Agilent Technologies. December 1, 2009 President and General Manager. Ron Nersesian. The Phoenician Electronic Measurement Group Scottsdale, AZ

Transcription

1 Agilent Technologies Credit Suisse Annual Technology Conference Ron Nersesian December 1, 2009 President and General Manager The Phoenician Electronic Measurement Group Scottsdale, AZ

2 Safe Harbor Statement This presentation contains forward-looking statements (including, without limitation, statements regarding the enhancement of shareholder value, restructuring activities, the acquisition of Varian, Inc., and information and future guidance on our goals, priorities, orders, revenues, demand, growth opportunities, customer service and innovation plans, new product introductions, financial condition, earnings, liquidity, capital structure, operating performance, cost structure, cyclicality, the continued strengths and expected growth of the markets we sell into, operations, operating earnings, balance sheet models and our cash flow expectations) that involve risks and uncertainties that could cause results of Agilent to differ materially from management s current expectations. In addition, other risks that the company faces in running its operations include the ability to execute successfully through business cycles while it continues to implement cost reductions; the ability to meet and achieve the benefits of its cost-reduction goals and otherwise successfully adapt its cost structures to continuing changes in business conditions; ongoing competitive, pricing and gross margin pressures; the risk that our cost-cutting initiatives will impair our ability to develop products and remain competitive and to operate effectively; the impact of geopolitical uncertainties on our markets and our ability to conduct business; the ability to improve asset performance to adapt to changes in demand; d the ability to successfully introduce new products at the right time, price and mix, and other risks detailed in the company's filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q for the three-month period ended July 31, The company assumes no obligation to update the information in these presentations. These presentations and the Q&A that follows include non-gaap numbers. A presentation of the most directly comparable GAAP numbers and the reconciliations between the non-gaap and GAAP numbers can be found at under Financial Results and accompany this slide set. Page 2

3 Company Overview Primary Businesses FY09 Revenue: $2.4B FY09 Revenue: $0.9B FY09 Revenue: $1.2B Electronic Measurement Group LTM Revenue* $2.7B Chemical Analysis LTM Revenue* Group $1.1B Life Sciences LTM Revenue* Group $1.0B above reflects new segmentation that will take effect in Q Currently Reported Segmentation (until new segmentation above reported in Q1 2010) Electronic Measurement FY09 Revenue: $2.2B Semi & Board Test: $0.2B to be combined under electronic measurement Bio-Analytical Measurement FY09 Revenue: $2.1B to be reported separately as life sciences and chemical analysis Page 3

4 Agilent s Q409 Business Mix Balanced portfolio reduces volatility End Markets Multi-Segment Global Reach Balanced Exposure graphs represent revenue distribution Page 4

5 Major Market Drivers and Opportunities Created Market Drivers Electronic M Measurement Page 5 Communications People want to communicate more information; from anywhere! Homeland Security Threat of terrorism is real and not going away! Agilent Opportunity Lead in development of new 4G wireless testing solutions Applying world-class measurement technology to operational surveillance Life Sciences Human Health and Aging Populations Leverage our broad portfolio of People are looking for faster, more proven technologies to provide affordable, and targeted disease & drug application solutions throughout the discoveries Life Sciences research and drug g discovery process Chemical Chemical Analysis Analysis Rising Standards of Living People are demanding that the food they eat, products they use, water they drink, and air they breathe is safe. Applying market leading technology, application solutions, solutions and global expertise to the world s food safety, environmental, forensic and petrochemical test challenges

6 Electronic Measurement 4-Point Strategy R&D for Technology Leadership Clear Performance Differentiation Value Pricing Technology Leadership in High-End Markets Differentiate through Application Solutions Application Expertise and Solutions Wireless Standards Digital Standards Wireline Aerospace/Defense Education Innovate for Cost Leadership Competitive in Mainstream Markets Expand in Adjacent Markets Operational Surveillance Just Enough Market Share Leadership RF/uW Installation & Maintenance Nanotechnology Page 6

7 Agilent s Commitment Deliver performance consistent with Agilent s Operating Model Agilent Operating Model 20% ROIC on average across the cycle 30-40% operating profit incremental/decremental Operating cash flow positive at every point in the cycle Management incentives aligned with operating model Take additional action where automatic flexibility not enough Page 7

8 Q409 Summary of Results* Strong top and bottom line beat; guided to above-consensus Q1 Orders momentum continues: stronger than seasonal sequential order growth at 19%; healthy book-to-bill at 1.09 Beat expectations: Q4 top line beat consensus; Q4 EPS came in $0.09 above consensus; guided to above-consensus Q1 revenue and EPS Margins expanding: Restructuring on track, gross margins and operating margins expanding Strong cash generation & working capital management: generated $208M in cash from operations, 18% ROIC Market strength: Life Sciences: Academic & Government; Chemical Analysis: Food Safety, China; Electronic Measurement: General Purpose, Aerospace & Defense Market weakness: Applied markets, Communications end markets *presented on a non-gaap basis, a reconciliation to the closest GAAP equivalents has been provided Page 8

9 FY10 - Positioned for Growth; Operating Discipline Remains Agilent Operating Model rapid response to economic headwinds Bio-Analytical Measurement positioned for growth Electronic Measurement Group (inc. Semi/Board Test) Focus on R&D, restructure to achieve 12% operating margin at $2.4B in revenue (30% below FY08) Varian Acquisition* execute on integration plan post-close; protect sources of value *not yet closed, subject to regulatory approval and other closing conditions Page 9

10 Agilent Technologies Credit Suisse Annual Technology Conference Ron Nersesian December 1, 2009 President and General Manager The Phoenician Electronic Measurement Group Scottsdale, AZ

11 Page 11 Appendix

12 Summary of Agilent Restructuring Programs on track to deliver $525 million in annualized savings Announced Restructuring Temps elimination, targeted restructuring (ann. 12/17/08) Exited inspection business, restructure Global Infrastructure Organization (GIO) (ann. 2/17/09) Annual Full Benefit Cost People Savings Timing Est. $65M $55M 500 Q $150M $100M 600 Q Electronic Measurement & Semi-Board Test restructuring (ann. 3/26/09) Structural Savings $310M $160M 2,700 $525M $315M 3,800 Q Key Factors Affecting Go-Forward Expense Run Rate Roughly one-third of $525M in structural savings yet to be realized Interest expense related to $750M bond offering Employees returned to full pay on 11/1/09 (+$80M/year) AVP* and merit pay scale with performance *Agilent variable pay Page 12

13 AGILENT TECHNOLOGIES, INC. NET CASH DETAILS (IN MILLIONS) PRELIMINARY Year over Year Sequential Q4'09 Q4'08 Q3'09 Delta % Delta % Cash and cash equivalents $ 2,479 $ 1,405 $ 1,479 Restricted cash and cash equivalents 1,566 1,582 1,568 Investments - debt securities Long-term debt (1,516) (1,514) (1,515) Senior notes (1,350) (600) (600) Total Net Cash $ 1,215 $ 969 $ 981 $ % $ % The preliminary reconciliation of net cash is estimated based on our current information.

14 AGILENT TECHNOLOGIES, INC. RECONCILIATION OF ROIC (IN MILLIONS) PRELIMINARY Agilent Numerator: Q4'09 Q4'08 Adjusted income from operations $ 150 $ 271 Less: Taxes and Other (income)/expense Agilent return (a) Agilent return annualized $ 496 $ 916 Denominator: Agilent assets (b) $ 3,566 $ 3,908 Less: Net current liabilities (c) Invested capital $ 2,639 $ 2,910 Average invested capital $ 2,683 $ 2,949 ROIC 18% 31% ROIC calculation:(annualized current quarter segment return)/(average of the two most recent quarter-end balances of Agilent Invested Capital) (a) Agilent return is equal to adjusted net income from continuing operations minus net interest income after tax. Please see "Adjusted Net Income and EPS Reconciliations" for a reconciliation of adjusted net income from continuing operations to GAAP income from continuing operations. (b) Assets consist of inventory, accounts receivable, property plant and equipment, gross goodwill and other intangibles, deferred taxes and allocated corporate assets. (c) Includes accounts payable, employee compensation and benefits, other accrued liabilities and allocated corporate liabilities. Historical amounts were reclassified to conform with current period presentation. Return on invested capital (ROIC) is a non-gaap measure that management believes provides useful supplemental information for management and the investor. ROIC is a tool by which we track how much value we are creating for our shareholders. Management uses ROIC as a performance measure for our businesses, and our senior managers' compensation is linked to ROIC improvements as well as other performance criteria. We believe that ROIC provides our management with a means to analyze and improve their business, measuring segment profitability in relation to net asset investments. We acknowledge that ROIC may not be calculated the same way by every company. We compensate for this limitation by monitoring and providing to the reader a full GAAP income statement and balance sheet. 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 reconciliation of ROIC is estimated based on our current information.

15 AGILENT TECHNOLOGIES, INC RECONCILIATION FROM GAAP TO NON-GAAP THREE MONTHS ENDED OCTOBER 31, 2009 (Unaudited) Non-GAAP Adjustments Acceleration of Share-Based Restructuring Compensation Patent and Other Asset Business Expense Related to Intangible Pension Litigation Litigation Adjustment for (In millions, except per share amounts) GAAP Related Costs Impairments Disposals Worforce Reduction Amortization Curtailment Judgement Settlement Other Taxes Non-GAAP Orders Change Year Over Year -11% $ 1,274 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 1,274-11% Change Year Over Year Net revenue Change Year Over Year -21% $ 1,167 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 1,167-21% Change Year Over Year Costs and expenses: Cost of products and services Gross Margin 54.3% 533 (8) (9) % Gross Margin Research and development As a % of Revenue 12.9% 150 (4) (1) (2) % As a % of Revenue Selling, general and administrative As a % of Revenue 35.4% 413 (38) (11) (1) (1) (9) % As a % of Revenue Total costs and expenses 1,096 (50) (10) - (1) (10) (11) - 1,017 Income from operations Operating Margin 6.1% (3) % Operating Margin Other income (expense), net (31) (10) Income before taxes (31) 1 10 (3) Provision (benefit) for taxes Tax rate (incl. Valuation Tax rate (incl. Valuation Allowance) 68% (25) 29 21% Allowance) Net income Net Margin 2.1% $ 25 $ 50 $ 10 $ (31) $ 1 $ 10 $ (3) $ - $ 13 $ 11 $ 25 $ % Net Margin Net income per share - Basic and Diluted: Basic $ 0.07 $ 0.14 $ 0.03 $ (0.09) $ - $ 0.03 $ (0.01) $ - $ 0.04 $ 0.03 $ 0.08 $ 0.32 Diluted $ 0.07 $ 0.14 $ 0.03 $ (0.09) $ - $ 0.03 $ (0.01) $ - $ 0.04 $ 0.03 $ 0.08 $ 0.32 Weighted average shares used in computing net income (loss) per share: Basic Diluted The preliminary reconciliation from GAAP to Non-GAAP net income is estimated based on our current information.