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Waters' Q3 Revenues Rise 7 Percent

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Waters today reported a 7 percent climb in revenues to $401 million for the third quarter, beating Wall Street estimates of $396.7 million.

For the three months ended Oct. 2, the company' net income climbed 25 percent to $94.7 million, or $1.02 per share. Its non-GAAP EPS was $.98, above analyst estimates of $0.97 per share.

The figures compare to $374 million in revenues and $75.9 million in profits, or $0.79 per share, for Q3 2009.

R&D costs for the quarter rose to $20.5 million, up 6 percent from $19.3 million a year ago, while SG&A costs rose about 8 percent to $111.4 million from $102.7 million.

Pacing sales growth in the quarter were instruments sales, which grew about 9 percent organically in the Waters division, company officials said during a conference call following the earnings release. In particular, they highlighted the company's UPLC performance, as well as its high-end mass spectrometry sales.

The UPLC line grew in the double digits, helped in part by continued strong adoption of the Acquity UPLC H-Class — an instrument bridging HPLC and UPLC capabilities — by customers who aren't yet ready to move to the full UPLC capabilities on the Acquity UPLC platform, Waters President and CEO Douglas Berthiaume said.

The instrument, he said, is initiating "a long awaited replacement cycle for applications such as pharmaceutical QA/QC, and we believe this replacement cycle has the potential to augment LC system growth over a multi-year period."

He added that "the largest business growth opportunity in analytical instrumentation may involve the broad conversion of the large HPLC installed base of instruments to UPLC-type capability." Though other companies have started to enter the ultra-high performance LC market in a "meaningful" way, Waters was the first to launch a UHPLC platform when it introduced the Acquity instrument in 2004, and the company is "best positioned to increase market share," Berthiaume said.

On the mass spec front, he cited strong sales for the Synapt G2 and Xevo G2 Q-TOF platforms. High-end mass specs, he said, performed particularly well in the quarter as the firm began shipping systems that were introduced earlier this year at the American Society for Mass Spectrometry conference.

Initial customer reactions to its newest mass spec launches — in particular, the introduction of the Xevo TQS platform — "make us pretty confident that those products have strong legs going into 2011," Berthiaume said.

He added that sales of mass specs grew in spite of a weak government market in Western Europe. "Clearly, it does affect our higher-end mass spectrometry significantly," Berthiaume said, but "we had an excellent quarter worldwide in mass spectrometry, so whatever it did to us in Western Europe was more than offset by strength in those applications outside of Western Europe."

Weakness in that region dragged business down 3 percent overall throughout Europe compared to a year ago, while Waters' US sales grew 11 percent. Japan rose 3 percent, and the rest of Asia spiked 28 percent, said Waters CFO John Ornell during the call.

Forecasting for the fourth quarter, Ornell said that on a currency-neutral basis sales are expected to grow 7 to 8 percent with the effects of currency at today's rates expected to add 1 percent growth. EPS is expected to fall between $1.28 and $1.33.

For full-year 2010, the firm's organic sales are forecast to increase about 8 percent and currency effects are expected to be neutral. EPS on a non-GAAP basis is anticipated to be between $4 and $4.05.

Waters finished the quarter with cash, cash equivalents, and short-term investments of $837.1 million.

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