01—Abstract
Summary
Summary of the 10-K filed February 27, 2015. Cited figures are marked; the original filing is the authoritative source.
Waters Corporation (NYSE: WAT) reported net sales of $1,989,344 thousanda for 2014, up from $1,904,218 thousand in 2013, and net income of $431,620 thousand, down from $450,003 thousand.
Diluted EPS was $5.07b compared with $5.20 in 2013. Sales growth was led by pharmaceutical customers, with the U.S. and Europe up in the mid-single digits and India up 18%. Sales in China were weaker, and foreign currency translation reduced sales by 2% across all products and services in both 2014 and 2013.
Gross margin was 58.5%, down from 58.9%, and operating income was flat at $517,908 thousandc versus $517,343 thousand. The company recorded a $15 million acquired in-process R&D charge, $6 million of severance costs, and a $5 million building impairment in 2014. Management expects foreign currency translation to have a significant negative effect on sales and gross profit in 2015.
The balance sheet shows $2,055,388 thousandd of cash, cash equivalents and investments, against $1,465,243 thousand of total debt, and $1,971 million of cash held by foreign subsidiaries. Operating cash flow was $511,648 thousand. The company repurchased $329 million of stock in 2014 and has $769 million remaining under its repurchase authorization.
It has not paid dividends in the past three fiscal years and does not plan to pay them in the immediate future. The company also repaid $100 million of senior unsecured notes at maturity in February 2015 using its revolving facility.
The CEO, Douglas A. Berthiaume, has announced his intention to retire, which the filing identifies as a succession-planning risk.
02—Key points
Key Highlights
- Net sales rose to $1,989,344 thousand in 2014 from $1,904,218 thousand in 2013, with growth led by pharmaceutical customers.
- Net income declined to $431,620 thousand from $450,003 thousand, and diluted EPS fell to $5.07 from $5.20.
- Gross profit as a percentage of sales was 58.5% in 2014, compared with 58.9% in 2013, and operating income was flat at $517,908 thousand.
- Cash, cash equivalents and investments totaled $2,055,388 thousand, while total debt was $1,465,243 thousand; $1,971 million of cash was held by foreign subsidiaries.
- Waters repurchased $329 million of common stock in 2014 and has $769 million remaining under its authorization. No dividends were paid.
- Management expects foreign currency translation to have a significant negative effect on sales and gross profit in 2015.
- The CEO has announced his intention to retire, and the filing lists succession planning as a risk factor.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Waters kept $0.22.
- Revenue$1.99B100.0%
- Cost of revenue−$824.9M41.5%
- Gross profit$1.16B58.5%
- Operating costs−$646.5M32.5%
- Operating income$517.9M26.0%
- Interest, other & tax−$86.3M4.3%
- Net income$431.6M21.7%
Where FY2014 revenue went
$1.99B- Cost of revenue: $824.9M, 41% of revenue
- SG&A: $512.7M, 26% of revenue
- Net income: $431.6M, 22% of revenue
- R&D: $107.7M, 5.4% of revenue
- Other operating costs: $26.1M, 1.3% of revenue
- Interest, other & tax: $86.3M, 4.3% of revenue
Kept 22% as net incomeOther operating costs $26.1M · 1.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 27, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $1.99B$1.90B | +4.5% |
| Cost of Revenue | $824.91M$783.46M | +5.3% |
| Gross Profit | $1.16B$1.12B | +3.9% |
| R&D Expenses | $107.73M$100.54M | +7.2% |
| SG&A Expenses | $512.71M$492.96M | +4.0% |
| Operating Expenses | $1.47B— | — |
| Operating Income | $517.91M$517.34M | +0.1% |
| Interest Expense | $34.19M$30.05M | +13.8% |
| Net Income | $431.62M$450.00M | −4.1% |
| EPS (Basic) | $5.12$5.27 | −2.8% |
| EPS (Diluted) | $5.07$5.20 | −2.5% |
| Shares Outstanding (Basic) | 84.36M85.43M | −1.3% |
| Shares Outstanding (Diluted) | 85.15M86.55M | −1.6% |
05—Questions
Frequently Asked Questions
How did Waters perform financially in 2014?
Net sales grew to $1,989,344 thousand from $1,904,218 thousand, but net income fell to $431,620 thousand from $450,003 thousand. Diluted EPS was $5.07, compared with $5.20 in 2013. Operating income was essentially flat at $517,908 thousand.
What drove sales growth and what held it back?
Sales growth was driven by strong demand from pharmaceutical customers, with sales to pharmaceutical customers up 8%. Sales grew 18% in India, while China slowed. Foreign currency translation reduced sales by 2% in both 2014 and 2013.
How strong is the company's cash and debt position?
At December 31, 2014, Waters held $2,055,388 thousand in cash, cash equivalents and investments and had $1,465,243 thousand of total debt. Most of the cash, $1,971 million, was held by foreign subsidiaries, which may face material tax effects on distribution to U.S. entities.
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 them in the immediate future. It repurchased $329 million of stock in 2014 and has $769 million remaining under its repurchase authorization.
What are the main risks flagged in the filing?
The filing highlights roughly 70% of net sales coming from outside the United States, currency fluctuations (the company said the strengthening U.S. dollar may have a significant negative impact), competitive pressure, debt covenants, and the planned CEO retirement.
06—Continue