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Waters Corporation Reports 10% Third Quarter 2008 Sales Growth

MILFORD, Mass.--(BUSINESS WIRE)--

Waters Corporation (NYSE/WAT) reported today third quarter 2008 sales of $386 million, an increase of 10% over sales of $353 million in the third quarter of 2007. Foreign currency translation contributed 3% to this reported sales growth rate. On a GAAP basis, earnings per diluted share (E.P.S.) for the third quarter were $0.71, compared to $0.52 for the third quarter in 2007. On a non-GAAP basis and including adjustments noted in the attached reconciliation, E.P.S. grew 27% to $0.79 in the third quarter of 2008 from $0.62 in the third quarter of 2007.

Through the first nine months of 2008, sales for the Company were $1,157 million, a 12% increase over sales in the first nine months of 2007 of $1,036 million. Foreign currency translation contributed 5% to this reported sales growth rate. E.P.S. for the first nine months of 2008 were $2.21 compared to $1.65 for the comparable period in 2007. On a non-GAAP basis and including the adjustments on the attached reconciliation, E.P.S. grew 26% in the first nine months of 2008 to $2.24 from $1.78 in 2007.

Commenting on the quarter, Douglas Berthiaume, Chairman, President and Chief Executive Officer said, "Our results in the third quarter affirm the strength of our business strategy in these tough economic times. The combination of solid recurring revenue growth and the success of our advanced system solutions demonstrate the continued importance of our products to our customers as they strive to maximize their laboratory productivity and address regulatory compliance needs."

As communicated in a prior press release, Waters Corporation will webcast its third quarter 2008 financial results conference call this morning, October 21, 2008 at 8:30 a.m. eastern time. To listen to the call, connect to www.waters.com, choose "Investor" and click on the Live Webcast. A replay of the call will be available through October 28, 2008, similarly by webcast and also by phone at 203-369-3624.

About Waters Corporation:

Waters Corporation creates business advantage for laboratory-dependent organizations by delivering practical and sustainable innovation to enable significant advancements in such areas as healthcare delivery, environmental management, food safety, and water quality worldwide.

Pioneering a connected portfolio of separations science, laboratory information management, mass spectrometry and thermal analysis, Waters technology breakthroughs and laboratory solutions provide an enduring platform for customer success.

With revenue of $1.47 billion in 2007 and 5,000 employees, Waters is driving scientific discovery and operational excellence for customers worldwide.

CAUTIONARY STATEMENT

This release may contain "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 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, the impact of changes in accounting principles or tax rates including the effect of recently restructuring certain legal entities, the impact on demand among the Company's market sectors of current economic difficulties and possible recession, the ability to access capital in volatile market conditions, 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, risks associated with lawsuits and other legal actions particularly involving claims for infringement of patents and other intellectual property rights, 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, 2007 and quarterly report on Form 10-Q for the period ended June 28, 2008 as filed with the Securities and Exchange Commission (the "SEC"), 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 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
                Consolidated Statements of Operations
                (In thousands, except per share data)
                             (Unaudited)

                              (Unaudited)            (Unaudited)
                           Three Months Ended     Nine Months Ended
                           September September September   September
                            27, 2008  29, 2007   27, 2008    29, 2007

Net sales                  $386,310  $352,638  $1,156,793  $1,036,045
Cost of sales (1) (2) (4)   158,520   153,679     489,203     449,130

  Gross profit              227,790   198,959     667,590     586,915

Selling and administrative
 expenses (4)               107,463   105,577     325,235     301,707
Research and development
 expenses (4)                19,946    21,974      61,960      59,811
Purchased intangibles
 amortization                 2,349     2,176       6,973       6,434

  Operating income           98,032    69,232     273,422     218,963

Interest expense, net        (4,542)   (6,722)    (13,641)    (19,953)

  Income from operations
   before income taxes       93,490    62,510     259,781     199,010

Provision for income taxes
 (2) (3)                     21,987     9,227      36,655      29,881

  Net income               $ 71,503  $ 53,283  $  223,126  $  169,129


Net income per basic common
 share                     $   0.72  $   0.53  $     2.24  $     1.68

Weighted-average number of
 basic common shares         98,891    99,821      99,611     100,457


Net income per diluted
 common share              $   0.71  $   0.52  $     2.21  $     1.65

Weighted-average number of
 diluted common shares and
 equivalents                100,566   101,712     101,150     102,352


(1) Included in cost of sales for the three and nine months ended
 September 27, 2008 are restructuring and other incremental costs of
 $1.2 million related to cost reduction plans.

(2) During the second quarter of 2008, the Company identified errors
 originating in periods prior to the quarter ended June 28, 2008. The
 errors primarily relate to (i) an overstatement of the Company's
 income tax expense of $16.3 million as a result of errors in
 recording its income tax provision in prior periods and (ii) an
 understatement of amortization expense of $8.7 million for certain
 capitalized software. The Company incorrectly calculated its
 provision for income taxes by tax-effecting a deferred tax liability
 utilizing a U.S. tax rate of 35% instead of an Irish tax rate of 10%.
 In addition, the Company incorrectly accounted for Irish-based
 capitalized software and the related amortization expense as a U.S.
 Dollar-denominated asset instead of Euro-denominated asset, resulting
 in an understatement of amortization expense and cumulative
 translation adjustment.

The Company identified and corrected the errors in the second quarter
 of 2008, which had the effect of increasing cost of sales by $8.7
 million; reducing gross profit and income from operations before
 income tax by $8.7 million; reducing the provision for income taxes
 by $16.3 million and increasing net income by $7.6 million. The
 Company does not believe that the prior period errors, individually
 or in the aggregate, are material to any previously issued annual or
 quarterly financial statements. In addition, the Company does not
 believe that the adjustments described above to correct the
 cumulative effect of the errors in the second quarter of 2008 are
 material to either the second quarter of 2008 or to the estimate of
 the full year results for 2008. As a result, the Company has not
 restated its previously issued annual financial statements or interim
 financial data.

(3) Included in the provision for income taxes for the three and nine
 months ended September 27, 2008 is a one-time charge of $5.1 million
 related to restructuring certain legal entities.

(4) The results for the three and nine months ended September 29, 2007
 include a charge for a one-time contribution to the 401(k) defined
 contribution plan associated with freezing of pay credit accruals
 under the Company's U.S. defined benefit pension plan. The amount of
 the one-time charge in the consolidated statement of operations above
 is as follows:

                              (Unaudited)            (Unaudited)
                           Three Months Ended     Nine Months Ended
                           September September September   September
                            27, 2008  29, 2007   27, 2008    29, 2007
Cost of sales              $      -  $  2,556  $        -  $    2,556
Selling and administrative
 expenses                         -     7,368           -       7,368
Research and development
 expenses                         -     2,243           -       2,243
                           --------- --------- ----------- -----------
   Total one-time
    contribution charge    $      -  $ 12,167  $        -  $   12,167

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

                                   (Unaudited)         (Unaudited)
                               Three Months Ended   Nine Months Ended
                               September September September September
                                27, 2008  29, 2007  27, 2008  29, 2007
Reconciliation of net income
 per diluted share, in
 accordance with
generally accepted accounting
 principles, with adjusted
 results:

Net income per diluted share      $ 0.71    $ 0.52  $  2.21     $ 1.65
                               --------- --------- --------- ---------

Adjustment for purchased
 intangibles amortization, net
 of tax                            1,639     1,557    4,917      4,843
Net income per diluted share
 effect                             0.02      0.02     0.05       0.05
                               --------- --------- --------- ---------

Adjustment for restructuring
 and other unusual charges, net
 of tax                              761         -      761          -
Net income per diluted share
 effect                             0.01         -     0.01          -
                               --------- --------- --------- ---------

Adjustment for out-of-period
 errors as described above, net
 of tax                                -         -   (7,612)         -
Net income per diluted share
 effect                                -         -    (0.08)         -
                               --------- --------- --------- ---------

Adjustment for tax impact of
 restructuring certain legal
 entities                          5,083         -    5,083          -
Net income per diluted share
 effect                             0.05         -     0.05          -
                               --------- --------- --------- ---------

Adjustment for one-time
 contribution, net of tax              -     7,750        -      7,750
Net income per diluted share
 effect                                -      0.08        -       0.08
                               --------- --------- --------- ---------


Adjusted net income per diluted
 share                            $ 0.79    $ 0.62  $  2.24     $ 1.78
                               ========= ========= ========= =========

The adjusted net 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.
 Management has excluded the purchased intangibles amortization, the
 restructuring charges, the adjustment for out-of-period errors and
 the related tax effects and the tax impact of restructuring certain
 legal entities from its non-GAAP adjusted amounts since management
 believes that these items are not directly related to ongoing
 operations, thereby providing investors with information that helps
 to compare ongoing operating performance. Management has also
 excluded the one-time contribution from its non-GAAP adjusted amounts
 to enable management and investors to prepare meaningful comparisons
 of the Company's operating results to prior and future periods.
                 Waters Corporation and Subsidiaries
                Condensed Consolidated Balance Sheets
                     (In thousands and unaudited)



                                                   September December
                                                    27, 2008  31, 2007


Cash, cash equivalents and short-term
 investments                                         892,600   693,014
Accounts receivable                                  289,271   317,792
Inventories                                          206,231   175,888
Other current assets                                  45,940    50,368
   Total current assets                            1,434,042 1,237,062

Property, plant and equipment, net                   166,569   160,856
Other assets                                         503,171   483,137
   Total assets                                    2,103,782 1,881,055


Notes payable and debt                               377,488   384,176
Accounts payable and accrued expenses                288,710   274,258
   Total current liabilities                         666,198   658,434

Long-term debt                                       650,000   500,000
Other long-term liabilities                          142,501   136,545
   Total liabilities                               1,458,699 1,294,979

Total equity                                         645,083   586,076
   Total liabilities and equity                    2,103,782 1,881,055

Source: Waters Corporation

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