Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jul. 04, 2026

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

Translation of Foreign Currencies

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

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

Cash and Cash Equivalents

Cash equivalents represent highly liquid investments, with original maturities of 90 days or less, while investments with longer maturities are classified as investments. The Company maintains cash balances in various operating accounts in excess of federally insured limits, and in foreign subsidiary accounts in currencies other than the U.S. dollar. As of July 4, 2026 and December 31, 2025, $488 million out of $539 million and $372 million out of $588 million, respectively, of the Company’s total cash and cash equivalents were held by foreign subsidiaries. In addition, $365 million out of $539 million and $306 million out of $588 million of cash and cash equivalents were held in currencies other than the U.S. dollar at July 4, 2026 and December 31, 2025, respectively.

Accounts Receivable and Allowance for Credit Losses

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company offers rebates, sales discounts and sales returns, and as a result, the transaction price determination may include variable consideration. Generally, the Company does not consider there to be significant concentrations of credit risk with respect to trade receivables due to the short-term nature of the balances, the Company having a large and diverse customer base, and the Company having a strong historical experience of collecting receivables with minimal defaults. As a result, credit risk is considered low across territories and trade receivables are considered to be a single class of financial asset. The allowance for credit losses is based on a number of factors and is calculated by applying a historical loss rate to trade receivable aging balances to estimate a general reserve balance along with an additional adjustment for any specific receivables with known or anticipated issues affecting the likelihood of recovery. Past due balances with a probability of default based on historical data as well as relevant available forward-looking information are included in the specific adjustment. Amounts are written off against the allowances for credit losses when the Company determines that a customer account is not collectable. The historical loss rate is reviewed on at least an annual basis and the allowance for credit losses is reviewed quarterly for any required adjustments. The Company does not have any

off-balance

sheet credit exposure related to its customers.

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

re-possess,

refurbish and

re-sell

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

Pursuant to the TSA BD collects receivables from customers and pays vendors on behalf of the Company as it relates to the BDS Business. As of July 4, 2026, the Company had a $

157

million net receivable due from BD related to such activity, which includes $

673

million classified as Accounts receivable, net and $

516

million classified as Accounts payable in the consolidated balance sheets. This net receivable was $140 million as of April 4, 2026, reflecting a broadly consistent level of net cash settlement activity during the three months ended July 4, 2026.

The Company considers the $673 million classified in Accounts receivable, net to be a significant concentration of receivables, as it accounts for greater than

% of the Company’s total accounts receivable balance for the period ended July 4, 2026. BD is an investment-grade rated, publicly traded global healthcare company, and the Company has not experienced any collection issues with respect to amounts due under the TSA to date.

The following is a summary of the activity of the Company’s allowance for credit losses for the six months ended July 4, 2026 and June 28, 2025 (in millions):


	Balance at Beginning of Period		Additions		Deductions and Other			Balance at End of Period
	Balance at Beginning of Period		Additions		Deductions and Other			Balance at End of Period
Allowance for Credit Losses
July 4, 2026	$	12	$	3	$	1		$	16
June 28, 2025	$	14	$	4	$	(5	)	$	13

Fair Value Measurements

In accordance with the accounting standards for fair value measurements and disclosures, certain of the Company’s assets and liabilities are measured at fair value on a recurring basis as of July 4, 2026 and December 31, 2025. Fair values determined by Level 1 inputs utilize observable data, such as quoted prices in active markets. Fair values determined by Level 2 inputs utilize data points other than quoted prices in active markets that are observable either directly or indirectly. Fair values determined by Level 3 inputs utilize unobservable data points for which there is little or no market data, which require the reporting entity to develop its own assumptions.

The following table represents the Company’s assets and liabilities measured at fair value on a recurring basis at July 4, 2026 (in millions):



	Total at July 4, 2026		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
401(k) Restoration Plan assets	$	32	$	32	$	—	$	—
Foreign currency exchange contracts		1		—		1		—
Interest rate cross-currency swap agreements		17		—		17		—

Total	$	50	$	32	$	18	$	—

Liabilities:
Interest rate cross-currency swap agreements		22		—		22		—
Interest rate swap cash flow hedge		1		—		1		—

Total	$	23	$	—	$	23	$	—

The following table represents the Company’s assets and liabilities measured at fair value on a rec

urr

ing basis at December 31, 2025 (in millions):


	Total at December 31, 2025		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
401(k) Restoration Plan assets	$	31	$	31	$	—	$	—
Foreign currency exchange contracts		—		—		—		—
Interest rate cross-currency swap agreements		—		—		—		—
Interest rate swap cash flow hedge		—		—		—		—

Total	$	31	$	31	$	—	$	—

Liabilities:
Foreign currency exchange contracts	$	—	$	—	$	—	$	—
Interest rate cross-currency swap agreements		50		—		50		—
Interest rate swap cash flow hedge		2		—		2		—

Total	$	52	$	—	$	52	$	—

Fair Value of 401(k) Restoration Plan Assets

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

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

The fair values of the Company’s foreign currency exchange contracts, interest rate cross-currency swap agreements and interest rate swap cash flow hedges are determined through market and observable sources and have been classified as Level 2. These assets and liabilities have been initially valued at the transaction price and subsequently valued, typically utilizing third-party pricing services. The pricing services use many inputs to determine value, including reportable trades, benchmark yields, credit spreads, broker/dealer quotes, current spot rates and other industry and economic events. The Company validates the prices provided by third-party pricing services by reviewing their pricing methods and obtaining market values from other pricing sources.

Fair Value of Other Financial Instruments

The Company’s accounts receivable and accounts payable are recorded at cost, which approximates fair value due to their short-term nature. The carrying value of the Company’s variable interest rate debt approximates fair value due to the variable nature of the interest rate. The carrying value of the Company’s fixed interest rate debt was $4.4 billion and $1.3 billion at July 4, 2026 and December 31, 2025, respectively. The fair value of the Company’s fixed interest rate debt was estimated using discounted cash flow models, based on estimated current rates offered for similar debt under current market conditions for the Company. The fair value of the Company’s fixed interest rate debt was estimated to be $4.3 billion and $1.2 billion at July 4, 2026 and December 31, 2025, respectively, using Level 2 inputs. Refer to Note 6 “Debt” for further information.

Derivative Transactions

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

non-U.S.

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

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

yen-denominated

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

Foreign Currency Exchange Contracts

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

Cash Flow Hedges

The Revolving Credit Facility is a variable borrowing and has interest payments based on a contractually specified interest rate index. The contractually specified index on the Revolving Credit Facility is the

1-month,

3-month

6-month

Term SOFR. The variable rate interest payments create interest risk for the Company as interest payments will fluctuate based on changes in the contractually specified interest rate index over the life of the Revolving Credit Facility. In order to reduce interest rate risk, the Company has entered into interest rate swaps with an aggregate notional value of $150 million to effectively lock in the forecasted interest payments on the variable rate borrowing over its term. The interest rate swaps represent cash flow hedges and are assessed for hedge effectiveness each reporting period. When the hedge relationship is highly effective at achieving offsetting changes in cash flows, the Company will record the entire change in fair value of the interest rate swaps in accumulated other comprehensive loss. The amount in accumulated other comprehensive loss is reclassified to income in the period that the underlying transaction impacts consolidated income. If it becomes probable that the forecasted transaction will not occur, the hedge relationship will be

de-designated,

and amounts accumulated in other comprehensive loss will be reclassified to income in the current period. Interest settlements due to benchmark interest rate changes are recorded in interest income or interest expense. For the six months ended July 4, 2026, the Company did not have any cash flow hedges that were deemed ineffective.

Interest Rate Cross-Currency Swap Agreements

As of July 4, 2026, the Company had entered into interest rate cross-currency swap derivative agreements with durations up to three years with an aggregate notional value of $1.3 billion 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. Under hedge accounting, the change in fair value of the derivative that relates to changes in the foreign currency spot rate are recorded in the currency translation adjustment in other comprehensive income and remain in accumulated other comprehensive loss in stockholders’ equity until the sale or substantial liquidation of the foreign operation. The difference between the interest rate received and paid under the interest rate cross-currency swap derivative agreement is recorded in interest income in the statement of operations.

The Company’s foreign currency exchange contracts, interest rate cross-currency swap agreements and interest rate swap agreements designated as cash flow hedges included in the consolidated balance sheets are classified as follows (in millions):


	July 4, 2026					December 31, 2025
	Notional Value		Fair Value			Notional Value		Fair Value
Foreign currency exchange contracts:
Other current assets	$	43	$	1		$	39	$	—
Other current liabilities	$	9	$	—		$	19	$	—
Interest rate cross-currency swap agreements:
Other assets	$	900	$	17		$	20	$	—
Other liabilities (1)	$	380	$	22		$	880	$	50
Accumulated other comprehensive loss			$	(22	)			$	(54	)
Interest rate swap cash flow hedges:
Other assets	$	50	$	—		$	50	$	—
Other liabilities	$	100	$	1		$	100	$	2
Accumulated other comprehensive loss			$	(1	)			$	(2	)

(1)	Includes $ 18 million and $ 4 million classified as Other current liabilities and Other noncurrent liabilities in the consolidated balance sheets, respectively.

The following is a summary of the activity included in the consolidated statements of operations and statements of comprehensive (loss)/income related to the foreign currency exchange contracts, interest rate cross-currency swap agreements and interest rate swap agreements designated as cash flow hedges (in millions):


	Financial Statement Classification	Three Months Ended						Six Months Ended
	Financial Statement Classification	July 4, 2026			June 28, 2025			July 4, 2026			June 28, 2025
Foreign currency exchange contracts:
Realized losses on closed contracts	Cost of revenue	$	(3	)	$	(1	)	$	(4	)	$	(1	)
Unrealized gains on open contracts	Cost of revenue		—			1			—			—

Cumulative net pre-tax losses	Cost of revenue	$	(3	)	$	—		$	(4	)	$	(1	)

Interest rate cross-currency swap agreements:
Interest earned	Interest income	$	4		$	3		$	8		$	5
Unrealized gains (losses) on open contracts	Other comprehensive income (loss)	$	11		$	(56	)	$	32		$	(83	)
Interest rate swap cash flow hedges:
Unrealized gains (losses) on open contracts	Other comprehensive income (loss)	$	1		$	(1	)	$	2		$	(2	)

(1)	Unrealized (losses) gains on open contracts from interest rate cross-currency swap agreements fluctuated year over year primarily due to changes in foreign exchange rates, which resulted in period-to-period variability.

Revenue Recognition

The Company recognizes revenue upon the transfer of control of promised products and services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company recognizes revenue on product sales at the time control of the product transfers to the customer. Certain of the Company’s customers have terms where control of the product transfers to the customer on shipment, while others have terms where control transfers to the customer on delivery.

Generally, the Company’s contracts for products include a performance obligation related to installation. In these situations, the product and installation are separate, distinct performance obligations as the installation is not complex and can be performed by other vendors. Revenue for the installation performance obligation is recognized separately upon the completion of installation.

For a limited number of arrangements involving products for which installation is complex, and significantly affects the customer’s ability to use and benefit from the product, revenue is recognized upon customer acceptance of the installed product.

All incremental costs of obtaining a contract are expensed as and when incurred if the expected amortization period of the asset that would have been recognized is one year or less. Shipping and handling costs are included as a component of cost of revenue. In situations where the control of the goods transfers prior to the completion of the Company’s obligation to ship the products to its customers, the Company has elected the practical expedient to account for the shipping services as a fulfillment cost. Accordingly, such costs are recognized when control of the related goods is transferred to the customer. The Company elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with specific revenue-producing transactions and collected by the Company from a customer.

When arrangements include multiple performance obligations, the Company allocates the transaction price to each performance obligation based on its relative standalone selling price, which requires judgement. The Company determines relative standalone selling prices using available information, including standalone sales, list prices and typical discounts offered to customers, as applicable. In developing these estimates, the Company considers past history, competition, billing rates of current services and other factors.

The Company has sales from standalone software, which are included in product revenue. These arrangements typically include software licenses and maintenance contracts, both of which the Company has determined are distinct performance obligations. The Company determines the amount of the transaction price to allocate to the license and maintenance contract based on the relative standalone selling price of each performance obligation. Software license revenue is recognized at the point in time when control has been transferred to the customer. The revenue allocated to the software maintenance contract is recognized on a straight-line basis over the maintenance period, which is the contractual term of the contract, as a time-based measure of progress best reflects the Company’s performance in satisfying this obligation. Unspecified rights to software upgrades are typically sold as part of the maintenance contract on a

when-and-if-available

basis.

Payment terms and conditions generally include a requirement of payment within 30 to 60 days. Prior to providing payment terms to customers, an evaluation of their credit risk is performed. Because the Company generally expects to receive payment within one year or less from the time control of a product or service is transferred to the customer, the Company does not generally adjust consideration for the effects of a significant financing component. Variable consideration, including rebates, sales discounts and returns, is estimated and recorded as a reduction to revenue in the same period the related revenue is recognized. These estimates are based on contractual terms, historical practices and current trends, and are adjusted as new information becomes available.

Service revenue includes (1) service and software maintenance contracts and (2) service calls (time and materials). Instrument service contracts and software maintenance contracts are typically annual or multi-year contracts, which are billed at the beginning of the contract or maintenance period. The amount of the service, and software maintenance contract is recognized on a straight-line basis to revenue over the service period, which is the contractual term of the contract, as a time-based measure of progress best reflects the Company’s performance in satisfying this obligation. There are no deferred costs associated with the service contract, as the cost of the service is recorded when the service is performed. Service calls are recognized to revenue at the time a service is performed.

Stockholders' Equity

Stockholders’ Equity

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 2026 or 2025. The Company repurchased $14 million of the Company’s common stock related to the vesting of restricted stock units during both the six months ended July 4, 2026 and June 28, 2025. On February 9, 2026, upon completion of the acquisition of the BDS Business, the Company issued 38,542 thousand shares of Waters common stock to the BD shareholders.

Product Warranty Costs

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

The following is a summary of the activity of the Company’s accrued warranty liability for the six months ended July 4, 2026 and June 28, 2025 (in millions):


	Balance at Beginning of Period		Accruals for Warranties		Settlements Made			Acquisitions		Balance at End of Period
Accrued warranty liability:
July 4, 2026	$	12	$	12	$	(14	)	$	11	$	21
June 28, 2025	$	12	$	3	$	(3	)	$	—	$	12

Restructuring

In the second quarter of 2026, the Company implemented a reduction in workforce that impacted approximately 3% of the Company’s employees. As a result, the Company incurred approximately $52 million of severance-related costs and paid $23 million of severance-related costs in connection with the workforce reduction during 2026. The accrued restructuring expense was approximately $29 million at July 4, 2026.

Deferred Close Businesses & Interim Operating Agreement

Regulatory, legal and other compliance requirements in certain foreign jurisdictions, principally China and Italy, prevented the legal transfer of certain assets and liabilities associated with the BDS Business (such assets and liabilities collectively, the “Deferred Close Businesses” and all other entities, the “Conveying Businesses”) at the Closing Date. The Company and BD will use reasonable best efforts to take all actions to transfer each Deferred Close Business as promptly as reasonably practicable. At Closing, the Company entered into an agreement (the “Interim Operating Agreement”) with BD that obligates BD to continue to operate the assets and liabilities of the Deferred Close Businesses on the Company’s behalf and at the sole direction of the Company. The Company and BD agreed that during the interim period between the Closing and the close date for an applicable Deferred Close Businesses BD will transfer to the Company the net profits from the operations of each of the Deferred Close Businesses to the Company (or, in the event the operations result in net losses to BD, the Company will reimburse BD for the amount of such net losses). The Interim Operating Agreement forms part of the Transition Services Agreement with BD described in Note 10, “Other Commitments and Contingencies” (the “TSA”). Amounts due from and due to BD with respect to billings and collections on the Company’s behalf, as described in Note 1 under “Accounts Receivable and Allowance for Credit Losses” arise under the TSA.

For the Company, the Interim Operating Agreement and consideration transferred at Closing creates a present enforceable right to receive the Deferred Close Businesses at a future closing when closing conditions are satisfied. Because legal title of the Deferred Close Businesses have not transferred to the Company at Closing and the Deferred Close Businesses remain commingled within legacy BD legal entities that will not be conveyed to the Company, the Company does not obtain control of the Deferred Close Businesses pursuant to the consolidation accounting framework. Legal and beneficial title to the Deferred Close Businesses remains with BD until the transfer of each Deferred Close Business to the Company. While legal title remains with BD, the Company obtained the economic rights to the Deferred Close Businesses through the Interim Operating Agreement, which represents a contractual right and meets the definition of an asset based on present rights to economic benefits. Accordingly, the consideration attributable to the Deferred Close Businesses is reflected as a prepaid deposit asset until such deferred closings occur. Refer to Note 4, “Acquisitions” for additional information regarding recognition of the prepaid deposit asset.

At Closing, the customers of the BDS Business were informed that the Company completed its acquisition of the BDS Business and that the Company is responsible for providing the product or service to the customer. More specifically, through the Interim Operating Agreement for the Deferred Close Businesses, the Company has control of the product or service before it is transferred to the customer. The Company also establishes the price for the goods or services, has inventory risk before the good has been transferred to the customer and is responsible for fulfilling the promise to provide the specified good or service. Therefore, in this revenue arrangement that involves three parties (the Company, BD and the customer), the Company is the principal in the arrangement and recognizes revenue, cost of revenue and operating expenses generated by the Deferred Close Businesses on a gross basis.

New Accounting Pronouncements

Recently Adopted Accounting Standards

There were no additions to the new accounting pronouncement adoptions as described in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2025. Other amendments to U.S. GAAP that have been issued by the Financial Accounting Standards Board (the “FASB”) or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

Recently Issued Accounting Standards

There were no additions to the new accounting pronouncements not yet adopted as described in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2025. Other amendments to U.S. GAAP that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.