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Text: Catherine, and good evening everyone.
I'm responsible for Investor Relations at Mettler Toledo and happy that you're joining us tonight.
I'm joined on the call today with Olivier Filliol, our CEO and Shawn Vadala, our Chief Financial Officer.
Let me cover just a couple of administrative matters.
For a discussion of these risks and uncertainties, please see our most recent Form 10-K and other reports filed with the SEC from time to time.
More detailed information with the respect to the use of and differences between the non-GAAP financial measure and the most directly comparable GAAP measure is provided in our Form 8-K.
I'm calling in from Switzerland tonight, while Shawn and Mary are in Columbus, Ohio.
Patrick Kaltenbach is also joining the call with me from Switzerland and we are excited to have him on board.
Patrick, I will turn it to you as I know you want to make a few comment.
I spent my time so far, working with Olivier, meeting senior leaders virtually throughout the world, and studying thorough strategy documents, comprehensive materials on Spinnaker approaches and detailed R&D and SternDrive priorities.
I'm truly impressed with the depth and sophistication of the strategy, initiatives and programs that are in place.
A fantastic foundation has been built and I'm committed to the organic growth strategy and look forward to leading a team to further enhance our performance and continue the successful journey.
Call today and I look forward to the actions on the next call and in the future.
Before I hand it back.
Under your leadership, you have developed Mettler Toledo into a tool with a tremendous track record and future potential.
I'm very pleased to note that you will continue to be part of the company.
For this very kind words.
From my side, we are off to a great start and I look forward to our continued teamwork.
I will start with a summary of the quarter and then, Shawn will provide details on our financials.
I will then have some additional comments and we will open the lines for Q&A.
We ended the year with a very strong fourth quarter, which came in better than we expected.
Local currency sales increased 7% in the quarter, our growth was relatively broad-based throughout the world.
Our Laboratory business and our Chinese business did particularly well in the quarter.
We benefited from strong execution and we're well-positioned to capture growth as customer demand improved.
However, we continued to be negatively impacted by COVID-19 in certain areas.
From the onset of the global pandemic, our focus has been to identify and pursue pockets of growth within our end markets and to be well-positioned to capture growth as demand improves, which is what we saw in Q4.
Our innovative go-to-market approach really played very well into this environment and allowed us to capture this growth.
Good cost control and the continued benefit of our margin and productivity initiatives contributed to strong growth in adjusted operating profit and very strong growth in adjusted earnings per share in the quarter.
Finally, cash flow not one in the quarter, but also for the full year was excellent.
2020 was an extraordinary year with some of the most challenging market conditions we have faced in more than a decade.
Our organizational agility helped us to quickly adapt approaches and processes to the new environment.
Our broad end-market diversification and the use of sophisticated data analytics allowed us to shift our sales and marketing focus to the most promising end markets early on.
It also helps to ensure we were well-positioned to capture growth as demand improved during the latter part of the year.
We adopted our supply chain and service organization to maintain superior performance that strengthened our franchise and introduced many new digital sales and support tools to provides top quality customer interactions despite the remote settings of our customers and sales teams.
Throughout 2020, we increased our customer engagement and customer satisfaction, which translated into accelerated market share gains in many product categories.
With the strong ends to 2020, we have very good momentum as we start 2021, and believe we are well-positioned to continue to gain share and deliver good results.
We will have some additional comments on 2021 but first, let me turn to Shawn to cover the financial results.
Sales were $938 million in the quarter, an increase of 7% in local currency.
On the U.S. dollar basis, sales increased 11% as currency benefited sales by 4% in the quarter.
On Slide number 4, we show sales growth by region.
Local currency sales increased 8% in the Americas, 7% in Europe, and 8% in Asia, rest of the world.
Local currency sales increased 12% in China in the quarter.
The next slide shows sales growth by region for the full year 2020.
Local currency sales increased 2% in the Americas, 1% in Europe and 3% in Asia/rest of the world.
China local currency sales grew 7% in 2020.
On Slide number 6, we outlined local currency sales growth by product area.
For the fourth quarter laboratory sales increased 12%, industrial increased 1%, with core industrial up 5%, and product Inspection down 5%.
Food Retail increased 7% in the quarter.
We estimate that we benefited 1% to 2% from COVID tailwinds in the quarter related to our pipette business for covered testing.
The next slide shows sales growth by product area for the full year.
Laboratory sales increased 5%, industrial declined 1% with core industrial up 2%, and Product Inspection down 7%.
Food Retail declined 4% in 2020.
Let me now move to the rest of the P&L for the fourth quarter, which is summarized on the next slide.
Gross margin in the quarter was 59.6%, a 60 basis point increase over the prior-year level of 59%.
Our margin initiatives centered on pricing in SternDrive, as well as temporary cost savings contributed to the margin growth, offset in part by higher transportation costs and unfavorable business mix.
R&D amounted to $39.9 million, which represents a 6% increase in local currency.
SG&A, amounted to $226.4 million, a 5% increase in local currency over the previous year.
Increased variable compensation was offset in part by our temporary cost savings and ongoing cost containment initiatives.
Adjusted operating profit amounted to $292.8 million in the quarter, which is a 14% increase over the prior year amount of $256.3 million.
Operating margins increased 80 basis points in the quarter to 31.2%.
We are very pleased with this margin growth.
Currency benefited operating profit growth by approximately 2%, but actually hurt operating margin expansion by about 50 basis points.
A couple of final comments on the P&L.
Amortization amounted to $14.7 million in the quarter.
Interest expense was $9.5 million in the quarter and other income amounted to $3.7 million.
We reduced our effective tax rate for the full year from 20.5% to 19.5%.
This is the rate before discrete items and adjusting for the timing of the stock option exercises in the quarter.
We are very pleased with this reduction and expect to maintain this rate in 2021.
Moving to fully diluted shares, which amounted to $24 million in the quarter and is a 3% decline from the prior year.
Adjusted earnings per share for the quarter was $9.26, a 19% increase over the prior year amount of $7.78.
Currency benefited adjusted earnings per share by approximately 2% in the quarter.
On a reported basis in the quarter, earnings per share was $9.03 as compared to $7.84 in the prior year.
Reported earnings per share in the quarter includes $0.12 of purchased intangible amortization and $0.11 of restructuring.
We also had 2 offsetting items for income taxes.
We had a $0.20 increase due to the difference between our quarterly and annual tax rate due to the timing of stock option exercises.
This was offset by a $0.20 benefit from adjusting our tax rate to 19.5% for the first three quarters.
The next slide shows our full year results.
Local currency sales increased 2% in 2020 while adjusted operating income increased 8% and adjusted operating margins were up 130 basis points.
Adjusted earnings per share amounted to $25.72, an increase of 13% over the prior year amount of $22.77.
Currency was neutral to the full year adjusted EPS.
Given the unprecedented challenges we faced in 2020, we are very pleased with our performance and believes it reflects the agility and the strong culture of our organization, the effectiveness of our growth in margin expansion initiatives, in resiliency of our end markets.
That is it for the P&L.
Now let me cover the cash flow.
In the quarter, adjusted free cash flow amounted to $218 million, which is an increase of 20% on a per share basis, as compared to the prior year.
We are very happy with our cash flow generation.
DSO declined approximately 3.5 days in the quarter to 36.5 days as compared to the prior year.
We are seeing concrete results from the use of analytics and productivity improvements in receivable collections and cash flow management during this period.
ITO came in at 4.3 times.
For the full year 2020, adjusted free cash flow was $648 million as compared to the prior year amount of $531 million.
On a per share basis, this is a 26% increase in earnings flow-through of more than 100%.
We are very pleased with this performance, which demonstrates the strength of our franchise as well as our focus on continuous process improvements to drive cash flow generation.
Let me now turn to guidance.
Forecasting continues to be challenging given the uncertainty surrounding Covid-19 and the ultimate impact for the global economy.
Market dynamics are fluid and changes in customer demand can happen quickly.
With our strong fourth quarter performance, we continue to feel confident about those factors within our control, namely executing on our sales and marketing initiatives, and continuing to launch new products with clear value-added benefits to our customers.
We believe we have been successful in identifying and capitalizing on pockets of growth and are well positioned to continue to gain share.
We also continue to feel positive in our ability to generate margin improvement by our pricing and SternDrive initiatives.
Now let me cover the specifics.
For the full year 2021, we now expect local currency sales growth will be in the range of 5% to 7% as compared to 2020.
We expect full year adjusted earnings per share will be in the range of $29.20 to $29.80, which is a growth rate of 14% to 16%.
This compares to previous adjusted earnings per share guidance in the range of $27.50 to $28.30.
With respect to the first quarter, we would expect local currency sales growth to be in the range of 11% to 13% and expected adjusted earnings per share to be in the range of $5.55 to $5.70, a growth rate of 39% to 43%.
Some further comments on 2021 guidance.
Let me start with the pacing of the year.
We expect the first half of the year will be much stronger than the second half.
We are starting the year with excellent momentum coming off a strong Q4.
The first half of the year will also benefit from easier comparisons and the continued tail -- Covid tailwind in our pipette business.
As we look to the second half, we will face more difficult comparisons, particularly with respect to our business in China.
Our Covid tailwinds will also turn to a headwind as we lack comparisons.
We also feel more uncertainty exists for the second half of the year, especially with respect to Covid's potential impact to the global economy.
We recognize that we're currently benefiting from strong momentum, which will not necessarily continue.
We will provide additional quarterly guidance on our next call, but I thought it would be helpful to provide this context now.
Some additional comments on guidance.
We expect interest expense to be approximately $40 million in 2021 and total amortization to be approximately $55 million.
Other income, which is below operating profit, will be approximately $9 million in 2021.
As I mentioned earlier, we would expect our effective tax rate in 2021 to also remain at 19.5%.
In terms of free cash flow for the year, we expect it to be approximately $690 million.
We will continue to repurchase shares and expect to end 2021 in a targeted range of approximately 1.5 times leverage ratio.
With respect to the impact of currency on sales growth, we expect currency to increase sales growth by approximately 3.5% in 2021 and 5% in the first quarter.
In terms of adjusted EPS, currency will benefit growth by approximately 3% in 2021.
Let me start with some comments on our operating results.
Our Lab business have exceptional growth in the quarter.
Pipettes have excellent growth and benefited from COVID-related testing demand.
Process Analytics had another quarter of strong growth, while demand for analytical instruments and balances recovered nicely in the quarter.
Sales growth in all regions was very strong.
We expect Lab to continue to be very strong in the first half of 2021 due to favorable biopharma trends, vaccine research, and testing a bioproduction scale-up and production.
Lab will face tougher comparisons in the second half of the year.
With our excellent Lab product portfolio including our power demand solutions, focus on automation, digital interfaces and data management and prove -- proven Spinnaker sales and marketing strategies, we believe we are well positioned to continue to capture share.
In terms of Industrial business, Core Industrial did well in the quarter with a 5% increase driven by double-digit growth in China.
We will return to growth in Core Industrial in Europe, while Americas was flat, although they have very good growth in the prior year.
We are particularly pleased at how resilient our Core Industrial has proven throughout 2020 given the challenges of the pandemic.
We believe this reflects the strength and diversity of our product portfolio, our success in identifying on pursuing pockets of growth, and strong focus on execution.
Product Inspection came in weaker than we had anticipated with a 5% decline in the quarter.
Both Europe and Asia declined while Americas was flat with the prior year.
While our outlook has improved for this business and we expect to start 2021 with solid growth, we are cautious as large package food companies continue to face operational challenges at their manufacturing sites related to COVID.
We believe pent-up demand exists for our instruments but ultimate timing is still hard to determine.
Food retailing came in better than we expected with 7% growth overall and growth in all regions.
Now let me make some additional comments by geography.
Sales in Europe increased 7% in the quarter with excellent growth in Lab and good growth in core industrial and food retail.
We expect solid growth in Europe in 2021.
Americas increased 8% in the quarter with excellent growth in Lab offset by flat results in both product inspection and core industrial.
We expect good growth in Americas in 2021.
Finally, Asia/Rest of the World grew 8% in the quarter with both Lab and Core Industrial doing very well.
As mentioned, China have 12% growth in the quarter with excellent growth across product lines.
We expect market conditions in China to be very favorable as we start 2021 while they face much tougher comparisons in the second half of the year.
One final comment on the business, Service and Consumables were up 13% in the quarter and 8% for the full year.
That concludes my comments on the business.
As I reflect on 2020.
I'm very pleased with our performance given the exceptional challenges we faced.
This performance would not have been possible without the strong foundation and well-ingrained corporate programs that we have in place, which allowed us to quickly pivot and adapt to the new environment.
We have always considered agility and focus on execution a key pillar of Mettler-Toledo and I think you saw evidence of both of these in our results.
Probably most important, however, our success in 2020 sets the stage for us to continue to capture growth in 2021 and beyond.
Our strategy over many years has been remarkably consistent.
As a leader in fragmented market, we have established strategies that allow us to gain a little market share each year while continuously expanding our margin.
The initiatives within these strategies will involve and develop but strategies remain the same.
As we look to 2021, let me comment on how we are going about this.
I would start with our Spinnaker sales and marketing initiatives.
As we discussed on our last call, we made some leapfrog advances in digital transformation during 2020 that positioned us very well for the future.
We will continue to refine our sophisticated Analytics to guide our sales force to the best opportunities.
We will continue to support our market organization with tools and methodologies to increase sales force time with the most strategic account while leveraging our value-selling and cross-selling tools to further penetrate opportunities.
We will also continue to leverage digitalization to develop new approaches that drives sales force efficiency and refine techniques to improve the effectiveness of telesales team, but also look forward to returning to visit accounts to generate new opportunities.
Finally, we look to execute more telemarketing campaigns, enhance tools to increase order conversions.
Service will continue to be essential element of our customer value proposition.
Our almost 3,000 service technicians are an important competitive advantage for us.
This year, we will focus on further I base penetration and utilizing many of the same sales force guidance telesales of digital tools that we use for product sales to further drive service sales.
Our team in China did an exceptional job in 2020, not only continuing to serve customers and penetrate growth opportunities, but also in terms of manufacturing and supply chain.
The team's priorities to continue to optimize the organization to focus on high potential growth areas and attractive segment and further leverage digital technology to engage customers and generate leads.
Introducing products for the local market such as an entry-level x-ray instrument for our product inspection portfolio is also an important element to growth in China and throughout emerging markets.
We remain very optimistic about the growth potential, not one in China, but throughout emerging markets over the medium term.
Constantly coming to market with new product launches is another important strategy.
Given the diversification of our product portfolio, a new product launch will never be material by itself, but together, these launches reinforces our market leadership, help trigger replacement in existing customers, help open doors to new customers, and help support our price differentiation.
Later this month, we will launch a new automatic laboratory balance that will set a new standard for weighing of powders and liquids in research labs, testing labs and quality-control labs.
Addressing the needs in the Laboratory for automation, smaller sample sizes, flexibility, ease of use, and seamless documentation, this new balances offers an unmatched value proposition.
It is a simple fully integrated solution that will support our customers in their everyday operation.
It is just one example of the many product launches we will have this year, but illustrates how we are continually focused on bringing products to market that demonstrate clear value to our customers.
Similar to the continued evolution of growth strategies, we also continue to develop our pricing and productivity initiatives.
We have good results -- good developments within pricing, utilizing Analytics, and so machine learning to most effectively price our offering.
On the supply chain side, the team was able to continue to make progress on their SternDrive productivity goals in 2020, but we will be able to make further progress in 2021 when the team won't have as many challenges as they faced last year.
Finally, I think you will continue to see us market strategic acquisition that leverage our technology leadership and global distribution.
However, these acquisitions will be small and strategic, not transformational.
I believe our franchise is stronger than ever as demonstrated in how we performed in 2020 despite all the challenges.
As I look back over the last decade plus years, we have made much progress in many areas.
Our continuous improvement programs of Spinnaker, sales and marketing, and SternDrive productivity, which I just discussed, are well ingrained throughout our organization and we'll continue to evolve and be important ingredients for the future.
Emerging markets, an important growth driver are 35% of sales today compared with 25% in 2007.
Similarly, our faster growing Laboratory business is now 54% of sales, up from 44%.
Finally, Service and Consumable is now 33% of sales as compared to 28%.
Redirecting resources and investments to faster growing businesses has always been at the heart of our initiatives and these businesses will continue to fuel growth in the future.
The strength of the organization and how well we are positioned for the future contributed to my decision to step down as CEO.
Under Patrick's leadership, I believe we have the organization, corporate programs, senior leadership team, and tools in place to continue to gain share and continue our successful track record.

user
compname reports q4 earnings per share $9.03.
q4 earnings per share $9.03.
q4 adjusted non-gaap earnings per share $9.26.
international inc - qtrly total reported sales increased 11% to $938.0 million.
anticipates local currency sales growth in 2021 will be in range of 5% to 7%.
international inc - sees 2021 adjusted earnings per share is forecasted to be in range of $29.20 to $29.80.

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