Waters (WAT) 8-K Waters Corporation Reports Third Quarter Results

Contact: Gene Cassis, Vice President of Investor Relations, 508-482-2349

Waters Corporation Reports Third Quarter Results

Milford, Mass., October 25, 2005— Waters Corporation (NYSE:WAT) announced today that its third quarter 2005 sales grew 3% compared to sales in the third quarter of 2004. Foreign currency translation had a negligible effect on this growth rate. Earnings per diluted share (E.P.S.), including a tax provision related to a qualified dividends distribution under the American Jobs Creation Act of 2004, were $0.22. Excluding this tax provision, E.P.S. for the quarter would be $0.43, a 2% increase over the $0.42 E.P.S. reported in the third quarter of 2004.

Through the first nine months of 2005, sales for the Company were $826.0 million, a 6% increase over sales in the first nine months of 2004 of $780.4 million, with foreign currency translation benefiting sales growth by 1%. Through the first nine months of 2005, E.P.S. were $1.07 compared to $1.24 for the comparable period in 2004. On a non-GAAP basis and including the adjustments in the attached reconciliation, E.P.S. grew 7% in the nine months of 2005 to $1.27 from $1.19 in 2004.

Commenting on the quarter, Douglas Berthiaume, Chairman, President and Chief Executive Officer said, “We are disappointed in our third quarter performance as sales of instruments to our largest pharmaceutical customers were weak due to delays and reductions in their capital spending plans. Unfortunately, revenue growth associated with our new product initiatives was insufficient to offset this market weakness.”

As communicated in a prior press release, Waters Corporation will webcast its third quarter 2005 financial results conference call this morning, October 25, 2005 at 8:30 a.m. eastern time. To listen to the call, connect towww.waters.info , choose Investor Relations and click on the Live Webcast. A replay of the call will be available through November 1, 2005, similarly by webcast and also by phone at 203-369-3997.

Waters Corporation holds worldwide leading positions in three complementary analytical technologies — liquid chromatography, mass spectrometry and thermal analysis. These markets account for $4.5 - $5.0 billion of the overall $20 + billion analytical instrument market.

CAUTIONARY STATEMENT

This release contains “forward-looking” statements regarding future results and events, including statements regarding expected financial results, future growth and customer demand that involve a number of risks and uncertainties. For this purpose, any statements contained herein that are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words, “believes”, “anticipates”, “plans”, “expects”, “intends”, “appears”, “estimates”, “projects”, and similar expressions are intended to identify forward-looking statements. The Company’s actual future results may differ significantly from the results discussed in the forward-looking statements within this release for a variety of reasons, including and without limitation, fluctuations in capital expenditures by our customers, in particular large pharmaceutical companies, regulatory and/or administrative obstacles to the timely completion of purchase order documentation, introduction of competing products, such as improved research-grade mass spectrometers, higher speed and/or more sensitive liquid chromatographs, by other companies, pressures on prices from competitors and/or customers, regulatory obstacles to new product introductions, lack of acceptance of new products, other changes in the demands of the Company’s healthcare and pharmaceutical company customers, changes in distribution of the Company’s products, changes in the healthcare market and the pharmaceutical industry, loss of market share through competition, potential product liability or other claims against the Company as a result of the use of its products, risks associated with lawsuits and other legal actions particularly involving claims for infringement of patents and other intellectual property rights, and foreign exchange rate fluctuations potentially adversely affecting translation of the Company’s future non-U.S. operating results . Such factors and others are discussed more fully in the section entitled “Risk Factors” of the Company’s annual report on Form 10-K for the year ended December 31, 2004, as filed with the Securities and Exchange Commission (the “SEC”), which “Risk Factors” discussion is incorporated by reference in this release. The forward-looking statements included in this release represent the Company’s estimates or views as of the date of this release report and should not be relied upon as representing the Company’s estimates or views as of any date subsequent to the date of this release. The Company specifically disclaims any obligation to update these forward-looking statements in the future.

Waters Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

	(Unaudited)						(Unaudited)
	Three Months Ended						Nine Months Ended
	October 1,			October 2,			October 1,			October 2,
	2005			2004			2005			2004
Net sales		273,031			264,808			825,966			780,382
Cost of sales		115,508			111,009			344,375			324,663
Gross profit		157,523			153,799			481,591			455,719
Selling and administrative expenses		76,645			71,967			240,101			219,234
Research and development expenses		16,982			17,001			50,214			48,766
Purchased intangibles amortization		1,241			1,228			3,789			3,578
Litigation settlement and provisions (A)		—			—			—			(9,277	)
Restructuring and other unusual charges, net		—			(158	)		—			(54	)
Operating income		62,655			63,761			187,487			193,472
Interest (expense) income, net		(1,969	)		445			(2,068	)		1,671
Income from operations before income taxes		60,686			64,206			185,419			195,143
Provision for income taxes (B)		34,969			12,266			59,042			42,607
Net income		25,717			51,940			126,377			152,536
Net income per basic common share	$	0.23		$	0.43		$	1.09		$	1.28
Weighted average number of basic common shares		112,981			119,519			115,923			119,452
Net income per diluted common share	$	0.22		$	0.42		$	1.07		$	1.24
Weighted average number of diluted common shares and equivalents		114,942			122,597			117,943			123,168

(A)	The results for the nine months ended October 2, 2004 include provisions of $7.8 million for ongoing patent litigation with Hewlett-Packard Company and settlement income of $17.1 million related to patent litigation with Perkin-Elmer Corporation.
(B)	The results for the three months and nine months ended October 1, 2005 include a tax provision of approximately $24.0 million related to a qualified dividends distribution under the American Jobs Creation Act of 2004.

Waters Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)

	(Unaudited)					(Unaudited)
	Three Months Ended					Nine Months Ended
	October 1,		October 2,			October 1,		October 2,
	2005		2004			2005		2004
Reconciliation of income per diluted share, in accordance with generally accepted accounting principles, with adjusted results:
Income per diluted share	$	0.22	$	0.42		$	1.07	$	1.24
Adjustment for litigation settlement and provisions, net of tax		—		—			—		(5,688	)
Income per diluted share effect		—		—			—		(0.05	)
Adjustment for restructuring and other unusual charges, net of tax		—		(125	)				(57	)
Income per diluted share effect		—		(0.00	)		—		(0.00	)
Adjustment for tax provision for qualified dividends distribution		24,000		—			24,000		—
Income per diluted share effect		0.21		—			0.20		—
Adjusted income per diluted share:	$	0.43	$	0.42		$	1.27	$	1.19

The adjusted income per diluted share presented above is used by the management of the Company to measure operating performance with prior periods and is not in accordance with generally accepted accounting principles (GAAP). The above reconciliation identifies items management has excluded as non-operational transactions. Management feels these transactions are not indicative of understanding the ongoing operations of the business or its future outlook.

Waters Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands and unaudited)

	October 1, 2005		December 31, 2004
Cash and cash equivalents		488,903		539,077
Accounts receivable		221,857		271,731
Inventories		140,965		139,900
Other current assets		18,548		23,176
Total current assets		870,273		973,884
Property, plant and equipment, net		139,943		135,908
Other assets		344,547		350,634
Total assets		1,354,763		1,460,426
Notes payable and debt		403,791		206,663
Accounts payable and accrued expenses		305,939		286,327
Total current liabilities		709,730		492,990
Long-term debt		250,000		250,000
Other long-term liabilities		40,400		38,750
Total liabilities		1,000,130		781,740
Total equity		354,633		678,686
Total liabilities and equity		1,354,763		1,460,426