EXHIBIT 99.2
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements of the Company have
been prepared to give effect to the Acquisition, including the Offering. The
accompanying Unaudited Pro Forma Balance Sheet at June 30, 1996 has been
prepared as if the Acquisition was consummated as of that date. The accompanying
Unaudited Pro Forma Statements of Operations of the Company for the year ended
December 31, 1995 and the six months ended June 30, 1995 and 1996 give effect to
the Acquisition as if it occurred at January 1, 1995.
The pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable under the circumstances.
Pro forma adjustments are applied to the historical financial statements of the
Mettler-Toledo Group to account for the Acquisition under the purchase method of
accounting. Under purchase accounting, the estimated Acquisition cost will be
allocated to the Mettler-Toledo Group's assets and liabilities based on their
relative fair values. Allocations are subject to valuations as of the date of
the Acquisition based on appraisals and other studies which are not yet
completed. Accordingly, the final allocations may differ from the amounts
reflected herein.
The Company is evaluating its business strategy as an independent company
after the Acquisition and believes that it can support continued sales growth
while further reducing its overall cost base. In July 1996, in anticipation of
the consummation of the Acquisition, the Company announced the closure of its
Westerville, Ohio facility. In addition, the Company will implement a targeted
workforce reduction by the end of 1996. The Unaudited Pro Forma Statements of
Operations reflect a pro forma adjustment of $8.3 million per year reflecting
the cost savings the Company expects to realize from these projects. See Note
(A) to the Unaudited Pro Forma Statements of Operations. A reserve of $9.0
million is reflected on the Unaudited Pro Forma Balance Sheet to reflect the
estimated costs of implementing these projects. See Note 2(F) to the Unaudited
Pro Forma Balance Sheet. Of such reserve of $9.0 million, the costs associated
with the closure of the Westerville facility of $2.0 million were recorded as a
charge in the quarter ended September 30, 1996.
In accordance with U.S. GAAP, the Company will allocate a portion of the
estimated Acquisition cost to (i) in-process research and development projects
that have economic value (currently estimated to be $120.4 million) and (ii) the
revaluation of inventories (currently estimated to be $21.1 million). In the
case of in-process research and development, the amount allocated will be
charged to expense as of the date of the Acquisition. In the case of
inventories, the revaluation amount will be charged to cost of sales over the
period in which such inventories are sold, which is expected to be one to two
quarters following the Closing. These one-time charges have not been reflected
in the accompanying Unaudited Pro Forma Statements of Operations due to their
unusual, non-recurring nature.
The pro forma financial statements have been prepared based upon the
Audited Combined Financial Statements and the Interim Financial Statements of
the Mettler-Toledo Group, included elsewhere herein, which have been prepared in
accordance with U.S. GAAP. The pro forma financial statements should be read in
conjunction with the Audited Combined Financial Statements, the Interim
Financial Statements, 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and other financial information included
elsewhere in this Prospectus. These unaudited pro forma financial statements and
related notes are provided for informational purposes only and do not purport to
be indicative of the results which would have actually been obtained had the
Acquisition and other events been completed on the dates indicated or which may
be expected to occur in the future. The Mettler-Toledo Group's historical net
income and cash flows as a wholly owned operation of Ciba are not necessarily
indicative of the net income and cash flows it might have realized as an
independent entity. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations--Effect of Acquisition on Results of
Operations.'
23
METTLER-TOLEDO, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 1996
------------------------------------------------------
METTLER-TOLEDO
METTLER-TOLEDO PRO FORMA INC.
GROUP HISTORICAL ADJUSTMENTS PRO FORMA
---------------- -------------- --------------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents...................... $ 45,935 $(40,935)(1) $ 5,000
Due from Ciba and affiliates................... 53,025 (53,025)(2)(A) --
Trade accounts receivable, net................. 157,212 157,212
Inventories.................................... 107,342 21,100(2)(B) 128,442
Deferred taxes................................. 5,836 5,836
Other current assets........................... 25,040 25,040
---------------- -------------- --------------
Total current assets........................ 394,390 (72,860) 321,530
Property, plant and equipment, net............... 225,885 52,500(2)(C) 278,385
Goodwill and other intangible assets, net........ 83,155 94,250(2)(D) 177,405
Long-term deferred taxes......................... 13,596 13,596
Debt issuance costs.............................. -- 14,013(2)(E) 14,013
Other assets..................................... 14,894 14,894
---------------- -------------- --------------
Total assets................................ $731,920 $ 87,903 $819,823
---------------- -------------- --------------
---------------- -------------- --------------
LIABILITIES AND STOCKHOLDER'S EQUITY/NET ASSETS
Current liabilities:
Trade accounts payable......................... $ 34,265 $ 34,265
Accrued and other liabilities.................. 101,782 $ 9,000(2)(F) 110,782
Taxes payable.................................. 16,439 16,439
Deferred taxes................................. 7,313 6,330(2)(G) 13,643
Bank and other loans........................... 32,610 (32,610)(2)(H) --
Notes payable to Ciba and affiliates........... 83,242 (83,242)(2)(A) --
Short-term portion of term loans............... -- 9,000(1) 9,000
---------------- -------------- --------------
Total current liabilities................... 275,651 (91,522) 184,129
Long-term debt payable to Ciba and affiliates.... 152,231 (152,231)(2)(A) --
Long-term debt due to third parties.............. 6,015 (6,015)(2)(H) --
Long-term deferred taxes......................... 12,827 14,104(2)(G) 26,931
Credit Agreement:
Term loans..................................... -- 246,000(1) 246,000
Revolving credit facility...................... -- 55,829(1) 55,829
Notes............................................ -- 135,000(1) 135,000
Other long-term liabilities...................... 88,979 10,500(2)(I) 99,479
---------------- -------------- --------------
Total liabilities........................... 535,703 211,665 747,368
Minority interest................................ 2,855 2,855
Stockholder's equity/net assets:
Net assets..................................... 193,362 (193,362)(2) --
Common stock................................... -- 190,000(1) 190,000
Accumulated deficit............................ -- (120,400)(2)(J) (120,400)
---------------- -------------- --------------
Total stockholder's equity/net assets....... 193,362 (123,762) 69,600
---------------- -------------- --------------
Total liabilities and stockholder's
equity/net assets......................... $731,920 $ 87,903 $819,823
---------------- -------------- --------------
---------------- -------------- --------------
24
METTLER-TOLEDO, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)
(1) For a description of the sources and uses of funds for the Acquisition, see
'Use of Proceeds.' The amount of all debt due to Ciba and affiliates, net of
amounts due from Ciba and affiliates, will be settled at Closing. The Company
also expects to repay all existing bank and other loans at Closing. The
Unaudited Pro Forma Balance Sheet assumes receipt at Closing of the $7,500
equity contribution that may be made after Closing, as described under 'Use of
Proceeds.'
(2) Under purchase accounting, the total estimated Acquisition cost will be
allocated to the Company's assets and liabilities based on their relative fair
values. Allocations are subject to valuations as of the date of the Acquisition
based on appraisals and other studies which are not yet completed. Accordingly,
the final allocations may be different from the amounts reflected herein. The
amount and the components of the estimated Acquisition cost, along with the
estimate of the allocation of the purchase price to assets acquired and
liabilities assumed is as follows:
Estimated Acquisition price, including debt...................... $ 642,764
Acquisition and financing costs.................................. 34,000
----------
Total estimated Acquisition price, including debt........... $ 676,764
----------
----------
Historical net book value at June 30, 1996....................... $ 193,362
Repayment of net amounts owed to Ciba and affiliates:
Due from Ciba and affiliates................................... (53,025)(A)
Notes payable to Ciba and affiliates........................... 83,242(A)
Long-term debt payable to Ciba and affiliates.................. 152,231(A)
Estimated revaluation of inventories............................. 21,100(B)
Estimated revaluation of property, plant and equipment........... 52,500(C)
Goodwill and other intangible assets, net........................ 94,250(D)
Capitalized debt issuance related expenses....................... 14,013(E)
Estimated restructuring reserve.................................. (9,000)(F)
Net deferred tax effects of certain of the purchase accounting
adjustments:
Current..................................................... (6,330)(G)
Long-term................................................... (14,104)(G)
Repayment of bank and other loans................................ 32,610(H)
Long-term debt due to third parties.............................. 6,015(H)
Record pension and post-retirement obligations at projected
benefit obligation
and accumulated benefit obligation, respectively............... (10,500)(I)
Estimated in-process research and development valuation.......... 120,400(J)
----------
$ 676,764
----------
----------
(A) As indicated in Note 1 above, the net amount of all debt due to Ciba
and affiliates will be settled at Closing.
(B) The Company will revalue certain inventories in connection with the
purchase price allocation. This revaluation will be charged to cost of sales in
the period in which the inventories are sold, which is expected to be one to two
quarters after Closing. This one-time charge is reflected in the Unaudited Pro
Forma Balance Sheet but not in the accompanying Unaudited Pro Forma Statements
of Operations due to its unusual, non-recurring nature.
(C) Represents the estimated revaluation of acquired real estate,
principally land holdings in Switzerland contiguous to certain of the Company's
manufacturing facilities.
25
(D) Represents the excess purchase price resulting from the Acquisition,
which includes value that will ultimately be attributed to patents and other
intangible assets, other acquired assets, and goodwill once the Company's asset
appraisals and other valuation studies are completed. Such asset appraisals and
valuation studies are anticipated to be completed shortly after completion of
the Acquisition. As such asset appraisals and valuation studies have not yet
been completed, for purposes of the accompanying pro forma presentation, the
excess purchase price has been included in Goodwill and other intangible assets,
net in the Unaudited Pro Forma Balance Sheet and is being amortized over an
estimated composite amortizable life of 30 years in the Unaudited Pro Forma
Statements of Operations. The Company presently estimates that upon completion
of the asset appraisals and valuation studies, approximately $20 million of such
excess purchase price may be allocated to patents and amortized over a useful
life of five years and approximately $40 million may be allocated to trademarks
and amortized over a useful life of 12 to 13 years, while the remaining
approximately $117 million would represent goodwill and be amortized over a
useful life of 40 years. Final allocation of the excess purchase price between
intangible assets and goodwill will have no material effect on the Company's
balance sheet but may affect the estimated composite amortizable life of such
intangible assets and goodwill and, accordingly, the amount of amortization
expense.
(E) Represents expenses relating to the issuance of the loans under the
Credit Agreement and the issuance of the Notes.
(F) Represents a reserve for costs associated with the closure of the
Company's Westerville, Ohio facility, which was announced in July 1996, and a
targeted workforce reduction to be implemented by the end of 1996.
(G) Represents the net deferred tax liability (both current and long-term)
relating to certain of the purchase price adjustments for which there will be no
change in underlying tax bases of the affected assets and liabilities.
(H) At Closing, the Company expects to repay all existing bank and other
loans and long-term debt to third parties. However, the Company may determine to
leave in place certain third party indebtedness following the Closing and reduce
the borrowings at Closing under the revolving credit facility.
(I) Represents the recording of the pension liability at the projected
benefit obligation, net of plan assets (funded status) level and the
post-retirement liability at the accumulated benefit obligation level.
(J) In accordance with U.S. GAAP, the Company will allocate a portion of
the purchase price to in-process research and development projects that have
economic value and immediately write-off this value as a charge to operations
upon consummation of the Acquisition. This one-time charge is reflected in the
Unaudited Pro Forma Balance Sheet but not in the Unaudited Pro Forma Statements
of Operations due to its unusual, non-recurring nature.
26
METTLER-TOLEDO, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------
METTLER-TOLEDO,
METTLER-TOLEDO PRO FORMA INC.
GROUP HISTORICAL ADJUSTMENTS PRO FORMA
---------------- -------------- ---------------
(IN THOUSANDS)
Net sales.......................... $850,415 $ 850,415
Cost of sales...................... 508,089 $ (2,600)(A) 505,489
---------------- -------------- ---------------
Gross profit..................... 342,326 2,600 344,926
Research and development
expenses......................... 54,542 (1,200)(A) 53,342
Marketing and selling expenses..... 167,396 (2,500)(A) 164,896
General and administrative
expenses......................... 81,167 2,300(B) 81,467
(2,000)(A)
Amortization of goodwill and other
intangible assets................ 2,529 3,385(C) 5,914
Other charges (income), net........ (701) (701)
---------------- -------------- ---------------
Income from operations........... 37,393 2,615 40,008
Interest expense................... 18,219 17,668(D) 38,270
2,383(E)
Financial income, net.............. 8,630 (5,388)(F) 3,242
---------------- -------------- ---------------
Income before taxes and minority
interest...................... 27,804 (22,824) 4,980
Provision for taxes................ 8,782 (4,218)(G) 4,564
Minority interest.................. 768 768
---------------- -------------- ---------------
Net income (loss).................. $ 18,254 $(18,606) $ (352)
---------------- -------------- ---------------
---------------- -------------- ---------------
See accompanying notes to Unaudited Pro Forma Statements of Operations.
27
METTLER-TOLEDO, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
-----------------------------------------------------
METTLER-TOLEDO,
METTLER-TOLEDO PRO FORMA INC.
GROUP HISTORICAL ADJUSTMENTS PRO FORMA
---------------- -------------- ---------------
(IN THOUSANDS)
Net sales..................... $406,992 $ 406,992
Cost of sales................. 243,643 $ (1,300)(A) 242,343
---------------- -------------- ---------------
Gross profit................ 163,349 1,300 164,649
Research and development
expenses.................... 27,005 (600)(A) 26,405
Marketing and selling
expenses.................... 80,965 (1,250)(A) 79,715
General and administrative
expenses.................... 37,909 1,150(B) 38,059
Amortization of goodwill and (1,000)(A)
other intangible assets..... 1,289 1,668(C) 2,957
---------------- -------------- ---------------
Income from operations...... 16,181 1,332 17,513
Interest expense.............. 8,717 9,226(D) 19,135
1,192(E)
Financial income, net......... 2,403 (2,110)(F) 293
---------------- -------------- ---------------
Income (loss) before taxes
and minority interest.... 9,867 (11,196) (1,329)
Provision (benefit) for
taxes....................... 3,117 (1,722)(G) 1,395
Minority interest............. 270 270
---------------- -------------- ---------------
Net income (loss)............. $ 6,480 $ (9,474) $ (2,994)
---------------- -------------- ---------------
---------------- -------------- ---------------
See accompanying notes to Unaudited Pro Forma Statements of Operations.
28
METTLER-TOLEDO, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
-----------------------------------------------------
METTLER-TOLEDO,
METTLER-TOLEDO PRO FORMA INC.
GROUP HISTORICAL ADJUSTMENTS PRO FORMA
---------------- -------------- ---------------
(IN THOUSANDS)
Net sales..................... $423,802 $ 423,802
Cost of sales................. 252,203 $ (1,300)(A) 250,903
---------------- -------------- ---------------
Gross profit................ 171,599 1,300 172,899
Research and development
expenses.................... 25,054 (600)(A) 24,454
Marketing and selling
expenses.................... 81,378 (1,250)(A) 80,128
General and administrative
expenses.................... 39,153 1,150(B) 39,303
Amortization of goodwill and (1,000)(A)
other intangible assets..... 1,270 1,687(C) 2,957
---------------- -------------- ---------------
Income from operations...... 24,744 1,313 26,057
Interest expense.............. 8,346 9,597(D) 19,135
1,192(E)
Financial income (expense),
net......................... 965 (1,813)(F) (848)
---------------- -------------- ---------------
Income before taxes and
minority interest........ 17,363 (11,289) 6,074
Provision for taxes........... 6,830 (3,266)(G) 3,564
Minority interest............. 526 526
---------------- -------------- ---------------
Net income.................... $ 10,007 $ (8,023) $ 1,984
---------------- -------------- ---------------
---------------- -------------- ---------------
See accompanying notes to Unaudited Pro Forma Statements of Operations.
29
METTLER-TOLEDO, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
PERIODS ENDED DECEMBER 31, 1995 AND JUNE 30, 1995 AND 1996
(IN THOUSANDS)
(A) Represents the cost savings the Company expects to realize from (i) its
targeted workforce reduction program that is expected to be completed by the end
of 1996 and (ii) the closure of the Company's Westerville, Ohio facility, which
was announced in July 1996. The Company believes it can achieve such cost
savings, which result principally from elimination of (i) the Westerville
facility's fixed manufacturing costs and (ii) the affected employees' salaries
and benefits, without otherwise affecting its cost base or impairing its sales
as a result of available manufacturing capacity in its other facilities.
(B) Reflects the estimated additional general and administrative expenses
the Company anticipates it will incur principally as a result of the Acquisition
and its changed legal, tax and financing structure. These costs include
additional administrative, treasury, internal audit and certain legal services
and an annual management fee of $1,000 to be paid to AEA Investors for
consulting and financial services to be provided to the Company.
(C) Represents the amortization of goodwill and other intangible assets
arising from the Acquisition over their useful lives (five years for
approximately $20 million allocated to patents, 12 to 13 years for approximately
$40 million allocated to trademarks and 40 years for approximately $117 million
of goodwill). See Note (D) to the Unaudited Pro Forma Balance Sheet.
(D) Reflects the net change in interest expense based on the Acquisition
financing:
SIX MONTHS ENDED
JUNE 30,
YEAR ENDED ------------------
DECEMBER 31, 1995 1995 1996
----------------- ------- -------
Elimination of historical interest
expense on
refinanced debt.................. $ (18,219) $(8,717) $(8,346)
Interest on revolving credit
facility......................... 3,350 1,675 1,675
Interest on term loans............. 19,375 9,687 9,687
Interest on Notes.................. 13,162 6,581 6,581
----------------- ------- -------
Net change....................... $ 17,668 $ 9,226 $ 9,597
----------------- ------- -------
----------------- ------- -------
For each 0.25% change in the assumed average rate on the revolving credit
facility and term loans under the Credit Agreement and the Notes, interest
expense would change by approximately $1,115 for the year ended December 31,
1995 and $557 for the six months ended June 30, 1995 and 1996.
(E) Represents the amortization of debt issuance fees plus other fees to be
incurred in connection with the Credit Agreement. The amortization periods for
the fees related to the term loans under the Credit Agreement and the Notes are
approximately seven years and ten years, respectively.
(F) Represents elimination of historical interest income.
(G) Estimated income tax effects of pre-tax pro forma adjustments and
related financing structure. The increased pro forma tax rate is principally
attributable to increased non-deductible goodwill expense.
30
INDEX TO FINANCIAL STATEMENTS
PAGE
----
METTLER-TOLEDO GROUP
Audited Combined Financial Statements:
Independent Auditors' Report....................................... F-2
Combined Statements of Net Assets as of December 31, 1994 and
1995.............................................................. F-3
Combined Statements of Operations for the years ended December 31,
1993, 1994 and 1995............................................... F-4
Combined Statements of Changes in Net Assets for the years ended
December 31, 1993, 1994 and 1995.................................. F-5
Combined Statements of Cash Flows for the years ended December 31,
1993, 1994 and 1995............................................... F-6
Notes to Combined Financial Statements for the years ended December
31, 1993, 1994 and 1995........................................... F-7
Unaudited Interim Combined Financial Statements:
Interim Combined Statements of Net Assets as of December 31, 1995
and June 30, 1996................................................. F-22
Interim Combined Statements of Operations for the six months ended
June 30, 1995 and 1996............................................ F-23
Interim Combined Statements of Changes in Net Assets for the six
months ended June 30, 1995 and 1996............................... F-24
Interim Combined Statements of Cash Flows for the six months ended
June 30, 1995 and 1996............................................ F-25
Notes to the Interim Combined Financial Statements for the six
months ended June 30, 1995 and 1996............................... F-26
MT ACQUISITION CORP.
Independent Auditors' Report.......................................... F-27
Balance Sheet as of July 16, 1996..................................... F-28
Notes to Balance Sheet as of July 16, 1996............................ F-29
METTLER-TOLEDO HOLDING INC.
Independent Auditors' Report.......................................... F-30
Consolidated Balance Sheet as of July 16, 1996........................ F-31
Notes to Consolidated Balance Sheet as of July 16, 1996............... F-32
F-1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Ciba-Geigy AG
We have audited the accompanying combined statements of net assets of the
Mettler-Toledo Group (as defined in Note 1) as of December 31, 1994 and 1995,
and the related combined statements of operations, changes in net assets and
cash flows for each of the years in the three-year period ended December 31,
1995. These combined financial statements are the responsibility of the Group's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Mettler-Toledo Group as of December 31, 1994 and 1995, and the combined results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995 in conformity with generally accepted accounting
principles in the United States of America.
KPMG FIDES PEAT
Zurich, Switzerland
February 5, 1996
F-2
METTLER-TOLEDO GROUP
COMBINED STATEMENTS OF NET ASSETS
AS OF DECEMBER 31, 1994 AND 1995
(IN THOUSANDS)
1994 1995
-------- --------
ASSETS
Current assets:
Cash and cash equivalents............................ $ 63,802 $ 41,402
Due from Ciba and affiliates (Note 3)................ 18,688 33,072
Trade accounts receivable, net (Note 4).............. 139,315 159,218
Inventories (Note 5)................................. 105,001 110,986
Deferred taxes (Note 15)............................. 6,830 6,180
Other current assets (Note 7)........................ 17,755 21,469
-------- --------
Total current assets.............................. 351,391 372,327
Property, plant and equipment, net (Note 8)............ 230,033 241,018
Goodwill, net (Note 9)................................. 86,833 84,425
Long-term deferred taxes (Note 15)..................... 10,882 14,312
Other assets (Notes 10, 14)............................ 4,059 12,012
-------- --------
Total assets...................................... $683,198 $724,094
-------- --------
-------- --------
LIABILITIES AND NET ASSETS
Current liabilities:
Trade accounts payable............................... $ 31,126 $ 34,389
Accrued and other liabilities (Note 12).............. 86,672 107,118
Taxes payable........................................ 10,596 11,737
Deferred taxes (Note 15)............................. 7,921 7,698
Bank and other loans (Note 11)....................... 24,947 29,513
Notes payable to Ciba and affiliates (Note 13)....... 64,064 91,132
-------- --------
Total current liabilities......................... 225,326 281,587
Long-term debt payable to Ciba and affiliates
(Note 13)............................................ 132,275 145,097
Long-term debt due to third parties (Note 13).......... 862 3,621
Long-term deferred taxes (Note 15)..................... 10,222 13,502
Other long-term liabilities (Note 14).................. 83,964 84,303
-------- --------
Total liabilities................................. 452,649 528,110
Minority interest...................................... 2,355 2,730
Net assets:
Capital employed..................................... 218,129 162,604
Currency translation adjustment...................... 10,065 30,650
-------- --------
Total net assets.................................. 228,194 193,254
-------- --------
Commitments and contingencies (Note 18)
Total liabilities and net assets.................. $683,198 $724,094
-------- --------
-------- --------
See the accompanying notes to the combined financial statements
F-3
METTLER-TOLEDO GROUP
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)
1993 1994 1995
--------- --------- ---------
Net sales.................................... $ 728,958 $ 769,136 $ 850,415
Cost of sales................................ 443,534 461,629 508,089
--------- --------- ---------
Gross profit............................... 285,424 307,507 342,326
Research and development expenses............ 46,438 47,994 54,542
Marketing and selling expenses............... 141,717 152,631 167,396
General and administrative expenses.......... 68,357 76,248 81,167
Amortization of goodwill..................... 2,535 2,536 2,529
Other charges (income), net (Note 16)........ 18,284 (2,852) (701)
--------- --------- ---------
Income from operations..................... 8,093 30,950 37,393
Interest expense (Note 13)................... 15,239 13,307 18,219
Financial income, net (Note 17).............. 4,174 4,864 8,630
--------- --------- ---------
Income (loss) before taxes and minority
interest................................ (2,972) 22,507 27,804
Provision for taxes (Note 15)................ 3,041 8,676 8,782
Minority interest............................ 1,140 347 768
--------- --------- ---------
Net income (loss).......................... $ (7,153) $ 13,484 $ 18,254
--------- --------- ---------
--------- --------- ---------
See the accompanying notes to the combined financial statements
F-4
METTLER-TOLEDO GROUP
COMBINED STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)
CURRENCY
CAPITAL TRANSLATION
EMPLOYED ADJUSTMENT TOTAL
-------- ---------- --------
Net assets at January 1, 1993................ $216,256 $ 36 $216,292
Capital transactions with Ciba and
affiliates................................. (6,460) -- (6,460)
Net loss..................................... (7,153) -- (7,153)
Change in currency translation adjustment.... -- (9,158) (9,158)
-------- ---------- --------
Net assets at December 31, 1993.............. 202,643 (9,122) 193,521
Capital transactions with Ciba and
affiliates................................. 2,002 -- 2,002
Net income................................... 13,484 -- 13,484
Change in currency translation adjustment.... -- 19,187 19,187
-------- ---------- --------
Net assets at December 31, 1994.............. 218,129 10,065 228,194
Capital transactions with Ciba and
affiliates................................. (73,779) -- (73,779)
Net income................................... 18,254 -- 18,254
Change in currency translation adjustment.... -- 20,585 20,585
-------- ---------- --------
Net assets at December 31, 1995.............. $162,604 $ 30,650 $193,254
-------- ---------- --------
-------- ---------- --------
See the accompanying notes to the combined financial statements
F-5
METTLER-TOLEDO GROUP
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)
1993 1994 1995
-------- -------- --------
Cash flows from operating activities:
Net income (loss)......................................... $ (7,153) $ 13,484 $ 18,254
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation......................................... 26,674 27,681 30,598
Amortization of goodwill............................. 2,535 2,536 2,529
Amortization and write-down of other intangibles..... 382 3,901 236
Net gain on disposal of long-term assets............. (305) (1,396) (1,053)
Deferred taxes....................................... (2,881) 740 (551)
Minority interest.................................... 1,140 347 768
Increase (decrease) in cash resulting from changes
in:
Trade accounts receivable, net.................... (4,765) (7,410) (9,979)
Inventories....................................... 1,218 (574) (607)
Other current assets.............................. (1,596) 1,636 (3,058)
Trade accounts payable............................ (1,728) (1,123) 1,437
Accruals and other liabilities, net............... 8,935 (5,728) 13,095
-------- -------- --------
Net cash provided by operating activities....... 22,456 34,094 51,669
-------- -------- --------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment....... 3,799 12,454 4,000
Purchase of property, plant and equipment................. (25,122) (24,916) (25,858)
Investments in other long term assets, net................ (2,534) 162 (7,484)
-------- -------- --------
Net cash used in investing activities........... (23,857) (12,300) (29,342)
-------- -------- --------
Cash flows from financing activities:
Borrowings (repayments) of third party debt............... (2,384) (311) 3,983
Ciba and affiliates borrowings (repayments)............... 16,660 (9,187) (15,693)
Capital transactions with Ciba and affiliates............. (6,460) 2,002 (37,361)
-------- -------- --------
Net cash provided by (used in) financing
activities................................... 7,816 (7,496) (49,071)
-------- -------- --------
Effect of exchange rate changes on cash and cash
equivalents............................................... 2,275 10,040 4,344
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 8,690 24,338 (22,400)
Cash and cash equivalents:
Beginning of year......................................... 30,774 39,464 63,802
-------- -------- --------
End of year............................................... $ 39,464 $ 63,802 $ 41,402
-------- -------- --------
-------- -------- --------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest............................................... $ 13,867 $ 13,225 $ 18,927
Taxes.................................................. 6,147 9,370 9,970
Non-cash financing and investing activities:
Due to Ciba for capital transactions (Note 13)............ $ 36,418
See the accompanying notes to the combined financial statements
F-6
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
1. BASIS OF PRESENTATION
The accompanying combined financial statements have been prepared in
accordance with United States generally accepted accounting principles ('U.S.
GAAP') on a basis which reflects the combined assets and liabilities ('net
assets') and sales, costs of sales and other income and expenses ('operations')
and cash flows of the companies constituting the Mettler-Toledo Group
('Mettler-Toledo' or the 'Group'). The Group represents the following entities
(including their respective subsidiaries) owned by Ciba-Geigy AG ('Ciba')
assuming that the Group was organized as a separate legal entity for all periods
presented (Ciba ownership percentage is 100% unless otherwise indicated):
JURISDICTION
ENTITY OF ORGANIZATION
- ----------------------------------------------------- -------------------------
Mettler-Toledo (Holding) Deutschland GmbH............ Germany
MARKET ORGANIZATIONS--EUROPE
Mettler-Toledo GmbH.................................. Germany
Mettler-Toledo Sp. z.o.o........................... Poland
Getmore Gesellschaft fur Marketing & Media Service
GmbH............................................ Germany
Ohaus Waagen Vertriebsgesellschaft mbH............. Germany
Mettler-Toledo SA.................................... France
Ohaus S.a.r.l...................................... France
Mettler-Toledo Ltd................................... United Kingdom
Ohaus Europe, Branch of Ohaus US..................... United Kingdom
Mettler-Toledo (Schweiz) AG.......................... Switzerland
N.V. Mettler-Toledo SA............................... Belgium
Mettler-Toledo BV.................................... Netherlands
Mettler-Toledo S.p.A. (including Grandi Impianti
Mettler-Toledo S.r.l.--52% ownership by Ciba)...... Italy
Mettler-Toledo S.A.E................................. Spain
Mettler-Toledo AB.................................... Sweden
Mettler-Toledo A/S................................. Norway
Mettler-Toledo A/S................................. Denmark
Mettler-Toledo Gesellschaft mbH...................... Austria
Mettler-Toledo spol. s.r.o......................... Slovakia
Mettler-Toledo Service s.r.o....................... Slovakia
Mettler-Toledo spol, s.r.o......................... Czech Republic
Mettler-Toledo Kereskedelmi Kft.................... Hungary
Mettler-Toledo d.o.o............................... Slovenia
Mettler-Toledo d.o.o............................... Croatia
Mettler-Toledo Analyse Industrielle S.ar.l........... France
PRODUCING ORGANIZATIONS--EUROPE
Mettler-Toledo AG.................................... Switzerland
Mettler-Toledo (Albstadt) GmbH....................... Germany
Garvens Automation GmbH.............................. Germany
F-7
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
1. BASIS OF PRESENTATION--(CONTINUED)
JURISDICTION
ENTITY OF ORGANIZATION
- ----------------------------------------------------- -------------------------
AMERICAN COMPANIES
Mettler-Toledo, Inc.................................. United States
Mettler-Toledo Inc................................... Canada
Hi-Speed Checkweigher Co., Inc....................... United States
Mettler-Toledo S.A. de C.V........................... Mexico
Mettler-Toledo Process Analytical Inc................ United States
Ohaus Corporation.................................... United States
Ohaus de Mexico S.A. de C.V.......................... Mexico
Mettler-Toledo Industria e Comercio Ltda.(1)......... Brazil
ASIAN AND PACIFIC COMPANIES
Mettler-Toledo Ltd.(2)............................... Australia
Toledo Scale (HK) Ltd................................ Hong Kong
Mettler-Toledo Instruments (Shanghai) Ltd............ Peoples Republic of China
Mettler-Toledo International Trading (Shanghai)
Corp............................................ Peoples Republic of China
Changzhou Toledo Electronic Scale Ltd. (60% ownership
by Ciba)........................................... Peoples Republic of China
Mettler-Toledo (S.E.A.) Pte. Ltd..................... Singapore
Mettler-Toledo K.K................................... Japan
Mettler-Toledo (M) Sdn. Bhd.......................... Malaysia
Mettler-Toledo (Thailand)(3)......................... Thailand
OTHER COMPANIES
Mettler-Toledo Pac Rim AG............................ Switzerland
Microwa Prazisionswaagen AG.......................... Switzerland
- ------------------
(1) Subsidiary of Mettler-Toledo AG.
(2) Subsidiary of Mettler-Toledo, Inc.
(3) Division of Ciba as of December 31, 1995. A separate legal entity formed in
1996.
- ------------------
In the opinion of management of the Group, the accompanying combined
financial statements include all material expenses that the Mettler-Toledo Group
would have incurred had it been operating as an independent entity for all
periods presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
The Mettler-Toledo Group is a manufacturer and marketer of weighing
instruments for use in laboratory, industrial and food retailing applications.
The Group also manufacturers and sells certain related laboratory
F-8
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
measurement instruments. The Group's manufacturing facilities are located in
Switzerland, the United States, Germany and China. The Group's principal
executive offices are located in Greifensee, Switzerland.
Principles of Combination
The combined financial statements include the entities listed in Note 1.
All transactions and balances between the Companies listed in Note 1 have been
eliminated.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with original
maturity dates of three months or less.
Inventories
Inventories are valued at the lower of cost or market. Cost, which includes
direct materials, labor and overhead plus indirect overhead, is determined using
the first in, first out (FIFO) or weighted average cost methods and to a lesser
extent the last in, first out (LIFO) method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is charged on a straight line basis over the
estimated useful lives of the assets as follows:
Buildings and improvements.... 15 to 50 years
Machinery and equipment....... 3 to 12 years
Computer software............. 3 years
Leasehold improvements........ Shorter of useful life or lease term
Beginning January 1, 1996 the Group adopted Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 121 (SFAS 121),
'Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of'. SFAS 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In addition, SFAS 121
requires that long-lived assets and certain identifiable intangibles to be
disposed of be reported at the lower of carrying amount or fair value less cost
to sell. Adoption of SFAS 121 had no effect on the combined financial
statements.
Goodwill
Goodwill, which represents the excess of purchase price over the fair value
of net assets acquired, is amortized on a straight-line basis over 40 years
being the expected period to be benefited. The Group assesses the recoverability
of goodwill by determining whether the amortization of the goodwill balance over
its remaining life can be recovered from the undiscounted future operating cash
flows of the acquired operation. The amount of goodwill impairment, if any, is
measured based on projected discounted future operating cash flows using a
discount rate commensurate with the risks involved. The assessment of the
recoverability of goodwill will be impacted if estimated future operating cash
flows are not achieved.
F-9
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Taxation
The Group files its own tax returns in each jurisdiction in which it
operates, except in certain jurisdictions where it files jointly with other Ciba
subsidiaries. The Group has a tax sharing arrangement with Ciba in these
countries to share the tax burden or benefits. Such arrangement results in each
company's tax burden or benefit equating to that which it would have incurred or
received if it had been filing a separate tax return.
Taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates in the respective jurisdictions in which the
Group operates that are expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred income tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Generally, deferred taxes are not provided on the unremitted earnings of
subsidiaries outside of Switzerland because it is expected that these earnings
are permanently reinvested. Such earnings may become taxable upon the sale or
liquidation of these subsidiaries or upon the remittance of dividends. Deferred
taxes are provided in situations where the Group's subsidiaries plan to make
future dividend distributions.
Research and Development
Research and development costs are expensed as incurred. Research and
development costs, including customer engineering (which represents research and
development funded by customers and, accordingly, is included in cost of sales),
amounted to approximately $52,600, $55,600 and $62,400 during 1993, 1994 and
1995, respectively.
Currency Translation and Transactions
The reporting currency for the combined financial statements of the Group
is the United States dollar (USD). The functional currency for the Group's
operations is generally the applicable local currency. Accordingly, the assets
and liabilities of companies whose functional currency is other than the USD are
included in the combination by translating the assets and liabilities into the
reporting currency at the exchange rates applicable at the end of the reporting
year. The statements of operations and cash flows of such non-USD functional
currency operations are translated at the monthly average exchange rates during
the year. Translation gains or losses are accumulated as a separate component of
net assets. Currency transaction gains or losses arising from transactions of
Group companies in currencies other than the functional currency are included in
operations at each reporting period.
Derivative Financial Instruments
The Group has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Derivative financial
instruments in the form of currency forward and option contracts are entered
into by the Group primarily as a hedge against anticipated currency exposures.
Such contracts limit the Group's exposure to both favorable and unfavorable
currency fluctuations. These contracts are adjusted to reflect market values as
of each balance sheet date, with the resulting unrealized gains and losses being
recognized in financial income or expense, as appropriate.
F-10
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable,
other current assets and current liabilities approximates fair market value
because of the short term maturity of these financial instruments. It is not
practical to determine the fair value of balances with Ciba due to the related
party nature of these financial instruments. Other financial instruments are not
significant to the combined financial statements.
Concentration of Credit Risk
The Group's revenue base is widely diversified by geographic region and by
individual customer. The Group's products are utilized in many different
industries, although extensively in the pharmaceutical and chemical industries.
The Group performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers.
Revenue Recognition
Revenue is recognized when title to a product has transferred or services
have been rendered. Revenues from service contracts are recognized on a
straight-line basis over the contract period.
Use of Estimates
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, as well as disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those
estimates.
3. DUE FROM CIBA AND AFFILIATES, NET
The amount due from Ciba, net is comprised of the following:
1994 1995
------- -------
Cash pool deposits..................................... $18,688 $22,239
Due from AG fur Prazisionsinstrumente ('AGP'), a
subsidiary of Ciba, 6.5%, revolving repayment
terms................................................ -- 10,833
------- -------
$18,688 $33,072
------- -------
------- -------
Certain Group operating units participate in an arrangement with Ciba
whereby excess cash is pooled into an account maintained by Ciba. The net
deposit with Ciba in connection with this arrangement bears interest at the
short-term money market rates available to Ciba.
Ciba performs certain limited administrative services on behalf of the
Group. The cost of such services, which has not been charged to the Group nor
included in the combined financial statements, would not be significant.
F-11
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
4. TRADE ACCOUNTS RECEIVABLE, NET
Trade accounts receivable, net, consisted of the following at December 31:
1994 1995
-------- --------
Trade accounts receivable............... $146,726 $168,510
Allowance for doubtful accounts......... (7,411) (9,292)
-------- --------
$139,315 $159,218
-------- --------
-------- --------
5. INVENTORIES
Inventories consisted of the following at December 31:
1994 1995
-------- --------
Raw materials and parts................. $ 46,305 $ 45,523
Work in progress........................ 30,689 38,191
Finished goods.......................... 30,564 30,149
-------- --------
107,558 113,863
LIFO reserve............................ (2,557) (2,877)
-------- --------
$105,001 $110,986
-------- --------
-------- --------
At December 31, 1994 and 1995, 9.2% and 8.8%, respectively, of the
Company's inventories (certain U.S. companies only) were valued using the LIFO
method of accounting. There were no material liquidations of LIFO inventories
during the periods presented.
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS
The Group may be exposed to credit losses in the event of nonperformance by
the counterparties to its currency forward and option contracts. The Group has
no reason to believe, however, that such counterparties will not be able to
fully satisfy their obligations under these contracts.
At December 31, 1994, the Group had contracts maturing during 1995 to
purchase the equivalent of approximately $130 and to sell the equivalent of
approximately $25,700 in various currencies. At December 31, 1995, the Group had
currency forward and option contracts maturing during 1996 to purchase the
equivalent of approximately $23,300 and to sell the equivalent of approximately
$27,900 in various currencies. These contracts were used to limit its exposure
to currency fluctuations on anticipated future cash flows, primarily for the
delivery and receipt of United States dollars, German marks, and Japanese yen in
exchange for Swiss francs.
At December 31, 1994 and 1995, the fair value of such financial
instruments, which the Group recognized as net unrealized gains, was
approximately $590 and $2,400, respectively.
7. OTHER CURRENT ASSETS
Other current assets consisted of the following at December 31:
1994 1995
------- -------
Prepaid expenses....................................... $ 4,273 $ 4,703
Other (including net gains on derivative financial
instruments)......................................... 13,482 16,766
------- -------
$17,755 $21,469
------- -------
------- -------
F-12
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
8. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net, consisted of the following at
December 31:
1994 1995
-------- --------
Land.............................................. $ 28,488 $ 31,535
Buildings and leasehold improvements.............. 166,281 186,608
Machinery and equipment........................... 218,824 237,457
Computer software................................. 4,114 5,373
-------- --------
417,707 460,973
Less accumulated depreciation and amortization.... (187,674) (219,955)
-------- --------
$230,033 $241,018
-------- --------
-------- --------
9. GOODWILL, NET
Goodwill, net, consists of the following at December 31:
1994 1995
-------- --------
Cost.......................... $101,572 $101,693
Accumulated amortization...... (14,739) (17,268)
-------- --------
$ 86,833 $ 84,425
-------- --------
-------- --------
10. OTHER ASSETS
Other assets consisted of the following at December 31:
1994 1995
------ -------
Bank deposits--restricted cash.......... $1,145 $ 4,697
Secured loans........................... 1,165 2,911
Other................................... 1,749 4,404
------ -------
$4,059 $12,012
------ -------
------ -------
Bank deposits--restricted cash at December 31, 1994 and 1995 represented
amounts restricted as to use under Switzerland tax law and, in 1995, deposits
collateralizing a letter of credit given by a financial institution in
connection with one of the Company's subsidiaries in the Peoples Republic of
China.
11. BANK AND OTHER LOANS
Bank and other loans consisted of the following at December 31:
1994 1995
------- -------
Bank overdraft liability................ $15,005 $16,977
Borrowings under line of credit......... 9,161 10,105
Other................................... 781 2,431
------- -------
$24,947 $29,513
------- -------
------- -------
The weighted average interest rate on the borrowings under line of credit
was approximately 6.6% and 8.0% at December 31, 1994 and 1995, respectively. The
Group had available unused bank lines of credit for short-term financing of
approximately $72,000 at December 31, 1995.
F-13
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
12. ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities consisted of the following at December 31:
1994 1995
------- --------
Accrued payroll and vacation................. $22,620 $ 26,400
Social benefits and payroll taxes............ 8,830 9,563
Other taxes payable.......................... 4,318 8,190
Warranty..................................... 5,633 6,420
Other liabilities............................ 45,271 56,545
------- --------
$86,672 $107,118
------- --------
------- --------
Warranties on Mettler-Toledo products are generally for one year. The Group
provides for warranty costs, which have not been significant, based on
historical experience.
13. DEBT
The Group's debt obligations consist of the following at December 31:
Short-term notes payable to Ciba and affiliates:
1994 1995
------- -------
Unsecured notes payable:
AGP, 4.25%, due February 29,1996 (renewable)......... $ -- $26,517
Ciba, 7.56%, due December 20, 1995................... 20,000 --
Due to Ciba for capital transactions................... -- 36,418
Due to AGP, 6.5%, revolving repayment terms............ 28,603 --
Other unsecured short-term debt to Ciba, varying
interest rates and maturities........................ 15,461 28,197
------- -------
$64,064 $91,132
------- -------
------- -------
Long-term debt payable to Ciba and affiliates:
1994 1995
-------- --------
Unsecured notes payable:
AGP, 8.4%, due December 20, 1999..................... $ -- $122,000
AGP, 6%, due December 20, 1999....................... -- 20,000
Ciba, 8.4%, due December 20, 1999
(refinanced during 1995).......................... 122,000 --
Other unsecured long-term debt to Ciba, varying
interest rates and maturities........................ 10,275 3,097
-------- --------
$132,275 $145,097
-------- --------
-------- --------
Long-term debt payable to third parties at December 31, 1994 and 1995 was
$862 and $3,621, respectively.
Interest expense consists of the following for the years ended December 31:
1993 1994 1995
------- ------- -------
Ciba........... $13,402 $10,506 $15,693
Third-party.... 1,837 2,801 2,526
------- ------- -------
$15,239 $13,307 $18,219
------- ------- -------
------- ------- -------
F-14
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
14. BENEFIT PLANS
Mettler-Toledo maintains a number of retirement plans for the benefit of
its employees.
Certain group companies sponsor defined contribution plans. Benefits are
determined and funded annually based upon the terms of the plans. Contributions
under these plans amounted to $8,455, $9,042, and $9,413, in 1993, 1994 and
1995, respectively.
Certain group companies sponsor defined benefit plans. Benefits are also
provided to employees under defined benefit plans primarily based upon years of
service and employees' compensation for certain periods during the last years of
employment.
The following table sets forth the funded status and amounts recognized in
the combined financial statements for the Group's principal defined benefit
plans at December 31, 1994 and 1995:
1994 1995
------------------------------- -------------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS EXCEED ACCUMULATED BENEFITS EXCEED
BENEFITS ASSETS BENEFITS ASSETS
------------- --------------- ------------- ---------------
Actuarial present value of accumulated
benefit obligations:
Vested benefits....................... $(8,247) $ (73,144) $ (8,582) $ (90,698)
Non-vested benefits................... (229) (4,279) (90) (3,122)
------------- --------------- ------------- ---------------
(8,476) (77,423) (8,672) (93,820)
------------- --------------- ------------- ---------------
Projected benefit obligations........... (9,166) (90,028) (10,737) (100,820)
Plan assets at fair value............... 10,135 28,414 10,546 40,091
------------- --------------- ------------- ---------------
Plan assets in excess of (less than)
projected benefit obligations......... 969 (61,614) (191) (60,729)
Unrecognized prior service cost
(benefit)............................. 502 1,103 183 (252)
Unrecognized net losses................. 66 1,265 188 247
Unrecognized transition obligations..... -- 3,835 -- 3,851
------------- --------------- ------------- ---------------
Prepaid (accrued) pension costs......... $ 1,537 $ (55,411) $ 180 $ (56,883)
------------- --------------- ------------- ---------------
------------- --------------- ------------- ---------------
The prepaid (accrued) pension costs are recognized in the accompanying
combined financial statements as other long-term assets and other long term
liabilities, respectively.
The assumed discount rates and rates of increase in future compensation
level used in calculating the projected benefit obligations vary according to
the economic conditions of the country in which the retirement plans are
situated. The range of rates used for the purposes of the above calculations
are:
1994 1995
------------- -------------
Discount rates................ 6.5% to 9.0% 6.5% to 8.0%
Compensation increase rates... 2.5% to 7.0% 2.5% to 6.0%
The expected long term rates of return on plan assets ranged between 9.0%
and 9.3% for 1993, 9.5% and 11.0% in 1994, and 9.5% and 10.0% for 1995.
The assumptions used above have a significant effect on the reported
amounts of projected benefit obligations and net periodic pension cost. For
example, increasing the assumed discount rate would have the effect of
decreasing the projected benefit obligation and increasing unrecognized net
gains.
F-15
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
14. BENEFIT PLANS--(CONTINUED)
Increasing the assumed compensation increase rate would increase the
projected benefit obligation and decrease unrecognized net gains. Increasing the
expected long-term rate of return on investments would decrease unrecognized net
gains.
Plan assets relate principally to the Group's U.S. companies and consist of
equity investments, obligations of the U.S. Treasury or other governmental
agencies, and other interest-bearing investments.
Net periodic pension cost for all of the plans above includes the following
components:
1993 1994 1995
------ ------- -------
Service cost (benefits earned during the
period).................................... $3,722 $ 3,833 $ 3,668
Interest cost on projected benefit
obligations................................ 6,055 6,426 7,561
Actual return on plan assets................. (3,609) (2,725) (8,653)
Net amortization and deferral................ 1,012 (170) 5,137
------ ------- -------
Net periodic pension expense................. $7,180 $ 7,364 $ 7,713
------ ------- -------
------ ------- -------
The Group's U.S. operations provide postretirement medical benefits to
their employees. Employee contributions for medical benefits are related to
employee years of service.
The following table sets forth the status of the U.S. postretirement plans
and amounts recognized in the Group's combined financial statements at December
31, 1994 and 1995:
1994 1995
-------- --------
Accumulated postretirement benefit obligations:
Retired...................................... $(27,837) $(27,682)
Fully eligible............................... (1,252) (1,196)
Other........................................ (2,547) (2,361)
-------- --------
(31,636) (31,239)
Unrecognized net loss.......................... 5,714 6,261
Unrecognized prior service benefit............. -- (692)
Unrecognized transition obligation............. 1,471 1,389
-------- --------
Accrued postretirement benefit cost............ $(24,451) $(24,281)
-------- --------
-------- --------
Net periodic postretirement benefit cost for the above plans includes the
following components:
1993 1994 1995
------- ------ ------
Service cost (benefits earned during the
period)......................................... $ 296 $ 333 $ 285
Interest cost on accumulated postretirement
benefit obligations............................. 2,053 2,193 2,371
Net amortization and deferral..................... 82 82 99
------- ------ ------
Net periodic postretirement benefit cost.......... $ 2,431 $2,608 $2,755
------- ------ ------
------- ------ ------
The accumulated postretirement benefit obligation and net periodic
postretirement benefit cost were determined using discount rates of 8.5% in 1993
and 7.3% in 1994 and 1995, and health care cost trend rates ranging from 10.75%
to 12.25% in 1993, 1994 and 1995, decreasing to 5.5% 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. For example, in 1995 the effect of a one-percentage-point increase
in the assumed health care cost trend rate would be an increase of $2,875 on the
accumulated
F-16
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
14. BENEFIT PLANS--(CONTINUED)
postretirement benefit obligations and an increase of $251 on the aggregate of
the service and interest cost components of the net periodic benefit cost.
15. TAXES
The sources of the Group's income (loss) before taxes and minority interest
were as follows:
1993 1994 1995
------- ------- -------
Switzerland.................................. $ (5) $ 9,855 $11,431
Non-Switzerland.............................. (2,967) 12,652 16,373
------- ------- -------
$(2,972) $22,507 $27,804
------- ------- -------
------- ------- -------
The provision (benefit) for taxes consists of:
CURRENT DEFERRED TOTAL
------- -------- ------
Year ended December 31, 1993:
Switzerland Federal........................ $ 464 $ (308) $ 156
Switzerland Canton (State) and Local....... 130 (509) (379)
Non-Switzerland............................ 5,328 (2,064) 3,264
------- -------- ------
$5,922 $ (2,881) $3,041
------- -------- ------
------- -------- ------
Year ended December 31, 1994:
Switzerland Federal........................ $1,182 $ (32) $1,150
Switzerland Canton (State) and Local....... 1,215 (53) 1,162
Non-Switzerland............................ 5,538 826 6,364
------- -------- ------
$7,935 $ 741 $8,676
------- -------- ------
------- -------- ------
Year ended December 31, 1995:
Switzerland Federal........................ $ 513 $ (92) $ 421
Switzerland Canton (State) and Local....... 481 (505) (24)
Non-Switzerland............................ 8,339 46 8,385
------- -------- ------
$9,333 $ (551) $8,782
------- -------- ------
------- -------- ------
The provision for tax expense (benefit) for the years ended December 31,
1993, 1994 and 1995 differed from the amounts computed by applying the
Switzerland federal income tax rate of 9.8% to income (loss) before taxes and
minority interest as a result of the following:
1993 1994 1995
------ ------ ------
Expected tax................................. $ (291) $2,206 $2,725
Switzerland Canton (state) and local income
taxes, net of federal income tax benefit... (342) 1,048 (21)
Non-deductible goodwill...................... 248 249 248
Change in valuation allowance................ 4,601 (716) 1,603
Non-Switzerland income taxes in excess of
(less than) 9.8%........................... (1,295) 5,591 4,968
Other, net................................... 120 298 (741)
------ ------ ------
$3,041 $8,676 $8,782
------ ------ ------
------ ------ ------
F-17
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
15. TAXES--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1994 and 1995 are presented below:
1994 1995
-------- --------
Deferred tax assets:
Inventory.............................................. $ 8,788 $ 9,706
Accrued and other liabilities.......................... 4,826 6,129
Deferred loss on sale of subsidiaries.................. 6,227 6,725
Accrued postretirement benefit costs................... 9,291 9,227
Accrued pension costs.................................. 5,684 6,276
Non-Switzerland foreign net operating loss
carryforwards........................................ 10,523 10,140
Other.................................................. 5,168 4,082
-------- --------
Total gross deferred tax assets........................ 50,507 52,285
Less valuation allowance............................... (19,563) (21,166)
-------- --------
Gross deferred tax assets less valuation allowance..... 30,944 31,119
-------- --------
Deferred tax liabilities:
Inventory.............................................. 5,946 5,952
Property, plant and equipment.......................... 21,352 21,675
Other.................................................. 4,077 4,200
-------- --------
Total gross deferred tax liabilities................... 31,375 31,827
-------- --------
Net deferred tax liability............................. $ (431) $ (708)
-------- --------
-------- --------
The net change in the total valuation allowance, including changes
resulting from translation of such amounts from the local functional currencies
to the reporting currency, for the years ended December 31, 1993, 1994 and 1995
was an increase of $4,601 and $1,603 in 1993 and 1995, respectively, and a
decrease of $716 in 1994.
The Group has established valuation allowances primarily for net operating
losses and deferred losses on the sale of subsidiaries as follows:
1994 1995
------- -------
Net operating losses:
Nordic Region........................................ $ 2,511 $ 2,680
Belgium.............................................. 1,537 1,937
Spain................................................ 2,379 1,551
Australia............................................ 1,189 1,415
Others............................................... 2,907 2,557
------- -------
Total net operating losses............................. 10,523 10,140
Deferred losses on sale of subsidiaries................ 6,227 6,725
Other.................................................. 2,813 4,301
------- -------
Total valuation allowance.............................. $19,563 $21,166
------- -------
------- -------
At December 31, 1995, the Group had federal net operating loss
carryforwards in various countries other than Switzerland for income tax
purposes of $28,017. Of this amount, $19,363 had no expiration date, relating to
subsidiaries in Sweden, Belgium, Australia, United Kingdom, and Singapore.
Additionally, there were operating
F-18
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
15. TAXES--(CONTINUED)
losses at that date in various other countries in the amount of $8,654 which
expire in varying amounts through 2001.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment.
16. OTHER CHARGES (INCOME), NET
In June, 1993, Mettler-Toledo management approved a plan of reorganization
designed to reduce the Group's production capacity in Europe. In connection with
the reorganization, the Group recorded in 1993 charges of $19,774, including
approximately $3,800 for non-cash asset writedowns and approximately $16,000 for
severance and other costs. During 1994 the reorganization was substantially
completed.
Other income in 1993, 1994 and 1995 primarily relates to gains from sales
of property, and in 1994 to a gain on sale of a cost basis investment.
17. FINANCIAL INCOME, NET
Financial income (expense) consists of the following for the years ended
December 31:
1993 1994 1995
-------- -------- --------
Interest income......................... $ 4,590 $ 4,386 $ 5,388
Foreign currency transactions, net...... (416) 478 3,242
-------- -------- --------
$ 4,174 $ 4,864 $ 8,630
-------- -------- --------
-------- -------- --------
18. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Group leases certain of its facilities in the U.S. and U.K. under
operating leases. The future minimum future lease payments under non-cancelable
operating leases are as follows at December 31, 1995:
1996.......... $ 8,497
1997.......... 5,878
1998.......... 3,731
1999.......... 1,802
2000.......... 1,145
Thereafter.... 6,407
-------
Total......... $27,460
-------
-------
Rent expense for operating leases amounted to $9,077, $10,508 and $11,480
in 1993, 1994 and 1995, respectively.
F-19
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
18. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
LEGAL
The Group 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 Group's financial condition or results of operations.
19. GEOGRAPHIC SEGMENT INFORMATION
The tables below shows the Group's operations by geographic region.
Transfers between geographic regions are priced to reflect consideration of
market conditions and the regulations of the countries in which the transferring
entities are located.
NET SALES BY NET SALES TRANSFERS BETWEEN TOTAL NET SALES INCOME (LOSS)
1993 DESTINATION BY ORIGIN GEOGRAPHIC AREAS BY ORIGIN FROM OPERATIONS
- ------------------ ------------ --------- ----------------- --------------- ---------------
Switzerland(1).... $ 29,927 $ 83,904 $ 116,281 $ 200,185 $(2,394)
Germany........... 123,464 132,012 34,403 166,415 115
Other Europe...... 193,919 172,527 679 173,206 (2,317)
------------ --------- ----------------- --------------- ---------------
Total Europe...... 347,310 388,443 151,363 539,806 (4,596)
United States..... 258,968 283,615 27,638 311,253 7,319
Other Americas.... 54,713 32,834 62 32,896 1,497
------------ --------- ----------------- --------------- ---------------
Total Americas.... 313,681 316,449 27,700 344,149 8,816
Asia and other.... 67,967 24,066 84 24,150 2,738
Eliminations...... -- -- (179,147) (179,147) 1,135
------------ --------- ----------------- --------------- ---------------
Totals............ $728,958 $ 728,958 $ -- $ 728,958 $ 8,093
------------ --------- ----------------- --------------- ---------------
------------ --------- ----------------- --------------- ---------------
NET SALES BY NET SALES TRANSFERS BETWEEN TOTAL NET SALES INCOME (LOSS) TOTAL
1994 DESTINATION BY ORIGIN GEOGRAPHIC AREAS BY ORIGIN FROM OPERATIONS ASSETS
- ------------------ ------------ --------- ----------------- --------------- --------------- ---------
Switzerland(1).... $ 31,992 $ 89,495 $ 133,583 $ 223,078 $10,516 $ 369,868
Germany........... 126,527 133,772 37,056 170,828 10,034 127,071
Other Europe...... 215,230 192,557 776 193,333 1,665 108,692
------------ --------- ----------------- --------------- --------------- ---------
Total Europe...... 373,749 415,824 171,415 587,239 22,215 605,631
United States..... 269,034 300,244 29,877 330,121 10,111 265,440
Other Americas.... 56,628 33,204 64 33,268 939 13,728
------------ --------- ----------------- --------------- --------------- ---------
Total Americas.... 325,662 333,448 29,941 363,389 11,050 279,168
Asia and other.... 69,725 19,864 75 19,939 238 21,601
Eliminations...... -- -- (201,431) (201,431) (2,553) (223,202)
------------ --------- ----------------- --------------- --------------- ---------
Totals............ $769,136 $ 769,136 $ -- $ 769,136 $30,950 $ 683,198
------------ --------- ----------------- --------------- --------------- ---------
------------ --------- ----------------- --------------- --------------- ---------
F-20
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
19. GEOGRAPHIC SEGMENT INFORMATION--(CONTINUED)
NET SALES BY NET SALES TRANSFERS BETWEEN TOTAL NET SALES INCOME (LOSS) TOTAL
1995 DESTINATION BY ORIGIN GEOGRAPHIC AREAS BY ORIGIN FROM OPERATIONS ASSETS
- ------------------ ------------ --------- ----------------- --------------- --------------- ---------
Switzerland(1).... $ 41,820 $ 102,712 $ 159,453 $ 262,165 $ 6,316 $ 593,955
Germany........... 151,974 158,393 47,379 205,772 14,799 196,460
Other Europe...... 247,802 228,939 799 229,738 2,080 123,431
------------ --------- ----------------- --------------- --------------- ---------
Total Europe...... 441,596 490,044 207,631 697,675 23,195 913,846
United States..... 263,945 298,053 29,578 327,631 7,363 257,956
Other Americas.... 52,966 32,732 131 32,863 950 14,474
------------ --------- ----------------- --------------- --------------- ---------
Total Americas.... 316,911 330,785 29,709 360,494 8,313 272,430
Asia and other.... 91,908 29,586 97 29,683 2,331 31,777
Eliminations...... -- -- (237,437) (237,437) 3,554 (493,959)
------------ --------- ----------------- --------------- --------------- ---------
Totals............ $850,415 $ 850,415 $ -- $ 850,415 $37,393 $ 724,094
------------ --------- ----------------- --------------- --------------- ---------
------------ --------- ----------------- --------------- --------------- ---------
- ------------------
(1) Includes Corporate.
20. SUBSEQUENT EVENT (UNAUDITED)
Pursuant to the terms of a Stock Purchase Agreement (as amended, the
'Agreement') dated April 2, 1996, between AEA MT Inc., AGP, and Ciba, Ciba
agreed to sell to AEA MT Inc. and AEA MT Inc. agreed to purchase from Ciba all
of the capital stock and other equity instruments in the entities listed in Note
1. Consummation of the transaction contemplated by the Agreement is subject to
various terms and conditions.
F-21
METTLER-TOLEDO GROUP
INTERIM COMBINED STATEMENTS OF NET ASSETS
DECEMBER 31, 1995 AND JUNE 30, 1996
(IN THOUSANDS)
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents............. $ 41,402 $ 45,935
Due from Ciba and affiliates.......... 33,072 53,025
Trade accounts receivable, net........ 159,218 157,212
Inventories........................... 110,986 107,342
Deferred taxes........................ 6,180 5,836
Other current assets.................. 21,469 25,040
----------------- -------------
Total current assets.................. 372,327 394,390
Property, plant and equipment, net...... 241,018 225,885
Goodwill, net........................... 84,425 83,155
Long-term deferred taxes................ 14,312 13,596
Other assets............................ 12,012 14,894
----------------- -------------
Total assets....................... $ 724,094 $ 731,920
----------------- -------------
----------------- -------------
LIABILITIES AND NET ASSETS
Current liabilities
Trade accounts payable................ $ 34,389 $ 34,265
Accrued and other liabilities......... 107,118 101,782
Taxes payable......................... 11,737 16,439
Deferred taxes........................ 7,698 7,313
Bank and other loans.................. 29,513 32,610
Notes payable to Ciba and
affiliates......................... 91,132 83,242
----------------- -------------
Total current liabilities.......... 281,587 275,651
Long-term debt payable to Ciba and
affiliates............................ 145,097 152,231
Long-term debt due to third parties..... 3,621 6,015
Long-term deferred taxes................ 13,502 12,827
Other long-term liabilities............. 84,303 88,979
----------------- -------------
Total liabilities.................. 528,110 535,703
Minority interest....................... 2,730 2,855
Net assets:
Capital employed...................... 162,604 173,964
Currency translation adjustment....... 30,650 19,398
----------------- -------------
Total net assets................... 193,254 193,362
----------------- -------------
Total liabilities and net assets... $ 724,094 $ 731,920
----------------- -------------
----------------- -------------
See the accompanying notes to the interim combined financial statements
F-22
METTLER-TOLEDO GROUP
INTERIM COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(IN THOUSANDS)
JUNE 30,
----------------------
1995 1996
--------- ---------
(UNAUDITED)
Net sales.................................... $ 406,992 $ 423,802
Cost of sales................................ 243,643 252,203
--------- ---------
Gross profit............................ 163,349 171,599
Research and development expenses............ 27,005 25,054
Marketing and selling expenses............... 80,965 81,378
General and administrative expenses.......... 37,909 39,153
Amortization of goodwill..................... 1,289 1,270
--------- ---------
Income from operations.................. 16,181 24,744
Interest expense............................. 8,717 8,346
Financial income, net........................ 2,403 965
--------- ---------
Income before taxes and minority
interest............................... 9,867 17,363
Provision for taxes.......................... 3,117 6,830
Minority interest............................ 270 526
--------- ---------
Net income.............................. $ 6,480 $ 10,007
--------- ---------
--------- ---------
See the accompanying notes to the interim combined financial statements
F-23
METTLER-TOLEDO GROUP
INTERIM COMBINED STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(IN THOUSANDS)
CURRENCY
CAPITAL TRANSLATION
EMPLOYED ADJUSTMENT TOTAL
-------- ---------- --------
(UNAUDITED)
Net assets at January 1, 1995...... $218,129 $ 10,065 $228,194
Capital transactions with Ciba and
affiliates....................... (18,644) -- (18,644)
Net income......................... 6,480 -- 6,480
Change in currency translation
adjustment....................... -- 28,823 28,823
-------- ---------- --------
Net assets at June 30, 1995........ $205,965 $ 38,888 $244,853
-------- ---------- --------
-------- ---------- --------
Net assets at January 1, 1996...... $162,604 $ 30,650 $193,254
Capital transactions with Ciba and
affiliates....................... 1,353 -- 1,353
Net income......................... 10,007 -- 10,007
Change in currency translation
adjustment....................... -- (11,252) (11,252)
-------- ---------- --------
Net assets at June 30, 1996........ $173,964 $ 19,398 $193,362
-------- ---------- --------
-------- ---------- --------
See the accompanying notes to the interim combined financial statements
F-24
METTLER TOLEDO GROUP
INTERIM COMBINED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(IN THOUSANDS)
JUNE 30,
--------------------------
1995 1996
----------- -----------
(UNAUDITED)
Cash flows from operating activities:
Net income........................................ $ 6,480 $ 10,007
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................... 13,880 12,942
Amortization of goodwill....................... 1,289 1,270
Amortization and write-down of other
intangibles................................... 314 147
Net (gain) loss on disposal of long-term
assets........................................ 290 (131)
Deferred taxes................................. 367 (191)
Minority interest.............................. 270 526
Increase (decrease) in cash resulting from
changes in:
Trade accounts receivable, net............... (3,822) (4,666)
Inventories.................................. (1,162) 279
Other current assets......................... (7,306) (352)
Trade accounts payable....................... 597 932
Accruals and other liabilities, net.......... 11,869 16,097
----------- -----------
Net cash provided by operating
activities.............................. 23,066 36,860
----------- -----------
Cash flows from investing activities:
Proceeds from sale of property, plant and
equipment...................................... 1,046 508
Purchase of property, plant and equipment......... (6,527) (10,053)
Investments in other long term assets, net........ (721) (37)
----------- -----------
Net cash used in investing activities..... (6,202) (9,582)
----------- -----------
Cash flows from financing activities:
Repayment of third party debt..................... (2,779) (1,078)
Ciba and affiliates borrowings (repayments)....... 5,291 (16,368)
Capital transactions with Ciba and affiliates..... (9,685) (2,983)
----------- -----------
Net cash used in financing activities..... (7,173) (20,429)
----------- -----------
Effect of exchange rate changes on cash and cash
equivalents.................................... 5,569 (2,316)
----------- -----------
Net increase in cash and cash
equivalents............................. 15,260 4,533
Cash and cash equivalents:........................
Beginning of year.............................. 63,802 41,402
----------- -----------
End of six month period........................ $ 79,062 $ 45,935
----------- -----------
----------- -----------
See the accompanying notes to the interim combined financial statements
F-25
METTLER-TOLEDO GROUP
NOTES TO THE INTERIM COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS UNLESS OTHERWISE STATED)
1. BASIS OF PRESENTATION
The accompanying interim combined financial statements have been prepared
in accordance with United States generally accepted accounting principles on a
basis which reflects the interim combined financial statements of the companies
constituting the Mettler-Toledo Group ('Mettler-Toledo' or the 'Group') assuming
that the Group, currently a business unit of Ciba-Geigy AG ('Ciba'), was
organized for all periods presented as a separate legal entity. Pursuant to the
terms of the Stock Purchase Agreement dated April 2, 1996 between AEA MT Inc.,
AG fur Prazisionsinstrumente, and Ciba, Ciba agreed to sell to AEA MT Inc. and
AEA MT Inc. agreed to purchase from Ciba all of the capital stock and other
equity instruments in the entities representing the Group.
The accompanying interim combined financial statements as of June 30, 1996
and for the six month periods ended June 30, 1995 and 1996 should be read in
conjunction with the December 31, 1994 and 1995 combined financial statements
and the notes thereto contained elsewhere in this Prospectus.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
The Mettler-Toledo Group is a manufacturer and marketer of weighing
instruments for use in laboratory, industrial and food retailing applications.
The Group also manufacturers and sells certain related laboratory measurement
instruments. The Group's manufacturing facilities are located in Switzerland,
the United States, Germany and China.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost, which includes
direct materials, labor and overhead plus indirect overhead, is determined using
the first in, first out (FIFO) or weighted average cost methods, and to a lesser
extent the last in, first out (LIFO) method.
Inventories consisted of the following at December 31, 1995 and June 30,
1996:
DECEMBER 31, JUNE 30,
1995 1996
------------ --------
Raw materials and parts....... $ 45,523 $ 43,227
Work in progress.............. 38,191 36,810
Finished goods................ 30,149 29,765
------------ --------
113,863 109,802
LIFO reserve.................. (2,877) (2,460)
------------ --------
$110,986 $107,342
------------ --------
------------ --------
MANAGEMENT REPRESENTATION
The accompanying unaudited interim combined financial statements have been
prepared by Group management pursuant to the rules and regulations of the
Securities and Exchange Commission and 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 six month period ended June 30, 1996 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1996.
F-26