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Waters Corporation Reports Strong Second Quarter Earnings on 12% Sales Growth

MILFORD, Mass.--(BUSINESS WIRE)--July 27, 2004--Waters Corporation (NYSE:WAT) reported today second quarter 2004 sales of $260.5 million, an increase of 12% over the $232.0 million in sales reported for the second quarter of 2003. This growth is comprised of 9% organic growth (prior to currency effects) and a 3% benefit from foreign exchange in the quarter. Earnings per diluted share (E.P.S.) for the second quarter were $0.49 compared to $0.33 for the comparable period in 2003. On a pro-forma basis, excluding the benefit of a patent litigation settlement in 2004, E.P.S. were $0.40 compared to $0.33 in 2003.

Commenting on the quarter, Douglas Berthiaume, Chairman, President and Chief Executive Officer said, "Our second quarter results reflect continued strong demand from major pharmaceutical and industrial customers. Shipments for chromatography systems were below our expectations as we shifted most customer deliveries of our AcQuity UPLC(TM) systems to the third quarter to allow for additional manufacturing related testing. Customer excitement and demand for AcQuity continues to build and we plan full production shipments in August.

Our mass spectrometry business, with organic growth of 11%, continues to benefit from rapid expansion of our tandem quadrupole systems and we look forward to a second half 2004 benefit from innovative instruments introduced at the ASMS conference in June."

As communicated in a prior press release, Waters Corporation will webcast its second quarter 2004 financial results conference call this morning, July 27, 2004, at 8:30 a.m. eastern time. To listen to the call, connect to , choose Investor Relations and click on the Live Webcast. A replay of the call will be available from today through August 3, 2004, similarly by webcast, and also by phone at 402-998-0666.

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 $4.5 - $5.0 billion of the overall $20+ billion analytical instrument market.


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 discussed in this release for a variety of reasons, including, without limitation, shipments of new product introductions expected in the upcoming quarters such as AcQuity UPLC and tandem quadrupole systems, 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, service and distribution organizations, 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   Six Months Ended
                               July 3,    June 28,  July 3,  June 28,
                                 2004       2003      2004     2003

Net sales                      260,488    231,752   515,574  452,751
Cost of sales                  106,180     95,488   213,654  189,699

  Gross profit                 154,308    136,264   301,920  263,052

Selling and administrative
 expenses                       75,840     68,679   147,267  130,290
Research and development
 expenses                       15,694     13,790    31,765   27,350
Purchased intangibles
 amortization                      996      1,027     2,350    2,055
Litigation settlement and
 provisions (A)                (17,124)         -    (9,277)   1,500
Loss on sale of business (B)         -          -         -    5,031
Restructuring and other
 unusual charges, net (C)            -          -       104    1,214

  Operating income              78,902     52,768   129,711   95,612

Interest income, net               995      1,904     1,226    2,729
  Income from operations
   before income taxes          79,897     54,672   130,937   98,341

Provision for income taxes      20,146     12,574    30,341   22,266

  Net income                    59,751     42,098   100,596   76,075

Net income per basic
 common share                    $0.50      $0.34     $0.84    $0.61

Weighted average number of
 basic common shares           118,691    123,610   119,439  124,925

Net income per diluted
 common share                    $0.49      $0.33     $0.81    $0.59

Weighted average number of
 diluted common shares
 and equivalents               122,820    128,252   123,434  129,483

(A) The results for the six months ended July 3, 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 six months ended June 28, 2003 include a $1.2 million provision
for an environmental matter with the Commonwealth of Massachusetts.

(B) The results for the six months ended June 28, 2003 include a loss
on sale of the inorganic mass spectrometry product line of $5.0

(C) The results for the six months ended July 3, 2004 and June 28,
2003 include restructuring and other incremental costs and adjustments
recorded in relation to the Company's reorganization of the HPLC and
mass spectrometry businesses of $0.1 million and $1.2 million,

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

                                    (Unaudited)         (Unaudited)
                                Three Months Ended   Six Months Ended
                                  July 3,  June 28,  July 3,  June 28,
                                    2004     2003      2004      2003
Reconciliation of income per
 diluted share, in accordance
 with generally accepted
 accounting principles,
 with adjusted results:

Income per diluted share            0.49     0.33      0.81      0.59
                                 --------  -------   -------  --------

Adjustment for litigation
 settlement and provisions,
 net of tax                      (10,788)       -    (5,688)    1,155
Income per diluted
 share effect                      (0.09)       -     (0.05)     0.01
                                 --------  -------   -------  --------

Adjustment for restructuring
 and other unusual charges,
 net of tax                            -        -        68       935
Income per diluted share effect        -        -      0.00      0.01
                                 --------  -------   -------  --------

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

Adjusted income per
 diluted share:                     0.40     0.33      0.77      0.63
                                 ========  =======   =======  ========

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

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

                                                  July 3,     Dec. 31,
                                                    2004        2003

Cash and cash equivalents                         419,979     356,781
Accounts receivable                               221,951     214,260
Inventories                                       132,784     128,810
Other current assets                               17,704      15,548
   Total current assets                           792,418     715,399

Property, plant and equipment, net                126,837     108,162
Other assets                                      351,622     307,300
   Total assets                                 1,270,877   1,130,861

Notes payable and debt                            294,496     121,309
Accounts payable and accrued expenses             268,880     257,212
   Total current liabilities                      563,376     378,521

Other long-term liabilities                       155,572     161,863
   Total liabilities                              718,948     540,384

Total equity                                      551,929     590,477
   Total liabilities and equity                 1,270,877   1,130,861

Waters Corporation
Gene Cassis