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Mettler-Toledo International, Inc. (MTD)
Q1 2009 Earnings Call Transcript
April 30, 2009 5:00 pm ET
Mary Finnegan - Treasurer, IR
Olivier Filliol - President and CEO
Bill Donnelly - CFO
Sung Ji - JPMorgan
Peter Lawson - Thomas Weisel Partners
Brandon Couillard - Bank of America
Peter McDonald - Wall Street Access
Jon Groberg - Macquarie
Richard Eastman - Robert W. Baird
Mike Hamilton - RBC
Greg Halter - Great Lakes Review
Chuck Murphy - Sidoti & Company
Welcome to our first quarter 2009 Mettler-Toledo International Earnings Call. (Operator Instructions).
I would now like to turn the call over to your hostess for today's call, Ms. Mary Finnegan.
Previous Statements by MTD
» Mettler-Toledo International Inc. Q2 2009 Earnings Call Transcript
» Mettler-Toledo International, Inc. Q4 2008 Earnings Call Transcript
» Mettler-Toledo International Inc. Q3 2008 Earnings Call Transcript
Now, for some administrative matters. This call is being webcast and is available for replay on our website at www.mt.com. A copy of the press release and the presentation that we will refer to on today's call is also available on our website. Let me summarize the safe harbor language, which is outlined on page one of the presentation.
Statements in this presentation which are not historical facts constitute forward-looking statements within the meaning of the U.S. Securities Act of 1933 and the U.S. Securities Exchange Act of 1934. These statements involve risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. For a discussion of these risks and uncertainties, please see the discussion in our recent Form 8-K.
All of the forward-looking statements are qualified in their entirety by reference to factors discussed under the captions "Factors affecting our future operating results" and in the "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our Form 10-K.
One other item on today's call, we may use non-GAAP financial measures. More detailed information with respect to the use of and differences between the non-GAAP financial measures and the most directly comparable GAAP measure is provided in the press release.
I will now turn the call over to Olivier.
I want to start with highlights of the quarter, and then Bill will provide details on our financial results and our updated outlook for 2009. I will then continue with additional comments on the business and our expanded cost reduction program. As always, we will have time for a Q&A at the end.
The highlights of the quarter are summarized on page two of the presentation. Today's economic environment is very challenging, and market conditions have continued to deteriorate. Consequently, local currency sales declined 8% in the quarter. However, we exceeded our operating profit and EPS targets through strong execution on cost control measures, strict discipline on pricing and improved material costs.
Specifically, operating profit reached $52.3 million, while adjusted EPS amounted to $0.95. Finally, we also had strong cash flow generation in the quarter.
We expect the current difficult market condition to continue at least through 2009. Given this framework, we have expanded our cost reduction program to target $100 million in total annual cost savings. This is necessary to align our cost structure for market levels and our expectations that market conditions will not improve in the course of 2009.
We have spent the last several weeks working closely with the management teams around the world to diligently develop and initiate these plans to achieve desired the cost savings, but also to ensure that we do not sacrifice the strength of our franchise. I'm convinced we have struck the right balance. We continue to invest in R&D and sales and marketing programs where cutbacks are more moderate.
I will come back on these topics shortly, but let me first turn it over to Bill to comment on the financial results.
Let me start with additional details and sales which are outlined on slide number three. Sales were $374.1 million in the quarter, a decrease of 8% in local currency. On a U.S. dollar basis, sales declined 15% in the quarter as a result of negative currency of approximately 7%.
Breaking down local currency sales by geographic destination, we had local currency sales decline in Europe of approximately 10% and an 11% decline in the Americas. In Asia/Rest of World, sales increased by 1%. By product area, laboratory sales declined by 9% in the quarter, industrial sales decreased by 8%, and food retailing declined by 4%.
Turning to slide number five, let me now cover the rest of the P&L. Gross margins were 50.2% in the quarter as compared to 50.4% in the prior year quarter. The impact of the drop in volumes was largely offset by the impact of the stronger U.S. dollar. We also enjoyed the benefits from our pricing initiatives and lower raw material costs.
R&D amounted to $21.6 million or 5.8% of sales. This represents a 6% decline in local currency. We saw the benefit of our cost control measures as SG&A was $114 million, a decrease of 11% in local currency. We benefited from our cost reduction program as well as lower variable compensation.
Adjusted operating income amounted to $52.3 million. This compares to $58.3 million last year. That's a 10% decline. On a constant currency basis, operating margins were down slightly in the quarter, a level we are pleased with, given the much lower sales volume.