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Waters Corporation Fourth Quarter 2004 Earnings Accelerate as New Products Drive Sales Growth

MILFORD, Mass.--(BUSINESS WIRE)--Jan. 27, 2005--Waters Corporation (NYSE/WAT) reported today fourth quarter 2004 sales of $324.2 million, an increase of 18% over sales of $275.1 million in the fourth quarter of 2003. Foreign currency translation benefited revenue growth by approximately 4%. Quarterly earnings per diluted share (E.P.S.) were $0.58, compared to $0.47 for the fourth quarter in 2003. On a non-GAAP basis, excluding a write down for an investment in an unaffiliated company and for an impairment of a technology license, both recorded in the fourth quarter of 2004, and excluding a charge for expensed in-process research and development relating to an acquisition recorded in the fourth quarter of 2003, E.P.S. grew 29%, from $0.48 in the fourth quarter of 2003 to $0.62 in the fourth quarter of 2004.

For the full year, reported sales grew 15% from $958.2 million in 2003 to $1,104.5 million in 2004 while E.P.S. grew from $1.34 in 2003 to $1.82 in 2004. On a non-GAAP basis, including the adjustments noted above and in the attached reconciliation, E.P.S. grew 26% from $1.44 in 2003 to $1.81 in 2004.

Commenting on the quarter and the year, Douglas Berthiaume, Chairman, President and Chief Executive Officer said, " We had a strong fourth quarter as broad-based customer demand and successful new product launches drove top-line growth. The Waters Division benefited from sales of new products including ACQUITY UPLC(TM) and the QTof Premier(TM) while our TA Instruments Division finished the year with strong sales growth driven by continued robust customer demand. We are encouraged by the enthusiastic customer response to our newly introduced product platforms and are excited about our prospects in 2005."

As communicated in a prior press release, Waters Corporation will webcast its fourth quarter 2004 financial results conference call this morning, January 27, 2004 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 through February 2, 2005, similarly by webcast and also by phone at 402-280-9915.

Waters Corporation holds worldwide leading positions in three complementary analytical technologies - liquid chromatography, mass spectrometry and thermal analysis. These markets account for $4.5 - $5.0 billion of the overall $20 + billion analytical instrument market.

CAUTIONARY STATEMENT

This release contains "forward-looking" statements regarding future results and events, including statements regarding expected financial results, future growth and customer demand that involve a number of risks and uncertainties. For this purpose, any statements contained herein that are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words, "believes", "anticipates", "plans", "expects", "intends", "appears", "estimates", "projects", and similar expressions 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: 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 the Company's 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 and others are discussed more fully in the section entitled "Risk Factors" of the Company's Form 10-K for the year ended December 31, 2003, as filed with the Securities and Exchange Commission, which "Risk Factors" discussion is incorporated by reference in this press release. The forward-looking statements included in this press release represent the Company's estimates as of the date of this press 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 press release. The Company specifically disclaims any obligation to update these forward-looking statements in the future.

                  Waters Corporation and Subsidiaries
                 Consolidated Statements of Operations
                 (In thousands, except per share data)



                               (Unaudited)            (Unaudited)
                            Three Months Ended        Year Ended
                               December 31,          December 31,
                              2004        2003      2004       2003

Net sales                    324,154    275,073  1,104,536   958,205
Cost of sales                130,144    113,104    454,807   397,848

  Gross profit               194,010    161,969    649,729   560,357

Selling and administrative
 expenses                     80,916     67,219    300,150   264,252
Research and development
 expenses                     16,475     16,786     65,241    59,242
Purchased intangibles
 amortization                  1,236      1,008      4,814     4,242
Litigation settlement and
 provisions (A)                    -          -     (9,277)    1,500
Loss on sale of business
 (B)                               -          -          -     5,031
Impairment of long-lived
 asset (C)                     3,997          -      3,997         -
Restructuring and other
 unusual charges, net (D)          -       (161)       (54)      918
Expensed in-process
 research and development
 (E)                               -        840          -     6,000

  Operating income            91,386     76,277    284,858   219,172

Other expense, net (F)        (1,014)      (250)    (1,014)     (250)
Interest income, net             156        485      1,827     4,764
  Income from operations
   before income taxes        90,528     76,512    285,671   223,686

Provision for income taxes    19,011     18,110     61,618    52,795

  Net income                  71,517     58,402    224,053   170,891


Income per basic common
 share:
Net income per basic
 common share                  $0.59      $0.48      $1.87     $1.39

Weighted average number of
 basic common shares         120,266    120,961    119,640   123,189


Income per diluted common
 share:
Net income per diluted
 common share                  $0.58      $0.47      $1.82     $1.34

Weighted average number of
 diluted common shares
  and equivalents            122,679    124,784    123,069   127,579


(A) The results for the year ended December 31, 2004 include
 provisions of $7.8 million for ongoing patent litigation with
 Hewlett-Packard Company and settlement income of $17.1 million
 related to patent litigation with Perkin-Elmer Corporation. The
 results for the year ended December 31, 2003 include a $1.2 million
 provision for an environmental matter with the Commonwealth of
 Massachusetts.

(B) The results for the year ended December 31, 2003 include a loss on
 sale of the inorganic mass spectrometry product line.

(C) The results for the three months and year ended December 31, 2004
 include charges of $4.0 million recorded for a write-down of a
 technology licensed asset.

(D) The results for the year ended December 31, 2004 and the three
 months and year ended December 31, 2003 include restructuring and
 other incremental costs and adjustments recorded in relation to the
 Company's reorganization of the HPLC and mass spectrometry
 businesses.

(E) The results for the three months and year ended December 31, 2003
 include charges for expensed in-process research and development
 relating to the acquisition of Creon Lab Control AG.

(F)  The results for the three months and year ended December 31, 2004
 include charges of $1.0 million recorded for full write-down of an
 investment in an unaffiliated company.  The results for the three
 months and year ended December 31, 2003 include the write-down of
 certain non-affiliate investments.


                  Waters Corporation and Subsidiaries
                 Consolidated Statements of Operations
                 (In thousands, except per share data)


                               (Unaudited)           (Unaudited)
                            Three Months Ended        Year Ended
                               December 31,          December 31,
                             2004        2003      2004       2003

Reconciliation of income per
diluted share, in accordance
with generally accepted
accounting principles, with
adjusted results:


Income per diluted share       $0.58      $0.47      $1.82     $1.34
                          -----------  --------- ---------- ---------

Adjustment for litigation
 settlement and
 provisions, net of tax            -          -     (5,688)    1,155
Income per diluted share
 effect                            -          -      (0.05)     0.01
                          -----------  --------- ---------- ---------

Adjustment for
 restructuring and other
 unusual charges, net of
 tax                               -       (124)       (57)      707
Income per diluted share
 effect                            -      (0.00)     (0.00)     0.01
                          -----------  --------- ---------- ---------

Loss on sale of business,
 net of tax                        -          -          -     3,522
Income per diluted share
 effect                            -          -          -      0.03
                          -----------  --------- ---------- ---------

Impairment of long-lived
 asset, net of tax             3,158          -      3,158         -
Income per diluted share
 effect                         0.03          -       0.03         -
                          -----------  --------- ---------- ---------

Other expense, write down
 of certain investments,
 net of tax                      801        220        801       220
Income per diluted share
 effect                         0.01       0.00       0.01      0.00
                          -----------  --------- ---------- ---------

Expensed in-process
 research and development          -        840          -     6,000
Income per diluted share
 effect                            -       0.01          -      0.05
                          -----------  --------- ---------- ---------

Adjusted income per
 diluted share:                $0.62      $0.48      $1.81     $1.44
                          ===========  ========= ========== =========


The adjusted income per diluted share presented above is used by the
 management of the Company to measure operating performance with prior
 periods and is not in accordance with generally accepted accounting
 principles (GAAP). The above reconciliation identifies those items
 management has excluded as non-operational activities or
 transactions. Management feels these transactions are not indicative
 of understanding the ongoing operations of the business or its future
 outlook.



                 Waters Corporation and Subsidiaries
                Condensed Consolidated Balance Sheets
                     (In thousands and unaudited)

                                        Dec. 31, 2004     Dec.31, 2003


Cash and cash equivalents                      539,077        356,781
Accounts receivable                            271,731        214,260
Inventories                                    139,900        128,810
Other current assets                            22,267         18,505
   Total current assets                        972,975        718,356

Property, plant and equipment, net             135,908        108,162
Other assets                                   350,634        304,343
   Total assets                              1,459,517      1,130,861


Notes payable and debt                         206,663        121,309
Accounts payable and accrued expenses          281,233        257,212
   Total current liabilities                   487,896        378,521

Other long-term liabilities                    288,750        161,863
   Total liabilities                           776,646        540,384

Total equity                                   682,871        590,477
   Total liabilities and equity              1,459,517      1,130,861

    CONTACT: Waters Corporation
             Gene Cassis, 508-482-2349
             Vice President of Investor Relations

    SOURCE: Waters Corporation