WAT Waters Corp

Broad-Based Growth Momentum Continues

Waters Corporation (NYSE: WAT) reported today third quarter 2015 sales of $501 million, an increase of 2% in comparison to sales of $493 million in the third quarter of 2014. Foreign currency translation reduced sales growth by approximately 7%. On a GAAP basis, earnings per diluted share (EPS) for the third quarter of 2015 were $1.40 compared to $1.34 for the third quarter of 2014. On a non-GAAP basis, including the adjustments in the attached reconciliation, EPS were $1.42 compared to $1.38 in the prior year quarter. A description and reconciliation of GAAP to non-GAAP EPS is attached and can be found on the Company’s website at http://www.waters.com under the caption “Investors”.

Through the first nine months of 2015, sales for the Company were $1.46 billion, up 4% compared with sales of $1.41 billion in the first nine months of 2014. Foreign currency translation decreased sales growth during the first nine months of 2015 by approximately 7%. On a GAAP basis, EPS for the first nine months of 2015 were $3.82 compared to $3.29 for the comparable period in 2014. On a non-GAAP basis, including the adjustments in the attached reconciliation, EPS increased 12% to $3.94 in the first nine months of 2015 as compared to $3.51 in 2014.

Commenting on the quarter, Christopher J. O’Connell, President and Chief Executive Officer, said, “Our strong organic sales growth in the third quarter was characterized by continued broad-based momentum in our life science end markets and solid performance in our industrial and applied markets. Our year-to-date performance demonstrates Waters’ ability to turn industry-leading technology and customer support into strong and consistent financial results. I am pleased to be joining Waters at this time and enthusiastic about the opportunities ahead.”

As communicated in a prior press release, Waters Corporation will webcast its third quarter 2015 financial results conference call this morning, October 27, 2015 at 8:30 a.m. eastern time. To listen to the call, connect to www.waters.com, choose “Investor Relations” and click on the “Live Webcast”. A replay will be available through November 3, 2015 at midnight eastern time, similarly by webcast and also by phone at 203-369-0277.

About Waters Corporation

Waters Corporation (NYSE: WAT) develops and manufactures advanced analytical science technologies for laboratory-dependent organizations. For more than 50 years, the company has pioneered a connected portfolio of separations science, laboratory information management, mass spectrometry and thermal analysis systems.

CAUTIONARY STATEMENT

This release may contain “forward-looking” statements regarding future results and events. For this purpose, any statements that are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words, “feels”, “believes”, “anticipates”, “plans”, “expects”, “intends”, “suggests”, “appears”, “estimates”, “projects”, and similar expressions, whether in the negative or affirmative, are intended to identify forward-looking statements. The Company’s actual future results may differ significantly from the results discussed in the forward-looking statements within this release for a variety of reasons, including and without limitation, foreign exchange rate fluctuations potentially affecting translation of the Company’s future non-U.S. operating results; the impact on demand among the Company’s various market sectors from economic, sovereign and political uncertainties; fluctuations in expenditures by the Company’s customers, in particular large pharmaceutical companies; introduction of competing products by other companies and loss of market share; pressures on prices from competitors and/or customers; regulatory, economic and competitive obstacles to new product introductions; other changes in demand from the effect of mergers and acquisitions by the Company’s customers; uncertainties relating to organizational/leadership changes; increased regulatory burdens as the Company’s business evolves, especially with respect to the U.S. Food and Drug Administration and U.S. Environmental Protection Agency, among others; shifts in taxable income in jurisdictions with different effective tax rates; the outcome of tax examinations or changes in respective country legislation affecting the Company’s effective tax rate; the ability to access capital, maintain liquidity and service our debt in volatile market conditions, particularly in the U.S., as a large portion of the Company’s cash is held and operating cash flows are generated outside the U.S.; environmental and logistical obstacles affecting the distribution of products and risks associated with lawsuits and other legal actions, particularly involving claims for infringement of patents and other intellectual property rights. Such factors and others are discussed more fully in the sections entitled “Forward-Looking Statements” and “Risk Factors” of the Company’s annual report on Form 10-K for the year ended December 31, 2014 and Form 10-Q for the period ended July 4, 2015 as filed with the Securities and Exchange Commission, which “Forward-Looking Statements” and “Risk Factors” discussions are incorporated by reference in this release. The forward-looking statements included in this release represent the Company’s estimates or views as of the date of this release report and should not be relied upon as representing the Company’s estimates or views as of any date subsequent to the date of this release.

  Waters Corporation and SubsidiariesCondensed Unclassified Consolidated Balance Sheets(In thousands and unaudited)       October 3, 2015 December 31, 2014     Cash, cash equivalents and investments 2,310,734 2,055,388 Accounts receivable 416,311 433,616 Inventories 281,786 246,430 Property, plant and equipment, net 325,554 321,583 Intangible assets, net 222,806 232,371 Goodwill 352,151 354,838 Other assets 211,902 233,708 Total assets 4,121,244 3,877,934     Notes payable and debt 1,630,176 1,465,243 Other liabilities 522,512 518,025 Total liabilities 2,152,688 1,983,268   Total equity 1,968,556 1,894,666 Total liabilities and equity 4,121,244 3,877,934     Waters Corporation and SubsidiariesConsolidated Statements of Operations(In thousands, except per share data)(Unaudited)        

Three Months Ended

Nine Months Ended October 3, 2015 September 27, 2014 October 3, 2015 September 27, 2014   Net sales $ 500,578 $ 493,165 $ 1,455,722 $ 1,405,474 Cost of sales 206,804 202,222 604,757 591,794   Gross profit 293,774 290,943 850,965 813,680   Selling and administrative expenses 124,655 122,226 367,066 380,791 Research and development expenses 30,703 27,279 90,209 79,002 Purchased intangibles amortization 2,573 2,725 7,547 8,018   Operating income 135,843 138,713 386,143 345,869   Interest expense, net (6,281 ) (7,300 ) (19,462 ) (19,602 )   Income from operations before income taxes 129,562 131,413 366,681 326,267   Provision for income tax expense 13,281 17,916 48,682 45,939   Net income $ 116,281 $ 113,497 $ 317,999 $ 280,328     Net income per basic common share $ 1.42 $ 1.36 $ 3.85 $ 3.32   Weighted-average number of basic common shares 82,036 83,663 82,552 84,375     Net income per diluted common share $ 1.40 $ 1.34 $ 3.82 $ 3.29   Weighted-average number of diluted common shares and equivalents 82,784 84,401 83,305 85,162           Waters Corporation and SubsidiariesQuarterly Reconciliation of GAAP to Adjusted Non-GAAP Financials(in thousands, except per share data)  

The 2015 and 2014 adjusted amounts presented below are used by the management of the Company to measure operating performance against prior periods and forecasts and are not in accordance with generally accepted accounting principles (GAAP). These Non-GAAP amounts should be considered supplemental to, and not a substitute for, financial performance in accordance with GAAP. The Company believes that the use of Non-GAAP measures, such as Adjusted Non-GAAP Earnings Per Share (EPS) and Adjusted Non-GAAP Operating Income, helps management and investors gain a better understanding of the Company's core operating results, and is consistent with how management measures performance for purposes of executive compensation and forecasts the Company’s performance. The reconciliation identifies items management has excluded as non-operational items. Management has excluded the following items:

 

* Purchased Intangibles Amortization was excluded to allow for comparisons of operating results that are consistent over periods of time.

 

* Restructuring Costs, Asset Impairments, Acquisition-Related Costs and Other One-Time Costs were excluded as the Company believes that costs to consolidate operations, reduce overhead and complete acquisitions are infrequent or unusual and are not indicative of normal operating costs.

 

* Infrequent Income Tax Items were excluded as these costs and benefits are typically the result of audit examination settlements, updates in management's assessment of ongoing examinations or other unusual tax items and are not indicative of the Company’s normal or future income tax expense.

  (Unaudited) Three Months Ended Nine Months Ended October 3, 2015   September 27, 2014   October 3, 2015   September 27, 2014   GAAP Selling and Administrative Expenses (including Purchased Intangibles Amortization) $ (127,228 ) $ (124,951 ) $ (374,613 ) $ (388,809 ) Purchased Intangibles Amortization 2,573 2,725 7,547 8,018 Restructuring Costs, Asset Impairments, Acquisition-Related Costs & Other One-Time Costs     1,732       191       5,020       14,557   Adjusted Non-GAAP Selling & Administrative Expenses   $ (122,923 )   $ (122,035 )   $ (362,046 )   $ (366,234 )     GAAP Operating Income $ 135,843 $ 138,713 $ 386,143 $ 345,869 Purchased Intangibles Amortization 2,573 2,725 7,547 8,018 Restructuring Costs, Asset Impairments, Acquisition-Related Costs & Other One-Time Costs     1,732       191       5,020       14,557   Adjusted Non-GAAP Operating Income   $ 140,148     $ 141,629     $ 398,710     $ 368,444       GAAP Provision for Income Tax Expense $ (13,281 ) $ (17,916 ) $ (48,682 ) $ (45,939 ) Purchased Intangibles Amortization (738 ) (804 ) (2,159 ) (2,306 ) Restructuring Costs, Asset Impairments, Acquisition-Related Costs & Other One-Time Costs (772 ) 150 (1,771 ) (4,054 ) Infrequent Income Tax Items     (1,832 )     1,033       1,367       2,740   Adjusted Non-GAAP Provision for Income Tax Expense   $ (16,623 )   $ (17,537 )   $ (51,245 )   $ (49,559 )     GAAP Net Income $ 116,281 $ 113,497 $ 317,999 $ 280,328 Purchased Intangibles Amortization 1,835 1,921 5,388 5,712 Restructuring Costs, Asset Impairments, Acquisition-Related Costs & Other One-Time Costs 960 341 3,249 10,503 Infrequent Income Tax Items     (1,832 )     1,033       1,367       2,740   Adjusted Non-GAAP Net Income   $ 117,244     $ 116,792     $ 328,003     $ 299,283       GAAP EPS $ 1.40 $ 1.34 $ 3.82 $ 3.29 Purchased Intangibles Amortization 0.02 0.02 0.06 0.07 Restructuring Costs, Asset Impairments, Acquisition-Related Costs & Other One-Time Costs 0.01 0.00 0.04 0.12 Infrequent Income Tax Items     (0.02 )     0.01       0.02       0.03   Adjusted Non-GAAP EPS   $ 1.42     $ 1.38     $ 3.94     $ 3.51  

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Waters CorporationJohn Lynch, 508-482-2314Vice President, Treasurer and Investor Relations