Waters' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Waters (WAT)

Q1 2012 Earnings Call

April 24, 2012 8:30 am ET


Douglas A. Berthiaume - Chairman, Chief Executive Officer and President

John A. Ornell - Chief Financial Officer and Vice President of Finance & Administration


Nandita Koshal - Barclays Capital, Research Division

Jonathan P. Groberg - Macquarie Research

Daniel L. Leonard - Leerink Swann LLC, Research Division

Daniel Brennan - Morgan Stanley, Research Division

Paul R. Knight - Credit Agricole Securities (USA) Inc., Research Division

Quintin J. Lai - Robert W. Baird & Co. Incorporated, Research Division

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Doug Schenkel - Cowen and Company, LLC, Research Division

Amit Bhalla - Citigroup Inc, Research Division

Jon Davis Wood - Jefferies & Company, Inc., Research Division

Isaac Ro - Goldman Sachs Group Inc., Research Division



Good morning. Welcome to the Waters Corporation First Quarter 2012 Financial Results Conference Call. [Operator Instructions] This conference is being recorded. [Operator Instructions] I would like to introduce you to your host for today's call, Mr. Douglas Berthiaume, Chairman, President and Chief Executive Officer of Waters Corporation. Sir, you may begin.

Douglas A. Berthiaume

Thank you. Well, good morning, and welcome to the Waters Corporation First Quarter Financial Results Conference Call. With me on today's call, as usual, is John Ornell, the Waters Chief Financial Officer; Art Caputo, the President of the Waters Division; and Gene Cassis, the Vice President of Investor Relations.

As our normal practice, I'll start with an overview of the quarter's results, and John will follow with details of our financials 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 A. Ornell

On this call, we may make forward-looking statements regarding future events, including statements regarding customer acceptance of our new products, international expansion of our business, spending by certain end markets that involve a number of risks and uncertainties. For this purpose, any statements that are not statements of historical fact may be deemed forward-looking statements.

The company's actual future results may differ significantly from the results discussed in the forward-looking statements on this call for a variety of reasons, including and without limitation, the impact of demand among the company's various market sectors from economic, sovereign and political uncertainties; increased regulatory burdens from the company's business as the company's business evolves, especially with respect to the U.S. Securities and Exchange Commission, U.S. Food and Drug Administration and the Environmental Protection Agency, among others; shifts in taxable income in jurisdictions with different tax rates; the outcome of tax examinations or changes in respective country legislations affecting the company's effective tax rate; the ability to access capital and maintain liquidity in volatile financial market conditions; the timing of fluctuations in capital expenditures by the company's customers spanning multiple quarters or years, in particular, pharmaceutical companies, governments and universities; the ability to sustain and enhance service and consumable demand by the company's installed base of instruments; introduction of competing products by other companies and loss of market share; pressures on prices from competitors and customers; regulatory, economic and competitive obstacles from product introductions; and other changes in demand from the effect of mergers and acquisitions by the company's customers; environmental and logistical obstacles affecting the distribution of products; risks associated with laysuits and other legal options, particularly involving claims for infringement of patents and intellectual property; foreign exchange fluctuations potentially affection translation of the company's future non-U.S. operating results.

Such factors and others are discussed more fully in the section entitled Risk Factors of the company's Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the Securities and Exchange Commission, which Risk Factors discussion is incorporated by reference on this call. The forward-looking statements included in this call represent the company's estimates or views as of the date of this release and should not be relied upon as representing the company's estimates or views as of any date subsequent to the date of this call.


Douglas A. Berthiaume

Thank you, John. Well, obviously, our sales in the first quarter fell short of our expectations as we encountered weaknesses in some developing markets and delays in capital releases from many of our larger pharmaceutical customers. However, as we look at the various pushes and pulls that resulted in the quarter's sales performance, I believe that the underlying demand for our product and services remains intact and that we will see improvements as we go through the rest of the year.

When you look at the first quarter, our sales were flat organically, and our adjusted earnings per share declined 4%. For the Waters division, a geographical situation of the business is useful in understanding the quarter's sales trend. In the quarter, sales growth from the approximately 1/3 of the business that we derived from the developing regions, including non-Japan Asia, Latin America and Eastern Europe, did not provide the growth that we've seen in recent quarters.

Our instrument sales in India declined rather sharply due to the residual budgetary effects of a weaker rupee and deferments in capital spending at both generic drug makers and CROs. At the start of a new fiscal year, as we enter the second quarter and more favorable quarterly comparisons, we're anticipating a return to growth in India and are encouraged by an improving trend that we've begun to see earlier in the second quarter.

In China, sales in the first quarter were up double digits based on strong industrial and governmental spending. Sales growth rates in the Middle East and Eastern Europe were weak in this quarter, and this weakness can be attributed to a tough base of comparison as well as the great amount of political instability in the region.

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