UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________
Form 10-K
_____________________________________________________________
(MARK ONE)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended October 31, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For transition period from to
Commission File Number: 001-15405
_____________________________________________________________
Agilent Technologies, Inc.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
Delaware
77-0518772
Address of principal executive offices: 5301 Stevens Creek Blvd., Santa Clara, California 95051
Registrant's telephone number, including area code: (800) 227-9770
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class
Common Stock, $0.01 par value
Trading Symbol
A
Name of each Exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
_____________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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 the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of
the Exchange Act.
Large accelerated filer
Smaller reporting company
☒
☐
Accelerated filer
☐
Non-accelerated filer
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant's common equity held by non-affiliates as of April 30, 2020, was approximately $18.0 billion. Shares of stock held
by officers, directors and 5 percent or more stockholders have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate
status is not necessarily a conclusive determination for other purposes.
As of December 10, 2020 there were 306,849,526 outstanding shares of common stock, par value $0.01 per share.
Document Description
_____________________________________________________________
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Stockholders (the "Proxy Statement") to be held on March 17, 2021, and to be filed
pursuant to Regulation 14A within 120 days after registrant's fiscal year ended October 31, 2020 are incorporated by reference into Part III of this
Report
10-K Part
III
1
TABLE OF CONTENTS
Forward-Looking Statements
PART I
Item 1
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4 Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Item 5 Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . .
Item 6
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Item 10 Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . .
Item 13 Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14 Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 15 Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
Page
3
3
16
26
27
27
27
28
29
31
52
54
114
114
114
114
115
115
116
116
116
2
Forward-Looking Statements
This report contains forward-looking statements including, without limitation, statements regarding growth
opportunities, including for revenue and 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 financial results, our operating margin, mix, our investments, including in manufacturing infrastructure,
research and development and expanding and improving our applications and 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 impact of foreign currency movements, our
hedging programs and other actions to offset the effects of tariffs and foreign currency movements, our future effective tax rate,
tax valuation allowance and unrecognized tax benefits, the impact of local government regulations on our ability to pay vendors
or conduct operations, our ability to satisfy our liquidity requirements, including through cash generated from operations, the
potential impact of adopting new accounting pronouncements, indemnification, source and supply of materials used in our
products, our sales, our purchase commitments, our capital expenditures, the integration and effects of our acquisitions and
other transactions, our stock repurchase program and dividends and the potential or anticipated direct or indirect impact of
COVID-19 on our business 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 I Item 1A and
elsewhere in this Form 10-K.
PART I
Item 1. Business
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.
For fiscal year ended October 31, 2020, we have three business segments comprised of the life sciences and applied
markets business, the diagnostics and genomics business and the Agilent CrossLab business.
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. Our diagnostics and genomics business is comprised of 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. The Agilent CrossLab business spans the entire lab with its extensive consumables and services portfolio,
which is designed to improve customer outcomes. In addition, we conduct centralized order fulfillment and supply chain
operations for our businesses through the order fulfillment and supply chain organization ("OFS"). OFS provides resources for
manufacturing, engineering and strategic sourcing to our respective businesses. Each of our businesses, together with OFS and
Agilent Technologies Research Laboratories, is supported by our global infrastructure organization, which provides shared
services in the areas of finance, information technology, legal, certain procurement services, workplace services and human
resources.
We sell our products primarily through direct sales, but we also utilize distributors, resellers, manufacturer's
representatives and electronic commerce. As of October 31, 2020, we employed approximately 16,400 people worldwide. Our
primary research and development and manufacturing sites are in California, Colorado, Delaware, Massachusetts, Texas and
Vermont in the U.S. and in Australia, China, Denmark, Germany, Italy, Japan, Malaysia, Singapore and the United Kingdom.
3
Life Sciences and Applied Markets Business
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") 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 analytics; laboratory automation and robotic systems; dissolution testing; vacuum pumps and measurement
technologies.
We employed approximately 5,300 people as of October 31, 2020 in our life sciences and applied markets business.
Life Sciences and Applied Markets
Our life sciences and applied markets business focuses primarily on the following five markets:
The Pharmaceutical, Biopharmaceutical, CRO & CMO Market. This market consists of “for-profit” companies who
participate across the pharmaceutical value chain in the areas of therapeutic research, discovery & development, clinical trials,
manufacturing and quality assurance and quality control. One sub-segment of this market is core and emerging pharmaceutical
companies ("pharma"). A second sub-segment includes biopharmaceutical companies ("biopharma"), contract research
organizations ("CROs") and contract manufacturing organizations ("CMOs"). Biopharma companies and, to a somewhat lesser
extent, CROs and CMOs typically participate in specific points in the pharmaceutical industry value chain. Additionally, due to
the relatively low drug efficacy within oncology, pharma companies are partnering with diagnostic companies to bring
validated tests to the market with their new drugs.
The Academic and Government Market. This market consists primarily of “not-for-profit” organizations and includes
academic institutions, large government institutes and privately funded organizations. The academic and government market
plays an influential role in technology adoption and therapeutic developments for pharmaceutical and molecular diagnostics
companies. After decades of investment in basic biomedical research by government funding bodies, the focus has widened to
include translational research - multidisciplinary scientific efforts directed at accelerating therapy development.
The Chemical & Energy Market. Our products and solutions are used throughout the chemicals sector in the
development, manufacturing, and quality control of commodity chemicals, specialty and agrochemicals, and fine chemicals.
Chemical market customers use our products to determine chemical composition, perform impurity analysis, qualify raw
materials, conduct materials characterization, and verify and ensure the environmental safety of operations and employees. The
natural gas and petroleum exploration and refining markets use our products to analyze crude oil composition, perform
intermediate material analysis, verify and improve refining processes and ensure the overall quality of gasoline, fuels, lubricants
and other products.
The Environmental & Forensics Market. Our instruments, software and workflow solutions are used by the
environmental market for applications such as laboratory and field analysis of chemical pollutants in air, water, soil and solid
waste. Environmental industry customers include all levels of government, the industrial and manufacturing sectors,
engineering and consulting companies, commercial testing laboratories and colleges and universities. Drug testing and forensics
laboratories use our instruments, software and workflow solutions for applications such as analyzing evidence associated with
crime, screening athletes for performance enhancing drugs, analyzing samples for recreational drugs, or detecting and
identifying biological and chemical warfare agents. Some of our instruments are used in mobile laboratories as well. Customers
include local, state, federal, and international law enforcement agencies and health laboratories.
The Food Market. Our instruments, software, and workflow solutions are used throughout the food production chain,
including incoming inspection, new product development, quality control and assurance, and packaging. For example, our mass
spectrometer portfolio is used to analyze contaminants and residual pesticides in food. There is also a significant food safety
market involved in analyzing food for pathogen contamination, accurate verification of species type and evidence of genetically
modified content.
4
Life Sciences and Applied Markets Products and Applications
Our products fall into eight main areas of work: liquid chromatography, gas chromatography, mass spectrometry,
spectroscopy, software and informatics, lab automation and robotics, vacuum technology and cell analysis.
Our key products and applications include the following technologies:
Liquid Chromatography
A liquid chromatograph ("LC") or a high-performance liquid chromatograph ("HPLC") is used to separate molecules of a
liquid mixture to determine the quantity and identity of the molecules present. The Agilent LC portfolio is modular in
construction and can be configured as analytical and preparative systems. These systems can be stepwise upgraded to highly
sophisticated, automated workflow solutions such as method development, multi‑method/walk-up, high-capacity/high-
throughput or multi‑dimensional LC and can be extended to application‑based analyzers (e.g., for bio-molecular separations,
chiral analysis or size exclusion chromatography). As a leader in liquid chromatography, we continue to expand our application
space with new HPLC columns, new services and diagnostics offerings and ongoing instrument and software product
enhancements.
Gas Chromatography
Agilent is the world's leading provider of gas chromatographs ("GC"), both laboratory and portable models. GCs are
used to separate any gas, liquid or solid that can be vaporized and then detect the molecules present to determine their identity
and quantity. Agilent provides custom or standard analyzers configured for specific chemical analysis applications, such as
detailed speciation of a complex hydrocarbon stream, calculation of gas calorific values in the field, or analysis of a new bio-
fuel formulation. We also offer related software, accessories and consumable products for these and other similar instruments.
Mass Spectrometry
A mass spectrometer (“MS”) identifies and quantifies chemicals based on a chemical's molecular mass and characteristic
patterns of fragment ion masses that result when a molecule is broken apart. Liquid chromatography is commonly used to
separate compounds and introduce them to the MS system. The combined use of LC and MS is frequently used both to identify
and quantify chemical compounds. Mass spectrometry is an important tool in analyzing small molecules and can also be used to
characterize and quantify proteins and other biological entities. Agilent's LCMS portfolio includes instruments built around four
main analyzer types - single quadrupole, triple quadrupole, time-of-flight ("TOF") and quadrupole time-of-flight ("QTOF").
Agilent's GC/MS portfolio includes instruments built around three main analyzer types - single quadrupole, triple quadrupole,
and quadrupole time-of-flight ("QTOF"). We significantly expanded our mass spectrometry portfolio in recent years with a
focus on improving performance, sensitivity, and ease of use.
Spectroscopy
Spectroscopy is a technique for analyzing the individual chemical components of substances based on the absorption or
emission of electromagnetic radiation of specific wavelengths of light. Our spectroscopy instruments include AA spectrometers,
microwave plasma-atomic emission spectrometers ("MP-AES"), ICP-OES, ICP-MS, fluorescence spectrophotometers,
ultraviolet-visible ("UV-Vis") spectrophotometers, Fourier Transform infrared ("FT-IR" spectrophotometers, near-infrared
("NIR") spectrophotometers, raman spectrometers and sample automation products. We also offer related software, accessories
and consumable products for these and other similar instruments.
Software and Informatics
We provide software for instrument control, data acquisition, data analysis, laboratory content and business process
management, and informatics. Our software facilitates the compliant use of instruments in pharmaceutical quality assurance/
quality control environments. With our OpenLab Laboratory Software Suite, Agilent has a scalable, open software platform that
enables customers to capture, analyze, and share scientific data throughout the lab and across the enterprise.
Lab Automation and Robotics
We offer a comprehensive suite of workflow solutions to our life science customers with the addition of automated liquid
handling and robotics that range from standalone instrumentation to bench-top automation solutions. These solutions strengthen
our offering of automated sample preparation solutions across a broad range of applications.
5
Vacuum Technology
Our vacuum technologies products are used to create, control, measure and test vacuum environments in life science,
industrial and scientific applications where ultra-clean, high-vacuum environments are needed. Vacuum technologies'
customers are typically OEMs that manufacture equipment for these applications, or government and research organizations
that require vacuum solutions in their facilities. Products include a wide range of high and ultra-high vacuum pumps (diffusion,
turbomolecular and ion getter), intermediate vacuum pumps (rotary vane, sorption and dry scroll), vacuum instrumentation
(vacuum control instruments, sensor gauges and meters) and vacuum components (valves, flanges and other mechanical
hardware). These products also include helium mass spectrometry and helium-sensing leak detection instruments used to
identify and measure leaks in hermetic or vacuum environments. In addition to product sales, we also offer a wide range of
services including an exchange and rebuild program, assistance with the design and integration of vacuum systems, applications
support and training in basic and advanced vacuum technologies.
Cell Analysis
Our cell analysis tools are used to study cell signaling pathways, general cell function and behavior through metabolic
profile analysis, real-time cellular impedance measurements, and traditional cytometry techniques. Characterizing cellular
behavior and function is an increasingly critical step in understanding normal behavior versus diseased states, advancements of
those diseases, and response to therapies, providing researchers with a more targeted approach for drug discovery and
ultimately more effective therapeutics. Our cell analysis portfolio includes cell analysis plate-based assays, flow cytometer,
real-time cell analyzer, microplate reader, cell imaging system and related consumables. Cell analysis customers are typically
academic institutions and pharma and biopharma companies.
Life Sciences and Applied Markets Customers
We had approximately 25,400 customers for our life sciences and applied markets business in fiscal 2020. No single
customer represented a material amount of the net revenue of the life sciences and applied markets business. A significant
number of our life sciences and applied markets customers are also customers of our Agilent CrossLab business.
The life sciences and applied markets business is susceptible to seasonality in its orders and revenues primarily related to
U.S. and foreign government budgets, chemical and energy and environmental customers and large pharmaceutical company
budgets. Historically, the result is that our first and fourth fiscal quarters tend to deliver the strongest profits for this group.
However, general economic trends, new product introductions and competition might overshadow this trend in any given year.
Life Sciences and Applied Markets Sales, Marketing and Support
The life sciences and applied markets channels focus on the therapeutics and human disease research customer base
(pharma, biopharma, CRO, CMO and generics), clinical customer base (high complexity clinical testing labs), emerging life
sciences opportunities in life science research institutes and applied markets (chemical and energy, food, environmental and
forensics). We deploy a multi-channel approach, marketing products to our customers through direct sales, electronic
commerce, resellers, manufacturers' representatives and distributors. We primarily use direct sales to market our solutions to
our pharmaceutical, biopharmaceutical, clinical, life science research and applied market accounts. Sales agents supplement
direct sales by providing broader geographic coverage and coverage of smaller accounts. Our active reseller program augments
our ability to provide more complete solutions to our customers. We sell our consumable products through distributors,
electronic commerce and direct sales.
Our products typically come with standard warranties, and extended warranties are available for additional cost.
Life Sciences and Applied Markets Manufacturing
Our manufacturing supports our diverse product range and customer‑centric focus. We assemble highly configurable
products to individual customer orders and make standard products to stock. We employ advanced manufacturing techniques
and supply chain management systems to reduce costs and manufacturing cycle times. Our manufacturing process then converts
these designs into standard as well as custom products for shipment to customers. We selectively use third parties to provide
some supply chain processes for manufacturing, warehousing and logistics. Inside the U.S., we have manufacturing facilities in
California, Delaware, Massachusetts and Vermont. Outside of the U.S., we have manufacturing facilities in Germany, Malaysia
and Singapore. We have FDA registered sites in California, Vermont, Germany and Singapore.
6
Life Sciences and Applied Markets Competition
The markets for analytical instruments in which we compete are characterized by evolving industry standards and intense
competition. Our principal competitors in the life sciences and applied markets arena include: Danaher Corporation,
PerkinElmer Inc., Shimadzu Corporation, Thermo Fisher Scientific Inc. and Waters Corporation. Agilent competes on the basis
of product performance, reliability, support quality, applications expertise, global channel coverage and price.
Diagnostics and Genomics Business
Our diagnostics and genomics business includes the genomics, nucleic acid contract manufacturing and research and
development, pathology, companion diagnostics, reagent partnership and biomolecular analysis businesses.
Our diagnostics and genomics business is comprised of 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 API in an emerging class
of drugs that utilize nucleic acid molecules for disease therapy. Third, our pathology solutions business is focused on product
offerings for 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.
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. 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.
We employed approximately 2,700 people as of October 31, 2020 in our diagnostics and genomics business.
Diagnostics and Genomics Market
Within the diagnostics and genomics business, we focus primarily on the diagnostics and clinical market. Our high-
quality, automated pathology tissue staining platforms and solutions are used most heavily by the large labs located in hospitals,
medical centers, and reference labs. The market is skewed towards mature economies, with most of the market in North
America, Western Europe and Japan. The mix is changing, however, as emerging markets increase spending on human health.
The clinical market for genomics consists of high complexity clinical labs performing patient testing, including “for-
profit” reference laboratories, hospital labs, and molecular diagnostic companies. While these labs primarily purchase in vitro
diagnostics ("IVD") labeled testing kits, they often develop and validate their own molecular based tests. Analyte Specific
Reagents ("ASRs") are often used by these labs.
Diagnostics and Genomics Products
Our products fall into eight main areas of work: pathology products, specific proteins and flow reagents, companion
diagnostics, target enrichment, cytogenetic research solutions and microarrays, PCR and qPCR instrumentation and molecular
biology reagents, nucleic acid solutions and automated electrophoresis and microfluidics.
Pathology
This area consists of routine clinical solutions for tissue-based cancer diagnostics with solutions that comprise
antibodies, reagents, instruments and software targeting both primary and advanced cancer diagnostics. Our CoverStainer and
Artisan based product families target primary cancer diagnostics through hematoxylin and eosin staining as well as special
stains for additional insights and detection of potentially carcinogenic tissue. Dako Omnis and Autostainer based IHC solution
and Instant Quality Fluorescence In Situ Hybridization ("IQFISH") technologies provide advanced tumor typing through
7
investigation of protein and gene expression. These products also include companion diagnostic tests that are used to help
identify patients most likely to benefit from a specific targeted therapy.
Specific Proteins and Flow Reagents
Our reagent OEM business is a provider of clinical diagnostic products within the areas of specific proteins for
turbidimetry and reagents for flow cytometry. These are sold to OEM customers as customized reagent solutions supplied to top
IVD companies or through retail partners.
Companion Diagnostics
In our companion diagnostics business, we partner with a number of major pharmaceutical companies to develop new
potential pharmacodiagnostics, which may be used to identify patients most likely to benefit from a specific targeted therapy.
We support pharmaceutical companies during each phase of their drug development process, from early pre-clinical through
commercial launch activities. Companion diagnostics has a history of developing clinically relevant and validated tests, with
accurate and effective scoring and interpretation guidelines, that enable successful regulatory approvals in our worldwide
markets.
Target Enrichment
We provide a target enrichment portfolio composed of two main platforms, SureSelect and HaloPlex, both enabling
customers to select specific target regions of the genome for sequencing. Customers can customize our products for their
regions of interest using the SureDesign software, or they can choose from a wide range of catalog products, including gene
panels for specific applications and Exome designs, which allow analysis of the entire coding sequences of the genome. The
technologies provide an easy sample prep workflow that can be automated with the Agilent Bravo platform for scalability.
HaloPlex provides less-than-24-hours fast workflow, which makes it suitable for labs that require fast turnaround time from
sample to results. These products are used for mutation detection and genotyping. Results can be easily analyzed using Agilent
software solutions GeneSpring or SureCall. Our solutions also enable clinical labs to identify DNA variants associated with
genetic diseases and help direct cancer therapy.
Cytogenetic Research Solutions and Microarrays
We provide microarrays for comparative genomic hybridization (“CGH”), mostly used by customers in cytogenetic
laboratories. The arrays allow customers to detect genome-wide copy number alterations, with high levels of resolution (from
entire chromosomal copy number changes to specific microdeletions or duplications). The arrays are offered in many formats
allowing the customers to choose from different levels of resolution and number of samples per arrays. Arrays can also be
customized using the SureDesign software. In addition to the microarrays, Agilent's solution includes reagents for sample
processing, hardware for reading the microarrays, and software to help users view the data in a meaningful way. In addition to
the CGH portfolio, the cytogenetics solution comprises a line of oligonucleotide probes for fluorescent in situ hybridization
("FISH") called SureFISH. Additionally, Agilent provides a wide range of microarrays to the research market for different types
of applications: gene expression, microRNA, methylation, splice variants, and chromatin immunoprecipitation applications.
Arrays are offered as catalog designs or customizable designs, with no minimum order size and short delivery time, which
differentiates us from other vendors and enables researchers the maximum flexibility in their studies.
PCR and qPCR Instrumentation and Molecular Biology Reagents
Polymerase chain reaction ("PCR") is a standard laboratory method used to amplify the amount of genetic material of a
given sample to enable further interrogation. Quantitative PCR ("qPCR") or real time PCR is also a standard method used in
genomic research facilities to measure the amount of a specific nucleic acid sequence within a sample. There are several
applications for qPCR; among the most common are identifying the expression level of a specific gene or calculating the
amount of a specific pathogen present in a sample. Agilent offers a complete portfolio of PCR & qPCR instruments, as well as
specialty enzymes for amplifying difficult sample types. In addition to PCR and qPCR enzymes, Agilent offers a wide range of
molecular biology reagents including tools for cloning and mutagenesis applications.
Nucleic Acid Solutions
Our nucleic acid solutions business is a contract manufacturing and development services business with equipment and
expertise focused on mid to large scale production of synthesized oligonucleotide APIs under pharmaceutical GMP conditions
for an emerging class of drugs that utilize oligonucleotide molecules for disease therapy. These drugs have advanced from
8
single strand DNA molecules to complex, highly modified molecules including antisense, aptamers, double-stranded RNA, and
RNA mixtures. These advancements in the technology have greatly improved the efficacy of delivery and stability of the oligos
in-vivo. Our nucleic acid solutions business offers industry leading experience to efficiently advance our customers' oligo drug
candidates from clinical trials to commercial launch with a common goal of patient health and safety.
Automated Electrophoresis and Microfluidics
Automated electrophoresis is a separation technique for bio molecules such as proteins, peptides and nucleic acids (RNA
and DNA) and is used to determine the identity of a molecule by either size or charge. It is widely used as a QC tool to check
sample integrity prior to subsequent analysis. Prominent examples are nucleic acid preparation products in front of polymerase
chain reaction, NGS and microarrays.
Diagnostics and Genomics Customers
We had approximately 10,900 customers for our diagnostics and genomics business in fiscal 2020. No single customer
represented a material amount of the net revenue of the diagnostics and genomics business.
Diagnostics and Genomics Sales, Marketing and Support
The diagnostics and genomics channels focus on the therapeutics and human disease research customer base (pharma,
biopharma, CRO, CMO and generics), clinical customer base (pathology labs and high complexity clinical testing labs) and on
emerging life sciences opportunities in life science research institutes. We deploy a multi-channel approach, marketing products
to our customers through direct sales, electronic commerce, resellers, manufacturers' representatives and distributors. We
primarily use direct sales to market our solutions to our pharmaceutical, biopharmaceutical and clinical accounts. Sales agents
supplement direct sales by providing broader geographic coverage and coverage of smaller accounts. Our active reseller
program augments our ability to provide more complete solutions to our customers. We sell our consumable products through
distributors, telesales, electronic commerce and direct sales. We utilize telesales for more mature product lines, as well as for
reorders of reagent products.
Diagnostics and Genomics Manufacturing
Our manufacturing supports our diverse product range and customer-centric focus. We assemble highly configurable
products to individual customer orders and make standard products to stock. We employ advanced manufacturing techniques
and supply chain management systems to reduce costs and manufacturing cycle times. We selectively use third parties to
provide some supply chain processes for manufacturing, warehousing and logistics. In the U.S., we have manufacturing
facilities in California, Colorado and Texas. Outside of the U.S., we have manufacturing facilities in Denmark and Malaysia.
Our FDA registered sites include California, Colorado, Texas and Denmark.
Diagnostics and Genomics Competition
The markets for diagnostics and genomics analytical products in which we compete are characterized by evolving
industry standards and intense competition. Our principal competitors in the diagnostics and genomics arena include: Roche
Ventana Medical Systems, Inc., a member of the Roche Group, Leica Biosystems, Inc., a division of Danaher Corporation,
Abbott Laboratories, Illumina, Inc. and Affymetrix, Inc., a division of Thermo Fisher Scientific Inc. Agilent competes on the
basis of product performance, reliability, support quality, applications expertise, whole solution offering, global channel
coverage and price.
Diagnostics and Genomics Government Regulation
Some of the products the diagnostics and genomics business sells are subject to regulatory approval by the FDA and
other regulatory bodies throughout the world. These regulations govern a wide variety of product related activities, from quality
management, design and development to labeling, manufacturing, promotion, sales and distribution. We continually invest in
our manufacturing infrastructure to gain and maintain certifications necessary for the level of clearance.
9
Agilent CrossLab Business
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, 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.
Our Agilent CrossLab business employed approximately 5,800 people as of October 31, 2020.
Agilent CrossLab Markets
The Pharmaceutical, Biopharmaceutical, CRO & CMO Market. Our services and consumable products support
customers in this market that consists of “for-profit” companies who participate across the pharmaceutical value chain in the
areas of therapeutic research, discovery and development, clinical trials, manufacturing and quality assurance and quality
control. One sub-segment of this market is core and emerging pharmaceutical companies ("pharma"). A second sub-segment
includes biopharmaceutical companies ("biopharma"), contract research organizations ("CROs") and contract manufacturing
organizations ("CMOs"). Biopharma companies and, to a somewhat lesser extent, CROs and CMOs typically participate in
specific points in the pharmaceutical industry value chain. Additionally, due to the relatively low drug efficacy within
oncology, pharma companies are partnering with diagnostic companies to bring validated tests to the market with their new
drugs.
The Academic and Government Market. Our services and consumable products support customers in this market that
consists primarily of “not-for-profit” organizations and includes academic institutions, large government institutes and privately
funded organizations. The academic and government market plays an influential role in technology adoption and therapeutic
developments for pharmaceutical and molecular diagnostics companies. After decades of investment in basic biomedical
research by government funding bodies, the focus has widened to include translational research - multidisciplinary scientific
efforts directed at accelerating therapy development.
The Chemical & Energy Market. Our services, software, technical support, and consumables are used throughout the
chemicals sector in the development, manufacturing, and quality control of commodity chemicals, specialty and agrochemicals,
and fine chemicals. Chemical market customers use our services, software, technical support, and consumables to maintain,
optimize, and enable higher productivity and profitability for labs, and support quality control and compliance with
environmental and safety regulations. The natural gas and petroleum exploration and refining markets use our services,
software, technical support, and consumables to support quality control, environmental safety reviews, analysis of crude oil
composition, and improve their refining processes and quality of products.
The Environmental & Forensics Market. Our services and consumable products support the environmental industry
customers that perform laboratory and field analysis of chemical pollutants in air, water, soil and solid waste. Environmental
industry customers include all levels of government, the industrial and manufacturing sectors, engineering and consulting
companies, commercial testing laboratories and colleges and universities. Our services and consumable products also support
drug testing and forensics laboratories that are involved with analyzing evidence associated with crime, screening athletes for
performance enhancing drugs, analyzing samples for recreational drugs, or detecting and identifying biological and chemical
warfare agents. Customers include local, state, federal, and international law enforcement agencies and commercial testing
laboratories.
The Food Market. Our services and consumable products support the food production chain, including incoming
inspection, new product development, quality control and assurance, and packaging. Our services and consumable products also
support the food safety market in their work to analyze food for concerns ranging from pathogen contamination, genetic
modification, species verification and others.
The Diagnostics and Clinical Market. Our services and consumable products support clinical diagnostic customers in
pathology labs throughout the world. The market is skewed towards the mature economies, with most of the market in North
America, Western Europe and Japan. The mix is changing, however, as emerging markets increase spending on human health.
10
Agilent CrossLab Products and Applications
Chemistries and Supplies
We offer a broad range of market specific consumables and supplies to complete customers' analytical workflows from
sample preparation through separation and analysis to storage, with the support of our technology platforms. This includes
sample preparation consumables such as solid phase extraction ("SPE") and filtration products, self-manufactured GC and LC
columns, chemical standards, and instrument replacement parts. Consumable products also include scientific instrument parts
and supplies such as filters and fittings for GC systems; xenon lamps and cuvettes for UV-Vis-NIR, fluorescence, FT-IR and
raman spectroscopy instruments; and graphite furnace tubes, hollow cathode lamps and specialized sample introduction
glassware for our AA, ICP-OES and ICP-MS products.
Services and Support
We offer a wide range of startup, operational, educational and compliance support services for our measurement and data
handling systems. Our support services include maintenance, troubleshooting, repair and training for all of our chemical and
bioanalytical instrumentation hardware and software products. With advances in digital and virtual support technologies, many
of those services can be offered remotely. Special service bundles have also been designed to meet the specific application
needs of various industries. As customers continue to outsource laboratory operations and consolidate suppliers, our enterprise
services consist of a broad portfolio of integrated laboratory management services including instrument services, lab supply
management, asset management, procurement, informatics and scientific services. Advancements in our offering software and
service solutions will help our customers operate a more digitally connected smart lab that can derive more value out of data
analytics, artificial intelligence and robotics.
Remarketed Instruments
We refurbish and resell certified pre-owned instruments to value-oriented customers who demand Agilent quality and
performance at a budget conscious price.
Agilent CrossLab Customers
We had approximately 54,600 Agilent CrossLab customers in fiscal 2020 and no single customer represented a material
amount of the net revenue of the Agilent CrossLab business. A significant number of our Agilent CrossLab customers are also
customers of our life sciences and applied markets business.
The service and consumables business is mostly recurring in nature and is not as susceptible to market seasonality and
industry cycles in comparison to our instrument businesses. The vendor neutral portion of the portfolio allows the business to
perform relatively independent from our instrument business.
Agilent CrossLab Sales, Marketing and Support
We deploy a multi-channel approach, marketing products and services to our customers through direct sales, electronic
commerce, resellers, manufacturers' representatives and distributors. We primarily use direct sales to market our solutions to
our large accounts. Sales agents supplement direct sales by providing broader geographic coverage and coverage of smaller
accounts. Our active reseller program augments our ability to provide more complete solutions to our customers. A substantial
portion of consumable sales are processed by our digital commerce infrastructure. All channels are supported by technical
product and application specialists to meet our customers' specific requirements.
We deliver our support services to customers in a variety of ways, including on-site assistance with repair or exchange of
returned products, as well as a growing number of remote service delivery options. In addition to the traditional telephone
support and on-site service, our teams remotely engage customers through various digital tools and omni-channel platforms. We
also offer special industry-focused service bundles that are designed to meet the specific needs of hydrocarbon processing,
environmental, pharmaceutical and biopharmaceutical customers to keep instruments fully operational and compliant with the
respective industry requirements. Our products typically come with standard warranties, and extended warranties are available
for additional cost.
11
Agilent CrossLab Manufacturing
Our primary manufacturing sites for the consumables business are in California and Delaware in the U.S., and in the
Netherlands and the United Kingdom outside of the U.S. Our direct service delivery organization is regionally based operating
in 28 countries.
Agilent CrossLab Competition
Our principal competitors in the services and consumable products arena include many of our competitors from the
instrument business, such as: Danaher Corporation, PerkinElmer, Inc., Shimadzu Corporation, Thermo Fisher Scientific Inc.
and Waters Corporation, as well as numerous niche consumables and service providers. Agilent competes on the basis of
product performance, reliability, support quality, applications expertise, global channel coverage and price.
Agilent Technologies Research Laboratories
Agilent Technologies Research Laboratories ("Agilent Labs") is our central research organization based in Santa Clara,
California. The Research Labs create competitive advantage through high-impact technology, driving market leadership and
growth in Agilent's core businesses and expanding Agilent's footprint into adjacent markets. At the cross-roads of the
organization, the Research Labs are able to identify and enable synergies across Agilent's businesses to create competitive
differentiation and compelling customer value.
The technical staff have advanced degrees that cover a wide range of scientific and engineering fields, including
molecular and cell biology, chemistry, physics, pathology, mathematics, software and informatics, artificial intelligence, deep
and machine learning, image processing, nano/microfabrication, and fluidics.
Global Infrastructure Organization
We provide support to our businesses through our global infrastructure organization. This support includes services in
the areas of finance, tax, treasury, legal, real estate, insurance services, workplace services, human resources, information
technology services, order administration and other corporate infrastructure expenses. Generally, these organizations are
managed from Santa Clara, California, with operations and services provided worldwide. As of October 31, 2020, our global
infrastructure organization employed approximately 2,600 people worldwide.
Agilent Order Fulfillment Organizations
Our order fulfillment and supply chain organization (“OFS”) focuses on order fulfillment and supply chain operations in
our businesses. OFS provides resources for manufacturing, engineering and strategic sourcing to our respective businesses. In
general, OFS employees are dedicated to specific businesses and the associated costs are directly allocated to those businesses.
The following discussions of Research and Development, Backlog, Intellectual Property, Materials, Environmental,
Regulatory Affairs and Human Capital Management include information common to each of our businesses.
Research and Development
We anticipate that we will continue to have significant research and development expenditures in order to maintain our
competitive position with a continuing flow of innovative, high-quality products and services. Our research and development
efforts focus on potential new products and product improvements covering a wide variety of technologies, none of which is
individually significant to our operations. Our research seeks to improve on various technical competencies in software,
systems and solutions, life sciences and diagnostics. In each of these research fields, we conduct research that is focused on
specific product development for release in the short-term as well as other research that is intended to be the foundation for
future products over a longer time-horizon. Most of our product development research is designed to improve products already
in production, focus on major new product releases, and develop new product segments for the future. We remain committed to
invest significantly in research and development and have focused our development efforts on key strategic opportunities to
align our business with available markets and position ourselves to capture market share.
12
Backlog
We believe that backlog is not a meaningful indicator of future business prospects for our business segments since a
significant portion of our revenue for a given quarter is derived from the current quarter's orders. Therefore, we believe that
backlog information is not material to an understanding of our business.
Intellectual Property
We generate patent and other intellectual property rights covering significant inventions and other innovations in order to
create a competitive advantage. While we believe that our licenses, patents and other intellectual property rights have value, in
general no single license, patent or other intellectual property right is in itself material. In addition, our intellectual property
rights may be challenged, invalidated or circumvented or may otherwise not provide significant competitive advantage.
Materials
Our life sciences and applied markets, diagnostics and genomics and Agilent CrossLab businesses all purchase materials
from thousands of suppliers on a global basis. Some of the parts that require custom design work are not readily available from
alternate suppliers due to their unique design or the length of time necessary for design work. Our long-term relationships with
suppliers allow us to proactively manage technology road maps and product discontinuance plans and monitor their financial
health. To address any potential disruption in our supply chain, we use a number of techniques, including qualifying multiple
sources of supply and redesign of products for alternative components. In addition, while we generally attempt to keep our
inventory at minimal levels, we do purchase incremental inventory as circumstances warrant to protect the supply chain.
Environmental
Our R&D, manufacturing and distribution operations involve the use of hazardous substances and are regulated under
international, federal, state and local laws governing health and safety and the environment. We apply strict standards for
protection of the environment and occupational health and safety to sites inside and outside the U.S., even if not subject to
regulation imposed by foreign governments. We believe that our properties and operations at our facilities comply in all
material respects with applicable environmental laws and occupational health and safety laws. We are also regulated under a
number of international, federal, state, and local laws regarding recycling, product packaging and product content requirements.
We believe we are substantially in compliance with such environmental, product content/disposal and recycling laws.
We maintain a comprehensive Environmental Site Liability insurance policy which may cover certain clean-up costs or
legal claims related to environmental contamination. This policy covers specified active, inactive and divested locations.
Regulatory Affairs
A number of our products and services are subject to regulation by the FDA and certain similar foreign regulatory
agencies. These regulations govern a wide variety of product and service related activities, from quality management, design
and development to labeling, manufacturing, promotion, sales and distribution. If we 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; adverse publicity; 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. In Europe, the European Union is going to enforce new
requirements, known as the EU In Vitro Diagnostic Regulation (the “EU IVDR”), which imposes stricter requirements for the
marketing and sale of in vitro diagnostics in the European Union. These new regulations are more stringent in a variety of areas,
including clinical requirements, quality systems and post-market surveillance activities. We will have until May 2022 to meet
the new EU IVDR requirements.
We are subject to laws and regulations governing government contracts, and failure to address these laws and
regulations or comply with government contracts could harm our business by leading to a reduction in revenue associated with
these customers. We have agreements relating to the sale of our products to government entities and, as a result, we are subject
to various statutes and regulations that apply to companies doing business with the government. We are also subject to
investigation for compliance with the regulations governing government contracts. A failure to comply with these regulations
could result in suspension of these contracts, criminal, civil and administrative penalties or debarment.
We are also subject to various significant international, federal, state and local regulations in the areas of health and
safety, packaging, product content, employment, labor and immigration, import/export controls, trade restrictions and anti-
13
competition. 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.
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.
While we believe we are in compliance in all material respects with such laws and regulations, any noncompliance
could result in substantial fines or otherwise restrict our ability to operate and thereby have an adverse effect on our financial
condition. To date, none has had a material impact on our operations.
Human Capital Management
As of October 31, 2020, we employed approximately 16,400 persons, of whom approximately 5,600 were employed in
the United States and approximately 10,800 were employed outside of the United States. We also leverage temporary workers
to provide flexibility for our business and manufacturing needs.
We believe that our future success largely depends upon our continued ability to attract and retain highly skilled
employees. We provide our employees with competitive salaries and bonuses, opportunities for equity ownership, development
programs that enable continued learning and growth and a robust employment package that promotes well-being across all
aspects of their lives, including health care, retirement planning and paid time off. As part of our promotion and retention
efforts, we also invest in ongoing leadership development through programs such as our Emerging Leader Program, our
Managing at Agilent programs and our experienced managers’ Accelerate program. In addition, we regularly conduct an
employee survey to gauge employee engagement and identify areas of focus.
As a global company, much of our success is rooted in the diversity of our teams and our commitment to inclusion. We
value diversity at all levels and continue to focus on extending our diversity and inclusion initiatives across our entire
workforce, from working with managers to develop strategies for building diverse teams to promoting the advancement of
leaders from different backgrounds.
Information about our Executive Officers
The names of our current executive officers and their ages, titles and biographies appear below:
Henrik Ancher-Jensen, 55, has served as our Senior Vice President, Agilent and President, Order Fulfillment since
September 2013. From September 2012 to September 2013, Mr. Ancher-Jensen served as our Vice President, Global Product
Supply, Diagnostics and Genomics Group. From September 2010 to September 2012 he served as Corporate Vice President,
Global Operations of Dako A/S, a Danish diagnostics company, and as Dako’s Vice President, Supply Chain and Chief
Information Officer from 2006 to September 2010. Prior to joining Dako, he spent more than 15 years in senior management
roles and management consulting with Chr. Hansen, Deloitte Consulting and NVE.
Rodney Gonsalves, 55, has served as our Vice President, Corporate Controllership and Chief Accounting Officer since
May 2015. From September 2009 to May 2015, Mr. Gonsalves served as Vice President and operational CFO for various
business groups within the company, most recently for the Life Sciences and Applied Markets Group. Prior to that, Mr.
Gonsalves served in various capacities for Agilent, including as vice president of Investor Relations, controller, corporate
governance and customer financing in Agilent’s Global Infrastructure Organization, and controller for the Photonics Systems
Business Unit. Before joining Agilent, Mr. Gonsalves held a variety of positions in finance with Hewlett-Packard Company.
Dominique P. Grau, 61, has served as our Senior Vice President, Human Resources and Global Communications since
November 2018. From August 2014 to October 2018 he served as Senior Vice President, Human Resources. From May 2012
to August 2014 Mr. Grau served as Vice President, Worldwide Human Resources. Prior to that, he served as Vice President,
14
Compensation, Benefits and HR Services from May 2006 to May 2012. Mr. Grau had previously served in various capacities
for Agilent and Hewlett-Packard Company.
Padraig McDonnell, 49, has served as our Senior Vice President, Agilent and President, Agilent CrossLab Group since
May 2020. From November 2016 to April 2020, Mr. McDonnell served as our Vice President and General Manager of the
Chemistries and Supplies Division. Prior to that, he served as our Vice President and General Manager of EMEAI Laboratory
Solutions Sales. Mr. McDonnell has previously held a variety of positions with Agilent and Hewlett-Packard Company.
Robert W. McMahon, 52, has served as our Senior Vice President since August 2018 and Chief Financial Officer since
September 2018. He previously served as the Chief Financial Officer of Hologic, Inc., a medical technology company from
May 2014 to August 2018. Prior to Hologic, Mr. McMahon spent 20 years with Johnson & Johnson most recently as
Worldwide Vice President of Finance and Business Development for Ortho Clinical Diagnostics a division of Johnson &
Johnson's Medical Device and Diagnostics Group.
Michael R. McMullen, 59, has served as Chief Executive Officer since March 2015 and as President since September
2014. From September 2014 to March 2015 he also served as Chief Operating Officer. From September 2009 to September
2014, he served as Senior Vice President, Agilent and President, Chemical Analysis Group. Prior to that, he served in various
capacities for Agilent, including as our Vice President and General Manager of the Chemical Analysis Solutions Unit of the
Life Sciences and Chemical Analysis Group and Country Manager for Agilent's China, Japan and Korea Life Sciences and
Chemical Analysis Group. Prior to that, Mr. McMullen served as Controller for the Hewlett‑Packard Company and Yokogawa
Electric Joint Venture from July 1996 to March 1999. Since September 2018, Mr. McMullen has served as a member of the
Board of Directors of Coherent, Inc.
Samraat S. Raha, 48, has served as our Senior Vice President, Agilent and President, Diagnostics and Genomics Group
since April 2018. From May 2017 to April 2018, Mr. Raha served as our Senior Vice President, Strategy and Corporate
Development. From June 2013 to January 2017 he served as Vice President, Global Marketing for Illumina, Inc. and from 2008
to 2012 he served as Vice President and General Manager, Genomic Assays / NextGen qPCR for Life Technologies, Inc.
Michael Tang, 46, has served as our Senior Vice President, General Counsel and Secretary since January 2016. From
May 2015 to January 2016 he served as Vice President, Assistant General Counsel and Secretary and from November 2013 to
April 2015 he served as Vice President, Assistant General Counsel and Assistant Secretary. From March 2012 to October 2013
he served as Business Development Manager in Agilent’s Corporate Development group. Prior to that, Mr. Tang served in
various capacities in Agilent's legal department. Before joining Agilent, Mr. Tang worked at Wilson Sonsini Goodrich &
Rosati, a California law firm and Fenwick & West LLP, a California law firm.
Jacob Thaysen, 45, has served as our Senior Vice President, Agilent and President, Life Sciences and Applied Markets
Group, since April 2018. From November 2014 to April 2018 he served as Senior Vice President, Agilent and President,
Diagnostics and Genomics Group. From October 2013 to November 2014 he served as Vice President and General Manager of
the Diagnostics and Genomics business. Prior to that he served as Vice President and General Manager of the Genomics
Solutions unit from January 2013 to October 2013. Before joining Agilent, he served in various capacities at Dako A/S, a
Danish diagnostics company, including as Corporate Vice President of R&D, Vice President, System Development, R&D, Vice
President, Strategic Marketing and Vice President, Global Sales Operations. Prior to Dako, Mr. Thaysen worked as a
management consultant and Chief Technical Officer and founder of a high-tech start-up company.
Investor Information
We are subject to the informational requirements of the Securities Exchange Act of 1934 (“Exchange Act”). Therefore,
we file periodic reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). The
SEC maintains an Internet site (https://www.sec.gov) that contains reports, proxy and information statements and other
information regarding issuers that file electronically.
Our financial and other information can be accessed at our Investor Relations website. The address is
www.investor.agilent.com. We make available, free of charge, copies of our annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the
SEC.
Our Amended and Restated Bylaws, Corporate Governance Standards, the charters of our Audit and Finance Committee,
our Compensation Committee, our Executive Committee and our Nominating/Corporate Governance Committee, as well as our
15
Standards of Business Conduct (including code of ethics provisions that apply to our principal executive officer, principal
financial officer, principal accounting officer and senior financial officers) are available on our website at
www.investor.agilent.com under “Corporate Governance”. These items are also available in print to any stockholder in the
United States and Canada who requests them by calling (877) 942-4200. This information is also available by writing to the
company at the address on the cover of this Annual Report on Form 10-K.
Item 1A. Risk Factors
Risks, Uncertainties and Other Factors Specific to Our Company That May Affect Future Results
The COVID-19 pandemic has adversely impacted, and continues to pose risks to, our business, results of operations and
financial condition, the nature and extent of which are highly uncertain and unpredictable.
Our global operations expose us to risks associated with public health crises, including epidemics and pandemics such as
COVID-19. The global spread of COVID-19 had, and may continue to have, an adverse impact on our operations, sales and
delivery and supply chains. Many countries including the United States implemented measures such as quarantine, shelter-in-
place, curfew, travel and activity restrictions and similar isolation measures, including government orders and other restrictions
on the conduct of business operations. Due to these measures we experienced significant and unpredictable reductions or
increases in demand for certain of our products. Moreover, these measures caused delays in installations and significantly
impacted our ability to service our customers on site. If the COVID-19 pandemic continues or worsens, we may again
experience a decline in sales activities and customer orders in certain of our businesses. Continuing travel restrictions,
prolonged quarantines or other government orders in response to the pandemic may significantly impact our ability to support
our sites and service customers in those locations. The COVID-19 pandemic has also impacted our supply chain as we
experienced disruptions or delays in shipments of certain materials or components of our products. If the pandemic continues or
worsens, our manufacturing facilities, our distribution centers where inventory is managed and the operations of our logistics
and other service providers may be significantly impacted. Accordingly, COVID-19 has negatively affected our revenue growth
in certain of our businesses. It is uncertain how materially COVID-19 will affect our global operations generally if these
impacts persist, worsen or re-emerge over an extended period of time. The extent and duration of these impacts are dependent
in part on customers returning to work and economic activity continuing to ramp up. The impact on our business also depends
in part on the pace at which our customers resume non-COVID-19 related patient care and testing, as well as the timing of
when research performed by laboratories and other institutions returns to normal levels.
Additionally, the COVID-19 pandemic caused significant volatility and uncertainty in U.S. and international markets. A
disruption of global financial markets or resulting economic downturn may reduce our ability to incur debt or access capital and
increase the cost of doing so. There are no assurances that the credit markets or the capital markets will be available to us in the
future or that the lenders participating in our credit facilities will be able to provide financing in accordance with their
contractual obligations.
We cannot reasonably estimate the length or severity of the COVID-19 pandemic or the related response, or the extent to
which the disruption may impact our business, financial position, results of operations and cash flows. Ultimately,
the COVID-19 pandemic could have a material adverse impact on our business, financial position, results of operations and
cash flows. To the extent COVID-19 conditions improve, the duration and sustainability of any such improvements will be
uncertain and continuing adverse impacts and/or the degree of improvement may vary dramatically by geography and by
business. The actions we take in response to any improvements in conditions may also vary widely by geography and by
business and will likely be made with incomplete information; pose the risk that such actions may prove to be premature,
incorrect or insufficient; and could have a material, adverse impact on our business and results of operations.
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,
16
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
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.
17
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, 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. Foreign currency movements for the year ended
October 31, 2020 had an overall unfavorable impact on revenue of approximately 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 and
the increased uncertainty around its implementation caused by COVID-19, as well as, new tariffs, trade
protection measures, import or export licensing 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 and import/export;
difficulty in staffing and managing widespread operations;
differing labor regulations;
differing protection of intellectual property;
unexpected changes in regulatory requirements;
geopolitical uncertainty or turmoil, terrorism and war; and
impact of public health crises, including pandemics and epidemics, such as COVID-19 on the global economy.
We 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 including general accounting, cost accounting, accounts payable, accounts
receivable and tax 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.
18
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 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 model, business infrastructure and sales and distribution
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
19
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 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 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
20
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 and services are subject to regulation by the FDA and certain similar foreign regulatory
agencies. In addition, a number of our products and services 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 and service-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; 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 our products and services. For
example, the EU is going to enforce new requirements, known as the EU In Vitro Diagnostic Regulation (the “EU IVDR”),
which imposes stricter requirements for the marketing and sale of in vitro diagnostics in the European Union. These new
regulations are more stringent in a variety of areas, including clinical requirements, quality systems and post-market
surveillance activities. We will have until May 2022 to meet the new EU IVDR requirements. 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. federal, 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.
21
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 consolidated, and may 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.
22
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 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 contamination.
Although we are indemnified for liability relating to the required remediation at some of those properties, we may be subject to
liability if these indemnification obligations are not fulfilled. In other cases, we have agreed to indemnify the current owners of
certain properties for liabilities related to contamination, including companies with which we have previously been affiliated
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 environmental contamination at material levels is
found to exist. In addition, in connection with the acquisition of certain companies, we have assumed 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.
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
23
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 U.S. Tax Cuts and Job Act ("the Tax Act") significantly changed the taxation of U.S. based multinational
corporations. Our compliance with the Tax Act 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 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.
24
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 October 31,
2020, the company had no 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 was repaid in full as of October 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 facilities as of October 31, 2020. On May 1, 2020, we entered into a new $1.0 billion commercial paper program,
and as of October 31, 2020 we had $75 million of commercial paper outstanding. We also have outstanding an aggregate
principal amount of $2.3 billion in senior unsecured notes. We may borrow additional amounts in the future and use the
proceeds from any future borrowing for general corporate purposes, 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 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 indentures governing our senior notes 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, the outbreak of COVID-19 in China led to an extension of the Lunar New Year holiday, which
impacted our business and results, reduced the number of selling days and otherwise impacted our supply chain. As described
above, the COVID-19 pandemic continued to impact our business operations, supply chain and financial results and may have a
material adverse effect on our business and results of operations. In 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 financial condition will be harmed by a catastrophic loss.
25
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.
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.
General Risks
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 October 31, 2020, we had cash and cash equivalents of approximately $1,441 million 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 are subject to the rules of the 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. 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 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.
Item 1B. Unresolved Staff Comments
None.
26
Item 2. Properties
As of October 31, 2020, we owned or leased a total of approximately 6.6 million square feet of space worldwide. Of that,
we owned approximately 4.6 million square feet and leased the remaining 2.0 million square feet. Our sales and support
facilities occupied a total of approximately 0.8 million square feet. Our manufacturing plants, R&D facilities and warehouse
and administrative facilities occupied approximately 5.8 million square feet. All of our businesses share sales offices throughout
the world.
Information about each of our businesses appears below:
Life Sciences & Applied Markets Business. Our life sciences and applied markets business has manufacturing and R&D
facilities in Australia, China, Germany, Italy, Malaysia, Singapore, United Kingdom and the United States.
Diagnostics and Genomics Business. Our diagnostics and genomics business has manufacturing and R&D facilities in
Belgium, Denmark, Germany, Malaysia and the United States.
Agilent CrossLab Business. Our Agilent CrossLab business has manufacturing and R&D facilities in Australia, China,
Germany, Japan, Netherlands, Singapore, United Kingdom and the United States.
Item 3. 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 and reasonably possible of having a material impact to our business,
consolidated financial condition, results of operations or cash flows.
Item 4. Mine Safety Disclosures
Not applicable.
27
PART II
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our common stock is listed on the New York Stock Exchange with the ticker symbol “A”. As of December 2, 2020,
there were 20,173 common stockholders of record.
The information required by this item with respect to equity compensation plans is included under the caption "Equity
Compensation Plans" in our Proxy Statement for the Annual Meeting of Stockholders to be held March 17, 2021, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A, and is incorporated herein by reference.
STOCK PRICE PERFORMANCE GRAPH
The graph below shows the cumulative total stockholder return on our common stock with the cumulative total return of
the S&P 500 Index and our peer group, consisting of all companies in the Health Care and Materials Indexes of the S&P 500,
assuming an initial investment of $100 on October 31, 2015 and the reinvestment of all dividends.
Agilent’s stock price performance shown in the following graph is not indicative of future stock price performance. The
data for this performance graph was compiled for us by Standard and Poor’s.
Base
Period
INDEXED RETURNS
Years Ending
Company Name / Index
Agilent Technologies . . . . . . . . . . . .
S&P 500 . . . . . . . . . . . . . . . . . . . . . .
Peer Group . . . . . . . . . . . . . . . . . . . .
10/31/2015
100
100
100
10/31/2016 10/31/2017
10/31/2018
10/31/2019
116.63
104.51
99.21
183.87
129.21
123.71
176.70
138.70
134.82
208.42
158.57
147.29
10/31/2020
283.31
173.97
163.88
28
Comparison of 5 Years (10/31/2015 to 10/31/2020) Cumulative Total ReturnAmong Agilent Technologies, the S&P 500 Index,and the Peer Group IndexAgilent TechnologiesS&P 500Peer Group10/31/1510/31/1610/31/1710/31/1810/31/1910/31/20$0$50$100$150$200$250$300
ISSUER PURCHASES OF EQUITY SECURITIES
The table below summarizes information about the 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 October 31, 2020. The total number of
shares of common stock purchased by the company during the fiscal year ended October 31, 2020 was 5,227,273 shares.
Period
August 1, 2020 through
August 31, 2020 . . . . . . . . . . . . . . . . . . . .
September 1, 2020 through
September 30, 2020 . . . . . . . . . . . . . . . .
October 1, 2020 through
October 31, 2020 . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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)
526,247 $
1,041,643 $
908,745 $
2,476,635 $
98.38
98.98
104.62
100.92
526,247 $
1,041,643 $
908,745 $
2,476,635
756
653
558
(1)
On November 19, 2018 we announced that our board of directors had approved a new share repurchase program (the
"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 2019 repurchase program authorizes the purchase
of up to $1.75 billion of our common stock at the company's discretion and has no fixed termination date. As of
October 31, 2020, we had remaining authorization to repurchase up to $558 million of our common stock under this
program. The 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. As of October 31, 2020, all repurchased shares have been retired.
(2)
The weighted average price paid per share of common stock does not include the cost of commissions.
29
Item 6. Selected Financial Data
SELECTED FINANCIAL DATA
(Unaudited)
Consolidated Statement of Operations Data:
Net revenue (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per share - Basic . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per share - Diluted . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average shares used in computing net income per
share:
Years Ended October 31,
2020
2019
2018
2017
2016
(in millions, except per share data)
5,339 $
5,163 $
4,914 $
4,472 $
4,202
842 $
919 $
719 $
1,071 $
2.33 $
2.30 $
3.41 $
3.37 $
946 $
316 $
0.98 $
0.97 $
803 $
684 $
2.12 $
2.10 $
544
462
1.42
1.40
326
329
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
309
312
314
318
321
325
322
326
Cash dividends declared per common share . . . . . . . . . . . . . $
0.720 $
0.656
0.596 $
0.528 $
0.460
(1) In 2019 we adopted ASC Topic 606, Revenue from Contracts with Customers, using the modified retrospective approach.
Results for reporting periods for 2019 and after are presented under ASC 606, while prior period amounts were not adjusted and
continue to be reported in accordance with ASC Topic 605, Revenue Recognition.
(2) Net income for the year ended October 31, 2019 was impacted by a tax benefit of $299 million related to the extension of
tax incentives in Singapore. Net income for the year ended October 31, 2018 was impacted by a tax expense of $552 million
related to the enactment of the U.S Tax Cuts and Jobs Act of 2017 (the "Tax Act").
October 31,
2020
2019
2018
2017
2016
(in millions)
Consolidated Balance Sheet Data (1):
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,441 $
1,948 $
9,627 $
2,284 $
4,873 $
1,382 $
1,109 $
9,452 $
1,791 $
4,748 $
2,247 $
2,677 $
8,541 $
1,799 $
4,567 $
2,678 $
2,906 $
8,426 $
1,801 $
4,831 $
2,289
2,690
7,794
1,904
4,243
(1) In 2020, we adopted ASC Topic 842, Leases, using the modified retrospective method. Results for reporting periods
beginning November 1, 2019 are presented under ASC 842, while prior period amounts were not adjusted and are reported
under ASC 840.
30
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto
included elsewhere in this Annual Report on Form 10-K. This report contains forward-looking statements including, without
limitation, statements regarding growth opportunities, including for revenue and our end markets, strength and drivers of the
markets into which we sell, 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 financial results, our operating margin, mix, our investments, including
in manufacturing infrastructure, research and development and expanding and improving our applications and 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 impact of
foreign currency movements, our hedging programs and other actions to offset the effects of tariffs and foreign currency
movements, our future effective tax rate, tax valuation allowance and unrecognized tax benefits, the impact of local government
regulations on our ability to pay vendors or conduct operations, our ability to satisfy our liquidity requirements, including
through cash generated from operations, the potential impact of adopting new accounting pronouncements, indemnification,
source and supply of materials used in our products, our sales, our purchase commitments, our capital expenditures, the
integration and effects of our acquisitions and other transactions, our stock repurchase program and dividends and the potential
or anticipated direct or indirect impact of COVID-19 on our business 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 I Item 1A and elsewhere in this Form 10-K.
Overview and 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.
COVID-19 Pandemic
Both our domestic and international operations have been and continue to be affected by the ongoing global pandemic of
a novel strain of coronavirus (“COVID-19”) and the resulting volatility and uncertainty it has caused in the U.S. and
international markets. Many countries, including the United States, implemented measures such as quarantine, shelter-in-place,
curfew, travel and activity restrictions and similar isolation measures, including government orders and other restrictions on the
conduct of business operations at different times. Due to these measures, we experienced unpredictable reductions or increases
in demand for certain of our products, disruptions or delays in shipments of certain materials or components of our products,
and delays in installations and services due to the inability to access customer sites, primarily in the latter part of our second
quarter.
As an essential business throughout the COVID-19 pandemic, we have remained open with our top priority being the
health and safety of our employees, customers and community. At every stage of the pandemic, we have taken decisive and
appropriate precautions, including a mandatory work from home policy for all employees with the exception of manufacturing,
distribution, and certain laboratory environments, as well as restrictions on all non-essential travel and visitors into our
facilities. At this time, our factories continue to operate around the world in accordance with the guidance issued by local, state
and national government authorities. Our digital workplace strategy and strategic technology investments have enabled us to
provide modern connectivity and collaboration tools to our employees to meet remote working needs as this situation has
escalated. We have taken and continue to take proactive measures to ensure the health and safety of our global employee base.
We designed a multi-phase return-to-office process for the safe return of our employees to our sites. We developed and
implemented rigorous return-to-office protocols to promote a safe work environment in all locations for employees who have
been working on-site throughout the pandemic and for employees who will be returning in the future, as well as, for the safety
of all customer and vendor interactions.
At this time, the COVID-19 pandemic has not significantly impacted our manufacturing facilities or third parties to
whom we outsource certain manufacturing processes, the distribution centers where our inventory is managed or the operations
of our logistics and other service providers. We continue working with our customers and suppliers to understand the existing
and potential future negative impacts to our delivery and supply chain and take actions in an effort to mitigate such impacts.
The majority of the markets we serve, such as the pharmaceutical, biopharmaceutical, food, environmental and diagnostics and
clinical markets, have continued to operate at various levels throughout the pandemic, and we continue working closely with
31
our customers to ensure their seamless operations. From a customer-facing perspective, we continue leveraging digital demand
generation activities, including virtual demonstrations across all regions, remote instrument repairs, virtual sales seminars,
online product training, and rapid one-on-one communications over emails, phone and video conferencing.
Despite the economic challenges due to the COVID-19 pandemic, we ended fiscal year 2020 with revenue growth of 3
percent year over year with revenue growth from most of our key end markets. In the latter part of the fiscal year, our Agilent
CrossLab business began to see an increase in revenue for our on-demand services and installation services due to the re-
opening of laboratories around the world, especially in Europe. While we began to see elective medical procedures resume in
the fourth quarter, revenue from our diagnostics and genomics business continues to be negatively impacted by the COVID-19
pandemic. In our life sciences and applied markets business, we saw an increase in demand for some of our products for use in
the COVID-19 testing, vaccine and therapeutic drug development. We also benefited from our cost savings actions which
included reduction in travel and non-essential spending.
The COVID-19 pandemic continues to be dynamic, and near-term challenges across the economy remain. Although we
anticipate there will be vaccines distributed widely in the near future, we expect continued volatility and unpredictability related
to the impact of COVID-19 on our business results. We continue to actively monitor the pandemic and we will continue to take
appropriate steps to mitigate the adverse impacts on our business posed by the on-going spread of COVID-19.
2030 Senior Notes
On June 4, 2020, we issued an aggregate principal amount of $500 million in senior notes ("2030 senior notes"). The
2030 senior notes were issued at 99.812% of their principal amount. The 2030 senior notes will mature on June 4, 2030, and
bear interest at a fixed rate of 2.10% per annum. The interest is payable semi-annually on June 4th and December 4th of each
year and payments commenced on December 4, 2020.
Acquisitions
In 2019, we acquired 100 percent of the stock of ACEA Biosciences Inc. ("ACEA"), a developer of cell analysis tools,
for $250 million. In addition, 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. The financial
results of these businesses have been included in our financial results from the date of the close.
Actual Results
Agilent's net revenue of $5,339 million in 2020 increased 3 percent when compared to 2019. Foreign currency
movements for 2020 had an overall unfavorable impact on revenue of approximately 1 percentage point compared to 2019. In
2020, acquisitions from 2019 had an overall favorable impact of 3 percentage points when compared to 2019. Revenue in the
life sciences and applied markets business increased 4 percent in 2020 when compared to 2019. In 2020 acquisitions from 2019
had an overall favorable impact of 7 percentage points when compared to 2019. Foreign currency movements had no overall
impact on revenue in 2020 when compared to 2019. Revenue in the diagnostics and genomics business increased 2 percent in
2020 when compared to 2019. Foreign currency movements had an overall unfavorable impact on revenue of 1 percentage
point in 2020 when compared to 2019. Revenue in the Agilent CrossLab business increased 3 percent in 2020 when compared
to 2019. Foreign currency movements had an overall unfavorable impact on revenue of 1 percentage point in 2020 when
compared to 2019.
Agilent's net revenue of $5,163 million increased 5 percent in 2019 when compared to 2018. Foreign currency
movements for 2019 had an overall unfavorable impact on revenue of approximately 2 percentage points compared to 2018. In
2019, acquisitions from 2018 had an overall favorable impact of 2 percentage points when compared to 2018. Revenue in the
life sciences and applied markets business increased 1 percent in 2019 when compared to 2018. Foreign currency movements
had an overall unfavorable impact on revenue of 2 percentage points in 2019 when compared to 2018. Revenue in the
diagnostics and genomics business increased 8 percent in 2019 when compared to 2018. Foreign currency movements had an
overall unfavorable impact of 3 percentage points on revenue in 2019 when compared to 2018. Revenue in the Agilent
CrossLab business increased 8 percent in 2019 when compared to 2018. Foreign currency movements had an overall
unfavorable impact on revenue of 3 percentage points in 2019 when compared to 2018.
Net income was $719 million in 2020 compared to net income of $1,071 million and $316 million in 2019 and 2018,
respectively. Net income in 2020 was impacted by revenue declines in certain of our businesses associated with the COVID-19
pandemic and increased costs and expenses which included an impairment charge of $98 million related to the closure of our
32
sequencer development program. Net income for the year ended October 31, 2019 was impacted by a discrete tax benefit of
$299 million related to the extension of the company's tax incentives in Singapore. Net income for the year ended October 31,
2018 was impacted by a discrete tax charge of $552 million related to the enactment of the Tax Act that was passed on
December 22, 2017. As of October 31, 2020 and 2019, we had cash and cash equivalents balances of $1,441 million and $1,382
million, respectively.
On May 28, 2015 we announced that our board of directors had approved a share repurchase program (the "2015
repurchase program"). The 2015 share repurchase program authorizes the purchase of up to $1.14 billion of our common stock
at the company's discretion through and including November 1, 2018. The 2015 repurchase program did not require the
company to acquire a specific number of shares and could have been suspended or discontinued at any time. During the year
ended October 31, 2018, we repurchased and retired approximately 6.4 million shares for $422 million under this authorization.
As of October 31, 2018, we had remaining authorization to repurchase up to $188 million of our common stock under this
program which expired on November 1, 2018.
On November 19, 2018 we announced that our board of directors had approved a new share repurchase program (the
"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 2019 share repurchase program authorizes the purchase of up to
$1.75 billion of our common stock at the company's discretion and has no fixed termination date. The 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 year ended October 31, 2019, we repurchased and retired 10.4 million shares for $723 million under this
authorization. During the year ended October 31, 2020, we repurchased and retired approximately 5.2 million shares for $469
million under this authorization. As of October 31, 2020, we had remaining authorization to repurchase up to $558 million of
our common stock under this program.
During the year ended October 31, 2020, cash dividends of 0.720 per share, or $222 million were declared and paid on
the company's outstanding common stock. During the year ended October 31, 2019, cash dividends of 0.656 per share, or $206
million were declared and paid on the company's outstanding common stock. During the year ended October 31, 2018, cash
dividends of 0.596 per share, or $191 million were declared and paid on the company's outstanding common stock.
On November 18, 2020 we declared a quarterly dividend of $0.194 per share of common stock, or approximately $59
million which will be paid on January 27, 2021 to shareholders of record as of the close of business on January 5, 2021. The
timing and amounts of any future dividends are subject to determination and approval by our board of directors.
Looking forward, our top priority continues to be the health and safety of our employees, customers and community, as
well as supporting our customers' operations. We also remain focused on improving our customers’ experience, differentiating
product solutions and productivity especially during these extraordinary times. Our focus on meeting our customers’ needs
supported several aspects of the COVID-19 research and testing along with therapeutic and vaccine development. While
uncertainties remain as the spread of COVID-19 begins to rise, we are cautiously optimistic that in the short-term our financial
results can continue to improve as the global economy continues its path towards recovery.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires
management to make estimates and assumptions that affect the amounts reported in our 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. 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. 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, retirement and post-retirement plan assumptions, valuation of goodwill and purchased
intangible assets and accounting for income taxes.
Revenue Recognition. On November 1, 2018, we adopted Accounting Standard Codification Topic 606, Revenue from
Contracts with Customers ("ASC 606").
We enter into contracts to sell products, services or combinations of products and services. Products may include
hardware or software and services may include one-time service events or services performed over time.
33
We derive revenue primarily from the sale of analytical and diagnostics products and services. A performance
obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account under ASC
606. Revenue is recognized when control of the promised products or services is transferred to our customers and the
performance obligation is fulfilled in an amount that reflects the consideration that we expect to be entitled in exchange for
those products or services, the transaction price. For equipment, consumables, and most software licenses, control transfers to
the customer at a point in time. We use present right to payment, legal title, physical possession of the asset, and risks and
rewards of ownership as indicators to determine the transfer of control to the customer. Where acceptance is not a formality, the
customer must have documented their acceptance of the product or service. For products that include installation, if the
installation meets the criteria to be considered a separate performance obligation, product revenue is recognized when control
has passed to the customer, and recognition of installation revenue occurs once completed. Product revenue, including sales to
resellers and distributors is reduced for provisions for warranties, returns, and other adjustments in the period the related sales
are recorded.
Service revenue includes extended warranty, customer and software support including: Software as a Service, post
contract support, consulting including companion diagnostics, and training and education. Instrument service contracts and
software maintenance contracts are typically annual contracts, which are billed at the beginning of the contract or maintenance
period. Revenue for these contracts is recognized on a straight-line basis to revenue over the service period, as a time-based
measure of progress best reflects our performance in satisfying this obligation. There are no deferred costs associated with the
service contract, as the cost of the service is recorded when the service is performed. Service calls not included in a support
contract are recognized to revenue at the time a service is performed.
We have sales from standalone software. These arrangements typically include software licenses and maintenance
contracts, both of which we have determined are distinct performance obligations. We determine the amount of the transaction
price to allocate to the license and maintenance contract based on the relative standalone selling price of each performance
obligation. Software license revenue is recognized at the point in time when control has been transferred to the customer. The
revenue allocated to the software maintenance contract is recognized on a straight-line basis over the maintenance period,
which is the contractual term of the contract, as a time-based measure of progress best reflects our performance in satisfying
this obligation. Unspecified rights to software upgrades are typically sold as part of the maintenance contract on a when-and-if-
available basis.
Our multiple-element arrangements are generally comprised of a combination of instruments, installation or other start-
up services, and/or software, and/or support or services. Hardware and software elements are typically delivered at the same
time and revenue is recognized when control passes to the customer. Service revenue is deferred and recognized over the
contractual period or as services are rendered and accepted by the customer. Our arrangements generally do not include any
provisions for cancellation, termination, or refunds that would significantly impact recognized revenue.
For contracts with multiple performance obligations, we allocate the consideration to which we expect to be entitled to
each performance obligation based on relative standalone selling prices and recognize the related revenue when or as control of
each individual performance obligation is transferred to customers. We estimate the standalone selling price by calculating the
average historical selling price of our products and services per country for each performance obligation. Stand-alone selling
prices are determined for each distinct good or service in the contract and then we allocate the transaction price in proportion to
those standalone selling prices by performance obligations.
A portion of our revenue relates to lease arrangements. 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. In a lease
arrangement that is a multiple-element arrangement that contains equipment leases and the supply of consumables, the revenue
associated with the instrument rental is treated under the lease accounting standard ASC 842, whereas the revenue associated
with the consumables, the non-lease component, is recognized in accordance with the ASC 606 revenue standard.
Inventory Valuation. We assess the valuation of our inventory on a periodic basis and make adjustments to the value for
estimated excess and obsolete inventory based upon estimates about future demand and actual usage. Such estimates are
difficult to make under most economic conditions. The excess balance determined by this analysis becomes the basis for our
excess inventory charge. Our excess inventory review process includes analysis of sales forecasts, managing product rollovers
and working with manufacturing to maximize recovery of excess inventory. If actual market conditions are less favorable than
those projected by management, additional write-downs may be required. If actual market conditions are more favorable than
anticipated, inventory previously written down may be sold to customers, resulting in lower cost of sales and higher income
from operations than expected in that period.
34
Retirement and Post-Retirement Benefit Plan Assumptions. Retirement and post-retirement benefit plan costs are a
significant cost of doing business. They represent obligations that will ultimately be settled sometime in the future and therefore
are subject to estimation. Pension accounting is intended to reflect the recognition of future benefit costs over the employees'
average expected future service to Agilent based on the terms of the plans and investment and funding decisions. To estimate
the impact of these future payments and our decisions concerning funding of these obligations, we are required to make
assumptions using actuarial concepts within the framework of accounting principles generally accepted in the U.S. Two critical
assumptions are the discount rate and the expected long-term return on plan assets. Other important assumptions include,
expected future salary increases, expected future increases to benefit payments, expected retirement dates, employee turnover,
retiree mortality rates, and portfolio composition. We evaluate these assumptions at least annually.
The discount rate is used to determine the present value of future benefit payments at the measurement date - October 31
for both U.S. and non-U.S. plans. For 2020 and 2019, the U.S. discount rates were based on the results of matching expected
plan benefit payments with cash flows from a hypothetically constructed bond portfolio. In 2020, discount rates for the U.S.
plans decreased compared to the previous year due to the decrease in the corporate bond rates. For 2020 and 2019, the discount
rates for non-U.S. plans were generally based on published rates for high quality corporate bonds and in 2020, decreased
marginally compared to the previous year. If we changed our discount rate by 1 percent, the impact would be less than $1
million in U.S. pension expense and $17 million on non-U.S. pension expense. Lower discount rates increase present values of
the pension benefit obligation and subsequent year pension expense; higher discount rates decrease present values of the
pension benefit obligation and subsequent year pension expense.
The company uses alternate methods of amortization as allowed by the authoritative guidance which amortizes the
actuarial gains and losses on a consistent basis for the years presented. For U.S. Plans, gains and losses are amortized over the
average future lifetime of participants using the corridor method. For most Non-U.S. Plans and U.S. Post-Retirement Benefit
Plans, gains and losses are amortized using a separate layer for each year's gains and losses.
In the U.S., target asset allocations for our retirement and post-retirement benefit plans are approximately 80 percent to
equities and approximately 20 percent to fixed income investments. Our Deferred Profit-Sharing Plan target asset allocation is
approximately 60 percent to equities and approximately 40 percent to fixed income investments. Approximately 1 percent of
the retirement and post-retirement plans consists of limited partnerships. Outside the U.S., our target asset allocation ranges
from 24 percent to 60 percent to equities, from 38 percent to 65 percent to fixed income investments, and from zero to 25
percent to real estate, depending on the plan. All plans' assets are broadly diversified. Due to fluctuations in equity markets, our
actual allocations of plan assets at October 31, 2020 and 2019 differ from the target allocation. Our policy is to bring the actual
allocation in line with the target allocation.
Equity securities include exchange-traded common stock and preferred stock of companies from broadly diversified
industries. Fixed income securities include a global portfolio of corporate bonds of companies from diversified industries,
government securities, mortgage-backed securities, asset-backed securities, derivative instruments and other. Other investments
include a group trust consisting primarily of private equity partnerships.
The expected long-term return on plan assets is estimated using current and expected asset allocations as well as
historical and expected returns. Plan assets are valued at fair value. If we changed our estimated return on assets by 1 percent,
the impact would be $4 million on U.S. pension expense and $9 million on non-U.S. pension expense. The net periodic pension
and post-retirement benefit costs recorded were a $22 million expense in 2020, $10 million expense in 2019 and $3 million
benefit in 2018. The year ended October 31, 2020 included a loss on settlement of $4 million. The year ended October 31, 2018
included a settlement gain of $5 million.
Goodwill and Purchased Intangible Assets. Under the authoritative guidance, we have the option to perform a qualitative
assessment to determine whether further impairment testing is necessary. The accounting standard gives an entity the option to
first assess qualitative factors to determine whether performing the two-step test is necessary. If an entity believes, as a result of
its qualitative assessment, that it is more-likely-than-not (i.e., greater than 50% chance) that the fair value of a reporting unit is
less than its carrying amount, the quantitative impairment test will be required. Otherwise, no further testing will be required.
The guidance includes examples of events and circumstances that might indicate that a reporting unit's fair value is less
than its carrying amount. These include macro-economic conditions such as deterioration in the entity's operating environment
or industry or market considerations; entity-specific events such as increasing costs, declining financial performance, or loss of
key personnel; or other events such as an expectation that a reporting unit will be sold or a sustained decrease in the stock price
on either an absolute basis or relative to peers.
35
If it is determined, as a result of the qualitative assessment, that it is more-likely-than-not that the fair value of a reporting
unit is less than its carrying amount, the provisions of authoritative guidance require that we perform a two-step impairment test
on goodwill. In the first step, we compare the fair value of each reporting unit to its carrying value. The second step (if
necessary) measures the amount of impairment by applying fair-value-based tests to the individual assets and liabilities within
each reporting unit. As defined in the authoritative guidance, a reporting unit is an operating segment, or one level below an
operating segment. We aggregate components of an operating segment that have similar economic characteristics into our
reporting units.
In fiscal year 2020, we assessed goodwill impairment for our three reporting units which consisted of three segments:
life sciences and applied markets, diagnostics and genomics and Agilent CrossLab. We performed a qualitative test for goodwill
impairment of the three reporting units as of September 30, 2020. Based on the results of our qualitative testing, we believe that
it is more-likely-than-not that the fair value of each reporting unit is greater than its respective carrying value. Each quarter we
review the events and circumstances to determine if goodwill impairment is indicated. There was no impairment of goodwill
during the years ended October 31, 2020, 2019 and 2018.
Purchased intangible assets consist primarily of acquired developed technologies, proprietary know-how, trademarks,
and customer relationships and are amortized using the best estimate of the asset's useful life that reflect the pattern in which the
economic benefits are consumed or used up or a straight-line method ranging from 6 months to 15 years. Our determination of
the fair value of the intangible assets acquired involves the use of significant estimates and assumptions. Specifically, our
determination of the fair value of the developed product technology and in-process research and development ("IPR&D")
acquired involves significant estimates and assumptions related to revenue growth rates and discount rates. Our determination
of the fair value of customer relationships acquired involves significant estimates and assumptions related to revenue growth
rates, discount rates, and customer attrition rates. Our determination of the fair value of the tradename acquired involves the use
of significant estimates and assumptions related to revenue growth rates, royalty rates and discount rates. The company believes
that the fair value assigned to the assets acquired and liabilities assumed are based on reasonable assumptions and estimates that
marketplace participants would use. Actual results could differ materially from these estimates. IPR&D is initially capitalized at
fair value as an intangible asset with an indefinite life and assessed for impairment thereafter. When the IPR&D project is
complete, it is reclassified as an amortizable purchased intangible asset and is amortized over its estimated useful life. If an
IPR&D project is abandoned, we will record a charge for the value of the related intangible asset to our consolidated statement
of operations in the period it is abandoned.
We continually monitor events and changes in circumstances that could indicate carrying amounts of finite-lived
intangible assets may not be recoverable. When such events or changes in circumstances occur, we assess the recoverability of
finite-lived intangible assets by determining whether the carrying value of such assets will be recovered through undiscounted
expected future cash flows. If the total of the undiscounted future cash flows is less than the carrying amount of those assets, we
recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. During 2018, we
recorded an impairment charge of $21 million related to purchased intangible assets within the diagnostics and genomics
segment that were deemed unrecoverable.
Our indefinite-lived intangible assets are IPR&D intangible assets. The accounting guidance allows a qualitative
approach for testing indefinite-lived intangible assets for impairment, similar to the issued impairment testing guidance for
goodwill and allows the option to first assess qualitative factors (events and circumstances) that could have affected the
significant inputs used in determining the fair value of the indefinite-lived intangible asset to determine whether it is more-
likely-than-not (i.e., greater than 50% chance) that the indefinite-lived intangible asset is impaired. An organization may
choose to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to
calculating its fair value. We performed a qualitative test for impairment of indefinite-lived intangible assets as of September
30, 2020. Based on the results of our qualitative testing, we believe that it is more-likely-than-not that the fair value of these
indefinite-lived intangible assets is greater than their respective carrying values. Each quarter we review the events and
circumstances to determine if impairment of indefinite-lived intangible assets is indicated. During fiscal year 2020, we recorded
an impairment of in-process research and development of $90 million related to the shutdown of our sequencer development
program in our diagnostics and genomics segment. During the year ended October 31, 2019 and 2018 there were no
impairments of indefinite-lived intangible assets.
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
36
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.
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.
Adoption of New Pronouncements
See Note 2, "New Accounting Pronouncements," to the consolidated financial statements for a description of new
accounting pronouncements.
Foreign Currency
Our revenues, costs and expenses, and monetary assets and liabilities are exposed to changes in foreign currency
exchange rates as a result of our global operating and financing activities. Foreign currency movements for the year ended
October 31, 2020 had an overall unfavorable impact on revenue of 1 percentage point when compared to the same period last
year. The unfavorable effects of changes in foreign currency exchange rates have decreased revenue by approximately 2
percentage points for the year ended October 31, 2019. When movements in foreign currency exchange rates have a negative
impact on revenue, they will also have a positive impact on our costs and expenses. We calculate the impact of movements in
foreign currency exchange rates by applying the actual foreign currency exchange rates in effect during the last month of each
quarter of the current year 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 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
thirteen-month period). We may also hedge equity balances denominated in foreign currency on a long-term basis. 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 U.S. dollar cost of the transaction.
37
Results from Operations
Net Revenue
Years Ended October 31,
2020
2019
2018
2020 over 2019
Change
2019 over 2018
Change
(in millions)
Net revenue:
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Services and other . . . . . . . . . . . . . . . . . . . . . . . . $
Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,993 $
1,346 $
5,339 $
3,877 $
1,286 $
5,163 $
3,746
1,168
4,914
3%
5%
3%
3%
10%
5%
Years Ended October 31,
2020
2019
2018
2020 over 2019
Change
2019 over 2018
Change
% of total net revenue:
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services and other . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
75 %
25 %
100 %
75 %
25 %
100 %
76 %
24 %
100 %
—
—
(1) ppt
1 ppt
Agilent's net revenue of $5,339 million for the year ended October 31, 2020 increased 3 percent when compared to 2019.
Foreign currency movements for 2020 had an unfavorable impact of approximately 1 percentage point when compared to 2019.
Agilent's net revenue of $5,163 million increased 5 percent in 2019 when compared to 2018. Foreign currency movements for
2019 had an unfavorable impact of approximately 2 percentage points when compared to 2018.
Product revenue includes revenue generated from the sales of our analytical instrumentation, software and consumables.
Revenue from products increased 3 percent for the year ended October 31, 2020, when compared to 2019. Revenue in 2020
was impacted by the global COVID-19 pandemic within most of our product lines as customers curtailed equipment spending
at various times when countries around the world were in the lockdown phase of the COVID-19 pandemic. Growth was due to
our cell analysis business, automation products and our nucleic acid solutions business. The increase in the cell analysis
business is primarily due to the contributions from our acquisitions and the increased demand for our products for use in
COVID-19 testing and vaccine research.
Revenue from products increased 3 percent for the year ended October 31, 2019, when compared to 2018. The growth in
product revenue was impacted by increased sales within our cell analysis business, mainly due to contributions from our recent
acquisitions. In addition, product revenue growth was impacted by strong sales in our consumables and nucleic acid solutions
businesses partially offset by revenue weakness in our liquid chromatography, gas chromatography, liquid chromatography
mass spectrometry and spectroscopy products.
Services and other revenue increased 5 percent in 2020 as compared to 2019. Services and other revenue increased 10
percent in 2019 as compared to 2018. Services and other revenue consist of revenue generated from our three business
segments: Agilent CrossLab, diagnostics and genomics and our life science and applied markets businesses. 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 year ended October 31, 2020, the service revenue from the Agilent CrossLab business increased 4 percent when
compared to the same period last year, with a 1 percentage point unfavorable currency impact. This growth for the year ended
October 31, 2020 is reflective of the resilience of the contracted service business throughout the year, as well as the recovery of
the on-demand and installation service businesses in the latter half of 2020, as customer sites gradually reopened following their
COVID-19 related closures earlier in the year. Those site re-openings were fastest in China.
Services and other revenue in the Agilent CrossLab business increased 9 percent in 2019 as compared to 2018, with a 3
percentage point unfavorable currency impact. Nearly all major service offerings from the Agilent CrossLab business
contributed to the revenue growth across all geographic regions.
38
For the year ended October 31, 2020, the service revenue from the diagnostics and genomics business remained flat
when compared to the same period last year. Services in the diagnostics and genomics business in 2019 increased due to growth
in service revenue throughout all our businesses when compared to 2018.
For the year ended October 31, 2020, the service revenue from the life sciences and applied markets business increased
28 percent when compared to the same period last year. The increase in life sciences and applied markets service revenue is due
to the additional service revenue within the cell analysis business due to the Lionheart Technologies LLC ("BioTek")
acquisition. Services and other revenue in the life sciences and applied markets business increased in 2019 as compared to 2018
due to the impact of acquisitions made in 2019.
Net Revenue By Segment
Years Ended October 31,
2020
2019
2018
2020 over 2019
Change
2019 over 2018
Change
(in millions)
Net revenue by segment:
Life sciences and applied markets . . . . . . . . . . . $
Diagnostics and genomics . . . . . . . . . . . . . . . . . $
Agilent CrossLab . . . . . . . . . . . . . . . . . . . . . . . . $
Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,392 $
1,047 $
1,900 $
5,339 $
2,302 $
1,021 $
1,840 $
5,163 $
2,270
943
1,701
4,914
4%
2%
3%
3%
1%
8%
8%
5%
Revenue in the life sciences and applied markets business increased 4 percent in 2020 when compared to 2019. Foreign
currency movements had no overall impact on revenue in 2020 when compared to 2019. Acquisitions had an overall favorable
impact on revenue growth of 7 percentage points and primarily impacted the overall growth in the pharmaceutical and academia
and government markets. Revenue growth within the life sciences and applied markets was driven by strong growth in the
academia and government, the pharmaceutical and the diagnostics and clinical markets with moderate growth from the food
market partially offset by declines in revenue within the environmental and forensics and chemical and energy markets.
Revenue in the life sciences and applied markets business increased 1 percent in 2019 when compared to 2018. Foreign
currency movements had an overall unfavorable impact of 2 percentage points in 2019 when compared to 2018. Acquisitions
had an overall favorable impact on revenue growth of 4 percentage points and primarily impacted the pharmaceutical and
academia and government markets when compared to 2018. For the year ended October 31, 2019, revenue growth was
favorable within academia and government, moderate within the pharmaceutical and the environmental and forensics markets
which was mostly offset by declines in revenue from the food market and to a lesser extent from the chemical and energy
market when compared to 2018.
Revenue in the diagnostics and genomics business increased 2 percent in 2020 when compared to 2019. Foreign currency
movements had an overall unfavorable impact on revenue of 1 percentage point in 2020 when compared to 2019. Revenue
growth within the diagnostics and genomics business was driven by strong growth in our nucleic acid solutions and
biomolecular analysis businesses partially offset by declines in our genomics business. Revenue in the diagnostics and
genomics business increased 8 percent in 2019 when compared to 2018. Foreign currency movements had an overall
unfavorable impact on revenue of 3 percentage points in 2019 when compared to 2018. Revenue growth within the diagnostics
and clinical market and the pharmaceutical market continued to be strong led by performance from our nucleic acid solutions
and biomolecular analysis businesses.
Revenue in the Agilent CrossLab business increased 3 percent in 2020 when compared to 2019. Foreign currency
movements had an overall unfavorable impact on revenue of 1 percentage point in 2020 when compared to 2019. Revenue
growth within Agilent CrossLab business was strong within the pharmaceutical and food markets which was partially offset by
declines in the academia and government and clinical and diagnostics markets. Revenue generated by Agilent CrossLab
increased 8 percent in 2019 when compared to 2018. Foreign currency movements had an overall unfavorable impact of 3
percentage points in 2019 when compared to 2018. Our performance in the Agilent CrossLab business saw continued growth in
all key end markets with strong growth in the pharmaceutical, academia and government and food markets compared to 2018.
39
Costs and Expenses
Years Ended October 31,
2020
2019
2018
2020 over 2019
Change
2019 over 2018
Change
(in millions, except margin data)
55.0 %
Gross margin on products . . . . . . . . . . . . . . . . . . . .
47.5 %
Gross margin on services and other . . . . . . . . . . . . .
53.1 %
Total gross margin . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . $
495
Selling, general and administrative . . . . . . . . . . . . . $ 1,496
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.8 %
56.7 %
47.3 %
54.3 %
$
404
$ 1,460
57.4 %
45.3 %
54.5 %
$
387
$ 1,389
18.2 %
18.4 %
(2) ppts
—
(1) ppt
22%
2%
(2) ppts
(1) ppt
2 ppts
—
5%
5%
—
Total gross margin for the year ended October 31, 2020 decreased 1 percentage point when compared to 2019. Gross
margin declined due to the impacts of pricing pressure, higher intangible amortization expense, higher wages, net unfavorable
currency impact and higher fixed costs related to the new manufacturing facility in Frederick, Colorado, partially offset by
lower period and travel costs. Total gross margin for the year ended October 31, 2019 was flat when compared to 2018. Total
gross margin reflects the impact of efficiency gains, lower inventory charges and favorable currency impact on costs offset by
higher wages and variable pay, product mix, higher expenses related to tariffs and higher amortization expense of intangible
assets.
Gross inventory charges were $28 million in 2020, $19 million in 2019 and $26 million in 2018. Sales of previously
written down inventory were $7 million in 2020, $6 million in 2019 and $8 million in 2018.
Research and development expenses increased 22 percent for the year ended October 31, 2020 when compared to 2019.
Research and development expenses increased primarily due to intangible and other asset impairments of $97 million related to
the shutdown of our sequencer development program. The increase is also due to higher wages and additional expenses related
to our acquisition of BioTek partially offset by lower discretionary expenditures including lower travel costs and favorable
currency impact. Research and development expenses increased 5 percent for the year ended October 31, 2019 when compared
to 2018. Research and development expenses increased due to increased program spending on new products related to all of our
businesses in addition to higher wages and variable pay and additional expenses related to acquired businesses partially offset
by favorable currency movements when compared to spending in 2018.
Selling, general and administrative expenses increased 2 percent in 2020 when compared to 2019. The increase in
selling, general and administrative expenses was due to higher wages, higher intangible amortization expense and higher
transformational initiative expenses, which was partially offset by lower discretionary expenditures including lower travel costs
and favorable currency impact. Selling, general and administrative expenses increased 5 percent in 2019 compared to 2018.
Selling, general and administrative expenses increased due to increased wages and variable pay, higher commissions, higher
legal expenses, higher acquisition and integration costs and higher transformation initiatives expenses partially offset by
operational efficiencies and savings and favorable currency impact.
Total operating margin decreased 2 percentage points for the year ended October 31, 2020, when compared to 2019.
Operating margin declined due to intangible and other asset impairments, higher wages, higher intangible amortization expense
and higher transformational initiative expenses partially offset by lower discretionary expenditures including lower travel costs
and favorable currency impact. Total operating margin was flat for the year ended October 31, 2019, when compared to 2018.
Total operating margin was impacted by higher wages and variable pay, higher acquisition and integration costs, higher
expenses related to tariffs and higher transformation initiatives expenses offset by operational efficiencies and savings and
favorable currency impact.
Interest income for the year ended October 31, 2020, 2019 and 2018 was $8 million, $36 million and $38 million,
respectively. The decrease in interest income in 2020 was primarily due to lower interest rates for our cash and cash
equivalents.
Interest expense for the years ended October 31, 2020, 2019 and 2018 was $78 million, $74 million and $75 million,
respectively, and relates to the interest charged on our senior notes, credit facilities, commercial paper and the amortization of
the deferred loss recorded upon termination of the forward starting interest rate swap contracts partially offset by the
amortization of deferred gains recorded upon termination of interest rate swap contracts.
40
At October 31, 2020, our headcount was approximately 16,400 compared to 16,300 in 2019.
Other income (expense), net
For the year ended October 31, 2020, other income (expense), net includes income of $12 million related to the provision
of site service costs to, and lease income from, Keysight Technologies, Inc. ("Keysight"). The costs associated with these
services are reported within income from operations. Other income (expense), net also includes net gains on the fair value of
equity investments of approximately $27 million and income of $22 million related to the settlement of our legal claim against
Twist Bioscience Corporation.
For the year ended October 31, 2019, other income (expense), net includes income of $12 million related to the provision
of site service costs to, and lease income from, Keysight Technologies, Inc. ("Keysight") and $9 million loss on the
extinguishment of debt.
For the year ended October 31, 2018, other income (expense), net includes the net gain of $20 million related to the step-
up of our initial investment in Lasergen, $15 million of income related to a special one-time settlement with a third-party, a $5
million pension settlement gain related to the substitutional portion of the defined benefit pension plans established under the
Japanese Welfare Pension Insurance Law and income of $12 million related to the provision of site service costs to, and lease
income from, Keysight.
Income Taxes
Years Ended October 31,
2020
2019
(in millions)
2018
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
123 $
(152) $
630
For 2020, the company's income tax expense was $123 million with an effective tax rate of 14.6 percent. For the year
ended October 31, 2020, our effective tax rate and the resulting provision for income taxes were impacted by foreign income
taxed at lower rates.
For 2019, the company's income tax benefit was $152 million with an effective tax rate of (16.5) percent. For the year
ended October 31, 2019, our effective tax rate and the resulting provision for income taxes were significantly impacted by the
discrete benefit of $299 million related to the extension of the company’s tax incentive in Singapore.
For 2018, the company's income tax expense was $630 million with an effective tax rate of 66.6 percent. For the year
ended October 31, 2018, our effective tax rate and the resulting provision for income taxes were significantly impacted by the
discrete charge of $552 million related to the enactment of the U.S. Tax Cuts and Jobs Act (the “Tax Act”) consisting of (1) an
expense of $499 million of U.S. transition tax and correlative items on deemed repatriated earnings of non-U.S. subsidiaries and
(2) an expense of $53 million associated with the impact on deferred taxes resulting from the decreased U.S. corporate tax rate.
The company has negotiated tax holidays in several different jurisdictions, most significantly in Singapore. The tax
holidays provide lower rates of taxation on certain classes of income and require various thresholds of investments and
employment or specific types of income in those jurisdictions. In December 2018, the tax holiday in Singapore was
renegotiated and extended through 2027. As a result of the incentives, the impact of the tax holidays decreased income taxes by
$71 million, $368 million, and $87 million in 2020, 2019, and 2018, respectively. The benefit of the tax holidays on net income
per share (diluted) was approximately $0.23, $1.16, and $0.27 in 2020, 2019 and 2018, respectively. Of the $1.16 benefit of the
tax incentives on net income per share (diluted) in 2019, $0.94 of the benefit relates to one-time items from the extension of the
company’s tax incentive in Singapore.
With these jurisdictions and the U.S., 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 limitation or a tax audit settlement which will
be partially offset by an anticipated tax liability related to unremitted foreign earnings, where applicable. 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.
41
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.
Segment Overview
Through October 31, 2020, we 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”) 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 analytics; laboratory automation and robotic systems; dissolution testing; vacuum pumps and measurement
technologies.
Net Revenue
Years Ended October 31,
2020
2019
2018
(in millions)
2020 over 2019
Change
2019 over 2018
Change
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,392 $
2,302 $
2,270
4%
1%
Life science and applied markets business revenue in 2020 increased 4 percent compared to 2019. Foreign currency
movements for 2020 had no impact on revenue growth when compared to the same period last year. Acquisitions had an overall
favorable impact on revenue growth of 7 percentage points when compared to the same period last year. Geographically,
revenue increased 13 percent in the Americas with a 1 percentage point unfavorable currency impact, decreased 2 percent in
Europe with no currency impact and increased 1 percent in Asia Pacific with no currency impact. In 2020, revenue increases in
our automation, liquid chromatography mass spectrometry and cell analysis products from our acquisitions, primarily in the
Americas, were partially offset by declines in other parts of the portfolio when compared to the same period last year.
End market revenue performance in 2020 was mixed with academia and government and diagnostics and clinical
markets delivering strong growth and the pharmaceutical and food markets delivering moderate growth which was partially
offset by chemical and energy and forensics and environmental markets. In 2020, despite the unfavorable impact from
COVID-19, revenue growth in the academia and government and pharmaceutical and diagnostics and clinical markets was
primarily driven by strong performance of our cell analysis products from the Lionheart Technologies LLC ("BioTek")
acquisition. The growth in the diagnostics and clinical business was also due to the strength in liquid phase mass spectrometry
and cell analysis products.
Life science and applied markets business revenue in 2019 increased 1 percent compared to 2018. Foreign currency
movements for 2019 had an overall unfavorable currency impact of 2 percentage points on revenue growth when compared to
2018. Acquisitions had an overall favorable impact on revenue growth of 3 percentage points when compared to 2018.
42
Geographically, revenue increased 12 percent in the Americas with a 1 percentage point unfavorable currency impact,
decreased 4 percent in Europe with a 3 percentage point unfavorable currency impact and decreased 2 percent in Asia Pacific
with a 1 percentage point unfavorable currency impact. From a product standpoint, revenue was driven by strength in sales in
our gas chromatography mass spectrometry and cell analysis primarily due to contributions from our acquisitions and
informatics businesses which was offset by weakness in our liquid chromatography, gas chromatography, liquid
chromatography mass spectrometry and spectroscopy products when compared to 2018.
End market performance in 2019 was mixed with the pharmaceutical, academia and government, diagnostics and clinical
and forensics markets delivering strong revenue growth, environmental delivering moderate growth while chemical and energy
markets decreased modestly, and food delivered weak results compared to 2018.
Looking forward, despite short term uncertainties and the adverse effects of the COVID-19 pandemic, 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 growth from our new product introductions and acquisitions
in the last couple of years 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 in the long term.
Gross Margin and Operating Margin
The following table shows the life sciences and applied markets business' margins, expenses and income from operations
for 2020 versus 2019, and 2019 versus 2018.
Years Ended October 31,
2020
2019
2018
2020 over 2019
Change
2019 over 2018
Change
(in millions, except margin data)
Total gross margin . . . . . . . . . . . . . . . . . . . . . . . . . .
59.2 %
61.0 %
61.3 %
(2) ppts
Research and development . . . . . . . . . . . . . . . . . . . $
Selling, general and administrative . . . . . . . . . . . . . $
219
650
$
$
216
646
$
$
220
630
1%
1%
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . .
22.9 %
23.5 %
23.9 %
(1) ppt
Income from operations . . . . . . . . . . . . . . . . . . . . . . $
548
$
542
$
543
1%
—
(1)%
3%
—
—
Gross margin decreased 2 percentage points in 2020 compared to 2019. Gross margin declined due to the increased
impact of pricing pressures and a net unfavorable impact from currency movements partially offset by favorable product mix
and material cost savings. Gross margin was flat in 2019 compared to 2018. Gross margin was impacted by unfavorable mix
and higher expenses related to tariffs which was offset by favorable currency impact.
Research and development expenses increased 1 percent in 2020 when compared to 2019. Research and development
expenses increased due to higher wages and additional expenses related to the BioTek acquisition partially offset by lower
discretionary spending and favorable impact from foreign currency movements. Research and development expenses decreased
1 percent in 2019 when compared to 2018. Research and development decreased due to lower discretionary spending and a
favorable currency offset by additional expenses related to acquisitions as well as higher wages and variable pay.
Selling, general and administrative expenses increased 1 percent in 2020 compared to 2019. Selling, general and
administrative expenses increased due to higher wages and additional expenses related to the BioTek acquisition partially offset
by favorable impact from foreign currency movements and lower travel costs. Selling, general and administrative expenses
increased 3 percent in 2019 compared to 2018. Selling, general and administrative expenses were impacted by higher wages
and variable pay and additional expenses related to our recent acquisitions partially offset by operational savings and a
favorable currency impact.
Operating margin decreased 1 percentage point in 2020 compared to 2019. Operating margin declined due to additional
expenses related to our recent acquisitions and unfavorable gross margin due to pricing pressures partially offset by operational
savings and favorable currency impact. Operating margin was relatively flat in 2019 compared to 2018. Operating margin
reflects relatively flat revenue growth partially offset by an increase in selling, general and administrative expenses.
43
Income from Operations
Income from operations in 2020 increased by $6 million or increased by 1 percent when compared to 2019 on a revenue
increase of $90 million. The increase in income from operations was mainly due to the impact of the BioTek acquisition.
Income from operations in 2019 decreased by $1 million or was relatively flat when compared to 2018 on a revenue increase of
$32 million. The decrease was due to the impact of acquisitions.
Diagnostics and Genomics
Our diagnostics and genomics business includes the genomics, nucleic acid contract manufacturing and research and
development, pathology, companion diagnostics, reagent partnership and biomolecular analysis businesses.
Our diagnostics and genomics business is comprised of 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 API in an emerging class
of drugs that utilize nucleic acid molecules for disease therapy. Third, our pathology solutions business is focused on product
offerings for 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.
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. 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
Years Ended October 31,
2020
2019
2018
(in millions)
2020 over 2019
Change
2019 over 2018
Change
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,047 $
1,021 $
943
2%
8%
Diagnostics and genomics business revenue in 2020 increased 2 percent compared to 2019. Foreign currency movements
for 2020 had an overall unfavorable impact on revenue growth of 1 percentage point when compared to the same period last
year. Geographically, revenue increased 2 percent in the Americas with no currency impact, increased 1 percent in Europe with
no currency impact and increased 7 percent in Asia Pacific with no currency impact. The increase in the Americas was driven
by strong performance in the nucleic acid solutions and reagent partnership businesses. Revenue growth in the Americas was
partly offset by a decline in the pathology and genomics business driven by the COVID-19 related reduction in routine and
cancer testing, as well as the closure of academic and research laboratories. In Europe, strong revenue from our biomolecular
analysis business was partially offset by the COVID-19 related declines from our genomics business. In Asia Pacific, revenue
growth was driven by the pathology and biomolecular analysis businesses.
In 2020 revenue performance in the diagnostics and genomics business was led by strong revenue growth in the nucleic
acid solutions and biomolecular analyses businesses. This was partly offset by a COVID-19 related reduction in routine and
cancer testing, as well as the closure of most academic and research laboratories. The diagnostics and clinical research end
markets remain strong long-term and growing driven by an aging population and lifestyle developments such as poor diet and
physical inactivity.
Diagnostics and genomics business revenue in 2019 increased 8 percent compared to 2018. Foreign currency movements
for 2019 had an overall unfavorable impact on revenue growth of 3 percentage points when compared to 2018. Geographically,
44
revenue increased 17 percent in the Americas with a 1 percentage point unfavorable currency impact, was flat in Europe with a
4 percentage point unfavorable currency impact and increased 2 percent in Asia Pacific with a 2 percentage point unfavorable
currency impact. The growth in Americas was driven by strong growth in our nucleic acid solutions, companion diagnostics
and biomolecular analysis business. In Europe we saw strong growth in the biomolecular analysis business offset by softness in
the genomics business. In Asia Pacific the growth was driven by our biomolecular analysis business and negatively impacted by
softness in the genomics business.
The revenue growth in 2019 was led by strong revenue performance in our nucleic acid solutions, companion
diagnostics and biomolecular analysis business. The diagnostics and clinical research market remains strong and growing
driven by an aging population and unhealthy lifestyle developments such as poor diet and physical inactivity.
Looking forward, although we see short-term impacts to routine and cancer testing due to COVID-19 which will affect
our revenue growth, we are optimistic about our long-term growth opportunities in our end markets and continue to invest in
expanding and improving our applications and solutions portfolio. We remain positive about our growth in our end markets as
our product portfolio around OMNIS, PD-L1 assays and SureFISH continue to gain strength with our customers in clinical
oncology applications, and our next generation sequencing target enrichment solutions continue to be adopted. Market demand
in the nucleic acid solutions business related to therapeutic oligo programs continues, and with our newly opened and planned
extension of our nucleic acid solutions production facility in Frederick, Colorado, we are well positioned to serve more of the
market demand. We will continue to invest in research and development and seek to expand our position in developing
countries and emerging markets.
Gross Margin and Operating Margin
The following table shows the diagnostics and genomics business' margins, expenses and income from operations for
2020 versus 2019, and 2019 versus 2018.
Years Ended October 31,
2020
2019
2018
2020 over 2019
Change
2019 over 2018
Change
(in millions, except margin data)
Total gross margin . . . . . . . . . . . . . . . . . . . . . . . . . .
51.9 %
54.7 %
56.3 %
(3) ppts
Research and development . . . . . . . . . . . . . . . . . . . . $
Selling, general and administrative . . . . . . . . . . . . . $
114
238
$
$
125
248
$
$
109
249
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . .
18.3 %
18.2 %
18.4 %
Income from operations . . . . . . . . . . . . . . . . . . . . . . $
192
$
185
$
173
(9)%
(4)%
—
3%
(2) ppts
15%
—
—
7%
Gross margin decreased 3 percentage points in 2020 when compared to 2019. Gross margin was impacted by
unfavorable product mix and higher fixed costs related to the new manufacturing facility in Frederick, Colorado, partially offset
by lower period and travel costs. Gross margin decreased 2 percentage points in 2019 when compared to 2018. The decrease in
gross margin was driven by an unfavorable product mix and a higher fixed cost structure due to the addition of a second nucleic
acid manufacturing facility that offset gains from higher sales volumes.
Research and development expenses decreased 9 percent in 2020 when compared to 2019. Research and development
expenses decreased due to the shutdown of our sequencer development program and a reduction in discretionary expenditures
including travel costs. Research and development expenses increased 15 percent in 2019 when compared to 2018. The increase
was due to additional expenses related to prior year's acquisitions, higher wages and variable pay and increased spending
around the development of clinical applications and solutions.
Selling, general and administrative expenses decreased 4 percent in 2020 when compared to 2019. Selling, general and
administrative expenses decreased due to a reduction in discretionary expenditures including travel costs partially offset by an
increase in wages. Selling, general and administrative expenses were flat in 2019 when compared to 2018. Selling, general and
administrative expenses were impacted by efficiency gains offsetting higher wages and variable pay.
Operating margin was relatively flat in 2020 when compared to 2019. Operating margin was aided by savings in
operating expenses which were offset by gross margin decline. Operating margin was relatively flat in 2019 when compared to
2018. Operating margin was impacted by higher sales volume, offsetting the gross margin deterioration and the increase in
research and development spending.
45
Income from Operations
Income from operations in 2020 increased by $7 million or 3 percent when compared to 2019 on a revenue increase of
$26 million. The increase was driven by gains from higher volume and lower operating expenses more than offsetting the gross
margin percentage decline. Income from operations in 2019 increased by $12 million or 7 percent when compared to 2018 on a
revenue increase of $78 million. The increase was due to higher volume partially offset by the gross margin percentage decline
and higher research and development expenses.
Agilent CrossLab
The Agilent CrossLab business spans the entire lab with its extensive consumables and services portfolio, which is
designed to improve customer outcomes. 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.
Net Revenue
Years Ended October 31,
2020
2019
2018
(in millions)
2020 over 2019
Change
2019 over 2018
Change
Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,900 $
1,840 $
1,701
3%
8%
Agilent CrossLab business revenue in 2020 increased 3 percent when compared to 2019. Foreign currency movements
for 2020 had an overall unfavorable impact of 1 percentage point when compared to 2019. Geographically, revenue was flat in
the Americas with a 1 percentage point unfavorable currency impact, increased 2 percent in Europe with a 1 percentage point
favorable currency impact and increased 7 percent in Asia Pacific with a 1 percentage point unfavorable currency impact. As a
consequence of the COVID-19 related impact on global commerce in 2020, consumable sales growth has been low single digits
in comparison to 2019 in most countries excluding China. In addition, the COVID-19 related customer site closures have
brought a temporary lull in our delivery of on-demand services and installation services, which has been recovering in the latter
half of the year as customer labs reopen. Consumable sales in China and the contracted service business across most regions
have seen solid gains throughout 2020. Among our major end markets, the pharmaceutical market and the food market
generated the strongest revenue growth when compared to 2019.
Agilent CrossLab business revenue in 2019 increased 8 percent when compared to 2018. Foreign currency movements
for 2019 had an overall unfavorable impact of 3 percentage points when compared to 2018. Acquisitions in 2018 added 1
percentage point to the revenue growth reported for 2019. Revenue growth in 2019 was driven broadly by our entire services
and consumables portfolio. Geographically, revenue increased 9 percent in the Americas with a 1 percentage point unfavorable
currency impact, increased 5 percent in Europe with a 5 percentage point unfavorable currency impact and increased 10 percent
in Asia Pacific with a 3 percentage point unfavorable currency impact. Agilent CrossLab business saw strong revenue growth in
all key end markets, except in the diagnostics and clinical market, when compared to 2018.
Looking forward, the Agilent CrossLab portfolio of products and services capabilities is well positioned to continue to
succeed in our key end markets. With less predictable access to customer sites during the global COVID-19 pandemic, the
business is taking advantage of digital and remote capabilities to offer services and consumables to customers. Despite the
current COVID-19 environment, we remain confident about the long-term growth opportunities as customer feedback remains
very positive on the value Agilent CrossLab brings to customer labs. Geographically, the business is well diversified across all
regions to take advantage of local market opportunities as they reopen to commerce.
46
Gross Margin and Operating Margin
The following table shows the Agilent CrossLab business' margins, expenses and income from operations for 2020
versus 2019 and 2019 versus 2018.
Years Ended October 31,
2020
2019
2018
2020 over 2019
Change
2019 over 2018
Change
(in millions, except margin data)
Total gross margin . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . $
Selling, general and administrative . . . . . . . . . . . . . $
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . $
52.2 %
58
417
27.2 %
516
$
$
$
51.8 %
58
421
25.8 %
475
$
$
$
50.4 %
56
413
22.8 %
388
—
—
(1)%
1 ppt
9%
1 ppt
3%
2%
3 ppts
23%
Gross margin for products and services was relatively flat in 2020 when compared to 2019. Gross margin benefited from
lower service delivery costs which include travel, parts and labor as well as improved productivity in manufacturing in the
consumables business. Those operational gains were offset by a net unfavorable impact from currency movements. Gross
margin for products and services increased 1 percentage point in 2019 when compared to 2018. Gross margin was impacted by
higher sales volume, combined with efficiency gains in the service delivery operation and in the logistics and manufacturing
processes for the consumables business. Some of those gains were offset by higher wages and higher variable costs and
increased headcount.
Research and development expenses were relatively flat in 2020 when compared to 2019. The higher wages and variable
pay in research and development expenses were offset by lower travel costs and the reduction of other discretionary
expenditures. Research and development expenses increased 3 percent in 2019 when compared to 2018. Research and
development increased due to higher wages and higher variable pay and additional research and development expenditures from
acquisitions made in 2018.
Selling, general and administrative expenses decreased 1 percent in 2020 when compared to 2019. Selling, general and
administrative expenses decreased due to favorable currency movements, reduced travel and training by the sales organization,
lower sales commissions, and a reduction in discretionary expenditures which were partially offset by higher wages. Selling,
general and administrative expenses increased 2 percent in 2019 when compared to 2018. Selling, general and administrative
expenses were higher due to additional operating expenses from our acquisitions made in 2018, in addition to higher wages and
higher variable pay. Those increases were partially offset by a favorable impact from foreign currency movements.
Operating margin increased 1 percentage point in 2020 when compared to 2019. The increase was primarily due to the
growth in revenue while lowering service delivery and selling costs and the reduction of discretionary expenditures, partially
offset by higher wages. Operating margin increased 3 percentage points in 2019 when compared to 2018. The increase in
operating margin was driven by the higher sales volume, combined with efficiency gains across the service delivery operations,
order fulfillment processes and other operations.
Income from Operations
Income from operations in 2020 increased by $41 million or 9 percent when compared to 2019 on a revenue increase of
$60 million. The increase was primarily due to the growth in revenue while lowering service delivery and selling costs and the
reduction of discretionary expenditures, partially offset by higher wages. Income from operations in 2019 increased by $87
million or 23 percent when compared to 2018 on a revenue increase of $139 million. The increase was driven by the higher
sales volume, combined with efficiency gains across the service delivery operations, order fulfillment processes and other
operations.
47
Financial Condition
Liquidity and Capital Resources
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. Our sources and uses of cash were not materially impacted by COVID-19 to date. We have not identified any
material liquidity concerns as a result of the COVID-19 pandemic. We will continue to monitor and assess the impact
COVID-19 may have on our business and financial results.
Economic stimulus legislation was passed in many countries in response to COVID-19. In March in the U.S., the
Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted to provide for tax relief and government
loans, subsidies and other relief for entities in affected industries. As of October 31, 2020, the CARES Act and other
government benefits outside the U.S. did not have a material impact on our consolidated financial statements and related
disclosures.
Our financial position as of October 31, 2020 consisted of cash and cash equivalents of $1,441 million as compared to
$1,382 million as of October 31, 2019.
As of October 31, 2020, approximately $1,395 million of our cash and cash equivalents is held outside of the U.S. by our
foreign subsidiaries and can be repatriated to the U.S. as local working capital and 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.
We may, from time to time, retire certain outstanding debt of ours through open market cash purchases, privately-
negotiated transactions or otherwise. Such transactions, if any, will depend on prevailing market conditions, our liquidity
requirements, contractual restrictions and other factors.
Net Cash Provided by Operating Activities
Net cash provided by operating activities was $921 million in 2020 as compared to $1,021 million provided in 2019 and
$1,087 million provided in 2018. We paid approximately $79 million under our variable and incentive pay programs in 2020, as
compared to a total of $118 million in 2019 and $103 million in 2018. The decrease in the amount for variable and incentive
pay programs paid in 2020 is primarily due to changes made for certain incentive pay programs which are now paid annually
versus semi-annually as was done in 2019 and 2018. Net cash paid for income taxes was approximately $361 million in 2020
which included a one-time payment of $231 million related to the transfer of intellectual property compared to incomes taxes
paid of $159 million in 2019 and $102 million in 2018. For the years ended October 31, 2020 and 2019, the net change in tax
related assets and liabilities due to the Tax Act was zero compared to $552 million in the same period of 2018. In 2018, $552
million in tax-related assets and liabilities related to the enactment of the U.S. Tax Act, which primarily consisted of an
estimated provision of $499 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 on deferred taxes resulting from the decreased U.S. corporate income tax rate.
Deferred tax inflows were $29 million in 2020 compared to cash outflows of $255 million 2019, which included $266 million
related to the extension of the company's tax incentive in Singapore, and cash outflows of $16 million in 2018. In 2020, there
was a net unrealized gain on fair value of equity investments of $28 million. In 2020, there was an impairment charge of $99
million mainly related to the shutdown of our sequencer development program compared to impairment charges of zero in
2019, and $21 million in 2018. For the years ended October 31, 2020, 2019 and 2018, other assets and liabilities used cash of
$181 million, $43 million and $4 million, respectively. The cash outflow in the year ended October 31, 2020 was largely the
result of increased income tax payments, interest payments on senior notes and changes in deferred revenue. Cash outflow for
the year ended October 31, 2019 and 2018 in other assets and liabilities is primarily due to tax payments and interest on senior
notes.
In 2020, the change in accounts receivable used cash of $107 million, $106 million in 2019, and $65 million in 2018.
Days' sales outstanding as of October 31, were 63 days in 2020, 61 days in 2019 and 54 days in 2018. The change in accounts
payable provided cash of $2 million in 2020, $29 million in 2019 and $40 million in 2018. Cash used in inventory was $68
million in 2020, $36 million in 2019 and $83 million in 2018. Inventory days on-hand decreased to 93 days in 2020 compared
to 97 days in 2019 and decreased compared to 98 days in 2018. In the year ended October 31, 2020, we increased our inventory
levels to meet our customer needs in response to the COVID-19 pandemic.
48
We made no contributions to our U.S defined benefit plans in 2020, 2019 and 2018. We contributed $31 million in 2020
and $21 million each year in 2019 and 2018 to our non-U.S. defined benefit plans, respectively. We did not contribute to our
U.S. post-retirement benefit plans in 2020, 2019 and 2018. Our non-U.S. defined benefit plans are generally funded ratably
throughout the year. The increase in 2020 mainly related to $12 million additional contribution in the Netherlands. Our annual
contributions are highly dependent on the relative performance of our assets versus our projected liabilities, among other
factors. We do not expect to contribute to our U.S. plans and U.S. post-retirement benefit plans during 2021. We expect to
contribute $22 million to our non-U.S. defined benefit plans during 2021.
Net Cash Used in Investing Activities
Net cash used in investing activities in 2020 was $147 million and in 2019 was $1,590 million as compared to net cash
used of $705 million in 2018.
Investments in property, plant and equipment were $119 million in 2020, $155 million in 2019 and $177 million in 2018.
In 2020 we made no acquisitions of businesses. In 2019 we invested $1,408 million in acquisitions of businesses and intangible
assets, net of cash acquired, for the acquisition of two businesses compared to the acquisition of seven businesses for $516
million in 2018. In 2020 cash used to purchase fair value investments was $20 million compared to $23 million outlay in 2019
and $11 million in 2018.
Net Cash Used in Financing Activities
Net cash used in financing activities in 2020 was $717 million compared to $299 million in 2019 and $797 million in
2018.
Treasury Stock Repurchases
On May 28, 2015 we announced that our board of directors had approved a share repurchase program (the "2015
repurchase program"). The 2015 share repurchase program authorizes the purchase of up to $1.14 billion of our common stock
at the company's discretion through and including November 1, 2018. The 2015 repurchase program did not require the
company to acquire a specific number of shares and could have been suspended or discontinued at any time. During the year
ended October 31, 2018, we repurchased and retired approximately 6.4 million shares for $422 million under this authorization.
As of October 31, 2018, we had remaining authorization to repurchase up to $188 million of our common stock under this
program which expired on November 1, 2018.
On November 19, 2018 we announced that our board of directors had approved a new share repurchase program (the
"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 2019 repurchase program authorizes the purchase of up to $1.75
billion of our common stock at the company's discretion and has no fixed termination date. The 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 year ended October 31, 2019, we repurchased and retired 10.4 million shares for $723 million under this
authorization. During the year ended October 31, 2020, we repurchased and retired approximately 5.2 million shares for $469
million under this authorization. As of October 31, 2020, we had remaining authorization to repurchase up to $558 million of
our common stock under this program.
Dividends
For the years ended October 31, 2020, 2019 and 2018 cash dividends of $222 million, $206 million and $191 million
were paid on the company's outstanding common stock, respectively. On November 18, 2020 we declared a quarterly dividend
of $0.194 per share of common stock, or approximately $59 million which will be paid on January 27, 2021 to shareholders of
record as of the close of business on January 5, 2021. The timing and amounts of any future dividends are subject to
determination and approval by our board of directors.
49
Credit Facilities
On March 13, 2019, we entered into a credit agreement with a group of financial institutions which provides for a $1
billion five-year unsecured credit facility that will expire on March 13, 2024. For the year ended October 31, 2020, we
borrowed $798 million and repaid $913 million under the credit facility. As of October 31, 2020, the company had no
borrowings outstanding under the credit facility. On August 7, 2019, we entered into an amendment to the credit agreement,
which provides for a $500 million short-term loan facility that was used in full to complete the BioTek acquisition and which
was repaid in full as of October 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 facilities as of
October 31, 2020. On April 17, 2020, we entered into a third amendment to the credit agreement which provides the company
with the option to request the consent of the applicable class of lenders to extend the maturity date of revolving borrowings and
swingline loans for an additional period of one year and of the 2019 incremental term loans for an additional period of up to
364 days. We were in compliance with the covenants for the credit facility during the year ended October 31, 2020.
Commercial Paper
In May 2020, we established a U.S. commercial paper program, under which the company may issue and sell unsecured,
short-term promissory notes in the aggregate principal amount not to exceed $1.0 billion with up to 397-day maturities. At any
point in time, the company intends to maintain available commitments under its revolving credit facility in an amount at least
equal to the amount of the commercial paper notes outstanding. Amounts available under the program may be borrowed, repaid
and re-borrowed from time to time. The proceeds from issuances under the program may be used for general corporate
purposes. As of October 31, 2020, borrowings outstanding under our U.S. commercial paper program had a weighted average
annual interest rate of 0.17 percent and a weighted average remaining maturity of approximately five days. We had borrowings
of $75 million outstanding under the U.S. commercial paper program as of October 31, 2020.
Long-term Debt
2022 Senior Notes
On September 13, 2012, the company issued an aggregate principal amount of $400 million in senior notes ("2022 senior
notes"). The 2022 senior notes were issued at 99.80% of their principal amount. The notes will mature on October 1, 2022, and
bear interest at a fixed rate of 3.20% per annum. The interest is payable semi-annually on April 1st and October 1st of each year
and payments commenced on April 1, 2013.
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 13, 2012. The treasury lock contracts were terminated on September 10,
2012 and we recognized a deferred gain in accumulated other comprehensive income (loss) 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
October 31, 2020 was less than $1 million.
2023 Senior Notes
On June 21, 2013, the company issued aggregate principal amount of $600 million in senior notes ("2023 senior notes").
The 2023 senior notes were issued at 99.544% of their principal amount. The notes will mature on July 15, 2023 and bear
interest at a fixed rate of 3.875% per annum. The interest is payable semi-annually on January 15th and July 15th of each year
and payments commenced January 15, 2014.
2026 Senior Notes
On September 22, 2016, the company issued aggregate principal amount of $300 million in senior notes ("2026 senior
notes"). The 2026 senior notes were issued at 99.624% of their principal amount. The notes will mature on September 22, 2026
and bear interest at a fixed rate of 3.05% per annum. The interest is payable semi-annually on March 22nd and September 22nd
of each year and payments commenced March 22, 2017.
In February 2016, Agilent executed three 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. 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 (loss) which is being amortized to interest expense over the
50
life of the 2026 senior notes. The remaining loss to be amortized related to the interest rate swap agreements at October 31,
2020 was $6 million.
2029 Senior Notes
On September 16, 2019, the company issued an aggregate principal amount of $500 million in senior notes ("2029 senior
notes"). The 2029 senior notes were issued at 99.316% of their principal amount. The notes will mature on September 15, 2029,
and bear interest at a fixed rate of 2.75% per annum. The interest is payable semi-annually on March 15th and September 15th
of each year and payments commenced on March 15, 2020.
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 of $6 million in accumulated
other comprehensive income (loss) 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 October 31, 2020 was $5 million.
2030 Senior Notes
On June 4, 2020, we issued an aggregate principal amount of $500 million in senior notes ("2030 senior notes"). The
2030 senior notes were issued at 99.812% of their principal amount. The 2030 senior notes will mature on June 4, 2030, and
bear interest at a fixed rate of 2.10% per annum. The interest is payable semi-annually on June 4th and December 4th of each
year and payments commenced on December 4, 2020.
Off Balance Sheet Arrangements and Other
Our liquidity is affected by many factors, some of which are based on normal ongoing operations of our business and
some of which arise from fluctuations related to global economics and markets. Our cash balances are generated and held in
many locations throughout the world. Local government regulations may restrict our ability to move cash balances to meet cash
needs under certain circumstances. We do not currently expect such regulations and restrictions to impact our ability to pay
vendors and conduct operations throughout our global organization.
Contractual Commitments
Our cash flows from operations are dependent on a number of factors, including fluctuations in our operating results,
accounts receivable collections, inventory management, and the timing of tax and other payments. As a result, the impact of
contractual obligations on our liquidity and capital resources in future periods should be analyzed in conjunction with such
factors.
The following table summarizes our total contractual obligations at October 31, 2020 for Agilent operations and excludes
amounts recorded in our consolidated balance sheet (in millions):
Commitments to contract manufacturers and suppliers . . . . $
Other purchase commitments . . . . . . . . . . . . . . . . . . . . . . . .
Retirement plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transitional pension contributions to our U.S. 401(k) plan .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
541 $
85
22
6
654 $
15 $
—
—
3
18 $
1 $
—
—
—
1 $
—
—
—
—
—
Less than one
year
One to three
years
Three to five
years
More than five
years
Commitments to Contract Manufacturers and Suppliers. We purchase components from a variety of suppliers and use
several contract manufacturers to provide manufacturing services for our products. During the normal course of business, we
issue purchase orders with estimates of our requirements several months ahead of the delivery dates. The above amounts
represent the commitments under the open purchase orders with our suppliers that have not yet been received. However, our
agreements with these suppliers usually provide us the option to cancel, reschedule, and adjust our requirements based on our
business needs prior to firm orders being placed. We expect to fulfill most of our purchase commitments for inventory within
one year.
51
Other Purchase Commitments. We have categorized "other purchase commitments" related to contracts with professional
services suppliers. Typically, we can cancel contracts with professional services suppliers without penalties. For those contracts
that are not cancelable without penalties, there are termination fees and costs or commitments for continued spending that we
are obligated to pay to a supplier under each contact's termination period before such contract can be cancelled. Our contractual
obligations with these suppliers under "other purchase commitments" were approximately $85 million within the next year.
Approximately $23 million of the contracts relate to penalties that will reduce over the next 13 years.
Retirement Plans. Commitments under the retirement plans relate to expected contributions to be made to our U.S. and
non-U.S. defined benefit plans and to our post-retirement medical plans for the next year only. Contributions after next year are
impractical to estimate. Effective May 1, 2016 until April 30, 2022, we will provide an additional transitional company
contribution for certain eligible employees equal to 3 percent, 4 percent or 5 percent of an employee's annual eligible
compensation due to the U.S. Retirement Plan benefits being frozen.
We had no material off-balance sheet arrangements as of October 31, 2020 or October 31, 2019.
On Balance Sheet Arrangements
The following table summarizes our total contractual obligations on our October 31, 2020 balance sheet (in millions):
Less than one
year
One to three years
Senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Commercial paper . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . .
Transition tax . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
75
69
—
54
198 $
1,000 $
—
126
7
69
1,202 $
Three to five years More than five years
1,300
— $
—
—
117
67
49
68
49
25
1,515
160 $
Other long-term liabilities as of October 31, 2020 and October 31, 2019 include $323 million and $328 million,
respectively, related to long-term income tax liabilities. Of these amounts, $199 million related to uncertain tax positions as of
both October 31, 2020 and October 31, 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 $124
million in other long-term liabilities relates to the one-time transition tax payable.
Item 7A. 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 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 mainly managed 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 52 percent of our
revenue in 2020, 51 percent of our revenue in 2019 and 53 percent of our revenue in 2018 were generated in U.S. dollars. The
overall unfavorable effect of changes in foreign currency exchange rates, principally as a result of the strength of the U.S.
dollar, has decreased revenue by approximately 1 percentage point in the year ended October 31, 2020. We calculate the impact
of movements in foreign currency exchange rates by applying the actual foreign currency exchange rates in effect during the
last month of each quarter of the current year to both the applicable current and prior year periods.
52
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 October 31, 2020 and 2019, the analysis indicated
that these hypothetical market movements would not have a material effect on our 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 October 31, 2020 and 2019, 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.
53
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Operations for each of the three years in the period ended October 31, 2020 . . . . . . . . .
Consolidated Statement of Comprehensive Income for each of the three years in the period ended October 31,
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheet at October 31, 2020 and 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Cash Flows for each of the three years in the period ended October 31, 2020 . . . . . . . . .
Consolidated Statement of Equity for each of the three years in the period ended October 31, 2020 . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quarterly Summary (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
55
57
58
59
60
61
62
113
54
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Agilent Technologies, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Agilent Technologies, Inc. and its subsidiaries (the
“Company”) as of October 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive income,
equity and cash flows for each of the three years in the period ended October 31, 2020, including the related notes and schedule
of valuation and qualifying accounts for each of the three years in the period ended October 31, 2020 appearing under Item
15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal
control over financial reporting as of October 31, 2020, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of October 31, 2020 and 2019, and the results of its operations and its cash flows for each of the
three years in the period ended October 31, 2020 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of October 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for
leases in 2020 and the manner in which it accounts for revenue from contracts with customers in 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express
opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
55
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Uncertain Tax Positions
As described in Note 6 to the consolidated financial statements, the Company has recorded liabilities for uncertain tax positions
of $240 million as of October 31, 2020. As disclosed by management, the estimate of the Company’s tax liabilities relating to
uncertain tax positions requires management to assess uncertainties and to make judgments about the application of complex
tax law and regulations in a multitude of jurisdictions. The Company is subject to taxes in the U.S., Singapore and various other
foreign jurisdictions and is subject to examinations of its tax returns by tax authorities in various jurisdictions around the world.
The Company has a number of years and matters which remain subject to examination by tax authorities in various jurisdictions
that could result in significant changes to unrecognized tax benefits due to either the expiration of a statute of limitation or a tax
audit settlement which will be partially offset by an anticipated tax liability related to unremitted foreign earnings, where
applicable.
The principal considerations for our determination that performing procedures relating to uncertain tax positions is a critical
audit matter are there was significant judgment by management when determining uncertain tax positions, including a high
degree of estimation uncertainty relative to the numerous and complex tax laws, tax audits, and potential for significant
adjustments as a result of such audits. This in turn led to a high degree of auditor judgment, effort, and subjectivity in
performing procedures to evaluate the timely identification and accurate measurement of uncertain tax positions. Also, the
evaluation of audit evidence available to support the tax liabilities for uncertain tax positions is complex and required
significant auditor judgment as the nature of the evidence is often highly subjective, and the audit effort involved the use of
professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
identification and recognition of the liability for uncertain tax positions, and controls addressing completeness of the uncertain
tax positions, as well as controls over measurement of the liability. These procedures also included, among others, testing the
completeness, accuracy, and relevance of information used in the calculation of the liability for uncertain tax positions,
including intercompany agreements, international, federal, and state filing positions, and the related final tax returns, testing the
calculation of the liability for uncertain tax positions by jurisdiction, including management’s assessment of the technical merits
of tax positions and estimates of the amount of tax benefit expected to be sustained, testing the completeness of management’s
assessment of both the identification of uncertain tax positions and possible outcomes of each uncertain tax position, and
evaluating the status and results of income tax audits with the relevant tax authorities. Professionals with specialized skill and
knowledge were used to assist in the evaluation of the Company's uncertain tax positions related to the application of relevant
tax laws.
/s/ PricewaterhouseCoopers LLP
San Jose, California
December 17, 2020
We have served as the Company’s auditor since 1999.
56
AGILENT TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Years Ended October 31,
2020
2019
2018
(in millions, except per
share data)
Net revenue:
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,993 $
3,877 $
Services and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs and expenses: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,346
5,339
1,796
706
2,502
495
1,496
4,493
846
8
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(78)
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66
842
123
1,286
5,163
1,680
678
2,358
404
1,460
4,222
941
36
(74)
16
919
(152)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
719 $
1,071 $
Net income per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.33 $
2.30 $
3.41 $
3.37 $
Weighted average shares used in computing net income per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
309
312
314
318
3,746
1,168
4,914
1,595
639
2,234
387
1,389
4,010
904
38
(75)
79
946
630
316
0.98
0.97
321
325
The accompanying notes are an integral part of these consolidated financial statements.
57
AGILENT TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive income (loss): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on derivative instruments, net of tax expense (benefit) of $(3), $(2) and $1 . . . . . .
Amounts reclassified into earnings related to derivative instruments, net of tax expense
(benefit) of $0, $(2) and $1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation, net of tax expense (benefit) of $1, $(10) and $7 . . . . . . . . . . . . .
Net defined benefit pension cost and post retirement plan costs: . . . . . . . . . . . . . . . . . . . . . . . .
Change in actuarial net loss, net of tax expense (benefit) of $0, $(25) and $(3) . . . . . . . . . . . .
Change in net prior service benefit, net of tax benefit of $(1), $(2) and $(2) . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Years Ended October 31,
2020
2019
2018
719 $ 1,071 $
316
(9)
(4)
6
2
10
(6)
10
(5)
(6)
(8)
711 $
(93)
(6)
(99)
972 $
3
(58)
(7)
(6)
(62)
254
The accompanying notes are an integral part of these consolidated financial statements.
58
AGILENT TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
Current assets:
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Employee compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement and post-retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies (Note 17)
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; 306 million shares at
October 31, 2020 and 309 million shares at October 31, 2019 issued and outstanding . . .
Additional paid-in-capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings (accumulated deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
October 31,
2020
2019
(in millions, except
par value and
share data)
1,441 $
1,038
720
216
3,415
845
3,602
831
158
776
9,627 $
354 $
367
386
75
285
1,467
2,284
389
614
4,754
—
3
5,311
81
(522)
4,873
9,627 $
1,382
930
679
198
3,189
850
3,593
1,107
102
611
9,452
354
334
336
616
440
2,080
1,791
360
473
4,704
—
3
5,277
(18)
(514)
4,748
9,452
The accompanying notes are an integral part of these consolidated financial statements.
59
AGILENT TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
2020
Years Ended October 31,
2019
(in millions)
2018
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
719 $
1,071 $
316
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess and obsolete inventory related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on step acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on equity securities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities:
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities due to Tax Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury lock agreement payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:
Investments in property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . .
Payment to acquire fair value investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment in exchange for convertible note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment to acquire intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions of businesses and intangible assets, net of cash acquired . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities:
Issuance of common stock under employee stock plans . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of taxes related to net share settlement of equity awards . . . . . . . . . . . . . . . . .
Treasury stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of non-controlling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from credit facility and short-term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of debt and credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate movements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash, cash equivalents and restricted cash . . . . . . . . . . .
Cash, cash equivalents and restricted cash at beginning of year . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . $
308
83
29
28
—
99
(28)
—
8
(107)
(68)
2
29
—
—
(181)
921
(119)
1
(20)
(9)
—
—
(147)
60
(37)
(469)
(222)
499
(4)
420
(345)
(4)
—
798
(1,413)
(717)
2
59
1,388
1,447 $
238
72
(255)
19
—
—
(1)
9
7
(106)
(36)
29
23
—
(6)
(43)
1,021
(155)
—
(23)
(3)
(1)
(1,408)
(1,590)
54
(16)
(723)
(206)
497
(4)
—
—
—
(4)
805
(702)
(299)
2
(866)
2,254
1,388 $
210
70
(16)
26
(20)
21
—
—
9
(65)
(83)
40
31
552
—
(4)
1,087
(177)
1
(11)
(2)
—
(516)
(705)
56
(30)
(422)
(191)
—
—
—
—
—
—
483
(693)
(797)
(17)
(432)
2,686
2,254
Supplemental cash flow information:
Income tax payments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net change in property, plant and equipment included in accounts payable and accrued
liabilities-increase (decrease) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
361 $
71 $
159 $
80 $
102
80
(1) $
(21) $
(5)
The accompanying notes are an integral part of these consolidated financial statements.
60
AGILENT TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF EQUITY
Common Stock
Number
of
Shares
Par
Value
Additional
Paid-in
Capital
Retained
Earnings
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
Non-
Controlling
Interest
Total
Equity
(in millions, except number of shares in thousands)
Balance as of October 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
321,975 $
3 $
5,300 $
(126) $
(346) $
4,831 $
4 $
4,835
Components of comprehensive income, net of tax:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared ($0.596 per common share) . . . . . . . . . . . . . . . . . . . . . . . .
Share-based awards issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
2,176
(6,436)
—
—
—
—
—
—
—
—
—
—
25
(87)
70
316
—
(191)
—
(335)
—
—
(62)
—
—
—
316
(62)
254
(191)
25
(422)
70
—
—
—
—
—
—
316
(62)
254
(191)
25
(422)
70
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Components of comprehensive income, net of tax;
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared ($0.656 per common share) . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of non-controlling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
Share-based awards issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,792
(10,436)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
40
(143)
72
33
1,071
—
(206)
—
—
(580)
—
(7)
—
(99)
—
—
—
—
—
26
1,071
(99)
972
(206)
—
40
(723)
72
—
—
—
—
(4)
—
—
—
26
1,071
(99)
972
(206)
(4)
40
(723)
72
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared ($0.720 per common share) . . . . . . . . . . . . . . . . . .
Share-based awards issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
2,354
(5,227)
—
—
—
—
—
—
—
—
—
—
22
(71)
83
719
—
(222)
—
(398)
—
—
(8)
—
—
—
—
719
(8)
711
(222)
22
(469)
83
—
—
—
—
—
—
719
(8)
711
(222)
22
(469)
83
Balance as of October 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
306,198 $
3 $
5,311 $
81 $
(522) $
4,873 $
— $
4,873
The accompanying notes are an integral part of these consolidated financial statements.
61
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OVERVIEW 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.
Basis of Presentation. The accompanying consolidated financial statements have been prepared by us pursuant to the
rules and regulations of the U.S. Securities and Exchange Commission ("SEC") and are in conformity with U.S. generally
accepted accounting principles ("GAAP"). Our fiscal year end is October 31. Unless otherwise stated, all years and dates refer
to our fiscal year.
Principles of Consolidation. The consolidated financial statements include the accounts of the company and our wholly-
and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.
Use of Estimates. The preparation of financial statements in accordance with U.S. GAAP requires management to make
estimates and assumptions that affect the amounts reported in our 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, valuation of goodwill and purchased intangible assets, inventory valuation, retirement and post-retirement plan
assumptions and accounting for income taxes.
Risks and Uncertainties. We are subject to risks common to companies in the analytical instrument industry, such as
global economic and financial market conditions, fluctuations in foreign currency exchange rates and fluctuations in customer
demand, among others.
Both our domestic and international operations have been and continue to be affected by the ongoing global pandemic of
a novel strain of coronavirus (“COVID-19”) and the resulting volatility and uncertainty it has caused in the U.S. and
international markets. In March 2020, the World Health Organization declared COVID-19 a pandemic and recommended
containment and mitigation measures worldwide. As a result, academic and research laboratories had temporarily closed in our
second and third quarters and hospitals and testing laboratories had halted or reduced certain elective medical procedures,
which had an adverse effect on our customers' business. The COVID-19 pandemic has caused significant volatility and
uncertainty in U.S. and international markets, which could result in a prolonged economic downturn that could disrupt our
business.
Revenue Recognition. We enter into contracts to sell products, services or combinations of products and services.
Products may include hardware or software and services may include one-time service events or services performed over time.
We derive revenue primarily from the sale of analytical and diagnostics products and services. A performance obligation
is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account under Accounting
Standard Codification Topic 606, Revenue from Contracts with Customers (“ASC 606’’). See also Note 4, "Revenue" for
additional information on revenue recognition.
Revenue is recognized when control of the promised products or services is transferred to our customers and the
performance obligation is fulfilled in an amount that reflects the consideration that we expect to be entitled in exchange for
those products or services, the transaction price. For equipment, consumables, and most software licenses, control transfers to
the customer at a point in time. We use present right to payment, legal title, physical possession of the asset, and risks and
rewards of ownership as indicators to determine the transfer of control to the customer. Where acceptance is not a formality, the
customer must have documented their acceptance of the product or service. For products that include installation, if the
installation meets the criteria to be considered a separate performance obligation, product revenue is recognized when control
has passed to the customer, and recognition of installation revenue occurs once completed. Product revenue, including sales to
62
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
resellers and distributors is reduced for provisions for warranties, returns, and other adjustments in the period the related sales
are recorded.
Service revenue includes extended warranty, customer and software support including: Software as a Service, post
contract support, consulting including companion diagnostics, and training and education. Instrument service contracts and
software maintenance contracts are typically annual contracts, which are billed at the beginning of the contract or maintenance
period. Revenue for these contracts is recognized on a straight-line basis to revenue over the service period, as a time-based
measure of progress best reflects our performance in satisfying this obligation. There are no deferred costs associated with the
service contract, as the cost of the service is recorded when the service is performed. Service calls not included in a support
contract are recognized to revenue at the time a service is performed.
We have sales from standalone software. These arrangements typically include software licenses and maintenance
contracts, both of which we have determined are distinct performance obligations. We determine the amount of the transaction
price to allocate to the license and maintenance contract based on the relative standalone selling price of each performance
obligation. Software license revenue is recognized at the point in time when control has been transferred to the customer. The
revenue allocated to the software maintenance contract is recognized on a straight-line basis over the maintenance period,
which is the contractual term of the contract, as a time-based measure of progress best reflects our performance in satisfying
this obligation. Unspecified rights to software upgrades are typically sold as part of the maintenance contract on a when-and-if-
available basis.
Our multiple-element arrangements are generally comprised of a combination of instruments, installation or other start-
up services, and/or software, and/or support or services. Hardware and software elements are typically delivered at the same
time and revenue is recognized when control passes to the customer. Service revenue is deferred and recognized over the
contractual period or as services are rendered and accepted by the customer. Our arrangements generally do not include any
provisions for cancellation, termination, or refunds that would significantly impact recognized revenue.
For contracts with multiple performance obligations, we allocate the consideration to which we expect to be entitled to
each performance obligation based on relative standalone selling prices and recognize the related revenue when or as control of
each individual performance obligation is transferred to customers. We estimate the standalone selling price by calculating the
average historical selling price of our products and services per country for each performance obligation. Standalone selling
prices are determined for each distinct good or service in the contract, and then we allocate the transaction price in proportion to
those standalone selling prices by performance obligations.
A portion of our revenue relates to lease arrangements. Standalone lease arrangements are outside the scope of ASC 606
and are therefore accounted for in accordance with ASC 842, Leases for 2020 and ASC 840, Leases for prior periods. 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.
Deferred Revenue. Contract liabilities (deferred revenue) primarily relate to multiple element arrangements for which
billing has occurred but transfer of control of all elements (performance obligations) 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 in current liabilities in deferred revenue or long-
term in other long-term liabilities in the consolidated balance sheet based on the timing of when we expect to complete our
performance obligation.
Sales Taxes. Sales taxes collected from customers and remitted to governmental authorities are not included in our
revenue.
Shipping and Handling Costs. Our shipping and handling costs charged to customers are included in net revenue, and
the associated expense is recorded in cost of products for all periods presented.
Research and Development. Costs related to research, design and development of our products are charged to research
and development expense as they are incurred.
Advertising. Advertising costs are generally expensed as incurred and amounted to $48 million in 2020, $36 million in
2019 and $41 million in 2018.
63
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Taxes on Income. Income tax expense or benefit is based on income or loss before taxes. Deferred tax assets and
liabilities are recognized principally for the expected tax consequences of temporary differences between the tax bases of assets
and liabilities and their reported amounts. See Note 6, "Income Taxes" for more information.
Net Income Per Share. Basic net income per share is computed by dividing net income - the numerator - by the weighted
average number of common shares outstanding - the denominator - during the period excluding the dilutive effect of stock
options and other employee stock plans. Diluted net income per share gives effect to all potential common shares outstanding
during the period unless the effect is anti-dilutive. 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 are
assumed proceeds to be used to repurchase hypothetical shares. See Note 7, "Net Income Per Share".
Cash, Cash Equivalents and Short-Term Investments. We classify investments as cash equivalents if their original or
remaining maturity is three months or less at the date of purchase. Cash equivalents are stated at cost, which approximates fair
value.
As of October 31, 2020, approximately $1,395 million of our cash and cash equivalents is held outside of the U.S. by our
foreign subsidiaries. Our cash and cash equivalents mainly consist of short-term deposits held at major global financial
institutions, institutional money market funds, and similar short duration instruments with original maturities of 90 days or less.
We continuously monitor the creditworthiness of the financial institutions and institutional money market funds in which we
invest our funds.
We classify investments as short-term investments if their original maturities are greater than three months and their
remaining maturities are one year or less. Currently, we have no short-term investments.
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 consolidated balance sheet follows:
October 31,
2020
2019
2018
(in millions)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,441 $
1,382 $
2,247
Restricted cash included in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
6
7
Total cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . . . $
1,447 $
1,388 $
2,254
Accounts Receivable, net. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Such
accounts receivable have been reduced by an allowance for doubtful accounts, which is our best estimate of the amount of
probable credit losses in our existing accounts receivable. We determine the allowance based on customer specific experience
and the aging of such receivables, among other factors. The allowance for doubtful accounts as of October 31, 2020 and 2019
was not material. We do not have any off-balance-sheet credit exposure related to our customers. Accounts receivable are also
recorded net of estimated product returns which are not material.
Concentration of Credit Risk. Financial instruments that potentially subject Agilent to significant concentration of credit
risk include money market fund investments, time deposits and demand deposit balances. These investments are categorized as
cash and cash equivalents. In addition, Agilent has credit risk from derivative financial instruments used in hedging activities
and accounts receivable. We invest in a variety of financial instruments and limit the amount of credit exposure with any one
financial institution. We have a comprehensive credit policy in place and credit exposure is monitored on an ongoing basis.
Credit risk with respect to our accounts receivable is diversified due to the large number of entities comprising our
customer base and their dispersion across many different industries and geographies. Credit evaluations are performed on
customers requiring credit over a certain amount, and we sell the majority of our products through our direct sales force. Credit
risk is mitigated through collateral such as letter of credit, bank guarantees or payment terms like cash in advance. No single
customer accounted for more than 10 percent of accounts receivable as of October 31, 2020, or 2019.
64
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Inventory. Inventory is valued at standard cost, which approximates actual cost computed on a first-in, first-out basis,
not in excess of market value. We assess the valuation of our inventory on a periodic basis and make adjustments to the value
for estimated excess and obsolete inventory based on estimates about future demand. The excess balance determined by this
analysis becomes the basis for our excess inventory charge. Our excess inventory review process includes analysis of sales
forecasts, managing product rollovers and working with manufacturing to maximize recovery of excess inventory.
Property, Plant and Equipment. Property, plant and equipment are stated at cost less accumulated depreciation.
Additions, improvements and major renewals are capitalized; maintenance, repairs and minor renewals are expensed as
incurred. When assets are retired or disposed of, the assets and related accumulated depreciation and amortization are removed
from our general ledger, and the resulting gain or loss is reflected in the consolidated statement of operations. Buildings and
improvements are depreciated over the lesser of their useful lives or the remaining term of the lease and machinery and
equipment over 3 years to 10 years. We use the straight-line method to depreciate assets.
Capitalized Software. We capitalize certain internal and external costs incurred to acquire or create internal use
software. Capitalized software is included in property, plant and equipment and is depreciated over 3 years to 5 years once
development is complete.
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") assets and lease liabilities on the 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 company's 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 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 Accounting Standard Codification ("ASC") Topic 606, Revenue Contracts with Customers, and are
therefore accounted for in accordance with ASC Topic 842, Leases. Each of these contracts is evaluated as a lease arrangement,
either as an operating lease or a sales-type finance lease using the current lease classification guidance. In a lease arrangement
that is a multiple-element arrangement that contains equipment leases and the supply of consumables, the revenue associated
with the instrument rental is treated under the lease accounting standard ASC 842, whereas the revenue associated with the
consumables, the non-lease component, is recognized in accordance with the ASC 606 revenue standard.
See also Note 2, "New Accounting Pronouncements" and Note 10, "Leases" for additional information about the
company’s leases.
Acquisitions. Agilent accounts for the acquisition of a business using the acquisition method of accounting, and we
allocate the fair value of the purchase price to the tangible assets acquired, liabilities assumed, and intangible assets acquired,
including in-process research and development (“IPR&D”), based on their estimated fair values. The excess value of the cost of
an acquired business over the fair value of the assets acquired and liabilities assumed is recognized as goodwill. The fair value
of IPR&D is initially capitalized as an intangible asset with an indefinite life. When an IPR&D project is completed, the
IPR&D is reclassified as an amortizable purchased intangible asset and amortized to costs of revenues over the asset’s
estimated useful life.
Our determination of the fair value of the intangible assets acquired involves the use of significant estimates and
assumptions. Specifically, our determination of the fair value of the developed product technology and IPR&D acquired
65
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
involve significant estimates and assumptions related to revenue growth rates and discount rates. Our determination of the fair
value of customer relationships acquired involved significant estimates and assumptions related to revenue growth rates,
discount rates, and customer attrition rates. Our determination of the fair value of the tradename acquired involved the use of
significant estimates and assumptions related to revenue growth rates, royalty rates and discount rates. The company believes
that the fair value assigned to the assets acquired and liabilities assumed are based on reasonable assumptions and estimates that
marketplace participants would use. Actual results could differ materially from these estimates.
Goodwill and Purchased Intangible Assets. Under the authoritative guidance we have the option to perform a qualitative
assessment to determine whether further impairment testing is necessary. The accounting standard gives an entity the option to
first assess qualitative factors to determine whether performing the two-step test is necessary. If an entity believes, as a result of
its qualitative assessment, that it is more-likely-than-not (i.e., greater than 50% chance) that the fair value of a reporting unit is
less than its carrying amount, the quantitative impairment test will be required. Otherwise, no further testing will be required.
The guidance includes examples of events and circumstances that might indicate that a reporting unit's fair value is less
than its carrying amount. These include macro-economic conditions such as deterioration in the entity's operating environment
or industry or market considerations; entity-specific events such as increasing costs, declining financial performance, or loss of
key personnel; or other events such as an expectation that a reporting unit will be sold or a sustained decrease in the stock price
on either an absolute basis or relative to peers.
If it is determined, as a result of the qualitative assessment, that it is more-likely-than-not that the fair value of a reporting
unit is less than its carrying amount, the provisions of authoritative guidance require that we perform a two-step impairment test
on goodwill. In the first step, we compare the fair value of each reporting unit to its carrying value. The second step (if
necessary) measures the amount of impairment by applying fair-value-based tests to the individual assets and liabilities within
each reporting unit. As defined in the authoritative guidance, a reporting unit is an operating segment, or one level below an
operating segment. We aggregate components of an operating segment that have similar economic characteristics into our
reporting units.
In fiscal year 2020, we assessed goodwill impairment for our three reporting units which consisted of three segments:
life sciences and applied markets, diagnostics and genomics and Agilent CrossLab. We performed a qualitative test for goodwill
impairment of the three reporting units, as of September 30, 2020, our annual impairment test date. Based on the results of our
qualitative testing, we believe that it is more-likely-than-not that the fair value of each reporting unit is greater than its
respective carrying value. Each quarter we review the events and circumstances to determine if goodwill impairment is
indicated. There was no impairment of goodwill during the years ended October 31, 2020, 2019 and 2018.
Purchased intangible assets consist primarily of acquired developed technologies, proprietary know-how, trademarks,
and customer relationships and are amortized using the best estimate of the asset's useful life that reflect the pattern in which the
economic benefits are consumed or used up or a straight-line method ranging from 6 months to 15 years. IPR&D is initially
capitalized at fair value as an intangible asset with an indefinite life and assessed for impairment thereafter. When the IPR&D
project is complete, it is reclassified as an amortizable purchased intangible asset and is amortized over its estimated useful life.
If an IPR&D project is abandoned, Agilent will record a charge for the value of the related intangible asset to Agilent's
consolidated statement of operations in the period it is abandoned.
Agilent's indefinite-lived intangible assets are IPR&D intangible assets. The accounting guidance allows a qualitative
approach for testing indefinite-lived intangible assets for impairment, similar to the issued impairment testing guidance for
goodwill and allows the option to first assess qualitative factors (events and circumstances) that could have affected the
significant inputs used in determining the fair value of the indefinite-lived intangible asset to determine whether it is more-
likely-than-not (i.e., greater than 50% chance) that the indefinite-lived intangible asset is impaired. An organization may
choose to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to
calculating its fair value. We performed a qualitative test for impairment of indefinite-lived intangible assets as of September
30, 2020. Based on the results of our qualitative testing, we believe that it is more-likely-than-not that the fair values of these
indefinite-lived intangible assets are greater than their respective carrying values. Each quarter we review the events and
circumstances to determine if impairment of indefinite-lived intangible asset is indicated. During the year ended October 31,
2020, we recorded an impairment of in-process research and development of $90 million related to the shutdown of our
sequencer development program in our diagnostics and genomics segment. During the year ended October 31, 2019 and 2018
there were no impairments of indefinite-lived intangible assets.
66
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Impairment of Long-Lived Assets. We continually monitor events and changes in circumstances that could indicate
carrying amounts of long-lived assets, including intangible assets, may not be recoverable. When such events or changes in
circumstances occur, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets
will be recovered through undiscounted expected future cash flows. If the total of the undiscounted future cash flows is less
than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the
fair value of the assets. During the year ended October 31, 2020 we recorded an impairment charge of long-lived assets
including indefinite-lived in-process research and development of $98 million related to the shutdown of our sequencer
development program in our diagnostics and genomics segment. During fiscal year 2019, there were no impairments of other
assets or intangible assets. During fiscal year 2018, we recorded an impairment charge of $21 million related to purchased
intangible assets within the diagnostics and genomics segment that were deemed unrecoverable.
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 October 31, 2020 and 2019, 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 in which we have invested nor are we the primary beneficiary. We account for these investments under either
the equity method or as equity investments without readily determinable fair value, 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.
During the year ended October 31, 2018, we exercised our option and acquired all of the remaining shares of Lasergen,
Inc. ("Lasergen") that we did not already own for an additional cash consideration of approximately $107 million. The fair
value remeasurement of our previous investment immediately before the acquisition resulted in a net gain of $20 million and
was recorded in other income. Lasergen was previously considered a VIE.
As of October 31, 2020 and October 31, 2019, the total carrying value of investments and loans in privately held
companies considered as VIEs was $67 million and $29 million respectively. The maximum exposure is equal to the carrying
value because we do not have future funding commitments. The investments are included on the long-term investments line and
the loans on the other current assets and other assets lines (depending upon tenure of loan) on the consolidated balance sheet.
Investments. Equity investments without readily determinable fair value consist of non-marketable equity securities
(typically investments in privately-held companies). These investments are accounted for using the measurement alternative at
cost, and we adjust for impairments and observable price changes (orderly transactions for the identical or a similar security
from the same issuer) included in net income as and when it occurs. Equity investments with readily determinable fair value
consist of shares we own in a special fund and are reported at fair value, with gains or losses resulting from changes in fair
value included in net income. Prior to fiscal year 2019, both equity investments without determinable fair value and with
determinable fair value were accounted for using cost method of accounting, measured at historical cost less other-than-
temporary investment. Trading securities, which are comprised of mutual funds, bonds and other similar instruments, other
investments and deferred compensation liabilities are reported at fair value, with gains or losses resulting from changes in fair
value recognized currently in net income. Equity method investments are reported at the amount of the company’s initial
investment and adjusted each period for the company’s share of the investee’s income or loss and dividend paid. There are no
equity method investments as of October 31, 2020 and 2019. The company assesses investments for impairment whenever
events or changes in circumstances indicate that the carrying value of an investment may not be recoverable.
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 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
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 $162 million as of October 31, 2020 and approximately $62 million as of October 31, 2019. The change in the
fair value over carrying value in the year ended October 31, 2020 is primarily due to 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
67
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 13, "Fair Value Measurements" for additional information on the fair value of financial instruments.
Warranty. Our standard warranty terms typically extend for one year from the date of delivery. We accrue for standard
warranty costs based on historical trends in warranty charges. The accrual is reviewed regularly and periodically adjusted to
reflect changes in warranty cost over the period. Estimated warranty charges are recorded within cost of products at the time
products are sold. See Note 16, "Guarantees".
Employee Compensation and Benefits. Amounts owed to employees, such as accrued salary, bonuses and vacation
benefits are accounted for within employee compensation and benefits. The total amount of accrued vacation benefit was $111
million and $115 million as of October 31, 2020, and 2019, respectively.
Retirement and Post-Retirement Plans. Substantially all of our employees are covered under various defined benefit
and/or defined contribution retirement plans. Additionally, we sponsor post-retirement health care benefits for our eligible U.S.
employees. Assumptions used to determine the benefit obligations and the expense for these plans are derived annually. See
Note 15, “Retirement plans and post-retirement pension plans” for additional information.
Retirement of Treasury Shares. Upon the formal retirement of treasury shares, we deduct the par value of the retired
treasury shares from common stock and allocate the excess of cost over par as a deduction to additional paid-in capital, based
on the pro-rata portion of additional paid-in-capital, and the remaining excess as a deduction to retained earnings. All retired
treasury shares revert to the status of authorized but unissued shares.
Share-Based Compensation. For the years ended 2020, 2019 and 2018, we accounted for share-based 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 under Agilent Technologies, Inc. Long-Term
Performance Program ("LTPP") using the estimated grant date fair value method of accounting. Under the fair value method,
we recorded compensation expense for all share-based awards of $84 million in 2020, $72 million in 2019 and $71 million in
2018. See Note 5, "Share-based Compensation" for additional information.
Derivative Instruments. Agilent is exposed to global foreign currency exchange rate and interest rate risks in the normal
course of business. We enter into foreign exchange hedging contracts, primarily forward contracts and purchased options,
interest rate swaps and interest rate locks to manage financial exposures resulting from changes in foreign currency exchange
rates and interest rates. In the vast majority of cases, these contracts are designated at inception as hedges of the related foreign
currency or interest exposures. Foreign currency exposures include committed and anticipated revenue and expense transactions
and assets and liabilities that are denominated in currencies other than the functional currency of the subsidiary. Interest rate
exposures are associated with the company's fixed-rate debt. For option contracts, we exclude time value from the measurement
of effectiveness. To qualify for hedge accounting, contracts must reduce the foreign currency exchange rate and interest rate
risk otherwise inherent in the amount and duration of the hedged exposures and comply with established risk management
policies. Foreign exchange hedging contracts generally mature within twelve months, interest rate swaps mature at the same
time as the maturity of the debt and interest rate locks mature at the same time as the issuance of debt. In order to manage
foreign currency exposures in a few limited jurisdictions, we may enter into foreign exchange contracts that do not qualify for
hedge accounting. In such circumstances, the local foreign currency exposure is offset by contracts owned by the parent
company. We do not use derivative financial instruments for trading or speculative purposes.
All derivatives are recognized on the balance sheet at their fair values. For derivative instruments that are designated and
qualify as a cash flow hedge, changes in the value of the effective portion of the derivative instrument are recognized in
comprehensive income (loss), a component of stockholders' equity. For derivative instruments that are designated and qualify as
a net investment hedge, changes in the 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 and recognized in income when
either the forecasted transaction occurs or it becomes probable the forecasted transaction will not occur. Derivatives not
designated as hedging instruments are recorded on the balance sheet at their fair value and changes in the fair values are
recorded in the income statement in the current period. Derivative instruments are subject to master netting arrangements and
are disclosed gross in the balance sheet. Changes in the fair value of the ineffective portion of derivative instruments are
recognized in earnings in the current period. The impact of the ineffectiveness measurement in 2020, 2019 and 2018 was not
material. Cash flows from derivative instruments are classified in the statement of cash flows in the same category as the cash
flows from the hedged or economically hedged item, primarily in operating activities.
68
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Foreign Currency Translation. We translate and remeasure balance sheet and income statement items into U.S. dollars.
For those subsidiaries that operate in a local currency functional environment, all assets and liabilities are translated into U.S.
dollars using current exchange rates at the balance sheet date; revenue and expenses are translated using monthly exchange
rates which approximate to average exchange rates in effect during each period. Resulting translation adjustments are reported
as a separate component of accumulated other comprehensive income (loss) in stockholders' equity.
For those subsidiaries that operate in a U.S. dollar functional environment, foreign currency assets and liabilities are
remeasured into U.S. dollars at current exchange rates except for non-monetary assets and capital accounts which are
remeasured at historical exchange rates. Revenue and expenses are generally remeasured at monthly exchange rates which
approximate average exchange rates in effect during each period. Gains or losses from foreign currency remeasurement are
included in consolidated net income. Net gains or losses resulting from foreign currency transactions, including hedging gains
and losses, are reported in other income (expense), net and were $4 million loss for 2020, $7 million loss for 2019 and $3
million loss for 2018.
2. NEW ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update 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 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 opening consolidated balance sheet as of November 1, 2019, but did not
have a significant impact on the consolidated statement of operations or consolidated statement of cash flows for the year ended
October 31, 2020 when compared to prior periods. 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 the 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.
Adoption of the new guidance impacted the consolidated balance sheet as follows:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . $
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . $
October 31, 2019
Impact of Adopting
November 1, 2019
As Reported
Lease Guidance
As Adopted
(in millions)
611 $
440 $
473 $
192 $
48 $
144 $
803
488
617
On November 1, 2018, we adopted ASC Topic 606, Revenue from Contracts with Customers, using the modified
retrospective approach only to contracts not completed as of this date. Results for reporting periods after November 1, 2018 are
presented under ASC 606, while prior period amounts were not adjusted and continue to be reported in accordance with ASC
Topic 605, Revenue Recognition.
New Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued new guidance to require a financial asset measured at amortized cost basis, such as
accounts receivable, to be presented at the net amount expected to be collected based on relevant information about past events,
including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the
reported amount. During 2018 and 2019, the FASB issued additional guidance and clarification. The new guidance is effective
for us beginning November 1, 2020. We do not expect this guidance to have a material impact on our consolidated financial
statements and disclosures.
69
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In January 2017, the FASB issued an amendment to modify the concept of impairment from the condition that exists
when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a
reporting unit exceeds its fair value. The amendment also simplifies the subsequent measurement of goodwill by eliminating
Step 2 from the goodwill impairment test. The amendments are effective for us beginning November 1, 2020. Early adoption is
permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect
this guidance to have a material impact on our consolidated financial statements and disclosures.
In August 2018, the FASB issued updates to improve the disclosure requirements on fair value measurements in Topic
820, Fair Value Measurement which eliminates certain disclosure requirements and modifies others. These amendments are
effective for us beginning November 1, 2020, and for interim periods within that year with early adoption permitted. We
currently do not expect this guidance to have a material impact on our consolidated financial statements and disclosures.
In August 2018, the FASB issued updates to improve the effectiveness of disclosures for defined benefit plans under
Accounting Standard Codification Topic 715-20. The amendments in this guidance remove disclosures that no longer are
considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as
relevant. These amendments are effective for us beginning November 1, 2021, with early adoption permitted. We currently do
not expect this guidance to have a material impact on our consolidated financial statements and disclosures.
In December 2019, the FASB issued new guidance to simplify the accounting for income taxes. This guidance eliminates
certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating
income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The guidance also
improves consistent application by clarifying and amending existing guidance related to aspects of the accounting for franchise
taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step up in the tax basis
of goodwill. The new guidance is effective for us beginning November 1, 2021, and for interim periods within that year. Early
adoption is permitted. We do not expect that the adoption of this standard will have a material impact on our consolidated
financial statements and disclosures.
In January 2020, accounting guidance was issued that clarifies the accounting guidance for equity method investments,
joint ventures, and derivatives and hedging. The guidance clarifies the interaction between different sections of the accounting
guidance that could be applicable and helps clarify which guidance should be applied in certain situations which should
increase relevance and comparability of financial statement information. This guidance is effective for us beginning November
1, 2021, and for interim periods within that year. Early adoption is permitted. We do not expect that the adoption of this
standard will have a material impact on our consolidated financial statements and disclosures.
In March 2020, the FASB issued an update for facilitation of the effects of reference rate reform on financial reporting.
This update provides optional guidance for a limited period of time to ease the potential burden in accounting for (or
recognizing the effects of) reference rate reform on financial reporting. The amendments in the guidance provide optional
expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other
transactions affected by reference rate reform if certain criteria are met. The amendments apply to contracts, hedging
relationships, and other transactions that reference London Inter-bank Offered Rate ("LIBOR") or another reference rate
expected to be discontinued because of reference rate reform. When elected, the optional expedients for contract modifications
are applied consistently for all eligible contracts or eligible transactions within the relevant Topic or Industry Subtopic in the
FASB's Accounting Standards Codification. The guidance was effective upon issuance and may generally be applied through
December 31, 2022 to any new or amended contracts, hedging relationships, and other transactions that reference LIBOR. We
are currently evaluating our contracts and we do not expect that the adoption of this guidance will have a material impact on our
consolidated financial statements and disclosures.
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 BioTek and 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 became a wholly-owned subsidiary of Agilent. Accordingly, the results of
70
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
BioTek are included in Agilent's 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.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
10
28
21
2
8
641
483
$ 1,193
(4)
(5)
(7)
(2)
(4)
$ 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.
71
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Valuations of intangible assets acquired
The components of intangible assets acquired in connection with the BioTek acquisition were as follows (in millions):
Developed product technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tradenames and trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total intangible assets subject to amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-process research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated
Useful Life
5-13 years
3-8 years
2 months
10 years
Fair Value
$ 387
202
5
43
$ 637
4
$ 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 was
subsequently released to customers in 2020. After release, the asset was moved to developed technology.
Acquisition and integration costs directly related to the BioTek acquisition totaled $12 million and $4 million for the
year ended October 31, 2020 and 2019, respectively, and were recorded in operating expenses and cost of sales. Such costs are
expensed in accordance with the authoritative accounting guidance.
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 consolidated statements of operations as of the beginning of fiscal 2018 (in millions, except per share amounts):
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per share — basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per share — diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019
2018
5,308 $
1,012 $
3.22 $
3.18 $
5,112
210
0.65
0.65
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 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 year ended October 31, 2019 combines the historical results of
Agilent for the year ended October 31, 2019 (which includes BioTek and ACEA after the acquisition date) and for BioTek for
the ten months ended August 23, 2019.
The unaudited proforma financial information for the year ended October 31, 2018 combines the historical results of
72
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Agilent and ACEA for the year ended October 31, 2018 and BioTek for the year ended December 31, 2018 (due to differences
in reporting periods).
4. REVENUE
The following table presents the company’s total revenue and segment revenue disaggregated by geographical region:
Life Sciences and
Applied Markets
Agilent CrossLab
Diagnostics and
Genomics
Total
Year Ended October 31, 2020:
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Year Ended October 31, 2019:
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
784 $
540
1,068
2,392 $
692 $
551
1,059
2,302 $
(in millions)
667 $
532
701
1,900 $
664 $
522
654
1,840 $
517 $
371
159
1,047 $
505 $
368
148
1,021 $
The following table presents the company’s total revenue disaggregated by end markets and by revenue type:
Years Ended October 31,
2020
2019
(in millions)
Revenue by End Markets
Pharmaceutical and Biopharmaceutical . . . . . . . . . . . . . . . . . . .
Chemical and Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diagnostics and Clinical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Food . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Academia and Government . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Environmental and Forensics . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue by Type
Instrumentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-instrumentation and other . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
1,754
1,154
787
517
526
601
5,339
2,249
3,090
5,339
1,968
1,443
1,928
5,339
1,861
1,441
1,861
5,163
1,604
1,199
785
486
474
615
5,163
2,150
3,013
5,163
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.
73
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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
consolidated balance sheet. The balances of contract assets as of October 31, 2020 and 2019, were $153 million and $110
million, respectively. The increase in unbilled receivables during the year ended October 31, 2020 is a result of recognition of
revenue upon the transfer of the control to the customer.
Contract Liabilities
The following table provides information about contract liabilities (deferred revenue) and the significant changes in the
balances during the years ended October 31, 2019 and 2020:
Ending balance as of October 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Impact of adoption of new revenue recognition guidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net revenue deferred in the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue recognized that was included in the contract liability balance at the beginning of the
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in deferrals from customer cash advances, net of revenue recognized . . . . . . . . . . . . . . . . . .
Contract liabilities acquired in business combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation and other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance as of October 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Net revenue deferred in the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue recognized that was included in the contract liability balance at the beginning of the
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in deferrals from customer cash advances, net of revenue recognized . . . . . . . . . . . . . . . . . .
Currency translation and other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance as of October 31,2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Contract
Liabilities
(in millions)
367
(11)
303
(287)
5
9
—
386
347
(300)
9
4
446
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 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 we expect 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 changes in total capitalized costs to obtain a contract were immaterial during the years ended October 31, 2020
and 2019 and are included in other current and long-term assets on the 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.
74
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 October 31, 2020, was $217 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 accounting guidance which requires the
measurement and recognition of compensation expense for all share-based payment awards made to our employees and
directors including restricted stock units, stock options, employee stock purchases made under our employee stock purchase
plan and performance share awards granted to selected members of our senior management under the long-term performance
plan ("LTPP") based on estimated fair values.
Description of Share-Based Plans
Employee Stock Purchase Plan. Effective May 1, 2020, we adopted the 2020 Employee Stock Purchase Plan ("ESPP")
which replaced our previous Employee Stock Purchase Plan. The ESPP allows eligible employees to contribute up to 10
percent of their base compensation to purchase shares of our common stock at 85 percent of the closing market price at
purchase date. There are 31 million shares authorized for issuance in connection with the ESPP.
Under our ESPP, employees purchased 628,644 shares for $41 million in 2020, 603,488 shares for $37 million in 2019
and 558,116 shares for $32 million in 2018. As of October 31, 2020, the number of shares of common stock authorized and
available for issuance under our ESPP was 25,770,573. This excludes the number of shares of common stock to be issued to
participants in consideration of the aggregate participant contributions totaling $22 million as of October 31, 2020.
Incentive Compensation Plans. On November 15, 2017 and March 21, 2018, the Board of Directors and the
stockholders, respectively, approved the Agilent Technologies, Inc. 2018 Stock Plan (the "2018 Plan") which amends, including
renaming and extending the term of, the Agilent Technologies, Inc. 2009 Stock Plan (the "2009 Plan"). The 2009 plan replaced
the Agilent Technologies, Inc. Amended and Restated 1999 Stock Plan and 1999 Non-Employee Director Stock Plan. The 2018
Plan provides for the grant of awards in the form of stock options, stock appreciation rights ("SARs"), restricted stock,
restricted stock units ("RSUs"), performance shares and performance units with performance-based conditions on vesting or
exercisability, and cash awards. The 2018 Plan has a term of ten years. As of October 31, 2020, 25,596,430 shares were
available for future awards under the 2018 Plan.
Stock options under the 2018 Plan may be either "incentive stock options", as defined in Section 422 of the Internal
Revenue Code, or non-statutory. Options were granted prior to November 1, 2015 and generally vest at a rate of 25 percent per
year over a period of four years from the date of grant with a maximum contractual term of ten years. The exercise price for
stock options is generally not less than 100 percent of the fair market value of our common stock on the date the stock award is
granted. Agilent issues new shares of common stock when employee stock options are exercised.
Effective November 1, 2003, the Compensation Committee of the Board of Directors approved the LTPP, which is a
performance stock award program administered under the 2018 Plan, for the company's executive officers and other key
employees. Participants in this program 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 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 beginning in
2017 and thereafter were based on Earnings Per Share ("EPS"). The performance targets for LTPP-EPS grants for year 2 and
year 3 of the performance period 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.
75
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Based on the performance metrics, the final LTPP award may vary from zero to 200 percent of the target award. The
maximum contractual term for awards under the LTPP program is three years. 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.
We also issue restricted stock units under our share-based plans. The estimated fair value of the restricted stock unit
awards granted under the Stock Plans is determined based on the market price of Agilent's common stock on the date of grant
adjusted for expected dividend yield. 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. All restricted stock units granted to our executives after November 1, 2015,
are subject to a one-year post-vest holding period.
Impact of Share-based Compensation Awards
We have recognized compensation expense based on the estimated grant date fair value method under the authoritative
guidance. For all share-based awards we have recognized compensation expense using a straight-line amortization method. As
the guidance requires that share-based compensation expense be based on awards that are ultimately expected to vest, estimated
share-based compensation has been reduced for estimated forfeitures.
The impact on our results for share-based compensation was as follows:
Years Ended October 31,
2020
2019
2018
(in millions)
Cost of products and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
21 $
9
54
84 $
18 $
7
47
72 $
16
7
48
71
At October 31, 2020 and 2019, no share-based compensation was capitalized within inventory.
Valuation Assumptions
For all periods presented, shares granted under the LTPP (TSR) were valued using a Monte Carlo simulation. The ESPP
allows eligible employees to purchase shares of our common stock at 85 percent of the fair market value at the purchase date.
The estimated fair value of restricted stock unit awards and LTPP (EPS) was determined based on the market price of
Agilent's common stock on the date of grant adjusted for expected dividend yield and as appropriate, a discount related to the
one-year post vesting. The compensation cost for LTPP (EPS) awards reflects the cost of awards that are probable to vest at the
end of the performance period.
The following assumptions were used to estimate the fair value of awards granted.
LTPP:
Volatility of Agilent shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility of selected peer-company shares . . . . . . . . . . . . . . . . .
Pair-wise correlation with selected peers . . . . . . . . . . . . . . . . . . .
23%
15%-44%
29%
22%
15%-66%
30%
21%
14%-66%
32%
Post-vest restriction discount for all executive awards . . . . . . . . .
5.3%
5.0%
4.8%
Years Ended October 31,
2020
2019
2018
Shares granted under the LTPP (TSR) were valued using a Monte Carlo simulation 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 LTPP (TSR) grants in 2017 and thereafter, we used our own historical stock price volatility.
76
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
All LTPP awards granted have a one-year post-vest holding restriction. The estimated discount associated with post-vest
holding restrictions is calculated using the Finnerty 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.
Share-Based Payment Award Activity
Employee Stock Options
The following table summarizes employee stock option award activity of our employees and directors for 2020.
Options
Outstanding
(in thousands)
Weighted
Average
Exercise Price
Outstanding at October 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at October 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,445 $
(575) $
870 $
36
34
37
The options outstanding and exercisable for equity share-based payment awards at October 31, 2020 were as follows:
Range of
Exercise Prices
Number
Outstanding
Options Outstanding
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Number
Exercisable
Options Exercisable
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
(in thousands)
(in years)
(in thousands)
(in thousands)
(in years)
(in thousands)
$25.01 - $30.00 . . . .
$30.01 - $40.00 . . . .
$40.01- over . . . . . . .
228
121
521
870
1.7
3.1
4.0
3.3
$
$
$
$
27 $
39
41
37 $
17,192
7,586
31,883
56,661
228
121
521
870
1.7
3.1
4.0
3.3
$
$
$
$
27 $
39
41
37 $
17,192
7,586
31,883
56,661
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on the company's
closing stock price of $102.09 at October 31, 2020, which would have been received by award holders had all award holders
exercised their awards that were in-the-money as of that date. The total number of in-the-money awards exercisable at October
31, 2020 was approximately 0.9 million.
The following table summarizes the aggregate intrinsic value of options exercised in 2020, 2019 and 2018:
Weighted
Average
Exercise
Price
Aggregate
Intrinsic Value
(in thousands)
Options exercised in fiscal 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Options exercised in fiscal 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Options exercised in fiscal 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
28,417 $
24,409 $
30,481 $
32
33
34
As of October 31, 2020, the unrecognized share-based compensation cost for outstanding stock option awards, net of
expected forfeitures, was zero. The amount of cash received from the exercise of share-based awards granted was $60 million in
2020, $54 million in 2019 and $56 million in 2018.
77
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Non-Vested Awards
The following table summarizes non-vested award activity in 2020 primarily for our LTPP and restricted stock unit
awards.
Weighted
Average
Grant Price
Shares
(in thousands)
Non-vested at October 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in LTPP shares in the year due to exceeding performance targets . . . . . . . . . . . . . . . .
Non-vested at October 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,173 $
1,091 $
(1,629) $
(115) $
298 $
2,818 $
60
79
52
68
47
70
As of October 31, 2020, the unrecognized share-based compensation cost for non-vested restricted stock awards was
approximately $95 million which is expected to be amortized over a weighted average period of 2.1 years. The total fair value
of restricted stock awards vested was $85 million for 2020, $69 million for 2019 and $58 million for 2018.
6. INCOME TAXES
The domestic and foreign components of income before taxes are:
U.S. operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-U.S. operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
54 $
788
842 $
189 $
730
919 $
169
777
946
The provision for income taxes is comprised of:
Years Ended October 31,
2020
2019
(in millions)
2018
U.S. federal taxes:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. taxes:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State taxes, net of federal benefit:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total provision (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Years Ended October 31,
2020
2019
(in millions)
2018
5 $
4
84
24
5
1
123 $
(191) $
—
290
(267)
4
12
(152) $
520
51
95
(22)
1
(15)
630
78
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The differences between the U.S. federal statutory income tax rate and our effective tax rate are:
Profit before tax times statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-U.S. income taxed at different rates . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in unrecognized tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of the Tax Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Extension of the tax incentive in Singapore . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from stock-based compensation . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years Ended October 31,
2020
2019
2018
177
(36)
(9)
—
—
(18)
9
123
14.6 %
$
$
(in millions)
193
(8)
(13)
—
(299)
(10)
(15)
(152)
(16.5) %
$
$
221
(93)
(17)
552
—
(18)
(15)
630
66.6 %
For 2020, the company's income tax expense was $123 million with an effective tax rate of 14.6 percent. For the year
ended October 31, 2020, our effective tax rate and the resulting provision for income taxes were impacted by foreign income
taxed at lower rates.
For 2019, the company's income tax benefit was $152 million with an effective tax rate of (16.5) percent. For the year
ended October 31, 2019, our effective tax rate and the resulting provision for income taxes were significantly impacted by the
discrete benefit of $299 million related to the extension of the company’s tax incentive in Singapore.
As part of the business integration of some of our prior acquisitions, we undertook corporate restructurings in the fourth
quarter of fiscal year 2019 that involved on-shoring certain intangible properties held by our foreign subsidiaries to the United
States. These restructurings resulted in a cash tax liability of $231 million. These taxes generate tax attributes that will offset
our transition tax liability which is included in other long-term liabilities in our consolidated balance sheet.
For 2018, the company's income tax expense was $630 million with an effective tax rate of 66.6 percent. For the year
ended October 31, 2018, our effective tax rate and the resulting provision for income taxes were significantly impacted by the
discrete charge of $552 million related to the enactment of the U.S. Tax Cuts and Jobs Act (the “Tax Act”) consisting of (1) an
expense of $499 million of U.S. transition tax and correlative items on deemed repatriated earnings of non-U.S. subsidiaries and
(2) an expense of $53 million associated with the impact on deferred taxes resulting from the decreased U.S. corporate tax rate.
The company has negotiated tax holidays in several different jurisdictions, most significantly in Singapore. The tax
holidays provide lower rates of taxation on certain classes of income and require various thresholds of investments and
employment or specific types of income in those jurisdictions. In December 2018, the tax holiday in Singapore was
renegotiated and extended through 2027. As a result of the incentives, the impact of the tax holidays decreased income taxes by
$71 million, $368 million, and $87 million in 2020, 2019, and 2018, respectively. The benefit of the tax holidays on net income
per share (diluted) was approximately $0.23, $1.16, and $0.27 in 2020, 2019 and 2018, respectively. Of the $1.16 benefit of the
tax incentives on net income per share (diluted) in 2019, $0.94 of the benefit relates to one-time items from the extension of the
company’s tax incentive in Singapore.
79
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The significant components of deferred tax assets and deferred tax liabilities included on the consolidated balance sheet are:
Deferred Tax Assets
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Pension benefits and retiree medical benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee benefits, other than retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss, capital loss, and credit carryforwards . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Tax valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets, net of valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred Tax Liabilities
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Right-of-use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Years Ended October 31,
2020
2019
(in millions)
153 $
65
31
182
27
22
35
41
556 $
(132)
424 $
(19) $
(35)
(14)
(68) $
356 $
131
71
34
195
32
38
—
35
536
(134)
402
(16)
—
(7)
(23)
379
Valuation allowances require an assessment of both positive and negative evidence when determining whether it is more
likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction by jurisdiction basis. As of
October 31, 2020, we continued to maintain a valuation allowance of $132 million until sufficient positive evidence exists to
support reversal. The valuation allowance is primarily related to deferred tax assets for the states of California and Colorado,
along with the net operating losses in the Netherlands and capital losses in the U.S. and Australia.
At October 31, 2020, we had federal, state and foreign net operating loss carryforwards of approximately $11 million,
$530 million and $411 million, respectively. The federal and state net operating loss carryforwards are subject to various
limitations under Section 382 of the Internal Revenue Code and applicable state tax laws. If not utilized, the federal and state
net operating loss carryforwards will begin to expire in 2021. If not utilized, $123 million of the foreign net operating loss
carryforwards will begin to expire in 2021. The remaining $288 million of the foreign net operating losses carry forward
indefinitely. At October 31, 2020, we had federal and foreign capital loss carryforwards of $48 million and $118 million,
respectively. If not utilized, the federal capital loss carryforwards will expire in 2022. The foreign capital losses carry forward
indefinitely. At October 31, 2020, we had state tax credit carryforwards of approximately $83 million. The state tax credits
carry forward indefinitely.
The breakdown between long-term deferred tax assets and deferred tax liabilities was as follows:
Long-term deferred tax assets (included within other assets) . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-term deferred tax liabilities (included within other long-term liabilities) . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
October 31,
2020
2019
(in millions)
380 $
(24)
356 $
410
(31)
379
80
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The breakdown between current and long-term income tax assets and liabilities, excluding deferred tax assets and
liabilities, was as follows:
Current income tax assets (included within other current assets) . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-term income tax assets (included within other assets) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current income tax liabilities (included within other accrued liabilities) . . . . . . . . . . . . . . . . . . . . .
Long-term income tax liabilities (included within other long-term liabilities) . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Uncertain Tax Positions
October 31,
2020
2019
$
(in millions)
89
6
(63)
(323)
(291) $
68
4
(292)
(328)
(548)
The aggregate changes in the balances of our gross unrecognized tax benefits including all federal, state and foreign tax
jurisdictions are as follows:
Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions for tax positions related to the current year . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions from prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions from prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statute of limitations expirations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
206 $
6
—
—
(17)
195 $
214 $
7
12
(2)
(25)
206 $
224
27
2
(13)
(26)
214
2020
2019
2018
(in millions)
As of October 31, 2020, we had $240 million of unrecognized tax benefits, including interest and penalties of which
$215 million, if recognized, would affect our effective tax rate. However, approximately $25 million of the unrecognized tax
benefits were related to state income tax positions that, if recognized, would be in the form of a deferred tax asset that would
likely not affect our effective tax rate due to a valuation allowance.
We recognized tax expense of $8 million, $9 million and $11 million for interest and penalties related to unrecognized
tax benefits in 2020, 2019 and 2018, respectively. Interest and penalties accrued as of October 31, 2020 and 2019 were $45
million and $36 million, respectively.
In the U.S., tax years remain open back to the year 2017 for federal income tax purposes and for significant states. In
other major jurisdictions where the company conducts business, the tax years generally remain open back to the year 2009.
With these jurisdictions and the U.S., 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 limitation or a tax audit settlement which will
be partially offset by an anticipated tax liability related to unremitted foreign earnings, where applicable. 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.
81
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. NET INCOME PER SHARE
The following is a reconciliation of the numerators and denominators of the basic and diluted net income per share
computations for the periods presented below.
Numerator:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Denominators:
Basic weighted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Potential common shares — stock options and other employee stock plans
Diluted weighted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years Ended October 31,
2020
2019
(in millions)
2018
719 $
1,071 $
309
3
312
314
4
318
316
321
4
325
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 collectively were greater than the average market price of our common stock because their effect would
also be anti-dilutive.
In 2020, 2019 and 2018, we issued share-based awards of approximately 2 million each year. For the years ended 2020,
2019 and 2018, the impacts of the anti-dilutive potential common shares that were excluded from the calculation of diluted
earnings per share were not material.
8. INVENTORY
Inventory as of October 31, 2020 and 2019 consisted of the following:
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Purchased parts and fabricated assemblies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
October 31,
2020
2019
(in millions)
417 $
303
720 $
416
263
679
Inventory-related excess and obsolescence charges of $28 million were recorded in cost of products in 2020, $19 million
in 2019 and $26 million in 2018. We record excess and obsolete inventory charges for both inventory on our site as well as
inventory at our contract manufacturers and suppliers where we have non-cancelable purchase commitments.
82
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment as of October 31, 2020 and 2019, consisted of the following:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
October 31,
2020
2019
(in millions)
58 $
1,055
579
182
1,874
(1,029)
845 $
57
1,012
546
160
1,775
(925)
850
In 2020 we recorded $6 million in asset impairments related to the shutdown of our sequencer development program. There
were no asset impairments in 2019 and less than $1 million in asset impairments in 2018. Depreciation expenses were $119
million in 2020, $111 million in 2019 and $102 million in 2018. In 2020 and 2019 we retired approximately $29 million and
$23 million, respectively, of fully depreciated assets that were no longer in use.
10. 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. 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 under
non-cancelable leases with initial terms exceeding twelve months were as follows:
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The components of lease cost for operating leases were as follows:
Operating lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable lease cost (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sublease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Leases
(in millions)
52
41
29
21
14
56
Year Ended October 31, 2020
(in millions)
60
1
14
(14)
61
$
$
$
$
$
$
$
$
(a) Variable lease cost includes cancelable leases, non-fixed maintenance costs and non-recoverable transaction taxes.
Total rent expense was $75 million in 2019 and $64 million in 2018.
Supplemental cash flow information related to leases was as follows:
83
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cash paid for amounts included in the amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash right of use assets obtained in exchange for operating lease obligations . . . . . . . . . . . . . .
$
$
59
37
Year Ended October 31, 2020
(in millions)
Supplemental balance sheet information related to leases was as follows:
Financial Statement Line Item
October 31, 2020
(in millions, except lease term and discount rate)
Assets:
Operating lease:
Right of use asset . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets
Liabilities:
Current
Operating lease liabilities . . . . . . . . . . . . . . . . . . .
Other accrued liabilities
Long-term
Operating lease liabilities . . . . . . . . . . . . . . . . . . .
Other long-term liabilities
$
$
$
Weighted average remaining lease term (in years)
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average discount rate
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . .
175
51
127
7.9 years
2.1 %
Future minimum rents payable as of October 31, 2020 under non-cancelable leases with initial terms exceeding one year
reconcile to lease liabilities included in the consolidated balance sheet as follows:
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total undiscounted future minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: amount of lease payments representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Present value of future minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
Operating Leases
(in millions)
54
41
28
16
9
49
197
(19)
178
(51)
127
As of October 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 ASC 606 guidance and the lease component under the leasing ASC 842 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 balance sheet and
depreciated over the equipment’s estimated useful life. For an arrangement that has been classified as a sales-type lease,
revenue is recognized when the transfer of control of the underlying leased asset has occurred and the net investment lease
recorded which is calculated at the present value of the remaining lease payments due from the lessee.
84
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 year ended October 31, 2020.
As of October 31, 2020, the original cost and net book value of operating leased assets was $43 million and $12 million,
respectively. As of October 31, 2020, lease receivables related to sales-type leases were $44 million. As of October 31, 2019,
the original cost and net book value of operating leased assets was $49 million and $17 million, respectively. As of October 31,
2019, lease receivables related to sales-type leases were $37 million.
11. GOODWILL AND OTHER INTANGIBLE ASSETS
The following table presents goodwill balances and the movements for each of our reportable segments during the years
ended October 31, 2019 and 2020:
Life Sciences
and Applied
Markets
Diagnostics
and
Genomics
Agilent
CrossLab
Total
(in millions)
Goodwill as of October 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Foreign currency translation impact . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill arising from acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill as of October 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Foreign currency translation impact . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill as of October 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
803 $
(1)
636
1,438 $
3
1,441 $
1,607 $
(2)
(11)
1,594 $
5
1,599 $
563 $
(2)
—
561 $
1
562 $
2,973
(5)
625
3,593
9
3,602
As of September 30, 2020, our annual impairment test date, we assessed goodwill for triggering events and circumstances,
including impacts due to COVID-19, and determined no impairment of goodwill was indicated for our reporting units.
The component parts of other intangible assets at October 31, 2019 and 2020 are shown in the table below:
As of October 31, 2019:
Purchased technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademark/Tradename . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third-party technology and licenses . . . . . . . . . . . . . . . . . . . . . . . . .
Total amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . $
In-Process R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
As of October 31, 2020:
Purchased technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trademark/Tradename . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third-party technology and licenses . . . . . . . . . . . . . . . . . . . . . . . . .
Total amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . $
In-Process R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other Intangible Assets
Gross
Carrying
Amount
Accumulated
Amortization
(in millions)
Net Book
Value
1,413 $
5
196
329
28
1,971 $
115
2,086 $
1,429 $
196
330
11
1,966 $
10
1,976 $
763 $
5
102
87
22
979 $
—
979 $
863 $
117
158
7
1,145 $
—
1,145 $
650
—
94
242
6
992
115
1,107
566
79
172
4
821
10
831
During fiscal year 2020, we recorded no additions to goodwill or to intangible assets. During the year ended October 31,
2020 we moved $15 million of in-process research and development intangible assets to purchased technology on the
completion of three projects.
85
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During fiscal year 2019, we recorded additions to goodwill of $636 million and to other intangible assets of $744 million
related to the acquisition of ACEA Biosciences and BioTek. In the second quarter of fiscal year 2019, we recorded a
measurement period adjustment to goodwill of $11 million for deferred tax assets related to pre-acquisition net operating losses
of Advanced Analytical Technologies, Inc. The increase to other intangible assets due to foreign currency translation was not
material in 2019.
In general, for United States federal tax purposes, goodwill from asset purchases is amortizable; however, any goodwill
created as part of a stock acquisition is not deductible.
During fiscal year 2020, we recorded an impairment of in-process research and development of $90 million in research
and development expenses in the consolidated statement of operations which was related to the shutdown of our sequencer
development program in our diagnostics and genomics segment. There were no impairments of indefinite-lived intangible
assets during fiscal year 2019 and 2018. During fiscal years 2020 and 2019, there were no impairments of finite-lived intangible
assets recorded. During 2018, we recorded an impairment of $21 million related to purchased intangible assets within the
diagnostics and genomics segment that were deemed unrecoverable.
During 2020, we also wrote-off the gross carrying amount of $17 million and the related accumulated amortization of
fully amortized intangible assets which were no longer being used.
Amortization expense of intangible assets was $186 million in 2020, $128 million in 2019, and $110 million in 2018.
Future amortization expense related to existing finite-lived purchased intangible assets associated with business
combinations for the next five fiscal years and thereafter is estimated below:
Estimated future amortization expense:
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
174
151
109
87
70
230
(in millions)
12. INVESTMENTS
The following table summarizes the company's equity investments as of October 31, 2020 and 2019 (net book value):
October 31,
2020
2019
(in millions)
Long-Term
Equity investments - without readily determinable fair value . . . . . . . . . . . . . . . . . . . . . . . . . . $
Equity investments - with readily determinable fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
103 $
25
30
158 $
47
25
30
102
Equity investments without readily determinable fair value (RDFV) consist of non-marketable equity securities issued by
private companies. These investments are accounted for using the measurement alternative at cost adjusting for impairments
and observable price changes (orderly transactions for the identical or a similar security from the same issuer). The adjustments
are included in net income in the period in which they occur. Equity investments with RDFV consist of shares we own in a
special fund and are reported at fair value, with gains or losses resulting from changes in fair value included in net income.
Prior to fiscal year 2019, both equity investments without RDFV and with RDFV were accounted for using cost method of
accounting, measured at historical cost less other-than-temporary impairment. Trading securities are reported at fair value, with
gains or losses resulting from changes in fair value recognized currently in earnings.
86
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Our investments without RDFV are subject to periodic impairment review. The impairment analysis requires significant
judgment to identify events or circumstances that would likely have a significant adverse effect on the future value of the
investment.
We recorded a net unrealized loss on our equity securities with RDFV of $1 million in 2020 and a net unrealized gain of
$3 million in 2019. Net unrealized gains on our equity securities without RDFV were $27 million and $1 million in 2020 and
2019, respectively. Upon adoption of new accounting guidance relating to financial instruments beginning fiscal year 2019, the
gains and losses on such securities are recognized in other income (expense) and therefore not applicable in prior periods. As of
November 1, 2019, total impact of adoption of this accounting guidance to our consolidated balance sheet was an increase of $7
million to equity securities with RDFV (included within long-term investments) and a net increase of $5 million to beginning
retained earnings.
Net unrealized gains on our trading securities portfolio were $2 million in 2020, $3 million in 2019 and $1 million in
2018.
13. 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.
87
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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 October 31, 2020 were as follows:
Fair Value Measurement at October 31, 2020 Using
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
(in millions)
Significant
Unobservable
Inputs
(Level 3)
October 31,
2020
Assets:
Short-term
Cash equivalents (money market funds) . . . . . . . $
Derivative instruments (foreign exchange
contracts) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading securities . . . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . .
Total assets measured at fair value . . . . . . . . . . . . . . . $
Liabilities:
Short-term
Derivative instruments (foreign exchange
contracts) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation liability . . . . . . . . . . . . .
Total liabilities measured at fair value . . . . . . . . . . . . $
740 $
740 $
— $
2
—
30
25
797 $
30
—
770 $
17 $
30
47 $
— $
—
— $
2
—
25
27 $
17 $
30
47 $
—
—
—
—
—
—
—
—
Financial assets and liabilities measured at fair value on a recurring basis as of October 31, 2019 were as follows:
Fair Value Measurement
at October 31, 2019 Using
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
(in millions)
Significant
Unobservable
Inputs
(Level 3)
October 31,
2019
Assets:
Short-term
Cash equivalents (money market funds) . . . . . . . $
Derivative instruments (foreign exchange
contracts) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading securities . . . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . .
Total assets measured at fair value . . . . . . . . . . . . . . . $
Liabilities:
Short-term
Derivative instruments (foreign exchange
contracts) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation liability . . . . . . . . . . . . .
Total liabilities measured at fair value . . . . . . . . . . . . $
784 $
784 $
— $
12
—
30
25
851 $
30
—
814 $
6 $
30
36 $
— $
—
— $
12
—
25
37 $
6 $
30
36 $
—
—
—
—
—
—
—
—
Our money market funds and trading securities 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
88
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 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 are 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. Certain derivative instruments are reported at fair value, with unrealized gains and losses, net of tax,
included in accumulated other comprehensive income (loss) within stockholders' equity. Realized gains and losses from the sale
of these instruments are recorded in net income.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
Long-Lived Assets
For assets measured at fair value on a non-recurring basis, the following table summarizes the impairments included in
net income for the years ended October 31, 2020, 2019 and 2018:
Years Ended
October 31,
2020
2019
2018
(in millions)
Long-lived assets held and used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-lived assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
98 $
— $
— $
— $
21
—
For the year ended October 31, 2020, long-lived assets held and used, including indefinite lived in-process research and
development intangible assets, with a carrying amount of $98 million were written down to their fair value of zero, resulting in
an impairment charge of $98 million related to the shutdown of our sequencer development program and other assets in our
diagnostics and genomics segment. There were no impairments of long-lived assets held and used in 2019. For 2018, long lived
assets held and used with a carrying amount of $21 million were written down to their fair value of zero, resulting in an
impairment charge of $21 million, which relates to purchased intangible assets within the diagnostics and genomics segment
that were deemed unrecoverable and were included in net income.
There were no impairments of long-lived assets held for sale in 2020, 2019 and 2018.
Fair values for the impaired long-lived assets during 2020 and 2018 were measured using level 3 inputs. To determine
the fair value of long-lived assets in 2020 and 2018, we used the income approach based on projected discounted cash flows
expected to be generated by the long-lived assets over the remaining useful life.
For the year ended October 31, 2020 and 2019, there were no impairments in non-marketable securities without readily
determinable fair value. For the year ended October 31, 2020 and 2019, a net unrealized gain of $27 million and $1 million,
respectively, was included in net income as an adjustment to the carrying value of non-marketable equity securities without
readily determinable fair value based on an observable market transaction. As of October 31, 2020 and 2019, the carrying
amount of non-marketable equity securities without readily determinable fair values was $103 million and $47 million,
respectively.
Fair values for the non-marketable securities included in long-term investments on the 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 adjust for impairments and observable price changes (orderly transactions for the identical or a similar
security from the same issuer) as and when they occur.
89
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. 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 and purchased
options to hedge economic and/or accounting exposures resulting from changes in foreign currency exchange rates.
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. For open
contracts as of October 31, 2020, changes in the time value of the foreign exchange contract are excluded from the assessment
of hedge effectiveness and are recognized in 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 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), net in the current period. Changes in the fair value of the ineffective portion of derivative instruments are recognized
in other income (expense), net in the 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 cost of sales over the life of the option
contract. For the years ended October 31, 2020, 2019 and 2018, ineffectiveness and gains and losses recognized in other
income (expense), net 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 13, 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 (loss) 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 October 31, 2020 was less than $1 million.
In February 2016, Agilent executed three 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
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 (loss) 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
October 31, 2020 was $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 of $6 million in accumulated
other comprehensive income (loss) 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 October 31, 2020 was $5 million.
Net Investment Hedges
Starting in 2020, 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.
As of October 31, 2020, we have 3 open forward contracts to sell euros to buy USD maturing in the first quarter of fiscal
year 2021, and these are designated as a net investment hedge of the U.S. parent's interest in foreign subsidiaries denominated
in euro functional currency. In the year ended October 31, 2020, the change in fair value of the net investment hedge resulted in
90
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
a net loss of $5 million recognized in accumulated other comprehensive income. For the year ended October 31, 2020,
ineffectiveness and the resultant effect of any gains or losses recognized in other income (expense) due to de-designation of the
hedge contracts were not significant.
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), net in the 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 October 31, 2020, was $16 million. The credit-risk-related contingent features underlying these
agreements had not been triggered as of October 31, 2020.
There were 270 foreign exchange forward contracts open as of October 31, 2020 and designated as cash flow hedges.
There were 183 foreign exchange forward contracts open as of October 31, 2020 not designated as hedging instruments. There
were 3 foreign exchange forward contracts open as of October 31, 2020 and designated as a net investment hedge. The
aggregated notional amounts by currency and designation as of October 31, 2020 were as follows:
Derivatives
Designated as
Cash Flow Hedges
Forward
Contracts USD
Buy/(Sell)
Derivatives
Designated as
Net Investment
Hedges
Forward
Contracts USD
Buy/(Sell)
(in millions)
Derivatives
Not
Designated
as Hedging
Instruments
Forward
Contracts USD
Buy/(Sell)
Currency
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
British Pound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canadian Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Korean Won . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Singapore Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chinese Yuan Renminbi . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swedish Krona . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taiwan Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
India Rupee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
(59) $
(41)
(33)
(83)
(58)
12
(74)
—
—
—
4
(332) $
(94) $
—
—
—
—
—
—
—
—
—
—
(94) $
17
7
(7)
(39)
(32)
23
(66)
(10)
(14)
(15)
2
(134)
91
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 October 31, 2020 and 2019 were as follows:
Asset Derivatives
Liability Derivatives
Fair Values of Derivative Instruments
Fair Value
October 31,
2020
October 31,
2019
(in millions)
Balance Sheet Location
Fair Value
October 31,
2020
October 31,
2019
Balance Sheet Location
Derivatives designated as hedging
instruments:
Cash flow hedges
Foreign exchange contracts
Other current assets . . . . . . . . . . . .
$
— $
3 Other accrued liabilities . . $
12 $
2
Derivatives not designated as
hedging instruments:
Foreign exchange contracts
Other current assets . . . . . . . . . . . . .
Total derivatives . . . . . . . . . . . . . . . . .
$
$
2 $
2 $
9 Other accrued liabilities . . $
$
12
5 $
17 $
4
6
The effects 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:
Years Ended October 31,
2020
2019
2018
(in millions)
Derivatives designated as hedging instruments:
Cash flow hedges
Foreign exchange contracts:
Loss on interest rate swaps recognized in other comprehensive income (loss) . . . . $
— $
(6) $
—
Loss reclassified from accumulated other comprehensive income (loss) into
interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gain (loss) recognized in accumulated other comprehensive income (loss) . . . . . . $
Gain (loss) reclassified from accumulated other comprehensive income (loss) into
cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gain (loss) on time value of forward contracts recorded in cost of sales . . . . . . . . . $
(1) $
(12) $
(1) $
2 $
(1) $
— $
9 $
2 $
Net investment hedges
Foreign exchange contracts:
Loss recognized in accumulated other comprehensive income (loss) . . . . . . . . . . . $
(5) $
— $
Derivatives not designated as hedging instruments:
Gain (loss) recognized in other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . $
(1) $
2 $
(1)
7
(3)
—
—
(2)
At October 31, 2020 the estimated amount of existing net loss that is expected to be reclassified from accumulated other
comprehensive income (loss) to cost of sales within the next twelve months is $7 million.
92
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. RETIREMENT PLANS AND POST RETIREMENT PENSION PLANS
General. Substantially all of our employees are covered under various defined benefit and/or defined contribution
retirement plans. Additionally, we sponsor post-retirement health care benefits for our eligible U.S. employees.
Agilent provides defined benefits to U.S. employees who meet eligibility criteria under the Agilent Technologies, Inc.
Retirement Plan (the "RP").
For eligible service through October 31, 1993, the benefit payable under the Agilent Retirement Plan is reduced by any
amounts due to the eligible employee under the Agilent defined contribution Deferred Profit-Sharing Plan (the "DPSP"), which
was closed to new participants as of November 1993.
As of October 31, 2020 and 2019, the fair value of plan assets of the DPSP was $123 million and $132 million,
respectively. Note that the projected benefit obligation for the DPSP equals the fair value of plan assets.
Effective November 1, 2014, Agilent’s U.S. defined benefit retirement plan was closed to new entrants including new
employees, new transfers to the U.S. payroll and rehires. As of April 30, 2016, benefits under the RP were frozen. Any pension
benefit earned in the U.S. Plans through April 30, 2016 remained fully vested, and there are no additional benefit accruals after
April 30, 2016.
Agilent also maintains a Supplemental Benefits Retirement Plan ("SBRP") in the U.S., which is a supplemental unfunded
non-qualified defined benefit plan to provide benefits that would be provided under the RP but for limitations imposed by the
Internal Revenue Code. The RP and the SBRP comprise the "U.S. Plans" in the tables below.
Eligible employees outside the U.S. generally receive retirement benefits under various retirement plans based upon
factors such as years of service and/or employee compensation levels. Eligibility is generally determined in accordance with
local statutory requirements.
Post-Retirement Medical Benefit Plans. In addition to receiving retirement benefits, Agilent U.S. employees who meet
eligibility requirements as of their termination date may participate in the Agilent Technologies, Inc. Health Plan for Retirees.
–
–
Eligible retirees who were less than age 50 as of January 1, 2005 and who retire after age 55 with 15 or more years
of service are eligible for a fixed amount which can be utilized to pay for either sponsored plans and/or individual
Medicare plans.
Effective January 1, 2012, employees who were at least age 50 as of January 1, 2005 and who retire after age 55
with 15 or more years of service are eligible for fixed dollar subsidies and stipends. Grandfathered retirees receive a
fixed monthly subsidy toward pre-65 premium costs (subsidy capped at 2011 levels) and a fixed monthly stipend
post-65. The subsidy amounts will not increase.
– Any new employee hired on or after November 1, 2014, will not be eligible to participate in the retiree medical plans
upon retiring.
– As of April 30, 2016, benefits under this plan were changed for Active employees who have not met the eligibility
requirement - 55 years old with at least 15 years of Agilent service, as of April 30, 2016 - for the Retiree Medical
Account (RMA) under the U.S. Post Retirement Benefit Plan. These employees will only be eligible for 50 percent
of the current RMA reimbursement amount upon retirement.
401(k) Defined Contribution Plan. Eligible Agilent U.S. employees may participate in the Agilent Technologies, Inc.
401(k) Plan. We match contributions to employees up to a maximum of 6 percent of an employee's annual eligible
compensation. Effective May 1, 2016 until April 30, 2022, we will provide an additional transitional company contribution for
certain eligible employees equal to 3 percent, 4 percent or 5 percent of an employee's annual eligible compensation due to the
RP benefits being frozen. The maximum contribution to the 401(k) Plan is 50 percent of an employee's annual eligible
compensation, subject to regulatory limitations. The 401(k) Plan employer expense included in income from operations was
$41 million in 2020, $39 million in 2019 and $37 million in 2018.
93
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Components of Net periodic cost. The service cost component is recorded in cost of sales and operating expenses in the
consolidated statement of operations. All other cost components are recorded in other income (expense), net in the consolidated
statement of operations. The company uses alternate methods of amortization as allowed by the authoritative guidance which
amortizes the actuarial gains and losses on a consistent basis for the years presented. For U.S. Plans, gains and losses are
amortized over the average future lifetime of participants using the corridor method. For most Non-U.S. Plans and U.S. Post-
Retirement Benefit Plans, gains and losses are amortized using a separate layer for each year's gains and losses.
For the years ended October 31, 2020, 2019 and 2018, components of net periodic benefit cost and other amounts
recognized in other comprehensive income were comprised of:
Pensions
U.S. Plans
Non-U.S. Plans
U.S. Post-Retirement Benefit
Plans
2020
2019
2018
2020
2019
2018
2020
2019
2018
(in millions)
Net periodic benefit cost (benefit)
Service cost — benefits earned during the
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ — $ 24 $ 20 $ 20 $
1 $ — $
Interest cost on benefit obligation . . . . . . .
15
18
16
8
14
13
3
4
Expected return on plan assets . . . . . . . . .
(28)
(27)
(28)
(47)
(43)
(46)
(7)
(7)
Amortization of net actuarial loss . . . . . . .
3
1
1
49
34
29
4
4
Amortization of prior service benefit . . . .
—
—
—
—
—
—
Total periodic benefit cost (benefit) . . . . . . $ (10) $
(8) $ (11) $ 34 $ 25 $ 16 $
(7)
(6) $
(8)
(7) $
1
3
(7)
8
(8)
(3)
Settlement (gain) loss . . . . . . . . . . . . . . . . . $
Other changes in plan assets and benefit
obligations recognized in other
comprehensive (income) loss
4 $ — $ — $ — $ — $
(5) $ — $ — $ —
Net actuarial (gain) loss . . . . . . . . . . . . . . $ 26 $ 51 $
(1)
Amortization of net actuarial loss . . . . . . .
(3)
2 $ 20 $ 104 $ 49 $
(29)
(1)
(49)
(34)
5 $
(4)
5 $
(4)
(2)
(8)
Amortization of prior service benefit . . . .
Loss due to settlement . . . . . . . . . . . . . . . .
—
—
(4) —
—
—
—
—
—
—
—
—
7
—
8
—
8
—
Foreign currency . . . . . . . . . . . . . . . . . . . .
—
—
—
10
(3)
1
—
—
—
Total recognized in other comprehensive
(income) loss . . . . . . . . . . . . . . . . . . . . . . . . $ 19 $ 50 $
1 $ (19) $ 67 $ 21 $
8 $
9 $
(2)
Total recognized in net periodic benefit cost
(benefit) and other comprehensive (income)
loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13 $ 42 $ (10) $ 15 $ 92 $ 32 $
2 $
2 $
(5)
94
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Funded Status. As of October 31, 2020 and 2019, the funded status of the defined benefit and post-retirement benefit
plans was:
U.S. Defined
Benefit Plans
Non-U.S. Defined
Benefit Plans
U.S.
Post-Retirement
Benefit Plans
2020
2019
2020
2019
2020
2019
Change in fair value of plan assets:
Fair value — beginning of year . . . . . . . . . . . . . . . . . . . . . . $
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participants' contributions . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value — end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Change in benefit obligation:
Benefit obligation — beginning of year . . . . . . . . . . . . . . . . $
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participants' contributions . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit obligation — end of year . . . . . . . . . . . . . . . . . . . . . . $
432 $
30
—
—
(8)
(15)
—
439 $
491 $
—
15
—
28
(9)
(15)
—
510 $
(in millions)
401 $
50
—
—
(19)
—
—
432 $
911 $
(2)
32
1
(31)
—
34
945 $
420 $ 1,067 $
—
18
—
74
(21)
24
8
1
(19)
(31)
825 $
85
21
1
(29)
—
8
911 $
913 $
20
14
1
143
(29)
—
—
491 $ 1,094 $ 1,067 $
—
5
—
44
Overfunded (underfunded) status of PBO . . . . . . . . . . . . . . $
(71) $
(59) $
(149) $
(156) $
Amounts recognized in the consolidated balance sheet
consist of:
95 $
6
—
—
(8)
—
—
93 $
94 $
1
3
—
4
(8)
—
—
94 $
(1) $
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $
Employee compensation and benefits . . . . . . . . . . . . . . . . . .
(1)
Retirement and post-retirement benefits . . . . . . . . . . . . . . . .
Total net asset (liability) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(70)
(71) $
(58)
(59) $
(1)
123 $
—
106 $ — $
—
—
(272)
(149) $
(262)
(156) $
(1)
(1) $
90
11
—
—
(6)
—
—
95
87
—
4
—
9
(6)
—
—
94
1
1
—
—
1
Amounts Recognized in Accumulated Other Comprehensive
Income (Loss):
Actuarial (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prior service costs (benefits) . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
134 $
—
134 $
115 $
—
115 $
311 $
—
311 $
330 $
—
330 $
11 $
(5)
6 $
10
(12)
(2)
The amounts in accumulated other comprehensive income (loss) expected to be recognized by Agilent as components of
net expense during 2021 are as follows:
Amortization of net prior service cost (benefit) . . . . . . . . . . . . . . . . . . $
Amortization of actuarial net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
U.S. Defined
Benefit Plans
Non-U.S. Defined
Benefit Plans
U.S. Post-Retirement
Benefit Plans
(in millions)
— $
4 $
— $
52 $
(1)
4
95
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Investment Policies and Strategies as of October 31, 2020 and 2019. In the U.S., target asset allocations for our
retirement and post-retirement benefit plans are approximately 80 percent to equities and approximately 20 percent to fixed
income investments. Our DPSP target asset allocation is approximately 60 percent to equities and approximately 40 percent to
fixed income investments. Approximately 1 percent of the retirement and post-retirement plans consist of limited partnerships.
The general investment objective for all our plan assets is to obtain the optimum rate of investment return on the total
investment portfolio consistent with the assumption of a reasonable level of risk. Specific investment objectives for the plans'
portfolios are to: maintain and enhance the purchasing power of the plans' assets; achieve investment returns consistent with the
level of risk being taken; and earn performance rates of return in accordance with the benchmarks adopted for each asset class.
Outside the U.S., our target asset allocation ranges from 24 percent to 60 percent to equities, from 38 percent to 65 percent to
fixed income investments, and from zero to 25 percent to real estate, depending on the plan. All plans' assets are broadly
diversified. Due to fluctuations in equity markets, our actual allocations of plan assets at October 31, 2020 and 2019 differ from
the target allocation. Our policy is to bring the actual allocation in line with the target allocation.
Equity securities include exchange-traded common stock and preferred stock of companies from broadly diversified
industries. Fixed income securities include a global portfolio of corporate bonds of companies from diversified industries,
government securities, mortgage-backed securities, asset-backed securities, derivative instruments and other. Other investments
include a group trust consisting primarily of private equity partnerships. Portions of the cash and cash equivalent, equity, and
fixed income investments are held in commingled funds that are valued using Net Asset Value (“NAV”) as the practical
expedient. In addition, some of the investments valued using NAV as the practical expedient may have limits on their
redemption to weekly or monthly and/or may require prior written notice specified by each fund.
Fair Value. The measurement of the fair value of pension and post-retirement plan assets uses the valuation
methodologies and the inputs as described in Note 13, "Fair Value Measurements".
Cash and Cash Equivalents - Cash and cash equivalents consist of short-term investment funds. The funds also invest in
short-term domestic fixed income securities and other securities with debt-like characteristics emphasizing short-term maturities
and quality. Some of our cash and cash equivalents are held in commingled funds. Other cash and cash equivalents are
classified as Level 1 investments.
Equity - Some equity securities consisting of common and preferred stock that are not traded on an active market are
valued at quoted prices reported by investment dealers based on the underlying terms of the security and comparison to similar
securities traded on an active market; these are classified as Level 2 investments. Securities which have quoted prices in active
markets are classified as Level 1 investments.
Fixed Income - Some of the fixed income securities are not actively traded and are valued at quoted prices based on the
terms of the security and comparison to similar securities traded on an active market; these are classified as Level 2
investments. Securities which have quoted prices in active markets are classified as Level 1 investments.
Other Investments - Other investments also include partnership investments where, due to their private nature, pricing
inputs are not readily observable. Asset valuations are developed by the general partners that manage the partnerships. These
valuations are based on proprietary appraisals, application of public market multiples to private company cash flows, utilization
of market transactions that provide valuation information for comparable companies and other methods. Holdings of limited
partnerships are classified as Level 3.
Agilent has adopted the accounting guidance related to the presentation of certain investments using the NAV practical
expedient. The accounting guidance exempts investments using this practical expedient from categorization within the fair
value hierarchy.
96
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following tables present the fair value of U.S. Defined Benefit Plans assets classified under the appropriate level of
the fair value hierarchy as of October 31, 2020 and 2019.
Fair Value Measurement
at October 31, 2020 Using
October 31,
2020
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
(in millions)
Significant
Unobservable
Inputs
(Level 3)
Not Subject to
Leveling (1)
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . $
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Investments . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets measured at fair value . . . . . . . . . . . $
1 $
357
79
2
439 $
— $
77
39
—
116 $
— $
—
—
—
— $
— $
—
—
2
2 $
1
280
40
—
321
(1) Investments measured at the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value
hierarchy.
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)
(in millions)
Significant
Unobservable
Inputs
(Level 3)
Not Subject to
Leveling (1)
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . $
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Investments . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets measured at fair value . . . . . . . . . . . $
1 $
336
91
4
432 $
— $
78
46
—
124 $
— $
—
—
—
— $
— $
—
—
4
4 $
1
258
45
—
304
(1) Investments measured at the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value
hierarchy.
For U.S. Defined Benefit Plans assets measured at fair value using significant unobservable inputs (level 3), the
following table summarizes the change in balances during 2020 and 2019:
Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Realized gains/(losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains/(losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases, sales, issuances, and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers in (out) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4 $
(3)
2
(1)
—
2 $
6
(1)
1
(2)
—
4
Years Ended
October 31.
2020
2019
97
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following tables present the fair value of U.S. Post-Retirement Benefit Plans assets classified under the appropriate
level of the fair value hierarchy as of October 31, 2020 and 2019.
Fair Value Measurement
at October 31, 2020 Using
October 31,
2020
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
(in millions)
Significant
Unobservable
Inputs
(Level 3)
Not Subject to
Leveling (1)
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . $
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Investments . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets measured at fair value . . . . . . . . . . . $
4 $
70
18
1
93 $
— $
17
9
—
26 $
— $
—
—
—
— $
— $
—
—
1
1 $
4
53
9
—
66
(1) Investments measured at the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value
hierarchy.
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)
(in millions)
Significant
Unobservable
Inputs
(Level 3)
Not Subject to
Leveling (1)
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . $
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Investments . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets measured at fair value . . . . . . . . . . . $
3 $
69
21
2
95 $
— $
18
11
—
29 $
— $
—
—
—
— $
— $
—
—
2
2 $
3
51
10
—
64
(1) Investments measured at the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value
hierarchy.
For U.S. Post-Retirement Benefit Plans assets measured at fair value using significant unobservable inputs (level 3), the
following table summarizes the change in balances during 2020 and 2019:
Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Realized gains/(losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains/(losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases, sales, issuances, and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers in (out) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2 $
(1)
1
(1)
—
1 $
4
(1)
—
(1)
—
2
Years Ended
October 31,
2020
2019
98
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following tables present the fair value of non-U.S. Defined Benefit Plans assets classified under the appropriate level
of the fair value hierarchy as of October 31, 2020 and 2019:
Fair Value Measurement
at October 31, 2020 Using
October 31,
2020
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
(in millions)
Significant
Unobservable
Inputs
(Level 3)
Not Subject to
Leveling (1)
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . $
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Investments . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets measured at fair value . . . . . . . . . . . $
7 $
504
434
—
945 $
— $
315
102
—
417 $
6 $
48
238
—
292 $
— $
—
—
—
— $
1
141
94
—
236
(1) Investments measured at the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value
hierarchy.
Fair Value Measurement
at October 31, 2019 Using
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
October 31,
2019
Not Subject to
Leveling (1)
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . $
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Investments . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets measured at fair value . . . . . . . . . . . $
1 $
512
398
—
911 $
(in millions)
— $
318
98
—
416 $
1 $
61
213
—
275 $
— $
—
—
—
— $
—
133
87
—
220
(1) Investments measured at the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value
hierarchy.
99
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The table below presents the combined projected benefit obligation ("PBO"), accumulated benefit obligation ("ABO")
and fair value of plan assets, grouping plans using comparisons of the PBO and ABO relative to the plan assets as of October
31, 2020 or 2019.
2020
2019
Benefit
Obligation
PBO
Fair Value of
Plan Assets
Benefit
Obligation
PBO
Fair Value of
Plan Assets
(in millions)
U.S. defined benefit plans where PBO exceeds the fair value of plan
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
510 $
439 $
491 $
432
U.S. defined benefit plans where fair value of plan assets exceeds PBO
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
510 $
—
439 $
—
491 $
—
432
Non-U.S. defined benefit plans where PBO exceeds or is equal to the
fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-U.S. defined benefit plans where fair value of plan assets exceeds
PBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
697 $
425 $
752 $
490
397
520
315
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,094 $
945 $
1,067 $
U.S. defined benefit plans where ABO exceeds the fair value of plan
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
U.S. defined benefit plans where the fair value of plan assets exceeds
ABO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ABO
ABO
510 $
439 $
491 $
432
—
—
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
510 $
439 $
491 $
Non-U.S. defined benefit plans where ABO exceeds or is equal to the
fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-U.S. defined benefit plans where fair value of plan assets exceeds
ABO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
675 $
425 $
651 $
418
387
520
381
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,062 $
945 $
1,032 $
421
911
—
432
493
911
Contributions and Estimated Future Benefit Payments. During fiscal year 2021, we expect to make no contributions to
the U.S. defined benefit plans and the Post-Retirement Medical Plans. We expect to contribute $22 million to plans outside the
U.S. The following table presents expected future benefit payments for the next 10 years:
U.S. Defined
Benefit Plans
Non-U.S. Defined
Benefit Plans
U.S. Post-Retirement
Benefit Plans
(in millions)
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2026 - 2030 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
33 $
31 $
33 $
34 $
33 $
152 $
33 $
34 $
36 $
36 $
37 $
192 $
8
8
7
7
7
35
Assumptions. The assumptions used to determine the benefit obligations and expense for our defined benefit and post-
retirement benefit plans are presented in the tables below. The expected long-term return on assets below represents an estimate
of long-term returns on investment portfolios consisting of a mixture of equities, fixed income and alternative investments in
proportion to the asset allocations of each of our plans. We consider long-term rates of return, which are weighted based on the
asset classes (both historical and forecasted) in which we expect our pension and post-retirement funds to be invested. Discount
rates reflect the current rate at which pension and post-retirement obligations could be settled based on the measurement dates
of the plans - October 31. The U.S. discount rates at October 31, 2020 and 2019, were determined based on the results of
100
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
matching expected plan benefit payments with cash flows from a hypothetically constructed bond portfolio. The non-U.S. rates
were generally based on published rates for high-quality corporate bonds. The range of assumptions that were used for the non-
U.S. defined benefit plans reflects the different economic environments within various countries.
Assumptions used to calculate the net periodic cost in each year were as follows:
For years ended October 31,
2020
2019
2018
U.S. defined benefit plans:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.25%
7.00%
4.50%
7.00%
3.75%
7.00%
Non-U.S. defined benefit plans:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average increase in compensation levels . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.22-1.81%
2.25-3.00%
4.00-5.75%
0.83-2.68%
2.25-3.25%
4.00-5.75%
0.67-2.52%
2.00-3.25%
4.00-6.00%
U.S. post-retirement benefits plans:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current medical cost trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate medical cost trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical cost trend rate decreases to ultimate rate in year . . . . . . . . . . . . . .
3.00%
7.00%
6.25%
4.50%
2029
4.25%
7.00%
6.00%
3.50%
2029
3.50%
7.00%
6.00%
3.50%
2029
Assumptions used to calculate the benefit obligation were as follows:
As of the Years Ending October 31,
2020
2019
U.S. defined benefit plans:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.75%
3.25%
Non-U.S. defined benefit plans:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average increase in compensation levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.07-1.54%
2.00-3.00%
0.22-1.81%
2.25-3.00%
U.S. post-retirement benefits plans:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current medical cost trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate medical cost trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical cost trend rate decreases to ultimate rate in year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.50%
6.25%
4.50%
2029
3.00%
6.25%
4.50%
2029
Health care trend rates do not have a significant effect on the total service and interest cost components or on the post-
retirement benefit obligation amounts reported for the U.S. Post-Retirement Benefit Plan for the year ended October 31, 2020.
16. GUARANTEES
Standard Warranty
We accrue for standard warranty costs based on historical trends in actual warranty charges over the past 12 months. The
accrual is reviewed regularly and periodically adjusted to reflect changes in warranty cost over the period. The standard
warranty accrual balances are held in other accrued and other long-term liabilities on our consolidated balance sheet. Our
standard warranty terms typically extend to one year from the date of delivery, depending on the product.
101
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A summary of the standard warranty accrual activity is shown in the table below.
Standard warranty accrual, beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accruals for warranties including change in estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements made during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Standard warranty accrual, ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accruals for warranties due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accruals for warranties due after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Standard warranty accrual, ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Bank Guarantees
October 31,
2020
2019
(in millions)
32 $
49
(49)
32 $
30 $
2
32 $
35
54
(57)
32
32
—
32
Guarantees consist primarily of outstanding standby letters of credit and bank guarantees and were approximately $43
million and $40 million as of October 31, 2020 and 2019, respectively. 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.
Indemnifications in Connection with Transactions
In connection with various divestitures, acquisitions, spin-offs and other transactions, we have agreed to indemnify
certain parties, their affiliates and/or other related parties against certain damages and expenses that might occur in the future.
These indemnifications may cover a variety of liabilities, including, but not limited to, employee, tax, environmental,
intellectual property, litigation and other liabilities related to the business conducted prior to the date of the transaction. In our
opinion, the fair value of these indemnification obligations was not material as of October 31, 2020.
Indemnifications to Officers and Directors
Our corporate bylaws require that we indemnify our officers and directors, as well as those who act as directors and
officers of other entities at our request, against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceedings arising out of their services to Agilent and such other entities, including
service with respect to employee benefit plans. In addition, we have entered into separate indemnification agreements with each
director and each board-appointed officer of Agilent which provide for indemnification of these directors and officers under
similar circumstances and under additional circumstances. The indemnification obligations are more fully described in the
bylaws and the indemnification agreements. We purchase standard insurance to cover claims or a portion of the claims made
against our directors and officers. Since a maximum obligation is not explicitly stated in our bylaws or in our indemnification
agreements and will depend on the facts and circumstances that arise out of any future claims, the overall maximum amount of
the obligations cannot be reasonably estimated. Historically, we have not made payments related to these obligations, and the
fair value for these indemnification obligations was not material as of October 31, 2020.
Other Indemnifications
As is customary in our industry and as provided for in local law in the U.S. and other jurisdictions, many of our standard
contracts provide remedies to our customers and others with whom we enter into contracts, such as defense, settlement, or
payment of judgment for intellectual property claims related to the use of our products. From time to time, we indemnify
customers, as well as our suppliers, contractors, lessors, lessees, companies that purchase our businesses or assets and others
with whom we enter into contracts, against combinations of loss, expense, or liability arising from various triggering events
related to the sale and the use of our products and services, the use of their goods and services, the use of facilities and state of
our owned facilities, the state of the assets and businesses that we sell and other matters covered by such contracts, usually up to
a specified maximum amount. In addition, from time to time we also provide protection to these parties against claims related to
102
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
undiscovered liabilities, additional product liability or environmental obligations. In our experience, claims made under such
indemnifications are rare and the associated estimated fair value of the liability was not material as of October 31, 2020.
In connection with the sale of several of our businesses, we have agreed to indemnify the buyers of such business, their
respective affiliates and other related parties against certain damages that they might incur in the future. The continuing
indemnifications primarily cover damages relating to liabilities of the businesses that Agilent retained and did not transfer to the
buyers, as well as other specified items. In our opinion, the fair value of these indemnification obligations was not material as of
October 31, 2020.
17. COMMITMENTS AND CONTINGENCIES
Other Purchase Commitments. Typically, we can cancel contracts with professional services suppliers without penalties.
For those contracts that are not cancelable without penalties, there are termination fees and costs or commitments for continued
spending that we are obligated to pay to a supplier under each contact's termination period before such contract can be
cancelled. Our contractual obligations with these suppliers under "other purchase commitments" were approximately $85
million. Approximately $23 million of the penalties for the new contracts will reduce over the next 13 years.
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 reasonably possible of having a material impact to our
business, consolidated financial condition, results of operations or cash flows.
18. SHORT-TERM DEBT
Credit Facilities
On March 13, 2019, we entered into a credit agreement with a group of financial institutions which provides for a $1
billion five-year unsecured credit facility that will expire on March 13, 2024. For the year ended October 31, 2020, we
borrowed $798 million and repaid $913 million under the credit facility. As of October 31, 2020, the company had no
borrowings outstanding under the credit facility. On August 7, 2019, we entered into an amendment to the credit agreement,
which provides for a $500 million short-term loan facility that was used in full to complete the BioTek acquisition and which
was repaid in full as of October 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 facilities as of
October 31, 2020. On April 17, 2020, we entered into a third amendment to the credit agreement which provides the company
with the option to request the consent of the applicable class of lenders to extend the maturity date of revolving borrowings and
swingline loans for an additional period of one year and of the 2019 incremental term loans for an additional period of up to
364 days. We were in compliance with the covenants for the credit facility during the year ended October 31, 2020.
Commercial Paper
In May 2020, we established a U.S. commercial paper program, under which the company may issue and sell unsecured,
short-term promissory notes in the aggregate principal amount not to exceed $1.0 billion with up to 397-day maturities. At any
point in time, the company intends to maintain available commitments under its revolving credit facility in an amount at least
equal to the amount of the commercial paper notes outstanding. Amounts available under the program may be borrowed, repaid
and re-borrowed from time to time. The proceeds from issuances under the program may be used for general corporate
purposes. As of October 31, 2020, borrowings outstanding under our U.S. commercial paper program had a weighted average
annual interest rate of 0.17 percent and a weighted average remaining maturity of approximately five days. We had borrowings
of $75 million outstanding under the U.S. commercial paper program as of October 31, 2020.
2020 Senior Notes
On July 13, 2010, the company issued an aggregate principal amount of $500 million in senior notes ("2020 senior
notes"). The 2020 senior notes were issued at 99.54% of their principal amount. The notes were scheduled to mature on July 15,
2020, and bear interest at a fixed rate of 5.00% per annum.
On August 9, 2011, we terminated our interest rate swap contracts related to our 2020 senior notes that represented the
notional amount of $500 million. The asset value, including interest receivable, upon termination for these contracts was
103
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
approximately $34 million. The gain was deferred and amortized to interest expense over the remaining life of the 2020 senior
notes.
On September 17, 2019, we repaid the $500 million outstanding aggregate principal amount of our 2020 senior notes due
July 15, 2020 that were called for redemption on August 16, 2019. The redemption price of approximately $512 million
included a $12 million prepayment penalty. The redemption price was computed in accordance with the terms of the 2020
senior notes as the present value of the remaining scheduled payments of principal and unpaid interest related to the
redemption. The prepayment penalty plus amortization of the previously deferred interest swap gain of $4 million and
amortization of previously deferred debt issuance costs and discount of $1 million were recorded in other income (expense), net
in the consolidated statement of operations. We also paid accrued and unpaid interest of $4 million on the 2020 senior notes up
to but not including the redemption date.
19. LONG-TERM DEBT
Senior Notes
The following table summarizes the company's long-term senior notes:
October 31, 2020
October 31, 2019
Amortized
Principal
Amortized
Principal
2022 Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2023 Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2029 Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2030 Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(in millions)
$
400
598
298
493
495
2,284
$
399
597
298
492
—
1,786
2022 Senior Notes
On September 13, 2012, the company issued an aggregate principal amount of $400 million in senior notes ("2022 senior
notes"). The 2022 senior notes were issued at 99.80% of their principal amount. The notes will mature on October 1, 2022, and
bear interest at a fixed rate of 3.20% per annum. The interest is payable semi-annually on April 1st and October 1st of each year
and payments commenced on April 1, 2013.
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 13, 2012. The treasury lock contracts were terminated on September 10,
2012 and we recognized a deferred gain in accumulated other comprehensive income (loss) 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
October 31, 2020 was less than $1 million.
2023 Senior Notes
On June 21, 2013, the company issued aggregate principal amount of $600 million in senior notes ("2023 senior notes").
The 2023 senior notes were issued at 99.544% of their principal amount. The notes will mature on July 15, 2023 and bear
interest at a fixed rate of 3.875% per annum. The interest is payable semi-annually on January 15th and July 15th of each year
and payments commenced January 15, 2014.
2026 Senior Notes
On September 22, 2016, the company issued aggregate principal amount of $300 million in senior notes ("2026 senior
notes"). The 2026 senior notes were issued at 99.624% of their principal amount. The notes will mature on September 22, 2026
and bear interest at a fixed rate of 3.05% per annum. The interest is payable semi-annually on March 22nd and September 22nd
of each year and payments commenced March 22, 2017.
104
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In February 2016, Agilent executed three 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. 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 (loss) 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 October 31,
2020 was $6 million.
2029 Senior Notes
On September 16, 2019, the company issued an aggregate principal amount of $500 million in senior notes ("2029 senior
notes"). The 2029 senior notes were issued at 99.316% of their principal amount. The notes will mature on September 15, 2029,
and bear interest at a fixed rate of 2.75% per annum. The interest is payable semi-annually on March 15th and September 15th
of each year and payments commenced on March 15, 2020.
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 of $6 million 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 October 31, 2020 was $5 million.
2030 Senior Notes
On June 4, 2020, we issued an aggregate principal amount of $500 million in senior notes ("2030 senior notes"). The
2030 senior notes were issued at 99.812% of their principal amount. The 2030 senior notes will mature on June 4, 2030, and
bear interest at a fixed rate of 2.10% per annum. The interest is payable semi-annually on June 4th and December 4th of each
year and payments commenced on December 4, 2020.
All outstanding notes listed above are unsecured and rank equally in right of payment with all of Agilent's other senior
unsecured indebtedness.
20. STOCKHOLDERS' EQUITY
Stock Repurchase Program
On May 28, 2015 we announced that our board of directors had approved a share repurchase program (the "2015
repurchase program"). The 2015 repurchase program authorizes the purchase of up to $1.14 billion of our common stock at the
company's discretion through and including November 1, 2018. The 2015 repurchase program did not require the company to
acquire a specific number of shares and could have been suspended or discontinued at any time. During the year ended October
31, 2018, we repurchased and retired approximately 6.4 million shares for $422 million under this authorization. As of October
31, 2018, we had remaining authorization to repurchase up to $188 million of our common stock under this program which
expired on November 1, 2018.
On November 19, 2018 we announced that our board of directors had approved a new share repurchase program (the
"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 2019 share repurchase program authorizes the purchase of up to
$1.75 billion of our common stock at the company's discretion and has no fixed termination date. The 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 year ended October 31, 2019, we repurchased and retired 10.4 million shares for $723 million under this
authorization. During the year ended October 31, 2020, we repurchased and retired approximately 5.2 million shares for $469
million under this authorization. As of October 31, 2020, we had remaining authorization to repurchase up to $558 million of
our common stock under this program.
Cash Dividends on Shares of Common Stock
During the year ended October 31, 2020, cash dividends of 0.720 per share, or $222 million were declared and paid on
the company's outstanding common stock. During the year ended October 31, 2019, cash dividends of 0.656 per share, or $206
million were declared and paid on the company's outstanding common stock. During the year ended October 31, 2018, cash
dividends of 0.596 per share, or $191 million were declared and paid on the company's outstanding common stock.
105
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On November 18, 2020 we declared a quarterly dividend of $0.194 per share of common stock, or approximately $59
million which will be paid on January 27, 2021 to shareholders of record as of the close of business on January 5, 2021. The
timing and amounts of any future dividends are subject to determination and approval by our board of directors.
Accumulated Other Comprehensive Income (Loss)
The following table summarizes the components of our accumulated other comprehensive income (loss) as of October 31,
2020 and 2019, net of tax effect:
Foreign currency translation, net of tax expense of $(6) and $(5) for 2020 and 2019,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Unrealized losses (including prior service benefit) on defined benefit plans, net of tax benefit
of $154 and $153 for 2020 and 2019, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains (losses) on derivative instruments, net of tax benefit of $6 and $3 for 2020
and 2019, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(194)
(317)
(11)
(522) $
(204)
(306)
(4)
(514)
October 31,
2020
2019
(in millions)
106
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Changes in accumulated other comprehensive income (loss) by component and related tax effects for the years ended
October 31, 2020 and 2019 were as follows:
Foreign
currency
translation
Net defined benefit pension cost
and post retirement plan costs
Prior service
credits
Actuarial
Losses
(in millions)
Unrealized
gains (losses)
on derivatives
Total
As of October 31, 2018 . . . . . . . . . . . . . . . . . .
$
(214)
$
134
$
(335) $
7
$
(408)
Impact of adoption of new guidance on tax
effects in accumulated other comprehensive
income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .
—
As of November 1, 2018 . . . . . . . . . . . . . . . . .
(214)
Other comprehensive loss before
reclassifications . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified out of accumulated
other comprehensive income (loss) . . . . . . . . .
Tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . .
—
—
10
10
3
137
—
(8)
2
(6)
(9)
(344)
(157)
39
25
(93)
(1)
6
(6)
(8)
4
(10)
(7)
(415)
(163)
23
41
(99)
As of October 31, 2019 . . . . . . . . . . . . . . . . . .
$
(204)
$
131
$
(437) $
(4) $
(514)
Other comprehensive income (loss) before
reclassifications . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified out of accumulated
other comprehensive income (loss) . . . . . . . . .
Tax (expense) benefit . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . .
11
—
(1)
10
—
(7)
1
(6)
(66)
(12)
(67)
61
—
(5)
2
3
(7)
56
3
(8)
As of October 31, 2020 . . . . . . . . . . . . . . . . . .
$
(194)
$
125
$
(442) $
(11) $
(522)
107
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Reclassifications out of accumulated other comprehensive income (loss) for the years ended October 31, 2020 and 2019
were as follows (in millions):
Details about Accumulated Other
Comprehensive Income components
Amounts Reclassified
from Other
Comprehensive Income
2020
2019
Affected line item in
statement of operations
Unrealized gains and (losses) on derivatives . . . . . . . . . . . .
$
(2) $
8 Cost of products and interest expense
Net defined benefit pension cost and post retirement plan
costs:
Actuarial net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
—
(2)
(61)
7
(54)
16
(38)
8
Total before income tax
(2)
(Provision)/benefit for income tax
6
Total net of income tax
(39) Other (income) expense
8 Other (income) expense
(31) Total before income tax
12 Benefit for income tax
(19) Total net of income tax
Total reclassifications for the period . . . . . . . . . . . . . . . . . .
$
(40) $
(13)
Amounts in parentheses indicate reductions to income and increases to other comprehensive income.
Reclassifications 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 (see Note 15, "Retirement Plans and Post Retirement Pension Plans").
21. 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 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") 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
108
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
management and analytics; laboratory automation and robotic systems; dissolution testing; vacuum pumps and measurement
technologies.
Our diagnostics and genomics business is comprised of 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 API in an emerging class
of drugs that utilize nucleic acid molecules for disease therapy. Third, our pathology solutions business is focused on product
offerings for 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.
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. 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. 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 acquisition-related intangible assets, pension curtailment or settlement gains, restructuring and
transformational initiatives expenses, acquisition and integration costs, business exit and divestiture 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, 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.
109
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The profitability of each of the segments is measured after excluding items such as asset impairment charges,
transformational initiatives, acquisition and integration costs, non-cash amortization of intangible assets related to business
combinations, interest income, interest expense, and other items as noted in the reconciliations below.
Life Sciences
and Applied
Markets
Diagnostics
and
Genomics
Agilent
CrossLab
Total
Segments
(in millions)
Year Ended October 31, 2020:
Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Share-based compensation expense (1) . . . . . . . . . . . . . . . . . . . . . . . . . $
2,392 $
548 $
43 $
35 $
1,047 $
192 $
39 $
17 $
Year Ended October 31, 2019:
Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,302 $
542 $
41 $
33 $
1,021 $
185 $
35 $
14 $
Year Ended October 31, 2018:
Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,270 $
543 $
38 $
33 $
943 $
173 $
33 $
14 $
1,900 $
516 $
37 $
29 $
1,840 $
475 $
35 $
25 $
1,701 $
388 $
31 $
24 $
5,339
1,256
119
81
5,163
1,202
111
72
4,914
1,104
102
71
(1) Share-based compensation expense in 2020 excludes amounts not allocated to the segments related to accelerated
share-based compensation expense from workforce reduction and from our acquisition of BioTek.
The following table reconciles reportable segments' income from operations to Agilent's total enterprise income before
taxes:
Years Ended October 31,
2020
2019
(in millions)
2018
Total reportable segments' income from operations . . . . . . . . . . . . . . . . . . . . $
1,256 $
1,202 $
Amortization of intangible assets related to business combinations . . . . . . .
Acquisition and integration costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transformational initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acceleration of share-based compensation expense related to workforce
reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business exit and divestiture costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NASD site costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special compliance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before taxes, as reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(184)
(41)
(53)
(2)
(99)
(2)
—
—
(29)
8
(78)
66
(125)
(48)
(44)
—
—
—
(12)
(2)
(30)
36
(74)
16
842 $
919 $
1,104
(105)
(23)
(25)
—
(21)
(9)
(8)
(4)
(5)
38
(75)
79
946
(1) For the years ended October 31, 2020 and 2019, the other category primarily includes legal costs related to a claim we
pursued against Twist Bioscience Corporation in addition to other miscellaneous adjustments.
(2) For the year ended October 31, 2020, other income (expense), net includes the settlement of a legal claim against Twist
Bioscience Corporation.
110
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Major Customers. No customer represented 10 percent or more of our total net revenue in 2020, 2019 or 2018.
The following table reflects segment assets and capital expenditures 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.
Life Sciences
and Applied
Markets
Diagnostics
and
Genomics
Agilent
CrossLab
Total
Segments
(in millions)
As of and for the Year Ended October 31, 2020:
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,143 $
44 $
2,515 $
34 $
1,375 $
41 $
7,033
119
As of and for the Year Ended October 31, 2019:
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,202 $
59 $
2,620 $
48 $
1,331 $
48 $
7,153
155
The following table reconciles segment assets to Agilent's total assets:
Total reportable segments' assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right of use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
October 31,
2020
2019
(in millions)
7,033 $
1,441
106
158
114
380
175
220
9,627 $
7,153
1,382
94
102
100
410
—
211
9,452
The other category primarily includes overfunded pension assets which are not allocated to the segments.
The following table presents summarized information for net revenue by geographic region. Revenues from external
customers are generally attributed to countries based upon the customers' location.
Net revenue:
Year Ended October 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,752 $ 1,087 $ 2,500 $ 5,339
Year Ended October 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,619 $ 1,019 $ 2,525 $ 5,163
Year Ended October 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,414 $ 1,015 $ 2,485 $ 4,914
1. China also includes Hong Kong net revenue.
United
States
China(1)
Rest of the
World
Total
(in millions)
The following table presents summarized information for long-lived assets by geographic region. Long lived assets
consist of property, plant, and equipment, right-of-use assets, long-term receivables and other long-term assets excluding
intangible assets. The rest of the world primarily consists of Asia and the rest of Europe.
111
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Long-lived assets:
October 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
October 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
727 $
621 $
126 $
122 $
538 $ 1,391
404 $ 1,147
United
States
Germany
Rest of the
World
Total
(in millions)
112
QUARTERLY SUMMARY
(Unaudited)
Three Months Ended
January 31,
April 30,
July 31,
October 31,
(in millions, except per share data)
2020
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per share — Basic . . . . . . . . . . . . . . . . . . . . . . $
Net income per share — Diluted . . . . . . . . . . . . . . . . . . . . $
Weighted average shares used in computing net income
per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,357 $
723
215
197
0.64 $
0.63 $
1,238 $
657
102
101
0.33 $
0.32 $
1,261 $
669
230
199
0.64 $
0.64 $
310
313
309
312
309
312
1,483
788
299
222
0.72
0.71
308
311
Cash dividends per common share . . . . . . . . . . . . . . . . . . . $
0.180 $
0.180 $
0.180 $
0.180
2019
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,284 $
1,238 $
1,274 $
1,367
707
250
504
669
216
182
692
225
191
Net income per share — Basic . . . . . . . . . . . . . . . . . . . . . . $
Net income per share — Diluted . . . . . . . . . . . . . . . . . . . . $
1.58 $
1.57 $
0.57 $
0.57 $
0.61 $
0.60 $
Weighted average shares used in computing net income
per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
318
322
317
321
312
316
Cash dividends per common share . . . . . . . . . . . . . . . . . . . $
0.164 $
0.164 $
0.164 $
0.164
113
737
250
194
0.63
0.62
309
313
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and
Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of October 31, 2020, pursuant to and as
required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”). Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that, as of October 31, 2020, the company's disclosure controls
and procedures, as defined by Rule 13a-15(e) under the Exchange Act, were effective and designed to ensure that
(i) information required to be disclosed in the company's reports filed under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and forms, and (ii) information is accumulated
and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosures.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as
such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over
financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission ("COSO"). As a result of that assessment, management concluded that
our internal control over financial reporting was effective as of October 31, 2020 based on criteria in Internal Control -
Integrated Framework (2013) issued by the COSO.
The effectiveness of our internal control over financial reporting as of October 31, 2020 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in
Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during Agilent's last fiscal quarter
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Information regarding our directors appears under “Proposal No. 1 - Election of Directors” in our Proxy Statement for
the Annual Meeting of Stockholders (“Proxy Statement”), to be held March 17, 2021. That portion of the Proxy Statement is
incorporated by reference into this report. Information regarding our executive officers appears in Item 1 of this report under
“Executive Officers of the Registrant.” Information regarding our Audit and Finance Committee and our Audit and Finance
Committee's financial expert appears under “Audit and Finance Committee Report” and “Corporate Governance” in our Proxy
Statement. That portion of the Proxy Statement is incorporated by reference into this report.
There were no material changes to the procedures by which security holders may recommend nominees to our Board of
Directors in fiscal year 2020. Information regarding our code of ethics (the company's Standards of Business Conduct)
applicable to our principal executive officer, our principal financial officer, our controller and other senior financial officers
appears in Item 1 of this report under “Investor Information.” We will post amendments to or waivers from a provision of the
Standards of Business Conduct with respect to those persons on our website at www.investor.agilent.com.
114
Compliance with Section 16(a) of the Exchange Act
Information about compliance with Section 16(a) of the Exchange Act appears under “Section 16(a) Beneficial
Ownership Reporting Compliance” in the Proxy Statement. That portion of the Proxy Statement is incorporated by reference
into this report.
Item 11. Executive Compensation
Information about compensation of our named executive officers appears under “Executive Compensation” in the Proxy
Statement. Information about compensation of our directors appears under “Compensation of Non-Employee Directors” and
“Compensation Committee Report” in the Proxy Statement. Those portions of the Proxy Statement are incorporated by
reference into this report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information about security ownership of certain beneficial owners and management appears under "Beneficial
Ownership" in the Proxy Statement. That portion of the Proxy Statement is incorporated by reference into this report.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information about our equity compensation plans as of October 31, 2020. All
outstanding awards relate to our common stock.
Plan Category
Number of Securities
to be Issued upon
Exercise of
Outstanding Options,
Warrants and Rights
Weighted-average
Exercise Price of
Outstanding
Options,
Warrants and
Rights
Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation Plans
(Excluding Securities
Reflected in Column
(a))
(a)
(b)
(c)
Equity compensation plans approved by security
holders (1)(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity compensation plans not approved by security
holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,687,752 $
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,687,752 $
37
—
37
51,367,003
—
51,367,003
(1) The number of securities remaining available for future issuance in column (c) includes 25,770,573 shares of common
stock authorized and available for issuance under our current Employee Stock Purchase Plan ("ESPP"). The number of
shares authorized for issuance under the ESPP is subject to an automatic annual increase of the lesser of one percent of
the outstanding common stock of Agilent or an amount determined by the Compensation Committee of our Board of
Directors. Under the terms of the ESPP, in no event shall the aggregate number of shares issued under the ESPP exceed
31 million shares.
(2) We issue securities under our equity compensation plans in forms other than options, warrants or rights. On November
15, 2017 and March 21, 2018, the Board and the stockholders, respectively, approved the Agilent Technologies, Inc.
2018 Stock Plan (the “2018 Plan”), which was an amendment and restatement of the company’s 2009 Stock Plan,
approved by the Board and the stockholders, respectively, on November 19, 2008 and March 11, 2009. The 2018 Plan
provides for awards of stock-based incentive compensation to our employees (including officers), directors and
consultants. The 2018 Plan provides for the grant of awards in the form of stock options, stock appreciation rights,
restricted stock, restricted stock units, performance shares and performance units with performance-based conditions to
vesting or exercisability, and cash awards. The 2018 Plan has a term of ten years.
(3) We issue securities under our equity compensation plans in forms which do not require a payment by the recipient to us
at the time of exercise or vesting, including restricted stock, restricted stock units and performance units. Accordingly,
the weighted-average exercise price in column (b) does not take these awards into account.
115
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information about certain relationships and related transactions appears under "Related Person Transactions Policy and
Procedures" in the Proxy Statement. Information about director independence appears under the heading "Corporate
Governance — Director Independence" in the Proxy Statement. Each of those portions of the Proxy Statement is incorporated
by reference into this report.
Item 14. Principal Accounting Fees and Services
Information about principal accountant fees and services as well as related pre-approval policies appear under "Fees Paid
to PricewaterhouseCoopers LLP" and "Policy on Preapproval of Audit and Permissible Non-Audit Services of Independent
Registered Public Accounting Firm" in the Proxy Statement. Those portions of the Proxy Statement are incorporated by
reference into this report.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)
The following documents are filed as part of this report:
1.
Financial Statements.
See Index to Consolidated Financial Statements under Item 8 on Page 54 of this report.
2.
Financial Statement Schedule.
The following additional financial statement schedule should be considered in conjunction with our consolidated
financial statements. All other schedules have been omitted because the required information is either not applicable or not
sufficiently material to require submission of the schedule:
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
Column A
Description
Column B
Balance at
Beginning
of Period
Column C
Column D
Additions Charged to
Expenses or
Other Accounts*
Deductions Credited
to Expenses or
Other Accounts**
Column E
Balance at
End of
Period
2020
Tax valuation allowance . . . . . . . . . . . . . . $
134 $
2019
Tax valuation allowance . . . . . . . . . . . . . . $
135 $
2018
Tax valuation allowance . . . . . . . . . . . . . . $
138 $
(in millions)
6 $
9 $
4 $
(8) $
132
(10) $
134
(7) $
135
* Additions include current year additions charged to expenses and current year build due to increases in net deferred tax
assets, return to provision true-ups, other adjustments and other comprehensive income impact to deferred taxes.
** Deductions include current year releases credited to expenses and current year reductions due to decreases in net
deferred tax assets, return to provision true-ups, other adjustments and other comprehensive income impact to deferred taxes.
3.
Exhibits.
Exhibits are incorporated herein by reference or are filed with this report as indicated below (numbered in
accordance with Item 601 of Regulation S-K):
116
Exhibit
Number
2.1
Description
Separation and Distribution Agreement, dated August 1,
2014, by and between Agilent Technologies, Inc. and
Keysight Technologies, Inc. (pursuant to Item 601(b)(2)
of Regulation S-K, schedules to the Separation and
Distribution Agreement have been omitted; they will be
supplementally provided to the SEC upon request) . . . . . .
Incorporation by Reference
Form
8-K
Date
8/5/2014
Exhibit
Number
2.1
Filed
Herewith
4.2
4.3
4.4
3.1 Amended and Restated Certificate of Incorporation. . . . . .
3.2 Amended and Restated Bylaws. . . . . . . . . . . . . . . . . . . . . .
4.1 Registration Rights Agreement between Agilent
Technologies, Inc. and Credit Suisse First Boston
Corporation, J.P. Morgan Securities, Inc. and Salomon
Smith Barney, Inc. dated November 27, 2001. . . . . . . . . .
S-1
10-K
8-K
8/16/1999
12/19/2019
11/27/2001
Indenture, dated October 24, 2007, between Agilent
Technologies, Inc. and the trustee for the debt securities. .
S-3ASR
10/24/2007
3.1
3.2
99.3
4.01
4.01
Sixth Supplemental Indenture, dated as of September 13,
2012, between the Company and U.S. Bank National
Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seventh Supplemental Indenture, dated as of June 21,
2013, between the Company and U.S. Bank National
Association and Form of Global Note for the Company’s
3.875% Senior Notes due 2023. . . . . . . . . . . . . . . . . . . . . .
8-K
9/13/2012
8-K
6/21/2013
4.01
4.5 Eighth Supplemental Indenture, dated as of September 22,
2016, between the Company and U.S. Bank National
Association and Form of Global Note for the Company’s
3.050% Senior Note due 2026 . . . . . . . . . . . . . . . . . . . . . .
8-K
9/22/2016
4.01
4.6
4.7
4.8
Indenture, dated as of September 16, 2019, between the
Company and U.S. Bank National Association . . . . . . . . .
8-K
9/16/2019
First Supplemental Indenture, dated as of September 16,
2019, between the Company and U.S. Bank National
Association and Form of 2.750% Senior Note due 2029 . .
8-K
9/16/2019
4.1
4.2
Second Supplemental Indenture, dated as of June 4, 2020,
between the Company and U.S. Bank National
Association and Form of 2.100% Senior Note due 2030 . .
8-K
6/4/2020
4.1
4.9 Description of Securities . . . . . . . . . . . . . . . . . . . . . . . . . .
10.1 Agilent Technologies, Inc. 1999 Stock Plan (Amendment
and Restatement Effective November 14, 2006).* . . . . . . .
10-K
10-K
12/19/2019
12/22/2006
4.8
10.8
10.2
10.3
Form of Award Agreement (U.S.) for grants under the
Agilent Technologies, Inc. 1999 Stock Plan.* . . . . . . . . . .
8-K
11/12/2004
10.1
Form of Award Agreement (Non-U.S.) for grants under
the Agilent Technologies, Inc. 1999 Stock Plan.* . . . . . . .
8-K
11/12/2004
10.2
10.4 Agilent Technologies, Inc. 2020 Employee Stock
10-Q
6/1/2020
10.1
Purchase Plan effective May 1, 2020).* . . . . . . . . . . . . . . .
10.5 Agilent Technologies, Inc. 2009 Stock Plan.* . . . . . . . . . . DEF14A
1/27/2009
Appendix A
10.6
Form of Stock Option Award Agreement under the 2009
Stock Plan for U.S. Employees (for awards made after
October 31, 2010).* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10‑K
12/20/2010
10.17
117
Exhibit
Number
10.7
Description
Form of Stock Option Award Agreement under the 2009
Stock Plan for U.S. Employees.* . . . . . . . . . . . . . . . . . . . .
10.8
Form of Stock Option Award Agreement under the 2009
Stock Plan for non-U.S. Employees (for awards made
after October 31, 2010).* . . . . . . . . . . . . . . . . . . . . . . . . . .
10.9
Form of Stock Option Award Agreement under the 2009
Stock Plan for non-U.S. Employees.* . . . . . . . . . . . . . . . .
10.10
10.11
10.12
10.13
Form of Stock Award Agreement for Standard Awards
granted to Employees (for awards made after October 31,
2010).* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form of Stock Award Agreement under the 2009 Stock
Plan for Standard Awards granted to Employees (for
awards made after November 17, 2015).* . . . . . . . . . . . . .
Form of Stock Award Agreement under the 2009 Stock
Plan for Long-Term Performance Program Awards (for
awards made after November 17, 2015). * . . . . . . . . . . . . .
Form of Stock Award Agreement under the 2009 Stock
Plan for New Executives (for awards made after
November 17, 2015). * . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incorporation by Reference
Form
10-K
Date
12/21/2009
Exhibit
Number
10.31
Filed
Herewith
10‑K
12/20/2010
10.19
10-K
12/21/2009
10.32
10‑K
12/20/2010
10.21
10-K
12/21/2015
10.26
10-K
12/21/2015
10.28
10-K
12/21/2015
10.29
10.14 Agilent Technologies, Inc. 2018 Stock Plan.* . . . . . . . . . . DEF14A
2/7/2019
Appendix B
10.15
Form of Stock Award Agreement under the 2018 Stock
Plan for Standard Awards granted to Employees. * . . . . . .
10-Q
5/31/2018
10.1
10.16
Form of Stock Award Agreement under the 2018 Stock
Plan for Long-Term Performance Program Awards. * . . .
10-Q
5/31/2018
10.2
10.17
Form of Stock Award Agreement under the 2018 Plan for
Standard Awards granted to Employees (for awards made
after November 13, 2018). *
10-K
12/20/2018
10.17
10.18
Form of Stock Award Agreement under the 2018 Stock
Plan for Long-Term Performance Program Awards (for
awards made after November 13, 2018). *
10-K
12/20/2018
10.18
10.19 Agilent Technologies, Inc. Supplemental Benefit
10-K
12/21/2017
10.17
Retirement Plan (Amended and Restated Effective
May 20, 2014).* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.20 Agilent Technologies, Inc. Long-Term Performance
10-Q
3/9/2006
10.63
Program (Amended and Restated through November 1,
2005).* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.21 Agilent Technologies, Inc. 2005 Deferred Compensation
10-K
12/21/2009
10.39
Plan for Non-Employee Directors (Amended and Restated
Effective November 18, 2009).* . . . . . . . . . . . . . . . . . . . .
10.22 Agilent Technologies, Inc. 2005 Deferred Compensation
Plan (Amended and Restated Effective May 20, 2014).* .
10-K
12/21/2017
10.20
10.23 Agilent Technologies, Inc. 2010 Performance‑Based
Compensation Plan for Covered Employees. (as adopted
on November 19. 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.24
Form of Amended and Restated Indemnification
Agreement between Agilent Technologies, Inc. and
Directors of the Company, Section 16 Officers and
Board‑elected Officers of the Company.* . . . . . . . . . . . . .
DEF14A
2/6/2015
Annex A
8-K
4/10/2008
10.1
118
Exhibit
Number
10.25
10.26
10.27
10.28
Description
Form of Tier I Change of Control Severance Agreement
between Agilent Technologies, Inc. and the Chief
Executive Officer* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form of Amended and Restated Change of Control
Severance Agreement between Agilent Technologies, Inc.
and Section 16 Officers (other than the Company's Chief
Executive Officer).* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form of Tier II Change of Control Severance Agreement
between Agilent Technologies, Inc. and Section 16
Officers (other than the Company’s Chief Executive
Officer)* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form of New Executive Officer Change of Control
Severance Agreement between Agilent Technologies, Inc.
and specified executives of the Company (for executives
hired, elected or promoted after July 14, 2009).* . . . . . . . .
Incorporation by Reference
Form
10-K
Date
12/22/2014
Exhibit
Number
10.35
Filed
Herewith
8-K
4/10/2008
10.3
10-K
12/22/2014
10.37
10-K
12/21/2009
10.5
10.29
Form of Tier III Change of Control Severance Agreement
between Agilent Technologies, Inc. and specified
executives of the Company* . . . . . . . . . . . . . . . . . . . . . . .
10-K
12/22/2014
10.39
10.30 Tax Matters Agreement, dated August 1, 2014, by and
8-K
8/5/2014
10.1
between Agilent Technologies, Inc. and Keysight
Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.31 Employee Matters Agreement, dated August 1, 2014, by
8-K
8/5/2014
10.2
and between Agilent Technologies, Inc. and Keysight
Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.32
Intellectual Property Matters Agreement, dated August 1,
2014, by and between Agilent Technologies, Inc. and
Keysight Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . . .
8-K
8/5/2014
10.3
10.33 Trademark License Agreement, dated August 1, 2014, by
8-K
8/5/2014
10.4
and between Agilent Technologies, Inc. and Keysight
Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.34 Real Estate Matters Agreement, dated August 1, 2014, by
8-K
8/5/2014
10.5
and between Agilent Technologies, Inc. and Keysight
Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.35 Credit Agreement, dated March 13, 2019, by and among
8-K
3/13/2019
10.1
the Company, the Lenders party thereto and BNP Paribas,
as Administrative Agent. . . . . . . . . . . . . . . . . . . . . . . . . . .
10.36 Amendment No. 1 to Credit Agreement, dated August 7,
8-K
8/8/2019
10.1
2019, by and among the Company, the Lenders party
thereto and BNP Paribas, as Administrative Agent . . . . . .
10.37 Amendment No. 2 to Credit Agreement, dated October
8-K
10/22/2019
10.1
21, 2019, by and among the Company, the Lenders party
thereto and BNP Paribas, as Administrative Agent
10.38 Amendment No. 3 to Credit Agreement, dated April 17,
8-K
4/20/2020
10.1
2020, by and among the Company, the Lenders party
thereto and BNP Paribas, as Administrative Agent . . . . . .
10.39 Letter of Terms and Conditions International Long Term
Assignment, by and among Jacob Thaysen and the
Company* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10-K
12/22/2014
10.62
10.40 Letter of Terms and Conditions Localization Program by
and among Jacob Thaysen and the Company * . . . . . . . . .
10-K
12/21/2015
10.70
119
Exhibit
Number
Description
10.41 Letter of Terms and Conditions of U.S. Indefinite
Relocation and U.S. Domestic Relocation Agreement,
each by and among Michael R. McMullen and the
Company* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incorporation by Reference
Form
10-Q
Date
3/8/2016
Exhibit
Number
10.1
Filed
Herewith
10.42 Letter of Terms and Conditions of U.S. Indefinite
10-K
12/20/2018
10.41
Relocation and U.S. Domestic Relocation Agreement,
each by and among Robert McMahon and the Company*
10.43 Letter of Terms and Conditions Localization Program by
and among Padraig McDonnell and the Company* . . . . . .
10-Q
6/1/2020
10.2
10.44 Agilent Technologies, Inc. Excess Benefit Retirement
10-K
12/21/2017
10.40
Plan (Amended and Restated Effective May 20, 2014)* . .
Significant subsidiaries of Agilent Technologies, Inc. as
of October 31, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consent of Independent Registered Public Accounting
Firm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Powers of Attorney. Contained in the signature page of
this Annual Report on Form 10-K. . . . . . . . . . . . . . . . . . . .
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes‑Oxley Act of 2002. . . . . . . . .
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes‑Oxley Act of 2002. . . . . . . . .
Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes‑Oxley Act of 2002. . . . . . . . .
21.1
23.1
24.1
31.1
31.2
32.1
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 Taxonomy Extension Schema Document. . . . . . . .
101.CAL XBRL Taxonomy Extension Calculation Linkbase
Document. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
101.LAB XBRL Taxonomy Extension Label Linkbase Document. .
101.PRE XBRL Taxonomy Extension Presentation Linkbase
Document. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
101.DEF XBRL Taxonomy Extension Definition Linkbase
Document. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*
Indicates management contract or compensatory plan, contract or arrangement.
X
X
X
X
X
X
X
X
X
X
X
X
X
120
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
AGILENT TECHNOLOGIES, INC.
BY
/s/ MICHAEL TANG
Michael Tang
Senior Vice President,
General Counsel and Secretary
Date: December 17, 2020
121
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Michael Tang and P. Diana Chiu, or either of them, his or her attorneys-in-fact, for such person in any and all
capacities, to sign any amendments to this report and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that any of said attorneys-in-fact,
or substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature
Title
Date
/s/ MICHAEL R. MCMULLEN
Director, President and Chief Executive Officer
December 17, 2020
Michael R. McMullen
(Principal Executive Officer)
/s/ ROBERT W. MCMAHON
Senior Vice President and Chief Financial Officer
December 17, 2020
Robert W. McMahon
(Principal Financial Officer)
/s/ RODNEY GONSALVES
Vice President, Corporate Controllership
December 17, 2020
Rodney Gonsalves
(Principal Accounting Officer)
/s/ KOH BOON HWEE
Koh Boon Hwee
/s/ MALA ANAND
Mala Anand
/s/ HANS E. BISHOP
Hans E. Bishop
/s/ PAUL N. CLARK
Paul N. Clark
/s/ HEIDI KUNZ
Heidi Kunz
/s/ DANIEL K. PODOLSKY, M.D.
Daniel K. Podolsky, M.D.
/s/ SUE H. RATAJ
Sue H. Rataj
/s/ GEORGE A. SCANGOS, Ph.D.
George A. Scangos, Ph.D.
/s/ DOW R. WILSON
Dow R. Wilson
/s/ TADATAKA YAMADA, M.D.
Tadataka Yamada, M.D.
Chairman of the Board of Directors
December 17, 2020
December 17, 2020
December 17, 2020
December 17, 2020
December 17, 2020
December 17, 2020
December 17, 2020
December 17, 2020
December 17, 2020
December 17, 2020
Director
Director
Director
Director
Director
Director
Director
Director
Director
122