SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________TO__________.
COMMISSION FILE NUMBER: 01-14010
WATERS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN THE CHARTER)
DELAWARE 13-3668640
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
34 MAPLE STREET
Milford, Massachusetts 01757
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (508) 478-2000
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 and 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 [X] No [ ]
Number of shares outstanding of the Registrant's common stock as of May 11,
2001: 130,460,073.
1
WATERS CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
INDEX
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2001 and 3
December 31, 2000
Consolidated Statements of Operations for the three
months ended March 31, 2001 and 2000 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 2001 and 2000 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market 11
Risk
PART II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, 2001 December 31, 2000
------------------ ------------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 89,192 $ 75,509
Accounts receivable, less allowances for doubtful accounts of
$3,156 and $2,815 at March 31, 2001 and December 31, 2000,
respectively 166,226 167,713
Inventories 96,210 87,275
Other current assets 20,363 13,299
------------------ ------------------
Total current assets 371,991 343,796
Property, plant and equipment, net of accumulated depreciation
of $72,347 and $68,357 at March 31, 2001 and December 31,
2000, respectively 104,700 102,608
Other assets 78,116 80,486
Goodwill, less accumulated amortization of $20,265 and $19,464 at
March 31, 2001 and December 31, 2000, respectively 163,243 165,455
------------------ ------------------
Total assets $718,050 $692,345
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable 2,277 4,879
Accounts payable 37,079 43,310
Accrued compensation 7,119 18,299
Deferred revenue and customer advances 45,913 40,044
Accrued retirement plan contributions 4,901 4,405
Accrued income taxes 46,931 45,653
Accrued other taxes 3,570 3,590
Other current liabilities 59,104 60,353
------------------ ------------------
Total current liabilities 206,894 220,533
Other liabilities 19,015 20,031
------------------ ------------------
Total liabilities 225,909 240,564
Stockholders' equity:
Common stock, par value $0.01 per share, 200,000 shares authorized,
130,443 and 129,811 shares issued and outstanding at March 31,
2001 and December 31, 2000, respectively 1,304 1,298
Additional paid-in capital 221,921 213,261
Retained earnings 283,783 245,383
Accumulated other comprehensive (loss) (14,867) (8,161)
------------------ ------------------
Total stockholders' equity 492,141 451,781
------------------ ------------------
Total liabilities and stockholders' equity $718,050 $692,345
=================== ===================
The accompanying notes are an integral part of the consolidated financial statements.
3
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
FOR THE THREE MONTHS ENDED
--------------------------------------------
MARCH 31, 2001 MARCH 31, 2000
---------------- ---------------
Net sales $201,032 $180,202
Cost of sales 73,298 66,340
--------------- --------------
Gross profit 127,734 113,862
Selling, general and administrative expenses 65,907 60,395
Research and development expenses 11,038 10,362
Goodwill and purchased technology amortization 1,748 1,811
--------------- --------------
Operating income 49,041 41,294
Interest income (expense), net 1,486 (701)
--------------- --------------
Income before income taxes 50,527 40,593
Provision for income taxes 12,127 10,545
--------------- --------------
Income before cumulative effect of change in accounting principle 38,400 30,048
Cumulative effect of change in accounting principle - (10,771)
--------------- --------------
Net income $ 38,400 $ 19,277
=============== ==============
Income per basic common share:
Net income per basic common share before cumulative effect
of change in accounting principle $ 0.30 $ 0.24
Cumulative effect of change in accounting principle - (0.09)
--------------- --------------
Net income per basic common share $ 0.30 $ 0.15
=============== ==============
Weighted average number of basic common shares 130,166 125,602
Income per diluted common share:
Net income per diluted common share before cumulative effect
of change in accounting principle $ 0.28 $ 0.22
Cumulative effect of change in accounting principle - (0.08)
--------------- --------------
Net income per diluted common share $ 0.28 $ 0.14
=============== ==============
Weighted average number of diluted common shares and equivalents 137,933 135,184
The accompanying notes are an integral part of the consolidated financial
statements.
4
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
FOR THE THREE MONTHS ENDED
----------------------------------------------------------------
MARCH 31, 2001 March 31, 2000
----------------------- ------------------------
Cash flows from operating activities:
Net income $ 38,400 $ 19,277
Adjustments to reconcile net income to net cash provided by
operating activities:
Deferred income taxes (1,225) (3,880)
Depreciation 4,901 4,292
Amortization of intangibles 2,970 3,424
Compensatory stock option expense - 55
Tax benefit related to stock option plans 4,717 -
Change in operating assets and liabilities, net of acquisitions:
(Increase) decrease in accounts receivable (4,309) 16,596
(Increase) in inventories (11,021) (8,977)
(Increase) in other current assets (2,850) (3,164)
(Increase) in other assets (1,231) (1,059)
(Decrease) increase in accounts payable and other current
liabilities (11,621) 4,392
Increase in deferred revenue and customer advances 6,404 4,008
(Decrease) increase in other liabilities (565) 272
-------------------------- --------------------------
Net cash provided by operating activities 24,570 35,236
Cash flows from investing activities:
Additions to property, plant, equipment, software
capitalization and other intangibles (9,554) (7,800)
Investments in unaffiliated companies (2,000) -
Loan repayments from officers 723 343
----------------------- ------------------------
Net cash (used in) investing activities (10,831) (7,457)
Cash flows from financing activities:
Net (repayment) of bank debt (2,602) (38,015)
Proceeds from stock plans 3,949 8,833
----------------------- ------------------------
Net cash provided by (used in) financing activities 1,347 (29,182)
Effect of exchange rate changes on cash and cash equivalents (1,403) (174)
-------------------------- --------------------------
Increase (decrease) in cash and cash equivalents 13,683 (1,577)
Cash and cash equivalents at beginning of period 75,509 3,803
----------------------- ------------------------
Cash and cash equivalents at end of period $ 89,192 $ 2,226
========================== ==========================
The accompanying notes are an integral part of the
consolidated financial statements.
5
WATERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND BASIS OF PRESENTATION
Waters Corporation ("Waters" or the "Company"), an analytical instrument
manufacturer, is the world's largest manufacturer and distributor of high
performance liquid chromatography ("HPLC") instruments, chromatography columns
and other consumables and related service. The Company has the largest HPLC
market share in the United States, Europe and non-Japan Asia and has a leading
position in Japan. HPLC, the largest product segment of the analytical
instrument market, is utilized in a broad range of industries to detect,
identify, monitor and measure the chemical, physical and biological composition
of materials, and to purify a full range of compounds. Through its Micromass
Limited ("Micromass") subsidiary, the Company is a market leader in the
development, manufacture, and distribution of mass spectrometry ("MS")
instruments, which are complementary products that can be integrated and used
along with other analytical instruments, especially HPLC. Through its TA
Instruments, Inc. ("TAI") subsidiary, the Company is also the world's leader in
thermal analysis, a prevalent and complementary technique used in the analysis
of polymers. As discussed in Note 7 to the financial statements, these three
operating segments have been aggregated into one reporting segment for financial
statement purposes.
The accompanying unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP"). The
consolidated financial statements include the accounts of the Company and its
subsidiaries. All material intercompany balances and transactions have been
eliminated. Certain amounts from prior years have been reclassified in the
accompanying financial statements in order to be consistent with the current
year's classifications.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect (i) the reported amounts of assets and liabilities, (ii) disclosure of
contingent assets and liabilities at the dates of the financial statements and
(iii) the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
It is management's opinion that the accompanying interim financial statements
reflect all adjustments (which are normal and recurring) necessary for a fair
presentation of the results for the interim periods. The interim financial
statements should be read in conjunction with the consolidated financial
statements included in the Company's Form 10-K filing with the Securities and
Exchange Commission for the year ended December 31, 2000.
2. ACCOUNTING CHANGES
Revenue Recognition
Effective January 1, 2000, the Company changed its method of revenue recognition
for certain products requiring installation in accordance with Staff Accounting
Bulletin ("SAB") 101, Revenue Recognition in Financial Statements. Previously,
the Company recognized revenue related to both the sale and the installation of
certain products at the time of shipment. The larger of the contractual cash
holdback or the fair value of the installation service is now deferred when the
product is shipped and recognized as a multiple element arrangement in
accordance with SAB 101 when installation is complete. The cumulative effect of
the change on prior years resulted in a charge to income of $10,771 (net of an
income tax benefit of $3,785), which is included in income for the three months
ended March 31, 2000 (the "2000 quarter"). The adoption of SAB 101 had virtually
no effect on the Company's results of operations for the 2000 quarter, excluding
the cumulative effect.
6
WATERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Accounting for Derivatives and Hedging Activities
Effective January 1, 2001, the Company adopted Statement of Financial Accounting
Standard ("SFAS") 133, Accounting for Derivative Instruments and Hedging
Activities, as amended, which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. All derivatives, whether
designated in hedging relationships or not, are required to be recorded on the
balance sheet at fair value as either assets or liabilities. If the derivative
is designated as a fair value hedge, the changes in the fair value of the
derivative and of the hedged item attributable to the hedged risk are recognized
in earnings. If the derivative is designated as a cash flow hedge, the
effective portions of changes in the fair value of the derivative are recorded
in other comprehensive income ("OCI") and are recognized in earnings when the
hedged item affects earnings; ineffective portions of changes in fair value are
recognized in earnings. The impact of adopting SFAS 133 on January 1, 2001 was
not material to the Company.
The Company currently uses derivative instruments to manage exposures to
foreign currency risks. The Company's objectives for holding derivatives are to
minimize foreign currency risk using the most effective methods to eliminate or
reduce the impact of foreign currency exposure. The Company documents all
relationships between hedging instruments and hedged items, and links all
derivatives designated as fair value, cash flow or foreign currency hedges to
specific assets and liabilities on the balance sheet or to specific forecasted
transactions. The Company also assesses and documents, both at the hedges'
inception and on an ongoing basis, whether the derivatives that are used in
hedging transactions are highly effective in offsetting changes in fair values
or cash flows associated with the hedged items.
The Company has operations in various countries and currencies throughout the
world. As a result, the Company's financial position, results of operations and
cash flows can be affected by fluctuations in foreign currency exchange rates.
The Company uses debt swap agreements to mitigate partially such effects. In
January 2001, the Company entered into debt swap agreements, in European and
Japanese currencies, with notional amounts totaling approximately $114.1 million
with terms of six months. The debt swap agreements have been designated as
foreign currency hedges of a net investment in foreign operations. For the three
months ended March 31, 2001, the Company recorded a cumulative unrealized pre-
tax gain of $4.5 million to OCI, which partially offset hedged foreign exchange
impacts. The Company recorded $1.9 million of interest income for the three
months end March 31, 2001, which included $.7 million related to the debt swap
agreements.
The Company also enters into forward foreign exchange contracts, not
designated as cash flow hedging instruments under SFAS 133, principally to hedge
the impact of currency fluctuations on certain intercompany balances. Principal
hedged currencies include the euro, Japanese yen and British pound. The periods
of these forward contracts typically range from three months to one year. At
March 31, 2001 and December 31, 2000, the Company held forward foreign exchange
contracts with notional amounts totaling approximately $56.0 million and $60.0
million, respectively.
3. INVENTORIES
Inventories are classified as follows:
March 31, December 31,
2001 2000
------------ ------------
Raw materials $37,938 $32,760
Work in progress 21,103 20,269
Finished goods 37,169 34,246
----------- ------------
Total inventories $96,210 $87,275
============ ============
4. INCOME TAXES
The Company's effective tax rate for the three months ended March 31, 2001 and
2000, was 24% and 26%, respectively.
7
WATERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
5. EARNINGS PER SHARE
Basic and diluted EPS calculations are detailed as follows:
Three Months Ended March 31, 2001
-------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net income per basic common share before cumulative
effect of change in accounting principle $38,400 130,166 $0.30
============ ============== ===========
Effect of dilutive securities:
Options outstanding 7,591
Options exercised 176
Net income per diluted common share before cumulative ------------ -------------- -----------
effect of change in accounting principle $38,400 137,933 $0.28
============ ============== ===========
----------------------------------------------------------------
Three Months Ended March 31, 2000
----------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------- ------------ ---------
Net income per basic common share before cumulative
effect of change in accounting principle $30,048 125,602 $0.24
=========== ============ =========
Effect of dilutive securities:
Options outstanding 9,048
Options exercised 534
Net income per diluted common share before cumulative
effect of change in accounting principle ------------- ------------ ----------
$30,048 135,184 $0.22
============= ============ ==========
For the three months ended March 31, 2001 and 2000, the Company had 1,690
and 4 stock option securities that were antidilutive, respectively. These
securities were not included in the computation of diluted EPS. The effect of
dilutive securities was calculated using the treasury stock method.
6. COMPREHENSIVE INCOME
Comprehensive income details follow:
Three Months Three Months
Ended Ended
March 31, 2001 March 31, 2000
------------------ ------------------
Net income $38,400 $19,277
Other comprehensive income (loss):
Foreign currency translation
adjustments, net of tax and
unrealized gain on derivative
instruments (4,256) (316)
Unrealized (loss) on investment,
net of tax (2,450) -
------------------ ------------------
Comprehensive income $31,694 $18,961
================== ==================
8
WATERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
7. BUSINESS SEGMENT INFORMATION
SFAS 131 establishes standards for reporting information about operating
segments in annual financial statements of public business enterprises. The
Company evaluated its business activities that are regularly reviewed by the
Chief Executive Officer for which discrete financial information is available.
As a result of this evaluation, the Company determined that it has three
operating segments: Waters, Micromass and TAI.
Waters is in the business of manufacturing and distributing HPLC instruments,
chromatography columns and other consumables, and related service; Micromass is
in the business of manufacturing and distributing mass spectrometry instruments
that can be integrated and used along with other analytical instruments,
particularly HPLC; and TAI is in the business of manufacturing and distributing
thermal analysis and rheology instruments. For all three of these operating
segments within the analytical instrument industry; economic characteristics,
production processes, products and services, types and classes of customers,
methods of distribution, and regulatory environments are similar. Because of
these similarities, the three segments have been aggregated into one reporting
segment for financial statement purposes. Please refer to the consolidated
financial statements for financial information regarding the one reportable
segment of the Company.
8. STOCKHOLDERS' EQUITY
On February 27, 2001, the Board of Directors approved an amendment to the
Company's Certificate of Incorporation to increase authorized common stock from
two hundred million to four hundred million shares, contingent upon shareholder
approval at the Company's Annual Meeting. Shareholders approved the amendment
at the Annual Meeting on May 3, 2001.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales:
Net sales for the three month period ended March 31, 2001 (the "2001 Quarter")
were $201.0 million, compared to $180.2 million for the three month period ended
March 31, 2000 (the "2000 Quarter"), an increase of 12%. Sales grew by 17% over
the 2000 Quarter before currency effects. Sales growth, as measured in local
currencies, was well distributed across the Company's geographic regions and was
led by sales to life science customers across the mass spectrometry and HPLC
product lines. Excluding currency effects, mass spectrometry and HPLC sales grew
at a strong double-digit rate. Thermal analysis product sales, as expected, grew
in the low single digits versus the 2000 Quarter, in advance of the March 2001
introduction of a revamped new product line. Currency reduced reported sales
growth in the 2001 Quarter by five percentage points primarily due to the
weakening of the euro and Japanese yen.
Gross Profit:
Gross profit for the 2001 Quarter was $127.7 million, compared to $113.9 million
for the 2000 Quarter, an increase of $13.8 million or 12%. Gross profit as a
percentage of sales increased to 63.5% in the 2001 Quarter from 63.2% in the
2000 Quarter, as the Company continues to benefit from productivity
improvements.
Selling, General, and Administrative Expenses:
Selling, general and administrative expenses for the 2001 Quarter were $65.9
million, compared to $60.4 million for the 2000 Quarter. As a percentage of net
sales, selling, general and administrative expenses decreased to 32.8% for the
2001 Quarter from 33.5% for the 2000 Quarter as a result of higher sales volume
and continued expense controls. The $5.5 million or 9% increase in total
expenditures primarily resulted from increased headcount and related costs
required to support increased sales levels, reduced by the effects of currency
translation.
Research and Development Expenses:
Research and development expenses were $11.0 million for the 2001 Quarter
compared to $10.4 million for the 2000 Quarter, a $.6 million or 7% increase
from the 2000 Quarter. The Company continued to invest significantly in the
development of new and improved HPLC, mass spectrometry, thermal analysis and
rheology products. The spending increase was reduced by the effects of currency
translation.
Goodwill and Purchased Technology Amortization:
Goodwill and purchased technology amortization for the 2001 Quarter was $1.7
million, relatively even with $1.8 million for the 2000 Quarter.
Operating Income:
Operating income for the 2001 Quarter was $49.0 million, compared to $41.3
million for the 2000 Quarter, an increase of $7.7 million or 19%. Waters
improved operating income levels on the strength of sales growth and
productivity improvements across all operating areas.
Interest Income (Expense), Net:
Net interest income was $1.5 million in the 2001 Quarter compared to net
interest (expense) of ($.7) million in the 2000 Quarter. The change primarily
reflected the cumulative effects of the Company's cash flow.
Provision for Income Taxes:
The Company's effective income tax rate was 24% in the 2001 Quarter and 26% in
the 2000 Quarter. The 2001 Quarter rate decreased primarily due to a favorable
shift in the mix of taxable income to lower tax rate jurisdictions.
Income before Cumulative Effect of Change in Accounting Principle:
Income from operations before the cumulative effect of an accounting change for
the 2001 Quarter was $38.4 million, compared to $30.0 million for the 2000
Quarter, an increase of $8.4 million or 28%. The improvement over the 2000
Quarter was a result of sales growth, productivity improvements across all
operating areas, favorable interest income dynamics and the impact of a decrease
in the Company's effective income tax rate.
10
EURO CURRENCY CONVERSION
Several countries of the European Union will adopt the euro as their legal
currency effective July 1, 2002. A transition period has been established from
January 1, 1999 to July 1, 2002 during which companies conducting business in
these countries may use the euro or their local currency. The Company has
considered the potential impact of the euro conversion on pricing competition,
information technology systems, currency risk and overall risk management.
Currently, the Company does not expect that the euro conversion will result in
any material increase in costs to the Company or have a material adverse effect
on its business or financial condition.
LIQUIDITY AND CAPITAL RESOURCES
During the 2001 Quarter, net cash provided by the Company's operating activities
was $24.6 million, primarily as a result of net income for the quarter after
adding back depreciation, amortization and the tax benefit related to stock
option activity, less working capital needs of approximately $24.6 million. In
terms of working capital, $15.3 million of cash was used for accounts receivable
and inventory growth, including new product inventory related to current and
future sales. Approximately $11.6 million was used for a decrease in accounts
payable and other current liabilities. This decrease was mainly attributed to
accelerated payments to certain mass spectrometry vendors in conjunction with
the build-up of new product inventory and payments of accrued compensation for
2000. The Company also spent $9.6 million on property, plant, equipment and
software capitalization investments during the quarter. In addition to cash
from operating activities, cash was provided by $3.9 million of proceeds
received by the Company from the exercise of stock options and its employee
stock purchase plan.
The Company believes that existing cash and cash equivalent balances of $89.2
million and expected cash flow from operating activities together with
borrowings available under the Bank Credit Agreement will be sufficient to fund
working capital and capital spending requirements of the Company in the
foreseeable future.
As a publicly held company, the Company has not paid any dividends and does
not plan to pay any dividends in the foreseeable future.
FORWARD-LOOKING INFORMATION
Safe Harbor Statement under Private Securities Litigation Reform Act of 1996
Certain statements contained herein are forward looking. These statements are
subject to various risks and uncertainties, many of which are outside the
control of the Company, including (i) changes in the HPLC, mass spectrometry and
thermal analysis portions of the analytical instrument marketplace as a result
of economic or regulatory influences, (ii) changes in the competitive
marketplace, including new products and pricing changes by the Company's
competitors and (iii) the ability of the Company to generate increased sales and
profitability from new product introductions, as well as additional risk factors
set forth in the Company's Form 10-K for the year ended December 31, 2000.
Factual results or events could differ materially from the plans, intentions and
expectations disclosed in the forward-looking statements we make, whether
because of these factors or for other reasons. We do not assume any obligations
to update any forward-looking statement we make.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Company's market risk during the
three months ended March 31, 2001. For additional information, refer to the
Company's Form 10-K, Item 7a for the year ended December 31, 2000.
11
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company and its subsidiaries are involved in various
litigation matters arising in the ordinary course of its business. The
Company does not believe that the matters in which it or its subsidiaries
are currently involved, either individually or in the aggregate, are
material to the Company or its subsidiaries.
The Company, through its subsidiary TAI, asserted a claim against The
Perkin-Elmer Corporation ("PE") alleging patent infringement of three
patents owned by TAI ("the TAI patents"). PE counterclaimed for
infringement of a patent owned by PE ("the PE patent"). The U.S. District
Court for the District of Delaware granted judgment as a matter of law in
favor of TAI and enjoined PE from infringing the TAI patents. PE appealed
the District Court judgment in favor of TAI to the federal appellate court.
The District Court's judgment, with respect to PE's infringement of the TAI
patents, was affirmed. The District Court's judgment with respect to TAI's
non-infringement of the PE patent was reversed and remanded to the District
Court for further proceedings. PE appealed the appellate court decision,
that PE failed to preserve certain arguments on appeal, to the U.S. Supreme
Court and that appeal was denied. The Company believes it has meritorious
arguments and should prevail, although the outcome is not certain. The
Company believes that any outcome will not be material to the Company.
The Company has filed suit in the U.S. against Hewlett-Packard Company
and Hewlett-Packard GmbH ("HP"), seeking a declaration that certain
products sold under the mark Alliance do not constitute an infringement of
one or more patents owned by HP or its foreign subsidiaries ("the HP
patents"). The action in the U.S. was dismissed for lack of controversy.
Actions seeking revocation or nullification of foreign HP patents have been
filed by the Company in Germany, France and England. A German patent
tribunal found the HP German patent to be valid. The Company is appealing
the German decision. In Germany, France and England, HP and its successor,
Agilent Technologies Deutschland GmbH, have brought an action alleging
certain features of the Alliance pump may infringe the HP patent. In
England, the High Court of Justice, Chancery Division, has found the HP
patent valid and uninfringed by the Alliance pump. The Company believes it
has meritorious arguments and should prevail, although the outcome is not
certain. The Company believes that any outcome of the proceedings will not
be material to the Company.
Cohesive Technologies, Inc. ("Cohesive") has filed infringement actions
against the Company alleging that several products in a large product line
infringe one or more Cohesive patents. The Company has denied infringement.
The Company believes it has meritorious arguments and should prevail,
although the outcome is not certain. The Company believes that any outcome
of the proceedings will not be material to the Company.
Viscotek Corporation ("Viscotek") has filed a civil action against the
Company alleging one option offered by the Company with a high temperature
gel permeation chromatography instrument is an infringement of two of its
patents. These patents are owned by E. I. Du Pont de Nemours and Company
("Du Pont") and claimed to be exclusively licensed to Viscotek. Du Pont is
not a party to the suit. The Company has answered the complaint and
believes it does not infringe the patents. The Company believes it has
meritorious arguments and should prevail, although the outcome is not
certain. The Company believes that any outcome of the proceedings will not
be material to the Company.
PE Corporation, MDS Inc. and Perkin-Elmer Sciex Instruments have filed a
civil action against Micromass UK Limited and Micromass, Inc., wholly owned
subsidiaries of the Company, alleging one or more mass spectroscopy
instrument products infringes upon a patent. The Company believes that it
does not infringe the patent. The Company believes it has meritorious
arguments and should prevail, although the outcome is not certain. The
Company believes that any outcome of the proceedings will not be material
to the Company.
Item 2. Changes in Securities
On February 27, 2001, the Board of Directors approved an amendment to the
Company's Certificate of Incorporation to increase authorized common stock
from two hundred million to four hundred million shares, contingent upon
shareholder approval at the Company's Annual Meeting. On May 3, 2001,
shareholders approved the amendment.
12
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
A. None
B. The Registrant filed reports on Form 8-K on each of the following
dates during the quarter for which this report is filed:
January 31, 2001
February 6, 2001
March 5, 2001
Each such report is included information under Item 9, in order to
assure compliance with SEC Regulation FD.
13
WATERS CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: May 14, 2001 Waters Corporation
/s/ Philip S. Taymor
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Philip S. Taymor
Senior Vice President and Chief Financial
Officer
14