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Waters Corporation Reports Third Quarter 2010 Results

MILFORD, Mass., Oct 26, 2010 (BUSINESS WIRE) -- Waters Corporation (NYSE/WAT) reported today third quarter 2010 sales of $401 million, an increase of 7% over sales of $374 million in the third quarter of 2009. These quarterly sales include an adverse foreign currency translation impact of approximately 2%. On a GAAP basis, earnings per diluted share (E.P.S.) for the third quarter were $1.02 compared to $0.79 for the third quarter in 2009. On a non-GAAP basis, E.P.S. were up 21% to $0.98 in the third quarter of 2010 from $0.81 in the third quarter of 2009. A reconciliation of GAAP to non-GAAP E.P.S. is attached.

Through the first nine months of 2010, sales for the Company were $1,160 million, an increase of 8% in comparison to sales of $1,070 million in the first nine months of 2009. Foreign currency translation did not contribute meaningfully to sales growth during the first nine months of 2010. E.P.S. for the first nine months of 2010 were $2.71 compared to $2.26 for the comparable period in 2009. On a non-GAAP basis and including adjustments on the attached reconciliation, E.P.S grew 17% in the first nine months of 2010 to $2.72 from $2.33 in 2009.

Commenting on the quarter, Douglas Berthiaume, Chairman, President and Chief Executive Officer said, "Our sales growth in the third quarter was significantly driven by shipments of our new instrument systems, including ACQUITY® H-Class UPLC® and our research-focused mass spectrometry platforms. Our pharmaceutical and chemical end markets continued to show strength and, geographically, business in the Americas and Asia accelerated global demand."

As communicated in a prior press release, Waters Corporation will webcast its third quarter 2010 financial results conference call this morning, October 26, 2010 at 8:30 a.m. eastern time. To listen to the call, connect to http://www.waters.com, choose "Investor" and click on the Live Webcast. A replay of the call will be available through November 2, 2010, similarly by webcast and also by phone at 203-369-3349.

About Waters Corporation:

For over 50 years, Waters Corporation has created business advantages 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 $1.5 billion in 2009 and 5,200 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 on demand among the Company's various market sectors from current economic difficulties and uncertainties; increased regulatory burdens as the Company's business evolves, especially with respect to the U.S. Securities and Exchange Commission, U.S. Food and Drug Administration, and U.S. Environmental Protection Agency, among others; shifts in taxable income in jurisdictions with different effective tax rates; the outcome of tax examinations or changes in respective country legislation affecting the Company's effective tax rate; the ability to access capital in volatile market conditions; fluctuations in capital expenditures by the Company's customers, in particular large pharmaceutical companies; the ability to sustain and enhance service and consumable demand from the Company's installed base of instruments; regulatory and/or administrative obstacles to the timely completion of purchase order documentation; introduction of competing products by other companies and loss of market share; pressures on prices from competitors and/or customers; regulatory, economic and competitive obstacles to new product introductions; other changes in demand from the effect of mergers and acquisitions by the Company's customers; environmental and logistical obstacles affecting the distribution of products; risks associated with lawsuits and other legal actions, particularly involving claims for infringement of patents and other intellectual property rights; the impact of changes in accounting principles and practices; and foreign exchange rate fluctuations potentially 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, 2009 and quarterly report on Form 10-Q for the period ended July 3, 2010 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 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
October 2, 2010 October 3, 2009 October 2, 2010 October 3, 2009
Net sales $ 401,038 $ 373,963 $ 1,159,793 $ 1,069,852
Cost of sales 162,985 153,143 464,050 424,751
Gross profit 238,053 220,820 695,743 645,101
Selling and administrative expenses (1) (2) (3) (5) 111,306 102,675 324,938 311,417
Research and development expenses 20,524 19,310 61,407 57,364
Purchased intangibles amortization 2,408 2,723 7,642 8,022
Operating income 103,815 96,112 301,756 268,298
Interest expense, net (3,294 ) (2,079 ) (8,752 ) (6,355 )
Income from operations before income taxes 100,521 94,033 293,004 261,943
Provision for income taxes (4) 5,802 18,097 37,845 42,753
Net income $ 94,719 $ 75,936 $ 255,159 $ 219,190
Net income per basic common share $ 1.03 $ 0.80 $ 2.75 $ 2.28
Weighted-average number of basic common shares 91,714 95,235 92,647 96,215
Net income per diluted common share $ 1.02 $ 0.79 $ 2.71 $ 2.26
Weighted-average number of diluted common shares and equivalents 93,286 96,513 94,271 97,027
(1) Included in selling and administrative expenses for both the three and nine months ended October 2, 2010 are costs of $3 million associated with a non-income tax audit settlement.
(2) Included in selling and administrative expenses for the three and nine months ended October 2, 2010 are costs of less than $1 million and $2 million, respectively, associated with asset impairments related to certain Company facilities. Included in selling and administrative expenses for the nine months ended October 3, 2009 are lease termination costs of $6 million.
(3) Included in selling and administrative expenses for the three and nine months ended October 2, 2010 are restructuring costs of less than $1 million and $1 million, respectively, related to cost reduction plans. Included in selling and administrative expenses for the nine months ended October 3, 2009 are restructuring costs of $1 million related to cost reduction plans.
(4) Included in the provision for income taxes for both the three and nine months ended October 2, 2010 is a net tax benefit of $8 million related to the reversal of a reserve for an uncertain tax position due to an audit settlement. Included in the provision for income taxes for the nine months ended October 2, 2010 is a $2 million tax benefit related to the resolution of a pre-acquisition tax exposure.
Included in the provision for income taxes for the nine months ended October 3, 2009 is approximately $5 million of tax benefit associated with the reversal of a $5 million tax provision, which was originally recorded in 2008, related to the reorganization of certain foreign legal entities. The recognition of this tax benefit in 2009 was a result of changes in income tax regulations promulgated by the U.S. Treasury in February 2009.
(5) Included in selling and administrative expenses for the nine months ended October 3, 2009 are acquisition and other related costs of $1 million related to recent acquisitions.
Waters Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
October 2, 2010 October 3, 2009 October 2, 2010 October 3, 2009

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

Net income per diluted share $ 1.02 $ 0.79 $ 2.71 $ 2.26
Adjustment for purchased intangibles amortization, net of tax 1,727 1,960 5,512 5,787
Net income per diluted share effect 0.02 0.02 0.06 0.06
Adjustment for non-income tax audit settlement, net of tax 2,197 - 2,197 -
Net income per diluted share effect 0.02 - 0.02 -
Adjustment for asset impairments and lease termination costs, net of tax 302 - 1,459 3,723
Net income per diluted share effect 0.00 - 0.02 0.04
Adjustment for restructuring costs, net of tax 64 - 751 643
Net income per diluted share effect 0.00 - 0.01 0.01
Adjustment for reversal of income tax reserves upon audit settlement (7,581 ) - (7,581 ) -
Net income per diluted share effect (0.08 ) - (0.08 ) -
Adjustment for one-time tax benefits - - (1,500 ) (4,555 )
Net income per diluted share effect - - (0.02 ) (0.05 )
Adjustment for acquisition-related costs, net of tax - - - 1,078
Net income per diluted share effect - - - 0.01
Adjusted net income per diluted share $ 0.98 $ 0.81 $ 2.72 $ 2.33
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, net of the effective applicable statutory tax rates. Management has excluded the purchased intangibles amortization, non-income tax audit settlement, asset impairments, lease termination costs, restructuring costs, reversal on income tax reserves upon audit settlement, one-time tax benefits and acquisition-related costs from its non-GAAP adjusted amounts since management believes that these items are not directly related to ongoing operations, thereby providing management and investors with information that may help them to compare ongoing operating performance.
Waters Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands and unaudited)
October 2, 2010 December 31, 2009
Cash, cash equivalents and short-term investments 837,098 630,257
Accounts receivable 337,562 314,247
Inventories 208,339 178,666
Other current assets 55,328 49,206
Total current assets 1,438,327 1,172,376
Property, plant and equipment, net 214,773 210,926
Other assets 552,546 524,629
Total assets 2,205,646 1,907,931
Notes payable and debt 92,243 131,772
Accounts payable and accrued expenses 325,167 262,796
Total current liabilities 417,410 394,568
Long-term debt 700,000 500,000
Other long-term liabilities 164,974 164,414
Total liabilities 1,282,384 1,058,982
Total equity 923,262 848,949
Total liabilities and equity 2,205,646 1,907,931

SOURCE: Waters Corporation

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