Item 1. Financial Statements

WATERS CORPORATION AND

SU

BSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)

		March 30, 2024				December 31, 2023
		(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents		$	337,290			$	395,076
Investments			923				898
Accounts receivable, net			626,329				702,168
Inventories			538,634				516,236
Other current assets			139,782				138,489
Total current assets			1,642,958				1,752,867
Property, plant and equipment, net			633,594				639,073
Intangible assets, net			611,147				629,187
Goodwill			1,297,826				1,305,446
Operating lease assets			81,065				84,591
Other assets			242,374				215,690
Total assets		$	4,508,964			$	4,626,854
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and debt		$	50,000			$	50,000
Accounts payable			86,219				84,705
Accrued employee compensation			65,098				69,391
Deferred revenue and customer advances			336,718				256,675
Current operating lease liabilities			26,879				27,825
Accrued income taxes			120,520				120,257
Accrued warranty			10,853				12,050
Other current liabilities			152,172				168,677
Total current liabilities			848,459				789,580
Long-term liabilities:
Long-term debt			2,005,761				2,305,513
Long-term portion of retirement benefits			48,977				47,559
Long-term income tax liabilities			137,439				137,123
Long-term operating lease liabilities			55,927				58,926
Other long-term liabilities			155,876				137,812
Total long-term liabilities			2,403,980				2,686,933
Total liabilities			3,252,439				3,476,513
Commitments and contingencies (Notes 6, 7 and 9)
Stockholders’ equity:
Preferred stock, par value $0.01 per share, 5,000 shares authorized, none issued at March 30, 2024 and December 31, 2023			—				—
Common stock, par value $0.01 per share, 400,000 shares authorized, 162,882 and 162,709 shares issued, 59,310 and 59,176 shares outstanding at March 30, 2024 and December 31, 2023, respectively			1,629				1,627
Additional paid-in capital			2,291,103				2,266,265
Retained earnings			9,253,017				9,150,821
Treasury stock, at cost, 103,572 and 103,533 shares at March 30, 2024 and December 31, 2023, respectively			(10,147,341	)			(10,134,252	)
Accumulated other comprehensive loss			(141,883	)			(134,120	)
Total stockholders’ equity			1,256,525				1,150,341
Total liabilities and stockholders’ equity		$	4,508,964			$	4,626,854

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

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

		Three Months Ended
		March 30, 2024				April 1, 2023
		(In thousands, except per share data)
Revenues:
Product sales		$	376,151			$	436,457
Service sales			260,688				248,217
Total net sales			636,839				684,674
Costs and operating expenses:
Cost of product sales			153,182				180,354
Cost of service sales			108,604				104,026
Selling and administrative expenses			174,536				181,956
Research and development expenses			44,595				42,691
Purchased intangibles amortization			11,834				1,479
Litigation provision			10,242				—
Total costs and operating expenses			502,993				510,506
Operating income			133,846				174,168
Other income, net			2,259				1,388
Interest expense			(25,520	)			(14,444	)
Interest income			4,271				4,061
Income before income taxes			114,856				165,173
Provision for income taxes			12,660				24,250
Net income		$	102,196			$	140,923
Net income per basic common share		$	1.73			$	2.39
Weighted-average number of basic common shares			59,232				59,023
Net income per diluted common share		$	1.72			$	2.38
Weighted-average number of diluted common shares and equivalents			59,431				59,317

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

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

		Three Months Ended
		March 30, 2024				April 1, 2023
		(In thousands)
Net income		$	102,196			$	140,923
Other comprehensive (loss) income:
Foreign currency translation			(9,540	)			8,783
Unrealized gains on derivative instruments before reclassifications			2,405				—
Amounts reclassified to interest income			(297	)			—
Unrealized gains on derivative instruments before income taxes			2,108				—
Income tax expense			(506	)			—
Unrealized gains on derivative instruments, net of tax			1,602				—
Retirement liability adjustment before reclassifications			332				80
Amounts reclassified to other income			(117	)			(83	)
Retirement liability adjustment before income taxes			215				(3	)
Income tax expense			(40	)			(4	)
Retirement liability adjustment, net of tax			175				(7	)
Other comprehensive (loss) income			(7,763	)			8,776
Comprehensive income		$	94,433			$	149,699

The accompanying notes are an integral part of the

interim

consolidated financial statements.

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

		Three Months Ended
		March 30, 2024				April 1, 2023
Cash flows from operating activities:		(In thousands)
Net income		$	102,196			$	140,923
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation			10,913				12,805
Deferred income taxes			4,453				(5,078	)
Depreciation			22,129				19,411
Amortization of intangibles			26,385				11,743
Change in operating assets and liabilities:
Decrease in accounts receivable			62,592				44,047
Increase in inventories			(28,309	)			(42,621	)
Increase in other current assets			(4,707	)			(2,123	)
D ecrease in other assets			7,369				6,662
Decrease in accounts payable and other current liabilities			(18,418	)			(71,257	)
Increase in deferred revenue and customer advances			85,901				77,206
(Decrease) i ncrease in other liabilities			(7,634	)			5,033
Net cash provided by operating activities			262,870				196,751
Cash flows from investing activities:
Additions to property, plant, equipment and software capitalization			(28,655	)			(34,390	)
Investments in unaffiliated companies			(1,064	)			—
Purchases of investments			(923	)			(893	)
Maturities and sales of investments			898				877
Net cash used in investing activities			(29,744	)			(34,406	)
Cash flows from financing activities:
Proceeds from debt issuances			—				50,040
Payments on debt			(300,000	)			(145,000	)
Proceeds from stock plans			13,932				2,378
Purchases of treasury shares			(13,089	)			(69,505	)
Proceeds from derivative contracts			6,981				2,876
Net cash used in financing activities			(292,176	)			(159,211	)
Effect of exchange rate changes on cash and cash equivalents			1,264				2,407
(Decrease) increase in cash and cash equivalents			(57,786	)			5,541
Cash and cash equivalents at beginning of period			395,076				480,529
Cash and cash equivalents at end of period		$	337,290			$	486,070

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

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands)

		Number of Common Shares				Common Stock				Additional Paid-In Capital				Retained Earnings				Treasury Stock				Accumulated Other Comprehensive Loss				Total Stockholders’ Equity
Balance December 31, 2022			162,425			$	1,624			$	2,199,824			$	8,508,587			$	(10,063,975	)		$	(141,572	)		$	504,488
Net income			—				—				—				140,923				—				—				140,923
Other comprehensive income			—				—				—				—				—				8,776				8,776
Issuance of common stock for employees:
Employee Stock Purchase Plan			8				—				2,000				—				—				—				2,000
Stock options exercised			6				—				969				—				—				—				969
Treasury stock			—				—				—				—				(69,505	)			—				(69,505	)
Stock-based compensation			111				2				12,170				—				—				—				12,172
Balance April 1, 2023			162,550			$	1,626			$	2,214,963			$	8,649,510			$	(10,133,480	)		$	(132,796	)		$	599,823
		Number of Common Shares				Common Stock				Additional Paid-In Capital				Retained Earnings				Treasury Stock				Accumulated Other Comprehensive Loss				Total Stockholders’ Equity
Balance December 31, 2023			162,709			$	1,627			$	2,266,265			$	9,150,821			$	(10,134,252	)		$	(134,120	)		$	1,150,341
Net income			—				—				—				102,196				—				—				102,196
Other comprehensive loss			—				—				—				—				—				(7,763	)			(7,763	)
Issuance of common stock for employees:
Employee Stock Purchase Plan			8				—				1,996				—				—				—				1,996
Stock options exercised			51				1				12,551				—				—				—				12,552
Treasury stock			—				—				—				—				(13,089	)			—				(13,089	)
Stock-based compensation			114				1				10,291				—				—				—				10,292
Balance March 30, 2024			162,882			$	1,629			$	2,291,103			$	9,253,017			$	(10,147,341	)		$	(141,883	)		$	1,256,525

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

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1 Basis of Presentation and Summary of Significant Accounting Policies

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 Credit Facility (as defined below). The Company’s financial results for the three months ended March 30, 2024 include the financial results of Wyatt. The Company’s financial results for the three months ended April 1, 2023 do not include any of the financial results of Wyatt since the closing of the Wyatt acquisition occurred in the second fiscal quarter of 2023. In addition, the Company has completed the purchase price allocation for the Wyatt acquisition and there were no material changes as compared to the Company’s preliminary purchase price allocation for the Wyatt acquisition.

The Company’s interim fiscal quarter typically ends on the thirteenth Saturday of each quarter. Since the Company’s fiscal year end is December 31, the first and fourth fiscal quarters may have more or less than thirteen complete weeks. The Company’s first fiscal quarters for 2024 and 2023 ended on March 30, 2024 and April 1, 2023, respectively.

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions in Form

10-Q

and do not include all of the information and footnote disclosures required for annual financial statements prepared in accordance with generally accepted accounting principles (“U.S. GAAP”) in the United States of America. The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All inter-company balances and transactions have been eliminated.

The preparation of consolidated financial statements in conformity with U.S. 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. Actual amounts may differ from these estimates under different assumptions or conditions.

It is management’s opinion that the accompanying interim consolidated financial statements reflect all adjustments (which are normal and recurring) that are necessary for a fair statement of the results for the interim periods. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission (“SEC”) on February 27, 2024.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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.

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.

Cash, Cash Equivalents and Investments

Cash equivalents represent highly liquid investments, with original maturities of 90 days or less, while investments with longer maturities are classified as investments. 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 March 30, 2024 and December 31, 2023, $305 million out of $338 million and $321 million out of $396 million, respectively, of the Company’s total cash, cash equivalents and investments were held by foreign subsidiaries. In addition, $239 million out of $338 million and $233 million out of $396 million of cash, cash equivalents and investments were held in currencies

other

than the U.S. dollar at March 30, 2024 and December 31, 2023, 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.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (

Continued

)

The following is a summary of the activity of the Company’s allowance for credit losses for the three months ended March 30, 2024 and April 1, 2023 (in thousands):

		Balance at Beginning of Period				Additions				Deductions and Other				Balance at End of Period
Allowance for Credit Losses
March 30, 2024		$	19,335			$	991			$	(5,461	)		$	14,865
April 1, 2023		$	14,311			$	1,572			$	(1,028	)		$	14,855

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 March 30, 2024 and December 31, 2023. 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.

The following table represents the Company’s assets and liabilities measured at fair value on a recurring basis at March 30, 2024 (in thousands):

		Total at March 30, 2024				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets:
Time deposits		$	923			$	—			$	923			$	—
Waters 401(k) Restoration Plan assets			30,791				30,791				—				—
Interest rate cross-currency swap agreements			7,642				—				7,642				—
Total		$	39,356			$	30,791			$	8,565			$	—
Liabilities:
Foreign currency exchange contracts		$	75			$	—			$	75			$	—
Interest rate cross-currency swap agreements			5,510				—				5,510				—
Interest rate swap cash flow hedge			865				—				865				—
Total		$	6,450			$	—			$	6,450			$	—

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (

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			$	—

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.

Fair Value of Cash Equivalents, Investments, Foreign Currency Exchange Contracts, Interest Rate Cross-Currency Swap 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 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 March 30, 2024 and December 31, 2023. 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 at both March 30, 2024 and December 31, 2023, 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.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

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 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 income in the period that the underlying transaction impacts consolidated income. 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 income in the current period. Interest settlements due to benchmark interest rate changes are recorded in interest income or interest expense. For the three months ended March 30, 2024, the Company did not have any cash flow hedges that were deemed ineffective.

Interest Rate Cross-Currency Swap Agreements

As of March 30, 2024, the Company had entered into interest rate cross-currency swap derivative agreements with durations up to three years with an aggregate notional value of $625 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.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (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):

		March 30, 2024								December 31, 2023
		Notional				Fair Value				Notional				Fair Value
Foreign currency exchange contracts:
Other current assets		$	5,000			$	—			$	24,155			$	183
Other current liabilities		$	35,314			$	75			$	16,000			$	207
Interest rate cross-currency swap agreements:
Other assets		$	285,000			$	7,642			$	220,000			$	4,835
Other liabilities		$	340,000			$	5,510			$	405,000			$	13,384
Accumulated other comprehensive income (loss)						$	6,942							$	(7,975	)
Interest rate swap cash flow hedges:
Other liabilities		$	100,000			$	865			$	100,000			$	2,974
Accumulated other comprehensive loss						$	(865	)						$	(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		Three Months Ended
		March 30, 2024				April 1, 2023
Foreign currency exchange contracts:
Realized gains on closed contracts		Cost of sales		$	257			$	30
Unrealized losses on open contracts		Cost of sales			(51	)			(78	)
Cumulative net pre-tax gains (losses)		Cost of sales		$	206			$	(48	)
Interest rate cross-currency swap agreements:
Interest earned		Interest income		$	2,537			$	2,655
Unrealized gains (losses) on contracts, net		Accumulated other comprehensive loss		$	14,917			$	(7,256	)
Interest rate swap cash flow hedges:
Interest earned		Interest income		$	296			$	—
Unrealized gains on		Accumulated other
open contracts		comprehensive loss		$	2,109			$	—

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

Stockholders’ Equity

In December 2023, the Company’s Board of Directors authorized the extension of its existing share repurchase program through January 21, 2025. The Company’s remaining authorization is $1.0 billion. During the three months ended April 1, 2023, the Company

repurchased 0.2

million shares of the Company’s outstanding common stock at a cost of

$58

million under the Company’s share repurchase program. The Company did not make any open market share repurchases in 2024. In addition, the Company repurchased

$13 million and $11 million of common stock related to the vesting of restricted stock units during the three months ended March 30, 2024 and April 1, 2023, respectively.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

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 three months ended March 30, 2024 and April 1, 2023 (in thousands):

		Balance at Beginning of Period				Accruals for Warranties				Settlements Made				Balance at End of Period
Accrued warranty liability:
March 30, 2024		$	12,050			$	480			$	(1,677	)		$	10,853
April 1, 2023		$	11,949			$	2,177			$	(1,815	)		$	12,311

Restructuring

In March 2024, the Company had a reduction in workforce that impacted approximately 2% of the employees, primarily in China due to the significant decline in sales resulting from lower customer demand, which resulted in the Company incurring approximately $8 million of severance-related costs. During the first quarter of 2024, the Company paid $8

million of severance-related costs in connection with the workforce reductions that occurred in March 2024 and July 2023, with the majority of the remaining costs to be paid in the second quarter of 2024. The accrued restructuring expense was $8 million at both March 30, 2024 and December 31, 2023 and were included in other current liabilities on the consolidated balance sheets.

2 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 three months ended March 30, 2024 and April 1, 2023 (in thousands):

		March 30, 2024				April 1, 2023
Balance at the beginning of the period		$	323,516			$	285,175
Recognition of revenue included in balance at beginning of the period			(103,996	)			(105,222	)
Revenue deferred during the period, net of revenue recognized			187,525				193,286
Balance at the end of the period		$	407,045			$	373,239

The Company classified $70 million and $67 million of deferred revenue and customer advances in other long-term liabilities at March 30, 2024 and December 31, 2023, respectively.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

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):

		March 30, 2024
Deferred revenue and customer advances expected to be recognized in:
One year or less		$	336,718
13-24 months			42,162
25 months and beyond			28,165
Total		$	407,045

3 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 March 30, 2024 and December 31, 2023.

4 Inventories

Inventories are classified as follows (in thousands):

		March 30, 2024				December 31, 2023
Raw materials		$	241,744			$	233,952
Work in progress			23,825				20,198
Finished goods			273,065				262,086
Total inventories		$	538,634			$	516,236

5 Goodwill and Other Intangibles

The carrying amount of goodwill was $1.3 billion at both March 30, 2024 and December 31, 2023.

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

		March 30, 2024												December 31, 2023
		Gross Carrying Amount				Accumulated Amortization				Weighted- Average Amortization Period				Gross Carrying Amount				Accumulated Amortization				Weighted- Average Amortization Period
Capitalized software		$	655,433			$	495,177				5 years			$	660,273			$	495,317				5 years
Purchased intangibles			612,382				207,620				10 years				614,357				197,154				10 years
Trademarks			9,680				—				—				9,680				—				—
Licenses			14,673				8,698				7 years				14,798				8,429				7 years
Patents and other intangibles			113,028				82,554				8 years				111,962				80,983				8 years
Total		$	1,405,196			$	794,049				7 years			$	1,411,070			$	781,883				7 years

The Company capitalized $10 million and $14 million of intangible assets in the three months ended March 30, 2024 and April 1, 2023, respectively. The gross carrying value of intangible assets and accumulated amortization for intangible assets decreased by $16 million and $14 million, respectively, in the three months ended March 30, 2024 due to the effects of foreign currency translation. Amortization expense for intangible assets was $26 million and $12 million for the three months ended March 30, 2024 and April 1, 2023, respectively. Amortization expense for intangible assets is estimated to be $108 million per year for each of the next five years.

CONDENSED

NOTES

TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

6 Debt

The Company has a five-year, $2.0

billion revolving credit facility (the “Credit Facility”) that matures in September 2026. As of March 30, 2024 and December 31, 2023, the Credit Facility had a total

of $0.8 billion and $1.1 billion outstanding, respectively.

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 March 30, 2024 and December 31, 2023, 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 March 30, 2024 and December 31, 2023 (in thousands):

		March 30, 2024				December 31, 2023
Senior unsecured notes - Series G - 3.92 %, due June 2024			50,000				50,000
Total notes payable and debt, current			50,000				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				50,000
Senior unsecured notes - Series Q - 4.91%, due May 2030			50,000				50,000
Credit agreement			750,000				1,050,000
Unamortized debt issuance costs			(4,239	)			(4,487	)
Total long-term debt			2,005,761				2,305,513
Total debt		$	2,055,761			$	2,355,513

As of March 30, 2024 and December 31, 2023, the Company had a total amount available to borrow under the Credit Facility of $1.2 billion and $0.9 billion, respectively, after outstanding letters of credit. The weighted-average interest rates applicable to the senior unsecured notes and credit agreement borrowings collectively were 4.42% and 4.69% at March 30, 2024 and December 31, 2023, respectively. As of March 30, 2024, the Company was in compliance with all debt

covenants.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

The Company and its foreign subsidiaries also had available short-term lines of credit totaling $112 million and $114 million at March 30, 2024

and

December 31, 2023, 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 March 30, 2024 or December 31, 2023.

7 Income Taxes

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 March 30, 2024. The Company has a Development and Expansion Incentive in Singapore that provides a concessionary income tax rate of 5%

on certain types of income for the period April 1, 2021 through March 31, 2026. The effect of applying the concessionary income tax rate rather than the statutory tax rate to income arising from qualifying activities in Singapore increased the Company’s net income for the three months ended March 30, 2024 and April 1, 2023 by $2 million

and $

million, respectively, and increased the Company’s net income per diluted

share by $0.03 and $0.05, respectively.

The Company’s effective tax rate for the three months ended March 30, 2024 and April 1, 2023 was 11.0% and 14.7%, respectively. The income tax provision includes a $1 million and a $2

million income tax benefit related to stock-based compensation for the three months ended March 30, 2024 and April 1, 2023, respectively. The remaining differences between the effective tax rates can primarily be attributed to the impact of discrete tax benefits in the current year and differences in the proportionate amounts of

pre-tax

income recognized in jurisdictions with different effective tax rates.

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.

The Company’s gross unrecognized tax benefits, excluding interest and penalties, at March 30, 2024 and April 1, 2023 were $15 million and $30

million, respectively. 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.

Effective in 2024, various foreign jurisdictions began implementing aspects of the guidance issued by the Organization for

Economic Co-operation and

Development related to the new Pillar Two system of global minimum tax rules. These changes in tax law did not have a material impact on the Company’s financial position, results of operations and cash flows for the first quarter of 2024. The Company continues to monitor the adoption of the Pillar Two rules in additional jurisdictions.

8 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 three months ended March 30, 2024, the Company recorded

$10

million of patent litigation settlement provisions and related costs. The accrued patent litigation expense is in other current liabilities in the consolidated balance sheet at March 30, 2024.

9 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 March 30, 2024 are immaterial for the years ended December 31, 2024 and thereafter.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

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.

10 Earnings Per Share

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

		Three Months Ended March 30, 2024
		Net Income (Numerator)				Weighted- Average Shares (Denominator)				Per Share Amount
Net income per basic common share		$	102,196				59,232			$	1.73
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities			—				199				(0.01	)
Net income per diluted common share		$	102,196				59,431			$	1.72

		Three Months Ended April 1, 2023
		Net Income (Numerator)				Weighted- Average Shares (Denominator)				Per Share Amount
Net income per basic common share		$	140,923				59,023			$	2.39
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities			—				294				(0.01	)
Net income per diluted common share		$	140,923				59,317			$	2.38

For the three months ended March 30, 2024 and April 1, 2023, the

Company had approximately

326,000

and approximately

140,000

stock options that were antidilutive, respectively, due to having higher exercise prices than the Company’s average stock price during the applicable period. These securities were not included in the computation of diluted EPS. The effect of dilutive securities was calculated using the treasury stock method.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

11 Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are detailed as follows (in thousands):

		Currency Translation				Unrealized Loss on Retirement Plans				Unrealized Loss on Derivative Instruments				Accumulated Other Comprehensive Loss
Balance at December 31, 2023		$	(128,359	)		$	(3,501	)		$	(2,260	)		$	(134,120	)
Other comprehensive income (loss), net of tax			(9,540	)			175				1,602				(7,763	)
Balance at March 30, 2024		$	(137,899	)		$	(3,326	)		$	(658	)		$	(141,883	)

12 Business Segment Information

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

TM

and TA

TM

.

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. Operations of the Wyatt business are part of the Waters operating segment. 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.

Net sales for the Company’s products and services are as follows for the three months ended March 30, 2024 and April 1, 2023 (in thousands):

		Three Months Ended
		March 30, 2024				April 1, 2023
Product net sales:
Waters instrument systems		$	191,259			$	244,211
Chemistry consumables			134,207				133,515
TA instrument systems			50,685				58,731
Total product sales			376,151				436,457
Service net sales:
Waters service			236,433				224,349
TA service			24,255				23,868
Total service sales			260,688				248,217
Total net sales		$	636,839			$	684,674

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

Net sales are attributable to geographic areas based on the region of destination. Geographic sales information is presented below for the three months ended March 30, 2024 and April 1, 2023 (in thousands):

		Three Months Ended
		March 30, 2024				April 1, 2023
Net Sales:
Asia:
China		$	85,745			$	116,065
Japan			35,547				46,494
Asia Other			86,267				90,522
Total Asia			207,559				253,081
Americas:
United States			202,839				202,305
Americas Other			38,332				44,116
Total Americas			241,171				246,421
Europe			188,109				185,172
Total net sales		$	636,839			$	684,674

Net sales by customer class are as follows for the three months ended March 30, 2024 and April 1, 2023 (in thousands):

		Three Months Ended
		March 30, 2024				April 1, 2023
Pharmaceutical		$	374,207			$	384,898
Industrial			195,334				209,650
Academic and government			67,298				90,126
Total net sales		$	636,839			$	684,674

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – (Continued)

Net sales for the Company recognized at a point in time versus over time are as follows for the three months ended March 30, 2024 and April 1, 2023 (in thousands):

		Three Months Ended
		March 30, 2024				April 1, 2023
Net sales recognized at a point in time:
Instrument systems		$	241,944			$	302,942
Chemistry consumables			134,207				133,515
Service sales recognized at a point in time (time & materials)			83,325				88,207
Total net sales recognized at a point in time			459,476				524,664
Net sales recognized over time:
Service and software maintenance sales recognized over time (contracts)			177,363				160,010
Total net sales		$	636,839			$	684,674

13 Recent Accounting Standard Changes and Developments

Recently Issued Accounting Standards

There were no additions to the new accounting pronouncements not yet adopted as described in our Annual Report on Form

10-K

for the year ended December 31, 2023. Other amendments to U.S. GAAP that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our condensed consolidated financial statements upon adoption.

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