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| WAT > SEC Filings for WAT > Form 10-Q on 8-May-2009 | All Recent SEC Filings |
8-May-2009
Quarterly Report
diluted share and decreased the Company's effective tax rate by 5.5 percentage
points for the three months ended April 4, 2009.
Net income per diluted share was $0.75 and $0.67 in the 2009 Quarter and 2008
Quarter, respectively. Although sales declined 10%, net income per diluted share
grew at a rate of 12% in the 2009 Quarter over the 2008 Quarter. This net income
per share growth is primarily attributed to the net favorable effect of foreign
currency translation; leverage from the Company's stock buyback programs; cost
reduction programs targeted to reduce manufacturing and operating expenses;
lower net interest expense and a lower effective tax rate.
Net cash provided by operating activities was $81 million and $96 million in
the 2009 Quarter and 2008 Quarter, respectively. The $15 million decrease is
primarily a result of lower cash collections from customers due to the decrease
in sales in the 2009 Quarter compared to the 2008 Quarter and the $6 million
litigation payment that was expensed in 2008, offset by higher net income.
Within cash flows used in investing activities, capital expenditures related
to property, plant, equipment and software capitalization were $22 million and
$14 million in the 2009 Quarter and 2008 Quarter, respectively. This increase in
capital expenditures is primarily attributed to the construction of a new TA
facility. In February 2009, the Company acquired Thar for $36 million in cash.
Within cash flows used in financing activities, the Company received
$1 million and $13 million of proceeds from stock plans in the 2009 Quarter and
2008 Quarter, respectively. The fluctuations in these amounts are primarily
attributed to the change in the Company stock price and the expiration of stock
option grants. In February 2009, the Company's Board of Directors authorized the
Company to repurchase up to $500 million of its outstanding common stock over a
two-year period. The Company repurchased $62 million and $75 million of the
Company's outstanding common stock in the 2009 Quarter and 2008 Quarter,
respectively, under the February 2009 authorization and previously announced
stock repurchase programs.
Results of Operations
Net Sales
Net sales for the 2009 Quarter and the 2008 Quarter were $333 million and
$372 million, respectively, a decrease of 10%. Foreign currency translation
lowered the 2009 Quarter sales rate by 5%. Product sales were $227 million and
$270 million for the 2009 Quarter and the 2008 Quarter, respectively, a decrease
of 16%. This decrease in product sales was primarily due to the overall decline
in Waters and TA instrument systems and adverse foreign currency translation.
Service sales were $106 million and $101 million in the 2009 Quarter and the
2008 Quarter, respectively, an increase of 4%. The increase in service sales was
primarily attributable to increased sales of service plans and billings to a
higher installed base of customers and approximately three more selling days,
offset by adverse foreign currency translation.
Waters Division Net Sales
The Waters Division net sales decreased 11% in the 2009 Quarter from the 2008
Quarter. The effect of foreign currency translation lowered the Waters Division
sales across all product lines by 6% in the 2009 Quarter. Recently acquired
companies added approximately 1% to the 2009 Quarter sales over the 2008
Quarter. Chemistry consumables sales were flat in the 2009 Quarter over the 2008
Quarter. Waters Division service sales grew 3% in the 2009 Quarter over the 2008
Quarter due primarily to increased sales of service plans and billings to the
higher installed base of customers. In addition, recurring sales of chemistry
consumables and service benefited from three more selling days than the 2008
Quarter. There will be conversely less selling days in the Company's fiscal
fourth quarter of 2009. Waters instrument system sales (LC and MS) declined 21%
in the 2009 Quarter over the 2008 Quarter. The decrease in instrument systems
sales is primarily attributable to weak industrial and pharmaceutical customer
spending caused by the global recession. Waters Division sales by product line
in the 2009 Quarter were approximately 48% for instrument systems, 20% for
chemistry consumables and 32% for service as compared to 54% for instrument
systems, 18% for chemistry consumables and 28% for service for the 2008 Quarter.
Geographically, Waters Division sales in the U.S., Europe, Asia and the rest
world declined approximately 6%, 17%, 5% and 17% respectively. This sales
decline was primarily due to lower demand from the Company's industrial and
pharmaceutical customers; while sales to government and academic customers
increased 13%. Asia's sales decline in the 2009 Quarter over the 2008 Quarter
was primarily driven by very weak sales in India and sluggish demand in Japan.
Sales growth in China in the 2009 Quarter over the 2008 Quarter was strong and
partially offset the
weakness in other Asian markets. In Europe, the Company's sales decline in the
2009 Quarter over the 2008 Quarter was primarily driven by weak demand in
Eastern Europe. The effects of foreign currency translation decreased sales in
Europe and the rest of the world by 14%, each in the 2009 Quarter compared to
the 2008 Quarter.
TA Division Net Sales
TA's sales decreased 8% in the 2009 Quarter from the 2008 Quarter primarily as a
result of weak instrument system demand from its industrial customers and a 2%
adverse effect from foreign currency translation. The impact of acquisitions
added approximately 3% to sales in the 2009 Quarter over the 2008 Quarter.
Instrument system sales declined 15% in the 2009 Quarter from the 2008 Quarter
and represented approximately 75% of sales in the 2009 Quarter as compared to
81% in the 2008 Quarter. TA service sales grew 19% in the 2009 Quarter over the
2008 Quarter and can be primarily attributed to the higher installed base of
customers and new service sales to the customers of recently acquired companies.
Geographically, the sales decrease for TA was broad-based.
Gross Profit
Gross profit for the 2009 Quarter was $206 million compared to $216 million for
the 2008 Quarter, a decrease of $10 million, or 5%. Gross profit as a percentage
of sales increased to 61.7% in the 2009 Quarter compared to 58.2% for the 2008
Quarter. The decrease in gross profit dollars can be attributed to the lower
sales volume being offset by the benefits from net favorable foreign currency
translation and, to a lesser extent, lower manufacturing costs. During the 2009
Quarter, the Company's gross profit as a percentage of sales benefited from the
favorable movements in foreign exchange rates between the currencies where the
Company manufactures products and the currencies where the sales were
transacted. The increase in gross profit as a percentage of sales is also
primarily a result of a significant change in sales mix. The 2009 Quarter
contained a much higher level of higher margin chemistry consumables and service
sales than the 2008 Quarter.
Selling and Administrative Expenses
Selling and administrative expenses for the 2009 Quarter and the 2008 Quarter
were $99 million and $106 million, respectively, a decrease of 6%. The decrease
in total selling and administrative expenses for the 2009 Quarter is primarily
due to cost reductions and the comparative favorable impact of foreign currency
translation. As a percentage of net sales, selling and administrative expenses
were 29.8% for the 2009 Quarter compared to 28.5% for the 2008 Quarter.
Research and Development Expenses
Research and development expenses were $18 million and $20 million for the 2009
Quarter and the 2008 Quarter, respectively, a decrease of $2 million, or 7%. The
decrease in research and development expenses for the 2009 Quarter is primarily
due to the timing of new project introduction costs and the comparative
favorable impact of foreign currency translation.
Interest Expense
Interest expense was $3 million and $11 million for the 2009 Quarter and 2008
Quarter, respectively. The decrease in interest expense for the 2009 Quarter is
primarily attributable to a significant decrease in average borrowings and lower
interest rates during the 2009 Quarter as compared to the 2008 Quarter.
Interest Income
Interest income was $1 million and $7 million for the 2009 Quarter and 2008
Quarter, respectively. The decrease in interest income is primarily due to
significantly lower yields and significantly lower cash and short-term
investment balances.
Provision for Income Taxes
The Company's effective tax rates for the 2009 Quarter and 2008 Quarter were
11.9% and 18.6%, respectively. The Company recorded a $5 million tax benefit in
the 2009 Quarter associated with the reversal of a $5 million tax provision,
recorded in the three months ended September 27, 2008, related to the
reorganization of certain foreign legal entities. The recognition of this tax
benefit was a result of changes in income tax regulations promulgated by the
U.S. Treasury in February 2009. This $5 million tax benefit increased net income
by $0.05 per diluted share and decreased the Company's effective tax rate by
5.5 percentage points in the 2009 Quarter. The remaining decrease in the
effective tax rate for the 2009 Quarter is primarily attributable to
proportionately lower income in jurisdictions with comparatively higher
effective tax rates.
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