Full Press Release Details
Brokmeier, CFA, Senior Director, Investor Relations, 508-482-3448
Waters Corporation (NYSE: WAT) Reports Second Quarter 2019 Financial Results
Milford, Mass., July 30, 2019 Waters Corporation (NYSE: WAT) today
announced second quarter 2019 sales of $599 million, which were flat as reported, compared to sales of $596 million for the second quarter of 2018. Foreign currency translation negatively impacted sales growth by
approximately 2% for the quarter.
On a GAAP basis, diluted earnings per share (EPS) for the second quarter of 2019 increased to $2.08, compared to $1.98
for the second quarter of 2018. On a non-GAAP basis, EPS increased to $2.14, compared to $1.95 for the second 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 $127 million for the second quarter of 2019, compared to $101 million
for the second quarter of 2018. On a non-GAAP basis, adjusted free cash flow for the second quarter of 2019 was $136 million versus $144 million for the second quarter of 2018.
For the first half of 2019, the Company s sales were $1,113 million, a decrease of 1% as reported, compared to sales of
$1,127 million for the first half of 2018. Foreign currency translation negatively impacted sales growth by approximately 2% for the first half of 2019.
On a GAAP basis, diluted EPS for the first half of 2019 increased to $3.57, compared to $3.39 for the first half of 2018. On a
non-GAAP basis, EPS increased to $3.73, compared to $3.54 in the first half of 2018.
On a GAAP basis, net cash
provided by operating activities was $303 million for the first half of 2019, compared to $277 million for the first half of 2018. On a non-GAAP basis, adjusted free cash flow for the
first half of 2019 was $294 million versus $304 million for the first half of 2018.
While sales in the quarter came in at
the low end of our guidance range and there is more work to be done, we experienced improvements in key areas of our business, including high-single-digit growth in the U.S., growth in China, and pharmaceutical strength across all geographies,
commented Chris O Connell, Chairman and Chief Executive Officer of Waters Corporation. The progress we made in the second quarter is encouraging, and we remain focused on improving our performance in the back half of the year. Stabilizing
end markets, as well as our accelerating cadence of new product introductions, provide us with confidence that we will be able to achieve continued improvement over the course of the year.
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 below.
During the second quarter of 2019, sales into the
pharmaceutical market increased 3% as reported and 6% in constant currency, sales into the industrial market declined 4% as reported and 3% in constant currency, and sales into the academic and governmental markets declined 2% as reported and were
flat in constant currency. For the first half of 2019, sales into the pharmaceutical market were flat as reported and grew 3% in constant currency, sales into the industrial market declined 4% as reported and 3% in constant currency, and sales into
the academic and governmental markets were flat as reported and grew 2% in constant currency.
During the second quarter, recurring revenues, which
represent the combination of service and precision chemistries revenues, grew 2% as reported and 4% in constant currency, while instrument system sales declined 1% as reported and were flat in constant currency. For the first half of 2019, recurring
revenues grew 1% as reported and 4% in constant currency, while instrument system sales declined 4% as reported and 2% in constant currency.
Geographically, sales in Asia during the quarter grew 1% as reported and 3% in constant currency, sales in the Americas grew 4% as reported and 5% in constant
currency (with U.S. sales growing 8%), and sales in Europe declined 5% as reported and 2% in constant currency. For the first half of 2019, sales in Asia were flat as reported and increased 3% in constant currency, sales in the Americas grew 2% as
reported and 3% in constant currency (with U.S. sales growing 5%), and sales in Europe declined 8% as reported and 3% in constant currency.
Quarter and Fiscal Year 2019 Financial Outlook
The Company expects third quarter 2019 constant-currency sales growth in the range of 2% to 4%. As of
today, currency translation is expected to decrease third quarter sales growth by approximately one percentage point. The Company also expects third 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 third 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 1% to 3%, compared to the prior range of 2% to 4%. As of today, currency translation is expected to decrease full-year sales growth by approximately one to two percentage points. The Company also expects full-year 2019 non-GAAP earnings per fully diluted share in the range of $8.95 to $9.10, compared to our prior range of $9.05 to $9.25. 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 second quarter 2019 financial results conference call today, July 30, 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 August 6, 2019 at midnight Eastern Time on the same website by webcast and also by
phone at 402-998-0587.
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 7,200 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/A 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 | Six Months Ended | |||||||||||||||
| June 29, 2019 | June 30, 2018 | June 29, 2019 | June 30, 2018 | |||||||||||||
| Net sales | $ | 599,162 | $ | 596,219 | $ | 1,113,024 | $ | 1,126,889 | ||||||||
| Costs and operating expenses: | ||||||||||||||||
| Cost of sales | 249,546 | 243,135 | 470,577 | 464,556 | ||||||||||||
| Selling and administrative expenses | 133,208 | 136,645 | 267,547 | 267,052 | ||||||||||||
| Research and development expenses | 36,490 | 35,644 | 71,550 | 70,124 | ||||||||||||
| Purchased intangibles amortization | 2,264 | 1,602 | 4,545 | 3,261 | ||||||||||||
| Litigation settlement | (1,672 | ) | ||||||||||||||
| Operating income | 177,654 | 179,193 | 298,805 | 323,568 | ||||||||||||
| Other expense | (342 | ) | (1,828 | ) | (867 | ) | (1,482 | ) | ||||||||
| Interest expense, net | (5,577 | ) | (2,804 | ) | (8,825 | ) | (6,976 | ) | ||||||||
| Income from operations before income taxes | 171,735 | 174,561 | 289,113 | 315,110 | ||||||||||||
| Provision for income taxes (a) | 27,325 | 18,884 | 35,717 | 47,482 | ||||||||||||
| Net income | $ | 144,410 | $ | 155,677 | $ | 253,396 | $ | 267,628 | ||||||||
| Net income per basic common share | $ | 2.09 | $ | 2.00 | $ | 3.60 | $ | 3.42 | ||||||||
| Weighted-average number of basic common shares | 68,989 | 77,833 | 70,331 | 78,330 | ||||||||||||
| Net income per diluted common share | $ | 2.08 | $ | 1.98 | $ | 3.57 | $ | 3.39 | ||||||||
| Weighted-average number of diluted common shares and equivalents | 69,494 | 78,438 | 70,904 | 79,041 |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segment, Products & Services, Geography and Markets
Three Months Ended June 29, 2019 and June 30, 2018
| Three Months Ended | Current Period Currency Impact | Constant Currency Growth Rate (a) | ||||||||||||||||||
| June 29, 2019 | June 30, 2018 | Percent Change | ||||||||||||||||||
| NET SALES OPERATING SEGMENT | ||||||||||||||||||||
| Waters | $ | 531,117 | $ | 527,305 | 1% | $ | (9,645 | ) | 3% | |||||||||||
| TA | 68,045 | 68,914 | (1%) | (759 | ) | 0% | ||||||||||||||
| Total | $ | 599,162 | $ | 596,219 | 0% | $ | (10,404 | ) | 2% | |||||||||||
| NET SALES PRODUCTS & SERVICES | ||||||||||||||||||||
| Instruments | $ | 286,973 | $ | 289,740 | (1%) | $ | (2,954 | ) | 0% | |||||||||||
| Service | 211,897 | 207,350 | 2% | (4,990 | ) | 5% | ||||||||||||||
| Chemistry | 100,292 | 99,129 | 1% | (2,460 | ) | 4% | ||||||||||||||
| Total Recurring | 312,189 | 306,479 | 2% | (7,450 | ) | 4% | ||||||||||||||
| Total | $ | 599,162 | $ | 596,219 | 0% | $ | (10,404 | ) | 2% | |||||||||||
| NET SALES GEOGRAPHY | ||||||||||||||||||||
| Asia | $ | 238,835 | $ | 236,905 | 1% | $ | (5,000 | ) | 3% | |||||||||||
| Americas | 206,775 | 198,126 | 4% | (370 | ) | 5% | ||||||||||||||
| Europe | 153,552 | 161,188 | (5%) | (5,034 | ) | (2%) | ||||||||||||||
| Total | $ | 599,162 | $ | 596,219 | 0% | $ | (10,404 | ) | 2% | |||||||||||
| NET SALES MARKETS | ||||||||||||||||||||
| Pharmaceutical | $ | 350,145 | $ | 338,354 | 3% | $ | (7,542 | ) | 6% | |||||||||||
| Industrial | 176,109 | 183,664 | (4%) | (1,414 | ) | (3%) | ||||||||||||||
| Academic & Governmental | 72,908 | 74,201 | (2%) | (1,448 | ) | 0% | ||||||||||||||
| Total | $ | 599,162 | $ | 596,219 | 0% | $ | (10,404 | ) | 2% |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segment, Products & Services, Geography and Markets
Six Months Ended June 29, 2019 and June 30, 2018
| Six Months Ended | Percent Change | Current Period Currency Impact | Constant Currency Growth Rate (a) | |||||||||||||||||
| June 29, 2019 | June 30, 2018 | |||||||||||||||||||
| NET SALES OPERATING SEGMENT | ||||||||||||||||||||
| Waters | $ | 991,031 | $ | 998,451 | (1%) | $ | (23,602 | ) | 2% | |||||||||||
| TA | 121,993 | 128,438 | (5%) | (1,637 | ) | (4%) | ||||||||||||||
| Total | $ | 1,113,024 | $ | 1,126,889 | (1%) | $ | (25,239 | ) | 1% | |||||||||||
| NET SALES PRODUCTS & SERVICES | ||||||||||||||||||||
| Instruments | $ | 508,223 | $ | 530,147 | (4%) | $ | (8,823 | ) | (2%) | |||||||||||
| Service | 405,256 | 398,903 | 2% | (10,838 | ) | 4% | ||||||||||||||
| Chemistry | 199,545 | 197,839 | 1% | (5,578 | ) | 4% | ||||||||||||||
| Total Recurring | 604,801 | 596,742 | 1% | (16,416 | ) | 4% | ||||||||||||||
| Total | $ | 1,113,024 | $ | 1,126,889 | (1%) | $ | (25,239 | ) | 1% | |||||||||||
| NET SALES GEOGRAPHY | ||||||||||||||||||||
| Asia | $ | 439,347 | $ | 437,185 | 0% | $ | (9,197 | ) | 3% | |||||||||||
| Americas | 388,643 | 379,836 | 2% | (855 | ) | 3% | ||||||||||||||
| Europe | 285,034 | 309,868 | (8%) | (15,187 | ) | (3%) | ||||||||||||||
| Total | $ | 1,113,024 | $ | 1,126,889 | (1%) | $ | (25,239 | ) | 1% | |||||||||||
| NET SALES MARKETS | ||||||||||||||||||||
| Pharmaceutical | $ | 644,657 | $ | 643,682 | 0% | $ | (18,064 | ) | 3% | |||||||||||
| Industrial | 331,327 | 345,994 | (4%) | (4,620 | ) | (3%) | ||||||||||||||
| Academic & Governmental | 137,040 | 137,213 | 0% | (2,555 | ) | 2% | ||||||||||||||
| Total | $ | 1,113,024 | $ | 1,126,889 | (1%) | $ | (25,239 | ) | 1% |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP Financials
Three & Six Months Ended June 29, 2019 and June 30, 2018
(In thousands, except per share data)
| Selling & Administrative Expenses (a) | Operating Income | Operating Income Percentage | Other (Expense) Income | Income from Operations before Income Taxes | Provision for Income Taxes | Net Income | Diluted Earnings per Share | |||||||||||||||||||||||||
| Three Months Ended June 29, 2019 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 135,472 | $ | 177,654 | 29.7 | % | $ (342) | $ | 171,735 | $ | 27,325 | $ | 144,410 | $ | 2.08 | |||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (2,264 | ) | 2,264 | 0.4 | % | 2,264 | 491 | 1,773 | 0.03 | |||||||||||||||||||||||
| Restructuring costs and certain other items (c) | (2,725 | ) | 2,725 | 0.5 | % | 2,725 | 640 | 2,085 | 0.03 | |||||||||||||||||||||||
| Certain income tax items (d) | (634 | ) | 634 | 0.01 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 130,483 | $ | 182,643 | 30.5 | % | $ | (342 | ) | $ | 176,724 | $ | 27,822 | $ | 148,902 | $ | 2.14 | |||||||||||||||
| Three Months Ended June 30, 2018 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 138,247 | $ | 179,193 | 30.1 | % | $ | (1,828 | ) | $ | 174,561 | $ | 18,884 | $ | 155,677 | $ | 1.98 | |||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (1,602 | ) | 1,602 | 0.3 | % | 1,602 | 304 | 1,298 | 0.02 | |||||||||||||||||||||||
| Restructuring costs and certain other items (c) | (1,189 | ) | 1,189 | 0.2 | % | 1,189 | 260 | 929 | 0.01 | |||||||||||||||||||||||
| Pension termination (e) | 2,165 | 2,165 | 520 | 1,645 | 0.02 | |||||||||||||||||||||||||||
| Tax reform (f) | 8,573 | (8,573 | ) | (0.11 | ) | |||||||||||||||||||||||||||
| Certain income tax items (d) | (1,993 | ) | 1,993 | 0.03 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 135,456 | $ | 181,984 | 30.5 | % | $ | 337 | $ | 179,517 | $ | 26,548 | $ | 152,969 | $ | 1.95 | ||||||||||||||||
| Six Months Ended June 29, 2019 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 272,092 | $ | 298,805 | 26.8 | % | $ | (867 | ) | $ | 289,113 | $ | 35,717 | $ | 253,396 | $ | 3.57 | |||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (4,545 | ) | 4,545 | 0.4 | % | 4,545 | 985 | 3,560 | 0.05 | |||||||||||||||||||||||
| Restructuring costs and certain other items (c) | (12,786 | ) | 12,786 | 1.1 | % | 12,786 | 3,273 | 9,513 | 0.13 | |||||||||||||||||||||||
| Tax reform (f) | 3,229 | (3,229 | ) | (0.05 | ) | |||||||||||||||||||||||||||
| Certain income tax items (d) | (1,308 | ) | 1,308 | 0.02 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 254,761 | $ | 316,136 | 28.4 | % | $ | (867 | ) | $ | 306,444 | $ | 41,896 | $ | 264,548 | $ | 3.73 | |||||||||||||||
| Six Months Ended June 30, 2018 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 268,641 | $ | 323,568 | 28.7 | % | $ | (1,482 | ) | $ | 315,110 | $ | 47,482 | $ | 267,628 | $ | 3.39 | |||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (3,261 | ) | 3,261 | 0.3 | % | 3,261 | 506 | 2,755 | 0.03 | |||||||||||||||||||||||
| Restructuring costs and certain other items (c) | (1,757 | ) | 1,757 | 0.2 | % | 1,757 | 392 | 1,365 | 0.02 | |||||||||||||||||||||||
| Pension termination (e) | 2,165 | 2,165 | 520 | 1,645 | 0.02 | |||||||||||||||||||||||||||
| Litigation settlement (g) | 1,672 | (1,672 | ) | (0.1 | %) | (1,672 | ) | (401 | ) | (1,271 | ) | (0.02 | ) | |||||||||||||||||||
| Stock award modification (h) | (1,014 | ) | 1,014 | 0.1 | % | 1,014 | 243 | 771 | 0.01 | |||||||||||||||||||||||
| Tax reform (f) | (3,877 | ) | 3,877 | 0.05 | ||||||||||||||||||||||||||||
| Certain income tax items (d) | (2,685 | ) | 2,685 | 0.03 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 264,281 | $ | 327,928 | 29.1 | % | $ | 683 | $ | 321,635 | $ | 42,180 | $ | 279,455 | $ | 3.54 |
Waters Corporation and Subsidiaries
Preliminary Condensed Unclassified Consolidated Balance Sheets
(In thousands and unaudited)
| June 29, 2019 | December 31, 2018 | |||||||
| Cash, cash equivalents and investments | $ | 675,773 | $ | 1,735,224 | ||||
| Accounts receivable | 518,520 | 568,316 | ||||||
| Inventories | 351,552 | 291,569 | ||||||
| Property, plant and equipment, net | 368,878 | 343,083 | ||||||
| Intangible assets, net | 244,094 | 246,902 | ||||||
| Goodwill | 355,890 | 355,614 | ||||||
| Other assets | 308,215 | 186,718 | ||||||
| Total assets | $ | 2,822,922 | $ | 3,727,426 | ||||
| Notes payable and debt | $ | 1,148,689 | $ | 1,148,350 | ||||
| Other liabilities | 1,117,988 | 1,011,818 | ||||||
| Total liabilities | 2,266,677 | 2,160,168 | ||||||
| Total equity | 556,245 | 1,567,258 | ||||||
| Total liabilities and equity | $ | 2,822,922 | $ | 3,727,426 |
Waters Corporation and Subsidiaries
Preliminary Condensed Consolidated Statements of Cash Flows
Three and Six Months Ended June 29, 2019 and June 30, 2018