Agilent Technologies Inc A
Q3 2012 Earnings Call Transcript

Transcript Call Date 08/15/2012

Operator: Good day, ladies and gentlemen, and welcome to the Third Quarter 2012 Agilent Technologies Incorporated Earnings Conference Call. My name is Karris, and I will be your coordinator for today. At this time, all participants are on a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this call is being recorded for replay purposes.

I would now like to hand the call over to your host for today, Ms. Alicia Rodriguez, Vice President of Investor Relations. Please proceed.

Alicia Rodriguez - VP, IR: Thank you and welcome everyone to Agilent's third quarter conference call for fiscal year 2012. With me are Agilent's President and CEO, Bill Sullivan; as well as Senior Vice President and CFO, Didier Hirsch. Joining in the Q&A after Didier's comments will be Agilent’s Chief Operating Officer, Ron Nersesian, and the Presidents of our Electronic Measurement, Life Sciences, and Chemical Analysis groups, Guy Sene, Nick Roelofs, and Mike McMullen. Also joining is Lars Holmkvist, President and CEO of Dako.

You can find the press release and information to supplement today's discussion on our website at While there, please click on the link for 'Financial Results', where you will find revenue breakout, historical financials for Agilent's operations, and an investor presentation. We will also post a copy of the prepared remarks following this call.

For any non-GAAP financial measures, you will find the most directly comparable GAAP financial metrics and reconciliations on our website. We will make forward-looking statements about the financial performance of the Company. These statements are subject to risks and uncertainties, and are only valid as of today. The Company assumes no obligation to update them. Please look at the Company's recent SEC filings for a more complete picture of our risks and other factors.

Now, I'd like to turn the call over to Bill.

William P. Sullivan - President and CEO: Thanks Alicia, and hello everyone. Agilent's Q3 orders were down 1%, and Q3 revenues were up 2% over last year. Non-GAAP EPS was $0.79 per share and operating margin was 20.3%. Agilent's performance in the fiscal third quarter did not meet our revenue and EPS guidance. This was due to a softening of shippable orders as well as a much higher than normal push-outs of delivery from our customers at the end of the quarter. While we are not seeing outright order cancellations, we're seeing all the classic signs of a slowdown. Deals are taking longer to close and customers delaying shipments. We felt the full effect of this phenomenon in July, the last month of Agilent’s third fiscal quarter.

The biggest headwind was in the aerospace and defense sector, where revenue was down 11% year-over-year. While U.S. government spending was stable, it was offset by a decline in defense contract business. We would normally see an uptick at the end of the year, but we expect Q4 to be lower than normal due to fears of automatic spending cuts.

The second headwind was in the industrial segment, which declined 10 % amid deteriorating economic conditions. We saw more conservative demand from our customers and distribution channels across the industrial markets. A third headwind was in the environmental markets, which declined 6% amid lower government spending. Finally, academic and government research was down 6%, while we saw continued softening due to budget concerns.

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