<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15 (d) OF THE
SECURITIES 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, include 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 12, 1998: 29,850,188
----------
1
<PAGE>
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, 1998 and
December 31, 1997 3
Consolidated Statements of Operations for the three
months ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
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
<PAGE>
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,591 $ 3,113
Accounts receivable, less allowances
for doubtful accounts of $2,756 and
$2,785 at March 31, 1998 and
December 31, 1997, respectively 114,369 111,022
Inventories 79,516 87,375
Other current assets 16,425 11,614
----------- -----------
Total current assets 212,901 213,124
Property, plant, and equipment, net of
accumulated depreciation of $33,499
and $30,074 at March 31, 1998 and
December 31, 1997, respectively 89,621 88,668
Other assets 68,432 70,089
Goodwill, less accumulated amortization
of $8,861 and $7,543 at March 31, 1998
and December 31, 1997, respectively 178,860 180,178
----------- -----------
Total assets $ 549,814 $ 552,059
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of
long term debt $ 8,924 $ 7,394
Accounts payable 40,808 33,061
Deferred revenue and customer advances 26,240 25,289
Other current liabilities 102,987 104,912
----------- -----------
Total current liabilities 178,959 170,656
Long term debt 292,955 305,340
Redeemable preferred stock 8,335 8,096
Other liabilities 5,653 5,670
----------- -----------
Total liabilities 485,902 489,762
Commitments and contingent liabilities - -
Stockholders' Equity:
Common stock (par value $0.01, 50,000
shares authorized, 29,795 and 29,583
shares issued and outstanding at
March 31, 1998 and December 31, 1997,
respectively) 298 296
Additional paid-in capital 162,733 161,476
Deferred stock option compensation (551) (606)
Accumulated deficit (95,852) (96,096)
Translation adjustments (2,716) (2,773)
----------- -----------
Total stockholders' equity 63,912 62,297
----------- -----------
Total liabilities and stockholders' equity $ 549,814 $ 552,059
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Net sales $138,725 $102,431
Cost of sales 51,920 37,765
Revaluation of acquired inventory 16,500 -
-------- --------
Gross profit 70,305 64,666
Selling, general and administrative expenses 49,988 39,076
Research and development expenses 8,372 5,786
Goodwill and purchased technology amortization 2,275 1,357
-------- --------
Operating income 9,670 18,447
Interest expense, net 5,063 3,024
-------- --------
Income from operations before income taxes 4,607 15,423
Provision for income taxes 4,363 3,085
-------- --------
Net income 244 12,338
Less: accretion of and 6% dividend
on preferred stock 239 234
-------- --------
Net income available to common stockholders $ 5 $ 12,104
======== ========
-------- --------
Net income per basic common share $0.00 $0.42
======== ========
Weighted average number of basic common shares 29,708 28,927
-------- --------
Net income per diluted common share $0.00 $0.38
======== ========
Weighted average number of diluted common shares
and equivalents 33,161 31,867
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE>
WATERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 244 $ 12,338
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,250 4,531
Amortization of debt issuance costs 308 256
Compensatory stock option expense 55 55
Revaluation of acquired inventory 16,500 -
Change in operating assets and liabilities:
(Increase) in accounts receivable (3,982) (3,910)
(Increase) in inventories (8,662) (2,707)
Increase in accounts payable and
accrued expenses 3,166 8,968
Increase in deferred revenue 2,945 2,402
Other, net (1,411) (334)
-------- --------
Net cash provided by operating activities 15,413 21,599
Cash flows from investing activities:
Additions to property, plant and equipment (4,995) (2,204)
Software capitalization and other intangibles (1,734) (1,033)
Loans to officers (34) (34)
-------- --------
Net cash (used in) investing activities (6,763) (3,271)
Cash flows from financing activities:
Net (repayments) of bank debt (10,855) (15,084)
Payments for debt issuance costs (18) -
Stock options exercised 1,476 33
-------- --------
Net cash (used in) financing activities (9,397) (15,051)
Effect of exchange rate changes on cash 225 (1,097)
-------- --------
Net change in cash and cash equivalents (522) 2,180
Cash and cash equivalents at beginning of period 3,113 639
-------- --------
Cash and cash equivalents at end of period $ 2,591 $ 2,819
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
5
<PAGE>
WATERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. Organization and Basis of Presentation
Waters Corporation (the "Company") is the world's largest
manufacturer, distributor and provider of high performance
liquid chromatography ("HPLC") instruments, chromatography
columns and other consumables, and related services. 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. With its acquisition of TA Instruments, Inc. ("TAI")
in May 1996, the Company is also the world's leader in thermal
analysis, a prevalent and complementary technique used in the
analysis of polymers. With its September 1997 acquisition of
Micromass Limited ("Micromass"), the Company is also 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.
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, most
of which are wholly owned. 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
GAAP 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 10-K filing with the
Securities and Exchange Commission for the year ended December
31, 1997.
2. Acquisitions
Micromass Limited Acquisition
On September 23, 1997, the Company acquired 100% of the capital
stock of Micromass Limited, a company headquartered in Manchester,
England, for approximately $175,000 in cash, common stock (375 shares)
and promissory notes. The acquisition principally was financed
through borrowings under the Company's Bank Credit Agreement.
Micromass develops, manufactures, and distributes mass
spectrometry instruments, products that are complementary to
Waters' existing product offering. Micromass offers products
ranging from high-end stand-alone instruments to smaller, easier-
to-use detectors that can be integrated and used along with
other analytical instruments, especially HPLC. Micromass is a
global market leader in the field of mass spectrometry.
YMC, Inc. Acquisition
On July 31, 1997, the Company acquired all of the capital stock
of YMC, Inc. ("YMC"), a U.S. based company for approximately
$9,000 in cash. YMC is a manufacturer and distributor of
chromatography chemicals and supplies which augment the Waters
consumables business.
6
<PAGE>
WATERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Pro Forma Results of Operations
The following unaudited Pro Forma results of operations for the
three months ended March 31, 1998 and 1997 give effect to the
Company's Micromass acquisition as if the transaction had
occurred at the beginning of each such period. The financial
data are based on the historical consolidated financial
statements for the Company, Micromass and YMC and include
related adjustments. The Pro Forma results of operations
exclude the non-recurring charges that were recorded in
conjunction with the Micromass acquisition in 1998 and 1997 and
do not purport to represent (i) what the Company's results of
operations actually would have been if the Micromass acquisition
had occurred as of the beginning of the periods or (ii) what
such results will be for any future periods. The financial data
are based upon assumptions that the Company believes are
reasonable and should be read in conjunction with the
Consolidated Financial Statements and accompanying notes thereto
included elsewhere in this report.
<TABLE>
<CAPTION>
Unaudited Pro Forma Results
---------------------------
For the Three Months Ended
--------------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Net sales $ 138,725 $ 123,547
Net income $ 16,505 $ 12,375
Net income per basic common share $ 0.56 $ 0.42
Net income per diluted common share $ 0.50 $ 0.38
</TABLE>
3. Inventories
Inventories are classified as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------- -----------
<S> <C> <C>
Raw materials $25,672 $22,092
Work in progress 15,471 15,315
Finished goods 38,373 33,468
Revaluation of acquired inventory - 16,500
------- -------
Total Inventories $79,516 $87,375
======= =======
</TABLE>
4. Income Taxes
The Company's effective tax rate for the three month periods
ended March 31, 1998 and March 31,1997, was 21% and 20%,
respectively, before the nondeductible acquisition related
expenses.
7
<PAGE>
WATERS CORPRATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
5. Earnings Per Share
SFAS 128, which now governs earnings per share computation,
requires the following reconciliation of the basic and diluted
EPS calculations:
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998
---------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Net income $ 244
Less: Accretion of and 6%
dividend on preferred stock 239
Income per basic common -----------
share from operations $ 5 29,708 $ 0.00
=========== ============= =========
Effect of dilutive securities:
Options outstanding 3,384
Options exercised 69
Income per diluted common ----------- ------------- ---------
share from operations $ 5 33,161 $ 0.00
=========== ============= =========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1997
---------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Net income $ 12,338
Less: Accretion of and 6%
dividend on preferred stock 234
Income per basic common -----------
share from operations $ 12,104 28,927 $ 0.42
=========== ============= =========
Effect of dilutive securities:
Options outstanding 2,938
Options exercised 2
Income per diluted common ----------- ------------- ---------
share from operations $ 12,104 31,867 $ 0.38
=========== ============= =========
</TABLE>
As of March 31, 1998 and March 31, 1997, the Company had
one thousand and three hundred and fifty-nine thousand stock option
securities that were antidilutive, respectively. These securities
could potentially dilute basic EPS in the future, and were not included
in the computation of diluted EPS because to do so would have been
antidilutive for the periods presented.
6. Comprehensive Income
SFAS 130, which establishes standards for reporting and display
of comprehensive income and its components, requires the
following calculation of the tax effects allocated to each
component of other comprehensive income and rollforward of
accumulated other comprehensive income:
8
<PAGE>
WATERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
-------- --------
<S> <C> <C>
Net income $ 244 $ 12,338
Foreign currency translation
adjustments before income taxes 57 (190)
Provision\(benefit) for income taxes 12 (38)
-------- --------
Other comprehensive income\(loss) $ 45 $ (152)
-------- --------
Comprehensive income $ 289 $ 12,186
======== ========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Foreign Other
Currency Comprehensive
Items Income
-------- -------------
<S> <C> <C>
Balance, December 31, 1997 $(2,773) $(2,773)
Change during 1st Quarter 57 57
-------- --------
Balance, March 31, 1998 $(2,716) $(2,716)
======== ========
Balance, December 31, 1996 $ 408 $ 408
Change during 1st Quarter (190) (190)
-------- --------
Balance, March 31, 1997 $ 218 $ 218
======== ========
</TABLE>
7. New Accounting Pronouncements
In February 1998, the Financial Accounting Standards Board issued
SFAS 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits, which is effective for periods beginning
after December 15, 1997, but excludes interim periods during
1998. The statement standardizes employers' disclosure
requirements about pension and other postretirement benefit plans
by requiring additional information on changes in the benefit
obligations and fair values of plan assets and eliminating
certain disclosures that are no longer useful. It does not
change the measurement or recognition of those plans.
In June 1997, the Financial Accounting Standards Board issued
SFAS 131, Disclosures about Segments of an Enterprise and Related
information, which is effective for periods ending after December
15, 1998, but excludes interim periods during 1998. The
statement establishes standards for reporting information about
operating segments in annual financial statements of public
business enterprises and in interim financial reports issued to
shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and
major customers.
While management has not determined the impact of the new
above-mentioned standards, they are not expected to be material
to the Company.
In June 1997, the Financial Accounting Standards Board issued
SFAS 130, Reporting Comprehensive Income, which is effective for
periods beginning after December 15, 1997. The statement
establishes standards for reporting and displaying comprehensive
income and its components (revenues, expenses, gains, and losses)
in a full set of general-purpose financial statements. The
statement requires that all components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements. The Company has adopted
SFAS 130 in the accompanying financial statements. Footnote disclosure
has been provided for interim periods.
9
<PAGE>
In February 1997, the Financial Accounting Standards Board
issued SFAS 128, Earnings Per Share, which is effective for
periods ending after December 15, 1997. The statement changes
computational guidelines and disclosure requirements for earnings
per share. The Company has adopted SFAS 128 in the accompanying
financial statements and has restated all prior period earnings
per share data.
10
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Recent Events
On September 23, 1997 the Company acquired all of the capital
stock of Micromass, a company headquartered in Manchester,
England, for approximately $175 million in cash, common stock and
promissory notes. The acquisition principally was financed
through borrowings under the Company's Bank Credit Agreement.
Micromass develops, manufactures, and distributes mass
spectrometry instruments, products that are complementary to the
Company's existing product offering. Micromass offers products
ranging from high-end stand-alone instruments to smaller, easier-
to-use detectors that can be integrated and used along with other
analytical instruments, especially HPLC. Micromass is a global
market leader in the field of mass spectrometry.
On September 4, 1997, the Company increased the maximum
availability under its Bank Credit Agreement to $450 million in
order to finance the acquisition of Micromass.
On July 31, 1997, the Company acquired all of the capital
stock of YMC, Inc. ("YMC"), a U.S. based company, for
approximately $9 million in cash. YMC is a manufacturer and
distributor of chromatography chemicals and supplies which
augment the Company's consumables business.
Results of Operations
Net Sales:
Net sales for the three month period ended March 31, 1998 (the
"1998 Quarter") were $138.7 million, compared with $102.4 million
for the three month period ended March 31, 1997 (the "1997
Quarter"), an increase of 35%. Excluding the adverse effects of
a stronger U.S. dollar, net sales increased by 39% over the 1997
Quarter. The Company's core HPLC and thermal analysis business
grew by 11%, while the impact of the Micromass acquisition
resulted in the remaining 28% points of growth. HPLC growth was
generally broad-based across all geographies, except Japan and
the Pacific Rim. Customer demand was strong in the U.S. and
Europe, offsetting Asia's weakness. Pharmaceutical customer
demand was especially strong across all geographies. The
Company's sales of mass spectrometry products grew strongly as
well.
Gross Profit:
Gross profit increased to $70.3 million in the 1998 Quarter from
$64.7 million in the 1997 Quarter, an increase of $5.6 million or
9% over the 1997 Quarter. Excluding the $16.5 million non-
recurring charge in the 1998 Quarter for revaluation of acquired
inventory related to purchase accounting for the Micromass
acquisition, gross profit increased by 34% over the 1997 Quarter.
Gross profit as a percentage of sales excluding the inventory
revaluation charges decreased to 62.6% in the 1998 Quarter from
63.1% in the 1997 Quarter, reflecting the inclusion of Micromass'
results after its September 1997 acquisition. (Micromass' gross
margins are lower than Waters' historical gross margins, but its
operating expenses are commensurately lower, and its operating
margins are comparable to those of Waters.) Excluding the impact
of Micromass' results, gross profit as a percentage of sales
increased to 63.5% in the 1998 Quarter, primarily as a result of
increased efficiencies in the Company's manufacturing operations.
Selling, General, and Administrative Expenses:
Selling, general and administrative expenses increased to $50.0
million in the 1998 Quarter as compared to $39.1 million in the
1997 Quarter. As a percentage of net sales, selling, general and
administrative expenses decreased to 36% for the 1998 Quarter
from 38% for the 1997 Quarter. Excluding the impact of
Micromass' results, the decrease in expenses as a percentage of
net sales was a result of revenue growth as expenses remained
flat. The $10.9 million or 28% increase in total selling, general,
and administrative expenditures is primarily the result of including
the expenses of acquired companies.
Research and Development Expenses:
Research and development expenses were $8.4 million for the 1998
Quarter compared to $5.8 million for the 1997 Quarter, a $2.6
million or 45% increase from prior year levels. Current year
spending increased with the addition of acquired company
spending. The Company continues to invest significantly in the
development of new and improved HPLC detection, consumable and
data products, thermal analysis and rheology products, and newly
acquired mass spectrometry products.
11
<PAGE>
Goodwill and Purchased Technology Amortization: Goodwill and
purchased technology amortization for the 1998 Quarter was $2.3
million, an increase of $0.9 million from the 1997 Quarter. This
increase was primarily related to the acquisition of Micromass.
Operating Income:
Operating income for the 1998 Quarter was $9.7 million, a
decrease of $8.7 million from the 1997 Quarter. This decrease
reflected a final $16.5 million non-recurring charge related to
the revaluation of acquired inventory in connection with the
Micromass acquisition. Excluding this non-recurring charge,
operating income was $26.2 million for the 1998 Quarter and
represented a $7.7 million or 42% increase over the 1997 Quarter.
Waters improved operating income levels in 1998 on the strength of
sales growth, volume leverage, continued focus on cost reduction in
all operating areas and the accretive impact of acquisitions.
Interest Expense, Net:
Net interest expense increased by $2.0 million or 67%, from $3.0
million in the 1997 Quarter to $5.0 million in the 1998 Quarter.
The current period increase reflected increased debt levels due
to the Micromass acquisition.
Provision for Income Taxes:
The Company's effective income tax rate for the three month
periods ended March 31, 1998 and March 31, 1997, excluding the
non-recurring, nondeductible charge related to the revaluation of
acquired inventory, was 21% and 20%, respectively.
Net Income:
Income from operations for the 1998 Quarter was $0.2 million,
compared to $12.3 million in income for the 1997 Quarter.
Excluding the $16.5 million non-recurring charge in 1998 for the
revaluation of acquired inventory, the Company generated $16.7
million of income in the 1998 Quarter compared to $12.3 million
in the 1997 Quarter. The improvement over the prior year was a
result of sales growth, continued focus on cost reductions in all
operating areas and the accretive impact of acquisitions.
Liquidity and Capital Resources:
During the 1998 Quarter, net cash provided by the Company's
operating activities was $15.4 million, primarily as a result of
net income for the period after adding back non-recurring non-
cash charges, and depreciation and amortization and after an $8.7
million investment in inventory. Primary uses of cash flows
during the period were $6.7 million invested in property, plant
and equipment and software capitalization and $10.9 million of bank
debt repayments.
The Company has evaluated the impact of Year 2000 issues on its
existing systems. The Company expects that the impact will not
be material.
The Company believes that existing cash balances and current
cash flow from operating activities together with borrowings
available under the Bank Credit Agreement will be sufficient to
fund working capital, capital spending and debt service
requirements of the Company in the foreseeable future.
Cautionary Statement:
Certain statements contained herein are forward looking. Many
factors could cause actual results to differ from these
statements, including loss of market share through competition,
introduction of competing products by other companies, pressure
on prices from competitors and/or customers, regulatory
obstacles to new product introductions, lack of acceptance of
new products, changes in the healthcare market and the
pharmaceutical industry, changes in distribution of the
Company's products, and interest rate and foreign exchange
fluctuations.
12
<PAGE>
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. None of the matters in
which the Company or its subsidiaries are currently
involved, either individually or in the aggregate, is
material to the Company or its subsidiaries.
The Company has asserted a claim contending that Millipore
has understated the amount of assets it is obligated to
transfer from the Millipore Retirement Plan to the Waters
successor plan. The Federal court has recently ruled in
favor of Millipore's position with respect to the claim.
This decision was affirmed on appeal. The Company believes
it has meritorious arguments; however, it is unlikely that
further appellate review will be pursued.
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"). PE withdrew its claim for
infringement preserving its right to appeal rulings
interpreting the claims of the PE patent. A jury returned a
verdict finding that no valid claims of the TAI patents were
infringed by PE. TAI has appealed the verdict with the U.S.
District Court for the District of Delaware and 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 revocation and nullification actions
against Hewlett-Packard Company and Hewlett-Packard GmbH
("HP"), seeking revocation or nullification of foreign HP
patents in Europe. The patents relate to the Alliance
product. 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
Not Applicable
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. Exhibit 27 - Financial Data Schedule
B. No reports on Form 8-K were filed during the three months
ended March 31, 1998.
13
<PAGE>
WATERS CORPORATION AND SUBSIDIARIES
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.
Date: May 13, 1998 Waters Corporation
/s/ Philip S. Taymor
-------------------------------
Philip S. Taymor
Senior Vice President and Chief
Financial Officer
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2591
<SECURITIES> 0
<RECEIVABLES> 117125
<ALLOWANCES> 2756
<INVENTORY> 79516
<CURRENT-ASSETS> 212901
<PP&E> 123120
<DEPRECIATION> 33499
<TOTAL-ASSETS> 549814
<CURRENT-LIABILITIES> 178959
<BONDS> 292955
8335
0
<COMMON> 298
<OTHER-SE> 63614
<TOTAL-LIABILITY-AND-EQUITY> 549814
<SALES> 138725
<TOTAL-REVENUES> 138725
<CGS> 51920
<TOTAL-COSTS> 68420
<OTHER-EXPENSES> 60635
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5063
<INCOME-PRETAX> 4607
<INCOME-TAX> 4363
<INCOME-CONTINUING> 244
<DISCONTINUED> 0
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</TABLE>
