Press Release

Agilent Technologies Reports Fourth-Quarter Fiscal Year 2017 Financial Results

Agilent Caps Stellar Year with Strong Q4 Results

Financial Statements
Financial TablesFinancial Tables (164kb)

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Highlights:

  • GAAP net income of $177 million, or $0.54 per share
  • Non-GAAP net income of $218 million, or $0.67 per share(1),
    $0.06 above midpoint guidance of $0.61 per share
  • Revenue of $1.19 billion, representing growth of 7.1 percent (core revenue growth of 5.8 percent(2) versus midpoint guidance of 3.5 percent)
  • First-quarter fiscal year 2018 revenue guidance of $1.145 billion to $1.165 billion and non-GAAP earnings guidance of $0.55 to $0.57 per share(3)
  • Fiscal year 2018 revenue guidance of $4.720 billion to $4.740 billion and non-GAAP earnings guidance of $2.50 to $2.56 per share(3)
  • Fiscal year 2018 operating cash flow guidance of $970 million

Agilent Technologies, Inc. (NYSE: A) today reported revenue of $1.19 billion for the fourth-quarter ended October 31, 2017, up 7.1 percent year over year (up 5.8 percent on a core basis(2)).

Fourth-quarter GAAP net income was $177 million, or $0.54 per share. Last year's fourth-quarter GAAP net income was $126 million, or $0.38 per share.

During the fourth quarter, Agilent had intangible amortization of $28 million, transformation costs of $7 million and acquisition and integration costs of $5 million. Excluding these items and a tax expense of $1 million, Agilent reported fourth-quarter non-GAAP net income of $218 million, or $0.67 per share(1).

"We ended fiscal 2017 with another strong quarter of revenue and profit growth," said Mike McMullen, Agilent CEO and President. "Every quarter this year we have delivered strong revenue growth, expanded operating margins and increased non-GAAP earnings per share. Our consistently excellent financial performance demonstrates our sustained ability to win in the marketplace, while also driving operational improvements."

"We are successfully executing our strategy positioning Agilent for future growth," he added. "We continue strengthening our portfolio through our own R&D investment and M&A, bringing new capabilities and highly differentiated products to our customers. We have positive momentum heading into fiscal year 2018, and will continue our focus on driving sustainable above-market growth and delivering value to shareholders."

Fourth-quarter revenue of $575 million from Agilent's Life Sciences and Applied Markets Group (LSAG) grew 5 percent year over year (up 4 percent on a core basis(2)), with strength in chemical and energy, academia and government and food end markets. LSAG's operating margin for the quarter was 23.9 percent.

Fourth-quarter revenue of $404 million from Agilent CrossLab Group (ACG) grew 9 percent year over year (up 8 percent on a core basis(2)). Growth was healthy across services and consumables, most regions and end markets. ACG's operating margin for the quarter was 22.9 percent.

Fourth-quarter revenue of $210 million from Agilent's Diagnostics and Genomics Group (DGG) grew 9 percent year over year (up 7 percent on a core basis(2)) led by increasing demand for pathology products and companion diagnostics services. DGG's operating margin for the quarter was 20.8 percent.

Agilent expects first-quarter 2018 revenue in the range of $1.145 billion to $1.165 billion. First-quarter 2018 non-GAAP earnings are expected to be in the range of $0.55 to $0.57 per share(3).

For fiscal year 2018, Agilent expects revenue of $4.720 billion to $4.740 billion and non-GAAP earnings of $2.50 to $2.56 per share(3). The guidance is based on October 31, 2017, currency exchange rates.

Conference Call

Agilent's management will present more details about its fourth-quarter FY2017 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 "Q4 2017 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 4:30 p.m. PST today through November 27 by dialing +1 855-859-2056 (or +1 404-537-3406 from outside the United States) and entering pass code 2283927.

# # #

 
AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
             
             
    Three Months Ended    
    October 31,   Percent
    2017   2016   Inc/(Dec)
             
Net revenue   $ 1,189     $ 1,111     7 %
             
Costs and expenses:            
Cost of products and services     542       523     4 %
Research and development     89       84     6 %
Selling, general and administrative     325       321     1 %
Total costs and expenses     956       928     3 %
             
Income from operations     233       183     27 %
             
Interest income     7       3     133 %
Interest expense     (20 )     (19 )   5 %
Other income (expense), net     6       (16 )    
             
Income before taxes     226       151     50 %
             
Provision for income taxes     49       25     96 %
             
Net income   $ 177     $ 126     40 %
             
             
             
Net income per share:            
Basic   $ 0.55     $ 0.39      
Diluted   $ 0.54     $ 0.38      
             
Weighted average shares used in computing net income per share:            
Basic     322       324      
Diluted     326       328      
             
Cash dividends declared per common share   $ 0.132     $ 0.115      
             
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
             
             
    Years Ended    
    October 31,   Percent
    2017   2016   Inc/(Dec)
             
Net revenue   $ 4,472     $ 4,202     6 %
             
Costs and expenses:            
Cost of products and services     2,063       2,005     3 %
Research and development     339       329     3 %
Selling, general and administrative     1,229       1,253     (2 %)
Total costs and expenses     3,631       3,587     1 %
             
Income from operations     841       615     37 %
             
Interest income     22       11     100 %
Interest expense     (79 )     (72 )   10 %
Other income (expense), net     19       (10 )    
             
Income before taxes     803       544     48 %
             
Provision for income taxes     119       82     45 %
             
Net income   $ 684     $ 462     48 %
             
             
             
Net income per share:            
Basic   $ 2.12     $ 1.42      
Diluted   $ 2.10     $ 1.40      
             
Weighted average shares used in computing net income per share:            
Basic     322       326      
Diluted     326       329      
             
Cash dividends declared per common share   $ 0.528     $ 0.460      
             
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  

Years Ended

    October 31,  

October 31,

    2017   2016  

2017

 

2016

                 
Net income   $ 177     $ 126     $ 684     $ 462  
                 
Other comprehensive income (loss), net of tax:                
                 
Unrealized gain (loss) on derivative instruments     3       5             (6 )
Amounts reclassified into earnings related to derivative instruments     1       3       (1 )     3  
Foreign currency translation     (21 )     (49 )     40       (8 )
Net defined benefit pension cost and post retirement plan costs:                
Change in actuarial net loss     84       (115 )     118       (86 )
Change in net prior service benefit     (2 )     (2 )     (6 )     (15 )
Other comprehensive income (loss)     65       (158 )     151       (112 )
                 
Total comprehensive income (loss)   $ 242     $ (32 )   $ 835     $ 350  
                 
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
         
         
    October 31,   October 31,
   

2017

 

2016(a)

ASSETS        
         
Current assets:        
Cash and cash equivalents   $ 2,678     $ 2,289  
Accounts receivable, net     724       631  
Inventory     575       533  
Other current assets     192       182  
Total current assets     4,169       3,635  
         
Property, plant and equipment, net     757       639  
Goodwill     2,607       2,517  
Other intangible assets, net     361       416  
Long-term investments     138       135  
Other assets     397       452  
Total assets   $ 8,429     $ 7,794  
         
LIABILITIES AND EQUITY        
         
Current liabilities:        
Accounts payable   $ 305     $ 257  
Employee compensation and benefits     276       235  
Deferred revenue     291       269  
Short-term debt     210        
Other accrued liabilities     181       184  
Total current liabilities     1,263       945  
         
Long-term debt     1,801       1,904  
Retirement and post-retirement benefits     242       360  
Other long-term liabilities     293       339  
Total liabilities     3,599       3,548  
         
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; 322 million shares at October 31, 2017 and 614 million shares at October 31, 2016, issued

    3       6  

Treasury stock at cost; zero shares at October 31, 2017 and 290 million shares at October 31, 2016

          (10,508 )
Additional paid-in-capital     5,301       9,159  
(Accumulated deficit) retained earnings     (126 )     6,089  
Accumulated other comprehensive loss     (352 )     (503 )
Total stockholders' equity     4,826       4,243  
Non-controlling interest     4       3  
Total equity     4,830       4,246  
Total liabilities and equity   $ 8,429     $ 7,794  
         

(a) Includes the impact of the adoption of ASU 2015-15 and reclassification of technology and licenses from third parties from other assets to other intangible assets, net.

 

       
         
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 Ended   Years Ended
    October 31,   October 31,   October 31,   October 31,
    2017   2016   2017   2016
Cash flows from operating activities:                
Net income   $ 177     $ 126     $ 684     $ 462  
                 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:            
Depreciation and amortization     52       56       212       246  
Share-based compensation     12       11       60       58  
Excess and obsolete inventory related charges     5       4       24       20  
Impairment of equity method investment and loans           25             25  
Other non-cash expenses, net     2       3       7       19  
Changes in assets and liabilities:                
Accounts receivable     (52 )     (52 )     (81 )     (33 )
Inventory     (15 )     4       (61 )     (7 )
Accounts payable     (9 )     12       2       (15 )
Employee compensation and benefits     49       29       38       15  
Interest rate swap payments           (10 )           (10 )
Other assets and liabilities     67       26       4       13  
Net cash provided by operating activities (a)     288       234       889       793  
                 
Cash flows from investing activities:                
Investments in property, plant and equipment     (58 )     (52 )     (176 )     (139 )
Proceeds from sale of investment securities                       1  
Payment to acquire cost method investment     (1 )           (1 )     (80 )
Loan to equity method investment                       (3 )
Change in restricted cash and cash equivalents, net     (1 )           (1 )     245  
Payment in exchange for convertible note                 (1 )     (1 )
Proceeds from divestitures     1             2        
Acquisition of businesses and intangible assets, net of cash acquired     (1 )     (26 )     (128 )     (261 )
Net cash used in investing activities     (60 )     (78 )     (305 )     (238 )
                 
Cash flows from financing activities:                
Issuance of common stock under employee stock plans     8       3       66       62  
Payment of taxes related to net share settlement of equity awards     (1 )           (14 )     (6 )
Payment of dividends     (43 )     (38 )     (170 )     (150 )
Proceeds from debts and credit facility     57             400       255  
Repayment of debts and credit facility     (127 )     (272 )     (290 )     (292 )
Proceeds from issuance of senior notes           299             299  
Debt issuance cost           (2 )           (2 )
Treasury stock repurchases           (46 )     (194 )     (434 )
Net cash used in financing activities     (106 )     (56 )     (202 )     (268 )
                 
Effect of exchange rate movements     (7 )     (10 )     7       (1 )
                 
Net increase in cash and cash equivalents     115       90       389       286  
                 
Cash and cash equivalents at beginning of period     2,563       2,199       2,289       2,003  
                 
Cash and cash equivalents at end of period   $ 2,678     $ 2,289     $ 2,678     $ 2,289  
                 
(a) Cash payments included in operating activities:                
Income tax payments, net   $ 7     $ 13     $ 63     $ 67  
Interest payments   $ 13     $ 8     $ 82     $ 73  
                 
                 
The preliminary cash flow is estimated based on our current information.
                 
                 
Page 5
 
 
AGILENT TECHNOLOGIES, INC.
NON-GAAP NET INCOME AND DILUTED EPS RECONCILIATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
                                 
    Three Months Ended   Years Ended
    October 31,   October 31,
    2017  

Diluted
EPS

  2016  

Diluted
EPS

  2017  

Diluted
EPS

  2016  

Diluted
EPS

                                 
GAAP Net income   $ 177   $ 0.54   $ 126     $ 0.38     $ 684     $ 2.10     $ 462     $ 1.40  
Non-GAAP adjustments:                                
Asset impairments                                     4      

0.01

 
Intangible amortization     28     0.09     32       0.10       117       0.36       152       0.46  
Business exit and divestiture costs             4       0.01                   10       0.03  
Transformational initiatives     7     0.02     6       0.02       12       0.04       38       0.12  
Acquisition and integration costs     5     0.02     13       0.04       32       0.10       41       0.12  
Impairment of investment and loans             25       0.08                   25       0.08  
Pension curtailment gain                                     (15 )     (0.05 )
Pension settlement gain                         (32 )     (0.10 )     (1 )      
Other             1             5       0.02       6       0.02  
Adjustment for taxes (a)     1         (14 )     (0.04 )     (50 )     (0.16 )     (71 )     (0.21 )
Non-GAAP Net income   $ 218   $ 0.67   $ 193     $ 0.59     $ 768     $ 2.36     $ 651     $ 1.98  
                                 
                                 
(a) The adjustment for taxes excludes tax benefits that management believes are not directly related to on-going operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. For the three months and year ended October 31, 2017, management uses a non-GAAP effective tax rate of 18.0% for both periods. In the same periods last year, management used a non-GAAP effective tax rate of 16.8% and 19.0%, respectively.
                                 
We provide non-GAAP net income and non-GAAP 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, charges related to asset impairments, amortization of intangibles, business exit and divestiture costs, transformational initiatives, acquisition and integration costs, impairment of investment and loans, pension curtailment gain and pension settlement gain.
 
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 other business divestitures.
 
Transformational initiatives include expenses associated with targeted cost reduction activities such as manufacturing transfers, site consolidations, legal entity and other business 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 system as well as company programs to transform our product lifecycle management (PLM) system and financial systems.
 
Acquisition and Integration costs include all incremental expenses incurred to effect a business combination. Such acquisition costs may include advisory, legal, tax, accounting, valuation, and other professional or consulting fees. Such integration costs may include expenses directly related to integration of business and facility operations, the transfer of assets and intellectual property, information technology systems and infrastructure and other employee-related costs.
 
Impairment of investment and loans include an investment and the related convertible loans that have been written down to their fair value.
 
Pension curtailment gain resulted from certain retirement plans benefit reductions.
 
Pension settlement gain resulted from transfer of the substitutional portion of our Japanese pension plan to the government.
 
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        
    Q4'17   Q4'16
Revenue   $ 575   $ 548
Gross Margin, %     61.0%     59.4%
Income from Operations   $ 138   $ 125
Operating margin, %     23.9%     22.8%
         
         
Diagnostics and Genomics Group        
    Q4'17   Q4'16
Revenue   $ 210   $ 193
Gross Margin, %     55.2%     55.4%
Income from Operations   $ 44   $ 38
Operating margin, %     20.8%     19.6%
         
         
Agilent CrossLab Group        
    Q4'17   Q4'16
Revenue   $ 404   $ 370
Gross Margin, %     49.6%     49.4%
Income from Operations   $ 92   $ 84
Operating margin, %     22.9%     22.7%
         
         
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 asset impairments, amortization of intangibles, business exit and divestiture costs, transformational initiatives, acquisition and integration costs, impairment of investment and loans, pension curtailment gain and pension settlement gain.
         
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

  Q4'17   Q4'16   % Change                
                             
Life Sciences and Applied Markets Group   $ 575   $ 548   5 %                
                             
Diagnostics and Genomics Group     210     193   9 %                
                             
Agilent CrossLab Group     404     370   9 %                
                                   
Agilent   $ 1,189   $ 1,111   7 %                
                             
                             
   

Non-GAAP
(excluding NMR and Acquisitions)

 

Currency
Adjustments

 

Currency-Adjusted (a)

            Year-over-Year               Year-over-Year

Non GAAP Revenue by Segment

  Q4'17   Q4'16   % Change   Q4'17   Q4'17   Q4'16   % Change
                             
Life Sciences and Applied Markets Group   $ 573   $ 547   5 %   $ 4   $ 569   $ 547   4 %
                             
Diagnostics and Genomics Group     208     193   7 %     2     206     193   7 %
                             
Agilent CrossLab Group     404     370   9 %     5     399     370   8 %
                                           
Agilent (Core)   $ 1,185   $ 1,110   7 %   $ 11   $ 1,174   $ 1,110   6 %
                             
                             
                             
(a) We compare the year-over-year change in revenue excluding the effect of 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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Download Financial Statements for Fourth-Quarter Fiscal 2017

Download Financial StatementsFinancial Tables (164KB)