Item 8. Financial Statements and Supplementary Data

Financial Statements and Supplementary Data

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in

Rules 13a-15(f)

and

15d-15(f)

under the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under the framework in Internal Control — Integrated Framework (2013), our management, including our chief executive officer and chief financial officer, concluded that our internal control over financial reporting was effective as of December 31, 2023.

We excluded Wyatt Technology, LLC, and its three operating subsidiaries, (Wyatt Technology Europe GmbH, Wyatt Technology France and Wyatt Technology UK Ltd) (collectively “Wyatt”) from our assessment of internal control over financial reporting as of December 31, 2023, because Wyatt was acquired by the Company in a purchase business combination during 2023. The total assets and total revenues of Wyatt represent 2% and 2%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Waters Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Waters Corporation and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in

Internal Control—Integrated Framework

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in

Internal Control—Integrated Framework

(2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Wyatt Technology, LLC, and its three operating subsidiaries, Wyatt Technology Europe GmbH, Wyatt Technology France, and Wyatt Technology UK Ltd (collectively Wyatt) from its assessment of internal control over financial reporting as of December 31, 2023, because it was acquired by the Company in a purchase

business combination during 2023. We have also excluded Wyatt from our audit of internal control over financial reporting. Wyatt is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 2% and 2%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Product Revenue Recognition

As described in Note 2 to the consolidated financial statements, the Company recognizes revenue upon transfer of control of promised products to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products. The Company recognizes revenue on product sales at the time control of the product transfers to the customer. Certain of the Company’s customers have terms where control of the product transfers to the customer on shipment, while others have terms where control transfers to the customer on delivery. Product sales totaled $1.9 billion for the year ended December 31, 2023.

The principal consideration for our determination that performing procedures relating to product revenue recognition is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s product revenue recognition.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to product revenue recognition. These procedures also included, among others, (i) evaluating the recognition of revenue for a sample of transactions by obtaining and inspecting source documents, such as invoices, customer purchase orders, and shipping documents, and (ii) obtaining and inspecting evidence of remittance of cash payment from customers, as applicable, related to product revenue.

Acquisition of Wyatt Technology, LLC—Valuation of U.S. Customer Relationships

As described in Notes 1, 2 and 7 to the consolidated financial statements, on May 16, 2023, the Company completed the Wyatt acquisition for a total purchase price of $1.3 billion. Management allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. As disclosed by management, of the $330.6 million of customer relationships recorded in connection with the acquisition, a majority relates to U.S. customer relationships. The customer relationships were valued using the multi-period excess earnings method under the income approach. Management’s cash flow projections for the customer relationships acquired included significant judgments and assumptions related to customer attrition rate, discount rate, and forecasted revenues.

The principal considerations for our determination that performing procedures relating to the valuation of U.S. customer relationships acquired in the acquisition of Wyatt Technology, LLC is a critical audit matter are (i) the significant judgment by management when determining the fair value estimate of the U.S. customer relationships acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the customer attrition rate, discount rate, and forecasted revenues, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the U.S. customer relationships acquired. These procedures also included, among others, (i) reading the purchase agreement; (ii) testing management’s process for developing the fair value estimate of the U.S. customer relationships acquired; (iii) evaluating the appropriateness of the multi-period excess earnings method used by management; (iv) testing the completeness and accuracy of the underlying data used in the multi-period excess earnings method; and (v) evaluating the reasonableness of the significant assumptions used by management related to the customer attrition rate, discount rate, and forecasted revenues. Evaluating the reasonableness of the significant assumptions used by management related to the customer attrition rate, discount rate and forecasted revenues involved considering (i) the current and past performance of the Wyatt business; (ii) the consistency with external market and industry data; and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the multi-period excess earnings method under the income approach and (ii) the reasonableness of the customer attrition, discount rate, and forecasted revenue assumptions.

/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 27, 2024

We have served as the Company’s auditor since 1994.

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		December 31,
		2023				2022
		(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents		$	395,076			$	480,529
Investments			898				862
Accounts receivable, net			702,168				722,892
Inventories			516,236				455,710
Other current assets			138,489				103,910
Total current assets			1,752,867				1,763,903
Property, plant and equipment, net			639,073				582,217
Intangible assets, net			629,187				227,399
Goodwill			1,305,446				430,328
Operating lease assets			84,591				86,506
Other assets			215,690				191,100
Total assets		$	4,626,854			$	3,281,453
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and debt		$	50,000			$	50,000
Accounts payable			84,705				93,302
Accrued employee compensation			69,391				103,300
Deferred revenue and customer advances			256,675				227,908
Current operating lease liabilities			27,825				26,429
Accrued income taxes			120,257				132,545
Accrued warranty			12,050				11,949
Other current liabilities			168,677				140,304
Total current liabilities			789,580				785,737
Long-term liabilities:
Long-term debt			2,305,513				1,524,878
Long-term portion of retirement benefits			47,559				38,203
Long-term income tax liabilities			137,123				248,496
Long-term operating lease liabilities			58,926				62,108
Other long-term liabilities			137,812				117,543
Total long-term liabilities			2,686,933				1,991,228
Total liabilities			3,476,513				2,776,965
Commitments and contingencies (Notes 9, 10, 11, 12, 13 and 17 )
Stockholders’ equity:
Preferred stock, par value $0.01 per share, 5,000 shares authorized, none issued at December 31, 2023 and December 31, 2022			—				—
Common stock, par value $0.01 per share, 400,000 shares authorized, 162,709 and 162,425 shares issued, 59,176 and 59,104 shares outstanding at December 31, 2023 and December 31, 2022, respectively			1,627				1,624
Additional paid-in capital			2,266,265				2,199,824
Retained earnings			9,150,821				8,508,587
Treasury stock, at cost, 103,533 and 103,321 shares at December 31, 2023 and December 31, 2022, respectively			(10,134,252	)			(10,063,975	)
Accumulated other comprehensive loss			(134,120	)			(141,572	)
Total stockholders’ equity			1,150,341				504,488
Total liabilities and stockholders’ equity		$	4,626,854			$	3,281,453

The accompanying notes are an integral part of the consolidated financial statements.

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

		Year Ended December 31,
		2023				2022				2021
		(In thousands, except per share data)
Revenues:
Product sales		$	1,903,050			$	1,988,169			$	1,822,070
Service sales			1,053,366				983,787				963,804
Total net sales			2,956,416				2,971,956				2,785,874
Costs and operating expenses:
Cost of product sales			766,374				836,209				752,514
Cost of service sales			428,849				411,973				404,019
Selling and administrative expenses			736,014				658,026				626,968
Research and development expenses			174,945				176,190				168,358
Purchased intangibles amortization			32,558				6,366				7,143
Litigation provision			—				—				5,165
Acquired in-process research and development			—				9,797				—
Total costs and operating expenses			2,138,740				2,098,561				1,964,167
Operating income			817,676				873,395				821,707
Other income, net			807				2,228				17,203
Interest expense			(98,861	)			(48,797	)			(44,938	)
Interest income			16,621				11,020				12,221
Income before income taxes			736,243				837,846				806,193
Provision for income taxes			94,009				130,091				113,350
Net income		$	642,234			$	707,755			$	692,843
Net income per basic common share		$	10.87			$	11.80			$	11.25
Weighted-average number of basic common shares			59,076				59,985				61,575
Net income per diluted common share		$	10.84			$	11.73			$	11.17
Weighted-average number of diluted common shares and equivalents			59,270				60,331				62,028

The accompanying notes are an integral part of the consolidated financial statements.

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

		Year Ended December 31,
		2023				2022				2021
		(In thousands)
Net income		$	642,234			$	707,755			$	692,843
Other comprehensive income (loss):
Foreign currency translation			17,761				(46,135	)			(1,903	)
Unrealized losses on derivative instruments before reclassifications			(2,648	)			—				—
Amounts reclassified to interest income			(326	)			—				—
Unrealized losses on derivative instruments before income taxes			(2,974	)			—				—
Income tax benefit			714				—				—
Unrealized losses on derivative instruments, net of tax			(2,260	)			—				—
Unrealized gains (losses) on investments before income taxes			—				26				(26	)
Income tax (expense) benefit			—				(6	)			6
Unrealized gains (losses) on investments, net of tax			—				20				(20	)
Retirement liability adjustment before reclassifications			(10,153	)			20,953				9,342
Amounts reclassified to other income, net			(98	)			574				1,167
Retirement liability adjustment before income taxes			(10,251	)			21,527				10,509
Income tax benefit (expense)			2,202				(5,119	)			(2,508	)
Retirement liability adjustment, net of tax			(8,049	)			16,408				8,001
Other comprehensive income (loss)			7,452				(29,707	)			6,078
Comprehensive income		$	649,686			$	678,048			$	698,921

The accompanying notes are an integral part of the consolidated financial statements.

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Year Ended December 31,
		2023				2022				2021
			(In thousands)
Cash flows from operating activities:
Net income		$	642,234			$	707,755			$	692,843
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation			36,868				42,564				29,918
Deferred income taxes			(1,197	)			(31,988	)			16,633
Depreciation			84,625				71,998				71,560
Amortization of intangibles			81,280				58,425				60,120
Observable unrealized gain on investment			—				—				(9,707	)
Realized gain on sale of investment			(742	)			—				—
In-process research and development and other non-cash charges			—				10,003				—
Change in operating assets and liabilities, net of acquisitions:
Decrease (increase) in accounts receivable			49,179				(137,874	)			(62,448	)
Increase in inventories			(45,443	)			(101,902	)			(67,250	)
Increase in other current assets			(43,164	)			(23,074	)			(20,765	)
(Increase) decrease in other assets			(26,264	)			(5,514	)			4,490
(Decrease) increase in accounts payable and other current liabilities			(79,524	)			60,984				46,110
Increase in deferred revenue and customer advances			10,433				12,862				37,845
Decrease in other liabilities			(105,476	)			(52,578	)			(52,075	)
Net cash provided by operating activities			602,809				611,661				747,274
Cash flows from investing activities:
Additions to property, plant, equipment and software capitalization			(160,632	)			(175,921	)			(161,266	)
Asset and business acquisitions, net of cash acquired			(1,282,354	)			—				—
Proceeds from (investments in) equity investments, net			742				8,903				(1,788	)
Payments for intellectual property licenses			—				(7,535	)			(7,000	)
Purchases of investments			(1,791	)			(11,407	)			(279,660	)
Maturities and sales of investments			1,770				77,993				218,084
Net cash used in investing activities			(1,442,265	)			(107,967	)			(231,630	)
Cash flows from financing activities:
Proceeds from debt issuances			1,450,040				205,000				510,000
Payments on debt			(670,040	)			(145,000	)			(350,000	)
Payments of debt issuance costs			(400	)			—				(8,537	)
Proceeds from stock plans			29,792				42,801				55,643
Purchases of treasury shares			(70,277	)			(626,061	)			(648,930	)
Proceeds from derivative contracts			15,836				13,627				3,549
Net cash provided by (used in) financing activities			754,951				(509,633	)			(438,275	)
Effect of exchange rate changes on cash and cash equivalents			(948	)			(14,766	)			(12,830	)
(Decrease) increase in cash and cash equivalents			(85,453	)			(20,705	)			64,539
Cash and cash equivalents at beginning of period			480,529				501,234				436,695
Cash and cash equivalents at end of period		$	395,076			$	480,529			$	501,234
Supplemental cash flow information:
Income taxes paid		$	243,316			$	160,082			$	153,504
Interest paid		$	94,099			$	48,083			$	42,408

The accompanying notes are an integral part of the consolidated financial statements.

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

		Number of Common Shares				Common Stock				Additional Paid-In Capital				Retained Earnings				Treasury Stock				Accumulated Other Comprehensive Loss				Total Stockholders’ Equity
		(In thousands)
Balance December 31, 2020			161,666			$	1,617			$	2,029,465			$	7,107,989			$	(8,788,984	)		$	(117,943	)		$	232,144
Net income			—				—				—				692,843				—				—				692,843
Other comprehensive income			—				—				—				—				—				6,078				6,078
Issuance of common stock for employees:
Employee Stock Purchase Plan			40				—				9,578				—				—				—				9,578
Stock options exercised			282				3				46,062				—				—				—				46,065
Treasury stock			—				—				—				—				(648,930	)			—				(648,930	)
Stock-based compensation			96				1				29,775				—				—				—				29,776
Balance December 31, 2021			162,084			$	1,621			$	2,114,880			$	7,800,832			$	(9,437,914	)		$	(111,865	)		$	367,554
Net income			—				—				—				707,755				—				—				707,755
Other comprehensive loss			—				—				—				—				—				(29,707	)			(29,707	)
Issuance of common stock for employees:
Employee Stock Purchase Plan			37				—				10,952				—				—				—				10,952
Stock options exercised			192				2				31,676				—				—				—				31,678
Treasury stock			—				—				—				—				(626,061	)			—				(626,061	)
Stock-based compensation			112				1				42,316				—				—				—				42,317
Balance December 31, 2022			162,425			$	1,624			$	2,199,824			$	8,508,587			$	(10,063,975	)		$	(141,572	)		$	504,488
Net income			—				—				—				642,234				—				—				642,234
Other comprehensive income			—				—				—				—				—				7,452				7,452
Issuance of common stock for employees:
Employee Stock Purchase Plan			41				—				11,124				—				—				—				11,124
Stock options exercise d			100				1				17,635				—				—				—				17,636
Treasury stock			—				—				—				—				(70,277	)			—				(70,277	)
Stock-based compensation			143				2				37,682				—				—				—				37,684
Balance December 31, 2023			162,709			$	1,627			$	2,266,265			$	9,150,821			$	(10,134,252	)		$	(134,120	)		$	1,150,341

The accompanying notes are an integral part of the consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 Description of Business and Organization

Waters Corporation (the “Company,” “we,” “our,” or “us”), a global leader in analytical instruments and software, has pioneered innovations in chromatography, mass spectrometry and thermal analysis serving life, materials and food sciences for more than 65 years. The Company primarily designs, manufactures, sells and services high-performance liquid chromatography (“HPLC”), ultra-performance liquid chromatography (“UPLC” and together with HPLC, referred to as “LC”) and mass spectrometry (“MS”) technology systems and support products, including chromatography columns, other consumable products and comprehensive post-warranty service plans. These systems are complementary products that are frequently employed together

(“LC-MS”)

and sold as integrated instrument systems using common software platforms. LC is a standard technique and is utilized in a broad range of industries to detect, identify, monitor and measure the chemical, physical and biological composition of materials, and to purify a full range of compounds. MS technology, principally in conjunction with chromatography, is employed in drug discovery and development, including clinical trial testing, the analysis of proteins in disease processes (known as “proteomics”), nutritional safety analysis and environmental testing.

LC-MS

instruments combine a liquid phase sample introduction and separation system with mass spectrometric compound identification and quantification. In addition, the Company designs, manufactures, sells and services thermal analysis, rheometry and calorimetry instruments through its TA Instruments product line. These instruments are used in predicting the suitability and stability of fine chemicals, pharmaceuticals, water, polymers, metals and viscous liquids for various industrial, consumer goods and healthcare products, as well as for life science research. The Company is also a developer and supplier of advanced software-based products that interface with the Company’s instruments, as well as other manufacturers’ instruments.

On May 16, 2023, the Company completed the acquisition of Wyatt Technology, LLC and its three operating subsidiaries, Wyatt Technology Europe GmbH, Wyatt Technology France and Wyatt Technology UK Ltd. (collectively, “Wyatt”), for a total purchase price of $1.3 billion in cash. Wyatt is a pioneer in innovative light scattering and field-flow fractionation instruments, software, accessories and services. The acquisition will expand Waters’ portfolio and increase exposure to large molecule applications. The Company financed this transaction with a combination of cash on its balance sheet and borrowings under its revolving credit facility.

2 Basis of Presentation and Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities at the dates of the financial statements. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, goodwill and intangible assets, income taxes, litigation and inventory valuation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts may differ from these estimates under different assumptions or conditions.

Risks and Uncertainties

The Company is subject to risks common to companies in the analytical instrument industry, including, but not limited to, global economic and financial market conditions, fluctuations in foreign currency exchange rates, fluctuations in customer demand, development by its competitors of new technological innovations, costs of developing new technologies, levels of debt and debt service requirements, risk of disruption, dependence on key personnel, protection and litigation of proprietary technology, shifts in taxable income between tax jurisdictions and compliance with regulations of the U.S. Food and Drug Administration and similar foreign regulatory authorities and agencies.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, which are wholly owned. The Company consolidates entities in which it owns or controls 50% or more of the voting shares. All inter-company balances and transactions have been eliminated.

Translation of Foreign Currencies

The functional currency of each of the Company’s foreign operating subsidiaries is the local currency of its country of domicile, except for the Company’s subsidiaries in Hong Kong, Singapore and the Cayman Islands, where the underlying transactional cash flows are denominated in currencies other than the respective local currency of domicile. The functional currency of the Hong Kong, Singapore and Cayman Islands subsidiaries is the U.S. dollar, based on the respective entity’s cash flows.

For the Company’s foreign operations, assets and liabilities are translated into U.S. dollars at exchange rates prevailing on the balance sheet date, while revenues and expenses are translated at average exchange rates prevailing during the respective period. Any resulting translation gains or losses are included in accumulated other comprehensive loss in the consolidated balance sheets.

The Company’s net sales derived from operations outside the United States were 69%, 70% and 72% in 2023, 2022 and 2021, respectively. Gains and losses from foreign currency transactions are included primarily in cost of sales in the consolidated statements of operations. In 2023, 2022 and 2021, foreign currency transactions resulted in net losses of $16 million, $31 million and $5 million, respectively.

Seasonality of Business

The Company typically experiences seasonality in its orders that is reflected as an increase in sales in the fourth quarter, as a result of purchasing habits for capital goods of customers that tend to exhaust their spending budgets by calendar

year-end.

Cash, Cash Equivalents and Investments

Cash equivalents represent highly liquid investments, with original maturities of 90 days or less, primarily in bank deposits, U.S. treasury bill money market funds and commercial paper. Investments with longer maturities are classified as investments, and are held primarily in U.S. treasury bills, U.S. dollar-denominated treasury bills and commercial paper, bank deposits and corporate debt securities.

Investments are classified as available-for-sale (“AFS”) debt securities. If the AFS debt security’s fair value exceeds the security’s amortized cost the unrealized gain is recognized in accumulated other comprehensive loss in stockholders’ equity (deficit), net of the related tax effects. If the AFS debt security’s fair value declines below its amortized cost the Company considers all available evidence to evaluate the extent to which the decline is due to credit-related factors or noncredit-related factors. If the decline is due to noncredit-related factors then no credit loss is recorded and the unrealized loss is recognized in accumulated other comprehensive income in stockholders’ equity, net of the related tax effects. If the decline is considered to be a credit-related impairment, it is recognized as an allowance on the consolidated balance sheet with a corresponding charge to the statement of operations. The credit allowance is limited to the difference between the fair value and the amortized cost basis. No credit-related allowances or impairments have been recognized on the Company’s investments in available-for-sale debt securities. The Company classifies its investments exclusive of those categorized as cash equivalents.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company maintains cash balances in various operating accounts in excess of federally insured limits, and in foreign subsidiary accounts in currencies other than the U.S. dollar. As of December 31, 2023 and 2022, $321 million out of $396 million and $472 million out of $481 million, respectively, of the Company’s total cash, cash equivalents and investments were held by foreign subsidiaries. In addition, $233 million out of $396 million and $336 million out of $481 million of cash, cash equivalents and investments were held in currencies other than the U.S. dollar at December 31, 2023 and 2022, respectively.

Accounts Receivable and Allowance for Credit Losses

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company has very limited use of rebates and other cash considerations payable to customers and, as a result, the transaction price determination does not have any material variable consideration. The Company does not consider there to be significant concentrations of credit risk with respect to trade receivables due to the short-term nature of the balances, the Company having a large and diverse customer base, and the Company having a strong historical experience of collecting receivables with minimal defaults. As a result, credit risk is considered low across territories and trade receivables are considered to be a single class of financial asset. The allowance for credit losses is based on a number of factors and is calculated by applying a historical loss rate to trade receivable aging balances to estimate a general reserve balance along with an additional adjustment for any specific receivables with known or anticipated issues affecting the likelihood of recovery. Past due balances with a probability of default based on historical data as well as relevant available forward-looking information are included in the specific adjustment. The historical loss rate is reviewed on at least an annual basis and the allowance for credit losses is reviewed quarterly for any required adjustments. The Company does not have any

off-balance

sheet credit exposure related to its customers.

Trade receivables related to instrument sales are collateralized by the instrument that is sold. If there is a risk of default related to a receivable that is collateralized, then the fair value of the collateral is calculated and adjusted for the cost to

re-possess,

refurbish and

re-sell

the instrument. This adjusted fair value is compared to the receivable balance and the difference would be recorded as the expected credit loss.

The following is a summary of the activity of the Company’s allowance for credit losses for the twelve months ended December 31, 2023, 2022 and 2021 (in thousands):

		Balance at Beginning of Period				Additions				Deductions				Balance at End of Period
Allowance for Credit Losses
December 31, 2023		$	14,311			$	8,120			$	(3,096	)		$	19,335
December 31, 2022		$	13,228			$	6,509			$	(5,426	)		$	14,311
December 31, 2021		$	14,381			$	5,380			$	(6,533	)		$	13,228

Concentration of Credit Risk

The Company sells its products and services to a significant number of large and small customers throughout the world, with net sales to the pharmaceutical industry of approximately 57%, 59% and 60% in 2023, 2022 and 2021, respectively. None of the Company’s individual customers accounted for more than 2% of annual Company sales in 2023, 2022 or 2021. The Company performs continuing credit evaluations of its customers and generally does not require collateral, but in certain circumstances may require letters of credit or deposits. Historically, the Company has not experienced significant credit losses.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Inventory

The Company values all of its inventories at the lower of cost or net realizable value on a

first-in,

first-out

basis (“FIFO”).

Income Taxes

As part of the process of preparing the consolidated financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. This process involves the Company estimating its income taxes, taking into account the amount, timing and character of taxable income, tax deductions and credits and assessing changes in tax laws, regulations, agreements and treaties. Differing treatment of items for tax and accounting purposes, such as depreciation, amortization and inventory reserves, result in deferred tax assets and liabilities, which are included within the consolidated balance sheets. In the event that actual results differ from these estimates, or the Company adjusts these estimates in future periods, such changes could materially impact the Company’s financial position and results of operations.

The accounting standards for income taxes require that a company continually evaluate the necessity of establishing or changing a valuation allowance for deferred tax assets depending on whether it is more likely than not that the actual benefit of those assets will be realized in future periods.

The Company accounts for its uncertain tax return positions in accordance with the accounting standards for income taxes, which require financial statement reporting of the expected future tax consequences of uncertain tax positions on the presumption that all concerned tax authorities possess full knowledge of those tax positions, as well as all of the pertinent facts and circumstances, but prohibit any discounting of unrecognized tax benefits associated with those positions for the time value of money. The Company classified interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.

Leases

The Company’s lease portfolio consists primarily of operating leases. The Company’s operating leases consist of property leases for sales, demonstration, laboratory, warehouse and office spaces, automotive leases for sales and service personnel and equipment leases, primarily used in our manufacturing and distribution operations. The Company categorizes leases as either operating or finance leases at the commencement date of the lease. The Company does not have any material financing leases.

The Company makes variable lease payments that do not depend on a rate or index, primarily for items such as real estate taxes and other expenses. These expenses are recorded as variable costs in the period incurred. For the years ended December 31, 2023, 2022 and 2021, variable costs incurred were not material.

The Company’s lease agreements may include tenant improvement allowances, rent holidays, and/or contingent rent provisions as well as a certain number of these leases contain rental escalation clauses that are either fixed or adjusted periodically for inflation of market rates which are factored into our determination of lease payments at lease inception. The Company’s leases also sometimes include renewal options and/or termination options which are included in the determination of the lease term when they are reasonably certain to be exercised.

The Company has lease agreements which contain lease and

non-lease

components, which are accounted for as a single lease component for all underlying classes of assets.

For leases with terms greater than 12 months, the Company records a

right-of-use

asset and lease liability at the present value of lease payments over the term of the leases and records rent expense on a straight-line basis over the lease term. The Company has elected not to apply the recognition requirements to short-term leases with terms less than 12 months. For short-term leases, the Company recognizes lease payments in net income on a

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

straight-line basis over the term of the lease. For the years ended December 31, 2023, 2022 and 2021, costs incurred related to short-term leases were not material.

When available, the Company uses the rate implicit in the lease to discount lease payments to determine the present value of the lease liabilities; however, most of the leases do not provide a readily determinable implicit rate and, as required by the accounting guidance, the Company estimates its incremental secured borrowing rate to discount the lease payments based on information available at lease commencement (or, for the leases in existence on the adoption date, the January 1, 2019 information). The Company’s incremental borrowing rate reflects the estimated rate of interest that the Company would pay to borrow on a collateralized basis over a similar term to the lease payments in a similar economic environment.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Expenditures for maintenance and repairs are charged to expense, while the costs of significant improvements are capitalized. Depreciation is provided using the straight-line method over the following estimated useful lives: buildings —

fifteen

to

thirty-nine

years; building improvements —

five

to ten years; leasehold improvements — the shorter of the economic useful life or life of lease; and production and other equipment — three to ten years. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are eliminated from the consolidated balance sheets and related gains or losses are reflected in the consolidated statements of operations.

Asset Impairments

The Company reviews its long-lived assets for impairment in accordance with the accounting standards for property, plant and equipment. Whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable, the Company evaluates the recoverability of the carrying value of the asset based on the expected future cash flows, relying on a number of factors, including, but not limited to, operating results, business plans, economic projections and anticipated future cash flows. If the asset is deemed not recoverable, it is written down to fair value and the impairment is recorded in the consolidated statements of operations.

During 2022, the Company recorded a total

non-cash

charge of $6 million in other income (expense), net in the consolidated statement of operations for the impairment of various equity investments without readily determinable fair values accounted for under the measurement alternative or the equity method of accounting. The impairments resulted from the substantial doubt of the investees ability to continue as a going concern.

Business Combinations and Asset Acquisitions

The Company accounts for business acquisitions under the accounting standards for business combinations. The results of each acquisition are included in the Company’s consolidated results as of the acquisition date and the purchase price of an acquisition is allocated to tangible and intangible assets and assumed liabilities based on their estimated fair values. Any excess of the fair value consideration transferred over the estimated fair values of the net assets acquired is recognized as goodwill. We use assumptions and estimates in determining the fair value of assets acquired and liabilities assumed. The determination of the fair value of intangible assets, which represents a significant portion of the purchase price in our recent acquisition of Wyatt, requires the use of significant judgment with regard to (i) the fair value; and (ii) whether such intangibles are amortizable or

non-amortizable

and, if the former, the period and the method by which the intangible asset will be amortized. We utilize commonly accepted valuation techniques, such as the income, cost and market approaches, as appropriate, in establishing the fair value of intangible

as

sets. Typically, key assumptions include projections of cash flows that arise from identifiable intangible assets of acquired businesses as well as discount rates based on an analysis of the weighted average cost of capital, adjusted for specific risks associated with the assets.

N

OTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In our recent acquisition of Wyatt, customer relationship intangible assets have been the most significant identifiable assets acquired. The customer relationships were valued using the multi-period excess earnings method under the income approach. Our

cash

flow projections for the customer relationships acquired included significant judgments and assumptions related to customer attrition rate, discount rate, and forecasted revenues.

Goodwill and Other Intangible Assets

Goodwill and indefinite-lived intangible assets are not amortized, but are evaluated for impairment on an annual basis, or on an interim basis when events or changes in circumstances indicate that the carrying value may not be recoverable. In assessing the recoverability of goodwill and indefinite-lived intangible assets, we must make assumptions regarding the estimated future cash flows, including forecasted revenue growth and the discount rate to determine the fair value of these assets. If these estimates or their related assumptions change in the future, we may be required to record impairment charges against these assets in the reporting period in which the impairment is determined.

We test goodwill for impairment at the reporting unit level, which is the operating segment or one level below an operating segment. We have the option of performing a qualitative assessment to determine whether further impairment testing is necessary before performing the quantitative assessment. If as a result of the qualitative assessment, it is

more-likely-than-not

that the fair value of a reporting unit is less than its carrying amount, a quantitative impairment test will be required. Otherwise, no further testing will be required. If a quantitative impairment test is performed, we compare the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. Estimating the fair value of the reporting units requires significant judgment by management. If the carrying amount of a reporting unit exceeds the fair value of the reporting unit, an impairment charge is recognized for the amount by which the carrying value amount exceeds the reporting unit’s fair value up to the total amount of goodwill allocated to the reporting unit. The Company performs an annual goodwill impairment assessment for its reporting units as of December 31 each year. The Company has

two

reporting units: Waters and TA. Goodwill is allocated to the reporting units at the time of acquisition.

The Company’s intangible assets include purchased technology; capitalized software; costs associated with acquiring Company patents, trademarks and intellectual properties, such as licenses; and acquired IPR&D. Purchased intangibles are recorded at their fair market values as of the acquisition date and amortized over their estimated useful lives, ranging from

one

to fifteen years. Other intangibles are amortized over a period ranging from

one

to ten years. Acquired IPR&D is amortized from the date of completion of the acquired program over its estimated useful life.

Goodwill totaled $1.3 billion and $430 million as of December 31, 2023 and 2022, respectively. Net intangible assets and long-lived assets amounted to $629 million and $639 million, as of December 31, 2023, respectively, and $227 million and $582 million as of December 31, 2022, respectively.

Software Development Costs

The Company capitalizes internal and external software development costs for products offered for sale in accordance with the accounting standards for the costs of software to be sold, leased, or otherwise marketed. Capitalized costs are amortized to cost of sales over the period of economic benefit, which approximates a straight-line basis over the estimated useful lives of the related software products, generally

three

to ten years.

The Company capitalized $

million, $

million and $

million of direct expenses that were related to the development of software in 2023, 2022 and 2021, respectively. Net capitalized software included in intangible assets totaled $

million and $

million at December 31, 2023 and 2022, respectively. See Note 8, Goodwill and Other Intangibles.

The Company capitalizes software development costs for internal use. Capitalized internal software development costs are amortized over the period of economic benefit, which approximates a straight-line

basis

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

over

ten years

. Net capitalized internal software included in property, plant and equipment totaled $

million and $

million at December 31, 2023 and 2022, respectively.

Other Investments

The Company accounts for its investments that represent less than twenty percent ownership, and for which the Company does not have the ability to exercise significant influence, using the accounting standards for investments in equity securities. Investments for which the Company does not have the ability to exercise significant influence, and for which there is not a readily determinable market value, are accounted for at cost, adjusted for subsequent observable price changes as applicable. The Company periodically evaluates the carrying value of its investments for which the Company does not have the ability to exercise significant influence, and for which there is not a readily determinable fair value and carries them at cost, less impairment, adjusted for subsequent observable price changes. For equity investments in which the Company has the ability to exercise significant influence over operating and financial policies of the investee, the equity method of accounting is used. The Company’s share of net income or losses of equity method investments is included in the consolidated statements of operations and was not material in any period presented.

During the year ended 2023, the Company received $1 million in proceeds from, and made no investments in, unaffiliated companies. During the year ended December 31, 2022 the Company received $10 million in proceeds from unaf

f

iliated companies. During the years ended December 31, 2022 and 2021, the Company made investments of $1 million and $2 million in unaffiliated companies, respectively.

In 2022, the Company recorded a realized gain of $7 million in other income (expense), net in the consolidated statement of operations due to the sales of various equity investments as well as incurring $6 million in impairment losses. The Company also recognized an additional $2 million

non-cash

gain on the cashless exercise of a warrant.

In 2021, the Company recorded an unrealized gain of $10 million due to an observable change in the fair value of an existing investment the Company does not have the ability to exercise significant influence over.

Fair Value Measurements

In accordance with the accounting standards for fair value measurements and disclosures, certain of the Company’s assets and liabilities are measured at fair value on a recurring basis as of December 31, 2023 and 2022. Fair values determined by Level 1 inputs utilize observable data, such as quoted prices in active markets. Fair values determined by Level 2 inputs utilize data points other than quoted prices in active markets that are observable either directly or indirectly. Fair values determined by Level 3 inputs utilize unobservable data points for which there is little or no market data, which require the reporting entity to develop its own assumptions.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table represents the Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2023 (in thousands):

		Total at December 31, 2023				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets:
Time deposits		$	898			$	—			$	898			$	—
Waters 401(k) Restoration Plan assets			28,995				28,995				—				—
Foreign currency exchange contracts			183				—				183				—
Interest rate cross-currency swap agreements			4,835				—				4,835				—
Total		$	34,911			$	28,995			$	5,916			$	—
Liabilities:
Foreign currency exchange contracts		$	207			$	—			$	207			$	—
Interest rate cross-currency swap agreements			13,384				—				13,384				—
Interest rate swap cash flow hedge			2,974				—				2,974				—
Total		$	16,565			$	—			$	16,565			$	—

The following table represents the Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2022 (in thousands):

		Total at December 31, 2022				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets:
Time deposits		$	862			$	—			$	862			$	—
Waters 401(k) Restoration Plan assets			25,532				25,532				—				—
Foreign currency exchange contracts			231				—				231				—
Interest rate cross-currency swap agreements			19,163				—				19,163				—
Total		$	45,788			$	25,532			$	20,256			$	—
Liabilities:
Contingent consideration		$	1,509			$	—			$	—			$	1,509
Foreign currency exchange contracts			98				—				98				—
Interest rate cross-currency swap agreements			4,783				—				4,783				—
Total		$	6,390			$	—			$	4,881			$	1,509

Fair Value of 401(k) Restoration Plan Assets

The 401(k) Restoration Plan is a nonqualified defined contribution plan and the assets were held in registered mutual funds and have been classified as Level 1. The fair values of the assets in the plan are determined through market and observable sources from daily quoted prices on nationally recognized securities exchanges.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fair Value of Cash Equivalents, Investments, Foreign Currency Exchange Contracts, Interest Rate Cross-Currency Swaps Agreements and Interest Rate Swap Cash Flow Hedges

The fair values of the Company’s cash equivalents, investments, foreign currency exchange contracts, interest rate cross-currency swap agreements and interest rate swap cash flow hedges are determined through market and observable sources and have been classified as Level 2. These assets and liabilities have been initially valued at the transaction price and subsequently valued, typically utilizing third-party pricing services. The pricing services use many inputs to determine value, including reportable trades, benchmark yields, credit spreads, broker/dealer quotes, current spot rates and other industry and economic events. The Company validates the prices provided by third-party pricing services by reviewing their pricing methods and obtaining market values from other pricing sources.

Fair Value of Contingent Consideration

The fair value of the Company’s liability for contingent consideration is determined using a probability-weighted discounted cash flow model, which uses significant unobservable inputs, and has been classified as Level 3. Subsequent changes in the fair value of the contingent consideration liability are recorded in the results of operations.

Fair Value of Other Financial Instruments

The Company’s accounts receivable and accounts payable are recorded at cost, which approximates fair value due to their short-term nature. The carrying value of the Company’s variable interest rate debt approximates fair value due to the variable nature of the interest rate. The carrying value of the Company’s fixed interest rate debt was $1.3 billion at both December 31, 2023 and 2022. The fair value of the Company’s fixed interest rate debt was estimated using discounted cash flow models, based on estimated current rates offered for similar debt under current market conditions for the Company. The fair value of the Company’s fixed interest rate debt was estimated to be $1.2 billion and $1.1 billion at December 31, 2023 and 2022, respectively, using Level 2 inputs.

Derivative Transactions

The Company is a global company that operates in over 35 countries and, as a result, the Company’s net sales, cost of sales, operating expenses and balance sheet amounts are significantly impacted by fluctuations in foreign currency exchange rates. The Company is exposed to currency price risk on foreign currency exchange rate fluctuations when it translates its

non-U.S.

dollar foreign subsidiaries’ financial statements into U.S. dollars and when any of the Company’s subsidiaries purchase or sell products or services in a currency other than its own currency.

The Company’s principal strategies in managing exposures to changes in foreign currency exchange rates are to (1) naturally hedge the foreign-currency-denominated liabilities on the Company’s balance sheet against corresponding assets of the same currency, such that any changes in liabilities due to fluctuations in foreign currency exchange rates are typically offset by corresponding changes in assets and (2) mitigate foreign exchange risk exposure of international operations by hedging the variability in the movement of foreign currency exchange rates on a portion of its euro-denominated and

yen-denominated

net asset investments. The Company presents the derivative transactions in financing activities in the statement of cash flows.

Foreign Currency Exchange Contracts

The Company does not specifically enter into any derivatives that hedge foreign-currency-denominated operating assets, liabilities or commitments on its balance sheet, other than a portion of certain third-party accounts

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

receivable

and accounts payable, and the Company’s net worldwide intercompany receivables and payables, which are eliminated in consolidation. The Company periodically aggregates its net worldwide balances by currency and then enters into foreign currency exchange contracts that mature within 90 days to hedge a portion of the remaining balance to minimize some of the Company’s currency price risk exposure. The foreign currency exchange contracts are not designated for hedge accounting treatment. Principal hedged currencies include the euro, Japanese yen, British pound, Mexican peso and Brazilian real.

Cash Flow Hedges

The Company’s Credit Facility is a variable borrowing and has interest payments based on a contractually specified interest rate index. The contractually specified index on the Credit Facility is the

3-month

Term SOFR. The variable rate interest payments create interest risk for the Company as interest payments will fluctuate based on changes in the contractually specified interest rate index over the life of the Credit Facility. In order to reduce interest rate risk, the Company enters into interest rate swaps that will effectively

lock-in

the forecasted interest payments on the variable rate borrowing over its term. The interest rate swaps represent cash flow hedges and are assessed for hedge effectiveness each reporting period. When the hedge relationship is highly effective at achieving offsetting changes in cash flows, the Company will record the entire change in fair value of the interest rate swaps in accumulated other comprehensive loss. The amount in accumulated other comprehensive loss is reclassified to earnings in the period that the underlying transaction impacts consolidated earnings. If it becomes probable that the forecasted transaction will not occur, the hedge relationship will be

de-designated

and amounts accumulated in other comprehensive loss will be reclassified to earnings in the current period. Interest settlements due to benchmark interest rate changes are recorded in interest income or interest expense. For the year ended December 31, 2023, the Company did not have any cash flow hedges that were deemed ineffective.

Interest Rate Cross-Currency Swap Agreements

As

of December 31, 2023, the Company had entered into interest rate cross-currency swap derivative agreements with durations up to three years with an aggregate notional value of $

million to hedge the variability in the movement of foreign currency exchange rates on a portion of its euro-denominated and

yen-denominated

net asset investments. Under hedge accounting, the change in fair value of the derivative that relates to changes in the foreign currency spot rate are recorded in the currency translation adjustment in other comprehensive income and remain in accumulated other comprehensive loss in stockholders’ equity until the sale or substantial liquidation of the foreign operation. The difference between the interest rate received and paid under the interest rate cross-currency swap derivative agreement is recorded in interest income in the statement of operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s foreign currency exchange contracts, interest rate cross-currency swap agreements

and

interest rate swap agreements designated as cash flow hedges are included in the consolidated balance sheets are classified as follows (in thousands):

		December 31, 2023								December 31, 2022
		Notional Value				Fair Value				Notional Value				Fair Value
Foreign currency exchange contracts:
Other current assets		$	24,155			$	183			$	42,047			$	231
Other current liabilities		$	16,000			$	207			$	13,450			$	98
Interest rate cross-currency swap agreements:
Other assets		$	220,000			$	4,835			$	400,000			$	19,163
Other liabilities		$	405,000			$	13,384			$	185,000			$	4,783
Accumulated other comprehensive (loss) income						$	(7,975	)						$	10,026
Interest rate swap cash flow hedges:
Other liabilities		$	100,000			$	2,974			$	—			$	—
Accumulated other comprehensive (loss) income						$	(2,974	)						$	—

The following is a summary of the activity included in the consolidated statements of operations and statements of comprehensive income related to the foreign currency exchange contracts, interest rate cross-currency swap agreements and interest rate swap agreements designated as cash flow hedges (in thousands):

		Financial Statement Classification				Year Ended December 31,
		2023				2022				2021
Foreign currency exchange contracts:
Realized gains (losses) on closed contracts			Cost of sales			$	224			$	(3,855	)		$	(1,973	)
Unrealized losses on open contracts			Cost of sales				(156	)			(176	)			(343	)
Cumulative net pre-tax gains (losses)			Cost of sales			$	68			$	(4,031	)		$	(2,316	)
Interest rate cross-currency swap agreements:
Interest earned			Interest income			$	10,974			$	8,872			$	11,084
Unrealized (losses) gains on open contracts			Accumulated other comprehensive loss			$	(18,001	)		$	25,969			$	29,052
Interest rate swap cash flow hedges:
Interest earned			Interest income			$	326			$	—			$	—
Unrealized losses on open contracts			Accumulated other comprehensive loss			$	(2,974	)		$	—			$	—

Stockholders’ Equity

In December 2023, the Company’s Board of Directors authorized the extension of the existing share repurchase program through January 21, 2025. The Company’s remaining authorization is $

1.0

billion. During 2023, 2022 and 2021, the Company repurchased

0.2 million, 2.0 million and 2.0 million shares of the Company’s outstanding common stock at a cost of $58 million, $616 million and $640 million, respectively, under the January 2019 authorization and other previously announced programs. In addition, the Company repurchased $12 million, $11 million and $9 million of common stock related to the vesting of restricted stock units during the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, the Company has a total of $1.0

b

illion authorized for future repurchases.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue Recognition

The Company recognizes revenue upon transfer of control of promised products and services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company generally enters into contracts that include a combination of products and services. Revenue is allocated to distinct performance obligations and is recognized net of allowances for returns and discounts.

The Company recognizes revenue on product sales at the time control of the product transfers to the customer. Certain of the Company’s customers have terms where control of the product transfers to the customer on shipment, while others have terms where control transfers to the customer on delivery. All incremental costs of obtaining a contract are expensed as and when incurred if the expected amortization period of the asset that would have been recognized is one year or less. Shipping and handling costs are included as a component of cost of sales. In situations where the control of the goods transfers prior to the completion of the Company’s obligation to ship the products to its customers, the Company has elected the practical expedient to account for the shipping services as a fulfillment cost. Accordingly, such costs are recognized when control of the related goods is transferred to the customer. In more rare situations, the Company has revenue associated with products that contain specific customer acceptance criteria and the related revenue is not recognized before the customer acceptance criteria are satisfied. The Company elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with specific revenue-producing transactions and collected by the Company from a customer.

Generally, the Company’s contracts for products include a performance obligation related to installation. The Company has determined that the installation represents a distinct performance obligation and revenue is recognized separately upon the completion of installation. The Company determines the amount of the transaction price to allocate to the installation service based on the standalone selling price of the product and the service, which requires judgment. The Company determines the relative standalone selling price of installation based upon a number of factors, including hourly service billing rates and estimated installation hours. In developing these estimates, the Company considers past history, competition, billing rates of current services and other factors.

The Company has sales from standalone software, which are included in product revenue. These arrangements typically include software licenses and maintenance contracts, both of which the Company has determined are distinct performance obligations. The Company determines the amount of the transaction price to allocate to the license and maintenance contract based on the relative standalone selling price of each performance obligation. Software license revenue is recognized at the point in time when control has been transferred to the customer. The revenue allocated to the software maintenance contract is recognized on a straight-line basis over the maintenance period, which is the contractual term of the contract, as a time-based measure of progress best reflects the Company’s performance in satisfying this obligation. Unspecified rights to software upgrades are typically sold as part of the maintenance contract on a

when-and-if-available

basis.

Payment terms and conditions vary among the Company’s revenue streams, although terms generally include a requirement of payment within 30 to 60 days of product shipment. Prior to providing payment terms to customers, an evaluation of their credit risk is performed. Returns and customer credits are infrequent and insignificant and are recorded as a reduction to sales. Rights of return are not included in sales arrangements and, therefore, there is minimal variable consideration included in the transaction price of our products.

Service revenue includes (1) service and software maintenance contracts and (2) service calls (time and materials). Instrument service contracts and software maintenance contracts are typically annual contracts, which are billed at the beginning of the contract or maintenance period. The amount of the service and software maintenance contract is recognized on a straight-line basis to revenue over the maintenance service period, which

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

is the contractual term of the contract, as a time-based measure of progress best reflects the Company’s performance in satisfying this obligation. There are no deferred costs associated with the service contract, as the cost of the service is recorded when the service is performed. Service calls are recognized to revenue at the time a service is performed.

Product Warranty Costs

The Company accrues estimated product warranty costs at the time of sale, which are included in cost of sales in the consolidated statements of operations. While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers, the Company’s warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. The amount of the accrued warranty liability is based on historical information, such as past experience, product failure rates, number of units repaired and estimated costs of material and labor. The liability is reviewed for reasonableness at least quarterly.

The following is a summary of the activity of the Company’s accrued warranty liability for the twelve months ended December 31, 2023, 2022 and 2021 (in thousands):

		Balance at Beginning of Period				Accruals for Warranties				Settlements Made				Balance at End of Period
Accrued warranty liability:
December 31, 2023		$	11,949			$	7,727			$	(7,626	)		$	12,050
December 31, 2022		$	10,718			$	10,067			$	(8,836	)		$	11,949
December 31, 2021		$	10,950			$	8,799			$	(9,031	)		$	10,718

Advertising Costs

All advertising costs are expensed as incurred and are included in selling and administrative expenses in the consolidated statements of operations. Advertising expenses were $7

million for the years ended December 31, 2023, 2022 and 2021.

Research and Development Expenses

Research and development expenses are comprised of costs incurred in performing research and development activities, including salaries and benefits, facilities costs, overhead costs, contract services and other outside costs. Research and development expenses are expensed as incurred.

Stock-Based Compensation

The Company has two stock-based compensation plans, which are described in Note 14, “Stock-Based Compensation”.

Earnings Per Share

In accordance with the earnings per share accounting standards, the Company presents two earnings per share (“EPS”) amounts. Income per basic common share is based on income available to common shareholders and the weighted-average number of common shares outstanding during the periods presented. Income per diluted common share includes additional dilution from potential common stock, such as stock issuable pursuant to the exercise of stock options outstanding.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Retirement Plans

The Company sponsors various retirement plans, which are described in Note 17, “Retirement Plans”.

Comprehensive Income

The Company accounts for comprehensive income in accordance with the accounting standards for comprehensive income, which establish the accounting rules for reporting and displaying comprehensive income. These standards require that all components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements.

Restructuring

In July 2023, the Company made organizational changes to better align its resources with its growth and innovation strategies, resulting in a worldwide workforce reduction, that has impacted approximately 5% of the Company’s employees. During 2023, the Company incurred $26

million of severance-related costs in connection with this reduction, which was recorded in selling and administrative expenses in the consolidated statement of operations. During 2023, the Company paid $

million of these costs with the majority of the remaining costs to be paid in the first half of 2024.

Recently Adopted Accounting Standards

In October 2021, accounting guidance was issued that requires acquirers in a business combination to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The new guidance requires that at the acquisition date, the acquirer should account for the related revenue contracts in accordance with 606 as if it had originated the contracts. This guidance differs from current GAAP which requires an acquirer to recognize assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts that are accounted for in accordance with 606, at fair value on the acquisition date. This guidance is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within those years. The Company adopted this standard on January 1, 2023. The adoption of this standard did not have a material impact on the Company’s financial position, results of operations and cash flows.

Recently Issued Accounting Standards

In March 2020, accounting guidance was issued that facilitates the effects of reference rate reform on financial reporting. The amendments in the update provide optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January of 2021, an update was issued to clarify that certain optional expedients and exceptions under the reference rate reform guidance for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, certain provisions in the reference rate reform guidance, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. This temporary guidance is effective for all entities as of March 12, 2020, through December 31, 2022. In December 2022, an update was issued because the cessation date for overnight LIBOR rates being published was extended to June 30, 2023, which was beyond the current expiration date of this guidance. The update extended the sunset date to December 31, 2024. The Company may elect to apply this guidance for all contract modifications or eligible hedging relationships during that time period subject to certain criteria. The Company does not believe that it has material reference

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

rate exposure which would require utilizing the guidance under this accounting pronouncement and if adopted does not believe that this standard would have a material impact on the Company’s financial position, results of operations and cash flows.

In November 2023, accounting guidance was issued that requires additional disclosures of reportable segment information. The guidance requires that public entities disclose, on an annual and interim basis (1) significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, (2) an amount for other segment items by reportable segment and a description of its composition (the other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss), (3) provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280 in interim periods, (4) clarify that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit. However, at least one of the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the public entity’s consolidated financial statements, (5) the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources, and (6) if a public entity has a single reportable segment to provide all the disclosures required by the amendments in this update and all existing segment disclosures in Topic 280. The amendments in this update do not change how operating segments are identified or aggregated nor how the quantitative thresholds are applied to determine its reportable segments. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments in this update should be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company does not believe this accounting standard update will have material impact on the Company’s financial position, results of operations and cash flows. The Company is currently evaluating the impact the adoption of this accounting standard update will have on our footnote disclosures.

In December 2023, accounting guidance was issued to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this update change disclosure requirements related to the rate reconciliation, income taxes paid and other disclosures. For the rate reconciliation the amendments require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. For income taxes paid the amendments require that all entities disclose on an annual basis the following information; (1) the amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes, (2) the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5

percent of total income taxes paid (net of refunds received). Finally, for other disclosures the amendments require that all entities disclose the following information: (1) income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign, and (2) income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. This update also eliminates the requirement for all entities to (1) disclose the nature and estimate of the range of the reasonably possible change in the unrecognized tax benefits balance in the next 12 months or (2) make a statement that an estimate of the range cannot be made. As well as removing the requirement to disclose the cumulative amount of each type of temporary difference when a deferred tax liability is not recognized because of the exceptions to comprehensive recognition of deferred taxes related to subsidiaries and corporate joint ventures. The amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis and retrospective application is permitted. The Company does not believe this accounting standard update will have material impact on the Company’s financial position, results of operations and cash flows. The Company is currently evaluating the impact the adoption of this accounting standard update will have on our footnote disclosures.

3 Revenue Recognition

The Company’s deferred revenue liabilities in the consolidated balance sheets consist of the obligation on instrument service contracts and customer payments received in advance, prior to transfer of control of the instrument. The Company records deferred revenue primarily related to its service contracts, where consideration is billable at the beginning of the service period.

The following is a summary of the activity of the Company’s deferred revenue and customer advances for the twelve months ended December 31, 2023, 2022 and 2021 (in thousands):

		December 31,
		2023				2022				2021
Balance at the beginning of the period		$	285,175			$	273,598			$	239,759
Recognition of revenue included in balance at beginning of the period			(240,808	)			(230,615	)			(216,920	)
Revenue deferred during the period, net of revenue recognized			279,149				242,192				250,759
Balance at the end of the period		$	323,516			$	285,175			$	273,598

The Company classified $67 million and $57 million of deferred revenue and customer advances in other long-term liabilities at December 31, 2023 and 2022, respectively.

The amount of deferred revenue and customer advances equals the transaction price allocated to unfulfilled performance obligations for the period presented. Such amounts are expected to be recognized in the future as follows (in thousands):

		December 31, 2023
Deferred revenue and customer advances expected to be recognized in:
One year or less		$	256,675
13-24 months			39,326
25 months and beyond			27,515
Total		$	323,516

4 Marketable Securities

The Company’s marketable securities within cash equivalents and investments included in the consolidated balance sheets consist of time deposits that mature in one year or less with an amortized cost and a fair value of $0.9 million at both December 31, 2023 and 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5 Inventories

Inventories are classified as follows (in thousands):

		December 31, 2023				December 31, 2022
Raw materials		$	233,952			$	205,760
Work in progress			20,198				19,899
Finished goods			262,086				230,051
Total inventories		$	516,236			$	455,710

During 2023, 2022 and 2021, the Company recorded inventory-related excess and obsolescence provisions of $11 million, $14 million and $9 million, respectively.

6 Property, Plant and Equipment

Property, plant and equipment consist of the following (in thousands):

		December 31,
		2023				2022
Land and land improvements		$	35,635			$	34,663
Buildings and leasehold improvements			488,667				444,994
Production and other equipment			748,411				640,460
Construction in progress			118,492				164,222
Total property, plant and equipment			1,391,205				1,284,339
Less: accumulated depreciation and amortization			(752,132	)			(702,122	)
Property, plant and equipment, net		$	639,073			$	582,217

During 2023, 2022 and 2021, the Company retired and disposed of approximately $48 million, $24 million and $23 million of property, plant and equipment, respectively, most of which was fully depreciated and no longer in use. Gains or losses on disposals were immaterial for the years ended December 31, 2023, 2022 and 2021.

7 Acquisitions

On May 16, 2023, the Company acquired all of the issued and outstanding equity interests of Wyatt for $1.3 billion, net of cash acquired. Wyatt is a pioneer in innovative light scattering and field-flow fractionation instruments, software, accessories and services. The acquisition will expand Waters portfolio and increase exposure to large molecule applications. As a result of the acquisition, the results of Wyatt are included in the Company’s consolidated financial statements from the acquisition date.

The Company allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The purchase price allocation was based upon preliminary information and is subject to change if additional information about the facts and circumstances that existed at the acquisition date becomes available. The Company is in the ongoing process of conducting a valuation of the assets acquired and liabilities assumed related to the acquisition. The final fair value of the net assets acquired may result in adjustments to these assets and liabilities, including goodwill.

The intangible assets were valued with input from valuation specialists. The Company used variations of the income approach, which uses Level 3 inputs, in determining the fair value of intangible assets acquired in the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Wyatt acquisition. Specifically, the customer relationships were valued using the multi-period excess earnings method under the income approach. The Company utilized the relief from royalty method to determine the fair value of the tradename and the developed technology. The following table presents the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed on the closing date of May 16, 2023 (in thousands):

Purchase Price
Cash paid		$	1,307,978
Less: cash acquired			(25,624	)
Net cash consideration			1,282,354
Identifiable Net Assets (Liabilities) Acquired
Accounts receivable			20,099
Inventory			14,706
Deferred tax assets			11,335
Prepaid and other assets			1,096
Property, plant and equipment			9,056
Operating lease assets			5,204
Intangible assets			418,100
Accounts payable and accrued expenses			(31,664	)
Operating lease liabilities			(5,204	)
Tax liabilities			(3,917	)
Deferred revenue			(15,219	)
Other liabilities			(5,728	)
Total identifiable net assets acquired			417,864
Goodwill			864,490
Cash consideration paid		$	1,282,354

The details of the purchase price allocated to the intangible assets acquired and the estimated useful lives are as follows (dollars in thousands):

		Amount				Weighted-Average Life
Developed technology		$	80,000				10 years
Customer relationships			330,600				10 years
Trade name			7,500				5 years
Total			$418,100

The Company allocated $864 million of the purchase price to goodwill which is primarily deductible for tax purposes and has been allocated to the Waters Division operating segment. The goodwill arising from the acquisition consists largely of the value of intangible assets that do not qualify for separate recognition such as workforce in place and cash flows from the integration of acquired technology, distribution channels and products with the Company’s products, which are higher than if the acquired companies’ technology, customer access or products were utilized on a stand-alone basis.

During the twelve months ended December 31, 2023, the Company’s consolidated results included net sales of $

million, and a net operating loss of $

million since the acquisition closed on May 16, 2023. The Company also incurred transaction related costs of $

13 million during the twelve months ended December 31, 2023, which are recorded in selling and administrative expenses in the consolidated statement of operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Unaudited Pro Forma Financial Information

The following unaudited pro forma information is presented for illustrative purposes only. It is not necessarily indicative of the actual results of operations that actually would have been realized had the entities been a single company as of January 1, 2022 or the future operating results of the combined entity. The unaudited pro forma information does not give effect to the potential impact of current financial conditions, regulatory matters or any anticipated synergies that may be associated with the acquisition. The unaudited pro forma information also does not include any integration costs that the Company may incur related to the acquisition as part of combining the operations of the companies.

The following unaudited pro forma information shows the results of the Company’s operations for the twelve months ended December 31, 2023 and 2022, as if the acquisition had occurred on January 1, 2022 (in thousands):

		December 31, 2023				December 31, 2022
Revenue		$	2,995,001			$	3,086,281
Net income			658,431				651,869

To reflect the acquisition of Wyatt as if it had occurred on January 1, 2022, the unaudited pro forma information includes adjustments to reflect, among other things, the incremental intangible asset amortization to be incurred based on the preliminary values of each identifiable intangible asset of Wyatt and the interest expense from debt financings obtained to partially fund the cash consideration transferred. Pro forma adjustments were tax effected at the Company’s historical statutory rates in effect for the respective periods.

Pro forma net income for the twelve months ended December 31, 2023, was adjusted to exclude certain

non-recurring

expenses related to transaction costs incurred and the fair value adjustment of inventory. These

non-recurring

expenses were reclassified to the prior period and included in the pro forma net income for the twelve months ended December 31, 2022.

In conjunction with the Wyatt acquisition, the Company entered into retention agreements with certain employees, in which the Company agreed to pay a total of $40 million, in two equal installments upon the first and second anniversary of the acquisition date. As these employees are earning their individual cash award by providing service over the

two-year

period that benefit the Company, the $40 million will be recognized within total costs and operating expenses in the consolidated statements of operations over the

two-year

service period. The Company has recorded $19 million of expense in the consolidated statement of operations for the year ended December 31, 2023.

On January 31, 2022, the Company completed an asset acquisition in which the charge detection mass spectrometry technology (“CDMS technology”) assets of Megadalton Solutions, Inc. (“Megadalton”) were acquired for approximately $10 million in total purchase price, of which $5 million was paid at closing and

the remaining

$4 million will be paid in the future at various dates through 2029. This CDMS technology makes it possible to analyze extremely large proteins and protein complexes used in cell and gene therapies that would otherwise be difficult to analyze with conventional mass spectrometry. Once this technology is further developed, it will extend the capabilities of our mass spectrometry portfolio for a broader set of applications, and as such, the cost of this technology asset has been accounted for as Acquired

In-Process Research

and Development and expensed in costs and operating expenses in the statement of operations.

8 Goodwill and Other Intangibles

The carrying amount of goodwill was $1.3 billion and $430 million at December 31, 2023 and 2022, respectively. The acquisition of Wyatt increased goodwill by $864 million, while the effect of foreign currency translation increased goodwill by $10 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s intangible assets included in the consolidated balance sheets are detailed as follows (dollars in thousands):

		December 31, 2023												December 31, 2022
		Gross Carrying Amount				Accumulated Amortization				Weighted- Average Amortization Period				Gross Carrying Amount				Accumulated Amortization				Weighted- Average Amortization Period
Capitalized software		$	660,273			$	495,317				5 years			$	589,604			$	441,414				5 years
Purchased intangibles			614,357				197,154				10 years				197,805				166,735				11 years
Trademarks			9,680				—				—				9,680				—				—
Licenses			14,798				8,429				7 years				14,070				6,729				6 years
Patents and other intangibles			111,962				80,983				8 years				104,139				73,021				8 years
Total		$	1,411,070			$	781,883				7 years			$	915,298			$	687,899				7 years

The Company capitalized $468 million, $54 million and $55 million of intangible assets for the years ended December 31, 2023, 2022 and 2021, respectively. The gross carrying value of intangible assets and accumulated amortization for intangible assets increased by $32 million and $18 million, respectively, in the year ended December 31, 2023 due to the effects of foreign currency translation. Amortization expense for intangible assets was $81 million, $58 million and $60

million for the years ended December 31, 2023, 2022 and 2021, respectively. In addition, in the year ended December 31, 2023, the company wrote off a $4 million intangible asset that was fully amortized. Amortization expense for intangible assets is estimated to be $

million per year for each of the next five years.

9 Debt

On May 16, 2023, the Company financed the Wyatt acquisition with a combination of cash on its balance sheet and borrowings under its revolving credit facility. As a result of the Wyatt transaction, the Company’s outstanding debt on December 31, 2023 was $2.4 billion.

On May 11, 2023, the Company issued the following senior unsecured notes:

Senior Unsecured Notes		Term		Interest Rate		Face Value (in millions)		Maturity Date
Series P		5 years		4.91%		$50		May 2028
Series Q		7 years		4.91%		$50		May 2030

The Company used the proceeds from the issuance of these senior unsecured notes to repay other outstanding debt and for general corporate purposes. Interest on the Series P and Q Senior Notes is payable semi-annually in arrears. The Company may prepay some or all of the Senior Notes, at any time and from time to time, in an amount not less than 10% of the aggregate principal amount of the Senior Notes then outstanding, plus the applicable make-whole amount for Series P and Q Senior Notes, in each case, upon no more than 60 nor less than 20 days’ written notice to the holders of the Senior Notes. In the event of a change in control (as defined in the note purchase agreement) of the Company, the Company may be required to prepay the Senior Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest. Other provisions for these senior unsecured notes are similar to the existing senior unsecured notes, as described below.

The Company ha

s

a five-year, $1.8 billion revolving facility (the “Credit Facility”) that expires in September 2026. On March 3, 2023, the Company amended the Credit Facility to increase the borrowing capacity by $200 million to an aggregate total borrowing capacity of $2.0 billion, which did not affect

the

maturity

date of September 17, 2026. The amendment also replaced all references in the Credit Facility to LIBOR with Term SOFR as the benchmark rate. As of December 31, 2023 and December 31, 2022, the Credit Facility had a total of $

1.1

billion and $

million outstanding,

respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The interest rates applicable under the Credit Facility are, at the Company’s option, equal to either the alternate base rate (which is a rate per annum equal to the greatest of (1) the prime rate in effect on such day, (2) the Federal Reserve Bank of New York Rate on such day plus 1/2 of 1% per annum and (3) the adjusted Term SOFR rate for a

one-month

interest period as published two U.S. Government Securities Business Days prior to such day (or if such day is not a U.S. Government Securities Business Day, the immediately preceding U.S. Government Securities Business Day), plus 1% annum) or the applicable 1, 3 or 6 month adjusted Term SOFR or EURIBO rate for euro-denominated loans, in each case, plus an interest rate margin based upon the Company’s leverage ratio, which can range between 0 and 12.5 basis points for alternate base rate loans and between 80 and 112.5 basis points for Term SOFR or EURIBO rate loans. The facility fee on the Credit Facility ranges between 7.5 and 25 basis points per annum, based on the leverage ratio, of the amount of the revolving facility commitments and the outstanding term loan.

The Credit Facility requires that the Company comply with an interest coverage ratio test of not less than

3.50

:1 as of the end of any fiscal quarter for any period of four consecutive fiscal quarters and a leverage ratio test of not more than

3.50

:1 as of the end of any fiscal quarter. In addition, the Credit Facility includes negative covenants, affirmative covenants, representations and warranties and events of default that are customary for investment grade credit facilities.

As of both December 31, 2023 and 2022, the Company had a total of $1.3 billion of outstanding senior unsecured notes. Interest on the fixed rate senior unsecured notes is payable semi-annually each year. Interest on the floating rate senior unsecured notes is payable quarterly. The Company may prepay all or some of the senior unsecured notes at any time in an amount not less than 10% of the aggregate principal amount outstanding. In the event of a change in control of the Company (as defined in the note purchase agreement), the Company may be required to prepay the senior unsecured notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest. These senior unsecured notes require that the Company comply with an interest coverage ratio test of not less than 3.50:1 for any period of four consecutive fiscal quarters and a leverage ratio test of not more than 3.50:1 as of the end of any fiscal quarter. In addition, these senior unsecured notes include customary negative covenants, affirmative covenants, representations and warranties and events of default.

The Company had the following outstanding debt at December 31, 2023 and 2022 (in thousands):

		December 31, 2023				December 31, 2022
Senior unsecured notes - Series I - 3.13%, due May 2023		$	—			$	50,000
Senior unsecured notes - Series G - 3.92%, due June 2024			50,000				—
Total notes payable and debt, current			50,000				50,000
Senior unsecured notes - Series G - 3.92%, due June 2024			—				50,000
Senior unsecured notes - Series H - floating rate*, due June 2024			—				50,000
Senior unsecured notes - Series K - 3.44%, due May 2026			160,000				160,000
Senior unsecured notes - Series L - 3.31%, due September 2026			200,000				200,000
Senior unsecured notes - Series M - 3.53%, due September 2029			300,000				300,000
Senior unsecured notes - Series N - 1.68%, due March 2026			100,000				100,000
Senior unsecured notes - Series O - 2.25%, due March 2031			400,000				400,000
Senior unsecured notes - Series P - 4.91%, due May 2028			50,000				—
Senior unsecured notes - Series Q - 4.91%, due May 2030			50,000				—
Credit agreement			1,050,000				270,000
Unamortized debt issuance costs			(4,487	)			(5,122	)
Total long-term debt			2,305,513				1,524,878
Total debt		$	2,355,513			$	1,574,878

*	Series H senior unsecured notes bear interest at a 3-month LIBOR for that floating rate interest period plus 1.25%.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of December 31, 2023 and 2022, the Company had a total amount available to borrow under the Credit Facility of $0.9 billion and $1.5 billion, respectively, after outstanding letters of credit. The weighted-average interest rates applicable to the senior unsecured notes and credit agreement borrowings collectively were 4.69% and 3.54% at December 31, 2023 and 2022, respectively. As of December 31, 2023, the Company was in compliance with all debt covenants.

The Company and its foreign subsidiaries also had available short-term lines of credit totaling $114 million and $113 million at December 31, 2023 and December 31, 2022, respectively, for the purpose of short-term borrowing and issuance of commercial guarantees. None of the Company’s foreign subsidiaries had outstanding short-term borrowings as of December 31, 2023 or December 31, 202

Annual maturities of debt outstanding at December 31, 2023 are as follows (in thousands):

		Total
2024		$	50,000
2025			—
2026			1,510,000
2027			—
2028			50,000
Thereafter			750,000
Total		$	2,360,000

10 Income Taxes

Income tax data for the years ended December 31, 2023, 2022 and 2021 is as follows (in thousands):

		Year Ended December 31,
		2023				2022				2021
The components of income before income taxes are as follows:
Domestic		$	74,119			$	133,816			$	144,410
Foreign			662,124				704,030				661,783
Total		$	736,243			$	837,846			$	806,193

		Year Ended December 31,
		2023				2022				2021
The components of the income tax provision were as follows:
Federal		$	178			$	62,153			$	16,302
State			6,427				8,025				3,691
Foreign			88,601				91,901				76,724
Total current tax provision		$	95,206			$	162,079			$	96,717
Federal		$	(2,457	)		$	(26,551	)		$	10,491
State			(3,029	)			(4,420	)			345
Foreign			4,289				(1,017	)			5,797
Total deferred tax provision			(1,197	)			(31,988	)			16,633
Total provision		$	94,009			$	130,091			$	113,350

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The differences between income taxes computed at the United States statutory rate and the provision for income taxes are summarized as follows for the years ended December 31, 2023, 2022 and 2021 (in thousands):

		Year Ended December 31,
		2023				2022				2021
Federal tax computed at U.S. statutory income tax rate		$	154,611			$	175,948			$	169,300
GILTI, net of foreign tax credits			15,103				17,812				10,476
Uncertain tax positions			(16,211	)			1,051				508
State income tax, net of federal income tax benefit			2,880				3,605				4,037
Net effect of foreign operations			(48,587	)			(55,273	)			(56,214	)
Effect of stock-based compensation			(2,262	)			(7,341	)			(6,682	)
Other, net			(11,525	)			(5,711	)			(8,075	)
Provision for income taxes		$	94,009			$	130,091			$	113,350

The Company’s effective tax rate was 12.8%, 15.5% and 14.1

% for the years ended December 31, 2023, 2022 and 2021, respectively. The decrease in the Company’s effective tax rate in 2023 can primarily be attributed to the recognition of a previously unrecognized tax benefit of $

18 million as a result of the completion of a tax examination, decreasing the Company’s 2023 effective tax rate by approximately 2.5%.

The Company’s effective income tax rate differs from the U.S. federal statutory rate each year due to differences in the proportionate amounts of

pre-tax

income recognized in jurisdictions with different effective tax rates and the items discussed below.

The four principal jurisdictions in which the Company manufactures are the U.S., Ireland,

the

U.K. and Singapore, where the statutory tax rates were 21%, 12.5%, 25% and 17%, respectively, as of December 31,

The

Company has a new Development and Expansion Incentive in Singapore that provides a concessionary income tax rate of

% on certain types of income for the period April 1, 2021 through March 31, 2026. Prior to April 1, 2021, the Company had a tax exemption on income arising from qualifying activities in Singapore based upon the achievement of certain contractual milestones, which the Company met as of December 31, 2020 and maintained through March 2021. The effect of applying these concessionary income tax rates rather than the statutory tax rate to income arising from qualifying activities in Singapore increased the Company’s net income by $

million, $

million and $

million and increased the Company’s net income per diluted share by $

0.27

, $

0.33

and $

0.32

for the year

s

ended December 31, 2023, 2022 and 2021, respectively.

During 2023, the Company’s effective tax rate differed from the 21% U.S. statutory tax rate primarily due to the jurisdictional mix of earnings, an $18 million recognition of a previously unrecognized tax benefit as a result of the completion of a tax examination, a $15 million provision related to the GILTI tax, including the impact of capitalizing research and development expenditures pursuant to IRC Section 174, and a tax benefit of $3 million on stock-based compensation.

The 2022 effective tax rate differed from the 21% U.S. statutory tax rate primarily due to the jurisdictional mix of earnings, a $18 million provision related to the GILTI tax and a tax benefit of $7 million on stock-based compensation.

The 2021 effective tax rate differed from the 21% U.S. statutory tax rate primarily due to the jurisdictional mix of earnings, an $10 million provision related to the GILTI tax and a tax benefit of $7 million on stock-based

compensation.

The Company recorded a tax provision of $4 million, $4 million and $3 million for 2023, 2022 and 2021, respectively, for future withholding taxes and U.S. state taxes on the repatriation of 2023, 2022 and 2021 undistributed earnings.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The tax effects of temporary differences and carryforwards which give rise to deferred tax assets and deferred tax liabilities are summarized as follows (in thousands):

		December 31,
		2023				2022
Deferred tax assets:
Net operating losses and credits		$	54,901			$	51,945
Depreciation			1,517				18
Operating leases			20,307				19,771
Amortization			5,905				2,713
Stock-based compensation			7,754				7,947
Deferred compensation			14,886				23,488
Deferred revenue			17,127				13,555
Revaluation of equity investments and licenses			1,884				23
Inventory			7,534				6,463
Accrued liabilities and reserves			5,720				4,815
Capitalized interest			12,586				—
Unrealized foreign currency gain/loss			700				1,858
Capitalized Section 174 Expenditures			34,487				34,234
Other			5,086				1,098
Total deferred tax assets			190,394				167,928
Valuation allowance			(57,873	)			(54,300	)
Deferred tax assets, net of valuation allowance			132,521				113,628
Deferred tax liabilities:
Capitalized software			(29,281	)			(25,429	)
Operating leases			(20,117	)			(19,543	)
Indefinite-lived intangibles			(14,824	)			(16,057	)
Deferred tax liability on foreign earnings			(20,374	)			(18,677	)
Total deferred tax liabilities			(84,596	)			(79,706	)
Net deferred tax assets		$	47,925			$	33,922

The Company has gross foreign net operating losses of $231 million, of which $192 million do not expire under current laws and $39 million start expiring in 2024. As of December 31, 2023, the Company has provided a deferred tax valuation allowance of $58 million, of which $52 million relates to certain foreign net operating losses. The Company’s net deferred tax assets associated with net operating losses and tax credit carryforwards are approximately $3 million as of December 31, 2023, which represent the future tax benefit of foreign net operating loss carryforwards that do not expire under current law.

The Company accounts for its uncertain tax return positions in accordance with the accounting standards for income taxes, which require financial statement reporting of the expected future tax consequences of uncertain tax reporting positions on the presumption that all concerned tax authorities possess full knowledge of those tax reporting positions, as well as all of the pertinent facts and circumstances, but prohibit any discounting of unrecognized tax benefits associated with those reporting positions for the time value of money. The Company continues to classify interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		2023				2022				2021
Balance at the beginning of the period		$	29,019			$	28,692			$	28,666
Net reductions for settlement of tax audits			(17,651	)			—				(1,300	)
Net reductions for lapse of statutes taken during the period			(512	)			(818	)			(433	)
Net additions for tax positions taken during the prior period			2,473				—				—
Net additions for tax positions taken during the current period			994				1,145				1,759
Balance at the end of the period		$	14,323			$	29,019			$	28,692

As of 2023, the total amount of gross unrecognized tax benefits was $14 million, all of which, if recognized, would impact the Company’s effective tax rate. This represents a decrease of $18 million resulting from the completion of a tax audit in 2023. This decrease reduced the income tax expense in the statement of operations and did not impact cash

flows. The Company is subject to various foreign audits and inquiries, and we currently do not expect any material adjustments.

With limited exceptions, the Company is no longer subject to tax audit examinations in significant jurisdictions for the years ended on or before December 31, 2018. The Company continuously monitors the lapsing of statutes of limitations on potential tax assessments for related changes in the measurement of unrecognized tax benefits, related net interest and penalties and deferred tax assets and liabilities.

As of December 31, 2023, the Company expects to record additional reductions in the measurement of its unrecognized tax benefits and related net interest and penalties of approximately $2 million within the next twelve months due to potential tax audit settlements and the lapsing of statutes of limitations on potential tax assessments. The Company does not expect to record any other material reductions in the measurement of its unrecognized tax benefits within the next twelve months.

The following is a summary of the activity of the Company’s valuation allowance for the years ended December 31, 2023, 2022 and 2021 (in thousands):

		Balance at Beginning of Period				Charged to Provision for Income Taxes*				Other**				Balance at End of Period
Valuation allowance for deferred tax assets:
2023		$	54,300			$	1,467			$	2,106			$	57,873
2022		$	58,834			$	(1,647	)		$	(2,887	)		$	54,300
2021		$	60,101			$	2,919			$	(4,186	)		$	58,834

*	These amounts have been recorded as part of the income statement provision for income taxes. The income statement effects of these amounts have largely been offset by amounts related to changes in other deferred tax balance sheet accounts.

**	The changes in the valuation allowance during the years ended December 31, 2023, 2022 and 2021 are primarily due to the effect of foreign currency translation on a valuation allowance related to a net operating loss carryforward.

11 Litigation

From time to time, the Company and its subsidiaries are involved in various litigation matters arising in the ordinary course of business. The Company believes it has meritorious arguments in its current litigation matters and believes any outcome, either individually or in the aggregate, will not be material to the Company’s financial position, results of operations or cash flows. During the year ended December 31, 2021, the Company executed a settlement agreement to resolve patent infringement litigation with Bruker Corporation and Bruker Daltronik

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GmbH regarding their timsTOF product line. In connection with the settlement, the Company is entitled to receive $

million in guaranteed payments, including minimum royalty payments, which was recognized within other income (expense), net in the consolidated statement of operations for the year ended December 31, 2021. During the years ended December 31, 2023, 2022 and 2021, the Company received $2 million, $1 million and $

million, respectively, in guaranteed payments, net of applicable withholding taxes. The Company also recorded a litigation provision of $

5 million during the year ended December 31, 2021, related to a legal settlement.

12 Leases

As of December 31, 2023 and 2022, the Company had lease agreements that expire at various dates through 2034, with weighted-average remaining lease terms of 4.5 years and 4.4 years, respectively. Rental expense was $38 million, $36 million and $34 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023 and 2022, the weighted-average discount rates used to determine the present value of lease liabilities were 4.15% and 3.24%, respectively. During the years ended December 31, 2023, 2022 and 2021, cash paid for amounts included in the measurement of lease liabilities in operating activities in the statement of cash flows was $38 million, $36 million and $34

million, respectively.

T

he Company

recorded

$

million

,

$

12 million and $3

million of

right-of-use

assets in exchange for new operating lease liabilities during the years ended December 31, 2023, 2022 and 2021, respectively.

The Company’s

right-of-use

lease assets and lease liabilities included in the consolidated balance sheets are classified as follows (in thousands):

				December 31,
		Financial Statement Classification		2023				2022
Assets:
Property operating lease assets		Operating lease assets		$	55,006			$	54,930
Automobile operating lease assets		Operating lease assets			28,675				30,582
Equipment operating lease assets		Operating lease assets			910				994
Total lease assets				$	84,591			$	86,506
Liabilities:
Current operating lease liabilities		Current operating lease liabilities		$	27,825			$	26,429
Long-term operating lease liabilities		Long-term operating lease liabilities			58,926				62,108
Total lease liabilities				$	86,751			$	88,537

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Undiscounted future minimum rents payable as of December 31, 2023 under

non-cancelable

leases with initial terms exceeding one year reconcile to lease liabilities included in the consolidated balance sheet as follows (in thousands):

2024		$	30,344
2025			24,570
2026			18,321
2027			10,752
2028			3,848
2029 and thereafter			5,215
Total future minimum lease payments			93,050
Less: amount of lease payments representing interest			(6,299	)
Present value of future minimum lease payments			86,751
Less: current operating lease liabilities			(27,825	)
Long-term operating lease liabilities		$	58,926

13 Other Commitments and Contingencies

The Company licenses certain technology and software from third parties in the course of ordinary business. Future minimum license fees payable under existing license agreements as of December 31, 2023 are immaterial for the years ended December 31, 2023 and thereafter.

The Company enters into standard indemnification agreements in its ordinary course of business. Pursuant to these agreements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners or customers, in connection with patent, copyright or other intellectual property infringement claims by any third party with respect to its current products, as well as claims relating to property damage or personal injury resulting from the performance of services by the Company or its subcontractors. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. Historically, the Company’s costs to defend lawsuits or settle claims relating to such indemnity agreements have been minimal and management accordingly believes the estimated fair value of these agreements is immaterial.

14 Stock-Based Compensation

In May 2020, the Company’s shareholders approved the Company’s 2020 Equity Incentive Plan (“2020 Plan”). As of December 31, 2023, the 2020 Plan has 6.3 million shares available for grant in the form of incentive or

non-qualified

stock options, stock appreciation rights (“SARs”), restricted stock or other types of awards (e.g. restricted stock units and performance stock units). The Company issues new shares of common stock upon exercise of stock options, restricted stock unit conversion or performance stock unit conversion. Under the 2020 Plan, the exercise price for stock options may not be less than the fair market value of the underlying stock at the date of grant. The 2020 Plan is scheduled to terminate on May 13, 2030. Options generally will expire no later than ten years after the date on which they are granted and will become exercisable as directed by the Compensation Committee of the Board of Directors and generally vest in equal annual installments over a five-year period. A SAR may be granted alone or in conjunction with an option or other award. Shares of restricted stock, restricted stock units and performance stock units may be issued under the 2020 Plan for such consideration as is determined by the Compensation Committee of the Board of Directors. As of December 31, 2023, the Company had stock

options

, restricted stock and restricted and performance stock unit awards o

utstanding.

In May 2009, the Company’s shareholders approved the 2009 Employee Stock Purchase Plan, under which eligible employees may contribute up

to

% of their earnings toward the quarterly purchase of the

Company’s

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

common stock.

The plan makes available

0.8

million shares of the Company’s common stock, which includes the remaining shares available under the 1996 Employee Stock Purchase Plan. As of December 31, 2023,

1.7

million shares have been issued under both the 2009 and 1996 Employee Stock Purchase Plans. Each plan period lasts

three months

beginning on January

, April 1, July 1 and October 1 of each year.

The purchase price for each share of stock is the lesser of 90% of the market price on the first day of the plan period or 100% of the market price on the last day of the plan period.

Stock-based compensation expense related to this plan was $

million for each of the years ended December 31, 2023, 2022 and 2021.

The Company accounts for stock-based compensation costs in accordance with the accounting standards for stock-based compensation, which require that all share-based payments to employees be recognized in the statements of operations, based on their grant date fair values. The Company recognizes the expense using the straight-line attribution method. The stock-based compensation expense recognized in the consolidated statements of operations is based on awards that ultimately are expected to vest; therefore, the amount of expense has been reduced for estimated forfeitures. Forfeitures are estimated based on historical experience. If actual results differ significantly from these estimates, stock-based compensation expense and the Company’s results of operations could be materially impacted. In addition, if the Company employs different assumptions in the application of these standards, the compensation expense that the Company records in the future periods may differ significantly from what the Company has recorded in the current period.

The consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021 include the following stock-based compensation expense related to stock option awards, restricted stock awards, restricted stock unit awards, performance stock unit awards and the employee stock purchase plan (in thousands):

		2023				2022				2021
Cost of sales		$	2,014			$	3,498			$	2,500
Selling and administrative expenses			31,012				32,192				21,727
Research and development expenses			3,842				6,874				5,691
Total stock-based compensation		$	36,868			$	42,564			$	29,918

Stock Options

In determining the fair value of the stock options, the Company makes a variety of assumptions and estimates, including volatility measures, expected yields and expected stock option lives. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. The Company uses implied volatility on its publicly-traded options as the basis for its estimate of expected volatility. The Company believes that implied volatility is the most appropriate indicator of expected volatility because it is generally reflective of historical volatility and expectations of how future volatility will differ from historical volatility. The expected life assumption for grants is based on historical experience for the population of

non-qualified

stock option exercises. The risk-free interest rate is the yield currently available on U.S. Treasury

zero-coupon

issues with a remaining term approximating the expected term used as the input to the Black-Scholes model.

The relevant data used to determine the value of the stock options granted during the twelve months ended December 31, 2023, 2022 and 2021 are as follows:

Options Issued and Significant Weighted-Average Assumptions Used to Estimate Option Fair Values		2023				2022				2021
Options issued in thousands			132				138				160
Risk-free interest rate			3.9	%			2.0	%			0.8	%
Expected life in years			6				6				6
Expected volatility			31.1	%			30.7	%			32.4	%
Expected dividends			—				—				—

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Weighted-Average Exercise Price and Fair Value of Options on the Date of Grant		2023				2022				2021
Exercise price		$	331.76			$	321.15			$	281.33
Fair value		$	126.73			$	107.99			$	91.48

The following table summarizes stock option activity for the plans for the twelve months ended December 31, 2023 (in thousands, except per share data):

		Number of Shares				Exercise Price per Share												Weighted- Average Exercise Price per Share
Outstanding at December 31, 2022			597			$	99.22				to			$	371.64			$	238.43
Granted			132			$	253.64				to			$	345.59			$	331.76
Exercised			(99	)		$	99.22				to			$	314.98			$	178.31
Canceled			(43	)		$	195.75				to			$	345.59			$	291.54
Outstanding at December 31, 2023			587			$	113.88				to			$	371.64			$	265.17

The following table details the options outstanding at December 31, 2023 by range of exercise prices (in thousands, except per share data):

Exercise Price Range		Number of Shares Outstanding				Weighted- Average Exercise Price				Remaining Contractual Life of Options Outstanding				Number of Shares Exercisable				Weighted- Average Exercise Price
$113.88 to $235.06			192			$	187.37				4.7				150			$	181.57
$235.07 to $303.64			166			$	267.95				6.8				80			$	262.92
$303.65 to $371.64			229			$	328.38				8.6				29			$	331.66
Total			587			$	265.17				6.8				259			$	223.37

During 2023, 2022 and 2021, the total intrinsic value of the stock options exercised (i.e., the difference between the market price at exercise and the price paid by the employee to exercise the options) was $11 million, $

31 million and $43 million, respectively. The total cash received from the exercise of these stock options was $18 million, $32 million and $46 million for the year

s

ended December 31, 2023, 2022 and 2021, respectively.

The aggregate intrinsic value of the outstanding stock options at December 31, 2023 was $39 million. There were 0.3 million options exercisable at December 31, 2023, 2022 and 2021. The weighted-average exercise prices of options exercisable at December 31, 2023, 2022 and 2021 were $223.37, $188.21 and $162.09, respectively. The weighted-average remaining contractual life of the exercisable outstanding stock options at December 31, 2023 was 5.1 years. The aggregate intrinsic value of stock options exercisable as of December 31, 2023 was $28 million.

At December 31, 2023, the Company had 0.6 million stock options that are vested and expected to vest. The intrinsic value, weighted-average exercise price and remaining contractual life of the vested and expected to vest stock options were $39 million, $264.78 and 6.7 years, respectively, at December 31, 2023.

The amount of compensation costs recognized for the year

s

ended December 31, 2023, 2022 and 2021 on the stock options expected to vest were $10 million, $8 million and $7 million, respectively. As of December 31, 2023, there were $25 million of total unrecognized compensation costs related to unvested stock option awards that are expected to vest. These costs are expected to be recognized over a weighted-average period of 3.4 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Restricted Stock

During the years ended December 31, 2023, 2022 and 2021, the Company granted

three

thousand,

three

thousand and

four

thousand shares of restricted stock, respectively. The weighted-average fair value per share on the grant date of the restricted stock granted in 2023, 2022 and 2021 was $

341.04

, $

363.44

and $

256.28

, respectively. The Company has recorded $

million of compensation expense in each of the years ended December 31, 2023, 2022 and 2021 related to the restricted stock grants. As of December 31, 2023, the Company had

three

thousand unvested shares of restricted stock outstanding, which have been fully expensed.

Restricted Stock Units

The following table summarizes the unvested restricted stock unit award activity for the twelve months ended December 31, 2023 (in thousands, except per share data):

		Shares				Weighted-Average Grant Date Fair Value per Share
Unvested at December 31, 2022			238			$	273.60
Granted			100			$	319.28
Vested			(74	)		$	254.61
Forfeited			(29	)		$	288.50
Unvested at December 31, 2023			235			$	297.18

Restricted stock units are generally granted annually in February and vest in equal annual installments over a five-year period. The amount of compensation costs recognized for the years ended December 31, 2023, 2022 and 2021 on the restricted stock units expected to vest were $19 million, $19 million and $17 million, respectively. As of December 31, 2023, there were $50 million of total unrecognized compensation costs related to the restricted stock unit awards that are expected to vest. These costs are expected to be recognized over a weighted-average period of 3.3 years

.

Performance Stock Units

The Company’s

performance stock units are equity compensation awards with a market vesting condition based on the Company’s Total Shareholder Return (“TSR”) relative to the TSR of the components of the S&P Health Care Index. TSR is the change in value of a stock price over time, including the reinvestment of dividends. The vesting schedule ranges from 0% to 200% of the target shares awarded. Beginning with the grants made in 2020, the vesting conditions for performance stock units now include a performance condition based on future sales growth.

In determining the fair value of the performance stock units, the Company makes a variety of assumptions and estimates, includ

ing vola

tility measures, expected yields and expected terms. The fair value of each performance stock unit grant was estimated on the date of grant using the Monte Carlo simulation model. The Company uses implied volatility on its publicly traded options as the basis for its estimate of expected volatility. The Company believes that implied volatility is the most appropriate indicator of expected volatility because it is generally reflective of historical volatility and expectations of how future volatility will differ from historical volatility. The expected life assumption for grants is based on the performance period of the underlying performance stock units. The risk-free interest rate is the yield currently available on U.S. Treasury

zero-coupon

issues with a remaining term approximating the expected term used as the input to the Monte Carlo simulation model. The correlation coefficient is used to model the way in which each company in the S&P Health Care Index tends to move in relation to each other during the performance period. The relevant data used to determine

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the value of

the performance stock units granted during the years ended December 31, 2023, 2022 and 2021 are as follows:

Performance Stock Units Issued and Significant Assumptions Used to Estimate Fair Values		2023				2022				2021
Performance stock units issued in thousands			45				40				41
Risk-free interest rate			4.8	%			1.6	%			0.2	%
Expected life in years			2.9				2.9				2.9
Expected volatility			33.3	%			25.4	%			38.7	%
Average volatility of peer companies			32.8	%			34.5	%			34.7	%
Correlation Coefficient			38.2	%			43.0	%			45.8	%
Expected dividends			—				—				—

The following table summarizes the unvested performance stock unit award activity for the twelve months ended December 31, 2023 (in thousands, except per share data):

		Shares				Weighted-Average Fair Value per Share
Unvested at December 31, 2022			111			$	297.55
Granted			45			$	338.02
Vested			(46	)		$	208.35
Forfeited			(17	)		$	307.03
Change in performance shares in the year due to exceeding performance targets			15			$	205.72
Unvested at December 31, 2023			108			$	337.22

The amount of compensation costs recognized for the years ended December 31, 2023, 2022 and 2021 on the performance stock units expected to vest were $5 million, $13 million and $3 million, respectively. As of December 31, 2023, there were $15 million of total unrecognized compensation costs related to the performance stock unit awards that are expected to vest. These costs are expected to be recognized over a weighted-average period of 1.9 years.

15  Earnings Per Share

Basic and diluted EPS calculations are detailed as follows (in thousands, except per share data):

		Year Ended December 31, 2023
		Net Income				Weighted-Average Shares				Per Share
		(Numerator)				(Denominator)				Amount
Net income per basic common share		$	642,234				59,076			$	10.87
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities			—				194				(0.03	)
Net income per diluted common share		$	642,234				59,270			$	10.84

		Year Ended December 31, 2022
		Net Income				Weighted-Average Shares				Per Share
		(Numerator)				(Denominator)				Amount
Net income per basic common share		$	707,755				59,985			$	11.80
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities			—				346				(0.07	)
Net income per diluted common share		$	707,755				60,331			$	11.73

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		Year Ended December 31, 2021
		Net Income				Weighted-Average Shares				Per Share
		(Numerator)				(Denominator)				Amount
Net income per basic common share		$	692,843				61,575			$	11.25
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities			—				453				(0.08	)
Net income per diluted common share		$	692,843				62,028			$	11.17

For the year

s

ended December 31, 2023, 2022 and 2021, the Company had 245 thousand, 66 thousand and 3 thousand stock options that were antidilutive, respectively, due to having higher exercise prices than the Company’s average stock price during the period. These securities were not included in the computation of diluted EPS. The effect of dilutive securities was calculated using the treasury

stock method.

16  Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are detailed as follows

(in thousands):

		Currency Translation				Unrealized Gain (Loss) on Retirement Plans				Unrealized Gain (Loss) on Investments				Unrealized Loss on Derivative Instruments				Accumulated Other Comprehensive Loss
Balance at December 31, 2021		$	(99,985	)		$	(11,860	)		$	(20	)		$	—			$	(111,865	)
Other comprehensive (loss) income, net of tax			(46,135	)			16,408				20				—				(29,707	)
Balance at December 31, 2022		$	(146,120	)		$	4,548			$	—			$	—			$	(141,572	)
Other comprehensive (loss) income, net of tax			17,761				(8,049	)			—				(2,260	)			7,452
Balance at December 31, 2023		$	(128,359	)		$	(3,501	)		$	—			$	(2,260	)		$	(134,120	)

17  Retirement Plans

U.S. employees are eligible to participate in the Waters Employee Investment Plan, a 401(k) defined contribution plan, immediately upon hire. Employees may contribute up to 60% of eligible pay on a

pre-tax

or

post-tax

basis and the Company makes matching contributions of 100% for contributions up to 6% of eligible pay. The Company also sponsors a 401(k) Restoration Plan, which is a nonqualified defined contribution plan. Employees are 100% vested in employee and Company matching contributions for both plans. For the year

s

ended December 31, 2023, 2022 and 2021, the Company’s matching contributions amounted to $22 million, $21 million and $19 million, respectively.

The Company also sponsors other employee benefit plans in the U.S., including a retiree healthcare plan, which provides reimbursement for medical expenses and is contributory. There are various employee benefit plans outside the United States (both defined benefit and defined contribution plans). Certain

non-U.S.

defined benefit plans

(“Non-U.S.

Pension Plans”) are included in the disclosures below, which are required under the accounting standards for retirement benefits.

The Company contributed $18 million, $16 million and $17 million in the year

s

ended December 31, 2023, 2022 and 2021, respectively, to the

non-U.S.

plans (primarily defined contribution plans) which are currently outside of the scope of the required disclosures. The eligibility and vesting of

non-U.S. plans

are consistent with local laws

and regulations.

NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS

— (Continued)

The net periodic pension cost

is made up of several components that reflect different aspects of the Company’s financial arrangements as well as the cost of benefits earned by employees. These components are determined using the projected unit credit actuarial cost method and are based on certain actuarial assumptions. The Company’s accounting policy is to reflect in the projected benefit obligation all benefit changes to which the Company is committed as of the current valuation date; use a market-related value of assets to determine pension expense; amortize increases in prior service costs on a straight-line basis over the expected future service of active participants as of the date such costs are first recognized; and amortize cumulative actuarial gains and losses in excess of 10% of the larger of the market-related value of plan assets and the projected benefit obligation over the expected future service of active participants.

Summary data for the U.S. Retiree Healthcare Plan and

Non-U.S. Pension

Plans are presented in the following tables, using the measurement dates of December 31, 2023 and 2022, respectively.

The reconciliation of the projected benefit obligations for the plans at December 31, 2023 and 2022 is as follows

(in thousands):

		2023								2022
		U.S. Retiree Healthcare Plan				Non-U.S. Pension Plans				U.S. Retiree Healthcare Plan				Non-U.S. Pension Plans
Projected benefit obligation, January 1		$	22,583			$	74,025			$	25,958			$	106,924
Service cost			275				3,073				775				4,018
Employee contributions			1,105				601				1,139				536
Interest cost			1,262				2,797				706				1,360
Actuarial losses (gains)			2,166				11,387				(4,657	)			(27,494	)
Benefits paid			(1,649	)			(2,051	)			(1,338	)			(3,567	)
Plan amendments			—				(500	)			—				—
Plan settlements			—				(488	)			—				(812	)
Currency impact			—				3,547				—				(6,940	)
Projected benefit obligation, December 31		$	25,742			$	92,391			$	22,583			$	74,025

The reconciliation of the fair value of the plan assets at December 31, 2023 and 2022 is as follows (in thousands):

		2023								2022
		U.S. Retiree				Non-U.S.				U.S. Retiree				Non-U.S.
		Healthcare				Pension				Healthcare				Pension
		Plan				Plans				Plan				Plans
Fair value of plan assets, January 1		$	15,724			$	77,697			$	18,314			$	91,169
Actual return on plan assets			2,444				4,144				(2,895	)			(6,497	)
Company contributions			529				3,224				504				2,500
Employee contributions			1,105				601				1,139				536
Plan settlements			—				(488	)			—				(812	)
Benefits paid			(1,649	)			(2,051	)			(1,338	)			(3,567	)
Currency impact			—				3,460				—				(5,632	)
Fair value of plan assets, December 31		$	18,153			$	86,587			$	15,724			$	77,697

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The summary of the funded status for the plans at December 31, 2023 and 2022 is as follows (in thousands):

		2023								2022
		U.S. Retiree				Non-U.S.				U.S. Retiree				Non-U.S.
		Healthcare				Pension				Healthcare				Pension
		Plan				Plans				Plan				Plans
Projected benefit obligation		$	(25,742	)		$	(92,391	)		$	(22,583	)		$	(74,025	)
Fair value of plan assets			18,153				86,587				15,724				77,697
Funded status		$	(7,589	)		$	(5,804	)		$	(6,859	)		$	3,672

The change in the Company’s projected benefit obligation for the year ended December 31, 2023 was primarily due to net actuarial losses that arose during the year driven by a decrease in discount rates, differences between expected and actual return on plan assets, and fluctuations in foreign currency exchange rates during the year. The change in the Company’s projected benefit obligation for the year ended December 31, 2022 was primarily due to net actuarial gains that arose during the year driven by an increase in discount rates, differences between expected and actual return on plan assets, and fluctuations in foreign currency exchange rates during the year.

The summary of the amounts recognized in the consolidated balance sheets for the plans at December 31, 2023 and 2022 is as follows (in

thousands):

		2023								2022
		U.S. Retiree				Non-U.S.				U.S. Retiree				Non-U.S.
		Healthcare				Pension				Healthcare				Pension
		Plan				Plans				Plan				Plans
Long-term assets		$	—			$	5,220			$	—			$	9,554
Long-term liabilities			(7,589	)			(11,024	)			(6,859	)			(5,882	)
Net amount recognized at December 31		$	(7,589	)		$	(5,804	)		$	(6,859	)		$	3,672

The accumulated benefit obligation for all defined benefit pension plans was $81 million and $64 million at December 31, 2023 and 2022, respectively.

The summary of the

Non-U.S.

Pension Plans that have accumulated benefit obligations in excess of plan assets at December 31, 2023 and 2022 is as follows (in thousands):

		2023				2022
Accumulated benefit obligations		$	60,815			$	16,962
Fair value of plan assets		$	52,894			$	13,616

The summary of the

Non-U.S.

Pension Plans that have projected benefit obligations in excess of plan assets at December 31, 2023 and 2022 is as follows (in thousands):

		2023				2022
Projected benefit obligations		$	63,918			$	19,498
Fair value of plan assets		$	52,894			$	13,616

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The summary of the components

of net periodic pension costs for the plans for the years ended December 31, 2023, 2022 and 2021 is as follows (in thousands):

		2023								2022								2021
		U.S. Retiree Healthcare Plan				Non-U.S. Pension Plans				U.S. Retiree Healthcare Plan				Non-U.S. Pension Plans				U.S. Retiree Healthcare Plan				Non-U.S. Pension Plans
Service cost		$	275			$	3,073			$	775			$	4,018			$	884			$	4,577
Interest cost			1,262				2,797				706				1,360				559				1,247
Expected return on plan assets			(978	)			(2,653	)			(1,138	)			(1,972	)			(1,011	)			(1,835	)
Settlement loss			—				221				—				73				—				77
Net amortization:
Prior service credit			(19	)			(105	)			(19	)			(129	)			(19	)			(87	)
Net actuarial (gain) loss			—				(195	)			—				649				10				1,186
Net periodic pension cost		$	540			$	3,138			$	324			$	3,999			$	423			$	5,165

The summary of the changes in amounts recognized in other comprehensive income (loss) for the plans for the years ended December 31, 2023, 2022 and 2021 is as follows (in thousands):

		2023								2022								2021
		U.S. Retiree Healthcare Plan				Non-U.S. Pension Plans				U.S. Retiree Healthcare Plan				Non-U.S. Pension Plans				U.S. Retiree Healthcare Plan				Non-U.S. Pension Plans
Prior service credit		$	—			$	—			$	—			$	—			$	—			$	(69	)
Net (loss) gain arising during the year			(699	)			(9,396	)			623				19,025				1,524				6,708
Amortization:
Prior service credit			(19	)			(105	)			(19	)			(129	)			(19	)			(87	)
Net loss			—				26				—				722				10				1,263
Currency impact			—				(58	)			—				1,305				—				1,179
Total recognized in other comprehensive (loss) income		$	(718	)		$	(9,533	)		$	604			$	20,923			$	1,515			$	8,994

The components of net periodic benefit cost other than the service cost component are included in other income, net in the consolidated statements of operations.

The summary of the amounts included in accumulated other comprehensive loss in stockholders’ equity for the plans at December 31, 2023 and 2022 is as follows (in thousands):

		2023								2022
		U.S. Retiree Healthcare Plan				Non-U.S. Pension Plans				U.S. Retiree Healthcare Plan				Non-U.S. Pension Plans
Net actuarial (loss) gain		$	(964	)		$	(3,241	)		$	(266	)		$	6,157
Prior service credit (cost)			17				(156	)			36				(20	)
Total		$	(947	)		$	(3,397	)		$	(230	)		$	6,137

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The plans’ investment asset mix is as follows at December 31, 2023 and 2022:

		2023								2022
		U.S. Retiree Healthcare Plan				Non-U.S. Pension Plans				U.S. Retiree Healthcare Plan				Non-U.S. Pension Plans
Equity securities			70	%			4	%			77	%			5	%
Debt securities			30	%			18	%			23	%			18	%
Cash and cash equivalents			0	%			2	%			0	%			2	%
Insurance contracts and other			0	%			76	%			0	%			75	%
Total			100	%			100	%			100	%			100	%

The plans’ investment policies include the following asset allocation guidelines:

		U.S. Retiree Healthcare Plan								Non-U.S. Pension Plans Policy Target
		Policy Target				Range
Equity securities			60	%			30% - 90%				13	%
Debt securities			35	%			20% - 50%				19	%
Cash and cash equivalents			0	%			0% - 10%				8	%
Insurance contracts and other			5	%			0% - 10%				60	%

The asset allocation policy for the U.S. Retiree Healthcare Plan was developed in consideration of the following long-term investment objectives: achieving a return on assets consistent with the investment policy, achieving portfolio returns which compare favorably with those of other similar plans, professionally managed portfolios and of appropriate market indexes and maintaining sufficient liquidity to meet the obligations of the plan. Within the equity portfolio of the U.S. Retiree Healthcare Plan, investments are diversified among market capitalization and investment strategy, and targets a 45% allocation of the equity portfolio to be invested in financial markets outside of the United States. The Company does not invest in its own stock within the U.S. Retiree Healthcare Plan’s assets.

Plan assets are measured at fair value using the following valuation techniques and inputs:

Level 1:		The fair value of these types of investments is based on market and observable sources from daily quoted prices on nationally recognized securities exchanges.
Level 2:		The fair value of these types of investments utilizes data points other than quoted prices in active markets that are observable either directly or indirectly.
Level 3:		These bank and insurance investment contracts are issued by well-known, highly-rated companies. The fair value disclosed represents the present value of future cash flows under the terms of the respective contracts. Significant assumptions used to determine the fair value of these contracts include the amount and timing of future cash flows and counterparty credit risk.

There have been no changes in the above valuation techniques associated with determining the value of the plans’ assets during the years ended December 31, 2023 and 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The fair value of the Company’s retirement plan assets are as follows at December 31, 2023 (in thousands):

		Total at December 31, 2023				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
U.S. Retiree Healthcare Plan:
Mutual funds (a)			18,153				18,153				—				—
Total U.S. Retiree Healthcare Plan			18,153				18,153				—				—
Non-U.S. Pension Plans:
Cash equivalents (b)			1,611				1,611				—				—
Mutual funds (c)			18,785				18,785				—				—
Bank and insurance investment contracts (d)			66,191				—				—				66,191
Total Non-U.S. Pension Plans			86,587				20,396				—				66,191
Total fair value of retirement plan assets		$	104,740			$	38,549			$	—			$	66,191

The fair value of the Company’s retirement plan assets are as follows at December 31, 2022 (in thousands):

		Total at December 31, 2022				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
U.S. Retiree Healthcare Plan:
Mutual funds (e)			15,724				15,724				—				—
Total U.S. Retiree Healthcare Plan			15,724				15,724				—				—
Non-U.S. Pension Plans:
Cash equivalents (b)			1,527				1,527				—				—
Mutual funds (f)			18,176				18,176				—				—
Bank and insurance investment contracts (d)			57,994				—				—				57,994
Total Non-U.S. Pension Plans			77,697				19,703				—				57,994
Total fair value of retirement plan assets		$	93,421			$	35,427			$	—			$	57,994

a)	The mutual fund balance in the U.S. Retiree Healthcare Plan is invested in the following categories: 41% in the common stock of large-cap U.S. companies, 29% in the common stock of international growth companies and 30% in fixed income bonds of U.S. companies and the U.S. government.

b)	Primarily represents deposit account funds held with various financial institutions.

c)	The mutual fund balance in the Non-U.S. Pension Plans is primarily invested in the following categories: 76% in international bonds, 18% in the common stock of international companies and 7% in various other global investments.

d)	Amount represents bank and insurance guaranteed investment contracts.

e)	The mutual fund balance in the U.S. Retiree Healthcare Plan is invested in the following categories: 49% in the common stock of large-cap U.S. companies, 28% in the common stock of international growth companies and 23% in fixed income bonds of U.S. companies and the U.S. government.

f)	The mutual fund balance in the Non-U.S. Pension Plans is invested in the following categories: 59% in international bonds, 22% in the common stock of international companies and 19% in various other global investments.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes the changes in fair value of the Level 3 retirement plan assets for the years ended December 31, 2023 and 2022 (in thousands)

:

		Insurance Guaranteed Investment Contracts
Fair value of assets, December 31, 2021		$	65,945
Net purchases (sales) and appreciation (depreciation)			(7,951	)
Fair value of assets, December 31, 2022			57,994
Net purchases (sales) and appreciation (depreciation)			8,197
Fair value of assets, December 31, 2023		$	66,191

The weighted-average assumptions used to determine the benefit obligation in the consolidated balance sheets at December 31, 2023, 2022 and 2021 are as follows:

		2023								2022								2021
		U.S.				Non-U.S.				U.S.				Non-U.S.				U.S.				Non-U.S.
Discount rate			5.18	%			2.97	%			5.42	%			3.82	%			2.70	%			1.40	%
Increases in compensation levels			*	*			2.90	%			*	*			3.14	%			*	*			2.74	%
Interest crediting rate			5.25	%			2.05	%			5.25	%			1.57	%			5.25	%			0.99	%

**	Not applicable

The weighted-average assumptions used to determine the net periodic pension cost for the years ended December 31, 2023, 2022 and 2021 are as follows:

		2023								2022								2021
		U.S.				Non-U.S.				U.S.				Non-U.S.				U.S.				Non-U.S.
Discount rate			5.42	%			4.70	%			2.70	%			2.09	%			2.25	%			1.40	%
Return on plan assets			6.25	%			3.95	%			6.25	%			3.07	%			6.25	%			2.58	%
Increases in compensation levels			*	*			4.32	%			*	*			3.58	%			*	*			3.11	%
Interest crediting rate			5.25	%			1.47	%			5.25	%			1.55	%			5.25	%			0.77	%

**	Not applicable

To develop the expected long-term rate of return on assets assumption, the Company considered historical returns and future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio and historical expenses paid by the plan. A

one-quarter

percentage point increase in the assumed long-term rate of return on assets would decrease the Company’s net periodic benefit cost by less than $1 million. A

one-quarter

percentage point increase in the discount rate would decrease the Company’s net periodic benefit cost by less than $1 million

.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During

fiscal year 2024, the Company expects to contribute a total of approximately $3 million to $6 million to the Company’s defined benefit plans. Estimated future benefit payments from the plans as of December 31, 2023 are as follows (in thousands):

		U.S. Retiree Healthcare Plans				Non-U.S. Pension Plans				Total
2024		$	1,959			$	4,018			$	5,977
2025			2,068				4,062				6,130
2026			2,153				3,376				5,529
2027			2,251				4,192				6,443
2028			2,444				5,420				7,864
2029 - 2033			13,807				26,732				40,539

18  Business Segment Information

The accounting standards for segment reporting establish standards for reporting information about operating segments in annual

financial

statements and require selected information for those segments to be presented in interim financial reports of public business enterprises. They also establish standards for related disclosures about products and services, geographic areas and major customers. The Company’s business activities, for which discrete financial information is available, are regularly reviewed and evaluated by the chief operating decision maker. As a result of this evaluation, the Company determined that it has two operating segments: Waters and TA.

The Waters operating segment is primarily in the business of designing, manufacturing, selling and servicing LC and MS instruments, columns and other precision chemistry consumables that can be integrated and used along with other analytical instruments. The TA operating segment is primarily in the business of designing, manufacturing, selling and servicing thermal analysis, rheometry and calorimetry instruments. The Company’s two operating segments have similar economic characteristics; product processes; products and services; types and classes of customers; methods of distribution; and regulatory environments. Because of these similarities, the two segments have been aggregated into one reporting segment for financial statement purposes. Please refer to the consolidated financial statements for financial information regarding the one reportable segment of the Company.

Net sales for the Company’s products and services are as follows for the years ended December 31, 2023, 2022 and 2021 (in thousa

nd

s):

		2023				2022				2021
Product net sales:
Waters instrument systems		$	1,108,702			$	1,210,456			$	1,089,248
Chemistry consumables			541,469				525,399				507,209
TA instrument systems			252,879				252,314				225,613
Total product sales			1,903,050				1,988,169				1,822,070
Service net sales:
Waters service			951,419				890,607				876,626
TA service			101,947				93,180				87,178
Total service sales			1,053,366				983,787				963,804
Total net sales		$	2,956,416			$	2,971,956			$	2,785,874

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Net sales are attributable to geographic areas

based

on the region of destination. Geographic sales information is presented below for the ye

a

rs ended December 31, 2023, 2022 and 2021 (in thousands):

		2023				2022				2021
Net Sales:
Asia:
China		$	440,707			$	565,143			$	521,128
Japan			167,202				167,220				182,597
Asia Other			399,916				399,380				372,040
Total Asia			1,007,825				1,131,743				1,075,765
Americas:
United States			927,982				886,140				774,014
Americas Other			180,591				169,495				151,206
Total Americas			1,108,573				1,055,635				925,220
Europe			840,018				784,578				784,889
Total net sales		$	2,956,416			$	2,971,956			$	2,785,874

None of the Company’s individual customers accounts for more than 2% of annual Company sales. Net sales by customer class are as follows for the years ended December 31, 2023, 2022 and 2021 (in thousands):

		2023				2022				2021
Pharmaceutical		$	1,696,875			$	1,751,665			$	1,667,061
Industrial			909,003				909,805				829,204
Academic and government			350,538				310,486				289,609
Total net sales		$	2,956,416			$	2,971,956			$	2,785,874

Net sales for the Company recognized at a point in time versus over time are as follows for the years ended December 31, 2023, 2022 and 2021 (in thousands):

		2023				2022				2021
Net sales recognized at a point in time:
Instrument systems		$	1,361,581			$	1,462,770			$	1,314,861
Chemistry consumables			541,469				525,399				507,209
Service sales recognized at a point in time (time & materials)			372,530				367,501				354,666
Total net sales recognized at a point in time			2,275,580				2,355,670				2,176,736
Net sales recognized over time:
Service and software maintenance sales recognized over time (contracts)			680,836				616,286				609,138
Total net sales		$	2,956,416			$	2,971,956			$	2,785,874

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Long-lived assets information at December 31, 2023, 2022 and 2021 is presented below (in thousands):

		December 31,
		2023				2022				2021
Long-lived assets:
United States		$	440,993			$	429,469			$	395,446
Americas Other			2,632				1,663				1,662
Total Americas			443,625				431,132				397,108
Europe			167,948				133,465				130,806
Asia			27,500				17,620				19,999
Total long-lived assets		$	639,073			$	582,217			$	547,913

The Americas Other category includes Canada, Latin America and Puerto Rico. Long-lived assets exclude goodwill, other intangible assets and other assets.

19  Unaudited Quarterly Results

The Company’s unaudited quarterly results are summarized below (in thousands, except per share data):

		First				Second				Third				Fourth
2023		Quarter				Quarter				Quarter				Quarter				Total
Net sales		$	684,674			$	740,576			$	711,692			$	819,474			$	2,956,416
Costs and operating expenses:
Cost of sales			284,380				301,076				291,407				318,360				1,195,223
Selling and administrative expenses			181,956				186,953				186,748				180,357				736,014
Research and development expenses			42,691				45,873				41,995				44,386				174,945
Purchased intangibles amortization			1,479				6,815				12,116				12,148				32,558
Total costs and operating expenses			510,506				540,717				532,266				555,251				2,138,740
Operating income			174,168				199,859				179,426				264,223				817,676
Other income (expense), net			1,388				(352	)			328				(557	)			807
Interest expense			(14,444	)			(23,272	)			(30,442	)			(30,703	)			(98,861	)
Interest income			4,061				4,040				3,883				4,637				16,621
Income before income taxes			165,173				180,275				153,195				237,600				736,243
Provision for income taxes			24,250				29,721				18,643				21,395				94,009
Net income		$	140,923			$	150,554			$	134,552			$	216,205			$	642,234
Net income per basic common share			2.39				2.56				2.28				3.66				10.87
Weighted-average number of basic common shares			59,023				58,857				59,093				59,142				59,076
Net income per diluted common share			2.38				2.55				2.27				3.65				10.84
Weighted-average number of diluted common shares and equivalents			59,317				59,010				59,225				59,311				59,270

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		First				Second				Third				Fourth
2022		Quarter				Quarter				Quarter				Quarter				Total
Net sales		$	690,572			$	714,319			$	708,555			$	858,510			$	2,971,956
Costs and operating expenses:
Cost of sales			285,685				307,206				307,101				348,190				1,248,182
Selling and administrative expenses			157,475				161,877				164,417				174,257				658,026
Research and development expenses			40,472				44,006				43,435				48,277				176,190
Purchased intangibles amortization			1,673				1,598				1,592				1,503				6,366
Acquired in-process research and development			9,797				—				—				—				9,797
Total costs and operating expenses			495,102				514,687				516,545				572,227				2,098,561
Operating income			195,470				199,632				192,010				286,283				873,395
Other income (expense), net			170				1,535				895				(372	)			2,228
Interest expense			(11,059	)			(11,419	)			(12,420	)			(13,899	)			(48,797	)
Interest income			2,114				2,526				2,896				3,484				11,020
Income before income taxes			186,695				192,274				183,381				275,496				837,846
Provision for income taxes			26,864				27,410				27,383				48,434				130,091
Net income		$	159,831			$	164,864			$	155,998			$	227,062			$	707,755
Net income per basic common share			2.64				2.74				2.61				3.83				11.80
Weighted-average number of basic common shares			60,580				60,206				59,801				59,329				59,985
Net income per diluted common share			2.62				2.72				2.60				3.81				11.73
Weighted-average number of diluted common shares and equivalents			60,952				60,510				60,081				59,644				60,331

The Company typically experiences an increase in sales in the fourth quarter, as a result of purchasing habits for capital goods of customers that tend to exhaust their spending budgets by calendar year-end. Selling and administrative expenses are typically higher after the first quarter in each year as the Company’s annual payroll merit increases take effect.

The

C

ompany experienced significant increases in purchased intangibles amortization and interest expense beginning in Q2 of 2023 as a result of the Wyatt acquisition.

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