Full Press Release Details
Waters Corporation (NYSE: WAT) Reports First Quarter 2017 Financial Results
Company Delivers Revenue of $498 Million with Strong Growth in Core End Markets
Milford, Mass., April 25, 2017 -
Waters Corporation (NYSE: WAT) reported first quarter 2017 sales of $498 million, a 5% increase versus sales of $475 million in the first quarter of 2016. Foreign currency translation reduced sales growth by
approximately 1% in the quarter. On a GAAP basis, diluted earnings per share (EPS) for the first quarter was up 14% to $1.31 (including a $0.09 EPS tax benefit on stock compensation from the adoption of the new accounting standard as further defined
in footnote (a) to our Consolidated Statements of Operations included below) compared to $1.15 for the first quarter of 2016. On a non-GAAP basis, including the adjustments in the attached reconciliation, EPS increased 16% to $1.46 from $1.26 in the
first quarter of 2016. A description and reconciliation of GAAP to non-GAAP EPS is attached and can be found on the Company s website at http://www.waters.com under the caption Investors.
Commenting on the Company s performance, Christopher J. O Connell, President and Chief Executive Officer said, We are pleased with our solid
start to 2017, highlighted by another quarter of strong organic sales and earnings per share growth. We saw continued strength in our business with the pharmaceutical markets, encouraging growth in our industrial businesses, and overall balanced
contributions across our key product lines.
Unless otherwise noted, sales growth percentages are presented on an as reported basis and are the same
as the sales growth percentages presented on a constant currency basis, each of which are detailed in the attached reconciliation of sales growth rates to constant currency growth rates.
Results from the Company s markets in the quarter were highlighted by strong 8% sales growth (9% in constant currency) from the broadly defined
pharmaceutical market and 5% sales growth (9% in constant currency) from the industrial market, while sales from our governmental and academic markets declined by 9% (11% in constant currency).
Instrument system sales grew 6% (7% in constant currency) in the quarter. Recurring revenues, the combination of service and chemistry consumables, posted 4%
sales growth (6% in constant currency).
Geographically, sales during the quarter grew 14% in Asia (13% in constant currency) and 3% in Europe (9% in
constant currency), and declined 2% in the Americas.
As communicated in a prior press release, Waters Corporation will webcast its first quarter 2017
financial results conference call this morning, April 25, 2017 at 8:00 a.m. eastern time. To listen to the call, connect to www.waters.com, choose Investors and click on the Live Webcast. A replay will be available
through May 2, 2017 at midnight eastern time, similarly by webcast and also by phone at 203-369-1050.
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 nearly 60 years. With approximately 7,000 employees worldwide, Waters operates directly in 31 countries, including 15 manufacturing facilities, and with products available in more than
Non-GAAP Financial Measures
This press release contains financial measures, such as constant currency growth rate, adjusted operating income, adjusted net income and adjusted earnings per
diluted share, 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 among the Company s various market sectors from economic, sovereign and political uncertainties; 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 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 our
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, 2016 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 | ||||||||
| April 1, 2017 | April 2, 2016 | |||||||
| Net sales | $ | 497,969 | $ | 475,246 | ||||
| Costs and operating expenses: | ||||||||
| Cost of sales | 211,095 | 201,151 | ||||||
| Selling and administrative expenses | 130,524 | 129,351 | ||||||
| Research and development expenses | 30,752 | 29,438 | ||||||
| Acquired in-process research and development | 5,000 | |||||||
| Purchased intangibles amortization | 1,729 | 2,644 | ||||||
| Operating income | 118,869 | 112,662 | ||||||
| Interest expense, net | (5,382 | ) | (6,032 | ) | ||||
| Income from operations before income taxes | 113,487 | 106,630 | ||||||
| Provision for income taxes (a) | 7,930 | 12,578 | ||||||
| Net income | $ | 105,557 | $ | 94,052 | ||||
| Net income per basic common share | $ | 1.32 | $ | 1.16 | ||||
| Weighted-average number of basic common shares | 80,073 | 81,275 | ||||||
| Net income per diluted common share | $ | 1.31 | $ | 1.15 | ||||
| Weighted-average number of diluted common shares and equivalents | 80,769 | 81,974 |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segment, Products & Services, Geography and Markets
Three Months Ended April 1, 2017 and April 2, 2016
| Current Period | Constant | |||||||||||||||||||
| Three Months Ended | Percent | Currency | Currency | |||||||||||||||||
| April 1, 2017 | April 2, 2016 | Change | Impact | Growth Rate (a) | ||||||||||||||||
| NET SALES - OPERATING SEGMENT | ||||||||||||||||||||
| Waters | $ | 443,426 | $ | 424,193 | 5 | % | $ | (6,431 | ) | 6 | % | |||||||||
| TA | 54,543 | 51,053 | 7 | % | (266 | ) | 7 | % | ||||||||||||
| Total | $ | 497,969 | $ | 475,246 | 5 | % | $ | (6,697 | ) | 6 | % | |||||||||
| NET SALES - PRODUCTS & SERVICES | ||||||||||||||||||||
| Instruments | $ | 236,393 | $ | 223,707 | 6 | % | $ | (2,628 | ) | 7 | % | |||||||||
| Service | 173,673 | 167,389 | 4 | % | (2,957 | ) | 6 | % | ||||||||||||
| Chemistry | 87,903 | 84,150 | 4 | % | (1,112 | ) | 6 | % | ||||||||||||
| Total Recurring | 261,576 | 251,539 | 4 | % | (4,069 | ) | 6 | % | ||||||||||||
| Total | $ | 497,969 | $ | 475,246 | 5 | % | $ | (6,697 | ) | 6 | % | |||||||||
| NET SALES - GEOGRAPHY | ||||||||||||||||||||
| Americas | $ | 174,650 | $ | 178,741 | (2 | %) | $ | 199 | (2 | %) | ||||||||||
| Europe | 128,213 | 125,032 | 3 | % | (7,447 | ) | 9 | % | ||||||||||||
| Asia | 195,106 | 171,473 | 14 | % | 551 | 13 | % | |||||||||||||
| Total | $ | 497,969 | $ | 475,246 | 5 | % | $ | (6,697 | ) | 6 | % | |||||||||
| NET SALES - MARKETS | ||||||||||||||||||||
| Pharmaceutical | $ | 279,810 | $ | 259,086 | 8 | % | $ | (2,734 | ) | 9 | % | |||||||||
| Industrial | 161,303 | 153,521 | 5 | % | (5,320 | ) | 9 | % | ||||||||||||
| Governmental & Academic | 56,856 | 62,639 | (9 | %) | 1,357 | (11 | %) | |||||||||||||
| Total | $ | 497,969 | $ | 475,246 | 5 | % | $ | (6,697 | ) | 6 | % |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP Financials
Quarters Ended April 1, 2017 and April 2, 2016
(In thousands, except per share data)
| Income from | ||||||||||||||||||||||||||||||||
| Operations | ||||||||||||||||||||||||||||||||
| Selling & | Research & | Operating | before | Provision for | Diluted | |||||||||||||||||||||||||||
| Administrative | Development | Operating | Income | Income | Income | Net | Earnings | |||||||||||||||||||||||||
| Expenses (a) | Expenses (a) | Income | Percentage | Taxes | Taxes | Income | per Share | |||||||||||||||||||||||||
| Quarter Ended April 1, 2017 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 132,253 | $ | 35,752 | $ | 118,869 | 23.9 | % | $ | 113,487 | $ | 7,930 | $ | 105,557 | $ | 1.31 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (1,729 | ) | 1,729 | 0.3 | % | 1,729 | 473 | 1,256 | 0.02 | |||||||||||||||||||||||
| Restructuring costs, asset impairments, acquisition-related costs & certain other items (c) | (9,348 | ) | 9,348 | 1.9 | % | 9,348 | 3,059 | 6,289 | 0.08 | |||||||||||||||||||||||
| Acquired in-process research and development (d) | (5,000 | ) | 5,000 | 1.0 | % | 5,000 | 962 | 4,038 | 0.05 | |||||||||||||||||||||||
| Certain income tax items (e) | (475 | ) | 475 | 0.01 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 121,176 | $ | 30,752 | $ | 134,946 | 27.1 | % | $ | 129,564 | $ | 11,949 | $ | 117,615 | $ | 1.46 | ||||||||||||||||
| Quarter Ended April 2, 2016 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 131,995 | $ | 29,438 | $ | 112,662 | 23.7 | % | $ | 106,630 | $ | 12,578 | $ | 94,052 | $ | 1.15 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (2,644 | ) | 2,644 | 0.6 | % | 2,644 | 750 | 1,894 | 0.02 | |||||||||||||||||||||||
| Stock award modification (f) | (7,085 | ) | 7,085 | 1.5 | % | 7,085 | 2,657 | 4,428 | 0.05 | |||||||||||||||||||||||
| Restructuring costs, asset impairments, acquisition-related costs & certain other items (c) | (3,608 | ) | 3,608 | 0.8 | % | 3,608 | 1,142 | 2,466 | 0.03 | |||||||||||||||||||||||
| Certain income tax items (e) | (737 | ) | 737 | 0.01 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 118,658 | $ | 29,438 | $ | 125,999 | 26.5 | % | $ | 119,967 | $ | 16,390 | $ | 103,577 | $ | 1.26 |
Waters Corporation and Subsidiaries
Condensed Preliminary Unclassified Consolidated Balance Sheets
(In thousands and unaudited)
| April 1, 2017 | December 31, 2016 | |||||||
| Cash, cash equivalents and investments | $ | 2,966,463 | $ | 2,813,032 | ||||
| Accounts receivable | 461,755 | 489,340 | ||||||
| Inventories | 279,976 | 262,682 | ||||||
| Property, plant and equipment, net | 334,382 | 337,118 | ||||||
| Intangible assets, net | 211,049 | 207,055 | ||||||
| Goodwill | 353,796 | 352,080 | ||||||
| Other assets | 203,282 | 200,752 | ||||||
| Total assets | $ | 4,810,703 | $ | 4,662,059 | ||||
| Notes payable and debt | $ | 1,867,384 | $ | 1,827,263 | ||||
| Other liabilities | 548,505 | 532,847 | ||||||
| Total liabilities | 2,415,889 | 2,360,110 | ||||||
| Total equity | 2,394,814 | 2,301,949 | ||||||
| Total liabilities and equity | $ | 4,810,703 | $ | 4,662,059 |