Full Press Release Details
Contact: Bryan Brokmeier, CFA, Senior
Director, Investor Relations, 508-482-3448
Corporation (NYSE: WAT) Reports Third Quarter 2019 Financial Results
Milford, Mass., October 29, 2019 - Waters Corporation (NYSE: WAT) today announced third
quarter 2019 sales of $577 million, which were flat as reported, compared to sales of $578 million for the third quarter of 2018. Foreign currency translation negatively impacted sales growth by approximately 1% for the quarter.
On a GAAP basis, diluted earnings per share (EPS) for the third quarter of 2019 increased to $2.07, compared to $1.83 for the third quarter of 2018. On a
non-GAAP basis, EPS increased to $2.13, compared to $1.92 for the third 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 $148 million for the third quarter of 2019, compared to $146 million for the third quarter of 2018. On a non-GAAP basis, adjusted free cash flow for the third
quarter of 2019 was $124 million versus $136 million for the third quarter of 2018.
For the first nine months of 2019, the Company s sales
were $1,690 million, a decrease of 1% as reported, compared to sales of $1,705 million for the first nine months of 2018. Foreign currency translation negatively impacted sales growth by approximately 2% for the nine months of 2019.
On a GAAP basis, EPS for the first nine months of 2019 increased to $5.63, compared to $5.21 for the first nine months of 2018. On a non-GAAP basis, EPS increased to $5.85, compared to $5.45 in the first nine months of 2018.
On a GAAP basis, net cash
provided by operating activities was $451 million for the first nine months of 2019, compared to $423 million for the first nine months of 2018. On a non-GAAP basis, adjusted free cash
flow for the first nine months of 2019 was $418 million versus $439 million for the first nine months of 2018.
quarter revenue came in lighter than we expected due to unanticipated late-quarter softness in the U.S., while the rest of our business performed largely as planned, commented Chris O Connell, Chairman and Chief Executive Officer of
Waters Corporation. Despite the macro challenges we ve faced, 2019 has been an important year for new product launches that we expect will provide increasing sales contributions over the coming quarters and years.
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 third quarter of 2019, sales into the
pharmaceutical market increased 1% as reported and 3% in constant currency, sales into the industrial market were flat, and sales into the academic and governmental markets declined 4% as reported and 3% in constant currency. For the first nine
months of 2019, sales into the pharmaceutical market were flat as reported and grew 3% in constant currency, sales into the industrial market declined 3% as reported and 2% in constant currency, and sales into the academic and governmental markets
declined 2% as reported and were flat in constant currency.
During the third quarter, recurring revenues, which represent the combination of service and
precision chemistries revenues, grew 4% as reported and 5% in constant currency, while instrument system sales declined 4% as reported and 3% in constant currency. For the first nine months of 2019, recurring revenues grew 2% as reported and 4% in
constant currency, while instrument system sales declined 4% as reported and 3% in constant currency.
Geographically, sales in Asia during the quarter
grew 7%, sales in the Americas declined 5% (with U.S. sales declining 4%), and sales in Europe declined 4% as reported and were flat in constant currency. For the first nine months of 2019, sales in Asia increased 3% as reported and 4% in constant
currency, sales in the Americas were flat (with U.S. sales growing 2%), and sales in Europe declined 7% as reported and 2% in constant currency.
Fourth Quarter and Fiscal Year 2019 Financial Outlook
The Company expects fourth quarter 2019 constant-currency sales growth in the range of 0% to 2%. As of today, currency translation is expected to decrease
fourth quarter sales growth by one percentage point. The Company also expects fourth quarter 2019 non-GAAP EPS in the range of $2.95 to $3.05. Please refer to the tables below for a reconciliation of the
projected GAAP to non-GAAP financial outlook for the fourth quarter.
In addition, the Company is updating its
previously issued full-year guidance, and currently expects full-year 2019 constant-currency sales growth to be approximately 1%, compared to the prior range of 1% to 3%. 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 EPS in the range of $8.73 to $8.83, compared to our prior range of $8.95 to $9.10. 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
third quarter 2019 financial results conference call today, October 29, 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 November 5, 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 U.S. generally accepted accounting principles (GAAP). The Company s
definitions 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 contains 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. Except as required by law, the Company does not assume any obligation to update any
forward-looking statements.
Waters Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 28, 2019 | September 29, 2018 | September 28, 2019 | September 29, 2018 | |||||||||||||
| Net sales | $ | 577,278 | $ | 578,021 | $ | 1,690,302 | $ | 1,704,910 | ||||||||
| Costs and operating expenses: | ||||||||||||||||
| Cost of sales | 241,055 | 241,139 | 711,632 | 705,695 | ||||||||||||
| Selling and administrative expenses | 126,036 | 126,997 | 393,583 | 394,049 | ||||||||||||
| Research and development expenses | 34,333 | 35,173 | 105,883 | 105,297 | ||||||||||||
| Purchased intangibles amortization | 2,619 | 2,114 | 7,164 | 5,375 | ||||||||||||
| Litigation provision (settlement) | 924 | (748 | ) | |||||||||||||
| Operating income | 173,235 | 171,674 | 472,040 | 495,242 | ||||||||||||
| Other expense | (496 | ) | (811 | ) | (1,363 | ) | (2,293 | ) | ||||||||
| Interest expense, net | (8,001 | ) | (1,633 | ) | (16,826 | ) | (8,609 | ) | ||||||||
| Income from operations before income taxes | 164,738 | 169,230 | 453,851 | 484,340 | ||||||||||||
| Provision for income taxes (a) | 26,605 | 28,216 | 62,322 | 75,698 | ||||||||||||
| Net income | $ | 138,133 | $ | 141,014 | $ | 391,529 | $ | 408,642 | ||||||||
| Net income per basic common share | $ | 2.09 | $ | 1.84 | $ | 5.68 | $ | 5.26 | ||||||||
| Weighted-average number of basic common shares | 66,226 | 76,575 | 68,952 | 77,741 | ||||||||||||
| Net income per diluted common share | $ | 2.07 | $ | 1.83 | $ | 5.63 | $ | 5.21 | ||||||||
| Weighted-average number of diluted common shares and equivalents | 66,768 | 77,136 | 69,533 | 78,395 |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segment, Products & Services, Geography and Markets
Three Months Ended September 28, 2019 and September 29, 2018
| Three Months Ended | Percent Change | Current Period Currency Impact | Constant Currency Growth Rate (a) | |||||||||||||||||
| September 28, 2019 | September 29, 2018 | |||||||||||||||||||
| NET SALES - OPERATING SEGMENT | ||||||||||||||||||||
| Waters | $ | 512,146 | $ | 515,795 | (1 | %) | $ | (6,063 | ) | |||||||||||
| TA | 65,132 | 62,226 | 5 | % | (407 | ) | 5 | % | ||||||||||||
| Total | $ | 577,278 | $ | 578,021 | $ | (6,470 | ) | 1 | % | |||||||||||
| NET SALES - PRODUCTS & SERVICES | ||||||||||||||||||||
| Instruments | $ | 270,317 | $ | 282,543 | (4 | %) | $ | (2,870 | ) | (3 | %) | |||||||||
| Service | 206,705 | 199,499 | 4 | % | (2,303 | ) | 5 | % | ||||||||||||
| Chemistry | 100,256 | 95,979 | 4 | % | (1,297 | ) | 6 | % | ||||||||||||
| Total Recurring | 306,961 | 295,478 | 4 | % | (3,600 | ) | 5 | % | ||||||||||||
| Total | $ | 577,278 | $ | 578,021 | $ | (6,470 | ) | 1 | % | |||||||||||
| NET SALES - GEOGRAPHY | ||||||||||||||||||||
| Asia | $ | 237,775 | $ | 222,196 | 7 | % | $ | (106 | ) | 7 | % | |||||||||
| Americas | 196,458 | 206,803 | (5 | %) | (160 | ) | (5 | %) | ||||||||||||
| Europe | 143,045 | 149,022 | (4 | %) | (6,204 | ) | ||||||||||||||
| Total | $ | 577,278 | $ | 578,021 | $ | (6,470 | ) | 1 | % | |||||||||||
| NET SALES - MARKETS | ||||||||||||||||||||
| Pharmaceutical | $ | 328,227 | $ | 325,166 | 1 | % | $ | (5,403 | ) | 3 | % | |||||||||
| Industrial | 171,352 | 171,985 | (699 | ) | ||||||||||||||||
| Academic & Governmental | 77,699 | 80,870 | (4 | %) | (368 | ) | (3 | %) | ||||||||||||
| Total | $ | 577,278 | $ | 578,021 | $ | (6,470 | ) | 1 | % |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segment, Products & Services, Geography and Markets
Nine Months Ended September 28, 2019 and September 29, 2018
| Nine Months Ended | Percent Change | Current Period Currency Impact | Constant Currency Growth Rate (a) | |||||||||||||||||
| September 28, 2019 | September 29, 2018 | |||||||||||||||||||
| NET SALES - OPERATING SEGMENT | ||||||||||||||||||||
| Waters | $ | 1,503,177 | $ | 1,514,246 | (1 | %) | $ | (29,665 | ) | 1 | % | |||||||||
| TA | 187,125 | 190,664 | (2 | %) | (2,044 | ) | (1 | %) | ||||||||||||
| Total | $ | 1,690,302 | $ | 1,704,910 | (1 | %) | $ | (31,709 | ) | 1 | % | |||||||||
| NET SALES - PRODUCTS & SERVICES | ||||||||||||||||||||
| Instruments | $ | 778,540 | $ | 812,690 | (4 | %) | $ | (11,693 | ) | (3 | %) | |||||||||
| Service | 611,961 | 598,402 | 2 | % | (13,141 | ) | 4 | % | ||||||||||||
| Chemistry | 299,801 | 293,818 | 2 | % | (6,875 | ) | 4 | % | ||||||||||||
| Total Recurring | 911,762 | 892,220 | 2 | % | (20,016 | ) | 4 | % | ||||||||||||
| Total | $ | 1,690,302 | $ | 1,704,910 | (1 | %) | $ | (31,709 | ) | 1 | % | |||||||||
| NET SALES - GEOGRAPHY | ||||||||||||||||||||
| Asia | $ | 677,122 | $ | 659,381 | 3 | % | $ | (9,303 | ) | 4 | % | |||||||||
| Americas | 585,101 | 586,639 | (1,015 | ) | ||||||||||||||||
| Europe | 428,079 | 458,890 | (7 | %) | (21,391 | ) | (2 | %) | ||||||||||||
| Total | $ | 1,690,302 | $ | 1,704,910 | (1 | %) | $ | (31,709 | ) | 1 | % | |||||||||
| NET SALES - MARKETS | ||||||||||||||||||||
| Pharmaceutical | $ | 972,884 | $ | 968,848 | $ | (23,467 | ) | 3 | % | |||||||||||
| Industrial | 502,679 | $ | 517,979 | (3 | %) | $ | (5,319 | ) | (2 | %) | ||||||||||
| Academic & Governmental | 214,739 | $ | 218,083 | (2 | %) | $ | (2,923 | ) | ||||||||||||
| Total | $ | 1,690,302 | $ | 1,704,910 | (1 | %) | $ | (31,709 | ) | 1 | % |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP Financials
Three & Nine Months Ended September 28, 2019 and September 29, 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 September 28, 2019 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 128,655 | $ | 173,235 | 30.0 | % | $ | (496 | ) | $ | 164,738 | $ | 26,605 | $ | 138,133 | $ | 2.07 | |||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (2,619 | ) | 2,619 | 0.5 | % | 2,619 | 535 | 2,084 | 0.03 | |||||||||||||||||||||||
| Restructuring costs and certain other items (c) | (1,596 | ) | 1,596 | 0.3 | % | 1,596 | 350 | 1,246 | 0.02 | |||||||||||||||||||||||
| Certain income tax items (d) | (600 | ) | 600 | 0.01 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 124,440 | $ | 177,450 | 30.7 | % | $ | (496 | ) | $ | 168,953 | $ | 26,890 | $ | 142,063 | $ | 2.13 | |||||||||||||||
| Three Months Ended September 29, 2018 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 130,035 | $ | 171,674 | 29.7 | % | $ | (811 | ) | $ | 169,230 | $ | 28,216 | $ | 141,014 | $ | 1.83 | |||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (2,114 | ) | 2,114 | 0.4 | % | 2,114 | 429 | 1,685 | 0.02 | |||||||||||||||||||||||
| Restructuring costs and certain other items (c) | (681 | ) | 681 | 0.1 | % | 681 | 157 | 524 | 0.01 | |||||||||||||||||||||||
| Pension termination (e) | 1,082 | 1,082 | 260 | 822 | 0.01 | |||||||||||||||||||||||||||
| Litigation provision (g) | (924 | ) | 924 | 0.2 | % | 924 | 222 | 702 | 0.01 | |||||||||||||||||||||||
| Tax reform (f) | (2,353 | ) | 2,353 | 0.03 | ||||||||||||||||||||||||||||
| Certain income tax items (d) | (700 | ) | 700 | 0.01 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 126,316 | $ | 175,393 | 30.3 | % | $ | 271 | $ | 174,031 | $ | 26,231 | $ | 147,800 | $ | 1.92 | ||||||||||||||||
| Nine Months Ended September 28, 2019 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 400,747 | $ | 472,040 | 27.9 | % | $ | (1,363 | ) | $ | 453,851 | $ | 62,322 | $ | 391,529 | $ | 5.63 | |||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (7,164 | ) | 7,164 | 0.4 | % | 7,164 | 1,520 | 5,644 | 0.08 | |||||||||||||||||||||||
| Restructuring costs and certain other items (c) | (14,382 | ) | 14,382 | 0.9 | % | 14,382 | 3,623 | 10,759 | 0.15 | |||||||||||||||||||||||
| Tax reform (f) | 3,229 | (3,229 | ) | (0.05 | ) | |||||||||||||||||||||||||||
| Certain income tax items (d) | (1,908 | ) | 1,908 | 0.03 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 379,201 | $ | 493,586 | 29.2 | % | $ | (1,363 | ) | $ | 475,397 | $ | 68,786 | $ | 406,611 | $ | 5.85 | |||||||||||||||
| Nine Months Ended September 29, 2018 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 398,676 | $ | 495,242 | 29.0 | % | $ | (2,293 | ) | $ | 484,340 | $ | 75,698 | $ | 408,642 | $ | 5.21 | |||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (5,375 | ) | 5,375 | 0.3 | % | 5,375 | 935 | 4,440 | 0.06 | |||||||||||||||||||||||
| Restructuring costs and certain other items (c) | (2,438 | ) | 2,438 | 0.1 | % | 2,438 | 549 | 1,889 | 0.02 | |||||||||||||||||||||||
| Pension termination (e) | 3,247 | 3,247 | 780 | 2,467 | 0.03 | |||||||||||||||||||||||||||
| Litigation settlement (g) | 748 | (748 | ) | (748 | ) | (179 | ) | (569 | ) | (0.01 | ) | |||||||||||||||||||||
| Stock award modification (h) | (1,014 | ) | 1,014 | 0.1 | % | 1,014 | 243 | 771 | 0.01 | |||||||||||||||||||||||
| Tax reform (f) | (6,230 | ) | 6,230 | 0.08 | ||||||||||||||||||||||||||||
| Certain income tax items (d) | (3,385 | ) | 3,385 | 0.04 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 390,597 | $ | 503,321 | 29.5 | % | $ | 954 | $ | 495,666 | $ | 68,411 | $ | 427,255 | $ | 5.45 |
Waters Corporation and Subsidiaries
Preliminary Condensed Unclassified Consolidated Balance Sheets
(In thousands and unaudited)
| September 28, 2019 | December 31, 2018 | |||||||
| Cash, cash equivalents and investments | $ | 404,649 | $ | 1,735,224 | ||||
| Accounts receivable | 504,865 | 568,316 | ||||||
| Inventories | 368,790 | 291,569 | ||||||
| Property, plant and equipment, net | 381,496 | 343,083 | ||||||
| Intangible assets, net | 237,610 | 246,902 | ||||||
| Goodwill | 353,938 | 355,614 | ||||||
| Other assets | 309,917 | 186,718 | ||||||
| Total assets | $ | 2,561,265 | $ | 3,727,426 | ||||
| Notes payable and debt | $ | 1,355,659 | $ | 1,148,350 | ||||
| Other liabilities | 1,090,106 | 1,011,818 | ||||||
| Total liabilities | 2,445,765 | 2,160,168 | ||||||
| Total equity | 115,500 | 1,567,258 | ||||||
| Total liabilities and equity | $ | 2,561,265 | $ | 3,727,426 |
Waters Corporation and Subsidiaries
Preliminary Condensed Consolidated Statements of Cash Flows
Three and Nine Months Ended September 28, 2019 and September 29, 2018