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Agilent Technologies Reports Fourth Quarter 2008 Results


SANTA CLARA, Calif.- Agilent Technologies Inc. (NYSE: A) today reported revenues of $1.48 billion for the fourth fiscal quarter ended Oct. 31, 2008, 2 percent above one year ago. Fourth quarter GAAP net income was $231 million, or $0.64 per diluted share. Last year’s fourth quarter GAAP net income was $180 million, or $0.46 per share.

Excluding non-cash amortization and impairment charges, and certain tax benefits, Agilent reported fourth quarter adjusted net income(1) of $223 million, or $0.62 per share. On a comparable basis, the company earned $178 million, or $0.46 per share, one year ago.

“The world has clearly changed in the past three months,” said Bill Sullivan, Agilent president and chief executive officer. “We are pleased to have performed well in a very dynamic and difficult economic environment. Fourth quarter revenues came in below the low end of our expectations because of weaker than expected Electronic Measurement markets. But, we were able to adjust to rapidly changing conditions, and our adjusted net income(1) came in at the high end of our guidance.”

Fourth quarter adjusted net income(1) of $0.62 per share was 34 percent above one year ago compared with a 2 percent increase in revenues.

Organic revenue growth in the Americas was about 4 percent, and local currency revenues were about flat in Asia due to continued weakness in Japan. In Europe, organic revenues were down about 5 percent from one year ago.

Electronic Measurement markets weakened throughout the quarter, with orders down 10 percent from one year ago and revenues off 3 percent. Semiconductor-related markets remained particularly weak. Bio-Analytical markets were more robust, with orders up 8 percent and revenues up 10 percent, and were particularly strong in Asia.

Fourth quarter Return on Invested Capital(2) was 31 percent, a new high and six points above last year. Despite the weakening environment, working capital ratios were stable compared with last year’s record performance. Cash generated from operations during the quarter was $258 million. During the period, the company repurchased $251 million of its common stock and ended the fiscal year with net cash of $969 million.

Looking to the first quarter of fiscal 2009, Sullivan noted that the full impact of the global financial meltdown on the world economy was far from clear. “Our planning is based on the assumption that an economic downturn in much of the world will continue through mid-2009, and that no geographies or markets will be entirely immune from its impact.”

Given these trends, Sullivan said the company expected fiscal first quarter revenues in the range of $1.34 billion to $1.39 billion, down 4 percent to flat compared with last year. First quarter adjusted net income is expected to be in the range of $0.34 to $0.38 per share, down 6 percent to up 6 percent from one year ago. (3)

Looking further ahead, Sullivan emphasized the uncertainty in the outlook, but said the company expected 2009 adjusted earnings per share(3) to be roughly flat with 2008 results on revenues that are flat to down 5 percent from this year.

“Regardless of the economic environment, we remain committed to creating value for our customers as the world’s premier measurement company, and to demonstrating the flexibility and strength of Agilent’s operating model throughout the economic cycle,” he said. Sullivan noted that the company would provide more details about 2009 expectations at Agilent’s annual analyst meeting scheduled for Dec. 9, 2008, in New York City.

Bio-Analytical Measurement orders of $617 million were up 8 percent during the fourth quarter from one year ago, with severe weakness in semiconductor-related materials science markets tempering what otherwise would have been 12 percent orders growth from one year ago. Revenues of $616 million were up 10 percent from last year, and up 13 percent excluding the semiconductor-related business, with organic growth of 5 percent.

Revenues were up double-digit percentages in both Life Sciences and traditional Chemical Analysis. Geographically, revenues were up 12 percent in the Americas, 2 percent in Europe, and 20 percent in Asia, with China particularly strong. There was strength across the major platforms - Gas Chromatography (GCs), Liquid Chromatography (LCs), and Liquid Chromatography / Mass Spectroscopy (LC/MS) - and consumables were up more than 10 percent from one year ago.

Life Sciences revenues of $276 million were up 17 percent from one year ago, and up 10 percent excluding acquisitions. Spending by Pharma and Biotech customers was up 15 percent despite continued weakness in the Americas and parts of Europe. Sales to the academic and government markets were 22 percent above one year ago, with particular strength in microarrays, which were up over 40 percent.

Chemical Analysis revenues of $340 million were up 5 percent from last year, with weakness in semiconductor-related materials science markets tempering what otherwise would have been 10 percent growth in Chemical Analysis revenues. Demand from petrochemicals remained quite robust, up 15 percent, and food safety was 14 percent ahead of one year ago. From a platform perspective, demand was particularly strong for the new 6460 Triple Quad LC/MS.

Fourth quarter segment income from operations of $130 million was $24 million above last year on a $58 million increase in revenues, an attractive 41 percent incremental. Gross margins were up about 1 point from last year, while operating margins, at 21 percent, were 2 points higher than one year ago. Segment Return On Invested Capital(2) also improved 2 points to 31 percent.

Fourth quarter Electronic Measurement orders of $821 million were 10 percent below last year, with particular weakness in semiconductor, electronic manufacturing, and network monitoring. Revenues of $865 million were down 3 percent, with the Americas up 2 percent, Europe down 2 percent, Japan off 15 percent and other Asia down 3 percent.

General Purpose Test revenues of $499 million were down 6 percent from last year because of a nearly 50 percent decline in the semiconductor-related parametric test business. Aerospace / defense and other general purpose markets were about flat with last year. Communications Test revenues of $366 million were up 3 percent, with network monitoring down 6 percent, wireless manufacturing down 2 percent, and other communications markets up 8 percent from one year ago.

Fourth quarter segment income from operations of $142 million was up $31 million from last year despite a $23 million drop in revenues. Gross margins were improved about 1 point from last year, while operating expenses dropped the equivalent of three points, resulting in an operating margin on 16 percent, 4 points above one year ago. Higher profitability and aggressive asset management enabled segment ROIC(2) to improve 10 points to 32 percent.


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