SEC Form 10-Q filed by Mettler-Toledo International Inc.
$MTD
Biotechnology: Laboratory Analytical Instruments
Industrials
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
Commission File Number: 1-13595
_______________________________________________________________________________________________________________________________________
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S Employer Identification No.) | |||||||
| incorporation or organization) | ||||||||
and
Im Langacher, P.O. Box MT-100
CH 8606 Greifensee, Switzerland
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)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer . ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The Registrant had 21,102,668 shares of Common Stock outstanding at September 30, 2024.
METTLER-TOLEDO INTERNATIONAL INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
| PAGE | ||||||||
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Three months ended September 30, 2024 and 2023
(In thousands, except share data)
(unaudited)
| September 30, 2024 | September 30, 2023 | ||||||||||
| Net sales | |||||||||||
| Products | $ | $ | |||||||||
| Service | |||||||||||
| Total net sales | |||||||||||
| Cost of sales | |||||||||||
| Products | |||||||||||
| Service | |||||||||||
| Gross profit | |||||||||||
| Research and development | |||||||||||
| Selling, general and administrative | |||||||||||
| Amortization | |||||||||||
| Interest expense | |||||||||||
| Restructuring charges | |||||||||||
| Other charges (income), net | ( | ( | |||||||||
| Earnings before taxes | |||||||||||
| Provision for taxes | |||||||||||
| Net earnings | $ | $ | |||||||||
| Basic earnings per common share: | |||||||||||
| Net earnings | $ | $ | |||||||||
| Weighted average number of common shares | |||||||||||
| Diluted earnings per common share: | |||||||||||
| Net earnings | $ | $ | |||||||||
| Weighted average number of common and common equivalent shares | |||||||||||
| Comprehensive income, net of tax (Note 9) | $ | $ | |||||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
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METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Nine months ended September 30, 2024 and 2023
(In thousands, except share data)
(unaudited)
| September 30, 2024 | September 30, 2023 | ||||||||||
| Net sales | |||||||||||
| Products | $ | $ | |||||||||
| Service | |||||||||||
| Total net sales | |||||||||||
| Cost of sales | |||||||||||
| Products | |||||||||||
| Service | |||||||||||
| Gross profit | |||||||||||
| Research and development | |||||||||||
| Selling, general and administrative | |||||||||||
| Amortization | |||||||||||
| Interest expense | |||||||||||
| Restructuring charges | |||||||||||
| Other charges (income), net | ( | ( | |||||||||
| Earnings before taxes | |||||||||||
| Provision for taxes | |||||||||||
| Net earnings | $ | $ | |||||||||
| Basic earnings per common share: | |||||||||||
| Net earnings | $ | $ | |||||||||
| Weighted average number of common shares | |||||||||||
| Diluted earnings per common share: | |||||||||||
| Net earnings | $ | $ | |||||||||
| Weighted average number of common and common equivalent shares | |||||||||||
| Comprehensive income, net of tax (Note 9) | $ | $ | |||||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
- 4 -
METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED BALANCE SHEETS
As of September 30, 2024 and December 31, 2023
(In thousands, except share data)
(unaudited)
| September 30, 2024 | December 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Trade accounts receivable, less allowances of $18,707 at September 30, 2024 | |||||||||||
| and $20,103 at December 31, 2023 | |||||||||||
| Inventories | |||||||||||
| Other current assets and prepaid expenses | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Other intangible assets, net | |||||||||||
| Deferred tax assets, net | |||||||||||
| Other non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Trade accounts payable | $ | $ | |||||||||
| Accrued and other liabilities | |||||||||||
| Accrued compensation and related items | |||||||||||
| Deferred revenue and customer prepayments | |||||||||||
| Taxes payable | |||||||||||
| Short-term borrowings and current maturities of long-term debt | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred tax liabilities, net | |||||||||||
| Other non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
| 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 21,102,668 shares and | |||||||||||
| 21,526,172 shares at September 30, 2024 and December 31, 2023, respectively | |||||||||||
| Additional paid-in capital | |||||||||||
| Treasury stock at cost (23,683,343 shares at September 30, 2024 and 23,259,839 shares at December 31, 2023) | ( | ( | |||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total shareholders' equity | ( | ( | |||||||||
| Total liabilities and shareholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
- 5 -
METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Nine months ended September 30, 2024 and 2023
(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, 2022 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Exercise of stock options and restricted stock units | — | ( | — | ||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Excise tax on net repurchases of common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
| Exercise of stock options and restricted stock units | — | ( | — | ||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Excise tax on net repurchases of common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
| Exercise of stock options and restricted stock units | — | — | ( | — | |||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Excise tax on net repurchases of common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
| Exercise of stock options and restricted stock units | — | ( | — | ||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Excise tax on net repurchases of common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
| Exercise of stock options and restricted stock units | — | — | |||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Excise tax on net repurchases of common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
| Exercise of stock options and restricted stock units | — | ( | — | ||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Excise tax on net repurchases of common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
- 6 -
METTLER-TOLEDO INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 2024 and 2023
(In thousands)
(unaudited)
| September 30, 2024 | September 30, 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net earnings | $ | $ | |||||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||
| Depreciation | |||||||||||
| Amortization | |||||||||||
| Deferred tax benefit | ( | ( | |||||||||
| Share-based compensation | |||||||||||
| Non-cash discrete tax benefit | (22,982) | — | |||||||||
| Increase (decrease) in cash resulting from changes in: | |||||||||||
| Trade accounts receivable, net | |||||||||||
| Inventories | |||||||||||
| Other current assets | ( | ||||||||||
| Trade accounts payable | ( | ( | |||||||||
| Taxes payable | |||||||||||
| Accruals and other | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Proceeds from sale of property, plant and equipment | |||||||||||
| Purchase of property, plant and equipment | ( | ( | |||||||||
| Proceeds from government funding | |||||||||||
| Acquisitions | ( | ( | |||||||||
| Other investing activities | (4,048) | (25,937) | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from borrowings | |||||||||||
| Repayments of borrowings | ( | ( | |||||||||
| Proceeds from stock option exercises | |||||||||||
| Repurchases of common stock | ( | ( | |||||||||
| Acquisition contingent consideration payment | ( | ||||||||||
| Other financing activities | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents: | |||||||||||
| Beginning of period | |||||||||||
| End of period | $ | $ | |||||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
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METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (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, the United States and Mexico. 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 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, 2023.
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 nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full year ending December 31, 2024.
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. These financial statements were prepared using information reasonably available as of September 30, 2024 and through the date of this report. Actual results may differ from those estimates due to uncertainty around ongoing developments in Ukraine, the war in the Middle East, as well as other factors.
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 expected credit losses represents the Company’s best estimate based on historical information, current information, and reasonable and supportable forecasts of future events and circumstances.
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METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
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. 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:
| September 30, 2024 | December 31, 2023 | ||||||||||
| Raw materials and parts | $ | $ | |||||||||
| Work-in-progress | |||||||||||
| Finished goods | |||||||||||
| $ | $ | ||||||||||
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 and indefinite-lived intangible assets are generally based on an assessment of qualitative factors to determine whether it is more likely than not that the fair value of the asset is less than the carrying amount.
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 of benefit. 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 "Intangible - Goodwill and Other" and ASC 360 "Property, Plant and Equipment".
Other intangible assets consisted of the following:
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| Gross Amount | Accumulated Amortization | Intangibles, Net | Gross Amount | Accumulated Amortization | Intangibles, Net | ||||||||||||||||||||||||||||||
| Customer relationships | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Proven technology and patents | ( | ( | |||||||||||||||||||||||||||||||||
| Tradenames (finite life) | ( | ( | |||||||||||||||||||||||||||||||||
| Tradenames (indefinite life) | — | — | |||||||||||||||||||||||||||||||||
| Other | ( | ( | |||||||||||||||||||||||||||||||||
| $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
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METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
The Company recognized amortization expense associated with the above intangible assets of $6.8 million and $7.0 million for the three months ended September 30, 2024 and 2023, respectively, and $20.3 million and $20.8 million for the nine months ended September 30, 2024 and 2023, respectively. The annual aggregate amortization expense based on the current balance of other intangible assets is estimated to be $27.2 million for 2024, $26.1 million for 2025, $22.0 million for 2026, $20.6 million for 2027, $19.3 million for 2028, and $17.5 million for 2029. Purchased intangible amortization was $6.4 million, $5.0 million after tax, and $6.7 million, $5.2 million after tax, for the three months ended September 30, 2024 and 2023, respectively, and $19.5 million, $15.1 million after tax, and $19.9 million, $15.4 million after tax, for the nine months ended September 30, 2024 and 2023, respectively.
In addition to the above amortization, the Company recorded amortization expense associated with capitalized software of $11.4 million and $11.2 million for the three months ended September 30, 2024 and 2023, respectively, and $34.2 million and $33.2 million for the nine months ended September 30, 2024 and 2023, respectively.
Revenue Recognition
Product revenue is recognized from contracts with customers when a customer has obtained control of a product. The Company considers control to have transferred based upon shipping terms. To the extent the Company’s arrangements have a separate performance obligation, revenue related to any post-shipment performance obligation is deferred until completed. Shipping and handling costs charged to customers are included in total net sales and the associated expense is a component of cost of sales. Certain products are also sold through indirect distribution channels whereby the distributor assumes any further obligations to the end customer. Revenue is recognized on these distributor arrangements upon transfer of control to the distributor. Contracts do not contain variable pricing arrangements that are retrospective, except for rebate programs. Rebates are estimated based on expected sales volumes and offset against revenue at the time such revenue is recognized. 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. The related provisions for estimated returns and rebates are immaterial to the consolidated financial statements.
Certain of the Company’s product arrangements include separate performance obligations, primarily related to installation. Such performance obligations are accounted for separately when the deliverables have stand-alone value and the satisfaction of the undelivered performance obligations is probable and within the Company's control. The allocation of revenue between the performance obligations is based on the observable stand-alone selling prices at the time of the sale in accordance with a number of factors including service technician billing rates, time to install, and geographic location.
Software is generally not considered a distinct performance obligation with the exception of a few small software applications. The Company generally does not sell software products without the related hardware instrument as the software is embedded in the product. 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.
Service revenue not under contract is recognized upon the completion of the service performed. Revenue from spare parts sold on a stand-alone basis is recognized when control is transferred to the customer, which is generally at the time of shipment or delivery. Revenue from service contracts is recognized ratably over the contract period using a time-based method. 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.
- 10 -
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
Share-Based Compensation
The Company recognizes share-based compensation expense within selling, general and administrative in the consolidated statements of operations and other comprehensive income with a corresponding offset to additional paid-in capital in the consolidated balance sheet. The Company recorded $4.4 million and $13.6 million of share-based compensation expense for the three and nine months ended September 30, 2024, respectively, compared to $4.2 million and $12.5 million for the corresponding periods in 2023.
Research and Development
Research and development costs primarily consist of salaries, consulting and other costs. The Company expenses these costs as incurred.
Business Combinations and Asset Acquisitions
The Company accounts for business acquisitions under the accounting standards for business combinations. The results of each acquisition are included in the Company's consolidated results as of the acquisition date. The purchase price of an acquisition is allocated to tangible and intangible assets and assumed liabilities based on their estimated fair values and any consideration in excess of the net assets acquired is recognized as goodwill. The determination of the values of the acquired assets and assumed liabilities, including goodwill and intangible assets, require significant judgment. Acquisition transaction costs are expensed when incurred.
In circumstances where an acquisition involves a contingent consideration arrangement, the Company recognizes a liability equal to the fair value of the expected contingent payments as of the acquisition date. Subsequent changes in the fair value of the contingent consideration are recorded to other charges (income), net.
Recent Accounting Pronouncements
In March 2020, January 2021 and December 2022, the FASB issued ASU 2020-04, ASU 2021-01 and ASU 2022-06: Reference Rate Reform, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuance of LIBOR or another referenced rate. The guidance may be applied to any applicable contract entered into before December 31, 2024. The Company amended its credit agreement and cross currency swap agreements in June 2023 to change the interest rate benchmark from LIBOR to SOFR and other non-U.S. dollar references, which did not change the amount or timing of cash flows. As a result, the discontinuation of LIBOR did not have a material impact on the Company's financial statements.
In November 2023, the FASB issued ASU 2023-07: Improvements to Reportable Segment Disclosures which requires incremental disclosures about a public entity's reportable segments but does not change the definition of a segment or the guidance for determining reportable segments. The Company will adopt the annual disclosure requirements in 2024 and is currently evaluating the impact of these requirements on the consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09: Improvements to Income Tax Disclosures, which enhances income tax disclosures, especially related to the rate reconciliation and income taxes paid information. The Company will adopt the annual disclosure requirements in 2025 and is currently evaluating the impact of these requirements on the consolidated financial statements.
- 11 -
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
3.REVENUE
The Company disaggregates revenue from contracts with customers by product, service, timing of revenue recognition and geography. A summary of revenue by the Company’s reportable segments for the three and nine months ended September 30, 2024 and 2023 follows:
| For the three months ended September 30, 2024 | U.S. Operations | Swiss Operations | Western European Operations | Chinese Operations | Other Operations | Total | |||||||||||||||||||||||||||||
| Product Revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Service Revenue: | |||||||||||||||||||||||||||||||||||
| Point in time | |||||||||||||||||||||||||||||||||||
| Over time | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| For the three months ended September 30, 2023 | U.S. Operations | Swiss Operations | Western European Operations | Chinese Operations | Other Operations | Total | |||||||||||||||||||||||||||||
| Product Revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Service Revenue: | |||||||||||||||||||||||||||||||||||
Point in time | |||||||||||||||||||||||||||||||||||
Over time | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| For the nine months ended September 30, 2024 | U.S. Operations | Swiss Operations | Western European Operations | Chinese Operations | Other Operations | Total | |||||||||||||||||||||||||||||
| Product Revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Service Revenue: | |||||||||||||||||||||||||||||||||||
| Point in time | |||||||||||||||||||||||||||||||||||
| Over time | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| For the nine months ended September 30, 2023 | U.S. Operations | Swiss Operations | Western European Operations | Chinese Operations | Other Operations | Total | |||||||||||||||||||||||||||||
| Product Revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Service Revenue: | |||||||||||||||||||||||||||||||||||
Point in time | |||||||||||||||||||||||||||||||||||
Over time | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
A breakdown of net sales to external customers by geographic customer destination for the three and nine months ended September 30 follows:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Americas | $ | $ | $ | $ | |||||||||||||||||||
| Europe | |||||||||||||||||||||||
| Asia / Rest of World | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
- 12 -
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
The Company's global revenue mix by product category is laboratory (56 % of sales), industrial (39 % of sales) and retail (5 % of sales). The Company's product revenue by reportable segment is proportionately similar to the Company's global mix except the Company's Swiss Operations is largely comprised of laboratory products while the Company's Chinese Operations has a slightly higher percentage of industrial products. A breakdown of the Company’s sales by product category for the three and nine months ended September 30 is as follows:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Laboratory | $ | $ | $ | $ | |||||||||||||||||||
| Industrial | |||||||||||||||||||||||
| Retail | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The payment terms in the Company’s contracts with customers do not exceed one year and therefore contracts do not contain a significant financing component. In most cases, after appropriate credit evaluations, payments are due in arrears and are recognized as receivables. Unbilled revenue is recorded when performance obligations have been satisfied, but not yet billed to the customer. Unbilled revenue as of September 30, 2024 and December 31, 2023 was $40.6 million and $35.7 million, respectively, and is included within accounts receivable. Deferred revenue and customer prepayments are recorded when cash payments are received or due in advance of the performance obligation being satisfied. Deferred revenue primarily includes prepaid service contracts, as well as deferred installation.
Changes in the components of deferred revenue and customer prepayments during the nine month periods ending September 30, 2024 and 2023 are as follows:
| 2024 | 2023 | |||||||||||||
| Beginning balances as of January 1 | $ | $ | ||||||||||||
| Customer pre-payments/deferred revenue | ||||||||||||||
| Revenue recognized | ( | ( | ||||||||||||
| Foreign currency translation | ( | |||||||||||||
| Ending balance as of September 30 | $ | $ | ||||||||||||
The Company generally expenses sales commissions when incurred because the contract period is one year or less. These costs are recorded within selling, general, and administrative expenses. The value of unsatisfied performance obligations other than customer prepayments and deferred revenue associated with contracts greater than one year is immaterial.
- 13 -
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
4. FINANCIAL INSTRUMENTS
The Company has limited involvement with derivative financial instruments and does not use them for trading purposes. The Company enters into certain interest rate and cross currency 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 and cross currency 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. For additional disclosures on derivative instruments regarding balance sheet location, fair value, and the amounts reclassified into other comprehensive income and the effective portion of the cash flow hedges, also see Note 5 and Note 9 to the interim consolidated financial statements. As also described in Note 7, the Company has designated its euro-denominated debt as a hedge of a portion of its net investment in euro-denominated foreign subsidiaries.
Cash Flow Hedges
The Company has entered into a number of cross currency swaps designated as cash flow hedges. The agreements convert borrowings under the Company’s credit facility into synthetic Swiss franc debt, which allows the Company to effectively change the floating rate SOFR-based interest payments, excluding the credit spread, to a fixed Swiss franc income or expense as follows:
| Agreement Date | Amount Converted | Effective Swiss Franc Interest Rate | Maturity Date | |||||||||||||||||
| June 2019 | $50 million | (0.82)% | June 2023 | |||||||||||||||||
| November 2021 | $50 million | (0.67)% | November 2023 | |||||||||||||||||
| June 2021 | $50 million | (0.73)% | June 2024 | |||||||||||||||||
| June 2021 | $50 million | (0.59)% | June 2025 | |||||||||||||||||
| December 2023 | $50 million | 1.04% | November 2026 | |||||||||||||||||
| November 2023 | $50 million | 1.16% | November 2026 | |||||||||||||||||
| June 2023 | $50 million | 1.55% | June 2027 | |||||||||||||||||
| June 2024 | $50 million | 1.15% | June 2027 | |||||||||||||||||
In June 2024, the Company entered into a cross currency swap arrangement, as summarized above, to replace the cross currency swap that matured in June 2024. The new swap was designated as an effective cash flow hedge.
The Company amended all active cross currency swap agreements to replace all references of LIBOR to SOFR as the interest rate benchmark to align with the amendment to the Company's Prior Credit Facility Agreement, as discussed in Note 10 to the consolidated financial statements for the year ended December 31, 2023. As part of these amendments, the corresponding fixed Swiss franc interest rates were amended as well to reflect the change in the benchmark.
The Company's cash flow hedges are recorded gross at fair value in the consolidated balance sheet at September 30, 2024 and December 31, 2023, respectively. A derivative gain of $5.3 million based upon interest rates at September 30, 2024, is expected to be reclassified from other comprehensive income (loss) to earnings in the next twelve months. The cash flow hedges remain effective as of September 30, 2024.
Other Derivatives
The Company enters into foreign currency forward contracts in order to economically hedge short-term trade and non-trade intercompany balances largely denominated in Swiss franc, other major
- 14 -
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
European currencies, and the Chinese Renminbi 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 are recorded at fair value in the consolidated balance sheet at September 30, 2024 and December 31, 2023, as disclosed in Note 5. The Company recognized in other charges (income) a net loss of $3.1 million and net loss of $0.2 million during the three months ended September 30, 2024 and 2023, respectively, and a net gain of $1.5 million and net loss of $15.7 million during the nine months ended September 30, 2024 and 2023, respectively, which offset the related transaction gains (losses) associated with these contracts. At September 30, 2024 and December 31, 2023, these contracts had a notional value of $916.1 million and $793.9 million, respectively.
5. FAIR VALUE MEASUREMENTS
At September 30, 2024 and December 31, 2023, the Company had derivative assets totaling $9.9 million and $8.3 million respectively, and derivative liabilities totaling $22.1 million and $25.2 million, respectively. The Company has limited involvement with derivative financial instruments and therefore does not present all the required disclosures in tabular format. The fair values of the cross currency swap agreements 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 September 30, 2024 and December 31, 2023.
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.
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
- 15 -
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
The following table presents the Company's assets and liabilities, which are all categorized as Level 2, that are measured at fair value on a recurring basis. The Company does not have any assets or liabilities which are categorized as Level 1:
| September 30, 2024 | December 31, 2023 | Balance Sheet Classification | ||||||||||||||||||
| Foreign currency forward contracts not designated as hedging instruments | $ | $ | Other current assets and prepaid expenses | |||||||||||||||||
| Total derivative assets | $ | $ | ||||||||||||||||||
| Foreign currency forward contracts not designated as hedging instruments | $ | $ | Accrued and other liabilities | |||||||||||||||||
| Cash Flow Hedges: | ||||||||||||||||||||
| Cross currency swap agreement | Accrued and other liabilities | |||||||||||||||||||
| Cross currency swap agreement | Other non-current liabilities | |||||||||||||||||||
| Total derivative liabilities | $ | $ | ||||||||||||||||||
The Company had $8.4 million and $4.0 million of cash equivalents at September 30, 2024 and December 31, 2023, respectively, the fair value of which is determined using Level 2 inputs, through quoted and corroborated prices in active markets. The fair value of cash equivalents approximates cost.
The fair value of the Company's debt is less than the carrying value by approximately $174.1 million as of September 30, 2024. The fair value of the Company's fixed interest rate debt was estimated using Level 2 inputs, primarily discounted cash flow models, based on estimated current rates offered for similar debt under current market conditions for the Company.
During the nine months ended September 30, 2023, $10.0 million of contingent consideration was paid relating to the PendoTECH acquisition of which $5.6 million is included in financing activities for the amount accrued at the acquisition date and $4.4 million is included in operating activities for the amount not accrued at the acquisition date on the Consolidated Statement of Cash Flows in accordance with U.S. GAAP. The Company no longer has a contingent consideration obligation relating to the PendoTECH acquisition as of September 30, 2024.
6. INCOME TAXES
- 16 -
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
7. DEBT
Debt consisted of the following at September 30, 2024:
| U.S. Dollar | Other Principal Trading Currencies | Total | |||||||||||||||
| 4.24% $125 million ten-year Senior Notes due June 25, 2025 | |||||||||||||||||
| 3.91% $75 million ten-year Senior Notes due June 25, 2029 | |||||||||||||||||
| 5.45% $150 million ten-year Senior Notes due March 1, 2033 | |||||||||||||||||
| 2.83% $125 million twelve-year Senior Notes due July 22, 2033 | — | ||||||||||||||||
| 3.19% $50 million fifteen-year Senior Notes due January 24, 2035 | |||||||||||||||||
| 2.81% $150 million fifteen-year Senior Note due March 17, 2037 | |||||||||||||||||
| 2.91% $150 million fifteen-year Senior Note due September 1, 2037 | — | ||||||||||||||||
| 1.47% Euro 125 million fifteen-year Senior Notes due June 17, 2030 | |||||||||||||||||
| 1.30% Euro 135 million fifteen-year Senior Notes due November 6, 2034 | |||||||||||||||||
| 1.06% Euro 125 million fifteen-year Senior Notes due March 19, 2036 | |||||||||||||||||
| Debt issuance costs, net | ( | ( | ( | ||||||||||||||
| Total Senior Notes | |||||||||||||||||
$1.35 billion Credit Agreement, interest at benchmark plus 97.5 basis points (a) | |||||||||||||||||
| Other local arrangements | |||||||||||||||||
| Total debt | |||||||||||||||||
| Less: current portion | ( | ( | ( | ||||||||||||||
| Total long-term debt | $ | $ | $ | ||||||||||||||
(a) The benchmark interest rate is determined by the borrowing currency. The benchmark rates by borrowing currency are as follows: SOFR for U.S. dollars (plus a 10 basis points spread adjustment), SARON for Swiss franc, EURIBOR for Euro and SONIA for Great British pounds.
On May 30, 2024, the Company entered into a $1.35 billion Credit Agreement (the Credit Agreement), which amended its $1.25 billion Amended and Restated Credit Agreement (the Prior Credit Agreement). As of September 30, 2024, the Company had $585.3 million of additional borrowings available under its Credit Agreement, and the Company maintained $71.6 million of cash and cash equivalents.
The Credit Agreement is provided by a group of financial institutions (similar to the Company's Prior Credit Agreement) and has a maturity date of 2029. It is a revolving credit facility and is not subject to any scheduled principal payments prior to maturity. The obligations under the Credit Agreement are unsecured.
Borrowings under the Credit Agreement bear interest at current market rates plus a margin based on the Company’s consolidated leverage ratio. The Company must also pay facility fees that are tied to its leverage ratio. The Credit Agreement contains covenants that are similar to those contained in the prior Credit Agreement, with which the Company was in compliance as of September 30, 2024.
The Company is required to maintain (i) a ratio of net funded indebtedness to EBITDA of 3.5 to 1.0 or less, except in certain circumstances and (ii) an interest coverage ratio of 3.0 to 1.0 or greater. The Credit Agreement also places certain limitations on the Company, including limiting the ability to incur liens or indebtedness at a subsidiary level. In addition, the Credit Agreement has several events of default,
- 17 -
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
with customary grace periods applicable. The Company incurred approximately $0.2 million of debt extinguishment costs during 2024 related to the Prior Credit Agreement. The Company capitalized $2.0 million in financing fees during 2024 associated with the Credit Agreement, which will be amortized to interest expense through 2029.
In May 2023, the Company amended its Prior Credit Agreement to replace all references of LIBOR to SOFR and other non-U.S. dollar references as the interest rate benchmark.
In December 2022, the Company entered into an agreement to issue and sell $150 million 10-year Senior Notes in a private placement. The Company issued $150 million with a fixed interest rate of 5.45% (5.45% Senior Notes) in March 2023. The 5.45% Senior Notes are senior unsecured obligations of the Company. The 5.45% Senior Notes mature in March 2033. The terms of the 5.45% Senior Notes are consistent with the previous Senior Notes as described in the Company's Annual Report on Form 10-K. The Company used the proceeds from the sale of the 5.45% Senior Notes to refinance existing indebtedness and for other general corporate purposes.
The Company has designated the EUR 125 million 1.47% Euro Senior Notes, the EUR 135 million 1.30% Euro Senior Notes, and the EUR 125 million 1.06% Euro Senior Notes as a hedge of a portion of its net investment in euro-denominated foreign subsidiaries to reduce foreign currency risk associated with the net investment. Changes in the carrying value of this debt resulting from fluctuations in the euro to U.S. dollar exchange rate are recorded as foreign currency translation adjustments within other comprehensive income (loss). The Company recorded in other comprehensive income (loss) related to this net investment hedge an unrealized loss of $17.9 million and an unrealized gain of $15.3 million for the three months ended September 30, 2024 and 2023, respectively, and an unrealized loss of $4.6 million and unrealized gain of $6.4 million for the nine month periods ended September 30, 2024 and 2023, respectively. The Company has an unrealized gain of $12.7 million recorded in accumulated other comprehensive income (loss) as of September 30, 2024.
Other Local Arrangements
8. SHARE REPURCHASE PROGRAM AND TREASURY STOCK
The Company has $1.9 billion of remaining availability for its share repurchase program as of September 30, 2024. The share repurchases are expected to be funded from cash generated from operating activities, borrowings, and cash balances. 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.
- 18 -
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
9. ACCUMULATED OTHER COMPREHENSIVE INCOME
Comprehensive income (loss), net of tax consisted of the following as of September 30:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net earnings | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (loss), net of tax | ( | ( | ( | ||||||||||||||||||||
| Comprehensive income, net of tax | $ | $ | $ | $ | |||||||||||||||||||
| Currency Translation Adjustment, Net of Tax | Net Unrealized Gain (Loss) on Cash Flow Hedging Arrangements, Net of Tax | Pension and Post-Retirement Benefit Related Items, Net of Tax | Total | ||||||||||||||||||||
| Balance at December 31, 2023 | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Unrealized gains (losses) on cash flow hedging arrangements | |||||||||||||||||||||||
Foreign currency translation adjustment | ( | ( | |||||||||||||||||||||
Amounts recognized from accumulated other comprehensive income (loss), net of tax | ( | ( | |||||||||||||||||||||
Net change in other comprehensive income (loss), net of tax | ( | ( | ( | ||||||||||||||||||||
| Balance at September 30, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Currency Translation Adjustment, Net of Tax | Net Unrealized Gain (Loss) on Cash Flow Hedging Arrangements, Net of Tax | Pension and Post-Retirement Benefit Related Items, Net of Tax | Total | ||||||||||||||||||||
| Balance at December 31, 2022 | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Unrealized gains (losses) on cash flow hedging arrangements | |||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ( | ( | ||||||||||||||||||||
| Amounts recognized from accumulated other comprehensive income (loss), net of tax | ( | ( | |||||||||||||||||||||
| Net change in other comprehensive income (loss), net of tax | ( | ( | ( | ||||||||||||||||||||
| Balance at September 30, 2023 | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
- 19 -
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
| Three Months Ended | ||||||||||||||||||||
| September 30, | ||||||||||||||||||||
| 2024 | 2023 | Location of Amounts Recognized in Earnings | ||||||||||||||||||
| Effective portion of (gains) losses on cash flow hedging arrangements: | ||||||||||||||||||||
| Cross currency swap agreement | $ | $ | ( | (a) | ||||||||||||||||
| Provision for taxes | ( | Provision for taxes | ||||||||||||||||||
| Total, net of taxes | $ | $ | ( | |||||||||||||||||
Recognition of defined benefit pension and post-retirement items: | ||||||||||||||||||||
Recognition of actuarial losses and prior service cost, before taxes | $ | $ | (b) | |||||||||||||||||
| Provision for taxes | Provision for taxes | |||||||||||||||||||
| Total, net of taxes | $ | $ | ||||||||||||||||||
(a) The cross currency swap reflects an unrealized loss of $13.9 million for the three months ended September 30, 2024 recorded in other charges (income) that was offset by the underlying unrealized gain on the hedged debt. The cross currency swap also reflects a realized gain of $2.9 million recorded in interest expense for the three months ended September 30, 2024.
(b) These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and post-retirement cost. See Note 11 for additional details for the three months ended September 30, 2024 and 2023.
| Nine Months Ended | ||||||||||||||||||||
| September 30, | ||||||||||||||||||||
| 2024 | 2023 | Location of Amounts Recognized in Earnings | ||||||||||||||||||
| Effective portion of (gains) losses on cash flow hedging arrangements: | ||||||||||||||||||||
Cross currency swap agreement | $ | ( | $ | ( | (a) | |||||||||||||||
| Provision for taxes | ( | ( | Provision for taxes | |||||||||||||||||
| Total, net of taxes | $ | ( | $ | ( | ||||||||||||||||
Recognition of defined benefit pension and post-retirement items: | ||||||||||||||||||||
Recognition of actuarial losses and prior service cost, before taxes | $ | $ | (b) | |||||||||||||||||
| Provision for taxes | Provision for taxes | |||||||||||||||||||
| Total, net of taxes | $ | $ | ||||||||||||||||||
(a) The cross currency swap reflects an unrealized gain of $1.9 million for the nine months ended September 30, 2024 recorded in other charges (income) that was offset by the underlying unrealized loss on the hedged debt. The cross currency swap also reflects a realized gain of $9.0 million recorded in interest expense for the nine months ended September 30, 2024.
(b) These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and post-retirement cost. See Note 11 for additional details for the nine months ended September 30, 2024 and 2023.
- 20 -
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
10. 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 nine months ended September 30, relating to outstanding stock options and restricted stock units:
| 2024 | 2023 | |||||||||||||
| Three months ended | ||||||||||||||
| Nine months ended | ||||||||||||||
11. NET PERIODIC PENSION 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 September 30:
| U.S. Pension Benefits | Non-U.S. Pension Benefits | Other U.S. Post-retirement Benefits | Total | ||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||
| Service cost, net | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Interest cost on projected benefit obligations | |||||||||||||||||||||||||||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
Recognition of prior service cost | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
Recognition of actuarial losses/(gains) | |||||||||||||||||||||||||||||||||||||||||||||||
Net periodic pension cost/(credit) | $ | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||
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 nine months ended September 30:
| U.S. Pension Benefits | Non-U.S. Pension Benefits | Other U.S. Post-retirement Benefits | Total | ||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||
| Service cost, net | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Interest cost on projected benefit obligations | |||||||||||||||||||||||||||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Recognition of prior service cost | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Recognition of actuarial losses/(gains) | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Net periodic pension cost/(credit) | $ | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||
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METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
As previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, the Company expects to make employer contributions of approximately $27.3 million to its non-U.S. pension plans during the year ended December 31, 2024. This estimate may change based upon several factors, including fluctuations in currency exchange rates, actual returns on plan assets and changes in legal requirements.
12. OTHER CHARGES (INCOME), NET
13. SEGMENT REPORTING
As disclosed in Note 18 to the Company's consolidated financial statements for the year ended December 31, 2023, 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 | As of September 30, | |||||||||||||||||||||||||||
| For the three months ended | External | Other | Total Net | Segment | 2024 | ||||||||||||||||||||||||
| September 30, 2024 | Customers | Segments | Sales | Profit | Goodwill | ||||||||||||||||||||||||
| U.S. Operations | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Swiss Operations | |||||||||||||||||||||||||||||
| Western European Operations | |||||||||||||||||||||||||||||
| Chinese Operations | |||||||||||||||||||||||||||||
| Other (a) | |||||||||||||||||||||||||||||
| Eliminations and Corporate (b) | ( | ( | ( | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Net Sales to | Net Sales to | ||||||||||||||||||||||||||||
| For the nine months ended | External | Other | Total Net | Segment | |||||||||||||||||||||||||
| September 30, 2024 | Customers | Segments | Sales | Profit | |||||||||||||||||||||||||
| U.S. Operations | $ | $ | $ | $ | |||||||||||||||||||||||||
| Swiss Operations | |||||||||||||||||||||||||||||
| Western European Operations | |||||||||||||||||||||||||||||
| Chinese Operations | |||||||||||||||||||||||||||||
| Other (a) | |||||||||||||||||||||||||||||
| Eliminations and Corporate (b) | ( | ( | ( | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||
- 22 -
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
(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.
| Net Sales to | Net Sales to | As of September 30, | |||||||||||||||||||||||||||
| For the three months ended | External | Other | Total Net | Segment | 2023 | ||||||||||||||||||||||||
| September 30, 2023 | Customers | Segments | Sales | Profit | Goodwill | ||||||||||||||||||||||||
| U.S. Operations | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Swiss Operations | |||||||||||||||||||||||||||||
| Western European Operations | |||||||||||||||||||||||||||||
| Chinese Operations | |||||||||||||||||||||||||||||
| Other (a) | |||||||||||||||||||||||||||||
| Eliminations and Corporate (b) | ( | ( | ( | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Net Sales to | Net Sales to | ||||||||||||||||||||||||||||
| For the nine months ended | External | Other | Total Net | Segment | |||||||||||||||||||||||||
| September 30, 2023 | Customers | Segments | Sales | Profit | |||||||||||||||||||||||||
| U.S. Operations | $ | $ | $ | $ | |||||||||||||||||||||||||
| Swiss Operations | |||||||||||||||||||||||||||||
| Western European Operations | |||||||||||||||||||||||||||||
| Chinese Operations | |||||||||||||||||||||||||||||
| Other (a) | |||||||||||||||||||||||||||||
| Eliminations and Corporate (b) | ( | ( | ( | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||
(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.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Earnings before taxes | $ | $ | $ | $ | |||||||||||||||||||
| Amortization | |||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Restructuring charges | |||||||||||||||||||||||
| Other income, net | ( | ( | ( | ( | |||||||||||||||||||
| Segment profit | $ | $ | $ | $ | |||||||||||||||||||
- 23 -
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data, unless otherwise stated)
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.
- 24 -
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 nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full year ending December 31, 2024.
Changes in local currency 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.
We also include in the discussion below disclosures of immaterial qualitative factors that are not quantified. Although the impact of such factors is not considered material, we believe these disclosures can be useful in evaluating 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 nine month periods ended September 30, 2024 and 2023 (amounts in thousands).
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| (unaudited) | % | (unaudited) | % | (unaudited) | % | (unaudited) | % | ||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 954,535 | 100.0 | $ | 942,462 | 100.0 | $ | 2,827,234 | 100.0 | $ | 2,853,317 | 100.0 | |||||||||||||||||||||||||||||||||||
| Cost of sales | 382,068 | 40.0 | 382,923 | 40.6 | 1,140,966 | 40.4 | 1,163,669 | 40.8 | |||||||||||||||||||||||||||||||||||||||
| Gross profit | 572,467 | 60.0 | 559,539 | 59.4 | 1,686,268 | 59.6 | 1,689,648 | 59.2 | |||||||||||||||||||||||||||||||||||||||
| Research and development | 47,117 | 4.9 | 46,127 | 4.9 | 139,303 | 4.9 | 138,849 | 4.9 | |||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative | 228,777 | 24.0 | 217,447 | 23.1 | 698,963 | 24.7 | 680,679 | 23.9 | |||||||||||||||||||||||||||||||||||||||
| Amortization | 18,243 | 1.9 | 18,314 | 1.9 | 54,649 | 1.9 | 54,135 | 1.9 | |||||||||||||||||||||||||||||||||||||||
| Interest expense | 18,599 | 1.9 | 20,278 | 2.2 | 56,781 | 2.0 | 57,711 | 2.0 | |||||||||||||||||||||||||||||||||||||||
| Restructuring charges | 2,631 | 0.3 | 7,385 | 0.8 | 17,624 | 0.6 | 19,680 | 0.7 | |||||||||||||||||||||||||||||||||||||||
| Other charges (income), net | (1,852) | (0.2) | (1,171) | (0.1) | (3,728) | (0.1) | (2,578) | (0.2) | |||||||||||||||||||||||||||||||||||||||
| Earnings before taxes | 258,952 | 27.2 | 251,159 | 26.6 | 722,676 | 25.6 | 741,172 | 26.0 | |||||||||||||||||||||||||||||||||||||||
| Provision for taxes | 47,436 | 5.0 | 49,528 | 5.2 | 111,837 | 4.0 | 137,188 | 4.8 | |||||||||||||||||||||||||||||||||||||||
| Net earnings | $ | 211,516 | 22.2 | $ | 201,631 | 21.4 | $ | 610,839 | 21.6 | $ | 603,984 | 21.2 | |||||||||||||||||||||||||||||||||||
Net sales
Net sales were $954.5 million and $942.5 million for the three months ended September 30, 2024, and 2023, respectively, and $2.8 billion and $2.9 billion for the nine month periods ended September 30, 2024 and 2023, respectively. Sales in U.S. dollars increased 1% for the three month period and decreased 1% for the nine month period ended September 30, 2024. Excluding the effect of currency exchange rate fluctuations, or in local currencies, net sales increased 1% for the three month period and were flat for the nine month period ended September 30, 2024. We estimate that
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net sales for the nine month period ended September 30, 2024 benefited by approximately 2% from the recovery of our previously disclosed shipping delays in 2023 related to a new external European logistics service provider.
During the three months ended September 30, 2024 we continued to experience soft market demand, particularly in China. We also continue to benefit from the execution of our global sales and marketing programs and our innovative product portfolio. However, there is uncertainty in the economic environment and our end markets, including the risk of recession in many countries, and market conditions may change quickly. The ongoing developments related to Ukraine, the war in the Middle East, and inflation also present several risks to our business as further described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023. These topics could adversely impact our financial results and could have a greater impact on our operating results in future periods.
Net sales by geographic destination for the three months ended September 30, 2024 in U.S. dollars increased 2% in Europe and 4% in Asia/Rest of World, and decreased 1% in the Americas. In local currencies, our net sales by geographic destination increased 1% in Europe and 4% in Asia/Rest of World, and decreased 1% in the Americas. Our net sales by geographic destination for the nine months ended September 30, 2024 in U.S. dollars increased 5% in Europe and 1% in the Americas, and decreased 8% in Asia/Rest of World. Net sales by geographic destination for the nine months ended September 30, 2024 in local currencies increased 4% in Europe and 1% in the Americas, and decreased 6% in Asia/Rest of World. Net sales in Asia/Rest of World in local currency includes an increase of 1% and a decrease of 15% in China during the three and nine months ended September 30, 2024, respectively. Excluding the benefit of delayed fourth quarter 2023 shipments, local currency sales were flat in Europe and the Americas, and decreased 7% in Asia/Rest of World, with a 15% decline in China, during the nine months ended September 30, 2024. 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, 2023, 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 decreased 1% in both U.S. dollars and local currencies for the three months ended September 30, 2024 and decreased 3% in U.S. dollars and 2% in local currencies for the nine months ended September 30, 2024, compared to the corresponding periods in 2023. Service revenue (including spare parts) increased 9% in both U.S. dollars and local currencies for the three months ended September 30, 2024, and increased 7% in both U.S. dollars and local currencies for the nine months ended September 30, 2024, compared to the corresponding periods in 2023.
Net sales of our laboratory products and services, which represented approximately 56% of our total net sales, increased 5% in both U.S. dollars and local currencies for the three months ended September 30, 2024, and increased 2% in both U.S. dollars and local currencies for the nine months ended September 30, 2024. Laboratory net sales benefited approximately 3% from the previously disclosed shipping delays during the nine month period ended September 30, 2024. The increase in local currency net sales for the three month period ended September 30, 2024 reflects growth in most product categories, especially analytical instruments and process analytics. Laboratory results for the nine month period ended September 30, 2024 were also negatively impacted by a significant decline in China.
Net sales of our industrial products and services, which represented approximately 39% of our total net sales, were flat in both U.S. dollars and local currencies for the three months ended September 30, 2024, and decreased 3% in U.S. dollars and 2% in local currencies for the nine months ended September 30, 2024. Industrial net sales benefited approximately 1% from the previously disclosed shipping delays during the nine months ended September 30, 2024. The local
- 26 -
currency net sales of our industrial-related products for the three month period ended September 30, 2024 includes growth in product inspection, offset by a modest decline in core-industrial products.
Net sales in our food retailing products and services, which represented approximately 5% of our total net sales, decreased 20% in both U.S. dollars and local currencies for the three months ended September 30, 2024, and decreased 14% in both U.S. dollars and local currencies for the nine months ended September 30, 2024. Retail net sales benefited approximately 2% from the previously disclosed shipping delays during the nine months ended September 30, 2024. The local currency net sales decrease in food retailing products during the three and nine months ended September 30, 2024 is primarily due to the especially strong project related growth in the prior year.
Gross profit
Gross profit as a percentage of net sales was 60.0% and 59.4% for the three months ended September 30, 2024 and 2023, respectively, and 59.6% and 59.2% for the nine months ended September 30, 2024 and 2023, respectively.
Gross profit as a percentage of net sales for products was 61.8% and 61.2% for the three months ended September 30, 2024 and 2023, respectively, and 61.7% and 60.7% for the nine months ended September 30, 2024 and 2023, respectively.
Gross profit as a percentage of net sales for services (including spare parts) was 54.4% and 53.5% for the three months ended September 30, 2024 and 2023, respectively, and 53.4% and 54.2% for the nine months ended September 30, 2024 and 2023, respectively.
The increase in gross profit as a percentage of net sales for the three and nine months ended September 30, 2024 primarily reflects favorable price realization and business mix, offset in part by investments in our service organization.
Research and development and selling, general and administrative expenses
Research and development expenses as a percentage of net sales was 4.9% for the three and nine months ended September 30, 2024 and 2023. Research and development expenses increased 2% in U.S. dollars and 1% in local currencies for the three months ended September 30, 2024, and was flat in U.S. dollars and in local currencies for the nine months ended September 30, 2024, respectively, compared to the corresponding periods in 2023.
Selling, general and administrative expenses as a percentage of net sales were 24.0% and 23.1% for the three months ended September 30, 2024 and 2023, respectively, and were 24.7% and 23.9% for the nine months ended September 30, 2024 and 2023, respectively. Selling, general and administrative expenses increased 5% in both U.S. dollars and local currencies for the three months ended September 30, 2024, and increased 3% in both U.S. dollars and local currencies for the nine months ended September 30, 2024, respectively, compared to the corresponding periods in 2023. The increase includes higher variable compensation costs, offset in part by benefits from our cost savings initiatives.
Amortization, interest expense, restructuring charges, other charges (income), net and taxes
Amortization expense was $18.2 million and $18.3 million for the three months ended September 30, 2024 and 2023, respectively, and $54.6 million and $54.1 million for the nine months ended September 30, 2024 and 2023, respectively.
Interest expense was $18.6 million and $20.3 million for the three months ended September 30, 2024 and 2023, respectively, and $56.8 million and $57.7 million for the nine months ended September 30, 2024 and 2023, respectively.
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Restructuring charges were $2.6 million and $7.4 million for the three months ended September 30, 2024 and 2023, respectively, and $17.6 million and $19.7 million for the nine months ended September 30, 2024 and 2023, respectively. Restructuring expenses are primarily comprised of employee-related costs.
Other charges (income), net includes non-service pension costs (benefits), net (gains) losses from foreign currency transactions and hedging activities, interest income and other items. Non-service pension benefits were $1.9 million for the three months ended September 30, 2024 and 2023, and $5.7 million and $5.6 million for the nine months ended September 30, 2024 and 2023, respectively.
Our reported tax rate was 18.3% and 19.7% during the three months ended September 30, 2024 and 2023, respectively, and 15.5% and 18.5% during the nine months ended September 30, 2024 and 2023, respectively. The reported tax rate for the nine month period ended September 30, 2024 includes a non-cash discrete tax benefit of $23 million resulting from the reduction of uncertain tax position liabilities related to the settlement of a tax audit. The provision for taxes is based upon using our projected annual effective tax rate of 19.0% before non-recurring discrete tax items for the three and nine month periods ended September 30, 2024 and 2023. The difference between the Company's projected annual effective tax rate and the reported tax rate for the nine month period ended September 30, 2024 is primarily related to a non-cash discrete tax benefit of $23 million resulting from the reduction of uncertain tax position liabilities related to the settlement of a tax audit. The reported tax rate for the three and nine month periods ended September 30, 2024 is also impacted by the timing of excess tax benefits associated with stock option exercises.
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, 2023.
U.S. Operations (amounts in thousands)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | % | 2024 | 2023 | % | ||||||||||||||||||||||||||||||
| Total net sales | $ | 388,453 | $ | 388,011 | —% | $ | 1,170,226 | $ | 1,151,517 | 2% | |||||||||||||||||||||||||
| Net sales to external customers | $ | 351,042 | $ | 353,758 | (1)% | $ | 1,059,380 | $ | 1,050,274 | 1% | |||||||||||||||||||||||||
| Segment profit | $ | 97,277 | $ | 90,604 | 7% | $ | 291,160 | $ | 276,605 | 5% | |||||||||||||||||||||||||
Total net sales were flat and increased 2% for the three and nine months ended September 30, 2024, respectively, compared with the corresponding periods in 2023. Net sales to external customers decreased 1% and increased 1% for the three and nine months ended September 30, 2024, respectively, compared with the corresponding periods in 2023. Net sales to external customers benefited by approximately 1% from the previously disclosed shipping delays during the nine months ended September 30, 2024. Net sales to external customers for the three and nine months ended September 30, 2024 reflect a significant decline in food retailing related to strong project activity in the prior year, offset in part by growth in most other product categories. Net sales to external customers for the three months ended September 30, 2024 also reflect strong growth in process analytics.
Segment profit increased $6.7 million and $14.6 million for the three and nine month period ended September 30, 2024, respectively, compared to the corresponding periods in 2023. Segment profit increased during the three and nine months ended September 30, 2024 primarily due to improved business mix, and benefits from our margin expansion and cost savings initiatives.
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Swiss Operations (amounts in thousands)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | %1) | 2024 | 2023 | %1) | ||||||||||||||||||||||||||||||
| Total net sales | $ | 242,391 | $ | 247,200 | (2)% | $ | 739,391 | $ | 723,579 | 2% | |||||||||||||||||||||||||
| Net sales to external customers | $ | 53,435 | $ | 50,233 | 6% | $ | 157,870 | $ | 143,405 | 10% | |||||||||||||||||||||||||
| Segment profit | $ | 80,195 | $ | 64,387 | 25% | $ | 195,085 | $ | 207,723 | (6)% | |||||||||||||||||||||||||
1)Represents U.S. dollar growth (decline) for net sales and segment profit.
Total net sales decreased 2% in U.S. dollars and 3% in local currency for the three months ended September 30, 2024, and increased 2% in U.S. dollars and was flat in local currency for the nine months ended September 30, 2024, respectively, compared to the corresponding periods in 2023. Net sales to external customers increased 6% in U.S. dollars and 5% in local currency for the three months ended September 30, 2024 and increased 10% in U.S. dollars and 8% in local currency for the nine months ended September 30, 2024, compared to the corresponding periods in 2023. Net sales to external customers benefited by approximately 5% from our previously disclosed shipping delays during the nine months ended September 30, 2024. Net sales to external customers for the three and nine months ended September 30, 2024 reflect strong growth in most product categories, offset in part by a significant decline in food retailing related to strong project activity in the prior year.
Segment profit increased $15.8 million and decreased $12.6 million for the three and nine months ended September 30, 2024, respectively, compared to the corresponding periods in 2023. Segment profit during the three months ended September 30, 2024 reflects favorable business mix and inter-segment pricing, as well as benefits from our margin expansion and cost savings initiatives. Segment profit for the nine months ended September 30, 2024 includes unfavorable inter-segment pricing, unfavorable foreign currency translation and business mix.
Western European Operations (amounts in thousands)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | %1) | 2024 | 2023 | %1) | ||||||||||||||||||||||||||||||
| Total net sales | $ | 245,442 | $ | 246,399 | —% | $ | 752,428 | $ | 730,540 | 3% | |||||||||||||||||||||||||
| Net sales to external customers | $ | 201,837 | $ | 198,520 | 2% | $ | 618,915 | $ | 590,019 | 5% | |||||||||||||||||||||||||
| Segment profit | $ | 43,960 | $ | 46,345 | (5)% | $ | 139,395 | $ | 129,615 | 8% | |||||||||||||||||||||||||
1)Represents U.S. dollar growth (decline) for net sales and segment profit.
Total net sales were flat in U.S. dollars and decreased 1% in local currencies for the three months ended September 30, 2024 and increased 3% in U.S. dollars and 2% in local currencies for the nine months ended September 30, 2024, compared to the corresponding periods in 2023. Net sales to external customers increased 2% in U.S. dollars and 1% in local currencies for the three months ended September 30, 2024, and increased 5% in U.S. dollars and 4% in local currencies for the nine months ended September 30, 2024, compared to the corresponding periods in 2023. Net sales benefited by approximately 3% from our previously disclosed shipping delays during the nine months ended September 30, 2024. Net sales to external customers for the three and nine months ended September 30, 2024 reflect modest growth in most product categories. Net sales to external customers for the three months ended September 30, 2024 also reflect strong growth in process analytics.
Segment profit decreased $2.4 million and increased $9.8 million for the three and nine month periods ended September 30, 2024, respectively, compared to the corresponding periods in 2023. Segment profit decreased during the three months ended September 30, 2024 primarily due to decreased sales volume, offset in part by benefits from our margin expansion and cost savings initiatives. Segment profit for the nine months ended September 30, 2024 reflects increased sales
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volume, favorable business mix and benefits from our margin expansion and cost savings initiatives.
Chinese Operations (amounts in thousands)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | %1) | 2024 | 2023 | %1) | ||||||||||||||||||||||||||||||
| Total net sales | $ | 242,469 | $ | 232,404 | 4% | $ | 712,586 | $ | 767,572 | (7)% | |||||||||||||||||||||||||
| Net sales to external customers | $ | 164,400 | $ | 162,012 | 1% | $ | 471,982 | $ | 569,449 | (17)% | |||||||||||||||||||||||||
| Segment profit | $ | 89,435 | $ | 83,865 | 7% | $ | 264,755 | $ | 284,828 | (7)% | |||||||||||||||||||||||||
1)Represents U.S. dollar growth (decline) for net sales and segment profit.
Total net sales increased 4% in U.S. dollars and 3% in local currency for the three months ended September 30, 2024 and decreased 7% in U.S. dollars and 5% in local currency for the nine months ended September 30, 2024, compared to the corresponding periods in 2023. Net sales to external customers increased 1% in both U.S. dollars and local currency for the three months ended September 30, 2024 and decreased 17% in U.S. dollars and 15% in local currency during the nine months ended September 30, 2024, compared to the corresponding periods in 2023. Net sales benefited by approximately 1% from our previously disclosed shipping delays during the nine months ended September 30, 2024. The increase in net sales to external customers for the three months ended September 30, 2024 benefited from easier prior year comparisons while market conditions remained soft. Results included growth in laboratory products, offset in part by a decline in industrial products. Net sales to external customers for the nine months ended September 30, 2024 reflect a significant decline in market demand in most product categories. Uncertainties continue to exist and market conditions may change quickly.
Segment profit increased $5.6 million and decreased $20.1 million for the three and nine month periods ended September 30, 2024, respectively, compared to the corresponding periods in 2023. The increase in segment profit for the three months ended September 30, 2024 includes increased sales volume and benefits from our margin expansion and cost savings initiatives. The decrease in segment profit for the nine months ended September 30, 2024 reflects significantly lower sales volumes and unfavorable currency translation.
Other (amounts in thousands)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | %1) | 2024 | 2023 | %1) | ||||||||||||||||||||||||||||||
| Total net sales | $ | 189,607 | $ | 180,616 | 5% | $ | 535,809 | $ | 517,406 | 4% | |||||||||||||||||||||||||
| Net sales to external customers | $ | 183,821 | $ | 177,939 | 3% | $ | 519,087 | $ | 500,170 | 4% | |||||||||||||||||||||||||
| Segment profit | $ | 31,455 | $ | 30,007 | 5% | $ | 81,264 | $ | 78,690 | 3% | |||||||||||||||||||||||||
1)Represents U.S. dollar growth (decline) for net sales and segment profit.
Total net sales increased 5% in U.S. dollars and 7% in local currency for the three months ended September 30, 2024 and increased 4% in U.S. dollars and 6% in local currency for the nine months ended September 30, 2024, compared to the corresponding periods in 2023. Net sales to external customers increased 3% in U.S. dollars and 5% in local currencies for the three months ended September 30, 2024 and increased 4% in U.S. dollars and 6% in local currencies for the nine months ended September 30, 2024, compared to the corresponding periods in 2023. Net sales benefited by approximately 3% from our previously disclosed shipping delays during the nine months ended September 30, 2024. Net sales to external customers for the three and nine months ended September 30, 2024 reflect strong growth in laboratory products.
Segment profit increased $1.4 million and $2.6 million for the three and nine months ended September 30, 2024, respectively, compared to the corresponding periods in 2023. The increase in
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segment profit for the three and nine months ended September 30, 2024 is primarily related to increased sales volume and our margin expansion initiatives, offset in part by unfavorable foreign currency translation.
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 available borrowings under our Credit Agreement, the ability to obtain appropriate financing and our cash and cash equivalent balances. Currently, our liquidity needs are primarily driven by working capital requirements, capital expenditures, share repurchases and acquisitions. Global market conditions can be uncertain, and our ability to generate cash flow could be reduced by a deterioration in global markets.
We currently believe that cash flows from operating activities, together with liquidity available under our Credit Agreement, local working capital facilities, and cash balances, will be sufficient to fund currently anticipated working capital needs and spending requirements for at least the foreseeable future.
Cash provided by operating activities totaled $702.2 million during the nine months ended September 30, 2024, compared to $684.4 million in the corresponding period in 2023. The increase for the nine months ended September 30, 2024 is primarily related to working capital, including lower cash incentive payments of approximately $35 million.
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 $62.6 million for the nine months ended September 30, 2024 compared to $72.9 million in the corresponding period in 2023.
In September 2021, we entered into an agreement with the U.S. Department of Defense to increase domestic production capacity of pipette tips and enhance manufacturing automation and logistics. We have received the maximum allowable funding of $35.8 million related to the agreement during prior years, which offset associated capital expenditures.
We continue to explore potential acquisitions. In connection with any acquisition, we may incur additional indebtedness. During the nine months ended September 30, 2023, $10.0 million of contingent consideration was paid relating to the PendoTECH acquisition of which $5.6 million is included in financing activities for the amount accrued at the acquisition date and $4.4 million is included in operating activities for the amount not accrued at the acquisition date on the Consolidated Statement of Cash Flows in accordance with U.S. GAAP.
Cash flows used in financing activities are primarily comprised of share repurchases. In accordance with our share repurchase program, we spent $637.5 million and $724.0 million on the repurchase of 482,413 shares and 526,019 shares, during the nine months ended September 30, 2024 and 2023, respectively.
The Inflation Reduction Act (IRA) was enacted on August 16, 2022. The IRA includes provisions imposing a 1% excise tax on net share repurchases that occur after December 31, 2022
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and introduces a 15% corporate alternative minimum tax (CAMT) on adjusted financial statement income. The financial impact of the IRA was immaterial to our financial statements.
Senior Notes and Credit Facility Agreement
Our debt consisted of the following at September 30, 2024:
| U.S. Dollar | Other Principal Trading Currencies | Total | |||||||||||||||
| 4.24% $125 million ten-year Senior Notes due June 25, 2025 | 125,000 | — | 125,000 | ||||||||||||||
| 3.91% $75 million ten-year Senior Notes due June 25, 2029 | 75,000 | — | 75,000 | ||||||||||||||
| 5.45% $150 million ten-year Senior Notes due March 1, 2033 | 150,000 | — | 150,000 | ||||||||||||||
| 2.83% $125 million twelve-year Senior Notes due July 22, 2033 | 125,000 | — | 125,000 | ||||||||||||||
| 3.19% $50 million fifteen-year Senior Notes due January 24, 2035 | 50,000 | — | 50,000 | ||||||||||||||
| 2.81% $150 million fifteen-year Senior Note due March 17, 2037 | 150,000 | — | 150,000 | ||||||||||||||
| 2.91% $150 million fifteen-year Senior Note due September 1, 2037 | 150,000 | — | 150,000 | ||||||||||||||
| 1.47% Euro 125 million fifteen-year Senior Notes due June 17, 2030 | — | 139,461 | 139,461 | ||||||||||||||
| 1.30% Euro 135 million fifteen-year Senior Notes due November 6, 2034 | — | 150,618 | 150,618 | ||||||||||||||
| 1.06% Euro 125 million fifteen-year Senior Notes due March 19, 2036 | — | 139,461 | 139,461 | ||||||||||||||
| Debt issuance costs, net | (2,400) | (1,258) | (3,658) | ||||||||||||||
| Total Senior Notes | 822,600 | 428,282 | 1,250,882 | ||||||||||||||
$1.35 billion Credit Agreement, interest at benchmark plus 97.5 basis points (a) | 438,206 | 321,934 | 760,140 | ||||||||||||||
| Other local arrangements | 8,550 | 57,913 | 66,463 | ||||||||||||||
| Total debt | 1,269,356 | 808,129 | 2,077,485 | ||||||||||||||
| Less: current portion | (128,162) | (57,662) | (185,824) | ||||||||||||||
| Total long-term debt | $ | 1,141,194 | $ | 750,467 | $ | 1,891,661 | |||||||||||
(a) The benchmark interest rate is determined by the borrowing currency. The benchmark rates by borrowing currency are as follows: SOFR for U.S. dollars (plus a 10 basis points spread adjustment), SARON for Swiss franc, EURIBOR for Euro and SONIA for Great British pounds.
On May 30, 2024, we entered into a $1.35 billion Credit Agreement (the Credit Agreement), which amended our $1.25 billion Amended and Restated Credit Agreement (the Prior Credit Agreement), that is further described in Note 7 of our consolidated financial statements.
As of September 30, 2024, we had $585.3 million of additional borrowings available under our Credit Agreement, and we maintained $71.6 million of cash and cash equivalents.
In May 2023 we amended our Prior Credit Agreement to replace all references of LIBOR to SOFR and other non-U.S. dollar references as the interest rate benchmark.
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. Further, we do not have any downgrade triggers relating to ratings from rating agencies that would accelerate the maturity dates of our debt. We were in compliance with our debt covenants as of September 30, 2024.
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Other Local Arrangements
In April 2018, two of our non-U.S. pension plans issued loans totaling $39.6 million (Swiss franc 38 million) to a wholly owned subsidiary of the Company. The loans have the same terms and conditions which include an interest rate of SARON plus 97.5 basis points. This rate changed from SARON plus 87.5 basis points in August 2024. The loans were renewed for one year in April 2024.
Share Repurchase Program
We have $1.9 billion of remaining availability for our share repurchase program as of September 30, 2024. The share repurchases are expected to be funded from cash generated from operating activities, borrowings, and cash balances. 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 32.2 million shares at an average price per share of $297.53 since the inception of the program in 2004 through September 30, 2024. During the nine months ended September 30, 2024 and 2023, we spent $637.5 million and $724.0 million on the repurchase of 482,413 and 526,019 shares at an average price per share of $1,321.46 and $1,388.54, respectively. We also reissued 58,909 shares and 70,812 shares held in treasury upon the exercise of stock options and vesting of restricted stock units during the nine months ended September 30, 2024 and 2023, respectively.
Effect of Currency on Results of Operations
Our earnings are affected by changes in exchange rates. We are most sensitive to changes in the exchange rates between the Swiss franc, euro, Chinese renminbi, and U.S. dollar. We have more Swiss franc expenses than we do Swiss franc sales because we develop and manufacture products in Switzerland that we sell globally, and have a number of corporate functions located in Switzerland. When the Swiss franc strengthens against our other trading currencies, particularly the U.S. dollar and euro, our earnings decrease. We also have significantly more sales in the euro than we do expenses. When the euro weakens against the U.S. dollar and Swiss franc, our earnings also decrease. We estimate a 1% strengthening of the Swiss franc against the euro would reduce our earnings before tax by approximately $2.3 million to $2.6 million annually.
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. The most significant of these currency exposures is the Chinese renminbi. The impact on our earnings before tax of the Chinese renminbi weakening 1% against the U.S. dollar is a reduction of approximately $2.5 million to $2.8 million annually.
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, the Swiss franc and the euro. Based on our outstanding debt at September 30, 2024, we estimate that a 5% weakening of the U.S. dollar against the currencies in which our debt is denominated would result in an increase of approximately $42.6 million in the reported U.S. dollar value of our debt.
Forward-Looking Statements Disclaimer
You should not rely on forward-looking statements to predict our actual results. Our actual results or performance may be materially different than reflected in forward-looking statements because of various risks and uncertainties, including statements about expected revenue growth, inflation, ongoing developments related to Ukraine and the war in the Middle East. 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.”
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We make forward-looking statements about future events or our future financial performance, including earnings and sales growth, earnings per share, strategic plans and contingency plans, growth opportunities or economic downturns, our ability to respond to changes in market conditions, planned research and development efforts and product introductions, adequacy of facilities, access to and the costs of raw materials, shipping and supplier costs, gross margins, customer demand, our competitive position, pricing, capital expenditures, cash flow, tax-related matters, the impact of foreign currencies, compliance with laws, effects of acquisitions, and the impact of inflation, ongoing developments related to Ukraine and the war in the Middle East on our business.
Our forward-looking statements may not be accurate or complete, and we do not intend to update or revise them in light of actual results. New risks also periodically arise. Please consider the risks and factors that could cause our results to differ materially from what is described in our forward-looking statements, including inflation, the ongoing developments related to Ukraine, and the war in the Middle East. See in particular “Factors Affecting Our Future Operating Results” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023 and other reports filed with the SEC from time to time.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2024, 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, 2023.
Item 4.Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and 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 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 September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1.Legal Proceedings. None
Item 1A.Risk Factors.
For the three and nine months ended September 30, 2024 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, 2023.
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 | |||||||||||
| July 1 to July 30, 2024 | 54,054 | $ | 1,375.64 | 54,054 | $ | 2,059,072,950 | ||||||||
| August 1 to August 31, 2024 | 54,714 | $ | 1,423.47 | 54,714 | $ | 1,981,187,983 | ||||||||
| September 1 to September 30, 2024 | 43,153 | $ | 1,396.26 | 43,153 | $ | 1,920,934,295 | ||||||||
| Total | 151,921 | $ | 1,398.73 | 151,921 | $ | 1,920,934,295 | ||||||||
The Company has $1.9 billion of remaining availability as of September 30, 2024. We have purchased 32.2 million shares at an average price per share of $297.53 since the inception of the program through September 30, 2024.
During the nine months ended September 30, 2024 and 2023, we spent $637.5 million and $724.0 million on the repurchase of 482,413 and 526,019 shares at an average price per share of $1,321.46 and $1,388.54, respectively. We also reissued 58,909 shares and 70,812 shares held in treasury upon the exercise of stock options and vesting of restricted stock units during the nine months ended September 30, 2024 and 2023, respectively. In addition, we incurred $5.8 million and $6.4 million of excise tax during the nine months ended September 30, 2024 and 2023, respectively related to the Inflation Reduction Act which is reflected as a reduction in shareholders' equity in our consolidated financial statements.
Item 3.Defaults Upon Senior Securities. None
Item 5. Other information. None
Item 6. Exhibits. See Exhibit Index.
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EXHIBIT INDEX
| Exhibit No. | Description | ||||||||||
| 101.INS* | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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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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: | November 8, 2024 | By: | /s/ Shawn P. Vadala | |||||||||||||||||
| Shawn P. Vadala | ||||||||||||||||||||
| Chief Financial Officer | ||||||||||||||||||||
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