SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001,
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 40,112,438 shares of Common Stock outstanding at June 30,
2001.
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 June 30, 2001 3
and December 31, 2000
Interim Consolidated Statements of Operations for the six 4
months ended June 30, 2001 and 2000
Interim Consolidated Statements of Operations for the three 5
months ended June 30, 2001 and 2000
Interim Consolidated Statements of Shareholders' Equity 6
for the six months ended June 30, 2001 and 2000
Interim Consolidated Statements of Cash Flows for the six 7
months ended June 30, 2001 and 2000
Notes to the Interim Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition 13
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 June 30, 2001 and December 31, 2000
(In thousands, except per share data)
June 30, December 31,
2001 2000
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 23,212 $ 21,725
Trade accounts receivable, net 210,031 212,570
Inventories, net 137,412 141,677
Other current assets and prepaid expenses 40,636 47,367
------- -------
Total current assets 411,291 423,339
Property, plant and equipment, net 182,988 199,388
Excess of cost over net assets acquired, net 221,023 228,035
Other assets 39,982 36,820
-------- --------
Total assets $855,284 $887,582
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 67,898 $ 80,513
Accrued and other liabilities 111,635 97,575
Accrued compensation and related items 38,788 51,968
Taxes payable 65,618 68,537
Short-term borrowings and current maturities of long-term debt 49,930 50,560
------- -------
Total current liabilities 333,869 349,153
Long-term debt 200,493 237,807
Non-current deferred taxes 22,939 25,939
Other non-current liabilities 96,366 95,843
------- -------
Total liabilities 653,667 708,742
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 40,112,438 shares at June 30, 2001 and 39,372,873 shares at
December 31, 2000 400 393
Additional paid-in capital 303,494 294,558
Accumulated deficit (47,127) (68,307)
Accumulated other comprehensive loss (55,150) (47,804)
-------- --------
Total shareholders' equity 201,617 178,840
Commitments and contingencies
-------- --------
Total liabilities and shareholders' equity $855,284 $887,582
======== ========
The accompanying notes are an integral part of these interim consolidated financial statements.
</table>
- 3 -
METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
Six months ended June 30, 2001 and 2000
(In thousands, except per share data)
June 30, June 30,
2001 2000
---- ----
(unaudited) (unaudited)
Net sales $544,677 $527,674
Cost of sales 299,518 293,847
------- -------
Gross profit 245,159 233,827
Research and development 30,310 27,282
Selling, general and administrative 144,124 144,238
Amortization 6,237 5,618
Interest expense 9,346 10,399
Other charges, net 15,297 627
------ ------
Earnings before taxes and minority interest 39,845 45,663
Provision for taxes 18,665 15,979
Minority interest - (1)
------- --------
Net earnings $21,180 $29,685
======= =======
Basic earnings per common share:
Net earnings $0.53 $0.77
Weighted average number of common shares 39,914,687 38,732,729
Diluted earnings per common share:
Net earnings $0.50 $0.71
Weighted average number of common shares 42,505,268 41,949,180
The accompanying notes are an integral part of these interim consolidated financial statements.
- 4 -
</Table>
METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended June 30, 2001 and 2000
(In thousands, except per share data)
June 30, June 30,
2001 2000
---- ----
(unaudited) (unaudited)
Net sales $279,033 $268,558
Cost of sales 152,184 148,972
------- -------
Gross profit 126,849 119,586
Research and development 15,503 13,909
Selling, general and administrative 70,928 70,461
Amortization 3,025 2,753
Interest expense 4,563 5,009
Other charges (income), net 15,290 (111)
------ -------
Earnings before taxes and minority interest 17,540 27,565
Provision for taxes 10,858 9,645
Minority interest - (11)
------ --------
Net earnings $ 6,682 $ 17,931
======= ========
Basic earnings per common share:
Net earnings $0.17 $0.46
Weighted average number of common shares 40,112,438 38,753,185
Diluted earnings per common share:
Net earnings $0.16 $0.43
Weighted average number of common shares 42,472,310 41,995,780
The accompanying notes are an integral part of these interim consolidated financial statements.
- 5 -
METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Six months ended June 30, 2001 and 2000
(In thousands, except per share data)
(unaudited)
Accumulated
Common Stock Additional Other
--------------------- Paid-in Accum. Comprehensive
Shares Amount Capital Deficit Loss Total
------ ------ ------- ------- ---- -----
Balance at December 31, 2000 39,372,873 $393 $294,558 $(68,307) $(47,804) $178,840
Exercise of stock options 739,565 7 8,936 - - 8,943
Comprehensive income:
Net earnings - - - 21,180 - 21,180
Fair value of cash-flow
hedging instruments - - - - (1,689) (1,689)
Change in currency
translation adjustment - - - - (5,657) (5,657)
-------
Comprehensive income 13,834
---------- ---- -------- --------- --------- --------
Balance at June 30, 2001 40,112,438 $400 $303,494 $(47,127) $(55,150) $201,617
========== ==== ======== ========= ========= ========
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 - - - 29,685 - 29,685
Change in currency
translation adjustment - - - - (9,359) (9,359)
-------
Comprehensive income 20,326
---------- ---- -------- ---------- --------- --------
Balance at June 30, 2000 38,753,185 $387 $288,945 $(108,741) $(47,396) $133,195
========== ==== ======== ========== ========= ========
The accompanying notes are an integral part of these interim consolidated financial statements.
</table>
- 6 -
METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 2001 and 2000
(In thousands)
June 30, June 30,
2001 2000
---- ----
(unaudited) (unaudited)
<s> <c> <c>
Cash flow from operating activities:
Net earnings $21,180 $29,685
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 11,367 11,018
Amortization 6,237 5,618
Other (704) (167)
Increase (decrease) in cash resulting from changes in:
Trade accounts receivable, net (672) 4,211
Inventories (4,469) (11,788)
Other current assets (4,762) (2,122)
Trade accounts payable (17,841) (19,838)
Accruals and other liabilities, net (a) 19,336 11,717
------ ------
Net cash provided by operating activities 29,672 28,334
------ ------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 1,917 300
Purchase of property, plant and equipment (15,166) (9,546)
Acquisitions (934) (16,755)
-------- --------
Net cash used in investing activities (14,183) (26,001)
-------- --------
Cash flows from financing activities:
Proceeds from borrowings 43,555 36,406
Repayments of borrowings (65,905) (40,411)
Proceeds from issuance of common stock 8,943 854
-------- -------
Net cash used in financing activities (13,407) (3,151)
-------- -------
Effect of exchange rate changes on cash and cash equivalents (595) (310)
----- -----
Net increase (decrease) in cash and cash equivalents 1,487 (1,128)
Cash and cash equivalents:
Beginning of period $21,725 $17,179
------- -------
End of period $23,212 $16,051
======= =======
(a) Accruals and other liabilities include payments for restructuring and certain acquisition
integration activities of $5.9 million in 2001 and $3.2 million in 2000.
The accompanying notes are an integral part of these interim consolidated financial statements.
</table>
- 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 is also a
leading provider of automated chemistry solutions used in drug and chemical
compound discovery and development. 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 June 30, 2001 and for the six and three month periods
ended June 30, 2001 and 2000 should be read in conjunction with the December 31,
2000 and 1999 consolidated financial statements and the notes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 31,
2000.
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 six and three month periods
ended June 30, 2001 are not necessarily indicative of the results to be expected
for the full year ending December 31, 2001.
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 June 30, 2001 and December
31, 2000:
June 30, December 31,
2001 2000
---- ----
Raw materials and parts $ 64,529 $ 67,379
Work in progress 31,145 37,289
Finished goods 43,019 38,148
------- -------
138,693 142,816
LIFO reserve (1,281) (1,139)
--------- ---------
$137,412 $141,677
======== ========
Earnings per Common Share
As described in Note 10 in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000, in accordance with the treasury stock method,
the Company has included the following equivalent shares relating to 4,395,503
outstanding options to purchase shares of common stock in the calculation of
diluted weighted average number of common shares for the six and three month
periods ended June 30, 2001 and 2000, respectively.
June 30, June 30,
2001 2000
----- ----
Six months ended 2,590,581 3,216,451
Three months ended 2,359,872 3,242,595
- 9 -
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
3. FINANCIAL INSTRUMENTS
The Company adopted Statement of Financial Accounting Standards No. 133
"Accounting for Derivative Instruments and Hedging Activities", as amended, on
January 1, 2001. 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.
As discussed more fully in Note 5 of the Company's Annual Report on
Form 10-K for the year ended December 31, 2000, the Company reduces its exposure
to changes in interest rates through the use of interest rate swap and cap
agreements. The fair value of outstanding interest rate swap and cap agreements
that are effective cash flow hedges at June 30, 2001 is included in the
Company's Consolidated Statement of Shareholders' Equity. The cumulative effect
of adopting SFAS 133 as of January 1, 2001 was not material to the Company's
consolidated financial statements.
4. OTHER CHARGES (INCOME), NET
Other charges (income), net consists primarily of foreign currency
transactions, interest income, and charges related to the Company's
cost-reduction programs.
As part of its efforts to reduce costs, the Company recorded a charge
of $15.2 million ($14.6 million after tax) during the three months ended June
30, 2001, associated primarily with headcount reductions and manufacturing
transfers. The charge comprised severance, write-downs of impaired assets to be
disposed and other exit costs. The Company expects to involuntarily terminate
approximately 350 employees and to substantially complete the manufacturing
transfers by the end of 2001. In connection with the employee related charges,
notification of the benefit arrangement had been appropriately communicated to
employees prior to June 30, 2001.
- 10 -
<page>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
4. OTHERS CHARGES (INCOME), NET (Continued)
A rollforward of the components of the Company's accrual for
restructuring activities for the six month period ended June 30 is as follows:
June 30,
2001
----
Beginning of the period............................. $ 2,980
Restructuring expense................................ 15,196
Reductions in workforce and other cash outflows...... (4,170)
Increase in retirement benefit obligation............ (2,114)
Non-cash write-downs of impaired assets to be disposed (4,721)
Impact of foreign currency........................... (32)
--------
End of the period.................................... $ 7,139
=======
The Company's accrual for restructuring activities at June 30, 2001
primarily consisted of severance, lease termination and other costs of exiting
facilities.
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 six month period ended
June 30:
<table>
<caption>
Principal Other Eliminations
Principal Central Swiss R&D Western and
U.S. European and Mfg. European Corporate
June 30, 2001 Operations Operations Operations Operations Other (a) (b) Total
- ------------------------------ ---------- ---------- ---------- ---------- --------- ------------ ---------
<s> <c> <c> <c> <c> <c> <c> <c>
Net sales to external
customers................. $ 174,050 $ 89,633 $ 13,362 $ 129,633 $137,999 $ - $ 544,677
Net sales to other segments. 14,012 28,384 70,791 20,951 70,822 (204,960) -
--------- --------- --------- --------- -------- ----------- ---------
Total net sales............. $ 188,062 $ 118,017 $ 84,153 $ 150,584 $208,821 $ (204,960) $ 544,677
========= ========= ========= ========= ======== ========== =========
Adjusted operating income... $ 9,369 $ 13,712 $ 18,434 $ 11,388 $ 17,488 $ 334 $ 70,725
Footnotes on following page
- 11 -
<page>
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands unless otherwise stated)
5. SEGMENT REPORTING (Continued)
Principal Other Eliminations
Principal Central Swiss R&D Western and
U.S. European and Mfg. European Corporate
June 30, 2000 Operations Operations Operations Operations Other (a) (b) Total
- ------------------------------ ---------- ---------- ---------- ---------- --------- ------------ ---------
<s> <c> <c> <c> <c> <c> <c> <c>
Net sales to external
customers................. $ 178,323 $ 87,686 $ 12,939 $ 127,901 $120,825 $ - $ 527,674
Net sales to other segments. 18,732 24,741 68,737 21,264 54,102 (187,576) -
--------- --------- --------- --------- -------- ----------- ---------
Total net sales............. $ 197,055 $ 112,427 $ 81,676 $ 149,165 $174,927 $ (187,576) $ 527,674
========= ========= ========= ========= ======== =========== =========
Adjusted operating income... $ 20,925 $ 8,780 $ 17,771 $ 8,432 $ 11,685 $ (5,286) $ 62,307
</table>
(a) Other includes reporting units in Asia, Eastern Europe, Latin America
and segments from other countries that do not meet the aggregation
criteria of SFAS 131.
(b) Eliminations and Corporate includes the elimination of intersegment
transactions as well as certain corporate expenses, intercompany
investments and certain goodwill, which are not included in the Company's
operating segments.
A reconciliation of adjusted operating income to earnings before taxes
and minority interest for the six month period ended June 30 follows:
June 30, June 30,
2001 2000
---- ----
Adjusted operating income....................... $70,725 $62,307
Amortization.................................... 6,237 5,618
Interest expense................................ 9,346 10,399
Other charges, net.............................. 15,297(a) 627
------- -------
Earnings before taxes and minority interest..... $39,845 $45,663
======= =======
(a) Includes a charge of $15.2 million, which comprises severance, asset
write-downs and other costs, primarily related to headcount reductions and
manufacturing transfers.
- 12 -
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 six and three
months ended June 30, 2001 are not necessarily indicative of the results to be
expected for the full year ending December 31, 2001.
Results of Operations
Net sales were $544.7 million and $279.0 million for the six and three
month periods ended June 30, 2001 compared to $527.7 million and $268.6 million
for the corresponding period in the prior year. This represents increases of 7%
and 8% in local currencies for the six and three month periods, respectively.
Results were negatively impacted by the strengthening of the U.S. dollar against
other currencies. Net sales in U.S. dollars during the six and three month
periods increased 3% and 4%, respectively.
Net sales by geographic customer location were as follows: Net sales in
Europe increased 10% and 12% in local currencies during the six and three month
periods ended June 30, 2001 versus the corresponding period in the prior year,
reflecting strong sales performance across most product lines. Net sales in
local currencies during the six and three month periods in the Americas
increased 2% as compared to the corresponding periods in 2000, principally due
to the effect of businesses acquired in 2000. Net sales in local currencies
during the six and three month periods in Asia and other markets increased 14%
and 15% compared to the same periods in the prior year. The results of our
business in Asia and other markets during the six and three month periods ending
June 30, 2001 primarily reflect strong sales performance throughout the region,
particularly Japan.
Net sales growth in the Americas was lower than Europe and Asia and
other markets primarily due to a deterioration in economic conditions. To the
extent that economic conditions significantly deteriorate in the Americas or
other parts of the world, our sales growth and profitability may be adversely
affected.
Gross profit as a percentage of net sales increased to 45.0% and 45.5%
for the six and three months ended June 30, 2001, compared to 44.3% and 44.5%
for the corresponding period in the prior year. This increase is primarily
related to changes in our sales mix, as well as benefits from various cost
savings initiatives.
Research and development expenses as a percentage of net sales
increased to 5.6% for the six and three month periods ended June 30, 2001,
compared to 5.2% for the corresponding periods in the prior year.
- 13 -
<page>
Selling, general and administrative expenses as a percentage of net
sales decreased to 26.4% and 25.4% for the six and three months ended June 30,
2001, compared to 27.3% and 26.2% 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 (income), net and non-recurring costs) increased 14% to $70.7 million,
or 13.0% of net sales, for the six months ended June 30, 2001, compared to $62.3
million, or 11.8% of net sales, for the corresponding period in the prior year.
Adjusted Operating Income was $40.4 million, or 14.5% of net sales, for the
three months ended June 30, 2001, compared to $35.2 million, or 13.1% 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 $9.3 million and $4.6 million for the six
and three month periods ended June 30, 2001, compared to $10.4 million and $5.0
million for the corresponding periods in the prior year. The decrease was
principally due to reduced debt levels.
Other charges (income), net of $15.3 million for the six and three
months ended June 30, 2001 compared to other charges (income), net of $0.6
million and $(0.1) million for the corresponding periods in the prior year. The
2001 amount includes a charge of $15.2 million ($14.6 million after tax)
primarily associated with headcount reductions and manufacturing transfers.
The provision for taxes is based upon our projected annual effective
tax rate for the related period. Our effective tax rate before the charge
associated with headcount reductions and manufacturing transfers for the six and
three month periods ended June 30, 2001 was approximately 35%.
Net earnings were $35.8 million and $21.3 million for the six and three
month periods ended June 30, 2001 before the previously mentioned charge
associated with headcount reductions and manufacturing transfers, compared to
net earnings of $29.7 million and $17.9 during the comparable periods in 2000.
Liquidity and Capital Resources
At June 30, 2001, our consolidated debt, net of cash, was $227.2
million. We had borrowings of $231.8 million under our credit agreement and
$18.6 million under various other arrangements as of June 30, 2001. Of our
credit agreement borrowings, approximately $108.0 million was borrowed as term
loans scheduled to mature in 2004 and $123.8 million was borrowed under our
multi-currency revolving credit facility. At June 30, 2001, we had $283.9
million of availability remaining under our revolving credit facility.
At June 30, 2001, approximately $124.3 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 $126.1 million at
- 14 -
<page>
June 30, 2001. 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
guaranteed by certain of our subsidiaries.
Cash provided by operating activities totaled $29.7 million for the six
months ended June 30, 2001. In the six months ended June 30, 2000, cash provided
by operating activities totaled $28.3 million.
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.
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.
- 15 -
European Economic and Monetary Union
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 European Monetary Union (the "EMU").
We expect nonparticipating European Union countries, where we also have
operations, may eventually join the EMU.
We have committed resources to ensure we are prepared for the
introduction of the euro. 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. 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 reviewing our pricing strategy throughout Europe due to the
increased price transparency created by the euro. We do not believe that the
effect of these adjustments will be material.
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 timeframe 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 July 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations" and No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets."
SFAS 141 prospectively prohibits the pooling of interest method of accounting
for business combinations initiated after June 30, 2001 and also provides new
criteria for recognizing acquired intangible assets separately from goodwill.
SFAS 142, effective for fiscal years beginning after December 15, 2001, requires
that goodwill no longer be amortized to earnings, but instead be reviewed for
impairment under SFAS 142 upon initial adoption of the Statement and on an
annual basis going forward. In addition, any goodwill resulting from
acquisitions completed after June 30, 2001 will not be amortized. We have not
yet fully assessed the impact of adopting these Statements on our consolidated
financial statements.
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
- 16 -
<page>
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,
2000. 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 June 30, 2001, 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, 2000.
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
The Mettler-Toledo International Inc. annual meeting of stockholders
was held on May 11, 2001. At the meeting, the following matters were submitted
to a vote of stockholders: the election of directors of the Company as
previously reported to the Commission, and the ratification of the appointment
of the Company's independent auditors.
As of March 16, 2001, the record date for the annual meeting, there
were 39,681,119 shares of Mettler-Toledo International Inc. common stock
entitled to vote at the meeting. The holders of 32,742,119 shares were
represented in person or in proxy at the meeting, constituting a quorum. The
vote with respect to the matters submitted to stockholders was as follows:
Withheld
Matter For or Against Abstained
- ------ --- ---------- ---------
Election of Directors
Robert F. Spoerry 32,648,893 93,226
Philip Caldwell 32,713,599 28,520
John T. Dickson 32,705,419 36,700
Reginald H. Jones 32,712,896 29,223
John D. Macomber 32,717,928 24,191
George M. Milne 32,720,628 21,491
Thomas P. Salice 32,720,545 21,574
Appointment of Independent Auditors
32,720,897 15,586 5,636
Item 5. Other information. Not applicable
Item 6. Exhibits and Reports on Form 8-K. Not applicable
- 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: August 15, 2001 By: /s/ William P. Donnelly
------------------------
William P. Donnelly
Vice President and
Chief Financial Officer
- 19 -