WATERS CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
INDEX
PART I
Item 1.
Financial Statements
Consolidated Balance Sheets (unaudited) as of September 27, 2025 and December 31, 2024
Consolidated Statements of Operations (unaudited) for the three months ended September 27, 2025 and September 28, 2024
Consolidated Statements of Operations (unaudited) for the nine months ended September 27, 2025 and September 28, 2024
Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended September 27, 2025 and September 28, 2024
Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 27, 2025 and September 28, 2024
Consolidated Statements of Stockholders’ Equity (unaudited) for the three months ended September 27, 2025 and September 28, 2024
Consolidated Statements of Stockholders’ Equity (unaudited) for the nine months ended September 27, 2025 and September 28, 2024
Condensed Notes to Consolidated Financial Statements (unaudited)
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
PART II
OTHER INFORMATION
Legal Proceedings
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Item 5.
Other Information
Item 6.
Exhibits
Signature
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Business Overview
The Company has two operating segments: WatersTM and TATM. Waters products and services primarily consist of high-performance liquid chromatography (“HPLC”), ultra-performance liquid chromatography (“UPLCTM” and, together with HPLC, referred to as “LC”), mass spectrometry (“MS”), light scattering and field-flow fractionation instruments (Wyatt), 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.
Acquisition of BD Biosciences & Diagnostic Solutions Businesses
On July 13, 2025, the Company entered into definitive agreements with BD, Augusta SpinCo Corporation, a Delaware corporation and wholly owned subsidiary of BD (“SpinCo”), and Beta Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Waters (“Merger Sub”), with respect to a Reverse Morris Trust transaction valued at approximately $17.5 billion as of the date of signing, and pursuant to which, subject to the terms and conditions of such definitive agreements, (i) BD will transfer (or cause to be transferred) and SpinCo will accept and assume (or cause to be accepted and assumed) all of the rights, titles and interests to and under certain assets and liabilities relating to BD’s Biosciences and Diagnostic Solutions business, (ii) BD will distribute to its shareholders all of the issued and outstanding shares of common stock, $0.01 par value per share, of SpinCo (“SpinCo Common Stock”) held by BD by way of a pro rata distribution (the “Spin-Off” and the disposition by BD of 100% of the SpinCo Common Stock by way of the Spin-Off, the “Distribution”) and (iii) following the Distribution, Merger Sub will be merged with and into SpinCo, with SpinCo as the surviving entity (the “Merger”), and all SpinCo Common Stock will be converted into the right to receive shares of common stock, $0.01 par value per share, of the Company (“Company Common Stock”), as calculated and subject to adjustment as set forth in the Merger Agreement (as defined herein). When the Merger is completed, SpinCo will become a wholly owned subsidiary of Waters. Upon completion of the Merger, BD’s shareholders are expected to own approximately 39.2% of the combined company, and existing Waters Corporation shareholders are expected to own approximately 60.8% of the combined company. This strategic combination is expected to create a leading global life sciences and diagnostics company with enhanced scale, complementary capabilities and expanded end-market exposure.
The definitive agreements entered into in connection with the transaction include (i) an Agreement and Plan of Merger (the “Merger Agreement”), dated as of July 13, 2025, by and among Waters, BD, SpinCo and Merger Sub, and (ii) a Separation Agreement (the “Separation Agreement”), dated as of July 13, 2025, by and among Waters, BD and SpinCo. As set forth in the Merger Agreement, Waters, BD and SpinCo will also enter into several additional agreements in connection with the transaction.
Prior to, and as a condition of, the Distribution, SpinCo will make a cash payment to BD equal to $4.0 billion (the “SpinCo Cash Distribution”), subject to adjustment for cash, working capital and indebtedness of SpinCo and subject to decrease if additional shares of Company Common Stock will be issued to the Company’s shareholders. The SpinCo Cash Distribution is expected to be paid using proceeds from approximately $4.0 billion of new indebtedness to be incurred by SpinCo prior to the Distribution. The Company is expected to assume all indebtedness incurred by SpinCo in connection with the payment of the SpinCo Cash Distribution upon completion of the Merger. Based on information available through the date of this report, if the transaction closes, the Company estimates it will incur transaction-related expenses and financing fees of approximately $140 million in total.
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In order to preserve the tax-free nature of the Spin-Off under the Reverse Morris Trust framework, the exchange ratio for the merger consideration specified in the Merger Agreement (the “Exchange Ratio”) may be adjusted and increased, if necessary, on the terms and subject to the conditions set forth in the Merger Agreement. In the event that the Exchange Ratio is adjusted upwards, the Company may issue a pre-closing cash dividend to the shareholders of the Company (the “Waters Special Dividend”) and/or the SpinCo Cash Distribution could be decreased to account for the value of the additional shares issued to the Company’s shareholders.
The transaction is expected to close around the end of the first quarter of calendar year 2026, subject to receipt of required regulatory approvals, shareholder approval from the Company’s shareholders and satisfaction of other customary closing conditions.
Acquisition of Halo Labs
On May 20, 2025, the Company completed the acquisition of all of the outstanding equity interests of Optofluidics, Inc., and its wholly owned operating subsidiary, Halo Labs LTD (collectively, “Halo Labs”), for $35 million, net of cash acquired. Halo Labs offers high throughput biopharmaceutical formulation, stability and product quality control tools for aggregate and subvisible particle analysis through the use of custom optics and image processing techniques. As a result of the acquisition, the results of Halo Labs are included in the Company’s consolidated financial statements from the acquisition date.
Tariffs
The Company sells and services its customers in over 35 countries outside of the U.S. and we have manufacturing operations in the U.S., Ireland, U.K. and in Singapore where we utilize subcontractors with worldwide capabilities.
In 2025, the U.S. government issued varying levels of tariffs on all imported goods into the U.S., including a baseline 10% tariff, subject to certain exceptions, which have also prompted retaliatory tariffs by a number of countries, including tariffs and export restrictions on certain manufacturing components imposed by China and tariffs pursuant to trade agreements the U.S. has entered into with certain countries. In addition, a number of new tariffs have been threatened, and the U.S. and other countries continue to negotiate trade arrangements and tariff levels. In August 2025, the U.S. Court of Appeals for the Federal Circuit ruled against certain of the U.S. tariffs that have been implemented. The U.S. government has appealed this ruling, and the U.S. Supreme Court has agreed to hear the case, with oral arguments anticipated in November 2025.
These tariffs, any resulting retaliatory tariffs and any related supply-chain disruptions could have a significant impact on the Company’s consolidated statement of operations and statement of cash flows. In response to currently applicable and potential future tariffs, the Company is continuing to evaluate and implement a series of actions and policies that are intended to offset a portion of the impact of the tariffs on the Company’s financial position and results of operations. While the Company believes that these actions and policies will mitigate a substantial portion of the impact of the tariffs, the Company cannot provide any assurances that the tariffs or any resulting impediments to trade will not have a material effect on the Company’s consolidated statement of operations and statement of cash flows.
In addition to changes in trade policy, the new U.S. administration has implemented a number of other regulatory, policy and personnel changes, including the elimination, downsizing and reduced funding of certain government agencies and programs and the cancellation or delay of government contracts and research grants, each of which may be exacerbated by the U.S. government shutdown that began in October 2025. In addition, the administration has changed the composition of and guidance from advisory panels on healthcare practices.
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Financial Overview
The Company’s operating results are as follows for the three and nine months ended September 27, 2025 and September 28, 2024 (dollars in thousands, except per share data):
Revenues:
Product sales
Service sales
Total net sales
Costs and operating expenses:
Cost of sales
Selling and administrative expenses
Research and development expenses
Purchased intangibles amortization
Litigation provision
Operating income
Operating income as a % of sales
Other (expense) income, net
Interest expense, net
Income before income taxes
Provision for income taxes
Net income
Net income per diluted common share
Percentage not meaningful
The Company’s net sales increased 8% in the third quarter of 2025, as compared to the third quarter of 2024 and 7% for the first nine months of 2025 as compared to the first nine months of 2024. The effect of foreign currency translation had minimal impact on total sales growth for both the third quarter and first nine months of 2025. The net sales growth in the third quarter and first nine months of 2025 was driven by strong customer demand for the Waters Division products and services across most major geographies, end markets and product lines.
Instrument system sales increased 6% for each of the third quarter and first nine months of 2025, respectively, primarily driven by broad-based higher customer demand for our instrument systems in most regions of the world. Foreign currency translation had minimal impact on instrument system sales growth for each of the third quarter of 2025 and first nine months of 2025.
Recurring revenues (combined sales of precision chemistry consumables and services) increased 10% and 8% for the third quarter and first nine months of 2025, respectively, with foreign currency translation increasing sales growth by 1% for the third quarter of 2025 and having a minimal impact on sales growth for the first nine months of 2025. Service revenues increased 8% and 6% for the third quarter and first nine months of 2025, respectively. Chemistry sales growth increased 14% and 11% for the third quarter and first nine months of 2025, respectively. The double-digit chemistry sales growth can be attributed to the uptake in columns and application-specific testing kits to pharmaceutical customers.
Operating income decreased 9% for the third quarter of 2025 primarily due to the impact of the higher sales volume being offset by the change in sales mix, merit increases and approximately $31 million of transaction and integration costs associated with the Merger. In addition, operating income for the third quarter of 2025 included the impact of $6 million of expenses associated with the Company’s new ERP system implementation.
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Operating income decreased by less than 1% for the first nine months of 2025, due to the impact of the higher sales volume and the absence of severance-related costs associated with a workforce reduction in China and certain litigation settlements incurred in 2024, being partially offset by merit increases and $45 million of transaction and integration costs associated with the Merger. In addition, operating income for the first nine months of 2025 also includes the impact of $14 million of expenses associated with the Company’s new ERP system implementation. The effect of foreign currency translation decreased operating income by $9 million.
In the third quarter and first nine months of 2025, the Company’s interest expense included approximately $14 million of financing costs paid by the Company on behalf of SpinCo in connection with financing activities related to the Merger.
The Company generated $488 million and $522 million of net cash from operating activities in the first nine months of 2025 and 2024, respectively. The first nine months of 2025 included an increase of $24 million more in tax payments associated with the final 2018 Tax Reform Transition payment; $14 million of costs related to the implementation of the Company’s new ERP system; and $14 million of payments made in connection with merger transaction and integration costs. Net cash used in investing activities included capital expenditures related to property, plant, equipment and software capitalization of $74 million and $90 million in the first nine months of 2025 and 2024, respectively, as well as $35 million used for the Halo Labs acquisition in the second quarter of 2025.
On May 22, 2025, the Company and certain of its subsidiaries, as guarantors, entered into an Amendment and Restatement Agreement in respect of that certain Amended and Restated Credit Agreement, dated as of September 17, 2021 and amended as of March 3, 2023, with the lenders and issuing banks party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, pursuant to which the Company, among other things, reduced the aggregate total borrowing capacity of its existing senior unsecured revolving credit facility (the “Credit Facility”) by up to $200 million for an aggregate principal amount of up to $1.8 billion. The Credit Facility will mature on May 22, 2030 subject to the Company’s ability to request, subject to customary conditions, a one-year extension to which each lender may, in its discretion, agree.
In connection with the Merger Agreement to purchase BD’s Biosciences & Diagnostic Solutions business, the Company and a financial institution executed a 364-day bridge facility commitment letter in July of 2025, pursuant to which such financial institution has committed to provide bridge financing of $1.8 billion to fund dividends, fees and expenses related to the transactions contemplated by the Merger Agreement. The bridge facility is expected to be replaced with permanent financing, which may include a delayed draw term loan facility.
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Results of Operations
Sales by Geography
Geographic sales information is presented below for the three and nine months ended September 27, 2025 and September 28, 2024 (dollars in thousands):
Net Sales:
Asia:
China
Asia Other
Total Asia
Americas:
United States
Americas Other
Total Americas
Europe
Geographically, the increase in the Company’s sales in the third quarter and first nine months of 2025 was broad-based across most major regions. Sales growth in China increased 13% and 12% in the third quarter and first nine months of 2025, respectively. In the third quarter and first nine months of 2025, foreign currency translation increased Europe’s sales growth by 8% and 4%, respectively, and decreased Asia’s sales growth by 5%.
Sales by Trade Class
Net sales by customer class are presented below for the three and nine months ended September 27, 2025 and September 28, 2024 (dollars in thousands):
Pharmaceutical
Industrial
Academic and government
During the third quarter of 2025, sales to pharmaceutical customers increased 12%, driven by sales growth in most regions. Foreign currency translation increased pharmaceutical sales growth by 1%. Combined sales to industrial customers, which include material characterization, food, environmental and fine chemical markets, increased 3% in the third quarter of 2025, primarily driven by the broad-based sales growth in most regions except for the U.S., where industrial sales declined by 9% on lower demand for TA instrument systems. Foreign currency translation decreased industrial sales growth by 1%. Combined sales to academic and government customers increased 2% in the third quarter of 2025, with foreign currency translation increasing sales growth by 1%.
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During the first nine months of 2025, sales to pharmaceutical customers increased 9%, primarily driven by broad-based growth across all regions, with foreign currency translation decreasing pharmaceutical sales growth by 1%. Combined sales to industrial customers increased 5%, with foreign currency having minimal impact on sales growth. Sales to our academic and government customers increased 1% and are highly dependent on when institutions receive funding to purchase our instrument systems and, as such, sales can vary significantly from period to period.
Waters Products and Services Net Sales
Net sales for Waters products and services were as follows for the three and nine months ended September 27, 2025 and September 28, 2024 (dollars in thousands):
Waters instrument systems
Chemistry consumables
Total Waters product sales
Waters service
Total Waters net sales
Waters products and services sales increased 9% and 8% for the third quarter and first nine months of 2025, respectively, with foreign currency translation having minimal impact on the third quarter of 2025 and decreasing sales growth by 1% for the first nine months of 2025.
Waters instrument system sales increased by 6% and 8% for the third quarter and first nine months of 2025, respectively, due to higher customer demand for our instrument systems led by the increase in sales of LC-MS instrument systems. The effect of foreign currency translation had minimal impact on sales growth for the third quarter and decreased sales growth by 1% for the first nine months of 2025.
Waters chemistry consumables sales grew 14% and 11% for the third quarter and first nine months of 2025, respectively, and was primarily due to the continued demand in most major geographies, driven by the uptake in columns and application-specific testing kits to pharmaceutical customers. Foreign currency translation increased chemistry consumable sales by 1% in the third quarter of 2025 and had minimal impact on the first nine months of 2025.
Waters service sales increased 9% and 6% for the third quarter and first nine months of 2025, respectively, due to higher service demand billing in most major regions, with the effect of foreign currency translation increasing service sales by 1% for the third quarter of 2025 and decreasing service sales by 1% for the first nine months of 2025.
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TA Product and Services Net Sales
Net sales for TA products and services were as follows for the three and nine months ended September 27, 2025 and September 28, 2024 (dollars in thousands):
TA instrument systems
TA service
Total TA net sales
TA sales increased 2% and decreased 1% for the third quarter and first nine months of 2025, respectively, due to lower customer demand for TA instrument systems primarily driven by a 9% and 14% decrease in U.S. sales in the third quarter and first nine months of 2025, respectively. Foreign currency translation increased sales growth by 1% for each of the third quarter and first nine months of 2025, respectively.
Cost of Sales
Cost of sales increased 9% in each of the third quarter and first nine months of 2025. The increase is primarily due to higher sales volume. Cost of sales is affected by many factors, including, but not limited to, foreign currency translation, product mix, product costs of instrument systems and amortization of software platforms.
Selling and Administrative Expenses
Selling and administrative expenses increased 27% and 14% in the third quarter and first nine months of 2025, respectively, primarily due to an increase in merit compensation as well as $27 million and $41 million of transaction and integration costs associated with the Merger in the third quarter and first nine months of 2025, respectively. In addition, 2025 included $6 million and $14 million of expenses associated with the Company’s new ERP system implementation for the third quarter and first nine months of 2025, respectively. The effect of foreign currency translation had minimal impact on selling and administrative expenses for the third quarter and first nine months of 2025.
As a percentage of net sales, selling and administrative expenses were 26.8% and 26.4% for the third quarter and first nine months of 2025, respectively, and 22.8% and 24.8% for the third quarter and first nine months of 2024, respectively.
Research and Development Expenses
Research and development expenses increased 18% and 9% in the third quarter and first nine months of 2025, respectively. The increase in these periods was primarily driven by merit compensation; costs associated with the development of new product and technology initiatives; and $4 million of transaction and integration costs associated with the Merger. The impact of foreign currency exchange decreased expenses by 2% and 1% for the third quarter and first nine months of 2025, respectively.
Litigation Provisions
The Company recorded $12 million of patent litigation settlement provisions and related costs in the first nine months of 2024. No litigation provisions were recorded by the Company in the first nine months of 2025.
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Interest Expense, net
Interest expense, net increased $5 million and decreased $16 million in the third quarter and first nine months of 2025, respectively. The increase in the third quarter of 2025 is primarily a result of $14 million costs paid by the Company on behalf of SpinCo in connection with financing fees associated with financing activities related to the Merger. The decrease in the first nine months of 2025 is primarily a result of lower average outstanding debt as compared to the third quarter of 2024. The average outstanding debt in these periods was impacted by the timing of the repayment of outstanding debt.
Provision for Income Taxes
The four principal jurisdictions in which the Company manufactures are the U.S., Ireland, the U.K. and Singapore, where the statutory tax rates were 21%, 12.5%, 25% and 17%, respectively, as of September 27, 2025. The Company has a Development and Expansion Incentive in Singapore that provides a concessionary income tax rate of 5% on certain types of income for the period April 1, 2021 through March 31, 2026. The effect of applying the concessionary income tax rate rather than the statutory tax rate to income from qualifying activities in Singapore increased the Company’s net income by $2 million and $9 million and increased the Company’s net income per diluted share by $0.03 and $0.15 for the third quarter of 2025 and 2024, respectively.
The Company’s effective tax rate for the third quarter of 2025 and 2024 was 12.5% and 16.6%, respectively. The decrease in the effective tax rate can be primarily attributed to the impact of discrete tax benefits in the current year and differences in the proportionate amounts of pre-tax income recognized in jurisdictions with different effective tax rates.
The Company’s effective tax rate for the first nine months of 2025 and 2024 was 14.9% and 15.0%, respectively. The decrease in the effective tax rate can be attributed to the impact of differences in the proportionate amounts of pre-tax income recognized in jurisdictions with different effective tax rates.
Effective in 2024, various foreign jurisdictions began implementing aspects of the guidance issued by the Organization for Economic Co-operation and Development related to the new Pillar Two system of global minimum tax rules. These changes in tax law did not have a material impact on the Company’s financial position, results of operations and cash flows for the third quarter and first nine months of 2025. The Company continues to monitor the adoption of the Pillar Two rules in additional jurisdictions.
On July 4, 2025, the U.S. government enacted the One Big Beautiful Tax Bill Act, enacting changes to the United States federal tax code, including adjustments to effective tax rates on certain types of income and certain deduction limitations. The OBBB did not have a material impact on the Company’s financial position, results of operations and cash flows for the three and nine months ended September 27, 2025. The Company will continue to monitor the impact of this Act in future periods.
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Liquidity and Capital Resources
Condensed Consolidated Statements of Cash Flows (in thousands):
Depreciation and amortization
Stock-based compensation
Deferred income taxes
Change in accounts receivable
Change in inventories
Change in accounts payable and other current liabilities
Change in deferred revenue and customer advances
Other changes
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash Flow from Operating Activities
Net cash provided by operating activities was $488 million and $522 million during the first nine months of 2025 and 2024, respectively. The decrease in 2025 operating cash flow was primarily a result of higher net income being offset by an increase of $24 million in tax payments associated with the final 2018 Tax Reform Transition payment as compared to the prior year; $34 million of costs related to the implementation of the Company’s new ERP system; and $14 million of payments made in connection with merger transaction and integration costs. The changes within net cash provided by operating activities include the following significant changes in the sources and uses of net cash provided by operating activities, aside from the changes in net income:
The changes in accounts receivable were primarily attributable to the timing of payments made by customers and timing of sales. Days sales outstanding was 85 days at September 27, 2025 and 82 days at September 28, 2024.
The increase in inventory can primarily be attributed to higher tariffs on material costs as well as an increase in safety stock levels to help navigate tariffs and mitigate any future supply chain issues.
Net cash provided from deferred revenue and customer advances results from annual increases in new service contracts as a higher installed base of customers renew annual service contracts.
Other changes were attributable to variation in the timing of various provisions, expenditures, prepaid income taxes and accruals in other current assets, other assets and other liabilities.
Cash Flow from Investing Activities
Net cash used in investing activities totaled $110 million and $92 million in the first nine months of 2025 and 2024, respectively. Additions to fixed assets and capitalized software were $74 million and $90 million in the first nine months of 2025 and 2024, respectively.
On May 20, 2025, the Company completed the acquisition of Halo Labs for a total purchase price of $35 million in cash, net of cash acquired. Halo Labs is an innovator of specialized imaging technologies to detect, identify and count interfering materials in therapeutic products, such as cell, protein and gene therapies.
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Cash Flow from Financing Activities
On May 22, 2025, the Company and certain of its subsidiaries, as guarantors, entered into an Amendment and Restatement Agreement in respect of that certain Amended and Restated Credit Agreement, dated as of September 17, 2021 and amended as of March 3, 2023, with the lenders and issuing banks party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, pursuant to which the Company, among other things, reduced the aggregate total borrowing capacity of its existing senior unsecured revolving credit facility by up to $200 million for an aggregate principal amount of up to $1.8 billion. The Credit Facility will mature on May 22, 2030 subject to the Company’s ability to request, subject to customary conditions, a one-year extension to which each lender may, in its discretion, agree. As of September 27, 2025, the Company had a total of $1.4 billion in outstanding debt, which consisted of $1.3 billion in outstanding senior unsecured notes and $200 million borrowed under its Credit Facility. The Company’s net debt borrowings decreased by $220 million and $530 million during the first nine months of 2025 and 2024, respectively.
Concurrently with the execution of the Merger Agreement, the Company and a financial institution executed a 364-day bridge facility commitment letter, pursuant to which such financial institution has committed to provide bridge financing of $1.8 billion to fund dividends, fees and expenses related to the transactions contemplated by the Merger Agreement, on the terms and conditions set forth therein. The bridge facility is expected to be replaced with permanent financing, which may include a delayed draw term loan facility. The Company incurred $5 million of financing costs that are being amortized over the term of the bridge facility. In addition, in connection with financing activities related to the Merger, the Company paid $14 million of financing costs on behalf of SpinCo. These financing costs were expensed in the three and nine months ended September 27, 2025.
As of September 27, 2025, the Company had entered into interest rate cross-currency swap derivative agreements with durations up to three years with an aggregate notional value of $730 million to hedge the variability in the movement of foreign currency exchange rates on a portion of its euro-denominated and yen-denominated net asset investments. As a result of entering into these agreements, the Company lowered net interest expense by approximately $8 million during both the first nine months of 2025 and 2024. The Company anticipates that these swap agreements will lower net interest expense by approximately $10 million in 2025.
In December 2024, the Company’s Board of Directors authorized the extension of its existing share repurchase program through January 21, 2028. The Company’s remaining authorization is $1.0 billion. The Company did not make any open market share repurchases in 2025 or 2024. The Company repurchased $15 million and $13 million of common stock related to the vesting of restricted stock units during the first nine months of 2025 and 2024, respectively.
The Company received $16 million and $25 million of proceeds from the exercise of stock options and the purchase of shares pursuant to the Company’s employee stock purchase plan during the first nine months of 2025 and 2024, respectively.
The Company had cash, cash equivalents and investments of $459 million as of September 27, 2025. The majority of the Company’s cash and cash equivalents are generated from foreign operations, with $339 million held by foreign subsidiaries as of September 27, 2025, of which $285 million was held in currencies other than U.S. dollars.
Contractual Obligations, Commercial Commitments, Contingent Liabilities and Dividends
A summary of the Company’s contractual obligations and commercial commitments is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 25, 2025. The Company reviewed its contractual obligations and commercial commitments as of September 27, 2025 and determined that there were no material changes outside the ordinary course of business from the information set forth in the Annual Report on Form 10-K.
From time to time, the Company and its subsidiaries are involved in various litigation matters arising in the ordinary course of business. The Company believes that it has meritorious arguments in its current litigation matters and that any outcome, either individually or in the aggregate, will not be material to the Company’s financial position or results of operations.
During fiscal year 2025, the Company expects to contribute a total of approximately $3 million to $6 million to its defined benefit plans.
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The Company has not paid any dividends and has no plans, at this time, to pay any dividends in the future.
In December 2024, the Company’s Board of Directors approved the implementation of a new worldwide ERP system. The Company anticipates spending approximately $130 million on the ERP implementation. The Company expects to use existing cash and its Credit Facility to fund the ERP implementation. For the first nine months of 2025, the Company has incurred $20 million of capitalized costs included in other assets and $14 million of operating costs included in the consolidated statement of operations for the ERP system implementation.
In accordance with the Merger Agreement, prior to, and as a condition of, the Distribution, SpinCo will make a cash payment to BD equal to $4.0 billion, subject to adjustment for cash, working capital and indebtedness of SpinCo and subject to decrease if additional shares of Company Common Stock will be issued to the Company’s shareholders. The SpinCo Cash Distribution is expected to be paid using proceeds from approximately $4.0 billion of new indebtedness to be incurred by SpinCo prior to the Distribution. The Company is expected to assume all indebtedness incurred by SpinCo in connection with the payment of the SpinCo Cash Distribution upon completion of the Merger.
Concurrently with the execution of the Merger Agreement, the Company and certain financial institutions executed a 364-day bridge facility commitment letter, pursuant to which such financial institutions have committed to provide bridge financing of $1.8 billion to fund dividends, fees and expenses related to the transactions contemplated by the Merger Agreement, on the terms and conditions set forth therein. The bridge facility is expected to be replaced with permanent financing, which may include a delayed draw term loan facility. Based on information available through the date of this report, if the Merger closes, the Company estimates it will incur transaction-related expenses and financing fees of approximately $140 million in total.
The Merger Agreement also contains specified termination rights for the Company and BD, including a right allowing the Company or BD to terminate the Merger Agreement if the Merger has not been consummated on or prior to July 13, 2026 (which date may be extended to October 13, 2026 in the event that required regulatory approvals have not been received). Additionally, the Merger Agreement requires the Company to pay BD a termination fee of $733 million if the Merger Agreement is terminated under certain circumstances.
Critical Accounting Policies and Estimates
In the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 25, 2025, the Company’s most critical accounting policies and estimates upon which its financial status depends were identified as those relating to revenue recognition, valuation of long-lived assets, intangible assets and goodwill, income taxes, uncertain tax positions and business combinations and asset acquisitions. The Company reviewed its policies and determined that those policies remain the Company’s most critical accounting policies for the nine months ended September 27, 2025. The Company did not make any changes in those policies during the nine months ended September 27, 2025.
New Accounting Pronouncements
Please refer to Note 13, Recent Accounting Standard Changes and Developments, in the Condensed Notes to Consolidated Financial Statements.
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, including the information incorporated by reference herein, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements that are not statements of historical fact may be deemed forward-looking statements. You can identify these forward-looking statements by the use of the words “feels”, “believes”, “anticipates”, “plans”, “expects”, “may”, “will”, “would”, “intends”, “suggests”, “appears”, “estimates”, “projects”, “should” and similar expressions, whether in the negative or affirmative. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the control of the Company, including, and without limitation:
certain risks related to the Merger, including, without limitation:
the risk that one or more closing conditions to the Merger may not be satisfied or waived, on a timely basis or otherwise, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the Merger or may require conditions, limitations or restrictions in connection with such approvals or that the required approval by the stockholders of the Company may not be obtained;
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the risk that the Merger may not be completed on the terms or in the time frame expected by the Company, due to such factors as delays in obtaining regulatory approvals due to the U.S. government shutdown that began in October 2025, or at all;
the occurrence of any event that could give rise to termination of the Merger;
failure to realize the anticipated benefits of the Merger, including as a result of delay in completing the Merger or integrating the businesses of the Company and SpinCo, on the expected timeframe or at all;
the ability of the combined company to implement its business strategy and achieve revenue and cost synergies;
the risk that stockholder litigation in connection with the Merger or other litigation, settlements or investigations may affect the timing or occurrence of the Merger or result in significant costs of defense, indemnification and liability;
the risk that the anticipated tax treatment of the Merger is not obtained;
the risk of greater than expected difficulty in separating the business of SpinCo from the other businesses of BD;
risks related to the disruption of management time from ongoing business operations due to the pendency of the Merger, or other effects of the pendency of the Merger on the relationship of the Company with its employees, customers, suppliers, or other counterparties;
foreign currency exchange rate fluctuations potentially affecting translation of the Company’s future non-U.S. operating results, particularly when a foreign currency weakens against the U.S. dollar;
current global economic, sovereign and political conditions and uncertainties, including the impact of the U.S. government shutdown that began in October 2025; the effect of new or proposed tariff or trade regulations, as well as other new or changed domestic and foreign laws, regulations and policies (or new interpretations thereof); inflation and interest rates; the impacts and costs of war, in particular as a result of the ongoing conflicts between Russia and Ukraine and in the Middle East; and the possibility of further escalation resulting in new geopolitical and regulatory instability;
economic conditions in China, trade tensions and tariffs between the U.S. and China and their impact on our business, increased competition from local and international competitors in China, the Chinese government’s ongoing tightening of restrictions on procurement by government-funded customers and other regulatory and other challenges and uncertainties in the Chinese market;
the Company’s ability to access capital, maintain liquidity and service the Company’s debt in volatile market conditions;
changes in timing and demand for the Company’s products among the Company’s customers and various market sectors, particularly as a result of fluctuations in their expenditures or ability to obtain funding;
the ability to realize the expected benefits related to the Company’s various cost-saving initiatives, including workforce reductions and organizational restructurings;
the introduction of competing products by other companies and loss of market share, as well as pressures on prices from competitors and/or customers;
changes in the competitive landscape as a result of changes in ownership, mergers and continued consolidation among the Company’s competitors;
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regulatory, economic and competitive obstacles to new product introductions, lack of acceptance of new products and inability to grow organically through innovation;
rapidly changing technology and product obsolescence;
the risks related to the development, deployment and use of artificial intelligence (“AI”);
a failure to timely and effectively use AI and embed it into new product offerings and services that negatively impacts our competitiveness;
risks associated with previous or future acquisitions, strategic investments, joint ventures and divestitures, including risks associated with achieving the anticipated financial results and operational synergies, contingent purchase price payments and expansion of our business into new or developing markets;
risks associated with unexpected disruptions in operations, including risks associated with our transition to a new ERP system;
risks related to any public health crisis or pandemic, climate change, severe weather and geological conditions or events or other events beyond our control;
failure to adequately protect the Company’s intellectual property, infringement of intellectual property rights of third parties and inability to obtain licenses on commercially reasonable terms;
the Company’s ability to acquire adequate sources of supply and its reliance on outside contractors for certain components and modules, as well as disruptions to its supply chain;
risks associated with third-party sales intermediaries and resellers;
the impact and costs of changes in statutory or contractual tax rates in jurisdictions in which the Company operates as well as shifts in taxable income among jurisdictions with different effective tax rates, the outcome of ongoing and future tax examinations and changes in legislation affecting the Company’s effective tax rate;
the Company’s ability to attract and retain qualified employees and management personnel;
risks associated with cybersecurity and our information technology infrastructure, including attempts by third parties, both private and state-sponsored, to defeat the information security measures of the Company or its third-party partners and gain unauthorized access to sensitive and proprietary Company products, services, systems, or data;
risks associated with compliance with data privacy and information security laws and regulations regarding the collection, transmission, storage and use of personally identifying information;
increased regulatory burdens as the Company’s business evolves, especially with respect to the U.S. Food and Drug Administration and U.S. Environmental Protection Agency, among others, and in connection with government contracts;
regulatory, environmental and logistical obstacles affecting the distribution of the Company’s products, completion of purchase order documentation and the ability of customers to obtain letters of credit or other financing alternatives;
risks associated with litigation and other legal and regulatory proceedings; and
the impact and costs incurred from changes in accounting principles and practices.
Certain of these and other factors are discussed under the heading “Risk Factors” under Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 25, 2025. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements, whether because of these factors or for other reasons. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are expressly qualified in their entirety by the cautionary statements included in this report. Except as required by law, the Company does not assume any obligation to update any forward-looking statements.
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Item 3: Quantitative and Qualitative Disclosures About Market Risk
The Company is also exposed to the risk of exchange rate fluctuations. The Company maintains cash balances in various operating accounts in excess of federally insured limits, and in foreign subsidiary accounts in currencies other than the U.S. dollar. As of September 27, 2025 and December 31, 2024, $339 million out of $459 million and $275 million out of $325 million, respectively, of the Company’s total cash and cash equivalents were held by foreign subsidiaries. In addition, $285 million out of $459 million and $226 million out of $325 million of cash and cash equivalents were held in currencies other than the U.S. dollar at September 27, 2025 and December 31, 2024, respectively. As of September 27, 2025, the Company had no holdings in auction rate securities or commercial paper issued by structured investment vehicles.
Assuming a hypothetical adverse change of 10% in year-end exchange rates (a strengthening of the U.S. dollar), the fair market value of the Company’s cash and cash equivalents held in currencies other than the U.S. dollar as of September 27, 2025 would decrease by approximately $29 million, of which the majority would be recorded to foreign currency translation in other comprehensive income within stockholders’ equity.
Assuming a hypothetical adverse change of 10% in year-end exchange rates (a strengthening of the U.S. dollar), the fair market value of the foreign currency exchange contracts outstanding as of September 27, 2025 would increase pre-tax earnings by approximately $2 million. Assuming a hypothetical adverse change of 10% in year-end exchange rates (a strengthening of the U.S. dollar), the fair market value of the interest rate cross-currency swap agreements outstanding as of September 27, 2025 would increase by approximately $78 million and would be recorded to foreign currency translation in other comprehensive income within stockholders’ equity. The related impact on interest income would not have a material effect on pre-tax earnings.
There have been no other material changes in the Company’s market risk during the nine months ended September 27, 2025. For information regarding the Company’s market risk, refer to Item 7A of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 25, 2025.
Item 4: Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s chief executive officer and chief financial officer (principal executive officer and principal financial officer), with the participation of management, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective as of September 27, 2025 (1) to ensure that information required to be disclosed by the Company, including its consolidated subsidiaries, in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its chief executive officer and chief financial officer, to allow timely decisions regarding the required disclosure and (2) to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control Over Financial Reporting
No change was identified in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 27, 2025 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Item 6: Exhibits
ExhibitNumber
Description of Document
Annexes, schedules and/or exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted attachment to the SEC on a confidential basis upon request.
This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any filing, except to the extent the Company specifically incorporates it by reference.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
/s/ Amol Chaubal
Date: November 4, 2025
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