METTLER TOLEDO INTERNATIONAL INC/ - Quarter Report: 2021 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021, 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						(I.R.S Employer Identification No.)
incorporation or organization)

1900 Polaris Parkway

Columbus, OH 43240

and

Im Langacher, P.O. Box MT-100

CH 8606 Greifensee, Swizterland

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

________________________________________________________________________________

(Registrant's telephone number, including area code)

not applicable

______________________________________________________________________________________________________________________

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

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	MTD	New York Stock Exchange

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

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

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer. ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

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

The Registrant had 22,985,655 shares of Common Stock outstanding at September 30, 2021.

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 and Comprehensive Income for the three months ended September 30, 2021 and 2020	3

	Interim Consolidated Statements of Operations and Comprehensive Income for the nine months ended September 30, 2021 and 2020	4

	Interim Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	5

	Interim Consolidated Statements of Shareholders’ Equity for the nine months ended September 30, 2021 and 2020	6

	Interim Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	7

	Notes to the Interim Consolidated Financial Statements at September 30, 2021	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

Item 4.	Controls and Procedures	35

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Defaults upon Senior Securities	36

Item 5.	Other Information	36

Item 6.	Exhibits	36

SIGNATURE		38

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

METTLER-TOLEDO INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Three months ended September 30, 2021 and 2020

(In thousands, except share data)

(unaudited)


	September 30, 2021		September 30, 2020
Net sales
Products	$	760,844	$	630,372
Service	191,106		176,985
Total net sales	951,950		807,357
Cost of sales
Products	304,290		254,050
Service	91,840		83,699
Gross profit	555,820		469,608
Research and development	42,276		34,656
Selling, general and administrative	240,734		204,974
Amortization	16,039		14,121
Interest expense	11,791		9,310
Restructuring charges	650		4,570
Other income, net	(3,257)		(3,832)
Earnings before taxes	247,587		205,809
Provision for taxes	43,899		44,042
Net earnings	$	203,688	$	161,767

Basic earnings per common share:
Net earnings	$	8.83	$	6.76
Weighted average number of common shares	23,056,924		23,922,272

Diluted earnings per common share:
Net earnings	$	8.71	$	6.68
Weighted average number of common and common equivalent shares	23,393,579		24,225,204

Comprehensive income, net of tax (Note 10)	$	208,428	$	180,099

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

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METTLER-TOLEDO INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Nine months ended September 30, 2021 and 2020

(In thousands, except share data)

(unaudited)


	September 30, 2021		September 30, 2020
Net sales
Products	$	2,124,245	$	1,656,819
Service	556,446		490,373
Total net sales	2,680,691		2,147,192
Cost of sales
Products	843,613		662,681
Service	272,658		242,524
Gross profit	1,564,420		1,241,987
Research and development	124,151		100,236
Selling, general and administrative	701,531		593,852
Amortization	46,141		42,008
Interest expense	31,701		29,111
Restructuring charges	2,719		7,335
Other income, net	(5,208)		(10,118)
Earnings before taxes	663,385		479,563
Provision for taxes	125,271		93,119
Net earnings	$	538,114	$	386,444

Basic earnings per common share:
Net earnings	$	23.19	$	16.13
Weighted average number of common shares	23,203,257		23,963,311

Diluted earnings per common share:
Net earnings	$	22.86	$	15.92
Weighted average number of common and common equivalent shares	23,536,615		24,272,354

Comprehensive income, net of tax (Note 10)	$	575,187	$	382,844

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

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METTLER-TOLEDO INTERNATIONAL INC.

INTERIM CONSOLIDATED BALANCE SHEETS

As of September 30, 2021 and December 31, 2020

(In thousands, except share data)

(unaudited)


	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	183,672	$	94,254
Trade accounts receivable, less allowances of $21,055 at September 30, 2021
and $18,625 at December 31, 2020	603,364		593,809
Inventories	381,457		297,611
Other current assets and prepaid expenses	77,731		71,230
Total current assets	1,246,224		1,056,904
Property, plant and equipment, net	783,813		798,868
Goodwill	639,184		550,270
Other intangible assets, net	288,593		196,785
Deferred tax assets, net	39,272		41,836
Other non-current assets	210,075		169,886
Total assets	$	3,207,161	$	2,814,549
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	219,294	$	175,801
Accrued and other liabilities	196,520		196,834
Accrued compensation and related items	209,356		179,252
Deferred revenue and customer prepayments	195,234		149,106
Taxes payable	127,633		89,017
Short-term borrowings and current maturities of long-term debt	53,524		50,317
Total current liabilities	1,001,561		840,327
Long-term debt	1,639,583		1,284,174
Deferred tax liabilities, net	42,656		34,448
Other non-current liabilities	364,190		372,925
Total liabilities	3,047,990		2,531,874
Commitments and contingencies (Note 16)
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 22,985,655 and
23,471,841 shares at September 30, 2021 and December 31, 2020, respectively	$	448	448
Additional paid-in capital	$	820,272	805,140
Treasury stock at cost (21,800,356 shares at September 30, 2021 and 21,314,170 shares at December 31, 2020)	$	(5,995,662)	(5,283,584)
Retained earnings	$	5,631,965	5,095,596
Accumulated other comprehensive loss	$	(297,852)	(334,925)
Total shareholders’ equity	159,171		282,675
Total liabilities and shareholders’ equity	$	3,207,161	$	2,814,549

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

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METTLER-TOLEDO INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Nine months ended September 30, 2021 and 2020

(In thousands, except share data)

(unaudited)


				Additional Paid-in Capital						Accumulated Other Comprehensive Income (Loss)
	Common Stock					Treasury Stock		Retained Earnings
	Shares	Amount										Total
Balance at December 31, 2019	24,125,317	$	448	$	783,871	$	(4,539,154)	$	4,499,288	$	(323,673)	$	420,780
Exercise of stock options and restricted stock units	50,372	—		—		9,355		(2,220)		—		7,135
Repurchases of common stock	(268,161)	—		—		(200,000)		—		—		(200,000)
Share-based compensation	—	—		4,395		—		—		—		4,395
Net earnings	—	—		—		—		98,115		—		98,115
Other comprehensive income (loss), net of tax	—	—		—		—		—		(24,028)		(24,028)
Balance at March 31, 2020	23,907,528	$	448	$	788,266	$	(4,729,799)	$	4,595,183	$	(347,701)	$	306,397
Exercise of stock options and restricted stock units	63,737	—		—		11,837		(1,222)		—		10,615
Repurchases of common stock	—	—		—		—		—		—		—
Share-based compensation	—	—		4,423		—		—		—		4,423
Net earnings	—	—		—		—		126,562		—		126,562
Other comprehensive income (loss), net of tax	—	—		—		—		—		2,096		2,096
Balance at June 30, 2020	23,971,265	$	448	$	792,689	$	(4,717,962)	$	4,720,523	$	(345,605)	$	450,093
Exercise of stock options and restricted stock units	30,667	—		2,582		5,865		(3)		—		8,444
Repurchases of common stock	(207,369)	—		—		(199,999)		—		—		(199,999)
Share-based compensation	—	—		4,430		—		—		—		4,430
Net earnings	—	—		—		—		161,767		—		161,767
Other comprehensive income (loss), net of tax	—	—		—		—		—		18,332		18,332
Balance at September 30, 2020	23,794,563	$	448	$	799,701	$	(4,912,096)	$	4,882,287	$	(327,273)	$	443,067

Balance at December 31, 2020	23,471,841	$	448	$	805,140	$	(5,283,584)	$	5,095,596	$	(334,925)	$	282,675
Exercise of stock options and restricted stock units	22,388	—		1,239		4,682		(872)		—		5,049
Repurchases of common stock	(224,808)	—		—		(262,500)		—		—		(262,500)
Share-based compensation	—	—		4,575		—		—		—		4,575
Net earnings	—	—		—		—		149,663		—		149,663
Other comprehensive income (loss), net of tax	—	—		—		—		—		23,181		23,181
Balance at March 31, 2021	23,269,421	$	448	$	810,954	$	(5,541,402)	$	5,244,387	$	(311,744)	$	202,643
Exercise of stock options and restricted stock units	13,248	—		—		2,849		(65)		—		2,784
Repurchases of common stock	(165,730)	—		—		(212,499)		—		—		(212,499)
Share-based compensation	—	—		4,581		—		—		—		4,581
Net earnings	—	—		—		—		184,763		—		184,763
Other comprehensive income (loss), net of tax	—	—		—		—		—		9,152		9,152
Balance at June 30, 2021	23,116,939	$	448	$	815,535	$	(5,751,052)	$	5,429,085	$	(302,592)	$	191,424
Exercise of stock options and restricted stock units	35,488	—		—		7,889		(808)		—		7,081
Repurchases of common stock	(166,772)	—		—		(252,499)		—		—		(252,499)
Share-based compensation	—	—		4,737		—		—		—		4,737
Net earnings	—	—		—		—		203,688		—		203,688
Other comprehensive income (loss), net of tax	—	—		—		—		—		4,740		4,740
Balance at September 30, 2021	22,985,655	$	448	$	820,272	$	(5,995,662)	$	5,631,965	$	(297,852)	$	159,171

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

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METTLER-TOLEDO INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended September 30, 2021 and 2020

(In thousands)

(unaudited)


	September 30, 2021		September 30, 2020
Cash flows from operating activities:
Net earnings	$	538,114	$	386,444
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	33,440		30,949
Amortization	46,141		42,008
Deferred tax benefit	(6,072)		(6,990)
Share-based compensation	13,893		13,248
Increase (decrease) in cash resulting from changes in:
Trade accounts receivable, net	(19,153)		49,084
Inventories	(87,568)		(11,421)
Other current assets	(3,596)		(8,733)
Trade accounts payable	44,170		(40,874)
Taxes payable	42,474		19,117
Accruals and other	65,876		998
Net cash provided by operating activities	667,719		473,830
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment	3,399		3,046
Purchase of property, plant and equipment	(69,796)		(57,428)
Acquisitions	(193,387)		(6,242)
Other investing activities	8,559		(9,421)
Net cash used in investing activities	(251,225)		(70,045)
Cash flows from financing activities:
Proceeds from borrowings	1,638,321		1,148,360
Repayments of borrowings	(1,249,177)		(1,231,191)
Proceeds from stock option exercises	14,914		26,194
Repurchases of common stock	(727,498)		(399,999)
Other financing activities	(2,864)		(800)
Net cash used in financing activities	(326,304)		(457,436)
Effect of exchange rate changes on cash and cash equivalents	(772)		(448)
Net increase (decrease) in cash and cash equivalents	89,418		(54,099)
Cash and cash equivalents:
Beginning of period	94,254		207,785
End of period	$	183,672	$	153,686

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

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (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 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, 2020.

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 nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021.

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. These financial statements were prepared using information reasonably available as of September 30, 2021 and through the date of this Report. Actual results may differ from those estimates due to the uncertainty around the magnitude and duration of the COVID-19 pandemic, as well as other factors.

All intercompany transactions and balances have been eliminated.

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 expected credit losses represents the Company’s best estimate based on historical information, current information, and reasonable and supportable forecasts of future events and circumstances.

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)

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:


	September 30, 2021		December 31, 2020
Raw materials and parts	$	158,541	$	132,041
Work-in-progress	73,105		55,688
Finished goods	149,811		109,882
	$	381,457	$	297,611

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 for goodwill and indefinite-lived intangible assets are generally based on an assessment of qualitative factors to determine whether it is more likely than not that the fair value of the asset is less than its carrying amount.

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 of benefit. 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 "Intangible - Goodwill and Other" and ASC 360 "Property, Plant and Equipment".

Other intangible assets consisted of the following:


	September 30, 2021						December 31, 2020
	Gross Amount		Accumulated Amortization		Intangibles, Net		Gross Amount		Accumulated Amortization		Intangibles, Net
Customer relationships	$	279,380	$	(76,777)	$	202,603	$	201,445	$	(68,319)	$	133,126
Proven technology and patents	98,539		(54,858)		43,681		78,312		(52,138)		26,174
Tradenames (finite life)	8,176		(3,654)		4,522		4,896		(3,444)		1,452
Tradenames (indefinite life)	35,528		—		35,528		35,595		—		35,595
Other	8,048		(5,789)		2,259		5,215		(4,777)		438
	$	429,671	$	(141,078)	$	288,593	$	325,463	$	(128,678)	$	196,785

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)

The Company recognized amortization expense associated with the above intangible assets of $5.7 million and $4.0 million for the three months ended September 30, 2021 and 2020, respectively, and $15.9 million and $11.8 million for the nine months ended September 30, 2021 and 2020, respectively. The annual aggregate amortization expense based on the current balance of other intangible assets is estimated at $21.6 million for 2021, $21.1 million for 2022, $20.3 million for 2023, $19.8 million for 2024, $18.9 million for 2025, and $16.7 million for 2026. Purchased intangible amortization was $5.5 million, $4.1 million after tax, and $3.8 million, $2.8 million after tax, for the three months ended September 30, 2021 and 2020, respectively, and $15.2 million, $11.5 million after tax, and $11.2 million, $8.5 million after tax, for the nine months ended September 30, 2021 and 2020, respectively.

In addition to the above amortization, the Company recorded amortization expense associated with capitalized software of $10.3 million and $10.1 million for the three months ended September 30, 2021 and 2020, respectively, and $30.0 million for both the nine months ended September 30, 2021 and 2020.

Revenue Recognition

Product revenue is recognized from contracts with customers when a customer has obtained control of a product. The Company considers control to have transferred based upon shipping terms. To the extent the Company’s arrangements have a separate performance obligation, revenue related to any post-shipment performance obligation is deferred until completed. Shipping and handling costs charged to customers are included in total net sales and the associated expense is a component of cost of sales. Certain products are also sold through indirect distribution channels whereby the distributor assumes any further obligations to the end customer. Revenue is recognized on these distributor arrangements upon transfer of control to the distributor. Contracts do not contain variable pricing arrangements that are retrospective, except for rebate programs. Rebates are estimated based on expected sales volumes and offset against revenue at the time such revenue is recognized. 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. The related provisions for estimated returns and rebates are immaterial to the consolidated financial statements.

Certain of the Company’s product arrangements include separate performance obligations, primarily related to installation. Such performance obligations are accounted for separately when the deliverables have stand-alone value and the satisfaction of the undelivered performance obligations is probable and within the Company's control. The allocation of revenue between the performance obligations is based on the observable stand-alone selling prices at the time of the sale in accordance with a number of factors including service technician billing rates, time to install, and geographic location.

Software is generally not considered a distinct performance obligation with the exception of a few small software applications. The Company generally does not sell software products without the related hardware instrument as the software is embedded in the product. 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.

Service revenue not under contract is recognized upon the completion of the service performed. Revenue from spare parts sold on a stand-alone basis is recognized when control is transferred to the customer, which is generally at the time of shipment or delivery. Revenue from service contracts is recognized ratably over the contract period using a time-based method. 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.

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(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 after 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 statements of operations and other comprehensive income with a corresponding offset to additional paid-in capital in the consolidated balance sheet. The Company recorded $4.7 million and $13.9 million of share-based compensation expense for the three and nine months ended September 30, 2021, respectively, compared to $4.4 million and $13.2 million for the corresponding periods in 2020.

On May 6, 2021, the Company's shareholders approved the adoption of the Company's 2013 Equity Incentive Plan (Amended and Restated), with the effect that approximately 0.9 million additional shares of common stock were added to the 2.1 million shares that remained available under the plan prior to its amendment. In addition, shares subject to options granted under the Company's prior equity incentive plan that terminate or are forfeited without being exercised, are also available for awards under the amended plan. The amended plan expires in 2031.

Research and Development

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

Business Combinations and Asset Acquisitions

The Company accounts for business acquisitions under the accounting standards for business combinations. The results of each acquisition are included in the Company's consolidated results as of the acquisition date. The purchase price of an acquisition is allocated to tangible and intangible assets and assumed liabilities based on their estimated fair values and any consideration in excess of the net assets acquired is recognized as goodwill. The determination of the values of the acquired assets and assumed liabilities, including goodwill and intangible assets, require significant judgment. Acquisition transaction costs are expensed when incurred.

In circumstances where an acquisition involves a contingent consideration arrangement, the Company recognizes a liability equal to the fair value of the expected contingent payments as of the acquisition date. Subsequent changes in the fair value of the contingent consideration are recorded to other charges (income), net.

Recent Accounting Pronouncements

In March 2020 and January 2021, the FASB issued ASU 2020-04 and ASU 2021-01: Reference Rate Reform which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuance of LIBOR or another referenced rate. The guidance may be applied to any applicable contract entered into before December 31, 2022. The Company's interest rate and cross currency swaps, as mentioned in Note 5 to the consolidated financial statements, are governed by International Swaps and Derivatives Association ("ISDA") agreements, and the Company adheres to the ISDA's fallback protocol when LIBOR is discontinued. In addition, the

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)

Company renewed the LIBOR based credit agreement, as discussed further in Note 8, which includes a fallback protocol when LIBOR is discontinued. Based on these procedures, when LIBOR is discontinued the interest rate and cross currency swaps will not require de-designation if certain criteria are met. The Company expects the financial impact of the rate change when LIBOR is discontinued to be immaterial to its financial statements.

3.REVENUE

The Company disaggregates revenue from contracts with customers by product, service, timing of revenue recognition and geography. A summary of revenue by the Company’s reportable segments for the three and nine months ended September 30, 2021 and 2020 follows:


For the three months ended September 30, 2021	U.S. Operations		Swiss Operations		Western European Operations		Chinese Operations		Other Operations		Total
Product Revenue	$	263,885	$	33,612	$	142,318	$	193,727	$	127,302	$	760,844
Service Revenue:
Point in time	56,325		6,092		37,524		12,680		30,120		142,741
Over time	16,498		2,146		18,790		4,053		6,878		48,365
Total	$	336,708	$	41,850	$	198,632	$	210,460	$	164,300	$	951,950


For the three months ended September 30, 2020	U.S. Operations		Swiss Operations		Western European Operations		Chinese Operations		Other Operations		Total
Product Revenue	$	212,607	$	30,507	$	124,073	$	150,879	$	112,306	$	630,372
Service Revenue:
Point in time	52,000		6,329		34,519		11,414		28,602		132,864
Over time	14,341		2,012		19,038		2,938		5,792		44,121
Total	$	278,948	$	38,848	$	177,630	$	165,231	$	146,700	$	807,357


For the nine months ended September 30, 2021	U.S. Operations		Swiss Operations		Western European Operations		Chinese Operations		Other Operations		Total
Product Revenue	$	721,744	$	95,797	$	424,904	$	525,855	$	355,945	$	2,124,245
Service Revenue:
Point in time	162,409		19,517		110,243		34,655		87,708		414,532
Over time	47,824		6,653		57,557		11,545		18,335		141,914
Total	$	931,977	$	121,967	$	592,704	$	572,055	$	461,988	$	2,680,691


For the nine months ended September 30, 2020	U.S. Operations		Swiss Operations		Western European Operations		Chinese Operations		Other Operations		Total
Product Revenue	$	578,405	$	76,796	$	334,408	$	369,351	$	297,859	$	1,656,819
Service Revenue:
Point in time	148,577		16,611		93,855		28,304		77,768		365,115
Over time	42,714		6,286		51,743		9,083		15,432		125,258
Total	$	769,696	$	99,693	$	480,006	$	406,738	$	391,059	$	2,147,192

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)

A summary of revenue by major geographic destination for the three and nine months ended September 30 follows:


	Three Months Ended				Nine Months Ended
	2021		2020		2021		2020
Americas	$	367,278	$	304,963	$	1,024,033	$	840,087
Europe	258,925		232,133		760,491		621,126
Asia / Rest of World	325,747		270,261		896,167		685,979
Total	$	951,950	$	807,357	$	2,680,691	$	2,147,192

The Company's global revenue mix by product category is comprised of laboratory (56% of sales), industrial (39% of sales) and retail (5% of sales). The Company's product revenue by reportable segment is proportionately similar to the Company's global mix except the Company's Swiss Operations is largely comprised of laboratory products while the Company's Chinese Operations has a slightly higher percentage of industrial products. A summary of the Company’s revenue by product category for the three and nine months ended September 30 is as follows:


	Three Months Ended				Nine Months Ended
	2021		2020		2021		2020
Laboratory	$	536,489	$	430,516	$	1,487,222	$	1,147,078
Industrial	370,505		322,808		1,049,295		863,987
Retail	44,956		54,033		144,174		136,127
Total	$	951,950	$	807,357	$	2,680,691	$	2,147,192

The payment terms in the Company’s contracts with customers do not exceed one year and therefore contracts do not contain a significant financing component. In most cases, after appropriate credit evaluations, payments are due in arrears and are recognized as receivables. Unbilled revenue is recorded when performance obligations have been satisfied, but not yet billed to the customer. Unbilled revenue as of September 30, 2021 and December 31, 2020 was $37.3 million and $22.6 million, respectively, and is included within accounts receivable. Deferred revenue and customer prepayments are recorded when cash payments are received or due in advance of the performance obligation being satisfied. Deferred revenue primarily includes prepaid service contracts, as well as deferred installation.

Changes in the components of deferred revenue and customer prepayments during the nine month periods ending September 30, 2021 and 2020 are as follows:


	2021		2020
Beginning balances as of January 1	$	149,106	$	122,489
Customer pre-payments/deferred revenue	496,437		435,952
Revenue recognized	(446,775)		(409,391)
Foreign currency translation	(3,534)		1,426
Ending balance as of September 30	$	195,234	$	150,476

The Company generally expenses sales commissions when incurred because the amortization period is one year or less. These costs are recorded within selling, general, and administrative expenses. The Company has not disclosed the value of unsatisfied performance obligations other than customer prepayments and deferred revenue above as most contracts have an expected length of one year or less and amounts greater than one year are immaterial.

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)

4. ACQUISITIONS

In March 2021, the Company 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 bio-pharmaceutical manufacturers and life science laboratories and is located in the United States. The initial cash payment was $185.0 million and the Company may be required to pay additional consideration of up to $20.0 million and other post-closing amounts. The additional consideration is based upon financial thresholds in 2022 and 2023. The estimated fair value of the contingent consideration obligation at the time of acquisition of $13.5 million was determined using a Monte Carlo simulation based on the Company's forecast of future financial results.

Goodwill recorded in connection with the acquisition totaled $93.1 million, which is deductible for tax purposes. Identified intangible finite-life assets acquired include customer relationships of $78.6 million, technology and patents of $21.7 million, trade name of $3.4 million, and other intangibles of $2.4 million. The Company used variations of the income statement approach in determining the fair value of the intangible assets acquired. Specifically, the multi-period excess earnings method was used to determine the fair value of the customer relationships acquired and the relief from royalty method was used to determine the fair value of the technology and patents. The Company's determination of the fair value of the intangible assets acquired involved the use of significant estimates and assumptions principally related to revenue growth, royalty and customer attrition rates.

The identifiable finite-live intangible assets will be amortized on a straight-line basis over periods of 5 to 20 years and the annual aggregate amortization expense is estimated at $6.9 million. Net tangible assets acquired were $7.4 million and were recorded at fair value in the consolidated financial statements. All of the acquired assets are included in the Company's U.S. Operations segment.

In October 2021, the Company acquired Scale-up Systems Inc., a leading software provider for scale-up and reaction modelling serving the biopharma and chemical markets. The initial cash payment was $22.2 million and the Company may be required to pay additional amounts up to EUR 3.0 million.

5. FINANCIAL INSTRUMENTS

The Company has limited involvement with derivative financial instruments and does not use them for trading purposes. The Company enters into certain interest rate and cross currency 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 and cross currency 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. For additional disclosures on derivative instruments regarding balance sheet location, fair value, and the amounts reclassified into other comprehensive income and the effective portion of the cash flow hedges, also see Note 6 and Note 10 to the interim consolidated financial statements. As also described in Note 8, the Company has designated its euro-denominated debt as a hedge of a portion of its net investment in euro-denominated foreign subsidiary.

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)

Cash Flow Hedges

In June 2021, the Company entered into a cross currency swap arrangement designated as a cash flow hedge. The agreement converts $50 million of borrowings under the Company's credit facility into synthetic Swiss franc debt, which allows the Company to effectively change the floating rate LIBOR-based interest payments, excluding the credit spread to a fixed Swiss franc income of 0.57%. The swap matures in June 2025. This cross currency swap replaced a similar $50 million swap entered into in June 2019 which matured in June 2021, which converted floating rate LIBOR to a fixed Swiss franc income of 0.95%.

In June 2021, the Company entered into a cross currency swap arrangement designated as a cash flow hedge. The agreement converts $50 million of borrowings under the Company's credit facility into synthetic Swiss franc debt, which allows the Company to effectively change the floating rate LIBOR-based interest payments, excluding the credit spread to a fixed Swiss franc income of 0.66%. The swap matures in June 2024. This cross currency swap replaced a similar $50 million swap entered into in February 2019 which matured in June 2021, which converted floating rate LIBOR to a fixed Swiss franc income of 0.78%.

In June 2019, the Company entered into a cross currency swap arrangement designated as a cash flow hedge. The agreement converts $50 million of borrowings under the Company's credit facility into synthetic Swiss franc debt, which allows the Company to effectively change the floating rate LIBOR-based interest payments, excluding the credit spread to a fixed Swiss franc income of 0.82%. The swap matures in June 2023.

In 2015, the Company entered into an interest rate swap agreement designated as a cash flow hedge. The agreement has the effect of changing the floating rate LIBOR-based interest payments associated with $100 million of borrowings under the Company's credit agreement to a fixed obligation of 2.25% beginning in February 2017 and matures in February 2022.

The Company's cash flow hedges are recorded gross at fair value in the consolidated balance sheet at September 30, 2021 and December 31, 2020, respectively. A derivative gain of $0.3 million based upon interest rates and foreign currency rates at September 30, 2021, is expected to be reclassified from other comprehensive income (loss) to earnings in the next twelve months. The cash flow hedges remain effective as of September 30, 2021.

Other Derivatives

The Company enters into foreign currency forward contracts in order to economically hedge short-term trade and non-trade intercompany balances largely denominated in Swiss franc, other major European currencies, and the Chinese Renminbi 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 are recorded at fair value in the consolidated balance sheet at September 30, 2021 and December 31, 2020, respectively, and disclosed in Note 6. The Company recognized in other charges (income) related to these instruments, a net gain of $3.3 million and $7.1 million during the three months ended September 30, 2021 and 2020, respectively, and a net gain of $16.5 million and $0.1 million during the nine months ended September 30, 2021 and 2020, respectively. The gains and losses are primarily offset by the underlying transaction gains and losses on the related intercompany balances. At September 30, 2021 and December 31, 2020, these contracts had a notional value of $652.0 million and $536.5 million, respectively.

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)

6. FAIR VALUE MEASUREMENTS

At September 30, 2021 and December 31, 2020, the Company had derivative assets totaling $6.9 million and $2.2 million respectively, and derivative liabilities totaling $5.9 million and $23.3 million, respectively. The Company has limited involvement with derivative financial instruments and therefore does not need to present all the required disclosures in tabular format. The fair values of the interest rate swap agreements, the cross-currency swap agreements and foreign currency forward contracts that economically hedge short-term intercompany balances are estimated based upon inputs from current valuation information obtained from dealer quotes and priced with observable market assumptions and appropriate valuation adjustments for credit risk. The Company has evaluated the valuation methodologies used to develop the fair values by dealers in order to determine whether such valuations are representative of an exit price in the Company’s principal market. In addition, the Company uses an internally developed model to perform testing on the valuations received from brokers. The Company has also considered both its own credit risk and counterparty credit risk in determining fair value and determined these adjustments were insignificant at September 30, 2021 and December 31, 2020.

The estimated fair value of the contingent consideration obligation of $13.5 million relating to the PendoTECH acquisition was determined using a Monte Carlo simulation based on the Company's forecast of future financial results. The fair value measurements are based on significant inputs not observable in the market and thus represent a Level 3 measurement.

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

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)

The following table presents the Company's assets and liabilities, which are all categorized as Level 2, that are measured at fair value on a recurring basis. The Company does not have any assets or liabilities which are categorized as Level 1 or Level 3, with the exception of the PendoTECH contingent consideration described above.


	September 30, 2021		December 31, 2020		Balance Sheet Classification
Foreign currency forward contracts not designated as hedging instruments	$	2,971	$	2,227	Other current assets and prepaid expenses
Cash Flow Hedges:
Cross currency swap agreement	3,932		—		Other non-current assets
Total derivative assets	$	6,903	$	2,227

Foreign currency forward contracts not designated as hedging instruments	$	1,637	$	1,399	Accrued and other liabilities
Cash Flow Hedges:
Interest rate swap agreements	901		—		Accrued and other liabilities
Cross currency swap agreement	—		13,093		Accrued and other liabilities
Interest rate swap agreements	—		2,502		Other non-current liabilities
Cross currency swap agreement	3,312		6,297		Other non-current liabilities
Total derivative liabilities	$	5,850	$	23,291

The Company had $25.6 million and $14.3 million of cash equivalents at September 30, 2021 and December 31, 2020, respectively, the fair value of which is determined using Level 2 inputs, through quoted and corroborated prices in active markets. The fair value of cash equivalents approximates cost.

The fair value of the Company's debt exceeds the carrying value by approximately $30.2 million as of September 30, 2021. The fair value of the Company's fixed interest rate debt was estimated using Level 2 inputs, primarily discounted cash flow models, based on estimated current rates offered for similar debt under current market conditions for the Company.

7. INCOME TAXES

The Company's reported tax rate was 17.7% and 21.4% during the three months ended September 30, 2021 and 2020, respectively and 18.9% and 19.4% during the nine months ended September 30, 2021 and 2020, respectively. The provision for taxes is based upon using the Company's projected annual effective tax rate of 19.5% and 20.5% before non-recurring discrete tax items during 2021 and 2020, respectively. The difference between the Company's projected annual effective tax rate and the reported tax rate is primarily related to the timing of excess tax benefits associated with stock option exercises.

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)

8. DEBT

Debt consisted of the following at September 30, 2021:


	U.S. Dollar		Other Principal Trading Currencies		Total
3.67% $50 million ten-year Senior Notes due December 17, 2022	$	50,000	$	—	$	50,000
4.10% $50 million ten-year Senior Notes due September 19, 2023	50,000		—		50,000
3.84% $125 million ten-year Senior Notes due September 19, 2024	125,000		—		125,000
4.24% $125 million ten-year Senior Notes due June 25, 2025	125,000		—		125,000
3.91% $75 million ten-year Senior Notes due June 25, 2029	75,000		—		75,000
3.19% $50 million fifteen-year Senior Notes due January 24, 2035	50,000		—		50,000
2.83% $125 million twelve-year Senior Notes due July 22, 2033	125,000		—		125,000
1.47% Euro 125 million fifteen-year Senior Notes due June 17, 2030	—		146,056		146,056
1.30% Euro 135 million fifteen-year Senior Notes due November 6, 2034	—		157,740		157,740
1.06% Euro 125 million fifteen-year Senior Notes due March 19, 2036	—		146,056		146,056
Debt issuance costs, net	(1,519)		(1,600)		(3,119)
Total Senior Notes	598,481		448,252		1,046,733
$1.25 billion Credit Agreement, interest at LIBOR plus 87.5 basis points	412,473		177,092		589,565
Other local arrangements	3,494		53,315		56,809
Total debt	1,014,448		678,659		1,693,107
Less: current portion	(351)		(53,173)		(53,524)
Total long-term debt	$	1,014,097	$	625,486	$	1,639,583

Credit Agreement

On June 25, 2021, the Company entered into a $1.25 billion Credit Agreement ("the Credit Agreement"), which amended its $1.1 billion Amended and Restated Credit Agreement (the "Prior Credit Agreement"). As of September 30, 2021, the Company had $654.2 million of additional borrowings available under its Credit Agreement, and the Company maintained $183.7 million of cash and cash equivalents.

The Credit Agreement is provided by a group of financial institutions (similar to the Company's Prior Credit Agreement) and has a maturity date of June 25, 2026. It is a revolving credit facility and is not subject to any scheduled principal payments prior to maturity. The obligations under the Credit Agreement are unsecured.

Borrowings under the Credit Agreement bear interest at current market rates plus a margin based on the Company’s consolidated leverage ratio. The Company must also pay facility fees that are tied to its leverage ratio. The Credit Agreement contains covenants that are similar as those contained in the prior Credit Agreement, with which the Company was in compliance as of September 30, 2021. The Company is required to maintain (i) a ratio of net funded indebtedness to EBITDA of 3.5 to 1.0 or less except that the required maximum ratio may increase to 4.0 to 1.0 for the four consecutive fiscal quarter period commencing with the fiscal quarter in which an acquisition having total consideration (including, without limitation, all cash payments, assumed indebtedness, issued equity interests and earn outs in connection with such acquisition) greater than $250 million and (ii) an interest coverage ratio of 3.0 to 1.0 or greater. The Credit Agreement also places certain limitations on the Company, including limiting the ability to incur liens or indebtedness at a subsidiary level. In addition, the Credit Agreement has several events of

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)

default. The Company incurred approximately $0.2 million of debt extinguishment costs during 2021 related to the Prior Credit Agreement. The Company capitalized $2.0 million in financing fees during 2021 associated with the Credit Agreement which will be amortized to interest expense through 2026.

Senior Notes

In May 2021, the Company entered into an agreement to issue and sell $125 million twelve-year Senior Notes with a fixed interest rate of 2.83%. The Senior Notes were issued in July 2021 and will mature July 2033. The terms of the Senior Notes are consistent with the previous Senior Notes as described above. The Company used the proceeds from the sale of the notes to refinance existing indebtedness and for other general corporate purposes.

In December 2020, the Company entered into an agreement to issue and sell EUR 125.0 million of 15-year 1.06% Euro Senior Notes ("1.06% Euro Senior Notes"). The terms of the Euro Senior Notes are consistent with the previous Euro Senior Notes as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. The Company also entered into a forward contract to receive $152.1 million at the time of issuing the 1.06% Euro Senior Notes in March 2021. The Company issued the 1.06% Euro Senior Notes with a fixed interest rate of 1.06% in March 2021. The 1.06% Euro Senior Notes are unsecured obligations of the Company and will mature on March 19, 2036. Interest on the 1.06% Euro Senior Notes is payable semi-annually in March and September of each year. The Company was in compliance with its debt covenants at September 30, 2021.

The Company has designated the EUR 125 million 1.47% Euro Senior Notes, the EUR 135 million 1.30% Euro Senior Notes, and the EUR 125 million 1.06% Euro Senior Notes as a hedge of a portion of its net investment in euro-denominated foreign subsidiaries to reduce foreign currency risk associated with the net investment. Changes in the carrying value of this debt resulting from fluctuations in the euro to U.S. dollar exchange rate are recorded as foreign currency translation adjustments within other comprehensive income (loss). The Company recorded in other comprehensive income (loss) related to this net investment hedge an unrealized gain of $9.4 million and an unrealized loss of $11.2 million for the three months ended September 30, 2021 and 2020, respectively, and an unrealized gain of $21.2 million and an unrealized loss of $11.3 million for the nine month periods ended September 30, 2021 and 2020, respectively. The Company has a loss of $7.6 million recorded in accumulated other comprehensive income (loss) as of September 30, 2021.

Other Local Arrangements

In April 2018, two of the Company's 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 Swiss franc LIBOR plus 87.5 basis points. The loans were renewed for one year in April 2021.

9. SHARE REPURCHASE PROGRAM AND TREASURY STOCK

In November 2020, the Company's Board of Directors authorized an additional $2.5 billion to be added to its share repurchase program, which has $2.3 billion of remaining availability as of September 30, 2021. 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.

The Company has purchased 30.0 million shares since the inception of the program in 2004 through September 30, 2021. During the nine months ended September 30, 2021 and 2020, the Company spent $727.5 million and $400.0 million on the repurchase of 557,310 shares and 475,530 shares at an average price per share of $1,305.35 and $841.14, respectively. The Company also reissued 71,124 shares

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)

and 144,776 shares held in treasury upon the exercise of stock options and vesting of restricted stock units during the nine months ended September 30, 2021 and 2020, respectively.

10. ACCUMULATED OTHER COMPREHENSIVE INCOME

Comprehensive income (loss), net of tax consisted of the following as of September 30:


	Three Months Ended				Nine Months Ended
	2021		2020		2021		2020
Net earnings	$	203,688	$	161,767	$	538,114	$	386,444
Other comprehensive income (loss), net of tax	4,740		18,332		37,073		(3,600)
Comprehensive income, net of tax	$	208,428	$	180,099	$	575,187	$	382,844

The following table presents changes in accumulated other comprehensive income by component for the nine months ended September 30, 2021 and 2020:


	Currency Translation Adjustment, Net of Tax		Net Unrealized Gain (Loss) on Cash Flow Hedging Arrangements, Net of Tax		Pension and Post-Retirement Benefit Related Items, Net of Tax		Total
Balance at December 31, 2020	$	(31,101)	$	(1,479)	$	(302,345)	$	(334,925)
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) cash flow hedging arrangements	—		7,327		—		7,327
Foreign currency translation adjustment	8,102		—		12,062		20,164
Amounts recognized from accumulated other comprehensive income (loss), net of tax	—		(5,773)		15,355		9,582
Net change in other comprehensive income (loss), net of tax	8,102		1,554		27,417		37,073
Balance at September 30, 2021	$	(22,999)	$	75	$	(274,928)	$	(297,852)


	Currency Translation Adjustment, Net of Tax		Net Unrealized Gain (Loss) on Cash Flow Hedging Arrangements, Net of Tax		Pension and Post-Retirement Benefit Related Items, Net of Tax		Total
Balance at December 31, 2019	$	(61,015)	$	(1,222)	$	(261,436)	$	(323,673)
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) cash flow hedging arrangements	—		(7,689)		—		(7,689)
Foreign currency translation adjustment	(571)		—		(11,662)		(12,233)
Amounts recognized from accumulated other comprehensive income (loss), net of tax	—		5,524		10,798		16,322
Net change in other comprehensive income (loss), net of tax	(571)		(2,165)		(864)		(3,600)
Balance at September 30, 2020	$	(61,586)	$	(3,387)	$	(262,300)	$	(327,273)

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)

The following table presents amounts recognized from accumulated other comprehensive income (loss) for the three and nine month periods ended September 30:


	Three Months Ended
	September 30,
	2021		2020		Location of Amounts Recognized in Earnings
Effective portion of (gains) / losses on cash flow hedging arrangements:
Interest rate swap agreements	$	551	$	833	Interest expense
Cross currency swap agreement	(1,793)		2,936		(a)
Total before taxes	(1,242)		3,769
Provision for taxes	(201)		440		Provision for taxes
Total, net of taxes	$	(1,041)	$	3,329

Recognition of defined benefit pension and post-retirement items:
Recognition of actuarial losses and prior service cost, before taxes	$	6,449	$	4,746	(b)
Provision for taxes	1,361		1,047		Provision for taxes
Total, net of taxes	$	5,088	$	3,699

(a) The cross currency swap reflects an unrealized gain of $1.5 million for the three months ended September 30, 2021 recorded in other charges (income) that was offset by the underlying unrealized loss on the hedged debt. The cross currency swap also reflects a realized gain of $0.3 million recorded in interest expense for the three months ended September 30, 2021.

(b) These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and post-retirement cost. See Note 12 for additional details for the three months ended September 30, 2021 and 2020.


	Nine Months Ended
	September 30,
	2021		2020		Location of Amounts Recognized in Earnings
Effective portion of (gains) / losses on cash flow hedging arrangements:
Interest rate swap agreements	$	1,625	$	1,774	Interest expense
Cross currency swap agreement	(8,625)		4,555		(a)
Total before taxes	(7,000)		6,329
Provision for taxes	(1,227)		805		Provision for taxes
Total, net of taxes	$	(5,773)	$	5,524

Recognition of defined benefit pension and post-retirement items:
Recognition of actuarial losses and prior service cost, before taxes	$	19,460	$	13,835	(b)
Provision for taxes	4,105		3,037		Provision for taxes
Total, net of taxes	$	15,355	$	10,798

(a) The cross currency swap reflects an unrealized gain of $7.5 million for the nine months ended September 30, 2021 recorded in other charges (income) that was offset by the underlying unrealized loss on the hedged debt. The cross currency swap also reflects a realized gain of $1.1 million recorded in interest expense for the nine months ended September 30, 2021.

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)

11. 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 nine months ended September 30, relating to outstanding stock options and restricted stock units:


	2021	2020
Three months ended	336,655	302,932
Nine months ended	333,358	309,044

Outstanding options and restricted stock units to purchase or receive 3,692 shares of common stock for the three month period ended September 30, 2021 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. For the three months ended September 30, 2020, there were no-anti-dilutive outstanding options or restricted stock units. Options and restricted stock units to purchase or receive 20,384 and 56,371 for the nine month period ended September 30, 2021 and 2020, respectively, have been excluded from the calculation of diluted weighted average of common and common equivalent shares as such options and restricted stock units would be anti-dilutive.

12. NET PERIODIC PENSION 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 September 30:


	U.S. Pension Benefits				Non-U.S. Pension Benefits				Other U.S. Post-retirement Benefits				Total
	2021		2020		2021		2020		2021		2020		2021		2020
Service cost, net	$	374	$	326	$	4,858	$	4,750	$	—	$	—	$	5,232	$	5,076
Interest cost on projected benefit obligations	546		889		843		1,208		2		5		1,391		2,102
Expected return on plan assets	(1,494)		(1,523)		(8,851)		(8,426)		—		—		(10,345)		(9,949)
Recognition of prior service cost	—		—		(462)		(1,819)		(18)		(18)		(480)		(1,837)
Recognition of actuarial losses/(gains)	728		643		6,211		5,947		(10)		(7)		6,929		6,583
Net periodic pension cost/(credit)	$	154	$	335	$	2,599	$	1,660	$	(26)	$	(20)	$	2,727	$	1,975

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 nine months ended September 30:


	U.S. Pension Benefits				Non-U.S. Pension Benefits				Other U.S. Post-retirement Benefits				Total
	2021		2020		2021		2020		2021		2020		2021		2020
Service cost, net	$	1,122	$	978	$	14,710	$	13,795	$	—	$	—	$	15,832	$	14,773
Interest cost on projected benefit obligations	1,644		2,667		2,551		3,541		6		19		4,201		6,227
Expected return on plan assets	(4,482)		(4,571)		(26,726)		(24,530)		—		—		(31,208)		(29,101)
Recognition of prior service cost	—		—		(1,398)		(5,279)		(56)		(56)		(1,454)		(5,335)
Recognition of actuarial losses/(gains)	2,186		1,933		18,756		17,258		(28)		(21)		20,914		19,170
Net periodic pension cost/(credit)	$	470	$	1,007	$	7,893	$	4,785	$	(78)	$	(58)	$	8,285	$	5,734

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)

As previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2020, the Company expects to make employer contributions of approximately $27.9 million to its non-U.S. pension plans and employer contributions of approximately $0.2 million to its U.S. post-retirement medical plan during the year ended December 31, 2021. These estimates may change based upon several factors, including fluctuations in currency exchange rates, actual returns on plan assets and changes in legal requirements.

13. RESTRUCTURING CHARGES

For the three and nine months ended September 30, 2021, the Company has incurred $0.7 million and $2.7 million of restructuring expenses, respectively, which primarily relates to employee related costs. Liabilities related to restructuring activities are included in accrued and other liabilities in the consolidated balance sheet. A roll forward of the Company’s accrual for restructuring activities for the nine months ended September 30, 2021 is as follows:


	Total
Balance at December 31, 2020	$	9,184
Restructuring charges	2,719
Cash payments and utilization	(7,422)
Impact of foreign currency	(319)
Balance at September 30, 2021	$	4,162

14. OTHER CHARGES (INCOME), NET

Other charges (income), net includes non-service pension costs (benefits), (gains) losses from foreign currency transactions and related hedging activities, interest income and other items. Non-service pension benefits for the three months ended September 30, 2021 and 2020 were $2.5 million and $3.1 million, respectively, and $7.5 million and $9.0 million for the nine months ended September 30, 2021 and 2020, respectively. Other charges (income), net also included $2.8 million of acquisition costs for the nine months ended September 30, 2021.

15. SEGMENT REPORTING

As disclosed in Note 19 to the Company's consolidated financial statements for the year ended December 31, 2020, 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).

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)

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


	Net Sales to		Net Sales to						As of September 30,
For the three months ended	External		Other		Total Net		Segment		2021
September 30, 2021	Customers		Segments		Sales		Profit		Goodwill
U.S. Operations	$	336,708	$	36,895	$	373,603	$	72,638	$	508,942
Swiss Operations	41,850		208,411		250,261		78,454		23,319
Western European Operations	198,632		52,259		250,891		40,288		91,228
Chinese Operations	210,460		79,001		289,461		108,636		696
Other (a)	164,300		835		165,135		24,381		14,999
Eliminations and Corporate (b)	—		(377,401)		(377,401)		(51,587)		—
Total	$	951,950	$	—	$	951,950	$	272,810	$	639,184


	Net Sales to		Net Sales to
For the nine months ended	External		Other		Total Net		Segment
September 30, 2021	Customers		Segments		Sales		Profit
U.S. Operations	$	931,977	$	112,186	$	1,044,163	$	215,581
Swiss Operations	121,967		594,057		716,024		212,849
Western European Operations	592,704		160,386		753,090		116,630
Chinese Operations	572,055		220,608		792,663		275,323
Other (a)	461,988		3,207		465,195		65,967
Eliminations and Corporate (b)	—		(1,090,444)		(1,090,444)		(147,612)
Total	$	2,680,691	$	—	$	2,680,691	$	738,738

(a)Other includes reporting units in Eastern Europe, Latin America, Southeast Asia and other countries.

(b)Eliminations and Corporate includes the elimination of inter-segment transactions and certain corporate expenses and intercompany investments, which are not included in the Company’s operating segments.


	Net Sales to		Net Sales to						As of September 30,
For the three months ended	External		Other		Total Net		Segment		2020
September 30, 2020	Customers		Segments		Sales		Profit		Goodwill
U.S. Operations	$	278,948	$	30,857	$	309,805	$	65,493	$	414,370
Swiss Operations	38,848		167,335		206,183		61,902		23,353
Western European Operations	177,630		42,130		219,760		36,954		88,292
Chinese Operations	165,231		54,314		219,545		81,055		651
Other (a)	146,700		1,509		148,209		23,554		15,056
Eliminations and Corporate (b)	—		(296,145)		(296,145)		(38,980)		—
Total	$	807,357	$	—	$	807,357	$	229,978	$	541,722

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METTLER-TOLEDO INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data, unless otherwise stated)


	Net Sales to		Net Sales to
For the nine months ended	External		Other		Total Net		Segment
September 30, 2020	Customers		Segments		Sales		Profit
U.S. Operations	$	769,696	$	84,761	$	854,457	$	163,012
Swiss Operations	99,693		462,671		562,364		164,060
Western European Operations	480,006		123,543		603,549		91,406
Chinese Operations	406,738		148,794		555,532		190,560
Other (a)	391,059		3,281		394,340		47,702
Eliminations and Corporate (b)	—		(823,050)		(823,050)		(108,841)
Total	$	2,147,192	$	—	$	2,147,192	$	547,899

(a)Other includes reporting units in Eastern Europe, Latin America, Southeast Asia and other countries.

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


	Three Months Ended				Nine Months Ended
	2021		2020		2021		2020
Earnings before taxes	$	247,587	$	205,809	$	663,385	$	479,563
Amortization	16,039		14,121		46,141		42,008
Interest expense	11,791		9,310		31,701		29,111
Restructuring charges	650		4,570		2,719		7,335
Other income, net	(3,257)		(3,832)		(5,208)		(10,118)
Segment profit	$	272,810	$	229,978	$	738,738	$	547,899

During the three months ended September 30, 2021, restructuring charges of $0.7 million were recognized, of which $0.3 million, $0.1 million, and $0.3 million, related to the Company’s U.S., Swiss, and Western European Operations, respectively. Restructuring charges of $4.6 million were recognized during the three months ended September 30, 2020, of which $2.3 million, $0.1 million, $1.8 million, and $0.4 million related to the Company’s U.S., Swiss, Western European, and Other Operations, respectively. Restructuring charges of $2.7 million were recognized during the nine months ended September 30, 2021, of which $0.7 million, $0.4 million, $1.3 million, and $0.3 million related to the Company’s U.S., Swiss, Western European, and Other Operations, respectively. Restructuring charges of $7.3 million were recognized during the nine months ended September 30, 2020, of which $2.9 million, $0.8 million, $2.9 million, $0.1 million, and $0.6 million and related to the Company’s U.S., Swiss, Western European, Chinese, and Other Operations, respectively.

16. 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.

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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 nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021.

Changes in local currency exclude the effect of currency exchange rate fluctuations. Local currency amounts are determined by translating current and previous year consolidated financial information at an index utilizing historical currency exchange rates. We believe local currency information provides a helpful assessment of business performance and a useful measure of results between periods. We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. We present non-GAAP financial measures in reporting our financial results to provide investors with an additional analytical tool to evaluate our operating results.

We also include in the discussion below disclosures of immaterial qualitative factors that are not quantified. Although the impact of such factors is not considered material, we believe these disclosures can be useful in evaluating our operating results.

COVID-19

The ongoing coronavirus ("COVID-19") pandemic has resulted in millions of confirmed cases throughout the world and in all countries where we conduct business. The outbreak caused many governments to implement stay-at-home orders, quarantines, and significant restrictions on travel. During the course of the ongoing pandemic, several governments implemented work restrictions that prohibited many employees from going to their customary work locations and that required these employees to work remotely when possible. These restrictions continue to change as the COVID-19 situation evolves in each country and region, considering local circumstances related to vaccine availability, population vaccination rates, and emerging variant strains of COVID-19.

The health and safety of our employees and business partners have been our highest priority throughout the COVID-19 pandemic, and we have implemented several preventative and protective measures. We have also continued to support our customers with their essential businesses such as life sciences, food manufacturing, chemicals (e.g., sanitizers, disinfectants, soaps, etc.), food retail, and transportation and logistics.

Our production and logistics facilities are currently operational, and our office-based employees continue to adhere to any applicable jurisdictional stay-at-home orders. Our supply chain is currently facing wide-ranging global challenges although we have been able to meet delivery requirements of our customers with some interruption. We continue to closely monitor risks associated with our supply chain, including the availability of certain components, material shortages, supplier delays, potential transportation delays, and higher transportation and material costs, which could significantly adversely affect sales and/or profitability in future quarters. We also continue to leverage our digital and remote sales capabilities and our service organization continues to provide on-site and remote customer support to facilitate uptime, productivity, and regulatory compliance.

COVID-19 presents several risks to our business as further described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020. Uncertainties related to COVID-19 and the resulting impact to the global economy continue in most regions of the world

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and market conditions can change quickly. The longer-term effects on our business will be impacted by the global economy and any economic implications in different regions of the world.

Results of Operations – Consolidated

The following tables set forth certain items from our interim consolidated statements of operations for the three and nine month periods ended September 30, 2021 and 2020 (amounts in thousands).


	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
	(unaudited)		%	(unaudited)		%	(unaudited)		%	(unaudited)		%
Net sales	$	951,950	100.0	$	807,357	100.0	$	2,680,691	100.0	$	2,147,192	100.0
Cost of sales	396,130		41.6	337,749		41.8	1,116,271		41.6	905,205		42.2
Gross profit	555,820		58.4	469,608		58.2	1,564,420		58.4	1,241,987		57.8
Research and development	42,276		4.4	34,656		4.3	124,151		4.6	100,236		4.7
Selling, general and administrative	240,734		25.3	204,974		25.4	701,531		26.2	593,852		27.7
Amortization	16,039		1.7	14,121		1.7	46,141		1.7	42,008		2.0
Interest expense	11,791		1.2	9,310		1.2	31,701		1.2	29,111		1.3
Restructuring charges	650		0.1	4,570		0.6	2,719		0.1	7,335		0.3
Other income, net	(3,257)		(0.3)	(3,832)		(0.5)	(5,208)		(0.2)	(10,118)		(0.5)
Earnings before taxes	247,587		26.0	205,809		25.5	663,385		24.8	479,563		22.3
Provision for taxes	43,899		4.6	44,042		5.5	125,271		4.7	93,119		4.3
Net earnings	$	203,688	21.4	$	161,767	20.0	$	538,114	20.1	$	386,444	18.0

Net sales

Net sales were $952.0 million and $807.4 million for the three months ended September 30, 2021, and 2020, respectively, and $2.7 billion and $2.1 billion for the nine months ended September 30, 2021 and 2020, respectively. This represents an increase of 18% and 25% in U.S. dollars for the three and nine months ended September 30, 2021, respectively. Excluding the effect of currency exchange rate fluctuations, or in local currencies, net sales increased 16% and 20% for the three and nine months ended September 30, 2021, respectively. Net sales benefited approximately 1% from the PendoTECH acquisition for the three and nine months ended September 30, 2021. We experienced broad-based growth with robust customer demand in most businesses and regions and strong execution of our sales and marketing programs. Growth in China also continued to be particularly strong. However, uncertainty relating to COVID-19 continues and market conditions may change quickly.

Net sales by geographic destination for the three months ended September 30, 2021 in U.S. dollars increased 20% in the Americas, 12% in Europe, and 21% in Asia/Rest of World. In local currencies, our net sales by geographic destination increased 20% in the Americas, 10% in Europe, and 16% in Asia/Rest of World. Our net sales by geographic destination for the nine months ended September 30, 2021 in U.S. dollars increased 22% in the Americas and in Europe, and 31% in Asia/Rest of World. Net sales by geographic destination for the nine months ended September 30, 2021 in local currencies increased 21% in the Americas, 15% in Europe, and 23% in Asia/Rest of World. Net sales in the Americas benefited approximately 3% and 2% from the PendoTECH acquisition for the three and nine months ended September 30, 2021, respectively, and net sales in Europe benefited approximately 1% from the PendoTECH acquisition for both the three and nine months ended September 30, 2021. Net sales growth in Asia/Rest of World in local currency includes 19% and 31% growth in China during the three and nine months ended September 30, 2021, respectively. A discussion of sales by operating segment is included below.

As described in Note 19 to our consolidated financial statements for the year ended December 31, 2020, 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.

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Net sales of products increased 21% in U.S. dollars and 18% in local currencies for the three months ended September 30, 2021 and increased 28% in U.S. dollars and 24% in local currencies for the nine months ended September 30, 2021, compared to the corresponding periods in 2020. Net sales of products benefited approximately 1% from the PendoTECH acquisition for the three and nine months ended September 30, 2021, respectively. Service revenue (including spare parts) increased by 8% in U.S. dollars and 6% in local currencies for the three months ended September 30, 2021 and increased 13% in U.S. dollars and 9% in local currencies for the nine months ended September 30, 2021, compared to the corresponding periods in 2020.

Net sales of our laboratory products and services, which represented approximately 56% of our total net sales, increased 25% in U.S. dollars and 23% in local currencies for the three months ended September 30, 2021, and increased 30% in U.S. dollars and 26% in local currencies for the nine months ended September 30, 2021. The local currency increase in net sales of our laboratory-related products for the three and nine months ended September 30, 2021 includes strong growth in most product categories. Net sales during the nine months ended September 30, 2021 also included especially strong growth in pipettes. Net sales of our laboratory products also benefited approximately 3% and 2% from the PendoTECH acquisition for the three and nine months ended September 30, 2021, respectively.

Net sales of our industrial products and services, which represented approximately 39% of our total net sales, increased 15% in U.S. dollars and 12% in local currencies for the three months ended September 30, 2021, and increased 21% in U.S. dollars and 16% in local currencies for the nine months ended September 30, 2021. The local currency increase in net sales of our industrial-related products for the three and nine months ended September 30, 2021 includes strong growth in product inspection and core industrial products. Net sales of our industrial-related products for the nine months ended September 30, 2021 includes particularly strong growth in core industrial, especially China.

Net sales in our food retailing products and services, which represented approximately 5% of our total net sales, decreased 18% in U.S. dollars and 19% in local currencies for the three months ended September 30, 2021, and increased 4% in U.S. dollars and decreased 1% in local currencies for the nine months ended September 30, 2021. Food retailing declined significantly for the three months ended September 30, 2021 due to timing of project activity and the negative impact of manufacturing component shortages. The local currency decrease in food retailing for the nine months ended September 30, 2021 was also negatively impacted by a decline in the Americas, offset in part by strong growth in Europe.

Gross profit

Gross profit as a percentage of net sales was 58.4% and 58.2% for the three months ended September 30, 2021 and 2020, respectively, and 58.4% and 57.8% for the nine months ended September 30, 2021 and 2020, respectively.

Gross profit as a percentage of net sales for products was 60.0% and 59.7% for the three months ended September 30, 2021 and 2020, respectively, and 60.3% and 60.0% for the nine months ended September 30, 2021 and 2020.

Gross profit as a percentage of net sales for services (including spare parts) was 51.9% and 52.7% for the three months ended September 30, 2021 and 2020, respectively, and 51.0% and 50.5% for the nine months ended September 30, 2021 and 2020, respectively.

The increase in gross profit as a percentage of net sales for the three and nine months ended September 30, 2021 primarily reflects increased sales volume and favorable price realization, partially offset by temporary cost savings in the prior year and higher transportation and material costs.

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Research and development and selling, general and administrative expenses

Research and development expenses as a percentage of net sales was 4.4% and 4.3% for the three months ended September 30, 2021 and 2020, respectively, and was 4.6% and 4.7% for the nine months ended September 30, 2021 and 2020, respectively. Research and development expenses increased 22% in U.S. dollars and 19% in local currencies for the three months ended September 30, 2021, and increased 24% in U.S. dollars and 18% in local currencies for the nine months ended September 30, 2021, respectively, compared to the corresponding periods in 2020. The local currency increase primarily relates to increased project activity and temporary savings in the prior year.

Selling, general and administrative expenses as a percentage of net sales were 25.3% and 25.4% for the three months ended September 30, 2021 and 2020, respectively, and were 26.2% and 27.7% for the nine months ended September 30, 2021 and 2020, respectively. Selling, general and administrative expenses increased 17% in U.S. dollars and 16% in local currencies for the three months ended September 30, 2021, and increased 18% in U.S. dollars and 14% in local currencies for the nine months ended September 30, 2021. The local currency increase primarily includes higher cash incentive expense and temporary savings in the prior year.

Amortization expense was $16.0 million and $14.1 million for the three months ended September 30, 2021 and 2020, respectively, and $46.1 million and $42.0 million for the nine months ended September 30, 2021 and 2020, respectively.

Interest expense was $11.8 million and $9.3 million for the three months ended September 30, 2021 and 2020, respectively, and $31.7 million and $29.1 million for the nine months ended September 30, 2021 and 2020, 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 was $2.5 million and $3.1 million for the three months ended September 30, 2021 and 2020, respectively, and $7.5 million and $9.0 million and for the nine months ended September 30, 2021 and 2020, respectively. Other charges (income), net also included $2.8 million of acquisition costs for the nine months ended September 30, 2021.

Our reported tax rate was 17.7% and 21.4% during the three months ended September 30, 2021 and 2020, respectively, and 18.9% and 19.4% during the nine months ended September 30, 2021 and 2020, respectively. The provision for taxes is based upon using our projected annual effective tax rate of 19.5% and 20.5% before non-recurring discrete tax items for the periods ended September 30, 2021 and 2020, respectively. The difference between our projected annual effective tax rate and the reported tax rate is related to the timing of excess tax benefits associated with stock option exercises.

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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 19 to our consolidated financial statements for the year ended December 31, 2020.

U.S. Operations (amounts in thousands)


	Three months ended September 30,					Nine months ended September 30,
	2021		2020		%	2021		2020		%
Total net sales	$	373,603	$	309,805	21%	$	1,044,163	$	854,457	22%
Net sales to external customers	$	336,708	$	278,948	21%	$	931,977	$	769,696	21%
Segment profit	$	72,638	$	65,493	11%	$	215,581	$	163,012	32%

Total net sales increased 21% and 22% for the three and nine months ended September 30, 2021, respectively, compared with the corresponding period in 2020. Net sales to external customers increased 21% for both the three and nine months ended September 30, 2021, respectively, compared with the corresponding period in 2020. Net sales to external customers for the three months ended September 30, 2021 includes very strong growth in most laboratory products and core industrial. The increases are partially offset by a significant decline in food retailing that was negatively impacted by the timing of customer project activity and manufacturing component shortages. Net sales during the nine months ended September 30, 2021 also included particularly strong results in pipettes. Net sales to external customers in our U.S. Operations also benefited approximately 4% and 3% from the PendoTECH acquisition for the three and nine months ended September 30, 2021, respectively.

Segment profit increased $7.1 million and $52.6 million for the three and nine months ended September 30, 2021, respectively, compared to the corresponding periods in 2020. Segment profit during the three and nine months ended September 30, 2021 includes higher sales volume and benefits from our margin expansion initiatives, offset in part by higher transportation and material costs and temporary cost savings in the prior year.

Swiss Operations (amounts in thousands)


	Three months ended September 30,					Nine months ended September 30,
	2021		2020		%1)	2021		2020		%1)
Total net sales	$	250,261	$	206,183	21%	$	716,024	$	562,364	27%
Net sales to external customers	$	41,850	$	38,848	8%	$	121,967	$	99,693	22%
Segment profit	$	78,454	$	61,902	27%	$	212,849	$	164,060	30%

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

Total net sales increased 21% in both U.S. dollars and in local currency for the three months ended September 30, 2021, and increased 27% in U.S. dollars and 23% in local currency for the nine months ended September 30, 2021, respectively, compared to the corresponding periods in 2020. Net sales to external customers increased 8% in both U.S. dollars and in local currency for the three months ended September 30, 2021 and increased 22% in U.S. dollars and 19% in local currency for the nine months ended September 30, 2021, compared to the corresponding periods in 2020. The increase in local currency net sales to external customers for the three months ended September 30, 2021 includes strong growth in product inspection and laboratory products. Net sales during the nine months ended September 30, 2021 included strong results in most product categories.

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Segment profit increased $16.6 million and $48.8 million the three and nine months ended September 30, 2021, compared to the corresponding periods in 2020. Segment profit during the three and nine months ended September 30, 2021 includes higher sales volume, benefits of our productivity initiatives and favorable foreign currency translation, offset in part by higher transportation and material costs and temporary cost savings in the prior year.

Western European Operations (amounts in thousands)


	Three months ended September 30,					Nine months ended September 30,
	2021		2020		%1)	2021		2020		%1)
Total net sales	$	250,891	$	219,760	14%	$	753,090	$	603,549	25%
Net sales to external customers	$	198,632	$	177,630	12%	$	592,704	$	480,006	23%
Segment profit	$	40,288	$	36,954	9%	$	116,630	$	91,406	28%

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

Total net sales increased 14% in U.S. dollars and 12% in local currencies for the three months ended September 30, 2021 and increased 25% in U.S. dollars and 16% in local currencies for the nine months ended September 30, 2021, compared to the corresponding periods in 2020. Net sales to external customers increased 12% in U.S. dollars and 10% in local currencies for the three months ended September 30, 2021, and increased 23% in U.S. dollars and 15% in local currencies for the nine months ended September 30, 2021, compared to the corresponding periods in 2020. Net sales to external customers for the three and nine months ended September 30, 2021 includes very strong growth in most product categories. Net sales to external customers for the three months ended September 30, 2021 is partially offset with a decline in food retailing.

Segment profit increased $3.3 million and $25.2 million for the three and nine month periods ended September 30, 2021, respectively, compared to the corresponding periods in 2020. Segment profit increased during the three and nine months ended September 30, 2021 primarily due to higher sales volume and benefits of our margin expansion initiatives, offset in part by higher transportation and material costs and temporary cost savings in the prior year. Segment profit for the nine months ended September 30, 2021 also includes favorable currency translation.

Chinese Operations (amounts in thousands)


	Three months ended September 30,					Nine months ended September 30,
	2021		2020		%1)	2021		2020		%1)
Total net sales	$	289,461	$	219,545	32%	$	792,663	$	555,532	43%
Net sales to external customers	$	210,460	$	165,231	27%	$	572,055	$	406,738	41%
Segment profit	$	108,636	$	81,055	34%	$	275,323	$	190,560	44%

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

Total net sales increased 32% in U.S. dollars and 23% in local currency for the three months ended September 30, 2021 and increased 43% in U.S. dollars and 32% in local currency for the nine months ended September 30, 2021, compared to the corresponding periods in 2020. Net sales to external customers increased 27% in U.S. dollars and 19% in local currency by origin for the three months ended September 30, 2021 and increased 41% in U.S. dollars and 31% in local currency during the nine months ended September 30, 2021, compared to the corresponding periods in 2020. Net sales to external customers during the three months ended September 30, 2021 includes especially strong growth in laboratory products and good growth in our industrial business, offset in part by a decline in food retailing. The increase in local currency net sales to external customers during the nine months ended September 30, 2021 reflects particularly strong growth in both laboratory and industrial products. However, market conditions may change quickly and we will face difficult prior period comparisons during the remainder of 2021.

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Segment profit increased $27.6 million and $84.8 million for the three and nine month periods ended September 30, 2021, respectively, compared to the corresponding periods in 2020. The increase in segment profit for the three and nine months ended September 30, 2021 primarily reflects increased sales volume and favorable foreign currency translation, offset in part by higher transportation and material costs and temporary cost savings in the prior year.

Other (amounts in thousands)


	Three months ended September 30,					Nine months ended September 30,
	2021		2020		%1)	2021		2020		%1)
Total net sales	$	165,135	$	148,209	11%	$	465,195	$	394,340	18%
Net sales to external customers	$	164,300	$	146,700	12%	$	461,988	$	391,059	18%
Segment profit	$	24,381	$	23,554	4%	$	65,967	$	47,702	38%

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

Net sales to external customers increased 12% in U.S. dollars and 11% in local currencies for the three months ended September 30, 2021 and increased 18% in U.S. dollars and 14% in local currencies for the nine months ended September 30, 2021, compared to the corresponding periods in 2020. The increase in net sales to external customers includes strong growth in most product categories.

Segment profit increased $0.8 million and $18.3 million for the three and nine months ended September 30, 2021, respectively, compared to the corresponding periods in 2020. The increase in segment profit for the nine months ended September 30, 2021 is primarily related to increased sales volume and favorable foreign currency translation.

Liquidity and Capital Resources

Liquidity is our ability to generate sufficient cash to meet our obligations and commitments. Sources of liquidity includes, 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.

Cash provided by operating activities totaled $667.7 million during the nine months ended September 30, 2021, compared to $473.8 million in the corresponding period in 2020. The increase for the nine months ended September 30, 2021 is primarily due to higher net earnings.

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 $69.8 million for the nine months ended September 30, 2021 compared to $57.4 million in the corresponding period in 2020.

In September 2021, the Company entered into an agreement with the US Department of Defense to increase domestic production capacity of pipette tips and enhance manufacturing automation and logistics. The Company will receive grant funding of $35.8 million over the next two years, which will offset future capital expenditures.

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Senior Notes and Credit Facility Agreement

Our debt consisted of the following at September 30, 2021:


	U.S. Dollar		Other Principal Trading Currencies		Total
3.67% $50 million ten-year Senior Notes due December 17, 2022	$	50,000	$	—	$	50,000
4.10% $50 million ten-year Senior Notes due September 19, 2023	50,000		—		50,000
3.84% $125 million ten-year Senior Notes due September 19, 2024	125,000		—		125,000
4.24% $125 million ten-year Senior Notes due June 25, 2025	125,000		—		125,000
3.91% $75 million ten-year Senior Notes due June 25, 2029	75,000		—		75,000
3.19% $50 million fifteen-year Senior Notes due January 24, 2035	50,000		—		50,000
2.83% $125 million twelve-year Senior Notes due July 22, 2033	125,000		—		125,000
1.47% Euro 125 million fifteen-year Senior Notes due June 17, 2030	—		146,056		146,056
1.30% Euro 135 million fifteen-year Senior Notes due November 6, 2034	—		157,740		157,740
1.06% Euro 125 million fifteen-year Senior Notes due March 19, 2036	—		146,056		146,056
Debt issuance costs, net	(1,519)		(1,600)		(3,119)
Total Senior Notes	598,481		448,252		1,046,733
$1.25 billion Credit Agreement, interest at LIBOR plus 87.5 basis points	412,473		177,092		589,565
Other local arrangements	3,494		53,315		56,809
Total debt	1,014,448		678,659		1,693,107
Less: current portion	(351)		(53,173)		(53,524)
Total long-term debt	$	1,014,097	$	625,486	$	1,639,583

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"), that is further described in Note 8 of our consolidated financial statements.

In May 2021, we entered into an agreement to issue and sell $125 million twelve-year Senior Notes with a fixed interest rate of 2.83%. The Senior Notes were issued in July 2021 and will mature July 2033. The terms of the Senior Notes are consistent with the previous Senior Notes as described above. We used the proceeds from the sale of the notes to refinance existing indebtedness and for other general corporate purposes.

As of September 30, 2021, approximately $654.2 million of additional borrowings was available under our Credit Agreement, and we maintained $183.7 million of cash and cash equivalents. During the nine months ended September 30, 2021, the Company increased its long-term debt primarily due to the funding of the PendoTECH acquisition as described in Note 4. Changes in exchange rates between the currencies in which we generate cash flows and the currencies in which our borrowings are denominated affect our liquidity. In addition, because we borrow in a variety of currencies, our debt balances fluctuate due to changes in exchange rates. Further, we do not have any downgrade triggers related to ratings from rating agencies that would accelerate the maturity dates of our debt.

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

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Annual Report on Form 10-K for the year ended December 31, 2020. The Company also entered into a forward contract to receive $152.1 million at the time of issuing the 1.06% Euro Senior Notes in March 2021. The Company issued the 1.06% Euro Senior Notes with a fixed interest rate of 1.06% in March 2021. The 1.06% Euro Senior Notes are unsecured obligations of the Company and will mature on March 19, 2036. Interest on the 1.06% Euro Senior Notes is payable semi-annually in March and September of each year.

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 Swiss franc LIBOR plus 87.5 basis points. The loans were renewed for one year in April 2021.

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 bio-pharmaceutical manufacturers and life science laboratories and is located in the United States. The initial cash payment was $185.0 million and we may be required to pay additional consideration of up to $20.0 million and other post-closing amounts. In October 2021, the Company acquired Scale-up Systems Inc., a leading software provider for scale-up and reaction modelling serving the biopharma and chemical markets. The initial cash payment was $22.2 million and the Company may be required to pay additional amounts up to EUR 3.0 million. For additional information related to these acquisitions, refer to Note 4 to the interim consolidated financial statements.

Share Repurchase Program

In November 2020, the Company's Board of Directors authorized an additional $2.5 billion to be added to our share repurchase program, which has $2.3 billion of remaining availability as of September 30, 2021. The share repurchases are expected to be funded from cash generated from operating activities, borrowings, and existing cash balances. Repurchases will be made through open market transactions, and the amount and timing of purchases will depend on business and market conditions, stock price, trading restrictions, the level of acquisition activity, and other factors.

We have purchased 30.0 million shares since the inception of the program through September 30, 2021. During the nine months ended September 30, 2021 and 2020, we spent $727.5 million and $400.0 million on the repurchase of 557,310 and 475,530 shares at an average price per share of $1,305.35 and $841.14, respectively. We also reissued 71,124 shares and 144,776 shares held in treasury upon the exercise of stock options and vesting of restricted stock units during the nine months ended September 30, 2021 and 2020, respectively.

Effect of Currency on Results of Operations

Our earnings are affected by changes in exchange rates. We are most sensitive to changes in the exchange rates between the Swiss franc, euro, Chinese renminbi, and U.S. dollar. We have more Swiss franc expenses than we do Swiss franc sales because we develop and manufacture products in Switzerland that we sell globally, and have a number of corporate functions located in Switzerland. When the Swiss franc strengthens against our other trading currencies, particularly the U.S. dollar and euro, our earnings decrease. We also have significantly more sales in the euro than we do expenses. When the euro weakens against the U.S. dollar and Swiss franc, our earnings also decrease. We estimate a 1% strengthening of the Swiss franc against the euro would reduce our earnings before tax by approximately $1.8 million to $2.0 million annually.

We also conduct business in many geographies throughout the world, including Asia Pacific, the United Kingdom, Eastern Europe, Latin America, and Canada. Fluctuations in these currency exchange rates against the U.S. dollar can also affect our operating results. The most significant of these currency exposures is the Chinese renminbi. The impact on our earnings before

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tax of the Chinese renminbi weakening 1% against the U.S. dollar is a reduction of approximately $2.6 million to $2.8 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 and the Swiss franc. Based on our outstanding debt at September 30, 2021, we estimate that a 5% weakening of the U.S. dollar against the currencies in which our debt is denominated would result in an increase of approximately $35.8 million in the reported U.S. dollar value of our debt.

Forward-Looking Statements Disclaimer

You should not rely on forward-looking statements to predict our actual results. Our actual results or performance may be materially different than reflected in forward-looking statements because of various risks and uncertainties, including statements about expected revenue growth and long-term impacts of the COVID-19 pandemic. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential” or “continue.”

We make forward-looking statements about future events or our future financial performance, including earnings and sales growth, earnings per share, strategic plans and contingency plans, growth opportunities or economic downturns, our ability to respond to changes in market conditions, customer demand, our competitive position, pricing, our supply chain, adequacy of our facilities, access to and the costs of raw materials, shipping and supplier costs, gross margins, planned research and development efforts and product introductions, capital expenditures, cash flow, tax-related matters, the impact of foreign currencies, compliance with laws, effects of acquisitions, and the impact of the COVID-19 pandemic on our businesses.

Our forward-looking statements may not be accurate or complete, and we do not intend to update or revise them in light of actual results. New risks also periodically arise. Please consider the risks and factors that could cause our results to differ materially from what is described in our forward-looking statements, including the uncertain duration and severity of the COVID-19 pandemic. See in particular “Factors Affecting Our Future Operating Results” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020 and other reports filed with the SEC from time to time.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

As of September 30, 2021, there was no material change in the information provided under Item 7A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Item 4.Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer, have concluded that these disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings. None

Item 1A.Risk Factors.

For the three and nine months ended September 30, 2021 there were no material changes from risk factors disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

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

Issuer Purchases of Equity Securities


	(a)	(b)		(c)	(d)
	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


July 1 to July 31, 2021	46,649	$	1,438.80	46,649	$	2,516,308
August 1 to August 31, 2021	64,519	$	1,525.25	64,519	$	2,417,900
September 1 to September 30, 2021	55,604	$	1,564.10	55,604	$	2,330,928
Total	166,772	$	1,514.02	166,772	$	2,330,928

In November 2020, the Company's Board of Directors authorized an additional $2.5 billion to the share repurchase program, which has $2.3 billion of remaining availability as of September 30, 2021. We have purchased 30.0 million shares since the inception of the program through September 30, 2021.

During the nine months ended September 30, 2021 and 2020, we spent $727.5 million and $400.0 million on the repurchase of 557,310 and 475,530 shares at an average price per share of $1,305.35 and $841.14, respectively. We also reissued 71,124 shares and 144,776 shares held in treasury upon the exercise of stock options and vesting of restricted stock units during the nine months ended September 30, 2021 and 2020, respectively.

Item 3.Defaults Upon Senior Securities. None

Item 5. Other information. None

Item 6. Exhibits. See Exhibit Index below.

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EXHIBIT INDEX


Exhibit No.		Description

	31.1*	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes — Oxley Act of 2002

	31.2*	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes — Oxley Act of 2002

	32*	Certification Pursuant to Section 906 of the Sarbanes — Oxley Act of 2002

	101.INS*	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

	101.SCH*	XBRL Taxonomy Extension Schema Document

	101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document

	101.LAB*	XBRL Taxonomy Extension Label Linkbase Document

	101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

	101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

_______________________

* Filed herewith

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Mettler-Toledo International Inc.

Date:

November 5, 2021

By:

/s/ Shawn P. Vadala

Shawn P. Vadala

Chief Financial Officer

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