Waters Corporation (NYSE: WAT) Reports Third Quarter 2018 Financial Results

October 23, 2018 |

23 min read

Sales of $578 million grew 2% as reported and 3% in constant currency

MILFORD, Mass.--(BUSINESS WIRE)-- Waters Corporation (NYSE: WAT) today announced third quarter 2018 sales of $578 million, a 2% increase as reported, versus sales of $566 million for the third quarter of 2017. Foreign currency translation decreased sales growth by approximately 1% for the quarter.

On a GAAP basis, diluted earnings per share (EPS) for the third quarter of 2018 increased 8% to $1.83, compared to $1.69 for the third quarter of 2017. On a non-GAAP basis, EPS increased 8% to $1.92, compared to $1.77 for the third quarter of 2017. A description and reconciliation of GAAP to non-GAAP results appear in the table below and can be found on the Company’s website at http://www.waters.com under the caption “Investors.”

On a GAAP basis, net cash provided by operating activities for the third quarter of 2018 decreased to $146 million from $154 million for the third quarter of 2017. On a non-GAAP basis, adjusted free cash flow increased to $136 million from $134 million for the third quarter of 2017.

For the first nine months of 2018, the Company’s sales were $1,705 million, up 5% as reported, compared with sales of $1,622 million for the first nine months of 2017. Foreign currency translation increased sales growth by approximately 2% during the first nine months of 2018. On a GAAP basis, EPS for the first nine months of 2018 was up 13% to $5.21, compared to $4.63 for the first nine months of 2017. On a non-GAAP basis, and including adjustments in the reconciliation below, EPS increased 9% to $5.45, compared to $4.98 for the first nine months of 2017.

On a GAAP basis, net cash provided by operating activities for the first nine months of 2018 decreased to $423 million from $505 million for the first nine months of 2017. On a non-GAAP basis, adjusted free cash flow decreased to $439 million from $450 million for the first nine months of 2017.

Chris O’Connell, Chairman and Chief Executive Officer of Waters Corporation, commented, “While third quarter sales growth was slower than expected, we delivered meaningful operating leverage and achieved high-single-digit earnings per share growth. We are making significant progress against our growth initiatives, headlined by our efforts over the past several years to transform our innovation process that is beginning to deliver a series of next generation products to market.”

Unless otherwise noted, sales growth and decline percentages are presented on an as reported basis and are the same as the sales growth and decline percentages presented on a constant currency basis as compared with the same period in the prior year, each of which is detailed in the reconciliation of sales growth rates to constant currency growth rates below.

During the third quarter of 2018, sales into the pharmaceutical market grew 1% as reported and 2% in constant currency, sales into the industrial market grew 2%, and sales into the governmental and academic markets grew 7% as reported and 8% in constant currency. During the first nine months of 2018, sales into the pharmaceutical market grew 5% as reported and 3% in constant currency, sales into the industrial market grew 3% as reported and 1% in constant currency, and sales into the governmental and academic markets grew 11% as reported and 9% in constant currency.

During the third quarter, recurring revenues, which represent the combination of service and precision chemistries revenues, grew 4% as reported and 6% in constant currency, while instrument system sales were flat year over year. For the first nine months of 2018, recurring revenues grew 9% as reported and 6% in constant currency, while instrument system sales grew 1% as reported and were flat in constant currency.

Geographically, sales in Asia during the quarter grew 6% as reported and 7% in constant currency, sales in the Americas grew 2% (with U.S. sales flat), and sales in Europe declined 3% as reported and 2% in constant currency. For the first nine months of 2018, sales in Asia grew 6% as reported and 5% in constant currency, sales in the Americas grew 2%, with U.S. sales increasing 1%, and sales in Europe grew 7% as reported and 2% in constant currency.

Fourth Quarter and Fiscal Year 2018 Financial Outlook

Waters Corporation expects fourth quarter 2018 constant currency sales growth to be in a range of 3% to 4%. As of today, currency translation is expected to decrease fourth quarter sales growth by one to two percentage points. The Company also expects fourth quarter 2018 non-GAAP earnings per fully diluted share to be in the range of $2.55 to $2.65. Please refer to the table below for a reconciliation of the projected GAAP to non-GAAP financial outlook for the fourth quarter.

The Company is revising its full-year 2018 guidance for constant currency sales growth to be in the range of 3% to 4%, compared to the prior range of 4% to 6%. As of today, currency translation is expected to increase 2018 sales growth by approximately one percentage point. The Company is also revising its guidance for full-year 2018 non-GAAP earnings per fully diluted share to be in the range of $8.00 to $8.10, compared to the prior range of $8.05 to $8.20. Please refer to the table below for a reconciliation of the projected GAAP to non-GAAP financial outlook for the full year.

Conference Call

Waters Corporation will webcast its third quarter 2018 financial results conference call today, October 23, 2018 at 8:00 a.m. Eastern Time. To listen to the call, please visit www.waters.com, choose “Investors,” and click on the “Live Webcast.” A replay will be available through October 30, 2018 at midnight Eastern Time on the same website by webcast and also by phone at 402-998-0977.

About Waters Corporation

Waters Corporation (NYSE: WAT), the world's leading specialty measurement company, has pioneered chromatography, mass spectrometry and thermal analysis innovations serving the life, materials and food sciences for 60 years. With approximately 7,000 employees worldwide, Waters operates directly in 31 countries, including 15 manufacturing facilities, with products available in more than 100 countries. For more information, visit www.waters.com.

Non-GAAP Financial Measures

This press release contains financial measures, such as constant currency growth rate, adjusted operating income, adjusted net income, adjusted earnings per diluted share and free cash flow, among others, which are considered “non-GAAP” financial measures under applicable U.S. Securities and Exchange Commission rules and regulations. These non-GAAP financial measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with generally accepted accounting principles (GAAP). The Company’s definition of these non-GAAP measures may differ from similarly titled measures used by others. The non-GAAP financial measures used in this press release adjust for specified items that can be highly variable or difficult to predict. The Company generally uses these non-GAAP financial measures to facilitate management’s financial and operational decision-making, including evaluation of Waters Corporation’s historical operating results, comparison to competitors’ operating results and determination of management incentive compensation. These non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting Waters Corporation’s business. Because non-GAAP financial measures exclude the effect of items that will increase or decrease the Company’s reported results of operations, management strongly encourages investors to review the Company’s consolidated financial statements and publicly filed reports in their entirety. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables accompanying this release.

Cautionary Statement

This release may contain “forward-looking” statements regarding future results and events. For this purpose, any statements that are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words, “feels”, “believes”, “anticipates”, “plans”, “expects”, “intends”, “suggests”, “appears”, “estimates”, “projects”, and similar expressions, whether in the negative or affirmative, 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, foreign exchange rate fluctuations potentially affecting translation of the Company’s future non-U.S. operating results; the impact on demand for the Company’s products among the Company’s various market sectors from economic, sovereign and political uncertainties, particularly regarding the effect of new or proposed tariff or trade regulations; the effect on the Company’s financial results from the United Kingdom voting to exit the European Union; fluctuations in expenditures by the Company’s customers, in particular large pharmaceutical companies; introduction of competing products by other companies and loss of market share; pressures on prices from competitors and/or customers; regulatory, economic and competitive obstacles to new product introductions; other changes in demand for the Company’s products from the effect of mergers and acquisitions by the Company’s customers; 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; impact of the newly enacted tax reform legislation in the U.S.; shifts in taxable income in jurisdictions with different effective tax rates; the outcome of tax examinations or changes in respective country legislation affecting the Company’s effective tax rate; the effect of the adoption of new accounting standards; the ability to access capital, maintain liquidity and service the Company’s debt in volatile market conditions, particularly in the U.S., as a large portion of the Company’s cash is held and operating cash flows are generated outside the U.S.; environmental and logistical obstacles affecting the distribution of products and risks associated with lawsuits and other legal actions, particularly involving claims for infringement of patents and other intellectual property rights. Such factors and others are discussed more fully in the sections entitled “Forward-Looking Statements” and “Risk Factors” of the Company’s annual report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission, which “Forward-Looking Statements” and “Risk Factors” discussions are incorporated by reference in this release. The forward-looking statements included in this release represent the Company’s estimates or views as of the date of this 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 release.


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


	Three Months Ended						Nine Months Ended
	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017

Net sales	$	578,021		$	565,584		$	1,704,910		$	1,621,803

Costs and operating expenses:
Cost of sales		241,139			235,892			705,695			676,614
Selling and administrative expenses		126,997			135,206			394,049			395,972
Research and development expenses		35,173			33,782			105,297			97,471
Litigation provision (settlement)		924			-			(748	)		10,018
Purchased intangibles amortization		2,114			1,682			5,375			5,104
Acquired in-process research and development		-			-			-			5,000

Operating income		171,674			159,022			495,242			431,624

Other (expense) income*		(811	)		12			(2,293	)		64
Interest expense, net		(1,633	)		(5,234	)		(8,609	)		(16,329	)

Income from operations before income taxes		169,230			153,800			484,340			415,359

Provision for income taxes**		28,216			17,696			75,698			41,876

Net income	$	141,014		$	136,104		$	408,642		$	373,483


Net income per basic common share	$	1.84		$	1.71		$	5.26		$	4.67

Weighted-average number of basic common shares		76,575			79,712			77,741			79,908


Net income per diluted common share	$	1.83		$	1.69		$	5.21		$	4.63

Weighted-average number of diluted common shares and equivalents		77,136			80,521			78,395			80,660

* The Company adopted new accounting guidance which requires that an employer disaggregate the service cost component from other components of net benefit cost. As a result of the adoption of this standard, the components of net periodic benefit cost other than the service cost component are included in other income in the consolidated statements of operations and all previous periods have been adjusted accordingly.

** The provision for income taxes for the three and nine months ended September 29, 2018 includes a $2 million expense and a $6 million expense, respectively, related to U.S. tax reform. The provisions include: (1) an adjustment to our 2017 year end accrual for the toll charge resulting from federal proposed regulations and other state guidance during the third quarter and (2) the tax that results from the change in foreign currency exchange rates on the earnings taxed on December 31, 2017 under the Tax Cuts and Jobs Act as compared with the foreign currency exchange rates on the date of distribution of assets into the U.S.


Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segment, Products & Services, Geography and Markets
Three Months Ended September 29, 2018 and September 30, 2017
(In thousands)

								Current
								Period			Constant
	Three Months Ended				Percent			Currency			Currency
	September 29, 2018		September 30, 2017		Change			Impact			Growth Rate ^(a)

NET SALES - OPERATING SEGMENT

Waters	$	515,795	$	503,904		2	%	$	(3,451	)		3	%
TA		62,226		61,680		1	%		(294	)		1	%

Total	$	578,021	$	565,584		2	%	$	(3,745	)		3	%


NET SALES - PRODUCTS & SERVICES

Instruments	$	282,543	$	282,671		-		$	(706	)		-

Service		199,499		190,034		5	%		(2,483	)		6	%
Chemistry		95,979		92,879		3	%		(556	)		4	%
Total Recurring		295,478		282,913		4	%		(3,039	)		6	%

Total	$	578,021	$	565,584		2	%	$	(3,745	)		3	%


NET SALES - GEOGRAPHY

Asia	$	222,196	$	209,339		6	%	$	(1,583	)		7	%
Americas		206,803		203,013		2	%		(297	)		2	%
Europe		149,022		153,232		(3	%)		(1,865	)		(2	%)

Total	$	578,021	$	565,584		2	%	$	(3,745	)		3	%


NET SALES - MARKETS

Pharmaceutical	$	325,166	$	321,963		1	%	$	(3,052	)		2	%
Industrial		171,985		168,349		2	%		(157	)		2	%
Governmental & Academic		80,870		75,272		7	%		(536	)		8	%

Total	$	578,021	$	565,584		2	%	$	(3,745	)		3	%



(a)The Company believes that referring to comparable constant currency growth rates is a useful way to evaluate the underlying performance of Waters Corporation's net sales. Constant currency growth rate, a non-GAAP financial measure, measures the change in net sales between current and prior year periods, ignoring the impact of foreign currency exchange rates during the current period. See description of non-GAAP financial measures contained in this release.


Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segment, Products & Services, Geography and Markets
Nine Months Ended September 29, 2018 and September 30, 2017
(In thousands)

							Current
							Period		Constant
	Nine Months Ended				Percent		Currency		Currency
	September 29, 2018		September 30, 2017		Change		Impact		Growth Rate ^(a)

NET SALES - OPERATING SEGMENT

Waters	$	1,514,246	$	1,445,110	5	%	$	28,767	3	%
TA		190,664		176,693	8	%		2,638	6	%

Total	$	1,704,910	$	1,621,803	5	%	$	31,405	3	%


NET SALES - PRODUCTS & SERVICES

Instruments	$	812,690	$	801,078	1	%	$	12,344	-

Service		598,402		549,119	9	%		12,272	7	%
Chemistry		293,818		271,606	8	%		6,789	6	%
Total Recurring		892,220		820,725	9	%		19,061	6	%

Total	$	1,704,910	$	1,621,803	5	%	$	31,405	3	%


NET SALES - GEOGRAPHY

Asia	$	659,381	$	620,148	6	%	$	7,791	5	%
Americas		586,639		574,249	2	%		420	2	%
Europe		458,890		427,406	7	%		23,194	2	%

Total	$	1,704,910	$	1,621,803	5	%	$	31,405	3	%


NET SALES - MARKETS

Pharmaceutical	$	968,848	$	921,423	5	%	$	18,961	3	%
Industrial		517,979		504,183	3	%		9,041	1	%
Governmental & Academic		218,083		196,197	11	%		3,403	9	%

Total	$	1,704,910	$	1,621,803	5	%	$	31,405	3	%



(a)The Company believes that referring to comparable constant currency growth rates is a useful way to evaluate the underlying performance of Waters Corporation's net sales. Constant currency growth rate, a non-GAAP financial measure, measures the change in net sales between current and prior year periods, ignoring the impact of foreign currency exchange rates during the current period. See description of non-GAAP financial measures contained in this release.


Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP Financials
Quarters and Nine Months Ended September 29, 2018 and September 30, 2017
(In thousands, except per share data)

																	Income from
																	Operations
		Selling &			Research &						Operating			Other			before			Provision for						Diluted
		Administrative			Development			Operating			Income			(Expense)			Income			Income			Net			Earnings
		Expenses^(a)			Expenses^(a)			Income			Percentage			Income			Taxes			Taxes			Income			per Share
Quarter Ended September 29, 2018
GAAP		$	130,035		$	35,173		$	171,674			29.7	%	$	(811	)	$	169,230		$	28,216		$	141,014		$	1.83
Adjustments:
	Purchased intangibles amortization ^(b)		(2,114	)		-			2,114			0.4	%		-			2,114			429			1,685			0.02
	Restructuring costs and certain other items ^(c)		(681	)		-			681			0.1	%		-			681			157			524			0.01
	Pension termination ^(d)		-			-			-			-			1,082			1,082			260			822			0.01
	Litigation settlement ^(e)		(924	)		-			924			0.2	%					924			222			702			0.01
	Tax reform ^(f)		-			-			-			-			-			-			(2,353	)		2,353			0.03
	Certain income tax items ^(g)		-			-			-			-			-			-			(700	)		700			0.01
Adjusted Non-GAAP		$	126,316		$	35,173		$	175,393			30.3	%	$	271		$	174,031		$	26,231		$	147,800		$	1.92

Quarter Ended September 30, 2017
GAAP		$	136,888		$	33,782		$	159,022			28.1	%	$	12		$	153,800		$	17,696		$	136,104		$	1.69
Adjustments:
	Purchased intangibles amortization ^(b)		(1,682	)		-			1,682			0.3	%		-			1,682			436			1,246			0.02
	Restructuring costs and certain other items ^(c)		(2,530	)		-			2,530			0.4	%		-			2,530			931			1,599			0.02
	Stock award modification ^(h)		(3,855	)		-			3,855			0.7	%		-			3,855			1,446			2,409			0.03
	Certain income tax items ^(g)		-			-			-			-			-			-			(837	)		837			0.01
Adjusted Non-GAAP		$	128,821		$	33,782		$	167,089			29.5	%	$	12		$	161,867		$	19,672		$	142,195		$	1.77

Nine Months Ended September 29, 2018
GAAP		$	398,676		$	105,297		$	495,242			29.0	%	$	(2,293	)	$	484,340		$	75,698		$	408,642		$	5.21
Adjustments:
	Purchased intangibles amortization ^(b)		(5,375	)		-			5,375			0.3	%		-			5,375			935			4,440			0.06
	Restructuring costs and certain other items ^(c)		(2,438	)		-			2,438			0.1	%		-			2,438			549			1,889			0.02
	Pension termination ^(d)		-			-			-			-			3,247			3,247			780			2,467			0.03
	Litigation settlement ^(e)		748			-			(748	)		-			-			(748	)		(179	)		(569	)		(0.01	)
	Stock award modification ^(h)		(1,014	)		-			1,014			0.1	%		-			1,014			243			771			0.01
	Tax reform ^(f)		-			-			-			-			-			-			(6,230	)		6,230			0.08
	Certain income tax items ^(g)		-			-			-			-			-			-			(3,385	)		3,385			0.04
Adjusted Non-GAAP		$	390,597		$	105,297		$	503,321			29.5	%	$	954		$	495,666		$	68,411		$	427,255		$	5.45

Nine Months Ended September 30, 2017
GAAP		$	411,094		$	102,471		$	431,624			26.6	%	$	64		$	415,359		$	41,876		$	373,483		$	4.63
Adjustments:
	Purchased intangibles amortization ^(b)		(5,104	)		-			5,104			0.3	%		-			5,104			1,358			3,746			0.05
	Restructuring costs and certain other items ^(c)		(13,541	)		-			13,541			0.8	%		-			13,541			4,725			8,816			0.11
	Litigation provisions ^(e)		(10,018	)		-			10,018			0.6	%		-			10,018			3,757			6,261			0.08
	Stock award modification ^(h)		(3,855	)		-			3,855			0.2	%		-			3,855			1,446			2,409			0.03
	Acquired in-process research and development ⁽ⁱ⁾		-			(5,000	)		5,000			0.3	%		-			5,000			962			4,038			0.05
	Certain income tax items ^(g)		-			-			-			-			-			-			(3,284	)		3,284			0.04
Adjusted Non-GAAP		$	378,576		$	97,471		$	469,142			28.9	%	$	64		$	452,877		$	50,840		$	402,037		$	4.98


(a)	Selling & administrative expenses include purchased intangibles amortization and litigation provisions. Research & development expenses include acquired in-process research and development.
(b)	The purchased intangibles amortization, a non-cash expense, was excluded to be consistent with how management evaluates the performance of its core business against historical operating results and the operating results of competitors over periods of time.
(c)	Restructuring costs and certain other items were excluded as the Company believes that the cost to consolidate operations and reduce overhead and certain other income or expense items are not normal and do not represent future ongoing business expenses of a specific function or geographic location of the Company.
(d)	The pension expense associated with terminating a frozen defined benefit pension plan was excluded as the Company believes these expenses are not indicative of normal operating costs.
(e)	Litigation provisions and settlement gain were excluded as these costs are isolated, unpredictable and not expected to recur regularly.
(f)	The provision for income taxes for the three and nine months ended September 29, 2018 includes a $2 million expense and a $6 million expense, respectively, related to U.S. tax reform. The provisions include: (1) an adjustment to our 2017 year end accrual for the toll charge resulting from federal proposed regulations and other state guidance during the third quarter and (2) the tax that results from the change in foreign currency exchange rates on the earnings taxed on December 31, 2017 under the Tax Cuts and Jobs Act as compared with the foreign currency exchange rates on the date of distribution of assets into the U.S. The Company believes this expense is not indicative of the Company's normal or future income tax expense.
(g)	Certain income tax items were excluded as these non-cash expenses and benefits represent updates in management's assessment of ongoing examinations or other tax items that are not indicative of the Company’s normal or future income tax expense.
(h)	The non-cash expense associated with accelerating the vesting of certain stock awards was excluded as the Company believes these expenses are not indicative of normal operating costs.
(i)	Acquired In-Process Research and Development was excluded as it relates to milestone payments associated with a licensing arrangement for mass spectrometry that the Company believes is unusual and not indicative of its normal business operations.


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



	September 29, 2018		December 31, 2017

Cash, cash equivalents and investments	$	2,084,260	$	3,393,701
Accounts receivable		489,193		533,825
Inventories		313,614		270,294
Property, plant and equipment, net		338,472		349,278
Intangible assets, net		252,834		228,395
Goodwill		357,869		359,819
Other assets		206,816		189,042
Total assets	$	4,043,058	$	5,324,354


Notes payable and debt	$	1,148,345	$	1,997,774
Other liabilities		1,018,281		1,092,792
Total liabilities		2,166,626		3,090,566

Total equity		1,876,432		2,233,788
Total liabilities and equity	$	4,043,058	$	5,324,354


Waters Corporation and Subsidiaries
Preliminary Condensed Consolidated Statements of Cash Flows
Three and Nine Months Ended September 29, 2018 and September 30, 2017
(In thousands and unaudited)

				Three Months Ended						Nine Months Ended
				September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017

Cash flows from operating activities:
	Net income			$	141,014		$	136,104		$	408,642		$	373,483
	Adjustments to reconcile net income to net cash
			provided by operating activities:
		Stock-based compensation			9,213			12,274			28,184			30,068
		Depreciation and amortization			26,975			25,844			82,811			78,249
		Change in operating assets and liabilities, net			(30,862	)		(20,026	)		(96,740	)		23,656
			Net cash provided by operating activities		146,340			154,196			422,897			505,456

Cash flows from investing activities:
	Additions to property, plant, equipment
			and software capitalization		(27,384	)		(19,899	)		(64,215	)		(55,257	)
	Asset acquisitions, net of cash acquired				(31,486	)		-			(31,486	)		-
	Investment in unaffiliated company				(4,400	)		-			(7,615	)		(7,000	)
	Payments for intellectual property licenses				-			-			-			(5,000	)
	Net change in investments				114,606			(90,237	)		1,361,034			(336,731	)
			Net cash provided by (used in) investing activities		51,336			(110,136	)		1,257,718			(403,988	)

Cash flows from financing activities:
	Net change in debt				(216	)		45,190			(849,990	)		130,126
	Proceeds from stock plans				7,532			14,639			42,377			72,821
	Purchases of treasury shares				(263,505	)		(79,908	)		(816,649	)		(245,742	)
	Other cash flow from financing activities, net				(23	)		2,871			(2,181	)		3,301
			Net cash used in financing activities		(256,212	)		(17,208	)		(1,626,443	)		(39,494	)

Effect of exchange rate changes on cash and cash equivalents					5,705			9,700			(7,118	)		36,202
			(Decrease) increase in cash and cash equivalents		(52,831	)		36,552			47,054			98,176

Cash and cash equivalents at beginning of period					742,204			567,255			642,319			505,631
			Cash and cash equivalents at end of period	$	689,373		$	603,807		$	689,373		$	603,807




Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flow ^(a)



Net cash provided by operating activities - GAAP				$	146,340		$	154,196		$	422,897		$	505,456

Adjustments:
	Additions to property, plant, equipment
		and software capitalization			(27,384	)		(19,899	)		(64,215	)		(55,257	)
	Tax reform payments				7,799			-			54,499			-
	Litigation settlement payment				-			-			15,400			-
	Major facility renovations				3,645			-			5,446			-
	One-time pension contributions				5,245			-			5,245			-

Free Cash Flow - Adjusted Non-GAAP				$	135,645		$	134,297		$	439,272		$	450,199


(a) The Company defines free cash flow as net cash flow from operations accounted for under GAAP less capital expenditures and software capitalizations plus or minus any unusual and non recurring items. Free cash flow is not a GAAP measurement and may not be comparable to free cash flow reported by other companies.


Waters Corporation and Subsidiaries
Reconciliation of Projected GAAP to Adjusted Non-GAAP Financial Outlook
(In thousands, except per share data)


		Three Months Ended							Twelve Months Ended
		December 31, 2018							December 31, 2018
		Range							Range
Projected Sales

Projected constant currency sales growth rate			3	%	-		4	%		3	%	-		4	%

Projected currency impact			(2	%)	-		(1	%)		1	%	-		1	%

Projected sales growth rate as reported			1	%	-		3	%		4	%	-		5	%


Projected Earnings Per Diluted Share		Range							Range


Projected GAAP earnings per diluted share		$	2.51		-	$	2.61		$	7.73		-	$	7.83
Adjustments:
	Purchased intangibles amortization	$	0.02		-	$	0.02		$	0.08		-	$	0.08
	Restructuring costs and certain other items	$	-		-	$	-		$	0.02		-	$	0.02
	Pension termination	$	0.01		-	$	0.01		$	0.04		-	$	0.04
	Litigation provision	$	-		-	$	-		$	(0.01	)	-	$	(0.01	)
	Stock award modification	$	-		-	$	-		$	0.01		-	$	0.01
	Tax reform	$	-		-	$	-		$	0.08		-	$	0.08
	Certain income tax items	$	0.01		-	$	0.01		$	0.05		-	$	0.05
Projected adjusted non-GAAP earnings per diluted share		$	2.55		-	$	2.65		$	8.00		-	$	8.10

Constant currency growth rates are a non-GAAP financial measure that measures the change in net sales between current and prior year periods, ignoring the impact of foreign currency exchange rates during the current period. These amounts are estimated at the current foreign currency exchange rates and based on the forecasted geographical sales in local currency as well as an assessment of market conditions as of today and may differ signficantly from actual results.

These forward-looking adustment estimates do not reflect future gains and charges that are inherently difficult to predict and estimate due to their unknown timing, effect and/or significance.

View source version on businesswire.com: https://www.businesswire.com/news/home/20181023005315/en/

Contacts

Waters Corporation
Bryan Brokmeier, CFA, 508-482-3448
Senior Director, Investor Relations

Source: Waters Corporation

View this news release online at:
http://www.businesswire.com/news/home/20181023005315/en

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