UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR
		FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008,
OR

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

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)

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

(Zip Code)

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

not applicable

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
			(Do not check if a smaller reporting company)

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

The Registrant had 33,522,365 shares of Common Stock outstanding at September 30, 2008.

 

 

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

		PAGE
PART I. FINANCIAL INFORMATION
Item 1.     Financial Statements
Unaudited Interim Consolidated Financial Statements:
Interim Consolidated Statements of Operations for the three months ended September 30, 2008 and 2007			3
Interim Consolidated Statements of Operations for the nine months ended September 30, 2008 and 2007			4
Interim Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007			5
Interim Consolidated Statements of Shareholders’ Equity and Comprehensive Income (Loss) for the nine months ended September 30, 2008 and twelve months ended December 31, 2007			6
Interim Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007			7
Notes to the Interim Consolidated Financial Statements at September 30, 2008			8
Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3.     Quantitative and Qualitative Disclosures About Market Risk			28
Item 4.     Controls and Procedures			28
PART II. OTHER INFORMATION
Item 1.     Legal Proceedings			29
Item 1A.  Risk Factors			29
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds			29
Item 3.     Defaults upon Senior Securities			30
Item 4.     Submission of Matters to a Vote of Security Holders			30
Item 5.     Other Information			30
Item 6.     Exhibits			30
SIGNATURE			31

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

METTLER-TOLEDO INTERNATIONAL INC.

		September 30,				September 30,
		2008				2007
Net sales
Products		$	396,876			$	341,436
Service			112,221				101,164
Total net sales			509,097				442,600
Cost of sales
Products			187,632				159,176
Service			72,785				64,415
Gross profit			248,680				219,009
Research and development			26,553				22,699
Selling, general and administrative			145,612				129,520
Amortization			2,728				2,825
Interest expense			6,846				5,515
Other charges (income), net			445				58
Earnings before taxes			66,496				58,392
Provision for taxes			13,772				14,620
Net earnings		$	52,724			$	43,772
Basic earnings per common share:
Net earnings		$	1.56			$	1.19
Weighted average number of common shares			33,856,574				36,650,215
Diluted earnings per common share:
Net earnings		$	1.52			$	1.16
Weighted average number of common and common equivalent shares			34,727,806				37,597,020

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

METTLER-TOLEDO INTERNATIONAL INC.

		September 30,				September 30,
		2008				2007
Net sales
Products		$	1,133,623			$	967,248
Service			330,034				293,659
Total net sales			1,463,657				1,260,907
Cost of sales
Products			522,422				446,812
Service			212,392				188,516
Gross profit			728,843				625,579
Research and development			77,511				66,489
Selling, general and administrative			441,311				379,810
Amortization			7,800				8,708
Interest expense			18,723				14,977
Other charges (income), net			2,620				(688	)
Earnings before taxes			180,878				156,283
Provision for taxes			41,024				41,050
Net earnings		$	139,854			$	115,233
Basic earnings per common share:
Net earnings		$	4.06			$	3.08
Weighted average number of common shares			34,482,431				37,390,019
Diluted earnings per common share:
Net earnings		$	3.96			$	3.01
Weighted average number of common and common equivalent shares			35,347,440				38,312,676

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

METTLER-TOLEDO INTERNATIONAL INC.

		September 30,				December 31,
		2008				2007
ASSETS
Current assets:
Cash and cash equivalents		$	111,039			$	81,222
Trade accounts receivable, less allowances of $9,631 at September 30, 2008 and $8,804 at December 31, 2007			340,481				354,596
Inventory			194,271				173,725
Current deferred tax assets, net			43,004				37,643
Other current assets and prepaid expenses			43,359				36,023
Total current assets			732,154				683,209
Property, plant and equipment, net			267,636				265,665
Goodwill			437,558				440,767
Other intangible assets, net			97,310				100,020
Non-current deferred tax assets, net			68,016				65,129
Other non-current assets			141,092				123,424
Total assets		$	1,743,766			$	1,678,214
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable		$	107,059			$	127,109
Accrued and other liabilities			81,447				73,661
Accrued compensation and related items			117,573				130,140
Deferred revenue and customer prepayments			65,318				52,703
Taxes payable			69,332				42,438
Current deferred tax liabilities			7,537				10,152
Short-term borrowings			24,048				11,570
Total current liabilities			472,314				447,773
Long-term debt			495,632				385,072
Non-current deferred tax liabilities			102,695				101,500
Other non-current liabilities			162,528				162,583
Total liabilities			1,233,169				1,096,928
Commitments and contingencies (Note 10)
Shareholders’ equity:
Preferred stock, $0.01 par value per share; authorized 10,000,000 shares; issued 0			—				—
Common stock, $0.01 par value per share; authorized 125,000,000 shares; issued 44,786,011 and 44,786,011 shares; outstanding 33,522,365 and 35,638,483 shares at September 30, 2008 and December 31, 2007, respectively			448				448
Additional paid-in capital			557,559				548,378
Treasury stock at cost (11,263,646 shares at September 30, 2008 and 9,147,528 shares at December 31, 2007)			(878,507	)			(662,393	)
Retained earnings			789,605				652,236
Accumulated other comprehensive income			41,492				42,617
Total shareholders’ equity			510,597				581,286
Total liabilities and shareholders’ equity		$	1,743,766			$	1,678,214

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

METTLER-TOLEDO INTERNATIONAL INC.

																						Accumulated
										Additional												Other
		Common Stock								Paid-in				Treasury				Retained				Comprehensive
		Shares				Amount				Capital				Stock				Earnings				Income (Loss)				Total
Balance at December 31, 2006			38,430,124			$	448			$	528,863			$	(374,819	)		$	493,691			$	(17,321	)		$	630,862
Exercise of stock options and restricted stock units			593,090				—				—				37,025				(15,851	)			—				21,174
Repurchases of common stock			(3,384,731	)			—				—				(324,599	)			—				—				(324,599	)
Tax benefit resulting from exercise of certain employee stock options			—				—				11,373				—				—				—				11,373
Share-based compensation			—				—				8,142				—				—				—				8,142
Adoption of FIN 48			—				—				—				—				(4,111	)			—				(4,111	)
Comprehensive income:
Net earnings			—				—				—				—				178,507				—				178,507
Change in currency translation adjustment			—				—				—				—				—				27,941				27,941
Pension adjustment, net of tax			—				—				—				—				—				31,997				31,997
Comprehensive income																											238,445
Balance at December 31, 2007			35,638,483			$	448			$	548,378			$	(662,393	)		$	652,236			$	42,617			$	581,286
Balance at December 31, 2007			35,638,483			$	448			$	548,378			$	(662,393	)		$	652,236			$	42,617			$	581,286
Exercise of stock options and restricted stock units			88,310				—				—				6,156				(2,837	)			—				3,319
Other treasury stock issuances			16,760				—				—				1,149				352				—				1,501
Repurchases of common stock			(2,221,188	)			—				—				(223,419	)			—				—				(223,419	)
Tax benefit resulting from exercise of certain employee stock options			—				—				1,803				—				—				—				1,803
Share-based compensation			—				—				7,378				—				—				—				7,378
Comprehensive income:
Net earnings			—				—				—				—				139,854				—				139,854
Change in currency translation adjustment			—				—				—				—				—				(1,706	)			(1,706	)
Pension adjustment, net of tax			—				—				—				—				—				581				581
Comprehensive income (a)																											138,729
Balance at September 30, 2008			33,522,365			$	448			$	557,559			$	(878,507	)		$	789,605			$	41,492			$	510,597

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

METTLER-TOLEDO INTERNATIONAL INC.

		September 30,				September 30,
		2008				2007
Cash flows from operating activities:
Net earnings		$	139,854			$	115,233
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation			22,194				19,501
Amortization			7,800				8,708
Deferred taxes			(7,957	)			(6,654	)
Excess tax benefits from share-based payment arrangements			(999	)			(5,223	)
Gain from sale of property, plant and equipment			(3,271	)			(656	)
Share-based compensation			7,378				6,186
Increase (decrease) in cash resulting from changes in:
Trade accounts receivable, net			14,463				19,301
Inventory			(19,523	)			(15,654	)
Other current assets			(7,710	)			(8,981	)
Trade accounts payable			(21,975	)			2,413
Taxes payable			28,456				30,953
Accruals and other			2,158				3,959
Net cash provided by operating activities			160,868				169,086
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment			13,184				3,398
Purchase of property, plant and equipment			(37,460	)			(24,826	)
Acquisitions			(607	)			(106	)
Net cash used in investing activities			(24,883	)			(21,534	)
Cash flows from financing activities:
Proceeds from borrowings			235,710				104,312
Repayments of borrowings			(121,123	)			(95,014	)
Proceeds from stock option exercises			3,319				11,530
Repurchases of common stock			(225,296	)			(254,506	)
Excess tax benefits from share-based payment arrangements			999				5,223
Refinancing fees			(3,085	)			—
Net cash used in financing activities			(109,476	)			(228,455	)
Effect of exchange rate changes on cash and cash equivalents			3,308				5,019
Net increase (decrease) in cash and cash equivalents			29,817				(75,884	)
Cash and cash equivalents:
Beginning of period			81,222				151,269
End of period		$	111,039			$	75,385

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

METTLER-TOLEDO INTERNATIONAL INC.

(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 Greifensee, Switzerland and Columbus, Ohio.

     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 majority owned subsidiaries. The interim consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The interim consolidated financial statements as of September 30, 2008 and for the three and nine month periods ended September 30, 2008 and 2007 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, 2007.

     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, 2008 are not necessarily indicative of the results to be expected for the full year ending December 31, 2008.

     The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates. A discussion of the Company’s critical accounting policies is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

     All intercompany transactions and balances have been eliminated.

     Certain reclassifications have been made to prior year amounts to conform to the current year presentation, primarily a $16.1 million reclassification of capitalized software, net from other non-current assets to property, plant and equipment, net as of December 31, 2007.

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At September 30, 2008 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Trade Accounts Receivable

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

Inventory

     Inventory is 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 inventory are made for excess and obsolete items based on forecasted 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.

     Inventory consisted of the following:

		September 30,				December 31,
		2008				2007
Raw materials and parts		$	84,814			$	86,852
Work-in-progress			37,695				28,102
Finished goods			71,762				58,771
		$	194,271			$	173,725

Other Intangible Assets

     Other intangible assets include indefinite lived assets and assets subject to amortization. Where applicable, amortization is charged on a straight-line basis over the expected period to be benefited. The straight-line method of amortization reflects an appropriate allocation of the cost of the intangible assets to earnings in proportion to the amount of economic benefits obtained by the Company in each reporting period. The Company assesses the initial acquisition of intangible assets in accordance with SFAS No. 141 “Business Combinations” and the continued accounting for previously recognized intangible assets and goodwill in accordance with SFAS No. 142 “Goodwill and Other Intangible Assets” and SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.”

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At September 30, 2008 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

     Other intangible assets consisted of the following:

		September 30, 2008								December 31, 2007
		Gross				Accumulated				Gross				Accumulated
		Amount				Amortization				Amount				Amortization
Customer relationships		$	74,066			$	(12,937	)		$	73,946			$	(11,363	)
Proven technology and patents			32,570				(19,829	)			32,079				(18,077	)
Tradename (finite life)			1,752				(746	)			1,655				(654	)
Tradename (indefinite life)			22,434				—				22,434				—
		$	130,822			$	(33,512	)		$	130,114			$	(30,094	)

     The annual aggregate amortization expense based on the current balance of other intangible assets is estimated at $4.7 million for 2008, $4.6 million for 2009 and 2010, $4.4 million for 2011 and $4.1 million for 2012. The Company had amortization expense associated with the above intangible assets of $3.5 million and $3.4 million for the nine months ended September 30, 2008 and 2007, respectively.

     In addition to the above amortization, the Company recorded amortization expense associated with capitalized software of $4.2 million and $5.3 million for the nine months ended September 30, 2008 and 2007, respectively.

Revenue Recognition

     Revenue is recognized when title to a product has transferred and any significant customer obligations have been fulfilled. Standard shipping terms are generally FOB shipping point in most countries and, accordingly, title transfers upon shipment. In countries where title cannot legally transfer before delivery, the Company defers revenue recognition until delivery has occurred. Other than a few small software applications, the Company does not sell software products without the related hardware instrument as the software is embedded in the instrument. The Company’s products typically require no significant production, modification or customization of the hardware or software that is essential to the functionality of the products. To the extent the Company’s solutions have a post shipment obligation, such as customer acceptance, revenue is deferred until the obligation has been completed. In addition, the Company defers revenue where installation is required, unless such installation is deemed perfunctory. 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. Further, certain products are also sold through indirect distribution channels whereby the distributor assumes any further obligations to the customer upon title transfer. Revenue is recognized on these products upon title transfer and risk of loss to its distributors. Distributor discounts are offset against revenue at the time such revenue is recognized. Shipping and handling costs charged to customers are included in total net sales and the associated expense is recorded in cost of sales for all periods presented.

     Service revenue not under contract is recognized upon the completion of the service performed. Spare parts sold on a stand-alone basis are recognized upon title transfer which is generally at the time of shipment.

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At September 30, 2008 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

     Revenues from service contracts are recognized ratably over the contract period. These contracts represent an obligation to perform repair and other services including regulatory compliance qualification, calibration, certification and preventative maintenance on a customer’s pre-defined equipment over the contract period. Service contracts are separately priced and payment is typically received from the customer at the beginning of the contract period.

Warranty

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

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

		September 30,				September 30,
		2008				2007
Balance at beginning of period		$	12,949			$	10,977
Accruals for warranties			13,405				9,951
Foreign currency translation			990				618
Payments / utilizations			(14,221	)			(9,881	)
Balance at end of period		$	13,123			$	11,665

Share-Based Compensation

     The Company applies the modified prospective method under SFAS 123R and Staff Accounting Bulletin (“SAB”) 107, “Share-Based Payments”. The Company recognizes compensation expense in selling, general and administrative expense in the consolidated statement of operations with a corresponding offset to additional paid-in capital in the consolidated balance sheet. The Company had $2.3 million and $7.4 million of share-based compensation expense for the three and nine months ended September 30, 2008, respectively, compared to $2.0 million and $6.2 million for the corresponding periods in 2007.

     During the first quarter of 2008, the Company granted 213,850 performance based options, with a grant date fair value of $32.20. Compensation expense will be recognized over the five year vesting provisions based upon the probability of the performance condition being met.

Research and Development

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

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At September 30, 2008 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

Fair Value Measurements

     On January 1, 2008, the Company adopted the provisions of FASB Statement No. 157, Fair Value Measurements, (“SFAS 157”) except as it relates to nonfinancial assets pursuant to FSP 157-2 as described below. SFAS 157 clarifies how companies are required to use a fair value measure for recognition and disclosure by establishing a common definition of fair value, a framework for measuring fair value, and expanding disclosures about fair value measurements. The adoption of SFAS 157 did not have a material impact on the Company’s consolidated results of operations or financial position.

     As of September 30, 2008, the Company has derivative assets totaling $0.7 million and derivative liabilities totaling $0.2 million. These derivative assets and liabilities consist of foreign currency forward exchange contracts and an interest rate swap agreement. The forward exchange contracts economically hedge short-term intercompany balances with the Company’s foreign businesses. The interest rate swap agreement changes the Company’s fixed interest obligation associated with $30 million of Senior Notes into a floating rate, and is accounted for as a fair value hedge. Changes in the fair values of these derivative assets and liabilities were insignificant to the Company’s consolidated results of operations and financial position for the three and nine month periods ended September 30, 2008.

     The fair values of these instruments 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. The Company has also considered both its own credit risk and counterparty credit risk in determining fair value and determined these adjustments were insignificant for the three and nine month periods ended September 30, 2008.

     On October 20, 2008, the Company entered into an interest rate swap agreement changing the floating rate interest payments associated with $150 million of debt borrowed from the Company’s credit facility to a fixed obligation. The swap agreement will be accounted for as a cash flow hedge.

     The Company has not yet applied the provisions of SFAS 157 to its nonfinancial assets such as goodwill and other intangible assets, in accordance with FSP 157-2, Effective Date of FASB Statement No. 157, which will be adopted on January 1, 2009. The Company does not believe that the adoption of FSP 157-2 will have a material impact on its consolidated results of operations or financial position.

3. INCOME TAXES

     The provision for taxes is based upon the Company’s projected annual effective rate of 26% for the three and nine months ended September 30, 2008. During the first quarter of 2008, the Company recorded a discrete tax benefit of $2.5 million related to favorable withholding tax law changes in China. During the third quarter of 2008, the Company recorded discrete tax items

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At September 30, 2008 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

resulting in a net tax benefit of $3.5 million primarily related to the closure of certain tax matters. The net impact of the items described above decreased the effective tax rate to 21% and 23% for the three and nine months ended September 30, 2008, respectively.

4. DEBT

     The Company’s short-term borrowings and long-term debt consisted of the following at September 30, 2008:

		September 30, 2008
						Other principal
						trading
		U.S. dollar				currencies				Total
$150m Senior notes (net of unamortized discount)		$	150,427			$	—			$	150,427
Credit facility			322,000				11,218				333,218
Other local arrangements (long-term)			—				11,987				11,987
Total long-term debt			472,427				23,205				495,632
Other local arrangements (short-term)			8,000				16,048				24,048
Total debt		$	480,427			$	39,253			$	519,680

     On August 15, 2008, the Company entered into a $950 million new Credit Agreement (the “Credit Agreement”), which replaced its $450 million Amended and Restated Credit Agreement (the “Prior Credit Agreement”). The new Credit Agreement is provided by a group of financial institutions (similar to our Prior Credit Agreement) and has a maturity date of August 15, 2013. 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 senior unsecured credit ratings, which was, as of September 30, 2008, set at LIBOR plus 0.70% (based on ratings of “BBB” by Standard & Poor’s and “Baa2” by Moody’s). The Company must also pay facility fees that are tied to its credit ratings. The Credit Agreement contains covenants, with which the Company was in compliance as of September 30, 2008, including maintaining a consolidated interest coverage ratio of more than 3.5 to 1.0 and a consolidated leverage ratio of less than 3.25 to 1.0. 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 default, including upon a change of control. The Company capitalized $3.3 million in financing fees associated with the Credit Agreement.

     The borrowings under the Credit Agreement have been classified as long-term debt in accordance with the Company’s intent and ability to refinance such obligations on a long-term basis. As of September 30, 2008, approximately $607.2 million was available under the facility.

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At September 30, 2008 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

5. SHARE REPURCHASE PROGRAM AND TREASURY STOCK

     The Company has a share repurchase program. Under the program, the Company has been authorized to buy back up to $1.5 billion of equity shares. As of September 30, 2008, there were $417.7 million of remaining equity shares authorized to be repurchased under the plan by December 31, 2010. The share repurchases are expected to be funded from cash balances, borrowings and cash generated from operating activities. Repurchases will be made through open market transactions, and the timing will depend on the level of acquisition activity, business and market conditions, the stock price, trading restrictions and other factors. The Company has purchased 15.2 million shares since the inception of the program through September 30, 2008.

     The Company reacquired $223.4 million (of which $3.3 million was unsettled at September 30, 2008) and $249.1 million on the repurchase of 2,221,188 shares and 2,710,531 shares at an average price of $100.57 and $91.86 during the nine months ended September 30, 2008 and 2007, respectively. An additional $5.2 million and $5.4 million were cash settled during the nine month periods ended September 30, 2008 and 2007, respectively, relating to the settlement of a liability for shares repurchased as of December 31, 2007 and 2006. The Company reissued 88,310 shares and 339,015 shares held in treasury for the exercise of stock options for the nine months ended September 30, 2008 and 2007, respectively.

     During the first quarter of 2008, the Company also reissued 16,760 shares held in treasury pursuant to its 2007 Share Plan, which extends certain eligible employees the option to receive a percentage of their annual bonus in shares of the Company’s stock.

6. EARNINGS PER COMMON SHARE

     In accordance with the treasury stock method, the Company has included the following common share equivalents in the calculation of diluted weighted average shares outstanding for the three and nine month periods ended September 30, relating to outstanding stock options and restricted stock units:

		2008				2007
Three months ended			871,232				946,805
Nine months ended			865,009				922,656

     Outstanding options to purchase 450,150 and 3,000 shares of common stock for the three month periods ended September 30, 2008 and 2007, respectively, and options to purchase 450,797 and 119,567 shares of common stock for the nine month periods ended September 30, 2008 and 2007, respectively, have been excluded from the calculation of diluted weighted average shares on the grounds that such options and restricted stock units would be anti-dilutive.

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At September 30, 2008 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

7. NET PERIODIC BENEFIT COST

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

																		Other U.S.
		U.S. Pension Benefits								Non-U.S. Pension Benefits								Post-retirement Benefits
		2008				2007				2008				2007				2008				2007
Service cost, net		$	182			$	170			$	4,223			$	4,072			$	109			$	101
Interest cost on projected benefit obligations			1,633				1,590				5,966				4,784				322				331
Expected return on plan assets			(2,232	)			(2,072	)			(7,866	)			(6,910	)			—				—
Net amortization and deferral			—				—				—				—				(240	)			(239	)
Actuarial losses			197				515				221				223				—				—
Net periodic pension cost (benefit)		$	(220	)		$	203			$	2,544			$	2,169			$	191			$	193

     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:

																		Other U.S.
		U.S. Pension Benefits								Non-U.S. Pension Benefits								Post-retirement Benefits
		2008				2007				2008				2007				2008				2007
Service cost, net		$	548			$	509			$	12,932			$	11,997			$	327			$	304
Interest cost on projected benefit obligations			4,901				4,769				18,232				14,086				968				992
Expected return on plan assets			(6,698	)			(6,217	)			(24,454	)			(20,273	)			—				—
Net amortization and deferral			—				—				—				—				(718	)			(718	)
Actuarial losses			593				1,544				382				632				—				—
Net periodic pension cost (benefit)		$	(656	)		$	605			$	7,092			$	6,442			$	577			$	578

     As previously disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2007, the Company expects to make normal employer contributions of approximately $15.6 million to its non-U.S. pension plans and $2.2 million to its U.S. post-retirement medical plan during the year ended December 31, 2008.

8. OTHER CHARGES (INCOME), NET

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

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At September 30, 2008 – Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

9. SEGMENT REPORTING

     As disclosed in Note 15 to the Company’s consolidated financial statements for the year ending December 31, 2007, 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, selling, general and administrative expenses and restructuring, before amortization, interest expense and other charges (income), net and taxes).

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

		Net Sales to				Net Sales to
For the three months ended		External				Other				Total Net				Segment
September 30, 2008		Customers				Segments				Sales				Profit				Goodwill
U.S. Operations		$	161,844			$	14,904			$	176,748			$	30,723			$	272,546
Swiss Operations			30,830				75,896				106,726				19,215				26,475
Western European Operations			168,497				20,414				188,911				14,165				118,141
Chinese Operations			66,458				23,371				89,829				15,619				2,092
Other (a)			81,468				1,401				82,869				6,198				18,304
Eliminations and Corporate (b)			—				(135,986	)			(135,986	)			(9,405	)			—
Total		$	509,097			$	—			$	509,097			$	76,515			$	437,558

		Net Sales to				Net Sales to
For the nine months ended		External				Other				Total Net				Segment
September 30, 2008		Customers				Segments				Sales				Profit
U.S. Operations		$	464,225			$	42,815			$	507,040			$	82,093
Swiss Operations			93,850				238,713				332,563				62,570
Western European Operations			509,464				63,191				572,655				41,923
Chinese Operations			166,179				70,504				236,683				44,098
Other (a)			229,939				3,408				233,347				17,436
Eliminations and Corporate (b)			—				(418,631	)			(418,631	)			(38,099	)
Total		$	1,463,657			$	—			$	1,463,657			$	210,021

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At September 30, 2008 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

		Net Sales to				Net Sales to
For the three months ended		External				Other				Total Net				Segment
September 30, 2007		Customers				Segments				Sales				Profit				Goodwill
U.S. Operations		$	155,425			$	13,060			$	168,485			$	27,901			$	272,439
Swiss Operations			26,942				67,446				94,388				20,696				24,511
Western European Operations			144,056				19,618				163,674				11,402				121,520
Chinese Operations			45,476				22,415				67,891				15,079				1,918
Other (a)			70,701				798				71,499				7,229				18,326
Eliminations and Corporate (b)			—				(123,337	)			(123,337	)			(15,517	)			—
Total		$	442,600			$	—			$	442,600			$	66,790			$	438,714

		Net Sales to				Net Sales to
For the nine months ended		External				Other				Total Net				Segment
September 30, 2007		Customers				Segments				Sales				Profit
U.S. Operations		$	449,743			$	37,694			$	487,437			$	73,089
Swiss Operations			74,964				196,959				271,923				55,800
Western European Operations			427,908				59,102				487,010				37,517
Chinese Operations			115,510				64,703				180,213				39,134
Other (a)			192,782				2,525				195,307				16,709
Eliminations and Corporate (b)			—				(360,983	)			(360,983	)			(42,969	)
Total		$	1,260,907			$	—			$	1,260,907			$	179,280

         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
		2008				2007				2008				2007
Earnings before taxes		$	66,496			$	58,392			$	180,878			$	156,283
Amortization			2,728				2,825				7,800				8,708
Interest expense			6,846				5,515				18,723				14,977
Other charges (income), net			445				58				2,620				(688	)
Segment profit		$	76,515			$	66,790			$	210,021			$	179,280

METTLER-TOLEDO INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
At September 30, 2008 — Unaudited (Continued)
(In thousands, except share data, unless otherwise stated)

10. 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 will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

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

     The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Unaudited Interim Consolidated Financial Statements included herein.

General

     Our interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a basis which reflects the interim consolidated financial statements of Mettler-Toledo International Inc. Operating results for the three and nine months ended September 30, 2008 are not necessarily indicative of the results to be expected for the full year ending December 31, 2008.

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, 2008 and 2007 (amounts in thousands).

		Three months ended September 30,																Nine months ended September 30,
		2008								2007								2008								2007
		(unaudited)				%				(unaudited)				%				(unaudited)				%				(unaudited)				%
Net sales		$	509,097				100.0			$	442,600				100.0			$	1,463,657				100.0			$	1,260,907				100.0
Cost of sales			260,417				51.2				223,591				50.5				734,814				50.2				635,328				50.4
Gross profit			248,680				48.8				219,009				49.5				728,843				49.8				625,579				49.6
Research and development			26,553				5.2				22,699				5.1				77,511				5.3				66,489				5.3
Selling, general and administrative			145,612				28.6				129,520				29.3				441,311				30.1				379,810				30.1
Amortization			2,728				0.5				2,825				0.6				7,800				0.5				8,708				0.7
Interest expense			6,846				1.3				5,515				1.3				18,723				1.3				14,977				1.2
Other charges (income), net			445				0.1				58				0.0				2,620				0.2				(688	)			(0.1	)
Earnings before taxes			66,496				13.1				58,392				13.2				180,878				12.4				156,283				12.4
Provision for taxes (a)			13,772				2.7				14,620				3.3				41,024				2.8				41,050				3.3
Net earnings		$	52,724				10.4			$	43,772				9.9			$	139,854				9.6			$	115,233				9.1

     Net sales

     Net sales were $509.1 million and $1,463.7 million for the three and nine months ended September 30, 2008, compared to $442.6 million and $1,260.9 million for the corresponding periods in 2007. This represents an increase in U.S. dollars of 15% and 16%, respectively, for the three and nine months ended September 30, 2008. Excluding the effect of currency exchange rate fluctuations, or in local currencies, net sales increased 10% and 9%, respectively, for the three and nine months ended September 30, 2008.

     During the three and nine months ended September 30, 2008, our net sales by geographic destination in local currencies increased by 4% and 3% in the Americas, by 9% and 8% in Europe and by 21% and 21% in Asia/Rest of World. A discussion of sales by operating segment is included below.

     As described in Note 15 to our consolidated financial statements for the year ending December 31, 2007, our net sales comprise product sales of precision instruments and related services. Service revenues are primarily derived from repair and other services, including regulatory compliance qualification, calibration, certification, preventative maintenance and spare parts.

     Net sales of products increased in U.S. dollars by 16% and 17% during the three and nine months ended September 30, 2008, respectively, compared to the corresponding period and by 11% and 10% respectively in local currencies. Service revenue (including spare parts) increased in U.S. dollars by 11% and 12% during the three and nine months ended September 30, 2008, respectively, compared to the corresponding periods and by 6% and 5%, respectively, in local currencies.

     Net sales for our laboratory-related products increased 9% in local currencies during both the three and nine months ended September 30, 2008, principally driven by strong growth across most product categories, especially analytical instruments, process analytics and laboratory balances. Our laboratory-related product sales were also reduced by 1% during the nine months ended September 30, 2008 due to product line exits in 2007.

     Net sales of our industrial-related products increased 12% and 9% in local currencies for the three and nine months ended September 30, 2008, respectively. We experienced strong sales growth in our core industrial products throughout most geographies, particularly China, as well as solid sales growth in our product inspection products. We also experienced strong sales growth in transportation and logistics products for the three month period ended September 30, 2008 related to increased project activity.

     In our food retailing markets, net sales increased 6% and 4% in local currencies during the three and nine months ended September 30, 2008, respectively. We experienced strong sales growth in Europe and continued solid growth in Asia during the three months ended September 30, 2008. Net sales for the nine months ended September 30, 2008 reflect strong project activity in Europe and continued growth in Asia/Rest of World while sales decreased in the U.S.

     Gross profit

     Gross profit as a percentage of net sales was 48.8% and 49.8% for the three and nine months ended September 30, 2008, respectively, compared to 49.5% and 49.6% for the corresponding periods in 2007.

     Gross profit as a percentage of net sales for products was 52.7% and 53.9% for the three and nine months ended September 30, 2008, respectively, compared to 53.4% and 53.8% for the corresponding periods in 2007.

     Gross profit as a percentage of net sales for services (including spare parts) was 35.1% and 35.7% for the three and nine months ended September 30, 2008, respectively, compared to 36.3% and 35.8% for the corresponding periods in 2007.

     The decrease in gross profit as a percentage of net sales for the three months ended September 30, 2008 reflects the weakening U.S. dollar, an unfavorable product mix and increased material costs, offset in part by increased sales volume leveraging our fixed production costs. For the nine months ended September 30, 2008 our gross profit increased as a percentage of net sales as a result of increased sales volume, offset in part by the weakening U.S. dollar and increased material costs.

     Research and development and selling, general and administrative expenses

     Research and development expenses as a percentage of net sales were 5% for the three and nine months ended September 30, 2008, respectively, as well as in the corresponding periods during 2007. Research and development expenses increased 9% and 6%, in local currencies, during the three and nine months ended September 30, 2008, respectively, compared to the corresponding period in 2007.

     Selling, general and administrative expenses as a percentage of net sales were 29% and 30% for the three and nine months ended September 30, 2008, compared to 29% and 30%, respectively, in the corresponding periods during 2007. Selling, general and administrative expenses increased 7% and 8%, in local currencies, during the three and nine months ended September 30, 2008, respectively, compared to the corresponding periods in 2007. This is primarily due to continued sales and marketing investments, especially in China and other emerging market countries and expenses associated with upcoming product launches. Selling, general and administrative expenses during the three months ended September 30, 2008 also included severance expense related to our cost-reduction activities.

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

     Interest expense was $6.8 million and $18.7 million for the three and nine months ended September 30, 2008, respectively, and $5.5 million and $15.0 million for the corresponding periods in 2007. The increase is due primarily to increased borrowings versus the corresponding periods in 2007.

     Other charges (income), net was $0.4 million and $2.6 million for the three and nine months ended September 30, 2008, respectively, and $0.1 million and ($0.7) million for the corresponding periods in 2007 and consists primarily of interest income as well as (gains) losses from foreign currency transactions and other items. Other charges (income), net includes the impact of unfavorable foreign currency fluctuations and reduced interest income associated with lower cash balances compared to the prior year periods.

     The provision for taxes is based upon our projected annual effective tax rate of 26% for the three and nine months ended September 30, 2008 and 27% for the three and nine months ended September 30, 2007.

     During the first quarter of 2008, the Company recorded a discrete tax benefit of $2.5 million related to favorable withholding tax law changes in China. During the third quarter of 2008, the Company recorded discrete tax items resulting in a net tax benefit of $3.5 million primarily related to the closure of certain tax matters. The net impact of the items described above decreased the effective tax rate to 21% and 23% for the three and nine months ended September 30, 2008, respectively.

     During the third quarter of 2007, the Company recorded certain discrete tax items which resulted in a net tax benefit of $1.1 million. The discrete items include a benefit of $3.4 million related to the favorable resolution of certain tax matters and other adjustments related to prior years, which was partially offset by a charge of $2.3 million primarily due to a tax law change in Germany. The net impact of the items described above decreased the effective tax rate to 25% and 26% for the three and nine months ended September 30, 2007, respectively.

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 15 to our consolidated financial statements for the year ending December 31, 2007.

     U.S. Operations (amounts in thousands)

		Three months ended September 30												Nine months ended September 30
		2008				2007				%1)				2008				2007				%1)
Total net sales		$	176,748			$	168,485				5	%		$	507,040			$	487,437				4	%
Net sales to external customers		$	161,844			$	155,425				4	%		$	464,225			$	449,743				3	%
Segment profit		$	30,723			$	27,901				10	%		$	82,093			$	73,089				12	%

     Total net sales increased 5% and 4% for the three and nine months ended September 30, 2008, respectively, and net sales to external customers increased 4% and 3% for the three and nine months ended September 30, 2008, respectively, compared with the corresponding periods in 2007. The increase for the three months ended September 30, 2008 reflects solid growth in our laboratory-related and product inspection products and increased transportation and logistics project activity, offset in part by reduced sales in retail products. Net sales to external customers were also reduced during the nine months ended September 30, 2008 by 1% due to product line exits during 2007.

     Segment profit increased $2.8 million and $9.0 million for the three and nine month periods ended September 30, 2008, respectively, compared to the corresponding periods in 2007. The increase in segment profit was primarily due to increased sales volume leveraging our fixed production costs, offset in part by investments in sales and marketing.

     Swiss Operations (amounts in thousands)

		Three months ended September 30												Nine months ended September 30
		2008				2007				%1)				2008				2007				%1)
Total net sales		$	106,726			$	94,388				13	%		$	332,563			$	271,923				22	%
Net sales to external customers		$	30,830			$	26,942				14	%		$	93,850			$	74,964				25	%
Segment profit		$	19,215			$	20,696				-7	%		$	62,570			$	55,800				12	%

     Total net sales in local currency increased 1% and 6% for the three and nine month periods ended September 30, 2008. Net sales to external customers in local currency increased 2% and 9% for the same periods versus the prior year corresponding periods. The increase in sales to external customers for the three and nine months ended September 30, 2008 related primarily to strong growth in most of our

laboratory-related products, particularly in process analytics, as well as improved project activity in retail products.

     Segment profit decreased $1.5 million and increased $6.8 million for the three and nine month periods ended September 30, 2008, respectively, compared to the corresponding periods in 2007. The increase in segment profit for the nine months ended September 30, 2008 relative to the corresponding prior period relates primarily to increased sales volume leveraging our fixed production costs, partially offset by higher research and development project activity and unfavorable currency fluctuations. Segment profit for the three months ended September 30, 2008 was also reduced by increased sales and marketing costs relating to product launches.

     Western European Operations (amounts in thousands)

		Three months ended September 30												Nine months ended September 30
		2008				2007				%1)				2008				2007				%1)
Total net sales		$	188,911			$	163,674				15	%		$	572,655			$	487,010				18	%
Net sales to external customers		$	168,497			$	144,056				17	%		$	509,464			$	427,908				19	%
Segment profit		$	14,165			$	11,402				24	%		$	41,923			$	37,517				12	%

     Total net sales in local currency increased 7% and 6% for the three and nine month periods ended September 30, 2008. Net sales to external customers in local currency increased 8% and 7% for the same periods. The increase includes solid sales growth in our industrial-related and laboratory-related products. Our industrial sales for the three months ended September 30, 2008 include particularly favorable results in core industrial products and transportation and logistics project activity. We also experienced strong European retail project activity during the three and nine months ended September 30, 2008.

     Segment profit increased $2.8 million and $4.4 million for the three and nine month periods ended September 30, 2008, respectively, compared to the corresponding periods in 2007. The increase in segment profit is principally a result of increased sales volume and favorable currency translation fluctuations, partially offset by increased sales and marketing investments. We also recorded severance charges of $2.7 million and $5.1 million associated with our cost reduction initiatives, during the three and nine month periods ended September 30, 2008, respectively.

     Chinese Operations (amounts in thousands)

		Three months ended September 30												Nine months ended September 30
		2008				2007				%1)				2008				2007				%1)
Total net sales		$	89,829			$	67,891				32	%		$	236,683			$	180,213				31	%
Net sales to external customers		$	66,458			$	45,476				46	%		$	166,179			$	115,510				44	%
Segment profit		$	15,619			$	15,079				4	%		$	44,098			$	39,134				13	%

     Total net sales in local currency increased 20% and 20% and net sales to external customers increased 32% and 31% for the three and nine months ended September 30, 2008, respectively, compared to the corresponding periods in 2007. These increases were due to continued sales growth for most product lines, in particular industrial products.

     Segment profit increased $0.1 million and $5.0 million for the three and nine month periods ended September 30, 2008, respectively, compared to the corresponding periods in 2007. Segment profit includes increased sales volume, partially offset by unfavorable currency fluctuations, increased material costs, increased costs to expand our manufacturing capabilities and investments in our Chinese sales and marketing organization. Segment profit during the three months ended September 30, 2008 was also reduced by unfavorable product mix.

     Other (amounts in thousands)

		Three months ended September 30												Nine months ended September 30
		2008				2007				%1)				2008				2007				%1)
Total net sales		$	82,869			$	71,499				16	%		$	233,347			$	195,307				19	%
Net sales to external customers		$	81,468			$	70,701				15	%		$	229,939			$	192,782				19	%
Segment profit		$	6,198			$	7,229				-14	%		$	17,436			$	16,709				4	%

     Total net sales in local currency increased 13% and 12% for the three and nine month periods ended September 30, 2008. Net sales to external customers in local currency increased 12% for the same periods versus the prior year corresponding periods. This performance reflects increased sales in our Other Asian Pacific, Eastern European and Other North American markets.

     Segment profit decreased $1.0 million and increased $0.7 million for the three and nine months ended September 30, 2008 compared to the corresponding periods in 2007. The decrease in segment profit for the three months ended September 30, 2008 was primarily a result of decreased profitability in Canada and severance charges associated with our cost reduction initiatives, partially offset by increased profitability in our Other Asia Pacific and Other Eastern European markets.

Liquidity and Capital Resources

     Liquidity is our ability to generate sufficient cash flows from operating activities to meet our obligations and commitments. In addition, liquidity includes the ability to obtain appropriate financing. Currently, our liquidity needs arise primarily from working capital requirements, capital expenditures, share repurchases and acquisitions.

     Cash provided by operating activities totaled $160.9 million in the nine months ended September 30, 2008, compared to $169.1 million in the corresponding period in 2007. The decrease in 2008 resulted principally from higher payments of approximately $11.5 million related to 2007 performance-related compensation incentives (bonus payments), reduced accounts payable balances of $24.4 million and the timing of tax disbursements of $5.9 million, offset in part by higher net earnings of $24.6 million.

     Cash flows used in investing activities during the nine months ended September 30, 2008 included $12.5 million of proceeds from the sale of a Swiss property.

     Capital expenditures are a significant use of funds and are made primarily for investments in information systems and technology, machinery, equipment and the purchase and expansion of facilities. Our capital expenditures totaled $37.5 million for the nine months ended September 30, 2008 compared to $24.8 million in the corresponding period in 2007. Approximately $8.2 million of these expenditures for the nine months ended September 30, 2008 relate to the initial phases of a multi-year program of information technology investment.

We expect capital expenditures to increase as our business grows, and to fluctuate as currency exchange rates change.

     Cash flows used in financing activities during the nine months ended September 30, 2008 included $3.1 million of financing fees related to the closing of our new $950 million credit facility during the third quarter.

     Debt

     The Company’s short-term borrowings and long-term debt consisted of the following at September 30, 2008:

		September 30, 2008
						Other principal
						trading
		U.S. dollar				currencies				Total
$150m Senior notes (net of unamortized discount)		$	150,427			$	—			$	150,427
Credit facility			322,000				11,218				333,218
Other local arrangements (long-term)			—				11,987				11,987
Total long-term debt			472,427				23,205				495,632
Other local arrangements (short-term)			8,000				16,048				24,048
Total debt		$	480,427			$	39,253			$	519,680

     On August 15, 2008, the Company entered into a $950 million new Credit Agreement (the “Credit Agreement”), which replaced its $450 million Amended and Restated Credit Agreement (the “Prior Credit Agreement”). The new Credit Agreement is provided by a group of financial institutions (similar to our Prior Credit Agreement) and has a maturity date of August 15, 2013. 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 senior unsecured credit ratings, which was, as of September 30, 2008, set at LIBOR plus 0.70% (based on ratings of “BBB” by Standard & Poor’s and “Baa2” by Moody’s). The Company must also pay facility fees that are tied to its credit ratings. The Credit Agreement contains covenants, with which the Company was in compliance as of September 30, 2008, including maintaining a consolidated interest coverage ratio of more than 3.5 to 1.0 and a consolidated leverage ratio of less than 3.25 to 1.0. 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 default, including upon a change of control. The Company capitalized $3.3 million in financing fees associated with the Credit Agreement.

     The borrowings under the Credit Agreement have been classified as long-term debt in accordance with the Company’s intent and ability to refinance such obligations on a long-term basis. As of September 30, 2008, approximately $607.2 million was available under the facility.

     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.

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

     Share repurchase program

     We have a share repurchase program. Under the program, we are authorized to buy back up to $1.5 billion of equity shares. As of September 30, 2008, there were $417.7 million of remaining equity shares authorized to be repurchased under the plan by December 31, 2010. The share repurchases are expected to be funded from cash balances, borrowings and cash generated from operating activities. Repurchases will be made through open market transactions, and the timing will depend on the level of acquisition activity, business and market conditions, the stock price, trading restrictions and other factors. We have purchased 15.2 million shares since the inception of the program through September 30, 2008.

     We reacquired $223.4 million (of which $3.3 million was unsettled at September 30, 2008) and $249.1 million on the repurchase of 2,221,188 shares and 2,710,531 shares at an average price of $100.57 and $91.86 during the nine months ended September 30, 2008 and 2007, respectively, as well as an additional $5.2 million and $5.4 million during the nine month periods ended September 30, 2008 and 2007, respectively, relating to the settlement of the liability for shares repurchased as of December 31, 2007 and 2006. See Part II, Item 2 regarding details of the share repurchase program for the three months ended September 30, 2008. The Company reissued 88,310 shares and 339,015 shares held in treasury for the exercise of stock options for the nine months ended September 30, 2008 and 2007, respectively. During the first quarter of 2008, the Company also reissued 16,760 shares held in treasury pursuant to its 2007 Share Plan which extends certain eligible employees the option to receive a percentage of their annual bonus in shares of the Company’s stock.

Effect of Currency on Results of Operations

     Because we conduct operations in many countries, our operating income can be significantly affected by fluctuations in currency exchange rates. Swiss franc-denominated expenses represent a much greater percentage of our operating expenses than Swiss franc-denominated sales represent of our net sales. In part, this is because most of our manufacturing costs in Switzerland relate to products that are sold outside Switzerland. Moreover, a substantial percentage of our research and development expenses and general and administrative expenses are incurred in Switzerland. Therefore, if the Swiss franc strengthens against all or most of our major trading currencies (e.g., the U.S. dollar, the Euro, other major European currencies and the Japanese yen), our operating profit is reduced. We also have significantly more sales in European currencies (other than the Swiss franc) than we have expenses in those currencies. Therefore, when European currencies weaken against the U.S. dollar and the Swiss franc, it also decreases our operating profits. Accordingly, the Swiss franc exchange rate to the Euro is an important cross-rate monitored by the Company. We estimate that a 1% strengthening of the Swiss franc against the Euro would result in a decrease in our earnings before tax of approximately $1.1 million to $1.3 million on an annual basis. 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, 2008, we estimate that a 10% weakening of the U.S. dollar against the currencies in which our debt is denominated would result in an increase of approximately $4.4 million in the reported U.S. dollar value of the debt.

New Accounting Pronouncements

     See “Fair Value Measurements” under Note 2 to the interim consolidated financial statements.

Forward-Looking Statements and Associated Risks

     Some of the statements in this quarterly report constitute “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. These statements relate to future events or our future financial performance, including, but not limited to, strategic plans, annual amortization expense, outcome of litigation, effect of potential loss of licensed rights, potential growth opportunities in both developed markets and emerging markets, planned research and development efforts, product introductions and innovation, manufacturing capacity, expected customer demand, meeting customer expectations, planned operational changes and productivity improvements, research and development expenditures, competitors’ product development, expected capital expenditures, source of funding, method and timing of share repurchases, timing and effect of potential exercises of options, future cash sources and requirements, liquidity, impact of taxes, impact of changes in tax laws, expected compliance with laws, impact of environmental costs and environmental proceedings, expected pension contribution, expected cost savings and benefits of completed or future acquisitions, which involve known and unknown risks, impact of currency fluctuations, uncertainties and other factors that may cause our or our businesses’ actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements.

     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” or the negative of those terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially because of market conditions in our industries or other factors. Moreover, we do not, nor does any other person, assume responsibility for the accuracy and completeness of those statements. Unless otherwise required by applicable laws, we disclaim any intention or obligation to publicly update or revise any of the forward-looking statements after the date of this quarterly report to conform them to actual results, whether as a result of new information, future events, or otherwise. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under the caption, “Factors affecting our future operating results” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2007, which describes risks and factors that could cause results to differ materially from those projected in those forward-looking statements.

     We caution the reader that the above list of risks and factors that may affect results addressed in the forward-looking statements may not be exhaustive. Other sections of this quarterly report and other documents incorporated by reference may describe additional risks or factors that could adversely impact our business and financial performance. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict these new risk factors, nor can it assess the impact, if any, of these new risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those projected in any forward-looking statements. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     As of September 30, 2008, 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, 2007.

Item 4. Controls and Procedures

     Under the supervision and with the participation of our management, including the Chief Executive Officer and the 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 the 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 nine months ended September 30, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings. None

Item 1A. Risk Factors.

     For the nine months ended September 30, 2008 there were no material changes from risk factors as disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

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

     Issuer Purchases of Equity Securities

										(c)				(d)
										Total Number of				Maximum Number
										Shares				(or Approximate
										Purchased as				Dollar Value) of
		(a)				(b)				Part of Publicly				Shares that May Yet
		Total Number				Average				Announced				Be Purchased Under
		of Shares				Price Paid per				Plans or				the Plans or
		Purchased				Share				Programs				Programs
July 1 to July 31, 2008			190,000			$	96.98				190,000			$	468,754
August 1 to August 31, 2008			227,000			$	107.10				227,000			$	444,439
September 1 to September 30, 2008			264,600			$	101.16				264,600			$	417,667
Total			681,600			$	101.97				681,600			$	417,667