United States
Securities and Exchange Commission
Washington, D.C. 20549
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Form 10-K
(Mark One)
|X| Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the fiscal year ended December 31, 1999
OR
|_| Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 [No Fee
Required] For the transition period from _______
to _______
Commission file number 0-22493
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Mettler-Toledo International Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3668641
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Im Langacher
P.O. Box MT-100
CH 8606 Greifensee, Switzerland
(Address of principal executive offices) (Zip Code)
011-41-1-944-22-11
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the
Act:
Name of each exchange
Title of each class on which registered
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
As of March 7, 2000 there were 38,712,272 shares of the Registrant's
Common Stock, $0.01 par value per share, outstanding. The aggregate market value
of the shares of common stock held by non-affiliates of the Registrant (based on
the closing price for the Common Stock on the New York Stock Exchange on March
7, 2000) was approximately $1,419,732,122. For purposes of this computation,
shares held by affiliates and by directors of the Registrant have been excluded.
Such exclusion of shares held by directors is not intended, nor shall it be
deemed, to be an admission that such persons are affiliates of the Registrant.
Documents Incorporated by Reference
Document Part of Form 10-K
Proxy Statement for 2000 Into which Incorporated
Annual Meeting of Stockholders Part III
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METTLER-TOLEDO INTERNATIONAL INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
PAGE
PART I
ITEM 1. BUSINESS........................................................1
ITEM 2. PROPERTIES.....................................................24
ITEM 3. LEGAL PROCEEDINGS..............................................25
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............25
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS............................................26
ITEM 6. SELECTED FINANCIAL DATA........................................27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................29
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....42
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE............................42
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............43
ITEM 11. EXECUTIVE COMPENSATION.........................................46
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.....................................................46
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................46
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K....................................................47
SIGNATURES...................................................................48
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Unless otherwise stated or where the context otherwise requires,
references herein to we, our, the "Company" or "Mettler-Toledo" refer to
Mettler-Toledo International Inc. and its direct and indirect subsidiaries.
This Annual Report on Form 10-K includes forward-looking statements
based on our current expectations and projections about future events. These
forward-looking statements are subject to a number of risks and uncertainties
which could cause our actual results to differ materially from historical
results or those anticipated and certain of which are beyond our control. The
words "believe," "expect," "anticipate" and similar expressions identify
forward-looking statements. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise. New risk factors emerge from time to time and it is
not possible for us to predict all such risk factors, nor can we assess the
impact of all such risk factors on our business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Exhibit 99.1 to
this Report.
METTLER-TOLEDO(R), METTLER(R), INGOLD(R), GARVENS(R), OHAUS(R),
DELTARANGE(R), DIGITOL(R), E-WEIGH(R), JAGUAR(R), JAGXTREME(R), MENTOR SC(R),
OPRA(R), PANTHER(R), PILAR(R), SAFELINE(R), SPIDER(R), TRIMWEIGH(R) and
TRUCKMATE(R) are among our registered trademarks used in this Report and
MONOBLOC(TM), MULTIRANGE(TM), POWERPHASE(TM), SIGNATURE(TM) and VIPER(TM) are
among our trademarks used in this Report.
Unless otherwise indicated, industry data contained herein is derived
from publicly available industry trade journals, government reports and other
publicly available sources. We have not independently verified this data but we
believe the data is reliable. Where such sources are not available, industry
data is derived from our internal estimates, which we believe to be reasonable,
but which cannot be independently verified. As used in this Annual Report, "$"
refers to U.S. dollars, "CHF" or "SFr" refers to Swiss francs, "(pound)" refers
to British pounds sterling and "CDN $" refers to Canadian dollars.
PART I
ITEM 1. BUSINESS
Overview
Mettler-Toledo is a leading global supplier of precision instruments.
We are the world's largest manufacturer and marketer of weighing instruments for
use in laboratory, industrial and food retailing applications. We hold leading
market positions in several related analytical instruments, and are a leading
provider of automated chemistry systems used in drug and chemical compound
discovery and development. For instance, we hold one of the top three global
market positions in the following analytical instruments: titrators, thermal
analysis systems, automatic lab reactors, automated synthesis products, pH
meters and electrodes. In addition, we are the world's largest manufacturer and
marketer of metal detection systems used in the production and packaging of
goods in industries such as food processing, pharmaceutical, cosmetics,
chemicals and other industries.
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Market leadership and technology leadership are critical components of
our success, and we have used these advantages to build our business. For
instance, using our leading position in weighing instruments as our base, we
have added other products, such as analytical instruments, automated chemistry
systems and metal detectors, that appeal to our existing customer base. In
addition, we focus on the high value-added segments of our markets by delivering
innovation to the marketplace. Some examples of our innovations include more
accurate forms of measurement, an increased use of automation or robotics in our
products and the use of custom-designed software or open-system architectures to
allow data gathered by our instruments to be more easily integrated into our
customers' management information systems.
We believe our ability to maintain and enhance the strength of our
leadership position in high value-added segments is due in part to the strength
of our brand name and the quality of our global sales and service organization.
We service a worldwide customer base through our own sales and service
organization and we have a global manufacturing presence in Europe, the United
States and Asia. Overall, we estimate the global market for weighing instruments
to be approximately $4.5 billion and the market for other measurement
instruments to be approximately $1.5 billion.
In 1999, our sales were $1.1 billion. Of this total 46% came from
Europe, 43% from North and South America and 11% from Asia and other countries.
For additional information regarding our segment disclosure, see Note 16 to our
audited consolidated financial statements. We attribute the strength of our
sales growth to the non-cyclical nature of our two largest markets, the
pharmaceutical and food and beverage industries. Moreover, the diversified
nature of our customer base and product offerings provides an additional
competitive strength on a global basis and limits our exposure to local economic
trends.
History
We trace our 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 introduced
the first fully electronic precision balance in 1973. The Toledo Scale Company,
which we acquired in 1989, 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. When we acquired
Toledo Scale, our name 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 two decades, we have grown through
additional acquisitions intended to complement our existing geographic markets
and products. For instance, in 1986, we acquired the Ingold Group of companies,
which manufacture electrodes, and Garvens Kontrollwaagen AG, which builds
dynamic checkweighers. Toledo Scale acquired Hi-Speed Checkweigher Co. in 1981.
In 1990, we acquired Ohaus Corporation, which manufactures laboratory balances.
More recently, in 1997 we acquired Safeline, in 1998 we acquired Bohdan
Automation, Applied Systems and Myriad Synthesizer Technology, and in 1999 we
acquired the Testut-Lutrana group.
Mettler-Toledo International Inc. was incorporated in December 1991 and
was recapitalized in connection with the October 15, 1996 acquisition of the
Mettler-Toledo group of companies from Ciba-Geigy. In the acquisition, we paid
cash consideration of approximately SFr 505.0 million (approximately $402.0
million at October 15, 1996), including dividends of approximately SFr 109.4
million (approximately $87.1 million at October 15, 1996), paid
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approximately $185.0 million to settle amounts due to Ciba-Geigy and its
affiliates and incurred expenses in connection with the acquisition and related
financing of approximately $29.0 million. We financed the acquisition primarily
with (i) borrowings under a credit agreement in the amount of $307.0 million,
(ii) the issuance of $135.0 million of senior subordinated notes and (iii) an
equity contribution of $190.0 million primarily from AEA Investors Inc., its
shareholder-investors and our executive officers and other employees. Following
the completion of our initial public offering in November 1997, management,
employees and Company sponsored benefit funds held approximately 18% of the
Company's shares on a fully diluted basis.
During the fourth quarter of 1997, we completed our initial public
offering of 7,666,667 shares of common stock, including the underwriters'
over-allotment options, at a per share price of $14.00. The offering raised net
proceeds, after underwriters' commissions and expenses, of approximately $97.3
million. Concurrently with the offering, we refinanced our prior credit facility
and used proceeds from the refinancing and the offering to repay the senior
subordinated notes of our wholly owned subsidiary, Mettler-Toledo, Inc.
In 1999 and 1998, certain selling shareholders completed secondary
offerings of 6,099,250 and 11,464,400 shares of our common stock, respectively,
including the underwriters' over-allotment options. Neither we nor any of our
directors, executive officers or other employees sold shares or received any
proceeds from these offerings.
Recent Acquisitions
In May 1999, we acquired the Testut-Lutrana group, a leading
manufacturer and marketer of industrial and retail weighing instruments in
France with annual sales of approximately $50 million. We believe this
acquisition is an excellent strategic fit given Testut-Lutrana's extensive sales
and service network in France and excellent brand recognition. By virtue of this
acquisition, we have assumed the leading position in food retail weighing in
Europe and are well positioned to meet the rapidly changing demands of our
European customer base.
In April 1999 we announced that we had signed an agreement to convert
our 60% joint venture in Changzhou, China, into a legal structure that provides
us with full control through this change in ownership, we will be able to fully
leverage this low cost manufacturing base for international markets. This move
further demonstrates our strategic commitment to Asia and our belief in the
fundamental growth factors for the region.
In 1998, we decided to pursue opportunities in the automated drug and
chemical compound discovery and development market, and build on our leadership
position as a provider of automated lab reactors and reaction calorimeters.
In December 1998, we announced that we had acquired two technologically
advanced instrument companies, Applied Systems and Myriad Synthesizer
Technology. Applied Systems designs, assembles and markets instruments for
in-process molecular analysis, which is primarily used for researching,
developing and monitoring chemical processes. Applied Systems' proprietary
sensors, together with its innovative Fourier transform infrared technology,
enable chemists to analyze chemical reactions as they occur, which is more
efficient than pulling samples. Myriad Synthesizer Technology designs, assembles
and markets instruments that facilitate and automate the synthesis of large
numbers of chemical compounds in parallel, which
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is a key step in the chemical compound discovery process. Its products can be
used in all stages of synthesis in drug discovery.
In July 1998, we also extended our product offerings to the automated
drug and chemical compound discovery market with our acquisition of Bohdan
Automation Inc. Bohdan is a leading supplier of laboratory automation and
automated synthesis products used in research for life science applications for
pharmaceutical and agricultural products and in other applications in the food
and chemicals industries.
These acquisitions enable us to offer a strong and comprehensive array
of solutions, from sample preparation to compound synthesis to process
development. We believe that our customers want solutions in this market from a
company like Mettler-Toledo, with a reputation for innovation and quality and
with a global presence and service network.
In May 1997, we acquired Safeline Limited for (pound)63.7 million
(approximately $104.4 million at May 30, 1997). Safeline is the world's largest
manufacturer and marketer of metal detection systems for companies that produce
and package goods in the food processing, pharmaceutical, cosmetics, chemicals
and other industries. Safeline's metal detectors can also be combined with our
checkweighing products for important quality and safety checks in these
industries.
Market Leadership
We believe that we have a leading position in each of our markets, and
at least 80% of our product sales are from products that are the global leaders
in their segment. In the weighing instruments market, we are the only company to
offer products for laboratory, industrial and food retailing applications
globally and we believe that we hold a market share more than twice that of our
nearest competitor. We believe that in 1999 we had approximately 45% of the
global market for laboratory balances, including the largest market share in
each of Europe, the United States and Asia (excluding Japan), and the number two
position in Japan. In the industrial and food retailing markets, we believe we
have the largest market share in Europe and the United States. In Asia, we have
a substantial industrial and food retailing business which has gained market
share in recent years. This business is supported by our established
manufacturing presence in China. In addition, we also have one of the top three
positions in the global market for several analytical instruments including
titrators, thermal analysis systems, automatic lab reactors, automated synthesis
products, pH meters and electrodes. We attribute our worldwide market leadership
positions to the following competitive strengths:
o 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, we
believe customers focus on accuracy, product reliability, technical
innovation, service quality, reputation and past experience when
choosing precision instruments. We also believe that our customers
experience high switching costs if they attempt to change vendors.
Mettler-Toledo has one of the strongest brand names in the laboratory.
In fact laboratory balances are often generically referred to as
"Mettlers". The strength of this brand name has allowed us to
successfully extend our laboratory product line to include other
laboratory instruments.
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o Technological Innovation. We have a long and successful track record
of innovation and remain at the forefront of technological development
by focusing on the high value-added segments of our markets. We
believe that we are the global leader in our industry in providing
innovative instruments, in integrating our instruments into
application-specific solutions for customers and in facilitating the
processing of data gathered by our instruments and the transfer of
this data to customers' management information systems. Our
technological innovation efforts benefit from our manufacturing
expertise in sensor technology, precision machining and electronics,
as well as our strength in software development.
o Comprehensive, High Quality Product Range. We manufacture a more
comprehensive range of weighing instruments than any of our
competitors. Our broad product line addresses a wide range of weighing
applications across and within many industries and regions.
Furthermore, our analytical instruments and metal detection systems
complement our weighing products, enabling us to offer integrated
solutions. We manufacture our products in modern facilities, most of
which are ISO 9001 certified. Our broad range of high quality products
and the ability to provide integrated solutions allows us to leverage
our sales and service organization, product development activities and
manufacturing and distribution capabilities.
o Global Sales and Service. We have the only global sales and service
organization among weighing instruments manufacturers, and we believe
that this capability is a major competitive advantage. At December 31,
1999, this organization consisted of more than 3,800 employees
organized into locally based, customer-focused groups that provide
prompt service and support to our customers and distributors in
virtually all major markets around the world. The local focus of our
sales and service organization enables us to provide timely,
responsive support to our customers worldwide and provides feedback
for manufacturing and product development. When we survey our current
and potential customers on their needs, they often name service as the
most important criteria for choosing their instrument suppliers. In
addition to the service capability, this global infrastructure also
allows us to capitalize on growth opportunities in emerging markets.
o Largest Installed Base. We believe that we have the largest installed
base of weighing instruments in the world. From this installed base,
we obtain service contracts that provide a strong, stable source of
recurring service revenue. Service revenue represented approximately
17% of net sales in 1999, of which approximately 8% was derived solely
from service contracts and repairs with the remainder derived from the
sale of spare parts. We believe that our 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 their
existing suppliers. In addition, switching to a new instrument
supplier entails additional costs to the customer for training, spare
parts, service and systems integration requirements. Close
relationships and frequent contact with our broad customer base also
provide us with sales leads and new product and application ideas.
o Geographical, Product and Customer Diversification. Our revenue base
is diversified by geographic region, product range and customer. Many
different industries, including chemicals, pharmaceuticals, food
processing, food retailing and transportation utilize our broad
product range. We supply customers all over the world, and no one
customer accounted for more than 3% of net sales in 1999. Our diverse
revenue base reduces our
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exposure to regional or industry-specific economic conditions, and our
presence in many different geographic markets, product markets and
industries enhances our attractiveness as a supplier to multinational
customers.
Growth Strategies
We are implementing strategies relating to expanding our technology
leadership, increasing our market share and capitalizing on opportunities in
developed markets, capitalizing on opportunities in emerging markets, pursuing
selected acquisition opportunities and re-engineering and cost savings. These
strategies are designed to reduce our overall cost structure and enhance our
position as a global market leader. The successful implementation of these
strategies has contributed to an improvement in Adjusted Operating Income (gross
profit less research and development and selling, general and administrative
expenses before amortization and non-recurring costs) from $39.5 million (4.6%
of net sales) for 1995 to $123.7 million (11.6% of net sales) for 1999. We are
committed to improving our performance and are pursuing the following
strategies:
Expanding Our Technology Leadership. We attribute a significant portion
of our recent margin improvement to our research and development efforts. We
intend to continue to invest in product innovation in order to provide
technologically advanced products to our customers for existing and new
applications. Over the last three years, we have invested more than $150 million
in research and development. Our research and development efforts fall into two
categories:
o technology advancements, which increase the value of our products.
These may be in the form of enhanced functionality, new
applications for our technologies, more accurate or reliable
measurement, additional software capability or automation through
robotics or other means
o cost reductions, which reduce the manufacturing cost of our
products through better overall design
Our research and development efforts have contributed to a pipeline of
innovative and new products, significant reductions in product costs and reduced
time to market for new products. Examples of recent product introductions
include:
o a family of highly automated parallel synthesis systems for drug
and new chemical compound discovery
o ALLex, an automated liquid/liquid extraction system, incorporating
robotics and unique sample handling technology
o additional modules for our high performance modular thermal
analysis system
o WinBridge, our global software solution for vehicle weighing
o FormWeigh, our global software solution handling automated
industrial batching processes (certified interface to SAP ERP
software)
o FreeWeigh, our latest generation software package for integrated
process validation and statistical process control
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o S-Line, our new open system modular checkweigher family for end-
of-line inspection in chemical, pharmaceutical, cosmetic and food
packaging processes
o OPRA, the first internet-enabled retail scale, based on open PC
architecture and Windows platforms
o VIPER, an innovative compact scale family for basic industrial
process application
o CountWeigh, our global software solution linking into integrated
parts inventory control systems
o a fully integrated metal detector and checkweigher (Combichecker)
o a new density and refractometry measurement technology
o a higher performance Karl Fischer titrator
o the first Chinese-designed and manufactured laboratory balance
line
o a cost reduced basic level laboratory balance product family
o a number of industrial and retail products that deploy open-system
architecture
Increasing Our Market Share and Capitalizing on Opportunities in
Developed Markets. We recognize that to be a successful company, we must not
only develop excellent products, but we must market and distribute them
effectively- more effectively than our competitors. We utilize what we believe
are the most sophisticated marketing and sales techniques in our industry. These
techniques include the development and utilization of marketing databases. We
develop these databases to better understand the full potential of our market by
customer, location, industry, instrument and related application. We then
utilize this data to more efficiently direct our field resources and complement
our direct and distributor sales forces with targeted mailing and telemarketing
campaigns to more fully exploit our market's potential. We also utilize a dual
brand strategy for certain market segments to improve our overall market
penetration. For example, we sell balances under the Ohaus brand name as an
alternative to the Mettler-Toledo brand name in certain distribution channels.
We believe that service capabilities are a critical success factor in
our business. Our service capabilities, which provide support to our customers
and distributors in virtually all major markets across the globe and include
around-the-clock availability of well-trained technicians, are highly valued by
our customers. We believe that no other competitor has global service
capabilities.
The combination of our sophisticated marketing and sales techniques and
service capabilities help us capitalize on growth opportunities in our developed
markets. These opportunities include:
o integrating information from our measurement instruments into our
customers' data management software systems
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o automating and/or improving process control, in part by developing
integrated solutions which combine instruments and related
technologies to optimize manufacturing processes
o harmonization of national weighing standards across countries
o increasing standardization of manufacturing and laboratory
practices programs like ISO 9001, Good Laboratory Practices and
Good Manufacturing Practices
o increasing recognition by our customers of the importance of
preventive maintenance in reducing down time
Capitalizing on Opportunities in Emerging Markets. We believe that
emerging markets will continue to provide growth opportunities for us in the
long term. These growth opportunities are being driven primarily by economic
development and global manufacturers' utilization of additional and more
sophisticated precision instruments as they shift production to these markets.
In addition, we believe that over the long term, the trend toward international
quality standards, the need to upgrade mechanical scales to electronic versions
and the establishment of local production facilities by our multinational client
base will add to the opportunities in emerging markets. To date our emerging
market expansion has primarily focused on Asia. In Asia (excluding Japan), we
are the market leader in laboratory weighing instruments and have a substantial
industrial and food retailing business that has gained market share in recent
years. For instance, we have two profitable operations in China: a facility that
manufactures and sells industrial and food retailing products and a facility
that manufactures and distributes laboratory products. Both of these operations
serve the domestic and export markets. We have also opened direct marketing
organizations in Taiwan, Korea, Hong Kong, Thailand, Malaysia and Eastern
Europe. Recognizing the strategic importance of Asia, we created a new executive
committee position to head our Asian business. Beyond Asia, we are also
expanding our sales and service presence in Latin America and other emerging
markets.
We believe that to succeed in emerging markets, there are several
advantages we must offer to our customer base:
o to our multinational customers, we must offer the same level of
service and problem-solving capabilities that we offer them in
developed countries. We accomplish this through extensive
training, including factory training, of our employees
o to our local customers, we must offer lower cost and less complex
products than are required by our customers in Japan, Europe and
North America. We accomplish this through the increased research
and development and manufacturing capabilities at our two Chinese
production facilities
o we must have a direct local presence to ensure that our
combination of quality products and excellent service is
effectively carried out at a local level so that we achieve the
same level of brand awareness in emerging markets that we enjoy in
developed markets. We have accomplished this in part by
establishing ten new sales and service operations in emerging
markets since 1996
Pursuing Selected Acquisition Opportunities. We believe that the
combination of our market leadership, our strong brand name and our
comprehensive sales and distribution network
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supports an attractive platform for acquisitions. We are interested in acquiring
companies that provide us with:
o complementary products that will benefit from our brand name and
global distribution channels. An example is our drug discovery
acquisitions that we made in 1998 and whose products we have now
added to our global distribution network. We offer these companies
the infrastructure to expand globally and take advantage of the
Mettler-Toledo brand name
o integrated technology solutions, which we can combine with our own
technologies to create an overall better solution for our
customers. An example is Safeline Limited, which we acquired in
1997. We combined its metal detection equipment with our
checkweighers to create one instrument, featuring integrated data
management, a smaller footprint and only one man-machine
interface- a better solution for many of our customers than
separate products
o consolidation opportunities in fragmented markets. Examples
include our recent acquisition of the Testut-Lutrana group in
France and our acquisitions of a number of independent industrial
and retail weighing distributors in the United States
o geographic expansion into markets where we do not have a direct
presence. For example, in 1998 we established a small presence in
India by acquiring a local manufacturer
Re-engineering and Cost Savings. We have improved our profitability in
recent years partly through a series of initiatives aimed at reducing our cost
structure. We plan to take similar initiatives in the future with the goal of
further improving our operating margins. These initiatives include:
o moving the production of certain product lines to lower cost
locations and consolidating the production of others. For example,
in 2000 we are planning to transfer production lines from the
Americas to China and Europe and close facilities in order to
continue to exploit our low cost Chinese manufacturing base and
better utilize existing capacity in Europe
o our worldwide procurement project, launched last year, is expected
to bring us substantial cost savings. To take full advantage of
our global purchasing power, we are working to eliminate price
differences between units, leverage high-potential opportunities
to increase buying power and establish a worldwide sourcing
arrangement
o increasing sales force productivity through telemarketing,
increased training and other focused initiatives. For example, we
have recently initiated an internet sales channel for certain
product categories and have also significantly increased our
telemarketing initiatives. We believe both of these programs will
increase the productivity of our sales force
o reducing distribution costs by using existing infrastructure more
efficiently and centralizing processes where economies of scale
can be obtained. For example, we recently consolidated most of our
North American order processing and billing functions into one
location
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o reducing product cost through research and development, improved
manufacturing processes and reducing the purchased cost of
components. For example, we will introduce a number of products in
2000 with lower costs than the previous generation, including a
number manufactured at our Chinese facilities
o continually reviewing operations to identify additional
opportunities to reduce costs
We believe that these initiatives will place us in a position to build
on our recent improvement in profitability. Furthermore, we believe that we can
leverage our existing infrastructure, particularly our recent investments in
Asia, to obtain continued sales growth without significant additions to our
overall cost base.
Drug Discovery
Virtually all our efforts center on improving customers' processes. By
working side-by-side with customers, we gain an in-depth understanding of their
processes and how we can help them become more efficient.
Increasingly, the answer is automation. And, frequently, the tools are
Mettler-Toledo's advanced robotics, intelligent software, and/or a combination
of technologies into integrated, more powerful instruments. Our automated
solutions provide excellent value and paybacks, ranging from time savings and
better yields to higher-quality products and tighter inventory control.
We offer products with advanced automation in areas from food retailing
to packaged goods. Where we are making the greatest difference is in the
high-growth field of drug discovery. Each day that automation accelerates the
introduction of a blockbuster drug can translate into millions of additional
sales for a pharmaceutical company. Such tremendous payback opportunities on
automation are driving our pharmaceutical customers to significantly increase
their spending on these techniques.
With a comprehensive array of automated solutions for drug discovery,
we can help customers achieve "leapfrog" improvements in efficiency. One such
solution, our Myriad synthesizer, uses robotics and software to automate the
generation of large libraries of compounds for screening. The benefits of this
automation are dramatic. A chemist can manually synthesize about 50 to 200
compounds per year; with Myriad, he or she can synthesize as many as 100,000. By
freeing scientists from time-consuming, routine tasks, our synthesizer allows
them to focus on intellectually demanding elements of their work and pursue
other value-creating activities.
In addition, we are establishing another unprecedented market position
by combining our technologies to condense the sequence of the drug discovery
process - further helping customers increase throughput. Our revolutionary
approaches will enable customers to simultaneously carry out steps that
historically have been done sequentially.
For example, we are launching an automatic lab reactor with multiple
reaction vessels combined with an infrared multi-sensor device that provides
real-time reaction analysis for each vessel. The combined instrument bridges the
gap between parallel synthesizers for drug discovery and single-vessel reactor
systems for process development. The combination also
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forms a fully integrated solution for the process screening of drug candidates
and creates exceptional customer value.
Instruments and Solutions
Laboratory Instruments and Solutions
We manufacture and market a complete range of laboratory balances, as
well as other selected laboratory instruments, such as titrators, thermal
analysis systems, automatic lab reactors, automated synthesis products, pH
meters and electrodes, for laboratory applications in research and development,
quality assurance, production and education. We estimate that approximately 40%
of our sales are to customers using our instruments and services in laboratory
environments. We estimate that we have approximately 45% share of the global
market for laboratory balances and we are among the top three producers
worldwide of titrators, thermal analysis systems, automatic lab reactors,
automated synthesis products, pH meters and electrodes. We have also established
a leading position in the drug discovery market. We believe that we have 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. We believe that we sell the highest performance laboratory balances
available on the market, with weighing ranges from one ten-millionth of a gram
up to 32 kilograms. The Company's brand name is so well recognized that
laboratory balances are often generically referred to as "Mettlers." The
Mettler-Toledo name is identified worldwide with accuracy, reliability and
innovation. In our judgment, this reputation constitutes one of our principal
competitive strengths.
In order to cover a wide range of customer needs and price points, we
market laboratory balances in three principal product tiers offering different
levels of functionality. High-end balances provide maximum automation of
calibration, application support and additional functions. Mid-level balances
provide a more limited but still extensive set of automated features and
software applications. Basic level balances provide simple operations and a
limited feature set. We also manufacture mass comparators, which are used by
weights and measures regulators as well as laboratories to ensure the accuracy
of reference weights. Due to the wide range of functions and features offered by
our products, prices vary significantly. A typical mid-range precision balance
is priced at approximately $2,500 and a typical microbalance is priced at
approximately $14,000.
In addition to Mettler-Toledo branded products, we also manufacture and
sell balances under the brand name "Ohaus." Ohaus branded products include
mechanical balances and electronic balances for the educational market and other
markets in which customers are interested in lower cost, a more limited set of
features and less comprehensive support and service.
Titrators. Titrators measure the chemical composition of samples. Our
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. Most models, including those in the lower-range, permit common
determinations to be stored in a database for frequent use. Titrators are used
heavily in the food and beverage industry. A typical titrator is priced at
approximately $12,000.
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Thermal Analysis Systems. Thermal analysis systems measure different
properties, such as weight, dimension and energy flow, at varying temperatures.
Our 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. We manufacture 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. Data collected from a portable meter can be
downloaded 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 simulate an entire chemical manufacturing
process in the laboratory. Customers use the simulation test before proceeding
to production, in order to test the safety and feasibility of new processes. Our
products are fully computer-integrated, with a significant software component
that we also provide. They also offer wide flexibility in the structuring of
experimental processes. Automatic lab reactors and reaction calorimeters are
typically used in the chemicals and pharmaceutical industries. A typical lab
reactor is priced at approximately $140,000.
Synthesizers. We manufacture automated parallel synthesizers for use in
sophisticated chemistry environments, such as pharmaceutical laboratories. These
synthesizers allow scientists to develop new compounds more efficiently and to
create large libraries of molecules at the same time instead of creating them
one by one as is done traditionally. This is an important aspect of
combinatorial chemistry in the drug and chemical compound discovery process. Our
synthesizers use robotics and sophisticated software to automate what was
previously a manual process. A synthesizer costs between $75,000 and $1,000,000,
depending on its functionality.
Robotic Workstations. Robotic workstations include dedicated automated
instruments for weighing, pH meter measurement, titration and other analytical
technologies, particularly in the area of sample preparation. Sample preparation
has historically been a manual process for our customers and accounts for a
significant cost in chemical analysis. By automating these manual processes, our
robotic workstations significantly increase productivity in the laboratory and
specifically meet our pharmaceutical, chemical and other customers' needs for
automated solutions for drug and chemical compound discovery. Our robotic
workstations include sophisticated software and cost between $20,000 and $75,000
depending on its functionality.
Other Instruments. We have recently introduced single-channel and
multi-channel pipettes which are used for liquid handling in the laboratory.
These devices are the most widely used instruments in the rapidly growing life
science market. We sell 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, we manufacture and sell moisture
analyzers, which precisely determine the moisture content of a sample by
utilizing an infrared dryer to evaporate moisture. We also manufacture
electrodes for use in a variety of laboratory instruments and in-line process
applications. Laboratory electrodes are used in pH meters and titrators, and may
be replaced many times during the life of the instrument.
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Industrial and Food Retailing Instruments and Solutions
In 1999, we continued the globalization of our industrial and retail
businesses, which historically were distinct entities in North America and
Europe, by reorganizing the businesses under a global head. Our reorganization
anticipates the continued emergence of a global marketplace, as our customers
set up operations worldwide and as industry standards are harmonized globally.
The new organization will improve customer service and support by
ensuring we offer state-of-the-art solutions and consistent quality and service
levels around the globe. It is this powerful combination that continues to
attract major customers who have standardized on our weighing instruments at
their facilities worldwide. Our reorganization also will increase our
cost-effectiveness by eliminating duplicate costs and standardizing product
lines. By reducing 25 regional product groups to 15 global lines, we are better
leveraging our R&D and other recources to develop even more advanced solutions
for customers.
We offer industrial measurement solutions, principally the measurement
of weight, to customers in a variety of industries, often in the same end
markets where we sell our laboratory instruments. The key end markets for these
solutions are the food, pharmaceutical, chemical, cosmetics and logistics
industries. We also sell weighing instruments and solutions to the electronics,
metal, rubber and plastics industries and to the public sector in connection
with the control and tariff of trucks.
Weighing instruments are among the most broadly used measurement
devices in industry and food retailing. We estimate that approximately 40% of
our sales are to customers using our instruments and services in industrial
environments and 20% to customers in food retailing environments. We believe
that we have the largest market share in the industrial and food retailing
market in each of Europe and the United States. In Asia, we have a substantial
industrial and food retailing business which has gained market share in recent
years. This business is supported by an established manufacturing presence in
China. We believe that we are the only company with a true global presence
across industrial and food retailing weighing applications.
Our industrial measurement solutions cover many customer processes from
raw material management, to production, through to packaging and into the
logistics industry. We can walk through the steps in a typical production
process to illustrate some of the solutions we offer:
o For food and pharmaceutical companies, as well as other process
industries, the production process begins with the receipt of bulk
materials, such as ingredients for food or chemicals. We offer
integrated solutions to help customers manage these inventory
items from the time they enter a facility to when they move into
production. This is accomplished through weigh stations with our
industrial terminals and application-specific software which helps
manage the inventory flow at each step. The data collected by our
instruments is usually interfaced with customers' ERP systems.
o Production processes often require the mixing of inventory items
or ingredients using a formula or recipe. Since these formulas are
based on weight, we offer
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integrated weighing solutions, including our FormWeigh software
package to control the formulation process and manage production.
o After the food item or drug has been manufactured, it must go
through a packaging process where it is sorted and enclosed in a
container. Two standard quality control processes in virtually all
packaging lines are tests for over- or under-filling and for metal
contamination. We offer instruments for both these applications.
In addition, we offer specialized industrial terminals and
software for statistical quality control which allows a customer
to run a number of standard quality control applications and to
send instructions to earlier phases in the packaging process to
correct off-specification conditions.
o Finally, after the food or drug item has been packaged, it enters
a logistics process in which the item ultimately reaches an end
customer. We offer highly advanced solutions for logistics
companies like FedEx and DHL to capture the weight and dimension
of packages as they move through their hub systems. Logistics
companies then use the data captured in these systems to manage
loads and bill their customers.
We also offer perishable goods management systems to assist large food
retailers in their management of fresh goods, such as meats, fruits, vegetables
and cheese. These perishable goods management systems are networked computers
deployed in a store, each with weighing sensors, which are linked together with
an array of software packages that assist in the management of perishable goods.
We offer these solutions for individual stores or can network together large
numbers of stores. Many food retailers are considering the movement of these
solutions to the internet, where they can manage their perishable goods
inventory and control pricing of individual items in real-time. Our perishable
goods management systems can also be used as merchandising tools, for example by
showing promotional information on the display.
The industrial and food retailing products that we offer in providing
these solutions are described in more detail below.
Industrial Scales and Balances. We offer a complete line of industrial
scales and balances, such as bench scales and floor scales, for weighing loads
from a few grams to several thousand kilograms in applications ranging from
measuring materials in chemical production to weighing mail and packages. Our
product lines include the "Viper" and "Spider" range of scales, often used in
receiving and shipping departments in counting applications; "TrimWeigh" scales,
which determine whether an item falls within a specified weight range, and are
used primarily in the food industry; "Mentor SC" scales, for counting parts; and
precision scales for formulating and mixing ingredients. Prices vary
significantly with the size and functions of the scale, generally ranging from
$1,000 to $20,000.
Industrial Weighing Terminals. Our industrial weighing terminals, such
as "FormWeigh," are based on an open-system architecture that enables
interaction with customers' enterprise software packages. Prices for industrial
weighing terminals vary significantly based on functionality of the application,
generally ranging from $500 to $10,000. Our "MultiRange" products also 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 our weighing equipment into a computer
system performing other functions, like inventory control or batch management.
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Truck Scale Systems. Our 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). Our 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. We also offer advanced computer software, such
as "WinBridge," that can be used with our heavy industrial scales to permit a
broad range of applications. Truck scale prices generally range from $20,000 to
$50,000.
Dynamic Checkweighers. We offer solutions to checkweighing requirements
in the food processing, pharmaceutical, chemicals and cosmetic industries, where
customers are required to accurately measure portions for packaging. We also
offer checkweighing solutions to the transportation and package delivery
industries, where tariffs are levied based on weight. 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. Our 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
products that are 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 using contaminated raw materials. Metal detectors are most
commonly used 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. We offer automated dimensioning equipment for
use in the shipping industry to measure package volumes. These products employ
the patented 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.
Retail Scale Systems and Prepackaging Systems. Supermarkets,
hypermarkets and other food retail establishments make use of multiple weighing
applications for the full handling of perishable goods. For example, perishable
goods are weighed on arrival to determine payment to suppliers and some of these
goods are repackaged, priced and labeled for sale to customers. Other goods are
kept loose and selected by customers and either weighed at the produce or
delicatessen counter or at the checkout counter.
We offer stand-alone scales for basic counter weighing and pricing,
price finding, and printing. In addition, we offer network scales and software,
which can integrate backroom, counter, self-service and checkout functions, and
can incorporate weighing data into a supermarket's overall perishable goods
management system. Backroom products include dynamic weighing products, labeling
and wrapping machines, perishable goods management and data processing systems.
In some countries in Europe, we also sell slicing and mincing equipment. Prices
for food retailing scales generally range from $500 to $5,000, but are often
sold as part of comprehensive weighing solutions.
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Customers and Distribution
Our business is geographically diversified, with sales in 1999 derived
46% from Europe, 43% from North and South America and 11% from Asia and other
countries. Our customer base is also diversified by industry and by individual
customer. Our largest single customer accounted for no more than 3% of 1999 net
sales.
We use the Mettler-Toledo Web site, www.mt.com, to provide current and
prospective customers and other audiences with the information they need in a
convenient manner. With more than 2,500 pages of information, our Web site has
become a principal source of answers for customers' questions on many
laboratory, industrial and food retailing processes. Customers repeatedly tell
us how much they value this resource, reinforcing their belief in our
unparalleled applications support and further strengthening our brand.
In addition, we use the information gained through visits to our site
to make our marketing messages even more relevant to customers. This includes
employing one-to-one marketing techniques, which are already proving successful.
Laboratory
Principal customers for laboratory products include: chemicals
manufacturers, pharmaceutical manufacturers, cosmetics manufacturers, food and
beverage makers, the metals industry, the electronics industry, the plastics
industry, the transportation industry, the packaging industry, the logistics
industry, the rubber industry, the jewelry and precious metals trade,
educational institutions and government standards laboratories. Balances, pH
meters and pipettes 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.
Our laboratory products are sold through a worldwide distribution
network. Our extensive direct distribution network and our dealer support
activities enable us to maintain a significant degree of control over the
distribution of our products.
We now offer customers the ability to shop online for basic instruments
with global appeal, such as balances, pipettes, pH meters, electrodes, titrators
and density meters. Launched in mid-1999, www.MT-Shop.com presents customers
with unique options, including the ability to customize a product down to a
specific color or design motif. Users also can access the site in five
languages.
Our virtual shop is aimed principally at small start-up companies and
individual scientists segments of the market that previously were difficult to
reach cost-effectively. The site is expected to increase brand awareness and
market penetration with these new target groups.
In the United States where there are strong independent laboratory
distributors, we use them as the primary marketing channel for lower to
mid-price products. This strategy allows us to leverage the strength of both the
Mettler-Toledo brand and the laboratory distributors' market position into sales
of other laboratory measurement instruments. We provide our distributors with a
significant amount of technical and sales support. Mid to high-end products in
the United States are handled by our own sales force. There has been recent
consolidation among distributors in the United States market. While this
consolidation could adversely affect our
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U.S. distribution, we believe our leadership position in the market gives us a
competitive advantage when dealing with our U.S. distributors.
We sell products in Asia through our own sales force and distributors,
and in Europe primarily through direct sales. European and Asian distributors
are generally fragmented on a country-by-country basis.
Ohaus branded laboratory balances are generally positioned in
alternative distribution channels to those of Mettler-Toledo branded products.
This means that we can fill a greater number of distribution channels and
increase penetration of our existing markets. Since acquiring Ohaus in 1990, we
have expanded this brand beyond its historical U.S. focus. Ohaus branded
products are sold exclusively through distributors.
Industrial and Food Retailing
We offer industrial and food retailing measurement solutions,
principally the measurement of weight, to customers in a variety of industries,
often in the same end markets where we sell our laboratory instruments. The key
end markets for these solutions are the food, pharmaceutical, chemical,
cosmetics and logistics industries. We also sell weighing instruments and
solutions to the electronics, metal, rubber and plastics industries and to the
public sector in connection with the control and tariff of trucks.
Our industrial products share weighing technology, and often minor
modifications to existing products make them useful for applications in a
variety of industrial processes. We also sell to original equipment
manufacturers ("OEMs") which integrate our modules into larger process control
applications or comprehensive packaging lines. Our 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 that must ensure that
their products are free from contamination by metal particles. Undetected metal
contamination can have severe consequences for these companies, including
potential litigation and product recalls. Metal detection systems are most
commonly utilized together with checkweighers as components of integrated
packaging lines. Metal detectors provide important safety checks before food and
other products are delivered to customers. Metal detection systems are also used
in pipeline detectors for dairy and other liquids, gravity fall systems for
grains and sugar and throat detection systems for raw material monitoring.
Our food retailing products customers include supermarkets,
hypermarkets and smaller food retailing establishments. The North American and
European markets already include many large supermarket chains, and there is an
on-going shift in most of our food retailing markets from "mom and pop" grocery
stores to supermarkets and hypermarkets. 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, we
also sell food retailing products to OEMs for inclusion in more comprehensive
checkout systems. For example, our OEMs often incorporate our checkout scales
into scanner-scales, which can 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.
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In the industrial and food retailing market, we sell both directly to
customers (including OEMs) and through distributors. In the United States,
direct sales exceed distribution sales and in Europe, direct sales predominate,
with distributors used in certain cases. We sell products in Asia primarily
through distributors, except in China where we sell products through our own
sales force and distributors. Where we use distributors, we seek to provide them
with significant support.
Sales and Service
Market Organizations
We have over 30 geographically focused market organizations ("MOs")
around the world that are responsible for all aspects of our sales and service.
The MOs are local marketing and service organizations designed to maintain close
relationships with our customer base. Each MO has the flexibility to adapt its
marketing and service efforts to account for different cultural and economic
conditions. MOs also work closely with our producing organizations (described
below) by providing feedback on manufacturing and product development
initiatives and relaying innovative product and application ideas.
We have the only global sales and service organization among weighing
instruments manufacturers. At December 31, 1999, our sales and services group
consisted of more than 3,800 employees in sales, marketing and customer service
(including related administration) and after-sales technical service. This field
organization has the capability to provide service and support to our customers
and distributors in virtually all major markets across the globe.
Sales managers and representatives interact across product lines and
markets in order to serve customers that have a wide range of instrument needs,
such as pharmaceutical companies that purchase both laboratory and industrial
products. We classify customers according to their potential for sales and the
appropriate distribution channel is selected to service the customer as
efficiently as possible. Larger accounts tend to have dedicated sales
representatives. Other representatives specialize by product line. Sales
representatives call directly on end-users either alone or, in regions where
sales are made through distributors, jointly with distributors.
We utilize a variety of advertising media, including trade journals,
catalogs, exhibitions and trade shows. In addition, we also sponsor seminars,
product demonstrations and customer training programs. Our high market share
helps us to gauge growth opportunities, target our message to appropriate
customer groups and monitor competitive developments. We utilize sophisticated
marketing techniques in our sales efforts. These techniques include the
development and utilization of marketing databases. We develop these databases
to better understand the full potential of our market by customer, location,
industry, instruments and related application. We then utilize this data to more
efficiently direct our field resources and complement our direct and distributor
sales forces with targeted mailing and telemarketing campaigns to more fully
exploit our market's potential.
We also utilize a dual brand strategy for certain market segments to
improve our overall market penetration. For example, we sell laboratory balances
under the Ohaus brand name as an alternative to the Mettler-Toledo brand name in
certain distribution channels.
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After-Sales Service
We believe service capabilities are a critical success factor in our
business. Through our own dedicated service technicians, we provide contract and
repair services in all countries in which our products are sold. We estimate
that we have the largest installed base of weighing instruments in the world,
and our contract and repair services generate significant revenues. In 1999,
service (representing service contracts, repairs and replacement parts)
accounted for approximately 17% of our total net sales (service revenue is
included in the laboratory and industrial and food retailing sales percentages
given above). Approximately half of this amount is derived from spare parts with
the remaining portion derived from service contacts. Beyond revenue
opportunities, service is a key part of our product offering and helps
significantly in generating repeat sales. The close relationships and frequent
contact with our large customer base provides us with sales opportunities and
innovative product and application ideas. A global service network also is an
important factor in our ability to expand in emerging markets. Moreover, the
widespread adoption of quality laboratory and manufacturing standards and the
privatization of weights and measures certification represent favorable trends
for our service business, as they tend to increase demand for on-site
calibration services.
Our 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. If the service contract also includes
products of other manufacturers, we will generally perform calibration, testing
and basic repairs directly, and contract out more significant repair work. As
application software becomes more complex, our service efforts increasingly
include installation and customer training programs as well as product service.
Research and Development; Manufacturing
Producing Organizations
Our product development, research and manufacturing efforts are
organized into a number of producing organizations ("POs"). At December 31,
1999, POs included approximately 4,100 employees worldwide. POs are product
development teams comprised of personnel from our marketing, development,
research, manufacturing, engineering and purchasing departments. POs often seek
customer input to ensure that the products developed are tailored to market
needs. We have organized our POs to reduce product development time, improve
customer focus, reduce costs and maintain technological leadership. The POs work
together to share ideas and best practices, and some employees are in both MOs
and POs. We recently implemented a number of projects that we believe will
further increase productivity and lower costs. For example, we restructured the
order and product delivery process in Europe to enable us to deliver many of our
products to our customers directly from the manufacturing facility within
several days, which minimizes the need to store products in decentralized
warehouses. In addition, we have centralized our European spare parts inventory
management system allowing all spare parts for Europe to be delivered from a
single, highly automated location.
Research and Product Development
We attribute a significant portion of our recent margin improvement to
our research and development efforts. We intend to continue to invest in product
innovation in order to provide technologically advanced products to our
customers for existing and new applications. Over the
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last three years, we have invested more than $150 million in research and
development. In 1999, we spent approximately 5.8% of net sales on research and
development (including costs associated with customer-specific engineering
projects, which are included in cost of sales for financial reporting purposes).
Our research and development efforts fall into two categories:
o technology advancements, which increase the value of our products.
These may be in the form of enhanced functionality, new
applications for our technologies, more accurate or reliable
measurement, additional software capability or automation through
robotics or other means
o cost reductions, which reduce the manufacturing cost of our
products through better overall design
We have devoted an increasing proportion of our research and
development budget to software development. 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 our broad product lines.
We closely integrate research and development with marketing,
manufacturing and product engineering. We have over 700 professionals in
research and development and product engineering. As part of our research and
development activities, we have frequent contact with university experts,
industry professionals and the governmental agencies responsible for weights and
measures, analytical instruments and metal detectors. In addition, our in-house
development is complemented by technology and product development alliances with
customers and original equipment manufacturers.
Manufacturing
We manufacture some of our own components, usually components that
contain proprietary technology. However, when outside manufacturing is more
efficient, we contract with others for certain components and in turn use these
components in our own manufacturing processes. We use a wide range of suppliers
and we believe our supply arrangements to be adequate. From time to time we rely
on a single supplier for all of our requirements of a particular component. Even
then, adequate alternative sources are generally available if necessary. Supply
arrangements for electronics are generally made globally. For mechanical
components, we generally use local sources to optimize materials flow.
We strive to emphasize product quality in our manufacturing operations,
and most of our products require very strict tolerances and exact
specifications. We use an extensive quality control system that is integrated
into each step of the manufacturing process. This integration permits field
service technicians to trace important information about the manufacture of a
particular unit, which facilitates repair efforts and permits fine-tuning of the
manufacturing process. Many of our measuring instruments are subjected to an
extensive calibration process that allows the software in the unit to
automatically adjust for the impact of temperature and humidity.
We are a worldwide manufacturer, with nine manufacturing plants in the
United States, four in Switzerland, two in Germany, two in the United Kingdom,
one in France and two in China. Laboratory products are produced mainly in
Switzerland and to a lesser extent in the United States and China, while
industrial and food retailing products are produced in all six countries. We
produce our metal detectors in the United Kingdom. We have manufacturing
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expertise in sensor technology, precision machining and electronics, as well as
strength in software development. Furthermore, most of our manufacturing
facilities have achieved ISO 9001 certification. We believe that our
manufacturing capacity is sufficient to meet our present and currently
anticipated needs.
Backlog
Manufacturing turnaround time is generally sufficiently short so as to
permit us to manufacture to fill orders for most of our products, which helps to
limit inventory costs. Backlog is therefore generally a function of requested
customer delivery dates and is typically no longer than one to two months.
Employees
As of December 31, 1999, we had approximately 7,900 employees
throughout the world, including more than 4,200 in Europe, more than 2,700 in
North and South America, and approximately 1,000 in Asia and other countries. We
believe our employee relations are good, and we have not suffered any material
employee work stoppage or strike during the last five years. Labor unions do not
represent a meaningful number of our employees.
In certain of our facilities, we have a flexible workforce environment,
in which hours vary depending on the workload. This flexible working environment
enhances employees' involvement, thus increasing productivity. It also improves
efficient payroll management by permitting us to adjust staffing to match
workload to a greater degree without changing the size of the overall workforce.
Intellectual Property
We hold more than 1,100 patents and trademarks, primarily in the United
States, Switzerland, Germany, the United Kingdom, France, Japan and China. Our
products generally incorporate a wide variety of technological innovations, 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 our business. We also have
numerous trademarks, including the Mettler-Toledo name and logo which are
material to our business. We regularly protect against infringement of our
intellectual property.
Regulation
Our products are subject to various regulatory standards and approvals
by weights and measures regulatory authorities. Although there are a large
number of regulatory agencies across our markets, there is an increasing trend
toward harmonization of standards, and weights and measures regulation is
harmonized across the European Union. Our food processing and food retailing
products are subject to regulation and approvals by relevant governmental
agencies, such as the United States Food and Drug Administration. Products used
in hazardous environments may also be subject to special requirements. All of
our electrical components are subject to electrical safety standards. We believe
that we are in compliance in all material respects with applicable regulations.
21
<PAGE>
Environmental Matters
We are subject to a variety of environmental laws and regulations in
the jurisdictions in which we operate, including provisions relating to air
emissions, wastewater discharges, the handling and disposal of solid and
hazardous wastes and the remediation of contamination associated with the use
and disposal of hazardous substances. We wholly or partly own, lease or hold a
direct or indirect equity interest in a number of properties and manufacturing
facilities around the world, including North and South America, Europe,
Australia and China. Like many of our competitors, we have incurred, and will
continue to incur, capital and operating expenditures and other costs in
complying with such laws and regulations in both the United States and abroad.
We are currently involved in, or have potential liability with respect
to, the remediation of past contamination in certain of our facilities in both
the United States and abroad. In addition, certain of our present and former
facilities have or had been in operation for many decades and, over such time,
some of these facilities may have used substances or generated and disposed of
wastes which are or may be considered hazardous. It is possible that such sites,
as well as disposal sites owned by third parties to which we have sent wastes,
may in the future be identified and become the subject of remediation.
Accordingly, although we believe that we are in substantial compliance with
applicable environmental requirements and to date we have not incurred material
expenditures in connection with environmental matters, it is possible that we
could become subject to additional environmental liabilities in the future that
could result in a material adverse effect on our financial condition or results
of operations.
Our operating facility in Landing, New Jersey is the subject of an
investigation and clean-up of hazardous substance contamination pursuant to the
New Jersey Industrial Site Recovering Act. 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 pursuant to the New Jersey Environmental
Cleanup Responsibility Act ("ECRA"). ECRA is now the Industrial Site Recovery
Act. Pursuant to a 1988 New Jersey Department of Environmental Protection
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. ("Hi-Speed"), our
wholly owned subsidiary that currently owns the facility, to recover certain
costs incurred by GEI in connection with the site. Pursuant to a 2000 settlement
agreement, GEI agreed to dismiss the litigation and covenanted not to sue us for
investigation, remediation and monitoring costs and natural resource damages
associated with contamination at the facility in exchange for our agreement to
assign to GEI certain potential insurance recovery rights relating to the
facility. Based on currently available information and our settlement agreement
with GEI, we believe that costs associated with the future investigation and
remediation of this site will not have a material adverse effect on our
financial condition or results of operations.
We, or in some cases the former owner of Toledo Scale, have been named
a potentially responsible party under CERCLA or analogous state statutes at the
following third-party owned sites with respect to the alleged disposal at the
sites by Toledo Scale during the period before we
22
<PAGE>
owned it: Granville Solvents Site, Granville, Ohio; Aqua-Tech Environmental,
Inc. Site, Greer, South Carolina; and Seaboard Chemical Company Site, Jamestown,
North Carolina. Pursuant to the terms of the stock purchase agreement between us
and the former owner of Toledo Scale, the former owner is obligated to indemnify
us for various environmental liabilities. To date, with respect to each of the
foregoing sites, the former owner has undertaken the defense and indemnification
of Toledo Scale. Based on currently available information and given our
contractual rights of indemnification, we believe that the costs associated with
the investigation and remediation of these sites will not have a material
adverse effect on our financial condition or results of operations.
Competition
Our markets are highly competitive. Furthermore, weighing instruments
markets are fragmented both geographically and by application, particularly the
industrial and food retailing weighing instruments market. As a result, we face
numerous regional or specialized competitors, many of which are well established
in their markets. In addition, some of our competitors are divisions of larger
companies with potentially greater financial and other resources than our own.
Taken together, the competitive forces present in our markets can impair our
operating margins in certain product lines and geographic markets.
We expect our competitors to continue to improve the design and
performance of their products and to introduce new products with competitive
prices. Although we believe that we have certain technological and other
advantages over our competitors, we may not be able to realize and maintain
these advantages. In any event, to remain competitive, we must continue to
invest in research and development, sales and marketing and customer service and
support. We cannot be sure that we will have sufficient resources to continue to
make these investments or that we will be successful in identifying, developing
and maintaining any competitive advantages.
We believe that the principal competitive factors in our U.S. markets
for purchasing decisions are accuracy and durability, while in Europe accuracy
and service are the most important factors. In emerging markets, where there is
greater demand for less sophisticated products, price is a more important factor
than in developed markets. Competition in the United States laboratory market is
also influenced by the presence of large distributors that sell not only our
products but those of our competitors as well.
23
<PAGE>
ITEM 2. PROPERTIES
The following table lists our principal operating facilities,
indicating the location, primary use and whether the facility is owned or
leased.
<TABLE>
<CAPTION>
Location Principal Use (1) Owned/Leased
- -------- ----------------- ------------
<S> <C> <C>
Europe:
Greifensee/Nanikon, Switzerland........ Production, Corporate Headquarters Owned
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
Bethune, France........................ Production Leased
Viroflay, France....................... Sales and Service Owned
Beersel, Belgium....................... Sales and Service Owned
Sint-Michielsgestel, Netherlands....... Sales and Service Leased
Tiel, Netherlands...................... Sales and Service Owned
Leicester, England..................... Sales and Service Leased
Manchester, England.................... Production, Sales and Service Leased
Royston, England....................... Production, Sales and Service Leased
Americas:
Columbus, Ohio......................... Sales and Service, North American Leased
Headquarters
Worthington, Ohio...................... Production Owned
Spartanburg, South Carolina............ Production Owned
Franksville, Wisconsin................. Production Owned
Ithaca, New York....................... Production Owned
Woburn, Massachusetts.................. Production Leased
Florham Park, New Jersey............... Production, Sales and Service Leased
Millersville, Maryland................. Production, Sales and Service Leased
Tampa, Florida......................... Production, Sales and Service Leased
Vernon Hills, Illinois................. Production, Sales and Service Leased
Mexico City, Mexico.................... Sales and Service Leased
San Paolo, Brazil...................... Production and Sales Leased
Other:
Shanghai, China........................ Production Building Owned;
Land Leased
Changzhou, China....................... Production Building Owned;
Land Leased
Melbourne, Australia................... Sales and Service Leased
Mumbai, India.......................... Production, Sales and Service Leased
</TABLE>
(1) We also conduct research and development activities at certain of the
listed facilities in Switzerland, Germany, France, the United Kingdom,
the United States and China.
We believe our facilities are adequate for our current and reasonably
anticipated future needs.
24
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Routine litigation is incidental to our business. Nevertheless, we are
not currently involved in any legal proceeding which we believe could have a
material adverse effect upon our financial condition or results of operations.
See "Environmental Matters" under Part I, Item 1 for information concerning
legal proceedings relating to certain environmental claims.
Our products generally are sold with a limited warranty for defects. We
have reviewed our products currently in use by customers or being sold and do
not believe that we will have material increase in warranty or product liability
claims arising out of Year 2000 non-compliance. However, any material increase
in these claims could harm our results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
25
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION FOR COMMON STOCK
Our common stock is traded on the New York Stock Exchange under the
symbol "MTD". The following table sets forth on a per share basis the high and
low sales prices for consolidated trading in our common stock as reported on the
New York Stock Exchange Composite Tape for the quarters indicated.
Common Stock
Price Range
------------
High Low
---- ---
1999
First Quarter $27 15/16 $19 5/8
Second Quarter $29 $22 5/8
Third Quarter $30 7/16 $23 13/16
Fourth Quarter $39 1/2 $27 5/8
1998
First Quarter $22 3/8 $16 9/16
Second Quarter $22 1/4 $18
Third Quarter $22 11/16 $16 1/4
Fourth Quarter $28 15/16 $16 3/4
HOLDERS
At March 7, 2000 there were 391 holders of record of common stock and
38,712,272 shares of common stock outstanding. The number of holders of record
excludes beneficial owners of common stock held in street name.
DIVIDEND POLICY
We have never paid any dividends on our common stock and we do not
anticipate paying any cash dividends on the common stock in the foreseeable
future. The current policy of our Board of Directors is to retain earnings to
finance the operations and expansion of our business. Moreover, our credit
agreement restricts our ability to pay dividends. Any future determination to
pay dividends will depend on our results of operations, financial condition,
capital requirements, contractual restrictions and other factors deemed relevant
by our Board of Directors.
26
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected historical financial information set forth below at
December 31, 1999, 1998, 1997, 1996 and 1995, for the years ended December 31,
1999, 1998 and 1997, for the period from October 15, 1996 to December 31, 1996,
for the period from January 1, 1996 to October 14, 1996 and for the year ended
December 31, 1995 is derived from our consolidated financial statements. The
financial information for all periods prior to October 15, 1996, the date of our
acquisition from Ciba-Geigy (the "Acquisition"), is combined financial
information of the Mettler-Toledo group of companies (the "Predecessor
Business"). 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
our consolidated financial statements and accompanying notes. The financial
information presented below, in thousands except per share data, was prepared in
accordance with generally accepted accounting principles in the United States of
America ("U.S. GAAP").
<TABLE>
<CAPTION>
Mettler-Toledo International Inc. Predecessor Business
--------------------------------------------------------- --------------------------
October 15 January 1
Year ended Year ended Year ended to to Year ended
December 31, December 31, December 31, December 31, October 14, December 31,
1999 1998 1997 1996 1996 1995
------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales................................ $1,065,473 $935,658 $878,415 $186,912 $662,221 $850,415
Cost of sales............................ 585,007(a) 520,190 493,480(c) 136,820(f) 395,239 508,089
---------- -------- -------- --------- ------- -------
Gross profit............................. 480,466 415,468 384,935 50,092 266,982 342,326
Research and development................. 57,393 48,977 47,551 9,805 40,244 54,542
Selling, general and administrative...... 300,389 265,511 260,397 59,353 186,898 248,327
Amortization............................. 10,359 7,634 6,222 1,065 2,151 2,765
Purchased research and development....... - 9,976(b) 29,959(d) 114,070(g) - -
Interest expense......................... 21,980 22,638 35,924 8,738 13,868 18,219
Other charges (income), net (h).......... 10,468 1,197 10,834 17,137 (1,332) (9,331)
------- ------- ------- ------- -------- --------
Earnings (loss) before taxes, minority
interest and extraordinary items....... 79,877 59,535 (5,952) (160,076) 25,153 27,804
Provision for taxes...................... 31,398 20,999 17,489 (938) 10,055 8,782
Minority interest........................ 378 911 468 (92) 637 768
------- ------- ------- -------- ------- -------
Earnings (loss) before extraordinary
items.................................. 48,101 37,625 (23,909) (159,046) 14,461 18,254
Extraordinary items -
debt extinguishments..................... - - (41,197)(e) - - -
------- ------- --------- ---------- ------- -------
Net earnings (loss)...................... $48,101 $37,625 $(65,106) $(159,046) $14,461 $18,254
======= ======= ========= ========== ======= =======
Basic earnings (loss) per common share:
Net earnings (loss) before
extraordinary items................. $ 1.25 $ 0.98 $ (0.76) $ (5.18)
Extraordinary items.................... - - (1.30) -
------- ------- --------- --------
Net earnings (loss).................... $ 1.25 $ 0.98 $ (2.06) $ (5.18)
======= ======= ========= ========
Weighted average number of common shares 38,518,084 38,357,079 31,617,071 30,686,065
Diluted earnings (loss) per common share:
Net earnings (loss) before
extraordinary items................. $ 1.16 $ 0.92 $ (0.76) $ (5.18)
Extraordinary items.................... - - (1.30) -
-------- ------- --------- --------
Net earnings (loss).................... $ 1.16 $ 0.92 $ (2.06) $ (5.18)
======= ======= ========= ========
Weighted average number of common shares 41,295,757 40,682,211 31,617,071 30,686,065
Balance Sheet Data (at end of period):
Cash and cash equivalents................ $ 17,179 $ 21,191 $ 23,566 $ 60,696 $ 41,402
Working capital.......................... 81,470 90,042 79,163 103,697 136,911
Total assets............................. 820,973 820,441 749,313 771,888 724,094
Long-term third party debt............... 249,721 340,246 340,334 373,758 3,621
Net borrowing from Ciba and
affiliates (i)......................... - - - - 203,157
Other non-current liabilities (j)........ 100,334 103,201 91,011 96,810 84,303
Shareholders' equity (k)................. 112,015 53,835 25,399 12,426 193,254
(Footnotes on next page)
</TABLE>
27
<PAGE>
(Footnotes from previous page)
- -----------------------------
(a) In connection with acquisitions in 1999, including the acquisition of
the Testut-Lutrana group, we allocated $998 of the purchase price to
revalue certain inventories (principally work-in-progress and finished
goods) to fair value (net realizable value). Substantially all such
inventories were sold during the second quarter of 1999.
(b) In connection with the Bohdan acquisition, we allocated, based upon
independent valuations, $9,976 of the purchase price to purchased research
and development in process. This amount was recorded as an expense
immediately following the Bohdan acquisition.
(c) In connection with the Safeline acquisition, we allocated $2,054 of the
purchase price to revalue certain inventories (principally work-in-progress
and finished goods) to fair value (net realizable value). Substantially all
such inventories were sold during the second quarter of 1997.
(d) In connection with the Safeline acquisition, we allocated, 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) Represents charges for the write-off of capitalized debt issuance fees and
related expenses associated with our previous credit facilities. The amount
for the year ended December 31, 1997 also includes the prepayment premium
on the senior subordinated notes which were repurchased and the write-off
of the related capitalized debt issuance fees.
(f) In connection with the Acquisition, we 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.
(g) In connection with the Acquisition, we 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.
(h) Other charges (income), net generally includes interest income, foreign
currency transactions, (gains) losses from sales of assets and other items.
For the years ended December 31, 1999 and 1998, the amount shown includes
$825 and $650, respectively, of expenses incurred on behalf of certain
selling shareholders in connection with the secondary offerings. The 1999
amount also includes a gain on an asset sale of approximately $3,100, a
charge of $8,007 to transfer production lines from the Americas to China
and Europe and the closure of facilities and losses of approximately $4,100
in connection with the exit from our glass batching business based in
Belgium. For the year ended December 31, 1997, the amount shown includes a
restructuring charge of $6,300 to consolidate three facilities in North
America.
(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 audited
consolidated financial statements included herein.
(k) Shareholders' equity for the Predecessor Business consists of the combined
net assets of the Mettler-Toledo group of companies.
28
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with our audited
consolidated financial statements.
Overview
We operate a global business, with net sales that are diversified by
geographic region, product range and customer. We hold leading positions in many
of our markets and attribute this leadership to several factors, including the
strength of our brand name, the quality of our global sales and service network,
our continued investment in product development, our pursuit of technology
leadership and our focus on capitalizing on opportunities in developed and
emerging markets.
Our financial information is presented in accordance with generally
accepted accounting principles in the United States of America ("U.S. GAAP").
Financial results following our initial public offering in November 1997 and the
Safeline acquisition in May 1997 are not comparable in many respects to the
financial results prior to those events.
In 1999, we attained two important financial milestones. Our net sales
exceeded $1 billion and our total debt was reduced below $300 million, despite
spending approximately $175 million on acquisitions in the last three years.
Net sales in local currency increased 16% in 1999, 8% in 1998 and 11%
in 1997. The strengthening of the U.S. dollar versus our major trading
currencies reduced U.S. dollar - reported sales growth in each year. Net sales
in U.S. dollars increased 14% in 1999, 7% in 1998 and 3% in 1997.
In 1999, we had solid local currency sales growth of 19% in Europe, 15%
in the Americas and 11% in Asia and other markets. We believe our sales growth
over the next several years will come primarily from (i) the needs of our lab
and industrial customers in developed markets to continue to automate their
research and development and manufacturing processes, (ii) the needs of our
retail customers in Europe to upgrade their scales for the implementation of the
euro, (iii) the needs of our retail customers to implement sophisticated
perishable goods management systems using weighing and PC technology in a
networked environment, (iv) the needs of customers in emerging markets to
continue modernizing research and development and manufacturing processes
through the use of increasingly sophisticated instruments and (v) acquisition
opportunities.
We increased our gross profit margin before non-recurring acquisition
costs from 44.1% in 1997 to 45.2% in 1999 and increased our Adjusted Operating
Income (gross profit less research and development and selling, general and
administrative expenses before amortization and non-recurring costs) as a
percentage of net sales from 9.3% in 1997 to 11.6% in 1999.
This improved performance was achieved while we continued to invest in
product development and in our distribution and manufacturing infrastructure. We
believe that a significant portion of the increases in our Adjusted Operating
Income resulted from our strategy to reduce costs, re-engineer our operations
and focus on the highest value-added segments of the markets in which we
compete.
29
<PAGE>
Recent Acquisitions
In May 1999, we completed the acquisition of the Testut-Lutrana group,
a leading manufacturer and marketer of industrial and retail weighing
instruments in France, with annual sales of approximately $50 million. We
believe this acquisition is an excellent strategic fit given Testut-Lutrana's
extensive sales and service network in France and excellent brand recognition.
By virtue of this acquisition, we have assumed the leading position in food
retail weighing in Europe and are well positioned to meet the rapidly changing
demands of our European customer base.
In April 1999, we announced that we had signed an agreement to convert
our 60% joint venture in Changzhou, China, into a legal structure that provides
us with full control. Through this change in ownership, we will be able to fully
leverage this low-cost manufacturing base for international markets. This move
further demonstrates our strategic commitment to Asia and our belief in the
fundamental growth factors for the region.
In 1998, we decided to pursue opportunities in the automated drug and
chemical compound discovery and development market, and build on our leadership
position as a provider of automated lab reactors and reaction calorimeters.
In December 1998, we announced that we had acquired two technologically
advanced instrument companies, Applied Systems and Myriad Synthesizer
Technology. Applied Systems designs, assembles and markets instruments for
in-process molecular analysis, which is primarily used for researching,
developing and monitoring chemical processes. Applied Systems' proprietary
sensors, together with its innovative Fourier transform infrared technology,
enable chemists to analyze chemical reactions as they occur, which is more
efficient than pulling samples. Myriad Synthesizer Technology designs, assembles
and markets instruments that facilitate and automate the synthesis of large
numbers of chemical compounds in parallel, which is a key step in the chemical
compound discovery process. Its products can be used in all stages of synthesis
in drug discovery.
In July 1998, we also extended our product offerings to the automated
drug and chemical compound discovery market with our acquisition of Bohdan
Automation Inc. Bohdan is a leading supplier of laboratory automation and
automated synthesis products used in research for life science applications for
pharmaceutical and agricultural products and in other applications in the food
and chemicals industries.
These acquisitions enable us to offer a strong and comprehensive array
of solutions, from sample preparation to compound synthesis to process
development. We believe that our customers want solutions in this market from a
company like Mettler-Toledo, with a reputation for innovation and quality and
with a global presence and service network.
Secondary Offerings and IPO
In 1999 and 1998, certain selling shareholders completed secondary
offerings totalling 6,099,250 and 11,464,400 shares, respectively, of our common
stock, including the underwriters' over-allotment options. No directors,
executive officers or other employees sold shares, and we did not sell shares or
receive proceeds in the offerings. We incurred charges of $0.8 million and $0.7
million in connection with the offerings during 1999 and 1998, respectively.
30
<PAGE>
During the fourth quarter of 1997, we completed our initial public
offering of 7,666,667 shares of common stock at a per share price of $14.00. The
offering raised net proceeds, after underwriters' commission and expenses, of
approximately $97.3 million. Concurrently with the offering, we refinanced our
existing credit facility by entering into a new credit facility, borrowings from
which, along with the proceeds from the offering, were used to repay
substantially all of our then-existing debt, including all of our 9 3/4% senior
subordinated notes due 2006. In connection with this refinancing, we 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. We also paid a one-time termination fee of $2.5 million in
connection with the termination of our management services agreement with AEA
Investors Inc.
Cost Reduction Programs
As part of our efforts to reduce costs, we evaluate from time to time
the cost effectiveness of our global manufacturing strategy. Over the next few
years, we intend to continue to develop China as a low-cost manufacturing
resource and to seek other manufacturing cost-saving opportunities. In this
respect, we recorded a charge of $8.0 million in 1999 associated with the
transfer of production lines from the Americas to China and Europe and the
closure of facilities. We believe that the future cash benefits of these
programs will exceed the costs, although the cash outflows will precede the cash
flow benefits. The charge relates primarily to severance and other related
benefits and costs of exiting facilities, including lease termination costs and
the write-down of impaired assets.
An initiative that we launched in 1999 is a worldwide procurement
project. The project is intended to eliminate price differences between units,
leverage potential opportunities to increase buying power, and work to establish
worldwide sourcing arrangements. We envision it will take at least two years to
obtain benefits from this project. It is too early to determine the potential
cost savings.
During 1999, we also exited our glass batching business based in
Belgium. In this respect, we incurred losses of $4.1 million during 1999
primarily for severance and other costs of exiting this business. We completed
our exit of the glass batching business by the end of 1999.
31
<PAGE>
Results of Operations
The following table sets forth certain items from our consolidated
statements of operations for the years ended December 31, 1999, 1998 and 1997.
The consolidated statement of operations data, in thousands, for the year ended
December 31, 1997 includes Safeline results from May 31, 1997.
<TABLE>
<CAPTION>
1999 (a) 1998(b) 1997(c)(d)
-------- ------- ----------
<S> <C> <C> <C>
Net sales.............................. $1,065,473 $935,658 $878,415
Cost of sales.......................... 585,007 520,190 493,480
------- ------- -------
Gross profit........................... 480,466 415,468 384,935
Research and development............... 57,393 48,977 47,551
Selling, general and administrative.... 300,389 265,511 260,397
Amortization........................... 10,359 7,634 6,222
Purchased research and development..... - 9,976 29,959
Interest expense....................... 21,980 22,638 35,924
Other charges, net(e).................. 10,468 1,197 10,834
------- ------- -------
Earnings (loss) before taxes,
minority interest and extraordinary items $ 79,877 $ 59,535 $ (5,952)
======== ======== ========
Adjusted Operating Income(f)........... $ 123,682 $ 100,980 $ 81,541
========= ========= ========
</TABLE>
(a) In connection with acquisitions in 1999, including the acquisition of the
Testut-Lutrana group, we allocated $998 of the purchase price to revalue
certain inventories (principally work-in-progress and finished goods) to
fair value (net realizable value). Substantially all such inventories were
sold during the second quarter of 1999.
(b) In connection with the Bohdan acquisition, we allocated, based upon
independent valuations, $9,976 of the purchase price to purchased research
and development in process. This amount was recorded as an expense
immediately following the Bohdan acquisition.
(c) In connection with the Safeline acquisition, we allocated $2,054 of the
purchase price to revalue certain inventories (principally
work-in-progress and finished goods) to fair value (net realizable value).
Substantially all such inventories revalued in connection with the
Safeline acquisition were sold in the second quarter of 1997.
(d) In connection with the Safeline acquisition, we 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, net generally includes interest income, foreign currency
transactions, (gains) losses from sales of assets and other items. For the
years ended December 31, 1999 and 1998, the amount shown includes $825 and
$650, respectively, of expenses incurred on behalf of certain selling
shareholders in connection with the secondary offerings. The 1999 amount
also includes a gain on an asset sale of approximately $3,100, a charge of
$8,007 to transfer production lines from the Americas to China and Europe
and the closure of facilities and losses of approximately $4,100 in
connection with the exit from our glass batching business based in Belgium.
For the year ended December 31, 1997, the amount shown includes a charge of
$6,300 to consolidate three facilities in North America.
(f) 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 Notes (a) and (c) above.
Non-recurring costs for the year ended December 31, 1997 also include a
charge of $2,500 in connection with the termination of our management
services agreement with AEA Investors Inc. We believe that Adjusted
Operating Income provides important financial information in measuring and
comparing our operating performance. Adjusted Operating Income is not
intended to represent operating income under U.S. GAAP and should not be
considered as an alternative to net earnings (loss) as an indicator of our
operating performance.
32
<PAGE>
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Net sales were $1,065.5 million for the year ended December 31, 1999,
compared to $935.7 million in the prior year. This reflected an increase of 16%
in local currencies during 1999. Results for 1999 were negatively impacted by
the strengthening of the U.S. dollar against other currencies. Net sales in U.S.
dollars during 1999 increased 14%.
Net sales by geographic customer location were as follows: Net sales in
Europe increased 19% in local currencies during 1999, versus the prior year. The
increase largely reflected the effect of Testut-Lutrana, as well as organic
growth in our business. Net sales in local currencies during 1999 in the
Americas increased 15% principally due to organic growth in our business, as
well as the effect of businesses acquired. Net sales in Asia and other markets
increased 11% in local currencies during 1999. The results of our business in
Asia and other markets during 1999 primarily represented improved economic
conditions throughout the region, which began in the fourth quarter of 1998.
The operating results for Testut-Lutrana (which were included in our
results from May 1, 1999) would have had the effect of increasing our net sales
by an additional $38.8 million in 1998, if included from May 1, 1998.
Gross profit as a percentage of net sales increased to 45.2% for 1999,
compared to 44.4% for 1998, before non-recurring acquisition costs.
Research and development expenses as a percentage of net sales
increased to 5.4% for 1999, compared to 5.2% for the prior year. The increase
primarily reflected increased research and development activity related to
product introductions, as well as the effect of acquired businesses.
Selling, general and administrative expenses as a percentage of net
sales decreased to 28.2% for 1999, compared to 28.4% for the prior year.
Adjusted Operating Income increased 22.5% to $123.7 million, or 11.6%
of sales, for 1999, compared to $101.0 million, or 10.8% of sales, for the prior
year. The 1999 period excludes the previously noted non-recurring acquisition
charge of $1.0 million for the revaluation of inventories to fair value. The
increased operating margin reflected the benefits of higher sales levels and our
continuous efforts to improve productivity.
Interest expense decreased to $22.0 million for 1999, compared to $22.6
million for the prior year. The decrease was principally due to reduced debt
levels.
Other charges, net were $10.5 million for 1999, compared to other
charges, net of $1.2 million for the prior year. The 1999 and 1998 amounts
included charges of $0.8 million and $0.7 million relating to the secondary
offerings completed in 1999 and 1998, respectively. The 1999 amount also
included a gain on an asset sale of $3.1 million, charges of $8.0 million
regarding the transfer of production lines from the Americas to China and Europe
and the closure of facilities and losses of $4.1 million to exit our glass
batching business based in Belgium. The 1998 amount also included gains on asset
sales offset by other charges.
Our tax rate in 1999 before non-recurring items was consistent with the
prior year, excluding a benefit of approximately 5 percentage points or $3.6
million based upon a one-time change in Swiss tax law which benefited only the
1998 period. The 1998 period also included
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non-deductible purchased research and development charges incurred in connection
with the Bohdan acquisition.
Net earnings before expenses for the secondary offerings, acquisition
charges and the $8.0 million charge to transfer production lines from the
Americas to China and Europe and the closure of facilities were $57.9 million in
1999, compared to $48.3 million in 1998. This represents an increase of almost
30%, excluding the one-time tax benefit of $3.6 million received in 1998.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net sales were $935.7 million for the year ended December 31, 1998,
compared to $878.4 million in the prior year. This reflected an increase of 8%
in local currency (6% including Safeline for full year 1997) during 1998.
Results for 1998 were negatively impacted by the strengthening of the U.S.
dollar against other currencies. Net sales in U.S. dollars during 1998 increased
7%.
Net sales in Europe increased 10% in local currencies during 1998,
versus the prior year. We experienced favorable sales trends during 1998 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 1998 in the
Americas also increased 10% due to improved market conditions across most
product lines, offset in part by weakness in Latin America. Net sales in local
currencies in 1998 in Asia and other markets decreased 4%. The sales decline in
Asia during 1998 results in part from a decline in net sales in Southeast Asia
and Korea. In addition, during the second half of 1998 we also experienced a
decline in net sales in Japan. Our sales and operating results in Asia and other
emerging markets deteriorated due to poor economic conditions. These results in
U.S. dollar terms were also affected by severe currency devaluations. We believe
that our sales growth on a U.S. dollar basis was reduced by 1 to 2 percentage
points during 1998 as a result of these poor economic conditions and
devaluations.
The operating results for Safeline (which were included in our results
from May 31, 1997) would have had the effect of increasing our net sales by an
additional $19.0 million in 1997, if included from January 1, 1997.
Additionally, Safeline's operating results during the same period would have
increased our Adjusted Operating Income (gross profit less research and
development and selling, general and administrative expenses before amortization
and non-recurring costs) by $4.4 million.
Gross profit as a percentage of net sales increased to 44.4% for 1998,
compared to 44.1% for 1997, before non-recurring acquisition costs. The 1997
period excludes a $2.1 million non-cash charge associated with the excess of
fair value over historical cost for inventories acquired in the Safeline
acquisition.
Research and development expenses as a percentage of net sales
decreased to 5.2% for 1998, compared to 5.4% for the prior year. However, the
local currency spending level remained relatively constant for the year.
In July 1998, we acquired Bohdan Automation Inc., a leading supplier of
laboratory automation and automated synthesis products. We incurred a charge of
$10.0 million immediately following the acquisition based upon an independent
valuation for purchased research and development costs for products being
developed that had not established
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technological feasibility as of the date of the acquisition and, if unsuccessful
had no alternative future use.
Selling, general and administrative expenses as a percentage of net
sales decreased to 28.4% for 1998, compared to 29.6% for the prior year. This
decrease primarily reflected the benefits of ongoing cost-efficiency programs.
Adjusted Operating Income was $101.0 million, or 10.8% of sales, for
1998, compared to $81.5 million, or 9.3% of sales, for the prior year, an
increase of 23.8%. The 1997 period excludes the previously noted charge of $2.1
million for the revaluation of inventories to fair value in connection with the
Safeline acquisition and $2.5 million in connection with the termination of our
management services agreement with AEA Investors Inc. at the time of our initial
public offering.
Interest expense decreased to $22.6 million for 1998, compared to $35.9
million for the prior year. The decrease was principally due to benefits
received from our initial public offering, the refinancing completed at that
time and cash flow provided by operations.
Other charges, net were $1.2 million for 1998, compared to other
charges, net of $10.8 million for the prior year. The 1998 amount includes a
one-time charge of $0.7 million relating to the secondary offering completed in
July 1998. The 1998 amount also includes gains on asset sales offset by other
charges. The 1997 period includes restructuring related charges of $6.3 million
and other charges of $3.5 million ($2.9 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 tax rate for 1998 included a benefit of approximately 5 percentage
points based upon a one-time change in Swiss tax law which benefited only the
1998 period. The 1998 period also reflects efficiencies in our global tax
structure, offset by the non-deductibility of purchased research and development
charges incurred in connection with the Bohdan acquisition.
The extraordinary loss of $41.2 million in 1997 represents charges for
the early repayment premium on our senior subordinated notes and the write-off
of capitalized debt issuance fees and related expenses associated with our
senior subordinated notes and previous credit facilities.
Net earnings excluding the expenses for purchased research and
development and the secondary offering were $48.3 million in 1998, compared with
net earnings before non-recurring items of $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 paid to AEA Investors Inc., restructuring charges,
losses relating to derivative financial instruments and unhedged bank debt
denominated in foreign currencies, and extraordinary items related to debt
extinguishments.
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Liquidity and Capital Resources
At December 31, 1999, our consolidated debt, net of cash, was $279.4
million. We had borrowings of $280.4 million under our credit agreement and
$16.2 million under various other arrangements as of December 31, 1999. Of our
credit agreement borrowings, approximately $153.1 million was borrowed as term
loans scheduled to mature in 2004 and $127.3 million was borrowed under a
multi-currency revolving credit facility. At December 31, 1999, we had $277.0
million of availability remaining under the revolving credit facility.
At December 31, 1999, approximately $96.5 million of the borrowings
under the credit agreement and local working capital facilities were denominated
in U.S. dollars. The balance of the borrowings under the credit agreement and
local working capital facilities were denominated in certain of our other
principal trading currencies amounting to approximately $200.1 million at
December 31, 1999. Changes in exchange rates between the currencies in which we
generate cash flow and the currencies in which our borrowings are denominated
affect our liquidity. In addition, because we borrow in a variety of currencies,
our debt balances fluctuate due to changes in exchange rates.
Under the credit agreement, amounts outstanding under the term loans
are payable in quarterly installments. In addition, the credit agreement
obligates us to make mandatory prepayments in certain circumstances with the
proceeds of asset sales or issuance of capital stock or indebtedness and with
certain excess cash flow. The credit agreement imposes certain restrictions on
us and our subsidiaries, including restrictions and limitations on the ability
to pay dividends to our shareholders, incur indebtedness, make investments,
grant liens, sell financial assets and engage in certain other activities. We
must also comply with several financial covenants. The credit agreement is
secured by most of our assets.
Cash provided by operating activities totaled $91.3 million in 1999,
compared to $72.0 million in 1998 and $55.6 million in 1997. The increase
resulted principally from improved Adjusted Operating Income.
During 1999, we spent approximately $20.5 million on acquisitions,
including approximately $2.0 million of working capital retained by sellers.
These purchases were funded from cash generated from operations and additional
borrowings. We continue to explore potential acquisitions. In connection with
any acquisition, we may incur additional indebtedness. In addition, we expect to
make additional earn-out payments in 2000 relating to certain of our 1998 drug
discovery acquisitions.
Capital expenditures are a significant use of funds and are made
primarily for machinery, equipment and the purchase and expansion of facilities.
Our capital expenditures totaled $29.2 million in 1999, $28.6 million in 1998
and $22.3 million in 1997. We do not expect the level of our capital expenditure
increases in 2000 to be significantly different than historical increases.
We currently believe that cash flow from operating activities, together
with borrowings available under the credit agreement and local working capital
facilities, will be sufficient to fund currently anticipated working capital
needs and capital spending requirements as well as debt service requirements for
at least several years, but there can be no assurance that this will be the
case.
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Effect of Currency on Results of Operations
Because we conduct operations in many countries, our operating income
can be significantly affected by fluctuations in currency exchange rates. Swiss
franc-denominated expenses represent a much greater percentage of our operating
expenses than Swiss franc-denominated sales represent of our net sales. In part,
this is because most of our manufacturing costs in Switzerland relate to
products that are sold outside of Switzerland. Moreover, a substantial
percentage of our research and development expenses and general and
administrative expenses are incurred in Switzerland. Therefore, if the Swiss
franc strengthens against all or most of our major trading currencies (e.g., the
U.S. dollar, the euro, other major European currencies and the Japanese yen),
our operating profit is reduced. We also have significantly more sales in
European currencies (other than the Swiss franc) than we have expenses in those
currencies. Therefore, when European currencies weaken against the U.S. dollar
and the Swiss franc, it also decreases our operating profits. In recent years,
the Swiss franc and other European currencies have generally moved in a
consistent manner versus the U.S. dollar. Therefore, because the two effects
previously described have offset each other, our operating profits have not been
materially affected by movements in the U.S. dollar exchange rate versus
European currencies. However, there can be no assurance that these currencies
will continue to move in a consistent manner in the future. In addition to the
effects of exchange rate movements on operating profits, our debt levels can
fluctuate due to changes in exchange rates, particularly between the U.S. dollar
and the Swiss franc.
Year 2000
We put in place detailed programs to address Year 2000 readiness
internally and with certain suppliers. The Year 2000 issue is the result of
computer logic that was written using two digits rather than four to define the
applicable year. Any computer logic that processes date-sensitive information
may recognize dates using "00" as the year 1900 rather than the year 2000, which
could result in miscalculations or system or equipment failures.
Pursuant to our readiness programs, all major categories of information
technology systems and non-information technology systems (e.g., equipment with
embedded microprocessors) in use by us, including manufacturing, sales,
financial and human resources, were inventoried and assessed. We also reviewed
our products, including products sold in recent years, and believe that our
products are Year 2000 compliant. We believe that all internal mission-critical
information technology and non-information technology systems are Year 2000
compliant.
We have not experienced any significant Year 2000 problems to date.
While we believe that the identification of significant Year 2000 issues is
unlikely at this time, there is an ongoing risk that Year 2000 related problems
could still occur and we will continue to monitor the situation closely.
The costs incurred to date related to our Year 2000 activities have not
been material. We do not expect to realize a significant reduction in related
expenditures now that the work on Year 2000 compliance is complete.
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European Economic and Monetary Union
Within Europe, the European Economic and Monetary Union (the "EMU")
introduced a new currency, the euro, on January 1, 1999. Switzerland is not part
of the EMU.
On January 1, 1999, the participating countries adopted the euro as
their local currency, initially available for currency trading on currency
exchanges and noncash (banking) transactions. The existing local currencies, or
legacy currencies, will remain legal tender through January 1, 2002. Beginning
on January 1, 2002, euro-denominated bills and coins will be issued for cash
transactions. For a period of six months from this date, both legacy currencies
and the euro will be legal tender. On or before July 1, 2002, the participating
countries will withdraw all legacy currency and use exclusively the euro.
We have recognized the introduction of the euro as a significant event
with potential implications for existing operations. Currently, we operate in
all of the participating countries in the EMU. We expect nonparticipating
European Union countries, where we also have operations, may eventually join the
EMU.
We have committed resources to conduct risk assessments and to take
corrective actions, where required, to ensure we are prepared for the
introduction of the euro. We have undertaken a review of the euro implementation
and have concentrated on areas such as operations, finance, treasury, legal,
information management, procurement and others, both in participating and
nonparticipating European Union countries where we operate. Also, existing
legacy accounting and business systems and other business assets have been
reviewed for euro compliance, including assessing any risks from third parties.
Progress regarding euro implementation is reported periodically to management.
Because of the staggered introduction of the euro regarding non-cash
and cash transactions, we have developed our plans to address our accounting and
business systems first and our business assets second. We were euro compliant
within our accounting and business systems by the end of 1999 and expect to be
compliant within our other business assets prior to the introduction of the euro
bills and coins. Compliance in participating and nonparticipating countries will
be achieved primarily through upgraded systems, which were previously planned to
be upgraded. Remaining systems will be modified to achieve compliance. We do not
currently expect to experience any significant operational disruptions or to
incur any significant costs, including any currency risk, which could materially
affect our liquidity or capital resources. We are preparing plans to address
issues within the transitional period when both legacy and euro currencies may
be used.
We are reviewing our pricing strategy throughout Europe due to the
increased price transparency created by the euro and are attempting to adjust
prices in some of our markets. We are also encouraging our suppliers, even in
Switzerland, to commence transacting in the euro. We do not believe that the
effect of these adjustments will be material.
We have a disproportionate amount of our costs in Swiss francs relative
to sales. Historically, the potential currency impact has been muted because
currency fluctuations between the Swiss franc and other major European
currencies have been minimal and there is greater balance between total European
(including Swiss) sales and costs. However, if the introduction of the euro
results in a significant weakening of the euro against the Swiss franc, our
financial performance could be harmed.
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The statements set forth herein concerning the introduction of the euro
which are not historical facts are forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially from
those in the forward-looking statements. In particular, the costs associated
with our euro programs and the time-frame in which we plan to complete euro
modifications are based upon management's best estimates. These estimates were
derived from internal assessments and assumptions of future events. There can be
no guarantee that any estimates or other forward-looking statements will be
achieved, and actual results could differ significantly from those contemplated.
Taxes
We are subject to taxation in many jurisdictions throughout the world.
Our effective tax rate and tax liability will be affected by a number of
factors, such as the amount of taxable income in particular jurisdictions, the
tax rates in such jurisdictions, tax treaties between jurisdictions, the extent
to which we transfer funds between jurisdictions and repatriate income, and
changes in law. Generally, the tax liability for each 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, we may pay income
taxes to certain jurisdictions even though on an overall basis we incur a net
loss for the period.
Environmental Matters
We are subject to various environmental laws and regulations, including
those relating to air emissions, wastewater discharges, the handling and
disposal of solid and hazardous wastes and the remediation of contamination
associated with the use and disposal of hazardous substances.
We incur capital and operating expenditures in complying with
environmental laws and regulations both in the United States and abroad. We are
currently involved in, or have potential liability with respect to, the
remediation of past contamination in facilities both in the United States and
abroad. In addition, some of these facilities have or had been in operation for
many decades and may have used substances or generated and disposed of wastes
that are hazardous or may be considered hazardous in the future. Such sites and
disposal sites owned by others to which we sent waste may in the future be
identified as contaminated and require remediation. Accordingly, it is possible
that we could become subject to additional environmental liabilities in the
future that may harm our results of operations or financial condition. However,
we do not anticipate any material adverse effect on our 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 that we use. The
competitive environment in which we operate limits somewhat our ability to
recover higher costs through increased selling prices. Moreover, there may be
differences in inflation rates between countries in which we incur the major
portion of our costs and other countries in which we sell products, which may
limit our ability to recover increased costs. We remain committed to operations
in China, Latin America and Eastern Europe, which have experienced inflationary
conditions. To date, inflationary conditions have not had a material effect on
our operating results. However, if
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our presence in China, Latin America and Eastern Europe increases, these
inflationary conditions could have a greater impact on our operating results.
Seasonality
Our business has historically experienced a slight amount of seasonal
variation, with sales in the first quarter slightly lower than, and sales in the
fourth quarter slightly higher than, sales in the second and third quarters.
This trend has a somewhat greater effect on income from operations than on net
sales because fixed costs are spread evenly across all quarters.
Quantitative and Qualitative Disclosures About Market Risk
We have only limited involvement with derivative financial instruments
and do not use them for trading purposes.
We have entered into foreign currency forward contracts to hedge
short-term intercompany balances with our foreign businesses. Such contracts
limit our exposure to both favorable and unfavorable currency fluctuations. A
sensitivity analysis to changes in the U.S. dollar and Swiss franc on these
foreign currency-denominated contracts indicates that if the U.S. dollar and
Swiss franc uniformly weakened by 10% against all of our currency exposures, the
fair value of these instruments would decrease by $3.7 million at December 31,
1999 as compared with $2.6 million at December 31, 1998. Any resulting changes
in fair value would be offset by changes in the underlying hedged balance sheet
position. The sensitivity analysis assumes a parallel shift in foreign currency
exchange rates. The assumption that exchange rates change in parallel fashion
may overstate the impact of changing exchange rates on assets and liabilities
denominated in a foreign currency. We also have other currency risks as
described under "Effect of Currency on Results of Operations."
We have entered into certain interest rate swap agreements in order to
limit our exposure to increases in interest rates. These contracts are more
fully described in Note 5 to our audited consolidated financial statements.
Based on our agreements outstanding at December 31, 1999, a 100 basis point
increase in interest rates would result in an increase in the net aggregate
market value of these instruments of $9.4 million, as compared with $8.2 million
at December 31, 1998. Conversely, a 100 basis point decrease in interest rates
would result in a $9.4 million net reduction in the net aggregate market value
of these instruments, as compared with $8.8 million at December 31, 1998. Any
change in fair value would not affect our Consolidated Statement of Operations
unless such agreements and the variable rate debt they hedge were prematurely
settled.
We have designated certain of our Swiss franc debt as a hedge of our
net investments. A sensitivity analysis to changes in the U.S. dollar on such
debt at December 31, 1999 indicates that if the U.S. dollar weakened by 10%
against the Swiss franc, the fair value of such debt would increase by $14.7
million as compared with $26.2 million at December 31, 1998. Any changes in fair
value of the debt are recorded in comprehensive income and offset the impact on
comprehensive income of foreign exchange changes on the net investments which
they hedge.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging
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Activities." This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. This statement is effective for all fiscal quarters
of fiscal years beginning after June 15, 2000. We have not determined the effect
of the adoption of this statement.
Forward-Looking Statements and Associated Risks
This annual report includes forward-looking statements based on our
current expectations and projections about future events, including: strategic
plans; potential growth, including penetration of developed markets and
opportunities in emerging markets; planned product introductions; planned
operational changes and research and development efforts; euro conversion
issues; future financial performance, including expected capital expenditures;
research and development expenditures; estimated proceeds from and the timing of
asset sales; potential acquisitions; future cash sources and requirements; and
potential cost savings from planned employee reductions and restructuring
programs.
These forward-looking statements are subject to a number of risks and
uncertainties, including those identified in Exhibit 99.1 to our Annual Report
on Form 10-K, which could cause our actual results to differ materially from
historical results or those anticipated and certain of which are beyond our
control. The words "believe," "expect," "anticipate" and similar expressions
identify forward-looking statements. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. New risk factors emerge from time to
time and it is not possible for us to predict all such risk factors, nor can we
assess the impact of all such risk factors on our business or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements. Given these
risks and uncertainties, investors should not place undue reliance on
forward-looking statements as a prediction of actual results.
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ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Discussion of this item is on page 40 of Management's Discussion and
Analysis of Financial Condition and Results of Operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this item are set forth on pages
F-1 through F-29 and the related financial schedule is set forth on page S-2.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On March 10, 1999, the Company dismissed KPMG Fides Peat as its
independent auditors. The reports of KPMG Fides Peat on the Company's financial
statements for the fiscal years ended December 31, 1998 and December 31, 1997
did not contain an adverse opinion or a disclaimer of opinion, or a
qualification or modification as to uncertainty, audit scope, or accounting
principles. In connection with its audits for the Company's two most recent
fiscal years, and through March 10, 1999, there were no disagreements with KPMG
Fides Peat on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreement(s), if
not resolved to the satisfaction of KPMG Fides Peat, would have caused it to
make a reference to the subject matter of the disagreement(s) in connection with
its reports covering such periods. None of the reportable events listed in Item
304(a)(1)(v) of Regulation S-K occurred with respect to the Company and KPMG
Fides Peat.
On March 10, 1999, the Company engaged PricewaterhouseCoopers ("PwC")
as its independent auditors for the fiscal year ending December 31, 1999. During
the Company's two most recent fiscal years, and through March 10, 1999, the
Company did not consult with PwC as to either the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company's financial statements
and the Company did not consult with PwC as to any matter that was either the
subject of a disagreement or reportable event.
The decision to dismiss KPMG Fides Peat as the Company's independent
auditors was approved by the Audit Committee of the Company's Board of
Directors.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are set forth
below. All directors hold office until the annual meeting of shareholders
following their election or until their successors are duly elected and
qualified. Officers are appointed by the Board of Directors and serve at the
discretion of the Board.
Name Age Position
Robert F. Spoerry 44 President, Chief Executive Officer and
Chairman of the Board of Directors
William P. Donnelly 38 Chief Financial Officer
Lukas Braunschweiler 43 Head, Industrial and Retail
Peter Burker 54 Head, Human Resources
Karl M. Lang 53 Head, Asia Pacific
Thomas Rubbe 45 Head, Logistics and Information Systems
Daniel G. Schillinger 41 Head, Laboratory Division
Philip Caldwell 80 Director
John T. Dickson 54 Director
Reginald H. Jones 82 Director
John D. Macomber 72 Director
George M. Milne 56 Director
Laurence Z. Y. Moh 74 Director
Thomas P. Salice 40 Director
Robert F. Spoerry has been President and Chief Executive Officer of the
Company since 1993. He served as Head, Industrial and Retail (Europe) of the
Company from 1987 to 1993. Mr. Spoerry has been a Director since October 1996.
Mr. Spoerry has been Chairman of the Board of Directors since May 1998.
William P. Donnelly has been Chief Financial Officer of the Company
since 1997. From 1993 until joining the Company, he held various senior
financial and management positions, including most recently Group Vice President
and Chief Financial Officer, with Elsag Bailey Process Automation, a global
manufacturer of instrumentation and analytical products, and developer of
distributed control systems.
Lukas Braunschweiler has been Head, Industrial and Retail of the
Company since 1999. From 1995 to 1999 he served as Head, Industrial and Retail
(Europe). From 1992 until 1995 he held various senior management positions with
the Landis & Gyr Group, a manufacturer of electrical meters. Prior to 1992, he
was a Vice President in the Technology Group of Saurer Group, a manufacturer of
textile machinery.
Peter Burker has been Head, 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.
Karl M. Lang has been Head, Asia Pacific of the Company since January
2000. From 1994 to January 2000 he served as Head, Laboratory Division. From
1991 to 1994 he was based
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in Japan as a representative of senior management with responsibility for
expansion of the Asian operations.
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.
Daniel G. Schillinger has been Head, Laboratory Division of the Company
since January 2000. From 1995 to 1999 he was with Grundfos, a Danish industrial
instrument manufacturer, as head of the mid- and east European sales companies
and as General Manager for Germany. Prior to 1995, he held various positions in
R&D and technology management with ABB, an engineering concern, and with Landis
& Gyr, a manufacturer of electrical meters and building control systems.
Philip Caldwell has been a Director since October 1996. Prior to May
1998, Mr. Caldwell served as Chairman of the Board of Directors. Mr. Caldwell
spent 32 years at Ford Motor Company, where he served as Chairman of the Board
of Directors and Chief Executive Officer from 1980 to 1985 and a Director from
1973 to 1990. He served as a Director and Senior Managing Director of Lehman
Bros. Inc. and its predecessor, Shearson Lehman Brothers Holdings, Inc., from
1985 to February 1998. Mr. Caldwell is also a Director of the Mexico Fund,
Russell Reynolds Associates, Inc. and Waters Corporation. He is a member of the
Zurich Financial Services Group US Advisory Board. He has served as a Director
of the Chase Manhattan Bank, N.A., the Chase Manhattan Corp., Digital Equipment
Corporation, Federated Department Stores Inc., Kellogg Company, CasTech Aluminum
Group Inc., Specialty Coatings International Inc., American Guarantee &
Liability Insurance Company, Zurich Holding Company of America, Inc., and Zurich
Reinsurance Centre Holdings, Inc.
John T. Dickson has been a Director since March 2000. Mr. Dickson is
Executive Vice President of Lucent Technologies and CEO of its Microelectronics
and Communications Technologies business. Mr. Dickson joined the
Microelectronics group in 1993. Mr. Dickson is also a Director of the
Semiconductor Industry Association and a member of the Board of Trustees of
Lehigh Valley Health Network.
Reginald H. Jones has been a Director since October 1996. Mr. Jones
retired as Chairman of the Board of Directors of General Electric Company
("General Electric") in April 1981. At General Electric, he served as Chairman
of the Board of Directors and Chief Executive Officer from December 1972 through
April 1981, President from June 1972 to December 1972 and a Director from August
1971 to April 1981.
John D. Macomber has been a Director since October 1996. He has been a
principal of JDM Investment Group since 1992. He was Chairman and President of
the Export-Import Bank of the United States (an agency of the U.S. Government)
from 1989 to 1992. From 1973 to 1986 Mr. Macomber was Chairman and Chief
Executive Officer of Celanese Corporation. Prior to that, Mr. Macomber was a
Senior Partner of McKinsey & Company. Mr. Macomber is also a Director of IRI
International, Lehman Brothers Holdings and Textron Inc.
George M. Milne has been a Director since September 1999. Mr. Milne is
President of the Central Research Division and Senior Vice President of Pfizer
Inc., with responsibility for guiding the company's global pharmaceutical and
animal health drug discovery and development efforts, a position he assumed in
1993. Since joining Pfizer in 1970, Mr. Milne has held a variety of senior
management and research positions.
44
<PAGE>
Laurence Z. Y. Moh has been a Director since October 1996. At present,
he is Chairman and Chief Executive Officer 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
President and Chief Executive Officer of AEA Investors Inc. and has been
associated with AEA Investors Inc. since June 1989. Mr. Salice is also a
Director of Waters Corporation and Sovereign Specialty Chemicals, Inc.
45
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information appearing in the sections captioned "Directors'
Compensation," "Executive Compensation" and "Compensation Committee Interlocks
and Insider Participation" in the Registrant's Proxy Statement for the 2000
Annual Meeting of Stockholders (the "2000 Proxy Statement") is incorporated by
reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing in the section "Principal Stockholders" in
the 2000 Proxy Statement is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing in the section captioned "Certain
Transactions" in the 2000 Proxy Statement is incorporated by reference herein.
46
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of this Report:
1. Financial Statements. See Index to Consolidated
Financial Statements included on page F-1.
2. Financial Statement Schedule and related Audit Report. See
Schedule I, which is included on pages S-1 and S-2.
3. List of Exhibits. See Index of Exhibits included on page
E-1.
(b) Reports on Form 8-K:
None.
47
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Mettler-Toledo International Inc.
(Registrant)
Date: March 24, 2000 By: /s/ ROBERT F. SPOERRY
---------------------
Robert F. Spoerry
Chairman of the Board,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Annual Report on Form 10-K has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
Signature Title Date
Chairman of the Board,
President and
/s/ ROBERT F. SPOERRY Chief Executive Officer March 24, 2000
- --------------------------
Robert F. Spoerry
Vice President and
Chief Financial Officer
(Principal financial and
/s/ WILLIAM P. DONNELLY accounting officer) March 24, 2000
- --------------------------
William P. Donnelly
/s/ PHILIP CALDWELL Director March 24, 2000
- --------------------------
Philip Caldwell
Director
- --------------------------
John T. Dickson
/s/ REGINALD H. JONES Director March 24, 2000
- --------------------------
Reginald H. Jones
/s/ JOHN D. MACOMBER Director March 24, 2000
- --------------------------
John D. Macomber
/s/ GEORGE M. MILNE Director March 24, 2000
- --------------------------
George M. Milne
/s/ LAURENCE Z.Y. MOH Director March 24, 2000
- --------------------------
Laurence Z.Y. Moh
/s/ THOMAS P. SALICE Director March 24, 2000
- --------------------------
Thomas P. Salice
48
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Page Number or
Exhibit No. Description Incorporation by Reference
----------- ----------- --------------------------
3.1 Amended and Restated Certificate of Filed as Exhibit 3.1 to the Annual Report on Form
Incorporation of the Company 10-K of the Company dated March 13, 1998 and
incorporated herein by reference
3.2* Amended By-laws of the Company, effective Page 84
February 3, 2000
4.1 Specimen Form of the Company's Stock Filed as Exhibit 4.3 to the Registration Statement,
Certificate as amended, on Form S-1 of the Company (Reg. No.
333-35597) and incorporated herein by reference
10.1 Employment Agreement between Robert F. Spoerry Filed as Exhibit 10.4 to the Annual Report on Form
and Mettler-Toledo AG, dated as of October 30, 10-K of Mettler-Toledo Holding Inc. dated March 31,
1996 1997 and incorporated herein by reference
10.2 Employment Agreement between Lukas Filed as Exhibit 10.2 to the Annual Report on Form
Braunschweiler and Mettler-Toledo GmbH dated 10-K of the Company dated March 13, 1998 and
as of November 10, 1997 incorporated herein by reference
10.3 Employment Agreement between William P. Filed as Exhibit 10.3 to the Annual Report on Form
Donnelly and Mettler-Toledo GmbH dated as of 10-K of the Company dated March 13, 1998 and
November 10, 1997 incorporated herein by reference
10.4 Employment Agreement between Karl M. Lang and Filed as Exhibit 10.4 to the Annual Report on Form
Mettler-Toledo GmbH dated as of November 10, 10-K of the Company dated March 13, 1998 and
1997 incorporated herein by reference
10.5 Loan Agreement between Robert F. Spoerry and Filed as Exhibit 10.6 to the Annual Report on Form
Mettler-Toledo AG, dated as of October 7, 1996 10-K of Mettler-Toledo Holding Inc. dated March 31,
1997 and incorporated herein by reference
10.6 Regulations of the Performance Oriented Bonus Filed as Exhibit 10.7 to the Annual Report on Form
System (POBS) - Incentive System for the 10-K of the Company dated March 18, 1999 and
Management of Mettler Toledo, effective as of incorporated herein by reference
November 5, 1998
10.7* Regulations of the POBS Plus - Incentive Page 96
Scheme for Senior Management of Mettler
Toledo, effective as of March 14, 2000
10.8 Credit Agreement, dated as of November 19, Filed as Exhibit 10.9 to the Annual Report on Form
1997, between Mettler-Toledo International 10-K of the Company dated March 13, 1998 and
Inc., as Guarantor, Mettler-Toledo, Inc., incorporated herein by reference
Mettler-Toledo AG, as Borrowers, Safeline
Holding Company as UK Borrower,
Mettler-Toledo, Inc., as Canadian Borrower and
Merrill Lynch & Co. as Arranger and
Documentation Agent, and the Lenders thereto
10.9 Amendment No.1, dated as of September 30, Filed as Exhibit 10 to the Quarterly Report on Form
1998, to the Second Amended and Restated 10-Q of the Company, dated November 16, 1998 and
Credit Agreement, dated as of November 19, incorporated herein by reference
1997
E-1
<PAGE>
Page Number or
Exhibit No. Description Incorporation by Reference
----------- ----------- --------------------------
10.10 1997 Amended and Restated Stock Option Plan Filed as Exhibit 10.10 to the Registration
Statement on Form S-1 of the Company (Reg. No.
333-35597) and incorporated herein by reference)
10.11* Employment Agreement between Peter Burker and Page 100
Mettler-Toledo GmbH dated as of November 10,
1997
10.12* Employment Agreement between Daniel G. Page 106
Schillinger and Mettler-Toledo GmbH dated as
of January 1, 2000
10.13* Regulations of the POBS PLUS - Incentive Page 111
Scheme for Members of the Group Management of
Mettler Toledo, effective as of March 7, 2000
21* Subsidiaries of the Company Page 115
27.1* Financial Data Schedule Page 118
99.1* Factors Affecting our Future Operating Results Page 119
- ---------------
* Filed herewith
</TABLE>
E-2
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Reports.......................................... F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998........... F-4
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997.................................... F-5
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1999, 1998 and 1997............... F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997................................... F-7
Notes to Consolidated Financial Statements............................. F-8
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Mettler-Toledo International Inc.
In our opinion, the consolidated financial statements listed in the index under
Item 14(a)(1) on page 47 present fairly, in all material respects, the financial
position of Mettler-Toledo International Inc. and its subsidiaries at December
31, 1999, and the results of their operations and their cash flows for the year
then ended in conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the financial statement
schedule listed in the index under Item 14 (a) (2) on page 47 presents fairly,
in all material respects, the information set forth therein for 1999 when read
in conjunction with the related consolidated financial statements. These
financial statements and financial statement schedule are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audit. We
conducted our audit of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers AG
Zurich, Switzerland
February 3, 2000
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Mettler-Toledo International Inc.
We have audited the accompanying consolidated balance sheet of Mettler-Toledo
International Inc. and subsidiaries as of December 31, 1998, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years ended December 31, 1998 and 1997. 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 auditing standards generally accepted
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, 1998, and
the consolidated results of their operations and their cash flows for the years
ended December 31, 1998 and 1997, in conformity with accounting principles
generally accepted in the United States of America.
KPMG Fides Peat
Zurich, Switzerland
February 5, 1999
F-3
<PAGE>
<TABLE>
<CAPTION>
METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
As of December 31
(In thousands, except per share data)
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 17,179 $ 21,191
Trade accounts receivable, less allowances of $9,827 in 1999
and $9,443 in 1998................................................... 203,750 178,525
Inventories, net........................................................ 123,901 112,059
Other current assets and prepaid expenses............................... 43,115 46,455
------- -------
Total current assets.................................................. 387,945 358,230
Property, plant and equipment, net......................................... 199,723 230,264
Excess of cost over net assets acquired, net of accumulated amortization
of $21,313 in 1999 and $13,911 in 1998.................................. 204,395 213,772
Other non-current assets .................................................. 28,910 18,175
------- -------
Total assets.......................................................... $820,973 $820,441
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable................................................. $ 81,234 $ 58,740
Accrued and other liabilities........................................... 105,783 91,049
Accrued compensation and related items.................................. 53,510 45,906
Taxes payable........................................................... 48,769 51,302
Short-term borrowings and current maturities of long-term debt......... 46,879 46,432
------- -------
Total current liabilities............................................. 336,175 293,429
Long-term debt............................................................. 249,721 340,246
Non-current deferred taxes................................................. 22,728 25,566
Other non-current liabilities.............................................. 100,334 103,201
------- -------
Total liabilities.................................................... 708,958 762,442
Minority interest.......................................................... - 4,164
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 38,674,768 and 38,400,363 (excluding 64,467 shares held in
treasury) at December 31, 1999 and 1998............................... 386 384
Additional paid-in capital.............................................. 288,092 285,161
Accumulated deficit .................................................... (138,426) (186,527)
Accumulated other comprehensive loss.................................... (38,037) (45,183)
-------- --------
Total shareholders' equity ........................................... 112,015 53,835
Commitments and contingencies..............................................
-------- --------
Total liabilities and shareholders' equity ........................... $820,973 $820,441
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31
(In thousands, except per share data)
1999 1998 1997
---------- -------- --------
<S> <C> <C> <C>
Net sales.................................. $1,065,473 $935,658 $878,415
Cost of sales.............................. 585,007 520,190 493,480
------- ------- -------
Gross profit........................... 480,466 415,468 384,935
Research and development................... 57,393 48,977 47,551
Selling, general and administrative........ 300,389 265,511 260,397
Amortization............................... 10,359 7,634 6,222
Purchased research and development......... - 9,976 29,959
Interest expense........................... 21,980 22,638 35,924
Other charges, net......................... 10,468 1,197 10,834
------ ----- ------
Earnings (loss) before taxes, minority
interest and extraordinary items.... 79,877 59,535 (5,952)
Provision for taxes........................ 31,398 20,999 17,489
Minority interest.......................... 378 911 468
------- -------- --------
Net earnings (loss) before extraordinary
items............................... 48,101 37,625 (23,909)
Extraordinary items-
debt extinguishments, net of tax.... - - (41,197)
------- -------- --------
Net earnings (loss).................... $48,101 $37,625 $(65,106)
======= ======= =========
Basic earnings (loss) per common share:
Net earnings (loss) before extraordinary
items.................................. $1.25 $0.98 $(0.76)
Extraordinary items.................... - - (1.30)
----- ----- -------
Net earnings (loss).................... $1.25 $0.98 $(2.06)
===== ===== =======
Weighted average number of common shares 38,518,084 38,357,079 31,617,071
Diluted earnings (loss) per common share:
Net earnings (loss) before extraordinary
items.................................. $1.16 $0.92 $(0.76)
Extraordinary items.................... - - (1.30)
----- ----- -------
Net earnings (loss).................... $1.16 $0.92 $(2.06)
===== ===== =======
Weighted average number of common shares 41,295,757 40,682,211 31,617,071
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31
(In thousands)
Common Stock Accumulated
All Classes Additional Other
----------------------- Paid-in Accumulated Comprehensive
Shares Amount Capital Deficit Loss Total
---------- ------ -------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996.......... 2,438,514 $25 $188,084 $(159,046) $(16,637) $12,426
New issuance of Class A and C shares.. 3,857 - 300 - - 300
Purchase of Class A and C treasury
stock.............................. (5,123) (1) (668) - - (669)
Common stock conversion............... 28,232,099 282 (282) - - -
Proceeds from stock offering.......... 7,666,667 77 97,196 - - 97,273
Comprehensive loss:
Net loss........................... - - - (65,106) - (65,106)
Change in currency translation
adjustment...................... - - - - (18,825) (18,825)
--------
Comprehensive loss.................... (83,931)
---------- ---- -------- ---------- --------- --------
Balance at December 31, 1997.......... 38,336,014 $383 $284,630 $(224,152) $(35,462) $25,399
Exercise of stock options............. 64,349 1 531 - 532
Comprehensive income:
Net earnings....................... - - - 37,625 - 37,625
Change in currency translation
adjustment...................... - - - - (4,962) (4,962)
Minimum pension liability.......... - - - - (4,759) (4,759)
--------
Comprehensive income.................. 27,904
---------- ---- -------- ---------- --------- -------
Balance at December 31, 1998.......... 38,400,363 $384 $285,161 $(186,527) $(45,183) $53,835
Exercise of stock options............. 274,405 2 2,931 - - 2,933
Comprehensive income:
Net earnings....................... - - - 48,101 - 48,101
Change in currency translation
adjustment...................... - - - - 2,387 2,387
Minimum pension liability.......... - - - - 4,759 4,759
-------
Comprehensive income.................. 55,247
---------- ---- -------- ---------- --------- -------
Balance at December 31, 1999.......... 38,674,768 $386 $288,092 $(138,426) $(38,037) $112,015
========== ==== ======== ========== ========= ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31
(In thousands)
1999 1998 1997
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)..................................... $48,101 $37,625 $(65,106)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation......................................... 24,940 24,592 25,613
Amortization......................................... 10,359 7,634 6,222
Write-off of purchased research and
development and cost of sales associated
with revaluation of inventories................... 998 9,976 32,013
Extraordinary items.................................. - - 41,197
Net (gain) loss on disposal of long-term assets...... (3,269) (2,868) 33
Deferred taxes and adjustments to goodwill........... (1,636) (1,200) 4,244
Minority interest.................................... 378 911 468
Increase (decrease) in cash resulting from changes in:
Trade accounts receivable, net....................... (19,437) (16,391) (8,113)
Inventories.......................................... (9,540) (5,953) (2,740)
Other current assets................................. 11,363 3,300 (7,177)
Trade accounts payable............................... 16,239 17,523 4,936
Accruals and other liabilities....................... 12,844 (3,107) 24,059
------ ------ ------
Net cash provided by operating activities.......... 91,340 72,042 55,649
------ ------ ------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment..... 10,151 22,500 15,913
Purchase of property, plant and equipment............... (29,188) (28,633) (22,251)
Acquisitions, net of seller financings.................. (18,468) (a) (28,925) (a) (80,469) (a)
Other investing activities.............................. - (885) (9,184)
-------- ------ --------
Net cash used in investing activities.............. (37,505) (35,943) (95,991)
-------- -------- --------
Cash flows from financing activities:
Proceeds from borrowings................................ 20,640 23,019 614,245
Repayments of borrowings................................ (80,393) (62,376) (703,201)
Proceeds from issuance of common stock.................. 2,592 532 97,573
Purchase of treasury stock.............................. - - (669)
-------- --------- ------
Net cash provided by (used in) financing activities (57,161) (38,825) 7,948
-------- --------- ------
Effect of exchange rate changes on cash and cash equivalents (686) 351 (4,736)
----- --- -------
Net decrease in cash and cash equivalents.................. (4,012) (2,375) (37,130)
------- ------- --------
Cash and cash equivalents:
Beginning of period..................................... 21,191 23,566 60,696
------ ------ ------
End of period........................................... $17,179 $21,191 $23,566
======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.............................................. $21,642 $21,109 $38,345
Taxes................................................. 25,952 20,285 6,140
Non-cash investing activities:
Seller financings on acquisitions....................... - $11,960 $22,514
(a) Amounts paid for acquisitions including working capital retained by
sellers, seller financing and assumed debt were $20.5 million, $44.0
million and $103.0 million in 1999, 1998 and 1997, respectively.
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-7
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands unless otherwise stated)
1. Business Description and Basis of Presentation
Mettler-Toledo International Inc. ("Mettler-Toledo" or the "Company")
is a global manufacturer and marketer of precision instruments, including
weighing and certain analytical and measurement technologies, for use in
laboratory, industrial and food retailing applications. The Company's primary
manufacturing facilities are located in Switzerland, the United States, Germany,
the United Kingdom, France and China. The Company's principal executive offices
are located in Greifensee, Switzerland.
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States of America
("U.S. GAAP") and include all entities in which the Company has control,
including its majority owned subsidiaries. Certain amounts in the prior period
financial statements have been reclassified to conform with current year
presentation.
All intercompany transactions and balances have been eliminated.
Investments in which the Company has voting rights between 20% to 50% are
accounted for using the equity method of accounting.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, as well as disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting periods. Actual results may differ from those
estimates.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with
original maturity dates of three months or less.
Inventories
Inventories are valued at the lower of cost or market. Cost, which
includes direct materials, labor and overhead plus indirect overhead, is
determined using the first in, first out (FIFO) or weighted average cost methods
and to a lesser extent the last in, first out (LIFO) method.
F-8
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
2. Summary of Significant Accounting Policies - (Continued)
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is charged on a straight-line basis over the
estimated useful lives of the assets as follows:
Buildings and improvements 15 to 50 years
Machinery and equipment 3 to 12 years
Computer software 3 to 5 years
Leasehold improvements Shorter of useful life or lease term
The Company reviews its property, plant and equipment for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. An impairment loss would be recognized when
estimated future cash flows expected to result from the use of the asset and its
eventual disposition are less than its carrying amount.
Excess of Cost over Net Assets Acquired
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 amounts by determining whether
the amortization of the balance over its remaining life can be recovered from
the undiscounted future operating cash flows of the acquired operations.
Taxation
The Company files tax returns in each jurisdiction in which it
operates. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates in the respective jurisdictions
in which the Company operates that are expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or
settled. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
Generally, deferred taxes are not provided on the unremitted earnings
of subsidiaries outside of the U.S. 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.
F-9
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
2. Summary of Significant Accounting Policies - (Continued)
Currency Translation and Transactions
The reporting currency for the consolidated financial statements of the
Company is the U.S. dollar. The functional currency for the Company's operations
is generally the applicable local currency. Accordingly, the assets and
liabilities of companies whose functional currency is other than the U.S. dollar
are included in the consolidated financial statements by translating the assets
and liabilities into the reporting currency at the exchange rates applicable at
the end of the reporting period. The statements of operations and cash flows of
such non-U.S. dollar functional currency operations are translated at the
monthly average exchange rates during the year. Translation gains or losses are
accumulated in other comprehensive income (loss) in the Consolidated Statements
of Shareholders' Equity.
Revenue Recognition
Revenue is recognized when title to a product has transferred or
services have been rendered. Revenues from service contracts are recognized over
the contract period.
Research and Development
Research and development costs are expensed as incurred.
Earnings per Common Share
As described in Note 11, in accordance with the treasury stock method,
the Company has included 2,777,673 and 2,325,132 equivalent shares relating to
5,035,647 outstanding options to purchase shares of common stock in the
calculation of diluted weighted average number of common shares for years ending
December 31, 1999 and 1998, respectively.
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 changes
in fair value being recognized in other charges, net.
The Company also enters into certain interest rate swap agreements in
order to reduce its exposure to changes in interest rates. The differential paid
or received on interest rate swap agreements is recognized as interest expense
over the life of the agreements as incurred.
The Company has entered into certain foreign currency forward contracts
in order to convert certain U.S. dollar based debt into Swiss franc based debt.
The Company has also designated certain of its Swiss franc debt as a hedge of
its net investments. Any changes in
F-10
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
2. Summary of Significant Accounting Policies - (Continued)
fair value of the forward contracts and the debt are recorded in comprehensive
income (loss) and offset the net investments which they hedge.
Stock Based Compensation
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for its stock option plan.
Concentration of Credit Risk
The Company's revenue base is widely diversified by geographic region
and by individual customer. The Company's products are utilized in many
different industries, although extensively in the pharmaceutical and chemicals
industries. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its customers.
3. Business Combinations
During 1999, the Company spent approximately $20.5 million on
acquisitions including the net assets of the Testut-Lutrana group, a leading
manufacturer and marketer of industrial and retail weighing instruments in
France. This amount includes approximately $2.0 million of working capital
retained by sellers which has been excluded from the purchase price allocation.
The Company accounted for the acquisitions using the purchase method of
accounting. Accordingly, the costs of the acquisitions were allocated to the
assets acquired and liabilities assumed based upon their respective fair values.
In this respect the Company allocated $1.0 million of the purchase price to
revalue certain finished goods inventories to fair value. Substantially all of
such inventories were sold in 1999.
During 1998, the Company spent approximately $44.9 million on
acquisitions and other investing activities including seller financing of $12.0
million and assumed debt of $3.1 million as well as contingent and other
payments associated with acquisitions consummated in 1997. The Company may be
required to make additional earn-out payments relating to certain of these
acquisitions in the future.
In December 1998, the Company announced that it had acquired Applied
Systems and Myriad Synthesizer Technology. The Company accounted for these
acquisitions using the purchase method of accounting.
Applied Systems designs, assembles and markets instruments for
in-process molecular analysis, which is primarily used for researching,
developing and monitoring chemical processes. Applied Systems' proprietary
sensors, together with its innovative Fourier transform infrared technology,
enable chemists to analyze chemical reactions as they occur, which is more
efficient than pulling samples.
Myriad Synthesizer Technology designs, assembles and markets
instruments that facilitate and automate the synthesis of large numbers of
chemical compounds in parallel,
F-11
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
3. Business Combinations - (Continued)
which is a key step in the chemical compound discovery process. Its products
can be used in all stages of synthesis in drug discovery.
In July 1998, the Company acquired Bohdan Automation Inc., a leading
supplier of laboratory automation and automated synthesis products. The Company
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 Company
incurred a charge of $10.0 million immediately following the acquisition based
upon an independent valuation for purchased research and development costs for
products being developed that had not established technological feasibility as
of the date of acquisition and, if unsuccessful, had no alternative future use
in research and development activities or otherwise.
In May 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)63.7 million
(approximately $104.4 million at May 30, 1997), including a post-closing
adjustment of (pound)1.9 million which was paid in October 1997 and an earn-out
of (pound)0.8 million which was paid in June 1998. Under the terms of the
agreement, the Company paid approximately (pound)13.7 million (approximately
$22.4 million) in the form of seller loan notes.
The Company accounted for the Safeline acquisition using the purchase
method of accounting. The Company incurred a charge of $30.0 million immediately
following the acquisition based upon an independent valuation for purchased
research and development costs. The technological feasibility of the products
being developed had not been established as of the date of the acquisition and,
if unsuccessful, had no alternative future use in research and development
activities or otherwise. In addition, the Company allocated $2.1 million 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 is being amortized over 30 years.
4. Inventories, net
Inventories, net consisted of the following at December 31:
1999 1998
-------- --------
Raw materials and parts........ $ 53,685 $ 48,718
Work-in-progress............... 33,073 32,416
Finished goods................. 37,769 30,956
-------- --------
124,527 112,090
LIFO reserve................... (626) (31)
--------- ---------
$123,901 $112,059
======== ========
F-12
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
5. Financial Instruments
At December 31, 1999, the Company had certain interest rate swap
agreements outstanding that fix the variable interest obligation associated with
CHF 265 million of Swiss franc based debt and $120 million of USD based debt.
Certain of these agreements have forward starting dates commencing in 2000. The
agreements have various maturities beginning in 2000 and continuing through
2004. The fixed rates associated with the swap of Swiss franc debt vary between
2.17% and 2.94%, while the rates associated with the USD debt range from 5.93%
and 6.09% plus the Company's normal interest margin. The swaps are effective at
either one-month or three month LIBOR rates. At December 31, 1999 and 1998, the
fair market value of such financial instruments was approximately $2.4 million
and $(6.6) million, respectively.
At December 31, 1999, the Company had outstanding foreign currency
forward contracts in the amount of $35.6 million. The purpose of these contracts
is to hedge short-term intercompany balances with its foreign businesses. The
fair value of these contracts was not materially different than the carrying
value at December 31, 1999 and 1998, respectively.
The Company may be exposed to credit losses in the event of
nonperformance by the counterparties to its derivative financial instrument
contracts. Counterparties are established banks and financial institutions with
high credit ratings. The Company has no reason to believe that such
counterparties will not be able to fully satisfy their obligations under these
contracts.
The fair values of all derivative financial instruments are estimated
based on current settlement prices of comparable contracts obtained from dealer
quotes. The values represent the estimated amount the Company would pay or
receive to terminate the agreements at the reporting date, taking into account
current creditworthiness of the counterparties.
F-13
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
6. Property, Plant and Equipment, Net
Property, plant and equipment, net, consisted of the following at
December 31:
1999 1998
-------- --------
Land.............................................. $ 41,230 $ 48,080
Buildings and leasehold improvements.............. 101,088 113,473
Machinery and equipment........................... 120,989 117,032
Computer software................................. 5,399 6,942
-------- --------
268,706 285,527
Less accumulated depreciation and amortization.... (68,983) (55,263)
--------- ---------
$199,723 $230,264
======== ========
7. Other non-current Assets
Other assets include deferred financing fees of $2.5 million and $3.1
million, net of accumulated amortization of $1.3 million and $0.6 million at
December 31, 1999 and 1998, respectively. Also included in other assets are
restricted bank deposits of $1.3 million and $1.6 million at December 31, 1999
and 1998, respectively. Other assets at December 31, 1999 and 1998 also included
a loan due from the Company's Chief Executive Officer of approximately $0.7
million. This 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 for the year ended December 31:
1999 1998
------ ------
Current maturities of long-term debt............. $ 23,204 $ 19,955
Other short-term borrowings...................... 23,675 26,477
-------- --------
$ 46,879 $ 46,432
======== ========
F-14
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
9. Long-Term Debt
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
------ -------
<S> <C> <C>
Credit Agreement Borrowings:
Term A USD Loans, interest at LIBOR plus 0.625% (6.8% at December 31,
1999) payable in quarterly installments due May 19, 2004........ $81,816 $93,953
Term A CHF Loans, interest at LIBOR plus 0.625% (2.6% at December 31,
1999) payable in quarterly installments due May 19, 2004........ 43,102 57,330
Term A GBP Loans, interest at LIBOR plus 0.625% (6.72% at December 31,
1999) payable in quarterly installments due May 19, 2004........ 28,221 33,279
Revolving credit facilities....................................... 127,283 166,723
Safeline Seller Notes, interest at LIBOR minus 0.131% (6.05% at December
31, 1999) due May 30, 2001..................................... 2,074 7,433
Other............................................................... 14,104 27,960
--------- ---------
296,600 386,678
Less current maturities............................................. (46,879) (46,432)
---------- ----------
$ 249,721 $ 340,246
========= =========
</TABLE>
The Company has a multi-currency $400.0 million revolving credit
facility and a CDN $26.3 million Canadian revolving credit facility under its
credit agreement. Loans under these revolving credit facilities may be repaid
and reborrowed and are due in full on May 19, 2004. At December 31, 1999, the
Company had approximately $277.0 million of additional borrowing capacity under
its credit agreement. The Company has the ability to refinance its short-term
borrowings through its revolving facilities for an uninterrupted period
extending beyond one year. Accordingly, approximately $119.8 million of the
Company's short-term borrowings at December 31, 1999 have been reclassified to
long-term.
The aggregate maturities of long-term obligations during each of the
years 2001 through 2004 are approximately $34.6 million, $32.5 million, $37.1
million and $27.8 million, respectively.
The Company is required to pay a facility fee based upon certain
financial ratios per annum on the amount of its revolving facilities. The
facility fee at December 31, 1999 was equal to 0.20%. At December 31, 1999,
borrowings under the Company's revolving facilities carried an interest rate of
LIBOR plus 0.425%. The Company's weighted average interest rate for the year
ended December 31, 1999 was approximately 6.1%.
The Company's credit agreement contains covenants, including
limitations on the Company's ability to pay dividends to shareholders, incur
indebtedness, make investments, grant liens, sell financial assets and engage in
certain other activities. The credit agreement also requires the Company to
maintain a minimum net worth, a minimum fixed charge coverage ratio, and a ratio
of total debt to EBITDA below a specified maximum.
The carrying value of the Company's obligations under its credit
agreement approximate fair value due to the variable rate nature of the
obligations.
F-15
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
9. Long-Term Debt - (Continued)
At the time of the Safeline acquisition in May 1997, the Company
refinanced its previous credit facility and entered into a new credit facility.
The Company recorded an extraordinary loss of approximately $9.6 million
representing a charge for the write-off of capitalized debt issuance fees and
related expenses associated with the Company's previous credit facility.
In connection with the Company's initial public offering in November
1997, the Company refinanced its existing credit facility by entering into a new
credit facility (the "Credit Agreement"). Concurrent with the initial public
offering and refinancing, the Company consummated a tender offer to repurchase
9 3/4% senior subordinated notes (the "Notes"). In connection with the
refinancing and the Notes repurchase, the Company recorded an extraordinary loss
of $31.6 million primarily representing the premium paid in connection with the
early extinguishment of the Notes of $17.9 million and the write-off of
capitalized debt issuance fees associated with the Notes and the Company's
previous credit facility.
10. Shareholders' Equity
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 was converted into 12.58392 shares of common stock
and the number of authorized shares was increased to 125,000,000 shares with a
par value of $0.01 per share. Concurrently 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 offering of approximately
$97.3 million were used to repay a portion of the Company's 9 3/4% 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
funds at the public offering price. Holders of the Company's common stock are
entitled to one vote per share.
At December 31, 1999, 6,029,691 shares of the Company's common stock
were reserved for grant pursuant to the Company's stock option plan.
Preferred Stock
The Board of Directors, without further shareholder authorization, is
authorized to issue up to 10,000,000 shares of preferred stock, par value $0.01
per share in one or more series and to determine and fix the rights, preferences
and privileges of each series, including dividend rights and preferences over
dividends on the common stock and one or more series of the preferred stock,
conversion rights, voting rights (in addition to those provided by law),
redemption rights and the terms of any sinking fund therefore, and rights upon
liquidation, dissolution or winding up, including preferences over the common
stock and one or more
F-16
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
10. Shareholders' Equity - (Continued)
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 directors of the Company additional incentive
to join and/or remain in the service of the Company as well as to maintain and
enhance the long-term performance and profitability of the Company.
Under the terms of the plan, options granted shall be nonqualified and
the exercise price shall not be less than the fair market value of the common
stock on the date of grant. Options vest equally over a five year period from
the date of grant.
<TABLE>
<CAPTION>
Stock option activity is shown below:
Weighted Average
Number of Options Exercise Price
<S> <C> <C>
Outstanding at December 31, 1996........................ 3,510,747 $ 7.95
Granted................................................. 1,028,992 14.68
Forfeited............................................... (130,999) (7.95)
---------- --------
Outstanding at December 31, 1997........................ 4,408,740 $ 9.75
Granted................................................. 670,000 21.48
Exercised............................................... (64,349) (8.26)
Forfeited............................................... (142,549) (7.95)
---------- --------
Outstanding at December 31, 1998........................ 4,871,842 $ 11.30
Granted................................................. 647,500 28.56
Exercised............................................... (274,405) (8.87)
Forfeited............................................... (209,290) (13.74)
---------- --------
Outstanding at December 31, 1999........................ 5,035,647 $ 13.45
========= =======
Options exercisable at December 31, 1999................ 2,232,333 $ 9.74
========= =======
</TABLE>
At December 31, 1999, 994,044 options were available for grant.
The following table details the weighted average remaining contractual
life of options outstanding at December 31, 1999 by range of exercise prices:
<TABLE>
<CAPTION>
Number of Options Weighted Average Remaining Contractual Options
Outstanding Exercise Price Life of Options Exercisable
Outstanding
<S> <C> <C> <C> <C>
3,014,971 $ 7.95 6.8 1,808,983
773,576 $15.89 7.8 309,430
599,600 $21.48 7.2 113,920
647,500 $28.56 8.4 -
--------- --- ---------
5,035,647 7.2 2,232,333
========= =========
</TABLE>
F-17
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
11. Stock Option Plan - (Continued)
As of the date granted, the weighted average grant-date fair value of
the options granted during the years ended December 31, 1999, 1998 and 1997 was
approximately $12.31, $8.11 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:
1999 1998 1997
---- ---- ----
Risk-free interest rate.............. 6.3% 5.2% 5.4%
Expected life in years............... 4 4 4
Expected volatility.................. 45% 39% 26%
Expected dividend yield.............. -- -- --
The Company applies Accounting Standards Board Opinion No. 25 and
related interpretations in accounting for its plan. Had compensation cost for
the Company's stock option plan been determined based upon the fair value of
such awards at the grant date, consistent with the methods of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation," the Company's net earnings (loss) and basic and diluted net
earnings (loss) per common share for the years ended December 31 would have been
as follows:
1999 1998 1997
------- ------- ---------
Net earnings (loss):
As reported............................. $48,101 $37,625 $(65,106)
Pro forma............................... 45,847 35,475 (66,417)
====== ====== ========
Basic earnings (loss) per common share:
As reported............................. $1.25 $0.98 $(2.06)
Pro forma............................... 1.19 0.92 (2.10)
==== ==== ======
Diluted earnings (loss) per common share:
As reported............................. $1.16 $0.92 $(2.06)
Pro forma............................... 1.11 0.87 (2.10)
==== ==== ======
F-18
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
12. Benefit Plans
Mettler-Toledo maintains a number of retirement 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. Amounts
recognized as cost under these plans amounted to $2.8 million, $8.2 million and
$8.9 million for the years ended December 31, 1999, 1998 and 1997, respectively.
Based on certain changes in 1999, the Company performed a reevaluation of its
Swiss pension plans and determined these plans to be defined benefit plans.
Accordingly, commencing in 1999, the Company has accounted for these plans as
such. The application of defined benefit accounting to the plans had no material
impact on the consolidated financial statements.
Certain companies sponsor defined benefit plans. Benefits are provided
to employees primarily based upon years of service and employees' compensation
for certain periods during the last years of employment. The Company's U.S.
operations also provide postretirement medical benefits to their employees.
Contributions for medical benefits are related to employee years of service.
F-19
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
12. Benefit Plans - (Continued)
The following table sets forth the change in benefit obligation, the
change in plan assets, the funded status and amounts recognized in the
consolidated financial statements for the Company's principal defined benefit
plans and postretirement plans at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------------ -----------------------
1999 1998 1999 1998
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year...... $ 149,930 $ 124,958 $ 37,095 $ 36,112
Service cost, gross.......................... 20,972 5,929 624 507
Interest cost................................ 18,680 8,624 2,489 2,360
Actuarial (gains) losses..................... (2,918) 7,977 (2,482) 821
Plan amendments and other.................... (239) 4,584 (105) (184)
Benefits paid................................ (17,429) (5,541) (2,161) (2,515)
Impact of foreign currency................... (46,316) 3,399 4 (6)
Impact of businesses acquired................ 1,867 - - -
Impact of Swiss pension plans................ 269,703 - - -
------- ------- ------ ------
Benefit obligation at end of year............ 394,250 149,930 35,464 37,095
------- ------- ------ ------
Change in plan assets:
Fair value of plan assets at beginning of 77,375 73,075 - -
year.........................................
Actual return on plan assets................. 39,760 4,921 - -
Employer contributions....................... 11,360 4,759 2,161 2,515
Plan participants' contributions............. 4,472 281 - -
Benefits paid................................ (17,429) (5,541) (2,161) (2,515)
Impact of foreign currency................... (42,738) (120) - -
Impact of Swiss pension plans................ 295,874 - - -
------- ------- ------ ------
Fair value of plan assets at end of year..... 368,674 77,375 - -
------- ------- ------ ------
Funded status................................ (25,576) (72,555) (35,464) (37,095)
Unrecognized actuarial (gain) loss........... (28,712) 9,855 2,438 5,110
-------- ---------- ---------- ----------
Net amount recognized........................ $ (54,288) $ (62,700) $ (33,026) $ (31,985)
========== ========== ========== ==========
Amounts recognized in the Consolidated Balance Sheets consist of:
Pension Benefits Other Benefits
------------------------ -----------------------
1999 1998 1999 1998
--------- --------- -------- --------
Other non-current assets..................... $ 6,597 $ 1,294 $ - $ -
Other non-current liabilities................... (60,885) (68,753) (33,026) (31,985)
Accumulated other comprehensive income....... - 4,759 - -
--------- --------- --------- ---------
Net amount recognized........................ $(54,288) $(62,700) $(33,026) $(31,985)
========= ========= ========= =========
</TABLE>
F-20
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
12. Benefit Plans - (Continued)
The assumed discount rates and rates of increase in future compensation
level used in calculating the projected benefit obligations vary according to
the economic conditions of the country in which the retirement plans are
situated. The weighted average rates used for the purposes of the Company's U.S.
plans are as follows:
1999 1998 1997
---- ---- ----
Discount rate......................................... 7.8% 7.2% 7.2%
Compensation increase rate............................ 5.0% 5.0% 5.0%
Expected long term rate of return on plan assets...... 9.5% 9.5% 9.5%
Plan assets relate principally to the Company's U.S. and Swiss
companies and consist of equity investments, obligations of the U.S. Treasury or
other governmental agencies, and other interest-bearing investments.
At December 31, 1999, the fair value of plan assets and the total
projected benefit obligation for the Company's non-U.S. defined benefit plans
were $305.4 million and $324.6 million, respectively. Actuarial assumptions for
these plans ranged from 3.75% to 8.5% for the discount rate, 2.0% to 6.5% for
the compensation increase rate and 5.0% to 8.5% for the expected long term rate
of return on plan assets for the years ended December 31, 1999, 1998 and 1997.
Net periodic pension cost for the defined benefit plans includes the
following components for the year ended December 31:
1999 1998 1997
------ ----- -----
Service cost, net...................... $16,842 $ 5,929 $ 5,655
Interest cost on projected benefit
obligations............................ 18,680 8,624 8,020
Expected return on plan assets......... (22,420) (6,613) (5,976)
Recognition of actuarial (gains) losses 394 (104) (51)
------- -------- ---------
Net periodic pension cost.............. $13,496 $ 7,836 $ 7,648
======= ======= ========
Net periodic postretirement benefit cost for the U.S. postretirement
plans includes the following components for the year ended December 31:
1999 1998 1997
---- ---- ----
Service cost........................... $ 624 $ 507 $ 440
Interest cost on projected benefit 2,489 2,360 2,296
obligations............................
Recognition of actuarial losses........ 189 - -
Net amortization and deferral.......... 21 26 33
------- ------- --------
Net periodic postretirement benefit
cost................................. $ 3,323 $ 2,893 $ 2,769
======= ======= ========
The accumulated postretirement benefit obligation and net periodic
postretirement benefit cost were principally determined using discount rates of
7.2% in 1999, 6.7% in 1998 and 7.0% in 1997 and health care cost trend rates
ranging from 7.5% to 8.5% in 1999, 1998 and 1997, decreasing to 5% in 2005.
The health care cost trend rate assumption has a significant effect on
the accumulated postretirement benefit obligation and net periodic
postretirement benefit cost. A one-percentage-point change in assumed health
care cost trend rates would have the following effects:
F-21
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
12. Benefit Plans - (Continued)
One-Percentage- One-Percentage-
Point Increase Point Decrease
-------------- --------------
Effect on total of service and
interest cost components.......... $ 593 $ (349)
Effect on postretirement benefit
obligation........................ $4,030 $(3,600)
13. Taxes
The sources of the Company's earnings (loss) before taxes, minority
interest and extraordinary items were as follows for the year ended December 31:
1999 1998 1997
------- ------- -------
United States................... $(1,906) $(2,172) $(14,178)
Non-United States............... 81,783 61,707 8,226
------- ------- ------
Earnings (loss) before taxes,
minority interest
and extraordinary items........ $79,877 $59,535 $(5,952)
======= ======= ========
The provision (benefit) for taxes consists of:
<TABLE>
<CAPTION>
Adjustments
to
Current Deferred Goodwill Total
------- -------- -------- -----
<S> <C> <C> <C> <C>
Year ended December 31, 1999:
United States federal........................ $ (17) $ - $ - $ (17)
State and local.............................. 494 - - 494
Non-United States............................ 32,557 (10,260) 8,624 30,921
------ -------- ------ ------
$33,034 $(10,260) $8,624 $31,398
======= ======== ====== =======
Adjustments
to
Current Deferred Goodwill Total
------- -------- -------- -----
Year ended December 31, 1998:
United States federal........................ $ 517 $ (700) $ 591 $ 408
State and local.............................. 561 (102) 351 810
Non-United States............................ 21,121 (2,642) 1,302 19,781
------ ------- ------ ------
$22,199 $(3,444) $2,244 $20,999
======= ======== ====== =======
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
======= ====== ====== =======
</TABLE>
F-22
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
13. Taxes - (Continued)
The adjustments to goodwill during the years ending December 31, 1999,
1998 and 1997 relate to tax benefits utilized which were not previously
recognized in the purchase price allocation pertaining to previous acquisitions.
The provision for tax expense for the years ended December 31, 1999,
1998 and 1997 differed from the amounts computed by applying the United States
federal income tax rate of 35% to the earnings (loss) before taxes, minority
interest and extraordinary items as a result of the following:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Expected tax..................................... $27,957 $20,837 $(2,083)
United States state and local income taxes, net
of federal income tax benefit................ 494 810 276
Non-deductible purchased research and development - 3,492 10,486
Non-deductible intangible amortization........... 2,254 2,459 2,073
Change in valuation allowance.................... (983) 4,964 263
Other non-United States income taxes at other
than a 35% rate.............................. 1,165 (6,708) 5,545
Change in Swiss tax law.......................... - (3,557) -
Change in Swiss tax rates........................ - (1,406) -
Other, net....................................... 511 108 929
------- ------- -------
Total provision for taxes........................ $31,398 $20,999 $17,489
======= ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below at December 31:
1999 1998
------ ------
Deferred tax assets:
Inventory............................................ $ 1,363 $ 6,055
Accrued and other liabilities........................ 15,099 12,601
Deferred loss on sale of subsidiaries................ 2,091 7,907
Accrued postretirement benefit and pension costs..... 21,984 24,983
Net operating loss carryforwards..................... 27,798 20,856
Other................................................ 4,075 2,743
------- -------
Total deferred tax assets................................ 72,410 75,145
Less valuation allowance................................. (53,128) (64,640)
-------- --------
Total deferred tax assets less valuation allowance....... 19,282 10,505
------- -------
Deferred tax liabilities:
Inventory............................................ 1,787 2,302
Property, plant and equipment........................ 15,531 24,534
Other................................................ 9,131 3,565
------- -------
Total deferred tax liabilities........................... 26,449 30,401
------- -------
Net deferred tax liability............................... $ 7,167 $19,896
======= =======
F-23
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
13. Taxes - (Continued)
The Company has established valuation allowances primarily for net
operating losses, deferred losses as well as postretirement and pension costs as
follows as of December 31:
1999 1998
------ ------
Summary of valuation allowances:
Cumulative net operating losses...................... $26,923 $20,856
Deferred loss........................................ 2,091 7,907
Accrued postretirement and pension benefit costs..... 14,579 23,300
Other................................................ 9,535 12,577
------- -------
Total valuation allowance................................ $53,128 $64,640
======= =======
The Company has recorded valuation allowances related to its deferred
income tax assets due to the uncertainty of the ultimate realization of future
benefits from such assets. The 1999 net change in the valuation allowance is
primarily attributable to the changes as enumerated above which are primarily
related to improved realization potential and/or utilization of associated
deferred tax assets.
The potential decrease or increase of the valuation allowance in the
near term is dependent on the future realizability of the deferred tax assets
which are primarily affected by the future profitability of operations in
various worldwide jurisdictions, but primarily in the United States.
The total valuation allowances relating to acquired businesses amount
to $16.7 million and $35.0 million at December 31, 1999 and 1998, respectively.
The reduction for the current year is primarily attributable to the utilization
of net operating losses and the expiration of the useful life of various
deferred tax assets. Future reductions of these valuation allowances will
continue to be credited to goodwill.
At December 31, 1999, the Company had net operating loss carryforwards
for U.S. federal income tax purposes of $46.8 million, all of which expire in
2012. The Company has various U.S. state net operating losses and various
foreign operating losses that expire in varying amounts through 2012.
14. Other Charges, Net
Other charges, net consists primarily of foreign currency transactions,
interest income, charges related to the Company's cost-reduction programs and
gains on the sale of property, plant and equipment.
As part of its efforts to reduce costs, the Company evaluates from time
to time the cost effectiveness of its global manufacturing strategy. In this
respect, the Company recorded a charge of approximately $8.0 million in 1999
associated with the transfer of production lines from the Americas to China and
Europe and the closure of facilities. The charge comprised primarily severance
and other related benefits and costs of exiting facilities, including lease
termination costs and the write-down of impaired assets. In connection with
these activities, the Company expects to involuntarily terminate approximately
180 employees.
F-24
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
14. Other Charges, Net - (Continued)
The Company also incurred losses of $4.1 million during 1999 in
connection with the exit from its glass batching business based in Belgium. This
amount primarily comprised severance and other costs of exiting this business.
The Company completed its exit of this business by the end of 1999. These losses
were offset by a gain of $3.1 million recorded in connection with an asset sale.
In 1997, the Company recorded restructuring charges of $6.3 million in
connection with the closure of three facilities in North America. These charges
comprised mainly severance and other related benefits and costs of exiting
facilities, including lease termination costs.
A rollforward of the components of the Company's accrual for
restructuring activities is as follows:
1999 1998
------ ------
Beginning of the year.................................... $1,831 $8,758
Restructuring expense.................................... 12,881 2,611
Reductions in workforce and other cash outflows.......... (5,902) (9,441)
Non-cash write-downs of impaired assets.................. (3,018) (188)
Impact of foreign currency............................... (330) 91
------- ------
End of the year.......................................... $5,462 $1,831
====== ======
The Company's accrual for restructuring activities at December 31, 1999
primarily consisted of severance, lease termination and other costs of exiting
facilities.
F-25
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
15. Commitments and Contingencies
Operating Leases
The Company leases certain of its facilities and equipment under
operating leases. The future minimum lease payments under non-cancelable
operating leases are as follows at December 31, 1999:
2000................................... $12,100
2001................................... 7,695
2002................................... 5,211
2003................................... 3,359
2004................................... 2,351
Thereafter............................. 8,645
-------
Total................................ $39,361
=======
Rent expense for operating leases amounted to $15.3 million, $17.7
million and $16.4 million for the years ended December 31, 1999, 1998 and 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. Segment Reporting
Operating segments are the individual reporting units within the
Company. These units are managed separately, and it is at this level where the
determination of resource allocation is made. The units have been aggregated
based on operating segments in geographical regions that have similar economic
characteristics and meet the aggregation criteria of SFAS 131. The Company has
determined that there are five reportable segments: Principal U.S. Operations,
Principal Central European Operations, Swiss R&D and Manufacturing Operations,
Other Western European Operations and Other. Principal U.S. Operations represent
certain of the Company's marketing and producing organizations located in the
United States. Principal Central European Operations primarily includes the
Company's German marketing and producing organizations that primarily serve the
German market and, to a lesser extent, Europe. Swiss R&D and Manufacturing
Operations consist of the organizations located in Switzerland that are
responsible for the development, production and marketing of precision
instruments, including weighing, analytical and measurement technologies for use
in a variety of industrial and laboratory applications. Other Western European
Operations include the Company's market organizations in Western Europe that are
not included in Principal Central European Operations. The Company's market
organizations are geographically focused and are responsible for all aspects of
the Company's sales and service. Operating segments that exist outside these
reportable segments are included in Other.
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies. The Company
evaluates performance based on adjusted operating income (gross profit less
research and development and selling, general
F-26
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
16. Segment Reporting - (Continued)
and administrative expenses before amortization and non-recurring costs).
Intersegment sales and transfers are priced to reflect consideration of market
conditions and the regulations of the countries in which the transferring
entities are located. The following tables show the operations of the Company's
operating segments:
<TABLE>
<CAPTION>
Principal Other
Principal Central Swiss R&D Western Eliminations
For the year ended U.S. European and Mfg. European and
December 31, 1999 Operations Operations Operations Operations Other (a) Corporate (b) Total
- ------------------------------- ---------- ---------- ---------- ---------- --------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales to external customers $356,400 $184,021 $ 23,832 $267,426 $233,794 $ - $1,065,473
Net sales to other segments.... 46,310 58,094 154,931 20,229 111,284 (390,848) -
-------- -------- -------- -------- -------- --------- ----------
Total net sales................ $402,710 $242,115 $178,763 $287,655 $345,078 $(390,848) $1,065,473
======== ======== ======== ======== ======== ========== ==========
Adjusted operating income...... $ 37,255 $23,070 $ 32,992 $ 25,024 $ 30,138 $ (24,797) $ 123,682
Depreciation................... 7,807 2,912 2,748 3,176 7,903 394 24,940
Total assets................... 217,202 139,726 158,160 146,955 624,528 (465,598) 820,973
Purchase of property, plant
and equipment.................. 7,588 2,051 2,322 4,140 10,548 2,539 29,188
Principal Other
Principal Central Swiss R&D Western Eliminations
For the year ended U.S. European and Mfg. European and
December 31, 1998 Operations Operations Operations Operations Other (a) Corporate (b) Total
- ------------------------------- ---------- ---------- ---------- ---------- --------- ------------- --------
Net sales to external customers $324,455 $181,377 $23,554 $220,543 $185,729 $ - $ 935,658
Net sales to other segments.... 39,634 58,035 148,062 22,848 104,585 (373,164) -
-------- -------- -------- -------- -------- --------- ---------
Total net sales................ $364,089 $239,412 $171,616 $243,391 $290,314 $(373,164) $ 935,658
======== ======== ======== ======== ======== ========== =========
Adjusted operating income...... $ 26,283 $ 20,314 $ 30,155 $ 17,795 $ 23,576 $ (17,143) $ 100,980
Depreciation................... 8,132 3,081 2,506 2,748 7,770 355 24,592
Total assets................... 166,934 146,754 142,717 125,621 597,175 (358,760) 820,441
Purchase of property, plant
and equipment.................. 8,296 2,957 2,922 3,562 8,886 2,010 28,633
Principal Other
Principal Central Swiss R&D Western Eliminations
For the year ended U.S. European and Mfg. European and
December 31, 1997 Operations Operations Operations Operations Other (a) Corporate (b) Total
- ------------------------------- ---------- ---------- ---------- ---------- --------- ------------- --------
Net sales to external customers $311,760 $163,976 $ 27,174 $209,995 $165,510 $ - $ 878,415
Net sales to other segments.... 39,138 51,692 137,797 14,458 105,113 (348,198) -
-------- -------- -------- -------- -------- --------- ---------
Total net sales................ $350,898 $215,668 $164,971 $224,453 $270,623 $(348,198) $ 878,415
======== ======== ======== ======== ======== ========== =========
Adjusted operating income...... $ 18,973 $ 17,479 $ 33,708 $ 15,242 $ 22,350 $ (26,211) $ 81,541
Depreciation................... 9,273 3,316 2,420 2,583 7,789 232 25,613
Purchase of property, plant
and equipment.................. 6,882 2,390 2,455 2,612 7,147 765 22,251
</TABLE>
(a) Other includes reporting units in Asia, Eastern Europe, Latin America and
segments from other countries that do not meet the aggregation criteria
of SFAS 131.
(b) Eliminations and Corporate includes the elimination of intersegment
transactions as well as certain corporate expenses, intercompany
investments and certain goodwill, which are not included in the Company's
operating segments.
F-27
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
16. Segment Reporting - (Continued)
A reconciliation of adjusted operating income to earnings (loss) before
taxes, minority interest and extraordinary items for the year ended December 31
follows:
1999 1998 1997
-------- -------- -------
Adjusted operating income............. $123,682 $100,980 $81,541
Amortization.......................... 10,359 7,634 6,222
Interest expense...................... 21,980 22,638 35,924
Other charges, net.................... 10,468 1,197 10,834
Revaluation of acquisition inventories 998 - 2,054
Purchased research and development.... - 9,976 29,959
Termination fee at IPO (a)............ - - 2,500
-------- -------- --------
Earnings (loss) before taxes, minority
interest and extraordinary items.... $ 79,877 $ 59,535 $(5,952)
======== ======== ========
(a) At the time of the IPO, the Company incurred fees associated with the
termination of its management services agreement with AEA Investors Inc.
The Company sells precision instruments, including weighing instruments
and certain analytical and measurement technologies, and related after-market
support to a variety of customers and industries. None of these customers
account for more than 3% of net sales. After-market support revenues are
primarily derived from parts and services such as calibration, certification and
repair, much of which is provided under contracts. A break-down of the Company's
sales by product category for the years ended December 31 follows:
1999 1998 1997
------- ------- -------
Weighing-related instruments..... $ 659,785 $600,450 $587,067
Non-weighing instruments......... 226,434 183,259 147,281
After-market..................... 179,254 151,949 144,067
------- ------- -------
Total net sales.................. $1,065,473 $935,658 $878,415
========== ======== ========
The breakdown of net sales by geographic customer destination and
property, plant and equipment, net for the year ended December 31 are as
follows:
<TABLE>
<CAPTION>
Property, plant
Net sales equipment, net
------------------------------------- -------------------
1999 1998 1997 1999 1998
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
United States....... $ 386,452 $328,448 $297,688 $ 41,604 $ 47,771
Other Americas...... 74,701 74,951 71,403 1,887 1,511
------- ------- ------- ------ ------
Total Americas...... 461,153 403,399 369,091 43,491 49,282
Germany............. 132,302 129,464 115,665 23,086 27,812
France.............. 94,557 58,081 55,008 5,438 6,053
United Kingdom...... 44,105 41,265 38,447 5,828 5,217
Switzerland......... 42,530 40,158 34,555 99,324 119,094
Other Europe........ 174,497 161,314 152,490 6,515 5,994
------- ------- ------- ------ ------
Total Europe........ 487,991 430,282 396,165 140,191 164,170
Rest of World....... 116,329 101,977 113,159 16,041 16,812
--------- ------- ------- ------- -------
Totals.............. $1,065,473 $935,658 $878,415 $199,723 $230,264
========== ======== ======== ======== ========
</TABLE>
F-28
<PAGE>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
17. Quarterly Financial Data (unaudited)
Quarterly financial data for the years ended December 31, 1999 and 1998
are as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter (a) Quarter (b)(c) Quarter (c)(d)
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
1999
Net sales ........................ $ 235,715 $257,465 $268,006 $304,287
Gross profit...................... 105,227 113,755 119,728 141,756
Net earnings...................... $ 8,065 $ 13,467 $ 13,658 $ 12,911
Basic earnings per common share... $0.21 $0.35 $0.35 $0.33
Diluted earnings per common share. $0.20 $0.33 $0.33 $0.31
Market price per share:
High............................ $27 15/16 $29 $30 7/16 $39 1/2
Low............................. $19 5/8 $22 5/8 $23 13/16 $27 5/8
1998
Net sales ........................ $215,655 $228,446 $225,646 $265,911
Gross profit...................... 94,607 101,667 98,879 120,315
Net earnings...................... $ 6,838 $ 11,397 $ 2,530 $ 16,860
Basic earnings per common share... $0.18 $0.30 $0.07 $0.44
Diluted earnings per common share. $0.17 $0.28 $0.06 $0.41
Market price per share:
High............................ $22 3/8 $22 1/4 $22 11/16 $28 15/16
Low............................. $16 9/16 $18 $16 1/4 $16 3/4
</TABLE>
(a) The financial data for the second quarter of 1999 includes acquisition
charges of $1.0 million regarding the revaluation of certain
inventories to fair value (Note 3).
(b) The financial data for the third quarter of 1998 includes a charge of
$10.0 million for in-process research and development in connection
with the Bohdan acquisition (Note 3).
(c) The financial data for the third and fourth quarters of 1998 included
one-time tax benefits of approximately $2.3 million and $1.3 million,
respectively, based upon a change in Swiss tax law which benefited only
the 1998 periods.
(d) The financial data for the fourth quarter of 1999 includes a charge of
approximately $8.0 million associated with the transfer of production
lines from the Americas to China and Europe and the closure of
facilities (Note 14).
F-29
<PAGE>
Schedule I
Independent Auditors' Report on Financial Statement Schedule
The Board of Directors and Shareholders
Mettler-Toledo International Inc.:
Under date of February 5, 1999, we reported on the consolidated balance sheet of
Mettler-Toledo International Inc. and subsidiaries as of December 31, 1998, and
the related consolidated statements of operations, shareholders' equity and cash
flows for the year ended December 31, 1998, included herein. In connection with
our audits of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedule included under
Item 14 of the Form 10-K. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG Fides Peat
Zurich, Switzerland
February 5, 1999
S-1
<PAGE>
<TABLE>
<CAPTION>
Schedule I- Valuation and Qualifying Accounts
- -------------------------------- ---------------- ---------------------------------- ---------------- -----------------
Column A Column B Column C Column D Column E
- -------------------------------- ---------------- ---------------------------------- ---------------- -----------------
Additions
----------------------------------
(1) (2)
Balance at Charged Charged to
the beginning to costs and other accounts -Deductions- Balance at
Description of period expenses describe describe end of period
<S> <C> <C> <C> <C> <C>
- -------------------------------- ---------------- ----------------- ---------------- ---------------- -----------------
Note (A)
Accounts Receivable-
allowance for doubtful
accounts:
Year ended
December 31, 1999 9,443 1,867 - 1,483 9,827
Year ended
December 31, 1998 7,669 2,008 - 234 9,443
Year ended
December 31, 1997 8,388 1,516 - 2,235 7,669
- -------------------------------- ---------------- ----------------- ---------------- ---------------- -----------------
</TABLE>
Note A
Represents excess of uncollectable balances written off over recoveries of
accounts previously written off. Additionally, amounts are net of foreign
currency translation effect of $(691), $239 and $(552) for the years ended
December 31, 1999, 1998 and 1997, respectively.
S-2
Exhibit 3.2
AMENDED BY-LAWS
OF
METTLER-TOLEDO INTERNATIONAL INC.
ARTICLE I
Stockholders
SECTION 1. Annual Meeting. The annual meeting of the
stockholders of the Corporation shall be held on such date, at such time and at
such place within or without the State of Delaware as may be designated by the
Board of Directors, for the purpose of electing Directors and for the
transaction of such other business as may be properly brought before the
meeting.
SECTION 2. Special Meetings. Except as otherwise provided in
the Certificate of Incorporation, a special meeting of the stockholders of the
Corporation may be called at any time by the Board of Directors, the Chairman of
the Board or the President and shall be called by the Chairman of the Board, the
President or the Secretary at the request in writing of stockholders holding
together at least twenty-five percent of the number of shares of stock
outstanding and entitled to vote at such meeting. Any special meeting of the
stockholders shall be held on such date, at such time and at such place within
or without the State of Delaware as the Board of Directors or the officer
calling the meeting may designate. At a special meeting of the stockholders, no
business shall be transacted and no corporate action shall be taken other than
that stated in the notice of the meeting unless all of the stockholders are
present in person or by proxy, in which case any and all business may be
transacted at the meeting even though the meeting is held without notice.
SECTION 3. Notice of Meetings. Except as otherwise provided in
these BY-LAWS or by law, a written notice of each meeting of the stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of the Corporation entitled to vote at
such meeting at his address as it appears on the records of the Corporation. The
notice shall state the place, date and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.
SECTION 4. Quorum. At any meeting of the stockholders, the
holders of a majority in number of the total outstanding shares of stock of the
Corporation entitled to vote at such meeting, present in person or represented
by proxy, shall constitute a quorum of the stockholders for all purposes, unless
the representation of a larger number of shares shall be required by law, by the
Certificate of Incorporation or by these By-Laws, in which case the
representation of the number of shares so required shall constitute a quorum;
provided that at any meeting of the stockholders at which the holders of any
class of stock of the Corporation shall be entitled to vote separately as a
class, the holders of a majority in number of the total outstanding shares of
such class, present in person or represented by proxy, shall constitute a quorum
for purposes of such class vote unless the representation of a larger number of
shares of such class shall be required by law, by the Certificate of
Incorporation or by these By-Laws.
1
<PAGE>
Exhibit 3.2
SECTION 5. Adjourned Meetings. Whether or not a quorum shall
be present in person or represented at any meeting of the stockholders, the
holders of a majority in number of the shares of stock of the Corporation
present in person or represented by Proxy and entitled to vote at such meeting
may adjourn from time to time; provided, however, that if the holders of any
class of stock of the Corporation are entitled to vote separately as a class
upon any matter at such meeting, any adjournment of the meeting in respect of
action by such class upon such matter shall be determined by the holders of a
majority of the shares of such class present in person or represented by proxy
and entitled to vote at such meeting. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting the stockholders, or the holders of any class of stock
entitled to vote separately as a class, as the case may be, may transact any
business which might have been transacted by them at the original meeting. If
the adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
adjourned meeting.
SECTION 6. Organization. The Chairman of the Board or, in his
absence, the President shall call all meetings of the stockholders to order, and
shall act as Chairman of such meetings. In the absence of the Chairman of the
Board and the President, the holders of a majority in number of the shares of
stock of the Corporation present in person or represented by proxy and entitled
to vote at such meeting shall elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all
meetings of the stockholders; but in the absence of the Secretary, the Chairman
may appoint any person to act as Secretary of the meeting. It shall be the duty
of the Secretary to prepare and make, at least ten days before every meeting of
stockholders, a complete list of stockholders entitled to vote at such meeting,
arranged in alphabetical order and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list shall
be open, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held, for the ten days next
preceding the meeting, to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, and shall be produced
and kept at the time and place of the meeting during the whole time thereof and
subject to the inspection of any stockholder who may be present.
SECTION 7. Voting. Except as otherwise provided in the
Certificate of Incorporation or by law, each stockholder shall be entitled to
one vote for each share of the capital stock of the Corporation registered in
the name of such stockholder upon the books of the Corporation. Each stockholder
entitled to vote at meeting of stockholders or to express consent or dissent to
corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
When directed by the presiding officer or upon the demand of any stockholder,
the vote upon any matter before a meeting of stockholders shall be by ballot.
Except as otherwise provided by law or by the Certificate of Incorporation,
Directors shall be elected by a plurality of the votes cast at a meeting of
stockholders by the stockholders entitled to vote in the election and, whenever
any corporate action, other than the election of Directors is to be taken, it
shall be authorized by a majority of the votes cast at a meeting of stockholders
by the stockholders entitled to vote thereon.
2
<PAGE>
Exhibit 3.2
Shares of the capital stock of the Corporation belonging to
the Corporation or to another corporation, if a majority of the shares entitled
to vote in the election of directors of such other corporation is held, directly
or indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes.
SECTION 8. Inspectors. When required by law or directed by the
presiding officer or upon the demand of any stockholder entitled to vote, but
not otherwise, the polls shall be opened and closed, the proxies and ballots
shall be received and taken in charge, and all questions touching the
qualification of voters, the validity of proxies and the acceptance or rejection
of votes shall be decided at any meeting of the stockholders by two or more
Inspectors who may be appointed by the Board of Directors before the meeting, or
if not so appointed, shall be appointed by the presiding officer at the meeting.
If any person so appointed fails to appear or act, the vacancy may be filled by
appointment in like manner.
SECTION 9. Consent of Stockholder in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required to
be taken or which may be taken at any annual or special meeting of the
stockholders of the Corporation, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of any such corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
SECTION 10. Advance Notice Provisions for Election of
Directors. Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors of the Corporation.
Nominations of persons for election to the Board of Directors may be made at any
annual meeting of stockholders, or at any special meeting of stockholders called
for the purpose of electing directors, (a) by or at the direction of the Board
of Directors (or any duly authorized committee thereof) or (b) by any
stockholder of the Corporation (i) who is a stockholder of record on the date of
the giving of the notice provided for in this Section 10 and on the record date
for the determination of stockholders entitled to vote at such meeting and (ii)
who complies with the notice procedures set forth in this Section 10.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder such stockholder must have given timely
notice thereof in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation (a) in the case of an annual meeting, not less than sixty (60) days
nor more than ninety (90) days prior to the date of the annual meeting;
provided, however, that in the event that less than seventy (70) days notice or
prior public disclosure of the date of the annual meeting is given or made to
stockholders, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure of the date of the annual meeting was made, whichever
first occurs; and (b) in the case of a special meeting of stockholders called
for the purpose of electing directors, not later than the close of business on
the tenth (10th) day following the day on which notice of the date of the
special meeting
3
<PAGE>
Exhibit 3.2
was mailed or public disclosure of the date of the special meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes to
nominate for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by the person and (iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such
stockholder, (iv) a representation that such stockholder intends to appear in
person or by proxy, at the meeting to nominate the persons named in its notice
and (v) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of
each proposed nominee to being named as a nominee and to serve as a director if
elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 10. If the Chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the Chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded.
SECTION 11. Advance Notice Provisions for Business to be
Transacted at Annual Meeting. No business may be transacted at an annual meeting
of stockholders, other than business that is either (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (c) otherwise properly
brought before the annual meeting by any stockholder of the Corporation (i) who
is a stockholder of record on the date of the giving of the notice provided for
in this Section 11 and on the record date for the determination of stockholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 11.
In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to the
Secretary of the Corporation. To be timely, a stockholder's notice to the
Secretary must be delivered to or mailed and received at the principal executive
offices of the Corporation not less than sixty (60) days nor more than ninety
(90) days prior to the date of the annual meeting; provided, however, that in
the event that less than seventy (70) days notice or prior public disclosure of
the date of the annual meeting is given or made to stockholders, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the tenth (10th) day
4
<PAGE>
Exhibit 3.2
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
whichever first occurs. To be in proper written form, a stockholder's notice to
the Secretary must set forth as to each matter such stockholder proposes to
bring before the annual meeting (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and record address of such
stockholder, (iii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such stockholder,
(iv) a description of all arrangements or understandings between such
stockholder and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such business and (v) a representation
that such stockholder intends to appear in person or by proxy at the annual
meeting to bring such business before the meeting.
No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in accordance
with the procedures set forth in this Section 11, provided, however that, once
business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Section 11 shall be deemed to preclude
discussion by any stockholder of any such business. If the Chairman of an annual
meeting determines that business was not properly brought before the annual
meeting in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the business was not properly brought before the meeting and
such business shall not be transacted.
SECTION 12. Order of Business. The order of business at all
meetings of the stockholders shall be determined by the Chairman of the meeting.
ARTICLE II
Board of Directors
SECTION 1. Number and Term of Office. The business and affairs
of the Corporation shall be managed by or under the direction of eight (8)
Directors, who need not be stockholders of the Corporation. The Directors shall,
except as hereinafter otherwise provided for filling vacancies, be elected at
the annual meeting of stockholders, and shall hold office until their respective
successors are elected and qualified or until their earlier resignation or
removal. The number of Directors may be altered from time to time by amendment
of these By-Laws.
SECTION 2. Removal, Vacancies and Additional Directors. The
stockholders may, at any special meeting the notice of which shall state that it
is called for that purpose, remove, with or without cause, any Director and fill
the vacancy; provided that whenever any Director shall have been elected by the
holders of any class of stock of the Corporation voting separately as a class
under the provisions of the Certificate of Incorporation, such Director may be
removed and the vacancy filled only by the holders of that class of stock voting
separately as a class. Vacancies caused by any such removal and not filled by
the stockholders at the meeting at which such removal shall have been made, or
any vacancy caused by the death or resignation of any Director or for any other
reason, and any newly created directorship resulting from any increase in the
authorized number of Directors, may be filled by the affirmative vote of a
majority of the Directors then in office,
5
<PAGE>
Exhibit 3.2
although less than a quorum, and any Director so elected to fill any such
vacancy or newly created directorship shall hold office until his successor is
elected and qualified or until his earlier resignation or removal.
When one or more Directors shall resign effective at a future
date, a majority of Directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office as herein provided in connection with
the filling of other vacancies.
SECTION 3. Place of Meeting. The Board of Directors may hold
its meetings in such place or places in the State of Delaware or outside the
State of Delaware as the Board from time to time shall determine.
SECTION 4. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as the Board from time to time
by resolution shall determine. No notice shall be required for any regular
meeting of the Board of Directors; but a copy of every resolution fixing or
changing the time or place of regular meetings shall be mailed to every Director
at least five days before the first meeting held in pursuance thereof.
SECTION 5. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by direction of the Chairman of the
Board, the President or by any two of the Directors then in office.
Notice of the day, hour and place of holding of each special
meeting shall be given by mailing the same at least two days before the meeting
or by causing the same to be delivered personally or transmitted by telegraph,
facsimile, telex or sent by certified, registered or overnight mail at least one
day before the meeting to each Director. Unless otherwise indicated in the
notice thereof, any and all business other than an amendment of these By-Laws
may be transacted at any special meeting, and an amendment of these By-Laws may
be acted upon if the notice of the meeting shall have stated that the amendment
of these By-Laws is one of the purposes of the meeting. At any meeting at which
every Director shall be present, even though without any notice, any business
may be transacted, including the amendment of these By-Laws.
SECTION 6. Quorum. Subject to the provisions of Section 2 of
this Article II, a majority of the members of the Board of Directors in office
(but in no case less than one-third of the total number of Directors nor less
than two Directors) shall constitute a quorum for the transaction of business
and the vote of the majority of the Directors present at any meeting of the
Board of Directors at which a quorum is present shall be the act of the Board of
Directors, If at any meeting of the Board there is less than a quorum present, a
majority of those present may adjourn the meeting from time to time.
SECTION 7. Organization. The Chairman of the Board or, in his
absence, the President shall preside at all meetings of the Board of Directors.
In the absence of the Chairman of the Board and the President, a Chairman shall
be elected from the Directors present. The Secretary of the Corporation shall
act as Secretary of all meetings of the Directors; but in the absence of the
Secretary, the Chairman may appoint any person to act as Secretary of the
meeting.
SECTION 8. Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to
6
<PAGE>
Exhibit 3.2
consist of one or more of the Directors of the Corporation. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided by resolution
passed by a majority of the whole Board, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and the affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporations property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending these By-Laws; and unless such resolution, these By-Laws, or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
SECTION 9. Conference Telephone Meetings. Unless otherwise
restricted by the Certificate of Incorporation or by these By-Laws, the members
of the Board of Directors or any committee designated by the Board, may
participate in a meeting of the Board or such committee, as the case may be, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting.
SECTION 10. Consent of Directors or Committee in Lieu of
Meeting. Unless otherwise restricted by the Certificate of Incorporation or by
these By-Laws, any action required or permitted to be taken at any meeting of
the Board of Directors, or of any committee thereof, may be taken without a
meeting if all members of the Board or committee, as the case may be, consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the Board or committee, as the case may be.
ARTICLE III
Officers
SECTION 1. Officers. The officers of the Corporation shall be
a Chairman of the Board, a President, one or more Vice Presidents, a Chief
Financial Officer, a Secretary and a Treasurer, and such additional officers, if
any, as shall be elected by the Board of Directors pursuant to the provisions of
Section 7 of this Article III. The Chairman of the Board, the President, one or
more Vice Presidents, a Chief Financial Officer, the Secretary and the Treasurer
shall be elected by the Board of Directors at its first meeting after each
annual meeting of the stockholders. The failure to hold such election shall not
of itself terminate the term of office of any officer. All officers shall hold
office at the pleasure of the Board of Directors. Any officer may resign at any
time upon written notice to the Corporation. Officers may, but need not, be
Directors. Any number of offices may be held by the same person.
All officers, agents and employees shall be subject to
removal, with or without cause, at any time by the Board of Directors. The
removal of an officer without cause shall be without prejudice to his contract
rights, if any. The election or appointment of an officer shall not of itself
create contract rights. All agents and employees other than officers elected
7
<PAGE>
Exhibit 3.2
by the Board of Directors shall also be subject to removal, with or without
cause, at any time by the officers appointing them.
Any vacancy caused by the death of any officer, his
resignation, his removal, or otherwise, may be filled by the Board of Directors,
and any officer so elected shall hold office at the pleasure of the Board of
Directors.
In addition to the powers and duties of the officers of the
Corporation as set forth in these By-Laws, the officers shall have such
authority and shall perform such duties as from time to time may be determined
by the Board of Directors.
SECTION 2. Powers and Duties of the Chairman of the Board, The
Chairman of the Board shall preside at all meetings of the stockholders and at
all meetings of the Board of Directors and shall have such other powers and
perform such other duties as may from time to time be assigned to him by these
By-Laws or by the Board of Directors.
SECTION 3. Powers and Duties of the President. The President
shall be the chief executive officer of the Corporation and, subject to the
control of the Board of Directors and the Chairman of the Board, shall have
general charge and control of all its operations and shall perform all duties
incident to the office of President. In the absence of the Chairman of the
Board, he shall preside at all meetings of the stockholders and at all meetings
of the Board of Directors and shall have such other powers and perform such
other duties as may from time to time be assigned to him by these By-Laws or by
the Board of Directors or the Chairman of the Board.
SECTION 4. Powers and Duties of the Vice Presidents. Each Vice
President shall perform all duties incident to the office of Vice President and
shall have such other powers and perform such other duties as may from time to
time be assigned to him by these By-Laws or by the Board of Directors, the
Chairman of the Board or the President.
SECTION 5. Powers and Duties of the Chief Financial Officer.
The Chief Financial Officer shall be the principal financial officer of the
Corporation, and shall be in charge of, and have control over, all financial
accounting and tax matters regarding the Corporation. The Chief Financial
Officer shall have such other powers and perform such other duties as may from
time to time be assigned to him by these By-Laws or by the Board of Directors,
the Chairman of the Board or the President.
SECTION 6. Powers and Duties of the Secretary. The Secretary
shall keep the minutes of all meetings of the Board of Directors and the minutes
of all meetings of the stockholders in books provided for that purpose; he shall
attend to the giving or serving of all notices of the Corporation; he shall have
custody of the corporate seal of the Corporation and shall affix the same to
such documents and other papers as the Board of Directors, the Chairman of the
Board or the President shall authorize and direct; he shall have charge of the
stock certificate books, transfer books and stock ledgers and such other books
and papers as the Board of Directors, the Chairman of the Board or the President
shall direct, all of which shall at reasonable times be open to the examination
of any Director, upon application, at the office of the Corporation during
business hours; and he shall perform duties incident to the office of Secretary
and shall also have such other powers and shall perform such other duties as may
from time to time be assigned to him by these By-Laws or the Board of Directors,
the Chairman of the Board or the President.
8
<PAGE>
Exhibit 3.2
SECTION 7. Powers and Duties of the Treasurer. The Treasurer
shall act at the direction of the Chief Financial Officer. At the direction of
the Chief Financial Officer, the Treasurer shall have custody of, and when
proper shall pay out, disburse or otherwise dispose of, all funds and securities
of the Corporation which may have come into his hands; he may endorse on behalf
of the Corporation for collection checks, notes and other obligations and shall
deposit the same to the credit of the Corporation in such bank or banks or
depository or depositories as the Board of Directors may designate; he shall
enter or cause to be entered regularly in the books of the Corporation kept for
the purpose full and accurate accounts of all moneys received or paid or
otherwise disposed of by him and whenever required by the Board of Directors, or
the President or Chief Financial Officer shall render statements of such
accounts; he shall, at all reasonable times, exhibit his books and accounts to
any Director of the Corporation upon application at the office of the
Corporation during business hours; and he shall perform all duties incident to
the office of Treasurer and shall also have such other powers and shall perform
such other duties as may from time to time be assigned to him by these By-Laws
or by the Board of Directors, the Chairman of the Board, or the President or the
Chief Financial Officer.
SECTION 8. Additional Officers. The Board of Directors may
from time to time elect such other officers (who may but need not be Directors),
including a Controller, Assistant Treasurers, Assistant Secretaries and
Assistant Controllers, as the Board may deem advisable and such officers shall
have such authority and shall perform such duties as may from time to time be
assigned to them by the Board of Directors, the Chairman of the Board or the
President.
The Board of Directors may from time to time by resolution
delegate to any Assistant Treasurer or Assistant Treasurers any of the powers or
duties herein assigned to the Treasurer; and may similarly delegate to any
Assistant Secretary or Assistant Secretaries any of the powers or duties herein
assigned to the Secretary.
SECTION 9. Giving of Bond by Officers. All officers of the
Corporation, if required to do so by the Board of Directors, shall furnish bonds
to the Corporation for the faithful performance of their duties, in such
penalties and with such conditions and security as the Board shall require.
SECTION 10. Voting Upon Stocks. Unless otherwise ordered by
the Board of Directors, the Chairman of the Board, the President or any Vice
President shall have full power and authority on behalf of the Corporation to
attend and to act and to vote, or in the name of the Corporation to execute
proxies to vote, at any meetings of stockholders of any corporation in which the
Corporation may hold stock, and at any such meetings shall possess and may
exercise, in person or by proxy, any and all rights, powers and privileges
incident to the ownership of such stock. The Board of Directors may from time to
time, by resolution, confer like powers upon any other person or persons.
SECTION 11. Compensation of Officers. The officers of the
Corporation shall be entitled to receive such compensation for their services as
shall from time to time be determined by the Board of Directors.
9
<PAGE>
Exhibit 3.2
ARTICLE IV
Stock-Seal-Fiscal Year
SECTION 1. Certificates For Shares of Stock. The certificates
for shares of stock of the Corporation shall be in such form, not inconsistent
with the Certificate of Incorporation, as shall be approved by the Board of
Directors. All certificates shall be signed by the Chairman of the Board, the
President or a Vice President and by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer, and shall not be valid unless so
signed.
In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates had not ceased
to be such officer or officers of the Corporation.
All certificates for shares of stock shall be consecutively
numbered as the same are issued. The name of the person owning the shares
represented thereby with the number of such shares and the date of issue thereof
shall be entered on the books of the Corporation.
Except as hereinafter provided, all certificates surrendered
to the Corporation for transfer shall be canceled, and no new certificates shall
be issued until former certificates for the same number of shares have been
surrendered and canceled.
SECTION 2. Lost, Stolen or Destroyed Certificates. Whenever
person owning a certificate for shares of stock of the Corporation alleges that
it has been lost stolen or destroyed, he shall in the office of the Corporation
an affidavit setting forth, to the best of his knowledge and belief, the time,
place and circumstances of the loss, theft or destruction, and, if required by
the Board of Directors, a bond of indemnity or other indemnification sufficient
in the opinion of the Board of Directors to indemnify the Corporation and its
agents against any claim that may be made against it or them on account of the
alleged loss, theft or destruction of any such certificate or the issuance of a
new certificate in replacement therefor. Thereupon the Corporation may cause to
be issued to such person a new certificate in replacement for the certificate
alleged to have been lost, stolen or destroyed. Upon the stub of every new
certificate so issued shall be noted the fact of such issue and the number, date
and the name of the registered owner of the lost, stolen or destroyed
certificate in lieu of which the new certificate is issued.
SECTION 3. Transfer of Shares. Shares of stock of the
Corporation shall be transferred on the books of the Corporation by the holder
thereof, in person or by his attorney duly authorized in writing, upon surrender
and cancellation of certificates for the number of shares of stock to be
transferred, except as provided in the preceding section.
SECTION 4. Regulations. The Board of Directors shall have
power and authority to make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
SECTION 5. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting or
10
<PAGE>
Exhibit 3.2
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock Or for the purpose of any other lawful action,
as the case may be, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is necessary, shall be
the day on which the first written consent is expressed; and the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 6. Dividends. Subject to the provisions of the
Certificate of Incorporation, the Board of Directors shall have power to declare
and pay dividends upon shares of stock of the Corporation, but only out of funds
available f6r the payment of dividends as provided by law.
Subject to the provisions of the Certificate of Incorporation,
any dividends declared upon the stock of the Corporation shall be payable on
such date or dates as the Board of Directors shall determine. If the date fixed
for the payment of any dividend shall in any year fall upon a legal holiday,
then the dividend payable on such date shall be paid on the next day not a legal
holiday.
SECTION 7. Corporate Seal. The Board of Directors shall
provide a suitable seal, containing the name of the Corporation, which seal
shall be kept in the custody of the Secretary. A duplicate of the seal may be
kept and be used by any officer of the Corporation designated by the Board of
Directors, the Chairman of the Board or the President.
SECTION 8. Fiscal Year. The fiscal year of the Corporation
shall be such fiscal year as the Board of Directors from time to time by
resolution shall determine.
ARTICLE V
Miscellaneous Provisions
SECTION 1. Checks, Notes, Etc. All checks, drafts, bills of
exchange, acceptances, notes or other obligations or orders for the payment of
money shall be signed and, if so required by the Board of Directors,
countersigned by such officers of the Corporation and/or other persons as the
Board of Directors from time to time shall designate.
Checks, drafts, bills of exchange, acceptances, notes,
obligations and orders for the payment of money made payable to the Corporation
may be endorsed for deposit to the
11
<PAGE>
Exhibit 3.2
credit of the Corporation with a duly authorized depository by the Treasurer, or
otherwise as the Board of Directors may from time to time, by resolution,
determine.
SECTION 2. Loans. No loans and no renewals of any loans shall
be contracted on behalf of the Corporation except as authorized by the Board of
Directors. When authorized so to do, any officer or agent of the Corporation may
effect loans and advances for the Corporation from any bank, trust company or
other institution or from any firm, corporation or individual, and for such
loans and advances may make, execute and deliver promissory notes, bonds or
other evidences of indebtedness of the Corporation. When authorized so to do,
any officer or agent of the Corporation may pledge, hypothecate or transfer, as
security for the payment of any and all loans, advances, indebtedness and
liabilities of the Corporation, any and all stocks, securities and other
personal property at any time held by the Corporation, and to that end may
endorse, assign and deliver the same. Such authority may be general or confined
to specific instances.
SECTION 3. Waivers of Notice. Whenever any notice whatever is
required to be given by law, by the Certificate of Incorporation or by these
By-Laws to any person or persons, a waiver thereof in writing, signed by the
person or persons entitled to the notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
SECTION 4. Offices Outside of Delaware. Except as otherwise
required by the laws of the State of Delaware, the Corporation may have an
office or offices and keep its books, documents and papers outside of the State
of Delaware at such place or places as from time to time may be determined by
the Board of Directors, the Chairman of the Board or the President.
SECTION 5. Indemnification of Directors Officers and
Employees. The Corporation shall indemnify to the full extent authorized by law
any person made or threatened to be made a party to an action, suit or
proceeding, whether criminal, civil, administrative or investigative, by reason
of the fact that he, his testator or intestate is or was a director, officer,
employee or agent of the Corporation or is or was serving, at the request of the
Corporation, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
ARTICLE VI
Amendments
These By-Laws and any amendment thereof may be altered,
amended or repealed, or new By-Laws may be adopted, by the Board of Directors at
any regular or special meeting by the affirmative vote of a majority of all of
the members of the Board, provided in the case of any special meeting at which
all of the members of the Board are not present, that the notice of such meeting
shall have stated that the amendment of these By-Laws was one of the purposes of
the meeting; but these By-Laws and any amendment thereof, including the By-Laws
adopted by the Board of Directors, may be altered, amended or repealed and other
By-Laws may be adopted by the holders of a majority of the total outstanding
stock of the Corporation entitled to vote at any annual meeting or at any
special meeting, provided, in the case of any special meeting, that notice of
such proposed alteration, amendment, repeal or adoption is included in the
notice of the meeting.
12
Exhibit 10.7
POBS Plus -
Incentive System for Senior Management of METTLER TOLEDO
Regulations, valid as of March 14, 2000
1. Objectives and Participants
With this incentive plan our aim is to pursue two main objectives:
o To orient the remuneration of senior managers directly to the
achievement of annual operating plan targets and to give a special
reward for reaching and exceeding the plan.
o To emphasize the responsibility of each participant for the
top-ranking interest of the Group and to promote the attainment of
the overall corporate goals and success of the corporation.
Participation in the POBS Plus incentive scheme is determined by the
Group Management Committee and must be agreed in writing.
Criteria for participation are:
o Key management function which by virtue of its tasks and the
performance of its jobholder can significantly influence and
contribute to the overall success of the entire Group.
o Managers with leadership skills and high professional competence.
2. General Principles
2.1 In addition to the yearly base salary, participants are eligible for a
bonus which is based and calculated on the grade of target achievement.
This bonus is a percentage multiple of the base salary ranging from 0 -
150 %.
2.2 Bonus Scale
o The bonus starts after 90 % target achievement and can go up to
a maximum of 130 % target achievement.
o Within this span, for each point of target achievement, 3.75 % of the
base salary are calculated as bonus.
1
<PAGE>
Exhibit 10.7
2.3 Targets
All targets in POBS Plus are closely related to the yearly budgets and
business plans.
As a general rule, POBS Plus includes the following target categories
and weighting:
A Group targets 50 %
B Operative unit targets 40 %
C Personal targets 10 %
Target parameters and respective weighting within a category for
typical functions in POBS Plus are established for each business year
in the respective POBS Plus Scheme.
Typical parameters within A and B category and their relative weighting
are:
OPBIT 70 %
OCF 1 30 %
With B category, also sales, inventory turnover, tax savings, interest
payments (for finance / control functions) can be defined.
Each individual target is given a weighting of minimum 5 %. The total
number of targets defined should not exceed 10 and the sum of the
weightings must equal 100 %.
Based on the approved budget of the Group and Operative Units, the POBS
Plus Rules which quantify the actual values and levels of target
achievement per category and parameter are established.
Both, POBS Plus Scheme and Rules are proposed per business year by the
Group Management Committee and they have to be approved by the
Compensation Committee.
3. Target Setting
3.1 The requirements for complete and proper target achievement (100 %)
should be challenging and ambitious, on the other hand they have to be
realistic and attainable. For each participant they should be set in
such a way that they can be fulfilled clearly and to the full extent.
3.2 Personal targets (category C) are agreed at the beginning of each
business year for each participant with his / her supervisor. They need
to be clearly measurable.
2
<PAGE>
Exhibit 10.7
3.3 For each participant, a POBS Plus Target Achievement Sheet lists per
business year all targets set incl. their weighting and the
corresponding values / levels in line with the corresponding POBS Plus
Rules.
4. Target Assessment
4.1 At the end of the business year, target achievement is assessed by the
superior manager for each participant.
The degree of achievement of each individual target (range 90 % to max.
130 %) is multiplied by the weighting of the individual target to give
a points award for each individual target. The total score for all
targets lies between 90 and 130 points which number also corresponds to
the overall percentage of target achievement.
4.2 Personal targets (C category) are evaluated as follows:
Target Achievement
90 % Target not reached - result unsatisfactory
100 % Target reached, corresponding to the requirements - good result
110 % Clearly more than target achieved, requirements clearly exceeded,
in terms of value, time limits, quality, additional related
success - very good result
120 % Target achievement outstanding, additional major benefits/success
for the company reached, excellent result
130 % Target achievement exceptional, extraordinary additional value
to the company - unique result.
5. Bonus Calculation
The bonus is calculated in a percentage of the yearly base salary and
can vary from 0 to 150 % of this base salary depending on the total sum
of points reached in the target assessment.
Each full point above 90 and up to a maximum of 130 corresponds to a
bonus amount of 3.75 % of the base salary.
"Bonus Formula":
(Target Points - 90 Points) x 3.75 = Bonus in % of base salary
3
<PAGE>
Exhibit 10.7
Example
- Base Salary: 120'000
- Target Achievement 109.55 % or Points
(109.55 - 90) x 3.75 = 73.3125 % of base salary
- Bonus: 87'975
6. Payment
During the salary year (Jan. 1 - Dec. 31 of the calendar year or April
1 - March 31 of the following year), the annual base salary will be
paid, normally divided in 12 equal monthly installments. The
distribution of this basic amount, however, can vary in certain
countries.
The Company represented by the Group Management Committee can elect to
make a payment on account of the expected bonus in December of the
relevant business year which is calculated on a provisional basis using
projected results. The amount of such payment on account cannot exceed
50 % of the presumable bonus.
The final bonus is calculated as soon as the results of the business
year and the assessment of the target achievement are known. Payment
(or deduction) adjusted by any payment on account is usually made until
April following the end of the business year.
7. Termination of Employment during the Business Year
In case of termination in the first half-year of the business year, the
bonus is paid pro rata on a set 95 % target achievement. In case of
termination of employment in the second half-year, target achievement
is measured at the end of the year (usual procedure) and the bonus
calculated accordingly will be paid pro rata.
8. Accounting Rules for Bonus Payments
Bonus payments are accounted for in the business year to which the
bonus belongs. Appropriate accruals have to be made for this purpose in
the year end closing. Carry over into accounts of the payout year are
not allowed.
For the Group Management Committee:
Peter Burker
Head Human Resources
4
Exhibit 10.11
EMPLOYMENT AGREEMENT
AGREEMENT made this 10th day of November, 1997, by and between Mettler-Toledo
GmbH (,,the Company"), and Peter Burker (the ,,Executive").
The Executive is presently employed as Head of Human Resources and as Member of
the Group Management Committee Europe of the METTLER TOLEDO Group (,,METTLER
TOLEDO").
The Board of Directors of the ultimate parent company (the ,,Board") recognizes
that the Executive's contribution to the growth and success of METTLER TOLEDO
has been substantial. The Board desires to provide for the continued employment
of the Executive and to make certain changes in the Executive's employment
arrangements with the Company which the Board has determined will reinforce and
encourage the continued attention and dedication to METTLER TOLEDO of the
Executive as a member of METTLER TOLEDO's management, in the best interest of
METTLER TOLEDO and its shareholders. The Executive is willing to commit himself
to continue to serve METTLER TOLEDO, on the terms and conditions herein
provided.
In order to effect the foregoing, the Company and the Executive wish to enter
into an employment agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
SECTION 1. Employment.
The Company hereby agrees to continue to employ the Executive, and the Executive
hereby agrees to continue to serve METTLER TOLEDO, on the terms and conditions
set forth herein.
SECTION 2. Term.
This Agreement enters into force as of November 10, 1997. It is of unlimited
duration.
SECTION 3. Position and Duties.
During the Term, the Executive shall serve as Head of Human Resources and as
Member of the Group Management Committee Europe of METTLER TOLEDO and shall have
such responsibilities, duties and authority as he may have as of the date hereof
and as may from time to time be assigned to the Executive by the Board that are
consistent with such responsibilities, duties and authority.
SECTION 4. Place of Performance.
In connection with the Executive's employment by the Company, the Executive
shall be based at the principal executive offices of METTLER TOLEDO in
Greifensee, Switzerland, except for required travel on METTLER TOLEDO's business
to an extent substantially consistent with present business travel obligations.
1
<PAGE>
Exhibit 10.11
SECTION 5. Compensation and Related Matters.
(a) Salary.
During the Term, the Company shall pay to the Executive an annual base salary at
a rate of CHF 182'400.-- or such higher rate as may from time to time be
determined by the Board, such salary to be paid in substantially equal
installments in accordance with the Company's payroll practices for its senior
executives. This salary may be increased from time to time in accordance with
normal business practices of the Company. Compensation of the Executive by
salary payments shall not be deemed exclusive and shall not prevent the
Executive from participating in any other compensation or benefit plan of the
Company. The salary payments (including any increased salary payments) hereunder
shall not in any way limit or reduce any other obligation of the Company
hereunder, and no other compensation, benefit or payment hereunder shall in any
way limit or reduce the obligation of the Company to pay the Executive's salary
hereunder.
(b) Bonus.
During the Term, the Executive shall be entitled to earn annual incentive
compensation in accordance with the POBS Plus Plan for Senior Management, as
attached hereto as Exhibit A1.
(c) Expenses.
(i) Expenses shall be reimbursed according to the Company expense regulations as
amended from time to time.
(ii) In addition the Executive is entitled to flat compensation for minor
expenses according to the Group Management Committee Europe Supplement to the
expense regulations, as amended from time to time, as attached hereto as Exhibit
B1.
(d) Other Benefits.
(i) The Company shall maintain in full force and effect, and the Executive shall
be entitled to continue to participate in, all of the Company's insurance
benefit plans and arrangements in effect on the date hereof in which the
Executive participates or plans or arrangements providing the Executive with at
least equivalent benefits thereunder (including, without limitation, the
Mettler-Toledo Fonds pension scheme for senior management, and the Company's
accident plan and disability plan), provided that the Company shall not make any
changes in such plans or arrangements that would adversely affect the
Executive's rights or benefits thereunder; provided, however, that, such a
change may be made, including termination of such plans or arrangements if it
occurs pursuant to a program applicable to all executives of the Company and
does not result in a proportionately greater reduction in the rights of or
benefits to the Executive as compared with any other executive of the Company.
The Executive shall be entitled to participate in or receive benefits under any
employee benefit plan or arrangement made available by the Company in the future
to its executives and key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements. Nothing paid to the Executive under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Executive pursuant to paragraph (a) of this
Section.
2
<PAGE>
Exhibit 10.11
(ii) The Executive shall be entitled to participation in the (x) Mettler-Toledo
Group Management Committee Stock Purchase Plan, and (y) the Mettler-Toledo
Management Share Option Plan, each as may be amended from time to time.
(iii) Any payments or benefits payable to the Executive under this Agreement in
respect of any calendar year during which the Executive is employed by the
Company for less than the entire such year shall, unless otherwise provided in
the applicable plan or arrangement, be prorated in accordance with the number of
full and partial months in such calendar year during which he is so employed.
(e) Vacations.
The Executive shall be entitled to no less than 30 paid vacation days in each
calendar year. The Executive shall also be entitled to all paid holidays and
personal days given by the Company to its executives.
SECTION 6. Offices.
Subject to Sections 3 and 4, the Executive agrees to serve without additional
compensation, if elected or appointed thereto, as a director of any of METTLER
TOLEDO's group companies, and in one or more executive offices of any of METTLER
TOLEDO's group companies.
SECTION 7. Termination.
a) This Agreement may be terminated by either party with or without cause giving
twelve (12) months notice to the end of a calendar month, subject, however, to
the provisions allowing for immediate termination according to Article 337 of
the Swiss Code of Obligations (,,Article 337").
b) The Executive may terminate his employment under Article 337 in case of
failure by the Company to comply with any material provision of this Agreement.
SECTION 8. Compensation upon Termination.
During the notice period, the Executive is entitled to full compensation as
defined in Section 5 of this Agreement and in the annexes / exhibits therein
referred to.
SECTION 9. No Mitigation or Offset / Noncompetition.
During notice periods, the Company may waive the services of the Executive. If
the Company so decides, the Executive shall have no duty to mitigate damages by
seeking another employment or otherwise, nor shall the amount of any payment or
benefit due under Section 5 be reduced by any compensation earned by the
Executive as the result of an employment by another employer, by retirement
benefits (other than as paid by the Company or under Company benefits schemes)
or by offset against any amount claimed to be owed by the Executive to the
Company. While the Executive is employed by the Company hereunder and for a
period of twelve (12) months after the termination of the Executive's
employment, the Executive shall not knowingly engage in or be employed by any
business anywhere in the world which competes with the principal businesses of
the Company or its affiliates as conducted at the date of such employment
termination.
3
<PAGE>
Exhibit 10.11
SECTION 10. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and / or assets of the Company, by agreement in form and substance
satisfactory to the Executive, to expressly assume and agree to perform this
Agreement in same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as he would be entitled to under Sections 7 and 8 hereof if the Company
had terminated his employment under Section 7 (a) hereof. As used in this
Agreement, ,,Company" shall mean the Company as herein before defined and any
successor to its business and / or assets as aforesaid which executes and
delivers the agreement provided for in this Section 11 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
(b) If the Executive should die after the giving of notice pursuant to Section 7
but while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, if there be no such designee, to the Executive's
estate. If the Executive should die before the giving of such notice under
Section 7 and while he is employed pursuant to this Agreement, the Company shall
continue to pay to the Executive's estate his salary for the period of six
months from the date of such death and a pro rata portion of the bonus, if any,
payable for the year in which the Executive died.
SECTION 11. Notice.
For the purposes of this Agreement, notices, demands and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by US or Swiss certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
Mr. Peter Burker
Eichenweg 37
CH-8121 Benglen
Switzerland
If to the Company:
Mettler-Toledo GmbH
Im Langacher
8606 Greifensee
Switzerland
Attn.: Chief Executive Officer
4
<PAGE>
Exhibit 10.11
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
SECTION 12. Miscellaneous.
No provisions of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing signed by the
Executive and such officer of the Company as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. Insofar as this
Agreement does not stipulate anything else to the contrary, the General Rules of
Employment (,,Allgemeine Arbeitsvertragliche Bestimmungen / AVB") of the Company
shall be applicable. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of Switzerland.
SECTION 13. Validity.
The invalidity or unenforceability of any provision or provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
SECTION 14. Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original but all of which together will constitute one and
the same instrument.
SECTION 15. Disputes.
All disputes between the Executive and the Company concerning the terms and
conditions of this Agreement shall be brought before the ordinary courts in the
Canton of Zurich, Switzerland.
SECTION 16. Entire Agreement.
This Agreement sets forth the entire agreement of the parties hereto in respect
of the subject matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto; and any prior agreement of the parties hereto in respect of
the subject matter contained herein is hereby terminated and canceled.
5
<PAGE>
Exhibit 10.11
IN WITNESS WHEREOF, the parties have executed this Agreement on the date and
year first above written.
Mettler-Toledo GmbH,
by: .........................
Robert F. Spoerry
by: .........................
Friedrich Ort
by: .........................
Peter Burker
6
Exhibit 10.12
Employment Agreement
AGREEMENT made this 26th day of January 2000, by and between Mettler-Toledo GmbH
(,,the Company"), and Daniel G. Schillinger (the ,,Executive").
The Company and the Executive wish to enter into an employment agreement on the
terms and conditions set forth below. Accordingly, and intending to be legally
bound hereby, the parties hereto agree as follows:
SECTION 1. Employment.
The Company hereby agrees to employ the Executive, and the Executive hereby
agrees to serve METTLER TOLEDO, on the terms and conditions set forth herein.
SECTION 2. Term.
This Agreement enters into force as of January 1, 2000. It is of unlimited
duration.
SECTION 3. Position and Duties.
During the Term, the Executive shall serve as Head of the Laboratory Division
and as Member of the Group Management Committee of METTLER TOLEDO and shall have
such responsibilities, duties and authority as he may have as of the date hereof
and as may from time to time be assigned to the Executive by the Board that are
consistent with such responsibilities, duties and authority.
SECTION 4. Place of Performance.
In connection with the Executive's employment by the Company, the Executive
shall be based at the principal executive offices of METTLER TOLEDO in
Greifensee, Switzerland, except for required travel on METTLER TOLEDO's business
to an extent substantially consistent with present business travel obligations.
SECTION 5. Compensation and Related Matters.
(a) Salary.
During the Term, the Company shall pay to the Executive an annual base salary at
a rate of CHF 276'000.-- or such higher rate as may from time to time be
determined by the Board, such salary to be paid in substantially equal
installments in accordance with the Company's payroll practices for its senior
executives. This salary may be increased from time to time in accordance with
normal business practices of the Company. Compensation of the Executive by
salary payments shall not be deemed exclusive and shall not prevent the
Executive from participating in any other compensation or benefit plan of the
Company. The salary payments (including any increased salary payments) hereunder
shall not in any way limit or reduce any other obligation of the Company
hereunder, and no other compensation, benefit or payment hereunder shall in any
way limit or reduce the obligation of the Company to pay the Executive's salary
hereunder.
1
<PAGE>
Exhibit 10.12
(b) Bonus.
During the Term, the Executive shall be entitled to earn annual incentive
compensation in accordance with the POBS Plus Plan for Senior Management, as
attached hereto as Exhibit A1.
(c) Expenses.
(i) Expenses shall be reimbursed according to the Company expense regulations as
amended from time to time.
(ii) In addition the Executive is entitled to flat compensation for minor
expenses according to the Group Management Committee Europe Supplement to the
expense regulations, as amended from time to time, as attached hereto as Exhibit
B1.
(d) Other Benefits.
(i) The Company shall maintain in full force and effect, and the Executive shall
be entitled to continue to participate in, all of the Company's insurance
benefit plans and arrangements in effect on the date hereof in which the
Executive participates or plans or arrangements providing the Executive with at
least equivalent benefits thereunder (including, without limitation, the
Mettler-Toledo Fonds pension scheme for senior management, and the Company's
accident plan and disability plan), provided that the Company shall not make any
changes in such plans or arrangements that would adversely affect the
Executive's rights or benefits thereunder; provided, however, that, such a
change may be made, including termination of such plans or arrangements if it
occurs pursuant to a program applicable to all executives of the Company and
does not result in a proportionately greater reduction in the rights of or
benefits to the Executive as compared with any other executive of the Company.
The Executive shall be entitled to participate in or receive benefits under any
employee benefit plan or arrangement made available by the Company in the future
to its executives and key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements. Nothing paid to the Executive under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Executive pursuant to paragraph (a) of this
Section.
(ii) The Executive shall be entitled to participation in the METTLER TOLEDO
Stock Option Plan as may be amended from time to time.
(iii) Any payments or benefits payable to the Executive under this Agreement in
respect of any calendar year during which the Executive is employed by the
Company for less than the entire such year shall, unless otherwise provided in
the applicable plan or arrangement, be prorated in accordance with the number of
full and partial months in such calendar year during which he is so employed.
(e) Vacations.
The Executive shall be entitled to no less than 30 paid vacation days in each
calendar year. The Executive shall also be entitled to all paid holidays and
personal days given by the Company to its executives.
2
<PAGE>
Exhibit 10.12
SECTION 6. Offices.
Subject to Sections 3 and 4, the Executive agrees to serve without additional
compensation, if elected or appointed thereto, as a director of any of METTLER
TOLEDO's group companies, and in one or more executive offices of any of METTLER
TOLEDO's group companies.
SECTION 7. Termination.
a) This Agreement may be terminated by either party with or without cause giving
twelve (12) months notice to the end of a calendar month, subject, however, to
the provisions allowing for immediate termination according to Article 337 of
the Swiss Code of Obligations (,,Article 337").
b) The Executive may terminate his employment under Article 337 in case of
failure by the Company to comply with any material provision of this Agreement.
SECTION 8. Compensation upon Termination.
During the notice period, the Executive is entitled to full compensation as
defined in Section 5 of this Agreement and in the annexes / exhibits therein
referred to.
SECTION 9. No Mitigation or Offset / Noncompetition.
During notice periods, the Company may waive the services of the Executive. If
the Company so decides, the Executive shall have no duty to mitigate damages by
seeking another employment or otherwise, nor shall the amount of any payment or
benefit due under Section 5 be reduced by any compensation earned by the
Executive as the result of an employment by another employer, by retirement
benefits (other than as paid by the Company or under Company benefits schemes)
or by offset against any amount claimed to be owed by the Executive to the
Company. While the Executive is employed by the Company hereunder and for a
period of twelve (12) months after the termination of the Executive's
employment, the Executive shall not knowingly engage in or be employed by any
business anywhere in the world which competes with the principal businesses of
the Company or its affiliates as conducted at the date of such employment
termination.
SECTION 10. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and / or assets of the Company, by agreement in form and substance
satisfactory to the Executive, to expressly assume and agree to perform this
Agreement in same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as he would be entitled to under Sections 7 and 8 hereof if the Company
had terminated his employment under Section 7 (a) hereof. As used in this
Agreement, ,,Company" shall mean the Company as herein before defined and any
successor to its business and / or assets as aforesaid which executes and
delivers the agreement provided for in this Section 11 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
(b) If the Executive should die after the giving of notice pursuant to Section 7
but while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this
3
<PAGE>
Exhibit 10.12
Agreement to the Executive's devisee, legatee, or other designee or, if there be
no such designee, to the Executive's estate. If the Executive should die before
the giving of such notice under Section 7 and while he is employed pursuant to
this Agreement, the Company shall continue to pay to the Executive's estate his
salary for the period of six months from the date of such death and a pro rata
portion of the bonus, if any, payable for the year in which the Executive died.
SECTION 11. Notice.
For the purposes of this Agreement, notices, demands and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by US or Swiss certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
Mr. Daniel G. Schillinger
Rosenberg
7243 Pany
Switzerland
If to the Company:
Mettler-Toledo GmbH
Im Langacher
8606 Greifensee
Switzerland
Attn.: Chief Executive Officer
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
SECTION 12. Miscellaneous.
No provisions of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing signed by the
Executive and such officer of the Company as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. Insofar as this
Agreement does not stipulate anything else to the contrary, the General Rules of
Employment (,,Allgemeine Arbeitsvertragliche Bestimmungen / AVB") of the Company
shall be applicable. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of Switzerland.
4
<PAGE>
Exhibit 10.12
SECTION 13. Validity.
The invalidity or unenforceability of any provision or provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
SECTION 14. Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original but all of which together will constitute one and
the same instrument.
SECTION 15. Disputes.
All disputes between the Executive and the Company concerning the terms and
conditions of this Agreement shall be brought before the ordinary courts in the
Canton of Zurich, Switzerland.
SECTION 16. Entire Agreement.
This Agreement sets forth the entire agreement of the parties hereto in respect
of the subject matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto; and any prior agreement of the parties hereto in respect of
the subject matter contained herein is hereby terminated and canceled.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date and
year first above written.
Mettler-Toledo GmbH,
by: .........................
Robert F. Spoerry
by: .........................
Peter Burker
by: .........................
Daniel G. Schillinger
5
Exhibit 10.13
POBS Plus -
Incentive System for Members of the Group Management
of METTLER TOLEDO
Regulations, valid as of March 14, 2000
1. Objectives and Participants
With this incentive plan our aim is to pursue two main objectives:
o To orient the remuneration of Members of the Group Management (GMC)
directly to the achievement of annual operating plan targets and to
give a special reward for reaching and exceeding the plan.
o To emphasize the responsibility of each participant for the
top-ranking interest of the Group and to promote the attainment of
the overall corporate goals and success of the corporation.
Participation in the POBS Plus incentive scheme for Members of the
Group Management is determined by the Compensation Committee and must
be agreed in writing.
Criteria for participation are:
o Executive Officer and Member of the GMC of METTLER TOLEDO who by
virtue of his or her tasks and performance can significantly
influence and contribute to the overall success of the entire
Group.
2. General Principles
2.1 In addition to the yearly base salary, participants are eligible for a
bonus which is based and calculated on the grade of target achievement.
This bonus is a percentage multiple of the base salary ranging from 0 -
300%. The maximum bonus which could be paid to any participant in any
given year is USD 2.5 million.
2.2 Bonus Scale
o The bonus starts after 90% target achievement and can go up to a
maximum of 130% target achievement.
o Within this span, for each point of target achievement, a percentage
of between 2.5% and 7.5% of the base salary is calculated as bonus.
The percentage per bonus point is scaled and determined for the
specific functions
1
<PAGE>
Exhibit 10.13
by the Compensation Committee within the first 90 days of each business
year.
2.3 Targets
All targets in POBS Plus are closely related to the yearly budgets and
business plans.
As a general rule, POBS Plus includes the following target categories
and weighting:
A Group targets: Earnings per share (EPS),
Net Cash Flow from Operations (NCO);
Operating Profit Division (OP),
Sales Division;
B Operative unit targets: Sales, Operating Profit (OP)
C Personal targets: 10 - 20%
Target parameters and respective weighting within a category for the
individual functions in POBS Plus are established for each business
year in the respective POBS Plus Scheme for Members of Group
Management.
The sum of total targets defined must equal 100%.
The POBS Plus Rules which quantify the actual values and levels of
target achievement per category and parameter are established and based
on the approved budget of the Group and Operative Units.
Both the POBS Plus Scheme and Rules are proposed each business year by
the Group Management Committee, and they must be approved by the
Compensation Committee.
3. Target Setting
3.1 The requirements for complete and proper target achievement (100%)
should be challenging and ambitious, on the other hand they have to be
realistic and attainable. For each participant they should be set in
such a way that they can be fulfilled clearly and to the full extent.
3.2 Personal targets (category C) are agreed at the beginning of each
business year for each participant with his / her supervisor. They need
to be clearly measurable. The Compensation Committee sets the maximum
possible degree of target achievement for personal targets for each
business year.
3.3 For each participant, a POBS Plus Target Achievement Sheet lists per
business year all targets set incl. their weighting and the
corresponding values / levels in line with the corresponding POBS Plus
Rules.
2
<PAGE>
Exhibit 10.13
4. Target Assessment
4.1 At the end of the business year, target achievement is assessed by the
superior manager for each participant.
The degree of achievement of each individual target (range 90% to max.
130%) is multiplied by the weighting of the individual target to give a
points award for each individual target. The total score for all
targets lies between 90 and 130 points which number also corresponds to
the overall percentage of target achievement.
4.2 Personal targets (C category) are evaluated as follows:
Target Achievement
90 % Target not reached - result unsatisfactory
100 % Target reached, corresponding to the requirements - good result
110 % Clearly more than target achieved, requirements clearly exceeded,
in terms of value, time limits, quality, additional related
success - very good result
120 % Target achievement outstanding, additional major benefits /
success for the company reached, excellent result
130 % Target achievement exceptional, extraordinary additional value
to the company - unique result.
5. Bonus Calculation
The bonus is calculated in a percentage of the yearly base salary and
depends on the total sum of points reached in the target assessment.
Each full point above 90 and up to a maximum of 130 corresponds to a
bonus amount of from 2.5% to a maximum of 7.5% of the base salary, as
determined for each individual function in its applicable scaling by
the Compensation Committee for each business year.
6. Payment
During the salary year (Jan. 1 - Dec. 31 of the calendar year or April
1 - March 31 of the following year), the annual base salary will be
paid, normally divided in 12 equal monthly installments. The
distribution of this basic amount, however, can vary in certain
countries.
The Company will normally make a payment on account of the expected
bonus in December of the relevant business year which is calculated on
a provisional
3
<PAGE>
Exhibit 10.13
basis using projected results. The amount of such payment on account
cannot exceed 50 % of the presumable bonus.
The final bonus is calculated as soon as the results of the business
year and the assessment of the target achievement are known. Payment
(or deduction) adjusted by any payment on account is usually made until
April following the end of the business year.
7. Termination of Employment during the Business Year
In case of termination in the first half-year of the business year, the
bonus is paid pro rata on a set 95 % target achievement. In case of
termination of employment in the second half-year, target achievement
is measured at the end of the year (usual procedure) and the bonus
calculated accordingly will be paid pro rata.
8. Accounting Rules for Bonus Payments
Bonus payments are accounted for in the business year to which the
bonus belongs. Appropriate accruals have to be made for this purpose in
the year end closing. Carry over into accounts of the payout year are
not allowed.
Peter Burker
Head Human Resources
4
Exhibit 21
Subsidiaries of the Company
Australia
Mettler-Toledo Limited
Austria
Mettler-Toledo Ges.m.b.H.
Belgium
N.V. Mettler-Toledo B.V.
Bermuda
Mettler-Toledo Finance Ltd.
Brazil
Mettler-Toledo Industria e Commercio Ltda
Safeline do Brasil Limitada
Canada
Mettler-Toledo Inc.
China
Mettler-Toledo Changzhou Scale Limited
Mettler-Toledo Instruments (Shanghai) Ltd.
Mettler-Toledo International Trading (Shanghai) Corp.
Ohaus International Trading (Shanghai) Ltd.
Panzhihua Toledo Electronic Scale Ltd.
Xinjiang Toledo Electronic Scale Ltd.
Croatia
Mettler-Toledo d.o.o.
Czech Republic
Mettler-Toledo spol. s.r.o.
Denmark
Mettler-Toledo A/S
France
Mettler-Toledo Analyse Industrielle S.a.r.l.
Mettler-Toledo Holding (France) SAS
Mettler-Toledo S.A.
NS Testut SAS
NS Lutrana SAS
NS A.S.V. Mettler-Toledo SAS
Ohaus S.a.r.l.
Safeline SA
1
<PAGE>
Exhibit 21
Germany
Garvens Automation GmbH
Getmore Ges. fur Marketing & Media Service m.b.H.
Mettler-Toledo (Albstadt) GmbH
Mettler-Toledo GmbH Mettler-Toledo Holding Deutschland GmbH Mettler-Toledo
Management Holding Deutschland GmbH Mettler-Toledo Orga-P GmbH Ohaus Waagen
Vertriebsgesellschaft m.b.H.
Safeline GmbH
Hong Kong
Mettler-Toledo (HK) Ltd.
Hungary
Mettler-Toledo Kereskedelmi Kft.
India
Mettler-Toledo India Private Limited
Italy
Mettler-Toledo S.p.A.
Japan
Mettler-Toledo K.K.
Korea
Mettler-Toledo (Korea) Ltd.
Malaysia
Mettler-Toledo (M) Sdn. Bhd.
Mexico
Mettler-Toledo S.A. de C.V.
Ohaus de Mexico S.A. de C.V.
Netherlands
Gelan Engineering B.V.
Gelan Holding B.V.
Gelan International B.V.
Gelan Metaaldetectiesystemen B.V.
Mettler-Toledo B.V.
Mettler-Toledo Holding B.V.
Norway
Cargoscan A/S
Mettler-Toledo A/S
Poland
Mettler-Toledo sp.z.o.o.
2
<PAGE>
Exhibit 21
Russian Federation
Mettler-Toledo AO
Singapore
Mettler-Toledo (S) Pte. Ltd.
Slovak Republic
Mettler-Toledo Spol s.r.o.
Slovenia
Mettler-Toledo d.o.o.
Spain
Mettler-Toledo S.A.E.
Sweden
Mettler-Toledo AB
Switzerland
Mettler-Toledo GmbH
Mettler-Toledo Holding AG
Mettler-Toledo Logistik AG
Mettler-Toledo Pac Rim AG
Mettler-Toledo (Schweiz) AG
Microwa AG
Pivott Instrumente AG
Thailand
Mettler-Toledo (Thailand) Ltd.
United Kingdom
Bohdan Europe Limited
Mettler-Toledo Ltd.
Mettler-Toledo Myriad Limited
Ohaus UK Ltd.
Safeline Limited
Safeline Holding Company
United States of America
American Garvens Corporation [Delaware]
ASI Applied Systems Inc. [Delaware]
Mettler-Toledo Bohdan, Inc. [Illinois]
Hi-Speed Checkweigher Co., Inc. [New York]
Mettler-Toledo Chemistry Systems Holding Inc. [Delaware]
Mettler Toledo Florida Inc. [Delaware]
Mettler-Toledo Inc. [Delaware]
Mettler-Toledo Process Analytical Inc. [Massachusetts]
Ohaus Corporation [New Jersey]
Safeline Inc. [Delaware]
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.1
FINANCIAL DATA SCHEDULE
Mettler-Toledo International Inc.
------------------------------------------
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Dec-31-1999
<CASH> 17,179
<SECURITIES> 0
<RECEIVABLES> 213,577
<ALLOWANCES> (9,827)
<INVENTORY> 123,901
<CURRENT-ASSETS> 387,945
<PP&E> 268,706
<DEPRECIATION> (68,983)
<TOTAL-ASSETS> 820,973
<CURRENT-LIABILITIES> 336,175
<BONDS> 0
0
0
<COMMON> 386
<OTHER-SE> 111,629
<TOTAL-LIABILITY-AND-EQUITY> 820,973
<SALES> 1,065,473
<TOTAL-REVENUES> 1,065,473
<CGS> 585,007
<TOTAL-COSTS> 585,007
<OTHER-EXPENSES> 376,742
<LOSS-PROVISION> 1,867
<INTEREST-EXPENSE> 21,980
<INCOME-PRETAX> 79,877
<INCOME-TAX> 31,398
<INCOME-CONTINUING> 48,101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,101
<EPS-BASIC> 1.25
<EPS-DILUTED> 1.16
</TABLE>
Exhibit 99.1
Factors affecting our future operating results
Certain statements contained in our public filings, press releases and
other documents and materials as well as certain statements in written or oral
statements made by us or on our behalf are forward-looking statements based on
our current expectations and projections about future events, including:
o strategic plans
o potential growth, including penetration of developed markets and
opportunities in emerging markets
o planned product introductions
o planned operational changes and research and development efforts
o euro conversion issues
o future financial performance, including expected capital expenditures
o research and development expenditures
o potential acquisitions
o future cash sources and requirements
o potential cost savings
These forward-looking statements are subject to a number of risks and
uncertainties, including those discussed below, which could cause our actual
results to differ materially from historical results or those anticipated and
certain of which are beyond our control. The words "believe," "expect,"
"anticipate" and similar expressions identify forward-looking statements. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
The risks included here are not exhaustive. Other sections of this report may
describe additional factors that could adversely impact our business and
financial performance. Moreover, we operate in a very competitive and rapidly
changing environment. New risk factors emerge from time to time and it is not
possible for us to predict all such risk factors, nor can we assess the impact
of all such risk factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results.
Investors should also be aware that while we do, from time to time,
communicate with securities analysts, it is against our policy to disclose to
them any material non-public information or other confidential commercial
information. Accordingly, investors should not assume that we agree with any
statement or report issued by any analyst irrespective of the content of the
statement or report. Furthermore, we have a policy against issuing or confirming
financial forecasts or projections issued by others. Thus, to the extent that
reports issued by securities analysts contain any projections, forecasts or
opinions, such reports are not our responsibility.
1
<PAGE>
Exhibit 99.1
The following factors could cause actual results to differ materially
from historical results or anticipated results:
Our substantial indebtedness could impair our operations and liquidity
We have a significant amount of indebtedness. At December 31, 1999, our
consolidated net indebtedness (excluding unused commitments) was $279.4 million,
and we had additional borrowing capacity of approximately $277.0 million. Term
loans under our credit agreement comprise $153.1 million of our consolidated
indebtedness. We are required to make scheduled quarterly principal payments on
these term loans. Our ability to comply with the terms of our credit agreement
and our other debt obligations, to make cash payments with respect to our debt
obligations and to refinance any of our debt obligations will depend on our
future performance. Our future performance is subject to prevailing economic and
competitive conditions and certain financial, business and other factors beyond
our control.
Having a high degree of leverage has significant consequences for us.
For instance, high leverage might impair our ability to obtain additional
financing for acquisitions, capital expenditures, working capital or general
corporate purposes. In addition, we use a substantial portion of our cash flow
from operations to pay principal and interest on our borrowings. This use of
cash flows reduces the funds available to us for our operations and other
purposes, including investments in research and development and capital
spending. Some of our borrowings are and will continue to be at variable rates
of interest, which exposes us to the risk of increased interest rates. Finally,
we may be substantially more leveraged than some of our competitors. This may
place us at a relative competitive disadvantage and may make us more vulnerable
to a downturn in general economic conditions, a slowdown in our business or
changing market conditions and regulations.
Covenants in our debt obligations restrict our ability to incur
additional indebtedness, dispose of certain assets and make capital
expenditures. The covenants also restrict our other corporate activities. Our
ability to comply with these covenants may be affected by events beyond our
control, including economic, financial and industry conditions. A failure to
comply with the covenants and restrictions contained in our debt obligations or
any other agreements with respect to any additional financing could result in an
acceleration of the amount we owe under our debt agreements.
Currency fluctuations may effect our operating profits
Because we conduct operations in many countries, our operating income
can be significantly affected by fluctuations in currency exchange rates. Swiss
franc-denominated expenses represent a much greater percentage of our operating
expenses than Swiss franc-denominated sales represent of our net sales. In part,
this is because most of our manufacturing costs in Switzerland relate to
products that are sold outside of Switzerland. Moreover, a substantial
percentage of our research and development expenses and general and
administrative expenses are incurred in Switzerland. Therefore, if the Swiss
franc strengthens against all or most of our major trading currencies (e.g., the
U.S. dollar, the euro, other major European currencies and the Japanese yen) our
operating profit is reduced. We also have significantly more sales in European
currencies (other than the Swiss franc) than we have expenses in those
currencies. Therefore, when European currencies weaken against the
2
<PAGE>
Exhibit 99.1
U.S. dollar and the Swiss franc, it also decreases our operating profits. In
recent years, the Swiss franc and other European currencies have generally moved
in a consistent manner versus the U.S. dollar. Therefore, because the two
effects previously described have offset each other, our operating profits have
not been materially affected by movements in the U.S. dollar exchange rate
versus European currencies. However, there can be no assurance that these
currencies will continue to move in a consistent manner in the future. In
addition to the effects of exchange rate movements on operating profits, our
debt levels can fluctuate due to changes in exchange rates, particularly between
the U.S. dollar and the Swiss franc.
We are subject to certain risks associated with our international operations and
fluctuating conditions in emerging markets
We do business in many countries, including emerging markets in Asia,
Latin America and Eastern Europe. In addition to the currency risks discussed
above, international operations pose substantial other risks and problems for
us. For instance, various local jurisdictions in which we operate may revise or
alter their respective legal and regulatory requirements. In addition, we may
encounter one or more of the following obstacles or risks:
o tariffs and trade barriers
o difficulties in staffing and managing local operations
o credit risks arising from financial difficulties facing local
customers and distributors
o difficulties in protecting intellectual property
o nationalization of private enterprises
o restrictions on investments and/or limitations regarding foreign
ownership
o adverse tax consequences, including imposition or increase of
withholding and other taxes on remittances and other payments by
subsidiaries
o uncertain local economic, political and social conditions, including
hyper-inflationary conditions
We must also comply with a variety of regulations regarding the
conversion and repatriation of funds earned in local currencies. For example,
converting earnings from our operations in China into other currencies and
repatriating such funds require governmental approvals. If we cannot comply with
these or other applicable regulations, we may face increased difficulties in
utilizing cash flow generated by these operations outside of China.
Economic conditions in emerging markets have from time to time
deteriorated significantly and some emerging markets are experiencing
recessionary trends, severe currency devaluations and inflationary prices.
Moreover, economic problems in individual markets can spread to other economies,
adding to the adverse conditions we face in emerging markets. We remain
committed to emerging markets, particularly those in Asia, Latin America and
Eastern Europe. However, we expect the fluctuating economic conditions will
affect our financial results in these markets for the foreseeable future.
3
<PAGE>
Exhibit 99.1
We operate in highly competitive markets and it may be difficult to maintain a
technological advantage
Our markets are highly competitive. Weighing instruments markets are
also fragmented both geographically and by application, particularly the
industrial and food retailing market. As a result, we face numerous regional or
specialized competitors, many of which are well established in their markets. In
addition, some of our competitors are divisions of larger companies with
potentially greater financial and other resources than our own. Taken together,
the competitive forces present in our markets can impair our operating margins
in certain product lines and geographic markets.
We expect our competitors to continue to improve the design and
performance of their products and to introduce new products with competitive
prices. Although we believe that we have certain technological and other
advantages over our competitors, we may not be able to realize and maintain
these advantages. In any event, to remain competitive we must continue to invest
in research and development, sales and marketing and customer service and
support. We cannot be sure that we will have sufficient resources to continue to
make these investments or that we will be successful in identifying, developing
and maintaining any competitive advantages.
A prolonged downturn or additional consolidation in the pharmaceutical and
chemicals industries could adversely affect our operating results
Our products are used extensively in the pharmaceutical, chemicals and
food and beverage industries. Consolidation in the pharmaceutical and chemicals
industries hurt our sales in prior years. A prolonged downturn or additional
consolidation in any of these industries could adversely affect our operating
results.
We may face risks associated with future acquisitions
We plan to pursue acquisitions of complementary product lines,
technologies or businesses. Acquisitions involve numerous risks, including:
o difficulties in the assimilation of the acquired operations,
technologies and products
o diversion of management's attention from other business concerns
o potential departures of key employees of the acquired company
If we successfully identify acquisitions in the future, completing such
acquisitions may result in:
o new issuances of our stock that may be dilutive to current owners
o increases in our debt and contingent liabilities
o additional amortization expenses related to goodwill and other
intangible assets
4
<PAGE>
Exhibit 99.1
Any of these risks could materially adversely affect our profitability.
We continue to explore potential acquisitions. We may not be able to identify,
successfully complete or integrate potential acquisitions in the future.
However, even if we can, we cannot be sure that such acquisitions will have a
positive impact on our business or operating results.
Departures of key employees could impair our operations
We have employment contracts with each of our key employees. In
addition, our key employees own shares of our common stock and have options to
purchase additional shares. Nonetheless, such individuals could leave the
Company. If any key employees stopped working for us, our operations could be
harmed. We have no key man life insurance policies with respect to any of our
senior executives.
We may be adversely affected by the environmental laws and regulations to which
we are subject
We are subject to various environmental laws and regulations, including
those relating to:
o air emissions
o wastewater discharges
o the handling and disposal of solid and hazardous wastes
o the remediation of contamination associated with the use and disposal
of hazardous substances
We incur capital and operating expenditures in complying with
environmental laws and regulations both in the United States and abroad. We are
currently involved in, or have potential liability with respect to, the
remediation of past contamination in facilities both in the United States and
abroad. In addition, some of these facilities have or had been in operation for
many decades and may have used substances or generated and disposed of wastes
that are hazardous or may be considered hazardous in the future. Such sites and
disposal sites owned by others to which we sent waste may in the future be
identified as contaminated and require remediation. Accordingly, it is possible
that we could become subject to additional environmental liabilities in the
future that may harm our results of operations or financial condition.
We do not expect to pay dividends in the foreseeable future
Our credit agreement restricts our ability to pay dividends. In any
event, we do not intend to pay cash dividends on our common stock in the
foreseeable future.
Anti-takeover provisions in our certificate and by-laws and under Delaware law
could inhibit a change of control of our Company
Our certificate of incorporation and by-laws contain provisions that
could make it more difficult for a third party to acquire the Company. Our
certificate of incorporation authorizes the Board of Directors to issue
preferred stock without shareholder approval and upon such terms as it may
determine. The rights of the holders of our common stock are subject to, and may
be
5
<PAGE>
Exhibit 99.1
adversely affected by, the rights of future holders of preferred stock. In
addition, our by-laws require shareholders to provide advance notice to nominate
candidates for election as directors and to submit proposals for consideration
at shareholder meetings. 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 after he becomes an "interested stockholder." In general,
these provisions may discourage a third party from attempting to acquire the
Company and therefore may inhibit a change of control of our company under
circumstances that could give shareholders an opportunity to realize a premium
over then-prevailing market prices.
We could be adversely affected by the introduction of the European Monetary
Union
The European Economic and Monetary Union (the "EMU") introduced a new
currency, the euro, within Europe on January 1, 1999. Switzerland is not part of
the EMU.
On January 1, 1999, the participating countries adopted the euro as
their local currency, initially available for currency trading on currency
exchanges and for noncash (banking) transactions. The existing local currencies,
or legacy currencies, will remain legal tender through January 1, 2002.
Beginning on January 1, 2002, euro-denominated bills and coins will be issued
for cash transactions. For a period of six months from this date, both legacy
currencies and the euro will be legal tender. On or before July 1, 2002, the
participating countries will withdraw all legacy currency and use exclusively
the euro.
We have committed resources to conduct risk assessments and take
corrective actions, where required, to ensure that we are prepared for the
introduction of the euro. We are reviewing euro implementation and our pricing
strategy in both participating and non-participating countries where we operate.
In addition, we are reviewing existing legacy accounting and business systems
and other business assets for euro compliance and assessing the risks posed by
non-compliance by third parties. Despite these efforts, it is possible that we
or third parties on whom we depend will not have in place in a timely manner the
systems necessary to process euro-denominated transactions. Such a failure could
adversely affect our business (e.g., by causing delays in order processing and
shipment). Moreover, increased price transparency or disruption of activity in
the markets in which we operate resulting from the conversion to the euro could
hurt our business in those markets, resulting in lost revenues.
6
