Item 1: Financial Statements

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

~~(IN THOUSANDS, EXCEPT PER SHARE DATA)~~

(unaudited)

   September 30, 2017 December 31, 2016
ASSETS

Current assets:

Cash and cash equivalents
   $ 603,807 $ 505,631
Investments
   2,651,150 2,307,401
Accounts receivable, less allowances for doubtful accounts and sales returns of $9,379 and $8,657 at September 30, 2017 and December 31, 2016, respectively
   456,334 489,340
Inventories
   297,854 262,682
Other current assets
   69,380 70,391


Total current assets
   4,078,525 3,635,445
Property, plant and equipment, net
   342,832 337,118
Intangible assets, net
   224,056 207,055
Goodwill
   359,376 352,080
Other assets
   158,196 130,361


Total assets
   $ 5,162,985 $ 4,662,059


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Notes payable and debt
   $ 225,423 $ 125,297
Accounts payable
   66,754 67,740
Accrued employee compensation
   42,021 57,465
Deferred revenue and customer advances
   185,524 148,837
Accrued income taxes
   24,355 15,244
Accrued warranty
   12,855 13,391
Other current liabilities
   105,217 92,347


Total current liabilities
   662,149 520,321
Long-term liabilities:

Long-term debt
   1,732,367 1,701,966
Long-term portion of retirement benefits
   69,666 72,568
Long-term income tax liabilities
   7,656 10,458
Other long-term liabilities
   62,052 54,797


Total long-term liabilities
   1,871,741 1,839,789


Total liabilities
   2,533,890 2,360,110
Commitments and contingencies (Notes 5, 6, 7 and 11)

Stockholders’ equity:

Preferred stock, par value $0.01 per share, 5,000 shares authorized, none issued at September 30, 2017 and December 31, 2016
   —   —
Common stock, par value $0.01 per share, 400,000 shares authorized, 159,589 and 158,634 shares issued, 79,522 and 80,023 shares outstanding at September 30, 2017 and December 31, 2016, respectively
   1,596 1,586
Additionalpaid-in capital
   1,710,783 1,607,241
Retained earnings
   5,758,552 5,385,069
Treasury stock, at cost, 80,067 and 78,611 shares at September 30, 2017 and December 31, 2016, respectively
   (4,721,409 ) (4,475,667 )
Accumulated other comprehensive loss
   (120,427 ) (216,280 )


Total stockholders’ equity
   2,629,095 2,301,949


Total liabilities and stockholders’ equity
   $ 5,162,985 $ 4,662,059


	September 30, 2023			December 31, 2022

	(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	336,414		$	480,529
Investments		898			862
Accounts receivable, net		631,284			722,892
Inventories		544,402			455,710
Other current assets		121,528			103,910

Total current assets		1,634,526			1,763,903
Property, plant and equipment, net		616,846			582,217
Intangible assets, net		631,209			227,399
Goodwill		1,308,027			430,328
Operating lease assets		84,726			86,506
Other assets		221,846			191,100

Total assets	$	4,497,180		$	3,281,453

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and debt	$	50,000		$	50,000
Accounts payable		79,834			93,302
Accrued employee compensation		43,481			103,300
Deferred revenue and customer advances		275,941			227,908
Current operating lease liabilities		26,527			26,429
Accrued income taxes		112,681			132,545
Accrued warranty		11,120			11,949
Other current liabilities		145,445			140,304

Total current liabilities		745,029			785,737
Long-term liabilities:
Long-term debt		2,455,265			1,524,878
Long-term portion of retirement benefits		41,529			38,203
Long-term income tax liabilities		155,743			248,496
Long-term operating lease liabilities		60,169			62,108
Other long-term liabilities		133,923			117,543

Total long-term liabilities		2,846,629			1,991,228

Total liabilities		3,591,658			2,776,965
Commitments and contingencies (Notes 7, 8 and 9)
Stockholders’ equity:
Preferred stock, par value $0.01 per share, 5,000 shares authorized, none issued at September 30, 2023 and December 31, 2022		—			—
Common stock, par value $0.01 per share, 400,000 shares authorized, 162,649 and 162,425 shares issued, 59,116 and 59,104 shares outstanding at September 30, 2023 and December 31, 2022, respectively		1,627			1,624
Additional paid-in capital		2,249,984			2,199,824
Retained earnings		8,934,616			8,508,587
Treasury stock, at cost, 103,533 and 103,321 shares at September 30, 2023 and December 31, 2022, respectively		(10,134,408	)		(10,063,975	)
Accumulated other comprehensive loss		(146,297	)		(141,572	)

Total stockholders’ equity		905,522			504,488

Total liabilities and stockholders’ equity	$	4,497,180		$	3,281,453

The accompanying notes are an integral part of the interim consolidated financial statements.

Table of Contents

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

~~(IN THOUSANDS)~~

(unaudited)

   Nine Months Ended
   September 30, 2017 October 1, 2016
Cash flows from operating activities:

Net income
   $ 373,483 $ 347,125
Adjustments to reconcile net income to net cash provided by operating activities:

Stock-based compensation
   30,068 32,604
Deferred income taxes
   3,046 4,924
Depreciation
   45,454 38,854
Amortization of intangibles
   32,795 33,510
Excess tax benefit related to stock-based compensation plans
   —   12,914
Gain on sale of assets
   —   (1,500 )
In-process research and development charge
   5,000 —
Change in operating assets and liabilities, net of acquisitions:

Decrease in accounts receivable
   53,358 39,471
Increase in inventories
   (26,217 ) (39,988 )
Increase in other current assets
   (12,944 ) (2,906 )
Increase in other assets
   (2,370 ) (4,667 )
Decrease in accounts payable and other current

liabilities
   (23,066 ) (29,179 )
Increase in deferred revenue and customer advances
   29,332 29,244
(Decrease) increase in other liabilities
   (2,483 ) 8,611


Net cash provided by operating activities
   505,456 469,017
Cash flows from investing activities:

Additions to property, plant, equipment and software

capitalization
   (55,257 ) (72,296 )
Business acquisitions, net of cash acquired
   —   (5,654 )
Investment in unaffiliated company
   (7,000 ) —
Payments for intellectual property licenses
   (5,000 ) —
Purchases of investments
   (2,345,259 ) (1,923,054 )
Maturities and sales of investments
   2,008,528 1,558,330
Proceeds from sale of assets
   —   4,000


Net cash used in investing activities
   (403,988 ) (438,674 )
Cash flows from financing activities:

Proceeds from debt issuances
   130,190 440,177
Payments on debt
   (64 ) (325,323 )
Payments of debt issuance costs
   —   (1,705 )
Proceeds from stock plans
   72,821 58,572
Purchases of treasury shares
   (245,742 ) (241,924 )
Proceeds from (payments for) derivative contracts
   3,301 (9,525 )


Net cash used in financing activities
   (39,494 ) (79,728 )
Effect of exchange rate changes on cash and cash equivalents
   36,202 (8,071 )


Increase (decrease) in cash and cash equivalents
   98,176 (57,456 )
Cash and cash equivalents at beginning of period
   505,631 487,665


Cash and cash equivalents at end of period
   $ 603,807 $ 430,209


	Nine Months Ended
	September 30, 2023			October 1, 2022

	(In thousands)
Cash flows from operating activities:
Net income	$	426,029		$	480,693
Adjustments to reconcile net income to net cash provided by
operating activities:
Stock-based compensation		32,224			30,929
Deferred income taxes		267			(20,836	)
Depreciation		62,235			54,306
Amortization of intangibles		55,610			44,799
R ealized gain on sale of investment		(651	)		—
Acquired in-process research and development and other non-cash items		—			10,003
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable		100,327			(39,098	)
Increase in inventories		(81,415	)		(113,211	)
Increase in other current assets		(24,066	)		(6,861	)
Increase in other assets		(23,432	)		(3,881	)
Decrease in accounts payable and other current liabilities		(130,065	)		(4,952	)
Increase in deferred revenue and customer advances		38,959			47,060
Decrease in other liabilities		(83,335	)		(65,999	)

Net cash provided by operating activities		372,687			412,952
Cash flows from investing activities:
Additions to property, plant, equipment and software
capitalization		(119,044	)		(113,737	)
Business acquisitions, net of cash acquired		(1,285,907	)		—
Proceeds from equity investments, net		651			8,903
Payments for intellectual property licenses		—			(7,535	)
Purchases of investments		(1,791	)		(11,407	)
Maturities and sales of investments		1,770			77,993

Net cash used in investing activities		(1,404,321	)		(45,783	)
Cash flows from financing activities:
Proceeds from debt issuances		1,450,041			165,000
Payments on debt		(520,040	)		(135,000	)
Payments of debt issuance costs		(400	)		—
Proceeds from stock plans		18,092			36,136
Purchases of treasury shares		(70,433	)		(477,167	)
Proceeds from derivative contracts		8,178			12,844

Net cash provided by (used in) financing activities		885,438			(398,187	)
Effect of exchange rate changes on cash and cash equivalents		2,081			(26,579	)

Decrease in cash and cash equivalents		(144,115	)		(57,597	)
Cash and cash equivalents at beginning of period		480,529			501,234

Cash and cash equivalents at end of period	$	336,414		$	443,637

The accompanying notes are an integral part of the interim consolidated financial statements.

Table of Contents

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1 Basis of Presentation and Summary of Significant Accounting Policies

Waters Corporation (the ~~“Company”~~“Company,” “we,” “our,” or “us”) is a specialty measurement company that operates with a fundamental underlying purpose to advance the science that enables our customers to enhance human health and well-being. The Company has pioneered analytical workflow solutions involving liquid chromatography, mass spectrometry and thermal analysis innovations serving the life, materials and food sciences for ~~nearly~~more than 60 years. The Company primarily designs, manufactures, sells and services ~~high performance~~high-performance liquid chromatography (“HPLC”), ~~ultra performance~~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 a common software ~~platform.~~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 ~~instruments are used~~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^®

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 ~~suppliers’~~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 ~~are typically purchased by customers as part~~services. The acquisition will expand Waters’ portfolio and increase exposure to large molecule applications. The Company financed this transaction with a combination of ~~the instrument system.~~

cash on its balance sheet and borrowings under its revolving credit facility.

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 third fiscal quarters for ~~2017~~2023 and ~~2016~~2022 ended on September 30, ~~2017~~2023 and October 1, ~~2016,~~2022, respectively.

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions to the Quarterly Report on Form

10-Q

and do not include all of the information and footnote disclosures required byfor 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, 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, ~~2016,~~2022, as filed with the U.S. Securities and Exchange Commission (“SEC”) on February ~~24, 2017.~~

27, 2023.

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.

Table of Contents

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Through the date of the issuance of these financial statements, the Company’s consolidated financial position, results of operations and cash flows have not been materially impacted and, thus, the Company concluded that no interim goodwill or long-lived asset impairment analyses were required. Further, there have been no violations of debt covenants. Any prolonged material disruption to the Company’s employees, suppliers, manufacturing, or customers could result in a material impact to its consolidated financial position, results of operations or cash flows in the future.

Translation of Foreign Currencies

For most of 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 period. Any resulting translation gains or losses are included in accumulated other comprehensive income in the consolidated balance sheets.

The functional currency of each of the Company’s foreign operating subsidiaries is the local currency of ~~that particular~~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.

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)~~

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 September 30, ~~2017~~2023 and December 31, ~~2016, $3,212~~2022, $307 million out of ~~$3,255~~$337 million and ~~$2,766~~$472 million out of ~~$2,813~~$481 million, respectively, of the Company’s total cash, cash equivalents and investments were held by foreign ~~subsidiaries and may be subject to material tax effects on distribution to U.S. legal entities.~~subsidiaries. In addition, ~~$337~~$196 million out of ~~$3,255~~$337 million and ~~$261~~$336 million out of ~~$2,813~~$481 million of cash, cash equivalents and investments were held in currencies other than the U.S. dollar at September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, 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.

Table of Contents

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 nine months ended September 30, 2023 and October 1, 2022 (in thousands):

Balance at
Beginning
of Period

Additions

Deductions

Balance at
End of
Period

Allowance for Credit Losses
September 30, 2023    $ 14,311    $ 3,727    $ (3,434 )    $ 14,604
October 1, 2022    $ 13,228    $ 4,980    $ (4,973 )    $ 13,235

Other Investments

During the nine months ended September 30, ~~2017,~~2023, the Company ~~made a~~recorded realized gains of approximately $0.7 million. During the nine months ended October 1, 2022, the Company recorded realized gains of approximately $7 million ~~investment~~and incurred approximately $6 million in ~~a developer~~losses. Realized gains and losses on equity investments are recorded within other income, net on the statement of ~~analytical system solutions used to make measurements, predict stability and accelerate product discovery in the routine analytic, process monitoring and quality control release processes~~operations.

Business Combinations

The Company accounts for ~~life science and biopharmaceutical markets. This investment was accounted for~~business combinations under the ~~cost~~acquisition method of accounting.

Accordingly, at the date of each acquisition, the Company measures the fair value of all identifiable assets acquired (including intangible assets) and liabilities assumed and allocates the amounts paid to all items measured. The fair value of identifiable intangible assets acquired is based on valuations that use information and assumptions determined by management and which consider management’s best estimates of inputs and assumptions that a market participant would use. Any excess of the fair value consideration transferred over the estimated fair values of the net assets acquired is recognized as goodwill.

Goodwill and Other Intangible Assets

The Company evaluates goodwill for impairment on an annual basis, or on an interim basis when events or changes in circumstances indicate that the carrying value may not be recoverable. Goodwill is tested for impairment at the reporting unit level, which is the operating segment or one level below an operating segment. The Company has the option of performing a qualitative assessment to determine whether further impairment testing is necessary before performing the quantitative assessment. If, as a result of the qualitative assessment, it is
more-likely-than-not
that the fair value of a reporting unit is less than its carrying amount, a quantitative impairment test will be required. Otherwise, no further testing will be required. If a quantitative impairment test is performed, the Company compares the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. The fair value of reporting units is estimated using a discounted cash flows technique, which includes certain management assumptions, such as estimated future cash flows, estimated growth rates and discount rates. Estimating the fair value of the reporting units requires significant judgment by management. If the carrying amount of a reporting unit exceeds the fair value of the reporting unit, an impairment charge is recognized for the amount by which the carrying value amount exceeds the reporting unit’s fair value up to the total amount of goodwill allocated to the reporting unit. The Company performs an annual goodwill impairment assessment for its reporting units as of December 31 each year. The Company has two reporting units: Waters
TM
and TA
TM
. Goodwill is allocated to the reporting units at the time of acquisition.

The Company’s intangible assets include purchased technology; capitalized software; costs associated with acquiring Company patents, trademarks and intellectual properties, such as licenses; and acquired IPR&D. Purchased intangibles are recorded at their fair market values as of the acquisition date and amortized over their estimated useful lives, ranging from
one
to fifteen years. Other intangibles are amortized over a period ranging from
one
to ten years. Acquired IPR&D is amortized from the date of completion of the acquired program over its estimated useful life. IPR&D and indefinite-lived intangibles are tested annually for impairment.

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 September 30, ~~2017~~2023 and December 31, ~~2016.~~2022. 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.

Table of Contents

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

The following table represents the Company’s assets and liabilities ~~that are~~ measured at fair value on a recurring basis at September 30, ~~2017~~2023 (in thousands):

   Total at
September 30,
2017    Quoted Prices
in Active
Markets
for Identical
Assets
(Level 1)    Significant
Other
Observable
Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3)
Assets:

U.S. Treasury securities
   $ 548,010    $ —      $ 548,010    $ —
Foreign government securities
   6,970    —      6,970    —
Corporate debt securities
   1,884,101    —      1,884,101    —
Time deposits
   403,112    —      403,112    —
Equity securities
   147    —      147    —
Waters 401(k) Restoration Plan assets
   33,845    33,845    —      —
Foreign currency exchange contracts
   213    —      213    —








Total
   $ 2,876,398    $ 33,845    $ 2,842,553    $ —








Liabilities:

Contingent consideration
   $ 3,017    $ —      $ —      $ 3,017
Foreign currency exchange contracts
   63    —      63    —








Total
   $ 3,080    $ —      $ 63    $ 3,017

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)~~


	Total at September 30, 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		26,460		26,460		—		—
Foreign currency exchange contracts		129		—		129		—
Interest rate cross-currency swap agreements		25,679		—		25,679		—
Interest rate swap cash flow hedge		778		—		778		—

Total	$	53,944	$	26,460	$	27,484	$	—

Liabilities:
Foreign currency exchange contracts	$	119	$	—	$	119	$	—
Interest rate cross-currency swap agreements		1,018		—		1,018		—
Interest rate swap cash flow hedge		175		—		175		—

Total	$	1,312	$	—	$	1,312	$	—

The following table represents the Company’s assets and liabilities ~~that are~~ measured at fair value on a recurring basis at December 31, ~~2016~~2022 (in thousands):

   Total at
December 31,
2016    Quoted Prices
in Active
Markets
for Identical
Assets
(Level 1)    Significant
Other
Observable
Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3)
Assets:

U.S. Treasury securities
   $ 570,313    $ —      $ 570,313    $ —
Foreign government securities
   17,991    —      17,991    —
Corporate debt securities
   1,643,838    —      1,643,838    —
Time deposits
   199,906    —      199,906    —
Equity securities
   147    —      147    —
Waters 401(k) Restoration Plan assets
   30,954    30,954    —      —
Foreign currency exchange contracts
   60    —      60    —








Total
   $ 2,463,209    $ 30,954    $ 2,432,255    $ —








Liabilities:

Contingent consideration
   $ 3,007    $ —      $ —      $ 3,007
Foreign currency exchange contracts
   730    —      730    —








Total
   $ 3,737    $ —      $ 730    $ 3,007

Total at
December 31,
2022

Quoted Prices
in Active
Markets

for Identical
Assets

(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs

(Level 3)

Assets:
Time deposits    $ 862    $ —    $ 862    $ —
Waters 401(k) Restoration Plan assets    25,532    25,532    —    —
Foreign currency exchange contracts    231    —    231    —
Interest rate cross-currency swap agreements    19,163    —    19,163    —

Total    $ 45,788    $ 25,532    $ 20,256    $ —

Liabilities:
Contingent consideration    $ 1,509    $ —    $ —    $ 1,509
Foreign currency exchange contracts    98    —    98    —
Interest rate cross-currency swap agreements    4,783    —    4,783    —

Total    $ 6,390    $ —    $ 4,881    $ 1,509

13

Table of Contents

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

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 ~~this~~the plan are determined through market and observable sources from daily quoted prices on nationally recognized securities exchanges.

Fair Value of Cash Equivalents, ~~Investment~~Investments, Foreign Exchange Contracts, Interest Rate Cross-Currency Swap Agreements and ~~Foreign Currency Exchange Contracts~~

Interest Rate Swap Cash Flow Hedges

The fair values of the Company’s cash equivalents, investments, ~~and~~ 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. After completing these validation procedures, the Company did not adjust or override any fair value measurements provided by third-party pricing services as of September 30, 2017 and December 31, 2016. There were no transfers between the levels of the fair value hierarchy during the nine months ended September 30, 2017.

~~Fair Value of Contingent Consideration~~

The fair value of the Company’s liability for contingent consideration relates to the July 2014 acquisition of Medimass Research, Development and Service Kft. and is determined using a probability-weighted discounted cash flow model, which uses significant unobservable inputs, and has been classified as Level 3. Subsequent changes in the fair value of the contingent consideration liability are recorded in the results of operations. The fair value of the contingent consideration liability associated with future earnout payments is based on several factors, including the estimated future results and a discount rate that reflects both the likelihood of achieving the estimated future results and the Company’s creditworthiness. A change in any of these unobservable inputs can significantly change the fair value of the contingent consideration. Although there is no contractual limit, the fair value of future contingent consideration payments was estimated to be $3 million at both September 30, 2017 and December 31, 2016, based on the Company’s best estimate, as the earnout is based on future sales of certain products, some of which are currently in development, through 2034. There have been no changes in significant assumptions since December 31, 2016 and the change in fair value since then is primarily due to change in time value of money.

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)~~

Fair Value of Other Financial Instruments

The Company’s ~~cash,~~ accounts receivable and accounts payable ~~and variable interest rate debt~~ 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 ~~$610 million~~$1.3 billion at both September 30, ~~2017~~2023 and December 31, ~~2016.~~2022. 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 ~~$611 million and $603 million~~$1.1 billion at both September 30, ~~2017~~2023 and December 31, ~~2016, respectively,~~2022, 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.

The Company’s principal ~~strategy~~strategies in managing ~~exposure~~exposures to changes in foreign currency exchange rates isare 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.~~

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,~~euro, Japanese yen, British pound, Mexican peso and Brazilian real. At

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

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 earnings in the period that the underlying transaction impacts consolidated earnings. 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 earnings in the current period. Interest settlements due to benchmark interest rate changes are recorded in interest income or interest expense. For the three and nine months ended

September

30, 2023, the Company did not have any cash flow hedges that were deemed ineffective.

Interest Rate Cross-Currency Swap Agreements

As of September 30, ~~2017 and December 31, 2016,~~2023, the Company ~~held~~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 ~~contracts with notional amounts totaling $127 million~~rates on a portion of its euro-denominated and ~~$120 million, respectively.~~

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.

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):

   September 30, 2017    December 31, 2016
Other current assets
   $ 213    $ 60
Other current liabilities
   $ 63    $ 730


	September 30, 2023				December 31, 2022
	Notional		Fair Value		Notional		Fair Value
Foreign currency exchange contracts:
Other current assets	$	16,000	$	129	$	42,047	$	231
Other current liabilities	$	24,790	$	119	$	13,450	$	98
Interest rate cross-currency swap agreements:
Other assets	$	505,000	$	25,679	$	400,000	$	19,163
Other liabilities	$	120,000	$	1,018	$	185,000	$	4,783
Accumulated other comprehensive income			$	20,306			$	10,026
Interest rate swap cash flow hedges:
Other assets	$	50,000	$	778	$	—	$	—
Other liabilities	$	50,000	$	175	$	—	$	—
Accumulated other comprehensive income			$	510			$	—

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

The following is a summary of the activity included in ~~cost of sales 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):

   Three Months Ended    Nine Months Ended
   September 30,
2017    October 1,
2016    September 30,
2017    October 1,
2016
Realized gains (losses) on closed contracts
   $ 2,871    $ (1,994 )    $ 3,301    $ (9,525 )
Unrealized (losses) gains on open contracts
   (1,258 )    1,003    819    11








Cumulative netpre-tax gains (losses)
   $ 1,613    $ (991 )    $ 4,120    $ (9,514 )

Financial

Statement

Classification

Three Months Ended

Nine Months Ended


September

30, 2023

October 1,
2022

September

30, 2023

October 1,
2022

Foreign currency exchange contracts:
Realized losses
on closed contracts    Cost of sales    $ (755 ) $ (3,811 ) $ (50 ) $ (6,603 )
Unrealized gains (losses)
on open contracts    Cost of sales    168 461 (123 ) (93 )
Cumulative net
pre-tax


losses    Cost of sales    $ (587 ) $ (3,350 ) $ (173 ) $ (6,696 )

Interest rate cross-currency swap agreements:
Interest earned    Interest income    $ 2,720 $ 2,362 $ 8,048 $ 6,214
Unrealized gains    Other comprehensive
on open contracts    income    $ 18,936 $ 31,108 $ 10,280 $ 73,812
Interest rate swap cash flow hedges:
Interest earned    Interest income    $ 93 $ — $ 93 $ —
Unrealized gains    Other comprehensive
on open contracts    income    $ 510 $ — $ 510 $ —

Stockholders’ Equity

In ~~May 2017,~~January 2019, the Company’s Board of Directors authorized the Company to repurchase up to $1$4 billion of its outstanding common stock over a ~~three-year~~

two-year

period. This program replaced the remaining amounts available from the

pre-existing

program. 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 shall now expire on January 21, 2024 and increased the total authorization level to $4.8 billion, an increase of $750 million. During the nine months ended September 30, ~~2017~~2023 and October 1, ~~2016,~~2022, the Company repurchased ~~1.4~~0.2 million and ~~1.8~~1.5 million shares of the Company’s outstanding common stock at a cost of ~~$238~~$58 million and ~~$236~~$467 million, respectively, under the ~~May 2017~~January 2019 authorization and other previously announced programs. ~~As of September 30, 2017, the Company had purchased an aggregate of 5.5 million shares at a cost of~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)~~

$750 million under the May 2014 authorization, which is now completed. The Company has a total of $885 million in remaining authorized capacity for future repurchases under the May 2017 authorization. In addition, the Company repurchased $8$12 million and $6$11 million of common stock related to the vesting of restricted stock units during the nine months ended September 30, ~~2017~~2023 and October 1, ~~2016,~~2022, respectively. ~~The~~As of September 30, 2023, the Company ~~believes that it has~~had repurchased an aggregate of 15.2 million shares at a cost of $3.8 billion under the ~~financial flexibility to fund these share repurchases given current cash levels~~January 2019 repurchase program and ~~debt borrowing capacity, as well as to invest in research, technology and business acquisitions to further grow the Company’s sales and profits.~~

had a total of $1.0 billion authorized for future repurchases.

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.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

The following is a summary of the activity of the Company’s accrued warranty liability for the nine months ended September 30, ~~2017~~2023 and October 1, ~~2016~~2022 (in thousands):

   Balance at
Beginning
of Period    Accruals for
Warranties    Settlements
Made    Balance at
End of
Period
Accrued warranty liability:

September 30, 2017
   $ 13,391    $ 6,287    $ (6,823 )    $ 12,855
October 1, 2016
   $ 13,349    $ 7,101    $ (6,915 )    $ 13,535

Balance at
Beginning
of Period

Accruals for
Warranties

Settlements
Made

Balance at
End of
Period

Accrued warranty liability:
September 30, 2023    $ 11,949    $ 4,813    $ (5,642 )    $ 11,120
October 1, 2022    $ 10,718    $ 6,606    $ (6,663 )    $ 10,661
Restructuring

In July 2023, the Company made organizational changes to better align its resources with its growth and ~~Other Charges~~

innovation strategies, resulting in a worldwide workforce reduction,

that has impacted approximately

5% of the Company’s employees. During the three and nine months ended September 30, 2023, the Company incurred $23 million and $27 million

, respectively,

of severance-related costs

connection

with this reduction.

During the three and nine months ended September 30, 2023, the Company paid $12 million and $14 million, respectively

of these costs

with the majority of the remaining costs to be paid in the fourth quarter of 2023 and the first half of 2024.

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.

The following is a summary of the activity of the Company’s deferred revenue and customer advances for the nine months ended September 30, ~~2017, the~~2023 and October 1, 2022 (in thousands):


	September 30, 2023			October 1, 2022
Balance at the beginning of the period	$	285,175		$	273,598
Recognition of revenue included in balance at beginning of the period		(222,001	)		(213,527	)
Revenue deferred during the period, net of revenue recognized		276,277			243,853

Balance at the end of the period	$	339,451		$	303,924

The Company ~~incurred $12~~classified $64 million and $57 million of ~~severance costs associated with the closure of a facility~~deferred revenue and customer advances in Germany and costs associated with providing U.S. employees with an early retirement transition incentive. During the nine months ended October 1, 2016, the Company incurred $3 million of severance costs associated with an organizational restructuring. Atother long-term liabilities at September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively.

The amount of deferred revenue and customer advances equals the ~~Company had $3 million and $2 million of severance costs accrued in other current liabilities.~~

~~AcquiredIn-process~~ ~~Research and Development~~

~~During the nine months ended September 30, 2017, the Company incurred a $5 million charge for acquiredin-process~~ ~~research and development related~~transaction price allocated to ~~a milestone payment~~unfulfilled performance obligations for the ~~licensing of certain intellectual property relating to mass spectrometry technologies yet~~period presented. Such amounts are expected to be ~~commercialized and for which there was no~~recognized in the future ~~alternative use~~ as of the acquisition date. This licensing arrangement is significantly related to new, biologically-focused applications, as well as other applications, and requires the Company to make additional future payments of up to $7 million if certain milestones are achieved, as well as royalties on future net sales.

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)~~

2follows (in thousands):


	September 30, 2023
Deferred revenue and customer advances expected to be recognized in:
One year or less	$	275,941
13-24 months		37,373
25 months and beyond		26,137

Total	$	339,451

3 Marketable Securities

The Company’s marketable securities within cash equivalents and investments included in the consolidated balance sheets ~~are detailed as follows (in thousands):~~

   September 30, 2017
   Amortized    Unrealized    Unrealized    Fair
   Cost    Gain    Loss    Value
U.S. Treasury securities
   $ 548,736    $ 91    $ (817 )    $ 548,010
Foreign government securities
   6,976    —      (6 )    6,970
Corporate debt securities
   1,883,688    1,474    (1,061 )    1,884,101
Time deposits
   403,113    —      (1 )    403,112
Equity securities
   77    70    —      147








Total
   $ 2,842,590    $ 1,635    $ (1,885 )    $ 2,842,340








Amounts included in:

Cash equivalents
   $ 191,190    $ —      $ —      $ 191,190
Investments
   2,651,400    1,635    (1,885 )    2,651,150








Total
   $ 2,842,590    $ 1,635    $ (1,885 )    $ 2,842,340

   December 31, 2016
   Amortized    Unrealized    Unrealized    Fair
   Cost    Gain    Loss    Value
U.S. Treasury securities
   $ 570,695    $ 253    $ (635 )    $ 570,313
Foreign government securities
   17,999    —      (8 )    17,991
Corporate debt securities
   1,645,468    496    (2,126 )    1,643,838
Time deposits
   199,906    —      —      199,906
Equity securities
   77    70    —      147








Total
   $ 2,434,145    $ 819    $ (2,769 )    $ 2,432,195








Amounts included in:

Cash equivalents
   $ 124,793    $ 1    $ —      $ 124,794
Investments
   2,309,352    818    (2,769 )    2,307,401








Total
   $ 2,434,145    $ 819    $ (2,769 )    $ 2,432,195

~~The estimated~~consist of time deposits that mature in one year or less with an amortized cost and a fair value of ~~marketable debt securities by maturity date is as follows (in thousands):~~

   September 30, 2017    December 31, 2016
Due in one year or less
   $ 1,574,317    $ 1,388,537
Due after one year through three years
   864,764    843,605




Total
   $ 2,439,081    $ 2,232,142

~~3 Inventories~~

~~Inventories are classified as follows (in thousands):~~

   September 30, 2017    December 31, 2016
Raw materials
   $ 99,832    $ 95,430
Work in progress
   20,205    16,585
Finished goods
   177,817    150,667




Total inventories
   $ 297,854    $ 262,682

$0.9 million at both September 30, 2023 and December 31, 2022.

Table of Contents

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

4 Inventories

Inventories are classified as follows (in thousands):


	September 30, 2023		December 31, 2022
Raw materials	$	241,012	$	205,760
Work in progress		25,689		19,899
Finished goods		277,701		230,051

Total inventories	$	544,402	$	455,710

5 Acquisitions

On May 16, 2023, the Company acquired all of the issued and outstanding equity interests of Wyatt for $1.3 billion, net of cash acquired. 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. As a result of the acquisition, the results of Wyatt are included in the Company’s consolidated financial statements from the acquisition date.

The Company preliminarily allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The purchase price allocation was based upon preliminary information and is subject to change if additional information about the facts and circumstances that existed at the acquisition date becomes available. The Company is in the ongoing process of conducting a valuation of the assets acquired and liabilities assumed related to the acquisition. The final fair value of the net assets acquired may result in adjustments to these assets and liabilities, including goodwill.

The intangible assets were valued with input from valuation specialists. The Company used variations of the income approach, which uses Level 3 inputs, in determining the fair value of intangible assets acquired in the Wyatt acquisition. Specifically, the customer relationships were valued using the multi-period excess earnings method under the income approach. The Company utilized the relief from royalty method to determine the fair value of the tradename and the developed technology. The following table presents the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed on the closing date of May 16, 2023 (in thousands):


Purchase Price
Cash paid	$	1,311,531
Less: cash acquired		(25,624	)

Net cash consideration		1,285,907

Identifiable Net Assets (Liabilities) Acquired
Accounts receivable		20,099
Inventory		14,706
Prepaid and other assets		1,327
Property, plant and equipment		9,056
Operating lease assets		5,204
Intangible assets		418,100
Accounts payable and accrued expenses		(31,664	)
Operating lease liabilities		(5,204	)
Tax liabilities		(3,871	)
Deferred revenue		(15,219	)
Other liabilities		(5,728	)

Total identifiable net assets acquired		406,806
Goodwill		879,101

Net cash consideration	$	1,285,907

The details of the purchase price allocated to the intangible assets acquired and the estimated useful lives are as follows (dollars in thousands

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)


	Amount		Weighted-Average Life
Developed technology	$	80,000		10 years
Customer relationships		330,600		10 years
Trade name		7,500		5 years

Total		$418,100

The Company allocated $879 million of the purchase price to goodwill which is

deductible for tax purposes and has been allocated to the Waters Division operating segment. The goodwill arising from the acquisition consists largely of the value of intangible assets that do not qualify for separate recognition such as workforce in place and cash flows from the integration of acquired technology, distribution channels and products with the Company’s products, which are higher than if the acquired companies’ technology, customer access or products were utilized on a stand-alone basis.

During the three and nine months ended September 30, 2023, the Company’s consolidated results included net sales of $

29 million and $

45 million

, respectively,

and a net operating loss of $

6 million and $

9 million

, respectively,

since the acquisition closed on May 16, 2023. The Company also incurred transaction related costs of $13 million during the nine months

ended

September 30, 2023

, which are recorded in selling and administrative expenses in the consolidated statement of operations.

Unaudited Pro Forma Financial Information

The following unaudited pro forma information is presented for illustrative purposes only. It is not necessarily indicative of the actual results of operations that actually would have been realized had the entities been a single company as of January 1, 2022 or the future operating results of the combined entity. The unaudited pro forma information does not give effect to the potential impact of current financial conditions, regulatory matters or any anticipated synergies that may be associated with the acquisition. The unaudited pro forma information also does not include any integration costs that the Company may incur related to the acquisition as part of combining the operations of the companies.

The following unaudited pro forma information shows the results of the Company’s operations for the nine months ended September 30, 2023 and October 1, 2022, as if the acquisition had occurred on January 1, 2022 (in thousands):


	September 30, 2023		October 1, 2022
Revenue	$	2,174,209	$	2,197,028
Net income		426,238		448,102

The impact of the unaudited pro forma information for the three months ended September 30, 2023 and October 1, 2022 was immaterial to the consolidated financial statements.

To reflect the acquisition of Wyatt as if it had occurred on January 1, 2022, the unaudited pro forma information includes adjustments to reflect, among other things, the incremental intangible asset amortization to be incurred based on the preliminary values of each identifiable intangible asset of Wyatt and the interest expense from debt financings obtained to partially fund the cash consideration transferred. Pro forma adjustments were tax effected at the Company’s historical statutory rates in effect for the respective periods.

Pro forma net income for the nine months ended September 30, 2023, was adjusted to exclude certain

non-recurring

expenses related to transaction costs incurred and the fair value adjustment of inventory. These

non-recurring

expenses were reclassified to the prior period and included in the pro forma net income for the nine months ended October 1, 2022.

In conjunction with the Wyatt acquisition, the Company entered into retention agreements with certain employees, in which the Company agreed to pay a total of $40 million, in two equal installments upon the first and second anniversary of the acquisition date. As these employees are earning their individual cash award by providing service over the

two-year

period that benefit the Company, the $40 million will be recognized within total costs and operating expenses in the consolidated statements of operations over the

two-year

service period. The Company has recorded $8 million and $11 million of expense in the consolidated statement of operations for the three and nine months ended September 30, 2023

, respectively.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

6 Goodwill and Other Intangibles

The carrying amount of goodwill was ~~$359 million~~$1.3 billion and ~~$352~~$430 million at September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively. ~~During the nine months ended September 30, 2017,~~The acquisition of Wyatt increased goodwill by $879 million, while the effect of foreign currency translation ~~increased~~decreased goodwill by $7$1 million.

The Company’s intangible assets included in the consolidated balance sheets are detailed as follows (dollars in thousands):

   September 30, 2017    December 31, 2016
   Gross
Carrying
Amount    Accumulated
Amortization    Weighted-
Average
Amortization
Period    Gross
Carrying
Amount    Accumulated
Amortization    Weighted-
Average
Amortization
Period
Capitalized software
   $ 424,155    $ 273,430    5 years    $ 355,973    $ 223,572    5 years
Purchased intangibles
   169,023    136,491    11 years    162,180    127,045    11 years
Trademarks and IPR&D
   13,924    —      —      13,544    —      —
Licenses
   5,837    4,502    6 years    4,632    3,851    6 years
Patents and other intangibles
   67,971    42,431    8 years    61,646    36,452    8 years









Total
   $ 680,910    $ 456,854    7 years    $ 597,975    $ 390,920    7 years

~~During~~


	September 30, 2023							December 31, 2022
					Weighted-							Weighted-
	Gross				Average			Gross				Average
	Carrying		Accumulated		Amortization			Carrying		Accumulated		Amortization
	Amount		Amortization		Period			Amount		Amortization		Period
Capitalized software	$	616,406	$	460,730		5	years	$	589,604	$	441,414		5	years
Purchased intangibles		610,513		182,214		10	years		197,805		166,735		11	years
Trademarks		9,680		—		—			9,680		—		—
Licenses		14,142		7,753		7	years		14,070		6,729		6	years
Patents and other intangibles		109,371		78,206		8	years		104,139		73,021		8	years

Total	$	1,360,112	$	728,903		7	years	$	915,298	$	687,899		7	years

The Company capitalized intangible assets in the amounts of $10 million and $14 million in the three months ended September 30, 2023 and October 1, 2022, respectively, and $455 million and $38 million in the nine months ended September 30, ~~2017,~~2023 and October 1, 2022, respectively. The increases in intangible assets are a result of the ~~effect of foreign currency translation increased the~~Wyatt acquisition.

The gross carrying value of intangible assets and accumulated amortization for intangible assets decreased by ~~$52~~$6 million and ~~$33~~$10 million, ~~respectively.~~ respectively, in the nine months ended September 30, 2023 due to the effects of foreign currency translation.

Amortization expense for intangible assets was ~~$11~~$26 million and ~~$12~~$15 million for the three months ended September 30, ~~2017~~2023 and October 1, ~~2016, respectively.~~2022. Amortization expense for intangible assets was ~~$33~~$56 million and ~~$34~~$45 million for the nine months ended September 30, ~~2017~~2023 and October 1, ~~2016,~~2022, respectively. Amortization expense for intangible assets is estimated to be ~~approximately $44~~$97 million per year for each of the next five years.

7 Debt

~~In June 2013,~~

On May 16, 2023, the Company ~~entered into~~financed the Wyatt acquisition with a combination of cash on its balance sheet and borrowings under its revolving credit ~~agreement that provides~~facility. As a result of the Wyatt transaction, the Company’s outstanding debt on September 30,

2023

was $2.5 billion, a change of $1.0 billion from the end of the first quarter of 2023.

On May 11, 2023, the Company issued the following senior unsecured notes:


Senior Unsecured Notes	Term		Interest Rate			Face Value (in millions)		Maturity Date
Series P		5 years		4.91	%	$	50		May 2028
Series Q		7 years		4.91	%	$	50		May 2030

The Company used the proceeds from the issuance of these senior unsecured notes to repay other outstanding debt and for general corporate purposes. Interest on the Series P and Q Senior Notes is payable semi-annually in arrears. The Company may prepay some or all of the Senior Notes, at any time and from time to time, in an amount not less than 10% of the aggregate principal amount of the Senior Notes then outstanding, plus the applicable make-whole

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

amount for Series P and Q Senior Notes, in each case, upon no more than 60 nor less than 20 days’ written notice to the holders of the Senior Notes. In the event of a ~~$1.1~~change in control (as defined in the note purchase agreement) of the Company, the Company may be required to prepay the Senior Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest. Other provisions for these senior unsecured notes are similar to the existing senior unsecured notes, as described below.

The Company has a five-year, $1.8 billion revolving facility (the “Credit Facility”) that expires in September 2026. On March 3, 2023, the Company amended the Credit Facility to increase the borrowing capacity by $200 million to an aggregate total borrowing capacity of $2.0 billion, which did not affect the maturity date of September 17, 2026. The amendment also replaced all references in the Credit Facility to LIBOR with Term SOFR as the benchmark rate. As of September 30, 2023 and December 31, 2022, the Credit Facility had a $300 million term loan facility. In April 2015, Waters Corporation entered into an amendment to this agreement (the “Amended Credit Agreement”). The Amended Credit Agreement provides for an increasetotal of ~~the revolving commitments from $1.1 billion to $1.3~~$1.2 billion and ~~extends the maturity of the original credit agreement from June 25, 2018 until April 23, 2020. The Company plans to use future proceeds from the revolving facility for general corporate purposes.~~

$270 million outstanding, respectively.

The interest rates applicable tounder the ~~Amended~~ Credit ~~Agreement~~Facility are, at the Company’s option, equal to either the alternate base rate ~~calculated daily~~ (which is a rate per annum equal to the greatest of ~~(a)~~(1) the prime rate in effect on such day, ~~(b)~~(2) the ~~federal funds effective rate in effect~~Federal Reserve Bank of New York Rate on such day plus 1/2%2 of 1% per annum ~~or (c)~~and (3) the adjusted ~~LIBO~~Term SOFR rate onfor 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 ~~business day,~~U.S. Government Securities Business Day, the immediately preceding ~~business day) for a deposit in~~ U.S. ~~dollars with a maturity of one month~~Government Securities Business Day), plus 1% ~~per~~ annum) or the applicable 1, 2, 3 or 6 month adjusted ~~LIBO~~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 ~~basis points to~~and 12.5 basis points for alternate base rate loans and between 80 ~~basis points~~ and ~~117.5~~112.5 basis points for ~~adjusted LIBO~~Term SOFR or EURIBO rate loans. The facility fee on the ~~Amended~~ Credit ~~Agreement~~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 ~~20 basis points.~~the outstanding term loan. The ~~Amended~~ Credit ~~Agreement~~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 ~~Amended~~ Credit ~~Agreement~~Facility includes negative covenants, affirmative covenants, representations and warranties and events of default that are customary for investment grade credit facilities.

As of both September 30, ~~2017, $125 million of~~2023 and December 31, 2022, the outstanding portion of the revolving facility was classified as short-term liabilities in the consolidated balance sheet due to the fact that the Company expects to repay this portion of the borrowing under the revolving line of credit within the next twelve months. The remaining $835 million of the outstanding portion of the revolving facility was classified as long-term liabilities in the consolidated balance sheet, as this portion is not expected to be repaid within the next twelve months.

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)~~

~~The~~ Company had a total of ~~$700 million~~$1.3 billion of outstanding senior unsecured ~~notes as of September 30, 2017 and December 31, 2016.~~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, plus the applicable make-whole amount or prepayment premium for Series H and J senior unsecured notes.~~outstanding. In the event of a 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.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

The Company had the following outstanding debt at September 30, ~~2017~~2023 and December 31, ~~2016~~2022 (in thousands):

   September 30, 2017    December 31, 2016
Foreign subsidiary lines of credit
   $ 423    $ 297
Senior unsecured notes—Series D—3.22%, due March 2018
   100,000    —
Credit agreements
   125,000    125,000




Total notes payable and debt
   225,423    125,297




Senior unsecured notes—Series B—5.00%, due February 2020
   100,000    100,000
Senior unsecured notes—Series D—3.22%, due March 2018
   —      100,000
Senior unsecured notes—Series E—3.97%, due March 2021
   50,000    50,000
Senior unsecured notes—Series F—3.40%, due June 2021
   100,000    100,000
Senior unsecured notes—Series G—3.92%, due June 2024
   50,000    50,000
Senior unsecured notes—Series H—floating rate*, due June 2024
   50,000    50,000
Senior unsecured notes—Series I—3.13%, due May 2023
   50,000    50,000
Senior unsecured notes—Series J—floating rate**, due May 2024
   40,000    40,000
Senior unsecured notes—Series K—3.44%, due May 2026
   160,000    160,000
Credit agreements
   1,135,000    1,005,000
Unamortized debt issuance costs
   (2,633 )    (3,034 )




Total long-term debt
   1,732,367    1,701,966




Total debt
   $ 1,957,790    $ 1,827,263


	September 30, 2023			December 31, 2022
Senior unsecured notes - Series I - 3.13%, due May 2023		—			50,000
Senior unsecured notes - Series G - 3.92%, due June 2024		50,000			—

Total notes payable and debt, current		50,000			50,000
Senior unsecured notes - Series G - 3.92%, due June 2024		—			50,000
Senior unsecured notes - Series H - floating rate*, due June 2024		—			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			—
Senior unsecured notes - Series Q - 4.91%, due May 2030		50,000			—
Credit agreement		1,200,000			270,000
Unamortized debt issuance costs		(4,735	)		(5,122	)

Total long-term debt		2,455,265			1,524,878

Total debt	$	2,505,265		$	1,574,878

*	Series H senior unsecured notes bear interest at a 3-month LIBOR for that floating rate interest period plus 1.25%.

**	~~Series J senior unsecured notes bear interest at a3-month~~ ~~LIBOR for that floating rate interest period plus 1.45%.~~

As of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, the Company had a total amount available to borrow under ~~existing credit agreements~~the Credit Facility of ~~$338 million~~$0.8 billion and ~~$468 million,~~$1.5 billion, respectively, after outstanding letters of credit. The weighted-average interest rates applicable to the senior unsecured notes and credit agreement borrowings collectively were ~~2.82%~~4.97% and ~~2.55%~~3.54% at September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively. As of September 30, ~~2017,~~2023, the Company was in compliance with all debt covenants.

The Company and its foreign subsidiaries also had available short-term lines of credit totaling ~~$90~~$112 million and ~~$79~~$113 million at September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively, for the purpose of short-term borrowing and issuance of commercial guarantees. AtNone of the Company’s foreign subsidiaries had outstanding short-term borrowings as of September 30, ~~2017 and~~2023 or December 31, ~~2016,~~2022.

As of September 30, 2023, the ~~weighted-average~~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 ~~applicable to these short-term borrowings were 1.48%~~on a portion of its euro-denominated and ~~1.49%, respectively.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)~~

yen-denominated

net asset investments.

8 Income Taxes

The four principal jurisdictions in which the Company manufactures are the U.S., Ireland, the U.K. and Singapore, where the ~~Company’s marginal effective~~statutory tax rates were ~~approximately 37.5%~~21%, 12.5%, ~~19.25%~~25% and 0%17%, respectively, as of September 30, ~~2017.~~2023. The Company has a ~~contractual~~Development and Expansion Incentive in Singapore that provides a concessionary income tax rate of 0%5% on ~~qualifying activities in Singapore~~certain types of income for the period April 1, 2021 through March ~~2021, based upon the achievement of certain contractual milestones, which the Company expects to continue to meet.~~31, 2026. The ~~current statutory tax rate in Singapore is 17%. For the first nine months of 2017 and 2016, the~~ effect of applying the ~~contractual~~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 nine months ended September 30, 2023 and October 1, 2022 by ~~$18~~$11 million and ~~$16~~$15 million, respectively, and increased the Company’s net income per diluted share by ~~$0.23~~$0.18 and ~~$0.20,~~$0.25, respectively.

The Company’s effective tax rate for the ~~quarter~~three months ended September 30, 2023 and October 1, 2022 was ~~11.5%~~12.2% and ~~14.2% for 2017 and 2016, respectively.Year-to-date,~~ ~~the Company’s effective tax rate was 10.1% and 12.7% for 2017 and 2016,~~14.9%, respectively. The

decrease

in the effective income tax rate ~~in 2017 as compared to 2016~~ can be primarily attributed to the ~~adoption~~impact of ~~new accounting guidance related to stock-based compensation, which decreased income~~discrete tax ~~expense by $3 million~~benefits in the

current

year and $14 million for the three and nine months ended September 30, 2017, respectively, and decreased the Company’s effective tax rate by 1.7 percentage points and 3.4 percentage points, respectively. See Note 13 for further information regarding the adoption of this standard. In addition, the provision for income tax for the first quarter of 2016 included a quarter-specific tax benefit associated with modifications to certain stock-based compensation awards. The remaining differences between the effective tax rate in 2017 and 2016 can be primarily attributed to differences in the proportionate amounts of

pre-tax

income recognized in jurisdictions with different effective tax rates.

Table of Contents

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

The Company’s effective tax rate for the nine months ended September 30, 2023 and October 1, 2022 was 14.6% and 14.5%, respectively. The differences between the effective tax rates can primarily be attributed to 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 ~~reporting~~ 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 ~~classifies~~continues to classify interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.

The ~~following is a summary of the activity of the~~ Company’s gross unrecognized tax benefits, ~~for the nine months ended~~excluding interest and penalties, at September 30, ~~2017~~2023 and October 1, ~~2016 (in thousands):~~

   September 30, 2017    October 1, 2016
Balance at the beginning of the period
   $ 9,964    $ 14,450
Net changes in uncertain tax benefits
   (2,953 )    (3,559 )




Balance at the end of the period
   $ 7,011    $ 10,891

2022 were $32 million and $29 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, 2012. However, carryforward tax attributes that were generated in years beginning on or before January 1, 2013 may still be adjusted upon examination by tax authorities if the attributes are utilized.2017. 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. As of September 30, ~~2017,~~2023, the Company expects to record ~~additional~~ reductions in the measurement of its unrecognized tax benefits and related net interest and penalties of ~~approximately $2~~$18 million within the next twelve months due to potential tax audit settlements and the lapsing of statutes of limitations on potential tax assessments. The Company does not expect to record any other material reductions in the measurement of its unrecognized tax benefits within the next twelve months.

~~7 Litigation~~

~~From time to time,~~

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 September 30, 2023 are immaterial for the years ended December 31, 2023 and thereafter.

The Company ~~and~~enters into standard indemnification agreements in its ~~subsidiaries are involved in various litigation matters arising in the~~ ordinary course of business. ~~The~~Pursuant to these agreements, the Company ~~believes it has meritorious arguments in its current litigation matters~~indemnifies, holds harmless and ~~believes any outcome, either individually~~agrees to reimburse the indemnified party for losses suffered or inincurred by the ~~aggregate, will not be material to~~indemnified party, generally the Company’s ~~financial position, results of operations~~business partners or ~~cash flows.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)~~

The Company has been engaged in patent litigation in Germany since 2005. In June 2017, the court issued a verdict against the Company and awarded the plaintiff damages, fees and interest. As a result of the court’s judgment, the Company recorded a $10 million provision for damages and fees estimated to be incurredcustomers, in connection with ~~this litigation. The accrued~~ patent, ~~litigation expense of $17 million and $7 million is in other current liabilities in the consolidated balance sheets at September 30, 2017 and December 31, 2016, respectively.~~

~~8 Stock-Based Compensation~~

~~The Company maintains various shareholder-approved, stock-based compensation plans which allow for the issuance of incentive ornon-qualified~~ ~~stock options, stock appreciation rights, restricted stock~~copyright or other ~~types~~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 ~~awards (e.g. restricted stock units and performance stock units). In the first quarter of 2017,~~services by the Company ~~adopted new accounting guidance related to stock-based compensation, see Note 13 for further information regarding the adoption of this standard.~~

or its subcontractors. The Company accounts for stock-based compensation costs in accordance with the accounting standards for stock-based compensation, which require that all share-based payments to employees be recognized in the statements of operations based on their grant date fair values. The Company recognizes the expense using the straight-line attribution method. The stock-based compensation expense recognized in the consolidated statements of operations is based on awards that ultimately are expected to vest; therefore, themaximum potential amount of ~~expense has been reduced for estimated forfeitures. The new stock-based compensation accounting guidance offers~~future payments the ~~option of recognizing forfeitures as they occur or estimating forfeitures at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The~~ Company ~~has elected~~could be required to remain consistent with prior periods and estimate forfeitures at the time of grant and, if necessary, revise in subsequent periods in which actual forfeitures differ from those estimates. Forfeitures are estimated based on historical experience. If actual results differ significantly frommake under these ~~estimates, stock-based compensation expense and~~indemnification agreements is unlimited. Historically, the Company’s ~~results of operations could be materially impacted. In addition, if~~costs to defend lawsuits or settle claims relating to such indemnity agreements have been minimal and management accordingly believes the Company employs different assumptions in the application of these standards, the compensation expense that the Company records in the future periods may differ significantly from what the Company has recorded in the current period.

The consolidated statements of operations for the three and nine months ended September 30, 2017 and October 1, 2016 include the following stock-based compensation expense related to stock option awards, restricted stock awards, restricted stock unit awards, performance stock unit awards and the employee stock purchase plan (in thousands):

   Three Months Ended    Nine Months Ended
   September 30, 2017    October 1, 2016    September 30, 2017    October 1, 2016
Cost of sales
   $ 726    $ 731    $ 2,251    $ 2,058
Selling and administrative expenses
   10,768    6,944    25,558    27,526
Research and development expenses
   780    692    2,259    3,020








Total stock-based compensation
   $ 12,274    $ 8,367    $ 30,068    $ 32,604

During the nine months ended September 30, 2017 and October 1, 2016, the Company recognized $4 million and $7 million, respectively, of stock-based compensation expense related to the modification of certain stock awards upon the retirement of senior executives.

~~Stock Options~~

~~In determining the~~estimated fair value of the stock options, the Company makes a variety of assumptions and estimates, including volatility measures, expected yields and expected stock option lives. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. The Company uses implied volatility on its publicly-traded options as the basis for its estimate of expected volatility. The Company believes that implied volatilitythese agreements is the most appropriate indicator of expected volatility because it is generally reflective of historical volatility and expectations of how future volatility will differ from historical volatility. The expected life assumption for grants is based on historical experience for the population of~~non-qualified~~ ~~stock option exercises. The risk-free interest rate is the yield currently available on U.S. Treasuryzero-coupon~~ issues with a remaining term approximating the expected term used as the input to the Black-Scholes model. The relevant data used to determine the value of the stock options granted during the nine months ended September 30, 2017 and October 1, 2016 is as follows:

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)~~

   Nine Months Ended
Options Issued and Significant Assumptions Used to Estimate Option Fair Values
   September 30, 2017 October 1, 2016
Options issued (in thousands)
   217 86
Risk-free interest rate
   2.2 % 1.5 %
Expected life in years
   6 5
Expected volatility
   0.230 0.286
Expected dividends
   —   —

   Nine Months Ended
Weighted-Average Exercise Price and Fair Value of Options on the Date of Grant
   September 30, 2017    October 1, 2016
Exercise price
   $ 151.24    $ 122.65
Fair value
   $ 40.49    $ 34.63

~~The following table summarizes stock option activity for the plans for the nine months ended September 30, 2017 (in thousands, except per share data):~~

   Number of Shares    Price per Share    Weighted-Average
Exercise Price per
Share
Outstanding at December 31, 2016
   2,697    $ 38.09 to $139.51    $ 106.55
Granted
   217    $ 136.43 to $184.89    $ 151.24
Exercised
   (751 )    $ 41.20 to $134.37    $ 90.28
Canceled
   (43 )    $ 87.06 to $136.43    $ 115.82



Outstanding at September 30, 2017
   2,120    $ 38.09 to $184.89    $ 116.70

~~Restricted Stock~~

During the nine months ended September 30, 2017, the Company granted eight thousand shares of restricted stock. The weighted-average fair value per share of these awards on the grant date was $140.52 per share.

~~Restricted Stock Units~~

~~The following table summarizes the unvested restricted stock unit award activity for the nine months ended September 30, 2017 (in thousands, except per share data):~~

   Shares    Weighted-Average
Price per Share
Unvested at December 31, 2016
   453    $ 110.34
Granted
   106    $ 154.31
Vested
   (140 )    $ 106.06
Forfeited
   (17 )    $ 116.83



Unvested at September 30, 2017
   402    $ 123.15

~~Restricted stock units are generally granted annually in February and vest in equal annual installments over a five-year period.~~

~~Performance Stock Units~~

The Company’s performance stock units are equity compensation awards with a market vesting condition based on the Company’s Total Shareholder Return (“TSR”) relative to the TSR of the components of the S&P Health Care Index. TSR is the change in value of a stock price over time, including the reinvestment of dividends. The vesting schedule ranges from 0% to 200% of the target shares awarded.

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)~~

In determining the fair value of the performance stock units, the Company makes a variety of assumptions and estimates, including volatility measures, expected yields and expected terms. The fair value of each performance stock unit grant was estimated on the date of grant using the Monte Carlo simulation model. The Company uses implied volatility on its publicly-traded options as the basis for its estimate of expected volatility. The Company believes that implied volatility is the most appropriate indicator of expected volatility because it is generally reflective of historical volatility and expectations of how future volatility will differ from historical volatility. The expected life assumption for grants is based on the performance period of the underlying performance stock units. The risk-free interest rate is the yield currently available on U.S. Treasury~~zero-coupon~~ issues with a remaining term approximating the expected term used as the input to the Monte Carlo simulation model. The correlation coefficient is used to model the way in which each company in the S&P Health Care Index tends to move in relation to each other during the performance period. The relevant data used to determine the value of the performance stock units granted during 2017 is as follows:


~~Performance Stock Units Issued and Significant Assumptions Used to Estimate Fair Values~~	~~2017~~
~~Performance stock units issued in thousands~~		20
~~Risk-free interest rate~~		~~1.5~~	%
~~Expected life in years~~		3
~~Expected volatility~~		~~0.232~~
~~Average volatility of peer companies~~		~~0.261~~
~~Correlation coefficient~~		~~0.385~~
~~Expected dividends~~		—

~~The following table summarizes the unvested performance stock unit award activity for the nine months ended September 30, 2017 (in thousands, except per share data):~~

   Shares    Weighted-Average
Fair Value per
Share
Unvested at December 31, 2016
   27    $ 171.16
Granted
   20    $ 198.78



Unvested at September 30, 2017
   47    $ 184.40

9immaterial.

10 Earnings Per Share

Basic and diluted ~~earnings per share (“EPS”)~~EPS calculations are detailed as follows (in thousands, except per share data):

   Three Months Ended September 30, 2017
   Net Income
(Numerator)    Weighted-
Average Shares
(Denominator)    Per Share
Amount
Net income per basic common share
   $ 136,104    79,712    $ 1.71
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities
   —      809    (0.02 )






Net income per diluted common share
   $ 136,104    80,521    $ 1.69


	Three Months Ended September 30, 2023
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	134,552		59,093	$	2.28
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		—		162		(0.01	)

Net income per diluted common share	$	134,552		59,255	$	2.27

Table of Contents

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

   Three Months Ended October 1, 2016
   Net Income
(Numerator)    Weighted-
Average Shares
(Denominator)    Per Share
Amount
Net income per basic common share
   $ 124,856    80,677    $ 1.55
Effect of dilutive stock option, restricted stock and restricted stock unit securities
   —      711    (0.02 )






Net income per diluted common share
   $ 124,856    81,388    $ 1.53

   Nine Months Ended September 30, 2017
   Net Income
(Numerator)    Weighted-
Average Shares
(Denominator)    Per Share
Amount
Net income per basic common share
   $ 373,483    79,908    $ 4.67
Effect of dilutive stock option, restricted stock, performance stock unit and and restricted stock unit securities
   —      752    (0.04 )






Net income per diluted common share
   $ 373,483    80,660    $ 4.63

   Nine Months Ended October 1, 2016
   Net Income
(Numerator)    Weighted-
Average Shares
(Denominator)    Per Share
Amount
Net income per basic common share
   $ 347,125    80,923    $ 4.29
Effect of dilutive stock option, restricted stock and restricted stock unit securities
   —      650    (0.03 )






Net income per diluted common share
   $ 347,125    81,573    $ 4.26


	Three Months Ended October 1, 2022
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	155,998		59,801	$	2.61
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		—		280		(0.01	)

Net income per diluted common share	$	155,998		60,081	$	2.60


	Nine Months Ended September 30, 2023
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	426,029		59,061	$	7.21
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		—		201		(0.02	)

Net income per diluted common share	$	426,029		59,262	$	7.19


	Nine Months Ended October 1, 2022
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	480,693		60,200	$	7.98
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		—		321		(0.04	)

Net income per diluted common share	$	480,693		60,521	$	7.94

For the three and nine months ended September 30, ~~2017,~~2023 and October 1, 2022, the Company had ~~0.2 million and 0.4~~fewer than one million stock options that were antidilutive ~~respectively,~~ due to having higher exercise prices than the Company’s average stock price during the applicable period. ~~For the three and nine months ended October 1, 2016, the Company had 0.5 million and 0.8 million 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.

11 Accumulated Other Comprehensive Income

(Loss)

The components of accumulated other comprehensive income (loss) are detailed as follows (in thousands):

   Currency
Translation    Unrealized Gain
(Loss) on
Retirement Plans    Unrealized Gain
(Loss) on
Investments    Accumulated
Other
Comprehensive
Income (Loss)
Balance at December 31, 2016
   $ (170,566 )    $ (43,894 )    $ (1,820 )    $ (216,280 )
Other comprehensive income (loss), net of tax
   94,209    52    1,592    95,853








Balance at September 30, 2017
   $ (76,357 )    $ (43,842 )    $ (228 )    $ (120,427 )


	Currency Translation			Unrealized Gain (Loss) on Retirement Plans			Unrealized Gain (Loss) on Derivative Instruments		Accumulated Other Comprehensive Loss

Balance at December 31, 2022	$	(146,120	)	$	4,548		$	—	$	(141,572	)
Other comprehensive (loss) income, net of tax		(4,909	)		(204	)		388		(4,725	)

Balance at September 30, 2023	$	(151,029	)	$	4,344		$	388	$	(146,297	)

Table of Contents

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

~~11 Retirement Plans~~

The Company sponsors various retirement plans. The summary of the components of net periodic pension costs for the plans for the three and nine months ended September 30, 2017 and October 1, 2016 is as follows (in thousands):

   Three Months Ended
   September 30, 2017 October 1, 2016
   U.S.
Pension
Plans U.S. Retiree
Healthcare
Plan Non-U.S.
Pension
Plans U.S.
Pension
Plans U.S. Retiree
Healthcare
Plan Non-U.S.
Pension
Plans
Service cost
   $ 113 $ 137 $ 1,311 $ 94 $ 116 $ 1,253
Interest cost
   1,707 155 386 1,710 135 423
Expected return on plan

assets
   (2,574 ) (146 ) (434 ) (2,392 ) (130 ) (401 )
Net amortization:

Prior service credit
   —   —   (47 ) —   —   (51 )
Net actuarial loss
   693 —   248 693 —   190


Net periodic pension (benefit) cost
   $ (61 ) $ 146 $ 1,464 $ 105 $ 121 $ 1,414

   Nine Months Ended
   September 30, 2017 October 1, 2016
   U.S.
Pension
Plans U.S. Retiree
Healthcare
Plan Non-U.S.
Pension
Plans U.S.
Pension
Plans U.S. Retiree
Healthcare
Plan Non-U.S.
Pension
Plans
Service cost
   $ 338 $ 410 $ 3,802 $ 282 $ 348 $ 3,721
Interest cost
   5,122 464 1,112 5,200 405 1,273
Expected return on plan assets
   (7,724 ) (440 ) (1,250 ) (7,226 ) (390 ) (1,206 )
Net amortization:

Prior service credit
   —   —   (140 ) —   —   (145 )
Net actuarial loss
   2,078 —   714 2,027 —   570


Net periodic pension (benefit) cost
   $ (186 ) $ 434 $ 4,238 $ 283 $ 363 $ 4,213

During the nine months ended September 30, 2017, the Company contributed $4 million to the Company’s U.S. pension plans. During fiscal year 2017, the Company expects to contribute a total of approximately $6 million to $11 million to the Company’s defined benefit plans.

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^®

and ~~TA.~~

The Waters operating segment is primarily in the business of designing, manufacturing, ~~distributing~~selling and servicing LC and MS instruments, columns and other precision chemistry consumables that can be integrated and used along with other analytical instruments. The TA operating segment is primarily in the business of designing, manufacturing, ~~distributing~~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. ~~Please refer to the consolidated financial statements for financial information regarding the one reportable segment of the Company.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)~~

Net sales for the Company’s products and services are as follows for the three and nine months ended September 30, ~~2017~~2023 and October 1, ~~2016~~2022 (in thousands):

   Three Months Ended    Nine Months Ended
   September 30, 2017    October 1, 2016    September 30, 2017    October 1, 2016
Product net sales:

Waters instrument systems
   $ 238,431    $ 226,296    $ 674,768    $ 646,733
Chemistry consumables
   92,879    84,114    271,606    255,312
TA instrument systems
   44,240    39,524    126,310    115,433








Total product sales
   375,550    349,934    1,072,684    1,017,478








Service net sales:

Waters service
   172,594    160,503    498,736    471,792
TA service
   17,440    16,393    50,383    49,366








Total service sales
   190,034    176,896    549,119    521,158








Total net sales
   $ 565,584    $ 526,830    $ 1,621,803    $ 1,538,636

~~13 Recent Accounting Standard Changes and Developments~~

~~Recently Adopted Accounting Standards~~

~~In July 2015, accounting guidance was issued which clarifies the measurement~~


	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Product net sales:
Waters instrument systems	$	262,142	$	274,869	$	786,293	$	825,677
Chemistry consumables		128,650		128,096		398,084		385,661
TA instrument systems		57,289		61,958		178,087		174,055

Total product sales		448,081		464,923		1,362,464		1,385,393
Service net sales:
Waters service		238,556		220,436		700,281		660,371
TA service		25,055		23,196		74,197		67,682

Total service sales		263,611		243,632		774,478		728,053

Total net sales	$	711,692	$	708,555	$	2,136,942	$	2,113,446

Table of ~~inventory. The new guidance requires inventory~~Contents

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

Net sales are attributable to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance is effective for annual and interim periods beginning after December 15, 2016. The Company adopted this standard as of January 1, 2017 and this standard did not have a material effectgeographic areas based on the ~~Company’s financial position, results~~region of ~~operations and cash flows.~~

In March 2016, accounting guidance was issued which simplifies the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This guidancedestination. Geographic sales information is effective for annual and interim reporting periods beginning after December 15, 2016. The new guidance is required to be adopted on a prospective basis for the statement of operations and the Company has elected to retrospectively apply the cash flow aspects of this new guidance. In addition, the Company has elected to continue to estimate forfeitures at the time of grant and update forfeiture estimates throughout the requisite service period. The Company adopted this standard as of January 1, 2017 and recognized an excess tax benefit related to stock-based compensation which decreased income tax expensepresented below for the three and nine months ended September 30, ~~2017~~2023 and October 1, 2022 (in thousands):


	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Net Sales:
Asia:
China	$	102,081	$	140,080	$	333,127	$	399,852
Japan		40,069		37,095		123,943		123,222
Asia Other		96,078		102,759		288,862		289,204

Total Asia		238,228		279,934		745,932		812,278
Americas:
United States		231,773		216,380		673,033		638,908
Americas Other		43,706		40,029		131,794		123,609

Total Americas		275,479		256,409		804,827		762,517
Europe		197,985		172,212		586,183		538,651

Total net sales	$	711,692	$	708,555	$	2,136,942	$	2,113,446

Net sales by ~~$3 million~~customer class are as follows for the three and ~~$14 million, respectively,~~nine months ended September 30, 2023 and added $0.03 and $0.18 to net income per diluted share, respectively. These excess tax benefits were previously recorded in equity and there were no cumulative-effect adjustments to retained earnings as a resultOctober 1, 2022 (in thousands):


	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Pharmaceutical	$	421,535	$	405,959	$	1,233,177	$	1,258,902
Industrial		209,449		223,968		648,754		641,882
Academic and government		80,708		78,628		255,011		212,662

Total net sales	$	711,692	$	708,555	$	2,136,942	$	2,113,446

Table of ~~the adoption of this standard. In addition,~~Contents

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

Net sales for the Company ~~reclassified $13 million of excess tax benefits related to stock-based compensation~~recognized at a point in time versus over time are as follows for the ~~first~~three and nine months ~~of 2016 from cash flows from financing activities to cash flows from operating activities.~~

ended September 30, 2023 and October 1, 2022 (in thousands):

Three Months Ended

Nine Months Ended


September 30,
2023

October 1,
2022

September 30,
2023

October 1,
2022

Net sales recognized at a point in time:
Instrument systems    $ 319,431    $ 336,827    $ 964,380    $ 999,732
Chemistry consumables    128,650    128,096    398,084    385,661
Service sales recognized at a point in time (time & materials)    88,545    89,724    269,464    267,074

Total net sales recognized at a point in time    536,626    554,647    1,631,928    1,652,467
Net sales recognized over time:
Service and software maintenance sales recognized over time (contracts)    175,066    153,908    505,014    460,979

Total net sales    $ 711,692    $ 708,555    $ 2,136,942    $ 2,113,446

13 Recent Accounting Standard Changes and Developments

Recently ~~Issued~~Adopted Accounting Standards

In ~~May 2014, amended~~October 2021, accounting guidance was issued ~~regarding~~that requires acquirers in a business combination to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The new guidance requires that at the ~~recognition of~~acquisition date, the acquirer should account for the related revenue contracts in accordance with 606 as if it had originated the contracts. This guidance differs from current GAAP which requires an acquirer to recognize assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with ~~customers. The objective of this~~customers and other similar contracts that are accounted for in accordance with 606, at fair value on the acquisition date. This guidance is ~~to significantly enhance comparability and clarify principles of revenue recognition practices across entities, industries, jurisdictions and capital markets. This guidance was originally~~ effective for ~~annual and interim reporting periods~~public business entities for fiscal years beginning after December 15, ~~2016; however, the Financial Accounting Standards Board (“FASB”) amended the standard in August 2015 to delay the effective period date by one year to annual and~~2022, including interim periods beginning after December 15, 2017. Adoption prior to December 15, 2016 is not permitted. In March 2016, the FASB clarified the implementation guidance on principal versus agent considerations and, in April 2016, clarification was made regarding certain aspects of identifying performance obligations and licensing implementation guidance. In May 2016, additional guidance was issued related to disclosure of remaining performance obligations, as well as other amendments to guidance on collectibility,~~non-cash~~ ~~consideration and the presentation of sales and other similar taxes collected from customers.~~within those years. The Company ~~does not intend to early adopt~~adopted this ~~accounting~~ standard ~~and will apply the modified-retrospective method. Based~~ on ~~a preliminary analysis, the Company currently believes that the~~January 1, 2023. The adoption of this standard ~~will~~did not have a material impact on the Company’s financial position, results of operations and cash flows.

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)~~

Recently Issued Accounting Standards

In January 2016, accounting guidance was issued which primarily affects the classification and measurement of certain financial instruments, principally equity investments and certain financial liabilities. Under the new guidance, there will no longer be an~~available-for-sale~~ classification for equity securities with readily determinable fair values. Changes to the fair value of equity investments will be recognized through earnings. Equity investments carried at cost should be adjusted for changes in observable prices, as applicable, and qualitatively assessed for impairment annually. Changes to the fair value of financial liabilities under the fair value option due to instrument specific credit risk will be recognized separately in other comprehensive income. The new guidance also requires financial assets and financial liabilities to be presented separately and grouped by measurement category in the notes to the financial statements. This guidance is effective for annual and interim reporting periods beginning after December 15, 2017 and early adoption of certain provisions of this guidance is permitted. The Company currently does not expect that the adoption of this standard will have a material effect on the Company’s financial position, results of operations and cash flows.

In February 2016, accounting guidance was issued regarding the accounting for leases. This new comprehensive lease standard amends various aspects of existing accounting guidance for leases. The core principle of the new guidance will require lessees to present the assets and liabilities that arise from leases on their balance sheets. This guidance is effective for annual and interim reporting periods beginning after December 15, 2018 and early adoption is permitted. The Company expects that the adoption of this standard will have a material effect on the Company’s balance sheet classifications; however, it is not expected to have an overall material impact on the Company’s results of operations and cash flows.

~~In June 2016,~~March 2020, accounting guidance was issued that ~~modifies~~facilitates the ~~recognition~~effects of ~~credit losses related~~reference rate reform on financial reporting. The amendments in the update provide optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial ~~assets, such as debt securities, trade receivables, net investments in leases,off-balance~~ ~~sheet credit exposures,~~reporting and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other ~~financial assets~~transactions that have the contractual right to receive cash. Current guidance requires the recognition of a credit loss when it is considered probable that a loss event has incurred. The new guidance requires the measurement ofreference LIBOR or another reference rate expected ~~credit losses~~ to be ~~based upon relevant information, including historical experience, current conditions,~~discontinued because of reference rate reform. In January of 2021, an update was issued to clarify that certain optional expedients and ~~reasonable and supportable forecasts that affect the collectability of the asset. As such, expected credit losses may be recognized sooner~~exceptions under the ~~new~~reference rate reform guidance ~~due~~for contract modifications and hedge accounting apply to derivatives that are affected by the ~~broader range~~discounting transition. Specifically, certain provisions in the reference rate reform guidance, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of ~~information that will be required to determine credit loss estimates. The new guidance also amends the current other-than-temporary impairment model used for debt securities classified asavailable-for-sale.~~ ~~When the fair value of anavailable-for-sale~~ ~~debt security is below its amortized cost, the new guidance requires the total unrealized loss to be bifurcated into its credit andnon-credit~~ components. Any expected credit losses or subsequent recoveries will be recognized in earnings and any changes not considered credit related will continue to be recognized within other comprehensive income.reference rate reform. This temporary guidance is effective for ~~annual and interim periods beginning after~~all entities as of March 12, 2020, through December ~~15, 2019.~~31, 2022. In December 2022, an update was issued because the cessation date for overnight LIBOR rates being published was extended to June 30, 2023, which was beyond the current expiration date of this guidance. The update extended the sunset date to December 31, 2024. The Company ~~currently does not expect~~may elect to apply this guidance for all contract modifications or eligible hedging relationships during that ~~the adoption of this standard will have a material effect on the Company’s financial position, results of operations and cash flows.~~

~~In August 2016, accounting guidance was issued that clarifies the classification of~~time period subject to certain ~~cash flows.~~criteria. The new guidance addresses eight specific areas where current accounting guidance is either unclear or does not specifically address classification issues. This guidance is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company ~~currently~~ does not believe that it has material reference rate exposure which would require utilizing the ~~adoption of~~guidance under this ~~standard will have a material impact on the Company’s cash flows.~~

~~In October 2016,~~ accounting ~~guidance was issued regarding intra-entity transfers of assets other than inventory. The new guidance eliminates the deferral of tax effects on intra-entity transfers other than inventory~~pronouncement and requires an entity to recognize the income tax consequences when the transfer occurs. This guidance is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company is currently evaluating the potential impact that the adoption of this standard will have on the Company’s financial position, results of operations and cash flows.

In January 2017, accounting guidance was issued that clarifies the definition of a business. The new guidance provides a more robust framework to use in determining when a set of assets and activities is a business, thus narrowing the definition and the amount of transactions accounted for as business combinations. This guidance is effective for annual and interim periods beginning after December 15, 2017 and early application is permitted under certain circumstances. The Company will apply this guidance prospectively to any business combination transactions that take place after adoption of this new guidance.

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)~~

In January 2017, accounting guidance was issued that simplifies the accounting for goodwill impairment. The guidance eliminates step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. This guidance is effective for annual and interim periods beginning after December 15, 2019 and early adoption is permitted. The Company currently does not expect that the adoption of this standard will have a material effect on the Company’s financial position, results of operations and cash flows.

In March 2017, accounting guidance was issued regarding the presentation of net periodic pension cost and net periodic postretirement benefit cost. The new guidance requires that an employer disaggregate the service cost component from other components of net benefit cost, with service cost reported in the same line items as other compensation costs and the other components of net benefit costs presented outside income from operations. This guidance is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company currentlyif adopted does not believe that ~~the adoption of~~ this standard ~~will~~would have a material impact on the Company’s financial position, results of operations and cash flows.

In March 2017, accounting guidance was issued to amend the amortization period for certain purchased callable debt securities held at a premium. Specifically, the amortization period for certain callable debt securities will be shortened to end at the earliest call date. This guidance is effective for annual and interim periods beginning after December 15, 2018 and early adoption is permitted. The Company currently does not believe that the adoption of this standard will have a material impact on the Company’s financial position, results of operations and cash flows.

In May 2017, accounting guidance was issued that clarifies the accounting for a change to the terms or conditions of a share-based payment award. The standard provides more specific guidance for determining when a change to an award requires modification accounting and when it should be deemed purely administrative in nature. This guidance is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company currently does not believe that the adoption of this standard will have a material impact on the Company’s financial position, results of operations and cash flows.

Item 2: ~~Management’s~~ Management’s Discussion and Analysis of Financial Condition andResults of Operations

Business ~~and Financial~~ Overview

The Company has two operating segments: Waters^®TM and TA^®TM. Waters products and services primarily consist of ~~high performance~~high-performance liquid chromatography (“HPLC”), ~~ultra performance~~ultra-performance liquid chromatography (“UPLC^®TM” and, together with HPLC, referred to as “LC”), mass spectrometry (“MS”) 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 ~~governmental~~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 will expand 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 nine months ended September 30, 2023 include the financial results of the Wyatt acquisition from the acquisition date.

Financial Overview

The Company’s operating results are as follows for the three and nine months ended September 30, ~~2017~~2023 and October 1, ~~2016~~2022 (dollars in thousands, except per share data):


	Three Months Ended									Nine Months Ended									Three Months Ended									Nine Months Ended
	September 30, 2017			October 1, 2016			% Change			September 30, 2017			October 1, 2016			% Change			September 30, 2023			October 1, 2022			% change			September 30, 2023			October 1, 2022			% change
Revenues:
Product sales	$	375,550		$	349,934			7	%	$	1,072,684		$	1,017,478			5	%	$	448,081		$	464,923			(4	%)	$	1,362,464		$	1,385,393			(2	%)
Service sales		190,034			176,896			7	%		549,119			521,158			5	%		263,611			243,632			8	%		774,478			728,053			6	%

Total net sales		565,584			526,830			7	%		1,621,803			1,538,636			5	%		711,692			708,555			—			2,136,942			2,113,446			1	%
Costs and operating expenses:
Cost of sales		235,892			218,344			8	%		676,614			639,874			6	%		291,407			307,101			(5	%)		876,863			899,992			(3	%)
Selling and administrative expenses		135,194			123,861			9	%		395,908			382,793			3	%		186,748			164,417			14	%		555,657			483,769			15	%
Research and development expenses		33,782			30,418			11	%		97,471			92,434			5	%		41,995			43,435			(3	%)		130,559			127,913			2	%
Litigation provisions		—			—						10,018			—
Purchased intangibles amortization																				12,116			1,592			661	%		20,410			4,863			320	%
Acquiredin-process research and development		—			—						5,000			—						—			—			—			—			9,797			(100	%)
Purchased intangibles amortization		1,682			2,476			(32	%)		5,104			7,531			(32	%)

Operating income		159,034			151,731			5	%		431,688			416,004			4	%		179,426			192,010			(7	%)		553,453			587,112			(6	%)
Operating income as a % of sales		28.1	%		28.8	%					26.6	%		27.0	%					25.2	%		27.1	%					25.9	%		27.8	%
Other income, net																				328			895			(63	%)		1,364			2,600			(48	%)
Interest expense, net		(5,234	)		(6,281	)		(17	%)		(16,329	)		(18,469	)		(12	%)		(26,559	)		(9,524	)		179	%		(56,174	)		(27,362	)		105	%

Income from operations before income taxes		153,800			145,450			6	%		415,359			397,535			4	%
Income before income taxes																				153,195			183,381			(16	%)		498,643			562,350			(11	%)
Provision for income taxes		17,696			20,594			(14	%)		41,876			50,410			(17	%)		18,643			27,383			(32	%)		72,614			81,657			(11	%)

Net income	$	136,104		$	124,856			9	%	$	373,483		$	347,125			8	%	$	134,552		$	155,998			(14	%)	$	426,029		$	480,693			(11	%)

Net income per diluted common share	$	1.69		$	1.53			10	%	$	4.63		$	4.26			9	%	$	2.27		$	2.60			(13	%)	$	7.19		$	7.94			(9	%)

~~Sales~~

The Company’s net sales increased less than one percent in ~~2017 grew 7% and 5% for~~ the third quarter ~~andyear-to-date~~ ~~periods, respectively,~~of 2023, as compared to the third quarter of 2022, with ~~the same periods in 2016. Foreign~~foreign currency translation ~~increased sales growth by 1% for the quarter and reduced sales growth 1%year-to-date.~~ ~~Sales growth was balanced across all product and customer end markets for both the quarter andyear-to-date.~~ ~~Recent acquisitions had a minimal~~having an insignificant impact on sales ~~growth for both the quarter andyear-to-date.~~

~~In 2017, instrument systems sales grew 6% and 5% for the quarter andyear-to-date,~~ ~~respectively, while recurring revenues (combined sales of chemistry consumables and services) grew 8% and 6%, respectively. Instrument system sales growth for both the quarter andyear-to-date~~ ~~are attributed to an increase in customer demand for ourLC-MS~~ ~~and TA instrument systems.~~

~~Our recurring revenues continue to benefit from a higher installed customer base, which has resulted in increased chemistry consumable and service sales.~~growth. For ~~the quarter, foreign currency translation increased both instrument system and recurring revenue sales growth by 1%.Year-to-date,~~ foreign currency translation reduced recurring revenue sales growth by 1% and had a minimal impact on instrument systems sales growth. In addition, recurring revenues were negatively impacted by two fewer calendar days in the first nine months of ~~2017~~2023, the Company’s net sales increased 1% with the effect of foreign currency translation decreasing sales growth by 2% as compared to the first nine months of ~~2016.~~

~~Geographically,~~2022. In both the third quarter and first nine months of 2023, the Company’s net sales were negatively impacted by a significant reduction in sales in ~~Europe~~China due to lower customer demand for our products. Excluding China, the Company’s net sales increased ~~20%~~7% and ~~8% in 2017~~5% for the third quarter and~~year-to-date,~~ ~~respectively, on strong demand from pharmaceutical customers and the favorable effect~~ first nine months of ~~foreign currency translation, which~~2023, respectively. The Wyatt acquisition increased sales growth by 7%4% and 2% for the third quarter and ~~reduced~~first nine months of 2023, respectively.

For the first nine months of 2023, the Company had the same amount of calendar days when compared to the first nine months of 2022. At current foreign currency exchange rates, the Company expects that foreign currency translation will be negative to sales for the remainder of 2023.

Instrument system sales decreased 5% and 4% for the third quarter and first nine months of 2023, respectively, as sales growth in the U.S., Latin America and Europe was offset by weaker customer demand in Asia (primarily in China). Instrument system sales in China declined 32% and 23% in the third quarter and first nine months of 2023, respectively, due to lower customer demand for our products. Excluding China, the Company’s instrument system sales increased 4% and 3% in the third quarter and first nine months of 2023, respectively. The decline in China’s instrument sales can be attributed to the decline in customer demand. The Wyatt acquisition increased instrument system sales growth by 1%~~year-to-date.~~ ~~Sales in Asia grew~~ 7% and ~~11% in 2017~~3%, for the ~~quarter andyear-to-date,~~ respectively, with strong demand continuing in China for our products and services, while sales in India were negatively impacted by lower customer demand resulting from the implementation of the new Goods and Services Tax (“GST”) system.

~~Sales in 2017 in the U.S. increased 1% for the~~third quarter and ~~declined 2%year-to-date,~~ ~~due to lower demand from pharmaceutical customers in this market as compared to the prior year. Sales in 2017 to the rest~~first nine months of ~~the world decreased 7% in the quarter and~~2023, respectively. Foreign currency translation increased 1%~~year-to-date~~ ~~as these markets were somewhat negatively impacted~~instrument system sales growth by ~~natural disasters~~1% in the third ~~quarter.~~

~~The recent natural disasters~~quarter of 2023 and decreased instrument system sales growth by 1% in the ~~U.S., Mexico~~first nine months of 2023.

Recurring revenues (combined sales of precision chemistry consumables and Puerto Rico, along with the impact of the GST system implementation in India, did not have a significant impact on our overall sales growth rates in the third quarter; however, it is unclear when the business climate in those affected areas will return to normal in the future.

~~In 2017, sales to pharmaceutical customers increased 7% and 6% for the quarter andyear-to-date,~~ respectively, as compared to the corresponding prior year periods, with the effect of foreign currency translation increasing sales to pharmaceutical customers by 2% for the quarter and a minimal impact~~year-to-date.~~ This increase was driven by the increasing need for global access to prescription drugs and the testing of newer and more complex biologic drugs. Sales to pharmaceutical customers was negatively impacted by a decline in sales in the U.S., which we believe is the result of macroeconomic and governmental policy uncertainties as well as natural disasters experienced in the third quarter.

~~Combined sales to industrial customers (including sales to industrial chemical, nutritional safety and environmental customers) in 2017~~services) increased 6% and 5% for the third quarter and~~year-to-date,~~ first nine months of 2023, respectively, ~~due to the increasing need for food quality and food safety testing and fine chemical applications. Combined global~~with foreign currency translation having a minimal impact on sales ~~to governmental and academic customers increased 15% and 4% in 2017 for the quarter andyear-to-date,~~ ~~respectively. Sales to governmental and academic customers are highly dependent on when institutions receive the funding to purchase our instrument systems and, as such, sales~~ growth ~~rates can vary significantly from quarter to quarter.~~

~~Operating income increased 5% and 4% for the quarter andyear-to-date,~~ respectively, in 2017. These increases were primarily a result of the positive effect achieved from higher sales volume and controlled spending being partially offset by a $4 million charge related to the acceleration of certain stock awards in the third quarter and decreasing sales growth by 2% for the first nine months of ~~2017. The 2017year-to-date~~ ~~operating income~~2023. Service revenues grew 8% and 6% for the third quarter and first nine months of 2023, respectively. Wyatt’s service revenues added 3% and 1% to service revenue growth for the third quarter and first nine months of 2023, respectively. Chemistry sales growth was ~~also~~flat and increased 3% for the third quarter and first nine months of 2023, respectively. Chemistry sales were significantly impacted by ~~$12 million~~the lower customer demand in China for our products. Excluding the impact of ~~severance costs~~China, the Company’s chemistry sales grew 9% and 6%, for the third quarter and first nine months of 2023, respectively.

Operating income decreased 7% and 6% for the third quarter and first nine months of 2023, respectively, primarily ~~associated with the closure of a facility~~due to higher salary expenses related to merit compensation and an increase in ~~Germany and~~severance-related costs associated with ~~providing U.S. employees~~a workforce reduction, partially offset by lower incentive compensation costs. In July 2023, the Company made organizational changes to better align its resources with ~~an early retirement transition incentive. In addition,year-to-date~~ ~~operating income~~its growth and innovation strategies, resulting in ~~2017 was~~a worldwide workforce reduction that has impacted ~~by $10~~approximately 5% of the Company’s employees. The Company incurred approximately $23 million and $27 million of ~~litigation settlement provisions and related~~severance-related costs ~~and a $5 million charge relating to a milestone payment for the licensing of certain intellectual property relating to mass spectrometry technologies yet to be commercialized. The change inyear-to-date~~ ~~operating income in 2017 as compared with 2016 was also impacted by the $7 million expense incurred in the first quarter of 2016 related to the acceleration of certain stock awards.~~

In the first quarter of 2017, the Company adopted a new accounting standard that requires the excess tax benefit or deficiency on stock-based compensation to be included in the statement of operations as a component of the provision for income taxes, whereas previously it was recognized in equity. As a result, the Company recorded a tax benefit on stock-based compensation in the third quarter and first nine months of ~~2017 that decreased income tax expense by $3~~2023, respectively. The Company paid $12 million and $14 million of severance-related costs in the third quarter and first nine months of 2023, respectively, with the majority of the remaining costs to be paid in the fourth quarter of 2023 and the first half of 2024. The Company estimates that the savings from this reduction in workforce will be approximately $48 million on an annual basis. In addition, the Company’s operating income was impacted by the Wyatt acquisition due diligence and integration costs of $1 million and $13 million for the third quarter and~~year-to-date,~~ first nine months of 2023, respectively, and ~~added $0.03~~the Wyatt acquisition related bonus expense of $8 million and ~~$0.18 to net~~$11 million for the third quarter and first nine months of 2023, respectively. The negative effect of foreign currency translation lowered operating income ~~per diluted share,~~by approximately $2 million and $18 million for the third quarter and first nine months of 2023, respectively. Additionally, this standard required the Company to present the tax benefit in the Consolidated Statements of Cash Flows as an operating activity, whereas in the past this tax benefit was reflected as a financing activity. All prior periods presented in the cash flow have been adjusted accordingly.

The Company generated ~~$505~~$373 million and ~~$469~~$413 million of net cash ~~flows~~ from ~~operations~~operating activities in the first nine months of ~~2017~~2023 and ~~2016,~~2022, respectively. ~~The increase in operating~~Net cash ~~flow was primarily a result of the increase in sales and net income. Cash flows~~ used in investing activities included $1.3 billion for the Wyatt acquisition in the first nine months of 2023 and capital expenditures related to property, plant, equipment and software capitalization of ~~$55~~$119 million and ~~$72~~$114 million ~~for the first nine months of 2017 and 2016,~~

respectively. The 2017 cash flow from investing activities included a $7 million payment for an investment in a developer of analytical system solutions used to make measurements, predict stability and accelerate product discovery in the routine analytic, process monitoring and quality control release processes for life science and biopharmaceutical markets. In addition, the Company made a milestone payment of $5 million in 2017 to acquire and license intellectual property.

~~Within cash flows used in financing activities, the Company received $73 million and $59 million of proceeds from stock plans~~ in the first nine months of ~~2017~~2023 and ~~2016,~~2022, respectively. ~~In May 2017,~~

The Company funded the Wyatt acquisition with a combination of cash on hand and borrowings under our revolving credit facility. The Company’s ~~Board~~outstanding debt on September 30, 2023 was $2.5 billion, a change of ~~Directors authorized~~$1.0 billion from the end of the first quarter of 2023. The Company estimates that its interest expense for the full year 2023 will be approximately $80 million. As a result of the Wyatt acquisition, the Company ~~to repurchase up to $1 billion of~~temporarily suspended its ~~outstanding common stock over a three-year period. The Company repurchased $238 million and $236 million of the Company’s outstanding common stock~~share buyback program in the first nine months of 2017 and 2016, respectively, under authorized share repurchase programs. The Company believes that it has the financial flexibility to fund these share repurchases given current cash and investment levels and debt borrowing capacity, as well as to invest in research, technology and business acquisitions to further grow the Company’s sales and profits.quarter 2023.

Results of Operations

Sales by Geography

Geographic sales information is presented below for the three and nine months ended September 30, ~~2017~~2023 and October 1, ~~2016~~2022 (dollars in thousands):


	Three Months Ended							Nine Months Ended							Three Months Ended							Nine Months Ended
	September 30, 2017		October 1, 2016		% change			September 30, 2017		October 1, 2016		% change			September 30, 2023		October 1, 2022		% change			September 30, 2023		October 1, 2022		% change
Net Sales:
United States	$	171,053	$	168,614		1	%	$	474,661	$	485,945		(2	%)
Europe		153,232		128,191		20	%		427,406		396,540		8	%
Asia:
China		96,141		84,051		14	%		275,367		234,632		17	%	$	102,081	$	140,080		(27	%)	$	333,127	$	399,852		(17	%)
Japan		42,202		42,191		—			125,058		126,305		(1	%)		40,069		37,095		8	%		123,943		123,222		1	%
Asia Other		70,996		69,273		2	%		219,723		196,399		12	%		96,078		102,759		(7	%)		288,862		289,204		—

Total Asia		209,339		195,515		7	%		620,148		557,336		11	%		238,228		279,934		(15	%)		745,932		812,278		(8	%)
Other		31,960		34,510		(7	%)		99,588		98,815		1	%
Americas:
United States																231,773		216,380		7	%		673,033		638,908		5	%
Americas Other																43,706		40,029		9	%		131,794		123,609		7	%

Total Americas																275,479		256,409		7	%		804,827		762,517		6	%
Europe																197,985		172,212		15	%		586,183		538,651		9	%

Total net sales	$	565,584	$	526,830		7	%	$	1,621,803	$	1,538,636		5	%	$	711,692	$	708,555		—		$	2,136,942	$	2,113,446		1	%

Geographically, the Company’s sales growth in the third quarter and first nine months of 2023 was broad-based across most major regions, with the exception of China, which declined 27% and 17%, respectively. The decline in China was primarily driven by lower demand for our instrument systems and chemistry products. Excluding China, the Company’s net sales increased 7% and 5% for the third quarter and first nine months of 2023, respectively. Foreign currency translation had minimal impact on sales growth in the third quarter and decreased sales growth by 2% in the first nine months of 2023.

During the third quarter of 2023, sales increased 7% in the U.S. and 15% in Europe, while decreasing 15% in Asia driven by weakness in China and the negative effect of currency translation on sales in Japan. In the third quarter of ~~2017,~~2023, foreign currency translation increased sales growth in Europe by 7% and decreased sales growth in Asia by 4%. This decline in Asia was primarily driven by the ~~increase~~8% decline in sales in ~~the U.S. was driven primarily by TA instrument system and service~~Japan due to foreign currency translation. Wyatt’s sales ~~to industrial markets. This increase partially offset the decline experienced~~contributed 9% of sales growth in the U.S. and 5% of sales growth in Europe in the third quarter of 2023. During the first ~~half~~nine months of ~~2017. Europe’s~~2023, sales ~~growth was broad-based across all product~~increased 5% in the U.S. and ~~customer classes,~~9% in Europe, while decreasing 8% in Asia driven by weakness in China, with the effect of foreign currency translation increasing sales growth in ~~2017~~Europe by ~~7% for the quarter~~1% and decreasing sales growth in Asia by 1%~~year-to-date.~~ ~~China achieved strong~~4%, which includes a 9% decrease in sales ~~growth across all product classes, which was driven~~in Japan resulting from foreign currency translation.

Waters Products and Services Net Sales

Net sales for Waters products and services ~~are~~were as follows for the three and nine months ended September 30, ~~2017~~2023 and October 1, ~~2016~~2022 (dollars in thousands):


														Three Months Ended
	Three Months Ended													September 30, 2023		% of Total			October 1, 2022		% of Total			% change
	September 30, 2017		% of Total			October 1, 2016		% of Total			*% change*			September 30, 2023		% of Total			October 1, 2022		% of Total			% change
Waters instrument systems	$	238,431		47	%	$	226,296		48	%		5	%	$	262,142		42	%	$	274,869		44	%		(5	%)
Chemistry consumables		92,879		19	%		84,114		18	%		10	%		128,650		20	%		128,096		21	%		—

Total Waters product sales		331,310		66	%		310,410		66	%		7	%		390,792		62	%		402,965		65	%		(3	%)
Waters service		172,594		34	%		160,503		34	%		8	%		238,556		38	%		220,436		35	%		8	%

Total Waters net sales	$	503,904		100	%	$	470,913		100	%		7	%	$	629,348		100	%	$	623,401		100	%		1	%

														Nine Months Ended
	Nine Months Ended													September 30, 2023		% of Total			October 1, 2022		% of Total			% change
	September 30, 2017		% of Total			October 1, 2016		% of Total			*% change*			September 30, 2023		% of Total			October 1, 2022		% of Total			% change
Waters instrument systems	$	674,768		47	%	$	646,733		47	%		4	%	$	786,293		42	%	$	825,677		44	%		(5	%)
Chemistry consumables		271,606		18	%		255,312		19	%		6	%		398,084		21	%		385,661		21	%		3	%

Total Waters product sales		946,374		65	%		902,045		66	%		5	%		1,184,377		63	%		1,211,338		65	%		(2	%)
Waters service		498,736		35	%		471,792		34	%		6	%		700,281		37	%		660,371		35	%		6	%

Total Waters net sales	$	1,445,110		100	%	$	1,373,837		100	%		5	%	$	1,884,658		100	%	$	1,871,709		100	%		1	%

Waters products and service sales increased 1% for both the third quarter and first nine months of 2023, with the effect of foreign currency translation having minimal impact on sales growth in the third quarter, while decreasing Waters sales growth by 1% in the first nine months of 2023. The ~~increase in~~Wyatt acquisition increased Waters products and service sales by approximately 5% and 2% for the third quarter and first nine months of 2023, respectively. Waters instrument system sales ~~(LC and MS technology-based)~~decreased by 5% for both the third quarter and~~year-to-date~~ first nine months of 2023 due to weaker customer demand in ~~2017~~China. Waters instrument system sales in China declined 35% and 25% for the third quarter and first nine months of 2023, respectively. Foreign currency translation had minimal impact on Waters instrument system sales growth in the third quarter while decreasing sales growth by 1% for the first nine months of 2023. Wyatt’s instrument system sales contributed 8% and 4% to Waters instrument system sales growth for the third quarter and first nine months of 2023, respectively.

Waters chemistry consumables sales were significantly impacted by the lower customer demand in China for our products. Excluding the impact of China, the Company’s chemistry sales grew 9% and 6% for the third quarter and first nine months of 2023, respectively. This sales growth was primarily ~~attributable~~due to ~~higher sales of LC instrument systems, as well as otherLC-MS~~ ~~systems that incorporate~~ the ~~Company’s tandem quadrupole technologies. Chemistry consumables sales increased on~~continued strong demand in most major geographies, driven by the uptake in columns and application-specific testing ~~kits.~~ kits to pharmaceutical customers, partially offset by the negative impact from foreign currency translation, which decreased chemistry sales growth by 1% and 2% in the third quarter and first nine months of 2023, respectively.

Waters service sales ~~benefited from~~ increased ~~sales~~in the third quarter and first nine months of ~~service plans and~~2023 due to higher service demand ~~billings to a higher installed base of customers. In total,~~billing, partially offset by the negative impact from foreign currency translation, ~~increased Waters product and service sales growth in 2017 by 1% for the quarter and reduced Waters product and~~which decreased service sales growth by 1%~~year-to-date.~~

In2% in the first nine months of 2023. Wyatt service revenues added 3% and 2% to Waters service revenue growth for the third quarter and first nine months of ~~2017, Waters sales in Europe increased 20%~~2023, respectively.

TA Product and ~~7% for the quarter andyear-to-date,~~ ~~respectively, as the effect of foreign currency translation increased sales in Europe by 6% for the quarter and decreased sales by 2%year-to-date.~~ ~~Waters sales in Asia increased 6% and 11% for the quarter andyear-to-date,~~ respectively, and were primarily driven by China on strong demand for the Company’s products and services from pharmaceutical and industrial customers. In the third quarter, Waters sales growth in India was impacted by customer ordering delays caused by the implementation of a new GST system. Waters sales in Japan were flat for the quarter and decreased 1%~~year-to-date,~~ ~~as the effect of foreign currency translation decreased sales in Japan by 9% and 5%, respectively. Waters sales in the U.S. were flat for the quarter and decreased 3%year-to-date~~ ~~due to lower demand from pharmaceutical customers compared to the third quarter of 2016. Waters sales in the rest of the world decreased 4% in the quarter and increased 2%year-to-date.~~ ~~Both the U.S. and the rest of the world sales were negatively impacted by natural disasters in the third quarter.~~

TAServices Net Sales

Net sales for TA products and services ~~are~~were as follows for the three and nine months ended September 30, ~~2017~~2023 and October 1, ~~2016~~2022 (dollars in thousands):

   Three Months Ended
   September 30,
2017    % of
Total October 1,
2016    % of
Total   % change
TA instrument systems
   $ 44,240    72 % $ 39,524    71 % 12 %
TA service
   17,440    28 % 16,393    29 % 6 %






Total TA net sales
   $ 61,680    100 % $ 55,917    100 % 10 %


	Three Months Ended
	September 30, 2023		% of Total			October 1, 2022		% of Total			% change
	September 30, 2023		% of Total			October 1, 2022		% of Total			% change
TA instrument systems	$	57,289		70	%	$	61,958		73	%		(8	%)
TA service		25,055		30	%		23,196		27	%		8	%

Total TA net sales	$	82,344		100	%	$	85,154		100	%		(3	%)

	Nine Months Ended
	September 30, 2023		% of Total			October 1, 2022		% of Total			% change
	September 30, 2023		% of Total			October 1, 2022		% of Total			% change
TA instrument systems	$	178,087		71	%	$	174,055		72	%		2	%
TA service		74,197		29	%		67,682		28	%		10	%

Total TA net sales	$	252,284		100	%	$	241,737		100	%		4	%

   Nine Months Ended
   September 30,
2017    % of
Total October 1,
2016    % of
Total % change
TA instrument systems
   $ 126,310    71 % $ 115,433    70 % 9 %
TA service
   50,383    29 % 49,366    30 % 2 %






Total TA net sales
   $ 176,693    100 % $ 164,799    100 % 7 %

~~The increase in~~ TA ~~instrument system~~ sales declined 3% for the third quarter of ~~2017~~2023 due to lower customer demand for TA products and services while TA sales grew 4% for the first nine months of 2023. For the third quarter, TA’s sales geographically were weak in the U.S., China and Asia Other, declining 8%, 5% and 13%, respectively, but were strong in Europe and Japan, which grew 7% and 19%, respectively. Foreign currency translation increased sales by 3% in Asia Other and 9% in Europe, while decreasing sales by 1% in China and 11% in Japan. For the first nine months of 2023, TA sales growth was broad-based across most major geographies, except for China and Asia Other, which declined 11% and 15%, respectively. The sales growth for the first nine months of 2023 was primarily driven by strong customer demand for our thermal ~~growth being fueled by continued acceptance of the recently introduced Discovery product line, while rheology saw strong performance across the entire range of products~~analysis instruments and service, particularly in the ~~portfolio. Recent acquisitions increased TA sales by 3%~~U.S. and ~~2% for the quarter andyear-to-date,~~ ~~respectively. The effect of foreign~~Europe. Foreign currency translation increased TA sales ~~in 2017~~ by 1% for the third quarter and ~~had a minimal impactyear-to-date.~~

~~Geographically, TA sales in Asia in 2017 increased 19% and 13% for the quarter andyear-to-date,~~ ~~respectively. TA sales in China increased 16% and 11% for the quarter andyear-to-date,~~ ~~respectively. TA sales in Japan~~ decreased ~~1% and 4% for the quarter andyear-to-date,~~ ~~respectively, as the effect of foreign currency translation decreased TA Japan sales by 8% and 2%, respectively. TA sales in the U.S. increased 10% and 3% for the quarter andyear-to-date,~~ ~~respectively. TA sales in Europe increased 11% for both the quarter andyear-to-date,~~ ~~with the effects of foreign currency translation increasing European sales by 5% for the quarter and reducing European~~ sales by 1%~~year-to-date.~~ ~~TA sales to the rest of the world decreased 32% and 12%~~ for the ~~quarter andyear-to-date,~~ ~~respectively.~~first nine months of 2023.

Cost of Sales

~~For both~~Cost of sales decreased by 5% and 3% in the ~~2017~~third quarter and~~year-to-date~~ ~~periods, the increase~~ first nine months of 2023, respectively. The decrease in cost of sales ~~as compared with~~in these periods is primarily due to the ~~2016 periods was consistent with the increase~~change in sales ~~volume, as well as product~~ mix ~~dynamics. In 2017,~~and the ~~effect of foreign currency translation increased cost of sales by 2% in~~lower material and freight costs for both the third quarter and ~~had a minimal impact onyear-to-date~~ ~~cost~~first nine months of ~~sales.~~

2023. Cost of sales ~~are~~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 ~~that the impact of~~ foreign currency translation ~~may increase sales and still negatively impact~~to be neutral to gross profit during the rest of 2017, as the foreign currency translation benefit expected from a weaker Euro and Japanese yen would be somewhat mitigated by the unfavorable effect of a stronger British pound on the Company’s U.K. manufacturing costs.2023.

Selling and Administrative Expenses

~~In 2017, selling~~Selling and administrative expenses increased 9%14% and ~~3% for the quarter andyear-to-date,~~ respectively. Overall, this change is attributable to the cost of headcount additions, higher merit compensation costs, severance incurred in connection with the closure of a facility in Germany and an early retirement transition incentive program. The Company incurred $1 million and $12 million of severance-related costs in the 2017 quarter and~~year-to-date,~~ ~~respectively. In addition, selling and administrative expenses included a $4 million and $7 million expense related to the acceleration of certain stock awards~~15% in the third quarter ~~of 2017~~ and first nine months of 2023, respectively. The increase in these periods is primarily driven by severance-related costs in connection with a reduction in workforce, which increased expenses by 14% and 5%; the Wyatt acquisition due diligence and integration costs, which increased expenses by 1% and 3%; and the Wyatt acquisition-related bonus expense, which increased expenses by 5% and 2%, in each case, for the third quarter and first nine months of ~~2016,~~2023, respectively. These increases were partially offset by lower incentive compensation costs. The effect of foreign currency translation increased selling and administrative expenses by 2% infor the third quarter and decreased ~~selling and administrative~~ expenses by 1%~~year-to-date.~~ for the first nine months of 2023.

As a percentage of net sales, selling and administrative expenses were ~~23.9%~~26.2% and ~~24.4%~~26.0% for the ~~2017~~third quarter and~~year-to-date,~~ first nine months of 2023, respectively, and ~~23.5%~~23.2% and ~~24.9%~~22.9% for the ~~2016~~third quarter and~~year-to-date,~~ first nine months of 2022, respectively.

Research and Development Expenses

Research and development expenses decreased 3% in ~~2017 increased 11% and 5% for~~ the third quarter and~~year-to-date,~~ ~~respectively, due to an increase~~ increased 2% in ~~additional headcount,~~the first nine months of 2023. The decrease in third quarter research and development expenses was driven by lower incentive compensation costs, which were offset by annual merit ~~compensation~~increases and costs associated with ~~new products and~~ the development of new product and technology initiatives.~~Year-to-date,~~ ~~these increases were partially offset by the favorable effect~~ The impact of foreign currency ~~translation, which decreased the Company’s U.K.-based research and development~~exchange increased expenses by ~~5% from~~1% for the ~~weakening~~third quarter and decreased expenses by 2% for the first nine months of 2023.

Purchased Intangibles Amortization

The increase in purchased intangible amortization of $11 million and $16 million in the ~~British pound.~~third quarter and first nine months of 2023, respectively, can be attributed to the Wyatt acquisition intangible assets.

~~Litigation Provisions~~Acquired In-Process Research & Development

In 2022, the Company completed an asset acquisition in which the CDMS technology assets of Megadalton were acquired for approximately $10 million in total purchase price, of which $5 million was paid at closing and the remaining $4 million will be paid in the future at various dates through 2029.

Other Income, net

During the first nine months of ~~2017,~~2022, the Company ~~incurred a~~sold an equity investment for $10 million ~~litigation provision related to~~in cash and recorded a gain on the ~~issuance~~sale of ~~a verdict~~approximately $7 million in ~~a German patent litigation case.~~

other income, net on the statement of operations. The Company also incurred $6 million in losses on an equity investment within other income, net on the statement of operations.

Interest Expense, net

~~AcquiredIn-Process~~ ~~Research~~The increase in interest expense for both the third quarter and ~~Development~~

~~During the~~ first nine months of ~~2017,~~2023 can be primarily attributed to the ~~Company incurred a $5 million charge for acquiredin-process~~ research and development related to milestone payments associated with a licensing arrangement for certain intellectual property relating to mass spectrometry technologies yet to be commercialized and for which there was no future alternative use as of the acquisition date. The licensing arrangement is significantly related to new, biologically-focused applications, as well as other applications, and requiresadditional borrowings by the Company to make additional future payments of up to $7 million if certain milestones are achieved, as well as royalties on future net sales. These future payments may be significant and may occur over multiple years.

~~Interest Expense, Net~~

fund the Wyatt acquisition. The ~~decrease in net~~Company estimates that its interest expense ~~in 2017 was primarily attributable to higher income earned on increased cash, cash equivalents and investment balances.~~for the full year 2023 will be approximately $80 million.

Provision for Income Taxes

The Company’s effective tax rate is influenced by many significant factors, including, but not limited to, the wide range of income tax rates in jurisdictions in which the Company operates; sales volumes and profit levels in each tax jurisdiction; changes in tax laws, tax rates and policies; the outcome of various ongoing tax audit examinations; and the impact of foreign currency transactions and translation. As a result of variability in these factors, the Company’s effective tax rates in the future may not be similar to the effective tax rates$0.25 for the ~~current or prior years.~~third quarter of 2023 and 2022, respectively.

The Company’s effective tax rate for the third quarter of 2023 and 2022 was ~~11.5%~~12.2% and ~~14.2% for 2017 and 2016, respectively.Year-to-date,~~ ~~the Company’s effective tax rate was 10.1% and 12.7% for 2017 and 2016,~~14.9%, respectively. The decrease in the effective tax rate ~~in 2017 as compared to 2016~~ can be primarily attributed to the ~~adoption~~impact of ~~new accounting guidance related to stock-based compensation, which decreased income~~discrete tax ~~expense by $3 million~~benefits in the current year and ~~$14 million for the quarter andyear-to-date,~~ respectively, and decreased the Company’s effective tax rate by 1.7 percentage points and 3.4 percentage points, respectively. See Note 13 for further information regarding the adoption of this standard. In addition, the provision for income tax for the first quarter of 2016 included a quarter-specific tax benefit associated with modifications to certain stock-based compensation awards. The remaining differences between the effective tax rate in 2017 and 2016 can be primarily attributed to differences in the proportionate amounts ofpre-tax income recognized in jurisdictions with different effective tax rates.

The Company’s effective tax rate for the first nine months of 2023 and 2022 was 14.6% and 14.5%, respectively. The differences between the effective tax rates can primarily be attributed to differences in the proportionate amounts of pre-tax income recognized in jurisdictions with different effective tax rates.

2834

Liquidity and Capital Resources

Condensed Consolidated Statements of Cash Flows (in thousands):


	Nine Months Ended						Nine Months Ended
	September 30, 2017			October 1, 2016			September 30, 2023			October 1, 2022
Net income	$	373,483		$	347,125		$	426,029		$	480,693
Depreciation and amortization		78,249			72,364			117,845			99,105
Stock-based compensation		30,068			32,604			32,224			30,929
Deferred income taxes		3,046			4,924			267			(20,836	)
Acquired in-process research and development and other non-cash items								—			10,003
Change in accounts receivable		53,358			39,471			100,327			(39,098	)
Change in inventories		(26,217	)		(39,988	)		(81,415	)		(113,211	)
Change in accounts payable and other current liabilities		(23,066	)		(29,179	)		(130,065	)		(4,952	)
Change in deferred revenue and customer advances		29,332			29,244			38,959			47,060
Other changes		(12,797	)		12,452			(131,484	)		(76,741	)

Net cash provided by operating activities		505,456			469,017			372,687			412,952
Net cash used in investing activities		(403,988	)		(438,674	)		(1,404,321	)		(45,783	)
Net cash used in financing activities		(39,494	)		(79,728	)
Net cash provided by (used in) financing activities								885,438			(398,187	)
Effect of exchange rate changes on cash and cash equivalents		36,202			(8,071	)		2,081			(26,579	)

Increase (decrease) in cash and cash equivalents	$	98,176		$	(57,456	)
Decrease in cash and cash equivalents							$	(144,115	)	$	(57,597	)

Cash Flow from Operating Activities

Net cash provided by operating activities was ~~$505~~$373 million and ~~$469~~$413 million induring the first nine months ~~ended September 30, 2017~~of 2023 and ~~October 1, 2016,~~2022, respectively. The decrease in 2023 operating cash flow was primarily a result of lower net income, higher inventory levels, higher income tax payments and the payment of acquired Wyatt liabilities, offset by higher cash collections in 2023 compared to 2022. The changes within net cash provided by operating activities ~~in the first nine months of 2017 as compared to the first nine months of 2016~~ 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 ~~change~~changes in accounts receivable ~~was~~were primarily attributable to the timing of payments made by customers and timing of sales. Days sales outstanding ~~decreased to 73~~was 81 days at September 30, ~~2017 from 76~~2023 and 77 days at October 1, ~~2016.~~2022.

The ~~change~~increase in inventory ~~was~~can primarily ~~attributable~~be attributed to ~~anticipated annual increases in sales volumes,~~higher material costs as well as ~~the timing of new product launches.~~an increase in safety stock levels to help mitigate any future supply chain issues.

~~The change in accounts payable and other current liabilities was a result of timing of payments to vendors, as well as the annual payment of management incentive compensation.~~

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.

An increase in income tax payments of $79 million as compared to the prior year and the payment of $26 million in Wyatt acquired liabilities.

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. In addition, as a result of the adoption of a new accounting standard related to stock-based compensation, the Company reclassified $13 million of excess tax benefits related to stock-based compensation for the first nine months of 2016

Cash Flow from ~~cash flows from financing activities to cash flows from operating activities.~~

~~Cash Used in~~ Investing Activities

Net cash used in investing activities totaled ~~$404 million~~$1.4 billion and ~~$439~~$46 million in the first nine months of ~~2017~~2023 and ~~2016,~~2022, respectively. Additions to fixed assets and capitalized software were ~~$55~~$119 million and ~~$72 millionyear-to-date~~ ~~in 2017 and 2016, respectively. During 2017 and 2016, the Company purchased $2,345 million and $1,923 million of investmentsyear-to-date,~~ ~~while $2,009 million and $1,558 million of investments matured, respectively.~~

~~Cash flow from investing activitiesyear-to-date~~ in 2017 included a $7 million payment for an investment in a developer of analytical system solutions used to make measurements, predict stability and accelerate product discovery in the routine analytic, process monitoring and quality control release processes for life science and biopharmaceutical markets. In addition, the Company made a $5 million milestone payment in the first nine months 2017 for~~acquired in-process research~~ ~~and development for the licensing of certain intellectual property relating to mass spectrometry technologies yet to be commercialized. Business acquisitions, net of cash acquired were $6~~$114 million in the first nine months of ~~2016.~~

2023 and 2022, respectively. The cash flows from investing activities in 2023 and 2022 include $12 million and $24 million, respectively, of capital expenditures related to the major expansion of the Company’s precision chemistry consumable operations in the United States. The Company has incurred costs of $245 million on this facility inception-to-date through the end of the first nine months of 2023 and anticipates completing this new state-of-the-art facility in 2023.

2935

~~Cash Used in Financing Activities~~During the first nine months of 2023 and 2022, the Company purchased $2 million and $11 million of investments, respectively, while $2 million and $78 million of investments matured, respectively, and were used for financing activities described below.

During the first nine months of ~~2017~~2022, the Company paid $5 million for the CDMS technology and ~~2016,~~intellectual property right asset from Megadalton, and the Company is required to make an additional $4 million of guaranteed payments at various dates in the future through 2029. The total purchase price of approximately $10 million was accounted for as Acquired In-Process Research and Development and expensed as part of costs and operating expenses in the statement of operations in 2022.

During the first nine months of 2022, the Company received $10 million in proceeds from equity investments and made $1 million of investments in equity investments.

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.

Cash Flow from Financing Activities

The Company had entered into a credit agreement in September 2021 governing the Company’s five-year, $1.8 billion revolving facility that matures in September 2026. On March 3, 2023, in anticipation of closing of the Wyatt acquisition, the Company entered into an agreement to amend the credit agreement governing its revolving credit facility (the “2023 Amendment”). The 2023 Amendment increases the borrowing capacity by $200 million to an aggregate total borrowing capacity of $2.0 billion. As of September 30, 2023, the Company had a total of $2.5 billion in outstanding debt, which consisted of $1.3 billion in outstanding senior unsecured notes and $1.2 billion borrowed under its credit agreement. The Company’s net debt borrowings increased by ~~$130~~$0.9 billion and $30 million during the first nine months of 2023 and ~~$115 million, respectively.~~ 2022, respectively, primarily to fund the Wyatt acquisition.

As of September 30, ~~2017,~~2023, 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 ~~total~~portion of ~~$1,958~~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 $8 million and $6 million during the first nine months of 2023 and 2022, respectively. The Company anticipates that these swap agreements will lower net interest expense by approximately $10 million in outstanding debt, which consisted of $700 million in outstanding senior unsecured notes, $300 million borrowed under a term loan facility under the Company’s credit agreement, $960 million borrowed under a revolving credit facility under the Company’s credit agreement and less than $1 million borrowed under various other short-term lines of credit, offset by $3 million of unamortized debt issuance costs. At September 30, 2017, $125 million of the outstanding portion of the revolving facility was classified as short-term liabilities in the consolidated balance sheet due to the fact that the Company expects to repay this portion of the borrowing under the revolving line of credit within the next twelve months. The remaining $835 million of the outstanding portion of the revolving facility was classified as long-term liabilities in the consolidated balance sheet, as this portion is not expected to be repaid within the next twelve months. As of September 30, 2017, the Company had a total amount available to borrow under its credit agreement of $338 million after outstanding letters of credit. As of September 30, 2017, the Company was in compliance with all debt covenants.2023.

In ~~May 2017,~~January 2019, the Company’s Board of Directors authorized the Company to repurchase up to $1$4 billion of its outstanding common stock over a ~~three-year~~two-year period. This new program replaced the remaining amounts available from the pre-existing program. 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 shall now expire on January 21, 2024 and increased the total authorization level to $4.8 billion, an increase of $750 million. During the first nine months ~~ended~~of September 30, ~~2017~~2023 and October 1, ~~2016,~~2022, the Company repurchased ~~1.4~~$58 million and ~~1.8~~$467 million ~~shares~~ of the Company’s outstanding common stock, ~~at a cost of $238 million and $236 million,~~ respectively, under the May 2017 and other previously announced programs. As of September 30, 2017, the Company had purchased an aggregate of 5.5 million shares at a cost of $750 million under the May 2014 authorization, which is now completed. The Company has a total of $885 million in remaining authorized capacity for future repurchases under the May 2017 authorization.share repurchase program. In addition, the Company repurchased $8$12 million and $6$11 million of common stock related to the vesting of restricted stock units during the first nine months ~~ended~~of September 30, ~~2017~~2023 and October 1, ~~2016,~~2022, respectively. While 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, it has temporarily suspended its share repurchases due to its acquisition of Wyatt.

The Company received ~~$73~~$18 million and ~~$59~~$36 million of proceeds from the exercise of stock options and the purchase of shares pursuant to the Company’s employee stock purchase plan ~~in 2017~~during the first nine months of 2023 and ~~2016,~~2022, respectively.

The Company had cash, cash equivalents and investments of ~~$3,255~~$337 million as of September 30, ~~2017.~~2023. The majority of the Company’s cash and cash equivalents ~~and investments~~ are generated from foreign operations, with ~~$3,212~~$307 million held by foreign subsidiaries at September 30, ~~2017,~~2023, of which ~~$337~~$196 million ~~were~~was held in currencies other than U.S. dollars. Due to the fact that most of the Company’s cash, cash equivalents and investments are held outside of the U.S., the Company must manage and maintain sufficient levels of cash flow in the U.S. to fund operations and capital expenditures, service debt interest, finance potential U.S. acquisitions and continue the authorized stock repurchase program in the U.S. These U.S. cash requirements are managed by the Company’s cash flow from U.S. operations and the use of the Company’s revolving credit facility.

Management believes, as of the date of this report, that its financial position, particularly in the U.S., along with expected future cash flows from earnings based on historical trends and the ability to raise funds from external sources and the borrowing capacity from existing, committed credit facilities, will be sufficient to service debt and fund working capital and capital spending requirements, authorized share repurchase amounts and potential acquisitions for at least the next twelve months. In addition, there have been no recent significant changes to the Company’s financial position, nor are there any anticipated changes, to warrant a material adjustment related to indefinitely reinvested foreign earnings.

Special Note Regarding Forward-Looking Statements

~~Certain of the statements in this~~This Quarterly Report on Form10-Q, including the information incorporated by reference herein, may contain 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”), with respect to future results and events, including any statements regarding, among other items, anticipated trends or growth in the Company’s business, including, but not limited to, the impact of foreign currency translation on financial results; development of products by acquired businesses; the growth rate of sales and research and development expenses; the impact of costs associated with developing new technologies and bringing these new technologies to market; the impact of new product launches and the associated costs, such as the amortization expense related to software platforms; geographic sales mix of business; development of products by acquired businesses and the amount of contingent payments to the sellers of an acquired business; anticipated expenses, including interest expense, capitalized software costs and effective tax rates; the impact and outcome of the Company’s various ongoing tax audit examinations; the achievement of contractual milestones to preserve foreign tax rates; the impact and outcome of litigation matters; the impact of the loss of intellectual property protection; the

impact of new accounting standards and pronouncements; the adequacy of the Company’s supply chain and manufacturing capabilities and facilities; the impact of regulatory compliance; the Company’s expected cash flow, borrowing capacity, debt repayment and refinancing; the Company’s ability to fund working capital, capital expenditures, service debt, repay outstanding lines of credit, make authorized share repurchases, fund potential acquisitions and pay any adverse litigation or tax audit liabilities, particularly in the U.S.; future impairment charges; the Company’s contributions to defined benefit plans; the Company’s expectations regarding changes to its financial position; compliance with applicable environmental laws; and the impact of recent acquisitions on sales and earnings.

Many of these statements appear, in particular, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this Quarterly Report on Form~~10-Q.~~. 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 that could adversely affect translation of the Company’s future sales, financial operating results and the condition of itsnon-U.S.~~ ~~operations, especially when a currency weakens against the U.S. dollar.~~

•

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~~

current global economic, sovereign and political conditions and uncertainties, ~~particularly regarding~~including the effect of new or proposed tariff or trade regulations, changes in inflation and interest rates, the ~~U.K. voting to~~impacts and costs of war, in particular as a result of the ongoing conflict between Russia and Ukraine and in the Middle East, and the possibility of further escalation resulting in new geopolitical and regulatory instability, the United Kingdom’s exit from the European Union ~~as well as~~and the Chinese government’s ongoing tightening of restrictions on procurement by government-funded customers;

the Company’s ability to access capital, ~~and~~ maintain liquidity and service the Company’s debt in volatile market conditions;

•

risks related to the effects of the ongoing COVID-19 pandemic on our business, financial condition, results of operations and prospects;

changes in timing and demand byfor the Company’s products among the Company’s customers and various market sectors, particularly ~~if they should reduce capital~~as a result of fluctuations in their expenditures or ~~are unable~~ability to obtain funding, as in the cases of academic, governmental ~~academic~~ and research institutions; ~~the effect of mergers and acquisitions on customer demand; and the Company’s ability to sustain and enhance service.~~

~~Negative industry trends;~~

the introduction of competing products by other companies and loss of market share, as well as pressures on prices from customers and/or competitors;

changes in the competitive landscape as a result of changes in ownership, mergers and continued consolidation among the Company’s competitors; ~~introduction of competing products by other companies and loss of market share; pressures on prices from customers or resulting from competition;~~

regulatory, economic and competitive obstacles to new product ~~introductions;~~introductions, lack of acceptance of new ~~products;~~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 contingent purchase price payments and expansion of our business ininto new or developing markets; ~~spending by certainend-markets;~~ ability to obtain alternative sources for components and modules; and the possibility that future sales of new products related to acquisitions, which trigger contingent purchase payments, may exceed the Company’s expectations.

~~Increased~~

risks associated with unexpected disruptions in operations;

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 in connection with shifts in taxable income in 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;

the ability to realize the expected benefits related to the Company’s various cost-saving initiatives;

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 ~~officers)~~officer), with the participation of management, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined inRules 13a-15(e) and15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report onForm 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 September 30, ~~2017~~2023 (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 ~~Controls~~Control Over Financial Reporting

No change was identified in the Company’s internal control over financial reporting (as defined inRules 13a-15(f) and15d-15(f) under the Exchange Act) during the quarter ended September 30, ~~2017~~2023 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 ~~three~~nine months ended September 30, ~~2017~~2023 as described in Item 3 of Part 1I of the Company’s Annual Report on Form10-K for the year ended December 31, ~~2016,~~2022, as filed with the SEC on February ~~24, 2017.~~27, 2023.

Item 1A: Risk Factors

~~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 Form10-K for the year ended December 31, ~~2016,~~2022, as filed with the SEC on February ~~24, 2017.~~27, 2023. The Company reviewed its risk factors as of September 30, ~~2017~~2023 and determined that there were no material changes from the ones set forth in the Form10-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 Form10-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 ~~also~~ may ~~materially adversely affect~~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

~~The following table provides information about purchases by the Company during~~During the three months ended September 30, ~~2017~~2023, the Company purchased 205 and 2,269 shares at a cost of $57 thousand and $634 thousand with average prices paid of $280.25 and $279.44 during fiscal July and September, respectively, of equity securities registered by the Company under the Exchange ~~Act (in thousands, except per~~Act.

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 ~~data):~~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 shall now expire on January 21, 2024 and increased the total authorization level to $4.8 billion, an increase of $750 million. As of September 30, 2023, 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.

Period
   Total
Number of
Shares
Purchased    Average
Price Paid
per Share    Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)    Maximum Dollar
Value of Shares that
May Yet Be
Purchased Under
the Plans or
Programs (1)
July 2 to July 29, 2017
   —      $ —      —      $ 964,384
July 30 to August 26, 2017
   230    $ 178.10    230    $ 923,458
August 27 to September 30, 2017
   208    $ 187.04    208    $ 885,182





Total
   438    $ 182.35    438    $ 885,182

~~(1)~~

~~In May 2017, the Company’s Board of Directors authorized the repurchase of up to $1 billion of its outstanding common stock in open market transactions over a three-year period.~~


Delaware		13-3668640
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


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.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐ ~~(Do not check if smaller reporting company)~~	Smaller reporting company	☐


		Emerging growth company	☐


~~PART I~~	~~FINANCIAL INFORMATION~~	Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets (unaudited) as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022		13
	Consolidated Statements of Operations (unaudited) for the three months ended September 30, ~~2017~~2023 and October 1, ~~2016~~2022		24
	Consolidated Statements of Operations (unaudited) for the nine months ended September 30, ~~2017~~2023 and October 1, ~~2016~~2022		35
	Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended September 30, ~~2017~~2023 and October 1, ~~2016~~2022		46
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, ~~2017~~2023 and October 1, ~~2016~~2022		57
	Consolidated Statements of Stockholders’ Equity (unaudited) for the three months ended September 30, 2023 and October 1, 2022		8
	Consolidated Statements of Stockholders’ Equity (unaudited) for the nine months ended September 30, 2023 and October 1, 2022		9
	Condensed Notes to Consolidated Financial Statements (unaudited)		610
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2328
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		3339
Item 4.	Controls and Procedures		3340

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		3340
Item 1A.	Risk Factors		3340
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		3440
Item 6.	Exhibits		3441
	Signature		3542


	Three Months Ended						Nine Months Ended
	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016
Net income	$	136,104		$	124,856		$	373,483		$	347,125
Other comprehensive income (loss):
Foreign currency translation		26,827			2,480			94,209			(12,954	)
Unrealized gains (losses) on investments before income taxes		318			(1,393	)		1,700			3,777
Income tax (expense) benefit		(9	)		61			(108	)		(108	)

Unrealized gains (losses) on investments, net of tax		309			(1,332	)		1,592			3,669
Retirement liability adjustment before reclassifications		(499	)		(183	)		(2,030	)		(682	)
Amounts reclassified to selling and administrative expenses		894			832			2,652			2,452

Retirement liability adjustment before income taxes		395			649			622			1,770
Income tax expense		(183	)		(272	)		(570	)		(1,163	)

Retirement liability adjustment, net of tax		212			377			52			607
Other comprehensive income (loss)		27,348			1,525			95,853			(8,678	)

Comprehensive income	$	163,452		$	126,381		$	469,336		$	338,447


	September 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	603,807		$	505,631
Investments		2,651,150			2,307,401
Accounts receivable, less allowances for doubtful accounts and sales returns of $9,379 and $8,657 at September 30, 2017 and December 31, 2016, respectively		456,334			489,340
Inventories		297,854			262,682
Other current assets		69,380			70,391

Total current assets		4,078,525			3,635,445
Property, plant and equipment, net		342,832			337,118
Intangible assets, net		224,056			207,055
Goodwill		359,376			352,080
Other assets		158,196			130,361

Total assets	$	5,162,985		$	4,662,059


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and debt	$	225,423		$	125,297
Accounts payable		66,754			67,740
Accrued employee compensation		42,021			57,465
Deferred revenue and customer advances		185,524			148,837
Accrued income taxes		24,355			15,244
Accrued warranty		12,855			13,391
Other current liabilities		105,217			92,347

Total current liabilities		662,149			520,321
Long-term liabilities:
Long-term debt		1,732,367			1,701,966
Long-term portion of retirement benefits		69,666			72,568
Long-term income tax liabilities		7,656			10,458
Other long-term liabilities		62,052			54,797

Total long-term liabilities		1,871,741			1,839,789

Total liabilities		2,533,890			2,360,110

Commitments and contingencies (Notes 5, 6, 7 and 11)
Stockholders’ equity:
Preferred stock, par value $0.01 per share, 5,000 shares authorized, none issued at September 30, 2017 and December 31, 2016		—			—
Common stock, par value $0.01 per share, 400,000 shares authorized, 159,589 and 158,634 shares issued, 79,522 and 80,023 shares outstanding at September 30, 2017 and December 31, 2016, respectively		1,596			1,586
Additionalpaid-in capital		1,710,783			1,607,241
Retained earnings		5,758,552			5,385,069
Treasury stock, at cost, 80,067 and 78,611 shares at September 30, 2017 and December 31, 2016, respectively		(4,721,409	)		(4,475,667	)
Accumulated other comprehensive loss		(120,427	)		(216,280	)

Total stockholders’ equity		2,629,095			2,301,949

Total liabilities and stockholders’ equity	$	5,162,985		$	4,662,059


	Three Months Ended						Nine Months Ended
	September 30, 2023			October 1, 2022			September 30, 2023			October 1, 2022
	(In thousands)						(In thousands)
Net income	$	134,552		$	155,998		$	426,029		$	480,693
Other comprehensive loss:
Foreign currency translation		(17,676	)		(23,779	)		(4,909	)		(54,255	)
Unrealized gains on derivative instruments before reclassifications		603			—			603			—
Amounts reclassified to other income, net		(93	)		—			(93	)		—

Unrealized gains on derivative instruments before income taxes		510			—			510			—
Income tax expense		(122	)		—			(122	)		—

Unrealized gains on derivative instruments, net of tax		388			—			388			—
Unrealized gains on investments before income taxes		—			—			—			26
Income tax expense		—			—			—			(6	)

Unrealized gains on investments, net of tax		—			—			—			20
Retirement liability adjustment before reclassifications		(200	)		767			(29	)		1,755
Amounts reclassified to other income, net		(75	)		254			(242	)		501

Retirement liability adjustment before income taxes		(275	)		1,021			(271	)		2,256
Income tax benefit (expense)		66			(243	)		67			(546	)

Retirement liability adjustment, net of tax		(209	)		778			(204	)		1,710
Other comprehensive loss		(17,497	)		(23,001	)		(4,725	)		(52,525	)


Comprehensive income	$	117,055		$	132,997		$	421,304		$	428,168


	Number of Common Shares		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance July 2, 2022		162,348	$	1,623	$	2,166,221	$	8,125,527	$	(9,759,858	)	$	(141,389	)	$	392,124
Net income		—		—		—		155,998		—			—			155,998
Other comprehensive loss		—		—		—		—		—			(23,001	)		(23,001	)
Issuance of common stock for employees:
Employee Stock Purchase Plan		9		—		2,488		—		—			—			2,488
Stock options exercised		17		—		2,506		—		—			—			2,506
Treasury stock		—		—		—		—		(155,223	)		—			(155,223	)
Stock-based compensation		5		1		10,343		—		—			—			10,344

Balance October 1, 2022		162,379	$	1,624	$	2,181,558	$	8,281,525	$	(9,915,081	)	$	(164,390	)	$	385,236


	Balance at Beginning of Period		Additions		Deductions			Balance at End of Period
Allowance for Credit Losses
September 30, 2023	$	14,311	$	3,727	$	(3,434	)	$	14,604
October 1, 2022	$	13,228	$	4,980	$	(4,973	)	$	13,235


	Total at September 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
U.S. Treasury securities	$	548,010	$	—	$	548,010	$	—
Foreign government securities		6,970		—		6,970		—
Corporate debt securities		1,884,101		—		1,884,101		—
Time deposits		403,112		—		403,112		—
Equity securities		147		—		147		—
Waters 401(k) Restoration Plan assets		33,845		33,845		—		—
Foreign currency exchange contracts		213		—		213		—

Total	$	2,876,398	$	33,845	$	2,842,553	$	—


Liabilities:
Contingent consideration	$	3,017	$	—	$	—	$	3,017
Foreign currency exchange contracts		63		—		63		—

Total	$	3,080	$	—	$	63	$	3,017


	Total at December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
U.S. Treasury securities	$	570,313	$	—	$	570,313	$	—
Foreign government securities		17,991		—		17,991		—
Corporate debt securities		1,643,838		—		1,643,838		—
Time deposits		199,906		—		199,906		—
Equity securities		147		—		147		—
Waters 401(k) Restoration Plan assets		30,954		30,954		—		—
Foreign currency exchange contracts		60		—		60		—

Total	$	2,463,209	$	30,954	$	2,432,255	$	—

Liabilities:
Contingent consideration	$	3,007	$	—	$	—	$	3,007
Foreign currency exchange contracts		730		—		730		—

Total	$	3,737	$	—	$	730	$	3,007


	Total at December 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Time deposits	$	862	$	—	$	862	$	—
Waters 401(k) Restoration Plan assets		25,532		25,532		—		—
Foreign currency exchange contracts		231		—		231		—
Interest rate cross-currency swap agreements		19,163		—		19,163		—

Total	$	45,788	$	25,532	$	20,256	$	—

Liabilities:
Contingent consideration	$	1,509	$	—	$	—	$	1,509
Foreign currency exchange contracts		98		—		98		—
Interest rate cross-currency swap agreements		4,783		—		4,783		—

Total	$	6,390	$	—	$	4,881	$	1,509


	Financial Statement Classification		Three Months Ended						Nine Months Ended
			September 30, 2023			October 1, 2022			September 30, 2023			October 1, 2022
			September 30, 2023			October 1, 2022			September 30, 2023			October 1, 2022
Foreign currency exchange contracts:
Realized losses
on closed contracts		Cost of sales	$	(755	)	$	(3,811	)	$	(50	)	$	(6,603	)
Unrealized gains (losses)
on open contracts		Cost of sales		168			461			(123	)		(93	)
Cumulative net pre-tax

losses		Cost of sales	$	(587	)	$	(3,350	)	$	(173	)	$	(6,696	)

Interest rate cross-currency swap agreements:
Interest earned		Interest income	$	2,720		$	2,362		$	8,048		$	6,214
Unrealized gains		Other comprehensive
on open contracts		income	$	18,936		$	31,108		$	10,280		$	73,812
Interest rate swap cash flow hedges:
Interest earned		Interest income	$	93		$	—		$	93		$	—
Unrealized gains		Other comprehensive
on open contracts		income	$	510		$	—		$	510		$	—


	Balance at Beginning of Period		Accruals for Warranties		Settlements Made			Balance at End of Period
Accrued warranty liability:
September 30, 2017	$	13,391	$	6,287	$	(6,823	)	$	12,855
October 1, 2016	$	13,349	$	7,101	$	(6,915	)	$	13,535


	September 30, 2017
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gain		Loss			Value
U.S. Treasury securities	$	548,736	$	91	$	(817	)	$	548,010
Foreign government securities		6,976		—		(6	)		6,970
Corporate debt securities		1,883,688		1,474		(1,061	)		1,884,101
Time deposits		403,113		—		(1	)		403,112
Equity securities		77		70		—			147

Total	$	2,842,590	$	1,635	$	(1,885	)	$	2,842,340

Amounts included in:
Cash equivalents	$	191,190	$	—	$	—		$	191,190
Investments		2,651,400		1,635		(1,885	)		2,651,150

Total	$	2,842,590	$	1,635	$	(1,885	)	$	2,842,340


	September 30, 2017		December 31, 2016
Due in one year or less	$	1,574,317	$	1,388,537
Due after one year through three years		864,764		843,605

Total	$	2,439,081	$	2,232,142


	September 30, 2017						December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Weighted- Average Amortization Period		Gross Carrying Amount		Accumulated Amortization		Weighted- Average Amortization Period
Capitalized software	$	424,155	$	273,430		5 years	$	355,973	$	223,572		5 years
Purchased intangibles		169,023		136,491		11 years		162,180		127,045		11 years
Trademarks and IPR&D		13,924		—		—		13,544		—		—
Licenses		5,837		4,502		6 years		4,632		3,851		6 years
Patents and other intangibles		67,971		42,431		8 years		61,646		36,452		8 years

Total	$	680,910	$	456,854		7 years	$	597,975	$	390,920		7 years


	September 30, 2017			December 31, 2016
Foreign subsidiary lines of credit	$	423		$	297
Senior unsecured notes—Series D—3.22%, due March 2018		100,000			—
Credit agreements		125,000			125,000

Total notes payable and debt		225,423			125,297

Senior unsecured notes—Series B—5.00%, due February 2020		100,000			100,000
Senior unsecured notes—Series D—3.22%, due March 2018		—			100,000
Senior unsecured notes—Series E—3.97%, due March 2021		50,000			50,000
Senior unsecured notes—Series F—3.40%, due June 2021		100,000			100,000
Senior unsecured notes—Series G—3.92%, due June 2024		50,000			50,000
Senior unsecured notes—Series H—floating rate*, due June 2024		50,000			50,000
Senior unsecured notes—Series I—3.13%, due May 2023		50,000			50,000
Senior unsecured notes—Series J—floating rate**, due May 2024		40,000			40,000
Senior unsecured notes—Series K—3.44%, due May 2026		160,000			160,000
Credit agreements		1,135,000			1,005,000
Unamortized debt issuance costs		(2,633	)		(3,034	)

Total long-term debt		1,732,367			1,701,966

Total debt	$	1,957,790		$	1,827,263


	Nine Months Ended
Options Issued and Significant Assumptions Used to Estimate Option Fair Values	September 30, 2017			October 1, 2016
Options issued (in thousands)		217			86
Risk-free interest rate		2.2	%		1.5	%
Expected life in years		6			5
Expected volatility		0.230			0.286
Expected dividends		—			—


	Nine Months Ended
Weighted-Average Exercise Price and Fair Value of Options on the Date of Grant	September 30, 2017		October 1, 2016
Exercise price	$	151.24	$	122.65
Fair value	$	40.49	$	34.63


	Number of Shares			Price per Share		Weighted-Average Exercise Price per Share
Outstanding at December 31, 2016		2,697		$	38.09 to $139.51	$	106.55
Granted		217		$	136.43 to $184.89	$	151.24
Exercised		(751	)	$	41.20 to $134.37	$	90.28
Canceled		(43	)	$	87.06 to $136.43	$	115.82

Outstanding at September 30, 2017		2,120		$	38.09 to $184.89	$	116.70


	Shares			Weighted-Average Price per Share
Unvested at December 31, 2016		453		$	110.34
Granted		106		$	154.31
Vested		(140	)	$	106.06
Forfeited		(17	)	$	116.83

Unvested at September 30, 2017		402		$	123.15


	Shares		Weighted-Average Fair Value per Share
Unvested at December 31, 2016		27	$	171.16
Granted		20	$	198.78

Unvested at September 30, 2017		47	$	184.40


	Three Months Ended September 30, 2017
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	136,104		79,712	$	1.71
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		—		809		(0.02	)

Net income per diluted common share	$	136,104		80,521	$	1.69


	Three Months Ended October 1, 2016
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	124,856		80,677	$	1.55
Effect of dilutive stock option, restricted stock and restricted stock unit securities		—		711		(0.02	)

Net income per diluted common share	$	124,856		81,388	$	1.53


	Nine Months Ended September 30, 2017
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	373,483		79,908	$	4.67
Effect of dilutive stock option, restricted stock, performance stock unit and and restricted stock unit securities		—		752		(0.04	)

Net income per diluted common share	$	373,483		80,660	$	4.63


	Nine Months Ended October 1, 2016
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	347,125		80,923	$	4.29
Effect of dilutive stock option, restricted stock and restricted stock unit securities		—		650		(0.03	)

Net income per diluted common share	$	347,125		81,573	$	4.26


	Currency Translation			Unrealized Gain (Loss) on Retirement Plans			Unrealized Gain (Loss) on Investments			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2016	$	(170,566	)	$	(43,894	)	$	(1,820	)	$	(216,280	)
Other comprehensive income (loss), net of tax		94,209			52			1,592			95,853

Balance at September 30, 2017	$	(76,357	)	$	(43,842	)	$	(228	)	$	(120,427	)


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 2 to July 29, 2017		—	$	—		—	$	964,384
July 30 to August 26, 2017		230	$	178.10		230	$	923,458
August 27 to September 30, 2017		208	$	187.04		208	$	885,182

Total		438	$	182.35		438	$	885,182


Exhibit Number		Description of Document

~~10.1~~		~~Employment Agreement, dated July 21, 2017, between Waters Corporation and Dr. Rohit Khanna.~~

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 Form10-Q for the quarter ended September 30, ~~2017,~~2023, formatted in ~~XBRL (Extensible~~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 ~~(v)~~(vi) Condensed Notes to Consolidated Financial Statements (unaudited).

104		Cover Page Interactive Date File (formatted in iXBRL and contained in Exhibit 101).


		WATERS CORPORATION

	/s/ ~~SHERRY L. BUCK~~Amol Chaubal
	~~Sherry L. Buck~~ Amol Chaubal
		Senior Vice President and
	Chief Financial Officer
(Principal Financial Officer)
(Principal Accounting Officer)