Full Press Release Details
Lynch, Vice President, Treasurer and Investor Relations, 508-482-2314
Waters Reports Fourth Quarter and Full Year 2016 Financial Results
Company Delivers Fourth Quarter Revenue of $629 Million and
Diluted GAAP EPS of $2.15 (Non-GAAP EPS of $2.21)
Milford, Mass., January 24, 2017 Waters
Corporation (NYSE: WAT) reported fourth quarter 2016 sales of $629 million, a 7% increase versus sales of $587 million in the fourth quarter of 2015. Foreign currency translation reduced sales growth by 2% in the quarter. On a GAAP basis,
earnings per diluted share (EPS) for the fourth quarter was up 17% to $2.15 compared to $1.83 for the fourth quarter of 2015. On a non-GAAP basis, including the adjustments in the attached reconciliation, EPS
increased 13% to $2.21 from $1.96 in the fourth quarter of 2015. 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.
For the full year, sales for the Company were $2,167 million, up 6% compared with sales of
$2,042 million in 2015. Foreign currency translation reduced sales growth by 1% in the year. On a GAAP basis, EPS for 2016 was up 13% to $6.41 compared to $5.65 in 2015. On a non-GAAP basis and including
adjustments in the attached reconciliation, EPS increased 12% to $6.62 in 2016 as compared to $5.89 in 2015.
Commenting on the Company s
performance, Christopher J. O Connell, President and Chief Executive Officer said, I am pleased to report that our fourth quarter featured broad-based sales growth across our major markets, and balance across all product lines. The global
Waters team executed well throughout 2016 and delivered strong financial results, while we continued to invest for future growth.
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 GAAP to non-GAAP sales.
Results from the Company s markets in the quarter were highlighted by 4% sales growth (6% in
constant currency) from the broadly defined pharmaceutical market, 13% sales growth (14% in constant currency) from the industrial market, and 5% sales growth (6% in constant currency) from the governmental and academic market. For the full year,
sales to the pharmaceutical market grew 9% (10% in constant currency), sales to the industrial market grew 6%, and sales to the governmental and academic market fell 4% (3% in constant currency).
Geographically, sales during the quarter grew 16% in Asia, 5% in Europe (9% in constant currency), and 1% in the
Americas (2% in constant currency). For the full year, sales grew 13% in Asia (12% in constant currency), 4% in Europe (6% in constant currency), and 2% in the Americas (3% in constant currency).
The Company s recurring revenues, the combination of service and chemistry consumables, posted 7% sales growth (8% in constant currency), while
instrument system sales grew 7% (9% in constant currency) in the quarter. For the full year, the Company s recurring revenues grew 8%, while instrument system sales grew by 4% (6% in constant currency).
As communicated in a prior press release, Waters Corporation will webcast its fourth quarter 2016 financial results conference call this morning,
January 24, 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 January 31, 2017 at midnight eastern
time, similarly by webcast and also by phone at 203-369-1050.
Waters Corporation (NYSE: WAT) develops and manufactures advanced analytical science technologies for laboratory-dependent
organizations. For more than 50 years, the Company has pioneered a connected portfolio of separations science, laboratory information management, mass spectrometry and thermal analysis systems.
Non-GAAP Financial Measures
This press release contains financial measures, such as constant currency growth rate, adjusted operating income, adjusted earnings per diluted share and
adjusted operating income, 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 affect 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 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, 2015 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
Condensed Preliminary Unclassified Consolidated Balance Sheets
(In thousands and unaudited)
| December 31, 2016 | December 31, 2015 | |||||||
| Cash, cash equivalents and investments | $ | 2,813,032 | $ | 2,399,263 | ||||
| Accounts receivable | 489,340 | 468,315 | ||||||
| Inventories | 262,682 | 263,415 | ||||||
| Property, plant and equipment, net | 337,118 | 333,355 | ||||||
| Intangible assets, net | 207,055 | 218,022 | ||||||
| Goodwill | 352,080 | 356,864 | ||||||
| Other assets | 200,752 | 229,443 | ||||||
| Total assets | $ | 4,662,059 | $ | 4,268,677 | ||||
| Notes payable and debt | $ | 1,827,263 | $ | 1,668,336 | ||||
| Other liabilities | 532,847 | 541,490 | ||||||
| Total liabilities | 2,360,110 | 2,209,826 | ||||||
| Total equity | 2,301,949 | 2,058,851 | ||||||
| Total liabilities and equity | $ | 4,662,059 | $ | 4,268,677 |
Waters Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, 2016 | December 31, 2015 | December 31, 2016 | December 31, 2015 | |||||||||||||
| Net sales | $ | 628,787 | $ | 586,610 | $ | 2,167,423 | $ | 2,042,332 | ||||||||
| Costs and operating expenses: | ||||||||||||||||
| Cost of sales | 251,579 | 237,915 | 891,453 | 842,672 | ||||||||||||
| Selling and administrative expenses | 130,238 | 128,681 | 513,031 | 495,747 | ||||||||||||
| Research and development expenses | 32,753 | 28,336 | 125,187 | 118,545 | ||||||||||||
| Acquired in-process research and development | 3,855 | 3,855 | ||||||||||||||
| Purchased intangibles amortization | 2,358 | 2,576 | 9,889 | 10,123 | ||||||||||||
| Litigation provisions | 3,524 | 3,939 | 3,524 | 3,939 | ||||||||||||
| Operating income | 208,335 | 181,308 | 624,339 | 567,451 | ||||||||||||
| Interest expense, net | (5,756 | ) | (6,070 | ) | (24,225 | ) | (25,532 | ) | ||||||||
| Income from operations before income taxes | 202,579 | 175,238 | 600,114 | 541,919 | ||||||||||||
| Provision for income taxes | 28,201 | 24,184 | 78,611 | 72,866 | ||||||||||||
| Net income | $ | 174,378 | $ | 151,054 | $ | 521,503 | $ | 469,053 | ||||||||
| Net income per basic common share | $ | 2.17 | $ | 1.85 | $ | 6.46 | $ | 5.70 | ||||||||
| Weighted-average number of basic common shares | 80,366 | 81,650 | 80,786 | 82,336 | ||||||||||||
| Net income per diluted common share | $ | 2.15 | $ | 1.83 | $ | 6.41 | $ | 5.65 | ||||||||
| Weighted-average number of diluted common shares and equivalents | 80,954 | 82,382 | 81,417 | 83,087 |
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, 2016 and December 31, 2015
| Three Months Ended | Percent Change | Currency Impact | Constant Currency Growth Rate (a) | |||||||||||||
| December 31, 2016 | December 31, 2015 | |||||||||||||||
| NET SALES - OPERATING SEGMENT | ||||||||||||||||
| Waters | $ | 554,226 | $ | 509,393 | 9% | $ | (8,057 | ) | 10% | |||||||
| TA | 74,561 | 77,217 | (3%) | (789 | ) | (2%) | ||||||||||
| Total | $ | 628,787 | $ | 586,610 | 7% | $ | (8,846 | ) | 9% | |||||||
| NET SALES - PRODUCTS & SERVICES | ||||||||||||||||
| Instruments | $ | 352,717 | $ | 329,568 | 7% | $ | (6,370 | ) | 9% | |||||||
| Service | 185,969 | 173,196 | 7% | (2,999 | ) | 9% | ||||||||||
| Chemistry | 90,101 | 83,846 | 7% | 523 | 7% | |||||||||||
| Total Recurring | 276,070 | 257,042 | 7% | (2,476 | ) | 8% | ||||||||||
| Total | $ | 628,787 | $ | 586,610 | 7% | $ | (8,846 | ) | 9% | |||||||
| NET SALES - GEOGRAPHY | ||||||||||||||||
| Americas | $ | 222,422 | $ | 219,676 | 1% | $ | (1,189 | ) | 2% | |||||||
| Europe | 180,717 | 171,967 | 5% | (6,912 | ) | 9% | ||||||||||
| Asia | 225,648 | 194,967 | 16% | (745 | ) | 16% | ||||||||||
| Total | $ | 628,787 | $ | 586,610 | 7% | $ | (8,846 | ) | 9% | |||||||
| NET SALES - MARKETS | ||||||||||||||||
| Pharmaceutical | $ | 335,075 | $ | 320,764 | 4% | $ | (5,274 | ) | 6% | |||||||
| Industrial | 210,899 | 186,708 | 13% | (2,404 | ) | 14% | ||||||||||
| Government & Academic | 82,813 | 79,138 | 5% | (1,168 | ) | 6% | ||||||||||
| Total | $ | 628,787 | $ | 586,610 | 7% | $ | (8,846 | ) | 9% |
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, 2016 and December 31, 2015
| Twelve Months Ended | Percent Change | Currency Impact | Constant Currency Growth Rate (a) | |||||||||||||||||
| December 31, 2016 | December 31, 2015 | |||||||||||||||||||
| NET SALES - OPERATING SEGMENT | ||||||||||||||||||||
| Waters | $ | 1,928,063 | $ | 1,806,868 | 7% | $ | (12,733 | ) | 7% | |||||||||||
| TA | 239,360 | 235,464 | 2% | (880 | ) | 2% | ||||||||||||||
| Total | $ | 2,167,423 | $ | 2,042,332 | 6% | $ | (13,613 | ) | 7% | |||||||||||
| NET SALES - PRODUCTS & SERVICES | ||||||||||||||||||||
| Instruments | $ | 1,114,883 | $ | 1,067,315 | 4% | $ | (11,654 | ) | 6% | |||||||||||
| Service | 707,127 | 657,076 | 8% | (4,848 | ) | 8% | ||||||||||||||
| Chemistry | 345,413 | 317,941 | 9% | 2,889 | 8% | |||||||||||||||
| Total Recurring | 1,052,540 | 975,017 | 8% | (1,959 | ) | 8% | ||||||||||||||
| Total | $ | 2,167,423 | $ | 2,042,332 | 6% | $ | (13,613 | ) | 7% | |||||||||||
| NET SALES - GEOGRAPHY | ||||||||||||||||||||
| Americas | $ | 807,182 | $ | 790,483 | 2% | $ | (4,287 | ) | 3% | |||||||||||
| Europe | 577,257 | 555,886 | 4% | (9,352 | ) | 6% | ||||||||||||||
| Asia | 782,984 | 695,963 | 13% | 26 | 12% | |||||||||||||||
| Total | $ | 2,167,423 | $ | 2,042,332 | 6% | $ | (13,613 | ) | 7% | |||||||||||
| NET SALES - MARKETS | ||||||||||||||||||||
| Pharmaceutical | $ | 1,206,316 | $ | 1,106,229 | 9% | $ | (9,827 | ) | 10% | |||||||||||
| Industrial | 690,119 | 653,213 | 6% | (1,281 | ) | 6% | ||||||||||||||
| Government & Academic | 270,988 | 282,890 | (4%) | (2,505 | ) | (3%) | ||||||||||||||
| Total | $ | 2,167,423 | $ | 2,042,332 | 6% | $ | (13,613 | ) | 7% |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP Financials
Quarters and Twelve Months Ended December 31, 2016 and December 31, 2015
(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 December 31, 2016 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 136,120 | $ | 32,753 | $ | 208,335 | 33.1 | % | $ | 202,579 | $ | 28,201 | $ | 174,378 | $ | 2.15 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (2,358 | ) | 2,358 | 0.4 | % | 2,358 | 661 | 1,697 | 0.02 | |||||||||||||||||||||||
| Restructuring costs, asset impairments, acquisition-related costs & certain other items (d) | (304 | ) | 304 | 0.0 | % | 304 | 312 | (8 | ) | |||||||||||||||||||||||
| Litigation provisions (f) | (3,524 | ) | 3,524 | 0.6 | % | 3,524 | 1,321 | 2,203 | 0.03 | |||||||||||||||||||||||
| Certain income tax items (g) | (739 | ) | 739 | 0.01 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 129,934 | $ | 32,753 | $ | 214,521 | 34.1 | % | $ | 208,765 | $ | 29,756 | $ | 179,009 | $ | 2.21 | ||||||||||||||||
| Quarter Ended December 31, 2015 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 135,196 | $ | 32,191 | $ | 181,308 | 30.9 | % | $ | 175,238 | $ | 24,184 | $ | 151,054 | $ | 1.83 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (2,576 | ) | 2,576 | 0.4 | % | 2,576 | 729 | 1,847 | 0.02 | |||||||||||||||||||||||
| Restructuring costs, asset impairments, acquisition-related costs & certain other items (d) | (2,435 | ) | 2,435 | 0.4 | % | 2,435 | 606 | 1,829 | 0.02 | |||||||||||||||||||||||
| Acquired in-process research and development (e) | (3,855 | ) | 3,855 | 0.7 | % | 3,855 | 786 | 3,069 | 0.04 | |||||||||||||||||||||||
| Litigation provisions (f) | (3,939 | ) | 3,939 | 0.7 | % | 3,939 | 1,478 | 2,461 | 0.03 | |||||||||||||||||||||||
| Certain income tax items (g) | (959 | ) | 959 | 0.01 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 126,246 | $ | 28,336 | $ | 194,113 | 33.1 | % | $ | 188,043 | $ | 26,824 | $ | 161,219 | $ | 1.96 | ||||||||||||||||
| Twelve Months Ended December 31, 2016 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 526,444 | $ | 125,187 | $ | 624,339 | 28.8 | % | $ | 600,114 | $ | 78,611 | $ | 521,503 | $ | 6.41 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (9,889 | ) | 9,889 | 0.5 | % | 9,889 | 2,864 | 7,025 | 0.09 | |||||||||||||||||||||||
| Stock award modification (c) | (7,085 | ) | 7,085 | 0.3 | % | 7,085 | 2,657 | 4,428 | 0.05 | |||||||||||||||||||||||
| Restructuring costs, asset impairments, acquisition-related costs & certain other items (d) | (6,856 | ) | 6,856 | 0.3 | % | 6,856 | 2,812 | 4,044 | 0.05 | |||||||||||||||||||||||
| Litigation provisions (f) | (3,524 | ) | 3,524 | 0.2 | % | 3,524 | 1,321 | 2,203 | 0.03 | |||||||||||||||||||||||
| Certain income tax items (g) | 135 | (135 | ) | |||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 499,090 | $ | 125,187 | $ | 651,693 | 30.1 | % | $ | 627,468 | $ | 88,400 | $ | 539,068 | $ | 6.62 | ||||||||||||||||
| Twelve Months Ended December 31, 2015 | ||||||||||||||||||||||||||||||||
| GAAP | $ | 509,809 | $ | 122,400 | $ | 567,451 | 27.8 | % | $ | 541,919 | $ | 72,866 | $ | 469,053 | $ | 5.65 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (b) | (10,123 | ) | 10,123 | 0.5 | % | 10,123 | 2,888 | 7,235 | 0.09 | |||||||||||||||||||||||
| Restructuring costs, asset impairments, acquisition-related costs & certain other items (d) | (7,455 | ) | 7,455 | 0.4 | % | 7,455 | 2,377 | 5,078 | 0.06 | |||||||||||||||||||||||
| Acquired in-process research and development (e) | (3,855 | ) | 3,855 | 0.2 | % | 3,855 | 786 | 3,069 | 0.04 | |||||||||||||||||||||||
| Litigation provisions (f) | (3,939 | ) | 3,939 | 0.2 | % | 3,939 | 1,478 | 2,461 | 0.03 | |||||||||||||||||||||||
| Certain income tax items (g) | (2,326 | ) | 2,326 | 0.03 | ||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 488,292 | $ | 118,545 | $ | 592,823 | 29.0 | % | $ | 567,291 | $ | 78,069 | $ | 489,222 | $ | 5.89 |