Full Press Release Details
Contact: Bryan Brokmeier, CFA, Senior
Director, Investor Relations, 508-482-3448
Corporation (NYSE: WAT) Reports Fourth Quarter and
Full-Year 2019 Financial Results
Fourth Quarter 2019 Highlights
Milford, Mass., February 4, 2020 - Waters Corporation (NYSE: WAT) today announced fourth quarter
2019 sales of $716 million, which were flat as reported, compared to sales of $715 million for the fourth 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 fourth quarter of 2019 increased to $3.12, compared to $2.46 for the fourth quarter of 2018. On a non-GAAP basis, EPS increased to $3.20, compared to $2.87 for the fourth 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 $192 million for the fourth quarter of 2019, compared to $182 million for the fourth quarter of 2018. On a non-GAAP basis, adjusted free cash flow for the fourth quarter
of 2019 was $158 million versus $160 million for the fourth quarter of 2018.
For fiscal year 2019, the Company s sales were
$2,407 million, a decline of 1% as reported, compared to sales of $2,420 million for fiscal year 2018. Foreign currency translation negatively impacted sales growth by approximately 2% during fiscal year 2019.
On a GAAP basis, EPS for fiscal year 2019 increased to $8.69, compared to $7.65 for fiscal year 2018. On a non-GAAP
basis, EPS increased to $8.99, compared to $8.29 for fiscal year 2018.
On a GAAP basis, net cash provided by operating activities was $643 million
for fiscal year 2019, compared to $604 million for fiscal year 2018. On a non-GAAP basis, adjusted free cash flow for fiscal year 2019 was $576 million versus $600 million
for fiscal year 2018.
Fourth quarter revenues were in-line with our expectations, as we faced similar macro
headwinds to what we experienced during the first three quarters of the year, commented Chris O Connell, Chairman and Chief Executive Officer of Waters Corporation. We were encouraged by the increasing impact in the fourth quarter
of our new products launched during 2019. Increasing R&D productivity has placed us at the front end of an exciting new product cycle and positioned Waters for a more sustainable new product cadence.
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 fourth quarter of 2019, sales into the
pharmaceutical market declined 1% as reported and were flat in constant currency, sales into the industrial market declined 1% as reported and in constant currency, and sales into the academic and governmental markets grew 8% as reported and 10% in
constant currency. For fiscal year 2019, sales into the pharmaceutical market were flat as reported and grew 2% in constant currency, sales into the industrial market declined 2% as reported and in constant currency, and sales into the academic and
governmental markets grew 2% as reported and 3% in constant currency.
During the fourth quarter, recurring revenues, which represent the combination of
service and precision chemistries revenues, grew 5% as reported and 6% in constant currency, while instrument system sales declined 4% as reported and 3% in constant currency. For fiscal year 2019, recurring revenues grew 3% as reported and 5% in
constant currency, while instrument system sales declined 4% as reported and 3% in constant currency.
Geographically, sales in Asia during the quarter
were flat as reported and in constant currency, sales in the Americas declined 1% (with flat U.S. sales), and sales in Europe grew 3% as reported and 5% in constant currency. For fiscal year 2019, sales in Asia grew 2% as reported and 3% in constant
currency, sales in the Americas declined 1% as reported and were flat in constant currency (with U.S. sales growing 1%), and sales in Europe declined 4% as reported and were flat in constant currency.
First Quarter and Fiscal Year 2020 Financial Outlook
Company expects full-year 2020 constant-currency sales growth in the range of 1% to 3%. Currency translation is expected to decrease full-year sales growth by less than one percentage point. The Company also expects full-year 2020 non-GAAP EPS in the range of $9.15 to $9.40. Please refer to the tables below for a reconciliation of the projected GAAP to non-GAAP financial outlook for the full-year.
The Company expects first quarter 2020 constant-currency sales growth in the range of 0% to 2%. Currency translation is expected to decrease first quarter
sales growth by less than one percentage point. The Company also expects first quarter 2020 non-GAAP EPS in the range of $1.55 to $1.65. Please refer to the tables below for a reconciliation of the projected
GAAP to non-GAAP financial outlook for the first quarter.
The potential impact from the coronavirus on our
business cannot be reasonably estimated at this time, and as a result, is not reflected in the Company s first quarter and fiscal year 2020 guidance.
Waters Corporation will webcast its fourth quarter 2019 financial results conference call today, February 4, 2020 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 February 11, 2020 at midnight Eastern Time on the same website by webcast and also by
phone at 800-568-4850.
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 7,500 employees worldwide, Waters operates directly in 35 countries, including 13 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; the 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, including the impact, if any, of the coronavirus
in China or elsewhere, 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 | Twelve Months Ended | |||||||||||||||
| December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | |||||||||||||
| Net sales | $ | 716,294 | $ | 715,019 | $ | 2,406,596 | $ | 2,419,929 | ||||||||
| Costs and operating expenses: | ||||||||||||||||
| Cost of sales | 299,068 | 286,869 | 1,010,700 | 992,564 | ||||||||||||
| Selling and administrative expenses | 141,208 | 142,853 | 534,791 | 536,902 | ||||||||||||
| Research and development expenses | 37,072 | 38,106 | 142,955 | 143,403 | ||||||||||||
| Purchased intangibles amortization | 2,529 | 2,337 | 9,693 | 7,712 | ||||||||||||
| Litigation provision (settlement) | 322 | (426 | ) | |||||||||||||
| Operating income | 236,417 | 244,532 | 708,457 | 739,774 | ||||||||||||
| Other expense (a) | (2,223 | ) | (45,501 | ) | (3,586 | ) | (47,794 | ) | ||||||||
| Interest expense, net | (9,806 | ) | (1,225 | ) | (26,632 | ) | (9,834 | ) | ||||||||
| Income from operations before income taxes | 224,388 | 197,806 | 678,239 | 682,146 | ||||||||||||
| Provision for income taxes (b) | 23,719 | 12,654 | 86,041 | 88,352 | ||||||||||||
| Net income | $ | 200,669 | $ | 185,152 | $ | 592,198 | $ | 593,794 | ||||||||
| Net income per basic common share | $ | 3.15 | $ | 2.48 | $ | 8.76 | $ | 7.71 | ||||||||
| Weighted-average number of basic common shares | 63,795 | 74,802 | 67,627 | 76,992 | ||||||||||||
| Net income per diluted common share | $ | 3.12 | $ | 2.46 | $ | 8.69 | $ | 7.65 | ||||||||
| Weighted-average number of diluted common shares and equivalents | 64,348 | 75,345 | 68,166 | 77,618 |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segment, Products & Services, Geography and Markets
Three Months Ended December 31, 2019 and 2018
| Current | ||||||||||||||||||||
| Period | Constant | |||||||||||||||||||
| Three Months Ended | Percent | Currency | Currency | |||||||||||||||||
| December 31, 2019 | December 31, 2018 | Change | Impact | Growth Rate (a) | ||||||||||||||||
| NET SALES - OPERATING SEGMENT | ||||||||||||||||||||
| Waters | $ | 634,306 | $ | 625,099 | 1 | % | $ | (5,136 | ) | 2 | % | |||||||||
| TA | 81,988 | 89,920 | (9 | %) | (488 | ) | (8 | %) | ||||||||||||
| Total | $ | 716,294 | $ | 715,019 | $ | (5,624 | ) | 1 | % | |||||||||||
| NET SALES - PRODUCTS & SERVICES | ||||||||||||||||||||
| Instruments | $ | 376,631 | $ | 392,016 | (4 | %) | $ | (3,766 | ) | (3 | %) | |||||||||
| Service | 227,446 | 216,534 | 5 | % | (1,386 | ) | 6 | % | ||||||||||||
| Chemistry | 112,217 | 106,469 | 5 | % | (472 | ) | 6 | % | ||||||||||||
| Total Recurring | 339,663 | 323,003 | 5 | % | (1,858 | ) | 6 | % | ||||||||||||
| Total | $ | 716,294 | $ | 715,019 | $ | (5,624 | ) | 1 | % | |||||||||||
| NET SALES - GEOGRAPHY | ||||||||||||||||||||
| Asia | $ | 261,990 | $ | 262,910 | $ | (804 | ) | |||||||||||||
| Americas | 245,140 | 248,538 | (1 | %) | 85 | (1 | %) | |||||||||||||
| Europe | 209,164 | 203,571 | 3 | % | (4,905 | ) | 5 | % | ||||||||||||
| Total | $ | 716,294 | $ | 715,019 | $ | (5,624 | ) | 1 | % | |||||||||||
| NET SALES - MARKETS | ||||||||||||||||||||
| Pharmaceutical | $ | 392,391 | $ | 396,883 | (1 | %) | $ | (4,214 | ) | |||||||||||
| Industrial | 216,698 | 219,165 | (1 | %) | (129 | ) | (1 | %) | ||||||||||||
| Academic & Governmental | 107,205 | 98,971 | 8 | % | (1,281 | ) | 10 | % | ||||||||||||
| Total | $ | 716,294 | $ | 715,019 | $ | (5,624 | ) | 1 | % |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segment, Products & Services, Geography and Markets
Twelve Months Ended December 31, 2019 and 2018
| Current | ||||||||||||||||||||
| Period | Constant | |||||||||||||||||||
| Twelve Months Ended | Percent | Currency | Currency | |||||||||||||||||
| December 31, 2019 | December 31, 2018 | Change | Impact | Growth Rate (a) | ||||||||||||||||
| NET SALES - OPERATING SEGMENT | ||||||||||||||||||||
| Waters | $ | 2,137,483 | $ | 2,139,345 | $ | (34,801 | ) | 2 | % | |||||||||||
| TA | 269,113 | 280,584 | (4 | %) | (2,532 | ) | (3 | %) | ||||||||||||
| Total | $ | 2,406,596 | $ | 2,419,929 | (1 | %) | $ | (37,333 | ) | 1 | % | |||||||||
| NET SALES - PRODUCTS & SERVICES | ||||||||||||||||||||
| Instruments | $ | 1,155,171 | $ | 1,204,706 | (4 | %) | $ | (15,459 | ) | (3 | %) | |||||||||
| Service | 839,407 | 814,936 | 3 | % | (14,527 | ) | 5 | % | ||||||||||||
| Chemistry | 412,018 | 400,287 | 3 | % | (7,347 | ) | 5 | % | ||||||||||||
| Total Recurring | 1,251,425 | 1,215,223 | 3 | % | (21,874 | ) | 5 | % | ||||||||||||
| Total | $ | 2,406,596 | $ | 2,419,929 | (1 | %) | $ | (37,333 | ) | 1 | % | |||||||||
| NET SALES - GEOGRAPHY | ||||||||||||||||||||
| Asia | $ | 939,112 | $ | 922,291 | 2 | % | $ | (10,107 | ) | 3 | % | |||||||||
| Americas | 830,241 | 835,177 | (1 | %) | (930 | ) | ||||||||||||||
| Europe | 637,243 | 662,461 | (4 | %) | (26,296 | ) | ||||||||||||||
| Total | $ | 2,406,596 | $ | 2,419,929 | (1 | %) | $ | (37,333 | ) | 1 | % | |||||||||
| NET SALES - MARKETS | ||||||||||||||||||||
| Pharmaceutical | $ | 1,365,275 | $ | 1,365,731 | $ | (27,681 | ) | 2 | % | |||||||||||
| Industrial | 719,377 | 737,144 | (2 | %) | (5,448 | ) | (2 | %) | ||||||||||||
| Academic & Governmental | 321,944 | 317,054 | 2 | % | (4,204 | ) | 3 | % | ||||||||||||
| Total | $ | 2,406,596 | $ | 2,419,929 | (1 | %) | $ | (37,333 | ) | 1 | % |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP Financials
Three & Twelve Months Ended December 31, 2019 and December 31, 2018
(In thousands, except per share data)
| Income from | ||||||||||||||||||||||||||||||||
| Operations | ||||||||||||||||||||||||||||||||
| Selling & | Operating | Other | before | Provision for | Diluted | |||||||||||||||||||||||||||
| Administrative | Operating | Income | (Expense) | Income | Income | Net | Earnings | |||||||||||||||||||||||||
| Expenses (a) | Income | Percentage | Income | Taxes | Taxes | Income | per Share | |||||||||||||||||||||||||
| Three Months Ended December 31, 2019 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 143,737 | $ | 236,417 | 33.0 | % | $ | (2,223 | ) | $ | 224,388 | $ | 23,719 | $ | 200,669 | $ | 3.12 | |||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (2,529 | ) | 2,529 | 0.4 | % | 2,529 | 512 | 2,017 | 0.03 | |||||||||||||||||||||||
| Restructuring costs and certain other items (c) | (1,810 | ) | 1,810 | 0.3 | % | 1,810 | 483 | 1,327 | 0.02 | |||||||||||||||||||||||
| Pension expenses (d) | 1,602 | 1,602 | 385 | 1,217 | 0.02 | |||||||||||||||||||||||||||
| Certain income tax items (e) | (714 | ) | 714 | 0.01 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 139,398 | $ | 240,756 | 33.6 | % | $ | (621 | ) | $ | 230,329 | $ | 24,385 | $ | 205,944 | $ | 3.20 | |||||||||||||||
| Three Months Ended December 31, 2018 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 145,512 | $ | 244,532 | 34.2 | % | $ | (45,501 | ) | $ | 197,806 | $ | 12,654 | $ | 185,152 | $ | 2.46 | |||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (2,337 | ) | 2,337 | 0.3 | % | 2,337 | 674 | 1,663 | 0.02 | |||||||||||||||||||||||
| Restructuring costs and certain other items (c) | 194 | (194 | ) | (194 | ) | 1 | (195 | ) | ||||||||||||||||||||||||
| Pension termination (f) | 45,891 | 45,891 | 15,879 | 30,012 | 0.40 | |||||||||||||||||||||||||||
| Litigation provision (g) | (322 | ) | 322 | 322 | 77 | 245 | ||||||||||||||||||||||||||
| Tax reform (h) | 1,073 | (1,073 | ) | (0.01 | ) | |||||||||||||||||||||||||||
| Certain income tax items (e) | (726 | ) | 726 | 0.01 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 143,047 | $ | 246,997 | 34.5 | % | $ | 390 | $ | 246,162 | $ | 29,632 | $ | 216,530 | $ | 2.87 | ||||||||||||||||
| Twelve Months Ended December 31, 2019 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 544,484 | $ | 708,457 | 29.4 | % | $ | (3,586 | ) | $ | 678,239 | $ | 86,041 | $ | 592,198 | $ | 8.69 | |||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (9,693 | ) | 9,693 | 0.4 | % | 9,693 | 2,032 | 7,661 | 0.11 | |||||||||||||||||||||||
| Restructuring costs and certain other items (c) | (16,192 | ) | 16,192 | 0.7 | % | 16,192 | 4,106 | 12,086 | 0.18 | |||||||||||||||||||||||
| Pension expenses (d) | 1,602 | 1,602 | 385 | 1,217 | 0.02 | |||||||||||||||||||||||||||
| Tax reform (h) | 3,229 | (3,229 | ) | (0.05 | ) | |||||||||||||||||||||||||||
| Certain income tax items (e) | (2,622 | ) | 2,622 | 0.04 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 518,599 | $ | 734,342 | 30.5 | % | $ | (1,984 | ) | $ | 705,726 | $ | 93,171 | $ | 612,555 | $ | 8.99 | |||||||||||||||
| Twelve Months Ended December 31, 2018 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 544,188 | $ | 739,774 | 30.6 | % | $ | (47,794 | ) | $ | 682,146 | $ | 88,352 | $ | 593,794 | $ | 7.65 | |||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (7,712 | ) | 7,712 | 0.3 | % | 7,712 | 1,609 | 6,103 | 0.08 | |||||||||||||||||||||||
| Restructuring costs and certain other items (c) | (2,244 | ) | 2,244 | 0.1 | % | 2,244 | 550 | 1,694 | 0.02 | |||||||||||||||||||||||
| Pension termination (f) | 49,138 | 49,138 | 16,659 | 32,479 | 0.42 | |||||||||||||||||||||||||||
| Litigation settlement (g) | 426 | (426 | ) | (426 | ) | (102 | ) | (324 | ) | |||||||||||||||||||||||
| Stock award modification (i) | (1,014 | ) | 1,014 | 1,014 | 243 | 771 | 0.01 | |||||||||||||||||||||||||
| Tax reform (h) | (5,157 | ) | 5,157 | 0.07 | ||||||||||||||||||||||||||||
| Certain income tax items (e) | (4,111 | ) | 4,111 | 0.05 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 533,644 | $ | 750,318 | 31.0 | % | $ | 1,344 | $ | 741,828 | $ | 98,043 | $ | 643,785 | $ | 8.29 |
Waters Corporation and Subsidiaries
Preliminary Condensed Unclassified Consolidated Balance Sheets
(In thousands and unaudited)
| December 31, 2019 | December 31, 2018 | |||||||
| Cash, cash equivalents and investments | $ | 337,144 | $ | 1,735,224 | ||||
| Accounts receivable | 587,734 | 568,316 | ||||||
| Inventories | 320,551 | 291,569 | ||||||
| Property, plant and equipment, net | 417,342 | 343,083 | ||||||
| Intangible assets, net | 240,203 | 246,902 | ||||||
| Goodwill | 356,128 | 355,614 | ||||||
| Other assets | 297,953 | 186,718 | ||||||
| Total assets | $ | 2,557,055 | $ | 3,727,426 | ||||
| Notes payable and debt | $ | 1,681,163 | $ | 1,148,350 | ||||
| Other liabilities | 1,092,173 | 1,011,818 | ||||||
| Total liabilities | 2,773,336 | 2,160,168 | ||||||
| Total (deficit) equity | (216,281 | ) | 1,567,258 | |||||
| Total liabilities and (deficit) equity | $ | 2,557,055 | $ | 3,727,426 |
Waters Corporation and Subsidiaries