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UPDATE: Waters' Q2 Revenues Drop 9 Percent

This article has been updated to include company comments from a conference call.

NEW YORK (GenomeWeb News) – Waters today reported that its second-quarter revenues fell 9 percent and its net income declined 16 percent, as a provision for income taxes took a bite out of its profit.

"Our financial results in the quarter were in line with our expectations and sales to our major end markets in the quarter indicated a continuation of the general demand trends that we reported in April 2009," Douglas Berthiaume, Chairman, President, and CEO of Waters, said in a statement.

The Milford, Mass.-based maker of mass spectrometers, chromatography, and thermal analysis products brought in total revenues of $362.8 million for the three-month period ended July 4, compared to revenues of $398.8 million for the second quarter of 2008. Foreign currency translation accounted for roughly 5 percent of the firm's 9 percent decline in revenues.

In a conference call accompanying the earnings release, Berthiaume attributed the drop-off to "weak demand" from the firm's industrial chemical accounts, which he believes is related to the global recession, as well as shrinking demand in certain geographies, most notably India and Latin America, due to economic factors and the effects of local currencies.

But within the instruments business, there was some good new for Waters, particularly among its high-end instruments, which Berthiaume said experienced stronger demand that "routine analysis instruments," which are often purchased to replace older systems.

"Customer interest was strongest for research mass spectrometry and Acquity UPLC instruments," he said.

For full-year 2009, Waters instrument sales are still anticipated to soften compared to a year ago, with sales projected to be down mid- to high-single digits, John Ornell, Waters' CFO, said during the conference call. Meanwhile, recurring revenues, which comprises Waters' consumables and services businesses, grew 2 percent year over year during the quarter, and for full-2009 that business is anticipated to grow in the mid-single digits.

Waters' net income declined to $69.9 million, or $.72 per share, from $83.1 million, or $.82 per share, year over year. The firm's profit was hit by a $14.7 million provision for taxes related to an earlier overstatement of its income tax expense.

On an adjusted basis, waters' EPS was $.78 versus $.76 for the prior year's second quarter. The firm missed analysts' consensus estimate by $.01.

Waters' R&D spending for the quarter fell 11 percent to $19.7 million from $22.2 million, while its SG&A expenses declined 2 percent to $109.6 million from $111.9 million.

Waters finished the quarter with $505.7 million in cash, cash equivalents, and short-term investments.

In early Tuesday afternoon trade on the New York Stock Exchange, shares of Waters were down 6 percent at $49.16.

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