filings.toolsItem 16. Form 10-K Summary
211K characters. Original on sec.gov · Markdown
Item 16. Form 10-K Summary
None.
EXHIBIT INDEX
E-1
E-2
| Exhibit | |||||
| No. | Description | ||||
| 31.1* | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
| 31.2* | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
| 32* | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||
| 101.INS* | XBRL Instance Document - 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 | ||||
| 104* | Cover Page Interactive Data File (embedded within the Inline XBRL Document) |
*(1)*Incorporated by reference to the Company’s Report on Form 10-K dated March 13, 1998
*(2)*Incorporated by reference to the Company’s Report on Form 8-K dated November 8, 2016
*(3)*Incorporated by reference to the Company’s Report on Form 10-K dated February 8, 2021
*(4)*Incorporated by reference to the Company’s Report on Form 8-K dated June 30, 2021
*(5)*Incorporated by reference to the Company’s Report on Form 8-K dated October 16, 2012
*(6)*Incorporated by reference to the Company’s Report on Form 8-K dated July 29, 2013
*(7)*Incorporated by reference to the Company’s Report on Form 8-K dated July 2, 2014
*(8)*Incorporated by reference to the Company’s Report on Form 8-K dated March 31, 2015
*(9)*Incorporated by reference to the Company’s Report on Form 8-K dated April 18, 2019
*(10)*Incorporated by reference to the Company’s Report on Form 8-K dated November 6, 2019
*(11)*Incorporated by reference to the Company’s Report on Form 8-K dated December 16, 2020
*(12)*Incorporated by reference to the Company’s Report on Form 8-K dated May 20, 2021
*(13)*Incorporated by reference to the Company’s Report on Form 8-K dated December 29, 2021
*(14)*Incorporated by reference to the Company’s Report on Form 10-K dated February 15, 2008
*(15)*Incorporated by reference to the Company’s Registration Statement on Form S-8 dated July 30, 2021 (Reg. No. 333-258294)
*(16)*Incorporated by reference to the Company’s Report on Form 10-K dated February 2, 2017
*(17)*Incorporated by reference to the Company’s Report on Form 10-K dated February 13, 2009
*(18)*Incorporated by reference to the Company’s Report on Form 10-K dated February 7, 2020
*(19)*Incorporated by reference to the Company’s Report on Form 10-K dated February 16, 2011
*(20)*Incorporated by reference to the Company’s Report on Form 8-K dated November 1, 2007
*(21)*Incorporated by reference to the Company’s Report on Form 8-K dated December 15, 2020
*(22)*Incorporated by reference to the Company’s Report on Form 10-Q dated July 27, 2018
*(23)*Incorporated by reference to the Company’s Report on Form 8-K dated April 24, 2015
** Filed herewith*
† Management contract or compensatory arrangement
E-3
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Mettler-Toledo International Inc.
(Registrant)
Date: February 11, 2022
| By: | /s/Patrick Kaltenbach | ||||
| Patrick Kaltenbach | |||||
| President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant as of the date set out above and in the capacities indicated.
| Signature | Title | |||||||
| /s/Patrick Kaltenbach | President and Chief Executive Officer | |||||||
| Patrick Kaltenbach | ||||||||
| /s/Shawn P. Vadala | Chief Financial Officer | |||||||
| Shawn P. Vadala | ||||||||
| /s/Olivier A. Filliol | Director | |||||||
| Olivier A. Filliol | ||||||||
| /s/Wah-Hui Chu | Director | |||||||
| Wah-Hui Chu | ||||||||
| /s/Domitille Doat-Le Bigot | Director | |||||||
| Domitille Doat-Le Bigot | ||||||||
| /s/Elisha Finney | Director | |||||||
| Elisha Finney | ||||||||
| /s/Richard Francis | Director | |||||||
| Richard Francis | ||||||||
| /s/Michael A. Kelly | Director | |||||||
| Michael A. Kelly | ||||||||
| /s/Thomas P. Salice | Director | |||||||
| Thomas P. Salice | ||||||||
| /s/Robert F. Spoerry | Director | |||||||
| Robert F. Spoerry |
E-4
METTLER-TOLEDO INTERNATIONAL INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Mettler-Toledo International Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Mettler-Toledo International Inc. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive income, of shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes, and the schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2021 appearing on page S-1 (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
F-2
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of Deferred Tax Assets
As described in Notes 2 and 14 to the consolidated financial statements, the Company recorded deferred tax assets of $205.6 million, net of a valuation allowance of $51.1 million, as of December 31, 2021.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in the respective jurisdictions in which the Company operates. In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The valuation allowance is based on management’s estimates of future taxable income and application of relevant income tax law.
The principal considerations for our determination that performing procedures relating to the valuation of deferred tax assets is a critical audit matter are (i) the significant judgment by management when assessing the ability to realize deferred tax assets, particularly as it relates to estimates of future taxable income and application of income tax law in relevant foreign jurisdictions; (ii) the high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s assessment of the realizability of deferred tax assets as it relates to estimates of future taxable income and application of relevant income tax law; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of deferred tax assets, including controls over estimates of future taxable income and application of relevant income tax law. These procedures also included, among others (i) evaluating management’s assessment of the realizability of deferred tax assets on a jurisdictional basis; (ii) evaluating management's estimates of future taxable income; (iii) evaluating management's application of relevant income tax law; and (iv) testing the completeness and accuracy of the underlying data used in management’s assessment.
F-3
Evaluating management’s estimates of future taxable income involved evaluating whether the estimates were reasonable considering (i) the current and past performance of the respective entity and (ii) whether the estimates were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating the application of relevant income tax law.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Columbus, Ohio
February 11, 2022
We have served as the Company’s auditor since 2005.
F-4
METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31
(In thousands, except share data)
| 2021 | 2020 | 2019 | |||||||||||||||
| Net sales | |||||||||||||||||
| Products | $ | 2,960,615 | $ | 2,405,172 | $ | 2,346,845 | |||||||||||
| Service | 757,315 | 680,005 | 661,807 | ||||||||||||||
| Total net sales | 3,717,930 | 3,085,177 | 3,008,652 | ||||||||||||||
| Cost of sales | |||||||||||||||||
| Products | 1,181,020 | 954,697 | 929,669 | ||||||||||||||
| Service | 365,357 | 329,449 | 337,772 | ||||||||||||||
| Gross profit | 2,171,553 | 1,801,031 | 1,741,211 | ||||||||||||||
| Research and development | 169,766 | 140,102 | 143,950 | ||||||||||||||
| Selling, general, and administrative | 943,976 | 820,221 | 819,183 | ||||||||||||||
| Amortization | 63,075 | 56,665 | 49,690 | ||||||||||||||
| Interest expense | 43,242 | 38,616 | 37,411 | ||||||||||||||
| Restructuring charges | 5,239 | 10,516 | 15,760 | ||||||||||||||
| Other income, net | (3,106) | (13,832) | (6,177) | ||||||||||||||
| Earnings before taxes | 949,361 | 748,743 | 681,394 | ||||||||||||||
| Provision for taxes | 180,376 | 146,004 | 120,285 | ||||||||||||||
| Net earnings | $ | 768,985 | $ | 602,739 | $ | 561,109 | |||||||||||
| Basic earnings per common share: | |||||||||||||||||
| Net earnings | $ | 33.25 | $ | 25.24 | $ | 22.84 | |||||||||||
| Weighted average number of common shares | 23,129,862 | 23,882,648 | 24,567,609 | ||||||||||||||
| Diluted earnings per common share: | |||||||||||||||||
| Net earnings | $ | 32.78 | $ | 24.91 | $ | 22.47 | |||||||||||
| Weighted average number of common and common equivalent shares | 23,457,630 | 24,199,230 | 24,974,457 |
The accompanying notes are an integral part of these consolidated financial statements.
F-5
METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31
(In thousands, except share data)
| 2021 | 2020 | 2019 | |||||||||||||||
| Net earnings | $ | 768,985 | $ | 602,739 | $ | 561,109 | |||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||
| Foreign currency translation adjustment | 11,535 | 29,914 | 2,898 | ||||||||||||||
| Unrealized gains (losses) on cash flow hedging arrangements: | |||||||||||||||||
| Unrealized gains (losses) | 4,394 | (11,323) | (1,063) | ||||||||||||||
| Effective portion of (gains) losses included in net earnings | (2,913) | 11,066 | (861) | ||||||||||||||
| Defined benefit pension and post-retirement plans: | |||||||||||||||||
| Net actuarial gains (losses) | 19,293 | (35,662) | (32,699) | ||||||||||||||
| Plan amendments and prior service cost | 18,831 | (93) | 430 | ||||||||||||||
| Amortization of actuarial losses (gains), plan amendments, and prior service cost | 19,326 | 14,547 | 12,144 | ||||||||||||||
| Impact of foreign currency | 9,235 | (19,701) | (2,108) | ||||||||||||||
| Total other comprehensive income (loss), net of tax | 79,701 | (11,252) | (21,259) | ||||||||||||||
| Comprehensive income | $ | 848,686 | $ | 591,487 | $ | 539,850 |
The accompanying notes are an integral part of these consolidated financial statements.
F-6
METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
As of December 31
(In thousands, except share data)
| 2021 | 2020 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 98,564 | $ | 94,254 | |||||||
| Trade accounts receivable, less allowances of $22,176 in 2021 and $18,625 in 2020 | 647,335 | 593,809 | |||||||||
| Inventories | 414,543 | 297,611 | |||||||||
| Other current assets and prepaid expenses | 108,916 | 71,230 | |||||||||
| Total current assets | 1,269,358 | 1,056,904 | |||||||||
| Property, plant, and equipment, net | 799,365 | 798,868 | |||||||||
| Goodwill | 648,622 | 550,270 | |||||||||
| Other intangible assets, net | 307,450 | 196,785 | |||||||||
| Deferred tax assets, net | 39,496 | 41,836 | |||||||||
| Other non-current assets | 262,507 | 169,886 | |||||||||
| Total assets | $ | 3,326,798 | $ | 2,814,549 | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Trade accounts payable | $ | 272,911 | $ | 175,801 | |||||||
| Accrued and other liabilities | 208,811 | 196,834 | |||||||||
| Accrued compensation and related items | 236,265 | 179,252 | |||||||||
| Deferred revenue and customer prepayments | 192,648 | 149,106 | |||||||||
| Taxes payable | 134,769 | 89,017 | |||||||||
| Short-term borrowings and current maturities of long-term debt | 101,134 | 50,317 | |||||||||
| Total current liabilities | 1,146,538 | 840,327 | |||||||||
| Long-term debt | 1,580,808 | 1,284,174 | |||||||||
| Deferred tax liabilities, net | 62,230 | 34,448 | |||||||||
| Other non-current liabilities | 365,801 | 372,925 | |||||||||
| Total liabilities | 3,155,377 | 2,531,874 | |||||||||
| Commitments and contingencies (Note 17) | |||||||||||
| 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 22,843,103 and 23,471,841 shares at December 31, 2021 and 2020, respectively | 448 | 448 | |||||||||
| Additional paid-in capital | 825,974 | 805,140 | |||||||||
| Treasury stock at cost (21,942,908 and 21,314,170 shares at December 31, 2021 and 2020, respectively) | (6,259,049) | (5,283,584) | |||||||||
| Retained earnings | 5,859,272 | 5,095,596 | |||||||||
| Accumulated other comprehensive income (loss) | (255,224) | (334,925) | |||||||||
| Total shareholders’ equity | 171,421 | 282,675 | |||||||||
| Total liabilities and shareholders’ equity | $ | 3,326,798 | $ | 2,814,549 |
The accompanying notes are an integral part of these consolidated financial statements.
F-7
METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the years ended December 31
(In thousands, except share data)
| Common Stock | Additional Paid-In Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2018 | 24,921,963 | $ | 448 | $ | 764,717 | $ | (3,814,604) | $ | 3,941,916 | $ | (302,414) | $ | 590,063 | ||||||||||||||||||||||||||||
| Exercise of stock options and restricted stock units | 298,002 | — | 869 | 50,449 | (3,737) | — | 47,581 | ||||||||||||||||||||||||||||||||||
| Repurchases of common stock | (1,094,648) | — | — | (774,999) | — | — | (774,999) | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 18,285 | — | — | — | 18,285 | ||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | 561,109 | — | 561,109 | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | (21,259) | (21,259) | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2019 | 24,125,317 | $ | 448 | $ | 783,871 | $ | (4,539,154) | $ | 4,499,288 | $ | (323,673) | $ | 420,780 | ||||||||||||||||||||||||||||
| Exercise of stock options and restricted stock units | 162,176 | — | 2,582 | 30,568 | (6,431) | — | 26,719 | ||||||||||||||||||||||||||||||||||
| Repurchases of common stock | (815,652) | — | — | (774,998) | — | — | (774,998) | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 18,687 | — | — | — | 18,687 | ||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | 602,739 | — | 602,739 | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | (11,252) | (11,252) | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | 23,471,841 | $ | 448 | $ | 805,140 | $ | (5,283,584) | $ | 5,095,596 | $ | (334,925) | $ | 282,675 | ||||||||||||||||||||||||||||
| Exercise of stock options and restricted stock units | 110,748 | — | 1,239 | 24,533 | (5,309) | — | 20,463 | ||||||||||||||||||||||||||||||||||
| Repurchases of common stock | (739,486) | — | — | (999,998) | — | — | (999,998) | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 19,595 | — | — | — | 19,595 | ||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | 768,985 | — | 768,985 | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | 79,701 | 79,701 | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | 22,843,103 | $ | 448 | $ | 825,974 | $ | (6,259,049) | $ | 5,859,272 | $ | (255,224) | $ | 171,421 |
The accompanying notes are an integral part of these consolidated financial statements.
F-8
METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31
(In thousands)
| 2021 | 2020 | 2019 | |||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||
| Net earnings | $ | 768,985 | $ | 602,739 | $ | 561,109 | |||||||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||||||||
| Depreciation | 44,982 | 42,044 | 38,991 | ||||||||||||||
| Amortization | 63,075 | 56,665 | 49,690 | ||||||||||||||
| Deferred tax provision (benefit) | 563 | (12,784) | 11,203 | ||||||||||||||
| Share-based compensation | 19,595 | 18,687 | 18,285 | ||||||||||||||
| Swiss tax reform (Note 14) | — | — | (15,833) | ||||||||||||||
| Increase in acquisition contingent consideration | 6,849 | — | — | ||||||||||||||
| Other | 381 | (2,399) | 133 | ||||||||||||||
| Increase (decrease) in cash resulting from changes in: | |||||||||||||||||
| Trade accounts receivable | (66,468) | (4,495) | (31,408) | ||||||||||||||
| Inventories | (118,718) | (3,836) | (4,603) | ||||||||||||||
| Other current assets | (5,040) | (4,763) | (335) | ||||||||||||||
| Trade accounts payable | 93,973 | (17,803) | (12,221) | ||||||||||||||
| Taxes payable | 19,688 | 14,049 | (6,176) | ||||||||||||||
| Accruals and other | 80,960 | 36,595 | (5,385) | ||||||||||||||
| Net cash provided by operating activities | 908,825 | 724,699 | 603,450 | ||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||
| Proceeds from sale of property, plant, and equipment | 3,652 | 3,106 | 1,422 | ||||||||||||||
| Purchase of property, plant, and equipment | (107,580) | (92,494) | (97,341) | ||||||||||||||
| Acquisitions | (220,862) | (6,242) | (2,004) | ||||||||||||||
| Other investing activities | 10,682 | (4,730) | (1,160) | ||||||||||||||
| Net cash used in investing activities | (314,108) | (100,360) | (99,083) | ||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||
| Proceeds from borrowings | 2,427,519 | 1,489,040 | 1,435,081 | ||||||||||||||
| Repayments of borrowings | (2,035,546) | (1,483,869) | (1,176,784) | ||||||||||||||
| Proceeds from exercise of stock options | 20,463 | 26,719 | 47,581 | ||||||||||||||
| Repurchases of common stock | (999,998) | (774,998) | (774,999) | ||||||||||||||
| Acquisition contingent consideration paid | — | — | (10,000) | ||||||||||||||
| Other financing activities | (2,987) | (800) | 1,753 | ||||||||||||||
| Net cash used in financing activities | (590,549) | (743,908) | (477,368) | ||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 142 | 6,038 | 2,676 | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | 4,310 | (113,531) | 29,675 | ||||||||||||||
| Cash and cash equivalents: | |||||||||||||||||
| Beginning of period | 94,254 | 207,785 | 178,110 | ||||||||||||||
| End of period | $ | 98,564 | $ | 94,254 | $ | 207,785 | |||||||||||
| Supplemental disclosures of cash flow information: | |||||||||||||||||
| Cash paid during the year for: | |||||||||||||||||
| Interest | $ | 41,338 | $ | 37,772 | $ | 37,499 | |||||||||||
| Taxes | $ | 152,657 | $ | 134,674 | $ | 129,347 |
The accompanying notes are an integral part of these consolidated financial statements.
F-9
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
**1.**BUSINESS DESCRIPTION AND 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, Switzerland, the United States, Germany, the United Kingdom, and Mexico. The Company’s principal executive offices are located in Columbus, Ohio and Greifensee, Switzerland.
The 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 preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates due to uncertainty around the magnitude and duration of the COVID-19 pandemic, as well as other factors. A discussion of the Company's significant accounting policies is included in the Notes to the Consolidated Financial Statements included within this filing.
All intercompany transactions and balances have been eliminated.
**2.**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with original maturity dates of three months or less. The carrying value of these cash equivalents approximates fair value.
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 current and historical information and reasonable and supportable forecasts of future events and circumstances.
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, expected future 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.
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METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
Long-Lived Assets
*a)*Property, Plant, and Equipment
Property, plant, and equipment are stated at cost less accumulated depreciation. Repair and maintenance costs are charged to expense as incurred. The Company capitalizes certain direct costs related to the acquisition and development of internal-use computer software. Externally purchased software is capitalized when we obtain legal ownership and is amortized over its useful life ranging from three to five years. Internally developed software costs for internal use are capitalized once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended. Costs associated with internal-use software are amortized on a straight-line basis over 10 years. Fully depreciated assets other than capitalized internally developed software are retained in property, plant, and equipment and accumulated depreciation accounts until disposal.
Depreciation and amortization are charged on a straight-line basis over the estimated useful lives of the assets as follows:
| Buildings and improvements | 15 to 50 years | ||||
| Machinery and equipment | 3 to 12 years | ||||
| Computer software | 3 to 10 years | ||||
| Leasehold improvements | Shorter of useful life or lease term |
In September 2021, the Company 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. The Company will receive funding of $35.8 million over the next two years, which will offset future capital expenditures. In accordance with ASU 2021-10: Government Assistance, the Company will apply guidance within IAS 20 - Accounting for Government Grants and Disclosure and will account for the government agreement by reducing the cost of the asset within property, plant, and equipment in the consolidated balance sheets by the amount of the funds received.
*b)*Goodwill and Other Intangible Assets
Goodwill, representing the excess of purchase price over the fair value of the net assets 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 evaluations of 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 its carrying amount.
If the Company is unable to conclude whether the goodwill or indefinite-lived intangible asset is not impaired after considering the totality of events and circumstances during its qualitative assessment, the Company performs a quantitative assessment by estimating the fair value of the respective reporting unit or indefinite-lived intangible asset and comparing the fair value to the carrying amount. If the carrying amount of the reporting unit or indefinite-lived intangible asset exceeds its fair value, an impairment charge equal to the difference is recognized.
Other intangible assets include indefinite-lived assets and assets subject to amortization. Where applicable, amortization is charged on a straight-line basis over the expected period to be benefited. The straight-line method of amortization reflects an appropriate allocation of the cost of the intangible assets to earnings in proportion to the amount of economic benefits obtained by the Company in each reporting
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METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
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.
Accounting for Impairment of Long-Lived Assets
The Company assesses the need to record impairment losses on long-lived assets (asset group) with finite lives when events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. An impairment loss would be recognized when future estimated undiscounted cash flows expected to result from use and eventually disposition of that asset (asset group) are less than the asset’s carrying value, with the loss measured as the difference between carrying value and estimated fair value.
Taxation
The Company files tax returns in each jurisdiction in which it operates. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in the respective jurisdictions in which the Company operates. In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The valuation allowance is based on management’s estimates of future taxable income and application of relevant income tax law.
Deferred taxes are not provided on the unremitted earnings of subsidiaries outside of the United States when it is expected that these earnings are permanently reinvested. Such earnings may become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends. Deferred taxes are provided when the Company no longer considers subsidiary earnings to be permanently invested, such as in situations where the Company’s subsidiaries plan to make future dividend distributions.
In accordance with the Tax Cuts and Jobs Act, the Company treats taxes due on future Global Intangible Low-Taxed Income (GILTI) inclusions in U.S. taxable income as a current period expense when incurred.
The Company recognizes accrued amounts of interest and penalties related to its uncertain tax positions as part of income tax expense within its consolidated statement of operations.
Currency Translation and Transactions
The reporting currency for the consolidated financial statements of the Company is the U.S. dollar. The functional currency for the Company’s operations is generally the applicable local currency. Accordingly, the assets and liabilities of companies whose functional currency is other than the U.S. dollar are included in the consolidated financial statements by translating the assets and liabilities into the reporting currency at the exchange rates applicable at the end of the reporting period. The statements of operations and cash flows of such non-U.S. dollar functional currency operations are translated at the monthly weighted average exchange rates during the year. Translation gains or losses are accumulated in other comprehensive income (loss) in the consolidated statements of shareholders’ equity. Transaction gains and losses are included as a component of net earnings or in certain circumstances as a component of other comprehensive income (loss) where the underlying item is considered a hedge of a net investment or relates to intercompany notes that are long term in nature.
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METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
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 contracts 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 limited number of small software applications. The Company generally sells software products with 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.
Leases
The Company considers an arrangement a lease if the arrangement transfers the right to control the use of an identified asset in exchange for consideration. The Company has operating leases, but does not have material financing leases.
Operating lease right-of-use assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make payments arising from the lease agreement. These assets and liabilities are recognized at the commencement of the lease based upon the present value of the lease payments over the lease term. Lease payments include both lease and non-lease components for items or activities that transfer a good and service. Vehicle lease and non-lease components are separately accounted for based on stand-alone value. Real estate lease and non-lease components are accounted for as
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METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
a single component. Operating lease right-of-use assets include initial direct costs, advanced lease payments, and lease incentives.
The lease term reflects the noncancellable period of the lease together with periods covered by an option to extend or terminate the lease when management is reasonably certain that it will exercise such option. The Company applies its incremental borrowing rate at the lease commencement date in determining the present value of lease payments as the information necessary to determine the rate implicit in the lease is not readily available. The incremental borrowing rate reflects similar terms by geographic location to the underlying leases. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease payments consist of non-lease services related to the lease. Variable lease payments are excluded from the right-of-use asset and lease liabilities and are expensed as incurred. Short-term leases are less than one year without purchase or renewal options that are reasonably certain to be exercised and are recognized on a straight-line basis over the lease term. The right-of-use asset is tested for impairment in accordance with ASC 360.
Research and Development
Research and development costs primarily consist of salaries, consulting, and other costs. The Company expenses these costs as incurred.
Employee Termination Benefits
In situations where contractual termination benefits exist, the Company records accruals for employee termination benefits when it is probable that a liability has been incurred and the amount of the liability is reasonably estimable. All other employee termination arrangements are recognized and measured at their fair value at the communication date unless the employee is required to render additional service beyond the legal notification period, in which case the liability is recognized ratably over the future service period.
Earnings per Common Share
In accordance with the treasury stock method, the Company has included 327,768, 316,582, and 406,848 common equivalent shares in the calculation of diluted weighted average number of common shares for the years ended December 31, 2021, 2020, and 2019, respectively, relating to outstanding stock options and restricted stock units.
Outstanding options and restricted stock units to purchase or receive 24,036, 36,263, and 71,660 shares of common stock for the years ended December 31, 2021, 2020, and 2019, respectively, have been excluded from the calculation of diluted weighted average number of common and common equivalent shares as such options and restricted stock units would be anti-dilutive.
Equity-Based Compensation
The Company applies the fair value methodology in accounting for its equity-based compensation plan.
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METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
Derivative Financial Instruments
The Company has limited involvement with derivative financial instruments and does not use them for trading purposes. As described more fully in Note 6, the Company primarily enters into foreign currency forward exchange contracts to economically hedge certain short-term intercompany balances involving its international businesses. Such contracts limit the Company’s exposure to currency fluctuations on the underlying hedged item. These contracts are adjusted to fair market value as of each balance sheet date, with the resulting changes in fair value being recognized in other charges (income), consistent with the underlying hedged item.
The Company also enters into interest rate swap agreements and cross currency swaps in order to manage its exposure to changes in interest rates. The differential paid or received on interest rate swap agreements is recognized as incurred in interest expense over the life of the hedge agreements. Floating to fixed interest rate swap agreements are accounted for as cash flow hedges. Changes in fair value of outstanding interest rate swap agreements that are effective as cash flow hedges are initially recognized in other comprehensive income as incurred.
Fair Value Measurements
The Company measures or monitors certain assets and liabilities on a fair value basis. Fair value is used on a recurring basis for assets and liabilities in which fair value is the primary basis of accounting, mainly derivative instruments. 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. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. The Company applies the fair value hierarchy established under U.S. GAAP and when possible looks to active and observable markets to price identical assets and liabilities. If identical assets and liabilities are not traded in active markets, the Company looks to observable market data for similar assets and liabilities.
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. 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 and January 2021, the FASB issued ASU 2020-04 and ASU 2021-01: 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, 2022. The Company's interest rate and cross currency swaps, as mentioned in Note 6 to the consolidated financial
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METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
statements, are governed by International Swaps and Derivatives Association (ISDA) agreements, and the Company will adhere to the ISDA's fallback protocol when LIBOR is discontinued. In addition, the Company renewed the LIBOR-based credit agreement, as discussed further in Note 10, which includes a fallback protocol when LIBOR is discontinued. Based on these procedures, when LIBOR is discontinued, the interest rate and cross currency swaps will not require de-designation if certain criteria are met. The Company expects the financial impact of the rate change when LIBOR is discontinued to be immaterial to its financial statements.
In November 2021, the FASB issued ASU 2021-10: Government Assistance, which increases the transparency of government assistance including the disclosure of the types of assistance, an entity's accounting for the assistance, and the effect of the assistance on an entity's financial statements. The Company early adopted this guidance on a prospective basis in the fourth quarter of 2021. The adoption of this guidance did not have a material impact on the Company's disclosures.
**3.**REVENUE
The Company disaggregates revenue from contracts with customers by product, service, timing of revenue recognition, and geography. A summary by the Company’s reportable segments follows for the years ended December 31:
| Twelve months ended December 31, 2021 | U.S. Operations | Swiss Operations | Western European Operations | Chinese Operations | Other Operations | Total | |||||||||||||||||||||||||||||
| Product Revenue | $ | 1,004,891 | $ | 135,987 | $ | 600,527 | $ | 707,355 | $ | 511,855 | $ | 2,960,615 | |||||||||||||||||||||||
| Service Revenue: | |||||||||||||||||||||||||||||||||||
| Point in time | 218,306 | 26,764 | 151,656 | 48,343 | 120,860 | 565,929 | |||||||||||||||||||||||||||||
| Over time | 64,786 | 8,882 | 77,578 | 15,953 | 24,187 | 191,386 | |||||||||||||||||||||||||||||
| Total | $ | 1,287,983 | $ | 171,633 | $ | 829,761 | $ | 771,651 | $ | 656,902 | $ | 3,717,930 |
| Twelve months ended December 31, 2020 | U.S. Operations | Swiss Operations | Western European Operations | Chinese Operations | Other Operations | Total | |||||||||||||||||||||||||||||
| Product Revenue | $ | 815,046 | $ | 112,542 | $ | 509,385 | $ | 526,231 | $ | 441,968 | $ | 2,405,172 | |||||||||||||||||||||||
| Service Revenue: | |||||||||||||||||||||||||||||||||||
| Point in time | 199,247 | 22,733 | 135,793 | 39,705 | 110,542 | 508,020 | |||||||||||||||||||||||||||||
| Over time | 58,026 | 8,648 | 71,537 | 12,674 | 21,100 | 171,985 | |||||||||||||||||||||||||||||
| Total | $ | 1,072,319 | $ | 143,923 | $ | 716,715 | $ | 578,610 | $ | 573,610 | $ | 3,085,177 |
| Twelve months ended December 31, 2019 | U.S. Operations | Swiss Operations | Western European Operations | Chinese Operations | Other Operations | Total | |||||||||||||||||||||||||||||
| Product Revenue | $ | 801,181 | $ | 110,390 | $ | 500,978 | $ | 495,579 | $ | 438,717 | $ | 2,346,845 | |||||||||||||||||||||||
| Service Revenue: | |||||||||||||||||||||||||||||||||||
| Point in time | 207,707 | 20,968 | 135,612 | 37,370 | 109,802 | 511,459 | |||||||||||||||||||||||||||||
| Over time | 48,227 | 8,141 | 64,151 | 11,767 | 18,062 | 150,348 | |||||||||||||||||||||||||||||
| Total | $ | 1,057,115 | $ | 139,499 | $ | 700,741 | $ | 544,716 | $ | 566,581 | $ | 3,008,652 |
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METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
The Company's global revenue mix by product category for the year ended December 31, 2021 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 with the exception of the Company’s Swiss Operations, which is largely comprised of laboratory products, and the Company’s Chinese Operations, which has a slightly higher percentage of industrial products. A breakdown of the Company’s sales by product category for the year ended December 31 follows:
| 2021 | 2020 | 2019 | |||||||||||||||
| Laboratory | $ | 2,083,025 | $ | 1,669,791 | $ | 1,578,625 | |||||||||||
| Industrial | 1,446,544 | 1,224,497 | 1,233,970 | ||||||||||||||
| Retail | 188,361 | 190,889 | 196,057 | ||||||||||||||
| Total net sales | $ | 3,717,930 | $ | 3,085,177 | $ | 3,008,652 |
A breakdown of net sales to external customers by geographic customer destination, net for the year ended December 31 follows:
| 2021 | 2020 | 2019 | |||||||||||||||
| Americas | $ | 1,419,832 | $ | 1,180,626 | $ | 1,165,847 | |||||||||||
| Europe | 1,062,961 | 921,266 | 892,092 | ||||||||||||||
| Asia/Rest of World | 1,235,137 | 983,285 | 950,713 | ||||||||||||||
| Total | $ | 3,717,930 | $ | 3,085,177 | $ | 3,008,652 |
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 December 31, 2021 and 2020 was $32.1 million and $22.6 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 period are as follows:
| 2021 | 2020 | 2019 | ||||||||||||||||||
| Beginning balances as of January 1 | $ | 149,106 | $ | 122,489 | $ | 105,381 | ||||||||||||||
| Customer prepayments/deferred revenue | 711,067 | 617,643 | 633,190 | |||||||||||||||||
| Revenue recognized | (667,245) | (595,802) | (615,957) | |||||||||||||||||
| Foreign currency translation | (280) | 4,776 | (125) | |||||||||||||||||
| Ending balance as of December 31 | $ | 192,648 | $ | 149,106 | $ | 122,489 |
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 Company has not disclosed the value of unsatisfied performance obligations other than customer prepayments and deferred revenue as most contracts have an expected length of one year or less and amounts greater than one year are immaterial.
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METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
4. ACQUISITIONS
In March 2021, the Company acquired all the membership interests of Mayfair Technology, LLC (PendoTECH), a manufacturer and distributor of single-use sensors, transmitters, control systems, and software for measuring, monitoring, and data collection primarily in bioprocess applications. PendoTECH serves biopharmaceutical manufacturers and life science laboratories and is located in the United States. The initial cash payment was $185.0 million and the Company made other post-closing payments of $7.4 million. The Company may be required to pay additional consideration of up to $20.0 million, which is based upon financial thresholds in 2022 and 2023. The estimated fair value of the contingent consideration obligation at the time of acquisition of $13.5 million was determined using a Monte Carlo simulation based on the Company's forecast of future financial results. During the fourth quarter of 2021, the Company increased the contingent consideration obligation to $20.0 million, based upon actual results and future financial projections, plus related obligations of $0.3 million due to the sellers. The $6.8 million increase to the contingent consideration and related obligations to the sellers was recorded in other charges (income), net.
Goodwill recorded in connection with the acquisition totaled $93.1 million, which is deductible for tax purposes. Identified intangible finite-lived assets acquired include customer relationships of $78.6 million, technology and patents of $21.7 million, trade name of $3.4 million, and other intangibles of $2.4 million. The Company used variations of the income statement approach in determining the fair value of the intangible assets acquired. Specifically, the multi-period excess earnings method was used to determine the fair value of the customer relationships acquired and the relief from royalty method was used to determine the fair value of the technology and patents. The Company's determination of the fair value of the intangible assets acquired involved the use of significant estimates and assumptions principally related to revenue growth, royalty, and customer attrition rates.
The identifiable finite-lived intangible assets will be amortized on a straight-line basis over periods of 5 to 20 years and the annual aggregate amortization expense is estimated at $6.9 million. Net tangible assets acquired were $7.4 million and were recorded at fair value in the consolidated financial statements. All of the acquired assets are included in the Company's U.S. Operations segment.
In October 2021, the Company acquired Scale-up Systems Inc., a leading software provider for scale-up and reaction modeling serving the biopharma and chemical markets. The initial cash payment was $20.2 million and the Company may be required to pay additional amounts up to EUR 3.0 million. Goodwill recorded in connection with the acquisition totaled $11.1 million, which is deductible for tax purposes. The Company also recorded $11.4 million of identifiable finite-lived intangibles primarily pertaining to technology and patents and customer relationships in connection with this acquisition, which will be amortized on a straight-line basis over 7 to 10 years. All of the acquired assets are included in the Company's Western European Operations segment.
In 2021, 2020, and 2019, the Company also incurred additional acquisition payments totaling $8.3 million, $6.2 million, and $2.0 million, respectively.
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METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
5. INVENTORIES
Inventories consisted of the following at December 31:
| 2021 | 2020 | ||||||||||
| Raw materials and parts | $ | 184,624 | $ | 132,041 | |||||||
| Work-in-progress | 76,019 | 55,688 | |||||||||
| Finished goods | 153,900 | 109,882 | |||||||||
| Total inventory | $ | 414,543 | $ | 297,611 |
6. 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. At December 31, 2021, the interest payments associated with 79% of the Company’s debt are fixed obligations. 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 agreement 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 7 and Note 11 to the consolidated financial statements. As also mentioned in Note 10, the Company has designated its euro-denominated debt as a hedge of a portion of its net investment in a euro-denominated foreign subsidiary.
Cash Flow Hedges
In November 2021, the Company entered into a cross currency swap arrangement designated as a cash flow hedge. The agreement converts $50 million of borrowings under the Company's credit facility into synthetic Swiss franc debt, which allows the Company to effectively change the floating rate LIBOR-based interest payments, excluding the credit spread, to a fixed Swiss franc income of 0.64%. The swap matures in November 2023.
In June 2021, the Company entered into a cross currency swap arrangement designated as a cash flow hedge. The agreement converts $50 million of borrowings under the Company's credit facility into synthetic Swiss franc debt, which allows the Company to effectively change the floating rate LIBOR-based interest payments, excluding the credit spread, to a fixed Swiss franc income of 0.57%. The swap matures in June 2025. This cross currency swap replaced a similar $50 million swap entered into in June 2019 which matured in June 2021, which converted floating rate LIBOR to a fixed Swiss franc income of 0.95%.
In June 2021, the Company entered into a cross currency swap arrangement designated as a cash flow hedge. The agreement converts $50 million of borrowings under the Company's credit facility into synthetic Swiss franc debt, which allows the Company to effectively change the floating rate LIBOR-based interest payments, excluding the credit spread, to a fixed Swiss franc income of 0.66%. The swap matures in June 2024. This cross currency swap replaced a similar $50 million swap entered into in February 2019 and maturing in June 2021, which converted floating rate LIBOR to a fixed Swiss franc income of 0.78%.
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METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
In June 2019, the Company entered into a cross currency swap arrangement designated as a cash flow hedge. The agreement converts $50 million of borrowings under the Company's credit facility into synthetic Swiss franc debt, which allows the Company to effectively change the floating rate LIBOR-based interest payment, excluding the credit spread, to a fixed Swiss franc income of 0.82%. The swap matures in June 2023.
In 2015, the Company entered into a forward-starting interest rate swap agreement. The agreement changes the floating rate LIBOR-based interest payments associated with $100 million in borrowings under the Company’s credit agreement to a fixed obligation of 2.25%, which began in February 2017 and matures in February 2022.
The Company’s cash flow hedges are recorded gross at fair value in the consolidated balance sheet at December 31, 2021 and 2020 and are disclosed in Note 7 to the consolidated financial statements. A derivative gain of $1.6 million based upon interest rates at December 31, 2021 is expected to be reclassified from other comprehensive income (loss) to earnings in the next 12 months. Through December 31, 2021, no hedge ineffectiveness has occurred in relation to these cash flow hedges.
Other Derivatives
The Company primarily enters into foreign currency forward contracts in order to economically hedge short-term intercompany balances largely denominated in Swiss franc, other major 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 December 31, 2021 and 2020, as disclosed in Note 7 to the consolidated financial statements. The Company recognized in other charges (income) net gains of $13.5 million and $4.8 million and a net loss of $3.7 million during the years ended December 31, 2021, 2020, and 2019, respectively, which offset the related net transaction gains (losses) associated with these contracts. At December 31, 2021 and 2020, these contracts had a notional value of $1.0 billion and $536.5 million, respectively.
The Company may be exposed to credit losses in the event of nonperformance by the counterparties to its derivative financial instrument contracts. Counterparties are established banks and financial institutions with high credit ratings. The Company believes that such counterparties will be able to fully satisfy their obligations under these contracts.
7. FAIR VALUE MEASUREMENTS
At December 31, 2021 and 2020, the Company had derivative assets totaling $6.0 million and $2.2 million, respectively, and derivative liabilities totaling $10.3 million and $23.3 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 interest rate swap agreements, the cross currency swap agreements, and the 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
F-20
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
and counterparty credit risk in determining fair value and determined these adjustments were insignificant for the years ended December 31, 2021 and 2020.
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
The following table presents the Company’s assets and liabilities, which are all categorized as Level 2 and are measured at fair value on a recurring basis at December 31, 2021 and 2020. The Company does not have any assets or liabilities which are categorized as Level 1.
| 2021 | 2020 | Balance Sheet Location | ||||||||||||||||||
| Foreign currency forward contracts not designated as hedging instruments | $ | 3,927 | $ | 2,227 | Other current assets and prepaid expenses | |||||||||||||||
| Cash flow hedges: | ||||||||||||||||||||
| Cross currency swap agreement | 2,119 | — | Other non-current assets | |||||||||||||||||
| Total derivative assets | $ | 6,046 | $ | 2,227 | ||||||||||||||||
| Foreign currency forward contracts not designated as hedging instruments | $ | 4,510 | $ | 1,399 | Accrued and other liabilities | |||||||||||||||
| Cash flow hedges: | ||||||||||||||||||||
| Cross currency swap agreements | 4,493 | 13,093 | Accrued and other liabilities | |||||||||||||||||
| Interest rate swap agreements | 352 | 2,502 | Other non-current liabilities | |||||||||||||||||
| Cross currency swap agreements | 989 | 6,297 | Other non-current liabilities | |||||||||||||||||
| Total derivative liabilities | $ | 10,344 | $ | 23,291 |
The Company had $18.5 million and $14.3 million of cash equivalents at December 31, 2021 and 2020, 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 exceeds the carrying value by approximately $32.8 million as of December 31, 2021. The fair value of the Company’s fixed interest rate debt was estimated using Level 2 inputs and primarily discounted cash flow models, based on estimated current rates offered for similar debt under current market conditions for the Company.
The initial estimated fair value of the contingent consideration obligation of $13.5 million relating to the PendoTECH acquisition was determined using a Monte Carlo simulation based on the Company's forecast of future financial results. During the fourth quarter of 2021, the Company increased the contingent consideration obligation to $20.0 million based upon actual results and future financial
F-21
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
projections. The fair value measurements are based on significant inputs not observable in the market and thus represent a Level 3 measurement.
8. PROPERTY, PLANT, AND EQUIPMENT, NET
Property, plant, and equipment, net consisted of the following at December 31:
| 2021 | 2020 | ||||||||||
| Land | $ | 61,883 | $ | 61,838 | |||||||
| Building and leasehold improvements | 367,846 | 356,699 | |||||||||
| Machinery and equipment | 473,914 | 458,174 | |||||||||
| Computer software | 502,198 | 544,490 | |||||||||
| Property, plant, and equipment, gross | 1,405,841 | 1,421,201 | |||||||||
| Less accumulated depreciation and amortization | (606,476) | (622,333) | |||||||||
| Property, plant, and equipment, net | $ | 799,365 | $ | 798,868 |
9. GOODWILL AND OTHER INTANGIBLE ASSETS
The following table shows the changes in the carrying amount of goodwill for the years ended December 31:
| 2021 | 2020 | ||||||||||
| Balance at beginning of year | $ | 550,270 | $ | 535,979 | |||||||
| Goodwill acquired | 103,882 | 6,169 | |||||||||
| Foreign currency translation | (5,530) | 8,122 | |||||||||
| Balance at year end | $ | 648,622 | $ | 550,270 |
Goodwill and indefinite-lived assets are reviewed for impairment on an annual basis in the fourth quarter. The Company completed its impairment review and determined that there had been no impairment of these assets through December 31, 2021. The Company identified no triggering events or other circumstances which indicated the carrying amount of goodwill or intangible assets may not be recoverable.
The components of other intangible assets as of December 31 are as follows:
| 2021 | 2020 | ||||||||||||||||||||||||||||||||||
| Gross Amount | Accumulated Amortization | Intangibles, Net | Gross Amount | Accumulated Amortization | Intangibles, Net | ||||||||||||||||||||||||||||||
| Customer relationships | $ | 282,470 | $ | (79,782) | $ | 202,688 | $ | 201,445 | $ | (68,319) | $ | 133,126 | |||||||||||||||||||||||
| Proven technology and patents | 115,680 | (56,305) | 59,375 | 78,312 | (52,138) | 26,174 | |||||||||||||||||||||||||||||
| Tradenames (finite life) | 8,206 | (3,731) | 4,475 | 4,896 | (3,444) | 1,452 | |||||||||||||||||||||||||||||
| Tradenames (indefinite life) | 35,949 | — | 35,949 | 35,595 | — | 35,595 | |||||||||||||||||||||||||||||
| Other | 10,641 | (5,678) | 4,963 | 5,215 | (4,777) | 438 | |||||||||||||||||||||||||||||
| $ | 452,946 | $ | (145,496) | $ | 307,450 | $ | 325,463 | $ | (128,678) | $ | 196,785 |
The Company recognized amortization expense associated with the above intangible assets of $22.5 million, $15.7 million, and $15.1 million for the years ended December 31, 2021, 2020, and 2019, respectively. The annual aggregate amortization expense based on the current balance of other intangible assets is estimated at $26.1 million for 2022, $24.8 million for 2023, $22.7 million for 2024, $21.8 million for 2025, and $19.6 million for 2026. The finite-lived intangible assets are amortized on a straight-line basis over periods ranging from 3 to 45 years. The straight-line method of amortization
F-22
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
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. Purchased intangibles amortization was $21.6 million, $16.3 million after tax, $14.9 million, $11.2 million after tax, and $14.3 million, $10.8 million after tax, for the years ended December 31, 2021, 2020, and 2019, respectively.
In addition to the above amortization, the Company recorded amortization expense associated with capitalized software, which is included in property, plant, and equipment in Note 8, of $40.4 million, $40.7 million, and $34.4 million for the years ended December 31, 2021, 2020, and 2019, respectively.
10. DEBT
Debt consisted of the following at December 31:
| 2021 | 2020 | ||||||||||
| 3.67% $50 million 10-year Senior Notes due December 17, 2022 | $ | 50,000 | $ | 50,000 | |||||||
| 4.10% $50 million 10-year Senior Notes due September 19, 2023 | 50,000 | 50,000 | |||||||||
| 3.84% $125 million 10-year Senior Notes due September 19, 2024 | 125,000 | 125,000 | |||||||||
| 4.24% $125 million 10-year Senior Notes due June 25, 2025 | 125,000 | 125,000 | |||||||||
| 3.91% $75 million 10-year Senior Notes due June 25, 2029 | 75,000 | 75,000 | |||||||||
| 2.83% $125 million 12-year Senior Notes due July 22, 2033 | 125,000 | — | |||||||||
| 3.19% $50 million 15-year Senior Notes due January 24, 2035 | 50,000 | 50,000 | |||||||||
| 1.47% EUR 125 million 15-year Senior Notes due June 17, 2030 | 141,789 | 153,299 | |||||||||
| 1.30% EUR 135 million 15-year Senior Notes due November 6, 2034 | 153,132 | 165,563 | |||||||||
| 1.06% EUR 125 million 15-year Senior Notes due March 19, 2036 | 141,789 | — | |||||||||
| Senior Notes debt issuance costs, net | (4,115) | (2,760) | |||||||||
| Total Senior Notes | 1,032,595 | 791,102 | |||||||||
| $1.25 billion Credit Agreement, interest at LIBOR plus 87.5 basis points(1) | 595,041 | 491,419 | |||||||||
| Other local arrangements | 54,306 | 51,970 | |||||||||
| Total debt | 1,681,942 | 1,334,491 | |||||||||
| Less: current portion | (101,134) | (50,317) | |||||||||
| Total long-term debt | $ | 1,580,808 | $ | 1,284,174 |
(1) See Note 6 and Note 7 for additional disclosures on the financial instruments associated with the Credit Agreement.
The Company’s weighted average interest rate was 2.7% and 2.9% for the years ended December 31, 2021 and 2020, respectively.
Senior Notes
The Senior Notes listed above are senior unsecured obligations of the Company and interest is payable semi-annually. The Company may at any time prepay the Senior Notes, in whole or in part, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interests, and in some instances a “make whole” prepayment premium. The Euro Senior Notes, if prepaid, may also include a swap related currency loss. The Senior Notes each 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. In December 2021, the Company amended all of its U.S. Senior Note agreements to conform to the financial
F-23
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
covenants in the underlying agreements. The amended agreements require the Company to maintain a consolidated interest coverage ratio of not less than 3.0 to 1.0 and a net consolidated leverage ratio of not more than 3.5 to 1.0. The Senior Notes also contain customary events of default with customary grace periods, as applicable. The Company was in compliance with its covenants at December 31, 2021.
Total issuance costs of approximately $4.1 million have been incurred by the Company related to the Senior Notes mentioned above and are being amortized to interest expense over the various terms.
In December 2021, the Company entered into an agreement to issue and sell $300 million 15-year Senior Notes in a private placement. The Company will issue $150 million with a fixed interest rate of 2.81% (2.81% Senior Notes) in March 2022 and will issue $150 million with a fixed interest rate of 2.91% (2.91% Senior Notes) in September 2022. The Senior Notes will be senior unsecured obligations of the Company. The 2.81% Senior Notes mature in March 2037 and the 2.91% Senior Notes mature in September 2037. Interest on the 2.81% and 2.91% Senior Notes will be payable semi-annually in March and September each year. Interest on the 2.81% Senior Notes will begin in September 2022 and interest on the 2.91% will begin in March 2023. The terms of the Senior Notes are consistent with the previous Senior Notes as described above. The Company will use the proceeds from the sale of the notes to refinance existing indebtedness and for other general corporate purposes.
In May 2021, the Company entered into an agreement to issue and sell $125 million 12-year Senior Notes with a fixed interest rate of 2.83%. The Senior Notes were issued in July 2021 and will mature in July 2033. The terms of the Senior Notes are consistent with the previous Senior Notes as described above. The Company used the proceeds from the sale of the notes to refinance existing indebtedness and for other general corporate purposes.
In December 2020, the Company entered into an agreement to issue and sell EUR 125.0 million 15-year 1.06% Euro Senior Notes (1.06% Euro Senior Notes). The terms of the Euro Senior Notes are consistent with the previous Euro Senior Notes as described above. The Company also entered into a forward contract to receive $152.1 million at the time of issuing the 1.06% Euro Senior Notes in March 2021. The proceeds will be used to repay outstanding amounts on the Company’s credit facility and fund operational expenses. The 1.06% Euro Senior Notes will be designated as a hedge of a portion of the Company’s net investment in a euro-denominated foreign subsidiary to reduce foreign currency risk associated with this net investment.
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 a euro-denominated foreign subsidiary to reduce foreign currency risk associated with this 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 gain of $34.3 million, an unrealized loss of $27.3 million, and an unrealized gain of $1.3 million for the years ended December 31, 2021, 2020, and 2019, respectively. The Company has a gain of $5.5 million recorded in accumulated other comprehensive income (loss) as of December 31, 2021.
Credit Agreement
On June 25, 2021, the Company entered into a $1.25 billion Credit Agreement (the Credit Agreement), which amended its $1.1 billion Amended and Restated Credit Agreement (the Prior Credit
F-24
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
Agreement). As of December 31, 2021, the Company had $649.0 million of additional borrowings available under its Credit Agreement.
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 June 25, 2026. 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 December 31, 2021. 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, with customary grace periods as applicable. The Company incurred approximately $0.2 million of debt extinguishment costs during 2021 related to the Prior Credit Agreement. The Company capitalized $2.0 million in financing fees during 2021 associated with the Credit Agreement, which will be amortized to interest expense through 2026.
Other Local Arrangements
In April 2018, two of the Company’s 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 Swiss franc LIBOR plus 87.5 basis points. The loans were renewed for one year in April 2021.
11. SHAREHOLDERS’ EQUITY
Common Stock
The number of authorized shares of the Company’s common stock is 125,000,000 shares with a par value of $0.01 per share. Holders of the Company’s common stock are entitled to one vote per share. At December 31, 2021, 3,611,750 shares of the Company’s common stock were reserved for issuance pursuant to the Company’s stock option plans.
Preferred Stock
The Board of Directors, without further shareholder authorization, is authorized to issue up to 10,000,000 shares of preferred stock, par value $0.01 per share in one or more series and to determine and fix the rights, preferences, and privileges of each series, including dividend rights and preferences over dividends on the common stock and one or more series of the preferred stock, conversion rights, voting rights (in addition to those provided by law), redemption rights, and the terms of any sinking fund therefore, and rights upon liquidation, dissolution, or winding up, including preferences over the common stock and one or more series of the preferred stock. The issuance of shares of preferred stock, or the issuance of rights to purchase such shares, may have the effect of delaying, deferring, or preventing a change in control of the Company or an unsolicited acquisition proposal.
F-25
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
Share Repurchase Program
In November 2020, the Company’s Board of Directors authorized an additional $2.5 billion to the share repurchase program, which had $2.1 billion of remaining availability as of December 31, 2021. 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.
The Company has purchased 30.2 million of common shares since the inception of the program in 2004 through December 31, 2021, at a total cost of $6.9 billion. The Company spent $1.0 billion in 2021 and $775 million in both 2020 and 2019 on the repurchase of 739,486 shares, 815,652 shares, and 1,094,648 shares at an average price per share of $1,352.27, $950.14, and $707.97, respectively. The Company reissued 110,748 shares, 162,176 shares, and 298,002 shares held in treasury for the exercise of stock options and restricted stock units during 2021, 2020, and 2019, respectively.
F-26
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
Accumulated Other Comprehensive Income (Loss)
The following table presents changes in accumulated other comprehensive income by component for the period ended December 31, 2021, 2020, and 2019:
| 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, 2018 | $ | (63,913) | $ | 702 | $ | (239,203) | $ | (302,414) | |||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Net unrealized actuarial gains (loss), prior service cost, and plan amendments | — | — | (32,269) | (32,269) | |||||||||||||||||||
| Net unrealized gains (loss) on cash flow hedging arrangements | — | (1,063) | — | (1,063) | |||||||||||||||||||
| Foreign currency translation adjustment | 2,898 | — | (2,108) | 790 | |||||||||||||||||||
| Amounts recognized from accumulated other comprehensive income (loss), net of tax | — | (861) | 12,144 | 11,283 | |||||||||||||||||||
| Net change in other comprehensive income (loss), net of tax | 2,898 | (1,924) | (22,233) | (21,259) | |||||||||||||||||||
| Balance at December 31, 2019 | $ | (61,015) | $ | (1,222) | $ | (261,436) | $ | (323,673) | |||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Net unrealized actuarial gains (loss), prior service cost, and plan amendments | — | — | (35,755) | (35,755) | |||||||||||||||||||
| Net unrealized gains (loss) on cash flow hedging arrangements | — | (11,323) | — | (11,323) | |||||||||||||||||||
| Foreign currency translation adjustment | 29,914 | — | (19,701) | 10,213 | |||||||||||||||||||
| Amounts recognized from accumulated other comprehensive income (loss), net of tax | — | 11,066 | 14,547 | 25,613 | |||||||||||||||||||
| Net change in other comprehensive income (loss), net of tax | 29,914 | (257) | (40,909) | (11,252) | |||||||||||||||||||
| Balance at December 31, 2020 | $ | (31,101) | $ | (1,479) | $ | (302,345) | $ | (334,925) | |||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Net unrealized actuarial gains (loss), prior service cost, and plan amendments | — | — | 38,124 | 38,124 | |||||||||||||||||||
| Net unrealized gains (loss) on cash flow hedging arrangements | — | 4,394 | — | 4,394 | |||||||||||||||||||
| Foreign currency translation adjustment | 11,535 | — | 9,235 | 20,770 | |||||||||||||||||||
| Amounts recognized from accumulated other comprehensive income (loss), net of tax | — | (2,913) | 19,326 | 16,413 | |||||||||||||||||||
| Net change in other comprehensive income (loss), net of tax | 11,535 | 1,481 | 66,685 | 79,701 | |||||||||||||||||||
| Balance at December 31, 2021 | $ | (19,566) | $ | 2 | $ | (235,660) | $ | (255,224) |
F-27
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
The following table presents amounts recognized from accumulated other comprehensive income (loss) during the years ended December 31, 2021, 2020, and 2019:
| 2021 | 2020 | 2019 | Location of Amounts Recognized in Earnings | |||||||||||||||||||||||
| Effective portion of losses (gains) on cash flow hedging arrangements: | ||||||||||||||||||||||||||
| Interest rate swap agreements | $ | 2,178 | $ | 2,413 | $ | 109 | Interest expense | |||||||||||||||||||
| Cross currency swap | (5,604) | 11,531 | (1,022) | (a) | ||||||||||||||||||||||
| Total before taxes | (3,426) | 13,944 | (913) | |||||||||||||||||||||||
| Provision for taxes | (513) | 2,878 | (52) | Provision for taxes | ||||||||||||||||||||||
| Total, net of taxes | $ | (2,913) | $ | 11,066 | $ | (861) | ||||||||||||||||||||
| Recognition of defined benefit pension and post-retirement items: | ||||||||||||||||||||||||||
| Recognition of actuarial losses, plan amendments, prior service cost, and settlement charge before taxes | $ | 24,529 | $ | 18,609 | $ | 15,467 | (b) | |||||||||||||||||||
| Provision for taxes | 5,203 | 4,062 | 3,323 | Provision for taxes | ||||||||||||||||||||||
| Total, net of taxes | $ | 19,326 | $ | 14,547 | $ | 12,144 |
(a)The cross currency swap reflects an unrealized gain of $4.2 million and an unrealized loss of $13.8 million and $3.6 million recorded in other charges (income) during the years ended December 31, 2021, 2020, and 2019, respectively, that was offset by the underlying unrealized gain or loss on the hedged debt. The cross currency swap also reflects a realized gain of $1.4 million, $2.3 million, and $4.6 million recorded in interest expense during the years ended December 31, 2021, 2020, and 2019, respectively.
(b)These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and post-retirement cost. See Note 13 for additional details.
12. EQUITY INCENTIVE PLAN
The Company’s equity incentive plan provides employees and directors of the Company additional incentives to join and/or remain in the service of the Company as well as to maintain and enhance the long-term performance and profitability of the Company. The Company’s 2013 Equity Incentive Plan was approved by shareholders on May 2, 2013 and provides that 2 million shares of common stock, plus any shares that remained available for grant under the Company’s prior equity incentive plan as well as options outstanding that terminate without being exercised, may be the subject of awards. The plan provides for the grant of options, restricted stock units, and other equity-based awards. The exercise price of options granted shall not be less than the fair market value of the common stock on the date of the award. Options primarily vest equally over a five-year period from the date of grant and have a maximum term of up to 10 years. Restricted units primarily vest equally over a five-year period from the date of grant. Performance share units generally vest after a three-year period from the date of the grant based upon satisfaction of the performance condition. The compensation committee of the Board of Directors has generally granted restricted share units to participating managers and non-qualified stock options and performance share units to executive officers.
On May 6, 2021, the Company's shareholders approved the adoption of the Company's 2013 Equity Incentive Plan (Amended and Restated), with the effect that approximately 0.9 million additional shares of common stock were added to the 2.1 million shares that remained available under the plan prior to its amendment. In addition, shares subject to options granted under the Company's prior equity incentive plan that terminate or are forfeited without being exercised are also available for awards under the amended plan. The amended plan expires in 2031.
F-28
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
All share-based compensation arrangements granted to employees, including stock option grants, are recognized in the consolidated statement of operations based on the grant-date fair value of the award over the period during which an employee is required to provide service in exchange for the award. Share-based compensation expense is recorded within selling, general, and administrative in the consolidated statement of operations with a corresponding offset to additional paid-in capital in the consolidated balance sheet.
The fair values of stock options granted were calculated using the Black-Scholes pricing model. The aggregate intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price. The following table summarizes all stock option activity from December 31, 2020 through December 31, 2021:
| Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value (in millions) | |||||||||||||||
| Outstanding at December 31, 2020 | 474,103 | $ | 400.21 | $ | 350.6 | ||||||||||||
| Granted | 28,116 | 1,390.31 | |||||||||||||||
| Exercised | (95,549) | 214.17 | |||||||||||||||
| Forfeited | (886) | 546.20 | |||||||||||||||
| Outstanding at December 31, 2021 | 405,784 | 512.30 | 480.8 | ||||||||||||||
| Options exercisable at December 31, 2021 | 309,558 | $ | 391.69 | $ | 404.1 |
The following table details the weighted average remaining contractual life of options outstanding at December 31, 2021 by range of exercise prices:
| Number of Options Outstanding | Weighted Average Exercise Price | Remaining Contractual Life of Options Outstanding | Options Exercisable | |||||||||||||||||
| 245,906 | $ | 301.84 | 3.28 | 233,228 | ||||||||||||||||
| 115,489 | $ | 663.34 | 6.92 | 72,155 | ||||||||||||||||
| 44,389 | $ | 1,285.26 | 9.33 | 4,175 | ||||||||||||||||
| 405,784 | 5.28 | 309,558 |
As of the date granted, the weighted average grant-date fair value of the options granted during the years ended December 31, 2021, 2020, and 2019 was $377.89, $284.25, and $196.40, respectively.
Such weighted average grant-date fair value was determined using the following assumptions:
| 2021 | 2020 | 2019 | |||||||||||||||
| Risk-free interest rate | 0.95 | % | 0.34 | % | 1.74 | % | |||||||||||
| Expected life in years | 6.3 | 6.0 | 6.0 | ||||||||||||||
| Expected volatility | 25 | % | 26 | % | 24 | % | |||||||||||
| Expected dividend yield | — | — | — |
The total intrinsic value of options exercised during the years ended December 31, 2021, 2020, and 2019 was approximately $116.0 million, $84.5 million, and $146.6 million, respectively.
The compensation expense for options recognized during the years ended December 31, 2021, 2020, and 2019 was $7.8 million, $7.7 million, and $8.0 million, respectively.
F-29
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
The following table summarizes all restricted stock unit and performance share unit activity from December 31, 2020 through December 31, 2021:
| Number of Restricted Stock Units | Aggregate Intrinsic Value (in millions) | Number of Performance Share Units | Aggregate Intrinsic Value (in millions) | ||||||||||||||||||||
| Outstanding at December 31, 2020 | 33,096 | $37.7 | 15,341 | $17.5 | |||||||||||||||||||
| Granted | 7,871 | 2,737 | |||||||||||||||||||||
| Adjustment for performance results achieved(1) | — | 927 | |||||||||||||||||||||
| Vested | (11,485) | (4,067) | |||||||||||||||||||||
| Forfeited | (2,583) | (94) | |||||||||||||||||||||
| Outstanding at December 31, 2021 | 26,899 | $45.6 | 14,844 | $25.2 |
(1) 2017 performance share units vested in the first quarter 2021.
The weighted average grant-date fair value of the restricted stock units granted during the years ended 2021, 2020, and 2019 was $1,445.37, $1,104.02, and $720.81 per unit, respectively, which primarily vest ratably over a five-year period. The total fair value of the restricted stock units on the date of grant was $11.4 million for 2021, $9.1 million for 2020, and $8.9 million for 2019 and will be recorded as compensation expense on a straight-line basis over the vesting period. The total fair value of restricted stock units vested during the years ended December 31, 2021, 2020, and 2019 was approximately $11.4 million, $7.7 million, and $7.0 million, respectively. Approximately $7.6 million, $7.9 million, and $7.1 million of compensation expense was recognized during the years ended December 31, 2021, 2020, and 2019, respectively.
The Company granted performance share units with a market condition during 2021, 2020, and 2019. Grantees of performance share units will be eligible to receive shares of the Company’s common stock depending upon the Company’s total shareholder return relative to the performance of companies in the S&P 500 Health Care and S&P 500 Industrials over a three-year period. The awards actually earned will range from zero to 200% of the targeted number of performance share units for the three-year performance period and will be paid, to the extent earned, in the fiscal quarter following the end of the applicable three-year performance period. During 2021, the market conditions for the 2018 performance share units were met and will vest in the first quarter 2022 with a payout of 200%. Performance share unit awards were valued using a Monte Carlo simulation based on the following assumptions:
| 2021 | 2020 | 2019 | |||||||||||||||
| Risk-free interest rate | 0.61 | % | 0.18 | % | 1.69 | % | |||||||||||
| Expected life in years | 3 | 3 | 3 | ||||||||||||||
| Expected volatility | 25 | % | 26 | % | 24 | % | |||||||||||
| Expected dividend yield | — | — | — |
As of the date granted, the fair value of the performance share units granted was $1,447.75 for 2021, $1,345.03 for 2020, and $803.26 for 2019. The total fair value of the performance share units on the date of the grant was $4.0 million for 2021 and $3.6 million for both 2020 and 2019, and will be recorded as compensation expense on a straight-line basis over the three-year performance period.
The compensation expense for performance share units recognized during the years ended December 31, 2021, 2020, and 2019 was $4.2 million, $3.1 million, and $3.2 million, respectively.
At December 31, 2021, a total of 3,858,825 shares of common stock were available for grant in the form of stock options, restricted stock units, or performance share units.
F-30
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
As of December 31, 2021, the unrecorded deferred share-based compensation balance related to stock options, restricted stock units, and performance share units was $52.5 million and will be recognized using a straight-line method over an estimated weighted average amortization period of 2.3 years.
13. BENEFIT PLANS
The Company maintains a number of retirement and other post-retirement employee benefit plans.
Certain subsidiaries sponsor defined contribution plans. Benefits are determined and funded annually based upon the terms of the plans. Amounts recognized as cost under these plans amounted to $24.8 million, $19.3 million, and $18.8 million for the years ended December 31, 2021, 2020, and 2019, respectively.
Certain subsidiaries sponsor defined benefit plans. Benefits are provided to employees primarily based upon years of service and employees’ compensation for certain periods during the last years of employment. Prior to 2002, the Company’s U.S. operations also provided post-retirement medical benefits to their employees. Contributions for medical benefits are related to employee years of service.
The following tables set forth the change in benefit obligation, the change in plan assets, the funded status, and amounts recognized in the consolidated financial statements for the Company’s defined benefit plans and post-retirement plan at December 31, 2021 and 2020:
| U.S. Pension Benefits | Non-U.S. Pension Benefits | Other Benefits | Total | ||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||
| Change in benefit obligation: | |||||||||||||||||||||||||||||||||||||||||||||||
| Benefit obligation at beginning of year | $ | 149,947 | $ | 142,450 | $ | 1,091,811 | $ | 961,263 | $ | 1,030 | $ | 1,295 | $ | 1,242,788 | $ | 1,105,008 | |||||||||||||||||||||||||||||||
| Service cost, gross | 1,498 | 1,304 | 35,675 | 33,995 | — | — | 37,173 | 35,299 | |||||||||||||||||||||||||||||||||||||||
| Interest cost | 2,194 | 3,556 | 3,347 | 4,778 | 8 | 25 | 5,549 | 8,359 | |||||||||||||||||||||||||||||||||||||||
| Actuarial losses (gains) | (3,399) | 10,733 | 1,904 | 43,508 | 37 | (70) | (1,458) | 54,171 | |||||||||||||||||||||||||||||||||||||||
| Plan amendments and other | — | — | (23,196) | 112 | — | — | (23,196) | 112 | |||||||||||||||||||||||||||||||||||||||
| Benefits paid | (8,334) | (8,096) | (39,911) | (39,412) | (200) | (220) | (48,445) | (47,728) | |||||||||||||||||||||||||||||||||||||||
| Impact of foreign currency | — | — | (42,297) | 87,567 | — | — | (42,297) | 87,567 | |||||||||||||||||||||||||||||||||||||||
| Benefit obligation at end of year | $ | 141,906 | $ | 149,947 | $ | 1,027,333 | $ | 1,091,811 | $ | 875 | $ | 1,030 | $ | 1,170,114 | $ | 1,242,788 | |||||||||||||||||||||||||||||||
| Change in plan assets: | |||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of plan assets at beginning of year | $ | 109,462 | $ | 102,812 | $ | 984,322 | $ | 861,962 | $ | — | $ | — | $ | 1,093,784 | $ | 964,774 | |||||||||||||||||||||||||||||||
| Actual return on plan assets | 12,307 | 9,223 | 52,922 | 39,535 | — | — | 65,229 | 48,758 | |||||||||||||||||||||||||||||||||||||||
| Employer contributions | 88 | 5,523 | 27,088 | 26,249 | 200 | 220 | 27,376 | 31,992 | |||||||||||||||||||||||||||||||||||||||
| Plan participants’ contributions | — | — | 16,102 | 15,681 | — | — | 16,102 | 15,681 | |||||||||||||||||||||||||||||||||||||||
| Benefits paid | (8,334) | (8,096) | (39,911) | (39,412) | (200) | (220) | (48,445) | (47,728) | |||||||||||||||||||||||||||||||||||||||
| Impact of foreign currency | — | — | (32,262) | 80,307 | — | — | (32,262) | 80,307 | |||||||||||||||||||||||||||||||||||||||
| Fair value of plan assets at end of year | $ | 113,523 | $ | 109,462 | $ | 1,008,261 | $ | 984,322 | $ | — | $ | — | $ | 1,121,784 | $ | 1,093,784 | |||||||||||||||||||||||||||||||
| Funded status | $ | (28,383) | $ | (40,485) | $ | (19,072) | $ | (107,489) | $ | (875) | $ | (1,030) | $ | (48,330) | $ | (149,004) |
F-31
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
The change in the benefit obligation for 2021 and 2020 is primarily related to the impact of foreign currency and a plan amendment within one of the Company's non-U.S. plans.
The accumulated benefit obligations at December 31, 2021 and 2020 were $141.9 million and $149.9 million, respectively, for the U.S. defined benefit pension plan and $867.0 million and $920.3 million, respectively, for all non-U.S. plans. Certain of the plans included within non-U.S. pension benefits have accumulated benefit obligations which exceed the fair value of plan assets. The projected benefit obligation, the accumulated benefit obligation, and fair value of assets of these plans as of December 31, 2021 were $181.3 million, $174.1 million, and $40.3 million, respectively. The projected benefit obligation, the accumulated benefit obligation, and fair value of assets of these plans as of December 31, 2020 were $216.7 million, $205.3 million, and $57.4 million, respectively.
Amounts recognized in the consolidated balance sheets consist of:
| U.S. Pension Benefits | Non-U.S. Pension Benefits | Other Benefits | Total | ||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||
| Other non-current assets | $ | — | $ | — | $ | 122,049 | $ | 51,619 | $ | — | $ | — | $ | 122,049 | $ | 51,619 | |||||||||||||||||||||||||||||||
| Accrued and other liabilities | (136) | (133) | (5,289) | (5,549) | (129) | (153) | (5,554) | (5,835) | |||||||||||||||||||||||||||||||||||||||
| Pension and other post-retirement liabilities | (28,246) | (40,353) | (135,833) | (153,559) | (746) | (877) | (164,825) | (194,789) | |||||||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive loss (income) | 56,648 | 69,296 | 259,714 | 332,280 | (742) | (891) | 315,620 | 400,685 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 28,266 | $ | 28,810 | $ | 240,641 | $ | 224,791 | $ | (1,617) | $ | (1,921) | $ | 267,290 | $ | 251,680 |
The following amounts have been recognized in accumulated other comprehensive income (loss), before taxes, at December 31, 2021 and have not yet been recognized as a component of net periodic pension cost:
| U.S. Pension Benefits | Non-U.S. Pension Benefits | Other Benefits | Total | Total, After Tax | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Plan amendments and prior service cost | $ | — | $ | — | $ | (29,446) | $ | (9,857) | $ | (426) | $ | (501) | $ | (29,872) | $ | (10,358) | $ | (24,118) | $ | (8,262) | |||||||||||||||||||||||||||||||||||||||
| Actuarial losses (gains) | 56,648 | 69,296 | 289,160 | 342,137 | (316) | (390) | 345,492 | 411,043 | 272,118 | $ | 322,947 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 56,648 | $ | 69,296 | $ | 259,714 | $ | 332,280 | $ | (742) | $ | (891) | $ | 315,620 | $ | 400,685 | $ | 248,000 | $ | 314,685 |
The following changes in plan assets and benefit obligations were recognized in other comprehensive income (loss), before taxes, for the year ended December 31, 2021:
| U.S. Pension Benefits | Non-U.S. Pension Benefits | Other Benefits | Total | Total, After Tax | |||||||||||||||||||||||||
| Net actuarial losses (gains) | $ | (9,732) | $ | (15,507) | $ | 37 | $ | (25,202) | $ | (19,293) | |||||||||||||||||||
| Plan amendment | — | (23,196) | — | (23,196) | (18,831) | ||||||||||||||||||||||||
| Amortization of: | |||||||||||||||||||||||||||||
| Actuarial (losses) gains | (2,916) | (24,899) | 37 | (27,778) | (21,958) | ||||||||||||||||||||||||
| Plan amendments and prior service cost | — | 3,174 | 75 | 3,249 | 2,632 | ||||||||||||||||||||||||
| Impact of foreign currency | — | (12,138) | — | (12,138) | (9,235) | ||||||||||||||||||||||||
| Total | $ | (12,648) | $ | (72,566) | $ | 149 | $ | (85,065) | $ | (66,685) |
F-32
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
The assumed discount rates and rates of increase in future compensation levels used in calculating the projected benefit obligations vary according to the economic conditions of the country in which the retirement plans are situated. The weighted average rates used for the purposes of the Company’s plans are as follows:
| U.S. | Non-U.S. | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Discount rate | 2.57 | % | 2.22 | % | 0.40 | % | 0.32 | % | |||||||||||||||
| Compensation increase rate | n/a | n/a | 0.85 | % | 0.86 | % | |||||||||||||||||
| Expected long-term rate of return on plan assets | 5.75 | % | 5.75 | % | 3.78 | % | 3.73 | % | |||||||||||||||
| Interest crediting rate | n/a | n/a | 1.00 | % | 0.50 | % |
The assumed discount rates, rates of increase in future compensation levels, and the long-term rate of return used in calculating the net periodic pension cost vary according to the economic conditions of the country in which the retirement plans are situated. The weighted average rates used for the purposes of the Company’s plans are as follows:
| U.S. | Non-U.S. | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | ||||||||||||||||||||||||||||||
| Discount rate | 2.22 | % | 3.03 | % | 4.11 | % | 0.63 | % | 0.51 | % | 1.22 | % | |||||||||||||||||||||||
| Compensation increase rate | n/a | n/a | n/a | 0.85 | % | 0.86 | % | 0.87 | % | ||||||||||||||||||||||||||
| Expected long-term rate of return on plan assets | 5.75 | % | 6.25 | % | 6.50 | % | 3.78 | % | 3.76 | % | 3.84 | % |
Net periodic pension cost and net periodic post-retirement benefit for the defined benefit plans and U.S. post-retirement plan include the following components for the years ended December 31:
| U.S. | Non-U.S. | Other Benefits | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Service cost, net | $ | 1,498 | $ | 1,304 | $ | 1,063 | $ | 19,558 | $ | 18,314 | $ | 15,534 | $ | — | $ | — | $ | — | $ | 21,056 | $ | 19,618 | $ | 16,597 | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest cost on projected benefit obligations | 2,194 | 3,556 | 4,585 | 3,347 | 4,778 | 10,192 | 8 | 25 | 64 | 5,549 | 8,359 | 14,841 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expected return on plan assets | (5,974) | (6,094) | (5,887) | (35,511) | (33,067) | (29,162) | — | — | — | (41,485) | (39,161) | (35,049) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Recognition of actuarial losses/(gains) and prior service cost | 2,916 | 2,578 | 2,374 | 21,725 | 16,134 | 13,784 | (112) | (103) | (691) | 24,529 | 18,609 | 15,467 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net periodic pension cost/(benefit) | $ | 634 | $ | 1,344 | $ | 2,135 | $ | 9,119 | $ | 6,159 | $ | 10,348 | $ | (104) | $ | (78) | $ | (627) | $ | 9,649 | $ | 7,425 | $ | 11,856 |
The projected post-retirement benefit obligation was principally determined using discount rates of 1.94% in 2021 and 1.47% in 2020. Net periodic post-retirement benefit cost was principally determined using discount rates of 1.47% in 2021, 2.54% in 2020, and 3.75% in 2019. The health care cost trend rate was 5.9% in 2021, 6.0% in 2020, and 6.2% in 2019, decreasing to 4.50% in 2029.
The Company’s overall asset investment strategy is to achieve long-term growth while minimizing volatility by widely diversifying among asset types and strategies. Target asset allocations and investment return criteria are established by the pension committee or designated officers of each plan. Target asset allocation ranges for the U.S. pension plan include 40-60% in equity securities, 23-33% in fixed income securities, and 15-25% in other types of investments. International plan assets relate primarily to the Company’s Swiss plan with target allocations of 24-45% in equities, 35-55% in fixed income securities, and 15-25% in other types of investments. Actual results are monitored against targets and the trustees are required to report to the members of each plan, including an analysis of investment performance on an
F-33
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
annual basis at a minimum. Day-to-day asset management is typically performed by third-party asset managers, reporting to the pension committees or designated officers.
The long-term rate of return on plan asset assumptions used to determine pension expense under U.S. GAAP is generally based on estimated future returns for the target investment mix determined by the trustees as well as historical investment performance.
The following table presents the fair value measurement of the Company’s plan assets by hierarchy level:
| December 31, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Observable Inputs for Identical Assets (Level 2) | Unobservable Inputs (Level 3) | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Observable Inputs for Identical Assets (Level 2) | Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||||||||||||||||||||||
| Asset Category: | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash and Cash Equivalents | $ | 92,207 | $ | — | $ | — | $ | 92,207 | $ | 166,614 | $ | — | $ | — | $ | 166,614 | |||||||||||||||||||||||||||||||
| Equity Securities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Mettler-Toledo Stock | 3,639 | — | — | 3,639 | 3,767 | — | — | 3,767 | |||||||||||||||||||||||||||||||||||||||
| Equity Mutual Funds: | |||||||||||||||||||||||||||||||||||||||||||||||
| U.S.(1) | 8,197 | 43,287 | — | 51,484 | 7,467 | 30,460 | — | 37,927 | |||||||||||||||||||||||||||||||||||||||
| International(2) | 100,197 | 23,022 | — | 123,219 | 83,309 | 41,027 | — | 124,336 | |||||||||||||||||||||||||||||||||||||||
| Emerging Markets(3) | 157,814 | 3,315 | — | 161,129 | 131,103 | 966 | — | 132,069 | |||||||||||||||||||||||||||||||||||||||
| Fixed Income Securities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Corporate/Government Bonds(4) | 87,772 | — | — | 87,772 | 92,085 | — | — | 92,085 | |||||||||||||||||||||||||||||||||||||||
| Fixed Income Mutual Funds: | |||||||||||||||||||||||||||||||||||||||||||||||
| Insurance Contracts(5) | — | 38,555 | 1,787 | 40,342 | — | 43,055 | 1,793 | 44,848 | |||||||||||||||||||||||||||||||||||||||
| Core Bond(6) | 107,394 | 71,608 | — | 179,002 | 72,061 | 64,111 | — | 136,172 | |||||||||||||||||||||||||||||||||||||||
| Real Asset Mutual Funds: | |||||||||||||||||||||||||||||||||||||||||||||||
| Real Estate(7) | — | 153,954 | — | 153,954 | 117,089 | 15,864 | — | 132,953 | |||||||||||||||||||||||||||||||||||||||
| Commodities(8) | 50,525 | — | — | 50,525 | 53,088 | — | — | 53,088 | |||||||||||||||||||||||||||||||||||||||
| Other Types of Investments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Debt Securities (9) | 41,628 | — | — | 41,628 | 43,060 | — | — | 43,060 | |||||||||||||||||||||||||||||||||||||||
| Global Allocation Funds(10) | 5,680 | — | — | 5,680 | 12,359 | — | — | 12,359 | |||||||||||||||||||||||||||||||||||||||
| Multi-Strategy Fund of Hedge Funds (11) | — | 16,103 | — | 16,103 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Insurance Linked Securities(12) | 19,287 | — | — | 19,287 | 19,038 | — | — | 19,038 | |||||||||||||||||||||||||||||||||||||||
| Total assets in fair value hierarchy | $ | 674,340 | $ | 349,844 | $ | 1,787 | $ | 1,025,971 | $ | 801,040 | $ | 195,483 | $ | 1,793 | $ | 998,316 | |||||||||||||||||||||||||||||||
| Investments measured at net asset value: | |||||||||||||||||||||||||||||||||||||||||||||||
| International(13) | 3,568 | 2,930 | |||||||||||||||||||||||||||||||||||||||||||||
| Emerging Markets (13) | 7,211 | 7,262 | |||||||||||||||||||||||||||||||||||||||||||||
| Multi-Strategy Fund of Hedge Funds (13) | 85,034 | 85,276 | |||||||||||||||||||||||||||||||||||||||||||||
| Total pension assets at fair value | $ | 1,121,784 | $ | 1,093,784 |
*(1)*Represents primarily large capitalization equity mutual funds tracking the S&P 500 Index.
*(2)*Represents all capitalization core and value equity mutual funds located primarily in Switzerland, the United Kingdom, and Canada.
*(3)*Represents core and growth mutual funds and funds of mutual funds invested in emerging markets primarily in Eastern Europe, Latin America, and Asia.
*(4)*Represents investments in high-grade corporate and government bonds located in Switzerland and the European Union.
*(5)*Represents fixed and variable rate annuity contracts provided by insurance companies.
F-34
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
*(6)*Represents fixed income mutual funds invested in the U.S., the United Kingdom, Switzerland, and European government bonds, high-grade corporate bonds, mortgage-backed securities, and collateralized mortgage obligations.
*(7)*Represents mutual funds invested in real estate located primarily in Switzerland.
*(8)*Represents commodity funds invested across a broad range of sectors.
*(9)*Represents a loan to a wholly owned subsidiary of the Company. See Note 10 for additional disclosure.
*(10)*Represents mutual funds invested globally in both equities and fixed income securities.
*(11)*Represents currency hedged versions of the non-currency hedged equity funds held in the United Kingdom.
*(12)*Represents a broadly diversified portfolio of assets that carry exposure to insurance risks, particularly insurance linked securities.
*(13)*Investments that are measured using the net asset value (NAV) per share practical expedient have not been categorized in the fair value hierarchy. The amounts presented above are intended to permit reconciliation of the fair value hierarchy to the fair value of total plan assets in order to determine the amounts included in the consolidated balance sheet.
The fair values of the Company’s stock and corporate and government bonds are valued at the year-end closing price as reported on the securities exchange on which they are traded. Mutual funds are valued at the exchange-listed year-end closing price or at the net asset value of shares held by the fund at the end of the year. Insurance contracts are valued by discounting the related cash flows using a current year-end market rate or at cash surrender value, which is presumed to equal fair value. Funds of hedge funds are valued at the net asset value of shares held by the fund at the end of the year.
The following table presents a roll-forward of activity for the years ended December 31, 2021 and 2020 for Level 3 asset categories:
| Insurance Contracts | |||||
| Balance at December 31, 2019 | $ | 1,486 | |||
| Actual return on plan assets related to assets held at end of year | 22 | ||||
| Purchases | 99 | ||||
| Impact of foreign currency | 186 | ||||
| Balance at December 31, 2020 | $ | 1,793 | |||
| Actual return on plan assets related to assets held at end of year | 26 | ||||
| Purchases | 70 | ||||
| Impact of foreign currency | (102) | ||||
| Balance at December 31, 2021 | $ | 1,787 |
There were no transfers between any asset levels during the years ended December 31, 2021 and 2020.
F-35
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
The following benefit payments, which reflect expected future service as appropriate, are expected to be paid:
| U.S. Pension Benefits | Non-U.S. Pension Benefits | Other Benefits, Net of Subsidy | Total | ||||||||||||||||||||
| 2022 | $ | 8,715 | $ | 48,030 | $ | 129 | $ | 56,874 | |||||||||||||||
| 2023 | 8,789 | 48,345 | 111 | 57,245 | |||||||||||||||||||
| 2024 | 8,848 | 50,636 | 99 | 59,583 | |||||||||||||||||||
| 2025 | 8,859 | 49,528 | 88 | 58,475 | |||||||||||||||||||
| 2026 | 8,809 | 50,121 | 78 | 59,008 | |||||||||||||||||||
| 2027-2031 | 42,737 | 251,739 | 269 | 294,745 |
In 2022, the Company expects to make employer pension contributions of approximately $28.2 million to its non-U.S. pension plan and employer contributions of approximately $0.1 million to its U.S. post-retirement medical plan.
14. TAXES
The sources of the Company’s earnings before taxes were as follows for the years ended December 31:
| 2021 | 2020 | 2019 | |||||||||||||||
| United States | $ | 109,918 | $ | 94,651 | $ | 102,262 | |||||||||||
| Non-United States | 839,443 | 654,092 | 579,132 | ||||||||||||||
| Earnings before taxes | $ | 949,361 | $ | 748,743 | $ | 681,394 |
The provision for taxes consists of:
| Current | Deferred | Total | |||||||||||||||
| Year ended December 31, 2021: | |||||||||||||||||
| United States federal | $ | 7,750 | $ | (7,415) | $ | 335 | |||||||||||
| United States state and local | 3,670 | (1,099) | 2,571 | ||||||||||||||
| Non-United States | 168,393 | 9,077 | 177,470 | ||||||||||||||
| Total | $ | 179,813 | $ | 563 | $ | 180,376 | |||||||||||
| Year ended December 31, 2020: | |||||||||||||||||
| United States federal | $ | 6,242 | $ | (6,311) | $ | (69) | |||||||||||
| United States state and local | 5,563 | (1,736) | 3,827 | ||||||||||||||
| Non-United States | 146,983 | (4,737) | 142,246 | ||||||||||||||
| Total | $ | 158,788 | $ | (12,784) | $ | 146,004 | |||||||||||
| Year ended December 31, 2019: | |||||||||||||||||
| United States federal | $ | 3,033 | $ | (2,622) | $ | 411 | |||||||||||
| United States state and local | (996) | (1,950) | (2,946) | ||||||||||||||
| Non-United States | 122,878 | (58) | 122,820 | ||||||||||||||
| Total | $ | 124,915 | $ | (4,630) | $ | 120,285 |
F-36
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
The provision for tax expense differed from the amounts computed by applying the United States federal income tax rate of 21% for the years ended December 31, 2021, 2020, and 2019 to earnings before taxes as a result of the following:
| 2021 | 2020 | 2019 | |||||||||||||||
| Expected tax | $ | 199,365 | $ | 157,236 | $ | 143,092 | |||||||||||
| United States state and local income taxes, net of federal income tax benefit | 1,235 | 3,320 | 499 | ||||||||||||||
| Net effect of Swiss tax reform implementation (see below) | — | — | (15,833) | ||||||||||||||
| Non-United States income taxes at other than U.S. federal rate | 3,439 | 179 | 18,546 | ||||||||||||||
| Excess tax benefits from stock option exercises | (22,843) | (17,261) | (28,279) | ||||||||||||||
| Other, net | (820) | 2,530 | 2,260 | ||||||||||||||
| Total provision for taxes | $ | 180,376 | $ | 146,004 | $ | 120,285 |
The Company’s reported effective tax rate was 19.0% in 2021, 19.5% in 2020, and 17.7% in 2019.
As discussed below, the provision for income taxes included a net benefit of $15.8 million in 2019 related to Swiss tax reform, which had the effect of reducing the Company’s effective tax rate by 2.3% in 2019.
In May 2019, a public referendum was held in Switzerland that approved Swiss federal tax reform proposals previously approved by the Swiss Parliament. Additional changes in Swiss cantonal law were enacted in October 2019 (collectively Swiss Tax Reform). The changes in Swiss federal tax had an immaterial effect on our financial statements. As a result of the enactment of the cantonal law, the Company recognized a deferred tax asset of $48.1 million less a valuation allowance of $31.9 million in the fourth quarter of 2019. The amount primarily related to deferred benefits associated with an allowed step-up of intangible assets for tax purposes. The rate impact of Swiss Tax Reform was effective January 1, 2020 and did not have a material impact on the Company’s consolidated effective tax rate.
F-37
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below at December 31:
| 2021 | 2020 | ||||||||||
| Deferred tax assets: | |||||||||||
| Inventory | $ | 24,007 | $ | 18,849 | |||||||
| Lease liability, accrued and other liabilities | 103,900 | 94,113 | |||||||||
| Accrued post-retirement benefit and pension costs | 49,774 | 56,618 | |||||||||
| Net operating loss and tax credit carryforwards | 26,808 | 27,717 | |||||||||
| Swiss tax reform intangible assets | 51,194 | 53,080 | |||||||||
| Other | 1,006 | 12,408 | |||||||||
| Total deferred tax assets | 256,689 | 262,785 | |||||||||
| Less valuation allowance | (51,126) | (52,388) | |||||||||
| Total deferred tax assets less valuation allowance | 205,563 | 210,397 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Inventory | 6,905 | 6,029 | |||||||||
| Lease right-of-use assets and other assets | 31,164 | 29,553 | |||||||||
| Property, plant, and equipment | 68,701 | 60,047 | |||||||||
| Acquired intangibles amortization | 61,289 | 62,584 | |||||||||
| Prepaid post-retirement benefit and pension costs | 41,524 | 28,270 | |||||||||
| International earnings | 15,001 | 16,526 | |||||||||
| Unrealized currency gains | 3,713 | — | |||||||||
| Total deferred tax liabilities | 228,297 | 203,009 | |||||||||
| Net deferred tax (liability) asset | $ | (22,734) | $ | 7,388 |
The Company continues to record valuation allowances related to certain of its deferred income tax assets due to the uncertainty of the ultimate realization of future benefits from such assets. The potential decrease or increase of the valuation allowance in the near term is dependent on the future ability of the Company to realize the deferred tax assets that are affected by the future profitability of operations in the respective/relevant jurisdictions.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
| 2021 | 2020 | ||||||||||
| Unrecognized tax benefits at beginning of year | $ | 38,294 | $ | 29,934 | |||||||
| Increases related to current tax positions | 12,200 | 9,503 | |||||||||
| Decreases related to prior year tax positions | (2,905) | (2,900) | |||||||||
| Impact of foreign currency | (1,157) | 1,757 | |||||||||
| Unrecognized tax benefits at end of year | $ | 46,432 | $ | 38,294 |
Included in the balance of unrecognized tax benefits at December 31, 2021 and 2020 were $46.4 million and $38.3 million, respectively, of tax benefits that if recognized would reduce the Company’s effective tax rate. Increases and decreases related to current and prior year tax positions during 2021 and 2020 primarily related to non-United States income taxes. The Company recognizes accrued amounts of interest and penalties related to its uncertain tax positions as part of its income tax expense within its consolidated statement of operations. The amount of accrued interest and penalties included
F-38
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
within other non-current liabilities within the Company’s consolidated balance sheet as of December 31, 2021 and 2020 was $7.7 million and $6.2 million, respectively.
The Company believes that it is reasonably possible that the unrecognized tax benefit balance could change over the next 12 months, primarily related to potential disputes raised by the taxing authorities over income and expense recognition. The Company does not expect a change would have a material impact on its financial position, results of operations, or cash flows.
The Company plans to repatriate earnings from China, Switzerland, Germany, the United Kingdom, and certain other countries in future years and believes that there will be no additional tax costs associated with the repatriation of such foreign earnings other than non-U.S. withholding taxes, certain state taxes, and U.S. taxes on currency gains, if any, for which a deferred tax liability has been recognized. All other undistributed earnings and any additional outside basis difference inherent in these entities and the contributed capital of our foreign subsidiaries are considered to be permanently reinvested on which no U.S. deferred income taxes or foreign withholding taxes have been provided. It is not practicable to estimate the amount of deferred tax liability related to these undistributed earnings and additional outside basis differences in these entities due to the complexity of the calculation and the uncertainty regarding assumptions necessary to compute the tax.
As of December 31, 2021, the major jurisdictions for which the Company is subject to examinations are: Germany for years after 2015; the United States after 2017; France after 2019; Switzerland after 2019; the United Kingdom after 2018; and China after 2018. Additionally, the Company is currently under examination in various taxing jurisdictions in which it conducts business operations. While the Company has not yet received any material assessments from these taxing authorities, the Company believes that adequate amounts of taxes and related interest and penalties have been provided for any adverse adjustments as a result of these examinations and that the ultimate outcome of these examinations will not result in a material impact on the Company’s consolidated results of operations or financial position.
15. OTHER CHARGES (INCOME), NET
Other charges (income), net consisted of net other income of $3.1 million, $13.8 million, and $6.2 million in 2021, 2020, and 2019, respectively. 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 $11.4 million, $12.2 million, and $4.8 million in 2021, 2020, and 2019, respectively. Other charges (income), net also includes $3.4 million of acquisition costs for the year ended December 31, 2021, as well as a $6.8 million charge to increase the PendoTECH acquisition contingent consideration and related obligations to the sellers.
16. LEASES
The Company adopted ASC 842 - Leases with an effective date of January 1, 2019. The operating lease right-of-use asset recognized upon adoption was $92.7 million, and the lease liability was $93.5 million. The Company elected the practical expedients package under ASC 842, and accordingly did not reassess any previously expired or existing arrangements, and related classification under ASC 840 - Leases.
F-39
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
The Company’s operating leases primarily comprise real estate and vehicles. Real estate leases are largely related to sales and marketing, service, and administrative offices, while vehicle leases are primarily related to the Company’s field sales and service organization. The consolidated balance sheet included the following balances as of December 31:
| 2021 | 2020 | Balance Sheet Location | |||||||||||||||
| Right-of-use assets, net | $ | 118,499 | $ | 98,624 | Other non-current assets | ||||||||||||
| Current lease liability | $ | 30,636 | $ | 29,216 | Accrued and other liabilities | ||||||||||||
| Non-current lease liability | 88,316 | 69,830 | Other non-current liabilities | ||||||||||||||
| Total operating lease liability | $ | 118,952 | $ | 99,046 |
As of December 31, 2021, the Company has not entered into any material real estate operating leases expected to commence in 2022.
For the years ended December 31, 2021 and 2020, the Company had the following recorded in selling, general, and administrative associated with leasing arrangements:
| 2021 | 2020 | 2019 | ||||||||||||||||||
| Operating lease expense | $ | 36,137 | $ | 34,559 | $ | 33,666 | ||||||||||||||
| Variable lease expense | 4,503 | 4,182 | 4,337 | |||||||||||||||||
| Short-term lease expense | 1,018 | 991 | 1,187 | |||||||||||||||||
| Total lease expense | $ | 41,658 | $ | 39,732 | $ | 39,190 | ||||||||||||||
| Weighted average remaining lease term | 7.4 years | 6.8 years | 6.4 years | |||||||||||||||||
| Weighted average discount rate | 2.1% | 2.5% | 2.9 | % |
Accruals and other on the consolidated statement of cash flows includes the amortization of the lease right-of-use asset of $33.7 million, $32.1 million, and $31.1 million, offset by a change in the lease liability of $33.7 million, $31.7 million, and $30.1 million for the years ended December 31, 2021, 2020, and 2019, respectively. Lease payments within operating activities were $35.5 million, $36.0 million, and $33.5 million for the years ended December 31, 2021, 2020, and 2019, respectively. The Company also obtained non-cash lease right-of-use assets in exchange for lease liabilities of $46.4 million, $35.0 million, and $25.7 million for the years ended December 31, 2021, 2020, and 2019, respectively.
F-40
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
The following is a maturity analysis of the annual undiscounted cash flows for the annual periods ended December 31:
| 2022 | $ | 32,865 | ||||||
| 2023 | 24,785 | |||||||
| 2024 | 16,156 | |||||||
| 2025 | 9,902 | |||||||
| 2026 | 7,413 | |||||||
| Thereafter | 38,212 | |||||||
| Total lease payments | 129,333 | |||||||
| Less imputed interest | (10,381) | |||||||
| Total operating lease liability | $ | 118,952 |
17. COMMITMENTS AND CONTINGENCIES
Legal
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 will have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.
18. SEGMENT REPORTING
The Company has five reportable segments: U.S. Operations, Swiss Operations, Western European Operations, Chinese Operations, and Other. U.S. Operations represent certain of the Company’s marketing and producing organizations located in the United States. Western European Operations include the Company’s marketing and producing organizations in Western Europe, excluding operations located in Switzerland. Swiss Operations include marketing and producing organizations located in Switzerland as well as extensive R&D operations that are responsible for the development, production, and marketing of precision instruments, including weighing, analytical, and measurement technologies for use in a variety of laboratory and industrial applications. Chinese Operations represent the Company’s marketing and producing organizations located in China. The Company’s market organizations are geographically focused and are responsible for all aspects of the Company’s sales and service. Operations that exist outside these reportable segments are included in Other.
The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on segment profit for segment reporting (gross profit less research and development and selling, general, and administrative expenses, before amortization, interest expense, restructuring charges, other charges (income), net, and taxes). Inter-segment sales and transfers are priced to reflect consideration of market conditions and the regulations of the countries in which the transferring entities are located.
F-41
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
The following tables show the operations of the Company’s reportable segments:
| For the Year Ended December 31, 2021 | Net Sales to External Customers | Net Sales to Other Segments | Total Net Sales | Segment Profit | Depreciation | Total Assets | Purchase of Property, Plant, and Equipment | Goodwill | ||||||||||||||||||||||||||||||||||||||||||
| U.S. Operations | $ | 1,287,983 | $ | 155,987 | $ | 1,443,970 | $ | 302,177 | $ | 12,123 | $ | 3,278,400 | $ | (34,972) | $ | 508,942 | ||||||||||||||||||||||||||||||||||
| Swiss Operations | 171,633 | 826,001 | 997,634 | 301,142 | 6,557 | 2,700,965 | (7,856) | 23,710 | ||||||||||||||||||||||||||||||||||||||||||
| Western European Operations | 829,761 | 211,547 | 1,041,308 | 172,265 | 5,264 | 1,566,819 | (11,014) | 100,433 | ||||||||||||||||||||||||||||||||||||||||||
| Chinese Operations | 771,651 | 291,779 | 1,063,430 | 369,835 | 9,566 | 1,037,838 | (15,700) | 710 | ||||||||||||||||||||||||||||||||||||||||||
| Other(a) | 656,902 | 4,780 | 661,682 | 100,028 | 3,819 | 365,182 | (5,652) | 14,827 | ||||||||||||||||||||||||||||||||||||||||||
| Eliminations and Corporate(b) | — | (1,490,094) | (1,490,094) | (187,636) | 7,653 | (5,622,406) | (32,386) | — | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 3,717,930 | $ | — | $ | 3,717,930 | $ | 1,057,811 | $ | 44,982 | $ | 3,326,798 | $ | (107,580) | $ | 648,622 |
| For the Year Ended December 31, 2020 | Net Sales to External Customers | Net Sales to Other Segments | Total Net Sales | Segment Profit | Depreciation | Total Assets | Purchase of Property, Plant, and Equipment | Goodwill | ||||||||||||||||||||||||||||||||||||||||||
| U.S. Operations | $ | 1,072,319 | $ | 121,850 | $ | 1,194,169 | $ | 244,940 | $ | 11,347 | $ | 2,560,652 | $ | (18,258) | $ | 415,869 | ||||||||||||||||||||||||||||||||||
| Swiss Operations | 143,923 | 679,837 | 823,760 | 245,465 | 6,257 | 2,028,879 | (5,495) | 24,525 | ||||||||||||||||||||||||||||||||||||||||||
| Western European Operations | 716,715 | 173,176 | 889,891 | 147,562 | 4,769 | 1,294,579 | (13,678) | 93,514 | ||||||||||||||||||||||||||||||||||||||||||
| Chinese Operations | 578,610 | 213,735 | 792,345 | 270,497 | 8,506 | 985,977 | (9,755) | 686 | ||||||||||||||||||||||||||||||||||||||||||
| Other(a) | 573,610 | 4,600 | 578,210 | 77,910 | 3,737 | 340,786 | (5,974) | 15,676 | ||||||||||||||||||||||||||||||||||||||||||
| Eliminations and Corporate(b) | — | (1,193,198) | (1,193,198) | (145,666) | 7,428 | (4,396,324) | (39,334) | — | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 3,085,177 | $ | — | $ | 3,085,177 | $ | 840,708 | $ | 42,044 | $ | 2,814,549 | $ | (92,494) | $ | 550,270 |
| For the Year Ended December 31, 2019 | Net Sales to External Customers | Net Sales to Other Segments | Total Net Sales | Segment Profit | Depreciation | Total Assets | Purchase of Property, Plant, and Equipment | Goodwill | ||||||||||||||||||||||||||||||||||||||||||
| U.S. Operations | $ | 1,057,115 | $ | 114,794 | $ | 1,171,909 | $ | 210,133 | $ | 10,684 | $ | 2,363,725 | $ | (15,607) | $ | 410,022 | ||||||||||||||||||||||||||||||||||
| Swiss Operations | 139,499 | 657,678 | 797,177 | 233,292 | 6,069 | 1,648,065 | (5,820) | 22,369 | ||||||||||||||||||||||||||||||||||||||||||
| Western European Operations | 700,741 | 175,759 | 876,500 | 123,845 | 4,450 | 1,150,214 | (11,267) | 87,980 | ||||||||||||||||||||||||||||||||||||||||||
| Chinese Operations | 544,716 | 224,517 | 769,233 | 266,522 | 8,045 | 694,903 | (10,252) | 633 | ||||||||||||||||||||||||||||||||||||||||||
| Other(a) | 566,581 | 5,890 | 572,471 | 71,483 | 3,395 | 358,281 | (4,936) | 14,975 | ||||||||||||||||||||||||||||||||||||||||||
| Eliminations and Corporate(b) | — | (1,178,638) | (1,178,638) | (127,197) | 6,348 | (3,425,867) | (49,459) | — | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 3,008,652 | $ | — | $ | 3,008,652 | $ | 778,078 | $ | 38,991 | $ | 2,789,321 | $ | (97,341) | $ | 535,979 |
*(a)*Other includes reporting units in Southeast Asia, Latin America, Eastern Europe, and other countries.
*(b)*Eliminations and Corporate includes the elimination of intersegment transactions as well as certain corporate expenses and intercompany investments, which are not included in the Company’s operating segments.
A reconciliation of earnings before taxes to segment profit follows:
| 2021 | 2020 | 2019 | |||||||||||||||
| Earnings before taxes | $ | 949,361 | $ | 748,743 | $ | 681,394 | |||||||||||
| Amortization | 63,075 | 56,665 | 49,690 | ||||||||||||||
| Interest expense | 43,242 | 38,616 | 37,411 | ||||||||||||||
| Restructuring charges | 5,239 | 10,516 | 15,760 | ||||||||||||||
| Other income, net | (3,106) | (13,832) | (6,177) | ||||||||||||||
| Segment profit | $ | 1,057,811 | $ | 840,708 | $ | 778,078 |
F-42
METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share data, unless otherwise stated)
The Company sells precision instruments, including weighing instruments and certain analytical and measurement technologies, and related services to a variety of customers and industries. None of these end-customers account for more than 1% of net sales. Service revenues are primarily derived from repair and other services including regulatory compliance qualification, calibration, certification, and preventative maintenance, and spare parts. A breakdown of the Company’s sales by product category is disclosed in Note 3 to the consolidated financial statements.
In certain circumstances, our reporting units sell directly into other geographies. A breakdown of net sales to external customers by geographic customer destination and property, plant, and equipment by geographic destination for the years ended December 31 follows:
| Net Sales | Property, Plant, and Equipment, Net | ||||||||||||||||||||||||||||
| 2021 | 2020 | 2019 | 2021 | 2020 | |||||||||||||||||||||||||
| United States | $ | 1,217,114 | $ | 1,014,180 | $ | 984,524 | $ | 228,010 | $ | 208,038 | |||||||||||||||||||
| Other Americas | 202,718 | 166,446 | 181,323 | 3,267 | 3,713 | ||||||||||||||||||||||||
| Total Americas | 1,419,832 | 1,180,626 | 1,165,847 | 231,277 | 211,751 | ||||||||||||||||||||||||
| Germany | 229,341 | 199,499 | 195,790 | 40,854 | 48,468 | ||||||||||||||||||||||||
| France | 152,225 | 134,542 | 130,387 | 8,026 | 9,123 | ||||||||||||||||||||||||
| United Kingdom | 90,431 | 70,163 | 66,855 | 35,349 | 34,631 | ||||||||||||||||||||||||
| Switzerland | 82,381 | 69,965 | 65,202 | 304,228 | 314,059 | ||||||||||||||||||||||||
| Other Europe | 508,583 | 447,097 | 433,858 | 51,760 | 64,048 | ||||||||||||||||||||||||
| Total Europe | 1,062,961 | 921,266 | 892,092 | 440,217 | 470,329 | ||||||||||||||||||||||||
| China | 754,002 | 565,100 | 527,076 | 95,356 | 89,277 | ||||||||||||||||||||||||
| Rest of World | 481,135 | 418,185 | 423,637 | 32,515 | 27,511 | ||||||||||||||||||||||||
| Total Asia/Rest of World | 1,235,137 | 983,285 | 950,713 | 127,871 | 116,788 | ||||||||||||||||||||||||
| Total | $ | 3,717,930 | $ | 3,085,177 | $ | 3,008,652 | $ | 799,365 | $ | 798,868 |
F-43
Schedule II — Valuation and Qualifying Accounts (in thousands)
| Column A | Column B | Column C | Column D | Column E | ||||||||||||||||||||||||||||
| Additions | ||||||||||||||||||||||||||||||||
| (1) | (2) | |||||||||||||||||||||||||||||||
| Balance at the Beginning of Period | Charged to Costs and Expenses | Charged to Other Accounts | Balance at End of Period | |||||||||||||||||||||||||||||
| Description | -Deductions- | |||||||||||||||||||||||||||||||
| Note (A) | Note (B) | |||||||||||||||||||||||||||||||
| Deferred tax valuation allowance: | ||||||||||||||||||||||||||||||||
| Year ended December 31, 2021 | $ | 52,388 | $ | 2,058 | $ | — | $ | 3,320 | $ | 51,126 | ||||||||||||||||||||||
| Year ended December 31, 2020 | $ | 50,853 | $ | 2,824 | $ | 3,009 | $ | 4,298 | $ | 52,388 | ||||||||||||||||||||||
| Year ended December 31, 2019 | $ | 15,084 | $ | 36,658 | $ | — | $ | 889 | $ | 50,853 |
Note (A)
Amounts in 2020 relate primarily to changes in currency translation adjustments.
Note (B)
Amounts in 2021, 2020, and 2019 include decreases in state net operating losses and credits, foreign tax credit, and R&D credit carryforwards.
S-1
Previous: Item 15. Exhibits and Financial Statement Schedules