Waters Annual Report, Year Ended Dec 31, 2013

Waters Corporation's 2013 Form 10-K reports net sales of $1.90 billion^a, up 3% from $1.84 billion in 2012, with net income of $450.0 million, or $5.20 per diluted share, compared with $461.4 million, or $5.19 per diluted share, in 2012.

Growth came mainly from instrument systems, which benefited from higher-end mass spectrometry, core chromatography and TA instrument demand, plus new products such as the ACQUITY UPC2 system, APC system and QDa Detector. Chemistry consumables and services grew 4%, while instrument system sales grew 2%. Net income declined 2% because of lower operating and tax benefits in the comparison, though the 2013 results include a $31 million^b net tax benefit from completed tax audit examinations.

Operating income rose 1% to $517.3 million^c, and gross margin fell to 58.9% from 60.0%, partly due to amortization of the UNIFI software platform. Cash flow and balance sheet data show net cash from operations of $485 million, capital expenditures of $118 million, and $1.80 billion in cash, cash equivalents and investments, of which $1.74 billion was held by foreign subsidiaries. Total debt was $1.32 billion, and the company repurchased $295 million of stock during 2013 under a $750 million two-year authorization from May 2012.

The company made several small acquisitions in 2013 and January 2014 and completed a new $78 million^d facility in Wilmslow, England. Management disclosed that CEO Douglas Berthiaume intends to retire by the end of 2015 and that CFO Eugene Cassis became interim CFO effective February 1, 2014, after the former CFO resigned.

The company reports approximately 52% of 2013 sales to pharmaceutical accounts and about 71% of net sales outside the United States. Its principal risks include global economic conditions, customer capital spending timing, foreign currency exposure to the Euro, yen and pound, reliance on single-source suppliers, and the tax and cash-repatriation effects of holding most of its cash overseas.