SEGMENT INFORMATION | 6 Months Ended |
Apr. 30, 2015 |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | 17. 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. In the first fiscal quarter of 2015, we completed the separation of our electronic measurement business. See Note 3 "Discontinued Operations" for further information. |
In November 2014, we announced a change in organizational structure designed to better serve our customers. Our new structure reflects our strategy to focus our expertise on the market segments we serve and utilize our resources to offer product solutions to address our customer needs. The new operating structure ensures that we are able to respond to market demand while reducing costs through increased efficiencies. As a result, our life sciences business, excluding the nucleic acid solutions division, together with the chemical analysis business merged to form a new segment called life sciences and applied markets business. Our diagnostics and genomics businesses combined and includes the nucleic acid solutions division of our life sciences business and became the diagnostics and genomics segment. Finally, the Agilent CrossLab segment was formed from the services and consumables businesses. The historical financial segment information has been recast to conform to this new presentation. |
Following this reorganization, 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 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 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”) instruments; inductively coupled plasma optical emission spectrometry ("ICP-OES") instruments; laboratory software and informatics systems; laboratory automation and robotic systems; dissolution testing; X-Ray diffraction systems; vacuum pumps and measurement technologies. |
|
Our diagnostics and genomics business is comprised of three areas of activity providing solutions that include reagents, instruments, software and consumables that enable customers in the clinical and life sciences research areas to interrogate samples at the cellular and molecular level. First, our Dako business is focused on product offerings to cancer diagnostics and anatomic pathology workflows. The broad portfolio of offerings includes immunohistochemistry (“IHC”), In Situ Hybridization (“ISH”), Hematoxylin and Eosin (“H&E”) staining and special staining. 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. Secondly 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. Finally 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") in an emerging class of drugs that utilize nucleic acid molecules for disease therapy. |
|
The Agilent CrossLab business spans the entire lab with its extensive consumables and services portfolio, which is designed to improve customer outcomes. The majority 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, 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, real estate, insurance services, information technology services, treasury, 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. Corporate charges previously allocated to our electronic measurement business, but not classified within discontinued operations, were not reallocated to our other segments. These charges are presented below as a component of the reconciliation between segments' income from operations and Agilent's income from continuing operations and are classified as unallocated corporate charges. In addition, we do not allocate amortization and impairment of acquisition-related intangible assets, restructuring and transformational expenses, acquisition and integration 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. |
|
The following tables reflect the results of our reportable segments under our management reporting system. These results are not necessarily in conformity with U.S. GAAP. The performance of each segment is measured based on several metrics, including adjusted 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. |
|
The profitability of each of the segments is measured after excluding restructuring and asset impairment charges, investment gains and losses, interest income, interest expense, acquisition and integration costs, non-cash amortization and other items as noted in the reconciliations below. |
|
| | | | | | | | | | | | | | | |
| Life Sciences and Applied Markets | | Diagnostics and Genomics | | Agilent CrossLab | | Total |
| (in millions) |
Three months ended April 30, 2015: | | | | | | | | | | | |
|
Total net revenue | $ | 473 | | | $ | 169 | | | $ | 321 | | | $ | 963 | |
|
Segment income from operations | $ | 75 | | | $ | 25 | | | $ | 69 | | | $ | 169 | |
|
Three months ended April 30, 2014: | | | | | | | | | | | |
|
Total net revenue | $ | 495 | | | $ | 168 | | | $ | 325 | | | $ | 988 | |
|
Segment income from operations | $ | 71 | | | $ | 26 | | | $ | 70 | | | $ | 167 | |
|
|
| | | | | | | | | | | | | | | |
| | | | | | | |
| Life Sciences and Applied Markets | | Diagnostics and Genomics | | Agilent CrossLab | | Total |
| (in millions) |
Six months ended April 30, 2015: | | | | | | | | | | | |
|
Total net revenue | $ | 1,020 | | | $ | 317 | | | $ | 652 | | | $ | 1,989 | |
|
Segment income from operations | $ | 182 | | | $ | 26 | | | $ | 137 | | | $ | 345 | |
|
Six months ended April 30, 2014: | | | | | | | | | | | |
|
Total net revenue | $ | 1,032 | | | $ | 325 | | | $ | 639 | | | $ | 1,996 | |
|
Segment income from operations | $ | 176 | | | $ | 45 | | | $ | 139 | | | $ | 360 | |
|
|
The following table reconciles reportable segments’ income from operations to Agilent’s total enterprise income before taxes: |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| April 30, | | April 30, |
| 2015 | | 2014 | | 2015 | | 2014 |
| (in millions) |
Total reportable segments’ income from operations | $ | 169 | | | $ | 167 | | | $ | 345 | | | $ | 360 | |
|
Acceleration of share-based compensation related to workforce reduction | (1 | ) | | — | | | (2 | ) | | — | |
|
Transformational initiatives | (17 | ) | | (8 | ) | | (29 | ) | | (11 | ) |
Amortization of intangibles | (38 | ) | | (49 | ) | | (81 | ) | | (98 | ) |
Acquisition and integration costs | (1 | ) | | (2 | ) | | (2 | ) | | (8 | ) |
Business exit and divestiture costs (primarily our NMR business) | (8 | ) | | — | | | (11 | ) | | — | |
|
Pre-separation costs | — | | | (2 | ) | | — | | | (4 | ) |
|
Other | 3 | | | (2 | ) | | 2 | | | (1 | ) |
|
Interest income | 2 | | | 2 | | | 4 | | | 4 | |
|
Interest expense | (17 | ) | | (30 | ) | | (33 | ) | | (59 | ) |
Other income (expense), net | 4 | | | 3 | | | 16 | | | 3 | |
|
Unallocated corporate charges | — | | | (10 | ) | | — | | | (20 | ) |
|
Income from continuing operations before taxes, as reported | $ | 96 | | | $ | 69 | | | $ | 209 | | | $ | 166 | |
|
|
The following table reflects segment assets under our management reporting system. Segment assets include allocations of corporate assets, including deferred tax assets, goodwill, other intangibles and other assets. Unallocated assets primarily consist of cash, cash equivalents, the valuation allowance relating to deferred tax assets and other assets. During the second quarter of 2015 we changed the segment asset allocation methodology to more closely represent the use of assets by each segment following a review of operational metrics. Accordingly the segment assets presented as of October 31, 2014 have been restated to follow the new methodology. |
|
|
| | | | | | | | | | | | | | | |
| Life Sciences and Applied Markets | | Diagnostics and Genomics | | Agilent CrossLab | | Total |
| (in millions) |
Assets: | | | | | | | | | | | |
|
As of April 30, 2015 | $ | 1,548 | | | $ | 2,028 | | | $ | 1,005 | | | $ | 4,581 | |
|
As of October 31, 2014 | $ | 1,663 | | | $ | 2,302 | | | $ | 1,001 | | | $ | 4,966 | |
|