10-QPeriod: Q2 FY2008

AGILENT TECHNOLOGIES, INC. Quarterly Report for Q2 Ended Apr 30, 2008

Filed June 5, 2008For Securities:A

Summary

Agilent Technologies, Inc. reported a solid second quarter of fiscal year 2008, with net revenue increasing by 10% to $1.46 billion and net income rising to $173 million ($0.47 per diluted share), up from $123 million ($0.30 per diluted share) in the prior year's comparable period. This growth was driven by strong performance in the bio-analytical measurement segment, which saw revenue increase by 20%, and continued resilience in the electronic measurement segment, with revenue up 5%. Both segments benefited from acquisitions and favorable currency movements. Operationally, the company managed its expenses effectively, leading to a 3 percentage point improvement in operating margins. While cash from operations decreased year-over-year, largely due to higher tax payments related to intellectual property transfers, the company maintained a strong liquidity position. A significant development during the quarter was the acceleration of a $1.5 billion repurchase obligation for its World Trade subsidiary, due in July 2008, which the company is evaluating financing options for. Investors should monitor the company's execution on its growth strategies and its ability to manage the upcoming repurchase obligation.

Key Highlights

  • 1Total net revenue increased by 10% to $1.46 billion for the quarter ended April 30, 2008.
  • 2Net income rose to $173 million ($0.47 per diluted share) from $123 million ($0.30 per diluted share) in the prior year's quarter.
  • 3Bio-analytical measurement segment revenue grew by 20%, showing strong demand in life sciences and chemical analysis.
  • 4Electronic measurement segment revenue increased by 5%, driven by communications test and aerospace/defense markets.
  • 5Operating margins improved by 3 percentage points to 13.1%, reflecting effective cost management.
  • 6The company is facing a $1.5 billion repurchase obligation due in July 2008 for its World Trade subsidiary, for which financing options are being evaluated.
  • 7Cash from operating activities decreased to $329 million for the six months ended April 30, 2008, primarily due to higher tax payments.

Frequently Asked Questions

For the three months ended April 30, 2008, Agilent reported total net revenue of $1.456 billion, an increase of 10% compared to the prior year. Net income was $173 million, or $0.47 per diluted share, compared to $123 million, or $0.30 per diluted share, in the same period of 2007. Income from operations was $191 million.

The Bio-analytical Measurement segment showed strong growth, with net revenue increasing by 20% to $556 million. The Electronic Measurement segment also performed well, with net revenue up 5% to $900 million. Both segments benefited from acquisitions and favorable currency movements.

A significant upcoming obligation is a $1.5 billion repurchase obligation for its World Trade subsidiary, accelerated to July 16, 2008. The company is exploring financing options for this, which could involve repatriating overseas cash (potentially incurring tax liabilities) or securing alternative financing, both of which could have an adverse financial impact. Additionally, the company is still undergoing an IRS audit for fiscal years 2000-2002, with a proposed tax deficiency of approximately $405 million plus penalties and interest, though Agilent believes it has strong defenses against this claim.

Net cash provided by operating activities for the six months ended April 30, 2008, was $329 million, a decrease from $395 million in the same period of 2007. This reduction was primarily attributed to higher tax payments related to the transfer of intellectual property between affiliated entities.