01—Abstract
Summary
Summary of the 10-K filed February 24, 2022. Cited figures are marked; the original filing is the authoritative source.
Waters Corporation reported a strong 2021, with net sales rising 18% to $2.79 billiona from $2.37 billion in 2020, driven by customers resuming laboratory and manufacturing operations after the COVID-19 slowdown.
Instrument system sales increased 23%, recurring revenues (consumables and services) rose 13%, and net income grew 33% to $692.8 millionb, or $11.17 per diluted share. Operating income was $821.7 million, a 29.5% operating margin, up from 27.3% in 2020. Pharmaceutical customers accounted for 60% of net sales and the company operates in over 35 countries, with 72% of 2021 sales outside the United States.
Cash generation was solid at $747 millionc of operating cash flow, though it declined from $791 million in 2020 as cost reductions from 2020 were reinstated. The company ended 2021 with $1.5 billion of debt and $569 million of cash, cash equivalents and investments. It repurchased $640 million of common stock during 2021 and had $885 million of authorization remaining, and it did not pay dividends.
Stockholders' equity was $367.6 milliond, reflecting cumulative buybacks, and the company has $327 million of remaining transition tax liabilities under the 2017 Tax Act to pay through 2025. Risk factors highlighted by the filing include ongoing COVID-19 uncertainty, foreign currency exposure, supply chain and logistics pressures, reliance on single-source components and outside contractors, intense competition, and cybersecurity. The company's effective tax rate was 14.1% in 2021, aided by Singapore's concessionary 5% rate through March 2026.
02—Key points
Key Highlights
- Net sales increased 18% to $2.79 billion in 2021, with Waters instrument systems up 22% and TA instrument systems up 29%.
- Operating income rose 27% to $821.7 million, and operating margin improved to 29.5% from 27.3% in 2020.
- Net income increased 33% to $692.8 million, with diluted EPS of $11.17 versus $8.36 in 2020.
- Operating cash flow was $747 million in 2021, down from $791 million in 2020, as 2020 cost reductions were reinstated and inventory rose.
- The company repurchased $640 million of common stock in 2021 and had $885 million of authorization remaining; no cash dividends were paid.
- Total debt was $1.5 billion at year-end 2021, against $569 million of cash, cash equivalents and investments, with $1.6 billion of additional borrowing capacity under the credit facility.
- Pharmaceutical customers represented 60% of 2021 net sales, and 72% of net sales came from outside the United States.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Waters kept $0.25.
- Revenue$2.79B100.0%
- Cost of revenue−$1.16B41.5%
- Gross profit$1.63B58.5%
- Operating costs−$807.6M29.0%
- Operating income$821.7M29.5%
- Interest, other & tax−$128.9M4.6%
- Net income$692.8M24.9%
Where FY2021 revenue went
$2.79B- Cost of revenue: $1.16B, 42% of revenue
- Net income: $692.8M, 25% of revenue
- SG&A: $627.0M, 23% of revenue
- R&D: $168.4M, 6.0% of revenue
- Interest, other & tax: $128.9M, 4.6% of revenue
Kept 25% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 24, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $2.79B$2.37B | +17.8% |
| Cost of Revenue | $1.16B$1.01B | +14.9% |
| Gross Profit | $1.63B$1.36B | +19.9% |
| R&D Expenses | $168.36M$140.78M | +19.6% |
| SG&A Expenses | $626.97M$553.70M | +13.2% |
| Operating Expenses | $1.96B$1.72B | +14.2% |
| Operating Income | $821.71M$645.49M | +27.3% |
| Interest Expense | $44.94M$49.07M | −8.4% |
| Net Income | $692.84M$521.57M | +32.8% |
| EPS (Basic) | $11.25$8.40 | +33.9% |
| EPS (Diluted) | $11.17$8.36 | +33.6% |
| Shares Outstanding (Basic) | 61.58M62.09M | −0.8% |
| Shares Outstanding (Diluted) | 62.03M62.41M | −0.6% |
05—Questions
Frequently Asked Questions
What drove Waters' revenue growth in 2021?
The filing attributes the 18% increase in net sales to customers resuming laboratory and manufacturing operations after 2020 COVID-19 disruptions, plus pent-up demand. Instrument system sales rose 23%, recurring revenues rose 13%, and foreign currency translation added 2% to sales.
How did cash flow and capital allocation look in 2021?
Net cash provided by operating activities was $747 million, compared with $791 million in 2020. The company spent $161 million on capital expenditures, repurchased $640 million of stock, and made net debt borrowings of $160 million.
What are the main risks to the business according to the filing?
Key risks include the continuing COVID-19 pandemic, foreign currency fluctuations (72% of sales were outside the U.S.), tariff and trade regulation changes, supply chain disruption and reliance on limited or single sources, competition from more diversified rivals, and cybersecurity threats.
What tax obligations and tax benefits affect the company?
The company's effective tax rate was 14.1% in 2021. It has $327 million of remaining transition tax liabilities under the 2017 Tax Act, payable in installments through 2025, and a Singapore concessionary 5% tax rate for April 2021 through March 2026 that added $20 million to 2021 net income.
06—Continue