Palo Alto, Calif. – Strong demand for new radiotherapy systems that are achieving dramatic results in treating cancer drove Varian Medical Systems (NYSE: VAR) sales and net orders to record highs and resulted in net income of $5.2 million ($0.17 per diluted share) for the first quarter of fiscal 2000. The company today announced sales of $141 million, up 35 percent from an unusually low first quarter of last fiscal year. Net orders for the quarter were $169 million, up 30 percent from the prior-year period. While all business segments experienced double-digit sales gains versus the year-ago quarter, sales growth was most dramatic in the company’s Oncology Systems business for its SmartBeam® IMRT (intensity modulated radiation therapy) systems that are enabling physicians to target and treat tumors with unprecedented accuracy and effectiveness. The company is reporting escalating demand among U.S. hospitals for its IMRT products that are already showing very promising results in prostate cancer cases.
"Sales and net orders for our Oncology Systems business have grown significantly over the last two years," said Richard M. Levy, president and CEO of Varian Medical Systems. "The company is seeing a rapid shift, particularly in North America, toward IMRT systems that are showing the potential to transform radiotherapy and improve patient outcomes in prostate, breast, and head and neck cancers. The company is in the right place at the right time with the right technology to help save the lives of cancer patients.
"In addition to the growth in North American oncology business, the company achieved sales gains in international markets as well as in our X-ray Products and Ginzton Technology Center brachytherapy businesses," Levy added.
"The high sales volume and somewhat shorter shipping cycles contributed to the unusually strong results for the first quarter which is typically the slowest period of the fiscal year for the company. Some sales and profits that were anticipated for later in the year moved up to the first quarter."
Oncology Systems:
Oncology Systems sales of Clinac® accelerators, Ximatron® simulators and ancillary products, software, and services for advanced radiotherapy including SmartBeam IMRT totaled $106 million for the quarter, up 41 percent from the prior-year period. First-quarter net orders in the Oncology Systems business totaled $129 million, up 29 percent from the prior year. "This growth stems from a combination of factors, including a booming North American economy, greater latitude among health care providers to invest in promising new technologies, and a drive among caregivers to offer patients better treatment options," Levy explained.
X-ray Products
Sales in the X-ray Products business, including tubes and amorphous silicon flat-panel digital imagers, were $30 million for the quarter, up 13 percent from the year-ago quarter. The business generated significant growth in sales of its new X-ray tubes used in new sub-second CT scanners for high-resolution diagnostic imaging. Net orders for the X-ray Products business totaled $36 million for the first quarter, up 32 percent from the year-ago period.
Ginzton Technology Center
The company’s premier research facility, the Ginzton Technology Center, which focuses on incubating new technologies and businesses such as brachytherapy, recorded sales of $5 million for the quarter, up 68 percent from the year-ago quarter. The growth in sales stemmed from shipments of the new delivery systems for high dose rate brachytherapy and treatment planning software for low dose rate brachytherapy with seed implants. Net orders for Ginzton Technology Center were $4 million for the quarter, up 26 percent from the year-ago quarter.
Outlook
At quarter’s end, the backlog for the company was $428 million, up 13 percent from the first quarter of last year.
"There is demonstrated interest within the medical community in our SmartBeam IMRT treatment systems for some of the world’s most common and deadly cancers, and our growth initiatives are clearly succeeding beyond expectations," said Levy. "Accordingly, we are making slight upward adjustments in our sales and earnings growth expectations for fiscal 2000. At this early stage in the year, we project that fiscal 2000 sales could be 12-14 percent over fiscal 1999 levels. We expect that earnings could grow above fiscal 1999 pro forma levels of $1.28 per share by about one and half times the rate of revenue growth."
Varian Medical Systems is scheduled to conduct its fiscal 2000 first quarter conference call at 7:30 a.m. PST on Thursday, January 27. To hear a live webcast or replay of the call, visit the investor relations page on the company’s web site at www.varian.com
Forward Looking Statements:
Except for historical information, this news release contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: product demand and market acceptance risks; the effect of general economic conditions and foreign currency fluctuations; the impact of competitive products and pricing; new product development and commercialization; the reliance on sole source suppliers; the Company’s ability to increase operating margins on higher sales; the impact of managed care initiatives in the U.S. on capital expenditures and resulting pricing pressure on medical equipment; effectiveness of certain third parties’ corrective actions to address the impact of the year 2000; the Company’s potential responsibility for liabilities arising out of the reorganization which were not expressly assumed by the Company; the possibility that indemnification for certain liabilities arising out of or relating to the reorganization will not be available to the Company due to the indemnifying party's insolvency or legal prohibition; increased debt leverage resulting from their organization impacting the Company’s ability to obtain future financing for working capital, capital expenditures, product development, acquisitions, and general corporate purposes; the effect of increased debt leverage on cash flow, vulnerability to economic downturns and flexibility in responding to changing business and economic conditions; possible exposure to fraudulent conveyance allegations arising out of the reorganization; possible exposure to additional tax obligations in connection with the reorganization; and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission.
# # #
Varian Medical Systems, Inc., (NYSE:VAR) of Palo Alto, California is the world’s leading manufacturer of integrated cancer therapy systems, which are treating thousands of patients per day. The company is also a premier supplier of X-ray tubes and flat-panel digital subsystems for imaging in medical, scientific, and industrial applications. Varian Medical Systems employs approximately 2,300 people who are located at manufacturing sites in North America and Europe and in its 40 sales and support offices around the world. In its most recent fiscal year ended October 1, 1999, Varian Medical Systems reported sales of $590 million. Additional information is available on the company’s investor relations web site at www.varian.com
A summary of income and other financial information follows:
|
Varian Medical Systems, Inc. and Subsidiary Companies |
|||||
|
Consolidated Statements of Earnings |
|||||
|
(Dollars and shares in millions except per share amounts) |
|||||
|
(Unaudited) |
|||||
|
Q1 QTR |
Q1 QTR |
||||
|
FY 00 |
FY 99 |
||||
| Net Orders |
$ |
169.0 |
130.2 |
||
| Oncology Systems |
128.9 |
99.7 |
|||
| X-Ray Products |
35.7 |
27.0 |
|||
| Ginzton Technology Center |
4.4 |
3.5 |
|||
| Order Backlog |
$ |
428.0 |
377.6 |
||
| Sales |
$ |
141.3 |
105.0 |
||
| Oncology Systems |
106.1 |
75.3 |
|||
| X-Ray Products |
30.0 |
26.6 |
|||
| Ginzton Technology Center |
5.2 |
3.1 |
|||
| Gross Margin |
50.4 |
32.8 |
|||
| As a percent of Sales |
35.7% |
31.2% |
|||
| Operating Expenses | |||||
| Selling, General and administrative |
30.2 |
23.6 |
|||
| Research and development |
10.3 |
9.4 |
|||
| Operating Earnings (Loss) Before | |||||
| Reorganization Expenses |
9.9 |
(0.2) |
|||
| As a percent of Sales |
7.0% |
-0.2% |
|||
| Reorganization Expenses |
0.0 |
3.5 |
|||
| Operating Earnings (Loss) |
9.9 |
(3.7) |
|||
| Interest Expense, Net |
1.5 |
1.2 |
|||
| Earnings (Loss) From Continuing Operations | |||||
| Before Taxes |
8.4 |
(4.9) |
|||
| Taxes on earnings |
3.2 |
(2.9) |
|||
| Earnings (Loss) from Continuing Operations |
5.2 |
(2.0) |
|||
| Earnings (Loss) from Discontinued Operations - | |||||
| Net of Taxes |
0.0 |
(0.4) |
|||
| Net Earnings (Loss) |
$ |
5.2 |
(2.4) |
||
| Average Shares Outstanding - Basic |
30.6 |
29.8 |
|||
| Average Shares Outstanding - Diluted |
31.4 |
29.8 |
|||
| Net Earnings (Loss) Per Share - Basic | |||||
| Continuing Operations |
$ |
0.17 |
(0.07) |
||
| Discontinued Operations |
0.00 |
(0.01) |
|||
| Net Earnings (Loss) Per Share |
0.17 |
(0.08) |
|||
| Net Earnings (Loss) Per Share - Diluted | |||||
| Continuing Operations |
0.17 |
(0.07) |
|||
| Discontinued Operations |
0.00 |
(0.01) |
|||
| Net Earnings (Loss) Per Share |
$ |
0.17 |
(0.08) |
||
|
Varian Medical Systems, Inc. and Subsidiary Companies |
||||
|
Consolidated Balance Sheets |
||||
|
December 31, |
October 1, |
|||
|
1999 |
1999 |
|||
| (Dollars in thousands, except par values) |
(Unaudited) |
|||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents |
$ |
19,294 |
$ |
25,126 |
| Accounts receivable |
200,117 |
233,785 |
||
| Inventories |
92,751 |
78,324 |
||
| Other current assets |
48,936 |
45,011 |
||
| Total current assets |
361,098 |
382,246 |
||
| Property, plant, and equipment |
200,631 |
200,386 |
||
| Accumulated depreciation and amortization |
(120,893) |
(120,138) |
||
| Net property, plant, and equipment |
79,738 |
80,248 |
||
| Other Assets |
76,119 |
76,689 |
||
| Total assets |
$ |
516,955 |
$ |
539,183 |
| Liabilities and Stockholders' Equity | ||||
| Current liabilities | ||||
| Notes payable |
$ |
20,585 |
$ |
35,587 |
| Accounts payable - trade |
36,497 |
40,141 |
||
| Accrued expenses |
113,250 |
121,165 |
||
| Product warranty |
18,812 |
18,152 |
||
| Advance payments from customers |
51,615 |
54,757 |
||
| Total current liabilities |
240,759 |
269,802 |
||
| Long-term accrued expenses |
25,029 |
25,890 |
||
| Long-term debt |
58,500 |
58,500 |
||
| Total liabilities |
324,288 |
354,192 |
||
| Stockholders' Equity | ||||
| Preferred stock | ||||
| Authorized 1,000,000 shares, par value $1, issued none |
- |
- |
||
| Common stock | ||||
| Authorized 99,000,000 shares, par value $1, issued and outstanding | ||||
| 30,702,000 shares at December 31, 1999 and 30,563,000 shares at | ||||
| October 1, 1999 |
30,702 |
30,563 |
||
| Capital in excess of par value |
22,494 |
20,185 |
||
| Retained earnings |
139,471 |
134,243 |
||
| Total stockholders' equity |
192,667 |
184,991 |
||
| Total liabilities and stockholder's equity |
$ |
516,955 |
$ |
539,183 |