EX-99.1 2 a07-21871_1ex99d1.htm EX-99.1

Exhibit 99.1

EDITORIAL CONTACTS:

Amy Flores

+1 408 345 8194

amy_flores@agilent.com

Jorgen Tesselaar (Europe and Asia)

+31 20 547 2825

jorgen_tesselaar@agilent.com

INVESTOR CONTACT:

Rodney Gonsalves

+1 408 345 8948

rodney_gonsalves@agilent.com

Agilent Technologies Reports Third Quarter 2007 Results

SANTA CLARA, Calif., Aug. 14, 2007 — Agilent Technologies Inc. (NYSE: A) today reported orders of $1.31 billion for the third fiscal quarter ended July 31, 2007, 7 percent above one year ago. Revenues during the quarter were $1.37 billion, 11 percent above last year. Third quarter GAAP net income was $185 million, or $0.45 per diluted share.  Last year’s third quarter GAAP net income from continuing operations, which included a $65 million, or $0.15 per share, gain from the sale of assets, was $216 million.

Included in this quarter’s GAAP income is $27 million of share-based compensation expense. Excluding this item and $18 million of tax and other net benefits, Agilent reported third quarter adjusted net income of $194 million, or $0.48 per share. On a comparable basis, the company earned $166 million, or $0.39 per share, one year ago. (1)

1




“Agilent met its aggressive performance targets despite very divergent market trends during the third quarter,” said Bill Sullivan, Agilent president and chief executive officer.  “Bio-analytical markets were strong across the board, and the performance of our Segment was even more robust.  Electronic measurement markets were solid in the Americas and Europe but surprisingly weak in Asia, particularly Japan.

“As a result, third quarter revenues were up 11 percent from last year to $1.37 billion, just shy of our revised expectations.  Adjusted net income per share, at $0.48, was 23 percent above last year’s results and in the middle of our guidance range.”

Sullivan noted that, including the impact of the third quarter acquisition of Stratagene, Bio-Analytical segment orders were up 21 percent from last year, while revenues hit a record $500 million, up 19 percent from one year ago.  “Initial integration activities are going well, and we are enthusiastic about the synergy between Stratagene’s bio-reagents and Agilent’s analytical instruments to better serve customers in both commercial and not-for-profit life sciences applications.”

Third quarter Return on Invested Capital(2) reached 28 percent, 3 points better than last year’s strong performance.  Both Receivables Days-Sales-Outstanding and Inventory Days-On-Hand improved 3 days from one year ago. Cash generated from operating activities was $176 million in the third quarter. During the period, the company repurchased $677 million of its common stock. The company ended the quarter with net cash of $1.5 billion.

For the fiscal fourth quarter of 2007, Agilent expects a softer than normal seasonal increase in revenues because of weak Asian electronic measurement markets.  Revenues are expected to be in the range of $1.39 billion to $1.43 billion, up 5 percent to 8 percent from last year. Adjusted net income is expected to be in the range of $0.50 to $0.54 per share, 9 percent to 17 percent above last year’s comparable earnings. (3)

Sullivan said, “Near-term weakness in Asian electronic measurement markets does not dampen our expectations for Agilent’s performance in fiscal

2




2008.  We anticipate continued momentum in our Bio-Analytical markets and a return to more normal secular growth in Electronic Measurement markets next year.  We continue to leverage our robust operating model, and will benefit from our investments in core products, growth initiatives and acquisitions.”

Segment Results

Bio-Analytical Measurement

($ millions except where noted)

 

Q3:F07

 

Q3:F06

 

Q2:F07

 

Orders

 

498

 

413

 

491

 

Revenues

 

500

 

420

 

463

 

Gross Margin, %

 

54

%

54

%

53

%

Income from Operations

 

92

 

66

 

76

 

Segment Assets

 

1,304

 

998

 

1,050

 

Return On Invested Capital(2), %

 

29

%

26

%

28

%

 

Bio-Analytical Measurement orders were up 21 percent during the third quarter from one year ago, and up 16 percent excluding the impact of the acquisition of Stratagene.  This marks the fifth consecutive quarter of double-digit orders growth.  Revenues of $500 million were up 19 percent from last year, and up 15 percent excluding Stratagene.  Life Sciences revenues of $209 million were up 22 percent from last year, and 12 percent higher excluding Stratagene. Sustained strength in the pharmaceutical and biotech markets fueled growth of our 1200 Series liquid chromatography, mass spectrometry and LC / MS platforms. Chemical Analysis revenues of $291 million were up 17 percent from last year, with approximately 20 percent rates of growth in food safety, environmental and petrochemical spending driving demand for the new gas chromatography and GC/MS platforms.

Segment income from operations of $92 million was $26 million above last year on an $80 million increase in revenues.  Operating margins improved nearly 3 points to 18 percent. Segment Return On Invested Capital(2) improved 2 points to 29 percent despite a 4-point reduction in ROIC due to the addition of Stratagene.

3




Electronic Measurement

($ millions except where noted)

 

Q3:F07

 

Q3:F06

 

Q2:F07

 

Orders

 

810

 

812

 

909

 

Revenues

 

874

 

819

 

857

 

Gross Margin, %

 

58

%

58

%

59

%

Income from Operations

 

133

 

119

 

121

 

Segment Assets

 

2,042

 

2,095

 

2,127

 

Return On Invested Capital(2), %

 

26

%

24

%

24

%

 

Third quarter Electronic Measurement orders of $810 million were flat compared to last year, with steady 5 percent to 9 percent growth in the Americas and Europe offset by flat Asian orders and a 24 percent decline from Japan. Revenues of $874 million were up 7 percent, with Americas up 12 percent and Europe up 8 percent, while revenues from Asia were up 1 percent. General Purpose Test revenues were 9 percent ahead of last year, with strength in aerospace / defense.  Communications Test revenues were up 3 percent, with particular strength in R&D markets.  Handset manufacturing test was up 11 percent sequentially, but still down 7 percent from last year’s third quarter.

Third quarter income from operations of $133 million was up $14 million from last year on a $55 million increase in revenues. Gross margins were flat with last year while operating margins improved less than a point due to increased acquisition-related spending.  Segment ROIC(2) improved 2 points to 26 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 19,000 employees serve customers in more than 110 countries. Agilent had net revenues of $5.0 billion in fiscal 2006. Information about Agilent is available on the Web at www.agilent.com.

Agilent’s management will present more details on its third quarter FY2007 financial results on a conference call with investors beginning at 1:30 p.m. (Pacific). This event will be webcast live in listen-only mode. Listeners may log on

4




at www.investor.agilent.com and select “Q3 2007 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 3:30 p.m. (Pacific) today through Aug. 21, 2007. The replay number is +1 888 286 8010 or international callers may dial +1 617 801 6888. The passcode is 61171511.

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 pace of new product introductions and future demand for the Company’s products and services; and guidance for the fourth quarter of fiscal year 2007.  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, and unforeseen changes in the demand for current and new products and technologies.

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 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 quarterly period ended April 30, 2007. Forward-looking statements are based on the beliefs and assumptions of Agilent’s management and on currently available information.

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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 stock-based compensation, intangible 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 Q407 is a non-GAAP measure which excludes primarily the impacts of future restructuring and asset impairment charges, non-cash stock-based compensation, and 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 $13 million 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.

6




AGILENT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

PRELIMINARY

 

 

Three Months Ended

 

 

 

 

 

July 31,

 

Percent

 

 

 

2007

 

2006

 

Inc/(Dec)

 

 

 

 

 

 

 

 

 

Orders

 

$

1,308

 

$

1,225

 

7

%

 

 

 

 

 

 

 

 

Net revenue

 

$

1,374

 

$

1,239

 

11

%

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

  Cost of products and services

 

616

 

553

 

11

%

  Research and development

 

170

 

162

 

5

%

  Selling, general and administrative

 

420

 

407

 

3

%

  Gain on sale of Palo Alto site

 

 

(65

)

100

%

 Total costs and expenses

 

1,206

 

1,057

 

14

%

 

 

 

 

 

 

 

 

Income from continuing operations

 

168

 

182

 

(8

)%

 

 

 

 

 

 

 

 

Other income (expense), net

 

22

 

45

 

(51

)%

 

 

 

 

 

 

 

 

Income from continuing operations before taxes

 

190

 

227

 

(16

)%

 

 

 

 

 

 

 

 

Provision for taxes

 

5

 

11

 

(55

)%

 

 

 

 

 

 

 

 

Income from continuing operations, net

 

185

 

216

 

(14

)%

 

 

 

 

 

 

 

 

Loss from and gain on sale of discontinued operations of our Semiconductor Products Business (net of taxes of zero in 2006)

 

 

(6

)

100

%

 

 

 

 

 

 

 

 

Income from the discontinued operations of our Semiconductor Test Solutions Business (net of taxes of $7 million in 2006)

 

 

17

 

(100

)%

 

 

 

 

 

 

 

 

Net income

 

$

185

 

$

227

 

(19

)%

 

 

 

 

 

 

 

 

Net income per share - basic:

 

 

 

 

 

 

 

   Income from continuing operations

 

$

0.47

 

$

0.52

 

 

 

   Income from and gain on sale of discontinued operations of our Semiconductor Products Business, net

 

 

(0.01

)

 

 

   Income from the discontinued operations of our Semiconductor Test Solutions Business, net

 

 

0.04

 

 

 

   Net income per share - basic

 

$

0.47

 

$

0.55

 

 

 

 

 

 

 

 

 

 

 

Net income per share - diluted:

 

 

 

 

 

 

 

   Income from continuing operations

 

$

0.45

 

$

0.51

 

 

 

   Income from and gain on sale of discontinued operations of our Semiconductor Products Business, net

 

 

(0.01

)

 

 

   Income from the discontinued operations of our Semiconductor Test Solutions Business, net

 

 

0.04

 

 

 

   Net income per share - diluted

 

$

0.45

 

$

0.54

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used in computing net income per share:

 

 

 

 

 

 

 

Basic

 

392

 

412

 

 

 

Diluted

 

407

 

422

 

 

 

 

Income from continuing operations for the third quarter of fiscal years 2007 and 2006 include pre-tax share-based  compensation expense under SFAS No. 123(R) of $27 million and $19 million, respectively, related to employee stock options and employee stock purchases. 

The preliminary income statement is estimated based on our current information.

7




AGILENT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

PRELIMINARY

 

 

Nine Months Ended

 

 

 

 

 

July 31,

 

Percent

 

 

 

2007

 

2006

 

Inc/(Dec)

 

 

 

 

 

 

 

 

 

Orders

 

$

3,958

 

$

3,678

 

8

%

 

 

 

 

 

 

 

 

Net revenue

 

$

3,974

 

$

3,645

 

9

%

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 Cost of products and services

 

1,795

 

1,716

 

5

%

 Research and development

 

511

 

499

 

2

%

 Selling, general and administrative

 

1,274

 

1,236

 

3

%

 Gain on sale of San Jose and Palo Alto sites

 

 

(121

)

100

%

  Total costs and expenses

 

3,580

 

3,330

 

8

%

 

 

 

 

 

 

 

 

Income from continuing operations

 

394

 

315

 

25

%

 

 

 

 

 

 

 

 

Other income (expense), net

 

75

 

139

 

(46

)%

 

 

 

 

 

 

 

 

Income from continuing operations before taxes and equity income

 

469

 

454

 

3

%

 

 

 

 

 

 

 

 

Provision for taxes

 

11

 

44

 

(75

)%

 

 

 

 

 

 

 

 

Income from continuing operations before equity income

 

458

 

410

 

12

%

 

 

 

 

 

 

 

 

Equity income from and gain on sale of Lumileds

 

 

901

 

(100

)%

 

 

 

 

 

 

 

 

Income from continuing operations, net

 

458

 

1,311

 

(65

)%

 

 

 

 

 

 

 

 

Income from and gain on sale of discontinued operations of our Semiconductor Products Business (net of taxes of $10 million in 2006)

 

 

1,815

 

(100

)%

 

 

 

 

 

 

 

 

Income from the discontinued operations of our Semiconductor Test Solutions Business (net of taxes of $17 million in 2006)

 

 

32

 

(100

)%

 

 

 

 

 

 

 

 

Net income

 

$

458

 

$

3,158

 

(85

)%

 

 

 

 

 

 

 

 

Net income per share - basic:

 

 

 

 

 

 

 

   Income from continuing operations

 

$

1.15

 

$

2.99

 

 

 

   Income from and gain on sale of discontinued operations of our Semiconductor Products Business, net

 

 

4.14

 

 

 

   Income from the discontinued operations of our Semiconductor Test Solutions Business, net

 

 

0.08

 

 

 

   Net income per share - basic

 

$

1.15

 

$

7.21

 

 

 

 

 

 

 

 

 

 

 

Net income per share - diluted:

 

 

 

 

 

 

 

   Income from continuing operations

 

$

1.11

 

$

2.92

 

 

 

   Income from and gain on sale of discontinued operations of our Semiconductor Products Business, net

 

 

4.04

 

 

 

   Income from the discontinued operations of our Semiconductor Test Solutions Business, net

 

 

0.07

 

 

 

   Net income per share - diluted

 

$

1.11

 

$

7.03

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used in computing net income per share:

 

 

 

 

 

 

 

Basic

 

400

 

438

 

 

 

Diluted

 

412

 

449

 

 

 

 

Income from continuing operations for the first nine months of fiscal years 2007 and 2006 include pre-tax share-based compensation expense under SFAS No. 123(R) of $103 million and $73 million, respectively, related to employee stock options and employee stock purchases.

The preliminary income statement is estimated based on our current information.

8




AGILENT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(In millions, except par value and share amounts)

(Unaudited)

PRELIMINARY

 

 

July 31,

 

October 31,

 

 

 

2007

 

2006

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

1,486

 

$

2,262

 

Accounts receivable, net

 

738

 

692

 

Inventory

 

674

 

627

 

Other current assets

 

383

 

377

 

Total current assets

 

3,281

 

3,958

 

 

 

 

 

 

 

Property, plant and equipment, net

 

787

 

775

 

Goodwill and other intangible assets, net

 

732

 

468

 

Restricted cash and cash equivalents

 

1,617

 

1,606

 

Other assets

 

607

 

562

 

Total assets

 

$

7,024

 

$

7,369

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

346

 

$

378

 

Employee compensation and benefits

 

368

 

414

 

Deferred revenue

 

251

 

225

 

Income and other taxes payable

 

389

 

390

 

Other accrued liabilities

 

156

 

131

 

Total current liabilities

 

1,510

 

1,538

 

 

 

 

 

 

 

Long-term debt

 

1,500

 

1,500

 

Retirement and post-retirement benefits

 

293

 

288

 

Other long-term liabilities

 

433

 

395

 

Total liabilities

 

3,736

 

3,721

 

 

 

 

 

 

 

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; 550 million shares at July 31, 2007 and 535 million shares at October 31, 2006 issued

 

5

 

5

 

Treasury stock at cost; 163 million shares at July 31, 2007 and 127 million shares at October 31, 2006

 

(5,838

)

(4,525

)

Additional paid-in capital

 

7,052

 

6,605

 

Retained earnings

 

1,992

 

1,534

 

Accumulated other comprehensive income

 

77

 

29

 

Total stockholders’ equity

 

3,288

 

3,648

 

Total liabilities and stockholders’ equity

 

$

7,024

 

$

7,369

 

 

The preliminary balance sheet is estimated based on our current information.

9




AGILENT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In millions)

(Unaudited)

PRELIMINARY

 

 

Nine Months

 

Three Months

 

 

 

Ended

 

Ended

 

 

 

July 31,

 

July 31,

 

 

 

2007

 

2007

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

458

 

$

185

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

143

 

50

 

Share based compensation

 

103

 

27

 

Deferred taxes

 

(29

)

(21

)

Excess and obsolete inventory-related charges

 

13

 

5

 

Asset impairment charges

 

8

 

4

 

Net gain on sale of investments

 

(2

)

 

Net gain on sale of assets

 

(13

)

(7

)

In-process research and development and others

 

1

 

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(9

)

(5

)

Inventory

 

(46

)

(16

)

Accounts payable

 

(14

)

17

 

Employee compensation and benefits

 

(50

)

(60

)

Income taxes and other taxes payable

 

11

 

(4

)

Other current assets and liabilities

 

23

 

(32

)

Other long-term assets and liabilities

 

(26

)

33

 

Net cash provided by operating activities (a)

 

571

 

176

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Investments in property, plant and equipment

 

(115

)

(36

)

Proceeds from the sale of property, plant and equipment

 

12

 

4

 

Proceeds from sale of investments

 

12

 

 

Proceeds from sale of intangibles and assets, net

 

14

 

14

 

Decrease (increase) in restricted cash, cash equivalents, net

 

1

 

(1

)

Acquisition of businesses and intangible assets, net of cash acquired

 

(311

)

(239

)

Net cash used in investing activities

 

(387

)

(258

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Net issuance of common stock under employee stock plans

 

344

 

197

 

Treasury stock repurchases

 

(1,313

)

(677

)

Payment of long-term debt

 

(4

)

(4

)

Net cash used in financing activities

 

(973

)

(484

)

 

 

 

 

 

 

Effect of exchange rate movements

 

13

 

2

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(776

)

(564

)

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

2,262

 

2,050

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

1,486

 

$

1,486

 

 

 

 

 

 

 

(a) Cash payments included in operating activities:

 

 

 

 

 

   Restructuring

 

54

 

14

 

   Income tax payments

 

63

 

30

 

 

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

10




AGILENT TECHNOLOGIES, INC.

ADJUSTED NET INCOME AND DILUTED EPS RECONCILIATIONS

(In millions, except per share amounts)

(Unaudited)

PRELIMINARY

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

July 31,

 

July 31,

 

 

 

 

 

Diluted

 

 

 

Diluted

 

 

 

Diluted

 

 

 

Diluted

 

 

 

2007

 

EPS

 

2006

 

EPS

 

2007

 

EPS

 

2006

 

EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per GAAP

 

$

185

 

$

0.45

 

$

227

 

$

0.54

 

$

458

 

$

1.11

 

$

3,158

 

$

7.03

 

Less income from and gain on sale of discontinued operations of our Semiconductor Products Business

 

 

 

(6

)

(0.01

)

 

 

1,815

 

4.04

 

Less income from discontinued operations of our Semiconductor Test Solutions Business

 

 

 

17

 

0.04

 

 

 

32

 

0.07

 

Income from continuing operations

 

$

185

 

$

0.45

 

$

216

 

$

0.51

 

$

458

 

$

1.11

 

$

1,311

 

$

2.92

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and asset impairment

 

11

 

0.03

 

36

 

0.09

 

30

 

0.07

 

131

 

0.29

 

Business disposal and infrastructure reduction costs

 

2

 

 

25

 

0.06

 

14

 

0.03

 

55

 

0.12

 

Gain on sale of assets

 

(8

)

(0.02

)

(65

)

(0.15

)

(15

)

(0.04

)

(121

)

(0.27

)

Share-based compensation expense

 

27

 

0.07

 

19

 

0.04

 

103

 

0.25

 

73

 

0.16

 

Excess software amortization

 

6

 

0.01

 

 

 

22

 

0.05

 

 

 

Intangible amortization

 

12

 

0.03

 

7

 

0.02

 

29

 

0.07

 

19

 

0.04

 

Donation to Agilent Foundation

 

 

 

 

 

20

 

0.05

 

 

 

Remeasurement loss for a one-time intercompany transaction

 

 

 

 

 

4

 

0.01

 

 

 

Gain on sale and equity in income of Lumileds

 

 

 

 

 

 

 

(901

)

(2.01

)

Income from foreign sales corporation tax study

 

 

 

(13

)

(0.03

)

 

 

(13

)

(0.03

)

Retirement plans curtailment gains

 

 

 

(18

)

(0.04

)

 

 

(18

)

(0.04

)

Unallocated SPG corporate charges

 

 

 

 

 

 

 

13

 

0.03

 

Unallocated STS corporate charges

 

 

 

5

 

0.01

 

 

 

40

 

0.09

 

Other

 

4

 

0.01

 

1

 

 

7

 

0.02

 

(9

)

(0.01

)

Adjustment for taxes

 

(45

)

(0.10

)

(47

)

(0.12

)

(140

)

(0.33

)

(115

)

(0.25

)

Adjusted net income from continuing operations

 

$

194

 

$

0.48

 

$

166

 

$

0.39

 

$

532

 

$

1.29

 

$

465

 

$

1.04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add net income for STS segment (non-GAAP)

 

 

 

29

 

0.07

 

 

 

62

 

0.13

 

Adjusted net income

 

$

194

 

$

0.48

 

$

195

 

$

0.46

 

$

532

 

$

1.29

 

$

527

 

$

1.17

 

 

We provide adjusted net income and adjusted 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, expenses related to share-based compensation, charges related to the amortization of intangibles, the impact of restructuring charges and the sale of our businesses. Some of the exclusions, such as impairments, may be beyond the control of management. Further, some may be less predictable than revenue derived from our core businesses (the day to day business of selling our products and services). These reasons provide the basis for management's belief that the measures are useful.

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 share-based compensation expenses, amortization of intangibles and restructuring charges 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 adjusted net income and diluted EPS reconciliation is estimated based on our current information.

11




AGILENT TECHNOLOGIES, INC.

RECONCILIATION OF ROIC

(In millions)

(Unaudited)

Preliminary

 

BAM

 

EM

 

Agilent

 

BAM

 

EM

 

BAM

 

EM

 

 

 

Q3’07

 

Q3’07

 

Q3’07

 

Q3’06

 

Q3’06

 

Q2’07

 

Q2’07

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted income from operations

 

$

92

 

$

133

 

$

223

 

$

66

 

$

119

 

$

76

 

$

121

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxes and Other (income)/expense

 

25

 

28

 

47

 

17

 

26

 

19

 

23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment return

 

67

 

105

 

176

(a)

49

 

93

 

57

 

98

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment return annualized

 

$

268

 

$

420

 

$

704

 

$

196

 

$

372

 

$

228

 

$

392

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment assets (b)

 

$

1,304

 

$

2,042

 

$

3,358

 

$

998

 

$

2,095

 

$

1,050

 

$

2,127

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net current liabilities (c)

 

254

 

463

 

714

 

260

 

522

 

236

 

527

 

Invested capital

 

$

1,050

 

$

1,579

 

$

2,644

 

$

738

 

$

1,573

 

$

814

 

$

1,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average invested capital

 

$

932

 

$

1,590

 

$

2,536

 

$

748

 

$

1,573

 

$

805

 

$

1,614

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ROIC

 

29

%

26

%

28

%

26

%

24

%

28

%

24

%

 

ROIC calculation:(annualized current quarter segment return)/(average of the two most recent quarter-end balances of Segment Invested Capital)


(a) Agilent return is equal to adjusted net income from continuing operations of $194 million minus net interest income after tax of $18 million. Please see “Adjusted Net Income and EPS Reconciliations” for a reconciliation of adjusted net income from continuing operations to GAAP income from continuing operations.

(b) Segment assets consist of inventory, accounts receivable, property plant and equipment, gross goodwill and other intangibles, deferred taxes and allocated corporate assets.

(c) Includes accounts payable, employee compensation and benefits, other accrued liabilities and allocated corporate liabilities.

 

Return on invested capital (ROIC) is a non-GAAP measure that management believes provides useful supplemental information for management and the investor.  ROIC is a tool by which we track how much value we are creating for our shareholders.  Management uses ROIC as a performance measure for our businesses, and our senior managers' compensation is linked to ROIC improvements as well as other performance criteria.  We believe that ROIC provides our management with a means to analyze and improve their business, measuring segment profitability in relation to net asset investments.  We acknowledge that ROIC may not be calculated the same way by every company.  We compensate for this limitation by monitoring and providing to the reader a full GAAP income statement and balance sheet.

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 ROIC is estimated based on our current information.

12