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Q2 2011 Earnings Call
July 26, 2011 8:30 am ET
Douglas Berthiaume - Chairman, Chief Executive Officer and President
John Ornell - Chief Financial Officer and Vice President of Finance & Administration
Jonathan Groberg - Macquarie Research
Ross Muken - Deutsche Bank AG
Tycho Peterson - JP Morgan Chase & Co
Quintin Lai - Robert W. Baird & Co. Incorporated
Daniel Leonard - Leerink Swann LLC
Sung Ji Nam - Gleacher & Company, Inc.
Isaac Ro - Goldman Sachs Group Inc.
Peter Lawson - Mizuho Securities USA Inc.
Doug Schenkel - Cowen and Company, LLC
Unknown Analyst -
Charles Butler - Barclays Capital
Amit Bhalla - Citigroup Inc
Previous Statements by WAT
» Waters' CEO Discusses Q1 2011 Results - Earnings Call Transcript
» Waters' CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Waters CEO Discusses Q3 2010 Results - Earnings Call transcript
Thank you. Well, good morning, and welcome to the Waters Corporation Second Quarter Financial Results Conference Call. With me on today's call as usual is John Ornell, Waters' Chief Financial Officer. And as normal practice, I'll start with an overview of the quarter's highlight, and then John will follow with details of our financial results and provide you with our outlook for the third quarter and for the full year. Before we get going, however, I'd like John to cover the usual 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, this time for Q3 and full year 2011. We caution you that all such statements are only predictions and that the 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, 2010, in Part I 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 October 2011.
During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures 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, our sales in the quarter grew 14%, and our adjusted earnings were up about 16%. This growth in revenue and earnings, although a little lighter than we had anticipated, was driven by an order volume that was higher than reported sales. Highlights of the quarter include significant new product launches at the ASMS Conference, strong recurring revenue growth and continued double-digit Asian sales growth. The stronger orders that I referred to and the accompanying backlog build was significantly associated with bookings for newly introduced products with third quarter shipping terms.
In the United States, sales to combined government and academic institutions were soft in the second quarter, and orders from pharmaceutical customers slowed as we approached the quarter's close. On the other hand, our chemical analysis business continued with good momentum.
Globally, Waters Division sales to the pharmaceutical end market were in line with the division's overall growth rate, with particular strength observed in Western Europe, Latin America and India. Applications within pharma that are driving growth include Regulated Bioanalysis, biological pharmaceutical development and QC testing. Here, I'm referring to protein and peptide-based therapeutics. ACQUITY H-Class uptake remained strong in QC application. Sales in our largest accounts grew sequentially from a strong first quarter performance and also in comparison to the prior year's quarterly result.
Global government and university spending was soft for the Waters Division and moderately impacted overall sales growth. The major exception to this trend were China and Latin America where we saw double-digit sales increases. Though we are not overly optimistic about worldwide governmental support for research for the foreseeable future, we do feel that our innovative new systems, especially in high-end mass spectrometry, will allow us to compete favorably within this more challenging funding environment.
Sales to industrial chemical accounts varied somewhat by geography with stronger growth in developing countries than what we saw in Western Europe and the U.S. Our TA Instruments Division's strong performance corroborates continued underlying strength in industrial spending.
If you look at TA, the division delivered yet another double-digit sales growth quarter. Sales growth for TA was geographically balanced and included revenues associated with shipment of the new discovery DSC instrument. This new -- this system is the launch of a new instrument platform configuration that will embody the majority of TA's future performance-leading thermal offerings. Also interesting to note is that about earlier this month, we closed a smaller-sized acquisition that secures technology, which will allow TA to pursue higher-temperature thermal analysis measurements critical to the characterization of materials such as ceramics and metals.