Full Press Release Details
Contact: Bryan Brokmeier, CFA, Senior
Director, Investor Relations, 508-482-3448
Corporation (NYSE: WAT) Reports First Quarter 2020 Financial Results
COVID-19 Business Impact and Response Plan
Milford, Mass., April 28, 2020 - Waters Corporation (NYSE: WAT) today announced
first quarter 2020 sales of $465 million, a 10% decrease as reported, compared to sales of $514 million for the first quarter of 2019. Foreign currency translation negatively impacted sales growth by approximately 2% for the quarter. Our
results were primarily impacted by lower demand in China due to the COVID-19 pandemic which impacted total sales negatively by approximately 8% in constant currency for the quarter.
On a GAAP basis, diluted earnings per share (EPS) for the first quarter of 2020 decreased to $0.86, compared to $1.51 for the first quarter of 2019. On a non-GAAP basis, EPS decreased to $1.15, compared to $1.60 in the first quarter of 2019. 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 $152 million for the first quarter of 2020, compared to $176 million for the first quarter of 2019. On a non-GAAP basis, adjusted free cash flow for the first quarter of 2020
was $121 million versus $158 million for the first quarter of 2019.
Our employees around the world have demonstrated incredible resolve
as we continue to serve our customers during the COVID-19 pandemic. We have taken decisive actions to ensure the health and safety of our global workforce, while also taking steps to proactively preserve our
financial strength and flexibility in order to best position the Company for a sustained rebound when our markets recover, commented Chris O Connell, President and Chief Executive Officer of Waters Corporation.
Our business was performing well to start the year. However, the impact of COVID-19 containment measures,
particularly in China, significantly affected our first quarter results. Our operations in Europe, the Americas and India were also impacted late in the first quarter. Looking ahead, we are focused on maintaining business continuity, and we remain
confident in the long-term demand dynamics and our strong position in the markets we serve, Mr. O Connell continued.
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 first quarter of 2020, sales into the
pharmaceutical market declined 7% as reported and 6% in constant currency, sales into the industrial market declined 8% as reported and 7% in constant currency, and sales into the academic and governmental markets declined 24% as reported and 22% in
During the first quarter, recurring revenues, which represent the combination of service and precision chemistries revenues, declined
2% as reported and were flat in constant currency, while instrument system sales declined 20% as reported and 19% in constant currency.
sales in Asia during the quarter declined 21% as reported and 19% in constant currency, sales in the Americas declined 5% (with U.S. sales declining 4%), and sales in Europe grew 2% as reported and 4% in constant currency.
Company Actions and Responses Relating to COVID-19
The COVID-19 pandemic remains fluid and is creating near-term challenges across the economy. The Company is taking a
proactive approach to managing through this unpredictability and has implemented a series of cost reduction actions in order to preserve liquidity and enhance financial flexibility in a variety of recovery scenarios. The following actions are
expected to reduce Waters cost structure by an estimated $100 million dollars for the year:
Additionally, the Company revised its capital deployment plans
to better align operations and investments with the current operating environment. Waters has delayed capital expenditures and implemented plans to reduce working capital, which is estimated to improve cash flow by $45 million for the remainder
Waters has also temporarily suspended share repurchases until there is a more stable and predictable business environment and has withdrawn
its previous full-year guidance to repurchase $800 million of shares during 2020.
Additionally, Waters has mobilized an Innovation Response Team to assist governments, hospitals, academics
and scientists worldwide in driving improved outcomes in the fight against COVID-19. To date, this team has proactively engaged with nearly 200 institutions that are focused on pandemic response to deliver
scientific expertise, services, supplies and equipment.
Withdrawing Fiscal Year 2020 Financial Guidance
Due to the evolving and significant uncertainties related to the impact of the COVID-19 pandemic, Waters is withdrawing
its full-year 2020 financial guidance, which was previously provided on February 4, 2020.
Waters Corporation will webcast its first quarter 2020 financial results conference call today, April 28, 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 May 5, 2020 at midnight Eastern Time on the same website by webcast and also by phone at 800-395-6236.
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, risks related to the effects of the COVID-19 pandemic on our
business, financial condition, results of operations and prospects, including: portions of our global workforce being unable to work fully and/or effectively due to working remotely, illness, quarantines, government actions, facility closures or
other reasons related to the pandemic, increased risks of cyber attacks resulting from our temporary remote working model, disruptions in our manufacturing capabilities or to our supply chain, volatility and uncertainty in global capital markets
limiting our ability to access capital, customers being unable to make timely payment for purchases and volatility in demand for our products; 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 exiting 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; 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, 2019 as filed with the Securities and Exchange
Commission ( SEC ), which Forward-Looking Statements and Risk Factors discussions are incorporated by reference in this release, as updated by the Company s future filings with the SEC. 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 | ||||||||
| March 28, 2020 | March 30, 2019 | |||||||
| Net sales | $ | 464,939 | $ | 513,862 | ||||
| Costs and operating expenses: | ||||||||
| Cost of sales | 210,644 | 221,031 | ||||||
| Selling and administrative expenses | 147,735 | 134,339 | ||||||
| Research and development expenses | 34,989 | 35,060 | ||||||
| Purchased intangibles amortization | 2,625 | 2,281 | ||||||
| Litigation provision | 666 | |||||||
| Operating income | 68,280 | 121,151 | ||||||
| Other expense | (374 | ) | (525 | ) | ||||
| Interest expense, net | (10,043 | ) | (3,248 | ) | ||||
| Income from operations before income taxes | 57,863 | 117,378 | ||||||
| Provision for income taxes (1) | 4,301 | 8,392 | ||||||
| Net income | $ | 53,562 | $ | 108,986 | ||||
| Net income per basic common share | $ | 0.86 | $ | 1.52 | ||||
| Weighted-average number of basic common shares | 62,232 | 71,704 | ||||||
| Net income per diluted common share | $ | 0.86 | $ | 1.51 | ||||
| Weighted-average number of diluted common shares and equivalents | 62,626 | 72,415 |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segments, Products & Services, Geographies and Markets
Three Months Ended March 28, 2020 and March 30, 2019
| Current | ||||||||||||||||||||
| Period | Constant | |||||||||||||||||||
| Three Months Ended | Percent Change | Currency | Currency | |||||||||||||||||
| March 28, 2020 | March 30, 2019 | Impact | Growth Rate (a) | |||||||||||||||||
| NET SALES - OPERATING SEGMENTS | ||||||||||||||||||||
| Waters | $ | 414,211 | $ | 459,914 | (10 | %) | $ | (5,544 | ) | (9 | %) | |||||||||
| TA | 50,728 | 53,948 | (6 | %) | (853 | ) | (4 | %) | ||||||||||||
| Total | $ | 464,939 | $ | 513,862 | (10 | %) | $ | (6,397 | ) | (8 | %) | |||||||||
| NET SALES - PRODUCTS & SERVICES | ||||||||||||||||||||
| Instruments | $ | 176,938 | $ | 221,250 | (20 | %) | $ | (3,151 | ) | (19 | %) | |||||||||
| Service | 190,756 | 193,359 | (1 | %) | (2,047 | ) | (0 | %) | ||||||||||||
| Chemistry | 97,245 | 99,253 | (2 | %) | (1,199 | ) | (1 | %) | ||||||||||||
| Total Recurring | 288,001 | 292,612 | (2 | %) | (3,246 | ) | (0 | %) | ||||||||||||
| Total | $ | 464,939 | $ | 513,862 | (10 | %) | $ | (6,397 | ) | (8 | %) | |||||||||
| NET SALES - GEOGRAPHIES | ||||||||||||||||||||
| Asia | $ | 159,080 | $ | 200,512 | (21 | %) | $ | (2,977 | ) | (19 | %) | |||||||||
| Americas | 172,176 | 181,868 | (5 | %) | 165 | (5 | %) | |||||||||||||
| Europe | 133,683 | 131,482 | 2 | % | (3,585 | ) | 4 | % | ||||||||||||
| Total | $ | 464,939 | $ | 513,862 | (10 | %) | $ | (6,397 | ) | (8 | %) | |||||||||
| NET SALES - MARKETS | ||||||||||||||||||||
| Pharmaceutical | $ | 272,563 | $ | 294,512 | (7 | %) | $ | (3,790 | ) | (6 | %) | |||||||||
| Industrial | 143,354 | 155,218 | (8 | %) | (1,621 | ) | (7 | %) | ||||||||||||
| Academic & Governmental | 49,022 | 64,132 | (24 | %) | (986 | ) | (22 | %) | ||||||||||||
| Total | $ | 464,939 | $ | 513,862 | (10 | %) | $ | (6,397 | ) | (8 | %) | |||||||||
| NET SALES EXCLUDING CHINA | ||||||||||||||||||||
| Total Net Sales | $ | 464,939 | $ | 513,862 | (10 | %) | $ | (6,397 | ) | (8 | %) | |||||||||
| China Net Sales | 47,231 | 90,091 | (48 | %) | (1,885 | ) | (45 | %) | ||||||||||||
| Net Sales Excluding China | $ | 417,708 | $ | 423,771 | (1 | %) | $ | (4,512 | ) | (0 | %) |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP Financials
Three Months Ended March 28, 2020 and March 30, 2019
(In thousands, except per share data)
| Selling & Administrative Expenses (a) | Research & Development Expenses | Operating Income | Operating Income Percentage | Other (Expense) Income | Income from Operations before Income Taxes | Provision for Income Taxes | Net Income | Diluted Earnings per Share | ||||||||||||||||||||||||||||
| Quarter Ended March 28, 2020 | ||||||||||||||||||||||||||||||||||||
| GAAP | $ | 151,026 | $ | 34,989 | $ | 68,280 | 14.7 | % | $ | (374 | ) | $ | 57,863 | $ | 4,301 | $ | 53,562 | $ | 0.86 | |||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (2,625 | ) | 2,625 | 0.6 | % | 2,625 | 522 | 2,103 | 0.03 | |||||||||||||||||||||||||||
| Restructuring costs and certain other items (c) | (20,520 | ) | 20,520 | 4.4 | % | (309 | ) | 20,211 | 4,597 | 15,614 | 0.25 | |||||||||||||||||||||||||
| Litigation provisions (d) | (666 | ) | 666 | 0.1 | % | 666 | 160 | 506 | 0.01 | |||||||||||||||||||||||||||
| Certain income tax items (e) | (375 | ) | 375 | 0.01 | ||||||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 127,215 | $ | 34,989 | $ | 92,091 | 19.8 | % | $ | (683 | ) | $ | 81,365 | $ | 9,205 | $ | 72,160 | $ | 1.15 | |||||||||||||||||
| Quarter Ended March 30, 2019 | ||||||||||||||||||||||||||||||||||||
| GAAP | $ | 136,620 | $ | 35,060 | $ | 121,151 | 23.6 | % | $ | (525 | ) | $ | 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 (f) | 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 | % | $ | (525 | ) | $ | 129,720 | $ | 14,074 | $ | 115,646 | $ | 1.60 |
Waters Corporation and Subsidiaries
Preliminary Condensed Unclassified Consolidated Balance Sheets
(In thousands and unaudited)
| March 28, 2020 | December 31, 2019 | |||||||
| Cash, cash equivalents and investments | $ | 393,871 | $ | 337,144 | ||||
| Accounts receivable | 522,209 | 587,734 | ||||||
| Inventories | 344,009 | 320,551 | ||||||
| Property, plant and equipment, net | 439,420 | 417,342 | ||||||
| Intangible assets, net | 243,389 | 240,203 | ||||||
| Goodwill | 423,787 | 356,128 | ||||||
| Other assets | 299,833 | 297,953 | ||||||
| Total assets | $ | 2,666,518 | $ | 2,557,055 | ||||
| Notes payable and debt | $ | 1,895,981 | $ | 1,681,163 | ||||
| Other liabilities | 1,108,536 | 1,092,173 | ||||||
| Total liabilities | 3,004,517 | 2,773,336 | ||||||
| Total (deficit) equity | (337,999 | ) | (216,281 | ) | ||||
| Total liabilities and (deficit) equity | $ | 2,666,518 | $ | 2,557,055 |
Waters Corporation and Subsidiaries
Preliminary Condensed Consolidated Statements of Cash Flows
Three Months Ended March 28, 2020 and March 30, 2019
(In thousands and unaudited)
| Three Months Ended | ||||||||
| March 28, 2020 | March 30, 2019 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 53,562 | $ | 108,986 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Stock-based compensation | 9,196 | 9,941 | ||||||
| Depreciation and amortization | 29,188 | 24,764 | ||||||
| Change in operating assets and liabilities, net | 59,689 | 32,088 | ||||||
| Net cash provided by operating activities | 151,635 | 175,779 | ||||||
| Cash flows from investing activities: | ||||||||
| Additions to property, plant, equipment and software capitalization | (51,130 | ) | (25,666 | ) | ||||
| Business acquisitions, net of cash acquired | (76,664 | ) | ||||||
| Net change in investments | (2,381 | ) | 459,705 | |||||
| Net cash (used in) provided by investing activities | (130,175 | ) | 434,039 | |||||
| Cash flows from financing activities: | ||||||||
| Net change in debt | 214,634 | 86 | ||||||
| Proceeds from stock plans | 11,743 | 27,631 | ||||||
| Purchases of treasury shares | (196,226 | ) | (753,105 | ) | ||||
| Other cash flow from financing activities, net | 2,767 | 2,254 | ||||||
| Net cash provided by (used in) financing activities | 32,918 | (723,134 | ) | |||||
| Effect of exchange rate changes on cash and cash equivalents | (32 | ) | 2,006 | |||||
| Increase (decrease) in cash and cash equivalents | 54,346 | (111,310 | ) | |||||
| Cash and cash equivalents at beginning of period | 335,715 | 796,280 | ||||||
| Cash and cash equivalents at end of period | $ | 390,061 | $ | 684,970 | ||||
| Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flow (a) | ||||||||
| Net cash provided by operating activities - GAAP | $ | 151,635 | $ | 175,779 | ||||
| Adjustments: | ||||||||
| Additions to property, plant, equipment and software capitalization | (51,130 | ) | (25,666 | ) | ||||
| Major facility renovations | 20,543 | 7,496 | ||||||
| Free Cash Flow - Adjusted Non-GAAP | $ | 121,048 | $ | 157,609 |