United States
Agilent Technologies Reports Third Quarter 2007 Results
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SANTA CLARA , Calif., August 14, 2007 Agilent Technologies Inc. (NYSE: A) today reported orders of $1.31 billion for the third fiscal quarter ended July 31, 2007, 7 percent above one year ago. Revenues during the quarter were $1.37 billion, 11 percent above last year. Third quarter GAAP net income was $185 million, or $0.45 per diluted share. Last year's third quarter GAAP net income from continuing operations, which included a $65 million, or $0.15 per share, gain from the sale of assets, was $216 million. Included in this quarter's GAAP income is $27 million of share-based compensation expense. Excluding this item and $18 million of tax and other net benefits, Agilent reported third quarter adjusted net income of $194 million, or $0.48 per share. On a comparable basis, the company earned $166 million, or $0.39 per share, one year "Agilent met its aggressive performance targets despite very divergent market trends during the third quarter," said Bill Sullivan, Agilent president and chief executive officer. "Bio-analytical markets were strong across the board, and the performance of our Segment was even more robust. Electronic measurement markets were solid in the Americas and Europe but surprisingly weak in Asia, particularly Japan. "As a result, third quarter revenues were up 11 percent from last year to $1.37 billion, just shy of our revised expectations. Adjusted net income per share, at $0.48, was 23 percent above last year's results and in the middle of our guidance range." Sullivan noted that, including the impact of the third quarter acquisition of Stratagene, Bio-Analytical segment orders were up 21 percent from last year, while revenues hit a record $500 million, up 19 percent from one year ago. "Initial integration activities are going well, and we are enthusiastic about the synergy between Stratagene's bio-reagents and Agilent's analytical instruments to better serve customers in both commercial and not-for-profit life sciences applications." Third quarter Return on Invested Capital(2) reached 28 percent, 3 points better than last year's strong performance. Both Receivables Days-Sales-Outstanding and Inventory Days-On-Hand improved 3 days from one year ago. Cash generated from operating activities was $176 million in the third quarter. During the period, the company repurchased $677 million of its common stock. The company ended the quarter with net cash of $1.5 billion. For the fiscal fourth quarter of 2007, Agilent expects a softer than normal seasonal increase in revenues because of weak Asian electronic measurement markets. Revenues are expected to be in the range of $1.39 billion to $1.43 billion, up 5 percent to 8 percent from last year. Adjusted net income is expected to be in the range of $0.50 to $0.54 per share, 9 percent to 17 percent above last year's comparable earnings.(3) Sullivan said, "Near-term weakness in Asian electronic measurement markets does not dampen our expectations for Agilent's performance in fiscal 2008. We anticipate continued momentum in our Bio-Analytical markets and a return to more normal secular growth in Electronic Measurement markets next year. We continue to leverage our robust operating model, and will benefit from our investments in core products, growth initiatives and acquisitions."
Segment Results
Segment income from operations of $92 million was $26 million above last year on an $80 million increase in revenues. Operating margins improved nearly 3 points to 18 percent. Segment Return On Invested Capital(2) improved 2 points to 29 percent despite a 4-point reduction in ROIC due to the addition of Stratagene.
Third quarter income from operations of $133 million was up $14 million from last year on a $55 million increase in revenues. Gross margins were flat with last year while operating margins improved less than a point due to increased acquisition-related spending. Segment ROIC(2) improved 2 points to 26 percent.
About Agilent TechnologiesAgilent 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 19,000 employees serve customers in more than 110 countries. Agilent had net revenues of $5.0 billion in fiscal 2006. Information about Agilent is available on the Web at www.agilent.com. Agilent’s management will present more details on its third quarter FY2007 financial results on a conference call with investors beginning at 1:30 p.m. (Pacific). This event will be webcast live in listen-only mode. Listeners may log on at www.investor.agilent.com and select “Q3 2007 Agilent Technologies Inc. Earnings Conference Call” in the “News & Events -- Calendar of Events” section. The webcast will remain available on the company’s Web site for 90 days. A telephone replay of the conference call will be available from 3:30 p.m. (Pacific) today through Aug. 21, 2007. The replay number is +1 888 286 8010 or international callers may dial +1 617 801 6888. The passcode is 61171511.
Forward-Looking StatementsThis 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; and guidance for the fourth quarter of fiscal year 2007. 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, and unforeseen changes in the demand for current and new products and technologies. 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 Quarterly Report on Form 10-Q for the quarterly period ended April 30, 2007. 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.
# # # AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
Three Months
Ended
July 31, Percent
--------------
2007 2006 Inc/(Dec)
------ ------- ---------
Orders $1,308 $1,225 7%
Net revenue $1,374 $1,239 11%
Costs and expenses:
Cost of products and services 616 553 11%
Research and development 170 162 5%
Selling, general and administrative 420 407 3%
Gain on sale of Palo Alto site - (65) 100%
------ -------
Total costs and expenses 1,206 1,057 14%
------ -------
Income from continuing operations 168 182 (8%)
Other income (expense), net 22 45 (51%)
------ -------
Income from continuing operations before taxes 190 227 (16%)
Provision for taxes 5 11 (55%)
------ -------
Income from continuing operations, net 185 216 (14%)
Loss from and gain on sale of discontinued
operations of our Semiconductor Products
Business (net of taxes of zero in 2006) - (6) 100%
Income from the discontinued operations of our
Semiconductor Test Solutions Business (net of
taxes of $7 million in 2006) - 17 (100%)
------ -------
Net income $ 185 $ 227 (19%)
====== =======
Net income per share - basic:
Income from continuing operations $ 0.47 $ 0.52
Income from and gain on sale of
discontinued operations of our
Semiconductor Products Business, net - (0.01)
Income from the discontinued operations
of our Semiconductor
Test Solutions Business, net - 0.04
------ -------
Net income per share - basic $ 0.47 $ 0.55
====== =======
Net income per share - diluted:
Income from continuing operations $ 0.45 $ 0.51
Income from and gain on sale of
discontinued operations of our
Semiconductor Products Business, net - (0.01)
Income from the discontinued operations
of our Semiconductor
Test Solutions Business, net - 0.04
------ -------
Net income per share - diluted $ 0.45 $ 0.54
====== =======
Weighted average shares used in computing net
income per share:
Basic 392 412
Diluted 407 422
Income from continuing operations for the third quarter of fiscal
years 2007 and 2006 include pre-tax share-based compensation expense
under SFAS No. 123(R) of $27 million and $19 million, respectively,
related to employee stock options and employee stock purchases.
The preliminary income statement is estimated based on our current
information.
Page 1
AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
Nine Months
Ended
July 31, Percent
--------------
2007 2006 Inc/(Dec)
------ ------- ---------
Orders $3,958 $3,678 8%
Net revenue $3,974 $3,645 9%
Costs and expenses:
Cost of products and services 1,795 1,716 5%
Research and development 511 499 2%
Selling, general and administrative 1,274 1,236 3%
Gain on sale of San Jose and Palo Alto sites - (121) 100%
------ -------
Total costs and expenses 3,580 3,330 8%
------ -------
Income from continuing operations 394 315 25%
Other income (expense), net 75 139 (46%)
------ -------
Income from continuing operations before taxes
and equity income 469 454 3%
Provision for taxes 11 44 (75%)
------ -------
Income from continuing operations before
equity income 458 410 12%
Equity income from and gain on sale of
Lumileds - 901 (100%)
------ -------
Income from continuing operations, net 458 1,311 (65%)
Income from and gain on sale of discontinued
operations of our Semiconductor Products
Business (net of taxes of $10 million in
2006) - 1,815 (100%)
Income from the discontinued operations of our
Semiconductor Test Solutions Business (net of
taxes of $17 million in 2006) - 32 (100%)
------ -------
Net income $ 458 $3,158 (85%)
====== =======
Net income per share - basic:
Income from continuing operations $ 1.15 $ 2.99
Income from and gain on sale of
discontinued operations of our
Semiconductor Products Business, net - 4.14
Income from the discontinued operations
of our Semiconductor
Test Solutions Business, net - 0.08
------ -------
Net income per share - basic $ 1.15 $ 7.21
====== =======
Net income per share - diluted:
Income from continuing operations $ 1.11 $ 2.92
Income from and gain on sale of
discontinued operations of our
Semiconductor Products Business, net - 4.04
Income from the discontinued operations
of our Semiconductor
Test Solutions Business, net - 0.07
------ -------
Net income per share - diluted $ 1.11 $ 7.03
====== =======
Weighted average shares used in computing net
income per share:
Basic 400 438
Diluted 412 449
Income from continuing operations for the first nine months of fiscal
years 2007 and 2006 include pre-tax share-based compensation expense
under SFAS No. 123(R) of $103 million and $73 million, respectively,
related to employee stock options and employee stock purchases.
The preliminary income statement is estimated based on our current
information.
Page 2
AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions, except par value and share amounts)
(Unaudited)
PRELIMINARY
July 31, October 31,
2007 2006
--------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 1,486 $ 2,262
Accounts receivable, net 738 692
Inventory 674 627
Other current assets 383 377
--------- -----------
Total current assets 3,281 3,958
Property, plant and equipment, net 787 775
Goodwill and other intangible assets, net 732 468
Restricted cash and cash equivalents 1,617 1,606
Other assets 607 562
--------- -----------
Total assets $ 7,024 $ 7,369
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 346 $ 378
Employee compensation and benefits 368 414
Deferred revenue 251 225
Income and other taxes payable 389 390
Other accrued liabilities 156 131
--------- -----------
Total current liabilities 1,510 1,538
--------- -----------
Long-term debt 1,500 1,500
Retirement and post-retirement benefits 293 288
Other long-term liabilities 433 395
--------- -----------
Total liabilities 3,736 3,721
--------- -----------
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; 550 million shares at July 31, 2007
and 535 million shares at October 31, 2006
issued 5 5
Treasury stock at cost; 163 million shares at
July 31, 2007 and 127 million shares at October
31, 2006 (5,838) (4,525)
Additional paid-in capital 7,052 6,605
Retained earnings 1,992 1,534
Accumulated other comprehensive income 77 29
--------- -----------
Total stockholders' equity 3,288 3,648
--------- -----------
Total liabilities and stockholders' equity $ 7,024 $ 7,369
========= ===========
The preliminary balance sheet is estimated based on our current
information.
Page 3
AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
PRELIMINARY
Nine Three
Months Months
Ended Ended
July 31, July 31,
2007 2007
--------- --------
Cash flows from operating activities:
Net income $ 458 $ 185
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 143 50
Share based compensation 103 27
Deferred taxes (29) (21)
Excess and obsolete inventory-related charges 13 5
Asset impairment charges 8 4
Net gain on sale of investments (2) -
Net gain on sale of assets (13) (7)
In-process research and development and others 1 -
Changes in assets and liabilities:
Accounts receivable (9) (5)
Inventory (46) (16)
Accounts payable (14) 17
Employee compensation and benefits (50) (60)
Income taxes and other taxes payable 11 (4)
Other current assets and liabilities 23 (32)
Other long-term assets and liabilities (26) 33
--------- --------
Net cash provided by operating activities (a) 571 176
Cash flows from investing activities:
Investments in property, plant and equipment (115) (36)
Proceeds from the sale of property, plant and
equipment 12 4
Proceeds from sale of investments 12 -
Proceeds from sale of intangibles and assets, net 14 14
Decrease (increase) in restricted cash, cash
equivalents, net 1 (1)
Acquisition of businesses and intangible assets,
net of cash acquired (311) (239)
--------- --------
Net cash used in investing activities (387) (258)
Cash flows from financing activities:
Net issuance of common stock under employee stock
plans 344 197
Treasury stock repurchases (1,313) (677)
Payment of long-term debt (4) (4)
--------- --------
Net cash used in financing activities (973) (484)
Effect of exchange rate movements 13 2
Net decrease in cash and cash equivalents (776) (564)
Cash and cash equivalents at beginning of period 2,262 2,050
--------- --------
Cash and cash equivalents at end of period $ 1,486 $1,486
========= ========
(a) Cash payments included in operating activities:
Restructuring 54 14
Income tax payments 63 30
The preliminary cash flow statement is estimated based on our current
information.
Page 4
AGILENT TECHNOLOGIES, INC.
ADJUSTED NET INCOME AND DILUTED EPS RECONCILIATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
Three Months Ended
July 31,
Diluted Diluted
2007 EPS 2006 EPS
--------------- --------------
Net income per GAAP $ 185 $ 0.45 $ 227 $ 0.54
Less income from and gain on sale of
discontinued operations of our
Semiconductor Products Business - - (6) (0.01)
Less income from discontinued operations
of our Semiconductor Test
Solutions Business - - 17 0.04
-------------- --------------
Income from continuing operations $ 185 $ 0.45 $ 216 $ 0.51
Non-GAAP adjustments:
Restructuring and asset impairment 11 0.03 36 0.09
Business disposal and infrastructure
reduction costs 2 - 25 0.06
Gain on sale of assets (8) (0.02) (65) (0.15)
Share-based compensation expense 27 0.07 19 0.04
Excess software amortization 6 0.01 - -
Intangible amortization 12 0.03 7 0.02
Donation to Agilent Foundation - - - -
Remeasurement loss for a one-time
intercompany transaction - - - -
Gain on sale and equity in income of
Lumileds - - - -
Income from foreign sales corporation
tax study - - (13) (0.03)
Retirement plans curtailment gains - - (18) (0.04)
Unallocated SPG corporate charges - - - -
Unallocated STS corporate charges - - 5 0.01
Other 4 0.01 1 -
Adjustment for taxes (45) (0.10) (47) (0.12)
-------------- --------------
Adjusted net income from continuing
operations $ 194 $ 0.48 $ 166 $ 0.39
============== ==============
Add net income for STS segment (non-
GAAP) - - 29 0.07
-------------- --------------
Adjusted net income $ 194 $ 0.48 $ 195 $ 0.46
============== ==============
Nine Months Ended
July 31,
Diluted Diluted
2007 EPS 2006 EPS
-------------- ---------------
Net income per GAAP $ 458 $ 1.11 $3,158 $ 7.03
Less income from and gain on sale of
discontinued operations of our
Semiconductor Products Business - - 1,815 4.04
Less income from discontinued
operations of our Semiconductor Test
Solutions Business - - 32 0.07
-------------- ---------------
Income from continuing operations $ 458 $ 1.11 $1,311 $ 2.92
Non-GAAP adjustments:
Restructuring and asset impairment 30 0.07 131 0.29
Business disposal and infrastructure
reduction costs 14 0.03 55 0.12
Gain on sale of assets (15) (0.04) (121) (0.27)
Share-based compensation expense 103 0.25 73 0.16
Excess software amortization 22 0.05 - -
Intangible amortization 29 0.07 19 0.04
Donation to Agilent Foundation 20 0.05 - -
Remeasurement loss for a one-time
intercompany transaction 4 0.01 - -
Gain on sale and equity in income of
Lumileds - - (901) (2.01)
Income from foreign sales corporation
tax study - - (13) (0.03)
Retirement plans curtailment gains - - (18) (0.04)
Unallocated SPG corporate charges - - 13 0.03
Unallocated STS corporate charges - - 40 0.09
Other 7 0.02 (9) (0.01)
Adjustment for taxes (140) (0.33) (115) (0.25)
-------------- ---------------
Adjusted net income from continuing
operations $ 532 $ 1.29 $ 465 $ 1.04
============== ===============
Add net income for STS segment (non-
GAAP) - - 62 0.13
-------------- ---------------
Adjusted net income $ 532 $ 1.29 $ 527 $ 1.17
============== ===============
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,
expenses related to share-based compensation, charges related to the
amortization of intangibles, the impact of restructuring charges and
the sale of our businesses. 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 share-based compensation
expenses, amortization of intangibles and restructuring charges can
have a material impact on our cash flows and/or our 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 may
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.
The preliminary adjusted net income and diluted EPS reconciliation is
estimated based on our current information.
Page 5
AGILENT TECHNOLOGIES, INC.
RECONCILIATION OF ROIC
(In millions)
(Unaudited)
Preliminary
BAM EM Agilent BAM EM BAM EM
Numerator: Q3'07 Q3'07 Q3'07 Q3'06 Q3'06 Q2'07 Q2'07
------------------- ------------ ------------
Adjusted income from
operations $92 $133 $223 $66 $119 $76 $121
Less:
Taxes and Other
(income)/expense 25 28 47 17 26 19 23
------------------- ------------ ------------
Segment return 67 105 176(a) 49 93 57 98
------------------- ------------ ------------
Segment return
annualized $268 $420 $704 $196 $372 $228 $392
=================== ============ ============
Denominator:
Segment assets (b) $1,304$2,042 $3,358 $998 $2,095 $1,050$2,127
Less:
Net current
liabilities (c) 254 463 714 260 522 236 527
------------------- ------------ ------------
Invested capital $1,050$1,579 $2,644 $738 $1,573 $814$1,600
------------------- ------------ ------------
Average invested
capital $932$1,590 $2,536 $748 $1,573 $805$1,614
ROIC 29% 26% 28% 26% 24% 28% 24%
ROIC calculation:(annualized current quarter segment return)/(average
of the two most recent quarter-end balances of Segment Invested
Capital)
(a) Agilent return is equal to adjusted net income from continuing
operations of $194 million minus net interest income after tax of $18
million. Please see "Adjusted Net Income and EPS Reconciliations" for
a reconciliation of adjusted net income from continuing operations to
GAAP income from continuing operations.
(b) Segment assets consist of inventory, accounts receivable, property
plant and equipment, gross goodwill and other intangibles, deferred
taxes and allocated corporate assets.
(c) Includes accounts payable, employee compensation and benefits,
other accrued liabilities and allocated corporate liabilities.
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.
The preliminary reconciliation of ROIC is estimated based on our
current information.
Page 6
Download Financial Statements for Third Quarter Fiscal 2007
ContactsEditorial Contacts: Amy Flores Jorgen Tesselaar (Europe and Asia)
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