Agilent Technologies Reports Third Quarter 2008 Results

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SANTA CLARA, Calif., Aug. 14, 2008

Agilent Technologies Inc. (NYSE: A) today reported orders of $1.39 billion for the third fiscal quarter ended July 31, 2008, 6 percent above one year ago. Revenues during the quarter were $1.44 billion, 5 percent above last year. Third quarter GAAP net income was $169 million, or $0.45 per diluted share. Last year's third quarter GAAP net income was $185 million, or $0.45 per share.

Included in this quarter's GAAP income is $22 million of non-cash amortization charges. Excluding this item and $7 million of other net charges, Agilent reported third quarter adjusted net income of $198 million, or $0.53 per share. On a comparable basis, the company earned $173 million, or $0.43 per share, one year ago. ⁽¹⁾

"The power of Agilent's operating model was clearly evident during the quarter," said Bill Sullivan, Agilent president and chief executive officer. "Economic conditions were difficult in much of the developed world, and third quarter revenues came in at the low end of our expectations. But we were able to quickly adapt to the changing economic environment, and our adjusted net income came in just above the high end of our expectations."

Third quarter adjusted net income of $0.53 per share was 23 percent above one year ago compared with a 5 percent increase in revenues. Subtracting $18 million of share-based compensation from operating results, third quarter adjusted net income of $0.57 per share compares with guidance of $0.52 to $0.56 per share.

Organic revenue growth in the Americas was about 3 percent, and local currency revenues were about flat in Europe compared with last year. Growth in Asia Pacific, at about 2 percent, was less robust than in recent quarters due largely to weakness in Japan.

Segment trends were very similar to the first half, with Bio-Analytical revenues up 13 percent, or 10 percent excluding acquisitions, with robust growth in both life sciences and chemical analysis markets. Electronic Measurement revenues increased less than 1 percent, with steady growth in communications test markets largely offset by weakness in semiconductor-related markets.

Third quarter Return on Invested Capital⁽²⁾ was a record 27 percent, three points above last year. Inventory Days-On-Hand improved by four days from one year ago, and Receivables Days Sales Outstanding improved by one day. Cash generated from operations during the quarter was $169 million. During the period, the company repurchased $250 million of its common stock and paid $41 million for acquisitions.

Looking to the fourth quarter of fiscal 2008, Sullivan said the company's outlook remained cautious but relatively unchanged. "We anticipate tough conditions in much of the developed world and slowing, though still robust, growth in developing Asian markets."

Given these trends, Sullivan said the company expected fiscal fourth quarter revenues in the range of $1.52 billion to $1.58 billion, up 5 percent to 9 percent from last year. Fourth quarter adjusted net income, including share-based compensation, is expected to be in the range of $0.58 to $0.62 per share, 26 percent to 35 percent above one year ago, and unchanged from prior guidance. ⁽³⁾

For the fiscal first quarter of 2009, Sullivan emphasized that visibility was poor given volatile economic conditions, and that the company would continue to plan conservatively. Revenues are expected to be in the range of $1.45 billion to $1.50 billion, up 4 percent to 8 percent from one year earlier. First quarter adjusted net income per share is expected to be in the range of $0.40 to $0.44 per share, 11 percent to 22 percent above the prior year's comparable earnings. ⁽³⁾

Bio-Analytical Measurement
($ millions except where noted)	Q3:F08	Q2:F08	Q3:F07
Orders	594	596	498
Revenues	566	556	500
Gross Margin, %	55%	53%	54%
Income from Operations	101	85	82
Segment Assets	1,549	1,476	1,304
Return On Invested Capital(2), %	25%	21%	26%

Bio-Analytical Measurement orders were up 19 percent during the third quarter from one year ago, the ninth consecutive double-digit advance, and up 15 percent excluding the impact of the Stratagene and Velocity11 acquisitions. Revenues of $566 million were up 13 percent from last year, and up 10 percent excluding the two acquisitions. Revenues were up double-digit percentages in both Life Sciences and Chemical Analysis. Geographically, revenues were up 15 percent in the Americas, 5 percent in Europe, and 23 percent in Asia.

Life Sciences revenues of $247 million were up 18 percent from one year ago, and up 11 percent excluding acquisitions. Pharma and Biotech markets were up 14 percent, with modest growth in the Americas and Europe and a strong performance from Asia. Sales to the academic and government markets were 36 percent above one year ago, with particular strength in microarrays, which were up nearly 50 percent. Chemical Analysis revenues of $319 million were up 10 percent from last year, with weakness in semiconductor-related materials science markets tempering what otherwise would have been 13 percent growth in Chemical Analysis revenues. Demand from petrochemicals was very strong, up 24 percent, and food safety was 17 percent ahead of one year ago.

Third quarter segment income from operations of $101 million was $19 million above last year on a $66 million increase in revenues. Adjusting for the impact of the Stratagene and Velocity11 acquisitions, the segment generated a $22 million improvement in income on a $48 million increase in revenues. Operating margins of 18 percent were improved about one point from last year due to an equivalent increase in gross margin. Segment Return On Invested Capital⁽²⁾ dropped one point to 25 percent due to acquisition-related costs and increased invested capital.

Electronic Measurement
($ millions except where noted)	Q3:F08	Q2:F08	Q3:F07
Orders	793	928	810
Revenues	878	900	874
Gross Margin, %	57%	58%	57%
Income from Operations	135	128	116
Segment Assets	2,090	2,121	2,042
Return On Invested Capital(2), %	27%	26%	23%

Third quarter Electronic Measurement orders of $793 million were 2 percent below last year. Revenues of $878 million were up less than 1 percent, with the Americas flat, Europe up 15 percent and Asia down 5 percent from one year ago because of weakness in Japan. General Purpose Test revenues were down 5 percent from last year because of a nearly 50 percent decline in the semiconductor-related parametric test business. Communications Test revenues were up 9 percent, with strength in R&D markets for LTE and broadband applications, and a continuing rebound in handset manufacturing test.

Third quarter segment income from operations of $135 million was up $19 million from last year on a $4 million increase in revenues. Gross margins were about unchanged from last year, but tight control of operating expenses produced an operating margin of 15 percent, two points above one year ago. Higher profitability and aggressive asset management enabled segment ROIC⁽²⁾ to improve four points to 27 percent.

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 revenues of $5.4 billion in fiscal 2007. Information about Agilent is available on the Web at www.agilent.com.

Agilent's management will present more details on its third quarter FY2008 financial results on a conference call with investors beginning today 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 2008 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, 2008. The replay number is +1 888 286-8010; international callers may dial +1 617 801-6888. The passcode is 18725363.

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 future demand for the Company's products and services; and guidance for the fiscal fourth quarter of 2008 and first quarter of fiscal 2009. 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 and global economic conditions 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 fiscal quarter ended April 30, 2008. 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.

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⁽¹⁾ Adjusted net income and adjusted net income per share are non-GAAP measures. Each of these measures is defined to exclude primarily the impacts of restructuring and asset impairment charges, business separation costs, non-cash amortization as well as gains and losses from the sale of investments and disposals of businesses net of their tax effects. A reconciliation between adjusted net income and GAAP net income is set forth on page 5 of the attached tables along with additional information regarding the use of this non-GAAP measure.

⁽²⁾ Return On Invested Capital is a non-GAAP measure and is defined as income (loss) from operations less other (income) expense and taxes, annualized, divided by the average of the two most recent quarter-end balances of assets less net current liabilities. The reconciliation of ROIC can be found on page 6 of the attached tables, along with additional information regarding the use of this non-GAAP measure.

⁽³⁾ Adjusted net income per share as projected for Q408 and Q109 is a non-GAAP measure which excludes primarily the impacts of future restructuring and asset impairment charges and non-cash amortization. Most of these excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy. Therefore, no reconciliation to GAAP amounts has been provided. Future amortization of intangibles is expected to be approximately $13 million per quarter.

Financial Tables (267KB)

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