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Waters Reports Fourth Quarter and Full Year 2015 Financial Results

Strong Fourth Quarter Caps Milestone Year

MILFORD, Mass--(BUSINESS WIRE)--Jan. 26, 2016-- Waters Corporation (NYSE: WAT) reported fourth quarter 2015 sales of $587 million, a slight increase versus sales of $584 million in the fourth quarter of 2014. Foreign currency translation reduced sales growth by approximately 5%. On a GAAP basis, earnings per diluted share (EPS) for the fourth quarter were $1.83 compared to $1.80 for the fourth quarter of 2014. On a non-GAAP basis, including the adjustments in the attached reconciliation, EPS declined 2% to $1.96 from $1.99 in the fourth quarter 2014. A description and reconciliation of GAAP to non-GAAP EPS is attached and can be found on the Company's website at http://www.waters.com under the caption “Investors”.

For the full year, sales for the Company were $2.04 billion, an increase of 3% in comparison to sales of $1.99 billion in 2014, with foreign currency translation reducing sales growth by about 6%. On a GAAP basis, EPS for 2015 was $5.65 compared to $5.07 in 2014. On a non-GAAP basis, including adjustments in the attached reconciliation, EPS grew 7% to $5.89 from $5.48 in 2014.

Commenting on the Company’s performance, Christopher J. O’Connell, President and Chief Executive Officer said, “2015 was a true milestone year for Waters, highlighted by impressive and balanced growth across key products and markets, the significant impact of meaningful new innovations, and a smooth CEO transition. Heading into 2016, we are operating from a strong foundation.”

As communicated in a prior press release, Waters Corporation will webcast its fourth quarter 2015 financial results conference call this morning, January 26, 2016 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 2, 2016 at midnight eastern time, similarly by webcast and also by phone at 402-220-4152.

About Waters Corporation

Waters Corporation (NYSE: WAT) develops and manufactures advanced analytical science technologies for laboratory-dependent organizations. For more than 50 years, the company has pioneered a connected portfolio of separations science, laboratory information management, mass spectrometry and thermal analysis systems.

CAUTIONARY STATEMENT

This release may contain “forward-looking” statements regarding future results and events. For this purpose, any statements that are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words, “feels”, “believes”, “anticipates”, “plans”, “expects”, “intends”, “suggests”, “appears”, “estimates”, “projects”, and similar expressions, whether in the negative or affirmative, 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, foreign exchange rate fluctuations potentially affecting translation of the Company’s future non-U.S. operating results; the impact on demand among the Company’s various market sectors from economic, sovereign and political uncertainties; fluctuations in expenditures by the Company’s customers, in particular large pharmaceutical companies; 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; uncertainties relating to organizational/leadership changes; increased regulatory burdens as the Company’s business evolves, especially with respect to the 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, maintain liquidity and service our debt in volatile market conditions, particularly in the U.S., as a large portion of the Company’s cash is held and operating cash flows are generated outside the U.S.; environmental and logistical obstacles affecting the distribution of products and risks associated with lawsuits and other legal actions, particularly involving claims for infringement of patents and other intellectual property rights. Such factors and others are discussed more fully in the sections entitled “Forward-Looking Statements” and “Risk Factors” of the Company’s annual report on Form 10-K for the year ended December 31, 2014 and Form 10-Q for the period ended October 3, 2015 as filed with the Securities and Exchange Commission, which “Forward-Looking Statements” and “Risk Factors” discussions are 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
Condensed Unclassified Consolidated Balance Sheets
(In thousands and unaudited)
       
December 31, 2015 December 31, 2014
 
 
Cash, cash equivalents and investments 2,399,263 2,055,388
Accounts receivable 468,315 433,616
Inventories 263,415 246,430
Property, plant and equipment, net 333,355 321,583
Intangible assets, net 218,022 232,371
Goodwill 356,864 354,838
Other assets 221,919 233,708
Total assets 4,261,153 3,877,934
 
 
Notes payable and debt 1,668,336 1,465,243
Other liabilities 533,966 518,025
Total liabilities 2,202,302 1,983,268
 
Total equity 2,058,851 1,894,666
Total liabilities and equity 4,261,153 3,877,934
 
 
Waters Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
           
Three Months Ended Twelve Months Ended
December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014
 
Net sales $ 586,610 $ 583,870 $ 2,042,332 $ 1,989,344
Cost of sales 237,915 233,119 842,672 824,913
 
Gross profit 348,695 350,751 1,199,660 1,164,431
 
Selling and administrative expenses 128,681 131,916 495,747 512,707
Research and development expenses 28,336 28,724 118,545 107,726
Acquired in-process research and development 3,855 15,456 3,855 15,456
Purchased intangibles amortization 2,576 2,616 10,123 10,634
Litigation provisions 3,939 - 3,939 -
 
Operating income 181,308 172,039 567,451 517,908
 
Interest expense, net (6,070 ) (7,566 ) (25,532 ) (27,168 )
 
Income from operations before income taxes 175,238 164,473 541,919 490,740
 
Provision for income tax expense 24,184 13,181 72,866 59,120
 
Net income $ 151,054 $ 151,292 $ 469,053 $ 431,620
 
 
Net income per basic common share $ 1.85 $ 1.82 $ 5.70 $ 5.12
 
Weighted-average number of basic common shares 81,650 83,217 82,336 84,358
 
 
Net income per diluted common share $ 1.83 $ 1.80 $ 5.65 $ 5.07
 
Weighted-average number of diluted common shares and equivalents 82,382 84,015 83,087 85,151
 
 
Waters Corporation and Subsidiaries
Quarterly Reconciliation of GAAP to Adjusted Non-GAAP Financials
(in thousands, except per share data)
               
The 2015 and 2014 adjusted amounts presented below are used by the management of the Company to measure operating performance against prior periods and forecasts and are not in accordance with generally accepted accounting principles (GAAP). These Non-GAAP amounts should be considered supplemental to, and not a substitute for, financial performance in accordance with GAAP. The Company believes that the use of Non-GAAP measures, such as Adjusted Non-GAAP Earnings Per Share (EPS) and Adjusted Non-GAAP Operating Income, helps management and investors gain a better understanding of the Company's core operating results, and is consistent with how management measures performance for purposes of executive compensation and forecasts the Company’s performance. The reconciliation identifies items management has excluded as non-operational items. Management has excluded the following items:
 

* Purchased Intangibles Amortization was excluded to allow for comparisons of operating results that are consistent over periods of time.

 
*Restructuring Costs, Asset Impairments, Acquisition-Related Costs and Other One-Time Costs were excluded as the Company believes that costs to consolidate operations, reduce overhead and complete acquisitions are infrequent or unusual and are not indicative of normal operating costs.
 

* Acquired In-Process Research and Development was excluded as the Company believes that the costs to license certain intellectual property are infrequent and are not indicative of normal operating costs. In 2015 and 2014, the Company entered into licensing arrangements for mass spectrometry technologies, primarily related to new medically-focused applications.

 

* Litigation Provisions were excluded as these costs are isolated, unpredictable and not expected to recur regularly.

 

* Infrequent Income Tax Items were excluded as these costs and benefits are typically the result of audit examination settlements, updates in management's assessment of ongoing examinations or other unusual tax items and are not indicative of the Company’s normal or future income tax expense.

 

 

(Unaudited)
Three Months Ended Twelve Months Ended
December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014
 
GAAP Selling and Administrative Expenses (including Purchased Intangibles $ (135,196) $ (134,532) $ (509,809) $ (523,341)
Amortization & Litigation Provisions)
Purchased Intangibles Amortization 2,576 2,616 10,123 10,634
Restructuring Costs, Asset Impairments, Acquisition-Related Costs & Other One-Time Costs 2,435 3,140 7,455 17,697
Litigation Provisions   3,939     -     3,939     -
Adjusted Non-GAAP Selling & Administrative Expenses   $ (126,246)     $ (128,776)     $ (488,292)     $ (495,010)
 
 
GAAP Research & Development Expenses (including Acquired In-Process Research and Development) $ (32,191) $ (44,180) $ (122,400) $ (123,182)
Acquired In-Process Research and Development   3,855     15,456     3,855     15,456
Adjusted Non-GAAP Research & Development Expenses   $ (28,336)     $ (28,724)     $ (118,545)     $ (107,726)
 
 
GAAP Operating Income $ 181,308 $ 172,039 $ 567,451 $ 517,908
Acquired In-Process Research and Development 3,855 15,456 3,855 15,456
Purchased Intangibles Amortization 2,576 2,616 10,123 10,634
Restructuring Costs, Asset Impairments, Acquisition-Related Costs & Other One-Time Costs 2,435 3,140 7,455 17,697
Litigation Provisions   3,939     -     3,939     -
Adjusted Non-GAAP Operating Income   $ 194,113     $ 193,251     $ 592,823     $ 561,695
 
 
GAAP Provision for Income Tax Expense $ (24,184) $ (13,181) $ (72,866) $ (59,120)
Acquired In-Process Research and Development (786) (3,323) (786) (3,323)
Purchased Intangibles Amortization (729) (718) (2,888) (3,024)
Restructuring Costs, Asset Impairments, Acquisition-Related Costs & Other One-Time Costs (606) (925) (2,377) (4,979)
Litigation Provisions (1,478) - (1,478) -
Infrequent Income Tax Items   959     (357)     2,326     2,383
Adjusted Non-GAAP Provision for Income Tax Expense   $ (26,824)     $ (18,504)     $ (78,069)     $ (68,063)
 
 
GAAP Net Income $ 151,054 $ 151,292 $ 469,053 $ 431,620
Acquired In-Process Research and Development 3,069 12,133 3,069 12,133
Purchased Intangibles Amortization 1,847 1,898 7,235 7,610
Restructuring Costs, Asset Impairments, Acquisition-Related Costs & Other One-Time Costs 1,829 2,215 5,078 12,718
Litigation Provisions 2,461 - 2,461 -
Infrequent Income Tax Items   959     (357)     2,326     2,383
Adjusted Non-GAAP Net Income   $ 161,219     $ 167,181     $ 489,222     $ 466,464
 
 
GAAP EPS $ 1.83 $ 1.80 $ 5.65 $ 5.07
Acquired In-Process Research and Development 0.04 0.14 0.04 0.14
Purchased Intangibles Amortization 0.02 0.02 0.09 0.09
Restructuring Costs, Asset Impairments, Acquisition-Related Costs & Other One-Time Costs 0.02 0.03 0.06 0.15
Litigation Provisions 0.03 - 0.03 -
Infrequent Income Tax Items   0.01     -     0.03     0.03
Adjusted Non-GAAP EPS   $ 1.96     $ 1.99     $ 5.89     $ 5.48
 

Source: Waters Corporation

Waters Corporation
John Lynch, 508-482-2314
Vice President, Treasurer and Investor Relations