10-K 1 mtd_10kx12312012.htm 10-K MTD_10K_12.31.2012
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
 
 
þ
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the fiscal year ended December 31, 2012
OR
o
 
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 001-13595
Mettler-Toledo International Inc.
(Exact name of registrant as specified in its charter)
Delaware
13-3668641
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1900 Polaris Parkway
Columbus, OH 43240
and
Im Langacher, P.O. Box MT-100
CH 8606 Greifensee, Switzerland
(Address of principal executive offices) (Zip Code)
1-614-438-4511 and +41-44-944-22-11
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value
 
New York Stock Exchange
Preferred Stock Purchase Rights
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ
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 þ     No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 þ     No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  Yes o     No þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12 b-2 of the Act).  Yes o     No þ
As of January 31, 2013 there were 30,305,383 shares of the registrant’s Common Stock, $0.01 par value per share, outstanding. The aggregate market value of the shares of Common Stock held by non-affiliates of the registrant on June 30, 2012 (based on the closing price for the Common Stock on the New York Stock Exchange as of the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2012) was approximately $4.8 billion. For purposes of this computation, shares held by affiliates and by directors of the registrant have been excluded. Such exclusion of shares held by directors is not intended, nor shall it be deemed, to be an admission that such persons are affiliates of the registrant.
Documents Incorporated by Reference
Document
 
Part of Form 10-K Into Which Incorporated
Certain Sections of the Proxy Statement for 2013
 
Part III
Annual Meeting of Shareholders
 
 





METTLER-TOLEDO INTERNATIONAL INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL Year Ended December 31, 2012
 
 
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FORWARD-LOOKING STATEMENTS DISCLAIMER
Some of the statements in this annual report and in documents incorporated by reference constitute “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. These statements relate to future events or our future financial performance, including, but not limited to, the following: projected earnings and sales growth in U.S. dollars and local currencies, projected earnings per share, strategic plans and contingency plans, potential growth opportunities or economic downturns in both developed markets and emerging markets, including China, factors influencing growth in our laboratory, industrial and food retail markets, our expectations in respect of the impact of general economic conditions on our business, our projections for growth in certain markets or industries, our capability to respond to future changes in market conditions, impact of inflation, currency and interest rate fluctuations, our ability to maintain a leading position in our key markets, our expected market share, our ability to leverage our market-leading position and diverse product offering to weather an economic downturn, the effectiveness of our “Spinnaker” initiatives relating to sales and marketing, planned research and development efforts, product introductions and innovation, manufacturing capacity, adequacy of facilities, access to and the costs of raw materials, shipping and supplier costs, expanding our operating margins, anticipated gross margins, anticipated customer spending patterns and levels, expected customer demand, meeting customer expectations, warranty claim levels, anticipated growth in service revenues, anticipated pricing, our ability to realize planned price increases, planned operational changes and productivity improvements, effect of changes in internal control over financial reporting, research and development expenditures, competitors’ product development, levels of competitive pressure, our future position vis-à-vis competitors, expected capital expenditures, the timing, impact, cost, benefits from and effectiveness of our cost reduction programs, future cash sources and requirements, cash flow targets, liquidity, value of inventories, impact of long-term incentive plans, continuation of our stock repurchase program and the related impact on cash flow, expected pension and other benefit contributions and payments, expected tax treatment and assessment, impact of taxes and changes in tax benefits, the need to take additional restructuring charges, expected compliance with laws, changes in laws and regulations, impact of environmental costs, expected trading volume and value of stocks and options, impact of issuance of preferred stock, expected cost savings, impact of legal proceedings, satisfaction of contractual obligations by counterparties, timeliness of payments by our customers, the adequacy of reserves for bad debts against our accounts receivable, benefits and other effects of completed or future acquisitions.
These statements involve known and unknown risks, uncertainties and other factors that may cause our or our businesses’ actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. 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” or the negative of those terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially because of market conditions in our industries or other factors. Moreover, we do not, nor does any other person, assume responsibility for the accuracy and completeness of those statements. Unless otherwise required by applicable laws, we disclaim any intention or obligation to publicly update or revise any of the forward-looking statements after the date of this annual report to conform them to actual results, whether as a result of new information, future events or otherwise. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under the captions “Factors affecting our future operating results” in the “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 1A of this annual report on Form 10-K for the fiscal year ended December 31, 2012, which describe risks and factors that could cause results to differ materially from those projected in those forward-looking statements.
We caution the reader that the above list of risks and factors that may affect results addressed in the forward-looking statements may not be exhaustive. Other sections of this annual report on Form 10-K for the fiscal year ended December 31, 2012 and other documents incorporated by reference may describe additional risks or factors that could adversely impact our business and financial performance. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict these new risk factors, nor can it assess the impact, if any, of these new risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those projected in any forward-looking statements. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results.


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PART I

Item 1.
Business
We are a leading global supplier of precision instruments and services. We have strong leadership positions in all of our businesses and believe we hold global number-one market positions in a majority of them. Specifically, we are the largest provider of weighing instruments for use in laboratory, industrial and food retailing applications. We are also a leading provider of analytical instruments for use in life science, reaction engineering and real-time analytic systems used in drug and chemical compound development and process analytics instruments used for in-line measurement in production processes. In addition, we are the largest supplier of end-of-line inspection systems used in production and packaging for food, pharmaceutical and other industries.
Our business is geographically diversified, with net sales in 2012 derived 34% from both Europe and North and South America and 32% from Asia and other countries. Our customer base is also diversified by industry and by individual customer.
Mettler-Toledo International Inc. was incorporated as a Delaware corporation in 1991 and became a publicly traded company with its initial public offering in 1997.
Business Segments
We have five reportable segments: U.S. Operations, Swiss Operations, Western European Operations, Chinese Operations and Other. See Note 18 to the audited consolidated financial statements and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under “Results of Operations — by Operating Segment” included herein for detailed results by segment and geographic region.
We manufacture a wide variety of precision instruments and provide value-added services to our customers. Our principal products and principal services are set forth below. We have followed this description of our products and services with descriptions of our customers and distribution, sales and service, research and development, manufacturing and certain other matters. These descriptions apply to substantially all of our products and related segments.
Laboratory Instruments
We make a wide variety of precision laboratory instruments, including laboratory balances, pipettes, titrators, thermal analysis systems and other analytical instruments. The laboratory instruments business accounted for approximately 46% of our net sales in 2012, 45% in 2011 and 46% in 2010.
Laboratory Balances
Our laboratory balances have weighing ranges from one ten-millionth of a gram up to 64 kilograms. To cover a wide range of customer needs and price points, we market our balances in a range of product tiers offering different levels of functionality. Based on the same technology platform, we also manufacture mass comparators, which are used by weights and measures regulators as well as laboratories to ensure the accuracy of reference weights. Laboratory balances are primarily used in the pharmaceutical, food, chemical, cosmetics and other industries.
Pipettes
Pipettes are used in laboratories for dispensing small volumes of liquids. We operate our pipette business with the Rainin brand name. Rainin develops, manufactures and distributes advanced pipettes, tips and accessories, including single- and multi-channel manual and electronic pipettes. Rainin maintains service centers in the key markets where customers periodically send their pipettes for certified recalibrations. Rainin’s principal end markets are pharmaceutical, biotech and academia.

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Analytical Instruments
Titrators measure the chemical composition of samples and are used in environmental and research laboratories as well as in quality control labs in the pharmaceutical, food and beverage and other industries. Our high-end titrators are multi-tasking models, which can perform two determinations simultaneously on multiple vessels. Our offering includes robotics to automate routine work in quality control applications.
Thermal analysis systems measure material properties as a function of temperature, such as weight, dimension, energy flow and viscoelastic properties. Thermal analysis systems are used in nearly every industry, but primarily in the plastics and polymer industries and increasingly in the pharmaceutical industry.
pH meters measure acidity in laboratory samples. We also sell density and refractometry instruments, which measure chemical concentrations in solutions. In addition, we manufacture and sell moisture analyzers, which precisely determine the moisture content of a sample by utilizing an infrared dryer to evaporate moisture.
Laboratory Software
LabX, our PC-based laboratory software platform, manages and analyzes data generated by our balances, titrators, pH meters, moisture analyzers and other analytical instruments. LabX provides full network capability; has efficient, intuitive protocols; and enables customers to collect and archive data in compliance with the U.S. Food and Drug Administration’s traceability requirements for electronically stored data (also known as 21 CFR Part 11).
Automated Chemistry Solutions
Our current automated chemistry solutions focus on selected applications in the chemical and drug discovery process. Our automated lab reactors and in situ analysis systems are considered integral to the process development and scale-up activities of our customers. Our on-line measurement technologies based on infrared and laser light scattering enables customers to monitor chemical reactions and crystallization processes in real time in the lab and plant. We believe that our portfolio of integrated technologies can bring significant efficiencies to the development process, enabling our customers to bring new chemicals and drugs to market faster.
Process Analytics
Our process analytics business provides instruments for the in-line measurement of liquid parameters used primarily in the production process of pharmaceutical, biotech, beverage, microelectronics, chemical and refining companies. Approximately half of our process analytics sales are to the pharmaceutical and biotech markets, where our customers need fast and secure scale-up and production that meets the validation processes required for GMP (Good Manufacturing Processes) and other regulatory standards. We are a leading solution provider for liquid analytical measurement to control and optimize production processes. Our solutions include sensor technology for measuring pH, dissolved oxygen, carbon dioxide, conductivity, turbidity, ozone and total organic carbons and automated systems for calibration and cleaning of measurement points. Intelligent sensor diagnostics capabilities enable improved asset management solutions for our customers to reduce process downtime and maintenance costs. Our instruments offer leading multi-parameter capabilities and plant-wide control system integration, which are key for integrated measurement of multiple parameters to secure production quality and efficiency. With a worldwide network of specialists, we support customers in critical process applications, compliance and systems integration questions.


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Industrial Instruments
We manufacture numerous industrial weighing instruments and related terminals and offer dedicated software solutions for the pharmaceutical, chemical, food and other industries. In addition, we manufacture metal detection and other end-of-line product inspection systems used in production and packaging. We supply automatic identification and data capture solutions, which integrate in-motion weighing, dimensioning and identification technologies for transport, shipping and logistics customers. We also offer heavy industrial scales and related software. The industrial instruments business accounted for approximately 45% of our net sales in both 2012 and 2011, and 43% in 2010.

Industrial Weighing Instruments
We offer a comprehensive line of industrial scales and balances, such as bench scales and floor scales, for weighing loads from a few grams to several thousand kilograms in applications ranging from measuring materials in chemical production to weighing packages. Our products are used in a wide range of applications, such as counting applications and in formulating and mixing ingredients.
Industrial Terminals
Our industrial scale terminals collect data and integrate it into manufacturing processes, helping to automate them. Our terminals allow users to remotely download programs or access setup data and can minimize downtime through predictive rather than reactive maintenance.
Transportation and Logistics
We are a leading global supplier of automatic identification and data capture solutions, which integrate in-motion weighing, dimensioning and identification technologies. With these solutions, customers can measure the weight and cubic volume of packages for appropriate billing, logistics and quality control. Our solutions also integrate into customers’ information systems.
Vehicle Scale Systems
Our primary heavy industrial products are scales for weighing trucks or railcars (i.e., weighing bulk goods as they enter or leave a factory or at a toll station). Heavy industrial scales are capable of measuring weights up to 500 tons and permit accurate weighing under extreme environmental conditions. We also offer advanced computer software that can be used with our heavy industrial scales to facilitate a broad range of customer solutions and provides a complete system for managing vehicle transaction processing.
Industrial Software
We offer software that can be used with our industrial instruments. Examples include FreeWeigh.Net, statistical quality control software, Formweigh.Net, our formulation/batching software and OverDrive, which supports the operation of vehicle scales. FreeWeigh.Net and Formweigh.Net provide full network capability and enable customers to collect and archive data in compliance with 21 CFR Part 11.
Product Inspection
Increasing safety and consumer protection requirements are driving the need for more sophisticated end-of-line product inspection systems (e.g., for use in food processing and packaging, pharmaceutical and other industries). We are a leading global provider of metal detectors, x-ray and camera-based visioning equipment and checkweighers that are used in these industries. Metal detectors are most commonly used to detect fine particles of metal that may be contained in raw materials or may be generated by the manufacturing process itself. X-ray-based vision inspection helps detect non-metallic contamination, such as glass, stones and pits, which enter the manufacturing process for similar reasons. Our x-ray systems can also detect metal in metallized containers and can be used for mass control. We

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also provide camera-based vision inspection solutions that provide in-line inspection of package quality and content and enable our customers to implement traceability and serialization tracking, which are needs for food and beverage, consumer goods and pharmaceutical companies. Checkweighers are used to control the filling content of packaged goods such as food, pharmaceuticals and cosmetics. Both x-ray and metal detection systems may be used together with checkweighers as components of integrated packaging lines. FreeWeigh.Net is our statistical and quality control software that optimizes package filling, monitors weight-related data and integrates it in real time into customers’ enterprise resource planning and/or process control systems.
Retail Weighing Solutions
Supermarkets, hypermarkets and other food retail businesses make use of multiple weighing and food labeling solutions for handling fresh goods (such as meats, vegetables, fruits and cheeses). We offer stand-alone scales for basic counter weighing and pricing, price finding and printing. In addition, we offer networked scales and software, which can integrate backroom, counter, self-service and checkout functions and can incorporate fresh goods item data into a supermarket’s overall food item and inventory management system. Customer benefits are in the areas of pricing, merchandising, inventory management and regulatory compliance. Our instruments have been expanded to allow in-store marketing which permits customers to make more decisions at the point of sale. The retail business accounted for approximately 9% of our net sales in 2012, 10% in 2011 and 11% in 2010.
Customers and Distribution
Our principal customers include companies in the following key end markets: the life science industry (pharmaceutical and biotech companies, as well as independent research organizations); food and beverage producers; food retailers; chemical, specialty chemicals and cosmetics companies; the transportation and logistics industry; the metals industry; the electronics industry; and the academic community.
Our products are sold through a variety of distribution channels. Generally, more technically sophisticated products are sold through our direct sales force, while less complicated products are sold through indirect channels. Our sales through direct channels exceed our sales through indirect channels. A significant portion of our sales in the Americas is generated through indirect channels, including sales of our “Ohaus” branded products. Ohaus branded products target markets, such as the educational market, in which customers are interested in lower cost, a more limited set of features and less comprehensive support and service.
We have a diversified customer base, with no single customer accounting for more than 1% of 2012 net sales.
Sales and Service
Market Organizations
We maintain geographically focused market organizations around the world that are responsible for all aspects of our sales and service. The market organizations are customer-focused, with an emphasis on building and maintaining value-added relationships with customers in our target market segments. Each market organization has the ability to leverage best practices from other units while maintaining the flexibility to adapt its marketing and service efforts to account for different cultural and economic conditions. Market organizations also work closely with our producing organizations (described below) by providing feedback on manufacturing and product development initiatives, new product and application ideas and information about key market segments.

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We have one of the largest and broadest global sales and service organizations among precision instrument manufacturers. At December 31, 2012, our sales and service group consisted of approximately 6,220 employees in sales, marketing and customer service (including related administration) and post-sales technical service, located in 36 countries. This field organization has the capability to provide service and support to our customers and distributors in major markets across the globe. This is important because our customers increasingly seek to do business with a consistent global approach.
Service
Our service business remains successful with a focus on repair and preventative maintenance services as well as further expansion of our offerings to include value-added services for a range of market needs, including regulatory compliance qualification, calibration and certification. We have a unique offering to our pharmaceutical customers in promoting use of our instruments in compliance with FDA regulations, and we can provide these services regardless of the customer’s location around the world. This global service network is also an important factor in our ability to expand in emerging markets. We estimate that we have the largest installed base of weighing instruments in the world. Service (representing service contracts, repairs and replacement parts) accounted for approximately 21% of our net sales in 2012 and 2011, and 23% in 2010. A significant portion of this amount is derived from the sale of replacement parts.
Beyond revenue opportunities, we believe service is a key part of our solution offering and helps significantly in customer retention. The close relationships and frequent contact with our large customer base provide us with sales opportunities and innovative product and application ideas.

Research and Development and Manufacturing
Producing Organizations
Our research, product development and manufacturing efforts are organized into a number of producing organizations. Our focused producing organizations help reduce product development time and costs, improve customer focus and maintain technological leadership. The producing organizations work together to share ideas and best practices, and there is a close interface and coordinated customer interaction among marketing organizations and producing organizations.
Research and Development
We continue to invest in product innovation to provide technologically advanced products to our customers for existing and new applications. Over the last three years, we have invested $325.6 million in research and development ($112.5 million in 2012, $116.1 million in 2011 and $97.0 million in 2010). In 2012, we spent approximately 4.8% of net sales on research and development. Our research and development efforts fall into two categories:
technology advancements, which generate new products and increase the value of our products. These advancements may be in the form of enhanced or new functionality, new applications for our technologies, more accurate or reliable measurement, additional software capability or automation through robotics or other means, which allow us to design products more specific to the needs of the industries we serve, and
cost reductions, which reduce the manufacturing cost of our products through better overall design.
We devote a substantial proportion of our research and development budget to software development. This includes software to process the signals captured by the sensors of our instruments, application-specific software and software that connects our solutions into customers’ existing IT systems. We closely

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integrate research and development with marketing, manufacturing and product engineering. We have approximately 1,180 employees in research and development and product engineering in countries around the globe.
Manufacturing
We are a worldwide manufacturer, with facilities principally located in China, Germany, Switzerland, the United Kingdom and the United States. Laboratory instruments are produced mainly in Switzerland and to a lesser extent in the United States and China, while our remaining products are manufactured worldwide. We emphasize product quality in our manufacturing operations, and most of our products require very strict tolerances and exact specifications. We use an extensive quality control system that is integrated into each step of the manufacturing process. All major manufacturing facilities have achieved ISO 9001 certification. We believe that our manufacturing capacity is sufficient to meet our present and currently anticipated demand.
We generally manufacture only critical components, which are components that contain proprietary technology. When outside manufacturing is more efficient, we contract with other manufacturers for certain nonproprietary components. We use a wide range of suppliers. We believe our supply arrangements are adequate and that there are no material constraints on the sources and availability of materials. From time to time we may rely on a single supplier for all of our requirements of a particular component. Supply arrangements for electronic components are generally made globally.
Backlog; Seasonality
Our manufacturing turnaround time is generally short, which permits us to manufacture orders to fill for most of our products. Backlog is generally a function of requested customer delivery dates and is typically no longer than one to two months.
Our business has historically experienced a slight amount of seasonal variation, particularly the high-end laboratory instruments business. Traditionally, sales in the first quarter are slightly lower than, and sales in the fourth quarter are slightly higher than, sales in the second and third quarters. Fourth quarter sales have historically generated approximately 26% to 30% of our net sales. This trend has a somewhat greater effect on income from operations than on net sales because fixed costs are spread evenly across all quarters.

Employees
Our total workforce including employees and temporary personnel as of December 31, 2012 was approximately 12,400 throughout the world, including approximately 4,600 in Europe, 3,400 in North and South America and 4,300 in Asia and other countries.
We believe our employee relations are good, and we have not suffered any material employee work stoppage or strike during the last five years. Labor unions do not represent a meaningful number of our employees.
Sustainability
We believe a sustainable business is one positioned for long-term growth and for us it defines our approach to decision making, from how we manage our impact on the environment to our relationships with employees, customers and shareholders.  We produced our first sustainability report in 2011 which outlined our GreenMT program which was launched in 2010 to improve our understanding of how our business affects the environment. We have gathered data to understand the magnitude of the global greenhouse gas or CO2 footprint generated not only by our fuel and electricity use, but also the products we sell and our use of supply chains.  We are now working to establish goals and will start to make reductions in these emissions.  This includes new ways of managing our vehicle fleets, incorporating new

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design features into our products, improving the energy efficiency of our buildings and processes and looking at how we source the electricity we use in our facilities. We think these efforts will produce a favorable impact on the environment as well as potential savings in future periods. 
Blue Ocean Program
“Blue Ocean” refers to our program to establish a new global operating model with standardized, automated and integrated processes, and high levels of global data transparency. It will encompass a new enterprise architecture, with a global, single instance ERP system. Within our IT systems we are moving toward integrated, homogeneous applications and common data structures. We will also largely standardize our key business processes. The implementation of the systems and processes have been proceeding on a staggered basis over a multi-year period with the initial go-live rollout having occurred in 2010. We have implemented the Blue Ocean program in our Swiss and Chinese operations and now have approximately one-third of the program completed as measured in users. We expect to implement the program in the United States and Germany over the next two years and will then have more than half of the Company's users on the system. Incremental capital expenditures for the Blue Ocean program are more than $20 million annually. This amount may change based upon fluctuations in currency exchange rates. We expect the return on this investment when complete to include improved realized pricing, reduced operating costs and working capital requirements.
Intellectual Property
We hold over 4,650 patents and trademarks (including pending applications), primarily in the United States, Switzerland, Germany, the United Kingdom, Italy, France, Japan, China, South Korea, Brazil and India. Our products generally incorporate a wide variety of technological innovations, some of which are protected by patents of various durations. Products are generally not protected as a whole by individual patents, and as a result, no one patent or group of related patents is material to our business. We have numerous trademarks, including the Mettler-Toledo name and logo, which are material to our business. We regularly protect against infringement of our intellectual property.
Regulation
Our products are subject to various regulatory standards and approvals by weights and measures regulatory authorities. All of our electrical components are subject to electrical safety standards. We believe that we are in compliance in all material respects with applicable regulations.
Approvals are required to ensure our instruments do not impermissibly influence other instruments and are themselves not affected by other instruments. In addition, some of our products are used in “legal for trade” applications, in which prices based on weight are calculated and for which specific weights and measures approvals are required. Although there are a large number of regulatory agencies across our markets, there is an increasing trend toward harmonization of standards, and weights and measures regulation is harmonized across the European Union.
Our products may also be subject to special requirements depending on the end-user and market. For example, laboratory customers are typically subject to Good Laboratory Practices (GLP), industrial customers to Good Manufacturing Practices (GMP), pharmaceutical customers to U.S. Food and Drug Administration (FDA) regulations, and customers in food processing industries may be subject to Hazard Analysis and Critical Control Point (HACCP) regulations. Products used in hazardous environments may also be subject to special requirements.
Environmental Matters
We are subject to environmental laws and regulations in the jurisdictions in which we operate. We own or lease a number of properties and manufacturing facilities around the world. Like many of our

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competitors, we have incurred, and will continue to incur, capital and operating expenditures and other costs in complying with such laws and regulations.
We are currently involved in, or have potential liability with respect to, the remediation of past contamination in certain of our facilities. A former subsidiary of Mettler-Toledo, LLC (“MT”) known as Hi-Speed Checkweigher Co., Inc. (“Hi-Speed”) was one of two private parties ordered by the New Jersey Department of Environmental Protection (“NJDEP”), in an administrative consent order (“ACO”) signed on June 13, 1988, to investigate and remediate certain ground water contamination at a certain property in Landing, New Jersey. After the other party ordered under this ACO failed to fulfill its obligations, Hi-Speed became solely responsible for compliance with the ACO. Residual ground water contamination at this site is now within a Classification Exception Area (“CEA”) which NJDEP has approved and within which MT oversees monitoring of the decay of contaminants of concern. A concurrent Well Restriction Area also exists for the site. The NJDEP does not view these vehicles as remedial measures, but rather as “institutional controls” that must be adequately maintained and periodically evaluated. In 2010, testing of indoor air at certain buildings within the site led to the installation of a vapor intrusion mitigation system at one building. We estimate that the costs of compliance associated with the site over the next several years will approximate $0.5 million.
In addition, certain of our present and former facilities have or had been in operation for many decades and, over such time, some of these facilities may have used substances or generated and disposed of wastes which are or may be considered hazardous. It is possible that these sites, as well as disposal sites owned by third parties to which we have sent wastes, may in the future be identified and become the subject of remediation. Although we believe that we are in substantial compliance with applicable environmental requirements and, to date, we have not incurred material expenditures in connection with environmental matters, it is possible that we could become subject to additional environmental liabilities in the future that could have a material adverse effect on our financial condition, results of operations or cash flows.
Competition
Our markets are highly competitive. Many of the markets in which we compete are fragmented both geographically and by application, particularly the industrial and food retailing markets. As a result, we face numerous regional or specialized competitors, many of which are well established in their markets. For example, some of our competitors are divisions of larger companies with potentially greater financial and other resources than our own. In addition, some of our competitors are domiciled in emerging markets and may have a lower cost structure than ours. We are confronted with new competitors in emerging markets who, although relatively small in size today, could become larger companies in their home markets. Given the sometimes significant growth rates of these emerging markets, and in light of their cost advantage over developed markets, emerging market competitors could become more significant global competitors. Taken together, the competitive forces present in our markets can impair our operating margins in certain product lines and geographic markets.
We expect our competitors to continue to improve the design and performance of their products and to introduce new products with competitive prices. Although we believe that we have technological and other competitive advantages over many of our competitors, we may not be able to realize and maintain these advantages. These advantages include our worldwide market leadership positions; our global brand and reputation; our track record of technological innovation; our comprehensive, high-quality solution offering; our global sales and service offering; our large installed base of weighing instruments; and the diversification of our revenue base by geographic region, product range and customer. To remain competitive, we must continue to invest in research and development, sales and marketing and customer service and support. We cannot be sure that we will have sufficient resources to continue to make these

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investments or that we will be successful in identifying, developing and maintaining any competitive advantages.
We believe the principal competitive factors in developed markets for purchasing decisions are the product itself, application support, service support and price. In emerging markets, where there is greater demand for less sophisticated products, price is a more important factor than in developed markets. Competition in the U.S. laboratory market is also influenced by the presence of large distributors that sell not only our products but those of our competitors as well.
Company Website and Information
Our website can be found on the Internet at www.mt.com. The website contains information about us and our operations. Copies of each of our filings with the SEC on Form 10-K, Form 10-Q, Form 8-K and Schedule 14A and all amendments to those reports can be viewed and downloaded free of charge when they are filed with the SEC by accessing www.mt.com, clicking on About Us, Investor Relations and then clicking on SEC Filings. These filings may also be read and copied at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
Our website also contains copies of the following documents that can be downloaded free of charge:
Corporate Governance Guidelines
Audit Committee Charter
Compensation Committee Charter
Nominating and Corporate Governance Committee Charter
Code of Conduct
Sustainability Report
Any of the above documents and any of our reports on Form 10-K, Form 10-Q, Form 8-K and Schedule 14A and all amendments to those reports can also be obtained in print, free of charge, by sending a written request to our Investor Relations Department:
Investor Relations
Mettler-Toledo International Inc.
1900 Polaris Parkway
Columbus, OH 43240 U.S.A.
Phone: +1 614 438 4748
Fax: +1 614 438 4646
E-mail: mary.finnegan@mt.com

12


Item 1A.
Risk Factors
Factors Affecting Our Future Operating Results
The majority of our business is derived from companies in developed countries. Continued economic uncertainty in these countries may adversely affect our operating results.
Although the percentage of our sales coming from emerging markets is growing, the majority of our business is still derived from companies in developed countries. Economic instability in many parts of the world, including the potential for a sovereign debt crisis in the European Union and the United States, continues to be a situation that we are monitoring closely. Concerns regarding this potential financial crisis on financial institutions globally would likely have an adverse effect on the global capital markets. More specifically, an escalation of the European or U.S. debt crises could have the following adverse effects:
A substantial drop in demand for our products because of the basic inability of companies to complete commercial transactions
Severe limits on the ability of our Company, our customers, suppliers and lenders to finance their respective businesses
Unavailability of liquidity at acceptable financing costs, if at all
The inability to obtain materials and supplies
Potential devaluation and/or impairment of assets
Increased accounts receivable write-offs
Difficulty in collecting accounts receivables
Potential disputes about the currency of payment under various contractual arrangements for the purchases and sales of goods and services
Increased foreign exchange rate volatility that could result in unexpected changes in profitability and cash flow

Because our customers often decrease or delay capital expenditures in uncertain or difficult economic times, economic downturns or recessions in developed countries adversely affect our operating results. Customers may also purchase lower-cost products made by competitors and not resume purchasing our products even after economic conditions improve. These conditions would reduce our revenues and profitability.
Concerns regarding the European debt crisis and market perception concerning the instability of the euro could affect our operating profits.
We conduct business in many countries that use the euro as their currency (the Eurozone). Concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations, the overall stability of the euro, and the suitability of the euro as a single currency given the diverse economic and political circumstances in individual Eurozone countries.
These concerns could lead to the re-introduction of individual currencies in one or more Eurozone countries, or in more extreme circumstances, the possible dissolution of the euro currency entirely. Should the euro dissolve entirely, the legal and contractual consequences for holders of euro-denominated obligations would be determined by laws in effect at such time. These potential developments, or market perceptions concerning these and related issues, could adversely affect the value of our euro-denominated assets and obligations. In addition, concerns over the effect of this financial crisis on financial institutions

13


in Europe and globally could have an adverse effect on the global capital markets, and more specifically on the ability of our Company, our customers, suppliers and lenders to finance their respective businesses, to access liquidity at acceptable financing costs, if at all, on the availability of supplies and materials and on the demand for our products.
We are subject to certain risks associated with our international operations and fluctuating conditions in emerging markets; and have a significant concentration of business in China.
We conduct business in many countries, including emerging markets in Asia, Latin America and Eastern Europe, and these operations represent a significant portion of our sales and earnings. For example, our Chinese operations account for $432.3 million of sales to external customers, approximately 30% of our global production, and $125.2 million of segment profit during 2012. In addition to the currency risks discussed below, international operations pose other substantial risks and problems for us. For instance, various local jurisdictions in which we operate may revise or alter their respective legal and regulatory requirements. In addition, we may encounter one or more of the following obstacles or risks:
tariffs and trade barriers;
difficulties in staffing and managing local operations and/or mandatory salary increases for local employees;
credit risks arising from financial difficulties facing local customers and distributors;
difficulties in protecting intellectual property;
nationalization of private enterprises which may result in the confiscation of assets as we hold significant assets around the world in the form of property, plant and equipment, inventory and accounts receivable, as well as $57.1 million of cash at December 31, 2012 in our Chinese subsidiaries;
restrictions on investments and/or limitations regarding foreign ownership;
adverse tax consequences, including tax disputes, imposition or increase of withholding and other taxes on remittances and other payments by subsidiaries; and
other uncertain local economic, political and social conditions, including hyper-inflationary conditions or periods of low or no productivity growth.
We must also comply with a variety of regulations regarding the conversion and repatriation of funds earned in local currencies. For example, converting earnings from our operations in China into other currencies and repatriating these funds require governmental approvals. If we cannot comply with these or other applicable regulations, we may face increased difficulties in utilizing cash flow generated by these operations outside of China.
While we continued to experience sales growth in emerging markets during 2012, growth in China was lower than recent years. Fluctuating economic conditions and the current change in China's political leadership may continue to affect our results of operations in these markets in the future. Certain emerging markets have also experienced currency devaluations and inflationary prices. Economic problems in individual markets can also spread to other economies, adding to the adverse conditions we may face in emerging markets. We remain committed to emerging markets, particularly those in Asia, Latin America and Eastern Europe. However, fluctuating economic conditions may adversely affect our results of operations in these markets.

14


We operate in highly competitive markets, and it may be difficult to preserve operating margins, gain market share and maintain a technological advantage.
Our markets are highly competitive. Many of the markets in which we compete are fragmented both geographically and by application, particularly the industrial and food retailing markets. As a result, we face numerous regional or specialized competitors, many of which are well established in their markets. In addition, some of our competitors are divisions of larger companies with potentially greater financial and other resources than our own. Some of our competitors are domiciled or operate in emerging markets and may have a lower cost structure than ours. We are confronted with new competitors in emerging markets who, although relatively small in size today, could become larger companies in their home markets. Given the sometimes significant growth rates of these emerging markets, and in light of their cost advantage over developed markets, emerging market competitors could become more significant global competitors. Taken together, the competitive forces present in our markets can impair our operating margins in certain product lines and geographic markets. We expect our competitors to continue to improve the design and performance of their products and to introduce new products with competitive prices. Although we believe that we have certain technological and other advantages over our competitors, we may not be able to realize and maintain these advantages.
We are vulnerable to system failures, including those that may be related to cyber security attacks, which could harm our business.
We rely on our technology infrastructure, among other functions, to interact with suppliers, sell our products and services, support our customers, fulfill orders and bill, collect and make payments. Our systems are vulnerable to damage or interruption from natural disasters, power loss, telecommunication failures, terrorist attacks, computer viruses, computer denial-of-service attacks and other events. When we upgrade or change systems, we may suffer interruptions in service, loss of data or reduced functionality. A significant number of our systems are not redundant, and our disaster recovery planning is not sufficient for every eventuality. Despite any precautions we may take, such problems could result in, among other consequences, interruptions in our services or unauthorized disclosure of confidential information, which could harm our reputation and financial condition. We do not carry business interruption insurance sufficient to compensate us for losses that may result from interruptions in our services as a result of system failures.
We also are in the process of implementing our Blue Ocean program, a program to globalize our business processes and information technology systems that includes the implementation of a Company-wide enterprise resource planning system. The implementation of this program has been proceeding on a staggered basis over a multi-year period with the initial go-live rollout having occurred in 2010. We have implemented the Blue Ocean program in our Swiss and Chinese operations and now have approximately one-third of the program completed as measured in users. We expect to implement the program in the United States and Germany over the next two years and will then have more than half of the Company's users on the system. If the implementation of any unit is flawed, we could suffer interruptions in operations and customer-facing activities which could harm our reputation and financial condition, or cause us to lose data, experience reduced functionality or have delays in reporting financial information. It may take us longer to implement the Blue Ocean program than we have planned, and the project may cost us more than we have estimated, either of which would negatively impact our ability to generate cost savings or other efficiencies. In addition, the implementation of Blue Ocean will increase our reliance on a single information technology system which would have greater consequences should we experience a system disruption.

15


Our ability to deliver products and services may be disrupted.
An interruption in our business due to events such as disruptions with our supply chain, natural disasters, pandemics or other health crises, fires or explosions may cause us to temporarily be unable to deliver products or services to our customers. It may be expensive to resolve these issues, even though some of these risks are covered by insurance policies. More importantly, customers may switch to competitors and may not return to us even if we resolve the interruption.
Our product development efforts may not produce commercially viable products in a timely manner.
We must introduce new products and enhancements in a timely manner, or our products could become technologically obsolete over time, which would harm our operating results. To remain competitive, we must continue to make significant investments in research and development, sales and marketing and customer service and support. We cannot be sure that we will have sufficient resources to continue to make these investments. In developing new products, we may be required to make substantial investments before we can determine their commercial viability. As a result, we may not be successful in developing new products and we may never realize the benefits of our research and development activities.
A widespread outbreak of an illness or other health issue could negatively affect our business, making it more difficult and expensive to meet our obligations to our customers, and could result in reduced demand from our customers.
In recent years, a number of countries have experienced outbreaks of the H1N1 influenza (swine flu) or, in the Asia Pacific region, outbreaks of SARS and/or avian influenza (bird flu). Despite the implementation of certain precautions, we are susceptible to such outbreaks. As a result of such outbreaks, businesses can be shut down and individuals can become ill or quarantined. Outbreaks of infectious diseases such as these, particularly in North America, Europe, China or other locations significant to our operations, could adversely affect general commercial activity, which could have a material adverse effect on our financial condition, results of operations, business or prospects. If our operations are curtailed because of health issues, we may need to seek alternate sources of supply for services and staff and these alternate sources may be more expensive. Alternate sources may not be available or may result in delays in shipments to our customers, each of which would affect our results of operations. In addition, a curtailment of our product design operations could result in delays in the development of new products. Further, if our customers’ businesses are affected by health issues, they might delay or reduce purchases from us, which could adversely affect our results of operations.
A prolonged downturn or additional consolidation in the pharmaceutical, food, food retailing and chemical industries could adversely affect our operating results.
Our products are used extensively in the pharmaceutical, food and beverage and chemical industries. Consolidation in the pharmaceutical and chemical industries hurt our sales in prior years. A prolonged economic downturn or additional consolidation in any of these industries could adversely affect our operating results. In addition, the capital spending policies of our customers in these industries are based on a variety of factors we cannot control, including the resources available for purchasing equipment, the spending priorities among various types of equipment and policies regarding capital expenditures. Any decrease or delay in capital spending by our customers would cause our revenues to decline and could harm our profitability.

16


We may face risks associated with future acquisitions.
We may pursue acquisitions of complementary product lines, technologies or businesses. Acquisitions involve numerous risks, including difficulties in the assimilation of the acquired operations, technologies and products; diversion of management’s attention from other business concerns; and potential departures of key employees of the acquired company. If we successfully identify acquisitions in the future, completing such acquisitions may result in new issuances of our stock that may be dilutive to current owners, increases in our debt and contingent liabilities and additional amortization expense related to intangible assets. Any of these acquisition-related risks could have a material adverse effect on our profitability.
Larger companies have identified life sciences and instruments as businesses they will consider entering, which could change the competitive dynamics of these markets. In addition, we may not be able to identify, successfully complete or integrate potential acquisitions in the future. However, even if we can do so, we cannot be sure that these acquisitions will have a positive impact on our business or operating results.
If we cannot protect our intellectual property rights, or if we infringe or misappropriate the proprietary rights of others, our operating results could be harmed.
Our success depends on our ability to obtain and enforce patents on our technology, maintain our trademarks and protect our trade secrets. Our patents may not provide complete protection, and competitors may develop similar products that are not covered by our patents. Our patents may also be challenged by third parties and invalidated or narrowed. Competitors sometimes seek to take advantage of our trademarks or brands in ways that may create customer confusion or weaken our brand. Although we take measures to protect confidential information, improper use or disclosure of our trade secrets may still occur.
We may be sued for infringing on the intellectual property rights of others. The cost of any litigation could affect our profitability regardless of the outcome, and management attention could be diverted. If we are unsuccessful in such litigation, we may have to pay damages, stop the infringing activity and/or obtain a license. If we fail to obtain a required license, we may be unable to sell some of our products, which could result in a decline in our revenues.
Departures of key employees could impair our operations.
We generally have employment contracts with each of our key employees. Our executive officers own shares of our common stock and/or have options to purchase additional shares. Nevertheless, such individuals could leave the Company. If any key employees stopped working for us, our operations could be harmed. Important R&D personnel may leave and join competitors, which could substantially delay or hinder ongoing development projects. We have no key man life insurance policies with respect to any of our senior executives.
We may be adversely affected by environmental laws and regulations.
We are subject to various environmental laws and regulations, including those relating to air emissions, wastewater discharges, the handling and disposal of solid and hazardous wastes and the remediation of contamination associated with the use and disposal of hazardous substances.
We incur expenditures in complying with environmental laws and regulations. We are currently involved in, or have potential liability with respect to, the remediation of past contamination in various facilities. In addition, some of our facilities are or have been in operation for many decades and may have used substances or generated and disposed of wastes that are hazardous or may be considered hazardous

17


in the future. These sites and disposal sites owned by others to which we sent waste may in the future be identified as contaminated and require remediation. Accordingly, it is possible that we could become subject to additional environmental liabilities in the future that may harm our results of operations or financial condition.
We may be adversely affected by new regulations relating to conflict minerals.
In August 2012, the SEC adopted new disclosures and reporting requirements for companies whose products contain certain minerals and their derivatives, namely tin, tantalum, tungsten or gold, known as conflict minerals. Companies must report annually whether or not such minerals originate from the Democratic Republic of Congo (DRC) and adjoining countries and in some cases to perform extensive due diligence on their supply chains for such minerals. The implementation of these new requirements could adversely affect the sourcing, availability and pricing of materials used in the manufacturing of our products. In addition, we will incur additional costs to comply with the disclosure requirements, including cost related to determining the source of any of the relevant minerals used in our products. Since our supply chain is complex, the due diligence procedures that we implement may not enable us to ascertain with sufficient certainty the origins for these minerals or determine that these minerals are DRC conflict free, which may harm our reputation. We may also face difficulties in satisfying customers who may require that our products be certified as DRC conflict free, which could harm our relationships with these customers and/or lead to a loss of revenue. These new requirements also could have the effect of limiting the pool of suppliers from which we source these minerals, and we may be unable to obtain conflict-free minerals at prices similar to the past, which could increase our costs and adversely affect our manufacturing operations and our profitability.
We may be adversely affected by failure to comply with regulations of governmental agencies or by the adoption of new regulations.
Our products are subject to regulation by governmental agencies. These regulations govern a wide variety of activities relating to our products, from design and development, to product safety, labeling, manufacturing, promotion, sales and distribution. If we fail to comply with these regulations, or if new regulations are adopted that substantially change existing practice or impose new burdens, we may have to recall products and cease their manufacture and distribution. In addition, we could be subject to fines or criminal prosecution.
We may experience impairments of goodwill or other intangible assets.
As of December 31, 2012, our consolidated balance sheet included goodwill of $452.4 million and other intangible assets of $117.6 million.
Our business acquisitions typically result in goodwill and other intangible assets, which affect the amount of future period amortization expense and possible impairment expense. The determination of the value of such intangible assets requires management to make estimates and assumptions that affect our consolidated financial statements.
In accordance with U.S. GAAP, our goodwill and indefinite-lived intangible assets are not amortized, but are evaluated for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that an asset might be impaired. The evaluation is based on valuation models that estimate fair value based on expected future cash flows and profitability projections. In preparing the valuation models we consider a number of factors, including operating results, business plans, economic conditions, future cash flows, and transactions and market data. There are inherent uncertainties related to these factors and our judgment in applying them to the impairment analyses. The significant estimates and assumptions within our fair value models include sales growth, controllable cost growth, perpetual

18


growth, effective tax rates and discount rates. Our assessments to date have indicated that there has been no impairment of these assets.
Should any of these estimates or assumptions change, or should we incur lower-than-expected operating performance or cash flows, including from a prolonged economic slowdown, we may experience a triggering event that requires a new fair value assessment for our reporting units, possibly prior to the required annual assessment. These types of events and resulting analysis could result in impairment charges for goodwill and other indefinite-lived intangible assets if the fair value estimate declines below the carrying value.
Our amortization expense related to intangible assets with finite lives may materially change should our estimates of their useful lives change.
Unanticipated changes in our tax rates or exposure to additional income tax liabilities could impact our profitability.
We are subject to income taxes in the United States and various other foreign jurisdictions, and our domestic and international tax liabilities are subject to allocation of expenses among different jurisdictions. Our effective tax rates could be adversely affected by changes in the mix of earnings by jurisdiction, changes in tax laws or tax rates, changes in the valuation of deferred tax assets and liabilities and material adjustments from tax audits.
In particular, the carrying value of deferred tax assets, which are predominantly in the U.S., is dependent upon our ability to generate future taxable income in the U.S. In addition, the amount of income taxes we pay is subject to ongoing audits in various jurisdictions, and a material assessment by a governing tax authority could affect our profitability.
Our tax expense could increase as a result of a changing application of tax law.
As a result of the current uncertain financial and economic environment, governments in certain of the jurisdictions in which we operate are facing greater pressure on public finances, which could lead to an increased tendency for a more aggressive application of existing tax laws and regulations. Governments in the jurisdictions in which we operate from time to time also implement changes to tax laws and regulations.  Any changes in corporate income tax rates or regulations, on repatriation of dividends or capital, on transfer pricing as well as changes in the interpretation of existing tax laws and regulations in the jurisdictions in which we operate could adversely affect our cash flow and lead to increases in our overall tax burden, which would negatively affect our profitability.
Currency fluctuations affect our operating profits.
Because we conduct operations in many countries, our operating income can be significantly affected by fluctuations in currency exchange rates. Swiss franc-denominated expenses represent a much greater percentage of our total operating expenses than Swiss franc-denominated sales represent of our total net sales. In part, this is because most of our manufacturing and product development costs in Switzerland relate to products that are sold outside Switzerland. In addition, we have a number of corporate functions located in Switzerland. Therefore, if the Swiss franc strengthens against all or most of our major trading currencies (e.g., the U.S. dollar, the euro, other major European currencies, the Chinese yuan and the Japanese yen), our operating profit is reduced. We also have significantly more sales in euro than we have expenses. Therefore, when the euro weakens against the U.S. dollar and the Swiss franc, it also decreases our operating profits. Accordingly, the Swiss franc exchange rate to the euro is an important cross-rate that we monitor. During the third quarter of 2011, the Swiss National Bank established a floor of 1.20 relating to the Swiss franc exchange rate to the euro. The duration for which the Swiss National Bank will

19


maintain this exchange rate floor of 1.20 is currently unknown. Beginning in the third quarter of 2012, we entered into foreign currency forward contracts, as described in Note 5 of our consolidated financial statements, which reduce our exposure to a strengthening of the Swiss franc versus the euro. These forward contracts currently continue until January 2014. We estimate, absent these forward contracts, that a 1% strengthening of the Swiss franc against the euro would result in a decrease in our earnings before tax of approximately $0.8 million to $1.2 million on an annual basis. The previously described foreign currency forward contracts reduce this exposure by approximately 75%. We also estimate a 1% strengthening of the Swiss franc against the U.S. dollar would result in a decrease in our earnings before tax of $0.7 million to $0.9 million on an annual basis. In addition to the Swiss franc and major European currencies, 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. 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 December 31, 2012, we estimate that a 10% weakening of the U.S. dollar against the currencies in which our debt is denominated would result in an increase of approximately $6.2 million in the reported U.S. dollar value of the debt.
We have debt and we may incur substantially more debt, which could affect our ability to meet our debt obligations and may otherwise restrict our activities.
We have debt and we may incur substantial additional debt in the future. As of December 31, 2012, we had total indebtedness of approximately $287.0 million, net of cash of $101.7 million. We are also permitted by the terms of our debt instruments to incur substantial additional indebtedness, subject to the restrictions therein.
The existence and magnitude of our debt could have important consequences. For example, it could make it more difficult for us to satisfy our obligations under our debt instruments; require us to dedicate a substantial portion of our cash flow to payments on our indebtedness, which would reduce the amount of cash flow available to fund working capital, capital expenditures, product development and other corporate requirements; increase our vulnerability to general adverse economic and industry conditions, including changes in raw material costs; limit our ability to respond to business opportunities; limit our ability to borrow additional funds, which may be necessary; and subject us to financial and other restrictive covenants, which, if we fail to comply with these covenants and our failure is not waived or cured, could result in an event of default under our debt instruments.
The agreements governing our debt impose restrictions on our business.
The note purchase agreements governing our senior notes and the agreements governing our credit facility contain covenants imposing various restrictions on our business. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. The restrictions these covenants place on us include limitations on our ability to incur liens and consolidate, merge, sell or lease all or substantially all of our assets. Our credit facility and the note purchase agreements governing our senior notes also require us to meet certain financial ratios.
Our ability to comply with these agreements may be affected by events beyond our control, including prevailing economic, financial and industry conditions, and is subject to the risks in this section. The breach of any of these covenants or restrictions could result in a default under the note purchase agreements governing the senior notes and/or under our credit facility. An event of default under the agreements governing our debt would permit holders of our debt to declare all amounts owed to them

20


under such agreements to be immediately due and payable. Acceleration of our other indebtedness may cause us to be unable to make interest payments on the senior notes and repay the principal amount of the senior notes.
The lenders under our credit agreement may be unable to meet their funding commitments, reducing the amount of our borrowing capacity.
We have a revolving credit facility outstanding under which the Company and certain of its subsidiaries may borrow up to $880 million. Our credit facility is provided by a group of 17 financial institutions, who individually have between 1% and 14% of the total funding commitment. At December 31, 2012, we had borrowings of $197.1 million outstanding under our credit facility. Our ability to borrow further funds under our credit facility is subject to the various lenders’ financial condition and ability to make funds available. Even though the financial institutions are contractually obligated to lend funds, if one or more of the lenders encounters financial difficulties or goes bankrupt, such lenders may be unable to meet their obligations. This could result in us being unable to borrow the full $880 million.
We make from time to time forward-looking statements, and actual events or results may differ materially from these statements because assumptions we have made prove incorrect due to market conditions in our industries or other factors.
We from time to time provide forward-looking statements both in our filings with the SEC and orally in connection with our quarterly earnings calls, including guidance on anticipated earnings per share. These statements are only predictions. Actual events or results may differ materially from these statements because assumptions we have made prove incorrect due to market conditions in our industries or other factors. We refer you to the factors discussed under the captions “Factors affecting our future operating results” in the “Business” section and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this annual report on Form 10-K, which describe risks and factors that could cause results to differ materially from those projected in those forward-looking statements. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict these new risk factors, nor can it assess the impact, if any, of these new risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those projected in any forward-looking statements. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results.
In providing guidance on our future earnings, our management evaluates our budgets, our strategic plan and certain factors relating to our business. This evaluation requires management to make several key assumptions relating to both external and internal factors. Some of the key external assumptions include:
the outlook for our end markets and the global economy;
impact of external factors on our competition;
financial position of our customers;
the estimated costs of purchasing materials;
developments in personnel costs; and
rates for currency exchange, particularly between the Swiss franc and the euro.
Some of these assumptions may prove to be incorrect over time. For example, although no one customer accounts for more than 1% of our revenues, if a number of our customers experienced significant deteriorations in their financial positions concurrently, it could have an impact on our results of operations.

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Some of our key internal assumptions include the following:
our ability to implement our business strategy;
the effectiveness of our marketing programs such as our Spinnaker initiatives;
our ability to develop and deliver innovative products and services;
the continued growth of our sales in emerging markets;
our ability to implement price increases as forecasted; and
the effectiveness of our cost saving initiatives.
These internal assumptions may also prove to be incorrect over time. For example, with respect to our ability to realize our planned price increases without disturbing our customer base in core markets, in certain markets, such as emerging markets, price tends to be a more significant factor in customers’ decisions to purchase our products. Furthermore, we can have no assurance that our cost reduction programs will generate adequate cost savings. Additionally, it may become necessary to take additional restructuring actions resulting in additional restructuring costs.
We believe our current assumptions are reasonable and prudent for planning purposes. However, should any of these assumptions prove to be incorrect, or should we incur lower-than-expected operating performance or cash flows, we may experience results different than our projections.
Our ability to generate cash depends in part on factors beyond our control.
Our ability to make payments on our debt and to fund planned capital expenditures and research and development efforts will depend on our ability to generate cash in the future. This, to an extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors, including those described in this section, that are beyond our control.
We cannot ensure that our business will generate sufficient cash flows from operations or that future borrowings will be available to us under our credit facility in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot ensure that we will be able to refinance any of our debt, including our credit facility and the senior notes, on commercially reasonable terms or at all.


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Item 1B.
Unresolved Staff Comments
None.

Item 2.
Properties
The following table lists our principal facilities, indicating the location and whether the facility is owned or leased. The properties listed below serve primarily as manufacturing facilities and also typically have a certain amount of space for service, sales and marketing and administrative activities. Our principal executive offices are located in Columbus, Ohio and Greifensee, Switzerland. The facilities in Giessen, Germany and Viroflay, France are used primarily for sales and marketing. We believe our facilities are adequate for our current and reasonably anticipated future needs.

Location
 
Owned/Leased
 
Business Segment
 
 
 
 
 
Europe:
 
 
 
 
Greifensee/Nanikon, Switzerland
 
Owned
 
Swiss Operations
Uznach, Switzerland
 
Owned
 
Swiss Operations
Urdorf, Switzerland
 
Owned
 
Swiss Operations
Schwerzenbach, Switzerland
 
Leased
 
Swiss Operations
Cambridge, England
 
Owned
 
Western European Operations
Manchester, England
 
Leased
 
Western European Operations
Viroflay, France (two facilities)
 
Building Owned
 
Western European Operations
 
 
Building Leased
 
 
Albstadt, Germany
 
Owned
 
Western European Operations
Giessen, Germany
 
Owned
 
Western European Operations
Americas:
 
 
 
 
Columbus, Ohio
 
Leased
 
U.S. Operations
Worthington, Ohio (two facilities)
 
Owned
 
U.S. Operations
Oakland, California
 
Leased
 
U.S. Operations
Bedford, Massachusetts
 
Leased
 
U.S. Operations
Ithaca, New York
 
Owned
 
U.S. Operations
Tampa, Florida
 
Leased
 
U.S. Operations
Other:
 
 
 
 
Shanghai, China (two facilities)
 
Buildings Owned;
 
Chinese Operations
 
 
Land Leased
 
 
Changzhou, China (two facilities)
 
Buildings Owned;
 
Chinese Operations
 
 
Land Leased
 
 
Mumbai, India (two facilities)
 
Buildings Leased
 
Other Operations

Item 3.
Legal Proceedings
We are not currently involved in any legal proceeding which we believe could have a material adverse effect upon our financial condition, results of operations or cash flows. See the disclosure above under “Environmental Matters.”
Executive Officers of the Registrant
See Part III, Item 10 of this annual report for information about our executive officers.


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PART II

Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information for Common Stock
Our common stock is traded on the New York Stock Exchange under the symbol “MTD.” The following table sets forth on a per share basis the high and low sales prices for consolidated trading in our common stock as reported on the New York Stock Exchange Composite Tape for the quarters indicated.

 
Common Stock Price
Range
 
High
 
Low
2012
 

 
 

Fourth Quarter
$
195.00

 
$
161.80

Third Quarter
$
177.44

 
$
148.68

Second Quarter
$
185.08

 
$
150.57

First Quarter
$
189.67

 
$
152.19

2011
 

 
 

Fourth Quarter
$
167.13

 
$
130.12

Third Quarter
$
175.28

 
$
131.91

Second Quarter
$
191.95

 
$
157.13

First Quarter
$
177.07

 
$
147.23

Holders
At January 31, 2013, there were 77 holders of record of common stock and 30,305,383 shares of common stock outstanding. We estimate we have approximately 26,662 beneficial owners of common stock.
Dividend Policy
Historically, we have not paid dividends on our common stock. However, we will evaluate this policy on a periodic basis taking into account our results of operations, financial condition, capital requirements, including potential acquisitions, our share repurchase program, the taxation of dividends to our shareholders and other factors deemed relevant by our Board of Directors.


24


Share Performance Graph
The following graph compares the cumulative total returns (assuming reinvestment of dividends) on $100 invested on December 31, 2007 through December 31, 2012 in our common stock, the Standard & Poor’s 500 Composite Stock Index (S&P 500 Index) and the SIC Code 3826 Index — Laboratory Analytical Instruments. Historically, we have not paid dividends on our common stock. However, the Company will evaluate this policy on a periodic basis taking into account our results of operations, financial condition, capital requirements, including potential acquisitions, our share repurchase program, the taxation of dividends to our shareholders and other factors deemed relevant by our Board of Directors.
Comparison of Cumulative Total Return Among Mettler-Toledo International Inc., the
S&P 500 Index and SIC Code 3826 Index — Laboratory Analytical Instruments


 
12-31-07
12-31-08
12-31-09
12-31-10
12-31-11
12-31-12
Mettler-Toledo
$100
$59
$92
$133
$130
$170
S&P 500 Index
$100
$63
$80
$92
$94
$109
SIC Code 3826 Index
$100
$60
$84
$106
$86
$115
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Issuer Purchases of Equity Securities
 
 
Total Number of
Shares Purchased
 
Average Price Paid
per Share
 
Total Number of
Shares Purchased as
Part of Publicly
Announced
Program
 
Approximate Dollar
Value (in thousands) of
Shares that may yet be
Purchased under the
Program
Period
 
 
 
 
October 1 to October 31, 2012
 
132,292

 
$
169.32

 
132,292

 
$
485,772

November 1 to November 30, 2012
 
128,689

 
177.52

 
128,689

 
462,927

December 1 to December 31, 2012
 
135,487

 
188.73

 
135,487

 
437,356

Total
 
396,468

 
$
178.61

 
396,468

 
$
437,356


25


We have a $2.25 billion share repurchase program. As of December 31, 2012, there was $437 million of remaining common shares authorized to be repurchased under our share repurchase program. The share repurchases are expected to be funded from existing cash balances, borrowings and cash generated from operating activities. Repurchases will be made through open market transactions, and the amount and timing of repurchases will depend on business and market conditions, stock price, trading restrictions, the level of acquisition activity and other factors. We have purchased 20.1 million common shares since the inception of the program through December 31, 2012, at a total cost of $1.8 billion.
During the years ended December 31, 2012 and 2011, we spent $278.7 million and $204.6 million on the repurchase of 1,637,827 shares and 1,285,827 shares at an average price per share of $170.13 and $159.08, respectively.

Item 6.
Selected Financial Data
The selected historical financial information set forth below as of December 31 and for the years then ended is derived from our audited consolidated financial statements. The financial information presented below, in thousands except share data, was prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
 
2012
 
2011
 
2010
 
2009
 
2008
Statement of Operations Data:
 

 
 

 
 

 
 

 
 

Net sales
$
2,341,528

 
$
2,309,328

 
$
1,968,178

 
$
1,728,853

 
$
1,973,344

Cost of sales
1,100,473

 
1,091,054

 
930,982

 
839,516

 
980,263

Gross profit
1,241,055

 
1,218,274

 
1,037,196

 
889,337

 
993,081

Research and development
112,530

 
116,139

 
97,028

 
89,685

 
102,282

Selling, general and administrative
684,026

 
703,632

 
588,726

 
505,177

 
579,806

Amortization
21,357

 
17,808

 
14,842

 
11,844

 
10,553

Interest expense
22,764

 
23,226

 
20,057

 
25,117

 
25,390

Restructuring charges(a)
16,687

 
5,912

 
4,866

 
31,368

 
6,413

Other charges (income), net(b)
1,090

 
2,380

 
4,164

 
1,384

 
2,568

Earnings before taxes
382,601

 
349,177

 
307,513

 
224,762

 
266,069

Provision for taxes(c)
91,754

 
79,684

 
75,365

 
52,169

 
63,291

Net earnings
$
290,847

 
$
269,493

 
$
232,148

 
$
172,593

 
$
202,778

Basic earnings per common share:
 
 
 

 
 

 
 

 
 

Net earnings
$
9.37

 
$
8.45

 
$
6.98

 
$
5.12

 
$
5.92

Weighted average number of common shares
31,044,532

 
31,897,779

 
33,280,463

 
33,716,353

 
34,250,310

Diluted earnings per common share:
 
 
 

 
 

 
 

 
 

Net earnings
$
9.14

 
$
8.21

 
$
6.80

 
$
5.03

 
$
5.79

Weighted average number of common and common equivalent shares
31,824,077

 
32,839,365

 
34,140,097

 
34,290,771

 
35,048,859

Balance Sheet Data:
 
 
 

 
 

 
 

 
 

Cash and cash equivalents
$
101,702

 
$
235,601

 
$
447,577

 
$
85,031

 
$
78,073

Working capital(d)
242,141

 
201,718

 
166,034

 
156,369

 
180,412

Total assets
2,117,400

 
2,203,474

 
2,283,063

 
1,718,787

 
1,664,056

Long-term debt
347,131

 
476,715

 
670,301

 
203,590

 
441,588

Other non-current liabilities(e)
240,886

 
209,945

 
174,469

 
189,593

 
183,301

Shareholders’ equity(f)
827,219

 
781,137

 
771,584

 
711,138

 
503,247

_________________________
(a)
Restructuring charges primarily relate to our global cost reduction program initiated in 2008 as well as additional cost reduction measures initiated during 2012. See Note 15 to the audited consolidated financial statements.

26


(b)
Other charges (income), net consists primarily of interest income, (gains) losses from foreign currency transactions and other items. Other charges (income), net in 2010 also includes a $4.4 million ($3.8 million after-tax) charge associated with the sale of our retail software business for in-store item and inventory management solutions. This amount was partially offset by a benefit from unrealized contingent consideration from a previous acquisition totaling $1.2 million ($1.2 million after-tax).
(c)
The provision for taxes for 2011, 2010 and 2009 includes discrete tax items resulting in a net tax benefit of $3.8 million, $5.2 million, and $8.3 million, respectively, primarily related to the favorable resolution of certain prior year tax matters. The provision for taxes for 2008 includes a discrete tax benefit of $2.5 million related to favorable withholding tax law changes in China and a discrete tax benefit of $3.5 million primarily related to the closure of certain tax matters.
(d)
Working capital represents total current assets net of cash, less total current liabilities net of short-term borrowings and current maturities of long-term debt.
(e)
Other non-current liabilities consist of pension and other post-retirement liabilities, plus certain other non-current liabilities. See Note 13 to the audited consolidated financial statements.
(f)
No dividends were paid during the five-year period ended December 31, 2012.

Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our audited consolidated financial statements.
Local currency changes exclude the effect of currency exchange rate fluctuations. Local currency amounts are determined by translating current and previous year consolidated financial information at an index utilizing historical currency exchange rates. We believe local currency information provides a helpful assessment of business performance and a useful measure of results between periods. We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. We present non-GAAP financial measures in reporting our financial results to provide investors with an additional analytical tool to evaluate our operating results.
Overview
We operate a global business, with sales that are diversified by geographic region, product range and customer. We hold leading positions worldwide in many of our markets and attribute this leadership to several factors, including the strength of our brand name and reputation, our comprehensive offering of innovative instruments and solutions, and the breadth and quality of our global sales and service network.
During 2012 the global environment has deteriorated, especially in Europe. Net sales in U.S. dollars increased by 1% in 2012 and increased by 17% in 2011. Excluding the effect of currency exchange rate fluctuations, or in local currencies, net sales increased 4% in 2012 and 13% in 2011. We expect our local currency organic sales growth in 2013 will continue to be less than growth rates experienced in 2011, and net sales may decline in future quarters depending on economic conditions. Given economic uncertainty, it is difficult to predict the extent to which our results may be adversely affected. However, we expect to continue to benefit from our strong global leadership positions, diversified customer base, robust product offering, investment in emerging markets and the impact of our global sales and marketing programs. Examples include identifying and investing in growth opportunities, improving our lead generation and lead nurturing processes, further penetrating our market segments and more effectively pricing our products and services.
With respect to our end-user markets, we experienced increased results during 2012 versus the prior year in our laboratory-related end-user markets, such as pharmaceutical and biotech customers as well as the laboratories of chemical companies and food and beverage companies. Demand from these markets increased during 2012, particularly in emerging markets. However, demand from these markets was

27


partially offset by reduced demand from universities and government-funded research institutions in developed markets, as well as difficult economic conditions in Europe. We expect net sales growth of our laboratory-related products (particularly in Europe) to continue to be less than growth rates experienced in 2011, and net sales may decline in future quarters depending on economic conditions. It is currently difficult to predict the extent to which our results may be adversely affected.
Our industrial markets, especially core-industrial products, were adversely impacted in 2012 by deterioration in global economic conditions, especially in Europe. Our industrial markets were also impacted by lower sales growth in China as compared to recent years. Emerging market economies have historically been an important source of growth based upon the expansion of their domestic economies, as well as increased exports as companies have moved production to low-cost countries. We expect net sales growth of our industrial related products (particularly in Europe and China) to continue to be less than growth rates experienced in 2011, and net sales may decline in future quarters depending on economic conditions. It is currently difficult to predict the extent to which our results may be adversely affected. Our industrial products are especially sensitive to changes in economic growth.
Our food retailing markets experienced a decline during 2012, related to decreases in Europe and Asia/Rest of World. The net sales declines were primarily related to reduced project activity as well as unfavorable economic conditions. Traditionally the spending levels in this sector have experienced more volatility than our other customer sectors due to the timing of customer project activity or new regulation. Similar to our industrial business, emerging markets have also historically provided growth as the expansion of local emerging market economies creates a significant number of new retail stores each year.
In 2013, we expect to continue to pursue the overall business growth strategies which we have followed in recent years:
Gaining Market Share.  Our global sales and marketing initiative, “Spinnaker,” continues to be an important growth strategy. We aim to gain market share by implementing sophisticated sales and marketing programs and leveraging our extensive customer databases. While this initiative is broad-based, efforts to improve these processes include increased segment marketing and leads generation and nurturing activities, the implementation of more effective pricing and value-based selling strategies and processes, improved sales force training and effectiveness, cross-selling, and other sales and marketing topics. Our comprehensive service offerings also help us further penetrate developed markets. We estimate that we have the largest installed base of weighing instruments in the world. In addition to traditional repair and maintenance, our service offerings continue to expand into value-added services for a range of market needs, including regulatory compliance.
Expanding Emerging Markets.  Emerging markets, comprising Asia (excluding Japan), Eastern Europe, Latin America, the Middle East and Africa, account for approximately 36% of our total net sales. We have a two-pronged strategy in emerging markets: first, to capitalize on growth opportunities in these markets and second, to leverage our low-cost manufacturing operations in China. We have over a 25-year track record in China, and our sales in Asia have grown more than 20% on a compound annual growth basis in local currency since 1999. We have broadened our product offering to the Asian markets and are benefiting as multinational customers shift production to China. We are pleased with our accomplishments in China and in recent years have expanded our territory coverage into second tier cities with new branch offices, additional dealers and more service professionals. India has also been a source of emerging market sales growth in past years due to increased life science research activities. Local currency sales increased in emerging markets by 9% during 2012 versus the prior year. Sales increases were experienced throughout most markets, however growth in China was less than recent years. We anticipate sales in 2013 will continue to increase as compared to 2012, absent a further deterioration in global economic conditions. However, we expect local currency sales growth will be less than growth rates experienced in

28


2011. To reduce costs, we also continue to shift more of our manufacturing to China where our four facilities manufacture for the local markets as well as for export.
Extending Our Technology Lead.  We continue to focus on product innovation. In the last three years, we spent approximately 5% of net sales on research and development. We seek to drive shorter product life cycles, as well as improve our product offerings and their capabilities with additional integrated technologies and software. In addition, we aim to create value for our customers by having an intimate knowledge of their processes via our significant installed product base.
Maintaining Cost Leadership.  We continue to strive to improve our margins by optimizing our cost structure. For example, we significantly reduced our global cost structure during 2009 in response to the global economic slowdown and took further actions during 2012 in response to the recent deterioration in the global economy. We have also focused on reallocating resources and better aligning our cost structure to support higher growth areas and opportunities for margin improvement. As previously mentioned, shifting production to China has also been an important component of our cost savings initiatives. We have also implemented global procurement and supply chain management programs over the last several years aimed at lowering supply costs. Our cost leadership initiatives are also focused on continuously improving our invested capital efficiency, such as reducing our working capital levels and ensuring appropriate returns on our expenditures.
Pursuing Strategic Acquisitions.  We seek to pursue acquisitions that may leverage our global sales and service network, respected brand, extensive distribution channels and technological leadership. We have identified life sciences, product inspection and process analytics as three key areas for acquisitions. We also continue to pursue “bolt-on” acquisitions. For example, during 2011 we acquired an x-ray inspection solutions business in the United States and a vision inspection solutions business in Germany, both of which have been integrated into our end-of-line product inspection systems offering. During 2010 we acquired our pipette distributor in the United Kingdom.
Results of Operations — Consolidated
Net sales
Net sales were $2,341.5 million for the year ended December 31, 2012, compared to $2,309.3 million in 2011 and $1,968.2 million in 2010. This represents increases in 2012 and 2011 of 1% and 17% in U.S. dollars and 4% and 13% in local currencies, respectively.
In 2012, our net sales by geographic destination increased in U.S. dollars by 4% in the Americas and 11% in Asia/Rest of World and decreased by 8% in Europe. In local currencies, our net sales by geographic destination increased in 2012 by 5% in the Americas and 10% in Asia/Rest of World, while net sales in Europe decreased 2%. A discussion of sales by operating segment is included below. Acquisitions/divestitures, net contributed approximately 1% in America and 2% in Europe to net sales growth during 2012. Net sales in local currencies during December 31, 2011, increased 9% in the Americas, 11% in Europe and 20% in Asia/Rest of World. As previously mentioned, the global environment has deteriorated, especially in Europe. We expect our local currency organic sales growth in 2013 will continue to be less than growth rates experienced in 2011, and net sales may decline in future quarters depending on economic conditions. Given economic uncertainty, it is difficult to predict the extent to which our results may be adversely affected.
As described in Note 18 to our audited consolidated financial statements, our net sales comprise product sales of precision instruments and related services. Service revenues are primarily derived from repair and other services, including regulatory compliance qualification, calibration, certification, preventative maintenance and spare parts.

29


Net sales of products increased by 1% and 20% in 2012 and 2011, respectively in U.S. dollars and by 4% and 15%, respectively in local currencies. Service revenue (including spare parts) increased in 2012 and 2011 by 1% and 9%, respectively in U. S. dollars, respectively, and 5% in both periods in local currencies.
 
Net sales of our laboratory-related products, which represented approximately 46% of our total net sales in 2012, increased by 2% in U.S. dollars and 5% in local currencies during 2012. This compares to strong local currency net sales growth of 9% in 2011. We experienced modest sales growth in most laboratory-related products with solid growth in process analytics and analytical instruments. Sales growth in 2012 benefited from favorable price realization as well as volume increases, particularly in Asia/Rest of World. We expect net sales growth of our laboratory-related products (particularly in Europe) to continue to be less than growth rates experienced in 2011, and net sales may decline in future quarters depending on economic conditions. It is currently difficult to predict the extent to which our results may be adversely affected.
Net sales of our industrial-related products, which represented approximately 45% of our total net sales in 2012, increased by 2% in U.S. dollars and 4% in local currencies during 2012. This compares to strong local currency net sales growth of 19% in 2011. Acquisitions contributed approximately 1% to our industrial-related net sales growth during 2012. Our industrial-related products experienced strong organic sales growth in product inspection products related to increased volume and favorable price realization, offset in part by a decline in our European core-industrial business related to decreased sales volume which is related to difficult prior period comparisons and unfavorable economic conditions in Europe. We also experienced reduced industrial-related sales growth in Asia/Rest of World in 2012, which is primarily related to reduced growth in China. We expect net sales of our industrial-related products (particularly in Europe and China) to continue to be less than growth rates experienced in 2011, and net sales may decline in future quarters depending on economic conditions. It is currently difficult to predict the extent to which our results may be adversely affected.
Net sales in our food retailing products, which represented approximately 9% of our total net sales in 2012, decreased by 7% in U.S. dollars and 4% in local currencies during 2012. We experienced local currency net sales declines in Europe and Asia/Rest of World during 2012. The net sales declines were primarily related to reduced project activity as well as unfavorable economic conditions. Local currency net sales growth was strong in the Americas related to incremental project activity and an easier prior period comparison. We expect net sales in our food retailing products may continue to decline in future quarters. It is currently difficult to predict the extent to which our results may be adversely affected.
Gross profit
Gross profit as a percentage of net sales was 53.0% for 2012, compared to 52.8% for 2011 and 52.7% for 2010.
Gross profit as a percentage of net sales for products was 56.2% for 2012, compared to 56.3% for 2011 and 56.5% for 2010. Gross profit as a percentage of net sales for services (including spare parts) was 40.9% for 2012, compared to 39.4% for 2011 and 39.5% for 2010.
The increase in gross profit as a percentage of net sales for 2012 was primarily due to improved price realization, reduced material costs, and favorable currency translation fluctuations. These results were partly offset by unfavorable geographic mix and increased investments in our field service organization.

30


Research and development and selling, general and administrative expenses
Research and development expenses as a percentage of net sales were 4.8% for 2012, 5.0% for 2011 and 4.9% for 2010. Research and development expenses in U.S. Dollars decreased by 3% in 2012 and increased 20% in 2011, and in local currencies were flat in 2012 and increased 9% in 2011. Our research and development spending levels reflect changes in part due to the timing of project launch activity.
Selling, general and administrative expenses as a percentage of net sales decreased to 29.2% for 2012, compared to 30.5% for 2011 and 29.9% for 2010. Selling, general and administrative expenses in U.S. dollars decreased by 3% in 2012 and increased 20% in 2011, and in local currencies were flat in 2012 and increased by 13% in 2011. The amount in 2012 reflects increased sales and marketing investments (especially in emerging markets), offset by lower cash incentives and savings from our cost reduction programs.
Restructuring charges
During 2012, we initiated additional cost reduction measures in response to global economic conditions. For the year ending December 31, 2012, we have incurred $16.7 million of restructuring expenses which primarily comprise severance costs. See Note 15 to our audited consolidated financial statements for a summary of restructuring activity during 2012.
Other charges (income), net
Other charges (income), net consisted of net charges of $1.1 million in 2012, compared to net charges of $2.4 million and $4.2 million in 2011 and 2010, respectively. Other charges (income), net consists primarily of interest income, (gains) losses from foreign currency transactions and other items. Other charges (income), net in 2010 also includes a $4.4 million ($3.8 million after-tax) charge associated with the sale of our retail software business for in-store item and inventory management solutions. This amount was partially offset by a benefit from unrealized contingent consideration from a previous acquisition totaling $1.2 million ($1.2 million after-tax).
Interest expense and taxes
Interest expense was $22.8 million for 2012, compared to $23.2 million for 2011 and $20.1 million for 2010. The decrease in interest expense for 2012 is primarily resulting from a decrease in average borrowings partially offset by an increase in rates for the period. The 2011 amount reflects additional borrowings in the fourth quarter 2010, in order to facilitate foreign earnings repatriation.
During 2011 and 2010 we recorded discrete tax items resulting in net tax benefits of $3.8 million, and $5.2 million primarily related to the favorable resolution of certain prior year tax matters.
Our annual effective tax rate was 24%, 23% and 25% for 2012, 2011 and 2010, respectively. The previously described discrete tax items had the effect of lowering our annual effective tax rate by 1% in both 2011 and 2010. Our consolidated income tax rate is lower than the U.S. statutory rate primarily because of benefits from lower-taxed non-U.S. operations. The most significant of these lower-taxed operations are in Switzerland and China.
Results of Operations — by Operating Segment
The following is a discussion of the financial results of our operating segments. We currently have five reportable segments: U.S. Operations, Swiss Operations, Western European Operations, Chinese Operations and Other. A more detailed description of these segments is outlined in Note 18 to our audited consolidated financial statements.

31


U.S. Operations (amounts in thousands)
 
2012
 
2011
 
2010
 
Increase
(Decrease) in %
2012 vs. 2011
 
Increase
(Decrease) in %
                                                                                                                                                    2011 vs. 2010
Net sales
$
778,120

 
$
745,258

 
$
679,656

 
4%
 
10%
Net sales to external customers
$
699,361

 
$
665,245

 
$
618,809

 
5%
 
8%
Segment profit
$
138,894

 
$
121,398

 
$
121,013

 
14%
 
0%
The increase in total net sales and net sales to external customers during 2012 includes strong growth in process analytics and product inspection due to increased sales volume and favorable price realization. Net sales and net sales to external customers in food retailing products also experienced strong growth during 2012 due to increased project activity.
Segment profit increased by $17.5 million in our U.S. Operations segment during 2012, compared to an increase of $0.4 million during 2011. Segment profit in 2012 includes increased sales volume, favorable price realization, higher inter-segment income, improved productivity, and lower cash incentive expense.
Swiss Operations (amounts in thousands)
 
2012
 
2011
 
2010
 
Increase
(Decrease) in %
(1) 2012 vs. 2011
 
Increase
(Decrease) in %
(1) 2011 vs. 2010
Net sales
$
530,847

 
$
555,308

 
$
456,491

 
(4)%
 
22%
Net sales to external customers
$
124,362

 
$
143,520

 
$
113,488

 
(13)%
 
26%
Segment profit
$
133,691

 
$
113,997

 
$
96,568

 
17%
 
18%
_______________________________________
(1)
Represents U.S. dollar growth for net sales and segment profit.
Total net sales in U.S. dollars decreased by 4% in 2012 and increased by 22% in 2011, and in local currencies increased by 1% in 2012 and by 4% in 2011. Net sales to external customers in U.S. dollars decreased by 13% in 2012 and increased by 26% in 2011, and in local currencies decreased by 8% in 2012 and increased by 8% in 2011. The decrease in local currency net sales to external customers in 2012 is primarily related to volume decreases across most product categories, especially food retailing, industrial, and third-party export business. Our Swiss Operations continue to face unfavorable economic conditions and we expect our local currency sales to external customers will be adversely impacted during the first half of 2013.
Segment profit increased by $19.7 million in our Swiss Operations segment during 2012, compared to a, increase of $17.4 million during 2011. The increase in segment profit during 2012 is primarily due to increased inter-segment sales in local currency, benefits from our cost reduction activities, and lower cash incentive expense. Segment profit also benefited from favorable currency translation fluctuations during 2012.
Western European Operations (amounts in thousands)
 
2012
 
2011
 
2010
 
Increase
(Decrease) in %
(1) 2012 vs. 2011
 
Increase
(Decrease) in %
(1) 2011 vs. 2010
Net sales
$
746,313

 
$
799,933

 
$
692,255

 
(7)%
 
16%
Net sales to external customers
$
644,361

 
$
692,348

 
$
600,933

 
(7)%
 
15%
Segment profit
$
95,523

 
$
99,969

 
$
85,120

 
(4)%
 
17%
_______________________________________
(1)
Represents U.S. dollar growth for net sales and segment profit.

32


Total net sales in U.S. dollars decreased by 7% in 2012 and increased by 16% in 2011, and in local currencies decreased by 1% in 2012 and increased by 10% in 2011. Net sales to external customers in U.S. dollars decreased by 7% in 2012 and increased by 15% in 2011, and in local currencies decreased by 1% in 2012 and by increased 9% in 2011. Net sales in our Western European Operations benefited approximately 1% from acquisitions during 2012. Total net sales and net sales to external customers for 2012 includes sales volume declines in most product categories, especially food retailing and core-industrial products. Our Western European Operations continue to face unfavorable economic conditions and we expect local currency sales to external customers will be adversely impacted during the first half of 2013.
Segment profit decreased by $4.4 million in our Western European Operations segment during 2012, compared to an increase of $14.8 million in 2011. The decrease in segment profit in 2012 resulted primarily from a decrease in local currency sales volume and unfavorable currency translation fluctuations, partially offset by improved price realization and initial benefits from our cost reduction activities.
Chinese Operations (amounts in thousands)
 
2012
 
2011
 
2010
 
Increase
(Decrease) in %
(1) 2012 vs. 2011
 
Increase
(Decrease) in %
(1) 2011 vs. 2010
Net sales
$
555,924

 
$
515,142

 
$
404,543

 
8%
 
27%
Net sales to external customers
$
432,255

 
$
388,592

 
$
298,637

 
11%
 
30%
Segment profit
$
125,217

 
$
120,857

 
$
92,969

 
4%
 
30%
_______________________________________
(1)
Represents U.S. dollar growth for net sales and segment profit.
Total net sales in U.S. dollars increased by 8% in 2012 and 27% in 2011, and in local currencies increased by 6% in 2012 and 22% in 2011. Net sales to external customers in U.S. dollars increased by 11% and 30% in 2012 and 2011, respectively and in local currencies increased by 9% in 2012 and 25% in 2011. The local currency increase in total net sales and net sales to external customers in 2012 includes particularly strong growth in laboratory-related products, modest growth in industrial-related products and a decline in food retailing. We expect local currency sales growth to external customers in 2013 will continue to be less than growth rates experienced in 2011.
Segment profit increased by $4.4 million in our Chinese Operations segment during 2012, compared to an increase of $27.9 million in 2011. The increase in segment profit in 2012 includes increased sales volume and favorable price realization, partially offset by increased inter-segment expenses.
Other (amounts in thousands)
 
2012
 
2011
 
2010
 
Increase
(Decrease) in %
(1) 2012 vs. 2011
 
Increase
(Decrease) in %
(1) 2011 vs. 2010
Net sales
$
447,727

 
$
425,971

 
$
340,649

 
5%
 
25%
Net sales to external customers
$
441,189

 
$
419,623

 
$
336,311

 
5%
 
25%
Segment profit
$
48,857

 
$
50,045

 
$
35,166

 
(2)%
 
42%
_______________________________________
(1)
Represents U.S. dollar growth for net sales and segment profit.
Total net sales and net sales to external customers in U.S. dollars increased by 5% in 2012 and by 25% in 2011, and in local currencies increased by 8% in 2012 and 19% in 2011. The increase in total net sales and net sales to external customers reflects solid sales growth across most product categories,

33


especially laboratory-related products, related to increased sales volume and favorable price realization. Geographically, we also experienced particularly strong growth in Other Asia Pacific.
Segment profit decreased by $1.2 million in our Other segment during 2012, compared to a increase of $14.9 million during 2011. The decrease in segment profit during 2012 relates primarily to increased costs from other segments and investments in sales and marketing, partially offset by an increase in 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 the ability to obtain appropriate financing. Currently, our financing requirements are primarily driven by working capital requirements, capital expenditures, share repurchases and acquisitions. As previously mentioned, global economic conditions deteriorated during 2012. Our ability to generate cash flows may be reduced by a prolonged global economic slowdown.
Cash provided by operating activities totaled $327.7 million in 2012, compared to $280.9 million in 2011 and $268.3 million in 2010. The increase in 2012 resulted principally from increased net earnings and working capital benefits related to decreased inventory levels and the timing of accounts receivable, partially offset by the timing of payables. The increase in 2011 resulted principally from increased net earnings, partially offset by increased incentive payments of approximately $39 million related to previous year performance-related compensation incentives, as well as increased working capital associated with the increased sales volume and higher tax payments. We also made $1.0 million and $5.0 million of voluntary incremental pension contributions in 2012 and 2010, respectively.
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 $95.6 million in 2012, $98.5 million in 2011 and $73.9 million in 2010. Our capital expenditures in 2012 included approximately $47.9 million of investments directly related to our Blue Ocean multi-year program of information technology investment compared with $55.7 million in 2011 and $30.6 million in 2010.
Cash flows used in financing activities during 2012 included proceeds of $50 million from the issuance of our 3.67% Senior Notes and payments of $0.4 million of debt issuance costs. As further described below, in accordance with our share repurchase plan, we repurchased 1,637,827 shares and 1,285,827 shares in the amount of $278.7 million and $204.6 million during 2012 and 2011, respectively. Cash flows used in financing activities during 2010 also included the repayment of our $75 million 4.85% Senior Notes which matured on November 15, 2010. The repayment was funded from additional borrowings under our credit facility.
We continue to explore potential acquisitions. In connection with any acquisition, we may incur additional indebtedness.
In August 2011, we acquired a leader in vision inspection technology for end-of-line product systems located in Germany that has been integrated into our end-of-line product inspection product offering for an aggregate purchase price of $19.4 million. We paid an additional cash consideration of $0.3 million during 2012 related to an earn-out period. We also paid additional contingent cash consideration of $7.8 million in 2011 related to an earn-out associated with an acquisition in 2009. These additional cash consideration payments are included in cash flows from financing activities in the consolidated statement of cash flows. During the first quarter 2011, we completed acquisitions totaling $15.4 million, of which $12.0 million related to an x-ray inspection solutions business that has been integrated into our product inspection product offering.

34


We plan to repatriate earnings from China, Switzerland, the United Kingdom and certain other countries in future years and expect the only additional cost associated with the repatriation of such foreign earnings will be withholding taxes. All other undistributed earnings are considered to be permanently reinvested. As of December 31, 2012, we had an immaterial amount of cash and cash equivalents in foreign subsidiaries where undistributed earnings are considered permanently reinvested. Accordingly, we believe the tax impact associated with repatriating our undistributed foreign earnings will not have a material effect on our liquidity.
6.30% Senior Notes
In June 2009, we entered into an agreement to issue and sell in a private placement, six-year Senior Notes with an aggregate principal amount of $100 million and a fixed interest obligation of 6.3% (“6.30% Senior Notes”) under a Note Purchase Agreement among the Company and accredited institutional investors (the “Agreement”). The 6.30% Senior Notes are senior unsecured obligations of the Company.
The 6.30% Senior Notes mature on June 25, 2015. Interest is payable semi-annually in June and December. We may at any time prepay the 6.30% Senior Notes, in whole or in part (but in an amount not less than 10% of the original aggregate principal amount), at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest, plus a “make-whole” prepayment premium. In the event of a change in control of the Company (as defined in the Agreement), we may be required to offer to prepay the 6.30% Senior Notes in whole at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest.
The Agreement contains customary affirmative and negative covenants for agreements of this type including, among others, limitations on the Company and its subsidiaries with respect to incurrence of liens and priority indebtedness, disposition of assets, mergers, and transactions with affiliates. The Agreement also requires us to maintain a consolidated interest coverage ratio of not less than 3.5 to 1.0 and a consolidated leverage ratio of not more than 3.5 to 1.0. The agreement contains customary events of default with customary grace periods, as applicable. We were in compliance with these covenants at December 31, 2012.
Issuance costs approximating $0.7 million will be amortized to interest expense over the six-year term of the 6.30% Senior Notes.
3.67% Senior Notes
In October 2012, we entered into an agreement to issue and sell in a private placement, ten-year Senior Notes with an aggregate principal amount of $50 million and a fixed interest obligation of 3.67% (“3.67% Senior Notes”) under a Note Purchase Agreement among the Company and accredited institutional investors (the “Agreement”). The 3.67% Senior Notes are senior unsecured obligations of the Company.
The 3.67% Senior Notes mature on December 17, 2022. Interest is payable semi-annually in June and December. We may at any time prepay the 3.67% Senior Notes, in whole or in part (but in an amount not less than 10% of the original aggregate principal amount), at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest, plus a “make-whole” prepayment premium. In the event of a change in control of the Company (as defined in the Agreement), we may be required to offer to prepay the 3.67% Senior Notes in whole at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest.
The Agreement contains customary affirmative and negative covenants for agreements of this type including, among others, limitations on the Company and its subsidiaries with respect to incurrence of

35


liens and priority indebtedness, disposition of assets, mergers, and transactions with affiliates. The Agreement also requires us to maintain a consolidated interest coverage ratio of not less than 3.5 to 1.0 and a consolidated leverage ratio of not more than 3.5 to 1.0. The agreement contains customary events of default with customary grace periods, as applicable. We were in compliance with these covenants at December 31, 2012.
Issuance costs approximating $0.4 million will be amortized to interest expense over the ten-year term of the 3.67% Senior Notes.
Tender Offer & Repayment of 4.85% Senior Notes
In November 2003, we issued $150 million of 4.85% unsecured Senior notes due November 15, 2010 (“4.85% Senior Notes”). On May 6, 2009, we commenced a cash tender offer to purchase any and all of our outstanding 4.85% Senior Notes due November 15, 2010. The tender offer, which expired May 12, 2009, resulted in the repurchase of $75 million of the principal balance of the 4.85% Senior Notes. At maturity, on November 15, 2010, we repaid the remaining $75 million outstanding principal balance of our 4.85% Senior Notes. The repayment was funded from additional borrowings under our credit facility.
Credit Agreement
On December 20, 2011, we entered into an $880 million Credit Agreement (the "Credit Agreement"), which replaced our $950 million Amended and Restated Credit Agreement (the "Prior Credit Agreement"). The Credit Agreement is provided by a group of financial institutions and has a maturity date of December 20, 2016. It is a revolving credit facility and is not subject to any scheduled principal payments prior to maturity. The obligations under the Credit Agreement are unsecured.
Borrowings under the Credit Agreement bear interest at current market rates plus a margin based on our senior consolidated leverage ratio, which was, as of December 31, 2012, set at LIBOR plus .0085 basis points. We must also pay facility fees that are tied to our leverage ratio. The Credit Agreement contains covenants, with which we were in compliance as of December 31, 2012, including maintaining a consolidated interest coverage ratio of not less than 3.5 to 1.0 and a consolidated leverage ratio of not more than 3.25 to 1.0. The Credit Agreement also places certain limitations on us, including limiting our ability to incur liens or indebtedness at a subsidiary level. In addition, the Credit Agreement has several events of default. We incurred approximately $0.3 million of debt extinguishment costs during 2011 related to the Prior Credit Agreement. We capitalized $3.1 million in financing fees during 2011 associated with the Credit Agreement which will be amortized to interest expense through 2016. As of December 31, 2012, approximately $677.9 million was available under the facility.
Our short-term borrowings and long-term debt consisted of the following at December 31, 2012:
 
U.S. Dollar
 
Other Principal
Trading Currencies
 
Total
6.30% $100 million Senior Notes
$
100,000

 
$

 
$
100,000

3.67% $50 million Senior Notes
50,000

 

 
50,000

$880 million Credit Agreement
182,806

 
14,325

 
197,131

Other local arrangements

 
41,600

 
41,600

Total debt
332,806

 
55,925

 
388,731

Less: current portion

 
(41,600
)
 
(41,600
)
Total long-term debt
$
332,806

 
$
14,325

 
$
347,131



36


Changes in exchange rates between the currencies in which we generate cash flow and the currencies in which our borrowings are denominated affect our liquidity. In addition, because we borrow in a variety of currencies, our debt balances fluctuate due to changes in exchange rates.
At December 31, 2012, we were in compliance with all covenants set forth in our 6.30% Senior Notes, 3.67% Senior Notes, and Credit Agreement. In addition, we do not have any downgrade triggers relating to ratings from rating agencies that would accelerate the maturity dates of our debt.
We currently believe that cash flows from operating activities, together with liquidity available under our Credit Agreement and local working capital facilities, will be sufficient to fund currently anticipated working capital needs and capital spending requirements for at least the foreseeable future.
Contractual Obligations
The following summarizes certain of our contractual obligations at December 31, 2012 and the effect such obligations are expected to have on our liquidity and cash flows in future periods. We do not have significant outstanding letters of credit or other financial commitments.
 
Payments Due by Period
 
Total
 
Less than 1 Year
 
1-3 Years
 
3-5 Years
 
After 5 Years
Short and long-term debt
$
388,731

 
$
41,600

 
$
100,000

 
$
197,131

 
$
50,000

Interest on debt
59,944

 
14,827

 
26,899

 
9,043

 
9,175

Non-cancelable operating leases
102,710

 
33,248

 
43,372

 
17,987

 
8,103

Pension and post-retirement funding(1)
23,570

 
23,570

 

 

 

Purchase obligations
93,959

 
83,831

 
7,756

 
2,372

 

Total(1)
$668,914
 
$197,076
 
$178,027
 
$226,533
 
$67,278
_______________________________________
(1)
In addition to the above table, we also have liabilities for pension and post-retirement funding and income taxes. However, we cannot determine the timing or the amounts for periods beyond 2012 for income taxes and beyond 2013 for pension and post-retirement funding.
We have purchase commitments for materials, supplies, services and fixed assets in the normal course of business. Due to the proprietary nature of many of our materials and processes, certain supply contracts contain penalty provisions. We do not expect potential payments under these provisions to materially affect results of operations or financial condition. This conclusion is based upon reasonably likely outcomes derived by reference to historical experience and current business plans.
Share Repurchase Program
We have a $2.25 billion share repurchase program. We expect that the new authorization will be utilized over the next several years. As of December 31, 2012, there were $437 million of remaining common shares authorized to be repurchased under the program. The share repurchases are expected to be funded from existing cash balances, borrowings and cash generated from operating activities. Repurchases will be made through open market transactions and the amount and timing of purchases will depend on business and market conditions, the stock price, trading restrictions, the level of acquisition activity and other factors. We have purchased 20.1 million shares since the inception of the program through December 31, 2012.
During the years ended December 31, 2012 and 2011, we spent $278.7 million and $204.6 million on the repurchase of 1,637,827 shares and 1,285,827 shares at an average price per share of $170.13 and $159.08, respectively. We reissued 457,732 and 450,613 shares held in treasury for the exercise of stock options and restricted stock units during 2012 and 2011, respectively.

37


Off-Balance Sheet Arrangements
Currently, we have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material.
Effect of Currency on Results of Operations
Currency fluctuations affect our operating profits.
Because we conduct operations in many countries, our operating income can be significantly affected by fluctuations in currency exchange rates. Swiss franc-denominated expenses represent a much greater percentage of our total operating expenses than Swiss franc-denominated sales represent of our total net sales. In part, this is because most of our manufacturing and product development costs in Switzerland relate to products that are sold outside Switzerland. In addition, we have a number of corporate functions located in Switzerland. Therefore, if the Swiss franc strengthens against all or most of our major trading currencies (e.g., the U.S. dollar, the euro, other major European currencies, the Chinese yuan and the Japanese yen), our operating profit is reduced. We also have significantly more sales in euro than we have expenses. Therefore, when the euro weakens against the U.S. dollar and the Swiss franc, it also decreases our operating profits. Accordingly, the Swiss franc exchange rate to the euro is an important cross-rate that we monitor. During the third quarter of 2011, the Swiss National Bank established a floor of 1.20 relating to the Swiss franc exchange rate to the euro. The duration for which the Swiss National Bank will maintain this exchange rate floor of 1.20 is currently unknown. Beginning in the third quarter of 2012, we entered into foreign currency forward contracts, as described in Note 5 of our consolidated financial statements, which reduce our exposure to a strengthening of the Swiss franc versus the euro. These forward contracts currently continue until January 2014. We estimate, absent these forward contracts, that a 1% strengthening of the Swiss franc against the euro would result in a decrease in our earnings before tax of approximately $0.8 million to $1.2 million on an annual basis. The previously described foreign currency forward contracts reduce this exposure by approximately 75%. We also estimate a 1% strengthening of the Swiss franc against the U.S. dollar would result in a decrease in our earnings before tax of $0.7 million to $0.9 million on an annual basis. In addition to the Swiss franc and major European currencies, 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. 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 December 31, 2012, we estimate that a 10% weakening of the U.S. dollar against the currencies in which our debt is denominated would result in an increase of approximately $6.2 million in the reported U.S. dollar value of the debt.
Taxes
We are subject to taxation in many jurisdictions throughout the world. Our effective tax rate and tax liability will be affected by a number of factors, such as the amount of taxable income in particular jurisdictions, the tax rates in such jurisdictions, tax treaties between jurisdictions, the extent to which we transfer funds between jurisdictions, earnings repatriations between jurisdictions and changes in law. Generally, the tax liability for each taxpayer within the group is determined either (i) on a non-consolidated/non-combined basis or (ii) on a consolidated/combined basis only with other eligible entities subject to tax in the same jurisdiction, in either case without regard to the taxable losses of non-consolidated/non-combined affiliated legal entities.

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Environmental Matters
We are subject to environmental laws and regulations in the jurisdictions in which we operate. We own or lease a number of properties and manufacturing facilities around the world. Like many of our competitors, we have incurred, and will continue to incur, capital and operating expenditures and other costs in complying with such laws and regulations.
We are currently involved in, or have potential liability with respect to, the remediation of past contamination in certain of our facilities. A former subsidiary of Mettler-Toledo, LLC (“MT”) known as Hi-Speed Checkweigher Co., Inc. (“Hi-Speed”) was one of two private parties ordered by the New Jersey Department of Environmental Protection (“NJDEP”), in an administrative consent order (“ACO”) signed on June 13, 1988, to investigate and remediate certain ground water contamination at certain property in Landing, New Jersey. After the other party ordered under this ACO failed to fulfill its obligations, Hi-Speed became solely responsible for compliance with the ACO. Residual ground water contamination at this site is now within a Classification Exception Area (“CEA”) which NJDEP has approved and within which MT oversees monitoring of the decay of contaminants of concern. A concurrent Well Restriction Area also exists for the site. The NJDEP does not view these vehicles as remedial measures, but rather as “institutional controls” that must be adequately maintained and periodically evaluated. NJDEP has informally told MT to expect a claim for natural resource damages (“NRD”) regarding this site but has not yet made such a claim. In 2010, testing of indoor air at certain buildings within the site led to the installation of a vapor intrusion mitigation system at one building. We estimate that the costs of compliance associated with the site over the next several years will approximate $0.5 million.
In addition, certain of our present and former facilities have or had been in operation for many decades and, over such time, some of these facilities may have used substances or generated and disposed of wastes which are or may be considered hazardous. It is possible that these sites, as well as disposal sites owned by third parties to which we have sent wastes, may in the future be identified and become the subject of remediation. Accordingly, although we believe that we are in substantial compliance with applicable environmental requirements and, to date, we have not incurred material expenditures in connection with environmental matters, it is possible that we could become subject to additional environmental liabilities in the future that could have a material adverse effect on our financial condition, results of operations or cash flows.
Inflation
Inflation can affect the costs of goods and services that we use, including raw materials to manufacture our products. The competitive environment in which we operate limits somewhat our ability to recover higher costs through increased selling prices.
Moreover, there may be differences in inflation rates between countries in which we incur the major portion of our costs and other countries in which we sell products, which may limit our ability to recover increased costs. We remain committed to operations in China and Eastern Europe, which have experienced inflationary conditions. To date, inflationary conditions have not had a material effect on our operating results. However, as our presence in China and Eastern Europe increases, these inflationary conditions could have a greater impact on our operating results.
Quantitative and Qualitative Disclosures about Market Risk
We have only limited involvement with derivative financial instruments and do not use them for trading purposes.
We have entered into foreign currency forward contracts to economically hedge short-term intercompany balances with our international businesses on a monthly basis and to hedge certain

39


forecasted intercompany sales. Such contracts limit our exposure to both favorable and unfavorable currency fluctuations. The net fair value of these contracts was a $0.2 million net gain at December 31, 2012. A sensitivity analysis to changes on these foreign currency-denominated contracts indicates that if the primary currency (primarily U.S. dollar, Swiss franc and the euro) declined by 10%, the fair value of these instruments would decrease by $4.6 million at December 31, 2012. Any resulting changes in fair value would be offset by changes in the underlying hedged balance sheet position. The sensitivity analysis assumes a parallel shift in foreign currency exchange rates. The assumption that exchange rates change in parallel fashion may overstate the impact of changing exchange rates on assets and liabilities denominated in a foreign currency. We also have other currency risks as described under “Effect of Currency on Results of Operations.”
We have entered into certain interest rate swap agreements. These contracts are more fully described in Note 5 to our audited consolidated financial statements. The fair value of these contracts was a loss of $8.2 million at December 31, 2012. Based on our agreements outstanding at December 31, 2012, a 100-basis-point increase in interest rates would result in an increase in the net aggregate market value of these instruments of $3.2 million. Conversely, a 100-basis-point decrease in interest rates would result in a $2.7 million decrease in the net aggregate market value of these instruments at December 31, 2012. Any change in fair value would not affect our consolidated statement of operations unless such agreements and the debt they hedge were prematurely settled.
Critical Accounting Policies
Management’s discussion and analysis of our financial condition and results of operations is based upon our audited consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to pensions and other post-retirement benefits, trade accounts receivable, inventories, intangible assets, income taxes, revenue and warranty costs. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our audited consolidated financial statements. For a detailed discussion on the application of these and other accounting policies, see Note 2 to our audited consolidated financial statements.
Employee benefit plans
The net periodic pension cost for 2012 and projected benefit obligation as of December 31, 2012 was $7.2 million and $156.8 million, respectively, for our U.S. pension plan and $4.3 million and $798.7 million, respectively, for our international pension plans. The net periodic post-retirement cost for 2012 and expected post-retirement benefit obligation as of December 31, 2012 for our U.S. post-retirement medical benefit plan was $0.1 million and $11.3 million, respectively.
Pension and post-retirement benefit plan expense and obligations are developed from assumptions utilized in actuarial valuations. The most significant of these assumptions include the discount rate and expected return on plan assets. In accordance with U.S. GAAP, actual results that differ from the assumptions are accumulated and deferred over future periods. While management believes the

40


assumptions used are appropriate, differences in actual experience or changes in assumptions may affect our plan obligations and future expense.
The expected rates of return on the various defined benefit pension plans’ assets are based on the asset allocation of each plan and the long-term projected return of those assets, which represent a diversified mix of U.S. and international corporate equities and government and corporate debt securities. In 2002, we froze our U.S. defined benefit pension plan and discontinued our retiree medical program for certain current and all future employees. Consequently, no significant future service costs will be incurred on these plans. For 2012, the weighted average return on assets assumption was 7.8% for the U.S. plan and 4.9% for the international plans. A change in the rate of return of 1% would impact annual benefit plan expense by approximately $6.3 million after tax.
The discount rates for defined benefit and post-retirement plans are set by benchmarking against high-quality corporate bonds. For 2012, the average discount rate assumption was 3.8% for the U.S. plan and 2.5% for the international plans, representing a weighted average of local rates in countries where such plans exist. A decrease in the discount rate of 1% would impact annual benefit plan expense by approximately $1.5 million after tax.
We made voluntary incremental funding payments of $1.0 million and $5.0 million in 2012 and 2010, respectively, to increase the funded status of our pension plans. In the future, we may make additional mandatory or discretionary contributions to our plan or we could be required to make additional cash funding payments.
Equity-based compensation
We also have an equity incentive plan that provides for the grant of stock options, restricted stock, restricted stock units and other equity-based awards which are accounted for and recognized in the consolidated statement of operations based on the grant-date fair value of the award. This methodology yields an estimate of fair value based in part on a number of management estimates, the most significant of which include future volatility and estimated option lives. Changes in these assumptions could significantly impact the estimated fair value of stock options.
Trade accounts receivable
As of December 31, 2012, trade accounts receivable were $437.4 million, net of a $14.1 million allowance for doubtful accounts.
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts represents our best estimate of probable credit losses in our existing trade accounts receivable. We determine the allowance based upon a review of both specific accounts for collection and the age of the accounts receivable portfolio.
Inventories
As of December 31, 2012, inventories were $198.9 million.
We record our inventory at the lower of cost or net realizable value. Cost, which includes direct materials, labor and overhead, is generally determined using the first in, first out (FIFO) method. The estimated net realizable value is based on assumptions for future demand and related pricing. Adjustments to the cost basis of our inventory are made for excess and obsolete items based on usage, orders and technological obsolescence. If actual market conditions are less favorable than those projected by management, reductions in the value of inventory may be required.

41


Goodwill and other intangible assets
As of December 31, 2012, our consolidated balance sheet included goodwill of $452.4 million and other intangible assets of $117.6 million.
Our business acquisitions typically result in goodwill and other intangible assets, which affect the amount of future period amortization expense and possible impairment expense. The determination of the value of such intangible assets requires management to make estimates and assumptions that affect our consolidated financial statements.
In accordance with U.S. GAAP, our goodwill and indefinite-lived intangible assets are not amortized, but are evaluated for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that an asset might be impaired. The annual evaluation for goodwill and indefinite-lived intangible assets 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 we are unable to conclude that the goodwill asset is not impaired after considering the totality of events and circumstances during our qualitative assessment, we perform the first step of the two-step impairment test by estimating the fair value of the goodwill asset and comparing the fair value to the carrying amount of the goodwill asset. If the carrying amount of the goodwill asset exceeds its fair value, then we perform the second step of the impairment test to measure the amount of the impairment loss, if any.
If we are unable to conclude that the indefinite-lived intangible asset is not impaired after considering the totality of events and circumstances, we perform an impairment test to measure the amount of the impairment loss, if any.
Both the qualitative and quantitative evaluations consider operating results, business plans, economic conditions and market data, among other factors. There are inherent uncertainties related to these factors and our judgment in applying them to the impairment analyses. Our assessments to date have indicated that there has been no impairment of these assets.
Should any of these estimates or assumptions change, or should we incur lower than expected operating performance or cash flows, including from a prolonged economic slowdown, we may experience a triggering event that requires a new fair value assessment for our reporting units, possibly prior to the required annual assessment. These types of events and resulting analysis could result in impairment charges for goodwill and other indefinite-lived intangible assets if the fair value estimate declines below the carrying value.
Our amortization expense related to intangible assets with finite lives may materially change should our estimates of their useful lives change.
Income taxes
Income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect management’s assessment of estimated future taxes to be paid on items in the consolidated financial statements. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, an adjustment to the deferred tax asset would increase income or equity in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of the net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.

42


We plan to repatriate earnings from China, Switzerland, Germany, the United Kingdom and certain other countries in future years and expect the only additional cost associated with the repatriation of such earnings outside the United States will be withholding taxes. All other undistributed earnings are considered permanently reinvested.
The significant assumptions and estimates described in the preceding paragraphs are important contributors to our ultimate effective tax rate for each year in addition to our income mix from geographical regions. If any of our assumptions or estimates were to change, or should our income mix from our geographical regions change, our effective tax rate could be materially affected. Based on earnings before taxes of $382.6 million for the year ended December 31, 2012, each increase of $3.9 million in tax expense would increase our effective tax rate by 1%.
Revenue recognition
Revenue is recognized when title to a product has transferred and any significant customer obligations have been fulfilled. Standard shipping terms are generally FOB shipping point in most countries and, accordingly, title and risk of loss transfers upon shipment. In countries where title cannot legally transfer before delivery, the Company defers revenue recognition until delivery has occurred. The Company generally maintains the right to accept or reject a product return in its terms and conditions and also maintains appropriate accruals for outstanding credits. Shipping and handling costs charged to customers are included in total net sales and the associated expense is recorded in cost of sales for all periods presented. Other than a few small software applications, the Company does not sell software products without the related hardware instrument as the software is embedded in the instrument. The Company’s products typically require no significant production, modification or customization of the hardware or software that is essential to the functionality of the products. To the extent the Company’s solutions have a post-shipment obligation, such as customer acceptance, revenue is deferred until the obligation has been completed. The Company defers product revenue where installation is required, unless such installation is deemed perfunctory. The Company also sometimes enters into certain arrangements that require the separate delivery of multiple goods and/or services. These deliverables are accounted for separately if the deliverables have standalone value and the performance of undelivered items is probable and within the Company's control. The allocation of revenue between the separate deliverables is typically based on the relative selling price at the time of the sale in accordance with a number of factors including service technician billing rates, time to install and geographic location.
Further, certain products are also sold through indirect distribution channels whereby the distributor assumes any further obligations to the customer upon title transfer. Revenue is recognized on these products upon transfer of title and risk of loss to distributors. Distributor discounts are offset against revenue at the time such revenue is recognized.
Service revenue not under contract is recognized upon the completion of the service performed. Spare parts sold on a stand-alone basis are recognized upon title and risk of loss transfer which is generally at the time of shipment. Revenues from service contracts are recognized ratably over the contract period. These contracts represent an obligation to perform repair and other services including regulatory compliance qualification, calibration, certification and preventative maintenance on a customer’s pre-defined equipment over the contract period. Service contracts are separately priced and payment is typically received from the customer at the beginning of the contract period.
Warranty
We generally offer one-year warranties on most of our products. Product warranties are recorded at the time revenue is recognized. While we engage in extensive product quality programs and processes, our warranty obligation is affected by product failure rates, material usage and service costs incurred in

43


correcting a product failure. If we experience claims or significant cost changes in material, freight and vendor charges, our cost of goods sold could be affected.
New Accounting Pronouncements
See Note 2 to the audited consolidated financial statements.

Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Discussion of this item is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations.


44


Item 8.
Financial Statements and Supplementary Data
The financial statements required by this item are set forth starting on page F-1 and the related financial schedule is set forth on page S-1.

Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

Item 9A.
Controls and Procedures
Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures and Changes in Internal Control over Financial Reporting
Under the supervision and with the participation of our management, including the Chief Executive Officer and the 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 the 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 December 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on our assessment, we concluded that, as of December 31, 2012, the Company’s internal control over financial reporting is effective.
PricewaterhouseCoopers LLP, an independent registered public accounting firm that audited the financial statements included in this Report on Form 10-K, has issued an attestation in their report on our internal control over financial reporting which appears on page F-2.

Item 9B.
Other Information
None.


45


PART III

Item 10.
Directors, Executive Officers and Corporate Governance
The executive officers of the Company are set forth below. Officers are appointed by the Board of Directors and serve at the discretion of the Board.
Name
 
Age
 
Position
Olivier A. Filliol
 
46
 
President and Chief Executive Officer
William P. Donnelly
 
51
 
Chief Financial Officer
Thomas Caratsch
 
54
 
Head of Laboratory
Christian Magloth
 
47
 
Head of Human Resources
Michael Heidingsfelder
 
52
 
Head of Industrial
Simon Kirk
 
53
 
Head of Product Inspection
Marc de la Guéronnière
 
49
 
Head of European Market Organizations
Waldemar Rauch
 
50
 
Head of Process Analytics

Olivier A. Filliol has been a director since January 2009. He has been President and Chief Executive Officer of the Company since January 1, 2008. Mr. Filliol served as Head of Global Sales, Service and Marketing of the Company from April 2004 to December 2007, and Head of Process Analytics of the Company from June 1999 to December 2007. From June 1998 to June 1999, he served as General Manager of the Company’s U.S. checkweighing operations. Prior to joining the Company, he was a Strategy Consultant with the international consulting firm Bain & Company, working in the Geneva, Paris and Sydney offices.
William P. Donnelly joined the Company in 1997 and has served as Chief Financial Officer of the Company since that time, except for a two year period when he ran the Company’s Product Inspection and Pipette businesses. Mr. Donnelly is also responsible for Supply Chain Management, Information Technology and the Company’s Blue Ocean Program.
Thomas Caratsch has been Head of Laboratory of the Company since January 2008. From October 2007 to December 2007, he served as the Head of Business Development. Prior to joining the Company in October 2007, he held various management positions with Hoffmann La Roche from 1987 to March 2007, including General Manager of Roche Instrument Center AG / Tegimenta AG and Head of Disetronic Medical Systems AG from January 2003 to August 2006.
Christian Magloth joined the Company in October 2010 and has been Head of Human Resources since December 2010. Prior to joining the Company he served as Head of Human Resources of Straumann, a leading global medical devices company listed on the Swiss stock exchange, from April 2006 to September 2010. He previously served as Head of Human Resources at Hero Group, an international consumer foods company, and in various management positions at Hilti, a leading global construction supply company.
Michael Heidingsfelder joined the company in April 2012 as Head of Industrial Division. Prior to joining the company, Mr. Heidingsfelder held various management positions within the Freudenberg Group from 2004 to March 2012 in Europe, Asia and the Americas, including Chief Operating Officer, Americas, and General Manager, China. Previously, he was a Partner of Roland Berger Strategy Consultants in the US and Europe.
Simon Kirk joined the company in January 2012 as Head of Product Inspection. Previously he worked at Schindler where he served since 2008 as Chief Executive Officer of Jardine Schindler Group, a joint venture responsible for all of Schindler's operations in South-East Asia. From 2004 until 2008, he

46


was Vice President responsible for Eastern Europe at Schindler. He has also held various management positions at Eaton Corporation, Owens Corning, Imperial Chemical Industries and British Railways Board.
Marc de la Guéronnière has been Head of European Market Organizations of the Company since January 2008. He was head of Region South and General Manager of the Company’s market organization in Spain from January 2006 to January 2008. He joined the Company in 2001 as the Industrial Business Area Manager for our market organization in France. Prior to joining the Company, Mr. de la Guéronnière held various management positions in Europe and the United States with ABB-Elsag Bailey and Danaher-Zellweger.
Waldemar Rauch joined the company in September 2000 as Head of our Ingold business. He has served as Operating Manager since March 2004, was named Head of Process Analytics Division in January 2008 and joined the Group Management Committee in July 2011. Prior to joining the company he worked in R&D at Siemens in Germany and held various technical management positions with Atomika Instruments in Germany as well as with Endress + Hauser Flowtec, a leading Swiss supplier of industrial measurement and automation equipment.
CEO and CFO Certifications
Our CEO and CFO also provide certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 in connection with our quarterly and annual financial statement filings with the Securities and Exchange Commission. The certifications relating to this annual report are attached as Exhibits 31.1 and 31.2.
The remaining information called for by this item is incorporated by reference from the discussion in the sections “Proposal One: Election of Directors,” “Board of Directors — General Information,” “Board of Directors — Operation” and “Additional Information — Section 16(a) Beneficial Ownership Reporting Compliance” in the 2013 Proxy Statement.

Item 11.
Executive Compensation
The information appearing in the sections captioned “Board of Directors — General Information — Director Compensation,” “Compensation Discussion and Analysis,” “Compensation Committee Report” and “Additional Information — Compensation Committee Interlocks and Insider Participation” in the 2013 Proxy Statement is incorporated by reference herein.

Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information appearing in the sections “Share Ownership” and “Securities Authorized for Issuance under Equity Compensation Plans as of December 31, 2012” in the 2013 Proxy Statement is incorporated by reference herein.

Item 13.
Certain Relationships and Related Transactions and Director Independence
Certain Relationships and Related Transactions — None.
Director Independence — The information in the section “Board of Directors — General Information — Independence of the Board” in the 2013 Proxy Statement is incorporated by reference herein.


47


Item 14.
Principal Accounting Fees and Services
Information appearing in the section “Audit Committee Report” in the 2013 Proxy Statement is hereby incorporated by reference.

PART IV

Item 15.
Exhibits and Financial Statement Schedules
(a) Exhibits, Financial Statements and Schedules:
1. Financial Statements. See Index to Consolidated Financial Statements included on page F-1.
2. Financial Statement Schedule. See Schedule II, which is included on page S-1.
3. List of Exhibits. See Exhibit Index included on page E-1.

48


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 8, 2013
By: 
/s/  Olivier A. Filliol
 
Olivier A. Filliol
 
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/  Olivier A. Filliol
 
President and Chief Executive Officer
Olivier A. Filliol
 
 
 
 
 
/s/  William P. Donnelly
 
Group Vice President and Chief Financial Officer
William P. Donnelly
 
(Principal financial and accounting officer)
 
 
 
/s/  Olivier A. Filliol
 
Director
Olivier A. Filliol
 
 
 
 
 
/s/  Wah-Hui Chu
 
Director
Wah-Hui Chu
 
 
 
 
 
/s/  Francis A. Contino
 
Director
Francis A. Contino
 
 
 
 
 
/s/  Michael A. Kelly
 
Director
Michael A. Kelly
 
 
 
 
 
/s/  Martin Madaus
 
Director
Martin Madaus
 
 
 
 
 
/s/  Hans Ulrich Maerki
 
Director
Hans Ulrich Maerki
 
 
 
 
 
/s/  George M. Milne
 
Director
George M. Milne
 
 
 
 
 
/s/  Thomas P. Salice
 
Director
Thomas P. Salice
 
 
 
 
 
/s/  Robert F. Spoerry
 
Director
Robert F. Spoerry
 
 

49


EXHIBIT INDEX
Exhibit
 
No.
Description
3.1
Amended and Restated Certificate of Incorporation of the Company(1)
3.2
Amended By-laws of the Company, effective as of July 23, 2009(2)
10.1
Credit Agreement among Mettler-Toledo International Inc., certain of its subsidiaries, JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, and certain other financial institutions, dated as of December 20, 2011(3)
10.11
Note Purchase Agreement dated as of June 25, 2009 by and among Mettler-Toledo International Inc. and Connecticut General Life Insurance Company, The Lincoln National Life Insurance Company, Lincoln Life & Annuity Company of New York, Massachusetts Mutual Life Insurance Company, C.M. Life Insurance Company, MassMutual Asia Limited, American Investors Life Insurance Company, Aviva Life and Annuity Company, Bankers Life and Casualty Company, Conseco Life Insurance Company, Conseco Health Insurance Company and Colonial Penn Life Insurance Company(4)
10.12
Note Purchase Agreement dated as of October 10, 2012 by and among Mettler-Toledo International Inc., Massachusetts Mutual Life Insurance Company, C.M. Life Insurance Company, MassMutual Asia Limited, The Lincoln National Life Insurance Company, Lincoln Life & Annuity Company of New York and Aviva Life and Annuity Company Royal Neighbors of America.(5)



10.20
1997 Amended and Restated Stock Option Plan(6)
10.21
Amendment to the 1997 Amended and Restated Stock Option Plan(7)
10.22
Mettler-Toledo International Inc. 2004 Equity Incentive Plan(8)
10.23
Mettler-Toledo International Inc. 2007 Share Plan, effective February 7, 2008(9)
10.31
Regulations of the POBS PLUS — Incentive Scheme for Senior Management of Mettler Toledo, effective as of November, 2006(10)
10.32
Regulations of the POBS PLUS — Incentive Scheme for Members of the Group Management of Mettler Toledo, effective as of January, 2009(10)
10.50
Employment Agreement between Thomas Caratsch and Mettler-Toledo International Inc., dated as of December 4, 2007(9)
10.51
Employment Agreement between Marc de la Guéronnière and Mettler-Toledo International Inc., dated as of January 27, 2011(11)
10.52
Employment Agreement between William Donnelly and Mettler-Toledo GmbH, dated as of November 10, 1997(1)
10.53
Employment Agreement between Olivier Filliol and Mettler-Toledo International Inc., dated as of November 1, 2007(12)
10.54*
Employment Agreement between Michael Heidingsfelder and Mettler-Toledo International Inc., dated as of November 30, 2011
10.55*
Employment Agreement between Simon Kirk and Mettler-Toledo International Inc., dated as of November 28, 2011
10.56
Employment Agreement between Christian Magloth and Mettler-Toledo International Inc., dated as of March 22, 2010(11)
10.57
Employment Agreement between Waldemar Rauch and Mettler-Toledo International Inc., dated as of June 10, 2011(14)
10.58
Employment Agreement between Robert Spoerry and Mettler-Toledo International Inc., dated as of November 1, 2007(12)
10.59
Form of Tax Equalization Agreement between Messrs. Caratsch, Filliol, Spoerry, von Arb, Widmer and Kirk and Mettler-Toledo International Inc., dated October 10, 2007(9)
21*
Subsidiaries of the Company
23.1*
Consent of PricewaterhouseCoopers LLP

E-1


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
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
_______________________________________
(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 July 24, 2009
(3) 
Incorporated by reference to the Company’s Report on Form 8-K dated December 27, 2011
(4) 
Incorporated by reference to the Company’s Report on Form 8-K dated June 25, 2009
(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 Registration Statement on Form S-1 (Reg. No. 333-35597)
(7) 
Incorporated by reference to the Company’s Report on Form 10-Q dated August 15, 2000
(8) 
Incorporated by reference to the Company’s Form DEF 14-A filed March 29, 2004
(9) 
Incorporated by reference to the Company’s Report on Form 10-K dated February 15, 2008
(10) 
Incorporated by reference to the Company’s Report on Form 10-K dated February 13, 2009
(11) 
Incorporated by reference to the Company's Report on Form 10-K dated February 16, 2010
(12) 
Incorporated by reference to the Company’s Report on Form 8-K dated November 1, 2007
(13) 
Incorporated by reference to the Company’s Report on Form 10-K dated March 4, 2002
(14) 
Incorporated by reference to the Company's Report on Form 10-K dated February 13, 2012
*
Filed herewith


E-2



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.
In our opinion, the consolidated financial statements listed in the index appearing on page F-1 present fairly, in all material respects, the financial position of Mettler-Toledo International Inc. at December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule appearing on page S-1 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, 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 these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. 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.
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 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.
/s/  Pricewaterhousecoopers LLP
PricewaterhouseCoopers LLP
Columbus, Ohio
February 8, 2013


F-2


METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31
(In thousands, except share data)
 
2012
 
2011
 
2010
Net sales
 

 
 

 
 

Products
$
1,852,192

 
$
1,826,891

 
$
1,524,083

Service
489,336

 
482,437

 
444,095

Total net sales
2,341,528

 
2,309,328

 
1,968,178

Cost of sales
 

 
 

 
 

Products
811,204

 
798,682

 
662,314

Service
289,269

 
292,372

 
268,668

Gross profit
1,241,055

 
1,218,274

 
1,037,196

Research and development
112,530

 
116,139

 
97,028

Selling, general and administrative
684,026

 
703,632

 
588,726

Amortization
21,357

 
17,808

 
14,842

Interest expense
22,764

 
23,226

 
20,057

Restructuring charges
16,687

 
5,912

 
4,866

Other charges (income), net
1,090

 
2,380

 
4,164

Earnings before taxes
382,601

 
349,177

 
307,513

Provision for taxes
91,754

 
79,684

 
75,365

Net earnings
$
290,847

 
$
269,493

 
$
232,148

 
 
 
 
 
 
Basic earnings per common share:
 

 
 

 
 

Net earnings
$
9.37

 
$
8.45

 
$
6.98

Weighted average number of common shares
31,044,532

 
31,897,779

 
33,280,463

Diluted earnings per common share:
 

 
 

 
 

Net earnings
$
9.14

 
$
8.21

 
$
6.80

Weighted average number of common and common equivalent shares
31,824,077

 
32,839,365

 
34,140,097


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


F-3


METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31
(In thousands, except share data)

 
2012
 
2011
 
2010
 
 
 
 
 
 
Net earnings
$
290,847

 
$
269,493

 
$
232,148

 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
Foreign currency translation adjustment
15,641

 
(18,731
)
 
31,647

Unrealized gains (losses) on cash flow hedging arrangements:
 
 
 
 
 
Unrealized gains (losses)
(1,748
)
 
(4,028
)
 
(6,766
)
Effective portion of (gains) losses included in net earnings
2,029

 
1,911

 
356

Defined benefit pension and post-retirement plans:
 
 
 
 
 
Net actuarial gains (losses)
(46,792
)
 
(79,947
)
 
(5,424
)
Plan amendments and prior service cost
18,017

 
(274
)
 
(405
)
Amortization of actuarial (gains) losses and plan amendments and prior service cost
4,261

 
2,326

 
2,972

          Impact of foreign currency
(1,931
)
 
3,604

 
2,030

Total other comprehensive income (loss), net of tax
(10,523
)
 
(95,139
)
 
24,410

 
 
 
 
 
 
Comprehensive income
$
280,324

 
$
174,354

 
$
256,558


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


F-4


METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
As of December 31
(In thousands, except share data)
 
2012
 
2011
ASSETS
Current assets:
 

 
 

Cash and cash equivalents
$
101,702

 
$
235,601

Trade accounts receivable, less allowances of $14,120 in 2012 and $12,317 in 2011
437,390

 
425,147

Inventories
198,939

 
241,421

Current deferred tax assets, net
57,690

 
51,125

Other current assets and prepaid expenses
69,199

 
65,569

Total current assets
864,920

 
1,018,863

Property, plant and equipment, net
469,421

 
410,007

Goodwill
452,351

 
447,743

Other intangible assets, net
117,564

 
121,410

Non-current deferred tax assets, net
127,110

 
118,899

Other non-current assets
86,034

 
86,552

Total assets
$
2,117,400

 
$
2,203,474

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
 

 
 

Trade accounts payable
$
142,362

 
$
168,109

Accrued and other liabilities
107,834

 
100,320

Accrued compensation and related items
119,415

 
139,940

Deferred revenue and customer prepayments
71,435

 
99,584

Taxes payable
64,000

 
55,139

Current deferred tax liabilities
16,031

 
18,452

Short-term borrowings and current maturities of long-term debt
41,600

 
28,300

Total current liabilities
562,677

 
609,844

Long-term debt
347,131

 
476,715

Non-current deferred tax liabilities
139,487

 
125,833

Other non-current liabilities
240,886

 
209,945

Total liabilities
1,290,181

 
1,422,337

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 30,410,006 and 31,590,101 shares at December 31, 2012 and 2011, respectively
448

 
448

Additional paid-in capital
638,705

 
616,202

Treasury stock at cost (14,376,005 and 13,195,910 shares at December 31, 2012 and 2011, respectively)
(1,463,924
)
 
(1,225,125
)
Retained earnings
1,749,451

 
1,476,550

Accumulated other comprehensive income (loss)
(97,461
)
 
(86,938
)
Total shareholders’ equity
827,219

 
781,137

Total liabilities and shareholders’ equity
$
2,117,400

 
$
2,203,474


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


F-5


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, 2009
33,851,124

 
$
448

 
$
574,034

 
$
(857,130
)
 
$
1,009,995

 
$
(16,209
)
 
$
711,138

Exercise of stock options and restricted stock units
527,276

 

 

 
39,555

 
(19,100
)
 

 
20,455

Other treasury stock issuances
2,549

 

 

 
183

 
87

 

 
270

Repurchases of common stock
(1,955,634
)
 

 

 
(239,998
)
 

 

 
(239,998
)
Tax benefit resulting from exercise of certain employee stock options

 

 
10,776

 

 

 

 
10,776

Share-based compensation

 

 
12,385

 

 

 

 
12,385

Net earnings

 

 

 

 
232,148

 

 
232,148

Other comprehensive income (loss), net of tax

 

 

 

 

 
24,410

 
24,410

Balance at December 31, 2010
32,425,315

 
$
448

 
$
597,195

 
$
(1,057,390
)
 
$
1,223,130

 
$
8,201

 
$
771,584

Exercise of stock options and restricted stock units
450,613

 

 

 
36,843

 
(16,073
)
 

 
20,770

Repurchases of common stock
(1,285,827
)
 

 

 
(204,578
)
 

 

 
(204,578
)
Tax benefit resulting from exercise of certain employee stock options

 

 
6,737

 

 

 

 
6,737

Share-based compensation

 

 
12,270

 

 

 

 
12,270

Net earnings

 

 

 

 
269,493

 

 
269,493

Other comprehensive income (loss), net of tax

 

 

 

 

 
(95,139
)
 
(95,139
)
Balance at December 31, 2011
31,590,101

 
$
448

 
$
616,202

 
$
(1,225,125
)
 
$
1,476,550

 
$
(86,938
)
 
$
781,137

Exercise of stock options and restricted stock units
457,732

 

 

 
39,873

 
(17,946
)
 

 
21,927

Repurchases of common stock
(1,637,827
)
 

 

 
(278,672
)
 

 

 
(278,672
)
Tax benefit resulting from exercise of certain employee stock options

 

 
9,318

 

 

 

 
9,318

Share-based compensation

 

 
13,185

 

 

 

 
13,185

Net earnings

 

 

 

 
290,847

 

 
290,847

Other comprehensive income (loss), net of tax

 

 

 

 

 
(10,523
)
 
(10,523
)
Balance at December 31, 2012
30,410,006

 
$
448

 
$
638,705

 
$
(1,463,924
)
 
$
1,749,451

 
$
(97,461
)
 
$
827,219


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

F-6


METTLER-TOLEDO INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31
(In thousands)
 
2012
 
2011
 
2010