☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
28, 2020
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware 13-3668640
(508)
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 | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
Securities registered pursuant to Section 12(b) of the Act:
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PART I | FINANCIAL INFORMATION | |||||
Item 1. | ||||||
3 | ||||||
4 | ||||||
5 | ||||||
6 | ||||||
7 | ||||||
8 | ||||||
Item 2. | 28 | |||||
Item 3. | 38 | |||||
Item 4. | 38 | |||||
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PART II | ||||||
Item | 39 | |||||
Item 1A. | 39 | |||||
Item 2. | 40 | |||||
Item 6. | 41 | |||||
42 |
March 30, 2019 | December 31, 2018 | |||||||
ASSETS | (In thousands, except per share data) | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 684,970 | $ | 796,280 | ||||
Investments | 482,293 | 938,944 | ||||||
Accounts receivable, net | 508,285 | 568,316 | ||||||
Inventories | 333,308 | 291,569 | ||||||
Other current assets | 68,935 | 68,054 | ||||||
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Total current assets | 2,077,791 | 2,663,163 | ||||||
Property, plant and equipment, net | 355,965 | 343,083 | ||||||
Intangible assets, net | 243,415 | 246,902 | ||||||
Goodwill | 356,632 | 355,614 | ||||||
Operating lease assets | 94,680 | — | ||||||
Other assets | 121,245 | 118,664 | ||||||
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Total assets | $ | 3,249,728 | $ | 3,727,426 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Notes payable and debt | $ | 100,263 | $ | 178 | ||||
Accounts payable | 72,367 | 68,168 | ||||||
Accrued employee compensation | 31,563 | 64,545 | ||||||
Deferred revenue and customer advances | 222,263 | 164,965 | ||||||
Current operating lease liabilities | 26,926 | — | ||||||
Accrued treasury stock repurchases | 25,208 | 23,005 | ||||||
Accrued income taxes | 19,854 | 22,943 | ||||||
Accrued warranty | 11,462 | 12,300 | ||||||
Other current liabilities | 93,373 | 92,827 | ||||||
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Total current liabilities | 603,279 | 448,931 | ||||||
Long-term liabilities: | ||||||||
Long-term debt | 1,048,283 | 1,148,172 | ||||||
Long-term income tax liabilities | 431,224 | 430,866 | ||||||
Long-term operating lease liabilities | 67,788 | — | ||||||
Long-term portion of retirement benefits | 56,376 | 55,853 | ||||||
Other long-term liabilities | 75,036 | 76,346 | ||||||
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Total long-term liabilities | 1,678,707 | 1,711,237 | ||||||
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Total liabilities | 2,281,986 | 2,160,168 | ||||||
Commitments and contingencies (Notes 6, 7, 8 and 12) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, par value $0.01 per share, 5,000 shares authorized, none issued at March 30, 2019 and December 31, 2018 | — | — | ||||||
Common stock, par value $0.01 per share, 400,000 shares authorized, 160,825 and 160,472 shares issued, 70,136 and 73,115 shares outstanding at March 30, 2019 and December 31, 2018, respectively | 1,608 | 1,605 | ||||||
Additionalpaid-in capital | 1,872,216 | 1,834,741 | ||||||
Retained earnings | 6,104,191 | 5,995,205 | ||||||
Treasury stock, at cost, 90,689 and 87,357 shares at March 30, 2019 and December 31, 2018, respectively | (6,901,629 | ) | (6,146,322 | ) | ||||
Accumulated other comprehensive loss | (108,644 | ) | (117,971 | ) | ||||
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Total stockholders’ equity | 967,742 | 1,567,258 | ||||||
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Total liabilities and stockholders’ equity | $ | 3,249,728 | $ | 3,727,426 | ||||
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March 28, 2020 | December 31, 2019 | |||||||
(In thousands, except per share data) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 390,061 | $ | 335,715 | ||||
Investments | 3,810 | 1,429 | ||||||
Accounts receivable, net | 522,209 | 587,734 | ||||||
Inventories | 344,009 | 320,551 | ||||||
Other current assets | 67,687 | 67,062 | ||||||
Total current assets | 1,327,776 | 1,312,491 | ||||||
Property, plant and equipment, net | 439,420 | 417,342 | ||||||
Intangible assets, net | 243,389 | 240,203 | ||||||
Goodwill | 423,787 | 356,128 | ||||||
Operating lease assets | 90,664 | 93,358 | ||||||
Other assets | 141,482 | 137,533 | ||||||
Total assets | $ | 2,666,518 | $ | 2,557,055 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Notes payable and debt | $ | 50,000 | $ | 100,366 | ||||
Accounts payable | 61,059 | 49,001 | ||||||
Accrued employee compensation | 22,648 | 43,467 | ||||||
Deferred revenue and customer advances | 218,210 | 176,360 | ||||||
Current operating lease liabilities | 27,999 | 27,125 | ||||||
Accrued income taxes | 46,875 | 45,967 | ||||||
Accrued warranty | 11,016 | 11,964 | ||||||
Other current liabilities | 113,244 | 137,084 | ||||||
Total current liabilities | 551,051 | 591,334 | ||||||
Long-term liabilities: | ||||||||
Long-term debt | 1,845,981 | 1,580,797 | ||||||
Long-term portion of retirement benefits | 55,078 | 59,159 | ||||||
Long-term income tax liabilities | 394,750 | 394,562 | ||||||
Long-term operating lease liabilities | 63,612 | 66,881 | ||||||
Other long-term liabilities | 94,045 | 80,603 | ||||||
Total long-term liabilities | 2,453,466 | 2,182,002 | ||||||
Total liabilities | 3,004,517 | 2,773,336 | ||||||
Commitments and contingencies (Notes 7, 8 and 12) | ||||||||
Stockholders’ deficit: | ||||||||
Preferred stock, par value $0.01 per share, 5,000 shares authorized, NaN issued at March 28, 2020 and December 31, 2019 | — | — | ||||||
Common stock, par value $0.01 per share, 400,000 shares authorized, 161,253 and 161,030 shares issued, 61,896 and 62,587 shares outstanding at March 28, 2020 and December 31, 2019, respectively | 1,613 | 1,610 | ||||||
Additional paid-in capital | 1,947,626 | 1,926,753 | ||||||
Retained earnings | 6,639,980 | 6,587,403 | ||||||
Treasury stock, at cost, 99,357 and 98,443 shares at March 28, 2020 and December 31, 2019, respectively | (8,788,801 | ) | (8,612,576 | ) | ||||
Accumulated other comprehensive loss | (138,417 | ) | (119,471 | ) | ||||
Total stockholders’ deficit | (337,999 | ) | (216,281 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 2,666,518 | $ | 2,557,055 | ||||
Three Months Ended | ||||||||
March 30, 2019 | March 31, 2018 | |||||||
(In thousands, except per share data) | ||||||||
Revenues: | ||||||||
Product sales | $ | 320,503 | $ | 339,117 | ||||
Service sales | 193,359 | 191,553 | ||||||
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Total net sales | 513,862 | 530,670 | ||||||
Costs and operating expenses: | ||||||||
Cost of product sales | 132,390 | 140,466 | ||||||
Cost of service sales | 88,641 | 80,955 | ||||||
Selling and administrative expenses | 134,339 | 130,407 | ||||||
Research and development expenses | 35,060 | 34,480 | ||||||
Purchased intangibles amortization | 2,281 | 1,659 | ||||||
Litigation settlement | — | (1,672 | ) | |||||
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Total costs and operating expenses | 392,711 | 386,295 | ||||||
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Operating income | 121,151 | 144,375 | ||||||
Other (expense) income | (525 | ) | 346 | |||||
Interest expense | (11,563 | ) | (13,838 | ) | ||||
Interest income | 8,315 | 9,666 | ||||||
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Income before income taxes | 117,378 | 140,549 | ||||||
Provision for income taxes | 8,392 | 28,598 | ||||||
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Net income | $ | 108,986 | $ | 111,951 | ||||
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Net income per basic common share | $ | 1.52 | $ | 1.42 | ||||
Weighted-average number of basic common shares | 71,704 | 78,883 | ||||||
Net income per diluted common share | $ | 1.51 | $ | 1.40 | ||||
Weighted-average number of diluted common shares and equivalents | 72,415 | 79,715 |
Three Months Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
(In thousands, except per share data) | ||||||||
Revenues: | ||||||||
Product sales | $ | 274,183 | $ | 320,503 | ||||
Service sales | 190,756 | 193,359 | ||||||
Total net sales | 464,939 | 513,862 | ||||||
Costs and operating expenses: | ||||||||
Cost of product sales | 119,839 | 132,390 | ||||||
Cost of service sales | 90,805 | 88,641 | ||||||
Selling and administrative expenses | 147,735 | 134,339 | ||||||
Research and development expenses | 34,989 | 35,060 | ||||||
Purchased intangibles amortization | 2,625 | 2,281 | ||||||
Litigation provision | 666 | — | ||||||
Total costs and operating expenses | 396,659 | 392,711 | ||||||
Operating income | 68,280 | 121,151 | ||||||
Other expense | (374 | ) | (525 | ) | ||||
Interest expense | (14,079 | ) | (11,563 | ) | ||||
Interest income | 4,036 | 8,315 | ||||||
Income before income taxes | 57,863 | 117,378 | ||||||
Provision for income taxes | 4,301 | 8,392 | ||||||
Net income | $ | 53,562 | $ | 108,986 | ||||
Net income per basic common share | $ | 0.86 | $ | 1.52 | ||||
Weighted-average number of basic common shares | 62,232 | 71,704 | ||||||
Net income per diluted common share | $ | 0.86 | $ | 1.51 | ||||
Weighted-average number of diluted common shares and equivalents | 62,626 | 72,415 |
Three Months Ended | ||||||||
March 30, 2019 | March 31, 2018 | |||||||
(In thousands) | ||||||||
Net income | $ | 108,986 | $ | 111,951 | ||||
Other comprehensive income: | ||||||||
Foreign currency translation | 7,522 | 23,913 | ||||||
Unrealized gains (losses) on investments before income taxes | 2,344 | (2,976 | ) | |||||
Income tax (expense) benefit | (547 | ) | 93 | |||||
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Unrealized gains (losses) on investments, net of tax | 1,797 | (2,883 | ) | |||||
Retirement liability adjustment before reclassifications | (61 | ) | (385 | ) | ||||
Amounts reclassified to other (expense) income | 93 | 907 | ||||||
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Retirement liability adjustment before income taxes | 32 | 522 | ||||||
Income tax expense | (24 | ) | (116 | ) | ||||
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Retirement liability adjustment, net of tax | 8 | 406 | ||||||
Other comprehensive income | 9,327 | 21,436 | ||||||
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Comprehensive income | $ | 118,313 | $ | 133,387 | ||||
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Three Months Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
(In thousands) | ||||||||
Net income | $ | 53,562 | $ | 108,986 | ||||
Other comprehensive (loss) income: | ||||||||
Foreign currency translation | (19,344 | ) | 7,522 | |||||
Unrealized gains on investments before income taxes | — | 2,344 | ||||||
Income tax expense | — | (547 | ) | |||||
Unrealized gains on investments, net of tax | — | 1,797 | ||||||
Retirement liability adjustment before reclassifications | 296 | (61 | ) | |||||
Amounts reclassified to other income | 340 | 93 | ||||||
Retirement liability adjustment before income taxes | 636 | 32 | ||||||
Income tax expense | (238 | ) | (24 | ) | ||||
Retirement liability adjustment, net of tax | 398 | 8 | ||||||
Other comprehensive (loss) income | (18,946 | ) | 9,327 | |||||
Comprehensive income | $ | 34,616 | $ | 118,313 | ||||
Three Months Ended | ||||||||
March 30, 2019 | March 31, 2018 | |||||||
Cash flows from operating activities: | (In thousands) | |||||||
Net income | $ | 108,986 | $ | 111,951 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Stock-based compensation | 9,941 | 9,892 | ||||||
Deferred income taxes | 1,442 | 1,071 | ||||||
Depreciation | 12,006 | 16,083 | ||||||
Amortization of intangibles | 12,758 | 12,557 | ||||||
Change in operating assets and liabilities: | ||||||||
Decrease in accounts receivable | 59,331 | 40,588 | ||||||
Increase in inventories | (44,438 | ) | (28,101 | ) | ||||
Increase in other current assets | (3,547 | ) | (13,049 | ) | ||||
Decrease (increase) in other assets | 4,637 | (4,409 | ) | |||||
Decrease in accounts payable and other current liabilities | (33,485 | ) | (34,258 | ) | ||||
Increase in deferred revenue and customer advances | 57,539 | 45,096 | ||||||
Effect of the 2017 Tax & Jobs Act | (3,229 | ) | 12,450 | |||||
(Decrease) increase in other liabilities | (6,162 | ) | 5,970 | |||||
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Net cash provided by operating activities | 175,779 | 175,841 | ||||||
Cash flows from investing activities: | ||||||||
Additions to property, plant, equipment and software capitalization | (25,666 | ) | (15,992 | ) | ||||
Investment in unaffiliated companies | — | (3,215 | ) | |||||
Purchases of investments | (26,732 | ) | (170,041 | ) | ||||
Maturities and sales of investments | 486,437 | 1,085,087 | ||||||
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Net cash provided by investing activities | 434,039 | 895,839 | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from debt issuances | 166 | 81 | ||||||
Payments on debt | (80 | ) | (750,000 | ) | ||||
Proceeds from stock plans | 27,631 | 24,287 | ||||||
Purchases of treasury shares | (753,105 | ) | (282,370 | ) | ||||
Proceeds from derivative contracts | 2,254 | 1,937 | ||||||
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Net cash used in financing activities | (723,134 | ) | (1,006,065 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 2,006 | 8,588 | ||||||
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(Decrease) increase in cash and cash equivalents | (111,310 | ) | 74,203 | |||||
Cash and cash equivalents at beginning of period | 796,280 | 642,319 | ||||||
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Cash and cash equivalents at end of period | $ | 684,970 | $ | 716,522 | ||||
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Three Months Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
(In thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 53,562 | $ | 108,986 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Stock-based compensation | 9,196 | 9,941 | ||||||
Deferred income taxes | (2,525 | ) | 1,442 | |||||
Depreciation | 15,708 | 12,006 | ||||||
Amortization of intangibles | 13,480 | 12,758 | ||||||
Change in operating assets and liabilities: | ||||||||
Decrease in accounts receivable | 54,026 | 59,331 | ||||||
Increase in inventories | (29,399 | ) | (44,438 | ) | ||||
Increase in other current assets | (5,036 | ) | (3,547 | ) | ||||
Decrease in other assets | 2,745 | 4,637 | ||||||
Decrease in accounts payable and other current liabilities | (15,825 | ) | (33,485 | ) | ||||
Increase in deferred revenue and customer advances | 46,465 | 57,539 | ||||||
Effect of the 2017 Tax Cuts & Jobs Act | — | (3,229 | ) | |||||
Increase (decrease) in other liabilities | 9,238 | (6,162 | ) | |||||
Net cash provided by operating activities | 151,635 | 175,779 | ||||||
Cash flows from investing activities: | ||||||||
Additions to property, plant, equipment and software capitalization | (51,130 | ) | (25,666 | ) | ||||
Business acquisitions, net of cash acquired | (76,664 | ) | — | |||||
Purchases of investments | (3,520 | ) | (26,732 | ) | ||||
Maturities and sales of investments | 1,139 | 486,437 | ||||||
Net cash (used in) provided by investing activities | (130,175 | ) | 434,039 | |||||
Cash flows from financing activities: | ||||||||
Proceeds from debt issuances | 315,000 | 166 | ||||||
Payments on debt | (100,366 | ) | (80 | ) | ||||
Proceeds from stock plans | 11,743 | 27,631 | ||||||
Purchases of treasury shares | (196,226 | ) | (753,105 | ) | ||||
Proceeds from derivative contracts | 2,767 | 2,254 | ||||||
Net cash provided by (used in) financing activities | 32,918 | (723,134 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (32 | ) | 2,006 | |||||
Increase (decrease) in cash and cash equivalents | 54,346 | (111,310 | ) | |||||
Cash and cash equivalents at beginning of period | 335,715 | 796,280 | ||||||
Cash and cash equivalents at end of period | $ | 390,061 | $ | 684,970 | ||||
Number of Common Shares | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | ||||||||||||||||||||||
Balance December 31, 2017 | 159,845 | $ | 1,598 | $ | 1,745,088 | $ | 5,405,380 | $ | (4,808,211 | ) | $ | (110,067 | ) | $ | 2,233,788 | |||||||||||||
Adoption of new accounting pronouncement | — | — | — | (3,969 | ) | — | — | (3,969 | ) | |||||||||||||||||||
Net income | — | — | — | 111,951 | — | — | 111,951 | |||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 21,436 | 21,436 | |||||||||||||||||||||
Issuance of common stock for employees: | ||||||||||||||||||||||||||||
Employee Stock Purchase Plan | 10 | — | 1,565 | — | — | — | 1,565 | |||||||||||||||||||||
Stock options exercised | 222 | 2 | 22,707 | — | — | — | 22,709 | |||||||||||||||||||||
Treasury stock | — | — | — | — | (282,370 | ) | — | (282,370 | ) | |||||||||||||||||||
Stock-based compensation | 123 | 2 | 9,782 | — | — | — | 9,784 | |||||||||||||||||||||
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Balance March 31, 2018 | 160,200 | $ | 1,602 | $ | 1,779,142 | $ | 5,513,362 | $ | (5,090,581 | ) | $ | (88,631 | ) | $ | 2,114,894 | |||||||||||||
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Number of Common Shares | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | ||||||||||||||||||||||
Balance December 31, 2018 | 160,472 | $ | 1,605 | $ | 1,834,741 | $ | 5,995,205 | $ | (6,146,322 | ) | $ | (117,971 | ) | $ | 1,567,258 | |||||||||||||
Net income | — | — | — | 108,986 | — | — | 108,986 | |||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 9,327 | 9,327 | |||||||||||||||||||||
Issuance of common stock for employees: | ||||||||||||||||||||||||||||
Employee Stock Purchase Plan | 10 | — | 1,670 | — | — | — | 1,670 | |||||||||||||||||||||
Stock options exercised | 239 | 2 | 26,097 | — | — | — | 26,099 | |||||||||||||||||||||
Treasury stock | — | — | — | — | (755,307 | ) | — | (755,307 | ) | |||||||||||||||||||
Stock-based compensation | 104 | 1 | 9,708 | — | — | — | 9,709 | |||||||||||||||||||||
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Balance March 30, 2019 | 160,825 | $ | 1,608 | $ | 1,872,216 | $ | 6,104,191 | $ | (6,901,629 | ) | $ | (108,644 | ) | $ | 967,742 | |||||||||||||
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Number of Common Shares | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | ||||||||||||||||||||||
Balance December 31, 2018 | 160,472 | $ | 1,605 | $ | 1,834,741 | $ | 5,995,205 | $ | (6,146,322 | ) | $ | (117,971 | ) | $ | 1,567,258 | |||||||||||||
Net income | — | — | — | 108,986 | — | — | 108,986 | |||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 9,327 | 9,327 | |||||||||||||||||||||
Issuance of common stock for employees: | ||||||||||||||||||||||||||||
Employee Stock Purchase Plan | 10 | — | 1,670 | — | — | — | 1,670 | |||||||||||||||||||||
Stock options exercised | 239 | 2 | 26,097 | — | — | — | 26,099 | |||||||||||||||||||||
Treasury stock | — | — | — | — | (755,307 | ) | — | (755,307 | ) | |||||||||||||||||||
Stock-based compensation | 104 | 1 | 9,708 | — | — | — | 9,709 | |||||||||||||||||||||
Balance March 30, 2019 | 160,825 | $ | 1,608 | $ | 1,872,216 | $ | 6,104,191 | $ | (6,901,629 | ) | $ | (108,644 | ) | $ | 967,742 | |||||||||||||
Number of Common Shares | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss | Total Stockholders’ D eficit | ||||||||||||||||||||||
Balance December 31, 2019 | 161,030 | $ | 1,610 | $ | 1,926,753 | $ | 6,587,403 | $ | (8,612,576 | ) | $ | (119,471 | ) | $ | (216,281 | ) | ||||||||||||
Net income | — | — | — | 53,562 | — | — | 53,562 | |||||||||||||||||||||
Adoption of new accounting pronouncement | — | — | — | (985 | ) | — | — | (985 | ) | |||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (18,946 | ) | (18,946 | ) | |||||||||||||||||||
Issuance of common stock for employees: | ||||||||||||||||||||||||||||
Employee Stock Purchase Plan | 9 | — | 1,736 | — | — | — | 1,736 | |||||||||||||||||||||
Stock options exercised | 81 | 1 | 10,124 | — | — | — | 10,125 | |||||||||||||||||||||
Treasury stock | — | — | — | — | (176,225 | ) | — | (176,225 | ) | |||||||||||||||||||
Stock-based compensation | 133 | 2 | 9,013 | — | — | — | 9,015 | |||||||||||||||||||||
Balance March 28, 2020 | 161,253 | $ | 1,613 | $ | 1,947,626 | $ | 6,639,980 | $ | (8,788,801 | ) | $ | (138,417 | ) | $ | (337,999 | ) | ||||||||||||
2020, the World Health Organization declared
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
Credit Losses
instrument that is sold. If there is a risk of default related to a receivable that is
Balance at | Balance at | |||||||||||||||
Beginning | End of | |||||||||||||||
of Period | Additions | Deduction | Period | |||||||||||||
Allowance for Doubtful Accounts | ||||||||||||||||
March 30, 2019 | $ | 7,663 | $ | 2,159 | $ | (2,324 | ) | $ | 7,498 | |||||||
March 31, 2018 | $ | 6,109 | $ | 1,056 | $ | (1,033 | ) | $ | 6,132 |
. The March 28, 2020 balance is calculated using the CECL method and the March 30, 2019 balance is calculated using the incurred loss method under legacy GAAP:
Balance at Beginning of Period | Impact of CECL A doption | Additions | Deduction | Balance at End of Period | ||||||||||||||||
Allowance for Doubtful Accounts | ||||||||||||||||||||
March 28, 2020 | $ | 9,560 | $ | 985 | $ | 3,506 | $ | (1,749 | ) | $ | 12,302 | |||||||||
March 30, 2019 | $ | 7,663 | $ | — | $ | 2,159 | $ | (2,324 | ) | $ | 7,498 |
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets | Other | Significant | ||||||||||||||
Total at | for Identical | Observable | Unobservable | |||||||||||||
March 30, | Assets | Inputs | Inputs | |||||||||||||
2019 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
U.S. Treasury securities | $ | 98,576 | $ | — | $ | 98,576 | $ | — | ||||||||
Foreign government securities | 3,476 | — | 3,476 | — | ||||||||||||
Corporate debt securities | 367,621 | — | 367,621 | — | ||||||||||||
Time deposits | 52,507 | — | 52,507 | — | ||||||||||||
Waters 401(k) Restoration Plan assets | 33,951 | 33,951 | — | — | ||||||||||||
Foreign currency exchange contracts | 355 | — | 355 | — | ||||||||||||
Interest rate cross-currency swap agreements | 7,120 | — | 7,120 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 563,606 | $ | 33,951 | $ | 529,655 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Contingent consideration | $ | 2,591 | $ | — | $ | — | $ | 2,591 | ||||||||
Foreign currency exchange contracts | 619 | — | 619 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 3,210 | $ | — | $ | 619 | $ | 2,591 | ||||||||
|
|
|
|
|
|
|
|
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets | Other | Significant | ||||||||||||||
Total at | for Identical | Observable | Unobservable | |||||||||||||
March 28, | Assets | Inputs | Inputs | |||||||||||||
2020 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
Time deposits | 3,810 | — | 3,810 | — | ||||||||||||
Waters 401(k) Restoration Plan assets | 29,165 | 29,165 | — | — | ||||||||||||
Foreign currency exchange contracts | 1,028 | — | 1,028 | — | ||||||||||||
Interest rate cross-currency swap agreements | 10,007 | — | 10,007 | — | ||||||||||||
Total | $ | 44,010 | $ | 29,165 | $ | 14,845 | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Contingent consideration | $ | 2,672 | $ | — | $ | — | $ | 2,672 | ||||||||
Foreign currency exchange contracts | 715 | — | 715 | — | ||||||||||||
Total | $ | 3,387 | $ | — | $ | 715 | $ | 2,672 | ||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets | Other | Significant | ||||||||||||||
Total at | for Identical | Observable | Unobservable | |||||||||||||
December 31, | Assets | Inputs | Inputs | |||||||||||||
2018 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
U.S. Treasury securities | $ | 164,315 | $ | — | $ | 164,315 | $ | — | ||||||||
Foreign government securities | 3,463 | — | 3,463 | — | ||||||||||||
Corporate debt securities | 723,059 | — | 723,059 | — | ||||||||||||
Time deposits | 108,638 | — | 108,638 | — | ||||||||||||
Waters 401(k) Restoration Plan assets | 33,104 | 33,104 | — | — | ||||||||||||
Foreign currency exchange contracts | 503 | — | 503 | — | ||||||||||||
Interest rate cross-currency swap agreements | 1,093 | 1,093 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,034,175 | $ | 33,104 | $ | 1,001,071 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Contingent consideration | $ | 2,476 | $ | — | $ | — | $ | 2,476 | ||||||||
Foreign currency exchange contracts | 224 | — | 224 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 2,700 | $ | — | $ | 224 | $ | 2,476 | ||||||||
|
|
|
|
|
|
|
|
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets | Other | Significant | ||||||||||||||
Total at | for Identical | Observable | Unobservable | |||||||||||||
December 31, | Assets | Inputs | Inputs | |||||||||||||
2019 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
Time deposits | 1,642 | — | 1,642 | — | ||||||||||||
Waters 401(k) Restoration Plan assets | 30,158 | 30,158 | — | — | ||||||||||||
Foreign currency exchange contracts | 16 | — | 16 | — | ||||||||||||
Interest rate cross-currency swap agreements | 4,485 | 4,485 | ||||||||||||||
Total | $ | 36,301 | $ | 30,158 | $ | 6,143 | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Contingent consideration | $ | 2,557 | $ | — | $ | — | $ | 2,557 | ||||||||
Foreign currency exchange contracts | 1,028 | — | 1,028 | — | ||||||||||||
Total | $ | 3,585 | $ | — | $ | 1,028 | $ | 2,557 | ||||||||
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
In 2018,
March 30, 2019 | December 31, 2018 | |||||||||||||||
Notional Value | Fair Value | Notional Value | Fair Value | |||||||||||||
Foreign currency exchange contracts: | ||||||||||||||||
Other current assets | $ | 34,219 | $ | 355 | $ | 112,212 | $ | 503 | ||||||||
Other current liabilities | $ | 98,745 | $ | 619 | $ | 40,175 | $ | 224 | ||||||||
Interest rate cross-currency swap agreements: | ||||||||||||||||
Other assets | $ | 300,000 | $ | 7,120 | $ | 300,000 | $ | 1,093 | ||||||||
Accumulated other comprehensive income | $ | (7,120 | ) | $ | (1,093 | ) |
March 28, 2020 | December 31, 2019 | |||||||||||||||
Notional Value | Fair Value | Notional Value | Fair Value | |||||||||||||
Foreign currency exchange contracts: | ||||||||||||||||
Other current assets | $ | 69,627 | $ | 1,028 | $ | 119,576 | $ | 16 | ||||||||
Other current liabilities | $ | 24,000 | $ | 715 | $ | 29,495 | $ | 1,028 | ||||||||
Interest rate cross-currency swap agreements: | ||||||||||||||||
Other assets | $ | 560,000 | $ | 10,007 | $ | 560,000 | $ | 4,485 | ||||||||
Accumulated other comprehensive income | $ | (10,007 | ) | $ | (4,485 | ) |
Financial | ||||||||||
Statement | Three Months Ended | |||||||||
Classification | March 30, 2019 | March 31, 2018 | ||||||||
Foreign currency exchange contracts: | ||||||||||
Realized (losses) gains on closed contracts | Cost of sales | $ | (543 | ) | $ | 1,937 | ||||
Unrealized gains (losses) on open contracts | Cost of sales | 526 | (985 | ) | ||||||
|
|
|
| |||||||
Cumulative netpre-tax (losses) gains | Cost of sales | $ | (17 | ) | $ | 952 | ||||
|
|
|
| |||||||
Interest rate cross-currency swap agreements: | ||||||||||
Interest earned | Interest income | $ | 2,227 | $ | — | |||||
Unrealized gains on contracts | Stockholders’ equity | $ | 7,120 | $ | — |
In April 2019, the Company entered into three-year interest rate cross-currency swap derivative agreements with a notional value of $110 million to hedge the variability in the movement of foreign currency exchange rates on a portion of its Euro-denominated net asset investments.
Financial Statement Classification | Three Months Ended | |||||||||
March 28, 2020 | March 30, 2019 | |||||||||
Foreign currency exchange contracts: | ||||||||||
Realized (losses) gains on closed contracts | Cost of sales | $ | (2,981 | ) | $ | 525 | ||||
Unrealized gains (losses) on open contracts | Cost of sales | 1,325 | (542 | ) | ||||||
Cumulative net pre-tax losses | Cost of sales | $ | (1,656 | ) | $ | (17 | ) | |||
Interest rate cross-currency swap agreements: | ||||||||||
Interest earned | Interest income | $ | 3,714 | $ | 2,227 | |||||
Unrealized gains on contracts | Stockholders’ equity | $ | 5,522 | $ | 7,120 |
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
Asacquisitions
subsequent quarter.
Balance at | Balance at | |||||||||||||||
Beginning | Accruals for | Settlements | End of | |||||||||||||
of Period | Warranties | Made | Period | |||||||||||||
Accrued warranty liability: | ||||||||||||||||
March 30, 2019 | $ | 12,300 | $ | 1,500 | $ | (2,338 | ) | $ | 11,462 | |||||||
March 31, 2018 | $ | 13,026 | $ | 1,767 | $ | (2,167 | ) | $ | 12,626 |
Balance at | Balance at | |||||||||||||||
Beginning | Accruals for | Settlements | End of | |||||||||||||
of Period | Warranties | Made | Period | |||||||||||||
Accrued warranty liability: | ||||||||||||||||
March 28, 2020 | $ | 11,964 | $ | 1,671 | $ | (2,619 | ) | $ | 11,016 | |||||||
March 30, 2019 | $ | 12,300 | $ | 1,500 | $ | (2,338 | ) | $ | 11,462 |
co
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
ship the products to its customers, the Company has elected the practical expedient to account for the shipping services as a fulfillment cost. Accordingly, such costs are recognized when control of the related goods is transferred to the customer. In more rare situations, the Company has revenue associated with products that contain specific customer acceptance criteria and the related revenue is not recognized before the customer acceptance criteria are satisfied. The Company elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with specific revenue-producing transactions and collected by the Company from a customer.
March 30, 2019 | March 31, 2018 | |||||||
Balance at the beginning of the period | $ | 204,257 | $ | 192,590 | ||||
Recognition of revenue included in balance at beginning of the period | (77,742 | ) | (93,286 | ) | ||||
Revenue deferred during the period, net of revenue recognized | 134,506 | 147,939 | ||||||
|
|
|
| |||||
Balance at the end of the period | $ | 261,021 | $ | 247,243 | ||||
|
|
|
|
March 28, 2020 | March 30, 2019 | |||||||
Balance at the beginning of the period | $ | 213,695 | $ | 204,257 | ||||
Recognition of revenue included in balance at beginning of the period | (82,604 | ) | (77,742 | ) | ||||
Revenue deferred during the period, net of revenue recognized | 138,430 | 134,506 | ||||||
Balance at the end of the period | $ | 269,521 | $ | 261,021 | ||||
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
March 30, 2019 | ||||
Deferred revenue and customer advances expected to be recognized in: | ||||
One year or less | $ | 222,263 | ||
13-24 months | 22,180 | |||
25 months and beyond | 16,578 | |||
|
| |||
Total | $ | 261,021 | ||
|
|
March 28, 2020 | ||||
Deferred revenue and customer advances expected to be recognized in: | ||||
One year or less | $ | 218,210 | ||
13-24 months | 31,821 | |||
25 months and beyond | 19,490 | |||
Total | $ | 269,521 | ||
March 30, 2019 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gain | Loss | Value | |||||||||||||
U.S. Treasury securities | $ | 98,723 | $ | 12 | $ | (159 | ) | $ | 98,576 | |||||||
Foreign government securities | 3,489 | 1 | (14 | ) | 3,476 | |||||||||||
Corporate debt securities | 368,163 | 121 | (663 | ) | 367,621 | |||||||||||
Time deposits | 52,507 | — | — | 52,507 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 522,882 | $ | 134 | $ | (836 | ) | $ | 522,180 | |||||||
|
|
|
|
|
|
|
| |||||||||
Amounts included in: | ||||||||||||||||
Cash equivalents | $ | 39,886 | $ | 1 | $ | — | $ | 39,887 | ||||||||
Investments | 482,996 | 133 | (836 | ) | 482,293 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 522,882 | $ | 134 | $ | (836 | ) | $ | 522,180 | |||||||
|
|
|
|
|
|
|
| |||||||||
December 31, 2018 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gain | Loss | Value | |||||||||||||
U.S. Treasury securities | $ | 164,619 | $ | 16 | $ | (320 | ) | $ | 164,315 | |||||||
Foreign government securities | 3,486 | 1 | (24 | ) | 3,463 | |||||||||||
Corporate debt securities | 725,778 | 41 | (2,760 | ) | 723,059 | |||||||||||
Time deposits | 108,638 | — | — | 108,638 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,002,521 | $ | 58 | $ | (3,104 | ) | $ | 999,475 | |||||||
|
|
|
|
|
|
|
| |||||||||
Amounts included in: | ||||||||||||||||
Cash equivalents | $ | 60,532 | $ | — | $ | (1 | ) | $ | 60,531 | |||||||
Investments | 941,989 | 58 | (3,103 | ) | 938,944 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,002,521 | $ | 58 | $ | (3,104 | ) | $ | 999,475 | |||||||
|
|
|
|
|
|
|
|
March 28, 2020 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gain | Loss | Value | |||||||||||||
Time deposits | 3,810 | — | — | 3,810 | ||||||||||||
Total | $ | 3,810 | $ | — | $ | — | $ | 3,810 | ||||||||
Amounts included in: | ||||||||||||||||
Investments | 3,810 | — | — | 3,810 | ||||||||||||
Total | $ | 3,810 | $ | — | $ | — | $ | 3,810 | ||||||||
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
December 31, 2019 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gain | Loss | Value | |||||||||||||
Time deposits | 1,642 | — | — | 1,642 | ||||||||||||
Total | $ | 1,642 | $ | — | $ | — | $ | 1,642 | ||||||||
Amounts included in: | ||||||||||||||||
Cash equivalents | $ | 213 | $ | — | $ | — | $ | 213 | ||||||||
Investments | 1,429 | — | — | 1,429 | ||||||||||||
Total | $ | 1,642 | $ | — | $ | — | $ | 1,642 | ||||||||
March 30, 2019 | December 31, 2018 | |||||||
Due in one year or less | $ | 437,648 | $ | 797,649 | ||||
Due after one year through three years | 84,532 | 201,826 | ||||||
|
|
|
| |||||
Total | $ | 522,180 | $ | 999,475 | ||||
|
|
|
|
March 28, 2020 | December 31, 2019 | |||||||
Due in one year or less | $ | 3,810 | $ | 1,642 | ||||
Total | $ | 3,810 | $ | 1,642 | ||||
March 30, 2019 | December 31, 2018 | |||||||
Raw materials | $ | 119,101 | $ | 111,641 | ||||
Work in progress | 18,314 | 15,552 | ||||||
Finished goods | 195,893 | 164,376 | ||||||
|
|
|
| |||||
Total inventories | $ | 333,308 | $ | 291,569 | ||||
|
|
|
|
March 28, 2020 | December 31, 2019 | |||||||
Raw materials | $ | 128,018 | $ | 126,850 | ||||
Work in progress | 19,364 | 15,457 | ||||||
Finished goods | 196,627 | 178,244 | ||||||
Total inventories | $ | 344,009 | $ | 320,551 | ||||
Cash | $ | 713 | ||
Accounts receivable and current other assets | 806 | |||
Inventory | 669 | |||
Prepaid and other assets | 611 | |||
Property, plant and equipment, net | 757 | |||
Operating lease assets | 847 | |||
Intangible assets | 6,960 | |||
Goodwill | 71,632 | |||
Total assets acquired | 82,995 | |||
Accrued expenses and other liabilities | 2,093 | |||
Total consideration | 80,902 | |||
Fair value of minority investment | 3,525 | |||
Cash consideration paid | 77,377 | |||
March 30, 2019 | December 31, 2018 | |||||||||||||||||||||||
Weighted- | Weighted- | |||||||||||||||||||||||
Gross | Average | Gross | Average | |||||||||||||||||||||
Carrying | Accumulated | Amortization | Carrying | Accumulated | Amortization | |||||||||||||||||||
Amount | Amortization | Period | Amount | Amortization | Period | |||||||||||||||||||
Capitalized software | $ | 456,388 | $ | 311,229 | 5 years | $ | 454,307 | $ | 307,634 | 5 years | ||||||||||||||
Purchased intangibles | 201,126 | 145,970 | 11 years | 201,566 | 144,184 | 11 years | ||||||||||||||||||
Trademarks and IPR&D | 13,817 | — | — | 13,677 | — | — | ||||||||||||||||||
Licenses | 5,710 | 5,119 | 6 years | 5,568 | 4,875 | 6 years | ||||||||||||||||||
Patents and other intangibles | 79,940 | 51,248 | 8 years | 77,753 | 49,276 | 8 years | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | $ | 756,981 | $ | 513,566 | 7 years | $ | 752,871 | $ | 505,969 | 7 years | ||||||||||||||
|
|
|
|
|
|
|
|
March 28, 2020 | December 31, 2019 | |||||||||||||||||||||||
Weighted- | Weighted- | |||||||||||||||||||||||
Gross | Average | Gross | Average | |||||||||||||||||||||
Carrying | Accumulated | Amortization | Carrying | Accumulated | Amortization | |||||||||||||||||||
Amount | Amortization | Period | Amount | Amortization | Period | |||||||||||||||||||
Capitalized software | $ | 487,894 | $ | 338,635 | 5 years | $ | 481,986 | $ | 333,255 | 5 years | ||||||||||||||
Purchased intangibles | 206,004 | 152,711 | 11 years | 200,523 | 151,722 | 11 years | ||||||||||||||||||
Trademarks and IPR&D | 13,477 | — | — | 13,782 | — | — | ||||||||||||||||||
Licenses | 5,346 | 5,026 | 6 years | 5,669 | 5,298 | 6 years | ||||||||||||||||||
Patents and other intangibles | 82,041 | 55,001 | 8 years | 83,035 | 54,517 | 8 years | ||||||||||||||||||
Total | $ | 794,762 | $ | 551,373 | 7 years | $ | 784,995 | $ | 544,792 | 7 years | ||||||||||||||
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
6
In 2018,
March 28, 2020 | December 31, 2019 | |||||||
Foreign subsidiary lines of credit | $ | — | $ | 366 | ||||
Senior unsecured notes - Series B - 5.00%, due February 2020 | — | 100,000 | ||||||
Senior unsecured notes - Series E - 3.97%, due March 2021 | 50,000 | — | ||||||
Total notes payable and debt, current | 50,000 | 100,366 | ||||||
Senior unsecured notes - Series E - 3.97%, due March 2021 | — | 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 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 | ||||||
Credit agreement | 940,000 | 625,000 | ||||||
Unamortized debt issuance costs | (4,019 | ) | (4,203 | ) | ||||
Total long-term debt | 1,845,981 | 1,580,797 | ||||||
Total debt | $ | 1,895,981 | $ | 1,681,163 | ||||
* | Series H senior unsecured notes bear interest at a 3-month LIBOR for that floating rate interest period plus 1.25% . |
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
The Company had the following outstanding debt at March 30, 2019 and December 31, 2018 (in thousands):
March 30, 2019 | December 31, 2018 | |||||||
Foreign subsidiary lines of credit | $ | 263 | $ | 178 | ||||
Senior unsecured notes - Series B - 5.00%, due February 2020 | 100,000 | — | ||||||
|
|
|
| |||||
Total notes payable and debt, current | 100,263 | 178 | ||||||
Senior unsecured notes - Series B - 5.00%, due February 2020 | — | 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 K - 3.44%, due May 2026 | 160,000 | 160,000 | ||||||
Credit agreement | 590,000 | 590,000 | ||||||
Unamortized debt issuance costs | (1,717 | ) | (1,828 | ) | ||||
|
|
|
| |||||
Total long-term debt | 1,048,283 | 1,148,172 | ||||||
|
|
|
| |||||
Total debt | $ | 1,148,546 | $ | 1,148,350 | ||||
|
|
|
| |||||
* Series H senior unsecured notes bear interest at a3-month LIBOR for that floating rate interest period plus 1.25%. |
|
As of both March 30, 2019 and December 31, 2018, the Company had a total amount available to borrow under the 2017 Credit Agreement of $1,208 million after outstanding letters of credit. The weighted-average interest rates applicable to the senior unsecured notes and credit agreement borrowings collectively were 3.80% and 3.83% at March 30, 2019 and December 31, 2018, respectively. As of March 30, 2019, 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 million at both March 30, 2019 and December 31, 2018, for the purpose of short-term borrowing and issuance of commercial guarantees. The weighted-average interest rates applicable to these short-term borrowings were 4.44% and 1.88% for March 30, 2019 and December 31, 2018, respectively.
7
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
March 30, 2019 | March 31, 2018 | |||||||
Balance at the beginning of the period | $ | 26,108 | $ | 5,843 | ||||
Net reductions for lapse of statutes taken during the period | (43 | ) | (83 | ) | ||||
Net additions for tax positions taken during the current period | 325 | 177 | ||||||
|
|
|
| |||||
Balance at the end of the period | $ | 26,390 | $ | 5,937 | ||||
|
|
|
|
March 28, 2020 | March 30, 2019 | |||||||
Balance at the beginning of the period | $ | 27,790 | $ | 26,108 | ||||
Net reductions for lapse of statutes taken during the period | (101 | ) | (43 | ) | ||||
Net additions for tax positions taken during the current period | 203 | 325 | ||||||
Balance at the end of the period | $ | 27,892 | $ | 26,390 | ||||
8 Leases
The Company adopted new accounting guidance regarding the accounting for leases as of January 1, 2019 using a modified retrospective transition approach that was applied to leases existing as of, or entered into after, January 1, 2019. The Company elected the package of transition provisions available for expired or existing contracts, which allowed the Company to carryforward historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. Upon adoption, the Company recorded aright-of-use lease asset and lease liabilities in the amount $100 million as of January 1, 2019. The adoption of this standard did not have a material impact on the Company’s results of operations, cash flows and retained earnings.
Prior to the adoption of the new lease accounting standard, undiscounted future minimum rents payable as of December 31, 2018 undernon-cancelable leases with initial terms exceeding one year were as follows (in thousands):
2019 | $ | 28,417 | ||
2020 | 23,424 | |||
2021 | 16,032 | |||
2022 | 11,816 | |||
2023 and thereafter | 23,269 | |||
|
| |||
Total future minimum lease payments | $ | 102,958 | ||
|
|
The Company’s operating leases consist of property leases for sales, demonstration, laboratory, warehouse and office spaces, automotive leases for sales and service personnel and equipment leases, primarily used in our manufacturing and distribution operations. The lease policies described below were effective as of January 1, 2019. For leases with terms greater than 12 months, the Company recorded the relatedright-of-use asset and lease liability obligation at the present value of lease payments over the term of the leases. Some of the Company’s leases include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments. A
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
certain number of these leases contain rent escalation clauses, either fixed or adjusted periodically for inflation of market rates, that are factored into the Company’s determination of lease payments. The Company also has variable lease payments that do not depend on a rate or index, primarily for items such as common area maintenance and real estate taxes, which are recorded as variable costs when incurred.
In addition, the Company’s lease agreements that contain lease andnon-lease components are generally accounted for as a single lease component. The Company has elected not to apply the recognition requirements of the new accounting guidance to leases with terms less than 12 months. For these leases, the Company recognizes lease payments in net income on a straight-line basis over the term of the lease. As of March 30, 2019 and March 31, 2018, the Company does not have leases that are classified as finance leases.
When available, the Company uses the rate implicit in the lease to discount lease payments to determine the present value of the lease liabilities; however, most of the leases do not provide a readily determinable implicit rate and, as required by the accounting guidance, the Company estimated its incremental secured borrowing rate to discount the lease payments based on information available at lease commencement (or, for the leases in existence on the adoption date, the January 1, 2019 information). The Company’s incremental borrowing rate reflects the estimated rate of interest that the Company would pay to borrow on a collateralized basis over a similar term to the lease payments in a similar economic environment.
As of March 30, 2019, the Company has lease agreements that expire at various dates through 2033, with a weighted-average remaining lease term of 4.8 years. Rental expense was $9 million for the three months ended March 30, 2019 under the new lease accounting standard and $7 million for the three months ended March 31, 2018 under the previous lease accounting standard. The weighted-average discount rate used to determine the present value of lease liabilities was 3.95%. Cash paid for amounts included in the measurement of lease liabilities in operating activities in the statement of cash flows was $9 million during the three months ended March 30, 2019.
The Company’sright-of-use lease assets and lease liabilities included in the consolidated balance sheets are classified as follows (in thousands):
Financial Statement Classification | March 30, 2019 | |||||
Assets: | ||||||
Property operating lease assets | Operating lease assets | $ | 64,439 | |||
Automobile operating lease assets | Operating lease assets | 27,573 | ||||
Equipment operating lease assets | Operating lease assets | 2,668 | ||||
|
| |||||
Total lease assets | $ | 94,680 | ||||
|
| |||||
Liabilities: | ||||||
Current operating lease liabilities | Current operating lease liabilities | $ | 26,926 | |||
Long-term operating lease liabilities | Long-term operating lease liabilities | 67,788 | ||||
|
| |||||
Total lease liabilities | $ | 94,714 | ||||
|
|
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
Undiscounted future minimum rents payable as of March 30, 2019 undernon-cancelable leases with initial terms exceeding one year reconcile to lease liabilities included in the consolidated balance sheet as follows (in thousands):
2019 (remaining 9 months) | $ | 22,145 | ||
2020 | 25,541 | |||
2021 | 16,426 | |||
2022 | 11,579 | |||
2023 | 6,039 | |||
2024 and thereafter | 23,816 | |||
|
| |||
Total future minimum lease payments | 105,546 | |||
Less: amount of lease payments representing interest | (10,832 | ) | ||
|
| |||
Present value of future minimum lease payments | 94,714 | |||
Less: current operating lease liabilities | (26,926 | ) | ||
|
| |||
Long-term operating lease liabilities | $ | 67,788 | ||
|
|
Three Months Ended | ||||||||
March 30, 2019 | March 31, 2018 | |||||||
Cost of sales | $ | 575 | $ | 605 | ||||
Selling and administrative expenses | 8,125 | 8,483 | ||||||
Research and development expenses | 1,241 | 804 | ||||||
|
|
|
| |||||
Total stock-based compensation | $ | 9,941 | $ | 9,892 | ||||
|
|
|
|
Three Months Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
Cost of sales | $ | 570 | $ | 575 | ||||
Selling and administrative expenses | 7,373 | 8,125 | ||||||
Research and development expenses | 1,253 | 1,241 | ||||||
Total stock-based compensation | $ | 9,196 | $ | 9,941 | ||||
Three Months Ended | ||||||||
Options Issued and Significant Assumptions Used to Estimate Option Fair Values | March 28, 2020 | March 30, 2019 | ||||||
Options issued in thousands | 227 | 136 | ||||||
Risk-free interest rate | 1.4 | % | 2.5 | % | ||||
Expected life in years | 6 | 5 | ||||||
Expected volatility | 26.5 | % | 24.2 | % | ||||
Expected dividends | — | — |
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
Three Months Ended | ||||||||
Options Issued and Significant Assumptions Used to Estimate Option Fair Values | March 30, 2019 | March 31, 2018 | ||||||
Options issued in thousands | 136 | 133 | ||||||
Risk-free interest rate | 2.5 | % | 2.7 | % | ||||
Expected life in years | 5 | 6 | ||||||
Expected volatility | 24.2 | % | 23.2 | % | ||||
Expected dividends | — | — |
Three Months Ended | ||||||||
Weighted-Average Exercise Price and Fair Value of Options on the Date of Grant | March 30, 2019 | March 31, 2018 | ||||||
Exercise price | $ | 232.08 | $ | 206.66 | ||||
Fair value | $ | 61.97 | $ | 58.38 |
Three Months Ended | ||||||||
Weighted-Average Exercise Price and Fair Value of Options on the Date of Grant | March 28, 2020 | March 30, 2019 | ||||||
Exercise price | $ | 216.08 | $ | 232.08 | ||||
Fair value | $ | 61.70 | $ | 61.97 |
Number of Shares | Exercise Price per Share | Weighted-Average Exercise Price per Share | ||||||||||||||||||
Outstanding at December 31, 2018 | 1,790 | $ | 38.09 | to | $ | 208.47 | $ | 142.47 | ||||||||||||
Granted | 136 | $ | 183.41 | to | $ | 238.52 | $ | 232.08 | ||||||||||||
Exercised | (239 | ) | $ | 38.09 | to | $ | 208.47 | $ | 108.57 | |||||||||||
|
| |||||||||||||||||||
Outstanding at March 30, 2019 | 1,687 | $ | 61.63 | to | $ | 238.52 | $ | 154.42 | ||||||||||||
|
|
Number of Shares | Exercise Price per Share | Weighted-Average Exercise Price per Share | ||||||||||
Outstanding at December 31, 2019 | 1,455 | $ | 61.63 to $238.52 | $ | 158.61 | |||||||
Granted | 227 | $ | 203.37 to $ | $ | 216.08 | |||||||
Exercised | (81 | ) | $ | 61.63 | $ | 125.76 | ||||||
Canceled | (55 | ) | $ | 128.93 to $ 208.47 | $ | 170.12 | ||||||
Outstanding at March 28, 2020 | 1,546 | $ | 99.47 to $ | $ | 168.25 | |||||||
$235.06.
Shares | Weighted-Average Fair Value per Share | |||||||
Unvested at December 31, 2018 | 304 | $ | 153.31 | |||||
Granted | 78 | $ | 238.52 | |||||
Vested | (102 | ) | $ | 138.48 | ||||
Forfeited | (6 | ) | $ | 158.22 | ||||
|
| |||||||
Unvested at March 30, 2019 | 274 | $ | 182.98 | |||||
|
|
Shares | Weighted-Average Grant Date Fair Value per Share | |||||||
Unvested at December 31, 2019 | 260 | $ | 184.70 | |||||
Granted | 105 | $ | 206.73 | |||||
Vested | (85 | ) | $ | 161.44 | ||||
Forfeited | (11 | ) | $ | 185.65 | ||||
Unvested at March 28, 2020 | 269 | $ | 200.61 | |||||
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
Three Months Ended | ||||||||
Performance Stock Units Issued and Significant Assumptions Used to Estimate Fair Values | March 30, 2019 | March 31, 2018 | ||||||
Performance stock units issued (in thousands) | 12 | 15 | ||||||
Risk-free interest rate | 2.4 | % | 2.0 | % | ||||
Expected life in years | 2.8 | 2.9 | ||||||
Expected volatility | 23.5 | % | 18.0 | % | ||||
Average volatility of peer companies | 26.2 | % | 25.8 | % | ||||
Correlation coefficient | 34.2 | % | 37.4 | % | ||||
Expected dividends | — | — |
Three Months Ended | ||||||||
Performance Stock Units Issued and Significant Assumptions Used to Estimate Fair Values | March 28, 2020 | March 30, 2019 | ||||||
Performance stock units issued (in thousands) | 58 | 12 | ||||||
Risk-free interest rate | 1.3 | % | 2.4 | % | ||||
Expected life in years | 2.9 | 2.8 | ||||||
Expected volatility | 25.1 | % | 23.5 | % | ||||
Average volatility of peer companies | 26.1 | % | 26.2 | % | ||||
Correlation coefficient | 36.6 | % | 34.2 | % | ||||
Expected dividends | — | — |
Shares | Weighted-Average Fair Value per Share | |||||||
Unvested at December 31, 2018 | 100 | $ | 212.34 | |||||
Granted | 12 | $ | 391.21 | |||||
|
| |||||||
Unvested at March 30, 2019 | 112 | $ | 231.50 | |||||
|
|
Shares | Weighted-Average Fair Value per Share | |||||||
Unvested at December 31, 2019 | 105 | $ | 233.11 | |||||
Granted | 58 | $ | 190.45 | |||||
Vested | (37 | ) | $ | 184.51 | ||||
Forfeited | (3 | ) | $ | 281.39 | ||||
Unvested at March 28, 2020 | 123 | $ | 226.44 | |||||
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
Shar
Three Months Ended March 28, 2020 | ||||||||||||
Net Income | Weighted- Average Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
Net income per basic common share | $ | 53,562 | 62,232 | $ | 0.86 | |||||||
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities | — | 394 | — | |||||||||
Net income per diluted common share | $ | 53,562 | 62,626 | $ | 0.86 | |||||||
Three Months Ended March 30, 2019 | ||||||||||||
Net Income | Weighted- Average Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
Net income per basic common share | $ | 108,986 | 71,704 | $ | 1.52 | |||||||
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities | — | 711 | (0.01 | ) | ||||||||
Net income per diluted common share | $ | 108,986 | 72,415 | $ | 1.51 | |||||||
Three Months Ended March 31, 2018 | ||||||||||||
Net Income | Weighted- Average Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
Net income per basic common share | $ | 111,951 | 78,883 | $ | 1.42 | |||||||
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities | — | 832 | (0.02 | ) | ||||||||
|
|
|
|
|
| |||||||
Net income per diluted common share | $ | 111,951 | 79,715 | $ | 1.40 | |||||||
|
|
|
|
|
|
Currency Translation | Unrealized Gain (Loss) on Retirement Plans | Unrealized Gain (Loss) on Investments | Accumulated Other Comprehensive Income (Loss) | |||||||||||||
Balance at December 31, 2018 | $ | (105,697 | ) | $ | (9,869 | ) | $ | (2,405 | ) | $ | (117,971 | ) | ||||
Other comprehensive income, net of tax | 7,522 | 8 | 1,797 | 9,327 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at March 30, 2019 | $ | (98,175 | ) | $ | (9,861 | ) | $ | (608 | ) | $ | (108,644 | ) | ||||
|
|
|
|
|
|
|
|
Currency Translation | Unrealized Gain (Loss) on Retirement Plans | Accumulated Other Comprehensive Loss | ||||||||||
Balance at December 31, 2019 | $ | (104,066 | ) | $ | (15,405 | ) | $ | (119,471 | ) | |||
Other comprehensive income (loss), net of tax | (19,344 | ) | 398 | (18,946 | ) | |||||||
Balance at March 28, 2020 | $ | (123,410 | ) | $ | (15,007 | ) | $ | (138,417 | ) | |||
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
Three Months Ended | ||||||||||||||||||||||||
March 30, 2019 | March 31, 2018 | |||||||||||||||||||||||
U.S. | U.S. Retiree | Non-U.S. | U.S. | U.S. Retiree | Non-U.S. | |||||||||||||||||||
Pension | Healthcare | Pension | Pension | Healthcare | Pension | |||||||||||||||||||
Plans | Plan | Plans | Plans | Plan | Plans | |||||||||||||||||||
Service cost | $ | — | $ | 142 | $ | 1,082 | $ | 142 | $ | 132 | $ | 1,374 | ||||||||||||
Interest cost | 13 | 159 | 434 | 1,619 | 156 | 428 | ||||||||||||||||||
Expected return on plan assets | — | (177 | ) | (543 | ) | (2,785 | ) | (178 | ) | (493 | ) | |||||||||||||
Net amortization: | ||||||||||||||||||||||||
Prior service credit | — | (5 | ) | (37 | ) | — | (8 | ) | (31 | ) | ||||||||||||||
Net actuarial loss | — | — | 135 | 769 | — | 177 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net periodic pension cost (benefit) | $ | 13 | $ | 119 | $ | 1,071 | $ | (255 | ) | $ | 102 | $ | 1,455 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | ||||||||||||||||||||||||
March 28, 2020 | March 30, 2019 | |||||||||||||||||||||||
U.S. | U.S. Retiree | Non-U.S. | U.S. | U.S. Retiree | Non-U.S. | |||||||||||||||||||
Pension | Healthcare | Pension | Pension | Healthcare | Pension | |||||||||||||||||||
Plans | Plan | Plans | Plans | Plan | Plans | |||||||||||||||||||
Service cost | $ | — | $ | 151 | $ | 1,099 | $ | — | $ | 142 | $ | 1,082 | ||||||||||||
Interest cost | — | 176 | 345 | 13 | 159 | 434 | ||||||||||||||||||
Expected return on plan assets | — | (219 | ) | (456 | ) | — | (177 | ) | (543 | ) | ||||||||||||||
Net amortization: | ||||||||||||||||||||||||
Prior service credit | — | (5 | ) | (40 | ) | — | (5 | ) | (37 | ) | ||||||||||||||
Net actuarial loss | — | — | 385 | — | — | 135 | ||||||||||||||||||
Net periodic pension cost | $ | — | $ | 103 | $ | 1,333 | $ | 13 | $ | 119 | $ | 1,071 | ||||||||||||
Plan.
Three Months Ended | ||||||||
March 30, 2019 | March 31, 2018 | |||||||
Product net sales: | ||||||||
Waters instrument systems | $ | 184,612 | $ | 198,103 | ||||
Chemistry consumables | 99,253 | 98,710 | ||||||
TA instrument systems | 36,638 | 42,304 | ||||||
|
|
|
| |||||
Total product sales | 320,503 | 339,117 | ||||||
Service net sales: | ||||||||
Waters service | 176,049 | 174,333 | ||||||
TA service | 17,310 | 17,220 | ||||||
|
|
|
| |||||
Total service sales | 193,359 | 191,553 | ||||||
|
|
|
| |||||
|
|
|
| |||||
Total net sales | $ | 513,862 | $ | 530,670 | ||||
|
|
|
|
Three Months Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
Product net sales: | ||||||||
Waters instrument systems | $ | 142,829 | $ | 184,612 | ||||
Chemistry consumables | 97,245 | 99,253 | ||||||
TA instrument systems | 34,109 | 36,638 | ||||||
Total product sales | 274,183 | 320,503 | ||||||
Service net sales: | ||||||||
Waters service | 174,137 | 176,049 | ||||||
TA service | 16,619 | 17,310 | ||||||
Total service sales | 190,756 | 193,359 | ||||||
Total net sales | $ | 464,939 | $ | 513,862 | ||||
Three Months Ended | ||||||||
March 30, 2019 | March 31, 2018 | |||||||
Net Sales: | ||||||||
Asia: | ||||||||
China | $ | 90,091 | $ | 93,828 | ||||
Japan | 43,504 | 42,765 | ||||||
Asia Other | 66,917 | 63,687 | ||||||
|
|
|
| |||||
Total Asia | 200,512 | 200,280 | ||||||
Americas: | ||||||||
United States | 149,157 | 146,821 | ||||||
Americas Other | 32,711 | 34,889 | ||||||
|
|
|
| |||||
Total Americas | 181,868 | 181,710 | ||||||
Europe | 131,482 | 148,680 | ||||||
|
|
|
| |||||
Total net sales | $ | 513,862 | $ | 530,670 | ||||
|
|
|
|
Three Months Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
Net Sales: | ||||||||
Asia: | ||||||||
China | $ | 47,231 | $ | 90,091 | ||||
Japan | 45,089 | 43,504 | ||||||
Asia Other | 66,760 | 66,917 | ||||||
Total Asia | 159,080 | 200,512 | ||||||
Americas: | ||||||||
United States | 143,898 | 149,157 | ||||||
Americas Other | 28,278 | 32,711 | ||||||
Total Americas | 172,176 | 181,868 | ||||||
Europe | 133,683 | 131,482 | ||||||
Total net sales | $ | 464,939 | $ | 513,862 | ||||
Three Months Ended | ||||||||
March 30, 2019 | March 31, 2018 | |||||||
Pharmaceutical | $ | 294,512 | $ | 305,328 | ||||
Industrial | 155,218 | 162,330 | ||||||
Academic and governmental | 64,132 | 63,012 | ||||||
|
|
|
| |||||
Total net sales | $ | 513,862 | $ | 530,670 | ||||
|
|
|
|
Three Months Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
Pharmaceutical | $ | 272,563 | $ | 294,512 | ||||
Industrial | 143,354 | 155,218 | ||||||
Academic and governmental | 49,022 | 64,132 | ||||||
Total net sales | $ | 464,939 | $ | 513,862 | ||||
Three Months Ended | ||||||||
March 30, 2019 | March 31, 2018 | |||||||
Net sales recognized at a point in time: | ||||||||
Instrument systems | $ | 221,250 | $ | 240,407 | ||||
Chemistry consumables | 99,253 | 98,710 | ||||||
Service sales recognized at a point in time (time & materials) | 72,759 | 72,518 | ||||||
|
|
|
| |||||
Total net sales recognized at a point in time | 393,262 | 411,635 | ||||||
Net sales recognized over time: | ||||||||
Service and software sales recognized over time (contracts) | 120,600 | 119,035 | ||||||
|
|
|
| |||||
Total net sales | $ | 513,862 | $ | 530,670 | ||||
|
|
|
|
Three Months Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
Net sales recognized at a point in time: | ||||||||
Instrument systems | $ | 176,938 | $ | 221,250 | ||||
Chemistry consumables | 97,245 | 99,253 | ||||||
Service sales recognized at a point in time (time & materials) | 67,742 | 72,759 | ||||||
Total net sales recognized at a point in time | 341,925 | 393,262 | ||||||
Net sales recognized over time: | ||||||||
Service and software sales recognized over time (contracts) | 123,014 | 120,600 | ||||||
Total net sales | $ | 464,939 | $ | 513,862 | ||||
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 requires lessees to present the assets and liabilities that arise from leases on their balance sheets. This guidance was effective for annual and interim reporting periods beginning after December 15, 2018. The Company has adopted this standard using a modified retrospective transition approach to be applied to leases existing as of, or entered into after, January 1, 2019. The adoption of this standard did have a material effect on the Company’s balance sheet by recording aright-of-use lease asset and lease liabilities in the amount $100 million as of January 1, 2019; however, it did not have a material impact on the Company’s results of operations, cash flows and retained earnings.
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 was shortened to end at the earliest call date. This guidance was effective for annual and interim periods beginning after December 15, 2018. The Company adopted this standard as of January 1, 2019 and the adoption of this standard did not have a material impact on the Company’s financial position, results of operations and cash flows.
In February 2018, accounting guidance was issued to address the impact of the 2017 Tax Act on items recorded in accumulated other comprehensive income. Current accounting guidance requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect recorded in income from continuing operations, even if the related tax effects were originally recognized in other comprehensive income, the new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the 2017 Tax Act. This guidance was effective for annual and interim periods beginning after December 15, 2018. The Company adopted this standard as of January 1, 2019 and the adoption of this standard did not have a material impact on the Company’s financial position, results of operations and cash flows.
Recently Issued Accounting Standards
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)
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. This guidance is effective for annual and interim periods beginning after December 15, 2019. On January 1, 2020 the Company adopted this new standard using a modified retrospective method for all financial assets measured at amortized cost which only impacted the Company’s allowance on trade accounts receivable. The Company currently doesdid not expect thathave any significant
Three Months Ended | ||||||||||||
March 30, 2019 | March 31, 2018 | % change | ||||||||||
Revenues: | ||||||||||||
Product sales | $ | 320,503 | $ | 339,117 | (5 | %) | ||||||
Service sales | 193,359 | 191,553 | 1 | % | ||||||||
|
|
|
|
|
| |||||||
Total net sales | 513,862 | 530,670 | (3 | %) | ||||||||
Costs and operating expenses: | ||||||||||||
Cost of sales | 221,031 | 221,421 | — | |||||||||
Selling and administrative expenses | 134,339 | 130,407 | 3 | % | ||||||||
Research and development expenses | 35,060 | 34,480 | 2 | % | ||||||||
Purchased intangibles amortization | 2,281 | 1,659 | 37 | % | ||||||||
Litigation settlement | — | (1,672 | ) | 100 | % | |||||||
|
|
|
|
|
| |||||||
Operating income | 121,151 | 144,375 | (16 | %) | ||||||||
Operating income as a % of sales | 23.6 | % | 27.2 | % | ||||||||
Other (expense) income | (525 | ) | 346 | (252 | %) | |||||||
Interest expense, net | (3,248 | ) | (4,172 | ) | (22 | %) | ||||||
|
|
|
|
|
| |||||||
Income before income taxes | 117,378 | 140,549 | (16 | %) | ||||||||
Provision for income taxes | 8,392 | 28,598 | (71 | %) | ||||||||
|
|
|
|
|
| |||||||
Net income | $ | 108,986 | $ | 111,951 | (3 | %) | ||||||
|
|
|
|
|
| |||||||
Net income per diluted common share | $ | 1.51 | $ | 1.40 | 8 | % |
Three Months Ended | ||||||||||||
March 28, 2020 | March 30, 2019 | % change | ||||||||||
Revenues: | ||||||||||||
Product sales | $ | 274,183 | $ | 320,503 | (14 | %) | ||||||
Service sales | 190,756 | 193,359 | (1 | %) | ||||||||
Total net sales | 464,939 | 513,862 | (10 | %) | ||||||||
Costs and operating expenses: | ||||||||||||
Cost of sales | 210,644 | 221,031 | (5 | %) | ||||||||
Selling and administrative expenses | 147,735 | 134,339 | 10 | % | ||||||||
Research and development expenses | 34,989 | 35,060 | — | |||||||||
Purchased intangibles amortization | 2,625 | 2,281 | 15 | % | ||||||||
Litigation settlement | 666 | — | — | |||||||||
Operating income | 68,280 | 121,151 | (44 | %) | ||||||||
Operating income as a % of sales | 14.7 | % | 23.6 | % | ||||||||
Other expense | (374 | ) | (525 | ) | 29 | % | ||||||
Interest expense, net | (10,043 | ) | (3,248 | ) | 209 | % | ||||||
Income before income taxes | 57,863 | 117,378 | (51 | %) | ||||||||
Provision for income taxes | 4,301 | 8,392 | (49 | %) | ||||||||
Net income | $ | 53,562 | $ | 108,986 | (51 | %) | ||||||
Net income per diluted common share | $ | 0.86 | $ | 1.51 | (43 | %) |
2019.
During the first quarter of 2019,2020, sales to pharmaceutical customers declined 4%7%, primarily due to the disruption in business activities caused by
academic customers are highly dependent on when institutions receive funding to purchase our instrument systems and, as such, sales can vary significantly from period to period.
Due to the uncertain business conditions caused the
profits, the Company suspended its share repurchases due to the uncertain business conditions caused by the
Three Months Ended | ||||||||||||
March 30, 2019 | March 31, 2018 | % change | ||||||||||
Net Sales: | ||||||||||||
Asia: | ||||||||||||
China | $ | 90,091 | $ | 93,828 | (4 | %) | ||||||
Japan | 43,504 | 42,765 | 2 | % | ||||||||
Asia Other | 66,917 | 63,687 | 5 | % | ||||||||
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Total Asia | 200,512 | 200,280 | — | |||||||||
Americas: | ||||||||||||
United States | 149,157 | 146,821 | 2 | % | ||||||||
Americas Other | 32,711 | 34,889 | (6 | %) | ||||||||
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Total Americas | 181,868 | 181,710 | — | |||||||||
Europe | 131,482 | 148,680 | (12 | %) | ||||||||
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| |||||||
Total net sales | $ | 513,862 | $ | 530,670 | (3 | %) | ||||||
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Three Months Ended | ||||||||||||
March 28, 2020 | March 30, 2019 | % change | ||||||||||
Net Sales: | ||||||||||||
Asia: | ||||||||||||
China | $ | 47,231 | $ | 90,091 | (48 | %) | ||||||
Japan | 45,089 | 43,504 | 4 | % | ||||||||
Asia Other | 66,760 | 66,917 | — | |||||||||
Total Asia | 159,080 | 200,512 | (21 | %) | ||||||||
Americas: | ||||||||||||
United States | 143,898 | 149,157 | (4 | %) | ||||||||
Americas Other | 28,278 | 32,711 | (14 | %) | ||||||||
Total Americas | 172,176 | 181,868 | (5 | %) | ||||||||
Europe | 133,683 | 131,482 | 2 | % | ||||||||
Total net sales | $ | 464,939 | $ | 513,862 | (10 | %) | ||||||
driven by service revenues and sales to pharmaceutical and academic and governmental customers. Sales in Asia Other were driven by TA products and services, despite a 3%2% decrease due to the effect of foreign currency translation. Sales in the rest of Asia were driven by service revenues andLC-MS instrument systems, primarily to pharmaceutical customers. Sales growthdeclines in the U.S. was driven by recurring revenues and sales to industrial, academic and governmental customers. Sales declines in the rest of the Americas were broad-based across all major product and customer classes primarily in South America. The sales declinedue the global spread of the
Three Months Ended | ||||||||||||
March 30, 2019 | March 31, 2018 | % change | ||||||||||
Pharmaceutical | $ | 294,512 | $ | 305,328 | (4 | %) | ||||||
Industrial | 155,218 | 162,330 | (4 | %) | ||||||||
Academic and governmental | 64,132 | 63,012 | 2 | % | ||||||||
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Total net sales | $ | 513,862 | $ | 530,670 | (3 | %) | ||||||
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Three Months Ended | ||||||||||||
March 28, 2020 | March 30, 2019 | % change | ||||||||||
Pharmaceutical | $ | 272,563 | $ | 294,512 | (7 | %) | ||||||
Industrial | 143,354 | 155,218 | (8 | %) | ||||||||
Academic and governmental | 49,022 | 64,132 | (24 | %) | ||||||||
Total net sales | $ | 464,939 | $ | 513,862 | (10 | %) | ||||||
Three Months Ended | ||||||||||||||||||||
March 30, 2019 | % of Total | March 31, 2018 | % of Total | % change | ||||||||||||||||
Waters instrument systems | $ | 184,612 | 40 | % | $ | 198,103 | 42 | % | (7 | %) | ||||||||||
Chemistry consumables | 99,253 | 22 | % | 98,710 | 21 | % | 1 | % | ||||||||||||
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Total Waters product sales | 283,865 | 62 | % | 296,813 | 63 | % | (4 | %) | ||||||||||||
Waters service | 176,049 | 38 | % | 174,333 | 37 | % | 1 | % | ||||||||||||
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| |||||||||||
Total Waters net sales | $ | 459,914 | 100 | % | $ | 471,146 | 100 | % | (2 | %) | ||||||||||
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Three Months Ended | ||||||||||||||||||||
March 28, 2020 | % of Total | March 30, 2019 | % of Total | % change | ||||||||||||||||
Waters instrument systems | $ | 142,829 | 34 | % | $ | 184,612 | 40 | % | (23 | %) | ||||||||||
Chemistry consumables | 97,245 | 24 | % | 99,253 | 22 | % | (2 | %) | ||||||||||||
Total Waters product sales | 240,074 | 58 | % | 283,865 | 62 | % | (15 | %) | ||||||||||||
Waters service | 174,137 | 42 | % | 176,049 | 38 | % | (1 | %) | ||||||||||||
Total Waters net sales | $ | 414,211 | 100 | % | $ | 459,914 | 100 | % | (10 | %) | ||||||||||
the
Three Months Ended | ||||||||||||||||||||
March 30, 2019 | % of Total | March 31, 2018 | % of Total | % change | ||||||||||||||||
TA instrument systems | $ | 36,638 | 68 | % | $ | 42,304 | 71 | % | (13 | %) | ||||||||||
TA service | 17,310 | 32 | % | 17,220 | 29 | % | 1 | % | ||||||||||||
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| |||||||||||
Total TA net sales | $ | 53,948 | 100 | % | $ | 59,524 | 100 | % | (9 | %) | ||||||||||
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Three Months Ended | ||||||||||||||||||||
March 28, 2020 | % of Total | March 30, 2019 | % of Total | % change | ||||||||||||||||
TA instrument systems | $ | 34,109 | 67 | % | $ | 36,638 | 68 | % | (7 | %) | ||||||||||
TA service | 16,619 | 33 | % | 17,310 | 32 | % | (4 | %) | ||||||||||||
Total TA net sales | $ | 50,728 | 100 | % | $ | 53,948 | 100 | % | (6 | %) | ||||||||||
2020.
impact from
2020. To date the Company has not had significant issues with its supply chain; however, the prolonged impact of
2020.
the $18 million of
Litigation Settlement
In the second quarter of 2017, the Company incurred an $11 million litigation provision related to the issuance of a verdict in a patent litigation case. In the first quarter of 2018, the Company resolved the case with a final settlement that resulted in a gain of $2 million.
quarter.
arewere 21%, 12.5%, 19% and 17%, respectively, as of March 30, 2019.28, 2020. The Company has a contractual tax rate of 0% on qualifying activities in Singapore through March 2021, based upon the achievement of certain contractual milestones, which the Company expects to continue to meet. The effect of applying the contractual tax rate rather than the statutory tax rate to income from qualifying activities in Singapore increased the Company’s net income for the quarter in 2020 and 2019 and 2018 by $4$2 million and $6$4 million, respectively, and increased the Company’s net income per diluted share by $0.04 and $0.06, and $0.07, respectively.20192020 and 20182019 quarters was 7.1%7.4% and 20.3%7.1%, respectively. The income tax provision includesincluded a $7$2 million and $6$7 million income tax benefit related to stock-based compensation for the three months ended March 30,first quarter of 2020 and 2019, and March 31, 2018, respectively. The effective tax rate for the 2020 quarter included a $4 million income tax benefit related to certain restructuring charges. This income tax benefit decreased the effective tax rate by 7.1 percentage points for the 2020 quarter. The effective tax rate for the 2019 quarter includes a $3 million income tax benefit related to the finalization of certain regulations relating to the Tax Cuts and Jobs Act (the “2017 Tax Act”). This income tax benefit decreased the effective tax rate by 2.9 percentage points for the 2019 quarter. The effective tax rate for the 2018 quarter includes $12 million of additional income tax expense related to the change in foreign currency exchange rates on the earnings taxed in December 2017 under the toll charge of the 2017 Tax Act. This additional income tax expense increased the effective tax rate by 8.9 percentage points for the 2018 quarter. The remaining differences between the effective tax rates can primarily be attributed to differences in the proportionate amounts of
Three Months Ended | ||||||||
March 30, 2019 | March 31, 2018 | |||||||
Net income | $ | 108,986 | $ | 111,951 | ||||
Depreciation and amortization | 24,764 | 28,640 | ||||||
Stock-based compensation | 9,941 | 9,892 | ||||||
Deferred income taxes | 1,442 | 1,071 | ||||||
Change in accounts receivable | 59,331 | 40,588 | ||||||
Change in inventories | (44,438 | ) | (28,101 | ) | ||||
Change in accounts payable and other current liabilities | (33,485 | ) | (34,258 | ) | ||||
Change in deferred revenue and customer advances | 57,539 | 45,096 | ||||||
Effect of the 2017 Tax Act | (3,229 | ) | 12,450 | |||||
Other changes | (5,072 | ) | (11,488 | ) | ||||
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| |||||
Net cash provided by operating activities | 175,779 | 175,841 | ||||||
Net cash provided by investing activities | 434,039 | 895,839 | ||||||
Net cash used in financing activities | (723,134 | ) | (1,006,065 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 2,006 | 8,588 | ||||||
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| |||||
(Decrease) increase in cash and cash equivalents | $ | (111,310 | ) | $ | 74,203 | |||
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|
|
Three Months Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
Net income | $ | 53,562 | $ | 108,986 | ||||
Depreciation and amortization | 29,188 | 24,764 | ||||||
Stock-based compensation | 9,196 | 9,941 | ||||||
Deferred income taxes | (2,525 | ) | 1,442 | |||||
Change in accounts receivable | 54,026 | 59,331 | ||||||
Change in inventories | (29,399 | ) | (44,438 | ) | ||||
Change in accounts payable and other current liabilities | (15,825 | ) | (33,485 | ) | ||||
Change in deferred revenue and customer advances | 46,465 | 57,539 | ||||||
Effect of the 2017 Tax Cuts & Jobs Act | — | (3,229 | ) | |||||
Other changes | 6,947 | (5,072 | ) | |||||
Net cash provided by operating activities | 151,635 | 175,779 | ||||||
Net cash (used in) provided by investing activities | (130,175 | ) | 434,039 | |||||
Net cash provided by (used in) financing activities | 32,918 | (723,134 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (32 | ) | 2,006 | |||||
Increase (decrease) in cash and cash equivalents | $ | 54,346 | $ | (111,310 | ) | |||
of 2020. Due to the uncertain business conditions caused by the COVID-19 pandemic, the Company currently plans to temporarily slow down the completions of the remaining construction and buildout of this Facility.”
repurchase activity in 2019 as compared to 2018 and intends to use existing cash and investments, cash flows from operations and, as needed, borrowings under its existing credit facilities to fund its repurchases under its share repurchase program.
Management believes,COVID-19 on our business, as of the date of this report, that the Company’s financial position, 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. The Company has conducted apost-tax reform evaluation
28, 2020.
Risks related to the effects of the
Assuming a hypothetical adverse change of 10% in30, 201928, 2020 would decrease by approximately $26$18 million, of which the majority would be recorded to foreign currency translation in other comprehensive income within stockholders’ (deficit) equity.
Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs (2) | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs (2) | ||||||||||||
January 1, 2020 to January 25, 2020 | 205 | $ | 234.58 | 205 | $ | 1,643,655 | ||||||||||
January 26, 2020 to February 22, 2020 | 276 | $ | 221.89 | 257 | $ | 1,586,524 | ||||||||||
February 23, 2020 to March 28, 2020 | 347 | $ | 192.78 | 321 | $ | 1,524,905 | ||||||||||
Total | 828 | $ | 212.83 | 783 | $ | 1,524,905 | ||||||||||
Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs (2) | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs (2) | ||||||||||||||
January 1, 2019 to January 26, 2019 | 923 | $ | 196.31 | 923 | $ | 3,968,621 | ||||||||||||
January 27, 2019 to February 23, 2019 | 1,085 | $ | 232.20 | 1,059 | $ | 3,722,869 | ||||||||||||
February 24, 2019 to March 30, 2019 | 1,324 | $ | 243.34 | 1,316 | $ | 3,402,436 | ||||||||||||
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Total | 3,332 | $ | 226.68 | 3,298 | $ | 3,402,436 | ||||||||||||
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|
(1) | The Company repurchased |
(2) | 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 |
| ||||
Exhibit Number | Description of Document | |||
| ||||
31.1 | ||||
| ||||
31.2 | ||||
| ||||
32.1 | ||||
| ||||
32.2 | ||||
101 | The following materials from Waters Corporation’s Quarterly Report on Form 10-Q for the quarter ended March | |||
104 | Cover Page Interactive Date File (formatted in iXBRL and contained in Exhibit 101). |
(*) | This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any filing, except to the extent the Company specifically incorporates it by reference. |
Waters Corporation | ||
/s/ Sherry L. Buck | ||
Sherry L. Buck | ||
Senior Vice President and | ||
Chief Financial Officer |
41