This past year was the most challenging for Waters in recent history. In the first quarter of 2002, an adverse U.S. mass spectrometry patent litigation judgement caused us to remove affected products from the U.S. market and start an accelerated reengineering program to address the resulting product void. Principally as a result of this product void, mass spectrometry revenues declined in 2002.

Our largest product line, high performance liquid chromatography (HPLC), performed well for most of the year. However, late in 2002, customers in the life science marketplace, including large pharmaceutical companies, slowed their pace of capital spending. As a result, overall product line revenue growth slowed in late 2002. As the year progressed, industrial customers, which have been generally weak for the last several years, did show signs of increasing demand for our core HPLC products, and for the thermal analysis products of our TA Instruments subsidiary as well.