SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the quarterly period ended March 31, 2003 |
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 the 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 of principal executive offices)
Registrant’s telephone number, including area code: (508) 478-2000
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 and 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 x No ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x No ¨
Number of shares outstanding of the Registrant’s common stock as of May 12, 2003: 124,253,229.
WATERS CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
| Page | ||||
| PART I |
FINANCIAL INFORMATION |
|||
| Item 1. |
Financial Statements |
|||
| Consolidated Balance Sheets (unaudited) as of March 31, 2003 and December 31, 2002 |
3 | |||
| Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2003 and 2002 |
4 | |||
| Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2003 and 2002 |
5 | |||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 | ||
| Item 3. |
17 | |||
| Item 4. |
17 | |||
| PART II |
OTHER INFORMATION |
|||
| Item 1. |
17 | |||
| Item 2. |
18 | |||
| Item 3. |
18 | |||
| Item 4. |
18 | |||
| Item 5. |
18 | |||
| Item 6. |
18 | |||
| 19 |
2
WATERS CORPORATION AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
| March 31, 2003 |
December 31, 2002 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
271,572 |
|
$ |
263,312 |
| ||
| Restricted cash (Note 2) |
|
48,997 |
|
|
49,944 |
| ||
| Accounts receivable, less allowances for doubtful accounts and sales returns of $6,913 and $7,855 at March 31, 2003 and December 31, 2002, respectively |
|
197,489 |
|
|
196,273 |
| ||
| Inventories |
|
124,853 |
|
|
130,241 |
| ||
| Other current assets |
|
15,309 |
|
|
13,341 |
| ||
| Total current assets |
|
658,220 |
|
|
653,111 |
| ||
| Property, plant and equipment, net of accumulated depreciation of $116,188 and $112,135 at March 31, 2003 and December 31, 2002, respectively |
|
104,517 |
|
|
100,329 |
| ||
| Intangible assets, net |
|
64,943 |
|
|
59,766 |
| ||
| Goodwill, net |
|
184,980 |
|
|
167,878 |
| ||
| Other assets |
|
26,681 |
|
|
27,834 |
| ||
| Total assets |
$ |
1,039,341 |
|
$ |
1,008,918 |
| ||
| LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
| Current liabilities: |
||||||||
| Notes payable and debt |
$ |
96,057 |
|
$ |
2,665 |
| ||
| Accounts payable |
|
46,031 |
|
|
45,199 |
| ||
| Accrued employee compensation |
|
14,651 |
|
|
21,322 |
| ||
| Deferred revenue and customer advances |
|
58,814 |
|
|
48,508 |
| ||
| Accrued retirement plan contributions |
|
19,165 |
|
|
17,598 |
| ||
| Accrued income taxes |
|
41,099 |
|
|
44,345 |
| ||
| Accrued other taxes |
|
4,485 |
|
|
9,686 |
| ||
| Accrued litigation |
|
82,547 |
|
|
80,830 |
| ||
| Other current liabilities |
|
50,545 |
|
|
48,033 |
| ||
| Total current liabilities |
|
413,394 |
|
|
318,186 |
| ||
| Other long-term liabilities |
|
26,556 |
|
|
25,422 |
| ||
| Total liabilities |
|
439,950 |
|
|
343,608 |
| ||
| Commitments and contingencies (Notes 7, 9, 10 and 11) |
||||||||
| Stockholders' equity: |
||||||||
| Preferred stock, par value $0.01 per share, 4,000 shares authorized, none issued at March 31, 2003 and December 31, 2002 |
|
— |
|
|
— |
| ||
| Common stock, par value $0.01 per share, 400,000 shares authorized, 132,431 and 132,182 shares issued (including treasury shares) at March 31, 2003 and December 31, 2002, respectively |
|
1,324 |
|
|
1,322 |
| ||
| Additional paid-in capital |
|
253,484 |
|
|
251,203 |
| ||
| Retained earnings |
|
541,615 |
|
|
507,638 |
| ||
| Treasury stock, at cost, 8,477 and 4,078 shares at March 31, 2003 and December 31, 2002, respectively |
|
(199,860 |
) |
|
(99,296 |
) | ||
| Accumulated other comprehensive income |
|
2,828 |
|
|
4,443 |
| ||
| Total stockholders' equity |
|
599,391 |
|
|
665,310 |
| ||
| Total liabilities and stockholders' equity |
$ |
1,039,341 |
|
$ |
1,008,918 |
| ||
The accompanying notes are an integral part of the interim consolidated financial statements.
3
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
| Three Months Ended March 31 |
||||||||
| 2003 |
2002 |
|||||||
| Net sales |
$ |
220,999 |
|
$ |
200,341 |
| ||
| Cost of sales |
|
94,211 |
|
|
84,634 |
| ||
| Gross profit |
|
126,788 |
|
|
115,707 |
| ||
| Selling, general and administrative expenses |
|
61,611 |
|
|
55,716 |
| ||
| Research and development expenses |
|
13,560 |
|
|
12,280 |
| ||
| Purchased intangibles amortization |
|
1,028 |
|
|
915 |
| ||
| Litigation provisions (Note 9 and 10) |
|
1,500 |
|
|
2,800 |
| ||
| Loss on disposal of business (Note 5) |
|
5,031 |
|
|
— |
| ||
| Restructuring and other unusual charges (Note 11) |
|
1,214 |
|
|
— |
| ||
| Operating income |
|
42,844 |
|
|
43,996 |
| ||
| Interest expense |
|
(1,071 |
) |
|
(242 |
) | ||
| Interest income |
|
1,896 |
|
|
1,620 |
| ||
| Income from operations before income taxes |
|
43,669 |
|
|
45,374 |
| ||
| Provision for income taxes |
|
9,692 |
|
|
10,324 |
| ||
| Income before cumulative effect of change in accounting principle |
|
33,977 |
|
|
35,050 |
| ||
| Cumulative effect of change in accounting principle, net of tax of $1,345 |
|
— |
|
|
(4,506 |
) | ||
| Net income |
$ |
33,977 |
|
$ |
30,544 |
| ||
| Income per basic common share: |
||||||||
| Income before cumulative effect of change in accounting principle per basic common share |
$ |
0.27 |
|
$ |
0.27 |
| ||
| Cumulative effect of change in accounting principle |
|
— |
|
|
(0.03 |
) | ||
| Net income per basic common share |
$ |
0.27 |
|
$ |
0.23 |
| ||
| Weighted average number of basic common shares |
|
126,308 |
|
|
131,029 |
| ||
| Income per diluted common share: |
||||||||
| Income before cumulative effect of change in accounting principle per diluted common share |
$ |
0.26 |
|
$ |
0.26 |
| ||
| Cumulative effect of change in accounting principle |
|
— |
|
|
(0.03 |
) | ||
| Net income per diluted common share |
$ |
0.26 |
|
$ |
0.22 |
| ||
| Weighted average number of diluted common shares and equivalents |
|
130,785 |
|
|
137,188 |
| ||
The accompanying notes are an integral part of the interim consolidated financial statements.
4
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
| Three Months Ended March 31 |
||||||||
| 2003 |
2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ |
33,977 |
|
$ |
30,544 |
| ||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Cumulative effect of accounting change for patent related costs |
|
— |
|
|
4,506 |
| ||
| Loss on disposal of business |
|
5,031 |
|
|
— |
| ||
| Change in provisions on accounts receivable and inventory |
|
(1,386 |
) |
|
258 |
| ||
| Deferred income taxes |
|
449 |
|
|
(237 |
) | ||
| Depreciation |
|
6,127 |
|
|
6,335 |
| ||
| Amortization of intangibles |
|
2,855 |
|
|
3,019 |
| ||
| Tax benefit related to stock option plans |
|
357 |
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