01—Abstract
Summary
Summary of the 10-K filed February 29, 2008. Cited figures are marked; the original filing is the authoritative source.
Waters Corporation (WAT), an analytical instrument manufacturer, reported 2007 net sales of $1.47 billiona, up 15% from $1.28 billion in 2006, with net income of $268.1 million and diluted EPS of $2.62, up 23%.
Growth was driven by the Waters Division's ACQUITY UPLC instrument and Synapt HDMS system sales, chemistry consumables growth of 24%, and the TA Division's 27% sales growth. Operating income rose to $348.9 millionb from $295.2 million, though gross margin slipped to 57.2% from 58.1% due to new product costs and unfavorable currency effects on Irish and UK manufacturing. Operating cash flow was $370.5 million, up from $263.6 million.
The balance sheet carried $884.2 millionc of debt against $693.0 million of cash, cash equivalents and short-term investments at year-end 2007. The company repurchased $200.5 million of stock during 2007 under its February 2007 $500.0 million program, leaving $333.9 million authorized. Waters paid no dividends and does not plan to pay them in the foreseeable future.
The 10-K also discloses a $12.6 milliond one-time contribution to the employee investment plan tied to freezing U.S. pension accruals, and an ongoing patent dispute with Hewlett-Packard/Agilent in which a French court found the modified Alliance pump non-infringing, a ruling Agilent has appealed. The filing describes a company with about 68% of 2007 net sales outside the United States and a customer base where pharmaceutical and biotechnology accounts represent roughly 52% of sales. Management concluded that internal control over financial reporting was effective as of December 31, 2007, and PricewaterhouseCoopers audited that assessment.
02—Key points
Key Highlights
- Net sales rose 15% to $1,473.0 million in 2007, with Waters Division up 14% and TA Division up 27%.
- Diluted EPS of $2.62 in 2007, up 23% from $2.13 in 2006; net income of $268.1 million.
- Operating income increased to $348.9 million from $295.2 million, partly offset by a $12.6 million pension transition charge.
- Gross margin declined to 57.2% from 58.1%, attributed to new product manufacturing costs and unfavorable foreign currency effects.
- Debt of $884.2 million versus $693.0 million in cash, cash equivalents and short-term investments at December 31, 2007.
- Repurchased $200.5 million of common stock in 2007; $333.9 million remains authorized under the February 2007 program.
- Approximately 68% of 2007 net sales were outside the United States, and no dividends have been paid in the past three fiscal years.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2007, Waters kept $0.18.
- Revenue$1.47B100.0%
- Cost of revenue−$631.1M42.8%
- Gross profit$841.9M57.2%
- Operating costs−$493.0M33.5%
- Operating income$348.9M23.7%
- Interest, other & tax−$80.8M5.5%
- Net income$268.1M18.2%
Where FY2007 revenue went
$1.47B- Cost of revenue: $631.1M, 43% of revenue
- SG&A: $403.7M, 27% of revenue
- Net income: $268.1M, 18% of revenue
- R&D: $80.6M, 5.5% of revenue
- Other operating costs: $8.7M, 0.6% of revenue
- Interest, other & tax: $80.8M, 5.5% of revenue
Kept 18% as net incomeOther operating costs $8.7M · 0.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2007filed February 29, 2008Financial Statements
| Revenue | $1.47B |
| Cost of Revenue | $631.12M |
| Gross Profit | $841.93M |
| R&D Expenses | $80.65M |
| SG&A Expenses | $403.70M |
| Operating Income | $348.88M |
| Interest Expense | -$56.52M |
| Net Income | $268.07M |
| EPS (Basic) | $2.67 |
| EPS (Diluted) | $2.62 |
| Shares Outstanding (Basic) | 100.50M |
| Shares Outstanding (Diluted) | 102.50M |
05—Questions
Frequently Asked Questions
How did Waters perform financially in 2007?
Net sales were $1,473.0 million, up 15% from $1,280.2 million in 2006. Net income was $268.1 million, and diluted EPS was $2.62, up 23%. Operating cash flow increased to $370.5 million from $263.6 million.
What drove sales growth?
The filing attributes growth to new products, notably ACQUITY UPLC systems, the Synapt HDMS and Q-Tof Premier instruments, chemistry consumables (up 24%), acquisitions, and increased spending by pharmaceutical, industrial, government and academic customers. TA Division growth was helped by new products and the CSC and Thermometric acquisitions.
How much debt does Waters carry and how is it managed?
The company had approximately $884.2 million of debt at December 31, 2007, including $865.0 million borrowed under the January 2007 credit agreement. Two $50.0 million floating-to-fixed interest rate swaps maturing in 2009 hedge part of the term loan. Available borrowing capacity was $233.2 million.
Does Waters pay dividends or buy back stock?
Waters has not declared or paid dividends in its past three fiscal years and does not plan to in the foreseeable future. It repurchased 3.4 million shares for $200.5 million in 2007, with $333.9 million left under the February 2007 $500.0 million authorization.
What litigation risks are disclosed?
The company is involved in patent litigation with Hewlett-Packard and its successor Agilent over Alliance products. A French court held in December 2007 that modified Alliance pump features are non-infringing, and Agilent has appealed. A German appeal was heard in January 2008 with no decision yet, and provisions were recorded in 2002, 2004 and 2005.
06—Continue