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Agilent Technologies, Inc. (A)

F4Q2010 Earnings Call Transcript

November 12, 2010 8:30 am ET


Alicia Rodriguez – VP, IR

Bill Sullivan – President and CEO

Didier Hirsch – SVP and CFO

Nick Roelofs – SVP, Agilent and President, Life Sciences Group

Ron Nersesian – SVP, Agilent and President, Electronic Measurement Group

Mike McMullen – SVP, Agilent and President, Chemical Analysis Group


Jon Wood – Jefferies

Tony Butler – Barclays Capital

William Stein – Credit Suisse

Jon Groberg – Macquarie

Vijay [ph] – Deutsche Bank

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Anthony Luscri – JPMorgan

Mark Douglass – Longbow Research

Isaac Ro – Goldman Sachs



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Good day, ladies and gentlemen and welcome to the fourth quarter 2010 Agilent Technologies Incorporated earnings conference call. My name is Keisha and I will be your operator for today. At this time, all lines are on listen-only mode. We will conduct a question-and-answer session towards the end of this conference.

I’d now like to turn the conference over to your host for today, Ms. Alicia Rodriguez, Vice President of Investor Relations. Please proceed.

Alicia Rodriguez

Thank you, Keisha and welcome everyone to Agilent’s fourth quarter conference call for fiscal year 2010. With me are Agilent’s President and CEO, Bill Sullivan, as well as Senior Vice President and CFO, Didier Hirsch. Joining in our Q&A will be the Presidents of Agilent’s Electronic Measurement, Life Sciences, and Chemical Analysis Group’s Ron Nersesian, Nick Roelofs, and Mike McMullen.

After my comments, Bill will give his perspective on the quarter and the overall market environment. Didier will then follow with the review of financial results and after Didier’s comments, we will open the lines and take your questions.

In case you haven’t had a chance to review our press release, you can find it on our Web site at Please note that the business segment financial tables are in the schedules that accompanying the press release.

We are also providing further information to supplement today’s discussion. After you log on to our webcast module from our Web site, please click on the link for supporting material. There you will find additional information such as our revenue breakouts and historical financial information for Agilent’s continuing operations.

Also, in accordance with SEC Regulation G, if during this conference call we use any non-GAAP financial measures, you will find on our Web site the required reconciliation to the most directly comparable GAAP financial metric.

Additionally, I’d like to remind you that we will make forward-looking statements about the future financial performance of the company. These involve risks and uncertainties that could cause Agilent’s results to differ materially from management’s current expectations. As a result, we encourage you to look at the company’s most recent filings with the SEC to get a more complete picture of all the factors at work.

The forward-looking statements, including our guidance provided today during the call are only valid as of this date and the company assumes no obligation to update such statements as we move throughout the current quarter.

Now, let me turn the call over to Bill for his comments.

Bill Sullivan

Thanks, Alicia and hello everyone. Agilent’s latest results continue to build on the strong momentum that we have seen throughout fiscal 2010. There are three major themes that have emerged. One, we have successfully completed the transformation of Agilent. Two, the Varian integration is going exceedingly well. Three, we are benefiting from strong organic growth as a result of the regional sales support expansion and technology investments we have made.

Fourth quarter orders of $1.7 billion were up 32% year-over-year, while revenues of $1.6 billion were up 36% from a year ago. Note that these numbers include the results of the Varian acquisition. Without the Varian acquisition and recent divestitures, orders and revenues were up 23% and 26% respectively.

In addition to the top line growth, our Q4 non-GAAP earnings were more than double to $228 million or $0.65 per share from a year ago. Agilent’s fourth quarter revenue growth was strong across all regions. Excluding acquisitions and divestitures, the Americas were up 23% year-over-year, Europe was up 13% and Asia Pacific was up 38%.

On November 1, we successfully reached a major milestone in the integration of the Varian acquisition. This includes combining all Agilent and Varian legal entities and moving Varian employees to Agilent’s pay and benefits. Agilent and Varian now appears as one single company to our customers.

We now have one Web site, unified call centers, a combined field organization and a single service and support process for our customers. Quotations, orders and invoices are all common for Agilent and Varian products.

Moving forward, our priority is to continue to drive revenue and cost synergies, as well as to drive technology sharing between the divisions and business groups. We now believe that we will achieve $100 million in net savings. This is inclusive of $10 million of additional R&D we’re investing in Varian’s technologies as well as our increased investment in service and support. From a market perspective, our fourth quarter results saw continued strength in our key markets and geographies.

In our Chemical Analysis business, we saw sustained growth across all market segments. Q4 revenues of $389 million were up 73% over last year, up 17% excluding Varian. Operating margin, including Varian, was 22%. The energy and petrochemical markets continue to recover, while food and environmental markets remained strong around the world.

From a product perspective, our new product introduction of GC/MS, ICP-MS and GC Triple Quad continue to drive strong interest in growth in food and environmental applications and the 5975 Transportable MSD which was introduced to Pittcon is getting significant interest from government sector.

In our Life Science business, revenues of $431 million were up 35% over last year. Not including Varian in a high core divestiture, Life Science revenues hit an all-time high growing 17% compared to Q4 2009. Operating margin, including Varian, was 14%.

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