Agilent Technologies Reports First Quarter 2010 Results
- GAAP net income of $79 million, or $0.22 per share
- Non-GAAP earnings of $135 million, or $0.38 per share(1)
- Orders of $1.22 billion, up 9% from last year; revenue of $1.21 billion, up 4% from one year ago
- Restructuring actions to achieve $525 million of annualized savings nearly completed
- Second quarter non-GAAP earnings guidance of $0.38 - $0.42 per share compares to $0.13 one year ago(3)
- Full fiscal year 2010 revenues expected to rise roughly 10 percent, and non-GAAP earnings to be in the range of $1.65 - $1.70 per share.
Agilent Technologies Inc. today reported revenues of $1.21 billion for the first fiscal quarter ended Jan. 31, 2010, 4% above one year ago. First quarter GAAP net income was $79 million, or $0.22 per diluted share. Last year's first quarter GAAP net income was $64 million, or $0.18 per share.
During the first quarter, Agilent had restructuring and asset impairment charges of $48 million and $10 million of non-cash amortization. Excluding these items and $2 million of other net charges, Agilent reported first quarter adjusted net income of $135 million, or $0.38 per share. On a comparable basis, the company earned $72 million, or $0.20 per share, one year ago.
"The economic momentum Agilent began to see late last year continued in our fiscal first quarter," said Bill Sullivan, Agilent president and chief executive. "First quarter revenues of $1.21 billion were up sequentially for the second consecutive quarter, and were 4% above one year ago."
First quarter Electronic Measurement revenues were down 2% from one year ago, but orders were up 8%, with solid demand from industrial, computer and semiconductor. Chemical Analysis revenues were 13% above one year ago, while orders were up 12%. Life Sciences revenues were 10% ahead of last year, while orders were up 9% from one year ago.
"Non-GAAP earnings of $0.38 per share were well above our expectations," said Sullivan, "demonstrating the power of Agilent's operating model as our markets begin to recover. Our restructuring actions to lower Agilent's revenue breakeven by over half a billion dollars can also be clearly seen in this quarter's operating results. Early in the new upturn, we are already reporting mid-cycle operating margins of 15% and a 21% Return On Invested Capital(2)."
First quarter ROIC of 21% compared with 11% one year ago. Inventory Days On Hand improved by 19 days to 93, while Receivables Days Sales Outstanding, at 47, improved by two days. The company generated $30 million of cash from operations during the seasonally weak first quarter. It ended the quarter with net cash of $1.20 billion.
Looking ahead, Sullivan said, "It is still early in the new economic cycle to be confident of future prospects but our orders suggest that the momentum will continue at a moderate pace, with broadening of the recovery across most markets and geographies as the year unfolds.
"We expect our fiscal second quarter revenues to be about 12 - 15% above last year, while non-GAAP earnings(3) are expected to be in the range of $0.38 - $0.42 per share compared to $0.13 one year ago. For the full fiscal year 2010, we now expect Agilent stand-alone revenues to be up roughly 10% and non-GAAP earnings to be in the range of $1.65 - 1.70 per share."
During the quarter, Agilent announced it had received conditional antitrust clearance from the European Commission (EC) for Agilent's proposed acquisition of Varian Inc. The company is in the process of divesting certain assets in order to comply with the remedies required by the EC. Clearance by the U.S. Federal Trade Commission (FTC) is still pending, although we do not expect the FTC to seek additional remedies in markets beyond those committed to for the European Commission.
Segment Results
Chemical Analysis segment orders of $242 million were up 12% from one year ago and up 7% in local currency terms. Revenues of $244 million were 13% above last year and up 9% adjusted for the weaker U.S. dollar. Geographically, the Americas were down 3%, while Europe and Japan were up about 20% and other Asia jumped 23%. By market, growth was uniformly up double digits in food, petrochemical, environmental and other applied markets. By platform, GC/MS and ICP/MS both showed particular strength due to successful new product introductions.
First quarter segment income from operations of $67 million was $10 million above last year's results on a $28 million increase in revenues, an attractive 38% incremental. Gross margins were stable at 55%, while operating margin, at 27.5%, was 1 1/2 points higher than one year ago. Segment Return On Invested Capital(2) rose 15 points to 60%.
First quarter Life Sciences orders of $336 million were 9% above last year and were up 4% currency-adjusted. Revenues of $340 million were up 10% from one year ago, or 5% in local currency terms. Pharma and Biotech market revenues rose 8%, as did Academic and Government markets, while revenues from Food Testing were 22% above last year. Geographically, the Americas grew 3% and Europe was up 9%, while Asia jumped 25% above one year ago. By platform, both LCs and microarrays were particularly strong, up about 15% from one year ago.
First quarter segment income from operations of $55 million was $11 million above last year's results on a $31 million increase in revenues, an attractive 36% incremental. Gross margins were stable at 54%, while operating margin, at 16%, was up 2 points from one year ago. Segment Return On Invested Capital(2) rose 5 points to 21%.
First quarter Electronic Measurement orders of $642 million were 8% above one year ago, or up 6% in local currency terms, the first increase since early 2008. Revenues of $629 million were down 2% from last year. Industrial, computer and semiconductor market revenues of $426 million were up 13%. Communications revenues of $203 million were down 23% from one year ago due to continued weakness in wireless manufacturing handset test markets. Geographically, revenues were down 3% in the Americas and Europe, Japan was off 26% and other Asia was up 16% from last year.
First quarter segment profit of $58 million was $64 million above last year despite $12 million lower revenues, a reflection of the successful restructuring of this business. Gross margins rose by 3 points from last year to 57%, while the segment operating margin improved by 10 points to 9%. Segment ROIC(2) rose 13 points to 13%.
(1) Adjusted net income and adjusted net income per share are non-GAAP measures. Each of these measures is defined to exclude primarily the impacts of restructuring and asset impairment charges, transformation initiatives, non-cash intangibles amortization as well as disposals of businesses net of their tax effects. A reconciliation between adjusted net income and GAAP net income is set forth on page 4 of the attached tables along with additional information regarding the use of this non-GAAP measure.
(2) Return On Invested Capital is a non-GAAP measure and is defined as income (loss) from operations less other (income) expense and taxes, annualized, divided by the average of the two most recent quarter-end balances of assets less net current liabilities. The reconciliation of ROIC can be found on page 5 of the attached tables, along with additional information regarding the use of this non-GAAP measure.
(3) Adjusted net income per share as projected for Q210 and full fiscal year 2010 is a non-GAAP measure which excludes primarily the impacts of future restructuring and asset impairment charges and non-cash intangibles amortization. Most of these excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy. Therefore, no reconciliation to GAAP amounts has been provided. Future amortization of intangibles is expected to be approximately $10 million per quarter.
