01—Abstract
Summary
Summary of the 10-K filed February 26, 2016. Cited figures are marked; the original filing is the authoritative source.
Waters Corporation (NYSE: WAT) reported net sales of $2.04 billiona for 2015, up 3% from $1.99 billion in 2014, with foreign currency translation reducing sales growth by 6%.
Operating income rose 10% to $567 millionb, and net income was $469.1 million, or $5.65 per diluted share, compared with $5.07 in 2014. The company operates two segments, the Waters Division (LC, LC-MS and chemistry consumables, plus services) and the TA Division (thermal analysis, rheometry and calorimetry), which are aggregated into one reporting segment. Management attributed the year's results to strong demand from life science, industrial chemical, nutritional safety and environmental customers, with double-digit growth in the U.S., China and India offset by declines in Europe, Japan and the rest of the world as a result of the stronger U.S. dollar.
Cash flow and liquidity remained solid. Net cash from operating activities was $560 millionc, and cash, cash equivalents and investments totaled $2.40 billion at year-end, of which $2.35 billion was held by foreign subsidiaries. Total debt was $1.67 billion, and the company had $428 million of additional borrowing capacity under its credit facility.
The company repurchased $327 milliond of common stock in 2015 and has $441 million remaining under its May 2014 authorization. It did not pay dividends and does not plan to in the immediate future.
The filing also notes that the company made several small acquisitions in 2015, including MPE, ElectroForce and a Malaysian distributor, which management does not expect to have a significant impact on 2016 sales or profits. The company expects foreign currency translation may negatively affect sales and gross profit in 2016.
02—Key points
Key Highlights
- Net sales rose 3% to $2,042.3 million in 2015; foreign currency translation reduced sales growth by 6%.
- Operating income increased 10% to $567.5 million, with operating margin of 27.8% of sales, up from 26.0% in 2014.
- Net income was $469.1 million, or $5.65 per diluted share, up from $5.07 in 2014; the filing notes foreign currency translation decreased diluted EPS by $0.59 in 2015.
- Sales in Europe declined 8% and Japan declined 11%, while U.S. sales grew 10% and China grew 17%.
- Operating cash flow was $560.3 million; cash, cash equivalents and investments were $2.40 billion, with $2.35 billion held by foreign subsidiaries.
- Total debt was $1.67 billion at year-end, and $428 million was available under the credit facility; the revolving commitment was increased to $1.3 billion and extended to April 2020.
- The company repurchased $327 million of common stock in 2015 and has $441 million remaining under its May 2014 authorization; no dividends were paid.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Waters kept $0.23.
- Revenue$2.04B100.0%
- Cost of revenue−$842.7M41.3%
- Gross profit$1.20B58.7%
- Operating costs−$632.2M31.0%
- Operating income$567.5M27.8%
- Interest, other & tax−$98.4M4.8%
- Net income$469.1M23.0%
Where FY2015 revenue went
$2.04B- Cost of revenue: $842.7M, 41% of revenue
- SG&A: $495.7M, 24% of revenue
- Net income: $469.1M, 23% of revenue
- R&D: $118.5M, 5.8% of revenue
- Other operating costs: $17.9M, 0.9% of revenue
- Interest, other & tax: $98.4M, 4.8% of revenue
Kept 23% as net incomeOther operating costs $17.9M · 0.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 26, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $2.04B$1.99B | +2.7% |
| Cost of Revenue | $842.67M$824.91M | +2.2% |
| Gross Profit | $1.20B$1.16B | +3.0% |
| R&D Expenses | $118.55M$107.73M | +10.0% |
| SG&A Expenses | $495.75M$512.71M | −3.3% |
| Operating Expenses | $1.47B$1.47B | +0.2% |
| Operating Income | $567.45M$517.91M | +9.6% |
| Interest Expense | $36.24M$34.19M | +6.0% |
| Net Income | $469.05M$431.62M | +8.7% |
| EPS (Basic) | $5.70$5.12 | +11.3% |
| EPS (Diluted) | $5.65$5.07 | +11.4% |
| Shares Outstanding (Basic) | 82.34M84.36M | −2.4% |
| Shares Outstanding (Diluted) | 83.09M85.15M | −2.4% |
05—Questions
Frequently Asked Questions
What drove Waters' revenue growth in 2015?
Net sales increased 3% to $2,042.3 million. The filing attributes the growth to strong demand for LC and LC-MS instrument systems, including HPLC, UPLC, QDa and the newly introduced ACQUITY Arc, as well as to higher service sales. Foreign currency translation reduced growth by 6%.
How did currency affect Waters' results?
The filing states that the stronger U.S. dollar significantly affected performance. Foreign currency translation reduced sales growth by 6% and decreased operating income by $56 million. It also reduced net income per diluted share by $0.59. The company expects currency translation may negatively affect sales and gross profit in 2016.
What is Waters' capital return policy?
Waters repurchased $327 million of common stock in 2015 under its authorizations and has $441 million remaining under the May 2014 plan. The company has not declared or paid dividends in the past three fiscal years and does not plan to pay dividends in the immediate future. The company plans to continue its share repurchase program in 2016.
How strong is Waters' balance sheet and liquidity?
At December 31, 2015, the company had $1.67 billion of total debt and $2.40 billion of cash, cash equivalents and investments. Most of its cash is held by foreign subsidiaries, and the filing notes that the company must maintain sufficient U.S. cash flow to service debt and fund operations and repurchases. The company was in compliance with all debt covenants.
Are there any notable legal or regulatory items?
The company recorded $4 million of litigation settlement provisions in 2015. It also received notice from the EPA of a $0.4 million fine for violations at its Taunton, Massachusetts facility, which it has appealed. The company estimates remediation capital expenditures of less than $2 million and considers the fine and remediation not material.
06—Continue