WAT
$198.11
Waters
($1.46)
(.73%)
Earnings Details
3rd Quarter September 2018
Tuesday, October 23, 2018 6:50:00 AM
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Summary

Waters Sees Earnings Below Estimates

Waters (WAT) reported 3rd Quarter September 2018 earnings of $1.92 per share on revenue of $578.0 million. The consensus earnings estimate was $1.90 per share on revenue of $588.1 million. Revenue grew 2.2% on a year-over-year basis.

The company said it expects fourth quarter earnings of $2.55 to $2.65 per share on revenue of $707.9 million to $714.8 million. The current consensus earnings estimate is $2.69 per share on revenue of $714.3 million for the quarter ending December 31, 2018.

Waters Corp is an analytical instrument manufacturer, that designs, manufactures, sells and services liquid chromatography, ultra performance liquid chromatography & mass spectrometry instrument systems & support products.

Results
Reported Earnings
$1.92
Earnings Whisper
-
Consensus Estimate
$1.90
Reported Revenue
$578.0 Mil
Revenue Estimate
$588.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

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

  • Sales of $578 million grew 2% as reported and 3% in constant currency
  • All end markets contributed to sales growth
  • Strong growth from China, partially offset by softness in Europe
  • GAAP EPS increased 8% to $1.83; non-GAAP EPS increased 8% to $1.92

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.
 

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

Source: Waters Corporation