What changed in this filing

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Item 1A. Risk Factors

2020-12-18 compared with 2019-12-19 · 65 added, 34 removed, 293 unchanged (25% of the section changed)

Risks, Uncertainties and Other Factors That May Affect Future Results

Risks, Uncertainties and Other Factors Specific to Our Company That May Affect Future Results

T he 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.

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Also, in such an environment, pricing pressures could intensify.

Since a significant portion of our operating expenses is relatively fixed in nature due to sales, research and development and manufacturing costs, if we were unable to respond quickly enough these pricing pressures could further reduce our operating margins.

Since a significant portion of our operating expenses is relatively fixed in nature due to sales,

research and development and manufacturing costs, if we were unable to respond quickly enough these pricing pressures could further reduce our operating margins.

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

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dollars for financial reporting purposes.

The unfavorable effects of changes in foreign currency exchange rates have decreased revenues by approximately 2 percentage points in the year ended October 31, 2019 .

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.

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

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

• 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.

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• unexpected changes in regulatory requirements;

geopolitical uncertainty or turmoil, including terrorism and war.

• geopolitical uncertainty or turmoil, terrorism and war;

• 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.

Tariffs recently announced and implemented could have negative impact on our business, results of operations and financial condition.

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 receivables and tax functions are centralized at locations in India and Malaysia.

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.

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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.

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Even if we are able to successfully integrate acquired businesses within Agilent, we may not be able to realize the revenue and other synergies and growth that we anticipated from the acquisition in the time frame that we expected, and the costs of achieving these benefits may be higher than what we expected.

As a result, the acquisition and integration of acquired businesses may not contribute to our earnings as expected, we may not achieve our operating margin targets when expected, or at all, and we may not achieve the other anticipated strategic and financial benefits of 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.

As a result, the acquisition and integration of acquired

businesses may not contribute to our earnings as expected, we may not achieve our operating margin targets when expected, or at all, and we may not achieve the other anticipated strategic and financial benefits of such transactions.

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.

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Any significant change in these regulations could reduce demand for our products, force us to modify our products to comply with new regulations or increase our costs of producing these products.

If demand for our products is adversely affected or our costs increase, our operating results and business would suffer.

If demand for our products is adversely

affected or our costs increase, our operating results and business would suffer.

Our products and operations are also often subject to the rules of industrial standards bodies, like the International Standards Organization, as well as regulation by other agencies such as the FDA.

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

A number of our products are subject to regulation by the FDA and certain similar foreign regulatory agencies.

In addition, a number of our products may in the future be subject to regulation by the FDA and certain similar foreign regulatory agencies.

These regulations govern a wide variety of product-related activities, from quality management, design and development to labeling, manufacturing, promotion, sales and distribution.

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;

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Any such FDA or other regulatory agency actions could disrupt our business and operations, lead to significant remedial costs and have a material adverse impact on our financial position and results of operations.

In addition, the global regulatory environment has become increasingly stringent.

For example, the EU has adopted the EU In Vitro Diagnostic Regulation (the “EU IVDR”), which imposes stricter requirements for the marketing and sale of medical devices, including in the area of clinical evaluation requirements, quality systems and post-market surveillance.

Manufacturers will have until May 2022 to meet the EU IVDR requirements for in vitro diagnostic medical devices currently on the market.

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.

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

We derive a portion of our revenue from direct and indirect sales to U.S., state, local, and foreign governments and their respective agencies.

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.

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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.

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.

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Our intellectual property portfolio may not be useful in asserting a counterclaim, or negotiating a license, in response to a claim of intellectual property infringement.

In certain of our businesses, we rely on third party intellectual property licenses and we cannot ensure that these licenses will continue to be available to us in the future or can be expanded to cover new products on favorable terms or at all.

In certain of our businesses, we rely on third-party intellectual

property licenses, and we cannot ensure that these licenses will continue to be available to us in the future or can be expanded to cover new products on favorable terms or at all.

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

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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.

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.

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We are party to a $1 billion five-year unsecured credit facility that will expire on March 13, 2024.

As of October 31, 2019 , the company had $115 million 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 acquisition of BioTek.

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.

We also currently have outstanding an aggregate principal amount of $1.8 billion in senior unsecured notes.

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.

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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, increasing severity or frequency of extreme weather events, or other natural or man-made disasters.

In particular, several of our facilities could be subject to a catastrophic loss caused by earthquake due to their locations.

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.

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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.

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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.

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.

A change in our dividend program could have an adverse effect on the market price of our common stock.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors