Full Press Release Details
Lynch, Vice President, Treasurer and Investor Relations, 508-482-2314
Waters Reports Second Quarter 2016 Financial Results
Company Delivers Revenue of $537 Million and
Diluted GAAP EPS of $1.57 (Non-GAAP EPS of $1.58)
Milford, Massachusetts, July 26,
2016 - Waters Corporation (NYSE: WAT) reported second quarter 2016 sales of $537 million, an 8% increase versus sales of $495 million in the second quarter of 2015. Foreign currency translation did not materially impact sales growth. On a GAAP
basis, earnings per diluted share (EPS) for the second quarter were up 24% to $1.57 compared to $1.27 for the second quarter of 2015. On a non-GAAP basis, including the adjustments in the attached reconciliation, EPS increased 20% to $1.58 from
$1.32 in the second 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 .
Through the first six months of 2016, sales for the Company were $1,012 million, up 6% compared with sales of $955 million in the first six months of 2015.
Foreign currency translation decreased sales growth during the first half of 2016 by 1%. On a GAAP basis, EPS for the first six months of 2016 were up 13% to $2.72 compared to $2.41 for the comparable period in 2015. On a non-GAAP basis and
including adjustments in the attached reconciliation, EPS increased 13% to $2.85 in the first six months of 2016 as compared to $2.52 in 2015.
on the Company s performance, Christopher J. O Connell, President and Chief Executive Officer said, Continued strength in bio/pharmaceutical end markets and improvement in industrial end markets, as well as relatively balanced
instrument and recurring revenue growth, highlighted our second quarter results. Disciplined execution of our business plan contributed to operating leverage and strong earnings per share growth, while we continued to invest in innovation to drive
The sales growth percentages below are on an as reported basis and are the same as the sales growth percentages on a constant
currency basis, as detailed in the attached reconciliation of GAAP to non-GAAP sales.
Results from the Company s end markets in the quarter were
highlighted by 12% sales growth from the broadly defined bio/pharmaceutical market and 7% sales growth from the industrial market, offset by a 4% decline in sales within the government and academic market.
The Company s recurring revenues, the combination of service and consumables, posted 10% sales growth in
comparison to a strong prior year s result, while instrument system sales grew about 7% in the quarter.
Geographically, the Company s sales
growth rate in Asia was 9%, with continued strong demand from China. Sales in Europe increased by 12%, while sales in the U.S. increased by 5% in the quarter.
As communicated in a prior press release, Waters Corporation will webcast its second quarter 2016 financial results conference call this morning, July 26,
2016 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 2, 2016 at midnight eastern time, similarly by
webcast and also by phone at 402-998-0509.
About Waters Corporation
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 share and adjusted operating margin, 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, the affect on the Company s financial results from the United Kingdom voting
to exit the European Union; 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; 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 report 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)
| July 2, 2016 | December 31, 2015 | |||||||
| Cash, cash equivalents and investments | 2,599,786 | 2,399,263 | ||||||
| Accounts receivable | 445,953 | 468,315 | ||||||
| Inventories | 286,447 | 263,415 | ||||||
| Property, plant and equipment, net | 330,235 | 333,355 | ||||||
| Intangible assets, net | 217,393 | 218,022 | ||||||
| Goodwill | 352,987 | 356,864 | ||||||
| Other assets | 215,272 | 229,443 | ||||||
| Total assets | 4,448,073 | 4,268,677 | ||||||
| Notes payable and debt | 1,756,958 | 1,668,336 | ||||||
| Other liabilities | 541,771 | 541,490 | ||||||
| Total liabilities | 2,298,729 | 2,209,826 | ||||||
| Total equity | 2,149,344 | 2,058,851 | ||||||
| Total liabilities and equity | 4,448,073 | 4,268,677 |
Waters Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
| Three Months Ended | Six Months Ended | |||||||||||||||
| July 2, 2016 | July 4, 2015 | July 2, 2016 | July 4, 2015 | |||||||||||||
| Net sales | $ | 536,560 | $ | 494,740 | $ | 1,011,806 | $ | 955,144 | ||||||||
| Cost of sales | 220,379 | 208,707 | 421,530 | 397,953 | ||||||||||||
| Gross profit | 316,181 | 286,033 | 590,276 | 557,191 | ||||||||||||
| Selling and administrative expenses | 129,581 | 122,660 | 258,932 | 242,411 | ||||||||||||
| Research and development expenses | 32,578 | 30,555 | 62,016 | 59,506 | ||||||||||||
| Purchased intangibles amortization | 2,411 | 2,500 | 5,055 | 4,974 | ||||||||||||
| Operating income | 151,611 | 130,318 | 264,273 | 250,300 | ||||||||||||
| Interest expense, net | (6,156 | ) | (6,546 | ) | (12,188 | ) | (13,181 | ) | ||||||||
| Income from operations before income taxes | 145,455 | 123,772 | 252,085 | 237,119 | ||||||||||||
| Provision for income taxes | 17,238 | 18,115 | 29,816 | 35,401 | ||||||||||||
| Net income | $ | 128,217 | $ | 105,657 | $ | 222,269 | $ | 201,718 | ||||||||
| Net income per basic common share | $ | 1.59 | $ | 1.28 | $ | 2.74 | $ | 2.44 | ||||||||
| Weighted-average number of basic common shares | 80,804 | 82,564 | 81,043 | 82,798 | ||||||||||||
| Net income per diluted common share | $ | 1.57 | $ | 1.27 | $ | 2.72 | $ | 2.41 | ||||||||
| Weighted-average number of diluted common shares and equivalents | 81,455 | 83,332 | 81,663 | 83,551 |
Waters Corporation and Subsidiaries
Quarterly Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segment, Products & Services, Geography and Markets
Quarters Ended July 2, 2016 and July 4, 2015
| Constant | ||||||||||||||||||||
| Three Months Ended | Percent | Currency | Currency | |||||||||||||||||
| July 2, 2016 | July 4, 2015 | Change | Impact | Growth Rate (a) | ||||||||||||||||
| NET SALES - OPERATING SEGMENT | ||||||||||||||||||||
| Waters | $ | 478,731 | $ | 442,232 | 8 | % | $ | 497 | 8 | % | ||||||||||
| TA | 57,829 | 52,508 | 10 | % | (167 | ) | 10 | % | ||||||||||||
| Total | $ | 536,560 | $ | 494,740 | 8 | % | $ | 330 | 8 | % | ||||||||||
| NET SALES - PRODUCTS & SERVICES | ||||||||||||||||||||
| Instruments | $ | 272,639 | $ | 254,297 | 7 | % | $ | (460 | ) | 7 | % | |||||||||
| Service | 176,873 | 162,704 | 9 | % | (358 | ) | 9 | % | ||||||||||||
| Chemistry | 87,048 | 77,739 | 12 | % | 1,148 | 11 | % | |||||||||||||
| Total Recurring | 263,921 | 240,443 | 10 | % | 790 | 10 | % | |||||||||||||
| Total | $ | 536,560 | $ | 494,740 | 8 | % | $ | 330 | 8 | % | ||||||||||
| NET SALES - GEOGRAPHY | ||||||||||||||||||||
| Americas | $ | 202,895 | $ | 192,652 | 5 | % | $ | (1,850 | ) | 6 | % | |||||||||
| Europe | 143,317 | 127,414 | 12 | % | 2,188 | 12 | % | |||||||||||||
| Asia | 190,348 | 174,674 | 9 | % | (8 | ) | 9 | % | ||||||||||||
| Total | $ | 536,560 | $ | 494,740 | 8 | % | $ | 330 | 8 | % | ||||||||||
| NET SALES - MARKETS | ||||||||||||||||||||
| Pharmaceutical | $ | 310,009 | $ | 276,851 | 12 | % | $ | (191 | ) | 12 | % | |||||||||
| Industrial | 166,686 | 155,379 | 7 | % | 939 | 7 | % | |||||||||||||
| Government & Academic | 59,865 | 62,510 | (4 | %) | (418 | ) | (4 | %) | ||||||||||||
| Total | $ | 536,560 | $ | 494,740 | 8 | % | $ | 330 | 8 | % |
Waters Corporation and Subsidiaries
Quarterly Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segment, Products & Services, Geography and Markets
Six Months Ended July 2, 2016 and July 4, 2015
| Constant | ||||||||||||||||||||
| Six Months Ended | Percent | Currency | Currency | |||||||||||||||||
| July 2, 2016 | July 4, 2015 | Change | Impact | Growth Rate (a) | ||||||||||||||||
| NET SALES - OPERATING SEGMENT | ||||||||||||||||||||
| Waters | $ | 902,924 | $ | 851,900 | 6 | % | $ | (5,824 | ) | 7 | % | |||||||||
| TA | 108,882 | 103,244 | 5 | % | (318 | ) | 6 | % | ||||||||||||
| Total | $ | 1,011,806 | $ | 955,144 | 6 | % | $ | (6,142 | ) | 7 | % | |||||||||
| NET SALES - PRODUCTS & SERVICES | ||||||||||||||||||||
| Instruments | $ | 496,346 | $ | 478,987 | 4 | % | $ | (4,891 | ) | 5 | % | |||||||||
| Service | 344,262 | 320,235 | 8 | % | (2,210 | ) | 8 | % | ||||||||||||
| Chemistry | 171,198 | 155,922 | 10 | % | 959 | 9 | % | |||||||||||||
| Total Recurring | 515,460 | 476,157 | 8 | % | (1,251 | ) | 9 | % | ||||||||||||
| Total | $ | 1,011,806 | $ | 955,144 | 6 | % | $ | (6,142 | ) | 7 | % | |||||||||
| NET SALES - GEOGRAPHY | ||||||||||||||||||||
| Americas | $ | 381,636 | $ | 370,232 | 3 | % | $ | (2,616 | ) | 4 | % | |||||||||
| Europe | 268,349 | 251,815 | 7 | % | 671 | 7 | % | |||||||||||||
| Asia | 361,821 | 333,097 | 9 | % | (4,197 | ) | 10 | % | ||||||||||||
| Total | $ | 1,011,806 | $ | 955,144 | 6 | % | $ | (6,142 | ) | 7 | % | |||||||||
| NET SALES - MARKETS | ||||||||||||||||||||
| Pharmaceutical | $ | 569,095 | $ | 518,154 | 10 | % | $ | (4,627 | ) | 11 | % | |||||||||
| Industrial | 320,207 | 310,389 | 3 | % | (250 | ) | 3 | % | ||||||||||||
| Government & Academic | 122,504 | 126,601 | (3 | %) | (1,265 | ) | (2 | %) | ||||||||||||
| Total | $ | 1,011,806 | $ | 955,144 | 6 | % | $ | (6,142 | ) | 7 | % |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP Financials
Quarters and Six Months Ended July 2, 2016 and July 4, 2015
(in thousands, except per share data)
| Net Sales | Gross Profit | Gross Profit Percentage | Selling & Administrative Expenses | Research & Development Expenses | Operating Income | Operating Income Percentage | Interest Expense, Net | Income from Operations before Income Taxes | Provision for Income Taxes | Net Income | Diluted Earnings per Share | |||||||||||||||||||||||||||||||||||||
| Quarter Ended July 2, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
| GAAP | $ | 536,560 | $ | 316,181 | 58.9 | % | $ | 131,992 | $ | 32,578 | $ | 151,611 | 28.3 | % | $ | (6,156) | $ | 145,455 | $ | 17,238 | $ | 128,217 | $ | 1.57 | ||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (a) | (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 incometax items (d) | 2,367 | (2,367 | ) | (0.03 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 536,560 | $ | 316,181 | 58.9 | % | $ | 127,601 | $ | 32,578 | $ | 156,002 | 29.1 | % | $ | (6,156) | $ | 149,846 | $ | 20,845 | $ | 129,001 | $ | 1.58 | ||||||||||||||||||||||||
| Quarter Ended July 4, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||
| GAAP | $ | 494,740 | $ | 286,033 | 57.8 | % | $ | 125,160 | $ | 30,555 | $ | 130,318 | 26.3 | % | $ | (6,546) | $ | 123,772 | $ | 18,115 | $ | 105,657 | $ | 1.27 | ||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (a) | (2,500 | ) | 2,500 | 0.5 | % | 2,500 | 717 | 1,783 | 0.02 | |||||||||||||||||||||||||||||||||||||||
| Restructuring costs, asset impairments, acquisition-related costs & certain other items (c) | (2,016 | ) | 2,016 | 0.4 | % | 2,016 | 636 | 1,380 | 0.02 | |||||||||||||||||||||||||||||||||||||||
| Certain income tax items (d) | (793 | ) | 793 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 494,740 | $ | 286,033 | 57.8 | % | $ | 120,644 | $ | 30,555 | $ | 134,834 | 27.3 | % | $ | (6,546) | $ | 128,288 | $ | 18,675 | $ | 109,613 | $ | 1.32 | ||||||||||||||||||||||||
| Six Months Ended July 2, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
| GAAP | $ | 1,011,806 | $ | 590,276 | 58.3 | % | $ | 263,987 | $ | 62,016 | $ | 264,273 | 26.1 | % | $ | (12,188) | $ | 252,085 | $ | 29,816 | $ | 222,269 | $ | 2.72 | ||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (a) | (5,055 | ) | 5,055 | 0.5 | % | 5,055 | 1,471 | 3,584 | 0.04 | |||||||||||||||||||||||||||||||||||||||
| Stock award modification (b) | (7,085 | ) | 7,085 | 0.7 | % | 7,085 | 2,657 | 4,428 | 0.05 | |||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||||
| Certain income tax items (d) | 1,630 | (1,630 | ) | (0.02 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 1,011,806 | $ | 590,276 | 58.3 | % | $ | 246,259 | $ | 62,016 | $ | 282,001 | 27.9 | % | $ | (12,188) | $ | 269,813 | $ | 37,235 | $ | 232,578 | $ | 2.85 | ||||||||||||||||||||||||
| Six Months Ended July 4, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||
| GAAP | $ | 955,144 | $ | 557,191 | 58.3 | % | $ | 247,385 | $ | 59,506 | $ | 250,300 | 26.2 | % | $ | (13,181) | $ | 237,119 | $ | 35,401 | $ | 201,718 | $ | 2.41 | ||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Purchased intangibles amortization (a) | (4,974 | ) | 4,974 | 0.5 | % | 4,974 | 1,421 | 3,553 | 0.04 | |||||||||||||||||||||||||||||||||||||||
| Restructuring costs, asset impairments, acquisition-related costs & certain other items (c) | (3,288 | ) | 3,288 | 0.3 | % | 3,288 | 999 | 2,289 | 0.03 | |||||||||||||||||||||||||||||||||||||||
| Certain income tax items (d) | (3,199 | ) | 3,199 | 0.04 | ||||||||||||||||||||||||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 955,144 | $ | 557,191 | 58.3 | % | $ | 239,123 | $ | 59,506 | $ | 258,562 | 27.1 | % | $ | (13,181) | $ | 245,381 | $ | 34,622 | $ | 210,759 | $ | 2.52 |