Waters is cutting 70 employees from its staff as part of a restructuring and resource reallocation plan begun last month that will help support the firm's growth in Asia, a Waters official said this week.
The "cost reduction and expense-reallocation" plan, revealed in a 10-K filing this week with the US Securities Exchange Commission, primarily effects Waters' operations in the US and Europe. The moves will free up resources that will be allocated to the firm's rapidly growing operations in Asia, according to Gene Cassis, Waters' vice president for investor relations.
The layoffs, which represent roughly 1.6 percent of the firm's global staff of 4,500, are expected to be completed by the end of the third quarter. Approximately 47 percent of Waters' total workforce is located in the US, according to the 10-K.
The job cuts mostly affect the firm's European operations, Cassis told BioCommerce Week. "We've moved from a country-based structure to a regional-based structure," he said. "It's something we've been thinking about doing ever since there became a common currency in Western Europe.
"A lot of the functions we had were duplicated in each country, and administratively we could do it much more effectively by creating regions within Europe and having administrative functions within those regions," said Cassis.
"A lot of the functions we had were duplicated in each country, and administratively we could do it much more effectively by creating regions within Europe and having administrative functions within those regions."
Waters said in the filing that it expects to take a one-time restructuring charge of $5 million to $7 million related to the plan in 2006.
"The company is implementing this cost reduction plan primarily to realign its operating costs with business opportunities around the world," Waters said in the filing.
Part of the realignment includes closure of the firm's sales, distribution, and demonstration center in Etten-Leur, the Netherlands. The firm has not disclosed how many employees at that location are affected by the closure.
Following the layoffs, Waters' employee count will still exceed its total of roughly 4,300 at the end of 2004. In that year the firm implemented a similar restructuring plan that also cut 70 positions.
Waters officials hinted during the firm's fourth-quarter conference call in January that layoffs and spending changes could be on the horizon. They said the company would invest more in its Asia operations and cut expenses elsewhere, but at the time did not provide details of the cost-cutting plans (see BioCommerce Week 1/25/2006).
"There will likely be one-time costs associated with these actions that are not included in our current earnings projections," said Ornell during the call. "These activities will take place over the next few quarters and could result in a one-time charge of $5 million to $9 million later this year."
The layoffs follow a difficult year for Waters in which it issued two warnings that quarterly revenue would not meet previous guidance. The firm is hoping its Acquity UPLC system will drive sales in 2006, and Waters officials have said that they expect continued strong growth in the Asian market, where the firm plans to expand this year.
Waters is in the process of building its business in the emerging Asia market, where it expects to realize double-digit growth in 2006. As the firm has ramped up production of its Acquity UPLC instruments, it has moved some manufacturing of its Alliance systems to Singapore.
Cassis said the expense reallocation is not part of the firm's shift of manufacturing to Singapore, but it would free up resources that could be applied to its operations in Asia. "The manufacturing going to Singapore did free up resources in our headquarters here [in Massachusetts] to build Acquity," he said. "We just physically couldn't build Alliance and Acquity at this facility."
Cassis said Waters' SG&A costs are still going to go up in 2006 as it adds staff in Asia. "We have to shift more resources for sales, support, and service to our businesses in India and China," he said.
Though Waters failed to meet its revenue targets twice during 2005, the firm finished the year with profit growth of 9 percent to $78.2 million even though fourth-quarter sales grew at a sluggish 3 percent year over year to $332 million.
Edward Winnick ([email protected])