Full Press Release Details
Contact: Bryan Brokmeier, CFA, Senior
Director, Investor Relations, 508-482-3448
Corporation (NYSE: WAT) Reports First Quarter 2019 Financial Results
Milford, Mass., April 23, 2019 Waters Corporation (NYSE: WAT) today announced first
quarter 2019 sales of $514 million, a 3% decrease as reported, compared to sales of $531 million for the first quarter of 2018. Foreign currency translation negatively impacted sales growth by approximately 3% for the
On a GAAP basis, diluted earnings per share (EPS) for the first quarter of 2019 increased to $1.51, compared to $1.40 for the first quarter of
2018. On a non-GAAP basis, EPS increased to $1.60, compared to $1.59 in the first quarter of 2018. A description and reconciliation of GAAP to non-GAAP results appear in
the tables below and can be found on the Company s website at http://www.waters.com under the caption Investors.
On a GAAP basis, net
cash provided by operating activities was $176 million for the first quarter of both 2019 and 2018. On a non-GAAP basis, adjusted free cash flow for the first quarter of 2019 was $158 million
versus $160 million for the first quarter of 2018.
Sales in the first quarter fell short of our expectations. Softer demand during the quarter
was driven by greater-than-expected macro impacts in China and Europe, as well as a slow release of budgets by key pharmaceutical and industrial customers, commented Chris O Connell, Chairman and Chief Executive Officer of Waters
Corporation. We remain confident in our strong market position, underlying customer activity, and the contribution of new product introductions underway and planned for 2019.
Unless otherwise noted, sales growth and decline percentages are presented on an as-reported basis and are the same as
the sales growth and decline percentages presented on a constant-currency basis as compared with the same period in the prior year, each of which is detailed in the reconciliation of sales growth rates to constant-currency growth rates in the tables
During the first quarter of 2019, sales into the pharmaceutical market declined 4% as reported and were flat in constant currency, sales into the
industrial market declined 4% as reported and 2% in constant currency, and sales into the academic and governmental markets grew 2% as reported and 4% in constant currency.
During the first quarter, recurring revenues, which represent the combination of service and precision chemistries revenues, grew 1% as reported and 4% in
constant currency, while instrument system sales declined 8% as reported and 6% in constant currency.
Geographically, sales in Asia during the quarter were flat as reported and grew 2% in constant currency,
sales in the Americas were flat (with U.S. sales growing 2%), and sales in Europe declined 12% as reported and 5% in constant currency.
and Fiscal Year 2019 Financial Outlook
The Company expects second quarter 2019 constant currency sales growth in the range of 2% to 4%. As of today,
currency translation is expected to decrease second quarter sales growth by one to two percentage points. The Company also expects second quarter 2019 non-GAAP earnings per fully diluted share in the range of
$2.05 to $2.15. Please refer to the tables below for a reconciliation of the projected GAAP to non-GAAP financial outlook for the second quarter.
In addition, the Company is updating its previously issued full-year guidance, and currently expects full-year 2019 constant currency sales growth in the
range of 2% to 4%, compared to the prior range of 4% to 6%. As of today, currency translation is expected to decrease full-year sales growth by one to two percentage points. The Company also now expects full-year 2019
non-GAAP earnings per fully diluted share in the range of $9.05 to $9.25, compared to our prior range of $9.20 to $9.45. Please refer to the tables below for a reconciliation of the projected GAAP to non-GAAP financial outlook for the full year.
Waters Corporation will webcast its first quarter 2019 financial results conference call today, April 23, 2019 at 8:00 a.m. Eastern Time. To listen to the
call, please visit www.waters.com, choose Investors, and click on the Live Webcast. A replay will be available through April 30, 2019 at midnight Eastern Time on the same website by webcast and also by phone at 203-369-0637.
About Waters Corporation
Waters Corporation (NYSE: WAT), the world s leading specialty measurement company, has pioneered chromatography, mass spectrometry and thermal analysis
innovations serving the life, materials and food sciences for more than 60 years. With approximately 7,000 employees worldwide, Waters operates directly in 35 countries, including 15 manufacturing facilities, and with products available in more than
100 countries. For more information, visit www.waters.com.
Non-GAAP Financial Measures
This press release contains financial measures, such as constant currency growth rate, adjusted operating income, adjusted net income, adjusted earnings per
diluted share and free cash flow, 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, foreign exchange rate fluctuations potentially affecting translation of the Company s future non-U.S. operating results; the impact on demand for the
Company s products among the Company s various market sectors or geographies from economic, sovereign and political uncertainties, particularly regarding the effect of new or proposed tariff or trade regulations or changes in the
interpretation or enforcement of existing regulations; the effect on the Company s financial results from the United Kingdom voting to exit the European Union; 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 for the Company s products 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; impact of the newly enacted tax reform legislation in the U.S.; 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 effect of the adoption of new accounting standards; the ability to access capital, maintain liquidity and service the Company s 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, 2018 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 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
Consolidated Statements of Operations
(In thousands, except per share data)
| Three Months Ended | ||||||||
| March 30, 2019 | March 31, 2018 | |||||||
| Net sales | $ | 513,862 | $ | 530,670 | ||||
| Costs and operating expenses: | ||||||||
| Cost of sales | 221,031 | 221,421 | ||||||
| Selling and administrative expenses | 134,339 | 130,407 | ||||||
| Research and development expenses | 35,060 | 34,480 | ||||||
| Purchased intangibles amortization | 2,281 | 1,659 | ||||||
| Litigation settlement | (1,672 | ) | ||||||
| Operating income | 121,151 | 144,375 | ||||||
| Other (expense) income | (525 | ) | 346 | |||||
| Interest expense, net | (3,248 | ) | (4,172 | ) | ||||
| Income from operations before income taxes | 117,378 | 140,549 | ||||||
| Provision for income taxes (1) | 8,392 | 28,598 | ||||||
| Net income | $ | 108,986 | $ | 111,951 | ||||
| Net income per basic common share | $ | 1.52 | $ | 1.42 | ||||
| Weighted-average number of basic common shares | 71,704 | 78,883 | ||||||
| Net income per diluted common share | $ | 1.51 | $ | 1.40 | ||||
| Weighted-average number of diluted common shares and equivalents | 72,415 | 79,715 |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segment, Products & Services, Geography and Markets
Three Months Ended March 30, 2019 and March 31, 2018
| Percent Change | Current Period Currency Impact | Constant Currency Growth Rate (a) | ||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| March 30, 2019 | March 31, 2018 | |||||||||||||||||||
| NET SALES - OPERATING SEGMENT | ||||||||||||||||||||
| Waters | $ | 459,914 | $ | 471,146 | (2%) | $ | (13,957 | ) | 1% | |||||||||||
| TA | 53,948 | 59,524 | (9%) | (878 | ) | (8%) | ||||||||||||||
| Total | $ | 513,862 | $ | 530,670 | (3%) | $ | (14,835 | ) | ||||||||||||
| NET SALES - PRODUCTS & SERVICES | ||||||||||||||||||||
| Instruments | $ | 221,250 | $ | 240,407 | (8%) | $ | (5,869 | ) | (6%) | |||||||||||
| Service | 193,359 | 191,553 | 1% | (5,848 | ) | 4% | ||||||||||||||
| Chemistry | 99,253 | 98,710 | 1% | (3,118 | ) | 4% | ||||||||||||||
| Total Recurring | 292,612 | 290,263 | 1% | (8,966 | ) | 4% | ||||||||||||||
| Total | $ | 513,862 | $ | 530,670 | (3%) | $ | (14,835 | ) | ||||||||||||
| NET SALES - GEOGRAPHY | ||||||||||||||||||||
| Asia | $ | 200,512 | $ | 200,280 | $ | (4,197 | ) | 2% | ||||||||||||
| Americas | 181,868 | 181,710 | (485 | ) | ||||||||||||||||
| Europe | 131,482 | 148,680 | (12%) | (10,153 | ) | (5%) | ||||||||||||||
| Total | $ | 513,862 | $ | 530,670 | (3%) | $ | (14,835 | ) | ||||||||||||
| NET SALES - MARKETS | ||||||||||||||||||||
| Pharmaceutical | $ | 294,512 | $ | 305,328 | (4%) | $ | (10,522 | ) | ||||||||||||
| Industrial | 155,218 | 162,330 | (4%) | (3,206 | ) | (2%) | ||||||||||||||
| Academic & Governmental | 64,132 | 63,012 | 2% | (1,107 | ) | 4% | ||||||||||||||
| Total | $ | 513,862 | $ | 530,670 | (3%) | $ | (14,835 | ) |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP Financials
Three Months Ended March 30, 2019 and March 31, 2018
(In thousands, except per share data)
| Selling & Administrative Expenses (a) | Research & Development Expenses | Operating Income | Operating Income Percentage | Income from Operations before Income Taxes | Provision for Income Taxes | Net Income | Diluted Earnings per Share | |||||||||||||||||||||||||
| Quarter Ended March 30, 2019 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 136,620 | $ | 35,060 | $ | 121,151 | 23.6 | % | $ | 117,378 | $ | 8,392 | $ | 108,986 | $ | 1.51 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (2,281 | ) | 2,281 | 0.4 | % | 2,281 | 494 | 1,787 | 0.02 | |||||||||||||||||||||||
| Restructuring costs and certain other items (c) | (10,061 | ) | 10,061 | 2.0 | % | 10,061 | 2,633 | 7,428 | 0.10 | |||||||||||||||||||||||
| Tax reform (d) | 3,229 | (3,229 | ) | (0.04 | ) | |||||||||||||||||||||||||||
| Certain income tax items (e) | (674 | ) | 674 | 0.01 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 124,278 | $ | 35,060 | $ | 133,493 | 26.0 | % | $ | 129,720 | $ | 14,074 | $ | 115,646 | $ | 1.60 | ||||||||||||||||
| Quarter Ended March 31, 2018 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 130,394 | $ | 34,480 | $ | 144,375 | 27.2 | % | $ | 140,549 | $ | 28,598 | $ | 111,951 | $ | 1.40 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (1,659 | ) | 1,659 | 0.3 | % | 1,659 | 202 | 1,457 | 0.02 | |||||||||||||||||||||||
| Restructuring costs and certain other items (c) | (568 | ) | 568 | 0.1 | % | 568 | 132 | 436 | 0.01 | |||||||||||||||||||||||
| Litigation settlement (f) | 1,672 | (1,672 | ) | (0.3 | %) | (1,672 | ) | (401 | ) | (1,271 | ) | (0.02 | ) | |||||||||||||||||||
| Stock award modification (g) | (1,014 | ) | 1,014 | 0.2 | % | 1,014 | 243 | 771 | 0.01 | |||||||||||||||||||||||
| Tax reform (d) | (12,450 | ) | 12,450 | 0.16 | ||||||||||||||||||||||||||||
| Certain income tax items (e) | (692 | ) | 692 | 0.01 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 128,825 | $ | 34,480 | $ | 145,944 | 27.5 | % | $ | 142,118 | $ | 15,632 | $ | 126,486 | $ | 1.59 |
Waters Corporation and Subsidiaries
Preliminary Condensed Unclassified Consolidated Balance Sheets
(In thousands and unaudited)
| March 30, 2019 | December, 31 2018 | |||||||
| Cash, cash equivalents and investments | $ | 1,167,263 | $ | 1,735,224 | ||||
| Accounts receivable | 508,285 | 568,316 | ||||||
| Inventories | 333,308 | 291,569 | ||||||
| Property, plant and equipment, net | 355,965 | 343,083 | ||||||
| Intangible assets, net | 243,415 | 246,902 | ||||||
| Goodwill | 356,632 | 355,614 | ||||||
| Other assets | 284,860 | 186,718 | ||||||
| Total assets | $ | 3,249,728 | $ | 3,727,426 | ||||
| Notes payable and debt | $ | 1,148,546 | $ | 1,148,350 | ||||
| Other liabilities | 1,133,440 | 1,011,818 | ||||||
| Total liabilities | 2,281,986 | 2,160,168 | ||||||
| Total equity | 967,742 | 1,567,258 | ||||||
| Total liabilities and equity | $ | 3,249,728 | $ | 3,727,426 |
Waters Corporation and Subsidiaries
Preliminary Condensed Consolidated Statements of Cash Flows
Three Months Ended March 30, 2019 and March 31, 2018
(In thousands and unaudited)
| Three Months Ended | ||||||||
| March 30, 2019 | March 31, 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 108,986 | $ | 111,951 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Stock-based compensation | 9,941 | 9,892 | ||||||
| Depreciation and amortization | 24,764 | 28,640 | ||||||
| Change in operating assets and liabilities, net | 32,088 | 25,358 | ||||||
| Net cash provided by operating activities | 175,779 | 175,841 | ||||||
| Cash flows from investing activities: | ||||||||
| Additions to property, plant, equipment and software capitalization | (25,666 | ) | (15,992 | ) | ||||
| Investment in unaffiliated company | (3,215 | ) | ||||||
| Net change in investments | 459,705 | 915,046 | ||||||
| Net cash provided by investing activities | 434,039 | 895,839 | ||||||
| Cash flows from financing activities: | ||||||||
| Net change in debt | 86 | (749,919 | ) | |||||
| Proceeds from stock plans | 27,631 | 24,287 | ||||||
| Purchases of treasury shares | (753,105 | ) | (282,370 | ) | ||||
| Other cash flow from financing activities, net | 2,254 | 1,937 | ||||||
| Net cash used in financing activities | (723,134 | ) | (1,006,065 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 2,006 | 8,588 | ||||||
| (Decrease) increase in cash and cash equivalents | (111,310 | ) | 74,203 | |||||
| Cash and cash equivalents at beginning of period | 796,280 | 642,319 | ||||||
| Cash and cash equivalents at end of period | $ | 684,970 | $ | 716,522 | ||||
| Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flow (a) | ||||||||
| Net cash provided by operating activities - GAAP | $ | 175,779 | $ | 175,841 | ||||
| Adjustments: | ||||||||
| Additions to property, plant, equipment and software capitalization | (25,666 | ) | (15,992 | ) | ||||
| Major facility renovations | 7,496 | |||||||
| Free Cash Flow - Adjusted Non-GAAP | $ | 157,609 | $ | 159,849 |
Waters Corporation and Subsidiaries
Reconciliation of Projected GAAP to Adjusted Non-GAAP Financial Outlook
(In thousands, except per share data)
| Three Months Ended June 29, 2019 | Twelve Months Ended December 31, 2019 | |||||||||||||||||||||||
| Range | Range | |||||||||||||||||||||||
| Projected Sales | ||||||||||||||||||||||||
| Projected constant currency sales growth rate | 2% | 4% | 2% | 4% | ||||||||||||||||||||
| Projected currency impact | (2%) | (1%) | (2%) | (1%) | ||||||||||||||||||||
| Projected sales growth rate as reported | 0% | 3% | 0% | 3% | ||||||||||||||||||||
| Range | Range | |||||||||||||||||||||||
| Projected Earnings Per Diluted Share | ||||||||||||||||||||||||
| Projected GAAP earnings per diluted share | $ | 2.01 | $ | 2.11 | $ | 8.84 | $ | 9.04 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||
| Purchased intangibles amortization | $ | 0.03 | $ | 0.03 | $ | 0.11 | $ | 0.11 | ||||||||||||||||
| Certain other items | $ | $ | $ | 0.11 | $ | 0.11 | ||||||||||||||||||
| Certain income tax items | $ | 0.01 | $ | 0.01 | $ | (0.01 | ) | $ | (0.01 | ) | ||||||||||||||
| Projected adjusted non-GAAP earnings per diluted share | $ | 2.05 | $ | 2.15 | $ | 9.05 | $ | 9.25 |
Constant currency growth rates are a non-GAAP financial measure that measures the change in net sales between current and
prior year periods, ignoring the impact of foreign currency exchange rates during the current period. These amounts are estimated at the current foreign currency exchange rates and based on the forecasted geographical sales in local currency, as
well as an assessment of market conditions as of today, and may differ significantly from actual results.
These forward-looking adjustment estimates do
not reflect future gains and charges that are inherently difficult to predict and estimate due to their unknown timing, effect and/or significance.