e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended October 1, 2011
or
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number: 01-14010
Waters Corporation
(Exact name of registrant as specified in its charter)
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Delaware
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13-3668640 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
34 Maple Street
Milford, Massachusetts 01757
(Address, including zip code, of principal executive offices)
(508) 478-2000
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).
þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Act). Yes o No þ
Indicate the number of shares outstanding of the registrants common stock as of October
28, 2011: 89,606,696
WATERS CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
INDEX
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
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October 1, 2011 |
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December 31, 2010 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
423,926 |
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$ |
308,498 |
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Short-term investments |
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770,291 |
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637,921 |
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Accounts receivable, less allowances for doubtful accounts and
sales returns of $7,009 and $6,196 at October 1, 2011 and
December 31, 2010, respectively |
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354,445 |
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358,237 |
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Inventories |
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246,258 |
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204,300 |
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Other current assets |
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68,439 |
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77,685 |
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Total current assets |
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1,863,359 |
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1,586,641 |
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Property, plant and equipment, net |
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221,059 |
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215,060 |
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Intangible assets, net |
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196,305 |
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181,316 |
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Goodwill |
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298,297 |
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291,657 |
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Other assets |
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60,595 |
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52,996 |
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Total assets |
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$ |
2,639,615 |
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$ |
2,327,670 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Notes payable and debt |
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$ |
271,578 |
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$ |
66,055 |
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Accounts payable |
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64,393 |
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64,406 |
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Accrued employee compensation |
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39,209 |
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52,831 |
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Deferred revenue and customer advances |
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129,653 |
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106,445 |
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Accrued income taxes |
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25,959 |
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11,909 |
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Accrued warranty |
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12,496 |
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11,272 |
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Other current liabilities |
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62,291 |
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72,932 |
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Total current liabilities |
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605,579 |
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385,850 |
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Long-term liabilities: |
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Long-term debt |
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700,000 |
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700,000 |
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Long-term portion of retirement benefits |
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71,952 |
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72,624 |
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Long-term income tax liability |
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77,537 |
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77,764 |
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Other long-term liabilities |
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25,464 |
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22,635 |
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Total long-term liabilities |
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874,953 |
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873,023 |
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Total liabilities |
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1,480,532 |
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1,258,873 |
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Commitments and contingencies (Notes 5, 6 and 10) |
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Stockholders equity: |
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Preferred stock, par value $0.01 per share, 5,000 shares
authorized, none issued at October 1, 2011 and
December 31, 2010 |
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Common stock, par value $0.01 per share, 400,000 shares
authorized, 152,403 and 151,054 shares issued, 89,584 and
91,848 shares outstanding at October 1, 2011 and
December 31, 2010, respectively |
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1,524 |
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1,511 |
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Additional paid-in capital |
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1,051,493 |
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970,068 |
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Retained earnings |
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2,914,300 |
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2,618,479 |
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Treasury stock, at cost, 62,819 and 59,206 shares at October 1, 2011
and December 31, 2010, respectively |
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(2,807,451 |
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(2,509,466 |
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Accumulated other comprehensive loss |
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(783 |
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(11,795 |
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Total stockholders equity |
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1,159,083 |
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1,068,797 |
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Total liabilities and stockholders equity |
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$ |
2,639,615 |
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$ |
2,327,670 |
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The accompanying notes are an integral part of the interim consolidated financial statements.
1
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
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Three Months Ended |
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October 1, 2011 |
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October 2, 2010 |
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Product sales |
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$ |
321,348 |
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$ |
282,934 |
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Service sales |
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133,186 |
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118,104 |
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Total net sales |
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454,534 |
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401,038 |
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Cost of product sales |
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124,228 |
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113,345 |
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Cost of service sales |
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56,090 |
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49,640 |
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Total cost of sales |
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180,318 |
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162,985 |
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Gross profit |
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274,216 |
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238,053 |
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Selling and administrative expenses |
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121,211 |
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111,306 |
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Research and development expenses |
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23,372 |
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20,524 |
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Purchased intangibles amortization |
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2,369 |
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2,408 |
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Operating income |
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127,264 |
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103,815 |
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Interest expense |
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(6,159 |
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(3,810 |
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Interest income |
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613 |
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516 |
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Income from operations before income taxes |
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121,718 |
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100,521 |
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Provision for income taxes |
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20,461 |
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5,802 |
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Net income |
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$ |
101,257 |
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$ |
94,719 |
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Net income per basic common share |
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$ |
1.12 |
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$ |
1.03 |
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Weighted-average number of basic common shares |
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90,688 |
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91,714 |
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Net income per diluted common share |
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$ |
1.10 |
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$ |
1.02 |
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Weighted-average number of diluted common shares and
equivalents |
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92,060 |
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93,286 |
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The accompanying notes are an integral part of the interim consolidated financial statements.
2
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
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Nine Months Ended |
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October 1, 2011 |
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October 2, 2010 |
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Product sales |
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$ |
940,834 |
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$ |
811,401 |
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Service sales |
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388,930 |
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348,392 |
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Total net sales |
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1,329,764 |
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1,159,793 |
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Cost of product sales |
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361,409 |
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317,640 |
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Cost of service sales |
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164,841 |
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146,410 |
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Total cost of sales |
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526,250 |
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464,050 |
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Gross profit |
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803,514 |
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695,743 |
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Selling and administrative expenses |
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363,774 |
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324,938 |
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Research and development expenses |
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68,640 |
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61,407 |
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Purchased intangibles amortization |
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7,374 |
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7,642 |
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Operating income |
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363,726 |
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301,756 |
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Interest expense |
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(15,294 |
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(10,045 |
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Interest income |
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2,139 |
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1,293 |
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Income from operations before income taxes |
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350,571 |
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293,004 |
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Provision for income taxes |
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54,750 |
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37,845 |
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Net income |
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$ |
295,821 |
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$ |
255,159 |
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Net income per basic common share |
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$ |
3.24 |
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$ |
2.75 |
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Weighted-average number of basic common shares |
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91,334 |
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92,647 |
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Net income per diluted common share |
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$ |
3.18 |
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$ |
2.71 |
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Weighted-average number of diluted common shares and
equivalents |
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92,898 |
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94,271 |
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The accompanying notes are an integral part of the interim consolidated financial statements.
3
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
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Nine Months Ended |
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October 1, 2011 |
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October 2, 2010 |
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Cash flows from operating activities: |
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Net income |
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$ |
295,821 |
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$ |
255,159 |
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Adjustments to reconcile net income to net cash provided by
operating activities: |
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Provisions for doubtful accounts on accounts receivable |
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2,267 |
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1,414 |
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Provisions on inventory |
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7,477 |
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7,309 |
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Stock-based compensation |
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20,645 |
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18,558 |
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Deferred income taxes |
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(7,072 |
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(4,669 |
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Depreciation |
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27,267 |
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25,897 |
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Amortization of intangibles |
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22,778 |
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19,621 |
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Change in operating assets and liabilities: |
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Decrease (increase) in accounts receivable |
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10,040 |
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(20,713 |
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Increase in inventories |
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(46,235 |
) |
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(35,771 |
) |
Decrease (increase) in other current assets |
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4,532 |
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(1,325 |
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Increase in other assets |
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(4,023 |
) |
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(1,256 |
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(Decrease) increase in accounts payable and other current
liabilities |
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(11,937 |
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36,311 |
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Increase in deferred revenue and customer advances |
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20,970 |
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23,335 |
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Increase (decrease) in other liabilities |
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4,782 |
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(101 |
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Net cash provided by operating activities |
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347,312 |
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323,769 |
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Cash flows from investing activities: |
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Additions to property, plant, equipment and software
capitalization |
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(51,344 |
) |
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(47,277 |
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Business acquisitions, net of cash acquired |
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(11,000 |
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Purchase of short-term investments |
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(1,297,497 |
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(924,727 |
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Maturity of short-term investments |
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1,165,127 |
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639,567 |
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Net cash used in investing activities |
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(194,714 |
) |
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(332,437 |
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Cash flows from financing activities: |
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Proceeds from debt issuances |
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558,199 |
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315,116 |
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Payments on debt |
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(352,676 |
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(154,645 |
) |
Payments of debt issuance costs |
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(4,523 |
) |
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(1,498 |
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Proceeds from stock plans |
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45,687 |
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26,850 |
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Purchase of treasury shares |
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(297,985 |
) |
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(244,893 |
) |
Excess tax benefit related to stock option plans |
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15,316 |
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|
5,149 |
|
Payments of debt swaps and other derivative
contracts |
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(1,971 |
) |
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(4,968 |
) |
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Net cash used in financing activities |
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(37,953 |
) |
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(58,889 |
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Effect of exchange rate changes on cash and cash equivalents |
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|
783 |
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(10,762 |
) |
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Increase (decrease) in cash and cash equivalents |
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115,428 |
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|
(78,319 |
) |
Cash and cash equivalents at beginning of period |
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|
308,498 |
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341,111 |
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Cash and cash equivalents at end of period |
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$ |
423,926 |
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$ |
262,792 |
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|
The accompanying notes are an integral part of the interim consolidated financial statements.
4
WATERS CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 Basis of Presentation and Summary of Significant Accounting Policies
Waters Corporation (Waters® or the Company), an analytical instrument manufacturer,
primarily designs, manufactures, sells and services, through its Waters Division, high performance
liquid chromatography (HPLC), ultra performance liquid chromatography (UPLC® and
together with HPLC, referred to as LC) and mass spectrometry (MS) instrument systems and
support products, including chromatography columns, other consumable products and comprehensive
post-warranty service plans. These systems are complementary products that can be integrated
together and used along with other analytical instruments. LC is a standard technique and is
utilized in a broad range of industries to detect, identify, monitor and measure the chemical,
physical and biological composition of materials, and to purify a full range of compounds. MS
instruments are used in drug discovery and development, including clinical trial testing, the
analysis of proteins in disease processes (known as proteomics), food safety analysis and
environmental testing. LC is often combined with MS to create LC-MS instruments that include a
liquid phase sample introduction and separation system with mass spectrometric compound
identification and quantification. Through its TA Division (TA®), the Company
primarily designs, manufactures, sells and services thermal analysis, rheometry and calorimetry
instruments, which are used in predicting the suitability of fine chemicals, polymers and viscous
liquids for various industrial products, consumer goods and healthcare products, as well as for
life science research. The Company is also a developer and supplier of software-based products that
interface with the Companys instruments and are typically purchased by customers as part of the
instrument system.
The Companys interim fiscal quarter typically ends on the thirteenth Saturday of each quarter.
Since the Companys fiscal year end is December 31, the first and fourth fiscal quarters will not
consist of thirteen complete weeks. The Companys third fiscal quarters for 2011 and 2010 ended on
October 1, 2011 and October 2, 2010, respectively.
The accompanying unaudited interim consolidated financial statements have been prepared in
accordance with the instructions to the Quarterly Report on Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting principles (GAAP) in
the United States of America. The consolidated financial statements include the accounts of the
Company and its subsidiaries, most of which are wholly owned. All material inter-company balances
and transactions have been eliminated.
The preparation of consolidated financial statements in conformity with GAAP requires the Company
to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent liabilities at the dates of the financial
statements. Actual amounts may differ from these estimates under different assumptions or
conditions.
It is managements opinion that the accompanying interim consolidated financial statements reflect
all adjustments (which are normal and recurring) that are necessary for a fair statement of the
results for the interim periods. The interim consolidated financial statements should be read in
conjunction with the consolidated financial statements included in the Companys Annual Report on
Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange
Commission on February 25, 2011.
During the second quarter of 2010, the Company identified an error originating in periods prior to
December 31, 2009. The error relates to an overstatement of the Companys incentive plan and other
accrual balances. The Company identified and corrected the error in the three months ended July 3,
2010 which reduced selling and administrative expense. The Company did not believe that the prior
period error, individually or in the aggregate, was material to the nine months ended October 2,
2010 or any previously issued annual or quarterly financial statements.
Cash, Cash Equivalents and Short-Term Investments
The Companys cash equivalents primarily represent highly liquid investments, with original
maturities of 90 days or less, primarily in bank deposits, and AAA rated U.S. treasury, Canadian
treasury, commercial paper and European government bond money market funds, which are convertible
to a known amount of cash and carry an insignificant risk of change in market value. Investments
with longer maturities are classified as short-term investments, and are held primarily in bank
deposits and U.S., Canadian, German, French and Dutch government treasury bills. As of October 1,
2011 and December 31, 2010, $1,130 million and $901 million, respectively, of our total cash, cash
equivalents, and marketable securities were held by our foreign subsidiaries.
5
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair Value Measurements
In accordance with the accounting standards for fair value measurements and disclosures, certain of
the Companys assets and liabilities are measured at fair value on a recurring basis as of October
1, 2011 and December 31, 2010. Fair values determined by Level 1 inputs utilize observable data,
such as quoted prices in active markets. Fair values determined by Level 2 inputs utilize data
points other than quoted prices in active markets that are observable either directly or
indirectly. Fair values determined by Level 3 inputs utilize unobservable data points for which
there is little or no market data, which require the reporting entity to develop its own
assumptions.
The following table represents the Companys assets and liabilities measured at fair value on a
recurring basis at October 1, 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active |
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Markets |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
for Identical |
|
|
Observable |
|
|
Unobservable |
|
|
|
Total at |
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
|
|
October 1, 2011 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
210,420 |
|
|
$ |
|
|
|
$ |
210,420 |
|
|
$ |
|
|
Short-term investments |
|
|
770,291 |
|
|
|
|
|
|
|
770,291 |
|
|
|
|
|
Waters 401(k) Restoration Plan assets |
|
|
19,079 |
|
|
|
|
|
|
|
19,079 |
|
|
|
|
|
Foreign currency exchange contract
agreements |
|
|
218 |
|
|
|
|
|
|
|
218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,000,008 |
|
|
$ |
|
|
|
$ |
1,000,008 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contract
agreements |
|
$ |
108 |
|
|
$ |
|
|
|
$ |
108 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
108 |
|
|
$ |
|
|
|
$ |
108 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table represents the Companys assets and liabilities measured at fair value on a
recurring basis at December 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active |
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Markets |
|
|
Other |
|
|
Significant |
|
|
|
Total at |
|
|
for Identical |
|
|
Observable |
|
|
Unobservable |
|
|
|
December 31, |
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
|
|
2010 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
87,975 |
|
|
$ |
|
|
|
$ |
87,975 |
|
|
$ |
|
|
Short-term investments |
|
|
637,921 |
|
|
|
|
|
|
|
637,921 |
|
|
|
|
|
Waters 401(k) Restoration Plan assets |
|
|
19,988 |
|
|
|
|
|
|
|
19,988 |
|
|
|
|
|
Foreign currency exchange contract
agreements |
|
|
424 |
|
|
|
|
|
|
|
424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
746,308 |
|
|
$ |
|
|
|
$ |
746,308 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contract
agreements |
|
$ |
626 |
|
|
$ |
|
|
|
$ |
626 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
626 |
|
|
$ |
|
|
|
$ |
626 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Companys financial assets and liabilities have been classified as Level 2. These assets and
liabilities have been initially valued at the transaction price and subsequently valued, typically
utilizing third-party pricing services. The pricing services use many inputs to determine value,
including reportable trades, benchmark yields, credit spreads, broker/dealer quotes, current spot
rates and other industry and economic events. The Company validates the prices provided by
third-party pricing services by reviewing their pricing methods and obtaining market values from
other pricing sources. The fair values of the Companys cash equivalents, short-term investments,
401(k) restoration plan assets and foreign currency exchange contracts are determined through
market and observable sources and have been classified as Level 2. After completing these
validation procedures, the Company did not adjust or override any fair value measurements provided
by third-party pricing services as of October 1, 2011 and December 31, 2010.
Fair Value of Other Financial Instruments
The Companys cash, accounts receivable, accounts payable and variable interest rate debt are
recorded at cost, which approximates fair value. The carrying value and fair value of the Companys
fixed interest rate debt is $400 million and $408 million, respectively, at October 1, 2011. The
carrying value and fair value of the Companys fixed interest rate debt was $200 million and $203
million, respectively, at December 31, 2010.
Hedge Transactions
The Company operates on a global basis and is exposed to the risk that its earnings, cash flows and
stockholders equity could be adversely impacted by fluctuations in currency exchange rates and
interest rates.
The Company records its hedge transactions in accordance with the accounting standards for
derivative instruments and hedging activities, which establish the accounting and reporting
standards for derivative instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. All derivatives, whether designated in hedging relationships
or not, are required to be recorded on the consolidated balance sheets at fair value as either
assets or liabilities. If the derivative is designated as a fair-value hedge, the changes in the
fair value of the derivative and of the hedged item attributable to the hedged risk are recognized
in earnings. If the derivative is designated as a cash flow hedge, the effective portions of
changes in the fair value of the derivative are recorded in other comprehensive income and are
recognized in earnings when the hedged item affects earnings; ineffective portions of changes in
fair value are recognized in earnings. In addition, disclosures required for derivative instruments
and hedging activities include the Companys objectives for using derivative instruments, the level
of derivative activity the Company engages in, as well as how derivative instruments and related
hedged items affect the Companys financial position and performance.
The Company currently uses derivative instruments to manage exposures to foreign currency and
interest rate risks. The Companys objectives for holding derivatives are to minimize foreign
currency and interest rate risk using the most effective methods to eliminate or reduce the impact
of foreign currency and interest rate exposures. The Company documents all relationships between
hedging instruments and hedged items and links all derivatives designated as fair-value, cash flow
or net investment hedges to specific assets and liabilities on the consolidated balance sheets or
to specific forecasted transactions. In addition, the Company considers the impact of its
counterparties credit risk on the fair value of the contracts as well as the ability of each party
to execute under the contracts. The Company also assesses and documents, both at the hedges
inception and on an ongoing basis, whether the derivatives that are used in hedging transactions
are highly effective in offsetting changes in fair values or cash flows associated with the hedged
items. The Company did not have any interest rate swap agreements in place at October 1, 2011 and
December 31, 2010.
The Company enters into forward foreign exchange contracts, principally to hedge the impact of
currency fluctuations on certain inter-company balances and short-term assets and liabilities.
Principal hedged currencies include the Euro, Japanese Yen, British Pound and Singapore Dollar. The
periods of these forward contracts typically range from one to three months and have varying
notional amounts, which are intended to be consistent with changes in the underlying exposures.
Gains and losses on these forward contracts are recorded in selling and administrative expenses in
the consolidated statements of operations. At October 1, 2011 and December 31, 2010, the Company
held forward foreign exchange contracts with notional amounts totaling $137 million and $136
million, respectively.
7
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Companys foreign currency exchange contracts included in the consolidated balance sheets are
classified as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
October 1, 2011 |
|
|
December 31, 2010 |
|
Other current assets |
|
$ |
218 |
|
|
$ |
424 |
|
Other current liabilities |
|
$ |
108 |
|
|
$ |
626 |
|
The following is a summary of the activity related to the forward foreign exchange contracts (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
October 1, 2011 |
|
|
October 2, 2010 |
|
|
October 1, 2011 |
|
|
October 2, 2010 |
|
Realized (losses) gains on closed
contracts |
|
$ |
(3,941 |
) |
|
$ |
1,998 |
|
|
$ |
(1,971 |
) |
|
$ |
(4,968 |
) |
Unrealized gains (losses) on open
contracts |
|
|
160 |
|
|
|
(382 |
) |
|
|
312 |
|
|
|
(127 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative net pre-tax (losses) gains |
|
$ |
(3,781 |
) |
|
$ |
1,616 |
|
|
$ |
(1,659 |
) |
|
$ |
(5,095 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
The Company repurchased $292 million and $241 million of the Companys outstanding common stock
during the nine months ended October 1, 2011 and October 2, 2010, respectively. In February 2011,
the Companys Board of Directors authorized the Company to repurchase up to $500 million of its
outstanding common stock over a two-year period. During the nine months ended October 1, 2011, the
Company repurchased 2.9 million shares at a cost of $242 million under this program.
In February 2009, the Companys Board of Directors authorized the Company to repurchase up to $500
million of its outstanding common stock over a two-year period. During the nine months ended
October 1, 2011 and October 2, 2010, the Company repurchased 0.7 million and 3.8 million shares at
a cost of $50 million and $241 million, respectively, under this program. As of April 2, 2011, the
Company repurchased an aggregate of 8.2 million shares of its common stock under the now expired
February 2009 program for an aggregate cost of $499 million.
Product Warranty Costs
The Company accrues estimated product warranty costs at the time of sale, which are included in
cost of sales in the consolidated statements of operations. While the Company engages in extensive
product quality programs and processes, including actively monitoring and evaluating the quality of
its component supplies, the Companys warranty obligation is affected by product failure rates,
material usage and service delivery costs incurred in correcting a product failure. The amount of
the accrued warranty liability is based on historical information, such as past experience, prior
product failure rates, number of units repaired and estimated costs of material and labor. The
liability is reviewed for reasonableness at least quarterly.
The following is a summary of the activity of the Companys accrued warranty liability for the nine
months ended October 1, 2011 and October 2, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
Beginning |
|
|
Accruals for |
|
|
Settlements |
|
|
End of |
|
|
|
of Period |
|
|
Warranties |
|
|
Made |
|
|
Period |
|
Accrued warranty liability: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1, 2011 |
|
$ |
11,272 |
|
|
$ |
7,061 |
|
|
$ |
(5,837 |
) |
|
$ |
12,496 |
|
October 2, 2010 |
|
$ |
10,109 |
|
|
$ |
4,849 |
|
|
$ |
(4,191 |
) |
|
$ |
10,767 |
|
Subsequent Events
The Company did not have any material subsequent events.
8
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2 Inventories
Inventories are classified as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
October 1, 2011 |
|
|
December 31, 2010 |
|
Raw materials |
|
$ |
78,780 |
|
|
$ |
63,475 |
|
Work in progress |
|
|
21,501 |
|
|
|
17,301 |
|
Finished goods |
|
|
145,977 |
|
|
|
123,524 |
|
|
|
|
|
|
|
|
Total inventories |
|
$ |
246,258 |
|
|
$ |
204,300 |
|
|
|
|
|
|
|
|
3 Acquisitions
In July 2011, the Company acquired the net assets of Anter Corporation (Anter), a manufacturer of
thermal analyzers used to measure thermal expansion and shrinkage, thermal conductivity and
resistivity, thermal diffusivity and specific heat capacity of a wide range of materials, for $11
million in cash. Anter was acquired to expand TAs thermal analysis instrument product offering and
to leverage the Companys distribution channels. This acquisition was accounted for under the
accounting standards for business combinations and Anters results have been included in the
consolidated results of the Company from the acquisition date. The purchase price of the
acquisition was allocated to tangible and intangible assets and assumed liabilities based on their
estimated fair values. The Company has allocated $4 million of the purchase price to intangible
assets comprised of customer relationships and acquired technology. The Company is amortizing the
customer relationships over six years and the acquired technology over ten years. These intangible
assets are being amortized over a weighted-average period of nine years. The remaining purchase
price of $6 million has been accounted for as goodwill. The principal factor that resulted in
recognition of goodwill was that the purchase price for the acquisition was based in part on cash
flow projections assuming the integration of any acquired technology and products with our
products, which is of considerably greater value than utilizing each of the acquired companys
technology or products on a stand-alone basis. Our goodwill also includes value assigned to
assembled workforce, which cannot be recognized as an intangible asset. The sellers also have provided
the Company with customary representations, warranties and indemnification, which would be settled
in the future if and when the contractual representation or warranty condition occurs. The goodwill
is deductible for tax purposes. Anter is expected to add approximately $6 million on a full-year
basis to the Companys annual sales. Anters impact on the Companys net income since the
acquisition date for the nine months ended October 1, 2011 was not significant.
In accordance with the accounting standards for fair value measurements and disclosures, the
Company measured the non-financial assets and non-financial liabilities that were acquired through
the acquisition of Anter at fair value. The fair value of these non-financial assets and
non-financial liabilities were determined using Level 3 inputs. The following table presents the
fair values, as determined by the Company, of 100% of the assets and liabilities owned and recorded
in connection with the Anter acquisition (in thousands):
|
|
|
|
|
Accounts receivable |
|
|
330 |
|
Inventory |
|
|
903 |
|
Other assets |
|
|
65 |
|
Goodwill |
|
|
6,080 |
|
Intangible assets |
|
|
3,910 |
|
|
|
|
|
Total assets acquired |
|
|
11,288 |
|
Accrued expenses and other current liabilities |
|
|
288 |
|
|
|
|
|
Cash consideration paid |
|
|
11,000 |
|
|
|
|
|
4 Goodwill and Other Intangibles
The carrying amount of goodwill was $298 million and $292 million at October 1, 2011 and December
31, 2010, respectively. The Companys acquisition of Anter increased goodwill by $6 million (Note
3).
9
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Companys intangible assets included in the consolidated balance sheets are detailed as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1, 2011 |
|
|
December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
Gross |
|
|
|
|
|
|
Average |
|
|
Gross |
|
|
|
|
|
|
Average |
|
|
|
Carrying |
|
|
Accumulated |
|
|
Amortization |
|
|
Carrying |
|
|
Accumulated |
|
|
Amortization |
|
|
|
Amount |
|
|
Amortization |
|
|
Period |
|
|
Amount |
|
|
Amortization |
|
|
Period |
|
Purchased intangibles |
|
$ |
139,169 |
|
|
$ |
78,581 |
|
|
10 years |
|
$ |
134,723 |
|
|
$ |
70,832 |
|
|
10 years |
Capitalized software |
|
|
259,004 |
|
|
|
142,512 |
|
|
5 years |
|
|
229,850 |
|
|
|
127,056 |
|
|
5 years |
Licenses |
|
|
6,644 |
|
|
|
5,973 |
|
|
6 years |
|
|
9,877 |
|
|
|
8,971 |
|
|
7 years |
Patents and other
intangibles |
|
|
32,722 |
|
|
|
14,168 |
|
|
8 years |
|
|
28,931 |
|
|
|
15,206 |
|
|
8 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
437,539 |
|
|
$ |
241,234 |
|
|
7 years |
|
$ |
403,381 |
|
|
$ |
222,065 |
|
|
7 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the nine months ended October 1, 2011, the Company acquired $4 million of purchased
intangibles as a result of the acquisition of Anter. In addition, the effect of foreign currency
translation increased the gross carrying value of intangible assets and accumulated amortization
for intangible assets by $7 million and $4 million, respectively, in the nine months ended October
1, 2011. Amortization expense for intangible assets was $7 million and $6 million for the three
months ended October 1, 2011 and October 2, 2010, respectively. Amortization expense for intangible
assets was $23 million and $20 million for the nine months ended October 1, 2011 and October 2,
2010, respectively. Amortization expense for intangible assets is estimated to be approximately $40
million per year for 2012 and 2013 and is estimated to increase to approximately $45 million per
year for the years 2014 through 2016. The estimated significant increases in amortization expense
in 2012, and thereafter, are due to amortization associated with capitalized software costs related
to the launch of new products and software platforms planned in 2012.
5 Debt
In July 2011, Waters entered into a new credit agreement (the 2011 Credit Agreement). The 2011
Credit Agreement provides for a $700 million revolving facility and a $300 million term loan
facility. The term loan facility and the revolving facility both mature on July 28, 2016 and
require no scheduled prepayments before that date. The Company used $425 million of the proceeds
from the 2011 Credit Agreement to repay the outstanding amounts under the Companys existing
multi-borrower credit agreement dated as of January 11, 2007 (the 2007 Credit Agreement). Waters
terminated the 2007 Credit Agreement early without penalty.
The interest rates applicable to term loan and revolving loans under the 2011 Credit Agreement are,
at the Companys option, equal to either the base rate (which is the highest of (i) the prime rate,
(ii) the federal funds rate plus 1/2%, or (iii) the one month LIBOR rate plus 1%) or the applicable
1, 2, 3, 6, 9 or 12 month LIBOR rate, in each case, plus an interest rate margin based upon the
Companys leverage ratio, which can range between 0 to 20 basis points and between 85 basis points
and 120 basis points. The facility fee on the 2011 Credit Agreement ranges between 15 basis points
and 30 basis points. The 2011 Credit Agreement requires that the Company comply with an interest
coverage ratio test of not less than 3.50:1 and a leverage ratio test of not more than 3.25:1 for
any period of four consecutive fiscal quarters, respectively, the same as the 2007 Credit
Agreement. In addition, the 2011 Credit Agreement includes negative covenants, affirmative
covenants, representations and warranties and events of default that are customary for investment
grade credit facilities and are similar in nature to ones contained in the 2007 Credit Agreement.
The outstanding portions of the revolving facilities have been classified as short-term liabilities
in the consolidated balance sheets due to the fact that the Company utilizes the revolving line of
credit to fund its working capital needs. It is the Companys intention to pay the outstanding
revolving line of credit balance during the subsequent months following the respective period end
date.
10
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In March 2011, the Company issued and sold the following senior unsecured notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Face Value |
|
|
|
|
Senior Notes |
|
Issue Date |
|
|
Term |
|
|
Interest Rate |
|
|
(in millions) |
|
|
Maturity Date |
|
Series C |
|
March 2011 |
|
5 years |
|
|
2.50 |
% |
|
$ |
50 |
|
|
March 2016 |
Series D |
|
March 2011 |
|
7 years |
|
|
3.22 |
% |
|
$ |
100 |
|
|
March 2018 |
Series E |
|
March 2011 |
|
10 years |
|
|
3.97 |
% |
|
$ |
50 |
|
|
March 2021 |
The Company used the proceeds from the issuance of these senior unsecured notes to repay $140
million of the term loan under the 2007 Credit Agreement and other outstanding debt, and for
general corporate purposes. Interest on the senior unsecured notes is payable semi-annually in
March and September of each year. The Company may prepay all or some of the senior unsecured notes
at any time in an amount not less than 10% of the aggregate principal amount outstanding, plus the
applicable make-whole amount. In the event of a change in control (as defined in the note purchase
agreement) of the Company, the Company may be required to prepay the senior unsecured notes at a
price equal to 100% of the principal amount thereof, plus accrued and unpaid interest. These notes
require that the Company comply with an interest coverage ratio test of not less than 3.50:1 and a
leverage ratio test of not more than 3.50:1 for any period of four consecutive fiscal quarters,
respectively. In addition, these notes include customary negative covenants, affirmative covenants,
representations and warranties and events of default.
As of October 1, 2011, the Company was in compliance with all debt covenants.
At October 1, 2011 and December 31, 2010, the Company had the following outstanding debt (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
October 1, 2011 |
|
|
December 31, 2010 |
|
Lines of credit |
|
$ |
11,578 |
|
|
$ |
11,055 |
|
Credit agreements |
|
|
260,000 |
|
|
|
55,000 |
|
|
|
|
|
|
|
|
Total notes payable and debt |
|
|
271,578 |
|
|
|
66,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior unsecured notes Series A 3.75%, due February 2015 |
|
|
100,000 |
|
|
|
100,000 |
|
Senior unsecured notes Series B 5.00%, due February 2020 |
|
|
100,000 |
|
|
|
100,000 |
|
Senior unsecured notes Series C 2.50%, due March 2016 |
|
|
50,000 |
|
|
|
|
|
Senior unsecured notes Series D 3.22%, due March 2018 |
|
|
100,000 |
|
|
|
|
|
Senior unsecured notes Series E 3.97%, due March 2021 |
|
|
50,000 |
|
|
|
|
|
Credit agreements |
|
|
300,000 |
|
|
|
500,000 |
|
|
|
|
|
|
|
|
Total long-term debt |
|
|
700,000 |
|
|
|
700,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
971,578 |
|
|
$ |
766,055 |
|
|
|
|
|
|
|
|
As of October 1, 2011 and December 31, 2010, the Company had a total amount available to borrow of
$439 million and $543 million, respectively, after outstanding letters of credit under the 2011
Credit Agreement and 2007 Credit Agreement. The weighted-average interest rates applicable to the
senior unsecured notes and credit agreement borrowings were 2.28% and 1.69% at October 1, 2011 and
December 31, 2010, respectively. The increase in the weighted-average interest rate for the
Companys long-term debt is primarily due to a higher mix of fixed-rate debt and an increase in the
interest rate margin on the 2011 Credit Agreement.
The Company and its foreign subsidiaries also had available short-term lines of credit totaling
$107 million and $111 million at October 1, 2011 and December 31, 2010, respectively, for the
purpose of short-term borrowing and issuance of commercial guarantees. At October 1, 2011 and
December 31, 2010, the weighted-average interest rates applicable to these short-term borrowings
were 2.08% and 2.10%, respectively.
6 Income Taxes
The Company accounts for its uncertain tax return reporting positions in accordance with the
accounting standards for income taxes, which require financial statement reporting of the expected
future tax consequences of uncertain tax reporting positions on the presumption that all concerned
tax authorities possess full knowledge of the reporting
11
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
positions, as well as all of the pertinent facts and circumstances, but prohibit any discounting of
unrecognized tax benefits associated with uncertain reporting positions for the time value of
money.
The following is a summary of the activity in the Companys unrecognized tax benefits for the nine
months ended October 1, 2011 and October 2, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
October 1, 2011 |
|
|
October 2, 2010 |
|
Balance at the beginning of the period |
|
$ |
71,523 |
|
|
$ |
77,924 |
|
Realization of uncertain U.K. tax benefits |
|
|
|
|
|
|
(9,996 |
) |
Realization of uncertain pre-acquisition tax benefits |
|
|
|
|
|
|
(1,500 |
) |
Increase in other uncertain tax benefits |
|
|
1,485 |
|
|
|
3,469 |
|
|
|
|
|
|
|
|
Balance at the end of the period |
|
$ |
73,008 |
|
|
$ |
69,897 |
|
|
|
|
|
|
|
|
During the three and nine months ended October 2, 2010, the Company recorded a net $8 million tax
benefit in the income tax provision which represents the realization of the reserve for uncertain
United Kingdom tax benefits offset by the amount of the audit settlement. Also during the nine
months ended October 2, 2010, the Company recorded approximately $2 million of tax benefit in the
income tax provision related to the resolution of a pre-acquisition tax exposure. The Companys
uncertain tax positions are taken with respect to income tax return reporting periods beginning
after December 31, 1999, which are the periods that generally remain open to income tax audit
examination by the concerned income tax authorities. The Company continuously monitors the lapsing
of statutes of limitations on potential tax assessments for related changes in the measurement of
unrecognized tax benefits, related net interest and penalties, and deferred tax assets and
liabilities. As of October 1, 2011, the Company does not expect to record any material changes in
the measurement of any other unrecognized tax benefits, related net interest and penalties or
deferred tax assets and liabilities due to the settlement of tax audit examinations or to the
lapsing of statutes of limitations on potential tax assessments within the next twelve months.
The Companys effective tax rates for the three months ended October 1, 2011 and October 2, 2010
were 16.8% and 5.8%, respectively. The Companys effective tax rates for the nine months ended
October 1, 2011 and October 2, 2010 were 15.6% and 12.9%, respectively. Included in the income tax
provision for the nine months ended October 1, 2011 is $2 million of tax benefit related to the
reversal of reserves for interest related to an audit settlement in the United Kingdom. This tax
benefit decreased the Companys effective tax rate by 0.5 percentage points in the nine months
ended October 1, 2011. Included in the income tax provision for the three and nine months ended
October 2, 2010 is the aforementioned $8 million tax benefit related to the reversal of reserves for uncertain
tax positions due to an audit settlement in the United Kingdom. This net tax benefit decreased the
Companys effective tax rate for the three and nine months ended October 2, 2010 by 7.5 percentage
points and 2.6 percentage points, respectively. Also included in the income tax provision for the
nine months ended October 2, 2010 is the aforementioned $2 million of tax benefit related to the
resolution of a pre-acquisition tax exposure. This tax benefit decreased the Companys effective
tax rate by 0.5 percentage points in the nine months ended October 2, 2010. The remaining
differences between the effective tax rates for the three and nine months ended October 1, 2011 as
compared to the three and nine months ended October 2, 2010 were primarily attributable to
differences in the proportionate amounts of pre-tax income recognized in jurisdictions with
different effective tax rates.
7 Stock-Based Compensation
The Company maintains various shareholder-approved, stock-based compensation plans which allow for
the issuance of incentive or non-qualified stock options, stock appreciation rights, restricted
stock or other types of awards (e.g. restricted stock units).
The Company accounts for stock-based compensation costs in accordance with the accounting standards
for stock-based compensation, which require that all share-based payments to employees be
recognized in the statements of operations based on their fair values. The Company recognizes the
expense using the straight-line attribution method. The stock-based compensation expense recognized
in the consolidated statements of operations is based on awards that ultimately are expected to
vest; therefore, the amount of expense has been reduced for estimated forfeitures. The stock-based
compensation accounting standards require forfeitures to be estimated at the time of grant and
revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
Forfeitures were estimated based on historical experience. If actual results differ significantly
from these estimates, stock-based compensation expense and the Companys results of operations
could be materially impacted. In addition, if the Company employs different assumptions in the
application of this standard, the compensation expense that the
12
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Company records in the future periods may differ significantly from what the Company has recorded
in the current period.
The consolidated statements of operations for the nine months ended October 1, 2011 and October 2,
2010 include the following stock-based compensation expense related to stock option awards,
restricted stock, restricted stock unit awards and the employee stock purchase plan (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
October 1, 2011 |
|
|
October 2, 2010 |
|
|
October 1, 2011 |
|
|
October 2, 2010 |
|
Cost of sales |
|
$ |
587 |
|
|
$ |
623 |
|
|
$ |
1,912 |
|
|
$ |
1,852 |
|
Selling and administrative expenses |
|
|
5,654 |
|
|
|
4,829 |
|
|
|
16,392 |
|
|
|
14,364 |
|
Research and development expenses |
|
|
641 |
|
|
|
792 |
|
|
|
2,341 |
|
|
|
2,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation |
|
$ |
6,882 |
|
|
$ |
6,244 |
|
|
$ |
20,645 |
|
|
$ |
18,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of both October 1, 2011 and December 31, 2010, the Company has capitalized stock-based
compensation costs of less than $1 million in inventory in the consolidated balance sheets. As of
both October 1, 2011 and December 31, 2010, the Company has capitalized stock-based compensation
costs of $3 million in capitalized software in the consolidated balance sheets.
Stock Options
In determining the fair value of the stock options, the Company makes a variety of assumptions and
estimates, including volatility measures, expected yields and expected stock option lives. The fair
value of each option grant was estimated on the date of grant using the Black-Scholes option
pricing model. The Company uses implied volatility on its publicly traded options as the basis for
its estimate of expected volatility. The Company believes that implied volatility is the most
appropriate indicator of expected volatility because it is generally reflective of historical
volatility and expectations of how future volatility will differ from historical volatility. The
expected life assumption for grants is based on historical experience for the population of
non-qualified stock optionees. The risk-free interest rate is the yield currently available on U.S.
Treasury zero-coupon issues with a remaining term approximating the expected term used as the input
to the Black-Scholes model. The relevant data used to determine the value of the stock options
granted during the nine months ended October 1, 2011 and October 2, 2010 are as follows:
|
|
|
|
|
|
|
|
|
Options Issued and Significant |
|
|
|
|
|
|
Assumptions Used to Estimate Option |
|
|
|
|
|
|
Fair Values |
|
October 1, 2011 |
|
|
October 2, 2010 |
|
Options issued in thousands |
|
|
32 |
|
|
|
32 |
|
Risk-free interest rate |
|
|
2.1 |
% |
|
|
3.0 |
% |
Expected life in years |
|
|
6 |
|
|
|
6 |
|
Expected volatility |
|
|
0.290 |
|
|
|
0.293 |
|
Expected dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average Exercise Price and |
|
|
|
|
|
|
Fair Value of Options on the Date of |
|
|
|
|
|
|
Grant |
|
October 1, 2011 |
|
|
October 2, 2010 |
|
Exercise price |
|
$ |
78.10 |
|
|
$ |
61.63 |
|
Fair value |
|
$ |
25.25 |
|
|
$ |
21.40 |
|
13
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes stock option activity for the plans for the nine months ended
October 1, 2011 (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
Number of Shares |
|
|
Price per Share |
|
|
Exercise Price |
|
Outstanding at December 31, 2010 |
|
|
5,560 |
|
|
$21.39 to $80.97 |
|
$ |
50.19 |
|
Granted |
|
|
32 |
|
|
$ |
78.10 |
|
|
$ |
78.10 |
|
Exercised |
|
|
(1,045 |
) |
|
$21.39 to $77.94 |
|
$ |
40.95 |
|
Canceled |
|
|
(24 |
) |
|
$36.25 to $80.97 |
|
$ |
80.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at October 1, 2011 |
|
|
4,523 |
|
|
$21.39 to $79.05 |
|
$ |
52.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
During the nine months ended October 1, 2011, the Company granted twelve thousand shares of
restricted stock. The fair value of these awards on the grant date was $78.10 per share. The
restrictions on these shares lapse at the end of a three-year period.
Restricted Stock Units
The following table summarizes the unvested restricted stock unit award activity for the nine
months ended October 1, 2011 (in thousands, except for per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Weighted-Average Price |
|
Unvested at December 31, 2010 |
|
|
752 |
|
|
$ |
49.64 |
|
Granted |
|
|
175 |
|
|
$ |
78.99 |
|
Vested |
|
|
(250 |
) |
|
$ |
48.16 |
|
Forfeited |
|
|
(11 |
) |
|
$ |
53.13 |
|
|
|
|
|
|
|
|
|
Unvested at October 1, 2011 |
|
|
666 |
|
|
$ |
57.85 |
|
|
|
|
|
|
|
|
|
Restricted stock units are generally granted annually in February and vest in equal annual
installments over a five-year period.
8 Earnings Per Share
Basic and diluted earnings per share (EPS) calculations are detailed as follows (in thousands,
except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended October 1, 2011 |
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
Net Income |
|
|
Shares |
|
|
Per Share |
|
|
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
Net income per basic common share |
|
$ |
101,257 |
|
|
|
90,688 |
|
|
$ |
1.12 |
|
Effect of dilutive stock option, restricted
stock and restricted stock unit securities |
|
|
|
|
|
|
1,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per diluted common share |
|
$ |
101,257 |
|
|
|
92,060 |
|
|
$ |
1.10 |
|
|
|
|
|
|
|
|
|
|
|
14
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended October 2, 2010 |
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
Net Income |
|
|
Shares |
|
|
Per Share |
|
|
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
Net income per basic common share |
|
$ |
94,719 |
|
|
|
91,714 |
|
|
$ |
1.03 |
|
Effect of dilutive stock option, restricted
stock and restricted stock unit securities |
|
|
|
|
|
|
1,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per diluted common share |
|
$ |
94,719 |
|
|
|
93,286 |
|
|
$ |
1.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended October 1, 2011 |
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
Net Income |
|
|
Shares |
|
|
Per Share |
|
|
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
Net income per basic common share |
|
$ |
295,821 |
|
|
|
91,334 |
|
|
$ |
3.24 |
|
Effect of dilutive stock option, restricted
stock and restricted stock unit securities |
|
|
|
|
|
|
1,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per diluted common share |
|
$ |
295,821 |
|
|
|
92,898 |
|
|
$ |
3.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended October 2, 2010 |
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
Net Income |
|
|
Shares |
|
|
Per Share |
|
|
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
Net income per basic common share |
|
$ |
255,159 |
|
|
|
92,647 |
|
|
$ |
2.75 |
|
Effect of dilutive stock option, restricted
stock and restricted stock unit securities |
|
|
|
|
|
|
1,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per diluted common share |
|
$ |
255,159 |
|
|
|
94,271 |
|
|
$ |
2.71 |
|
|
|
|
|
|
|
|
|
|
|
For both the three and nine months ended October 1, 2011, the Company had 0.7 million stock options
that were antidilutive due to having higher exercise prices than the Companys average stock price
during the period. For both the three and nine months ended October 2, 2010, the Company had 1.8
million stock options that were antidilutive. These securities were not included in the computation
of diluted EPS. The effect of dilutive securities was calculated using the treasury stock method.
9 Comprehensive Income
Comprehensive income is detailed as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
October 1, |
|
|
October 2, |
|
|
October 1, |
|
|
October 2, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Net income |
|
$ |
101,257 |
|
|
$ |
94,719 |
|
|
$ |
295,821 |
|
|
$ |
255,159 |
|
Foreign currency translation |
|
|
(31,741 |
) |
|
|
39,474 |
|
|
|
10,312 |
|
|
|
(12,356 |
) |
Unrealized (losses) gains on investments
before income taxes |
|
|
(2,547 |
) |
|
|
24 |
|
|
|
(18 |
) |
|
|
24 |
|
Income tax benefit (expense) |
|
|
891 |
|
|
|
(8 |
) |
|
|
6 |
|
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (losses) gains on investments, net of tax |
|
|
(1,656 |
) |
|
|
16 |
|
|
|
(12 |
) |
|
|
16 |
|
Retirement liability adjustment, net of tax |
|
|
119 |
|
|
|
175 |
|
|
|
712 |
|
|
|
288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income |
|
|
(33,278 |
) |
|
|
39,665 |
|
|
|
11,012 |
|
|
|
(12,052 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
67,979 |
|
|
$ |
134,384 |
|
|
$ |
306,833 |
|
|
$ |
243,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10 Retirement Plans
The Company sponsors various retirement plans. The summary of the components of net periodic
pension costs for the plans for the three and nine months ended October 1, 2011 and October 2, 2010
is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
October 1, 2011 |
|
|
October 2, 2010 |
|
|
|
U.S. |
|
|
U.S. Retiree |
|
|
Non-U.S. |
|
|
U.S. |
|
|
U.S. Retiree |
|
|
Non-U.S. |
|
|
|
Pension |
|
|
Healthcare |
|
|
Pension |
|
|
Pension |
|
|
Healthcare |
|
|
Pension |
|
|
|
Plans |
|
|
Plan |
|
|
Plans |
|
|
Plans |
|
|
Plan |
|
|
Plans |
|
Service cost |
|
$ |
|
|
|
$ |
134 |
|
|
$ |
453 |
|
|
$ |
12 |
|
|
$ |
118 |
|
|
$ |
424 |
|
Interest cost |
|
|
1,554 |
|
|
|
94 |
|
|
|
258 |
|
|
|
1,573 |
|
|
|
75 |
|
|
|
256 |
|
Expected return on plan
assets |
|
|
(1,880 |
) |
|
|
(69 |
) |
|
|
(74 |
) |
|
|
(1,777 |
) |
|
|
(60 |
) |
|
|
(79 |
) |
Net amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service credit |
|
|
|
|
|
|
(13 |
) |
|
|
(22 |
) |
|
|
|
|
|
|
(14 |
) |
|
|
|
|
Net actuarial loss
(gain) |
|
|
433 |
|
|
|
|
|
|
|
9 |
|
|
|
286 |
|
|
|
|
|
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost |
|
$ |
107 |
|
|
$ |
146 |
|
|
$ |
624 |
|
|
$ |
94 |
|
|
$ |
119 |
|
|
$ |
588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
October 1, 2011 |
|
|
October 2, 2010 |
|
|
|
U.S. |
|
|
U.S. Retiree |
|
|
Non-U.S. |
|
|
U.S. |
|
|
U.S. Retiree |
|
|
Non-U.S. |
|
|
|
Pension |
|
|
Healthcare |
|
|
Pension |
|
|
Pension |
|
|
Healthcare |
|
|
Pension |
|
|
|
Plans |
|
|
Plan |
|
|
Plans |
|
|
Plans |
|
|
Plan |
|
|
Plans |
|
Service cost |
|
$ |
|
|
|
$ |
402 |
|
|
$ |
1,413 |
|
|
$ |
42 |
|
|
$ |
310 |
|
|
$ |
1,272 |
|
Interest cost |
|
|
4,662 |
|
|
|
282 |
|
|
|
788 |
|
|
|
4,743 |
|
|
|
281 |
|
|
|
768 |
|
Expected return on plan
assets |
|
|
(5,640 |
) |
|
|
(207 |
) |
|
|
(224 |
) |
|
|
(5,347 |
) |
|
|
(166 |
) |
|
|
(237 |
) |
Net amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service credit |
|
|
|
|
|
|
(39 |
) |
|
|
(22 |
) |
|
|
|
|
|
|
(40 |
) |
|
|
|
|
Net actuarial loss
(gain) |
|
|
1,299 |
|
|
|
|
|
|
|
23 |
|
|
|
810 |
|
|
|
|
|
|
|
(39 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost |
|
$ |
321 |
|
|
$ |
438 |
|
|
$ |
1,978 |
|
|
$ |
248 |
|
|
$ |
385 |
|
|
$ |
1,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three and nine months ended October 1, 2011, the Company contributed $1 million and $2 million to
the Companys U.S. pension plans, respectively. During fiscal year 2011, the Company expects to
contribute a total of approximately $4 million to $5 million to the Companys defined benefit
plans.
11 Business Segment Information
The Companys business activities, for which discrete financial information is available, are
regularly reviewed and evaluated by the chief operating decision makers. As a result of this
evaluation, the Company determined that it has two operating segments: Waters Division and TA
Division.
Waters Division is primarily in the business of designing, manufacturing, distributing and
servicing LC and MS instruments, columns and other chemistry consumables that can be integrated and
used along with other analytical instruments. TA Division is primarily in the business of
designing, manufacturing, distributing and servicing thermal analysis, rheometry and calorimetry
instruments. The Companys two divisions are its operating segments and each has similar economic
characteristics; product processes; products and services; types and classes of customers; methods
of distribution; and regulatory environments. Because of these similarities, the two segments have
been aggregated into one reporting segment for financial statement purposes. Please refer to the
consolidated financial statements for financial information regarding the one reportable segment of
the Company.
16
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Net sales for the Companys products and services are as follows for the three and nine months
ended October 1, 2011 and October 2, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
October 1, 2011 |
|
|
October 2, 2010 |
|
|
October 1, 2011 |
|
|
October 2, 2010 |
|
Product net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Waters instrument systems |
|
$ |
212,664 |
|
|
$ |
185,526 |
|
|
$ |
616,596 |
|
|
$ |
526,627 |
|
Chemistry |
|
|
72,104 |
|
|
|
65,595 |
|
|
|
220,125 |
|
|
|
195,144 |
|
TA instrument systems |
|
|
36,580 |
|
|
|
31,813 |
|
|
|
104,113 |
|
|
|
89,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total product sales |
|
|
321,348 |
|
|
|
282,934 |
|
|
|
940,834 |
|
|
|
811,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Waters service |
|
|
121,245 |
|
|
|
107,904 |
|
|
|
354,523 |
|
|
|
317,798 |
|
TA service |
|
|
11,941 |
|
|
|
10,200 |
|
|
|
34,407 |
|
|
|
30,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total service sales |
|
|
133,186 |
|
|
|
118,104 |
|
|
|
388,930 |
|
|
|
348,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
$ |
454,534 |
|
|
$ |
401,038 |
|
|
$ |
1,329,764 |
|
|
$ |
1,159,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 Recent Accounting Standard Changes and Developments
Recently Adopted Accounting Standards
In October 2009, a new accounting consensus was issued for multiple-deliverable revenue
arrangements. This consensus amends existing revenue recognition accounting standards. This
consensus provides accounting principles and application guidance on whether multiple deliverables
exist, how the arrangement should be separated and the consideration allocated. This guidance
eliminates the requirement to establish the fair value of undelivered products and services and
instead provides for separate revenue recognition based upon managements estimate of the selling
price for an undelivered item when there is no other means to determine the fair value of that
undelivered item. Previously, the existing accounting consensus required that the fair value of
the undelivered item be the price of the item either sold in a separate transaction between
unrelated third parties or the price charged for each item when the item is sold separately by the
vendor. Under the existing accounting consensus, if the fair value of all of the elements in the
arrangement was not determinable, then revenue was deferred until all of the items were delivered
or fair value was determined. This new approach is effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June 15, 2010. The
adoption of this standard in the nine months ended October 1, 2011 did not have a material effect
on the Companys financial position, results of operations or cash flows.
Also in October 2009, a new accounting consensus was issued for certain revenue arrangements that
include software elements. This consensus amends the existing accounting guidance for revenue
arrangements that contain tangible products and software. This consensus requires that tangible
products which contain software components and non-software components that function together to
deliver the tangible products essential functionality are no longer within the scope of the
software revenue guidance. This new approach is effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June 15, 2010. The
adoption of this standard in the nine months ended October 1, 2011 did not have a material effect
on the Companys financial position, results of operations or cash flows.
Recently Issued Accounting Standards
In June 2011, a new accounting standard was issued relating to the presentation of comprehensive
income. This standard eliminates the option to present components of other comprehensive income as
part of the statement of changes in stockholders equity. An entity has the option to present the
total of comprehensive income, the components of net income and the components of other
comprehensive income either in a single continuous statement of comprehensive income or in two
separate but consecutive statements. This standard is to be applied retrospectively for fiscal
years and interim periods beginning after December 15, 2011. The adoption of this standard will not
have a material effect on the Companys financial position, results of operations or cash flows.
17
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In September 2011, amended accounting guidance was issued
for goodwill in order to simplify
how companies test goodwill for impairment. The amendments permit a company to first assess the
qualitative factors to determine whether it is more likely than not that the fair value of the
reporting unit is less than its carrying amount as a basis for determining whether it is necessary
to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as
having a likelihood of more than 50 percent. If, after assessing the totality of events or
circumstances, a company determines it is not more likely than not that the fair value of a
reporting unit is less than its carrying amount, then performing the two-step impairment test is
unnecessary. The amendments are effective for annual and interim goodwill impairment tests
performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. We do
not expect the adoption of this accounting pronouncement to have a material effect on our financial
statements when implemented.
18
Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
Business and Financial Overview
The Company has two operating segments: the Waters Division and the TA Division (TA®).
The Waters Divisions products and services primarily consist of high performance liquid
chromatography (HPLC), ultra performance liquid chromatography (UPLC® and together
with HPLC, referred to as LC), mass spectrometry (MS) and chemistry consumable products and
related services. TA products and services primarily consist of thermal analysis, rheometry and
calorimetry instrument systems and service sales. The Companys products are used by
pharmaceutical, life science, biochemical, industrial, food safety, academic and government
customers. These customers use the Companys products to detect, identify, monitor and measure the
chemical, physical and biological composition of materials and to predict the suitability of fine
chemicals, polymers and viscous liquids in consumer goods and healthcare products.
The Companys sales were $455 million and $401 million, an increase of 13%, for the three months
ended October 1, 2011 (the 2011 Quarter) and October 2, 2010 (the 2010 Quarter), respectively.
The Companys sales were $1,330 million and $1,160 million, an increase of 15%, for the nine months
ended October 1, 2011 (the 2011 Period) and October 2, 2010 (the 2010 Period), respectively. In
the 2011 Quarter and 2011 Period, as compared with the 2010 Quarter and 2010 Period, instrument
system sales increased 15% and 17%, respectively, while new and recurring sales of chemistry
consumables and services increased 12% for both the 2011 Quarter and 2011 Period. These overall
increases in sales are attributable to increased spending by the Companys pharmaceutical,
industrial and chemical analysis customers on LC, MS and TA products. The sales growth is also
attributable to an increase in demand for the recently launched ACQUITY UPLC® H-Class,
Xevo® Q-TofTM, Xevo® TQ-S and SYNAPT® G2-S instrument
systems, which had minimal sales in the 2010 Quarter and 2010 Period. Sales growth of these new
instrument systems was achieved in all major regions of the world. The effect of foreign currency
translation increased sales by 4% and 5% in the 2011 Quarter and 2011 Period, respectively.
During the 2011 Quarter, sales increased 22% in Europe, 11% in Asia (including Japan), 8% in the
U.S. and 14% in the rest of the world as compared with the 2010 Quarter. The effect of foreign
currency translation increased sales by 10% in Europe, 4% in Asia and 2% in the rest of the world.
During the 2011 Period, sales increased 18% in Asia, 18% in Europe, 6% in the U.S. and 26% in the
rest of the world as compared with the 2010 Period. The effect of foreign currency translation
increased sales by 8% in Europe, 5% in Asia and 2% in the rest of the world. The increase in sales
in Europe can be attributed to stronger demand from pharmaceutical, industrial and government and
academic customers. The increase in Asias sales for both the 2011 Quarter and 2011 Period was
primarily due to continued strong sales growth in China and India, particularly in government,
industrial and chemical analysis markets. Japans sales grew 15% in both the 2011 Quarter and 2011
Period, with the effect of foreign currency translation adding 9% and 11% to the sales growth in
the 2011 Quarter and 2011 Period, respectively.
In both the 2011 Quarter and 2011 Period, sales to pharmaceutical customers increased 15% and
combined sales to industrial and environmental customers increased 10% and 17%, respectively, as
compared with the 2010 Quarter and 2010 Period. These increases were primarily a result of
increased spending on instrument systems, chemistry consumables and services by the Companys
customers and sales from the ACQUITY UPLC H-Class, Xevo Q-Tof, Xevo TQ-S, and SYNAPT G2-S
instrument systems. Combined global sales to government and academic customers were 10% and 5%
higher in the 2011 Quarter and 2011 Period, respectively.
Operating income was $127 million and $104 million in the 2011 Quarter and 2010 Quarter,
respectively. Operating income was $364 million and $302 million in the 2011 Period and 2010
Period, respectively. The overall increases in operating income in 2011 as compared to 2010 were
primarily from the increases in sales volumes and the favorable effect of foreign currency
translation.
Net income per diluted share was $1.10 and $1.02 in the 2011 Quarter and 2010 Quarter,
respectively. Net income per diluted share was $3.18 and $2.71 in the 2011 Period and 2010 Period,
respectively. These increases in net income per diluted share were primarily attributable to higher
sales volume and the favorable effect of foreign currency translation.
Net cash provided by operating activities was $347 million and $324 million in the 2011 Period and
2010 Period, respectively. The $23 million increase was primarily a result of higher net income in
the 2011 Period. Net cash provided by operating activities was also impacted by the timing of
receipts from customers, the increase in inventory for new products and payments to vendors, as
well as the payment of amounts earned under the Companys 2010 management incentive plans.
19
Within cash flows used in investing activities, capital expenditures related to property, plant,
equipment and software capitalization were $51 million and $47 million in the 2011 Period and 2010
Period, respectively.
In July 2011, the Company acquired the net assets of Anter Corporation (Anter), a manufacturer of
thermal analyzers used to measure thermal expansion and shrinkage, thermal conductivity and
resistivity, thermal diffusivity and specific heat capacity of a wide range of materials, for $11
million in cash. Anter is expected to add approximately $6 million on a full-year basis to the
Companys annual sales and initially be neutral to earnings per share.
Within cash flows used in financing activities, the Company received $46 million and $27 million of
proceeds from stock plans in the 2011 Period and 2010 Period, respectively. Fluctuations in these
amounts were primarily attributable to changes in the Companys stock price and the expiration of
stock option grants. In February 2011, the Companys Board of Directors authorized the Company to
repurchase up to $500 million of its outstanding common stock over a two-year period. The Company
repurchased $292 million and $241 million of the Companys outstanding common stock in the 2011
Period and 2010 Period, respectively, under the February 2011 authorization and previously
announced stock repurchase programs.
In July 2011, Waters entered into a new credit agreement (the 2011 Credit Agreement). The 2011
Credit Agreement provides for a $700 million revolving facility and a $300 million term loan
facility. The term loan facility and the revolving facility both mature on July 28, 2016 and
require no scheduled prepayments before that date. In March 2011, the Company issued and sold
senior unsecured notes with a total face value of $200 million. The Company used the proceeds from
the 2011 Credit Agreement and the issuances of senior unsecured notes to repay other outstanding
debt and for general corporate purposes. As a result of the issuances of senior unsecured notes,
the Companys weighted-average interest rates have increased in the 2011 Period due to higher rates
paid on this fixed-rate debt.
Results of Operations
Net Sales
Product sales were $321 million and $283 million for the 2011 Quarter and the 2010 Quarter,
respectively, an increase of 14%. Product sales were $941 million and $811 million for the 2011
Period and the 2010 Period, respectively, an increase of 16%. The increases in product sales in
both the 2011 Quarter and 2011 Period as compared to the 2010 Quarter and 2010 Period were
primarily due to higher demand from the Companys pharmaceutical, industrial and chemical analysis
customers and the strong uptake in sales from the ACQUITY UPLC H-Class, Xevo Q-Tof, Xevo TQ-S and
SYNAPT G2-S instrument systems, which had minimal sales in the 2010 Quarter and 2010 Period. The
Company also benefited during the 2011 Quarter and 2011 Period from higher sales of ACQUITY UPLC
columns, which are primarily used by an expanding installed base of ACQUITY UPLC instruments. In
addition, foreign currency translation added 4% and 5% to product sales for the 2011 Quarter and
2011 Period, respectively.
Service sales were $133 million and $118 million in the 2011 Quarter and the 2010 Quarter,
respectively, an increase of 13%. Service sales were $389 million and $348 million in the 2011
Period and the 2010 Period, respectively, an increase of 12%. The increases in service sales were
primarily attributable to increased sales of service plans and billings to a higher installed base
of customers. In addition, foreign currency translation added 4% to service sales for
both the 2011 Quarter and 2011 Period.
Waters Division Sales
Waters Division sales increased 13% and 15% in the 2011 Quarter and 2011 Period, respectively, as
compared to the 2010 Quarter and 2010 Period. The effect of foreign currency translation impacted
the Waters Division across all product lines, resulting in an increase in total sales of 4% and 5% in the 2011 Quarter
and 2011 Period, respectively.
Waters instrument system sales (LC and MS) increased 15% and 17% in the 2011 Quarter and 2011
Period, respectively. The increases in instrument systems sales were primarily attributable to
higher demand from the Companys pharmaceutical and industrial customers and the adoption and
uptake in sales from the ACQUITY UPLC H-Class, Xevo Q-Tof and Xevo TQ-S instrument systems.
Chemistry consumables sales increased 10% and 13% in the 2011 Quarter and 2011 Period,
respectively. These increases were driven primarily by higher demand for chemistry consumable
products, including increased sales of ACQUITY UPLC lines of columns. Waters Division service sales
increased 12% in both the 2011 Quarter and 2011 Period due to increased sales of service plans and
billings to a higher installed base of customers. Waters Division sales by product line in the 2011
Quarter, 2010
20
Quarter, 2011 Period and 2010 Period were approximately 52% for instrument systems, 18% for
chemistry consumables and 30% for service.
In the 2011 Quarter, as compared to the 2010 Quarter, Waters Division sales in Europe increased
22%, sales in Asia increased 11%, sales in the U.S. increased 7% and sales to the rest of the world
increased 14%. In the 2011 Period, as compared to the 2010 Period, Waters Division sales in Europe
increased 18%, sales in Asia increased 17%, sales in the U.S. increased 5% and sales to the rest of
the world increased 26%. The effect of foreign currency translation increased Europes sales by 10%
and 8% in the 2011 Quarter and 2011 Period, respectively. The increases in Asias sales are
primarily due to strong sales growth in China and India. The effects of foreign currency
translation increased Asias sales by 4% and 5% in the 2011 Quarter and 2011 Period, respectively.
The effects of foreign currency translation increased sales in the rest of world by 1% and 2% in
the 2011 Quarter and 2011 Period, respectively.
TA Division Net Sales
TAs sales were 15% higher in both the 2011 Quarter as compared to the 2010 Quarter and the 2011
Period as compared to the 2010 Period. Instrument system sales increased 15% in the 2011 Quarter
and 16% in the 2011 Period. Instrument system sales represented approximately 75% of TAs sales in
the 2011 Quarter, 2011 Period, 2010 Quarter and 2010 Period. The increases were primarily a result
of higher demand for instrument systems from TAs industrial customers due to improved economic
conditions, as well as revenue associated with the shipment of the new Discovery DSC instrument
system. TA service sales increased 17% and 12% in the 2011 Quarter and 2011 Period, respectively,
primarily due to increased sales of service plans and billings to a higher installed base of
customers. The acquisition of Anter added 2% to TAs 2011 Quarter sales and had minimal impact on
TAs 2011 Period sales. Geographically, TAs sales increased in each territory.
Gross Profit
Gross profit for the 2011 Quarter was $274 million compared to $238 million for the 2010 Quarter,
an increase of 15%. Gross profit for the 2011 Period was $804 million compared to $696 million for
the 2010 Period, an increase of 15%. The increase in gross profit dollars in both the 2011 Quarter
and 2011 Period can be primarily attributed to higher sales volumes. Comparatively, gross profit as
a percentage of sales increased slightly to 60.3% in the 2011 Quarter and 60.4% in the 2011 Period
from 59.4% in the 2010 Quarter and 60.0% 2010 Period due to sales volume leverage of fixed costs,
favorable impact of foreign currency translation and a change in sales mix.
Gross profit as a percentage of sales is significantly affected by many factors, including, but not
limited to, product mix and product costs of instrument systems and associated software platforms.
In future quarters, the Company will be launching several new products and software platforms whose
cost and amortization of capitalized software could slightly affect the Companys product mix and
associated gross profit margins as a percentage of sales. See Note 4 in the Notes to the
Consolidated Financial Statements for estimated future amortization expense.
Selling and Administrative Expenses
Selling and administrative expenses for the 2011 Quarter and 2010 Quarter were $121 million and
$111 million, respectively, an increase of 9%. Selling and administrative expenses for the 2011
Period and 2010 Period were $364 million and $325 million, respectively, an increase of 12%. This
increase in selling and administrative expenses is a result of headcount additions; higher merit
and fringe benefit costs; higher sales and incentive compensation costs; and foreign currency
translation. As a percentage of net sales, selling and administrative expenses were 26.7% for the
2011 Quarter, 27.4% for the 2011 Period, 27.8% for the 2010 Quarter and 28.0% for the 2010 Period.
Research and Development Expenses
Research and development expenses were $23 million and $21 million for the 2011 Quarter and 2010
Quarter, respectively, an increase of 14%. Research and development expenses were $69 million and
$61 million for the 2011 Period and 2010 Period, respectively, an increase of 12%. The increases in
research and development expenses in both the 2011 Quarter and 2011 Period were primarily due to
development costs incurred on new products.
Provision for Income Taxes
The Companys effective tax rate increased to 16.8% in the 2011 Quarter from 5.8% in the 2010
Quarter. The Companys effective tax rate increased to 15.6% in the 2011 Period from 12.9% in the
2010 Period. Included in the income tax provision for the 2011 Period is a $2 million tax benefit
related to the reversal of a reserve for interest related to an audit settlement in the United
Kingdom. This tax benefit decreased the Companys effective tax rate by 0.5 percentage points in
the 2011 Period. Included in the income tax provision for the 2010 Quarter and 2010 Period is an $8
million tax benefit related to the reversal of reserves for uncertain tax positions due to an audit settlement
in the United Kingdom. This net tax benefit decreased the Companys effective tax rate for the 2010
Quarter and 2010 Period by
21
7.5 percentage points and 2.6 percentage points, respectively. Also included in the income tax
provision for the 2010 Period is a $2 million tax benefit related to the resolution of a
pre-acquisition tax exposure. This tax benefit decreased the Companys effective tax rate by 0.5
percentage points in the 2010 Period. The remaining differences between the effective tax rates for
the 2011 Quarter and 2011 Period as compared to the 2010 Quarter and 2010 Period were primarily
attributable to differences in the proportionate amounts of pre-tax income recognized in
jurisdictions with different effective tax rates.
The Companys effective tax rate is influenced by many significant factors including, but not
limited to, the wide range of income tax rates in jurisdictions in which the Company operates,
sales volumes and profit levels in each tax jurisdiction, changes in tax laws and policies and the
impact of foreign currency transactions and translation. As a result of variability in these
factors, the Companys effective tax rates in the future may not be similar to the effective tax
rates in the 2011 Quarter, 2011 Period, 2010 Quarter or 2010 Period. A known factor that increased
the Companys effective tax rate is that the Companys Ireland statutory tax rate has increased to
12.5% in 2011 from the historical contractual tax rate of 10%.
Liquidity and Capital Resources
Condensed Consolidated Statements of Cash Flows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
October 1, 2011 |
|
|
October 2, 2010 |
|
Net income |
|
$ |
295,821 |
|
|
$ |
255,159 |
|
Depreciation and amortization |
|
|
50,045 |
|
|
|
45,518 |
|
Stock-based compensation |
|
|
20,645 |
|
|
|
18,558 |
|
Deferred income taxes |
|
|
(7,072 |
) |
|
|
(4,669 |
) |
Change in accounts receivable |
|
|
10,040 |
|
|
|
(20,713 |
) |
Change in inventories |
|
|
(46,235 |
) |
|
|
(35,771 |
) |
Change in accounts payable and other current liabilities |
|
|
(11,937 |
) |
|
|
36,311 |
|
Change in deferred revenue and customer advances |
|
|
20,970 |
|
|
|
23,335 |
|
Other changes |
|
|
15,035 |
|
|
|
6,041 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
347,312 |
|
|
|
323,769 |
|
Net cash used in investing activities |
|
|
(194,714 |
) |
|
|
(332,437 |
) |
Net cash used in financing activities |
|
|
(37,953 |
) |
|
|
(58,889 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
783 |
|
|
|
(10,762 |
) |
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
$ |
115,428 |
|
|
$ |
(78,319 |
) |
|
|
|
|
|
|
|
Cash Flow from Operating Activities
Net cash provided by operating activities was $347 million and $324 million in the 2011 Period and
2010 Period, respectively. The changes within net cash provided by operating activities in the 2011
Period as compared to the 2010 Period include the following significant changes in the sources and
uses of net cash provided by operating activities, aside from the increase in net income:
|
|
|
The change in accounts receivable in the 2011 Period compared to the 2010 Period was
primarily attributable to timing of shipments and payments made by customers and higher
sales volumes in the 2011 Period as compared to the 2010 Period. Days-sales-outstanding
(DSO) decreased to 71 days at October 1, 2011 from 77 days at October 2, 2010. The
effect of foreign currency favorably impacted DSOs by 2 days in the 2011 Period as
compared to the 2010 Period. |
|
|
|
|
The 2011 Period change in inventory is primarily due to the ramp up of new product
and an increase in order backlog at the end of the 2011 Period. |
|
|
|
|
The 2011 Period change in accounts payable and other current liabilities is a result
of timing of payments to vendors and payments under the 2010 management incentive plans,
offset somewhat by an increase in income taxes payable. The 2010 Period change in accounts
payable and other current liabilities was a result of increases in accounts payable and
accrued income taxes. |
22
|
|
|
Net cash provided from deferred revenue and customer advances in both the 2011 Period
and the 2010 Period was a result of the higher installed base of customers renewing annual
service contracts. |
|
|
|
|
Other changes were attributable to variation in the timing of various provisions,
expenditures and accruals in other current assets, other assets and other liabilities. |
Cash Used in Investing Activities
Net cash used in investing activities totaled $195 million and $332 million in the 2011 Period and
2010 Period, respectively. Additions to fixed assets and capitalized software were $51 million in
the 2011 Period and $47 million in the 2010 Period. During the 2011 Period and 2010 Period, the
Company purchased $1,297 million and $925 million of short-term investments while $1,165 million
and $640 million of short-term investments matured, respectively. Business acquisitions, net of
cash acquired, were $11 million during the 2011 Period. There were no business acquisitions in the
2010 Period.
Cash Used in Financing Activities
In July 2011, Waters entered into a new credit agreement (the 2011 Credit Agreement). The 2011
Credit Agreement provides for a $700 million revolving facility and a $300 million term loan
facility. The term loan facility and the revolving facility both mature on July 28, 2016 and
require no scheduled prepayments before that date. The Company uses the revolving line of credit to
fund its working capital needs. In July 2011, the Company borrowed $300 million under the new term
loan facility. The Company used the proceeds of the term loan and the revolving borrowings to repay
the outstanding amounts under the 2007 Credit Agreement. Waters terminated the 2007 Credit
Agreement early without penalty.
The Company issued and sold senior unsecured notes with a total face value of $200 million in both
the 2011 Period and 2010 Period. Interest on both issuances of senior unsecured notes is payable
semi-annually. The Company may redeem some of the senior unsecured notes at any time in an amount
not less than 10% of the aggregate principal amount outstanding, plus accrued and unpaid interest,
plus the applicable make-whole amount. These senior unsecured notes require that the Company comply
with an interest coverage ratio test of not less than 3.50:1 and a leverage ratio test of not more
than 3.50:1 for any period of four consecutive fiscal quarters, respectively. In addition, these
notes include customary negative covenants, affirmative covenants, representations and warranties
and events of default.
During the 2011 Period and 2010 Period, the Companys total debt borrowings increased by $206
million and $160 million, respectively. As of October 1, 2011, the Company had a total of $972
million in outstanding debt, which consisted of $400 million in outstanding notes, $300 million
borrowed under the term loan facility under the 2011 Credit Agreement, $260 million borrowed under
revolving credit facilities under the 2011 Credit Agreement and $12 million borrowed under various
other short-term lines of credit. The outstanding portions of the revolving facilities have been
classified as short-term liabilities in the consolidated balance sheets due to the fact that the
Company utilizes the revolving line of credit to fund its working capital needs. It is the
Companys intention to pay the outstanding revolving line of credit balance during the subsequent
twelve months following the respective period end date; however, there can be no assurance that it
will be able to do so. As of October 1, 2011, the Company had a total amount available to borrow
under existing credit agreements of $439 million after outstanding letters of credit.
In February 2011, the Companys Board of Directors authorized the Company to repurchase up to $500
million of its outstanding common stock over a two-year period. During the 2011 Period and 2010
Period, the Company repurchased a total of 3.6 million and 3.8 million shares at a cost of $292
million and $241 million, respectively, under the February 2011 authorization and previously
announced programs. As of October 1, 2011, the Company had purchased an aggregate of 2.9 million
shares at a cost of $242 million under the February 2011 program, leaving $258 million authorized
for future repurchases.
The Company received $46 million and $27 million of proceeds from the exercise of stock options and
the purchase of shares pursuant to the Companys employee stock purchase plan in the 2011 Period
and 2010 Period, respectively.
The Company believes that the cash, cash equivalents and short-term investments of $1,194 million
at the end of the 2011 Period and expected cash flow from operating activities, together with
borrowing capacity from committed credit facilities, will be sufficient to service debt and fund
working capital and capital spending requirements, authorized share repurchase amounts, potential
acquisitions and any adverse final determination of ongoing litigation for at least the next twelve
months. Management believes, as of the date of this report, that its financial
23
position, along with
expected future cash flows from earnings based on historical trends and the ability to raise funds
from external sources, will be sufficient to meet future operating and investing needs for the
foreseeable future.
Contractual Obligations and Commercial Commitments
A summary of the Companys contractual obligations and commercial commitments is included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the U.S.
Securities and Exchange Commission (SEC) on February 25, 2011. The Company reviewed its
contractual obligations and commercial commitments as of October 1, 2011 and determined that there
were no material changes from the information set forth in the Annual Report on Form 10-K, with the
exception of the issuance of senior unsecured notes and the new credit agreement dated July 28,
2011 as described in Note 5, Debt, in the Condensed Notes to Consolidated Financial Statements.
From time to time, the Company and its subsidiaries are involved in various litigation matters
arising in the ordinary course of business. The Company believes that it has meritorious arguments
in its current litigation matters and that any outcome, either individually or in the aggregate,
will not be material to the Companys financial position or results of operations.
For the nine months ended October 1, 2011, the Company contributed $2 million to the Companys U.S.
pension plans. During fiscal year 2011, the Company expects to contribute a total of approximately
$4 million to $5 million to the Companys defined benefit plans.
The Company has not paid any dividends and does not plan to pay any dividends in the foreseeable
future.
Critical Accounting Policies and Estimates
In the Companys Annual Report on Form 10-K for the year ended December 31, 2010, the Companys
most critical accounting policies and estimates upon which its financial status depends were
identified as those relating to revenue recognition, loss provisions on accounts receivable and
inventory, valuation of long-lived assets, intangible assets and goodwill, warranty, income taxes,
pension and other postretirement benefit obligations, litigation and stock-based compensation. The
Company reviewed its policies and determined that those policies remain the Companys most critical
accounting policies for the 2011 Period. The Company did not make any changes in those policies
during the 2011 Period.
New Accounting Pronouncements
Refer to Note 12, Recent Accounting Standards Changes and Developments, in the Condensed Notes to
Consolidated Financial Statements.
Special Note Regarding Forward-Looking Statements
Certain of the statements in this Quarterly Report on Form 10-Q, including the information
incorporated by reference herein, may contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended (the Exchange Act), with respect to future results and events, including
statements regarding, among other items, anticipated trends in the Companys business; new product
launches; geographic breakdown of business; anticipated expenses, including interest expense, taxes
and tax benefits, and amortization expense; the impact of the Companys various ongoing tax audits
and litigation matters; the impact of the loss of intellectual property protection; the effect of
new accounting pronouncements; use of the Companys debt proceeds; the impact of regulatory
compliance; the Companys expected cash flow, borrowing capacity, debt repayment and refinancing;
the Companys ability to fund working capital, authorized share repurchases, potential acquisitions
and any adverse litigation determinations; the Companys contributions to defined benefit plans;
the Companys expectations regarding the payment of dividends; the effects of the Anter
acquisition; and the Companys capital spending, sufficiency of capital and ability to fund other
facility expansions to accommodate future sales growth.
Many of these statements appear, in particular, under the heading Managements Discussion and
Analysis of Financial Condition and Results of Operations in Part I, Item 2 of this Quarterly
Report on Form 10-Q. Statements that are not statements of historical fact may be deemed
forward-looking statements. You can identify these forward-looking statements by the use of the
words believes, anticipates, plans, expects, may, will, would, intends, suggests,
appears, estimates, projects, should and similar expressions, whether in the
24
negative or
affirmative. These statements are subject to various risks and uncertainties, many of which are
outside the control of the Company, including, and without limitation:
|
|
Current economic, sovereign and political conditions and uncertainties; ability to access
capital and maintain liquidity in volatile financial market conditions; changes in demand by
the Companys customers and various market sectors, particularly if they should reduce capital
expenditures; the effect of mergers and acquisitions on customer demand; and ability to
sustain and enhance service. |
|
|
|
Negative industry trends; introduction of competing products by other companies and loss of
market share; pressures on prices from customers or resulting from competition; regulatory,
economic and competitive obstacles to new product introductions; lack of acceptance of new
products; expansion of our business in Asia; spending by certain end-markets and ability to
obtain alternative sources for components and modules. |
|
|
|
Foreign exchange rate fluctuations that could adversely affect translation of the Companys
future financial operating results and condition. |
|
|
|
Increased regulatory burdens as the Companys business evolves, especially with respect to
the SEC, U.S. Food and Drug Administration, and U.S. Environmental Protection Agency, among
others and regulatory, environmental and logistical obstacles affecting the distribution of
the Companys products and completion of purchase order documentation. |
|
|
|
Risks associated with lawsuits, particularly involving claims for infringement of patents
and other intellectual property rights. |
|
|
|
The impact and costs incurred from changes in accounting principles and practices or tax
rates (specifically, the increase in the Companys 2011 statutory tax rate in Ireland from the
10% historical contractual tax rate to 12.5%); shifts in taxable income in jurisdictions with
different effective tax rates; and the outcome of and costs associated with ongoing and future
tax examinations or changes in respective country legislation affecting the Companys
effective rates. |
Certain of these and other factors are discussed in Part II, Item 1A of this Quarterly Report on
Form 10-Q and under the heading Risk Factors under Part I, Item 1A of the Companys Annual Report
on Form 10-K for the year ended December 31, 2010, as filed with the SEC on February 25, 2011.
Actual results or events could differ materially from the plans, intentions and expectations
disclosed in the forward-looking statements, whether because of these factors or for other reasons.
All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and
are expressly qualified in their entirety by the cautionary statements included in this report.
Except as required by law, the Company does not assume any obligation to update any forward-looking
statements.
Item 3: Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in the Companys market risk during the nine months ended October
1, 2011. For information regarding the Companys market risk, refer to Item 7A of Part II of the
Companys Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on
February 25, 2011.
Item 4: Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Companys chief executive officer and chief financial officer (principal executive and
principal financial officer), with the participation of management, evaluated the effectiveness of
the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based
on this evaluation, the Companys chief executive officer and chief financial officer concluded
that the Companys disclosure controls and procedures were effective as of October 1, 2011 (1) to
ensure that information required to be disclosed by the Company, including its consolidated
subsidiaries, in the reports that it files or submits under the Exchange Act is accumulated and
communicated to the Companys management, including its chief executive officer and chief financial
officer, to allow timely decisions regarding the required disclosure and (2) to provide reasonable
assurance that information required to be disclosed by the Company in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms.
25
Changes in Internal Controls Over Financial Reporting
There have been no changes identified in the Companys internal control over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended
October 1, 2011 that have materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.
Part II: Other Information
Item 1: Legal Proceedings
There have been no material changes in the Companys legal proceedings during the nine months ended
October 1, 2011 as described in Item 3 of Part I of the Companys Annual Report on Form 10-K for
the year ended December 31, 2010, as filed with the SEC on February 25, 2011.
Item 1A: Risk Factors
Information regarding risk factors of the Company is set forth under the heading Risk Factors
under Part I, Item 1A in the Companys Annual Report on Form 10-K for the year ended December 31,
2010, as filed with the SEC on February 25, 2011. The Company reviewed its risk factors as of
October 1, 2011 and determined that there were no material changes from the ones set forth in the
Form 10-K. These risks are not the only ones facing the Company. Additional risks and uncertainties
not currently known to the Company or that the Company currently deems to be immaterial also may
materially adversely affect the Companys business, financial condition and operating results.
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer
The following table provides information about purchases by the Company during the three months
ended October 1, 2011 of equity securities registered by the Company under the Exchange Act (in
thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
Maximum Dollar |
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased as |
|
|
Value of Shares |
|
|
|
|
|
|
|
|
|
|
|
Part of Publicly |
|
|
that May Yet Be |
|
|
|
Total Number of |
|
|
Average Price Paid |
|
|
Announced Plans or |
|
|
Purchased Under the |
|
Period |
|
Shares Purchased |
|
|
per Share |
|
|
Programs (1) |
|
|
Plans or Programs |
|
July 3 to July 30, 2011 |
|
|
40 |
|
|
$ |
87.85 |
|
|
|
40 |
|
|
$ |
399,185 |
|
July 31 to August 27, 2011 |
|
|
900 |
|
|
$ |
77.47 |
|
|
|
900 |
|
|
$ |
329,462 |
|
August 28 to October 1, 2011 |
|
|
905 |
|
|
$ |
78.35 |
|
|
|
905 |
|
|
$ |
258,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,845 |
|
|
$ |
78.13 |
|
|
|
1,845 |
|
|
$ |
258,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Company purchased 1.8 million shares of its outstanding common stock in the 2011 Quarter in open market transactions pursuant to a
repurchase program that was announced in February 2011 (the 2011 Program). The 2011 Program authorized the repurchase of up to $500
million of common stock in open market transactions over a two-year period. |
26
Item 6: Exhibits
|
|
|
Exhibit |
|
|
Number |
|
Description of Document |
10.30
|
|
Five Year Credit Agreement, dated July 28, 2011 among
Waters Corporation, JPMorgan Chase Bank, N.A., J.P. Morgan
Europe Limited and other Lenders party thereto.(1) |
|
|
|
31.1
|
|
Chief Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
31.2
|
|
Chief Financial Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
32.1 **
|
|
Chief Executive Officer Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
32.2 **
|
|
Chief Financial Officer Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
101 **
|
|
The following materials from Waters Corporations Quarterly
Report on Form 10-Q for the quarter ended October 1, 2011,
formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated
Statements of Operations, (iii) the Consolidated Statements
of Cash Flows, and (iv) Condensed Notes to Consolidated
Financial Statements. |
|
|
|
(1) |
|
Incorporated by reference to the Registrants Report on
Form 10-Q dated August 5, 2011 (File No. 001-14010). |
|
** |
|
This exhibit shall not be deemed filed for purposes of
Section 18 of the Exchange Act, or otherwise subject to the
liability of that section, nor shall it be deemed
incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Exchange Act,
whether made before or after the date hereof and
irrespective of any general incorporation language in any
filing, except to the extent the Company specifically
incorporates it by reference. |
27
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
Waters Corporation
|
|
|
/s/ WILLIAM J. CURRY
|
|
|
William J. Curry |
|
|
Vice President, Corporate Controller
and Principal Accounting Officer
(duly authorized and chief accounting officer) |
|
|
Date: November 4, 2011
28