01—Abstract
Summary
Summary of the 10-K filed February 8, 2019. Cited figures are marked; the original filing is the authoritative source.
Mettler-Toledo International Inc. reported net sales of $2.94 billiona for 2018, up from $2.73 billion in 2017 and $2.51 billion in 2016, and diluted earnings per share of $19.88 versus $14.24 in 2017.
Net earnings rose to $512.6 millionb from $376.0 million, though 2018 benefited from a one-time $18.7 million gain on the Biotix contingent consideration settlement and 2017 included a $72 million charge related to the Tax Cuts and Jobs Act. Net sales increased 8% in U.S. dollars and 6% in local currencies, with Chinese Operations growing 12% in U.S. dollars and Asia/Rest of World sales up 12%. The company operates across laboratory instruments (51% of 2018 net sales), industrial instruments (41%), and retail weighing solutions (8%), with service accounting for about 22% of net sales.
Gross margin was 57.4% in 2018 versus 57.8% in 2017, reflecting initial costs for a new manufacturing facility, tariff costs, and business mix, partly offset by price realization. The company estimates the annualized cost of 2018 U.S. tariffs on Chinese imports at approximately $25 millionc. Cash from operations was $565.0 million in 2018, and the company repurchased $475 million of its own shares.
At year end, total debt was $1.03 billiond against cash of $178.1 million, and the company had $2.1 billion of remaining share repurchase authorization after the board added $2.0 billion in November 2018. Mettler-Toledo has historically not paid dividends on its common stock.
02—Key points
Key Highlights
- Net sales of $2,935.6 million in 2018, up 8% in U.S. dollars and 6% in local currencies from $2,725.1 million in 2017.
- Diluted EPS of $19.88 in 2018 versus $14.24 in 2017; net earnings of $512.6 million versus $376.0 million.
- Chinese Operations net sales rose 12% in U.S. dollars to $767.6 million, with segment profit up 17% to $270.7 million.
- Gross profit margin was 57.4% in 2018 compared with 57.8% in 2017, pressured by new facility costs, tariffs, and business mix.
- Operating cash flow of $565.0 million and share repurchases of $475 million in 2018.
- Total debt of $1,034.7 million at year end, with $600.7 million available under the $1.1 billion Credit Agreement.
- Estimated annualized cost of U.S. tariffs on Chinese-sourced products of approximately $25 million, and $62 million of Transition Tax payable over up to eight years.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 8, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $2.94B$2.73B | +7.7% |
| Gross Profit | $1.68B$1.58B | +6.9% |
| R&D Expenses | $141.07M$128.31M | +9.9% |
| SG&A Expenses | $812.80M$794.86M | +2.3% |
| Interest Expense | $34.51M$32.78M | +5.3% |
| Net Income | $512.61M$375.97M | +36.3% |
| EPS (Basic) | $20.33$14.62 | +39.1% |
| EPS (Diluted) | $19.88$14.24 | +39.6% |
| Shares Outstanding (Basic) | 25.22M25.71M | −1.9% |
| Shares Outstanding (Diluted) | 25.78M26.39M | −2.3% |
05—Questions
Frequently Asked Questions
What drove the increase in earnings per share in 2018?
Net earnings rose to $512.6 million from $376.0 million, and diluted EPS rose to $19.88 from $14.24. Results were helped by higher net sales, a lower reported tax rate of 21.4% versus 34.5% in 2017 (which included a $72 million Tax Cuts and Jobs Act charge in 2017), and a one-time $18.7 million gain from the Biotix contingent consideration settlement.
How concentrated is the business in China, and what risks does that create?
Chinese operations accounted for 18% of sales to external customers, approximately 30% of global production, and 37% of total segment profit in 2018. The company holds $145 million of cash in its Chinese subsidiaries and notes that repatriating funds requires government approval. It also cites exposure to tariffs, trade disputes, and economic volatility in China.
How much debt does the company carry and how is it structured?
Total debt was $1,034.7 million at December 31, 2018, including $491.8 million of senior notes and $493.2 million drawn under the $1.1 billion Credit Agreement, which matures June 15, 2023. Long-term debt was $985.0 million. Cash and cash equivalents were $178.1 million, and the company stated it was in compliance with its debt covenants.
Does the company pay dividends, and how is it returning capital to shareholders?
The company has not historically paid dividends on its common stock and will evaluate that policy periodically. Instead, it returns capital through share repurchases: it spent $475 million to buy 802,809 shares in 2018 and had $2.1 billion of remaining authorization at December 31, 2018, after the board added $2.0 billion in November 2018.
06—Continue