Full Press Release Details
Contact: John Lynch, Vice
President, Treasurer and Investor Relations, 508-482-2314
Waters Corporation (NYSE: WAT) Reports Second Quarter 2017 Financial Results
Company Delivers Another Solid Quarter of Revenue Growth and Profitability
Milford, Mass., July 25, 2017 - Waters Corporation (NYSE: WAT) reported second quarter 2017 sales of
$558 million, a 4% increase versus sales of $537 million in the second 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
second quarter was up 4% to $1.63 compared to $1.57 for the second quarter of 2016. On a non-GAAP basis, including the adjustments in the attached reconciliation, EPS increased 11% to $1.76 from $1.58 in the
second 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.
Through the first half of 2017, sales for the Company were $1,056 million, up 4% compared with sales of $1,012 million in the first half
of 2016. Foreign currency translation reduced sales growth by approximately 2% during the first half of 2017. On a GAAP basis, EPS for the first half of 2017 was up 8% to $2.94 compared to $2.72 for the first half of 2016. On a non-GAAP basis and including adjustments in the attached reconciliation, EPS increased 13% to $3.22 in 2017 as compared to $2.85 for the first half of 2016.
Commenting on the Company s performance, Christopher J. O Connell, President and Chief Executive Officer said, We are pleased with our
performance in the second quarter, highlighted by balanced growth across our major customer end markets and product lines, along with continued strength in Asia and Europe. In addition, meaningful operating leverage drove strong adjusted earnings
growth in the quarter and year to date.
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 3% sales growth (4% in constant currency) from the broadly defined pharmaceutical
market, 5% sales growth (7% in constant currency) from the industrial market and 7% sales growth (5% in constant currency) from governmental and academic markets. For the first half of 2017, sales to the pharmaceutical market grew 5% (6% in constant
currency), sales to the industrial market grew 5% (8% in constant currency), and sales to the governmental and academic market fell 1% (3% in constant currency).
The Company s recurring revenues, the combination of service and chemistry consumables, posted 5% sales
growth (7% in constant currency), while instrument system sales grew 3% (4% in constant currency) in the quarter. For the first half of 2017, the Company s recurring revenues grew 4% (6% in constant currency), while instrument system sales grew
by 4% (5% in constant currency).
Geographically, sales during the quarter grew 13% in Asia (14% in constant currency) and 2% in Europe (5% in constant
currency), and declined 3% in the Americas. For the first half of 2017, sales grew 14% in Asia and 2% in Europe (7% in constant currency), and declined 3% in the Americas.
As communicated in a prior press release, Waters Corporation will webcast its second quarter 2017 financial results conference call this morning,
July 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 August 1, 2017 at midnight
eastern time, similarly by webcast and also by phone at 203-369-0511.
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 100 countries.
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 | Six Months Ended | |||||||||||||||
| July 1, 2017 | July 2, 2016 | July 1, 2017 | July 2, 2016 | |||||||||||||
| Net sales | $ | 558,250 | $ | 536,560 | $ | 1,056,219 | $ | 1,011,806 | ||||||||
| Costs and operating expenses: | ||||||||||||||||
| Cost of sales | 229,627 | 220,379 | 440,722 | 421,530 | ||||||||||||
| Selling and administrative expenses | 130,190 | 129,581 | 260,714 | 258,932 | ||||||||||||
| Research and development expenses | 32,937 | 32,578 | 63,689 | 62,016 | ||||||||||||
| Litigation provisions | 10,018 | 10,018 | ||||||||||||||
| Acquired in-process research and development | 5,000 | |||||||||||||||
| Purchased intangibles amortization | 1,693 | 2,411 | 3,422 | 5,055 | ||||||||||||
| Operating income | 153,785 | 151,611 | 272,654 | 264,273 | ||||||||||||
| Interest expense, net | (5,713 | ) | (6,156 | ) | (11,095 | ) | (12,188 | ) | ||||||||
| Income from operations before income taxes | 148,072 | 145,455 | 261,559 | 252,085 | ||||||||||||
| Provision for income taxes (a) | 16,250 | 17,238 | 24,180 | 29,816 | ||||||||||||
| Net income | $ | 131,822 | $ | 128,217 | $ | 237,379 | $ | 222,269 | ||||||||
| Net income per basic common share | $ | 1.65 | $ | 1.59 | $ | 2.97 | $ | 2.74 | ||||||||
| Weighted-average number of basic common shares | 79,979 | 80,804 | 80,029 | 81,043 | ||||||||||||
| Net income per diluted common share | $ | 1.63 | $ | 1.57 | $ | 2.94 | $ | 2.72 | ||||||||
| Weighted-average number of diluted common shares and equivalents | 80,756 | 81,455 | 80,769 | 81,663 |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segment, Products & Services, Geography and Markets
Three Months Ended July 1, 2017 and July 2, 2016
| Three Months Ended | Percent | Currency | Constant Currency | |||||||||||||||||
| July 1, 2017 | July 2, 2016 | Change | Impact | Growth Rate (a) | ||||||||||||||||
| NET SALES - OPERATING SEGMENT | ||||||||||||||||||||
| Waters | $ | 497,780 | $ | 478,731 | 4 | % | $ | (6,023 | ) | 5 | % | |||||||||
| TA | 60,470 | 57,829 | 5 | % | (540 | ) | 6 | % | ||||||||||||
| Total | $ | 558,250 | $ | 536,560 | 4 | % | $ | (6,563 | ) | 5 | % | |||||||||
| NET SALES - PRODUCTS & SERVICES | ||||||||||||||||||||
| Instruments | $ | 282,014 | $ | 272,639 | 3 | % | $ | (1,571 | ) | 4 | % | |||||||||
| Service | 185,412 | 176,873 | 5 | % | (3,980 | ) | 7 | % | ||||||||||||
| Chemistry | 90,824 | 87,048 | 4 | % | (1,012 | ) | 6 | % | ||||||||||||
| Total Recurring | 276,236 | 263,921 | 5 | % | (4,992 | ) | 7 | % | ||||||||||||
| Total | $ | 558,250 | $ | 536,560 | 4 | % | $ | (6,563 | ) | 5 | % | |||||||||
| NET SALES - GEOGRAPHY | ||||||||||||||||||||
| Asia | $ | 215,703 | $ | 190,348 | 13 | % | $ | (1,755 | ) | 14 | % | |||||||||
| Americas | 196,586 | 202,895 | (3 | %) | (434 | ) | (3 | %) | ||||||||||||
| Europe | 145,961 | 143,317 | 2 | % | (4,374 | ) | 5 | % | ||||||||||||
| Total | $ | 558,250 | $ | 536,560 | 4 | % | $ | (6,563 | ) | 5 | % | |||||||||
| NET SALES - MARKETS | ||||||||||||||||||||
| Pharmaceutical | $ | 319,650 | $ | 310,009 | 3 | % | $ | (3,750 | ) | 4 | % | |||||||||
| Industrial | 174,531 | 166,686 | 5 | % | (4,034 | ) | 7 | % | ||||||||||||
| Government & Academic | 64,069 | 59,865 | 7 | % | 1,221 | 5 | % | |||||||||||||
| Total | $ | 558,250 | $ | 536,560 | 4 | % | $ | (6,563 | ) | 5 | % |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segment, Products & Services, Geography and Markets
Six Months Ended July 1, 2017 and July 2, 2016
| Six Months Ended | Percent | Current Period Currency | Constant Currency | |||||||||||||||||
| July 1, 2017 | July 2, 2016 | Change | Impact | Growth Rate (a) | ||||||||||||||||
| NET SALES - OPERATING SEGMENT | ||||||||||||||||||||
| Waters | $ | 941,206 | $ | 902,924 | 4 | % | $ | (12,454 | ) | 6 | % | |||||||||
| TA | 115,013 | 108,882 | 6 | % | (806 | ) | 6 | % | ||||||||||||
| Total | $ | 1,056,219 | $ | 1,011,806 | 4 | % | $ | (13,260 | ) | 6 | % | |||||||||
| NET SALES - PRODUCTS & SERVICES | ||||||||||||||||||||
| Instruments | $ | 518,407 | $ | 496,346 | 4 | % | $ | (4,199 | ) | 5 | % | |||||||||
| Service | 359,085 | 344,262 | 4 | % | (6,937 | ) | 6 | % | ||||||||||||
| Chemistry | 178,727 | 171,198 | 4 | % | (2,124 | ) | 6 | % | ||||||||||||
| Total Recurring | 537,812 | 515,460 | 4 | % | (9,061 | ) | 6 | % | ||||||||||||
| Total | $ | 1,056,219 | $ | 1,011,806 | 4 | % | $ | (13,260 | ) | 6 | % | |||||||||
| NET SALES - GEOGRAPHY | ||||||||||||||||||||
| Asia | $ | 410,809 | $ | 361,821 | 14 | % | $ | (1,204 | ) | 14 | % | |||||||||
| Americas | 371,236 | 381,636 | (3 | %) | (235 | ) | (3 | %) | ||||||||||||
| Europe | 274,174 | 268,349 | 2 | % | (11,821 | ) | 7 | % | ||||||||||||
| Total | $ | 1,056,219 | $ | 1,011,806 | 4 | % | $ | (13,260 | ) | 6 | % | |||||||||
| NET SALES - MARKETS | ||||||||||||||||||||
| Pharmaceutical | $ | 599,460 | $ | 569,095 | 5 | % | $ | (6,484 | ) | 6 | % | |||||||||
| Industrial | 335,834 | 320,207 | 5 | % | (9,354 | ) | 8 | % | ||||||||||||
| Governmental & Academic | 120,925 | 122,504 | (1 | %) | 2,578 | (3 | %) | |||||||||||||
| Total | $ | 1,056,219 | $ | 1,011,806 | 4 | % | $ | (13,260 | ) | 6 | % |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP Financials
Quarters and Six Months Ended July 1, 2017 and July 2, 2016
(In thousands, except per share data)
| Selling & Administrative Expenses (a) | Research & Development Expenses (a) | Operating Income | Operating Income Percentage | Income from Operations before Income Taxes | Provision for Income Taxes | Net Income | Diluted Earnings per Share | |||||||||||||||||||||||||
| Quarter Ended July 1, 2017 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 141,901 | $ | 32,937 | $ | 153,785 | 27.5 | % | $ | 148,072 | $ | 16,250 | $ | 131,822 | $ | 1.63 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (1,693 | ) | 1,693 | 0.3 | % | 1,693 | 449 | 1,244 | 0.02 | |||||||||||||||||||||||
| Restructuring costs, asset impairments, acquisition-related costs & certain other items (c) | (1,663 | ) | 1,663 | 0.3 | % | 1,663 | 735 | 928 | 0.01 | |||||||||||||||||||||||
| Litigation provisions (d) | (10,018 | ) | 10,018 | 1.8 | % | 10,018 | 3,757 | 6,261 | 0.08 | |||||||||||||||||||||||
| Certain income tax items (e) | (1,972 | ) | 1,972 | 0.02 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 128,527 | $ | 32,937 | $ | 167,159 | 29.9 | % | $ | 161,446 | $ | 19,219 | $ | 142,227 | $ | 1.76 | ||||||||||||||||
| Quarter Ended July 2, 2016 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 131,992 | $ | 32,578 | $ | 151,611 | 28.3 | % | $ | 145,455 | $ | 17,238 | $ | 128,217 | $ | 1.57 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (2,411 | ) | 2,411 | 0.4 | % | 2,411 | 721 | 1,690 | 0.02 | |||||||||||||||||||||||
| Restructuring costs, asset impairments, acquisition-related costs & certain other items (c) | (1,980 | ) | 1,980 | 0.4 | % | 1,980 | 519 | 1,461 | 0.02 | |||||||||||||||||||||||
| Certain income tax items (e) | 2,367 | (2,367 | ) | (0.03 | ) | |||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 127,601 | $ | 32,578 | $ | 156,002 | 29.1 | % | $ | 149,846 | $ | 20,845 | $ | 129,001 | $ | 1.58 | ||||||||||||||||
| Six Months Ended July 1, 2017 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 274,154 | $ | 68,689 | $ | 272,654 | 25.8 | % | $ | 261,559 | $ | 24,180 | $ | 237,379 | $ | 2.94 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (3,422 | ) | 3,422 | 0.3 | % | 3,422 | 922 | 2,500 | 0.03 | |||||||||||||||||||||||
| Restructuring costs, asset impairments, acquisition-related costs & certain other items (c) | (11,011 | ) | 11,011 | 1.0 | % | 11,011 | 3,794 | 7,217 | 0.09 | |||||||||||||||||||||||
| Litigation provisions (d) | (10,018 | ) | 10,018 | 0.9 | % | 10,018 | 3,757 | 6,261 | 0.08 | |||||||||||||||||||||||
| Acquired in-process research and development (f) | (5,000 | ) | 5,000 | 0.5 | % | 5,000 | 962 | 4,038 | 0.05 | |||||||||||||||||||||||
| Certain income tax items (e) | (2,447 | ) | 2,447 | 0.03 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 249,703 | $ | 63,689 | $ | 302,105 | 28.6 | % | $ | 291,010 | $ | 31,168 | $ | 259,842 | $ | 3.22 | ||||||||||||||||
| Six Months Ended July 2, 2016 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 263,987 | $ | 62,016 | $ | 264,273 | 26.1 | % | $ | 252,085 | $ | 29,816 | $ | 222,269 | $ | 2.72 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (5,055 | ) | 5,055 | 0.5 | % | 5,055 | 1,471 | 3,584 | 0.04 | |||||||||||||||||||||||
| Restructuring costs, asset impairments, acquisition-related costs & certain other items (c) | (5,588 | ) | 5,588 | 0.6 | % | 5,588 | 1,661 | 3,927 | 0.05 | |||||||||||||||||||||||
| Stock award modification (g) | (7,085 | ) | 7,085 | 0.7 | % | 7,085 | 2,657 | 4,428 | 0.05 | |||||||||||||||||||||||
| Certain income tax items (e) | 1,630 | (1,630 | ) | (0.02 | ) | |||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 246,259 | $ | 62,016 | $ | 282,001 | 27.9 | % | $ | 269,813 | $ | 37,235 | $ | 232,578 | $ | 2.85 |
Waters Corporation and Subsidiaries
Condensed Preliminary Unclassified Consolidated Balance Sheets
(In thousands and unaudited)
| July 1, 2017 | December 31, 2016 | |||||||
| Cash, cash equivalents and investments | $ | 3,125,946 | $ | 2,813,032 | ||||
| Accounts receivable | 462,811 | 489,340 | ||||||
| Inventories | 287,139 | 262,682 | ||||||
| Property, plant and equipment, net | 338,860 | 337,118 | ||||||
| Intangible assets, net | 219,092 | 207,055 | ||||||
| Goodwill | 357,122 | 352,080 | ||||||
| Other assets | 205,775 | 200,752 | ||||||
| Total assets | $ | 4,996,745 | $ | 4,662,059 | ||||
| Notes payable and debt | $ | 1,912,466 | $ | 1,827,263 | ||||
| Other liabilities | 565,640 | 532,847 | ||||||
| Total liabilities | 2,478,106 | 2,360,110 | ||||||
| Total equity | 2,518,639 | 2,301,949 | ||||||
| Total liabilities and equity | $ | 4,996,745 | $ | 4,662,059 |