# METTLER TOLEDO INTERNATIONAL INC/ (MTD) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from METTLER TOLEDO INTERNATIONAL INC/'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1037646/000103764622000008/mtd-20211231.htm
Accession: 0001037646-22-000008
Filing date: 2022-02-11
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/MTD/
All MD&A years: /company/MTD/mda/
Next year: /company/MTD/mda/fy2022/ (FY 2022)

Item 7.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 together with our consolidated financial statements.

Changes in local currencies exclude the effect of currency exchange rate fluctuations. Local currency amounts are determined by translating current and previous year consolidated financial information at an index utilizing historical currency exchange rates. We believe local currency information provides a helpful assessment of business performance and a useful measure of results between periods. We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. We present non-GAAP financial measures in reporting our financial results to provide investors with an additional analytical tool to evaluate our operating results.

We also include in the discussion below disclosures of immaterial qualitative factors that are not quantified. Although the impact of such factors is not considered material, we believe these disclosures can be useful in evaluating our operating results.

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Overview

We operate a global business with sales that are diversified by geographic region, product range, and customer. We hold leading positions worldwide in many of our markets and attribute this leadership to several factors, including the strength of our brand name and reputation, our comprehensive offering of innovative instruments and solutions, our Spinnaker sales and marketing program, and the breadth and quality of our global sales and service network.

Net sales in U.S. dollars increased 21% in 2021 and 3% in 2020. Excluding the effect of currency exchange rate fluctuations, or in local currencies, net sales increased 18% in 2021 and 2% in 2020. In 2021, we experienced broad-based growth with robust customer demand in most businesses and regions as global economies recovered from COVID-19. We also benefited from excellent execution of our sales and marketing programs and effectively navigated supply chain challenges to meet heightened customer demand. Growth in China was particularly strong. We continue to benefit from our strong global leadership positions, diversified customer base, innovative product offering, investment in emerging markets, significant installed base, and the impact of our sophisticated global sales and marketing programs. Examples of these programs include identifying and investing in growth and market penetration opportunities, more effectively pricing our products and services, increasing our sales force effectiveness through improved guidance and redirecting resources to our most promising growth opportunities, increasing digitalization tools, and continuing to optimize our lead generation and lead nurturing processes.

During the past two years, we accelerated our ability to use advanced analytics to identify and pursue growth opportunities, while increasing the effectiveness of our digital tools to support our global sales organization. We have also successfully adapted to remote and hybrid work environments and increased engagement with our customers with our Go-to-Market and digital approaches. While global market conditions are currently favorable, challenges remain in the global supply chain and we will face difficult prior period comparisons in 2022 due to strong results in 2021. Uncertainties and challenges relating to COVID-19 also continue, including new variants (such as Omicron), lockdowns, logistical and inflationary challenges, and the potential impact on global economies, and market conditions may change quickly.

Our laboratory sales experienced excellent growth in 2021, particularly from life sciences and biotech customers, while other end-markets such as the chemical industry experienced a strong recovery. We also continue to support COVID-19 testing, development, treatment, and vaccine production activities in biopharma. We expect to continue to benefit from favorable biopharma market trends. We also believe we will benefit from increased customer demand for automation, digitalization, and safety; new facility investments; and continued focus on regulatory compliance including data integrity requirements. Overall, we believe we are well positioned to continue to capture growth and gain market share in our laboratory business.

Our industrial sales experienced strong growth in 2021 in both core industrial and product inspection. Core industrial experienced particularly strong growth, especially in China and the Americas. We continue to benefit from our strong product offering and focus on the more attractive, faster-growing segments of the market and strong execution of our growth initiatives in each region. We also continue to benefit from market trends in automation and digitalization. Emerging market economies, especially China, have historically been an important source of growth based upon the expansion of their domestic economies, and we expect this to be a continued source of future growth. Our core industrial-related products are also especially sensitive to changes in economic growth. Our product inspection business experienced improved customer demand during 2021 after being negatively impacted by COVID-19 in 2020. We

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expect our product inspection end-market to also benefit from our customers’ focus on brand protection, food safety, and productivity.

Our food retailing sales decreased during 2021 primarily due to weak market dynamics, the timing of project activity, and the negative impact of component shortages. Traditionally, the spending levels in this sector have experienced more volatility than our other end-markets due to the timing of customer project activity and new regulations.

In 2022, we will continue to pursue the overall business growth strategies which we have followed in recent years:

Gaining Market Share. Innovation is essential to gaining market share and is fundamental in all aspects of our business including sales and marketing and technology leadership. Our global sales and marketing initiative, Spinnaker, continues to be an important growth strategy. We aim to gain market share by implementing sophisticated sales and marketing programs, leveraging our extensive customer databases, and leveraging our product offering to larger customers through key account management. While this initiative is broad-based, efforts to improve these processes include the use of advanced data analytics to identify, prioritize, and pursue growth opportunities; the implementation of more effective pricing and value-based selling strategies and processes; improved sales force guidance, training and effectiveness; cross-selling; increased segment marketing; and leads generation and nurturing activities. We have also added field sales and service resources to pursue underpenetrated market opportunities and will make additional investments to front-end resources in 2022. We also continue to adapt our Go-to-Market approaches with additional inside and telesales resources, while also increasing digital customer interaction. We continue to benefit from digitalization tools to gain efficiencies and increase the effectiveness of our field sales force. In addition, our comprehensive service offerings, and our initiatives to globalize and harmonize these offerings, help us further penetrate developed markets. We estimate that we have the largest installed base of weighing instruments in the world, and we continue to leverage advanced data analytics and invest in sales and marketing activities to increase the proportion of our installed base that is under service contract, or sell new products that replace old products in our installed base. In addition to traditional repair and maintenance, our service offerings continue to expand into value-added services for a range of market needs, including regulatory compliance. We have also made adjustments to our service model to incorporate remote service, depot drop-off/pickup, and other approaches to ensure the safety of our technicians and customers.

Expanding Emerging Markets. Emerging markets, comprising Asia (excluding Japan), Eastern Europe, Latin America, the Middle East, and Africa, account for approximately 36% of our total net sales. We have a two-pronged strategy in emerging markets: first, to capitalize on long-term growth opportunities in these markets, and second, to leverage our low-cost manufacturing operations in China. We have nearly a 35-year track record in China, and our sales in Asia have grown more than 13% on a compound annual growth basis in local currencies since 1999. Over the years, we have also broadened our product offering to the Asian markets. India has also been a source of emerging market sales growth in past years due to increased life science research activities. Overall, versus the prior year, we experienced a 20% increase in emerging market local currency sales by destination during 2021, which included 25% local currency sales growth in China. Within China, we continue to redeploy resources and sales and marketing efforts to the faster-growing segments of pharma, food manufacturing, chemical, and environment. We believe the long-term growth of these segments will be favorably impacted by the Chinese government’s emphasis on science, high-value industries, product quality, and food safety. We expect our laboratory and product inspection businesses will particularly benefit from our focus on these segments. We also continue to invest and add sales and marketing resources to pursue growth in under-penetrated emerging markets. However, emerging market sales can be volatile. In particular, China has historically been volatile and market conditions may change unfavorably due to various factors.

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Extending Our Technology Lead. We continue to focus on product innovation. In the last three years, we spent approximately 5% of net sales on research and development. We seek to improve our product offerings and their capabilities with additional integrated technologies and software, which we believe supports our pricing differentiation and accelerates product replacement cycles. In addition, we aim to create value for our customers by having thorough knowledge of their processes via our significant installed product base.

Expanding Our Margins. During 2021, we experienced increased inflation in our cost structure, particularly regarding material product costs and transportation and logistics, and we expect our cost structure to further increase in 2022 due to these inflationary dynamics. However, despite these challenges to our cost structure, we continue to strive to improve our margins by more effectively pricing our products and services, optimizing our cost structure, and improving our mix in higher-margin businesses such as service. For example, sophisticated data analytic tools provide us new insights to further refine our price strategies and processes. We also focus on reallocating resources and better aligning our cost structure to support our investments in market penetration initiatives, higher-growth/profitable areas, and opportunities for margin improvement.

We have also initiated various cost reduction programs over the past few years, including temporary cost containment measures during 2020 in response to COVID-19. We have also implemented global procurement and supply chain management programs over the last several years aimed at lowering supply costs, and have increased our focus on these programs with our SternDrive initiative. SternDrive is our global operational excellence program for continuous improvement efforts within our supply chain, manufacturing, and back-office operations. Blue Ocean is also an important enabler of our various margin expansion initiatives. Our move to standardized business processes, systems, and data structures throughout our global organization provides greater data transparency and faster access to real-time data. Our cost leadership and productivity initiatives are also focused on continuously improving our invested capital efficiency, such as reducing our working capital levels, improving our order to cash cycle, and ensuring appropriate returns on our expenditures.

Pursuing Strategic Acquisitions. We seek to pursue "bolt-on" acquisitions that may leverage our global sales and service network, respected brand, extensive distribution channels, and technological leadership. We have identified life sciences, process analytics, and product inspection as three key areas for acquisitions. For example, in March 2021, we acquired all the membership interests of Mayfair Technology, LLC (PendoTECH), a manufacturer and distributor of single-use sensors, transmitters, control systems, and software for measuring, monitoring, and data collection primarily in bioprocess applications. PendoTECH serves biopharmaceutical manufacturers and life science laboratories and is located in the United States. The initial cash payment was $185.0 million and we made other post-closing payments of $7.4 million. We may be required to pay additional consideration of up to $20.0 million. In October 2021, we also acquired Scale-up Systems Inc., a leading software provider for scale-up and reaction modeling serving the biopharma and chemical markets. The initial cash payment was $20.2 million and we may be required to pay additional amounts up to EUR 3.0 million.

COVID-19

Since late 2019, the coronavirus pandemic (COVID-19) has spread globally in all countries where we conduct business. The COVID-19 pandemic is evolving and has led to the implementation of various responses, including government-imposed quarantines, stay-at-home orders and lockdowns, travel restrictions, vaccination and testing requirements, and other public health safety measures. These restrictions continue to change as COVID-19 evolves, variants are discovered, and vaccinations are distributed in each country and region. The emergence of the Omicron variant of COVID-19 in late 2021 has presented particular challenges to the global economy given its high level of transmissibility, which

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can cause many people to be affected at the same time or over a short period of time, leading to potential disruptions to our business and supply chain.

The health and safety of our employees and business partners have been our highest priority throughout the COVID-19 pandemic, and we have implemented several preventative and protective measures. We also have continued to support our customers with their essential businesses, such as life sciences, food manufacturing, chemicals (e.g., sanitizers, disinfectants, soaps, etc.), food retail, and transportation and logistics.

Our production and logistics facilities are currently operational, and our office-based employees continue to adhere to any applicable jurisdictional stay-at-home orders. Our supply chain is currently facing wide-ranging global challenges, although we have been able to meet delivery requirements of our customers with some interruption. We continue to closely monitor risks associated with our supply chain, including the availability of certain components, material shortages, supplier delays, potential transportation delays, and higher transportation and material costs, which could significantly adversely affect sales and/or profitability in future quarters. We also continue to leverage our digital and remote sales capabilities, and our service organization continues to provide on-site and remote customer support to facilitate uptime, productivity, and regulatory compliance.

COVID-19 presents several risks to our business as further described on page 14 in the Risk Factors section of this Form 10-K. Uncertainties related to COVID-19 and the resulting impact to the global economy continue in most regions of the world, and market conditions can change quickly. The longer-term effects on our business will be influenced by the global economy and any economic implications in different regions of the world.

Results of Operations — Consolidated

Net sales

Net sales were $3.7 billion for the year ended December 31, 2021, compared to $3.1 billion in 2020 and $3.0 billion in 2019. This represents an increase of 21% in 2021 and 3% in 2020 in U.S. dollars and an increase of 18% in 2021 and 2% in 2020 in local currencies. The PendoTECH acquisition contributed 1% to our net sales in 2021. In 2021, we experienced broad-based growth with robust customer demand in most businesses and regions, with particularly strong growth in China. We continue to benefit from the execution of our global sales and marketing programs, our innovative product portfolio, and investments in our field organization, particularly surrounding digital tools and techniques. However, uncertainties and challenges relating to COVID-19 continue, including new variants (such as Omicron), lockdowns, supply chain and inflationary challenges, and the potential impact on global economies, and market conditions may change quickly.

In 2021, our net sales by geographic destination increased in U.S. dollars compared to 2020 by 20% in the Americas, 15% in Europe, and 26% in Asia/Rest of World. In local currencies, our net sales by geographic destination increased in 2021 by 20% in the Americas, 12% in Europe, and 21% in Asia/Rest of World, with 25% growth in China. The PendoTECH acquisition contributed approximately 2% to net sales in the Americas and 1% to net sales in Europe during 2021. A discussion of sales by operating segment is included below.

As described in Note 3 to our consolidated financial statements, 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.

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Net sales of products increased 23% in U.S. dollars and 20% in local currencies during 2021 and increased 2% in both U.S. dollars and in local currencies in 2020. The PendoTECH acquisition contributed approximately 1% to our net sales of products during 2021. Service revenue (including spare parts) increased 11% in U.S. dollars and 8% in local currencies in 2021 and increased 3% in U.S. dollars and 2% in local currencies in 2020.

Net sales of our laboratory products and services, which represented approximately 56% of our total net sales in 2021, increased 25% in U.S. dollars and 22% in local currencies during 2021. The local currency increase in net sales of our laboratory-related products during 2021 includes very strong growth in most product categories, especially in pipettes and process analytics. Net sales of our laboratory products also benefited approximately 2% from the PendoTECH acquisition.

Net sales of our industrial products and services, which represented approximately 39% of our total net sales in 2021, increased 18% in U.S. dollars and 15% in local currencies during 2021. The local currency increase in net sales of our industrial-related products during 2021 includes strong growth in most product categories, with particularly strong growth in core industrial, especially in China and the Americas.

Net sales of our food retailing products and services, which represented approximately 5% of our total net sales in 2021, decreased 3% in U.S. dollars and 6% in local currencies during 2021. The decline in food retailing is primarily due to weak market dynamics, the timing of project activity, and the negative impact of component shortages.

Gross profit

Gross profit as a percentage of net sales was 58.4% for both 2021 and 2020 and 57.9% for 2019.

Gross profit as a percentage of net sales for products was 60.1% for 2021, compared to 60.3% for 2020 and 60.4% for 2019. Gross profit as a percentage of net sales for services (including spare parts) was 51.8% for 2021, compared to 51.6% for 2020 and 49.0% for 2019.

The gross profit as a percentage of net sales for 2021 reflects increased sales volume and favorable price realization, offset by higher material and transportation costs in 2021 and temporary cost savings in 2020.

Research and development and selling, general, and administrative expenses

Research and development expenses as a percentage of net sales were 4.6% for 2021, 4.5% for 2020, and 4.8% for 2019. Research and development expenses in U.S. dollars increased 21% in 2021 and decreased 3% in 2020, and in local currencies increased 17% in 2021 and decreased 5% in 2020. The increase during 2021 primarily relates to increased project activity and temporary savings in the prior year.

Selling, general, and administrative expenses as a percentage of net sales were 25.4% for 2021, compared to 26.6% for 2020 and 27.2% for 2019. Selling, general, and administrative expenses increased 15% in U.S. dollars and increased 12% in local currencies in 2021 and were flat in U.S. dollars and decreased 1% in local currencies in 2020. The increase during 2021 primarily includes higher cash incentive expense, temporary savings in the prior year, and increased sales and marketing investments.

Amortization expense

Amortization expense was $63.1 million in 2021, compared to $56.7 million and $49.7 million in 2020 and 2019, respectively. The increase in amortization expense primarily includes intangible assets related to the PendoTECH acquisition, as well as our investments in information technology, including our Blue Ocean program.

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Restructuring charges

During the past few years, we initiated various cost reduction measures. Restructuring charges were $5.2 million in 2021, compared to $10.5 million and $15.8 million in 2020 and 2019, respectively. Restructuring expenses are primarily comprised of employee-related costs.

Other charges (income), net

Other charges (income), net consisted of net income of $3.1 million, $13.8 million, and $6.2 million in 2021, 2020, and 2019, respectively. Other charges (income), net includes non-service pension costs (benefits), net (gains) losses from foreign currency transactions and hedging activities, interest income, and other items. Non-service pension benefits were $11.4 million, $12.2 million, and $4.8 million in 2021, 2020, and 2019, respectively. Other charges (income), net also includes $3.4 million of acquisition costs for the year ended December 31, 2021, as well as a $6.8 million charge to increase the PendoTECH acquisition contingent consideration and related obligations to the sellers.

Interest expense and taxes

Interest expense was $43.2 million for 2021, compared to $38.6 million for 2020 and $37.4 million for 2019.

Our reported tax rate was 19% during 2021, compared to 19.5% and 17.7% during 2020 and 2019, respectively. The 2019 reported tax rate includes a net benefit of $15.8 million associated with Swiss tax reform described below.

In May 2019, a public referendum was held in Switzerland that approved Swiss federal tax reform proposals previously approved by the Swiss Parliament. Additional changes in Swiss cantonal law were enacted in October 2019. The changes in Swiss federal tax had an immaterial effect on our financial statements. We recognized a discrete non-cash net deferred tax benefit of $15.8 million as a result of the enactment of the cantonal law in the fourth quarter of 2019. A further description of Swiss tax reform is in Note 14 to our consolidated financial statements.

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 18 to our consolidated financial statements.

U.S. Operations (amounts in thousands)

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[[/GREPCENT_TABLE]]

Total net sales increased 21% in 2021 and 2% in 2020 and net sales to external customers increased 20% in 2021 and 1% in 2020. The increase during 2021 is driven by very strong growth in most product categories, especially laboratory and core industrial. These results were partially offset by a significant decline in food retailing that was impacted by weak market dynamics, the timing of customer project

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activity, and component shortages. Net sales to external customers in our U.S. Operations also benefited approximately 3% from the PendoTECH acquisition.

Segment profit increased $57.2 million in our U.S. Operations segment during 2021, compared to an increase of $34.8 million during 2020. The segment profit increase in 2021 includes higher sales volume and benefits from our margin expansion initiatives, offset in part by higher transportation and material costs and temporary cost savings in the prior year.

Swiss Operations (amounts in thousands)

[[GREPCENT_TABLE]]
[["","2021","","2020","","2019","","Increase (Decrease) in % (1) 2021 vs. 2020","","Increase (Decrease) in % (1) 2020 vs. 2019"],["Net sales","$","997,634","","","$","823,760","","","$","797,177","","","21%","","3%"],["Net sales to external customers","$","171,633","","","$","143,923","","","$","139,499","","","19%","","3%"],["Segment profit","$","301,142","","","$","245,465","","","$","233,292","","","23%","","5%"]]
[[/GREPCENT_TABLE]]

(1)Represents U.S. dollar growth.

Total net sales in U.S. dollars increased 21% in 2021 and 3% in 2020, and in local currencies increased 19% in 2021 and decreased 2% in 2020. Net sales to external customers in U.S. dollars increased 19% in 2021 and increased 3% in 2020, and in local currencies increased 17% in 2021 and decreased 1% in 2020. Local currency net sales to external customers during 2021 includes strong growth in most product categories.

Segment profit increased $55.7 million in our Swiss Operations segment during 2021, compared to an increase of $12.2 million during 2020. The segment profit increase in 2021 includes higher sales volume, benefits from our productivity initiatives, and favorable foreign currency translation, offset in part by higher transportation and material costs and temporary cost savings in the prior year.

Western European Operations (amounts in thousands)

[[GREPCENT_TABLE]]
[["","2021","","2020","","2019","","Increase (Decrease) in % (1) 2021 vs. 2020","","Increase (Decrease) in % (1) 2020 vs. 2019"],["Net sales","$","1,041,308","","","$","889,891","","","$","876,500","","","17%","","2%"],["Net sales to external customers","$","829,761","","","$","716,715","","","$","700,741","","","16%","","2%"],["Segment profit","$","172,265","","","$","147,562","","","$","123,845","","","17%","","19%"]]
[[/GREPCENT_TABLE]]

(1)Represents U.S. dollar growth.

Total net sales in U.S. dollars increased 17% in 2021 and 2% in 2020, and in local currencies increased 12% in 2021 and decreased 1% in 2020. Net sales to external customers in U.S. dollars increased 16% in 2021 and increased 2% in 2020, and in local currencies increased 12% in 2021 and were flat in 2020. Local currency net sales to external customers during 2021 includes strong growth in most product categories, especially in laboratory-related products.

Segment profit increased $24.7 million in our Western European Operations segment during 2021, compared to an increase of $23.7 million in 2020. The segment profit increase in 2021 is primarily due to higher sales volume, benefits from our margin expansion initiatives, and favorable currency translation, offset in part by higher transportation and material costs and temporary cost savings in the prior year.

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Chinese Operations (amounts in thousands)

[[GREPCENT_TABLE]]
[["","2021","","2020","","2019","","Increase (Decrease) in % (1) 2021 vs. 2020","","Increase (Decrease) in % (1) 2020 vs. 2019"],["Net sales","$","1,063,430","","","$","792,345","","","$","769,233","","","34%","","3%"],["Net sales to external customers","$","771,651","","","$","578,610","","","$","544,716","","","33%","","6%"],["Segment profit","$","369,835","","","$","270,497","","","$","266,522","","","37%","","1%"]]
[[/GREPCENT_TABLE]]

(1)Represents U.S. dollar growth.

Total net sales in U.S. dollars increased 34% in 2021 and increased 3% in 2020, and in local currencies increased 26% in 2021 and 3% in 2020. Net sales by origin to external customers in U.S. dollars increased 33% in 2021 and 6% in 2020, and in local currencies increased 25% in 2021 and 6% in 2020. The increase in net sales to external customers during 2021 reflects particularly strong growth in both laboratory and industrial products. However, market conditions may change quickly and we will face difficult prior period comparisons in 2022.

Segment profit increased $99.3 million in our Chinese Operations segment during 2021, compared to an increase of $4.0 million in 2020. The increase in segment profit during 2021 primarily reflects increased sales volume, benefits from our margin expansion initiatives, and favorable foreign currency translation, offset in part by higher transportation and material costs and temporary cost savings in the prior year.

Other (amounts in thousands)

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

(1)Represents U.S. dollar growth.

Other includes reporting units in Southeast Asia, Latin America, Eastern Europe, and other countries. Net sales to external customers in U.S. dollars increased 14% in 2021 and 1% in 2020, and in local currencies increased 12% in 2021 and 2% in 2020. The increase in local currency growth in net sales to external customers during 2021 includes strong growth in most product categories.

Segment profit increased $22.1 million in our Other segment during 2021, compared to an increase of $6.4 million during 2020. The increase in segment profit during 2021 primarily relates to increased sales volume and favorable foreign currency translation.

Liquidity, Capital Resources, and Future Cash Requirements

Liquidity is our ability to generate sufficient cash to meet our obligations and commitments. Sources of liquidity include cash flows from operating activities, available borrowings under our Credit Agreement, the ability to obtain appropriate financing, and our cash and cash equivalent balances. Currently, our financing requirements are primarily driven by working capital requirements, capital expenditures, share repurchases, and acquisitions. Global market conditions can be uncertain, and our ability to generate cash flows could be reduced by a deterioration in global markets.

We currently believe that cash flows from operating activities, together with liquidity available under our Credit Agreement, local working capital facilities, and cash balances, will be sufficient to fund currently anticipated working capital needs and spending requirements for at least the foreseeable future.

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Cash provided by operating activities totaled $908.8 million in 2021, compared to $724.7 million in 2020 and $603.5 million in 2019. The increase in 2021 is primarily due to higher net earnings.

Capital expenditures are made primarily for investments in information systems and technology, machinery, equipment, and the purchase and expansion of facilities. Our capital expenditures totaled $107.6 million in 2021, $92.5 million in 2020, and $97.3 million in 2019. Capital expenditures are expected to increase in 2022 similarly as we experienced in 2021, subject to business and economic conditions.

In September 2021, the Company entered into an agreement with the U.S. Department of Defense to increase domestic production capacity of pipette tips and enhance manufacturing automation and logistics. The Company will receive funding of $35.8 million over the next two years, which will offset future capital expenditures.

We continue to explore potential acquisitions. In connection with any acquisition, we may incur additional indebtedness. In March 2021, we acquired all the membership interests of Mayfair Technology, LLC (PendoTECH), a manufacturer and distributor of single-use sensors, transmitters, control systems, and software for measuring, monitoring, and data collection primarily in bioprocess applications. PendoTECH serves biopharmaceutical manufacturers and life science laboratories and is located in the United States. The initial cash payment was $185.0 million and we made other post-closing payments of $7.4 million. We may be required to pay additional consideration of up to $20.0 million. In October 2021, the Company acquired Scale-up Systems Inc., a leading software provider for scale-up and reaction modeling serving the biopharma and chemical markets. The initial cash payment was $20.2 million and the Company may be required to pay additional amounts up to EUR 3.0 million. For additional information related to these acquisitions, refer to Note 4 to the consolidated financial statements.

In 2021, 2020, and 2019, we also incurred additional acquisition payments totaling $8.3 million, $6.2 million, and $2.0 million, respectively.

Cash flows used in financing activities during 2021 primarily comprised share repurchases. In accordance with our share repurchase program, we spent $1.0 billion in 2021 and $775 million in both 2020 and 2019 on the repurchase of 739,486 shares, 815,652 shares, and 1,094,648 shares, respectively. Our share repurchase program does not obligate us to acquire any specific number of shares; however, in 2022, we intend to spend a similar amount on the repurchase of shares as we spent in 2021, subject to business and economic conditions.

We plan to continue to repatriate earnings from China, Switzerland, Germany, the United Kingdom, and certain other countries in future years and expect the only additional cost associated with the repatriation of such foreign earnings will be withholding taxes. All other undistributed earnings are considered to be permanently reinvested. We believe the ongoing tax impact associated with repatriating our undistributed foreign earnings will not have a material effect on our liquidity.

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Senior Notes and Credit Facility Agreement

Our short-term borrowings and long-term debt consisted of the following at December 31, 2021:

[[GREPCENT_TABLE]]
[["","U.S. Dollar","","Other Principal Trading Currencies","","Total"],["3.67% $50 million 10-year Senior Notes due December 17, 2022","$","50,000","","","$","\u2014","","","$","50,000"],["4.10% $50 million 10-year Senior Notes due September 19, 2023","50,000","","","\u2014","","","50,000"],["3.84% $125 million 10-year Senior Notes due September 19, 2024","125,000","","","\u2014","","","125,000"],["4.24% $125 million 10-year Senior Notes due June 25, 2025","125,000","","","\u2014","","","125,000"],["3.91% $75 million 10-year Senior Notes due June 25, 2029","75,000","","","\u2014","","","75,000"],["2.83% $125 million 12-year Senior Notes due July 22, 2033","125,000","","","\u2014","","","125,000"],["3.19% $50 million 15-year Senior Notes due January 24, 2035","50,000","","","\u2014","","","50,000"],["1.47% EUR 125 million 15-year Senior Notes due June 17, 2030","\u2014","","","141,789","","","141,789"],["1.30% EUR 135 million 15-year Senior Notes due November 6, 2034","\u2014","","","153,132","","","153,132"],["1.06% EUR 125 million 15-year Senior Notes due March 19, 2036","\u2014","","","141,789","","","141,789"],["Senior Notes debt issuance costs, net","(2,546)","","","(1,569)","","","(4,115)"],["Total Senior Notes","597,454","","","435,141","","","1,032,595"],["$1.25 billion Credit Agreement, interest at LIBOR plus 87.5 basis points(1)","429,815","","","165,226","","","595,041"],["Other local arrangements","4,794","","","49,512","","","54,306"],["Total debt","1,032,063","","","649,879","","","1,681,942"],["Less: current portion","(51,755)","","","(49,379)","","","(101,134)"],["Total long-term debt","$","980,308","","","$","600,500","","","$","1,580,808"]]
[[/GREPCENT_TABLE]]

(1) See Note 6 and Note 7 to our consolidated financial statements for additional disclosures on the financial instruments associated with the Credit Agreement.

As of December 31, 2021, approximately $649.0 million of additional borrowings were available under our Credit Agreement and we maintained $98.6 million of cash and cash equivalents. We expect to make interest payments of approximately $50 million during 2022 associated with our debt outstanding as of December 31, 2021.

Changes in exchange rates between the currencies in which we generate cash flow 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. Further, we do not have any downgrade triggers from rating agencies that would accelerate the maturity dates of our debt. We were in compliance with our debt covenants as of December 31, 2021.

Senior Notes

The Senior Notes listed above are senior unsecured obligations and interest is payable semi-annually. The Senior Notes each contain customary affirmative and negative covenants as further described in Note 10 to our consolidated financial statements.

In December 2021, we entered into an agreement to issue and sell $300 million 15-year Senior Notes in a private placement. We will issue $150 million with a fixed interest rate of 2.81% (2.81% Senior Notes) in March 2022, which will mature in March 2037, and we will issue $150 million with a fixed interest rate of 2.91% (2.91% Senior Notes) in September 2022, which will mature in September 2037. We will use the proceeds from the sale of the notes to refinance existing indebtedness and for other general corporate purposes.

In May 2021, we entered into an agreement to issue and sell $125 million 12-year Senior Notes with a fixed interest rate of 2.83%. The Senior Notes were issued in July 2021 and will mature in July 2033.

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We used the proceeds from the sale of the notes to refinance existing indebtedness and for other general corporate purposes.

Credit Agreement

On June 25, 2021, we entered into a $1.25 billion Credit Agreement (the Credit Agreement), which amended our $1.1 billion Amended and Restated Credit Agreement (the Prior Credit Agreement), which is further described in Note 10 to our consolidated financial statements.

Other Local Arrangements

In April 2018, two of our non-U.S. pension plans issued loans totaling $39.6 million (Swiss franc 38 million) to a wholly-owned subsidiary of the Company. The loans have the same terms and conditions, which include an interest rate of Swiss franc LIBOR plus 87.5 basis points. The loans were renewed for one year in April 2021.

Share Repurchase Program

In November 2020, the Company’s Board of Directors authorized an additional $2.5 billion to the share repurchase program which has $2.1 billion of remaining availability as of December 31, 2021. The share repurchases are expected to be funded from cash generated from operating activities, borrowings, and cash balances. Repurchases will be made through open market transactions, and the amount and timing of purchases will depend on business and market conditions, the stock price, trading restrictions, the level of acquisition activity, and other factors.

We have purchased 30.2 million common shares since the inception of the program in 2004 through December 31, 2021, at a total cost of $6.9 billion. During the years ended December 31, 2021 and 2020, we spent $1.0 billion and $775.0 million on the repurchase of 739,486 shares and 815,652 shares at an average price per share of $1,352.27 and $950.14, respectively. We reissued 110,748 shares and 162,176 shares held in treasury for the exercise of stock options and restricted stock units during 2021 and 2020, respectively.

Effect of Currency on Results of Operations

Our earnings are affected by changing exchange rates. We are particularly sensitive to changes in the exchange rates between the Swiss franc, euro, Chinese renminbi, and U.S. dollar. We have more Swiss franc expenses than we do Swiss franc sales because we develop and manufacture products in Switzerland that we sell globally and have a number of corporate functions located in Switzerland. When the Swiss franc strengthens against our other trading currencies, particularly the U.S. dollar and euro, our earnings go down. We also have significantly more sales in the euro than we do expenses. When the euro weakens against the U.S. dollar and Swiss franc, our earnings also go down. We estimate a 1% strengthening of the Swiss franc against the euro would reduce our earnings before tax by approximately $1.9 million to $2.1 million annually.

We also conduct business throughout the world, including Asia Pacific, the United Kingdom, Eastern Europe, Latin America, and Canada. Fluctuations in these currency exchange rates against the U.S. dollar can also affect our operating results. The most significant of these currency exposures is the Chinese renminbi. The impact on our earnings before tax of the Chinese renminbi weakening 1% against the U.S. dollar is a reduction of approximately $2.9 million to $3.1 million annually.

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, the Swiss franc, and euro. Based on our outstanding debt at December 31, 2021, we estimate that a 5% weakening of the U.S. dollar

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against the currencies in which our debt is denominated would result in an increase of $34.3 million in the reported U.S. dollar value of our debt.

Taxes

We are subject to taxation in many jurisdictions throughout the world. Our effective tax rate and tax liability will be affected by a number of factors, such as changes in law, the amount of taxable income in particular jurisdictions, the tax rates in such jurisdictions, tax treaties between jurisdictions, the extent to which we transfer funds between jurisdictions, and earnings repatriations between jurisdictions. Generally, the tax liability for each taxpayer within the Mettler-Toledo International Inc. group of companies is determined either (i) on a non-consolidated/non-combined basis or (ii) on a consolidated/combined basis only with other eligible entities subject to tax in the same jurisdiction, in either case without regard to the taxable losses of non-consolidated/non-combined affiliated legal entities.

Environmental Matters

We are subject to environmental laws and regulations in the jurisdictions in which we operate. We own or lease a number of properties and manufacturing facilities around the world. Like many of our competitors, we have incurred, and will continue to incur, capital and operating expenditures and other costs in complying with such laws and regulations.

We are currently involved in, or have potential liability with respect to, the remediation of past contamination in certain of our facilities. A former subsidiary of Mettler-Toledo, LLC known as Hi-Speed Checkweigher Co., Inc. was one of two private parties ordered by the New Jersey Department of Environmental Protection, in an administrative consent order signed on June 13, 1988, to investigate and remediate certain ground water contamination at a property in Landing, New Jersey. After the other party under this order failed to fulfill its obligations, Hi-Speed became solely responsible for compliance with the order. Residual ground water contamination at this site is now within a Classification Exception Area which the Department of Environmental Protection has approved and within which the Company oversees monitoring of the decay of contaminants of concern. A concurrent Well Restriction Area also exists for the site. The Department of Environmental Protection does not view these vehicles as remedial measures, but rather as “institutional controls” that must be adequately maintained and periodically evaluated. We estimate that the costs of compliance associated with the site over the next several years will approximate a total of $0.4 million.

In addition, certain of our present and former facilities have or had been in operation for many decades and, over such time, some of these facilities may have used substances or generated and disposed of wastes which are or may be considered hazardous. It is possible that these sites, as well as disposal sites owned by third parties to which we have sent wastes, may in the future be identified and become the subject of remediation. Although we believe that we are in substantial compliance with applicable environmental requirements and, to date, we have not incurred material expenditures in connection with environmental matters, it is possible that we could become subject to additional environmental liabilities in the future that could have a material adverse effect on our financial condition, results of operations, or cash flows.

Inflation

Inflation can affect the costs of goods and services that we use, including raw materials to manufacture our products, as well as transportation and logistical costs. The competitive environment in which we operate limits somewhat our ability to recover higher costs through increased selling prices. Global inflation significantly increased during 2021 related to the COVID-19 economic recovery and associated disruptions in global demand, logistics, and labor markets. These inflationary conditions could have a greater impact on our operating results in future years.

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Moreover, there may be differences in inflation rates between countries in which we incur the major portion of our costs and other countries in which we sell products, which may limit our ability to recover increased costs. We remain committed to operations in China, Eastern Europe, India, and Brazil, which have experienced inflationary conditions. To date, these inflationary conditions have not had a material effect on our operating results. However, as our presence in China, Eastern Europe, India, and Brazil increases, these inflationary conditions could have a greater impact on our operating results.