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Highlights:

  • Revenue of $1.21 billion, representing growth of 9 percent (core revenue growth of 4.3 percent(1))
  • GAAP net income of $205 million, or $0.63 per share
  • Non-GAAP net income of $212 million, or $0.65 per share(2), $0.03 above midpoint guidance of $0.62 per share, an increase of 12 percent from 2017
  • Third-quarter fiscal year revenue guidance of $1.185 billion to $1.205 billion, and non-GAAP earnings guidance of $0.61 to $0.63 per share(3)
  • Reaffirming fiscal year 2018 core revenue growth guidance of 5.5 percent(1) and fiscal year 2018 non-GAAP earnings guidance midpoint of $2.65 per share(3)

Agilent Technologies, Inc. (NYSE: A) today reported revenue of $1.21 billion for the second quarter ended April 30, 2018, up 9 percent year over year (up 4.3 percent on a core basis(1)).

Second-quarter GAAP net income was $205 million, or $0.63 per share. Last year's second-quarter GAAP net income was $164 million, or $0.50 per share.

During the second quarter, Agilent had intangible amortization of $25 million, business exit and divestitures of $8 million, transformational initiatives of $5 million, acquisition and integration costs of $4 million, and $11 million in other net gains. Excluding these items and a tax benefit of $24 million, Agilent reported second-quarter non-GAAP net income of $212 million, or $0.65 per share(2).

"Again this quarter, we delivered significant earnings and cash flow growth on strong top-line results, contributing to an excellent first half of 2018. We saw strength in the Pharma and Chemical & Energy markets with 8 percent and 5 percent growth this quarter, respectively," said Mike McMullen, Agilent CEO and president.

"We are successfully executing on our growth strategy," continued McMullen. "On the innovation front, we are seeing strong momentum in our newly released products and are continuing to introduce highly differentiated solutions to help our customers advance their work. We are also effectively deploying our capital—the recently closed acquisitions of Genohm and Lasergen, Inc. will add new strategic capabilities to drive future growth and create value for our customers and our shareholders."

Second-quarter revenue of $561 million from Agilent's Life Sciences and Applied Markets Group (LSAG) grew 7 percent year over year (up 3 percent on a core basis(1)). Strength in mass spectrometry and cell analysis led the results. LSAG's operating margin for the quarter was 21.2 percent.

Second-quarter revenue of $426 million from the Agilent CrossLab Group (ACG) grew 13 percent year over year (up 7 percent on a core basis(1)). Growth was strong across services and consumables. ACG's operating margin for the quarter was 23.1 percent.

Second-quarter revenue of $219 million from Agilent's Diagnostics and Genomics Group (DGG) grew 9 percent year over year (up 4 percent on a core basis(1)) led by strength in genomics. DGG's operating margin for the quarter was 20.2 percent.

Agilent expects third-quarter 2018 revenue in the range of $1.185 billion to $1.205 billion. Third-quarter 2018 non-GAAP earnings are expected to be in the range of $0.61 to $0.63 per share(3).

For fiscal year 2018, revenue guidance of $4.850 billion to $4.870 billion is adjusted only for changes in currency. Core revenue growth of 5.5 percent at the midpoint of guidance remains unchanged. Agilent expects non-GAAP earnings of $2.63 to $2.67 per share(3). The guidance is based on April 30, 2018 currency exchange rates.

Conference Call

Agilent's management will present more details about its second-quarter fiscal 2018 financial results on a conference call with investors today at 1:30 p.m. (Pacific Time). This event will be webcast live in listen-only mode. Listeners may log on at www.investor.agilent.com and select "Q2 2018 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 May 14, 2018 at 4:30 PM (Pacific Time) after the call and through May 21 by dialing +1 855-859-2056 (or +1 404-537-3406 from outside the United States) and entering pass code 7398497.

# # #

Financial Statements for Second-Quarter Fiscal 2018

     
AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
 
 
Three Months Ended
April 30, Percent
2018 2017 Inc/(Dec)
 
Net revenue $ 1,206 $ 1,102 9 %
 
Costs and expenses:
Cost of products and services 562 510 10 %
Research and development 91 84 8 %
Selling, general and administrative   338     307   10 %
Total costs and expenses   991     901   10 %
 
Income from operations 215 201 7 %
 
Interest income 10 5 100 %
Interest expense (19 ) (20 ) (5 %)
Other income (expense), net   21     5  
 
Income before taxes 227 191 19 %
 
Provision for income taxes 22 27 (19 %)
   
Net income $ 205   $ 164   25 %
 
 
 
Net income per share:
Basic $ 0.64 $ 0.51
Diluted $ 0.63 $ 0.50
 
Weighted average shares used in computing net income per share:
Basic 322 321
Diluted 326 325
 
Cash dividends declared per common share $ 0.149 $ 0.132
 
 
 
The preliminary income statement is estimated based on our current information.
 
 
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AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
 
 
Six Months Ended
April 30, Percent
2018 2017 Inc/(Dec)
 
Net revenue $ 2,417 $ 2,169 11 %
 
Costs and expenses:
Cost of products and services 1,100 1,003 10 %
Research and development 184 163 13 %
Selling, general and administrative   679     596   14 %
Total costs and expenses   1,963     1,762   11 %
 
Income from operations 454 407 12 %
 
Interest income 19 9 111 %
Interest expense (39 ) (40 ) (3 %)
Other income (expense), net   26     8  
 
Income before taxes 460 384 20 %
 
Provision for income taxes 575 52
   
Net income (loss) $ (115 ) $ 332  
 
 
 
Net income (loss) per share:
Basic $ (0.36 ) $ 1.03
Diluted $ (0.36 ) $ 1.02
 
Weighted average shares used in computing net income (loss) per share:
Basic 323 322
Diluted 323 325
 
Cash dividends declared per common share $ 0.298 $ 0.264
 
 
 
The preliminary income statement is estimated based on our current information.
 
 
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AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(In millions)
(Unaudited)
PRELIMINARY
       
 
Three Months Ended Six Months Ended
April 30, April 30,
2018 2017 2018 2017
 
Net income (loss) $ 205 $ 164 $ (115 ) $ 332
 
Other comprehensive income (loss), net of tax:
 
Unrealized gain (loss) on derivative instruments 4 (1 ) (3 )
Amounts reclassified into earnings related to derivative instruments 3 (1 ) 3 (1 )
Foreign currency translation (53 ) 7 26 4
Net defined benefit pension cost and post retirement plan costs:
Change in actuarial net loss 7 9 13 26
Change in net prior service benefit   (2 )   (2 )   (3 )   (3 )
Other comprehensive income (loss)   (41 )   12     36     26  
 
Total comprehensive income (loss) $ 164   $ 176   $ (79 ) $ 358  
 
 
 
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
   
 
April 30, October 31,
2018 2017
ASSETS
 
Current assets:
Cash and cash equivalents $ 3,011 $ 2,678
Accounts receivable, net 754 724
Inventory 594 575
Other current assets   166     192  

Total current assets

4,525 4,169
 
Property, plant and equipment, net 798 757
Goodwill 2,618 2,607
Other intangible assets, net 314 361
Long-term investments 139 138
Other assets   390     394  
Total assets $ 8,784   $ 8,426  
 
LIABILITIES AND EQUITY
 
Current liabilities:
Accounts payable $ 271 $ 305
Employee compensation and benefits 271 276
Deferred revenue 333 291
Short-term debt 315 210
Other accrued liabilities   175     181  
Total current liabilities 1,365 1,263
 
Long-term debt 1,800 1,801
Retirement and post-retirement benefits 226 234
Other long-term liabilities   776     293  
Total liabilities   4,167     3,591  
 
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 April 30, 2018 and 322 million shares at October 31, 2017, issued

3 3
Additional paid-in-capital 5,332 5,300
Accumulated deficit (412 ) (126 )
Accumulated other comprehensive loss   (310 )   (346 )
Total stockholders' equity 4,613 4,831
Non-controlling interest   4     4  
Total equity   4,617     4,835  
Total liabilities and equity $ 8,784   $ 8,426  
 
 
 
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 Three Months Six Months Six Months
Ended Ended Ended Ended
April 30, April 30, April 30, April 30,
2018 2017 2018 2017
Cash flows from operating activities:
Net income (loss) $ 205 $ 164 $ (115 ) $ 332
 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 50 54 101 109
Share-based compensation 12 15 43 35
Excess and obsolete inventory related charges 12 8 17 15
Other non-cash expenses, net 1 2 2
Changes in assets and liabilities:
Accounts receivable, net (16 ) (17 ) (21 ) (48 )
Inventory (3 ) (34 ) (29 )
Accounts payable (11 ) (3 ) (14 ) 6
Employee compensation and benefits 55 50 (7 ) 7
Change in assets and liabilities due to Tax Act 533
Other assets and liabilities   (5 )   (11 )   13     (56 )
Net cash provided by operating activities (a) 303 257 518 373
 
Cash flows from investing activities:
Investments in property, plant and equipment (48 ) (43 ) (108 ) (75 )
Payment to acquire cost method investments (1 )
Proceeds from divestitures 1
Change in restricted cash and cash equivalents, net 1 1
Payment in exchange for convertible note (2 ) (2 )
Acquisition of businesses and intangible assets, net of cash acquired   (1 )       (7 )   (70 )
Net cash used in investing activities (50 ) (43 ) (117 ) (144 )
 
Cash flows from financing activities:
Issuance of common stock under employee stock plans 11 8 36 26
Payment of taxes related to net share settlement of equity awards (1 ) (1 ) (29 ) (13 )
Payment of dividends (48 ) (43 ) (96 ) (85 )
Proceeds from debt and revolving credit facility 82 97 356 228
Repayment of debt and revolving credit facility (112 ) (45 ) (251 ) (87 )
Treasury stock repurchases   (46 )   (83 )   (93 )   (194 )
Net cash used in financing activities (114 ) (67 ) (77 ) (125 )
 
Effect of exchange rate movements (15 ) 1 9 (4 )
 
Net increase in cash and cash equivalents 124 148 333 100
 
Cash and cash equivalents at beginning of period   2,887     2,241     2,678     2,289  
 
Cash and cash equivalents at end of period $ 3,011   $ 2,389   $ 3,011   $ 2,389  
 
(a) Cash payments included in operating activities:
Income tax payments (refunds), net $ 16 $ 14 $ 48 $ 41
Interest payments $ 14 $ 11 $ 43 $ 40
 
 
 
The preliminary cash flow is estimated based on our current information.
 
 
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AGILENT TECHNOLOGIES, INC.
NON-GAAP NET INCOME AND DILUTED EPS RECONCILIATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
                 
Three Months Ended Six Months Ended
April 30, April 30,
2018   Diluted EPS 2017   Diluted EPS 2018   Diluted EPS 2017   Diluted EPS
 
GAAP net (loss) income $ 205 $ 0.63 $ 164 $ 0.50 $ (115 ) $ (0.36 ) (b) $ 332 $ 1.02
Non-GAAP adjustments:
Intangible amortization 25 0.08 31 0.10 50 0.15 62 0.19
Business exit and divestiture costs 8 0.02 8 0.02
Transformational initiatives 5 0.02 10 0.03 2 0.01
Acquisition and integration costs 4 0.01 7 0.02 7 0.02 23 0.07
Pension settlement gain (5 ) (0.02 ) (32 ) (0.10 )
NASD site costs 2 0.01 4 0.01
Special compliance costs 1 2 0.01
Other (14 ) (0.04 ) 2 0.01 (14 ) (0.04 ) 4 0.01
Adjustment for Tax Reform 533 1.63
Adjustment for taxes (a)   (24 )     (0.08 )   (17 )     (0.05 )   (52 )     (0.14 )   (32 )     (0.10 )
Non-GAAP net income $ 212     $ 0.65   $ 187     $ 0.58   $ 428     $ 1.31   (c) $ 359     $ 1.10  
 
 
 
(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 and six months ended April 30, 2018, management uses a non-GAAP effective tax rate of 18.0%. In the same periods last year, management used a non-GAAP effective tax rate of 19.0%.
(b) GAAP diluted net loss per share was computed using 323 million weighted average diluted shares which excludes from consideration the anti-dilutive effects of all potential common shares outstanding.
(c) Non-GAAP diluted net income per share was computed using 326 million weighted average diluted shares which includes the dilutive effects of potential common shares outstanding.
 
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 amortization of intangibles, transformational initiatives, acquisition and integration costs, pension settlement gain, NASD site costs, special compliance costs, and adjustment for Tax Reform.
 
Business exit and divestiture costs include costs associated with business divestitures.
 
Transformational initiatives include expenses associated with targeted cost reduction activities such as manufacturing transfers, small 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 company programs to transform our product lifecycle management (PLM) system, human resources and financial systems.
 
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, the transfer of assets and intellectual property, information technology systems and infrastructure and other employee-related costs.
 
Pension settlement gain resulted from transfer of the substitutional portion of our Japanese pension plan to the government.
 
NASD site costs include all the costs related to the expansion of our manufacturing of nucleic acid active pharmaceutical ingredients incurred prior to the commencement of commercial manufacturing.
 
Special compliance costs include costs associated with transforming our processes to implement new regulations such as the EU's General Data Protection Regulation (GDPR), revenue recognition and certain tax reporting requirements.
 
Other includes certain legal costs and settlements in addition to other miscellaneous adjustments.
 
Adjustment for Tax Reform primarily consists of an estimated provision of $480 million for U.S. transition tax and correlative items on deemed repatriated earnings of non-U.S. subsidiaries and an estimated provision of $53 million associated with the decrease in the U.S. corporate tax rate from 35% to 21% and its impact on our U.S. deferred tax assets and liabilities. The taxes payable associated with the transition tax, net of tax attributes, on deemed repatriation of foreign earnings is approximately $440 million, payable over 8 years. The final impact of Tax Reform may differ materially from these estimates, due to, among other things, changes in interpretations, analysis and assumptions made, additional guidance that may be issued, and actions that we may undertake.
 
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
Q2'18 Q2'17
Revenue $ 561 $ 523
Gross Margin, % 59.5 % 59.9 %
Income from Operations $ 119 $ 110
Operating margin, % 21.2 % 21.1 %
 
 
Diagnostics and Genomics Group
Q2'18 Q2'17
Revenue $ 219 $ 201
Gross Margin, % 54.9 % 57.6 %
Income from Operations $ 44 $ 49
Operating margin, % 20.2 % 24.2 %
 
 
Agilent CrossLab Group
Q2'18 Q2'17
Revenue $ 426 $ 378
Gross Margin, % 50.2 % 49.7 %
Income from Operations $ 98 $ 82
Operating margin, % 23.1 % 21.6 %
 
 
 
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 amortization of intangibles, business exit and divestiture costs, transformational initiatives, acquisition and integration costs, NASD site costs, and special compliance 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
ACQUISITIONS, DIVESTITURES AND THE IMPACT OF CURRENCY ADJUSTMENTS (CORE)
(in millions)
(Unaudited)
PRELIMINARY
 
Year-over-Year
 
GAAP

 

Year-over-Year

GAAP Revenue by Segment

Q2'18   Q2'17   % Change
 
Life Sciences and Applied Markets Group $ 561 $ 523 7 %
 
Diagnostics and Genomics Group 219 201 9 %
 
Agilent CrossLab Group 426 378 13 %
     
Agilent $ 1,206   $ 1,102 9 %
 
 

Non-GAAP
(excluding Acquisitions & Divestitures)

Year-over-Year
at Constant Currency (a)

 
Year-over-Year Year-over-Year

Percentage Point
Impact from
Currency

Current Quarter
Currency Impact (b)

Non GAAP Revenue by Segment

  Q2'18   Q2'17   % Change % Change      
 
Life Sciences and Applied Markets Group $ 557 $ 522 7 % 3 % 4 ppts $ 22
 
Diagnostics and Genomics Group 219 201 9 % 4 % 5 ppts 10
 
Agilent CrossLab Group 426 378 13 % 7 % 6 ppts 22
       
Agilent (Core) $ 1,202   $ 1,101 9 % 4 % 5 ppts $ 54
 
 
 
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.
 
(a) The constant currency year-over-year growth percentage is calculated by recalculating all periods in the comparison period at the foreign currency exchange rates used for accounting during the last month of the current quarter, and then using those revised values to calculate the year-over-year percentage change.
 
(b) The dollar impact from the current quarter currency impact is equal to the total year-over-year dollar change less the constant currency year-over-year change.
 
The preliminary reconciliation of GAAP revenue adjusted for recent acquisitions and divestitures and impact of currency is estimated based on our current information.
 
 
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