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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, 2010
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 1-13595
 
 
 
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 February 1, 2011 there were 32,320,515 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, 2010 (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, 2010) was approximately $3.7 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 2011
  Part III
Annual Meeting of Shareholders    
 


 

 
METTLER-TOLEDO INTERNATIONAL INC.
 
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL Year Ended December 31, 2010
 
                 
        Page
 
      Business     4  
      Risk Factors     12  
      Unresolved Staff Comments     20  
      Properties     20  
      Legal Proceedings     20  
        Executive Officers of the Registrant     20  
 
PART II
      Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities     21  
      Selected Financial Data     23  
      Management’s Discussion and Analysis of Financial Condition and Results of Operations     24  
      Quantitative and Qualitative Disclosures about Market Risk     39  
      Financial Statements and Supplementary Data     39  
      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     39  
      Controls and Procedures     39  
      Other Information     40  
 
PART III
      Directors, Executive Officers and Corporate Governance     41  
      Executive Compensation     42  
      Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters     42  
      Certain Relationships and Related Transactions and Director Independence     42  
      Principal Accounting Fees and Services     42  
 
PART IV
      Exhibits and Financial Statement Schedules     42  
    43  
  EX-10.57
  EX-10.58
  EX-21
  EX-23.1
  EX-31.1
  EX-31.2
  EX-32
  EX-101 INSTANCE DOCUMENT
  EX-101 SCHEMA DOCUMENT
  EX-101 CALCULATION LINKBASE DOCUMENT
  EX-101 LABELS LINKBASE DOCUMENT
  EX-101 PRESENTATION LINKBASE DOCUMENT
  EX-101 DEFINITION LINKBASE DOCUMENT


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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, 2010, 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, 2010 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 2010 derived 37% from Europe, 36% from North and South America and 27% 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 2010 and 2009 and 44% in 2008.
 
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.
 
Also included in our offerings is Quantos, an automated powder dosing solution for small sample sizes, which is controlled and monitored by the balance. The first step in sample preparation for analytical methods is precise weighing of substances, which has traditionally been done by hand using a spatula. The Quantos dosing system offers automated measuring performance of 200 grams to 0.005 milligrams.
 
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.
 
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 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 43% of our net sales in 2010, 42% in 2009 and 43% in 2008.


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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 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 also provide 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


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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 11% of our net sales in 2010, 12% in 2009 and 13% in 2008.
 
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 2% of 2010 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.
 
We have one of the largest and broadest global sales and service organizations among precision instrument manufacturers. At December 31, 2010, our sales and service group consisted of approximately 5,500 employees in sales, marketing and customer service (including related administration) and post-sales technical service, located in 35 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 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, certification and preventative maintenance. 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 23% of our net sales in 2010, 25% in 2009 and 22% in 2008. 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.


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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 $289.0 million in research and development ($97.0 million in 2010, $89.7 million in 2009 and $102.3 million in 2008). In 2010, we spent approximately 4.9% 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 integrate research and development with marketing, manufacturing and product engineering. We have approximately 1,000 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.


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Employees
 
Our total workforce including employees and temporary personnel as of December 31, 2010 was approximately 11,200 throughout the world, including approximately 4,400 in Europe, 3,000 in North and South America and 3,800 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 — GreenMT
 
We have long felt it is important to be an environmentally conscious company. We believe this philosophy has lead to a strong recognition in our organization for the importance of the topics and strong track record of environmental consciousness in how we run our business. For example, our product manufacturing processes are clean and efficient, and our products are designed to minimize energy consumption as well as help our customers to be “green” through better yield and reduced waste. We want to gain a broader awareness of all the ways our business affects the environment and society and to ensure we are continuously improving our practices. In 2010, we initiated a formal program to pursue these ambitions called GreenMT. GreenMT is considered a key strategic program for the Company.
 
Blue Ocean Program
 
“Blue Ocean” refers to our program to establish a new global operating model, with standardized, automated and integrated processes, with 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 will proceed on a staggered basis over a several year period with the initial go-live rollout having occurred in 2010. We expect the incremental capitalized project costs associated with Blue Ocean to approximate $20 million on an annual basis over the next five years. This amount may change based upon fluctuations in currency exchange rates. We expect the return on this investment when complete to include reduced operating costs and working capital requirements.
 
Intellectual Property
 
We hold over 4,000 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


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(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 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, Inc. (“MTI”) 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 MTI 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 MTI 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 six years will approximate $0.6 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


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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 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
 
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


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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. Because our customers often decrease or delay capital expenditures in 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.
 
We are subject to certain risks associated with our international operations and fluctuating conditions in emerging markets.
 
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 $298.6 million of sales to external customers and $93.0 million of segment profit during 2010. 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 $105.5 million of cash at December 31, 2010 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 business activity in emerging markets improved during 2010, fluctuating economic conditions may continue to affect our results of operations in these markets for the foreseeable 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.


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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, 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, 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 will proceed on a staggered basis over a several year period with the initial go-live rollout having occurred in 2010. 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.
 
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


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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.
 
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.


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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 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 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, 2010, our consolidated balance sheet included goodwill of $434.7 million and other intangible assets of $104.4 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


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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 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 both 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.
 
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. We have seen higher volatility in exchange rates generally than in the past, and recently the Swiss franc has strengthened against the euro. The exchange rate between the Swiss franc and the euro was 1.39 during 2010 as compared to 1.51 for the prior year, reflecting an 8% strengthening of the Swiss franc against the euro. The current exchange rate for the Swiss franc to the euro is 1.30 as of February 8, 2011, reflecting a 6% strengthening of the Swiss franc against the euro as compared to 2010. We estimate that a 1% strengthening of the Swiss franc against the euro would result in a decrease in our earnings before tax of $1.1 million to $1.8 million on an annual basis. In addition to the Swiss


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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, 2010, 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 $9.5 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, 2010, we had total indebtedness of approximately $233.6 million, net of cash of $447.6 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 agreement 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 agreement 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 agreement 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 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 $950 million. Our credit facility is provided by a group of 20 financial institutions, who individually have between 1% and 11% of the total funding commitment. At December 31, 2010, we had borrowings of $556.5 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 $950 million.


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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 2% 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.
 
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.


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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
Oslo, Norway
  Leased   Western European Operations
Americas:
       
Columbus, Ohio
  Leased   U.S. Operations
Worthington, Ohio
  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 (three 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
 
2010
               
Fourth Quarter
  $ 157.55     $ 123.28  
Third Quarter
  $ 124.44     $ 108.42  
Second Quarter
  $ 126.70     $ 107.42  
First Quarter
  $ 110.31     $ 94.10  
2009
               
Fourth Quarter
  $ 106.24     $ 89.20  
Third Quarter
  $ 92.92     $ 75.33  
Second Quarter
  $ 78.25     $ 51.64  
First Quarter
  $ 70.35     $ 45.72  
 
Holders
 
At February 1, 2011, there were 99 holders of record of common stock and 32,320,515 shares of common stock outstanding. We estimate we have approximately 32,000 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.


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Share Performance Graph
 
The following graph compares the cumulative total returns (assuming reinvestment of dividends) on $100 invested on December 31, 2005 through December 31, 2010 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
 
(PERFORMANCE GRAPH)
 
                                                             
      12-31-05     12-31-06     12-31-07     12-31-08     12-31-09     12-31-10
Mettler-Toledo
    $ 100       $ 143       $ 206       $ 122       $ 190       $ 274  
S&P 500 Index
    $ 100       $ 116       $ 122       $ 77       $ 97       $ 112  
SIC Code 3826 Index
    $ 100       $ 127       $ 171       $ 104       $ 144       $ 181  
                                                             
 
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 
Issuer Purchases of Equity Securities
 
                                 
                Total Number of
    Approximate Dollar
 
                Shares Purchased as
    Value (in thousands) of
 
                Part of Publicly
    Shares that may yet be
 
    Total Number of
    Average Price Paid
    Announced
    Purchased under the
 
Period   Shares Purchased     per Share     Program     Program  
 
October 1 to October 31, 2010
    171,000     $ 126.95       171,000     $ 240,095  
November 1 to November 30, 2010
    208,500       139.36       208,500       961,034  
December 1 to December 31, 2010
    265,198       152.44       265,198       920,603  
                                 
Total
    644,698     $ 141.45       644,698     $ 920,603  
 
We have a $2.25 billion share repurchase program that was increased in November 2010, whereby the Board of Directors authorized us to repurchase an additional $750 million of common shares. As of December 31, 2010, there was $920.6 million of remaining common shares authorized to be repurchased


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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 17.2 million common shares since the inception of the program through December 31, 2010, at a total cost of $1.3 billion.
 
Our share repurchase program was suspended in October 2008 and restarted in December 2009. During the years ended December 31, 2010 and 2009, we spent $240.0 million and $6.0 million on the repurchase of 1,955,634 shares and 58,800 shares at an average price per share of $122.70 and $101.82, 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”).
 
                                         
    2010     2009     2008     2007     2006  
 
Statement of Operations Data:
                                       
Net sales
  $ 1,968,178     $ 1,728,853     $ 1,973,344     $ 1,793,748     $ 1,594,912  
Cost of sales
    930,982       839,516       980,263       897,567       804,480  
                                         
Gross profit
    1,037,196       889,337       993,081       896,181       790,432  
Research and development
    97,028       89,685       102,282       92,378       82,802  
Selling, general and administrative
    588,726       505,177       579,806       529,126       481,709  
Amortization
    14,842       11,844       10,553       11,682       11,503  
Interest expense
    20,057       25,117       25,390       21,003       17,492  
Restructuring charges (a)
    4,866       31,368       6,413              
Other charges (income), net (b)
    4,164       1,384       2,568       (875 )     (7,921 )
                                         
Earnings before taxes
    307,513       224,762       266,069       242,867       204,847  
Provision for taxes (c)
    75,365       52,169       63,291       64,360       47,315  
                                         
Net earnings
  $ 232,148     $ 172,593     $ 202,778     $ 178,507     $ 157,532  
                                         
Basic earnings per common share:
                                       
Net earnings
  $ 6.98     $ 5.12     $ 5.92     $ 4.82     $ 3.93  
Weighted average number of common shares
    33,280,463       33,716,353       34,250,310       37,025,209       40,065,951  
Diluted earnings per common share:
                                       
Net earnings
  $ 6.80     $ 5.03     $ 5.79     $ 4.70     $ 3.86  
Weighted average number of common and common equivalent shares
    34,140,097       34,290,771       35,048,859       37,952,923       40,785,708  
Balance Sheet Data:
                                       
Cash and cash equivalents
  $ 447,577     $ 85,031     $ 78,073     $ 81,222     $ 151,269  
Working capital (d)
    166,034       156,369       180,412       165,784       144,084  
Total assets
    2,283,063       1,718,787       1,664,056       1,678,214       1,587,085  
Long-term debt
    670,301       203,590       441,588       385,072       345,705  
Other non-current liabilities (e)
    174,469       189,593       183,301       162,583       143,526  
Shareholders’ equity (f)
    771,584       711,138       503,247       581,286       630,862  


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(a) Restructuring charges relate to our global cost reduction program initiated in 2008. See Note 15 to the audited consolidated financial statements.
 
(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 2010 includes discrete tax items resulting in a net tax benefit of $5.2 million primarily related to the favorable resolution of certain prior year tax matters. The provision for taxes for 2009 includes a discrete tax benefit of $8.3 million 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. The provision for taxes for 2007 includes $1.1 million of discrete tax items. The discrete items include a benefit of $3.4 million related to the favorable resolution of certain tax matters and other adjustments related to prior years, which was partially offset by a charge of $2.3 million primarily related to a tax law change in Germany. The provision for taxes for 2006 includes net tax benefits related to a legal reorganization that resulted in a reduction of the estimated annual effective tax rate from 30% to 27% and $8.0 million net of discrete tax items. The discrete items include a benefit of $2.9 million, net associated with the legal reorganization and a benefit of $5.1 million from a favorable tax law change.
 
(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, 2010.
 
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 2010, we experienced broad-based sales increases across most geographies and products related to improved global economic conditions. We also experienced increased sales during 2010 given the replacement nature of many of our products and the respective deferral of product replacements by our customers during 2009. Net sales in U.S. dollars increased by 14% in 2010 and decreased by 12% in 2009. Excluding the effect of currency exchange rate fluctuations, or in local currencies, net sales increased 14% in 2010 and decreased 10% in 2009. Our future sales in local currencies may be adversely affected by weak


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global economic conditions, although we also expect to continue to benefit from our strong leadership positions and the impact of our global sales and marketing programs. Examples include identifying and investing in growth opportunities, improving our lead generation and nurturing processes, better penetrating our market segments and more effectively pricing our products and services. While we have experienced improved business activity during 2010, the global economic environment remains uncertain and it is currently difficult to predict the extent to which our results may be adversely affected.
 
With respect to our end-user markets, we experienced increased results during 2010 in our laboratory-related end-user markets, such as pharmaceutical and biotech customers as well as the laboratories of chemical companies, food and beverage companies and universities. Demand from these markets increased during 2010 related to the previously mentioned improved global economic conditions, particularly in Asia Pacific and the Americas.
 
Our industrial markets, especially core-industrial products, were particularly impacted by improved economic conditions in emerging markets due to increased production capacity for domestic and export markets. 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. Local currency sales growth in our developed industrial markets during 2010 was also primarily related to improved economic conditions, as well as weaker prior period comparisons. However, market conditions improved more quickly in the Americas as compared to Europe.
 
In our food retail end markets, we also experienced increased results during 2010 related to improved global economic conditions, especially in emerging markets. However, we did not experience a significant increase in project activity in developed markets during 2010. 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 2011, 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 achieve above-market sales growth 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 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 31% 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 20-year track record in China, and our sales in Asia have grown more than 16% 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 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 24% during 2010 versus the prior year related to improved global economic conditions. Sales increases were experienced throughout all markets, especially in China. We anticipate sales in 2011 will continue to increase as compared to 2010, absent a deterioration in global economic conditions. However, we expect local currency sales growth to be


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reduced as 2010 benefited from weaker prior period comparisons. To reduce costs, we also continue to shift more of our manufacturing to China where our three 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 5.1% 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 recent global economic slowdown. 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 the first quarter of 2010, we acquired our pipette distributor in the United Kingdom and during the fourth quarter of 2009, we also acquired a leader of vision inspection technology that has been integrated with our end-of-line packaging inspection systems product offering.
 
Results of Operations — Consolidated
 
Net sales
 
Net sales were $1,968.2 million for the year ended December 31, 2010, compared to $1,728.9 million in 2009 and $1,973.3 million in 2008. In U.S. dollars, this represents an increase in 2010 of 14% and a decrease in 2009 of 12%. In local currencies, net sales increased 14% in 2010 and decreased 10% in 2009. During the fourth quarter of 2009, we acquired a vision technology company that has been integrated into our end-of-line packaging inspection systems product offering. During the first quarter of 2010, we also acquired our pipette distributor in the United Kingdom that has been integrated into our U.K. market organization. We estimate acquisitions contributed approximately 2% to our net sales growth during 2010.
 
In 2010, our net sales by geographic destination increased in U.S. dollars by 16% in the Americas, 4% in Europe and 27% in Asia/Rest of World. In local currencies, our net sales by geographic destination increased in 2010 by 15% in the Americas, 7% in Europe and 23% in Asia/Rest of World. A discussion of sales by operating segment is included below. Acquisitions contributed approximately 2% in the Americas and 2% in Europe to net sales growth during 2010. While we have experienced improved business activity, particularly in Asia/Rest of World and the Americas, the global economic environment remains uncertain and it is currently 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.
 
Net sales of products increased by 17% in 2010 in U.S. dollars and decreased by 15% in 2009. In local currencies, net sales of products increased by 16% in 2010 and decreased by 13% in 2009. Service revenue (including spare parts) increased in 2010 by 5% and decreased in 2009 by 4% in U.S. dollars. In local currencies, service revenue increased by 5% in 2010 and was flat in 2009.


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Net sales of our laboratory-related products increased by 15% in U.S. dollars and in local currencies during 2010 principally driven by strong growth across most product categories and geographies. Acquisitions contributed approximately 2% to our laboratory-related net sales growth during 2010.
 
Net sales of our industrial-related products increased by 15% in U.S. dollars and in local currencies during 2010. We experienced strong sales growth in our product inspection and core-industrial products. Net sales growth was offset in part by decreased sales in transportation and logistics products during 2010. Net sales growth in industrial-related products reflects particularly strong growth in China and the Americas. Acquisitions contributed approximately 2% to our industrial-related net sales growth during 2010.
 
In our food retailing markets, net sales increased by 3% in U.S. dollars and increased 5% in local currencies during 2010 compared to the previous year, resulting from strong growth in China.
 
Gross profit
 
Gross profit as a percentage of net sales was 52.7% for 2010, compared to 51.4% for 2009 and 50.3% for 2008.
 
Gross profit as a percentage of net sales for products was 56.5% for 2010, compared to 55.2% for 2009 and 54.2% for 2008. Gross profit as a percentage of net sales for services (including spare parts) was 39.5% for 2010, compared to 39.8% for 2009 and 36.8% for 2008.
 
The increase in gross profit as a percentage of net sales reflects benefits from increased sales volume and operating efficiencies, as well as pricing. These results were also partly offset by unfavorable business mix, as well as increased material costs, including higher costs for certain steel-related items and unfavorable currency.
 
Research and development and selling, general and administrative expenses
 
Research and development expenses as a percentage of net sales were 4.9% for 2010 and 5.2% for both 2009 and 2008. Research and development expenses increased by 8% and decreased by 12% in U.S. dollars in 2010 and 2009, respectively, and in local currencies increased by 6% in 2010 and decreased by 11% in 2009. Our research and development spending levels reflect increased research and development investments across most product categories.
 
Selling, general and administrative expenses as a percentage of net sales increased to 29.9% for 2010, compared to 29.2% for 2009 and 29.4% for 2008. Selling, general and administrative expenses in U.S. dollars increased by 17% in 2010 and decreased by 13% in 2009 and in local currencies increased by 16% in 2010 and decreased by 11% in 2009. The increase in 2010 is primarily due to higher performance-related compensation costs and increased sales and marketing activities related to the improved economic environment, as well as acquisition-related expenses. The decrease in selling, general and administrative expenses in 2009 compared to 2008 is primarily due to benefits from our cost reduction activities and reduced performance-related compensation costs.
 
Restructuring charges
 
During the fourth quarter of 2008, we initiated a global cost reduction program which has substantially been completed. Charges under the program primarily comprise severance costs. Through December 31, 2010, total charges recognized were $42.7 million of which $4.9 million, $31.4 million and $6.4 million was recognized during 2010, 2009 and 2008, respectively. See Note 15 to our audited consolidated financial statements for a summary of restructuring activity during 2010.
 
Other charges (income), net
 
Other charges (income), net consisted of net charges of $4.2 million in 2010, compared to net charges of $1.4 million and $2.6 million in 2009 and 2008, respectively. Other charges (income), net consists primarily of interest income, (gains) losses from foreign currency transactions and other items. Other charges (income),


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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 $20.1 million for 2010, compared to $25.1 million for 2009 and $25.4 million for 2008. The 2010 amount reflects the benefit of lower average borrowings and lower costs associated with our interest rate swap agreements compared with the prior year. The 2009 amount includes charges associated with the tender offer of our 4.85% Senior Notes and other financing costs as well as costs associated with our interest rate swap agreements which were offset by lower average debt balances in comparison to 2008.
 
During 2010, we recorded discrete tax items resulting in a net tax benefit of $5.2 million primarily related to the favorable resolution of certain prior year tax matters. In 2009, we recorded a discrete net tax benefit of $8.3 million primarily related to the favorable resolution of certain prior year tax matters. During 2008, we recorded a discrete tax benefit of $2.5 million related to favorable withholding tax law changes in China and discrete tax items resulting in a net tax benefit of $3.5 million primarily related to the closure of certain tax matters.
 
Our annual effective tax rate was 25%, 23% and 24% for 2010, 2009 and 2008, respectively. The previously described discrete tax items had the effect of lowering our annual effective tax rate by 1% in 2010, 4% in 2009 and 2% in 2008.
 
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.
 
U.S. Operations (amounts in thousands)
 
                                 
                Increase
  Increase
                (Decrease) in % (1)
  (Decrease) in % (1)
    2010   2009   2008   2010 vs. 2009   2009 vs. 2008
 
Net sales
  $ 689,546     $ 597,172     $ 682,282     15%   (12)%
Net sales to external customers
  $ 628,699     $ 548,677     $ 622,692     15%   (12)%
Segment profit
  $ 123,384     $ 107,719     $ 113,578     15%   (5)%
 
 
(1) Represents U.S. dollar growth for net sales and segment profit.
 
The increase in total net sales and net sales to external customers during 2010 reflects increases across most product categories, particularly product inspection and laboratory-related products. Net sales in our U.S. operations benefited approximately 2% from acquisitions during 2010.
 
Segment profit increased by $15.7 million in our U.S. Operations segment during 2010, compared to a decrease of $5.9 million during 2009. The increase in segment profit in 2010 was primarily due to increased sales volume as well as benefits from our cost reduction efforts and acquisitions, offset in part by increased material costs and a $1.8 million gain recognized during 2009 from the receipt of a previously reserved receivable.


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Swiss Operations (amounts in thousands)
 
                                 
                Increase
  Increase
                (Decrease) in % (1)
  (Decrease) in % (1)
    2010   2009   2008   2010 vs. 2009   2009 vs. 2008
 
Net sales
  $ 455,325     $ 396,269     $ 442,054     15%   (10)%
Net sales to external customers
  $ 113,488     $ 107,472     $ 126,476     6%   (15)%
Segment profit
  $ 97,666     $ 81,476     $ 86,279     20%   (6)%
 
 
(1) Represents U.S. dollar growth for net sales and segment profit.
 
Total net sales in U.S. dollars increased by 15% in 2010 and decreased by 10% in 2009 and in local currencies increased by 11% in 2010 and decreased by 11% in 2009. Net sales to external customers in U.S. dollars increased by 6% in 2010 and decreased by 15% in 2009 and in local currencies increased by 2% in 2010 and decreased by 15% in 2009. The increase in sales to external customers in local currencies during 2010 reflects growth in most laboratory-related products, partially offset by declines in core-industrial and food retail products.
 
Segment profit increased by $16.2 million in our Swiss Operations segment during 2010, compared to a decrease of $4.8 million during 2009. The increase in segment profit during 2010 is primarily due to increased sales volume and increased inter-segment pricing, partially offset by increased sales and marketing investments.
 
Western European Operations (amounts in thousands)
 
                                 
                      Increase
  Increase
                      (Decrease) in % (1)
  (Decrease) in % (1)
    2010     2009     2008     2010 vs. 2009   2009 vs. 2008
 
Net sales
  $ 692,255     $ 650,250     $ 762,717     6%   (15)%
Net sales to external customers
  $ 600,933     $ 574,109     $ 679,083     5%   (15)%
Segment profit
  $ 85,120     $ 72,201     $ 70,724     18%   2%
 
 
(1) Represents U.S. dollar growth for net sales and segment profit.
 
Total net sales in U.S. dollars increased by 6% in 2010 and decreased by 15% in 2009 and in local currencies increased by 10% in 2010 and decreased by 9% in 2009. Net sales to external customers in U.S. dollars increased by 5% in 2010 and decreased by 15% in 2009 and in local currencies increased by 8% in 2010 and decreased by 10% in 2009. Net sales in our Western European Operations benefited approximately 2% from acquisitions during 2010. The net sales increase in local currencies during 2010 reflects strong growth in most laboratory-related products offset in part by a decline in transportation and logistics related to reduced project activity.
 
Segment profit increased by $12.9 million in our Western European Operations segment during 2010, compared to an increase of $1.5 million in 2009. The increase in segment profit in 2010 primarily reflects increased sales volume and benefits from our cost reduction efforts, partially offset by unfavorable currency translation fluctuations.
 
Chinese Operations (amounts in thousands)
 
                                 
                      Increase
  Increase
                      (Decrease) in % (1)
  (Decrease) in % (1)
    2010     2009     2008     2010 vs. 2009   2009 vs. 2008
 
Net sales
  $ 404,543     $ 303,614     $ 317,040     33%   (4)%
Net sales to external customers
  $ 298,637     $ 232,643     $ 228,890     28%   2%
Segment profit
  $ 92,969     $ 69,617     $ 58,779     34%   18%
 
 
(1) Represents U.S. dollar growth for net sales and segment profit.


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Total net sales in U.S. dollars increased by 33% in 2010 and decreased by 4% in 2009 and in local currencies increased by 32% in 2010 and decreased by 6% in 2009. Net sales to external customers in U.S. dollars increased by 28% and 2% in 2010 and 2009, respectively and in local currencies increased by 27% in 2010 and were flat in 2009. The increase in 2010 total net sales in local currencies reflects strong sales growth across most product categories, particularly core-industrial products.
 
Segment profit increased by $23.4 million in our Chinese Operations segment during 2010, compared to an increase of $10.8 million in 2009. The increase in segment profit in 2010 is primarily due to increased sales volume partially offset by increased investments in response to the improved economic conditions.
 
Other (amounts in thousands)
 
                                 
                      Increase
  Increase
                      (Decrease) in % (1)
  (Decrease) in % (1)
    2010     2009     2008     2010 vs. 2009   2009 vs. 2008
 
Net sales
  $ 330,759     $ 269,926     $ 321,480     23%   (16)%
Net sales to external customers
  $ 326,421     $ 265,952     $ 316,203     23%   (16)%
Segment profit
  $ 32,795     $ 23,522     $ 28,691     39%   (18)%
 
 
(1) Represents U.S. dollar growth for net sales and segment profit.
 
Total net sales in U.S. dollars increased by 23% in 2010 and decreased by 16% in 2009 and in local currencies increased by 16% in 2010 and decreased by 13% in 2009. Net sales to external customers in U.S. dollars increased by 23% in 2010 and decreased by 16% in 2009 and in local currencies increased by 16% in 2010 and decreased by 13% in 2009. This performance primarily reflects increased sales across most geographies, especially other Asian countries.
 
Segment profit increased $9.3 million in our Other segment during 2010, compared to a decrease of $5.2 million during 2009. The increase in segment profit during 2010 relates primarily to increased sales volume.
 
Liquidity and Capital Resources
 
Liquidity is our ability to generate sufficient cash flows from operating activities to meet our obligations and commitments. In addition, liquidity includes the ability to obtain appropriate financing. Currently, our financing requirements are primarily driven by working capital requirements, capital expenditures, share repurchases and acquisitions. In 2010, we have also increased our debt balance at a European owned entity and our cash balance in the United States to facilitate foreign earnings repatriation. Our share repurchase program was suspended in October 2008 and restarted in December 2009 due to the economic downturn and instability in the financial markets. While we have seen an improvement in global economic conditions, our ability to generate cash flows may be reduced by a prolonged global economic slowdown.
 
Cash provided by operating activities totaled $268.3 million in 2010, compared to $232.6 million in 2009 and $223.1 million in 2008. The increase in 2010 resulted principally from higher net earnings, offset in part by increased working capital associated with the increased sales volume. Our inventory balances have also increased during 2010 related to increased business activity, as well as supplier constraints, system changes, product transfers and new product introductions. In addition, benefits during 2010 from reduced incentive payments related to previous year performance-related compensation incentives were offset by benefits during 2009 from reduced working capital balances associated with the decline in prior year business activity. The increase in cash provided by operating activities during 2009 resulted principally from decreased incentive payments of $15.4 million related to 2008 performance-related compensation incentives and reduced accounts receivable and inventory balances, offset in part by lower net earnings and cash payments of $22.2 million related to our restructuring program. We also made $5.0 million, $11.5 million and $5.0 million of voluntary incremental pension contributions in 2010, 2009 and 2008, respectively.


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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 $73.9 million in 2010, $60.0 million in 2009 and $61.0 million in 2008. Our capital expenditures in 2010 included approximately $30.6 million of investments directly related to our Blue Ocean multi-year program of information technology investment compared with $35.1 million in 2009 and $16.2 million in 2008.
 
Cash flows used in financing activities during 2010 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. Cash flows used in financing activities during 2009 included proceeds of $100 million from the issuance of our 6.30% Senior Notes and payments of $0.7 million of debt issuance costs. In 2009, we also made payments to repurchase $75 million of our 4.85% Senior Notes and paid $1.6 million in debt extinguishment costs and other financing charges in connection with our tender offer. Financing activities during 2008 included $3.3 million of financing fees related to the closing of our $950 million credit facility. As further described below, in accordance with our share repurchase plan, we repurchased 1,955,634 shares and 58,800 shares in the amount of $240.0 million and $6.0 million during 2010 and 2009, respectively.
 
As previously mentioned, cash flows provided by financing activities during 2010 also reflected increased debt balances at a European owned entity to facilitate foreign earnings repatriation. The increase in our Credit Agreement from 2009 to 2010 was primarily related to this transaction. The transaction also increased cash balances in the U.S.
 
We continue to explore potential acquisitions. In connection with any acquisition, we may incur additional indebtedness. During the first quarter of 2010 we spent approximately $12.5 million relating to the acquisition of our pipette distributor in the United Kingdom. During the fourth quarter of 2009, we also spent approximately $14.3 million, plus contingent consideration up to a maximum of $7.8 million, for a leader in vision technology that we have integrated into our end-of-line packaging inspection systems product offering.
 
During the fourth quarter of 2010, we also sold our retail software business for in-store item and inventory management solutions for approximately $10 million. The sale resulted in a $4.4 million pre-tax charge ($3.8 million after-tax) and has been included in other charges (income), net in our 2010 consolidated statement of operations. Annualized net sales and net earnings associated with this business are immaterial to our consolidated results.
 
6.30% Senior Notes
 
On June 25, 2009, we issued and sold, in a private placement, $100 million aggregate principal amount of our 6.30% Series 2009-A Senior Notes due June 25, 2015 (“6.30% Senior Notes”) under a Note Purchase Agreement among the Company and the accredited institutional investors named therein (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 us and our 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, 2010.


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Under the terms of the offering, we may sell additional Senior Notes at our discretion in an aggregate amount not to exceed $600 million. Such additional Senior Notes would rank equally with our unsecured indebtedness.
 
Issuance costs approximating $0.7 million will be amortized to interest expense over the six-year term of the 6.30% 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”). Discount and issuance costs approximated $1.2 million and were amortized to interest expense over the seven-year term of the 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. In connection with the tender, we recorded a charge of $1.5 million, which included a premium of $0.9 million, unamortized discount and debt issuance fees of $0.2 million and certain third party costs of $0.4 million. These charges were recorded in interest expense in the consolidated statement of operations.
 
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 August 15, 2008, we entered into a $950 million Credit Agreement (the “Credit Agreement”), which replaced our $450 million Amended and Restated Credit Agreement (the “Prior Credit Agreement”). The Credit Agreement is provided by a group of financial institutions (similar to our Prior Credit Agreement) and has a maturity date of August 15, 2013. 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 unsecured credit ratings, which was, as of December 31, 2010, set at LIBOR plus 0.70% (based on ratings of “BBB” by Standard & Poor’s and “Baa2” by Moody’s). We must also pay facility fees that are tied to our credit ratings. The Credit Agreement contains covenants, with which we were in compliance as of December 31, 2010, which include 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, including upon a change of control. We capitalized $3.3 million in financing fees during 2008 associated with the Credit Agreement which are amortized to interest expense through 2013. As of December 31, 2010, approximately $387.9 million was available under the facility.
 
Our short-term borrowings and long-term debt consisted of the following at December 31, 2010:
 
                         
          Other Principal
       
    U.S. Dollar     Trading Currencies     Total  
 
6.30% $100 million Senior Notes
  $ 100,000     $     $ 100,000  
$950 million Credit Agreement
          556,481       556,481  
Other local arrangements
          24,722       24,722  
                         
Total debt
    100,000       581,203       681,203  
Less: current portion
          (10,902 )     (10,902 )
                         
Total long-term debt
  $ 100,000     $ 570,301     $ 670,301  
                         


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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, 2010, we were in compliance with all covenants set forth in our 6.30% 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, 2010 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
  $ 681,203     $ 10,902     $ 570,301     $ 100,000     $  
Interest on debt
    69,274       18,147       41,668       9,459        
Non-cancelable operating leases
    98,890       29,709       38,321       21,521       9,339  
Pension and post-retirement funding (1)
    20,530       20,530                    
Purchase obligations
    89,750       80,264       9,486              
                                         
Total (1)
  $ 959,647     $ 159,552     $ 659,776     $ 130,980     $ 9,339  
                                         
 
 
(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 2010 for income taxes and beyond 2011 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 that was increased in November 2010, whereby the Board of Directors authorized us to repurchase an additional $750 million of common shares. We expect that the new authorization will be utilized over the next several years. As of December 31, 2010, there were $920.6 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 17.2 million shares since the inception of the program through December 31, 2010.
 
Our share repurchase program was suspended in October 2008 and restarted in December 2009. During the years ended December 31, 2010 and 2009, we spent $240.0 million and $6.0 million on the repurchase of 1,955,634 shares and 58,800 shares at an average price per share of $122.70 and $101.82, respectively. We


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reissued 527,276 shares and 308,154 shares held in treasury for the exercise of stock options and restricted stock units during 2010 and 2009, respectively.
 
We also reissued 2,549 shares and 6,467 shares held in treasury during 2010 and 2009, respectively, pursuant to our 2007 Share Plan, which extends certain eligible employees the option to receive a percentage of their annual performance-related compensation in shares of the Company’s stock.
 
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
 
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. We have seen higher volatility in exchange rates generally than in the past, and recently the Swiss franc has strengthened against the euro. The exchange rate between the Swiss franc and the euro was 1.39 during 2010 as compared to 1.51 for the prior year, reflecting an 8% strengthening of the Swiss franc against the euro. The current exchange rate for the Swiss franc to the euro is 1.30 as of February 8, 2011, reflecting a 6% strengthening of the Swiss franc against the euro as compared to 2010. We estimate that a 1% strengthening of the Swiss franc against the euro would result in a decrease in our earnings before tax of $1.1 million to $1.8 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, 2010, 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 $9.5 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.
 
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,


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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, Inc. (“MTI”) 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 MTI 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 MTI 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 six years will approximate $0.6 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 forecasted intercompany sales. Such contracts limit our exposure to both favorable and unfavorable currency fluctuations. The net fair value of these contracts was a $1.5 million net gain at December 31, 2010. A sensitivity analysis to changes on these foreign currency-denominated contracts indicates that if the primary currency (primarily U.S. dollar, Swiss franc and British pound) declined by 10%, the fair value of these instruments would decrease by $7.3 million at December 31, 2010. 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


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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 $5.8 million at December 31, 2010. Based on our agreements outstanding at December 31, 2010, a 100-basis-point increase in interest rates would result in an increase in the net aggregate market value of these instruments of $4.8 million. Conversely, a 100-basis-point decrease in interest rates would result in a $5.1 million decrease in the net aggregate market value of these instruments at December 31, 2010. 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 2010 and projected benefit obligation as of December 31, 2010 was $5.1 million and $125.3 million, respectively, for our U.S. pension plan and $5.8 million and $661.0 million, respectively, for our international pension plans. The net periodic post-retirement credit for 2010 and expected post-retirement benefit obligation as of December 31, 2010 for our U.S. post-retirement medical benefit plan was $0.4 million and $14.6 million, respectively.
 
Pension and post-retirement benefit plan expense and obligations are developed from assumptions utilized in actuarial valuations. The most significant of these assumptions include the discount rate and expected return on plan assets. In accordance with U.S. GAAP, actual results that differ from the assumptions are accumulated and deferred over future periods. While management believes the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect our plan obligations and future expense.
 
The expected rates of return on the various defined benefit pension plans’ assets are based on the asset allocation of each plan and the long-term projected return of those assets, which represent a diversified mix of U.S. and international corporate equities and government and corporate debt securities. In 2002, we froze our U.S. defined benefit pension plan and discontinued our retiree medical program for certain current and all future employees. Consequently, no significant future service costs will be incurred on these plans. For 2010, the weighted average return on assets assumption was 8.25% for the U.S. plan and 5.20% for the international plans. A change in the rate of return of 1% would impact annual benefit plan expense by approximately $5.9 million after tax.
 
The discount rates for defined benefit and post-retirement plans are set by benchmarking against high-quality corporate bonds. For 2010, the average discount rate assumption was 5.50% for the U.S. plan and


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3.90% 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 $5.0 million, $11.5 million and $5.0 million in 2010, 2009 and 2008, 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, 2010, trade accounts receivable were $368.9 million, net of a $11.5 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, 2010, inventories were $217.1 million.
 
We record our inventory at the lower of cost or net realizable value. Cost, which includes direct materials, labor and overhead, is generally determined using the first in, first out (FIFO) method. The estimated net realizable value is based on assumptions for future demand and related pricing. Adjustments to the cost basis of our inventory are made for excess and obsolete items based on usage, orders and technological obsolescence. If actual market conditions are less favorable than those projected by management, reductions in the value of inventory may be required.
 
Goodwill and other intangible assets
 
As of December 31, 2010, our consolidated balance sheet included goodwill of $434.7 million and other intangible assets of $104.4 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 most significant of these estimates and assumptions within our fair value models include sales growth, controllable cost growth,


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perpetual 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.
 
Income taxes
 
Income tax expense and deferred tax assets and liabilities reflect management’s assessment of actual future taxes to be paid on items in the consolidated financial statements. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, an adjustment to the deferred tax asset would increase income or equity in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of the net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.
 
We plan to repatriate earnings from China, Switzerland, the United Kingdom and certain other countries in future years and we currently believe that there will be no additional cost associated with the repatriation of such foreign earnings other than withholding taxes. All other undistributed earnings are considered to be permanently invested.
 
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 $307.5 million for the year ended December 31, 2010, each increase of $3.1 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, we defer revenue recognition until delivery has occurred. Other than a few small software applications, we do not sell software products without the related hardware instrument as the software is embedded in the instrument. Our 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 our solutions have a post-shipment obligation, such as customer acceptance, revenue is deferred until the obligation has been completed. In addition, we also defer revenue where installation is required, unless such installation is deemed perfunctory. We generally maintain the right to accept or reject a product return in our terms and conditions and we also maintain appropriate accruals for outstanding credits. 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 our distributors. Distributor discounts are offset against revenue at the time such revenue is recognized. 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.


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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 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.
 
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, 2010 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.


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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, 2010. 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, 2010, 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.


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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
    44     President and Chief Executive Officer
William P. Donnelly
    49     Chief Financial Officer
Thomas Caratsch
    52     Head of Laboratory
Hans-Peter von Arb
    56     Head of Retail
Christian Magloth
    45     Head of Human Resources
Joakim Weidemanis
    41     Head of Product Inspection
Urs Widmer
    60     Head of Industrial
Marc de la Guéronnière
    47     Head of European Market Organizations
 
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.
 
Hans-Peter von Arb has been Head of Retail of the Company since June 2006. From 2001 until June 2006, he served as the Head of the Company’s Load Cell Competence Center. From 1996 to 2000, he held various management positions with the Company in Switzerland and Germany. Prior to joining the Company in 1996, he worked in the field of industrial laser systems.
 
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.
 
Joakim Weidemanis has been Head of Product Inspection of the Company since January 2006. From August 2005 to January 2006, he served as Head of Business Development of the Product Inspection Division. Prior to joining the Company, he held various management positions at ABB, including from July 2000 to August 2005 when he served as President of the North American water metering systems business and from early 2004 as the Head of the global water metering division that became Elster Water Metering Systems.
 
Urs Widmer has been Head of Industrial since 2001. From 1984 to 2001, he served in various management functions within the Company, including most recently Head of Standard Industrial (Europe) from 1995 to 1999. Prior to 1984, he held various management positions with Siemens, a global manufacturer of solutions for information and communications, automation and control, power and transportation.


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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.
 
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 2011 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 2011 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, 2010” in the 2011 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 2011 Proxy Statement is incorporated by reference herein.
 
Item 14.    Principal Accounting Fees and Services
 
Information appearing in the section “Audit Committee Report” in the 2011 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.


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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 16, 2011
 
  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

Olivier A. Filliol
  President and Chief Executive Officer
     
/s/   William P. Donnelly

William P. Donnelly
  Group Vice President and Chief Financial Officer
(Principal financial and accounting officer)
     
/s/   Olivier A. Filliol

Olivier A. Filliol
  Director
     
/s/   Wah-Hui Chu

Wah-Hui Chu
  Director
     
/s/   Francis A. Contino

Francis A. Contino
  Director
     
/s/   Michael A. Kelly

Michael A. Kelly
  Director
     
/s/   Martin Madaus

Martin Madaus
  Director
     
/s/   Hans Ulrich Maerki

Hans Ulrich Maerki
  Director
     
/s/   George M. Milne

George M. Milne
  Director
     
/s/   Thomas P. Salice

Thomas P. Salice
  Director
     
/s/   Robert F. Spoerry

Robert F. Spoerry
  Director


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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 February 8, 2007 (2)
  4 .6   Rights Agreement dated as of August 26, 2002 between the Company and Mellon Investor Services LLC, as Rights Agent, which includes as Exhibit A thereto, the Certificate of Designation, as Exhibit B thereto, the Form of Rights Certificate, and as Exhibit C thereto, the Summary of Rights to Purchase Preferred Shares (3)
  10 .1   Credit Agreement among Mettler-Toledo International Inc., certain of its subsidiaries, JP Morgan Chase, N.A., J.P. Morgan Securities Inc. and Banc of America Securities LLC and certain other financial institutions, dated as of August 15, 2008 (4)
  10 .11   Indenture, dated as of November 12, 2003 (12)
  10 .12   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 (14)
  10 .20   1997 Amended and Restated Stock Option Plan (5)
  10 .21   Amendment to the 1997 Amended and Restated Stock Option Plan (6)
  10 .22   Mettler-Toledo International Inc. 2004 Equity Incentive Plan (7)
  10 .23   Mettler-Toledo International Inc. 2007 Share Plan, effective February 7, 2008 (8)
  10 .31   Regulations of the POBS PLUS — Incentive Scheme for Senior Management of Mettler Toledo, effective as of November, 2006 (9)
  10 .32   Regulations of the POBS PLUS — Incentive Scheme for Members of the Group Management of Mettler Toledo, effective as of January, 2009 (9)
  10 .51   Employment Agreement between Robert Spoerry and Mettler-Toledo International Inc., dated as of November 1, 2007 (10)
  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 (10)
  10 .54   Employment Agreement between Urs Widmer and Mettler-Toledo International Inc., dated as of November 5, 2001 (11)
  10 .55   Employment Agreement between Joakim Weidemanis and Mettler-Toledo International Inc., dated as of May 23, 2005 (13)
  10 .56   Employment Agreement between Hans-Peter von Arb and Mettler-Toledo International Inc., dated as of April 11, 2006 (13)
  10 .57*   Employment Agreement between Marc de la Guéronnière and Mettler-Toledo International Inc., dated as of January 27, 2011
  10 .58*   Employment Agreement between Christian Magloth and Mettler-Toledo International Inc., dated as of March 22, 2010
  10 .59   Form of Tax Equalization Agreement between Messrs. Bürker, Caratsch, Filliol, Spoerry, von Arb and Widmer and Mettler-Toledo International Inc., dated October 10, 2007 (8)
  10 .60   Employment Agreement between Thomas Caratsch and Mettler-Toledo International Inc., dated as of December 4, 2007 (8)
  21 *   Subsidiaries of the Company
  23 .1*   Consent of PricewaterhouseCoopers LLP


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Table of Contents

         
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 10-K dated February 16, 2007
 
(3) Incorporated by reference to the Company’s Registration Statement on Form 8-K/A filed on August 29, 2002
 
(4) Incorporated by reference to the Company’s Report on Form 8-K dated August 15, 2008
 
(5) Incorporated by reference to the Company’s Registration Statement on Form S-1 (Reg. No. 333-35597)
 
(6) Incorporated by reference to the Company’s Report on Form 10-Q dated August 15, 2000
 
(7) Incorporated by reference to the Company’s Form DEF 14-A filed March 29, 2004
 
(8) Incorporated by reference to the Company’s Report on Form 10-K dated February 15, 2008
 
(9) Incorporated by reference to the Company’s Report on Form 10-K dated February 13, 2009
 
(10) Incorporated by reference to the Company’s Report on Form 8-K dated November 1, 2007
 
(11) Incorporated by reference to the Company’s Report on Form 10-K dated March 4, 2002
 
(12) Incorporated by reference to the Company’s Report on Form 10-K dated March 15, 2004
 
(13) Incorporated by reference to the Company’s Report on Form 10-Q dated July 28, 2006
 
(14) Incorporated by reference to the Company’s Report on Form 8-K dated June 25, 2009
 
  * Filed herewith

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METTLER-TOLEDO INTERNATIONAL INC.
 
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
         
    Page
 
    F-2  
    F-3  
    F-4  
    F-5  
    F-6  
    F-7  


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Table of Contents

 
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, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing on page S-1 present 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, 2010, 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 schedules, 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 schedules, 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 16, 2011


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METTLER-TOLEDO INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31
(In thousands, except share data)
 
                         
    2010     2009     2008  
 
Net sales
                       
Products
  $ 1,524,083     $ 1,304,713     $ 1,532,823  
Service
    444,095       424,140       440,521  
                         
Total net sales
    1,968,178       1,728,853       1,973,344  
Cost of sales
                       
Products
    662,314       583,998       701,642  
Service
    268,668       255,518       278,621  
                         
Gross profit
    1,037,196       889,337       993,081  
Research and development
    97,028       89,685       102,282  
Selling, general and administrative
    588,726       505,177       579,806  
Amortization
    14,842       11,844       10,553  
Interest expense
    20,057       25,117       25,390  
Restructuring charges
    4,866       31,368       6,413  
Other charges (income), net
    4,164       1,384       2,568  
                         
Earnings before taxes
    307,513       224,762       266,069  
Provision for taxes
    75,365       52,169       63,291  
                         
Net earnings
  $ 232,148     $ 172,593     $ 202,778  
                         
Basic earnings per common share:
                       
Net earnings
  $ 6.98     $ 5.12     $ 5.92  
Weighted average number of common shares
    33,280,463       33,716,353       34,250,310  
Diluted earnings per common share:
                       
Net earnings
  $ 6.80     $ 5.03     $ 5.79  
Weighted average number of common and common equivalent shares
    34,140,097       34,290,771       35,048,859  
 
The accompanying notes are an integral part of these consolidated financial statements.


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METTLER-TOLEDO INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEETS
As of December 31
(In thousands, except share data)
 
                 
    2010     2009  
 
ASSETS
Current assets:
               
Cash and cash equivalents
  $ 447,577     $ 85,031  
Trade accounts receivable, less allowances of $11,536 in 2010 and $12,399 in 2009
    368,936       312,998  
Inventories
    217,104       168,042  
Current deferred tax assets, net
    44,548       34,225  
Other current assets and prepaid expenses
    66,730       45,811  
                 
Total current assets
    1,144,895       646,107  
Property, plant and equipment, net
    364,472       316,334  
Goodwill
    434,699       440,950  
Other intangible assets, net
    104,372       105,284  
Non-current deferred tax assets, net
    95,996       95,688  
Other non-current assets
    138,629       114,424  
                 
Total assets
  $ 2,283,063     $ 1,718,787  
                 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
               
Trade accounts payable
  $ 138,105     $ 103,160  
Accrued and other liabilities
    100,793       91,907  
Accrued compensation and related items
    138,358       96,359  
Deferred revenue and customer prepayments
    86,746       63,292  
Taxes payable
    49,577       38,686  
Current deferred tax liabilities
    17,705       11,303  
Short-term borrowings and current maturities of long-term debt
    10,902       89,968  
                 
Total current liabilities
    542,186       494,675  
Long-term debt
    670,301       203,590  
Non-current deferred tax liabilities
    124,523       119,791  
Other non-current liabilities
    174,469       189,593  
                 
Total liabilities
    1,511,479       1,007,649  
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 32,425,315 and 33,851,124 shares at December 31, 2010 and 2009, respectively
    448       448  
Additional paid-in capital
    597,195       574,034  
Treasury stock at cost (12,360,696 and 10,934,887 shares at December 31, 2010 and 2009, respectively)
    (1,057,390 )     (857,130 )
Retained earnings
    1,223,130       1,009,995  
Accumulated other comprehensive income (loss)
    8,201       (16,209 )
                 
Total shareholders’ equity
    771,584       711,138  
                 
Total liabilities and shareholders’ equity
  $ 2,283,063     $ 1,718,787  
                 
 
The accompanying notes are an integral part of these consolidated financial statements.


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METTLER-TOLEDO INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
For the years ended December 31
(In thousands, except share data)
 
                                                         
                                  Accumulated
       
                Additional
                Other
       
    Common Stock     Paid-In
    Treasury
    Retained
    Comprehensive
       
    Shares     Amount     Capital     Stock     Earnings     Income (Loss)     Total  
 
Balance at December 31, 2007
    35,638,483     $ 448     $ 548,378     $ (662,393 )   $ 652,236     $ 42,617     $ 581,286  
Exercise of stock options and restricted stock units
    172,248                   12,138       (6,910 )           5,228  
Other treasury stock issuances
    16,760                   1,149       352             1,501  
Repurchases of common stock
    (2,232,188 )                 (224,495 )                 (224,495 )
Tax benefit resulting from exercise of certain employee stock options
                2,696                         2,696  
Share-based compensation
                8,698                         8,698  
Adoption of year end pension measurement date provision, net of tax
                            33       (107 )     (74 )
Comprehensive income:
                                                       
Net earnings
                            202,778             202,778  
Net unrealized loss on cash flow hedging arrangements, net of tax
                                  (2,593 )     (2,593 )
Change in currency translation adjustment, net of tax
                                  (23,349 )     (23,349 )
Pension adjustment, net of tax
                                  (48,429 )     (48,429 )
                                                         
Total comprehensive income
                                                    128,407  
                                                         
Balance at December 31, 2008
    33,595,303     $ 448     $ 559,772     $ (873,601 )   $ 848,489     $ (31,861 )   $ 503,247  
Exercise of stock options and restricted stock units
    308,154                   21,998       (10,930 )           11,068  
Other treasury stock issuances
    6,467                   461       (157 )           304  
Repurchases of common stock
    (58,800 )                 (5,988 )                 (5,988 )
Tax benefit resulting from exercise of certain employee stock options
                2,895                         2,895  
Share-based compensation
                11,367                         11,367  
Comprehensive income:
                                                       
Net earnings
                            172,593             172,593  
Net unrealized gain on cash flow hedging arrangements, net of tax
                                  5,401       5,401  
Change in currency translation adjustment, net of tax
                                  15,835       15,835  
Pension adjustment, net of tax
                                  (5,584 )     (5,584 )
                                                         
Total comprehensive income
                                                    188,245  
                                                         
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  
Comprehensive income:
                                                       
Net earnings
                            232,148             232,148  
Net unrealized loss on cash flow hedging arrangements, net of tax
                                  (6,410 )     (6,410 )
Change in currency translation adjustment, net of tax
                                  31,647       31,647  
Pension adjustment, net of tax
                                  (827 )     (827 )
                                                         
Total comprehensive income
                                                    256,558  
                                                         
Balance at December 31, 2010
    32,425,315     $ 448     $ 597,195     $ (1,057,390 )   $ 1,223,130     $ 8,201     $ 771,584  
                                                         
 
The accompanying notes are an integral part of these consolidated financial statements.


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Table of Contents

 
METTLER-TOLEDO INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31
(In thousands)
 
                         
    2010     2009     2008  
 
Cash flows from operating activities:
                       
Net earnings
  $ 232,148     $ 172,593     $ 202,778  
Adjustments to reconcile net earnings to net cash provided by operating activities:
                       
Depreciation
    29,686       29,634       28,987  
Amortization
    14,842       11,844       10,553  
Deferred tax provision
    4,058       3,766       4,137  
Excess tax benefits from share-based payment arrangements
    (9,017 )     (2,137 )     (1,609 )
Share-based compensation
    12,385       11,367       8,698  
Other
    3,499       166       (3,359 )
Increase (decrease) in cash resulting from changes in:
                       
Trade accounts receivable, net
    (55,025 )     37,071       53  
Inventories
    (40,417 )     7,817       (398 )
Other current assets
    (20,107 )     (5,801 )     (3,713 )
Trade accounts payable
    31,696       (9,416 )     (15,945 )
Taxes payable
    6,613       (6,844 )     5,416  
Accruals and other
    57,918       (17,455 )     (12,449 )
                         
Net cash provided by operating activities
    268,279       232,605       223,149  
                         
Cash flows from investing activities:
                       
Proceeds from sale of property, plant and equipment
    350       2,081       13,307  
Purchase of property, plant and equipment
    (73,943 )     (60,041 )     (61,008 )
Acquisitions
    (13,064 )     (14,620 )     (999 )
Proceeds from divestiture
    9,750              
Other investing activities
    (108 )            
                         
Net cash used in investing activities
    (77,015 )     (72,580 )     (48,700 )
                         
Cash flows from financing activities:
                       
Proceeds from borrowings
    714,575       261,436       306,602  
Repayments of borrowings
    (329,536 )     (422,812 )     (259,566 )
Proceeds from exercise of stock options
    20,455       11,068       5,228  
Repurchases of common stock
    (239,998 )     (5,988 )     (229,671 )
Excess tax benefits from share-based payment arrangements
    9,017       2,137       1,609  
Debt issuance costs
          (670 )     (3,349 )
Debt extinguishment costs
          (1,316 )      
Other financing activities
    (6,590 )     (1,298 )     615  
                         
Net cash provided by (used in) financing activities
    167,923       (157,443 )     (178,532 )
                         
Effect of exchange rate changes on cash and cash equivalents
    3,359       4,376       934  
                         
Net increase (decrease) in cash and cash equivalents
    362,546       6,958       (3,149 )
                         
Cash and cash equivalents:
                       
Beginning of period
    85,031       78,073       81,222  
                         
End of period
  $ 447,577     $ 85,031     $ 78,073  
                         
Supplemental disclosures of cash flow information:
                       
Cash paid during the year for:
                       
Interest
  $ 15,019     $ 19,256     $ 21,904  
Taxes
  $ 60,101     $ 51,361     $ 53,332  
 
The accompanying notes are an integral part of these consolidated financial statements.


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Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data, unless otherwise stated)
 
1.   BUSINESS DESCRIPTION AND BASIS OF PRESENTATION
 
Mettler-Toledo International Inc. (“Mettler-Toledo” or the “Company”) is a leading global supplier of precision instruments and services. The Company manufactures weighing instruments for use in laboratory, industrial, packaging, logistics and food retailing applications. The Company also manufactures several related analytical instruments and provides automated chemistry solutions used in drug and chemical compound discovery and development. In addition, the Company manufactures metal detection and other end-of-line inspection systems used in production and packaging and provides solutions for use in certain process analytics applications. The Company’s primary manufacturing facilities are located in China, Germany, Switzerland, the United Kingdom and the United States. The Company’s principal executive offices are located in Columbus, Ohio and Greifensee, Switzerland.
 
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include all entities in which the Company has control, which are its wholly-owned subsidiaries.
 
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates.
 
All intercompany transactions and balances have been eliminated.
 
Certain reclassifications have been made to prior year amounts to conform to the current year presentation.
 
2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Cash and Cash Equivalents
 
Cash and cash equivalents include highly liquid investments with original maturity dates of three months or less. The carrying value of these cash equivalents approximates fair value.
 
Trade Accounts Receivable
 
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts represents the Company’s best estimate of probable credit losses in its existing trade accounts receivable. The Company determines the allowance based upon a review of both specific accounts for collection and the age of the accounts receivable portfolio.
 
Inventories
 
Inventories are valued at the lower of cost or net realizable value. Cost, which includes direct materials, labor and overhead, is generally determined using the first in, first out (FIFO) method. The estimated net realizable value is based on assumptions for future demand and related pricing. Adjustments to the cost basis of the Company’s inventory are made for excess and obsolete items based on usage, orders and technological obsolescence. If actual market conditions are less favorable than those projected by management, reductions in the value of inventory may be required.


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Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
Long-Lived Assets
 
   a)  Property, Plant and Equipment
 
Property, plant and equipment are stated at cost less accumulated depreciation. Repair and maintenance costs are charged to expense as incurred. The Company expenses all internal-use software costs incurred in the preliminary project stage and capitalizes certain direct costs associated with the development and purchase of internal-use software within property, plant and equipment. Capitalized costs are amortized on a straight-line basis over the estimated useful lives of the software, generally not exceeding 10 years.
 
Depreciation and amortization are charged on a straight-line basis over the estimated useful lives of the assets as follows:
 
     
Buildings and improvements
  15 to 50 years
Machinery and equipment
  3 to 12 years
Computer software
  3 to 10 years
Leasehold improvements
  Shorter of useful life or lease term
 
   b)  Goodwill and Other Intangible Assets
 
Goodwill, representing the excess of purchase price over the net asset value of companies acquired, and indefinite-lived intangible assets are not amortized, but are reviewed for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that an asset might be impaired. The annual evaluation is based on valuation models that estimate fair value based on expected future cash flows and profitability projections.
 
Other intangible assets also include definite-lived assets which are subject to amortization. Where applicable, amortization is charged on a straight-line basis over the expected period to be benefited. The straight-line method of amortization reflects an appropriate allocation of the cost of the intangible assets to earnings in proportion to the amount of economic benefits obtained by the Company in each reporting period. The Company assesses the recoverability of other intangible assets annually, or more frequently if events or changes in circumstances indicate that an asset might be impaired.
 
   Accounting for Impairment of Long-Lived Assets
 
The Company assesses the need to record impairment losses on long-lived assets with finite lives when events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. An impairment loss would be recognized when future estimated undiscounted cash flows expected to result from use of the asset are less than the asset’s carrying value, with the loss measured as the difference between carrying value and fair value.
 
   Taxation
 
The Company files tax returns in each jurisdiction in which it operates. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in the respective jurisdictions in which the Company operates. In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.


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Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
Deferred taxes are not provided on the unremitted earnings of subsidiaries outside of the United States when it is expected that these earnings are permanently reinvested. Such earnings may become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends. Deferred taxes are provided when the Company no longer considers subsidiary earnings to be permanently invested, such as in situations where the Company’s subsidiaries plan to make future dividend distributions.
 
The Company recognizes accrued amounts of interest and penalties related to its uncertain tax positions as part of income tax expense within its consolidated statement of operations.
 
   Currency Translation and Transactions
 
The reporting currency for the consolidated financial statements of the Company is the U.S. dollar. The functional currency for the Company’s operations is generally the applicable local currency. Accordingly, the assets and liabilities of companies whose functional currency is other than the U.S. dollar are included in the consolidated financial statements by translating the assets and liabilities into the reporting currency at the exchange rates applicable at the end of the reporting period. The statements of operations and cash flows of such non-U.S. dollar functional currency operations are translated at the monthly average exchange rates during the year. Translation gains or losses are accumulated in other comprehensive income (loss) in the consolidated statements of shareholders’ equity. Transaction gains and losses are included as a component of net earnings.
 
   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. 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. In addition, the Company also defers revenue where installation is required, unless such installation is deemed perfunctory. 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. 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 its distributors. Distributor discounts are offset against revenue at the time such revenue is recognized. 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.
 
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.


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Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
   Research and Development
 
Research and development costs primarily consist of salaries, consulting and other costs. The Company expenses these costs as incurred.
 
   Warranty
 
The Company generally offers one-year warranties on most of its products. Product warranties are recorded at the time revenue is recognized. While the Company engages in extensive product quality programs and processes, its warranty obligation is affected by product failure rates, material usage and service costs incurred in correcting a product failure.
 
   Employee Termination Benefits
 
In situations where contractual termination benefits exist, the Company records accruals for employee termination benefits when it is probable that a liability has been incurred and the amount of the liability is reasonably estimable. All other employee termination arrangements are recognized and measured at their fair value at the communication date unless the employee is required to render additional service beyond the legal notification period, in which case the liability is recognized ratably over the future service period.
 
   Earnings per Common Share
 
In accordance with the treasury stock method, the Company has included 859,634, 574,418 and 798,549 common equivalent shares in the calculation of diluted weighted average number of common shares for the years ending December 31, 2010, 2009 and 2008, respectively, relating to outstanding stock options and restricted stock units.
 
Outstanding options and restricted stock units to purchase or receive 474,443, 1,017,136 and 564,487 shares of common stock for the years ending December 31, 2010, 2009 and 2008, respectively, have been excluded from the calculation of diluted weighted average number of common and common equivalent shares as such options and restricted stock units would be anti-dilutive.
 
   Equity-Based Compensation
 
The Company applies the fair value methodology in accounting for its equity-based compensation plan.
 
   Derivative Financial Instruments
 
The Company has only limited involvement with derivative financial instruments and does not use them for trading purposes. As described more fully in Note 5, the Company enters into foreign currency forward exchange contracts to economically hedge certain short-term intercompany balances involving its international businesses and to hedge certain forecasted intercompany sales. Such contracts limit the Company’s exposure to currency fluctuations on the items they hedge. These contracts are adjusted to fair market value as of each balance sheet date, with the resulting changes in fair value being recognized in the appropriate financial statement caption in the income statement consistent with the underlying hedged item.
 
The Company also enters into interest rate swap agreements in order to manage its exposure to changes in interest rates. The differential paid or received on interest rate swap agreements is recognized in interest expense over the life of the agreements as incurred. Fixed to floating interest rate swap agreements are accounted for as fair value hedges. Changes in fair value of outstanding interest rate swap agreements that are effective as fair value hedges are recognized in earnings as incurred and offset by the change in fair value of the hedged item. Floating to fixed interest rate swap agreements are accounted for as cash flow hedges.


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Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
Changes in fair value of outstanding interest rate swap agreements that are effective as cash flow hedges are recognized in other comprehensive income as incurred.
 
   Fair Value Measurements
 
The Company measures or monitors certain assets and liabilities on a fair value basis. Fair value is used on a recurring basis for assets and liabilities in which fair value is the primary basis of accounting, mainly derivative instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. The Company applies the fair value hierarchy established under U.S. GAAP and when possible looks to active and observable markets to price identical assets and liabilities. If identical assets and liabilities are not traded in active markets, the Company looks to market observable data for similar assets and liabilities.
 
   Recent Accounting Pronouncements
 
In January 2010, the FASB issued authoritative guidance regarding fair value measures and disclosures. The guidance requires disclosure of significant transfers between level 1 and level 2 fair value measurements along with the reason for the transfer. An entity must also separately report purchases, sales, issuances and settlements within the level 3 fair value rollforward. The guidance further provides clarification of the level of disaggregation to be used within the fair value measurement disclosures for each class of assets and liabilities and clarified the disclosures required for the valuation techniques and inputs used to measure level 2 or level 3 fair value measurements. This new authoritative guidance is effective for the Company in fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this guidance will not impact the Company’s consolidated results of operations or financial position.
 
In October 2009, the FASB issued authoritative guidance impacting two areas of revenue recognition. First, the guidance revises previous criteria for separating deliverables and allocating consideration to units of accounting in multiple deliverable arrangements. Arrangement consideration under the new guidance is allocated on the basis of “relative selling price” rather than fair value. The guidance establishes a hierarchy for determining relative selling price requiring first the use of vendor-specific objective evidence (“VSOE”) if it exists, then the use of third party evidence. If neither VSOE nor third party evidence exists, estimated selling price may be used. In addition, the guidance no longer permits the use of the residual method of allocation. Secondly, guidance was issued excluding software components essential to the functionality of tangible products from the scope of software revenue recognition. This new authoritative guidance requires expanded qualitative and quantitative disclosures and is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations or financial position.
 
3.   ACQUISITIONS AND DIVESTITURE
 
The Company adopted authoritative guidance on business combinations on January 1, 2009, which retained the fundamental requirements of the previous guidance requiring that the purchase method be used for all business combinations, but also provided revised guidance for recognizing and measuring identifiable assets and goodwill acquired and liabilities assumed. Contingent consideration is measured at fair value on the acquisition date with subsequent changes in the fair value of contingent consideration classified as a


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Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
liability recognized in earnings. Transaction costs are excluded from acquisition accounting and recognized as an expense as incurred.
 
In December 2009, the Company acquired a leader in vision technology for end-of-line packaging systems located in the U.S. for an aggregate purchase price of $14.3 million. The Company may be required to pay additional cash consideration up to a maximum amount of $7.8 million related to an earn-out period. Goodwill recorded in connection with the acquisition totaled $10.2 million, which is included in the Company’s U.S. Operations segment. The Company also recorded $11.8 million of identified intangibles primarily pertaining to tradename, customer relationships and acquired technology.
 
In January 2010, the Company acquired a pipette distributor located in the United Kingdom for an aggregate purchase price of approximately $12.5 million. Goodwill recorded in connection with the acquisition totaled approximately $7.4 million, which is included in the Company’s Western European Operations segment. The Company also recorded $4.5 million of identified intangibles pertaining to a tradename and customer relationships.
 
In December 2010, the Company also sold its retail software business for in-store item and inventory management solutions for approximately $10 million. The sale resulted in a $4.4 million pre-tax charge ($3.8 million after-tax) and has been included in other charges (income), net in the Company’s consolidated statement of operations for the year ending December 31, 2010. Annualized net sales and net earnings associated with this business are immaterial to the Company’s consolidated financial results. Goodwill previously recorded associated with this business amounted to $13.0 million and was included in the Company’s U.S. Operations segment.
 
4.   INVENTORIES
 
Inventory consisted of the following at December 31:
 
                 
    2010     2009  
 
Raw materials and parts
  $ 101,660     $ 80,150  
Work-in-progress
    36,615       29,695  
Finished goods
    78,829       58,197  
                 
    $ 217,104     $ 168,042  
                 
 
5.   FINANCIAL INSTRUMENTS
 
On January 1, 2009, the Company adopted authoritative guidance which requires enhanced disclosure of a Company’s objectives and strategies for using derivative instruments and the impact of those derivative instruments on a Company’s operations, financial position and cash flows. The Company has limited involvement with derivative financial instruments and does not use them for trading purposes. As more fully described below, the Company enters into interest rate swap agreements in order to manage its exposure to changes in interest rates. At December 31, 2010, the interest payments associated with 31% of the Company’s debt are fixed obligations. The amount of the Company’s fixed obligation interest payments may change based upon the expiration dates of its interest rate swap agreement and the level and composition of its debt. The Company also enters into foreign currency forward contracts to limit the Company’s exposure to currency fluctuations on the respective hedged items. For additional disclosures on the fair value of financial instruments, also see Note 6 to the consolidated financial statements.


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Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
   Cash Flow Hedges
 
The Company has an interest rate swap agreement, designated as a cash flow hedge. The agreement is a forward-starting swap which changes the floating rate LIBOR-based interest payments associated with $100 million in forecasted borrowings under the Company’s credit facility to a fixed obligation of 3.24% beginning in October 2010. During 2010, the Company settled $100 million of its original $200 million arrangement, resulting in expense of $0.6 million being reclassified from other comprehensive income to interest expense. An additional interest rate swap agreement that changed the floating rate LIBOR-based interest payments associated with $40 million outstanding under the Company’s credit facility to a fixed obligation of 2.70% expired in October 2010. During 2009, $110 million of the original $150 million agreement was terminated and settled. This coincided with the repayment on the Company’s credit facility of the same amount, the interest payments of which were hedged under the agreement. As a result of this transaction, a charge of $2.4 million was reclassified from other comprehensive income to interest expense.
 
The Company entered into a foreign currency forward contract (with a notional amount of $25.3 million), designated as a cash flow hedge, to hedge certain forecasted intercompany sales denominated in U.S. dollars with its foreign businesses. The Company recorded the effective portion of the cash flow derivative hedging gains and losses in accumulated other comprehensive income (loss), net of tax and reclassified these amounts into earnings in the period in which the transaction affected earnings. The foreign currency forward contract expired in December 2010.
 
Through December 31, 2010, no hedge ineffectiveness has occurred in relation to these cash flow hedges.
 
The fair value of these derivative instruments as of December 31, 2010 and 2009 are as follows:
 
                     
    Balance Sheet
  Fair Value
    Fair Value
 
    Location   December 31, 2010     December 31, 2009  
 
Derivatives designated as hedging instruments:
                   
Cash flow hedges:
                   
Interest rate forward-starting swap agreement
  Other non-current
(liabilities)/assets
  $ (5,842 )   $ 3,419  
Interest rate swap agreement
  Current liabilities         $ (733 )
Foreign currency forward contract
  Current assets         $ 1,566  
 
The effects of these derivative instruments on the consolidated statements of operations before taxes for the years ended December 31, 2010 and December 31, 2009 are as follows:
 
                                 
    Location of
  December 31, 2010     December 31, 2009  
    Derivative
      Gain/(Loss)
          Gain/(Loss)
 
    Gain/(Loss)
  Derivative
  Reclassified from
    Derivative
    Reclassified from
 
    Recognized in
  Gain/(Loss)
  AOCI into Earnings
    Gain/(Loss)
    AOCI into Earnings
 
    Earnings   Recognized in OCI   (Effective Portion)     Recognized in OCI     (Effective Portion)  
 
Derivatives designated as hedging instruments:
                               
Cash flow hedges:
                               
Interest rate swaps
  Interest expense   $(8,528)   $ (1,824 )   $ 6,940     $ (5,363 )
Foreign currency forward contract
  Net sales   $(1,566)   $ 1,263     $ 1,566     $ 1,706  
 
A net after tax derivative loss of $1.8 million based upon interest rates at December 31, 2010 is expected to be recognized in earnings in the next twelve months.


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Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
   Fair Value Hedges and Other Derivatives
 
The Company enters into foreign currency forward contracts in order to economically hedge short-term intercompany balances largely denominated in Swiss franc and other major European currencies with its foreign businesses. In accordance with U.S. GAAP, these contracts are considered “derivatives not designated as hedging instruments” and are categorized as “other derivatives” in the table below. Gains or losses on these instruments are reported in current earnings. At December 31, 2010 and 2009, these contracts had a notional value of $99.3 million and $128.7 million, respectively.
 
The Company entered into a $30 million interest rate swap agreement, designated as a fair value hedge, in connection with its 4.85% $75 million seven-year Senior Notes. Under the swap the Company received a fixed rate of 4.85% (i.e. the same rate as the 4.85% Senior Notes) and paid interest at a rate of LIBOR plus 0.22%. The Company recorded the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item in earnings under interest expense. The interest rate swap agreement expired in November 2010.
 
The fair value of these derivative instruments as of December 31, 2010 and December 31, 2009 are as follows:
 
                     
        Fair Value
    Fair Value
 
    Balance Sheet
  December 31,
    December 31,
 
    Location   2010     2009  
 
Derivatives not designated as hedging instruments:
                   
Other derivatives:
                   
Foreign currency forward contracts — liabilities
  Accrued and
other liabilities
  $ (305 )   $ (344 )
Foreign currency forward contracts — assets
  Other current assets   $ 1,763     $ 453  
Derivatives designated as hedging instruments:
                   
Fair value hedges:
                   
Interest rate swap agreement
  Other current assets         $ 846  
 
The fair value of these derivative instruments and their effects on the consolidated statement of operations before taxes for the years ended December 31, 2010 and December 31, 2009 are as follows:
 
                     
        Derivative
    Derivative
 
    Location of
  Gain/(Loss)
    Gain/(Loss)
 
    Derivative
  Recognized in
    Recognized in
 
    Gain/(Loss)
  Earnings for the
    Earnings for the
 
    Recognized in
  Year Ended
    Year Ended
 
    Earnings   December 31, 2010     December 31, 2009  
 
Derivatives not designated as hedging instruments:
                   
Other derivatives:
                   
Foreign currency forward contracts — liabilities
  Other charges
(income), net
  $ (37 )   $ 281  
Foreign currency forward contracts — assets
                   
Derivatives designated as hedging instruments:
                   
Fair value hedges:
                   
Interest rate swap agreement
  Interest Expense   $ 846     $ 681  


F-14


Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
The Company may be exposed to credit losses in the event of nonperformance by the counterparties to its derivative financial instrument contracts. Counterparties are established banks and financial institutions with high credit ratings. The Company believes that such counterparties will be able to fully satisfy their obligations under these contracts.
 
6.   FAIR VALUE MEASUREMENTS
 
On January 1, 2008, the Company adopted guidance which clarified how companies are required to use a fair value measure for recognition and disclosure by establishing a common definition of fair value, provided a framework for measuring fair value and expanded disclosures about fair value measurements. The guidance was applied to all financial assets and liabilities reported at fair value on the consolidated balance sheet. On January 1, 2009, this guidance was adopted for all nonfinancial assets reported at fair value on the consolidated balance sheet on a non-recurring basis, including goodwill, other intangible assets, long-lived assets (for purposes of impairment analysis) and asset retirement obligations.
 
At December 31, 2010 and 2009, the Company had derivative assets totaling $1.8 million and $6.3 million, respectively, and derivative liabilities totaling $6.1 million and $1.1 million, respectively. The fair values of the interest rate swap agreements and foreign currency forward contracts that economically hedge short-term intercompany balances are estimated based upon inputs from current valuation information obtained from dealer quotes and priced with observable market assumptions and appropriate valuation adjustments for credit risk. The Company has evaluated the valuation methodologies used to develop the fair values by dealers in order to determine whether such valuations are representative of an exit price in the Company’s principal market. In addition, the Company uses an internally developed model to perform testing on the valuations received from brokers. The fair value of the foreign currency forward contract hedging forecasted intercompany sales is priced with observable market assumptions with appropriate valuations for credit risk. The Company has also considered both its own credit risk and counterparty credit risk in determining fair value and determined these adjustments were insignificant for the years ended December 31, 2010 and December 31, 2009.
 
At December 31, 2010 and 2009, the Company had $243.5 million and $11.1 million of cash equivalents, respectively, the fair value of which is determined through quoted and corroborated prices in active markets. The fair value of cash equivalents approximates cost.
 
The difference between the fair value and carrying value of the Company’s long-term debt is not material.
 
Under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement consists of observable and unobservable inputs that reflect the assumptions that a market participant would use in pricing an asset or liability.
 
A fair value hierarchy has been established that categorizes these inputs into three levels:
 
Level 1: Quoted prices in active markets for identical assets and liabilities
 
Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities
 
Level 3: Unobservable inputs


F-15


Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
The following table presents for each of these hierarchy levels, the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2010 and 2009:
 
                                                                 
    December 31, 2010     December 31, 2009  
    Total     Level 1     Level 2     Level 3     Total     Level 1     Level 2     Level 3  
 
Assets:
                                                               
Cash equivalents
  $ 243,514     $ 230,000     $ 13,514     $     $ 11,080     $     $ 11,080     $  
Foreign currency forward contracts
    1,763             1,763             2,019             2,019        
Interest rate swap agreements
                              4,265             4,265          
                                                                 
Total
  $ 245,277     $ 230,000     $ 15,277     $     $ 17,364     $     $ 17,364     $  
                                                                 
Liabilities:
                                                               
Interest rate swap agreements
  $ 5,842     $     $ 5,842     $     $ 733     $     $ 733     $  
Foreign currency forward contracts
    305             305             344             344        
                                                                 
Total
  $ 6,147     $     $ 6,147     $     $ 1,077     $     $ 1,077     $  
                                                                 
 
7.   PROPERTY, PLANT AND EQUIPMENT, NET
 
Property, plant and equipment, net consisted of the following at December 31:
 
                 
    2010     2009  
 
Land
  $ 53,642     $ 50,666  
Building and leasehold improvements
    186,974       177,615  
Machinery and equipment
    312,501       287,247  
Computer software
    129,697       89,523  
                 
      682,814       605,051  
Less accumulated depreciation and amortization
    (318,342 )     (288,717 )
                 
    $ 364,472     $ 316,334  
                 
 
8.   GOODWILL AND OTHER INTANGIBLE ASSETS
 
The following table shows the changes in the carrying amount of goodwill for the years ended December 31:
 
                 
    2010     2009  
 
Balance at beginning of year
  $ 440,950     $ 424,426  
Goodwill acquired
    7,778       10,339  
Goodwill disposed
    (12,952 )      
Foreign currency translation
    (1,077 )     6,185  
                 
Balance at year end
  $ 434,699     $ 440,950  
                 


F-16


Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
Goodwill and indefinite-lived assets are reviewed for impairment on an annual basis in the fourth quarter. The Company completed its impairment review and determined that, through December 31, 2010, there had been no impairment of these assets.
 
The components of other intangible assets as of December 31 are as follows:
 
                                 
    2010     2009  
    Gross
    Accumulated
    Gross
    Accumulated
 
    Amount     Amortization     Amount     Amortization  
 
Customer relationships
  $ 80,674     $ (15,968 )   $ 80,357     $ (15,622 )
Proven technology and patents
    36,262       (22,298 )     38,242       (23,011 )
Tradename (finite life)
    2,420       (760 )     1,993       (909 )
Tradename (indefinite life)
    23,634             23,634        
Other
    510       (102 )     600        
                                 
    $ 143,500     $ (39,128 )   $ 144,826     $ (39,542 )
                                 
 
The annual aggregate amortization expense based on the current balance of other intangible assets is estimated at $5.7 million for 2011, $5.4 million for 2012, $3.9 million for 2013, $3.8 million for 2014 and $3.2 million for 2015. The non-indefinite-lived intangible assets are amortized on a straight-line basis over periods ranging from 5 to 45 years. The straight-line method of amortization reflects an appropriate allocation of the cost of the intangible assets to earnings in proportion to the amount of economic benefits obtained by the Company in each reporting period. The weighted average amortization period of the non-indefinite-lived intangible assets acquired during 2010 is 21 years. Further, the weighted average amortization periods of the customer relationships, proven technology and patents and tradenames acquired during 2010 are 30 years, 12 years and 7 years, respectively.
 
The Company recognized amortization expense associated with the above intangible assets of $6.2 million for the year ended December 31, 2010 and $4.8 million and $4.7 million for the years ended December 31, 2009 and 2008, respectively, of which $3.7 million, net of tax for the year ended December 31, 2010 and $2.7 million, net of tax, for the years ended December 31, 2009 and 2008, pertained to purchased intangibles.
 
In addition to the above amortization, the Company recorded amortization expense associated with capitalized software of $8.6 million, $7.0 million and $5.9 million for the years ended December 31, 2010, 2009 and 2008, respectively.
 
9.   WARRANTY
 
The Company’s accrual for product warranties is included in accrued and other liabilities in the consolidated balance sheets. Changes to the Company’s accrual for product warranties for the years ended December 31, 2010 and 2009 are as follows:
 
                 
    2010     2009  
 
Balance at beginning of year
  $ 15,856     $ 12,822  
Accruals for warranties
    16,001       19,576  
Payments/utilizations
    (16,019 )     (16,821 )
Foreign currency translation
    (158 )     279  
                 
Balance at year end
  $ 15,680     $ 15,856  
                 


F-17


Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
10.   DEBT
 
Debt consisted of the following at December 31:
 
                 
    2010     2009  
 
$100 million Senior Notes, interest at 6.30%, due June 25, 2015
  $ 100,000     $ 100,000  
$950 million Credit Agreement, interest at LIBOR plus 0.70%
    556,481       91,066  
Other local arrangements
    24,722       26,661  
$75 million Senior Notes, interest at 4.85%, due November 15, 2010
          75,846  
Less: unamortized discount
          (15 )
                 
            75,831  
                 
      681,203       293,558  
Less: current portion
    (10,902 )     (89,968 )
                 
Long-term debt
  $ 670,301     $ 203,590  
                 
 
   6.30% Senior Notes
 
On June 25, 2009, the Company issued and sold, in a private placement, $100 million aggregate principal amount of its 6.30% Series 2009-A Senior Notes due June 25, 2015 (“6.30% Senior Notes”) under a Note Purchase Agreement among the Company and the accredited institutional investors named therein (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. The Company 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), the Company 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 the Company to maintain a consolidated interest coverage ratio of not less than 3.5 to 1.0 and a consolidated leverage ratio of not more than 3.5 to 1.0. The agreement contains customary events of default with customary grace periods, as applicable. The Company was in compliance with these covenants at December 31, 2010.
 
Under the terms of the offering, the Company may sell additional Senior Notes at its discretion in an aggregate amount not to exceed $600 million. Such additional Senior Notes would rank equally with the Company’s unsecured indebtedness.
 
Issuance costs approximating $0.7 million will be amortized to interest expense over the six-year term of the 6.30% Senior Notes.
 
   Tender Offer & Repayment of 4.85% Senior Notes
 
In November 2003, the Company issued $150 million of 4.85% unsecured Senior notes due November 15, 2010 (“4.85% Senior Notes”). Discount and issuance costs approximated $1.2 million and were amortized to interest expense over the seven-year term of the 4.85% Senior Notes.


F-18


Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
On May 6, 2009, the Company commenced a cash tender offer to purchase any and all of its 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. In connection with the tender, the Company recorded a charge of $1.5 million, which included a premium of $0.9 million, unamortized discount and debt issuance fees of $0.2 million and certain third party costs of $0.4 million. These charges were recorded in interest expense in the consolidated statement of operations.
 
At maturity, on November 15, 2010, the Company repaid the remaining $75 million outstanding principal balance of its 4.85% Senior Notes. The repayment was funded from additional borrowings under the Company’s credit facility.
 
   Credit Agreement
 
On August 15, 2008, the Company entered into a $950 million Credit Agreement (the “Credit Agreement”), which replaced its $450 million Amended and Restated Credit Agreement (the “Prior Credit Agreement”). The Credit Agreement is provided by a group of financial institutions (similar to our Prior Credit Agreement) and has a maturity date of August 15, 2013. It is a revolving credit facility and is not subject to any scheduled principal payments prior to maturity. The obligations under the Credit Agreement are unsecured.
 
Borrowings under the Credit Agreement bear interest at current market rates plus a margin based on the Company’s senior unsecured credit ratings, which was, as of December 31, 2010, set at LIBOR plus 0.70% (based on ratings of “BBB” by Standard & Poor’s and “Baa2” by Moody’s). The Company must also pay facility fees that are tied to its credit ratings. The Credit Agreement contains covenants, with which the Company was in compliance as of December 31, 2010, 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 the Company, including limiting the ability to incur liens or indebtedness at a subsidiary level. In addition, the Credit Agreement has several events of default, including upon a change of control. The Company capitalized $3.3 million in financing fees during 2008 associated with the Credit Agreement which are amortized to interest expense through 2013. As of December 31, 2010, approximately $387.9 million was available under the facility.
 
   Other Local Arrangements
 
During 2006, a wholly owned subsidiary of the Company issued and sold $10 million of redeemable equity instruments to one of the Company’s non-U.S. sponsored defined benefit plans. These instruments will be redeemable no earlier than July 2012 and, as such, are classified as long-term debt on the Company’s consolidated balance sheet.
 
The Company’s weighted average interest rate for the years ended December 31, 2010 and 2009 was approximately 5% in both years. The carrying value of the Company’s debt obligations approximates fair value.
 
11.   SHAREHOLDERS’ EQUITY
 
   Common Stock
 
The number of authorized shares of the Company’s common stock is 125,000,000 shares with a par value of $0.01 per share. Holders of the Company’s common stock are entitled to one vote per share. At December 31, 2010, 4,069,742 shares of the Company’s common stock were reserved for issuance pursuant to the Company’s stock option plans.


F-19


Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
   Preferred Stock
 
The Board of Directors, without further shareholder authorization, is authorized to issue up to 10,000,000 shares of preferred stock, par value $0.01 per share in one or more series and to determine and fix the rights, preferences and privileges of each series, including dividend rights and preferences over dividends on the common stock and one or more series of the preferred stock, conversion rights, voting rights (in addition to those provided by law), redemption rights and the terms of any sinking fund therefore, and rights upon liquidation, dissolution or winding up, including preferences over the common stock and one or more series of the preferred stock. The issuance of shares of preferred stock, or the issuance of rights to purchase such shares, may have the effect of delaying, deferring or preventing a change in control of the Company or an unsolicited acquisition proposal.
 
   Restricted Stock Units
 
In 2010 and 2009, the Company granted 43,485 and 57,194 restricted stock units, respectively, to certain employees and directors. The weighted average grant-date fair value of the restricted stock units granted in 2010 and 2009 was $132.94 and $90.41 per unit, respectively, and the restricted units vest ratably primarily over a five-year period. The total fair value of the restricted stock units on the date of grant of $5.8 million for 2010 and $5.2 million for 2009 will be recorded as compensation expense ratably over the vesting period. Approximately $4.2 million and $3.4 million of compensation expense was recognized during the years ended December 31, 2010 and 2009, respectively.
 
   Shareholder Rights Plan
 
On August 26, 2002, the Board of Directors adopted a Shareholder Rights Plan under which the Company declared a non-cash dividend of one right for each outstanding share of common stock. The Rights, which expire on September 5, 2012, entitle stockholders to buy one one-thousandth of a share of preferred stock at an exercise price of $150. The Rights were distributed to those stockholders of record as of close of business on September 5, 2002 and are attached to all certificates representing those shares of common stock.
 
The Rights Plan provides that should any person or group acquire, or announce a tender or exchange offer for 15% or more of the Company’s common stock, each Right, other than Rights held by the acquiring person or group, would entitle its holder to purchase a number of shares of the Company’s common stock for 50% of its then-current market value. Unless a 15% acquisition has occurred, the Rights may be redeemed by the Board of Directors of the Company at any time. The Rights Plan will not be triggered by a tender or exchange offer for all outstanding shares of the Company at a price and on terms that the Company’s Board of Directors determines to be adequate and in the best interest of the Company and its stockholders.
 
The Rights Plan exempts any stockholder that beneficially owned 15% or more of the Company’s common stock as of August 26, 2002. However, the Rights will become exercisable if, at any time after August 26, 2002, any of these stockholders acquire additional shares of the Company’s common stock in an amount which is greater than 2% of the Company’s outstanding common stock.
 
   Share Repurchase Program
 
The Company has a $2.25 billion share repurchase program that was increased in November 2010, whereby the Board of Directors authorized the Company to repurchase an additional $750 million of common shares. The Company expects that the new authorization will be utilized over the next several years. As of December 31, 2010, there were $920.6 million of remaining common shares authorized to be repurchased under the program. The share repurchases are expected to be funded from cash balances, borrowings and cash generated from operating activities. Repurchases will be made through open market


F-20


Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
transactions, and the amount and timing of purchases will depend on business and market conditions, the stock price, trading restrictions, the level of acquisition activity and other factors. The Company has purchased 17.2 million shares since the inception of the program through December 31, 2010.
 
The Company’s share repurchase program was suspended in October 2008 and restarted in December 2009. During the years ended December 31, 2010 and 2009, the Company spent $240.0 million and $6.0 million on the repurchase of 1,955,634 shares and 58,800 shares at an average price per share of $122.70 and $101.82, respectively. The Company reissued 527,276 shares and 308,154 shares held in treasury for the exercise of stock options and restricted stock units during 2010 and 2009, respectively.
 
The Company also reissued 2,549 shares and 6,467 shares held in treasury during 2010 and 2009, respectively, pursuant to its 2007 Share Plan, which extends certain eligible employees the option to receive a percentage of their annual performance-based compensation in shares of the Company’s stock.
 
   Accumulated Other Comprehensive Income (Loss)
 
Accumulated other comprehensive income (loss) consisted of the following at December 31:
 
                         
    2010     2009     2008  
 
Currency translation adjustment, net of tax
  $ 59,102     $ 27,455     $ 11,620  
Net unrealized (loss) gain on cash flow hedging arrangements, net of tax
    (3,602 )     2,808       (2,593 )
Pension and post-retirement benefit related items
    (72,510 )     (73,234 )     (63,411 )
Deferred taxes on pension and post-retirement benefit related items
    25,211       26,762       22,523  
                         
Total accumulated other comprehensive income (loss)
  $ 8,201     $ (16,209 )   $ (31,861 )
                         
 
12.   EQUITY INCENTIVE PLAN
 
The Company’s equity incentive plan provides employees and directors of the Company additional incentives to join and/or remain in the service of the Company as well as to maintain and enhance the long-term performance and profitability of the Company. The Company’s 2004 equity incentive plan was approved by shareholders on May 6, 2004 and provides that 3.5 million shares of common stock, plus any options outstanding under the Company’s prior option plan that terminate without being exercised, may be the subject of awards. Of the 3.5 million shares of common stock available for awards, up to 2.1 million shares may be issued in the form of restricted stock or restricted stock units. The plan provides for the grant of options, restricted stock, restricted stock units and other equity-based awards. The exercise price of options granted shall not be less than the fair market value of the common stock on the date of the award. Options primarily vest equally over a five-year period from the date of grant and have a maximum term of up to 10 years and six months. Restricted units primarily vest equally over a five-year period from the date of grant. Since 2005, the compensation committee of the Board of Directors has generally granted restricted share units to participating managers and non-qualified stock options to executive officers.
 
All share-based compensation arrangements granted to employees, including stock option grants, are recognized in the consolidated statement of operations based on the grant-date fair value of the award over the period during which an employee is required to provide service in exchange for the award. Share-based compensation expense is recorded within selling, general and administrative in the consolidated statement of operations with a corresponding offset to additional paid-in capital in the consolidated balance sheet.


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Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
During the first quarter of 2008, the Company granted 213,850 performance-based options, with a grant-date fair value of $32.20. Compensation expense will be recognized over the five-year vesting provisions based upon the probability of the performance condition being met.
 
The fair values of stock options granted were calculated using the Black-Scholes pricing model. The aggregate intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price. The following table summarizes all stock option activity from December 31, 2009 through December 31, 2010:
 
                         
    Number of
    Weighted Average
    Aggregate Intrinsic
 
    Options     Exercise Price     Value (in millions)  
 
Outstanding at December 31, 2009
    2,943,353     $ 64.05     $ 122.2  
Granted
    215,955       133.00          
Exercised
    (473,442 )     43.20          
Forfeited
    (12,300 )     81.02          
                         
Outstanding at December 31, 2010
    2,673,566     $ 73.24     $ 208.5  
                         
Options exercisable at December 31, 2010
    1,668,223     $ 56.66     $ 157.7  
 
The following table details the weighted average remaining contractual life of options outstanding at December 31, 2010 by range of exercise prices:
 
                                 
                Remaining Contractual
       
    Number of Options
    Weighted Average
    Life of Options
    Options
 
    Outstanding     Exercise Price     Outstanding     Exercisable  
 
      376,978     $ 36.04       2.6       376,978  
      732,580     $ 49.21       4.0       732,580  
      647,600     $ 71.11       7.1       372,840  
      700,453     $ 101.92       7.6       185,825  
      215,955     $ 133.00       9.8        
                                 
      2,673,566               6.0       1,668,223  
                                 
 
As of the date granted, the weighted average grant-date fair value of the options granted during the years ended December 31, 2010, 2009 and 2008 was approximately $37.84, $27.82 and $24.42, respectively.
 
Such weighted average grant-date fair value was determined using an option pricing model that incorporated the following assumptions:
 
                         
    2010     2009     2008  
 
Risk-free interest rate
    1.17 %     2.33 %     2.77 %
Expected life in years
    5       5       5  
Expected volatility
    30 %     30 %     25 %
Expected dividend yield
                 
 
The total intrinsic value of options exercised during the years ended December 31, 2010, 2009 and 2008 was approximately $39.3 million, $10.9 million and $8.0 million, respectively.
 
The total fair value of options vested during the years ended December 31, 2010, 2009 and 2008 was approximately $6.9 million, $6.5 million and $6.0 million, respectively.


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Table of Contents

METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
The following table summarizes all restricted stock unit activity from December 31, 2009 through December 31, 2010:
 
                 
    Number of Restricted
    Aggregate Intrinsic
 
    Stock Units     Value (in millions)  
 
Outstanding at December 31, 2009
    169,587     $ 17.8  
Granted
    43,485          
Vested
    (53,834 )        
Forfeited
    (5,960 )        
                 
Outstanding at December 31, 2010
    153,278     $ 23.2  
                 
 
The total fair value of restricted stock units vested during the years ended December 31, 2010, 2009 and 2008 was approximately $4.1 million, $3.2 million and $2.3 million, respectively.
 
At December 31, 2010, a total of 1,242,898 shares of common stock were available for grant in the form of stock options or restricted stock units.
 
As of December 31, 2010, the unrecorded deferred share-based compensation balance related to both stock options and restricted stock units was $38.4 million and will be recognized using a straight-line method over an estimated weighted average amortization period of 2.3 years.
 
13.   BENEFIT PLANS
 
Mettler-Toledo maintains a number of retirement and other post-retirement employee benefit plans.
 
Certain subsidiaries sponsor defined contribution plans. Benefits are determined and funded annually based upon the terms of the plans. Amounts recognized as cost under these plans amounted to $10.5 million, $11.6 million and $12.4 million for the years ended December 31, 2010, 2009 and 2008, respectively.
 
Certain subsidiaries sponsor defined benefit plans. Benefits are provided to employees primarily based upon years of service and employees’ compensation for certain periods during the last years of employment. Prior to 2002, the Company’s U.S. operations also provided post-retirement medical benefits to their employees. Contributions for medical benefits are related to employee years of service.


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METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
The following table sets forth the change in benefit obligation, the change in plan assets, the funded status and amounts recognized in the consolidated financial statements for the Company’s defined benefit plans and post-retirement plan at December 31, 2010 and 2009:
 
                                                 
    U.S. Pension Benefits     Non-U.S. Pension Benefits     Other Benefits  
    2010     2009     2010     2009     2010     2009  
 
Change in benefit obligation:
                                               
Benefit obligation at beginning of year
  $ 119,930     $ 111,368     $ 600,063     $ 560,870     $ 14,509     $ 18,903  
Service cost, gross
    264       183       22,719       25,339       295       381  
Interest cost
    6,439       6,782       22,438       21,610       757       1,120  
Actuarial losses (gains)
    4,661       7,431       4,815       9,729       5       (4,530 )
Plan amendments and other
                (123 )     (3,976 )            
Benefits paid
    (5,954 )     (5,834 )     (25,431 )     (28,214 )     (958 )     (1,365 )
Impact of foreign currency
                36,548       14,705              
                                                 
Benefit obligation at end of year
  $ 125,340     $ 119,930     $ 661,029     $ 600,063     $ 14,608     $ 14,509  
                                                 
Change in plan assets:
                                               
Fair value of plan assets at beginning of year
  $ 86,801     $ 85,927     $ 580,273     $ 532,682     $     $  
Actual return on plan assets
    11,135       663       29,400       29,929              
Employer contributions
    5,058       6,045       18,944       23,515       1,135       1,365  
Plan participants’ contributions
                9,903       8,791       103       101  
Benefits paid
    (5,954 )     (5,834 )     (25,431 )     (28,214 )     (1,238 )     (1,466 )
Impact of foreign currency and other
                54,035       13,570              
                                                 
Fair value of plan assets at end of year
  $ 97,040     $ 86,801     $ 667,124     $ 580,273     $     $  
                                                 
Funded status
  $ (28,300 )   $ (33,129 )   $ 6,095     $ (19,790 )   $ (14,608 )   $ (14,509 )
                                                 
 
Amounts recognized in the consolidated balance sheets consist of:
 
                                                 
    U.S. Pension Benefits     Non-U.S. Pension Benefits     Other Benefits  
    2010     2009     2010     2009     2010     2009  
 
Other non-current assets
  $     $     $ 107,173     $ 86,365     $     $  
Pension and other post-retirement liabilities
    (28,300 )     (33,129 )     (101,078 )     (106,155 )     (14,608 )     (14,509 )
Accumulated other comprehensive loss (income)
    63,958       68,822       17,366       14,638       (8,814 )     (10,226 )
                                                 
Net amount recognized
  $ 35,658     $ 35,693     $ 23,461     $ (5,152 )   $ (23,422 )   $ (24,735 )
                                                 
 
The prepaid pension asset is recorded in other non-current assets on the consolidated balance sheet. The short-term and long-term portion of the accrued pension liability is recorded on the consolidated balance sheet within accrued and other liabilities and other non-current liabilities, respectively. The long-term portion of the accrued pension liabilities and other post-retirement liabilities at December 31, 2010 and 2009 was


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METTLER-TOLEDO INTERNATIONAL INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands, except share data, unless otherwise stated)
 
$28.2 million and $33.0 million, respectively, for the U.S. defined benefit pension plan, $96.6 million and $101.4 million, respectively, for the non-U.S. plans and $13.2 million and $13.0 million, respectively, for the U.S. post-retirement plan. The current portion of the accrued pension and other post-retirement liabilities at both December 31, 2010 and 2009 was $0.1 million for the U.S. defined benefit pension plan, $4.5 million and $4.8 million, respectively, for the non-U.S. plans and $1.4 million and $1.5 million, respectively, for the U.S. post-retirement plan.
 
The following amounts have been recognized in accumulated other comprehensive income (loss), before taxes, at December 31, 2010 and have not yet been recognized as a component of net periodic pension cost:
 
                         
    U.S. Pension
    Non-U.S. Pension
       
    Benefits     Benefits     Other Benefits  
 
Prior service cost, net
  $     $ (10,032 )   $  
Actuarial losses (gains)
    63,958       27,398       (8,814 )
                         
Total
  $ 63,958     $ 17,366     $ (8,814 )
                         
 
The accumulated benefit obligations at December 31, 2010 and 2009 were $125.3 million and $119.9 million, respectively, for the U.S. defined benefit pension plan and $634.8 million and $562.9 million, respectively, for all non-U.S. plans. Certain of the plans included within non-U.S. pension benefits have benefit obligations which exceed the fair value of plan assets. The projected benefit obligation, the accumulated benefit obligation and fair value of assets of these plans as of December 31, 2010 were $139.5 million, $126.8 million and $38.4 million, respectively.
 
The assumed discount rates and rates of increase in future compensation levels used in calculating the projected benefit obligations vary according to the economic conditions of the country in which the retirement plans are situated. The weighted average rates used for the purposes of the Company’s plans are as follows:
 
                                                 
    U.S.   Non-U.S.
    2010   2009   2008   2010   2009   2008
 
Discount rate
    5.25 %     5.50 %     6.25 %     3.60 %     3.90 %     3.95 %
Compensation increase rate
    n/a       n/a       n/a       2.20 %     2.20 %     2.25 %
 
The assumed discount rates, rates of increase in future compensation levels and the long-term rate of return used in calculating the net periodic pension cost vary according to the economic conditions of the country in which the retirement plans are situated. The weighted average rates used for the purposes of the Company’s plans are as follows:
 
                                                 
    U.S.   Non-U.S.
    2010   2009   2008   2010   2009   2008