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Waters Reports Fourth Quarter 2008 Financial Results

MILFORD, Mass.--(BUSINESS WIRE)--Jan. 27, 2009--Waters Corporation (NYSE/WAT) reported fourth quarter 2008 sales of $418 million, a decrease of 4% from sales of $437 million in the fourth quarter of 2007. In the quarter, the effects of foreign currency translation reduced the sales growth rate 4%. Thus on a currency neutral basis, sales were approximately flat with the prior year's quarterly sales. On a GAAP basis, earnings per diluted share (E.P.S.) for the fourth quarter were $1.01, compared to $0.96 for the fourth quarter of 2007. On a non-GAAP basis, including the adjustments in the attached reconciliation, E.P.S. grew 9% to $1.07 from $0.98 in the fourth quarter of 2007.

For the full year, sales for the Company were $1.58 billion, an increase of 7% over sales of $1.47 billion in 2007. Foreign currency translation contributed 2% to the reported sales growth rate. On a GAAP basis, E.P.S. for 2008 were $3.21 compared to $2.62 in 2007. On a non-GAAP basis, including adjustments in the attached reconciliation, E.P.S. grew 20% to $3.30 from $2.75 in 2007.

Commenting on the Company's performance, Douglas Berthiaume, Chairman, President and Chief Executive Officer said, "Overall, 2008 was a very successful year for Waters as non-GAAP E.P.S. were up 20% and cash from operations reached a record high. The challenges that we faced in the fourth quarter reflect the tougher economic environment that we are likely to continue to encounter in 2009. We are confident that we can manage our business effectively through this difficult period and we remain committed to new product research and customer support programs to ensure our long term growth and continued strong market position."

As communicated in a prior press release, Waters Corporation will webcast its fourth quarter 2008 financial results conference call this morning, January 27, 2009 at 8:30 a.m. eastern time. To listen to the call, connect to www.waters.com, choose "Investor Relations" and click on the "Live Webcast". A replay will be available through February 3, 2009 at midnight eastern time, similarly by webcast and also by phone at 402-220-6440.

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", "should" 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 unpredictable impact on demand of the current global economic deterioration and recession, the impact of changes in accounting principles or tax rates including the effect of recently restructuring certain legal entities, 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 September 27, 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          Twelve Months Ended

                 December 31,  December 31,  December 31,   December 31, 2007
                 2008          2007          2008

Net sales        $ 418,331     $ 437,003     $ 1,575,124    $ 1,473,048

Cost of sales      172,063       181,992       661,266        631,122
(1) (2) (5)

Gross profit       246,268       255,011       913,858        841,926

Selling and
administrative     101,464       101,996       426,699        403,703
expenses (5)

Research and
development        19,628        20,838        81,588         80,649
expenses (5)

Purchased
intangibles        2,317         2,261         9,290          8,695
amortization

Litigation         6,527         -             6,527          -
provision (4)

Operating income   116,332       129,916       389,754        348,879

Interest           (3,921  )     (5,734  )     (17,562   )    (25,687   )
expense, net

Income from
operations         112,411       124,182       372,192        323,192
before income
taxes

Provision for
income taxes (2)   13,058        25,239        49,713         55,120
(3)

Net income       $ 99,353      $ 98,943      $ 322,479      $ 268,072

Net income per
basic common     $ 1.01        $ 0.98        $ 3.25         $ 2.67
share

Weighted-average
number of basic    98,029        100,689       99,199         100,500
common shares

Net income per
diluted common   $ 1.01        $ 0.96        $ 3.21         $ 2.62
share

Weighted-average
number of
diluted common     98,821        102,778       100,555        102,505
shares and
equivalents

(1) Included in cost of sales for the three and twelve months ended December
31, 2008 are restructuring and other incremental costs of $0.8 million and
$1.9 million, respectively, 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
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 twelve
months ended December 31, 2008 is a one-time charge of $5.1
million related to restructuring certain legal entities.

(4) The results for the three and twelve months ended
December 31, 2008 include a provision of $6.5 million for
ongoing patent litigation with Agilent Technologies, Inc.

(5) The results for the twelve months ended December 31, 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)

                                        Twelve Months Ended

                                        December 31, 2008  December 31, 2007

Cost of sales                           $ -                $ 2,556

Selling and administrative expenses       -                  7,368

Research and development expenses         -                  2,243

Total one-time contribution charge      $ -                $ 12,167




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, 2008  December 31, 2007
               2008          2007

Reconciliation
of net income
per diluted
share, in
accordance
with

generally
accepted
accounting
principles,
with adjusted
results:

Net income per $ 1.01        $ 0.96        $ 3.21             $ 2.62
diluted share

Adjustment for
purchased
intangibles      1,557         1,294         6,474              6,137
amortization,
net of tax

Net income per
diluted share    0.02          0.01          0.06               0.06
effect

Adjustment for
restructuring,   541           -             1,302              -
net of tax

Net income per
diluted share    0.01          -             0.01               -
effect

Adjustment for
litigation       4,138         -             4,138              -
provision, net
of tax

Net income per
diluted share    0.04          -             0.04               -
effect

Adjustment for
out-of-period
errors as        -             -             (7,612 )           -
described
above, net of
tax

Net income per
diluted share    -             -             (0.08  )           -
effect

Adjustment for
tax impact of
restructuring    -             -             5,083              -
certain legal
entities

Net income per
diluted share    -             -             0.05               -
effect

Adjustment for
one-time         -             -             -                  7,750
contribution,
net of tax

Net income per
diluted share    -             -             -                  0.08
effect

Adjusted net
income per     $ 1.07        $ 0.98        $ 3.30             $ 2.75
diluted share

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 litigation provision, 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)

                                       December 31, 2008  December 31, 2007

Cash, cash equivalents and short-term  428,522            693,014
investments

Accounts receivable                    291,763            317,792

Inventories                            173,051            175,888

Other current assets                   62,966             50,368

Total current assets                   956,302            1,237,062

Property, plant and equipment, net     171,588            160,856

Other assets                           495,008            483,137

Total assets                           1,622,898          1,881,055

Notes payable and debt                 36,120             384,176

Accounts payable and accrued expenses  253,386            274,258

Total current liabilities              289,506            658,434

Long-term debt                         500,000            500,000

Other long-term liabilities            172,387            136,545

Total liabilities                      961,893            1,294,979

Total equity                           661,005            586,076

Total liabilities and equity           1,622,898          1,881,055



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

Source: Waters Corporation