01—Abstract
Summary
Summary of the 10-K filed February 26, 2010. Cited figures are marked; the original filing is the authoritative source.
Waters Corporation's 2009 results reflected the global economic recession.
Net sales were $1,498.7 milliona, down from $1,575.1 million in 2008, a decline of 5%. Instrument system sales fell, with Waters instrument system sales down 9% and TA Division sales down 11%, while recurring chemistry consumables and service sales were more resilient, and service sales rose 3% to $446.7 million. Operating income was $394.6 million versus $389.8 million, helped by higher gross margin (60.3% of sales versus 58.0%), tighter discretionary spending, and a weaker British pound.
Net income was $323.3 millionb, and diluted EPS was $3.34 compared with $3.21 in 2008. The balance sheet and cash position remained solid. Cash, cash equivalents and short-term investments totaled $630.3 million at December 31, 2009, against $632 million of debt, and the company had $479 million of additional borrowing capacity under its credit facilities.
Operating cash flow was $418.3 millionc, flat with 2008. Waters repurchased 4.5 million shares for $210 million during 2009 and has $343 million remaining under its February 2009 $500 million authorization.
In February 2010 it issued $100 milliond of 3.75% five-year senior unsecured notes, and it expected to issue $100 million of 5.00% ten-year notes in early March 2010. Key risks disclosed include weak customer capital spending, competition from Agilent's UHPLC system and the Danaher/Life Technologies and Agilent/Varian transactions, about 69% of 2009 net sales generated outside the United States, and ongoing patent litigation with Agilent and a securities class action (the Dearborn Heights case) that the company intends to defend vigorously.
02—Key points
Key Highlights
- Net sales of $1,498.7 million, down 5% from $1,575.1 million in 2008, with instrument system sales weakening due to lower customer capital spending during the global recession.
- Diluted EPS of $3.34 versus $3.21 in 2008; operating income rose to $394.6 million from $389.8 million, supported by gross margin of 60.3% of sales versus 58.0%.
- Service sales grew 3% to $446.7 million, while Waters Division chemistry consumables were comparable to 2008, providing recurring revenue stability.
- Cash, cash equivalents and short-term investments of $630.3 million against $632 million of debt; $479 million of additional borrowing capacity under existing credit facilities.
- Operating cash flow of $418.3 million in 2009, consistent with 2008, and $210 million of share repurchases during 2009, with $343 million remaining under the February 2009 authorization.
- February 2010 issuance of $100 million of 3.75% five-year senior unsecured notes, with a planned $100 million of 5.00% ten-year notes in early March 2010, to repay other debt and for general corporate purposes.
- Ongoing Agilent patent litigation in France and Germany, with a $7 million provision recorded in 2008 and a $6 million payment made in early 2009, plus a federal securities class action (City of Dearborn Heights) that the company intends to defend vigorously.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Waters kept $0.22.
- Revenue$1.50B100.0%
- Cost of revenue−$594.9M39.7%
- Gross profit$903.8M60.3%
- Operating costs−$509.2M34.0%
- Operating income$394.6M26.3%
- Interest, other & tax−$71.3M4.8%
- Net income$323.3M21.6%
Where FY2009 revenue went
$1.50B- Cost of revenue: $594.9M, 40% of revenue
- SG&A: $421.4M, 28% of revenue
- Net income: $323.3M, 22% of revenue
- R&D: $77.2M, 5.1% of revenue
- Other operating costs: $10.7M, 0.7% of revenue
- Interest, other & tax: $71.3M, 4.8% of revenue
Kept 22% as net incomeOther operating costs $10.7M · 0.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 26, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $1.50B$1.58B | −4.9% |
| Cost of Revenue | $594.88M$661.27M | −10.0% |
| Gross Profit | $903.82M$913.86M | −1.1% |
| R&D Expenses | $77.15M$81.59M | −5.4% |
| SG&A Expenses | $421.40M$426.70M | −1.2% |
| Operating Income | $394.60M$389.75M | +1.2% |
| Interest Expense | $10.99M$38.52M | −71.5% |
| Net Income | $323.31M$322.48M | +0.3% |
| EPS (Basic) | $3.37$3.25 | +3.7% |
| EPS (Diluted) | $3.34$3.21 | +4.0% |
| Shares Outstanding (Basic) | 95.80M99.20M | −3.4% |
| Shares Outstanding (Diluted) | 96.86M100.56M | −3.7% |
05—Questions
Frequently Asked Questions
How did Waters perform in 2009 compared with 2008?
Net sales declined 5% to $1,498.7 million from $1,575.1 million, mainly due to lower instrument system spending by customers during the global recession and a 2% negative effect from foreign currency translation. Operating income increased slightly to $394.6 million, and net income was $323.3 million, or $3.34 per diluted share, compared with $322.5 million, or $3.21 per diluted share, in 2008.
Which parts of the business held up during the downturn?
Recurring revenue held up better than instrument sales. Service sales rose 3% to $446.7 million, supported by service plans and a larger installed base, and Waters Division chemistry consumables were comparable to 2008. By contrast, Waters instrument system sales fell 9% and TA Division sales fell 11%, with TA instrument system sales down 15%.
How strong is Waters' balance sheet and liquidity?
At December 31, 2009, the company had $630.3 million in cash, cash equivalents and short-term investments and about $632 million in debt, including $500 million of long-term debt. It also had $479 million available under its credit facilities. Management stated that its cash position and expected operating cash flow would be sufficient for at least the next twelve months. Most of its debt is in the U.S., while most of its cash is generated abroad.
What are the main risks flagged in the filing?
Key risks include weak customer capital spending and global economic conditions, intense competition (including Agilent's UHPLC product and the pending Danaher and Agilent transactions involving competitors' mass spectrometry and Varian businesses), foreign exchange exposure with about 69% of 2009 net sales outside the U.S., reliance on single-source suppliers and outside contractors, and ongoing patent litigation with Agilent and a federal securities class action.
Does Waters pay dividends or buy back stock?
Waters has not paid dividends in the past three fiscal years and does not plan to pay dividends in the foreseeable future. It has actively repurchased stock, buying 4.5 million shares for $210 million in 2009 under the February 2009 program and prior programs, and has $343 million remaining authorized under the February 2009 $500 million program.
06—Continue