SEC Form 10-Q filed by Waters Corporation
Table of Contents
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Common Stock, par value $0.01 per share |
WAT |
, Inc. |
☑ |
Accelerated filer | ☐ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
| Emerging growth company | ||||||
Table of Contents
WATERS CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
INDEX
| PART I | FINANCIAL INFORMATION | Page | ||||
| Item 1. |
Financial Statements | |||||
| Consolidated Balance Sheets (unaudited) as of March 30, 2024 and December 31, 2023 |
3 | |||||
| 4 | ||||||
| 5 | ||||||
| 6 | ||||||
| 7 | ||||||
| Condensed Notes to Consolidated Financial Statements (unaudited) |
8 | |||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 | ||||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 31 | ||||
| Item 4. |
Controls and Procedures | 32 | ||||
| PART II |
OTHER INFORMATION | |||||
| Item 1. |
Legal Proceedings | 32 | ||||
| Item 1A. |
Risk Factors | 32 | ||||
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds | 32 | ||||
| Item 5. |
Other Information | 33 | ||||
| Item 6. |
Exhibits | 34 | ||||
| Signature | 35 | |||||
Table of Contents
March 30, 2024 |
December 31, 2023 |
|||||||
(In thousands, except per share data) |
||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Investments |
||||||||
Accounts receivable, net |
||||||||
Inventories |
||||||||
Other current assets |
||||||||
Total current assets |
||||||||
Property, plant and equipment, net |
||||||||
Intangible assets, net |
||||||||
Goodwill |
||||||||
Operating lease assets |
||||||||
Other assets |
||||||||
Total assets |
$ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Notes payable and debt |
$ | $ | ||||||
Accounts payable |
||||||||
Accrued employee compensation |
||||||||
Deferred revenue and customer advances |
||||||||
Current operating lease liabilities |
||||||||
Accrued income taxes |
||||||||
Accrued warranty |
||||||||
Other current liabilities |
||||||||
Total current liabilities |
||||||||
Long-term liabilities: |
||||||||
Long-term debt |
||||||||
Long-term portion of retirement benefits |
||||||||
Long-term income tax liabilities |
||||||||
Long-term operating lease liabilities |
||||||||
Other long-term liabilities |
||||||||
Total long-term liabilities |
||||||||
Total liabilities |
||||||||
Commitments and contingencies (Notes 6, 7 and 9) |
||||||||
Stockholders’ equity: |
||||||||
Preferred stock, par value $ |
||||||||
Common stock, par value $ |
||||||||
Additional paid-in capital |
||||||||
Retained earnings |
||||||||
Treasury stock, at cost, |
( |
) | ( |
) | ||||
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
Total stockholders’ equity |
||||||||
Total liabilities and stockholders’ equity |
$ | $ | ||||||
Three Months Ended |
||||||||
March 30, 2024 |
April 1, 2023 |
|||||||
(In thousands, except per share data) |
||||||||
| Revenues: |
||||||||
| Product sales |
$ | $ | ||||||
| Service sales |
||||||||
| |
|
|
|
|||||
| Total net sales |
||||||||
| Costs and operating expenses: |
||||||||
| Cost of product sales |
||||||||
| Cost of service sales |
||||||||
| Selling and administrative expenses |
||||||||
| Research and development expenses |
||||||||
| Purchased intangibles amortization |
||||||||
| Litigation provision |
||||||||
| |
|
|
|
|||||
| Total costs and operating expenses |
||||||||
| |
|
|
|
|||||
| Operating income |
||||||||
| Other income, net |
||||||||
| Interest expense |
( |
) | ( |
) | ||||
| Interest income |
||||||||
| |
|
|
|
|||||
| Income before income taxes |
||||||||
| Provision for income taxes |
||||||||
| |
|
|
|
|||||
| Net income |
$ | $ | ||||||
| |
|
|
|
|||||
| Net income per basic common share |
$ | $ | ||||||
| Weighted-average number of basic common shares |
||||||||
| Net income per diluted common share |
$ | $ | ||||||
| Weighted-average number of diluted common shares and equivalents |
||||||||
Three Months Ended |
||||||||
March 30, 2024 |
April 1, 2023 |
|||||||
(In thousands) |
||||||||
| Net income |
$ | $ | ||||||
| Other comprehensive (loss) income: |
||||||||
| Foreign currency translation |
( |
) | ||||||
| Unrealized gains on derivative instruments before reclassifications |
||||||||
| Amounts reclassified to interest income |
( |
) | ||||||
| |
|
|
|
|||||
| Unrealized gains on derivative instruments before income taxes |
||||||||
| Income tax expense |
( |
) | ||||||
| |
|
|
|
|||||
| Unrealized gains on derivative instruments, net of tax |
||||||||
| Retirement liability adjustment before reclassifications |
||||||||
| Amounts reclassified to other income |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Retirement liability adjustment before income taxes |
( |
) | ||||||
| Income tax expense |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Retirement liability adjustment, net of tax |
( |
) | ||||||
| Other comprehensive (loss) income |
( |
) | ||||||
| |
|
|
|
|||||
| Comprehensive income |
$ | $ | ||||||
| |
|
|
|
|||||
Three Months Ended |
||||||||
March 30, 2024 |
April 1, 2023 |
|||||||
| Cash flows from operating activities: |
(In thousands) |
|||||||
| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Stock-based compensation |
||||||||
| Deferred income taxes |
( |
) | ||||||
| Depreciation |
||||||||
| Amortization of intangibles |
||||||||
| Change in operating assets and liabilities: |
||||||||
| Decrease in accounts receivable |
||||||||
| Increase in inventories |
( |
) | ( |
) | ||||
| Increase in other current assets |
( |
) | ( |
) | ||||
| D ecrease in other assets |
||||||||
| Decrease in accounts payable and other current liabilities |
( |
) | ( |
) | ||||
| Increase in deferred revenue and customer advances |
||||||||
| (Decrease) ncrease in other liabilities |
( |
) | ||||||
| |
|
|
|
|||||
| Net cash provided by operating activities |
||||||||
| Cash flows from investing activities: |
||||||||
| Additions to property, plant, equipment and software capitalization |
( |
) | ( |
) | ||||
| Investments in unaffiliated companies |
( |
) | ||||||
| Purchases of investments |
( |
) | ( |
) | ||||
| Maturities and sales of investments |
||||||||
| |
|
|
|
|||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from debt issuances |
||||||||
| Payments on debt |
( |
) | ( |
) | ||||
| Proceeds from stock plans |
||||||||
| Purchases of treasury shares |
( |
) | ( |
) | ||||
| Proceeds from derivative contracts |
||||||||
| |
|
|
|
|||||
| Net cash used in financing activities |
( |
) | ( |
) | ||||
| Effect of exchange rate changes on cash and cash equivalents |
||||||||
| |
|
|
|
|||||
| (Decrease) increase in cash and cash equivalents |
( |
) | ||||||
| Cash and cash equivalents at beginning of period |
||||||||
| |
|
|
|
|||||
| Cash and cash equivalents at end of period |
$ | $ | ||||||
| |
|
|
|
|||||
Number of Common Shares |
Common Stock |
Additional Paid-In Capital |
Retained Earnings |
Treasury Stock |
Accumulated Other Comprehensive Loss |
Total Stockholders’ Equity |
||||||||||||||||||||||
| Balance December 31, 2022 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||||||||||||
| Net income |
— |
— |
— |
— |
— |
|||||||||||||||||||||||
| Other comprehensive income |
— |
— |
— |
— |
— |
|||||||||||||||||||||||
| Issuance of common stock for employees: |
||||||||||||||||||||||||||||
| Employee Stock Purchase Plan |
— |
— |
— |
— |
||||||||||||||||||||||||
| Stock options exercised |
— |
— |
— |
|||||||||||||||||||||||||
| Treasury stock |
— |
— |
— |
— |
( |
) |
— |
( |
) | |||||||||||||||||||
| Stock-based compensation |
— |
— |
— |
|||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance April 1, 2023 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Number of Common Shares |
Common Stock |
Additional Paid-In Capital |
Retained Earnings |
Treasury Stock |
Accumulated Other Comprehensive Loss |
Total Stockholders’ Equity |
||||||||||||||||||||||
| Balance December 31, 2023 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||||||||||||
| Net income |
— |
— |
— |
— |
— |
|||||||||||||||||||||||
| Other comprehensive loss |
— |
— |
— |
— |
— |
( |
) |
( |
) | |||||||||||||||||||
| Issuance of common stock for employees: |
||||||||||||||||||||||||||||
| Employee Stock Purchase Plan |
— |
— |
— |
— |
||||||||||||||||||||||||
| Stock options exercised |
— |
— |
— |
|||||||||||||||||||||||||
| Treasury stock |
— |
— |
— |
— |
( |
) |
— |
( |
) | |||||||||||||||||||
| Stock-based compensation |
— |
— |
— |
|||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance March 30, 2024 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at Beginning of Period |
Additions |
Deductions and Other |
Balance at End of Period |
|||||||||||||
Allowance for Credit Losses |
||||||||||||||||
March 30, 2024 |
$ | $ | $ | ( |
) | $ | ||||||||||
April 1, 2023 |
$ | $ | $ | ( |
) | $ | ||||||||||
Total at March 30, 2024 |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||||||
Assets: |
||||||||||||||||
Time deposits |
$ | $ | — | $ | $ | — | ||||||||||
Waters 401(k) Restoration Plan assets |
— | — | ||||||||||||||
Interest rate cross-currency swap agreements |
— | — | ||||||||||||||
Total |
$ | $ | $ | $ | ||||||||||||
Liabilities: |
||||||||||||||||
Foreign currency exchange contracts |
$ | $ | — | $ | $ | — | ||||||||||
Interest rate cross-currency swap agreements |
— | — | ||||||||||||||
Interest rate swap cash flow hedge |
— | — | ||||||||||||||
Total |
$ | $ | $ | $ | ||||||||||||
Total at December 31, 2023 |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||||||
Assets: |
||||||||||||||||
Time deposits |
$ | $ | — | $ | $ | — | ||||||||||
Waters 401(k) Restoration Plan assets |
— | — | ||||||||||||||
Foreign currency exchange contracts |
— | — | ||||||||||||||
Interest rate cross-currency swap agreements |
— | — | ||||||||||||||
Total |
$ | $ | $ | $ | ||||||||||||
Liabilities: |
||||||||||||||||
Foreign currency exchange contracts |
— | — | ||||||||||||||
Interest rate cross-currency swap agreements |
— | — | ||||||||||||||
Interest rate swap cash flow hedge |
— | — | ||||||||||||||
Total |
$ | $ | $ | $ | ||||||||||||
March 30, 2024 |
December 31, 2023 |
|||||||||||||||
Notional |
Fair Value |
Notional |
Fair Value |
|||||||||||||
| Foreign currency exchange contracts: |
||||||||||||||||
| Other current assets |
$ | $ | — | $ | $ | |||||||||||
| Other current liabilities |
$ | $ | $ | $ | ||||||||||||
| Interest rate cross-currency swap agreements: |
||||||||||||||||
| Other assets |
$ | $ | $ | $ | ||||||||||||
| Other liabilities |
$ | $ | $ | $ | ||||||||||||
| Accumulated other comprehensive income (loss) |
$ | $ | ( |
) | ||||||||||||
| Interest rate swap cash flow hedges: |
||||||||||||||||
| Other liabilities |
$ | $ | $ | $ | ||||||||||||
| Accumulated other comprehensive loss |
$ | ( |
) | $ | ( |
) | ||||||||||
Financial Statement Classification |
Three Months Ended |
|||||||||
March 30, 2024 |
April 1, 2023 |
|||||||||
| Foreign currency exchange contracts: |
||||||||||
| Realized gains on closed contracts |
Cost of sales | $ | $ | |||||||
| Unrealized losses on open contracts |
Cost of sales | ( |
) | ( |
) | |||||
| |
|
|
|
|||||||
| Cumulative net pre-tax gains (losses) |
Cost of sales | $ | $ | ( |
) | |||||
| |
|
|
|
|||||||
| Interest rate cross-currency swap agreements: |
||||||||||
| Interest earned |
Interest income | $ | $ | |||||||
| Unrealized gains (losses) on contracts, net |
Accumulated other comprehensive loss |
$ | $ | ( |
) | |||||
| Interest rate swap cash flow hedges: |
||||||||||
| Interest earned |
Interest income | $ | $ | — | ||||||
| Unrealized gains on |
Accumulated other | |||||||||
| open contracts |
comprehensive loss | $ | $ | — | ||||||
Balance at Beginning of Period |
Accruals for Warranties |
Settlements Made |
Balance at End of Period |
|||||||||||||
| Accrued warranty liability: |
||||||||||||||||
| March 30, 2024 |
$ | $ | $ | ( |
) | $ | ||||||||||
| April 1, 2023 |
$ | $ | $ | ( |
) | $ | ||||||||||
March 30, 2024 |
April 1, 2023 |
|||||||
| Balance at the beginning of the period |
$ | $ | ||||||
| Recognition of revenue included in balance at beginning of the period |
( |
) | ( |
) | ||||
| Revenue deferred during the period, net of revenue recognized |
||||||||
| |
|
|
|
|||||
| Balance at the end of the period |
$ | $ | ||||||
| |
|
|
|
|||||
March 30, 2024 |
||||
Deferred revenue and customer advances expected to be recognized in: |
||||
| $ | ||||
Total |
$ | |||
March 30, 2024 |
December 31, 2023 |
|||||||
Raw materials |
$ | $ | ||||||
Work in progress |
||||||||
Finished goods |
||||||||
Total inventories |
$ | $ | ||||||
March 30, 2024 |
December 31, 2023 |
|||||||||||||||||||||||
Gross Carrying Amount |
Accumulated Amortization |
Weighted- Average Amortization Period |
Gross Carrying Amount |
Accumulated Amortization |
Weighted- Average Amortization Period |
|||||||||||||||||||
Capitalized software |
$ | $ | $ | $ | ||||||||||||||||||||
Purchased intangibles |
||||||||||||||||||||||||
Trademarks |
— | — | — | — | ||||||||||||||||||||
Licenses |
||||||||||||||||||||||||
Patents and other intangibles |
||||||||||||||||||||||||
Total |
$ | $ | $ | $ | ||||||||||||||||||||
March 30, 2024 |
December 31, 2023 |
|||||||
Senior unsecured notes - Series G - |
||||||||
Total notes payable and debt, current |
||||||||
Senior unsecured notes - Series K - |
||||||||
Senior unsecured notes - Series L - |
||||||||
Senior unsecured notes - Series M - |
||||||||
Senior unsecured notes - Series N - |
||||||||
Senior unsecured notes - Series O - |
||||||||
Senior unsecured notes - Series P - |
||||||||
Senior unsecured notes - Series Q - |
||||||||
Credit agreement |
||||||||
Unamortized debt issuance costs |
( |
) | ( |
) | ||||
Total long-term debt |
||||||||
Total debt |
$ | $ | ||||||
Three Months Ended March 30, 2024 |
||||||||||||
Net Income (Numerator) |
Weighted- Average Shares (Denominator) |
Per Share Amount |
||||||||||
Net income per basic common share |
$ | $ | ||||||||||
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities |
— | ( |
) | |||||||||
Net income per diluted common share |
$ | $ | ||||||||||
Three Months Ended April 1, 2023 |
||||||||||||
Net Income (Numerator) |
Weighted- Average Shares (Denominator) |
Per Share Amount |
||||||||||
| Net income per basic common share |
$ | $ | ||||||||||
| Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities |
— | ( |
) | |||||||||
| |
|
|
|
|
|
|||||||
| Net income per diluted common share |
$ | $ | ||||||||||
| |
|
|
|
|
|
|||||||
Currency Translation |
Unrealized Loss on Retirement Plans |
Unrealized Loss on Derivative Instruments |
Accumulated Other Comprehensive Loss |
|||||||||||||
| Balance at December 31, 2023 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Other comprehensive income (loss), net of tax |
( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Balance at March 30, 2024 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| |
|
|
|
|
|
|
|
|||||||||
Three Months Ended |
||||||||
March 30, 2024 |
April 1, 2023 |
|||||||
| Product net sales: |
||||||||
| Waters instrument systems |
$ | $ | ||||||
| Chemistry consumables |
||||||||
| TA instrument systems |
||||||||
| |
|
|
|
|||||
| Total product sales |
||||||||
| Service net sales: |
||||||||
| Waters service |
||||||||
| TA service |
||||||||
| |
|
|
|
|||||
| Total service sales |
||||||||
| |
|
|
|
|||||
| Total net sales |
$ | $ | ||||||
| |
|
|
|
|||||
Three Months Ended |
||||||||
March 30, 2024 |
April 1, 2023 |
|||||||
| Net Sales: |
||||||||
| Asia: |
||||||||
| China |
$ | $ | ||||||
| Japan |
||||||||
| Asia Other |
||||||||
| |
|
|
|
|||||
| Total Asia |
||||||||
| Americas: |
||||||||
| United States |
||||||||
| Americas Other |
||||||||
| |
|
|
|
|||||
| Total Americas |
||||||||
| Europe |
||||||||
| |
|
|
|
|||||
| Total net sales |
$ | $ | ||||||
| |
|
|
|
|||||
Three Months Ended |
||||||||
March 30, 2024 |
April 1, 2023 |
|||||||
| Pharmaceutical |
$ | $ | ||||||
| Industrial |
||||||||
| Academic and government |
||||||||
| |
|
|
|
|||||
| Total net sales |
$ | $ | ||||||
| |
|
|
|
|||||
Three Months Ended |
||||||||
March 30, 2024 |
April 1, 2023 |
|||||||
Net sales recognized at a point in time: |
||||||||
Instrument systems |
$ | $ | ||||||
Chemistry consumables |
||||||||
Service sales recognized at a point in time (time & materials) |
||||||||
Total net sales recognized at a point in time |
||||||||
Net sales recognized over time: |
||||||||
Service and software maintenance sales recognized over time (contracts) |
||||||||
Total net sales |
$ | $ | ||||||
Table of Contents
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Business Overview
The Company has two operating segments: WatersTM and TATM. Waters products and services primarily consist of high-performance liquid chromatography (“HPLC”), ultra-performance liquid chromatography (“UPLCTM” and, together with HPLC, referred to as “LC”), mass spectrometry (“MS”), light scattering and field-flow fractionation instruments (Wyatt), and precision chemistry consumable products and related services. TA products and services primarily consist of thermal analysis, rheometry and calorimetry instrument systems and service sales. The Company’s products are used by pharmaceutical, biochemical, industrial, nutritional safety, environmental, academic and government customers. These customers use the Company’s products to detect, identify, monitor and measure the chemical, physical and biological composition of materials and to predict the suitability and stability of fine chemicals, pharmaceuticals, water, polymers, metals and viscous liquids in various industrial, consumer goods and healthcare products.
Wyatt Acquisition
On May 16, 2023, the Company completed the acquisition of Wyatt Technology, LLC and its three operating subsidiaries, Wyatt Technology Europe GmbH, Wyatt Technology France and Wyatt Technology UK Ltd. (collectively, “Wyatt”), for a total purchase price of $1.3 billion in cash. Wyatt is a pioneer in innovative light scattering and field-flow fractionation instruments, software, accessories, and services. The acquisition will expand Waters’ portfolio and increase exposure to large molecule applications. The Company financed this transaction with a combination of cash on its balance sheet and borrowings under its revolving credit facility. The Company’s financial results for the three months ended March 30, 2024 include the financial results of Wyatt. The Company’s financial results for the three months ended April 1, 2023 do not include any of the financial results of Wyatt since the closing of the Wyatt acquisition occurred in the second fiscal quarter of 2023.
23
Table of Contents
Financial Overview
The Company’s operating results are as follows for the three months ended March 30, 2024 and April 1, 2023 (dollars in thousands, except per share data):
| Three Months Ended | ||||||||||||
| March 30, 2024 | April 1, 2023 | % change | ||||||||||
| Revenues: |
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| Product sales |
$ | 376,151 | $ | 436,457 | (14 | %) | ||||||
| Service sales |
260,688 | 248,217 | 5 | % | ||||||||
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| Total net sales |
636,839 | 684,674 | (7 | %) | ||||||||
| Costs and operating expenses: |
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| Cost of sales |
261,786 | 284,380 | (8 | %) | ||||||||
| Selling and administrative expenses |
174,536 | 181,956 | (4 | %) | ||||||||
| Research and development expenses |
44,595 | 42,691 | 4 | % | ||||||||
| Purchased intangibles amortization |
11,834 | 1,479 | 700 | % | ||||||||
| Litigation provision |
10,242 | — | * | * | ||||||||
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| Operating income |
133,846 | 174,168 | (23 | %) | ||||||||
| Operating income as a % of sales |
21.0 | % | 25.4 | % | ||||||||
| Other income, net |
2,259 | 1,388 | * | * | ||||||||
| Interest expense, net |
(21,249 | ) | (10,383 | ) | 105 | % | ||||||
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| Income before income taxes |
114,856 | 165,173 | (30 | %) | ||||||||
| Provision for income taxes |
12,660 | 24,250 | (48 | %) | ||||||||
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| Net income |
$ | 102,196 | $ | 140,923 | (27 | %) | ||||||
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| Net income per diluted common share |
$ | 1.72 | $ | 2.38 | (28 | %) | ||||||
| ** | Percentage not meaningful |
The Company’s net sales decreased 7% in the first quarter of 2024, as compared to the first quarter of 2023, with foreign currency translation decreasing total sales growth by 1%. The decrease in first quarter sales was driven by lower customer demand for our products across most major regions, except for sales in Europe, which increased 2%, and the U.S., which were flat and benefited from Wyatt sales contributions. The decline in customer demand can be attributed to our customers delaying the purchase of our instrument systems as they remained cautious with their capital spending entering 2024. The Wyatt acquisition increased sales growth by 3% for the first quarter of 2024. In addition, the Company’s first quarter of 2024 had one less calendar day than the first quarter of 2023.
Instrument system sales decreased 20% in the first quarter of 2024 primarily driven by weaker customer demand in all regions of the world. The instrument system sales decline was broad-based across all of our instrument systems but especially for our mass spectrometry instrument systems, where the decline was significantly greater. Our mass spectrometry system sales are higher priced instrument systems that are significantly impacted by the timing and level of funding our academic and government customers receive. In addition, the Wyatt acquisition increased instrument system sales growth by 5% in the first quarter of 2024. Foreign currency translation did not impact instrument system sales growth in the first quarter of 2024.
Recurring revenues (combined sales of precision chemistry consumables and services) increased 3% in the first quarter of 2024, with foreign currency translation decreasing sales growth by 1%. Service revenues increased 5% in the first quarter of 2024, with Wyatt contributing 2% to service revenue growth in the quarter. Chemistry sales increased 1% in the first quarter of 2024 and were impacted by the lower customer demand in China for our products. Excluding the impact of China, the Company’s chemistry sales increased 3% in the first quarter of 2024.
Operating income was $134 million in the first quarter of 2024, a decrease of 23% as compared to $174 million in the first quarter of 2023. The decrease in operating income was primarily due to lower sales volume and the increase in the following expenses: Wyatt acquisition-related retention expense and purchased intangible amortization, which added 10%; severance-related costs associated with a workforce reduction primarily in China, which added 5%; and litigation settlement provisions and related costs, which added 6%. These costs were partially offset by a 5% reduction in costs related to the Wyatt acquisition diligence incurred in the first quarter of 2023.
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The Company generated $263 million and $197 million of net cash from operating activities in the first three months of 2024 and 2023, respectively, with the $66 million increase being attributable to lower annual incentive bonus payments and an improvement in working capital in the current year. Net cash used in investing activities included capital expenditures related to property, plant, equipment and software capitalization of $29 million and $34 million in the first quarter of 2024 and 2023, respectively.
Results of Operations
Sales by Geography
Geographic sales information is presented below for the three months ended March 30, 2024 and April 1, 2023 (dollars in thousands):
| Three Months Ended | ||||||||||||
| March 30, 2024 | April 1, 2023 | % change | ||||||||||
| Net Sales: |
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| Asia: |
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| China |
$ | 85,745 | $ | 116,065 | (26 | %) | ||||||
| Japan |
35,547 | 46,494 | (24 | %) | ||||||||
| Asia Other |
86,267 | 90,522 | (5 | %) | ||||||||
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| Total Asia |
207,559 | 253,081 | (18 | %) | ||||||||
| Americas: |
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| United States |
202,839 | 202,305 | — | |||||||||
| Americas Other |
38,332 | 44,116 | (13 | %) | ||||||||
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| Total Americas |
241,171 | 246,421 | (2 | %) | ||||||||
| Europe |
188,109 | 185,172 | 2 | % | ||||||||
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| Total net sales |
$ | 636,839 | $ | 684,674 | (7 | %) | ||||||
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Geographically, the Company’s sales decline in the first quarter of 2024 was broad-based across most major regions except for Europe, which increased 2%, and the U.S., which was flat and benefited from Wyatt sales contributions. The decline in sales can be attributed to the lower demand for our instrument systems and chemistry products as customers delayed the purchase of these products. Foreign currency translation decreased sales growth by 3% in Asia and increased sales growth by 2% in Europe in the first quarter of 2024.
Sales by Trade Class
Net sales by customer class are presented below for the three months ended March 30, 2024 and April 1, 2023 (dollars in thousands):
| Three Months Ended | ||||||||||||
| March 30, 2024 | April 1, 2023 | % change | ||||||||||
| Pharmaceutical |
$ | 374,207 | $ | 384,898 | (3 | %) | ||||||
| Industrial |
195,334 | 209,650 | (7 | %) | ||||||||
| Academic and government |
67,298 | 90,126 | (25 | %) | ||||||||
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| Total net sales |
$ | 636,839 | $ | 684,674 | (7 | %) | ||||||
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During the first quarter of 2024, sales to pharmaceutical customers decreased 3%, as growth in Europe and India was offset by weakness across most major regions, with foreign currency translation decreasing pharmaceutical sales growth by 1% and Wyatt contributing 4% to the Company’s pharmaceutical sales growth. Combined sales to industrial customers, which include material characterization, food, environmental and fine chemical markets, decreased 7% in the first quarter of 2024, with foreign currency translation decreasing sales growth by 1% and Wyatt contributing 1% to industrial sales growth.
Sales to our academic and government customers are highly dependent on when institutions receive funding to purchase our instrument systems and, as such, sales can vary significantly from period to period. Our combined sales to academic and government customers decreased 25% in the first quarter of 2024, with foreign currency translation increasing sales by 2% and Wyatt contributing 3% to the Company’s academic and government sales growth. This overall decline in sales of 25% to our academic and government customers in the first quarter of 2024 compares to a 38% increase in academic and government sales in the first quarter of 2023, which represents a two-year compound annual growth rate of 1%.
Waters Products and Services Net Sales
Net sales for Waters products and services were as follows for the three months ended March 30, 2024 and April 1, 2023 (dollars in thousands):
| Three Months Ended | ||||||||||||||||||||
| March 30, 2024 | % of Total |
April 1, 2023 | % of Total |
% change | ||||||||||||||||
| Waters instrument systems |
$ | 191,259 | 34 | % | $ | 244,211 | 41 | % | (22 | %) | ||||||||||
| Chemistry consumables |
134,207 | 24 | % | 133,515 | 22 | % | 1 | % | ||||||||||||
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| Total Waters product sales |
325,466 | 58 | % | 377,726 | 63 | % | (14 | %) | ||||||||||||
| Waters service |
236,433 | 42 | % | 224,349 | 37 | % | 5 | % | ||||||||||||
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| Total Waters net sales |
$ | 561,899 | 100 | % | $ | 602,075 | 100 | % | (7 | %) | ||||||||||
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Waters products and service sales decreased 7% in the first quarter of 2024, with the effect of foreign currency translation decreasing sales growth by 1%. The Wyatt acquisition increased Waters products and service sales growth by approximately 4% in the quarter. Waters instrument system sales decreased 22% in the first quarter of 2024 due to weaker customer demand. Waters service sales increased 5% in the first quarter of 2024 due to higher service demand billing in all regions except for China, partially offset by the negative impact from foreign currency translation which decreased service sales growth by 1%.
TA Product and Services Net Sales
Net sales for TA products and services were as follows for the three months ended March 30, 2024 and April 1, 2023 (dollars in thousands):
| Three Months Ended | ||||||||||||||||||||
| March 30, 2024 | % of Total |
April 1, 2023 | % of Total |
% change | ||||||||||||||||
| TA instrument systems |
$ | 50,685 | 68 | % | $ | 58,731 | 71 | % | (14 | %) | ||||||||||
| TA service |
24,255 | 32 | % | 23,868 | 29 | % | 2 | % | ||||||||||||
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| Total TA net sales |
$ | 74,940 | 100 | % | $ | 82,599 | 100 | % | (9 | %) | ||||||||||
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TA sales declined 9% in the first quarter of 2024 due to lower customer demand for TA products in all regions except for Latin America and India. Foreign currency translation decreased TA sales growth by 1% in the quarter.
Cost of Sales
Cost of sales decreased by 8% in the first quarter 2024, primarily due to lower sales volume, changes in sales mix and lower freight costs. Cost of sales is affected by many factors, including, but not limited to, foreign currency translation, product mix, product costs of instrument systems and amortization of software platforms. At current foreign currency exchange rates, the Company expects foreign currency translation to decrease gross profit during 2024.
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Selling and Administrative Expenses
Selling and administrative expenses decreased 4% in the first quarter of 2024 primarily due to the $8 million decline in costs related to the Wyatt acquisition diligence incurred in the first quarter of 2023 and the decrease in salary expense resulting from lower headcount from the reductions in workforce that occurred in March 2024. These decreases were partially offset by the increase of $6 million in Wyatt acquisition-related retention expense and the $8 million increase in severance-related costs in connection with a reduction in workforce. In the first quarter of 2024, the Company had a reduction in workforce, primarily impacting China employees, as result of the significant sales volume decline in China’s sales over the last year. This workforce reduction impacted approximately 2% of the Company’s employees worldwide. The effect of foreign currency translation did not have a significant impact on selling and administrative expenses in the first quarter of 2024.
As a percentage of net sales, selling and administrative expenses were 27.4% and 26.6% for the first quarter of 2024 and 2023, respectively.
Research and Development Expenses
Research and development expenses increased 4% in the first quarter of 2024, primarily driven by costs associated with the development of new product and technology initiatives as well as $2 million in Wyatt acquisition-related retention expense. The impact of foreign currency exchange increased expenses by 3% in the first quarter of 2024.
Purchased Intangibles Amortization
The increase in purchased intangible amortization of $10 million in the first quarter of 2024 can be attributed to the Wyatt acquisition intangible assets.
Litigation Provisions
The Company recorded $10 million of patent litigation settlement provisions and related costs in the first quarter of 2024.
Interest Expense, net
Net interest expense in the first quarter of 2024 increased $11 million, which can be primarily attributed to the additional borrowings by the Company to fund the Wyatt acquisition.
Provision for Income Taxes
The four principal jurisdictions in which the Company manufactures are the U.S., Ireland, the U.K. and Singapore, where the statutory tax rates were 21%, 12.5%, 25% and 17%, respectively, as of March 30, 2024. The Company has a Development and Expansion Incentive in Singapore that provides a concessionary income tax rate of 5% on certain types of income for the period April 1, 2021 through March 31, 2026. The effect of applying the concessionary income tax rate rather than the statutory tax rate to income from qualifying activities in Singapore increased the Company’s net income by $2 million and $3 million and increased the Company’s net income per diluted share by $0.03 and $0.05 for the first quarter of 2024 and 2023, respectively.
The Company’s effective tax rate for the first quarter of 2024 and 2023 was 11.0% and 14.7%, respectively. The income tax provision includes a $1 million and a $2 million income tax benefit related to stock-based compensation for the first quarter of 2024 and 2023, respectively. The remaining differences between the effective tax rates can primarily be attributed the impact of discrete tax benefits in the current year and to differences in the proportionate amounts of pre-tax income recognized in jurisdictions with different effective tax rates.
Effective in 2024, various foreign jurisdictions began implementing aspects of the guidance issued by the Organization for Economic Co-operation and Development related to the new Pillar Two system of global minimum tax rules. These changes in tax law did not have a material impact on the Company’s financial position, results of operations and cash flows for the first quarter of 2024. The Company continues to monitor the adoption of the Pillar Two rules in additional jurisdictions.
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Liquidity and Capital Resources
Condensed Consolidated Statements of Cash Flows (in thousands):
| Three Months Ended | ||||||||
| March 30, 2024 | April 1, 2023 | |||||||
| Net income |
$ | 102,196 | $ | 140,923 | ||||
| Depreciation and amortization |
48,514 | 31,154 | ||||||
| Stock-based compensation |
10,913 | 12,805 | ||||||
| Deferred income taxes |
4,453 | (5,078 | ) | |||||
| Change in accounts receivable |
62,592 | 44,047 | ||||||
| Change in inventories |
(28,309 | ) | (42,621 | ) | ||||
| Change in accounts payable and other current liabilities |
(18,418 | ) | (71,257 | ) | ||||
| Change in deferred revenue and customer advances |
85,901 | 77,206 | ||||||
| Other changes |
(4,972 | ) | 9,572 | |||||
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| Net cash provided by operating activities |
262,870 | 196,751 | ||||||
| Net cash used in investing activities |
(29,744 | ) | (34,406 | ) | ||||
| Net cash used in financing activities |
(292,176 | ) | (159,211 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents |
1,264 | 2,407 | ||||||
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| (Decrease) increase in cash and cash equivalents |
$ | (57,786 | ) | $ | 5,541 | |||
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Cash Flow from Operating Activities
Net cash provided by operating activities was $263 million and $197 million during the first quarter of 2024 and 2023, respectively. The decrease in 2024 operating cash flow was primarily a result of lower net income and higher inventory levels, offset by higher cash collections and lower annual incentive bonus payments in 2024 compared to 2023. The changes within net cash provided by operating activities include the following significant changes in the sources and uses of net cash provided by operating activities, aside from the changes in net income:
| • | The changes in accounts receivable were primarily attributable to timing of payments made by customers and timing of sales. Days sales outstanding was 89 days at March 30, 2024 and 91 days at April 1, 2023. |
| • | The increase in inventory can primarily be attributed to higher material costs. |
| • | Net cash provided from deferred revenue and customer advances results from annual increases in new service contracts as a higher installed base of customers renew annual service contracts. |
| • | Other changes were attributable to variation in the timing of various provisions, expenditures, prepaid income taxes and accruals in other current assets, other assets and other liabilities. |
Cash Flow from Investing Activities
Net cash used in investing activities totaled $30 million and $34 million in the first quarter of 2024 and 2023, respectively. Additions to fixed assets and capitalized software were $29 million and $34 million in the first three months of 2024 and 2023, respectively.
During the first three months of 2024 and 2023, the Company purchased $1 million of investments, while $1 million of investments matured, and were used for financing activities described below.
Cash Flow from Financing Activities
The Company entered into a credit agreement in September 2021 governing the Company’s five-year, $1.8 billion revolving credit facility that matures in September 2026. On March 3, 2023, the Company entered into an agreement to amend such credit agreement. The 2023 Amendment increased the borrowing capacity by $200 million to an aggregate borrowing capacity of $2.0 billion. As of March 30, 2024, the Company had a total of $2.1 billion in outstanding debt, which consisted of $1.3 billion in outstanding senior unsecured notes and $750 million borrowed under its credit agreement. The Company’s net debt borrowings decreased by $300 million and $95 million during the three months ended March 30, 2024 and April 1, 2023, respectively.
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As of March 30, 2024, the Company has entered into interest rate cross-currency swap derivative agreements with durations up to three years with a notional value $625 million to hedge the variability in the movement of foreign currency exchange rates on a portion of its euro-denominated and yen-denominated net asset investments. As a result of entering into these agreements, the Company lowered net interest expense by approximately $3 million in the first quarter of 2024 and 2023. The Company anticipates that these swap agreements will lower net interest expense by approximately $8 million in 2024.
In December 2023, the Company’s Board of Directors authorized the extension of its existing share repurchase program through January 21, 2025. The Company’s remaining authorization is $1.0 billion. During the three months ended April 1, 2023, the Company repurchased 0.2 million shares of the Company’s outstanding common stock at a cost of $58 million under the Company’s share repurchase program. The Company did not make any open market share repurchases in 2024. In addition, the Company repurchased $13 million and $11 million of common stock related to the vesting of restricted stock units during the three months ended March 30, 2024 and April 1, 2023, respectively. While the Company believes that it has the financial flexibility to fund these share repurchases, as well as to invest in research, technology and business acquisitions, given current cash levels and debt borrowing capacity, it has temporarily suspended its share repurchases due to its recent acquisition of Wyatt.
The Company received $14 million and $2 million of proceeds from the exercise of stock options and the purchase of shares pursuant to the Company’s employee stock purchase plan during the first three months of 2024 and 2023, respectively.
The Company had cash, cash equivalents and investments of $338 million as of March 30, 2024. The majority of the Company’s cash and cash equivalents are generated from foreign operations, with $305 million held by foreign subsidiaries at March 30, 2024, of which $239 million was held in currencies other than U.S. dollars.
Contractual Obligations, Commercial Commitments, Contingent Liabilities and Dividends
A summary of the Company’s contractual obligations and commercial commitments is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 27, 2024. The Company reviewed its contractual obligations and commercial commitments as of March 30, 2024 and determined that there were no material changes outside the ordinary course of business from the information set forth in the Annual Report on Form 10-K.
From time to time, the Company and its subsidiaries are involved in various litigation matters arising in the ordinary course of business. The Company believes that it has meritorious arguments in its current litigation matters and that any outcome, either individually or in the aggregate, will not be material to the Company’s financial position or results of operations.
During fiscal year 2024, the Company expects to contribute a total of approximately $3 million to $6 million to its defined benefit plans.
The Company has not paid any dividends and has no plans, at this time, to pay any dividends in the future.
Critical Accounting Policies and Estimates
In the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 27, 2024, the Company’s most critical accounting policies and estimates upon which its financial status depends were identified as those relating to revenue recognition, valuation of long-lived assets, intangible assets and goodwill, income taxes, uncertain tax positions and business combinations and asset acquisitions. The Company reviewed its policies and determined that those policies remain the Company’s most critical accounting policies for the three months ended March 30, 2024. The Company did not make any changes in those policies during the three months ended March 30, 2024.
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New Accounting Pronouncements
Please refer to Note 13, Recent Accounting Standard Changes and Developments, in the Condensed Notes to Consolidated Financial Statements.
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, including the information incorporated by reference herein, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements that are not statements of historical fact may be deemed forward-looking statements. You can identify these forward-looking statements by the use of the words “feels”, “believes”, “anticipates”, “plans”, “expects”, “may”, “will”, “would”, “intends”, “suggests”, “appears”, “estimates”, “projects”, “should” and similar expressions, whether in the negative or affirmative. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the control of the Company, including, and without limitation:
| • | foreign currency exchange rate fluctuations potentially affecting translation of the Company’s future non-U.S. operating results, particularly when a foreign currency weakens against the U.S. dollar; |
| • | current global economic, sovereign and political conditions and uncertainties, including the effect of new or proposed tariff or trade regulations, as well as other new or changed domestic and foreign laws, regulations and policies, changes in inflation and interest rates, the impacts and costs of war, in particular as a result of the ongoing conflicts between Russia and Ukraine and in the Middle East, and the possibility of further escalation resulting in new geopolitical and regulatory instability and the Chinese government’s ongoing tightening of restrictions on procurement by government-funded customers; |
| • | the Company’s ability to access capital, maintain liquidity and service the Company’s debt in volatile market conditions; |
| • | risks related to the effects of any pandemic on our business, financial condition, results of operations and prospects; |
| • | changes in timing and demand for the Company’s products among the Company’s customers and various market sectors, particularly as a result of fluctuations in their expenditures or ability to obtain funding; |
| • | the ability to realize the expected benefits related to the Company’s various cost-saving initiatives, including workforce reductions and organizational restructurings; |
| • | the introduction of competing products by other companies and loss of market share, as well as pressures on prices from competitors and/or customers; |
| • | changes in the competitive landscape as a result of changes in ownership, mergers and continued consolidation among the Company’s competitors; |
| • | regulatory, economic and competitive obstacles to new product introductions, lack of acceptance of new products and inability to grow organically through innovation; |
| • | rapidly changing technology and product obsolescence; |
| • | risks associated with previous or future acquisitions, strategic investments, joint ventures and divestitures, including risks associated with achieving the anticipated financial results and operational synergies; contingent purchase price payments; and expansion of our business into new or developing markets; |
| • | risks associated with unexpected disruptions in operations; |
| • | failure to adequately protect the Company’s intellectual property, infringement of intellectual property rights of third parties and inability to obtain licenses on commercially reasonable terms; |
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| • | the Company’s ability to acquire adequate sources of supply and its reliance on outside contractors for certain components and modules, as well as disruptions to its supply chain; |
| • | risks associated with third-party sales intermediaries and resellers; |
| • | the impact and costs of changes in statutory or contractual tax rates in jurisdictions in which the Company operates as well as shifts in taxable income among jurisdictions with different effective tax rates, the outcome of ongoing and future tax examinations and changes in legislation affecting the Company’s effective tax rate; |
| • | the Company’s ability to attract and retain qualified employees and management personnel; |
| • | risks associated with cybersecurity and technology, including attempts by third parties to defeat the security measures of the Company and its third-party partners; |
| • | increased regulatory burdens as the Company’s business evolves, especially with respect to the U.S. Food and Drug Administration and U.S. Environmental Protection Agency, among others, and in connection with government contracts; |
| • | regulatory, environmental and logistical obstacles affecting the distribution of the Company’s products, completion of purchase order documentation and the ability of customers to obtain letters of credit or other financing alternatives; |
| • | risks associated with litigation and other legal and regulatory proceedings; and |
| • | the impact and costs incurred from changes in accounting principles and practices. |
Certain of these and other factors are discussed under the heading “Risk Factors” under Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 27, 2024. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements, whether because of these factors or for other reasons. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are expressly qualified in their entirety by the cautionary statements included in this report. Except as required by law, the Company does not assume any obligation to update any forward-looking statements.
Item 3: Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to the risk of interest rate fluctuations from the investments of cash generated from operations. Investments with maturities greater than 90 days are classified as investments and are held primarily in U.S. dollar-denominated treasury bills and commercial paper, bank deposits and corporate debt securities. As of March 30, 2024, the Company estimates that a hypothetical adverse change of 100 basis points across all maturities would not have a material effect on the fair market value of its portfolio.
The Company is also exposed to the risk of exchange rate fluctuations. The Company maintains cash balances in various operating accounts in excess of federally insured limits, and in foreign subsidiary accounts in currencies other than the U.S. dollar. As of March 30, 2024 and December 31, 2023, $305 million out of $338 million and $321 million out of $396 million, respectively, of the Company’s total cash, cash equivalents and investments were held by foreign subsidiaries. In addition, $239 million out of $338 million and $233 million out of $396 million of cash, cash equivalents and investments were held in currencies other than the U.S. dollar at March 30, 2024 and December 31, 2023, respectively. As of March 30, 2024, the Company had no holdings in auction rate securities or commercial paper issued by structured investment vehicles.
Assuming a hypothetical adverse change of 10% in year-end exchange rates (a strengthening of the U.S. dollar), the fair market value of the Company’s cash, cash equivalents and investments held in currencies other than the U.S. dollar as of March 30, 2024 would decrease by approximately $24 million, of which the majority would be recorded to foreign currency translation in other comprehensive income within stockholders’ equity.
There have been no other material changes in the Company’s market risk during the three months ended March 30, 2024. For information regarding the Company’s market risk, refer to Item 7A of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 27, 2024.
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Item 4: Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s chief executive officer and chief financial officer (principal executive officer and principal financial officer), with the participation of management, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective as of March 30, 2024 (1) to ensure that information required to be disclosed by the Company, including its consolidated subsidiaries, in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its chief executive officer and chief financial officer, to allow timely decisions regarding the required disclosure and (2) to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control Over Financial Reporting
No change was identified in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 30, 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part II: Other Information
Item 1: Legal Proceedings
There have been no material changes in the Company’s legal proceedings during the three months ended March 30, 2024 as described in Item 3 of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 27, 2024, other than the $10 million patent litigation settlement provisions and related costs recorded in the three months ended March 30, 2024.
Item 1A: Risk Factors
Information regarding risk factors of the Company is set forth under the heading “Risk Factors” under Part I, Item 1A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 27, 2024. The Company reviewed its risk factors as of March 30, 2024 and determined that there were no material changes from the ones set forth in the Form 10-K. Note, however, the discussion of certain factors under the subheading “Special Note Regarding Forward-Looking Statements” in Part I, Item 2 of this Quarterly Report on Form 10-Q. These risks are not the only ones facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial may have a material adverse effect on the Company’s business, financial condition and operating results.
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer
In January 2019, the Company’s Board of Directors authorized the Company to repurchase up to $4 billion of its outstanding common stock in open market or private transactions over a two-year period. This program replaced the remaining amounts available under the pre-existing authorization. In December 2020, the Company’s Board of Directors authorized the extension of the share repurchase program through January 21, 2023. In December 2022, the Company’s Board of Directors amended and extended this repurchase program’s term by one year such that it expired on January 21, 2024 and increased the total authorization level to $4.8 billion, an increase of $750 million. In December 2023, the Company’s Board of Directors authorized the extension of the share repurchase program through January 21, 2025. As of March 30, 2024, the Company had repurchased an aggregate of 15.2 million shares at a cost of $3.8 billion under the January 2019 repurchase program and had a total of $1.0 billion authorized for future repurchases. The size and timing of these purchases, if any, will depend on our stock price and market and business conditions, as well as other factors.
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Period |
Total Number of Shares Purchased (1) |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Programs |
Maximum Dollar Value of Shares That May Yet Be Purchased Under the Programs |
||||||||||||||
January 1, 2024 to January 27, 2024 |
— | $ | — | — | $ | 961,207 | ||||||||||||
January 28, 2024 to February 24, 2024 |
9 | $ | 329.26 | — | $ | 961,207 | ||||||||||||
February 25, 2024 to March 30, 2024 |
30 | $ | 335.87 | — | $ | 961,207 | ||||||||||||
Total |
39 | $ | 334.34 | — | $ | 961,207 | ||||||||||||
| (1) | The Company repurchased approximately 39,000 shares of common stock at a cost of $13 million related to the vesting of restricted stock during the three months ended March 30, 2024. |
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Item 6: Exhibits
| Exhibit Number |
Description of Document | |
| 31.1 | Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(*) | |
| 32.2 | Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(*) | |
| 101 | The following materials from Waters Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2024, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets (unaudited), (ii) the Consolidated Statements of Operations (unaudited), (iii) the Consolidated Statements of Comprehensive Income (unaudited), (iv) the Consolidated Statements of Cash Flows (unaudited) and (vi) Condensed Notes to Consolidated Financial Statements (unaudited). | |
| 104 | Cover Page Interactive Date File (formatted in iXBRL and contained in Exhibit 101). | |
| (*) | This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any filing, except to the extent the Company specifically incorporates it by reference. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| WATERS CORPORATION |
| /s/ Amol Chaubal |
| Amol Chaubal |
| Senior Vice President and Chief Financial Officer |
| (Principal Financial Officer) |
| (Principal Accounting Officer) |
Date: May 7, 2024
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