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Waters Corporation Reports 16% Increase in Fourth Quarter Sales

MILFORD, Mass.--(BUSINESS WIRE)--Jan. 24, 2007--Waters Corporation (NYSE: WAT) reported fourth quarter 2006 sales of $387 million, an increase of 16% over sales of $332 million in the fourth quarter of 2005. In the quarter, foreign currency translation contributed 3% to the Company's sales growth rate. On a GAAP basis, earnings per diluted share (E.P.S.) for the fourth quarter were $0.78, compared to $0.69 for the fourth quarter in 2005. On a non-GAAP basis, which includes the adjustments noted in the attached reconciliation, E.P.S. grew 19% to $0.87 in the fourth quarter of 2006 from $0.73 in the fourth quarter of 2005.

Full year 2006 sales for the Company were $1.28 billion, an 11% increase over sales in 2005 of $1.16 billion. E.P.S. for 2006 were $2.13 compared to $1.74 for 2005. On a non-GAAP basis, which includes the adjustments noted in the attached reconciliation, E.P.S. grew 22% to $2.44 in 2006 from $2.00 in 2005.

Commenting on the quarter, Douglas Berthiaume, Chairman, President and Chief Executive Officer said, "Improved pharmaceutical demand, continued growth in our overseas' markets and strong sales growth by our TA Instruments Division all contributed nicely to the quarter's results. In addition, we continued to benefit from rapid uptake of new instrument systems and recently introduced mass spectrometry technologies."

As communicated in a prior press release, Waters Corporation will webcast its fourth quarter 2006 financial results conference call this morning, January 24, 2007 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 January 31, 2007 at midnight eastern time, similarly by webcast and also by phone at 203-369-3463.

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 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 any 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, risks associated with lawsuits and other legal actions particularly involving claims for the 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, 2005 and quarterly report on Form 10-Q for the period ended September 30 2006, as filed with the Securities and Exchange Commission, which "Risk Factors" discussion is incorporated by reference in this release. Any 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        Twelve Months Ended
                   December 31, December 31, December 31, December 31,
                      2006         2005         2006         2005

Net sales              386,930      332,270    1,280,229    1,158,236
Cost of sales (1)      162,386      133,980      536,185      478,355

  Gross profit         224,544      198,290      744,044      679,881

Selling and
 administrative
 expenses (1)           95,761       81,593      357,664      321,694
Research and
 development
 expenses (1)           19,470       16,691       77,306       66,905
Purchased
 intangibles
 amortization            1,459        1,216        5,439        5,005
Litigation
 provisions (2)              -        3,122            -        3,122
Restructuring and
 other unusual
 charges (3)               814            -        8,484            -

  Operating income     107,040       95,668      295,151      283,155

Other expense, net
 (4)                    (5,847)      (3,103)      (5,847)      (3,103)
Interest expense,
 net                    (7,249)      (3,421)     (26,345)      (5,489)
  Income from
   operations
   before income
   taxes                93,944       89,144      262,959      274,563

Provision for
 income taxes (5)       14,055       13,546       40,759       72,588

  Net income            79,889       75,598      222,200      201,975


Income per basic
 common share:
Net income per
 basic common
 share                   $0.79        $0.70        $2.16        $1.77

Weighted average
 number of basic
 common shares         101,431      108,364      102,691      114,023


Income per diluted
 common share:
Net income per
 diluted common
 share                   $0.78        $0.69        $2.13        $1.74

Weighted average
 number of diluted
 common shares
  and equivalents      103,019      109,962      104,240      115,945


(1) Effective January 1, 2006, Waters Corporation adopted FAS 123(R),
 "Share-Based Payment". Accordingly, for the three months and twelve
 months ended December 31, 2006, stock-based compensation was
 accounted for under FAS 123(R), while for the three months and twelve
 months ended December 31, 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        Twelve Months Ended
                   December 31, December 31, December 31, December 31,
                      2006         2005         2006         2005

Cost of sales            1,059            -        4,345            -
Selling and
 administrative
 expenses                4,775           60       19,357          786
Research and
 development
 expenses                1,238            -        5,111            -
   Total stock-
    based
    compensation         7,072           60       28,813          786


(2) The results for the three months and year ended December 31, 2005
 include provisions of $3.1 million for patent litigation with
 Hewlett-Packard Company that was settled in 2006.

(3) The results for the three months and twelve months ended December
 31, 2006 include restructuring and other incremental costs in
 relation to a cost reduction plan implemented in February 2006.

(4) The results for the three months and twelve months ended December
 31, 2006 includes a charge of $5.8 million recorded for a impairment
 of an equity investment. The results for the three months and twelve
 months ended December 31, 2005 include charges of $4.8 million
 recorded for a write-off of an equity investment and gain of $1.7
 million related to the sale of an equity investment.

(5) The results for the twelve months ended December 31, 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        Twelve Months Ended
                   December 31, December 31, December 31, December 31,
                      2006         2005         2006         2005

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


Income per diluted
 share                   $0.78        $0.69        $2.13        $1.74
                   ------------ ------------ ------------ ------------

Adjustment for
 stock-based
 compensation, net
 of tax                  4,537           52       20,554          637
Income per diluted
 share effect             0.04         0.00         0.20         0.01
                   ------------ ------------ ------------ ------------

Adjustment for
 litigation
 provisions and
 settlement, net of
 tax                         -        2,569            -        2,569
Income per diluted
 share effect                -         0.02            -         0.02
                   ------------ ------------ ------------ ------------

Adjustment for
 restructuring and
 other unusual
 charges, net of
 tax                       693            -        7,059            -
Income per diluted
 share effect             0.01            -         0.07            -
                   ------------ ------------ ------------ ------------

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

Other expense,
 write down and
 sale of certain
 investments, net
 of tax                  4,865        2,554        4,865        2,554
Income per diluted
 share effect             0.05         0.02         0.05         0.02
                   ------------ ------------ ------------ ------------

Adjusted income per
 diluted share:          $0.87        $0.73        $2.44        $2.00
                   ============ ============ ============ ============


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 litigation
 provisions, restructuring charges and other expenses 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)



                                December 31, 2006    December 31, 2005


Cash and cash equivalents                514,166              493,588
Accounts receivable                      272,157              256,809
Inventories                              168,437              131,554
Other current assets                      44,920               31,041
   Total current assets                  999,680              912,992

Property, plant and equipment,
 net                                     149,262              141,030
Other assets                             468,371              374,909
   Total assets                        1,617,313            1,428,931


Notes payable and debt                   403,461              326,286
Accounts payable and accrued
 expenses                                282,373              277,605
   Total current liabilities             685,834              603,891

Long-term debt                           500,000              500,000
Other long-term liabilities               69,096               41,408
   Total liabilities                   1,254,930            1,145,299

Total equity                             362,383              283,632
   Total liabilities and
    equity                             1,617,313            1,428,931

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

    SOURCE: Waters Corporation