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» Waters Corp. Q1 2010 Earnings Call Transcript
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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 October 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 from many perspectives I think we’re pleased with our second quarter’s performance. Sales of our newly introduced instrument systems and a broad-based improvement in customer demand contributed to 9% currency neutral sales growth and close to 20% growth in earnings per share. At the same time, we are confident that our exciting new product launches, which we showcased at June’s ASMS conference and earlier this year, will provide us with a powerful competitive edge in the second half of 2010 and further into 2011. When you look at the quarter, sales growth to pharmaceutical and industrial chemical customers significantly improved in comparison to what we’ve been seeing in the last few quarters. As you know, the pharmaceutical segment represents more than half of the Waters Division’s sales, and it was improvements in this customer set that contributed most meaningfully to the division’s growth in the second quarter.
Geographically, pharmaceutical growth was strongest in North America and Asia, with drug discovery and QC applications leading the way. Sales in the quarter for most of our large-cap drug accounts grew sequentially from the levels that we saw in the first quarter. However, in absolute terms, demand remained somewhat weak, as many of these customers continue to rationalize their operations. Fortunately, strong demand from generic, specialty biopharmaceuticals, and TRO customers much more than offset the slower sales at our larger drug firms and all in our pharmaceutical business segment enjoyed double-digit top-line growth in the quarter.Sales to industrial chemical accounts were also strong in the quarter, and our TA instruments division benefitted from a significant and broad rebound in capital spending. As you may recall, TA’s largest customer segment is the industrial chemical market, manufacturers of fine chemicals and polymers used in applications ranging from consumer electronics, to aerospace components, to medical devices. And as you may remember, the severe economic conditions that we endured in late 2008 and through 2009 resulted in a pronounced decline in TA’s sales. Throughout this difficult period, TA continued to maintain its technological leadership, provided market-leading customer support, and successfully maintained system pricing. This year, as we continue to emerge from a recession, we are seeing a very impressive rebound in demand for both instrumentation and services at our TA division. Within the Waters division, we are seeing a similar recovery in demand at fine chemical accounts, though this customer segment is a significantly smaller percentage of the Waters division’s overall business. If you look at our non-profit customers, the combined government and academic sales grew more modestly in the quarter and were highlighted by robust shipment volume of high-end mass spec systems to universities. Read the rest of this transcript for free on seekingalpha.com