UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~Form 10-Q~~

Form

10-Q

☒☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~April 1, ~~2022~~2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number:

01-14010

Waters Corporation

(Exact name of registrant as specified in its charter)


Delaware		13-3668640
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

34 Maple Street

Milford, Massachusetts 01757

(Address, including zip code, of principal executive offices)

(

508)

478-2000

~~478-2000~~

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	WAT	New York Stock Exchange , Inc.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☒☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such ~~file~~

s)files). Yes

☒☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in

Rule 12b-2

of the Exchange

Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in

Rule 12b-2

of the Act).

Yes ☐ No ☑

☒

Indicate the number of shares outstanding of the registrant’s common stock as of ~~October 28, 2022: 59,407,575~~May 5, 2023:

59,033,571

~~Table of Contents~~

WATERS CORPORATION AND SUBSIDIARIES

QUARTERLY REPORT ON FORM

10-Q

INDEX


		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets (unaudited) as of ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021~~2022		1
	Consolidated Statements of Operations (unaudited) for the three months ended April 1, 2023 and April 2, 2022		2
	Consolidated Statements of Comprehensive Income (unaudited) for the three months ended April 1, 2023 and April 2, 2022		3
	Consolidated Statements of ~~Operations~~Cash Flows (unaudited) for the three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021~~2022		4
	~~Consolidated Statements of Operations (unaudited) for the nine months ended October 1, 2022 and October 2, 2021~~		5
	~~Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended October 1, 2022 and October 2, 2021~~		6
	~~Consolidated Statements of Cash Flows (unaudited) for the nine months ended October 1, 2022 and October 2, 2021~~		7
	Consolidated Statements of Stockholders’ Equity (unaudited) for the three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021~~2022		85
	~~Consolidated Statements of Stockholders’ Equity (unaudited) for the nine months ended October 1, 2022 and October 2, 2021~~		9
	Condensed Notes to Consolidated Financial Statements (unaudited)		106
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2820
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		3930
Item 4.	Controls and Procedures		3931

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		4031
Item 1A.	Risk Factors		4031
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		4032
Item 6.	Exhibits		4133
	Signature		4234

~~Table of Contents~~

Item 1: Financial Statements

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)


	October 1, 2022			December 31, 2021			April 1, 2023			December 31, 2022

	(In thousands, except per share data)						(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	443,637		$	501,234		$	486,070		$	480,529
Investments		876			68,051			885			862
Accounts receivable, net		600,924			612,648			683,341			722,892
Inventories		442,236			356,095			499,422			455,710
Other current assets		87,912			90,914			103,981			103,910

Total current assets		1,575,585			1,628,942			1,773,699			1,763,903
Property, plant and equipment, net		547,386			547,913			590,207			582,217
Intangible assets, net		213,429			242,401			232,715			227,399
Goodwill		420,257			437,865			431,642			430,328
Operating lease assets		86,285			84,734			86,076			86,506
Other assets		227,111			153,077			192,481			191,100

Total assets	$	3,070,053		$	3,094,932		$	3,306,820		$	3,281,453

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and debt	$	50,000		$	—		$	50,040		$	50,000
Accounts payable		96,567			96,799			93,558			93,302
Accrued employee compensation		64,554			101,192			25,727			103,300
Deferred revenue and customer advances		248,884			227,561			306,865			227,908
Current operating lease liabilities		24,231			27,906			24,470			26,429
Accrued income taxes		116,819			61,278			150,689			132,545
Accrued warranty		10,661			10,718			12,311			11,949
Other current liabilities		120,254			155,054			138,290			140,304

Total current liabilities		731,970			680,508			801,950			785,737
Long-term liabilities:
Long-term debt		1,494,626			1,513,870			1,430,130			1,524,878
Long-term portion of retirement benefits		48,798			64,027			42,661			38,203
Long-term income tax liabilities		248,111			319,547			249,196			248,496
Long-term operating lease liabilities		61,470			59,623			62,257			62,108
Other long-term liabilities		99,842			89,803			120,803			117,543

Total long-term liabilities		1,952,847			2,046,870			1,905,047			1,991,228

Total liabilities		2,684,817			2,727,378			2,706,997			2,776,965
Commitments and contingencies (Notes 6, 7, 8 and 12)

Commitments and contingencies (Notes 6, 7 and 8)
Stockholders’ equity:
Preferred stock, par value $0.01 per share, 5,000 shares authorized, no ne issued at October 1, 2022 and December 31, 2021		—			—
Common stock, par value $0.01 per share, 400,000 shares authorized, 162,379 and 162,084 shares issued, 59,534 and 60,728 shares outstanding at October 1, 2022 and December 31, 2021, respectively		1,624			1,621
Preferred stock, par value $0.01 per share, 5,000 shares authorized, none issued at April 1, 2023 and December 31, 2022								—			—
Common stock, par value $0.01 per share, 400,000 shares authorized, 162,550 and 162,425 shares issued, 59,020 and 59,104 shares outstanding at April 1, 2023 and December 31, 2022, respectively								1,626			1,624
Additional paid-in capital		2,181,558			2,114,880			2,214,963			2,199,824
Retained earnings		8,281,525			7,800,832			8,649,510			8,508,587
Treasury stock, at cost, 102,845 and 101,356 shares at October 1, 2022 and December 31, 2021, respectively		(9,915,081	)		(9,437,914	)
Treasury stock, at cost, 103,530 and 103,321 shares at April 1, 2023 and December 31, 2022, respectively								(10,133,480	)		(10,063,975	)
Accumulated other comprehensive loss		(164,390	)		(111,865	)		(132,796	)		(141,572	)

Total stockholders’ equity		385,236			367,554			599,823			504,488

Total liabilities and stockholders’ equity	$	3,070,053		$	3,094,932		$	3,306,820		$	3,281,453

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

Table of Contents

~~WATERS CORPORATION AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(unaudited)~~

Three Months Ended


October 1, 2022

October 2, 2021



(In thousands, except per share data)

Revenues:
Product sales    $ 464,923 $ 419,133
Service sales    243,632 240,100

Total net sales    708,555 659,233
Costs and operating expenses:
Cost of product sales    199,918 171,364
Cost of service sales    107,183 99,764
Selling and administrative expenses    164,417 152,545
Research and development expenses    43,435 41,986
Purchased intangibles amortization    1,592 1,759

Total costs and operating expenses    516,545 467,418

Operating income    192,010 191,815
Other income (expense), net    895 (607 )
Interest expense    (12,420 ) (11,081 )
Interest income    2,896 2,548

Income before income taxes    183,381 182,675
Provision for income taxes    27,383 21,490

Net income    $ 155,998 $ 161,185

Net income per basic common share    $ 2.61 $ 2.63
Weighted-average number of basic common shares    59,801 61,359
Net income per diluted common share    $ 2.60 $ 2.60
Weighted-average number of diluted common shares and equivalents    60,081 61,888

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

~~Table of Contents~~

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Nine Months Ended						Three Months Ended
	October 1, 2022			October 2, 2021			April 1, 2023			April 2, 2022

	(In thousands, except per share data)						(In thousands, except per share data)
Revenues:
Product sales	$	1,385,393		$	1,242,110		$	436,457		$	450,840
Service sales		728,053			707,315			248,217			239,732

Total net sales		2,113,446			1,949,425			684,674			690,572
Costs and operating expenses:
Cost of product sales		593,884			506,985			180,354			191,610
Cost of service sales		306,108			298,544			104,026			94,075
Selling and administrative expenses		483,769			453,954			181,956			157,475
Research and development expenses		127,913			125,027			42,691			40,472
Purchased intangibles amortization		4,863			5,408			1,479			1,673
Acquired in-process research and development		9,797			—			—			9,797

Total costs and operating expenses		1,526,334			1,389,918			510,506			495,102

Operating income		587,112			559,507			174,168			195,470
Other income, net		2,600			18,073			1,388			170
Interest expense		(34,898	)		(34,054	)		(14,444	)		(11,059	)
Interest income		7,536			10,347			4,061			2,114

Income before income taxes		562,350			553,873			165,173			186,695
Provision for income taxes		81,657			77,269			24,250			26,864

Net income	$	480,693		$	476,604		$	140,923		$	159,831

Net income per basic common share	$	7.98		$	7.72		$	2.39		$	2.64
Weighted-average number of basic common shares		60,200			61,771			59,023			60,580
Net income per diluted common share	$	7.94		$	7.66		$	2.38		$	2.62
Weighted-average number of diluted common shares and equivalents		60,521			62,244			59,317			60,952

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

Table of Contents

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended
	October 1, 2022			October 2, 2021			October 1, 2022			October 2, 2021			April 1, 2023			April 2, 2022

	(In thousands)						(In thousands)						(In thousands)
Net income	$	155,998		$	161,185		$	480,693		$	476,604		$	140,923		$	159,831
Other comprehensive (loss) income:
Other comprehensive income (loss):
Foreign currency translation		(23,779	)		(4,560	)		(54,255	)		1,256			8,783			(6,169	)
Unrealized gains on investments before income taxes		—			17			26			2			—			15
Income tax expense		—			—			(6	)		—			—			(4	)

Unrealized gains on investments, net of tax		—			17			20			2			—			11
Retirement liability adjustment before reclassifications		767			(103	)		1,755			691			80			268
Amounts reclassified to other income, net		254			248			501			682
Amounts reclassified to other income														(83	)		127

Retirement liability adjustment before income taxes		1,021			145			2,256			1,373			(3	)		395
Income tax expense		(243	)		(37	)		(546	)		(302	)		(4	)		(97	)

Retirement liability adjustment, net of tax		778			108			1,710			1,071			(7	)		298
Other comprehensive (loss) income		(23,001	)		(4,435	)		(52,525	)		2,329
Other comprehensive income (loss)														8,776			(5,860	)

Comprehensive income	$	132,997		$	156,750		$	428,168		$	478,933		$	149,699		$	153,971

~~The~~

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

Table of Contents

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Three Months Ended
	April 1, 2023			April 2, 2022
	(In thousands)
Cash flows from operating activities:
Net income	$	140,923		$	159,831
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation		12,805			10,933
Deferred income taxes		(5,078	)		4,175
Depreciation		19,411			17,209
Amortization of intangibles		11,743			15,455
Acquired in-process research and development and other non-cash items		—			9,381
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable		44,047			(907	)
Increase in inventories		(42,621	)		(26,832	)
Increase in other current assets		(2,123	)		(1,805	)
Decrease (increase) in other assets		6,662			(13,491	)
Decrease in accounts payable and other current liabilities		(71,257	)		(69,548	)
Increase in deferred revenue and customer advances		77,206			91,514
Increase in other liabilities		5,033			2,045

Net cash provided by operating activities		196,751			197,960
Cash flows from investing activities:
Additions to property, plant, equipment and software capitalization		(34,390	)		(27,751	)
Proceeds from equity investments, net		—			6,785
Payments for intellectual property licenses		—			(4,897	)
Purchases of investments		(893	)		(9,219	)
Maturities and sales of investments		877			54,074

Net cash (used in) provided by investing activities		(34,406	)		18,992
Cash flows from financing activities:
Proceeds from debt issuances		50,040			—
Payments on debt		(145,000	)		(70,000	)
Proceeds from stock plans		2,378			12,832
Purchases of treasury shares		(69,505	)		(170,136	)
Proceeds from (payments for) derivative contracts		2,876			(107	)

Net cash used in financing activities		(159,211	)		(227,411	)
Effect of exchange rate changes on cash and cash equivalents		2,407			(10,705	)

Increase (decrease) in cash and cash equivalents		5,541			(21,164	)
Cash and cash equivalents at beginning of period		480,529			501,234

Cash and cash equivalents at end of period	$	486,070		$	480,070

Nine Months Ended


October 1, 2022

October 2, 2021



(In thousands)

Cash flows from operating activities:

Net income    $ 480,693 $ 476,604
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation    30,929 21,949
Deferred income taxes    (20,836 ) 9,219
Depreciation    54,306 52,760
Amortization of intangibles    44,799 45,166
Acquired
in-process
research and development and other
non-cash
items
   10,003 —
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable    (39,098 ) 23,472
Increase in inventories    (113,211 ) (93,878 )
Increase in other current assets    (6,861 ) (9,123 )
Increase in other assets    (3,881 ) (6,116 )
Decrease in accounts payable and other current liabilities    (4,952 ) (4,768 )
Increase in deferred revenue and customer advances    47,060 71,889
Decrease in other liabilities    (65,999 ) (57,838 )

Net cash provided by operating activities    412,952 529,336
Cash flows from investing activities:
Additions to property, plant, equipment and software capitalization    (113,737 ) (116,614 )
Proceeds from (investments in) equity investments, net    8,903 (867 )
Payments for intellectual property licenses    (7,535 ) (7,000 )
Purchases of investments    (11,407 ) (241,230 )
Maturities and sales of investments    77,993 117,283

Net cash used in investing activities    (45,783 ) (248,428 )
Cash flows from financing activities:
Proceeds from debt issuances    165,000 510,000
Payments on debt    (135,000 ) (250,000 )
Payments of debt issuance costs    —   (8,537 )
Proceeds from stock plans    36,136 55,000
Purchases of treasury shares    (477,167 ) (492,695 )
Proceeds from derivative contracts    12,844 2,325

Net cash used in financing activities    (398,187 ) (183,907 )
Effect of exchange rate changes on cash and cash equivalents    (26,579 ) (8,994 )

(Decrease) increase in cash and cash equivalents    (57,597 ) 88,007
Cash and cash equivalents at beginning of period    501,234 436,695

Cash and cash equivalents at end of period    $ 443,637 $ 524,702

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

Table of Contents

WATERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands)


	Number of Common Shares		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity

Balance December 31, 2021		162,084	$	1,621	$	2,114,880	$	7,800,832	$	(9,437,914	)	$	(111,865	)	$	367,554
Net income		—		—		—		159,831		—			—			159,831
Other comprehensive loss		—		—		—		—		—			(5,860	)		(5,860	)
Issuance of common stock for employees:
Employee Stock Purchase Plan		7		—		2,327		—		—			—			2,327
Stock options exercised		69		1		11,091		—		—			—			11,092
Treasury stock		—		—		—		—		(170,136	)		—			(170,136	)
Stock-based compensation		92		1		10,128		—		—			—			10,129

Balance April 2, 2022		162,252	$	1,623	$	2,138,426	$	7,960,663	$	(9,608,050	)	$	(117,725	)	$	374,937


	Number of Common Shares		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity			Number of Common Shares		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance July 3, 2021		162,017	$	1,620	$	2,090,052	$	7,423,408	$	(9,135,628	)	$	(111,179	)	$	268,273
Balance December 31, 2022																			162,425	$	1,624	$	2,199,824	$	8,508,587	$	(10,063,975	)	$	(141,572	)	$	504,488
Net income		—		—		—		161,185		—			—			161,185			—		—		—		140,923		—			—			140,923
Other comprehensive loss		—		—		—		—		—			(4,435	)		(4,435	)
Other comprehensive income																			—		—		—		—		—			8,776			8,776
Issuance of common stock for employees:
Employee Stock Purchase Plan		8		—		2,567		—		—			—			2,567			8		—		2,000		—		—			—			2,000
Stock options exercised		45		1		7,396		—		—			—			7,397			6		—		969		—		—			—			969
Treasury stock		—		—		—		—		(146,051	)		—			(146,051	)		—		—		—		—		(69,505	)		—			(69,505	)
Stock-based compensation		5		—		6,286		—		—			—			6,286			111		2		12,170		—		—			—			12,172

Balance October 2, 2021		162,075	$	1,621	$	2,106,301	$	7,584,593	$	(9,281,679	)	$	(115,614	)	$	295,222
Balance April 1, 2023																			162,550	$	1,626	$	2,214,963	$	8,649,510	$	(10,133,480	)	$	(132,796	)	$	599,823


	Number of Common Shares		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance July 2, 2022		162,348	$	1,623	$	2,166,221	$	8,125,527	$	(9,759,858	)	$	(141,389	)	$	392,124
Net income		—		—		—		155,998		—			—			155,998
Other comprehensive loss		—		—		—		—		—			(23,001	)		(23,001	)
Issuance of common stock for employees:
Employee Stock Purchase Plan		9		—		2,488		—		—			—			2,488
Stock options exercised		17		—		2,506		—		—			—			2,506
Treasury stock		—		—		—		—		(155,223	)		—			(155,223	)
Stock-based compensation		5		1		10,343		—		—			—			10,344

Balance October 1, 2022		162,379	$	1,624	$	2,181,558	$	8,281,525	$	(9,915,081	)	$	(164,390	)	$	385,236

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

~~Table of Contents~~

~~WATERS CORPORATION AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

~~(unaudited, in thousands)~~

Number
of
Common
Shares

Common
Stock

Additional
Paid-In

Capital

Retained
Earnings

Treasury
Stock

Accumulated
Other
Comprehensive
Loss

Total
Stockholders’
Equity

Balance December 31, 2020    161,666    $ 1,617    $ 2,029,465    $ 7,107,989    $ (8,788,984 ) $ (117,943 ) $ 232,144
Net income    —      —      —      476,604    —   —   476,604
Other comprehensive income    —      —      —      —      —   2,329 2,329
Issuance of common stock for employees:
Employee Stock Purchase Plan    40    —      9,578    —      —   —   9,578
Stock options exercised    275    3    46,109    —      —   —   46,112
Treasury stock    —      —      —      —      (492,695 ) —   (492,695 )
Stock-based compensation    94    1    21,149    —      —   —   21,150

Balance October 2, 2021    162,075    $ 1,621    $ 2,106,301    $ 7,584,593    $ (9,281,679 ) $ (115,614 ) $ 295,222



Number
of
Common
Shares

Common
Stock

Additional
Paid-In

Capital

Retained
Earnings

Treasury
Stock

Accumulated
Other
Comprehensive
Loss

Total
Stockholders’
Equity

Balance December 31, 2021    162,084    $ 1,621    $ 2,114,880    $ 7,800,832    $ (9,437,914 ) $ (111,865 ) $ 367,554
Net income    —      —      —      480,693    —   —   480,693
Other comprehensive loss    —      —      —      —      —   (52,525 ) (52,525 )
Issuance of common stock for employees:
Employee Stock Purchase Plan    28    —      8,374    —      —   —   8,374
Stock options exercised    167    2    28,121    —      —   —   28,123
Treasury stock    —      —      —      —      (477,167 ) —   (477,167 )
Stock-based compensation    100    1    30,183    —      —   —   30,184

Balance October 1, 2022    162,379    $ 1,624    $ 2,181,558    $ 8,281,525    $ (9,915,081 ) $ (164,390 ) $ 385,236

~~The accompanying notes are an i~~

~~ntegral~~

~~part of the consolidated financial statements.~~

Table of Contents

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

~~(unaudited)~~

1 Basis of Presentation and Summary of Significant Accounting P

~~olicies~~Policies

Waters Corporation (the “Company,” “we,” “our,” or “us”) is a specialty measurement company that operates with a fundamental underlying purpose to advance the science that enables our customers to enhance human health and well-being. The Company has pioneered analytical workflow solutions involving liquid chromatography, mass spectrometry and thermal analysis innovations serving the life, materials and food sciences for more than 60 years. The Company primarily designs, manufactures, sells and services high-performance liquid chromatography (“HPLC”), ultra-performance liquid chromatography (“UPLC

” and, together with HPLC, referred to as “LC”) and mass spectrometry (“MS”) technology systems and support products, including chromatography columns, other consumable products and comprehensive post-warranty service plans. These systems are complementary products that are frequently employed together

(“LC-MS”)

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

LC-MS

instruments combine a liquid phase sample introduction and separation system with mass spectrometric compound identification and quantification. In addition, the Company designs, manufactures, sells and services thermal analysis, rheometry and calorimetry instruments through its TA

product line. These instruments are used in predicting the suitability and stability of fine chemicals, pharmaceuticals, water, polymers, metals and viscous liquids for various industrial, consumer goods and healthcare products, as well as for life science research. The Company is also a developer and supplier of advanced software-based products that interface with the Company’s instruments, as well as other manufacturers’ instruments.

The Company’s interim fiscal quarter typically ends on the thirteenth Saturday of each quarter. Since the Company’s fiscal year end is December 31, the first and fourth fiscal quarters may have more or less than thirteen complete weeks. The Company’s ~~third~~first fiscal quarters for ~~2022~~2023 and ~~2021~~2022 ended on ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021,~~2022, respectively.

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

10-Q

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

The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities at the dates of the financial statements. Actual amounts may differ from these estimates under different assumptions or conditions.

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

10-K

for the year ended December 31, ~~2021,~~2022, as filed with the U.S. Securities and Exchange Commission (“SEC”) on February ~~24, 2022.~~27, 2023.

Risks and Uncertainties

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

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

Both the Company’s domestic and international operations have been and continue to be affected by the ongoing global

COVID-19

pandemic and the resulting volatility and uncertainty it has caused in the U.S. and international markets. The Company operates in over 35 countries, including those in regions most impacted by the

COVID-19

pandemic.

~~Table of Contents~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

Through the date of the issuance of these financial statements, the Company’s consolidated financial position, results of operations and cash flows have not been materially impacted and, thus, the Company concluded that no interim goodwill or long-lived asset impairment analyses were required. Further, there have been no violations of debt covenants. Any prolonged material disruption to the Company’s employees, suppliers, manufacturing, or customers could result in a material impact to its consolidated financial position, results of operations or cash flows in the future.

Translation of Foreign Currencies

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

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

Acquisition Agreement

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.

Cash, Cash Equivalents and Investments

Cash equivalents represent highly liquid investments, with original maturities of 90 days or less, while investments with longer maturities are classified as investments. The Company maintains cash balances in various operating accounts in excess of federally insured limits, and in foreign subsidiary accounts in currencies other than the U.S. dollar. As of ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021, $409~~2022, $313 million out of ~~$445~~$487 million and ~~$440~~$472 million out of ~~$569~~$481 million, respectively, of the Company’s total cash, cash equivalents and investments were held by foreign subsidiaries. In addition, ~~$270~~$188 million out of ~~$445~~$487 million and ~~$298~~$336 million out of ~~$569~~$481 million of cash, cash equivalents and investments were held in currencies other than the U.S. dollar at ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Accounts Receivable and Allowance for Credit Losses

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company has very limited use of rebates and other cash considerations payable to customers and, as a result, the transaction price determination does not have any material variable consideration. The Company does not consider there to be significant concentrations of credit risk with respect to trade receivables due to the short-term nature of the balances, the Company having a large and diverse customer base, and the Company having a strong historical experience of collecting

Table of Contents

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

receivables with minimal defaults. As a result, credit risk is considered low across territories and trade receivables are considered to be a single class of financial asset. The allowance for credit losses is based on a number of factors and is calculated by applying a historical loss rate to trade receivable aging balances to estimate a general reserve balance along with an additional adjustment for any specific receivables with known or anticipated issues affecting the likelihood of recovery. Past due balances with a probability of default based on historical data as well as relevant available forward-looking information are included in the specific adjustment. The historical loss rate is reviewed on at least an annual basis and the allowance for credit losses is reviewed quarterly for any required adjustments. The Company does not have any

off-balance

sheet credit exposure related to its customers.

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

re-possess,

refurbish and

re-sell

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

~~Table of Contents~~

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

The following is a summary of the activity of the Company’s allowance for credit losses for the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021~~2022 (in thousands):

Balance at
Beginning
of Period

Additions

Deductions

Balance at End
of Period

Allowance for Credit Losses
October 1, 2022    $ 13,228    $ 4,980    $ (4,973 )    $ 13,235
October 2, 2021    $ 14,381    $ 3,388    $ (4,107 )    $ 13,662


	Balance at Beginning of Period		Additions		Deductions			Balance at End of Period

Allowance for Credit Losses
April 1, 2023	$	14,311	$	1,572	$	(1,028	)	$	14,855
April 2, 2022	$	13,228	$	987	$	(1,072	)	$	13,143

Other Investments

During the ~~nine~~three months ended ~~October~~April 1, 2023, the Company did not have any other investment activity. During the three months ended April 2, 2022, the Company ~~sold equity investments for $10 million in cash and~~ recorded ~~gains on the sales~~a realized gain of ~~approximately $7~~ $

million in other income, net onin the consolidated statement of ~~operations. The Company also incurred $6~~ operations due to the sale of an equity investment as well as incurring

million in impairment losses ~~on equity investments recorded within other income, net on the statement of operations.~~

~~During the nine months ended October 2, 2021, the Company recorded an unrealized gain~~ on an equity security still held at the reporting date of approximately $10 million within other income, net on the statement of operations. This unrealized gain was recorded as an upward price adjustment to the carrying value of the investment due to an observable price change of a similar security.investment.

Fair Value Measurements

In accordance with the accounting standards for fair value measurements and disclosures, certain of the Company’s assets and liabilities are measured at fair value on a recurring basis as of ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021.~~2022. Fair values determined by Level 1 inputs utilize observable data, such as quoted prices in active markets. Fair values determined by Level 2 inputs utilize data points other than quoted prices in active markets that are observable either directly or indirectly. Fair values determined by Level 3 inputs utilize unobservable data points for which there is little or no market data, which require the reporting entity to develop its own assumptions.

Table of Contents

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

The following table represents the Company’s assets and liabilities measured at fair value on a recurring basis at ~~October~~April 1, ~~2022~~2023 (in thousands):

Total at
October 1,
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    876    —      876    —
Waters 401(k) Restoration Plan assets    24,099    24,099    —      —
Foreign currency exchange contracts    278    —      278    —
Interest rate cross-currency swap agreements    62,223    —      62,223    —

Total    $ 87,476    $ 24,099    $ 63,377    $ —

Liabilities:
Contingent consideration    $ 1,469    $ —      $ —      $ 1,469
Foreign currency exchange contracts    63    —      63    —

Total    $ 1,532    $ —      $ 63    $ 1,469

~~Table of Contents~~

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


	Total at April 1, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Time deposits	$	885	$	—	$	885	$	—
Waters 401(k) Restoration Plan assets		28,310		28,310		—		—
Foreign currency exchange contracts		121		—		121		—
Interest rate cross-currency swap agreements		13,880		—		13,880		—

Total	$	43,196	$	28,310	$	14,886	$	—

Liabilities:
Foreign currency exchange contracts	$	67	$	—	$	67	$	—
Interest rate cross-currency swap agreements		6,756		—		6,756		—

Total	$	6,823	$	—	$	6,823	$	—

The following table represents the Company’s assets and liabilities measured at fair value on a recurring basis at December 31, ~~2021~~2022 (in thousands):

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


	Total at December 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Time deposits	$	862	$	—	$	862	$	—
Waters 401(k) Restoration Plan assets		25,532		25,532		—		—
Foreign currency exchange contracts		231		—		231		—
Interest rate cross-currency swap agreements		19,163		—		19,163		—

Total	$	45,788	$	25,532	$	20,256	$	—

Liabilities:
Contingent consideration	$	1,509	$	—	$	—	$	1,509
Foreign currency exchange contracts		98		—		98		—
Interest rate cross-currency swap agreements		4,783		—		4,783		—

Total	$	6,390	$	—	$	4,881	$	1,509

Fair Value of 401(k) Restoration Plan Assets

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

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

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

The fair values of the Company’s cash equivalents, investments, foreign currency exchange contracts and interest rate cross-currency swap agreements are determined through market and observable sources and have been classified as Level 2.

. These assets and liabilities have been initially valued at the transaction price and subsequently valued, typically utilizing third-party pricing services. The pricing services use many inputs to determine value, including reportable trades, benchmark yields, credit spreads, broker/dealer quotes, current spot rates and other industry and economic events. The Company validates the prices provided by third-party pricing services by reviewing their pricing methods and obtaining market values from other pricing sources.

~~Fair Value of Contingent Consideration~~

The fair value of the Company’s liability for contingent consideration relates to earnout payments in connection with the December 2020 acquisition of Integrated Software Solutions (“ISS”) and is determined using a probability-weighted discounted cash flow model, which uses significant unobservable inputs, and has been classified as Level 3. Subsequent changes in the fair value of the contingent consideration liability are recorded in the results of operations. The fair value of the contingent consideration liability associated with future earnout payments is based on several factors, including the achievement of certain revenue and customer account milestones over the two years after the acquisition date and a discount rate that reflects both the likelihood of achieving the estimated future results and the Company’s creditworthiness. A change in any of these unobservable inputs can significantly change the fair value of the contingent consideration.

~~The fair value of future contingent consideration payments related to the December 2020 acquisition of ISS was estimated to be $1 million at both October 1, 2022 and December 31, 2021.~~

~~Table of Contents~~

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

Fair Value of Other Financial Instruments

The Company’s accounts receivable and accounts payable are recorded at cost, which approximates fair value due to their short-term nature. The carrying value of the Company’s variable interest rate debt approximates fair value due to the variable nature of the interest rate. The carrying value of the Company’s fixed interest rate debt was $1.3

billion at both ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021.~~2022. The fair value of the Company’s fixed interest rate debt was estimated using discounted cash flow models, based on estimated current rates offered for similar debt under current market conditions for the Company. The fair value of the Company’s fixed interest rate debt was estimated to be ~~$1.1 billion and $1.3~~

$1.1

billion at ~~October~~both April 1, ~~2022~~2023 and December 31, ~~2021, respectively,~~2022, using Level 2 inputs.

Derivative Transactions

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

non-U.S.

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

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

~~Yen-denominated~~yen-denominated

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

Foreign Currency Exchange Contracts

The Company does not specifically enter into any derivatives that hedge foreign-currency-denominated operating assets, liabilities or commitments on its balance sheet, other than a portion of certain third-party accounts receivable and accounts payable, and the Company’s net worldwide intercompany receivables and payables, which are eliminated in consolidation. The Company periodically aggregates its net worldwide balances by currency and then enters into foreign currency exchange contracts that mature within 90 days to hedge a portion of the remaining balance to minimize some of the Company’s currency price risk exposure. The foreign currency exchange contracts are not designated for hedge accounting treatment. Principal hedged currencies include the ~~Euro,~~euro, Japanese yen, British pound, Mexican peso and Brazilian real.

Interest Rate Cross-Currency Swap Agreements

As of ~~October~~April 1, ~~2022,~~2023, the Company had three-year interest rate cross-currency swap derivative agreements with an aggregate notional value of $585 million to hedge the variability in the movement of foreign currency exchange rates on a portion of its ~~Euro-denominated~~euro-denominated and

~~Yen-denominated~~yen-denominated

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

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

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):


	October 1, 2022				December 31, 2021					April 1, 2023				December 31, 2022
	Notional Value		Fair Value		Notional Value		Fair Value			Notional Value		Fair Value		Notional Value		Fair Value
Foreign currency exchange contracts:
Other current assets	$	42,690	$	278	$	55,309	$	504		$	31,461	$	121	$	42,047	$	231
Other current liabilities	$	17,000	$	63	$	9,000	$	195		$	16,968	$	67	$	13,450	$	98
Interest rate cross-currency swap agreements:
Other assets	$	585,000	$	62,223	$	—	$	—		$	400,000	$	13,880	$	400,000	$	19,163
Other liabilities		—		—		230,000		5,363		$	185,000	$	6,756	$	185,000	$	4,783
Accumulated other comprehensive income (loss)			$	57,869			$	(15,944	)
Accumulated other comprehensive income												$	2,770			$	10,026

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

Three Months Ended

Nine Months Ended


October 1,
2022

October 2,
2021

October 1,
2022

October 2,
2021

Foreign currency exchange contracts:
Realized (losses) gains on closed contracts    Cost of sales    $ (3,811 ) $ (774 ) $ (6,603 ) $ 681
Unrealized gains (losses) on open contracts    Cost of sales    461 (933 ) (93 ) (2,256 )

Cumulative net
pre-tax
losses
   Cost of sales    $ (3,350 ) $ (1,707 ) $ (6,696 ) $ (1,575 )

Interest rate cross-currency swap agreements:
Interest earned    Interest income    $ 2,362 $ 2,305 $ 6,214 $ 9,505
Unrealized gains on open contracts    Other comprehensive income    $ 31,108 $ 7,762 $ 73,812 $ 24,777


	Financial Statement Classification	Three Months Ended
	Financial Statement Classification	April 1, 2023			April 2, 2022
Foreign currency exchange contracts:
Realized gains (losses) on closed contracts	Cost of sales	$	30		$	(1,499	)
Unrealized losses on open contracts	Cost of sales		(78	)		(489	)

Cumulative net pre-tax losses	Cost of sales	$	(48	)	$	(1,988	)

Interest rate cross-currency swap agreements:
Interest earned	Interest income	$	2,655		$	1,775
Unrealized (losses) gains on contracts, net	Accumulated other comprehensive loss	$	(7,256	)	$	12,188

Stockholders’ Equity

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

two-year

period. This program

replaced the remaining amounts available from the

pre-existing

program. In ~~Dec~~

~~mber~~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

increased the total
authorization level to $

4.8

billion, an increase of $

750

million. During ~~both~~ the ~~nine~~

three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021,~~2022, the Company repurchased ~~1.5~~

0.2 million and 0.5

million shares of the Company’s outstanding common stock at a cost of ~~$467~~$

58 million and ~~$484~~$160

million, respectively, under the January 2019 authorization and other previously announced programs. In addition, the Company repurchased ~~$11~~$

11 million and $9$10

million of common stock related to the vesting of restricted stock units during the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021,~~2022, respectively. As of ~~October~~April 1, ~~2022,~~2023, the Company had repurchased an aggregate of ~~14.6~~

15.2

million shares at a cost of ~~$3.6~~ $

3.8

billion under the January 2019 repurchase program and had a total of ~~$418 million~~$1.0 billion authorized for future ~~repurchase~~repurchases. While the Company believes that it has the financial flexibility to fund these share repurchases, as well as to invest in research, technology and business acquisitions, given current cash levels and debt borrowing capacity, it has temporarily suspended its share repurchases due to its recently announced agreement to acquire Wyatt Technology.

s.1

Table of Contents

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

Product ~~Warr~~

~~nty Cost~~Warranty Costs

The ~~Compan~~

yCompany accrues estimated product warranty costs at the time of sale, which are included in cost of sales in the consolidated statements of operations. While the Company en

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

~~Table of Contents~~

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

The following is a summary of the activity of the Company’s accrued warranty liability for the ~~nine~~

three

months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021~~2022 (in thousands):

Balance at
Beginning
of Period

Accruals for
Warranties

Settlements
Made

Balance at
End of
Period

Accrued warranty liability:
October 1, 2022    $ 10,718    $ 6,606    $ (6,663 )    $ 10,661
October 2, 2021    $ 10,950    $ 6,537    $ (6,991 )    $ 10,496

~~Other Items~~

During the nine months ended October 1, 2022, the Company completed an asset acquisition in which the charge detection mass spectrometry technology (“CDMS technology”) assets of Megadalton Solutions, Inc. (“Megadalton”) were acquired for approximately $10 million in total purchase price, of which $5 million was paid at closing and the remaining $4 million will be paid in the future at various dates through 2029. This CDMS technology makes it possible to analyze extremely large proteins and protein complexes used in cell and gene therapies that would otherwise be difficult to analyze with conventional mass spectrometry. Once this technology is further developed, it will extend the capabilities of our mass spectrometry portfolio for a broader set of applications and as such the cost of this technology asset has been accounted for as Acquired

~~In-Process~~

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


	Balance at Beginning of Period		Accruals for Warranties		Settlements Made			Balance at End of Period
Accrued warranty liability:
April 1, 2023	$	11,949	$	2,177	$	(1,815	)	$	12,311
April 2, 2022	$	10,718	$	1,916	$	(2,422	)	$	10,212

2 Revenue Recognition

The Company’s deferred revenue liabilities on

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

The following is a summary of the activity of the Company’s deferred revenue and customer advances for the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021~~2022 (in thousands):


	October 1, 2022			October 2, 2021			April 1, 2023			April 2, 2022
Balance at the beginning of the period	$	273,598		$	239,759		$	285,175		$	273,598
Recognition of revenue included in balance at beginning of the period		(213,527	)		(197,279	)		(105,222	)		(103,355	)
Revenue deferred during the period, net of revenue recognized		243,853			264,184			193,286			198,036

Balance at the end of the period	$	303,924		$	306,664		$	373,239		$	368,279

The Company classified ~~$55~~$66 million and ~~$46~~$57 million of deferred revenue and customer advances in other long-term liabilities at ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

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


	October 1, 2022		April 1, 2023
Deferred revenue and customer advances expected to be recognized in:
One year or less	$	248,884	$	306,865
13 -24 months		31,632
13-24 months				40,785
25 months and beyond		23,408		25,589

Total	$	303,924	$	373,239

161

Table of Contents

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

3 Marketable Securities

The Company’s marketable securities within cash equivalents and investments included in the consolidated balance sheets ~~are detailed as follows (in thousands):~~

October 1, 2022


Amortized
Cost

Unrealized
Gain

Unrealized
Loss

Fair
Value

Time deposits    876    —      —      876

Total    $ 876    $ —      $ —      $ 876

Amounts included in:
Investments    876    —      —      876

Total    $ 876    $ —      $ —      $ 876

December 31, 2021


Amortized
Cost

Unrealized
Gain

Unrealized
Loss

Fair
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

~~The estimated~~consist of time deposits that mature in one year or less with an amortized cost and a fair value of ~~marketable debt securities by maturity date is as follows (in thousands):~~$0.9 million at both April 1, 2023 and December 31, 2022.

October 1, 2022

December 31, 2021

Due in one year or less    $ 876    $ 71,066
Due after one year through three years    —      1,002

Total    $ 876    $ 72,068

4 Inventories

Inventories are classified as follows (in thousands):


	October 1, 2022		December 31, 2021		April 1, 2023		December 31, 2022
Raw materials	$	186,958	$	165,240	$	217,120	$	205,760
Work in progress		23,577		19,726		24,380		19,899
Finished goods		231,701		171,129		257,922		230,051

Total inventories	$	442,236	$	356,095	$	499,422	$	455,710

5 Goodwill and Other Intangibles

The carrying amount of goodwill was ~~$420~~$432 million and ~~$438~~$430 million at ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The effect of foreign currency translation ~~decreased~~

increased

goodwill by ~~$18~~$2 million.

~~Table of Contents~~

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

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


	October 1, 2022						December 31, 2021						April 1, 2023						December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Weighted- Average Amortization Period		Gross Carrying Amount		Accumulated Amortization		Weighted- Average Amortization Period		Gross Carrying Amount		Accumulated Amortization		Weighted- Average Amortization Period		Gross Carrying Amount		Accumulated Amortization		Weighted- Average Amortization Period
Capitalized software	$	525,196	$	391,250		5 years	$	575,658	$	420,862		5 years	$	610,668	$	455,952		5years	$	589,604	$	441,414		5years
Purchased intangibles		193,056		160,972		11 years		201,302		163,752		11 years		198,395		168,787		11years		197,805		166,735		11years
Trademarks		9,680		—		—		9,680		—		—		9,680		—		—		9,680		—		—
Licenses		12,739		5,848		6 years		12,635		6,199		7 years		14,339		7,186		6years		14,070		6,729		6years
Patents and other intangibles		100,255		69,427		8 years		102,353		68,414		8 years		106,660		75,102		8years		104,139		73,021		8years

Total	$	840,926	$	627,497		7 years	$	901,628	$	659,227		7 years	$	939,742	$	707,027		7years	$	915,298	$	687,899		7years

The Company capitalized ~~intangible assets in the amounts of~~ $14 million and ~~$18~~$12

million of intangible assets in the three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021, respectively, and $38 million and $45 million in the nine months ended October 1,~~ 2022, ~~and October 2, 2021,~~ respectively. The gross carrying value of intangible assets and accumulated amortization for intangible assets ~~decreased~~increased by ~~$98~~$

10 million and ~~$76~~$8

million, respectively, in the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023 due to the effects of foreign currency translation. Amortization expense for intangible assets was $

12 million and $15 million for

~~both~~

the three months ended ~~October~~April 1, 2023 and April 2, 2022, ~~and October 2, 2021. Amortization expense for intangible assets was $45 million for both the nine months ended October 1, 2022 and October 2, 2021.~~respectively. Amortization expense for intangible assets is estimated to

be ~~$62~~

$49 million per year for each of the next five years.

6 Debt

The Company ~~entered into~~has a ~~credit agreement in September 2021 (the “2021 Credit Agreement”) governing the Company’s~~ five-year, $1.8 billion revolving facility (the ~~“2021 Credit~~“Credit Facility”) that expires in September 2026. On March 3, 2023, the Company amended the Credit Facility to increase the borrowing capacity by $200 million to an aggregate total borrowing capacity of $2.0

billion, which did not affect the maturity date of September 17, 2026. The amendment also replaced all references in the Credit Facility to LIBOR with Term SOFR as the benchmark rate. As of ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021,~~2022, the ~~2021~~ Credit Facility had a total of ~~$240~~$

175 million and ~~$210~~$270 million outstanding, respectively.

Table of Contents

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

The interest rates applicable tounder the ~~2021~~ Credit ~~Agreement~~Facility are, at the Company’s option, equal to either the alternate base rate (which is a rate per annum equal to the greatest of (1) the prime rate in effect on such day, (2) the Federal Reserve Bank of New York Rate on such day plus 1/2 of 1% per annum and (3) the adjusted ~~LIBO~~Term SOFR rate onfor a one—month interest period as published two U.S. Government Securities Business Days prior to such day (or if such day is not a ~~business day,~~U.S. Government Securities Business Day, the immediately preceding ~~business day) for a deposit in~~ U.S. ~~dollars with a maturity of one month~~Government Securities Business Day), plus 1% ~~per~~ annum) or the applicable 1, 3 or 6 month adjusted ~~LIBO rate~~Term SOFR or EURIBO rate for ~~Euro-denominated~~euro—denominated loans, in each case, plus an interest rate margin based upon the Company’s leverage ratio, which can range between 0 and 12.5 basis points for alternate base rate loans and between 80 and 112.5 basis points for ~~LIBO rate~~Term SOFR or EURIBO rate loans. The facility fee on the ~~2021~~ Credit ~~Agreement~~Facility ranges between 7.5 and 25 basis points per annum, based on the leverage ratio, of the amount of the revolving facility commitments and the outstanding term loan. The ~~2021~~ Credit ~~Agreement~~Facility requires that the Company comply with an interest coverage ratio test of not less than 3.50:1 as of the end of any fiscal quarter for any period of four consecutive fiscal quarters and a leverage ratio test of not more than 3.50:1 as of the end of any fiscal quarter. In addition, the ~~2021~~ Credit ~~Agreement~~Facility includes negative covenants, affirmative covenants, representations and warranties and events of default that are customary for investment grade credit facilities.

of both ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had a total of ~~$1.3~~ $

1.3

billion of outstanding senior unsecured notes. Interest on the fixed rate senior unsecured notes is payable ~~semi-annually~~semi—annually each year. Interest on the floating rate senior unsecured notes is payable quarterly. ~~The~~

Company may prepay all or some of the senior unsecured notes at any time in an amount not less than ~~10%~~

of the aggregate principal amount outstanding, plus the applicable ~~make-whole~~make—whole amount or prepayment premium for the Series H senior unsecured note. In the event of a change in control of the Company (as defined in the note purchase agreement), the Company may be required to prepay the senior unsecured notes at a price equal

to 100% of the principal amount thereof, plus accrued and unpaid interest.

These senior unsecured notes require that the Company comply with an interest coverage ratio test of not less than ~~3.50:1~~

3.50

~~Table of Contents~~

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

1 for

any period of four consecutive fiscal quarters and a leverage ratio test of not more than

3.50

as of the end of any fiscal quarter. In addition, these senior unsecured notes include customary negative covenants, affirmative covenants, representations and warranties and events of default.

The

Company had the following

outstanding

debt at ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):

October 1, 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 September 2026    200,000    200,000
Senior unsecured notes - Series M - 3.53%, due September 2029    300,000    300,000
Senior unsecured notes - Series N - 1.68%, due March 2026    100,000    100,000
Senior unsecured notes - Series O - 2.25%, due March 2031    400,000    400,000
Credit agreement    240,000    210,000
Unamortized debt issuance costs    (5,374 )    (6,130 )

Total long-term debt    1,494,626    1,513,870

Total debt    $ 1,544,626    $ 1,513,870


	April 1, 2023			December 31, 2022

Foreign subsidiary lines of credit	$	40		$	—
Senior unsecured notes—Series I - 3.13%, due May 2023		50,000			50,000

Total notes payable and debt, current		50,040			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 K - 3.44%, due May 2026		160,000			160,000
Senior unsecured notes—Series L - 3.31%, due September 2026		200,000			200,000
Senior unsecured notes—Series M - 3.53%, due September 2029		300,000			300,000
Senior unsecured notes—Series N - 1.68%, due March 2026		100,000			100,000
Senior unsecured notes—Series O - 2.25%, due March 2031		400,000			400,000
Credit agreement		175,000			270,000
Unamortized debt issuance costs		(4,870	)		(5,122	)

Total long-term debt		1,430,130			1,524,878

Total debt	$	1,480,170		$	1,574,878

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

As of ~~both October~~April 1, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had a total amount available to borrow under the ~~2021~~ Credit ~~Agreement~~Facility of ~~$1.6~~$1.8 billion and $1.5 billion, respectively, after outstanding letters of credit. The weighted-average interest rates applicable to the senior unsecured notes and credit agreement borrowings collectively were ~~3.24%~~3.50% and ~~2.74%~~3.54% at ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. As of ~~October~~April 1, ~~2022,~~2023, the Company was in compliance with all debt covenants.

The Company and its foreign subsidiaries also had available short-term lines of credit totaling ~~$111~~$114 million and ~~$121 million~~$

113

illion at ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, for the purpose of short-term borrowing and issuance of commercial guarantees. None of the Company’s foreign subsidiaries had outstanding short-term borrowings as of ~~October~~April 1, ~~2022~~2023 or December 31, ~~2021.~~2022.

Table of Contents

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

As of ~~October~~April 1, ~~2022,~~2023, the Company had entered into

three-year

interest rate cross-currency swap derivative agreements with an aggregate notional value of ~~$585~~$

585

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

~~Yen-denominated~~yen-denominated

net asset investments.

7 Income Taxes

The four principal jurisdictions in which the Company manufactures are the U.S., Ireland, the U.K. and Singapore, where the statutory tax rates were 21%, 12.5%, ~~19%~~25% and 17%, respectively, as of ~~October~~April 1, ~~2022. The Company had a contractual tax rate of 0% on qualifying activities in Singapore through March 2021, based upon the achievement of certain contractual milestones.~~2023. 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. The effect of applying the concessionary income tax ~~rates~~rate rather than the statutory tax rate to income arising from qualifying activities in Singapore increased the Company’s net income for the ~~nine~~three months

ended ~~October~~

April

1, ~~2022~~2023 and ~~October~~April 2, ~~2021~~ 2022

by ~~$15~~$3 million and ~~$13~~

$5 million, respectively, and increased the Company’s net income per diluted share by ~~$0.25~~$0.05 and ~~$0.20,~~$0.08, respectively.

The Company’s effective tax rate

for the

three

months

April

2023

and April

2022

was

14.7

% and

14.4

%, respectively. The income tax provision includes a

million and a $

million income tax benefit related to stock-based compensation for the three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021 was 14.9% and 11.8%,~~2022, respectively. The ~~increase in the effective income tax rate can be attributed to the impact of favorable quarter-specific adjustments in the prior year and differences in the proportionate amounts of~~

~~pre-tax~~

~~income recognized in jurisdictions with different effective tax rates.~~

~~Table of Contents~~

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

~~The Company’s effective tax rate for the nine months ended October 1, 2022 and October 2, 2021 was 14.5% and 14.0%, respectively. The~~remaining differences between the effective tax rates can primarily be attributed to differences in the proportionate amounts of

pre-tax

income recognized in jurisdictions with different effective tax rates.

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

The Company’s gross unrecognized tax benefits, excluding interest and penalties, ~~for both the nine months ended October~~at April 1, 2023 and April 2, 2022 were $30 million and ~~October 2, 2021 were $29 million.~~$

million, respectively. With limited exceptions, the Company is no longer subject to tax audit examinations in significant jurisdictions for the years ended on or before December 31, ~~2016.~~2017. The Company continuously monitors the lapsing of statutes of limitations on potential tax assessments for related changes in the measurement of unrecognized tax benefits, related net interest and penalties, and deferred tax assets and liabilities. As of ~~October~~April 1, ~~2022,~~2023, the Company expects to record reductions in the measurement of its unrecognized tax benefits and related net interest and penalties of ~~$18~~$

million within the next twelve months due to potential tax audit settlements and the lapsing of statutes of limitations on potential tax assessments. The Company does not expect to record any other material reductions in the measurement of its unrecognized tax benefits within the next twelve months.

8 Other Commitments and Contingencies

The Company licenses certain technology and software from third parties in the course of ordinary business. Future minimum license fees payable under existing license agreements as of ~~October~~April 1, ~~2022~~2023 are immaterial for the years ended December 31, ~~2022~~2023 and thereafter. The Company enters into licensing arrangements with third parties that require future milestone or royalty payments contingent upon future events. Upon the achievement of certain milestones in existing agreements, the Company could make additional future payments of up to $2 million.

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

~~9 Stock-Based Compensation~~

~~The Company maintains various stockholder-approved, stock-based compensation plans which allow for the issuance of incentive or~~

~~non-qualified~~

~~stock options, stock appreciation rights, restricted stock or other types of awards (e.g. restricted stock units and performance stock units).~~

In May 2020, the Company’s stockholders approved the Company’s 2020 Equity Incentive Plan (“2020 Plan”). As of October 1, 2022, the 2020 Plan had 6.5 million shares available for grant in the form of incentive or

~~non-qualified~~

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

~~period. A SAR may be granted alone or in conjunction with an option or other award. Shares of restricted stock, restricted stock units and performance stock units may be issued under the~~

Table of Contents

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

2020 Plan for such consideration as is determined by the Compensation Committee of the Board of Directors. As of October 1, 2022, the Company had stock options, restricted stock, and restricted and performance stock unit awards outstanding under the 2020 Plan.

~~The~~

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

The consolidated statements of operations for the three and nine months ended October 1, 2022 and October 2, 2021 include the following stock-based compensation expense related to stock option awards, restricted stock awards, restricted stock unit awards, performance stock unit awards and the employee stock purchase plan (in thousands):

Three Months Ended

Nine Months Ended


October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

Cost of sales    $ 478    $ 468    $ 2,420    $ 1,828
Selling and administrative expenses    8,174    4,116    23,607    15,810
Research and development expenses    1,555    1,769    4,902    4,311

Total stock-based compensation    $ 10,207    $ 6,353    $ 30,929    $ 21,949

~~Stock Options~~

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

~~non-qualified~~

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

~~zero-coupon~~

issues with a remaining term approximating the expected term used as the input to the Black-Scholes model. The relevant data used to determine the value of the stock options granted during the nine months ended October 1, 2022 and October 2, 2021 are as follows:

Nine Months Ended

Options Issued and Significant Assumptions Used to Estimate Option Fair Values

October 1, 2022

October 2, 2021

Options issued in thousands    138 160
Risk-free interest rate    2.0 % 0.8 %
Expected life in years    6 6
Expected volatility    30.7 % 32.4 %
Expected dividends    —   —

Nine Months Ended

Weighted-Average Exercise Price and Fair Value of Options on the Date of Grant

October 1, 2022

October 2, 2021

Exercise price    $ 321.12    $ 281.23
Fair value    $ 107.95    $ 91.46

~~Table of Contents~~

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

~~The following table summarizes stock option activity for the plans for the nine months ended October 1, 2022 (in thousands, except per share data):~~

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    $ 321.12
Exercised    (167 )    $ 88.71 to $279.90    $ 168.37
Canceled    (40 )    $ 188.63 to $364.59    $ 253.23

Outstanding at October 1, 2022    622    $ 88.71 to $371.64    $ 234.43

~~Restricted Stock~~

~~During the nine months ended October 1, 2022, the Company granted three thousand shares of restricted stock. The weighted-average fair value per share of these awards on the grant date was $364.59.~~

~~Restricted Stock Units~~

~~The following table summarizes the unvested restricted stock unit award activity for the nine months ended October 1, 2022 (in thousands, except per share data):~~

Shares

Weighted-Average

Grant Date Fair
Value per Share

Unvested at December 31, 2021    245    $ 234.97
Granted    98    $ 322.99
Vested    (76 )    $ 219.30
Forfeited    (23 )    $ 256.22

Unvested at October 1, 2022    244    $ 273.20

~~Restricted stock units are generally granted annually in February and vest in equal annual installments over a five-year period.~~

~~Performance Stock Units~~

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

~~Table of Contents~~

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

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

~~zero-coupon~~

issues with a remaining term approximating the expected term used as the input to the Monte Carlo simulation model. The correlation coefficient is used to model the way in which each company in the S&P Health Care Index tends to move in relation to each other during the performance period. The relevant data used to determine the value of the performance stock units granted during the nine months ended October 1, 2022 and October 2, 2021 are as

~~follows:~~

Nine Months Ended

Performance Stock Units Issued and Significant Assumptions Used to Estimate
Fair Values

October 1, 2022

October 2, 2021

Performance stock units issued (in thousands)    40 41
Risk-free interest rate    1.6 % 0.2 %
Expected life in years    2.9 2.9
Expected volatility    25.4 % 38.7 %
Average volatility of peer companies    34.5 % 34.7 %
Correlation coefficient    43.0 % 45.8 %
Expected dividends    —   —

~~The following table summarizes the unvested performance stock unit award activity for the nine months ended October 1, 2022 (in thousands, except per share data):~~

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 October 1, 2022    111    $ 297.55

9 Earnings Per Share

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


	Three Months Ended October 1, 2022							Three Months Ended April 1, 2023
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount			Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	155,998		59,801	$	2.61		$	140,923		59,023	$	2.39
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		—		280		(0.01	)		—		294		(0.01	)

Net income per diluted common share	$	155,998		60,081	$	2.60		$	140,923		59,317	$	2.38

~~Table of Contents~~

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


	Three Months Ended April 2, 2022
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	159,831		60,580	$	2.64
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		—		372		(0.02	)

Net income per diluted common share	$	159,831		60,952	$	2.62

Three Months Ended October 2, 2021


Net Income
(Numerator)

Weighted-
Average Shares
(Denominator)

Per Share
Amount

Net income per basic common share    $ 161,185    61,359    $ 2.63
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities    —      529    (0.03 )

Net income per diluted common share    $ 161,185    61,888    $ 2.60

Nine Months Ended October 1, 2022


Net Income
(Numerator)

Weighted-
Average Shares
(Denominator)

Per Share
Amount

Net income per basic common share    $ 480,693    60,200    $ 7.98
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities    —      321    (0.04 )

Net income per diluted common share    $ 480,693    60,521    $ 7.94

Nine Months Ended October 2, 2021


Net Income
(Numerator)

Weighted-
Average Shares
(Denominator)

Per Share
Amount

Net income per basic common share    $ 476,604    61,771    $ 7.72
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities    —      473    (0.06 )

Net income per diluted common share    $ 476,604    62,244    $ 7.66

For the three ~~and nine~~ months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021,~~2022, the Company had ~~fewer than one million~~140 thousand and 12 thousand stock options that were antidilutive, respectively, due to having higher exercise prices than the Company’s average stock price during the ~~applicable~~ period. These securities were not included in the computation of diluted EPS. The effect of dilutive securities was calculated using the treasury stock method.

1110 Accumulated Other Comprehensive ~~Loss~~Income (Loss)

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

Currency
Translation

Unrealized Gain
(Loss) on
Retirement Plans

Unrealized Gain
(Loss) on
Investments

Accumulated Other
Comprehensive
Loss

Balance at December 31, 2021    $ (99,985 )    $ (11,860 )    $ (20 )    $ (111,865 )
Other comprehensive (loss) income, net of tax    (54,255 )    1,710    20    (52,525 )

Balance at October 1, 2022    $ (154,240 )    $ (10,150 )    $ —      $ (164,390 )


	Currency Translation			Unrealized Gain (Loss) on Retirement Plans			Accumulated Other Comprehensive Loss
Balance at December 31, 2022	$	(146,120	)	$	4,548		$	(141,572	)
Other comprehensive (loss) income, net of tax		8,783			(7	)		8,776

Balance at April 1, 2023	$	(137,337	)	$	4,541		$	(132,796	)

~~Table of Contents~~

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

~~12 Retirement Plans~~

The Company sponsors various retirement plans. The components of net periodic benefit cost other than the service cost component are included in other income, net in the consolidated statements of operations. The summary of the components of net periodic pension costs for the plans for the three and nine months ended October 1, 2022 and October 2, 2021 is as follows (in thousands):

Three Months Ended


October 1, 2022

October 2, 2021


U.S. Retiree
Healthcare
Plan

Non-U.S.

Pension
Plans

U.S. Retiree
Healthcare
Plan

Non-U.S.

Pension
Plans

Service cost    $ 226    $ 972    $ 198    $ 1,140
Interest cost    145    327    141    309
Expected return on plan assets    (269 )    (475 )    (248 )    (459 )
Settlement loss    —      139    —      102
Net amortization:
Prior service (credit) cost    (4 )    (31 )    (5 )    13
Net actuarial loss    —      150    8    130

Net periodic pension cost    $ 98    $ 1,082    $ 94    $ 1,235

Nine Months Ended


October 1, 2022

October 2, 2021


U.S. Retiree
Healthcare
Plan

Non-U.S.

Pension
Plans

U.S. Retiree
Healthcare
Plan

Non-U.S.

Pension
Plans

Service cost    $ 678    $ 3,057    $ 663    $ 3,447
Interest cost    436    1,034    419    936
Expected return on plan assets    (807 )    (1,505 )    (758 )    (1,389 )
Settlement loss    —      139    —      102
Net amortization:
Prior service credit    (14 )    (100 )    (14 )    (67 )
Net actuarial loss    —      476    8    653

Net periodic pension cost    $ 293    $ 3,101    $ 318    $ 3,682

~~During fiscal year 2022, the Company expects to contribute a total of approximately $3 million to $6 million to the Company’s defined benefit plans.~~

1311 Business Segment Information

The Company’s business activities, for which discrete financial information is available, are regularly reviewed and evaluated by the chief operating decision maker. As a result of this evaluation, the Company determined that it has two operating segments: Waters

and TA

Table of Contents

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

The Waters operating segment is primarily in the business of designing, manufacturing, selling and servicing LC and MS instruments, columns and other precision chemistry consumables that can be integrated and used along with other analytical instruments. The TA operating segment is primarily in the business of designing, manufacturing, selling and servicing thermal analysis, rheometry and calorimetry instruments. The Company’s

two

operating segments have similar economic characteristics; product processes; products and services; types and classes of customers; methods of distribution; and regulatory environments. Because of these similarities, the

two

segments have been aggregated into

one

reporting segment for financial statement purposes. Please refer to the consolidated financial statements for financial information regarding the

one

reportable segment of the Company.

~~Table of Contents~~

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

Net sales for the Company’s products and services are as follows for the three ~~and nine~~ months ended ~~October~~April 1, 2023 and April 2, 2022 ~~and October 2, 2021~~ (in

thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021		April 1, 2023		April 2, 2022
Product net sales:
Waters instrument systems	$	274,869	$	240,475	$	825,677	$	717,910	$	244,211	$	269,962
Chemistry consumables		128,096		123,045		385,661		368,478		133,515		125,618
TA instrument systems		61,958		55,613		174,055		155,722		58,731		55,260

Total product sales		464,923		419,133		1,385,393		1,242,110		436,457		450,840
Service net sales:
Waters service		220,436		218,291		660,371		644,625		224,349		217,576
TA service		23,196		21,809		67,682		62,690		23,868		22,156

Total service sales		243,632		240,100		728,053		707,315		248,217		239,732

Total net sales	$	708,555	$	659,233	$	2,113,446	$	1,949,425	$	684,674	$	690,572

Net sales are attributable to geographic areas based on the region of destination. Geographic sales information is presented below for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021~~2022 (in thousands):

Three Months Ended

Nine Months Ended


October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

Net Sales:
Asia:
China    $ 140,080    $ 115,886    $ 399,852    $ 346,030
Japan    37,095    44,293    123,222    139,702
Asia Other    102,759    94,423    289,204    268,359

Total Asia    279,934    254,602    812,278    754,091
Americas:
United States    216,380    194,776    638,908    544,124
Americas Other    40,029    36,225    123,609    109,128

Total Americas    256,409    231,001    762,517    653,252
Europe    172,212    173,630    538,651    542,082

Total net sales    $ 708,555    $ 659,233    $ 2,113,446    $ 1,949,425

~~Net sales by customer class are as follows for the three and nine months ended October 1, 2022 and October 2, 2021 (in thousands):~~

Three Months Ended

Nine Months Ended


October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

Pharmaceutical    $ 405,959    $ 398,338    $ 1,258,902    $ 1,175,191
Industrial    223,968    196,032    641,882    581,884
Academic and government    78,628    64,863    212,662    192,350

Total net sales    $ 708,555    $ 659,233    $ 2,113,446    $ 1,949,425


	Three Months Ended
	April 1, 2023		April 2, 2022
Net Sales:
Asia:
China	$	116,065	$	121,032
Japan		46,494		48,623
Asia Other		90,522		84,679

Total Asia		253,081		254,334
Americas:
United States		202,305		208,713
Americas Other		44,116		40,124

Total Americas		246,421		248,837
Europe		185,172		187,401

Total net sales	$	684,674	$	690,572

Table of Contents

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

Net sales by customer class are as follows for the three months ended April 1, 2023 and April 2, 2022 (in thousands):


	Three Months Ended
	April 1, 2023		April 2, 2022
Pharmaceutical	$	384,898	$	415,772
Industrial		209,650		209,397
Academic and government		90,126		65,403

Total net sales	$	684,674	$	690,572

Net sales for the Company recognized at a point in time versus over time are as follows for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021~~2022 (in thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021		April 1, 2023		April 2, 2022
Net sales recognized at a point in time:
Instrument systems	$	336,827	$	296,088	$	999,732	$	873,632	$	302,942	$	325,222
Chemistry consumables		128,096		123,045		385,661		368,478		133,515		125,618
Service sales recognized at a point in time (time & materials)		89,724		85,093		267,074		253,212		88,207		85,778

Total net sales recognized at a point in time		554,647		504,226		1,652,467		1,495,322		524,664		536,618
Net sales recognized over time:
Service and software maintenance sales recognized over time (contracts)		153,908		155,007		460,979		454,103		160,010		153,954

Total net sales	$	708,555	$	659,233	$	2,113,446	$	1,949,425	$	684,674	$	690,572

1412 Recent Accounting Standard Changes and Developments

Recently ~~Issued~~Adopted Accounting Standards

In March 2020, accounting guidance was issued that facilitates the effects of reference rate reform on financial reporting. The amendments in the update provide optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January of 2021, an update was issued to clarify that certain optional expedients and exceptions under the reference rate reform guidance for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, certain provisions in the reference rate reform guidance, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. This temporary guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company may elect to apply this guidance for all contract modifications or eligible hedging relationships during that time period subject to certain criteria. The Company does not believe that it has material reference rate exposure which would require utilizing the guidance under this accounting pronouncement and if adopted does not believe that this standard would have a material impact on the Company’s financial position, results of operations and cash flows.

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

Recently Issued Accounting Standards

In March 2020, accounting guidance was issued that facilitates the effects of reference rate reform on financial reporting. The amendments in the update provide optional guidance for a

~~busin~~

~~ess combination activity~~ limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting and ~~therefore~~apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January of 2021, an update was issued to clarify that certain optional expedients and exceptions under the ~~Company will evaluate the impact of~~

~~thi~~

~~s guidance when and if there is applicable activity.~~reference rate reform

Table of Contents

~~Item 2:~~

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

’

guidance for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, certain provisions in the reference rate reform guidance, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. This temporary guidance is effective for all entities as of March 12, 2020, through December 31, 2022. In December 2022, an update was issued because the cessation date for overnight LIBOR rates being published was extended to June 30, 2023, which was beyond the current expiration date of this guidance. The update extended the sunset date to December 31, 2024. The Company may elect to apply this guidance for all contract modifications or eligible hedging relationships during that time period subject to certain criteria. The Company does not believe that it has material reference rate exposure which would require utilizing the guidance under this accounting pronouncement and if adopted does not believe that this standard would have a material impact on the Company’s financial position, results of operations and cash flows.

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

The Company has two operating segments: Waters

^TM

and TA

^TM

. Waters products and services primarily consist of high-performance liquid chromatography (“HPLC”), ultra-performance liquid chromatography (“UPLC

^TM

” and, together with HPLC, referred to as “LC”), mass spectrometry (“MS”) and precision chemistry consumable products and related services. TA products and services primarily consist of thermal analysis, rheometry and calorimetry instrument systems and service sales. The Company’s products are used by pharmaceutical, biochemical, industrial, nutritional safety, environmental, academic and government customers. These customers use the Company’s products to detect, identify, monitor and measure the chemical, physical and biological composition of materials and to predict the suitability and stability of fine chemicals, pharmaceuticals, water, polymers, metals and viscous liquids in various industrial, consumer goods and healthcare products.

COVID-19

Pandemic

Both the Company’s domestic and international operations have been and continue to be affected by the ongoing global

COVID-19

pandemic that has led to volatility and uncertainty in the U.S. and international markets. The Company is actively managing its business to respond to the

COVID-19

impact; however, the Company cannot reasonably estimate the length or severity of the

COVID-19

pandemic, including the effect of the emergence of variants of the virus, or the related response, or the extent to which the disruption may materially impact the Company’s business, consolidated financial position, consolidated results of operations or consolidated cash flows in the future.

The

COVID-19

pandemic has not had a material impact on the Company’s manufacturing facilities or those of the third parties to whom it outsources certain manufacturing processes, the distribution centers where the inventory is managed or the operations of its logistics and other service providers.

~~During the second quarter of 2022, the Company successfully managed a significant delay in the receipt of certain materials and components from a supplier that was directly related to the~~

~~COVID-19~~

pandemic lockdown in China, and while the Company did not experience these significant delays in the third quarter of 2022, the Company cannot provide any assurances that any further disruptions in its logistics and supply chains will not have a significant impact on its future financial results and cashflows.

~~The Company has taken decisive and appropriate actions throughout the~~

~~COVID-19~~

pandemic and continues to take proactive measures to guard the health of its global employee base and the safety of all customer interactions. The Company has implemented rigorous protocols to promote a safe work environment in all of its locations that are operational around the world and continues to closely monitor and update its multi-phase process for the safe return of employees to their physical workplaces as social distancing, governmental requirements, including capacity limitations, and other protocols allow.

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.


	Total at October 1, 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		876		—		876		—
Waters 401(k) Restoration Plan assets		24,099		24,099		—		—
Foreign currency exchange contracts		278		—		278		—
Interest rate cross-currency swap agreements		62,223		—		62,223		—

Total	$	87,476	$	24,099	$	63,377	$	—

Liabilities:
Contingent consideration	$	1,469	$	—	$	—	$	1,469
Foreign currency exchange contracts		63		—		63		—

Total	$	1,532	$	—	$	63	$	1,469


	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


	Financial Statement Classification	Three Months Ended						Nine Months Ended
	Financial Statement Classification	October 1, 2022			October 2, 2021			October 1, 2022			October 2, 2021
Foreign currency exchange contracts:
Realized (losses) gains on closed contracts	Cost of sales	$	(3,811	)	$	(774	)	$	(6,603	)	$	681
Unrealized gains (losses) on open contracts	Cost of sales		461			(933	)		(93	)		(2,256	)

Cumulative net pre-tax losses	Cost of sales	$	(3,350	)	$	(1,707	)	$	(6,696	)	$	(1,575	)

Interest rate cross-currency swap agreements:
Interest earned	Interest income	$	2,362		$	2,305		$	6,214		$	9,505
Unrealized gains on open contracts	Other comprehensive income	$	31,108		$	7,762		$	73,812		$	24,777


	October 1, 2022
	Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value
Time deposits		876		—		—		876

Total	$	876	$	—	$	—	$	876

Amounts included in:
Investments		876		—		—		876

Total	$	876	$	—	$	—	$	876


	October 1, 2022		December 31, 2021
Due in one year or less	$	876	$	71,066
Due after one year through three years		—		1,002

Total	$	876	$	72,068


	October 1, 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 September 2026		200,000			200,000
Senior unsecured notes - Series M - 3.53%, due September 2029		300,000			300,000
Senior unsecured notes - Series N - 1.68%, due March 2026		100,000			100,000
Senior unsecured notes - Series O - 2.25%, due March 2031		400,000			400,000
Credit agreement		240,000			210,000
Unamortized debt issuance costs		(5,374	)		(6,130	)

Total long-term debt		1,494,626			1,513,870

Total debt	$	1,544,626		$	1,513,870


	Nine Months Ended
Options Issued and Significant Assumptions Used to Estimate Option Fair Values	October 1, 2022			October 2, 2021
Options issued in thousands		138			160
Risk-free interest rate		2.0	%		0.8	%
Expected life in years		6			6
Expected volatility		30.7	%		32.4	%
Expected dividends		—			—


	Nine Months Ended
Weighted-Average Exercise Price and Fair Value of Options on the Date of Grant	October 1, 2022		October 2, 2021
Exercise price	$	321.12	$	281.23
Fair value	$	107.95	$	91.46


	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	$	321.12
Exercised		(167	)	$	88.71 to $279.90	$	168.37
Canceled		(40	)	$	188.63 to $364.59	$	253.23

Outstanding at October 1, 2022		622		$	88.71 to $371.64	$	234.43


	Shares			Weighted-Average Grant Date Fair Value per Share
Unvested at December 31, 2021		245		$	234.97
Granted		98		$	322.99
Vested		(76	)	$	219.30
Forfeited		(23	)	$	256.22

Unvested at October 1, 2022		244		$	273.20


	Nine Months Ended
Performance Stock Units Issued and Significant Assumptions Used to Estimate Fair Values	October 1, 2022			October 2, 2021
Performance stock units issued (in thousands)		40			41
Risk-free interest rate		1.6	%		0.2	%
Expected life in years		2.9			2.9
Expected volatility		25.4	%		38.7	%
Average volatility of peer companies		34.5	%		34.7	%
Correlation coefficient		43.0	%		45.8	%
Expected dividends		—			—


	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 October 1, 2022		111		$	297.55


	Three Months Ended October 2, 2021
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	161,185		61,359	$	2.63
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		—		529		(0.03	)

Net income per diluted common share	$	161,185		61,888	$	2.60


	Nine Months Ended October 1, 2022
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	480,693		60,200	$	7.98
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		—		321		(0.04	)

Net income per diluted common share	$	480,693		60,521	$	7.94


	Nine Months Ended October 2, 2021
	Net Income (Numerator)		Weighted- Average Shares (Denominator)		Per Share Amount
Net income per basic common share	$	476,604		61,771	$	7.72
Effect of dilutive stock option, restricted stock, performance stock unit and restricted stock unit securities		—		473		(0.06	)

Net income per diluted common share	$	476,604		62,244	$	7.66


	Currency Translation			Unrealized Gain (Loss) on Retirement Plans			Unrealized Gain (Loss) on Investments			Accumulated Other Comprehensive Loss
Balance at December 31, 2021	$	(99,985	)	$	(11,860	)	$	(20	)	$	(111,865	)
Other comprehensive (loss) income, net of tax		(54,255	)		1,710			20			(52,525	)

Balance at October 1, 2022	$	(154,240	)	$	(10,150	)	$	—		$	(164,390	)


	Three Months Ended
	October 1, 2022		% of Total			October 2, 2021		% of Total			% change
Waters instrument systems	$	274,869		44	%	$	240,475		41	%		14	%
Chemistry consumables		128,096		21	%		123,045		21	%		4	%

Total Waters product sales		402,965		65	%		363,520		62	%		11	%
Waters service		220,436		35	%		218,291		38	%		1	%

Total Waters net sales	$	623,401		100	%	$	581,811		100	%		7	%


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)
July 3, 2022 to July 30, 2022		129	$	340.09		129	$	528,840
July 31, 2022 to August 27, 2022		157	$	335.11		157	$	476,337
August 28, 2022 to October 1, 2022		199	$	295.79		197	$	418,055

Total		485	$	320.30		483	$	418,055


Exhibit Number		Description of Document

2.1		Share Purchase Agreement, dated as of February 14, 2023, by and among Wyatt Technology Corporation, Waters Technologies Corporation, the shareholders named therein and Geofrey Wyatt in his capacity as representative of the shareholders (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 15, 2023).

10.1		Amendment and Incremental Commitment Agreement, dated as of March 3, 2023, by and among the Company, Waters Technologies Corporation, TA Instruments – Waters L.L.C., Waters Asia Limited, Environmental Resource Associates, Inc., the lenders party thereto, the issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 7, 2023).

31.1		Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(*)

32.2		Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(*)

101		The following materials from Waters Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~October~~April 1, ~~2022,~~2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets (unaudited), (ii) the Consolidated Statements of Operations (unaudited), (iii) the Consolidated Statements of Comprehensive Income (unaudited), (iv) the Consolidated Statements of Cash Flows (unaudited) and (vi) Condensed Notes to Consolidated Financial Statements (unaudited).

104		Cover Page Interactive Date File (formatted in iXBRL and contained in Exhibit 101).

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company