Rating The IPO

Note: "Before IPO" and "After IPO" measure the use of the proceedings to enhance revenue growth. A small difference between the two Xs means funds from the proceedings probably will have little effect on the index.

Rating Scale

Prediction
The Company is an industry leader in a global marketplace with a rich and varied line of products. It knows how to manufacture and how to market. The management is experienced in running large corporations; it doesn’t appear inclined toward the frivolous sale of stock. The Company is aggressively pursuing the fast-growing Asian market. It has a constant flow of new products entering the marketplace. It’s applying R&D toward making the manufacturing process more efficient and consequently improving its gross profit margins. It acquires companies, which advance its core line of business. It makes money.

The stock will open in the upper teens. At the end of Year 1 it could be a $40 stock.

Material On This Page Taken From Prospectus
"Mettler-Toledo is a leading global supplier of precision instruments. The Company is the world's largest manufacturer and marketer of weighing instruments for use in laboratory, industrial and food retailing applications. In addition, the Company holds one of the top three market positions in several related analytical instruments such as titrators, thermal analysis systems, pH meters, automatic lab reactors and electrodes. Through its recent acquisition of Safeline Limited the Company is also the world's largest manufacturer and marketer of metal detection systems for companies that produce and package goods in the food processing, pharmaceutical, cosmetics, chemicals and other industries. The Company focuses on high value-added segments of its markets by providing innovative instruments, by integrating these instruments into application-specific solutions for customers, and by facilitating the processing of data gathered by its instruments and the transfer of this data to customers' management information systems. Mettler-Toledo services a worldwide customer base through its own sales and service organization and has a global manufacturing presence in Europe, the  United States and Asia."

Summary Of Financial Data
In millions except for Net Income Per Share.

The task of weighing an object is complex in proportion to the complexity of the society. The most advanced countries require the most precision, accuracy, and speed, and often they need the collection of the measured weight as a data item to be used in a computer process. All this invariably requires the subtlest of technologies. It means the industry is driven by R&D, is relatively fast paced, and is rich in applications. So much depends on the accurate measurement of weight that the industry is characterized by governmental inspections, constant, periodic calibration of the equipment, and service contracts. Although it’s fragmented in some specialty markets down at the regional level, nevertheless the industry remains difficult to penetrate in a broad way. With all the applications these days depending on accuracy or other essential features, the brand name takes on great importance. Mettler-Toledo has perhaps the most widely recognized name in its industry.

Its Global Reach
The Company claims to be the world’s largest manufacturer of weighing instruments, one of the top 3 in related analytical instruments, and the world’s largest in metal detection. Of its installed base of weighing instruments, over 600,000 are covered by service contract. Service contracts resulted in 17% of net sales in ’96, or $151 million.

Forty nine percent of sales come from Europe, 40% from North and South America, and the remaining 11% from other parts of the world. Asia is its most rapidly growing market.

It owns 16 manufacturing plants—7 are in the U.S., 4 in Switzerland, 2 in German, 1 in the U.K., and 2 in China. Remarkably, each of the plants has achieved ISO9001 certification, which indicates a high level of maturity in its manufacture of product.

Who owns Mettler-Toledo?
Mettler-Toledo is a Delaware corporation whose corporate offices are in Switzerland. The Company is so internationalized that its website has to ask and answer the question "Who owns Mettler-Toledo?"

The Mettler part of the company began in Switzerland in 1945 when Erhard Mettler came up with a single-pan analytical balance. The Toledo part began as Toledo Scales in the U.S in 1901. Most North Americans up to and through the Baby Boomers will recognize its brand name; for the last four generations "Toledo" appeared wherever a scale was found.

In 1980 Mettler became a part of the Swiss conglomerate Ciba-Geigy AG. In 1989 Toledo merged with Mettler to become Mettler-Toledo. Finally, in October, 1996 the established AEA Investors, Inc. of New York acquired the Company. AEA Investors is proud of claiming the Rockefellers, Mellons, and Harrimans as its founding members in 1969. The investor group has since expanded to include members from around the world, but the common thread is that they are all "Chairmen or Chief Executive Officers of major companies and prestigious institutions." True to their word, the Chairman of the Company’s Board is Philip Caldwell, former Chairman and CEO of Ford Motor Company.

AEA’s purchase of the Company is a telling sign. Their strategy is to go after strong companies with already large market share and make them stronger. After the acquisition, "a number of AEA's individual investors typically join the Board of the company and support management in implementing its business plan." Precisely that has been done here.

The acquisition of Mettler-Toledo from Ciba took the form of a recapitalization in a transaction sponsored by its management and AEA Investors. The Company paid cash of $402 million plus dividends of $87.1. It also paid around $185 million to settle amounts due to Ciba, and it incurred expenses of roughly $29 million related to the acquisition and financing. The total cost of acquisition, then, was about $703 million.

The Company financed most of the acquisition with debt through a credit agreement in the amount of $307 million and the issuance of $135 million in senior subordinted notes at 9 �%. AEA, along with other investors including employees, made an equity contribution of close to $190 million.

The Safeline Acquisition
In May, ’97 the Company made a further acquisition. It purchased Safeline, a British manufacturer of metal detection devices. The acquisition added another $100 million in debt on revenues of $40 million.

Metal detection is a critical element in many of the same industries, in fact, in many of the same production lines, which use the Company’s weighing instruments, such as pharmaceuticals, chemicals, cosmetics, and most critically in food processing. The increasing exchange of food exports among countries requires that they be free of contamination by metal particles. Regulatory controls for product safety have turned the manufacture of metal detection equipment into a high growth and lucrative market segment. Mettler-Toledo’s global marketing reach should have a substantial, positive impact on Safeline’s sales. There is the further opportunity to integrate its features together with weighing for more expanded solutions.

Products
The Company is not exactly a one-trick pony. It has a constant flow of new products always entering the market in what it calls filling the "pipeline". These products fall into 2 broad categories of instruments for —industrial use & food retailing and for laboratories.

Four trends are currently energizing the Company.

• First is the integration of weighing instruments together with data management software systems. The weight of a product can be used to advantage in many ways from counting to quality assurance and from pricing to inventory control. All these functions can be performed more thoroughly when linked to computers.

• Second is the integration of weighing instruments and related technologies directly into the manufacturing process where these functions are used. The acquisition of Safeline and its metal detection technology is an example of the synergies that can be developed to create new and sophisticated capabilities.

• Third is the unification of national weighing standards. Such standards have been promoted for at least the last 200 years but now are coming together at an accelerated pace, especially in the European Union. Weighing instruments, consequently, can be manufactured at less cost when the need to customize them for individual countries is avoided. The unification of standards will give governments the assurance that the inspection of weighing instruments for accuracy, which is often a public function, can be privatized. This area could well be a future source of revenue for the Company.

• And fourth, ISO9001 certification is creating a standardization of manufacturing practices throughout the world. It’s motivating a concomitant standardization in the equipment, which in turn reduces costs and opens up significant marketing opportunities.

The Company expects these trends to help sustain high levels of annual growth for the industry and for itself.

Selling and G&A expenditures for ’96 came in at a hefty 28% of revenue for the years ’94 through ’96 and gave no indication of being reduced for ’97. This is a good 10 to 14 points over what one would expect of a matured operation. They attribute these added expenses to the creation of direct marketing organizations throughout Asia including Taiwan, Korea, Hong Kong, Thailand, and Malaysia.. They’ve also beefed up their sales and service in Latin America.

Capital expenditures over the last number of years have been in the $25 to $29 million range annually. Most of the expenses lately have been for the purchase of land and the development of the two factories in China.

Proceeds For Debt Management
On June 30, 1997 the Company’s net amount of debt had reached $480 million, the greater percentage of it related to its acquisition and that of Safeline. Interest expense on the debt increased to $19 million for the first 6 months of ’97. At the same time there was a net loss of $36 million compared to earnings of $17 million for the corresponding period in the prior year. The loss was due mainly to the nonrecurring cost of $30 million for the purchase of Safeline’s in-process R&D projects.

Although highly leveraged the Company has the ability to sustain this kind of debt capacity, and it clearly will over the next several years. In the near-term it intends to refinance its current credit agreement to give it increased pro forma borrowing capability of as much as $401 million. Of this amount, $196 million will be a term loan and the remainder will be outstanding under a revolving credit facility. The credit facility itself will be increased from $170 million to $420 million.

Using borrowings from the new credit agreement, together with proceeds from the offering, the Company will attempt to repurchase all of the 9 �% senior subordinated notes, which are due in 2006. This should reduce their interest expense and let them present a stronger picture of operating income. The potential for earnings, of course, will have a positive effect on stock price.

As of this writing (9/30/97) the amount of stock held by the beneficial stockholders is unknown. Whatever it may be, the public offering will put another 6 to 7 million shares in play. It’s also unknown how much stock will enter the market through the exercise of options and warrants. If we assume a total of 50 million tradable shares in Year 1, then a $40 stock price would mean a market valuation of $2 billion, which would be 2.2 times revenues of $889 million or 2.5 times assets of $787 million; these ratios are probably supportable by the market. However, it’s doubtful we’ll find that much stock in play so soon. The Company does not appear inclined to pay its bills or resolve its problems with the sale of stock. It expects cash flow along with borrowings under the new credit agreement to be enough for working capital, capital expenditures, and debt service "for at least several years."

Management
Philip Caldwell is Chairman Of The Board. His bio reads that he has been "Senior Managing Director of Lehman Brothers Inc. and its predecessor, Shearson Lehman Brothers Holdings, Inc., since 1985. During a 32 year career at Ford Motor Company, Mr. Caldwell was Chairman of the Board of Directors and Chief Executive Officer from 1980 to 1985. He as served as a Director of the Chase manhattan Corp, the Chase Manhattan Bank, Digital Equipment Corp, Federated Department Stores, Inc. the Kellogg Company…", and others.

Robert F. Spoerry has been President and CEO since 1993. "He served as Head, Industrial and Retail (Europe) of the Company since 1987 to 1993." Mr. Spoerry’s salary is a realistic $435,000 with a $277,000 bonus.

William P. Donnelly is CFO. "From ’93 until joining the Company he held various senior financial and management positions, including most recently Group VP and CFO with Elsag Gailey Process Automation…. Prior to 1993, Mr. Donnelly was associated with the international accounting firm of Price Waterhouse."