Waters Corporation (WAT)
Q4 2009 Earnings Call
January 26, 2010 8:30 am ET
Douglas Berthiaume – Chairman, President, Chief Executive Officer
John Ornell – Chief Financial Officer
Arthur Caputo – President of Waters Division
Gene Cassis – Vice President Investor Relations
Ross Mukin – Deutsche Bank
Quintin Lai – Robert W. Baird
Tycho Peterson – J.P. Morgan
Robert Hawkins – Stifel Nicolaus
Isaac Ro – Leerink Swann
Jennifer Lu for Marshall Urist – Morgan Stanley
Derik deBruin – UBS
Doug Schenkel – Cowan & Company
Patrick for Peter Larson – Thomas Weisel Partners
Jonathan Groberg – Macquarie Capital
Previous Statements by WAT
» Waters Corporation Q3 2009 Earnings Call Transcript
» Waters Corporation Q2 2009 Earnings Call Transcript
» Waters Corporation Q1 2009 Earnings Call Transcript
Good morning and welcome to the Waters Corporation fourth quarter and full year financial results conference call. With me on today’s call is John Ornell, Waters Chief Financial Officer, Art Caputo, President of the Waters Division and Gene Cassis, the Vice President of Investor Relations.
As is our normal practice I will start with an overview of the business highlights. John will follow with the details on our financial results and provide you with our outlook for the first quarter and the full year 2010.
Before we get going, I’d like John to cover the cautionary language.
During the course of this conference call we will make various forward-looking statements regarding future events or future financial performance of the company. In particular we will provide guidance regarding possible future income statement results of the company, at this time for Q1 and full year 2010. We caution you that all such statements are only predictions and that actual events or results may differ materially.
For a detailed discussion of some of the risks and contingencies that could cause our actual performance to differ significantly from our present expectations, see our 10-K annual report for the fiscal year ended December 31, 2008 part one under the caption Business Risk Factors.
We further caution you that the company does not obligate or commit itself by providing this guidance to update predictions. We do not plan to update prediction regarding possible future income statement results except during our regularly scheduled quarterly earnings release conference calls and webcasts. The next earnings release call and webcast is currently planned for April 2010.
During this call we will be referring to certain non-GAAP financial measures. A reconciliation of the non-GAAP financial to the most directly comparable GAAP measure is attached to the company’s earnings release issued this morning.
In our discussions of the results of operations we may refer to pro forma results which exclude the impact of items such as those outlined in our schedule entitled Reconciliation of Net Income per Diluted Share included in this morning’s press release.
Thank you John. Well, for Waters 2009 I think as you all realize was a very challenging year. The year of course started with a high degree of uncertainty in the midst of a global financial crisis, severe recessionary conditions. It was around the mid point of 2009 the uncertainties for our markets began to abate a little bit and a more stable but significantly weaker demand pattern emerged.
During the second half of the year demand appeared to remain fairly stable with some indications that certain segments of our end markets were potentially seeing a modest level of recovery. These second half dynamics continued through the fourth quarter and we find ourselves entering 2010 somewhat optimistic that our end markets will improve, but continuing to feel that the recovery may be slow.
Fortunately we were able to see storm clouds building in late 2008 and we adequately anticipated end market weakness as we designed our 2009 business plans.
Early in 2009 steps were taken to tightly control spending while continuing to support critical growth programs including new product introductions. Now, with the year behind us we can appreciate the results of our business strategy as we were able to grow our earnings, generate strong free cash flow and introduce exciting new products in this most difficult demand environment.
If you look at the fourth quarter, our sales and earnings came in roughly as we had expected with currency neutral revenues just under flat and our earnings per share up 5%. Geographically, our revenues were largely in line with our expectations.
Moving down the P&L our profitability remains strong due to favorable currency translation, disciplined pricing and continued tight expense control.
On the product side, we began shipping Synapse G2 mass spectrometry system in the fourth quarter. As you will recall, this new technology system was showcased at the ASMS conference earlier in 2009 and was quickly well received by the scientific community as offering novel capabilities for a wide array of applications.
In fact, the order ramp for Synapse 2 during the second half of 2009 was stronger than for any previously introduced high end mass spec instrument from Waters, even without significant governmental stimulus orders in the U.S., a topic I’ll come back to a little later.
On the chromatography side, Acuity UPLC continued to displace HPLC system sales and now represents our most popular chromatography platform. In our view, recent competitive introductions in the UPLC product space corroborate the technology and will help accelerate the conversion of the overall LC market to proven sub two micron particle chromatography as pioneered by Waters.
Looking at customer segments in the fourth quarter, we saw a continuation of the trends from earlier in the year. The weakest segment was the chemical industry, a business that’s about 15% of our overall sales. The declines that we saw in this segment were less severe as we anniversaried the onset of the weakness that began in the fourth quarter of 2008.