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Agilent Technologies Announces Adjustment To Second-Quarter 2014 GAAP Net Income

Stocks in this article: A

Agilent Technologies Inc. (NYSE:A) today announced that the company’s second-quarter 2014 GAAP net income was $139 million, or $0.41 per share, a change from the second-quarter GAAP net income of $150 million, or $0.45 per share, previously announced May 14, 2014.

As disclosed in the company’s quarterly report on Form 10-Q filed today, this change was made as a result of an out-of-period adjustment for tax expense. There have been no changes to the second-quarter 2014 non-GAAP net income of $244 million, or $0.72 per share (1), previously announced by the company May 14.

About Agilent Technologies

Agilent Technologies Inc. (NYSE:A) is the world’s premier measurement company and a technology leader in chemical analysis, life sciences, diagnostics, electronics and communications. The company’s 20,600 employees serve customers in more than 100 countries. Agilent had revenues of $6.8 billion in fiscal 2013. Information about Agilent is available at www.agilent.com.

On Sept. 19, 2013, Agilent announced plans to separate into two publicly traded companies through a tax-free spinoff of its electronic measurement business. The new company is named Keysight Technologies, Inc. The separation is expected to be completed in early November 2014.

Additional information regarding financial results can be found at www.investor.agilent.com by selecting “Financial Results” in the “Financial Information” section.

(1) Non-GAAP net income and non-GAAP net income per share exclude primarily the impacts of acquisition and integration costs, pre-separation costs, transformation initiatives and restructuring costs, and non-cash intangibles amortization. Agilent also excludes any tax benefits that are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. A reconciliation between non-GAAP net income and GAAP net income is set forth in the attached table.

NOTE TO EDITORS: Further technology, corporate citizenship and executive news is available on the Agilent news site at www.agilent.com/go/news.

AGILENT TECHNOLOGIES, INC.
NON-GAAP NET INCOME AND DILUTED EPS RECONCILIATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
     
 
Three Months Ended
April 30,
2014  

Diluted EPS

 
GAAP Net income $ 139 $ 0.41
Non-GAAP adjustments:
Restructuring and other related costs
Asset impairments and write-downs
Intangible amortization 51 0.15
Transformational initiatives 8 0.02
Acquisition and integration costs 2 0.01
Pre-separation costs 41 0.12
Other 2 0.01
Adjustment for taxes (a)   1    
Non-GAAP Net income $ 244   $ 0.72
 
 
(a) The adjustment for taxes excludes tax benefits that management believes are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. For the three months ended April 30, 2014, management uses a non-GAAP effective tax rate of 16% that we believe to be indicative of on-going operations.
 
Historical amounts are reclassified to conform with current presentation.
 

We provide non-GAAP net income and non-GAAP net income per share amounts in order to provide meaningful supplemental information regarding our operational performance and our prospects for the future. These supplemental measures exclude, among other things, charges related to the amortization of intangibles, the impact of restructuring charges, acquisition and integration costs and pre-separation costs. Some of the exclusions, such as impairments, may be beyond the control of management. Further, some may be less predictable than revenue derived from our core businesses (the day to day business of selling our products and services). These reasons provide the basis for management's belief that the measures are useful.

 

Pre-separation costs include all incremental expenses incurred by Agilent in order to effect the separation, through the planned early November distribution date. They also include the cost of all the new FY14 hires required to operate two separate companies. The intent is to only include in non-GAAP expenses what would have been incurred if we had no plan to spin-off Keysight.

 
Our management uses non-GAAP measures to evaluate the performance of our core businesses, to estimate future core performance and to compensate employees. Since management finds this measure to be useful, we believe that our investors benefit from seeing our results “through the eyes” of management in addition to seeing our GAAP results. This information facilitates our management’s internal comparisons to our historical operating results as well as to the operating results of our competitors.
 
Our management recognizes that items such as amortization of intangibles and restructuring charges can have a material impact on our cash flows and/or our net income. Our GAAP financial statements including our statement of cash flows portray those effects. Although we believe it is useful for investors to see core performance free of special items, investors should understand that the excluded items are actual expenses that may impact the cash available to us for other uses. To gain a complete picture of all effects on the company’s profit and loss from any and all events, management does (and investors should) rely upon the GAAP income statement. The non-GAAP numbers focus instead upon the core business of the company, which is only a subset, albeit a critical one, of the company’s performance.
 
Readers are reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. They should be read in conjunction with the GAAP financial measures. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.
 
The preliminary non-GAAP net income and diluted EPS reconciliation is estimated based on our current information.




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