Waters Corporation (WAT)

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Waters Corp. (WAT)

Q1 2010 Earnings Call

April 27, 2010 08:30 am ET


Douglas Berthiaume - Chairman, President & CEO

John Ornell - CFO

Art Caputo - President of Waters Division

Gene Cassis - VP of IR


Ross Muken - Deutsche Bank

Marshall Urist – Morgan Stanley

Doug Schenkel - Cowan & Company

Peter Lawson - Thomas Weisel Partners

Quintin Lai - Robert W. Baird

Jon Groberg - Macquarie Capital

Tycho Peterson - JPMorgan

Jeff Ares - Leerink Swann & Company

Rob Hawkins - Stifel Nicolaus

Steve Unger - Lazard Capital Markets

Derik De Bruin - UBS

Jon Wood - Jefferies



Good morning welcome to the Waters Corporation First Quarter 2010 Financial Results Conference Call. (Operator Instructions) I would like to introduce your host for today’s call, Mr. Douglas Berthiaume, the Chairman, President and Chief Executive Officer of Waters Corporation. Sir you may begin.

Douglas Berthiaume

Thank you. Good morning and welcome to the Waters Corporation first quarter financial results conference call. With me on today’s call are 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 quarter’s highlights. And John will follow with details on our financial results and provide you with our outlook for the second quarter and for the full year and then we’ll open it up for Q&A.

Before we get going, John will cover the cautionary language.

John Ornell

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 Q2 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, 2009 in 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 predictions 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 July 2010.

During this call we will refer to certain non-GAAP financial measures. A reconciliation of the non-GAAP financial measure 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.

Douglas Berthiaume

Thank you John. Well, our results in the first quarter I think signify continued improvement in customer demands and also stronger reacceptance of our key new products. But we’re not totally prepared to believe that the economic conditions that have challenged industries since late 2008 are fully behind us. We are increasingly optimistic about our business prospects for 2010 and are very excited about out strong product division.

The difficult business conditions in 2009 required us to improve our operational efficiency and with these efficiency still in place improving end markets in 2010 should allow us to transition toward our more traditional sales growth rates in 2011 and beyond.

Turning to first quarter 2010, our organic sales growth with 6%, and we delivered 9% adjusted earnings per share growth. And however more important, we executed well on our new product initiatives most notably, our new Synapt G-2 and our H-Class ACUITY UPLC systems.

Demand for our Synapt G-2 has been strong and we successfully delivered and installed the record number of Synapt class mass spectrometers in the first quarter. Sales of new Synapt instruments was strongest in North America, Europe and Japan. Key application areas of Synapt continued to be in proteomics and metabolite identification. However, we have more recently begun to see uptake by customers in organic synthesis and central analytical labs and pharmaceutical, academic and industrial accounts.

On decision to introduce the H-Class ACUITY UPLC early in 2010 helped to drive order growth in LC instrumentation an important. Our H-Class UPLC system was designed based on consistent customer feedback regarding key performance features required to accelerate UPLC uptake and regulated testing applications.

As you may recall we introduced this new instruments configuration in late January and gained customer shipments in early February. Though significant new launches often result in the delay of orders as customers reevaluate and modify their purchasing plan to adequately consider a new system offerings. Our positioning of the H-Class appears to have resulted in a little disruption of our sales momentum while setting the stage for an acceleration of the equity business as we move through 2010.

Some of our largest equity users, companies that have globally deployed UPLC instruments through the development organizations have told us that they are now more confident of transferring UPLC technology throughout their quality control labratories.

For many this new outlook is based upon new H-Class instrument features that allow for the running of legacy HPLC methodologies while providing an easy upgrades path to UPLC performance. With the introduction of the H-Class, overall interest in UPLC has significantly increased. We see this in seminar attendance and requests for customer demonstration and then our lead and quotation volumes. Most interesting we have started to see new orders in sales from competitive uses. We have been motivated to try small particle chromatography but it has not been sufficiently confident to move forward until they learned about our new H-Class UPLC.

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