Mettler-Toledo 10-Q 2022-09-30

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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, 2022, 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, Switzerland

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

________________________________________________________________________________

(Registrant's telephone number, including area code)

not applicable

______________________________________________________________________________________________________________________

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

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

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 22,294,189 shares of Common Stock outstanding at September 30, 2022.

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, 2022 and 2021

(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, 2022 and 2021

(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, 2022 and December 31, 2021

(In thousands, except share data)

(unaudited)

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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, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2022.

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

Since late 2019, the coronavirus pandemic (COVID-19) has spread globally in all countries where we conduct business. The COVID-19 pandemic is evolving and has led to the implementation of various responses, including government-imposed quarantines, stay-at-home orders and lockdowns, travel restrictions, vaccination and testing requirements, and other public health safety measures. These restrictions continue to change as COVID-19 evolves, variants and subvariants are discovered, and vaccinations and booster doses are distributed in each country and region. The emergence of COVID-19 variants and subvariants have presented particular challenges to the global economy given the high level of transmissibility, which can cause many people to be affected at the same time or over a short period of time. For example, China continues to institute lockdowns in certain cities as part of the government's response to COVID-19 outbreaks. The location and length of potential future lockdowns will determine the extent to which any lockdowns impact our business and supply chain, as well as the Chinese and global economies. We continue to monitor and comply with all global restrictions and requirements relating to 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 also have 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 employees continue to adhere to any applicable jurisdictional lockdowns and 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 ongoing and potential future lockdowns in China, 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.

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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, 2021. Uncertainties related to COVID-19 and the resulting impact to the global economy continue in most regions of the world and market conditions can change quickly. The longer-term effects on our business will be impacted by the global economy and any recession implications in different regions of the world.

Ongoing Developments Related to Ukraine

In 2021, approximately 1% of our net sales were in Russia and Ukraine, and we have an immaterial amount of assets and liabilities in both countries as of September 30, 2022. We also do not have manufacturing in Russia or Ukraine.

We remain in constant contact with our employees in Ukraine and have provided financial assistance and supplies as they seek safety. We also have suspended all shipments to Russia since the beginning of the invasion of Ukraine in February 2022. In addition, the U.S., the European Union, and certain other countries imposed economic sanctions on Russian financial institutions, businesses in Russia, and on Russian interests and individuals, and the Russian government implemented sanctions and regulations in response. Also, due to the impact of reduced energy supplies from Russia, the Council of the European Union (EU Council) proposed that all European member states strive for a voluntary 15% reduction in gas consumption compared to their average consumption over the last five years. The reduction timeframe commenced August 1, 2022 and is expected to continue through March 31, 2023. Accordingly, the availability and cost of energy will continue to be impacted.

While it is difficult to estimate the impact of the ongoing invasion on the global economy, including increased inflation, higher energy and transportation costs and potential energy shortages, the invasion of Ukraine could adversely impact our financial results and presents several risks to our business as further described in Part II, Item 1A, “Risk Factors” of this Quarterly Report. Uncertainties related to this conflict and the resulting impact to the global economy and market conditions can change quickly.

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, 2022 and 2021 (amounts in thousands).

Net sales

Net sales were $985.8 million and $952.0 million for the three months ended September 30, 2022, and 2021, respectively, and $2.9 billion and $2.7 billion for the nine months ended September 30, 2022 and 2021, respectively. This represents an increase of 4% and 7% in U.S. dollars for the three and nine months ended September 30, 2022, respectively. Excluding the effect

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of currency exchange rate fluctuations, or in local currencies, net sales increased 10% and 11% for the three and nine months ended September 30, 2022, respectively. We experienced strong growth in most businesses with excellent execution and lower growth in Europe. We continue to benefit from our best-in-class sales and marketing programs, innovative product portfolio, and investments in our field service organization. However, uncertainties exist in the macro environment and global economy including the impact of COVID-19, related lockdowns in China, and the impact from the ongoing developments related to Ukraine. Furthermore, we face continuing challenges in the global supply chain and inflationary cost increases, and market conditions may change quickly.

Net sales by geographic destination for the three months ended September 30, 2022 in U.S. dollars increased 11% in the Americas and 7% in Asia/Rest of World and decreased 12% in Europe. In local currencies, our net sales by geographic destination increased 11% in the Americas, 1% in Europe, and 15% in Asia/Rest of World. Our net sales by geographic destination for the nine months ended September 30, 2022 in U.S. dollars increased 13% in the Americas and 10% in Asia/Rest of World and decreased 5% in Europe. Net sales by geographic destination for the nine months ended September 30, 2022 in local currencies increased 13% in the Americas, 5% in Europe, and 15% in Asia/Rest of World. Net sales in the Americas benefited approximately 1% from the PendoTECH acquisition for the nine months ended September 30, 2022. Net sales growth in Asia/Rest of World in local currency includes 15% growth in China during the three and nine months ended September 30, 2022. A discussion of sales by operating segment is included below.

As described in Note 18 to our consolidated financial statements for the year ended December 31, 2021, our net sales comprise product sales of precision instruments and related services. Service revenues are primarily derived from repair and other services, including regulatory compliance qualification, calibration, certification, preventative maintenance and spare parts.

Net sales of products increased 3% in U.S. dollars and 9% in local currencies for the three months ended September 30, 2022 and increased 7% in U.S. dollars and 11% in local currencies for the nine months ended September 30, 2022, compared to the corresponding periods in 2021. Service revenue (including spare parts) increased by 6% in U.S. dollars and 13% in local currencies for the three months ended September 30, 2022 and increased 6% in U.S. dollars and 12% in local currencies for the nine months ended September 30, 2022, compared to the corresponding periods in 2021.

Net sales of our laboratory products and services, which represented approximately 56% of our total net sales, increased 3% in U.S. dollars and 10% in local currencies for the three months ended September 30, 2022, and increased 9% in U.S. dollars and 13% in local currencies for the nine months ended September 30, 2022. The local currency increase in net sales of our laboratory-related products for the three and nine months ended September 30, 2022 includes very strong growth in most product categories. Net sales of our laboratory products also benefited approximately 1% from the PendoTECH acquisition for the nine months ended September 30, 2022.

Net sales of our industrial products and services, which represented approximately 39% of our total net sales, increased 4% in U.S. dollars and 10% in local currencies for the three months ended September 30, 2022, and increased 6% in U.S. dollars and 10% in local currencies for the nine months ended September 30, 2022. The local currency increase in net sales of our industrial-related products for the three and nine months ended September 30, 2022 includes very strong growth in our core industrial business, especially in the U.S. and China.

Net sales in our food retailing products and services, which represented approximately 5% of our total net sales, decreased 2% in U.S. dollars and increased 7% in local currencies for the three months ended September 30, 2022, and decreased 8% in U.S. dollars and 2% in local currencies for the nine months ended September 30, 2022. Food retailing for the three months ended September 30, 2022 included very strong growth in the Americas, offset in part by reduced sales in China. The local currency decrease in net sales in our food retailing products for the nine months ended September 30, 2022 was negatively impacted by weak market dynamics, especially in China, offset in part by very strong growth in the Americas.

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Gross profit

Gross profit as a percentage of net sales was 59.3% and 58.4% for the three months ended September 30, 2022 and 2021, respectively, and 58.6% and 58.4% for the nine months ended September 30, 2022 and 2021, respectively.

Gross profit as a percentage of net sales for products was 61.1% and 60.0% for the three months ended September 30, 2022 and 2021, respectively, and 60.3% and 60.3% for the nine months ended September 30, 2022 and 2021.

Gross profit as a percentage of net sales for services (including spare parts) was 52.5% and 51.9% for the three months ended September 30, 2022 and 2021, respectively, and 52.0% and 51.0% for the nine months ended September 30, 2022 and 2021, respectively.

The increase in gross profit as a percentage of net sales for the three and nine months ended September 30, 2022 primarily reflects favorable price realization and increased sales volume, offset in part by higher material costs.

Research and development and selling, general and administrative expenses

Research and development expenses as a percentage of net sales was 4.5% and 4.4% for the three months ended September 30, 2022 and 2021, respectively, and was 4.6% for the nine months ended September 30, 2022 and 2021. Research and development expenses increased 4% in U.S. dollars and 10% in local currencies for the three months ended September 30, 2022, and increased 6% in U.S. dollars and 10% in local currencies for the nine months ended September 30, 2022, respectively, compared to the corresponding periods in 2021. The local currency increase primarily relates to increased project activity.

Selling, general and administrative expenses as a percentage of net sales were 23.7% and 25.3% for the three months ended September 30, 2022 and 2021, respectively, and were 24.8% and 26.2% for the nine months ended September 30, 2022 and 2021, respectively. Selling, general and administrative expenses decreased 3% in U.S. dollars and increased 3% in local currencies for the three months ended September 30, 2022, and increased 1% in U.S. dollars and 6% in local currencies for the nine months ended September 30, 2022. The local currency increase includes investments in sales and marketing.

Amortization, interest expense, restructuring charges, other charges (income), net and taxes

Amortization expense was $16.7 million and $16.0 million for the three months ended September 30, 2022 and 2021, respectively, and $49.7 million and $46.1 million for the nine months ended September 30, 2022 and 2021, respectively.

Interest expense was $14.5 million and $11.8 million for the three months ended September 30, 2022 and 2021, respectively, and $38.6 million and $31.7 million for the nine months ended September 30, 2022 and 2021, respectively.

Restructuring charges were $2.0 million and $0.7 million for the three months ended September 30, 2022 and 2021, respectively, and $7.8 million and $2.7 million for the nine months ended September 30, 2022 and 2021, respectively. Restructuring expenses are primarily comprised of employee-related costs.

Other charges (income), net includes non-service pension costs (benefits), net (gains) losses from foreign currency transactions and hedging activities, interest income and other items. Non-service pension benefits were $4.2 million and $2.5 million for the three months ended September 30, 2022 and 2021, respectively, and $12.7 million and $7.5 million and for the nine months ended September 30, 2022 and 2021, respectively. Other charges (income), net also included $0.7 million and $2.8 million of acquisition costs for the nine months ended September 30, 2022 and 2021, respectively.

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Our reported tax rate was 20.0% and 17.7% during the three months ended September 30, 2022 and 2021, respectively, and 18.6% and 18.9% during the nine months ended September 30, 2022 and 2021, respectively. The provision for taxes is based upon using our projected annual effective tax rate of 19% and 19.5% before non-recurring discrete tax items for the periods ended September 30, 2022 and 2021, 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.

Results of Operations – by Operating Segment

The following is a discussion of the financial results of our operating segments. We currently have five reportable segments: U.S. Operations, Swiss Operations, Western European Operations, Chinese Operations and Other. A more detailed description of these segments is outlined in Note 18 to our consolidated financial statements for the year ended December 31, 2021.

U.S. Operations (amounts in thousands)

Total net sales increased 9% and 13% for the three and nine months ended September 30, 2022, respectively, compared with the corresponding periods in 2021. Net sales to external customers increased 11% and 14% for the three and nine months ended September 30, 2022, respectively, compared with the corresponding periods in 2021. Net sales to external customers for the three and nine months ended September 30, 2022 includes strong growth in most product categories, particularly industrial and food retailing. Net sales to external customers in our U.S. Operations also benefited approximately 1% from the PendoTECH acquisition for the nine months ended September 30, 2022.

Segment profit increased $21.2 million and $46.2 million for the three and nine months ended September 30, 2022, respectively, compared to the corresponding periods in 2021. Segment profit during the three and nine months ended September 30, 2022 includes higher net sales volume and benefits from our margin expansion initiatives, offset in part by higher material costs.

Swiss Operations (amounts in thousands)

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

Total net sales decreased 1% in U.S. dollars and increased 4% in local currency for the three months ended September 30, 2022, and increased 3% in U.S. dollars and 7% in local currency for the nine months ended September 30, 2022, respectively, compared to the corresponding periods in 2021. Net sales to external customers decreased 2% in U.S. dollars and increased 1% in local currency for the three months ended September 30, 2022 and increased 4% in U.S. dollars and 7% in local currency for the nine months ended September 30, 2022, compared to the corresponding periods in 2021. The increase in local currency net sales to external customers for the three and nine months ended September 30, 2022 includes growth in laboratory and industrial products.

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Segment profit decreased $1.0 million and increased $7.9 million the three and nine months ended September 30, 2022, compared to the corresponding periods in 2021. Segment profit during the nine months ended September 30, 2022 includes higher net sales volume and benefits from our margin expansion initiatives, offset in part by unfavorable foreign currency translation and higher material costs.

Western European Operations (amounts in thousands)

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

Total net sales decreased 8% in U.S. dollars and increased 8% in local currencies for the three months ended September 30, 2022 and decreased 6% in U.S. dollars and increased 6% in local currencies for the nine months ended September 30, 2022, compared to the corresponding periods in 2021. Net sales to external customers decreased 9% in U.S. dollars and increased 7% in local currencies for the three months ended September 30, 2022, and decreased 5% in U.S. dollars and increased 7% in local currencies for the nine months ended September 30, 2022, compared to the corresponding periods in 2021. The increase in local currency net sales to external customers for the three and nine months ended September 30, 2022 includes solid growth in most product categories, especially laboratory and core-industrial products. Net sales to external customers for the three months ended September 30, 2022 includes declines in pipettes and product inspection.

Segment profit decreased $1.3 million and $3.7 million for the three and nine month periods ended September 30, 2022, respectively, compared to the corresponding periods in 2021. Segment profit decreased during the three and nine months ended September 30, 2022 primarily due to unfavorable currency translation and higher material costs, offset in part by higher sales volume and benefits from our margin expansion initiatives.

Chinese Operations (amounts in thousands)

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

Total net sales increased 7% in U.S. dollars and 13% in local currency for the three months ended September 30, 2022 and increased 11% in U.S. dollars and 13% in local currency for the nine months ended September 30, 2022, compared to the corresponding periods in 2021. Net sales to external customers increased 9% in U.S. dollars and 15% in local currency by origin for the three months ended September 30, 2022 and increased 12% in U.S. dollars and 15% in local currency during the nine months ended September 30, 2022, compared to the corresponding periods in 2021. Net sales to external customers during the three and nine months ended September 30, 2022 includes very strong growth in laboratory and core-industrial products, offset in part by a decline in food retailing. However, uncertainties exist, especially relating to potential additional COVID-19 lockdowns and the related impact on the economy, and market conditions may change quickly.

Segment profit increased $14.7 million and $38.4 million for the three and nine month periods ended September 30, 2022, respectively, compared to the corresponding periods in 2021.

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The increase in segment profit for the three and nine months ended September 30, 2022 primarily reflects increased sales volume and benefits from our margin expansion initiatives, offset in part by unfavorable currency translation and higher material costs.

Other (amounts in thousands)

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

Net sales to external customers decreased 2% in U.S. dollars and increased 7% in local currencies for the three months ended September 30, 2022 and increased 1% in U.S. dollars and 9% in local currencies for the nine months ended September 30, 2022, compared to the corresponding periods in 2021. The increase in net sales to external customers for the three and nine months ended September 30, 2022 includes particularly strong growth in laboratory products.

Segment profit decreased $3.8 million and $2.7 million for the three and nine months ended September 30, 2022, respectively, compared to the corresponding periods in 2021. The decrease in segment profit for the three and nine months ended September 30, 2022 is primarily related to unfavorable foreign currency translation and higher material costs, offset by increased sales volume.

Liquidity and Capital Resources

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

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

Cash provided by operating activities totaled $555.4 million during the nine months ended September 30, 2022, compared to $667.7 million in the corresponding period in 2021. The decrease for the nine months ended September 30, 2022 is primarily related to higher cash incentive payments related to our strong previous year performance, as well as increased inventory levels.

Capital expenditures are made primarily for investments in information systems and technology, machinery, equipment and the purchase and expansion of facilities. Our capital expenditures totaled $89.2 million for the nine months ended September 30, 2022 compared to $69.8 million in the corresponding period in 2021.

In September 2021, we entered into an agreement with the U.S. Department of Defense to increase domestic production capacity of pipette tips and enhance manufacturing automation and logistics. As of September 30, 2022, we have obtained $28.7 million of the $35.8 million of total funding to be received through 2023, which will offset associated capital expenditures. During the nine months ended September 30, 2022, we incurred approximately $28.6 million of capital expenditures relating to this funding agreement.

We continue to explore potential acquisitions. In connection with any acquisition, we may incur additional indebtedness. During the nine months ended September 30, 2022, $10.0 million of

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contingent consideration was paid relating to the PendoTECH acquisition of which $7.9 million is included in financing activities for the amount accrued at the acquisition date and $2.1 million is included in operating activities for the amount not accrued at the acquisition date on the Consolidated Statement of Cash Flows in accordance with U.S. GAAP.

In 2022, we also incurred acquisition payments totaling $25.6 million. Goodwill recorded in connection with these acquisitions totaled $8.9 million. We also recorded $10.7 million of identified intangibles primarily pertaining to customer relationships in connection with these acquisitions, which will be amortized on a straight-line basis over 10 to 15 years.

Cash flows used in financing activities are primarily comprised of share repurchases. In accordance with our share repurchase program, we spent $825.0 million and $727.5 million on the repurchase of 629,380 shares and 557,310 shares, during the nine months ended September 30, 2022 and 2021, respectively.

The Inflation Reduction Act (IRA) was enacted on August 16, 2022. The IRA includes provisions imposing a 1% excise tax on net share repurchases that occur after December 31, 2022 and introduces a 15% corporate alternative minimum tax (CAMT) on adjusted financial statement income. We expect the financial impact of the IRA to be immaterial to our financial statements.

Senior Notes and Credit Facility Agreement

Our debt consisted of the following at September 30, 2022:

As of September 30, 2022, approximately $589.3 million of additional borrowings was available under our Credit Agreement, and we maintained $122.1 million of cash and cash equivalents.

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.

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Further, we do not have any downgrade triggers relating to ratings from rating agencies that would accelerate the maturity dates of our debt. We were in compliance with our debt covenants as of September 30, 2022.

In December 2021, we entered into an agreement to issue and sell $300 million 15-year Senior Notes in a private placement. We issued $150 million with a fixed interest rate of 2.81% (2.81% Senior Notes) in March 2022, which will mature in March 2037, and an additional $150 million with a fixed interest rate of 2.91% (2.91% Senior Notes) in September 2022, which will mature in September 2037. We will use the proceeds from the sale of the notes to refinance existing indebtedness and for other general corporate purposes.

Other Local Arrangements

In April 2018, two of our non-U.S. pension plans issued loans totaling $39.6 million (Swiss franc 38 million) to a wholly owned subsidiary of the Company. The loans have the same terms and conditions which include an interest rate of SARON plus 87.5 basis points. The loans were renewed for one year in April 2022.

Share Repurchase Program

In November 2022, our Board of Directors authorized an additional $2.5 billion to be added to our share repurchase program, which has $1.2 billion of remaining availability as of September 30, 2022. The share repurchases are expected to be funded from cash generated from operating activities, borrowings, and cash balances. Repurchases will be made through open market transactions, and the amount and timing of purchases will depend on business and market conditions, the stock price, trading restrictions, the level of acquisition activity, and other factors.

We have purchased 30.8 million shares since the inception of the program through September 30, 2022. During the nine months ended September 30, 2022 and 2021, we spent $825.0 million and $727.5 million on the repurchase of 629,380 and 557,310 shares at an average price per share of $1,310.79 and $1,305.35, respectively. We also reissued 80,466 shares and 71,124 shares held in treasury upon the exercise of stock options and vesting of restricted stock units during the nine months ended September 30, 2022 and 2021, 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 $1.9 million to $2.1 million annually.

We also conduct business in many geographies throughout the world, including Asia Pacific, the United Kingdom, Eastern Europe, Latin America, and Canada. Fluctuations in these currency exchange rates against the U.S. dollar can also affect our operating results. The most significant of these currency exposures is the Chinese renminbi. The impact on our earnings before tax of the Chinese renminbi weakening 1% against the U.S. dollar is a reduction of approximately $3.5 million to $3.7 million annually.

In addition to the effects of exchange rate movements on operating profits, our debt levels can fluctuate due to changes in exchange rates, particularly between the U.S. dollar, the Swiss franc and the euro. Based on our outstanding debt at September 30, 2022, 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 $30.7 million in the reported U.S. dollar value of our debt.

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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 and ongoing developments related to Ukraine. 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 and ongoing developments related to Ukraine 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 and ongoing developments related to Ukraine. 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, 2021 and other reports filed with the SEC from time to time.

As of September 30, 2022, 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, 2021.

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, 2022 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, 2022 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, 2021, and as updated in the Company's Form 10-Q for the period ended June 30, 2022.

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

Issuer Purchases of Equity Securities

In November 2022, the Company's Board of Directors authorized an additional $2.5 billion to be added to its share repurchase program, which has $1.2 billion of remaining availability as of September 30, 2022. We have purchased 30.8 million shares since the inception of the program through September 30, 2022.

During the nine months ended September 30, 2022 and 2021, we spent $825.0 million and $727.5 million on the repurchase of 629,380 and 557,310 shares at an average price per share of $1,310.79 and $1,305.35, respectively. We also reissued 80,466 shares and 71,124 shares held in treasury upon the exercise of stock options and vesting of restricted stock units during the nine months ended September 30, 2022 and 2021, 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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