METTLER TOLEDO INTERNATIONAL INC/ - Quarter Report: 2011 June (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2011, OR

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

Commission File Number: 1-13595

Mettler-Toledo International Inc.

(Exact name of registrant as specified in its charter)

	Delaware		13-3668641
	(State or other jurisdiction of incorporation or organization)		(I.R.S Employer Identification No.)

1900 Polaris Parkway
Columbus, Ohio 43240
and
Im Langacher, P.O. Box MT-100
CH 8606 Greifensee, Switzerland

            (Address of principal executive offices)            
(Zip Code)

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

not applicable

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

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

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer  X  Accelerated filer      Non-accelerated filer      (Do not check if a smaller reporting company) Smaller reporting company     

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

The Registrant had 31,884,134 shares of Common Stock outstanding at June 30, 2011.

 

 

METTLER-TOLEDO INTERNATIONAL INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q

				PAGE
		PART I. FINANCIAL INFORMATION
Item 1.		Financial Statements
		Unaudited Interim Consolidated Financial Statements:
		Interim Consolidated Statements of Operations for the three months ended June 30, 2011 and 2010			3
		Interim Consolidated Statements of Operations for the six months ended June 30, 2011 and 2010			4
		Interim Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010			5
		Interim Consolidated Statements of Shareholders' Equity and Comprehensive Income for the six months ended June 30, 2011 and twelve months ended December 31, 2010			6
		Interim Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010			7
		Notes to the Interim Consolidated Financial Statements at June 30, 2011			8
Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			32
Item 4.		Controls and Procedures			32
		PART II. OTHER INFORMATION
Item 1.		Legal Proceedings			33
Item 1A.		Risk Factors			33
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			33
Item 3.		Defaults upon Senior Securities			33
Item 5.		Other Information			33
Item 6.		Exhibits			34
SIGNATURE
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

METTLER-TOLEDO INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

			June 30,				June 30,
		2011				2010
Net sales
Products		$	439,321			$	358,829
Service			121,767				109,720
Total net sales			561,088				468,549
Cost of sales
Products			189,253				154,770
Service			75,644				67,154
Gross profit			296,191				246,625
Research and development			29,605				23,105
Selling, general and administrative			172,054				143,602
Amortization			4,325				3,565
Interest expense			5,692				4,711
Restructuring charges			1,971				1,526
Other charges (income), net			1,207				730
Earnings before taxes			81,337				69,386
Provision for taxes			21,149				18,039
Net earnings		$	60,188			$	51,347
Basic earnings per common share:
Net earnings		$	1.88			$	1.53
Weighted average number of common shares			31,997,850				33,536,105
Diluted earnings per common share:
Net earnings		$	1.82			$	1.49
Weighted average number of common and common equivalent shares			33,013,887				34,395,487

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

METTLER-TOLEDO INTERNATIONAL INC.

		June 30,				June 30,
		2011				2010
Net sales
Products		$	826,395			$	672,233
Service			233,459				212,967
Total net sales			1,059,854				885,200
Cost of sales
Products			356,966				289,101
Service			145,190				131,548
Gross profit			557,698				464,551
Research and development			55,956				45,570
Selling, general and administrative			333,432				278,616
Amortization			7,947				6,946
Interest expense			11,403				9,965
Restructuring charges			2,469				1,910
Other charges (income), net			1,876				984
Earnings before taxes			144,615				120,560
Provision for taxes			37,600				31,345
Net earnings		$	107,015			$	89,215
Basic earnings per common share:
Net earnings		$	3.33			$	2.65
Weighted average number of common shares			32,144,223				33,646,640
Diluted earnings per common share:
Net earnings		$	3.23			$	2.59
Weighted average number of common and common equivalent shares			33,152,760				34,464,277

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

METTLER-TOLEDO INTERNATIONAL INC.

		June 30,				December 31,
		2011				2010
ASSETS
Current assets:
Cash and cash equivalents		$	328,763			$	447,577
Trade accounts receivable, less allowances of $12,525 at June 30, 2011 and $11,536 at December 31, 2010			382,089				368,936
Inventories			268,154				217,104
Current deferred tax assets, net			51,932				44,548
Other current assets and prepaid expenses			67,231				66,730
Total current assets			1,098,169				1,144,895
Property, plant and equipment, net			416,872				364,472
Goodwill			447,599				434,699
Other intangible assets, net			113,686				104,372
Non-current deferred tax assets, net			100,264				95,996
Other non-current assets			164,689				138,629
Total assets		$	2,341,279			$	2,283,063
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable		$	151,499			$	138,105
Accrued and other liabilities			107,207				100,793
Accrued compensation and related items			114,132				138,358
Deferred revenue and customer prepayments			107,247				86,746
Taxes payable			54,285				49,577
Current deferred tax liabilities			18,999				17,705
Short-term borrowings and current maturities of long-term debt			12,626				10,902
Total current liabilities			565,995				542,186
Long-term debt			621,359				670,301
Non-current deferred tax liabilities			129,907				124,523
Other non-current liabilities			185,613				174,469
Total liabilities			1,502,874				1,511,479
Commitments and contingencies (Note 14)
Shareholders’ equity:
Preferred stock, $0.01 par value per share; authorized 10,000,000 shares			–				–
Common stock, $0.01 par value per share; authorized 125,000,000 shares; issued 44,786,011 and 44,786,011 shares; outstanding 31,884,134 and 32,425,315 shares at June 30, 2011 and December 31, 2010, respectively			448				448
Additional paid-in capital			608,543				597,195
Treasury stock at cost (12,901,877 shares at June 30, 2011 and 12,360,696 shares at December 31, 2010)			(1,159,848	)			(1,057,390	)
Retained earnings			1,325,007				1,223,130
Accumulated other comprehensive income (loss)			64,255				8,201
Total shareholders’ equity			838,405				771,584
Total liabilities and shareholders’ equity		$	2,341,279			$	2,283,063

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

METTLER-TOLEDO INTERNATIONAL INC.

																						Accumulated
		Common Stock								Additional												Other
										Paid-in				Treasury				Retained				Comprehensive
		Shares				Amount				Capital				Stock				Earnings				Income (Loss)				Total
Balance at December 31, 2009			33,851,124			$	448			$	574,034			$	(857,130	)		$	1,009,995			$	(16,209	)		$	711,138
Exercise of stock options and restricted stock units			527,276				-				-				39,555				(19,100	)			-				20,455
Other treasury stock issuances			2,549				-				-				183				87				-				270
Repurchases of common stock			(1,955,634	)			-				-				(239,998	)			-				-				(239,998	)
Tax benefit resulting from exercise of certain employee stock options			-				-				10,776				-				-				-				10,776
Share-based compensation			-				-				12,385				-				-				-				12,385
Comprehensive income:
Net earnings			-				-				-				-				232,148				-				232,148
Net unrealized loss on cash flow hedging arrangements, net of tax			-				-				-				-				-				(6,410	)			(6,410	)
Change in currency translation adjustment, net of tax			-				-				-				-				-				31,647				31,647
Pension adjustment, net of tax			-				-				-				-				-				(827	)			(827	)
Total comprehensive income																											256,558
Balance at December 31, 2010			32,425,315			$	448			$	597,195			$	(1,057,390	)		$	1,223,130			$	8,201			$	771,584
Exercise of stock options and restricted stock units			146,898				-				-				11,721				(5,138	)			-				6,583
Repurchases of common stock			(688,079	)			-				-				(114,179	)			-				-				(114,179	)
Tax benefit resulting from exercise of certain employee stock options			-				-				5,626				-				-				-				5,626
Share-based compensation			-				-				5,722				-				-				-				5,722
Comprehensive income:
Net earnings			-				-				-				-				107,015				-				107,015
Net unrealized loss on cash flow hedging arrangements, net of tax			-				-				-				-				-				(599	)			(599	)
Change in currency translation adjustment, net of tax			-				-				-				-				-				54,605				54,605
Pension adjustment, net of tax			-				-				-				-				-				2,048				2,048
Total comprehensive income (a)																											163,069
Balance at June 30, 2011			31,884,134			$	448			$	608,543			$	(1,159,848	)		$	1,325,007			$	64,255			$	838,405

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

METTLER-TOLEDO INTERNATIONAL INC.

		June 30,				June 30,
		2011				2010
Cash flows from operating activities:
Net earnings		$	107,015			$	89,215
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation			14,854				14,465
Amortization			7,947				6,946
Deferred tax provision			(8,058	)			(4,534	)
Excess tax benefits from share-based payment arrangements			(4,931	)			(2,718	)
Share-based compensation			5,722				6,009
Other			(515	)			129
Increase (decrease) in cash resulting from changes in:
Trade accounts receivable, net			4,121				(10,697	)
Inventories			(33,628	)			(23,633	)
Other current assets			1,229				(2,325	)
Trade accounts payable			6,874				9,481
Taxes payable			(796	)			8,957
Accruals and other			(6,281	)			27,963
Net cash provided by operating activities			93,553				119,258
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment			2,302				102
Purchase of property, plant and equipment			(40,517	)			(19,803	)
Acquisitions			(15,463	)			(12,557	)
Other investing activities			(882	)			—
Net cash used in investing activities			(54,560	)			(32,258	)
Cash flows from financing activities:
Proceeds from borrowings			46,443				52,143
Repayments of borrowings			(104,200	)			(47,058	)
Proceeds from stock option exercises			6,583				9,384
Repurchases of common stock			(114,179	)			(72,794	)
Excess tax benefits from share-based payment arrangements			4,931				2,718
Other financing activities			67				(3,538	)
Net cash used in financing activities			(160,355	)			(59,145	)
Effect of exchange rate changes on cash and cash equivalents			2,548				(1,295	)
Net (decrease) increase in cash and cash equivalents			(118,814	)			26,560
Cash and cash equivalents:
Beginning of period			447,577				85,031
End of period		$	328,763			$	111,591

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

METTLER-TOLEDO INTERNATIONAL INC.

At June 30, 2011 — Unaudited
(In thousands, except share data, unless otherwise stated)

      

1.       BASIS OF PRESENTATION

          Mettler-Toledo International Inc. (“Mettler-Toledo” or the “Company”) is a leading global supplier of precision instruments and services. The Company manufactures weighing instruments for use in laboratory, industrial, packaging, logistics and food retailing applications. The Company also manufactures several related analytical instruments and provides automated chemistry solutions used in drug and chemical compound discovery and development. In addition, the Company manufactures metal detection and other end-of-line inspection systems used in production and packaging and provides solutions for use in certain process analytics applications. The Company’s primary manufacturing facilities are located in China, Germany, Switzerland, the United Kingdom and the United States. The Company’s principal executive offices are located in Columbus, Ohio and Greifensee, Switzerland.

          The accompanying interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include all entities in which the Company has control, which are its wholly-owned subsidiaries. The interim consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The interim consolidated financial statements as of June 30, 2011 and for the three and six month periods ended June 30, 2011 and 2010 should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

          The accompanying interim consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. Operating results for the three and six months ended June 30, 2011 are not necessarily indicative of the results to be expected for the full year ending December 31, 2011.

          The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates. A discussion of the Company’s critical accounting policies is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

          All intercompany transactions and balances have been eliminated.

          Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

METTLER-TOLEDO INTERNATIONAL INC.

At June 30, 2011 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

2.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Trade Accounts Receivable

          Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts represents the Company’s best estimate of probable credit losses in its existing trade accounts receivable. The Company determines the allowance based upon a review of both specific accounts for collection and the age of the accounts receivable portfolio.

Inventories

          Inventories are valued at the lower of cost or net realizable value. Cost, which includes direct materials, labor and overhead, is generally determined using the first in, first out (FIFO) method. The estimated net realizable value is based on assumptions for future demand and related pricing. Adjustments to the cost basis of the Company’s inventory are made for excess and obsolete items based on usage, orders and technological obsolescence. If actual market conditions are less favorable than those projected by management, reductions in the value of inventory may be required.

          Inventories consisted of the following:

		June 30,				December 31,
		2011				2010
Raw materials and parts		$	114,839			$	101,660
Work-in-progress			51,014				36,615
Finished goods			102,301				78,829
		$	268,154			$	217,104

Goodwill and Other Intangible Assets

          Goodwill, representing the excess of purchase price over the net asset value of companies acquired, and indefinite-lived intangible assets are not amortized, but are reviewed for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that an asset might be impaired. The annual evaluation is based on valuation models that estimate fair value based on expected future cash flows and profitability projections.

          Other intangible assets include indefinite-lived assets and assets subject to amortization. Where applicable, amortization is charged on a straight-line basis over the expected period to be benefited. The straight-line method of amortization reflects an appropriate allocation of the cost of the intangible assets to earnings in proportion to the amount of economic benefits obtained by the Company in each reporting period. The Company assesses the initial acquisition of intangible assets in accordance with the provisions of ASC 805 “Business Combinations” and the continued accounting for previously recognized intangible assets and goodwill in accordance with the provisions of ASC 350 “Intangibles — Goodwill and Other” and ASC 360 “Property, Plant and Equipment.”

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2011 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

          Other intangible assets consisted of the following:

		June 30, 2011								December 31, 2010
		Gross				Accumulated				Gross				Accumulated
		Amount				Amortization				Amount				Amortization
Customer relationships		$	86,928			$	(17,342	)		$	80,674			$	(15,968	)
Proven technology and patents			41,417				(24,449	)			36,262				(22,298	)
Tradename (finite life)			4,101				(960	)			2,420				(760	)
Tradename (indefinite life)			23,634				-				23,634				-
Other			510				(153	)			510				(102	)
		$	156,590			$	(42,904	)		$	143,500			$	(39,128	)

          The Company recognized amortization expense associated with the above intangible assets of $1.7 million and $1.5 million for the three months ended June 30, 2011 and 2010, respectively and $3.2 million and $3.1 million for the six months ended June 30, 2011 and 2010, respectively. The annual aggregate amortization expense based on the current balance of other intangible assets is estimated at $6.6 million for 2011 and 2012, $5.1 million for 2013, $5.0 million for 2014, $4.4 million for 2015 and $4.2 million for 2016. Purchased intangible amortization, net of tax was $1.0 million and $0.9 million for the three months ended June 30, 2011 and 2010, respectively and $1.8 million for both the six month periods ended June 30, 2011 and 2010.

          In addition to the above amortization, the Company recorded amortization expense associated with capitalized software of $2.6 million and $2.1 million for the three months ended June 30, 2011 and 2010, respectively and of $4.7 million and $3.9 million for the six months ended June 30, 2011 and 2010, respectively.

Revenue Recognition

          Revenue is recognized when title to a product has transferred and any significant customer obligations have been fulfilled. Standard shipping terms are generally FOB shipping point in most countries and, accordingly, title and risk of loss transfers upon shipment. In countries where title cannot legally transfer before delivery, the Company defers revenue recognition until delivery has occurred. The Company generally maintains the right to accept or reject a product return in its terms and conditions and also maintains appropriate accruals for outstanding credits. Shipping and handling costs charged to customers are included in total net sales and the associated expense is recorded in cost of sales for all periods presented. Other than a few small software applications, the Company does not sell software products without the related hardware instrument as the software is embedded in the instrument. The Company’s products typically require no significant production, modification or customization of the hardware or software that is essential to the functionality of the products. To the extent the Company’s solutions have a post-shipment obligation, such as customer acceptance, revenue is deferred until the obligation has been completed. The Company defers product revenue where installation is required, unless such installation is deemed perfunctory. The Company also sometimes enters into certain arrangements that require the separate delivery of multiple goods and/or services. These deliverables are accounted for separately if the deliverables have standalone value and the performance of undelivered items is probable and within the Company’s control. The allocation of revenue between the separate deliverables is typically based

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2011 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

on the relative selling price at the time of the sale in accordance with a number of factors including service technician billing rates, time to install and geographic location. The adoption of the recently issued multiple-element arrangement guidance on January 1, 2011, has not and is not expected to have a material impact on the Company’s financial statements.

          Further, certain products are also sold through indirect distribution channels whereby the distributor assumes any further obligations to the customer upon title transfer. Revenue is recognized on these products upon transfer of title and risk of loss to its distributors. Distributor discounts are offset against revenue at the time such revenue is recognized.

          Service revenue not under contract is recognized upon the completion of the service performed. Spare parts sold on a stand-alone basis are recognized upon title and risk of loss transfer which is generally at the time of shipment. Revenues from service contracts are recognized ratably over the contract period. These contracts represent an obligation to perform repair and other services including regulatory compliance qualification, calibration, certification and preventative maintenance on a customer’s pre-defined equipment over the contract period. Service contracts are separately priced and payment is typically received from the customer at the beginning of the contract period.

Warranty

          The Company generally offers one-year warranties on most of its products. Product warranties are recorded at the time revenue is recognized. While the Company engages in extensive product quality programs and processes, its warranty obligation is affected by product failure rates, material usage and service costs incurred in correcting a product failure.

          The Company’s accrual for product warranties is included in accrued and other liabilities in the consolidated balance sheets. Changes to the Company’s accrual for product warranties for the six months ended June 30 are as follows:

		June 30,				June 30,
		2011				2010
Balance at beginning of period		$	15,680			$	15,856
Accruals for warranties			7,451				6,851
Foreign currency translation			722				(997	)
Payments / utilizations			(7,073	)			(8,656	)
Balance at end of period		$	16,780			$	13,054

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2011 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

Employee Termination Benefits

          In situations where contractual termination benefits exist, the Company records accruals for employee termination benefits when it is probable that a liability has been incurred and the amount of the liability is reasonably estimable. All other employee termination arrangements are recognized and measured at their fair value at the communication date unless the employee is required to render additional service beyond the legal notification period, in which case the liability is recognized ratably over the future service period.

Share-Based Compensation

          The Company recognizes share-based compensation expense within selling, general and administrative in the consolidated statement of operations with a corresponding offset to additional paid-in capital in the consolidated balance sheet. The Company recorded $2.5 million and $5.7 million of share-based compensation expense for the three and six months ended June 30, 2011, respectively, compared to $3.0 million and $6.0 million for the corresponding periods in 2010.

Research and Development

          Research and development costs primarily consist of salaries, consulting and other costs. The Company expenses these costs as incurred.

3.         ACQUISITIONS

          In March 2011, the Company completed acquisitions totaling $15.4 million, of which $12.0 million related to an X-ray inspection solutions business that will be integrated into the Company’s product inspection product offering. Goodwill recorded in connection with these acquisitions totaled $4.4 million, of which $1.9 million is included in the Company’s U.S. Operations segment and $2.5 million is included in the Company’s Swiss Operations segment. The Company also recorded $9.9 million of identified intangibles pertaining to tradename, customer relationships and technology. The weighted average amortization periods are 15 years for both tradename and customer relationships and 9 years for technology.

          In January 2010, the Company acquired a pipette distributor located in the United Kingdom for an aggregate purchase price of approximately $12.5 million. Goodwill recorded in connection with the acquisition totaled $7.4 million, which is included in the Company’s Western European Operations segment. The Company also recorded $4.5 million of identified intangibles pertaining to tradename and customer relationships. The weighted average amortization periods are 7 years for tradename and 30 years for customer relationships.

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2011 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

4.         FINANCIAL INSTRUMENTS

          As more fully described below, the Company enters into certain interest rate swap agreements in order to manage its exposure to changes in interest rates. The amount of the Company’s fixed obligation interest payments may change based upon the expiration dates of its interest rate swap agreements and the level and composition of its debt. The Company also enters into certain foreign currency forward contracts to limit the Company’s exposure to currency fluctuations on the respective hedged items. The Company does not use derivative financial instruments for trading purposes. For additional disclosures on the fair value of financial instruments, also see Note 5 to the interim consolidated financial statements.

          Cash Flow Hedge

          The Company has an interest rate swap agreement, designated as a cash flow hedge. The agreement is a forward-starting swap which changed the floating rate LIBOR-based interest payments associated with $100 million in forecasted borrowings under the Company’s credit facility to a fixed obligation of 3.24% beginning in October 2010. During the six months ended June 30, 2010, the Company settled $100 million of its original $200 million arrangement, resulting in expense of $0.6 million being reclassified from other comprehensive income to interest expense. The swap is recorded in other non-current liabilities in the consolidated balance sheet at its fair value at June 30, 2011 and December 31, 2010 of $6.8 million and $5.8 million, respectively. The effective portion of the loss reclassified from accumulated other comprehensive income (loss) to interest expense was $0.8 million for the three month period ended June 30, 2011 and $1.5 million and $0.6 million for the six month periods ended June 30, 2011 and 2010 respectively. No reclassification occurred for the three month period ended June 30, 2010. The amount recognized in other comprehensive income (loss) during the three month periods ended June 30, 2011 and 2010 was a loss of $1.9 million and $4.7 million, respectively and during the six month periods ended June 30, 2011 and 2010 was a loss of $0.9 million and $8.8 million, respectively. A net after tax derivative loss of $1.9 million based upon interest rates at June 30, 2011, is expected to be reclassified from other comprehensive income (loss) to earnings in the next twelve months. Through June 30, 2011 no hedge ineffectiveness has occurred in relation to this hedge.

          Other Derivatives

          The Company enters into foreign currency forward contracts in order to economically hedge short-term intercompany balances largely denominated in Swiss franc and other major European currencies with its foreign businesses. In accordance with U.S. GAAP, these contracts are considered “derivatives not designated as hedging instruments”. Gains or losses on these instruments are reported in current earnings. The foreign currency forward contracts were reported at their fair value in the consolidated balance sheet at June 30, 2011 and December 31, 2010 in other current assets of $1.0 million and $1.8 million, respectively and other liabilities of $0.3 million at both balance sheet dates. The net gain recognized in other charges (income), net during both the three and six month periods ended June 30, 2011 was $4.4 million. The net loss recognized during the three and six month periods ended June 30, 2010 was $3.0 million and $4.6 million, respectively. At June 30, 2011 and December 31, 2010, these contracts had a notional value of $98.4 million and $99.3 million, respectively.

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2011 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

5.        FAIR VALUE MEASUREMENTS

          At June 30, 2011 and December 31, 2010, the Company had derivative assets totaling $1.0 million and $1.8 million, respectively, and derivative liabilities totaling $7.1 million and $6.1 million, respectively. The fair values of the interest rate swap agreement and foreign currency forward contracts that economically hedge short-term intercompany balances are estimated based upon inputs from current valuation information obtained from dealer quotes and priced with observable market assumptions and appropriate valuation adjustments for credit risk. The Company has evaluated the valuation methodologies used to develop the fair values by dealers in order to determine whether such valuations are representative of an exit price in the Company’s principal market. In addition, the Company uses an internally developed model to perform testing on the valuations received from brokers. The Company has also considered both its own credit risk and counterparty credit risk in determining fair value and determined these adjustments were insignificant at June 30, 2011 and December 31, 2010.

          At June 30, 2011 and December 31, 2010, the Company had $163.0 million and $243.5 million of cash equivalents, respectively, the fair value of which is determined through quoted and corroborated prices in active markets. The fair value of cash equivalents approximates cost.

          The difference between the fair value and carrying value of the Company’s long-term debt is not material.

          Under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement consists of observable and unobservable inputs that reflect the assumptions that a market participant would use in pricing an asset or liability.

          A fair value hierarchy has been established that categorizes these inputs into three levels:

Level 1:		Quoted prices in active markets for identical assets and liabilities
Level 2:		Observable inputs other than quoted prices in active markets for identical assets and liabilities
Level 3:		Unobservable inputs

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2011 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

          The following table presents for each of these hierarchy levels, the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2011 and December 31, 2010:

		June 30, 2011																December 31, 2010
		Total				Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3
Assets:
Cash equivalents		$	162,996			$	150,003			$	12,993			$	-			$	243,514			$	230,000			$	13,514			$	-
Foreign currency forward contracts			1,042				-				1,042				-				1,763				-				1,763				-
Total		$	164,038			$	150,003			$	14,035			$	-			$	245,277			$	230,000			$	15,277			$	-
Liabilities:
Interest rate swap agreement		$	6,787			$	-			$	6,787			$	-			$	5,842			$	-			$	5,842			$	-
Foreign currency forward contracts			263				-				263				-				305				-				305				-
Total		$	7,050			$	-			$	7,050			$	-			$	6,147			$	-			$	6,147			$	-

6.        INCOME TAXES

          The provision for taxes is based upon the Company’s projected annual effective rate of 26% for both the three and six month periods ended June 30, 2011.

7.       DEBT

          Debt consisted of the following at June 30, 2011:

		June 30, 2011
						Other Principal
						Trading
		U.S. Dollar				Currencies				Total
6.30% $100 million Senior Notes		$	100,000			$	-			$	100,000
Credit facility			440,100				65,659				505,759
Other local arrangements			-				28,226				28,226
Total debt			540,100				93,885				633,985
Less: current portion			-				(12,626	)			(12,626	)
Total long-term debt		$	540,100			$	81,259			$	621,359

          As of June 30, 2011, the Company had $438.6 million of availability remaining under the credit facility.

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2011 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

8.       SHARE REPURCHASE PROGRAM AND TREASURY STOCK

          The Company has a $2.25 billion share repurchase program, of which there is $806.4 million remaining to repurchase common shares as of June 30, 2011. The share repurchases are expected to be funded from cash balances, borrowings and cash generated from operating activities. Repurchases will be made through open market transactions, and the amount and timing of purchases will depend on business and market conditions, the stock price, trading restrictions, the level of acquisition activity and other factors. The Company has purchased 17.9 million shares since the inception of the program through June 30, 2011.

          During the six months ended June 30, 2011 and 2010, the Company spent $114.2 million and $72.8 million on the repurchase of 688,079 shares and 662,999 shares at an average price per share of $165.92 and $109.78, respectively. The Company reissued 146,898 shares and 216,270 shares held in treasury for the exercise of stock options and restricted stock units during the six months ended June 30, 2011 and 2010, respectively. The Company also reissued 2,549 shares held in treasury during the six months ended June 30, 2010, pursuant to its 2007 Share Plan which extends certain eligible employees the option to receive a percentage of their annual cash incentive in shares of the Company’s stock. There were no shares reissued related to the 2007 Share Plan during the six months ended June 30, 2011.

9.       EARNINGS PER COMMON SHARE

          In accordance with the treasury stock method, the Company has included the following common equivalent shares in the calculation of diluted weighted average number of common shares outstanding for the three and six month periods ended June 30, solely relating to outstanding stock options and restricted stock units:

		2011				2010
Three months ended			1,016,037				859,382
Six months ended			1,008,537				817,637

          Outstanding options and restricted stock units to purchase or receive 171,991 and 517,328 shares of common stock for the three month periods ended June 30, 2011 and 2010, respectively, and options and restricted stock units to purchase or receive 171,923 and 620,226 shares of common stock for the six month periods ended June 30, 2011 and 2010, respectively, have been excluded from the calculation of diluted weighted average number of common and common equivalent shares as such options and restricted stock units would be anti-dilutive.

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2011 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

10.      NET PERIODIC BENEFIT COST

           Net periodic pension cost for the Company’s defined benefit pension plans and U.S. post-retirement medical plan includes the following components for the three months ended June 30:

																		Other U.S.
		U.S. Pension Benefits								Non-U.S. Pension Benefits								Post-retirement Benefits
		2011				2010				2011				2010				2011				2010
Service cost, net		$	83			$	66			$	3,590			$	2,978			$	76			$	74
Interest cost on projected benefit obligations			1,606				1,610				6,282				5,339				183				190
Expected return on plan assets			(1,875	)			(1,727	)			(8,704	)			(6,943	)			-				-
Net amortization and deferral			-				-				(378	)			(295	)			-				(167	)
Recognition of actuarial losses/(gains)			1,276				1,325				291				260				(173	)			(184	)
Recognition of settlement/curtailment losses, net			-				-				-				58				-				-
Net periodic pension cost/(credit)		$	1,090			$	1,274			$	1,081			$	1,397			$	86			$	(87	)

           Net periodic pension cost for the Company’s defined benefit pension plans and U.S. post-retirement medical plan includes the following components for the six months ended June 30:

																		Other U.S.
		U.S. Pension Benefits								Non-U.S. Pension Benefits								Post-retirement Benefits
		2011				2010				2011				2010				2011				2010
Service cost, net		$	166			$	132			$	6,947			$	6,268			$	152			$	148
Interest cost on projected benefit obligations			3,212				3,220				12,196				10,971				366				379
Expected return on plan assets			(3,750	)			(3,454	)			(16,852	)			(14,209	)			-				-
Net amortization and deferral			-				-				(727	)			(608	)			-				(335	)
Recognition of actuarial losses/(gains)			2,552				2,649				576				530				(346	)			(368	)
Recognition of settlement/curtailment losses, net			-				-				-				58				-				-
Net periodic pension cost/(credit)		$	2,180			$	2,547			$	2,140			$	3,010			$	172			$	(176	)

            As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, the Company expects to make employer contributions of approximately $19.1 million to its non-U.S. pension plans and employer contributions of approximately $1.4 million to its U.S. post-retirement medical plan during the year ended December 31, 2011. These estimates may change based upon several factors, including fluctuations in currency exchange rates, actual returns on plan assets and changes in legal requirements.

11.     RESTRUCTURING CHARGES

          During the fourth quarter of 2008, the Company initiated a global cost reduction program which has substantially been completed. Charges under the program primarily comprise severance costs.

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2011 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

          A rollforward of the Company’s accrual for restructuring activities for the six months ended June 30, 2011 is as follows:

		Employee Related				Lease Termination				Other				Total
Balance at December 31, 2010		$	7,721			$	4			$	131			$	7,856
Restructuring charges			2,224				-				245				2,469
Cash payments			(2,495	)			(4	)			(339	)			(2,838	)
Impact of foreign currency			365				-				-				365
Balance at June 30, 2011		$	7,815			$	-			$	37			$	7,852

12.      OTHER CHARGES (INCOME), NET

          Other charges (income), net consists primarily of interest income, (gains) losses from foreign currency transactions and other items.

13.      SEGMENT REPORTING

          As disclosed in Note 18 to the Company’s consolidated financial statements for the year ending December 31, 2010, the Company has determined there are five reportable segments: U.S. Operations, Swiss Operations, Western European Operations, Chinese Operations and Other.

          The Company evaluates segment performance based on Segment Profit (gross profit less research and development and selling, general and administrative expenses, before amortization, interest expense, restructuring charges, other charges (income), net and taxes).

          The following tables show the operations of the Company’s operating segments:

		Net Sales to				Net Sales to
For the three months ended		External				Other				Total Net				Segment
June 30, 2011		Customers				Segments				Sales				Profit				Goodwill (c)
U.S. Operations		$	167,017			$	19,412			$	186,429			$	30,834			$	308,467
Swiss Operations			32,179				91,489				123,668				21,978				25,695
Western European Operations			167,419				26,089				193,508				20,609				98,076
Chinese Operations			95,721				34,433				130,154				34,443				695
Other (a)			98,752				1,526				100,278				10,640				14,666
Eliminations and Corporate (b)			-				(172,949	)			(172,949	)			(23,972	)			-
Total		$	561,088			$	-			$	561,088			$	94,532			$	447,599

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2011 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

		Net Sales to				Net Sales to
For the six months ended		External				Other				Total Net				Segment
June 30, 2011		Customers				Segments				Sales				Profit
U.S. Operations		$	315,229			$	38,100			$	353,329			$	53,164
Swiss Operations			63,824				192,751				256,575				51,058
Western European Operations			320,279				51,677				371,956				39,076
Chinese Operations			170,558				64,770				235,328				55,132
Other (a)			189,964				2,335				192,299				20,107
Eliminations and Corporate (b)			—				(349,633	)			(349,633	)			(50,227	)
Total		$	1,059,854			$	—			$	1,059,854			$	168,310

		Net Sales to				Net Sales to
For the three months ended		External				Other				Total Net				Segment
June 30, 2010		Customers				Segments				Sales				Profit				Goodwill (c)
U.S. Operations		$	153,905			$	14,899			$	168,804			$	31,091			$	318,883
Swiss Operations			26,619				79,941				106,560				20,447				17,800
Western European Operations			139,310				22,011				161,321				19,560				89,058
Chinese Operations			72,847				26,002				98,849				23,917				654
Other (a)			75,868				879				76,747				6,376				12,875
Eliminations and Corporate (b)			—				(143,732	)			(143,732	)			(21,473	)			—
Total		$	468,549			$	—			$	468,549			$	79,918			$	439,270
		Net Sales to				Net Sales to
For the six months ended		External				Other				Total Net				Segment
June 30, 2010		Customers				Segments				Sales				Profit
U.S. Operations		$	287,457			$	28,944			$	316,401			$	54,483
Swiss Operations			49,123				152,910				202,033				38,396
Western European Operations			276,068				41,654				317,722				34,632
Chinese Operations			127,598				46,822				174,420				38,753
Other (a)			144,954				1,677				146,631				10,621
Eliminations and Corporate (b)			—				(272,007	)			(272,007	)			(36,520	)
Total		$	885,200			$	—			$	885,200			$	140,365

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2011 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

          A reconciliation of earnings before taxes to segment profit for the three and six month periods ended June 30 follows:

		Three Months Ended								Six Months Ended
		2011				2010				2011				2010
Earnings before taxes		$	81,337			$	69,386			$	144,615			$	120,560
Amortization			4,325				3,565				7,947				6,946
Interest expense			5,692				4,711				11,403				9,965
Restructuring charges			1,971				1,526				2,469				1,910
Other charges (income), net			1,207				730				1,876				984
Segment profit		$	94,532			$	79,918			$	168,310			$	140,365

          During the three months ended June 30, 2011, restructuring charges of $2.0 million were recognized, of which $0.3 million, $1.3 million, $0.1 million and $0.3 million related to the Company’s U.S., Western European, Chinese and Other operations, respectively. Restructuring charges of $1.5 million were recognized during the three months ended June 30, 2010, of which $0.1 million and $1.4 million related to the Company’s Chinese and Other operations, respectively. Restructuring charges of $2.5 million were recognized during the six months ended June 30, 2011, of which $0.6 million, $0.2 million, $1.3 million, $0.1 million and $0.3 million related to the Company’s U.S., Swiss, Western European, Chinese and Other operations, respectively. Restructuring charges of $1.9 million were recognized during the six months ended June 30, 2010, of which $0.1 million, $0.2 million, $0.2 million and $1.4 million related to the Company’s U.S., Western European, Chinese and Other operations, respectively.

14. CONTINGENCIES

          The Company is party to various legal proceedings, including certain environmental matters, incidental to the normal course of business. Management does not expect that any of such proceedings, either individually or in the aggregate, will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Item 2. 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 in conjunction with the Unaudited Interim Consolidated Financial Statements included herein.

General

          Our interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Operating results for the three and six months ended June 30, 2011 are not necessarily indicative of the results to be expected for the full year ending December 31, 2011.

          Local currency changes exclude the effect of currency exchange rate fluctuations that result from translating activity outside of the United States into U.S. dollars. Local currency amounts are determined by translating current and previous year consolidated financial information at an index utilizing historical currency exchange rates. Because changes in foreign currency exchange rates have a non-operating impact on our financial results, 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.

Results of Operations — Consolidated

          The following tables set forth certain items from our interim consolidated statements of operations for the three and six month periods ended June 30, 2011 and 2010 (amounts in thousands).

		Three months ended June 30,																Six months ended June 30,
		2011								2010								2011								2010
		(unaudited)				%				(unaudited)				%				(unaudited)				%				(unaudited)				%
Net sales		$	561,088				100.0			$	468,549				100.0			$	1,059,854				100.0			$	885,200				100.0
Cost of sales			264,897				47.2				221,924				47.4				502,156				47.4				420,649				47.5
Gross profit			296,191				52.8				246,625				52.6				557,698				52.6				464,551				52.5
Research and development			29,605				5.3				23,105				4.9				55,956				5.3				45,570				5.2
Selling, general and administrative			172,054				30.7				143,602				30.6				333,432				31.5				278,616				31.5
Amortization			4,325				0.8				3,565				0.8				7,947				0.7				6,946				0.8
Interest expense			5,692				1.0				4,711				1.0				11,403				1.1				9,965				1.1
Restructuring charges			1,971				0.3				1,526				0.3				2,469				0.2				1,910				0.2
Other charges (income), net			1,207				0.2				730				0.2				1,876				0.2				984				0.1
Earnings before taxes			81,337				14.5				69,386				14.8				144,615				13.6				120,560				13.6
Provision for taxes			21,149				3.8				18,039				3.8				37,600				3.5				31,345				3.5
Net earnings		$	60,188				10.7			$	51,347				11.0			$	107,015				10.1			$	89,215				10.1

          Net sales

          Net sales were $561.1 million and $1.1 billion for the three and six months ended June 30, 2011, respectively, compared to $468.5 million and $885.2 million for the corresponding periods in 2010. This represents an increase in U.S. dollars of 20% for both the three and six months ended June 30, 2011. Excluding the effect of currency exchange rate fluctuations, or in local currencies, net sales increased 11% and 14%, respectively, for the three and six months ended June 30, 2011.

          Net sales by geographic destination for the three and six months ended June 30, 2011, in U.S. dollars increased 10% and 11% in the Americas, 25% and 22% in Europe and 26% and 29% in Asia/Rest of World. In local currencies, our net sales by geographic destination increased 9% and 10% in the Americas, 9% and 12% in Europe and 17% and 21% in Asia/Rest of World. A discussion of sales by operating segment is included below.

          As described in Note 18 to our consolidated financial statements for the year ended December 31, 2010, our net sales comprise product sales of precision instruments and related services. Service revenues are primarily derived from repair and other services, including regulatory compliance qualification, calibration, certification, preventative maintenance and spare parts.

          Net sales of products increased in U.S. dollars by 22% and 23% for the three and six months ended June 30, 2011, respectively, and in local currencies by 14% and 17%, respectively, compared to the corresponding prior periods. Service revenue (including spare parts) in U.S. dollars increased 11% and 10% during the three and six months ended June 30, 2011, respectively, and increased in local currencies by 3% and 4% during the three and six months ended June 30, 2011, respectively, compared to corresponding prior periods.

          Net sales of our laboratory-related products, which represented approximately 43% and 45% of our total net sales for the three and six months ended June 30, 2011, increased 13% and 16% in U.S. dollars and increased 4% and 10% in local currencies during the three and six months ended June 30, 2011, respectively. The increase for the three months ended June 30, 2011 was principally driven by laboratory balances and process analytics products. The six months ended June 30, 2011 also includes strong growth in our analytical instrument products.

          Net sales of our industrial-related products, which represented approximately 47% and 45% of our total net sales for the three and six months ended June 30, 2011, increased 30% and 26% in U.S. dollars and increased 21% in local currencies during the three and six months ended June 30, 2011, respectively. We experienced strong sales growth across most product categories and geographies. Acquisitions contributed approximately 3% and 2% to our net sales growth of industrial-related products for the three and six months ended June 30, 2011, respectively.

          Net sales in our food retailing markets, which represented approximately 10% of our total net sales for both the three and six months ended June 30, 2011, increased 4% and 5% in U.S. dollars and decreased 3% and increased 1% in local currencies during the three and six months ended June 30, 2011, respectively, primarily due to decreased sales in the U.S., offset by sales growth in Europe related to increased project activity. Food retailing sales were reduced by approximately 6% and 5% for the three and six months ended June 30, 2011, respectively, due to product line exits.

          Gross profit

          Gross profit as a percentage of net sales was 52.8% and 52.6% for the three and six months ended June 30, 2011, respectively, compared to 52.6% and 52.5% for the corresponding periods in 2010.

          Gross profit as a percentage of net sales for products was 56.9% and 56.8% for the three and six months ended June 30, 2011, respectively, compared to 56.9% and 57.0% for the corresponding periods in 2010.

          Gross profit as a percentage of net sales for services (including spare parts) was 37.9% and 37.8% for the three and six months ended June 30, 2011, respectively, compared to 38.8% and 38.2% for the corresponding periods in 2010.

          The increase in gross profit as a percentage of net sales for the three and six months ended June 30, 2011 primarily reflects benefits from increased sales volume and operating efficiencies, as well as pricing. These results were partly offset by unfavorable currency rate changes, as well as increased material costs.

          Research and development and selling, general and administrative expenses

          Research and development expenses as a percentage of net sales were 5.3% for both the three and six months ended June 30, 2011, respectively, compared to 4.9% and 5.2% for the corresponding periods during 2010. Research and development expenses increased 28% and 23% in U.S. dollars and increased 11% in local currencies, during the three and six months ended June 30, 2011, respectively, compared to the corresponding periods in 2010 relating to the timing of research and development project activity.

          Selling, general and administrative expenses as a percentage of net sales were 30.7% and 31.5% for the three and six months ended June 30, 2011, respectively, compared to 30.6% and 31.5% in the corresponding periods during 2010. Selling, general and administrative expenses increased 20% in U.S. dollars and increased 9% and 12% in local currencies, during the three and six months ended June 30, 2011, respectively, compared to the corresponding periods in 2010. The increase is primarily due to increased sales and marketing activities, costs related to our Blue Ocean program, a program to globalize our business processes and information technology systems that includes the implementation of a Company-wide enterprise resource planning system, and acquisition-related expenses.

          Interest expense, other charges (income), net and taxes

          Interest expense was $5.7 million and $11.4 million for the three and six months ended June 30, 2011, respectively, and $4.7 million and $10.0 million for the corresponding periods in 2010. The increase in interest expense for the three and six month period ended June 30, 2011 is primarily a result of additional borrowings during the fourth quarter of 2010, in order to facilitate foreign earnings repatriation.

          Other charges (income), net consists primarily of interest income, (gains) losses from foreign currency transactions and other items. The increase in other charges (income), net for the three and six months ended June 30, 2011 of $0.5 million and $0.9 million, respectively, compared to the prior year was primarily due to unfavorable foreign currency fluctuations.

          The provision for taxes is based upon our projected annual effective tax rate of 26% for both the three and six months ended June 30, 2011, respectively. Our consolidated income tax rate is lower than the U.S. statutory rate primarily because of benefits from lower-taxed non-U.S. operations. The most significant of these lower-taxed operations are in Switzerland and China.

Results of Operations — by Operating Segment

          The following is a discussion of the financial results of our operating segments. We currently have five reportable segments: U.S. Operations, Swiss Operations, Western European Operations, Chinese Operations and Other. A more detailed description of these segments is outlined in Note 18 to our consolidated financial statements for the year ended December 31, 2010.

     U.S. Operations (amounts in thousands)

		Three months ended June 30												Six months ended June 30
		2011				2010				%1)				2011				2010				%1)
Total net sales		$	186,429			$	168,804				10	%		$	353,329			$	316,401				12	%
Net sales to external customers		$	167,017			$	153,905				9	%		$	315,229			$	287,457				10	%
Segment profit		$	30,834			$	31,091				-1	%		$	53,164			$	54,483				-2	%

          Total net sales increased 10% and 12% for the three and six months ended June 30, 2011, respectively, and net sales to external customers increased 9% and 10% for the three and six months ended June 30, 2011, respectively, compared with the corresponding periods in 2010. The increase in total net sales and net sales to external customers for the three and six months ended June 30, 2011 reflects strong growth in product inspection, laboratory balances and core-industrial products, offset in part by reduced sales in retail products. Acquisitions/divestitures, net contributed approximately 1% to our segment net sales growth for the three months ended June 30, 2011. The six months ended June 30, 2011 also reflects strong growth in analytical instruments.

          Segment profit decreased $0.3 million and $1.3 million for the three and six months ended June 30, 2011, respectively, compared to the corresponding periods in 2010. The decrease in segment profit was primarily due to a product line exit, as well as business transfers to other operating segments, investments in sales and marketing, expenses related to our Blue Ocean program and increased product costs, partially offset by increased sales volume.

          Swiss Operations (amounts in thousands)

		Three months ended June 30												Six months ended June 30
		2011				2010				%1)				2011				2010				%1)
Total net sales		$	123,668			$	106,560				16	%		$	256,575			$	201,532				27	%
Net sales to external customers		$	32,179			$	26,619				21	%		$	63,824			$	49,123				30	%
Segment profit		$	21,978			$	20,447				7	%		$	51,058			$	38,396				33	%

          Total net sales increased 16% and 27% in U.S. dollars for the three and six months ended June 30, 2011, respectively. Total net sales in local currency decreased 9% for the three month

          period ended June 30, 2011 and increased 6% for the six month period ended June 30, 2011, compared to the corresponding periods in 2010. Net sales to external customers increased 21% and 30% in U.S. dollars and decreased 5% and increased 8% in local currency during the three and six months ended June 30, 2011, respectively, compared to the corresponding periods in 2010. The decrease in local currency net sales and net sales to external customers for the three months ended June 30, 2011 resulted from a timing effect in certain product categories after a particularly strong first quarter of 2011. The increase in net sales and net sales to external customers for the six months ended June 30, 2011 includes strong growth in laboratory balances and core-industrial products.

          Segment profit increased $1.5 million and $12.7 million for the three and six month periods ended June 30, 2011, respectively, compared to the corresponding periods in 2010. The increase in segment profit is primarily due to increased inter-segment sales, partially offset by unfavorable currency translation fluctuations.

          Western European Operations (amounts in thousands)

		Three months ended June 30												Six months ended June 30
		2011				2010				%1)				2011				2010				%1)
Total net sales		$	193,508			$	161,321				20	%		$	371,956			$	317,722				17	%
Net sales to external customers		$	167,419			$	139,310				20	%		$	320,279			$	276,068				16	%
Segment profit		$	20,609			$	19,560				5	%		$	39,076			$	34,632				13	%