10-QPeriod: Q2 FY2003

AGILENT TECHNOLOGIES, INC. Quarterly Report for Q2 Ended Apr 30, 2003

Filed June 4, 2003For Securities:A

Summary

Agilent Technologies, Inc. reported a net loss of $146 million, or $0.31 per share, for the second quarter ended April 30, 2003, a slight improvement from a loss of $253 million, or $0.55 per share, in the same period last year. Total net revenue remained relatively flat at $1.47 billion. The company continued to grapple with a challenging economic environment, particularly in its Test and Measurement and Semiconductor Products segments, leading to a decrease in orders. Despite revenue pressures and ongoing pricing challenges, Agilent benefited from significant cost-saving measures, including ongoing restructuring efforts that resulted in substantial workforce reductions. The adoption of new accounting standards, particularly SFAS No. 142, also impacted the reported financials by eliminating goodwill amortization, which helped to reduce the reported net loss. The company's balance sheet shows a decrease in cash and cash equivalents to $1.53 billion from $1.84 billion, reflecting cash used in operating activities, largely due to restructuring costs. While the company is undergoing significant restructuring, its liquidity position is considered sufficient for the next twelve months. However, recent credit rating downgrades by Moody's and Standard & Poor's indicate increased financial risk, though they do not currently have an immediate material impact on liquidity. Investors should monitor the effectiveness of cost-cutting measures and the pace of market recovery across Agilent's key segments.

Key Highlights

  • 1Net loss for the quarter was $146 million ($0.31/share), an improvement from $253 million ($0.55/share) in the prior year's quarter.
  • 2Total net revenue remained flat at $1.47 billion, with mixed performance across segments.
  • 3Orders declined 4% year-over-year, reflecting continued weakness in key markets like telecommunications and semiconductors.
  • 4Significant restructuring efforts continued, with 11,700 employees reduced by the end of the quarter, aiming to reduce quarterly costs.
  • 5Adoption of SFAS No. 142 resulted in a $268 million goodwill impairment charge and eliminated future goodwill amortization, positively impacting reported net loss.
  • 6Cash and cash equivalents decreased to $1.53 billion, with operating activities consuming $282 million primarily due to restructuring payments.
  • 7Credit ratings were downgraded by Moody's and Standard & Poor's to 'speculative grade' (BB) with a negative outlook.

Frequently Asked Questions

Agilent Technologies reported a net loss of $146 million ($0.31 per share) for the quarter ended April 30, 2003, which is an improvement compared to a net loss of $253 million ($0.55 per share) in the same period last year. Total net revenue remained relatively flat at $1.47 billion. The company is actively managing costs through restructuring initiatives while facing ongoing market pressures.

The company has undertaken significant restructuring, reducing its workforce by approximately 11,700 employees to date, which is reflected in substantial restructuring charges but expected to yield future cost savings. The adoption of SFAS No. 142, effective November 1, 2002, eliminated goodwill amortization and included a one-time goodwill impairment charge of $268 million. While the impairment charge impacted earnings in the prior period, the cessation of amortization benefits the current reported net loss.

Agilent's cash and cash equivalents stood at $1.53 billion as of April 30, 2003, a decrease from the previous period. The company used cash in operations primarily for restructuring payments. Management believes current liquidity is sufficient for the next twelve months. However, recent downgrades to 'speculative grade' by Moody's and S&P, with a negative outlook, indicate increased financial risk and could lead to higher borrowing costs if the company needs to raise debt in the future. Currently, there are no outstanding credit facilities, and no immediate impact on liquidity is expected.

Revenue was flat overall, but segment performance varied. The Test and Measurement segment saw declining orders and revenue pressures. The Semiconductor Products segment experienced order declines, partly due to shifts in customer demand and pricing pressures, though new product introductions offer some hope. The Automated Test segment showed a rebound in orders but faced cost pressures. The Life Sciences and Chemical Analysis segment maintained stable revenue and earnings. The company anticipates no material change in overall demand in the near term and continues to invest in R&D while focusing on cost reduction.