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Waters (WAT)

Q1 2011 Earnings Call

April 26, 2011 8:30 am ET


John Ornell - Chief Financial Officer, Principal Accounting Officer and Vice President of Finance & Administration

Arthur Caputo - Executive Vice President and President of the Waters Division

Douglas Berthiaume - Chairman, Chief Executive Officer and President


Derik De Bruin - UBS Investment Bank

Jonathan Groberg - Macquarie Research

Tycho Peterson - JP Morgan Chase & Co

Quintin Lai - Robert W. Baird & Co. Incorporated

Daniel Leonard - Leerink Swann LLC

Paul Knight - Credit Agricole Securities (USA) Inc.

Marshall Urist - Morgan Stanley

Sung Ji Nam - Gleacher & Company, Inc.

Isaac Ro - Goldman Sachs Group Inc.

Peter Lawson - Mizuho Securities USA Inc.

Doug Schenkel - Cowen and Company, LLC

Jon Wood - Jefferies & Company, Inc.

Bill Bonello - RBC Capital Markets, LLC

Charles Butler - Barclays Capital

Amit Bhalla - Citigroup Inc



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Previous Statements by WAT
» Waters' CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Waters CEO Discusses Q3 2010 Results - Earnings Call transcript
» Waters Corporation Q2 2010 Earnings Call Transcript

Good morning, welcome to the Waters Corporation First Quarter 2011 Financial Results Conference Call. [Operator Instructions] This conference is being recorded. [Operator Instructions] I would like to introduce your host for today's call, Mr. Douglas Berthiaume, 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 is John Ornell, Waters' Chief Financial Officer; Art Caputo, the President of the Waters division; and Gene Cassis, the Vice President of Investor Relations.

As is our normal practice, I'll 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. But before we get going, I'd like John to 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, this time for Q2 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, 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 earnings release conference call and webcasts. The next earnings release call and webcast is currently planned for July 2011.

During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of the non-GAAP financial measure to the most directly comparable GAAP measure is attached to our company's earnings release issued this morning. In our discussions of the results of operation, 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, we're very pleased with our first quarter results and encouraged by the broad strength that we saw across our product lines, geographies and markets. The trend of improving end markets and strong acceptance of our new systems that we've now seen over multiple quarters is very encouraging.

During this quarter, our organic sales growth was 14%, and we delivered 28% adjusted earnings per share growth due primarily to strong shipment volume and effective expense leverage. Instrument sales, that is the high-risk [ph] sales, grew organically at more than 20%, led by continued rapid uptake of our ACQUITY H-Class UPLC and Xevo UPLC/MS Systems.

As you may recall, we began shipping our H-Class UPLC system in the first quarter of 2010. And during the past year, H-Class has been a remarkable success for us, as we've seen consistent and growing demand for this innovative system across our customer segments and especially among our pharmaceutical users, as they've upgraded their laboratories.

Bringing in our business geographically, I'd like to start off by speaking about our situation in Japan. Most important, we are grateful that our employees are safe, and we are not aware of casualties among our many loyal customers. The resiliency of our staff and their dedication to ensuring the continued operation of instrumentation in our customers' labs have been very impressive. For weeks, they've endured disruptions in electrical power and in the public transportation system while working long hours under extremely stressful conditions. We're thankful for these extraordinary efforts and certainly continue to keep all the people in Japan in our thoughts and prayers through these crying times.

During the first quarter, our sales in Japan were roughly flat against a very difficult basic comparison. You may recall, we benefited from significant government stimulus demand in Japan during the first quarter of 2010. In fact, for the quarter, our sales volume was in line with the expected demand included in our January guidance.

Moving forward, we remain concerned about the situation in Japan, but are hopeful that the most difficult conditions impacting our business may be behind us. Adjusting for currency, Japan has represented about 10% of our sales. And at this time, we have only marginally reduced our revenue outlook for the full year. However, a further deterioration of infrastructure in the country is a potential risk to our business, and we will continue to monitor as the year goes by.

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