01—Abstract
Summary
Summary of the 10-K filed February 25, 2011. Cited figures are marked; the original filing is the authoritative source.
Waters Corporation (NYSE: WAT) reported net sales of $1.64 billiona for 2010, up from $1.50 billion in 2009, with sales increasing 10% year over year.
Operating income rose to $450 millionb from $395 million, and net income was $381.8 million, or $4.06 per diluted share, compared with $3.34 in 2009. Growth was driven by higher demand as global economic conditions improved, new product introductions including the ACQUITY UPLC H-Class, SYNAPT G2 and Xevo Q-Tof systems, and stronger pharmaceutical and industrial spending. Waters Division sales rose 9% and TA Division sales rose 17%.
Sales increased 21% in Asia, while Europe was flat. Cash flow from operations was $458 millionc, up from $418 million. The company ended 2010 with $766 million in total debt and $946 million in cash, cash equivalents and short-term investments.
In 2010 it issued $100 milliond of 3.75% five-year notes and $100 million of 5.00% ten-year notes. The $500 million term loan under the 2007 Credit Agreement, which expires in January 2012, is to be refinanced, and $555 million was outstanding at year end. The Board authorized an additional $500 million share repurchase program in February 2011, and the company repurchased $292 million of stock in 2010.
No dividends were paid. Key risks include exposure to global economic conditions and customer capital spending, with about 70% of 2010 net sales generated outside the United States. The company also faces competition from larger diversified instrument makers, a scheduled increase in its Irish statutory tax rate to 12.5% in 2011 from 10%, and ongoing patent litigation with Agilent Technologies in France and Germany.
The company recorded a $7 million provision for the French case in 2008. The securities class action filed in 2008 was dismissed, and the dismissal was affirmed on appeal in January 2011.
02—Key points
Key Highlights
- Net sales rose 10% to $1.64 billion in 2010, from $1.50 billion in 2009, driven by instrument systems (up 12%) and chemistry consumables and services (up 7%).
- Net income per diluted share was $4.06 in 2010, versus $3.34 in 2009; operating income increased to $450 million from $395 million.
- Gross margin was 60.2% in 2010, versus 60.3% in 2009.
- Operating cash flow was $458 million in 2010, versus $418 million in 2009.
- Total debt was $766 million and cash, cash equivalents and short-term investments were $946 million at December 31, 2010.
- The Board authorized an additional $500 million share repurchase program in February 2011, and the company repurchased $292 million of stock in 2010.
- The 2007 Credit Agreement, with $555 million outstanding, expires in January 2012, and the company anticipates refinancing it at market rates.
03—One dollar
Where FY2010 revenue went
$1.64B- Cost of revenue: $653.3M, 40% of revenue
- Operating income: $449.9M, 27% of revenue
- SG&A: $445.5M, 27% of revenue
- R&D: $84.3M, 5.1% of revenue
- Other operating costs: $10.4M, 0.6% of revenue
Kept 27% as operating incomeOther operating costs $10.4M · 0.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 25, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $1.64B$1.50B | +9.7% |
| Cost of Revenue | $653.30M$594.88M | +9.8% |
| Gross Profit | $990.07M$903.82M | +9.5% |
| R&D Expenses | $84.27M$77.15M | +9.2% |
| SG&A Expenses | $445.46M$421.40M | +5.7% |
| Operating Income | $449.93M$394.60M | +14.0% |
| Interest Expense | $13.92M$10.99M | +26.7% |
| EPS (Basic) | $4.13$3.37 | +22.6% |
| EPS (Diluted) | $4.06$3.34 | +21.6% |
| Shares Outstanding (Basic) | 92.39M95.80M | −3.6% |
| Shares Outstanding (Diluted) | 94.06M96.86M | −2.9% |
05—Questions
Frequently Asked Questions
What drove the increase in Waters' 2010 sales?
The filing attributes the 10% sales increase to higher customer demand from improving global economic conditions, new product introductions including the ACQUITY UPLC H-Class, SYNAPT G2 and Xevo Q-Tof systems, and increased pharmaceutical and industrial spending on LC, MS and TA products. Sales rose 21% in Asia, including Japan, and were flat in Europe.
How is Waters funding its share repurchases and debt obligations?
The company cites cash flow from operations, cash and short-term investments of $946 million, and borrowing capacity of $543 million under committed credit facilities. It issued $200 million of senior unsecured notes in 2010 and plans to refinance the 2007 Credit Agreement, which had $555 million outstanding at December 31, 2010.
What are the main risks identified in the filing?
Key risks include global economic conditions and customer capital spending, foreign exchange exposure with about 70% of 2010 net sales outside the United States, competition from larger diversified instrument makers, an increase in the Irish statutory tax rate to 12.5% in 2011 from 10%, and ongoing patent litigation with Agilent Technologies in France and Germany.
Does Waters pay dividends?
No. The filing states that the company has not declared or paid any dividends on its common stock in the past three fiscal years and does not plan to pay dividends in the foreseeable future.
06—Continue