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Highlights:

  • GAAP income from continuing operations of $123 million, or $0.37 per share
  • Non-GAAP income from continuing operations of $153 million, or $0.46 per share(1)
  • Revenue of $1.03 billion
  • Second-quarter fiscal year 2016 revenue guidance of $965 million to $985 million, and non-GAAP earnings guidance of $0.37 to $0.39 per share(2)
  • Fiscal year 2016 revenue guidance of $4.10 billion to $4.12 billion, and non-GAAP earnings guidance of $1.81 to $1.87 per share(2)

Agilent Technologies Inc. (NYSE: A) today reported revenue of $1.03 billion, flat year over year (up 6 percent on a core basis(3)) for the first fiscal quarter ended Jan. 31, 2016.

First-quarter GAAP income from continuing operations was $123 million, or $0.37 per share. Last year's first-quarter GAAP income from continuing operations was $93 million, or $0.28 per share.

During the first quarter, Agilent had intangible amortization of $43 million, transformation costs of $11 million, acquisition and integration costs of $5 million, a pension curtailment gain of $16 million, and $6 million of other costs. Excluding those items, and a tax benefit of $19 million, Agilent reported first-quarter adjusted income from continuing operations of $153 million, $0.46 per share(1).

Agilent's adjusted operating margin was 20.2%(4) for the first quarter, up 200 basis points over a year ago.

"Agilent delivered a strong start to the year," said Mike McMullen, Agilent president and CEO. "Revenue and earnings per share exceeded our guidance range, reflecting the strength of Agilent's products, services and relationships with customers in our markets."

"We are building a business that can drive sustainable growth, expand operating margins and provide long-term value to our shareholders," he added.

First-quarter revenue of $526 million from Agilent's Life Sciences and Applied Markets Group (LSAG) declined 4 percent year over year (up 2 percent on a core basis(3)). Robust growth in pharma was offset by softness in the applied markets. LSAG's Q1 operating margin was 21.7 percent.

First-quarter revenue of $344 million from the Agilent CrossLab Group (ACG) grew 4 percent year over year (up 10 percent on a core basis(3)). Both services and consumables continued to see solid growth worldwide. ACG's operating margin was 22.1 percent for the quarter.

First-quarter revenue of $158 million from Agilent's Diagnostics and Genomics Group (DGG) increased 7 percent year over year (up 12 percent on a core basis(3)), reflecting momentum across all of its businesses. DGG's operating margin for the quarter was 9.6 percent.

Agilent expects second-quarter 2016 revenue in the range of $965 million to $985 million. Second-quarter non-GAAP earnings are expected to be in the range of $0.37 to $0.39 per share(2).

For fiscal year 2016, Agilent expects revenue of $4.10 billion to $4.12 billion and non-GAAP earnings of $1.81 to $1.87 per share(2). The guidance is based on Jan. 29, 2016, exchange rates.


Financial Statements for First-Quarter Fiscal 2016

 
AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
       
 
Three Months Ended
January 31, Percent
2016

2015
(As Revised)

Inc/(Dec)
 
Net revenue $ 1,028 $ 1,026
 
Costs and expenses:
Cost of products and services 491 513 (4 %)
Research and development 78 88 (11 %)
Selling, general and administrative   304     310   (2 %)
Total costs and expenses   873     911   (4 %)
 
Income from operations 155 115 35 %
 
Interest income 2 2
Interest expense (18 ) (16 ) 13 %
Other income (expense), net   3     12   (75 %)
 
Income from continuing operations before taxes 142 113 26 %
 
Provision for income taxes   19     20   (5 %)
 
Income from continuing operations 123 93 32 %
 
Loss from discontinued operations, net of tax   -     (30 )
 
Net income $ 123   $ 63   95 %
 
 
 
Net income per share - Basic:
Income from continuing operations $ 0.37 $ 0.28
Loss from discontinued operations $ -   $ (0.09 )
Net income per share - Basic $ 0.37   $ 0.19  
 
 
Net income per share - Diluted:
Income from continuing operations $ 0.37 $ 0.28
Loss from discontinued operations $ -   $ (0.09 )
Net income per share - Diluted $ 0.37   $ 0.19  
 
 
Weighted average shares used in computing net income per share:
Basic 329 336
Diluted 332 338
 
Cash dividends declared per common share $ 0.115 $ 0.100
 
 
 
The preliminary income statement is estimated based on our current information.
 
 
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AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
PRELIMINARY
     
 
Three Months Ended
January 31,
2016

2015
(As Revised)

 
Net income $ 123 $ 63
 
Other comprehensive income (loss), net of tax:
 
Unrealized gain on derivative instruments 3 7
Amounts reclassified into earnings related to derivative instruments (1 ) (3 )
Foreign currency translation (56 ) (265 )
Net defined benefit pension cost and post retirement plan costs:
Change in actuarial net loss 15 4
Change in net prior service benefit   (8 )   (2 )
Other comprehensive loss   (47 )   (259 )
 
Total comprehensive income (loss) $ 76   $ (196 )
 
 
 
The preliminary statement of comprehensive income is estimated based on our current information.
 
 
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AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions, except par value and share amounts)
(Unaudited)
PRELIMINARY
       
 
January 31, October 31,
2016 2015
ASSETS
 
Current assets:
Cash and cash equivalents $ 1,931 $ 2,003
Short-term restricted cash and cash equivalents - 242
Accounts receivable, net 617 606
Inventory 554 541
Other current assets   297     294  
Total current assets 3,399 3,686
 
Property, plant and equipment, net 594 604
Goodwill 2,478 2,366
Other intangible assets, net 513 445
Long-term investments 76 86
Other assets   242     292  
Total assets $ 7,302   $ 7,479  
 
LIABILITIES AND EQUITY
 
Current liabilities:
Accounts payable $ 250 $ 279
Employee compensation and benefits 171 221
Deferred revenue 277 258
Short-term debt 80 -
Other accrued liabilities   169     218  
Total current liabilities 947 976
 
Long-term debt 1,653 1,655
Retirement and post-retirement benefits 242 264
Other long-term liabilities   412     414  
Total liabilities   3,254     3,309  
 
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; 612 million shares at January 31, 2016 and 611 million shares at October 31, 2015, issued

6 6

Treasury stock at cost; 284 million shares at January 31, 2016 and 279 million shares at October 31, 2015

(10,274 ) (10,074 )
Additional paid-in-capital 9,085 9,045
Retained earnings 5,666 5,581
Accumulated other comprehensive loss   (438 )   (391 )
Total stockholders' equity 4,045 4,167
Non-controlling interest   3     3  
Total equity   4,048     4,170  
Total liabilities and equity $ 7,302   $ 7,479  
 
 
 
The preliminary balance sheet is estimated based on our current information.
 
 
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AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
PRELIMINARY
     
 
Three Months
Ended
January 31,
  2016  
Cash flows from operating activities:
Net income $ 123
 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 66
Share-based compensation 23
Excess and obsolete inventory related charges 4
Other non-cash expenses, net 2
Changes in assets and liabilities:
Accounts receivable (15 )
Inventory (13 )
Accounts payable (18 )
Employee compensation and benefits (47 )
Other assets and liabilities   (19 )
Net cash provided by operating activities (a) 106
 
Cash flows from investing activities:
Investments in property, plant and equipment (38 )
Proceeds from sale of investment securities 1
Change in restricted cash and cash equivalents, net 245
Payment in exchange for convertible note (1 )
Acquisition of businesses and intangible assets, net of cash acquired   (235 )
Net cash used in investing activities (28 )
 
Cash flows from financing activities:
Issuance of common stock under employee stock plans 24
Treasury stock repurchases (200 )
Payment of dividends (38 )
Proceeds from revolving credit facility 100
Repayment of revolving credit facility   (20 )
Net cash used in financing activities (134 )
 
Effect of exchange rate movements (16 )
 
Net decrease in cash and cash equivalents (72 )
 
Cash and cash equivalents at beginning of period   2,003  
 
Cash and cash equivalents at end of period $ 1,931  
 
(a) Cash payments included in operating activities:
Severance payments 2
Income tax payments, net 37
 
 
The preliminary cash flow is estimated based on our current information.
 
 
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AGILENT TECHNOLOGIES, INC.

NON-GAAP INCOME FROM CONTINUING OPERATIONS AND DILUTED EPS RECONCILIATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
   
Three Months Ended
January 31,
  2016     Diluted EPS   2015     Diluted EPS
(As Revised)
GAAP Income from continuing operations $ 123 $ 0.37 $ 93 $ 0.28
Non-GAAP adjustments:
Acceleration of share-based compensation related to workforce reduction 1
Intangible amortization 43 0.13 43 0.13
Transformational initiatives 11 0.03 12 0.04
Acquisition and integration costs 5 0.02 1
Business exit and divestiture costs 4 0.01 3 0.01
Pension curtailment gain (16 ) (0.05 )
Other 2 0.01 1
Adjustment for taxes (a)   (19 )     (0.06 )   (15 )     (0.05 )
Non-GAAP Income from continuing operations $ 153     $ 0.46   $ 139     $ 0.41  
 

(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 months ended January 31, 2016 and 2015, management uses a non-GAAP effective tax rate of 20% for both periods, 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, pension curtailment, transformational initiatives, acquisition and integration costs and business exit and divestiture costs.
 
Transformational initiatives include expenses 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. Included in this category are also expenses associated with the post-separation resizing of the IT infrastructure and streamlining of IT systems as well as the expenses incurred primarily in fiscal year 2015 to effect the Agile Agilent reengineering.
 
Acquisition and Integration costs include all incremental expenses incurred to effect a business combination. 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.
 
Business exit and divestiture costs include costs associated with the exit of the NMR business and the divestiture of the XRD business.
 
Pension curtailment gain resulted from certain retirement plans benefit reductions.
 
Other includes certain legal costs and settlements in addition to other miscellaneous adjustments.
 
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 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.
 
 
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AGILENT TECHNOLOGIES, INC.
SEGMENT INFORMATION
(In millions, except where noted)
(Unaudited)
PRELIMINARY
   
Life Sciences and Applied Markets Group
Q1'16 Q1'15
Revenue $ 526 $ 547
Gross Margin, % 58.7 % 56.1 %
Income from Operations $ 114 $ 107
Operating margin, % 21.7 % 19.6 %
 
 
Diagnostics and Genomics Group
Q1'16 Q1'15
Revenue $ 158 $ 148
Gross Margin, % 52.7 % 48.9 %
Income from Operations $ 15 $ 1
Operating margin, % 9.6 % 0.5 %
 
 
Agilent CrossLab Group
Q1'16 Q1'15
Revenue $ 344 $ 331
Gross Margin, % 50.1 % 50.1 %
Income from Operations $ 76 $ 68
Operating margin, % 22.1 % 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, pension curtailment gain, transformational initiatives, acquisition and integration costs and business exit and divestiture costs.
 
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.
 
 
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AGILENT TECHNOLOGIES, INC.
RECONCILIATIONS OF REVENUE BY SEGMENT EXCLUDING THE NMR BUSINESS,
ACQUISITIONS, DIVESTITURES AND THE IMPACT OF CURRENCY ADJUSTMENTS (CORE)
(in millions)
(Unaudited)
PRELIMINARY
               
Year-over-Year
 
GAAP
Year-over-Year

GAAP Revenue by Segment

Q1'16   Q1'15   % Change  
 
Life Sciences and Applied Markets Group $ 526 $ 547 (4 %)
 
Diagnostics and Genomics Group 158 148 7 %
 
Agilent CrossLab Group 344 331 4 %
     
Agilent $ 1,028   $ 1,026 0 %
 
 

Non-GAAP

Currency
Adjustments

Currency-Adjusted (a)
Year-over-Year Year-over-Year

Non GAAP Revenue by Segment

Q1'16   Q1'15   % Change   Q1'16 Q1'16   Q1'15   % Change  
 
Life Sciences and Applied Markets Group excluding acquisition and NMR $ 513 $ 523 (2 %) $ (23 ) $ 536 $ 523 2 %
 
Diagnostics and Genomics Group excluding acquisition 157 148 6 % (9 ) 166 148 12 %
 
Agilent CrossLab Group 344 331 4 % (21 ) 365 331 10 %
             
Agilent Revenue (Core) $ 1,014   $ 1,002 1 % $ (53 ) $ 1,067   $ 1,002 6 %
 
 
(a) We compare the year-over-year change in revenue excluding the effect of the NMR business, recent acquisitions and divestitures and 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 NMR business, recent acquisitions and divestitures and impact of currency is estimated based on our current information.
 
 
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AGILENT TECHNOLOGIES, INC.
RECONCILIATION OF ADJUSTED NON-GAAP INCOME FROM OPERATIONS AND OPERATING MARGINS
(In millions, except margin data)
(Unaudited)
PRELIMINARY
   
Operating
Q1 2016 Margin %
 
Revenue: $ 1,028
 
Income from operations:
GAAP Income from operations $ 155 15.1 %
Add:
Intangible amortization 43
Transformational initiatives 11
Acquisition and integration costs 5
Business exit and divestiture costs 5
Pension curtailment gain (16 )
Other   2  
Non-GAAP income from operations $ 205 20.0 %
Reimbursement from Keysight for services (a)   3  
Adjusted non-GAAP income from operations $ 208   20.2 %
 
 
(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.
 
Our management recognizes that items such as amortization of intangibles 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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