Olivier A. Filliol - CEO William P. Donnelly - Head of Finance, Supply Chain and IT Mary T. Finnegan - Head of Investor Relations and Treasurer.

Brandon Couillard - Jefferies & Company, Inc. Isaac Ro - Goldman Sachs Tycho Peterson - JP Morgan Bryan Kipp - Janney Montgomery Scott LLC Ross Muken - ISI Group LLC Steve Willoughby - Cleveland Research Richard Eastman - Robert W. Baird & Company, Inc. Sung Ji Nam - Cantor Fitzgerald, L.P..

Good day, ladies and gentlemen, and welcome to our First Quarter 2014 Mettler-Toledo International Earnings Conference Call. My name is Jay, and I will be your audio coordinator for today. (Operator Instructions) Thank you. I’d now like to turn our presentation over to your hostess for today’s call, Ms. Mary Finnegan. Please proceed, ma'am..

Thanks, Jay, and good evening, everyone. I’m Mary Finnegan. I'm the Treasurer and responsible for Investor Relations at Mettler-Toledo, and I’m happy you’re joining us tonight. I'm here today with Olivier Filliol, our CEO; and Bill Donnelly, our Executive Vice President. I need to cover just a couple of administrative matters.

This call is being Webcast and is available for replay on our website. A copy of the press release and the presentation that we'll refer to on today's call is also available on our website. Let me summarize the Safe Harbor language, which is outlined on Page 1 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 our discussion in our recent Form 8-K.

All of the forward-looking statements are qualified in their entirety by reference to the factors under the captions Factors Affecting our Future Operating Results and in the Business and Management Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K. Just one last item.

On today's call, we may use non-GAAP financial measures. More detailed information with respect to the use of and differences between non-GAAP financial measure and the most directly comparable GAAP measure is in our Form 8-K. I’m going to now turn the call over to Olivier..

Thanks, Mary, and welcome to everyone on the call. I will start with a summary of the quarter, and then Bill will provide details on our financial results and guidance. I will then have some additional comments on 2014. As always, we will have time for Q&A at the end. The highlights of the quarter are on Page 2 of the presentation.

Local currency sales increased 4% in the quarter with very strong growth in Europe. We have solid growth in the Americas and improving demand in China, although as expected sales were down in the quarter. China sales results were offset by relatively good growth in all the regions of Asia / Rest of World.

We executed well in the quarter and I’m pleased with our growth in earnings per share, particularly given the challenging currency headwinds we faced in the quarter. We are benefiting from our values cost control and margin initiatives that we have enacted over the last few years.

Let me turn it to Bill, to provide more details on the financial results and an update to our guidance for the year..

Thanks, Olivier, and hello, everybody. Let me start with additional details on sales, which were $550.6 million in the quarter, an increase of 4% in local currency. On a dollar base -- U.S. dollar basis, sales increased 5%, as currencies benefited by about 1% in the quarter. Turning to Page 3 of the presentation, we outlined sales by geography.

In the quarter, local currency sales increased by 9% in Europe, 3% in the Americas and 1% in Asia / Rest of World. Without the impact of exited product lines, Asia / Rest of World increased by 2% in the quarter. For China specifically, local currency sales, excluding exited product lines, were flat with the prior-year.

Exited product lines contributed a further 2% decline in China sales for the quarter. Sales growth by product line for the quarter is highlighted on Slide number 4. Laboratory sales increased by 7% in local currency, while industrial increased 1%.

Adjusting for the China product line exits, industrials increased by 2%, food retailing increased by 8% in the quarter. Turning to the next slide, let me walk you through the key P&L items for the quarter. Gross margins were 53.1%, this compares to 53.2% in the prior-year. This was a little lower than we expected.

We had benefited from pricing and lower raw material costs, which were offset by unfavorable mix, currency, and higher inventory charges. R&D amounted to $29.5 million, a 4% increase in local currency. The increase was principally driven by project development activity. SG&A amounted to $172.2 million, which is an increase of 3% in local currency.

Increased sales and marketing costs and higher variable compensation were offset by cost savings initiatives and lower employee benefit costs. Adjusted operating income amounted to $91 million in the quarter, which is a 6% increase over the prior-year amount of $85.4 million.

Our operating margins were 16.5%, that’s a 20 basis point increase over the prior-year. Currency had a larger negative impact on operating profit than we had expected the last time we spoke. We estimate currency reduced operating profit by $3.7 million.

Without this impact operating profit would have increased 11% and our operating margins would have grown by 100 bps in the quarter. Given this headwind, we’re pleased with the growth in operating income and our margin expansion for the quarter. A couple of final items on the P&L. Amortization amounted to $7.1 million in the quarter.

Interest expense was $5.7 million, while our effective tax rate was 24%. Fully diluted shares for the quarter were 30.1 million, that’s a 3% decline from the prior-year, reflecting the impact of our share repurchase program. Adjusted earnings per share were $2, a 9% increase over the prior-year amount of $1.84. Currency reduced EPS by approximately 5%.

Given this headwind, again we’re pleased with earnings growth in the quarter. On a reported basis, earnings per share was a $1.93, this compares to a $1.69 in the prior-year. Reported EPS includes pre-tax restructuring charges of $1.5 million or $0.04 a share, which are primarily employee-related charges.

Reported EPS also includes $0.03 of purchased intangible amortization. Now turning to cash flow, free cash flow in the quarter was $34 million, and this compares to $9.6 million in the prior-year. We are obviously improved with that strong number.

Working capital statistics were solid in the quarter with ITO at 5.1x and our DSO at 48 days; both of these are slight improvements as compared to the prior-year. Let me make some additional comments on our balance sheet before turning to guidance.

We have about $350 million of net debt which is a relatively modest level resulting in a net debt to EBITDA ratio of approximately 0.6x. Given this solid capital structure and cash flow generation capability, we believe we can improve our cost of capital with modest increases in our leverage ratio over time.

We’ve evaluated different alternatives to achieve this objective. In consultation with our Board, we have decided to increase the level of our share repurchases in the coming quarters.

We’ve always believed that having an investment grade rating was appropriate for this business, but we can maintain such a rating with a larger debt burden than we have today. This is a gradual change that we expect to do in our capital structure and it will not have any impact on our ability to do bolt-on acquisitions.

We also want to highlight that we do expect the changes in our leverage levels to be gradual and achieved over multiple years and begin to have a modest benefit to EPS towards the end of this year.

Just one last item on the balance sheet and cash flow, given the strong start to the year, I think will likely our cash flow will come closer to the $310 million range and this compares to the $305 million we had discussed in the last quarter. Now let's turn to guidance.

We are more optimistic about our Western markets as the conditions appear to be improving. Europe will face tougher comparisons in the second half, but we expect both Americas and Europe to perform well this year. Offsetting this is greater uncertainty and caution in emerging markets.

Year-to-date China is pretty much playing out according to our expectations that we shared with you last quarter. While sales growth was a little bit better than we expected, there remains enough uncertainty to keep us cautious.

We expect sales to be flattish in the second quarter and then see sales growth in the second half of the year, principally due to easier comparisons in China. As a reminder, we estimate exited product lines will reduce sales by approximately 2% for the full-year.

In terms of our emerging markets macroeconomic conditions in Russia, Brazil and India are all weaker as compared to the last time we spoke. Taken altogether, we’re slightly more positive about the developed world which is offset by a little more caution towards emerging markets.

Given this outlook and the good start to the year with our Q1 sales growth, we are moving our full-year sales guidance to approximately 4%. This compares to our previous guidance in the range of 3% to 4%. We are also raising the bottom end of our adjusted EPS guidance by a nickel to $11.45.

This reflects the Q1 results, some help at the end of the year from the increase in our share repurchase program offset by a little greater currency headwinds than previously thought. The top line remains at $11.60, which results in a growth rate of between 8% and 10%. Our previous guidance was $11.40 to $11.60 per share.

For the second quarter, we would expect local currency sales growth to be in the range of 3% to 4% and adjusted earnings per share in the range of $2.50 to $2.55 or a growth rate of 6% to 9%.

Similar to what we experienced in the first quarter, earnings per share growth is lower versus our full-year guidance as two of the headwinds we faced this year, higher Blue Ocean amortization and foreign exchange, had a larger impact as compared -- in the first half of the year as compared to the second half of the year.

There is also more difficult comparison on sales as compared to Q1. As you're updating your models, let me also cover some additional specifics on guidance. First, currency. We’d expect currency to have no impact on second quarter sales. It should also have no impact on Q3 sales, but will reduce Q4 sales by about 1%.

These are all based on current exchange rates. For the full year, we’d expect to have no impact on currency -- on sales due to currency. In terms of impact of currency on earnings, we’d expect currency to reduce earnings by approximately 2% in Q2, 1% in Q3, and to be slightly negative in Q4.

For the full-year 2014, currency is expected to reduce earnings growth by 2%. This is slightly worse than what we discussed last quarter. Okay, that’s it from my side. And now let me turn it back to Olivier..

Thanks, Bill, and let me start with summary comments on business conditions. Lab increased 7% in the quarter with very good growth in Balances, Analytical Instruments and Automated Chemistry. Process Analytics and Pipette also had growth in the quarter. Industrial increased 1% in the quarter.

We are happy to see core industrial returning to growth with 2% sales increase in the quarter. Product Inspection also had growth. Retail increased 8% in the quarter driven by project activity in Europe. Now let me make some additional comments by geography. Europe was up very strongly in the quarter with a 9% growth, better than we expected.

While comparisons were fairly easy, we did see good growth in most countries. Americas increased 3% in the quarter. We had good growth in Lab and Core Industrial offset by Product Inspection, which was up against very strong comparisons from a year earlier period. Asia / Rest of the World increased 1% in the quarter.

Bill already made some comments on China, but let me add some additional ones. As mentioned, China is pretty much on track with our expectations. We recognized it is going to take some time to work through the weakness in industrial sectors, but I’m pleased with the strong growth that we’re seeing in certain markets.

For example, our Lab business was up 6% in the quarter in China. However, if you look deeper, you’d see that our Lab instruments sold primarily into life science and research environment was up strongly, in fact, up double-digits. This was offset however by our Lab business, which is sold into more industrial markets which was down significantly.

Similarly, in industrial, while Core Industrial was down as expected, Product Inspection was up quite strongly. We acknowledge recent economic news has not been encouraging and we’re being cautious for the second quarter and second half of the year, given its greater level of uncertainty.

I’d stress however, we’re convinced of the strong growth opportunities in this market over the medium and long-term, given the growing GDP per capita, increasing number of scientists, and greater focus on quality. Now let me make a few comments on service, which had good sales growth in the quarter of 5%.

Service and consumables represent 30% of sales with service representing about three quarters of the total. Service represents an even larger percentage of sales in the developed market due to the large installed base and the maturity of the markets.

With all -- with almost 2,800 service personnel, we have the largest and most global service force as compared to our competitors. We invest a great deal in our service organization in terms of expensive training and value of tools to support their activities. Also our service technicians are specialized in the product areas, which makes them expert.

Taken together, this attributes makes -- make our service organization a unique value proposition to our customers and a clear competitive advantage for us. We are currently making investments for growth in our service business, most recently as part of our field approval program that we discussed last quarter.

Approvals are targeted additions of front end resources to pursue very specific growth opportunities. On the service side, we are adding some direct resources in our Lab and Product Inspection areas as well as support in a couple of regions to better leverage our service technicians. One last comment on service.

With an installed base of a few million instruments, our service data base provides important information that is wanted for product development, but also for service marketing campaign, tailored to the product life cycle.

We view this data as one of our most important intangible asset and in 2014 we will launch 100s of marketing campaigns to leverage this asset and deliver further growth. That covers my comments on the current business conditions.

In terms of additional topics this quarter, I want to cover two new product offerings which illustrates how we continue to use product launches to target growth segments and margin enhancement to cost reduction. Let me start with our offering in Product Inspection.

As background, this business represents about 17% of our total sales and customers are principally food and beverage manufacturers and pharma companies. We help to ensure the integrity and quality of packaged items with our checkweighers, metal detectors, X-ray vision and sterilization solutions.

We are the clear leader in this business with the broadest product offering of anyone in the market today. We combine this with the most extensive service force, which is especially important to these customers as manufacturing uptime is critical.

The dynamics of this business are very strong because of market concerns around quality in all consumer products. Given our broad product offerings, customers can gain synergies by using multiple products in their line to tackle rather complex quality hurdles.

For example, a European food company recently purchased an integrated solution involving checkweighers, metal detectors and [ph] [column] vision inspection systems. In addition to ensuring accurate weight and no metal contaminants, the food manufacturer wanted to enhance the identification of products that does not meet quality level.

In particular, they wanted the ability to isolate products that had a burned area, irregular shape, or insufficient amount of topping such as cheese. The vision inspection technology allows these defects to be identified and the product to be rejected before packaging.

The vision system consists of five cameras, covering different angles and it is incorporated into the checkweighing conveyor line. This results in reduced space on the line and the more efficient man machine interface.

While infield training and testing are needed to ensure accurate performance to specifications, the instruments are intuitive and easy to operate. This is just one example of the synergies within our product offerings and product inspection. Another example of our innovation is from our core industrial business.

We recently launched our next generation of industrial weighing terminals. These terminals are used in manufacturing operations and capture data from our weighing instruments and integrated into manufacturing control systems. This new generation of terminals enhances operator productivity by providing cost effective reliable weighing.

The display has outstanding readability under a variety of lighting conditions and function keys with graphical items, easily guide an operator. Software allows users to easily configure the terminal and backup files over multiple units within a facility, while the remote display provides additional operational flexibility.

Communication options allow connectivity to devices such as printers, remote displays and PCs. The terminals are targeted to general manufacturing customers, particularly in the food segment. Completely designed and developed in China, these terminals provide a cost effective solution for our customers and improved margins for us.

These are just two examples of how we use new products to target growth sectors and continue to drive margin improvements. Let me make a couple of concluding remarks before I open for questions. We remain cautiously optimistic in our Western markets and believe we’re well positioned to capture growth opportunities in these regions.

We recognize the conditions in emerging markets and in China, in particular, are more uncertain, but believe we’re executing well and will see better growth as the year progresses. We continue to focus on execution and capturing more share. That covers my comments, and I want to ask the operator to open the line for questions..

(Operator Instructions) Our first question comes from Brandon Couillard with Jefferies. Your line is open..

Thanks, good afternoon..

Hi, Brandon..

Hi, Brandon..

Olivier, I think Mettler might be the only company on the planet raising revenue guidance at this point in the year.

Can you give us a sense of like how the orders trended in the first quarter, was April better? And, particularly, what region do you feel more comfortable about in terms of the dynamics?.

Okay. I mentioned on the call Europe certainly positively surprised us, and it was little bit better than we expected. And I would say in general, the West feels better than we talked last time on the call.

When it comes to order of trend, I think we need always to be (audio gap) rather and talk about the year-to-date numbers and the year to May numbers, reflect the comments that we had on the call and give us kind of the confidence that we had a good start and allows us to modestly increase the midpoint of our sales guidance..

Thanks.

And Bill, are you able to quantify the incremental buyback planned for the year now? And could you remind us how much cash, if any, is trapped overseas?.

So in terms of quantifying it, I think we probably will end up by somewhere in the range of another $50 million, $75 million before the year is out. I don’t think it’s that our goal is to catch up in -- I should say, our goal certainly is not to catch up on the capital structure side too quickly. We will do it gradually over a longer period of time.

And then sort of the second part of your question?.

Just if you have any overseas trapped cash?.

Oh, so in terms of trapped cash, we really don’t have any. Our program is our tax rate reflects the idea that we got to fully repatriate our earnings. So in that sense, we don’t really have any trapped cash.

Sometimes, if I look at the $100 million, most of its related to kind of the idea that in certain countries you need to hand in the annual statutory accounts before you can remit the cash back. So it’s never the idea of trapped cash and our tax structure doesn’t really fit together these days..

Super, thank you..

Your next question comes from the line of Isaac Ro with Goldman Sachs. Your line is open..

Good afternoon, guys. Thanks. I’m just wondering if you could maybe spend a moment on some of the less often discussed emerging markets, Southeast Asia, Eastern Europe.

Just give us some color or anecdotes there as to how those markets are doing?.

Yes, okay. In general we commented that emerging markets are a little bit more challenging in these days. But there are -- there were some good numbers nevertheless, I start for example, with Russia. Russia was actually up for us in the quarter, but against easier comparisons. I would however, expect that Russia will be weaker in the near-term.

I would also stress that all the emerging markets are actually the individual account, we saw less than 3% and for example Russia is only about 2% for us. Then going on the Eastern Europe, actually did perform very well for us, had good growth and partially against weaker comparisons, but still was very happy to see the numbers there.

The part that was weaker was Latin America. I would say in general Latin America, but in particular also Brazil. The currency effects and the general economic conditions in Brazil are more challenging. Then we have in India certainly also currency topics, partially also government related topics that delay certain investments on our customers.

Then Southeast Asia was also softer, I’d say mostly impacted in China, but then sometimes you have also country specific issues going on, like in Thailand that we’re also facing.

But I would stress the point in all these countries, we really feel we have very strong local management, very experienced management, but also interesting is that all these country management and country managers have been around for many years. They have experienced us addressing the downturn, particularly in Europe and U.S. in the economic crisis.

They know how to handle their own local crisis now and adapt to the circumstances and adapt also the cost structure, but I would say as much also applying Spinnaker techniques to go after the segments that still offer growth. So I feel like we’re responding in a very good way in all these countries..

Very helpful. Thanks very much. And Bill, just a question on share repurchase in the context of your revised views on target leverage. If I heard you correctly, earlier you said that you’re looking at, I think, a pretty modest pace of share repurchase for the balance of the year. I think you said -- I won’t quote you, but I missed the number.

But the point was that sounded like you might be -- maybe ticking up your annualized repurchase on an absolute basis. But the pace of repurchase for the rest of this year kind of sounded like you’d more or less end up to be about in line with last year, effectively 95% or 100% of free cash flow.

So can you just maybe clarify kind of the magnitude of share repurchase we should assume for this year? That would be helpful..

Yes. So sorry if I chose my words poorly so, we’d incrementally add another $50 million, $75 million between now and the end of the year.

I think it a little bit depends on how our free cash flow, but in terms of absolute dollars I think even at that level because of the higher cash flow as well, we will probably be closer to the $400 million range, whereas in last year we’re closer to $300 million range..

Okay. That’s perfect. Thanks very much..

Your next question comes from the line of Tycho Peterson with JP Morgan. Your line is open..

Thanks. First question on Europe, you called out strength in food retail and some of the other sub segments.

Can you maybe just talk about the sustainability of the trend, in particular, food retail? I know you had an easy comp there, but how are you thinking about that business in Europe?.

Okay. I’d first state Europe overall did very well and it wasn’t so much driven by food retail. Food retail was nicely contributing, but actually you have to say we did well in Europe across product lines and across countries. The food retail as you all know is for us very project driven business. In that sense also lumpy.

I’d not read too much into our performance of Q1 by food retail. Actually I wouldn’t be surprised if we’re also going to have the quarters in this year where we will be down in food retail. So this is not a new trend. It’s more reflecting the nature of the business.

When I look for the overall European numbers, I don’t certainly expect that we’re going to experience this nice growth rates of Europe in the same way for the full-year.

We’re going to have more difficult comparisons in the latter part of the year, but I’d say what was really good about this Q1 number is first the magnitude of the growth and then how consistent it was across countries. We had even France showing growth. We had Southern countries that has growth. We have the U.K.

and Nordic which was for example very solid. This very encouraging signs and of course it’s also very motivating for the teams and that will create additional momentum also for the rest of the year..

And then thinking about China, I think you had previously talked about back half of the year getting back to mid-single digit growth.

Anything changed in your assumptions given kind of the recent data, and any update on kind of how payment terms are trending?.

I would agree the economic news have not been that promising, but at the same time I have to say we did really anticipate that things in China will remain challenging for us. The numbers should start to look better in the second part of the year, mainly because of comparison reasons.

We feel like our numbers are showing that we’re bottoming, but it’s actually difficult to really say when the momentum comes back. What I’m really seeing and the team is confirming that is that there are different areas of growth.

I think the prepared remarks about our Core Lab in selling mostly to the life science industry is certainly encouraging and showing that point. There are different industry segments that we see life coming back, particularly when it’s oriented to consumer goods.

But even I got an update last week about specialty chemicals industry segment that were encouraging. There is certainly also geographic parts of China that are encouraging. Certainly markets will remain very difficult for a long time, talking about steel industry, service industry and so on.

But all in all, we do see that things should gradually improve and then combining with the easier comparisons yet, we do expect growth in the second part of the year. How fast things will get -- come back to the high single-digit growth, low double-digit growth, that’s the key part. So really difficult to forecast and anticipate..

In terms of the ….

It's not that we see -- go ahead, Bill..

Yes, maybe just a comment on the credit thing.

So, you guys remember we talked probably about a year-ago about our concerns around credit topics, I think for us its not that we see more credit availability in the system, but its not incrementally worse in terms of our own balance sheet, our past due, our DSO type of statistics are actually now back to where they were before we started seeing this problem and so we feel good about that.

Actually it’s probably one of the reasons are -- probably it is one of the reasons our cash flow was good this quarter and so we don't see that situation getting worse..

And then last one, Bill can you just talk about bookings versus revenues? Last quarter I think the delta was about 2% in any particular areas where the bookings were better than the revenues significantly?.

I think if we kind of look at the Western world let’s say or even excluding China, we’re talking about mid single-digit kind of growth rates in terms of orders and sales. And then China was took both of those down.

If I look at like absolute backlog levels, I think we’re -- we’ve a little bit more backlog than we did a year-ago and things started out reasonable in the first part of this quarter..

Okay. Thank you..

Your next question comes from Jon Groberg with Macquarie. Your line is open..

Hi. This is actually Harris on for Jon. Just a quick question around capital structure.

Can you maybe comment on what your new longer term leverage targets are?.

So we think it make sense to be remain in investment grade like company that probably implies net debt to EBITDA ratios in the one, no more than probably two level. And so we could gradually work there over a multi-year period..

Great. Thank you..

Your next question comes from Bryan Kipp with Janney Capital. Your line is open..

Hi. This is -- just taking this one for Paul. Just to start off, I guess, to step back and look at the margins -- you did see a gross margin decline and there was some acceleration, some incrementals in 4Q. Did those not crossover? I know those were on material costs and a little bit of a pricing leverage.

And then on that SG&A decline as a percentage of sales, is that attributed to anything specific ala the pull in consolidation that you guys saw at the beginning half of 2013? Was that pulled through or does it represent more of the benefits and initiatives you guys instituted in 2013?.

Okay. So let me start with the gross profit side. So just to set the numbers, we -- our gross profit was down about 10 bps in the quarter. If I look at pricing, our pricing did well, our price -- net realized prices across everything was more than 150, slightly less than 200 basis points.

Our material costs were down about a 100 and -- between a 100 and 150 basis points, let’s say. And if you kind of dig deeper into okay, so why then was the margin not bigger because those are certainly numbers that would be inline with what we’d expect for the full-year and should produce, lets say, 30 to 50 bps if we kept on that pace.

We had kind of a funny mix within some of the details like so for example the mix within what we sold of Lab balances and a couple other topics. And then we had a currency headwind and then finally we just -- and that we had some inventory charge comparison topics between two periods.

Our expectation will be that we will return to this some margin -- gross margin expansion for the remainder of the year. So I don’t expect that trend that you saw here in the first quarter to remain. Maybe the second comment you made was on what were the specifics that led us to being able to have a pretty good cost control on the SG&A side.

I think there are several factors there so and maybe some pluses and minuses, but overall a good picture. As a reminder, we have a headwind on the bonus side, so have some catch up to do this year and bonuses versus the prior-year. I think for the full-year, it’s a number in the $15 million range. That’s kind of being split now throughout the year.

Second headwind is currency and then we of course have some cost savings as well associated with different programs that we had. Some of them relate to the shared service center, but other topics as well. So overall we feel like the cost structure is in pretty good shape as we start the year..

And just a quick follow-up on the new -- two new products that you guys highlighted earlier, just thinking about that in terms of your revenue guidance here, is there any benefit with those new products in those numbers? And I guess the other question, to back up is full utilization when you ramp up on something like that, is that 6 to 9 months or 12 months?.

Either way we need to look at product launches in Mettler-Toledo is that we have such a broad product range and so many products that a new product launch makes -- has a very little impact on our top line. It’s -- we have really in that sense very diversified across many different businesses.

Continuous product innovation and product launches however is very important to maintain our technology leadership to be able to continue to expand our markets and all that. So in that sense, I’m very happy about this product launches, but I do not expect that they have a big impact on the overall revenue..

Thank you..

Your next question comes from Ross Muken with ISI Group. Your line is open..

Good afternoon, guys. I just wanted to maybe dig into a little nuance on the China commentary and I appreciate a lot of the details you’ve given.

Any differential demand or order trend at different price points? We’ve heard from various folks some of the higher end instrumentation, obviously, it’s a little bit different for you guys, it’s been less robust than maybe lower-priced or typical service or other types of revenues.

And then, Olivier you commented on the industrial side, pieces like specialty chemical getting better, any other discernible trend among some of the other major industrial end markets where things either got materially better or materially worse or you were kind of surprised with the lack of reaction, and this is China-specific?.

Okay. On the price point actually I would say surprisingly we don't have much differentiation.

I would say the big difference is what goes well and what doesn’t go well is more actually geography than anything else and if I look at the different business lines that we have, they were relatively consistent and even if I like -- take a product category like laboratory weighing, its not that the high-end or the low end did perform particularly in a differentiated way..

Just to clarify your question Ross, you were asking specifically about China?.

Yes..

Yes, so if we dig down actually what Olivier said would apply to China as well. If you look maybe to pick pipettes and balances as a proxy for lower cost, I don’t want to hurt any of our Swiss engineers’ feelings with the higher end of the balances. And then maybe analytical instruments and auto can be kind of – relatively higher end.

Actually we had excellent growth in all those categories..

Great. That was very helpful. Thank you..

In terms of industry segments, I think nothing particular to add, other than what I said. Its really everything that’s closer to consumer related things is going well. And the industry that is linked to consumer demand and benefits of that and then things that are related to quality measurement, food safety and so on is also particularly healthy.

And on the other side, everything that’s related to infrastructure is particularly challenging..

Your next question comes from of Steve Willoughby with Cleveland Research. Your line is open..

Hi. Couple of questions. First, Bill, your comments regarding the impact from FX on margins, you made a comment about, something about 80 basis points.

I was just wondering if that was the total impact from FX on margins or versus what you were expecting?.

A year-on-year number..

Okay.

In total?.

Yes..

And then secondly, on the step up in share repurchases, should we also factor in some sort of step-up in interest expense, or is it going to be from working down cash balances?.

Hey, there will be a step up in terms of interest expense..

Okay.

And then, I guess, just the final thing is if you could just comment on Japan in the quarter and then Japan maybe after the quarter, given the changes there at the end of their fiscal year?.

So let me pull forward the Japanese numbers first. So, we had a good quarter in Japan, but it was against a relatively easy comp. Maybe to give you a feel that the two-year growth rate would get you mid single-digit kind of numbers. In terms of their outlook for the second quarter, I don’t remember them sticking out particularly good or bad.

And actually getting a -- yes, lets call it some modest growth in Q2 probably..

What might be interesting for you to realize that Japan is definitely skewed towards Lab business and you have heard us saying that Lab was strong across the world in the first quarter and that’s actually also reflected here in Japan. In Japan we have less and less revenue in the industrial world and none for food or retail..

And as you guys know Japan is not nearly as big a market for us as it is for some of the peer group companies. But I think that there are also some tax things that took place in Japan that might have helped some customers who want to buy in Q1 versus Q2, if I remember correctly..

Great. Thanks, guys..

Your next question comes from Richard Eastman with Robert W. Baird. Your line is open..

Yes, good afternoon..

Hi, Rich..

Olivier or Bill, could you just kind of speak to the Lab growth rate of plus 7%? I guess, is the appropriate way to look at that again is kind of this two-year growth rate, which puts it more in the lower single digits or was there anything that really stepped out at you as driving a 7% core growth rate there?.

Hey, we certainly think that multi-year growth rates are a good way to look at it. As we some times look at three-year growth rates too. Rick so on a three-year basis, it was maybe a nice move in a positive way.

So while Q1 of last year was the easiest comp for 2013 in terms of the quarters if you actually look at 2012 and 2011, 2011 we grew 16% the Lab business in the first quarter and in 2012 8%. So there is some of why Q1 last year was weak was partly due to the comps of the prior-year.

So -- but we’re -- we think that -- we think in China -- or sorry in Asia, or sorry in Europe, we’re certainly benefiting from that market being more stable economically not having things and there were some pent up demand as comps get a little tougher in the second half of the year from Europe, we wont be seeing those type of growth rates.

But we feel very good and how we did vis-à-vis competitors in our Lab product lines in the last few quarters frankly..

Sure.

And do you get -- if price was 175 basis point kind of capture for all of Mettler in the quarter, would it be north of that for Lab, I presume?.

Yes, I think that’s a fair statement..

Okay, yep. And then, I'm still maybe a little bit surprised when I look at the growth rates by Lab, Industrial, I’m surprised that again that you didn’t get more of a positive bump on the gross profit margin line.

But you referenced kind of a weak lab mix of instruments, was that anything to do with material costs or one-timers or was that just …?.

Yes. I could take it through there is a little bit of a story behind multiple of them. AutoChem had one very large order that went through, there were some specifics on a couple of other product categories like the mix of business within processing analytics, a little bit less TOC versus some other topics.

So there were different things that contributed to it as well as just kind of some inventory charge topics where we were unusually low in Q1 last year and a little bit above what we’d expect on quarterly basis in Q1..

Sure, okay. All right. And then, just the last question, I probably just missed this, but in terms of China, did you mention -- I think you had mentioned Lab was plus 16% in China. If I tried to weight that out, then maybe the industrial was minus kind of a high single-digit.

Is that reasonable math?.

Maybe just I think the word that Olivier used was quote unquote Classic Lab which would have included, excluded process analytics. So actually our Industrial business did a little bit better than what you described..

Okay, I understand. Okay. Thank you..

(Operator Instructions) Our next question comes from Sung Ji Nam with Cantor. Your line is open..

Hi. Thanks for taking the question.

Hi, can you hear me okay?.

Yes, we can hear you great..

Thank you. So I was wondering, you obviously had a good quarter for your Lab business, had more difficult comps for product inspection. Just curious, I know I think you guys have roughly a quarter of your business exposed to biopharma.

And in light of all the announcements about mergers and potential mergers, I was wondering kind of how that might or if it all, impact your business going forward?.

These merger activities that we see today in big pharma and partially also expected associated restructuring has been going on for quite a while. And we had that in the past few years in the West. In essence, we’ve also learned from that that this can impact some of our Lab categories, but then all the lab categories might benefit.

So to give you an illustration, while the number of scientist might go down, and this could impact the pipette business partially also the Lab -- balance business, but then the automated chemistry typically benefits from that, because these new companies want to invest in automation tools.

Then what I also want to stress is that none of this big pharma customers are really representing a big part of our revenue, not -- we don’t have a single customer that is representing more than 1% of revenue and in that sense we are particularly exposed to it.

And then last, but not least this has been a continuous trend that we’d see the pharma, biopharma more challenging in the West, but more than offset by the activities and the growth going on in the East. All the CROs and all the auto partially government driven investments in this biopharma industry sector..

Great. Thank you. And then just one more question on China. Obviously you’re seeing the region playing out as you had expected thus far. I was wondering kind of if you could talk about the competitive landscape.

I know you’ve talked about in the past walking away from some of the project, and I also was wondering if there are further opportunities for pruning your -- or rightsizing your product portfolio there?.

Yes. In terms of portfolio this was some thing that we did last year and then rapidly executed by absent of any major changes in the economic environment. I don’t see that we’ve additional steps that we’d take.

And in terms of competitive landscape, we keep our discipline on payment terms and so we still have cases where we see competitors accepting these payment terms that we’d not. We are okay. We are okay; we definitely feel that keeping the discipline is more important.

We don’t have full transparency about market share on a quarterly basis, and we’ve many competitors that don’t publish numbers.

But exchanging with the teams, I really don’t feel that we are losing here market share, in contrary, especially against international players, we’re very well positioned and I feel we continue to win market share even in this environment and even that we keep this very disciplined approach to payment terms..

Great. Thank you..

Thank you..

There are no additional questions at this time. I’ll turn the call back to our presenters..

Hey thanks, Jay, and thanks everyone for joining us tonight. Of course, if you have any questions, don’t hesitate to give us a call. Good night..

This concludes today’s conference call. You may now disconnect..