10-QPeriod: Q2 FY2007

AGILENT TECHNOLOGIES, INC. Quarterly Report for Q2 Ended Apr 30, 2007

Filed June 5, 2007For Securities:A

Summary

Agilent Technologies, Inc. reported solid financial results for the quarter ended April 30, 2007, with total net revenue of $1.32 billion, an increase of 7% year-over-year. Income from continuing operations was $123 million, or $0.30 per diluted share. The company experienced strong order growth, up 10%, driven particularly by its Bio-analytical Measurement segment which saw 14% order growth and 15% revenue growth. The Electronic Measurement segment showed a more modest 3% revenue increase, though orders were up 8%, indicating potential stabilization in some markets like wireless manufacturing test. The company generated $395 million in operating cash flow for the first six months of the fiscal year, a significant improvement from the prior year. Agilent also announced a definitive agreement to acquire Stratagene Corporation for approximately $250 million, strengthening its position in the life sciences sector, and secured a new $300 million unsecured credit facility.

Key Highlights

  • 1Total net revenue increased by 7% to $1.32 billion for the three months ended April 30, 2007.
  • 2Income from continuing operations was $123 million, with diluted EPS of $0.30.
  • 3Orders grew by 10% year-over-year, with Bio-analytical Measurement showing particularly strong growth of 14%.
  • 4The Bio-analytical Measurement segment revenues increased by 15% compared to the prior year.
  • 5The Electronic Measurement segment saw revenue growth of 3% and orders grew by 8%.
  • 6Operating cash flow for the first six months was $395 million, up significantly from $127 million in the prior year.
  • 7Agilent signed an agreement to acquire Stratagene Corporation for approximately $250 million, subject to closing conditions.
  • 8A new $300 million unsecured credit facility was established.

Frequently Asked Questions

Revenue growth was driven by both the Bio-analytical Measurement segment, which saw strong demand across its instruments, consumables, and services, and the Electronic Measurement segment, with positive contributions from general purpose test solutions and a stabilization in the wireless manufacturing test market. Currency fluctuations also contributed positively to revenue growth.

Agilent demonstrated strong operating cash flow generation, with $395 million in the first six months of fiscal 2007, a significant increase compared to $127 million in the same period of the prior year. This improvement was attributed to higher net operating income and reduced disbursements for restructuring activities, lower tax payments, and decreased contributions to defined benefit plans.

The planned acquisition of Stratagene Corporation for approximately $250 million is expected to enhance Agilent's capabilities in the life sciences sector. Stratagene specializes in developing, manufacturing, and marketing specialized life science research and diagnostic products, aligning with Agilent's focus on bio-analytical measurement solutions.

The company is subject to an ongoing IRS audit for U.S. federal income tax returns from 2000-2002, with the IRS proposing significant increases in taxable income. Agilent believes these claims are inconsistent with applicable tax laws and intends to contest them vigorously, but an adverse outcome could materially affect financial results. Additionally, a securities class action lawsuit related to the IPO is ongoing, though Agilent believes the likelihood of material payment is remote.