01—Abstract
Summary
Summary of the 10-K filed February 9, 2018. Cited figures are marked; the original filing is the authoritative source.
Mettler-Toledo International Inc. (MTD) reported net sales of $2.73 billiona for 2017, up from $2.51 billion in 2016, with net sales increasing 9% in U.S. dollars and 8% in local currencies.
Gross profit rose to $1.57 billionb (57.7% of net sales, versus 57.2% in 2016), and net earnings were $375,972 thousand, or $14.24 diluted earnings per share, compared with $384.4 million in 2016. The filing attributes growth to favorable global market conditions, strong execution of sales and marketing programs, and a strong performance in China, where local currency sales grew 19% in 2017 for the Chinese subsidiaries' external customers. Management cautions that 2018 will face difficult prior-period comparisons.
Net earnings were held nearly flat by a provisional one-time charge of $72 millionc under the Tax Cuts and Jobs Act, of which $59 million is a cash charge payable over up to eight years. Excluding this charge, the annual effective tax rate was 22% in 2017, versus 24% in 2016 and 2015. Operating cash flow was $516.3 million, and capital expenditures were $127.4 million.
The company repurchased $400 milliond of common stock in 2017 and had $583.4 million remaining under its repurchase program at year-end. Leverage rose during the year: total debt was $979.8 million at December 31, 2017, against cash of $148.7 million, and long-term debt increased to $960.2 million from $875.1 million.
Shareholders' equity was $547.3 million, up from $434.9 million. The company made the Biotix acquisition in 2017 for an initial cash payment of $105 million, with up to $65 million of additional contingent consideration.
02—Key points
Key Highlights
- Net sales of $2,725,053 thousand in 2017, up from $2,508,257 thousand in 2016; 9% growth in U.S. dollars and 8% in local currencies.
- Diluted earnings per share of $14.24 in 2017, compared with $14.22 in 2016, with net earnings of $375,972 thousand versus $384,370 thousand.
- A provisional one-time $72 million charge under the Tax Cuts and Jobs Act reduced 2017 net earnings; the effective tax rate excluding this charge was 22%.
- Chinese Operations net sales to external customers rose 17% in U.S. dollars, and Chinese Operations accounted for 35% of total segment profit in 2017.
- Gross profit as a percentage of net sales increased to 57.7% in 2017 from 57.2% in 2016.
- Total debt rose to $979.8 million at year-end 2017, with $461.9 million borrowed under the $800 million Credit Agreement, and shareholders' equity increased to $547.3 million.
- Repurchased $400 million of common stock in 2017, with $583.4 million remaining under the authorization at December 31, 2017.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 9, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $2.73B$2.51B | +8.6% |
| Cost of Revenue | $833.79M$767.75M | +8.6% |
| Gross Profit | $1.58B$1.44B | +9.6% |
| R&D Expenses | $128.31M$119.20M | +7.6% |
| SG&A Expenses | $794.86M$745.36M | +6.6% |
| Interest Expense | $32.78M$28.03M | +17.0% |
| Net Income | $375.97M$384.37M | −2.2% |
| EPS (Basic) | $14.62$14.49 | +0.9% |
| EPS (Diluted) | $14.24$14.22 | +0.1% |
| Shares Outstanding (Basic) | 25.71M26.52M | −3.0% |
| Shares Outstanding (Diluted) | 26.39M27.02M | −2.3% |
05—Questions
Frequently Asked Questions
How did Mettler-Toledo perform in 2017?
Net sales reached $2.73 billion, up 9% in U.S. dollars and 8% in local currencies, driven by favorable global market conditions and growth in laboratory-related and product inspection products. Net earnings were $375,972 thousand, slightly below 2016, mainly because of the $72 million one-time tax charge.
What was the impact of the Tax Cuts and Jobs Act on 2017 results?
The company recorded a provisional one-time charge of $72 million, including a $59 million cash charge for un-repatriated foreign earnings payable over up to eight years and a $13 million non-cash charge. The company expects to finalize the accounting during 2018 under SAB 118.
How significant is China to the business?
China accounted for 17% of sales to external customers, approximately 30% of global production, and 35% of total segment profit in 2017. The filing also notes that Chinese operations are exposed to volatility in emerging-market growth and China's credit availability.
What are the main risks flagged in the filing?
Key risks include international and China concentration, currency exposure (especially the Swiss franc, euro, and renminbi), a dependence on developed-market customers, competition from lower-cost emerging-market rivals, and rising debt levels with covenant restrictions under the senior notes and credit facility.
How is the company returning capital to shareholders?
The company has not paid common dividends historically but repurchased $400 million of stock in 2017 and $500 million in 2016. The remaining authorization was $583.4 million at December 31, 2017, and the filing says it will evaluate its dividend policy periodically.
06—Continue