WAT Waters Corp

Company Delivers Revenue of $475 Million and Non-GAAP EPS of $1.26

• Sales Grew 5% in Constant Currency
• Continued Bio/Pharmaceutical Strength
• Steady Service and Chemistry Consumable Growth
• Notable Sales Growth from Largest Asian Markets

Waters Corporation (NYSE: WAT) reported first quarter 2016 sales of $475 million, a 3% increase versus sales of $460 million in the first quarter of 2015. Foreign currency translation reduced sales growth by approximately 2%. On a GAAP basis, earnings per diluted share (EPS) for the first quarter were $1.15 and were flat compared to the first quarter of 2015. On a non-GAAP basis, including the adjustments in the attached reconciliation, EPS increased 4% to $1.26 from $1.21 in the first quarter of 2015. 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”.

Commenting on the Company’s performance, Christopher J. O’Connell, President and Chief Executive Officer said, “We are pleased with our solid start to 2016, led by continued strength in bio/pharmaceutical end markets, and balanced contribution from key products and geographies. Furthermore, strong operational execution enabled earnings per share growth while we continued key investments in innovation.”

Results from the Company’s end markets were highlighted by 9% constant currency sales growth from the broadly defined bio/pharmaceutical market, offset by flat performance in other markets.

The Company’s recurring revenues, the combination of service and consumables, posted 8% constant currency sales growth in comparison to a strong prior year’s result, while instrument system sales grew more slowly and were up about 2% in the quarter.

Regionally, the Company’s highest geographical growth in the quarter came from Asia, which posted an 11% constant currency sales growth rate, with continued strong demand from China and India. Sales in the U.S. and Europe, in constant currency, grew more modestly and increased by 2% in the quarter.

As communicated in a prior press release, Waters Corporation will webcast its first quarter 2016 financial results conference call this morning, April 26, 2016 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 May 3, 2016 at midnight eastern time, similarly by webcast and also by phone at 203-369-1599.

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.

Non-GAAP Financial Measures

This press release contains financial measures, such as constant currency growth rate, adjusted operating income, adjusted earnings per share and adjusted operating margin, which are considered “non-GAAP” financial measures under applicable U.S. Securities and Exchange Commission rules and regulations. These non-GAAP financial measures should be considered supplemental to and not a substitute for financial information prepared in accordance with generally accepted accounting principles (GAAP). The Company’s definition of these non-GAAP measures may differ from similarly titled measures used by others. The non-GAAP financial measures used in this press release adjust for specified items that can be highly variable or difficult to predict. The Company generally uses these non-GAAP financial measures to facilitate management’s financial and operational decision-making, including evaluation of Waters Corporation’s historical operating results, comparison to competitors’ operating results and determination of management incentive compensation. These non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting Waters Corporation’s business. Because non-GAAP financial measures exclude the effect of items that will increase or decrease the Company’s reported results of operations, management strongly encourages investors to review the Company’s consolidated financial statements and publicly filed reports in their entirety. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables accompanying this release.

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; 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, 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 Subsidiaries Condensed Unclassified Consolidated Balance Sheets (In thousands and unaudited)           April 2, 2016 December 31, 2015     Cash, cash equivalents and investments 2,505,168 2,399,263 Accounts receivable 439,578 468,315 Inventories 287,048 263,415 Property, plant and equipment, net 336,798 333,355 Intangible assets, net 223,364 218,022 Goodwill 356,880 356,864 Other assets 219,559 229,443 Total assets 4,368,395 4,268,677     Notes payable and debt 1,718,800 1,668,336 Other liabilities 547,909 541,490 Total liabilities 2,266,709 2,209,826   Total equity 2,101,686 2,058,851 Total liabilities and equity 4,368,395 4,268,677     Waters Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)             Three Months Ended April 2, 2016 April 4, 2015   Net sales $ 475,246 $ 460,404 Cost of sales 201,151 189,246   Gross profit 274,095 271,158   Selling and administrative expenses 129,351 119,751 Research and development expenses 29,438 28,951 Purchased intangibles amortization 2,644 2,474   Operating income 112,662 119,982   Interest expense, net (6,032 ) (6,635 )   Income from operations before income taxes 106,630 113,347   Provision for income tax expense 12,578 17,286   Net income $ 94,052 $ 96,061     Net income per basic common share $ 1.16 $ 1.16   Weighted-average number of basic common shares 81,275 83,025     Net income per diluted common share $ 1.15 $ 1.15   Weighted-average number of diluted common shares and equivalents 81,974 83,752     Waters Corporation and Subsidiaries Quarterly Reconciliation of GAAP to Adjusted Non-GAAP Net Sales by Operating Segment, Products & Services, Geography and Markets Quarters Ended April 2, 2016 and April 4, 2015 (in thousands)                       Constant Three Months Ended Percent Currency Currency April 2, 2016 April 4, 2015 Change Impact Growth Rate (a)   NET SALES - OPERATING SEGMENT   Waters $ 424,193 $ 409,668 4 % $ (6,321 ) 5 % TA 51,053 50,736 1 % (151 ) 1 %             Total $ 475,246 $ 460,404 3 % $ (6,472 ) 5 %     NET SALES - PRODUCTS & SERVICES   Instruments $ 223,707 $ 224,690 - $ (4,431 ) 2 %   Service 167,389 157,531 6 % (1,852 ) 8 % Chemistry   84,150   78,183 8 %   (189 ) 8 % Total Recurring 251,539 235,714 7 % (2,041 ) 8 %             Total $ 475,246 $ 460,404 3 % $ (6,472 ) 5 %     NET SALES - GEOGRAPHY   Americas $ 178,741 $ 177,580 1 % $ (766 ) 1 % Europe 125,032 124,401 1 % (1,517 ) 2 % Asia 171,473 158,423 8 % (4,189 ) 11 %             Total $ 475,246 $ 460,404 3 % $ (6,472 ) 5 %     NET SALES - MARKETS   Pharmaceutical $ 259,086 $ 241,303 7 % $ (4,436 ) 9 % Industrial 153,521 155,010 (1 %) (1,189 ) - Government & Academic 62,639 64,091 (2 %) (847 ) (1 %)             Total $ 475,246 $ 460,404 3 % $ (6,472 ) 5 %      

(a) The Company believes that referring to comparable, constant currency growth rates is a useful way to evaluate the underlying performance of Waters Corporation's net sales. Constant currency growth rate, a non-GAAP financial measure, measures the change in net sales between current and prior year periods ignoring the impact of foreign currency exchange rates during the current period. See description of non-GAAP financial measures contained in this release.

  Waters Corporation and Subsidiaries Quarterly Reconciliation of GAAP to Adjusted Non-GAAP Financials Quarters Ended April 2, 2016 and April 4, 2015 (in thousands, except per share data)            

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NetSales

 

GrossProfit

 

GrossProfitPercentage

 

Selling &AdministrativeExpenses

 

 

Research &DevelopmentExpenses

 

OperatingIncome

 

OperatingIncomePercentage

 

InterestExpense,Net

 

Income fromOperationsbeforeIncomeTaxes

 

Provision forIncome TaxExpense

NetIncome

 

DilutedEarningsper Share

Quarter Ended April 2, 2016 GAAP $ 475,246 $ 274,095 57.7% $ 131,995 $ 29,438 $ 112,662 23.7% $ (6,032) $ 106,630 $ 12,578 $ 94,052 $ 1.15 Adjustments: Purchased intangibles

amortization (a)

- - - (2,644) - 2,644 0.6% - 2,644

750

1,894 0.02 Stock award

modification (b)

- - - (7,085) - 7,085 1.5% - 7,085 2,657 4,428 0.05 Restructuring costs,

asset impairments,

acquisition-related costs

& other one-time costs (c)

- - - (3,608) - 3,608 0.8% - 3,608 1,142 2,466 0.03 Infrequent income

tax items (d)

  -     -   -   -   -   -   -   -   -   (737)   737   0.01 Adjusted Non-GAAP $ 475,246   $ 274,095   57.7% $ 118,658 $ 29,438 $ 125,999   26.5% $ (6,032) $ 119,967 $ 16,390 $ 103,577 $ 1.26   Quarter Ended April 4, 2015 GAAP $ 460,404 $ 271,158 58.9% $ 122,225 $ 28,951 $ 119,982 26.1% $ (6,635) $ 113,347 $ 17,286 $ 96,061 $ 1.15 Adjustments Purchased intangibles

amortization (a)

- - - (2,474) - 2,474 0.5% - 2,474 704 1,770 0.02 Restructuring costs,

asset impairments,

acquisition-related costs

& other one-time costs (c)

- - - (1,272) - 1,272 0.3% - 1,272 363 909 0.01 Infrequent income

tax items (d)

  -     -   -   -   -   -   -   -   -   (2,406)   2,406   0.03 Adjusted Non-GAAP $ 460,404   $ 271,158   58.9% $ 118,479 $ 28,951 $ 123,728   26.9% $ (6,635) $ 117,093 $ 15,947 $ 101,146 $ 1.21        

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

(b) The expense associated with accerlerating the vesting of certain stock awards were excluded as the Company believes these expenses are infrequent, unusual and are not indicative of normal operating costs.

(c) 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.

(d) 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.

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