Company Delivers Revenue of $527 Million and
Diluted GAAP EPS of $1.53 (Non-GAAP EPS of $1.57)
- Sales grew 5% as reported and in
constant currency
- Strength in bio/pharmaceutical markets
and in key Asian geographies
- Steady growth in chemistry consumables
and service products
Waters Corporation (NYSE: WAT) reported third quarter 2016 sales
of $527 million, a 5% increase versus sales of $501 million in the
third quarter of 2015. Foreign currency translation did not
materially impact sales growth. On a GAAP basis, earnings per
diluted share (EPS) for the third quarter were up 9% to $1.53
compared to $1.40 for the third quarter of 2015. On a non-GAAP
basis, including the adjustments in the attached reconciliation,
EPS increased 11% to $1.57 from $1.42 in the third 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”.
Through the first nine months of 2016, sales for the Company
were $1,539 million, up 6% compared with sales of $1,456 million in
the first nine months of 2015. Foreign currency translation did not
materially impact sales growth. On a GAAP basis, EPS for the first
nine months of 2016 were up 12% to $4.26 compared to $3.82 for the
comparable period in 2015. On a non-GAAP basis and including
adjustments in the attached reconciliation, EPS increased 12% to
$4.41 in the first nine months of 2016 as compared to $3.94 in
2015.
Commenting on the Company’s performance, Christopher J.
O’Connell, President and Chief Executive Officer said, “Our third
quarter sales performance was highlighted by continued strength in
our core bio/pharmaceutical business, impressive growth in Asia,
particularly China, and ongoing contribution from our recurring
revenues. These drivers offset softer demand from our industrial,
governmental and academic customers, and combined with disciplined
expense management enabled us to deliver strong EPS growth.”
Sales growth percentages are on an as reported basis and are the
same as the sales growth percentages on a constant currency basis,
unless otherwise noted, and are detailed in the attached
reconciliation of GAAP to non-GAAP sales.
Results from the Company’s markets in the quarter were
highlighted by 13% sales growth from the broadly defined
bio/pharmaceutical market and 2% sales growth (or 1% in constant
currency) from the industrial market, offset by a 15% decline in
sales within the governmental and academic markets.
Geographically, the Company’s sales growth in Asia was 16% (or
13% in constant currency), with continued strong demand from China.
Sales in Europe decreased by 3% (or 1% in constant currency), with
stronger Western European results, offset by weaker demand from
Eastern Europe. Sales in the U.S. decreased by 1% in the quarter,
with pharmaceutical sector growth offset by weaker governmental and
academic demand.
The Company’s recurring revenues, the combination of service and
chemistry consumables, posted 8% (or 7% in constant currency) sales
growth, while instrument system sales grew approximately 3% in the
quarter.
As communicated in a prior press release, Waters Corporation
will webcast its third quarter 2016 financial results conference
call this morning, October 25, 2016 at 8:00 a.m. eastern time. To
listen to the call, connect to www.waters.com, choose “Investors”
and click on the “Live Webcast”. A replay will be available through
November 1, 2016 at midnight eastern time, similarly by webcast and
also by phone at 203-369-1050.
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, among others, 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, the affect on the
Company’s financial results from the United Kingdom voting to exit
the European Union; 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
Preliminary Unclassified Consolidated Balance Sheets (In
thousands and unaudited)
October 1, 2016 December 31, 2015
Cash, cash equivalents and investments 2,713,015
2,399,263 Accounts receivable 441,768 468,315 Inventories 303,183
263,415 Property, plant and equipment, net 329,721 333,355
Intangible assets, net 221,619 218,022 Goodwill 356,446 356,864
Other assets 211,030 229,443 Total assets 4,576,782 4,268,677
Notes payable and debt 1,782,008 1,668,336 Other
liabilities 535,634 541,490 Total liabilities 2,317,642 2,209,826
Total equity 2,259,140 2,058,851 Total liabilities and
equity 4,576,782 4,268,677
Waters Corporation and
Subsidiaries Consolidated Statements of Operations
(In thousands, except per share data) (Unaudited)
Three Months
Ended Nine Months Ended October 1, 2016
October 3, 2015 October 1, 2016 October 3,
2015 Net sales $ 526,830 $ 500,578 $ 1,538,636 $
1,455,722 Costs and operating expenses: Cost of sales
218,344 206,804 639,874 604,757 Selling and administrative expenses
123,861 124,655 382,793 367,066 Research and development expenses
30,418 30,703 92,434 90,209 Purchased intangibles amortization
2,476 2,573 7,531 7,547 Operating income 151,731 135,843
416,004 386,143 Interest expense, net (6,281 ) (6,281 )
(18,469 ) (19,462 ) Income from operations before income
taxes 145,450 129,562 397,535 366,681 Provision for income
taxes 20,594 13,281 50,410 48,682 Net income $ 124,856 $
116,281 $ 347,125 $ 317,999 Net income per basic
common share $ 1.55 $ 1.42 $ 4.29 $ 3.85 Weighted-average
number of basic common shares 80,677 82,036 80,923 82,552
Net income per diluted common share $ 1.53 $ 1.40 $ 4.26 $
3.82 Weighted-average number of diluted common shares and
equivalents 81,388 82,784 81,573 83,305
Waters
Corporation and Subsidiaries Reconciliation of GAAP to
Adjusted Non-GAAP Net Sales by Operating Segment, Products
& Services, Geography and Markets Three Months Ended
October 1, 2016 and October 3, 2015 (in thousands)
Constant Three Months
Ended Percent Currency Currency October
1, 2016 October 3, 2015 Change Impact
Growth Rate (a) NET SALES - OPERATING SEGMENT
Waters $ 470,913 $ 445,575 6 % $ 1,148 5 % TA 55,917 55,003
2 % 227 1 %
Total
$ 526,830 $ 500,578 5 %
$ 1,375 5 % NET
SALES - PRODUCTS & SERVICES Instruments $ 265,820 $
258,760 3 % $ (393 ) 3 % Service 176,896 163,645 8 % 361 8 %
Chemistry 84,114 78,173 8 % 1,407 6 %
Total Recurring 261,010 241,818 8 % 1,768 7 %
Total $ 526,830 $
500,578 5 % $ 1,375
5 % NET SALES - GEOGRAPHY
Americas $ 203,124 $ 200,575 1 % $ (482 ) 2 % Europe 128,191
132,104 (3 %) (3,111 ) (1 %) Asia 195,515 167,899 16 % 4,968 13 %
Total $
526,830 $ 500,578 5 % $
1,375 5 % NET SALES -
MARKETS Pharmaceutical $ 302,146 $ 267,311 13 % $ 74 13 %
Industrial 159,013 156,116 2 % 1,373 1 % Government & Academic
65,671 77,151 (15 %) (72 ) (15 %)
Total $ 526,830 $
500,578 5 % $ 1,375
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 Reconciliation
of GAAP to Adjusted Non-GAAP Net Sales by Operating Segment,
Products & Services, Geography and Markets Nine Months
Ended October 1, 2016 and October 3, 2015 (in thousands)
Constant Nine
Months Ended Percent Currency Currency
October 1, 2016 October 3, 2015 Change
Impact Growth Rate (a) NET SALES -
OPERATING SEGMENT Waters $ 1,373,837 $ 1,297,475 6 % $
(4,676 ) 6 % TA 164,799 158,247 4 % (91 ) 4 %
Total $ 1,538,636
$ 1,455,722 6 % $ (4,767
) 6 % NET SALES - PRODUCTS &
SERVICES Instruments $ 762,166 $ 737,747 3 % $ (5,284 ) 4 %
Service 521,158 483,880 8 % (1,849 ) 8 % Chemistry
255,312 234,095 9 % 2,366 8 % Total Recurring
776,470 717,975 8 % 517 8 %
Total $ 1,538,636 $
1,455,722 6 % $ (4,767 )
6 % NET SALES - GEOGRAPHY
Americas $ 584,760 $ 570,807 2 % $ (3,098 ) 3 % Europe 396,540
383,919 3 % (2,440 ) 4 % Asia 557,336 500,996 11 % 771 11 %
Total $
1,538,636 $ 1,455,722 6 %
$ (4,767 ) 6 % NET
SALES - MARKETS Pharmaceutical $ 871,241 $ 785,465 11 % $
(4,553 ) 12 % Industrial 479,220 466,505 3 % 1,123 2 % Government
& Academic 188,175 203,752 (8 %) (1,337 ) (7 %)
Total $ 1,538,636
$ 1,455,722 6 % $ (4,767
) 6 %
(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 Reconciliation
of GAAP to Adjusted Non-GAAP Financials Quarters and Nine
Months Ended October 1, 2016 and October 3, 2015 (in
thousands, except per share data)
Income from Operations
Selling & Research & Operating
Interest before Provision for Diluted
Net Cost of Administrative Development
Operating Income Expense, Income
Income Net Earnings Sales
Sales Expenses(e) Expenses
Income Percentage Net Taxes
Taxes Income per Share Quarter Ended
October 1, 2016 GAAP $ 526,830 $
218,344 $ 126,337 $ 30,418
$ 151,731 28.8 % $ (6,281
) $ 145,450 $ 20,594 $
124,856 $ 1.53 Adjustments:
Purchased intangiblesamortization (a)
- - (2,476 ) - 2,476 0.5 % - 2,476 732 1,744 0.02
Restructuring costs,asset
impairments,acquisition-related costs& certain other items
(c)
- - (964 ) - 964 0.2 % - 964 839 125 -
Certain incometax items (d)
- - - - - -
- - (756 ) 756
0.01
Adjusted Non-GAAP $ 526,830
$ 218,344 $ 122,897 $
30,418 $ 155,171 29.5 %
$ (6,281 ) $ 148,890 $
21,409 $ 127,481 $
1.57 Quarter Ended October 3, 2015
GAAP $ 500,578 $ 206,804
$ 127,228 $ 30,703 $
135,843 27.1 % $ (6,281 )
$ 129,562 $ 13,281 $
116,281 $ 1.40 Adjustments:
Purchased intangiblesamortization (a)
- - (2,573 ) - 2,573 0.5 % - 2,573 738 1,835 0.02
Restructuring costs,asset
impairments,acquisition-related costs& certain other items
(c)
- - (1,732 ) - 1,732 0.3 % - 1,732 772 960 0.01
Certain incometax items (d)
- - - - - -
- - 1,832 (1,832 )
(0.02 )
Adjusted Non-GAAP $ 500,578 $
206,804 $ 122,923 $
30,703 $ 140,148 28.0 %
$ (6,281 ) $ 133,867 $
16,623 $ 117,244 $
1.42 Nine Months Ended October 1, 2016
GAAP $ 1,538,636 $ 639,874
$ 390,324 $ 92,434 $
416,004 27.0 % $ (18,469
) $ 397,535 $ 50,410 $
347,125 $ 4.26 Adjustments:
Purchased intangiblesamortization (a)
- - (7,531 ) - 7,531 0.5 % - 7,531 2,203 5,328 0.07
Stock awardmodification (b)
- - (7,085 ) - 7,085 0.5 % - 7,085 2,657 4,428 0.05
Restructuring costs,asset
impairments,acquisition-related costs& certain other items
(c)
- - (6,552 ) - 6,552 0.4 % - 6,552 2,500 4,052 0.05 Certain income
tax items (d)
- - - - - -
- - 874 (874 )
(0.01 )
Adjusted Non-GAAP $ 1,538,636 $
639,874 $ 369,156 $
92,434 $ 437,172 28.4 %
$ (18,469 ) $ 418,703 $
58,644 $ 360,059 $
4.41 Nine Months Ended October 3, 2015
GAAP $ 1,455,722 $ 604,757
$ 374,613 $ 90,209 $
386,143 26.5 % $ (19,462
) $ 366,681 $ 48,682 $
317,999 $ 3.82 Adjustments:
Purchased intangiblesamortization (a)
- - (7,547 ) - 7,547 0.5 % - 7,547 2,159 5,388 0.06
Restructuring costs,asset
impairments,acquisition-related costs& certain other items
(c)
- - (5,020 ) - 5,020 0.3 % - 5,020 1,771 3,249 0.04
Certain incometax items (d)
- - - - - -
- - (1,367 ) 1,367
0.02
Adjusted Non-GAAP $ 1,455,722
$ 604,757 $ 362,046 $
90,209 $ 398,710 27.4 %
$ (19,462 ) $ 379,248 $
51,245 $ 328,003 $
3.94
(a) The Purchased intangibles amortization, a non-cash expense,
was excluded to be consistent with how management evaluates the
performance of its core business against historical operating
results and the operating results of competitors over periods of
time.
(b) The non-cash expense associated with accelerating the
vesting of certain stock awards was excluded as the Company
believes these expenses are not indicative of normal operating
costs.
(c) Restructuring costs, asset impairments, acquisition-related
costs and certain other items were excluded as the Company believes
that the cost to consolidate operations and reduce overhead; the
cost to complete acquisitions; the non-cash expense to record asset
impairments and certain other income or expense items are not
normal and do not represent future ongoing business expenses of a
specific function or geographic location of the Company.
(d) Certain income tax items were excluded as these non-cash
expenses and benefits represent updates in management's assessment
of ongoing examinations or other tax items that are not indicative
of the Company’s normal or future income tax expense.
(e) Includes purchased intangibles amortization.
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version on businesswire.com: http://www.businesswire.com/news/home/20161025005404/en/
Waters CorporationJohn Lynch, 508-482-2314Vice President,
Treasurer and Investor Relations
Waters (NYSE:WAT)
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