Waters Corporation Fourth Quarter 2004 Earnings Accelerate as New Prod

    Business Editors/Financial Editors/High-Tech Editors

    MILFORD, Mass.--(BUSINESS WIRE)--Jan. 27, 2005--Waters Corporation (NYSE/WAT) reported today fourth quarter 2004 sales of $324.2 million, an increase of 18% over sales of $275.1 million in the fourth quarter of 2003. Foreign currency translation benefited revenue growth by approximately 4%. Quarterly earnings per diluted share (E.P.S.) were $0.58, compared to $0.47 for the fourth quarter in 2003. On a non-GAAP basis, excluding a write down for an investment in an unaffiliated company and for an impairment of a technology license, both recorded in the fourth quarter of 2004, and excluding a charge for expensed in-process research and development relating to an acquisition recorded in the fourth quarter of 2003, E.P.S. grew 29%, from $0.48 in the fourth quarter of 2003 to $0.62 in the fourth quarter of 2004.
    For the full year, reported sales grew 15% from $958.2 million in 2003 to $1,104.5 million in 2004 while E.P.S. grew from $1.34 in 2003 to $1.82 in 2004. On a non-GAAP basis, including the adjustments noted above and in the attached reconciliation, E.P.S. grew 26% from $1.44 in 2003 to $1.81 in 2004.
    Commenting on the quarter and the year, Douglas Berthiaume, Chairman, President and Chief Executive Officer said, " We had a strong fourth quarter as broad-based customer demand and successful new product launches drove top-line growth. The Waters Division benefited from sales of new products including ACQUITY UPLC(TM) and the QTof Premier(TM) while our TA Instruments Division finished the year with strong sales growth driven by continued robust customer demand. We are encouraged by the enthusiastic customer response to our newly introduced product platforms and are excited about our prospects in 2005."
    As communicated in a prior press release, Waters Corporation will webcast its fourth quarter 2004 financial results conference call this morning, January 27, 2004 at 8:30 a.m. eastern time. To listen to the call, connect to www.waters.info , choose Investor Relations and click on the Live Webcast. A replay of the call will be available through February 2, 2005, similarly by webcast and also by phone at 402-280-9915.
    Waters Corporation holds worldwide leading positions in three complementary analytical technologies - liquid chromatography, mass spectrometry and thermal analysis. These markets account for $4.5 - $5.0 billion of the overall $20 + billion analytical instrument market.

    CAUTIONARY STATEMENT

    This release contains "forward-looking" statements regarding future results and events, including statements regarding expected financial results, future growth and customer demand that involve a number of risks and uncertainties. For this purpose, any statements contained herein that are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words, "believes", "anticipates", "plans", "expects", "intends", "appears", "estimates", "projects", and similar expressions are intended to identify forward looking statements. The Company's actual future results may differ significantly from the results discussed in the forward-looking statements within this release for a variety of reasons including and without limitation: loss of market share through competition, introduction of competing products by other companies, pressures on prices from competitors and/or customers, regulatory obstacles to new product introductions, lack of acceptance of new products, changes in the demands of the Company's healthcare and pharmaceutical company customers, changes in the healthcare market and the pharmaceutical industry, changes in distribution of the Company's products and foreign exchange fluctuations. Such factors and others are discussed more fully in the section entitled "Risk Factors" of the Company's Form 10-K for the year ended December 31, 2003, as filed with the Securities and Exchange Commission, which "Risk Factors" discussion is incorporated by reference in this press release. The forward-looking statements included in this press release represent the Company's estimates as of the date of this press release and should not be relied upon as representing the Company's estimates or views as of any date subsequent to the date of this press release. The Company specifically disclaims any obligation to update these forward-looking statements in the future.

Waters Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data)

(Unaudited) (Unaudited) Three Months Ended Year Ended December 31, December 31, 2004 2003 2004 2003

Net sales 324,154 275,073 1,104,536 958,205 Cost of sales 130,144 113,104 454,807 397,848

Gross profit 194,010 161,969 649,729 560,357

Selling and administrative expenses 80,916 67,219 300,150 264,252 Research and development expenses 16,475 16,786 65,241 59,242 Purchased intangibles amortization 1,236 1,008 4,814 4,242 Litigation settlement and provisions (A) - - (9,277) 1,500 Loss on sale of business (B) - - - 5,031 Impairment of long-lived asset (C) 3,997 - 3,997 - Restructuring and other unusual charges, net (D) - (161) (54) 918 Expensed in-process research and development (E) - 840 - 6,000

Operating income 91,386 76,277 284,858 219,172

Other expense, net (F) (1,014) (250) (1,014) (250) Interest income, net 156 485 1,827 4,764 Income from operations before income taxes 90,528 76,512 285,671 223,686

Provision for income taxes 19,011 18,110 61,618 52,795

Net income 71,517 58,402 224,053 170,891

Income per basic common share: Net income per basic common share $0.59 $0.48 $1.87 $1.39

Weighted average number of basic common shares 120,266 120,961 119,640 123,189

Income per diluted common share: Net income per diluted common share $0.58 $0.47 $1.82 $1.34

Weighted average number of diluted common shares and equivalents 122,679 124,784 123,069 127,579

(A) The results for the year ended December 31, 2004 include provisions of $7.8 million for ongoing patent litigation with Hewlett-Packard Company and settlement income of $17.1 million related to patent litigation with Perkin-Elmer Corporation. The results for the year ended December 31, 2003 include a $1.2 million provision for an environmental matter with the Commonwealth of Massachusetts.

(B) The results for the year ended December 31, 2003 include a loss on sale of the inorganic mass spectrometry product line.

(C) The results for the three months and year ended December 31, 2004 include charges of $4.0 million recorded for a write-down of a technology licensed asset.

(D) The results for the year ended December 31, 2004 and the three months and year ended December 31, 2003 include restructuring and other incremental costs and adjustments recorded in relation to the Company's reorganization of the HPLC and mass spectrometry businesses.

(E) The results for the three months and year ended December 31, 2003 include charges for expensed in-process research and development relating to the acquisition of Creon Lab Control AG.

(F) The results for the three months and year ended December 31, 2004 include charges of $1.0 million recorded for full write-down of an investment in an unaffiliated company. The results for the three months and year ended December 31, 2003 include the write-down of certain non-affiliate investments.

Waters Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data)

(Unaudited) (Unaudited) Three Months Ended Year Ended December 31, December 31, 2004 2003 2004 2003

Reconciliation of income per diluted share, in accordance with generally accepted accounting principles, with adjusted results:

Income per diluted share $0.58 $0.47 $1.82 $1.34 ----------- --------- ---------- ---------

Adjustment for litigation settlement and provisions, net of tax - - (5,688) 1,155 Income per diluted share effect - - (0.05) 0.01 ----------- --------- ---------- ---------

Adjustment for restructuring and other unusual charges, net of tax - (124) (57) 707 Income per diluted share effect - (0.00) (0.00) 0.01 ----------- --------- ---------- ---------

Loss on sale of business, net of tax - - - 3,522 Income per diluted share effect - - - 0.03 ----------- --------- ---------- ---------

Impairment of long-lived asset, net of tax 3,158 - 3,158 - Income per diluted share effect 0.03 - 0.03 - ----------- --------- ---------- ---------

Other expense, write down of certain investments, net of tax 801 220 801 220 Income per diluted share effect 0.01 0.00 0.01 0.00 ----------- --------- ---------- ---------

Expensed in-process research and development - 840 - 6,000 Income per diluted share effect - 0.01 - 0.05 ----------- --------- ---------- ---------

Adjusted income per diluted share: $0.62 $0.48 $1.81 $1.44 =========== ========= ========== =========

The adjusted income per diluted share presented above is used by the management of the Company to measure operating performance with prior periods and is not in accordance with generally accepted accounting principles (GAAP). The above reconciliation identifies those items management has excluded as non-operational activities or transactions. Management feels these transactions are not indicative of understanding the ongoing operations of the business or its future outlook.

Waters Corporation and Subsidiaries Condensed Consolidated Balance Sheets (In thousands and unaudited)

Dec. 31, 2004 Dec.31, 2003

Cash and cash equivalents 539,077 356,781 Accounts receivable 271,731 214,260 Inventories 139,900 128,810 Other current assets 22,267 18,505 Total current assets 972,975 718,356

Property, plant and equipment, net 135,908 108,162 Other assets 350,634 304,343 Total assets 1,459,517 1,130,861

Notes payable and debt 206,663 121,309 Accounts payable and accrued expenses 281,233 257,212 Total current liabilities 487,896 378,521

Other long-term liabilities 288,750 161,863 Total liabilities 776,646 540,384

Total equity 682,871 590,477 Total liabilities and equity 1,459,517 1,130,861

--30--LG/bo*

CONTACT: Waters Corporation Gene Cassis, 508-482-2349 Vice President of Investor Relations

KEYWORD: MASSACHUSETTS INDUSTRY KEYWORD: PHARMACEUTICAL BIOTECHNOLOGY MANUFACTURING EARNINGS CONFERENCE CALLS SOURCE: Waters Corporation

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