01—Abstract
Summary
Summary of the 10-K filed February 24, 2021. Cited figures are marked; the original filing is the authoritative source.
Waters Corporation (WAT) reported net sales of $2.37 billiona for 2020, down from $2.41 billion in 2019, as COVID-19 disrupted customer demand in the first half of the year.
Sales in the second half of 2020 grew 7% over the prior year period, and the company said customers began resuming laboratory and manufacturing operations. Net income was $521.6 millionb, or $8.36 per diluted share, compared with $592.2 million, or $8.69 per diluted share, in 2019. Operating income was $645.5 million, down 9%, with the decline partly offset by about $103 million of cost-reduction actions that included salary reductions, furloughs and reduced non-essential spending.
The balance sheet shows $1.4 billionc of debt against $443 million of cash, cash equivalents and investments at year-end 2020. Net cash provided by operating activities rose to $790.5 million from $643.1 million, while stockholders' equity turned positive at $232.1 million from a deficit of $216.3 million a year earlier. The company repurchased only 0.8 million shares for $167 million in 2020, versus $2.5 billion in 2019, and has temporarily suspended repurchases.
Remaining transition tax liabilities under the 2017 Tax Act total $365 milliond, and the company announced acquisitions of Andrew Alliance for about $80 million and Integrated Software Solutions for $4 million. Management highlighted a new Chief Executive Officer, Dr. Udit Batra, who took office September 1, 2020, and an interim Chief Financial Officer, Michael F.
Silveira, effective January 1, 2021, after the prior CFO departed on December 31, 2020. The company stated that it cannot reasonably estimate the length or severity of the COVID-19 pandemic, and it notes that about 71% of net sales were generated outside the United States.
02—Key points
Key Highlights
- Net sales declined 2% to $2,365.4 million in 2020; sales fell 12% in the first half but rose 7% in the second half versus the prior year.
- Net income was $521.6 million, or $8.36 per diluted share, versus $592.2 million, or $8.69, in 2019.
- Operating income of $645.5 million fell 9%, partly offset by approximately $103 million of cost-reduction savings; the company recorded $27 million of severance-related costs.
- Net cash provided by operating activities increased to $790.5 million from $643.1 million, with inventory reduction and working capital improvements cited as drivers.
- Share repurchases dropped to $167 million in 2020 from $2.5 billion in 2019, and repurchases are temporarily suspended; $1.5 billion remains authorized through January 21, 2023.
- Total debt was $1.36 billion at year-end, with $443 million of cash, cash equivalents and investments, and $1.4 billion available under the credit agreement.
- Leadership changes included new CEO Dr. Udit Batra (effective September 1, 2020) and an interim CFO, Michael F. Silveira, after the prior CFO's departure at year-end 2020.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Waters kept $0.22.
- Revenue$2.37B100.0%
- Cost of revenue−$1.01B42.6%
- Gross profit$1.36B57.4%
- Operating costs−$713.2M30.2%
- Operating income$645.5M27.3%
- Interest, other & tax−$123.9M5.2%
- Net income$521.6M22.1%
Where FY2020 revenue went
$2.37B- Cost of revenue: $1.01B, 43% of revenue
- SG&A: $553.7M, 23% of revenue
- Net income: $521.6M, 22% of revenue
- R&D: $140.8M, 6.0% of revenue
- Other operating costs: $18.7M, 0.8% of revenue
- Interest, other & tax: $123.9M, 5.2% of revenue
Kept 22% as net incomeOther operating costs $18.7M · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 24, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $2.37B$2.41B | −1.7% |
| Cost of Revenue | $1.01B$1.01B | −0.4% |
| Gross Profit | $1.36B$1.40B | −2.7% |
| R&D Expenses | $140.78M$142.96M | −1.5% |
| SG&A Expenses | $553.70M$534.79M | +3.5% |
| Operating Expenses | $1.72B$1.70B | +1.3% |
| Operating Income | $645.49M$708.46M | −8.9% |
| Interest Expense | $49.07M$48.69M | +0.8% |
| Net Income | $521.57M$592.20M | −11.9% |
| EPS (Basic) | $8.40$8.76 | −4.1% |
| EPS (Diluted) | $8.36$8.69 | −3.8% |
| Shares Outstanding (Basic) | 62.09M67.63M | −8.2% |
| Shares Outstanding (Diluted) | 62.41M68.17M | −8.4% |
05—Questions
Frequently Asked Questions
How did COVID-19 affect Waters' 2020 results?
The filing states that the pandemic caused lower customer demand and disrupted business activities, which reduced net sales by 2% and was most pronounced in the first half of 2020, when sales declined 12%. Sales recovered in the second half, growing 7% over the prior-year period, and the company took cost-reduction actions to protect liquidity.
Did Waters' balance sheet and cash position improve in 2020?
Stockholders' equity moved to $232.1 million from a deficit of $216.3 million at the end of 2019. Cash, cash equivalents and investments rose to $443.1 million from $337.1 million, and operating cash flow increased to $790.5 million, although total debt remained at $1.36 billion.
What is Waters' capital return policy now?
The company has not declared or paid dividends in the past three fiscal years and does not intend to pay cash dividends in the foreseeable future. It repurchased $167 million of stock in 2020 but has temporarily suspended share repurchases due to COVID-19 uncertainty, while $1.5 billion remains authorized.
What tax obligations does Waters face going forward?
The company has estimated remaining transition tax liabilities of $365 million under the 2017 Tax Act, with about $38 million to be paid annually over the next two years and the final 60% due in a three-year period beginning in 2023. It also notes a Singapore tax exemption through March 2021 and a new Singapore incentive providing a 5% rate from April 2021 through March 2026.
What acquisitions did Waters complete in 2020?
Waters acquired Andrew Alliance, a laboratory workflow automation company, in January 2020 for about $80 million net of cash acquired, and Integrated Software Solutions, a clinical laboratory software provider, in December 2020 for $4 million net of cash acquired. The company said neither acquisition had a material effect on 2020 sales and expenses.
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