Douglas Berthiaume - Chairman, President and Chief Executive Officer Gene Cassis - Chief Financial Officer Art Caputo - President, Waters Division John Lynch - Vice President, Investor Relations.

John Groberg - UBS Tycho Peterson - JP Morgan Issac Ro - Goldman Sachs Bryan Brokmeier - Maxim Group Derik de Bruin - Bank of America Paul Knight - Janney Capital Markets Doug Schenkel - Cowen and Company Steve Beuchaw - Morgan Stanley Steve Willoughby - Cleveland Research.

Good morning, welcome to the Waters Corporation First Quarter 2015 Financial Results Conference Call. All participants will be able to listen-only until the conference has a question-and-answer session of the conference. This conference is being recorded. If anyone has objections, please disconnect at this time.

I would like to introduce your host for today’s call, Mr. Douglas Berthiaume, Chairman, President and Chief Executive Officer of Waters Corporation. Sir, you may begin..

Thank you, well good morning and welcome to the Waters Corporation first quarter 2015 conference call. With me on today's call is Gene Cassis, the Waters' Chief Financial Officer; Art Caputo, the President of the Waters Division; and John Lynch, the Vice President of Investor Relations.

As is our normal custom I will start with an overview of the business then Gene will follow with details of our financial results and an outlook for our business in the second quarter and for the full year 2015. But before we start, I’d like Gene to cover the cautionary language..

Thank you, Doug. During the course of this conference call we will make various forward-looking statements regarding future events or future financial performance of the company. In particular, we will provide guidance regarding possible future income statement results of the company, this time for the second quarter 2015 and for full year 2015.

We caution you that all such statements are only predictions and that actual events or results may differ materially.

For a detailed discussion of some of the risks and contingencies that could cause our actual performance to differ significantly from our present expectations, please see our Form 10-K Annual Report for fiscal year ended December 31, 2014 in Part 1 under the caption Risk Factors and the cautionary language included in this morning's press release and 8-K.

We further caution you that the company does not obligate or commit itself by providing this guidance to update predictions. We do not plan to update predictions regarding our possible future income statement results, except during our regularly scheduled quarterly earnings release calls and webcasts.

The next earnings release call and webcast is currently planned for July 2015. During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is attached to the company's earnings release issued this morning.

In our discussions of results of operations, we may refer to pro forma results, which exclude the impact of items such as those outlined in our schedule entitled Quarterly Reconciliation of GAAP to Adjusted Non-GAAP Financials and that was included in this morning's press release also.

Doug?.

Thanks, Gene. Well, we had a strong and a very encouraging start to 2015. The strong business momentum that we saw in the fourth quarter of 2014 continued through the current quarter with strength in our pharmaceutical life science end markets and improving sales growth in China.

The 15% organic growth rate that we saw in the quarter was geographically broad based and also very balanced across our major product lines, with instrument system sales and recurring revenue both at mid-teens growth rates. Looking at our operating divisions, Waters' division constant currency sales grew 15%.

The strength that we saw in quarter for this division partially included the benefits to a favorable basic comparison and additional selling days in the quarter. Similarly our TA Instruments Division enjoyed a strong start to the year and delivered 14% growth.

Currency translation reduced our overall cost in currency sales growth by 8% in the quarter as a result of the U.S. dollar strengthening against all major currencies.

A highlight of the quarter was the continued strong growth of our business in the broadly defined life science and pharmaceutical market, a trend that has benefitted Waters' overall growth for the past year or so.

All meaningful application segments of our pharma business performed well in the first quarter and contributed to the high-teen sales growth for this market. For research applications for large biopharmaceuticals to more classical small molecule QC testing demand for instruments, services and chemistry consumable was robust.

As we saw in 2014 a lion share of our pharmaceutical growth came from smaller specialty and generic customers. Our global chemical analysis business at the Waters' division including food, environmental and industrial chemical markets was up 10% in the quarter.

This non-life science segment strength was also seen in our TA Instruments results that I'll describe in more details shortly. Geographically for the Water's division sales in the U.S. were up about 20%. In the quarter we saw continued strength in life science spending and solid increases in the U.S. government and academic sales which were up 7%.

Sales growth in Europe for the Water's division and at constant currency was up 13%. As in the U.S. we saw strong life science, government and academic spending. Turning to Asia, sales in China, our largest Asian market were up 16% with sales to life science and other private sector labs driving the overall sales growth.

This marks the second quarter in a row of double-digit growth in China and this is performance more consistent with what we've seen over the long-term.

Water's division's constant currency sales in Japan were flat with the prior years with strong life science and chemical industry demand offsetting a decline in public sector spending which was strong in the prior year's quarter.

In India Waters' division sales were up at a strong double-digit pace, as we saw during 2014 the first quarter's growth in India was primarily associated with higher instrument, software and service sales to the generic drug industry. Our sales in Asian markets outside of Japan, China and India grew at a healthy mid-teens rate in the quarter.

Our TA instrument's division saw a 14% increase in sales this quarter and geographically TA shipments were strong in most regions with the exception of Europe where the division enjoyed robust growth in the prior year's first quarter.

From a product line perspective TA benefitted from strong shipments of instrument systems embodying technologies from businesses that the division recently acquired as well as from its core thermal and rheology platforms. Now I'll discuss some product line dynamics that we saw for the Waters' division in the quarter.

The division's recurring revenues, the combination of service and consumables grew 15% at consumables growth was balanced across geographical regions with continued strong uptake of ACQUITY UPLC column offerings including our recently introduced line of CORTECS columns and for our new column chemistry tailored for protein separations.

Waters' division service business also performed very well in the quarter and grew with a 16% rate with extra business days in the quarter benefitting our service growth by a few percentage points.

Extra selling days aside, the strength in the service business was geographically balanced and was strongly correlated to general strength that we saw in our pharmaceutical life science end market. Waters' division instrument sales grew 15% in the first quarter.

This growth was balanced between LC and LC/MS technology platforms and highlighted by continued strong uptake of the ACQUITY QDa Detector and positive uptake of new UPLC-MS systems launched in mid 2014 at the ASMS conference. Notably our Xevo TQ-S micro tandem quadrupole technology.

On the new product front we started off 2015 with new launches by both the Waters' and TA Instruments division at this year's Pittsburgh Conference in March. Highlights of the conference included our full spectrum molecular imaging system and our GlycoWorks RapiFluor-MS labeling technology.

Our new full spectrum molecular imaging system embodies the convergence of MALDI and DESI ionization technology with high performance ion mobility and Q-Tof Mass Spectrometry.

New research workflows are enabled with this system with advanced software which more easily provides researchers with actionable information on the location and distribution of key chemical compounds and tissue samples. Our GlycoWorks labeling kit represents a major advance in Glycan analysis.

Glycan's a sugar molecules bonded to protein backbones which can meaningfully affect the biological activity of protein based biopharmaceuticals.

The structure, frequency and location of these bonded sugars are variable in the biosynthesis of protein based drugs and consequently are important to characterize as part of drug discovery development and quality manufacture.

Our new GlycoWorks kit is been received by leading researches in this field as a breakthrough technology, that's exclusive to Waters. Our early customer are experiencing more comprehensive analytical results and a fraction of the time required to perform what they have perceived to be the best LCMS methodology.

We believe that this technology is well suited to improve the quality testing of new biologic drugs including the QC testing of bio generics or biosimilar drugs, and may likely set a new standard for required regulatory testing.

In addition, this new workflow is designed to be carried out on a tailored AQUITY UPLC system outfitted with our innovative QDa detector. Another first quarter 2015 development that's important to mention is an agreement that we have entered into with PerkinElmer Corporation.

Under this agreement Waters will manufacture and supply chromatography components for PerkinElmer that PerkinElmer will in turn sell on service as PerkinElmer branded LC Systems to non-life science market segments.

In addition Waters also has agreement to supply PerkinElmer within power workstations software for LC and GC applications for new as well as existing installations. We expect that this new initiative will afford Waters an opportunity to profitably grow our 2015 sales by an additional 1% or so.

On the January call, I outlined for you our health science initiatives and some of the longer term plans that we have to position Waters as a technological leader in emerging fields of mass spectrometry based disease, characterization and diagnosis.

You may recall my discussion on REIMS technology and its potential future usages for diagnostic and even surgical applications. I also mentioned that pursuing this type of opportunity represented a new type of investment for Waters one that potentially expands our business reach beyond more classical bio-analytical research segments.

While I'm pleased to tell you that during the first quarter of 2015, we've continued to expand the funding of this strategic program. And in fact at this year's ASMS conference in St. Louis, you will begin to hear about some initial product offerings that will further indicate the trajectory and potential of this exciting initiative.

So in summarizing this quarter's performance, I will reiterate that we are pleased with the breadth and depth of the demand for our products and services. In addition we demonstrated an ability to drive both operational and non-operational leverage and growing our earnings per share by more than 30%.

Free cash flow in the quarter a metric that you know I follow closely was impressive and we generated about $0.30 of free cash flow from each dollar of sale. But before turning over to Gene, I'd like to say a few words about our non-operational plans.

In 2015 we expect another year of strong free cash flow and anticipate continued capital deployment towards our share repurchase program. On an M&A front, it's likely that we'll continue to target smaller bolt-on businesses.

On the leadership transition front, we continue to make steady progress on the search for a CEO replacement from the start of this process; we have focused on achieving a best match fit between the experience set and track record over potential successor and the unique drivers of Waters' performance.

These drivers include commitments to technological leadership, to financial discipline and to the maintenance of close customer relationships. So please stay tuned for updates on this front and know that the successful completion of this transition process continues to be a high priority for me and for our Board of Directors.

So on closing 2015 is off to a strong start with all segments of our business performing well. In the upcoming months we've plan to introduce a series of exciting new products which will benefit our third and fourth quarters sales.

We are encouraged by the broad geographical and product line strengths that have will helped us deliver superior results in recent quarters and look forward to successfully executing our business plans throughout 2015. Now I'll like to turn it to Gene for a review of our financials..

Well thank you Doug and good morning all, at $460 million our first quarter revenues increased 15% before currency translation. Currency translation reduced sales growth in the quarter by 8% resulting in 7% reporting sales growth. Our non-GAAP earnings per diluted share were up 32% to $1.21 in comparison to earnings of $0.92 last year.

On a GAAP basis, our earnings were $1.15 compared to $0.82 last year. Reconciliation of our GAAP to non-GAAP earnings is attached to our press release that we issued this morning. Looking at our growth geographically and before foreign currency effects, U.S.

sales were up 20%, Europe was up 10%, Japan was flat and sales in Asia outside of Japan were up 20% with strong demand in India and China, rest of world sales were up 12%. On the product front and again in constant-currency within the Waters division, instrument system sales increased by 15% and our recurring revenues grew by 15%.

So consequently the division sales were up 15%. For our TA instruments division, constant-currency sales including instruments and services increased by 14%. Now, I'd like to comment on our first quarter's non-GAAP financial performance versus the prior year. Gross margins came in at 58.9% up from 56.4% in the first quarter of last year.

This improvement can be attributed to a combination of factors including higher sales volume, positive mix dynamics and successful ongoing engineering efforts aimed at reducing product manufacturing costs. Moving down the P&L, SG&A expenses were up 9% on a constant-currency basis. The impact of currency translation reduced SG&A by about 9%.

R&D expenses increased due to our ongoing spending associated with new product development and increased incremental spending related to our health science initiative.

On the tax front, our effective operating tax rate for the quarter was 14%, for the full year 2015 we expect our operating tax rate to come in at around 14% and in this projection we have not assumed the reestablishment of the United States R&D tax credit.

In the quarter, net interest expense was $7 million and share count came in at 83.8 million shares or approximately 2.1 million shares lower than in the first quarter of last year. This is a result of our share repurchase program.

Turning to the balance sheet, cash and short-term investments totaled $2.1 billion and debt came in at $1.5 billion bringing us to a net cash position of $624 million. As for first quarter share repurchases, we bought 710,000 shares of our common stock for $85 million. This leaves $684 million remaining on our authorized share repurchase programs.

We define free cash flow is cash from operations less capital expenditure plus non-cash benefits from stock based compensation accounting and excluding unusual non-recurring items.

In the first quarter of 2015 free cash flow came in at $138 million after funding $21 million of capital, excluded from this amount is approximately $2 million of investments associated with major facility expansion. Accounts receivable days outstanding stood at 78 days in the quarter.

The quarter inventories increased by $11 million reflecting normal seasonal patterns. Now I'll discuss our 2015 full year outlook. While we had a stronger top-line growth rate in the first quarter than we had expected. Contributing significantly to this strong start was continued strength in our pharmaceutical life science end markets.

In addition, we benefited from stronger shipments of TA Instrument systems and continued positive sales momentum in China. We estimate that additional selling days in the quarter in comparison to the first quarter of last year added about 3 or 4 points to sales growth, predominantly augmenting our recurring revenue product lines.

In the upcoming quarters of 2015, we anticipate that continued growth in sales we're broadly defined pharmaceutical life science customers, solid recurring revenue growth and stable to improving business trends in Asia will allow us to finish the year with mid single-digit sales growth before currency translation.

Currency translation for the full year and assuming current exchange rates is now expected to reduce as reported sales growth by approximately 6%. Moving down to P&L, gross margins are expected to improve slightly from last year and came in at or around 59% for the full year 2015.

We expect to manage our constant-currency operating expenses to grow at a rate that's less than our constant-currency sales growth rate. However, we anticipate that our R&D expenses will grow at a higher rate due to continued investments in new product development and incremental spending associated with our health science initiative.

Moving below the operating profit line, net interest expense is expected to be approximately $31 million. Turning to share account, our full year average diluted share account is expected to be reduced an end up at around 83 million shares outstanding as a result of continued share repurchases.

Rolling all this together non-GAAP earnings for full diluted share are now expected to be in the range of $5.67 to $5.87. As we think about our expectations for the second quarter of 2015 our guidance anticipates that constant currency sales growth will come in at or around 7%.

Currency translation in the quarter is expected to reduce reported sales growth by the same rate or about 7%. This top-line performance is expected to result in non-GAAP earnings per fully diluted share within a range of $1.20 to a $1.30 in the quarter. Doug..

Thank you Gene, and operator I think at this point we can open it up for Q&A..

Thank you sir. We'll now begin the question-and-answer session. [Operator instructions]. Our first question comes from Mr. John Groberg of UBS. Sir your line is open..

I think maybe just to start off, Doug obviously you have extra selling days, easy comps, and those things; but can you maybe just talk about some of the bigger opportunities that you're seeing out there that you think are really sustainable, that have legs, beyond just the easy comps and the days? I don't know if it's biosimilars.

I don't know if it's some of these new initiatives that you think are just getting off the ground. Could you maybe talk about some of the ones that you're more excited about that you think will have durability beyond just the factors.

Sure John.

I think there are couple of basic things, that probably are not what you are getting at but let me reiterate we're clearly seeing a recovery in Asian markets that depressed sales growth in the '13 and early '14 period and now pretty clearly we're seeing a recovery in the India generics markets and this marks the second quarter of improving conditions in China and for the most part we think those are sustainable going forward.

So clearly so as some depression of that prior year's I think we're in a benevolent cycle at this point.

If you talk more about the applications we serve and the condition of the markets, there are couple of areas, certainly the heath science initiative and all that it promises from research into biomarkers to research into the phenomics dynamics and how it affects health, we're seeing a significant amount of investment that we're intimately involved in, in the early stages of that that we think have a lot of legs in terms of the investment cycle but also can lead down the road into the whole personal medicine and diagnostic space that being on the ground floor or helping develop those discoveries will lead us further down the path into the downstream diagnostic opportunities that is part and parcel of the foundation of the whole health science initiative.

So we have a very strong quarter in that whole health science area, so it's already showing promise.

You'll hear us talk more and more about our emerging technologies that Gene pointed to and the investments that we're making in REIMS technology in the iKnife that get us further down that healthcare path, closer to actually treating some of these disease states in the future in essence broadening our ability to service customers somewhat outside of our traditional analytical laboratory, so and you're certainly seeing the science of actual progress with biosimilars and biogenerics, we're certainly seeing a great deal of interest in our new glycol-protein products that we've just talked about.

It clearly is emerging appreciation of the importance of characterizing these molecules and rarely have we seen the kind of initial interest in a new product as we have seen with this GlycoWorks application that we've recently introduced. So, those are a number of the areas that evidence the enthusiasm that we're talking about now..

That's great.

If I can have two quick follow-ups, can you Doug, one on the leadership transition Is there any change given your comments -- are there any change to your expectation that you'll something by August? And then other one is given the FX regime, I know on some of your competitors have actually been raising price, are trying to, what's your plan around pricing?.

Well in terms of pricing we don’t anticipate any radical change, and certainly we balance pricing regularly, and we certainly look at pricing when we introduce a new product to try to make sure that we stay and sink across all geographic regions, but we present as a local company and all of the areas of the world that we do business, and so when currencies move against us in this phase we've got to find ways to stick with it and prove our business; and when they move for us as they clearly do in cycles, we don’t radically change our pricing in those local markets, so that's been our practice over a 40 year period and it's not likely the change.

In terms of the transition in leadership, you can clearly assume that we're being very careful, methodical and examining carefully how we execute this transition.

I continues to be optimistic that we'll do it around the timing that I have talked about I'll always said that this timing was a guideline wasn't meant to be a rigid hurdle rate that I'm not going anywhere come August 1 or August 15th, whatever that two year deadline is, and in almost any circumstance you are likely here my voice for a while post August.

At this point it's certainly possible that we'll have something done by August but I wouldn't bet ranch on, it may stretch longer than that. I continue to say, we have high quality candidates but until we're ready to actually sign on the bottom line continue to say watch this space for further notice..

Our next question comes from Mr. Tycho Peterson of JP Morgan. Sir your line is open..

Doug, I want to try to kind of get your latest thoughts on the pharma cycle. I know in the past you've kind of talked about a two-year cycle where you can see seven to eight strong quarters, and then maybe seven to eight weaker quarters.

Can you maybe just talk about where you think we are in the cycle right now, your visibility to that customer base, and can you do better than mid-single growth in pharma this year?.

Tycho I think partly it's an unfortunate characterization when people say pharma, they think the top 10 or 12 integrated pharmaceutical companies in the world and that group of customers says as you know, faced a lot of hurdles, they've gone through the mergers and acquisitions phase.

If anything I think, we're probably come through the worst periods of reorganization and then cutting spending on that group. That's gone on for well over five years but I think, we don’t see the worst of that in the future, we think the worst of that's behind us.

On the other hand, I think the broader life science community is clearly the more dynamic piece of this market, was last year, I think will continue to be when you talk about generics, biosimilars the innovative bio-tech marketplace, the merging diagnostic discovery companies and the discovery working arm-an-arm with the therapeutic pharmaceutical customers.

So we continued to see very robust conditions in those market places, surrounding the classical large scale ethical pharmaceutical companies. So combined we are very optimistic about the opportunity that broadly defined market place to sustain the high single-digit growth rate that we're aiming at..

I just want make sure I understand some of the nuances around guidance. You beat by $0.19, you raised by $0.09 to $0.10 overall. And then on the top-line looks like you're guiding for the back half of the year to be flat organic.

Is that the right way to be thinking about it? Is the lack of more upside to the bottom line reinvestment and FX?.

Well Gene can start off and I’ll give you my tinge on it..

Hi Tycho. Yes; we certainly had a nice start to the year but we also know that since we gave guidance last foreign currency dynamics have presented us with the stronger headwind.

So in the first quarter results we delivered about $0.20 more than we had it originally anticipated, however, if you just look at the effect of foreign currency again applying it to the full year.

You had an additional about $0.10 worth of headwind that we are dealing with, so in the guidance that we've presented going for the remainder of the year we've taken these two factors into consideration, little bit more headwind on the FX side, but acknowledging that we did have a stronger start to the year than we had anticipated.

I would also say that as we go through the year, the largest quarter is the fourth quarter we had a particularly strong fourth quarter last year, so it probably makes sense to be a little bit more conservative on our outlook at the end of the year.

Hopefully when we're talking to you again in July, we will have a higher level of visibility on business momentum towards the close of the year and be able to modify our outlook appropriately..

I think Gene covered it pretty well, Tycho, I think, we clearly had a very strong first quarter even when you discounted for the base and for the extra selling days.

No matter, how you estimate that effect, we're still around at 10% organic rate even if you cleansed it, so it's pretty impressive and if you look at our trailing 12 months results, we're at that 8%, 9% organic growth rate, so all of that's very encouraging but we're still being careful I would say early in the year, to not get too much ahead of ourselves.

So I think it's fair to say there are current conditions could lead to better results but we want to be careful early in the year..

And then just one last one, Doug. Can you comment on the 20% U.S. constant currency growth. That really stood out.

You obviously had an easier comp, but was that all pharma or a TA recovery? What drove the 20% here?.

Well, certainly the life science market was since by far the biggest market is that life science market that grew with that high double-digit rate but interestingly all the markets contributed double-digit growth rates, I think I'm right..

Yes, and the other thing, Tycho, is that in the quarter in the U.S. as well as globally, you know the strength of the recurring revenues was pretty encouraging for us.

Again we understand, that that revenue line benefits most from extra selling days but again even accounting for that at a minimum you're looking at what is now a pattern and a high single-digit growth rate for our recurring revenues on a constant currency basis, and that's something is very encouraging as we project out through the remainder of the year..

As Gene mentioned that something I would like to emphasize, it's interesting that in the service and support market place in the last four or five may be plus years a number of competitors have emerged to try to address the broader service market. And essentially take share from us by servicing Waters gear around the world.

And I am sure you're familiar with all of the players who advertise that they can service and support Waters and everybody else who is in the analytical libratory. I think it's telling that our strategy is clearly not to do that, we focus on our business, we train the best service people, we support our instruments.

What that's led to is a service business that continues to grow at the double-digit pace and in this past quarter grew even much stronger than that.

So I just think it's a very telling dynamic that the customer support for our strategy and the importance of that service dynamic tie directly to our business, is far in a way the fastest grower in the service business and all we do is support our own installed base. It’s very interesting dynamic that we'll continue to track..

Our next question comes from Mr. Issac Ro of Goldman Sachs. Sir your line is open..

Gene, I had a question for you. I think kind of gone around this topic a little bit; but if you could maybe give us the growth rate you saw in your biopharma end markets versus your academic and government this quarter? It seems like it must have been a huge number, given the strength of the organic growth rate for the total company..

Yes, the biopharmaceutical growth rate was in the high-teens for the quarter, Issac.

And looking at our government and academic spend are all in again these numbers are in constant currency was at a mid single-digit rate, but that mid single-digit includes much stronger performance in the United States and Europe and it was somewhat offset by weaker performance in Japan and still not that robust spending on the public side in China, so all in we ended up with mid single-digit government and academic but there was a definite geographic pattern to be gleaned behind that number..

And then just a follow-up to that. I think in the past you said that the majority of your biopharma revenue tends to come from the production side versus R&D. So just given that high-teens number you offered.

Is that consistent to gain consistent again here, where the implication would be that most of your growth you're seeing was really on the production side?.

No, it's interesting there is another geographic story there. We had a very strong performance as Doug and I mentioned in India.

And given that that is primarily a generic drug market for us that was clearly production related, but as we begin to look a little bit more broadly at this pharmaceutical space or we saw a strength and from discovery through development, so a very broad based and is very broad based geographically too.

So, I'd say that the long-term trend of half of the business related to production and production related activities that 50-50 mix is not too far off, but I would just say that we saw strength in both of those broadly defined segments in the quarter..

Last one, if I could sneak it in. If we take all that in context with what we've seen so far elsewhere from your competitors, it does seem like you took a little bit of market share this quarter, at least in biopharma.

Would you agree with that statement?.

Well, it's always difficult to talk about market share quarter-by-quarter, our experience tends to tell us that yes market share shifts to occur but they tend to occur over a longer cycle. I think, clearly in the quarter we benefited from our heavy weighting towards life science pharmaceutical and the underlying strength of that market.

I think that we are at little bit more leverage for a better derivative of that end market and maybe some other players in the space. So, longer term, I mean, again Doug had mentioned that over the last four quarters our growth rate has been at the high single-digit level.

And I think you can look at the growth rate of the industry as a whole and some of our competitors and you can make the assessment as you wish on that front..

Our next question comes from the Mr. Bryan Brokmeier of Maxim Group. Sir your line is open..

In your prepared remarks you attributed the strong margin to volume positive mix dynamics and engineering efforts, improved manufacturing costs.

How much of the margin expansion would you attribute to each of those?.

It's actually pretty well balanced on that front. The results for the quarter where you saw in our nice 200 basis point improvement and gross margins compared to the prior year result. It just demonstrates how -- with the positive sensitivity is of our gross margin to volume.

But I'd say in the quarter we had nice contributions from volume from product mix and part of that mix includes a nice strong performance from our TA group that has a wonderful profitably profile, so I would say looking at those factors probably volume and mix were the biggest components on top that, we ended up benefiting from some of our cost improvement efforts..

And despite the really strong revenue, SG&A was flat year-over-year.

Was all of that through cost containment, as well, or were there any delays in needed expenses, or delays in additions to your head count that we'll see causing increase in expenses over the next few quarters?.

Actually if we look at the business in constant currency we're able to grow to top line 15% in constant currency with 9% SG&A growth rate, so it's impressive leverage. But we did grow our SG&A again in constant currency by 9%, what you are also seeing is the effective weaker euro and recognizing that we have a meaningful spend in Europe.

We also saw benefits from the pound on that front too, some costs. So as you begin to look at the actual SG&A growth, the main reason why it was flat is because we benefited on the operating expense side from lower yen and from the lower euro and from the lower pound..

Our next question comes from the Mr. Derik de Bruin of Bank of America. Sir your line is open..

There's been a lot of noise and potential consolidation activity being discussed in sort of like in the spec pharma space and the generic space. I know Teva is one of your largest customers.

I guess when you save all the combinations and possibilities going on in the spec back in that market, do you -- is there any one particular area combination that would make you nervous? Is there any potential impact in terms of how people deploy their fleets of LCs in that? I'm trying to think of how you see all this -- how you think all the generic and spec pharma consolidation is going to play out to your business?.

Derik, I think it is true that when the large ethical pharma companies went through that binge of merging, they ultimately cut R&D and that ultimately -- certainly had a short-term affect on demand. So we clearly saw a blip down after a big merger with those big ethical pharmaceutical companies.

And the ones that you're talking about with Teva and Mylan and Perrigo, much less likely to see a significant impact, because those are driven off production, most of our sales to those customers are pill count.

And so you are not going to see a significant change in pill count and unlikely to see a significant impact related to those of kinds of companies..

And then one quick follow-up. Was there any significant bulk purchases during the quarter? I know you've got some stuff with the UK's Phenome Centre. I know there were some potential grants that are pending for that.

Was there any unusual volume purchases in the quarter in mass spec or LC?.

No..

Our next question comes from Mr. Paul Knight of Janney Capital Markets. Sir your line is open..

Doug you seem very excited about GlycoWorks.

Could you talk a little more about it? Is there anybody you see on the horizon that could offer anything comparable? I guess quantifying it, was it a lot of your growth, or is it just rolling out now?.

Paul, it's really just rolling out now. I have Art sitting next to me who, if I let him speak, he'd have you convinced it's going to change the nature of the western world, so he might break in here any minute any way, but we are extraordinarily excited about it.

I think I said it's certainly unusual that we have seen the amount of customer reaction to the introduction of this product. The reaction of our field force who -- it's a premium price product and they might even be telling us we're under pricing it, it is so strong and so good in the customers eyes.

However it was just introduced at Pittcon, so we didn't see any real economic impact of it in the first quarter. But I will unleash Art in here and let him chime in on how he feels about this..

And I'll try not to be too extravagant for Doug here. But I think the reason for our optimism for this particular chemistry and keep in mind that most of our innovations and impact in the market place originated chemistry. UPLC originated as a chemistry advance.

This particular application predominantly in the biopharmaceutical life science arena, where our customers are producing biologically based drugs, glycan testing is pervasive requirement. It's done from research, through development and through the production process and it's an FDA requirement.

And so understanding the glycan profile of a biological is of extreme importance. The existing technology that laboratory's conduct today takes more than a day to prepare samples, its costly, keep in mind there are millions of samples run per year.

The technology that we have is exclusive proprietary and it reduces the analysis time down to roughly hours, hour compared to whole day. It enables you to detect by both fluorescence and mass spectrometry so it provides a lot more information keeping in mind it's a critical assay to characterize the glycan content.

It affects the quality of these drugs, so there are two attributes to these. One is, it greatly improves the productivity of the assay, number one and number two it improves the quality and the content of the information you get.

So considering that we just launched this, there is standing room only and we've actually had to rebook seminars, the early responses from the primary users of this technology is been outstanding.

So we're more excited about it, what's even more exciting besides it being a renewable, repeatable chemistry business is that we're seeing that a lot of analytical products are particular QDa which is our benchtop mass spectrometer when combined with this chemistry is a very attractive analytical tool for those in the research and development side of the equation.

So for us, it's in early stages, we're in a development phase, but the early acceptance of this is quite exciting and I don't see think we've seen a chemistry product since the introduction of UPLC that it has raised such an excitement level in what is a fairly attractive segment in the market place right now, where this type of requirement is necessary.

So that's the essence of the opportunity and the additional response is outstanding.

Does that cover it Paul?.

Yes..

Our next question comes from Mr. Doug Schenkel of Cowen and Company. Sir your line is open..

My first question has two parts, and is specific to China. I think you indicated China revenue grew 16% year-over-year in the quarter in the Waters' division. Commentary has clearly been really encouraging.

The first part of the question is when you say growth is improving, are you just pointing at growth relative to a favorable comp or do you believe that China is actually improving, as measured relative by demand over the last couple of quarters.

And the second part is does your full-year guidance still embed the assumption that China revenue grows at mid-single-digit levels, or is there some change to that, given strong Q1 performance?.

Doug this is Gene. We're impressed with having mid-teens growth rate in China now for two quarters in a row.

And if I take a look at the drivers of growth in that country, it's a little bit more weighted towards the for profit customer and we're still seeing a little bit slower than historical demand from governmentally funded laboratories but we are somewhat encouraged by what we're hearing about governmental spending plans during this next fiscal year.

I would say that as we begin to look at the combination of India and China and make assumptions about how those businesses will impact, our full year 2015 outlook, we're at least set a high single-digit level given strong start we have this year, so far early indications for demand in the second quarter looked like a continuation of the trends that we saw in the first quarter.

So I would say that in looking at the geographical components that make up our full year guidance we're probably a little bit more bullish on Asia in general and India and China in particular..

Another multi-parter, this time on the pharma end market. Just to clarify as a follow-up to a few earlier questions, what percentage of sales did say top 20 accounts account for today? I think that's probably down around 10%, which is considerably lower than it was last time we went through anything resembling a consolidation period.

The second question, second part, is could you talk a little bit about what you're seeing in terms of replacement versus new customer placements within the pharma end market? And the third part is, how correlated do you think biopharma growth is right now with the strong equity market conditions that exist in terms of financing these companies right now?.

I'll start off, but you have to remind me Doug, what exactly was the first question that you started with?.

Top 20 pharma as a percentage of total sales?.

You're estimate is right on, I think as you know, if I go back a decade our top 15 accounts represented about a quarter of our business and now you're looking at around 10% of our sales from our top 15.

So it is kind of interesting because those top 15 are actually companies that are the result of mergers that have occurred in this period, so in some ways it's even more dramatic. It's, when me talk about the top 15, it talks about the amount of business that we transact directly with those accounts.

But I have to say that those accounts also are more frequently over the years have used outsourcing, so some of the money that we're getting from CRO accounts, from small specialty pharmaceuticals, some of the funding may actually be coming from some of those large multinationals, so that's another factor to consider.

Looking at the replacement versus new, I mean one metric to consider is just looking at the number of HPLC versus UPLC systems that we're selling. And over the last few quarters, the growth rate in our alliance based HPLCs has been comparable to the growth rate that we've seen in the ACQUITY.

That's an indicator that you're seeing both a strong replacement cycle as well as expansion of the business..

I think in general Doug; you can look at the strength that we're seeing in the biotech, the innovative piece. The Gilead's of the world, et cetera, and say most of that's growth driven.

You look at the large pharma and India for instance, some of that certainly on the big pharma that's a fair amount of replacement because we know they've delayed, delayed, delayed in a multi-year period and we've talked about pent-up replacement demand. We’re seeing some of that, we still think that there's more to come.

So I think, yes we're seeing pretty good replacement demand in the big pharma world, but a lot of the novel life science segment is just growth in their applications..

Our next question comes from Mr. Steve Beuchaw of Morgan Stanley. Sir your line is open..

First on the expanded relationship with Perkin; thanks for the commentary there around your expectation for that to contribute about a point of growth.

I wonder if that point of growth that you referred to -- is that a proxy for how this evolves over the medium term or does that reflect the -- let's call it early days of that relationship? And then maybe Gene or John, could you give us a sense for how that revenue gets booked, and how that revenue flows through the P&L, what might be the impact on margins?.

Steve in terms of what it could mean and I think -- the points probably a fair estimate and might be on the conservative side.

I don’t think it will be less than that; but where early days of this relationship, the very interesting thing and the reason why we were enthusiastic about entering into this deal is that we're dealing with customers that almost universally we haven't dealt within the past. So these are customers that PE has serviced as a broad range supplier.

They go in and outfit an industrial laboratory with a whole series of technologies and those customers typically want to deal with perhaps with only one supplier. PE has not traditionally been one of the major suppliers of HPLC or UPLC, so, I think it became more and more expensive for them to maintain a development program.

And so the fit between Waters and PE turned out to be a nice fit of the various requirements and we get this volume without having to support it -- at very much on an SG&A basis. So, the margins are very good and it doesn’t cause those barely anything on the SG&A line.

And I think we're reasonably optimistic that this can grow a little bit faster, if we're right about the debt. So, Gene do you have anything..

No, I think you characterized here well. If this is the situation where I truly believe it's a win-win situation.

Our colleagues in PerkinElmer wanted to really have high performance workhorse instruments to supply to their customer base and if I look at the portfolio of products that we are providing to them; I think they fit that category very well and also these are products that have been very effectively cost-engineered and are manufactured in Singapore largely for us too, so that’s another advantage in that, it increases our footprint in a very cost favored and tax favored production side..

Then one quickly on TA. How did the business track through the quarter from your point of view? Was it as strong exiting the quarter as it was for the full quarter? Then I'll jump back in queue..

TA had a very solid first quarter and I mentioned earlier in response to a question as that, not only was the sales growth rate but you also saw nice improvement in the profitably of the business.

Looking at the division, the growth benefited from new technologies that we had acquired over the past couple of years as well as from the core business in rheology and thermal analysis.

And I'd say that looking across the quarter we saw pretty consistent results across the quarter and are pretty encouraged as we go into the second quarter and look towards the remainder of the year. Operator, I think we've past the bottom of the hour, so, we'll take one more question and then wrap it up..

Sir, our next question comes from Mr. Steve Willoughby of Cleveland Research. Sir your line is open..

Just a couple of housekeeping questions, first, I understand for your guidance for the full year the increased FX impact.

Am I also correct to assume that your tax rate guidance is going up slightly? Secondly, the extra selling days you had here in the first quarter, is there an offset to that in the back half of the year? You did 15% organic growth and then guiding to 7%.

Obviously it would relate to a pretty meaningful slow-down in organic growth in the back half to get to that mid-single-digit guidance for the full year?.

I'll start with the second question and then move to the first question. You're absolutely right, as we look at the second half of the year, the base of comparison becomes a little bit more challenging and that we had a very strong second half in 2014. And looking at the number of days we do have fewer selling days in the fourth quarter.

But I'd say that one of the things about a fourth quarter is that you do have the December 31st and requirement that people do allocate their capital spending, actually this is probably a little bit more of an advantage to the selling days in the first quarter and that as people release capital budgets, you might be able to get a little bit more towards the end of the quarter.

But, you are absolutely right that we are going to be more conservative on our outlook for the fourth quarter due to a combination of the stronger base of comparison and to the fewer selling days. Looking at the tax rate, the tax rate that's embedded in our forecast is 14%. We had a tax rate last year that was a point better than that.

The difference being that last year the U.S. R&D tax credit was enacted and we were able to take advantage of that, if that happens again this year our tax rate should be roughly the same as it was in 2014..

Gene just one quick follow-up on the tax rate.

Is there any update regarding your tax structure in Singapore?.

It continues to move in a very positive direction, there's a feeling that the long-term benefits that the Singaporean government is looking for and our desires they are all very well aligned.

So I see nothing that makes me uncomfortable about a continued very favorable relationship that results in a favorable tax position over the next multi-year period..

Thank you. And thank you all for being with us on this first call of 2015 and we'll look forward to updating you after the second quarter. Thank you all..

That concludes today's conference. Thank you for participating. You may now disconnect..