Agilent Technologies Reports Second-Quarter 2015 Results

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Highlights:

  • GAAP income from continuing operations of $88 million, or $0.26 per share
  • Non-GAAP income from continuing operations of $129 million, or $0.38 per share(1)
  • Orders of $1.04 billion and revenues of $963 million
  • Third-quarter fiscal year 2015 revenue guidance of $995 million to $1.015 billion, and non-GAAP earnings guidance of $0.38 to $0.42 per share(2)
  • Fiscal year 2015 revenue guidance of $4.05 billion to $4.11 billion, and non-GAAP earnings guidance of $1.67 to $1.73 per share(2)

 

SANTA CLARA, Calif., May 18, 2015

Agilent Technologies Inc. (NYSE: A) today reported orders of $1.04 billion, up 1 percent (up 8 percent adjusted for currency) over one year ago for the second fiscal quarter ended April 30, 2015. Second-quarter revenues were $963 million, down 3 percent (up 4 percent adjusted for currency(3)) compared with one year ago.

Second-quarter GAAP income from continuing operations was $88 million, or $0.26 per share. Last year's second-quarter GAAP income from continuing operations was $40 million, or $0.12 per share.

During the second quarter, Agilent had intangible amortization of $38 million, business exit and divestiture costs of $10 million, transformation costs of $17 million and a tax benefit of $24 million. Excluding these items, Agilent reported second-quarter adjusted income from continuing operations of $129 million, or $0.38 per share(1).

"Agilent delivered solid earnings within guidance, along with excellent order momentum in the second quarter," said Mike McMullen, Agilent president and CEO. "Our continued focus on customers and strong market acceptance of our new products and sales structure are driving order growth."

"We continue to make progress on streamlining our company," he added. "We delivered an adjusted operating margin of 18.3 percent(4), up 140 basis points. We are well positioned to deliver on our core growth and earnings guidance for the year."

Second-quarter revenues of $473 million from Agilent's Life Sciences and Applied Markets Group (LSAG) declined 5 percent year over year (up 1 percent adjusted for currency(3)). LSAG saw strong order growth but was unable to convert all of this order strength to revenue in the quarter. LSAG's Q2 operating margin was 15.8 percent.

Q2 revenues of $321 million from the Agilent CrossLab Group (ACG) declined 1 percent year over year (up 7 percent adjusted for currency(3)). Growth continued to be strong across Agilent's analytical services and consumables business. ACG's operating margin was 21.5 percent in the quarter.

The Diagnostics and Genomics Group (DGG) Q2 revenues of $169 million rose 1 percent year over year (up 10 percent adjusted for currency(3)), led by particular strength in Dako and the nucleic acid businesses. DGG's operating margin for the quarter was 15.0 percent.

Agilent's third-quarter 2015 revenues are expected to be in the range of $995 million to $1,015 million. Third-quarter non-GAAP earnings are expected to be in the range of $0.38 to $0.42 per share(2).

For fiscal year 2015, Agilent expects revenues of $4.05 billion to $4.11 billion and non-GAAP earnings of $1.67 to $1.73 per share(2). The guidance is based on April 30, 2015 exchange rates. Foreign currency movements continue to impact Agilent's revenues and profits, and the company has taken action on multiple fronts to mitigate the effects.


About Agilent Technologies

Agilent Technologies Inc. (NYSE: A), a global leader in life sciences, diagnostics and applied chemical markets, is the premier laboratory partner for a better world. Agilent works with customers in more than 100 countries, providing instruments, software, services and consumables for the entire laboratory workflow. Agilent generated revenues of $4.0 billion in fiscal 2014. The company employs about 12,000 people worldwide. Information about Agilent is available at www.agilent.com.

Agilent's management will present more details about its second-quarter FY2015 financial results on a conference call with investors today at 1:30 p.m. PT. This event will be webcast live in listen-only mode. Listeners may log on at www.investor.agilent.com and select "Q2 2015 Agilent Technologies Inc. Earnings Conference Call" in the "News & Events Calendar of Events" section. The webcast will remain available on the company's website for 90 days.

Additional information regarding financial results can be found at www.investor.agilent.com by selecting "Financial Results" in the "Financial Information" section.

A telephone replay of the conference call will be available at approximately 5:30 p.m. PT today through May 25 by dialing +1 855 859 2056 (or +1 404 537 3406 from outside the United States) and entering passcode 22310408.

Forward-Looking Statements

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; planned new products; market trends; the future demand for the company's products and services; customer expectations; and revenue and non-GAAP earnings guidance for the third quarter and full fiscal year 2015. 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, technologies, and services; unforeseen changes in the currency markets; customer purchasing decisions and timing, and the risk that we are not able to realize the savings expected from integration and restructuring activities.

In addition, other risks that Agilent faces in running its operations include the ability to execute successfully through business cycles; 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 of our supply chain to adapt to changes in demand; the ability to successfully introduce new products at the right time, price and mix; the ability of Agilent to successfully integrate recent acquisitions; the ability of Agilent to successfully comply with certain complex regulations; and other risks detailed in Agilent's filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q for the quarter ended Jan. 31, 2015. 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.

(1) Non-GAAP income from continuing operations and non-GAAP income from continuing operations per share exclude primarily the impacts of acquisition and integration costs, pre-separation costs, transformation initiatives and restructuring costs, business exit and divestiture costs, and non-cash intangibles amortization. We also exclude any tax benefits that are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. A reconciliation between non-GAAP net income and GAAP net income is set forth on page 6 of the attached tables along with additional information regarding the use of this non-GAAP measure.

(2) Non-GAAP earnings per share as projected for Q3 FY15 and full fiscal year 2015 excludes primarily the impact of acquisition and integration costs, future restructuring costs, asset impairment charges, business exit and divestiture costs and non-cash intangibles amortization. We also exclude any tax benefits that are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. 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 $40 million per quarter.

(3) Revenue excluding the impact of currency is a non-GAAP measure. A reconciliation between GAAP revenue and non-GAAP revenue is set forth on page 8 of the attached tables along with additional information regarding the use of this non-GAAP measure.

(4) Adjusted operating margin is a non-GAAP measure and excludes primarily the impacts of acquisition and integration costs, transformation initiatives and restructuring costs, business exit and divestiture costs, and non-cash intangibles amortization in addition to the costs related to services Agilent is providing to Keysight post separation. A reconciliation is set forth on page 9 of the attached tables along with additional information regarding the use of this non-GAAP measure.

# # #

 

Financial Statements for Second-Quarter Fiscal 2015
 
AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
 
 
  Three Months Ended  
April 30, Percent
  2015       2014   Inc/(Dec)
 
Orders $ 1,039 $ 1,031 1 %
 
Net revenue $ 963 $ 988 (3 %)
 
Costs and expenses:
Cost of products and services 483 503 (4 %)
Research and development 81 87 (7 %)
Selling, general and administrative   292     304   (4 %)
Total costs and expenses   856     894   (4 %)
 
Income from operations 107 94 14 %
 
Interest income 2 2
Interest expense (17 ) (30 ) (43 %)
Other income (expense), net   4     3   33 %
 
Income from continuing operations before taxes 96 69 39 %
 
Provision for income taxes   8     29   (72 %)
 
Income from continuing operations 88 40 120 %
 
Income (loss) from discontinued operations, net of tax   (5 )   99  
 
Net income $ 83   $ 139   (40 %)
 
 
 
Net income per share - Basic:
Income from continuing operations $ 0.26 $ 0.12
Income (loss) from discontinued operations $ (0.01 ) $ 0.30  
Net income per share - Basic $ 0.25   $ 0.42  
 
 
Net income per share - Diluted:
Income from continuing operations $ 0.26 $ 0.12
Income (loss) from discontinued operations $ (0.01 ) $ 0.29  
Net income per share - Diluted $ 0.25   $ 0.41  
 
 
Weighted average shares used in computing net income per share:
Basic 334 333
Diluted 337 337
 
Cash dividends declared per common share $ 0.100 $ 0.132
 
 

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
 
 
  Six Months Ended  
April 30, Percent
  2015       2014   Inc/(Dec)
 
Orders $ 2,034 $ 2,010 1 %
 
Net revenue $ 1,989 $ 1,996
 
Costs and expenses:
Cost of products and services 996 1,001
Research and development 169 175 (3 %)
Selling, general and administrative   602     602  
Total costs and expenses   1,767     1,778   (1 %)
 
Income from operations 222 218 2 %
 
Interest income 4 4
Interest expense (33 ) (59 ) (44 %)
Other income (expense), net   16     3   433 %
 
Income from continuing operations before taxes 209 166 26 %
 
Provision for income taxes   19     5   280 %
 
Income from continuing operations 190 161 18 %
 
Income (loss) from discontinued operations, net of tax   (35 )   173  
 
Net income $ 155   $ 334   (54 %)
 
 
 
Net income per share - Basic:
Income from continuing operations $ 0.57 $ 0.48
Income (loss) from discontinued operations $ (0.11 ) $ 0.52  
Net income per share - Basic $ 0.46   $ 1.00  
 
 
Net income per share - Diluted:
Income from continuing operations $ 0.56 $ 0.48
Income (loss) from discontinued operations $ (0.10 ) $ 0.51  
Net income per share - Diluted $ 0.46   $ 0.99  
 
 
Weighted average shares used in computing net income per share:
Basic 335 333
Diluted 337 338
 
Cash dividends declared per common share $ 0.200 $ 0.264
 
 

The preliminary income statement is estimated based on our current information.

 
 

Page 2

 
AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
PRELIMINARY
 
 
  Three Months Ended   Six Months Ended
April 30, April 30,
  2015       2014     2015       2014  
 
Net income $ 83 $ 139 $ 155 $ 334
 
Other comprehensive income (loss), net of tax:
 
Unrealized gain on investments 3
Unrealized gain (loss) on derivative instruments (1 ) 1 6 (1 )
Amounts reclassified into earnings related to derivative instruments (5 ) (8 )
Foreign currency translation (6 ) 88 (271 ) 33
Net defined benefit pension cost and post retirement plan costs:
Change in actuarial net loss 6 12 10 25
Change in net prior service benefit   (3 )   (8 )   (5 )   (16 )
Other comprehensive income (loss)   (9 )   96     (268 )   41  
 
Total comprehensive income (loss) $ 74   $ 235   $ (113 ) $ 375  
 
 

The preliminary statement of comprehensive income is estimated based on our current information.

 
 

Page 3

 
AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions, except par value and share amounts)
(Unaudited)
PRELIMINARY
 
 
  April 30,   October 31,
  2015     2014  
ASSETS
 
Current assets:
Cash and cash equivalents $ 2,197 $ 2,218
Accounts receivable, net 576 626
Inventory 556 574
Other current assets 291 261
Current assets of discontinued operations       1,821  
Total current assets 3,620 5,500
 
Property, plant and equipment, net 593 631
Goodwill 2,341 2,507
Other intangible assets, net 516 649
Long-term investments 91 96
Other assets 251 283
Non-current assets of discontinued operations       1,165  
Total assets $ 7,412   $ 10,831  
 
LIABILITIES AND EQUITY
 
Current liabilities:
Accounts payable $ 261 $ 302
Employee compensation and benefits 208 228
Deferred revenue 271 260
Other accrued liabilities 190 289
Current liabilities of discontinued operations       623  
Total current liabilities 930 1,702
 
Long-term debt 1,656 1,663
Retirement and post-retirement benefits 176 209
Other long-term liabilities 489 522
Long-term liabilities of discontinued operations       1,434  
Total liabilities   3,251     5,530  
 
Total Equity:
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; 610 million shares at April 30, 2015 and 608 million shares at October 31, 2014, issued

6 6

Treasury stock at cost; 277 million shares at April 30, 2015 and 273 million shares at October 31, 2014

(9,975 ) (9,807 )
Additional paid-in-capital 9,000 8,967
Retained earnings 5,397 6,466
Accumulated other comprehensive loss   (270 )   (334 )
Total stockholders' equity 4,158 5,298
Non-controlling interest   3     3  
Total equity   4,161     5,301  
Total liabilities and equity $ 7,412   $ 10,831  
 
 

The preliminary balance sheet is estimated based on our current information.

 
 

Page 4

 
AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
PRELIMINARY
 
 
  Three Months   Six Months
Ended Ended
April 30, April 30,
  2015     2015  
Cash flows from operating activities:
Net income $ 83 $ 155
 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 63 131
Share-based compensation 11 33
Excess and obsolete inventory related charges 9 13
Other non-cash expenses, net 2 5
Changes in assets and liabilities:
Accounts receivable 31 16
Inventory (13 ) (18 )
Accounts payable 4 (35 )
Employee compensation and benefits 27 (7 )
Other assets and liabilities   (34 )   (130 )
Net cash provided by operating activities (a) 183 163
 
Cash flows from investing activities:
Investments in property, plant and equipment (20 ) (52 )
Proceeds from sale of property, plant and equipment 11 11
Proceeds from divestiture 3 3
Payment to acquire equity method investment (1 ) (1 )
Change in restricted cash and cash equivalents, net       1  
Net cash used in investing activities (7 ) (38 )
 
Cash flows from financing activities:
Issuance of common stock under employee stock plans 32 40
Treasury stock repurchases (162 ) (168 )
Payment of dividends (33 ) (67 )
Net transfer (to) from Keysight   62     (734 )
Net cash used in financing activities (101 ) (929 )
 
Effect of exchange rate movements 4 (27 )
 
Net increase (decrease) in cash and cash equivalents 79 (831 )
 
Change in cash and cash equivalents within current assets of discontinued operations 810
 
Cash and cash equivalents at beginning of period   2,118     2,218  
 
Cash and cash equivalents at end of period $ 2,197   $ 2,197  
 
(a) Cash payments included in operating activities:
Severance payments 16 23
Income tax payments, net 6 79
 
 

The preliminary cash flow is estimated based on our current information.

 
 

Page 5

 
NON-GAAP INCOME FROM CONTINUING OPERATIONS AND DILUTED EPS RECONCILIATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
 
 
  Three Months Ended   Six Months Ended
April 30, April 30,
  2015    

Diluted
EPS

    2014  

Diluted
EPS

  2015    

Diluted
EPS

    2014    

Diluted
EPS

       
GAAP Income from continuing operations $ 88 $ 0.26 $ 40 $ 0.12 $ 190 $ 0.56 $ 161 $ 0.48
Non-GAAP adjustments:
Restructuring and other related costs (2 ) (0.01 )
Acceleration of share-based compensation related to workforce reduction 1 2 0.01
Intangible amortization 38 0.11 49 0.14 81 0.24 98 0.29
Business exit and divestiture costs 10 0.03 13 0.04
Transformational initiatives 17 0.05 8 0.02 29 0.09 11 0.03
Acquisition and integration costs 1 2 0.01 2 0.01 8 0.02
Pre-separation costs 2 0.01 4 0.01
Unallocated corporate costs 10 0.03 20 0.06
Other (2 ) (0.01 ) 2 0.01 (1 ) 3 0.01
Adjustment for taxes (a)   (24 )     (0.06 )   6     0.01   (48 )     (0.15 )   (44 )     (0.12 )
Non-GAAP Income from continuing operations $ 129     $ 0.38   $ 119   $ 0.35 $ 268     $ 0.80   $ 259     $ 0.77  
 

(a) The adjustment for taxes excludes tax benefits that management believes are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. For the three and six months ended April 30, 2015 and 2014, management uses a non-GAAP effective tax rate of 20% and 16%, respectively, that we believe to be indicative of on-going operations.

 

Historical amounts are reclassified to conform with current presentation.

 

We provide non-GAAP income from continuing operations and non-GAAP income from continuing operations 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, charges related to the amortization of intangibles, the impact of restructuring charges, transformational initiatives, acquisition and integration costs, business exit and divestiture and pre-separation costs. 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.

 

Restructuring costs include incremental expenses incurred in the period associated with publicly announced major restructuring programs, usually aimed at material changes in business and/or cost structure. Such costs may include one-time termination benefits, asset impairments, facility-related costs and contract termination fees.

 

Transformational initiatives include expenses incurred in the period associated with targeted cost reduction activities such as manufacturing transfers, small site consolidations, reorganizations, insourcing or outsourcing of activities. Such costs may include move and relocation costs, one-time termination benefits and other one-time reorganization costs.

 

Acquisition and Integration costs include all incremental expenses incurred to effect a business combination which have been expensed during the period. Such acquisition costs may include advisory, legal, accounting, valuation, and other professional or consulting fees. Such integration costs may include expenses directly related to integration of business and facility operations, information technology systems and infrastructure and other employee-related costs.

 

Pre-separation costs include Agilent-specific incremental expenses incurred in order to effect the separation, through November 1, 2014 distribution date.

 

Business exit and divestiture costs include costs associated with the exit of the NMR business and the divestiture of the XRD business.

 

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 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 non-GAAP net income and diluted EPS reconciliation is estimated based on our current information.

 
 

Page 6

 
AGILENT TECHNOLOGIES, INC.
SEGMENT INFORMATION
(In millions, except where noted)
(Unaudited)
PRELIMINARY
 
 
Life Sciences and Applied Markets Group      
Q2'15 Q2'14 Q1'15
Orders $ 506 $ 502 $ 488
Revenue $ 473 $ 495 $ 547
Gross Margin, % 56.1 % 54.4 % 56.1 %
Income from Operations $ 75 $ 71 $ 107
Operating margin, % 15.8 % 14.2 % 19.6 %
 
 
Diagnostics and Genomics Group
Q2'15 Q2'14 Q1'15
Orders $ 168 $ 175 $ 158
Revenue $ 169 $ 168 $ 148
Gross Margin, % 54.8 % 57.8 % 48.9 %
Income from Operations $ 25 $ 26 $ 1
Operating margin, % 15.0 % 15.2 % 0.5 %
 
 
Agilent CrossLab™ Group
Q2'15 Q2'14 Q1'15
Orders $ 365 $ 354 $ 349
Revenue $ 321 $ 325 $ 331
Gross Margin, % 49.6 % 47.9 % 50.1 %
Income from Operations $ 69 $ 70 $ 68
Operating margin, % 21.5 % 21.5 % 20.7 %
 

Income from operations reflect the results of our reportable segments under Agilent's management reporting system which are not necessarily in conformity with GAAP financial measures. Income from operations of our reporting segments exclude, among other things, charges related to the amortization of intangibles, the impact of restructuring charges, transformational initiatives, acquisition and integration costs, business exit and divestiture and pre-separation costs.

 

In general, recorded orders represent firm purchase commitments from our customers with established terms and conditions for products and services that will be delivered within six months.

 

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 segment information is estimated based on our current information.

 
 

Page 7

 
AGILENT TECHNOLOGIES, INC.
RECONCILIATIONS OF REVENUE BY SEGMENT EXCLUDING THE IMPACT OF CURRENCY ADJUSTMENTS (CORE)
(in millions)
(Unaudited)
PRELIMINARY
 
 
  Year-over-Year
 
GAAP  

Currency
Adjustments (a)

  Currency-Adjusted
    Year-over-Year     Year-over-Year

Revenue by Segment

Q2'15   Q2'14   % Change Q2'15 Q2'15   Q2'14   % Change
 
Life Sciences and Applied Markets Group $ 473 $ 495 -5 % $ (27 ) $ 500 $ 495 1 %
 
Diagnostics and Genomics Group 169 168 1 % (16 ) 185 168 10 %
 
Agilent CrossLab™ Group 321 325 -1 % (26 ) 347 325 7 %
         
Agilent $ 963 $ 988 -3 % $ (69 ) $ 1,032 $ 988 4 %
 

(a) We compare the year-over-year change in revenue excluding the effect of foreign currency rate fluctuations to assess the performance of our underlying business. To determine the impact of currency fluctuations, current period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the actual exchange rate in effect during the respective prior periods.

 
 

The preliminary reconciliation of GAAP revenue adjusted for the impact of currency is estimated based on our current information.

 
 

Page 8

 
AGILENT TECHNOLOGIES, INC.
RECONCILIATION OF ADJUSTED NON-GAAP INCOME FROM OPERATIONS AND OPERATING MARGINS
(In millions, except margin data)
(Unaudited)
PRELIMINARY
 
    Operating
Q2 2015   Margin %
 
Revenue: $ 963
 
Income from operations:
GAAP Income from operations $ 107
Add:
Amortization of intangible assets 38
Transformational programs 17
Acquisition and integration costs 1
Business exit and divestiture costs 8
Acceleration of share-based compensation expense 1
Other   (3 )
Non-GAAP income from operations $ 169   17.6 %
Reimbursement from Keysight for services (a)   7  
Adjusted non-GAAP income from operations $ 176   18.3 %
 

(a) Post separation, Agilent is providing Keysight Technologies, Inc. certain IT and site services. These IT and site services are included in our operating expenses. The amounts billed to Keysight for these services are recorded in other income.

 

We provide non-GAAP income from operations in order to provide meaningful supplemental information regarding our operational performance and our prospects for the future. These supplemental measures exclude, among other things, charges related to the amortization of intangibles, transformational initiatives, acquisition and integration costs and business exit and divestiture costs. 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 recognizes that items such as 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 reconciliation of income from operations and operating margins is estimated based on our current information.

 
 

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Contacts

Editorial Contact:

Michele Drake
+1 408 345 8396
michele_drake@agilent.com

Investor Contact:

Alicia Rodriguez
+1 408 345 8948
alicia_rodriguez@agilent.com