
Stock will be made in New York, New York on or about________, 1998.
--------------
MERRILL LYNCH INTERNATIONAL
BT ALEX. BROWN INTERNATIONAL
CREDIT SUISSE FIRST BOSTON
GOLDMAN SACHS INTERNATIONAL
SALOMON SMITH BARNEY INTERNATIONAL
------------
The date of this Prospectus is________, 1998.
UNDERWRITING
Merrill Lynch International, BT Alex. Brown International, a Division
of Bankers Trust International PLC, Credit Suisse First Boston (Europe)
Limited, Goldman Sachs International and Smith Barney Inc. are acting as
the International Managers (the "International Managers") for the
International Offering. Subject to the terms and conditions set forth in an
international purchase agreement (the "International Purchase Agreement")
among the Company, the Selling Shareholders and the International Managers,
and concurrently with the sale of 2,950,000 shares of Common Stock to the
U.S. Underwriters (as defined below), the Selling Shareholders have agreed
to sell to the International Managers, and each of the International
Managers severally and not jointly has agreed to purchase from the Selling
Shareholders the number of shares of Common Stock set forth opposite its
name below.
NUMBER OF
INTERNATIONAL MANAGER SHARES
--------------------- -------------
Merrill Lynch International....................................
BT Alex. Brown International,..................................
a Division of Bankers Trust International PLC...............
Credit Suisse First Boston (Europe) Limited....................
Goldman Sachs International....................................
Smith Barney Inc...............................................
-------------
2,950,000
Total................................................. =============
The Company and the Selling Shareholders have also entered into a U.S.
purchase agreement (the "U.S. Purchase Agreement") with Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), BT Alex. Brown
Incorporated, Credit Suisse First Boston Corporation, Goldman, Sachs & Co.,
Smith Barney Inc. in the United States and Canada (the "U.S. Underwriters"
and, together with the International Managers, the "Underwriters"). Subject
to the terms and conditions set forth in the U.S. Purchase Agreement, and
concurrently with the sale of 2,950,000 shares of Common Stock to the
International Managers pursuant to the International Purchase Agreement,
the Selling Shareholders have agreed to sell to the U.S. Underwriters, and
the U.S. Underwriters severally have agreed to purchase from the Selling
Shareholders, an aggregate of 11,800,000 shares of Common Stock. The
initial public offering price per share and the total underwriting discount
per share of Common Stock are identical under the International Purchase
Agreement and the U.S. Purchase Agreement.
In the International Purchase Agreement and the U.S. Purchase
Agreement, the several International Managers and the several U.S.
Underwriters, respectively, have agreed, subject to the terms and
conditions set forth therein, to purchase all of the shares of Common Stock
being sold pursuant to each such agreement if any of the shares of Common
Stock being sold pursuant to such agreement are purchased. Under certain
circumstances, under the International Purchase Agreement and the U.S.
Purchase Agreement, the commitments of non-defaulting Underwriters may be
increased. The closings with respect to the sale of shares of Common Stock
to be purchased by the International Managers and the U.S. Underwriters are
conditioned upon one another.
The Lead Managers have advised the Company and the Selling
Shareholders that the International Managers propose initially to offer the
shares of Common Stock to the public at the initial public offering price
set forth on the cover page of this Prospectus, and to certain dealers at
such price less a concession not in excess of $________ per share of Common
Stock. The International Managers may allow, and such dealers may reallow,
a discount not in excess of $________ per share of Common Stock on sales to
certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.
The Selling Shareholders also have granted options to the
International Managers, exercisable for 30 days after the date of this
Prospectus, to purchase up to an aggregate of 442,500 additional shares of
Common Stock at the initial public offering price set forth on the cover
page of this Prospectus, less the underwriting discount. The International
Managers may exercise these options solely to cover over-allotments, if
any, made on the sale of the Common Stock offered hereby. To the extent
that the International Managers exercise these options, each International
Manager will be obligated, subject to certain conditions, to purchase a
number of additional shares of Common Stock proportionate to such
International Manager's initial amount reflected in the foregoing table.
The Selling Shareholders also have granted options to the U.S.
Underwriters, exercisable for 30 days after the date of this Prospectus, to
purchase up to an aggregate of 1,770,000 additional shares of Common Stock
to cover over-allotments, if any, on terms similar to those granted to the
International Managers.
The Company, the Company's executive officers and directors and
certain existing shareholders of the Company holding in the aggregate
______ shares of Common Stock will agree, subject to certain exceptions,
not to directly or indirectly (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant for the sale of or otherwise
dispose of or transfer any shares of Common Stock or securities convertible
into or exchangeable or exercisable for Common Stock, whether now owned or
thereafter acquired by the person executing the agreement or with respect
to which the person executing the agreement thereafter acquires the power
of disposition, or file a registration statement under the Securities Act
with respect to the foregoing or (ii) enter into any swap or other
agreement that transfers, in whole or in part, the economic consequence of
ownership of the Common Stock whether any such swap or transaction is to be
settled by delivery of Common Stock or other securities, in cash or
otherwise, without the prior written consent of Merrill Lynch on behalf of
the Underwriters for a period of 90 days after the date of this Prospectus.
See "Shares Eligible for Future Sale."
The International Managers and the U.S. Underwriters have entered into
an intersyndicate agreement (the "Intersyndicate Agreement") that provides
for the coordination of their activities. Pursuant to the Intersyndicate
Agreement, the International Managers and the U.S. Underwriters are
permitted to sell shares of Common Stock to each other for purposes of
resale at the initial public offering price, less an amount not greater
than the selling concession. Under the terms of the Intersyndicate
Agreement, the U.S. Underwriters and any dealer to whom they sell shares of
Common Stock will not offer to sell or sell shares of Common Stock to
persons who are non-U.S. or non-Canadian persons or to persons they believe
intend to resell to persons who are non-U.S. or non-Canadian persons, and
the International Managers and any dealer to whom they sell shares of
Common Stock will not offer to sell or sell shares of Common Stock to U.S.
persons or to Canadian persons or to persons they believe intend to resell
to U.S. or Canadian persons, except in the case of transactions pursuant to
the Intersyndicate Agreement.
The Company and the Selling Shareholders have agreed to indemnify the
International Managers and the U.S. Underwriters against certain
liabilities, including certain liabilities under the Securities Act, or to
contribute to payments the U.S. Underwriters and the International Managers
may be required to make in respect thereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the
Underwriters and certain selling group members to bid for and purchase the
Common Stock. As an exception to these rules, the U.S. Underwriters are
permitted to engage in certain transactions that stabilize the price of the
Common Stock. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offerings, i.e. if they sell more shares of Common
Stock than are set forth on the cover page of this Prospectus, the U.S.
Underwriters may reduce that short position by purchasing Common Stock in
the open market. The U.S. Underwriters may also elect to reduce any short
position by exercising all or part of the over-allotment option described
above.
The U.S. Underwriters may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Underwriters purchase shares of Common Stock in the open market to reduce
the Underwriters' short position or to stabilize the price of the Common
Stock, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares as part of the
Offerings.
In general, purchases of a security for the purpose of stabilization
or to reduce a short position could cause the price of the security to be
higher than it might be in the absence of such purchases. The imposition of
a penalty bid might also have an effect on the price of the Common Stock to
the extent that it discourages resales of the Common Stock.
Neither the Company nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Common
Stock. In addition, neither the Company nor any of the Underwriters makes
any representation that the U.S. Underwriters will engage in such
transactions or that such transactions, once commenced, will not be
discontinued without notice.
Each International Manager has agreed that (i) it has not offered or
sold and, prior to the expiration of the period of six months from the
Closing Date, will not offer or sell any shares of Common Stock to persons
in the United Kingdom, except to persons whose ordinary activities involve
them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which do not constitute an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations
1995; (ii) it has complied and will comply with all applicable provisions
of the Financial Services Act 1986 with respect to anything done by it in
relation to the Common Stock in, from or otherwise involving the United
Kingdom; and (iii) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in connection
with the issuance of Common Stock to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on.
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of Common
Stock, or the possession, circulation or distribution of this Prospectus or
any other material relating to the Company, the Selling Shareholders or
shares of Common Stock in any jurisdiction where action for that purpose is
required. Accordingly, the shares of Common Stock may not be offered or
sold, directly or indirectly, and neither this Prospectus nor any other
offering material or advertisements in connection with the shares of Common
Stock may be distributed or published, in or from any country or
jurisdiction except in compliance with any applicable rules and regulations
of any such country or jurisdiction.
Purchasers of the shares offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practices of the
country of purchase in addition to the offering price set forth on the
cover page hereof.
The Underwriters have from time to time provided investment banking
financial advisory services to the Company and AEA Investors and its
affiliates, for which they have received customary compensation, and may
continue to do so in the future. Merrill Lynch served as lead manager and
Credit Suisse First Boston Corporation served as a co-manager of the
offering of the Notes in October 1996, Merrill Lynch served as the Arranger
and Documentation Agent and an affiliate of Credit Suisse First Boston
Corporation served as co-agent in connection with the Company's previous
credit facility and the Credit Agreement for which they received customary
compensation. An affiliate of Credit Suisse First Boston Corporation and
Merrill Lynch and its affiliates were lenders under the Company's previous
credit facility and are lenders under the Credit Agreement. Merrill Lynch,
BT Alex. Brown Incorporated, Credit Suisse First Boston Corporation and
Goldman, Sachs & Co and certain of their affiliates acted as underwriters
in connection with the IPO.
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
- ---------------------------------------- -------------------------------------
NO DEALER, SALESPERSON OR OTHER 14,750,000
INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE SHARES
ANY INFORMATION OR TO MAKE ANY [LOGO]
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE
OFFERING COVERED BY THIS PROSPECTUS. METTLER-TOLEDO
IF GIVEN OR MADE, SUCH INFORMATION OR INTERNATIONAL INC.
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING SHAREHOLDERS OR
THE UNDERWRITERS. THIS PROSPECTUS DOES COMMON STOCK
NOT CONSTITUTE AN OFFER TO SELL, OR A ------------
SOLICITATION OF AN OFFER TO BUY, THE PROSPECTUS
COMMON STOCK IN ANY JURISDICTION ------------
WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF MERRILL LYNCH INTERNATIONAL
THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY BT ALEX. BROWN INTERNATIONAL
CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN CREDIT SUISSE FIRST BOSTON
THE FACTS SET FORTH IN THIS PROSPECTUS
OR IN THE AFFAIRS OF THE COMPANY SINCE GOLDMAN SACHS INTERNATIONAL
THE DATE HEREOF.
SALOMON SMITH BARNEY INTERNATIONAL
-----------------------
TABLE OF CONTENTS
PAGE
----
__, 1998
Prospectus Summary................3
Risk Factors.....................11
The Company......................14
Use Of Proceeds..................15
Dividend Policy..................15
Price Range Of Common Stock......16
Capitalization...................16
Management's Discussion And
Analysis Of Financial Condition
And Results Of Operations.....20
Industry.........................30
Business.........................32
Management.......................47
Certain Relationships And Related
Transactions..................52
Principal And Selling
Shareholders..................53
Description Of Credit Agreement..55
Description Of Capital Stock.....56
Shares Eligible For Future Sale..58
Certain United States Federal Tax
Considerations For Non-United
States Holders................59
Underwriting.....................62
Legal Matters....................65
Independent Auditors.............65
Available Information............65
Incorporation Of Certain Documents
By Reference..................66
Index To Consolidated Financial
Statements...................F-1
- ---------------------------------------- -------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
The following table shows the expenses, other than underwriting
discounts and commissions, to be incurred by the Company in connection with
the sale and distribution of securities being registered by the Company.
SEC Registration Fee.................. $ 98,978
NASD Filing Fee.......................
Listing Fee...........................
Blue Sky Fees and Expenses............
Legal Fees and Expenses...............
Accounting Fees and Expenses..........
Printing Expenses.....................
Miscellaneous Expenses................
----------
Total.............................. $
* Except for the SEC registration fee and the NASD Filing Fee, all of the
foregoing expenses have been estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company, 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 Company or his serving at the request of the
Company 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 Amended By-laws provide for
indemnification by the Company of its directors and officers to the full
extent authorized by the DGCL. Pursuant to Section 145 of the DGCL, the
Company 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
Amended and Restated 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 Amended 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 Company has entered into agreements to provide indemnification for
their directors and certain officers in addition to the indemnification
provided for in the Amended and Restated Certificate of Incorporation and
Amended 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
Company, on account of services as a director or officer of any affiliate
of the Company, or as a director or officer of any other company or
enterprise that the indemnitee provides services to at the request of the
Company.
The Management Agreement between Mettler-Toledo, Inc. and AEA
Investors provides for indemnification of employees of AEA Investors who
serve as directors of the Company.
ITEM 16 - EXHIBITS
Exhibit
Number Description
1.1* -- Form of U.S. Purchase Agreement.
1.2* -- Form of International Purchase Agreement.
2.1 -- Stock Purchase Agreement between AEA-MT Inc., AG fur
Prazisionsinstrumente and Ciba-Geigy AG, as amended (Filed as
Exhibit 2.1 to the Registration Statement, as amended, on Form
S-1, of the Company (Reg. No. 33-09621) and incorporated herein
by reference).
2.2 -- Share Sale and Purchase Agreement relating to the
acquisition of the entire issued share capital of Safeline
Limited (Filed as Exhibit 2 to the Current Report on Form 8-K
of Mettler-Toledo Holding Inc. dated June 3, 1997 and
incorporated herein by reference).
4.3 -- Specimen Form of the Company's Common Stock Certificate
(Filed as Exhibit 4.3 to the Registration Statement, as amended,
on Form S-1 of the Company (Reg. No. 333-35597) and
incorporated herein by reference).
5.1* -- Opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel
to the Company, as to the legality of the securities being
registered.
23.1* -- Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 5.1).
23.2 -- Consent of KPMG Fides Peat, independent auditors.
24.1 -- Powers of Attorney (included on the signature page included in
this Part II).
- ----------------------
* To be filed by amendment
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
Prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of Prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of Prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(4) The registrant undertakes that every prospectus: (i) that is
filed pursuant to paragraph (3) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and
is used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and
that, for purposes of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(5) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
(6) The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that was
not the subject of and included in the registration statement when it
became effective.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED
THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON
THE 6th OF MAY, 1998.
METTLER-TOLEDO INTERNATIONAL INC.
By: /s/ Robert F. Spoerry
-------------------------------------
Robert F. Spoerry
President and Chief Executive
Officer
KNOWN ALL MEN BY THESE PRESENTS, that each person whose name appears
below consitutes and appoints Robert F. Spoerry and William P. Donnelly,
and each of them, his true and lawful attorney-in-fact and agent with full
power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, as
well as any related registration statement (or amendment thereto) filed
pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and
to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original, but which taken together shall
constitute one instrument.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Robert F. Spoerry
- -------------------------- President and Chief Executive May 6, 1998
Robert F. Spoerry Officer (Principal Executive ----------------
Officer), Director
/s/ William P. Donnelly May 6, 1998
- -------------------------- Chief Financial Officer ----------------
William P. Donnelly
/s/ Philip Caldwell May 6, 1998
- -------------------------- Chairman of the Board ----------------
Philip Caldwell
/s/ Reginald H. Jones May 6, 1998
- -------------------------- Director ----------------
Reginald H. Jones
/s/ John D. Macomber May 6, 1998
- -------------------------- Director ----------------
John D. Macomber
/s/ John M. Manser May 6, 1998
- -------------------------- Director ----------------
John M. Manser
/s/ Laurence Z. Y. Moh May 6, 1998
- -------------------------- Director ----------------
Laurence Z. Y. Moh
/s/ Thomas P. Salice May 6, 1998
- -------------------------- Director ----------------
Thomas P. Salice
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
1.1* -- Form of U.S. Purchase Agreement.
1.2* -- Form of International Purchase Agreement.
2.1 -- Stock Purchase Agreement between AEA-MT Inc., AG fur
Prazisionsinstrumente and Ciba-Geigy AG, as amended (Filed as
Exhibit 2.1 to the Registration Statement, as amended, on Form
S-1, of the Company (Reg. No. 33-09621) and incorporated herein
by reference).
2.2 -- Share Sale and Purchase Agreement relating to the
acquisition of the entire issued share capital of Safeline
Limited (Filed as Exhibit 2 to the Current Report on Form 8-K
of Mettler-Toledo Holding Inc. dated June 3, 1997 and
incorporated herein by reference).
4.3 -- Specimen Form of the Company's Common Stock Certificate
(Filed as Exhibit 4.3 to the Registration Statement, as amended,
on Form S-1 of the Company (Reg. No. 333-35597) and
incorporated herein by reference).
5.1* -- Opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel
to the Company, as to the legality of the securities being
registered.
23.1* -- Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 5.1).
23.2 -- Consent of KPMG Fides Peat, independent auditors.
24.1 -- Powers of Attorney (included on the signature page included in
Part II of the Registration Statement).
- ----------------------
* To be filed by amendment
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Mettler-Toledo International Inc.:
We consent to the use of our reports included and incorporated by reference
herein and to the reference to our firm under the headings "Summary Financial
Information", "Selected Historical Financial Information" and "Independent
Auditors" in the prospectus
KPMG Fides Peat
Zurich, Switzerland
May 6, 1998
