-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DJJGiCJIABECVwbNUjvCTn4ispZgMI/dworamFs9rtb2S3u0r8lTROswG/X8HvK3 LXjgQ0VJ1edA3l0YmC1jlA== /in/edgar/work/0001037646-00-000014/0001037646-00-000014.txt : 20001116 0001037646-00-000014.hdr.sgml : 20001116 ACCESSION NUMBER: 0001037646-00-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001115 FILED AS OF DATE: 20001115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METTLER TOLEDO INTERNATIONAL INC/ CENTRAL INDEX KEY: 0001037646 STANDARD INDUSTRIAL CLASSIFICATION: [3826 ] IRS NUMBER: 133668641 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13595 FILM NUMBER: 769691 BUSINESS ADDRESS: STREET 1: IM LANGACHER P O BOX MT-100 STREET 2: CH 8606 GREIFENSEE CITY: SWITZERLAND STATE: V8 ZIP: 10022 BUSINESS PHONE: 2126445900 MAIL ADDRESS: STREET 1: IM LANGACHER STREET 2: P O BOX MT 100 CH 8606 GREIFENSEE CITY: SWITZERLAND STATE: V8 ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: METTLER TOLEDO INTERNATIONAL INC DATE OF NAME CHANGE: 19971117 FORMER COMPANY: FORMER CONFORMED NAME: MT INVESTORS INC DATE OF NAME CHANGE: 19970411 10-Q 1 0001.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000, OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ________________ Commission File Number 1-13595 Mettler-Toledo International Inc. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3668641 (State or other jurisdiction of (IRS Employer Identification No.) - ----------------------------------------- ----------------------------------- Incorporation or organization) Im Langacher, P.O. Box MT-100 CH 8606 Greifensee, Switzerland - ----------------------------------------- ---------------------------------- (Address of principal executive offices) (Zip Code) 41-1-944-22-11 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No____ The Registrant had 38,753,185 shares of Common Stock outstanding at September 30, 2000. METTLER-TOLEDO INTERNATIONAL INC. INDEX TO QUARTERLY REPORT ON FORM 10-Q Page No. Part I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Interim Consolidated Financial Statements: Interim Consolidated Balance Sheets as of September 30, 2000 3 and December 31, 1999 Interim Consolidated Statements of Operations for the nine 4 months ended September 30, 2000 and 1999 Interim Consolidated Statements of Operations for the three 5 months ended September 30, 2000 and 1999 Interim Consolidated Statements of Shareholders' Equity 6 for the nine months ended September 30, 2000 and 1999 Interim Consolidated Statements of Cash Flows for the nine 7 months ended September 30, 2000 and 1999 Notes to the Interim Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition 12 and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk 18 Part II. OTHER INFORMATION 18 Item 1. Legal Proceedings 18 Item 2. Changes in Security 18 Item 3. Default upon Senior Securities 18 Item 4. Submission of Matters to a Vote of Security Holders 18 Item 5. Other Information 18 Item 6. Exhibits and Reports on Form 8-K 18 Signature 19 Part I. FINANCIAL INFORMATION Item 1. Financial Statements
METTLER-TOLEDO INTERNATIONAL INC. INTERIM CONSOLIDATED BALANCE SHEETS As of September 30, 2000 and December 31, 1999 (In thousands, except per share data) September 30, December 31, 2000 1999 ---- ---- (unaudited) ASSETS Current assets: Cash and cash equivalents $15,683 $17,179 Trade accounts receivable, net 201,765 203,750 Inventories, net 130,717 123,901 Other current assets and prepaid expenses 34,090 43,115 ------- ------- Total current assets 382,255 387,945 Property, plant and equipment, net 186,473 199,723 Excess of cost over net assets acquired, net 195,129 204,395 Other assets 34,649 28,910 -------- -------- Total assets $798,506 $820,973 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable $60,266 $81,234 Accrued and other liabilities 106,384 105,783 Accrued compensation and related items 46,509 53,510 Taxes payable 48,776 48,769 Short-term borrowings and current maturities of long-term debt 45,783 46,879 ------- ------- Total current liabilities 307,718 336,175 Long-term debt 232,944 249,721 Non-current deferred taxes 21,928 22,728 Other non-current liabilities 90,330 100,334 ------- ------- Total liabilities 652,920 708,958 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 38,753,185 shares at September 30, 2000 and 38,674,768 shares at December 31, 1999 (excluding 64,467 shares held in treasury) 387 386 Additional paid-in capital 288,945 288,092 Accumulated deficit (91,607) (138,426) Accumulated other comprehensive loss (52,139) (38,037) -------- --------- Total shareholders' equity 145,586 112,015 Commitments and contingencies -------- -------- Total liabilities and shareholders' equity $798,506 $820,973 ======== ======== The accompanying notes are an integral part of these interim consolidated financial statements.
3 METTLER-TOLEDO INTERNATIONAL INC. INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS Nine months ended September 30, 2000 and 1999 (In thousands, except per share data) September 30 September 30 2000 1999 ---- ---- (unaudited) (unaudited) Net sales $797,677 $761,186 Cost of sales 443,166 422,476 ------- ------- Gross profit 354,511 338,710 Research and development 41,375 40,235 Selling, general and administrative 216,698 216,818 Amortization 8,403 7,635 Interest expense 15,212 16,567 Other charges, net 847 1,638 ------ ------ Earnings before taxes and minority interest 71,976 55,817 Provision for taxes 25,195 20,174 Minority interest (38) 453 ------- ------- Net earnings $46,819 $35,190 ======= ======= Basic earnings per common share: Net earnings $1.21 $0.91 Weighted average number of common shares 38,739,547 38,465,856 Diluted earnings per common share: Net earnings $1.11 $0.85 Weighted average number of common shares 42,032,434 41,175,684 The accompanying notes are an integral part of these interim consolidated financial statements. 4 METTLER-TOLEDO INTERNATIONAL INC. INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended September 30, 2000 and 1999 (In thousands, except per share data) September 30 September 30 2000 1999 ---- ---- (unaudited) (unaudited) Net sales $270,003 $268,006 Cost of sales 149,319 148,278 ------- ------- Gross profit 120,684 119,728 Research and development 14,093 13,913 Selling, general and administrative 72,460 75,496 Amortization 2,785 2,666 Interest expense 4,813 5,579 Other charges, net 220 1,131 ------ ------ Earnings before taxes and minority interest 26,313 20,943 Provision for taxes 9,216 7,329 Minority interest (37) (44) ------- ------- Net earnings $17,134 $13,658 ======= ======= Basic earnings per common share: Net earnings $0.44 $0.35 Weighted average number of common shares 38,753,185 38,553,843 Diluted earnings per common share: Net earnings $0.41 $0.33 Weighted average number of common shares 42,198,943 41,310,499 The accompanying notes are an integral part of these interim consolidated financial statements. 5
METTLER-TOLEDO INTERNATIONAL INC. INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Nine months ended September 30, 2000 and 1999 (In thousands, except per share data) (unaudited) Common Stock Accumulated All Classes Additional Other ----------------- Paid-in Accum. Comprehensive Shares Amount Capital Deficit Loss Total ------ ------ ------- ------- ---- ----- Balance at December 31, 1999 38,674,768 $386 $288,092 $(138,426) $(38,037) $112,015 Exercise of stock options 78,417 1 853 - - 854 Comprehensive income: Net earnings - - - 46,819 - 46,819 Change in currency translation adjustment - - - - (14,102) (14,102) ------- Comprehensive income 32,717 ---------- ---- -------- ---------- --------- -------- Balance at September 30, 2000 38,753,185 $387 $288,945 $ (91,607) $(52,139) $145,586 ========== ==== ======== ========== ========= ======== Balance at December 31, 1998 38,400,363 $384 $285,161 $(186,527) $(45,183) $ 53,835 Exercise of stock options 153,480 2 1,376 - - 1,378 Comprehensive income: Net earnings - - - 35,190 - 35,190 Change in currency translation adjustment - - - - 4,770 4,770 ----- Comprehensive income 39,960 ---------- ---- -------- ---------- --------- -------- Balance at September 30, 1999 38,553,843 $386 $286,537 $(151,337) $(40,413) $ 95,173 ========== ==== ======== ========== ========= ======== The accompanying notes are an integral part of these interim consolidated financial statements.
6
METTLER-TOLEDO INTERNATIONAL INC. INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS Nine months ended September 30, 2000 and 1999 (In thousands) September 30, September 30, 2000 1999 ---- ---- (unaudited) (unaudited) Cash flow from operating activities: Net earnings $46,819 $35,190 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 16,011 18,900 Amortization 8,403 7,635 Revaluation of acquired inventory - 998 Net loss (gain) on disposal of property, plant and equipment 129 (3,355) Deferred taxes (288) (33) Minority interest (38) 453 Increase (decrease) in cash resulting from changes in: Trade accounts receivable, net (10,060) (3,830) Inventories (13,193) (3,808) Other current assets (4,417) 2,499 Trade accounts payable (19,152) (6,667) Accruals and other liabilities, net 13,623 3,140 ------ ------ Net cash provided by operating activities 37,837 51,122 ------ ------ Cash flows from investing activities: Proceeds from sale of property, plant and equipment 635 9,673 Purchase of property, plant and equipment (18,317) (16,837) Acquisitions (18,170) (18,468) -------- -------- Net cash used in investing activities (35,852) (25,632) -------- -------- Cash flows from financing activities: Proceeds from borrowings 46,203 12,937 Repayments of borrowings (50,111) (45,755) Proceeds from issuance of common stock 854 1,378 ------ -------- Net cash used in financing activities (3,054) (31,440) ------- -------- Effect of exchange rate changes on cash and cash equivalents (427) (340) ----- ----- Net decrease in cash and cash equivalents (1,496) (6,290) Cash and cash equivalents: Beginning of period $17,179 $21,191 ------- ------- End of period $15,683 $14,901 ======= ======= The accompanying notes are an integral part of these interim consolidated financial statements.
7 METTLER-TOLEDO INTERNATIONAL INC. NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (In thousands unless otherwise stated) 1. BASIS OF PRESENTATION Mettler-Toledo International Inc. ("Mettler Toledo" or the "Company") is a global 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 accompanying interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). The interim consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The interim consolidated financial statements as of September 30, 2000 and for the nine and three month periods ended September 30, 2000 and 1999 should be read in conjunction with the December 31, 1999 and 1998 consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. The accompanying interim consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) which, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. Operating results for the nine and three month periods ended September 30, 2000 are not necessarily indicative of the results to be expected for the full year ending December 31, 2000. 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. 8 METTLER-TOLEDO INTERNATIONAL INC. NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands unless otherwise stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Inventories Inventories are valued at the lower of cost or market. Cost, which includes direct materials, labor and overhead plus indirect overhead, is determined using either the first in, first out (FIFO) or weighted average cost methods and to a lesser extent the last in, first out (LIFO) method. Inventories consisted of the following at September 30, 2000 and December 31, 1999: September 30, December 31, 2000 1999 ------------- ------------- Raw materials and parts $58,051 $53,685 Work in progress 38,382 33,073 Finished goods 34,947 37,769 ------- ------- 131,380 124,527 LIFO reserve (663) (626) -------- -------- $130,717 $123,901 ========= ========= Earnings per Common Share As described in Note 11 in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, in accordance with the treasury stock method, the Company has included the following equivalent shares relating to 5,096,495 outstanding options to purchase shares of common stock in the calculation of diluted weighted average number of common shares for the nine and three month periods ended September 30, 2000 and 1999, respectively. September 30, September 30, 2000 1999 ------------- ------------- Nine months ended 3,292,887 2,709,828 Three months ended 3,445,758 2,756,656 3. BUSINESS COMBINATIONS During the nine months ended September 30, 2000 the Company spent approximately $18.2 million on acquisitions, including approximately $10.2 million of additional consideration related to earn-out payments associated with acquisitions consummated in December of 1998. 9 METTLER-TOLEDO INTERNATIONAL INC. NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands unless otherwise stated) 3. BUSINESS COMBINATIONS (Continued) The Company accounted for the acquisition payments using the purchase method of accounting. 4. OTHER CHARGES, NET Other charges, net consists primarily of foreign currency transactions, interest income, gains on asset sales and other charges. The Company incurred losses of approximately $4.1 million during the nine months ended September 30, 1999 in connection with the exit from its glass batching business based in Belgium. 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. 5. SEGMENT REPORTING The Company has five reportable segments: Principal U.S. Operations, Principal Central European Operations, Swiss R&D and Manufacturing Operations, Other Western European Operations and Other. The following tables show the operations of the Company's operating segments for the nine months ended September 30:
Principal Other Eliminations Principal Central Swiss R&D Western and U.S. European and Mfg. European Corporate September 30, 2000 Operations Operations Operations Operations Other (a) (b) Total - ------------------------------ ---------- ---------- ---------- ---------- --------- ------------ --------- Net sales to external customers................. $ 271,219 $ 131,256 $ 20,787 $ 185,506 $188,909 $ - $ 797,677 Net sales to other segments. 30,638 37,840 104,460 30,722 86,719 (290,379) - --------- --------- --------- --------- -------- ----------- --------- Total net sales............. $ 301,857 $ 169,096 $ 125,247 $ 216,228 $275,628 $ (290,379) $ 797,677 ========= ========= ========= ========= ======== ========== ========= Adjusted operating income... $ 31,412 $ 14,816 $ 25,636 $ 12,184 $ 18,695 $ (6,305) $ 96,438 Principal Other Eliminations Principal Central Swiss R&D Western and U.S. European and Mfg. European Corporate September 30, 1999 Operations Operations Operations Operations Other (a) (b) Total - ------------------------------ ---------- ---------- ---------- ---------- --------- ------------ --------- Net sales to external customers................. $ 257,645 $ 135,066 $ 16,920 $ 185,636 $165,919 $ - $ 761,186 Net sales to other segments. 131,710 41,576 109,389 14,833 79,901 (377,409) - --------- --------- --------- --------- -------- ----------- --------- Total net sales............. $ 389,355 $ 176,642 $ 126,309 $ 200,469 $245,820 $ (377,409) $ 761,186 ========= ========= ========= ========= ======== ========== ========= Adjusted operating income... $ 28,093 $ 15,579 $ 20,676 $ 14,655 $ 18,161 $ (14,509) $ 82,655 Footnotes on following page
10 METTLER-TOLEDO INTERNATIONAL INC. NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands unless otherwise stated) 5. SEGMENT REPORTING (Continued) Footnotes from previous page (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. A reconciliation of adjusted operating income to earnings before taxes and minority interest for the nine months ended September 30 follows: September 30, September 30, 2000 1999 ------------- ------------- Adjusted operating income..................... $96,438 $82,655 Amortization.................................. 8,403 7,635 Interest expense.............................. 15,212 16,567 Revaluation of acquired inventory............. - 998 (a) Other charges, net............................ 847 1,638 --- ----- Earnings before taxes and minority interest... $71,976 $55,817 ======= ======= (a) Represents a charge for the excess of fair value over historical cost for inventories acquired in certain acquisitions. 11 Item 2. 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 the Unaudited Interim Consolidated Financial Statements included herein. General Our interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America on a basis which reflects the interim consolidated financial statements of Mettler-Toledo International Inc. Operating results for the nine and three months ended September 30, 2000 are not necessarily indicative of the results to be expected for the full year ending December 31, 2000. Results of Operations Net sales were $797.7 million and $270.0 million for the nine and three month periods ended September 30, 2000 compared to $761.2 million and $268.0 million for the corresponding periods in the prior year. This represents increases of 10% and 7% in local currencies for the nine and three month periods, respectively. The second half of 1999 benefited from Year 2000 and euro conversion related spending by our large retail customers. Results were negatively impacted by the strengthening of the U.S. dollar against other currencies. Net sales in U.S. dollars during the nine and three month periods increased 5% and 1%, respectively. Net sales by geographic customer location were as follows: Net sales in Europe increased 14% and 10% in local currencies during the nine and three month periods ended September 30, 2000 versus the corresponding periods in the prior year, principally due to organic growth in our business and, with respect to the nine-month period, the effect of businesses acquired in May 1999. Net sales in local currencies during the nine and three month periods in the Americas increased 6% as compared to the corresponding periods in 1999. Net sales in local currencies during the nine-month period in Asia and other markets increased 12%, while net sales in local currencies in the three-month period were flat, compared to the same periods in the prior year. The results of our business in Asia and other markets during the three-month period ending September 30, 2000 reflect strong performance in China and Japan, offset primarily by results in other markets. 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 $16.3 million for the nine months ended September 30, 1999. Gross profit as a percentage of net sales was 44.4% for the nine months ended September 30, 2000, compared to 44.6% before $1.0 million of non-recurring acquisition costs for the comparable period in the prior year and 44.7% for the three months ended September 30, 2000 and 1999. Current year results reflect changes in our sales mix, as well as increased raw material costs, including electronics. 12 Research and development expenses as a percentage of net sales were 5.2% for the nine and three month periods ended September 30, 2000, compared to 5.3% and 5.2% for the corresponding periods in the prior year. Selling, general and administrative expenses as a percentage of net sales decreased to 27.2% and 26.8% for the nine and three months ended September 30, 2000, compared to 28.5% and 28.2% for the corresponding periods in the prior year in part due to the lower distribution costs associated with the changes in our sales mix. Adjusted Operating Income (gross profit less research and development and selling, general and administrative expenses before amortization, other charges, net and non-recurring costs) increased 17% to $96.4 million, or 12.1% of net sales, for the nine months ended September 30, 2000, compared to $82.7 million, or 10.9% of net sales, for the corresponding period in the prior year. Adjusted Operating Income was $34.1 million, or 12.6% of net sales, for the three months ended September 30, 2000, compared to $30.3 million, or 11.3% of net sales, for the corresponding period in the prior year. The increased operating margin reflects the benefits of higher sales levels and our continuous efforts to improve productivity. Interest expense decreased to $15.2 million and $4.8 million for the nine and three month periods ended September 30, 2000, compared to $16.6 million and $5.6 million for the corresponding periods in the prior year. The decrease was principally due to reduced debt levels. Other charges, net of $0.8 million and $0.2 million for the nine and three months ended September 30, 2000 compared to other charges, net of $1.6 million and $1.1 million for the corresponding periods in the prior year. The 1999 nine month amount included a gain on an asset sale of $3.1 million offset by losses of $4.1 million to exit our glass batching business based in Belgium, of which $1.0 million was recorded in the third quarter of 1999. The 1999 amounts also included a one-time charge of $0.8 million relating to the secondary offering completed in February 1999. The provision for taxes is based upon our projected annual effective tax rate for the related period. Our effective tax rate for the nine and three month periods ended September 30, 2000 was approximately 35%. Net earnings were $46.8 million and $17.1 million for the nine and three month periods ended September 30, 2000, compared to net earnings of $37.0 million and $13.7 million before the one-time charge relating to the secondary offering and the non-recurring acquisition related charge for the corresponding periods of the prior year. Liquidity and Capital Resources At September 30, 2000, our consolidated debt, net of cash, was $263.0 million. We had borrowings of $265.4 million under our credit agreement and $13.3 million under various other arrangements as of September 30, 2000. Of our credit agreement borrowings, approximately $130.6 million was borrowed as term loans scheduled to mature in 2004 and $134.8 million was borrowed under our multi-currency revolving credit facility. At September 30, 2000, we had $273.9 million of availability remaining under our revolving credit facility. 13 At September 30, 2000, approximately $83.7 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 $195.0 million at September 30, 2000. 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 certain financial covenants. The credit agreement is secured by certain of our assets. Cash provided by operating activities totaled $37.8 million for the nine months ended September 30, 2000. In the nine months ended September 30, 1999, cash provided by operating activities totaled $51.1 million. We experienced increased inventory levels during the nine months ended September 30, 2000, in part due to additional purchases of electronic components to reduce our exposure to potential supply shortages, and the introduction of new product lines. During the nine months ended September 30, 2000, we spent approximately $18.2 million on acquisitions, including approximately $10.2 million of additional consideration related to earn-out payments associated with acquisitions consummated in December 1998. These payments were funded from cash generated from operations and additional borrowings. We continue to explore potential acquisitions to expand our product portfolio and improve our distribution capabilities. In connection with any acquisition, we may incur additional indebtedness. In November 2000, we announced agreements to acquire Berger Instruments and AVS. We also announced that we had increased our shareholding in Cargoscan to greater than 90% and our intention to purchase the minority shareholding in Cargoscan by the end of the year. Payments related to these acquisitions will be made in the remainder of 2000 and in subsequent periods. Berger Instruments is the market leader in Supercritical Fluid Chromatography (SFC), a high-performance technology used to analyze and purify chemical compounds during drug discovery. AVS is a leader in x-ray visioning solutions used in the inspection of packaged goods. Cargoscan is the leading provider of dimensioning technology used by major express carriers, freight forwarders, third-party logistic entities and distribution companies. 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 the next several years, but there can be no assurance that this will be the case. 14 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. 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 non-cash (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 nine 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 15 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. 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. New Accounting Standards In December 1999, the Securities and Exchange Commission staff released Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements," which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. In June 2000, the SEC issued an amendment SAB 101B, "Second Amendment: Revenue Recognition in Financial Statements" which further delays implementation of SAB 101 until the Company's fourth fiscal quarter of 2000. Management is currently evaluating the impact of SAB No. 101 to determine what effect, if any, it could have on our financial position and results of operations. 16 In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. It requires that an entity recognizes 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. Management has not determined the effect of the adoption of this statement. Forward-Looking Statements and Associated Risks This Quarterly Report on Form 10-Q 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 restructuring programs. These forward-looking statements are subject to a number of risks and uncertainties, certain of which are beyond our control, which could cause our actual results to differ materially from historical results or those anticipated. Certain of these risks and uncertainties have been identified in Exhibit 99.1 to our Annual Report on Form 10-K for the year ended December 31, 1999. 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. 17 Item 3. Quantitative and Qualitative Disclosures About Market Risk As of September 30, 2000, there was no material change in the information provided under Item 7A in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Part II. OTHER INFORMATION Item 1. Legal Proceedings. Not applicable Item 2. Changes in Security. Not applicable Item 3. Defaults Upon Senior Securities. Not applicable Item 4. Submission of Matters to a Vote of Security Holders. Not applicable Item 5. Other information. Not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27 - Financial data schedule (b) Reports on Form 8-K - None 18 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. Mettler-Toledo International Inc. Date: November 15, 2000 By: /s/ William P. Donnelly ------------------------ William P. Donnelly Vice President and Chief Financial Officer 19 EX-27 2 0002.txt
5 9-MOS DEC-31-2000 SEP-30-2000 15,683 0 210,606 (8,841) 130,717 382,255 262,325 (75,852) 798,506 307,718 0 0 0 387 145,199 798,506 797,677 797,677 443,166 443,166 266,488 835 15,212 71,976 25,195 46,819 0 0 0 46,819 1.21 1.11
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