United States
Agilent Technologies Reports First Quarter 2006 Results
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PALO ALTO, Calif., Feb. 13, 2006 Agilent Technologies Inc. (NYSE: A) today reported orders of $1.35 billion for the first fiscal quarter ended Jan. 31, 2006, 15 percent above one year ago. Revenues during the quarter were $1.34 billion, 10 percent above last year. First quarter GAAP net earnings were $2.82 billion, or $5.83 per diluted share, compared with $103 million, or $0.21 per share, in last year's first quarter. During the first quarter, Agilent sold its Semiconductor Products business for $2.7 billion and its 47 percent share of Lumileds for approximately $1.0 billion. The pre-tax gain on the sale of these businesses was approximately $2.7 billion. Also included in GAAP results are $63 million of charges related to the planned spin-off of Semiconductor Test Solutions (STS) and the reduction of Agilent's infrastructure costs. Excluding these charges and $36 million of non-cash stock compensation expenses, Agilent reported first quarter adjusted net income of $154 million, or $0.32 per share. On a comparable basis, the company earned $71 million, or $0.15 per share, one year ago.(1) "We are pleased with Agilent's performance in the first quarter of 2006," said Bill Sullivan, Agilent president and chief executive officer. "We successfully completed the semiconductor-related divestitures and a self-tender offer that returned $3 billion of cash to our owners. Operationally, we also performed to our commitments, with revenues and adjusted net income at the high end of our expectations after reflecting fewer shares outstanding during the quarter." Sullivan noted that gross margins were at the highest level in five years, that working capital ratios were at a first quarter record low, and that the company achieved its targeted 21 percent Return on Invested Capital(2) during the quarter. "With backlog at its highest level in 1½ years and a continued rapid pace of new product introductions, we are well positioned for the second quarter and 2006." For the second quarter of fiscal 2006, the company expects revenues (including STS) in the range of $1.37 billion to $1.43 billion, up 6 to 12 percent from last year. Adjusted net income is expected to be in the range of $0.35 to $0.40 per share(3), roughly double last year's comparable earnings. For the full year, the company remains comfortable with the range of analyst estimates for adjusted net income. Preparations for a planned spin-off of STS continue on schedule, with an initial public offering expected to take place near mid-year 2006.
Segment income from operations of $52 million was $1 million above last year. A one-point improvement in gross margins was more than offset by a $12 million increase in operating expenses to fund recent acquisitions, for planned new product introductions and for incremental investments in molecular diagnostics. The first quarter's 14 percent operating margin was equal to last year, while segment Return On Invested Capital(2) fell one point to a still attractive 28 percent. On Feb. 1, 2006, Agilent completed the purchase of Yokogawa Electric Company's
49 percent ownership of Yokogawa Analytical Systems (YAN) for $98 million.
First quarter income from operations of $89 million was up $21 million on a
$14 million increase in revenue. Gross margin improved 4 points to 55 percent,
and segment operating margin rose 2½ points to 11 percent. ROIC(2)
improved 7 points to 18 percent based on better operating margins and reductions
in working capital.
Segment income of $16 million compares with a $40 million loss one year ago.
Gross margins doubled from last year to 44 percent and included an $8 million
charge for the discontinuance of certain products, while operating expenses
were flat over the period. Operating margin improved to 9 percent. Return On
Invested Capital(2) during the quarter reached 17 percent. About Agilent Technologies Agilent Technologies Inc. (NYSE: A) is the world's premier measurement company
and a technology leader in communications, electronics, life sciences and chemical
analysis. The company's 20,000 employees serve customers in more than 110 countries.
Agilent had net revenue of $5.1 billion in fiscal 2005. Information about Agilent
is available on the Web at www.agilent.com. Agilent Management will present more details on its first-quarter FY2006 financial results later this morning at its analyst meeting in New York City beginning at 8 a.m. (Eastern). The event will be webcast live in listen-only mode. Listeners may log on at www.investor.agilent.com and select "Agilent Analyst Meeting and Q1 Earnings Release." The webcast will remain available on the company's website for 90 days. A telephone replay of the first half of the meeting during which the Q1 results
will be discussed will be available from 2 p.m. (Eastern) today through Feb.
20, 2006. The replay number is (888) 286-8010 (for international, dial +1 (617)
801-6888); enter passcode 36010187.
This news release contains forward-looking statements as defined in the Securities Exchange Act of 1934 and is subject to the safe harbors created therein. The forward-looking statements contained herein include, but are not limited to, information regarding Agilent's future revenues, earnings and profitability; the pace of new product introductions and future demand for the Company's products and services; the planned spin-off of the Company's Semiconductor Test Solutions business, including the timing of the initial public offering of that business and completion of the spin-off; the Company's revenue and earnings (on a segment and consolidated basis) guidance for the second quarter of fiscal year 2006 and earnings guidance for fiscal year 2006; the Company's opportunities in fiscal year 2006; and future demand for the Company's products and services. These forward-looking statements involve risks and uncertainties that could cause Agilent's results to differ materially from management's current expectations. Such risks and uncertainties include, but are not limited to, unforeseen changes in the strength of our customers' businesses; unforeseen changes in the demand for current and new products and technologies; changes in the planned spin-off of the Semiconductor Test Solutions business, including complications in connection with the separation of STS assets from the Company and difficulties or delays in the expected IPO process due to market conditions or regulatory delays. In addition, other risks that Agilent faces in running its operations include
the ability to execute successfully through business cycles while it continues
to implement cost reductions; the ability to meet and achieve the benefits of
its cost-reduction goals and otherwise successfully adapt its cost structures
to continuing changes in business conditions; ongoing competitive, pricing and
gross margin pressures; the risk that our cost-cutting initiatives will impair
our ability to develop products and remain competitive and to operate effectively;
the impact of geopolitical uncertainties on our operations, our markets and
our ability to conduct business, the ability to improve asset performance to
adapt to changes in demand; the ability to successfully introduce new products
at the right time, price and mix, and other risks detailed in Agilent's filings
with the Securities and Exchange Commission, including our Annual Report on
Form 10-K for the year ended Oct. 31, 2005. Forward-looking statements are based
on the beliefs and assumptions of Agilent's management and on currently available
information. Agilent undertakes no responsibility to publicly update or revise
any forward-looking statement.
# # # Financial tables for first quarter fiscal 2006 PRELIMINARY
AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
Three Months
Ended January 31,
------------------- Percent
2006 2005 Inc/(Dec)
--------- --------- ----------
Orders $ 1,353 $ 1,176 15%
Net revenue $ 1,336 $ 1,212 10%
Costs and expenses:
Cost of products and services 657 621 6%
Research and development 189 175 8%
Selling, general and administrative 445 378 18%
--------- ---------
Total costs and expenses 1,291 1,174 10%
--------- ---------
Income from operations 45 38 18%
Other income (expense), net 48 20 140%
--------- ---------
Income from operations before taxes and
equity in income 93 58
Provision for taxes 15 15 -
Equity in net income of unconsolidated
affiliate and gain -- Lumileds 901 8 11163%
--------- ---------
Income from continuing operations 979 51
Income from and gain on sale of
discontinued operations, net of taxes 1,837 52 3433%
--------- ---------
Net income 2,816 103 2634%
========= =========
Net income per share:
Basic
Continuing operations $ 2.07 $ 0.10
Discontinued operations 3.88 0.11
--------- ---------
Total net income per share $ 5.95 $ 0.21
========= =========
Diluted
Continuing operations $ 2.03 $ 0.10
Discontinued operations 3.80 0.11
--------- ---------
Total net income per share $ 5.83 $ 0.21
========= =========
Weighted average shares used in
computing net income per share:
Basic 473 491
Diluted 483 496
Historical amounts were reclassified to conform with current period
presentation.
Income from continuing operations for the first quarter of fiscal 2006
included pre-tax share-based compensation expense under SFAS 123(R) of
$36 million related to employee stock options and employee stock
purchases.
The preliminary income statement is estimated based on our current
information.
PRELIMINARY
AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions, except par value and share amounts)
(Unaudited)
January 31, October 31,
2006 2005
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,737 $ 2,226
Short term investments - 25
------------ ------------
Cash and cash equivalents and short
term investments 2,737 2,251
Accounts receivable, net 772 753
Inventory 740 722
Other current assets 377 298
Current assets of discontinued
operations - 423
------------ ------------
Total current assets 4,626 4,447
Property, plant and equipment, net 875 873
Goodwill and other intangible assets, net 375 362
Other assets 549 628
Restricted investments 1,601 22
Non-current assets of discontinued
operations - 419
------------ ------------
Total assets $ 8,026 $ 6,751
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 386 $ 344
Employee compensation and benefits 434 542
Deferred revenue 262 247
Income and other taxes payable 365 474
Other accrued liabilities 190 179
Current liabilities of discontinued
operations - 150
------------ ------------
Total current liabilities 1,637 1,936
------------ ------------
Long-term debt 1,500 -
Retirement and post-retirement benefits 303 383
Other long-term liabilities 404 351
------------ ------------
Total liabilities 3,844 2,670
------------ ------------
Commitments and contingencies - -
Stockholders' equity:
Preferred stock; $0.01 par value; 125
million shares authorized; none issued
and outstanding - -
Common stock; $0.01 par value; 2 billion
shares authorized; 522 million shares at
January 31, 2006 and 512 million shares
at October 31, 2005 issued and
outstanding 5 5
Treasury stock at cost; 92 million
shares at January 31, 2006 and 9 million
shares at October 31, 2005 (3,281) (290)
Additional paid-in capital 6,156 5,878
Retained earnings (Accumulated deficit) 1,353 (1,463)
Accumulated other comprehensive loss (51) (49)
------------ ------------
Total stockholders' equity 4,182 4,081
------------ ------------
Total liabilities and
stockholders' equity $ 8,026 $ 6,751
============ ============
The preliminary balance sheet is estimated based on our current
information.
PRELIMINARY
AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
Three months
ended
January 31,
2006
-------------
Cash flows from operating activities:
Net income $ 2,816
Less: income from and gain on sale of discontinued
operations 1,837
-------------
Income from continuing operations $ 979
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 43
Deferred taxes 11
Excess and obsolete inventory-related charges 22
Asset impairment charges 1
Gain on sale of investments (9)
Equity in net income of unconsolidated affiliate and
gain -- Lumileds (901)
Gain on sale of assets (1)
Non-cash share based compensation 36
Changes in assets and liabilities:
Accounts receivable (13)
Inventory (36)
Accounts payable 45
Employee compensation and benefits (107)
Income taxes and other taxes payable (100)
Other current assets and liabilities (28)
Other long-term assets and liabilities (77)
-------------
Net cash used in operating activities of continuing
operations(a): (135)
Net cash provided by operating activities of
discontinued operations 7
-------------
Net cash used in operating activities (128)
Cash flows from investing activities:
Investments in property, plant and equipment (50)
Proceeds from the sale of property, plant and
equipment 2
Investment in equity securities (2)
Proceeds from sale of Lumileds and other investments 960
Increase in restricted investments (1,579)
Payment of loan receivable 50
Net proceeds from sale of discontinued operations 2,528
Proceeds from sale of short-term investments 25
Acquisition of businesses and intangible assets, net
of cash acquired (15)
-------------
Net cash provided by investing activities of continuing
operations: 1,919
Net cash used in investing activities of discontinued
operations: (6)
-------------
Net cash provided by investing activities 1,913
Cash flows from financing activities:
Issuance of common stock under employee stock plans 238
Treasury stock repurchases (2,991)
Proceeds from term facility 700
Repayment of term facility (700)
Debt issuance costs (23)
Long-term debt 1,500
-------------
Net cash used in financing activities of continuing
operations: (1,276)
Effect of exchange rate movements 2
Net increase in cash and cash equivalents 511
Cash and cash equivalents at beginning of period 2,226
-------------
Cash and cash equivalents at end of period $ 2,737
=============
(a) Cash payments included in operating activities:
Restructuring 50
Income tax payments 96
The preliminary cash flow statement is estimated based on our current
information.
PRELIMINARY
AGILENT TECHNOLOGIES, INC.
NON-GAAP NET INCOME AND EPS RECONCILIATIONS
Three Months Ended
January 31,
2006 EPS 2005 EPS
----------------- -----------------
Net income per GAAP $ 2,816 $ 5.83 $ 103 $ 0.21
Income from and gain on sale of
discontinued operations (1,837) (3.80) (52) (0.11)
----------------- -----------------
Income from continuing operations $ 979 $ 2.03 $ 51 $ 0.10
Non-GAAP adjustments:
Restructuring and asset
impairment 20 0.04 6 0.01
Business disposal and
related costs 13 0.03 - -
Gain on sale of investments (5) (0.01) (5) (0.01)
Gain on sale of Lumileds (901) (1.87) (5) (0.01)
Share-based compensation
expense 36 0.07 - -
Unallocated SPG corporate
charges 7 0.02 20 0.04
Other, principally other
intangibles 5 0.01 4 0.01
----------------- -----------------
Adjusted net income $ 154 $ 0.32 $ 71 $ 0.15
================= =================
We provide adjusted net income and adjusted net income per share
amounts in order to provide meaningful supplemental information
regarding our operational performance and our prospects for the
future. These supplemental measures exclude, among other things, the
impact of the sale of our businesses and investments from the results
of the sales of our products. Some of the exclusions, such as
impairments, may be beyond the control of management. Further, some
may be less predictable than revenue derived from our core businesses
(the day to day business of selling our products and services). These
reasons provide the basis for management's belief that the measures
are useful.
Our management uses non-GAAP measures to evaluate the performance of
our core businesses, to estimate future core performance and to
compensate employees. Since management finds this measure to be
useful, we believe that our investors benefit from seeing our results
"through the eyes" of management in addition to seeing our GAAP
results. This information facilitates our management's internal
comparisons to our historical operating results as well as to the
operating results of our competitors.
Our management recognizes that items such as restructuring charges and
sales of investments can have a material impact on our cash flows and
net income. Our GAAP financial statements including our statement of
cash flows portray those effects. Although we believe it is useful for
investors to see core performance free of special items, investors
should understand that the excluded items are actual expenses that
impact the cash available to us for other uses. To gain a complete
picture of all effects on the Company's profit and loss from any and
all events, management does (and investors should) rely upon the GAAP
income statement. The non-GAAP numbers focus instead upon the core
business of the company, which is only a subset, albeit a critical
one, of the Company's performance.
Readers are reminded that non-GAAP numbers are merely a supplement to,
and not a replacement for, GAAP financial measures. They should be
read in conjunction with the GAAP financial measures. It should be
noted as well that our non-GAAP information may be different from the
non-GAAP information provided by other companies.
PRELIMINARY
AGILENT TECHNOLOGIES, INC.
Reconciliation of Segment ROIC
(In millions)
(Unaudited)
Q1 FY06 Q1 FY06 Q1 FY06
BAS EM STS
Numerator:
Segment income (loss) from operations $ 52 $ 89 $ 16
Less:
Other (income) expense and taxes 15 15 5
--------- --------- ---------
Segment return 37 74 11
--------- --------- ---------
Segment return annualized $ 148 $ 296 $ 44
========= ========= =========
Denominator:
Segment assets (a) $ 802 $ 2,248 $ 399
Less:
Net current liabilities (b) 220 532 87
--------- --------- ---------
Invested capital $ 582 $ 1,716 $ 312
--------- --------- ---------
Average Invested capital $ 532 $ 1,617 $ 266
ROIC 28% 18% 17%
Q4 FY05 Q4 FY05 Q4 FY05
BAS EM STS
Numerator:
Segment income (loss) from operations $ 65 $ 131 $ (2)
Less:
Other (income) expense and taxes 19 26 -
--------- --------- ---------
Segment return 46 105 (2)
--------- --------- ---------
Segment return annualized $ 184 $ 420 $ (8)
========= ========= =========
Denominator:
Segment assets (a) $ 690 $ 2,009 $ 312
Less:
Net current liabilities (b) 208 492 93
--------- --------- ---------
Invested capital $ 482 $ 1,517 $ 219
--------- --------- ---------
Average Invested capital $ 514 $ 1,640 $ 245
ROIC 36% 26% -3%
Q1 FY05 Q1 FY05 Q1 FY05
BAS EM STS
Numerator:
Segment income (loss) from operations $ 51 $ 68 $ (40)
Less:
Other (income) expense and taxes 13 13 (10)
--------- --------- ---------
Segment return 38 55 (30)
--------- --------- ---------
Segment return annualized $ 152 $ 220 $ (120)
========= ========= =========
Denominator:
Segment assets (a) $ 704 $ 2,384 $ 349
Less:
Net current liabilities (b) 203 457 73
--------- --------- ---------
Invested capital $ 501 $ 1,927 $ 276
--------- --------- ---------
Average Invested capital $ 526 $ 1,993 $ 274
ROIC 29% 11% -44%
ROIC calculation:(annualized current quarter segment return)/(average
of the two most recent quarter-end balances of Segment Invested
Capital)
(a) Segment assets consist of inventory, accounts receivable, property
plant and equipment, gross goodwill and other intangibles,
deferred taxes and allocated corporate assets.
(b) Includes accounts payable, employee compensation and benefits,
other accrued liabilities and allocated corporate liabilities.
Historical amounts were reclassified to conform with current period
presentation.
Return on invested capital (ROIC) is a non-GAAP measure that
management believes provides useful supplemental information for
management and the investor. ROIC is a tool by which we track how much
value we are creating for our shareholders. Management uses ROIC as a
performance measure for our businesses, and our senior managers'
compensation is linked to ROIC improvements as well as other
performance criteria. We believe that ROIC provides our management
with a means to analyze and improve their business, measuring segment
profitability in relation to net asset investments. We acknowledge
that ROIC may not be calculated the same way by every company. We
compensate for this limitation by monitoring and providing to the
reader a full GAAP income statement and balance sheet.
Readers are reminded that non-GAAP numbers are merely a supplement to,
and not a replacement for, GAAP financial measures. They should be
read in conjunction with the GAAP financial measures. It should be
noted as well that our non-GAAP information may be different from the
non-GAAP information provided by other companies.
Editorial Contacts: Amy Flores Jorgen Tesselaar (Europe and Asia) Investor Contact: |
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