Waters Corporation Reports Third Quarter 2009 Results

Through the first nine months of 2009, sales for the Company were $1,070 million, a decrease of 8% in comparison to sales of $1,157 million in the first nine months of 2008. Foreign currency translation contributed negatively to sales growth during the first nine months of 2009 and reduced sales by 4%. E.P.S. for the first nine months of 2009 were $2.26 compared to $2.21 for the comparable period in 2008. On a non-GAAP basis and including adjustments on the attached reconciliation, E.P.S grew 4% in the first nine months of 2009 to $2.33 from $2.24 in 2008.

Commenting on the quarter, Douglas Berthiaume, Chairman, President and Chief Executive Officer said, "Business trends in the third quarter suggest a stabilization of demand by our major end markets. Customer interest in our new products is encouraging and indicates that research-related spending may benefit our future results. Additionally, our focus on expense and balance sheet management is reflected in the third quarter's financial results, including excellent cash flow generation in the quarter."

As communicated in a prior press release, Waters Corporation will webcast its third quarter 2009 financial results conference call this morning, October 27, 2009 at 8:30 a.m. eastern time. To listen to the call, connect to www.waters.com, choose "Investor" and click on the Live Webcast. A replay of the call will be available through November 3, 2009, similarly by webcast and also by phone at 203-369-1708.

About Waters Corporation:

Waters Corporation creates business advantage for laboratory-dependent organizations by delivering practical and sustainable innovation to enable significant advancements in such areas as healthcare delivery, environmental management, food safety, and water quality worldwide.

Pioneering a connected portfolio of separations science, laboratory information management, mass spectrometry and thermal analysis, Waters technology breakthroughs and laboratory solutions provide an enduring platform for customer success.

With revenue of $1.58 billion in 2008 and 5,000 employees, Waters is driving scientific discovery and operational excellence for customers worldwide.

CAUTIONARY STATEMENT

This release may contain "forward-looking" statements regarding future results and events, including statements regarding expected financial results, future growth and customer demand that involve a number of risks and uncertainties. For this purpose, any statements that are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words, "believes", "anticipates", "plans", "expects", "intends", "appears", "estimates", "projects", and similar expressions are intended to identify forward-looking statements. The Company's actual future results may differ significantly from the results discussed in the forward-looking statements within this release for a variety of reasons, including and without limitation, the impact on demand among the Company's various market sectors from current economic difficulties and possible recession; the impact of changes in accounting principles and practices or tax rates; shifts in taxable income in jurisdictions with different effective tax rates; the ability to access capital in volatile market conditions; the ability to successfully integrate acquired businesses; fluctuations in capital expenditures by the Company's customers, in particular large pharmaceutical companies; regulatory and/or administrative obstacles to the timely completion of purchase order documentation; introduction of competing products by other companies and loss of market share; pressures on prices from competitors and/or customers; regulatory obstacles to new product introductions; lack of acceptance of new products; other changes in the demands of the Company's healthcare and pharmaceutical company customers; changes in distribution of the Company's products; risks associated with lawsuits and other legal actions, particularly involving claims for infringement of patents and other intellectual property rights; and foreign exchange rate fluctuations potentially affecting translation of the Company's future non-U.S. operating results. Such factors and others are discussed more fully in the section entitled "Risk Factors" of the Company's annual report on Form 10-K for the year ended December 31, 2008 and quarterly report on Form 10-Q for the period ended July 4, 2009 as filed with the Securities and Exchange Commission, which "Risk Factors" discussion is incorporated by reference in this release. The forward-looking statements included in this release represent the Company's estimates or views as of the date of this release report and should not be relied upon as representing the Company's estimates or views as of any date subsequent to the date of this release.

Waters Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
                                                                  (Unaudited)                          (Unaudited)
                                                                  Three Months Ended                   Nine Months Ended
                                                                  October 3, 2009  September 27, 2008  October 3, 2009    September 27, 2008
Net sales                                                         $     373,963    $      386,310      $     1,069,852    $      1,156,793
Cost of sales (1) (5)                                                   153,143           158,520            424,751             489,203
Gross profit                                                            220,820           227,790            645,101             667,590
Selling and administrative expenses (1) (2) (3)                         102,675           107,463            311,417             325,235
Research and development expenses                                       19,310            19,946             57,364              61,960
Purchased intangibles amortization                                      2,723             2,349              8,022               6,973
Operating income                                                        96,112            98,032             268,298             273,422
Interest expense, net                                                   (2,079  )         (4,542  )          (6,355    )         (13,641   )
Income from operations before income taxes                              94,033            93,490             261,943             259,781
Provision for income taxes (4) (5)                                      18,097            21,987             42,753              36,655
Net income                                                        $     75,936     $      71,503       $     219,190      $      223,126
Net income per basic common share                                 $     0.80       $      0.72         $     2.28         $      2.24
Weighted-average number of basic common shares                          95,235            98,891             96,215              99,611
Net income per diluted common share                               $     0.79       $      0.71         $     2.26         $      2.21
Weighted-average number of diluted common shares and equivalents        96,513            100,566            97,027              101,150
(1) Included in selling and administrative expenses for the nine
months ended October 3, 2009 are restructuring and other incremental
costs of $1.0 million related to cost reduction plans. Included in
cost of sales for the three and nine months ended September 27, 2008
are restructuring and other incremental costs of $1.2 million
related to cost reduction plans.
(2) Included in selling and administrative expenses for the nine
months ended October 3, 2009 are lease termination costs and other
incremental related costs of $5.9 million.
(3) Included in selling and administrative expenses for the nine
months ended October 3, 2009 are acquisition and other related costs
of $1.3 million related to recent acquisitions.
(4) Included in the provision for income taxes for the three and
nine months ended September 27, 2008 is a one-time charge of $5.1
million related to restructuring certain legal entities. During the
nine months ended October 3, 2009, $4.6 million of this charge was
reversed as a result of changes in income tax regulations
promulgated by the U.S. Treasury in February 2009.
(5) During the second quarter of 2008, the Company identified errors
originating in periods prior to the quarter ended June 28, 2008. The
errors primarily relate to (i) an overstatement of the Company's
income tax expense of $16.3 million as a result of errors in
recording its income tax provision in prior periods and (ii) an
understatement of amortization expense of $8.7 million for certain
capitalized software. The Company incorrectly calculated its
provision for income taxes by tax-effecting a deferred tax liability
utilizing a U.S. tax rate of 35% instead of an Irish tax rate of
10%. In addition, the Company incorrectly accounted for Irish-based
capitalized software and the related amortization expense as a U.S.
Dollar-denominated asset instead of Euro-denominated asset resulting
in an understatement of amortization expense and cumulative
translation adjustment. The correction of these errors is included
in cost of sales and in the provision for income taxes for the nine
months ended September 27, 2008.

Waters Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
                                                                    (Unaudited)                           (Unaudited)
                                                                    Three Months Ended                    Nine Months Ended
                                                                    October 3, 2009  September 27, 2008   October 3, 2009 September 27, 2008
Reconciliation of net income per diluted share, in accordance with
generally accepted accounting principles, with adjusted results:
Net income per diluted share                                        $       0.79     $         0.71       $     2.26      $      2.21
Adjustment for purchased intangibles amortization, net of tax               1,960              1,639            5,787            4,917
Net income per diluted share effect                                         0.02               0.02             0.06             0.05
Adjustment for restructuring, net of tax                                    -                  761              643              761
Net income per diluted share effect                                         -                  0.01             0.01             0.01
Adjustment for lease termination costs, net of tax                          -                  -                3,723            -
Net income per diluted share effect                                         -                  -                0.04             -
Adjustment for acquisition related costs, net of tax                        -                  -                1,078            -
Net income per diluted share effect                                         -                  -                0.01             -
Adjustment for tax impact of restructuring certain legal entities           -                  5,083            (4,555 )         5,083
Net income per diluted share effect                                         -                  0.05             (0.05  )         0.05
Adjustment for out-of-period errors as described above, net of tax          -                  -                -                (7,612 )
Net income per diluted share effect                                         -                  -                -                (0.08  )
Adjusted net income per diluted share                               $       0.81     $         0.79       $     2.33      $      2.24
The adjusted net income per diluted share presented above is used by
the management of the Company to measure operating performance with
prior periods and is not in accordance with generally accepted
accounting principles (GAAP). The above reconciliation identifies
items management has excluded as non-operational transactions.
Management has excluded the purchased intangibles amortization, the
restructuring charge, the lease termination costs, the acquisition
related costs, the tax impact of restructuring certain legal
entities and the adjustment for out-of-period errors and the related
tax effects from its non-GAAP adjusted amounts since management
believes that these items are not directly related to ongoing
operations, thereby providing investors with information that helps
to compare ongoing operating performance.

Waters Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands and unaudited)
                                                            October 3, 2009  December 31, 2008
Cash, cash equivalents and short-term investments           578,148          428,522
Accounts receivable                                         289,650          291,763
Inventories                                                 197,088          173,051
Other current assets                                        56,961           62,966
Total current assets                                        1,121,847        956,302
Property, plant and equipment, net                          209,172          171,588
Other assets                                                554,542          495,008
Total assets                                                1,885,561        1,622,898
Notes payable and debt                                      144,650          36,120
Accounts payable and accrued expenses                       287,564          253,386
Total current liabilities                                   432,214          289,506
Long-term debt                                              500,000          500,000
Other long-term liabilities                                 172,689          172,387
Total liabilities                                           1,104,903        961,893
Total equity                                                780,658          661,005
Total liabilities and equity                                1,885,561        1,622,898

SOURCE: Waters Corporation

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