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Waters Corporation Reports 10% Increase in Third Quarter Sales and Strong E.P.S. Growth

MILFORD, Mass.--(BUSINESS WIRE)--Oct. 24, 2006--Waters Corporation (NYSE: WAT) reported third quarter 2006 sales of $301 million, an increase of 10% over sales of $273 million in the third quarter of 2005. In the quarter, foreign currency translation did not materially affect the Company's sales growth rate. On a GAAP basis, earnings per diluted share (E.P.S.) for the third quarter were $0.49, compared to $0.22 for the third quarter in 2005. On a non-GAAP basis, including the adjustments noted in the attached reconciliation, E.P.S. grew 26% to $0.54 in the third quarter of 2006 from $0.43 in the third quarter of 2005.

Through the first nine months of 2006, sales for the Company were $893 million, an 8% increase over sales in the first nine months of 2005 of $826 million. Foreign currency translation reduced this reported sales growth rate by approximately 1%. E.P.S. through the first nine months of 2006 were $1.36 compared to $1.07 for the comparable period in 2005. On a non-GAAP basis, including the adjustments noted in the attached reconciliation, E.P.S. grew 23% in the first nine months of 2006 to $1.57 in 2006 from $1.28 in 2005.

Commenting on the quarter, Douglas Berthiaume, Chairman, President and Chief Executive Officer said, "During the quarter, our business benefited from continued strong Asian sales growth, from improved pharmaceutical spending in the U.S., and from the overall positive acceptance and uptake of our ACQUITY UPLC(TM)-based system solutions. These factors, in combination with our efforts to continuously improve our operational efficiency, resulted in strong earnings per share growth."

As communicated in a prior press release, Waters Corporation will webcast its third quarter 2006 financial results conference call this morning, October 24, 2006 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 October 31, 2006 at midnight eastern time, similarly by webcast and also by phone at 402-220-9709.

Waters Corporation is among leading companies offering instrumentation, software, service and consumable products for liquid chromatography, mass spectrometry and thermal analysis. These markets account for approximately $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, fluctuations in capital expenditures by the Company's customers, in particular large pharmaceutical companies, regulatory and/or administrative obstacles to the timely completion of purchase order documentation, introduction of competing products by other companies, such as improved research-grade mass spectrometers, and/or higher speed and/or more sensitive liquid chromatographs, pressures on prices from competitors and/or customers, regulatory obstacles to new product introductions, lack of acceptance of new products, other changes in the demands of the Company's healthcare and pharmaceutical company customers, changes in distribution of the Company's products, changes in the healthcare market and the pharmaceutical industry, loss of market share through competition, potential product liability or other claims against the Company as a result of the use of its products, risks associated with lawsuits and other legal actions particularly involving claims for the infringement of patents and other intellectual property rights, the short-term impact to 2006 operating results from cost savings initiatives the Company implemented in February 2006 and foreign exchange rate fluctuations affecting translation of the Company's future non-U.S. operating results. Such factors and others are discussed more fully in the section entitled "Risk Factors" of the Company's annual report on Form 10-K for the year ended December 31, 2005 and quarterly report on Form 10-Q for the period ended July 1, 2006, as filed with the Securities and Exchange Commission, which "Risk Factors" discussion is 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)
                             (Unaudited)


                                 (Unaudited)          (Unaudited)
                              Three Months Ended   Nine Months Ended
                             September   October  September   October
                                 30,        1,        30,        1,
                                2006      2005       2006      2005

Net sales                       301,182  273,031     893,299  825,966
Cost of sales (1)               127,167  115,508     373,799  344,375

  Gross profit                  174,015  157,523     519,500  481,591

Selling and administrative
 expenses (1)                    87,397   76,645     261,903  240,101
Research and development
 expenses (1)                    19,138   16,982      57,836   50,214
Purchased intangibles
 amortization                     1,403    1,241       3,980    3,789
Restructuring and other
 unusual charges (2)                344        -       7,670        -

  Operating income               65,733   62,655     188,111  187,487

Interest expense, net            (6,688)  (1,969)    (19,096)  (2,068)
  Income from operations
   before income taxes           59,045   60,686     169,015  185,419
Provision for income taxes
 (3)                              8,669   34,969      26,704   59,042

  Net income                     50,376   25,717     142,311  126,377

Net income per basic common
 share                            $0.49    $0.23       $1.38    $1.09

Weighted average number of
 basic common shares            101,845  112,981     103,135  115,923

Net income per diluted common
 share                            $0.49    $0.22       $1.36    $1.07

Weighted average number of
 diluted common shares and
 equivalents                    103,074  114,942     104,570  117,943

(1) Effective January 1, 2006, Waters Corporation adopted FAS 123(R),
 "Share-Based Payment". Accordingly, for the three months and nine
 months ended September 30, 2006, stock-based compensation was
 accounted for under FAS 123 (R), while for the three months and nine
 months ended October 1, 2005, stock-based compensation was accounted
 for under APB No. 25, Accounting for Stock Issued to Employees." The
 amounts in the consolidated statements of operations above include
 stock-based compensation as follows:

                                 (Unaudited)          (Unaudited)
                              Three Months Ended   Nine Months Ended
                             September   October  September   October
                                 30,        1,        30,        1,
                                2006      2005       2006      2005
Cost of sales                     1,034        -       3,286        -
Selling and administrative
 expenses                         4,786       58      14,582      726
Research and development
 expenses                         1,305        -       3,873        -
   Total stock-based
    compensation                  7,125       58      21,741      726


(2) The results for the three months and nine months ended September
 30, 2006 include restructuring and other incremental costs in
 relation to a cost reduction plan implemented in February 2006.

(3) The results for the three months and nine months ended October 1,
 2005 include a tax provision of approximately $24.0 million related
 to a qualified dividends distribution under the American Jobs
 Creation Act of 2004.

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

                                 (Unaudited)          (Unaudited)
                              Three Months Ended   Nine Months Ended
                             September   October  September   October
                                 30,        1,        30,        1,
                                2006      2005       2006      2005

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


Income per diluted share          $0.49    $0.22       $1.36    $1.07
                             ----------- -------- ----------- --------

Adjustment for stock-based
 compensation, net of tax         5,293       47      16,017      585
Income per diluted share
 effect                            0.05     0.00        0.15     0.00
                             ----------- -------- ----------- --------

Adjustment for restructuring
 and other unusual charges,
 net of tax                         329        -       6,366        -
Income per diluted share
 effect                            0.00        -        0.06        -
                             ----------- -------- ----------- --------

Adjustment for tax provision
 for qualified dividends
 distribution                         -   24,000           -   24,000
Income per diluted share
 effect                               -     0.21           -     0.20
                             ----------- -------- ----------- --------

Adjusted income per diluted
 share:                           $0.54    $0.43       $1.57    $1.28
                             =========== ======== =========== ========


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 items
 management has excluded as non-operational transactions. As a result
 of the adoption of FAS 123(R), management has excluded the stock-
 based compensation cost from its non-GAAP adjusted amounts to enable
 management and investors to perform a meaningful comparison of the
 Company's operating results to the prior period. In the prior period,
 the Company's consolidated statements of operations were not required
 to include the expense associated with stock-based compensation and
 now the Company must include the expense in the consolidated
 statements of operations. Management has excluded the restructuring
 charges from its non-GAAP adjusted amounts since management believes
 that these charges are not directly related to ongoing operations
 thereby providing investors with information that helps to compare
 ongoing operating performance.
                 Waters Corporation and Subsidiaries
                Condensed Consolidated Balance Sheets
                     (In thousands and unaudited)


                                          September 30,  December 31,
                                               2006           2005


Cash and cash equivalents                       511,567       493,588
Accounts receivable                             225,935       256,809
Inventories                                     177,291       131,554
Other current assets                             32,923        31,041
   Total current assets                         947,716       912,992

Property, plant and equipment, net              145,691       141,030
Other assets                                    408,501       374,909
   Total assets                               1,501,908     1,428,931


Notes payable and debt                          385,893       326,286
Accounts payable and accrued expenses           308,616       277,605
   Total current liabilities                    694,509       603,891

Long-term debt                                  500,000       500,000
Other long-term liabilities                      45,977        41,408
   Total liabilities                          1,240,486     1,145,299

Total equity                                    261,422       283,632
   Total liabilities and equity               1,501,908     1,428,931

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

SOURCE: Waters Corporation