Table of Contents
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
Form 10-Q

 
 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 29, 2024
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ______.
Commission File Number:
01-14010
 
 
Waters Corporation
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
13-3668640
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
34 Maple Street
Milford, Massachusetts 01757
(Address, including zip code, of principal executive offices)
(
508) 478-2000
(Registrant’s telephone number, including area code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 

Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock, par value $0.01 per share
 
WAT
 
New York Stock Exchange, Inc.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (
or
for such shorter period that the registrant was required to submit such files). Yes
 ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, an
d
 “emerging growth company” in
Rule 12b-2
of the Exchange Act.

Large accelerated filer      Accelerated filer  
Non-accelerated
filer
     Smaller reporting company  
     Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2
of the Act). Yes ☐ No 
Indicate the number of shares outstanding of the registrant’s common stock as of July 26, 2024: 59,361,927
 
 
 


Table of Contents

WATERS CORPORATION AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

INDEX

 

          Page  

PART I

  

FINANCIAL INFORMATION

  

 Item 1.

  

Financial Statements

  
  

Consolidated Balance Sheets (unaudited) as of June 29, 2024 and December 31, 2023

     3  
  

Consolidated Statements of Operations (unaudited) for the three months ended June 29, 2024 and July 1, 2023

     4  
  

Consolidated Statements of Operations (unaudited) for the six months ended June 29, 2024 and July 1, 2023

     5  
  

Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended June 29, 2024 and July 1, 2023

     6  
  

Consolidated Statements of Cash Flows (unaudited) for the six months ended June 29, 2024 and July 1, 2023

     7  
  

Consolidated Statements of Stockholders’ Equity (unaudited) for the three months ended June 29, 2024 and July 1, 2023

     8  
  

Consolidated Statements of Stockholders’ Equity (unaudited) for the six months ended June 29, 2024 and July 1, 2023

     9  
  

Condensed Notes to Consolidated Financial Statements (unaudited)

     10  

 Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     25  

 Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

     34  

 Item 4.

  

Controls and Procedures

     35  

PART II

  

OTHER INFORMATION

  

 Item 1.

  

Legal Proceedings

     35  

 Item 1A.

  

Risk Factors

     35  

 Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

     35  

 Item 5.

  

Other Information

     36  

 Item 6.

  

Exhibits

     37  
   Signature      38  


Table of Contents

Item 1: Financial Statements
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
 
    
June 29, 2024
   
December 31, 2023
 
    
(In thousands, except per share data)
 
ASSETS
  
Current assets:
    
Cash and cash equivalents
   $ 326,427     $ 395,076  
Investments
     934       898  
Accounts receivable, net
     610,088       702,168  
Inventories
     522,927       516,236  
Other current assets
     143,307       138,489  
  
 
 
   
 
 
 
Total current assets
     1,603,683       1,752,867  
Property, plant and equipment, net
     636,110       639,073  
Intangible assets, net
     596,398       629,187  
Goodwill
     1,297,796       1,305,446  
Operating lease assets
     81,124       84,591  
Other assets
     233,936       215,690  
  
 
 
   
 
 
 
Total assets
   $ 4,449,047     $ 4,626,854  
  
 
 
   
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
    
Current liabilities:
    
Notes payable and debt
   $     $ 50,000  
Accounts payable
     78,436       84,705  
Accrued employee compensation
     56,037       69,391  
Deferred revenue and customer advances
     316,933       256,675  
Current operating lease liabilities
     26,367       27,825  
Accrued income taxes
     134,265       120,257  
Accrued warranty
     10,437       12,050  
Other current liabilities
     140,057       168,677  
  
 
 
   
 
 
 
Total current liabilities
     762,532       789,580  
Long-term liabilities:
    
Long-term debt
     2,006,009       2,305,513  
Long-term portion of retirement benefits
     48,582       47,559  
Long-term income tax liabilities
     17,587       137,123  
Long-term operating lease liabilities
     56,346       58,926  
Other long-term liabilities
     146,024       137,812  
  
 
 
   
 
 
 
Total long-term liabilities
     2,274,548       2,686,933  
  
 
 
   
 
 
 
Total liabilities
     3,037,080       3,476,513  
Commitments and contingencies (Notes 6, 7 and 9)
    
Stockholders’ equity:
    
Preferred stock, par value $0.01 per share, 5,000 shares authorized, none issued at June 29, 2024 and December 31, 2023
            
Common stock, par value $0.01 per share, 400,000 shares authorized, 162,926 and 162,709 shares issued, 59,353 and 59,176 shares outstanding at June 29, 2024 and December 31, 2023, respectively
     1,629       1,627  
Additional
paid-in
capital
     2,310,372       2,266,265  
Retained earnings
     9,395,754       9,150,821  
Treasury stock, at cost,
103,573
and
103,533
shares at June 29, 2024 and December 31, 2023, respectively
     (10,147,586 )     (10,134,252
Accumulated other comprehensive loss
     (148,202 )     (134,120
  
 
 
   
 
 
 
Total stockholders’ equity
     1,411,967       1,150,341  
  
 
 
   
 
 
 
Total liabilities and stockholders’ equity
   $ 4,449,047     $ 4,626,854  
  
 
 
   
 
 
 
The accompanying notes are an integral part
of
the interim consolidated financial statements.
 
3

Table of Contents
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
 
  
Three Months Ended
 
 
  
June 29, 2024
 
 
July 1, 2023
 
 
  
(In thousands, except per share data)
 
Revenues:
    
Product sales
   $ 435,144     $ 477,926  
Service sales
     273,385       262,650  
  
 
 
   
 
 
 
Total net sales
     708,529       740,576  
Costs and operating expenses:
    
Cost of product sales
     175,836       194,354  
Cost of service sales
     112,408       106,722  
Selling and administrative expenses
     173,247       186,953  
Research and development expenses
     46,182       45,873  
Purchased intangibles amortization
     11,744       6,815  
  
 
 
   
 
 
 
Total costs and operating expenses
     519,417       540,717  
  
 
 
   
 
 
 
Operating income
     189,112       199,859  
Other expense, net
     (302 )     (352
Interest expense
     (23,726 )     (23,272
Interest income
     4,328       4,040  
  
 
 
   
 
 
 
Income before income taxes
     169,412       180,275  
Provision for income taxes
     26,675       29,721  
  
 
 
   
 
 
 
Net income
   $ 142,737     $ 150,554  
  
 
 
   
 
 
 
Net income per basic common share
   $ 2.41     $ 2.56  
Weighted-average number of basic common shares
     59,339       58,857  
Net income per diluted common share
   $ 2.40     $ 2.55  
Weighted-average number of diluted common shares and equivalents
     59,451       59,010  
The accompanying notes are an integral part of the interim consolidated financial statements.
 
4

Table of Contents
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
    
Six Months Ended
 
    
June 29, 2024
   
July 1, 2023
 
    
(In thousands, except per share data)
 
Revenues:
    
Product sales
   $ 811,295     $ 914,383  
Service sales
     534,073       510,867  
  
 
 
   
 
 
 
Total net sales
     1,345,368       1,425,250  
Costs and operating expenses:
    
Cost of product sales
     329,018       374,708  
Cost of service sales
     221,012       210,748  
Selling and administrative expenses
     347,783       368,909  
Research and development expenses
     90,777       88,564  
Purchased intangibles amortization
     23,578       8,294  
Litigation provision
     10,242        
  
 
 
   
 
 
 
Total costs and operating expenses
     1,022,410       1,051,223  
  
 
 
   
 
 
 
Operating income
     322,958       374,027  
Other income, net
     1,957       1,036  
Interest expense
     (49,246 )     (37,716
Interest income
     8,599       8,101  
  
 
 
   
 
 
 
Income before income taxes
     284,268       345,448  
Provision for income taxes
     39,335       53,971  
  
 
 
   
 
 
 
Net income
   $ 244,933     $ 291,477  
  
 
 
   
 
 
 
Net income per basic common share
   $ 4.13     $ 4.97  
Weighted-average number of basic common shares
     59,287       58,703  
Net income per diluted common share
   $ 4.12     $ 4.95  
Weighted-average number of diluted common shares and equivalents
     59,445       58,909  
The accompanying notes are an integral part of the interim consolidated financial statements.
 
5

Table of Contents
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)


 
  
Three Months Ended
 
 
Six Months Ended
 
 
  
June 29, 2024
 
 
July 1, 2023
 
 
June 29, 2024
 
 
July 1, 2023
 
 
  
(In thousands)
 
 
(In thousands)
 
Net income
   $ 142,737     $ 150,554     $ 244,933     $ 291,477  
Other comprehensive (loss) income:
        
Foreign currency translation
     (6,675 )     3,984       (16,215 )     12,767  
Unrealized gains on derivative instruments before reclassifications
     829             3,234        
Amounts reclassified to interest income
     (277 )           (574 )      
  
 
 
   
 
 
   
 
 
   
 
 
 
Unrealized gains on derivative instruments before income taxes
     552             2,660        
Income tax expense
     (132 )           (638 )      
  
 
 
   
 
 
   
 
 
   
 
 
 
Unrealized gains on derivative instruments, net of tax
     420             2,022        
Retirement liability adjustment before reclassifications
     (181 )     91       151       171  
Amounts reclassified to other income, net
     59       (84     (58 )     (167
  
 
 
   
 
 
   
 
 
   
 
 
 
Retirement liability adjustment before income taxes
     (122 )     7       93       4  
Income tax benefit
     58       5       18       1  
  
 
 
   
 
 
   
 
 
   
 
 
 
Retirement liability adjustment, net of tax
     (64 )     12       111       5  
Other comprehensive (loss) income
     (6,319 )     3,996       (14,082 )     12,772  
  
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive income
   $ 136,418     $ 154,550     $ 230,851     $ 304,249  
  
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of the interim consolidated financial statements.
 
6

Table of Contents
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
    
Six Months Ended
 
    
June 29, 2024
   
July 1, 2023
 
    
(In thousands)
 
Cash flows from operating activities:
  
Net income
   $ 244,933     $ 291,477  
Adjustments to reconcile net income to net cash provided by operating activities:
    
Stock-based compensation
     22,346       23,734  
Deferred income taxes
     3,958       (6,435
Depreciation
     44,375       40,172  
Amortization of intangibles
     51,368       29,866  
Change in operating assets and liabilities:
    
Decrease in accounts receivable
     69,642       50,273  
Increase in inventories
     (16,709     (63,607
Increase in other current assets
     (12,549     (19,044
Decrease in other assets
     6,802       12  
Decrease in accounts payable and other current liabilities
     (31,206     (122,836
Increase in deferred revenue and customer advances
     69,352       81,659  
Decrease in other liabilities
     (134,908     (90,402
  
 
 
   
 
 
 
Net cash provided by operating activities
     317,404       214,869  
Cash flows from investing activities:
    
Additions to property, plant, equipment and software capitalization
     (64,759     (80,997
Business acquisitions, net of cash acquired
           (1,285,907
Investments in unaffiliated companies
     (1,064      
Purchases of investments
     (1,855     (893
Maturities and sales of investments
     1,819       877  
  
 
 
   
 
 
 
Net cash used in investing activities
     (65,859     (1,366,920
Cash flows from financing activities:
    
Proceeds from debt issuances
     170,000       1,450,040  
Payments on debt
     (520,000     (395,040
Payments of debt issuance costs
           (218
Proceeds from stock plans
     21,836       8,628  
Purchases of treasury shares
     (13,334     (69,741
Proceeds from derivative contracts
     15,285       5,294  
  
 
 
   
 
 
 
Net cash (used in) provided by financing activities
     (326,213     998,963  
Effect of exchange rate changes on cash and cash equivalents
     6,019       2,252  
  
 
 
   
 
 
 
Decrease in cash and cash equivalents
     (68,649     (150,836
Cash and cash equivalents at beginning of period
     395,076       480,529  
  
 
 
   
 
 
 
Cash and cash equivalents at end of period
   $ 326,427     $ 329,693  
  
 
 
   
 
 
 
The accompanying notes are an integral part of the interim consolidated financial statements.
 
7

Table of Contents
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited, in thousands)
 
    
Number
of
Common
Shares
    
Common
Stock
    
Additional
Paid-In

Capital
    
Retained
Earnings
    
Treasury

Stock
   
Accumulated
Other
Comprehensive
Loss
   
Total
Stockholders’
Equity
 
Balance April 1, 2023
     162,550      $ 1,626      $ 2,214,963      $ 8,649,510      $ (10,133,480   $ (132,796   $ 599,823  
Net income
     —         —         —         150,554        —        —        150,554  
Other comprehensive income
     —         —         —         —         —        3,996       3,996  
Issuance of common stock for employees:
                  
Employee Stock Purchase Plan
     13        —         3,933        —         —        —        3,933  
Stock options exercised
     11               2,316        —         —        —        2,316  
Treasury stock
     —         —         —         —         (236     —        (236
Stock-based compensation
     2               10,843        —         —        —        10,843  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance July 1, 2023
     162,576      $ 1,626      $ 2,232,055      $ 8,800,064      $ (10,133,716   $ (128,800   $ 771,229  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
 
    
Number
of
Common
Shares
    
Common
Stock
    
Additional
Paid-In

Capital
    
Retained
Earnings
   
Treasury

Stock
   
Accumulated
Other
Comprehensive
Loss
   
Total
Stockholders’
Equity
 
Balance March 30, 2024
     162,882      $ 1,629      $ 2,291,103      $ 9,253,017     $ (10,147,341   $ (141,883   $ 1,256,525  
Net income
     —         —         —         142,737       —        —        142,737  
Other comprehensive loss
     —         —         —         —         —        (6,319     (6,319
Issuance of common stock for employees:
                 
Employee Stock Purchase Plan
     10        —         2,794        —         —        —        2,794  
Stock options exercised
     32               5,060        —         —        —        5,060  
Treasury stock
     —         —         —         —         (245     —        (245
Stock-based compensation
     2               11,415        —         —        —        11,415  
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Balance June 29, 2024
     162,926      $ 1,629      $ 2,310,372      $ 9,395,754     $ (10,147,586 )   $ (148,202 )   $ 1,411,967  
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of the consolidated financial statements.
 
8

Table of Contents
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited, in thousands)
 
    
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
     162,425      $ 1,624      $ 2,199,824      $ 8,508,587      $ (10,063,975   $ (141,572   $ 504,488  
Net income
     —         —         —         291,477        —        —        291,477  
Other comprehensive income
     —         —         —         —         —        12,772       12,772  
Issuance of common stock for employees:
                  
Employee Stock Purchase Plan
     21        —         5,933        —         —        —        5,933  
Stock options exercised
     17               3,285        —         —        —        3,285  
Treasury stock
     —         —         —         —         (69,741     —        (69,741
Stock-based compensation
     113        2        23,013        —         —        —        23,015  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance July 1, 2023
     162,576      $ 1,626      $ 2,232,055      $ 8,800,064      $ (10,133,716   $ (128,800   $ 771,229  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
 
    
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
     162,709      $ 1,627      $ 2,266,265      $ 9,150,821      $ (10,134,252   $ (134,120   $ 1,150,341  
Net income
     —         —         —         244,933        —        —        244,933  
Other comprehensive loss
     —         —         —         —         —        (14,082 )     (14,082 )
Issuance of common stock for employees:
                  
Employee Stock Purchase Plan
     18        —         4,790        —         —        —        4,790  
Stock options exercised
     83        1        17,611        —         —        —        17,612  
Treasury stock
     —         —         —         —         (13,334 )     —        (13,334 )
 
Stock-based compensation
     116        1        21,706        —         —        —        21,707  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance June 29, 2024
     162,926      $ 1,629      $ 2,310,372      $ 9,395,754      $ (10,147,586 )   $ (148,202 )   $ 1,411,967  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of the consolidated financial statements.
 
9

Table of Contents
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1 Basis of Presentation and Summary of Significant Accounting Policies
Waters Corporation (the “Company,” “we,” “our,” or “us”), a global leader in analytical instruments and software, has pioneered innovations in chromatography, mass spectrometry and thermal analysis serving life, materials and food sciences for more than 65 years. The Company primarily designs, manufactures, sells and services high-performance liquid chromatography (“HPLC”), ultra-performance liquid chromatography (“UPLC” and together with HPLC, referred to as “LC”) and mass spectrometry (“MS”) technology systems and support products, including chromatography columns, other consumable products and comprehensive post-warranty service plans. These systems are complementary products that are frequently employed together
(“LC-MS”)
and sold as integrated instrument systems using common software platforms. LC is a standard technique and is utilized in a broad range of industries to detect, identify, monitor and measure the chemical, physical and biological composition of materials, and to purify a full range of compounds. MS technology, principally in conjunction with chromatography, is employed in drug discovery and development, including clinical trial testing, the analysis of proteins in disease processes (known as “proteomics”), nutritional safety analysis and environmental testing.
LC-MS
instruments combine a liquid phase sample introduction and separation system with mass spectrometric compound identification and quantification. In addition, the Company designs, manufactures, sells and services thermal analysis, rheometry and calorimetry instruments through its TA Instruments product line. These instruments are used in predicting the suitability and stability of fine chemicals, pharmaceuticals, water, polymers, metals and viscous liquids for various industrial, consumer goods and healthcare products, as well as for life science research. The Company is also a developer and supplier of advanced software-based products that interface with the Company’s instruments, as well as other manufacturers’ instruments.
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 expanded Waters’ portfolio and increased exposure to large molecule applications. The Company financed this transaction with a combination of cash on its balance sheet and borrowings under its Credit Facility (as defined below). The Company’s financial results for the three and six months ended June 29, 2024 include the financial results of Wyatt. The Company’s financial results for the three and six months ended July 1, 2023 only include
one-and-a-half
months of the financial results of Wyatt as the closing of the acquisition occurred during the second quarter of 2023. In addition, the Company has completed the purchase price allocation for the Wyatt acquisition and there were no material changes as compared to the Company’s preliminary purchase price allocation for the Wyatt acquisition.
The Company’s interim fiscal quarter typically ends on the thirteenth Saturday of each quarter. Since the Company’s fiscal year end is December 31, the first and fourth fiscal quarters may have more or less than thirteen complete weeks. The Company’s second fiscal quarters for 2024 and 2023 ended on June 29, 2024 and July 1, 2023, respectively.
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions in Form
10-Q
and do not include all of the information and footnote disclosures required for annual financial statements prepared in accordance with generally accepted accounting principles (“U.S. GAAP”) in the United States of America. The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All inter-company balances and transactions have been eliminated.
The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities at the dates of the financial statements. Actual amounts may differ from these estimates under different assumptions or conditions.
It is management’s opinion that the accompanying interim consolidated financial statements reflect all adjustments (which are normal and recurring) that are necessary for a fair statement of the results for the interim periods. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form
10-K
for the year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission (“SEC”) on February 27, 2024.
 
 
10

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 
Risks and Uncertainties
The Company is subject to risks common to companies in the analytical instrument industry, including, but not limited to, global economic and financial market conditions, fluctuations in foreign currency exchange rates, fluctuations in customer demand, development by its competitors of new technological innovations, costs of developing new technologies, levels of debt and debt service requirements, risk of disruption, dependence on key personnel, protection and litigation of proprietary technology, shifts in taxable income between tax jurisdictions and compliance with regulations of the U.S. Food and Drug Administration and similar foreign regulatory authorities and agencies.
Translation of Foreign Currencies
The functional currency of each of the Company’s foreign operating subsidiaries is the local currency of its country of domicile, except for the Company’s subsidiaries in Hong Kong, Singapore and the Cayman Islands, where the underlying transactional cash flows are denominated in currencies other than the respective local currency of domicile. The functional currency of the Hong Kong, Singapore and Cayman Islands subsidiaries is the U.S. dollar, based on the respective entity’s cash flows.
For the Company’s foreign operations, assets and liabilities are translated into U.S. dollars at exchange rates prevailing on the balance sheet date, while revenues and expenses are translated at average exchange rates prevailing during the respective period. Any resulting translation gains or losses are included in accumulated other comprehensive loss in the consolidated balance sheets.
Cash, Cash Equivalents and Investments
Cash equivalents represent highly liquid investments, with original maturities of 90 days or less, while investments with longer maturities are classified as investments. 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 June 29, 2024 and December 31, 2023, $290 million out of $327 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, $228 million out of $327 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 June 29, 2024 and December 31, 2023, respectively.
Accounts Receivable and Allowance for Credit Losses
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company has very limited use of rebates and other cash considerations payable to customers and, as a result, the transaction price determination does not have any material variable consideration. The Company does not consider there to be significant concentrations of credit risk with respect to trade receivables due to the short-term nature of the balances, the Company having a large and diverse customer base, and the Company having a strong historical experience of collecting receivables with minimal defaults. As a result, credit risk is considered low across territories and trade receivables are considered to be a single class of financial asset. The allowance for credit losses is based on a number of factors and is calculated by applying a historical loss rate to trade receivable aging balances to estimate a general reserve balance along with an additional adjustment for any specific receivables with known or anticipated issues affecting the likelihood of recovery. Past due balances with a probability of default based on historical data as well as relevant available forward-looking information are included in the specific adjustment. The historical loss rate is reviewed on at least an annual basis and the allowance for credit losses is reviewed quarterly for any required adjustments. The Company does not have any
off-balance
sheet credit exposure related to its customers.
Trade receivables related to instrument sales are collateralized by the instrument that is sold. If there is a risk of default related to a receivable that is collateralized, then the fair value of the collateral is calculated and adjusted for the cost to
re-possess,
refurbish and
re-sell
the instrument. This adjusted fair value is compared to the receivable balance and the difference would be recorded as the expected credit loss.
 
11

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
 
The following is a summary of the activity of the Company’s allowance for credit losses for the six months ended June 29, 2024 and July 1, 2023 (in thousands):
 
    
Balance at
Beginning of
Period
    
Additions
    
Deductions and
Other
    
Balance at End
of Period
 
Allowance for Credit Losses
           
June 29, 2024
   $ 19,335      $ 1,691      $ (6,882 )    $ 14,144  
July 1, 2023
   $ 14,311      $ 3,075      $ (2,432    $ 14,954  
Fair Value Measurements
In accordance with the accounting standards for fair value measurements and disclosures, certain of the Company’s assets and liabilities are measured at fair value on a recurring basis as of June 29, 2024 and December 31, 2023. Fair values determined by Level 1 inputs utilize observable data, such as quoted prices in active markets. Fair values determined by Level 2 inputs utilize data points other than quoted prices in active markets that are observable either directly or indirectly. Fair values determined by Level 3 inputs utilize unobservable data points for which there is little or no market data, which require the reporting entity to develop its own assumptions.
The following table represents the Company’s assets and liabilities measured at fair value on a recurring basis at June 29, 2024 (in thousands):
 
 
  
Total at
June 29,
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
   $ 934      $ —       $ 934      $ —   
Waters 401(k) Restoration Plan assets
     30,158        30,158        —         —   
Foreign currency exchange contracts
     128        —         128        —   
Interest rate cross-currency swap agreements
     6,010        —         6,010        —   
Interest rate swap cash flow hedge
     206        —         206        —   
  
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 37,436      $ 30,158      $ 7,278      $  
  
 
 
    
 
 
    
 
 
    
 
 
 
Liabilities:
           
Foreign currency exchange contracts
   $ 86      $ —       $ 86      $ —   
Interest rate cross-currency swap agreements
     2,837        —         2,837        —   
Interest rate swap cash flow hedge
     519        —         519        —   
  
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 3,442      $      $ 3,442      $  
  
 
 
    
 
 
    
 
 
    
 
 
 
 
12

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
 
The following table represents the Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2023 (in thousands):

 
  
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
   $ 898      $ —       $ 898      $ —   
Waters 401(k) Restoration Plan assets
     28,995        28,995        —         —   
Foreign currency exchange contracts
     183        —         183        —   
Interest rate cross-currency swap agreements
     4,835        —         4,835        —   
  
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 34,911      $ 28,995      $ 5,916      $  
  
 
 
    
 
 
    
 
 
    
 
 
 
Liabilities:
           
Foreign currency exchange contracts
     207        —         207        —   
Interest rate cross-currency swap agreements
     13,384        —         13,384        —   
Interest rate swap cash flow hedge
     2,974        —         2,974        —   
  
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 16,565      $      $ 16,565      $  
  
 
 
    
 
 
    
 
 
    
 
 
 
Fair Value of 401(k) Restoration Plan Assets
The 401(k) Restoration Plan is a nonqualified defined contribution plan and the assets were held in registered mutual funds and have been classified as Level 1. The fair values of the assets in the plan are determined through market and observable sources from daily quoted prices on nationally recognized securities exchanges.
Fair Value of Cash Equivalents, Investments, Foreign Currency Exchange Contracts, Interest Rate Cross-Currency Swap Agreements and Interest Rate Swap Cash Flow Hedges
The fair values of the Company’s cash equivalents, investments, foreign currency exchange contracts, interest rate cross-currency swap agreements and interest rate swap cash flow hedges are determined through market and observable sources and have been classified as Level 2. These assets and liabilities have been initially valued at the transaction price and subsequently valued, typically utilizing third-party pricing services. The pricing services use many inputs to determine value, including reportable trades, benchmark yields, credit spreads, broker/dealer quotes, current spot rates and other industry and economic events. The Company validates the prices provided by third-party pricing services by reviewing their pricing methods and obtaining market values from other pricing sources.
Fair Value of Other Financial Instruments
The Company’s accounts receivable and accounts payable are recorded at cost, which approximates fair value due to their short-term nature. The carrying value of the Company’s variable interest rate debt approximates fair value due to the variable nature of the interest rate. The carrying value of the Company’s fixed interest rate debt was $1.3 billion at both June 29, 2024 and December 31, 2023. The fair value of the Company’s fixed interest rate debt was estimated using discounted cash flow models, based on estimated current rates offered for similar debt under current market conditions for the Company. The fair value of the Company’s fixed interest rate debt was
estimated to be $1.1 billion and
 $1.2 
billion at June 29, 2024 and December 31, 2023, respectively, using Level 2 inputs.
Derivative Transactions
The Company is a global company that operates in over 35 countries and, as a result, the Company’s net sales, cost of sales, operating expenses and balance sheet amounts are significantly impacted by fluctuations in foreign currency exchange rates. The Company is exposed to currency price risk on foreign currency exchange rate fluctuations when it translates its
non-U.S.
dollar foreign subsidiaries’ financial statements into U.S. dollars and when any of the Company’s subsidiaries purchase or sell products or services in a currency other than its own currency.
 
13

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
 
The Company’s principal strategies in managing exposures to changes in foreign currency exchange rates are to (1) naturally hedge the foreign-currency-denominated liabilities on the Company’s balance sheet against corresponding assets of the same currency, such that any changes in liabilities due to fluctuations in foreign currency exchange rates are typically offset by corresponding changes in assets and (2) mitigate foreign exchange risk exposure of international operations by hedging the variability in the movement of foreign currency exchange rates on a portion of its euro-denominated and
yen-denominated
net asset investments. The Company presents the derivative transactions in financing activities in the statement of cash flows.
Foreign Currency Exchange Contracts
The Company does not specifically enter into any derivatives that hedge foreign-currency-denominated operating assets, liabilities or commitments on its balance sheet, other than a portion of certain third-party accounts receivable and accounts payable, and the Company’s net worldwide intercompany receivables and payables, which are eliminated in consolidation. The Company periodically aggregates its net worldwide balances by currency and then enters into foreign currency exchange contracts that mature within 90 days to hedge a portion of the remaining balance to minimize some of the Company’s currency price risk exposure. The foreign currency exchange contracts are not designated for hedge accounting treatment. Principal hedged currencies include the euro, Japanese yen, British pound, Mexican peso and Brazilian real.
Cash Flow Hedges
The Company’s Credit Facility is a variable borrowing and has interest payments based on a contractually specified interest rate index. The contractually specified index on the Credit Facility is the
3-month
Term SOFR. The variable rate interest payments create interest risk for the Company as interest payments will fluctuate based on changes in the contractually specified interest rate index over the life of the Credit Facility. In order to reduce interest rate risk, the Company enters into interest rate swaps that will effectively
lock-in
the forecasted interest payments on the variable rate borrowing over its term. The interest rate swaps represent cash flow hedges and are assessed for hedge effectiveness each reporting period. When the hedge relationship is highly effective at achieving offsetting changes in cash flows, the Company will record the entire change in fair value of the interest rate swaps in accumulated other comprehensive loss. The amount in accumulated other comprehensive loss is reclassified to income in the period that the underlying transaction impacts consolidated income. If it becomes probable that the forecasted transaction will not occur, the hedge relationship will be
de-designated
and amounts accumulated in other comprehensive loss will be reclassified to income in the current period. Interest settlements due to benchmark interest rate changes are recorded in interest income or interest expense. For the six months ended June 29, 2024, the Company did not have any cash flow hedges that were deemed ineffective.
Interest Rate Cross-Currency Swap Agreements
As of June 29, 2024, the Company had entered into interest rate cross-currency swap derivative agreements with durations up to three years with an aggregate notional value of $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. Under hedge accounting, the change in fair value of the derivative that relates to changes in the foreign currency spot rate are recorded in the currency translation adjustment in other comprehensive income and remain in accumulated other comprehensive loss in stockholders’ equity until the sale or substantial liquidation of the foreign operation. The difference between the interest rate received and paid under the interest rate cross-currency swap derivative agreement is recorded in interest income in the statement of operations.
 
14

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
 
The Company’s foreign currency exchange contracts, interest rate cross-currency swap agreements and interest rate swap agreements designated as cash flow hedges are included in the consolidated balance sheets are classified as follows (in thousands):

 
  
June 29, 2024
 
  
December 31, 2023
 
 
  
Notional

Value
 
  
Fair Value
 
  
Notional

Value
 
  
Fair Value
 
Foreign currency exchange contracts:
           
Other current assets
   $ 16,000      $
128
     $ 24,155      $ 183  
Other current liabilities
   $ 24,428      $ 86      $ 16,000      $ 207  
Interest rate cross-currency swap agreements:
           
Other assets
   $ 405,000      $ 6,010      $ 220,000      $ 4,835  
Other liabilities
   $ 220,000      $ 2,837      $ 405,000      $ 13,384  
Accumulated other comprehensive income (loss)
      $ 13,589         $ (7,975
Interest rate swap cash flow hedges:
           
Other assets
   $ 50,000      $ 206      $ —       $ —   
Other liabilities
   $ 50,000      $ 519      $ 100,000      $ 2,974  
Accumulated other comprehensive loss
      $ (314 )       $ (2,974
The following is a summary of the activity included in the consolidated statements of operations and statements of comprehensive income related to the foreign currency exchange contracts, interest rate cross-currency swap agreements and interest rate swap agreements designated as cash flow hedges (in thousands):
 
 
  
Financial
  
Three Months Ended
 
  
Six Months Ended
 
 
  
Statement

Classification
  
June 29,
2024
 
  
July 1, 2023
 
  
June 29,
2024
 
  
July 1, 2023
 
Foreign currency exchange contracts:
              
Realized gains on closed contracts
  
Cost of sales
   $ 794      $ 675      $ 1,051      $ 705  
Unrealized gains (losses) on open contracts
  
Cost of sales
     117        (213 )      66        (291
       
 
 
    
 
 
    
 
 
    
 
 
 
Cumulative net
pre-tax
gains
  
Cost of sales
   $ 911      $ 462      $ 1,117      $ 414  
       
 
 
    
 
 
    
 
 
    
 
 
 
Interest rate cross-currency swap agreements:
           
Interest earned
  
Interest income
   $ 2,590      $ 2,673      $ 5,127      $ 5,328  
Unrealized gains (losses) on open contracts
   Other comprehensive
 income
   $ 6,647      $ (1,400    $ 21,564      $ (8,656
Interest rate swap cash flow hedges:
           
Interest earned
  
Interest income
   $ 278      $ —       $ 574      $ —   
Unrealized gains (losses) on open contracts
   Other comprehensive
 income
   $ 551      $ —       $ 2,660      $ —   
Stockholders’ Equity
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 six months ended July 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 six months ended June 29, 2024 and July 1, 2023, respectively.
 
15

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
 
Product Warranty Costs
The Company accrues estimated product warranty costs at the time of sale, which are included in cost of sales in the consolidated statements of operations. While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers, the Company’s warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. The amount of the accrued warranty liability is based on historical information, such as past experience, product failure rates, number of units repaired and estimated costs of material and labor. The liability is reviewed for reasonableness at least quarterly.
The following is a summary of the activity of the Company’s accrued warranty liability for the six months ended June 29, 2024 and July 1, 2023 (in thousands):
 
    
Balance at

Beginning

of Period
 
  
Accruals for

Warranties
 
  
Settlements

Made
 
  
Balance at

End of

Period
 
Accrued warranty liability:
           
June 29, 2024
   $ 12,050      $ 1,880      $ (3,493 )    $ 10,437  
July 1, 2023
   $ 11,949      $ 3,983      $ (3,523    $ 12,409  
Restructuring
In March 2024, the Company had a reduction in workforce that impacted approximately 2%
of the Company’s employees, primarily in China, where there had been a significant decline in sales as a result of lower customer demand, which resulted in the Company incurring approximately
$8 
million of severance-related costs. During the six months ended June 29, 2024, the Company paid
$11 
million of severance-related costs in connection with the workforce reductions that occurred in March 2024 and July 2023, with the majority of the remaining costs to be paid in the second half of 2024. The accrued restructuring expense was approximately
$4 million at June 29, 2024 and $8 
million at December 31, 2023 and included in other current liabilities on the consolidated balance sheets.
Subsequent Event
On July 12, 2024 the Company entered into a private Master Note Facility Agreement (the “Shelf Agreement”) pursuant to which the Company may, at its option, authorize the issuance and sale of senior promissory notes (the “Shelf Notes”) up to an aggregate principal amount of
$200
 million. The purchase of any Shelf Notes is in the sole discretion of NYL Investors LLC. Any Shelf Notes sold or issued pursuant to the Shelf Agreement will mature no more than
15
years after the issuance date and will bear interest on the unpaid balance from the issuance date at the rates specified in the Shelf Agreement. As of July 31, 2024 the Company has
not
issued any Shelf Notes under the Shelf Agreement.
2 Revenue Recognition
The Company’s deferred revenue liabilities in the consolidated balance sheets consist of the obligation on instrument service contracts and customer payments received in advance, prior to transfer of control of the instrument. The Company records deferred revenue primarily related to its service contracts, where consideration is billable at the beginning of the service period.
 
16

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
 
The following is a summary of the activity of the Company’s deferred revenue and customer advances for the six months ended June 29, 2024 and July 1, 2023 (in thousands):
 
    
June 29, 2024
    
July 1, 2023
 
Balance at the beginning of the period
   $ 323,516      $ 285,175  
Recognition of revenue included in balance at beginning of the period
     (192,050 )      (176,508
Revenue deferred during the period, net of revenue recognized
     251,599        284,863  
  
 
 
    
 
 
 
Balance at the end of the period
   $ 383,065      $ 393,530  
  
 
 
    
 
 
 
The Company classified $
66
 million and $
67
 million of deferred revenue and customer advances in other long-term liabilities at June 29, 2024 and December 31, 2023, respectively.
The amount of deferred revenue and customer advances equals the transaction price allocated to unfulfilled performance obligations for the period presented. Such amounts are expected to be recognized in the future as follows (in thousands):
 
    
June 29, 2024
 
Deferred revenue and customer advances expected to be recognized in:
  
One year or less
   $ 316,933  
13-24
months
     41,395  
25 months and beyond
     24,737  
  
 
 
 
Total
   $ 383,065  
  
 
 
 
3 Marketable Securities
The Company’s marketable securities within cash equivalents and investments included in the consolidated balance sheets consist of time deposits that mature in one year or less with an amortized cost and a fair value of $0.9 million at both June 29, 2024 and December 31, 2023.
4 Inventories
Inventories are classified as follows (in thousands):
 
    
June 29, 2024
    
December 31, 2023
 
Raw materials
   $ 236,091      $ 233,952  
Work in progress
     24,976        20,198  
Finished goods
     261,860        262,086  
  
 
 
    
 
 
 
Total inventories
   $ 522,927      $ 516,236  
  
 
 
    
 
 
 
5 Goodwill and Other Intangibles
The carrying amount of goodwill was $1.3 billion at both June 29, 2024 and December 31, 2023.
 
17

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
 
The Company’s intangible assets included in the consolidated balance sheets are detailed as follows (dollars in thousands):
 
 
  
June 29, 2024
 
  
December 31,
2023
 
 
  
Gross
Carrying
Amount
 
  
Accumulated
Amortization
 
  
Weighted-
Average
Amortization
Period
 
  
Gross
Carrying
Amount
 
  
Accumulated
Amortization
 
  
Weighted-
Average
Amortization
Period
 
Capitalized software
   $ 657,175      $ 499,290        5 years      $ 660,273      $ 495,317        5 years  
Purchased intangibles
     611,721        218,781        10 years        614,357        197,154        10 years  
Trademarks
     9,680        —            —        9,680        —            —  
Licenses
     14,665        9,029        7 years        14,798        8,429        7 years  
Patents and other intangibles
     114,537        84,280        8 years        111,962        80,983        8 years  
  
 
 
    
 
 
       
 
 
    
 
 
    
Total
   $ 1,407,778      $ 811,380        7 years      $ 1,411,070      $ 781,883        7 years  
  
 
 
    
 
 
       
 
 
    
 
 
    
The Company capitalized intangible assets in the amounts of $10 million and $431 million in the three months ended June 29, 2024 and July 1, 2023, respectively, and $20 million and $445 
million in the six months ended June 29, 2024 and July 1, 2023, respectively. The increases in intangible assets in the three and six months ended July 1, 2023 were a result of the Wyatt acquisition.

The gross carrying value of intangible assets and accumulated amortization for intangible assets decreased by $
23
 million and $
22
 million, respectively, in the six months ended June 29, 2024 due to the effects of foreign currency translation.
Amortization expense for intangible assets was $
25
 million and $
18
 million for the three months ended June 29, 2024 and July 1, 2023. Amortization expense for intangible assets was $
51
 million and $
30
 million for the six months ended June 29, 2024 and July 1, 2023, respectively. Amortization expense for intangible assets is estimated to be $
105
 million per year for each of the next five years.
6 Debt
The Company has a five-year, $2.0 billion revolving credit facility (the “Credit Facility”) that matures in September 2026. As of June 29, 2024 and December 31, 2023, the Credit Facility had a total of $0.8 billion and $1.1 billion outstanding, respectively.
The interest rates applicable under the Credit Facility are, at the Company’s option, equal to either the alternate base rate (which is a rate per annum equal to the greatest of (1) the prime rate in effect on such day, (2) the Federal Reserve Bank of New York Rate on such day plus
1
2
of 1% per annum and (3) the adjusted Term SOFR rate for a
one-month
interest period as published two U.S. Government Securities Business Days prior to such day (or if such day is not a U.S. Government Securities Business Day, the immediately preceding U.S. Government Securities Business Day), plus 1% annum) or the applicable 1, 3 or 6 month adjusted Term SOFR or EURIBO rate for euro-denominated loans, in each case, plus an interest rate margin based upon the Company’s leverage ratio, which can range between 0 and 12.5 basis points for alternate base rate loans and between 80 and 112.5 basis points for Term SOFR or EURIBO rate loans. The facility fee on the Credit Facility ranges between 7.5 and 25 basis points per annum, based on the leverage ratio, of the amount of the revolving facility commitments and the outstanding term loan.
The Credit Facility requires that the Company comply with an interest coverage ratio test of not less than 3.50:1 as of the end of any fiscal quarter for any period of four consecutive fiscal quarters and a leverage ratio test of not more than 3.50:1 as of the end of any fiscal quarter. In addition, the Credit Facility includes negative covenants, affirmative covenants, representations and warranties and events of default that are customary for investment grade credit facilities.
As of both June 29, 2024 and December 31, 2023, the Company had a total of $1.3 
billion of outstanding senior unsecured notes. Interest on the fixed rate senior unsecured notes is payable semi-annually each year. Interest on the floating rate senior unsecured notes is payable quarterly. The Company may prepay all or some of the senior unsecured notes at any time in an amount not less than 10% of the aggregate principal amount outstanding. In the event of a

 
18

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
 
change in control of the Company (as defined in the note purchase agreement), the Company may be required to prepay the senior unsecured notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest.
These senior unsecured notes require that the Company comply with an interest coverage ratio test of not less than 3.50:1 for any period of four consecutive fiscal quarters and a leverage ratio test of not more than 3.50:1 as of the end of any fiscal quarter. In addition, these senior unsecured notes include customary negative covenants, affirmative covenants, representations and warranties and events of default.
 
The Company had the following outstanding debt at June 29, 2024 and December 31, 2023 (in thousands):

 
  
June 29, 2024
 
  
December 31, 2023
 
Senior unsecured notes - Series G - 3.92%, due June 2024
            50,000  
  
 
 
    
 
 
 
Total notes payable and debt, current
            50,000  
Senior unsecured notes - Series K - 3.44%, due May 2026
     160,000        160,000  
Senior unsecured notes - Series L - 3.31%, due September
2026
     200,000        200,000  
Senior unsecured notes - Series M - 3.53%, due September
2029
     300,000        300,000  
Senior unsecured notes - Series N - 1.68%, due March 2026
     100,000        100,000  
Senior unsecured notes - Series O - 2.25%, due March 2031
     400,000        400,000  
Senior unsecured notes - Series P - 4.91%, due May 2028
     50,000        50,000  
Senior unsecured notes - Series Q - 4.91%, due May 2030
     50,000        50,000  
Credit agreement
     750,000        1,050,000  
Unamortized debt issuance costs
     (3,991 )      (4,487
  
 
 
    
 
 
 
Total long-term debt
     2,006,009        2,305,513  
  
 
 
    
 
 
 
Total debt
   $ 2,006,009      $ 2,355,513  
  
 
 
    
 
 
 
As of June 29, 2024 and December 31, 2023, the Company had a total amount available to borrow under the Credit Facility of $1.2 billion and $0.9 billion, respectively, after outstanding letters of credit. The weighted-average interest rates applicable to the senior unsecured notes and credit agreement borrowings collectively were 4.44% and 4.69% at June 29, 2024 and December 31, 2023, respectively. As of June 29, 2024, the Company was in compliance with all debt covenants.
The Company and its foreign subsidiaries also had available short-term lines of credit totaling $111 million and $114 million at June 29, 2024 and December 31, 2023, respectively, for the purpose of short-term borrowing and issuance of commercial guarantees. None of the Company’s foreign subsidiaries had outstanding short-term borrowings as of June 29, 2024 or December 31, 2023.
7 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 June 29, 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 arising from qualifying activities in Singapore increased the Company’s net income for the six months ended June 29, 2024 and July 1, 2023 by $5 million and $7 million, respectively, and increased the Company’s net income per diluted share by $0.09 and $0.11, respectively.
The Company’s effective tax rate for the three months ended June 29, 2024 and July 1, 2023 was 15.7% and 16.5%,
respectively. The decrease between the effective tax rates can be primarily attributed to a higher tax benefit related to stock-based compensation in the three months ended June 29, 2024, with the remaining difference due to the proportionate amounts of pre-tax income recognized in jurisdictions with different effective tax rates. 

 
19

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
 
The Company’s effective tax rate for the six months ended June 29, 2024 and July 1, 2023 was 13.8% and 15.6%, respectively. The decrease between the effective tax rates can primarily be attributed to a higher tax benefit related to stock-based compensation in 2024, the impact of discrete tax benefits in the current year and differences in the proportionate amounts of
pre-tax
income recognized in jurisdictions with different effective tax rates.
The Company accounts for its uncertain tax return positions in accordance with the accounting standards for income taxes, which require financial statement reporting of the expected future tax consequences of uncertain tax reporting positions on the presumption that all concerned tax authorities possess full knowledge of those tax reporting positions, as well as all of the pertinent facts and circumstances, but prohibit any discounting of unrecognized tax benefits associated with those reporting positions for the time value of money. The Company continues to classify interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.
The Company’s gross unrecognized tax benefits, excluding interest and penalties, at June 29, 2024 and July 1, 2023 were $15 million and $30 million, respectively. With limited exceptions, the Company is no longer subject to tax audit examinations in significant jurisdictions for the years ended on or before December 31, 2018. The Company continuously monitors the lapsing of statutes of limitations on potential tax assessments for related changes in the measurement of unrecognized tax benefits, related net interest and penalties, and deferred tax assets and liabilities.
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 three and six months ended June 29, 2024. The Company continues to monitor the adoption of the Pillar Two rules in additional jurisdictions.
8 Litigation
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 it has meritorious arguments in its current litigation matters and believes any outcome, either individually or in the aggregate, will not be material to the Company’s financial position, results of operations or cash flows. During the six months ended June 29, 2024, the Company recorded and paid
$10 
million of patent litigation settlement and related costs.
9 Other Commitments and Contingencies
The Company licenses certain technology and software from third parties in the course of ordinary business. Future minimum license fees payable under existing license agreements as of June 29, 2024 are immaterial for the years ended December 31, 2024 and thereafter.
The Company enters into standard indemnification agreements in its ordinary course of business. Pursuant to these agreements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners or customers, in connection with patent, copyright or other intellectual property infringement claims by any third party with respect to its current products, as well as claims relating to property damage or personal injury resulting from the performance of services by the Company or its subcontractors. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. Historically, the Company’s costs to defend lawsuits or settle claims relating to such indemnity agreements have been minimal and management accordingly believes the estimated fair value of these agreements is immaterial.
 
20

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
 
10 Earnings Per Share
Basic and diluted EPS calculations are detailed as follows (in thousands, except per share data): 
 
 
  
Three Months Ended June 29, 2024
 
 
  
Net Income
 
  
Weighted-
Average Shares
 
  
Per Share
 
 
  
(Numerator)
 
  
(Denominator)
 
  
Amount
 
Net income per basic common share
   $ 142,737        59,339      $ 2.41  
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities
     —         112        (0.01 )
  
 
 
    
 
 
    
 
 
 
Net income per diluted common share
   $ 142,737        59,451      $ 2.40  
  
 
 
    
 
 
    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
Three Months Ended July 1, 2023
 
 
  
Net Income
 
  
Weighted-
Average Shares
 
  
Per Share
 
 
  
(Numerator)
 
  
(Denominator)
 
  
Amount
 
Net income per basic common share
   $ 150,554        58,857      $ 2.56  
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities
     —         153        (0.01
  
 
 
    
 
 
    
 
 
 
Net income per diluted common share
   $ 150,554        59,010      $ 2.55  
  
 
 
    
 
 
    
 
 
 


    
Six Months Ended June 29, 2024
 
    
Net Income
    
Weighted-
Average Shares
    
Per Share
 
    
(Numerator)
    
(Denominator)
    
Amount
 
Net income per basic common share
   $ 244,933        59,287      $ 4.13  
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities
     —         158        (0.01
  
 
 
    
 
 
    
 
 
 
Net income per diluted common share
   $ 244,933        59,445      $ 4.12  
  
 
 
    
 
 
    
 
 
 
 
 
  
Six Months Ended July 1, 2023
 
 
  
Net Income
 
  
Weighted-
Average Shares
 
  
Per Share
 
 
  
(Numerator)
 
  
(Denominator)
 
  
Amount
 
Net income per basic common share
   $ 291,477        58,703      $ 4.97  
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities
     —         206        (0.02
  
 
 
    
 
 
    
 
 
 
Net income per diluted common share
   $ 291,477        58,909      $ 4.95  
  
 
 
    
 
 
    
 
 
 
The Company had 270 thousand and 128 thousand stock options that were antidilutive due to having higher exercise prices than the Company’s average stock price during the three and six months ended June 29, 2024, respectively. For the three and six months ended July 1, 2023, the Company had 362 thousand and 260 thousand stock options that were antidilutive, respectively. These securities were not included in the computation of diluted EPS. The effect of dilutive securities was calculated using the treasury stock method.
 
21

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
 
11 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are detailed as follows (in thousands):
 
    
Currency
Translation
    
Unrealized
Loss on
Retirement
Plans
    
Unrealized
Loss on
Derivative
Instruments
    
Accumulated
Other
Comprehensive
Loss
 
Balance at December 31, 2023
   $ (128,359    $ (3,501    $ (2,260    $ (134,120
Other comprehensive income (loss), net of tax
     (16,215      111        2,022        (14,082
  
 
 
    
 
 
    
 
 
    
 
 
 
Balance at June 29, 2024
   $ (144,574 )    $ (3,390 )    $ (238 )    $ (148,202 )
  
 
 
    
 
 
    
 
 
    
 
 
 
12 Business Segment Information
The Company’s business activities, for which discrete financial information is available, are regularly reviewed and evaluated by the chief operating decision maker. As a result of this evaluation, the Company determined that it has two operating segments: Waters
TM
and TA
TM
.
The Waters operating segment is primarily in the business of designing, manufacturing, selling and servicing LC and MS instruments, columns and other precision chemistry consumables that can be integrated and used along with other analytical instruments. Operations of the Wyatt business are part of the Waters operating segment. The TA operating segment is primarily in the business of designing, manufacturing, selling and servicing thermal analysis, rheometry and calorimetry instruments. The Company’s two operating segments have similar economic characteristics; product processes; products and services; types and classes of customers; methods of distribution; and regulatory environments. Because of these similarities, the two segments have been aggregated into one reporting segment for financial statement purposes.
Net sales for the Company’s products and services are as follows for the three and six months ended June 29, 2024 and July 1, 2023 (in thousands):
 
    
Three Months Ended
    
Six Months Ended
 
    
June 29, 2024
    
July 1, 2023
    
June 29, 2024
    
July 1, 2023
 
Product net sales:
           
Waters instrument systems
   $ 235,228      $ 279,940      $ 426,487      $ 524,151  
Chemistry consumables
     141,085        135,919        275,292        269,434  
TA instrument systems
     58,831        62,067        109,516        120,798  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total product sales
     435,144        477,926        811,295        914,383  
Service net sales:
           
Waters service
     246,248        237,376        482,681        461,725  
TA service
     27,137        25,274        51,392        49,142  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total service sales
     273,385        262,650        534,073        510,867  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total net sales
   $ 708,529      $ 740,576      $ 1,345,368      $ 1,425,250  
  
 
 
    
 
 
    
 
 
    
 
 
 
 
22

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
 
Net sales are attributable to geographic areas based on the region of destination. Geographic sales information is presented below for the three and six months ended June 29, 2024 and July 1, 2023 (in thousands):
 
    
Three Months Ended
    
Six Months Ended
 
    
June 29, 2024
    
July 1, 2023
    
June 29, 2024
    
July 1, 2023
 
Net Sales:
           
Asia:
           
China
   $ 100,105      $ 114,981      $ 185,850      $ 231,046  
Japan
     33,352        37,380        68,899        83,874  
Asia Other
     103,974        102,262        190,241        192,784  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total Asia
     237,431        254,623        444,990        507,704  
Americas:
           
United States
     231,931        238,955        434,770        441,260  
Americas Other
     42,537        43,972        80,869        88,088  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total Americas
     274,468        282,927        515,639        529,348  
Europe
     196,630        203,026        384,739        388,198  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total net sales
   $ 708,529      $ 740,576      $ 1,345,368      $ 1,425,250  
  
 
 
    
 
 
    
 
 
    
 
 
 
Net sales by customer class are as follows for the three and six months ended June 29, 2024 and July 1, 2023 (in thousands):
 
    
Three Months Ended
    
Six Months Ended
 
    
June 29, 2024
    
July 1, 2023
    
June 29, 2024
    
July 1, 2023
 
Pharmaceutical
   $ 415,747      $ 426,744      $ 789,954      $ 811,642  
Industrial
     221,385        229,655        416,719        439,305  
Academic and government
     71,397        84,177        138,695        174,303  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total net sales
   $ 708,529      $ 740,576      $ 1,345,368      $ 1,425,250  
  
 
 
    
 
 
    
 
 
    
 
 
 
Net sales for the Company recognized at a point in time versus over time are as follows for the three and six months ended June 29, 2024 and July 1, 2023 (in thousands):
 
    
Three Months Ended
    
Six Months Ended
 
    
June 29, 2024
    
July 1, 2023
    
June 29, 2024
    
July 1, 2023
 
Net sales recognized at a point in time:
           
Instrument systems
   $ 294,059      $ 342,007      $ 536,003      $ 644,949  
Chemistry consumables
     141,085        135,919        275,292        269,434  
Service sales recognized at a point in time (time & materials)
     92,075        92,711        175,400        180,918  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total net sales recognized at a point in time
     527,219        570,637        986,695        1,095,301  
Net sales recognized over time:
           
Service and software maintenance sales recognized over time (contracts)
     181,310        169,939        358,673        329,949  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total net sales
   $ 708,529      $ 740,576      $ 1,345,368      $ 1,425,250  
  
 
 
    
 
 
    
 
 
    
 
 
 
 
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
 
13 Recent Accounting Standard Changes and Developments
Recently Issued Accounting Standards
There were no additions to the new accounting pronouncements not yet adopted as described in our Annual Report on Form
10-K
for the year ended December 31, 2023. Other amendments to U.S. GAAP that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our condensed consolidated financial statements upon adoption.
 
24


Table of Contents

Item 2: Managements 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 expanded 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 and six months ended June 29, 2024 include the financial results of Wyatt. The Company’s financial results for the three and six months ended July 1, 2023 only include one-and-a-half months of Wyatt’s financial results as the closing of the acquisition occurred during the second quarter of 2023.

Financial Overview

The Company’s operating results are as follows for the three and six months ended June 29, 2024 and July 1, 2023 (dollars in thousands, except per share data):

 

     Three Months Ended     Six Months Ended  
     June 29,
2024
    July 1,
2023
    %
change
    June 29,
2024
    July 1,
2023
    % change  

Revenues:

            

Product sales

   $ 435,144     $ 477,926       (9 %)    $ 811,295     $ 914,383       (11 %) 

Service sales

     273,385       262,650       4     534,073       510,867       5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net sales

     708,529       740,576       (4 %)      1,345,368       1,425,250       (6 %) 

Costs and operating expenses:

            

Cost of sales

     288,244       301,076       (4 %)      550,030       585,456       (6 %) 

Selling and administrative expenses

     173,247       186,953       (7 %)      347,783       368,909       (6 %) 

Research and development expenses

     46,182       45,873       1     90,777       88,564       2

Purchased intangibles amortization

     11,744       6,815       72     23,578       8,294       184

Litigation provision

     —        —        —        10,242       —        100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     189,112       199,859       (5 %)      322,958       374,027       (14 %) 

Operating income as a % of sales

     26.7     27.0       24.0     26.2  

Other income, net

     (302     (352     (14 %)      1,957       1,036       89

Interest expense, net

     (19,398     (19,232     1     (40,647     (29,615     37
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     169,412       180,275       (6 %)      284,268       345,448       (18 %) 

Provision for income taxes

     26,675       29,721       (10 %)      39,335       53,971       (27 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 142,737     $ 150,554       (5 %)    $ 244,933     $ 291,477       (16 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per diluted common share

   $ 2.40     $ 2.55       (6 %)    $ 4.12     $ 4.95       (17 %) 

 

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Table of Contents

The Company’s net sales decreased 4% in the second quarter of 2024, as compared to the second quarter of 2023, with foreign currency translation decreasing total sales growth by 2%. For the first half of 2024, the Company’s net sales decreased 6% with the effect of foreign currency translation decreasing sales growth by 1% as compared to the first half of 2023. In both the second quarter and first half of 2024, the Company’s net sales were negatively impacted by our customers delaying the purchase of our instrument systems as they remained cautious with their capital spending during the first half of 2024. The Wyatt acquisition increased sales growth by 2% and 3% for the second quarter and first half of 2024, respectively. In addition, the Company’s first half of 2024 had one less calendar day than the first half of 2023. At current foreign currency exchange rates, the Company expects that foreign currency translation will have a negative impact on sales for the remainder of 2024.

Instrument system sales decreased 14% and 17% for the second quarter and first half of 2024, respectively, primarily driven by weaker customer demand across all major regions. The decline in instrument system sales was broad-based across all of our instrument systems and was led by our mass spectrometry instrument systems, which are higher priced instruments that are significantly impacted by the timing and level of funding our academic and government customers receive. The Wyatt acquisition increased instrument system sales growth by 4% for both the second quarter and first half of 2024. Foreign currency translation decreased instrument system sales growth by 1% in the second quarter of 2024 but had no impact in the first half of 2024.

Recurring revenues (combined sales of precision chemistry consumables and services) increased 4% for both the second quarter and first half of 2024, with foreign currency translation decreasing sales growth by 2% in both the second quarter and first half of 2024. Service revenues increased 4% and 5% for the second quarter and first half of 2024, respectively. Wyatt contributed 1% and 2% to service revenue growth for the second quarter and first half of 2024, respectively. Chemistry sales growth increased 4% and 2% for the second quarter and first half of 2024, respectively, and was impacted by the lower customer demand in China for our products.

Operating income decreased for the second quarter and first half of 2024, primarily due to lower sales volume as well as the Wyatt acquisition-related retention expenses and purchased intangibles amortization, which collectively decreased operating income by 8% and 10%, respectively. In addition, operating income for the first half of 2024 was impacted by first quarter of 2024 severance-related costs associated with a workforce reduction primarily in China and a litigation settlement, which collectively decreased operating income by 5%. These costs were partially offset by cost savings from recent workforce reductions and the absence of transaction costs related to the Wyatt acquisition. The negative effect of foreign currency translation lowered operating income by approximately $9 million and $16 million for the second quarter and first half of 2024, respectively.

The Company generated $317 million and $215 million of net cash from operating activities in the first half of 2024 and 2023, respectively, with the $102 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 $65 million and $81 million in the first half of 2024 and 2023, respectively.

 

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Table of Contents

Results of Operations

Sales by Geography

Geographic sales information is presented below for the three and six months ended June 29, 2024 and July 1, 2023 (dollars in thousands):

 

     Three Months Ended     Six Months Ended  
     June 29,
2024
     July 1, 2023      % change     June 29, 2024      July 1, 2023      % change  

Net Sales:

                

Asia:

                

China

   $ 100,105      $ 114,981        (13 %)    $ 185,850      $ 231,046        (20 %) 

Japan

     33,352        37,380        (11 %)      68,899        83,874        (18 %) 

Asia Other

     103,974        102,262        2     190,241        192,784        (1 %) 
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total Asia

     237,431        254,623        (7 %)      444,990        507,704        (12 %) 

Americas:

                

United States

     231,931        238,955        (3 %)      434,770        441,260        (1 %) 

Americas Other

     42,537        43,972        (3 %)      80,869        88,088        (8 %) 
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total Americas

     274,468        282,927        (3 %)      515,639        529,348        (3 %) 

Europe

     196,630        203,026        (3 %)      384,739        388,198        (1 %) 
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total net sales

   $ 708,529      $ 740,576        (4 %)    $ 1,345,368      $ 1,425,250        (6 %) 
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Geographically, the decline in the Company’s sales in the second quarter and first half of 2024 was broad-based across most major regions, led by China and Japan, while sales in India increased 11% and 13% in the second quarter and first half of 2024, respectively. The broad-based decline in sales can be attributed to the lower demand for our instrument systems as customers delayed the purchase of these products. Excluding China sales, the Company’s sales declined 3% for both the second quarter and first half of 2024. Foreign currency translation decreased sales growth in Asia by 5% and 4% for the second quarter and first half of 2024 respectively. Foreign currency translation decreased sales growth in Japan by 12% and 9% for the second quarter and first half of 2024, respectively.

Sales by Trade Class

Net sales by customer class are presented below for the three and six months ended June 29, 2024 and July 1, 2023 (dollars in thousands):

 

     Three Months Ended     Six Months Ended  
     June 29,
2024
     July 1, 2023      % change     June 29,
2024
     July 1, 2023      % change  

Pharmaceutical

   $ 415,747      $ 426,744        (3 %)    $ 789,954      $ 811,642        (3 %) 

Industrial

     221,385        229,655        (4 %)      416,719        439,305        (5 %) 

Academic and government

     71,397        84,177        (15 %)      138,695        174,303        (20 %) 
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total net sales

   $ 708,529      $ 740,576        (4 %)    $ 1,345,368      $ 1,425,250        (6 %) 
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

During the second quarter of 2024, sales to pharmaceutical customers decreased 3%, as growth in India was offset by weakness across most other major regions, with foreign currency translation decreasing pharmaceutical sales growth by 2% and Wyatt contributing 3% to the Company’s pharmaceutical sales growth. Combined sales to industrial customers, which include material characterization, food, environmental and fine chemical markets, decreased 4% in the second quarter of 2024, with foreign currency translation decreasing sales growth by 1% and Wyatt contributing 1% to industrial sales growth. Combined sales to academic and government customers decreased 15% in the second quarter of 2024, with foreign currency translation decreasing sales growth by 1% and Wyatt contributing 2% to the Company’s academic and government sales growth.

 

 

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During the first half of 2024, sales to pharmaceutical customers decreased 3%, primarily driven by weakness in customer demand in China, with foreign currency translation decreasing pharmaceutical sales growth by 1% and Wyatt contributing 4%. Combined sales to industrial customers decreased 5%, 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. Combined sales to academic and government customers decreased 20%, with foreign currency translation having minimal impact on sales growth and Wyatt contributing 3% to the Company’s academic and government sales growth. This overall decline in sales of 20% to our academic and government customers in the first half of 2024 compares to a 30% increase in academic and government sales in the first half of 2023, which represents a two-year compound annual growth rate of 2%.

Waters Products and Services Net Sales

Net sales for Waters products and services were as follows for the three and six months ended June 29, 2024 and July 1, 2023 (dollars in thousands):

 

     Three Months Ended  
     June 29, 2024      % of
Total
    July 1, 2023      % of
Total
    % change  

Waters instrument systems

   $ 235,228        38   $ 279,940        43     (16 %) 

Chemistry consumables

     141,085        22     135,919        21     4
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total Waters product sales

     376,313        60     415,859        64     (10 %) 

Waters service

     246,248        40     237,376        36     4
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total Waters net sales

   $ 622,561        100   $ 653,235        100     (5 %) 
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

     Six Months Ended  
     June 29, 2024      % of
Total
    July 1, 2023      % of
Total
    % change  

Waters instrument systems

   $ 426,487        36   $ 524,151        42     (19 %) 

Chemistry consumables

     275,292        23     269,434        21     2
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total Waters product sales

     701,779        59     793,585        63     (12 %) 

Waters service

     482,681        41     461,725        37     5
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total Waters net sales

   $ 1,184,460        100   $ 1,255,310        100     (6 %) 
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Waters products and service sales decreased 5% and 6% for the second quarter and first half of 2024, respectively, with the effect of foreign currency translation decreasing sales growth by 2% and 1% for the second quarter and first half of 2024, respectively. The contribution from Wyatt increased Waters products and service sales growth by 3% for both the second quarter and first half of 2024. Waters instrument system sales decreased by 16% and 19% for the second quarter and first half of 2024, respectively, due to weaker customer demand across most major regions. Wyatt’s instrument system sales contributed 5% to Waters instrument system sales growth for both the second quarter and first half of 2024. The increase in Waters chemistry consumables sales was primarily due to the continued demand in most major geographies, driven by the uptake in columns and application-specific testing kits to pharmaceutical customers, partially offset by the negative impact from foreign currency translation which decreased sales growth by 1% in both the second quarter and first half of 2024. Waters service sales increased 4% and 5% for the second quarter and first half of 2024, respectively, 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 2% and 1% in the second quarter and first half of 2024, respectively. Wyatt service revenues added 1% and 2% to Waters service revenue growth for the second quarter and first half of 2024, respectively.

 

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TA Product and Services Net Sales

Net sales for TA products and services were as follows for the three and six months ended June 29, 2024 and July 1, 2023 (dollars in thousands):

 

     Three Months Ended  
     June 29, 2024      % of
Total
    July 1, 2023      % of
Total
    % change  

TA instrument systems

   $ 58,831        68   $ 62,067        71     (5 %) 

TA service

     27,137        32     25,274        29     7
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total TA net sales

   $ 85,968        100   $ 87,341        100     (2 %) 
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

     Six Months Ended  
     June 29, 2024      % of
Total
    July 1, 2023      % of
Total
    % change  

TA instrument systems

   $ 109,516        68   $ 120,798        71     (9 %) 

TA service

     51,392        32     49,142        29     5
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total TA net sales

   $ 160,908        100   $ 169,940        100     (5 %) 
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

TA sales declined 2% and 5% for the second quarter and first half of 2024, respectively, due to lower customer demand for TA instrument systems across most major regions. Foreign currency translation decreased sales by 2% for both the second quarter and first half of 2024.

Cost of Sales

Cost of sales decreased by 4% and 6% in the second quarter and first half of 2024, respectively. The decrease in these periods is primarily due to lower sales volume and changes in sales mix. 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.

Selling and Administrative Expenses

Selling and administrative expenses decreased 7% and 6% in the second quarter and first half of 2024, respectively. The decrease in these periods is primarily due to the decline in salary expense resulting from lower headcount from the recent reductions in workforce and a decrease in the Wyatt acquisition diligence and integration costs incurred in the second quarter and first half of 2023, which declined $4 million and $12 million, respectively. These decreases were partially offset by the increases of $2 million and $9 million related to Wyatt acquisition-related retention expenses in the second quarter and first half of 2024, respectively. The effect of foreign currency translation increased selling and administrative expenses by 1% for both the second quarter and first half of 2024.

As a percentage of net sales, selling and administrative expenses were 24.5% and 25.9% for the second quarter and first half of 2024, respectively, and 25.2% and 25.9% for the second quarter and first half of 2023, respectively.

Research and Development Expenses

Research and development expenses increased 1% and 2% in the second quarter and first half of 2024, respectively. The increase in these periods was driven by costs associated with the development of new product and technology initiatives. The impact of foreign currency exchange increased expenses by 1% for both the second quarter and first half of 2024.

Purchased Intangibles Amortization

The increase in purchased intangibles amortization of $5 million and $15 million in the second quarter and first half of 2024, respectively, is primarily due to the Wyatt acquisition intangible assets.

 

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Litigation Provisions

The Company incurred a $10 million patent litigation settlement in the first half of 2024.

Interest Expense, net

The increase in interest expense for both the second quarter and first half of 2024 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 June 29, 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 $5 million and $7 million and increased the Company’s net income per diluted share by $0.09 and $0.11 for the second quarter of 2024 and 2023, respectively.

The Company’s effective tax rate for the second quarter of 2024 and 2023 was 15.7% and 16.5%, respectively. The decrease in the effective tax rate can be primarily attributed to a higher tax benefit related to stock-based compensation in the second quarter of 2024, with the remaining difference due to the proportionate amounts of pre-tax income recognized in jurisdictions with different effective tax rates.

The Company’s effective tax rate for the first half of 2024 and 2023 was 13.8% and 15.6%, respectively. The decrease in the effective tax rate can be attributed to a higher tax benefit related to stock-based compensation in 2024, the impact of discrete tax benefits in the current year and 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 second quarter and first half 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):

 

     Six Months Ended  
     June 29, 2024      July 1, 2023  

Net income

   $ 244,933      $ 291,477  

Depreciation and amortization

     95,743        70,038  

Stock-based compensation

     22,346        23,734  

Deferred income taxes

     3,958        (6,435

Change in accounts receivable

     69,642        50,273  

Change in inventories

     (16,709      (63,607

Change in accounts payable and other current liabilities

     (31,206      (122,836

Change in deferred revenue and customer advances

     69,352        81,659  

Other changes

     (140,655      (109,434
  

 

 

    

 

 

 

Net cash provided by operating activities

     317,404        214,869  

Net cash used in investing activities

     (65,859      (1,366,920

Net cash (used in) provided by financing activities

     (326,213      998,963  

Effect of exchange rate changes on cash and cash equivalents

     6,019        2,252  
  

 

 

    

 

 

 

Decrease in cash and cash equivalents

   $ (68,649    $ (150,836
  

 

 

    

 

 

 

Cash Flow from Operating Activities

Net cash provided by operating activities was $317 million and $215 million during the first half of 2024 and 2023, respectively. The increase in 2024 operating cash flow was primarily a result of higher cash collections, lower inventory levels and lower incentive bonus payments, partially offset by lower net income. 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 the timing of payments made by customers and timing of sales. Days sales outstanding was 78 days at June 29, 2024 and 85 days at July 1, 2023.

 

   

The change in inventory can primarily be attributed to the reduction in our production plan as a result of the decline in sales.

 

   

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.

 

   

A decrease in income tax payments of $32 million as compared to the prior year and the payment of $20 million in Wyatt acquisition-related retention payments.

 

   

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 $66 million and $1.4 billion in the first half of 2024 and 2023, respectively. Additions to fixed assets and capitalized software were $65 million and $81 million in the first half of 2024 and 2023, respectively.

During the first half of 2024 and 2023, the Company purchased $2 million and $1 million of investments, respectively, while $2 million and $1 million of investments matured, respectively, and were used for financing activities described below.

On May 16, 2023, the Company completed the acquisition of 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.

 

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Cash Flow from Financing Activities

The Company has a credit agreement with an aggregate borrowing capacity of $2.0 billion. As of June 29, 2024, the Company had a total of $2.0 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 $350 million and increased by $1.1 billion during the first half of 2024 and 2023, respectively, with the prior year increase primarily being due to the funding of the Wyatt acquisition.

As of June 29, 2024, the Company had entered into interest rate cross-currency swap derivative agreements with durations up to three years with an aggregate notional value of $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 $5 million during both the first half of 2024 and 2023. The Company anticipates that these swap agreements will lower net interest expense by approximately $10 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 first half of 2023, the Company repurchased $58 million of the Company’s outstanding common stock under the Company’s share repurchase program. In addition, the Company repurchased $13 million and $11 million of common stock related to the vesting of restricted stock units during the first half of 2024 and 2023, respectively. 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.

The Company received $22 million and $9 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 half of 2024 and 2023, respectively.

The Company had cash, cash equivalents and investments of $327 million as of June 29, 2024. The majority of the Company’s cash and cash equivalents are generated from foreign operations, with $290 million held by foreign subsidiaries at June 29, 2024, of which $228 million was held in currencies other than U.S. dollars.

On July 12, 2024, the Company entered into a Master Note Facility Agreement pursuant to which the Company may, at its option, authorize the issuance and sale of senior promissory notes up to an aggregate principal amount of $200 million with a maturity date not to exceed 15 years after the issuance date.

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 June 29, 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 six months ended June 29, 2024. The Company did not make any changes in those policies during the six months ended June 29, 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;

 

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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;

 

   

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 June 29, 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 June 29, 2024 and December 31, 2023, $290 million out of $327 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, $228 million out of $327 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 June 29, 2024 and December 31, 2023, respectively. As of June 29, 2024, the Company had no holdings in auction rate securities or commercial paper issued by structured investment vehicles.

 

 

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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 June 29, 2024 would decrease by approximately $23 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 six months ended June 29, 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.

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 June 29, 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 June 29, 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 six months ended June 29, 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 and related costs recorded and paid in the six months ended June 29, 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 June 29, 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

During the three months ended June 29, 2024, the Company purchased 202, 367 and 162 shares at a cost of $68 thousand, $125 thousand and $52 thousand with average prices paid of $335.94, $341.33 and $320.54 during fiscal April, May and June, respectively, of equity securities registered by the Company under the Exchange Act.

 

 

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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 June 29, 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.

Item 5: Other Information

Insider Trading Arrangements and Related Disclosures

None.

 

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Item 6: Exhibits

 

Exhibit
Number

  

Description of Document

3.1    Certificate of Amendment of Second Amended and Restated Certificate of Incorporation of Waters Corporation.
10.1    Master Note Facility Agreement, dated as of July 12, 2024, by and between Waters Corporation and NYL Investors LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2024).
10.2    Offer Letter, dated May 28, 2024, between Waters Corporation and Robert Carpio.(+)
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 June 29, 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).

 

(+)

Management contract or compensatory plan required to be filed as an Exhibit to this Quarterly Report on Form 10-Q.

(*)

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: July 31, 2024

 

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