UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

~~FOR THE QUARTERLY PERIOD ENDED JANUARY~~For the quarterly period ended January 31, ~~2018~~2020

¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

~~FOR THE TRANSITION PERIOD FROM TO~~For transition period from to

~~COMMISSION FILE NUMBER:~~ Commission File Number: 001-15405

AGILENT TECHNOLOGIES, INC.

(~~EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)~~Exact Name of registrant as specified in its charter)



~~DELAWARE~~	Delaware			77-0518772
(State or other jurisdiction of			~~(IRS employer~~
incorporation or organization)		(IRS Employer Identification ~~no.~~No.)

~~5301 STEVENS CREEK BLVD.,~~
~~SANTA CLARA, CALIFORNIA~~		~~95051~~
~~(Address of principal executive offices)~~		~~(Zip Code)~~

5301 Stevens Creek Blvd.,

Santa Clara,California95051

(Address of principal executive offices)

Registrant’s telephone number, including area code: ~~(408) 345-8886~~(800)227-9770

Securities registered pursuant to Section 12(b) of the Act:



Title of each Class	Trading Symbol		Name of each Exchange on which registered
Common Stock, $0.01 par value		A		New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x☒ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filerx	☒		Accelerated filer¨
~~Non-accelerated filer~~ ¨ ☐		Non-accelerated filer	☐
Smaller reporting company¨
~~(do not check if a smaller reporting company)~~☐				Emerging growth company¨	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐No x☒

~~Indicate~~

As of February 27, 2020, the ~~number of~~registrant had 309,651,359 shares ~~outstanding of each of the issuer’s classes~~ of common stock, ~~as of the latest practicable date.~~



~~CLASS~~		~~OUTSTANDING AT FEBRUARY 28, 2018~~
~~COMMON STOCK, $0.01 PAR VALUE~~		~~322,476,579~~

$0.01 par value per share, outstanding.

AGILENT TECHNOLOGIES, INC.

TABLE OF CONTENTS



			Page Number
Part I.	Financial Information		3
	Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
		Condensed Consolidated Statement of Operations	3
		Condensed Consolidated Statement of Comprehensive Income (Loss)	4
		Condensed Consolidated Balance Sheet	5
		Condensed Consolidated Statement of Cash Flows	6
		~~Notes to~~ Condensed Consolidated ~~Financial Statements~~Statement of Equity	7
		~~Item 2.~~Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2532
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3743
	Item 4.	Controls and Procedures	3843
Part II.	Other Information		3944
	Item 1.	Legal Proceedings	3944
	Item 1A.	Risk Factors	3944
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5055
	Item 6.	Exhibits	5156
Signature			5257


PART I	— FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

AGILENT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(in millions, except per share amounts)

(Unaudited)


	Three Months Ended						Three Months Ended
	January 31,						January 31,
	2018			2017			2020			2019
Net revenue:
Products	$	930		$	815		$	1,023		$	980
Services and other	281			252			334			304
Total net revenue	1,211			1,067			1,357			1,284
Costs and expenses:
Cost of products	383			347			454			414
Cost of services and other	155			146			180			163
Total costs	538			493			634			577
Research and development	93			79			104			102
Selling, general and administrative	341			289			404			355
Total costs and expenses	972			861			1,142			1,034
Income from operations	239			206			215			250
Interest income	9			4			3			10
Interest expense	(20		)	(20		)	(20		)	(18		)
Other income (expense), net	5			3			21			6
Income before taxes	233			193			219			248
Provision for income taxes	553			25
Net income (loss)	$	(320	)	$	168
Provision (benefit) for income taxes							22			(256		)
Net income							$	197		$	504

Net income (loss) per share:
Net income per share:
Basic	$	(0.99	)	$	0.52		$	0.64		$	1.58
Diluted	$	(0.99	)	$	0.52		$	0.63		$	1.57

Weighted average shares used in computing net income per share:
Basic	323			322			310			318
Diluted	323			326			313			322

Cash dividends declared per common share	$	0.149		$	0.132

The accompanying notes are an integral part of these condensed consolidated financial statements.

AGILENT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(in millions)

(Unaudited)

Three Months Ended
January 31,
2018 2017

Net income (loss) $ (320 ) $ 168
Other comprehensive income (loss):
Unrealized gain (loss) on derivative instruments, net of tax expense (benefit) of $(3) and $1 (7 ) 1
Amounts reclassified into earnings related to derivative instruments, net of tax expense (benefit) of $0 and $(1) —
—
Foreign currency translation, net of tax expense (benefit) of $0 and $(1) 79
(3 )
Net defined benefit pension cost and post retirement plan costs:
Change in actuarial net loss, net of tax expense of $2 and $8 6
17
Change in net prior service benefit, net of tax benefit of $(1) and $(1) (1 ) (1 )
Other comprehensive income 77
14
Total comprehensive income (loss) $ (243 ) $ 182



	Three Months Ended
	January 31,
	2020			2019

Net income	$	197		$	504
Other comprehensive income (loss):
Unrealized gain (loss) on derivative instruments, net of tax expense (benefit) of $0 and $(2)	1			(4		)
Amounts reclassified into earnings related to derivative instruments, net of tax expense (benefit) of $0 and $(1)	—			(4		)
Foreign currency translation, net of tax expense (benefit) of $0 and $(9)	(11		)	38
Net defined benefit pension cost and post retirement plan costs:
Change in actuarial net loss, net of tax expense of $3 and $4	6			6
Change in net prior service benefit, net of tax expense of $1 and $0	(3		)	(2		)
Other comprehensive income (loss)	(7		)	34
Total comprehensive income	$	190		$	538

The accompanying notes are an integral part of these condensed consolidated financial statements.

AGILENT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions, except par value and share amounts)

(Unaudited)


	January 31, 2018			October 31, 2017			January 31, 2020			October 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	2,887		$	2,678		$	1,226		$	1,382
Accounts receivable, net	751			724			966			930
Inventory	608			575			706			679
Other current assets	151			192			204			198
Total current assets	4,397			4,169			3,102			3,189
Property, plant and equipment, net	792			757			844			850
Goodwill	2,633			2,607			3,589			3,593
Other intangible assets, net	341			361			1,059			1,107
Long-term investments	140			138			118			102
Other assets	395			394			789			611
Total assets	$	8,698		$	8,426		$	9,501		$	9,452
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	292		$	305		$	329		$	354
Employee compensation and benefits	221			276			253			334
Deferred revenue	321			291			379			336
Short-term debt	345			210			675			616
Other accrued liabilities	182			181			256			440
Total current liabilities	1,361			1,263			1,892			2,080
Long-term debt	1,800			1,801			1,787			1,791
Retirement and post-retirement benefits	241			234			354			360
Other long-term liabilities	770			293			620			473
Total liabilities	4,172			3,591			4,653			4,704
Commitments and contingencies (Note 11)
Commitments and contingencies (Note 14)
Total equity:
Stockholders’ equity:
Preferred stock; $0.01 par value; 125 million shares authorized; none issued and outstanding	—			—			—			—
Common stock; $0.01 par value; 2 billion shares authorized; 323 million shares at January 31, 2018 and 322 million shares at October 31, 2017 issued	3			3
Treasury stock at cost; 37 thousand shares at January 31, 2018 and zero shares at October 31, 2017	(3		)	—
Common stock; $0.01 par value; 2 billion shares authorized; 310 million shares at January 31, 2020 and 309 million shares at October 31, 2019 issued							3			3
Additional paid-in-capital	5,320			5,300			5,293			5,277
Accumulated deficit	(529		)	(126		)
Retained earnings (accumulated deficit)							73			(18		)
Accumulated other comprehensive loss	(269		)	(346		)	(521		)	(514		)
Total stockholders' equity	4,522			4,831			4,848			4,748
Non-controlling interest	4			4
Total equity	4,526			4,835
Total liabilities and equity	$	8,698		$	8,426		$	9,501		$	9,452

The accompanying notes are an integral part of these condensed consolidated financial statements.

AGILENT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)

(Unaudited)


	Three Months Ended						Three Months Ended
	January 31,						January 31,
	2018			2017			2020			2019

Net income (loss)	$	(320	)	$	168
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net income							$	197		$	504
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	51			55			79			54
Share-based compensation	31			20			27			24
Deferred taxes	(6		)	16			10			(281		)
Excess and obsolete inventory related charges	5			7			4			4
Unrealized gain on equity securities							(16		)	—
Other non-cash expense, net	1			2			2			3
Changes in assets and liabilities:
Accounts receivable	(5		)	(31		)	(40		)	(22		)
Inventory	(34		)	(26		)	(32		)	(12		)
Accounts payable	(3		)	9			(15		)	(16		)
Employee compensation and benefits	(62		)	(43		)	(80		)	(71		)
Change in assets and liabilities due to Tax Act	533			—
Other assets and liabilities	24			(61		)	(195		)	26
Net cash provided by operating activities	215			116
Net cash provided (used in) by operating activities							(59		)	213

Cash flows from investing activities:
Investments in property, plant and equipment	(60		)	(32		)	(34		)	(39		)
Payment to acquire cost method investments	(1		)	—
Proceeds from divestitures	—			1
Payment to acquire fair value investments							(1		)	(2		)
Payment in exchange for convertible note							—			(1		)
Acquisitions of businesses and intangible assets, net of cash acquired	(6		)	(70		)	—			(248		)
Net cash used in investing activities	(67		)	(101		)	(35		)	(290		)

Cash flows from financing activities:
Issuance of common stock under employee stock plans	25			18			32			22
Payment of taxes related to net share settlement of equity awards	(28		)	(12		)	(33		)	(13		)
Payment of dividends	(48		)	(42		)	(56		)	(52		)
Purchase of non-controlling interest							—			(4		)
Proceeds from revolving credit facility	274			131			432			—
Repayment of debt and revolving credit facility	(139		)	(42		)
Repayment of revolving credit facility							(372		)	—
Repayment of finance lease							(4		)	—
Treasury stock repurchases	(47		)	(111		)	(60		)	(75		)
Net cash provided by (used in) financing activities	37			(58		)
Net cash used in financing activities							(61		)	(122		)

Effect of exchange rate movements	24			(5		)	(1		)	9

Net increase (decrease) in cash and cash equivalents	209			(48		)
Net decrease in cash, cash equivalents and restricted cash							(156		)	(190		)

Cash and cash equivalents at beginning of period	2,678			2,289
Cash and cash equivalents at end of period	$	2,887		$	2,241
Cash, cash equivalents and restricted cash at beginning of period							1,388			2,254
Cash, cash equivalents and restricted cash at end of period							$	1,232		$	2,064

Supplemental cash flow information:
Income tax paid, net	$	32		$	27		$	241		$	21
Interest payments	$	29		$	29		$	17		$	25
Non-cash changes in investments in property, plant and equipment - increase (decrease)	$	(12	)	$	6		$	(9	)	$	(13	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

AGILENT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(in millions, except number of shares in thousands)

(Unaudited)



	Common Stock							Treasury Stock								Accumulated Other Comprehensive Income/(Loss)
Three Months Ended January 31, 2020	Number of Shares		Par Value		Additional Paid-in Capital			Number of Shares		Treasury Stock at Cost			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income/(Loss)			Total Stockholders' Equity			Non- Controlling Interest		Total Equity
Balance as of October 31, 2019	309,071		$	3	$	5,277		—		$	—		$	(18	)	$	(514	)	$	4,748		$	—	$	4,748
Components of comprehensive income, net of tax:
Net income	—		—		—			—		—			197			—			197			—		197
Other comprehensive income (loss)	—		—		—			—		—			—			(7		)	(7		)	—		(7		)
Total comprehensive income																			190					190
Cash dividends declared ($0.18 per common share)	—		—		—			—		—			(56		)	—			(56		)	—		(56		)
Share-based awards issued, net of tax of $33	1,703		—		(1		)	—		—			—			—			(1		)	—		(1		)
Repurchase of common stock	—		—		—			(726	)	(60		)	—			—			(60		)	—		(60		)
Retirement of treasury stock	(726	)	—		(10		)	726		60			(50		)	—			—			—		—
Share-based compensation	—		—		27			—		—			—			—			27			—		27
Balance as of January 31, 2020	310,048		$	3	$	5,293		—		$	—		$	73		$	(521	)	$	4,848		$	—	$	4,848



	Common Stock							Treasury Stock								Accumulated Other Comprehensive Income/(Loss)
Three Months Ended January 31, 2019	Number of Shares		Par Value		Additional Paid-in Capital			Number of Shares		Treasury Stock at Cost			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income/(Loss)			Total Stockholders' Equity			Non- Controlling Interest			Total Equity
Balance as of October 31, 2018	317,715		$	3	$	5,308		—		$	—		$	(336	)	$	(408	)	$	4,567		$	4		$	4,571
Effects of adoption of new accounting standards	—		—		—			—		—			33			(7		)	26			—			26
Components of comprehensive income, net of tax:
Net income	—		—		—			—		—			504			—			504			—			504
Other comprehensive income	—		—		—			—		—			—			34			34			—			34
Total comprehensive income																			538						538
Purchase of non-controlling interest	—		—		—			—		—			—			—			—			(4		)	(4		)
Cash dividends declared ($0.164 per common share)	—		—		—			—		—			(52		)	—			(52		)	—			(52		)
Share-based awards issued, net of tax of $13	946		—		8			—		—			—			—			8			—			8
Repurchase of common stock	—		—		—			(1,128	)	(75		)	—			—			(75		)	—			(75		)
Retirement of treasury stock	(1,128	)	—		(16		)	1,128		75			(59		)	—			—			—			—
Share-based compensation	—		—		24			—		—			—			—			24			—			24
Balance as of January 31, 2019	317,533		$	3	$	5,324		—		$	—		$	90		$	(381	)	$	5,036		$	—		$	5,036

The accompanying notes are an integral part of these condensed consolidated financial statements.

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


1.	OVERVIEW, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview. Agilent Technologies, Inc. ("we", "Agilent" or the "company"), incorporated in Delaware in May 1999, is a global leader in life sciences, diagnostics and applied chemical markets, providing application focused solutions that include instruments, software, services and consumables for the entire laboratory workflow.

Our fiscal year-end is October 31, and our fiscal quarters end on January 31, April 30 and July 31. Unless otherwise stated, these dates refer to our fiscal year and fiscal quarters.

Basis of Presentation. We have prepared the accompanying financial data for the three months ended January 31, ~~2018~~2020 and ~~2017~~2019 pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. have been condensed or omitted pursuant to such rules and regulations. The October 31, ~~2017~~2019 condensed balance sheet data was derived from audited financial statements but does not include all the disclosures required in audited financial statements by U.S. GAAP. The accompanying financial data and information should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2017.~~2019.

In the opinion of management, the accompanying condensed consolidated financial statements contain all normal and recurring adjustments necessary for a fair statement of our condensed consolidated balance sheet as of January 31, ~~2018~~2020 and October 31, ~~2017,~~2019, condensed consolidated statement of comprehensive income (loss) for the three months ended January 31, ~~2018~~2020 and ~~2017,~~2019, condensed consolidated statement of operations for the three months ended January 31, ~~2018~~2020 and ~~2017, and~~2019, condensed consolidated statement of cash flows for the three months ended January 31, ~~2018~~2020 and ~~2017.~~

~~Revision of Services~~2019 and ~~Other and Product Net Revenues and related Cost of Sales.~~ ~~In 2018, we~~ ~~revised amounts shown in our~~ condensed consolidated statement of operations to more accurately reflect the character of items delivered to customers. We identified a stream of service revenues that had been presented as product revenue in the prior year. We have now revised prior year's presentation to show the revenue within services and other. The cost of sales associated with these newly identified service revenues has also been revised to align with the new presentation. Forequity for the three months ended January 31, ~~2017 service~~2020 and other revenue increased $3 million and service and other cost of sales increased $2 million with corresponding reductions in product revenue and cost of sales. These corrections to the classifications are not considered to be material to current or prior periods and had no impact to our results of operations previously reported in our condensed consolidated statement of operations.2019.

Use of Estimates. The preparation of condensed consolidated financial statements in accordance with GAAP in the U.S. requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are revenue recognition, inventory valuation, ~~share-based compensation,~~ retirement and post-retirement benefit plan assumptions, valuation of goodwill and purchased intangible assets and accounting for income ~~taxes.~~taxes,.

~~Variable Interest Entities.~~ We make a determination upon entering into an arrangement whether an entity in which we have made an investment is considered a Variable Interest Entity (“VIE”). The company evaluates its investments in privately held companies on an ongoing basis. We have determined that as of January 31, 2018 there were no VIE’s required to be consolidated in the company’s consolidated financial statements because we do not have a controlling financial interest in any of the VIE’s that we have invested in nor are we the primary beneficiary. We account for these investments under either the equity or cost method, depending on the circumstances. We periodically reassess whether we are the primary beneficiary of a VIE. The reassessment process considers whether we have acquired the power to direct the most significant activities of the VIE through changes in governing documents or other circumstances. We also reconsider whether entities previously determined not to be VIEs have become VIEs, based on changes in facts and circumstances including changes in contractual arrangements and capital structure. As of January 31, 2018, the carrying value of our cost method investment in Lasergen, Inc. ("Lasergen"), a VIE, was $80 million with a maximum exposure of $80 million. The investments are included on the long-term investments line of the condensed consolidated balance sheet. Agilent’s initial ownership stake in Lasergen was 48 percent and we have the option to acquire all of the remaining shares of Lasergen until March 2, 2018, for an additional consideration of $105 million. See also Note 16, "Subsequent Events" for additional information on Lasergen.

~~AGILENT TECHNOLOGIES, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

Fair Value of Financial Instruments. The carrying values of certain of our financial instruments including cash and cash equivalents, accounts receivable, accounts payable, accrued compensation and other accrued liabilities approximate fair value because of their short maturities. The fair value of long-term equity investments ~~is determined~~which are readily determinable, and which are not accounted under the equity method are reported at fair value using quoted market prices for those securities when ~~available.~~available with gains and losses included in net income. The fair value of long-term equity investments which are not readily determinable, and which are not accounted under the equity method are reported at cost with adjustments for observable changes in prices or impairments included in net income. The fair value of our senior notes, calculated from quoted prices which are primarily Level 1 inputs under the accounting guidance fair value hierarchy, exceeds the carrying value by approximately ~~$25~~$90 million and ~~$58~~$62 million as of January 31, ~~2018~~2020 and October 31, ~~2017,~~2019, respectively. The change in the ~~excess of~~ fair value over carrying value in the three months ended January 31, ~~2018~~2020 is primarily due to ~~fluctuations in~~decreased market interest rates. The fair value of foreign currency contracts used for hedging purposes is estimated internally by using inputs tied to active markets. These inputs, for example, interest rate yield curves, foreign exchange rates, and forward and spot prices for currencies are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. See also Note 8,11, "Fair Value Measurements" for additional information on the fair value of financial instruments.

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

Restricted Cash and Restricted Cash Equivalents. Restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. A reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet follows:



	January 31,		October 31
	2020		2019
	(in millions)
Cash and cash equivalents	$	1,226	$	1,382
Restricted cash included in other assets	6		6
Total cash, cash equivalents and restricted cash	$	1,232	$	1,388

Leases. We determine whether an arrangement is, or contains, a lease at inception. Prior to November 1, 2019, for leases where we are the lessee, we accounted for operating lease payments by charging them to expense as incurred. At the beginning of fiscal 2020, the company adopted new lease accounting guidance issued by the Financial Accounting Standards Board ("FASB"). The most significant change requires lessees to record the present value of operating lease payments as right-of-use ("ROU") and lease liabilities on the condensed consolidated balance sheet. Where we are the lessee, ROU assets represent the company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments based on the present value of lease payments over the lease term. Classification of operating lease liabilities as either current or non-current is based on the expected timing of payments due under our obligations. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term and at an amount equal to the lease payments in a similar economic environment. In order to determine the appropriate incremental borrowing rates we have used a number of factors including the parent credit rating, the lease term and the currency swap rate. The ROU asset also consists of any lease incentives received. The lease terms used to calculate the ROU asset and related lease liability include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheet and lease expense for these leases is recognized on a straight-line basis over the lease term. Lease expense for operating leases with an initial term of more than twelve months is recognized on a straight-line basis over the lease term as an operating expense. We have lease agreements which require payments for lease and non-lease components. We have elected to account for these payments as a single lease component.

A portion of our revenue relates to lease arrangements where Agilent is the lessor. Standalone lease arrangements are outside the scope of ASC 606 and are therefore accounted for in accordance with ASC 842, Leases. Each of these contracts is evaluated as a lease arrangement, either as an operating lease or a sales-type capital lease using the current lease classification guidance.

See also Note 2, "New Accounting Pronouncements" and Note 9, "Leases" for additional information about the company’s leases.

2. NEW ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Not Yet Adopted

There were no changes to the new accounting pronouncements not yet adopted as described in our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2017~~2019 except for the following:

In ~~February 2018,~~December 2019, the Financial Accounting Standards Board ("FASB") issued ~~amendments~~new guidance to ~~reporting comprehensive~~simplify the accounting for income taxes. This guidance eliminates certain exceptions to ~~allow a reclassification from accumulated other comprehensive~~existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income ~~to retained earnings~~taxes in an interim period and the recognition of deferred tax liabilities for ~~stranded tax effects resulting from the Tax Cuts and Jobs Act that was enacted in December 2017 that reduced the U.S. federal corporate income tax rate and made other changes to U.S. federal tax laws.~~ outside basis differences.The ~~amendments in this update also require certain disclosures about stranded tax effects. The amendments are~~new guidance is effective for us beginning November 1, ~~2019,~~2021, and for interim periods within that fiscal year and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.year. Early adoption ~~of this guidance~~ is permitted. We are ~~currently~~ evaluating the ~~timing of our adoption and the~~ impact ~~the adoption~~ of this guidance ~~will have~~ on our consolidated financial statements and disclosures.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires lessees to record most leases on the balance sheet as lease liabilities, initially measured at the present value of future lease payments, with a corresponding right-of-use asset. The accounting applied by a lessor is largely unchanged from that applied under the prior

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

accounting standard.

On November 1, 2019, we adopted the new accounting guidance using the modified retrospective method, by applying the transition approach, for all lease arrangements at the beginning of the period of adoption. Results for reporting periods beginning November 1, 2019 are presented under the new accounting standard, while prior period amounts have not been restated. The standard had a significant impact on the condensed consolidated balance sheet as of January 31, 2020, but did not have a significant impact on the condensed consolidated statement of operations or condensed consolidated statement of cash flows for the three months ended January 31, 2020. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while the accounting for finance leases remained substantially unchanged. For leases that commenced before the effective date of new accounting standard, we elected the permitted practical expedients to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. We also elected to exclude leases with a term of 12 months or less in the ROU assets and lease liabilities. The adoption of this standard had no impact on our results of operations, cash flows and retained earnings.

Adoption of the new guidance impacted the condensed consolidated balance sheet as follows:



	October 31, 2019		Impact of Adopting		November 1, 2019
	As Reported		Lease Guidance		As Adopted
	(in millions)
Other assets	$	611	$	192	$	803
Other accrued liabilities	$	440	$	48	$	488
Other long-term liabilities	$	473	$	144	$	617

Other amendments to GAAP in the U.S. that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.

3. ACQUISITIONS

Acquisition of BioTekand ACEA

On August 23, 2019 we completed the acquisition of privately-owned Lionheart Technologies LLC ("BioTek"), a leader in the design, manufacture and distribution of innovative life science instrumentation for $1.17 billion, under the merger agreement. As a result of the acquisition, BioTek has become a wholly-owned subsidiary of Agilent. Accordingly, the results of BioTek are included in Agilent's condensed consolidated financial statements from the acquisition date. The acquisition of BioTek and its portfolio is another step to expand our position in the cell analysis market.

The consideration paid was $1.17 billion. Agilent funded the acquisition using existing cash of $470 million and debt of $700 million.

The BioTek acquisition was accounted for in accordance with the authoritative accounting guidance. The acquired assets and assumed liabilities were recorded by Agilent at their estimated fair values. Agilent determined the estimated fair values with the assistance of appraisals or valuations performed by third party specialists, discounted cash flow analyses, and estimates made by management. We expect to realize revenue synergies, leverage and expand the existing sales channels and product development resources, and utilize the assembled workforce. These factors, among others, contributed to a purchase price in excess of the estimated fair value of BioTek’s net identifiable assets acquired (see summary of net assets below), and, as a result, we have recorded goodwill in connection with this transaction.

Goodwill acquired was allocated to our operating segments and reporting units as a part of the purchase price allocation. All goodwill was allocated to the life sciences and applied markets reporting unit.

Agilent’s acquisition of BioTek is treated as an asset purchase for tax purposes. The tax basis of the acquired assets equals the fair market value on acquisition date.

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

The following table summarizes the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed on the closing date of August 23, 2019 (in millions):



Cash and cash equivalents		$	10
Accounts receivable		28
Inventories		21
Other current assets		2
Property, plant and equipment		8
Intangible assets		641
Goodwill		483
Total assets acquired	1,193
Accounts payable		(4		)
Deferred revenue		(5		)
Employee compensation and benefits		(7		)
Other accrued liabilities		(2		)
Long-term debt		(4		)
Net assets acquired		$	1,171

The fair value of cash and cash equivalents, accounts receivable, other current assets, accounts payable and other accrued liabilities were generally determined using historical carrying values given the short-term nature of these assets and liabilities.

The fair values for acquired intangible assets and deferred revenue were determined with the input from third party valuation specialists.

The fair values of certain other assets, inventory, property, plant and equipment, investments, long-term debt, and certain other long-term liabilities were determined internally using historical carrying values and estimates made by management.

Valuations of intangible assets acquired

The components of intangible assets acquired in connection with the BioTek acquisition were as follows (in millions):



	Fair Value			Estimated Useful Life
Developed product technology		$	387	5-13 years
Customer relationships		202		3-8 years
Backlog		5		2 months
Tradenames and trademarks		43		10 years
Total intangible assets subject to amortization		637
In-process research and development		4
Total intangible assets		$	641

As noted above, the intangible assets, including in-process research and development, were valued with input from valuation specialists. Agilent used variations of the income approach in determining the fair value of intangible assets acquired in the BioTek acquisition. Specifically, the developed product technology and in-process research and development were valued using the multi-period excess earnings method under the income approach by discounting forecasted cash flows directly related to the products expecting to result from the projects, net of returns on contributory assets. The company utilized the incremental cash flow method for determining the fair value of the customer relationships acquired, and the relief from royalty method to determine the fair value of the tradename. Order backlog was valued on a direct cash flow basis.

The primary in-process research and development project acquired relates to a next version of a product which will be released later in 2020. Total costs to complete for all BioTek in-process research and development were estimated at approximately $2 million as of the close date.

Acquisition and integration costs directly related to the BioTek acquisition totaled $4 million for the three months ended

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

January 31, 2020 and were recorded in selling, general and administrative expenses.

On November 14, 2018, we acquired 100 percent of the stock of ACEA Biosciences (“ACEA”), a developer of cell analysis tools, for $250 million. The financial results of ACEA have been included in our financial results from the acquisition date.

The following represents the unaudited proforma operating results as if BioTek and ACEA had been included in the company's condensed consolidated statements of operations as of the beginning of fiscal 2019 (in millions, except per share amounts):



	Three Months Ended January 31,
	2019
Net revenue	$	1,326
Net income	$	474
Net income per share — basic	$	1.49
Net income per share — diluted	$	1.47

The unaudited proforma financial information assumes that the companies were combined as of November 1, 2017 and include business combination accounting effects from the acquisition including amortization charges from acquired intangible assets, the impact on cost of sales due to the respective estimated fair value adjustments to inventory, changes to interest income for cash used in the acquisition, interest expense and currency losses associated with debt paid in connection with the acquisition and acquisition related transaction costs and tax related effects. The proforma information as presented above is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2018.

The unaudited proforma financial information for the three months ended January 31, 2019 combines the historical results of Agilent (which includes ACEA after the acquisition date), the first two weeks of the quarter for ACEA and BioTek for the three months ended January 31, 2019.

4. REVENUE

The following table presents the company’s total revenue and segment revenue disaggregated by geographical region:



	Three Months Ended January 31,
	2020								2019
	Life Sciences and Applied Markets		Diagnostics and Genomics		Agilent CrossLab		Total		Life Sciences and Applied Markets		Diagnostics and Genomics		Agilent CrossLab		Total
	(in millions)
Revenue by Region
Americas	$	209	$	118	$	167	$	494	$	168	$	109	$	156	$	433
Europe	167		92		133		392		164		91		128		383
Asia Pacific	262		39		170		471		275		35		158		468
Total	$	638	$	249	$	470	$	1,357	$	607	$	235	$	442	$	1,284

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

The following table presents the company’s total revenue disaggregated by end markets and by revenue type:



	Three Months Ended
	January 31,
	2020		2019
	(in millions)
Revenue by End Markets
Pharmaceutical and Biopharmaceutical	$	423	$	391
Chemical and Energy	312		308
Diagnostics and Clinical	194		187
Food	130		129
Academia and Government	141		116
Environmental and Forensics	157		153
Total	$	1,357	$	1,284

Revenue by Type
Instrumentation	$	593	$	567
Non-instrumentation and other	764		717
Total	$	1,357	$	1,284

Revenue by region is based on the ship to location of the customer. Revenue by end market is determined by the market indicator of the customer and by customer type. Instrumentation revenue includes sales from instruments, remarketed instruments and third-party products. Non-instrumentation and other revenue include sales from contract and per incident services, our companion diagnostics and our nucleic acid solutions businesses as well as sales from spare parts, consumables, reagents, vacuum pumps, subscriptions, software licenses and associated services.

Contract Balances

Contract Assets

Contract assets (unbilled accounts receivable) primarily relate to the company's right to consideration for work completed but not billed at the reporting date. The unbilled receivables are reclassified to trade receivables when billed to customers. Contract assets are generally classified as current assets and are included in "Accounts receivable, net" in the condensed consolidated balance sheet.

The balance of contract assets as of January 31, 2020 and October 31, 2019 were $131 million and $110 million, respectively. The increase in unbilled receivables during the three months ended January 31, 2020 is a result of recognition of revenue upon the transfer of the control to the customer. In some instances, transfer of control is prior to invoicing the customers and excluding amounts transferred to trade receivables during the period amounted to $21 million.

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

Contract Liabilities

The following table provides information about contract liabilities (deferred revenue) and the significant changes in the balances during the three months ended January 31, 2020:



	Contract Liabilities
	(in millions)

Ending balance as of October 31, 2019	$	386
Net revenue deferred in the period	180
Revenue recognized that was included in the contract liability balance at the beginning of the period	(142		)
Change in deferrals from customer cash advances, net of revenue recognized	9
Currency translation and other adjustments	(1		)
Ending balance as of January 31, 2020	$	432

During the three months ended January 31, 2019 revenue recognized that was included in the contract liability balance at October 31, 2018 was $125 million.

Contract liabilities primarily relate to multiple element arrangements for which billing has occurred but transfer of control of all elements to the customer has either partially or not occurred at the balance sheet date. This includes cash received from customers for products and related installation and services in advance of the transfer of control. Contract liabilities are classified as either current in deferred revenue or long-term in other long-term liabilities in the condensed consolidated balance sheet based on the timing of when we expect to complete our performance obligation.

Contract Costs

Incremental costs of obtaining a contract with a customer are recognized as an asset if it expects the benefit of those costs to be longer than one year. We have determined that certain sales incentive programs meet the requirements to be capitalized. The change in total capitalized costs to obtain a contract was immaterial during the three months ended January 31, 2020 and are included in other current and long-term assets on the condensed consolidated balance sheet. We have applied the practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. These costs include the company's internal sales force compensation program, as we have determined that annual compensation is commensurate with annual sales activities.

Transaction Price Allocated to the Remaining Performance Obligations

We have applied the practical expedient in ASC 606-10-50-14 and have not disclosed information about transaction price allocated to remaining performance obligations that have original expected durations of one year or less.

The estimated revenue expected to be recognized for remaining performance obligations that have an original term of more than one year, as of January 31, 2020, was $210 million, the majority of which is expected to be recognized over the next 12 months. Remaining performance obligations primarily include extended warranty, customer manufacturing contracts, and software maintenance contracts and revenue associated with lease arrangements.

5. SHARE-BASED COMPENSATION

Agilent accounts for share-based awards in accordance with the provisions of the authoritative accounting guidance which requires the measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors including ~~employee stock option awards,~~ restricted stock units, employee stock purchases made under our employee stock purchase plan (“ESPP”) and performance share awards granted to selected members of our senior management under the long-term performance plan (“LTPP”) based on estimated fair values.

Participants in the LTPP are entitled to receive ~~unrestricted~~ shares of the company's stock after the end of a three-year period, if specified performance targets are met. Certain LTPP awards are generally designed to meet the criteria of a performance award with the performance metrics and peer group comparison based on the Total Stockholders’ Return (“TSR”) set at the beginning of the

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

performance period. Effective November 1, 2015, the Compensation Committee of the Board of Directors approved another type of performance stock award, for the company's executive officers and other key employees. Participants in this program are also entitled to receive ~~unrestricted~~ shares of the company's stock after the end of a three-year period, if specified performance targets over the three-year period are met. The performance target for grants made ~~in 2016 were based on Operating Margin (“OM”) and the performance grants made in~~beginning 2017 and ~~2018~~later were based on Earnings Per Share ("EPS"). The performance targets for the LTPP-EPS grants for year 2 and year 3 of the performance period ~~will be~~are set in the first quarter of year 2 and year 3, respectively. All LTPP awards granted after November 1, 2015, are subject to a one-year post-vest holding period.

The final LTPP award may vary from zero to 200 percent of the target award. ~~The maximum award value for awards granted in 2016 and 2017 cannot exceed 300 percent of the grant date target value.~~ We consider the dilutive impact of these programs in our diluted net income per share calculation only to the extent that the performance conditions are expected to be met. Restricted stock units generally vest, with some exceptions, at a rate of 25 percent per year over a period of four years from the date of grant.

~~AGILENT TECHNOLOGIES, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

The impact on our results for share-based compensation was as follows:


	Three Months Ended				Three Months Ended
	January 31,				January 31,
	2018		2017		2020		2019
	(in millions)				(in millions)
Cost of products and services	$	7	$	6	$	6	$	5
Research and development	3		2		3		2
Selling, general and administrative	21		13		18		17
Total share-based compensation expense	$	31	$	21	$	27	$	24

At January 31, ~~2018~~2020 and October 31, ~~2017,~~2019, there was no0 share-based compensation capitalized within inventory.

The following assumptions were used to estimate the fair value of awards granted.


	Three Months Ended		Three Months Ended
	January 31,		January 31,
	2018	2017	2020	2019
LTPP:
Volatility of Agilent shares	21%	23%	23%	22%
Volatility of selected peer-company shares	14%-66%	15%-63%	15%-44%	15%-66%
Price-wise correlation with selected peers	32%	36%
Pair-wise correlation with selected peers			29%	30%

Post-vest holding restriction discount for all executive awards	4.8%	5.3%	5.3%	5.0%

Shares granted under the LTPP (TSR) were valued using a Monte Carlo simulations model. The Monte Carlo simulation fair value model requires the use of highly subjective and complex assumptions, including the price volatility of the underlying stock. For the volatility of our ~~2017 and 2018~~ LTPP (TSR) grants, we used our own historical stock price volatility.

The ESPP allows eligible employees to purchase shares of our common stock at 85 percent of the price at purchase and uses the purchase date to establish the fair market value.

The estimated fair value of restricted stock units ~~LTPP (OM)~~ and LTPP (EPS) awards is determined based on the market price of Agilent’s common stock on the date of grant adjusted for expected dividend yield. The compensation cost for LTPP ~~(OM) and LTPP~~ (EPS) reflects the cost of awards that are probable to vest at the end of the performance period.

All awards granted ~~in 2016 and thereafter~~ to our senior management employees have a one-year post-vest holding restriction. The estimated discount associated with post-vest holding restrictions is calculated using the Finnerty ~~model (see table above).~~model. The model calculates the potential lost value if the employee were able to sell the shares during the lack of marketability period, instead of being required to hold the shares. The model used the same historical stock price volatility and dividend yield assumption used for the Monte Carlo simulations model and an expected dividend yield to compute the discount.

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

6. INCOME TAXES

For the three months ended January 31, ~~2018,~~2020, the company's income tax expense was ~~$553~~$22 million with an effective tax rate of ~~237.3~~10.0 percent. ~~Our~~For the three months ended January 31, 2020, our effective tax rate and the resulting provision for income taxes were significantly impacted by ~~the~~a discrete ~~charge~~benefit of ~~$533~~$13 million related to the ~~enactment~~excess tax benefits from stock-based compensation.

For the three months ended January 31, 2019, the company's income tax benefit was $256 million with an effective tax rate of (103.2) percent. For the three months ended January 31, 2019, our effective tax rate and the resulting provision for income taxes were significantly impacted by a discrete benefit of $299 million related to the extension of the ~~U.S. Tax Cuts and Jobs Act (the “Tax Act”) as discussed below.~~company’s tax incentive in Singapore. The income taxes for the three months ended January 31, ~~2018~~2019 also includes the excess tax benefits of ~~$11~~$4 million from ~~stock based~~stock-based compensation.

For the three months ended January 31, 2017, the company's income tax expense was $25 million with an effective tax rate of 13.0 percent. The income tax provision for the three months ended January 31, 2017 included net discrete tax benefits of $2 million. The significant component of the net discrete tax benefit for the three months ended January 31, 2017 included a $11 million tax expense related to an employee pension settlement gain and $7 million of tax benefit for the settlement of an audit in Italy.

~~AGILENT TECHNOLOGIES, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

~~2017 U.S. Tax Reform - Tax Cuts and Jobs Act~~

On December 22, 2017, the Tax Cuts and Jobs Act ("Tax Act") was enacted into law. The Tax Act enacted significant changes affecting our fiscal year 2018, including, but not limited to, (1) reducing the U.S. federal corporate tax rate and (2) imposing a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that had not been previously taxed in the U.S.

The Tax Act also establishes new tax provisions affecting our fiscal year 2019, including, but not limited to, (1) creating a new provision designed to tax global intangible low-tax income (“GILTI”); (2) generally eliminating U.S. federal taxes on dividends from foreign subsidiaries; (3) eliminating the corporate alternative minimum tax (“AMT”); (4) creating the base erosion anti-abuse tax (“BEAT”); (5) establishing a deduction for foreign derived intangible income ("FDII"); (6) repealing domestic production activity deduction; and (7) establishing new limitations on deductible interest expense and certain executive compensation.

The Tax Act reduces the U.S. federal corporate tax rate from 35 percent to 21 percent effective January 1, 2018. Due to our fiscal year end, the lower corporate tax rate will be phased in, resulting in a U.S. statutory federal rate of 23 percent for our fiscal year ending October 31, 2018 and 21 percent for subsequent fiscal years.

ASC 740, Income Taxes, requires companies to recognize the effect of the tax law changes in the period of enactment. However, the SEC staff issued Staff Accounting Bulletin 118 ("SAB 118")which allows companies to record provisional amounts during a measurement period not extending beyond one year from the Tax Act enactment date. As of January 31, 2018, the company has not completed the accounting for all the impacts of the Tax Act. During the quarter, the company recognized a provisional amount of $533 million which includes (1) an estimated provision of $480 million of U.S. transition tax and correlative items on deemed repatriated earnings of non-U.S. subsidiaries and (2) an estimated provision of $53 million associated with the impact of decreased U.S. corporate tax rate as described below.

~~Deemed Repatriation Transition Tax ("Transition Tax")~~: The Transition Tax is based on the company’s total unrepatriated post-1986 earnings and profits ("E&P") of its foreign subsidiaries and the amount of non-U.S. taxes paid on such earnings. Historically, the company permanently reinvested a significant portion of these post-1986 E&P outside the U.S. For the remaining portion, the company previously accrued deferred taxes. Since the Tax Act required all foreign earnings to be taxed currently, the company recorded a provisional income tax expense of $643 million for its one-time transition U.S. federal tax and a benefit of $163 million for the reversal of related deferred tax liabilities. The resulting $480 million net transition tax, reduced by existing tax credits, will be paid over 8 years in accordance with the election available under the Tax Act. These amounts represent the best estimate of all required calculations based on currently available information and do not include any potential state tax impacts. The one-time transition tax is based in part on cash and illiquid asset amounts present on various comparable measurement dates, some of which are as of our future fiscal year end. As a result, the company’s calculation of the transition tax will change as the measurement dates occur and as federal and state tax authorities provide further guidance.

~~Reduction of U.S. federal corporate tax rate~~: The reduction of the corporate income tax rate requires companies to remeasure their deferred tax assets and liabilities as of the date of enactment. The provisional amount recorded in the three months ended January 31, 2018 for the remeasurement due to tax rate change is $53 million. We have not yet completed our accounting for the measurement of deferred taxes. To calculate the remeasurement of deferred taxes, we estimated when the existing deferred taxes will be settled or realized. These estimates may be affected by activities in the remaining quarters and other analysis related to the Tax Act, including, but not limited to, the impact of state conformity to the tax law change.

~~GILTI:~~ The Tax Act subjects a U.S. corporation to tax on its GILTI. The U.S. GAAP allows companies to make an accounting policy election to either (1) treat taxes due on future GILTI inclusions in the U.S. taxable income as a current-period expense when incurred (“period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (“deferred method”). Our analysis of the new GILTI rules and how they may impact us is incomplete. Accordingly, we have not made a policy election regarding the treatment of GILTI tax.

Indefinite Reinvestment Assertion: The company incurred U.S. tax on substantially all of the prior accumulated earnings of its foreign subsidiaries as part of the Transition Tax. This increased the company’s previously taxed earnings and will allow for the repatriation of the majority of its foreign earnings without any U.S. federal tax. However, any repatriation of its foreign earnings could still be subjected to withholding taxes, state taxes or other income taxes that might be incurred. The company’s analysis is incomplete at this time with respect to its investments intentions for its accumulated foreign earnings. During the period prescribed by SAB 118, the company will evaluate, among other factors, the need for cash within and outside the United States, legal entity capitalization requirements, cash controls imposed in foreign jurisdictions, withholding taxes and the availability to offset with foreign tax credits in determining its investment assertion on its accumulated foreign earnings.

~~AGILENT TECHNOLOGIES, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

Our estimates as described above, may change as a result of future guidance and interpretation from the Internal Revenue Service, the SEC, the FASB and various other taxing jurisdictions. In particular, we anticipate the U.S. state jurisdictions will continue to determine and announce their conformity or decoupling from the Tax Act either in its entirety or with respect to specific provisions. All of these potential legislative and interpretive actions could result in adjustments to our provisional estimates when the accounting for the income tax effects of the Tax Act is completed.

~~There were no substantial changes from our 2017 Annual Report on Form 10-K to the status of the open tax years in the first three months of fiscal year 2018.~~ In the U.S., tax years remain open back to the year ~~2014~~2016 for federal income tax purposes and the year ~~2000~~2015 for significant states. In other major jurisdictions where the company conducts business, the tax years generally remain open back to the year ~~2001.~~2009.

~~With these jurisdictions and the U.S., it~~It is reasonably possible there could be significant changes to our unrecognized tax benefits in the next twelve months due to either the expiration of a statute of limitation or a tax audit settlement. Given the number of years and numerous matters that remain subject to examination in various tax jurisdictions, management is unable to estimate the range of possible changes to the balance of our unrecognized tax benefits. The company will continue to assess the impact of the further guidance from federal and state tax authorities on its business and consolidated financial statements. Any future adjustments will be recognized as discrete income tax expense or benefit in the period the adjustments are determined.

5.7. NET INCOME PER SHARE

The following is a reconciliation of the numerator and denominator of the basic and diluted net income per share computations for the periods presented below:



	Three Months Ended
	January 31,
	2020		2019
	(in millions)
Numerator:
Net income	$	197	$	504
Denominator:
Basic weighted-average shares	310		318
Potential common shares— stock options and other employee stock plans	3		4
Diluted weighted-average shares	313		322

Three Months Ended
January 31,
2018 2017
(in millions)
Numerator:

Net income (loss) $ (320 ) $ 168
Denominator:
Basic weighted-average shares 323
322
Potential common shares— stock options and other employee stock plans —
4
Diluted weighted-average shares 323
326

The dilutive effect of share-based awards is reflected in diluted net income per share by application of the treasury stock method, which includes consideration of unamortized share-based compensation expense and the dilutive effect of in-the-money options and non-vested restricted stock units. Under the treasury stock method, the amount the employee must pay for exercising stock options and unamortized share-based compensation expense collectively are assumed proceeds to be used to repurchase hypothetical shares. An increase in the fair market value of the company's common stock can result in a greater dilutive effect from potentially dilutive awards.

We exclude stock options with exercise prices greater than the average market price of our common stock from the calculation of diluted earnings per share because their effect would be anti-dilutive. In addition, we exclude from the calculation of diluted earnings per share stock options, ESPP, LTPP and restricted stock awards whose combined exercise price and unamortized fair value were greater than the average market price of our common stock because their effect would also be anti-dilutive.

For the three months ended January 31, ~~2018,~~2020 and 2019, the ~~diluted net loss per share is~~impact of the ~~same as basic net loss per share as the effects of all 6.7 million~~anti-dilutive potential common shares ~~outstanding would be anti-dilutive. For the three months ended January 31, 2017, no potential common shares~~that were excluded from the calculation of diluted earnings per ~~share.~~share was not material.

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

6.8. INVENTORY



	January 31, 2020		October 31, 2019
	(in millions)
Finished goods	$	423	$	416
Purchased parts and fabricated assemblies	283		263
Inventory	$	706	$	679

January 31,
2018 October 31,
2017
(in millions)
Finished goods $ 372
$ 363
Purchased parts and fabricated assemblies 236
212
Inventory $ 608
$ 575

7.9. LEASES

As a lessee, we have various non- cancelable operating lease agreements for office space, warehouses, distribution centers, research and development facilities, manufacturing and production locations as well as vehicles, personal computers and other equipment. Our real estate leases have remaining lease terms of one to thirty years, which represent the non-cancelable periods of the leases and include extension options that we determined are reasonably certain to be exercised. We exclude options that are not reasonably certain to be exercised from our lease terms, ranging from six months to twenty years. Our lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms was well as payments for common area maintenance. We often receive incentives from our landlords, such as rent abatement periods, which effectively reduce the total lease payments owed for these leases. Vehicle, personal computer and other equipment operating leases have terms between three and five years.

Prior to the adoption of the new lease accounting standard, future minimum lease payments as of October 31, 2019 and previously disclosed in the company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019 under non- cancelable leases with initial terms exceeding twelve months were as follows:



	Operating Leases
	(in millions)
2020	$	52
2021	41
2022	29
2023	21
2024	14
2025 and thereafter	56
Total future minimum lease payments	$	213

The components of lease cost for operating leases were as follows:



	Three Months Ended
	January 31, 2020
	(in millions)

Operating lease cost	$	15
Variable lease cost ^(a)	4
Sublease income	(4		)
Total lease cost	$	15

(a) Variable lease cost includes cancelable leases, non-fixed maintenance costs and non-recoverable transaction taxes.

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

Supplemental cash flow information related to leases was as follows:



	Three Months Ended
	January 31, 2020
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases	$	15
Non-cash right of use assets obtained in exchange for operating lease obligations	$	14

Supplemental balance sheet information related to leases was as follows:



		Three Months Ended
	Financial Statement Line Item	January 31, 2020
		(in millions, except lease term and discount rate)
Assets:
Operating lease:
Right of use asset	Other assets	$	191

Liabilities:
Current
Operating lease liabilities	Other accrued liabilities	$	51
Long-Term
Operating lease liabilities	Other long-term liabilities	$	141

Weighted average remaining lease term in years
Operating leases		8.25 years
Weighted average discount rate
Operating leases		2.1		%

Future minimum rents payable as of January 31, 2020 under non-cancelable leases with initial terms exceeding one year reconcile to lease liabilities included in the condensed consolidated balance sheet as follows:



	Operating Leases
	(in millions)
2020	$	41
2021	45
2022	33
2023	22
2024	14
2025 and thereafter	57
Total undiscounted future minimum lease payments	$	212
Less: amount of lease payments representing interest	(20		)
Present value of future minimum lease payments	$	192
Less: current liabilities	(51		)
Long-term lease liabilities	$	141

As of January 31, 2020, we had no additional significant operating or finance leases that had not yet commenced.

As a lessor, we have contracts for equipment leased to customers in connection with our diagnostics business which include both operating-type lease and sales-type lease arrangements. We account for the non-lease component under the revenue recognition rules and the lease component under the leasing guidance. Equipment lease revenue for operating lease agreements is recognized as visualization kits and reagents are shipped over the life of the lease and the cost of customer leased equipment is recorded within property, plant and equipment, net in the consolidated condensed balance sheet and depreciated over the equipment’s estimated

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

useful life. For arrangements that have been classified as sales-type leases revenue is recognized when the transfer of control of the underlying leased asset has occurred and the net investment the lease recorded which is calculated at the present value of the remaining lease payments due from the lessee.

Revenue allocated to the lease income for both finance/sales-type lease and operating lease rental arrangements represents less than one percent of total net revenue in the three months ended January 31, 2020.

As of January 31, 2020, the original cost and net book value of operating leased assets was $49 million and $16 million, respectively. As of January 31, 2020, lease receivables related to sales-type leases were $38 million.

10. GOODWILL AND OTHER INTANGIBLE ASSETS

The following table presents goodwill balances and the movements for each of our reportable segments during the three months ended January 31, ~~2018~~2020:

Life Sciences and Applied Markets Diagnostics and Genomics Agilent CrossLab Total
(in millions)
Goodwill as of October 31, 2017 $ 818
$ 1,285
$ 504
$ 2,607
Foreign currency translation impact 8
9
4
21
Goodwill arising from acquisitions 5
—
—
5
Goodwill as of January 31, 2018 $ 831
$ 1,294
$ 508
$ 2,633



	Life Sciences and Applied Markets		Diagnostics and Genomics			Agilent CrossLab			Total
	(in millions)
Goodwill as of October 31, 2019	$	1,438	$	1,594		$	561		$	3,593
Foreign currency translation impact	—		(2		)	(2		)	(4		)
Goodwill as of January 31, 2020	$	1,438	$	1,592		$	559		$	3,589

The components of other intangible assets as of January 31, ~~2018~~2020 and October 31, ~~2017~~2019 are shown in the table below:


	Purchased Other Intangible Assets						Purchased Other Intangible Assets
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization and Impairments		Net Book Value
	(in millions)						(in millions)
As of October 31, 2017
As of October 31, 2019
Purchased technology	$	855	$	646	$	209	$	1,413	$	763	$	650
Backlog							5		5		—
Trademark/Tradename	149		73		76		196		102		94
Customer relationships	151		112		39		329		87		242
Third-party technology and licenses	27		14		13		28		22		6
Total amortizable intangible assets	1,182		845		337		1,971		979		992
In-Process R&D	24		—		24		115		—		115
Total	$	1,206	$	845	$	361	$	2,086	$	979	$	1,107
As of January 31, 2018
As of January 31, 2020
Purchased technology	$	863	$	665	$	198	$	1,412	$	787	$	625
Backlog							5		5		—
Trademark/Tradename	149		76		73		196		106		90
Customer relationships	153		119		34		329		105		224
Third-party technology and licenses	27		16		11		28		23		5
Total amortizable intangible assets	1,192		876		316		1,970		1,026		944
In-Process R&D	25		—		25		115		—		115
Total	$	1,217	$	876	$	341	$	2,085	$	1,026	$	1,059

During the three months ended January 31, ~~2018, we recorded~~2020, there were 0 additions to goodwill ~~of $5 million~~ and there were 0 additions to other intangible ~~assets of $2 million related to an acquisition.~~assets. During the three months ended January 31, ~~2018, other intangible assets, net increased $4 million due to~~2020, the impact of foreign ~~exchange translation.~~currency translation on other intangible assets was not material.

In general, for United States federal tax purposes, goodwill from asset purchases is deductible, however any goodwill created as part of a stock acquisition is not deductible.

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

Each quarter we review the events and circumstances to determine if impairment of indefinite-lived intangible assets and goodwill is indicated. There were no0 indicators of impairments of indefinite-lived intangible assets or goodwill during the three months ended January 31, ~~2018~~2020 and ~~2017,~~2019, respectively.

~~AGILENT TECHNOLOGIES, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

Amortization expense of intangible assets was ~~$26~~$48 million and ~~$32~~$29 million for the three months ended January 31, ~~2018~~2020 and ~~2017,~~2019, respectively.

Future amortization expense related to existing finite-lived purchased intangible assets for the remainder of fiscal year ~~2018~~2020 and for each of the five succeeding fiscal years and thereafter is estimated below:



Estimated future amortization expense:
(in millions)
Remainder of 2020	$	138
2021	$	172
2022	$	150
2023	$	107
2024	$	86
2025	$	68
Thereafter	$	223

Estimated future amortization expense:
(in millions)
Remainder of 2018 $ 73
2019 $ 71
2020 $ 56
2021 $ 42
2022 $ 32
2023 $ 21
Thereafter $ 21

8.11. FAIR VALUE MEASUREMENTS

The authoritative guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market and assumptions that market participants would use when pricing the asset or liability.

Fair Value Hierarchy

The guidance establishes a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into three levels. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There are three levels of inputs that may be used to measure fair value:

Level 1- applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2- applies to assets or liabilities for which there are inputs other than quoted prices included within level 1 that are observable, either directly or indirectly, for the asset or liability such as: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in less active markets; or other inputs that can be derived principally from, or corroborated by, observable market data.

Level 3- applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis as of January 31, ~~2018~~2020 were as follows:


			Fair Value Measurement at January 31, 2018 Using								Fair Value Measurement at January 31, 2020 Using
	January 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		January 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)								(in millions)
Assets:
Short-term
Cash equivalents (money market funds)	$	1,960	$	1,960	$	—	$	—	$	602	$	602	$	—	$	—
Derivative instruments (foreign exchange contracts)	9		—		9		—		6		—		6		—
Long-term
Trading securities	31		31		—		—		29		29		—		—
Other investments									25		—		25		—
Total assets measured at fair value	$	2,000	$	1,991	$	9	$	—	$	662	$	631	$	31	$	—
Liabilities:
Short-term
Derivative instruments (foreign exchange contracts)	$	16	$	—	$	16	$	—	$	6	$	—	$	6	$	—
Long-term
Deferred compensation liability	31		—		31		—		29		—		29		—
Total liabilities measured at fair value	$	47	$	—	$	47	$	—	$	35	$	—	$	35	$	—

Financial assets and liabilities measured at fair value on a recurring basis as of October 31, ~~2017~~2019 were as follows:



			Fair Value Measurement at October 31, 2019 Using
	October 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Assets:
Short-term
Cash equivalents (money market funds)	$	784	$	784	$	—	$	—
Derivative instruments (foreign exchange contracts)	12		—		12		—
Long-term
Trading securities	30		30		—		—
Other investments	25		—		25		—
Total assets measured at fair value	$	851	$	814	$	37	$	—
Liabilities:
Short-term
Derivative instruments (foreign exchange contracts)	$	6	$	—	$	6	$	—
Long-term
Deferred compensation liability	30		—		30		—
Total liabilities measured at fair value	$	36	$	—	$	36	$	—

Fair Value Measurement at October 31, 2017 Using
October 31,
2017
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
(in millions)
Assets:

Short-term

Cash equivalents (money market funds) $ 1,659
$ 1,659
$ —
$ —
Derivative instruments (foreign exchange contracts) 4
—
4
—
Long-term
Trading securities 32
32
—
—
Total assets measured at fair value $ 1,695
$ 1,691
$ 4
$ —
Liabilities:

Short-term
Derivative instruments (foreign exchange contracts) $ 6
$ —
$ 6
$ —
Long-term
Deferred compensation liability 32
—
32
—
Total liabilities measured at fair value $ 38
$ —
$ 38
$ —

Our money market funds and trading securities ~~investments~~ are generally valued using quoted market prices and therefore are classified within level 1 of the fair value hierarchy. Our derivative financial instruments are classified within level 2, as there is not an active market for each hedge contract, but the inputs used to calculate the value of the instruments are tied to active markets. Our deferred compensation liability is classified as level 2 because, although the values are not directly based on quoted market prices, the inputs used in the calculations are observable. Other investments represent shares we own in a special fund that targets underlying investments of approximately 40 percent in debt securities and 60 percent in equity securities. It has been classified as level 2

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

because, although the shares of the fund are not traded on any active stock exchange, each of the individual underlying securities are or can be derived from and hence we have a readily determinable value for the underlying securities, from which we are able to determine the fair market value for the special fund itself.

Trading securities, which is comprised of mutual funds, bonds and other similar instruments, other investments and deferred compensation liability are reported at fair value, with gains or losses resulting from changes in fair value recognized currently in net income.

~~AGILENT TECHNOLOGIES, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

Certain derivative instruments are reported at fair value, with unrealized gains and losses, net of tax, included in accumulated other comprehensive loss within stockholders' equity. Realized gains and losses from the sale of these instruments are recorded in net income.

Impairment of Investments. There were no0 impairments of investments for the three months ended January 31, ~~2018~~2020 and ~~2017.~~2019.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

For the three months ended January 31, ~~2018~~2020 and ~~2017,~~2019, there were no0 impairments of long-lived assets held and used or long-lived assets held for sale. For the three months ended January 31, 2020 and 2019, there were 0 impairment of non-marketable securities. For the three months ended January 31, 2020 and 2019, an unrealized gain of $16 million and 0, respectively, were included in net income as adjustments to the carrying value of non-marketable equity securities without readily determinable fair value based on an observable market transaction. As of January 31, 2020 and October 31, 2019, the carrying amount of non-marketable equity securities without readily determinable fair values was $63 million and $47 million, respectively.

Fair values for the non-marketable securities included in long-term investments on the condensed consolidated balance sheet were measured using Level 3 inputs because they are primarily equity stock issued by private companies without quoted market prices. To estimate the fair value of our non-marketable securities, we use the measurement alternative to record these investments at cost and to adjust for impairments and observable price changes (orderly transactions for the identical or a similar security from the same issuer) as and when it occurs.

9.12. DERIVATIVES

We are exposed to foreign currency exchange rate fluctuations and interest rate changes in the normal course of our business. As part of our risk management strategy, we use derivative instruments, primarily forward contracts, purchased options to hedge economic and/or accounting exposures resulting from changes in foreign currency exchange rates.

~~Fair Value Hedges~~

We are exposed to interest rate risk due to the mismatch between the interest expense we pay on our loans at fixed rates and the variable rates of interest we receive from cash, cash equivalents and other short-term investments. We have issued long-term debt in U.S. dollars at fixed interest rates based on the market conditions at the time of financing. The fair value of our fixed rate debt changes when the underlying market rates of interest change, and, in the past, we have used interest rate swaps to change our fixed interest rate payments to U.S. dollar LIBOR-based variable interest expense to match the floating interest income from our cash, cash equivalents and other short term investments. As of ~~January 31, 2018, all interest rate swap contracts had either been terminated or had expired.~~

On August 9, 2011, we terminated five interest rate swap contracts related to our 2020 senior notes that represented the notional amount of $500 million. The remaining gain to be amortized at January 31, 2018 was $10 million. All deferred gains from terminated interest rate swaps are being amortized over the remaining life of the respective senior notes.

Cash Flow Hedges

We enter into foreign exchange contracts to hedge our forecasted operational cash flow exposures resulting from changes in foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities between one and twelve months. These derivative instruments are designated and qualify as cash flow hedges under the criteria prescribed in the authoritative guidance and are assessed for effectiveness against the underlying exposure every reporting period. ~~Changes~~For open contracts as of January 31, 2020 changes in the time value of the foreign exchange contract are excluded from the assessment of hedge effectiveness and are recognized in ~~other income (expense) each period.~~cost of sales over the life of the foreign exchange contract. The changes in fair value of the effective portion of the derivative instrument are recognized in accumulated other comprehensive income (loss). Amounts associated with cash flow hedges are reclassified to cost of sales in the condensed consolidated statement of operations when the forecasted transaction occurs. If it becomes probable that the forecasted transaction will not occur, the hedge relationship will be de-designated and amounts accumulated in other comprehensive income (loss) will be reclassified to other income (expense) in the current period. Changes in the fair value of the ineffective portion of derivative instruments are recognized in other income (expense) in the condensed consolidated statement of operations in the current period. We record the premium paid (time value) of an option on the date of purchase as an asset. For options designated as cash flow hedges, changes in the time value are excluded from the assessment of hedge effectiveness and are recognized in ~~other income (expense)~~cost of sales over the life of the option contract. For the three months ended January 31, ~~2018~~2020 and ~~2017~~2019 ineffectiveness and gains and losses recognized in other income (expense) due to de-designation of cash flow hedge contracts were not significant.

In July 2012, Agilent executed treasury lock agreements for $400 million in connection with future interest payments to be made on our 2022 senior notes issued on September 10, 2012. We designated the treasury lock as a cash flow hedge. The treasury lock contracts were terminated on September 10, 2012 and we recognized a deferred gain in accumulated other comprehensive income which is being amortized to interest expense over the life of the 2022 senior notes. The remaining gain to be amortized related to the treasury lock agreements at January 31, ~~2018~~2020 was $2$1 million.

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

In February 2016, Agilent executed ~~three~~3 forward-starting pay fixed/receive variable interest rate swaps for the notional amount of $300 million in connection with future interest payments to be made on our 2026 senior notes issued on September 15, 2016. These derivative instruments were designated and qualified as cash flow hedges under the criteria prescribed in the

~~AGILENT TECHNOLOGIES, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

authoritative guidance. The swap arrangements were terminated on September 15, 2016 with a payment of $10 million and we recognized this as a deferred loss in accumulated other comprehensive income which is being amortized to interest expense over the life of the 2026 senior notes. The remaining loss to be amortized related to the interest rate swap agreements at January 31, ~~2018~~2020 was $8$6 million.

In August 2019, Agilent executed treasury lock agreements for $250 million in connection with future interest payments to be made on our 2029 senior notes issued on September 16, 2019. We designated the treasury lock as a cash flow hedge. The treasury lock contracts were terminated on September 6, 2019 and we recognized a deferred loss in accumulated other comprehensive income which is being amortized to interest expense over the life of the 2029 senior notes. The remaining loss to be amortized related to the treasury lock agreements at January 31, 2020 was $6 million.

Net Investment Hedges

We enter into foreign exchange contracts to hedge net investments in foreign operations to mitigate the risk of adverse movements in exchange rates. These foreign exchange contracts are carried at fair value and are designated and qualify as net investment hedges under the criteria prescribed in the authoritative guidance. Changes in fair value of the effective portion of the derivative instrument are recognized in accumulated other comprehensive income (loss) and are assessed for effectiveness against the underlying exposure every reporting period. If the company’s net investment changes during the year, the hedge relationship will be assessed and de-designated if the hedge notional amount is outside of prescribed tolerance with a gain/loss reclassified from other comprehensive income (loss) to other income (expense) in the current period.

Other Hedges

Additionally, we enter into foreign exchange contracts to hedge monetary assets and liabilities that are denominated in currencies other than the functional currency of our subsidiaries. These foreign exchange contracts are carried at fair value and do not qualify for hedge accounting treatment and are not designated as hedging instruments. Changes in value of the derivative instruments are recognized in other income (expense) in the condensed consolidated statement of operations, in the current period, along with the offsetting foreign currency gain or loss on the underlying assets or liabilities.

Our use of derivative instruments exposes us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We do, however, seek to mitigate such risks by limiting our counterparties to major financial institutions which are selected based on their credit ratings and other factors. We have established policies and procedures for mitigating credit risk that include establishing counterparty credit limits, monitoring credit exposures, and continually assessing the creditworthiness of counterparties.

A number of our derivative agreements contain threshold limits to the net liability position with counterparties and are dependent on our corporate credit rating determined by the major credit rating agencies. The counterparties to the derivative instruments may request collateralization, in accordance with derivative agreements, on derivative instruments in net liability positions.

The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position as of January 31, ~~2018~~2020, was $103 million. The credit-risk-related contingent features underlying these agreements had not been triggered as of January 31, ~~2018~~2020.

~~There were~~ 77 ~~foreign exchange forward contracts open as of~~ ~~January 31, 2018~~ ~~and designated as cash flow hedges. There were~~ ~~153~~ ~~foreign exchange forward contracts open as of~~ ~~January 31, 2018~~ ~~not designated as hedging instruments. The aggregated notional amounts by currency and designation as of~~ ~~January 31, 2018~~ ~~were as follows:~~

Derivatives Designated as Cash Flow
Hedges

Derivatives
Not
Designated
as Hedging
Instruments

Forward
Contracts USD

Forward
Contracts USD
Currency Buy/(Sell) Buy/(Sell)
(in millions)
Euro $ (80 ) $ 54
British Pound (47 ) 11
Canadian Dollar (36 ) 9
Australian Dollar 5
16
Malaysian Ringgit —
(2 )
Japanese Yen (54 ) (17 )
Danish Krone —
18
Korean Won (39 ) (2 )
Singapore Dollar 14
2
Swiss Franc —
29
Other —
(18 )
Totals $ (237 ) $ 100

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

There were 267 foreign exchange forward contracts open as of January 31, 2020 and designated as cash flow hedges. There were 172 foreign exchange forward contracts open as of January 31, 2020 not designated as hedging instruments. There was 1 foreign exchange forward contracts open as of January 31, 2020 and designated as a net investment hedge. The aggregated notional amounts by currency and designation as of January 31, 2020 were as follows:



	Derivatives Designated as Cash Flow Hedges			Derivatives Designated as Net Investment Hedges			Derivatives Not Designated as Hedging Instruments
	Forward Contracts USD			Forward Contracts USD			Forward Contracts USD
Currency	Buy/(Sell)			Buy/(Sell)			Buy/(Sell)
	(in millions)
Euro	$	(63	)	$	(55	)	$	64
British Pound	(43		)	—			(4		)
Canadian Dollar	(39		)	—			26
Japanese Yen	(83		)	—			(10		)
Korean Won	(62		)	—			(36		)
Singapore Dollar	15			—			26
Chinese Yuan Renminbi	(71		)	—			(40		)
Swedish Krona	—			—			(8		)
Other	4			—			(9		)
Totals	$	(342	)	$	(55	)	$	9

Derivative instruments are subject to master netting arrangements and are disclosed gross in the balance sheet in accordance with the authoritative guidance. The gross fair values and balance sheet location of derivative instruments held in the consolidated balance sheet as of January 31, ~~2018~~2020 and October 31, ~~2017~~2019 were as follows:

																					Fair Values of Derivative Instruments
Asset Derivatives	Asset Derivatives					Liability Derivatives					Asset Derivatives					Liability Derivatives
		Fair Value					Fair Value					Fair Value					Fair Value
Balance Sheet Location		January 31, 2018		October 31, 2017		Balance Sheet Location	January 31, 2018		October 31, 2017			January 31, 2020		October 31, 2019		Balance Sheet Location	January 31, 2020		October 31, 2019
(in millions)
Derivatives designated as hedging instruments:
Cash flow hedges
Foreign exchange contracts
Other current assets		$	1	$	2	Other accrued liabilities	$	10	$	2		$	3	$	3	Other accrued liabilities	$	2	$	2


Derivatives not designated as hedging instruments:
Foreign exchange contracts
Other current assets		$	8	$	2	Other accrued liabilities	$	6	$	4		$	3	$	9	Other accrued liabilities	$	4	$	4
Total derivatives		$	9	$	4		$	16	$	6		$	6	$	12		$	6	$	6

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

The effect of derivative instruments for foreign exchange contracts designated as hedging instruments and not designated as hedging instruments in our consolidated statement of operations were as ~~follows:~~follows



	Three Months Ended
	January 31,
	2020			2019
	(in millions)
Derivatives designated as hedging instruments:
Cash Flow Hedges
Foreign exchange contracts:
Gain (loss) recognized in accumulated other comprehensive income	$	1		$	(6	)
Gain (loss) reclassified from accumulated other comprehensive income (loss) into cost of sales	$	—		$	5
Gain (loss) on time value of forward contracts recorded in cost of sales	$	—		$	1

Derivatives not designated as hedging instruments:
Gain (loss) recognized in other income (expense)	$	(2	)	$	(3	)

Three Months Ended
January 31,
2018 2017
(in millions)
Derivatives designated as hedging instruments:

Cash Flow Hedges
Foreign exchange contracts:
Gain (loss) recognized in accumulated other comprehensive income (loss) $ (10 ) $ 2
Gain (loss) reclassified from accumulated other comprehensive income (loss) into cost of sales $ —
$ 1
Derivatives not designated as hedging instruments:
Gain (loss) recognized in other income (expense) $ 6
$ (3 )

At January 31, ~~2018~~2020, the estimated amount of existing net ~~loss~~gain that is expected to be reclassified from accumulated other comprehensive ~~income (loss)~~loss to cost of sales within the next twelve months is $84 million.

~~AGILENT TECHNOLOGIES, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

~~10.~~13. RETIREMENT PLANS AND POST RETIREMENT PENSION PLANS

Components of net periodic costs. For the three months ended January 31, ~~2018~~2020 and ~~2017,~~2019, our net pension and post retirement benefit costs were comprised of the following:



	Three Months Ended January 31,
	U.S. Pension Plans						Non-U.S. Pension Plans						U.S. Post Retirement Benefit Plans
	2020			2019			2020			2019			2020			2019
	(in millions)
Service cost—benefits earned during the period	$	—		$	—		$	7		$	6		$	—		$	—
Interest cost on benefit obligation	4			5			2			3			1			—
Expected return on plan assets	(8		)	(7		)	(12		)	(11		)	(1		)	(1		)
Amortization:
Actuarial losses	1			—			12			9			1			1
Prior service credits	—			—			—			—			(2		)	(2		)
Total net plan costs	$	(3	)	$	(2	)	$	9		$	7		$	(1	)	$	(2	)

Pensions
U.S. Plans
Non-U.S.
Plans

U.S. Post Retirement
Benefit Plans
Three Months Ended January 31,
2018 2017 2018 2017 2018 2017
(in millions)
Service cost—benefits earned during the period $ —
$ —
$ 6
$ 4
$ —
$ —
Interest cost on benefit obligation 4
3
3
3
1
1
Expected return on plan assets (7 ) (6 ) (11 ) (10 ) (2 ) (2 )
Amortization:
Actuarial losses —
1
7
9
2
3
Prior service credits —
—
—
—
(2 ) (2 )
Total net plan costs $ (3 ) $ (2 ) $ 5
$ 6
$ (1 ) $ —
Settlements gains $ —
$ —
$ (5 ) $ (32 ) $ —
$ —

The service cost component is recorded in cost of sales and operating expenses in the condensed consolidated statement of operations. All other cost components are recorded in other income (expense), net in the condensed consolidated statement of operations.

We made no0 contributions to our U.S. defined benefit plans during the three months ended January 31, ~~2018.~~2020. We contributed $65 million to our non-U.S. defined benefit plans during the three months ended January 31, ~~2018.~~2020.

We made no0 contributions to our U.S. defined benefit plans during the three months ended January 31, ~~2017.~~2019. We contributed $36 million to our non-U.S. defined benefit plans during the three months ended January 31, ~~2017~~2019.

We do not expect to contribute to our U.S. defined benefit plans during the remainder of ~~2018~~2020 and we expect to contribute ~~$17~~$19 million to our non-U.S. defined benefit plans during the remainder of ~~2018.~~2020.

~~Japanese Welfare Pension Insurance Law~~. In Japan, Agilent has employees' pension fund plans, which are defined benefit pension plans established under the Japanese Welfare Pension Insurance Law (JWPIL). The plans are composed of (a) a substitutional portion based on the pay-related part of the old-age pension benefits prescribed by JWPIL (similar to social security benefits in the United States) and (b) a corporate portion based on a contributory defined benefit pension arrangement established at the discretion of the company. ~~During the~~ ~~three months ended January 31, 2017~~, Agilent received government approval and returned the substitutional portion of Japan's pension plan to the Japanese government, as allowed by the JWPIL. The initial transfer resulted in a net gain of $32 million which was recorded within cost of sales and operating expenses in the condensed consolidated statement of operations. The net gain consisted of two parts - a gain of $41 million, representing the difference between the fair values of the Accumulated Benefit Obligation (ABO) settled of $65 million and the assets transferred from the pension trust to the government of Japan of $24 million, offset by a settlement loss of $9 million related to the recognition of previously unrecognized actuarial losses included in accumulated other comprehensive income. In the first quarter of 2018, after the Japanese government’s final review of our initial payment, we received a refund of $5.2 million which was recorded as a settlement gain.

~~11.~~

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

14. WARRANTIES AND CONTINGENCIES

Warranties

We accrue for standard warranty costs based on historical trends in warranty charges as a percentage of net product shipments. The accrual is reviewed regularly and periodically adjusted to reflect changes in warranty cost estimates. Estimated warranty charges are recorded within cost of products at the time products are sold. The standard warranty accrual balances are held in other accrued and other long-term liabilities on our condensed consolidated balance sheet. Our standard warranty terms typically extend to one year from the date of delivery, depending on the product.

~~AGILENT TECHNOLOGIES, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

A summary of the standard warranty accrual activity is shown in the table below:


	Three Months Ended						Three Months Ended
	January 31,						January 31,
	2018			2017			2020			2019
	(in millions)						(in millions)
Beginning balance as of November 1,	$	34		$	35		$	32		$	35
Accruals for warranties including change in estimate	11			13			12			13
Settlements made during the period	(12		)	(13		)	(14		)	(16		)
Ending balance as of January 31,	$	33		$	35		$	30		$	32

Accruals for warranties due within one year	$	33		$	34		$	30		$	32
Accruals for warranties due after one year	—			1
Ending balance as of January 31,	$	33		$	35

Bank Guarantees

Guarantees consist primarily of outstanding standby letters of credit and bank guarantees and were approximately $40 million as of January 31, 2020 and October 31, 2019. A standby letter of credit is a guarantee of payment issued by a bank on behalf of us that is used as payment of last resort should we fail to fulfill a contractual commitment with a third party. A bank guarantee is a promise from a bank or other lending institution that if we default on a loan, the bank will cover the loss.

Contingencies

We are involved in lawsuits, claims, investigations and proceedings, including, but not limited to, intellectual property, commercial, real estate, environmental and employment matters, which arise in the ordinary course of business. There are no matters pending that we currently believe are probable and reasonably possible of having a material impact to our business, consolidated financial condition, results of operations or cash flows.

~~12.~~15. SHORT-TERM DEBT

Credit Facilities

On ~~September 15, 2014,~~March 13, 2019, Agilent entered into a credit agreement with a group of financial institutions which ~~provides~~provided for a ~~$400 million~~$1 billion five-year unsecured credit facility that will expire on ~~September 15, 2019. On June 9, 2015,~~March 13, 2024. For the ~~commitments~~three months ended January 31, 2020, we borrowed $432 million and repaid $372 million under the ~~existing~~ credit facility were increased by $300 million and on July 14, 2017, the commitments under the existing credit facility were increased by an additional $300 million so that the aggregate commitments under the facility now total $1 billion.facility. As of January 31, ~~2018,~~2020, the company had borrowings of ~~$345~~$175 million outstanding under the credit facility. We were in compliance with the covenants for the credit facility during the three months ended January 31, ~~2018.~~

~~2017 Senior Notes~~

~~In October 2007,~~2020. On August 7, 2019, we entered into an amendment to the ~~company issued an aggregate principal amount of $600~~credit agreement, which provided for a $500 million short-term loan facility that was used in ~~senior notes ("2017 senior notes").~~full to complete the BioTek acquisition and which is outstanding at January 31, 2020. On October ~~20, 2014,~~21, 2019, we ~~settled~~entered into a second amendment to the ~~redemption~~credit agreement, which refreshed the amount available for additional incremental term loan facilities under the credit agreement to permit additional incremental facilities of up to $500 ~~million~~million. We had 0 borrowings under the additional incremental loan facilities as of ~~the $600 million outstanding aggregate principal amount of our 2017 senior notes. The remaining $100 million in senior notes matured on November 1, 2017 and were paid in full.~~January 31, 2020.

~~13.~~

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

16. LONG-TERM DEBT

Senior Notes

The following table summarizes the company’s long-term senior ~~notes and the related interest rate swaps:~~notes:


	January 31, 2018						October 31, 2017						January 31, 2020		October 31, 2019
	Amortized Principal		Swap		Total		Amortized Principal		Swap		Total		Amortized Principal		Amortized Principal
	(in millions)
2020 Senior Notes	499		10		509		499		11		510
2022 Senior Notes	398		—		398		398		—		398		$	399	$	399
2023 Senior Notes	596		—		596		596		—		596		597		597
2026 Senior Notes	297		—		297		297		—		297		298		298
2029 Senior Notes													493		492
Total	$	1,790	$	10	$	1,800	$	1,790	$	11	$	1,801	$	1,787	$	1,786

~~AGILENT TECHNOLOGIES, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

All outstanding notes listed above are unsecured and rank equally in right of payment with all of Agilent’s other senior unsecured indebtedness. There have been no changes to the principal, maturity, interest rates and interest payment terms of the Agilent senior notes, detailed in the table above, in the three months ended January 31, ~~2018~~2020 as compared to the senior notes described in our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2017~~2019. ~~All interest rate swap contracts have been terminated and amounts to be amortized over the remaining life of the senior notes as of~~ ~~January 31, 2018~~ ~~and~~ ~~October 31, 2017~~ ~~are detailed above.~~

~~14.~~17. STOCKHOLDERS' EQUITY

Stock Repurchase Program

On ~~May 28, 2015,~~November 19, 2018 we announced that our board of directors had approved a new share repurchase program (the ~~"2015~~"2019 repurchase program"). designed, among other things, to reduce or eliminate dilution resulting from issuance of stock under the company's employee equity incentive programs. The ~~2015~~2019 repurchase program authorizes the purchase of up to ~~$1.14~~$1.75 billion of our common stock at the company's discretion ~~through~~ and ~~including November 1, 2018.~~has no fixed termination date. The ~~2015~~2019 repurchase program does not require the company to acquire a specific number of shares and may be suspended, amended or discontinued at any time. During the three months ended January 31, ~~2018,~~2020, we repurchased ~~674,000~~and retired approximately 725,827 shares for ~~$47~~$60 million under this authorization. During the three months ended January 31, 2019, we repurchased and retired approximately 1.1 million shares for $75 million under this authorization. As of January 31, 2018, we retired approximately 637,000 shares and the remaining 37,000 shares as of January 31, 2018 were retired in February 2018. During the three months ended January 31, 2017, we repurchased and retired approximately 2.5 million shares for $111 million, under this authorization. As of January 31, 2018,2020, we had remaining authorization to repurchase up to ~~$563~~$967 million of our common stock under this program.

Cash Dividends on Shares of Common Stock

During the three months ended January 31, ~~2018~~2020, we paid cash dividends of ~~$0.149~~$0.180 per common share or ~~$48~~$56 million on the company's common stock. During the three months ended January 31, ~~2017~~2019, we paid cash dividends of ~~$0.132~~$0.164 per common share or ~~$42~~$52 million on the company's common stock.

~~The timing and amounts of any future dividends are subject to determination and approval by our board of directors.~~

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) by component and related tax effects were as follows (in millions):



				Net defined benefit pension cost and post retirement plan costs
Three Months Ended January 31, 2020	Foreign currency translation			Prior service credits			Actuarial Losses			Unrealized gains (losses) on derivatives			Total
	(in millions)
As of October 31, 2019	$	(204	)	$	131		$	(437	)	$	(4	)	$	(514	)

Other comprehensive income (loss) before reclassifications	(11		)	—			(5		)	1			(15		)

Amounts reclassified out of accumulated other comprehensive income (loss)	—			(2		)	14			—			12

Tax expense	—			(1		)	(3		)	—			(4		)

Other comprehensive income (loss)	(11		)	(3		)	6			1			(7		)

As of January 31, 2020	$	(215	)	$	128		$	(431	)	$	(3	)	$	(521	)

Net defined benefit pension cost and post retirement plan costs
Three Months Ended January 31, 2018 Foreign currency translation Prior service credits Actuarial Losses Unrealized gains (losses) on derivatives Total
(in millions)
As of October 31, 2017 $ (156 ) $ 140
$ (328 ) $ (2 ) $ (346 )

Other comprehensive income (loss) before reclassifications 79
—
(1 ) (10 ) 68

Amounts reclassified out of accumulated other comprehensive income (loss) —
(2 ) 9
—
7

Tax (expense) benefit —
1
(2 ) 3
2

Other comprehensive income (loss) 79
(1 ) 6
(7 ) 77

As of January 31, 2018 $ (77 ) $ 139
$ (322 ) $ (9 ) $ (269 )

~~AGILENT TECHNOLOGIES, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

Reclassifications out of accumulated other comprehensive income (loss) for the three months ended January 31, ~~2018~~2020 and ~~2017~~2019 were as follows (in millions):



Details about accumulated other comprehensive income (loss) components	Amounts Reclassified from other comprehensive income (loss)						Affected line item in statement of operations


	Three Months Ended
	January 31,
	2020			2019

Unrealized gain (loss) on derivatives	$	—		$	5		Cost of products
	—			5			Total before income tax
	—			(1		)	Provision for income tax
	—			4			Total net of income tax
Net defined benefit pension cost and post retirement plan costs:

Actuarial net loss	(14		)	(10		)
Prior service benefit	2			2
	(12		)	(8		)	Total before income tax
	6			4			Benefit for income tax
	(6		)	(4		)	Total net of income tax

Total reclassifications for the period	$	(6	)	$	—

Details about accumulated other
comprehensive income (loss) components

Amounts Reclassified from
other comprehensive income (loss)

Affected line item in
statement of operations

Three Months Ended
January 31,
2018
2017

Unrealized gain (loss) on derivatives $ —

$ 1
Cost of products
—

1
Total before income tax
—

(1 ) (Provision) benefit for income tax
—

—
Total net of income tax
Net defined benefit pension cost and post retirement plan costs:

Actuarial net loss (9 )
(22 )
Prior service benefit 2

2

(7 )
(20 ) Total before income tax
1

6
(Provision) benefit for income tax
(6 )
(14 ) Total net of income tax

Total reclassifications for the period $ (6 )
$ (14 )

Amounts in parentheses indicate reductions to income and increases to other comprehensive income (loss).

Reclassifications out of accumulated other comprehensive income (loss) of prior service benefit and actuarial net loss in respect of retirement plans and post retirement pension plans are included in the computation of net periodic cost together with curtailments and settlements (see Note 1013, "Retirement Plans and Post Retirement Pension Plans").

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

~~15.~~18. SEGMENT INFORMATION

Description of segments. We are a global leader in life sciences, diagnostics and applied chemical markets, providing application focused solutions that include instruments, software, services and consumables for the entire laboratory workflow. Agilent has three business segments comprised of the life sciences and applied markets business, diagnostics and genomics business and the Agilent CrossLab business each of which comprises a reportable segment. The ~~three~~3 operating segments were determined based primarily on how the chief operating decision maker views and evaluates our operations. Operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance. Other factors, including market separation and customer specific applications, go-to-market channels, products and services and manufacturing are considered in determining the formation of these operating segments.

A description of our three reportable segments is as follows:

Our life sciences and applied markets business provides application-focused solutions that include instruments and software that enable customers to identify, quantify and analyze the physical and biological properties of substances and products, as well as enable customers in the clinical and life sciences research areas to interrogate samples at the molecular and cellular level. Key product categories include: liquid chromatography ("LC") systems and components; liquid chromatography mass spectrometry ("LCMS") systems; gas chromatography ("GC") systems and components; gas chromatography mass spectrometry ("GCMS") systems; inductively coupled plasma mass spectrometry ("ICP-MS") instruments; atomic absorption ("AA") instruments; microwave plasma-atomic emission spectrometry ~~(“MP-AES”~~("MP-AES") instruments; inductively coupled plasma optical emission spectrometry ("ICP-OES") instruments; raman spectroscopy; cell analysis plate based assays; flow cytometer; real-time cell analyzer; cell imaging systems; microplate reader; laboratory software for sample tracking; information management and ~~informatics~~analytics; laboratory automation and robotic systems; ~~laboratory automation;~~ dissolution testing; vacuum pumps and measurement technologies.

~~AGILENT TECHNOLOGIES, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

Our diagnostics and genomics business is comprised of ~~five~~six areas of activity providing active pharmaceutical ingredients ("APIs") for oligo-based therapeutics as well as solutions that include reagents, instruments, software and consumables, which enable customers in the clinical and life sciences research areas to interrogate samples at the cellular and molecular level. First, our genomics business includes arrays for DNA mutation detection, genotyping, gene copy number determination, identification of gene rearrangements, DNA methylation profiling, gene expression profiling, as well as next generation sequencing ("NGS") target enrichment and genetic data management and interpretation support software. This business also includes solutions that enable clinical labs to identify DNA variants associated with genetic disease and help direct cancer therapy. Second, our nucleic acid solutions business provides equipment and expertise focused on production of synthesized oligonucleotides under pharmaceutical good manufacturing practices ("GMP") conditions for use as ~~active pharmaceutical ingredients ("API")~~API in an emerging class of drugs that utilize nucleic acid molecules for disease therapy. ~~Next,~~Third, our pathology solutions business is focused on product offerings tofor cancer diagnostics and anatomic pathology workflows. The broad portfolio of offerings includes immunohistochemistry ~~(“IHC”~~("IHC"), in situ hybridization ~~(“ISH”~~("ISH"), hematoxylin and eosin (“("H~~&E”~~&E") staining and special staining. WeFourth, we also collaborate with a number of major pharmaceutical companies to develop new potential pharmacodiagnostics, also known as companion diagnostics, which may be used to identify patients most likely to benefit from a specific targeted therapy. ~~Finally,~~Fifth, the reagent partnership business is a provider of reagents used for turbidimetry and flow cytometry. Finally, our biomolecular analysis business provides complete workflow solutions, including instruments, consumables and software, for quality control analysis of nucleic acid samples. Samples are analyzed using quantitative and qualitative techniques to ensure accuracy in further genomics analysis techniques utilized in clinical and life science research applications.

The Agilent CrossLab business spans the entire lab with its extensive consumables and services portfolio, which is designed to improve customer outcomes. ~~The majority~~Most of the portfolio is vendor neutral, meaning Agilent can serve and supply customers regardless of their instrument purchase choices. Solutions range from chemistries and supplies to services and software helping to connect the entire lab. Key product categories in consumables include GC and LC columns, sample preparation products, custom chemistries, and a large selection of laboratory instrument supplies. Services include startup, operational, training and compliance support, software as a service, as well as asset management and consultative services that help increase customer productivity. Custom service and consumable bundles are tailored to meet the specific application needs of various industries and to keep instruments fully operational and compliant with the respective industry requirements.

A significant portion of the segments' expenses arise from shared services and infrastructure that we have historically provided to the segments in order to realize economies of scale and to efficiently use resources. These expenses, collectively called corporate charges, include legal, accounting, tax, real estate, insurance services, information technology services, treasury, order administration, other corporate infrastructure expenses and costs of centralized research and development. Charges are allocated to the segments, and the allocations have been determined on a basis that we consider to be a reasonable reflection of the utilization of services provided to or benefits received by the segments. In addition, we do not allocate amortization and impairment of

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

acquisition-related intangible assets, ~~pension curtailment or settlement gains, restructuring and~~ transformational initiatives expenses, acquisition and integration ~~costs, special compliance~~ costs, some nucleic acid solutions division ("NASD") site costs and certain other charges to the operating margin for each segment because management does not include this information in its measurement of the performance of the operating segments. Transformational initiatives include expenses associated with targeted cost reduction activities such as manufacturing transfers, site consolidations, legal entity and other business reorganizations and in-sourcing or outsourcing of activities.

The following tables reflect the results of our reportable segments under our management reporting system. The performance of each segment is measured based on several metrics, including segment income from operations. These results are used, in part, by the chief operating decision maker in evaluating the performance of, and in allocating resources to, each of the segments.

~~AGILENT TECHNOLOGIES, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

The profitability of each of the segments is measured after excluding ~~restructuring~~transformational initiatives, acquisition and ~~asset impairment charges,~~integration costs, investment gains and losses, interest income, interest expense, acquisition and integration costs, non-cash amortization and other items as noted in the reconciliations below:



	Three Months Ended
	January 31,
	2020		2019
	(in millions)
Net Revenue:
Life Sciences and Applied Markets	$	638	$	607
Diagnostics and Genomics	249		235
Agilent CrossLab	470		442
Total net revenue	$	1,357	$	1,284

Segment Income From Operations:
Life Sciences and Applied Markets	$	158	$	159
Diagnostics and Genomics	34		33
Agilent CrossLab	119		105
Total segment income from operations	$	311	$	297

Three Months Ended
January 31,
2018 2017
(in millions)
Net Revenue:
Life Sciences and Applied Markets $ 618
$ 540
Diagnostics and Genomics 185
164
Agilent CrossLab 408
363
Total net revenue $ 1,211
$ 1,067

Segment Income From Operations:

Life Sciences and Applied Markets $ 159
$ 126
Diagnostics and Genomics 22
23
Agilent CrossLab 88
74
Total segment income from operations $ 269
$ 223

The following table reconciles reportable segments’ income from operations to Agilent’s total enterprise income before taxes:



	Three Months Ended
	January 31,
	2020			2019
	(in millions)
Total reportable segments’ income from operations	$	311		$	297
Transformational initiatives	(13		)	(5		)
Amortization of intangible assets related to business combinations	(48		)	(28		)
Acquisition and integration costs	(13		)	(10		)
NASD site costs	—			(2		)
Other⁽¹⁾	(22		)	(2		)
Interest income	3			10
Interest expense	(20		)	(18		)
Other income (expense), net	21			6
Income before taxes, as reported	$	219		$	248

(1) The other category primarily includes legal costs related to our pursuing our claim against a third party in addition to other miscellaneous adjustments and settlements.

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

Three Months Ended
January 31,
2018 2017
(in millions)
Total reportable segments’ income from operations $ 269
$ 223
Transformational initiatives (4 ) (2 )
Amortization of intangible assets related to business combinations (25 ) (31 )
Acquisition and integration costs (3 ) (14 )
Pension settlement gain 5
32
NASD site costs (2 ) —
Special compliance costs (1 ) —
Other —
(2 )
Interest income 9
4
Interest expense (20 ) (20 )
Other income (expense), net 5
3
Income before taxes, as reported $ 233
$ 193

The following table reflects segment assets under our management reporting system. Segment assets include allocations of corporate assets, goodwill, net other intangibles and other assets. Unallocated assets primarily consist of cash, cash equivalents, the valuation allowance relating to deferred tax assets and other assets.



	January 31, 2020		October 31, 2019
	(in millions)
Segment Assets:
Life Sciences and Applied Markets	$	3,187	$	3,202
Diagnostics and Genomics	2,612		2,620
Agilent CrossLab	1,360		1,331
Total segment assets	$	7,159	$	7,153

January 31,
2018 October 31,
2017
(in millions)
Segment Assets:
Life Sciences and Applied Markets $ 1,804
$ 1,753
Diagnostics and Genomics 2,130
2,119
Agilent CrossLab 1,181
1,138
Total segment assets $ 5,115
$ 5,010

~~AGILENT TECHNOLOGIES, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~19. SUBSEQUENT EVENT

~~16. SUBSEQUENT EVENTS~~In February 2020, the company reached a settlement agreement with Twist Bioscience Corporation ("Twist") under which Twist has agreed to pay us $22.5 million to settle our intellectual property claim against Twist. The settlement agreement provides a license to Twist for discrete aspects of Agilent’s oligo-synthesis technology and successfully resolves all outstanding litigation between all parties.

On February 23, 2018, we exercised our option to acquire all of the remaining shares of Lasergen, Inc. that we do not already own for consideration of $105 million. The completion of this transaction is contingent on executing the merger agreement and certain closing conditions.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED)

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q and our Annual Report on Form 10-K. This report contains forward-looking statements including, without limitation, statements regarding ~~trends, seasonality~~growth opportunities, including for revenue and ~~growth in,~~our end markets, strength and drivers of the markets we sell into, sales funnels, our strategic direction, new product and service introductions and the position of our current products and services, market demand for and adoption of our products, the ability of our products and solutions to address customer needs and meet industry requirements, our focus on differentiating our product solutions, improving our customers’ experience and growing our earnings, future ~~effective tax rate~~financial results, our operating margin, mix, our investments, including in manufacturing infrastructure, research and ~~tax valuation allowance, earnings from~~development and expanding and improving our ~~foreign subsidiaries, lease~~applications and ~~site services income from Keysight,~~solutions portfolios, expanding our position in developing countries and emerging markets, our focus on balanced capital allocation, our contributions to our pension and other defined benefit plans, impairment of goodwill and other intangible assets, the effect of the U.S. and other tariffs, the impact of foreign currency movements, ~~on our performance,~~ our hedging programs ~~indemnification, new product~~ and ~~service introductions,~~other actions to offset the ~~ability~~effects of tariffs and foreign currency movements, our ~~products to meet market needs, adoption of our products, changes to our manufacturing processes, the use of contract manufacturers, out sourcing~~future effective tax rate, tax valuation allowance and ~~third-party package delivery services, source and supply of materials used in our products,~~unrecognized tax benefits, the impact of local government regulations on our ability to pay vendors or conduct operations, our ~~liquidity position, our~~ ability to ~~generate~~satisfy our liquidity requirements, including through cash generated from operations, ~~growth in our businesses, our investments, including in research and development,~~ the potential impact of adopting new accounting pronouncements, indemnification, source and supply of materials used in our ~~financial results, our operating margin,~~products, our sales, our purchase commitments, our capital expenditures, ~~our contributions to our pension~~the integration and ~~other defined benefit plans, our strategic initiatives, our cost-control activities and other cost saving initiatives, the integration~~effects of our acquisitions and other transactions, ~~impairment~~the effects of ~~goodwill~~the public health crisis in China and ~~other intangible assets,~~worldwide and our stock repurchase program ~~our declared~~and dividends ~~and the existence of economic instability,~~ that involve risks and uncertainties. Our actual results could differ materially from the results contemplated by these forward-looking statements due to various factors, including those discussed in Part II Item 1A and elsewhere in this Form 10-Q.

Basis of Presentation

The financial information presented in this Form 10-Q is not audited and is not necessarily indicative of our future consolidated financial position, results of operations, comprehensive income (loss) or cash flows. Our fiscal year-end is October 31, and our fiscal quarters end on January 31, April 30 and July 31. Unless otherwise stated, these dates refer to our fiscal year and fiscal periods.

Executive Summary

Agilent Technologies, Inc. ("we", "Agilent" or the "company"), incorporated in Delaware in May 1999, is a global leader in life sciences, diagnostics and applied chemical markets, providing application focused solutions that include instruments, software, services and consumables for the entire laboratory workflow.

Net revenue of ~~$1,211~~$1,357 million for the three months ended January 31, ~~2018~~2020 increased 146 percent when compared to the same period last year. In January 2020, net revenue was negatively impacted due to the public health crisis in China and the extension of the Lunar New Year resulting in fewer selling days in the month. Foreign currency movements for the three months ended January 31, 2020 had an overall unfavorable impact on revenue of less than 1 percentage point when compared to the same period last year. Revenue generated by our life sciences and applied markets business for the three months ended January 31, 2020 increased 5 percent when compared to the same period last year. Revenue from our recent acquisitions contributed approximately 8 percentage points to our life sciences and applied markets business revenue growth in the three months ended January 31, 2020. Foreign currency movements for the three months ended January 31, 2020 had an overall unfavorable impact on revenue of less than 1 percentage point when compared to the same period last year. Revenue generated by our diagnostics and genomics business for the three months ended January 31, 2020 increased 6 percent when compared to the same period last year.Foreign currency movements for the three months ended January 31, 2020 had an overall unfavorable impact on revenue of 1 percentage point when compared to the same period last year. Revenue generated by our Agilent CrossLab business in the three months ended January 31, 2020 increased 6 percent when compared to the same period last year. Foreign currency movements for the three months ended January 31, ~~2018~~2020 had ~~a favorable~~an overall unfavorable impact on revenue of ~~approximately 4~~1 percentage ~~points~~point when compared to the same ~~period~~periods last year. We calculate the impact of foreign currency exchange rates movements by applying the actual foreign currency exchange rates in effect during the last month of the current year period to both the current year and prior year periods.

~~Revenue in the life sciences and applied markets business~~Net income for the three months ended January 31, 2018, increased 14 percent when compared to the same period last year. Foreign currency movements had an overall favorable impact on revenue of 3 percentage points in the three months ended January 31, 2018 when compared to the same period last year. For the three months ended January 31, 2018, our performance within the life sciences market showed revenue growth from all our key end markets, led by strong growth in the pharmaceutical and biotechnology market and strong growth in our academia and government market. Within the applied markets, there2020 was ~~strong revenue growth in the chemical and energy markets and the environmental market in the three months ended January 31, 2018, when compared to the same period last year.~~

Revenue in the diagnostics and genomics business for the three months ended January 31, 2018, increased 13 percent when compared to the same period last year. Foreign currency movements had an overall favorable impact of 4 percentage points on revenue in the three months ended January 31, 2018 when compared to the same period last year. For the three months ended January 31, 2018, our performance within the diagnostics and clinical market continued to improve when compared to the same period last year, led by strong revenue growth from our pathology and companion diagnostics businesses.

the three months ended January 31, 2018 when compared to the same period last year. For the three months ended January 31, 2018, revenue grew across nearly all key markets led by strong growth in the food, chemical and energy and pharmaceutical and biotechnology markets primarily driven by our consumables portfolio.

~~Net loss for the three months ended~~ ~~January 31, 2018~~ ~~was $320~~$197 million compared to net income of ~~$168~~$504 million for the corresponding period last year. Net ~~loss~~income for the three months ended January 31, ~~2018~~2019 was ~~significantly~~ impacted by ~~the~~a discrete tax ~~charge~~benefit of ~~$533~~$299 million related to the ~~enactment~~extension of the ~~U.S. Tax Cuts and Jobs Act (the “Tax Act”) passed on December 22, 2017. See Note 4, "Income Taxes" for more details.~~company’s tax incentive in Singapore. In the three months ended January 31, ~~2018~~,2020, cash used in operations was $59 million which includes an one-time tax outflow of $226 million related to a transfer of intangibles compared to cash generated from operations ~~was $215 million compared to $116~~of $213 million in the same period last year.

For the three months ended January 31, ~~2018~~2020 and ~~2017,~~2019, cash dividends of ~~$48~~$56 million and ~~$42~~$52 million, respectively, were paid on the company's outstanding common stock. ~~The timing and amounts of any future dividends are subject to determination and approval by our board of directors.~~

On ~~May 28, 2015,~~November 19, 2018 we announced that our board of directors had approved a new share repurchase program (the ~~"2015~~"2019 repurchase program"). designed, among other things, to reduce or eliminate dilution resulting from issuance of stock under the company's employee equity incentive programs. The ~~2015~~2019 repurchase program authorizes the purchase of up to ~~$1.14~~$1.75 billion of our common stock at the company's discretion ~~through~~ and ~~including November 1, 2018.~~has no fixed termination date. The ~~2015~~2019 repurchase program does not require the company to acquire a specific number of shares and may be suspended, amended or discontinued at any time. During the three months ended January 31, ~~2018,~~2020, we repurchased and retired approximately ~~674,000~~725,827 shares for ~~$47~~$60 million under this authorization. During the three months ended January 31, 2019, we repurchased and retired approximately 1.1 million shares for $75 million under this authorization. As of January 31, 2018, we retired approximately 637,000 shares and the remaining 37,000 shares as of January 31, 2018 were retired in February 2018. During the three months ended January 31, 2017, we repurchased and retired approximately 2.5 million shares for $111 million, under this authorization. As of January 31, 2018,2020, we had remaining authorization to repurchase up to ~~$563~~$967 million of our common stock under this program.

Looking forward, we continue to focus on ~~the growth of operating margin in our businesses by exploring new ways to simplify our operations, differentiate~~differentiating product solutions, ~~and improve~~improving our customers' ~~experience.~~experience, continued growth and earnings expansion. Based on current information, we expect the recent public health crisis that started in China and has grown worldwide will reduce business results in the first half of fiscal year 2020, but despite the short-term uncertainty caused by this health crisis, we remain optimistic about our long-term growth opportunities. In addition, we remain focused on ~~returning~~ a ~~significant proportion of our cash flow to shareholders~~balanced capital allocation through our dividend and share repurchase programs. We ~~started~~expect foreign currency to negatively impact revenue for 2020 but we also anticipate the contribution from our acquisitions in fiscal year ~~2018 with good momentum and strong broad-based growth for all of our businesses. While it is difficult~~2019 to ~~predict future market conditions, we remain optimistic about our growth opportunities in most of our key end markets. The favorable effects of changes in foreign~~partially offset the currency exchange rates increased revenue by approximately 4 percentage points in the three months ended January 31, 2018. Costs and expenses, incurred in local currency, were subject to the unfavorable effects due to changes in foreign currency exchange rates in the three months ended January 31, 2018, increasing our overall net exposure. The impact of foreign currency exchange rates movements can be positive or negative in any period and is calculated by applying the actual foreign currency exchange rates in effect during the last month of the current year period to both the current year and prior year periods.impact.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. The preparation of condensed consolidated financial statements in conformity with GAAP in the U.S. requires management to make estimates, judgments and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are revenue recognition, inventory valuation, share-based compensation, retirement and post-retirement benefit plan assumptions, goodwill and purchased intangible assets and accounting for income taxes. ~~Other than accounting for income taxes as described below, there~~There have been no significant changes to our critical accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2017.~~2019. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made and if different estimates that reasonably could have been used or changes in the accounting estimate that are reasonably likely to occur could materially change the financial statements.

~~Accounting for Income Taxes.~~ We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits and deductions, and in the calculation of certain tax assets and liabilities which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as interest and penalties related to uncertain tax positions. Significant

changes to these estimates may result in an increase or decrease to our tax provision in a subsequent period. On a quarterly basis, we provide for income taxes based upon an estimated annual effective tax rate. The effective tax rate is highly dependent upon the geographic composition of worldwide earnings, tax regulations governing each region, availability of tax credits and the effectiveness of our tax planning strategies. We monitor the changes in many factors and adjust our effective income tax rate on a timely basis. If actual results differ from these estimates, this could have a material effect on our financial condition and results of operations.

Significant management judgment is also required in determining whether deferred tax assets will be realized in full or in part. When it is more-likely-than-not that all or some portion of deferred tax assets may not be realized, a valuation allowance must be established against such deferred tax assets. We consider all available positive and negative evidence on a jurisdiction-by-jurisdiction basis when assessing whether it is more likely than not that deferred tax assets are recoverable. We consider evidence such as our past operating results, the existence of losses in recent years and our forecast of future taxable income. At January 31, 2018, we continue to recognize a valuation allowance for certain U.S. and U.S state and foreign deferred tax assets. We intend to maintain a valuation allowance in these jurisdictions until sufficient positive evidence exists to support its reversal.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax law and regulations in a multitude of jurisdictions. Although the guidance on the accounting for uncertainty in income taxes prescribes the use of a recognition and measurement model, the determination of whether an uncertain tax position has met those thresholds will continue to require significant judgment by management. In accordance with the guidance on the accounting for uncertainty in income taxes, for all U.S. and other tax jurisdictions, we recognize potential liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes and interest will be due. The ultimate resolution of tax uncertainties may differ from what is currently estimated, which could result in a material impact on income tax expense. If our estimate of income tax liabilities proves to be less than the ultimate assessment, a further charge to expense would be required. If events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when we determine the liabilities are no longer necessary. We include interest and penalties related to unrecognized tax benefits within the provision for income taxes on the consolidated statements of operations.

On December 22, 2017, the Tax Cuts and Jobs Act ("Tax Act") was enacted into law. The Tax Act significantly changes the existing U.S. tax law and includes numerous provisions that affect our business. ASC 740, Income Taxes, requires companies to recognize the effect of the tax law changes in the period of enactment. However, the SEC staff issued Staff Accounting Bulletin 118 which allows companies to record provisional amounts during a measurement period that should not extend beyond one year from the Tax Act enactment date. We have recognized the provisional tax charge of $480 million due to transition tax liability and $53 million due to the impact of reduction in U.S. tax rates in the period when the tax law was enacted as a component of provision for income taxes from continuing operations. See Note 4, "Income Taxes" for more details. The company will continue to assess the impact of the enacted tax law, expected further guidance from federal and state tax authorities as well as any further guidance for the associated income tax accounting on its business and consolidated financial statements. The company will also continue to evaluate the impact of the tax law change as it relates to the accounting for the outside basis difference of its foreign entities. We expect to fully complete our provisional calculation within the reasonable measurement period allowed by SEC staff guidance.

Adoption of New Pronouncements

See Note 2, “New Accounting Pronouncements,” to the condensed consolidated financial statements for a description of new accounting pronouncements.

Foreign Currency

Our revenues, costs and expenses, and monetary assets and liabilities and equity are exposed to changes in foreign currency exchange rates as a result of our global operating and financing activities. ~~The favorable effects of changes in foreign~~Foreign currency ~~exchange rates has increased revenue by approximately 4 percentage points in~~movements for the three months ended January 31, ~~2018. Costs and expenses, incurred in local currency, were subject~~2020 had an overall unfavorable impact on revenue of less than 1 percentage point when compared to the ~~unfavorable effects due to changes~~same period last year. When movements in foreign currency exchange rates ~~in the three months ended January 31, 2018, increasing~~have a negative impact on revenue it will also have a positive impact by reducing our ~~overall net exposure.~~costs and expenses. We calculate the impact of foreign currency exchange rates movements by applying the actual foreign currency exchange rates in effect during the last month of each quarter of the current year ~~period~~ to both the applicable current and prior year periods. We hedge revenues, expenses and balance sheet exposures that are not denominated in the functional currencies of our subsidiaries on a short term and anticipated basis. We do experience some fluctuations within individual lines of the condensed consolidated statement of operations and balance sheet because our hedging program is not designed to offset the currency movements in each category of revenues, expenses, monetary assets and liabilities. Our hedging program is designed to hedge currency movements on a relatively short-term basis (up to a rolling twelve-month period). ~~Therefore, we are exposed to~~We may also hedge equity balances denominated in foreign currency ~~fluctuations over the longer term. To~~on a long term basis.To the extent that we are required to pay for all, or portions, of an ~~acquisition~~

acquisition price in foreign currencies, we may enter into foreign exchange contracts to reduce the risk that currency movements will impact the U.S. dollar cost of the transaction.

Results from Operations

Net Revenue


	Three Months Ended				Year over Year Change	Three Months Ended				Year over Year Change
	January 31,				Three	January 31,				Three
	2018		2017		Months	2020		2019		Months
	(in millions)					(in millions)
Net revenue:
Products	$	930	$	815	14%	$	1,023	$	980	4%
Services and other	281		252		12%	334		304		10%
Total net revenue	$	1,211	$	1,067	14%	$	1,357	$	1,284	6%

Net revenue of ~~$1,211~~$1,357 million for the three months ended January 31, ~~2018~~2020 increased 146 percent when compared to the same period last year. Revenue from our acquisitions in fiscal year 2019 contributed approximately 4 percentage points to our revenue growth in the three months ended January 31, 2020. In January 2020, net revenue was negatively impacted due to the public health crisis in China and the extension of the Lunar New Year resulting in fewer selling days in the month. Foreign currency movements for the three months ended January 31, 2020 had an unfavorable impact on revenue of less than 1 percentage point when compared to the same period last year.

Revenue from products increased 4 percent for the three months ended January 31, 2020 when compared to the same period last year. The growth in product revenue was driven by increased sales within our cell analysis business, mainly due to contributions from our recent acquisitions. Excluding recent acquisitions, life science and applied markets revenue from products decreased approximately 2 percent.

Services and other revenue increased 10 percent for the three months ended January 31, 2020 when compared to the same period last year. Services and other revenue consists of revenue generated from our three business segments; Agilent CrossLab, diagnostics and genomics and our life science and applied markets business. Some of the prominent services in the Agilent CrossLab business include repair and maintenance on multi-vendor instruments, compliance services and installation services. Services in the diagnostics and genomics business include consulting services related to the companion diagnostics and nucleic acid businesses. Services in the life science and applied markets business include repair and maintenance and installation services.

For the three months ended January 31, 2020, the service revenue from the Agilent CrossLab business increased 8 percent with a less than 1 percentage point unfavorable currency impact on revenue when compared to the same period last year. The growth in the service revenue from the Agilent CrossLab business was driven by strong growth in the Asia Pacific region. From a service portfolio perspective, the growth came from a wide range of service offerings.

For the three months ended January 31, 2020, the service revenue from the diagnostics and genomics business increased 5 percent when compared to the same period last year. The increase in diagnostics and genomics service revenue reflects growth in the pathology and companion diagnostics service businesses.

For the three months ended January 31, 2020, the service revenue from the life sciences and applied markets business increased significantly when compared to the same period last year. The increase in life sciences and applied markets service revenue is primarily due to the additional service revenue within the cell analysis business due to our recent acquisitions.

Net Revenue By Segment



	Three Months Ended				Year over Year Change
	January 31,				Three
	2020		2019		Months
	(in millions)
Net revenue by segment:
Life sciences and applied markets	$	638	$	607	5%
Diagnostics and genomics	249		235		6%
Agilent CrossLab	470		442		6%
Total net revenue	$	1,357	$	1,284	6%

Revenue in the life sciences and applied markets business for the three months ended January 31, 2020, increased 5 percent when compared to the same period last year. However, our instrumentation revenue has decreased mainly due to current subdued demand. Revenue from our recent acquisitions contributed approximately 8 percentage points to our revenue growth in the three months ended January 31, 2020. Foreign currency movements for the three months ended January 31, 2020 had an overall unfavorable impact on revenue of less than 1 percentage point when compared to the same period last year. For the three months ended January 31, 2020, revenue growth within the academia and government, diagnostics and clinical and pharmaceutical markets was strong which was partially offset by declines in revenue from the food market when compared to the same period last year.

Revenue in the diagnostics and genomics business for the three months ended January 31, 2020, increased 6 percent when compared to the same period last year.Foreign currency movements for the three months ended January 31, 2020 had an overall unfavorable impact on revenue of 1 percentage point when compared to the same period last year. For the three months ended January 31, 2020, revenue growth within the diagnostics and clinical market and the pharmaceutical market continued to be strong led by performance from our pathology, biomolecular analysis and our nucleic acid solutions businesses.

Revenue generated by Agilent CrossLab in the three months ended January 31, 2020, increased 6 percent when compared to the same period last year. Foreign currency movements for the three months ended January 31, ~~2018~~2020 had ~~a favorable~~an overall unfavorable impact on revenue of ~~approximately 4~~1 percentage ~~points when compared to the same period last year.~~

Services and other revenue increased 12 percent for the three months ended January 31, 2018 compared to the same period last year. Services and other revenue primarily consists of revenue generated from Agilent CrossLab services and consulting services in the companion diagnostics business. Some of the prominent services include repair and maintenance on multi-vendor instruments, compliance services and installation services. Agilent CrossLab service revenue increased 12 percent with a 4 percentage point favorable currency impact, driven by strong growth in the Asia Pacific region, growth across a broad spectrum of service types, and strong growth in nearly all end markets. Companion diagnostics business revenue increased 10 percent with no material currency impact, driven by the demand from our pharmaceutical partners.

~~Net Revenue By Segment~~

Three Months Ended Year over Year Change
January 31, Three
2018 2017 Months
(in millions)
Net revenue by segment:
Life sciences and applied markets $ 618
$ 540
14%
Diagnostics and genomics 185
164
13%
Agilent Crosslab 408
363
12%
Total net revenue $ 1,211
$ 1,067
14%

Revenue in the life sciences and applied markets business for the three months ended January 31, 2018, increased 14 percent when compared to the same period last year. Foreign currency movements had an overall favorable impact on revenue of 3 percentage points in the three months ended January 31, 2018 when compared to the same period last year. For the three months ended January 31, ~~2018, our performance within the life sciences market showed~~2020, revenue growth ~~from~~was strong across all ~~our~~ key end ~~markets, led by strong~~markets. Revenue growth ~~in the pharmaceutical and biotechnology market and strong growth in our academia and government market. Within the applied markets, there~~ was ~~strong revenue growth in the chemical and energy markets and the environmental market in the three months ended January 31, 2018, when compared to the same period last year.~~

Revenue generated by Agilent CrossLab in the three months ended January 31, 2018, increased 12 percent when compared to the same period last year. Foreign currency movements had an overall favorable impact of 3 percentage points on revenue in the three months ended January 31, 2018 when compared to the same period last year. For the three months ended January 31, 2018, revenue grew across nearly all key markets led by strong growth in the food, chemical and energy and pharmaceutical and biotechnology markets primarily driven broadly by our entire services and consumables portfolio.

Operating Results


	Three Months Ended						Year over Year Change	Three Months Ended						Year over Year Change
	January 31,						Three	January 31,						Three
	2018			2017			Months	2020			2019			Months
(in millions, except margin data)
Total gross margin	55.6		%	53.8		%	2 ppts	53.3		%	55.1		%	(2) ppts
Operating margin	19.7		%	19.3		%	—

(in millions)
Research and development	$	93		$	79		17%	$	104		$	102		1%
Selling, general and administrative	$	341		$	289		18%	$	404		$	355		14%
Operating margin								15.9		%	19.5		%	(4) ppts

Total gross margin for the three months ended January 31, ~~2018 increased~~2020 decreased 2 percentage points when compared to the same period last year. ~~Increases in total gross~~Gross margin for the three months ended January 31, ~~2018,~~2020 reflects unfavorable product mix, higher ~~sales volume, favorable business mix, lower manufacturing materials costs and lower~~intangible amortization expense ~~of intangible assets~~and higher fixed costs related to the new manufacturing facility in Frederick, Colorado, partially offset by ~~wage increases~~favorable currency impact.

Research and ~~variable pay.~~

~~Total operating margin was flat in~~development expenses for the three months ended January 31, 2018 when compared to the same period last year. In the three months ended January 31, 2018, total operating margin was impacted by improved gross margin, lower amortization expense and lower acquisition and integration costs offset by2020 increased ~~research and development costs, general administrative costs, wages and variable pay when compared to the same period last year.~~

~~Research and development expenses in the three months ended January 31, 2018 increased 17~~1 percent when compared to the same period last year. Research and development expenses for the three months ended January 31, 2020 increased due ~~to increased program spending on new products related to all of our businesses in addition~~ to higher wages and ~~variable pay when compared~~additional expenses related to ~~spending in the same period last year. We remain committed to invest significantly in research~~recent acquisitions partially offset by operational savings and ~~development and have focused our development efforts on key strategic opportunities in order to align our business with available markets and position ourselves to capture market share.~~favorable currency impact.

Selling, general and administrative expenses ~~increased 18 percent in~~for the three months ended January 31, ~~2018~~2020 increased 14 percent when compared to the same period last year. ~~Selling,~~The increase in selling, general and administrative expenses ~~increased~~for the three months ended

January 31, 2020 was due to ~~increased corporate~~higher wages, higher intangible amortization expense, higher acquisition and integration costs, higher ~~share-based compensation expense,~~transformation initiative expenses and higher ~~selling and administrative~~legal costs ~~unfavorable currency movements,~~in connection with our claim against a third party.

Total operating margin for the three months ended January 31, 2020 decreased 4 percentage points when compared to the same period last year. Operating margin for the three months ended January 31, 2020 was impacted by higher wages, higher acquisition-related expenses, higher transformation initiatives and ~~variable pay.~~increased legal costs associated with our claim against a third party.

At January 31, ~~2018,~~2020, our headcount was approximately ~~13,800~~16,300 as compared to approximately ~~12,600~~15,300 at January 31, ~~2017.~~2019.

Other income (expense), net

In the three months ended January 31, ~~2018~~2020 and ~~2017,~~2019, other income (expense), net, includes $3 million of income in both periods related to the provision of site service costs to, and lease income from ~~Keysight.~~Keysight Technologies, Inc. The costs associated with these services are reported within income from operations. Also included in other income (expense), net for the three months ended January 31, 2020 is a gain on the fair value of an equity investment of approximately $16 million.

Income Taxes

million. The significant component of the net discrete tax benefit for the three months ended January 31, 2017 included a $11 million tax expense related to an employee pension settlement gain and $7 million of tax benefit for the settlement of an audit in Italy.

~~2017 U.S. Tax Reform - Tax Cuts and Jobs Act~~

ASC 740, Income Taxes, requires companies to recognize the effect of the tax law changes in the period of enactment. However, the SEC staff issued Staff Accounting Bulletin 118 ("SAB 118") which allows companies to record provisional amounts during a measurement period not extending beyond one year from the Tax Act enactment date. As of January 31, 2018, the company has not completed the accounting for all the impacts of the Tax Act. During the quarter, the company recognized a provisional amount of $533 million which includes (1) an estimated provision of $480 million of U.S. transition tax and correlative items on deemed repatriated earnings of non-U.S. subsidiaries and (2) an estimated provision of $53 million associated with the impact of decreased U.S. corporate tax rate as described below.

~~Deemed Repatriation Transition Tax ("Transition Tax")~~: The Transition Tax is based on the company’s total unrepatriated post-1986 earnings and profits ("E&P") of its foreign subsidiaries and the amount of non-U.S. taxes paid on such earnings. Historically, the company permanently reinvested a significant portion of these post-1986 E&P outside the U.S. For the remaining portion, the company previously accrued deferred taxes. Since the Tax Act required all foreign earnings to be taxed currently, the company recorded a provisional income tax expense of $643 million for its one-time transition U.S. federal tax and a benefit of $163 million for the reversal of related deferred tax liabilities. The resulting $480 million net transition tax expense, reduced by existing tax credits, will be paid over 8 years in accordance with the election available under the Tax Act.These amounts represent the best estimate of all required calculations based on currently available information. The one-time transition tax is based in part on cash and illiquid asset amounts present on various comparable measurement dates, some of which are as of our future fiscal year end. As a result, the company’s calculation of the transition tax will change as the measurement dates occur and as federal and state tax authorities provide further guidance.

prescribed by SAB 118, the company will evaluate, among other factors, the need for cash within and outside the United States, legal entity capitalization requirements, cash controls imposed in foreign jurisdictions, withholding taxes and the availability to offset with foreign tax credits in determining its investment assertion on its accumulated foreign earnings.

Segment Overview

We continue to have three business segments comprised of the life sciences and applied markets business, diagnostics and genomics business and the Agilent CrossLab business.

Life Sciences and Applied Markets

Our life sciences and applied markets business provides application-focused solutions that include instruments and software that enable customers to identify, quantify and analyze the physical and biological properties of substances and products, as well as enable customers in the clinical and life sciences research areas to interrogate samples at the molecular and cellular level. Key product categories include: liquid chromatography ("LC") systems and components; liquid chromatography mass spectrometry ("LCMS") systems; gas chromatography ("GC") systems and components; gas chromatography mass spectrometry ("GCMS") systems; inductively coupled plasma mass spectrometry ("ICP-MS") instruments; atomic absorption ("AA") instruments; microwave plasma-atomic emission spectrometry ~~(“MP-AES”~~("MP-AES") instruments; inductively coupled plasma optical emission spectrometry ("ICP-OES") instruments; raman spectroscopy; cell analysis plate based assays; flow cytometer; real-time cell analyzer; cell imaging systems; microplate reader; laboratory software for sample tracking; information management and ~~informatics systems;~~analytics; laboratory automation and robotic systems; dissolution testing; vacuum pumps and measurement technologies.

Net Revenue

Three Months Ended Year over Year Change
January 31, Three
2018 2017 Months
(in millions)

Net revenue $ 618
$ 540
14%



	Three Months Ended				Year over Year Change
	January 31,				Three
	2020		2019		Months
	(in millions)

Net revenue	$	638	$	607	5%

Life sciences and applied markets business revenue for the three months ended January 31, ~~2018~~2020 increased 145 percent when compared to the same period last year.~~Foreign~~Overall, foreign currency movements for the three months ended January 31, ~~2018~~2020 had an ~~overall favorable~~unfavorable impact of less than 1 percentage point on revenue ~~of 3 percentage points~~ when compared to the same period last year. Revenue from our acquisitions in fiscal year 2019 contributed approximately 8 percentage points to our revenue growth in the three months ended January 31, 2020. Geographically, revenue increased 723 percent in the Americas with noa 1 percentage point unfavorable currency impact, increased 272 percent in Europe with a 91 percentage point ~~favorable~~unfavorable currency impact and ~~increased 11~~decreased 4 percent in Asia Pacific with ~~a 1 percentage point favorable~~no currency impact for the three months ended January 31, ~~2018~~2020 compared to the same period last year. ~~Revenue growth in Europe was mainly driven by strong growth in the academia~~Excluding recent acquisitions and ~~government, chemical and energy and food markets. During~~currency impact, revenue decreased 2 percent during the three months ended January 31, ~~2018, LCMS~~2020. Weaker sales in liquid chromatography, gas chromatography and vacuum were partially offset by increased revenue in liquid chromatography mass spectrometry, informatics and cell analysis products ~~experienced robust growth, particularly in~~when compared to the ~~academia and government markets. Other product areas that saw strong growth in the quarter were GCMS, GC and Spectroscopy.~~same period last year.

For the three months ended January 31, ~~2018, many of our~~2020, revenue results by end markets ~~showed solid growth compared to~~were mixed with the ~~same period last year. Chemical and energy markets continued to show strong growth during the quarter. Academia~~pharmaceutical, academia and government, diagnostics and clinical and environmental markets delivering strong revenue growth ~~was also strong, particularly~~partially offset by weakness in ~~Asia~~the food and ~~Europe where our customers saw increased funding to purchase our products. Pharmaceutical markets had nearly double-digit growth for the current quarter.~~forensics markets. Revenue growth in the ~~food~~pharmaceutical, academia and ~~environmental~~government and diagnostics and clinical markets ~~were also~~was entirely driven by strong ~~led by demand in LCMS.~~performance of our cell analysis products, which includes products from the Lionheart Technologies LLC ("BioTek") acquisition.

Looking forward, despite short term uncertainties, we are optimistic about our long-term growth opportunities in the life sciences and applied markets as our broad portfolio of products and solutions are well suited to address customer needs. We anticipate strong ~~sales funnels given~~growth from our new product introductions and recent acquisitions as we continue to invest in expanding and improving our applications and solutions portfolio. While we anticipate volatility in our markets, we expect continued growth across most end ~~markets.~~markets in the long term.

Operating Results


	Three Months Ended						Year over Year Change	Three Months Ended						Year over Year Change
	January 31,						Three	January 31,						Three
	2018			2017			Months	2020			2019			Months

(in millions, except margin data)
Gross margin	61.8		%	59.6		%	2 ppts	60.2		%	62.1		%	(2) ppts
Operating margin	25.8		%	23.4		%	2 ppts

(in millions)
Research and development	$	55		$	50		10%	$	55		$	56		(2)%
Selling, general and administrative	$	168		$	146		15%	$	171		$	162		5%
Operating margin								24.8		%	26.1		%	(1) ppt

Gross ~~margins~~margin for products and services for the three months ended January 31, ~~2018, increased~~2020, decreased 2 percentage points when compared to the same period last year. ~~The increase in gross margins~~Gross margin for the three months ended January 31, ~~2018~~2020 was ~~due to lower warranty and logistics costs, as well as improved~~impacted by the increased impact of pricing pressures and lower ~~material costs.~~volume partially offset by favorable currency impact.

Research and development expenses for the three months ended January 31, ~~2018, increased 10~~2020, decreased 2 percent when compared to the same period last year. ~~The increase in research~~Research and development for the three ~~and nine~~ months ended January 31, ~~2018~~2020 was ~~due~~impacted by operational savings and favorable currency impact partially offset by additional expenses related to ~~higher program funding in the product division~~our recent acquisitions as well as ~~wage~~higher wages and ~~variable pay increases and unfavorable currency related effects.~~benefits.

Selling, general and administrative expenses for the three months ended January 31, ~~2018,~~2020, increased 155 percent when compared to the same period last year. ~~The increase in selling,~~Selling, general and administrative expenses for the three months ended January 31, ~~2018~~2020 was ~~due primarily~~impacted by higher wages and benefits and additional expenses related to ~~increased marketing~~our recent acquisitions partially offset by operational savings and ~~sales force investments to drive top line growth as well as wage and variable pay increases, higher share-based compensation expenses, and unfavorable~~a favorable currency ~~related effects.~~impact.

Operating margin for ~~product~~products and services for the three months ended January 31, ~~2018 increased 2~~2020 decreased 1 percentage ~~points~~point when compared to the same period last year. The ~~increase~~decrease in operating margin ~~for the three months ended January 31, 2018~~ was due to additional expenses related to our recent acquisitions and unfavorable product mix partially offset by modest revenue ~~growth and improved gross margin.~~growth.

Income from Operations

Income from operations for the three months ended January 31, ~~2018, increased $33~~2020, decreased $1 million on a corresponding revenue ~~increases~~increase of ~~$78~~$31 million.

Diagnostics and Genomics

Our diagnostics and genomics business includes the genomics, nucleic acid contract manufacturing and research and development, pathology, companion diagnostics, ~~and~~ reagent partnership and biomolecular analysis businesses.

Fourth, we also collaborate with a number of major pharmaceutical companies to develop new potential pharmacodiagnostics, also known as companion diagnostics, which may be used to identify patients most likely to benefit from a specific targeted therapy. ~~Finally,~~Fifth, the reagent partnership business is a provider of reagents used for turbidimetry and flow cytometry. Finally, our biomolecular analysis business provides complete workflow solutions, including instruments, consumables and software, for quality control analysis of nucleic acid samples. Samples are analyzed using quantitative and qualitative techniques to ensure accuracy in further genomics analysis techniques utilized in clinical and life science research applications.

Net Revenue

Three Months Ended Year over Year Change
January 31, Three
2018 2017 Months
(in millions)

Net revenue $ 185
$ 164
13%



	Three Months Ended				Year over Year Change
	January 31,				Three
	2020		2019		Months
	(in millions)

Net revenue	$	249	$	235	6%

Diagnostics and genomics business revenue for the three months ended January 31, ~~2018~~2020 increased 136 percent when compared to the same period last year.Foreign currency movements for the three months ended January 31, ~~2018~~2020 had an overall ~~favorable~~unfavorable impact on revenue of 41 percentage ~~points~~point when compared to the same period last year. Geographically, revenue increased 179 percent in the Americas with no currency impact, increased 101 percent in Europe with a 72 percentage point ~~favorable~~unfavorable currency impact and increased 11 percent in Asia Pacific with ~~a 2 percentage point favorable~~no currency impact for the three months ended January 31, ~~2018~~2020 compared to the same period last year. Regionally, the performance in Americas was assisted by growth in sales in the genomics business (particularly target enrichment and arrays), continued strength in pathology business and reagent partnership business. Europe results were supported by growth in our genomics and pathology businesses. Asia Pacific, our relatively smaller region, increased mainly due to higher shipment volumes in China and Japan.

~~The 13 percent revenue growth in~~For the three months ended January 31, ~~2018~~2020, the growth in Americas was ~~due to positive~~driven by strong performance in the nucleic acid solutions, companion diagnostics and reagent partnership businesses. The performance in Europe was driven by the biomolecular analysis and reagent partnership businesses. Asia Pacific growth ~~from almost all businesses~~was mainly driven by the pathology and ~~regions. This~~biomolecular analysis businesses.

For the three months ended January 31, 2020, revenue growth in the diagnostics and genomics business was led by ~~good revenue performance in the pathology business which saw strength due to~~ strong ~~adoption of Agilent’s Dako OMNIS platform and strength in our PD-L1 assays. Good~~ revenue performance in our next generation sequencing solution portfolio offering within the genomics business, was mainly driven by SureSelect, in our NGS target enrichment portfolio. Companion diagnostics business continued to see steady growth with our pharmaceutical partners.nucleic acid solutions and reagent partnership businesses. The ~~end markets in~~ diagnostics and clinical research end markets remain strong and growing driven by an aging population and ~~lifestyle.~~lifestyle developments such as poor diet and physical inactivity.

Looking forward, we are optimistic about our growth opportunities in ~~the diagnostics~~our end markets and continue to invest in expanding and improving our applications and solutions portfolio. We remain positive about our growth in ~~these~~our end markets, as our ~~Dako~~product portfolio around OMNIS, ~~products,~~ PD-L1 assays and SureFISH, continue to gain strength with our customers in clinical oncology applications and our next generation sequencing ~~(target~~target enrichment ~~solutions)~~solutions continue to be adopted. Market demand in the nucleic acid solutions business related to therapeutic oligo programs continues to be ~~strong. We are investing in building further capacity in~~strong and, with our newly opened nucleic acid ~~business~~solutions production facility in Frederick, we are well positioned to ~~address~~serve more of the ~~demand for the oligos.~~market demand. We will continue to invest in research and development and seek to expand our position in developing countries and emerging markets.

Operating Results


	Three Months Ended						Year over Year Change	Three Months Ended						Year over Year Change
	January 31,						Three	January 31,						Three
	2018			2017			Months	2020			2019			Months

(in millions, except margin data)
Gross margin	54.4		%	54.8		%	—	51.7		%	54.0		%	(2) ppts
Operating margin	11.7		%	14.3		%	(3) ppts

(in millions)
Research and development	$	23		$	20		18%	$	32		$	31		3%
Selling, general and administrative	$	56		$	47		20%	$	63		$	63		—
Operating margin								13.5		%	14.0		%	(1) ppt

Gross ~~margins~~margin for products and services for the three months ended January 31, ~~2018, was flat~~2020, decreased 2 percentage points when compared to the same period last year. Gross ~~margins performance~~margin in the three months ended January 31, 2020 was ~~mainly driven due~~impacted by higher fixed costs related to ~~higher volume offset by wage and variable pay increases.~~the new manufacturing facility in Frederick, Colorado.

Research and development expenses for the three months ended January 31, ~~2018,~~2020, increased 183 percent when compared to the same period last year. ~~The increase in research~~Research and development ~~expenses~~ for the three months ended January 31, ~~2018~~2020 was ~~due to increase in wages and variable pay, unfavorable currency movements and~~impacted by increased spending around the development of clinical applications and solutions and ~~additional research~~higher wages and ~~development expenses related to the Multiplicom acquisition.~~benefits.

Selling, general and administrative expenses for the three months ended January 31, ~~2018 increased 20 percent~~2020, was flat when compared to the same period last year. ~~The increase in selling,~~Selling general and administrative expenses for the three months ended January 31, 2020 was ~~due to~~impacted by higher ~~infrastructure expenses, increase in~~ wages and ~~variable pay, higher share-based compensation expenses, unfavorable currency movements and spending increase caused~~benefits offset by ~~our acquisition of Multiplicom.~~savings in discretionary spending.

Operating margin for ~~product~~products and services for the three months ended January 31, ~~2018~~2020 decreased 31 percentage ~~points~~point when compared to the same period last year. The decrease in operating ~~margins~~margin for the three months ended January 31, 2020 was mainly due to higher wages and benefits and the ~~additional cost structure of the Multiplicom acquisition, higher research and development expenses and wage increases partially offset by the~~gross margin deterioration more than offsetting gains from higher ~~revenue volumes.~~revenue.

Income from Operations

Income from operations for the three months ended January 31, ~~2018, decreased~~2020 increased $1 million on a corresponding revenue ~~increases~~increase of ~~$21 million due to acquisition expenses, higher infrastructure expenses and wage and variable pay increases.~~$14 million.

Agilent CrossLab

Net Revenue

Three Months Ended Year over Year Change
January 31, Three
2018 2017 Months
(in millions)

Net revenue $ 408
$ 363
12%



	Three Months Ended				Year over Year Change
	January 31,				Three
	2020		2019		Months
	(in millions)

Net revenue	$	470	$	442	6%

Agilent CrossLab business revenue for the three months ended January 31, ~~2018~~2020 increased 126 percent when compared to the same period last year. Foreign currency movements for the three months ended January 31, ~~2018~~2020 had an overall ~~favorable~~unfavorable impact on revenue of 31 percentage ~~points~~point when compared to the same period last year. Geographically, revenue increased 6 percent in the Americas with no currency impact, increased 134 percent in Europe with a 91 percentage point ~~favorable~~unfavorable currency impact and increased 198 percent in Asia Pacific with a 31 percentage point ~~favorable~~unfavorable currency impact for the three months ended January 31, ~~2018~~2020 compared to the same period last year. ~~The revenue growth in Asia Pacific was bolstered by strong revenue growth in China for a broad range of products and services.~~

~~Agilent CrossLab business saw positive revenue growth in all the key end markets in~~During the three months ended January 31, ~~2018 compared to same period prior year. Key end markets for~~2020, revenue growth was driven by strong revenue growth in the ~~Agilent CrossLab business include~~overall service portfolio, while the ~~pharmaceutical and biotechnology market, the chemical and energy market, and the food market. All three of these end markets produced strong growth in~~consumables portfolio had moderate revenue growth.

For the three months ended January 31, ~~2018, driven by~~2020, the ~~success of~~Agilent CrossLab business saw the ~~consumables portfolio and~~strongest growth ofcoming from the ~~remarketed instruments business.~~food market, as well as strong growth from our largest market segment, the pharmaceutical market. The other major market segments all saw moderate growth for the three months ended January 31, 2020 when compared to the same period last year.

Looking forward, we anticipate ~~that balanced~~ strength in ~~nearly all~~ key end markets will continue to drive ~~the~~our revenue growth in the near term. The Agilent CrossLab portfolio of products and services capabilities are well positioned to succeed in changing market conditions in our key end markets. Geographically, the business is well diversified across all regions to swiftly take advantage of local market opportunities and to help hedge against market volatility in any one region. Despite the short-term logistical hurdle against delivering service caused by the health crisis closing off access to certain customer sites in a few countries, we remain optimistic onabout the ~~market~~long-term growth ~~and market penetration~~ opportunities ~~in China and~~of the

~~emerging markets.~~ global service business. Other factors for near term revenue growth include ~~upcoming product launches from~~continued expansion of digital capabilities and leveraging of our ~~consumables pipeline, as well as investment in our laboratory enterprise offerings.~~deep understanding of customer workflows.

Operating Results


	Three Months Ended						Year over Year Change	Three Months Ended						Year over Year Change
	January 31,						Three	January 31,						Three
	2018			2017			Months	2020			2019			Months

(in millions, except margin data)
Gross margin	50.6		%	48.5		%	2 ppts	51.8		%	51.3		%	1 ppt
Operating margin	21.6		%	20.3		%	1 ppt

(in millions)
Research and development	$	14		$	12		18%	$	15		$	15		—
Selling, general and administrative	$	104		$	90		15%	$	109		$	107		2%
Operating margin								25.4		%	23.9		%	2 ppts

Gross ~~margins~~margin for products and services for the three months ended January 31, ~~2018,~~2020 increased 21 percentage ~~points~~point when compared to the same period last year. ~~Gross~~This margin ~~improvement~~increase was ~~primarily driven by the faster growth~~a result of the higher ~~margin~~sales volume partially offset by higher tariffs on service parts and consumables ~~business~~ and ~~remarketed instrument business relative to~~by an unfavorable product mix impact in the ~~lower margin service business and lower inventory charges.~~consumables business.

Research and development expenses for the three months ended January 31, ~~2018, increased 18 percent~~2020 was relatively flat when compared to the same period last year. ~~The increase in research and development expenses was primarily due to higher wages and variable pay, as well as higher infrastructure costs.~~

Selling, general and administrative expenses for the three months ended January 31, ~~2018,~~2020 increased 152 percent when compared to the same period last year. The increase ~~in selling, general and administrative expenses~~ was primarily due to higher orders driving higher selling costs, as well as higher wages and ~~variable pay, higher share-based compensation expenses and higher administrative costs.~~benefits.

Operating margin for ~~product~~products and services for the three months ended January 31, ~~2018~~2020 increased 12 percentage ~~point~~points when compared to the same period last year. The improvement was ~~primarily~~ driven by ~~the faster~~strong growth ~~of the higher margin consumables business and remarketed instrument business relative to the lower margin service business.~~in revenues combined with a slower growth in operating expenses.

Income from Operations

Income from operations for the three months ended January 31, ~~2018,~~2020 increased $14 million on a corresponding revenue ~~increases~~increase of ~~$45~~$28 million.

FINANCIAL CONDITION

Liquidity and Capital Resources

Our financial position as of January 31, ~~2018~~2020 consisted of cash and cash equivalents of ~~$2,887~~$1,226 million as compared to ~~$2,678~~$1,382 million as of October 31, ~~2017.~~2019.

As of January 31, ~~2018, approximately $2,850~~2020, $1,164 million of our cash and cash equivalents is held outside of the U.S. inby our foreign ~~subsidiaries. Most of the amounts held outside of the U.S. could~~subsidiaries and can be repatriated to the U.S. ~~within a reasonable period of time. As a result of the Tax Act, our cash~~as local working capital and ~~cash equivalents are no longer subjected to U.S. federal tax on repatriation into the U.S.~~other regulatory conditions permit. We utilize a variety of funding strategies to ensure that our worldwide cash is available in the locations in which it is needed.

As a result of the Tax Act, we are required to pay a one-time transition tax of $440 million on deferred foreign income not previously subject to U.S. federal income tax. The transition tax is payable, beginning in fiscal year 2019 over eight years with 8 percent due in each of the first five years, 15 percent in year six, 20 percent in year seven and 25 percent in year eight.

We believe our cash and cash equivalents, cash generated from operations, and ability to access capital markets and credit lines will satisfy, for at least the next twelve months, our liquidity requirements, both globally and domestically, including the following: working capital needs, capital expenditures, business acquisitions, stock repurchases, cash dividends, contractual obligations, commitments, principal and interest payments on debt, and other liquidity requirements associated with our operations.

Net Cash Provided by Operating Activities

Net cash ~~inflow~~outflow from operating activities was ~~$215~~$59 million for the three months ended January 31, ~~2018~~2020 compared to cash inflow of ~~$116~~$213 million for the same period in ~~2017.~~2019. In the three months ended January 31, ~~2018,~~2020 and 2019, we paid approximately ~~$69~~$79 million under our variable and incentive pay programs ~~as compared to a total of $58 million paid during the same period of 2017.~~in both periods. Net cash paid for income taxes was approximately ~~$32~~$241 million which included a one-time payment of $226 million related to the transfer of intellectual property compared to income taxes paid of $21 million in the prior year. For the three months ended January 31, 2020, deferred tax cash inflows was $10 million compared to cash outflows of $281 million in the prior year. Deferred tax outflows in 2019 included $266 million related to the extension of the company's tax incentive in Singapore. For the three months ended January 31, 2020, there was an unrealized gain on the fair value of an equity investment of $16 million. For the three months ended January 31, 2020, other assets and ~~$27~~liabilities had cash outflow of $195 million compared to cash inflow of $26 million for the same period in 2019. Cash outflow in the three months ended January 31, ~~2018~~2020 was largely the result of increased income tax payments, interest payments on senior notes and ~~2017, respectively. For~~changes in deferred revenue. Cash inflow for the three months ended January 31, 2018, the net change in tax-related assets and liabilities of $533 million was due to the enactment of the U.S. Tax Cuts and Jobs Act and primarily consisted of an estimated provision of $480 million of U.S. transition tax on deemed repatriated earnings of non-U.S. subsidiaries as well as an estimated $53 million associated with the impact of the decreased U.S. corporate income tax rate. For the three months ended January 31, 2018, other assets and liabilities provided cash of $24 million compared to cash used of $61 million for the same period in 2017. Cash provided in the three months ended January 31, 20182019 in other assets and liabilities was related to changes in ~~the~~non-U.S. transaction ~~taxes,~~tax receivables and deferred ~~revenue and the employee pension settlement gain of $5 million. The usage of cash in~~revenue.

In the three months ended January 31, ~~2017 in other assets and liabilities was largely the result of income tax payments, transaction taxes, interest payments on senior notes and the employee pension settlement gain of $32 million.~~

~~In the three months ended~~ ~~January 31, 2018~~,2020, accounts receivable used cash of $5$40 million compared to cash used of ~~$31~~$22 million for the same period in ~~2017.~~2019. Days’ sales outstanding ~~increased due primarily to increased sales to 56 days~~ as of January 31, ~~2018~~ ~~from 55~~2020 and 2019 was 64 days ~~compared to a year ago.~~and 58 days, respectively. Accounts payable used cash of $3$15 million for the three months ended January 31, ~~2018~~2020 compared to cash ~~provided~~used of $9$16 million in the same period in ~~2017.~~2019. Cash used for inventory was ~~$34~~$32 million for the three months ended January 31, ~~2018~~2020 compared to cash used of ~~$26~~$12 million for the same period in ~~2017.~~2019. Inventory days on-hand ~~increased~~was 100 days as of January 31, 2020 compared to 102 days as of January 31, ~~2018~~ ~~compared to 101 days as of the end of the same period last year.~~2019.

We contributed approximately ~~$6 million and $3~~$5 million to our defined benefit plans in both the three months ended January 31, ~~2018~~2020 and ~~2017, respectively.~~2019. Our annual contributions are highly dependent on the relative performance of our assets versus our projected liabilities, among other factors. We expect to contribute approximately ~~$17~~$19 million to our defined benefit plans during the remainder of ~~2018.~~2020.

Net Cash Used in Investing Activities

Net cash used in investing activities was ~~$67~~$35 million for the three months ended January 31, ~~2018~~2020 as compared to net cash used in investing activities of ~~$101 million.~~$290 million in the same period of 2019. Investments in property, plant and equipment were ~~$60~~$34 million for the three months ended January 31, ~~2018~~2020 compared to ~~$32~~$39 million in the same period of ~~2017. The increase in property, plant and equipment in 2018 was related to the capacity expansion for our nucleic acid solutions facility.~~2019. We expect that total capital expenditures for the current year will be approximately ~~$200~~$180 million. In the three months ended January 31, ~~2018,~~2019, we invested $6$248 million in our acquisition of ~~businesses, net of cash acquired, compared to $70 million in the same period last year.~~ACEA.

Net Cash Used in Financing Activities

Net cash ~~provided by~~used in financing activities for the three months ended January 31, ~~2018~~2020 was ~~$37~~$61 million compared to net cash used in financing activities of ~~$58~~$122 million for the same period of ~~2017.~~2019.

Treasury ~~stock repurchases~~Stock Repurchases

On ~~May 28, 2015,~~November 19, 2018 we announced that our board of directors had approved a new share repurchase program (the ~~"2015~~"2019 repurchase program"). designed, among other things, to reduce or eliminate dilution resulting from issuance of stock under the company's employee equity incentive programs. The ~~2015~~2019 repurchase program authorizes the purchase of up to ~~$1.14~~$1.75 billion of our common stock at the company's discretion ~~through~~ and ~~including November 1, 2018.~~has no fixed termination date. The ~~2015~~2019 repurchase program does not require the company to acquire a specific number of shares and may be suspended, amended or discontinued at any time. During the three months ended January 31, ~~2018,~~2020, we repurchased and retired approximately ~~674,000~~725,827 shares for ~~$47~~$60 million under this authorization. During the three months ended January 31, 2019, we repurchased and retired approximately 1.1 million shares for $75 million under this authorization. As of January 31, 2018, we retired approximately 637,000 shares and the remaining 37,000 shares as of January 31, 2018 were retired in February 2018. During the three months ended January 31, 2017, we repurchased and retired approximately 2.5 million shares for $111 million, under this authorization. As of January 31, 2018,2020, we had remaining authorization to repurchase up to ~~$563~~$967 million of our common stock under this program.

Dividends

During the three months ended January 31, ~~2018,~~2020 and 2019, we paid cash dividends of ~~$0.149~~$0.180 per common share or ~~$48~~$56 million ~~on the company's common stock. During the three months ended January 31, 2017, we paid cash dividends of $0.132~~and $0.164 per common share or ~~$42~~$52 million, respectively, on the company's common stock.

~~The timing and amounts of any future dividends are subject to determination and approval by our board of directors.~~

Credit Facilities and Short Term Debt

Credit Facilities. On ~~September 15, 2014,~~March 13, 2019, Agilent entered into a credit agreement with a group of financial institutions which ~~provides~~provided for a ~~$400 million~~$1 billion five-year unsecured credit facility that will expire on September 15, 2019. On June 9, 2015, the commitments under the existing credit facility were increased by $300 million and on July 14, 2017, the commitments under the existing credit facility were increased by an additional $300 million so that the aggregate commitments under the facility now total $1 billion. DuringMarch 13, 2024. For the three months ended January 31, ~~2018,~~2020, we borrowed $432 million and repaid $372 million under the credit facility. As of January 31, 2020, the company had borrowings of ~~$274~~$175 million ~~and repaid $39 million. As of January 31, 2018, the~~ outstanding ~~balance was $345 million~~ under the credit facility. We were in compliance with the covenants for the credit facility during the three months ended January 31, ~~2018.~~

~~Short-term debt~~2020. On August 7, 2019, we entered into an amendment to the credit agreement, which provided for a $500 million short-term loan facility that was used in full to complete the BioTek acquisition and ~~Long-term debt~~

~~In October 2007, the company issued an aggregate principal amount of $600 million in senior notes ("2017 senior notes").~~which is outstanding at January 31, 2020. On October ~~20, 2014,~~21, 2019, we ~~settled~~entered into a second amendment to the ~~redemption~~credit agreement, which refreshed the amount available for additional incremental term loan facilities under the credit agreement to permit additional incremental facilities of up to $500 ~~million~~million. We had no borrowings under the additional incremental loan facilities as of ~~the $600 million outstanding aggregate principal amount of our 2017 senior notes. The remaining $100 million in senior notes matured on November 1, 2017 and were paid in full.~~January 31, 2020.

Long-term debt

There have been no other changes to the principal, maturity, interest rates and interest payment terms of the Agilent outstanding senior notes in the three months ended January 31, ~~2018~~2020 as compared to the senior notes as described in our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2017.~~2019.

Other

As of January 31, 2018, our contractual obligations reported under “other purchase commitments” were approximately $47 million, an increase of approximately $7 million in the first three months of fiscal year 2018, primarily due to the new contracts that were executed during the quarter. There were no other substantial changes from our ~~2017~~ Annual Report on Form 10-K for the fiscal year ended October 31, 2019 to our contractual commitments in the first three months of fiscal ~~2018.~~2020. We have contractual commitments for non-cancelable operating ~~leases.~~leases see Note 9, "Leases" for more information. We have no other material non-cancelable guarantees or commitments.

Other long-term liabilities as of January 31, ~~2018~~2020 and October 31, ~~2017~~2019 include ~~$611~~$333 million and ~~$131~~$328 million, respectively, related to long-term income tax liabilities. Of these amounts, ~~$222~~$204 million and ~~$131~~$199 million related to uncertain tax positions of continuing operations as of January 31, ~~2018~~2020 and October 31, ~~2017,~~2019, respectively. We are unable to accurately predict when these amounts will be realized or released. However, it is reasonably possible that there could be significant changes to our unrecognized tax benefits in the next twelve months due to either the expiration of a statute of limitations or a tax audit settlement. The remaining $129 million in other long-term liabilities relates to the one-time transition tax payable.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to foreign currency exchange rate risks inherent in our sales commitments, anticipated sales, and assets and liabilities and equity denominated in currencies other than the functional currency of our subsidiaries. We hedge future cash flows denominated in currencies other than the functional currency using sales forecasts up to twelve months in advance. Our exposure to exchange rate risks is ~~managed~~mainlymanaged on an enterprise-wide basis. This strategy utilizes derivative financial instruments, including option and forward contracts, to hedge certain foreign currency exposures with the intent of offsetting gains and losses that occur on the underlying exposures with gains and losses on the derivative contracts hedging them. We may also hedge equity balances denominated in foreign currency on a long term basis. We do not currently and do not intend to utilize derivative financial instruments for speculative trading purposes. To the extent that we are required to pay for all, or portions, of an acquisition price in foreign currencies, we may enter into foreign exchange contracts to reduce the risk that currency movements will impact the cost of the transaction.

Our operations generate non-functional currency cash flows such as revenues, third party vendor payments and inter-company payments. In anticipation of these foreign currency cash flows and in view of volatility of the currency market, we enter into such foreign exchange contracts as are described above to manage our currency risk. Approximately 5150 percent and 5349 percent of our revenue was generated in U.S. dollars during the three months ended January 31, ~~2018~~2020 and ~~2017,~~2019, respectively. The ~~favorable~~overall unfavorable effects of changes in foreign currency exchange rates, principally as a result of the ~~weakening~~strength of the U.S. dollar, has ~~increased~~

decreased revenue by ~~approximately 4~~less than 1 percentage ~~points~~point in the three months ended January 31, ~~2018.~~2020. We calculate the impact of foreign currency exchange rates movements by applying the actual foreign currency exchange rates in effect during the last month of each quarter of the current year ~~period~~ to both the applicable current and prior year periods.

We performed a sensitivity analysis assuming a hypothetical 10 percent adverse movement in foreign exchange rates to the hedging contracts and the underlying exposures described above. As of January 31, ~~2018~~2020, the analysis indicated that these hypothetical market movements would not have a material effect on our condensed consolidated financial position, results of operations, statement of comprehensive income or cash flows.

We are also exposed to interest rate risk due to the mismatch between the interest expense we pay on our loans at fixed rates and the variable rates of interest we receive from cash, cash equivalents and other short-term investments. We have issued long-term debt in U.S. dollars or foreign currencies at fixed interest rates based on the market conditions at the time of financing. We believe that the fair value of our fixed rate debt changes when the underlying market rates of interest change, and we may use interest rate swaps to modify such market risk.

We performed a sensitivity analysis assuming a hypothetical 10 percent adverse movement in interest rates relating to the underlying fair value of our fixed rate debt. As of January 31, ~~2018~~2020, the sensitivity analyses indicated that a hypothetical 10 percent adverse movement in interest rates would result in an immaterial impact to the fair value of our fixed interest rate debt.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by the Securities Exchange Act of 1934 (the "Exchange Act") Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective at ensuring that information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding such required disclosure to the SEC.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended January 31, ~~2018~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in lawsuits, claims, investigations and proceedings, including, but not limited to, intellectual property, commercial, real estate, environmental and employment matters, which arise in the ordinary course of business. There are no matters pending that we currently believe are probable or reasonably possible of having a material impact to our business, consolidated financial condition, results of operations or cash flows.

ITEM 1A. RISK FACTORS

Risks, Uncertainties and Other Factors That May Affect Future Results

Our operating results and financial condition could be harmed if the markets into which we sell our products decline or do not grow as anticipated.

Visibility into our markets is limited. Our quarterly sales and operating results are highly dependent on the volume and timing of orders received during the fiscal quarter, which are difficult to forecast and may be cancelled by our customers. In addition, our revenue and earnings forecasts for future fiscal quarters are often based on the expected seasonality of our markets. However, the markets we serve do not always experience the seasonality that we expect as customer spending policies and budget allocations, particularly for capital items, may change. Any decline in our customers' markets or in general economic conditions would likely result in a reduction in demand for our products and services. Also, if our customers' markets decline, we may not be able to collect on outstanding amounts due to us. Such declines could harm our consolidated financial position, results of operations, cash flows and stock price, and could limit our profitability. Also, in such an environment, pricing pressures could intensify. Since a significant portion of our operating expenses is relatively fixed in nature due to sales, research and development and manufacturing costs, if we were unable to respond quickly enough these pricing pressures could further reduce our operating margins.

If we do not introduce successful new products and services in a timely manner to address increased competition through frequent new product and service introductions, rapid technological changes and changing industry standards, our products and services may become obsolete, and our operating results may suffer.

We generally sell our products in industries that are characterized by increased competition through frequent new product and service introductions, rapid technological changes and changing industry standards. Without the timely introduction of new products, services and enhancements, our products and services may become technologically obsolete over time, in which case our revenue and operating results could suffer. The success of our new products and services will depend on several factors, including our ability to:

properly identify customer needs and predict future needs;

innovate and develop new technologies, services and applications;

appropriately allocate our research and development spending to products and services with higher growth prospects;

successfully commercialize new technologies in a timely manner;

manufacture and deliver new products in sufficient volumes and on time;

differentiate our offerings from our competitors' offerings;

price our products competitively;

anticipate our competitors' development of new products, services or technological innovations; and

control product quality in our manufacturing process.

In addition, if we fail to accurately predict future customer needs and preferences or fail to produce viable technologies, we may invest in research and development of products and services that do not lead to significant revenue, which would adversely affect our profitability. Even if we successfully innovate and develop new and enhanced products and services, we may incur substantial costs in doing so, and our operating results may suffer. In addition, promising new products may fail to reach the market or realize only limited commercial success because of real or perceived concerns of our customers. Furthermore, as we collaborate with pharmaceutical customers to develop drugs such as companion diagnostics assays or ~~providing~~provide drug components like active pharmaceutical ingredients, we face risks that those drug programs may be cancelled upon clinical trial failures.

General economic conditions may adversely affect our operating results and financial condition.

Our business is sensitive to negative changes in general economic conditions, both inside and outside the United States. Slower global economic growth and uncertainty in the markets in which we operate may adversely impact our business resulting in:

reduced demand for our products, delays in the shipment of orders, or increases in order cancellations;

increased risk of excess and obsolete inventories;

increased price pressure for our products and services; and

greater risk of impairment to the value, and a detriment to the liquidity, of our investment portfolio.

Failure to adjust our purchases due to changing market conditions or failure to accurately estimate our customers' demand could adversely affect our income.

Our income could be harmed if we are unable to adjust our purchases to reflect market fluctuations, including those caused by the seasonal nature of the markets in which we operate. The sale of our products and services are dependent, to a large degree, on customers whose industries are subject to seasonal trends in the demand for their products. During a market upturn, we may not be able to purchase sufficient supplies or components to meet increasing product demand, which could materially affect our results. In the past, we have experienced a shortage of parts for some of our products. In addition, some of the parts that require custom design are not readily available from alternate suppliers due to their unique design or the length of time necessary for design work. Should a supplier cease manufacturing such a component, we would be forced to reengineer our product. In addition to discontinuing parts, suppliers may also extend lead times, limit supplies or increase prices due to capacity constraints or other factors. In order to secure components for the production of products, we may continue to enter into non-cancelable purchase commitments with vendors, or at times make advance payments to suppliers, which could impact our ability to adjust our inventory to declining market demands. If demand for our products is less than we expect, we may experience additional excess and obsolete inventories and be forced to incur additional expenses.

Demand for some of our products and services depends on the capital spending policies of our customers, research and development budgets and on government funding policies.

Our customers include pharmaceutical companies, laboratories, universities, healthcare providers, government agencies and public and private research institutions. Many factors, including public policy spending priorities, available resources, mergers and consolidations, ~~spending priorities,~~ institutional and governmental budgetary policies and spending priorities, and product and economic cycles, have a significant effect on the capital spending policies of these entities. Fluctuations in the research and development budgets at these organizations could have a significant effect on the demand for our products and services. Research and development budgets fluctuate due to changes in available resources, consolidation, spending priorities, general economic conditions and institutional and governmental budgetary policies. The timing and amount of revenue from customers that rely on government funding or research may vary significantly due to factors that can be difficult to forecast, including changes in spending authorizations and budgetary priorities for our products and services. If demand for our products and services is adversely affected, our revenue and operating results would suffer.

Economic, political, foreign currency and other risks associated with international sales and operations could adversely affect our results of operations.

Because we sell our products worldwide, our business is subject to risks associated with doing business internationally. We anticipate that revenue from international operations will continue to represent a majority of our total revenue. International revenue and costs are subject to the risk that fluctuations in foreign currency exchange rates could adversely affect our financial results when translated into U.S. dollars for financial reporting purposes. ~~The favorable effects of changes in foreign~~Foreign currency ~~exchange rates has increased revenues by approximately 4 percentage points in~~movements for the three months ended January 31, ~~2018.~~2020 had an overall unfavorable impact on revenue of less than 1 percentage point when compared to the same period last year. When movements in foreign currency exchange rates have a negative impact on revenue, they will also have a positive impact by reducing our costs and expenses. In addition, many of our employees, contract manufacturers, suppliers, job functions, outsourcing activities and manufacturing facilities are located outside the United States. Accordingly, our future results could be harmed by a variety of factors, including:

interruption to transportation flows for delivery of parts to us and finished goods to our customers;

changes in a specific country's or region's political, economic or other conditions;

changes in diplomatic and trade relationships, such as the United Kingdom's exit from the European Union, including new tariffs, trade protection measures, ~~and~~ import or export licensing ~~requirements;~~requirements, new or different customs duties, trade embargoes and sanctions and other trade barriers;

tariffs imposed by the U.S. on goods from other countries and tariffs imposed by other countries on U.S. goods, including the tariffs enacted and proposed by the U.S. government on various imports from China and by the Chinese government on certain U.S. goods;

negative consequences from changes in or differing interpretations of laws and regulations, including those related to tax ~~laws;~~and import/export;

difficulty in staffing and managing widespread operations;

differing labor regulations;

differing protection of intellectual property;

unexpected changes in regulatory requirements; ~~and~~

geopolitical uncertainty or turmoil, ~~including~~ terrorism and ~~war.~~war; and

impact of public health crises, including pandemics and epidemics, such as COVID-19 on the global economy.

We ~~centralized most~~sell our products into many countries and we also source many components and materials for our products from and manufacture our products in various countries. Future tariffs and tariffs already implemented could have negative impact on our business, results of operations and financial condition. It may be time-consuming and expensive for us to alter our business operations in order to adapt to any such change. Further, additional tariffs, the scope and duration of which, if implemented, remains uncertain, which have been proposed or threatened and the potential escalation of a trade war and retaliatory measures could have a material adverse effect on our business, results of operations and financial condition.

Most of our accounting and tax processes ~~to two locations: India and Malaysia. These processes include~~including general accounting, cost accounting, accounts payable, accounts receivables and tax ~~functions.~~functions are centralized at locations in India and Malaysia. If conditions change in those countries, it may adversely affect operations, including impairing our ability to pay our suppliers and collect our receivables. Our results of operations, as well as our liquidity, may be adversely affected and possible delays may occur in reporting financial results.

In addition, although the majority of our products are priced and paid for in U.S. dollars, a significant amount of certain types of expenses, such as payroll, utilities, tax, and marketing expenses, are paid in local currencies. Our hedging programs reduce, but do not always entirely eliminate, within any given twelve-month period, the impact of currency exchange rate movements, and therefore fluctuations in exchange rates, including those caused by currency controls, could impact our business, operating results and financial condition by resulting in lower revenue or increased expenses. For expenses beyond that twelve-month period, our hedging strategy does not mitigate our exposure. In addition, our currency hedging programs involve third party financial institutions as counterparties. The weakening or failure of financial institution counterparties may adversely affect our hedging programs and our financial condition through, among other things, a reduction in available counterparties, increasingly unfavorable terms, and the failure of the counterparties to perform under hedging contracts.

Our strategic initiatives to adjust our cost structure could have long-term adverse effects on our business and we may not realize the operational or financial benefits from such actions.

We have implemented multiple strategic initiatives across our businesses to adjust our cost structure, and we may engage in similar activities in the future. These strategic initiatives and our regular ongoing cost reduction activities may distract management, could slow improvements in our products and services and limit our ability to increase production quickly if demand for our products increases. In addition, delays in implementing our strategic initiatives, unexpected costs or failure to meet targeted improvements may diminish the operational and financial benefits we realize from such actions. Any of the above circumstances could have an adverse effect on our business and operating results and financial condition.

Our business will suffer if we are not able to retain and hire key personnel.

Our future success depends partly on the continued service of our key research, engineering, sales, marketing, manufacturing, executive and administrative personnel. If we fail to retain and hire a sufficient number of these personnel, we will not be able to maintain or expand our business. The markets in which we operate are very dynamic, and our businesses continue to respond with reorganizations, workforce reductions and site closures. We believe our pay levels are very competitive within the regions that we operate. However, there is an intense competition for certain highly technical specialties in geographic areas where we continue to recruit, and it may become more difficult to hire and retain our key employees.

Our acquisitions, strategic investments and alliances, joint ventures, exiting of businesses and divestitures may result in financial results that are different than expected.

In the normal course of business, we frequently engage in discussions with third parties relating to possible acquisitions, strategic investments and alliances, joint ventures and divestitures, and generally expect to complete several transactions per year. In addition, we may decide to exit a particular business within our product portfolio. As a result of such transactions, our financial results may differ from our own or the investment community's expectations in a given fiscal quarter, or over the long term. We may have difficulty developing, manufacturing and marketing the products of a newly acquired company in a way that enhances the performance of our combined businesses or product lines. Acquired businesses may also expose us to new risks and new markets and we may have difficulty addressing these risks in a cost effective and timely manner. Transactions such as acquisitions have resulted, and may in the future result in, unexpected significant costs and expenses. In the future, we may be required to record charges to earnings during the period if we determine there is an impairment of goodwill or intangible assets, up to the full amount of the value of the assets, or, in the case of strategic investments and alliances, consolidate results, including losses, of third parties or write down investment values or loans and convertible notes related to the strategic investment.

Integrating the operations of acquired businesses within Agilent could be a difficult, costly and time-consuming process that involves a number of risks. Acquisitions and strategic investments and alliances may require us to integrate and collaborate with a different company culture, management team, business ~~models,~~model, business infrastructure and sales and distribution ~~methodologies~~methodology and assimilate and retain geographically dispersed, decentralized operations and personnel. Depending on the size and complexity of an acquisition, our successful integration of the entity depends on a variety of factors, including introducing new products and meeting revenue targets as expected, the retention of key employees and key customers, increased exposure to certain governmental regulations and compliance requirements and increased costs and use of resources. Further, the integration of acquired businesses is likely to result in our systems and internal controls becoming increasingly complex and more difficult to manage. Any difficulties in the assimilation of acquired businesses into our control system could harm our operating results or cause us to fail to meet our financial reporting obligations.

Even if we are able to successfully integrate acquired businesses within Agilent, we may not be able to realize the revenue and other synergies and growth that we anticipated from the acquisition in the time frame that we expected, and the costs of achieving these benefits may be higher than what we expected. As a result, the acquisition and integration of acquired businesses may not contribute to our earnings as expected, we may not achieve our operating margin targets when expected, or at all, and we may not achieve the other anticipated strategic and financial benefits of ~~this transaction.~~such transactions.

A successful divestiture depends on various factors, including our ability to effectively transfer liabilities, contracts, facilities and employees to the purchaser, identify and separate the intellectual property to be divested from the intellectual property that we wish to keep and reduce fixed costs previously associated with the divested assets or business. In addition, if customers of the divested business do not receive the same level of service from the new owners, this may adversely affect our other businesses to the extent that these customers also purchase other Agilent products. In exiting a business, we may still retain liabilities associated with the support and warranty of those businesses and other indemnification obligations. All of these efforts require varying levels of management resources, which may divert our attention from other business operations. If we do not realize the expected benefits

or synergies of such transactions, our consolidated financial position, results of operations, cash flows and stock price could be negatively impacted.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results, which could lead to a loss of investor confidence in our financial statements and have an adverse effect on our stock price.

Effective internal controls are necessary for us to provide reliable and accurate financial statements and to effectively prevent fraud. We devote significant resources and time to comply with the internal control over financial reporting requirements of the Sarbanes Oxley Act of 2002 and continue to enhance our controls. However, we cannot be certain that we will be able to prevent future significant deficiencies or material weaknesses. Inadequate internal controls could cause investors to lose confidence in our reported financial information, which could have a negative effect on investor confidence in our financial statements, the trading price of our stock and our access to capital.

Our customers and we are subject to various governmental ~~regulations, compliance~~regulations. Compliance with or changes in such regulations may cause us to incur significant expenses, and if we fail to maintain satisfactory compliance with certain regulations, we may be forced to recall products and cease their manufacture and distribution, and we could be subject to civil or criminal penalties.

Our customers and we are subject to various significant international, federal, state and local regulations, including but not limited to regulations in the areas of health and safety, packaging, product content, employment, labor and immigration, import/export controls, trade restrictions and anti-competition. In addition, as a global organization, we are subject to data privacy and security laws, regulations, and customer-imposed controls in numerous jurisdictions as a result of having access to and processing confidential, personal, sensitive and/or patient health data in the course of our business. The EU's General Data Protection Regulation ("GDPR"), which became effective in May 2018, applies to all of our activities related to products and services that we offer to EU customers and workers. The GDPR established new requirements regarding the handling of personal data and includes significant penalties for non-compliance (including possible fines of up to 4 percent of total company revenue). Other governmental authorities around the world have passed or are considering similar types of legislative and regulatory proposals concerning data protection. Each of these privacy, security and data protection laws and regulations could impose significant limitations and increase our cost of providing our products and services where we process end user personal data and could harm our results of operations and expose us to significant fines, penalties and other damages.

We must also comply with complex foreign and U.S. laws and regulations, such as the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and other local laws prohibiting corrupt payments to governmental officials, anti-competition regulations and sanctions imposed by the U.S. Office of Foreign Assets Control and other similar laws and regulations. Violations of these laws and regulations could result in fines and penalties, criminal sanctions, restrictions on our business conduct and on our ability to offer our products in one or more countries, and could also materially affect our brand, our ability to attract and retain employees, our international operations, our business and our operating results. Although we have implemented policies and procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our employees, contractors, or agents will not violate our policies.

These regulations are complex, change frequently and have tended to become more stringent over time. We may be required to incur significant expenses to comply with these regulations or to remedy any violations of these regulations. Any failure by us to comply with applicable government regulations could also result in the cessation of our operations or portions of our operations, product recalls or impositions of fines and restrictions on our ability to carry on or expand our operations. In addition, because many of our products are regulated or sold into regulated industries, we must comply with additional regulations in marketing our products. We develop, configure and market our products to meet customer needs created by these regulations. Any significant change in these regulations could reduce demand for our products, force us to modify our products to comply with new regulations or increase our costs of producing these products. If demand for our products is adversely affected or our costs increase, our operating results and business would suffer.

Our products and operations are also often subject to the rules of industrial standards bodies, like the International Standards Organization, as well as regulation by other agencies such as the FDA. We also must comply with work safety rules. If we fail to adequately address any of these regulations, our businesses could be harmed.

We are subject to extensive regulation by the FDA and certain similar foreign regulatory agencies, and failure to comply with such regulations could harm our reputation, business, financial condition and results of operations.

A number of our products are subject to regulation by the FDA and certain similar foreign regulatory agencies. In addition, a number of our products may in the future be subject to regulation by the FDA and certain similar foreign regulatory agencies. These regulations govern a wide variety of product-related activities, from quality management, design and development to labeling, manufacturing, promotion, sales and distribution. If we or any of our suppliers or distributors fail to comply with FDA and other applicable regulatory requirements or are perceived to potentially have failed to comply, we may face, among other things, warning ~~letters,~~letters; adverse publicity affecting both us and our customers; investigations or notices of non-compliance, fines, injunctions, and civil penalties; import or export restrictions; partial suspensions or total shutdown of production facilities or the imposition of operating restrictions; increased difficulty in obtaining required FDA clearances or approvals or foreign equivalents; seizures or recalls of our products or those of our customers; or the inability to sell our products. Any such FDA or other regulatory agency actions could disrupt our business and operations, lead to significant remedial costs and have a material adverse impact on our financial position and results of operations. In addition, the global regulatory environment has become increasingly stringent. For example, the EU has adopted the EU In Vitro Diagnostic Regulation (the “EU IVDR”), which imposes stricter requirements for the marketing and sale of medical devices, including in the area of clinical evaluation requirements, quality systems and post-market surveillance. Manufacturers will have until May 2022 to meet the EU IVDR requirements for in vitro diagnostic medical devices currently on the market. Failure to meet these requirements could adversely impact our business in the EU and other regions that tie their product registrations to the EU requirements.

Some of our products are subject to particularly complex regulations such as regulations of toxic substances and failure to comply with such regulations could harm our business.

Some of our products and related consumables are used in conjunction with chemicals whose manufacture, processing, distribution and notification requirements are regulated by the U.S. Environmental Protection Agency (“EPA”) under the Toxic Substances Control Act, and by regulatory bodies in other countries under similar laws. The Toxic Substances Control Act regulations govern, among other things, the testing, manufacture, processing and distribution of chemicals, the testing of regulated chemicals for their effects on human health and safety and the import and export of chemicals. The Toxic Substances Control Act prohibits persons from manufacturing any chemical in the United States that has not been reviewed by the EPA for its effect on health and safety, and placed on an EPA inventory of chemical substances. We must ensure conformance of the manufacturing, processing, distribution of and notification about these chemicals to these laws and adapt to regulatory requirements in all applicable countries as these requirements change. If we fail to comply with the notification, record-keeping and other requirements in the manufacture or distribution of our products, then we could be subject to civil penalties, criminal prosecution and, in some cases, prohibition from distributing or marketing our products until the products or component substances are brought into compliance.

Our business may suffer if we fail to comply with government contracting laws and regulations.

We derive a portion of our revenue from direct and indirect sales to U.S., state, local, and foreign governments and their respective agencies. Such contracts are subject to various procurement laws and regulations and contract provisions relating to their formation, administration and performance. Failure to comply with these laws, regulations or provisions in our government contracts could result in the imposition of various civil and criminal penalties, termination of contracts, forfeiture of profits, suspension of payments, increased pricing pressure or suspension from future government contracting. If our government contracts are terminated, if we are suspended from government work, or if our ability to compete for new contracts is adversely affected, our business could suffer.

Our reputation, ability to do business and financial statements may be harmed by improper conduct by any of our employees, agents or business partners.

We cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by employees, agents or business partners of ours (or of businesses we acquire or partner with) that would violate U.S. and/or non-U.S. laws, including the laws governing payments to government officials, bribery, fraud, kickbacks and false claims, pricing, sales and marketing practices, conflicts of interest, competition, employment practices and workplace behavior, export and import compliance, money laundering and data privacy. In particular, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business, and we operate in many parts of the world that have experienced governmental corruption to some degree. Any such improper actions or allegations of such acts could damage our reputation and subject us to civil or criminal investigations in the United States and in other jurisdictions and related shareholder lawsuits, could lead to substantial civil and criminal, monetary and non-monetary penalties and could cause us to incur significant legal and investigatory fees. In addition, the government may seek to hold us liable as a successor for violations committed by companies in which we invest or that we acquire. We also rely on our suppliers to adhere to our supplier standards of conduct, and material violations of such standards of conduct could occur that could have a material effect on our business, reputation and financial statements.

Our retirement and post retirement pension plans are subject to financial market risks that could adversely affect our future results of operations and cash flows.

We have significant retirement and post retirement pension plan assets and obligations. The performance of the financial markets and interest rates impact our plan expenses and funding obligations. Significant decreases in market interest rates, decreases in the fair value of plan assets and investment losses on plan assets will increase our funding obligations, and adversely impact our results of operations and cash flows.

The impact of consolidation and acquisitions of competitors is difficult to predict and may harm our business.

The life sciences industry is intensely competitive and has been subject to increasing consolidation. Consolidation in our industries could result in existing competitors increasing their market share through business combinations and result in stronger competitors, which could have a material adverse effect on our business, financial condition and results of operations. We may not be able to compete successfully in increasingly consolidated industries and cannot predict with certainty how industry consolidation will affect our competitors or us.

If we are unable to successfully manage the consolidation and streamlining of our manufacturing operations, we may not achieve desired efficiencies and our ability to deliver products to our customers could be disrupted.

Although we utilize manufacturing facilities throughout the world, we have ~~been consolidating,~~consolidated, and may ~~continue to~~further consolidate, our manufacturing operations to certain of our plants to achieve efficiencies and gross margin improvements. Additionally, we typically consolidate the production of products from our acquisitions into our supply chain and manufacturing processes, which are technically complex and require expertise to operate. If we are unable to establish processes to efficiently and effectively produce high quality products in the consolidated locations, we may not achieve the anticipated synergies and production may be disrupted, which could adversely affect our business and operating results.

Our operating results may suffer if our manufacturing capacity does not match the demand for our products.

Because we cannot immediately adapt our production capacity and related cost structures to rapidly changing market conditions, when demand does not meet our expectations, our manufacturing capacity may exceed our production requirements. If during an economic downturn we had excess manufacturing capacity, then our fixed costs associated with excess manufacturing capacity would adversely affect our gross margins and operating results. If, during a general market upturn or an upturn in one of our segments, we cannot increase our manufacturing capacity to meet product demand, we may not be able to fulfill orders in a timely manner which could lead to order cancellations, contract breaches or indemnification obligations. This inability could materially and adversely limit our ability to improve our results.

Dependence on contract manufacturing and outsourcing other portions of our supply chain, including logistics and third-party package delivery services, may adversely affect our ability to bring products to market and damage our reputation. Dependence on outsourced information technology and other administrative functions may impair our ability to operate effectively.

As part of our efforts to streamline operations and to ~~cut~~manage costs, we outsource aspects of our manufacturing processes and other functions and continue to evaluate additional outsourcing. If our contract manufacturers or other outsourcers fail to perform their obligations in a timely manner or at satisfactory quality levels, our ability to bring products to market and our reputation could suffer. For example, during a market upturn, our contract manufacturers may be unable to meet our demand requirements, which may preclude us from fulfilling our customers' orders on a timely basis. The ability of these manufacturers to perform is largely outside of our control. If one or more of the third-party package delivery providers experiences a significant disruption in services or institutes a significant price increase, we may have to seek alternative providers, our costs could increase and the delivery of our products could be prevented or delayed. Additionally, changing or replacing our contract manufacturers, logistics providers or other outsourcers could cause disruptions or delays. In addition, we outsource significant portions of our information technology ("IT") and other administrative functions. Since IT is critical to our operations, any failure to perform on the part of our IT providers could impair our ability to operate effectively. In addition to the risks outlined above, problems with manufacturing or IT outsourcing could result in lower revenue and unexecuted efficiencies, and impact our results of operations and our stock price.

Environmental contamination from past and ongoing operations could subject us to substantial liabilities.

Certain properties we have previously owned or leased are undergoing remediation for subsurface ~~contaminations.~~contamination. Although we are indemnified for ~~any~~ liability relating to the required remediation at some of those properties, we may be subject to liability if these indemnification obligations are not fulfilled. ~~Further,~~In other ~~properties we have previously owned or facilities we have operated in the past, may be contaminated based on our operations. In some~~ cases, we have agreed to indemnify the current owners of certain properties for ~~any~~ liabilities related to ~~such~~ contamination, including companies ~~that~~with which we ~~used to be~~have previously been affiliated ~~with~~ such as HP, Inc., Hewlett-Packard Enterprise (formerly Hewlett-Packard Company) and Varian Medical Systems, Inc. Further, other properties we have previously owned or leased at which we have operated in the past, or for which we have otherwise contractually assumed, or provided indemnities for, certain actual or contingent environmental liabilities may or do require remediation. While we are not aware of any material liabilities associated with any potential environmental contamination at any of those properties or facilities, we may be exposed to material liability if ~~such~~ environmental contamination at material levels is found to exist. In addition, in connection with the acquisition of certain companies, we have assumed ~~the~~other costs and potential or contingent liabilities for environmental matters. Any significant costs or liabilities could have an adverse effect on results of operations.

Our current and historical manufacturing processes and operations involve, or have involved, the use of certain substances regulated under various foreign, federal, state and local environment protection and health and safety laws and regulations. As a result, we may become subject to liabilities for environmental contamination and these liabilities may be substantial. Although our policy is to apply strict standards for environmental protection and health and safety at our sites inside and outside the United States, we may not be aware of all conditions that could subject us to liability. Further, in the event that any future climate change legislation would require that stricter standards be imposed by domestic or international environmental regulatory authorities, we may be required to make certain changes and adaptations to our manufacturing processes. Failure to comply with these environmental protection and health and safety laws and regulations could result in civil, criminal, regulatory, administrative or contractual sanction, including

fines, penalties or suspensions. If we have any violations of, or incur liabilities pursuant to these laws or regulations, our financial condition and operating results could be adversely affected.

~~Regulations related to “conflict minerals” may cause us to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing our products.~~

We are subject to the rules of the Securities and Exchange Commission (“SEC”) which require disclosures by public companies of specified minerals, known as conflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured. The rule, which requires an annual disclosure report to be filed with the SEC by May 31st of each year, requires companies to perform due diligence, disclose and report whether or not such minerals originate from the Democratic Republic of Congo or an adjoining country. There are costs associated with complying with these disclosure requirements, including for diligence in regards to the sources of any conflict minerals used in our products, in addition to the cost of remediation and other changes to products, processes, or sources of supply as a consequence of such verification activities. In addition, our ongoing implementation of these rules could adversely affect the sourcing, supply, and pricing of materials used in our products. The rule could affect sourcing at competitive prices and availability in sufficient quantities of certain minerals used in the manufacture of our products, including tin, tantalum, gold and tungsten. The number of suppliers who provide conflict-free minerals may be limited. In addition, there may be material costs associated with complying with the disclosure requirements, such as costs related to the due diligence process of determining the source of certain minerals used in our products, as well as costs of possible changes to products, processes, or sources of supply as a consequence of such verification activities. As our supply chain is complex and we use contract manufacturers for some of our products, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that we implement, which may harm our reputation. We may also encounter challenges to satisfy those customers who require that all of the components of our products be certified as conflict-free, which could place us at a competitive disadvantage if we are unable to do so.

Third parties may claim that we are infringing their intellectual property and we could suffer significant litigation or licensing expenses or be prevented from selling products or services.

From time to time, third parties may claim that one or more of our products or services infringe their intellectual property rights. We analyze and take action in response to such claims on a case by case basis. Any dispute or litigation regarding patents or other intellectual property could be costly and time-consuming due to the complexity of our technology and the uncertainty of intellectual property litigation and could divert our management and key personnel from our business operations. A claim of intellectual property infringement could force us to enter into a costly or restrictive license agreement, which might not be available under acceptable terms or at all, could require us to redesign our products, which would be costly and time-consuming, and/or could subject us to significant damages or to an injunction against the development and sale of certain of our products or services. Our intellectual property portfolio may not be useful in asserting a counterclaim, or negotiating a license, in response to a claim of intellectual property infringement. In certain of our businesses, we rely on third party intellectual property licenses and we cannot ensure that these licenses will continue to be available to us in the future or can be expanded to cover new products on favorable terms or at all.

Third parties may infringe our intellectual property and we may suffer competitive injury or expend significant resources enforcing our rights.

Our success depends in large part on our proprietary technology, including technology we obtained through acquisitions. We rely on various intellectual property rights, including patents, copyrights, trademarks and trade secrets, as well as confidentiality provisions and licensing arrangements, to establish our proprietary rights. If we do not enforce our intellectual property rights successfully, our competitive position may suffer which could harm our operating results.

Our pending patent, copyright and trademark registration applications may not be allowed or competitors may challenge the validity or scope of our patents, copyrights or trademarks. In addition, our patents, copyrights, trademarks and other intellectual property rights may not provide us with a significant competitive advantage.

We may need to spend significant resources monitoring and enforcing our intellectual property rights and we may not be aware of or able to detect or prove infringement by third parties. Our competitive position may be harmed if we cannot detect infringement and enforce our intellectual property rights quickly or at all. In some circumstances, we may choose to not pursue enforcement because an infringer has a dominant intellectual property position or for other business reasons. In addition, competitors might avoid infringement by designing around our intellectual property rights or by developing non-infringing competing technologies. Intellectual property rights and our ability to enforce them may be unavailable or limited in some countries which could make it easier for competitors to capture market share and could result in lost revenues. Furthermore, some of our intellectual property is licensed to others which may allow them to compete with us using that intellectual property.

Changes in tax laws, unfavorable resolution of tax examinations, or exposure to additional tax liabilities could have a material adverse effect on our results of operations, financial condition and liquidity.

We are subject to taxes in the U.S., Singapore and various foreign jurisdictions. Governments in the jurisdictions in which we operate implement changes to tax laws and regulations periodically. Any implementation of tax laws that fundamentally change the taxation of corporations in the U.S. or Singapore could materially impact our effective tax rate and could have a significant adverse impact on our financial results.

The ~~2017 United States~~U.S. Tax ~~Cut~~Cuts and ~~Jobs~~Job Act (“("the Tax ~~Act”~~Act") significantly changed the taxation of U.S. based multinational corporations. Our compliance with the Tax Act ~~will require~~requires the use of estimates in our financial statements and exercise of significant judgment in accounting for its provisions. The implementation of the Tax Act ~~will require~~requires interpretations and implementing regulations by the Internal Revenue Service ("IRS"), as well as state tax authorities. The legislation could be subject to potential amendments and technical corrections, any of which could materially lessen or increase certain adverse impacts of the legislation. As regulations and guidance evolve with respect to the Tax Act, and as we gather information and perform more analysis, our results may differ from previous estimates and may materially affect our financial position.

We are also subject to examinations of our tax returns by tax authorities in various jurisdictions around the world. We regularly assess the likelihood of adverse outcomes resulting from ongoing tax examinations to determine the adequacy of our provision for taxes. These assessments can require a high degree of judgment and estimation. Intercompany transactions associated with the sale of inventory, services, intellectual property and cost share arrangements are complex and affect our tax liabilities. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in multiple jurisdictions. There can be no assurance that the outcomes from ongoing tax examinations will not have an adverse effect on our operating results and financial condition. A difference in the ultimate resolution of tax uncertainties from what is currently estimated could have an adverse effect on our financial results and condition.

If tax incentives change or cease to be in effect, our income taxes could increase significantly.

We benefit from tax incentives extended to our foreign subsidiaries to encourage investment or employment. Several jurisdictions have granted us tax incentives which require renewal at various times in the future. The incentives are conditioned on achieving various thresholds of investments and employment, or specific types of income. Our taxes could increase if the incentives are not renewed upon expiration. If we cannot or do not wish to satisfy all or parts of the tax incentive conditions, we may lose the related tax incentive and could be required to refund tax incentives previously realized. As a result, our effective tax rate could be higher than it would have been had we maintained the benefits of the tax incentives.

We have substantial cash requirements in the United States while most of our cash is generated outside of the United States. The failure to maintain a level of cash sufficient to address our cash requirements in the United States could adversely affect our financial condition and results of operations.

Although the cash generated in the United States from our operations should cover our normal operating requirements and debt service requirements, a substantial amount of additional cash is required for special purposes such as the maturity of our debt obligations, our stock repurchase program, our declared dividends and acquisitions of third parties. Our business operating results, financial condition, and strategic initiatives could be adversely impacted if we were unable to address our U.S. cash requirements through the efficient and timely repatriations of overseas cash or other sources of cash obtained at an acceptable cost.

We have outstanding debt and may incur other debt in the future, which could adversely affect our financial condition, liquidity and results of operations.

We are party to a $1 billion five-year unsecured credit facility that will expire on March 13, 2024. As of January 31, 2020, the company had $175 million borrowings outstanding under the credit facility. On August 7, 2019, we entered into an amendment to the credit agreement, which provided for a $500 million short-term loan facility that was used in full to complete the acquisition of BioTek and is outstanding as of January 31, 2020. On October 21, 2019, we entered into a second amendment to the credit agreement, which refreshed the amount available for additional incremental term loan facilities under the credit agreement to permit additional incremental facilities of up to $500 million. We had no borrowings under the additional incremental loan facilities as of January 31, 2020. We also currently have outstanding an aggregate principal amount of $1.8 billion in senior unsecured notes. We also are party to a five-year unsecured revolving credit facility which expires in September 2019. On June 9, 2015, we increased the commitments under the existing credit facility by $300 million and on July 14, 2017, the commitments under the existing credit facility were increased by an additional $300 million so that the aggregate commitments under the facility now total $1 billion. As of January 31, 2018, we had $345 million outstanding under the credit facility. We may borrow additional amounts in the future and use the proceeds from any future borrowing for general corporate purposes, ~~other~~ future acquisitions, expansion of our business or repurchases of our outstanding shares of common stock.

Our incurrence of this debt, and increases in our aggregate levels of debt, may adversely affect our operating results and financial condition by, among other things:

increasing our vulnerability to downturns in our business, to competitive pressures and to adverse economic and industry conditions;

requiring the dedication of an increased portion of our expected cash flows from operations to service our indebtedness, thereby reducing the amount of expected cash flows available for other purposes, including capital expenditures, acquisitions, stock repurchases and dividends; and

limiting our flexibility in planning for, or reacting to, changes in our business and our industry.

Our ~~current revolving~~ credit facility imposes restrictions on us, including restrictions on our ability to create liens on our assets and engage in certain types of sale and leaseback transactions and the ability of our subsidiaries to incur indebtedness, and requires us to maintain compliance with specified financial ratios. Our ability to comply with these ratios may be affected by events beyond our control. In addition, the ~~indenture~~indentures governing our senior notes ~~contains~~contain covenants that may adversely affect our ability to incur certain liens or engage in certain types of sale and leaseback transactions. If we breach any of the covenants and do not obtain a waiver from the lenders or noteholders, then, subject to applicable cure periods, our outstanding indebtedness could be declared immediately due and payable.

If we suffer a loss to our factories, facilities or distribution system due to catastrophe, our operations could be seriously harmed.

Our factories, facilities and distribution system are subject to catastrophic loss due to fire, flood, terrorism, public health crises, increasing severity or frequency of extreme weather events, or other natural or man-made disasters. For example, in the first quarter of fiscal year 2020, a public health crisis in China led to an extension of the Lunar New Year holiday, which impacted our business, reduced the number of selling days and otherwise impacted our supply chain. This negatively impacted our results for the first quarter of fiscal year 2020 and may continue to affect our business and operating results. In ~~particular,~~addition, several of our facilities could be subject to a catastrophic loss caused by earthquake due to their locations. Our production facilities, headquarters and laboratories in California, and our production facilities in Japan, are all located in areas with above-average seismic activity. If any of our facilities were to experience a catastrophic loss, it could disrupt our operations, delay production, shipments and revenue and result in large expenses to repair or replace the facility. If such a disruption were to occur, we could breach agreements, our reputation could be harmed, and our business and operating results could be adversely affected. In addition, because we have consolidated our manufacturing facilities and we may not have redundant manufacturing capability readily available, we are more likely to experience an interruption to our operations in the event of a catastrophe in any one location. Although we carry insurance for property damage and business interruption, we do not carry insurance or financial reserves for interruptions or potential losses arising from earthquakes or terrorism. Also, our third party insurance coverage will vary from time to time in both type and amount depending on availability, cost and our decisions with respect to risk retention. Economic conditions and uncertainties in global markets may adversely affect the cost and other terms upon which we are able to obtain third party insurance. If our third party insurance coverage is adversely affected or to the extent we have elected to self-insure, we may be at a greater risk that our ~~operations~~financial condition will be harmed by a catastrophic loss.

If we experience a significant disruption in, or breach in security of, our information technology systems, or if we fail to implement new systems and software successfully, our business could be adversely affected.

We rely on several centralized information technology systems throughout our company to provide products and services, keep financial records, process orders, manage inventory, process shipments to customers and operate other critical functions. Our information technology systems may be susceptible to damage, disruptions or shutdowns due to power outages, hardware failures,

computer viruses, attacks by computer hackers, telecommunication failures, user errors, catastrophes or other unforeseen events. Our information technology systems also may experience interruptions, delays or cessations of service or produce errors in connection with system integration, software upgrades or system migration work that takes place from time to time. If we were to experience a prolonged system disruption in the information technology systems that involve our interactions with customers or suppliers, it could result in the loss of sales and customers and significant incremental costs, which could adversely affect our business. In addition, security breaches of our information technology systems could result in the misappropriation or unauthorized disclosure of confidential information belonging to us or to our employees, partners, customers or suppliers, which could result in our suffering significant financial or reputational damage.

Adverse conditions in the global banking industry and credit markets may adversely impact the value of our cash investments or impair our liquidity.

As of January 31, ~~2018,~~2020, we had cash and cash equivalents of approximately ~~$2.9~~$1.2 billion invested or held in a mix of money market funds, time deposit accounts and bank demand deposit accounts. Disruptions in the financial markets may, in some cases, result in an inability to access assets such as money market funds that traditionally have been viewed as highly liquid. Any failure of our counterparty financial institutions or funds in which we have invested may adversely impact our cash and cash equivalent positions and, in turn, our operating results and financial condition.

Regulations related to “conflict minerals” may cause us to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing our products.

We ~~could incur significant liability if~~are subject to the ~~distribution~~rules of ~~Keysight common stock~~the SEC which require disclosures by public companies of specified minerals, known as conflict minerals, that are necessary to ~~our shareholders is determined~~the functionality or production of products manufactured or contracted to be ~~a taxable transaction.~~

~~We have received~~manufactured. The rule, which requires an ~~opinion~~annual disclosure report to be filed with the SEC by May 31st of each year, requires companies to perform due diligence, disclose and report whether or not such minerals originate from ~~outside tax counsel~~the Democratic Republic of Congo or an adjoining country. Our ongoing implementation of these rules could affect sourcing at competitive prices and availability in sufficient quantities of certain minerals used in the manufacture of our products, including tin, tantalum, gold and tungsten. The number of suppliers who provide conflict-free minerals may be limited. In addition, there may be material costs associated with complying with the disclosure requirements, such as costs related to the ~~effect that~~due diligence process of determining the ~~separation and distribution~~source of ~~Keysight qualifies~~certain minerals used in our products, as well as costs of possible changes to products, processes, or sources of supply as a ~~transaction that~~consequence of such verification activities. As our supply chain is ~~described in Sections 355(a)~~complex and ~~368(a)(1)(D)~~we use contract manufacturers for some of the Internal Revenue Code. The opinion relies on certain facts, assumptions, representations and undertakings from Keysight and us regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these facts, assumptions, representations or undertakings are incorrect or not satisfied, our ~~shareholders and~~products, we may not be able to ~~rely on~~sufficiently verify the ~~opinion~~origins of ~~tax counsel and~~the relevant minerals used in our products through the due diligence procedures that we implement, which may harm our reputation. We may also encounter challenges to satisfy those customers who require that all of the components of our products be certified as conflict-free, which could ~~be subject~~place us at a competitive disadvantage if we are unable to significant tax liabilities. Notwithstanding the opinion of tax counsel, we have received, the IRS could determine on audit that the separation is taxable if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated or if it disagrees with the conclusions in the opinion. If the separation is determined to be taxable for U.S. federal income tax purposes, our shareholders that are subject to U.S. federal income tax and we could incur significant U.S. federal income tax liabilities.do so.

We cannot assure that we will continue to pay dividends on our common stock.

Since the first quarter of fiscal year 2012, we have paid a quarterly dividend on our common stock. The timing, declaration, amount and payment of any future dividends fall within the discretion of our Board of Directors and will depend on many factors, including our available cash, estimated cash needs, earnings, financial condition, operating results, capital requirements, as well as limitations in our contractual agreements, applicable law, regulatory constraints, industry practice and other business considerations that our Board of Directors considers relevant. A change in our dividend program could have an adverse effect on the market price of our common stock.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ISSUER PURCHASES OF EQUITY SECURITIES

The table below summarizes information about the ~~Company’s~~company’s purchases, based on trade date, of its equity securities registered pursuant to Section 12 of the Exchange Act during the quarterly period ended January 31, ~~2018~~2020.

Period
Total Number of
Shares of Common
Stock Purchased (1)

Weighted Average
Price Paid per Share
of
Common Stock (2)

Total
Number of
Shares of Common
Stock Purchased as
Part of Publicly
Announced Plans or
Programs (1)

Maximum
Approximate Dollar
Value of Shares of
Common Stock that
May Yet Be
Purchased Under the
Plans or Programs
(in millions) (1)

(a)
(b)
(c)
(d)
November 1, 2017 through November 30, 2017
231

$ 68.46

231

$ 594
December 1, 2017 through December 31, 2017
225

$ 67.18

225

$ 579
January 1, 2018 through January 31, 2018
218

$ 71.79

218

$ 563
Total
674

$ 69.11

674

$ 563



Period	Total Number of Shares of Common Stock Purchased (1)	Weighted Average Price Paid per Share of Common Stock (2)		Total Number of Shares of Common Stock Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Approximate Dollar Value of Shares of Common Stock that May Yet Be Purchased Under the Plans or Programs (in millions) (1)
	(a)	(b)		(c)	(d)
November 1, 2019 through November 30, 2019	258,761	$	77.80	258,761	$	1,007
December 1, 2019 through December 31, 2019	249,887	$	83.46	249,887	$	986
January 1, 2020 through January 31, 2020	217,179	$	87.47	217,179	$	967
Total	725,827	$	82.64	725,827	$	967

(1)


(2)	The weighted average price paid per share of common stock does not include the cost of commissions.

ITEM 6. EXHIBITS

(a)Exhibits:



Exhibit
Number	Description

~~11.1~~		~~See Note 5, “Net Income Per Share”, to our Condensed Consolidated Financial Statements.~~

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL	Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH XBRL	Schema Document

101.CAL XBRL	Calculation Linkbase Document

101.LAB XBRL	Labels Linkbase Document

101.PRE XBRL	Presentation Linkbase Document

101.DEF XBRL	Definition Linkbase Document

AGILENT TECHNOLOGIES, INC.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Dated:	March ~~5, 2018~~3, 2020	By:	/s/ ~~Didier Hirsch~~Robert W. McMahon
			~~Didier Hirsch~~Robert W. McMahon
			Senior Vice President and Chief Financial Officer
			(Principal Financial Officer)


Dated:	March ~~5, 2018~~3, 2020	By:	/s/ Rodney Gonsalves
			Rodney Gonsalves
			Vice President, Corporate Controllership
			(Principal Accounting Officer)

5257



Estimated future amortization expense:
(in millions)
Remainder of 2018	$	73
2019	$	71
2020	$	56
2021	$	42
2022	$	32
2023	$	21
Thereafter	$	21



	Derivatives Designated as Cash Flow Hedges			Derivatives Not Designated as Hedging Instruments
	Forward Contracts USD			Forward Contracts USD
Currency	Buy/(Sell)			Buy/(Sell)
	(in millions)
Euro	$	(80	)	$	54
British Pound	(47		)	11
Canadian Dollar	(36		)	9
Australian Dollar	5			16
Malaysian Ringgit	—			(2		)
Japanese Yen	(54		)	(17		)
Danish Krone	—			18
Korean Won	(39		)	(2		)
Singapore Dollar	14			2
Swiss Franc	—			29
Other	—			(18		)
Totals	$	(237	)	$	100



	Pensions
	U.S. Plans						Non-U.S. Plans						U.S. Post Retirement Benefit Plans
	Three Months Ended January 31,
	2018			2017			2018			2017			2018			2017
	(in millions)
Service cost—benefits earned during the period	$	—		$	—		$	6		$	4		$	—		$	—
Interest cost on benefit obligation	4			3			3			3			1			1
Expected return on plan assets	(7		)	(6		)	(11		)	(10		)	(2		)	(2		)
Amortization:
Actuarial losses	—			1			7			9			2			3
Prior service credits	—			—			—			—			(2		)	(2		)
Total net plan costs	$	(3	)	$	(2	)	$	5		$	6		$	(1	)	$	—
Settlements gains	$	—		$	—		$	(5	)	$	(32	)	$	—		$	—



				Net defined benefit pension cost and post retirement plan costs
Three Months Ended January 31, 2018	Foreign currency translation			Prior service credits			Actuarial Losses			Unrealized gains (losses) on derivatives			Total
	(in millions)
As of October 31, 2017	$	(156	)	$	140		$	(328	)	$	(2	)	$	(346	)

Other comprehensive income (loss) before reclassifications	79			—			(1		)	(10		)	68

Amounts reclassified out of accumulated other comprehensive income (loss)	—			(2		)	9			—			7

Tax (expense) benefit	—			1			(2		)	3			2

Other comprehensive income (loss)	79			(1		)	6			(7		)	77

As of January 31, 2018	$	(77	)	$	139		$	(322	)	$	(9	)	$	(269	)