MTD_10Q_6.30.2012
Table of Contents

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2012, 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
 
(I.R.S Employer Identification No.)
incorporation or organization)
 
 
1900 Polaris Parkway
Columbus, Ohio 43240
and
Im Langacher, P.O. Box MT-100
CH 8606 Greifensee, Switzerland
_________________________________________________________
 (Address of principal executive offices)
(Zip Code)

1-614-438-4511 and +41-44-944-22-11
________________________________________________________________________________
(Registrant's telephone number, including area code)

not applicable
______________________________________________________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

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 ___

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web-site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   X   No ___             

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer.  X  Accelerated filer __ Non-accelerated filer __ (Do not check if a smaller reporting company)Smaller reporting company __     

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ___ No  X 

The Registrant had 31,026,152 shares of Common Stock outstanding at June 30, 2012.
 




METTLER-TOLEDO INTERNATIONAL INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q

 
 
PAGE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.
Financial Statements

METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Three months ended June 30, 2012 and 2011
(In thousands, except share data)
(unaudited)

 
June 30,
2012
 
June 30,
2011
Net sales
 
 
 
Products
$
450,079

 
$
439,321

Service
120,204

 
121,767

Total net sales
570,283

 
561,088

Cost of sales
 
 
 
Products
198,612

 
189,253

Service
72,663

 
75,644

Gross profit
299,008

 
296,191

Research and development
27,966

 
29,605

Selling, general and administrative
169,985

 
172,054

Amortization
5,357

 
4,325

Interest expense
5,706

 
5,692

Restructuring charges
7,835

 
1,971

Other charges (income), net
433

 
1,207

Earnings before taxes
81,726

 
81,337

Provision for taxes
20,022

 
21,149

Net earnings
$
61,704

 
$
60,188

 
 
 
 
Basic earnings per common share:
 
 
 
Net earnings
$
1.97

 
$
1.88

Weighted average number of common shares
31,267,660

 
31,997,850

 
 
 
 
Diluted earnings per common share:
 
 
 
Net earnings
$
1.93

 
$
1.82

Weighted average number of common and common equivalent shares
32,038,928

 
33,013,887

 
 
 
 
Comprehensive income, net of tax (Note 2)
$
36,969

 
$
97,326



The accompanying notes are an integral part of these interim consolidated financial statements.

- 3 -

Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Six months ended June 30, 2012 and 2011
(In thousands, except share data)
(unaudited)

 
June 30,
2012
 
June 30,
2011
Net sales
 
 
 
Products
$
870,070

 
$
826,395

Service
235,613

 
233,459

Total net sales
1,105,683

 
1,059,854

Cost of sales
 
 
 
Products
386,457

 
356,966

Service
143,116

 
145,190

Gross profit
576,110

 
557,698

Research and development
56,633

 
55,956

Selling, general and administrative
337,626

 
333,432

Amortization
10,556

 
7,947

Interest expense
11,529

 
11,403

Restructuring charges
8,143

 
2,469

Other charges (income), net
589

 
1,876

Earnings before taxes
151,034

 
144,615

Provision for taxes
37,003

 
37,600

Net earnings
$
114,031

 
$
107,015

 
 
 
 
Basic earnings per common share:
 
 
 
Net earnings
$
3.63

 
$
3.33

Weighted average number of common shares
31,399,788

 
32,144,223

 
 
 
 
Diluted earnings per common share:
 
 
 
Net earnings
$
3.54

 
$
3.23

Weighted average number of common and common equivalent shares
32,212,927

 
33,152,760

 
 
 
 
Comprehensive income, net of tax (Note 2)
$
110,087

 
$
163,069



The accompanying notes are an integral part of these interim consolidated financial statements.

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Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED BALANCE SHEETS
As of June 30, 2012 and December 31, 2011
(In thousands, except share data)
(unaudited)

 
June 30,
2012
 
December 31,
2011
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
134,766

 
$
235,601

Trade accounts receivable, less allowances of $12,243 at June 30, 2012
397,238

 
425,147

and $12,317 at December 31, 2011
 
Inventories
217,231

 
241,421

Current deferred tax assets, net
51,491

 
51,125

Other current assets and prepaid expenses
60,250

 
65,569

Total current assets
860,976

 
1,018,863

Property, plant and equipment, net
427,666

 
410,007

Goodwill
446,280

 
447,743

Other intangible assets, net
118,439

 
121,410

Non-current deferred tax assets, net
114,651

 
118,899

Other non-current assets
87,614

 
86,552

Total assets
$
2,055,626

 
$
2,203,474

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
 
 
 
Trade accounts payable
$
129,988

 
$
168,109

Accrued and other liabilities
98,419

 
100,320

Accrued compensation and related items
95,323

 
139,940

Deferred revenue and customer prepayments
95,691

 
99,584

Taxes payable
58,587

 
55,139

Current deferred tax liabilities
17,919

 
18,452

Short-term borrowings and current maturities of long-term debt
27,075

 
28,300

Total current liabilities
523,002

 
609,844

Long-term debt
431,730

 
476,715

Non-current deferred tax liabilities
120,664

 
125,833

Other non-current liabilities
205,256

 
209,945

Total liabilities
1,280,652

 
1,422,337

Commitments and contingencies (Note 14)


 


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 44,786,011 and 44,786,011 shares; outstanding 31,026,152 and 31,590,101 shares
 
 
 
at June 30, 2012 and December 31, 2011, respectively
448

 
448

Additional paid-in capital
622,454

 
616,202

Treasury stock at cost (13,759,859 shares at June 30, 2012 and 13,195,910 shares
(1,341,120
)
 
(1,225,125
)
at December 31, 2011)
 
Retained earnings
1,584,074

 
1,476,550

Accumulated other comprehensive income (loss)
(90,882
)
 
(86,938
)
Total shareholders’ equity
774,974

 
781,137

Total liabilities and shareholders’ equity
$
2,055,626

 
$
2,203,474



The accompanying notes are an integral part of these interim consolidated financial statements.

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Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Six months ended June 30, 2012 and twelve months ended December 31, 2011
(In thousands, except share data)
(unaudited)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional Paid-in Capital
 
 
 
 
 
Accumulated Other Comprehensive Income (Loss)
 
 
 
Common Stock
 
 
Treasury Stock
 
Retained Earnings
 
 
 
 
Shares
 
Amount
 
 
 
 
 
Total
Balance at December 31, 2010
32,425,315

 
$
448

 
$
597,195

 
$
(1,057,390
)
 
$
1,223,130

 
$
8,201

 
$
771,584

Exercise of stock options and restricted
 
 
 
 
 
 
 
 
 
 
 
 
 
stock units
450,613

 

 

 
36,843

 
(16,073
)
 

 
20,770

Repurchases of common stock
(1,285,827
)
 

 

 
(204,578
)
 

 

 
(204,578
)
Tax benefit resulting from exercise of
 
 
 
 
 
 
 
 
 
 
 
 
 
certain employee stock options

 

 
6,737

 

 

 

 
6,737

Share-based compensation

 

 
12,270

 

 

 

 
12,270

Net earnings

 

 

 

 
269,493

 

 
269,493

Other comprehensive income (loss),
 
 
 
 
 
 
 
 
 
 
 
 
 
net of tax (Note 2)

 

 

 

 

 
(95,139
)
 
(95,139
)
Balance at December 31, 2011
31,590,101

 
$
448

 
$
616,202

 
$
(1,225,125
)
 
$
1,476,550

 
$
(86,938
)
 
$
781,137

Exercise of stock options and restricted
 
 
 
 
 
 
 
 
 
 
 
 
 
stock units
233,146

 

 

 
19,771

 
(6,507
)
 

 
13,264

Repurchases of common stock
(797,095
)
 

 

 
(135,766
)
 

 

 
(135,766
)
Tax benefit resulting from exercise of
 
 
 
 
 
 
 
 
 
 
 
 
 
certain employee stock options

 

 
298

 

 

 

 
298

Share-based compensation

 

 
5,954

 

 

 

 
5,954

Net earnings

 

 

 

 
114,031

 

 
114,031

Other comprehensive income (loss),
 
 
 
 
 
 
 
 
 
 
 
 
 
net of tax (Note 2)

 

 

 

 

 
(3,944
)
 
(3,944
)
Balance at June 30, 2012
31,026,152

 
$
448

 
$
622,454

 
$
(1,341,120
)
 
$
1,584,074

 
$
(90,882
)
 
$
774,974

 
 
 
 
 
 
 
 
 
 
 
 
 
 


The accompanying notes are an integral part of these interim consolidated financial statements.

- 6 -

Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 2012 and 2011
(In thousands)
(unaudited)

 
June 30,
2012
 
June 30,
2011
Cash flows from operating activities:
 
 
 
Net earnings
$
114,031

 
$
107,015

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation
16,106

 
14,854

Amortization
10,556

 
7,947

Deferred tax benefit
(4,758
)
 
(8,058
)
Excess tax benefits from share-based payment arrangements
(340
)
 
(4,931
)
Share-based compensation
5,954

 
5,722

Other
1,258

 
(515
)
Increase (decrease) in cash resulting from changes in:
 
 
 
Trade accounts receivable, net
23,645

 
4,121

Inventories
21,832

 
(33,628
)
Other current assets
2,220

 
1,229

Trade accounts payable
(37,727
)
 
6,874

Taxes payable
4,369

 
(796
)
Accruals and other
(45,097
)
 
(6,281
)
Net cash provided by operating activities
112,049

 
93,553

Cash flows from investing activities:
 
 
 
Proceeds from sale of property, plant and equipment
153

 
2,302

Purchase of property, plant and equipment
(43,233
)
 
(40,517
)
Acquisitions
(1,541
)
 
(15,463
)
Other investing activities

 
(882
)
Net cash used in investing activities
(44,621
)
 
(54,560
)
Cash flows from financing activities:
 
 
 
Proceeds from borrowings
99,813

 
46,443

Repayments of borrowings
(145,612
)
 
(104,200
)
Proceeds from stock option exercises
13,264

 
6,583

Repurchases of common stock
(135,766
)
 
(114,179
)
Excess tax benefits from share-based payment arrangements
340

 
4,931

Other financing activities
(543
)
 
67

Net cash used in financing activities
(168,504
)
 
(160,355
)
Effect of exchange rate changes on cash and cash equivalents
241

 
2,548

Net decrease in cash and cash equivalents
(100,835
)
 
(118,814
)
Cash and cash equivalents:
 
 
 
Beginning of period
235,601

 
447,577

End of period
$
134,766

 
$
328,763



The accompanying notes are an integral part of these interim consolidated financial statements.


Table of Contents
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2012 – Unaudited
(In thousands, except share data, unless otherwise stated)


1.
BASIS OF PRESENTATION
Mettler-Toledo International Inc. ("Mettler-Toledo" or the "Company") is a leading global supplier of precision instruments and services. The Company manufactures weighing instruments for use in laboratory, industrial, packaging, logistics and food retailing applications. The Company also manufactures several related analytical instruments and provides automated chemistry solutions used in drug and chemical compound discovery and development. In addition, the Company manufactures metal detection and other end-of-line inspection systems used in production and packaging and provides solutions for use in certain process analytics applications. The Company's primary manufacturing facilities are located in China, Germany, Switzerland, the United Kingdom and the United States. The Company's principal executive offices are located in Columbus, Ohio and Greifensee, Switzerland.
The accompanying interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include all entities in which the Company has control, which are its wholly-owned subsidiaries. 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 U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The interim consolidated financial statements as of June 30, 2012 and for the three and six month periods ended June 30, 2012 and 2011 should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.
The accompanying interim consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. Operating results for the three and six months ended June 30, 2012 are not necessarily indicative of the results to be expected for the full year ending December 31, 2012.
The preparation of financial statements in conformity with U.S. GAAP 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. A discussion of the Company’s critical accounting policies is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.
All intercompany transactions and balances have been eliminated.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Trade Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts represents the Company’s best estimate of probable credit losses in its existing trade accounts receivable. The Company determines the allowance based upon a review of both specific accounts for collection and the age of the accounts receivable portfolio.
Inventories
Inventories are valued at the lower of cost or net realizable value. Cost, which includes direct materials, labor and overhead, is generally determined using the first in, first out (FIFO) method. The estimated net realizable value is based on assumptions for future demand and related pricing.

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Table of Contents
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2012 – Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

Adjustments to the cost basis of the Company’s inventory are made for excess and obsolete items based on usage, orders and technological obsolescence. If actual market conditions are less favorable than those projected by management, reductions in the value of inventory may be required.
Inventories consisted of the following:
 
June 30,
2012
 
December 31,
2011
Raw materials and parts
$
97,738

 
$
101,716

Work-in-progress
36,736

 
40,822

Finished goods
82,757

 
98,883

 
$
217,231

 
$
241,421

Goodwill and Other Intangible Assets
Goodwill, representing the excess of purchase price over the net asset value of companies acquired, and indefinite-lived intangible assets are not amortized, but are reviewed for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that an asset might be impaired. The annual evaluation for goodwill is generally based on an assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company is unable to conclude that a reporting unit is not impaired after considering the totality of events and circumstances during its qualitative assessment, the Company performs the first step of the two-step impairment test by estimating the fair value of the reporting unit and comparing the fair value to the carrying amount of the reporting unit. If the carrying amount of a reporting unit exceeds its fair value, then the Company performs the second step of the goodwill impairment test to measure the amount of the impairment loss, if any. The annual evaluation for indefinite-lived intangible assets is based on valuation models that estimate fair value based on expected future cash flows and profitability projections.
Other intangible assets include indefinite-lived assets and assets subject to amortization. Where applicable, amortization is charged on a straight-line basis over the expected period to be benefited. The straight-line method of amortization reflects an appropriate allocation of the cost of the intangible assets to earnings in proportion to the amount of economic benefits obtained by the Company in each reporting period. The Company assesses the initial acquisition of intangible assets in accordance with the provisions of ASC 805 “Business Combinations” and the continued accounting for previously recognized intangible assets and goodwill in accordance with the provisions of ASC 350 “Intangibles – Goodwill and Other” and ASC 360 “Property, Plant and Equipment.”
Other intangible assets consisted of the following:
 
June 30, 2012
 
December 31, 2011
 
Gross
Amount
 
Accumulated
Amortization
 
Gross
Amount
 
Accumulated
Amortization
Customer relationships
$
96,238

 
$
(20,307
)
 
$
95,203

 
$
(18,735
)
Proven technology and patents
40,789

 
(26,433
)
 
41,643

 
(25,174
)
Tradename (finite life)
3,975

 
(1,224
)
 
3,995

 
(1,072
)
Tradename (indefinite life)
24,982

 

 
25,033

 

Other
735

 
(316
)
 
743

 
(226
)
 
$
166,719

 
$
(48,280
)
 
$
166,617

 
$
(45,207
)

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Table of Contents
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2012 – Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

The Company recognized amortization expense associated with the above intangible assets of $1.9 million and $1.7 million for the three months ended June 30, 2012 and 2011, respectively and $3.7 million and $3.2 million for the six months ended June 30, 2012 and 2011, respectively. The annual aggregate amortization expense based on the current balance of other intangible assets is estimated at $7.2 million for 2012, $5.9 million for 2013, $5.8 million for 2014, $5.1 million for 2015, $4.9 million for 2016 and $4.7 million for 2017. Purchased intangible amortization, net of tax was $1.1 million and $1.0 million for the three months ended June 30, 2012 and 2011, respectively and $2.3 million and $1.8 million for the six months ended June 30, 2012 and 2011, respectively.
In addition to the above amortization, the Company recorded amortization expense associated with capitalized software of $3.4 million and $2.6 million for the three months ended June 30, 2012 and 2011, respectively and $6.7 million and $4.7 million for the six months ended June 30, 2012 and 2011, respectively.
Revenue Recognition
Revenue is recognized when title to a product has transferred and any significant customer obligations have been fulfilled. Standard shipping terms are generally FOB shipping point in most countries and, accordingly, title and risk of loss transfers upon shipment. In countries where title cannot legally transfer before delivery, the Company defers revenue recognition until delivery has occurred. The Company generally maintains the right to accept or reject a product return in its terms and conditions and also maintains appropriate accruals for outstanding credits. Shipping and handling costs charged to customers are included in total net sales and the associated expense is recorded in cost of sales for all periods presented. Other than a few small software applications, the Company does not sell software products without the related hardware instrument as the software is embedded in the instrument. The Company’s products typically require no significant production, modification or customization of the hardware or software that is essential to the functionality of the products. To the extent the Company’s solutions have a post-shipment obligation, such as customer acceptance, revenue is deferred until the obligation has been completed. The Company defers product revenue where installation is required, unless such installation is deemed perfunctory. The Company also sometimes enters into certain arrangements that require the separate delivery of multiple goods and/or services. These deliverables are accounted for separately if the deliverables have standalone value and the performance of undelivered items is probable and within the Company's control. The allocation of revenue between the separate deliverables is typically based on the relative selling price at the time of the sale in accordance with a number of factors including service technician billing rates, time to install and geographic location.
Further, certain products are also sold through indirect distribution channels whereby the distributor assumes any further obligations to the customer upon title transfer. Revenue is recognized on these products upon transfer of title and risk of loss to its distributors. Distributor discounts are offset against revenue at the time such revenue is recognized.
Service revenue not under contract is recognized upon the completion of the service performed. Spare parts sold on a stand-alone basis are recognized upon title and risk of loss transfer which is generally at the time of shipment. Revenues from service contracts are recognized ratably over the contract period. These contracts represent an obligation to perform repair and other services including regulatory compliance qualification, calibration, certification and preventative maintenance on a customer’s pre-defined equipment over the contract period. Service contracts are separately priced and payment is typically received from the customer at the beginning of the contract period.

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Table of Contents
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2012 – Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

Warranty
The Company generally offers one-year warranties on most of its products. Product warranties are recorded at the time revenue is recognized. While the Company engages in extensive product quality programs and processes, its warranty obligation is affected by product failure rates, material usage and service costs incurred in correcting a product failure.
The Company’s accrual for product warranties is included in accrued and other liabilities in the consolidated balance sheets. Changes to the Company’s accrual for product warranties for the six months ended June 30 are as follows:
 
June 30,
2012
 
June 30,
2011
Balance at beginning of period
$
16,748

 
$
15,680

Accruals for warranties
8,094

 
7,451

Foreign currency translation
(305
)
 
722

Payments / utilizations
(8,444
)
 
(7,073
)
Balance at end of period
$
16,093

 
$
16,780


Employee Termination Benefits
In situations where contractual termination benefits exist, the Company records accruals for employee termination benefits when it is probable that a liability has been incurred and the amount of the liability is reasonably estimable. All other employee termination arrangements are recognized and measured at their fair value at the communication date unless the employee is required to render additional service beyond the legal notification period, in which case the liability is recognized ratably over the future service period.
Share-Based Compensation
The Company recognizes share-based compensation expense within selling, general and administrative in the consolidated statement of operations with a corresponding offset to additional paid-in capital in the consolidated balance sheet. The Company recorded $2.7 million and $6.0 million of share-based compensation expense for the three and six months ended June 30, 2012, respectively, compared to $2.5 million and $5.7 million for the corresponding periods in 2011.
Research and Development
Research and development costs primarily consist of salaries, consulting and other costs. The Company expenses these costs as incurred.

Recent Accounting Pronouncements
In January 2012, the Company adopted ASU 2011-05, to ASC 220 “Comprehensive Income,” as amended by ASU 2011-12. For interim consolidated financial reporting, the Company presents other comprehensive income in the consolidated statements of operations and comprehensive income. Additionally, as required by ASU 2011-05, the Company ceased presenting components of other comprehensive income as part of the consolidated statements of shareholders' equity and comprehensive income. The adoption of the recently issued guidance did not impact the Company's consolidated results of operations or financial position.
    

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Table of Contents
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2012 – Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

Comprehensive income (loss), net of tax consisted of the following for the six months ended June 30:
 
June 30,
2012
 
June 30,
2011
Currency translation adjustment, net of tax
$
(8,129
)
 
$
54,605

Net unrealized gain (loss) on cash flow hedging arrangements, net of tax
(60
)
 
(599
)
Pension and post-retirement benefit related items, net of tax
4,245

 
2,048

Other comprehensive income (loss), net of tax
(3,944
)
 
56,054

Net earnings
114,031

 
107,015

Comprehensive income (loss), net of tax
$
110,087

 
$
163,069

In January 2012, the Company adopted ASU 2011-04, to ASC 820, "Fair Value Measurement." ASU 2011-04 changes the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The adoption of the recently issued guidance did not impact the Company's consolidated results of operations or financial position.
3.
ACQUISITIONS
In August 2011, the Company acquired a vision inspection solutions business located in Germany for an aggregate purchase price of $19.4 million that will be integrated into the Company's product inspection product offering. The Company may be required to pay additional cash consideration up to a maximum amount of $2.4 million related to an earn-out period. Goodwill recorded in connection with this acquisition totaled $10.9 million, which is included in the Company’s Western European Operations segment. The Company also recorded $13.3 million of identified intangibles primarily pertaining to tradename, customer relationships and technology.

In March 2011, the Company completed acquisitions totaling $15.4 million, of which $12.0 million related to an X-ray inspection solutions business that will be integrated into the Company's product inspection product offering. Goodwill recorded in connection with these acquisitions totaled $4.4 million, of which $1.9 million is included in the Company's U.S. Operations segment and $2.5 million is included in the Company's Swiss Operations segment. The Company also recorded $9.9 million of identified intangibles pertaining to tradename, customer relationships and technology.

4.
FINANCIAL INSTRUMENTS
As more fully described below, the Company enters into certain interest rate swap agreements in order to manage its exposure to changes in interest rates. The amount of the Company’s fixed obligation interest payments may change based upon the expiration dates of its interest rate swap agreements and the level and composition of its debt. The Company also enters into certain foreign currency forward contracts to limit the Company’s exposure to currency fluctuations on the respective hedged items. The Company does not use derivative financial instruments for trading purposes. For additional disclosures on the fair value of financial instruments, also see Note 5 to the interim consolidated financial statements.
Cash Flow Hedge
The Company has an interest rate swap agreement, designated as a cash flow hedge. The agreement is a forward-starting swap which changed the floating rate LIBOR-based interest payments associated with $100 million in forecasted borrowings under the Company’s credit facility to a fixed obligation of 3.24% beginning in October 2010. The swap is recorded in other non-current liabilities in the consolidated balance sheet at its fair value at June 30, 2012 and December 31, 2011 of $9.1 million and $9.2 million, respectively. The effective portion of the loss reclassified from accumulated other

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Table of Contents
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2012 – Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

comprehensive income (loss) to interest expense was $0.8 million for both the three month periods ended June 30, 2012 and 2011, respectively, and $1.5 million for both the six month periods ended June 30, 2012 and 2011, respectively. The amount recognized in other comprehensive income (loss) during the three month periods ended June 30, 2012 and 2011 was a loss of $0.3 million and $1.9 million, respectively, and during the six month periods ended June 30, 2012 and 2011 was a gain of $0.1 million and loss of $0.9 million, respectively. A net after tax derivative loss of $1.9 million based upon interest rates at June 30, 2012, is expected to be reclassified from other comprehensive income (loss) to earnings in the next twelve months. Through June 30, 2012 no hedge ineffectiveness has occurred in relation to this hedge.
In July 2012, the Company entered into a foreign currency forward contract (with a notional amount of $72.3 million), designated as a cash flow hedge, to hedge certain forecasted intercompany sales denominated in euro with its foreign businesses. The Company will record the effective portion of the cash flow derivative hedging gains and losses in accumulated other comprehensive income (loss), net of tax and reclassify these amounts into earnings in the period in which the transactions affect earnings.
Other Derivatives
The Company enters into foreign currency forward contracts in order to economically hedge short-term intercompany balances largely denominated in Swiss franc and other major European currencies with its foreign businesses. In accordance with U.S. GAAP, these contracts are considered “derivatives not designated as hedging instruments.” Gains or losses on these instruments are reported in current earnings. The foreign currency forward contracts were reported at their fair value in the consolidated balance sheet at June 30, 2012 and December 31, 2011 in other current assets of $0.3 million and $0.5 million, respectively, and other liabilities of $0.3 million and $0.5 million, respectively. The Company recognized in other charges (income), net, a loss of $1.6 million during the three month period and a gain of $0.3 million during the six month period ended June 30, 2012, respectively. The Company recognized a net gain of $4.4 million during the three and six month periods ended June 30, 2011. At June 30, 2012 and December 31, 2011, these contracts had a notional value of $240.8 million and $143.6 million, respectively.

5.
FAIR VALUE MEASUREMENTS
At June 30, 2012 and December 31, 2011, the Company had derivative assets totaling $0.3 million and $0.5 million, respectively, and derivative liabilities totaling $9.4 million and $9.7 million, respectively. The fair values of the interest rate swap agreement and foreign currency forward contracts that economically hedge short-term intercompany balances are estimated based upon inputs from current valuation information obtained from dealer quotes and priced with observable market assumptions and appropriate valuation adjustments for credit risk. The Company has evaluated the valuation methodologies used to develop the fair values by dealers in order to determine whether such valuations are representative of an exit price in the Company’s principal market. In addition, the Company uses an internally developed model to perform testing on the valuations received from brokers. The Company has also considered both its own credit risk and counterparty credit risk in determining fair value and determined these adjustments were insignificant at June 30, 2012 and December 31, 2011.
At June 30, 2012 and December 31, 2011, the Company had $16.9 million and $13.6 million of cash equivalents, respectively, the fair value of which is determined through quoted and corroborated prices in active markets. The fair value of cash equivalents approximates cost.
Under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement consists of observable and unobservable inputs that reflect the assumptions that a market participant would use in pricing an asset or liability.

- 13 -

Table of Contents
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2012 – Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

A fair value hierarchy has been established that categorizes these inputs into three levels:
Level 1:
Quoted prices in active markets for identical assets and liabilities
Level 2:
Observable inputs other than quoted prices in active markets for identical assets and liabilities
Level 3:
Unobservable inputs
The following table presents for each of these hierarchy levels, the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2012 and December 31, 2011:
 
June 30, 2012
 
December 31, 2011
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents
$
16,861

 
$

 
$
16,861

 
$

 
$
13,619

 
$

 
$
13,619

 
$

Foreign currency forward contracts
329

 

 
329

 

 
545

 

 
545

 

Total
$
17,190

 
$

 
$
17,190

 
$

 
$
14,164

 
$

 
$
14,164

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swap agreement
$
9,114

 
$

 
$
9,114

 
$

 
$
9,175

 
$

 
$
9,175

 
$

Foreign currency forward contracts
328

 

 
328

 

 
480

 

 
480

 

Total
$
9,442

 
$

 
$
9,442

 
$

 
$
9,655

 
$

 
$
9,655

 
$


The difference between the fair value and carrying value of the Company's long-term debt is not material and is classified in Level 2 and Level 3 of the fair value hierarchy. The fair value of the Company's debt is estimated based on either similar issues or other inputs derived from available market information, including interest rates, term of debt and creditworthiness.

6.
INCOME TAXES
The provision for taxes for both the three and six month periods ended June 30, 2012 is based upon the Company’s projected annual effective rate of 24.5%.

7.
DEBT
Debt consisted of the following at June 30, 2012:
 
June 30, 2012
 
U.S. Dollar
 
Other Principal Trading Currencies
 
Total
6.30% $100 million Senior Notes
$
100,000

 
$

 
$
100,000

Credit facility
326,253

 
5,477

 
331,730

Other local arrangements

 
27,075

 
27,075

Total debt
426,253

 
32,552

 
458,805

Less: current portion

 
(27,075
)
 
(27,075
)
Total long-term debt
$
426,253

 
$
5,477

 
$
431,730


- 14 -

Table of Contents
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2012 – Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

As of June 30, 2012, the Company had $544.3 million of availability remaining under the credit facility.

8.
SHARE REPURCHASE PROGRAM AND TREASURY STOCK
The Company has a $2.25 billion share repurchase program, of which there is $580.3 million remaining to repurchase common shares as of June 30, 2012. The share repurchases are expected to be funded from cash balances, borrowings and cash generated from operating activities. Repurchases will be made through open market transactions, and the amount and timing of purchases will depend on business and market conditions, the stock price, trading restrictions, the level of acquisition activity and other factors. The Company has purchased 19.3 million shares since the inception of the program through June 30, 2012.
During the six months ended June 30, 2012 and 2011, the Company spent $135.8 million and $114.2 million on the repurchase of 797,095 shares and 688,079 shares at an average price per share of $170.31 and $165.92, respectively. The Company reissued 233,146 shares and 146,898 shares held in treasury for the exercise of stock options and restricted stock units during the six months ended June 30, 2012 and 2011, respectively.

9.
EARNINGS PER COMMON SHARE
In accordance with the treasury stock method, the Company has included the following common equivalent shares in the calculation of diluted weighted average number of common shares outstanding for the three and six month periods ended June 30, solely relating to outstanding stock options and restricted stock units:
 
2012
 
2011
Three months ended
771,268

 
1,016,037

Six months ended
813,139

 
1,008,537

Outstanding options and restricted stock units to purchase or receive 269,154 and 171,991 shares of common stock for the three month periods ended June 30, 2012 and 2011, respectively, and options and restricted stock units to purchase or receive 210,607 and 171,923 shares of common stock for the six month periods ended June 30, 2012 and 2011, respectively, have been excluded from the calculation of diluted weighted average number of common and common equivalent shares as such options and restricted stock units would be anti-dilutive.

10.
NET PERIODIC BENEFIT COST
Net periodic pension cost for the Company’s defined benefit pension plans and U.S. post-retirement medical plan includes the following components for the three months ended June 30:
 
U.S. Pension Benefits
 
Non-U.S. Pension Benefits
 
Other U.S. Post-retirement Benefits
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Service cost, net
$
114

 
$
83

 
$
3,588

 
$
3,590

 
$
83

 
$
76

Interest cost on projected benefit obligations
1,523

 
1,606

 
5,535

 
6,282

 
135

 
183

Expected return on plan assets
(1,741
)
 
(1,875
)
 
(8,141
)
 
(8,704
)
 

 

Recognition of prior service cost

 

 
(353
)
 
(378
)
 

 

Recognition of actuarial losses/(gains)
1,916

 
1,276

 
609

 
291

 
(188
)
 
(173
)
Net periodic pension cost/(credit)
$
1,812

 
$
1,090

 
$
1,238

 
$
1,081

 
$
30

 
$
86


- 15 -

Table of Contents
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2012 – Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

Net periodic pension cost for the Company’s defined benefit pension plans and U.S. post-retirement medical plan includes the following components for the six months ended June 30:

 
U.S. Pension Benefits
 
Non-U.S. Pension Benefits
 
Other U.S. Post-retirement Benefits
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Service cost, net
$
228

 
$
166

 
$
7,226

 
$
6,947

 
$
166

 
$
152

Interest cost on projected benefit obligations
3,046

 
3,212

 
11,139

 
12,196

 
270

 
366

Expected return on plan assets
(3,483
)
 
(3,750
)
 
(16,375
)
 
(16,852
)
 

 

Recognition of prior service cost

 

 
(710
)
 
(727
)
 

 

Recognition of actuarial losses/(gains)
3,832

 
2,552

 
1,223

 
576

 
(377
)
 
(346
)
Net periodic pension cost/(credit)
$
3,623

 
$
2,180

 
$
2,503

 
$
2,140

 
$
59

 
$
172


The Company expects to make employer contributions of approximately $3.7 million and $20.6 million to its U.S. pension plan and non-U.S. pension plans and employer contributions of approximately $1.1 million to its U.S. post-retirement medical plan during the year ended December 31, 2012. These estimates may change based upon several factors, including fluctuations in currency exchange rates, actual returns on plan assets and changes in legal requirements.

11.
RESTRUCTURING CHARGES
The Company has initiated additional cost reduction measures in 2012. Estimated charges under the current program are primarily comprised of severance costs and are expected to be approximately $20 million to $25 million, of which $7.8 million and $8.1 million were recorded during the three and six months ended June 30, 2012. The program is expected to be substantially completed by the end of 2013.
A rollforward of the Company’s accrual for restructuring activities for the six months ended June 30, 2012 is as follows:

 
Employee
Related
 
Other
 
Total
Balance at December 31, 2011
$
7,469

 
$
100

 
$
7,569

Restructuring charges
6,290

 
1,853

 
8,143

Cash payments
(2,864
)
 
(1,301
)
 
(4,165
)
Impact of foreign currency
(97
)
 

 
(97
)
Balance at June 30, 2012
$
10,798

 
$
652

 
$
11,450


12.
OTHER CHARGES (INCOME), NET
Other charges (income), net consists primarily of interest income, (gains) losses from foreign currency transactions and other items.



- 16 -

Table of Contents
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2012 – Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

13.
SEGMENT REPORTING
As disclosed in Note 18 to the Company's consolidated financial statements for the year ended December 31, 2011, the Company has determined there are five reportable segments:  U.S. Operations, Swiss Operations, Western European Operations, Chinese Operations and Other.
The Company evaluates segment performance based on Segment Profit (gross profit less research and development and selling, general and administrative expenses, before amortization, interest expense, restructuring charges, other charges (income), net and taxes).
The following tables show the operations of the Company’s operating segments:
 
Net Sales to
 
Net Sales to
 
 
 
 
 
 
For the three months ended
External
 
Other
 
Total Net
 
Segment
 
 
June 30, 2012
Customers
 
Segments
 
Sales
 
Profit
 
Goodwill (c)
U.S. Operations
$
177,182

 
$
16,626

 
$
193,808

 
$
35,403

 
$
307,618

Swiss Operations
28,420

 
93,750

 
122,170

 
26,312

 
22,530

Western European Operations
156,284

 
24,838

 
181,122

 
21,978

 
100,859

Chinese Operations
108,479

 
26,122

 
134,601

 
30,931

 
716

Other (a)
99,918

 
1,345

 
101,263

 
8,506

 
14,557

Eliminations and Corporate (b)

 
(162,681
)
 
(162,681
)
 
(22,073
)
 

Total
$
570,283

 
$

 
$
570,283

 
$
101,057

 
$
446,280


 
Net Sales to
 
Net Sales to
 
 
 
 
 
 
For the six months ended
External
 
Other
 
Total Net
 
Segment
 
 
June 30, 2012
Customers
 
Segments
 
Sales
 
Profit
 
 
U.S. Operations
$
334,480

 
$
34,737

 
$
369,217

 
$
59,360

 
 
Swiss Operations
60,025

 
191,269

 
251,294

 
55,454

 
 
Western European Operations
309,289

 
48,685

 
357,974

 
40,243

 
 
Chinese Operations
199,773

 
55,935

 
255,708

 
56,249

 
 
Other (a)
202,116

 
2,994

 
205,110

 
18,830

 
 
Eliminations and Corporate (b)

 
(333,620
)
 
(333,620
)
 
(48,285
)
 
 
Total
$
1,105,683

 
$

 
$
1,105,683

 
$
181,851

 
 

 
Net Sales to
 
Net Sales to
 
 
 
 
 
 
For the three months ended
External
 
Other
 
Total Net
 
Segment
 
 
June 30, 2011
Customers
 
Segments
 
Sales
 
Profit
 
Goodwill (c)
U.S. Operations
$
167,017

 
$
19,412

 
$
186,429

 
$
30,834

 
$
308,467

Swiss Operations
32,179

 
91,489

 
123,668

 
21,978

 
25,695

Western European Operations
167,419

 
26,089

 
193,508

 
20,609

 
98,076

Chinese Operations
95,721

 
34,433

 
130,154

 
34,443

 
695

Other (a)
98,752

 
1,526

 
100,278

 
10,640

 
14,666

Eliminations and Corporate (b)

 
(172,949
)
 
(172,949
)
 
(23,972
)
 

Total
$
561,088

 
$

 
$
561,088

 
$
94,532

 
$
447,599



- 17 -

Table of Contents
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2012 – Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

 
Net Sales to
 
Net Sales to
 
 
 
 
 
 
For the six months ended
External
 
Other
 
Total Net
 
Segment
 
 
June 30, 2011
Customers
 
Segments
 
Sales
 
Profit
 
 
U.S. Operations
$
315,229

 
$
38,100

 
$
353,329

 
$
53,164

 
 
Swiss Operations
63,824

 
192,751

 
256,575

 
51,058

 
 
Western European Operations
320,279

 
51,677

 
371,956

 
39,076

 
 
Chinese Operations
170,558

 
64,770

 
235,328

 
55,132

 
 
Other (a)
189,964

 
2,335

 
192,299

 
20,107

 
 
Eliminations and Corporate (b)

 
(349,633
)
 
(349,633
)
 
(50,227
)
 
 
Total
$
1,059,854

 
$

 
$
1,059,854

 
$
168,310

 
 

(a)
Other includes reporting units in Eastern Europe, Latin America, Southeast Asia and other countries.
(b)
Eliminations and Corporate includes the elimination of inter-segment transactions and certain corporate expenses and intercompany investments, which are not included in the Company’s operating segments.
(c)
Goodwill as of June 30, 2012 includes additions of $10.9 million in Western European Operations related to an acquisition in the third quarter of 2011. See Note 3 for additional information. Other goodwill changes are primarily related to foreign currency fluctuations.
A reconciliation of earnings before taxes to segment profit for the three and six month periods ended June 30 follows:

 
Three Months Ended
 
Six Months Ended
 
2012
 
2011
 
2012
 
2011
Earnings before taxes
$
81,726

 
$
81,337

 
$
151,034

 
$
144,615

Amortization
5,357

 
4,325

 
10,556

 
7,947

Interest expense
5,706

 
5,692

 
11,529

 
11,403

Restructuring charges
7,835

 
1,971

 
8,143

 
2,469

Other charges (income), net
433

 
1,207

 
589

 
1,876

Segment profit
$
101,057

 
$
94,532

 
$
181,851

 
$
168,310


During the three months ended June 30, 2012, restructuring charges of $7.8 million were recognized, of which $0.5 million, $1.3 million, $3.3 million, $0.1 million and $2.6 million related to the Company’s U.S., Swiss, Western European, Chinese and Corporate operations, respectively. Restructuring charges of $2.0 million were recognized during the three months ended June 30, 2011, of which $0.3 million, $1.3 million, $0.1 million and $0.3 million related to the Company’s U.S., Western European, Chinese and Other operations, respectively. Restructuring charges of $8.1 million were recognized during the six months ended June 30, 2012, of which $0.7 million, $1.3 million, $3.4 million, $0.1 million and $2.6 million related to the Company’s U.S., Swiss, Western European, Chinese and Corporate operations, respectively. Restructuring charges of $2.5 million were recognized during the six months ended June 30, 2011, of which $0.6 million, $0.2 million, $1.3 million, $0.1 million and $0.3 million related to the Company’s U.S., Swiss, Western European, Chinese and Other operations, respectively.

14.
CONTINGENCIES
The Company is party to various legal proceedings, including certain environmental matters, incidental to the normal course of business. Management does not expect that any of such proceedings, either individually or in the aggregate, will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

- 18 -


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 accounting principles generally accepted in the United States of America. Operating results for the three and six months ended June 30, 2012 are not necessarily indicative of the results to be expected for the full year ending December 31, 2012.
Local currency changes exclude the effect of currency exchange rate fluctuations. Local currency amounts are determined by translating current and previous year consolidated financial information at an index utilizing historical currency exchange rates. We believe local currency information provides a helpful assessment of business performance and a useful measure of results between periods. We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. We present non-GAAP financial measures in reporting our financial results to provide investors with an additional analytical tool to evaluate our operating results.
Results of Operations – Consolidated
The following tables set forth certain items from our interim consolidated statements of operations for the three and six month periods ended June 30, 2012 and 2011 (amounts in thousands).
 
Three months ended June 30,
 
Six months ended June 30,
 
2012
 
2011
 
2012
 
2011
 
(unaudited)
 
%
 
(unaudited)
 
%
 
(unaudited)
 
%
 
(unaudited)
 
%
Net sales
$
570,283

 
100.0
 
$
561,088

 
100.0
 
$
1,105,683

 
100.0
 
$
1,059,854

 
100.0
Cost of sales
271,275

 
47.6
 
264,897

 
47.2
 
529,573

 
47.9
 
502,156

 
47.4
Gross profit
299,008

 
52.4
 
296,191

 
52.8
 
576,110

 
52.1
 
557,698

 
52.6
Research and development
27,966

 
4.9
 
29,605

 
5.3
 
56,633

 
5.1
 
55,956

 
5.3
Selling, general and administrative
169,985

 
29.8
 
172,054

 
30.7
 
337,626

 
30.5
 
333,432

 
31.5
Amortization
5,357

 
0.9
 
4,325

 
0.8
 
10,556

 
1.0
 
7,947

 
0.7
Interest expense
5,706

 
1.0
 
5,692

 
1.0
 
11,529

 
1.0
 
11,403

 
1.1
Restructuring charges
7,835

 
1.4
 
1,971

 
0.3
 
8,143

 
0.7
 
2,469

 
0.2
Other charges (income), net
433

 
0.1
 
1,207

 
0.2
 
589

 
0.1
 
1,876

 
0.2
Earnings before taxes
81,726

 
14.3
 
81,337

 
14.5
 
151,034

 
13.7
 
144,615

 
13.6
Provision for taxes
20,022

 
3.5
 
21,149

 
3.8
 
37,003

 
3.4
 
37,600

 
3.5
Net earnings
$
61,704

 
10.8
 
$
60,188

 
10.7
 
$
114,031

 
10.3
 
$
107,015

 
10.1

Net sales
Net sales were $570.3 million and $1.1 billion for the three and six months ended June 30, 2012, compared to $561.1 million and $1.1 billion for the corresponding period in 2011. This represents an increase in U.S. dollars of 2% and 4% for the three and six months ended June 30, 2012. Excluding the effect of currency exchange rate fluctuations, or in local currencies, net sales increased 6% and 7% for the three and six months ended June 30, 2012. Acquisitions contributed approximately 1% and 2% to our net sales growth for the three and six months ended June 30, 2012. The global economic environment has recently deteriorated, especially in Europe. We expect our local currency organic sales growth in 2012 will continue to be less than growth rates experienced in 2011 and 2010. We also expect local currency organic sales growth in the second half of 2012 to be lower than the first half of 2012. If the global economy further deteriorates, we would expect an

- 19 -


adverse impact on net sales. Given economic uncertainty, it is difficult to predict the extent to which our results may be adversely affected.
Net sales by geographic destination for the three and six months ended June 30, 2012, in U.S. dollars increased 5% and 6% in the Americas and 14% and 17% in Asia/Rest of World and decreased 11% and 6% in Europe. In local currencies, our net sales by geographic destination increased 6% in the Americas, decreased 2% in Europe and increased 14% in Asia/Rest of World for the three months ended June 30, 2012. In local currencies, our net sales by geographic destination increased 6% in the Americas, remained flat in Europe and increased 16% in Asia/Rest of World for the six months ended June 30, 2012. Acquisitions contributed approximately 2% to net sales growth in Europe for the three months ended June 30, 2012 and contributed 1% and 2% in the Americas and Europe, respectively, for the six months ended June 30, 2012. A discussion of sales by operating segment is included below.
As described in Note 18 to our consolidated financial statements for the year ended December 31, 2011, our net sales comprise product sales of precision instruments and related services. Service revenues are primarily derived from repair and other services, including regulatory compliance qualification, calibration, certification, preventative maintenance and spare parts.
Net sales of products increased in U.S. dollars by 2% and 5% for the three and six months ended June 30, 2012, respectively, and in local currencies by 6% and 7%, respectively, compared to the corresponding prior periods. Service revenue (including spare parts) in U.S. dollars decreased 1% and increased 1% during the three and six months ended June 30, 2012, respectively, and increased in local currencies by 4% during both the three and six months ended June 30, 2012, compared to the corresponding prior periods.
Net sales of our laboratory-related products, which represented approximately 44% and 45% of our total net sales for the three and six months ended June 30, 2012, increased 4% and 6% in U.S. dollars during the three and six months ended June 30, 2012, and increased 8% in local currencies during both the three and six months ended June 30, 2012, respectively. The increase for the three and six months ended June 30, 2012 was driven by growth in most product categories, especially process analytics, analytical instruments and automated chemistry related to increased sales volume and favorable price realization. We expect net sales growth of our laboratory-related products (particularly in Europe) to be lower in the second half of 2012 as compared to the first half of 2012 due to unfavorable global economic conditions. It is currently difficult to predict the extent to which our results may be adversely affected.
Net sales of our industrial-related products, which represented approximately 47% and 46% of our total net sales for the three and six months ended June 30, 2012, increased 2% and 5% in U.S. dollars and increased 6% and 8% in local currencies during the three and six months ended June 30, 2012, respectively. Acquisitions contributed approximately 2% and 3% to net sales growth for the three and six months ended June 30, 2012. We experienced organic sales growth in our industrial-related products in Asia/Rest of World for the three and six months ended June 30, 2012 primarily related to increased sales volume. We also experienced organic sales growth for the three and six months ended June 30, 2012 in the Americas, especially product inspection products, despite difficult prior period comparisons. However, our European industrial-related products experienced organic sales declines in local currency during the three and six months ended June 30, 2012, related to decreased sales volume in core-industrial products, and unfavorable economic conditions. We expect net sales growth of our industrial-related products (particularly in Europe) to be lower in the second half of 2012 as compared to the first half of 2012 due to unfavorable global economic conditions. It is currently difficult to predict the extent to which our results may be adversely affected.

- 20 -


Net sales in our food retailing markets, which represented approximately 9% of our total net sales for both the three and six months ended June 30, 2012, decreased 11% and 7% in U.S. dollars and decreased 6% and 3% in local currencies during the three and six months ended June 30, 2012, respectively. We experienced local currency net sales declines in each geographic region during the three months ended June 30, 2012. The net sales declines were primarily related to reduced project activity as well as unfavorable economic conditions.
Gross profit
Gross profit as a percentage of net sales was 52.4% and 52.1% for the three and six months ended June 30, 2012, respectively, compared to 52.8% and 52.6% for the corresponding periods in 2011.
Gross profit as a percentage of net sales for products was 55.9% and 55.6% for the three and six months ended June 30, 2012, respectively, compared to 56.9% and 56.8% for the corresponding periods in 2011.
Gross profit as a percentage of net sales for services (including spare parts) was 39.6% and 39.3% for the three and six months ended June 30, 2012, respectively, compared to 37.9% and 37.8% for the corresponding periods in 2011.
The decrease in gross profit as a percentage of net sales for the three and six months ended June 30, 2012 was primarily due to unfavorable business and geographic mix, increased production costs, and the impact of acquisitions. These results were partly offset by benefits from increased sales volume, price increases, and favorable currency translation fluctuations.
Research and development and selling, general and administrative expenses
Research and development expenses as a percentage of net sales were 4.9% and 5.1% for the three and six months ended June 30, 2012, respectively, compared to 5.3% for both of the corresponding periods during 2011. Research and development expenses decreased 5.5% and increased 1.2% in U.S. dollars and decreased 1% and increased 3% in local currencies, during the three and six months ended June 30, 2012, respectively, compared to the corresponding periods in 2011 relating to the timing of research and development project and product launch activity.
Selling, general and administrative expenses as a percentage of net sales were 29.8% and 30.5% for the three and six months ended June 30, 2012, respectively, compared to 30.7% and 31.5% in the corresponding periods during 2011. Selling, general and administrative expenses decreased 1% and increased 1% in U.S. dollars during the three and six months ended June 30, 2012, respectively, compared to the corresponding periods in 2011. Selling, general and administrative expenses increased 3% in local currencies, during both the three and six months ended June 30, 2012, compared to the corresponding periods in 2011. The local currency increase is primarily due to increased sales and marketing investments (especially in emerging markets), offset in part by lower variable compensation.     
Interest expense, other charges (income), net, restructuring charges and taxes
Interest expense was $5.7 million and $11.5 million for the three and six months ended June 30, 2012, respectively, and $5.7 million and $11.4 million for the corresponding periods in 2011. Interest expense remained flat for the three and six months ended June 30, 2012 primarily resulting from a decrease in average borrowings offset by an increase in rates for the period.
Other charges (income), net consists primarily of interest income, (gains) losses from foreign currency transactions and other items. The decrease in other charges (income), net for the three and six months ended June 30, 2012 of $0.8 million and $1.3 million, respectively, compared to the prior year was primarily due to unfavorable foreign currency costs in the prior year period.

- 21 -


We also initiated additional cost reduction measures in 2012. Estimated charges under the current program are primarily comprised of severance costs and are expected to be approximately $20 million to $25 million, of which $7.8 million and $8.1 million were recorded during the three and six months ended June 30, 2012. The program is expected to be substantially completed by the end of 2013.

The provision for taxes for both the three and six month periods ended June 30, 2012 is based upon the Company’s projected annual effective rate of 24.5%. Our consolidated income tax rate is lower than the U.S. statutory rate primarily because of benefits from lower-taxed non-U.S. operations. The most significant of these lower-taxed operations are in Switzerland and China.

Results of Operations – by Operating Segment

The following is a discussion of the financial results of our operating segments. We currently have five reportable segments: U.S. Operations, Swiss Operations, Western European Operations, Chinese Operations and Other. A more detailed description of these segments is outlined in Note 18 to our consolidated financial statements for the year ended December 31, 2011.
U.S. Operations (amounts in thousands)
 
Three months ended June 30,
 
Six months ended June 30,
 
2012
 
2011
 
%1)
 
2012
 
2011
 
%1)
Total net sales
$
193,808

 
$
186,429

 
4
%
 
$
369,217

 
$
353,329

 
4
%
Net sales to external customers
$
177,182

 
$
167,017

 
6
%
 
$
334,480

 
$
315,229

 
6
%
Segment profit
$
35,403

 
$
30,834

 
15
%
 
$
59,360

 
$
53,164

 
12
%

1)
Represents U.S. dollar (decline) growth for net sales and segment profit.

Total net sales increased 4% for both the three and six months ended June 30, 2012, respectively, and net sales to external customers increased 6% for both the three and six months ended June 30, 2012, respectively, compared with the corresponding periods in 2011. The increase in total net sales and net sales to external customers for the three and six months ended June 30, 2012 primarily reflects strong growth in laboratory balances, analytical instruments, process analytics and product inspection products due to increased sales volume and favorable price realization. Net sales in food retailing products declined slightly during the three months ended June 30, 2012 due to reduced project activity. Acquisitions, net contributed approximately 1% to our net sales growth for the six months ended June 30, 2012.
Segment profit increased $4.6 million and $6.2 million for the three and six months ended June 30, 2012, respectively, compared to the corresponding periods in 2011. The increase in segment profit was primarily due to increased sales volume, favorable price realization and higher inter-segment income, partially offset by unfavorable business mix, increased production costs and investments in our field service organization.
Swiss Operations (amounts in thousands)
 
Three months ended June 30,
 
Six months ended June 30,
 
2012
 
2011
 
%1)
 
2012
 
2011
 
%1)
Total net sales
$
122,170

 
$
123,668

 
(1
)%
 
$
251,294

 
$
256,575

 
(2
)%
Net sales to external customers
$
28,420

 
$
32,179

 
(12
)%
 
$
60,025

 
$
63,824

 
(6
)%
Segment profit
$
26,312

 
$
21,978

 
20
 %
 
$
55,454

 
$
51,058

 
9
 %

1)
Represents U.S. dollar (decline) growth for net sales and segment profit.

    

- 22 -


Total net sales decreased 1% and 2% in U.S. dollars for the three and six months ended June 30, 2012, respectively. Total net sales in local currency increased 6% for the three month period ended June 30, 2012 and were flat for the six month period ended June 30, 2012, compared to the corresponding periods in 2011. Net sales to external customers decreased 12% and 6% in U.S. dollars and 5% and 4% in local currency during the three and six months ended June 30, 2012, respectively, compared to the corresponding periods in 2011. The decrease in local currency net sales to external customers for the three and six month period ended June 30, 2012 primarily related to volume decreases in industrial-related products and food retailing, offset in part by strong volume growth in analytical instruments. Our Swiss Operations continue to face unfavorable economic conditions and we expect our local currency sales to external customers will be adversely impacted during the second half of 2012.
 
Segment profit increased $4.3 million and $4.4 million for the three and six month periods ended June 30, 2012, respectively, compared to the corresponding periods in 2011. The increase in segment profit for the three and six months ended June 30, 2012 resulted primarily due to increased inter-segment sales and benefits from our cost reduction activities, partially offset by unfavorable currency translation fluctuations.

Western European Operations (amounts in thousands)
 
Three months ended June 30,
 
Six months ended June 30,
 
2012
 
2011
 
%1)
 
2012
 
2011
 
%1)
Total net sales
$
181,122

 
$
193,508

 
(6
)%
 
$
357,974

 
$
371,956

 
(4
)%
Net sales to external customers
$
156,284

 
$
167,419

 
(7
)%
 
$
309,289

 
$
320,279

 
(3
)%
Segment profit
$
21,978

 
$
20,609

 
7
 %
 
$
40,243

 
$
39,076

 
3
 %

1)
Represents U.S. dollar (decline) growth for net sales and segment profit.

Total net sales decreased 6% and 4% in U.S. dollars and increased 3% in local currency for both the three and six month periods ended June 30, 2012, respectively, compared to the corresponding periods in 2011. Net sales to external customers decreased 7% and 3% in U.S. dollars and increased 3% and 4% in local currency for the same periods versus the prior year comparable periods. Acquisitions contributed approximately 2% and 4% to our net sales growth for the three and six months ended June 30, 2012. Total net sales and net sales to external customers for the three and six months ended June 30, 2012 includes strong sales growth in analytical instruments due to increased volume and improved price realization, partially offset by sales volume declines in food retailing and core-industrial products. Our Western European Operations continue to face unfavorable economic conditions and we expect our local currency sales to external customers will be adversely impacted during the second half of 2012.

Segment profit increased $1.4 million and $1.2 million for the three and six month periods ended June 30, 2012, respectively, compared to the corresponding periods in 2011. The increase in segment profit for the three and six months ended June 30, 2012 resulted primarily from an increase in local currency sales volume, an improved price realization, favorable business mix and benefits from our cost reduction activities, which were partially offset by unfavorable foreign currency translation fluctuations.

- 23 -


Chinese Operations (amounts in thousands)
 
Three months ended June 30,
 
Six months ended June 30,
 
2012
 
2011
 
%1)
 
2012
 
2011
 
%1)
Total net sales
$
134,601

 
$
130,154

 
3
 %
 
$
255,708

 
$
235,328

 
9
%
Net sales to external customers
$
108,479

 
$
95,721

 
13
 %
 
$
199,773

 
$
170,558

 
17
%
Segment profit
$
30,931

 
$
34,443

 
(10
)%
 
$
56,249

 
$
55,132

 
2
%

1)
Represents U.S. dollar (decline) growth for net sales and segment profit.

Total net sales increased 3% and 9% in U.S. dollars and increased 1% and 5% in local currency during the three and six months ended June 30, 2012, respectively, compared to the corresponding periods in 2011. Net sales to external customers increased 13% and 17% in U.S. dollars and increased 10% and 13% in local currency during the three and six months ended June 30, 2012, respectively, as compared to the corresponding periods in 2011. The local currency increase in total net sales and net sales to external customers for the three and six month periods ended June 30, 2012 is due to increased sales volume across most product categories, with particularly strong growth in laboratory-related products.

Segment profit decreased $3.5 million and increased $1.1 million for the three and six month periods ended June 30, 2012, respectively, compared to the corresponding periods in 2011. The decrease in segment profit for the three month period ended June 30, 2012 includes increased inter-segment expenses, a gain from an asset sale in the prior year and investments in sales and marketing, partially offset by increased sales volume.

Other (amounts in thousands)
 
Three months ended June 30,
 
Six months ended June 30,
 
2012
 
2011
 
%1)
 
2012
 
2011
 
%1)
Total net sales
$
101,263

 
$
100,278

 
1
 %
 
$
205,110

 
$
192,299

 
7
 %
Net sales to external customers
$
99,918

 
$
98,752

 
1
 %
 
$
202,116

 
$
189,964

 
6
 %
Segment profit
$
8,506

 
$
10,640

 
(20
)%
 
$
18,830

 
$
20,107

 
(6
)%

1)
Represents U.S. dollar (decline) growth for net sales and segment profit.

Total net sales increased 1% and 7% in U.S. dollars and increased 7% and 10% in local currency during the three and six month periods ended June 30, 2012, respectively, compared to the corresponding periods in 2011. Net sales to external customers in U.S. dollars increased 1% and 6% and increased 7% and 10% in local currency during the three and six months ended June 30, 2012, respectively, as compared to the corresponding periods in 2011. The increase in total net sales and net sales to external customers reflects strong sales growth across most product categories and geographies, especially Other Asia Pacific and Latin America.

Segment profit decreased $2.1 million and $1.3 million for the three and six months ended June 30, 2012, respectively, compared to the corresponding periods in 2011. The decrease in segment profit is primarily due to unfavorable geographic mix and investments in sales and marketing in emerging markets, offset in part by an increase in sales volume.
Liquidity and Capital Resources
Liquidity is our ability to generate sufficient cash flows from operating activities to meet our obligations and commitments. In addition, liquidity includes the ability to obtain appropriate financing. Currently, our financing requirements are primarily driven by working capital requirements, capital expenditures, share repurchases and acquisitions.

- 24 -


Cash provided by operating activities totaled $112.0 million during the six months ended June 30, 2012, compared to $93.6 million in the corresponding period in 2011. The increase in 2012 is primarily due to increased net earnings and working capital benefits related to decreased inventory levels and the timing of accounts receivable, partially offset by the timing of payables.
Capital expenditures are made primarily for investments in information systems and technology, machinery, equipment and the purchase and expansion of facilities. Our capital expenditures totaled $43.2 million for the six months ended June 30, 2012 compared to $40.5 million in the corresponding period in 2011. Our capital expenditures during the six months ended June 30, 2012 included approximately $22.4 million of investments related to our Blue Ocean multi-year program of information technology investment, as compared with $26.6 million during the prior year comparable period.
We continue to explore potential acquisitions. In connection with any acquisition, we may incur additional indebtedness. During the first quarter of 2011, we completed acquisitions totaling $15.4 million, of which $12.0 million related to an X-ray inspection solutions business that will be integrated into our product inspection product offering. We paid approximately $14.5 million for these acquisitions during the first quarter 2011.

We plan to repatriate earnings from China, Switzerland, the United Kingdom and certain other countries in future years and expect the only additional cost associated with the repatriation of such earnings outside the United States will be withholding taxes. All other undistributed earnings are considered to be permanently reinvested. As of June 30, 2012, we have an immaterial amount of cash and cash equivalents outside the United States where undistributed earnings are considered permanently reinvested. Accordingly, we believe the tax impact associated with repatriating our undistributed foreign earnings will not have a material effect on our liquidity.

Senior Notes and Credit Facility Agreement

Our debt consisted of the following at June 30, 2012:
 
June 30, 2012
 
U.S. Dollar
 
Other Principal Trading Currencies
 
Total
6.30% $100 million Senior Notes
$
100,000

 
$

 
$
100,000

Credit facility
326,253

 
5,477

 
331,730

Other local arrangements

 
27,075

 
27,075

Total debt
426,253

 
32,552

 
458,805

Less: current portion

 
(27,075
)
 
(27,075
)
Total long-term debt
$
426,253

 
$
5,477

 
$
431,730


As of June 30, 2012, approximately $544.3 million was available under our credit facility. Changes in exchange rates between the currencies in which we generate cash flows 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.

We currently believe that cash flow from operating activities, together with liquidity available under our credit facility and local working capital facilities, will be sufficient to fund currently anticipated working capital needs and capital spending requirements for at least the foreseeable future.

We continue to explore potential acquisitions. In connection with any acquisition, we may incur additional indebtedness.


- 25 -


Share Repurchase Program

We have a $2.25 billion share repurchase program, of which there is $580.3 million remaining to repurchase common shares as of June 30, 2012. The share repurchases are expected to be funded from cash balances, borrowings and cash generated from operating activities. Repurchases will be made through open market transactions, and the amount and timing of purchases will depend on business and market conditions, the stock price, trading restrictions, the level of acquisition activity and other factors. We have purchased 19.3 million shares since the inception of the program through June 30, 2012.
During the six months ended June 30, 2012 and 2011, we spent $135.8 million and $114.2 million on the repurchase of 797,095 shares and 688,079 shares at an average price per share of $170.31 and $165.92, respectively. We reissued 233,146 shares and 146,898 shares held in treasury for the exercise of stock options and restricted stock units during the six months ended June 30, 2012 and 2011, respectively.

- 26 -


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 total operating expenses than Swiss franc denominated sales represent of our total net sales. In part, this is because most of our manufacturing costs in Switzerland relate to products that are sold outside Switzerland. In addition, we have a number of corporate functions located 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, the Chinese yuan and the Japanese yen), our operating profit is reduced. We also have significantly more sales in euro than we have expenses. Therefore, when the euro weakens against the U.S. dollar and the Swiss franc, it also decreases our operating profits. Accordingly, the Swiss franc exchange rate to the euro is an important cross-rate that we monitor. We have seen higher volatility in exchange rates generally than in the past. We estimate that a 1% strengthening of the Swiss franc against the euro would result in a decrease in our earnings before tax of $0.9 million to $1.2 million on an annual basis. We also estimate a 1% strengthening of the Swiss franc against the U.S. dollar would result in a decrease in our earnings before tax of $0.7 million to $0.9 million on an annual basis. In addition to the Swiss franc and major European currencies, we also conduct business in many geographies throughout the world, including Asia Pacific, the United Kingdom, Eastern Europe, Latin America and Canada. Fluctuations in these currency exchange rates against the U.S. dollar can also affect our operating results. 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. Based on our outstanding debt at June 30, 2012, we estimate that a 10% weakening of the U.S. dollar against the currencies in which our debt is denominated would result in an increase of approximately $3.6 million in the reported U.S. dollar value of the debt.
Recent Accounting Pronouncements
In January 2012, the Company adopted ASU 2011-05, to ASC 220 “Comprehensive Income,” as amended by ASU 2011-12. The adoption of the amended guidance requires the Company to present items of net earnings and other comprehensive income either in one continuous statement or in two separate, but consecutive statements. Additionally, ASU 2011-05 eliminated the option to present components of other comprehensive income as part of the consolidated statements of shareholders' equity and comprehensive income. The Company is also required to present reclassification adjustments on the face of the consolidated statements of comprehensive income, by component of other comprehensive income. The adoption of the recently issued guidance did not impact the Company's consolidated results of operations or financial position.
In January 2012, the Company adopted ASU 2011-04, to ASC 820, "Fair Value Measurement." ASU 2011-04 changes the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The adoption of the recently issued guidance did not impact the Company's consolidated results of operations or financial position.

- 27 -


Forward-Looking Statements Disclaimer
Some of the statements in this quarterly report and in documents incorporated by reference constitute “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. These statements relate to future events or our future financial performance, including, but not limited to, the following: projected earnings and sales growth in U.S. dollars and local currencies, projected earnings per share, strategic plans and contingency plans, potential growth opportunities or economic downturns in both developed markets and emerging markets, including China, factors influencing growth in our laboratory, industrial and food retail markets, our expectations in respect of the impact of general economic conditions on our business, our projections for growth in certain markets or industries, our capability to respond to future changes in market conditions, impact of inflation, currency and interest rate fluctuations, our ability to maintain a leading position in our key markets, our expected market share, our ability to leverage our market-leading position and diverse product offering to weather an economic downturn, the effectiveness of our “Spinnaker” initiatives relating to sales and marketing, planned research and development efforts, product introductions and innovation, manufacturing capacity, adequacy of facilities, access to and the costs of raw materials, shipping and supplier costs, expanding our operating margins, anticipated gross margins, anticipated customer spending patterns and levels, expected customer demand, meeting customer expectations, warranty claim levels, anticipated growth in service revenues, anticipated pricing, our ability to realize planned price increases, planned operational changes and productivity improvements, effect of changes in internal control over financial reporting, research and development expenditures, competitors’ product development, levels of competitive pressure, our future position vis-à-vis competitors, expected capital expenditures, the timing, impact, cost, benefits from and effectiveness of our cost reduction programs, future cash sources and requirements, cash flow targets, liquidity, value of inventories, impact of long-term incentive plans, continuation of our stock repurchase program and the related impact on cash flow, expected pension and other benefit contributions and payments, expected tax treatment and assessment, impact of taxes and changes in tax benefits, the need to take additional restructuring charges, expected compliance with laws, changes in laws and regulations, impact of environmental costs, expected trading volume and value of stocks and options, impact of issuance of preferred stock, expected cost savings, impact of legal proceedings, satisfaction of contractual obligations by counterparties, timeliness of payments by our customers, the adequacy of reserves for bad debts against our accounts receivable, benefits and other effects of completed or future acquisitions.
These statements involve known and unknown risks, uncertainties and other factors that may cause our or our businesses’ actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of those terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially because of market conditions in our industries or other factors. Moreover, we do not, nor does any other person, assume responsibility for the accuracy and completeness of those statements. Unless otherwise required by applicable laws, we disclaim any intention or obligation to publicly update or revise any of the forward-looking statements after the date of this quarterly report to conform them to actual results, whether as a result of new information, future events or otherwise. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under the captions “Factors affecting our future operating results” in the “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 1A of our annual report on Form 10-K for the fiscal year ended December 31, 2011, which describe risks and factors that could cause results to differ materially from those projected in those forward-looking statements.
We caution the reader that the above list of risks and factors that may affect results addressed in the forward-looking statements may not be exhaustive. Other sections of this quarterly report on Form 10-Q for the period ended June 30, 2012 and other documents incorporated by reference may describe additional risks or factors that could adversely impact our business and financial performance. We

- 28 -


operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict these new risk factors, nor can it assess the impact, if any, of these new risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those projected in any forward-looking statements. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
As of June 30, 2012, 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, 2011.

Item 4.
Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that these disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 


 


- 29 -



PART II. OTHER INFORMATION

Item 1.
Legal Proceedings. None
Item 1A.
Risk Factors.
For the six months ended June 30, 2012 there were no material changes from risk factors disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
 
(a)
(b)
(c)
(d)
 
Total Number of
Shares Purchased
Average Price Paid
per Share
Total Number of
Shares Purchased as Part of Publicly Announced Program
Approximate Dollar
Value (in thousands) of Shares that may yet be Purchased under the Program
 
 
April 1 to April 30, 2012
96,506

$
178.17

96,506

$
635,107

May 1 to May 31, 2012
153,778

$
168.51

153,778

$
609,191

June 1 to June 30, 2012
185,034

$
156.34

185,034

$
580,259

Total
435,318

$
165.48

435,318

$
580,259


We have a share repurchase program, of which there is $580.3 million remaining to repurchase common shares as of June 30, 2012. We have purchased 19.3 million shares since the inception of the program through June 30, 2012.
During the six months ended June 30, 2012 and 2011, we spent $135.8 million and $114.2 million on the repurchase of 797,095 and 688,079 shares at an average price per share of $170.31 and $165.92, respectively. We reissued 233,146 shares and 146,898 shares held in treasury for the exercise of stock options and restricted stock units for the six months ended June 30, 2012 and 2011, respectively.
Item 3.
Defaults Upon Senior Securities. None
Item 5.
Other information. None
Item 6.
Exhibits. See Exhibit Index below.

- 30 -


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 thereunto duly authorized.
    
 
 
 
Mettler-Toledo International Inc.
 
Date:
July 27, 2012
 
By:  
/s/ William P. Donnelly  
 
 
 
 
 
 
 
 
 
 
 
 
William P. Donnelly 
 
 
 
 
 
Group Vice President and
Chief Financial Officer 
 


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EXHIBIT INDEX

Exhibit No.
 
Description
 
 
 
 
 
31.1*
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes — Oxley Act of 2002
 
 
 
 
 
31.2*
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes — Oxley Act of 2002
 
 
 
 
 
32*
Certification Pursuant to Section 906 of the Sarbanes — Oxley Act of 2002
 
 
 
 
 
101.INS*
XBRL Instance Document
 
 
 
 
 
101.SCH*
XBRL Taxonomy Extension Schema Document
 
 
 
 
 
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
 
 
101.LAB*
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
 
 
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
 
 
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document
_______________________
*    Filed herewith

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