EDGAR 10-K Filing

Company CIK: 1037646
Filing Year: 2024
Filename: 1037646_10-K_2024_0001037646-24-000007.json

---

ITEM 1. BUSINESS
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 most of them. We are recognized as an innovation leader and our solutions are critical in key research and development, quality control, and manufacturing processes for customers in a wide range of industries including life sciences, food, and chemicals. Our sales and service network is one of the most extensive in the industry. Our products are sold in more than 140 countries and we have a direct presence in approximately 40 countries. With proven growth strategies and a focus on execution, we have achieved a long-term track record of strong financial performance.
Our business is geographically diversified, with net sales in 2023 derived 41% from North and South America, 27% from Europe, and 32% from Asia and other countries. Our customer base is also diversified by industry and by individual end-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 consolidated financial statements and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under “Results of Operations by Reportable Segment” 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 services are described below. We also describe 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 reportable segments.
Laboratory Instruments
We make a wide variety of precision laboratory instruments for sample preparation, synthesis, analytical bench top, material characterization, and in-line measurement. Our portfolio includes laboratory balances, liquid pipetting solutions, automated laboratory reactors including real-time analytics, titrators, pH meters, process analytics sensors and analyzer technology, physical value analyzers including density and refractometry instruments, thermal analysis systems, and other analytical instruments such as UV/VIS spectrophotometers and moisture analyzers. Our laboratory instruments have leading-edge embedded software and we also offer LabX, our laboratory software platform to manage and analyze data generated by our instruments. The laboratory instruments and related service business accounted for approximately 55% of our net sales in 2023, 57% in 2022, and 56% in 2021.
Laboratory Balances
Our laboratory balances have weighing ranges from one ten-millionth of a gram up to 64 kilograms. To respond to a wide range of customer needs and value/price points, we market our balances in a range of product tiers offering different levels of functionality. We also provide filter weighing and powder and liquid dosing automated systems. Based on the same weighing technology platform, we manufacture mass comparators, which are used by weights and measures officials as well as National Measurement Institute laboratories to ensure the accuracy of reference weights. Laboratory balances are primarily used in the pharmaceutical, biotechnology, testing lab, food, chemical, cosmetics, academia, and other industries.
Pipettes
Pipettes are used in life science research laboratories for dispensing small volumes of liquids. We develop, manufacture, and distribute advanced pipettes, including single- and multi-channel manual and electronic pipettes. We also develop and produce high-value consumables such as pipette tips. We maintain service centers in key markets where customers periodically send their pipettes for certified recalibrations. These service centers, combined with our advanced asset management solutions, provide our customers with innovative solutions to maintain their instruments and meet regulatory compliance. Our principal end-markets are pharmaceutical, biotech, and academia.
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, testing lab, 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 plastics and polymer industries and academia and increasingly in the pharmaceutical and advanced materials industries.
pH meters measure acidity in laboratory samples. We also manufacture and 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 the loss on drying method, and UV/VIS spectrophotometers that optimize spectroscopic workflows.
Laboratory Software
LabX, our laboratory software platform, manages and analyzes data generated by our balances, titrators, pH meters, physical value analyzers, and other analytical instruments like UV/VIS spectrophotometers. LabX provides full network capability; assists with workflow automation; has efficient, intuitive protocols; and enables customers to collect and archive data in compliance with the U.S. Food and Drug Administration’s traceability and data integrity requirements for electronically stored data (also known as 21 CFR Part 11).
Automated Chemistry Solutions
Our automated chemistry solutions focus on select 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, enable customers to monitor chemical reactions and crystallization processes in real time in the lab and plant. In situ samples allow overnight sampling and testing. Additionally, we provide industry-leading software solutions that enable our customers to manage, optimize, and improve experiments as well as production scale-up. We believe that our portfolio of integrated technologies can bring significant efficiencies to the development process, enabling our customers to bring new drugs and chemicals to market faster.
Process Analytics
Our process analytics business provides instruments for the in-line measurement of liquid and gas parameters used primarily in the production process of pharmaceutical, biotech, beverage, micro-
electronics, chemical, and refining companies, as well as power plants. More than 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 meet the validation processes required for GMP (Good Manufacturing Processes) and other regulatory standards like the USP (U.S. Pharmacopeia) regulations for ultrapure water quality.
We are a leading solution provider for liquid analytical measurement to control and optimize production processes. Our solutions include sensor and analyzer technology for measuring pH, dissolved oxygen, carbon dioxide, conductivity, turbidity, ozone, total organic carbons, pressure, bioburden, sodium, and silica, as well as laser analyzers for gas measurement. 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, discrete manufacturing, and other industries. In addition, we manufacture metal detection, x-ray, checkweighing, and other end-of-line product inspection systems used in production and packaging. We supply automatic identification and data capture solutions, which integrate in-motion weighing, dimensioning, and identification technologies for transport, shipping, and logistics customers. We also offer heavy industrial scales and related software. The industrial instruments and related service business accounted for approximately 39% of our net sales in 2023, 38% in 2022, and 39% in 2021.
Industrial Weighing Instruments
We offer a comprehensive line of industrial scales and weighing devices, such as bench scales, floor scales, and weigh modules, for weighing loads from a few grams to several thousand kilograms in applications ranging from measuring materials in production to quality completeness control in manufacturing to weighing packages at the end of the line. Our products are used in a wide range of industrial applications, such as counting, formulating and mixing ingredients, and quality control.
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 formulation recipes or access setup data and can minimize downtime through predictive rather than reactive maintenance.
Transportation and Logistics
We supply automatic dimensional measurement 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, load management, 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, formulation/batching software; and DataBridge, 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 U.S. Food and Drug Administration requirements, 21 CFR Part 11.
Product Inspection
Increasing safety and consumer protection requirements are driving the need for more sophisticated end-of-line product inspection systems (e.g., for use in food processing and packaging, pharmaceutical, packaged consumer goods, and other industries). We are a leading global provider of metal detectors, x-ray systems, checkweighers, camera-based imaging equipment, and track-and-trace solutions 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 inspection is used to detect metallic contamination in applications unsuited to metal detectors and many types of non-metallic contamination, such as glass, calcified bone, stones, and pits. Our x-ray systems are also used for mass control and for determining and controlling the fat content in meat. Checkweighers are used to control the filled weight of packaged goods such as food, pharmaceuticals, and cosmetics. Our camera-based vision inspection solutions provide in-line inspection of package quality, labels, and content, which are needs for food and beverage, consumer goods, and pharmaceutical companies. Vision inspection systems with associated specialist software enable our pharmaceutical customers to implement traceability and serialization tracking, as required by regulation.
All of our technologies are integrated with material handling systems to ensure the correct presentation of the customer’s product to the device and the secure rejection of non-conforming product, and are frequently designed to comply with stringent hygiene standards. Our technologies may also be used together as components of integrated packaging lines. ProdX Inspect is our quality and productivity control software for helping customers comply with regulations and optimize process efficiency, either as a stand-alone solution or through integration with the customer’s manufacturing and enterprise 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, or cheeses). We offer weighing and software solutions, which can integrate counter, self-service, backroom and checkout functions and can incorporate fresh goods item data into a supermarket’s overall food item and inventory management system. In addition, we offer weighing solutions for fast-growing areas like self-checkout and unmanned stores, as well as AI-driven image recognition solutions for fresh goods. The customer benefits of our retail solutions are in the areas of enterprise-wide device management as well as article and price management, merchandising, and regulatory compliance. In North America and select other markets, our offering also includes automated packaging and labeling solutions for the meat backroom, which are fully integrated with the scales in the store. The retail business accounted for approximately 6% of our net sales in 2023 and 5% in both 2022 and 2021.
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 and testing
labs); food manufacturers; chemical, specialty chemicals, and cosmetics companies; the academic community; food retailers; the transportation and logistics industry; the metals industry; and the electronics industry.
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 end-customer accounting for more than 1% of 2023 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 we compete against. At December 31, 2023, our sales and service group consisted of approximately 9,000 employees in sales, marketing and customer service (including related administration), and post-sales technical service, located in approximately 40 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 continues to be successful with a focus on providing uptime and calibration services, as well as further expanding our offerings to provide value-added services for a range of market needs, including regulatory compliance, performance enhancements, application expertise and training, and remote services. We have a unique offering to our pharmaceutical customers in promoting the use of our instruments in compliance with FDA and other international regulations, and we can provide these services to most customers’ locations around the world. Our 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, on-demand services, and replacement parts) accounted for approximately 23% of our net sales in 2023 and 20% in both 2022 and 2021.
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 allow us to be the trusted advisor of our customers, which provides us with high-quality sales opportunities as well as innovative product and application ideas.
Research and Development and Manufacturing
Producing Organizations
Our research, product development, and manufacturing efforts are organized into a number of producing organizations. Our focused producing organizations help reduce product development time and costs, improve customer focus, and maintain technological leadership. The producing organizations work together to share ideas and best practices, and there is a close interface and coordinated customer interaction among marketing organizations and producing organizations. We also have regional logistics hubs to satisfy customer delivery requirements while optimizing our logistics processes.
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 $532 million in research and development ($185 million in 2023, $177 million in 2022, and $170 million in 2021), which is approximately 5% of net sales for each year. Our research and development efforts fall into three categories:
•technology advancements, which generate new products or features 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.
•applications development to complement our products and provide complete solutions to our customers.
•cost reductions, which reduce the manufacturing cost of our products through better overall design and/or improve the ease of serviceability.
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 1,600 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, Switzerland, the United States, Germany, the United Kingdom, and Mexico. 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 critical components, which are components that contain proprietary technology. When outside manufacturing is more efficient, we contract with other manufacturers for certain non-proprietary 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 not 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. Prior to 2023, fourth quarter sales have historically generated approximately 27% to 30% of our net sales. This trend has a somewhat greater effect on earnings before taxes than on net sales because fixed costs are generally incurred evenly across all quarters.
Employees
Our total global workforce was approximately 17,300, consisting of 16,000 employees and 1,300 temporary personnel, as of December 31, 2023, and includes approximately 6,200 in Europe, 4,800 in North and South America, and 6,300 in Asia and other countries.
We are proud of our corporate culture and our talented employees. We endeavor to continue to provide an attractive work environment and keep our employees fully engaged. We know that our future success depends on attracting, developing, and retaining the best employees. We promote equal opportunity and inclusiveness worldwide and value diversity in our global workforce, which reflects the diversity in the many communities in which we operate internationally. We employ people of more than 100 nationalities.
We promote diversity and we encourage all employees, inclusive of all our demographics, to take on more responsibilities and management positions. As of December 31, 2023, approximately 36% of our global employee headcount was female, with approximately 29% holding management positions. We place great emphasis on performance management, training, and developing our employees across all levels and regions. During 2023, approximately 97% of employees completed one or more training courses, including part-time and temporary personnel. Lastly, we have local safety programs in place in all relevant units, and select locations have implemented a certified work safety management system. Severe workplace accidents are rare and there has been one fatality from an occupational incident related to a motor vehicle accident in the past five years.
We believe our employee relations are good, and we have not suffered any material employee work stoppage or strike during the last five years. Approximately 8,000 employees are represented by collective bargaining or another arrangement organized to represent employee interests.
Sustainability
Sustainability touches all aspects of our business, from designing, sourcing, and producing our products, to selling and delivering them to our customers, to handling them at the end of their lifecycle. A sustainable mindset helps guide us to make the right decisions for our customers, employees, suppliers, shareholders, and the communities in which we operate our business. We want to manage our business sustainably to position the Company for long-term growth. Approximately 15 years ago, we launched our GreenMT program to pursue environmental, social, and governance priorities where we can have a significant positive impact. We do this in five key areas: (1) keeping our operations sustainable over the long term by ensuring we use resources efficiently, (2) helping our customers to be sustainable in their businesses by offering sustainable products and services, (3) promoting responsible practices within our supply chain, (4) ensuring an engaged workforce through fair, attractive, safe, and development-minded workplaces (see Employees section above), and (5) following corporate governance best practices.
We have set a number of goals relating to our GreenMT sustainability program, including reducing our carbon footprint and other environmental, social, and governance goals. As an example, as of 2020, we achieved carbon neutrality with respect to Scope 1 and Scope 2 CO2 emissions by realizing efficiency improvements, sourcing 100% renewable electricity for all our operations, and using offsets. We also have goals relating to waste, including reducing our waste intensity by 20% and achieving zero waste to landfill, in each case by 2025. Furthermore, we are committed to greenhouse gas emission reduction targets in line with what the latest climate science deems necessary to meet the goals of the 2015 Paris Agreement on climate change. Our commitment includes near-term and long-term net-zero targets approved by the Science Based Target initiative (SBTi). As a further example, we pursue several goals related to supply chain transparency including targeted supplier audits. We report annually on our progress related to sustainability topics in our Corporate Responsibility Report, available on www.mt.com/sustainability.
Blue Ocean Program
Blue Ocean refers to our program to establish a global operating model with standardized, automated, and integrated processes and high levels of global data transparency. It encompasses an enterprise architecture, with a global, single-instance ERP system. Within our IT systems, we continue to move toward integrated, homogeneous applications and common data structures. We also are largely standardizing our key business processes. The implementation of the systems and processes has been proceeding on a staggered basis over a multi-year period. We have implemented the Blue Ocean program in our operations in the U.S., China, most of Asia Pacific, and a significant portion of Europe including Switzerland, Germany, U.K., Benelux, France, and Spain. We estimate that we have more than 90% of our users on the program, and we will continue to implement additional locations and functionality over the coming years.
Intellectual Property
We hold over 5,300 patents and trademarks (including pending applications), primarily in the United States, Switzerland, China, the European Union, Germany, the United Kingdom, Italy, France, Japan, South Korea, Brazil, and India. Our products generally incorporate a wide variety of technological innovations, some of which are protected by patents of various durations. Products are generally not protected as a whole by individual patents, and as a result, no one patent or group of related patents is material to our business. We have numerous trademarks, including the Mettler-Toledo name and logo, which are material to our business. We regularly protect against infringement of our intellectual property.
Regulation
Our products are subject to various regulatory standards and approvals by weights and measures regulatory authorities. All of our electrical components are subject to electrical safety standards. We believe that we are in compliance in all material respects with applicable regulations.
Approvals are required to ensure our instruments do not impermissibly influence other instruments and are themselves not affected by other instruments. In addition, some of our products are used in “legal for trade” applications, in which prices based on weight are calculated and for which specific weights and measures approvals are required. Although there are a large number of regulatory agencies across our markets, there is an increasing trend toward harmonization of standards, and weights and measures regulation is harmonized across the European Union.
Our products may also be subject to special requirements depending on the end-user and market. For example, laboratory customers are typically subject to Good Laboratory Practices (GLP), industrial customers to Good Manufacturing Practices (GMP), pharmaceutical customers to U.S. Food and Drug Administration (FDA) regulations, and customers in food processing industries may be subject to Hazard
Analysis and Critical Control Point (HACCP) regulations. Products used in hazardous environments may also be subject to special requirements.
Environmental Matters
We are subject to environmental laws and regulations in the jurisdictions in which we operate. We own or lease a number of properties and manufacturing facilities around the world. Like many of our competitors, we have incurred, and will continue to incur, capital and operating expenditures and other costs in complying with such laws and regulations.
We are currently involved in, or have potential liability with respect to, the remediation of past contamination in certain of our facilities. A former subsidiary of Mettler-Toledo, LLC known as Hi-Speed Checkweigher Co., Inc. was one of two private parties ordered by the New Jersey Department of Environmental Protection, in an administrative consent order signed on June 13, 1988, to investigate and remediate certain ground water contamination at a property in Landing, New Jersey. After the other party under this order failed to fulfill its obligations, Hi-Speed became solely responsible for compliance with the order. We estimate that the costs of compliance associated with the site over the next several years will be approximately a total of $0.1 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 that 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 which, 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 instruments; and the diversification of our revenue base by geographic region, product range, application, and customer. To remain competitive, we must continue to invest in research and development, sales and marketing, customer service and support, and operational excellence throughout our supply chain. 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
You can find our website on the internet at www.mt.com. The website contains information about us and our operations. The information contained on our website is not included in, or incorporated by reference into, this annual report on Form 10-K. You can view and download free of charge 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 by accessing www.mt.com, clicking on About Us, Investor Relations, and then clicking on SEC Filings. The SEC maintains a website at https://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 you can download free of charge:
•Corporate Governance Guidelines
•Audit Committee Charter
•Compensation Committee Charter
•Nominating and Corporate Governance Committee Charter
•Code of Conduct
•Equal Employment Opportunity Policy
•Business Partner Code of Conduct
•Ethical, Social, and Quality Standards
•Corporate Responsibility Report
•Environmental Policy
•Political Participation Policy
•Conflict Mineral Report
•Statement on Slavery, Human Trafficking, and Transparency in the Supply Chain
You can also obtain in print, free of charge, 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 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 4794
Email: adam.uhlman@mt.com

---

ITEM 1A. RISK FACTORS
Item 1A.Risk Factors
Factors Affecting Our Future Operating Results
Operational Risks
We sell primarily to companies in developed countries. An economic downturn in these countries could hurt our operating results.
Most of our business is derived from companies in developed countries. Economic uncertainty in many parts of the world, including the impact of high inflationary environments and governmental monetary policies and related rising interest rates to combat inflation, the war in Ukraine, the escalation of the conflict in the Middle East related to the Israel-Hamas war, international trade disputes, and sovereign debt levels in the European Union and the United States, are situations that we monitor closely. If developed countries were to experience slow growth or recession, we could see the following effects:
•a drop in demand for our products;
•companies being unable to finance their businesses;
•difficulty in obtaining materials and supplies;
•potential devaluation and/or impairment of assets;
•difficulty in collecting accounts receivables;
•an increase in accounts receivable write-offs; and
•greater foreign exchange rate volatility affecting our profitability and cash flow.
Economic downturns or recessions adversely affect our operating results because our customers often decrease or delay capital expenditures. 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.
In addition, a potential financial crisis on financial institutions globally would likely have an adverse effect on the global capital markets and our business.
We are subject to certain risks associated with our international operations, including our significant concentration of business in China and ongoing developments related to Russia, Ukraine, and the Middle East.
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. In addition to the currency risks discussed below, our international operations pose other potential substantial risks and problems for us, including the following:
•current reduced market demand in our core segments in China and the current economic conditions in this region;
•local tariffs and trade barriers;
•additions or revisions to a country's legal and regulatory requirements;
•difficulties in staffing and managing local operations and/or mandatory salary increases;
•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 $19.8 million of cash at December 31, 2023 in our Chinese subsidiaries;
•restrictions on investments and/or limitations regarding foreign ownership;
•adverse tax consequences, including tax disputes and imposition or increase of withholding and other taxes on remittances and other payments by subsidiaries;
•domestic purchasing requirements that could favor local competition;
•other uncertain local economic, political, and social conditions, including inflation, hyper-inflation, and other decreases in purchasing power, or periods of low or no productivity growth;
•reduced foreign investment and/or demand;
•credit tightening or reduction in credit availability for local customers; and
•emerging markets can be volatile and change quickly.
China represents a significant portion of our business and financial results and has an important role in our global supply chain. For example, our Chinese operations accounted for 19% of sales to external customers, 32% of total segment profit, and approximately 34% of our global production during 2023. In recent years, geopolitical tensions have increased, particularly between the United States and China. Among other issues, these geopolitical topics have resulted in increased tariffs and trade restrictions. The Chinese government and other governments have also increased their focus on domestic purchasing requirements. In addition, as a result of the significant supply chain disruptions during the COVID-19 pandemic, many companies are seeking increased flexibility in their supply chains that may result in reduced foreign investment in China. The Chinese economy also has recently slowed and is impacted by challenges with the country's real estate market that affects domestic consumption and has historically been a source of funds for government stimulus. These risks could lead to reduced sales in China, as well as higher costs.
After benefiting from significant growth in 2022 and 2021, market demand in China declined significantly during the second half of 2023, resulting in a 10% decrease in local currency net sales during 2023. We also expect net sales in China to decrease during the first half of 2024. Our business is significantly impacted by market demand in our core segments of pharma/biopharmaceutical, food manufacturing, and chemical. Market conditions also can be volatile and change quickly, as experienced in 2023.
We must also comply with regulations regarding the conversion and repatriation of funds earned in local currencies. For example, we need government approval to convert earnings from our operations in China into other currencies and to repatriate these funds. If we cannot comply with these or other applicable regulations or these regulations are amended to make it more difficult to repatriate the funds, we may face increased difficulties in using cash generated in China.
We are required to comply with various import, export control, and economic sanctions laws, which may affect our transactions with certain customers, business partners, and other persons, including in certain cases dealings with or between our employees and subsidiaries. We address below the topic of economic sanctions laws related to Russia's invasion of Ukraine, which commenced in February 2022. In certain circumstances, export control and economic sanctions regulations may prohibit the export of certain products, services, and technologies, and in other circumstances, we may be required to obtain an export license before exporting a controlled item. Failure to comply with any regulations and sanctions could result in civil and criminal actions, monetary and non-monetary penalties, disruptions to our business, limitations on our ability to import and export products and services, and damage to our reputation.
In response to Russia's invasion of Ukraine in 2022, and as referenced above, the U.S., the European Union, and certain other countries imposed economic sanctions on Russian financial institutions, businesses in Russia, and Russian interests and individuals, and the Russian government implemented sanctions and regulations in response. We continue to monitor the ongoing developments related to Ukraine, as well as the status of all applicable sanctions.
We have remained in close contact with our employees in Ukraine and have provided financial assistance and supplies to them. We suspended all shipments to Russia since the beginning of the invasion in February 2022. For historical reference, in 2021, approximately 1% of our net sales were in Russia and Ukraine, and we had an immaterial amount of assets and liabilities in both countries as of December 31, 2023, 2022, and 2021. We also do not have manufacturing in Russia or Ukraine.
Due to the impact of reduced energy supplies from Russia, the Council of the European Union (EU Council) proposed that all European member states extend their voluntary 15% reduction target in gas consumption compared to their average consumption for the five years ended March 31, 2022. The extended reduction timeframe commenced April 1, 2023 and is expected to continue through March 31, 2024. Accordingly, the availability and cost of energy may be impacted.
While we do not conduct manufacturing operations in the Middle East, we do sell products into the region, which represents less than 1% of total sales. Our customer base and demand in and nearby the region and worldwide may be affected by the Israel-Hamas war and the effects it is having in the region. In addition, the recent Houthi attacks on commercial shipping vessels in the Red Sea and Suez Canal, which are related to the Israel-Hamas war, have disrupted global supply chains, resulting in increased shipping costs, freight surcharges, shipment delays, reduced shipping capacity, and other significant supply chain impacts to companies that could negatively impact our financial results. These events may also negatively impact our customers which could result in reduced sales. The ongoing and potential future impacts of escalating global conflicts, including those between Russia and Ukraine and the Israel-Hamas war, have heightened global economic and geopolitical uncertainty.
While it is difficult to estimate the impact of the ongoing Ukraine invasion and the Israel-Hamas war on the global economy, including increased inflation, higher energy and transportation costs, global supply chain disruptions, and potential energy shortages, the invasion of Ukraine and the Israel-Hamas war could adversely impact our financial results and present several risks to our business. Also, uncertainties related to these conflicts exist, and the resulting impact to the global economy and market conditions can change quickly.
We continue to monitor the ongoing developments related to these conflicts, as well as the advent of any applicable sanctions.
Our business and financial performance may be adversely affected by a cybersecurity attack.
We rely on our technology infrastructure to interact with suppliers, sell our products and services, fulfill orders, support our customers, and bill, collect, and make payments. Our internally developed system and processes, as well as those provided by third-party vendors, may be susceptible to damage or interruption from cybersecurity incidents, such as terrorist or hacker attacks, the introduction of malicious computer viruses, ransomware, falsification of banking and other information, insider risk, or other security breaches. If there is a cybersecurity incident, we may suffer interruptions in service, loss of assets or data, or reduced functionality. Many of our systems are not redundant, and our disaster recovery planning may not be sufficient for every eventuality a cybersecurity incident could cause. Security breaches of our systems which allow inappropriate access to or inadvertent transfer of information and misappropriation or unauthorized disclosure of confidential information belonging to us or to our employees, customers, or suppliers could result in our suffering significant financial and reputational damage.
Customers may use our products and/or software to generate or manage critical information. Though we take steps to ensure our products and/or software are secure, it is possible that a cyber attack could result in the loss or compromise of critical information. If a customer alleges that a cyber attack causes or
contributes to a loss or compromise of critical information, whether or not caused by us, we could face harm to our reputation and financial condition.
The techniques and sophistication used to conduct cyberattacks and compromise information technology infrastructure, as well as the sources and targets of these attacks, change and are often not recognized until such attacks are launched or have been in place for some time. In addition, there has been an increase in state-sponsored cyberattacks which are often conducted by capable, well-funded groups. The rapid evolution and increased adoption of artificial intelligence technologies amplify these concerns.
While we attempt to mitigate cybersecurity risks by employing a number of proactive measures, including mandatory quarterly ongoing employee training and awareness, technical security controls, enhanced data protection, and maintenance of backup and protective systems, our systems remain potentially vulnerable to cybersecurity threats, any of which could have a material adverse effect on our business. We believe our mitigation measures reduce, but cannot eliminate, the risk of a cybersecurity incident. Despite any precautions we may take, a cybersecurity incident could harm our reputation and financial condition and cause us to incur legal liability and increased costs to respond to such events. Our cyber liability insurance may not be sufficient to compensate us for losses that may result from interruptions in our services or asset or data loss as a result of cybersecurity incidents.
In addition, regulatory or legislative action related to cybersecurity, privacy, and data protection worldwide, such as the European General Data Protection Regulation which went into effect in May 2018, may increase the costs to develop, implement, or secure our products or services. We expect cybersecurity regulations to continue to evolve and be costly to implement. If we violate or fail to comply with such regulatory or legislative requirements, we could be fined or otherwise sanctioned, and such fines or penalties could have a material adverse effect on our business and operations.
We are vulnerable to system failures and data loss risks, which could harm our business.
We rely on our technology infrastructure 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, malicious employees or employee negligence, computer viruses, 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 interruptions in our services, fraudulent or negligent loss of assets, or unauthorized disclosure of confidential information, which could harm our reputation and financial condition. Our business interruption insurance may not be sufficient to compensate us for losses that may result from interruptions in our services or data loss as a result of system failures.
Customers may use our products and/or software to generate or manage confidential information. Though we take steps to ensure our products and/or software are secure, it is possible customers could lose confidential information stored on our products. If a customer alleges system failures in our products and/or software cause or contribute to a loss, whether or not caused by us, we could face harm to our reputation and our financial condition and legal liability.
We have also been implementing our Blue Ocean program to globalize our business processes and information technology systems that includes the implementation of a Company-wide enterprise resource planning system. This has been proceeding on a staggered basis over a multi-year period. We have implemented the program in our operations in the U.S., China, most of Asia Pacific, and a significant portion of Europe including Switzerland, Germany, U.K., Benelux, France, and Spain. We estimate that we have more than 90% of our users on the program and will continue to implement additional locations
and functionality over the coming years. If our implementation is flawed, we could suffer interruptions in operations and customer-facing activities that could harm our reputation and financial condition or cause us to lose data, experience reduced functionality, or have delays in reporting financial information. In addition, the program has increased our reliance on a single information technology system, which would have greater consequences should we experience a system disruption.
Our ability to manufacture and deliver products and services may be disrupted.
We have key manufacturing facilities located in China, Europe, and the United States. Many of our products are developed and manufactured at single locations, with limited alternate facilities. In addition, a large portion of our products and spare parts are distributed through regional logistics centers, in which certain logistics activities are outsourced to third parties. If we experience any significant disruption in these facilities for any reason, such as global supply chain and production issues, changes in third-party service providers, strikes or other labor unrest, power interruptions, cybersecurity attacks, fire, earthquakes, hurricanes, floods, rising water levels, other weather events or natural disasters (including the potential impacts of climate change), or other events beyond our control, we may be unable to satisfy customer demand for our products or services resulting in lost sales. 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 business would suffer if we were unable to obtain supplies of material.
We purchase most of our raw materials, components, and supplies from multiple suppliers. Some items are purchased from a limited or single source of supply, and disruption of these sources whether as a result of issues with our suppliers' operation or the timely availability of shipments from freight carriers could affect our ability to manufacture products. For example, the recent Houthi attacks on commercial shipping vessels in the Red Sea and Suez Canal, which are related to the Israel-Hamas war, have disrupted global supply chains, resulting in increased shipping costs, freight surcharges, shipment delays, reduced shipping capacity, and other significant supply chain impacts to companies that could negatively impact our financial results. Even where multiple sources of materials and components are available, the quality of the alternative materials, regulatory and contractual requirements to qualify materials for use in manufacturing, and the time required to establish new relationships with reliable suppliers could result in manufacturing delays and possible loss of sales. If we are unable to obtain materials or components for an extended time, this could damage our customer relationships and harm our financial condition or results of operations.
Our product development efforts may not produce commercially viable products in a timely manner.
If we do not introduce new products and enhancements, our products could become technologically obsolete over time, which would harm our operating results. To remain competitive, we must continue to make significant investments in research and development, sales and marketing, customer service and support, and operational excellence throughout our supply chain. 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.
In addition, as we develop new products and services, we could be required to comply with additional regulations. If we fail to comply with the new regulations, it could affect the launch of the new product and service, in particular, and our company, as a whole. For instance, it is expected that laws and regulations around the use of AI and machine learning tools will increase over the next few years, but it is unknown at this time what these laws and regulations will address and how and whether they will be adopted globally. As we introduce AI and machine learning into our technology platform (as well as those
of our customers through provision of our services), we could become subject to these new regulations, which may be difficult to comply with. Some of our competitors may not be required to comply, which would put us at a competitive disadvantage. Further, if we fail to adopt these new technologies, we may face price pressure from competitors using lower-cost AI systems.
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.
We face risks related to sales through distributors and other third parties that we do not control, which could harm our business.
We sell some products through third parties, including distributors and value-added resellers. This exposes us to various risks, including competitive pressure, concentration of sales volumes, credit risks, and compliance risks. We may rely on one or a few key distributors for a product or market, and the loss of these distributors could reduce our revenue and net earnings. Distributors may also face financial difficulties, including bankruptcy, which could harm our collection of accounts receivables. Violations of the FCPA or similar anti-bribery laws by distributors or other third-party intermediaries could materially impact our business. In addition to financial risk, actions of some of our distributors could cause reputational harm, especially if our products are involved. Risks related to our use of distributors may reduce sales, increase expenses, and weaken our competitive position.
Departures of key employees could impair our operations.
Key employees 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.
The COVID-19 pandemic adversely affected and may continue to adversely affect various aspects of our business, such as our workforce and supply chain, and make it more difficult and expensive to meet our obligations to our customers, and has adversely affected the global economy, which in turn can adversely affect our global business, results of operations, and financial condition.
Our global operations expose us to risks associated with public health crises that could have an adverse effect on our business results and financial condition.
For instance, the coronavirus pandemic (COVID-19) spread globally in all countries where we do business and led to the implementation of various responses, including government-imposed quarantines, stay-at-home orders and lockdowns, travel restrictions, vaccination and testing requirements, and other public health safety measures. While the impact of COVID-19 has diminished, our global operations could be negatively affected if our employees become ill as a result of exposure to COVID-19 or another pandemic illness, are subject to governmental stay-at-home orders, lockdowns, facility closures, reduction in operating hours, staggered shifts or other social distancing efforts, or labor shortages, or are quarantined. COVID-19 or another pandemic may interfere with general commercial activity related to our supply chain and customer base.
The COVID-19 pandemic resulted in significant disruptions to the global economy, as well as to businesses and capital markets globally. If COVID-19 resurges or another pandemic develops, we may experience volatility in our results, including reduced global sales volume from lower customer demand and supply chain challenges, including the availability of certain components, material shortages, supplier delays, transportation delays, and higher transportation and material costs.
Our business involves certain operating risks, and our insurance may not be adequate to cover all insured losses of liabilities we might incur in our operations.
We have procured various insurance policies for certain types of insurance coverage and in varying coverage amounts. Our insurance may not be adequate to cover all losses or liabilities that we might incur in our operations. Furthermore, our insurance may not adequately protect us against liability from all of the hazards of our business. As a result of market conditions, premiums and deductibles for certain of our insurance policies may substantially increase. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage. We also are subject to the risk that we may be unable to maintain or obtain insurance of the type and amount we desire at a reasonable cost. If we were to incur a significant liability for which we were uninsured or for which we were not fully insured, it could have a material adverse effect on our financial position, results of operations, and cash flows.
Strategic Risks
A prolonged downturn or additional consolidation in the pharma/biopharmaceutical, food manufacturing, and chemical industries could adversely affect our operating results. A reduction in the capital resources or government funding of our customers could reduce our sales.
Our products are used extensively in the pharma/biopharmaceutical, food manufacturing, and chemical industries. We experienced reduced demand in these segments, which negatively impacted our net sales in 2023. Market demand in pharma/biopharmaceutical was particularly impacted in 2023 after significant growth during the COVID-19 pandemic over the past few years. Consolidation in these industries also hurt our sales in the past. A prolonged global economic downturn, a downturn affecting one or more of these industries, or consolidation in any of these industries could adversely affect our operating results. In addition, the capital spending policies of our customers in these and other 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. A decline in government funding of research or education could reduce some customers’ ability to purchase our products.
We operate in highly competitive markets, and it may be difficult for us to preserve operating margins, gain market share, and maintain a technological advantage.
Our markets are highly competitive. Many 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. There has also been an increase in the consolidation of precision instrument companies in recent years. Any consolidation within our market could result in competitors becoming larger and having 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 which, 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 could harm our operating margins.
We also expect our competitors to continue to improve the design and performance of their products and to introduce new products with competitive prices. In addition, our competitors are expected to continue to improve their technology infrastructure, as well as the technology services offered to their
customers, including the use of artificial intelligence and machine learning solutions, to interact with suppliers, sell their products and services, and support and grow their customer base. Our ability to innovate our own technology infrastructure and appropriately address user experience could affect our ability to compete. Although we believe that our products and services have advantages over our competitors, we may not be able to realize and maintain these advantages.
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 integrating 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 or expanding their presence, 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. Even if we can do so, we cannot be sure that these acquisitions will have a positive impact on our business or operating results. We are also required to estimate the fair value of certain assets acquired or liabilities assumed. Such fair values may be based on valuation models which are subject to inherent uncertainties and our judgments regarding certain assumptions.
Financial Risks
Currency fluctuations affect our operating profits.
Our earnings are affected by changing exchange rates. We are particularly sensitive to changes in the exchange rates between the Swiss franc, euro, Chinese renminbi, and U.S. dollar. We have more Swiss franc expenses than we do Swiss franc sales because we develop and manufacture products in Switzerland that we sell globally and have a number of corporate functions located in Switzerland. When the Swiss franc strengthens against our other trading currencies, particularly the U.S. dollar and euro, our earnings go down. We also have significantly more sales in the euro than we do expenses. When the euro weakens against the U.S. dollar and Swiss franc, our earnings also go down. We estimate a 1% strengthening of the Swiss franc against the euro would reduce our earnings before tax by approximately $2.0 million to $2.3 million annually.
We also conduct business throughout the world, including Asia Pacific, the United Kingdom, Eastern Europe, Latin America, and Canada. Fluctuations in these currency exchange rates against the U.S. dollar can also affect our operating results. The most significant of these currency exposures is the Chinese renminbi. The impact on our earnings before tax of the Chinese renminbi weakening 1% against the U.S. dollar is a reduction of approximately $3.2 million to $3.5 million annually.
In addition to the effects of exchange rate movements on operating profits, our debt levels can fluctuate due to changes in exchange rates, particularly between the U.S. dollar, the Swiss franc, and euro. Based on our outstanding debt at December 31, 2023, we estimate that a 5% weakening of the U.S. dollar against the currencies in which our debt is denominated would result in an increase of $39.8 million in the reported U.S. dollar value of our debt.
Inflation can impact our operating results and the global economy.
Inflation affects the costs of goods and services that we use, including raw materials to manufacture our products, as well as transportation and logistical costs and other external costs and services. Inflation also affects labor costs, which are a significant element of our overall cost structure. If these costs cannot be passed on to customers, our margins could be reduced.
Inflation also leads to increased interest rates as country monetary policies combat inflation. This can result in reduced economic growth and recessionary conditions, as well as higher borrowing costs.
Global inflation significantly increased in 2022 and 2021 related to the COVID-19 economic recovery and associated disruptions in global demand, supply chains/logistics, and labor markets, as well as the war in Ukraine and related significant increase in energy costs. While the global inflation rate began to ease in 2023 as a result of central bank policy tightening, core inflation has proved persistent as a result of the preceding factors, in addition to others such as the escalating number of significant geopolitical conflicts throughout the world.
These inflationary conditions could have a greater impact on our operating results in future years, including the impact of a potential European energy crisis, which could also negatively impact demand in certain customer segments that are more energy dependent such as customers in the chemical industry.
The pace of inflationary changes can also occur more quickly than our ability to respond with corresponding price increases and cost optimization or reduction measures. In addition, there may be differences in inflation rates between countries where we incur the major portion of our costs and other countries where we sell products, which may limit our ability to recover increased costs. The competitive environment in which we operate may also limit our ability to recover higher costs through increased selling prices.
Historically, we also have experienced higher inflation in China, Eastern Europe, India, and Brazil. To date, these inflationary conditions have not had a material effect on our operating results. However, given our presence in China, Eastern Europe, India, and Brazil, these inflationary conditions could have a greater impact on our operating results.
We may experience impairments of goodwill or other intangible assets.
As of December 31, 2023, our consolidated balance sheet included goodwill of $670.1 million and other intangible assets of $285.4 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. We make estimates and assumptions in valuing such intangible assets 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 may be based on valuation models that estimate fair value. In preparing the valuation models, we consider a number of factors, including operating results, business plans, economic conditions, future cash flows, and transaction 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.
Concerns regarding the Eurozone debt levels and market perception related to the instability of the euro could affect our operating profits.
We conduct business in many countries that use the euro as their currency (the Eurozone). In the past, there have been concerns regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations. In addition, concerns in recent years have existed regarding the overall stability of the euro and the suitability of the euro as a single currency given the diverse economic and political circumstances in individual Eurozone countries.
These concerns could lead to the re-introduction of individual currencies in one or more Eurozone countries or, in more extreme circumstances, the possible dissolution of the euro currency entirely. Should the euro dissolve entirely, the legal and contractual consequences for holders of euro-denominated obligations would be determined by laws in effect at such time. These potential developments, or market perceptions concerning these and related issues, could adversely affect the value of our euro-denominated assets and obligations. In addition, concerns over the effect of this type of financial crisis on financial institutions in Europe and globally could have an adverse effect on the global capital markets and, more specifically, on the ability of our Company, our customers, suppliers, and lenders to finance their respective businesses and to access liquidity at acceptable financing costs, if at all, on the availability of supplies and materials, and on the demand for our products. For information on the impact of the United Kingdom's withdrawal from the European Union, see "Risk Factors - The United Kingdom's withdrawal from the European Union could adversely impact our results of operations."
Legal, Tax, Regulatory, and Other Risks
Unanticipated changes in our tax rates or additional income tax liabilities could impact our profitability.
We are subject to income taxes in the United States and various other jurisdictions, and our domestic and international tax liabilities are subject to allocation of expenses among different jurisdictions. Our effective tax rates and tax obligations could be adversely affected by changes in tax laws or rates (including the potential implementation of various U.S. tax proposals), changes in the mix of earnings by jurisdiction, changes in the valuation of deferred tax assets and liabilities, and material adjustments from tax audits.
In particular, the carrying value of deferred tax assets, which are predominantly in the U.S., is dependent upon our ability to generate future taxable income in the U.S. In addition, the amount of income taxes we pay is subject to ongoing audits in various jurisdictions, and a material assessment by a governing tax authority could affect our profitability.
Our tax expense and tax obligations could increase as a result of changing application of tax law.
Governments are facing greater pressure on public finances, which could lead to their more aggressively applying existing tax laws and regulations. Governments also periodically change tax laws and regulations.
The Organization for Economic Co-Operation and Development (OECD) has recently proposed changes to the current transfer pricing arm’s length standard for allocating profit as well as a 15% minimum tax by jurisdiction. While the provision to alter the way profit is allocated by jurisdiction is not expected to impact the Company, the 15% minimum tax by jurisdiction may adversely impact the Company's global tax provision.
Any changes in corporate income tax rates or regulations, on repatriation of dividends, earnings, share repurchases, or capital, or on transfer pricing, as well as changes in the interpretation of existing tax laws and regulations in the jurisdictions in which we operate, could adversely affect our cash flow and increase our overall tax burden, which would negatively affect our profitability. Potential OECD changes impacting consumer businesses could also have an unfavorable effect on some of our key customer segments such as pharmaceutical and food manufacturing, which could result in a decline or delay in capital spending by our customers and a resulting decline in our revenues and profitability.
We may be adversely affected by failure to comply with regulations of governmental agencies or by the adoption of new regulations. United States trade policy, including the imposition of tariffs and the resulting consequences, as well as other political policies in the United States, China, the U.K., and certain European countries, may also impact global trade or create uncertainty impacting our business.
Our products are subject to regulation by governmental agencies. These regulations govern a wide variety of activities relating to our products, including design and development, product safety, labeling, manufacturing, promotion, sales, and distribution. We also operate a global business and are subject to various laws and regulations in the many markets where we do business, including those relating to competition, employment and labor practices, international trade, and corruption. 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 investigation costs, reputational harm, fines, criminal prosecution, and other damages that could impact our profitability.
Political policy in the United States, China, the U.K., and certain European countries may impact global trade and domestic purchasing or create uncertainty. In recent years, the United States government has adopted a new approach to trade policy and in certain cases has sought to renegotiate, or possibly terminate, certain existing trade agreements. The United States government has also initiated tariffs on certain foreign goods, particularly those produced in China. As a result, certain foreign governments, including the Chinese government, have imposed retaliatory tariffs on goods that their countries import from the United States. Certain governments, such as China, also have implemented domestic purchasing requirements that could favor local competition and result in reduced sales.
These various trade policy and regulatory actions described above may restrict our access to lower-cost countries in certain circumstances or otherwise create uncertainty, negatively impact global markets, and make it more difficult or costly for us to import our products into certain countries. The adoption and expansion of trade restrictions or other governmental action related to tariffs or trade agreements or policies could also lead to an economic downturn and/or could create unfavorable fluctuations in currency exchange rates (see above description "Currency fluctuations affect our operating profits."). In times of uncertainty, some customers delay investments or defer normal replacement cycles, which could have an adverse impact on our sales. The adoption and expansion of trade restrictions or other governmental action related to tariffs or trade agreements or policies have the potential to adversely impact our business and financial performance.
The United Kingdom’s withdrawal from the European Union could adversely impact our results of operations.
On January 31, 2020, the U.K. formally left the E.U. (commonly referred to as Brexit). After a transition period, on December 24, 2020, the U.K. and E.U. agreed to a trade deal (the Trade and Cooperation Agreement), which was ratified by the U.K. on December 30, 2020. This Trade and Cooperation Agreement came into effect on May 1, 2021 after it was ratified by both the European Parliament and Council of the European Union. The Trade and Cooperation Agreement allows the U.K. and E.U. to continue trading without tariffs or quotas; however, the movement of goods between the U.K. and the remaining member states of the E.U. may be subject to additional inspections and documentation checks, leading to possible delays at ports of entry and departure.
In addition, there are still a number of areas of uncertainty in connection with the future of the U.K. and its relationship with the E.U. and the application and interpretation of the Trade and Cooperation Agreement, and Brexit-related matters may take several years to be clarified and resolved. At this time, we cannot predict the potential impact of Brexit on our business. However, Brexit could adversely affect our operating results and financial condition.
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, maintain, and enforce patents on our technology, maintain our trademarks, and protect our trade secrets. Our patents may not provide complete protection or may expire, 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. We may experience a decline in sales and/or profitability if any of these things occur. Competitors sometimes seek to take advantage of our trademarks or brands in ways that may create customer confusion or weaken our brand. 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.
We may be adversely affected by environmental laws and regulations.
We are subject to various environmental laws and regulations and incur expenditures in complying with environmental laws and regulations. We have corporate programs in place to manage compliance and stakeholder expectations related to environmental matters, but increasing public interest in climate change topics may result in the enactment of additional governmental laws and regulations related to this subject area. 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 regulations and market expectations related to sourcing and our supply chain, including conflict minerals.
The SEC has adopted disclosures and reporting requirements for companies whose products contain certain minerals and their derivatives, namely tin, tantalum, tungsten, or gold, known as conflict minerals. Companies must report annually whether or not such minerals originate from the Democratic Republic of Congo (DRC) and adjoining countries. These requirements could adversely affect the sourcing, availability, and pricing of materials used in the manufacturing of our products. In addition, we have incurred additional costs to comply with the disclosure requirements, including cost related to determining the source of any of the relevant minerals used in our products. Since our supply chain is complex, due diligence procedures we have implemented to understand the origins of the minerals we use in our operations may not enable us to ascertain with sufficient certainty the origins for these minerals or determine that these minerals are DRC conflict free, which may harm our reputation. We may also face difficulties in satisfying customers and other stakeholders who may require that our products be certified as DRC conflict free, which could harm our relationships with these customers and/or lead to a loss of revenue. These requirements also could have the effect of limiting the pool of suppliers from which we source these minerals, and we may be unable to obtain conflict-free minerals at prices similar to the past, which could increase our costs and adversely affect our manufacturing operations and our profitability.
Future laws, regulations, or customers may make additional demands on supply chain transparency. These demands can include more transparency into the activities of our suppliers with regard to human rights and sustainable sourcing. We have significant protections in place to ensure we partner with responsible suppliers, but increased demands may cause us to incur increased supply chain costs. If we cannot satisfy customers’ demands, we may lose business, and if we cannot meet new regulatory requirements, we may have to alter our sourcing at increased expense.
Our ability to generate and repatriate cash depends in part on factors beyond our control.
Our ability to make payments on our debt and to fund our share repurchase program, planned capital expenditures, and research and development efforts depends on our ability to generate and repatriate cash in the future. This is subject to factors beyond our control, including general economic, financial, competitive, legislative, regulatory, governmental, and other factors described in this section.
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.
Our ability to fund our share repurchase program is also dependent on our ability to repatriate our international cash flows. Changes in governmental cash repatriation policies, restrictions, or tax laws could impair our ability to continue our share repurchase program.
Risks Related to Our 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, 2023, we had total indebtedness of approximately $2.0 billion, net of cash of $69.8 million. Our debt instruments allow us to incur substantial additional indebtedness.
The existence and magnitude of our debt could have important consequences. For example, it could make it more difficult for us to satisfy our obligations under our debt instruments; require us to dedicate a
substantial portion of our cash flow to payments on our indebtedness, which would reduce the amount of cash flow available to fund working capital, capital expenditures, product development, and other corporate requirements; increase our vulnerability to general adverse economic and industry conditions, including changes in raw material costs; limit our ability to respond to business opportunities; limit our ability to borrow additional funds, which may be necessary; and subject us to financial and other restrictive covenants, which, if we fail to comply with these covenants and our failure is not waived or cured, could result in an event of default under our debt instruments.
The agreements governing our debt impose restrictions on our business.
The note purchase agreements governing our 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. The restrictions these covenants place on us include limitations on our ability to incur liens and consolidate, merge, sell, or lease all or substantially all of our assets. Our credit facility and the note purchase agreements governing our senior notes also require us to meet certain financial ratios.
Our ability to comply with these agreements may be affected by events beyond our control, including economic, financial, and industry conditions. The breach of any covenants or restrictions could result in a default under the note purchase agreements governing the senior notes and/or under our credit facility. An event of default under the agreements governing our debt would permit holders of our debt to declare all amounts owed to them 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 $1.25 billion. Our credit facility is provided by a group of 14 financial institutions, which individually have between 4% and 11% of the total funding commitment. At December 31, 2023, we had borrowings of $643.6 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 $1.25 billion amount available.
We are subject to risks associated with the discontinuation of LIBOR.
In 2017, the U.K. Financial Conduct Authority (the FCA) announced that it intended to phase out the London Interbank Offered Rate (LIBOR). The FCA ceased publication of U.S. dollar LIBOR after December 31, 2021 in the case of one-week and two-month U.S. dollar LIBOR, ceased publication on June 30, 2023 in the case of the overnight and 12-month U.S. dollar LIBOR, and will cease publication after September 2024 in the case of the remaining U.S. dollar LIBOR benchmarks, which continue to be published using a synthetic methodology. While regulators in various jurisdictions have been working to replace LIBOR, it is unclear when new agreed-upon benchmark rates will be established. As mentioned in Note 2 to the consolidated financial statements, our current cross currency swap and credit agreements were amended to change the interest rate benchmark from LIBOR to SOFR and other non-U.S. dollar
references, which did not materially change the amount or timing of cash flows. As a result, the discontinuation of LIBOR in June 2023 did not have a material impact on our financial statements.
General Risk Factors
We make 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 provide forward-looking statements both in our filings with the SEC and orally in connection with our quarterly earnings calls, including guidance on anticipated sales growth and earnings per share. You should not rely on forward-looking statements to predict our actual results. Our actual results or performance may be materially different than reflected in forward-looking statements because of various risks and uncertainties.
Our forward-looking statements may not be accurate or complete, and we do not intend to update or revise them in light of actual results. New risks also periodically arise. Please consider the risks and factors that could cause our results to differ materially from what is described in our forward-looking statements. See in particular “Factors Affecting Our Future Operating Results” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
In providing guidance on our future earnings, we evaluate our budgets, strategic plans, and other factors relating to our business. We make assumptions about external factors, including the following:
•the outlook for our end-markets and the global economy;
•the impact of external factors on our competition;
•the financial position of our customers and their willingness to pay for our products and services;
•the estimated costs of purchasing materials;
•the estimated costs and performance of transportation and logistics, including third-party service providers;
•developments in personnel costs;
•our estimated income tax expense; and
•rates for currency exchange, particularly between the Chinese renminbi and the U.S. dollar and between the Swiss franc and the euro.
Some of these assumptions may prove to be incorrect over time. For example, although no single end-customer accounts for more than 1% of our revenues, if a number of our customers experienced significant deteriorations in their financial positions concurrently, it could have an impact on our results of operations.
Some of our key internal assumptions include the following:
•our ability to implement our business strategy;
•our ability to implement price increases as forecasted;
•the effectiveness of our sales and marketing programs such as our Spinnaker, market penetration, and Field Turbo initiatives;
•the effectiveness of our programs to improve our service business, including growth, globalization, and productivity initiatives;
•our ability to develop and deliver innovative products and services;
•the continued growth of our sales in emerging markets; and
•the effectiveness of our productivity and 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 and services. 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.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B.Unresolved Staff Comments
None.

---

ITEM 2. PROPERTIES
Item 2.Properties
Our principal executive offices are located in Columbus, Ohio and Greifensee, Switzerland. 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 or shared service centers and also typically have a certain amount of space for service, sales and marketing, and administrative activities. The facilities in Giessen, Germany, Viroflay, France, and Salford, United Kingdom 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/Nänikon, Switzerland Owned Swiss Operations
Urdorf, Switzerland Owned Swiss Operations
Manchester, England Leased Western European Operations
Royston, United Kingdom Owned Western European Operations
Salford, United Kingdom Leased Western European Operations
Viroflay, France Owned Western European Operations
Albstadt, Germany Owned Western European Operations
Giessen, (Hesse) Germany Owned Western European Operations
Giesen, (Lower Saxony) Germany Owned Western European Operations
Warsaw, Poland Leased Other Operations
Americas:
Columbus, Ohio Leased U.S. Operations
Worthington, Ohio (two facilities) Owned U.S. Operations
Oakland, California Owned U.S. Operations
Vacaville, California Owned U.S. Operations
Billerica, Massachusetts Owned U.S. Operations
Lutz, Florida Owned U.S. Operations
Tijuana, Mexico (two facilities) Leased U.S. Operations
Thorofare, New Jersey Owned U.S. Operations
Princeton, New Jersey Leased U.S. Operations
Other:
Shanghai, China (two facilities) Buildings Owned; Chinese Operations
Land Leased
Changzhou, China (two facilities) Buildings Owned; Chinese Operations
Land Leased
ChengDu, China Building Owned; Chinese Operations
Land Leased
Mumbai, India (four facilities) Building, Land Owned (1); Leased (3) Other Operations

---

ITEM 3. LEGAL PROCEEDINGS
Item 3.Legal Proceedings
We are not currently involved in any legal proceeding that we believe could have a material adverse effect upon our financial condition, results of operations, or cash flows. See the disclosure in Item 1 above under “Environmental Matters,” as well as Note 17 to the consolidated financial statements.
Executive Officers of the Registrant
See Part III, Item 10 of this annual report for information about our executive officers.
PART II

---

ITEM 4. MINE SAFETY DISCLOSURE

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
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.”
Holders
At January 25, 2024, there were 35 holders of record of common stock and 21,478,705 shares of common stock outstanding. We estimate we have approximately 201,717 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.
Share Performance Graph
The following graph compares the cumulative total returns (assuming reinvestment of dividends) on $100 invested on December 31, 2018 through December 31, 2023 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.
Comparison of Cumulative Total Return Among Mettler-Toledo International Inc., the S&P 500 Index, and SIC Code 3826 Index - Laboratory Analytical Instruments(a)
12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23
Mettler-Toledo $100 $140 $202 $300 $256 $214
S&P 500 Index $100 $131 $156 $200 $164 $207
SIC Code 3826 Index $100 $137 $191 $265 $208 $196
(a) The Performance Graph will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference. In addition, the Performance Graph will not be deemed to be "soliciting material" or to be "filed" with the SEC or subject to Regulation 14A or 14C, other than as provided in Regulation S-K, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that the Company specifically requests that such information be treated as soliciting material or specifically incorporates it by reference into a filing under the Securities Act or the Securities Exchange Act.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Issuer Purchases of Equity Securities
Total Number of
Shares Purchased Average Price Paid
per Share Total Number of
Shares Purchased as
Part of Publicly
Announced
Program Approximate Dollar
Value (in thousands) of
Shares that may yet be
Purchased under the
Program
Period
October 1 to October 31, 2023 68,504 $ 1,043.79 68,504 $ 2,662,927
November 1 to November 30, 2023 59,951 1,031.17 59,951 2,601,107
December 1 to December 31, 2023 37,439 1,139.84 37,439 2,558,431
Total 165,894 $ 1,060.91 165,894 $ 2,558,431
In November 2022, the Company’s Board of Directors authorized an additional $2.5 billion to the share repurchase program, which had $2.6 billion of remaining availability as of December 31, 2023. The share repurchases are expected to be funded from cash generated from operating activities, borrowings, and cash balances. Repurchases will be made through open market transactions, and the amount and timing of purchases will depend on business and market conditions, the stock price, trading restrictions, the level of acquisition activity, and other factors.
We have purchased 31.7 million common shares since the inception of the program in 2004 through December 31, 2023, at a total cost of $8.9 billion and an average price per share of $281.95. During the years ended December 31, 2023 and 2022, we spent $900.0 million and $1.1 billion on the repurchase of 691,913 shares and 838,010 shares at an average price per share of $1,300.72 and $1,312.61, respectively. We reissued 79,076 shares and 133,916 shares held in treasury for the exercise of stock options and restricted stock units during 2023 and 2022, respectively. In addition, we incurred $8.1 million of excise tax during the year ended December 31, 2023 related to the Inflation Reduction Act which is reflected as a reduction in shareholders' equity in our consolidated financial statements.

---

ITEM 6. SELECTED FINANCIAL DATA
Item 6.Reserved

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
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 consolidated financial statements.
Changes in local currencies exclude the effect of currency exchange rate fluctuations. Local currency amounts are determined by translating current and previous year consolidated financial information at an index utilizing historical currency exchange rates. We believe local currency information provides a helpful assessment of business performance and a useful measure of results between periods. We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. We present non-GAAP financial measures in reporting our financial results to provide investors with an additional analytical tool to evaluate our operating results.
We also include in the discussion below disclosures of immaterial qualitative factors that are not quantified. Although the impact of such factors is not considered material, we believe these disclosures can be useful in evaluating our operating results.
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, our Spinnaker sales and marketing program, and the breadth and quality of our global sales and service network.
Net sales in U.S. dollars decreased 3% in 2023 and increased 5% in 2022. Excluding the effect of currency exchange rate fluctuations, or in local currencies, net sales decreased 3% in 2023 and increased 11% in 2022. 2023 was a challenging year after very strong sales growth during the previous two years. Net sales in 2023 were also impacted by shipping delays of approximately $58 million with a new external European logistics service provider, which we expect to largely recover in the first quarter of 2024. We estimate local currency net sales decreased approximately 1% in 2023 excluding the impact of the delayed shipments. Market demand declined in our core segments, especially pharma/biopharmaceutical, with a significant drop-off in China during the second half of the year. While market demand declined, we continue to benefit from our strong global leadership positions, diversified customer base, innovative product offering, investment in emerging markets, significant installed base, and the impact of our sophisticated global sales and marketing programs. Examples of these programs include identifying and investing in growth and market penetration opportunities, more effectively pricing our products and services, increasing our sales force effectiveness through improved guidance and redirecting resources to our most promising growth opportunities, increasing the use of digital tools, and continuing to optimize our lead generation and lead nurturing processes.
In addition to reduced market demand during 2023, we also continued to experience global inflation, unfavorable foreign currency, and increased interest rates. Our team’s resilience and agility to quickly react to adapt to the changing environment were critical to our ability to mitigate these challenges. In particular, our pricing program and productivity and cost savings initiatives helped offset inflationary pressures and volume declines. Over the past few years, we also accelerated our ability to use advanced analytics to identify and pursue growth opportunities, while increasing the effectiveness of our digital tools to support our global sales organization. We also have continued to increase engagement with our customers with our Go-to-Market and digital approaches. Our market leading solutions and ability to leverage our innovative portfolio have also allowed us to quickly capitalize on our customers demand for automation and digitalization solutions. This is also true for faster growing segments such as lithium-ion batteries, semiconductors and advanced new materials. We are well positioned, and have continued to make investments to further strengthen our portfolio and capture future growth opportunities. Our Service business also delivered very strong results in 2023 as we have been able to support our customers’ ability to maintain uptime, improve productivity, and comply with regulatory requirements.
As we enter 2024, we expect to continue to benefit from market trends towards automation and digitalization, as well as customer investments in on/near-shoring activities. However, many of our end markets, including pharma/biopharmaceutical, food, and chemical are challenged after years of very strong growth. In addition, market conditions and challenges remain uncertain relating to the macro environment and global economy, including the impacts of tighter monetary policies and related increase in interest rates to combat inflation, and ongoing developments in Ukraine, the Israel-Hamas war, and increasing geopolitical tensions. Accordingly, we expect demand for our products to be reduced during the first half of 2024 which also reflects difficult prior period comparisons after strong results in both 2023 and 2022, particularly in our laboratory business and in China. Market conditions also may change quickly.
Our laboratory sales experienced a significant decline in 2023, particularly from life sciences and biotech customers after two years of very strong growth. We expect difficult market conditions during the first half of 2024, but believe we will benefit from favorable biopharma market trends in the future. We also believe we will continue to benefit from increased customer demand for automation, digitalization, and safety; new facility investments; and continued focus on regulatory compliance including data integrity requirements. Overall, we believe we are well positioned to continue to capture growth and gain market share in our laboratory business.
Our industrial sales were down slightly in 2023 related to core-industrial which included weak market conditions in China. We expect reduced market demand, especially in China, during the first half of 2024. Our core industrial-related products are also especially sensitive to changes in economic growth. However, we continue to benefit from our strong product offering and focus on the more attractive, faster-growing segments of the market and strong execution of our growth initiatives in each region. We also continue to benefit from market trends in automation and digitalization and also expect to benefit from customer on/near-shoring activities in the future. China and emerging market economies have historically been an important source of growth based upon the expansion of their domestic economies, and we expect this to also be a source of long-term growth. We expect our product inspection end-market to also benefit from our customers’ focus on brand protection, food safety, and productivity. However, product inspection customers in the packaged food industry have been negatively impacted by inflation and many of these customers reduced investments during 2023.
Our food retailing sales increased significantly during 2023 primarily due to strong project activity, especially in the Americas. Traditionally, the spending levels in this sector have experienced more volatility than our other end-markets due to the timing of customer project activity and new regulations.
In 2024, we will continue to pursue the overall business growth strategies which we have followed in recent years:
Gaining Market Share. Innovation is essential to gaining market share and is fundamental in all aspects of our business including sales and marketing and technology leadership. Our global sales and marketing initiative, Spinnaker, continues to be an important growth strategy. We aim to gain market share by implementing sophisticated sales and marketing programs, leveraging our extensive customer databases, product offering, and installed base. While this initiative is broad-based, efforts to improve these processes include the use of advanced data analytics to identify, prioritize, and pursue growth opportunities; the implementation of more effective pricing related to value-based selling strategies and processes; improved sales force guidance, training, and effectiveness; cross-selling; increased segment marketing; and leads generation and nurturing activities. We also have added resources to pursue under-penetrated market opportunities and continue to adapt our Go-to-Market approaches with additional inside and telesales resources, while also increasing digital customer interaction. We continue to benefit from digitalization tools to gain efficiencies and increase the effectiveness of our field sales force. In addition, our comprehensive service offerings, and our initiatives to globalize and harmonize these offerings, help us further penetrate developed markets.
We estimate that we have the largest installed base of weighing instruments in the world, and we continue to leverage advanced data analytics and invest in sales and marketing activities to increase the proportion of our installed base that is under service contract, or sell new products that replace old products in our installed base. 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. We have also made adjustments to our service model to incorporate remote service, depot drop-off/pickup, and other approaches.
Faster-Growing Markets. Emerging markets, comprising Asia (excluding Japan), Eastern Europe, Latin America, the Middle East, and Africa, account for approximately 35% of our total net sales. We have a two-pronged strategy in emerging markets: first, to capitalize on long-term growth opportunities in these markets, and second, to leverage our low-cost manufacturing operations in China. We have a 35-year track record in China, and our sales in Asia have grown more than 12% on a compound annual growth basis in local currencies since 1999. Over the years, we also have broadened our product offering to the Asian markets. India has also been a source of emerging market sales growth in past years due to increased life science research activities. Overall, versus the prior year, we experienced a 5% decrease in emerging market local currency sales by destination during 2023, which included a 10% local currency sales decline in China. Following particularly strong growth in 2022 and 2021, market conditions in China declined significantly during the second half of 2023, especially in our laboratory business, and we expect reduced sales during the first half of 2024. Going forward, we continue to redeploy resources and sales and marketing efforts to pharma, food manufacturing, chemical, and new energy. We believe the long-term growth of these segments will be favorably impacted by the Chinese government’s emphasis on science, high-value industries, product quality, and food safety. We expect our laboratory and product inspection businesses will particularly benefit from our focus on these segments. We also continue to pursue growth in under-penetrated emerging markets. However, emerging market sales can be volatile as we experienced in China during 2023. China has historically been volatile and market conditions may change unfavorably due to various factors. In addition to China and emerging markets, we also pursue other faster-growth vertical markets. While rather small, these markets present outsized growth potential. Segments include lithium-ion batteries, semiconductors, advanced materials, and plant-based food. The components of these faster-growing segments will change as various markets develop and we will continue to leverage the breadth and scope of our product offering as new opportunities emerge.
Extending Our Technology Lead. We continue to focus on product innovation. In the last three years, we spent approximately 5% of net sales on research and development. We seek to improve our product offerings and their capabilities with additional integrated technologies and software, which we believe supports our pricing differentiation and accelerates product replacement cycles. In addition, we aim to create value for our customers by having thorough knowledge of their processes via our significant installed product base.
Expanding Our Margins. We continue to strive to improve our margins by enhancing our value proposition via innovation, more effectively pricing our products and services, optimizing our cost structure, and improving our mix in higher-margin businesses such as service. For example, sophisticated data analytic tools provide us new insights to further refine our price strategies and processes. We also have implemented productivity and cost savings initiatives to mitigate our reduced 2023 volume, while also focusing on reallocating resources to better align our cost structure to support our investments in market penetration initiatives, higher-growth/profitable areas, and opportunities for margin improvement.
We also have implemented global procurement and supply chain management programs over the last several years aimed at lowering costs and have increased our focus on these programs with our SternDrive initiative. SternDrive is our global operational excellence program for continuous improvement efforts within our supply chain, manufacturing, and back-office operations. Blue Ocean is also an important enabler of our various margin expansion initiatives. Our move to standardized business processes, systems, and data structures throughout our global organization provides greater data transparency and faster access to real-time data. Our cost leadership and productivity initiatives are also focused on continuously improving our invested capital efficiency, such as reducing our working capital levels, improving our order to cash cycle, and ensuring appropriate returns on our expenditures.
Pursuing Strategic Acquisitions. We seek to pursue "bolt-on" acquisitions that may leverage our global sales and service network, respected brand, extensive distribution channels, and technological
leadership. We have identified life sciences and process analytics as key areas for acquisitions. For example, in 2021, we acquired all the membership interests of Mayfair Technology, LLC (PendoTECH), a manufacturer and distributor of single-use sensors, transmitters, control systems, and software for measuring, monitoring, and data collection primarily in bioprocess applications. PendoTECH serves biopharmaceutical manufacturers and life science laboratories and is located in the United States. The initial cash payment was $185.0 million and we made other post-closing payments of $7.4 million. We also paid an additional $10.0 million per year related to an earn-out provision in the agreement both in 2022 and 2023. In 2021, we also acquired Scale-up Systems Inc., a leading software provider for scale-up and reaction modeling serving the biopharma and chemical markets. The initial cash payment was $20.2 million and we have paid additional consideration of EUR 2.0 million in 2023 and EUR 0.6 million in 2022.
Results of Operations - Consolidated
Net sales
Net sales were $3.8 billion for the year ended December 31, 2023, compared to $3.9 billion in 2022 and $3.7 billion in 2021. This represents a decrease of 3% in 2023 and an increase of 5% in 2022 in U.S. dollars and a decrease of 3% in 2023 and an increase of 11% in 2022 in local currencies. In 2023, we experienced reduced market demand, particularly in China and our laboratory business. Net sales in 2023 were also impacted by shipping delays of approximately $58 million with a new external European logistics service provider, which we expect to largely recover in the first quarter of 2024. We estimate local currency net sales decreased approximately 1% in 2023 excluding the impact of the delayed shipments. We continue to benefit from the execution of our global sales and marketing programs, our innovative product portfolio, and investments in our field organization, particularly surrounding digital tools and techniques. However, there continues to be uncertainty in our end-markets and the economic environment, including the risk of recession in some countries, and market conditions may change quickly.
In 2023, our net sales by geographic destination decreased in U.S. dollars compared to 2022 by 1% in the Americas, 9% in Asia/Rest of World, and were flat in Europe. In local currencies, our net sales by geographic destination decreased in 2023 by 1% in the Americas, 2% in Europe, and 5% in Asia/Rest of World, with a 10% decline in China. A discussion of sales by operating segment is included below.
As described in Note 3 to our 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 decreased 7% in U.S. dollars and 6% in local currencies during 2023 and increased 5% in U.S. dollars and 10% in local currencies in 2022. Service revenue (including spare parts) increased 10% in both U.S. dollars and local currencies in 2023 and increased 6% in U.S. dollars and 12% in local currencies in 2022.
Net sales of our laboratory products and services, which represented approximately 55% of our total net sales in 2023, decreased 7% in both U.S. dollars and local currencies during 2023. The local currency decrease in net sales of our laboratory-related products during 2023 includes a decline in most product categories related to reduced market demand after two years of particularly strong growth.
Net sales of our industrial products and services, which represented approximately 39% of our total net sales in 2023, decreased 1% in both U.S. dollars and local currencies during 2023. The local currency decrease in net sales of our industrial-related products during 2023 includes a decline in most product categories with weak market conditions in China.
Net sales of our food retailing products and services, which represented approximately 6% of our total net sales in 2023, increased 28% in U.S. dollars and 27% in local currencies during 2023. The local currency increase in net sales of our food retailing products during 2023 includes strong project activity, especially in the Americas.
Gross profit
Gross profit as a percentage of net sales was 59.2% for 2023, 58.9% for 2022 and 58.4% for 2021.
Gross profit as a percentage of net sales for products was 60.6% for 2023, compared to 60.6% for 2022, and 60.1% for 2021. Gross profit as a percentage of net sales for services (including spare parts) was 54.3% for 2023, compared to 52.0% for 2022 and 51.8% for 2021.
The gross profit as a percentage of net sales for 2023 primarily reflects favorable price realization that benefits from our innovative product portfolio, and results from our cost savings initiatives, partially offset by lower sales volume, unfavorable mix, and foreign currency.
Research and development and selling, general, and administrative expenses
Research and development expenses as a percentage of net sales were 4.9% for 2023, 4.5% for 2022, and 4.6% for 2021. Research and development expenses in U.S. dollars increased 5% in 2023 and 4% in 2022, and in local currencies increased 3% in 2023 and 9% in 2022. The increase during 2023 relates to increased project activity.
Selling, general, and administrative expenses as a percentage of net sales were 23.9% for 2023, compared to 23.9% for 2022 and 25.4% for 2021. Selling, general, and administrative expenses decreased 4% in both U.S. dollars and local currencies in 2023 and decreased 1% in U.S. dollars and increased 4% in local currencies in 2022. The decrease during 2023 primarily includes benefits from our cost savings initiatives and reduced variable compensation.
Amortization expense
Amortization expense was $72.2 million in 2023, compared to $66.2 million and $63.1 million in 2022 and 2021, respectively. The increase in amortization expense during 2023 relates to our investments in information technology, primarily from our Blue Ocean program.
Restructuring charges
During the past few years, we initiated various cost reduction measures. Restructuring charges were $32.7 million in 2023, compared to $9.6 million and $5.2 million in 2022 and 2021, respectively. Restructuring expenses are primarily comprised of employee-related costs.
Other charges (income), net
Other charges (income), net consisted of net income of $4.1 million, $9.3 million, and $3.1 million in 2023, 2022, and 2021, respectively. Other charges (income), net includes non-service pension costs (benefits), net (gains) losses from foreign currency transactions and hedging activities, interest income, and other items. Non-service pension benefits were $7.6 million, $16.9 million, and $11.4 million in 2023, 2022, and 2021, respectively. Other charges (income), net also includes acquisition costs, for which there was $0.9 million for the year ended December 31, 2022. For the year ended December 31, 2021, $3.4 million of acquisition costs, as well as a $6.8 million charge to increase the PendoTECH acquisition contingent consideration and related obligations to the sellers, were included in other charges (income), net.
Interest expense and taxes
Interest expense was $77.4 million for 2023, compared to $55.4 million for 2022 and $43.2 million for 2021. The increase in interest expense is primarily related to higher variable interest rates and increased debt.
Our reported tax rate was 19% during 2023, compared to 18.5% and 19% during 2022 and 2021, respectively.
Results of Operations - by Operating Segment
The following is a discussion of the financial results of our operating segments. We currently have five reportable segments: U.S. Operations, Swiss Operations, Western European Operations, Chinese Operations, and Other. A more detailed description of these segments is outlined in Note 18 to our consolidated financial statements.
U.S. Operations (amounts in thousands)
2023 2022 2021 Increase
(Decrease) in %
2023 vs. 2022 Increase
(Decrease) in %
2022 vs. 2021
Net sales $ 1,541,111 $ 1,601,344 $ 1,443,970 (4)% 11%
Net sales to external customers $ 1,403,919 $ 1,444,460 $ 1,287,983 (3)% 12%
Segment profit $ 365,052 $ 357,802 $ 302,177 2% 18%
Total net sales decreased 4% in 2023 and increased 11% in 2022 and net sales to external customers decreased 3% in 2023 and increased 12% in 2022. The decrease during 2023 is driven by a decline in laboratory-related and industrial-related products, offset in part by very strong project activity in food retailing.
Segment profit increased $7.3 million in our U.S. Operations segment during 2023, compared to an increase of $55.6 million during 2022. The segment profit increase in 2023 is driven by our margin expansion and cost saving initiatives, offset in part by a decline in net sales volume.
Swiss Operations (amounts in thousands)
2023 2022 2021 Increase
(Decrease) in % (1)
2023 vs. 2022
Increase
(Decrease) in % (1)
2022 vs. 2021
Net sales $ 949,793 $ 1,016,070 $ 997,634 (7)% 2%
Net sales to external customers $ 188,679 $ 176,119 $ 171,633 7% 3%
Segment profit $ 281,481 $ 309,844 $ 301,142 (9)% 3%
(1)Represents U.S. dollar growth.
Total net sales in U.S. dollars decreased 7% in 2023 and increased 2% in 2022, and in local currencies decreased 12% in 2023 and increased 6% in 2022. Net sales to external customers in U.S. dollars increased 7% in 2023 and increased 3% in 2022, and in local currencies increased 3% in 2023 and increased 6% in 2022. Local currency net sales to external customers during 2023 includes particularly strong growth in food retailing and industrial-related products, offset in part by a decline in laboratory-related products.
Segment profit decreased $28.4 million in our Swiss Operations segment during 2023, compared to an increase of $8.7 million during 2022. The segment profit decrease in 2023 includes lower net sales volume to intercompany segments and unfavorable foreign currency translation, offset in part by cost savings initiatives.
Western European Operations (amounts in thousands)
2023 2022 2021 Increase
(Decrease) in % (1)
2023 vs. 2022
Increase
(Decrease) in % (1)
2022 vs. 2021
Net sales $ 981,870 $ 996,831 $ 1,041,308 (2)% (4)%
Net sales to external customers $ 792,907 $ 799,931 $ 829,761 (1)% (4)%
Segment profit $ 178,673 $ 174,352 $ 172,265 2% 1%
(1)Represents U.S. dollar growth.
Total net sales in U.S. dollars decreased 2% in 2023 and 4% in 2022, and in local currencies decreased 3% in 2023 and increased 8% in 2022. Net sales to external customers in U.S. dollars decreased 1% in 2023 and 4% in 2022, and in local currencies decreased 3% in 2023 and increased 9% in 2022. Local currency net sales to external customers during 2023 includes a decline in most product categories, especially food retailing.
Segment profit increased $4.3 million in our Western European Operations segment during 2023, compared to an increase of $2.1 million in 2022. The segment profit increase in 2023 is primarily due to the benefits from our margin expansion initiatives and cost savings initiatives and favorable currency translation.
Chinese Operations (amounts in thousands)
2023 2022 2021 Increase
(Decrease) in % (1)
2023 vs. 2022
Increase
(Decrease) in % (1)
2022 vs. 2021
Net sales $ 996,845 $ 1,149,690 $ 1,063,430 (13)% 8%
Net sales to external customers $ 718,818 $ 841,526 $ 771,651 (15)% 9%
Segment profit $ 367,094 $ 424,162 $ 369,835 (13)% 15%
(1)Represents U.S. dollar growth.
Total net sales in U.S. dollars decreased 13% in 2023 and increased 8% in 2022, and in local currencies decreased 9% in 2023 and increased 13% in 2022. Net sales by origin to external customers in U.S. dollars decreased 15% in 2023 and increased 9% in 2022, and in local currencies decreased 11% in 2023 and increased 13% in 2022. The decrease in local currency net sales to external customers during 2023 reflects a significant decline in market demand during the second half of 2023, especially in laboratory products following very strong growth in the previous two years. Market demand in China has significantly deteriorated, and we expect reduced sales during the first half of 2024 as compared to 2023. Uncertainties have increased, and market conditions may change quickly.
Segment profit decreased $57.1 million in our Chinese Operations segment during 2023, compared to an increase of $54.3 million in 2022. The decrease in segment profit during 2023 primarily reflects lower sales volume and unfavorable currency translation, offset partially by benefits from our margin expansion and cost savings initiatives.
Other (amounts in thousands)
2023 2022 2021 Increase
(Decrease) in % (1)
2023 vs. 2022
Increase
(Decrease) in % (1)
2022 vs. 2021
Net sales $ 704,586 $ 661,632 $ 661,682 6% -%
Net sales to external customers $ 683,986 $ 657,673 $ 656,902 4% -%
Segment profit $ 106,238 $ 90,322 $ 100,028 18% (10)%
(1)Represents U.S. dollar growth.
Other includes reporting units in Southeast Asia, Latin America, Eastern Europe, and other countries. Total net sales in U.S. dollars increased 6% in 2023 and were flat in 2022, and in local currencies increased 7% in 2023 and 8% in 2022. Net sales to external customers in U.S. dollars increased 4% in 2023 and were flat in 2022, and in local currencies increased 5% in 2023 and 8% in 2022. The increase in local currency growth in net sales to external customers during 2023 includes solid growth in most product categories.
Segment profit increased $15.9 million in our Other segment during 2023, compared to a decrease of $9.7 million during 2022. The increase in segment profit during 2023 primarily relates to increased sales volume and our margin expansion initiatives.
Liquidity, Capital Resources, and Future Cash Requirements
Liquidity is our ability to generate sufficient cash to meet our obligations and commitments. Sources of liquidity include cash flows from operating activities, available borrowings under our Credit Agreement, the ability to obtain appropriate financing, and our cash and cash equivalent balances. Currently, our financing requirements are primarily driven by working capital requirements, capital expenditures, share repurchases, and acquisitions. Global market conditions can be uncertain, and our ability to generate cash flows could be reduced by a deterioration in global markets.
We currently believe that cash flows from operating activities, together with liquidity available under our Credit Agreement, local working capital facilities, and cash balances, will be sufficient to fund currently anticipated working capital needs and spending requirements for at least the foreseeable future.
Cash provided by operating activities totaled $965.9 million in 2023, compared to $859.1 million in 2022 and $908.8 million in 2021. The increase in 2023 is primarily related to favorable working capital, the timing of tax payments, and lower cash incentive payments of $20 million.
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 $105.3 million in 2023, $121.2 million in 2022, and $107.6 million in 2021. Capital expenditures in 2024 are expected to be relatively consistent with 2023 subject to business and economic conditions.
In September 2021, the Company entered into an agreement with the U.S. Department of Defense to increase domestic production capacity of pipette tips and enhance manufacturing automation and logistics. As of December 31, 2023, we have received the maximum allowable funding of $35.8 million related to the agreement, which offset associated capital expenditures.
We continue to explore potential acquisitions. In connection with any acquisition, we may incur additional indebtedness. In March 2021, we acquired all the membership interests of Mayfair Technology, LLC (PendoTECH), a manufacturer and distributor of single-use sensors, transmitters, control systems, and software for measuring, monitoring, and data collection primarily in bioprocess applications. PendoTECH serves biopharmaceutical manufacturers and life science laboratories and is located in the United States. The initial cash payment was $185.0 million and we made other post-closing payments of $7.4 million. Additional consideration of $20.0 million was paid reflecting $10.0 million payments in both 2023 and 2022. In October 2021, the Company acquired Scale-up Systems Inc., a leading software provider for scale-up and reaction modeling serving the biopharma and chemical markets. The initial cash payment was $20.2 million and the Company paid additional consideration of EUR 2.6 million. For additional information related to these acquisitions, refer to Note 4 to the consolidated financial statements.
In 2023, 2022, and 2021, we also incurred additional acquisition payments totaling $5.8 million, $38.0 million, and $8.3 million, respectively.
Cash flows used in financing activities during 2023 primarily comprised share repurchases. In accordance with our share repurchase program, we spent $900.0 million in 2023 and $1.1 billion and $1.0 billion in 2022 and 2021, respectively, on the repurchase of 691,913 shares, 838,010 shares, and 739,486 shares, respectively. Our share repurchase program does not obligate us to acquire any specific number of shares; however, in 2024, we intend to spend approximately $850.0 million on the repurchase of shares, subject to business and economic conditions.
The Inflation Reduction Act (IRA) was enacted in August, 2022. The IRA includes provisions imposing a 1% excise tax on net share repurchases that occur after December 31, 2022 and introduces a 15% corporate alternative minimum tax (CAMT) on adjusted financial statement income. The financial impact of the IRA is immaterial to our financial statements.
We plan to continue to repatriate earnings from China, Switzerland, Germany, the United Kingdom, and certain other countries in future years and expect the only additional cost associated with the repatriation of such foreign earnings will be withholding taxes. All other undistributed earnings are considered to be permanently reinvested. We believe the ongoing tax impact associated with repatriating our undistributed foreign earnings will not have a material effect on our liquidity.
Senior Notes and Credit Facility Agreement
Our short-term borrowings and long-term debt consisted of the following at December 31, 2023:
U.S. Dollar Other Principal
Trading Currencies Total
3.84% $125 million 10-year Senior Notes due September 19, 2024 125,000 - 125,000
4.24% $125 million 10-year Senior Notes due June 25, 2025 125,000 - 125,000
3.91% $75 million 10-year Senior Notes due June 25, 2029 75,000 - 75,000
5.45% $150 million 10-year Senior Notes due March 1, 2033 150,000 - 150,000
2.83% $125 million 12-year Senior Notes due July 22, 2033 125,000 - 125,000
3.19% $50 million 15-year Senior Notes due January 24, 2035 50,000 - 50,000
2.81% $150 million 15-year Senior Notes due March 17, 2037 150,000 - 150,000
2.91% $150 million 15-year Senior Notes due September 1, 2037 150,000 - 150,000
1.47% EUR 125 million 15-year Senior Notes due June 17, 2030 - 137,966 137,966
1.30% EUR 135 million 15-year Senior Notes due November 6, 2034 - 149,003 149,003
1.06% EUR 125 million 15-year Senior Notes due March 19, 2036 - 137,966 137,966
Senior Notes debt issuance costs, net (2,663) (1,356) (4,019)
Total Senior Notes 947,337 423,579 1,370,916
$1.25 billion Credit Agreement, interest at benchmark plus 87.5 basis points(1)(2)
373,196 265,249 638,445
Other local arrangements 5,225 66,253 71,478
Total debt 1,325,758 755,081 2,080,839
Less: current portion (126,258) (65,961) (192,219)
Total long-term debt $ 1,199,500 $ 689,120 $ 1,888,620
(1) See Note 6 and Note 7 for additional disclosures on the financial instruments associated with the Credit Agreement.
(2) The benchmark interest rate is determined by the borrowing currency. The benchmark rates by borrowing currency are as follows: SOFR for U.S. dollars (plus a 10 basis points spread adjustment), SARON for Swiss franc, EURIBOR for euro and SONIA for Great British pounds.
As of December 31, 2023, approximately $606.4 million of additional borrowings were available under our Credit Agreement and we maintained $69.8 million of cash and cash equivalents. At December 31, 2023, the interest payments associated with 78% of the Company’s debt are fixed
obligations. We expect to make interest payments of approximately $85.0 million during 2024 associated with our debt outstanding as of December 31, 2023.
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. Further, we do not have any downgrade triggers from rating agencies that would accelerate the maturity dates of our debt. We were in compliance with our debt covenants as of December 31, 2023.
Senior Notes
The Senior Notes listed above are senior unsecured obligations and interest is payable semi-annually. The Senior Notes each contain customary affirmative and negative covenants as further described in Note 10 to our consolidated financial statements.
In December 2022, we entered into an agreement to issue and sell $150 million 10-year Senior Notes in a private placement. We issued $150 million with a fixed interest rate of 5.45% in March 2023, which will mature in March 2033. We used the proceeds from the sale of the notes to refinance existing indebtedness and for other general corporate purposes.
In December 2021, we entered into an agreement to issue and sell $300 million 15-year Senior Notes in a private placement. We issued $150 million with a fixed interest rate of 2.81% (2.81% Senior Notes) in March 2022, which will mature in March 2037, and we issued $150 million with a fixed interest rate of 2.91% (2.91% Senior Notes) in September 2022, which will mature in September 2037. We used the proceeds from the sale of the notes to refinance existing indebtedness and for other general corporate purposes.
Credit Agreement
On June 25, 2021, we entered into a $1.25 billion Credit Agreement (the Credit Agreement), which amended our $1.1 billion Amended and Restated Credit Agreement (the Prior Credit Agreement), which is further described in Note 10 to our consolidated financial statements.
Other Local Arrangements
In April 2018, two of our non-U.S. pension plans issued loans totaling $39.6 million (Swiss franc 38 million) to a wholly-owned subsidiary of the Company. The loans have the same terms and conditions, which include an interest rate of SARON plus 87.5 basis points. The loans were renewed for one year in April 2023.
Share Repurchase Program
The Company has $2.6 billion of remaining availability under its share repurchase program as of December 31, 2023. The share repurchases are expected to be funded from cash generated from operating activities, borrowings, and cash balances. Repurchases will be made through open market transactions, and the amount and timing of purchases will depend on business and market conditions, the stock price, trading restrictions, the level of acquisition activity, and other factors.
We have purchased 31.7 million common shares since the inception of the program in 2004 through December 31, 2023, at a total cost of $8.9 billion and average price per share of $281.95. During the years ended December 31, 2023 and 2022, we spent $900.0 million and $1.1 billion on the repurchase of 691,913 shares and 838,010 shares at an average price per share of $1,300.72 and $1,312.61, respectively. We reissued 79,076 shares and 133,916 shares held in treasury for the exercise of stock options and restricted stock units during 2023 and 2022, respectively. In addition, we incurred $8.1 million of excise
tax during the year ended December 31, 2023 related to the Inflation Reduction Act which is reflected as a reduction in shareholders' equity in our consolidated financial statements.
Effect of Currency on Results of Operations
Our earnings are affected by changing exchange rates. We are particularly sensitive to changes in the exchange rates between the Swiss franc, euro, Chinese renminbi, and U.S. dollar. We have more Swiss franc expenses than we do Swiss franc sales because we develop and manufacture products in Switzerland that we sell globally and have a number of corporate functions located in Switzerland. When the Swiss franc strengthens against our other trading currencies, particularly the U.S. dollar and euro, our earnings go down. We also have significantly more sales in the euro than we do expenses. When the euro weakens against the U.S. dollar and Swiss franc, our earnings also go down. We estimate a 1% strengthening of the Swiss franc against the euro would reduce our earnings before tax by approximately $2.0 million to $2.3 million annually.
We also conduct business throughout the world, including Asia Pacific, the United Kingdom, Eastern Europe, Latin America, and Canada. Fluctuations in these currency exchange rates against the U.S. dollar can also affect our operating results. The most significant of these currency exposures is the Chinese renminbi. The impact on our earnings before tax of the Chinese renminbi weakening 1% against the U.S. dollar is a reduction of approximately $3.2 million to $3.5 million annually.
In addition to the effects of exchange rate movements on operating profits, our debt levels can fluctuate due to changes in exchange rates, particularly between the U.S. dollar, the Swiss franc, and euro. Based on our outstanding debt at December 31, 2023, we estimate that a 5% weakening of the U.S. dollar against the currencies in which our debt is denominated would result in an increase of $39.8 million in the reported U.S. dollar value of our 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 changes in law, 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, and earnings repatriations between jurisdictions. Generally, the tax liability for each taxpayer within the Mettler-Toledo International Inc. group of companies 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, we have incurred, and will continue to incur, capital and operating expenditures and other costs in complying with such laws and regulations.
We are currently involved in, or have potential liability with respect to, the remediation of past contamination in certain of our facilities. A former subsidiary of Mettler-Toledo, LLC known as Hi-Speed Checkweigher Co., Inc. was one of two private parties ordered by the New Jersey Department of Environmental Protection, in an administrative consent order signed on June 13, 1988, to investigate and remediate certain ground water contamination at a property in Landing, New Jersey. After the other party under this order failed to fulfill its obligations, Hi-Speed became solely responsible for compliance with the order. We estimate that the costs of compliance associated with the site over the next several years will approximate a total of $0.1 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.
Inflation
Global inflation moderated during 2023, after rising sharply in 2022 and 2021 related to the COVID-19 economic recovery and associated disruptions in global demand, supply chains/logistics, and labor markets, as well as the war in Ukraine and related significant increase in energy costs. Inflation can affect the costs of goods and services that we use, including raw materials to manufacture our products, as well as transportation and logistical costs and other external costs and services. Inflation can also affect labor costs which are a significant element of our overall cost structure. Inflation can also lead to increased interest rates as country monetary policies combat inflation. This can result in reduced economic growth and recessionary conditions, as well as higher borrowing costs. Inflation presents several risks to our business as further described on page 22 in the Risk Factors section of this Form 10-K, and these inflationary conditions could have a greater impact on our operating results in future years.
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 certain cross currency swap agreements. The fair value of these contracts was a net liability of $16.9 million at December 31, 2023. Based on our agreements outstanding at December 31, 2023, a 100-basis-point change in interest rates and foreign currency exchange rates would result in a change in the net aggregate market value of these instruments by approximately $8.1 million. 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 Estimates
Management’s discussion and analysis of our financial condition and results of operations is based upon our 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, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue, income taxes, inventories, goodwill and intangibles, leases, and pensions and other post-retirement benefits. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The results 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 estimates affect our more significant judgments used in the preparation of our consolidated financial statements. For a detailed discussion on the application of these and other accounting policies, see Note 2 to our consolidated financial statements.
Income taxes
Income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s assessment of estimated future taxes to be paid on items in the consolidated financial statements. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. The valuation allowance of $73.5 million as of December 31, 2023 is based on management’s estimates of future taxable income and application of relevant income tax law. 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 valuation allowance 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 deferred tax asset in the future, an adjustment to the valuation allowance would be charged to income in the period such determination was made.
We plan to repatriate earnings from China, Switzerland, Germany, the United Kingdom, and certain other countries in future years and expect the additional tax costs associated with the repatriation of such earnings will be non-U.S. withholding taxes, certain state taxes, and U.S. taxes on currency gains, if any. All other undistributed earnings are considered permanently reinvested.
The significant assumptions and estimates described in the preceding paragraphs are important contributors to our ultimate effective tax rate for each year in addition to our income mix from geographical regions. If any of our assumptions or estimates were to change, or should our income mix from our geographical regions change, our effective tax rate could be materially affected. Based on earnings before taxes of $1.0 billion for the year ended December 31, 2023, each increase of $9.7 million in tax expense would increase our effective tax rate by 1%.
Employee benefit plans
The net periodic pension cost for 2023 and projected benefit obligation as of December 31, 2023 were $2.8 million and $108.5 million, respectively, for our U.S. pension plan. The net periodic cost for 2023 and projected benefit obligation as of December 31, 2023 were $5.3 million and $917.3 million, respectively, for our international pension plans. The net periodic post-retirement benefit for 2023 and expected post-retirement benefit obligation as of December 31, 2023 for our U.S. post-retirement medical benefit plan were $0.1 million and $0.6 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 2023, the weighted average return on assets assumption was 6.75% for the U.S. plan and 3.85% for the international plans. A change in the rate of return of 1% would impact annual benefit plan expense by approximately $8.7 million after tax.
The discount rates for defined benefit and post-retirement plans are set by benchmarking against high-quality corporate bonds. For 2023, the weighted average discount rate assumption was 4.68% for the U.S. plan and 2.07% for the international plans, representing a weighted average of local rates in countries
where such plans exist. A change in the discount rate of 1% would impact annual benefit plan expense by approximately $7.5 million after tax.
Goodwill and other intangible assets
As of December 31, 2023, our consolidated balance sheet included goodwill of $670.1 million and other intangible assets of $285.4 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 annual evaluations of goodwill and indefinite-lived intangible assets are generally based on an assessment of qualitative factors to determine whether it is more likely than not that the fair value of the asset is less than its carrying amount.
If we are unable to conclude whether the goodwill or indefinite-lived intangible asset is not impaired after considering the totality of events and circumstances during our qualitative assessment, we perform a quantitative impairment test by estimating the fair value of the respective reporting unit or indefinite-lived intangible asset and comparing the fair value to the carrying amount of the goodwill asset. If the carrying amount of the reporting unit or indefinite-lived intangible asset exceeds its fair value, an impairment charge equal to the difference is recognized.
Both the qualitative and quantitative evaluations consider operating results, business plans, economic conditions, and market data, among other factors. There are inherent uncertainties related to these factors and our judgment in applying them to the impairment analyses. Our assessments to date have indicated that there has been no impairment of these assets.
Should any of these estimates or assumptions change, or should we incur lower than expected operating performance or cash flows, including from a prolonged economic slowdown, we may experience a triggering event that requires a new fair value assessment for our reporting units, possibly prior to the required annual assessment. These types of events and resulting analysis could result in impairment charges for goodwill and other indefinite-lived intangible assets if the fair value estimate declines below the carrying value.
Our amortization expense related to intangible assets with finite lives may materially change should our estimates of their useful lives change.
New Accounting Pronouncements
See Note 2 to the consolidated financial statements.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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
Item 8.Financial Statements and Supplementary Data
The financial statements required by this item are set forth starting on page and the related financial schedule is set forth on page S-1.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
Item 9A.Controls and Procedures
Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
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.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023. 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 (2013). Based on our assessment, we concluded that, as of December 31, 2023, 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 their integrated audit report, which covers our internal control over financial reporting, which appears on page.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

---

ITEM 9B. OTHER INFORMATION
Item 9B.Other Information
None.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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
Patrick Kaltenbach 60 President and Chief Executive Officer
Marc de La Guéronnière 60 Head of European and North American Market Organizations
Gerhard Keller 56 Head of Process Analytics
Christian Magloth 58 Head of Human Resources
Shawn P. Vadala 55 Chief Financial Officer
Richard Wong 59 Head of Asia/Pacific
Patrick Kaltenbach joined the Company in January 2021 and assumed the role of Chief Executive Officer beginning April 1, 2021. Prior to joining the Company, he served as the President of the Life Sciences Segment at Becton Dickinson since 2018. He was President of Life Sciences and Applied Markets Group at Agilent from 2014 to 2018. Previously, he held wide-ranging and increasing leadership roles at Agilent and its predecessor company, Hewlett Packard, since joining in 1991.
Marc de La Guéronnière has been Head of European Market Organizations of the Company since January 2008 and Head of North American Market Organizations since April 2014. 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.
Gerhard Keller joined the Company in 1991 and has been Head of Process Analytics since July 2018 and Head of Pipettes since July 2013. He previously was Head of Region East Asia/Pacific and also served in various Sales and Marketing leadership functions in Europe and Asia Pacific. Prior to joining the Company, he worked in Quality Control at Sandoz, now Novartis, in Switzerland.
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.
Shawn P. Vadala joined the Company in 1997 and has been Chief Financial Officer since January 2014 and also responsible for the Company’s Pricing program since 2008. Mr. Vadala previously held various senior financial positions at the Company’s Columbus, Ohio and Greifensee, Switzerland offices and was also responsible for Business Intelligence from 2010 to 2018. Prior to joining the Company, he worked in the Boston and Zurich, Switzerland offices of PricewaterhouseCoopers.
Richard Wong has been Head of Asia/Pacific since 2009. Prior to joining the Company in 2008, he held various regional management positions with Agilent Technologies from 1998 to 2008 including Life Sciences Field Operations for North Asia based in Beijing and later in Tokyo. He started his career with Hewlett Packard in 1991 and held positions of increasing responsibilities in Sales and Marketing and Finance.
Certifications
Our Chief Executive Officer and Chief Financial Officer 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 2024 Proxy Statement.

---

ITEM 11. EXECUTIVE COMPENSATION
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 2024 Proxy Statement is incorporated by reference herein.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information appearing in the section “Share Ownership” in the 2024 Proxy Statement is incorporated by reference herein. Information appearing in “Securities Authorized for Issuance under Equity Compensation Plans as of December 31, 2023” is included within Note 12 to the financial statements.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 2024 Proxy Statement is incorporated by reference herein.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14.Principal Accounting Fees and Services
Information appearing in the section “Audit Committee Report” in the 2024 Proxy Statement is hereby incorporated by reference.
PART IV

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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.
2. Report of Independent Registered Public Accounting Firm (PCAOB ID 238). See page.
3. Financial Statement Schedule. See Schedule II, which is included on page S-1.
4. List of Exhibits. See Exhibit Index included on page E-1.