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Waters Reports Flat Q2 Revenues; Lowers 2013 EPS Guidance

NEW YORK (GenomeWeb News) – Waters today reported that its revenues in the second quarter were flat year over year, as it experienced a late-quarter slowdown in instrument systems orders.

The company posted Q2 revenues of $451 million, short of the average Wall Street estimate of $466.4 million. It reported a profit of $89.3 million, or $1.03 per share, during the quarter, compared to a profit of $97.7 million, or $1.09 per share, a year ago.

On a non-GAAP basis, Waters had EPS of $1.08, below the average analyst estimate of $1.21.

In a statement, Waters Chairman, President, and CEO Douglas Berthiaume said that "order delays and a meaningful backlog build combined in late June to negatively affect" the company's sales and earnings. He noted that management believed "that underlying demand for instrument systems is, in fact, stronger than indicated by our weak sales growth in the quarter."

Waters' recurring revenues – the combination of its service and chromatography consumables business – was up 8 percent in the quarter. Its mass spectrometry business, meanwhile, saw mid-single digit sales growth and double-digit growth in orders, Berthiaume said on a conference call following the release of Waters' Q2 earnings.

In particular, he noted, the company saw strong demand for its high-performance QTOF mass spectrometers, including its Xevo and Synapt platforms.

These strengths, however, were offset by the poor performance of Waters' LC business, where the company saw mid-single digit declines in both orders and sales, Berthiaume said, adding that "this weakness was most pronounced for our pharmaceutical companies in well established markets — US, Wstern Europe, and Japan — and in application areas outside of pharmaceutical QC."

This mix shift in the quarter from LC instruments toward mass spec sales contributed to lower margins, noted Waters' Chief Financial Officer John Ornell on the call.

For full-year 2013 the company said it expects non-GAAP EPS to be in the range of $5.00 to $5.10. This is $.15 below the guidance it provided after release of its Q1 earnings in April and $.30 below its guidance from January.

Water's R&D spending was up 3 percent year over year to $24.7 million from $23.9 million a year ago, while SG&A costs less than 1 percent to $123.1 million from $122.7 million.

The company ended the quarter with $1.65 billion in cash, cash equivalents, and investments.

In morning trading on the New York Stock Exchange, shares of Waters was down 6 percent at $98.66.

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