Waters Corporation, an analytical instrument manufacturer, designs, manufactures
and sells, through its Waters Division, high performance liquid chromatography
(“HPLC”) and mass spectrometry (“MS”) instrument systems and associated service
and support products, including chromatography columns and other “consumable”
products. Through its TA Instruments Division (“TAI”), the Company designs, manufactures,
services and sells thermal analysis and rheology instruments. The Company is also
a developer and supplier of software based products which interface with the Company’s
instruments and are typically purchased by customers as part of the instrument
system.
The Company’s products are used by pharmaceutical, life science, biochemical,
industrial, academic and government customers working in research and development,
quality assurance and other laboratory applications. The Company’s HPLC instruments
are utilized in this broad range of industries to detect, identify, monitor
and measure the chemical, physical and biological composition of materials as
well as to purify a full range of compounds. MS instruments are used in drug
discovery and development, including clinical trial testing, the analysis of
proteins in disease processes (known as “proteomics”) and environmental testing.
The Company’s thermal analysis and rheometry instruments are used in predicting
the suitability of polymers and viscous liquids for uses in various industrial,
consumer goods and health care products.
Waters is a holding company that owns all of the outstanding common stock of
Waters Technologies Corporation, its operating subsidiary. The Company previously
operated as the Waters Chromatography division of Millipore Corporation, prior
to a management buyout of the division that became effective on August 18, 1994.
Waters became a publicly traded company with its initial public offering (“IPO”)
in November 1995. Since the IPO, the Company has added two significant and complementary
technologies to its range of products with the acquisitions of Micromass Limited
(“Micromass”) in September 1997 and TAI in May 1996.
The Company operates in the analytical instruments industry, manufacturing
and distributing products in three complementary technologies: HPLC, MS and
Thermal Analysis. In the third quarter of fiscal year 2003, the Company completed
the integration of the Micromass field sales, service distribution and manufacturing
organizations into the Waters Division and changed the internal reporting structure
to reflect this integration. As a result, the Company has two operating segments,
Waters Division and TAI, which 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.
Customers
The Company has a broad and diversified customer base that includes pharmaceutical
accounts, other industrial accounts, universities and government agencies. The
pharmaceutical segment represents the Company’s largest sector and includes
multinational pharmaceutical companies, generic drug manufacturers and biotechnology
companies. The Company’s other industrial customers include chemical manufacturers,
polymer manufacturers, food and beverage companies and environmental testing
laboratories. The Company also sells to various universities and government
agencies worldwide. The Company’s technical support staff work closely with
its customers in developing and implementing applications that meet their full
range of analytical requirements.
Sales and Service
The Company has one of the largest sales and service organizations in the industry
focused exclusively on HPLC, MS and thermal analysis markets. Across these technologies,
using respective specialized sales and service forces, the Company serves its
customer base with approximately 1,530 field representatives in 97 sales offices
throughout the world. The sales representatives have direct responsibility for
account relationships, while service representatives work in the field to install
instruments and minimize instrument downtime for customers. Technical support
representatives work directly with customers, helping them to develop applications
and procedures. The Company provides customers with comprehensive product literature
and also makes consumable products available through a dedicated catalog.
Manufacturing
The Company provides high quality HPLC products by controlling each stage of
production of its instruments and columns. The Company assembles most of its
HPLC instruments at its facility in Milford, Massachusetts, where it performs
machining, wiring, assembly and testing. The Milford facility employs manufacturing
techniques that are expected to meet the strict ISO 9002 quality manufacturing
standards and FDA mandated Good Manufacturing Practices. The Company outsources
manufacturing of certain electronic components such as computers, monitors and
circuit boards to outside vendors that can meet the Company’s quality requirements.
The Company manufactures its HPLC columns at its facilities in Taunton, Massachusetts
and Wexford, Ireland, where it processes, sizes and treats silica and polymer
media that are packed into columns, solid phase extraction cartridges and bulk
shipping containers. The Wexford facility also manufactures and distributes
certain data, instruments and software components for the Company’s HPLC, MS
and thermal analysis product lines. These facilities meet the same ISO and FDA
standards met by the Milford, Massachusetts facility and are approved by the
FDA.
The Company manufactures most of its MS products at its facilities in Manchester,
England, Cheshire, England and Wexford, Ireland. Certain components or modules
of the Company’s MS instruments are manufactured by outside long-standing contractors.
Each stage of this supply chain is closely monitored by the Company to maintain
its high quality and performance standards. The instruments, components or modules
are then returned to the Company’s facilities where its engineers perform final
assembly, calibrations to customer specifications and quality control procedures.
Thermal analysis products are manufactured at the Company’s New Castle, Delaware
facility and rheology products are manufactured at the Company’s New Castle,
Delaware and Leatherhead, England facilities. Similar to MS, certain elements
of TAI’s products are manufactured by outside contractors and are then returned
to the Company’s facilities for final assembly, calibration and quality control.
Competition
The analytical instrument and systems market is highly competitive. The Company
encounters competition from several worldwide instrument manufacturers in both
domestic and foreign markets for each of its three technologies. The Company
competes in its markets primarily on the basis of instrument performance, reliability
and service and, to a lesser extent, price. Some competitors have instrument
businesses that are more diversified than the Company’s business, but are typically
less focused on the Company’s chosen markets. Some competitors have greater
financial and other resources than the Company.
In the markets served by HPLC and MS, the Company’s principal competitors include:
Applied BioSystems, Inc., Agilent Technologies, Inc., Thermo Electron Corporation,
Varian, Inc., Shimadzu Corporation and Bruker BioSciences Corporation. In the
markets served by TAI, the Company’s principal competitors include: PerkinElmer
Inc., Mettler-Toledo International Inc., Shimadzu Corporation, HAAKE and Parr-Physica.
The market for consumable HPLC products, including separation columns, is also
highly competitive but is more fragmented than the analytical instruments market.
The Company encounters competition in the consumable columns market from chemical
companies that produce column chemicals and small specialized companies that
pack and distribute columns. The Company believes that it is one of the few
suppliers that process silica, packs columns, and distributes its own product.
The Company competes in this market on the basis of reproducibility, reputation
and performance, and, to a lesser extent, price. The Company’s principal competitors
for consumable products include Phenomenex, Supelco Inc., Agilent Technologies,
Inc., Alltech International Holdings, Inc. and Merck and Co., Inc.