10-QPeriod: Q1 FY2015

AGILENT TECHNOLOGIES, INC. Quarterly Report for Q1 Ended Jan 31, 2015

Filed March 10, 2015For Securities:A

Summary

Agilent Technologies, Inc. reported financial results for the first quarter ended January 31, 2015, which were significantly impacted by the separation of its electronic measurement business, Keysight Technologies, Inc., completed on November 1, 2014. This separation led to Keysight's results being classified as discontinued operations. For the quarter, Agilent saw a modest 2% increase in total net revenue to $1,026 million, compared to $1,008 million in the prior year. However, net income from continuing operations decreased to $102 million ($0.30 per diluted share) from $121 million ($0.36 per diluted share) in the prior year. This decrease was partly due to separation-related expenses and transformational charges. The company also noted an unfavorable impact from foreign currency movements. The company has reorganized into three new reportable segments: Life Sciences and Applied Markets, Diagnostics and Genomics, and Agilent CrossLab. While Life Sciences and Applied Markets revenue grew 2%, Diagnostics and Genomics revenue declined 6% due to manufacturing issues. Agilent CrossLab showed a 5% revenue increase. Investors should note the ongoing impact of currency fluctuations and the successful completion of the Keysight separation as key themes for the period.

Financial Highlights

56 data points
Beta

Revenue

$1.03B

50.0% Gross Margin

Net Income

$63.00M

6.1% Net Margin

EPS (Diluted)

$0.19

Total Assets

$7.52B

Cash & Equivalents

$2.12B

Free Cash Flow

-$52.00M

Financial Statements
Beta
Revenue$1.03B
Cost of Revenue$513.00M
Gross Profit$513.00M
R&D Expenses$88.00M
SG&A Expenses$310.00M
Operating Expenses$911.00M
Operating Income$115.00M
Interest Expense$16.00M
Net Income$63.00M
EPS (Basic)$0.19
EPS (Diluted)$0.19
Shares Outstanding (Basic)336.00M
Shares Outstanding (Diluted)338.00M

Key Highlights

  • 1Total net revenue increased 2% to $1,026 million, primarily driven by growth in the Life Sciences and Applied Markets and Agilent CrossLab segments.
  • 2Net income from continuing operations decreased to $102 million from $121 million in the prior year, impacted by separation and restructuring costs.
  • 3The company completed the spin-off of Keysight Technologies, Inc. on November 1, 2014, with Keysight's results now reported as discontinued operations.
  • 4The Diagnostics and Genomics segment experienced a 6% revenue decline due to manufacturing issues, though efforts to resolve these were underway.
  • 5Agilent announced a new organizational structure with three reportable segments: Life Sciences and Applied Markets, Diagnostics and Genomics, and Agilent CrossLab.
  • 6Cash flow from operations turned negative at ($20 million) for the quarter, impacted by separation-related expenses and tax payments.
  • 7The company repurchased $6 million of its stock during the quarter under its share repurchase program.

Frequently Asked Questions

The separation of Keysight Technologies, Inc. on November 1, 2014, resulted in Keysight's historical financial results being classified as discontinued operations. This significantly impacted Agilent's balance sheet and cash flow statements, particularly in the current period, due to separation costs and the transfer of assets and liabilities. While revenue from continuing operations saw a modest increase, the net income from continuing operations decreased year-over-year.

Agilent reorganized into three new segments. The Life Sciences and Applied Markets segment saw a 2% revenue increase, driven by growth in most end-markets. The Diagnostics and Genomics segment experienced a 6% revenue decrease, attributed to manufacturing issues, though these were being addressed. The Agilent CrossLab segment, focused on consumables and services, grew revenue by 5%, led by strong performance in pharmaceutical, biotechnology, and food markets.

Agilent expects the strong U.S. dollar to continue to negatively impact its performance in the near future. However, the company remains confident that its focus on providing value-driven solutions and its strategic positioning within target market segments will help mitigate these currency headwinds. The company plans to focus on organic growth through innovative product offerings and expanding its services and consumables portfolio.

The company experienced a net cash outflow of $20 million from operating activities during the quarter, a significant change from the $194 million provided in the prior year. This was primarily due to separation-related expenses, transformational and restructuring expenses, and additional income tax payments related to the separation of Keysight. Investing activities used $31 million, while financing activities showed a substantial outflow of $828 million, largely due to cash transferred to Keysight during the separation.