Item 7. 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 together with our audited consolidated financial statements.

Changes in local currencies 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.

Overview

We operate a global business with sales that are diversified by geographic region, product range, and customer. We hold leading positions worldwide in many of our markets and attribute this leadership to several factors, including the strength of our brand name and reputation, our comprehensive offering of innovative instruments and solutions, and the breadth and quality of our global sales and service network.

Net sales in U.S. dollars decreased 4% in 2015 and increased 4% in 2014. Excluding the effect of currency exchange rate fluctuations, or in local currencies, net sales increased 3% in 2015 and 5% in 2014. Net sales growth during 2015 reflected favorable market conditions in our Western markets, particularly the United States, and our ability to pursue under-penetrated markets, offset in part by reduced market demand in China, Russia, and Brazil. We expect to continue to benefit from our strong global leadership positions, diversified customer base, robust product offering, investment in emerging markets, significant installed base, and the impact of our global sales and marketing programs. Examples of these programs include identifying and investing in growth and market penetration opportunities, improving our lead generation and lead nurturing processes, and more effectively pricing our products and services. Currency exchange rate fluctuations negatively impacted net sales as most of our non-U.S. dollar trading currencies, especially the euro, have weakened against the U.S. dollar. While market conditions remain stable in most parts of the world, we continue to see unfavorable market conditions in China, Russia, and Brazil, where customer investments have slowed due to a variety of economic factors. We remain cautious about our sales outlook as the timing of a market stabilization or recovery in these three countries remains uncertain.

With respect to our end-user markets, we experienced increased results during 2015 versus the prior year in our laboratory-related markets, such as pharmaceutical and biotech customers, as well as the laboratories of chemical companies and food and beverage companies. Demand from these markets was generally strong during 2015. The local currency increase in net sales of our laboratory-related products during 2015 was driven by strong volume and favorable price realization in most product categories, including particularly strong growth in automated chemistry and pipettes. These results were offset in part by significant sales volume declines in Brazil and Russia.

Our industrial markets experienced favorable market conditions in the United States and benefited from our customers' focus on brand protection and food safety within our product inspection end-market, but were adversely impacted in 2015 by a significant decline in our industrial-related sales in China, Russia, and Brazil due to reduced market demand related to a variety of economic conditions. Emerging market economies have historically been an important source of growth based upon the expansion of their

domestic economies, as well as increased exports as companies have moved production to low-cost countries. Our industrial-related products are especially sensitive to changes in economic growth.

Our food retailing markets experienced modest growth during 2015, primarily driven by strong project activity in the United States, offset in part by reduced sales in Europe. Traditionally the spending levels in this sector have experienced more volatility than our other customer sectors due to the timing of customer project activity and new regulations. Similar to our industrial business, emerging markets have also historically provided growth as the expansion of local emerging market economies creates a significant number of new retail stores each year.

In 2016, we expect to continue to pursue the overall business growth strategies which we have followed in recent years:

Gaining Market Share. Our global sales and marketing initiative, “Spinnaker,” continues to be an important growth strategy. For example, we added more than 200 field sales and service resources to pursue under-penetrated market opportunities and will look to make similar investments to front-end resources in 2016. We also aim to gain market share by implementing sophisticated sales and marketing programs, leveraging our extensive customer databases, and leveraging our product offering to larger customers through key account management. While this initiative is broad-based, efforts to improve these processes include increased segment marketing and leads generation and nurturing activities, the implementation of more effective pricing and value-based selling strategies and processes, improved sales force training and effectiveness, cross-selling, and other sales and marketing topics. Our comprehensive service offerings, and our initiatives to globalize and harmonize these offerings, help us further penetrate developed markets. We estimate that we have the largest installed base of weighing instruments in the world, and we continue to invest in sales and marketing activities aimed at increasing the proportion of our installed base that is under service contract, or selling new products that replace old products in our installed base. In addition to traditional repair and maintenance, our service offerings continue to expand into value-added services for a range of market needs, including regulatory compliance.

Expanding Emerging Markets. Emerging markets, comprising Asia (excluding Japan), Eastern Europe, Latin America, the Middle East, and Africa, account for approximately 33% of our total net sales. We have a two-pronged strategy in emerging markets: first, to capitalize on long-term growth opportunities in these markets and second, to leverage our low-cost manufacturing operations in China. We have over a 25-year track record in China, and our sales in Asia have grown more than 14% on a compound annual growth basis in local currencies since 1999. We have broadened our product offering to the Asian markets and benefit as multinational customers shift production to China. India has also been a source of emerging market sales growth in past years due to increased life science research activities. Overall, market conditions in emerging markets were mixed during 2015 and below our long-term expectations. We experienced a 2% decrease in emerging market local currency sales during 2015 versus the prior year, due to unfavorable market conditions in China, Russia, and Brazil. Chinese market conditions for our industrial products were particularly weak in 2015 related to overcapacity in certain end-user segments and a reduction of credit availability for many local Chinese customers. We also experienced significant sales declines in Russia and Brazil due to reduced market demand. During 2015, China, Russia, and Brazil represented 18% of our global sales to external customers and experienced a decline in sales of 11% in local currencies, while sales in our other emerging markets increased 10% in local currencies. Emerging market sales can be expected to be volatile, and the timing of a market stabilization or recovery in China, Russia, and Brazil remains uncertain. Within China, we are redeploying resources and sales and marketing efforts to the faster-growing segments of pharma, food safety, and environment. We believe the long-term growth of these segments will be favorably impacted by the Chinese government's emphasis on science, high-value industries, and product quality. We expect our

laboratory, process analytics, and product inspection businesses will particularly benefit from these segments.

Extending Our Technology Lead. We continue to focus on product innovation. In the last three years, we spent approximately 5% of net sales on research and development. We seek to drive shorter product life cycles, as well as improve our product offerings and their capabilities with additional integrated technologies and software. In addition, we aim to create value for our customers by having an intimate knowledge of their processes via our significant installed product base.

Maintaining Cost Leadership. We continue to strive to improve our margins by optimizing our cost structure. For example, we have focused on reallocating resources and better aligning our cost structure to support our investments in market penetration initiatives, higher growth areas, and opportunities for margin improvement. We have also initiated various restructuring programs over the past few years in response to changing market conditions. As previously mentioned, shifting production to China has also been an important component of our cost savings initiatives. We have also implemented global procurement and supply chain management programs over the last several years aimed at lowering supply costs. Our cost leadership initiatives are also focused on continuously improving our invested capital efficiency, such as reducing our working capital levels and ensuring appropriate returns on our expenditures.

Pursuing Strategic Acquisitions. We seek to pursue acquisitions that may leverage our global sales and service network, respected brand, extensive distribution channels, and technological leadership. We have identified life sciences, product inspection, and process analytics as three key areas for acquisitions. We also continue to pursue “bolt-on” acquisitions. For example, during the third quarter of 2015, we acquired a real-time water purity technology in the United States that has been integrated into our process analytics product offering.

Results of Operations — Consolidated

Net sales

Net sales were $2,395.4 million for the year ended December 31, 2015, compared to $2,486.0 million in 2014, and $2,379.0 million in 2013. This represents a decrease of 4% in 2015 and an increase of 4% in 2014 in U.S. dollars and an increase of 3% and 5% in local currencies, respectively.

In 2015, our net sales by geographic destination increased in U.S. dollars 6% in the Americas, decreased 12% in Europe, and decreased 5% in Asia/Rest of World. In local currencies, our net sales by geographic destination increased in 2015 by 8% in the Americas and 2% in Europe, and was flat in Asia/Rest of World. Net sales were impacted by significant sales declines in China, Russia, and Brazil. A discussion of sales by operating segment is included below.

As described in Note 17 to our audited consolidated financial statements, 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 3% in U.S. dollars and increased 3% in local currencies during 2015 and increased 4% in both U.S. dollars and local currencies in 2014. Service revenue (including spare parts) decreased 5% in U.S. dollars and increased 4% in local currencies in 2015, and increased 7% in U.S. dollars and 8% in local currencies in 2014.

Net sales of our laboratory-related products, which represented approximately 48% of our total net sales in 2015, decreased 1% in U.S. dollars and increased 7% in local currencies during 2015. The local currency increase in net sales of our laboratory-related products during 2015 was driven by strong volume

and favorable price realization in most product categories, including particularly strong growth in automated chemistry and pipettes. These results were offset in part by significant sales volume declines in Brazil and Russia.

Net sales of our industrial-related products, which represented approximately 43% of our total net sales in 2015, decreased 7% in U.S. dollars and were flat in local currencies during 2015. Local currency net sales included significant sales volume declines of industrial-related products in China, Russia, and Brazil, offset by strong growth in the United States primarily due to increased volume and favorable price realization across most product categories.

Net sales of our food retailing products, which represented approximately 9% of our total net sales in 2015, decreased 5% in U.S. dollars and increased 2% in local currencies during 2015. The increase in net sales in local currencies of our food retailing products during 2015 was driven by strong project activity in the Americas offset in part by reduced net sales in Europe.

Gross profit

Gross profit as a percentage of net sales was 56.4% for 2015, compared to 54.7% for 2014 and 53.9% for 2013.

Gross profit as a percentage of net sales for products was 60.1% for 2015, compared to 58.1% for 2014 and 57.3% for 2013. Gross profit as a percentage of net sales for services (including spare parts) was 43.6% for 2015, compared to 42.8% for 2014, and 41.7% for 2013.

The increase in gross profit as a percentage of net sales for 2015 includes the benefit of hedging gains and currency translation, favorable price realization, reduced material costs, and improved labor efficiency, offset in part by investments in our field service organization.

Research and development and selling, general, and administrative expenses

Research and development expenses as a percentage of net sales were 5.0% for both 2015 and 2014 and 4.9% for 2013. Research and development expenses in U.S. dollars decreased 3% in 2015 and increased 6% in 2014, and in local currencies increased 2% in 2015 and increased 5% in 2014, relating to the timing of research and development project activity.

Selling, general, and administrative expenses as a percentage of net sales were 29.3% for both 2015 and 2014, compared to 29.1% for 2013. Selling, general, and administrative expenses decreased 4% in 2015 in U.S. dollars and increased 3% in local currencies and increased 5% in both U.S. dollars and local currencies in 2014. The increase during 2015 includes additional investments in our field sales organization and higher employee benefit costs, offset in part by lower cash incentive expense and benefits from our cost savings programs.

Amortization expense

Amortization expense was $31.0 million in 2015, compared to $29.2 million and $24.5 million in 2014 and 2013, respectively. The increase in amortization expense is primarily related to our investments in information technology, including the Company's Blue Ocean program.

Restructuring charges

During the past few years, we initiated additional cost reduction measures in response to global economic conditions. For the year ended December 31, 2015, we have incurred $11.1 million of restructuring expenses which primarily comprise employee-related costs. See Note 14 to our audited consolidated financial statements for a summary of restructuring activity during 2015.

Other charges (income), net

Other charges (income), net consisted of net income of $0.9 million in 2015, compared to net charges of $2.2 million and $3.1 million in 2014 and 2013, respectively. Other charges (income), net consists primarily of (gains) losses from foreign currency transactions and hedging activity, interest income, and other items.

Interest expense and taxes

Interest expense was $27.5 million for 2015, compared to $24.5 million for 2014 and $22.7 million for 2013.

Our annual effective tax rate was 24% for 2015, 2014, and 2013. Our consolidated income tax rate is lower than the U.S. statutory rate primarily because of benefits from lower-taxed non-U.S. operations. The most significant of these lower-taxed operations are in Switzerland and China.

Results of Operations — by Operating Segment

The following is a discussion of the financial results of our operating segments. We currently have five reportable segments: U.S. Operations, Swiss Operations, Western European Operations, Chinese Operations, and Other. A more detailed description of these segments is outlined in Note 17 to our audited consolidated financial statements.

U.S. Operations (amounts in thousands)

	2015				2014				2013				Increase (Decrease) in % 2015 vs. 2014		Increase (Decrease) in % 2014 vs. 2013
Net sales	$	912,778			$	849,598			$	801,853			7%		6%
Net sales to external customers	$	825,290			$	759,135			$	718,671			9%		6%
Segment profit	$	147,331			$	123,080			$	126,423			20%		(3)%

The increase in total net sales and net sales to external customers in 2015 reflects strong growth in most product categories.

Segment profit increased $24.3 million in our U.S. Operations segment during 2015, compared to a decrease of $3.3 million during 2014. The increase in segment profit during 2015 is primarily related to increased sales and benefits from our margin expansion initiatives and cost savings programs, offset in part by increased sales and service investments.

Swiss Operations (amounts in thousands)

	2015				2014				2013				Increase (Decrease) in % (1)2015 vs. 2014		Increase (Decrease) in % (1) 2014 vs. 2013
Net sales	$	588,598			$	599,752			$	568,144			(2)%		6%
Net sales to external customers	$	134,169			$	138,581			$	132,240			(3)%		5%
Segment profit	$	163,243			$	152,090			$	129,158			7%		18%

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

Total net sales in U.S. dollars decreased 2% in 2015 and increased 6% in 2014, and in local currencies increased 3% in 2015 and 4% in 2014. Net sales to external customers in U.S. dollars decreased 3% in 2015 and increased 5% in 2014, and in local currencies increased 1% in 2015 and increased 3% in 2014. The increase in local currency net sales to external customers during 2015 includes

growth in our laboratory-related products, offset in part by volume declines in industrial-related products related to soft market conditions.

Segment profit increased $11.2 million in our Swiss Operations segment during 2015, compared to an increase of $22.9 million during 2014. Segment profit includes the benefit of currency hedging, the impact of favorable inter-segment price realization, reduced material costs, and benefits from our cost savings programs, offset in part by unfavorable foreign currency translation.

Western European Operations (amounts in thousands)

	2015				2014				2013				Increase (Decrease) in % (1) 2015 vs. 2014		Increase (Decrease) in % (1)2014 vs. 2013
Net sales	$	750,632			$	833,104			$	786,327			(10)%		6%
Net sales to external customers	$	623,153			$	708,755			$	674,278			(12)%		5%
Segment profit	$	108,539			$	120,580			$	111,951			(10)%		8%

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

Total net sales in U.S. dollars decreased 10% in 2015 and increased 6% in 2014, and in local currencies increased 6% in both 2015 and 2014. Net sales to external customers in U.S. dollars decreased 12% in 2015 and increased 5% in 2014, and in local currencies increased 4% in 2015 and 6% in 2014. The increase in local currency total net sales and net sales to external customers during 2015 includes strong growth across most laboratory-related products due to volume increases and favorable price realization, offset in part by a decline in food retailing.

Segment profit decreased $12.0 million in our Western European Operations segment during 2015, compared to an increase of $8.6 million in 2014. Segment profit decreased primarily due to unfavorable foreign currency translation and increased sales and service investments, offset in part by increased total net sales in local currencies and benefits from our margin expansion initiatives and cost savings programs.

Chinese Operations (amounts in thousands)

	2015				2014				2013				Increase (Decrease) in % (1)2015 vs. 2014		Increase (Decrease) in % (1)2014 vs. 2013
Net sales	$	559,895			$	571,164			$	556,215			(2)%		3%
Net sales to external customers	$	376,291			$	415,474			$	407,131			(9)%		2%
Segment profit	$	153,314			$	160,793			$	152,459			(5)%		5%

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

Total net sales in U.S. dollars decreased 2% in 2015 and increased 3% in 2014, and in local currencies decreased 1% in 2015 and increased 2% in 2014. Net sales to external customers in U.S. dollars decreased 9% in 2015 and increased 2% in 2014, and in local currencies decreased 8% in 2015 and increased 1% in 2014. The decrease in net sales to external customers during 2015 reflects a significant sales volume decline in industrial-related products, offset in part by growth in laboratory-related products and food retailing. Net sales to external customers in local currency for our industrial-related products decreased 18% during 2015.

Segment profit decreased $7.5 million in our Chinese Operations segment during 2015, compared to an increase of $8.3 million in 2014. The decrease in segment profit during 2015 includes a reduction in net sales to external customers and increased sales and service investments, offset in part by favorable price realization and favorable business mix.

Other (amounts in thousands)

	2015				2014				2013				Increase (Decrease) in % (1)2015 vs. 2014		Increase (Decrease) in % (1)2014 vs. 2013
Net sales	$	444,631			$	471,565			$	452,960			(6)%		4%
Net sales to external customers	$	436,544			$	464,038			$	446,652			(6)%		4%
Segment profit	$	50,454			$	52,461			$	49,673			(4)%		6%

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

Total net sales and net sales to external customers in U.S. dollars decreased 6% in 2015 and increased 4% in 2014, and in local currencies increased 5% and 8% in 2015 and 2014, respectively. The increase in local currency total net sales and net sales to external customers includes strong volume growth and increased price realization in several countries, offset in part by significant sales volume declines in Russia and Brazil.

Segment profit decreased $2.0 million in our Other segment during 2015, compared to an increase of $2.8 million during 2014. The decrease in segment profit during 2015 includes unfavorable currency translation and increased sales and service investments, offset in part by increased local currency net sales.

Liquidity and Capital Resources

Liquidity is our ability to generate sufficient cash flows from operating activities to meet our obligations and commitments. In addition, liquidity includes the ability to obtain appropriate financing. Currently, our financing requirements are primarily driven by working capital requirements, capital expenditures, share repurchases, and acquisitions. Global market conditions are uncertain, and our ability to generate cash flows could be reduced by a deterioration in global market conditions.

Cash provided by operating activities totaled $426.9 million in 2015, compared to $418.9 million in 2014 and $345.9 million in 2013. The increase in 2015 includes higher net earnings, voluntary pension payments of $18 million in the prior year, and increased customer deposits, offset in part by increased cash incentive payments of $14 million and higher inventory levels.

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 $82.5 million in 2015, $89.4 million in 2014, and $82.3 million in 2013. We expect to make increased investments in manufacturing facilities of $80 million to $90 million over the next two years.

Cash flows used in financing activities during 2015 included proceeds from the issuance of our $125 million 4.24% Senior Notes and Euro 125 million 1.47% Euro Senior Notes, offset by the payment of our $100 million 6.30% Senior Notes. As further described below, in accordance with our share repurchase plan, we repurchased 1,556,797 shares and 1,617,499 shares in the amount of $495.0 million and $414.0 million during 2015 and 2014, respectively.

We continue to explore potential acquisitions. In connection with any acquisition, we may incur additional indebtedness. In September 2015, we consummated acquisitions totaling $16.6 million, including the acquisition of a real-time monitoring water purity technology for an estimated aggregate purchase price of $14.7 million that will be integrated into our process analytics product offering. We may be required to pay additional cash consideration related to an earn-out period. Goodwill recorded in connection with the acquisition totaled $9.0 million, which is included in our U.S. Operations segment. We also recorded $6.8 million of identified intangibles primarily pertaining to technology in connection with the acquisitions, which will be amortized on a straight-line basis over 10 years.

We plan to repatriate earnings from China, Switzerland, Germany, Luxembourg, the United Kingdom, and certain other countries in future years and expect the only additional cost associated with the repatriation of such foreign earnings will be withholding taxes. All other undistributed earnings are considered to be permanently reinvested. As of December 31, 2015, we had an immaterial amount of cash and cash equivalents in foreign subsidiaries where undistributed earnings are considered permanently reinvested. Accordingly, we believe the tax impact associated with repatriating our undistributed foreign earnings will not have a material effect on our liquidity.

3.67% Senior Notes

In 2012, we issued and sold $50 million of 3.67% Senior Notes due December 17, 2022 in a private placement. The 3.67% Senior Notes are senior unsecured obligations of the Company. Interest is payable semi-annually in June and December.

The 3.67% Senior Notes contain customary affirmative and negative covenants including, among others, limitations on the Company and its subsidiaries with respect to incurrence of liens and priority indebtedness, disposition of assets, mergers, and transactions with affiliates. The note purchase agreement also requires the Company to maintain a consolidated interest coverage ratio of not less than 3.5 to 1.0 and a consolidated leverage ratio of not more than 3.5 to 1.0. The agreement contains customary events of default with customary grace periods, as applicable. We were in compliance with these covenants at December 31, 2015.

Issuance costs approximating $0.4 million are being amortized to interest expense over the ten-year term of the 3.67% Senior Notes.

4.10% Senior Notes

In 2013, we issued and sold $50 million of 4.10% Senior Notes due September 19, 2023 in a private placement. The 4.10% Senior Notes are senior unsecured obligations of the Company. Interest on the 4.10% Senior Notes is payable semi-annually in March and September of each year, beginning in March 2014.

The 4.10% Senior Notes contain customary affirmative and negative covenants, change in control and prepayment provisions, that are substantially similar to those contained in the previously issued debt of the Company as described above. The 4.10% Senior Notes also contain customary events of default with customary grace periods, as applicable. We were in compliance with these covenants at December 31, 2015.

Issuance costs approximating $0.4 million are being amortized to interest expense over the ten-year term of the 4.10% Senior Notes.

3.84% Senior Notes and 4.24% Senior Notes

In the second quarter of 2014, the Company entered into an agreement to issue and sell $250 million of ten-year Senior Notes in a private placement. The Company issued $125 million with a fixed interest rate of 3.84% ("3.84% Senior Notes") in September 2014 and issued $125 million with a fixed interest rate of 4.24% ("4.24% Senior Notes") in June 2015. The Senior Notes are senior unsecured obligations of the Company. Interest on the 3.84% Senior Notes is payable semi-annually in March and September each year, beginning in March 2015. Interest on the 4.24% Senior Notes is payable semi-annually in June and December each year, beginning in December 2015. The 4.24% Senior Notes were used to repay $100 million of 6.30% Senior Notes which were due June 25, 2015.

The 3.84% Senior Notes and 4.24% Senior Notes contain customary affirmative and negative covenants, change in control and prepayment provisions, that are substantially similar to those contained in the previously issued debt of the Company as described above. The 3.84% Senior Notes and 4.24% Senior Notes also contain customary events of default with customary grace periods, as applicable. The Company was in compliance with these covenants at December 31, 2015.

Issuance costs approximating $0.9 million are being amortized to interest expense over the ten-year term of the Senior Notes.

1.47% Euro Senior Notes

In June 2015, the Company issued in private placement the Euro 125 million fifteen- year Senior Notes with a fixed interest rate of 1.47% ("1.47% Euro Senior Notes"). The Euro Senior Notes are senior unsecured obligations of the Company. The Company has designated the 1.47% Euro Senior Notes as a hedge of a portion of its net investment in a euro-functional currency foreign subsidiary to reduce foreign currency translation risk associated with the net investment in these operations. 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 unrealized gain recorded in other comprehensive income (loss) related to this net investment hedge was $3.6 million for the period ended December 31, 2015.

Issuance costs approximating $0.4 million are being amortized to interest expense over the fifteen year term of the Euro Senior Notes.

Credit Agreement

In 2015, we entered into an $800 million Amended Credit Agreement (the "Credit Agreement"), which replaced our $800 million Amended and Restated Credit Agreement (the "Prior Credit Agreement"). The Credit Agreement is provided by a group of financial institutions (similar to our Prior Credit Agreement) and has a maturity date of December 17, 2020. 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 our consolidated leverage ratio, which was, as of December 31, 2015, set at LIBOR plus 87.5 basis points. We must also pay facility fees that are tied to our leverage ratio. The Credit Agreement contains covenants that are substantially similar to those contained in our previously issued debt as described above, with which we were in compliance as of December 31, 2015. The Credit Agreement also places certain limitations on us, including limiting our ability to incur liens or indebtedness at a subsidiary level. In addition, the Credit Agreement has several events of default. We incurred approximately $0.1 million of debt extinguishment costs during 2015 related to the Prior Credit Agreement. We capitalized $1.1 million in financing fees during 2015 associated with the Credit Agreement which will be amortized to interest expense through 2020. As of December 31, 2015, approximately $704.7 million was available under the facility.

Our short-term borrowings and long-term debt consisted of the following at December 31, 2015:

	U.S. Dollar				Other Principal Trading Currencies				Total
$50 million Senior Notes, interest at 3.67%, due December 17, 2022	$	50,000			$	—			$	50,000
$50 million Senior Notes, interest 4.10%, due September 19, 2023	50,000				—				50,000
$125 million Senior Notes, interest 3.84%, due September 19, 2024	125,000				—				125,000
$125 million Senior Notes, interest 4.24% due June 25, 2025	125,000				—				125,000
Euro 125 million Senior Notes, interest 1.47% due June 17, 2030	—				136,575				136,575
$800 million Credit Agreement, interest at LIBOR plus 87.5 basis points	69,032				21,377				90,409
Other local arrangements	—				14,488				14,488
Total debt	419,032				172,440				591,472
Less: current portion	—				(14,488		)		(14,488		)
Total long-term debt	$	419,032			$	157,952			$	576,984

Changes in exchange rates between the currencies in which we generate cash flow and the currencies in which our borrowings are denominated affect our liquidity. In addition, because we borrow in a variety of currencies, our debt balances fluctuate due to changes in exchange rates. Further, we do not have any downgrade triggers relating to ratings from rating agencies that would accelerate the maturity dates of our debt.

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

Contractual Obligations

The following summarizes certain of our contractual obligations at December 31, 2015 and the effect such obligations are expected to have on our liquidity and cash flows in future periods. We do not have significant outstanding letters of credit or other financial commitments.

	Payments Due by Period
	Total				Less than 1 Year				1-3 Years				3-5 Years				After 5 Years
Short and long-term debt	$	591,472			$	14,488			$	—			$	—			$	576,984
Interest on debt	167,339				19,132				39,441				38,910				69,856
Non-cancelable operating leases	96,549				30,873				37,674				18,498				9,504
Pension and post-retirement funding(1)	19,981				19,981				—				—				—
Purchase obligations	70,818				70,424				394				—				—
Total(1)	$	946,159			$	154,898			$	77,509			$	57,408			$	656,344

(1)	In addition to the above table, we also have liabilities for pension and post-retirement funding and income taxes. However, we cannot determine the timing or the amounts for income taxes or the timing and amounts beyond 2016 for pension and post-retirement funding.

We have purchase commitments for materials, supplies, services, and fixed assets in the normal course of business. Due to the proprietary nature of many of our materials and processes, certain supply contracts contain penalty provisions. We do not expect potential payments under these provisions to materially affect results of operations or financial condition. This conclusion is based upon reasonably likely outcomes derived by reference to historical experience and current business plans.

Share Repurchase Program

The Company has a share repurchase program of which there was $1.5 billion of remaining common shares authorized to be repurchased under the program as of December 31, 2015. This includes the Board of Directors authorization of an additional $1.5 billion to the program in November 2015. The share repurchases are expected to be funded from existing cash balances, borrowings, and cash generated from operating activities. Repurchases will be made through open market transactions, and the amount and timing of repurchases will depend on business and market conditions, stock price, trading restrictions, the level of acquisition activity, and other factors.

We have purchased 24.6 million common shares since the inception of the program through December 31, 2015, at a total cost of $3.0 billion. During the years ended December 31, 2015 and 2014, we spent $495.0 million and $414.0 million on the repurchase of 1,556,797 shares and 1,617,499 shares at an average price per share of $317.92 and $255.93, respectively.

Off-Balance Sheet Arrangements

Currently, we have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material.

Effect of Currency on Results of Operations

Our earnings are affected by changing exchange rates. We are most sensitive to changes in the exchange rates between the Swiss franc, euro, 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 go down. 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 go down.

We entered into foreign currency forward contracts that reduce our exposure from the Swiss franc strengthening against the euro through 2016. The notional amount and average forward rate of our foreign currency forward contracts is Euro 66.5 million and 1.19 for contracts that mature in 2016. In September 2011, the Swiss National Bank established an exchange rate floor of 1.20 Swiss francs per euro which was abandoned in January 2015 after we entered into the previously mentioned foreign currency forward contracts. The Swiss National Bank's abandonment of the euro exchange rate floor resulted in an immediate strengthening of the Swiss franc against the euro and U.S. dollar. Absent these forward currency forward contracts, we estimate a 1% strengthening of the Swiss franc against the euro would reduce our earnings before tax by approximately $1.2 million to $1.4 million annually. We also estimate a 1% strengthening of the Swiss franc against the U.S. dollar would reduce our earnings before tax by approximately $0.4 million to $0.6 million annually in addition to the previously mentioned strengthening of the Swiss franc against the euro impact.

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 $0.3 million to $0.5 million annually.

In 2015 the U.S. dollar strengthened against most of the major currencies throughout the world. The strength of the U.S. dollar may have a significant negative impact on the Company’s financial performance in the future.

In addition to the effects of exchange rate movements on operating profits, our debt levels can fluctuate due to changes in exchange rates, particularly between the U.S. dollar, the Swiss franc, and the euro. Based on our outstanding debt at December 31, 2015, we estimate that a 10% weakening of the U.S. dollar against the currencies in which our debt is denominated would result in an increase of approximately $19.2 million in the reported U.S. dollar value of our debt.

Taxes

We are subject to taxation in many jurisdictions throughout the world. Our effective tax rate and tax liability will be affected by a number of factors, such as the amount of taxable income in particular jurisdictions, the tax rates in such jurisdictions, tax treaties between jurisdictions, the extent to which we transfer funds between jurisdictions, earnings repatriations between jurisdictions, and changes in law. Generally, the tax liability for each taxpayer within the group is determined either (i) on a non-consolidated/non-combined basis or (ii) on a consolidated/combined basis only with other eligible entities subject to tax in the same jurisdiction, in either case without regard to the taxable losses of non-consolidated/non-combined affiliated legal entities.

Environmental Matters

We are subject to environmental laws and regulations in the jurisdictions in which we operate. We own or lease a number of properties and manufacturing facilities around the world. Like many of our competitors, we have incurred, and will continue to incur, capital and operating expenditures and other costs in complying with such laws and regulations.

We are currently involved in, or have potential liability with respect to, the remediation of past contamination in certain of our facilities. A former subsidiary of Mettler-Toledo, LLC known as Hi-Speed Checkweigher Co., Inc. was one of two private parties ordered by the New Jersey Department of Environmental Protection, in an administrative consent order signed on June 13, 1988, to investigate and remediate certain ground water contamination at a property in Landing, New Jersey. After the other party under this order failed to fulfill its obligations, Hi-Speed became solely responsible for compliance with the order. Residual ground water contamination at this site is now within a Classification Exception Area which the Department of Environmental Protection has approved and within which the Company oversees monitoring of the decay of contaminants of concern. A concurrent Well Restriction Area also exists for the site. The Department of Environmental Protection does not view these vehicles as remedial measures, but rather as “institutional controls” that must be adequately maintained and periodically evaluated. We estimate that the costs of compliance associated with the site over the next several years will approximate $0.4 million.

In addition, certain of our present and former facilities have or had been in operation for many decades and, over such time, some of these facilities may have used substances or generated and disposed of wastes which are or may be considered hazardous. It is possible that these sites, as well as disposal sites owned by third parties to which we have sent wastes, may in the future be identified and become the subject of remediation. Although we believe that we are in substantial compliance with applicable environmental requirements and, to date, we have not incurred material expenditures in connection with environmental matters, it is possible that we could become subject to additional environmental liabilities in the future that could have a material adverse effect on our financial condition, results of operations, or cash flows.

Inflation

Inflation can affect the costs of goods and services that we use, including raw materials to manufacture our products. The competitive environment in which we operate limits somewhat our ability to recover higher costs through increased selling prices.

Moreover, there may be differences in inflation rates between countries in which we incur the major portion of our costs and other countries in which we sell products, which may limit our ability to recover increased costs. We remain committed to operations in China, Eastern Europe, and Brazil, which have experienced inflationary conditions. To date, inflationary conditions have not had a material effect on our operating results. However, as our presence in China and Eastern Europe increases, these inflationary conditions could have a greater impact on our operating results.

Quantitative and Qualitative Disclosures about Market Risk

We have only limited involvement with derivative financial instruments and do not use them for trading purposes.

We have entered into foreign currency forward contracts to hedge certain forecasted intercompany sales and to economically hedge short-term intercompany balances with our international businesses on a monthly basis. Such contracts limit our exposure to both favorable and unfavorable currency fluctuations. The net fair value of the foreign currency contracts hedging intercompany sales was a $7.1 million asset and the net fair value of the foreign currency contracts hedging short-term intercompany balances was a $0.5 million net asset at December 31, 2015. A sensitivity analysis to changes on the foreign forward contracts indicates that if the Swiss franc declined by 10% relative to the euro, the fair value of foreign currency forward contracts designated as cash flow hedges would decrease by $6.9 million at December 31, 2015. Additionally, a sensitivity analysis to changes on the foreign currency-denominated contracts indicates that if the primary currency (primarily U.S. dollar, Swiss franc, and the euro) declined by 10%, the fair value of derivatives not designated as hedging instruments would increase by $5.7 million at December 31, 2015. Any resulting changes in fair value would be offset by changes in the underlying economic position. The sensitivity analysis assumes a parallel shift in foreign currency exchange rates. The assumption that exchange rates change in parallel fashion may overstate the impact of changing exchange rates on assets and liabilities denominated in a foreign currency. We also have other currency risks as described under “Effect of Currency on Results of Operations.”

We have entered into certain interest rate swap agreements. These contracts are more fully described in Note 5 to our audited consolidated financial statements. The fair value of these contracts was a net loss of $4.1 million at December 31, 2015. Based on our agreements outstanding at December 31, 2015, a 100-basis-point increase in interest rates would result in an increase in the net aggregate market value of these instruments of $7.1 million. Conversely, a 100-basis-point decrease in interest rates would result in a $7.5 million decrease in the net aggregate market value of these instruments at December 31, 2015. Any change in fair value would not affect our consolidated statement of operations unless such agreements and the debt they hedge were prematurely settled.

Critical Accounting Policies

Management’s discussion and analysis of our financial condition and results of operations is based upon our audited consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to pensions and other post-retirement benefits, trade accounts receivable, inventories, intangible assets,

income taxes, and revenue. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our audited consolidated financial statements. For a detailed discussion on the application of these and other accounting policies, see Note 2 to our audited consolidated financial statements.

Employee benefit plans

The net periodic pension cost for 2015 and projected benefit obligation as of December 31, 2015 were $5.3 million and $154.4 million, respectively, for our U.S. pension plan. The net periodic cost for 2015 and projected benefit obligation as of December 31, 2015 were $6.5 million and $818.3 million, respectively, for our international pension plans. The net periodic post-retirement benefit for 2015 and expected post-retirement benefit obligation as of December 31, 2015 for our U.S. post-retirement medical benefit plan were $5.1 million and $3.3 million, respectively.

Pension and post-retirement benefit plan expense and obligations are developed from assumptions utilized in actuarial valuations. The most significant of these assumptions include the discount rate and expected return on plan assets. In accordance with U.S. GAAP, actual results that differ from the assumptions are accumulated and deferred over future periods. While management believes the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect our plan obligations and future expense.

The expected rates of return on the various defined benefit pension plans’ assets are based on the asset allocation of each plan and the long-term projected return of those assets, which represent a diversified mix of U.S. and international corporate equities and government and corporate debt securities. In 2002, we froze our U.S. defined benefit pension plan and discontinued our retiree medical program for certain current and all future employees. Consequently, no significant future service costs will be incurred on these plans. For 2015, the weighted average return on assets assumption was 7.25% for the U.S. plan and 4.6% for the international plans. A change in the rate of return of 1% would impact annual benefit plan expense by approximately $6.5 million after tax.

The discount rates for defined benefit and post-retirement plans are set by benchmarking against high-quality corporate bonds. For 2015, the average discount rate assumption was 4.3% for the U.S. plan and 1.3% for the international plans, representing a weighted average of local rates in countries where such plans exist. A change in the discount rate of 1% would impact annual benefit plan expense by approximately $8.9 million after tax.

We made voluntary incremental funding payments of $18 million in 2014 to increase the funded status of our pension plans. In the future, we may make additional mandatory or discretionary contributions to our plans.

In early 2016, in order to reduce the size and potential volatility of our U.S. defined benefit pension plan obligation, we offered approximately 700 former employees who have deferred vested pension plan benefits a one-time option to receive a lump sum distribution of their benefits in early May 2016. The vested benefit obligation associated with these former employees is approximately $32 million, equivalent to 21% of the company's benefit obligation for this U.S. plan. Eligible participants have 45 days to make their election. If the percentage of benefits distributed through the lump sum option exceeds 18% of the benefit obligation associated with these former employees, we anticipate recognizing a one-time non-cash

settlement charge of approximately $7 million to $13 million in the second quarter of 2016. The lump sum payments will be funded from existing pension plan assets.

Equity-based compensation

We also have an equity incentive plan that provides for the grant of stock options, restricted stock, restricted stock units, and other equity-based awards which are accounted for and recognized in the consolidated statement of operations based on the grant-date fair value of the award. This methodology yields an estimate of fair value based in part on a number of management estimates, the most significant of which include future volatility and estimated option lives. Changes in these assumptions could significantly impact the estimated fair value of stock options.

Trade accounts receivable

As of December 31, 2015, trade accounts receivable were $411.4 million, net of a $14.4 million allowance for doubtful accounts.

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts represents our best estimate of probable credit losses in our existing trade accounts receivable. We determine the allowance based upon a review of both specific accounts for collection and the age of the accounts receivable portfolio.

Inventories

As of December 31, 2015, inventories were $214.4 million.

We record our inventory 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 our 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.

Goodwill and other intangible assets

As of December 31, 2015, our consolidated balance sheet included goodwill of $446.3 million and other intangible assets of $115.3 million.

Our business acquisitions typically result in goodwill and other intangible assets, which affect the amount of future period amortization expense and possible impairment expense. The determination of the value of such intangible assets requires management to make estimates and assumptions that affect our consolidated financial statements.

In accordance with U.S. GAAP, our goodwill and indefinite-lived intangible assets are not amortized, but are evaluated 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 is generally based on an assessment of qualitative and quantitative factors to determine whether it is more likely than not that the fair value of the asset is less than its carrying amount.

Both the qualitative and quantitative evaluations consider operating results, business plans, economic conditions, and market data, among other factors. There are inherent uncertainties related to these factors and our judgment in applying them to the impairment analyses. Our assessments to date have indicated that there has been no impairment of these assets and the estimated fair values of goodwill and indefinite-lived intangible assets significantly exceed the carrying values.

Should any of these estimates or assumptions change, or should we incur lower than expected operating performance or cash flows, including from a prolonged economic slowdown, we may experience a triggering event that requires a new fair value assessment for our reporting units, possibly prior to the required annual assessment. These types of events and resulting analysis could result in impairment charges for goodwill and other indefinite-lived intangible assets if the fair value estimate declines below the carrying value.

Our amortization expense related to intangible assets with finite lives may materially change should our estimates of their useful lives change.

Income taxes

Income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s assessment of estimated future taxes to be paid on items in the consolidated financial statements. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, an adjustment to the deferred tax asset would increase income or equity in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of the net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.

We plan to repatriate earnings from China, Switzerland, Germany, the United Kingdom, and certain other countries in future years and expect the only additional cost associated with the repatriation of such earnings outside the United States will be withholding taxes. All other undistributed earnings are considered permanently reinvested.

The significant assumptions and estimates described in the preceding paragraphs are important contributors to our ultimate effective tax rate for each year in addition to our income mix from geographical regions. If any of our assumptions or estimates were to change, or should our income mix from our geographical regions change, our effective tax rate could be materially affected. Based on earnings before taxes of $463.4 million for the year ended December 31, 2015, each increase of $4.6 million in tax expense would increase our effective tax rate by 1%.

Revenue recognition

Revenue is recognized when title to a product has transferred and any significant customer obligations have been fulfilled. Standard shipping terms are generally FOB shipping point in most countries and, accordingly, title and risk of loss transfers upon shipment. In countries where title cannot legally transfer before delivery, the Company defers revenue recognition until delivery has occurred. The Company generally maintains the right to accept or reject a product return in its terms and conditions and also maintains appropriate accruals for outstanding credits. Shipping and handling costs charged to customers are included in total net sales and the associated expense is recorded in cost of sales for all periods presented. Other than a few small software applications, the Company does not sell software products without the related hardware instrument as the software is embedded in the instrument. The Company’s products typically require no significant production, modification, or customization of the hardware or software that is essential to the functionality of the products. To the extent the Company’s solutions have a significant post-shipment obligation, revenue is deferred until the obligation has been completed. The Company defers product revenue where installation is required, unless such installation is deemed perfunctory. The Company also sometimes enters into certain arrangements that require the separate delivery of multiple goods and/or services. These deliverables are accounted for separately if the

deliverables have stand-alone value and the performance of undelivered items is probable and within the Company's control. The allocation of revenue between the separate deliverables is typically based on the relative selling price at the time of the sale in accordance with a number of factors including service technician billing rates, time to install, and geographic location.

Further, certain products are also sold through indirect distribution channels whereby the distributor assumes any further obligations to the customer upon title transfer. Revenue is recognized on these products upon transfer of title and risk of loss to distributors. Distributor discounts are offset against revenue at the time such revenue is recognized.

Service revenue not under contract is recognized upon the completion of the service performed. Spare parts sold on a stand-alone basis are recognized upon title and risk of loss transfer which is generally at the time of shipment. Revenues from service contracts are recognized ratably over the contract period. These contracts represent an obligation to perform repair and other services including regulatory compliance qualification, calibration, certification, and preventative maintenance on a customer’s pre-defined equipment over the contract period. Service contracts are separately priced and payment is typically received from the customer at the beginning of the contract period.

New Accounting Pronouncements

See Note 2 to the audited consolidated financial statements.