Mettler-Toledo 10-Q 2021-09-30

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021, OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ________________

Commission File Number: 1-13595

Mettler Toledo International Inc

_______________________________________________________________________________________________________________________________________

(Exact name of registrant as specified in its charter)

1900 Polaris Parkway

Columbus, OH 43240

and

Im Langacher, P.O. Box MT-100

CH 8606 Greifensee, Swizterland

1-614-438-4511 and +41-44-944-22-11

________________________________________________________________________________

(Registrant's telephone number, including area code)

not applicable

______________________________________________________________________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer. ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

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

The Registrant had 22,985,655 shares of Common Stock outstanding at September 30, 2021.

METTLER-TOLEDO INTERNATIONAL INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

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PART I. FINANCIAL INFORMATION

METTLER-TOLEDO INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Three months ended September 30, 2021 and 2020

(In thousands, except share data)

(unaudited)

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

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METTLER-TOLEDO INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Nine months ended September 30, 2021 and 2020

(In thousands, except share data)

(unaudited)

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

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METTLER-TOLEDO INTERNATIONAL INC.

INTERIM CONSOLIDATED BALANCE SHEETS

As of September 30, 2021 and December 31, 2020

(In thousands, except share data)

(unaudited)

Showing the first 8K of 100K characters. Open the full section

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Unaudited Interim Consolidated Financial Statements included herein.

General

Our interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021.

Changes in local currency exclude the effect of currency exchange rate fluctuations. Local currency amounts are determined by translating current and previous year consolidated financial information at an index utilizing historical currency exchange rates. We believe local currency information provides a helpful assessment of business performance and a useful measure of results between periods. We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. We present non-GAAP financial measures in reporting our financial results to provide investors with an additional analytical tool to evaluate our operating results.

We also include in the discussion below disclosures of immaterial qualitative factors that are not quantified. Although the impact of such factors is not considered material, we believe these disclosures can be useful in evaluating our operating results.

COVID-19

The ongoing coronavirus ("COVID-19") pandemic has resulted in millions of confirmed cases throughout the world and in all countries where we conduct business. The outbreak caused many governments to implement stay-at-home orders, quarantines, and significant restrictions on travel. During the course of the ongoing pandemic, several governments implemented work restrictions that prohibited many employees from going to their customary work locations and that required these employees to work remotely when possible. These restrictions continue to change as the COVID-19 situation evolves in each country and region, considering local circumstances related to vaccine availability, population vaccination rates, and emerging variant strains of COVID-19.

The health and safety of our employees and business partners have been our highest priority throughout the COVID-19 pandemic, and we have implemented several preventative and protective measures. We have also continued to support our customers with their essential businesses such as life sciences, food manufacturing, chemicals (e.g., sanitizers, disinfectants, soaps, etc.), food retail, and transportation and logistics.

Our production and logistics facilities are currently operational, and our office-based employees continue to adhere to any applicable jurisdictional stay-at-home orders. Our supply chain is currently facing wide-ranging global challenges although we have been able to meet delivery requirements of our customers with some interruption. We continue to closely monitor risks associated with our supply chain, including the availability of certain components, material shortages, supplier delays, potential transportation delays, and higher transportation and material costs, which could significantly adversely affect sales and/or profitability in future quarters. We also continue to leverage our digital and remote sales capabilities and our service organization continues to provide on-site and remote customer support to facilitate uptime, productivity, and regulatory compliance.

COVID-19 presents several risks to our business as further described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020. Uncertainties related to COVID-19 and the resulting impact to the global economy continue in most regions of the world

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and market conditions can change quickly. The longer-term effects on our business will be impacted by the global economy and any economic implications in different regions of the world.

Results of Operations – Consolidated

The following tables set forth certain items from our interim consolidated statements of operations for the three and nine month periods ended September 30, 2021 and 2020 (amounts in thousands).

Net sales

Net sales were $952.0 million and $807.4 million for the three months ended September 30, 2021, and 2020, respectively, and $2.7 billion and $2.1 billion for the nine months ended September 30, 2021 and 2020, respectively. This represents an increase of 18% and 25% in U.S. dollars for the three and nine months ended September 30, 2021, respectively. Excluding the effect of currency exchange rate fluctuations, or in local currencies, net sales increased 16% and 20% for the three and nine months ended September 30, 2021, respectively. Net sales benefited approximately 1% from the PendoTECH acquisition for the three and nine months ended September 30, 2021. We experienced broad-based growth with robust customer demand in most businesses and regions and strong execution of our sales and marketing programs. Growth in China also continued to be particularly strong. However, uncertainty relating to COVID-19 continues and market conditions may change quickly.

Net sales by geographic destination for the three months ended September 30, 2021 in U.S. dollars increased 20% in the Americas, 12% in Europe, and 21% in Asia/Rest of World. In local currencies, our net sales by geographic destination increased 20% in the Americas, 10% in Europe, and 16% in Asia/Rest of World. Our net sales by geographic destination for the nine months ended September 30, 2021 in U.S. dollars increased 22% in the Americas and in Europe, and 31% in Asia/Rest of World. Net sales by geographic destination for the nine months ended September 30, 2021 in local currencies increased 21% in the Americas, 15% in Europe, and 23% in Asia/Rest of World. Net sales in the Americas benefited approximately 3% and 2% from the PendoTECH acquisition for the three and nine months ended September 30, 2021, respectively, and net sales in Europe benefited approximately 1% from the PendoTECH acquisition for both the three and nine months ended September 30, 2021. Net sales growth in Asia/Rest of World in local currency includes 19% and 31% growth in China during the three and nine months ended September 30, 2021, respectively. A discussion of sales by operating segment is included below.

As described in Note 19 to our consolidated financial statements for the year ended December 31, 2020, our net sales comprise product sales of precision instruments and related services. Service revenues are primarily derived from repair and other services, including regulatory compliance qualification, calibration, certification, preventative maintenance and spare parts.

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Net sales of products increased 21% in U.S. dollars and 18% in local currencies for the three months ended September 30, 2021 and increased 28% in U.S. dollars and 24% in local currencies for the nine months ended September 30, 2021, compared to the corresponding periods in 2020. Net sales of products benefited approximately 1% from the PendoTECH acquisition for the three and nine months ended September 30, 2021, respectively. Service revenue (including spare parts) increased by 8% in U.S. dollars and 6% in local currencies for the three months ended September 30, 2021 and increased 13% in U.S. dollars and 9% in local currencies for the nine months ended September 30, 2021, compared to the corresponding periods in 2020.

Net sales of our laboratory products and services, which represented approximately 56% of our total net sales, increased 25% in U.S. dollars and 23% in local currencies for the three months ended September 30, 2021, and increased 30% in U.S. dollars and 26% in local currencies for the nine months ended September 30, 2021. The local currency increase in net sales of our laboratory-related products for the three and nine months ended September 30, 2021 includes strong growth in most product categories. Net sales during the nine months ended September 30, 2021 also included especially strong growth in pipettes. Net sales of our laboratory products also benefited approximately 3% and 2% from the PendoTECH acquisition for the three and nine months ended September 30, 2021, respectively.

Net sales of our industrial products and services, which represented approximately 39% of our total net sales, increased 15% in U.S. dollars and 12% in local currencies for the three months ended September 30, 2021, and increased 21% in U.S. dollars and 16% in local currencies for the nine months ended September 30, 2021. The local currency increase in net sales of our industrial-related products for the three and nine months ended September 30, 2021 includes strong growth in product inspection and core industrial products. Net sales of our industrial-related products for the nine months ended September 30, 2021 includes particularly strong growth in core industrial, especially China.

Net sales in our food retailing products and services, which represented approximately 5% of our total net sales, decreased 18% in U.S. dollars and 19% in local currencies for the three months ended September 30, 2021, and increased 4% in U.S. dollars and decreased 1% in local currencies for the nine months ended September 30, 2021. Food retailing declined significantly for the three months ended September 30, 2021 due to timing of project activity and the negative impact of manufacturing component shortages. The local currency decrease in food retailing for the nine months ended September 30, 2021 was also negatively impacted by a decline in the Americas, offset in part by strong growth in Europe.

Gross profit

Gross profit as a percentage of net sales was 58.4% and 58.2% for the three months ended September 30, 2021 and 2020, respectively, and 58.4% and 57.8% for the nine months ended September 30, 2021 and 2020, respectively.

Gross profit as a percentage of net sales for products was 60.0% and 59.7% for the three months ended September 30, 2021 and 2020, respectively, and 60.3% and 60.0% for the nine months ended September 30, 2021 and 2020.

Gross profit as a percentage of net sales for services (including spare parts) was 51.9% and 52.7% for the three months ended September 30, 2021 and 2020, respectively, and 51.0% and 50.5% for the nine months ended September 30, 2021 and 2020, respectively.

The increase in gross profit as a percentage of net sales for the three and nine months ended September 30, 2021 primarily reflects increased sales volume and favorable price realization, partially offset by temporary cost savings in the prior year and higher transportation and material costs.

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Research and development and selling, general and administrative expenses

Research and development expenses as a percentage of net sales was 4.4% and 4.3% for the three months ended September 30, 2021 and 2020, respectively, and was 4.6% and 4.7% for the nine months ended September 30, 2021 and 2020, respectively. Research and development expenses increased 22% in U.S. dollars and 19% in local currencies for the three months ended September 30, 2021, and increased 24% in U.S. dollars and 18% in local currencies for the nine months ended September 30, 2021, respectively, compared to the corresponding periods in 2020. The local currency increase primarily relates to increased project activity and temporary savings in the prior year.

Selling, general and administrative expenses as a percentage of net sales were 25.3% and 25.4% for the three months ended September 30, 2021 and 2020, respectively, and were 26.2% and 27.7% for the nine months ended September 30, 2021 and 2020, respectively. Selling, general and administrative expenses increased 17% in U.S. dollars and 16% in local currencies for the three months ended September 30, 2021, and increased 18% in U.S. dollars and 14% in local currencies for the nine months ended September 30, 2021. The local currency increase primarily includes higher cash incentive expense and temporary savings in the prior year.

Amortization expense was $16.0 million and $14.1 million for the three months ended September 30, 2021 and 2020, respectively, and $46.1 million and $42.0 million for the nine months ended September 30, 2021 and 2020, respectively.

Interest expense was $11.8 million and $9.3 million for the three months ended September 30, 2021 and 2020, respectively, and $31.7 million and $29.1 million for the nine months ended September 30, 2021 and 2020, 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 was $2.5 million and $3.1 million for the three months ended September 30, 2021 and 2020, respectively, and $7.5 million and $9.0 million and for the nine months ended September 30, 2021 and 2020, respectively. Other charges (income), net also included $2.8 million of acquisition costs for the nine months ended September 30, 2021.

Our reported tax rate was 17.7% and 21.4% during the three months ended September 30, 2021 and 2020, respectively, and 18.9% and 19.4% during the nine months ended September 30, 2021 and 2020, respectively. The provision for taxes is based upon using our projected annual effective tax rate of 19.5% and 20.5% before non-recurring discrete tax items for the periods ended September 30, 2021 and 2020, respectively. The difference between our projected annual effective tax rate and the reported tax rate is related to the timing of excess tax benefits associated with stock option exercises.

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Results of Operations – by Operating Segment

The following is a discussion of the financial results of our operating segments. We currently have five reportable segments: U.S. Operations, Swiss Operations, Western European Operations, Chinese Operations and Other. A more detailed description of these segments is outlined in Note 19 to our consolidated financial statements for the year ended December 31, 2020.

U.S. Operations (amounts in thousands)

Total net sales increased 21% and 22% for the three and nine months ended September 30, 2021, respectively, compared with the corresponding period in 2020. Net sales to external customers increased 21% for both the three and nine months ended September 30, 2021, respectively, compared with the corresponding period in 2020. Net sales to external customers for the three months ended September 30, 2021 includes very strong growth in most laboratory products and core industrial. The increases are partially offset by a significant decline in food retailing that was negatively impacted by the timing of customer project activity and manufacturing component shortages. Net sales during the nine months ended September 30, 2021 also included particularly strong results in pipettes. Net sales to external customers in our U.S. Operations also benefited approximately 4% and 3% from the PendoTECH acquisition for the three and nine months ended September 30, 2021, respectively.

Segment profit increased $7.1 million and $52.6 million for the three and nine months ended September 30, 2021, respectively, compared to the corresponding periods in 2020. Segment profit during the three and nine months ended September 30, 2021 includes higher sales volume and benefits from our margin expansion initiatives, offset in part by higher transportation and material costs and temporary cost savings in the prior year.

Swiss Operations (am**ounts in thousands)

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

Total net sales increased 21% in both U.S. dollars and in local currency for the three months ended September 30, 2021, and increased 27% in U.S. dollars and 23% in local currency for the nine months ended September 30, 2021, respectively, compared to the corresponding periods in 2020. Net sales to external customers increased 8% in both U.S. dollars and in local currency for the three months ended September 30, 2021 and increased 22% in U.S. dollars and 19% in local currency for the nine months ended September 30, 2021, compared to the corresponding periods in 2020. The increase in local currency net sales to external customers for the three months ended September 30, 2021 includes strong growth in product inspection and laboratory products. Net sales during the nine months ended September 30, 2021 included strong results in most product categories.

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Segment profit increased $16.6 million and $48.8 million the three and nine months ended September 30, 2021, compared to the corresponding periods in 2020. Segment profit during the three and nine months ended September 30, 2021 includes higher sales volume, benefits of our productivity initiatives and favorable foreign currency translation, offset in part by higher transportation and material costs and temporary cost savings in the prior year.

Western European Operations (amounts in thousands)

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

Total net sales increased 14% in U.S. dollars and 12% in local currencies for the three months ended September 30, 2021 and increased 25% in U.S. dollars and 16% in local currencies for the nine months ended September 30, 2021, compared to the corresponding periods in 2020. Net sales to external customers increased 12% in U.S. dollars and 10% in local currencies for the three months ended September 30, 2021, and increased 23% in U.S. dollars and 15% in local currencies for the nine months ended September 30, 2021, compared to the corresponding periods in 2020. Net sales to external customers for the three and nine months ended September 30, 2021 includes very strong growth in most product categories. Net sales to external customers for the three months ended September 30, 2021 is partially offset with a decline in food retailing.

Segment profit increased $3.3 million and $25.2 million for the three and nine month periods ended September 30, 2021, respectively, compared to the corresponding periods in 2020. Segment profit increased during the three and nine months ended September 30, 2021 primarily due to higher sales volume and benefits of our margin expansion initiatives, offset in part by higher transportation and material costs and temporary cost savings in the prior year. Segment profit for the nine months ended September 30, 2021 also includes favorable currency translation.

Chinese Operations (amounts in thousands)

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

Total net sales increased 32% in U.S. dollars and 23% in local currency for the three months ended September 30, 2021 and increased 43% in U.S. dollars and 32% in local currency for the nine months ended September 30, 2021, compared to the corresponding periods in 2020. Net sales to external customers increased 27% in U.S. dollars and 19% in local currency by origin for the three months ended September 30, 2021 and increased 41% in U.S. dollars and 31% in local currency during the nine months ended September 30, 2021, compared to the corresponding periods in 2020. Net sales to external customers during the three months ended September 30, 2021 includes especially strong growth in laboratory products and good growth in our industrial business, offset in part by a decline in food retailing. The increase in local currency net sales to external customers during the nine months ended September 30, 2021 reflects particularly strong growth in both laboratory and industrial products. However, market conditions may change quickly and we will face difficult prior period comparisons during the remainder of 2021.

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Segment profit increased $27.6 million and $84.8 million for the three and nine month periods ended September 30, 2021, respectively, compared to the corresponding periods in 2020. The increase in segment profit for the three and nine months ended September 30, 2021 primarily reflects increased sales volume and favorable foreign currency translation, offset in part by higher transportation and material costs and temporary cost savings in the prior year.

Other (amounts in thousands)

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

Net sales to external customers increased 12% in U.S. dollars and 11% in local currencies for the three months ended September 30, 2021 and increased 18% in U.S. dollars and 14% in local currencies for the nine months ended September 30, 2021, compared to the corresponding periods in 2020. The increase in net sales to external customers includes strong growth in most product categories.

Segment profit increased $0.8 million and $18.3 million for the three and nine months ended September 30, 2021, respectively, compared to the corresponding periods in 2020. The increase in segment profit for the nine months ended September 30, 2021 is primarily related to increased sales volume and favorable foreign currency translation.

Liquidity and Capital Resources

Liquidity is our ability to generate sufficient cash to meet our obligations and commitments. Sources of liquidity includes, cash flows from operating activities, available borrowings under our Credit Agreement, the ability to obtain appropriate financing and our cash and cash equivalent balances. Currently, our financing requirements are primarily driven by working capital requirements, capital expenditures, share repurchases and acquisitions.

Cash provided by operating activities totaled $667.7 million during the nine months ended September 30, 2021, compared to $473.8 million in the corresponding period in 2020. The increase for the nine months ended September 30, 2021 is primarily due to higher net earnings.

Capital expenditures are made primarily for investments in information systems and technology, machinery, equipment and the purchase and expansion of facilities. Our capital expenditures totaled $69.8 million for the nine months ended September 30, 2021 compared to $57.4 million in the corresponding period in 2020.

In September 2021, the Company entered into an agreement with the US Department of Defense to increase domestic production capacity of pipette tips and enhance manufacturing automation and logistics. The Company will receive grant funding of $35.8 million over the next two years, which will offset future capital expenditures.

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Senior Notes and Credit Facility Agreement

Our debt consisted of the following at September 30, 2021:

On June 25, 2021, we entered into a $1.25 billion Credit Agreement ("the Credit Agreement"), which amended our $1.1 billion Amended and Restated Credit Agreement (the "Prior Credit Agreement"), that is further described in Note 8 of our consolidated financial statements.

In May 2021, we entered into an agreement to issue and sell $125 million twelve-year Senior Notes with a fixed interest rate of 2.83%. The Senior Notes were issued in July 2021 and will mature July 2033. The terms of the Senior Notes are consistent with the previous Senior Notes as described above. We used the proceeds from the sale of the notes to refinance existing indebtedness and for other general corporate purposes.

As of September 30, 2021, approximately $654.2 million of additional borrowings was available under our Credit Agreement, and we maintained $183.7 million of cash and cash equivalents. During the nine months ended September 30, 2021, the Company increased its long-term debt primarily due to the funding of the PendoTECH acquisition as described in Note 4. Changes in exchange rates between the currencies in which we generate cash flows and the currencies in which our borrowings are denominated affect our liquidity. In addition, because we borrow in a variety of currencies, our debt balances fluctuate due to changes in exchange rates. Further, we do not have any downgrade triggers related to ratings from rating agencies that would accelerate the maturity dates of our debt.

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

In December 2020, the Company entered into an agreement to issue and sell EUR 125.0 million of 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 in the Company's

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Annual Report on Form 10-K for the year ended December 31, 2020. 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 Company issued the 1.06% Euro Senior Notes with a fixed interest rate of 1.06% in March 2021. The 1.06% Euro Senior Notes are unsecured obligations of the Company and will mature on March 19, 2036. Interest on the 1.06% Euro Senior Notes is payable semi-annually in March and September of each year.

In April 2018, two of our non-U.S. pension plans issued loans totaling $39.6 million (Swiss franc 38 million) to a wholly owned subsidiary of the Company. The loans have the same terms and conditions which include an interest rate of Swiss franc LIBOR plus 87.5 basis points. The loans were renewed for one year in April 2021.

We continue to explore potential acquisitions. In connection with any acquisition, we may incur additional indebtedness. In March 2021, we 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 bio-pharmaceutical manufacturers and life science laboratories and is located in the United States. The initial cash payment was $185.0 million and we may be required to pay additional consideration of up to $20.0 million and other post-closing amounts. In October 2021, the Company acquired Scale-up Systems Inc., a leading software provider for scale-up and reaction modelling serving the biopharma and chemical markets. The initial cash payment was $22.2 million and the Company may be required to pay additional amounts up to EUR 3.0 million. For additional information related to these acquisitions, refer to Note 4 to the interim consolidated financial statements.

Share Repurchase Program

In November 2020, the Company's Board of Directors authorized an additional $2.5 billion to be added to our share repurchase program, which has $2.3 billion of remaining availability as of September 30, 2021. The share repurchases are expected to be funded from cash generated from operating activities, borrowings, and existing cash balances. Repurchases will be made through open market transactions, and the amount and timing of purchases will depend on business and market conditions, stock price, trading restrictions, the level of acquisition activity, and other factors.

We have purchased 30.0 million shares since the inception of the program through September 30, 2021. During the nine months ended September 30, 2021 and 2020, we spent $727.5 million and $400.0 million on the repurchase of 557,310 and 475,530 shares at an average price per share of $1,305.35 and $841.14, respectively. We also reissued 71,124 shares and 144,776 shares held in treasury upon the exercise of stock options and vesting of restricted stock units during the nine months ended September 30, 2021 and 2020, respectively.

Effect of Currency on Results of Operations

Our earnings are affected by changes in exchange rates. We are most sensitive to changes in the exchange rates between the Swiss franc, euro, Chinese renminbi, and U.S. dollar. We have more Swiss franc expenses than we do Swiss franc sales because we develop and manufacture products in Switzerland that we sell globally, and have a number of corporate functions located in Switzerland. When the Swiss franc strengthens against our other trading currencies, particularly the U.S. dollar and euro, our earnings decrease. We also have significantly more sales in the euro than we do expenses. When the euro weakens against the U.S. dollar and Swiss franc, our earnings also decrease. We estimate a 1% strengthening of the Swiss franc against the euro would reduce our earnings before tax by approximately $1.8 million to $2.0 million annually.

We also conduct business in many geographies throughout the world, including Asia Pacific, the United Kingdom, Eastern Europe, Latin America, and Canada. Fluctuations in these currency exchange rates against the U.S. dollar can also affect our operating results. The most significant of these currency exposures is the Chinese renminbi. The impact on our earnings before

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tax of the Chinese renminbi weakening 1% against the U.S. dollar is a reduction of approximately $2.6 million to $2.8 million annually.

In addition to the effects of exchange rate movements on operating profits, our debt levels can fluctuate due to changes in exchange rates, particularly between the U.S. dollar and the Swiss franc. Based on our outstanding debt at September 30, 2021, we estimate that a 5% weakening of the U.S. dollar against the currencies in which our debt is denominated would result in an increase of approximately $35.8 million in the reported U.S. dollar value of our debt.

Forward-Looking Statements Disclaimer

You should not rely on forward-looking statements to predict our actual results. Our actual results or performance may be materially different than reflected in forward-looking statements because of various risks and uncertainties, including statements about expected revenue growth and long-term impacts of the COVID-19 pandemic. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential” or “continue.”

We make forward-looking statements about future events or our future financial performance, including earnings and sales growth, earnings per share, strategic plans and contingency plans, growth opportunities or economic downturns, our ability to respond to changes in market conditions, customer demand, our competitive position, pricing, our supply chain, adequacy of our facilities, access to and the costs of raw materials, shipping and supplier costs, gross margins, planned research and development efforts and product introductions, capital expenditures, cash flow, tax-related matters, the impact of foreign currencies, compliance with laws, effects of acquisitions, and the impact of the COVID-19 pandemic on our businesses.

Our forward-looking statements may not be accurate or complete, and we do not intend to update or revise them in light of actual results. New risks also periodically arise. Please consider the risks and factors that could cause our results to differ materially from what is described in our forward-looking statements, including the uncertain duration and severity of the COVID-19 pandemic. See in particular “Factors Affecting Our Future Operating Results” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020 and other reports filed with the SEC from time to time.

As of September 30, 2021, there was no material change in the information provided under Item 7A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer, have concluded that these disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

**Item 1.**Legal Proceedings. None

For the three and nine months ended September 30, 2021 there were no material changes from risk factors disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

**Item 2.**Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

In November 2020, the Company's Board of Directors authorized an additional $2.5 billion to the share repurchase program, which has $2.3 billion of remaining availability as of September 30, 2021. We have purchased 30.0 million shares since the inception of the program through September 30, 2021.

During the nine months ended September 30, 2021 and 2020, we spent $727.5 million and $400.0 million on the repurchase of 557,310 and 475,530 shares at an average price per share of $1,305.35 and $841.14, respectively. We also reissued 71,124 shares and 144,776 shares held in treasury upon the exercise of stock options and vesting of restricted stock units during the nine months ended September 30, 2021 and 2020, respectively.

**Item 3.**Defaults Upon Senior Securities. None

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EXHIBIT INDEX

_______________________

• Filed herewith

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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