10-QPeriod: Q3 FY2003

AGILENT TECHNOLOGIES, INC. Quarterly Report for Q3 Ended Jul 31, 2003

Filed September 9, 2003For Securities:A

Summary

Agilent Technologies, Inc. reported a significant net loss of $1.56 billion for the third quarter of fiscal year 2003, a substantial increase from the prior year's loss of $228 million. This widened loss is largely attributable to a $1.4 billion non-cash charge to establish a valuation allowance against deferred tax assets. Despite this, the company saw an 8% increase in total net revenue to $1.50 billion for the quarter, driven by growth in product and service revenues, with notable increases in Europe and Asia Pacific. Total costs and expenses decreased year-over-year, primarily due to ongoing restructuring efforts which have reduced the workforce by approximately 14,000 employees since inception. The company's liquidity remains a key focus, with cash and cash equivalents decreasing to $1.43 billion. While operational cash flow was negative, the company believes its current cash position is sufficient to meet its obligations for the next twelve months. Investors should note the ongoing strategic shifts, including the reporting of the Automated Test segment as a separate entity and the continued focus on cost management and operational efficiency amidst challenging market conditions.

Key Highlights

  • 1Reported a net loss of $1.56 billion ($3.28 per share) for the third quarter of fiscal 2003, compared to a net loss of $228 million ($0.49 per share) in the prior year.
  • 2Recorded a significant $1.4 billion non-cash charge in the third quarter of 2003 to establish a valuation allowance against net deferred tax assets.
  • 3Total net revenue increased by 8% to $1.50 billion for the third quarter of fiscal 2003, compared to $1.39 billion in the prior year.
  • 4Restructuring efforts have led to a significant workforce reduction of approximately 14,000 employees.
  • 5Cash and cash equivalents decreased to $1.43 billion as of July 31, 2003, from $1.84 billion as of October 31, 2002.
  • 6The company continues to see revenue growth in Europe and Asia Pacific, while revenue in the Americas declined.
  • 7The Automated Test segment returned to profitability in the third quarter of fiscal 2003.

Frequently Asked Questions

The primary reason for the substantial increase in net loss is a $1.4 billion non-cash charge recorded to establish a valuation allowance against net deferred tax assets, in accordance with SFAS No. 109. This reflects the company's assessment that it is unlikely to realize these deferred tax assets due to cumulative losses in certain jurisdictions.

Agilent is actively pursuing cost reduction through multiple restructuring plans initiated in 2001, 2002, and 2003. These plans involve significant workforce reductions (approximately 14,000 employees to date), consolidation of facilities, and operational efficiencies aimed at achieving a lower quarterly operating cost structure. These efforts have led to a decrease in total costs and expenses compared to the prior year.

As of July 31, 2003, Agilent Technologies had $1.43 billion in cash and cash equivalents. While this represents a decrease from the prior fiscal year-end, the company believes its current cash and other financing capabilities are sufficient to meet its working capital, capital expenditure, and other liquidity needs for the next twelve months. However, the company did experience negative cash flow from operations during the nine months ended July 31, 2003, partly due to restructuring payments.

Agilent adopted several new accounting pronouncements, including SFAS No. 144, SFAS No. 146, FIN 45, FIN 46, and SFAS No. 148. Notably, the adoption of SFAS No. 142 in the prior year led to the cessation of goodwill amortization, which reduced expenses. The establishment of the $1.4 billion valuation allowance for deferred tax assets in the current quarter is a significant event impacting the income tax provision.