Amol Chaubal
Senior Vice President and Chief Financial Officer at Waters
Thank you, Udit, and good morning, everyone.
In the third quarter, sales grew less than 1% as reported. Organic constant currency sales declined 4% against a mid-teens growth comparison last year. Waters' Division and TA both declined 4%. We saw good results again from our Wyatt acquisition, which added 4% constant currency growth and performed in line with our expectations despite the challenging environment. The impact of FX was flat in the quarter, which came in below our expectations of a 1% tailwind to as reported sales.
In organic constant currency by end market, pharma declined 2%, industrial declined 8% and academic and government declined 3%. In Pharma, mid-single-digit positive growth outside of China was more than offset by continued slowdown in China Pharma, which declined over 30%. In Industrial, our business declined high-single-digits with a tough growth comparison of 22% in the prior year quarter and due to China weakness now spilling over into non-pharma segments. We continue to see strong growth in global PFAS testing and battery testing applications.
Academic and government declined 3%. Outside of China, overall A&G growth was up 8%. This was led by double-digit growth in Europe and mid-single-digit growth in the Americas. In China, A&G declined over 30% as demand fell rapidly after we completed shipments under the stimulus program in the first half of the year.
By geography, sales in Asia declined 12%. The Americas was flat and Europe grew 3%. In Asia, China broadly declined. Excluding China, Asia grew 3%, which was in line with our expectations. India grew low-double-digits and Japan grew mid-teens. In Americas, Pharma grew 6%, which exceeded our expectations as we executed very well with our large to mid-pharma customers. Academic and government also grew 6%. However, strength in these two segments was offset by contraction in industrial for the quarter. In Europe, growth exceeded our expectations in Pharma, which grew mid-single-digits and academic and government, which grew 10%, while Industrial declined mid-single-digits.
By products and segments, instruments declined 13%. Recurring revenues grew mid-single-digits overall and high-single-digits outside of China. There was no change in number of days versus the prior year's quarter.
Our continued focus on operational excellence with pricing, productivity and proactive cost alignment together with lower incentive compensation drove continued margin expansion. Gross margin for the quarter was approximately 59.1%, an expansion of 240 basis points compared to 56.7% in the third quarter of 2022. Adjusted operating margin for the quarter was approximately 31.5%, an expansion of 380 basis points compared to 27.7% in the third quarter of 2022. Our effective operating tax rate for the quarter was 14.7% due to discrete items within the quarter. The average share count came in at 59.3 million shares, which is about 800,000 less than the third quarter of last year.
Our non-GAAP earnings per fully diluted share were $2.84, an increase of 8% despite flat revenue. On a GAAP basis, our earnings per fully diluted share were $2.27. A reconciliation of our GAAP to non-GAAP earnings is attached to this morning's press release and in the appendix of our earnings call presentation..
Turning now to free cash flow, capital deployment and our balance sheet. We define free cash flow as cash from operations, less capital expenditures and excludes special items. In the third quarter of 2023, free cash flow was $123 million after funding $38 million of capital expenditures. Free cash flow was impacted by higher inventory balances.
We maintain a strong balance sheet, access to liquidity and a well-structured debt maturity profile. This strength allows us to prioritize investing in growth, including M&A and returning capital to shareholders. We continue to evaluate M&A opportunities that will meaningfully accelerate value creation.
At the end of third quarter, our net debt position further declined to $2.2 billion, a net debt-to-EBITDA ratio of about 2.2. This represents a decrease of $125 million during the quarter as we delivered the Wyatt acquisition. As previously disclosed, our share buyback program has been temporarily suspended to enable us to pay down the debt incurred as part of the Wyatt acquisition. We will evaluate the resumption of our share repurchase program through the quarter and into the first half of next year.
Now I would like to provide our updated thoughts for 2023. As Udit outlined, growth rates in China have continued to deteriorate as the year has progressed. In addition, weakness in China has now broadened beyond pharma and into industrial and academic and government end markets. We expect China growth rates to sequentially decline further in the fourth quarter and now expect China to decline approximately 25% for the full year versus our prior expectations of low-double-digit decline. This translates to a full year growth headwind of approximately 250 basis points versus our previous guide. As a result, we are updating our full year 2023 organic constant currency sales growth guidance to the range between negative 2% and negative 1%.
At current exchange rates, where the U.S. dollar has strengthened against most major currencies since our last earnings call, currency translation is now expected to have a 1.5% negative impact on our full year sales, which is a 150 basis point headwind versus our prior guide. Consistent with our prior expectations, we expect the Wyatt transaction to add approximately 2.5% to our full year 2023 revenue growth. Therefore, our total reported sales growth guidance is now negative 1% to flat.
As Udit covered, despite incremental headwinds from China and FX, our teams have rallied to drive pricing and productivity gains. We expect this will allow us to deliver a gross margin of approximately 59% for the year, which is in line with our previous guidance and is 100 basis points of expansion versus last year. Together with proactive cost alignment, we expect this will allow us to deliver an adjusted operating margin of approximately 30.5% for the year, after funding investments in high-growth adjacencies, which is also in line with our previous guide and is 30 basis points of expansion versus last year.
We expect our full year net interest expense to be approximately $80 million. The full year tax rate is expected to remain at approximately 15.5%. Our average diluted 2023 share count is expected to be approximately 59.2 million shares.
Now rolling all this together on a non-GAAP basis, our full year 2023 earnings per fully diluted share guidance is projected in the range of $11.65 to $11.75, which includes a negative currency impact of approximately 3.5 percentage points at current FX rates.
Looking to the fourth quarter of 2023, we expect further weakness in China and cautious spending from our customers throughout the quarter. Hence, we expect fourth quarter organic constant currency sales growth in the range of negative 8% to negative 5%. At today's rates, currency translation is expected to subtract approximately 1.5%, while we expect Wyatt to add approximately 3.5% to our fourth quarter revenue growth. Therefore, our total fourth quarter reported sales growth guidance is negative 6% to negative 3%. Fourth quarter non-GAAP earnings per fully diluted share are estimated to be in the range of $3.52 to $3.62, which includes a negative impact from currency of approximately 5 percentage points at current FX rates.
Now I would like to turn it back to Udit for some summary comments. Udit?
