Agilent Technologies Reports First-Quarter 2016 Results

February 16, 2016

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⁾

SANTA CLARA, Calif.--(BUSINESS WIRE)--Feb. 16, 2016-- 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.

About Agilent Technologies

Agilent Technologies Inc. (NYSE: A), a global leader in life sciences, diagnostics and applied chemical markets, is the premier laboratory partner for a better world. Agilent works with customers in more than 100 countries, providing instruments, software, services and consumables for the entire laboratory workflow. Agilent generated revenue of $4.04 billion in fiscal 2015. The company employs about 12,000 people worldwide. Information about Agilent is available at www.agilent.com.

Agilent’s management will present more details about its first-quarter FY2016 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 “Q1 2016 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. PT today through Feb. 23 by dialing +1 855 859 2056 (or +1 404 537 3406 from outside the United States) and entering passcode 24914313.

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 revenue, earnings and profitability; planned new products; market trends; the future demand for the company’s products and services; customer expectations; and revenue and non-GAAP earnings guidance for the second quarter and full fiscal year 2016. 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, unforeseen changes in the strength of our customers’ businesses; unforeseen changes in the demand for current and new products, technologies, and services; unforeseen changes in the currency markets; customer purchasing decisions and timing, and the risk that we are not able to realize the savings expected from integration and restructuring activities.

In addition, other risks that Agilent faces in running its operations include the ability to execute successfully through business cycles; 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 of our supply chain to adapt to changes in demand; the ability to successfully introduce new products at the right time, price and mix; the ability of Agilent to successfully integrate recent acquisitions; the ability of Agilent to successfully comply with certain complex regulations; and other risks detailed in Agilent’s filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended Oct. 31, 2015. 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)	Non-GAAP income from continuing operations and non-GAAP income from continuing operations per share exclude primarily the impacts of acquisition and integration costs, transformation initiatives, pension curtailment gain, business exit and divestiture costs, and non-cash intangibles amortization. We also exclude any tax benefits that are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. A reconciliation between non-GAAP 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)	Non-GAAP earnings per share as projected for Q2 FY16 and full fiscal year 2016 excludes primarily the future impact of acquisition and integration costs, pension curtailment gain, business exit and divestiture costs and non-cash intangibles amortization. We also exclude any tax benefits that are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. 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 $42 million per quarter.

(3)	Core revenue excludes the impact of currency, the NMR business and acquisitions and divestitures within the past 12 months. Core revenue is a non-GAAP measure. A reconciliation between GAAP revenue and core revenue is set forth on page 7 of the attached tables along with additional information regarding the use of this non-GAAP measure.

(4)	Adjusted operating margin is a non-GAAP measure and excludes primarily the impacts of acquisition and integration costs, transformation initiatives, pension curtailment gain, business exit and divestiture costs, and non-cash intangibles amortization in addition to the costs related to services Agilent is providing to Keysight post separation. A reconciliation is set forth on page 8 of the attached tables along with additional information regarding the use of this non-GAAP measure.

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


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.


Page 1


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.


Page 2


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.


Page 3


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.


Page 4


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.


Page 5


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.


Page 6


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.


Page 7


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.

Page 8

View source version on businesswire.com: http://www.businesswire.com/news/home/20160216005651/en/

Source: Agilent Technologies Inc.

Agilent Technologies Inc.
EDITORIAL CONTACT:
Michele Drake , +1 408-345-8396
michele_drake@agilent.com
INVESTOR CONTACT:
Alicia Rodriguez, +1 408-345-8948
alicia_rodriguez@agilent.com

Visit Newsroom

News Details

Agilent Technologies Reports First-Quarter 2016 Results

Investor Contact



Enter the code shown above.
*