UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July ~~3, 2021~~2, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number:

01-14010

Waters Corporation

(Exact name of registrant as specified in its charter)


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

34 Maple Street

Milford, Massachusetts 01757

(Address, including zip code, of principal executive offices)

(

~~508)~~

(508) 478-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading ~~Trading~~ Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	WAT	New York Stock Exchange, Inc.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes

☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in

Rule 12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in

Rule 12b-2

of the Act). Yes ☐

☒

Indicate the number of shares outstanding of the registrant’s common stock as of July ~~30, 2021:~~ 29, 2022: 59,875,919

~~61,363,399~~

Table of Contents

WATERS CORPORATION AND SUBSIDIARIES

QUARTERLY REPORT ON FORM

10-Q

INDEX


		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets (unaudited) as of July ~~3, 2021~~2, 2022 and December 31, ~~2020~~2021		3
	Consolidated Statements of Operations (unaudited) for the three months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~		4
	Consolidated Statements of Operations (unaudited) for the six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~		5
	Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~		6
	Consolidated Statements of Cash Flows (unaudited) for the six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~		7
	Consolidated Statements of Stockholders’ Equity ~~(Deficit)~~ (unaudited) for the three months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~		8
	Consolidated Statements of Stockholders’ Equity ~~(Deficit)~~ (unaudited) for the six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~		9
	Condensed Notes to Consolidated Financial Statements (unaudited)		10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		3028
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		4139
Item 4.	Controls and Procedures		4139

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		4240
Item 1A.	Risk Factors		4240
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		4240
Item 6.	Exhibits		4 3 41
	Signature		4 4 42

Table of Contents

Item 1:

Financial Statements

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)

July 3, 2021

December 31, 2020


(In thousands, except per share data)

ASSETS

Current assets:

Cash and cash equivalents
   $ 460,056 $ 436,695
Investments
   203,566 6,451
Accounts receivable, net
   543,072 573,316
Inventories
   348,770 304,281
Other current assets
   83,086 80,290


Total current assets
   1,638,550 1,401,033
Property, plant and equipment, net
   527,135 494,003
Intangible assets, net
   246,836 258,645
Goodwill
   439,826 444,362
Operating lease assets
   88,871 93,252
Other assets
   162,429 148,625


Total assets
   $ 3,103,647 $ 2,839,920


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Notes payable and debt
   $ 0   $ 150,000
Accounts payable
   83,249 72,212
Accrued employee compensation
   48,282 72,166
Deferred revenue and customer advances
   284,765 198,240
Current operating lease liabilities
   27,583 27,764
Accrued income taxes
   52,583 76,558
Accrued warranty
   10,810 10,950
Other current liabilities
   173,746 197,093


Total current liabilities
   681,018 804,983
Long-term liabilities:

Long-term debt
   1,603,367 1,206,515
Long-term portion of retirement benefits
   74,794 72,620
Long-term income tax liabilities
   319,121 357,493
Long-term operating lease liabilities
   61,404 68,197
Other long-term liabilities
   95,670 97,968


Total long-term liabilities
   2,154,356 1,802,793


Total liabilities
   2,835,374 2,607,776

Commitments and contingencies (Notes 6, 7 and 11)
   0 0

Stockholders’ equity:

Preferred stock, par value $0.01 per share, 5,000 shares authorized, 0ne issued at July 3, 2021 and December 31, 2020
   0   0—
Common stock, par value $0.01 per share, 400,000 shares authorized, 162,017 and 161,666 shares issued, 61,481 and 62,309 shares outstanding at July 3, 2021
and December 31, 2020, respectively
   1,620 1,617
Additional
paid-in
capital
   2,090,052 2,029,465
Retained earnings
   7,423,408 7,107,989
Treasury stock, at cost, 100,536 and 99,357 shares at July 3, 2021 and December 31, 2020, respectively
   (9,135,628 ) (8,788,984 )
Accumulated other comprehensive loss
   (111,179 ) (117,943 )


Total stockholders’ equity
   268,273 232,144


Total liabilities and stockholders’ equity
   $ 3,103,647 $ 2,839,920


		July 2, 2022				December 31, 2021

		(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents		$	418,897			$	501,234
Investments			897				68,051
Accounts receivable, net			639,451				612,648
Inventories			409,922				356,095
Other current assets			95,160				90,914

Total current assets			1,564,327				1,628,942
Property, plant and equipment, net			545,813				547,913
Intangible assets, net			225,101				242,401
Goodwill			428,005				437,865
Operating lease assets			86,102				84,734
Other assets			191,222				153,077

Total assets		$	3,040,570			$	3,094,932

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and debt		$	50,000			$	—
Accounts payable			97,980				96,799
Accrued employee compensation			44,956				101,192
Deferred revenue and customer advances			282,342				227,561
Current operating lease liabilities			25,199				27,906
Accrued income taxes			104,982				61,278
Accrued warranty			10,156				10,718
Other current liabilities			130,948				155,054

Total current liabilities			746,563				680,508
Long-term liabilities:
Long-term debt			1,434,374				1,513,870
Long-term portion of retirement benefits			51,675				64,027
Long-term income tax liabilities			247,950				319,547
Long-term operating lease liabilities			60,579				59,623
Other long-term liabilities			107,305				89,803

Total long-term liabilities			1,901,883				2,046,870

Total liabilities			2,648,446				2,727,378
Commitments and contingencies (Notes 6, 7, 8 and 1 2 )	0				0
Stockholders’ equity:
Preferred stock, par value $0.01 per share, 5,000 shares authorized, NaN issued at July 2, 2022 and December 31, 2021			—				—
Common stock, par value $0.01 per share, 400,000 shares authorized, 162,348 and 162,084 shares issued, 59,988 and 60,728 shares outstanding at July 2, 2022 and December 31, 2021, respectively			1,623				1,621
Additional paid-in capital			2,166,221				2,114,880
Retained earnings			8,125,527				7,800,832
Treasury stock, at cost, 102,360 and 101,356 shares at July 2, 2022 and December 31, 2021, respectively			(9,759,858	)			(9,437,914	)
Accumulated other comprehensive loss			(141,389	)			(111,865	)

Total stockholders’ equity			392,124				367,554

Total liabilities and stockholders’ equity		$	3,040,570			$	3,094,932

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

Table of Contents

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

Three Months Ended


July 3, 2021

June 27, 2020


(In thousands, except per share data)

Revenues:

Product sales
   $ 440,955 $ 314,920

Service sales
   240,692 205,064


Total net sales
   681,647 519,984

Costs and operating expenses:

Cost of product sales
   176,745 134,802

Cost of service sales
   103,509 78,332

Selling and administrative expenses
   158,213 117,449

Research and development expenses
   44,949 31,155

Purchased intangibles amortization
   1,809 2,618

Litigation provision
   0   514


Total costs and operating expenses
   485,225 364,870


Operating income
   196,422 155,114

Other income (expense)
   9,321 (736 )

Interest expense
   (12,027 ) (13,018 )

Interest income
   3,698 4,003


Income before income taxes
   197,414 145,363

Provision for income taxes
   30,122 22,434


Net income
   $ 167,292 $ 122,929


Net income per basic common share
   $ 2.71 $ 1.98

Weighted-average number of basic common shares
   61,685 61,944

Net income per diluted common share
   $ 2.69 $ 1.98

Weighted-average number of diluted common shares and equivalents
   62,157 62,184


	Three Months Ended
	July 2, 2022			July 3, 2021

	(In thousands, except per share data)

Revenues:
Product sales	$	469,630		$	440,955
Service sales		244,689			240,692

Total net sales		714,319			681,647
Costs and operating expenses:
Cost of product sales		202,356			176,745
Cost of service sales		104,850			103,509
Selling and administrative expenses		161,877			158,213
Research and development expenses		44,006			44,949
Purchased intangibles amortization		1,598			1,809

Total costs and operating expenses		514,687			485,225

Operating income		199,632			196,422
Other income, net		1,535			9,321
Interest expense		(11,419	)		(12,027	)
Interest income		2,526			3,698

Income before income taxes		192,274			197,414
Provision for income taxes		27,410			30,122

Net income	$	164,864		$	167,292

Net income per basic common share	$	2.74		$	2.71
Weighted-average number of basic common shares		60,206			61,685
Net income per diluted common share	$	2.72		$	2.69
Weighted-average number of diluted common shares and equivalents		60,510			62,157

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

Table of Contents

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

Six Months Ended


July 3, 2021

June 27, 2020


(In thousands, except per share data)

Revenues:

Product sales
   $ 822,977 $ 589,103

Service sales
   467,215 395,820


Total net sales
   1,290,192 984,923

Costs and operating expenses:

Cost of product sales
   335,621 254,641

Cost of service sales
   198,780 169,137

Selling and administrative expenses
   301,409 265,184

Research and development expenses
   83,041 66,144

Purchased intangibles amortization
   3,649 5,243

Litigation provision
   0   1,180


Total costs and operating expenses
   922,500 761,529


Operating income
   367,692 223,394

Other income (expense), net
   18,680 (1,110 )

Interest expense
   (22,973 ) (27,097 )

Interest income
   7,799 8,039


Income before income taxes
   371,198 203,226

Provision for income taxes
   55,779 26,735


Net income
   $ 315,419 $ 176,491


Net income per basic common share
   $ 5.09 $ 2.84

Weighted-average number of basic common shares
   61,979 62,085

Net income per diluted common share
   $ 5.05 $ 2.83

Weighted-average number of diluted common shares and equivalents
   62,435 62,404


	Six Months Ended
	July 2, 2022			July 3, 2021

	(In thousands, except per share data)

Revenues:
Product sales	$	920,470		$	822,977
Service sales		484,421			467,215

Total net sales		1,404,891			1,290,192
Costs and operating expenses:
Cost of product sales		393,966			335,621
Cost of service sales		198,925			198,780
Selling and administrative expenses		319,352			301,409
Research and development expenses		84,478			83,041
Purchased intangibles amortization		3,271			3,649
Acquired in-process research and development		9,797			—

Total costs and operating expenses		1,009,789			922,500

Operating income		395,102			367,692
Other income, net		1,705			18,680
Interest expense		(22,478	)		(22,973	)
Interest income		4,640			7,799

Income before income taxes		378,969			371,198
Provision for income taxes		54,274			55,779

Net income	$	324,695		$	315,419

Net income per basic common share	$	5.38		$	5.09
Weighted-average number of basic common shares		60,399			61,979
Net income per diluted common share	$	5.35		$	5.05
Weighted-average number of diluted common shares and equivalents		60,744			62,435

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

Table of Contents

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

Three Months Ended

Six Months Ended


July 3,

2021

June 27,

2020

July 3,

2021

June 27,

2020


(In thousands)

(In thousands)

Net income
   $ 167,292 $ 122,929 $ 315,419 $ 176,491

Other comprehensive income (loss):


Foreign currency translation
   (9 ) 11,587 5,816 (7,757 )

Unrealized losses on investments before income taxes
   (5 ) 0   (15 ) 0


Unrealized losses on investments, net of tax
   (5 ) 0   (15 ) 0

Retirement liability adjustment before reclassifications
   (260 ) (522 ) 794 (226 )
Amounts reclassified to other income
   218 336 434 676


Retirement liability adjustment before income taxes
   (42 ) (186 ) 1,228 450
Income tax benefit (expense)
   83 126 (265 ) (112 )


Retirement liability adjustment, net of tax
   41 (60 ) 963 338

Other comprehensive income (loss)
   27 11,527 6,764 (7,419 )


Comprehensive income
   $ 167,319 $ 134,456 $ 322,183 $ 169,072


	Three Months Ended						Six Months Ended
	July 2, 2022			July 3, 2021			July 2, 2022			July 3, 2021

	(In thousands)						(In thousands)


Net income	$	164,864		$	167,292		$	324,695		$	315,419
Other comprehensive (loss) income:
Foreign currency translation		(24,307	)		(9	)		(30,476	)		5,816
Unrealized gains (losses) on investments before income taxes		11			(5	)		26			(15	)
Income tax expense		(2	)		—			(6	)		—

Unrealized gains (losses) on investments, net of tax		9			(5	)		20			(15	)
Retirement liability adjustment before reclassifications		720			(260	)		988			794
Amounts reclassified to other income, net		120			218			247			434

Retirement liability adjustment before income taxes		840			(42	)		1,235			1,228
Income tax (expense) benefit		(206	)		83			(303	)		(265	)

Retirement liability adjustment, net of tax		634			41			932			963
Other comprehensive (loss) income		(23,664	)		27			(29,524	)		6,764

Comprehensive income	$	141,200		$	167,319		$	295,171		$	322,183

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

(unaudited)

Six Months Ended


July 3, 2021

June 27, 2020


(In thousands)

Cash flows from operating activities:

Net income
   $ 315,419 $ 176,491
Adjustments to reconcile net income to net cash provided by operating activities:

Stock-based compensation
   15,596 18,122
Deferred income taxes
   6,107 (777 )
Depreciation
   34,891 33,220
Amortization of intangibles
   29,852 26,983
Change in operating assets and liabilities:

Decrease in accounts receivable
   18,985 86,978
Increase in inventories
   (50,873 ) (27,089 )
Increase in other current assets
   (10,600 ) (14,699 )
(Increase) decrease in other assets
   (9,263 ) 8,238
(Decrease) increase in accounts payable and other current liabilities
   (35,328 ) 34,714
Increase in deferred revenue and customer advances
   91,631 37,558
Decrease in other liabilities
   (44,973 ) (29,293 )


Net cash provided by operating activities
   361,444 350,446
Cash flows from investing activities:

Additions to property, plant, equipment and software capitalization
   (76,889 ) (97,029 )
Business acquisitions, net of cash acquired
   0   (76,664 )
Investment in unaffiliated companies
   0   (3,350 )
Payments for intellectual property licenses
   (7,000 ) —
Purchases of investments
   (215,140 ) (16,828 )
Maturities and sales of investments
   17,923 1,536


Net cash used in investing activities
   (281,106 ) (192,335 )
Cash flows from financing activities:

Proceeds from debt issuances
   500,000 315,000
Payments on debt
   (250,000 ) (300,366 )
Payments of debt issuance costs
   (3,637 ) 0
Proceeds from stock plans
   45,036 14,739
Purchases of treasury shares
   (341,507 ) (196,297 )
Proceeds from derivative contracts
   1,917 7,558


Net cash used in financing activities
   (48,191 ) (159,366 )
Effect of exchange rate changes on cash and cash equivalents
   (8,786 ) 4,576


Increase in cash and cash equivalents
   23,361 3,321
Cash and cash equivalents at beginning of period
   436,695 335,715


Cash and cash equivalents at end of period
   $ 460,056 $ 339,036


	Six Months Ended
	July 2, 2022			July 3, 2021

	(In thousands)
Cash flows from operating activities:
Net income	$	324,695		$	315,419
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation		20,722			15,596
Deferred income taxes		(12,523	)		6,107
Depreciation		36,956			34,891
Amortization of intangibles		29,935			29,852
Acquired in-process research and development and other non-cash items		7,903			—
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable		(57,377	)		18,985
Increase in inventories		(65,070	)		(50,873	)
Increase in other current assets		(9,199	)		(10,600	)
Increase in other assets		4,658			(9,263	)
Increase (decrease) in accounts payable and other current liabilities		(32,197	)		(35,328	)
Increase in deferred revenue and customer advances		70,027			91,631
Decrease in other liabilities		(63,667	)		(44,973	)

Net cash provided by operating activities		254,863			361,444
Cash flows from investing activities:
Additions to property, plant, equipment and software capitalization		(74,746	)		(76,889	)
Proceeds from sale of equity investment, net		5,646			—
Payments for intellectual property licenses		(4,897	)		(7,000	)
Purchases of investments		(10,959	)		(215,140	)
Maturities and sales of investments		77,553			17,923

Net cash used investing activitie s		(7,403	)		(281,106	)
Cash flows from financing activities:
Proceeds from debt issuances		105,000			500,000
Payments on debt		(135,000	)		(250,000	)
Payments of debt issuance costs		—			(3,637	)
Proceeds from stock plans		30,914			45,036
Purchases of treasury shares		(321,944	)		(341,507	)
Proceeds from derivative contracts		10,849			1,917

Net cash used in financing activities		(310,181	)		(48,191	)
Effect of exchange rate changes on cash and cash equivalents		(19,616	)		(8,786	)

(Decrease) increase in cash and cash equivalents		(82,337	)		23,361
Cash and cash equivalents at beginning of period		501,234			436,695

Cash and cash equivalents at end of period	$	418,897		$	460,056

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

Table of Contents

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY ~~(DEFICIT)~~

(unaudited, in thousands)

Number

of

Common

Shares

Common

Stock

Additional
Paid-In

Capital

Retained

Earnings

Treasury

Stock

Accumulated

Other

Comprehensive

Loss

Total
Stockholders’
Deficit

Balance March 28, 2020
   161,253    $ 1,613    $ 1,947,626    $ 6,639,980    $ (8,788,801 ) $ (138,417 ) $ (337,999 )
Net income
   —      —      —      122,929    —   —   122,929
Other comprehensive income
   —      —      —      —      —   11,527 11,527
Issuance of common stock for employees:

Employee Stock Purchase Plan
   12    —      2,216    —      —   —   2,216
Stock options exercised
   6    —      779    —      —   —   779
Treasury stock
   —      —      —      —      (71 ) —   (71 )
Stock-based compensation
   2    —      8,877    —      —   —   8,877










Balance June 27, 2020
   161,273    $ 1,613    $ 1,959,498    $ 6,762,909    $ (8,788,872 ) $ (126,890 ) $ (191,742 )


	Number of Common Shares		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity

Balance April 3, 2021		161,859	$	1,619	$	2,054,076	$	7,256,116	$	(8,969,643	)	$	(111,206	)	$	230,962
Net income		—		—		—		167,292		—			—			167,292
Other comprehensive income		—		—		—		—		—			27			27
Issuance of common stock for employees:
Employee Stock Purchase Plan		22		—		5,156		—		—			—			5,156
Stock options exercised		135		1		23,584		—		—			—			23,585
Treasury stock		—		—		—		—		(165,985	)		—			(165,985	)
Stock-based compensation		1		—		7,236		—		—			—			7,236

Balance July 3, 2021		162,017	$	1,620	$	2,090,052	$	7,423,408	$	(9,135,628	)	$	(111,179	)	$	268,273

Number

of

Common

Shares

Common

Stock

Additional

Paid-In

Capital

Retained

Earnings

Treasury

Stock

Accumulated
Other
Comprehensive
Loss

Total
Stockholders’
Equity

Balance April 3, 2021
   161,859    $ 1,619    $ 2,054,076    $ 7,256,116    $ (8,969,643 ) $ (111,206 ) $ 230,962
Net income
   —      —      —      167,292    —   —   167,292
Other comprehensive income
   —      —      —      —      —   27 27
Issuance of common stock for employees:

Employee Stock Purchase Plan
   22    —      5,156    —      —   —   5,156
Stock options exercised
   135    1    23,584    —      —   —   23,585
Treasury stock
   —      —      —      —      (165,985 ) —   (165,985 )
Stock-based compensation
   1       7,236    —      —   —   7,236










Balance July 3, 2021
   162,017    $ 1,620    $ 2,090,052    $ 7,423,408    $ (9,135,628 ) $ (111,179 ) $ 268,273


	Number of Common Shares		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity

Balance April 2, 2022		162,252	$	1,623	$	2,138,426	$	7,960,663	$	(9,608,050	)	$	(117,725	)	$	374,937
Net income		—		—		—		164,864		—			—			164,864
Other comprehensive loss		—		—		—		—		—			(23,664	)		(23,664	)
Issuance of common stock for employees:
Employee Stock Purchase Plan		11		—		3,559		—		—			—			3,559
Stock options exercised		81		—		14,523		—		—			—			14,523
Treasury stock		—		—		—		—		(151,808	)		—			(151,808	)
Stock-based compensation		4		—		9,713		—		—			—			9,713

Balance July 2, 2022		162,348	$	1,623	$	2,166,221	$	8,125,527	$	(9,759,858	)	$	(141,389	)	$	392,124

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

Table of Contents

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY ~~(DEFICIT)~~

(unaudited, in thousands)

Number

of

Common

Shares

Common

Stock

Additional

Paid-In

Capital

Retained

Earnings

Treasury

Stock

Accumulated

Other

Comprehensive

Loss

Total

Stockholders’

Deficit

Balance December 31, 2019
   161,030    $ 1,610    $ 1,926,753    $ 6,587,403 $ (8,612,576 ) $ (119,471 ) $ (216,281 )
Net income
   —      —      —      176,491 —   —   176,491
Adoption of new accounting pronouncement
   —      —      —      (985 ) —   —   (985 )
Other comprehensive loss
   —      —      —      —   —   (7,419 ) (7,419 )
Issuance of common stock for employees:

Employee Stock Purchase Plan
   21    —      3,952    —   —   —   3,952
Stock options exercised
   87    1    10,904    —   —   —   10,905
Treasury stock
   —      —      —      —   (176,296 ) —   (176,296 )
Stock-based compensation
   135    2    17,889    —   —   —   17,891








Balance June 27, 2020
   161,273    $ 1,613    $ 1,959,498    $ 6,762,909 $ (8,788,872 ) $ (126,890 ) $ (191,742 )








��


	Number of Common Shares		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance December 31, 2020		161,666	$	1,617	$	2,029,465	$	7,107,989	$	(8,788,984	)	$	(117,943	)	$	232,144
Net income		—		—		—		315,419		—			—			315,419
Other comprehensive income		—		—		—		—		—			6,764			6,764
Issuance of common stock for employees:
Employee Stock Purchase Plan		32		—		7,011		—		—			—			7,011
Stock options exercised		230		2		38,713		—		—			—			38,715
Treasury stock		—		—		—		—		(346,644	)		—			(346,644	)
Stock-based compensation		89		1		14,863		—		—			—			14,864

Balance July 3, 2021		162,017	$	1,620	$	2,090,052	$	7,423,408	$	(9,135,628	)	$	(111,179	)	$	268,273

Number

of

Common

Shares

Common

Stock

Additional

Paid-In

Capital

Retained

Earnings

Treasury

Stock

Accumulated

Other

Comprehensive

Loss

Total

Stockholders’

Equity

Balance December 31, 2020
   161,666    $ 1,617    $ 2,029,465    $ 7,107,989    $ (8,788,984 ) $ (117,943 ) $ 232,144
Net income
   —      —      —      315,419    —   —   315,419
Other comprehensive income
   —      —      —      —      —   6,764 6,764
Issuance of common stock for employees:

Employee Stock Purchase Plan
   32       7,011    —      —   —   7,011
Stock options exercised
   230    2    38,713    —      —   —   38,715
Treasury stock
   —      —      —      —      (346,644 ) —   (346,644 )
Stock-based compensation
   89    1    14,863    —      —   —   14,864










Balance July 3, 2021
   162,017    $ 1,620    $ 2,090,052    $ 7,423,408    $ (9,135,628 ) $ (111,179 ) $ 268,273


	Number of Common Shares		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance December 31, 2021		162,084	$	1,621	$	2,114,880	$	7,800,832	$	(9,437,914	)	$	(111,865	)	$	367,554
Net income		—		—		—		324,695		—			—			324,695
Other comprehensive loss		—		—		—		—		—			(29,524	)		(29,524	)
Issuance of common stock for employees:
Employee Stock Purchase Plan		19		—		5,886		—		—			—			5,886
Stock options exercised		150		1		25,614		—		—			—			25,615
Treasury stock		—		—		—		—		(321,944	)		—			(321,944	)
Stock-based compensation		95		1		19,841		—		—			—			19,842

Balance July 2, 2022		162,348	$	1,623	$	2,166,221	$	8,125,527	$	(9,759,858	)	$	(141,389	)	$	392,124

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

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 six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~ (in thousands):

Balance at

Beginning

of Period

Impact of

CECL
Adoption

Additions

Deductions

Balance at
End of

Period

Allowance for Credit Losses

July 3, 2021
   $ 14,381    $ —      $ 3,042 $ (2,625 ) $ 14,798
June 27, 2020
   $ 9,560    $ 985    $ 6,664 $ (3,901 ) $ 13,308


	Balance at Beginning							Balance at End of
	of Period		Additions		Deductions			Period

Allowance for Credit Losses
July 2, 2022	$	13,228	$	3,690	$	(3,571	)	$	13,347
July 3, 2021	$	14,381	$	3,042	$	(2,625	)	$	14,798

~~Table of Contents~~

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

Other Investments

During the six months ended ~~June 27, 2020,~~July 2, 2022, the Company ~~made investments~~sold an equity investment for $7 million in ~~unaffiliated companies~~cash and recorded a gain on the sale of ~~$3 million.~~approximately $4 million in other income, net on the statement of operations. The Company also recorded an

other-than-temporary

impairment loss on an equity method investment still held at the reporting date of approximately $4 million within other income, net on the statement of operations as the company entered into a sale process and we adjusted the carrying value of our investment based on our portion of the total proceeds we expect to receive.

During the six months ended July 3, 2021, the Company recorded an unrealized gain on an equity security still held at the reporting date of approximately $10 million within other income ~~(expense)~~ on the income statement. This unrealized gain was recorded as an upward price adjustment to the carrying value of the investment due to an observable price change of a similar security issued during the current period.

~~During the three and six months ended June 27, 2020, the Company recorded an unrealized loss on an equity security still held at the reporting date of approximately $~~

million within other income (expense) on the income statement. This unrealized loss was recorded as a downward price adjustment to the carrying value of the investment due to an observable price change of a similar security issued during the current period.

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 July ~~3, 2021~~2, 2022 and December 31, ~~2020.~~2021. 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 measured at fair value on a recurring basis at July ~~3, 2021~~2, 2022 (in thousands):

Total at

July 3,
2021

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
   $ 12,051    $ 0      $ 12,051    $ 0
Corporate debt securities
   130,231    0      130,231    0
Time deposits
   75,897    0      75,897    0
Waters 401(k) Restoration Plan assets
   40,965    40,965    0      0
Foreign currency exchange contracts
   223    0      223    0








Total
   $ 259,367    $ 40,965    $ 218,402    $ 0








Liabilities:

Contingent consideration
   $ 1,266    $ 0      $ 0      $ 1,266
Foreign currency exchange contracts
   142    0      142    0
Interest rate cross-currency swap agreements
   22,457    0      22,457    0








Total
   $ 23,865    $ 0      $ 22,599    $ 1,266


			Quoted Prices
			in Active		Significant
			Markets		Other		Significant
	Total at		for Identical		Observable		Unobservable
	July 2,		Assets		Inputs		Inputs
	2022		(Level 1)		(Level 2)		(Level 3)

Assets:
Time deposits		897		—		897		—
Waters 401(k) Restoration Plan assets		26,560		26,560		—		—
Foreign currency exchange contracts		76		—		76		—
Interest rate cross-currency swap agreements		31,173		—		31,173		—

Total	$	58,706	$	26,560	$	32,146	$	—

Liabilities:
Contingent consideration	$	1,428	$	—	$	—	$	1,428
Foreign currency exchange contracts		322		—		322		—
Interest rate cross-currency swap agreements		58		—		58		—

Total	$	1,808	$	—	$	380	$	1,428

Table of Contents

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

The following table represents the Company’s assets and liabilities measured at fair value on a recurring basis at December 31, ~~2020~~2021 (in thousands):

Total at

December 31,
2020

Quoted Prices

in Active

Markets

for Identical
Assets

(Level 1)

Significant

Other

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs

(Level 3)

Assets:

Time deposits
   $ 6,451    $ —      $ 6,451    $ —
Waters 401(k) Restoration Plan assets
   38,988    38,988    —      —
Foreign currency exchange contracts
   836    —      836    —








Total
   $ 46,275    $ 38,988    $ 7,287    $ —








Liabilities:

Contingent consideration
   $ 1,185    $ —      $ —      $ 1,185
Foreign currency exchange contracts
   185    —      185    —
Interest rate cross-currency swap agreements
   44,996    —      44,996    —








Total
   $ 46,366    $ —      $ 45,181    $ 1,185

~~Table of Contents~~

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


			Quoted Prices
			in Active		Significant
			Markets		Other		Significant
	Total at		for Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs
	2021		(Level 1)		(Level 2)		(Level 3)

Assets:
U.S. Treasury securities	$	13,917	$	—	$	13,917		—
Corporate debt securities		39,121		—		39,121		—
Time deposits		19,030		—		19,030	$	—
Waters 401(k) Restoration Plan assets		38,729		38,729		—		—
Foreign currency exchange contracts		504		—		504		—

Total	$	111,301	$	38,729	$	72,572	$	—

Liabilities:
Contingent consideration	$	1,347	$	—	$	—	$	1,347
Foreign currency exchange contracts		195		—		195		—
Interest rate cross-currency swap agreements		5,363		—		5,363		—

Total	$	6,905	$	—	$	5,558	$	1,347

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

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

The fair values of the Company’s cash equivalents, investments, ~~and~~ foreign currency exchange contracts and interest rate cross-currency swap agreements 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.

Fair Value of Contingent Consideration

The fair value of the Company’s liability for contingent consideration relates to earnout payments in connection with the December 2020 acquisition of Integrated Software Solutions (“ISS”) 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~~achievement of certain revenue and customer account milestones over the two years after the acquisition date 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.

The fair value of future contingent consideration payments related to the December 2020 acquisition of ISS was estimated to be $1 million at both July ~~3, 2021~~2, 2022 and December 31, ~~2020. The fair value is based on the achievement~~2021.

Table of ~~certain revenue and customer account milestones over the two years after the acquisition date.~~Contents

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

Fair Value of Other Financial Instruments

The Company’s 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 $1.3 billion ~~and $910 million~~ at both July ~~3, 2021~~2, 2022 and December 31, ~~2020, respectively.~~2021. 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 ~~$1.3~~$1.2 billion and ~~$1.0~~$1.3 billion at July ~~3, 2021~~2, 2022 and December 31, ~~2020,~~2021, respectively, 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 strategies in managing exposures to changes in foreign currency exchange rates are 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 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 net asset investments. The Company presents the derivative transactions in financing activities in the statement of cash flows.

~~Table of Contents~~

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

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, Japanese yen, British pound, Mexican peso and Brazilian real.

Interest Rate Cross-Currency Swap Agreements

As of July ~~3, 2021,~~2, 2022, the Company had ~~entered into~~ three-year interest rate cross-currency swap derivative agreements with an aggregate notional value of ~~$490~~$560 million to hedge the variability in the movement of foreign currency exchange rates on a portion of its Euro-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 comprehensive ~~income~~loss in stockholders’ equity ~~(deficit)~~ 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.

Table of Contents

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

The Company’s foreign currency exchange contracts and interest rate cross-currency swap agreements included in the consolidated balance sheets are classified as follows (in thousands):

July 3, 2021

December 31, 2020


Notional Value

Fair Value

Notional Value

Fair Value

Foreign currency exchange contracts:

Other current assets
   $ 21,000    $ 223    $ 66,690    $ 836
Other current liabilities
   $ 40,030    $ 142    $ 20,000    $ 185
Interest rate cross-currency swap agreements:

Other liabilities
   $ 490,000    $ (22,457 )    $ 560,000    $ (44,996 )
Accumulated other comprehensive loss
      $ 27,981       $ 44,996


	July 2, 2022				December 31, 2021
	Notional Value		Fair Value		Notional Value		Fair Value
Foreign currency exchange contracts:
Other current assets	$	17,000	$	76	$	55,309	$	504
Other current liabilities	$	42,640	$	322	$	9,000	$	195
Interest rate cross-currency swap agreements:
Other assets	$	520,000	$	31,173	$	—	$	—
Other liabilities		40,000		58		230,000		5,363
Accumulated other comprehensive income (loss)			$	26,761			$	(15,944	)

The following is a summary of the activity included in the consolidated statements of operations and statements of comprehensive income related to the foreign currency exchange contracts and interest rate cross-currency swap agreements (in thousands):


	Financial	Three Months Ended						Six Months Ended
	Statement	July 2, 2022			July 3, 2021			July 2, 2022			July 3, 2021
	Classification	July 2, 2022			July 3, 2021			July 2, 2022			July 3, 2021

Foreign currency exchange contracts:
Realized (losses) gains on closed contracts	Cost of sales	$	(1,292	)	$	(213	)	$	(2,791	)	$	1,455
Unrealized losses on open contracts	Cost of sales		(66	)		(569	)		(555	)		(1,323	)

Cumulative net pre-tax (losses) gains	Cost of sales	$	(1,358	)	$	(782	)	$	(3,346	)	$	132

Interest rate cross-currency swap agreements:
Interest earned	Interest income	$	2,077		$	3,373		$	3,852		$	7,200
Unrealized gains (losses) on open contracts	Other comprehensive income	$	30,516		$	(4,229	)	$	42,704		$	17,015

Financial
Statement
Classification

Three Months Ended

Six Months Ended


July 3,
2021

June 27,
2020

July 3,
2021

June 27,
2020

Foreign currency exchange contracts:

Realized (losses) gains on closed contracts
   Cost of sales    $ (213 ) $ 1,823 $ 1,455 $ (1,157 )
Unrealized (losses) gains on open contracts    Cost of sales    (569 ) (678 ) (1,323 ) 646


Cumulative net
pre-tax
(losses) gains
   Cost of sales    $ (782 ) $ 1,145 $ 132 $ (511 )


Interest rate cross-currency swap agreements:

Interest earned
   Interest income    $ 3,373 $ 3,784 $ 7,200 $ 7,498
Unrealized (losses) gains on open contracts
   Stockholders’ equity (deficit)    $ (4,229 ) $ (5,615 ) $ 17,015 $ (93 )

~~Table of Contents~~

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

Stockholders’ Equity

January 2019, the Company’s Board of Directors authorized the Company to repurchase up to $4 billion of its outstanding common stock over a

two-year

period. This program replaced the remaining amounts available from the

pre-existing

program. During the six months ended July 2, 2022 and July 3, 2021, ~~and June 27, 2020,~~ the Company repurchased ~~1.2~~1.0 million and ~~0.8~~1.2 million shares of the Company’s outstanding common stock at a cost of ~~$339~~$312 million and ~~$167~~$339 million, respectively, under the January 2019 authorization and other previously announced programs. In addition, the Company repurchased $8$10 million and $9$8 million of common stock related to the vesting of restricted stock units during the six months ended July 2, 2022 and July 3, 2021, ~~and June 27, 2020,~~ respectively. As of July ~~3, 2021,~~2, 2022, the Company had repurchased an aggregate of ~~12.3~~14.1 million shares at a cost of ~~$2.8~~$3.4 billion under the January 2019 repurchase program and had a total of ~~$1.2~~$0.6 billion authorized for future repurchases. In December 2020, the Company’s Board of Directors authorized the extension of the share repurchase program through January 21, 2023.

The Company had $5 million of treasury stock purchases that were accrued and unsettled at July 3, 2021. These transactions were settled in July 2021, during the Company’s third quarter. The Company had $20 million of treasury stock purchases that were accrued and unsettled at December 31, 2019. These transactions were settled in January 2020. The Company did 0t have any unsettled treasury stock purchases as of December 31, 2020 or June 27, 2020.

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.

Table of Contents

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 six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~ (in thousands):

Balance at

Beginning

of Period

Accruals for

Warranties

Settlements

Made

Balance at

End of

Period

Accrued warranty liability:

July 3, 2021
   $ 10,950    $ 4,719    $ (4,859 )    $ 10,810
June 27, 2020
   $ 11,964    $ 3,577    $ (5,428 )    $ 10,113


	Balance at							Balance at
	Beginning		Accruals for		Settlements			End of
	of Period		Warranties		Made			Period
Accrued warranty liability:
July 2, 2022	$	10,718	$	4,084	$	(4,646	)	$	10,156
July 3, 2021	$	10,950	$	4,719	$	(4,859	)	$	10,810

~~Restructuring~~Other Items

In January 2020, the Company made organizational changes to better align its resources with its growth and innovation strategies, resulting in a worldwide workforce reduction, impacting 3% of the Company’s employees. During the six months ended ~~June 27, 2020,~~July 2, 2022, the Company ~~incurred $21~~completed an asset acquisition in which the charge detection mass spectrometry technology (“CDMS technology”) assets of Megadalton Solutions, Inc. (“Megadalton”) were acquired for approximately $10 million in total purchase price, of ~~severance-related costs, lease termination~~which $5 million was paid at closing and the remaining $4 million will be paid in the future at various dates through 2029. This CDMS technology makes it possible to analyze extremely large proteins and protein complexes used in cell and gene therapies that would otherwise be difficult to analyze with conventional mass spectrometry. Once this technology is further developed, it will extend the capabilities of our mass spectrometry portfolio for a broader set of applications and as such the cost of this technology asset has been accounted for as Acquired

In-Process

Research and Development and expensed in costs and ~~other related costs. The Company did not incur any restructuring charges during~~operating expenses in the ~~six months ended July 3, 2021.~~

~~Other Items~~

During the three and six months ended July 3, 2021, the Company executed a settlement agreement to resolve patent infringement litigation with Bruker Corporation and Bruker Daltronik GmbH regarding their timsTOF product line. In connection with the settlement, the Company is entitled to receive $

~~million in guaranteed payments, including minimum royalty payments, which was recognized within other income in our consolidated~~ statement of operations. ~~During the three and six months ended July 3, 2021, the Company received $3 million in guaranteed payments, net of applicable withholding taxes.~~

2 Revenue Recognition

The Company’s deferred revenue liabilities on 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.

~~Table of Contents~~

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

The following is a summary of the activity of the Company’s deferred revenue and customer advances for the six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~ (in thousands):


	July 3, 2021			June 27, 2020			July 2, 2022			July 3, 2021
Balance at the beginning of the period	$	239,759		$	213,695		$	273,598		$	239,759
Recognition of revenue included in balance at beginning of the period		(159,393	)		(141,297	)		(173,606	)		(159,393	)
Revenue deferred during the period, net of revenue recognized		251,065			195,444			240,928			251,065

Balance at the end of the period	$	331,431		$	267,842		$	340,920		$	331,431

The Company classified ~~$47~~$60 million and ~~$42~~$46 million of deferred revenue and customer advances in other long-term liabilities at July ~~3, 2021~~2, 2022 and December 31, ~~2020,~~2021, respectively.

The amount of deferred revenue and customer advances equals the transaction price allocated to unfulfilled performance obligations for the period presented. Such amounts are expected to be recognized in the future as follows (in thousands):


	July 2, 2022
Deferred revenue and customer advances expected to be recognized in:
One year or less	$	282,342
13-24 months		36,568
25 months and beyond		22,010

Total	$	340,920

July 3, 2021

Deferred revenue and customer advances expected to be recognized in:

One year or less
   $ 284,765
13
-24
months
   28,343
25
months and beyond
   18,323


Total
   $ 331,431

Table of Contents

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

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):

July 3, 2021


Amortized

Cost

Unrealized

Gain

Unrealized

Loss

Fair

Value

U.S. Treasury securities
   $ 12,050    $ 1    $ —      $ 12,051
Corporate debt securities
   130,246    3    (18 )    130,231
Time deposits
   75,897    —      —      75,897








Total
   $ 218,193    $ 4    $ (18 )    $ 218,179








Amounts included in:

Cash equivalents
   $ 14,614    $ 0      $ (1 )    $ 14,613
Investments
   203,579    4    (17 )    203,566








Total
   $ 218,193    $ 4    $ (18 )    $ 218,179









December 31, 2020


Amortized

Cost

Unrealized

Gain

Unrealized

Loss

Fair

Value

Time deposits
   6,451    —      —      6,451








Total
   $ 6,451    $ —      $ —      $ 6,451








Amounts included in:

Investments
   6,451    —      —      6,451








Total
   $ 6,451    $ —      $ —      $ 6,451


	July 2, 2022
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gain		Loss		Value

Time deposits		897		—		—		897

Total	$	897	$	—	$	—	$	897

Amounts included in:
Investments		897		—		—		897

Total	$	897	$	—	$	—	$	897

~~Table of Contents~~

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


	December 31, 2021
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gain		Loss			Value

U.S. Treasury securities	$	13,929	$	—	$	(12	)	$	13,917
Corporate debt securities		39,135		—		(14	)		39,121
Time deposits		19,030		—		—			19,030

Total	$	72,094	$	—	$	(26	)	$	72,068

Amounts included in:
Cash equivalents	$	4,017	$	—	$	—		$	4,017
Investments		68,077		—		(26	)		68,051

Total	$	72,094	$	—	$	(26	)	$	72,068

The estimated fair value of marketable debt securities by maturity date is as follows (in thousands):


	July 2, 2022		December 31, 2021
Due in one year or less	$	897	$	71,066
Due after one year through three years		—		1,002

Total	$	897	$	72,068

July 3, 2021

December 31, 2020

Due in one year or less
   $ 203,368    $ 6,451
Due after one year through three years
   14,811    —




Total
   $ 218,179    $ 6,451

4 Inventories

Inventories are classified as follows (in thousands):


	July 3, 2021		December 31, 2020		July 2, 2022		December 31, 2021
Raw materials	$	149,562	$	133,490	$	180,658	$	165,240
Work in progress		23,224		18,678		24,285		19,726
Finished goods		175,984		152,113		204,979		171,129

Total inventories	$	348,770	$	304,281	$	409,922	$	356,095

5 Goodwill and Other Intangibles

The carrying amount of goodwill was ~~$440~~$428 million and ~~$444~~$438 million at July ~~3, 2021~~2, 2022 and December 31, ~~2020,~~2021, respectively. The effect of foreign currency translation decreased goodwill by $4$10 million.

Table of Contents

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

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

July 3, 2021

December 31, 2020


Gross
Carrying
Amount

Accumulated
Amortization

Weighted-
Average
Amortization
Period

Gross
Carrying
Amount

Accumulated
Amortization

Weighted-
Average
Amortization
Period

Capitalized software
   $ 578,641    $ 418,409    5    years    $ 584,452    $ 409,847    5    years
Purchased intangibles
   203,421    162,312    11    years    205,585    160,342    11    years
Trademarks
   9,680    —      —         9,680    —      —
Licenses
   12,882    5,803    7    years    5,923    5,697    6    years
Patents and other intangibles
   94,043    65,307    8    years    90,699    61,808    8    years









Total
   $ 898,667    $ 651,831    7    years    $ 896,339    $ 637,694    7    years


	July 2, 2022						December 31, 2021
					Weighted-						Weighted-
	Gross				Average		Gross				Average
	Carrying		Accumulated		Amortization		Carrying		Accumulated		Amortization
	Amount		Amortization		Period		Amount		Amortization		Period

Capitalized software	$	555,602	$	411,492		5 years	$	575,658	$	420,862		5 years
Purchased intangibles		196,887		162,839		11 years		201,302		163,752		11 years
Trademarks		9,680		—		—		9,680		—		—
Licenses		11,484		6,091		7 years		12,635		6,199		7 years
Patents and other intangibles		101,679		69,809		8 years		102,353		68,414		8 years

Total	$	875,332	$	650,231		7 years	$	901,628	$	659,227		7 years

The Company capitalized intangible assets in the amounts of $12 million and $19 mill

~~In June~~i

on in the three months ended July 2, 2022 and July 3, 2021, ~~the Company paid $7~~respectively, and $24 million and $27 million in ~~connection with an existing licensing arrangement. The payment was tied to~~ the ~~commercial launch of Waters~~

™

~~SELECT SERIES~~

™

~~MRT, a high-resolution mass spectrometer~~six months ended July 2, 2022 and ~~was capitalized as an intangible asset on our consolidated balance sheet as of~~ July 3, ~~2021.~~

2021, respectively. The gross carrying value of intangible assets and accumulated amortization for intangible assets decreased by $

$50 million and $

$38 million, respectively, in the

six

months ended July

~~2021~~

2, 2022 due to the effects of foreign currency translation. Amortization expense for intangible assets was $

~~million and $~~

$15 million for both the

three

months ended July

~~2021~~

2, 2022 and ~~June~~

~~2020~~

~~, respectively.~~July 3, 2021. Amortization expense for intangible assets was $

~~million and $~~

$30 million for both the

six

months ended July

~~2021~~

2, 2022 and ~~June~~

~~2020~~

~~, respectively.~~July 3, 2021. Amortization expense for intangible assets is estimated to be $

$62 million per year for each of the next

five

years.

~~Table of Contents~~

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

6 Debt

~~In March 2021, the Company issued the following senior unsecured notes:~~

Senior
Unsecured Notes

Term

Interest Rate

Face Value
(in millions)

Maturity
Date

Series N
   5 years    1.68 % $ 100    March 2026
Series O
   10 years    2.25 % $ 400    March 2031

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 N and O Senior Notes is payable semi-annually. The Company may prepay some or all of the Senior Notes at any time in an amount not less than 10% of the aggregate principal amount of the Senior Notes then outstanding, plus the applicable make-whole amount for Series N and O 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 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.

~~In November 2017, the~~ Company entered into a credit agreement in September 2021 (the ~~“2017~~“2021 Credit Agreement”) ~~that provides for a $1.5~~governing the Company’s five-year, $1.8 billion revolving facility ~~and a $300 million term loan.~~(the “2021 Credit Facility”) that expires in September 2026. As of July ~~3, 2021~~2, 2022 and December 31, ~~2020,~~2021, the ~~revolving facility and term loan~~2021 Credit Facility had a total of ~~$300~~$180 million and ~~$400~~$210 million ~~respectively,~~ outstanding, ~~and mature on November 30, 2022 and require no scheduled prepayments before that date.~~respectively.

The interest rates applicable to the ~~2017~~2021 Credit Agreement are, at the Company’s option, equal to either the alternate base rate (which is a rate per annum equal to the greatest of (1) the prime rate in effect on such day, (2) the Federal Reserve Bank of New York Rate on such day plus 1/2 of 1% per annum and (3) the adjusted LIBO rate on such day (or if such day is not a business day, the immediately preceding business day) for a deposit in U.S. dollars with a maturity of one month plus 1% per annum) or the applicable 1, 2, 3 or 6 month adjusted LIBO rate 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 and 12.5 basis points for alternate base rate loans and between 80 and 112.5 basis points for LIBO rate or EURIBO rate loans. The facility fee on the ~~2017~~2021 Credit Agreement ranges between 7.5 and 25 basis

points per annum, based on the leverage ratio, of the amount of the revolving facility commitments and the outstanding term loan. The ~~2017~~2021 Credit Agreement 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 ~~2017~~2021 Credit Agreement includes negative covenants, affirmative covenants, representations and warranties and events of default that are customary for investment grade credit facilities.

As of both July ~~3, 2021~~2, 2022 and December 31, ~~2020,~~2021, the Company had a total of $1.3 billion ~~and $1.0 billion, respectively,~~ of outstanding senior unsecured 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 the Series H senior unsecured note. 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.

In February 2019, certain defined terms related to the subsidiary guarantors were amended in the 2017 Credit Agreement and senior unsecured note agreements. In addition, the Company amended the senior unsecured note agreements to allow the Company to elect an increase in the permitted leverage ratio from 3.50:1 to 4.0:1, for a period of three consecutive quarters, for a material acquisition of $400 million or more. During the period of time where the leverage ratio exceeds 3.50:1, the interest payable on the senior unsecured notes shall increase by 0.50%. The debt covenants in the senior unsecured note agreements were also modified to address the change in accounting guidance for leases.

Table of Contents

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

The Company had the following outstanding debt at July ~~3, 2021~~2, 2022 and December 31, ~~2020~~2021 (in thousands):

July 3, 2021

December 31, 2020

Senior unsecured notes—Series E—3.97%, due March 2021
   —      50,000
Senior unsecured notes—Series F—3.40%, due June 2021
   0      100,000




Total notes payable and debt, current
   0      150,000
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
Senior unsecured notes—Series N—1.68%, due March 2026
   100,000    —
Senior unsecured notes—Series O—2.25%, due March 2031
   400,000    —
Credit agreement
   300,000    400,000
Unamortized debt issuance costs
   (6,633 )    (3,485 )




Total long-term debt
   1,603,367    1,206,515




Total debt
   $ 1,603,367    $ 1,356,515


	July 2, 2022			December 31, 2021
Senior unsecured notes - Series I - 3.13%, due May 2023	$	50,000		$	—

Total notes payable and debt, current		50,000			—
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
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
Credit agreement		180,000			210,000
Unamortized debt issuance costs		(5,626	)		(6,130	)

Total long-term debt		1,434,374			1,513,870

Total debt	$	1,484,374		$	1,513,870

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

As of

both

July ~~3, 2021~~2, 2022 and December 31, ~~2020,~~2021, the Company had a total amount available to borrow under the ~~2017~~2021 Credit Agreement of ~~$1.5~~$1.6 billion, ~~and $1.4 billion, respectively,~~ after outstanding letters of credit. The weighted-average interest rates applicable to the senior unsecured notes and credit agreement borrowings collectively were ~~2.71%~~3.02% and ~~2.92%~~2.74% at July ~~3, 2021~~2, 2022 and December 31, ~~2020,~~2021, respectively. As of July ~~3, 2021,~~2, 2022, the Company was in compliance with all debt covenants.

The Company and its foreign subsidiaries also had available short-term lines of credit totaling ~~$122~~$113 million and ~~$109~~$121 million at July ~~3, 2021~~2, 2022 and December 31, ~~2020,~~2021, respectively, for the purpose of short-term borrowing and issuance of commercial guarantees. None of the Company’s foreign subsidiaries had outstanding short-term borrowings as of July ~~3, 2021~~2, 2022 or December 31, ~~2020.~~2021.

As of July ~~3, 2021,~~2, 2022, the Company had entered into three-year interest rate cross-currency swap derivative agreements with an aggregate notional value of ~~$490~~$560 million to hedge the variability in the movement of foreign currency exchange rates on a portion of its Euro-denominated net asset investments.

7 Income Taxes

had a contractual tax rate of 0% on qualifying activities in Singapore through March 2021, based upon the achievement of certain contractual milestones. The Company has a new Development and Expansion Incentive in Singapore that provides a concessionary income tax rate of 5% on certain types of income for the period April 1, 2021 through March 31, 2026. The effect of applying the concessionary income tax rates rather than the statutory tax rate to income from qualifying activities in Singapore increased the Company’s net income for the six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~ by $9$10 million and $7$9 million, respectively, and increased the Company’s net income per diluted share by $0.16 and $0.14, ~~and $0.11,~~ respectively.

The Company’s effective tax rate for the three months ended July 2, 2022 and July 3, 2021 was 14.3% and ~~June 27, 2020 was~~ 15.3% ~~and 15.4%~~, respectively. The decrease in the effective income tax rate can be attributed to the impact of quarter-specific adjustments and 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 ~~STAEMENTS~~STATEMENTS (unaudited) – (Continued)

The Company’s effective tax rate for the six months ended July 2, 2022 and July 3, 2021 was 14.3% and ~~June 27, 2020 was~~ 15.0% ~~and 13.2%~~, respectively. The effective tax rate for the six months ended July 2, 2022 includes a $5 million tax benefit related to stock-based compensation. This income tax benefit decreased the effective tax rate by 1.4 percentage points for the six months ended July 2, 2022. The effective tax rate for the six months ended July 3, 2021 includes a $4 million income tax benefit related to stock-based compensation. This income tax benefit decreased the effective tax rate by 1.1 percentage points for the six months ended July 3, 2021. The effective tax rate for the six months ended June 27, 2020 includes a $5 million income tax benefit related to certain restructuring charges and a $2 million tax benefit related to stock-based compensation. These income tax benefits decreased the effective tax rate by 2.4 percentage points and 1.2 percentage points, respectively, for the six months ended June 27, 2020. The remaining 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 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 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, excluding interest and penalties, for both the six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020 (in thousands):~~

July 3, 2021

June 27, 2020

Balance at the beginning of the period
   $ 28,666 $ 27,790
Net reductions for settlement of tax audits
   (593 ) 0
Net reductions for lapse of statutes taken during the period
   (198 ) (252 )
Net additions for tax positions taken during the current period
   653 536


Balance at the end of the period
   $ 28,528 $ 28,074

were $29 million. 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, ~~2015.~~2016. 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 July ~~3, 2021,~~2, 2022, the Company expects to record reductions in the measurement of its unrecognized tax benefits and related net interest and penalties of ~~less than $1~~$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.

8 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 July 2, 2022 are immaterial for the years ended December 31, 2022 and thereafter. The Company enters into licensing arrangements with third parties that require future milestone or royalty payments contingent upon future events. Upon the achievement of certain milestones in existing agreements, the Company could make additional future payments of up to $2 million.

The Company enters into standard indemnification agreements in its ordinary course of business. Pursuant to these agreements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners or customers, in connection with patent, copyright or other 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 services by the Company or its subcontractors. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. Historically, the Company’s costs to defend lawsuits or settle claims relating to such indemnity agreements have been minimal and management accordingly believes the estimated fair value of these agreements is immaterial.

9 Stock-Based Compensation

The Company maintains various stockholder-approved, stock-based compensation plans which allow for the issuance of incentive or

non-qualified

stock options, stock appreciation rights, restricted stock or other types of awards (e.g. restricted stock units and performance stock units).

In May 2020, the Company’s stockholders approved the Company’s 2020 Equity Incentive Plan (“2020 Plan”). As of July ~~3, 2021,~~2, 2022, the 2020 Plan had ~~6.6~~6.4 million shares available for grant in the form of incentive or

non-qualified

stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units or other types of awards (e.g. restricted stock units and performance stock units). The Company issues new shares of common stock upon exercise of stock options or restricted stock unit conversion. Under the 2020 Plan, the exercise price for stock options may not

Table of Contents

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

be less than the fair market value of the underlying stock at the date of grant. The 2020 Plan is scheduled to terminate on May 13, 2030. Options generally will expire no later than ten years after the date on which they are granted and will become exercisable as directed by the Compensation Committee of the Board of Directors and generally vest in equal annual installments over a five-year period. A SAR may be granted alone or in conjunction with an option or other award. Shares of restricted stock, restricted stock units and performance stock units may be issued under the 2020 Plan for such consideration as is determined by the Compensation Committee of the Board of Directors. As of July ~~3, 2021,~~2, 2022, the Company had stock options, restricted stock, and restricted and performance stock unit awards outstanding under the 2020 Plan.

~~Table of Contents~~

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, the amount of expense has been reduced for estimated forfeitures. Forfeitures are estimated based on historical experience. If actual results differ significantly from these estimates, stock-based compensation expense and the Company’s results of operations could be materially impacted. In addition, if 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 six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~ 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				Six Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Cost of sales	$	915	$	727	$	1,942	$	1,360
Selling and administrative expenses		7,264		5,274		15,433		11,694
Research and development expenses		1,610		1,290		3,347		2,542

Total stock-based compensation	$	9,789	$	7,291	$	20,722	$	15,596

Three Months Ended

Six Months Ended


July 3, 2021

June 27, 2020

July 3, 2021

June 27, 2020

Cost of sales
   $ 727    $ 635    $ 1,360    $ 1,205
Selling and administrative expenses
   5,274    7,352    11,694    14,725
Research and development expenses
   1,290    939    2,542    2,192








Total stock-based compensation
   $ 7,291    $ 8,926    $ 15,596    $ 18,122

Stock Options

In determining the 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~~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 historical experience for the population of

non-qualified

stock option exercises. 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 Black-Scholes model. The relevant data used to determine the value of the stock options granted during the six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~ are as follows:


	Six Months Ended
Options Issued and Significant Assumptions Used to Estimate Option Fair Values	July 2, 2022			July 3, 2021
Options issued in thousands		127			159
Risk-free interest rate		1.9	%		0.8	%
Expected life in years		6			6
Expected volatility		30.9	%		32.5	%
Expected dividends		0—			—

Six Months Ended

Options Issued and Significant Assumptions Used to Estimate Option Fair Values

July 3, 2021

June 27, 2020

Options issued in thousands
   159 227
Risk-free interest rate
   0.8 % 1.4 %
Expected life in years
   6 6
Expected volatility
   32.5 % 26.5 %
Expected dividends
   0   —

Six Months Ended

Weighted-Average Exercise Price and Fair Value of Options on the Date of Grant

July 3, 2021

June 27, 2020

Exercise price
   $ 280.92    $ 216.08
Fair value
   $ 91.42    $ 61.70

Table of Contents

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


	Six Months Ended
Weighted-Average Exercise Price and Fair Value of Options on the Date of Grant	July 2, 2022		July 3, 2021

Exercise price	$	321.91	$	280.92
Fair value	$	107.76	$	91.42

The following table summarizes stock option activity for the plans for the six months ended July ~~3, 2021~~2, 2022 (in thousands, except per share data):

Number of Shares

Exercise Price per Share

Weighted-Average

Exercise Price per
Share

Outstanding at December 31, 2020
   1,067    $ 75.94    to    $ 238.52    $ 179.59
Granted
   159    $ 250.15    to    $ 346.56    $ 280.92
Exercised
   (230 )    $ 99.22    to    $ 238.52    $ 168.39
Canceled
   (228 )    $ 139.51    to    $ 224.37    $ 194.59



Outstanding at July 3, 2021
   768    $ 75.94    to    $ 346.56    $ 199.21


	Number of Shares			Exercise Price per Share					Weighted-Average Exercise Price per Share
Outstanding at December 31, 2021		691		$	88.71	to	$	371.64	$	202.24
Granted		127		$	314.98	to	$	364.59	$	321.91
Exercised		(150	)	$	88.71	to	$	279.90	$	170.44
Canceled		(18	)	$	203.37	to	$	364.59	$	250.27

Outstanding at July 2, 2022		650		$	88.71	to	$	371.64	$	231.63

Restricted Stock

During the six months ended July ~~3, 2021,~~2, 2022, the Company granted ~~four~~three thousand shares of restricted stock. The weighted-average fair value per share of these awards on the grant date was ~~$250.15.~~$364.59.

Restricted Stock Units

The following table summarizes the unvested restricted stock unit award activity for the six months ended July ~~3, 2021~~2, 2022 (in thousands, except per share data):

Shares

Weighted-Average

Grant Date Fair
Value per Share

Unvested at December 31, 2020
   271    $ 202.00
Granted
   88    $ 282.94
Vested
   (81 )    $ 182.26
Forfeited
   (14 )    $ 220.23



Unvested at July 3, 2021
   264    $ 234.07


	Shares			Weighted-Average Grant Date Fair Value per Share
Unvested at December 31, 2021		245		$	234.97
Granted		94		$	323.65
Vested		(71	)	$	220.07
Forfeited		(16	)	$	256.66

Unvested at July 2, 2022		252		$	270.87

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. Beginning with the grants made in 2020, the vesting conditions for performance stock units now include a performance condition based on future

sales growth.

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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~~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 the six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~ are as follows:


	Six Months Ended
Performance Stock Units Issued and Significant Assumptions Used to Estimate Fair Values	July 2, 2022			July 3, 2021

Performance stock units issued (in thousands)		40			41
Risk-free interest rate		1.6	%		0.2	%
Expected life in years		2.9			2.9
Expected volatility		25.4	%		38.7	%
Average volatility of peer companies		34.5	%		34.7	%
Correlation coefficient		43.0	%		45.8	%
Expected dividends		0—			—

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

Six Months Ended

Performance Stock Units Issued and Significant Assumptions Used to Estimate Fair Values

July 3,
2021

June 27,
2020

Performance stock units issued (in thousands)
   41 58
Risk-free interest rate
   0.2 % 1.3 %
Expected life in years
   2.9 2.9
Expected volatility
   38.7 % 25.1 %
Average volatility of peer companies
   34.7 % 26.1 %
Correlation coefficient
   45.8 % 36.6 %
Expected dividends
   0   —

The following table summarizes the unvested performance stock unit award activity for the six months ended July ~~3, 2021~~2, 2022 (in thousands, except per share data):


	Shares			Weighted-Average Fair Value per Share		Shares			Weighted-Average Fair Value per Share
Unvested at December 31, 2020		95		$	230.36
Unvested at December 31, 2021							87		$	285.73
Granted		41		$	315.98		40		$	313.21
Vested		(5	)	$	242.94		(24	)	$	308.71
Forfeited		(39	)	$	229.78		10		$	370.15

Unvested at July 3, 2021		92		$	268.08
Unvested at July 2, 2022							113		$	298.05

910 Earnings Per Share

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

Three Months Ended July 3, 2021


Net Income
(Numerator)

Weighted-
Average Shares
(Denominator)

Per Share
Amount

Net income per basic common share
   $ 167,292    61,685    $ 2.71
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities
   0      472    (0.02 )






Net income per diluted common share
   $ 167,292    62,157    $ 2.69







Three Months Ended June 27, 2020


Net Income
(Numerator)

Weighted-
Average Shares
(Denominator)

Per Share
Amount

Net income per basic common share
   $ 122,929    61,944    $ 1.98
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities
   —      240    —






Net income per diluted common share
   $ 122,929    62,184    $ 1.98


	Three Months Ended July 2, 2022
	Net Income		Weighted- Average Shares		Per Share
	(Numerator)		(Denominator)		Amount

Net income per basic common share	$	164,864		60,206	$	2.74
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		—		304		(0.02	)

Net income per diluted common share	$	164,864		60,510	$	2.72

14 Recent Accounting Standard Changes and Developments

~~Recently Adopted Accounting Standards~~

~~In June 2016, accounting guidance was issued that modifies the recognition of credit losses related to financial assets, such as debt securities, trade receivables, net investments in leases,~~

~~off-balance~~

sheet credit exposures, and other financial assets that have the contractual right to receive cash. Prior guidance required the recognition of a credit loss when it was considered probable that a loss event had occurred. The current guidance requires the measurement of expected credit losses to be based upon relevant information, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the asset. As such, expected credit losses may be recognized sooner under the new guidance due to the broader range 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 as

~~available-for-sale.~~

~~When the fair value of an~~

~~available-for-sale~~

~~debt security is below its amortized cost, the new guidance requires the total unrealized loss to be bifurcated into its credit and~~

~~non-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. 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 did not have any significant

~~off-balance~~

sheet credit exposures which would be impacted by the new guidance. Results for reporting periods beginning after January 1, 2020 are presented under the new standard while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a net decrease of $1

million to stockholders’ deficit as of January 1, 2020 for the cumulative effect of adopting the new standard due to converting to the current expected credit loss model for the allowance recorded against trade accounts receivables. This accounting standard did not have a material impact on the Company’s results of operations and cash flows.

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. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material effect on the Company’s financial position, results of operations and cash flows.

In August 2018, accounting guidance was issued that modifies the disclosure requirements of fair value measurements. The amendments remove disclosures that are no longer considered cost beneficial, clarify the specific requirements of disclosure and add disclosure requirements identified as relevant. This guidance is effective for annual and interim periods beginning after December 15, 2019. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on the Company’s financial position, results of operations and cash flows.

In August 2018, accounting guidance was issued that modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendments remove disclosures that are no longer

~~Table of Contents~~

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

considered cost beneficial, clarify the specific requirements of disclosure and add disclosure requirements identified as relevant. This guidance is effective for annual and interim periods ending after December 15, 2020. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on the Company’s financial position, results of operations and cash flows.

In December 2019, accounting guidance was issued that simplifies the accounting for income taxes by removing certain exceptions within the current guidance, including the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The amendment also improves consistent application by clarifying and amending existing guidance related to aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step up in the tax basis of goodwill. This guidance is effective for annual and interim periods beginning after December 15, 2020. The Company adopted this standard on January 1, 2021. The adoption of this standard did not have a material impact on the Company’s financial position, results of operations and cash flows.

In January 2020, accounting guidance was issued that clarifies the accounting guidance for equity method investments, joint ventures, and derivatives and hedging. The update clarifies the interaction between different sections of the accounting guidance that could be applicable and helps clarify which guidance should be applied in certain situations which should increase relevance and comparability of financial statement information. This guidance is effective for annual and interim periods beginning after December 15, 2020. The Company adopted this standard on January 1, 2021. 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

In March 2020, accounting guidance was issued that facilitates the effects of 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 reporting and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January of 2021, an update was issued to clarify that certain optional expedients and exceptions under the reference rate reform guidance for contract modifications and hedge accounting apply to derivatives that are affected by the 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 reference rate reform. This temporary guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company may elect to apply this guidance for all contract modifications or eligible hedging relationships during that time period subject to certain criteria. The Company does not believe that it has material reference rate exposure which would require utilizing the guidance under this accounting pronouncement and if adopted does not believe that this standard would have a material impact on the Company’s financial position, results of operations and cash flows.

In October 2021, accounting guidance was issued 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 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 and other similar contracts that are accounted for in accordance with 606, at fair value on the acquisition date. This guidance is ~~still evaluating~~effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within those years. The amendments within this update should be applied prospectively to business combinations on or after the effective date of the amendments. Early adoption of the amendment is permitted, including adoption in an interim period. The applicability of this standard is dependent on there being a business combination activity and therefore the Company will evaluate the impact of ~~reference rate reform and whether~~ this guidance ~~will be adopted.~~when and if there is applicable activity.

297

Table of Contents

Item 2:

~~Management’s~~Management

’

s Discussion and Analysis of Financial Condition and

Results of Operations

Business Overview

The Company has two operating segments: Waters

and TA

. Waters products and services primarily consist of ~~high performance~~high-performance liquid chromatography (“HPLC”), ~~ultra performance~~ultra-performance liquid chromatography (“UPLC

” 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 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.

COVID-19

Pandemic

Both the Company’s domestic and international operations have been and continue to be affected by the ongoing global

COVID-19

pandemic that has led to volatility and uncertainty in the U.S. and international markets. The Company is actively managing its business to respond to the

COVID-19

impact; however, the Company cannot reasonably estimate the length or severity of the

COVID-19

pandemic, including the effect of the emergence of variants of the virus, or the related response, or the extent to which the disruption may materially impact the Company’s business, consolidated financial position, consolidated results of operations or consolidated cash flows in the future.

~~During the six months ended July 3, 2021, the~~

The COVID-19

pandemic ~~did~~has not ~~materially~~had a material impact on the Company’s manufacturing facilities or those of the third parties to whom it outsources certain manufacturing processes, the distribution centers where ~~its~~the inventory is managed or the operations of its logistics and other service providers. ~~The~~

In the second quarter of 2022, the Company ~~also did not see material disruptions or delays~~successfully managed a significant delay in ~~shipments~~the receipt of certain materials orand components offrom a supplier that was directly related to the COVID-19 pandemic lockdown in China. The Company cannot provide any assurances that any further disruptions in its ~~products.~~logistics and supply chains will not have a significant impact on its future financial results and cashflows.

The Company has taken decisive and appropriate actions throughout the

COVID-19

pandemic and continues to take proactive measures to guard the health of its global employee base and the safety of all customer interactions. The Company has implemented rigorous protocols to promote a safe work environment in all of its locations that are operational around the world and continues to closely monitor and update its multi-phase process for the safe return of employees to their physical workplaces as social distancing, governmental requirements, including capacity limitations, and other protocols allow.

The vast majority of the markets the Company serves, most notably the pharmaceutical, biomedical research, materials sciences, food/environmental and clinical markets, have continued to operate at various levels, and the Company is working closely with these customers to facilitate their seamless operation.

~~The~~

~~COVID-19~~

pandemic continues to be fluid with uncertainties and risks remaining across the global economy. During 2020, the Company took a proactive approach managing through this unpredictability and implemented a series of cost reduction actions, which included temporary salary reductions, furloughs and reductions in

~~non-essential~~

spending and other working capital reductions in order to preserve liquidity and enhance financial flexibility. These cost reductions were completed by the end of 2020; however, the Company’s plan will be adjusted accordingly depending on the pace of the recovery and any further governmental restrictions that may be implemented. The 2020 cost actions reduced the Company’s spending by approximately $100 million with 58% of these savings being realized by the end of the second quarter of 2020 and approximately 21% of the savings being realized in each of the third and fourth quarters of 2020. The majority of these cost saving actions were reinstated at the beginning of 2021 and as a result, the Company expects a significant increase in its expenses and a negative impact on its cash flows during the second half of 2021 from a normalization of these costs.

3028

Sales by Trade Class

Net sales by customer class are presented below for the three and six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~ (dollars in thousands):


	Three Months Ended							Six Months Ended							Three Months Ended				Six Months Ended
	July 3, 2021		June 27, 2020		% change			July 3, 2021		June 27, 2020		% change			July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Pharmaceutical	$	416,705	$	311,018		34	%	$	776,853	$	583,581		33	%	$	437,171	$	416,705	$	852,943	$	776,853
Industrial		202,579		152,110		33	%		385,852		295,464		31	%		208,517		202,579		417,914		385,852
Academic and government		62,363		56,856		10	%		127,487		105,878		20	%		68,631		62,363		134,034		127,487

Total net sales	$	681,647	$	519,984		31	%	$	1,290,192	$	984,923		31	%	$	714,319	$	681,647	$	1,404,891	$	1,290,192

During the second quarter ~~and first half~~ of ~~2021, the increase in~~2022, sales to pharmaceutical customers ~~was broad-based with double-digit sales~~increased 5%, driven by growth ~~across all~~in most major ~~geographies, primarily due to stronger demand for our products~~regions, including 14% in China, 4% in India, and ~~services as a result of our customers continuing to resume laboratory and manufacturing operations. Sales also benefited from the demand from certain pharmaceutical customers involved~~

~~with COVID-19~~

~~diagnostic testing and the increase~~12% in the ~~development of new drugs and therapies.~~Americas on strong customer demand. Foreign currency translation ~~increased~~decreased pharmaceutical sales ~~to pharmaceutical customers~~growth by 3%5% in the second quarter ~~and 4% in the first half~~ of ~~2021. Sales to industrial and academic and government~~

~~Table of Contents~~

customers increased double-digits in both the second quarter and first half of 2021, primarily due to customers continuing to resume laboratory and manufacturing operations during the year. Foreign currency translation increased2022. Combined sales to industrial customers, which include material characterization, food, environmental and fine chemical markets, increased 3%, with foreign currency translation decreasing sales growth by 5% in ~~both~~the quarter. During the second quarter ~~and first half~~ of ~~2021, and increased~~2022, combined sales to academic and government customers increased 10%, with foreign currency translation decreasing academic and government sales growth by ~~3% in both~~6%. Sales to our academic and government 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.

During the ~~second quarter and~~ first half of ~~2021.~~2022, sales to pharmaceutical customers increased 10%, driven by growth in all regions on strong customer demand. Foreign currency translation decreased pharmaceutical sales growth by 4%. Combined sales to industrial customers increased 8%, with the effect of foreign currency translation decreasing sales growth by 4%. During the first half of 2022, combined sales to academic and government customers increased 5%, with foreign currency translation decreasing sales growth by 5%.

Waters Products and Services Net Sales

Net sales for Waters products and services were as follows for the three and six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~ (dollars in thousands):


	Three Months Ended													Three Months Ended
	July 3, 2021		% of Total			June 27, 2020		% of Total			% change			July 2, 2022		% of Total			July 3, 2021		% of Total			% change
Waters instrument systems	$	261,363		43	%	$	181,399		39	%		44	%	$	280,846		44	%	$	261,363		43	%		7	%
Chemistry consumables		126,459		21	%		95,105		20	%		33	%		131,947		21	%		126,459		21	%		4	%

Total Waters product sales		387,822		64	%		276,504		59	%		40	%		412,793		65	%		387,822		64	%		6	%
Waters service		219,502		36	%		189,205		41	%		16	%		222,359		35	%		219,502		36	%		1	%

Total Waters net sales	$	607,324		100	%	$	465,709		100	%		30	%	$	635,152		100	%	$	607,324		100	%		5	%


															Six Months Ended
	Six Months Ended														July 2, 2022		% of Total			July 3, 2021		% of Total			% change
	July 3, 2021		% of Total			June 27, 2020			% of Total			% change			July 2, 2022		% of Total			July 3, 2021		% of Total			% change
Waters instrument systems	$	477,435		42	%	$	324,228			37	%		47	%	$	550,808		44	%	$	477,435		42	%		15	%
Chemistry consumables		245,433		21	%		192,350			22	%		28	%		257,565		21	%		245,433		21	%		5	%

Total Waters product sales		722,868		63	%		516,578	��		59	%		40	%		808,373		65	%		722,868		63	%		12	%
Waters service		426,334		37	%		363,342			41	%		17	%		439,935		35	%		426,334		37	%		3	%

Total Waters net sales	$	1,149,202		100	%	$	879,920			100	%		31	%	$	1,248,308		100	%	$	1,149,202		100	%		9	%

Waters products and service sales increased ~~30%~~5% and ~~31%~~9% in the second quarter and first half of ~~2021,~~2022, respectively, with the effect of foreign currency translation ~~increasing~~decreasing Waters sales growth by 3%5% and 4% in the second quarter and first half of ~~2021,~~2022, respectively. ~~Chemistry consumables sales increased double-digits in both~~Waters instrument systems grew 7% and 15% for the second quarter and first half of 2022,

Table of Contents

respectively, with foreign currency translation lowering sales growth by 5% and 4% for the ~~year driven by~~second quarter and first half of 2022, respectively. The increase in the Waters instrument system sales can be attributed to the strong customer demand for our existing products as well as our newer Arc

HPLC and ACQUITY

Premier product introductions. The increase in ~~China, where~~Waters chemistry consumables sales ~~grew 45%~~

~~year-to-date,~~

~~in addition~~was primarily due to ~~increased~~the strong demand in the U.S., Europe, ~~Japan,~~China and India, driven by the uptake in columns and application-specific testing kits to pharmaceutical customers. Waters service sales increased due to higher service demand ~~billings as~~

~~COVID-19~~

~~business closures and restrictions began to ease,~~billing, particularly in ~~China~~India and ~~Europe.~~the United States. Waters recurring revenues were also ~~benefited~~negatively impacted by ~~five additional~~one less calendar ~~days~~day in the first half of the year. Waters instrument system sales (LC and MS technology-based) increased in all major geographical regions primarily due to higher sales as a result of stronger demand for our products and services as our customers continued to resume laboratory and manufacturing operations throughout the world.

In the second quarter of ~~2021,~~2022, Waters sales ~~growth was broad-based and~~ increased ~~34% in Europe, 27%~~16% in the Americas and ~~30%~~2% in Asia, with sales in China ~~growing 44%~~increasing 8%, while sales in Europe and Japan decreased by 4% and 17%, respectively. Foreign currency translation decreased Waters sales growth by 10% in Europe and 15% in Japan.

In the first half of 2022, Waters sales decreased 1% in Europe, and sales increased 22% in the Americas and 5% in Asia, with sales in China increasing 11%. Foreign currency translation ~~increased~~decreased Waters sales growth by ~~11%~~8% in Europe and 4% in ~~Europe and China, respectively, and 1% in both the Americas and~~ Asia.

~~Table of Contents~~

TA Product and Services Net Sales

Net sales for TA products and services were as follows for the three and six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~ (dollars in thousands):


														Three Months Ended
	Three Months Ended													July 2, 2022		% of Total			July 3, 2021		% of Total			% change
	July 3, 2021		% of Total			June 27, 2020		% of Total			% change			July 2, 2022		% of Total			July 3, 2021		% of Total			% change
TA instrument systems	$	53,133		71	%	$	38,416		71	%		38	%	$	56,837		72	%	$	53,133		71	%		7	%
TA service		21,190		29	%		15,859		29	%		34	%		22,330		28	%		21,190		29	%		5	%

Total TA net sales	$	74,323		100	%	$	54,275		100	%		37	%	$	79,167		100	%	$	74,323		100	%		7	%


														Six Months Ended
	Six Months Ended													July 2, 2022		% of Total			July 3, 2021		% of Total			% change
	July 3, 2021		% of Total			June 27, 2020		% of Total			% change			July 2, 2022		% of Total			July 3, 2021		% of Total			% change
TA instrument systems	$	100,109		71	%	$	72,525		69	%		38	%	$	112,097		72	%	$	100,109		71	%		12	%
TA service		40,881		29	%		32,478		31	%		26	%		44,486		28	%		40,881		29	%		9	%

Total TA net sales	$	140,990		100	%	$	105,003		100	%		34	%	$	156,583		100	%	$	140,990		100	%		11	%

TA instrument system and service sales growth in the second quarter and first half of ~~2021~~2022 was broad-based across ~~all~~most major geographies increasing ~~37%~~7% and ~~34%~~11%, respectively, and was primarily driven by ~~stronger~~strong customer demand ~~as a result of~~for our ~~customers continuing to resume laboratory~~thermal analysis instruments and ~~manufacturing operations.~~

~~In the second quarter and first half of 2021, the increase in TA instrument system sales was primarily driven by strength in all major regions and the~~services. The increase in TA service sales was ~~mostly~~primarily due to ~~customers continuing to resume their operations after~~ the ~~restrictions caused~~

~~by COVID-19 during~~

~~2020, as well as~~ sales of service plans and billings to a higher installed base of customers. The effect of foreign currency translation ~~increased~~decreased TA’s sales growth by 5% and 4% in the second quarter and first half of ~~2021,~~2022, respectively.

Cost of Sales

Cost of sales increased 10% and 11% for the second quarter and first half of ~~2021 increased 31% and 26%, respectively,~~2022, respectively. The increase in cost of sales in these periods is primarily due to the increase in sales ~~volumes during the year,~~volume as well as ~~the restoration~~an increase in ~~2021 of expenses that had been reduced as a result of the COVID-19 pandemic that consisted of salary reductions, furloughs~~electronic component and ~~reductions~~

~~in non-essential spending.~~

freight inflationary costs. Cost of sales 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 foreign currency translation to ~~increase~~significantly decrease gross profit ~~slightly~~ for the remainder of ~~2021. To date, the Company has not had significant issues with its supply chain; however, the prolonged impact~~

~~of COVID-19 on~~2022.

~~businesses could negatively impact our suppliers’ ability to deliver goods to us, as well as possibly increase the cost of those goods used in our manufacturing operations.~~

Selling and Administrative Expenses

Selling and administrative expenses increased ~~35%~~2% and ~~14%~~6% for the second quarter and first half of ~~2021,~~2022, respectively. The increase in selling and administrative expenses in these periods can be attributed to the salary merit and ~~incentive~~additional compensation ~~increases compared~~due to ~~2020 which was impacted by~~an increase in the ~~$33 million reduction in expenses from salary reductions, furloughs and reductions~~

~~in non-essential~~

~~spending.~~number of employees. In addition, the effect of foreign currency translation ~~increased~~decreased selling and administrative expenses by 4% and 3% for ~~both~~ the second quarter and first half of ~~2021.~~2022, respectively.

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As a percentage of net sales, selling and administrative expenses were 22.7% for both the second quarter and first half of 2022 and 23.2% and 23.4% for the second quarter and first half of 2021, ~~and 22.6% and 26.9% for the second quarter and first half of 2020,~~ respectively.

~~Table of Contents~~

Research and Development Expenses

Research and development expenses ~~increased 44% and 26%~~decreased 2% in the second quarter ~~and~~of 2022, while increasing by 2% in the first half of ~~2021, respectively. The increase in expense in these periods was impacted by the $9 million reduction in expenses from salary reductions, furloughs and reductions~~

~~in non-essential spending~~

~~in 2020.~~2022. The impact of foreign currency exchange ~~was neutral~~decreased expenses by 3% in the second quarter of ~~2021~~2022 and ~~decreased expenses by approximately 1%~~2% in the first half of ~~2021.~~2022.

Acquired

In-Process

Research & Development

During the first half of 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. This CDMS technology makes it possible to analyze extremely large proteins and protein complexes used in cell and gene therapies that would otherwise be difficult to analyze with conventional mass spectrometry. Once this technology is further developed, we anticipate that it will extend the capabilities of our mass spectrometry portfolio for a broader set of applications and as such the cost of this technology asset has been accounted for as Acquired

In-Process

Research and Development and expensed as part of costs and operating expenses in the statement of operations.

Other Income, ~~(Expense),~~ net

During the ~~second quarter~~first half of ~~2021,~~2022, the Company executed a settlement agreement to resolve patent infringement litigation with Bruker Corporation and Bruker Daltronik GmbH regarding their timsTOF product line. In connection with the settlement, the Company is entitled to receive $10sold an equity investment for $7 million in ~~guaranteed payments, including minimum royalty payments, which were recognized~~cash and recorded a gain on sale of approximately $4 million in other income, net on the statement of operations. The Company also recorded an other than temporary impairment loss on an equity method investment still held at the reporting date of approximately $4 million within other income, ~~in our consolidated~~net on the statement of ~~operations. In~~operations as the ~~first quarter~~company entered into a sale process and we adjusted the carrying value of our investment based on our portion of the total proceeds we expect to receive.

During the first half of 2021, the Company recorded an unrealized gain of $10 million due to an observable change in the fair value of an existing investment the Company does not have the ability to exercise significant influence over.

Interest Expense, ~~Net~~net

The ~~decrease in~~ net interest expense in the second quarter and first half of ~~2021 was~~2022 increased by approximately $1 million and $3 million, respectively, as compared to the same periods in the prior year. The increase in both periods can be primarily attributable to the lower interest ~~earned on higher cash, cash equivalents and investment balances.~~income benefit from the lower notional amount of interest rate cross currency swap agreements.

Provision for Income Taxes

The four principal jurisdictions in which the Company manufactures are the U.S., Ireland, the U.K. and Singapore, where the statutory tax rates were 21%, 12.5%, 19% and 17%, respectively, as of July ~~3, 2021.~~2, 2022. The Company had a contractual tax rate of 0% on qualifying activities in Singapore through March 2021, based upon the achievement of certain contractual milestones. The Company has a new Development and Expansion Incentive in Singapore that provides a concessionary income tax rate of 5% on certain types of income for the period April 1, 2021 through March 31, 2026. The effect of applying the concessionary income tax rates rather than the statutory tax rate to income from qualifying activities in Singapore increased the Company’s net income for the first ~~six months~~half of 2022 and 2021 ~~and 2020~~ by $9$10 million and $7$9 million, respectively, and increased the Company’s net income per diluted share by $0.16 and $0.14 for the first half of 2022 and ~~$0.11,~~2021, respectively.

The Company’s effective tax rate for the second quarter of 2022 and 2021 was 14.3% and ~~2020 was~~ 15.3% ~~and 15.4%~~, respectively. The decrease in the effective income tax rate can be attributed to the impact of quarter-specific adjustments, as discussed below, and differences in the proportionate amounts

of pre-tax income

recognized in jurisdictions with different effective tax rates.

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The Company’s effective tax rate for the first ~~six months~~half of 2022 and 2021 was 14.3% and ~~2020 was~~ 15.0% ~~and 13.2%~~, respectively. The effective tax rate for the first ~~six months~~half of July 2, 2022 includes a $5 million tax benefit related to stock-based compensation. This income tax benefit decreased the effective tax rate by 1.4 percentage points for the first half of July 2, 2022. The effective tax rate for the first half of July 3, 2021 includes a $4 million income tax benefit related to stock-based compensation. This income tax benefit decreased the effective tax rate by 1.1 percentage points for the first ~~six months~~half of July 3, 2021. The effective tax rate for the first six months of June 27, 2020 includes a $5 million income tax benefit related to certain restructuring charges and a $2 million income tax benefit related to stock-based compensation. These income tax benefits decreased the effective tax rate by 2.4 percentage points and 1.2 percentage points, respectively, for the first six months of June 27, 2020. The remaining 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.

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Liquidity and Capital Resources

Condensed Consolidated Statements of Cash Flows (in thousands):

Six Months Ended


July 3, 2021

June 27, 2020

Net income
   $ 315,419    $ 176,491
Depreciation and amortization
   64,743    60,203
Stock-based compensation
   15,596    18,122
Deferred income taxes
   6,107    (777 )
Change in accounts receivable
   18,985    86,978
Change in inventories
   (50,873 )    (27,089 )
Change in accounts payable and other current liabilities
   (35,328 )    34,714
Change in deferred revenue and customer advances
   91,631    37,558
Other changes
   (64,836 )    (35,754 )




Net cash provided by operating activities
   361,444    350,446
Net cash used in investing activities
   (281,106 )    (192,335 )
Net cash used in financing activities
   (48,191 )    (159,366 )
Effect of exchange rate changes on cash and cash equivalents
   (8,786 )    4,576




Increase in cash and cash equivalents
   $ 23,361    $ 3,321


	Six Months Ended
	July 2, 2022			July 3, 2021
Net income	$	324,695		$	315,419
Depreciation and amortization		66,891			64,743
Stock-based compensation		20,722			15,596
Deferred income taxes		(12,523	)		6,107
Acquired in-process research and development and other non-cash items		7,903			—
Change in accounts receivable		(57,377	)		18,985
Change in inventories		(65,070	)		(50,873	)
Change in accounts payable and other current liabilities		(32,197	)		(35,328	)
Change in deferred revenue and customer advances		70,027			91,631
Other changes		(68,208	)		(64,836	)

Net cash provided by operating activities		254,863			361,444
Net cash used in investing activities		(7,403	)		(281,106	)
Net cash used in financing activities		(310,181	)		(48,191	)
Effect of exchange rate changes on cash and cash equivalents		(19,616	)		(8,786	)

(Decrease) increase in cash and cash equivalents	$	(82,337	)	$	23,361

Cash Flow from Operating Activities

Net cash provided by operating activities was ~~$361~~$255 million and ~~$350~~$361 million during the first ~~six months~~half of ~~2021~~2022 and ~~2020,~~2021, respectively. This ~~increase~~decrease in operating cash flow was primarily a result of higher inventory levels due to higher sales volumes and higher incentive compensation payments in the first ~~six months~~half of ~~2021~~2022 compared to the first ~~six months~~half of ~~2020.~~2021. The changes within net cash provided by operating activities 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 changes in accounts receivable were primarily attributable to timing of payments made by customers and timing of sales. Days sales outstanding ~~decreased~~increased to 81 days at July 2, 2022 as compared to 73 days at July 3, ~~2021~~2021. This increase is days sales outstanding is primarily due to delays in the timing of shipments to our customers from a supply chain issue caused by the

COVID-19

pandemic lockdowns in China.

The increase in inventory can be primarily attributed to higher material costs as ~~compared~~well as an increase in safety stock levels to ~~87 days at June 27, 2020.~~help mitigate any future supply chain issues.

The changes in accounts payable and other current liabilities were a result of the timing of payments to vendors, as well as the annual payment of management incentive compensation. ~~The Company also paid $38 million of tax payments in the first half of 2021 associated with 2017 tax reform.~~

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.

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.

Cash Flow from Investing Activities

Net cash used in investing activities totaled ~~$281~~$7 million and ~~$192~~$281 million in the ~~six months ended July 3,~~first half of 2022 and 2021, ~~and June 27, 2020,~~ respectively. Additions to fixed assets and capitalized software were ~~$77~~$75 million and ~~$97~~$77 million in the ~~six months ended~~first half July 2, 2022 and July 3, 2021, ~~and June 27, 2020,~~ respectively. ~~In February 2018,~~The cash flows from investing activities in 2022 also included $17 million of capital expenditures related to the expansion of the Company’s ~~Board of Directors approved expanding its~~ precision chemistry consumable ~~manufacturing~~ operations in the ~~U.S. The Company anticipates spending an estimated $215 million to build and equip this new~~

~~state-of-the-art~~

manufacturing facility, which will be paid for with existing cash, investments and debt capacity. The Company incurred $31 million of costs associated with the construction of this facility during the six months ended July 3, 2021.United States. The Company has incurred ~~$182~~costs of $215 million on this facility through the end of the ~~second quarter~~first half of ~~2021.~~2022 and anticipates spending approximately $30 million to complete this new

state-of-the-art

facility in 2022.

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During the ~~six months ended July 3,~~first half of 2022 and 2021, ~~and June 27, 2020,~~ the Company purchased ~~$215~~$11 million and ~~$17~~$215 million of investments, respectively, while ~~$18~~$78 million and $2$18 million of investments matured, respectively, and were used for financing activities described below.

~~In January~~During the first half of ~~2020,~~2022, the Company ~~acquired all of~~paid $5 million for the ~~outstanding stock of Andrew Alliance, S.A.~~CDMS technology and ~~its two operating subsidiaries, Andrew Alliance USA, Inc.~~intellectual property right asset from Megadalton, and ~~Andrew Alliance France, SASU (collectively “Andrew Alliance”), for $80 million, net of cash acquired. The~~the Company ~~had~~is required to make an ~~equity investment in Andrew Alliance that was valued at~~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 ~~included~~Development and expensed as part of costs and operating expenses in the ~~total consideration.~~

statement of operations in the first half of 2022.

Cash Flow from Financing Activities

In March 2021, the Company issued senior unsecured notes with an aggregate principal amount of $500 million. The Series N $100 million notes have a five-year term and a fixed interest rate of 1.68%. The Series O $400 million notes have

~~a 10-year term~~

~~and a fixed interest rate of 2.25%~~ The Company ~~used the proceeds from the issuance of these senior unsecured notes to repay other outstanding debt and for general corporate purposes. During the six months ended July 3,~~entered into a credit agreement in September 2021 ~~and June 27, 2020,~~governing the Company’s ~~net debt borrowings increased by $250 million and $15 million, respectively.~~five-year, $1.8 billion revolving facility that matures in September 2026. As of July ~~3, 2021,~~2, 2022, the Company had a total of ~~$1.6~~$1.5 billion in outstanding debt, which consisted of $1.3 billion in outstanding senior unsecured notes and ~~$300~~$180 million borrowed under ~~a term loan under~~ the ~~credit agreement dated November 2017 (“2017~~2021 Credit ~~Agreement”).~~ Agreement. During the first half of 2022 and 2021, the Company’s net debt borrowings decreased by $30 million and increased by $250 million, respectively.

As of July ~~3, 2021,~~2, 2022, the Company ~~had a total amount available to borrow under the 2017 Credit Agreement of $1.5 billion after outstanding letters of credit. As of July 3, 2021, the Company was in compliance with all debt covenants.~~

~~In 2018 and 2019, the Company~~has entered into ~~a total of $560 million of~~

~~U.S.-to-Euro~~

three-year interest rate cross-currency swap derivative agreements ~~that~~with a notional value $560 million to hedge the ~~Company’s~~variability in the movement of foreign currency exchange rates on a portion of its Euro-denominated net ~~investment in its Euro denominated net assets.~~asset investments. As a result of entering into these agreements, the Company anticipates lowering net interest expense by approximately ~~$12~~$7 million ~~annually over the three-year term of the agreements. During the first six months of 2021, $70 million of the Company’s interest rate cross-currency swaps had matured and resulted~~ in ~~total payments of $4 million upon settlement. As of July 3, 2021, the Company had a total of $490 million of interest rate cross-currency swaps agreements outstanding.~~

2022.

In January 2019, the Company’s Board of Directors authorized the Company to repurchase up to $4 billion of its outstanding common stock over a

two-year

period. This new program replaced the remaining amounts available from the

pre-existing

program. During the six months ended July 3, 2021 and June 27, 2020, the Company repurchased $339 million and $167 million, respectively, of the Company’s outstanding common stock under authorized share repurchase programs. In addition, the Company repurchased $8 million and $9 million of common stock related to the vesting of restricted stock units during both the six months ended July 3, 2021 and June 27, 2020, respectively. In December 2020, the Company’s Board of Directors authorized the extension of the share repurchase program through January 21, 2023.

~~The~~ During the first half of 2022 and 2021, the Company ~~had $5~~repurchased $312 million and $339 million, respectively, of the Company’s outstanding common stock under authorized share repurchase programs. In addition, the Company repurchased $10 million and $8 million of ~~treasury~~common stock ~~purchases that were accrued and unsettled at July 3, 2021. These transactions were settled in July 2021,~~related to the vesting of restricted stock units during the ~~Company’s third quarter. The Company had $20 million~~first half of ~~treasury stock purchases that were accrued~~2022 and ~~unsettled at December 31, 2019. These transactions were settled in January 2020. The Company did not have any unsettled treasury stock purchases as of December 31, 2020 or June 27, 2020.~~

2021, respectively.

The Company received ~~$45~~$31 million and ~~$15~~$45 million of proceeds from the exercise of stock options and the purchase of shares pursuant to the Company’s employee stock purchase plan during the ~~six months ended July 3,~~first half 2022 and 2021, ~~and June 27, 2020,~~ respectively.

The Company had cash, cash equivalents and investments of ~~$664~~$420 million as of July ~~3, 2021.~~2, 2022. The majority of the Company’s cash and cash equivalents are generated from foreign operations, with ~~$353~~$399 million held by foreign subsidiaries at July ~~3, 2021,~~2, 2022, of which ~~$267~~$270 million was held in currencies other than U.S. dollars.

Management believes, 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.

Contractual Obligations, Commercial Commitments, Contingent Liabilities and Dividends

A summary of the Company’s contractual obligations and commercial commitments is included in the Company’s Annual Report on Form

10-K

for the year ended December 31, ~~2020,~~2021, as filed with the SEC on February 24, ~~2021.~~2022. The Company reviewed its contractual obligations and commercial commitments as of July ~~3, 2021~~2, 2022 and determined that there were no material changes outside the ordinary course of business from the information set forth in the Annual Report on Form

~~10-K,~~

~~with the exception of the recently issued senior unsecured notes as described in Note 6, “Debt.”~~

10-K.

~~Table of Contents~~

From time to time, the Company and its subsidiaries are involved in various litigation matters arising in the ordinary course of business. The Company believes that it has meritorious arguments in its current litigation matters and that any outcome, either individually or in the aggregate, will not be material to the Company’s financial position or results of operations.

During fiscal year ~~2021,~~2022, the Company expects to contribute a total of approximately $3 million to $6 million to its defined benefit plans, excluding the U.S. defined benefit pension plans.

The Company has not paid any dividends and has no plans, at this time, to pay any dividends in the future.

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Off-Balance

Sheet Arrangements

The Company has not created, and is not party to, any special-purpose or

off-balance

sheet entities for the purpose of raising capital, incurring debt or operating parts of its business that are not consolidated (to the extent of the Company’s ownership interest therein) into the consolidated financial statements. The Company has not entered into any transactions with unconsolidated entities whereby it has subordinated retained interests, derivative instruments or other contingent arrangements that expose the Company to material continuing risks, contingent liabilities or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the Company.

Critical Accounting Policies and Estimates

In the Company’s Annual Report on Form

10-K

for the year ended December 31, ~~2020,~~2021, as filed with the SEC on February 24, ~~2021,~~2022, the Company’s most critical accounting policies and estimates upon which its financial status depends were identified as those relating to revenue recognition, loss provisions on accounts receivable and inventory, valuation of long-lived assets, intangible assets and goodwill, income taxes, uncertain tax positions, warranty, litigation, pension and other postretirement benefit obligations, stock-based compensation and business combinations and asset acquisitions. The Company reviewed its policies and determined that those policies remain the Company’s most critical accounting policies for the six months ended July ~~3, 2021.~~2, 2022. The Company did not make any changes in those policies during the six months ended July ~~3, 2021.~~2, 2022.

New Accounting Pronouncements

Please refer to Note ~~13,~~14, Recent Accounting Standard Changes and Developments, in the Condensed Notes to Consolidated Financial Statements.

Special Note Regarding Forward-Looking Statements

Certain of the statements in this Quarterly Report on Form

10-Q,

including the information incorporated by reference herein, may contain forward-looking statements 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 the ongoing

COVID-19

pandemic; the impact of new or proposed tariff or trade regulations or changes in the interpretation or enforcement of existing regulations; 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

~~Table of Contents~~

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 of the 2017 Tax Act in the U.S.; 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.

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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 statements are subject to various risks and uncertainties, many of which are outside the control of the Company, including, and without limitation:

Risks related to the effects of the

COVID-19

pandemic on our business, including: portions of our global workforce being unable to work fully and/or effectively due to working remotely, illness, quarantines, government actions, facility closures or other reasons related to the

COVID-19

pandemic, increased risks of cyber attacks resulting from our temporary remote working model, disruptions in our manufacturing capabilities or to our supply chain and distribution network, including the impact from the lockdown in China, volatility and uncertainty in global capital markets limiting our ability to access capital, customers being unable to make timely payment for purchases, ~~and~~ volatility in demand for our ~~products.~~products and current global economic, sovereign and political conditions and uncertainties regarding the effect of the

COVID-19

pandemic.

Foreign currency exchange rate fluctuations that could adversely affect translation of the Company’s future sales, financial operating results and the condition of its

non-U.S.

operations, especially when a currency weakens against the U.S. dollar.

Current global economic, sovereign and political conditions and ~~uncertainties, particularly regarding the effect of the~~

~~COVID-19~~

~~pandemic;~~uncertainties; new or proposed tariffs or trade regulations or changes in the interpretation or enforcement of existing regulations; the United Kingdom’s exit from the European Union as well as the Chinese government’s ongoing tightening of restrictions on procurement by government-funded customers; the Company’s ability to access capital and maintain liquidity in volatile market conditions; rising interest rates; changes in timing and demand for the Company’s products among the Company’s customers and various market sectors or geographies, particularly if they should reduce capital expenditures or are unable to obtain funding, as in the cases of governmental, academic and research institutions; the effect of mergers and acquisitions on customer demand for the Company’s products; and the Company’s ability to sustain and enhance service.

Negative industry trends; 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; lack of acceptance of new products; expansion of our business in developing markets; spending by certain

end-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 regulatory burdens as the Company’s business evolves, especially with respect to the United States Food and Drug Administration and the United States Environmental Protection Agency, among others, as well as regulatory, environmental and logistical obstacles affecting the distribution of the Company’s products, completion of purchase order documentation by our customers and ability of customers to obtain letters of credit or other financing alternatives.

Risks associated with lawsuits, particularly involving claims for infringement of patents and other intellectual property rights.

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The impact and costs incurred from changes in accounting principles and practices; the impact and costs of changes in statutory or contractual tax rates in jurisdictions in which the Company operates, specifically as it relates to the 2017 Tax Act in the U.S.; shifts in taxable income among jurisdictions with different effective tax rates; and the outcome of and costs associated with ongoing and future tax audit examinations or changes in respective country legislation affecting the Company’s effective rates.

The impact and costs of war, in particular as a result of the ongoing conflict between Russia and Ukraine, and the possibility of further escalation resulting in a new geopolitical and regulatory instability.

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Certain of these and other factors are discussed under the heading “Risk Factors” under Part I, Item 1A of the Company’s Annual Report on Form

10-K

for the year ended December 31, ~~2020,~~2021, as filed with the SEC on February 24, ~~2021.~~2022. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements, whether because of these factors or for other reasons. All forward-looking statements speak only as of the date of this Quarterly Report on Form

10-Q

and are expressly qualified in their entirety by the cautionary statements included in this report. Except as required by law, the Company does not assume any obligation to update any forward-looking statements.

Item 3:

Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to the risk of interest rate fluctuations from the investments of cash generated from operations. Investments with maturities greater than 90 days are classified as investments, and are held primarily in U.S. dollar-denominated treasury bills and commercial paper, bank deposits and corporate debt securities. As of July ~~3, 2021,~~2, 2022, the Company estimates that a hypothetical adverse change of 100 basis points across all maturities would not have a material effect on the fair market value of its portfolio.

The Company is also exposed to the risk of exchange rate fluctuations. 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 July ~~3, 2021~~2, 2022 and December 31, ~~2020, $353~~2021, $399 million out of ~~$664~~$420 million and ~~$364~~$440 million out of ~~$443~~$569 million, respectively, of the Company’s total cash, cash equivalents and investments were held by foreign subsidiaries. In addition, ~~$267~~$270 million out of ~~$664~~$420 million and ~~$254~~$298 million out of ~~$443~~$569 million of cash, cash equivalents and investments were held in currencies other than the U.S. dollar at July ~~3, 2021~~2, 2022 and December 31, ~~2020,~~2021, respectively. As of July ~~3, 2021,~~2, 2022, the Company had no holdings in auction rate securities or commercial paper issued by structured investment vehicles.

Assuming a hypothetical adverse change of 10% in

year-end

exchange rates (a strengthening of the U.S. dollar), the fair market value of the Company’s cash, cash equivalents and investments held in currencies other than the U.S. dollar as of July ~~3, 2021~~2, 2022 would decrease by approximately ~~$25~~$30 million, of which the majority would be recorded to foreign currency translation in other comprehensive income within stockholders’ equity.

There have been no other material changes in the Company’s market risk during the ~~six months ended~~first half July ~~3, 2021.~~2, 2022. For information regarding the Company’s market risk, refer to Item 7A of Part II of the Company’s Annual Report on Form

10-K

for the year ended December 31, ~~2020,~~2021, as filed with the SEC on February 24, ~~2021.~~2022.

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 officer), with the participation of management, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in

Rules 13a-15(e)

and

15d-15(e)

under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form

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 July ~~3, 2021~~2, 2022 (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 Control Over Financial Reporting

No change was identified in the Company’s internal control over financial reporting (as defined in

Rules 13a-15(f)

and

15d-15(f)

under the Exchange Act) during the quarter ended July ~~3, 2021~~2, 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II:

Other Information

Item 1:

Legal Proceedings

There have been no material changes in the Company’s legal proceedings during the three months ended July ~~3, 2021~~2, 2022 as described in Item 3 of Part I of the Company’s Annual Report on Form

10-K

for the year ended December 31, ~~2020,~~2021, as filed with the SEC on February 24, ~~2021.~~2022.

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 Form

10-K

for the year ended December 31, ~~2020,~~2021, as filed with the SEC on February 24, ~~2021.~~2022. The Company reviewed its risk factors as of July ~~3, 2021~~2, 2022 and determined that there were no material changes from the ones set forth in the Form

10-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 Form

10-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 the three months ended July ~~3, 2021~~2, 2022 of equity securities registered by the Company under the Exchange Act (in thousands, except per share data):

Period

Total Number
of Shares
Purchased (1)

Average
Price Paid
per Share

Total Number of
Shares Purchased
as Part of Publicly
Announced
Programs

Maximum Dollar
Value of Shares that
May Yet Be
Purchased Under
the Programs (2)

April 4, 2021 to May 1, 2021
   188    $ 301.59    188    $ 1,295,113
May 2, 2021 to May 29, 2021
   153    $ 314.28    153    $ 1,247,189
May 30, 2021 to July 3, 2021
   183    $ 334.37    183    $ 1,185,905





Total
   524    $ 316.76    524    $ 1,185,905


Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs (2)
April 3, 2022 to April 30, 2022		166	$	302.44		166	$	673,941
May 1, 2022 to May 28, 2022		156	$	320.74		155	$	624,106
May 29, 2022 to July 2, 2022		158	$	326.65		158	$	572,627

Total		480	$	316.36		479	$	572,627

(1)	The Company repurchased ~~fewer than~~approximately one thousand shares of common stock at a cost of less than $1 million related to the vesting of restricted stock during the three months ended July ~~3, 2021.~~2, 2022.

(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

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 repurchase program through January 21, 2023. 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.

4240

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Item 6:

Exhibits


Exhibit Number		Description of Document

~~10.1~~		Employment Offer Letter, dated April 16, 2021, between Waters Corporation and Amol Chaubal (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended April 3, 2021 (File No. ~~001-140010)).~~

~~10.2~~		Change of Control Agreement, dated April 16, 2021, between Waters Corporation and Amol Chaubal (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended April 3, 2021 (File No. 001-140010)).

~~10.3~~		Transition and Consulting Agreement, dated April 16, 2021, between Waters Corporation and Michael C. Harrington (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended April 3, 2021 (File No. 001-140010)).

~~10.4~~		Transition and Consulting Agreement, dated April 19, 2021, between Waters Corporation and Ian S. King (incorporated by reference to Exhibit 10.25 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended April 3, 2021 (File No. 001-140010)).

~~10.5~~		Letter Agreement, dated April 18, 2021, between Waters Corporation and Jonathan M. Pratt (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended April 3, 2021 (File No. 001-140010)).

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 Form 10-Q for the quarter ended July ~~3, 2021,~~2, 2022, formatted in 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 (vi) Condensed Notes to Consolidated Financial Statements (unaudited).

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.

4341

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ATERS

ORPORATION

/s/ Amol Chaubal

Amol Chaubal

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

(Principal Accounting Officer)

Date: August ~~5, 2021~~4, 2022

4442


	Three Months Ended						Six Months Ended
	July 3, 2021			June 27, 2020			July 3, 2021			June 27, 2020
	(In thousands)						(In thousands)
Net income	$	167,292		$	122,929		$	315,419		$	176,491

Other comprehensive income (loss):

Foreign currency translation		(9	)		11,587			5,816			(7,757	)

Unrealized losses on investments before income taxes		(5	)		0			(15	)		0

Unrealized losses on investments, net of tax		(5	)		0			(15	)		0

Retirement liability adjustment before reclassifications		(260	)		(522	)		794			(226	)
Amounts reclassified to other income		218			336			434			676

Retirement liability adjustment before income taxes		(42	)		(186	)		1,228			450
Income tax benefit (expense)		83			126			(265	)		(112	)

Retirement liability adjustment, net of tax		41			(60	)		963			338

Other comprehensive income (loss)		27			11,527			6,764			(7,419	)

Comprehensive income	$	167,319		$	134,456		$	322,183		$	169,072


	Number of Common Shares		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Deficit
Balance March 28, 2020		161,253	$	1,613	$	1,947,626	$	6,639,980	$	(8,788,801	)	$	(138,417	)	$	(337,999	)
Net income		—		—		—		122,929		—			—			122,929
Other comprehensive income		—		—		—		—		—			11,527			11,527
Issuance of common stock for employees:
Employee Stock Purchase Plan		12		—		2,216		—		—			—			2,216
Stock options exercised		6		—		779		—		—			—			779
Treasury stock		—		—		—		—		(71	)		—			(71	)
Stock-based compensation		2		—		8,877		—		—			—			8,877

Balance June 27, 2020		161,273	$	1,613	$	1,959,498	$	6,762,909	$	(8,788,872	)	$	(126,890	)	$	(191,742	)


	Number of Common Shares		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance April 3, 2021		161,859	$	1,619	$	2,054,076	$	7,256,116	$	(8,969,643	)	$	(111,206	)	$	230,962
Net income		—		—		—		167,292		—			—			167,292
Other comprehensive income		—		—		—		—		—			27			27
Issuance of common stock for employees:
Employee Stock Purchase Plan		22		—		5,156		—		—			—			5,156
Stock options exercised		135		1		23,584		—		—			—			23,585
Treasury stock		—		—		—		—		(165,985	)		—			(165,985	)
Stock-based compensation		1				7,236		—		—			—			7,236

Balance July 3, 2021		162,017	$	1,620	$	2,090,052	$	7,423,408	$	(9,135,628	)	$	(111,179	)	$	268,273


	Balance at Beginning of Period		Impact of CECL Adoption		Additions		Deductions			Balance at End of Period
Allowance for Credit Losses
July 3, 2021	$	14,381	$	—	$	3,042	$	(2,625	)	$	14,798
June 27, 2020	$	9,560	$	985	$	6,664	$	(3,901	)	$	13,308


	Total at July 3, 2021		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	$	12,051	$	0	$	12,051	$	0
Corporate debt securities		130,231		0		130,231		0
Time deposits		75,897		0		75,897		0
Waters 401(k) Restoration Plan assets		40,965		40,965		0		0
Foreign currency exchange contracts		223		0		223		0

Total	$	259,367	$	40,965	$	218,402	$	0


Liabilities:
Contingent consideration	$	1,266	$	0	$	0	$	1,266
Foreign currency exchange contracts		142		0		142		0
Interest rate cross-currency swap agreements		22,457		0		22,457		0

Total	$	23,865	$	0	$	22,599	$	1,266


	Total at December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Time deposits	$	6,451	$	—	$	6,451	$	—
Waters 401(k) Restoration Plan assets		38,988		38,988		—		—
Foreign currency exchange contracts		836		—		836		—

Total	$	46,275	$	38,988	$	7,287	$	—

Liabilities:
Contingent consideration	$	1,185	$	—	$	—	$	1,185
Foreign currency exchange contracts		185		—		185		—
Interest rate cross-currency swap agreements		44,996		—		44,996		—

Total	$	46,366	$	—	$	45,181	$	1,185


	Financial Statement Classification	Three Months Ended						Six Months Ended
		July 3, 2021			June 27, 2020			July 3, 2021			June 27, 2020
		July 3, 2021			June 27, 2020			July 3, 2021			June 27, 2020
Foreign currency exchange contracts:
Realized (losses) gains on closed contracts	Cost of sales	$	(213	)	$	1,823		$	1,455		$	(1,157	)
Unrealized (losses) gains on open contracts	Cost of sales		(569	)		(678	)		(1,323	)		646

Cumulative net pre-tax (losses) gains	Cost of sales	$	(782	)	$	1,145		$	132		$	(511	)

Interest rate cross-currency swap agreements:
Interest earned	Interest income	$	3,373		$	3,784		$	7,200		$	7,498
Unrealized (losses) gains on open contracts	Stockholders’ equity (deficit)	$	(4,229	)	$	(5,615	)	$	17,015		$	(93	)


	Balance at Beginning of Period		Accruals for Warranties		Settlements Made			Balance at End of Period
Accrued warranty liability:
July 3, 2021	$	10,950	$	4,719	$	(4,859	)	$	10,810
June 27, 2020	$	11,964	$	3,577	$	(5,428	)	$	10,113


	July 3, 2021
	Amortized Cost		Unrealized Gain		Unrealized Loss			Fair Value
U.S. Treasury securities	$	12,050	$	1	$	—		$	12,051
Corporate debt securities		130,246		3		(18	)		130,231
Time deposits		75,897		—		—			75,897

Total	$	218,193	$	4	$	(18	)	$	218,179

Amounts included in:
Cash equivalents	$	14,614	$	0	$	(1	)	$	14,613
Investments		203,579		4		(17	)		203,566

Total	$	218,193	$	4	$	(18	)	$	218,179


	December 31, 2020
	Amortized Cost		Unrealized Gain		Unrealized Loss			Fair Value
Time deposits		6,451		—		—			6,451

Total	$	6,451	$	—	$	—		$	6,451

Amounts included in:
Investments		6,451		—		—			6,451

Total	$	6,451	$	—	$	—		$	6,451


	July 3, 2021							December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Weighted- Average Amortization Period			Gross Carrying Amount		Accumulated Amortization		Weighted- Average Amortization Period
Capitalized software	$	578,641	$	418,409		5	years	$	584,452	$	409,847		5	years
Purchased intangibles		203,421		162,312		11	years		205,585		160,342		11	years
Trademarks		9,680		—		—			9,680		—		—
Licenses		12,882		5,803		7	years		5,923		5,697		6	years
Patents and other intangibles		94,043		65,307		8	years		90,699		61,808		8	years

Total	$	898,667	$	651,831		7	years	$	896,339	$	637,694		7	years


Senior Unsecured Notes	Term		Interest Rate			Face Value (in millions)		Maturity Date
Series N		5 years		1.68	%	$	100		March 2026
Series O		10 years		2.25	%	$	400		March 2031


	July 3, 2021			December 31, 2020
Senior unsecured notes—Series E—3.97%, due March 2021		—			50,000
Senior unsecured notes—Series F—3.40%, due June 2021		0			100,000

Total notes payable and debt, current		0			150,000
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
Senior unsecured notes—Series N—1.68%, due March 2026		100,000			—
Senior unsecured notes—Series O—2.25%, due March 2031		400,000			—
Credit agreement		300,000			400,000
Unamortized debt issuance costs		(6,633	)		(3,485	)

Total long-term debt		1,603,367			1,206,515

Total debt	$	1,603,367		$	1,356,515


	Number of Shares			Exercise Price per Share					Weighted-Average Exercise Price per Share
Outstanding at December 31, 2020		1,067		$	75.94	to	$	238.52	$	179.59
Granted		159		$	250.15	to	$	346.56	$	280.92
Exercised		(230	)	$	99.22	to	$	238.52	$	168.39
Canceled		(228	)	$	139.51	to	$	224.37	$	194.59

Outstanding at July 3, 2021		768		$	75.94	to	$	346.56	$	199.21


	Shares			Weighted-Average Grant Date Fair Value per Share
Unvested at December 31, 2020		271		$	202.00
Granted		88		$	282.94
Vested		(81	)	$	182.26
Forfeited		(14	)	$	220.23

Unvested at July 3, 2021		264		$	234.07


	Three Months Ended July 3, 2021
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	167,292		61,685	$	2.71
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		0		472		(0.02	)

Net income per diluted common share	$	167,292		62,157	$	2.69


	Three Months Ended June 27, 2020
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	122,929		61,944	$	1.98
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		—		240		—

Net income per diluted common share	$	122,929		62,184	$	1.98


	Six Months Ended July 3, 2021
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	315,419		61,979	$	5.09
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		0		456		(0.04	)

Net income per diluted common share	$	315,419		62,435	$	5.05


	Six Months Ended June 27, 2020
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	176,491		62,085	$	2.84
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		0		319		(0.01	)

Net income per diluted common share	$	176,491		62,404	$	2.83


	Six Months Ended July 2, 2022
	Net Income		Weighted- Average Shares		Per Share
	(Numerator)		(Denominator)		Amount

Net income per basic common share	$	324,695		60,399	$	5.38
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		—		345		(0.03	)

Net income per diluted common share	$	324,695		60,744	$	5.35


	Currency Translation			Unrealized Gain (Loss) on Retirement Plans			Unrealized Gain (Loss) on Investments			Accumulated Other Comprehensive Loss
Balance at December 31, 2021	$	(99,985	)	$	(11,860	)	$	(20	)	$	(111,865	)
Other comprehensive (loss) income, net of tax		(30,476	)		932			20			(29,524	)

Balance at July 2, 2022	$	(130,461	)	$	(10,928	)	$	—		$	(141,389	)


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

Balance at December 31, 2020	$	(98,082	)	$	(19,861	)	$	0		$	(117,943	)
Other comprehensive income (loss), net of tax		5,816			963			(15	)		6,764

Balance at July 3, 2021	$	(92,266	)	$	(18,898	)	$	(15	)	$	(111,179	)

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company