Mettler-Toledo International Inc. ("Mettler-Toledo" or the "Company") is a leading global supplier of precision instruments and services. The Company manufactures weighing instruments for use in laboratory, industrial, packaging, logistics and food retailing applications. The Company also manufactures several related analytical instruments and provides automated chemistry solutions used in drug and chemical compound discovery and development. In addition, the Company manufactures metal detection and other end-of-line inspection systems used in production and packaging and provides solutions for use in certain process analytics applications. The Company's primary manufacturing facilities are located in China, Germany, Switzerland, the United Kingdom and the United States. The Company's principal executive offices are located in Columbus, Ohio and Greifensee, Switzerland.

All intercompany transactions and balances have been eliminated.

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

Inventories are valued at the lower of cost or net realizable value. Cost, which includes direct materials, labor and overhead, is generally determined using the first in, first out (FIFO) method. The estimated net realizable value is based on assumptions for future demand and related pricing. Adjustments to the cost basis of the Company’s inventory are made for excess and obsolete items based on usage, orders and technological obsolescence. If actual market conditions are less favorable than those projected by management, reductions in the value of inventory may be required.

Goodwill, representing the excess of purchase price over the net asset value of companies acquired, and indefinite-lived intangible assets are not amortized, but are reviewed for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that an asset might be impaired. The annual evaluation for goodwill and indefinite-lived intangible assets are generally based on an assessment of qualitative and quantitative factors to determine whether it is more likely than not that the fair value of the asset is less than its carrying amount.

Other intangible assets include indefinite-lived assets and assets subject to amortization. Where applicable, amortization is charged on a straight-line basis over the expected period of benefit. The straight-line method of amortization reflects an appropriate allocation of the cost of the intangible assets to earnings in proportion to the amount of economic benefits obtained by the Company in each reporting period. The Company assesses the initial acquisition of intangible assets in accordance with the provisions of ASC 805 "Business Combinations" and the continued accounting for previously recognized intangible assets and goodwill in accordance with the provisions of ASC 350 "Intangible - Goodwill and Other" and ASC 360 "Property, Plant and Equipment".

The Company recognized amortization expense associated with the above intangible assets of $1.7$2.5 million and $1.6$1.7 million for the three months ended June 30, 20162017 and 2015,2016, respectively and $3.5$5.0 million and $3.1$3.5 million for the six months ended June 30, 20162017 and 2015,2016, respectively. The annual aggregate amortization expense based on the current balance of other intangible assets is estimated at $6.8 million for 2016, $6.5$9.9 million for 2017, $6.2$9.7 million for 2018, $5.9$9.2 million for 2019, $5.6$8.9 million for 2020, and $5.3$8.3 million for 2021.2021 and $7.3 million for 2022. Purchased intangible amortization was $1.5$2.3 million, $1.0$1.5 million after tax, and $1.4$1.5 million, $0.9$1.0 million after tax, for the three months ended June 30, 2017 and 2016, respectively and 2015, respectively$4.6 million, $3.0 million after tax, and $3.2 million, $2.1 million after tax, and $2.8 million, $1.9 million after tax, for the six months ended June 30, 20162017 and 2015,2016, respectively.

Revenue is recognized when title to a product has transferred and any significant customer obligations have been fulfilled. Standard shipping terms are generally FOB shipping point in most countries and, accordingly, title and risk of loss transfers upon shipment. In countries where title cannot legally transfer before delivery, the Company defers revenue recognition until delivery has occurred. The Company generally maintains the right to accept or reject a product return in its terms and conditions and also maintains appropriate accruals for outstanding credits. Shipping and handling costs charged to customers are included in total net sales and the associated expense is recorded in cost of sales for all periods presented. Other than a few small software applications, the Company does not sell software products without the related hardware instrument as the software is embedded in the instrument. The Company’s products typically require no significant production, modification or customization of the hardware or software that is essential to the functionality of the products. To the extent the Company’s solutions have a post-shipment obligation, revenue is deferred until the obligation has been completed. The Company defers product revenue where installation is required, unless such installation is deemed perfunctory. The Company also sometimes enters into certain arrangements that require the separate delivery of multiple goods and/or services. These deliverables are accounted for separately if the deliverables have standalone value and the performance of undelivered items is probable and within the Company's control. The allocation of revenue between the separate deliverables is typically based on the relative selling price at the time of the sale in accordance with a number of factors including service technician billing rates, time to install and geographic location.

Further, certain products are also sold through indirect distribution channels whereby the distributor assumes any further obligations to the customer upon title transfer. Revenue is recognized on these products upon transfer of title and risk of loss to its distributors. Distributor discounts are offset against revenue at the time such revenue is recognized.

Service revenue not under contract is recognized upon the completion of the service performed. Spare parts sold on a stand-alone basis are recognized upon title and risk of loss transfer which is generally at the time of shipment. Revenues from service contracts are recognized ratably over the contract period. These contracts represent an obligation to perform repair and other services including regulatory compliance qualification, calibration, certification and preventative maintenance on a customer’s pre-defined equipment over the contract period. Service contracts are separately priced and payment is typically received from the customer at the beginning of the contract period.

In situations where contractual termination benefits exist, the Company records accruals for employee termination benefits when it is probable that a liability has been incurred and the amount of the liability is reasonably estimable. All other employee termination arrangements are recognized and measured at their fair value at the communication date unless the employee is required to render additional service beyond the legal notification period, in which case the liability is recognized ratably over the future service period.

In May 2014,January 2017, the Company adopted ASU 2016-09, to ASC 718 "Compensation - Stock Compensation." The primary impact of adoption was the recognition of excess tax benefits from stock option exercises within the provision for taxes rather than within shareholder's equity, and a change in the determination of diluted earnings per common share. The Company adopted the guidance on a prospective basis, and expects its estimated annual tax rate will be reduced by 2% in 2017. The adoption of this guidance also reduced the Company's income tax rate by approximately 4% and 5% for the three and six months ending June 30, 2017. In addition, the Company recognized additional deferred tax assets of $1.5 million as a cumulative adjustment within shareholder's equity. The Company also classified on a retrospective basis the excess tax benefits from stock option exercises of $11.2 million as operating activities in the prior period Statements of Cash Flows. For additional disclosure, see Note 5 to the interim consolidated financial statements.

The FASB issued ASU 2014-09, ASU 2016-10 and ASU 2016-12 to ASC 606 "Revenue from Contracts with Customers." ASU 2014-09 provides authoritative guidance clarifying the principles for recognizing revenue and developing a common revenue standard for U.S. GAAP. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Additionally, the guidance requires improved disclosure to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. TheASU 2016-10 provides guidance becomes effective for the Company for the year beginning January 1, 2018. We are currently evaluating the impact the adoption of this guidance will have on the Company's consolidated results of operations, financial position,identifying performance obligations as they pertain to immaterial promised goods or services, shipping and disclosures.

The Company has limited involvement with derivative financial instruments and does not use them for trading purposes. The Company enters into certain interest rate swap agreements in order to manage its exposure to changes in interest rates. The amount of the Company's fixed obligation interest payments may change based upon the expiration dates of its interest rate swap agreements and the level and composition of its debt. The Company also enters into certain foreign currency forward contracts to limit the Company's exposure to currency fluctuations on the respective hedged items. As also mentioned in Note 7,6, the Company has designated its euro denominated debt as a hedge of a portion of its net

In July 2012,June 2017, the Company began enteringentered into foreigna cross currency forward contracts,swap arrangement designated as a cash flow hedges, to hedge certain forecasted intercompany sales denominated in euro with its Swiss-based business. In January 2015, prior tohedge. The agreement converts $100 million of borrowings under the Swiss National Bank's abandonment of its previously established exchange rate of 1.20Company's credit facility into synthetic Swiss franc per euro,debt which allows the Company increasedto effectively change the notional amount of the cash flow hedgesfloating rate LIBOR-based interest payment to a total notional valuefixed Swiss franc income of 0.01%. The swap began in June 2017 and average forward rate of Euro 86 million and 1.21 for contracts that maturedmatures in 2015 and Euro 67 million and 1.19 for contracts that mature in 2016. The notional amount of foreign currency forward contracts outstanding at June 30, 2016 were $40.1 million (Euro 36.3 million) and $73 million (Euro 67 million) at December 31, 2015. The gross amount recognized in other comprehensive income (loss) during the three month periods ended June 30, 2016 and 2015 was a gain of $0.3 million and $1.4 million, respectively. The gross amount recognized in other comprehensive income (loss) during the six month periods ended June 30, 2016 and 2015 was a loss of $0.2 million and a gain $24.2 million, respectively.2019.

The Company has an interest rate swap agreement designated as a cash flow hedge. The agreement is a swap which has the effect of changing the floating rate LIBOR-based interest payments associated with $50 million in forecastedof borrowings under the Company’s credit facility to a fixed obligation of 2.52%. The swap began in October 2015 and matures in October 2020.

In March 2015, the Company entered into a forward-starting interest rate swap agreement. The agreement will changeis a swap which has the effect of changing the floating rate LIBOR-based interest payments associated with $100 million in forecastedof borrowings under the Company's credit agreement to a fixed obligation of 2.25% beginning in February 2017 and matures in February 2022.

The Company's cash flow hedges are recorded gross at fair value in the consolidated balance sheet at June 30, 20162017 and December 31, 2015,2016, respectively, and disclosed in Note 54 to the consolidated financial statements. Amounts reclassified into other comprehensive income and the effective portions of the cash flow hedges are further disclosed in Note 98 to the consolidated financial statements. A derivative gain of $2.1$1.3 million based upon interest rates and foreign currency rates at June 30, 2016,2017, is expected to be reclassified from other comprehensive income (loss) to earnings in the next twelve months. Through June 30, 2016,2017, no hedge ineffectiveness has occurred in relation to the cash flow hedges.

The Company enters into foreign currency forward contracts in order to economically hedge short-term trade and non-trade intercompany balances largely denominated in Swiss franc, other major European currencies, and the Chinese Renminbi with its foreign businesses. In accordance with U.S. GAAP, these contracts are considered “derivatives not designated as hedging instruments.” Gains or losses on these instruments are reported in current earnings. The foreign currency forward contracts are recorded at fair value in the consolidated balance sheet at June 30, 20162017 and June 30, 2015,2016, respectively, and disclosed in Note 5.4. The Company recognized in other charges (income), a net gain of $0.1 million and a net loss of $1.7 million and $0.2 million during the three months ended June 30, 2017 and 2016, respectively, and 2015, respectively,a net gain of $1.9 million and a net loss of $0.6 million and $9.5 million during the six months ended June 30, 20162017 and 2015,2016, respectively. The gains and losses are primarily offset by the underlying transaction gains and losses on the related intercompany balances. At June 30, 20162017 and June 30, 2015,December 31, 2016, these contracts had a notional value of $348.4$343.0 million and $318.7$353.0 million, respectively.    

A fair value hierarchy has been established that categorizes these inputs into three levels:

The Company has a share repurchase program of which there was $1.2 billion$733.5 million common shares remaining to be repurchased under the program as of June 30, 2016.2017. The share repurchases are expected to be funded from cash balances, borrowings and cash generated from operating activities. Repurchases will be made through open market transactions, and the 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.

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