☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) |
OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) |
OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 13-3668640 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, | WAT | New York Stock Exchange, Inc. |
Securities registered pursuant to Section 12(g) of the Act: | None |
Large accelerated filer ☑ | Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company ☐ | |||
Emerging growth company ☐ |
WATERS CORPORATION AND SUBSIDIARIES
ANNUAL REPORT ON FORM
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PART I
Item 1:
General
Waters Corporation (the “Company,” “Waters
The Company’s products are used by pharmaceutical, clinical, biochemical, industrial, nutritional safety, environmental, academic and governmental customers working in research and development, quality assurance and other laboratory applications. 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.
Waters Corporation, organized as a Delaware corporation in 1991, is a holding company that owns all of the outstanding common stock of Waters Technologies Corporation, its operating subsidiary. Waters Corporation became a publicly-tradedpublicly traded company with its initial public offering (“IPO”) in November 1995. Since the IPO, the Company has added two significant and complementary technologies to its range of products with the acquisitions of TA Instruments in May 1996 and Micromass Limited in September 1997.
Business Segments
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 instrument systems, 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.
Information concerning revenues and long-lived assets attributable to each of the Company’s products, services and geographic areas is set forth in Note 18 in the Notes to the Consolidated Financial Statements, which is incorporated herein by reference.
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Waters Products and Markets
High-Performance and Ultra PerformanceUltra-Performance Liquid Chromatography
HPLC is a standard technique used to identify and analyze the constituent components of a variety of chemicals and other materials. The Company believes that HPLC’s performance capabilities enable it to separate, identify and quantify a high proportion of all known chemicals. As a result, HPLC is used to analyze substances in a wide variety of industries for research and development purposes, quality control and process engineering applications.
The most significant
In 2004, Waters introduced a novel technology that the Company describes as ultra performanceultra-performance liquid chromatography that utilizes a packing material with small, uniform diameter particles and a specialized instrument, the ACQUITY UPLC
Waters manufactures LC instruments that are offered in configurations that allow for varying degrees of automation, from component configured systems for academic teaching and research applications to fully automated systems for regulated and high sample throughput testing, and that have a variety of detection technologies, from optical-based ultra-violet (“UV”) absorbance, refractive index and fluorescence detectors to a suite of
In 2019, the Company introduced the ACQUITY
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the Company’s introduction of ACQUITY
The primary consumable products for LC instruments are chromatography columns. These columns are packed with separation media used in the LC testing process and are typically replaced at regular intervals. The chromatography column contains one of several types of packing material, typically stationary phase particles made from silica or polymeric resins. As a pressurized sample is introduced to the column inlet and permeates through the packed column, it is separated into its constituent components.
Waters HPLC columns can be used on Waters-branded and competitors’ LC systems. The Company believes that it is one of a few suppliers in the world that manufactures silica and polymeric resins, packs columns and distributes its own products. In doing so, the Company believes it can better ensure product consistency, a key attribute for its customers in quality control laboratories, and can react quickly to new customer requirements. The Company believes that its ACQUITY UPLC lines of columns are used primarily on its ACQUITY UPLC instrument systems and, furthermore, that its ACQUITY UPLC instruments primarily use ACQUITY UPLC columns. In 2019, the Company introduced the BioResolv SCX mAb Columns and VanGuard
The Company’s precision chemistry consumable products also include environmental and nutritional safety testing products, including Certified Reference Materials (“CRM”s) and Proficiency Testing (“PT”) products. Laboratories around the world and across multiple industries use these products for quality control and proficiency testing and also purchase product support services required to help with their federal and state mandated accreditation requirements or with quality control over critical pharmaceutical analysis.
In 2020, the Company acquired all of the outstanding stock of Andrew Alliance, S.A. and its two operating subsidiaries, Andrew Alliance USA, Inc. and Andrew Alliance France, SASU (collectively, “Andrew Alliance”), for $80 million, net of cash acquired. Andrew Alliance offers lab workflow automation solutions with the combination of its software platform and smart, connected laboratory equipment and accessories. The Company expects the acquisitionanticipates that full integration of Andrew Alliance will allow us to positively impact our customers’ workflows by improving the repeatability, performance and speed of laboratory operations and chemistry workflows.
Mass Spectrometry and Liquid Chromatography-Mass Spectrometry
MS is a powerful analytical technology that is used to identify unknown compounds, to quantify known materials and to elucidate the structural and chemical properties of molecules by measuring the masses of molecules that have been converted into ions.
The Company is a technology and market leader in the development, manufacture, sale and service of MS instruments and components. These instruments are typically integrated and used along with other complementary analytical instruments and systems, such as LC, chemical electrophoresis and gas chromatography. A wide variety of instrumental designs fall within the overall category of MS instrumentation, including devices that incorporate quadrupole, ion trap,
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Currently, the Company offers a wide range of MS instrument systems utilizing various combinations of quadrupole, Tof and ion mobility designs. These instrument systems are used in drug discovery and development, as well as for environmental, clinical and nutritional safety testing. The overwhelming majority of mass spectrometers sold by the Company are designed to utilize an LC system and a liquid compatible interface (such as an electrospray ionization source) as the sample introduction device. These products supply a diverse market with a strong emphasis on the pharmaceutical, biomedical, clinical, food and beverage and environmental market segments worldwide.
MS is an increasingly important detection technology for LC. The Company’s
LC and MS are typically embodied within an analytical system tailored for either a dedicated class of analyses or as a general purposegeneral-purpose analytical device. An increasing percentage of the Company’s customers are purchasing LC and MS components simultaneously and it has become common for LC and MS instrumentation to be used within the same laboratory and operated by the same user. The descriptions of LC and MS above reflect the historical segmentation of these analytical technologies and the historical categorization of their respective practitioners. Increasingly in today’s instrument market, this segmentation and categorization is becoming obsolete as a high percentage of instruments used in the laboratory embody both LC and MS technologies as part of a single device. In response to this development and to further promote the high utilization of these hybrid instruments, the Company has organized its Waters operating segment to develop, manufacture, sell and service integrated
In 2019, the Company introduced the BioAccord
In 2021, the Company introduced the Waters SELECT SERIES
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molecule analysis for pharmaceutical, academic, food, and forensic applications. The Company also introduced a new peptide
In 2022, the Company introduced the new Xevo™ TQ Absolute system, the most sensitive and compact benchtop tandem mass spec in its class. The Company introduced the new Xevo™ G3 quadrupole time-of-flight (“QTof”) mass spectrometer with CONFIRM Sequence—a new oligonucleotide sequencing confirmation app for the waters_connect™ software platform and an electrospray ionization source for the high-resolution Waters™ SELECT SERIES™ Multi-Reflecting Time-of-Flight mass spectrometer.
Based upon 20212022 reports from independent marketing research firms and publicly-disclosedpublicly disclosed sales figures from competitors, the Company believes that it is one of the world’s largest manufacturers and distributors of LC and
The Company has been a developer and supplier of software-based products that interface with both the Company’s and other suppliers’ instruments. The Company’s newest software technology is the waters_connect
On December 15, 2020, the Company acquired all of the outstanding stock of Integrated Software Solutions Pty Limited and its two operating subsidiaries Integrated Software Solutions Limited and Integrated Software Solutions USA, LLC (collectively, “ISS”), for $4 million, net of cash acquired. In addition to the cash paid at closing there was an earn out provision in which the Company maywould have to pay an additional consideration which has an estimated fair value of $1$2 million as of the close date. The contingent consideration is recorded as a liability and will be paid to the prior shareholders of ISS if certain revenue and customer account conditions are achieved overin the next two years aftersubsequent to the acquisition date. This contingent consideration is recorded as a liability. As of the balance sheet date the earn out period has been completed. ISS offers clinical laboratory software systems that will support and further expand product offerings within our clinical business. The net assets acquired primarily relate to ISS’ laboratory information system,
In 2022, the Company introduced a new Per-and Polyfluoroalkyl Substances (“PFAS”) quantitation workflow enabled by enhancements to its waters_connect™ for quantitation software and the Company introduced Extraction+ Connected Device, a new software-controlled product for the Waters™ Andrew+™ Pipetting Robot that automates the preparation of biological, food, forensics and environmental samples by solid phase extraction.
Waters Service
Services provided by Waters enable customers to maximize technology productivity, support customer compliance activities and provide transparency into enterprise resource management efficiencies. The customer benefits from improved budget control, data-driven technology adoption and accelerated workflow at a site or on
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a global perspective. The Company considers its service offerings to be highly differentiated from ourits competition, as evidenced by a consistent increase in annual service revenues. The Company’s principal competitors in the service market include PerkinElmer, Inc., Agilent Technologies, Inc. and Thermo Fisher Scientific Inc. These competitors can provide certain services on Waters instruments to varying degrees and always present competitive risk.
The servicing and support of instruments, software and accessories is an important source of revenue and represented over 35% of sales for Waters in 2021.2022. These revenues are derived primarily through the sale of support plans, demand services, spare parts, customer performance validation services and customer training. Support plans typically involve scheduled instrument maintenance and an agreement to promptly repair a
TA Products and Markets
Thermal Analysis, Rheometry and Calorimetry
Thermal analysis measures the physical or thermodynamic characteristics of materials as a function of temperature. Changes in temperature affect several characteristics of materials, such as their heat flow characteristics, physical state, weight, dimension and mechanical and electrical properties, which may be measured by one or more thermal analysis techniques, including calorimetry. Consequently, thermal analysis techniques are widely used in the development, production and characterization of materials in various industries, such as plastics, chemicals, automobiles, pharmaceuticals and electronics.
Rheometry instruments often complement thermal analyzers in characterizing materials. Rheometry characterizes the flow properties of materials and measures their viscosity, elasticity and deformation under different types of “loading” or other conditions. The information obtained under such conditions provides insight into a material’s behavior during processing, packaging, transport, usage and storage.
Thermal analysis, rheometry and calorimetry instruments are heavily used in material testing laboratories and, in many cases, provide information useful in predicting the suitability and stability of industrial polymers, fine chemicals, pharmaceuticals, water, metals and viscous liquids in various industrial, consumer goods and healthcare products, as well as for life science research. As with systems offered by Waters, a range of instrument configurations is available with increasing levels of sample handling and information processing automation. In addition, systems and accompanying software packages can be tailored for specific applications.
In 2020, TA introduced the new Discovery X3 Differential Scanning Calorimeter (“X3 DSC”), Discovery Hybrid Rheometers and TAM IV Micro XL isothermal microcalorimeter. The X3 DSC accelerates productivity in customers’ laboratories by enabling three samples to be measured in a single experiment, compared to the single-sample series operation of the other available DSC offerings in the market. This particularly addresses a need in high-throughput laboratories in industries such as composites, electronics and polymer manufacturing. The new line of Discovery Hybrid Rheometers provides increased sensitivity and versatility of rheometry measurements, supporting the development of next-generation, high-performance materials by improving the productivity and efficiency of materials science research. The TAM IV Micro XL isothermal calorimeter supports the development of new battery chemistries by measuring self-discharge and unwanted reactions that reduce battery life and efficiency.
In 2021, TA introduced the TMA 450RH and the Discovery SA. The TMA 450RH provides measurements of dimensional compatibility of materials under controlled temperature and humidity that are important for the development of new electronic devices. The Discovery SA is used in pharmaceutical development to assess the impact of moisture in drug product processing and storage on crystalline structure, which is related to drug product efficacy.
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In 2021, TA introduced the TRIOS AutoPilot software for its thermal analyzer product line. This software helps laboratory staff using TA’s thermal analyzers create routine and streamlined standard operating procedures improving the speed and productivity of thermal analysis measurements.
In 2022, TA introduced the Powder Rheology Accessory, which enables our Discovery Hybrid Rheometers to characterize the behavior of powders during storage, dispensing, processing and end-use. The Powder Rheology Accessory provides relevant property and processing measurements for battery electrode coatings to prevent defects that cause cell failure and pharmaceutical tablets to prevent instabilities of API blends.
In 2022, TA introduced Polymer Workflow Guided Methods, which provides walk up and use functionality by codifying polymer workflows. Guided Methods leverages the power of AutoPilot and enables novice users to quickly learn and use the instrument to set up test methods, run tests, and execute analyses across our Thermal Analysis and Rheology product lines.
TA Service
Similar to Waters, the servicing and support of TA’s instruments is an important source of revenue and represented more than 20%25% of sales for TA in 2021.2022. TA operates independently from the Waters operating segment, though many of its overseas offices are situated in Waters’ facilitiesjointly occupied with Waters to achieve operational efficiencies. TA has dedicated field sales and service operations. Service sales are primarily derived from the sale of support plans, replacement parts and billed labor fees associated with the repair, maintenance and upgrade of installed systems.
Global Customers
The Company typically has a broad and diversified customer base that includes pharmaceutical accounts, other industrial accounts, universities and governmental agencies. Purchase of the Company’s instrument systems is often dependent on its customers’ capital spending, or funding as in the cases of academic, governmental and research institutions, which often fluctuate from year to year. The pharmaceutical segment represents the Company’s largest sector and includes multinational pharmaceutical companies, generic drug manufacturers, contract research organizations (“CRO”s) and biotechnology companies. The Company’s other industrial customers include chemical manufacturers, polymer manufacturers, food and beverage companies and environmental testing laboratories. The Company also sells to universities and governmental agencies worldwide. The Company’s technical sales and support staff members work closely with its customers in developing and implementing applications that meet their full range of analytical requirements. During 2021, 60%2022, 59% of the Company’s net sales were to pharmaceutical accounts, 30%31% to other industrial accounts and 10% to academic institutions and governmental agencies.
The Company typically experiences an increase in sales in the fourth quarter, as a result of purchasing habits for capital goods of many customers who tend to exhaust their spending budgets by calendar year end.year-end. The Company does not rely on any single customer for a material portion of its sales. During fiscal years 2022, 2021 2020 and 2019,2020, no single customer accounted for more than 2% of the Company’s net sales.
Sales and Service
The Company has one of the largest direct sales and service organizations focused exclusively on the analytical workflows offered by the Company. Across these product technologies, using respective specialized sales and service workforces, the Company serves its customer base with 8283 sales offices throughout the world as of December 31, 20212022 and approximately 4,500, 4,300 4,000 and 4,000 field representatives in 2022, 2021 2020 and 2019, 2020,
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respectively. This investment in sales and service personnel serves to maintain and expand the Company’s installed base of instruments. The Company’s sales representatives have direct responsibility for account relationships, while service representatives work in the field to install instruments, train customers and minimize instrument downtime.
Manufacturing and Distribution
The Company provides high product quality by overseeing each stage of the production of its instruments, columns and chemical reagents.
The Company currently assembles a portion of its LC instruments at its facility in Milford, Massachusetts, where it performs machining, assembly and testing. The Milford facility maintains quality management and environmental management systems in accordance with the requirements of ISO 9001:2015, ISO 13485:2016, ISO 45001:2018 and ISO 14001:2015, and adheres to applicable regulatory requirements (including the FDA Quality System Regulation and the European
The Company primarily manufactures and distributes its LC columns at its facilities in Taunton, Massachusetts and Wexford, Ireland. In February 2018, the Company’s Board of Directors approved expanding its Taunton location. The Company has incurred costs of $200approximately $232 million on thisa new state-of-the-art facility, through the end of 2021, and anticipates spending approximately $50 millionwhich is expected to complete this new state-of-the-art facilitybe completed in 2022.2023. The Taunton facility processes, sizes and treats silica and polymeric media that are packed into columns, solid phase extraction cartridges and bulk shipping containers in both Taunton and Wexford. The Wexford facility also manufactures and distributes certain data, instruments and software components for the Company’s LC, MS and TA product lines. The Company’s Taunton facility is certified to ISO 9001:2015 and ISO 14001:2015. The Wexford facility is certified to ISO 9001:2015, and ISO 13485:2016/EN ISO 13485:2016.2016 and ISO 14001:2015. VICAM
The Company manufactures and distributes its MS products at its facilities in Wilmslow, England and Wexford, Ireland. Certain components or modules of the Company’s MS instruments are manufactured at its facility in Solihull, England and by long-standing outside contractors. Each stage of this supply chain is closely monitored by the Company to maintain high quality and performance standards. The instruments, components or modules are then returned to the Company’s facilities, where its engineers perform final assembly, calibrations to customer specifications and quality control procedures. The Company’s MS facilities are certified to ISO 9001:2015, and ISO 13485:2016/EN ISO 13485:2016 and ISO 14001:2015 (Wexford only) and adhere to applicable regulatory requirements (including the FDA Quality System Regulation and the European
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TA’s thermal analysis, rheometry and calorimetry products are manufactured and distributed at the Company’s New Castle, Delaware, Eden Prairie, Minnesota, Lindon, Utah and Huellhorst,Hüllhorst, Germany facilities. Similar to MS, elements of TA’s products are manufactured by outside contractors and are then returned to the Company’s facilities for final assembly, calibration and quality control. The Company’s New Castle facility is certified to the ISO 9001:2015 and ISO 17025:2005 standardsstandard and the Eden Prairie facility is certified to both ISO 9001:2015 and ISO/IEC 17025:2017 standards, and the Lindon facility is certified to ISO 9001:2015.
Raw Materials
The Company purchases a variety of raw materials, primarily consisting of high temperature alloy sheet metal and castings, forgings,
The Company is subject to rules of the Securities and Exchange Commission (“SEC”) under the Dodd-Frank Wall Street Reform and Consumer Protection Act, requiringwhich requires disclosure as to whether certain materials (tantalum, tin, gold and tungsten), known as conflict minerals, which may be contained in the Company’s products, are mined from the Democratic Republic of the Congo and adjoining countries. In 2020,2021, the Company was not able to determine with certainty the country of origin of some of the conflict minerals in its manufactured products. However, the Company does not have knowledge that any of its conflict minerals originated from the Democratic Republic of the Congo or adjoining countries. The Company is in the process of evaluating its 20212022 supply chain, and the Company plans to file its 20212022 Form SD with the SEC in May 2022.2023. The results of this and future evaluations may impose additional costs and may introduce new risks related to the Company’s ability to verify the origin of any conflict minerals contained in its products.
In addition, the Company continues to monitor environmental, health and safety regulations in countries in which it operates throughout the world, in particular, European Union and China Restrictions on the use of certain Hazardous Substances in electrical and electronic equipment (RoHS) and European Union Waste Electrical and Electronic Equipment directives. Further information regarding these regulations is available on the Company’s website,
Research and Development
The Company maintains an active research and development program focused on the development and commercialization of products that extend, complement and update its existing product offering. The Company’s research and development expenditures for 2022, 2021 and 2020 and 2019 were $176 million, $168 million and $141 million, and $143 million, respectively. In addition, the Company is party to an existing licensing arrangement for certain intellectual property relating to mass spectrometry technologies yet to be commercialized and for which there was no future alternative use as of the acquisition date. This licensing arrangement is significantly related to new, biologically-focused applications, as well as other applications, and requires the Company to make additional future payments of up to $7 million if certain milestones are achieved, as well as royalties on future net sales.
Nearly all of the Company’s LC products have been developed at the Company’s main research and development center located in Milford, Massachusetts, with input and feedback from the Company’s extensive field organizations and customers. The majority of the Company’s MS products are developed at facilities in England and most of the Company’s current materials characterization products are developed at the Company’s research and development center in New Castle, Delaware. At December 31, 2022, 2021 2020 and 2019,2020, there were approximately 1,233, 1,150 1,112 and 1,0891,112 employees, respectively, involved in the Company’s research and development efforts. The Company has increased research and development expenses from its continued commitment to invest significantly in new product development and existing product enhancements, and as a result of acquisitions. Despite the Company’s active research and development programs, there can be no assurance that the Company’s product development and commercialization efforts will be successful or that the products developed by the Company will be accepted by the marketplace.
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In 2020, the Company opened a new research laboratory in Cambridge, MA, which will serveserves as a strategic, collaborative space in the community, where Waters can partner with academia, research and industry to accelerate the next generation of scientific advancements.
Human Capital
We believe that our people differentiate our business and are vital to our continued success. As a result, we have made important investments in our workforce through initiatives and programs that support talent development and inclusion and enhance our Total Rewards programs.
Employees
The Company employed approximately 8,200, 7,800 7,400 and 7,5007,400 employees at December 31, 2022, 2021 December 31,and 2020, and 2019, respectively, with approximately 39% of the Company’s employees located in the United States. The Company believes its employee relations are generally good. The Company’s employees are not unionized or affiliated with any internal or external labor organizations.
Talent Development
We believe that our future success depends in a significant part on our continued ability to attract and retain highly skilled employees and then contribute to the growth and development of these employees.
We further the growth and development of our employees by investing in various programs, digital platforms and workshops that build professional and technical skills.
Inclusion & Diversity
We believe inclusion is a core tenet of organizational success and that fostering a sense of inclusivity allows our employees to maximize their performance contribution to our business. In 2021, we hired our first Director of Diversity, Equity and Inclusion to help strategize and focus Waters’ inclusivity efforts. We celebrate difference and diversity in our Employee Circles, which are composed of employees from throughout the company,Company, which provide a forum in which to promote topics related to diversity and inclusion focusing on gender, Multicultural, Veteranspeople of color, veterans, disability and LGBTQ+ employees and allies. All employees are encouraged to participate in these Employee Circles at the local and global levels. We have also rolled out training to all employees to support an inclusive culture that values diverse perspectives.
We believe that part of fostering an inclusive and increasingly racially and ethnically diverse workforce requires understanding the makeup of our current employees. As of December 31, 2021,2022, our workforce is:
32% female, with women occupying 30%34% of company leadership roles (defined as Senior Director or above) compared with 18%22% in 2016,2017, a 12% increase; and
23% racially and/or ethnically diverse, with 9%11% of our workforce identifying as Asian, 3%4% as Black or African American, 6%7% identifying as Hispanic/Latinx and 1% identifying as two or more races.
Recruitment
Waters has focused on expanding diversity in our recruitment processes. We have developed hiring partnerships with agencies such as the National Organization of Black Chemists and Chemical Engineers, the National Society of Black Engineers, Recruit Military, Out in Tech and Power to FlyFairygodboss to expand the pipeline of strong candidates.
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Health and Safety
The health and safety of our employees is our highest priority. Through online and
We manufacture products deemed essential to critical infrastructure, including health and safety, food and agriculture, and energy, and as a result, the majority of our production sites continued operating during the
During the pandemic, we invested in maintaining safe work environments for our employees. We responded to the
Adding work from home flexibility;
Adjusting attendance policies to encourage those who are sick to stay home;
Increasing cleaning protocols across all work locations;
• | Initiating regular communication regarding impacts of the COVID-19 pandemic, including health and safety protocols and procedures; |
Establishing new physical distancing and safety procedures for employees who need to be onsite;
Modifying workspaces as appropriate;
• | Implementing protocols to address actual and suspected COVID-19 cases and potential exposure; and |
• | Continuing to modify and evolve our COVID-19 response plan as governments issue new recommendations and guidelines. |
Competition
The analytical instrument systems, supplies and services market is highly competitive. The Company encounters competition from several worldwide suppliers and other companies in both domestic and foreign markets for each of its three primary technologies. The Company competes in its markets primarily on the basis of product performance, reliability, service and, to a lesser extent, price. Competitors continuously introduce new products and have instrument businesses that are generally more diversified than the Company’s business. Some competitors have greater financial resources and broader distribution than the Company’s.
In the markets served by Waters, the Company’s principal competitors include: Agilent Technologies, Inc., Shimadzu Corporation, Bruker Corporation, Danaher Corporation and Thermo Fisher Scientific Inc. In the markets served by TA, the Company’s principal competitors include: PerkinElmer, Inc., NETZSCH-Geraetebau GmbH, Thermo Fisher Scientific Inc., Malvern PANalytical Ltd., a subsidiary of Spectris plc, Mettler-Toledo International Inc.Anton-Paar GmbH and Anton-Paar GmbH.
The market for consumable LC products, including separation columns, is highly competitive and generally more fragmented than the analytical instruments market. The Company encounters competition in the consumable columns market from chemical companies that produce column sorbents and small specialized companies that primarily pack purchased sorbents into columns and subsequently package and distribute columns. The Company believes that it is one of the few suppliers that processes silica and polymeric resins, packs columns and distributes its own products. The Company competes in this market on the basis of performance, reproducibility, reputation and, to a lesser extent, price. In recent years, the Company’s principal competitors for consumable products have included: Danaher Corporation; Merck KGaA; Agilent Technologies, Inc.; General Electric Company and Thermo Fisher Scientific Inc. The ACQUITY UPLC instrument is designed to offer a predictable level of performance when used with ACQUITY UPLC columns and the Company believes that the expansion of the ACQUITY UPLC instrument base will enhance its chromatographic column business because of the high level of synergy between ACQUITY UPLC columns and the ACQUITY UPLC instruments.
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Patents, Trademarks and Licenses
The Company owns a number of United States and foreign patents and has patent applications pending in the United States and abroad. Certain technology and software has been acquired or is licensed from third parties. The Company also owns a number of trademarks. The Company’s patents, trademarks and licenses are viewed as valuable assets to its operations. However, the Company believes that no one patent or group of patents, trademark or license is, in and of itself, essential to the Company such that its loss would materially affect the Company’s business as a whole.
Environmental Matters and Climate Change
The Company is subject to foreign and U.S. federal, state and local laws, regulations and ordinances that (i) govern activities or operations that may have adverse environmental effects, such as discharges to air and
The Company is sensitive to the growing global debate with respect to climate change. An internal sustainability working group develops increasingly robust data with respect to the Company’s utilization of carbon producing substances in an effort to continuously reduce the Company’s carbon footprint. In 2019, the Company published a sustainability report identifying the various actions and behaviors the Company adopted in 2018 concerning its commitment to both the environment and the broader topic of social responsibility. The Company has continued to annually publish a sustainability report, including the now-renamed ESG Report that the Company published on November 10, 2022, detailing the Company’s efforts to address its environmental impact and uphold its social responsibilities. See Item 1A, Risk Factors –
Available Information
The Company files or furnishes all required reports with the SEC. The Company is an electronic filer and the SEC maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The address of the SEC electronic filing website is
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Forward-Looking Statements
This Annual Report, including the information incorporated by reference herein, may containcontains forward-looking statements with respect to future results and events, including any statements regarding, among other items, anticipated trends or growth inwithin the Company’s business, including, but not limited to, the impactmeaning of Section 27A of the ongoing
• | foreign currency exchange rate fluctuations potentially affecting translation of the Company’s future non-U.S. operating results, particularly when a foreign currency weakens against the U.S. dollar; |
current global economic, sovereign and political conditions and uncertainties, particularly regardingincluding the effect of new or proposed tariff or trade regulations;regulations, changes in inflation and interest rates, the impacts and costs of war, in particular as a result of the ongoing conflict between Russia and Ukraine, and the possibility of further escalation resulting in new geopolitical and regulatory instability, the United Kingdom’s exit from the European Union as well asand the Chinese government’s ongoing tightening of restrictions on procurement by government-funded customers;
the Company’s ability to access capital, and maintain liquidity and service the Company’s debt in volatile market conditions;
• | risks related to the effects of the ongoing COVID-19 pandemic on our business, financial condition, results of operations and prospects; |
changes in timing and demand for the Company’s products among the Company’s customers and various market sectors, particularly if they should reduce capitalas a result of fluctuations in their expenditures or are unableability to obtain funding, as in the cases of academic, governmental and research institutions;
the effectintroduction of mergerscompeting products by other companies and acquisitionsloss of market share, as well as pressures on customer demand for the Company’s products; and the Company’s ability to sustain and enhance service.prices from customers and/or competitors;
changes in the competitive landscape as a result of changes in ownership, mergers and continued consolidation among the Company’s competitors; introduction of competing products by other companies and loss of market share; pressures on prices from customers or resulting from competition;
regulatory, economic and competitive obstacles to new product introductions;introductions, lack of acceptance of new products;products and inability to grow organically through innovation;
rapidly changing technology and product obsolescence;
risks associated with previous or future acquisitions, strategic investments, joint ventures and divestitures, including risks associated with contingent purchase price payments and expansion of our business ininto new or developing markets; spending by certain
risks associated with unexpected disruptions in operations;
failure to adequately protect the Company’s intellectual property, infringement of intellectual property rights of third parties and inability to obtain licenses on commercially reasonable terms;
the Company’s ability to obtain alternativeacquire adequate sources of supply and its reliance on outside contractors for certain components and modules;modules, as well as disruptions to its supply chain;
risks associated with third-party sales intermediaries and resellers;
the possibility thatimpact and costs in connection with shifts in taxable income in jurisdictions with different effective tax rates, the outcome of ongoing and future sales of new products related to acquisitions, which trigger contingent purchase payments, may exceedtax examinations and changes in legislation affecting the Company’s expectations.effective tax rate;
the Company’s ability to attract and retain qualified employees and management personnel;
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risks associated with cybersecurity and technology, including attempts by third parties to defeat the security measures of the Company and its third-party partners;
increased regulatory burdens as the Company’s business evolves, especially with respect to the FDAU.S. Food and EPA,Drug Administration and U.S. Environmental Protection Agency, among others, as well as and in connection with government contracts;
regulatory, environmental and logistical obstacles affecting the distribution of the Company’s products, including the impact, if any, of the coronavirus in China or elsewhere; completion of purchase order documentation by our customers; and the customers’ ability of customers to obtain letters of credit or other financing alternatives.alternatives;
risks associated with lawsuits, particularly involving claims for infringement of patentslitigation and other intellectual property rights.legal and regulatory proceedings; and
the impact and costs incurred from changes in accounting principles and practices; the impact and costs of changes in statutory or contractual tax rates in jurisdictions in which the Company operates, specifically as it relates to the 2017 Tax Cuts and Jobs Act (the “2017 Tax Act”) in the U.S.; and shifts in taxable income among jurisdictions with different effective tax rates; and the outcome of and costs associated with ongoing and future tax audit examinations or changes in respective country legislation affecting the Company’s effective rates.
Certain of these and other factors are further described below in Item 1A, Risk Factors, of this Form
Item 1A:
The Company is subject to risks and uncertainties, including, but not limited to, the following:
RISKS RELATED TO THE CORONAVIRUS
The Company’s international operations may be negatively affected by political events, wars or terrorism, economic conditions and regulatory changes, related to either a specific country or a larger region. These potential political, currency and economic disruptions, as well as foreign currency exchange rate fluctuations, could have a material adverse effectseffect on the Company’s results of operations or financial condition.
Approximately 70% and 72% of the Company’s net sales in 2022 and 2021, respectively, were outside of the United States and were primarily denominated in foreign currencies. During 2022, the U.S. dollar strengthened significantly against all other major currencies in the world, which resulted in foreign currency exchange rate fluctuations negatively impacting the Company’s sales growth by 5% and earnings per diluted share growth by 9% or $1.00. In addition, the Company has considerable manufacturing operations in Ireland and the U.K., as well as significant subcontractors located in Singapore. As a result, a significant portion of the Company’s sales and operations are subject to certain risks, including adverse developments in the political, regulatory and economic environment, in particular, uncertainty regarding possible changes to foreign and domestic trade policy; the effect of the U.K.’s exit from the European Union as well as the financial difficulties and debt burden experienced by a number of European countries; impact and costs of terrorism or war, in particular as a result of the ongoing conflict between Russia and Ukraine, and the possibility of further escalation resulting in new geopolitical and regulatory instability; the instability and possible dissolution of the euro as a single currency; sudden movements in a country’s foreign exchange rates due to a change in a country’s sovereign risk profile or foreign exchange regulatory practices; trade protection measures including embargoes, sanctions and tariffs; differing tax laws and changes in those laws; restrictions on investments and/or limitations regarding foreign ownership; nationalization of private enterprises which may result in the confiscation of assets; credit risk and uncertainties regarding the collectability of accounts receivable; the impact of global health pandemics and epidemics, such as COVID-19; difficulties in protecting intellectual property; difficulties in staffing and managing foreign operations; and associated adverse operational, contractual and tax consequences.
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In 2022, the Company generated approximately 19% of its total net sales from China. China’s government continues to play a significant role in regulating industry development by imposing sector-specific policies, and it maintains control over China’s economic growth through setting monetary policy and determining treatment of particular industries or companies. Accordingly, our financial position or results of operations can be adversely influenced by political, economic, legal, compliance, social and business conditions in China generally.
Additionally, the U.S. dollar value of the Company’s net sales, cost of sales, operating expenses, interest, taxes and net income varies with foreign currency exchange rate fluctuations. Significant increases or decreases in the value of the U.S. dollar relative to certain foreign currencies, particularly the euro, Japanese yen, British pound and Chinese renminbi, could have a material adverse effect or benefit on the Company’s results of operations or financial condition.
From time to time, the Company enters into certain foreign currency exchange contracts that are intended to offset some of the market risk associated with sales denominated in foreign currencies. We cannot predict the effectiveness of these transactions or their impact upon our future operating results, and from time to time they may negatively affect our quarterly earnings.
Global economic conditions may have an adverse effect on the demand for, and supply of, the Company’s products and harm the Company’s financial results.
The Company is a global business that may be adversely affected by changes in global economic conditions such as changes in the rate of inflation (including the cost of raw materials, commodities and supplies) and interest rates. These changes in global economic conditions may affect the demand for, and supply of, the Company’s products and services. This may result in a decline in sales in the future, increased rate of order cancellations or delays, increased risk of excess or obsolete inventories, longer sales cycles and potential difficulty in collecting sales proceeds. There can be no assurance regarding demand for the Company’s products and services in the future.
Disruption in worldwide financial markets could adversely impact the Company’s access to capital and financial condition.
Financial markets in the U.S., Europe and Asia have experienced times of extreme disruption, including, among other things, sharp increases in the cost of new capital, credit rating downgrades and bailouts, severely diminished capital availability and severely reduced liquidity in money markets. Financial and banking institutions have also experienced disruptions, resulting in large asset write-downs, higher costs of capital, rating downgrades and reduced desire to lend money. There can be no assurance that there will not be future deterioration or prolonged disruption in financial markets or financial institutions. Any future deterioration or prolonged disruption in financial markets or financial institutions in which the Company participates may impair the Company’s ability to access its existing cash, utilize its existing syndicated bank credit facility funded by such financial institutions or access sources of new capital, which it may need to meet its capital needs. The cost to the Company of any new capital raised and interest expense would increase if this were to occur.
Public health crises, epidemics or pandemics, such as the continuingan indeterminate recovery period has negatively affectedcould in the future have, a negative impact on the Company’s business and operations,operations.
Public health crises, epidemics or pandemics have had, and may continue to negativelycould in the future have, a negative impact the Company’son our business and operations,operations. In particular, the nature and extent of such impact is highly uncertain.
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For example, the COVID-19
The COVID-19
The degree to which
RISKS RELATED TO OUR BUSINESS
The Company’s financial results are subject to changes in customer demand, which may decrease for a number of reasons, many beyond the Company’s control.
The demand for the Company’s products is dependent upon the size of the markets for its LC,
The analytical instrument market may also, from time to time, experience low sales growth. Approximately 60%59% and 59%60% of the Company’s net sales in 20212022 and 2020,2021, respectively, were to worldwide pharmaceutical and biotechnology companies,accounts, which may be periodically subject to unfavorable market conditions and consolidations. Unfavorable industry conditions could have a material adverse effect on the Company’s results of operations or financial condition.
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Competitors may introduce more effective or less expensive products than the Company’s, which could result in decreased sales. The competitive landscape may transform as a result of potential changes in ownership, mergers and continued consolidations among the Company’s competitors, which could harm the Company’s business.
The analytical instrument market, and, in particular, the portion related to the Company’s HPLC, UPLC,
Strategies for organic growth require developing new technologies and bringing these new technologies to market, which could negatively impact the Company’s financial results.
The Company’s corporate strategy is fundamentally based on winning through organic innovation and deep application expertise. The Company is in the process of developing new products with recently acquired technologies. The future development of these new products will require a significant amount of spending over
In addition, the Company’s products are subject to rapid changes in technology. Rapidly changing technology could make some or all of our product lines obsolete unless the Company is able to continually improve our existing products and develop new products. If the Company fails to develop and introduce products in a timely manner in response to changing technology, market demands or the requirements of our customers, the Company’s product sales may decline, and we could experience an adverse effect on our results of operations or financial condition.
The Company may face risks associated with previous or future acquisitions, strategic investments, joint ventures and divestitures.
In the normal course of business, the Company may engage in discussions with third parties relating to possible acquisitions, strategic investments, joint ventures and divestitures. The Company may pursue transactions that complement or augment its existing products and services. Such transactions involve numerous risks, including difficulties in integrating the acquired operations, technologies and products; diversion of management’s attention from other business concerns; inability to predict financial results; potential departures of key employees of the acquired company; and difficulties in effectively transferring divested businesses and liabilities. If the Company successfully identifies acquisitions in the future, completing such acquisitions may result in new issuances of the Company’s stock that may be dilutive to current owners; increases in the Company’s debt and contingent liabilities; and additional amortization expense related to intangible assets. Acquired businesses may also expose the Company to new risks and new markets, and the Company may have difficulty addressing these risks in a cost-effective and timely manner. Any of these transaction-related risks could have a material adverse effect on the Company’s profitability. In addition, the Company may not be able to identify, successfully complete, or integrate potential acquisitions in the future. Even if the Company can do so, it cannot be sure that these acquisitions will have a positive impact on the Company’s business or operating results.
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The Company’s software or hardware may contain coding or manufacturing errors that could impact their function, performance and security, and result in other negative consequences.
Despite testing prior to the release and throughout the lifecycle of a product or service, the detection and correction of any errors in released software or hardware can be time consuming and costly. This could delay the development or release of new products or services, or new versions of products or services, create security vulnerabilities in the Company’s products or services, and adversely affect market acceptance of products or services. If the Company experiences errors or delays in releasing its software or hardware, or new versions thereof, its sales could be affected and revenues could decline. Errors in software or hardware could expose the Company to product liability, performance and warranty claims as well as harm to brand and reputation, which could impact future sales.
A successful product liability claim brought against the Company in excess of, or outside the coverage of, the Company’s insurance coverage could have a material adverse effect on our business, financial condition and results of operations. The Company may not be able to maintain product liability insurance on acceptable terms, if at all, and insurance may not provide adequate coverage against potential liabilities.
Disruption of operations at the Company’s manufacturing facilities could harm the Company’s financial condition.
The Company manufactures LC instruments at facilities in Milford, Massachusetts and through a subcontractor in Singapore; precision chemistry separation columns at its facilities in Taunton, Massachusetts and Wexford, Ireland; MS products at its facilities in Wilmslow, England, Solihull, England and Wexford, Ireland; thermal analysis and rheometry products at its facilities in New Castle, DelawareDelaware; and other instruments and consumables at various other locations as a result of the Company’s acquisitions. Any prolonged disruption to the operations at any of these facilities, whether due to labor difficulties, destruction of or damage to any facility or other reasons, could harm our customer relationships, impede our ability to generate sales and have a material adverse effect on the Company’s results of operations or financial condition.
Failure to adequately protect intellectual property could have materially adverse effects on the Company’s results of operations or financial condition.
Our success depends on our ability to obtain, maintain, and enforce patents on our technology, maintain our trademarks, and protect our trade secrets. There can be no assurance that any patents held by the Company will not be challenged, invalidated or circumvented or that the rights granted thereunder will provide competitive advantages to the Company. Additionally, there could be successful claims against the Company by third-party patent holders with respect to certain Company products that may infringe the intellectual property rights of such third parties. In the event that a claim relating to intellectual property is asserted against the Company, or third parties hold pending or issued patents that relate to the Company’s products or technology, the Company may seek licenses to such intellectual property or challenge those patents. However, the Company may be unable to obtain these licenses on commercially reasonable terms, if at all, and the challenge of the patents may be unsuccessful. The Company’s failure to obtain the necessary licenses or other rights could impact the sale, manufacture, or distribution of its products and, therefore, could have a material adverse effect on its results of operations and financial condition. The Company’s patents, including those licensed from others, expire on various dates.
The Company also relies on trade secrets and proprietary know-how with which it seeks to protect its products, in part, by confidentiality agreements with its collaborators, employees and consultants. These agreements may not adequately protect the Company’s trade secrets and other proprietary rights. These agreements may be breached, and the Company may not have adequate remedies for any breach. In addition, the Company’s trade secrets may otherwise become known or be independently developed by its competitors. If the Company is unable to protect its intellectual property rights, it could have an adverse and material effect on the Company’s results of operations or financial condition.
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The Company’s business would suffer if the Company were unable to acquire adequate sources of supply.
Most of the raw materials, components and supplies purchased by the Company are available from a number of different suppliers; however, a number of items are purchased from limited or single sources of supply and disruptionsupply. Consolidation among such suppliers could also result in other limited or sole-source suppliers for the Company in the future. Disruption of these sources could have, at a minimum, a temporary adverse effect on shipments and the financial results of the Company. In addition, price increases from these suppliers could have an adverse effect on the Company’s margins. A prolonged inability to obtain certain materials or components could have an adverse effect on the Company’s financial condition or results of operations and could result in damage to its relationships with its customers and, accordingly, adversely affect the Company’s business.
The Company’s sales would deteriorate if the Company’s outside contractors fail to provide necessary components or modules.
Certain components or modules of the Company’s LC and MS instruments are manufactured by outside contractors, including the manufacturing of LC instrument systems and related components by contract manufacturing firms in Singapore. DisruptionsThe ability of servicethese contractors to perform their obligations is largely outside of the Company’s control. Failure by these outside contractors to perform their obligations in a timely manner or at satisfactory quality levels could have an adverse effect on the supply chain and the financial results of the Company. In addition, if one or more of such contractors experience significant disruption in services or institute a significant price increase, the Company may have to seek alternative providers, its costs could increase and the delivery of its products could be prevented or delayed. A prolonged inability to obtain these components or modules could have an adverse effect on the Company’s financial condition or results of operations.
The Company’s business could be harmed by actions of distributorsthird-party sales intermediaries and other third parties that sell our products.
The Company sells some products through third parties, including distributorsthird-party sales intermediaries and value-added resellers. This exposes us to various risks, including competitive pressure, concentration of sales volumes, credit risks and compliance risks. We may rely on one or a few key distributorsthird-party sales intermediaries for a product or market and the loss of these distributorsthird-party sales intermediaries could reduce our revenue or net earnings. DistributorsThird-party sales intermediaries may also face financial difficulties, including bankruptcy, which could harm our collection of accounts receivable. ViolationsMoreover, violations of the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act or similar anti-bribery laws by distributors or other third-party intermediaries could materially and adversely impact our business.business, reputation and results of operations. Risks related to our use of distributorsthird-party sales intermediaries and other third parties may reduce sales, increase expenses and weaken our competitive position.
The Company is subject to laws and regulations governing government contracts, and failure to address these laws and regulations or comply with government contracts could harm its business by leading to a reduction in revenues associated with these customers.
The Company derives a portion of its revenue from direct and indirect sales to U.S. federal, state and local as well as foreign governments and their respective agencies, and, as a result, it is subject to various statutes and regulations that apply to companies doing business with the government. The laws governing government contracts differ from the laws governing private contracts and government contracts may contain pricing terms and conditions that are not applicable to private contracts. The Company is also subject to investigation for compliance with the regulations governing government contracts. A failure to comply with these regulations could result in suspension of these contracts, criminal, civil and administrative penalties or debarment, which could negatively impact the Company’s business and operations. If the Company’s government contracts are terminated, if it is suspended from government work or if its ability to compete for new contracts is adversely affected, the Company’s business could be negatively impacted.
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The Company’s financial results are subject to unexpected shifts in
The Company is subject to rates of income tax that range from 0% up to 34% in various jurisdictions in which it conducts business. In addition, the Company typically generates a substantial portion of its income in the fourth quarter of each fiscal year. Geographical shifts in income from previous quarters’ projections caused by factors including, but not limited to, changes in volume and product mix and fluctuations in foreign currency translation rates, could therefore have potentially significant favorable or unfavorable effects on the Company’s income tax expense, effective tax rate and results of operations.
Governments in the jurisdictions in which the Company operates implement changes to tax laws and regulations from time to time. Any changes in corporate income tax rates or regulations regarding transfer pricing or repatriation of dividends or capital, as well as changes in the interpretation of existing tax laws and regulations, in the jurisdictions in which the Company operates could adversely affect the Company’s cash flow and lead to increases in its overall tax burden, which would negatively affect the Company’s profitability.
The Company entered into a new 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. Prior to April 1, 2021, the Company had a tax exemption in Singapore on certain types of income, based upon the achievement and continued satisfaction of certain operational and financial milestones, which the Company met as of December 31, 2020 and maintained through March 2021. The Company had determined that it was more likely than not to realize the tax exemption in Singapore and, accordingly, did not recognize any reserves for unrecognized tax benefits on its balance sheet related to this tax exemption. If any of the milestone targets were not met, the Company would not have been entitled to the tax exemption on income earned in Singapore dating back to the start date of the agreement (April 1, 2016), and all the tax benefits previously recognized would be reversed, resulting in the recognition of income tax expense equal to the statutory tax of 17% on income earned during that period.
As a global business, the Company is subject to tax audit examinations in various jurisdictions throughout the world. The Company must manage the cost and disruption of responding to governmental audits, investigationinvestigations and proceedings. In addition, the impact of the settlement of pending or future tax audit examination could have an unfavorable effect on the Company’s income tax expense, effective tax rate and results of operations.
The Company may be required to recognize impairment charges for our goodwill and other intangible assets.
As of December 31, 2022, the net carrying value of the Company’s goodwill and other intangible assets totaled approximately $658 million. In accordance with generally accepted accounting principles, the Company periodically assesses these assets to determine if they are impaired. Significant negative industry or economic trends, disruptions to the Company’s business, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of our assets, changes in the structure of our business, divestitures, market capitalization declines or increases in associated discount rates can impair the Company’s goodwill and other intangible assets. Any charges relating to such impairments adversely affect the Company’s financial statements in the periods recognized.
RISKS RELATED TO HUMAN CAPITAL MANAGEMENT
We may not be able to attract and retain qualified employees.
Our future success depends upon the continued service of our executive officers and other key management and technical personnel, and on our ability to continue to identify, attract, retain and motivate them. Implementing our business strategy requires specialized engineering and other talent, as our revenues are highly dependent on technological and product innovations. The market for employees in our industry is extremely competitive, and competitors for talent, particularly engineering talent, increasingly attempt to hire, and to varying degrees have
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and are able to offer compensation in excess of what we are able to offer. Further, existing immigration laws make it more difficult for us to recruit and retain highly skilled foreign national graduates of universities in the United States, making the pool of available talent even smaller. If we are unable to attract and retain qualified employees, our business may be harmed.
The loss of key members of management and the risks inherent in succession planning could adversely affect the Company’s results of operations or financial condition.
The operation of the Company requires managerial and operational expertise. None of the Company’s key management employees, with the exception of the Chief Executive Officer and Chief Financial Officer, have an employment contract with the Company and there can be no assurance that such individuals will remain with the Company. If, for any reason, other key personnel do not continue to be active in management, the Company’s results of operations or financial condition could be adversely affected.
RISKS RELATED TO CYBERSECURITY AND DATA PRIVACY
Disruption, cyber-attack or unforeseen problems with the security, maintenance or upgrade of the Company’s information and
The Company relies on its technology infrastructure and that of its third-party partners, including its software and banking partners, among other functions, to interact with suppliers, sell products and services, fulfill contract obligations, ship products, collect and make electronic wire and check based payments and otherwise conduct business. The Company’s technology infrastructure and that of its third-party partners has been, and may in the future be, vulnerable to damage or interruption from, but not limited to, natural disasters, power loss, telecommunication failures, terrorist attacks, computer viruses, ransomware, unauthorized access to customer or employee data, unauthorized access to and funds transfers from Company bank accounts and other attempts to harm the Company’s systems. For example,In the event of such an incident, the Company has in December 2021, a vulnerability named “Log4Shell” was reported for the widely used Java logging library, Apache Log4j 2. We have reviewedpast, and may in the usefuture, suffer interruptions in service, loss of this library within our software product portfolio and in our IT environment and have taken stepsassets or data or reduced functionality. The Company attempts to mitigate cybersecurity risks by employing a number of proactive measures, including mandatory ongoing employee training and awareness, technical security controls, enhanced data protection and maintenance of backup and protective systems. Despite these mitigation measures, the vulnerability.Company’s systems and those of its partners remain potentially vulnerable to cybersecurity threats, any of which could have a material adverse effect on the Company’s business. To date, cybersecurity incidents have not resulted in a material adverse impact to ourthe Company’s business or operations, but there can be no guarantee weit will not experience such an impact. Additionally, wethe Company must maintain and periodically upgrade ourits information and
If the Company’s security measures are compromised or fail to adequately protect its technology infrastructure, research and development efforts or manufacturing operations, the Company’s products and services may be perceived as vulnerable or unreliable, the information protected by the Company’s controls and processes may be subject to unauthorized access, acquisition or modification, the Company’s brand and reputation could be damaged, the services that the Company provides to its customers could be disrupted, and customers may stop using the Company’s products and services, all of which could reduce the Company’s revenue and earnings, increase its expenses and expose the Companyit to legal claims and regulatory actions.
The Company is in the business of designing, manufacturing, selling and servicing analytical instruments to life science, pharmaceutical, biochemical, industrial, nutritional safety and environmental, academic and governmental customers working in research and development, quality assurance and other laboratory
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applications, and the Company is also a developer and supplier of software-based products that support instrument systems. Many of the Company’s customers are in highly regulated industries. While the Company has invested time and resources implementing measures designed to protect the integrity and security of its technology infrastructure, research and development processes, manufacturing operations, products and services, and the internal and external data managed by the Company, there is a risk these measures will be defeated or compromised or that they are otherwise insufficient to protect against existing or emerging threats. The Company also has acquired companies, products, services and technologies over time and may face inherent risk when integrating these acquisitions into the Company. In addition, at times, the Company faces attempts by third
The Company could suffer significant damage to its brand and reputation if a security incident resulted in unauthorized access to, acquisition of, or modification to the Company’s technology infrastructure, research and development processes, manufacturing operations, its products and services as well as the internal and external data managed by the Company. Such an incident could disrupt the Company’s operations and customers could lose confidence in the Company’s ability to deliver quality and reliable products or services. This could negatively impact sales and could increase costs related to fixing and addressing these incidents and any vulnerabilities exposed by them, as well as to lawsuits, regulatory investigations, claims or legal liability including contractual liability, costs and expenses owed to customers and business partners.
RISKS RELATED TO COMPLIANCE, REGULATORY OR LEGAL CHANGES
Changes in governmental regulations and compliance failures could harm the Company’s business.
The Company is subject to regulation by various federal, state and foreign governments and agencies in areas including, among others, health and safety, import/export, privacy and data protection, FCPA and environmental laws and regulations. A portion of the Company’s operations are subject to regulation by the FDA and similar foreign regulatory agencies. These regulations are complex, can change frequently and govern an array of product activities, including design, development, labeling, manufacturing, promotion, sales and distribution. Any failure by the Company to comply with applicable governmental regulations could result in product recalls, the imposition of fines, restrictions on the Company’s ability to conduct or expand its operations or the cessation of all or a portion of its operations.
Regulators globally are increasingly imposing greater fines and penalties for privacy and data protection violations, and the European Union, as an example, has enacted a broad data protection regulation with fines based on a percentage of global revenues. Changes in laws or regulations associated with enhanced protection of certain sensitive types of personal information, such as information related to health, could greatly increase the cost of compliance and the cost of providing the Company’s products or services. Any failure, or perceived failure, by the Company to comply with laws and regulations on privacy, data security or consumer protection, or other policies, public perception, standards, self-regulatory requirements or legal obligations, could result in lost or restricted business, proceedings, actions or fines brought against the Company or levied by governmental entities or others, or could otherwise adversely affect the business and harm the Company’s reputation.
Some of the Company’s operations are subject to domestic and international laws and regulations with respect to the manufacturing, handling, use or sale of toxic or hazardous substances. This requires the Company to devote substantial resources to maintain compliance with those applicable laws and regulations. If the Company fails to comply with such requirements in the manufacturing or distribution of its products, it could face civil and/or criminal penalties and potentially be prohibited from distributing or selling such products until they are compliant.
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Some of the Company’s products are also subject to the rules of certain industrial standards bodies, such as the International Standards Organization. The Company must comply with these rules, as well as those of other agencies, such as the United States Occupational Safety and Health Administration. Failure to comply with such rules could result in the loss of certification and/or the imposition of fines and penalties, which could have a material adverse effect on the Company’s operations.
As a publicly-traded company, the Company is subject to the rules of the SEC and the New York Stock Exchange. In addition, the Company must comply with the Sarbanes-Oxley regulations, which require the Company to establish and maintain adequate internal control over financial reporting. The Company’s efforts to comply with such laws and regulations are time consuming and costly. While we continue to enhance our controls, we cannot be certain that we will be able to prevent future significant deficiencies or material
The Company is subject to the rules of the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act, requiringwhich require disclosure as to whether certain materials (tantalum, tin, gold and tungsten), known as conflict minerals, which may be contained in the Company’s products, are mined from the Democratic Republic of the Congo and adjoining countries. In 2020,2021, the Company was not able to determine with certainty the country of origin of some of the conflict minerals in its manufactured products. However, the Company does not have knowledge that any of its conflict minerals originated from the Democratic Republic of the Congo or adjoining countries. The Company is in the process of evaluating its 20212022 supply chain, and the Company plans to file its 20212022 Form SD with the SEC in May 2022.2023. The results of this and future evaluations may impose additional costs and may introduce new risks related to the Company’s ability to verify the origin of any conflict minerals contained in its products.
The Company may be harmed by improper conduct of any of our employees, agents or business partners.
We cannot provide assurance that our internal controls and compliance systems will always protect the Company from acts committed by employees, agents or business partners that would violate domestic and international laws, including laws governing payments to government officials, bribery, fraud, kickbacks and false claims, pricing, sales and marketing practices, conflicts of interest, competition, export and import compliance, money laundering and data privacy. In particular, the FCPA, the U.K. Bribery Act and similar anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business, and we operate in many parts of the world that have experienced governmental corruption to some degree. Any such improper actions or allegations of such acts could damage our reputation and subject us to civil or criminal investigations in the U.S. and in other jurisdictions and related shareholder lawsuits, could lead to substantial civil and criminal, monetary and
Environmental, social and corporate governance (“ESG”) issues, including those related to climate change and sustainability, may have an adverse effect on our business, financial condition and results of operations and damage our reputation.
There is an increasing focus from certain investors, customers, consumers, employees and other stakeholders concerning ESG matters. Additionally, public interest and legislative pressure related to public companies’ ESG practices continue to grow. If our ESG practices fail to meet regulatory requirements or investor, customer, consumer, employee or other stakeholders’ evolving expectations and standards for responsible corporate
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citizenship in areas including environmental stewardship and sustainability, support for local communities, Board of Directordirector and employee diversity, human capital management, employee health and safety practices, product quality, supply chain management, corporate governance and transparency, our reputation, brand and employee retention may be negatively impacted, and our customers and suppliers may be unwilling to continue to doconduct business with us.
Customers, consumers, investors and other stakeholders are increasingly focusing on environmental issues, including climate change, energy and water use, plastic waste and other sustainability concerns. Concern over climate change or plastics and packaging materials, in particular, may result in new or increased legal and regulatory requirements to reduce or mitigate impacts to the environment. Changing customer and consumer preferences or increased regulatory requirements may result in increased demands or requirements regarding plastics and packaging materials, including
If we do not adapt to or comply with new regulations, or fail to meet evolving investor, industry or stakeholder expectations and concerns regarding ESG issues, investors may reconsider their capital investment in our Company, and customers and consumers may choose to stop purchasing our products, which could have a material adverse effect on our reputation, business or financial condition.
The Company is subject to or otherwise responsible for a variety of litigation and other legal and regulatory proceedings in the ordinary course of business that can adversely affect our business, results of operations and financial condition.
From time to time, the Company and its subsidiaries are subject to or otherwise responsible for a variety of litigation and other legal and regulatory proceedings in the ordinary course of business, as well as regulatory subpoenas, requests for information, investigations and enforcement. Defending or otherwise responding to these matters can divert the Company’s management’s attention and may cause it to incur significant expenses. 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 or results of operations. However, each of these matters is subject to uncertainties, and it is possible that some of these matters may be resolved unfavorably to the Company.
GENERAL RISK FACTORS
The effects of climate change could harm the Company’s business.
The Company’s manufacturing processes for certain of its products involve the use of chemicals and other substances that are regulated under various international, federal, state and local laws governing the environment. In the event that any future climate change legislation would require that stricter standards be imposed by domestic or international environmental regulatory authorities with respect to the use and/or levels of possible emissions from such chemicals and/or other substances, the Company may be required to make certain changes and adaptations to its manufacturing processes. Any such changes could have a material adverse effect on the financial statements of the Company.
Another potential effect of climate change is an increase in the severity of global weather conditions. The Company’s manufacturing facilities are located in the U.S., U.K., Ireland and Germany. In addition, the Company manufactures a growing percentage of its HPLC, UPLC and MS products in both Singapore and Ireland. Severe weather and geological conditions or events, including earthquakes, hurricanes and/or tsunamis, could potentially cause significant damage to the Company’s manufacturing facilities in each of these countries. The effects of such damage and the resulting disruption of manufacturing operations and the impact of lost sales could have a material adverse impact on the financial results of the Company.
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Estimates and assumptions made in accounting for the Company’s results from operations are dependent on future results, which involve significant judgments and may be imprecise and may differ materially from actual results.
The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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. These estimates and assumptions must be made due to certain information used in preparation of our financial statements which is dependent on future events, cannot be calculated with a high degree of precision from data available or is not capable of being readily calculated based on generally accepted methodologies. The Company believes that the accounting related to revenue recognition, bad debts, inventory valuation, goodwill and intangible assets, income taxes, warranty and installation provisions,uncertain tax positions, litigation, retirement plan obligations, stock-based compensation, business combinations and asset acquisitions uncertain tax positions and contingenciesinventory valuation involves significant judgments and estimates. Actual results for all estimates could differ materially from the estimates and assumptions used, which could have a material adverse effect on our financial condition and results of operations.
The Company’s financial condition and results of operations could be adversely affected by changes to the Company’s retirement plans or retirement plan assets.
The Company sponsors various retirement plans, both inside and outside the United States. Any changes in regulations made by governments in countries in which the Company sponsors retirement plans could adversely impact the Company’s cash flows or results of operations. In connection with these retirement plans, the Company is exposed to market risks associated with changes in the various capital markets. For example, changes in long-term interest rates affect the discount rate that is used to measure the Company’s retirement plan
The Company’s financial condition and results of operations could be adversely affected if the Company is unable to maintain a sufficient level of cash flow.
The Company had $1.5$1.6 billion in debt and $569$481 million in cash, cash equivalents and investments as of December 31, 2021.2022. As of December 31, 2021,2022, the Company also had the ability to borrow an additional $1.6$1.5 billion from its existing, committed credit facility. All but a small portion of the Company’s debt was in the U.S. There is a substantial cash requirement in the United States to fund operations and capital expenditures, service debt interest obligations, finance potential United States acquisitions and continue authorized stock repurchase programs. As such, the Company’s financial condition and results of operations could be adversely impacted if the Company is unable to generate and maintain a sufficient level of cash flow to address these requirements through (1) cash from operations, (2) the Company’s ability to access its existing cash and revolving credit facility, (3) the ability to expand the Company’s borrowing capacity and (4) other sources of capital obtained at an acceptable cost.
Debt covenants, and the Company’s failure to comply with them, could negatively impact the Company’s capital and financial results.
The Company’s existing debt is, and future debt may be, subject to restrictive debt covenants that limit the Company’s ability to engage in certain activities that could otherwise benefit the Company. These debt covenants include restrictions on the Company’s ability to enter into certain contracts or agreements, which may limit the Company’s ability to make dividend or other payments, secure other indebtedness, enter into transactions with affiliates and consolidate, merge or transfer all or substantially all of the Company’s assets. The Company is also required to meet specified financial ratios under the terms of the Company’s debt agreements. The Company’s ability to comply with these financial restrictions and all other covenants is dependent on the Company’s future performance, which is subject to, but not limited to, prevailing economic conditions and other factors, including factors that are beyond the Company’s control, such as foreign exchange rates, interest rates, changes in
25
technology and changes in the level of competition.
Item 1B:
None.
Item 2:
Waters Corporation operates 19 United States facilities and 6970 international facilities, including field offices. The Company believes its facilities are suitable and adequate for its current production level and for reasonable growth over the next several years. The Company’s primary facilities are summarized in the table below.
Primary Facility Locations (1)
Location | Function (2) | Owned/Leased | ||||
Golden, CO | M, R, S, D, A | Leased | ||||
New Castle, DE | M, R, S, D, A | Owned | ||||
Franklin, MA | D | Leased | ||||
Milford, MA | M, R, S, A | Owned | ||||
Taunton, MA | M, R | Owned | ||||
Cambridge, MA | R, S | Leased | ||||
Eden Prairie, MN | M, R, S, D, A | Leased | ||||
Nixa, MO | M, S, D, A | Leased | ||||
Lindon, UT | M, R, S, D, A | Leased | ||||
Beijing, China | S, A | Leased | ||||
Shanghai, China | R, S, A | Leased | ||||
Solihull, England | M, A | Owned | ||||
Wilmslow, England | M, R, S, D, A | Owned | ||||
St. Quentin, France | S, A | Leased | ||||
Hüllhorst, Germany | M, R, S, D, A | Owned | ||||
Hong Kong | S, A | Leased | ||||
Wexford, Ireland | M, R, D, A | Owned | ||||
Bangalore, India | M, S, D, A | Owned | ||||
Etten-Leur, Netherlands | S, D, A | Owned | ||||
Brasov, Romania | R, A | Leased | ||||
Singapore | R, S, D, A | Leased |
(1) | The Company operates more than one primary facility within certain states and foreign countries. |
(2) | M = Manufacturing; R = Research; S = Sales and Service; D = Distribution; A = Administration |
The Company operates and maintains 9 field offices in the United States and 5657 field offices abroad in addition to sales offices in the primary facilities listed above. The Company’s field office locations are listed below.
Field Office Locations (3)
United States | International | |||||
Costa Mesa, CA | Australia | Hungary | Norway | |||
Pleasanton, CA | Austria | India | People’s Republic of China |
26
United States | International | |||||
Wood Dale, IL | Belgium | Ireland | Portugal | |||
Carmel, IN | Brazil | Israel | Poland | |||
Columbia, MD | Canada | Italy | Puerto Rico | |||
Morrisville, NC | Czech Republic | Japan | Spain | |||
Parsippany, NJ | Denmark | Korea | Sweden | |||
Plymouth Meeting, PA | Finland | Malaysia | Switzerland | |||
Bellaire, TX | France | Mexico | Taiwan | |||
Germany | Netherlands | United Arab Emirates | ||||
United Kingdom |
(3) | The Company operates more than one field office within certain states and foreign countries. |
Item 3:
From time to time, the Company and its subsidiaries are involved in various litigationlawsuits, claims, investigations and proceedings covering a wide range of matters arisingthat arise 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 or results of operations.
Item 4:
Not applicable.
27
PART II
Item 5: | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
The Company’s common stock is registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is listed on the New York Stock Exchange under the symbol “WAT”. As of February 19, 2022,24, 2023, the Company had 75 common stockholders of record. The Company has not declared or paid any dividends on its common stock in its past three fiscal years and does not intend to pay cash dividends in the foreseeable future. Any future determination to pay cash dividends will be made at the discretion of the Board of Directors and will depend on restrictions and other factors the Board of Directors may deem relevant. The Company has not made any sales of unregistered equity securities in the years ended December 31, 2022, 2021 2020 or 2019.
Securities Authorized for Issuance under Equity Compensation Plans
Equity compensation plan information is incorporated by reference from Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, of this document and should be considered an integral part of this Item 5.
28
Stock Price Performance Graph
The following performance graph and related information shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended (“Securities Act”), or the Exchange Act, except to the extent that the Company specifically incorporates it by reference into such filing.
The following graph compares the cumulative total return on $100 invested as of December 31, 20162017 (the last day of public trading of the Company’s common stock in fiscal year 2016)2017) through December 31, 20212022 (the last day of public trading of the common stock in fiscal year 2021)2022) in the Company’s common stock, the NYSE Market Index, the SIC Code 3826 Index and the S&P 500 Index. The return of the indices is calculated assuming reinvestment of dividends during the period presented. The Company has not paid any dividends since its IPO. The stock price performance shown on the graph below is not necessarily indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN SINCE DECEMBER 31, 2016
AMONG WATERS CORPORATION, NYSE MARKET INDEX, SIC CODE 3826 INDEX – LABORATORY ANALYTICAL INSTRUMENTS AND S&P 500 INDEX
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||||||||||
WATERS CORPORATION | 100.00 | 97.65 | 120.94 | 128.07 | 192.87 | 177.33 | ||||||||||||||||||
NYSE MARKET INDEX | 100.00 | 91.05 | 114.28 | 122.26 | 147.54 | 133.75 | ||||||||||||||||||
SIC CODE INDEX | 100.00 | 95.62 | 125.72 | 148.85 | 191.58 | 156.89 | ||||||||||||||||||
S&P 500 INDEX | 100.00 | 109.38 | 135.10 | 179.41 | 220.97 | 147.77 |
29
2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |||||||||||||||||||
WATERS CORPORATION | 100.00 | 143.75 | 140.38 | 173.86 | 184.11 | 277.25 | ||||||||||||||||||
NYSE MARKET INDEX | 100.00 | 118.73 | 108.10 | 135.68 | 145.16 | 175.18 | ||||||||||||||||||
SIC CODE INDEX | 100.00 | 121.83 | 116.49 | 153.17 | 181.35 | 233.41 | ||||||||||||||||||
S&P 500 INDEX | 100.00 | 139.02 | 142.44 | 200.67 | 275.70 | 372.23 |
Purchases of Equity Securities by the Issuer
The following table provides information about purchases by the Company during the last three months ended December 31, 2021of 2022 of equity securities registered by the Company under the Exchange Act (in thousands, except per share data):
Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs (2) | ||||||||||||
October 3, 2021 to October 30, 2021 | 145 | $ | 351.92 | 145 | $ | 989,582 | ||||||||||
October 31, 2021 to November 27, 2021 | 141 | $ | 348.42 | 141 | $ | 940,385 | ||||||||||
November 28, 2021 to December 31, 2021 | 162 | $ | 346.16 | 162 | $ | 884,561 | ||||||||||
Total | 448 | $ | 348.74 | 448 | $ | 884,561 | ||||||||||
Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs (2) | ||||||||||||
October 2, 2022 to October 29, 2022 | 174 | $ | 282.93 | 174 | $ | 368,795 | ||||||||||
October 30, 2022 to November 26, 2022 | 147 | $ | 318.78 | 147 | $ | 321,997 | ||||||||||
November 27, 2022 to December 31, 2022 | 154 | $ | 342.87 | 154 | $ | 269,297 | ||||||||||
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Total | 475 | $ | 313.46 | 475 | $ | 269,297 | ||||||||||
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(1) | The Company repurchased |
(2) | In January 2019, the Company’s Board of Directors authorized the Company to repurchase up to $4 billion of its outstanding common stock in open market or private transactions over a two-year period. This program replaced the remaining amounts available under thepre-existing authorization. In December 2020, the Company’s Board of Directors authorized the extension of the share repurchase program through January 21, 2023. In December 2022, the Company’s Board of Directors amended and extended this repurchase program’s term by one year such that it shall now expire on January 21, 2024 and increases the total authorization level to $4.8 billion, an increase of $750 million. The size and timing of these purchases, if any, will depend on our stock price and market and business conditions, as well as other factors. |
30
Item 6:
Item 7:
Business Overview
The Company has two operating segments: Waters
COVID-19
Both the Company’s domestic and international operations have been and continue to be affected by the ongoing global
The
The Company has taken decisive and appropriate actions throughout the
The vast majority of the markets the Company serves, most notably the pharmaceutical, biomedical research, materials sciences, food/environmental and clinical markets, have continued to operate at various levels, and the Company is working closely with these customers to facilitate their seamless operation.
31
Financial Overview
The Company’s operating results are as follows for the years ended December 31, 2022, 2021 2020 and 20192020 (dollars in thousands, except per share data):
Year Ended December 31, | % change | |||||||||||||||||||
2021 | 2020 | 2019 | 2021 vs. 2020 | 2020 vs. 2019 | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Product sales | $ | 1,822,070 | $ | 1,497,333 | $ | 1,567,189 | 22 | % | (4 | %) | ||||||||||
Service sales | 963,804 | 868,032 | 839,407 | 11 | % | 3 | % | |||||||||||||
Total net sales | 2,785,874 | 2,365,365 | 2,406,596 | 18 | % | (2 | %) | |||||||||||||
Costs and operating expenses: | ||||||||||||||||||||
Cost of sales | 1,156,533 | 1,006,689 | 1,010,700 | 15 | % | — | % | |||||||||||||
Selling and administrative expenses | 626,968 | 553,698 | 534,791 | 13 | % | 4 | % | |||||||||||||
Research and development expenses | 168,358 | 140,777 | 142,955 | 20 | % | (2 | %) | |||||||||||||
Purchased intangibles amortization | 7,143 | 10,587 | 9,693 | (33 | %) | 9 | % | |||||||||||||
Asset impairments | — | 6,945 | — | (100 | %) | * | * | |||||||||||||
Litigation provision | 5,165 | 1,180 | — | 338 | % | * | * | |||||||||||||
Operating income | 821,707 | 645,489 | 708,457 | 27 | % | (9 | %) | |||||||||||||
Operating income as a % of sales | 29.5 | % | 27.3 | % | 29.4 | % | ||||||||||||||
Other income (expense), net | 17,203 | (1,775 | ) | (3,586 | ) | * | * | 51 | % | |||||||||||
Interest expense, net | (32,717 | ) | (32,800 | ) | (26,632 | ) | — | % | (23 | %) | ||||||||||
Income before income taxes | 806,193 | 610,914 | 678,239 | 32 | % | (10 | %) | |||||||||||||
Provision for income taxes | 113,350 | 89,343 | 86,041 | 27 | % | 4 | % | |||||||||||||
Net income | $ | 692,843 | $ | 521,571 | $ | 592,198 | 33 | % | (12 | %) | ||||||||||
Net income per diluted common share | $ | 11.17 | $ | 8.36 | $ | 8.69 | 34 | % | (4 | %) |
Year Ended December 31, | % change | |||||||||||||||||||
2022 | 2021 | 2020 | 2022 vs 2021 | 2021 vs 2020 | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Product sales | $ | 1,988,169 | $ | 1,822,070 | $ | 1,497,333 | 9 | % | 22 | % | ||||||||||
Service sales | 983,787 | 963,804 | 868,032 | 2 | % | 11 | % | |||||||||||||
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Total net sales | 2,971,956 | 2,785,874 | 2,365,365 | 7 | % | 18 | % | |||||||||||||
Costs and operating expenses: | ||||||||||||||||||||
Cost of sales | 1,248,182 | 1,156,533 | 1,006,689 | 8 | % | 15 | % | |||||||||||||
Selling and administrative expenses | 658,026 | 626,968 | 553,698 | 5 | % | 13 | % | |||||||||||||
Research and development expenses | 176,190 | 168,358 | 140,777 | 5 | % | 20 | % | |||||||||||||
Purchased intangibles amortization | 6,366 | 7,143 | 10,587 | (11 | %) | (33 | %) | |||||||||||||
Asset impairments | — | — | 6,945 | * | * | * | * | |||||||||||||
Acquired in-process research and development | 9,797 | — | — | * | * | * | * | |||||||||||||
Litigation provision | — | 5,165 | | 1,180 | | * | * | * | * | |||||||||||
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Operating income | 873,395 | 821,707 | 645,489 | 6 | % | 27 | % | |||||||||||||
Operating income as a % of sales | 29.4 | % | 29.5 | % | 27.3 | % | ||||||||||||||
Other income (expense), net | 2,228 | 17,203 | (1,775 | ) | (87 | %) | * | * | ||||||||||||
Interest expense, net | (37,777 | ) | (32,717 | ) | (32,800 | ) | 15 | % | — | |||||||||||
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Income before income taxes | 837,846 | 806,193 | 610,914 | 4 | % | 32 | % | |||||||||||||
Provision for income taxes | 130,091 | 113,350 | 89,343 | 15 | % | 27 | % | |||||||||||||
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Net income | $ | 707,755 | $ | 692,843 | $ | 521,571 | 2 | % | 33 | % | ||||||||||
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Net income per diluted common share | $ | 11.73 | $ | 11.17 | $ | 8.36 | 5 | % | 34 | % |
** | Percentage not meaningful |
The Company’s net sales increased approximately7% in 2022 as compared to 2021, and 18% in 2021 as compared to 2020,2020. The sales growth in 2022 and decreased 2% in 2020 as compared to 2019. The increase in sales in 2021 can be attributed to thewas driven by strong sales performancecustomer demand across most major geographies, end markets, and product categories duecategories. The increase in sales in 2021 was also impacted by the increase in demand for our products and services as our customers returned to customer demand continuing to return to
Instrument system sales increased 11% and 23% in 2022 and 2021, and decreased 8% in 2020. In 2021,respectively. Such increases were attributable to the broad-based increase in instrument system sales was attributable to customer demand continuing to increase to
Operating income was $873 million in 2022, an increase of 6% as compared to 2021. This increase was primarily a result of the increase in sales volume and pricing increases, partially offset by higher electronic component and freight inflationary costs and the negative effect of foreign currency translation. The effect of foreign currency translation increasing saleslowered operating income by 2% and 1% in 2021 and 2020, respectively. This increase in sales to industrial customers was driven by the TA business as TA’s sales grew 26% in 2021 as compared to a decline of 8% in 2020. Combined sales to academic and government customers increased 7% in 2021 and decreased 16% in 2020, with foreign currency translation increasing sales by 2% in 2021 and having minimal impact on sales in 2020. Sales to our academic and governmental customers are highly dependent on when institutions receive funding to purchase our instrument systems and, as such, sales can vary significantly from period to period.approximately $71 million during 2022.
32
Operating income was $822 millionincreased 27% in 2021 an increase of 27% as compared to 2020. This increase was primarily a result of the increase in sales volumes caused by our customers resuming laboratory and manufacturing operations throughout the world as they returned to pre-pandemic levels of operations and the favorable impact of foreign currency translation. The operating income increase was partially offset by the restoration of expenses that had been decreased in 2020 which consisted of a series of cost reduction actions that included salary reductions, furloughs and reductions in
Operating income as a percentage of sales was 29.5%29.4%, 29.5% and 27.3% in 2022, 2021 and 29.4% in 2021, 2020, and 2019, respectively. The 2020 operating income percentage decreased as a result of the decrease in sales volume due to the
The Company’s effective tax rates were 14.1%15.5%, 14.1% and 14.6% for 2022, 2021 and 12.7% for 2021, 2020, and 2019, respectively. Net income per diluted share was $11.73, $11.17 and $8.36 in 2022, 2021 and $8.69 in 2021, 2020, and 2019, respectively.
The Company generated $612 million, $747 million $791 million and $643$791 million of net cash flows from operationsprovided by operating activities in 2022, 2021 2020 and 2019,2020, respectively. The decrease in 2022 operating cash flow in 2021 was primarily a result of the $100 million of 2020 cost actionshigher inventory levels, slower cash collections and working capital improvements implemented being reinstated once customer demand increased. Included in the 2021, 2020 and 2019 net cash flow from operations is $38 million,
Net cash used in investing activities included capital expenditures related to property, plant, equipment and software capitalization of $176 million, $161 million and $172 million in 2022, 2021 and $164 million in 2021, 2020, and 2019, respectively. The cash flows fromused in investing activities in 2022, 2021 alsoand 2020 included $32 million, $49 million and $70 million, respectively, of capital expenditures related to the major expansion of the Company’s precision chemistry consumable operations in the United States. The Company has incurred costs of $200 million on this facility through the end of 2021, and anticipates spending approximately $50 million to complete this new state-of-the-art facility in 2022.
In January 2019, the Company’s Board of Directors authorized the Company to repurchase up to $4 billion of its outstanding common stock over a
On February 14, 2023, the Company entered into an agreement to acquire all issued and outstanding equity interests of Wyatt Technology for $1.4 billion in cash at closing, subject to customary adjustments. Wyatt Technology is a pioneer in innovative light scattering and field-flow fractionation instruments, software, accessories and services. The Company will finance this acquisition through cash on its balance sheet and existing borrowing capacity that is available on its revolving credit facility. The agreement contains certain customary termination rights, including the right of the sellers to terminate this transaction if it has not been completed by June 14, 2023, subject to automatic extension to August 14, 2023 if certain regulatory approvals are not obtained by such date. If this were to occur, the Company would be required to pay the sellers a one-time fee in the amount of $15 million if the agreement is validly terminated and not consummated in accordance with the closing conditions set forth in the agreement. This transaction is expected to close in the second quarter of 2023, subject to regulatory approvals and other customary closing conditions.
33
Results of Operations
Sales by Geography
Geographic sales information is presented below for the years ended December 31, 2022, 2021 2020 and 20192020 (dollars in thousands):
Year Ended December 31, | % change | |||||||||||||||||||
2021 | 2020 | 2019 | 2021 vs. 2020 | 2020 vs. 2019 | ||||||||||||||||
Net Sales: | ||||||||||||||||||||
Asia: | ||||||||||||||||||||
China | $ | 521,128 | $ | 404,352 | $ | 439,557 | 29 | % | (8 | %) | ||||||||||
Japan | 182,597 | 179,815 | 180,707 | 2 | % | — | % | |||||||||||||
Asia Other | 372,040 | 315,010 | 318,848 | 18 | % | (1 | %) | |||||||||||||
Total Asia | 1,075,765 | 899,177 | 939,112 | 20 | % | (4 | %) | |||||||||||||
Americas: | ||||||||||||||||||||
United States | 774,014 | 678,313 | 692,277 | 14 | % | (2 | %) | |||||||||||||
Americas Other | 151,206 | 119,529 | 137,964 | 27 | % | (13 | %) | |||||||||||||
Total Americas | 925,220 | 797,842 | 830,241 | 16 | % | (4 | %) | |||||||||||||
Europe | 784,889 | 668,346 | 637,243 | 17 | % | 5 | % | |||||||||||||
Total net sales | $ | 2,785,874 | $ | 2,365,365 | $ | 2,406,596 | 18 | % | (2 | %) | ||||||||||
Year Ended December 31, | % change | |||||||||||||||||||
2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||
Net Sales: | ||||||||||||||||||||
Asia: | ||||||||||||||||||||
China | $ | 565,143 | $ | 521,128 | $ | 404,352 | 8 | % | 29 | % | ||||||||||
Japan | 167,220 | 182,597 | 179,815 | (8 | %) | 2 | % | |||||||||||||
Asia Other | 399,380 | 372,040 | 315,010 | 7 | % | 18 | % | |||||||||||||
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Total Asia | 1,131,743 | 1,075,765 | 899,177 | 5 | % | 20 | % | |||||||||||||
Americas: | ||||||||||||||||||||
United States | 886,140 | 774,014 | 678,313 | 14 | % | 14 | % | |||||||||||||
Americas Other | 169,495 | 151,206 | 119,529 | 12 | % | 27 | % | |||||||||||||
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Total Americas | 1,055,635 | 925,220 | 797,842 | 14 | % | 16 | % | |||||||||||||
Europe | 784,578 | 784,889 | 668,346 | — | 17 | % | ||||||||||||||
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Total net sales | $ | 2,971,956 | $ | 2,785,874 | $ | 2,365,365 | 7 | % | 18 | % | ||||||||||
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Geographically, the Company’s sales growth in 2022 and 2021 was broad-based across most major regions. Foreign currency translation decreased total sales growth by 5% in 2022 as the U.S. dollar strengthened significantly against all other major currencies. The geographies that were the most negatively impacted by the strengthening of the U.S. dollar in 2022 were Europe and Japan, as the weakening of the euro and Japanese yen lowered sales growth in Europe and Japan by 10% and 17%, respectively, in 2022. In 2021,2022, sales increased 18% as compared to 2020, due to stronger5% in Asia, 14% in the Americas, and were flat in Europe, with the effect of foreign currency translation decreasing sales growth by 7% in Asia, and 10% in Europe. China sales increased 8% in 2022 with foreign currency translation decreasing China sales growth by 2% in 2022. This increase in China sales was driven by strong customer demand for our products and services despite the negative impact that the COVID-19 pandemic had on our business in China in 2022. The latest COVID-19 pandemic lockdowns and reopening in China made it difficult to conduct normal business operations in 2022, and the Company’s future sales growth may be negatively impacted if future lockdowns were to occur for a prolonged period in the future.
The sales growth in 2021 across most majorall geographies was driven by increased demand for our products and customer classesservices as a result of our customers resuming laboratory and manufacturing operations, as well as
Sales by Trade Class
Net sales by customer class are presented below for the years ended December 31, 2022, 2021 2020 and 20192020 (dollars in thousands):
Year Ended December 31, | % change | |||||||||||||||||||
2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||
Pharmaceutical | $ | 1,751,665 | $ | 1,667,061 | $ | 1,386,966 | 5 | % | 20 | % | ||||||||||
Industrial | 909,805 | 829,204 | 707,772 | 10 | % | 17 | % | |||||||||||||
Academic and government | 310,486 | 289,609 | 270,627 | 7 | % | 7 | % | |||||||||||||
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Total net sales | $ | 2,971,956 | $ | 2,785,874 | $ | 2,365,365 | 7 | % | 18 | % | ||||||||||
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34
Year Ended December 31, | % change | |||||||||||||||||||
2021 | 2020 | 2019 | 2021 vs. 2020 | 2020 vs. 2019 | ||||||||||||||||
Pharmaceutical | $ | 1,667,061 | $ | 1,386,966 | $ | 1,365,275 | 20 | % | 2 | % | ||||||||||
Industrial | 829,204 | 707,772 | 719,377 | 17 | % | (2 | %) | |||||||||||||
Academic and governmental | 289,609 | 270,627 | 321,944 | 7 | % | (16 | %) | |||||||||||||
Total net sales | $ | 2,785,874 | $ | 2,365,365 | $ | 2,406,596 | 18 | % | (2 | %) | ||||||||||
Sales to pharmaceutical customers increased 5% and 20% in 2022 and 2021, respectively, with foreign currency translation positively impactingdecreasing pharmaceutical sales by 1%. The increase5% in 2022 and increasing sales to pharmaceutical customers was broad-based with double-digitby 1% in 2021. The sales growth across most major geographies, primarily due to stronger demand for our products and services as a result of our customers continuing to resume laboratory and manufacturing operations. Sales also benefited from the demand from certain pharmaceutical customers involved
Waters Products and Services Net Sales
Net sales for Waters products and services were as follows for the years ended December 31, 2022, 2021 2020 and 20192020 (dollars in thousands):
Year Ended December 31, | % change | |||||||||||||||||||||||||||||||
2021 | % of Total | 2020 | % of Total | 2019 | % of Total | 2021 vs. 2020 | 2020 vs. 2019 | |||||||||||||||||||||||||
Waters instrument systems | $ | 1,089,248 | 44 | % | $ | 890,855 | 42 | % | $ | 963,871 | 45 | % | 22 | % | (8 | %) | ||||||||||||||||
Chemistry consumables | 507,209 | 21 | % | 432,080 | 20 | % | 412,018 | 19 | % | 17 | % | 5 | % | |||||||||||||||||||
Total Waters product sales | 1,596,457 | 65 | % | 1,322,935 | 62 | % | 1,375,889 | 64 | % | 21 | % | (4 | %) | |||||||||||||||||||
Waters service | 876,626 | 35 | % | 794,189 | 38 | % | 761,594 | 36 | % | 10 | % | 4 | % | |||||||||||||||||||
Total Waters net sales | $ | 2,473,083 | 100 | % | $ | 2,117,124 | 100 | % | $ | 2,137,483 | 100 | % | 17 | % | (1 | %) | ||||||||||||||||
Year Ended December 31, | % change | |||||||||||||||||||||||||||||||
2022 | % of Total | 2021 | % of Total | 2020 | % of Total | 2022 vs. 2021 | 2021 vs. 2020 | |||||||||||||||||||||||||
Waters instrument systems | $ | 1,210,456 | 46 | % | $ | 1,089,248 | 44 | % | $ | 890,855 | 42 | % | 11 | % | 22 | % | ||||||||||||||||
Chemistry consumables | 525,399 | 20 | % | 507,209 | 21 | % | 432,080 | 20 | % | 4 | % | 17 | % | |||||||||||||||||||
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Total Waters product sales | 1,735,855 | 66 | % | 1,596,457 | 65 | % | 1,322,935 | 62 | % | 9 | % | 21 | % | |||||||||||||||||||
Waters service | 890,607 | 34 | % | 876,626 | 35 | % | 794,189 | 38 | % | 2 | % | 10 | % | |||||||||||||||||||
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Total Waters net sales | $ | 2,626,462 | 100 | % | $ | 2,473,083 | 100 | % | $ | 2,117,124 | 100 | % | 6 | % | 17 | % | ||||||||||||||||
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Waters products and service sales increased 6% and 17% in 2022 and 2021, and declined 1% in 2020,respectively, with the effect of foreign currency translation increasingdecreasing Waters sales growth by 6% in 2022 and increasing sales growth by 2% and 1% in 2021 and 2020, respectively.2021. Waters instrument system sales (LC and MS technology-based) increasedgrew 11% and 22% in 2022 and 2021, primarily duerespectively, with foreign currency translation lowering sales growth by 5% in 2022. The increase in the Waters instrument system sales in 2022 and 2021 can be attributed to the strong customer demand continuing tofor our existing products as well as the introduction of our new ArcTM HPLC, ACQUITYTM Premier and XEVOTM TQ Absolute products. The increase to
In 2021, the increase in Waters products and service sales was due to customer demand increasing to pre-pandemic levels as
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TA Product and Services Net Sales
Net sales for TA products and services were as follows for the years ended December 31, 2022, 2021 2020 and 20192020 (dollars in thousands):
Year Ended December 31, | % change | |||||||||||||||||||||||||||||||
2021 | % of Total | 2020 | % of Total | 2019 | % of Total | 2021 vs. 2020 | 2020 vs. 2019 | |||||||||||||||||||||||||
TA instrument systems | $ | 225,613 | 72 | % | $ | 174,398 | 70 | % | $ | 191,300 | 71 | % | 29 | % | (9 | %) | ||||||||||||||||
TA service | 87,178 | 28 | % | 73,843 | 30 | % | 77,813 | 29 | % | 18 | % | (5 | %) | |||||||||||||||||||
Total TA net sales | $ | 312,791 | 100 | % | $ | 248,241 | 100 | % | $ | 269,113 | 100 | % | 26 | % | (8 | %) | ||||||||||||||||
Year Ended December 31, | % change | |||||||||||||||||||||||||||||||
2022 | % of Total | 2021 | % of Total | 2020 | % of Total | 2022 vs. 2021 | 2021 vs. 2020 | |||||||||||||||||||||||||
TA instrument systems | $ | 252,314 | 73 | % | $ | 225,613 | 72 | % | $ | 174,398 | 70 | % | 12 | % | 29 | % | ||||||||||||||||
TA service | 93,180 | 27 | % | 87,178 | 28 | % | 73,843 | 30 | % | 7 | % | 18 | % | |||||||||||||||||||
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Total TA net sales | 345,494 | 100 | % | 312,791 | 100 | % | 248,241 | 100 | % | 10 | % | 26 | % | |||||||||||||||||||
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TA instrument system and service sales growth in 2022 and 2021 was broad-based across allmost major geographies increasing 10% and 26%, and wasrespectively. These increases were primarily driven by strongerstrong customer demand as a result offor our customers continuing to resume laboratorythermal analysis instruments and manufacturing operations. In 2021, theservices. The increase in TA instrument systemsystems and TA service sales in 2022 was primarilydriven by strength in China and the Americas, while the increase in 2021 was driven by strength in all major regions. TheIn 2021, the increase in TA products and service sales was attributablealso due to customers continuingcustomer demand increasing to resume their operations after the restrictions caused
Cost of Sales
Cost of sales increased 15%8% in 2022 as compared to 2021, primarily due to the increase in sales volumes during the year as well as an increase in electronic component and freight inflationary costs. In 2021, cost of sales increased 15% as compared to 2020, primarily due to the increase in sales volumes during the year, the reinstatement in 2021 of expenses that had been reduced as a result of the
Cost of sales is affected by many factors, including, but not limited to, foreign currency translation, product mix, product costs of instrument systems and amortization of software platforms. At current foreign currency exchange rates, the Company expects foreign currency translation to decrease sales and gross profit during 2022.
Selling and Administrative Expenses
Selling and administrative expenses increased 5% and 13% in 2022 and 4% in 2021, and 2020, respectively. The increase in selling and administrative expenses in 2022 can be attributed to higher salary merit and variable incentive compensation costs due to an increase in the number of employees. The increase in selling and administrative expenses in 2021 as compared to 2020 can be attributed to the higher salary merit and variable incentive compensation costs as well as the impact of the reinstatement of salary reductions, furloughs and reductions in2020. The increase in selling and administrative expenses in 2020 can be attributed toas a result of the salary merit and incentive compensation increases along with the severance-related costs in connection with a reduction in workforce and lease-termination and exit costs. Severance and lease termination and exit costs were $27 million and $10 million in 2020 and 2019, respectively. Offsetting these increases in selling and administrative expenses were $70 million of savings in 2020, which
As a percentage of net sales, selling and administrative expenses were 22.5%22.1%, 22.5% and 23.4% for 2022, 2021, and 22.2% for 2021, 2020, and 2019, respectively.
Research and Development Expenses
Research and development expenses increased 5% and 20% in 2022 and 2021, and decreased 2% in 2020.respectively. The increase in research and development expenses in 2022 was impacted by additional headcount, merit compensation and costs associated with new products and the development of new technology initiativesinitiatives. The impact of foreign currency exchange decreased expenses by 3% and 1% in 2022 and 2021, respectively.
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Acquired In-Process Research & Development
In 2022, the Company completed an asset acquisition in which the CDMS technology assets of 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, we anticipate that it will extend the capabilities of our mass spectrometry portfolio for a broader set of applications, and as wellsuch, the cost of this technology asset has been accounted for as the reinstatement of
Asset Impairments
During 2020, due to a shift in strategic priorities, the Company recorded a
Other Income (Expense), Net
In 2022, the Company sold equity investments for $10 million in cash and recorded gains on the sales of approximately $7 million in other income (expense), net on the statement of operations. The Company also incurred $6 million in losses on equity investments within other income (expense), net on the statement of operations.
In 2021, the Company executed a settlement agreement to resolve patent infringement litigation with Bruker Corporation and Bruker Daltronik GmbH regarding their timsTOF product line. In connection with the settlement, the Company is entitled to receive $10 million in guaranteed payments, including minimum royalty payments, which were recognized within other income in our consolidated statement of operations.payments. In 2021, the Company also recorded an unrealized gain of $10 million due to an observable change in the fair value of an existing investment that the Company does not have the ability to exercise significant influence over.
Interest Expense, net
Net
Provision for 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%, 19% and 17%, respectively, as of December 31, 2021.2022. The Company entered intohas a new Development and Expansion Incentive in Singapore that provides a concessionary income tax rate of 5% on certain types of income for the period of 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 thesethe concessionary income tax rates rather than the statutory tax rate to income arising from qualifying activities in Singapore increased the
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The Company’s effective tax rate for the years ended December 31, 2022, 2021 and 2020 was 15.5%, 14.1% and 14.6%, respectively. The increase in the Company’s effective tax rate in 2022 can primarily be attributed to the impact of the change in the U.S. tax law that now requires research and development expenditures to be capitalized and amortized. This change in tax law increased the Company’s 2022 effective tax rate, through the Global Intangible Low-Taxed Income (“GILTI”) provision, by approximately 1.5%. The remaining differences in the effective tax rate are primarily attributed to differences in the proportionate amounts of pre-tax income recognized in jurisdictions with different effective tax rates 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, a $10 million provision related to the Global Intangible
The 2020 effective tax rate differed from the U.S. federal statutory tax rate primarily due to the jurisdictional mix of earnings, a $13 million provision related to the GILTI tax and a tax benefit of $7 million on stock-based compensation.
Liquidity and Capital Resources
Condensed Consolidated Statements of Cash Flows (in thousands):
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Net income | $ | 692,843 | $ | 521,571 | $ | 592,198 | ||||||
Depreciation and amortization | 131,680 | 125,361 | 105,296 | |||||||||
Stock-based compensation | 29,918 | 36,865 | 38,577 | |||||||||
Deferred income taxes | 16,633 | (2,693 | ) | 9,620 | ||||||||
Asset impairments | — | 6,945 | — | |||||||||
Observable unrealized gain on investment | (9,707 | ) | — | — | ||||||||
Change in accounts receivable | (62,448 | ) | 37,467 | (22,195 | ) | |||||||
Change in inventories | (67,250 | ) | 18,940 | (31,854 | ) | |||||||
Change in accounts payable and other current liabilities | 46,110 | 140,598 | 9,784 | |||||||||
Change in deferred revenue and customer advances | 37,845 | 11,073 | 12,189 | |||||||||
Effect of the 2017 Tax Cuts and Jobs Act | — | — | (3,229 | ) | ||||||||
Other changes | (68,350 | ) | (105,620 | ) | (67,299 | ) | ||||||
Net cash provided by operating activities | 747,274 | 790,507 | 643,087 | |||||||||
Net cash (used in) provided by investing activities | (231,630 | ) | (264,094 | ) | 768,802 | |||||||
Net cash used in financing activities | (438,275 | ) | (440,502 | ) | (1,872,678 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (12,830 | ) | 15,069 | 224 | ||||||||
Increase (decrease) in cash and cash equivalents | $ | 64,539 | $ | 100,980 | $ | (460,565 | ) | |||||
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Net income | $ | 707,755 | $ | 692,843 | $ | 521,571 | ||||||
Depreciation and amortization | 130,423 | 131,680 | 125,361 | |||||||||
Stock-based compensation | 42,564 | 29,918 | 36,865 | |||||||||
Deferred income taxes | (31,988 | ) | 16,633 | (2,693 | ) | |||||||
Asset impairments | — | — | 6,945 | |||||||||
Observable unrealized gain on investment | — | (9,707 | ) | — | ||||||||
Acquired in-process research and development and other non-cash items | 10,003 | — | — | |||||||||
Change in accounts receivable | (137,874 | ) | (62,448 | ) | 37,467 | |||||||
Change in inventories | (101,902 | ) | (67,250 | ) | 18,940 | |||||||
Change in accounts payable and other current liabilities | 60,984 | 46,110 | 140,598 | |||||||||
Change in deferred revenue and customer advances | 12,862 | 37,845 | 11,073 | |||||||||
Other changes | (81,166 | ) | (68,350 | ) | (105,620 | ) | ||||||
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Net cash provided by operating activities | 611,661 | 747,274 | 790,507 | |||||||||
Net cash used in investing activities | (107,967 | ) | (231,630 | ) | (264,094 | ) | ||||||
Net cash used in financing activities | (509,633 | ) | (438,275 | ) | (440,502 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (14,766 | ) | (12,830 | ) | 15,069 | |||||||
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(Decrease) increase in cash and cash equivalents | $ | (20,705 | ) | $ | 64,539 | $ | 100,980 | |||||
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Cash Flow Provided Byfrom Operating Activities
Net cash provided by operating activities was $612 million, $747 million and $791 million in 2022, 2021 and $643 million2020, respectively. The decrease in 2021, 20202022 operating cash flow was primarily a result of higher inventory levels, slower cash collections and 2019, respectively.higher incentive compensation payments in 2022 compared to 2021. The changes within net cash provided by operating activities include the following significant changes in the sources and uses of net cash provided by operating activities, aside from the changes in net income:
The changes in accounts receivable were primarily attributable to the increase in sales volumes as well as the timing of sales and the timing of payments made by customers.customers and timing of sales. Days sales outstanding was 77 days at December 31, 2022, 66 days at December 31, 2021 and 70 days at December 31, 2020 and 77 days at December 31, 2019.2020.
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The increase in inventory in 2021 can primarily be attributed to higher sales volumes and thematerial costs as well as an increase in safety stock levels to help mitigate logistic andany future supply chain issues. The change in inventory in 2020 compared to 2019 is a result of the Company’s efforts to reduce its inventory levels during the
• | The changes in accounts payable and other current liabilities were a result of the timing of payments to vendors, as well as the annual payment of management incentive compensation. In addition, the changes in 2022, 2021 and 2020 each included $38 million |
Under the 2017 Tax Act, the Company is required to make a U.S. federal tax payment of approximately $72 million in 2023 to tax authorities in connection with the Company’s estimated 2017remaining transition tax reform liability. In addition,liabilities of $289 million. The remainder of the transition tax liability is required to be paid in 2021, the change was impacted by the normalizationannual installments of $96 million and $121 million in 2024 and 2025, respectively.
Net cash provided from deferred revenue and customer advances results from annual increases in new service contracts as a higher installed base of customers renew annual service contracts.
Other changes were attributable to variation in the timing of various provisions, expenditures, prepaid income taxes and accruals in other current assets, other assets and other liabilities and an income tax payment related to the 2017 Tax Act. In addition,liabilities.
Cash Used in 2019, the Company made $11 million of contributions to certain defined benefit pension plans.
Net cash used in investing activities totaled $108 million, $232 million and $264 million in 2022, 2021 and 2020, respectively, while net cash provided by investing activities was $769 million in 2019.respectively. Additions to fixed assets and capitalized software were $176 million, $161 million and $172 million in December 31, 2022, 2021 and $164 million in 2021, 2020, and 2019, respectively. The cash flows from investing activities in 2022, 2021 also includedand 2020 include $32 million, $49 million and $70 million, respectively, of capital expenditures related to the major expansion of the Company’s precision chemistry consumable operations in the United States. The Company has incurred costs of $200$232 million on this facility through the end of 2021,2022 and anticipates spending approximately $50$20 million to complete this new state-of-the-art facility in 2022.
During 2022, 2021 2020 and 2019,2020, the Company purchased $11 million, $280 million $26 million and $37$26 million of investments, respectively. During 2021, 2020 and 2019,respectively, while $78 million, $218 million and $21 million and $1.0 billion of investments matured, respectively.
In 2022, the Company paid $5 million for the CDMS technology and intellectual property right asset from Megadalton, and the Company is required to make an additional $4 million of guaranteed payments at various dates in the future through 2029. The total purchase price of approximately $10 million was accounted for as Acquired In-Process Research and Development and expensed as part of costs and operating expenses in the statement of operations in 2022.
In January 2020, the company entered into a definitive agreement to acquire Andrew Alliance, an innovator in specialty laboratory automation technology, including software and robotics for approximately $80 million in cash. The Company had an equity investment in Andrew Alliance that was valued at $4 million and included as part of the total consideration. This acquisition did not have a material effect on the Company’s sales and expenses in 2020.
In December 2020, the company entered into a definitive agreement to acquire ISS, a provider of clinical laboratory software systems, for $4 million in cash. This acquisition did not have a material effect on the Company’s sales and expenses in 2020.
There were no business acquisitions in 2022 and 2021.
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In 2022, the Company received $10 million in proceeds and made $1 million of investments in certain equity investments. In 2021 and 2019.
On September 17, 2021,February 14, 2023, the Company entered into an amendedagreement to acquire all issued and restatedoutstanding equity interests of Wyatt Technology for $1.4 billion in cash at closing, subject to customary adjustments. Wyatt Technology is a pioneer in innovative light scattering and field-flow fractionation instruments, software, accessories and services. The Company will finance this acquisition through cash on its balance sheet and existing borrowing capacity that is available on its revolving credit facility. The agreement contains certain customary termination rights, including the right of the sellers to terminate this transaction if it has not been completed by June 14, 2023, subject to automatic extension to August 14, 2023 if certain regulatory approvals are not obtained by such date. If this were to occur, the Company would be required to pay the sellers a one-time fee in the amount of $15 million if the agreement is validly terminated and not consummated in accordance with the closing conditions set forth in the agreement. This transaction is expected to close in the second quarter of 2023, subject to regulatory approvals and other customary closing conditions.
Cash Used in Financing Activities
The Company entered into a credit agreement (the “2021 Credit Agreement”), which amendedin September 2021 governing the Company’s existing credit agreement entered into in 2017 (the “2017 Credit Agreement”). The 2021 Credit Agreement provides for afive-year, $1.8 billion revolving facility (the “2021 Credit Facility”) and converted the $300 million term loan under the 2017 Credit Agreement into part of the new revolving facility.that matures in September 2026. As of December 31, 2021, the 2021 Credit Facility had a total of $210 million outstanding. As of December 31, 2020, the revolving credit facility and the term loan governed by the 2017 Credit Agreement had a total of $100 million and $300 million, respectively, outstanding. The 2021 Credit Facility matures on September 17, 2026 and requires no scheduled prepayments before that date.
As of December 31, 2021, the Company had a total amount available to borrow under the 2017 Credit Agreement of $1.6 billion after outstanding letters of credit. As of December 31, 2021, the Company was in compliance with all debt covenants.
In January 2019, the Company’s Board of Directors authorized the Company to repurchase up to $4 billion of its outstanding common stock over a
The Company received $43 million, $56 million $66 million and $54$66 million of proceeds from the exercise of stock options and the purchase of shares pursuant to the Company’s employee stock purchase plan induring 2022, 2021 and 2020, and 2019, respectively.
The Company had cash, cash equivalents and investments of $569$481 million as of December 31, 2021.2022. The majority of the Company’s cash and cash equivalents are generated from foreign operations, with $440$472 million held by foreign subsidiaries at December 31, 2021,2022, of which $298$336 million was held in currencies other than U.S. dollars.
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As of December 31, 2021,2022, the Company’s material cash requirements include the following contractual and other obligations:
Long-term debt.
Interest on Senior Unsecured Notes.
2017 Tax Act liabilities.
Operating Leases.
Long-term Software Contract Commitments.
Management believes, as of the date of this report, that the Company’s financial position, along with expected future cash flows from earnings based on historical trends and the ability to raise funds from external sources and the borrowing capacity from existing, committed credit facilities, will be sufficient to service debt and fund working capital and capital spending requirements, authorized share repurchase amounts and potential acquisitions for at least the next twelve months.
Critical Accounting Policies and Estimates
Summary
The preparation of consolidated financial statements 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. Critical accounting policies are those that are central to the presentation of the Company’s financial condition and results of operations that require management to make estimates about matters that are highly uncertain and that would have a material impact on the Company’s results of operations given changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that reasonably could have been used in the current period. On an ongoing basis, the Company evaluates its policies and estimates. The Company bases its estimates on historical experience and on various other assumptions that are
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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. In substantially all of the Company’s arrangements, title of the product transfers at shipping point and, as a result, the Company determined control transfers at the point of shipment. In more limited cases, there are destination-based shipping terms and, thus, control is deemed to transfer when the products arrive at the customer site. 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 instrument systemsproduct 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
Service revenue includes (i) service and software maintenance contracts and (ii) 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 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.
The Company’s deferred revenue liabilities at December 31, 20212022 of $274$285 million on the consolidated balance sheets consist of the obligation on instrument service contractscontract obligations 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.
Loss Provision on Inventory
The Company values all of its inventories at the lower of cost or net realizable value on a
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Long-Lived Assets, Intangible Assets and Goodwill
The Company assesses thegoodwill for impairment of identifiable intangibles, long-lived assetsannually and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important which could trigger impairment include but are not limited to, the following:
Net intangible assets and long-lived assets amounted to $227 million and $582 million, respectively, as of December 31, 2022. The factorscompany reviews definite-lived intangible assets for impairment when indication of potential impairment exists, such as a significant underperformance relative to historical or projected future operating results, significant negative industry or economic trends or significant changes or developments in strategic technological collaborations or legal matters. When the Company determines that could cause a material goodwillthe carrying value of an individual intangible asset or long-lived asset may not be recoverable based upon the existence of one or more of the above indicators, an estimate of undiscounted future cash flows produced by that intangible asset or long-lived asset, including its eventual residual value, is compared to the carrying value to determine whether impairment charge inexists. Estimates of future cash flows require assumptions related to revenue growth and other factors. In the future include, butevent that such cash flows are not limitedexpected to be sufficient to recover the following:
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 evaluateevaluates 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.
Uncertain Tax Positions
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. At December 31, 2021,2022, the Company had unrecognized tax benefits, excluding interest and penalties, of $29 million.
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The Company has a new 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. This new incentive has similar requirements for business spending targets, attaining and sustaining employment targets and performance of certain research and manufacturing activities as previous agreements. 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. These milestones include the following types of objectives: reaching and maintaining annual revenue and business spending targets; meeting capital expenditures targets; attaining and sustaining employment targets; and establishing a local research and development and service center. The Company determined that it was more likely than not to realize the tax exemption in Singapore and, accordingly, did not recognize any reserves for unrecognized tax benefits on its balance sheet related to this exemption. In the event that any of the milestone targets were not met, the Company would not be entitled to the tax exemption on income earned in Singapore and all the tax benefits previously recognized would be reversed, resulting in the recognition of income tax expense equal to the statutory tax of 17% on income earned during that period.
Litigation
As described in Part I, Item 3, Legal Proceedings, of this
Unrecognized Compensation Costs | Weighted-Average Life in Years | |||||||
Stock options | $ | 20 | 3.5 | |||||
Restricted stock units | 44 | 3.3 | ||||||
Performance stock units | 12 | 2.0 | ||||||
Total | $ | 76 | 3.1 | |||||
Business Combinations and Asset Acquisitions
As of the accounting standards for business combinations. Theacquisition date the results of each acquisitionthe acquiree 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
The Company also acquires intellectual property through licensing arrangements. These arrangements often require upfront payments and may include additional milestone or royalty payments, contingent upon certain future events. IPR&D acquired in an asset acquisition (as opposed to a business combination) is expensed immediately unless there is an alternative future use. Subsequent payments made for the achievement of milestones are evaluated to determine whether they have an alternative future use or should be expensed. Payments made to third parties subsequent to commercialization are capitalized and amortized over the remaining useful life of the related asset, and are classified as intangible assets.
Recent Accounting Standard Changes and Developments
Information regarding recent accounting standard changes and developments is incorporated by reference from Part II, Item 8, Financial Statements and Supplementary Data, of this document and should be considered an integral part of this Item 7. See Note 2 in the Notes to the Consolidated Financial Statements for recently adopted and issued accounting standards.
44
Item 7A:
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
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-denominatedeuro-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 these 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,euro, Japanese yen, British pound, Mexican peso and Brazilian real.
Interest Rate Cross-Currency Swap Agreements
As of December 31, 2021,2022, the Company had three-year interest rate cross-currency swap derivative agreements with a notional value of $230$585 million to hedge the variability in the movement of foreign currency exchange rates on a portion of its Euro-denominatedeuro-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 income in stockholders’ equity (deficit) 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.
The Company’s foreign currency exchange contracts and interest rate cross-currency swap agreements included in the consolidated balance sheets are classified as follows (in thousands):
December 31, 2022 | December 31, 2021 | |||||||||||||||
Notional Value | Fair Value | Notional Value | Fair Value | |||||||||||||
Foreign currency exchange contracts: | ||||||||||||||||
Other current assets | $ | 42,047 | $ | 231 | $ | 55,309 | $ | 504 | ||||||||
Other current liabilities | $ | 13,450 | $ | 98 | $ | 9,000 | $ | 195 | ||||||||
Interest rate cross-currency swap agreements: | ||||||||||||||||
Other assets | $ | 400,000 | $ | 19,163 | $ | — | $ | — | ||||||||
Other liabilities | $ | 185,000 | $ | 4,783 | $ | 230,000 | $ | 5,363 | ||||||||
Accumulated other comprehensive income (loss) | $ | 10,026 | $ | (15,944 | ) |
45
December 31, 2021 | December 31, 2020 | |||||||||||||||
Notional Value | Fair Value | Notional Value | Fair Value | |||||||||||||
Foreign currency exchange contracts: | ||||||||||||||||
Other current assets | $ | 55,309 | $ | 504 | $ | 66,690 | $ | 836 | ||||||||
Other current liabilities | $ | 9,000 | $ | 195 | $ | 20,000 | $ | 185 | ||||||||
Interest rate cross-currency swap agreements: | ||||||||||||||||
Other liabilities | $ | 230,000 | $ | 5,363 | $ | 560,000 | $ | 44,996 | ||||||||
Accumulated other comprehensive loss | $ | 15,944 | $ | 44,996 |
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 and interest rate cross-currency swap agreements (in thousands):
Financial Statement Classification | ||||||||||||||
Year Ended December 31, | ||||||||||||||
2021 | 2020 | 2019 | ||||||||||||
Foreign currency exchange contracts: | ||||||||||||||
Realized (losses) gains on closed contracts | Cost of sales | $ | (1,973 | ) | $ | 1,444 | $ | (3,552 | ) | |||||
Unrealized (losses) gains on open contracts | Cost of sales | (343 | ) | 1,663 | (1,292 | ) | ||||||||
Cumulative net pre-tax (losses) gains | Cost of sales | $ | (2,316 | ) | $ | 3,107 | $ | (4,844 | ) | |||||
Interest rate cross-currency swap agreements: | ||||||||||||||
Interest earned | Interest income | $ | 11,084 | $ | 15,296 | $ | 11,709 | |||||||
Unrealized gains (losses) on open contracts | Accumulated other comprehensive loss | $ | 29,052 | $ | (44,996 | ) | $ | 4,485 |
Financial Statement Classification | ||||||||||||||
Year Ended December 31, | ||||||||||||||
2022 | 2021 | 2020 | ||||||||||||
Foreign currency exchange contracts: | ||||||||||||||
Realized (losses) gains on closed contracts | Cost of sales | $ | (3,855 | ) | $ | (1,973 | ) | $ | 1,444 | |||||
Unrealized (losses) gains on open contracts | Cost of sales | (176 | ) | (343 | ) | 1,663 | ||||||||
|
|
|
|
|
| |||||||||
Cumulative net pre-tax (losses) gains | Cost of sales | $ | (4,031 | ) | $ | (2,316 | ) | $ | 3,107 | |||||
|
|
|
|
|
| |||||||||
Interest rate cross-currency swap agreements: | ||||||||||||||
Interest earned | Interest income | $ | 8,872 | $ | 11,084 | $ | 15,296 | |||||||
Unrealized gains (losses) on open contracts | Accumulated other comprehensive loss | $ | 25,969 | $ | 29,052 | $ | (44,996 | ) |
Assuming a hypothetical adverse change of 10% in
The Company’s cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. The Company’s 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. As of December 31, 2021,2022, the carrying value of the Company’s cash and cash equivalents approximated fair value.
The Company is exposed to the risk of interest rate fluctuations from the investments of cash generated from operations. Investments with maturities greater than 90 days are classified as investments, and are held primarily in U.S. dollar-denominated treasury bills and commercial paper, bank deposits and corporate debt securities. As of December 31, 2021,2022, the Company estimates that a hypothetical adverse change of 100 basis points across all maturities would not have a material effect on the fair market value of its portfolio.
The Company is also exposed to the risk of exchange rate fluctuations. 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, 2022 and 2021, $472 million out of $481 million and 2020, $440 million out of $569 million and $364 million out of $443 million, respectively, of the Company’s total cash, cash equivalents and investments were held by foreign subsidiaries. In addition, $336 million out of $481 million and $298 million out of $569 million and $254 million out of $443 million of cash, cash equivalents and investments were held in currencies other than the U.S. dollar at December 31, 20212022 and 2020,2021, respectively. As of December 31, 2021,2022, the Company had no holdings in auction rate securities or commercial paper issued by structured investment vehicles.
Assuming a hypothetical adverse change of 10% in
46
/s/PricewaterhouseCoopers LLP |
Boston, Massachusetts |
February |
December 31, | ||||||||
2021 | 2020 | |||||||
(In thousands, except per share data) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 501,234 | $ | 436,695 | ||||
Investments | 68,051 | 6,451 | ||||||
Accounts receivable, net | 612,648 | 573,316 | ||||||
Inventories | 356,095 | 304,281 | ||||||
Other current assets | 90,914 | 80,290 | ||||||
Total current assets | 1,628,942 | 1,401,033 | ||||||
Property, plant and equipment, net | 547,913 | 494,003 | ||||||
Intangible assets, net | 242,401 | 258,645 | ||||||
Goodwill | 437,865 | 444,362 | ||||||
Operating lease assets | 84,734 | 93,252 | ||||||
Other assets | 153,077 | 148,625 | ||||||
Total assets | $ | 3,094,932 | $ | 2,839,920 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Notes payable and debt | $ | 0 | $ | 150,000 | ||||
Accounts payable | 96,799 | 72,212 | ||||||
Accrued employee compensation | 101,192 | 72,166 | ||||||
Deferred revenue and customer advances | 227,561 | 198,240 | ||||||
Current operating lease liabilities | 27,906 | 27,764 | ||||||
Accrued income taxes | 61,278 | 76,558 | ||||||
Accrued warranty | 10,718 | 10,950 | ||||||
Other current liabilities | 155,054 | 197,093 | ||||||
Total current liabilities | 680,508 | 804,983 | ||||||
Long-term liabilities: | ||||||||
Long-term debt | 1,513,870 | 1,206,515 | ||||||
Long-term portion of retirement benefits | 64,027 | 72,620 | ||||||
Long-term income tax liabilities | 319,547 | 357,493 | ||||||
Long-term operating lease liabilities | 59,623 | 68,197 | ||||||
Other long-term liabilities | 89,803 | 97,968 | ||||||
Total long-term liabilities | 2,046,870 | 1,802,793 | ||||||
Total liabilities | 2,727,378 | 2,607,776 | ||||||
Commitments and contingencies (Notes 6, 9, 10, 11, 12, 13 and 17) | 0 | 0 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, par value $0.01 per share, 5,000 shares authorized, NaN issued at December 31, 2021 and December 31, 2020 | 0 | 0 | ||||||
Common stock, par value $0.01 per share, 400,000 shares authorized, 162,084 and 161,666 shares issued, 60,728 and 62,309 shares outstanding at December 31, 2021 and December 31, 2020, respectively | 1,621 | 1,617 | ||||||
Additional paid-in capital | 2,114,880 | 2,029,465 | ||||||
Retained earnings | 7,800,832 | 7,107,989 | ||||||
Treasury stock, at cost, 101,356 and 99,357 shares at December 31, 2021 and December 31, 2020, respectively | (9,437,914 | ) | (8,788,984 | ) | ||||
Accumulated other comprehensive loss | (111,865 | ) | (117,943 | ) | ||||
Total stockholders’ equity | 367,554 | 232,144 | ||||||
Total liabilities and stockholders’ equity | $ | 3,094,932 | $ | 2,839,920 | ||||
December 31, | ||||||||
2022 | 2021 | |||||||
(In thousands, except per share data) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 480,529 | $ | 501,234 | ||||
Investments | 862 | 68,051 | ||||||
Accounts receivable, net | 722,892 | 612,648 | ||||||
Inventories | 455,710 | 356,095 | ||||||
Other current assets | 103,910 | 90,914 | ||||||
Total current assets | 1,763,903 | 1,628,942 | ||||||
Property, plant and equipment, net | 582,217 | 547,913 | ||||||
Intangible assets, net | 227,399 | 242,401 | ||||||
Goodwill | 430,328 | 437,865 | ||||||
Operating lease assets | 86,506 | 84,734 | ||||||
Other assets | 191,100 | 153,077 | ||||||
Total assets | $ | 3,281,453 | $ | 3,094,932 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Notes payable and debt | $ | 50,000 | $ | — | ||||
Accounts payable | 93,302 | 96,799 | ||||||
Accrued employee compensation | 103,300 | 101,192 | ||||||
Deferred revenue and customer advances | 227,908 | 227,561 | ||||||
Current operating lease liabilities | 26,429 | 27,906 | ||||||
Accrued income taxes | 132,545 | 61,278 | ||||||
Accrued warranty | 11,949 | 10,718 | ||||||
Other current liabilities | 140,304 | 155,054 | ||||||
Total current liabilities | 785,737 | 680,508 | ||||||
Long-term liabilities: | ||||||||
Long-term debt | 1,524,878 | 1,513,870 | ||||||
Long-term portion of retirement benefits | 38,203 | 64,027 | ||||||
Long-term income tax liabilities | 248,496 | 319,547 | ||||||
Long-term operating lease liabilities | 62,108 | 59,623 | ||||||
Other long-term liabilities | 117,543 | 89,803 | ||||||
Total long-term liabilities | 1,991,228 | 2,046,870 | ||||||
Total liabilities | 2,776,965 | 2,727,378 | ||||||
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, 2022 and December 31, 2021 | — | — | ||||||
Common stock, par value $0.01 per share, 400,000 shares authorized, 162,425 and 162,084 shares issued, 59,104 and 60,728 shares outstanding at December 31, 2022 and December 31, 2021, respectively | 1,624 | 1,621 | ||||||
Additional paid-in capital | 2,199,824 | 2,114,880 | ||||||
Retained earnings | 8,508,587 | 7,800,832 | ||||||
Treasury stock, at cost, 103,321 and 101,356 shares at December 31, 2022 and December 31, 2021, respectively | (10,063,975 | ) | (9,437,914 | ) | ||||
Accumulated other comprehensive loss | (141,572 | ) | (111,865 | ) | ||||
Total stockholders’ equity | 504,488 | 367,554 | ||||||
Total liabilities and stockholders’ equity | $ | 3,281,453 | $ | 3,094,932 | ||||
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(In thousands, except per share data) | ||||||||||||
Revenues: | ||||||||||||
Product sales | $ | 1,822,070 | $ | 1,497,333 | $ | 1,567,189 | ||||||
Service sales | 963,804 | 868,032 | 839,407 | |||||||||
Total net sales | 2,785,874 | 2,365,365 | 2,406,596 | |||||||||
Costs and operating expenses: | ||||||||||||
Cost of product sales | 752,514 | 638,033 | 642,706 | |||||||||
Cost of service sales | 404,019 | 368,656 | 367,994 | |||||||||
Selling and administrative expenses | 626,968 | 553,698 | 534,791 | |||||||||
Research and development expenses | 168,358 | 140,777 | 142,955 | |||||||||
Purchased intangibles amortization | 7,143 | 10,587 | 9,693 | |||||||||
Asset impairments | 0 | 6,945 | 0 | |||||||||
Litigation provision (Note 11) | 5,165 | 1,180 | 0 | |||||||||
Total costs and operating expenses | 1,964,167 | 1,719,876 | 1,698,139 | |||||||||
Operating income | 821,707 | 645,489 | 708,457 | |||||||||
Other income (expense), net | 17,203 | (1,775 | ) | (3,586 | ) | |||||||
Interest expense | (44,938 | ) | (49,070 | ) | (48,690 | ) | ||||||
Interest income | 12,221 | 16,270 | 22,058 | |||||||||
Income before income taxes | 806,193 | 610,914 | 678,239 | |||||||||
Provision for income taxes | 113,350 | 89,343 | 86,041 | |||||||||
Net income | $ | 692,843 | $ | 521,571 | $ | 592,198 | ||||||
Net income per basic common share | $ | 11.25 | $ | 8.40 | $ | 8.76 | ||||||
Weighted-average number of basic common shares | 61,575 | 62,094 | 67,627 | |||||||||
Net income per diluted common share | $ | 11.17 | $ | 8.36 | $ | 8.69 | ||||||
Weighted-average number of diluted common shares and equivalents | 62,028 | 62,414 | 68,166 |
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
(In thousands, except per share data) | ||||||||||||
Revenues: | ||||||||||||
Product sales | $ | 1,988,169 | $ | 1,822,070 | $ | 1,497,333 | ||||||
Service sales | 983,787 | 963,804 | 868,032 | |||||||||
Total net sales | 2,971,956 | 2,785,874 | 2,365,365 | |||||||||
Costs and operating expenses: | ||||||||||||
Cost of product sales | 836,209 | 752,514 | 638,033 | |||||||||
Cost of service sales | 411,973 | 404,019 | 368,656 | |||||||||
Selling and administrative expenses | 658,026 | 626,968 | 553,698 | |||||||||
Research and development expenses | 176,190 | 168,358 | 140,777 | |||||||||
Purchased intangibles amortization | 6,366 | 7,143 | 10,587 | |||||||||
Asset impairments | — | — | 6,945 | |||||||||
Litigation provision (Note 11) | — | 5,165 | 1,180 | |||||||||
Acquired in-process research and development | 9,797 | — | — | |||||||||
Total costs and operating expenses | 2,098,561 | 1,964,167 | 1,719,876 | |||||||||
Operating income | 873,395 | 821,707 | 645,489 | |||||||||
Other income (expense), net | 2,228 | 17,203 | (1,775 | ) | ||||||||
Interest expense | (48,797 | ) | (44,938 | ) | (49,070 | ) | ||||||
Interest income | 11,020 | 12,221 | 16,270 | |||||||||
Income before income taxes | 837,846 | 806,193 | 610,914 | |||||||||
Provision for income taxes | 130,091 | 113,350 | 89,343 | |||||||||
Net income | $ | 707,755 | $ | 692,843 | $ | 521,571 | ||||||
Net income per basic common share | $ | 11.80 | $ | 11.25 | $ | 8.40 | ||||||
Weighted-average number of basic common shares | 59,985 | 61,575 | 62,094 | |||||||||
Net income per diluted common share | $ | 11.73 | $ | 11.17 | $ | 8.36 | ||||||
Weighted-average number of diluted common shares and equivalents | 60,331 | 62,028 | 62,414 |
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(In thousands) | ||||||||||||
Net income | $ | 692,843 | $ | 521,571 | $ | 592,198 | ||||||
Other comprehensive income (loss): | ||||||||||||
Foreign currency translation | (1,903 | ) | 5,984 | 1,631 | ||||||||
Unrealized (losses) gains on investments before income taxes | (26 | ) | 0 | 3,046 | ||||||||
Income tax benefit (expense) | 6 | 0 | (641 | ) | ||||||||
Unrealized (losses) gains on investments, net of tax | (20 | ) | 0 | 2,405 | ||||||||
Retirement liability adjustment before reclassifications | 9,342 | (6,786 | ) | (9,360 | ) | |||||||
Amounts reclassified to other income (expense), net | 1,167 | 1,389 | 1,979 | |||||||||
Retirement liability adjustment before income taxes | 10,509 | (5,397 | ) | (7,381 | ) | |||||||
Income tax (expense) benefit | (2,508 | ) | 941 | 1,845 | ||||||||
Retirement liability adjustment, net of tax | 8,001 | (4,456 | ) | (5,536 | ) | |||||||
Other comprehensive income (loss) | 6,078 | 1,528 | (1,500 | ) | ||||||||
Comprehensive income | $ | 698,921 | $ | 523,099 | $ | 590,698 | ||||||
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
(In thousands) | ||||||||||||
Net income | $ | 707,755 | $ | 692,843 | $ | 521,571 | ||||||
Other comprehensive (loss) income: | ||||||||||||
Foreign currency translation | (46,135 | ) | (1,903 | ) | 5,984 | |||||||
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 | 20,953 | 9,342 | (6,786 | ) | ||||||||
Amounts reclassified to other income (expense), net | 574 | 1,167 | 1,389 | |||||||||
Retirement liability adjustment before income taxes | 21,527 | 10,509 | (5,397 | ) | ||||||||
Income tax (expense) benefit | (5,119 | ) | (2,508 | ) | 941 | |||||||
Retirement liability adjustment, net of tax | 16,408 | 8,001 | (4,456 | ) | ||||||||
Other comprehensive (loss) income | (29,707 | ) | 6,078 | 1,528 | ||||||||
Comprehensive income | $ | 678,048 | $ | 698,921 | $ | 523,099 | ||||||
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(In thousands) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 692,843 | $ | 521,571 | $ | 592,198 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Stock-based compensation | 29,918 | 36,865 | 38,577 | |||||||||
Deferred income taxes | 16,633 | (2,693 | ) | 9,620 | ||||||||
Depreciation | 71,560 | 68,685 | 53,839 | |||||||||
Amortization of intangibles | 60,120 | 56,676 | 51,457 | |||||||||
Asset impairments | 0 | 6,945 | 0 | |||||||||
Observable unrealized gain o n investment | (9,707 | ) | 0 | 0 | ||||||||
Change in operating assets and liabilities, net of acquisitions: | ||||||||||||
(Increase) decrease in accounts receivable | (62,448 | ) | 37,467 | (22,195 | ) | |||||||
(Increase) decrease in inventories | (67,250 | ) | 18,940 | (31,854 | ) | |||||||
Increase in other current assets | (20,765 | ) | (27,030 | ) | (10,918 | ) | ||||||
Decrease (increase) in other assets | 4,490 | (37,865 | ) | (16,470 | ) | |||||||
Increase in accounts payable and other current liabilities | 46,110 | 140,598 | 9,784 | |||||||||
Increase in deferred revenue and customer advances | 37,845 | 11,073 | 12,189 | |||||||||
Effect of the 2017 Tax Cuts and Jobs Act | 0 | 0 | (3,229 | ) | ||||||||
Decrease in other liabilities | (52,075 | ) | (40,725 | ) | (39,911 | ) | ||||||
Net cash provided by operating activities | 747,274 | 790,507 | 643,087 | |||||||||
Cash flows from investing activities: | ||||||||||||
Additions to property, plant, equipment and software capitalization | (161,266 | ) | (172,384 | ) | (163,823 | ) | ||||||
Asset and business acquisitions, net of cash acquired | 0 | (80,545 | ) | 0 | ||||||||
Investment in unaffiliated company | (1,788 | ) | (6,143 | ) | (8,843 | ) | ||||||
Payments for intellectual property licenses | (7,000 | ) | 0 | 0— | ||||||||
Purchases of investments | (279,660 | ) | (25,884 | ) | (36,951 | ) | ||||||
Maturities and sales of investments | 218,084 | 20,862 | 978,419 | |||||||||
Net cash (used in) provided by investing activities | (231,630 | ) | (264,094 | ) | 768,802 | |||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from debt issuances | 510,000 | 315,000 | 925,670 | |||||||||
Payments on debt | (350,000 | ) | (640,366 | ) | (390,482 | ) | ||||||
Payments of debt issuance costs | (8,537 | ) | 0 | (2,932 | ) | |||||||
Proceeds from stock plans | 55,643 | 66,033 | 53,715 | |||||||||
Purchases of treasury shares | (648,930 | ) | (196,409 | ) | (2,469,258 | ) | ||||||
Proceeds from derivative contracts | 3,549 | 15,240 | 10,609 | |||||||||
Net cash used in financing activities | (438,275 | ) | (440,502 | ) | (1,872,678 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (12,830 | ) | 15,069 | 224 | ||||||||
Increase (decrease) in cash and cash equivalents | 64,539 | 100,980 | (460,565 | ) | ||||||||
Cash and cash equivalents at beginning of period | 436,695 | 335,715 | 796,280 | |||||||||
Cash and cash equivalents at end of period | $ | 501,234 | $ | 436,695 | $ | 335,715 | ||||||
Supplemental cash flow information: | ||||||||||||
Income taxes paid | $ | 153,504 | $ | 97,621 | $ | 87,998 | ||||||
Interest paid | $ | 42,408 | $ | 52,103 | $ | 42,843 |
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
(In thousands) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 707,755 | $ | 692,843 | $ | 521,571 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Stock-based compensation | 42,564 | 29,918 | 36,865 | |||||||||
Deferred income taxes | (31,988 | ) | 16,633 | (2,693 | ) | |||||||
Depreciation | 71,998 | 71,560 | 68,685 | |||||||||
Amortization of intangibles | 58,425 | 60,120 | 56,676 | |||||||||
Asset impairments | — | — | 6,945 | |||||||||
Observable unrealized gain on investment | — | (9,707 | ) | — | ||||||||
In-process research and development and othernon-cash charges | 10,003 | — | — | |||||||||
Change in operating assets and liabilities, net of acquisitions: | ||||||||||||
(Increase) decrease in accounts receivable | (137,874 | ) | (62,448 | ) | 37,467 | |||||||
(Increase) decrease in inventories | (101,902 | ) | (67,250 | ) | 18,940 | |||||||
Increase in other current assets | (23,074 | ) | (20,765 | ) | (27,030 | ) | ||||||
(Increase) decrease in other assets | (5,514 | ) | 4,490 | (37,865 | ) | |||||||
Increase in accounts payable and other current liabilities | 60,984 | 46,110 | 140,598 | |||||||||
Increase in deferred revenue and customer advances | 12,862 | 37,845 | 11,073 | |||||||||
Decrease in other liabilities | (52,578 | ) | (52,075 | ) | (40,725 | ) | ||||||
Net cash provided by operating activities | 611,661 | 747,274 | 790,507 | |||||||||
Cash flows from investing activities: | ||||||||||||
Additions to property, plant, equipment and software capitalization | (175,921 | ) | (161,266 | ) | (172,384 | ) | ||||||
Asset and business acquisitions, net of cash acquired | — | — | (80,545 | ) | ||||||||
Proceeds from (investments in) equity investments, net | 8,903 | (1,788 | ) | (6,143 | ) | |||||||
Payments for intellectual property licenses | (7,535 | ) | (7,000 | ) | — | |||||||
Purchases of investments | (11,407 | ) | (279,660 | ) | (25,884 | ) | ||||||
Maturities and sales of investments | 77,993 | 218,084 | 20,862 | |||||||||
Net cash used in investing activities | (107,967 | ) | (231,630 | ) | (264,094 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from debt issuances | 205,000 | 510,000 | 315,000 | |||||||||
Payments on debt | (145,000 | ) | (350,000 | ) | (640,366 | ) | ||||||
Payments of debt issuance costs | — | (8,537 | ) | — | ||||||||
Proceeds from stock plans | 42,801 | 55,643 | 66,033 | |||||||||
Purchases of treasury shares | (626,061 | ) | (648,930 | ) | (196,409 | ) | ||||||
Proceeds from derivative contracts | 13,627 | 3,549 | 15,240 | |||||||||
Net cash used in financing activities | (509,633 | ) | (438,275 | ) | (440,502 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (14,766 | ) | (12,830 | ) | 15,069 | |||||||
(Decrease) increase in cash and cash equivalents | (20,705 | ) | 64,539 | 100,980 | ||||||||
Cash and cash equivalents at beginning of period | 501,234 | 436,695 | 335,715 | |||||||||
Cash and cash equivalents at end of period | $ | 480,529 | $ | 501,234 | $ | 436,695 | ||||||
Supplemental cash flow information: | ||||||||||||
Income taxes paid | $ | 160,082 | $ | 153,504 | $ | 97,621 | ||||||
Interest paid | $ | 48,083 | $ | 42,408 | $ | 52,103 |
Number of Common Shares | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity (Deficit) | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Balance December 31, 2018 | 160,472 | $ | 1,605 | $ | 1,834,741 | $ | 5,995,205 | $ | (6,146,322 | ) | $ | (117,971 | ) | $ | 1,567,258 | |||||||||||||
Net income | — | — | — | 592,198 | — | — | 592,198 | |||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (1,500 | ) | (1,500 | ) | |||||||||||||||||||
Issuance of common stock for employees: | ||||||||||||||||||||||||||||
Employee Stock Purchase Plan | 43 | — | 7,996 | — | — | — | 7,996 | |||||||||||||||||||||
Stock options exercised | 406 | 4 | 45,715 | — | — | — | 45,719 | |||||||||||||||||||||
Treasury stock | — | — | — | — | (2,466,254 | ) | — | (2,466,254 | ) | |||||||||||||||||||
Stock-based compensation | 109 | 1 | 38,301 | — | — | — | 38,302 | |||||||||||||||||||||
Balance December 31, 2019 | 161,030 | $ | 1,610 | $ | 1,926,753 | $ | 6,587,403 | $ | (8,612,576 | ) | $ | (119,471 | ) | $ | (216,281 | ) | ||||||||||||
Adoption of new accounting pronouncement | — | — | — | (985 | ) | — | — | (985 | ) | |||||||||||||||||||
Net income | — | — | — | 521,571 | — | — | 521,571 | |||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 1,528 | 1,528 | |||||||||||||||||||||
Issuance of common stock for employees: | ||||||||||||||||||||||||||||
Employee Stock Purchase Plan | 43 | — | 7,531 | — | — | — | 7,531 | |||||||||||||||||||||
Stock options exercised | 456 | 5 | 58,497 | — | — | — | 58,502 | |||||||||||||||||||||
Treasury stock | — | — | — | — | (176,408 | ) | — | (176,408 | ) | |||||||||||||||||||
Stock-based compensation | 137 | 2 | 36,684 | — | — | — | 36,686 | |||||||||||||||||||||
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 | |||||||||||||
Number of Common Shares | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity (Deficit) | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Balance December 31, 2019 | 161,030 | $ | 1,610 | $ | 1,926,753 | $ | 6,587,403 | $ | (8,612,576 | ) | $ | (119,471 | ) | $ | (216,281 | ) | ||||||||||||
Adoption of new accounting pronouncement | — | — | — | (985 | ) | — | — | (985 | ) | |||||||||||||||||||
Net income | — | — | — | 521,571 | — | — | 521,571 | |||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 1,528 | 1,528 | |||||||||||||||||||||
Issuance of common stock for employees: | ||||||||||||||||||||||||||||
Employee Stock Purchase Plan | 43 | — | 7,531 | — | — | — | 7,531 | |||||||||||||||||||||
Stock options exercised | 456 | 5 | 58,497 | — | — | — | 58,502 | |||||||||||||||||||||
Treasury stock | — | — | — | — | (176,408 | ) | — | (176,408 | ) | |||||||||||||||||||
Stock-based compensation | 137 | 2 | 36,684 | — | — | — | 36,686 | |||||||||||||||||||||
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 | |||||||||||||
Balance at Beginning | CECL Adoption | Additions | Deductions | Balance at End of | ||||||||||||||||
Allowance for Credit Losses | ||||||||||||||||||||
December 31, 2022 | $ | 13,228 | $ | — | $ | 6,509 | $ | (5,426 | ) | $ | 14,311 | |||||||||
December 31, 2021 | $ | 14,381 | $ | — | $ | 5,380 | $ | (6,533 | ) | $ | 13,228 | |||||||||
December 31, 2020 | $ | 9,560 | $ | 985 | $ | 9,051 | $ | (5,215 | ) | $ | 14,381 |
Balance at Beginning | Impact of CECL Adoption | Additions | Deductions | Balance at End of Period | ||||||||||||||||
Allowance for Credit Losses | ||||||||||||||||||||
December 31, 2021 | $ | 14,381 | $ | 0 | $ | 5,380 | $ | (6,533 | ) | $ | 13,228 | |||||||||
December 31, 2020 | $ | 9,560 | $ | 985 | $ | 9,051 | $ | (5,215 | ) | $ | 14,381 | |||||||||
December 31, 2019 | $ | 7,663 | $ | — | $ | 4,701 | $ | (2,804 | ) | $ | 9,560 |
Total at December 31, 2021 | Quoted Prices in Active Markets for Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
U.S. Treasury securities | $ | 13,917 | $ | — | $ | 13,917 | $ | — | ||||||||
Corporate debt securities | 39,121 | — | 39,121 | — | ||||||||||||
Time deposits | 19,030 | — | 19,030 | — | ||||||||||||
Waters 401(k) Restoration Plan assets | 38,729 | 38,729 | 0 | — | ||||||||||||
Foreign currency exchange contracts | 504 | — | 504 | — | ||||||||||||
Total | $ | 111,301 | $ | 38,729 | $ | 72,572 | $ | 0 | ||||||||
Liabilities: | ||||||||||||||||
Contingent consideration | $ | 1,347 | $ | — | $ | — | $ | 1,347 | ||||||||
Foreign currency exchange contracts | 195 | — | 195 | — | ||||||||||||
Interest rate cross-currency swap agreements | 5,363 | — | 5,363 | — | ||||||||||||
Total | $ | 6,905 | $ | 0 | $ | 5,558 | $ | 1,347 | ||||||||
Total at December 31, 2020 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||||||||||
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 | $ | 6,451 | $ | — | $ | 6,451 | $ | — | $ | 862 | $ | — | $ | 862 | $ | — | ||||||||||||||||
Waters 401(k) Restoration Plan assets | 38,988 | 38,988 | — | — | 25,532 | 25,532 | — | — | ||||||||||||||||||||||||
Foreign currency exchange contracts | 836 | — | 836 | — | 231 | — | 231 | — | ||||||||||||||||||||||||
Interest rate cross-currency swap agreements | 19,163 | — | 19,163 | — | ||||||||||||||||||||||||||||
Total | $ | 46,275 | $ | 38,988 | $ | 7,287 | $ | — | $ | 45,788 | $ | 25,532 | $ | 20,256 | $ | — | ||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Contingent consideration | $ | 1,185 | $ | — | $ | — | $ | 1,185 | $ | 1,509 | $ | — | $ | — | $ | 1,509 | ||||||||||||||||
Foreign currency exchange contracts | 185 | — | 185 | — | 98 | — | 98 | — | ||||||||||||||||||||||||
Interest rate cross-currency swap agreements | 44,996 | — | 44,996 | — | 4,783 | — | 4,783 | — | ||||||||||||||||||||||||
Total | $ | 46,366 | $ | — | $ | 45,181 | $ | 1,185 | $ | 6,390 | $ | — | $ | 4,881 | $ | 1,509 | ||||||||||||||||
Total at December 31, 2021 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
U.S. Treasury securities | $ | 13,917 | $ | — | $ | 13,917 | $ | — | ||||||||
Corporate debt securities | 39,121 | — | 39,121 | — | ||||||||||||
Time deposits | 19,030 | — | 19,030 | — | ||||||||||||
Waters 401(k) Restoration Plan assets | 38,729 | 38,729 | — | — | ||||||||||||
Foreign currency exchange contracts | 504 | — | 504 | — | ||||||||||||
Total | $ | 111,301 | $ | 38,729 | $ | 72,572 | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Contingent consideration | $ | 1,347 | $ | — | $ | — | $ | 1,347 | ||||||||
Foreign currency exchange contracts | 195 | — | 195 | — | ||||||||||||
Interest rate cross-currency swap agreements | 5,363 | — | 5,363 | — | ||||||||||||
Total | $ | 6,905 | $ | — | $ | 5,558 | $ | 1,347 | ||||||||
December 31, 2021 | December 31, 2020 | |||||||||||||||
Notional Value | Fair Value | Notional Value | Fair Value | |||||||||||||
Foreign currency exchange contracts: | ||||||||||||||||
Other current assets | $ | 55,309 | $ | 504 | $ | 66,690 | $ | 836 | ||||||||
Other current liabilities | $ | 9,000 | $ | 195 | $ | 20,000 | $ | 185 | ||||||||
Interest rate cross-currency swap agreements: | ||||||||||||||||
Other liabilities | $ | 230,000 | $ | 5,363 | $ | 560,000 | $ | 44,996 | ||||||||
Accumulated other comprehensive loss | $ | 15,944 | $ | 44,996 |
December 31, 2022 | December 31, 2021 | |||||||||||||||
Notional Value | Fair Value | Notional Value | Fair Value | |||||||||||||
Foreign currency exchange contracts: | ||||||||||||||||
Other current assets | $ | 42,047 | $ | 231 | $ | 55,309 | $ | 504 | ||||||||
Other current liabilities | $ | 13,450 | $ | 98 | $ | 9,000 | $ | 195 | ||||||||
Interest rate cross-currency swap agreements: | ||||||||||||||||
Other assets | $ | 400,000 | $ | 19,163 | $ | — | $ | — | ||||||||
Other liabilities | $ | 185,000 | $ | 4,783 | $ | 230,000 | $ | 5,363 | ||||||||
Accumulated other comprehensive income (loss) | $ | 10,026 | $ | (15,944 | ) |
Financial Statement Classification | Year Ended December 31, | |||||||||||||
2022 | 2021 | 2020 | ||||||||||||
Foreign currency exchange contracts: | ||||||||||||||
Realized (losses) gains | ||||||||||||||
on closed contracts | Cost of sales | $ | (3,855 | ) | $ | (1,973 | ) | $ | 1,444 | |||||
Unrealized (losses) gains on open contracts | Cost of sales | (176 | ) | (343 | ) | 1,663 | ||||||||
Cumulative net pre-tax (losses) gains | Cost of sales | $ | (4,031 | ) | $ | (2,316 | ) | $ | 3,107 | |||||
Interest rate cross-currency swap agreements: | ||||||||||||||
Interest earned | Interest income | $ | 8,872 | $ | 11,084 | $ | 15,296 | |||||||
Unrealized gains (losses) on open contracts | Accumulated other comprehensive loss | $ | 25,969 | $ | 29,052 | $ | (44,996 | ) |
Financial Statement Classification | Year Ended December 31, | |||||||||||||
2021 | 2020 | 2019 | ||||||||||||
Foreign currency exchange contracts: | ||||||||||||||
Realized (losses) gains on closed contracts | Cost of sales | $ | (1,973 | ) | $ | 1,444 | $ | (3,552 | ) | |||||
Unrealized (losses) gains on open contracts | Cost of sales | (343 | ) | 1,663 | (1,292 | ) | ||||||||
Cumulative net pre-tax (losses) gains | Cost of sales | $ | (2,316 | ) | $ | 3,107 | $ | (4,844 | ) | |||||
Interest rate cross-currency swap agreements: | ||||||||||||||
Interest earned | Interest income | $ | 11,084 | $ | 15,296 | $ | 11,709 | |||||||
Unrealized gains (losses) on open contracts | Accumulated other | |||||||||||||
comprehensive loss | $ | 29,052 | $ | (44,996 | ) | $ | 4,485 |
Balance at Beginning of Period | Accruals for Warranties | Settlements Made | Balance at End of Period | |||||||||||||
Accrued warranty liability: | ||||||||||||||||
December 31, 2021 | $ | 10,950 | $ | 8,799 | $ | (9,031 | ) | $ | 10,718 | |||||||
December 31, 2020 | $ | 11,964 | $ | 7,909 | $ | (8,923 | ) | $ | 10,950 | |||||||
December 31, 2019 | $ | 12,300 | $ | 7,540 | $ | (7,876 | ) | $ | 11,964 |
Balance at Beginning of Period | Accruals for Warranties | Settlements Made | Balance at End of Period | |||||||||||||
Accrued warranty liability: | ||||||||||||||||
December 31, 2022 | $ | 10,718 | $ | 10,067 | $ | (8,836 | ) | $ | 11,949 | |||||||
December 31, 2021 | $ | 10,950 | $ | 8,799 | $ | (9,031 | ) | $ | 10,718 | |||||||
December 31, 2020 | $ | 11,964 | $ | 7,909 | $ | (8,923 | ) | $ | 10,950 |
December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Balance at the beginning of the period | $ | 273,598 | $ | 239,759 | $ | 213,695 | ||||||
Recognition of revenue included in balance at beginning of the period | (230,615 | ) | (216,920 | ) | (198,209 | ) | ||||||
Revenue deferred during the period, net of revenue recognized | 242,192 | 250,759 | 224,273 | |||||||||
Balance at the end of the period | $ | 285,175 | $ | 273,598 | $ | 239,759 | ||||||
December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Balance at the beginning of the period | $ | 239,759 | $ | 213,695 | $ | 204,257 | ||||||
Recognition of revenue included in balance at beginning of the period | (216,920 | ) | (198,209 | ) | (176,981 | ) | ||||||
Revenue deferred during the period, net of revenue recognized | 250,759 | 224,273 | 186,419 | |||||||||
Balance at the end of the period | $ | 273,598 | $ | 239,759 | $ | 213,695 | ||||||
December 31, 2021 | ||||
Deferred revenue and customer advances expected to be recognized in: | ||||
One year or less | $ | 227,561 | ||
13-24 months | 26,840 | |||
25 months and beyond | 19,197 | |||
Total | $ | 273,598 | ||
December 31, | ||||
Deferred revenue and customer advances expected to be recognized in: | ||||
One year or less | $ | 227,908 | ||
13-24 months | 34,018 | |||
25 months and beyond | 23,249 | |||
Total | $ | 285,175 | ||
December 31, 2022 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gain | Loss | Value | |||||||||||||
Time deposits | 862 | — | — | 862 | ||||||||||||
Total | $ | 862 | $ | — | $ | — | $ | 862 | ||||||||
Amounts included in: | ||||||||||||||||
Investments | 862 | — | — | 862 | ||||||||||||
Total | $ | 862 | $ | — | $ | — | $ | 862 | ||||||||
December 31, 2021 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gain | Loss | Value | |||||||||||||
U.S. Treasury securities | $ | 13,929 | $ | 0 | $ | (12 | ) | $ | 13,917 | |||||||
Corporate debt securities | 39,135 | 0 | (14 | ) | 39,121 | |||||||||||
Time deposits | 19,030 | — | — | 19,030 | ||||||||||||
Total | $ | 72,094 | $ | 0 | $ | (26 | ) | $ | 72,068 | |||||||
Amounts included in: | ||||||||||||||||
Cash equivalents | $ | 4,017 | $ | — | $ | — | $ | 4,017 | ||||||||
Investments | 68,077 | 0 | (26 | ) | 68,051 | |||||||||||
Total | $ | 72,094 | $ | 0 | $ | (26 | ) | $ | 72,068 | |||||||
December 31, 2020 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gain | Loss | Value | |||||||||||||
Time deposits | 6,451 | — | — | 6,451 | ||||||||||||
Total | $ | 6,451 | $ | — | $ | — | $ | 6,451 | ||||||||
Amounts included in: | ||||||||||||||||
Investments | 6,451 | — | — | 6,451 | ||||||||||||
Total | $ | 6,451 | $ | — | $ | — | $ | 6,451 | ||||||||
December 31, 2021 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gain | Loss | Value | |||||||||||||
U.S. Treasury securities | $ | 13,929 | $ | — | $ | (12 | ) | $ | 13,917 | |||||||
Corporate debt securities | 39,135 | — | (14 | ) | 39,121 | |||||||||||
Time deposits | 19,030 | — | — | 19,030 | ||||||||||||
Total | $ | 72,094 | $ | — | $ | (26 | ) | $ | 72,068 | |||||||
Amounts included in: | ||||||||||||||||
Cash equivalents | $ | 4,017 | $ | — | $ | — | $ | 4,017 | ||||||||
Investments | 68,077 | — | (26 | ) | 68,051 | |||||||||||
Total | $ | 72,094 | $ | — | $ | (26 | ) | $ | 72,068 | |||||||
December 31, 2021 | December 31, 2020 | December 31, | December 31, | |||||||||||||
Due in one year or less | $ | 71,066 | $ | 6,451 | $ | 862 | $ | 71,066 | ||||||||
Due after one year through three years | 1,002 | — | — | 1,002 | ||||||||||||
Total | $ | 72,068 | $ | 6,451 | $ | 862 | $ | 72,068 | ||||||||
December 31, 2021 | December 31, 2020 | |||||||
Raw materials | $ | 165,240 | $ | 133,490 | ||||
Work in progress | 19,726 | 18,678 | ||||||
Finished goods | 171,129 | 152,113 | ||||||
Total inventories | $ | 356,095 | $ | 304,281 | ||||
December 31, 2022 | December 31, 2021 | |||||||
Raw materials | $ | 205,760 | $ | 165,240 | ||||
Work in progress | 19,899 | 19,726 | ||||||
Finished goods | 230,051 | 171,129 | ||||||
Total inventories | $ | 455,710 | $ | 356,095 | ||||
December 31, | ||||||||
2021 | 2020 | |||||||
Land and land improvements | $ | 36,428 | $ | 36,884 | ||||
Buildings and leasehold improvements | 446,061 | 376,705 | ||||||
Production and other equipment | 621,792 | 588,625 | ||||||
Construction in progress | 117,148 | 125,925 | ||||||
Total property, plant and equipment | 1,221,429 | 1,128,139 | ||||||
Less: accumulated depreciation and amortization | (673,516 | ) | (634,136 | ) | ||||
Property, plant and equipment, net | $ | 547,913 | $ | 494,003 | ||||
December 31, | ||||||||
2022 | 2021 | |||||||
Land and land improvements | $ | 34,663 | $ | 36,428 | ||||
Buildings and leasehold improvements | 444,994 | 446,061 | ||||||
Production and other equipment | 640,460 | 621,792 | ||||||
Construction in progress | 164,222 | 117,148 | ||||||
Total property, plant and equipment | 1,284,339 | 1,221,429 | ||||||
Less: accumulated depreciation and amortization | (702,122 | ) | (673,516 | ) | ||||
Property, plant and equipment, net | $ | 582,217 | $ | 547,913 | ||||
Cash | $ | 713 | ||
Accounts receivable and current other assets | 806 | |||
Inventory | 669 | |||
Prepaid and other assets | 611 | |||
Property, plant and equipment, net | 757 | |||
Operating lease assets | 847 | |||
Intangible assets | 6,960 | |||
Goodwill | 71,632 | |||
Total assets acquired | 82,995 | |||
Accrued expenses and other liabilities | 2,093 | |||
Total consideration | 80,902 | |||
Fair value of minority investment | 3,525 | |||
Cash consideration paid | $ | 77,377 | ||
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Weighted- Average Amortization Period | Gross Carrying Amount | Accumulated Amortization | Weighted- Average Amortization Period | |||||||||||||||||||
Capitalized software | $ | 589,604 | $ | 441,414 | 5 years | $ | 575,658 | $ | 420,862 | 5 years | ||||||||||||||
Purchased intangibles | 197,805 | 166,735 | 11 years | 201,302 | 163,752 | 11 years | ||||||||||||||||||
Trademarks | 9,680 | — | — | 9,680 | — | — | ||||||||||||||||||
Licenses | 14,070 | 6,729 | 6 years | 12,635 | 6,199 | 7 years | ||||||||||||||||||
Patents and other intangibles | 104,139 | 73,021 | 8 years | 102,353 | 68,414 | 8 years | ||||||||||||||||||
Total | $ | 915,298 | $ | 687,899 | 7 years | $ | 901,628 | $ | 659,227 | 7 years | ||||||||||||||
December 31, 2021 | December 31, 2020 | |||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Weighted- Average Amortization Period | Gross Carrying Amount | Accumulated Amortization | Weighted- Average Amortization Period | |||||||||||||||||||
Capitalized software | $ | 575,658 | $ | 420,862 | 5 years | $ | 584,452 | $ | 409,847 | 5 years | ||||||||||||||
Purchased intangibles | 201,302 | 163,752 | 11 years | 205,585 | 160,342 | 11 years | ||||||||||||||||||
Trademarks | 9,680 | — | — | 9,680 | — | — | ||||||||||||||||||
Licenses | 12,635 | 6,199 | 7 years | 5,923 | 5,697 | 6 years | ||||||||||||||||||
Patents and other intangibles | 102,353 | 68,414 | 8 years | 90,699 | 61,808 | 8 years | ||||||||||||||||||
Total | $ | 901,628 | $ | 659,227 | 7 years | $ | 896,339 | $ | 637,694 | 7 years | ||||||||||||||
Senior Unsecured Notes | Term | Interest Rate | Face Value (in millions) | Maturity Date | ||||||||||||
Series N | 5 years | 1.68 | % | $ | 100 | March 2026 | ||||||||||
Series O | 10 years | 2.25 | % | $ | 400 | March 2031 |
December 31, 2021 | December 31, 2020 | |||||||
Senior unsecured notes - Series E - 3.97%, due March 2021 | 0 | 50,000 | ||||||
Senior unsecured notes - Series F - 3.40%, due June 2021 | 0 | 100,000 | ||||||
Total notes payable and debt, current | 0 | 150,000 | ||||||
Senior unsecured notes - Series G - 3.92%, due June 2024 | 50,000 | 50,000 | ||||||
Senior unsecured notes - Series H - floating rate*, due June 2024 | 50,000 | 50,000 | ||||||
Senior unsecured notes - Series I - 3.13%, due May 2023 | 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 | — | ||||||
Senior unsecured notes - Series O - 2.25%, due March 2031 | 400,000 | — | ||||||
Credit agreement | 210,000 | 400,000 | ||||||
Unamortized debt issuance costs | (6,130 | ) | (3,485 | ) | ||||
Total long-term debt | 1,513,870 | 1,206,515 | ||||||
Total debt | $ | 1,513,870 | $ | 1,356,515 | ||||
December 31, 2022 | December 31, 2021 | |||||||
Senior unsecured notes - Series I - 3.13%, due May 2023 | $ | 50,000 | $ | — | ||||
Total notes payable and debt, current | 50,000 | — | ||||||
Senior unsecured notes - Series G - 3.92%, due June 2024 | 50,000 | 50,000 | ||||||
Senior unsecured notes - Series H - floating rate*, due June 2024 | 50,000 | 50,000 | ||||||
Senior unsecured notes - Series I - 3.13%, due May 2023 | — | 50,000 | ||||||
Senior unsecured notes - Series K - 3.44%, due May 2026 | 160,000 | 160,000 | ||||||
Senior unsecured notes - Series L - 3.31%, due | 200,000 | 200,000 | ||||||
Senior unsecured notes - Series M - 3.53%, due | 300,000 | 300,000 | ||||||
Senior unsecured notes - Series N - 1.68%, due March | 100,000 | 100,000 | ||||||
Senior unsecured notes - Series O - 2.25%, due March | 400,000 | 400,000 | ||||||
Credit agreement | 270,000 | 210,000 | ||||||
Unamortized debt issuance costs | (5,122 | ) | (6,130 | ) | ||||
Total long-term debt | 1,524,878 | 1,513,870 | ||||||
Total debt | $ | $ | ||||||
* | Series H senior unsecured notes bear interest at a 3-month LIBOR for that floating rate interest period plus 1.25%. |
Total | ||||
2022 | $ | 0 | ||
2023 | 50,000 | |||
2024 | 100,000 | |||
2025 | 0 | |||
2026 | 670,000 | |||
Thereafter | 700,000 | |||
Total | $ | 1,520,000 | ||
Total | ||||
2023 | $ | 50,000 | ||
2024 | 100,000 | |||
2025 | — | |||
2026 | 730,000 | |||
2027 | — | |||
Thereafter | 700,000 | |||
Total | $ | 1,580,000 | ||
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
The components of income before income taxes are as follows: | ||||||||||||
Domestic | $ | 144,410 | $ | 75,193 | $ | 97,325 | ||||||
Foreign | 661,783 | 535,721 | 580,914 | |||||||||
Total | $ | 806,193 | $ | 610,914 | $ | 678,239 | ||||||
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
The components of income before income taxes are as follows: | ||||||||||||
Domestic | $ | 133,816 | $ | 144,410 | $ | 75,193 | ||||||
Foreign | 704,030 | 661,783 | 535,721 | |||||||||
Total | $ | 837,846 | $ | 806,193 | $ | 610,914 | ||||||
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
The components of the income tax provision were as follows: | ||||||||||||
Federal | $ | 16,302 | $ | 28,385 | $ | 7,009 | ||||||
State | 3,691 | 4,243 | 3,329 | |||||||||
Foreign | 76,724 | 59,408 | 66,083 | |||||||||
Total current tax provision | $ | 96,717 | $ | 92,036 | $ | 76,421 | ||||||
Federal | $ | 10,491 | $ | (8,244 | ) | $ | 6,913 | |||||
State | 345 | (506 | ) | 1,253 | ||||||||
Foreign | 5,797 | 6,057 | 1,454 | |||||||||
Total deferred tax provision | 16,633 | (2,693 | ) | 9,620 | ||||||||
Total provision | $ | 113,350 | $ | 89,343 | $ | 86,041 | ||||||
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
The components of the income tax provision were as follows: | ||||||||||||
Federal | $ | 62,153 | $ | 16,302 | $ | 28,385 | ||||||
State | 8,025 | 3,691 | 4,243 | |||||||||
Foreign | 91,901 | 76,724 | 59,408 | |||||||||
Total current tax provision | $ | 162,079 | $ | 96,717 | $ | 92,036 | ||||||
Federal | $ | (26,551 | ) | $ | 10,491 | $ | (8,244 | ) | ||||
State | (4,420 | ) | 345 | (506 | ) | |||||||
Foreign | (1,017 | ) | 5,797 | 6,057 | ||||||||
Total deferred tax provision | (31,988 | ) | 16,633 | (2,693 | ) | |||||||
Total provision | $ | 130,091 | $ | 113,350 | $ | 89,343 | ||||||
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Federal tax computed at U.S. statutory income tax rate | $ | 169,300 | $ | 128,292 | $ | 142,430 | ||||||
Foreign currency exchange impact on distributed earnings | — | — | (3,229 | ) | ||||||||
GILTI, net of foreign tax credits | 10,476 | 13,319 | 10,523 | |||||||||
State income tax, net of federal income tax benefit | 4,036 | 2,415 | 3,459 | |||||||||
Net effect of foreign operations | (54,566 | ) | (48,962 | ) | (52,727 | ) | ||||||
Effect of stock-based compensation | (6,682 | ) | (6,798 | ) | (9,211 | ) | ||||||
Other, net | (9,214 | ) | 1,077 | (5,204 | ) | |||||||
�� | ||||||||||||
Provision for income taxes | $ | 113,350 | $ | 89,343 | $ | 86,041 | ||||||
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Federal tax computed at U.S. statutory income tax rate | $ | 175,948 | $ | 169,300 | $ | 128,292 | ||||||
GILTI, net of foreign tax credits | 17,812 | 10,476 | 13,319 | |||||||||
State income tax, net of federal income tax benefit | 3,605 | 4,036 | 2,415 | |||||||||
Net effect of foreign operations | (54,549 | ) | (54,566 | ) | (48,962 | ) | ||||||
Effect of stock-based compensation | (7,341 | ) | (6,682 | ) | (6,798 | ) | ||||||
Other, net | (5,384 | ) | (9,214 | ) | 1,077 | |||||||
Provision for income taxes | $ | 130,091 | $ | 113,350 | $ | 89,343 | ||||||
December 31, | ||||||||
2021 | 2020 | |||||||
Deferred tax assets: | ||||||||
Net operating losses and credits | $ | 55,813 | $ | 61,962 | ||||
Depreciation | 0 | 5,701 | ||||||
Operating leases | 19,288 | 24,317 | ||||||
Amortization | 2,316 | 2,377 | ||||||
Stock-based compensation | 8,074 | 7,773 | ||||||
Deferred compensation | 30,105 | 27,754 | ||||||
Deferred revenue | 10,997 | 11,341 | ||||||
Revaluation of equity investments and licenses | 3,083 | 4,492 | ||||||
Inventory | 5,405 | 5,060 | ||||||
Accrued liabilities and reserves | 6,675 | 10,639 | ||||||
Unrealized foreign currency gain/loss | 2,266 | 0 | ||||||
Other | 6,713 | 3,483 | ||||||
Total deferred tax assets | 150,735 | 164,899 | ||||||
Valuation allowance | (58,834 | ) | (60,101 | ) | ||||
Deferred tax assets, net of valuation allowance | 91,901 | 104,798 | ||||||
Deferred tax liabilities: | ||||||||
Capitalized software | (24,357 | ) | (23,748 | ) | ||||
Operating leases | (19,251 | ) | (24,314 | ) | ||||
Indefinite-lived intangibles | (15,534 | ) | (14,973 | ) | ||||
Unrealized foreign currency gain/loss | 0 | (10,819 | ) | |||||
Depreciation | (3,481 | ) | 0 | |||||
Deferred tax liability on foreign earnings | (17,283 | ) | (17,277 | ) | ||||
Total deferred tax liabilities | (79,906 | ) | (91,131 | ) | ||||
Net deferred tax assets | $ | 11,995 | $ | 13,667 | ||||
December 31, | ||||||||
2022 | 2021 | |||||||
Deferred tax assets: | ||||||||
Net operating losses and credits | $ | 51,945 | $ | 55,813 | ||||
Depreciation | 18 | — | ||||||
Operating leases | 19,771 | 19,288 | ||||||
Amortization | 2,713 | 2,316 | ||||||
Stock-based compensation | 7,947 | 8,074 | ||||||
Deferred compensation | 23,488 | 30,105 | ||||||
Deferred revenue | 13,555 | 10,997 | ||||||
Revaluation of equity investments and licenses | 23 | 3,083 | ||||||
Inventory | 6,463 | 5,405 | ||||||
Accrued liabilities and reserves | 4,815 | 6,675 | ||||||
Unrealized foreign currency gain/loss | 1,858 | 2,266 | ||||||
Capitalized Section 174 Expenditures | 34,234 | — | ||||||
Other | 1,098 | 6,713 | ||||||
Total deferred tax assets | 167,928 | 150,735 | ||||||
Valuation allowance | (54,300 | ) | (58,834 | ) | ||||
Deferred tax assets, net of valuation allowance | 113,628 | 91,901 | ||||||
Deferred tax liabilities: | ||||||||
Capitalized software | (25,429 | ) | (24,357 | ) | ||||
Operating leases | (19,543 | ) | (19,251 | ) | ||||
Indefinite-lived intangibles | (16,057 | ) | (15,534 | ) | ||||
Depreciation | — | (3,481 | ) | |||||
Deferred tax liability on foreign earnings | (18,677 | ) | (17,283 | ) | ||||
Total deferred tax liabilities | (79,706 | ) | (79,906 | ) | ||||
Net deferred tax assets | $ | 33,922 | $ | 11,995 | ||||
2021 | 2020 | 2019 | ||||||||||
Balance at the beginning of the period | $ | 28,666 | $ | 27,790 | $ | 26,108 | ||||||
Net reductions for settlement of tax audits | (1,300 | ) | (399 | ) | — | |||||||
Net reductions for lapse of statutes taken during the period | (433 | ) | (684 | ) | (261 | ) | ||||||
Net additions for tax positions taken during the current period | 1,759 | 1,959 | 1,943 | |||||||||
Balance at the end of the period | $ | 28,692 | $ | 28,666 | $ | 27,790 | ||||||
2022 | 2021 | 2020 | ||||||||||
Balance at the beginning of the period | $ | 28,692 | $ | 28,666 | $ | 27,790 | ||||||
Net reductions for settlement of tax audits | — | (1,300 | ) | (399 | ) | |||||||
Net reductions for lapse of statutes taken during the period | (818 | ) | (433 | ) | (684 | ) | ||||||
Net additions for tax positions taken during the current period | 1,145 | 1,759 | 1,959 | |||||||||
Balance at the end of the period | $ | 29,019 | $ | 28,692 | $ | 28,666 | ||||||
Balance at Beginning of Period | Charged to Provision for Income Taxes* | Other** | Balance at End of Period | |||||||||||||
Valuation allowance for deferred tax assets: | ||||||||||||||||
2021 | $ | 60,101 | $ | 2,919 | $ | (4,186 | ) | $ | 58,834 | |||||||
2020 | $ | 51,221 | $ | 1,137 | $ | 7,743 | $ | 60,101 | ||||||||
2019 | $ | 53,893 | $ | (1,242 | ) | $ | (1,430 | ) | $ | 51,221 |
Balance at Beginning of Period | Charged to Provision for Income Taxes* | Other** | Balance at End of Period | |||||||||||||
Valuation allowance for deferred tax assets: | ||||||||||||||||
2022 | $ | 58,834 | $ | (1,647 | ) | $ | (2,887 | ) | $ | 54,300 | ||||||
2021 | $ | 60,101 | $ | 2,919 | $ | (4,186 | ) | $ | 58,834 | |||||||
2020 | $ | 51,221 | $ | 1,137 | $ | 7,743 | $ | 60,101 | ||||||||
* | 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 |
December 31, | ||||||||||
Financial Statement Classification | 2021 | 2020 | ||||||||
Assets: | ||||||||||
Property operating lease assets | Operating lease assets | $ | 55,774 | $ | 62,374 | |||||
Automobile operating lease assets | Operating lease assets | 28,236 | 29,694 | |||||||
Equipment operating lease assets | Operating lease assets | 724 | 1,184 | |||||||
Total lease assets | $ | 84,734 | $ | 93,252 | ||||||
Liabilities: | ||||||||||
Current operating lease liabilities | Current operating lease liabilities | $ | 27,906 | $ | 27,764 | |||||
Long-term operating lease liabilities | Long-term operating lease liabilities | 59,623 | 68,197 | |||||||
Total lease liabilities | $ | 87,529 | $ | 95,961 | ||||||
December 31, | ||||||||||
Financial Statement Classification | 2022 | 2021 | ||||||||
Assets: | ||||||||||
Property operating lease assets | Operating lease assets | $ | 54,930 | $ | 55,774 | |||||
Automobile operating lease assets | Operating lease assets | 30,582 | 28,236 | |||||||
Equipment operating lease assets | Operating lease assets | 994 | 724 | |||||||
Total lease assets | $ | 86,506 | $ | 84,734 | ||||||
Liabilities: | ||||||||||
Current operating lease liabilities | Current operating lease liabilities | $ | 26,429 | $ | 27,906 | |||||
Long-term operating lease liabilities | Long-term operating lease liabilities | 62,108 | 59,623 | |||||||
Total lease liabilities | $ | 88,537 | $ | 87,529 | ||||||
2022 | $ | 29,311 | ||
2023 | 20,763 | |||
2024 | 14,688 | |||
2025 | 10,642 | |||
2026 | 7,107 | |||
2027 and thereafter | 11,072 | |||
Total future minimum lease payments | 93,583 | |||
Less: amount of lease payments representing interest | (6,054 | ) | ||
Present value of future minimum lease payments | 87,529 | |||
Less: current operating lease liabilities | (27,906 | ) | ||
Long-term operating lease liabilities | $ | 59,623 | ||
2023 | $ | 28,494 | ||
2024 | 23,472 | |||
2025 | 14,121 | |||
2026 | 12,933 | |||
2027 | 6,970 | |||
2028 and thereafter | 8,921 | |||
Total future minimum lease payments | 94,911 | |||
Less: amount of lease payments representing interest | (6,374 | ) | ||
Present value of future minimum lease payments | 88,537 | |||
Less: current operating lease liabilities | (26,429 | ) | ||
Long-term operating lease liabilities | $ | 62,108 | ||
2021 | 2020 | 2019 | ||||||||||
Cost of sales | $ | 2,500 | $ | 2,485 | $ | 2,271 | ||||||
Selling and administrative expenses | 21,727 | 29,711 | 30,907 | |||||||||
Research and development expenses | 5,691 | 4,669 | 5,399 | |||||||||
Total stock-based compensation | $ | 29,918 | $ | 36,865 | $ | 38,577 | ||||||
2022 | 2021 | 2020 | ||||||||||
Cost of sales | $ | 3,498 | $ | 2,500 | $ | 2,485 | ||||||
Selling and administrative expenses | 32,192 | 21,727 | 29,711 | |||||||||
Research and development expenses | 6,874 | 5,691 | 4,669 | |||||||||
Total stock-based compensation | $ | 42,564 | $ | 29,918 | $ | 36,865 | ||||||
Options Issued and Significant Weighted-Average Assumptions Used to Estimate Option Fair Values | 2021 | 2020 | 2019 | |||||||||
Options issued in thousands | 160 | 267 | 146 | |||||||||
Risk-free interest rate | 0.8 | % | 1.2 | % | 2.5 | % | ||||||
Expected life in years | 6 | 6 | 5 | |||||||||
Expected volatility | 32.4 | % | 27.8 | % | 24.5 | % | ||||||
Expected dividends | 0 | — | — |
Options Issued and Significant Weighted-Average Assumptions Used to Estimate Option Fair Values | 2022 | 2021 | 2020 | |||||||||
Options issued in thousands | 138 | 160 | 267 | |||||||||
Risk-free interest rate | 2.0 | % | 0.8 | % | 1.2 | % | ||||||
Expected life in years | 6 | 6 | 6 | |||||||||
Expected volatility | 30.7 | % | 32.4 | % | 27.8 | % | ||||||
Expected dividends | — | — | — |
Weighted-Average Exercise Price and Fair Value of Options on the Date of Grant | 2021 | 2020 | 2019 | |||||||||
Exercise price | $ | 281.33 | $ | 215.12 | $ | 230.37 | ||||||
Fair value | $ | 91.48 | $ | 63.14 | $ | 61.75 |
Weighted-Average Exercise Price and Fair Value of Options on the Date of Grant | 2022 | 2021 | 2020 | |||||||||
Exercise price | $ | 321.15 | $ | 281.33 | $ | 215.12 | ||||||
Fair value | $ | 107.99 | $ | 91.48 | $ | 63.14 |
Number of Shares | Exercise Price per Share | Weighted- Average Exercise Price per Share | ||||||||||||||||||
Outstanding at December 31, 2020 | 1,067 | $ | 75.94 | to | $ | 238.52 | $ | 179.59 | ||||||||||||
Granted | 160 | $ | 250.15 | to | $ | 371.64 | $ | 281.33 | ||||||||||||
Exercised | (282 | ) | $ | 75.94 | to | $ | 238.52 | $ | 165.29 | |||||||||||
Canceled | (254 | ) | $ | 139.51 | to | $ | 280.80 | $ | 198.05 | |||||||||||
Outstanding at December 31, 2021 | 691 | $ | 88.71 | to | $ | 371.64 | $ | 202.24 | ||||||||||||
Number of Shares | Exercise Price per Share | Weighted- Average Exercise Price per Share | ||||||||||||||||||
Outstanding at December 31, 2021 | 691 | $ | 88.71 | to | $ | 371.64 | $ | 202.24 | ||||||||||||
Granted | 138 | $ | 270.49 | to | $ | 364.59 | $ | 321.15 | ||||||||||||
Exercised | (192 | ) | $ | 88.71 | to | $ | 279.90 | $ | 164.76 | |||||||||||
Canceled | (40 | ) | $ | 188.63 | to | $ | 364.59 | $ | 252.25 | |||||||||||
Outstanding at December 31, 2022 | 597 | $ | 99.22 | to | $ | 371.64 | $ | 238.43 | ||||||||||||
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 | |||||||||||||||
$88.71 to $194.2 5 | 232 | $ | 135.77 | 4.3 | 213 | $ | 133.11 | |||||||||||||
$194.2 6 to $224.37 | 232 | $ | 206.51 | 7.4 | 84 | $ | 204.73 | |||||||||||||
$224.38 to $371.64 | 227 | $ | 265.81 | 8.4 | 34 | $ | 237.24 | |||||||||||||
Total | 691 | $ | 202.24 | 6.7 | 331 | $ | 162.09 | |||||||||||||
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 | |||||||||||||||
$99.22 to $208.47 | 213 | $ | 168.12 | 4.7 | 157 | $ | 155.59 | |||||||||||||
$208.48 to $279.90 | 191 | $ | 243.60 | 7.3 | 82 | $ | 236.58 | |||||||||||||
$279.91 to $371.64 | 193 | $ | 310.91 | 9.0 | 11 | $ | 294.55 | |||||||||||||
Total | 597 | $ | 238.43 | 6.9 | 250 | $ | 188.21 | |||||||||||||
Shares | Weighted-Average Grant Date Fair Value per Share | |||||||
Unvested at December 31, 2020 | 271 | $ | 202.00 | |||||
Granted | 88 | $ | 283.10 | |||||
Vested | (88 | ) | $ | 184.60 | ||||
Forfeited | (26 | ) | $ | 224.71 | ||||
Unvested at December 31, 2021 | 245 | $ | 234.97 | |||||
Shares | Weighted-Average Grant Date Fair Value per Share | |||||||
Unvested at December 31, 2021 | 245 | $ | 234.97 | |||||
Granted | 98 | $ | 322.99 | |||||
Vested | (77 | ) | $ | 219.49 | ||||
Forfeited | (28 | ) | $ | 257.26 | ||||
Unvested at December 31, 2022 | 238 | $ | 273.60 | |||||
Performance Stock Units Issued and Significant Assumptions Used to Estimate Fair Values | 2021 | 2020 | 2019 | |||||||||
Performance stock units issued in thousands | 41 | 58 | 13 | |||||||||
Risk-free interest rate | 0.2 | % | 1.3 | % | 2.4 | % | ||||||
Expected life in years | 2.9 | 2.9 | 2.8 | |||||||||
Expected volatility | 38.7 | % | 25.1 | % | 23.5 | % | ||||||
Average volatility of peer companies | 34.7 | % | 26.1 | % | 26.2 | % | ||||||
Correlation Coefficient | 45.8 | % | 36.6 | % | 34.2 | % | ||||||
Expected dividends | 0 | — | — |
Performance Stock Units Issued and Significant Assumptions Used to Estimate Fair Values | 2022 | 2021 | 2020 | |||||||||
Performance stock units issued in thousands | 40 | 41 | 58 | |||||||||
Risk-free interest rate | 1.6 | % | 0.2 | % | 1.3 | % | ||||||
Expected life in years | 2.9 | 2.9 | 2.9 | |||||||||
Expected volatility | 25.4 | % | 38.7 | % | 25.1 | % | ||||||
Average volatility of peer companies | 34.5 | % | 34.7 | % | 26.1 | % | ||||||
Correlation Coefficient | 43.0 | % | 45.8 | % | 36.6 | % | ||||||
Expected dividends | — | — | — |
Shares | Weighted-Average Fair Value per Share | |||||||
Unvested at December 31, 2020 | 95 | $ | 230.36 | |||||
Granted | 41 | $ | 315.98 | |||||
Vested | (5 | ) | $ | 242.94 | ||||
Forfeited | (44 | ) | $ | 199.22 | ||||
Unvested at December 31, 2021 | 87 | $ | 285.73 | |||||
Shares | Weighted-Average Fair Value per Share | |||||||
Unvested at December 31, 2021 | 87 | $ | 285.73 | |||||
Granted | 40 | $ | 313.21 | |||||
Vested | (24 | ) | $ | 308.71 | ||||
Forfeited | 8 | $ | 381.32 | |||||
Unvested at December 31, 2022 | 111 | $ | 297.55 | |||||
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 | |||||||
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 | |||||||
Year Ended December 31, 2020 | ||||||||||||
Net Income | Weighted-Average Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
Net income per basic common share | $ | 521,571 | 62,094 | $ | 8.40 | |||||||
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities | — | 320 | (0.04 | ) | ||||||||
Net income per diluted common share | $ | 521,571 | 62,414 | $ | 8.36 | |||||||
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 | — | 453 | (0.08 | ) | ||||||||
Net income per diluted common share | $ | 692,843 | 62,028 | $ | 11.17 | |||||||
Year Ended December 31, 2019 | ||||||||||||
Net Income | Weighted-Average Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
Net income per basic common share | $ | 592,198 | 67,627 | $ | 8.76 | |||||||
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities | — | 539 | (0.07 | ) | ||||||||
Net income per diluted common share | $ | 592,198 | 68,166 | $ | 8.69 | |||||||
Year Ended December 31, 2020 | ||||||||||||
Net Income | Weighted-Average Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
Net income per basic common share | $ | 521,571 | 62,094 | $ | 8.40 | |||||||
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities | — | 320 | (0.04 | ) | ||||||||
Net income per diluted common share | $ | 521,571 | 62,414 | $ | 8.36 | |||||||
Currency Translation | Unrealized Gain (Loss) on Retirement Plans | Unrealized Loss on Investments | Accumulated Other Comprehensive Loss | |||||||||||||
Balance at December 31, 2019 | $ | (104,066 | ) | $ | (15,405 | ) | $ | 0 | $ | (119,471 | ) | |||||
Other comprehensive income (loss), net of tax | 5,984 | (4,456 | ) | 0 | 1,528 | |||||||||||
Balance at December 31, 2020 | $ | (98,082 | ) | $ | (19,861 | ) | $ | 0 | $ | (117,943 | ) | |||||
Other comprehensive income (loss), net of tax | (1,903 | ) | 8,001 | (20 | ) | 6,078 | ||||||||||
Balance at December 31, 2021 | $ | (99,985 | ) | $ | (11,860 | ) | $ | (20 | ) | $ | (111,865 | ) | ||||
Currency Translation | Unrealized Gain (Loss) on Retirement Plans | Unrealized Gain (Loss) on Investments | Accumulated Other Comprehensive Income (Loss) | |||||||||||||
Balance at December 31, 2020 | $ | (98,082 | ) | $ | (19,861 | ) | $ | — | $ | (117,943 | ) | |||||
Other comprehensive (loss) income, net of tax | (1,903 | ) | 8,001 | (20 | ) | 6,078 | ||||||||||
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 | ) | ||||||
2021 | 2020 | |||||||||||||||
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 | $ | 25,369 | $ | 119,590 | $ | 21,186 | $ | 103,366 | ||||||||
Service cost | 884 | 4,577 | 665 | 4,519 | ||||||||||||
Employee contributions | 1,176 | 561 | 1,149 | 514 | ||||||||||||
Interest cost | 559 | 1,247 | 711 | 1,413 | ||||||||||||
Actuarial (gains) losses | (852 | ) | (5,803 | ) | 2,788 | 2,624 | ||||||||||
Benefits paid | (1,178 | ) | (5,334 | ) | (1,130 | ) | (1,474 | ) | ||||||||
Plan amendments | — | 69 | — | — | ||||||||||||
Plan settlements | — | (341 | ) | — | (1,449 | ) | ||||||||||
Currency impact | — | (7,642 | ) | — | 10,077 | |||||||||||
Projected benefit obligation, December 31 | $ | 25,958 | $ | 106,924 | $ | 25,369 | $ | 119,590 | ||||||||
2022 | 2021 | |||||||||||||||
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 | $ | 25,958 | $ | 106,924 | $ | 25,369 | $ | 119,590 | ||||||||
Service cost | 775 | 4,018 | 884 | 4,577 | ||||||||||||
Employee contributions | 1,139 | 536 | 1,176 | 561 | ||||||||||||
Interest cost | 706 | 1,360 | 559 | 1,247 | ||||||||||||
Actuarial gains | (4,657 | ) | (27,494 | ) | (852 | ) | (5,803 | ) | ||||||||
Benefits paid | (1,338 | ) | (3,567 | ) | (1,178 | ) | (5,334 | ) | ||||||||
Plan amendments | — | — | — | 69 | ||||||||||||
Plan settlements | — | (812 | ) | — | (341 | ) | ||||||||||
Currency impact | — | (6,940 | ) | — | (7,642 | ) | ||||||||||
Projected benefit obligation, December 31 | $ | 22,583 | $ | 74,025 | $ | 25,958 | $ | 106,924 | ||||||||
2021 | 2020 | |||||||||||||||
U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | |||||||||||||
Fair value of plan assets, January 1 | $ | 16,168 | $ | 93,890 | $ | 13,773 | $ | 83,011 | ||||||||
Actual return on plan assets | 1,682 | 2,739 | 1,967 | 1,395 | ||||||||||||
Company contributions | 466 | 5,529 | 409 | 3,581 | ||||||||||||
Employee contributions | 1,176 | 561 | 1,149 | 514 | ||||||||||||
Plan settlements | — | (341 | ) | — | (1,449 | ) | ||||||||||
Benefits paid | (1,178 | ) | (5,334 | ) | (1,130 | ) | (1,474 | ) | ||||||||
Currency impact | — | (5,875 | ) | — | 8,312 | |||||||||||
Fair value of plan assets, December 31 | $ | 18,314 | $ | 91,169 | $ | 16,168 | $ | 93,890 | ||||||||
2022 | 2021 | |||||||||||||||
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 | $ | 18,314 | $ | 91,169 | $ | 16,168 | $ | 93,890 | ||||||||
Actual return on plan assets | (2,895 | ) | (6,497 | ) | 1,682 | 2,739 | ||||||||||
Company contributions | 504 | 2,500 | 466 | 5,529 | ||||||||||||
Employee contributions | 1,139 | 536 | 1,176 | 561 | ||||||||||||
Plan settlements | — | (812 | ) | — | (341 | ) | ||||||||||
Benefits paid | (1,338 | ) | (3,567 | ) | (1,178 | ) | (5,334 | ) | ||||||||
Currency impact | — | (5,632 | ) | — | (5,875 | ) | ||||||||||
Fair value of plan assets, December 31 | $ | 15,724 | $ | 77,697 | $ | 18,314 | $ | 91,169 | ||||||||
2021 | 2020 | |||||||||||||||
U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | |||||||||||||
Projected benefit obligation | $ | (25,958 | ) | $ | (106,924 | ) | $ | (25,369 | ) | $ | (119,590 | ) | ||||
Fair value of plan assets | 18,314 | 91,169 | 16,168 | 93,890 | ||||||||||||
Funded status | $ | (7,644 | ) | $ | (15,755 | ) | $ | (9,201 | ) | $ | (25,700 | ) | ||||
2022 | 2021 | |||||||||||||||
U.S. Retiree | Non-U.S. | U.S. Retiree | Non-U.S. | |||||||||||||
Healthcare | Pension | Healthcare | Pension | |||||||||||||
Plan | Plans | Plan | Plans | |||||||||||||
Projected benefit obligation | $ | (22,583 | ) | $ | (74,025 | ) | $ | (25,958 | ) | $ | (106,924 | ) | ||||
Fair value of plan assets | 15,724 | 77,697 | 18,314 | 91,169 | ||||||||||||
Funded status | $ | (6,859 | ) | $ | 3,672 | $ | (7,644 | ) | $ | (15,755 | ) | |||||
2021 | 2020 | |||||||||||||||
U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | |||||||||||||
Long-term assets | $ | — | $ | 1,992 | $ | — | $ | 971 | ||||||||
Current liabilities | (466 | ) | 0 | (409 | ) | (1,999 | ) | |||||||||
Long-term liabilities | (7,178 | ) | (17,747 | ) | (8,792 | ) | (24,672 | ) | ||||||||
Net amount recognized at December 31 | $ | (7,644 | ) | $ | (15,755 | ) | $ | (9,201 | ) | $ | (25,700 | ) | ||||
2022 | 2021 | |||||||||||||||
U.S. Retiree | Non-U.S. | U.S. Retiree | Non-U.S. | |||||||||||||
Healthcare | Pension | Healthcare | Pension | |||||||||||||
Plan | Plans | Plan | Plans | |||||||||||||
Long-term assets | $ | — | $ | 9,554 | $ | — | $ | 1,992 | ||||||||
Current liabilities | — | — | (466 | ) | — | |||||||||||
Long-term liabilities | (6,859 | ) | (5,882 | ) | (7,178 | ) | (17,747 | ) | ||||||||
Net amount recognized at December 31 | $ | (6,859 | ) | $ | 3,672 | $ | (7,644 | ) | $ | (15,755 | ) | |||||
2021 | 2020 | |||||||
Accumulated benefit obligations | $ | 75,178 | $ | 84,940 | ||||
Fair value of plan assets | $ | 66,414 | $ | 68,334 |
2022 | 2021 | |||||||
Accumulated benefit obligations | $ | 16,962 | $ | 75,178 | ||||
Fair value of plan assets | $ | 13,616 | $ | 66,414 |
2021 | 2020 | |||||||
Projected benefit obligations | $ | 96,010 | $ | 107,093 | ||||
Fair value of plan assets | $ | 78,264 | $ | 80,422 |
2022 | 2021 | |||||||
Projected benefit obligations | $ | 19,498 | $ | 96,010 | ||||
Fair value of plan assets | $ | 13,616 | $ | 78,264 |
2021 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||
U.S. Pension Plans | U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | U.S. Pension Plans | U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | U.S. Pension Plans | U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | ||||||||||||||||||||||||||||
Service cost | $ | — | $ | 884 | $ | 4,577 | $ | — | $ | 665 | $ | 4,519 | $ | 0 | $ | 499 | $ | 4,339 | ||||||||||||||||||
Interest cost | — | 559 | 1,247 | 0 | 711 | 1,413 | 29 | 777 | 1,735 | |||||||||||||||||||||||||||
Expected return on plan assets | — | (1,011 | ) | (1,835 | ) | — | (871 | ) | (1,874 | ) | 0 | (706 | ) | (2,154 | ) | |||||||||||||||||||||
Settlement loss | — | — | 77 | 0 | — | 235 | 27 | — | 1,548 | |||||||||||||||||||||||||||
Net amortization: | ||||||||||||||||||||||||||||||||||||
Prior service credit | — | (19 | ) | (87 | ) | — | (19 | ) | (163 | ) | — | (19 | ) | (108 | ) | |||||||||||||||||||||
Net actuarial loss | — | 10 | 1,186 | — | — | 1,571 | 0 | — | 531 | |||||||||||||||||||||||||||
Net periodic pension cost | $ | — | $ | 423 | $ | 5,165 | $ | 0 | $ | 486 | $ | 5,701 | $ | 56 | $ | 551 | $ | 5,891 | ||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||||||
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 | $ | 775 | $ | 4,018 | $ | 884 | $ | 4,577 | $ | 665 | $ | 4,519 | ||||||||||||
Interest cost | 706 | 1,360 | 559 | 1,247 | 711 | 1,413 | ||||||||||||||||||
Expected return on plan assets | (1,138 | ) | (1,972 | ) | (1,011 | ) | (1,835 | ) | (871 | ) | (1,874 | ) | ||||||||||||
Settlement loss | — | 73 | — | 77 | — | 235 | ||||||||||||||||||
Net amortization: | ||||||||||||||||||||||||
Prior service credit | (19 | ) | (129 | ) | (19 | ) | (87 | ) | (19 | ) | (163 | ) | ||||||||||||
Net actuarial loss | — | 649 | 10 | 1,186 | — | 1,571 | ||||||||||||||||||
Net periodic pension cost | $ | 324 | $ | 3,999 | $ | 423 | $ | 5,165 | $ | 486 | $ | 5,701 | ||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||
U.S. Pension Plans | U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | U.S. Pension Plans | U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | U.S. Pension Plans | U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | ||||||||||||||||||||||||||||
Prior service credit | $ | — | $ | — | $ | (69 | ) | $ | — | $ | — | $ | — | $ | — | $ | 0 | $ | 0 | |||||||||||||||||
Net gain (loss) arising during the year | — | 1,524 | 6,708 | 0 | (1,692 | ) | (3,104 | ) | 32 | (648 | ) | (8,940 | ) | |||||||||||||||||||||||
Amortization: | ||||||||||||||||||||||||||||||||||||
Prior service credit | — | (19 | ) | (87 | ) | — | (19 | ) | (163 | ) | — | (19 | ) | (108 | ) | |||||||||||||||||||||
Net loss | — | 10 | 1,263 | 0 | — | 1,806 | 27 | — | 2,079 | |||||||||||||||||||||||||||
Other Plans | — | — | — | — | — | 0 | — | — | 18 | |||||||||||||||||||||||||||
Currency impact | — | — | 1,179 | — | — | (2,225 | ) | — | — | 178 | ||||||||||||||||||||||||||
Total recognized in other comprehensive income (loss) | $ | 0 | $ | 1,515 | $ | 8,994 | $ | 0 | $ | (1,711 | ) | $ | (3,686 | ) | $ | 59 | $ | (667 | ) | $ | (6,773 | ) | ||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||||||
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 gain (loss) arising during the year | 623 | 19,025 | 1,524 | 6,708 | (1,692 | ) | (3,104 | ) | ||||||||||||||||
Amortization: | ||||||||||||||||||||||||
Prior service credit | (19 | ) | (129 | ) | (19 | ) | (87 | ) | (19 | ) | (163 | ) | ||||||||||||
Net loss | — | 722 | 10 | 1,263 | — | 1,806 | ||||||||||||||||||
Currency impact | — | 1,305 | — | 1,179 | — | (2,225 | ) | |||||||||||||||||
Total recognized in other comprehensive (loss) income | $ | 604 | $ | 20,923 | $ | 1,515 | $ | 8,994 | $ | (1,711 | ) | $ | (3,686 | ) | ||||||||||
2021 | 2020 | |||||||||||||||
U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | |||||||||||||
Net actuarial loss | $ | (889 | ) | $ | (14,938 | ) | $ | (2,423 | ) | $ | (24,138 | ) | ||||
Prior service credit | 55 | 152 | 74 | 358 | ||||||||||||
Total | $ | (834 | ) | $ | (14,786 | ) | $ | (2,349 | ) | $ | (23,780 | ) | ||||
2022 | 2021 | |||||||||||||||
U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | |||||||||||||
Net actuarial (loss) gain | $ | (266 | ) | $ | 6,157 | $ | (889 | ) | $ | (14,938 | ) | |||||
Prior service credit (cost) | 36 | (20 | ) | 55 | 152 | |||||||||||
Total | $ | (230 | ) | $ | 6,137 | $ | (834 | ) | $ | (14,786 | ) | |||||
2021 | 2020 | |||||||||||||||
U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | |||||||||||||
Equity securities | 77 | % | 8 | % | 67 | % | 5 | % | ||||||||
Debt securities | 23 | % | 18 | % | 33 | % | 20 | % | ||||||||
Cash and cash equivalents | 0 | % | 1 | % | 0 | % | 1 | % | ||||||||
Insurance contracts and other | 0 | % | 73 | % | 0 | % | 74 | % | ||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
2022 | 2021 | |||||||||||||||
U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans | |||||||||||||
Equity securities | 77 | % | 5 | % | 77 | % | 8 | % | ||||||||
Debt securities | 23 | % | 18 | % | 23 | % | 18 | % | ||||||||
Cash and cash equivalents | 0 | % | 2 | % | 0 | % | 1 | % | ||||||||
Insurance contracts and other | 0 | % | 75 | % | 0 | % | 73 | % | ||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
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 | % |
U.S. Retiree Healthcare Plan | Non-U.S. Pension Plans Policy Target | |||||||||||
Policy Target | Range | |||||||||||
Equity securities | 60 | % | 30% | 13 | % | |||||||
Debt securities | 35 | % | 20% | 19 | % | |||||||
Cash and cash equivalents | 0 | % | 0% | 8 | % | |||||||
Insurance contracts and other | 5 | % | 0% | 60 | % |
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. |
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 (a) | 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 (c) | 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 | ||||||||
Total at December 31, 2021 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level | |||||||||||||
U.S. Retiree Healthcare Plan: | ||||||||||||||||
Mutual funds (a) | 18,314 | 18,314 | — | — | ||||||||||||
Total U.S. Retiree Healthcare Plan | 18,314 | 18,314 | — | — | ||||||||||||
Non-U.S. Pension Plans: | ||||||||||||||||
Cash equivalents (b) | 1,333 | 1,333 | — | — | ||||||||||||
Mutual funds (c) | 23,891 | 23,891 | — | — | ||||||||||||
Bank and insurance investment contracts (d) | 65,945 | — | — | 65,945 | ||||||||||||
Total Non-U.S. Pension Plans | 91,169 | 25,224 | — | 65,945 | ||||||||||||
Total fair value of retirement plan assets | $ | 109,483 | $ | 43,538 | $ | — | $ | 65,945 | ||||||||
Total at December 31, 2021 | 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) | 18,314 | 18,314 | — | — | ||||||||||||
Total U.S. Retiree Healthcare Plan | 18,314 | 18,314 | — | — | ||||||||||||
Non-U.S. Pension Plans: | ||||||||||||||||
Cash equivalents (b) | 1,333 | 1,333 | — | — | ||||||||||||
Mutual funds (f) | 23,891 | 23,891 | — | — | ||||||||||||
Bank and insurance investment contracts (d) | 65,945 | — | — | 65,945 | ||||||||||||
Total Non-U.S. Pension Plans | 91,169 | 25,224 | — | 65,945 | ||||||||||||
Total fair value of retirement plan assets | $ | 109,483 | $ | 43,538 | $ | — | $ | 65,945 | ||||||||
a) | 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. |
b) | Primarily represents deposit account funds held with various financial institutions. |
Total at December 31, 2020 | 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) | 16,168 | 16,168 | — | — | ||||||||||||
Total U.S. Retiree Healthcare Plan | 16,168 | 16,168 | — | — | ||||||||||||
Non-U.S. Pension Plans: | ||||||||||||||||
Cash equivalents (b) | 1,188 | 1,188 | — | — | ||||||||||||
Mutual funds (f) | 23,582 | 23,582 | — | — | ||||||||||||
Bank and insurance investment contracts (d) | 69,120 | — | — | 69,120 | ||||||||||||
Total Non-U.S. Pension Plans | 93,890 | 24,770 | — | 69,120 | ||||||||||||
Total fair value of retirement plan assets | $ | 110,058 | $ | 40,938 | $ | — | $ | 69,120 | ||||||||
The mutual fund balance in the Non-U.S. Pension Plans is primarily invested in the following categories: 59% in international bonds, 22% in the common stock of international companies and 19% 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: 48% in the common stock of large-cap U.S. companies, 29% in the common stock of international growth companies and 23% in fixed income bonds of U.S. companies and the U.S. government. |
The mutual fund balance in the Non-U.S. Pension Plans is |
Insurance Guaranteed Investment Contracts | ||||
Fair value of assets, December 31, 2019 | $ | 60,119 | ||
Net purchases (sales) and appreciation (depreciation) | 9,001 | |||
Fair value of assets, December 31, 2020 | 69,120 | |||
Net purchases (sales) and appreciation (depreciation) | (3,175 | ) | ||
Fair value of assets, December 31, 2021 | $ | 65,945 | ||
Insurance Guaranteed Investment Contracts | ||||
Fair value of assets, December 31, 2020 | $ | 69,120 | ||
Net purchases (sales) and appreciation (depreciation) | (3,175 | ) | ||
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 | ||
2021 | 2020 | 2019 | 2022 | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
U.S. | Non-U.S. | U.S. | Non-U.S. | U.S. | Non-U.S. | U.S. | Non-U.S. | U.S. | Non-U.S. | U.S. | Non-U.S. | |||||||||||||||||||||||||||||||||||||
Discount rate | 2.70 | % | 1.40 | % | 2.25 | % | 1.12 | % | 3.42 | % | 1.38 | % | 5.42 | % | 3.82 | % | 2.70 | % | 1.40 | % | 2.25 | % | 1.12 | % | ||||||||||||||||||||||||
Increases in compensation levels | * | * | 2.74 | % | * | * | 2.69 | % | * | * | 2.83 | % | * | * | 3.14 | % | * | * | 2.74 | % | * | * | 2.69 | % | ||||||||||||||||||||||||
Interest crediting rate | 5.25 | % | 0.99 | % | 5.25 | % | 0.85 | % | 5.25 | % | 0.79 | % | 5.25 | % | 1.57 | % | 5.25 | % | 0.99 | % | 5.25 | % | 0.85 | % |
** | Not applicable |
2021 | 2020 | 2019 | ||||||||||||||||||||||
U.S. | Non-U.S. | U.S. | Non-U.S. | U.S. | Non-U.S. | |||||||||||||||||||
Discount rate | 2.25 | % | 1.40 | % | 3.42 | % | 1.98 | % | 4.41 | % | 2.25 | % | ||||||||||||
Return on plan assets | 6.25 | % | 2.58 | % | 6.25 | % | 2.99 | % | 6.25 | % | 3.11 | % | ||||||||||||
Increases in compensation levels | * | * | 3.11 | % | * | * | 3.62 | % | * | * | 3.20 | % | ||||||||||||
Interest crediting rate | 5.25 | % | 0.77 | % | 5.25 | % | 0.63 | % | 5.25 | % | 0.58 | % |
2022 | 2021 | 2020 | ||||||||||||||||||||||
U.S. | Non-U.S. | U.S. | Non-U.S. | U.S. | Non-U.S. | |||||||||||||||||||
Discount rate | 2.70 | % | 2.09 | % | 2.25 | % | 1.40 | % | 3.42 | % | 1.98 | % | ||||||||||||
Return on plan assets | 6.25 | % | 3.07 | % | 6.25 | % | 2.58 | % | 6.25 | % | 2.99 | % | ||||||||||||
Increases in compensation levels | * | * | 3.58 | % | * | * | 3.11 | % | * | * | 3.62 | % | ||||||||||||
Interest crediting rate | 5.25 | % | 1.55 | % | 5.25 | % | 0.77 | % | 5.25 | % | 0.63 | % |
** | Not applicable |
U.S. Retiree Healthcare Plans | Non-U.S. Pension Plans | Total | ||||||||||
2022 | $ | 1,452 | $ | 4,090 | $ | 5,542 | ||||||
2023 | 1,554 | 2,285 | 3,839 | |||||||||
2024 | 1,643 | 2,635 | 4,278 | |||||||||
2025 | 1,703 | 3,815 | 5,518 | |||||||||
2026 | 1,726 | 3,093 | 4,819 | |||||||||
2027 - 2031 | 8,358 | 23,408 | 31,766 |
U.S. Retiree Healthcare Plans | Non-U.S. Pension Plans | Total | ||||||||||
2023 | $ | 1,700 | $ | 3,459 | $ | 5,159 | ||||||
2024 | 1,789 | 2,479 | 4,268 | |||||||||
2025 | 1,855 | 2,573 | 4,428 | |||||||||
2026 | 1,878 | 3,162 | 5,040 | |||||||||
2027 | 1,893 | 4,253 | 6,146 | |||||||||
2028 - 2032 | 9,288 | 25,285 | 34,573 |
2021 | 2020 | 2019 | ||||||||||
Product net sales: | ||||||||||||
Waters instrument systems | $ | 1,089,248 | $ | 890,855 | $ | 963,871 | ||||||
Chemistry consumables | 507,209 | 432,080 | 412,018 | |||||||||
TA instrument systems | 225,613 | 174,398 | 191,300 | |||||||||
Total product sales | 1,822,070 | 1,497,333 | 1,567,189 | |||||||||
Service net sales: | ||||||||||||
Waters service | 876,626 | 794,189 | 761,594 | |||||||||
TA service | 87,178 | 73,843 | 77,813 | |||||||||
Total service sales | 963,804 | 868,032 | 839,407 | |||||||||
Total net sales | $ | 2,785,874 | $ | 2,365,365 | $ | 2,406,596 | ||||||
2022 | 2021 | 2020 | ||||||||||
Product net sales: | ||||||||||||
Waters instrument systems | $ | 1,210,456 | $ | 1,089,248 | $ | 890,855 | ||||||
Chemistry consumables | 525,399 | 507,209 | 432,080 | |||||||||
TA instrument systems | 252,314 | 225,613 | 174,398 | |||||||||
Total product sales | 1,988,169 | 1,822,070 | 1,497,333 | |||||||||
Service net sales: | ||||||||||||
Waters service | 890,607 | 876,626 | 794,189 | |||||||||
TA service | 93,180 | 87,178 | 73,843 | |||||||||
Total service sales | 983,787 | 963,804 | 868,032 | |||||||||
Total net sales | $ | 2,971,956 | $ | 2,785,874 | $ | 2,365,365 | ||||||
2022 | 2021 | 2020 | ||||||||||
Net Sales: | ||||||||||||
Asia: | ||||||||||||
China | $ | 565,143 | $ | 521,128 | $ | 404,352 | ||||||
Japan | 167,220 | 182,597 | 179,815 | |||||||||
Asia Other | 399,380 | 372,040 | 315,010 | |||||||||
Total Asia | 1,131,743 | 1,075,765 | 899,177 | |||||||||
Americas: | ||||||||||||
United States | 886,140 | 774,014 | 678,313 | |||||||||
Americas Other | 169,495 | 151,206 | 119,529 | |||||||||
Total Americas | 1,055,635 | 925,220 | 797,842 | |||||||||
Europe | 784,578 | 784,889 | 668,346 | |||||||||
Total net sales | $ | 2,971,956 | $ | 2,785,874 | $ | 2,365,365 | ||||||
2021 | 2020 | 2019 | ||||||||||
Net Sales: | ||||||||||||
Asia: | ||||||||||||
China | $ | 521,128 | $ | 404,352 | $ | 439,557 | ||||||
Japan | 182,597 | 179,815 | 180,707 | |||||||||
Asia Other | 372,040 | 315,010 | 318,848 | |||||||||
Total Asia | 1,075,765 | 899,177 | 939,112 | |||||||||
Americas: | ||||||||||||
United States | 774,014 | 678,313 | 692,277 | |||||||||
Americas Other | 151,206 | 119,529 | 137,964 | |||||||||
Total Americas | 925,220 | 797,842 | 830,241 | |||||||||
Europe | 784,889 | 668,346 | 637,243 | |||||||||
Total net sales | $ | 2,785,874 | $ | 2,365,365 | $ | 2,406,596 | ||||||
2021 | 2020 | 2019 | ||||||||||
Pharmaceutical | $ | 1,667,061 | $ | 1,386,966 | $ | 1,365,275 | ||||||
Industrial | 829,204 | 707,772 | 719,377 | |||||||||
Academic and governmental | 289,609 | 270,627 | 321,944 | |||||||||
Total net sales | $ | 2,785,874 | $ | 2,365,365 | $ | 2,406,596 | ||||||
2022 | 2021 | 2020 | ||||||||||
Pharmaceutical | $ | 1,751,665 | $ | 1,667,061 | $ | 1,386,966 | ||||||
Industrial | 909,805 | 829,204 | 707,772 | |||||||||
Academic and government | 310,486 | 289,609 | 270,627 | |||||||||
Total net sales | $ | 2,971,956 | $ | 2,785,874 | $ | 2,365,365 | ||||||
2021 | 2020 | 2019 | ||||||||||
Net sales recognized at a point in time: | ||||||||||||
Instrument systems | $ | 1,314,861 | $ | 1,065,253 | $ | 1,155,171 | ||||||
Chemistry consumables | 507,209 | 432,080 | 412,018 | |||||||||
Service sales recognized at a point in time (time & materials) | 354,666 | 365,776 | 323,247 | |||||||||
Total net sales recognized at a point in time | 2,176,736 | 1,863,109 | 1,890,436 | |||||||||
Net sales recognized over time: | ||||||||||||
Service and software sales recognized over time (contracts) | 609,138 | 502,256 | 516,160 | |||||||||
Total net sales | $ | 2,785,874 | $ | 2,365,365 | $ | 2,406,596 | ||||||
2022 | 2021 | 2020 | ||||||||||
Net sales recognized at a point in time: | ||||||||||||
Instrument systems | $ | 1,462,770 | $ | 1,314,861 | $ | 1,065,253 | ||||||
Chemistry consumables | 525,399 | 507,209 | 432,080 | |||||||||
Service sales recognized at a point in time (time & materials) | 367,501 | 354,666 | 365,776 | |||||||||
Total net sales recognized at a point in time | 2,355,670 | 2,176,736 | 1,863,109 | |||||||||
Net sales recognized over time: | ||||||||||||
Service and software maintenance sales recognized over time (contracts) | 616,286 | 609,138 | 502,256 | |||||||||
Total net sales | $ | 2,971,956 | $ | 2,785,874 | $ | 2,365,365 | ||||||
2021 | 2020 | 2019 | ||||||||||
Long-lived assets: | ||||||||||||
United States | $ | 395,446 | $ | 350,615 | $ | 276,891 | ||||||
Americas Other | 1,662 | 1,179 | 1,929 | |||||||||
Total Americas | 397,108 | 351,794 | 278,820 | |||||||||
Europe | 130,806 | 119,978 | 116,734 | |||||||||
Asia | 19,999 | 22,231 | 21,788 | |||||||||
Total long-lived assets | $ | 547,913 | $ | 494,003 | $ | 417,342 | ||||||
December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Long-lived assets: | ||||||||||||
United States | $ | 429,469 | $ | 395,446 | $ | 350,615 | ||||||
Americas Other | 1,663 | 1,662 | 1,179 | |||||||||
Total Americas | 431,132 | 397,108 | 351,794 | |||||||||
Europe | 133,465 | 130,806 | 119,978 | |||||||||
Asia | 17,620 | 19,999 | 22,231 | |||||||||
Total long-lived assets | $ | 582,217 | $ | 547,913 | $ | 494,003 | ||||||
First | Second | Third | Fourth | |||||||||||||||||
2021 | Quarter | Quarter | Quarter | Quarter | Total | |||||||||||||||
Net sales | $ | 608,545 | $ | 681,647 | $ | 659,233 | $ | 836,449 | $ | 2,785,874 | ||||||||||
Costs and operating expenses: | ||||||||||||||||||||
Cost of sales | 254,147 | 280,254 | 271,128 | 351,004 | 1,156,533 | |||||||||||||||
Selling and administrative expenses | 143,196 | 158,213 | 152,545 | 173,014 | 626,968 | |||||||||||||||
Research and development expenses | 38,092 | 44,949 | 41,986 | 43,331 | 168,358 | |||||||||||||||
Purchased intangibles amortization | 1,840 | 1,809 | 1,759 | 1,735 | 7,143 | |||||||||||||||
Litigation provisions | 0 | 0 | — | 5,165 | 5,165 | |||||||||||||||
Total costs and operating expenses | 437,275 | 485,225 | 467,418 | 574,249 | 1,964,167 | |||||||||||||||
Operating income | 171,270 | 196,422 | 191,815 | 262,200 | 821,707 | |||||||||||||||
Other income (expense) | 9,359 | 9,321 | (607 | ) | (870 | ) | 17,203 | |||||||||||||
Interest expense | (10,946 | ) | (12,027 | ) | (11,081 | ) | (10,884 | ) | (44,938 | ) | ||||||||||
Interest income | 4,101 | 3,698 | 2,548 | 1,874 | 12,221 | |||||||||||||||
Income before income taxes | 173,784 | 197,414 | 182,675 | 252,320 | 806,193 | |||||||||||||||
Provision for income taxes | 25,657 | 30,122 | 21,490 | 36,081 | 113,350 | |||||||||||||||
Net income | $ | 148,127 | $ | 167,292 | $ | 161,185 | $ | 216,239 | $ | 692,843 | ||||||||||
Net income per basic common share | 2.38 | 2.71 | 2.63 | 3.55 | 11.25 | |||||||||||||||
Weighted-average number of basic common shares | 62,260 | 61,685 | 61,359 | 60,984 | 61,575 | |||||||||||||||
Net income per diluted common share | 2.37 | 2.69 | 2.60 | 3.52 | 11.17 | |||||||||||||||
Weighted-average number of diluted common shares and equivalents | 62,632 | 62,157 | 61,888 | 61,423 | 62,028 |
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 |
First | Second | Third | Fourth | |||||||||||||||||
2021 | Quarter | Quarter | Quarter | Quarter | Total | |||||||||||||||
Net sales | $ | 608,545 | $ | 681,647 | $ | 659,233 | $ | 836,449 | $ | 2,785,874 | ||||||||||
Costs and operating expenses: | ||||||||||||||||||||
Cost of sales | 254,147 | 280,254 | 271,128 | 351,004 | 1,156,533 | |||||||||||||||
Selling and administrative expenses | 143,196 | 158,213 | 152,545 | 173,014 | 626,968 | |||||||||||||||
Research and development expenses | 38,092 | 44,949 | 41,986 | 43,331 | 168,358 | |||||||||||||||
Purchased intangibles amortization | 1,840 | 1,809 | 1,759 | 1,735 | 7,143 | |||||||||||||||
Litigation provisions | — | — | — | 5,165 | 5,165 | |||||||||||||||
Total costs and operating expenses | 437,275 | 485,225 | 467,418 | 574,249 | 1,964,167 | |||||||||||||||
Operating income | 171,270 | 196,422 | 191,815 | 262,200 | 821,707 | |||||||||||||||
Other income (expense), net | 9,359 | 9,321 | (607 | ) | (870 | ) | 17,203 | |||||||||||||
Interest expense | (10,946 | ) | (12,027 | ) | (11,081 | ) | (10,884 | ) | (44,938 | ) | ||||||||||
Interest income | 4,101 | 3,698 | 2,548 | 1,874 | 12,221 | |||||||||||||||
Income before income taxes | 173,784 | 197,414 | 182,675 | 252,320 | 806,193 | |||||||||||||||
Provision for income taxes | 25,657 | 30,122 | 21,490 | 36,081 | 113,350 | |||||||||||||||
Net income | $ | 148,127 | $ | 167,292 | $ | 161,185 | $ | 216,239 | $ | 692,843 | ||||||||||
Net income per basic common share | 2.38 | 2.71 | 2.63 | 3.55 | 11.25 | |||||||||||||||
Weighted-average number of basic common shares | 62,260 | 61,685 | 61,359 | 60,984 | 61,575 | |||||||||||||||
Net income per diluted common share | 2.37 | 2.69 | 2.60 | 3.52 | 11.17 | |||||||||||||||
Weighted-average number of diluted common shares and equivalents | 62,632 | 62,157 | 61,888 | 61,423 | 62,028 |
First | Second | Third | Fourth | |||||||||||||||||
2020 | Quarter | Quarter | Quarter | Quarter | Total | |||||||||||||||
Net sales | $ | 464,939 | $ | 519,984 | $ | 593,784 | $ | 786,658 | $ | 2,365,365 | ||||||||||
Costs and operating expenses: | ||||||||||||||||||||
Cost of sales | 210,644 | 213,134 | 262,342 | 320,569 | 1,006,689 | |||||||||||||||
Selling and administrative expenses | 147,735 | 117,449 | 135,430 | 153,084 | 553,698 | |||||||||||||||
Research and development expenses | 34,989 | 31,155 | 34,971 | 39,662 | 140,777 | |||||||||||||||
Purchased intangibles amortization | 2,625 | 2,618 | 2,657 | 2,687 | 10,587 | |||||||||||||||
Asset Impairments | — | — | — | 6,945 | 6,945 | |||||||||||||||
Litigation provisions | 666 | 514 | — | — | 1,180 | |||||||||||||||
Total costs and operating expenses | 396,659 | 364,870 | 435,400 | 522,947 | 1,719,876 | |||||||||||||||
Operating income | 68,280 | 155,114 | 158,384 | 263,711 | 645,489 | |||||||||||||||
Other (expense) income | (374 | ) | (736 | ) | (1,039 | ) | 374 | (1,775 | ) | |||||||||||
Interest expense | (14,079 | ) | (13,018 | ) | (10,915 | ) | (11,058 | ) | (49,070 | ) | ||||||||||
Interest income | 4,036 | 4,003 | 4,007 | 4,224 | 16,270 | |||||||||||||||
Income before income taxes | 57,863 | 145,363 | 150,437 | 257,251 | 610,914 | |||||||||||||||
Provision for income taxes | 4,301 | 22,434 | 23,668 | 38,940 | 89,343 | |||||||||||||||
Net income | $ | 53,562 | $ | 122,929 | $ | 126,769 | $ | 218,311 | $ | 521,571 | ||||||||||
Net income per basic common share | 0.86 | 1.98 | 2.04 | 3.51 | 8.40 | |||||||||||||||
Weighted-average number of basic common shares | 62,232 | 61,944 | 62,002 | 62,170 | 62,094 | |||||||||||||||
Net income per diluted common share | 0.86 | 1.98 | 2.03 | 3.49 | 8.36 | |||||||||||||||
Weighted-average number of diluted common shares and equivalents | 62,626 | 62,184 | 62,303 | 62,501 | 62,414 |
Item 9:
None.
Item 9A:
Evaluation of Disclosure Controls and Procedures
The Company’s chief executive officer and chief financial officer (principal executive officer and principal financial officer), with the participation of management, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in
Management’s Annual Report on Internal Control Over Financial Reporting
See Management’s Report on Internal Control Over Financial Reporting in Item 8 on page 5147 of this Form
Report of the Independent Registered Public Accounting Firm
See the report of PricewaterhouseCoopers LLP in Item 8 beginning on page 5248 of this Form
Changes in Internal Control Over Financial Reporting
No change was identified in the Company’s internal control over financial reporting (as defined in
Item 9B:
None.
Item 9C:
None.
PART III
Item 10: | Directors, Executive Officers and Corporate Governance |
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Officers of the Company are elected annually by the Board of Directors and hold office at the discretion of the Board of Directors. The following persons serve as executive officers of the Company:
Dr. Udit Batra, 51,52, was appointed a Director of the Company as well as President and CEO on September 1, 2020. He most recently served as Chief Executive Officer of the Life Science business of Merck KGaA,
96
Darmstadt, Germany, which operates as MilliporeSigma in the United States and Canada, and as a member of its Executive Board, roles he held from 2014 and 2016, respectively, through July 2020. Prior to that, Dr. Batra
Jianqing Bennett, 52,53, was appointed Senior Vice President of TA Instruments Division on May 1, 2021. Previously, Ms. Bennett served as Senior Vice President, High Growth Markets at Beckman Coulter Diagnostics from November 2017 to March 2021. Prior to that, from 2007-2017, she held various senior management positions at Carestream Health Inc, including serving as President, Medical Digital Solutions from August 2015 to November 2017.
Amol Chaubal, 46,47, was appointed Chief Financial OfficersOfficer of Waters Corporation on May 12, 2021. Previously, Mr. Chaubal was Chief Financial Officer of Quanterix Corporation, a life sciences company, where he served as Chief Financial Officer since April 2019. Before Quanterix, Mr. Chaubal served as Chief Financial Officer, Global Operations at Smith & Nephew, a global medical devices company, from October 2017 to April 2019. Prior to his time at Smith & Nephew, he served as Corporate Vice President and Head of Finance for the Clinical Research Services and Access business at Parexel from July 2015 to October 2017.
Jonathan M. Pratt, 52,53, was appointed Senior Vice President, Waters Division, on May 1, 2021. Previously, he served as Senior Vice President and President, TA Instruments from August 2019 to April 30, 2021. Prior to joining Waters Corporation, Mr. Pratt was President of Beckman Coulter Life Sciences from January 2017 to April 2019. Additionally, he held senior positions at Pall Corporation from 2001 to 2017, where he was Vice President and General Manager from October 2015 to December 2016 following Pall Corporation’s acquisition by Danaher Corporation and, prior to that, President of its Food & Beverage, Laboratory and ForteBio businesses from April 2011 to October 2015. Since August 2020, Mr. Pratt has served on the Board of SPX FLOW, Inc. (NYSE:FLOW) as an independent director and a member of the Audit, Compensation and Nominating & Governance Committees.
Information regarding the Company’s directors, any material changes to the process by which security holders may recommend nominees to the Board of Directors and the information required by the Item will be contained in our definitive proxy statement for the 20222023 Annual Meeting of Stockholders, to be filed with the SEC not later than 120 days after the close of business of the fiscal year and is incorporated in this report by reference (the “2022“2023 Proxy Statement”), under the headings “Election of Directors”, “Directors Meetings and Board Committees”, “Corporate Governance”, “Report of the Audit Committee of the Board of Directors” and “Compensation of Directors and Executive Officers”. Information regarding compliance with Section 16(a) of the Exchange Act is contained in the 20222023 Proxy Statement, under the heading “Delinquent Section 16(a) Reports”. Information regarding the Company’s Audit Committee and Audit Committee Financial Expert is contained in the 20222023 Proxy Statement, under the headings “Report of the Audit Committee of the Board of Directors” and “Directors Meetings and Board Committees”. Such information is incorporated herein by reference.
The Company has adopted a Global Code of Business Conduct & Ethics (the “Code”) that applies to all of the Company’s employees (including its executive officers) and directors and that is in compliance with Item 406 of Regulation
97
the Code applicable to any executive officer or director by posting such information on its website. The Company shall also provide to any person without charge, upon request, a copy of the Code. Any such request must be made in writing to the Secretary of the Company, c/o Waters Corporation, 34 Maple Street, Milford, MA 01757.
The Company’s corporate governance guidelines and the charters of the audit committee, compensation committee and nominating and corporate governance committee of the Board of Directors are available on the Company’s website,
Item 11: | Executive Compensation |
This information is contained in the 20222023 Proxy Statement, under the headings “Compensation of Directors and Executive Officers”, “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report”. Such information is incorporated herein by reference.
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Except for the Equity Compensation Plan information set forth below, this information is contained in the 20222023 Proxy Statement, under the heading “Security Ownership of Certain Beneficial Owners and Management”. Such information is incorporated herein by reference.
Equity Compensation Plan Information
The following table provides information as of December 31, 20212022 about the Company’s common stock that may be issued upon the exercise of options, warrants and rights under its existing equity compensation plans (in thousands):
A | B | C | ||||||||||
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (1) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (A)) | ||||||||||
Equity compensation plans approved by security holders | 1,064 | $ | 202.24 | 7,177 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 1,064 | $ | 202.24 | 7,177 | ||||||||
A | B | C | ||||||||||
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (1) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (A)) | ||||||||||
Equity compensation plans approved by security holders | 976 | $ | 238.43 | 6,929 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | 976 | $ | 238.43 | 6,929 | ||||||||
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(1) | Column (a) includes an aggregate of |
See Note 14, Stock-Based Compensation, in the Notes to Consolidated Financial Statements for a description of the material features of the Company’s equity compensation plans.
Item 13: | Certain Relationships and Related Transactions and Director Independence |
This information is contained in the 20222023 Proxy Statement, under the headings “Directors Meetings and Board Committees”, “Corporate Governance” and “Compensation of Directors and Executive Officers”. Such information is incorporated herein by reference.
98
Item 14: | Principal Accountant Fees and Services |
This information is contained in the 20222023 Proxy Statement, under the headings “Ratification of Selection of Independent Registered Public Accounting Firm” and “Report of the Audit Committee of the Board of Directors”. Such information is incorporated herein by reference.
99
Item 15: | Exhibits, Financial Statement Schedules |
(1) | Financial Statements: |
(2) | Exhibits: |
Exhibit Number | Description of Document | |
3.1 | Second Amended and Restated Certificate of Incorporation of Waters 10-K dated March 29, 1996 (FileNo. 001-14010)).+ | |
3.2 | ||
3.3 | ||
3.4 | ||
3.5 | ||
4.1 | ||
10.1 | Waters Corporation Retirement Plan. S-1 dated October 24, 1996 (FileNo. 333-96934)) | |
Exhibit | Description of Document | |
10.15 | Change of Control/Severance Agreement, dated as of April 1, 2015, between Waters Corporation and Michael F. | |
10.18 | Form of Waters 2012 Performance Stock Unit Award | |
101
Number | ||
23.1 |
102
Exhibit | Description of Document | |
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101 | The following materials from Waters Corporation’s Annual Report on Form 10-K for the year ended December 31, |
Number | ||
104 | Cover Page Interactive Date File (formatted in iXBRL and contained in Exhibit 101). |
Paper Filing |
Management contract or compensatory plan required to be filed as an Exhibit to this |
This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any filing, except to the extent the Company specifically incorporates it by reference. |
(b) | See Item 15 (a) (2) above. |
Item 16: | Form |
The optional summary in Item 16 has not been included in this Form
103
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
W ATERS CORPORATION |
/s/ Amol Chaubal |
Amol Chaubal |
Senior Vice President and Chief Financial Officer |
(Principal Financial Officer) |
(Principal Accounting Officer) |
Date: February 24, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on February 24, 2022.
/s/ Dr. Flemming Ornskov, M.D., M.P.H. | Chairman of the Board of Directors | |||
Dr. Flemming Ornskov, M.D., M.P.H. | ||||
/s/ Dr. Udit Batra, Ph.D. | President and Chief Executive Officer | |||
Dr. Udit Batra, Ph.D. | Director (Principal Executive Officer) | |||
/s/ Amol Chaubal | Senior Vice President and Chief Financial Officer | |||
Amol Chaubal | (Principal Financial Officer) | |||
(Principal Accounting Officer) | ||||
/s/ Linda Baddour | Director | |||
Linda Baddour | ||||
/s/ | Director | |||
/s/ Edward Conard | Director | |||
Edward Conard | ||||
/s/ Dr. Pearl S. Huang, Ph.D. | Director | |||
Dr. Pearl S. Huang, Ph.D. | ||||
/s/ Wei Jiang | Director | |||
Wei Jiang | ||||
/s/ Christopher A. Kuebler | Director | |||
Christopher A. Kuebler | ||||
/s/ | Director | |||
104