News Details

During the third quarter, Agilent had restructuring and asset impairment charges of $81 million and $11 million of non-cash amortization. It also recognized a tax benefit of $36 million and had $16 million of other net charges. Excluding these items, Agilent reported third quarter adjusted net income of $53 million, or $0.15 per share. On a comparable basis, the company earned $198 million, or $0.53 per share, one year ago.

"Given the extraordinarily difficult economic conditions around the world, Agilent performed well in our third quarter," said Bill Sullivan, Agilent president and chief executive. "Our restructuring actions to lower Agilent's revenue breakeven by over half a billion dollars are on track. Third quarter revenues of $1.06 billion were off 27 percent from one year ago but close to our expectations. Uncharacteristically for a third quarter, orders of $1.07 billion exceeded revenues, and were off 23 percent from last year. Compared with three months ago, we have more confidence that the quarter just ended will represent the cyclical low point for Agilent."

Electronic Measurement revenues were down 36 percent, with continued weakness across all end markets and across all regions. Orders were down a less severe 26 percent and were up sequentially from Q2. Bio-analytical segment revenues were 8 percent below last year, with applied markets down 11 percent and life science off 5 percent. Bio-analytical segment orders declined 14 percent but were also up sequentially.

During the quarter, Agilent announced it signed a definitive agreement to acquire Varian, Inc. for $1.5 billion. Closing is subject to regulatory and Varian shareholder approval, as well as other customary conditions, and is expected by calendar year-end.

Third quarter Return On Invested Capital⁽²⁾ fell to 9 percent compared with 27 percent one year ago because of lower earnings. The company generated $41 million of cash from operations during the seasonally weak third quarter and ended the quarter with net cash of $981 million.

Looking ahead, Sullivan said that market conditions are expected to remain difficult through fiscal year-end, while recent increases in quotation activity and order funnels suggest that a modest recovery could begin early in fiscal 2010.

"We expect our fourth quarter revenues to improve seasonally, and that the benefits of our restructuring program will become increasingly evident in our operating results. Non-GAAP earnings⁽³⁾ are expected to be in the range of $0.20 to $0.25 per share."

Bio-analytical segment orders of $493 million were down 14 percent from one year earlier, while revenues of $496 million were off 8 percent from last year. During the quarter, Chemical Analysis revenues were down 11 percent, with continued strength in food markets and weakness in all other applied markets. Life Sciences revenues were off 5 percent from one year ago.

Geographically, weakness continued to be most pronounced in Europe, which was off 22 percent from last year, while revenue in the Americas was down 13 percent. Asia remained an area of strength, with Japan up 8 percent from last year and other Asia up 19 percent. China was particularly robust, up 48 percent from one year ago. By product platform, Gas (GC) and Liquid Chromatography (LC) both remained weak, while microarrays remained strong, up nearly 20 percent.

Life Sciences revenues of $234 million were down 5 percent in the third quarter from one year ago, with spending by Pharma and Biotech customers down 6 percent, and sales to the academic and government markets off 2 percent from one year ago. Interest has been particularly strong for the new 1290 Infinity LC introduced in July, while the microarray business saw strong adoption of SurePrint arrays for Comparative Genomic Hybridization (CGH) applications.

Chemical Analysis revenues of $262 million were down 11 percent from last year. Food safety remained robust, with revenues up 14 percent from one year ago, while weakness was widespread in other applied markets. From a platform perspective, demand remained weak for GCs and relatively strong for LC/MS systems.

Third quarter segment income from operations of $91 million was $11 million below last year's results on a $44 million decline in revenues. Gross margins were off less than 1 point from last year, while operating margins, at 18 percent, were also down less than 1 point from one year ago. Segment Return On Invested Capital⁽²⁾ declined 2 points to 25 percent.

Third quarter Electronic Measurement orders of $542 million were 26 percent below last year but, uncharacteristically, were up sequentially from Q2. Reflecting earlier orders weakness, revenues of $524 million were 36 percent below one year ago. Market weakness continued in all markets and all geographies, with General Purpose revenues down 25 percent and Communications 48 percent below one year ago. Geographically, Europe declined 38 percent, Japan was off 43 percent, other Asia dropped 30 percent and the Americas were 36 percent below last year.

General Purpose revenues of $326 million were down 25 percent from last year. Aerospace / defense held up best, off 6 percent from one year ago. Other general purpose markets were off 34 percent from last year due to continued severe weakness in electronics manufacturing and computer / semiconductor markets. Communications revenues of $198 million were down 48 percent from one year ago, with extreme weakness virtually across the board.

Third quarter segment profit declined $124 million from last year to an operating loss of $1 million based on a $290 million decline in revenues. Gross margins fell by 4 points from last year due to lower volume, while operating expenses were $65 million below last year. Operating margins fell 15 points to breakeven. Segment ROIC⁽²⁾ fell 29 points to 0 percent, driven by lower profitability and despite $232 million lower invested capital.

As announced previously, Agilent is implementing a program to reduce the operating breakeven of the Electronic Measurement segment by $300 million. This program is on track to be completed by mid-FY2010.

While industry conditions in Semiconductor & Board Test remain severely depressed, the Segment showed some signs of coming off the bottom during the third quarter. Orders of $36 million were down 56 percent from last year but up 60 percent sequentially. Revenues of $37 million were off 59 percent from one year ago but up modestly from the second quarter.

Third quarter segment loss from operations of $10 million represents a deterioration of $21 million from last year's results on a $53 million decline in revenues. Sequentially, income improved $5 million on a $1 million increase in revenue as restructuring actions began to gain traction. Gross margins fell 18 points due to the drop in volume, while operating expenses declined by $13 million from last year. Segment ROIC⁽²⁾ fell 19 points to (9) percent.

About Agilent Technologies

Agilent Technologies Inc. (NYSE: A) is the world's premier measurement company and a technology leader in communications, electronics, life sciences and chemical analysis. The company's 18,000 employees serve customers in more than 110 countries. Agilent had net revenues of $5.8 billion in fiscal 2008. Information about Agilent is available on the Web at www.agilent.com.

Agilent's management will present more details on its third quarter FY2009 financial results on a conference call with investors beginning today at 1:45 p.m. (Pacific). This event will be webcast live in listen-only mode. Listeners may log on at www.investor.agilent.com and select "Q3 2009 Agilent Technologies Inc. Earnings Conference Call" in the "News & Events -- Calendar of Events" section. The webcast will remain available on the company's Web site for 90 days.

A telephone replay of the conference call will be available from 5:45 p.m. (Pacific) today through Aug. 24, 2009. The replay number is +1 888 286-8010; international callers may dial +1 617 801-6888. The passcode is 33830564.

Forward-Looking Statements

This news release contains forward-looking statements as defined in the Securities Exchange Act of 1934 and is subject to the safe harbors created therein. The forward-looking statements contained herein include, but are not limited to, information regarding Agilent's future revenues, earnings and profitability; the future demand for the Company's products and services, revenue and non-GAAP earnings guidance for fiscal 2009, the acquisition of Varian, Inc. and our planned restructuring activities, including our current estimates of the scope, timing and cost of those activities. These forward-looking statements involve risks and uncertainties that could cause Agilent's results to differ materially from management's current expectations. Such risks and uncertainties include, but are not limited to, the timing of regulatory approvals for the Varian acquisition, unforeseen changes in the strength of our customers' businesses, unforeseen changes in the demand for current and new products and technologies, the risk of additional costs and delays associated with compliance with U.S. and international labor and other laws associated with our planned restructuring activities, the risk that a further decline in general economic conditions and the global credit and equity markets will require changes to the planned restructuring, and the risk that we are not able to realize the savings expected from the restructuring activities.

In addition, other risks that Agilent faces in running its operations include the ability to execute successfully through business cycles while it continues to implement cost reductions; the ability to meet and achieve the benefits of its cost-reduction goals and otherwise successfully adapt its cost structures to continuing changes in business conditions; ongoing competitive, pricing and gross-margin pressures; the risk that our cost-cutting initiatives will impair our ability to develop products and remain competitive and to operate effectively; the impact of geopolitical uncertainties and global economic conditions on our operations, our markets and our ability to conduct business; the ability to improve asset performance to adapt to changes in demand; the ability to successfully introduce new products at the right time, price and mix; and other risks detailed in Agilent's filings with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q for the quarter ended April 30, 2009. Forward-looking statements are based on the beliefs and assumptions of Agilent's management and on currently available information. Agilent undertakes no responsibility to publicly update or revise any forward-looking statement.

⁽¹⁾ Adjusted net income and adjusted net income per share are non-GAAP measures. Each of these measures is defined to exclude primarily the impacts of restructuring and asset impairment charges, business separation costs, non-cash intangibles amortization as well as gains and losses from the sale of investments and disposals of businesses net of their tax effects. A reconciliation between adjusted net income and GAAP net income is set forth on page 5 of the attached tables along with additional information regarding the use of this non-GAAP measure.

⁽²⁾ Return On Invested Capital is a non-GAAP measure and is defined as income (loss) from operations less other (income) expense and taxes, annualized, divided by the average of the two most recent quarter-end balances of assets less net current liabilities. The reconciliation of ROIC can be found on page 6 of the attached tables, along with additional information regarding the use of this non-GAAP measure.

⁽³⁾Adjusted net income per share as projected for Q409 is a non-GAAP measure which excludes primarily the impacts of future restructuring and asset impairment charges and non-cash intangibles amortization. Most of these excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy. Therefore, no reconciliation to GAAP amounts has been provided. Future amortization of intangibles is expected to be approximately $11million per quarter.

NOTE TO EDITORS: Further technology, corporate citizenship and executive news is available on the Agilent news site at www.agilent.com/go/news.

SOURCE: Agilent Technologies Inc.

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