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Waters Corp (FRA:WAZ)
Long-Term Debt
€935 Mil (As of Sep. 2014)

Long-Term Debt is the debt due more than 12 months in the future. Waters Corp's long-term debt for the quarter that ended in Sep. 2014 was €935 Mil.

Long-Term Debt to Total Assets is a measurement representing the percentage of a corporation's assets that are financed with loans and financial obligations lasting more than one year. The ratio provides a general measure of the financial position of a company, including its ability to meet financial requirements for outstanding loans. It is calculated as a company's long-term debt divide by its total assets. Waters Corp's long-term debt for the quarter that ended in Sep. 2014 was €935 Mil. Waters Corp's total assets for the quarter that ended in Sep. 2014 was €2,911 Mil. Waters Corp's long-term debt to total assets ratio for the quarter that ended in Sep. 2014 was 0.32.

Waters Corp's long-term debt to total assets ratio declined from Sep. 2013 (0.34) to Sep. 2014 (0.32). It may suggest that Waters Corp is progressively becoming less dependent on debt to grow their business.


Definition

Long-Term Debt is the debt due more than 12 months in the future. The debt can be owed to banks or bondholders. Some companies issue bonds to investors and pay interest on the bonds.

The interest paid on companies’ debt is reflected in the income statement as interest expense. If a company has too much debt and it cannot serve the interest payment on the debt or repay the matured debt, the company risks bankruptcy. Peter Lynch famously said: “A company that does not have debt cannot go bankrupt.”

A company’s long term debt may have different dates of maturity and interest rates, depending on the terms.

Usually a company issues long term debt to pay for its capital expenditures. Borrowing allows the company to do things that otherwise cannot be done with only the capital it has. But debt can be risky.


Explanation

Long-Term Debt to Total Assets is a measurement representing the percentage of a corporation's assets that are financed with loans and financial obligations lasting more than one year. The ratio provides a general measure of the financial position of a company, including its ability to meet financial requirements for outstanding loans. A year-over-year decrease in this metric would suggest the company is progressively becoming less dependent on debt to grow their business.

Waters Corp's Long-Term Debt to Total Asset Ratio for the quarter that ended in Sep. 2014 is calculated as:

Long-Term Debt to Total Assets (Q: Sep. 2014 )=Long-Term Debt (Q: Sep. 2014 )/Total Assets (Q: Sep. 2014 )
=934.833204034/2910.5321955
=0.32

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Buffett says that durable competitive advantages carry little to no LT debt because the company is so profitable that even expansions or acquisitions are self financed.

We are interested in long term debt load for the last ten years. If the ten years of operation show little to no long term debt, then the company has some kind of strong competitive advantage.

Warren Buffett’s historic purchases indicate that on any given year, the company should have sufficient yearly net earnings to pay all long term within 3 or 4 year earnings period. (e.g. Coke + Moody’s = 1yr)

Companies with enough earning power to pay long term debt in less than 3 or 4 years is a good candidate in our search for long term competitive advantage.

BUT, these companies are targets for leveraged buy outs, which saddles the business with long term debt.

If all else indicates the company has a moat, but it has ton of debt, a leveraged buyout may have created the debt. In these cases the company’s bonds offer the better bet, in that the company’s earnings power is focused on paying off the debt and not growth.

Important: little or no long term debt often means a Good Long Term Bet


Related Terms

Total Liabilities, Current Portion of Long-Term Debt


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Waters Corp Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Long-Term Debt 187422379343370343529532796867

Waters Corp Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
Long-Term Debt 558543796849861869867795854935
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