MILFORD, Mass.--(BUSINESS WIRE)--Jan. 28, 2003--Waters Corporation reported today fourth quarter 2002 sales of $256 million and earnings per diluted share (E.P.S.) of $0.41, compared to $0.43 in 2001, both before unusual charges. Sales were down 1% compared with the prior year's quarterly results before currency effects and up 3% at actual exchange rates. Earnings per share including charges were $0.30 for the fourth quarter 2002, as compared to ($0.01) in 2001.
Fourth quarter unusual charges, as explained in the accompanying financial schedules, consisted of charges for the write down of non-affiliate investments reflected in other expense and an impairment of long-lived assets, restructuring and unusual charges related to the combination of the company's field organizations, and an estimated litigation provision for outstanding legal matters. The financial schedules also reflect a reclassification of service costs from selling, general and administrative expenses to cost of sales as explained in the financial schedules.
Douglas Berthiaume, Chairman and Chief Executive Officer, said, "Overall, 2002 was a challenging year for the company. The combined effects of a mass spectrometry patent dispute loss in the first quarter and slower demand, late in the year, from large pharmaceutical customers adversely affected our growth.
During the fourth quarter, despite slower high performance liquid chromatography (HPLC) sales to our large pharmaceutical customers, improved HPLC demand from other market segments in late December resulted in somewhat better performance than last expected. Results for the quarter therefore exceeded the revised guidance we had communicated in early December. Sales of mass spectrometry (MS) and thermal analysis instruments for the quarter were in line with our expectations.
In preparation for 2003, we have made significant progress on several key initiatives. New product development efforts in mass spectrometry are on track and a second quarter 2003 introduction of a new high performance triple quadrupole system is planned. Our combined field organization for HPLC and MS products is now in place and we recorded restructuring and other unusual charges of $7.4 million in the fourth quarter. The acquisition of the rheology products of Rheometric Scientific was completed in January and we have begun its integration into our thermal analysis product line. We continue to pursue new business acquisitions, and our $200 million share repurchase plan is on schedule; approximately $100 million of stock was purchased during the last half of 2002.
Significantly, our business continues to generate strong free cash flow with $50 million for the quarter alone and $192 million for the full year."
As communicated in a prior press release, Waters Corporation will webcast its fourth quarter 2002 financial results conference call this morning, January 28, 2003, at 8:30 a.m. eastern time. To listen to the call, connect to www.waters.info, choose Investor Relations and click on the Live Webcast. A replay of the call will be available from today through February 3, 2003, similarly by webcast, and also by phone at 402-220-2055.
Waters Corporation holds worldwide leading positions in three complementary analytical technologies - high performance liquid chromatography (HPLC), mass spectrometry (MS) and thermal analysis (TA). These markets account for $4.4 billion of the overall $20 billion analytical instrument market.
This press release presents earnings per share, excluding unusual charges, not derived in accordance with generally accepted accounting principles (GAAP). Such earnings per share should not be considered a substitute for earnings per share derived in accordance with GAAP, (and may also be prepared in a different manner from, or inconsistent with similar earnings per share presented by other companies.) Reconciliation of non-GAAP earnings per share to GAAP is presented in the attached pages.
This press release also contains certain statements that are forward looking. Many factors could cause actual results to differ from these statements, including loss of market share through competition, introduction of competing products by other companies, pressures on prices from competitors and/or customers, regulatory obstacles to new product introductions, lack of acceptance of new products, changes in the demands of our healthcare and pharmaceutical company customers, changes in the healthcare market and the pharmaceutical industry, changes in distribution of the Company's products, and foreign exchange fluctuations. Such factors are discussed in detail in the Company's filings with the Securities and Exchange Commission.
Waters Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Three Months Ended Year Ended December 31 December 31 2002 2001 2002 2001 Net sales 256,389 248,679 889,967 859,208 Cost of sales (A) 108,402 102,601 373,468 361,931 Gross profit 147,987 146,078 516,499 497,277 Selling, general and administrative expenses (A) 62,920 56,385 246,816 219,007 Research and development expenses 13,424 12,029 51,923 46,602 Goodwill and purchased technology amortization 903 1,867 3,600 7,141 Litigation provision (B) 5,100 75,000 7,900 75,000 Impairment of long-lived asset(C) 2,445 - 2,445 - Restructuring and other unusual charges (D) 7,404 - 7,404 - Operating income 55,791 797 196,411 149,527 Other expense, net (E) (6,113) (7,066) (5,997) (7,066) Interest income, net 458 1,117 4,997 4,965 Income (loss) from operations before income taxes 50,136 (5,152) 195,411 147,426 Provision for income taxes 9,892 (3,736) 43,193 32,883 Income (loss) before cumulative effect of change in accounting principle 40,244 (1,416) 152,218 114,543 Cumulative effect of change in accounting principle, net of tax (F) - - (4,506) - Net income (loss) 40,244 (1,416) 147,712 114,543 Income (loss) per basic common share: Net income (loss) before cumulative effect of accounting principle change 0.31 (0.01) 1.17 0.88 Cumulative effect of change in accounting principle (F) - - (0.03) - Net income (loss) 0.31 (0.01) 1.13 0.88 Income (loss) per diluted common share: Net income (loss) before cumulative effect of accounting principle change 0.30 (0.01) 1.12 0.83 Cumulative effect of change in accounting principle (F) - - (0.03) - Net income (loss) 0.30 (0.01) 1.09 0.83 Weighted average number of basic common shares 128,752 130,815 130,489 130,559 Weighted average number of diluted common shares and equivalents 133,573 130,815 135,762 137,509 (A) Certain service costs previously classified in selling, general and administrative expenses have been reclassified to cost of sales in the following amounts: $15.7m and $13.3m for Q4 2002 and 2001, respectively, and $58.4m and $50.7m for the full year 2002 and 2001, respectively. (B) Expenses recorded in relation to the Company's patent and regulatory proceedings. (C) Charge recorded for full write-down of a technology license asset. (D) Both restructuring and other incremental costs incurred in relation to the Company's reorganization of the HPLC and Mass Spectrometry business. (E) Includes write-down of certain non-affiliate investments. (F) Effect at January 1, 2002 of a change in accounting method for patent related costs. Waters Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Three Months Ended Year Ended December 31 December 31 2002 2001 2002 2001 Reconciliation of income per diluted share, in accordance with generally accepted accounting principles, with income before unusual charges: Income per diluted share before cumulative effect of change in accounting principle 0.30 (0.01) 1.12 0.83 Adjustment for litigation provision, net of tax 3,315 54,500 5,359 54,500 Income per diluted share effect 0.03 0.40 0.04 0.40 Adjustment for restructuring and other unusual charges, net of tax 5,701 - 5,701 - Income per diluted share effect 0.04 - 0.04 - Adjustment for impairment of long- lived asset, net of tax 1,589 - 1,589 - Income per diluted share effect 0.01 - 0.01 - Adjustment for other expense, write down of certain investments, net of tax 3,974 5,370 3,974 5,370 Income per diluted share effect 0.03 0.04 0.03 0.04 Income per diluted share before unusual charges 0.41 0.43 1.24 1.27 The income per diluted share before unusual charges presented above is used by the management of the Company to measure performance with prior periods and is not in accordance with generally accepted accounting principles (GAAP). The above reconciliation identifies those activities and transactions management has excluded. Management feels these activities or transactions may not be indicative of understanding the performance of the business or its future outlook. Waters Corporation and Subsidiaries Condensed Consolidated Balance Sheets (In thousands) December 31, December 31, 2002 2001 Cash and cash equivalents 263,312 226,798 Restricted cash 49,944 - Accounts receivable 198,302 182,164 Inventories 111,557 102,718 Other current assets 13,341 11,064 Total current assets 636,456 522,744 Property, plant and equipment, net 119,013 114,207 Other assets 255,478 249,960 Total assets 1,010,947 886,911 Notes payable 2,665 1,140 Accounts payable and accrued expenses 317,550 279,866 Total current liabilities 320,215 281,006 Other liabilities 25,422 24,160 Total liabilities 345,637 305,166 Total equity 665,310 581,745 Total liabilities and equity 1,010,947 886,911