Press Release

Agilent Technologies Reports Third-Quarter 2016 Results

Delivers Another Strong Quarter, Reaffirms Full-Year Guidance

 

Financial Statements
Financial TablesFinancial Tables (174kb)

  Printer Friendly Version

Highlights:

  • GAAP income from continuing operations of $124 million, or $0.38 per share
  • Non-GAAP income from continuing operations of $160 million, or $0.49 per share(1) versus midpoint guidance of $0.46 per share
  • Revenue of $1.04 billion; core revenue growth of 3.0 percent(2) versus midpoint guidance of 1.3 percent
  • Fiscal year 2016 revenue guidance of $4.14 billion to $4.16 billion. Core revenue growth guidance maintained at 4.5 percent(2). Non-GAAP earnings guidance of $1.89 to $1.91 per share(3). Midpoint from previous guidance unchanged.

Agilent Technologies Inc. (NYSE: A) today reported revenue of $1.04 billion, up 3 percent year over year (also up 3 percent on a core basis(2)) for the third fiscal quarter ended July 31, 2016.

Third-quarter GAAP income from continuing operations was $124 million, or $0.38 per share. Last year's third-quarter GAAP income from continuing operations was $113 million, or $0.34 per share.

During the third quarter, Agilent had intangible amortization of $37 million, transformation costs of $11 million, acquisition and integration costs of $11 million, asset impairment costs of $4 million, and $3 million of other costs. Excluding those items, and a tax benefit of $30 million, Agilent reported third-quarter adjusted income from continuing operations of $160 million, $0.49 per share(1) .

Agilent's adjusted operating margin was 20.6 percent(4) for the third quarter, up 70 basis points over a year ago.

"Agilent delivered another quarter above expectations," said Mike McMullen, Agilent president and CEO. "Despite currency headwinds, revenue came in above the midpoint of guidance, and earnings per share exceeded our guidance range. These results, in a challenging global economic environment, reflect the strength of Agilent's scale and broad differentiated portfolio of products and services."

"We continue to deliver on our strategy to drive sustainable growth, expand operating margins and provide long-term value to our shareholders," he added.

Third-quarter revenue of $504 million from Agilent's Life Sciences and Applied Markets Group (LSAG) decreased 1 percent year over year (down 2 percent on a core basis(2)), in line with expectations. LSAG's Q3 operating margin was 19.1 percent.

Third-quarter revenue of $360 million from the Agilent CrossLab Group (ACG) grew 7 percent year over year (up 8 percent on a core basis(2)). Both services and consumables continued to see solid growth worldwide and across key markets. ACG's operating margin was 22.7 percent for the quarter.

Third-quarter revenue of $180 million from Agilent's Diagnostics and Genomics Group (DGG) increased 8 percent year over year (also up 8 percent on a core basis(2)), reflecting growth across all businesses. DGG's operating margin for the quarter was 18.8 percent.

Agilent expects fourth-quarter 2016 revenue in the range of $1.05 billion to $1.07 billion. Fourth-quarter non-GAAP earnings are expected to be in the range of $0.50 to $0.52 per share(3).

For fiscal year 2016, Agilent expects revenue of $4.14 billion to $4.16 billion and non-GAAP earnings of $1.89 to $1.91 per share(3). Guidance is based on July 29, 2016 exchange rates. Core revenue growth and earnings per share midpoint are the same as prior guidance.


Financial Statements for Third-Quarter Fiscal 2016
AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
                   
                   
        Three Months Ended      
        July 31,     Percent
        2016  

2015
(As Revised)

    Inc/(Dec)
                   
Net revenue       $ 1,044     $ 1,014       3%
                   
Costs and expenses:                  
Cost of products and services         502       501      
Research and development         86       79       9%
Selling, general and administrative         310       290       7%
Total costs and expenses         898       870       3%
                   
Income from operations         146       144       1%
                   
Interest income         3       2       50%
Interest expense         (17 )     (17 )    
Other income (expense), net         2       (1 )    
                   
Income from continuing operations before taxes         134       128       5%
                   
Provision for income taxes         10       15       (33%)
                   
Income from continuing operations         124       113       10%
                   
Loss from discontinued operations, net of tax         -       (2 )    
                   
Net income       $ 124     $ 111       12%
                   
                   
                   
Net income per share - Basic:                  
Income from continuing operations       $ 0.38     $ 0.34        
Loss from discontinued operations       $ -     $ (0.01 )      
Net income per share - Basic       $ 0.38     $ 0.33        
                   
                   
Net income per share - Diluted:                  
Income from continuing operations       $ 0.38     $ 0.34        
Loss from discontinued operations       $ -     $ (0.01 )      
Net income per share - Diluted       $ 0.38     $ 0.33        
                   
                   
Weighted average shares used in computing net income per share:                  
Basic         325       332        
Diluted         328       334        
                   
Cash dividends declared per common share       $ 0.115     $ 0.100        
                   
                   
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
       

2016 (a)

 

2015
(As Revised)

    Inc/(Dec)
                   
Net revenue       $ 3,091     $ 3,003       3%
                   
Costs and expenses:                  
Cost of products and services         1,482       1,497       (1%)
Research and development         245       248       (1%)
Selling, general and administrative         932       892       4%
Total costs and expenses         2,659       2,637       1%
                   
Income from operations         432       366       18%
                   
Interest income         8       6       33%
Interest expense         (53 )     (50 )     6%
Other income (expense), net         6       15       (60%)
                   
Income from continuing operations before taxes         393       337       17%
                   
Provision for income taxes         57       39       46%
                   
Income from continuing operations         336       298       13%
                   
Loss from discontinued operations, net of tax         -       (37 )    
                   
Net income       $ 336     $ 261       29%
                   
                   
                   
Net income per share - Basic:                  
Income from continuing operations       $ 1.03     $ 0.89        
Loss from discontinued operations       $ -     $ (0.11 )      
Net income per share - Basic       $ 1.03     $ 0.78        
                   
                   
Net income per share - Diluted:                  
Income from continuing operations       $ 1.02     $ 0.89        
Loss from discontinued operations       $ -     $ (0.11 )      
Net income per share - Diluted       $ 1.02     $ 0.78        
                   
                   
Weighted average shares used in computing net income per share:                  
Basic         326       334        
Diluted         329       336        
                   
Cash dividends declared per common share       $ 0.345     $ 0.300        
                   

(a) Includes the impact of the adoption of ASU 2016-09 as of 11/1/2015.

                   
                   
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     Nine Months Ended
        July 31,     July 31,
        2016  

2015
(As Revised)

   

2016 (a)

 

2015
(As Revised)

                       
Net income       $ 124     $ 111       $ 336     $ 261  
                       
Other comprehensive income (loss), net of tax:                      
                       
Unrealized gain (loss) on derivative instruments         (5 )     1         (11 )     7  
Amounts reclassified into earnings related to derivative instruments         1       (1 )       -       (9 )
Foreign currency translation         (48 )     (66 )       41       (337 )
Net defined benefit pension cost and post retirement plan costs:                      
Change in actuarial net loss         8       7         29       17  
Change in net prior service benefit         (2 )     (3 )       (13 )     (8 )
Other comprehensive income (loss)         (46 )     (62 )       46       (330 )
                       
Total comprehensive income (loss)       $ 78     $ 49       $ 382     $ (69 )
                       
(a) Includes the impact of the adoption of ASU 2016-09 as of 11/1/2015.
                       
                       
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
               
               
        July 31,     October 31,
       

2016 (a)

    2015
ASSETS              
               
Current assets:              
Cash and cash equivalents       $ 2,199       $ 2,003  
Short-term restricted cash and cash equivalents                 242  
Accounts receivable, net         590         606  
Inventory         543         541  
Other current assets         198         294  
Total current assets         3,530         3,686  
               
Property, plant and equipment, net         623         604  
Goodwill         2,525         2,366  
Other intangible assets, net         442         445  
Long-term investments         155         86  
Other assets         459         292  
Total assets       $ 7,734       $ 7,479  
               
LIABILITIES AND EQUITY              
               
Current liabilities:              
Accounts payable       $ 261       $ 279  
Employee compensation and benefits         209         221  
Deferred revenue         279         258  
Short-term debt         235          
Other accrued liabilities         167         218  
Total current liabilities         1,151         976  
               
Long-term debt         1,652         1,655  
Retirement and post-retirement benefits         229         264  
Other long-term liabilities         356         414  
Total liabilities         3,388         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; 613 million shares at July 31, 2016 and 611 million shares at October 31, 2015, issued

        6         6  

Treasury stock at cost; 289 million shares at July 31, 2016 and 279 million shares at October 31, 2015

        (10,462 )       (10,074 )
Additional paid-in-capital         9,144         9,045  
Retained earnings         6,000         5,581  
Accumulated other comprehensive loss         (345 )       (391 )
Total stockholders' equity         4,343         4,167  
Non-controlling interest         3         3  
Total equity         4,346         4,170  
Total liabilities and equity       $ 7,734       $ 7,479  
               
(a) Includes the impact of the adoption of ASU 2016-09 as of 11/1/2015.
               
               
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     Nine Months
        Ended     Ended
        July 31,     July 31,
        2016    

2016 (c)

Cash flows from operating activities:              
Net income       $ 124       $ 336  
               
Adjustments to reconcile net income to net cash provided by (used in) operating activities:              
Depreciation and amortization         60         190  
Share-based compensation         11         47  
Excess and obsolete inventory related charges         4         16  
Other non-cash expenses, net         8         16  
Changes in assets and liabilities:              
Accounts receivable                 19  
Inventory         2         (11 )
Accounts payable         26         (27 )
Employee compensation and benefits         (1 )       (14 )
Other assets and liabilities (b)         (40 )       (13 )
Net cash provided by operating activities (a)         194         559  
               
Cash flows from investing activities:              
Investments in property, plant and equipment         (24 )       (87 )
Proceeds from sale of investment securities                 1  
Payment to acquire cost method investment                 (80 )
Loan to equity method investment                 (3 )
Change in restricted cash and cash equivalents, net                 245  
Payment in exchange for convertible loan                 (1 )
Acquisition of businesses and intangible assets, net of cash acquired                 (235 )
Net cash used in investing activities         (24 )       (160 )
               
Cash flows from financing activities:              
Issuance of common stock under employee stock plans         27         59  
Cash paid to tax authorities for withheld shares from employees (b)         (1 )       (6 )
Treasury stock repurchases         (94 )       (388 )
Payment of dividends         (37 )       (112 )
Proceeds from revolving credit facility                 255  
Repayment of revolving credit facility                 (20 )
Net cash used in financing activities         (105 )       (212 )
               
Effect of exchange rate movements         (5 )       9  
               
Net increase in cash and cash equivalents         60         196  
               
Cash and cash equivalents at beginning of period         2,139         2,003  
               
Cash and cash equivalents at end of period       $ 2,199       $ 2,199  
               
(a) Cash payments included in operating activities:              
Severance payments         2         5  
Income tax payments, net         33         54  
Interest payments         29         66  
               

(b) YTD decrease to financing activities and a corresponding increase to operating cash of $6 million upon adoption of ASU 2016-09 of which $5 million was related to Q1'16.

               

(c) Includes the impact of the adoption of ASU 2016-09 as of 11/1/2015.

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

Page 5

               
AGILENT TECHNOLOGIES, INC.
NON-GAAP INCOME FROM CONTINUING OPERATIONS AND DILUTED EPS RECONCILIATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
                                             
                                             
        Three Months Ended     Nine Months Ended
        July 31,     July 31,
        2016  

Diluted
EPS

    2015  

Diluted
EPS

   

2016

   

Diluted
EPS

    2015  

Diluted
EPS

                  (As Revised)                 (As Revised)
GAAP Income from continuing operations       $ 124     $ 0.38       $ 113       0.34       $ 336

 

(b)

  $ 1.02   (b)   $ 298       0.89  
Non-GAAP adjustments:                                            
Acceleration of share-based compensation related to workforce reduction                                                     2       0.01  
Asset impairments         4       0.01                       4         0.01                
Intangible amortization         37       0.11         38       0.11         120         0.36         119       0.35  
Business exit and divestiture costs         1                             6         0.02         13       0.04  
Transformational initiatives         11       0.03         12       0.04         32         0.10         41       0.12  
Acquisition and integration costs         11       0.03         4       0.01         28         0.09         6       0.02  
Pension curtailment gain                                     (16 )       (0.05 )              
Other         2       0.01         2       0.01         5         0.02         1        
Adjustment for taxes (a)         (30 )     (0.08 )       (22 )     (0.07 )       (57 )       (0.18 )       (65 )     (0.19 )
Non-GAAP Income from continuing operations       $ 160     $ 0.49       $ 147     $ 0.44       $ 458       $ 1.39       $ 415     $ 1.24  
                                             

(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 nine months ended July 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.

 
(b) Includes the impact of the adoption of ASU 2016-09 as of 11/1/2015.
 
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 asset impairments, amortization of intangibles, pension curtailment, transformational initiatives, acquisition and integration costs and business exit and divestiture costs.
 
Asset impairments include assets that have been written-down to their fair value.
Business exit and divestiture costs include costs associated with the exit of the NMR business and the divestiture of the XRD business.
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.
 
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.
 
Page 6
 
AGILENT TECHNOLOGIES, INC.
SEGMENT INFORMATION
(In millions, except where noted)
(Unaudited)
PRELIMINARY
             
 
Life Sciences and Applied Markets Group
        Q3'16   Q3'15
Revenue       $ 504     $ 511  
Gross Margin, %         57.8 %     55.6 %
Income from Operations       $ 96     $ 95  
Operating margin, %         19.1 %     18.7 %
             
             
Diagnostics and Genomics Group
        Q3'16   Q3'15
Revenue       $ 180     $ 167  
Gross Margin, %         55.8 %     57.0 %
Income from Operations       $ 34     $ 28  
Operating margin, %         18.8 %     16.8 %
             
             
Agilent CrossLab Group
        Q3'16   Q3'15
Revenue       $ 360     $ 336  
Gross Margin, %         48.7 %     48.5 %
Income from Operations       $ 82     $ 76  
Operating margin, %         22.7 %     22.6 %
             
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 asset impairments, amortization of intangibles,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.    
             
Page 7
 
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

      Q3'16   Q3'15   % Change                    
                                     
Life Sciences and Applied Markets Group       $ 504   $ 511   (1 %)                    
                                     
Diagnostics and Genomics Group         180     167   8 %                    
                                     
Agilent CrossLab Group         360     336   7 %                    
                                     
Agilent       $ 1,044   $ 1,014   3 %                    
                                     
                                     
        Non-GAAP    

Currency
Adjustments

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

Non GAAP Revenue by Segment

      Q3'16   Q3'15   % Change     Q3'16     Q3'16   Q3'15   % Change
                                     
Life Sciences and Applied Markets Group excluding acquisition and NMR       $ 490   $ 503   (3 %)     $ (3 )     $ 493   $ 503   (2 %)
                                     
Diagnostics and Genomics Group excluding acquisition         179     166   8 %       -         179     166   8 %
                                     
Agilent CrossLab Group         360     336   7 %       (5 )       365     336   8 %
                                     
Agilent Revenue (Core)       $ 1,029   $ 1,005   2 %     $ (8 )     $ 1,037   $ 1,005   3 %
                                     
(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.
   
Page 8
 
AGILENT TECHNOLOGIES, INC.
RECONCILIATION OF ADJUSTED NON-GAAP INCOME FROM OPERATIONS AND OPERATING MARGINS
(In millions, except margin data)
(Unaudited)
PRELIMINARY
                                Year Over Year
          Operating           Operating     Percent
    Q3'16   Margin %     Q3'15   Margin %     Inc/(Dec)
                                   
Revenue:   $ 1,044           $ 1,014              
                                   
Income from operations:                                  
GAAP Income from operations   $ 146  

14.0

%     $ 144   14.2 %        
Add:                                  
Asset impairments   $ 4           $ -              
Intangible amortization     37             38              
Transformational initiatives     11             12              
Acquisition and integration costs     11             4              
Business exit and divestiture costs     1             -              
Other     2             1              
Non-GAAP income from operations   $ 212   20.3 %     $ 199   19.7 %        
Reimbursement from Keysight for services (a)     3             4              
Adjusted non-GAAP income from operations   $ 215   20.6 %     $ 203   19.9 %     0.7 %

(a) Post separation, Agilent is providing Keysight Technologies, Inc. certain site services. These 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 asset impairments, 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.
   
Page 9
 
Download Financial Statements for Third-Quarter Fiscal 2016

Download Financial StatementsFinancial Tables (174KB)