Varian Medical Systems Reports Results for Third Quarter of Fiscal Year 2010 | Varian

Varian Medical Systems Reports Results for Third Quarter of Fiscal Year 2010

PALO ALTO, Calif., July 28 /PRNewswire-FirstCall/ -- Varian Medical Systems (NYSE: VAR) today is reporting net earnings from continuing operations of $0.74 per diluted share in the third quarter of fiscal year 2010, up 9 percent from $0.68 per diluted share in the year-ago quarter.  Including discontinued operations, net earnings for the third quarter of fiscal 2010 were $0.69 per diluted share.  Revenues for the quarter were $578 million, up 13 percent from the prior-year period and also up 13 percent on a constant currency basis.

Varian's third quarter net orders totaled $629 million, up 14 percent from the year-ago period and up 15 percent on a constant currency basis.  The quarter-ending backlog was $2.1 billion, up 7 percent versus the year-ago quarter.

"Company net orders rose in double digits in North America, Europe, and the Far East, driven in part by demand for new products from our Oncology Systems and X-Ray Products businesses," said Tim Guertin, president and CEO of Varian Medical Systems.  "Excellent execution in our two major businesses contributed to quarter-over-quarter gains in both gross and operating margins as well as in net earnings from continuing operations."  

The company ended the quarter with $588 million in cash and cash equivalents and $23 million of debt.  During the third quarter, the company spent $116 million to repurchase 2.3 million shares of common stock. Compared to the same period last year, accounts receivable days sales outstanding was 80, an improvement of three days.

Oncology Systems

Oncology Systems' third quarter revenues from sales of products and services for radiotherapy, radiosurgery, and brachytherapy totaled $456 million, up 6 percent from the same period last fiscal year.  Third quarter net orders totaled $507 million, up 10 percent versus the year-ago period.  Net orders rose 9 percent in international markets and increased 12 percent in North America.

"Strong demand for our new TrueBeam™ System for high-precision image-guided radiotherapy and radiosurgery contributed to a solid gain in North American and European net orders during the quarter," said Guertin.  "China, Korea, and Thailand contributed to healthy order increases in the Far East.  Service, including software service agreements, and our RapidArc product for faster treatment delivery also added to the orders growth in this business."

X-Ray Products

X-Ray Products third quarter revenues from sales of X-ray tubes and digital detectors for filmless imaging were $102 million, up 52 percent from the weak year-ago quarter.  Compared to the same period in fiscal year 2009, X-Ray Products' third quarter net orders rose 26 percent to $103 million.  

"This business had another strong quarter with robust revenue growth for flat panel detectors as well as our X-ray tubes," Guertin said.  "Net orders for our panel products, particularly our new radiographic panels, also rose significantly in the period.  It appears that we are benefitting from recovering and expanding businesses among many of our customers.  Our X-Ray Products unit was a leading contributor to the company's improved margins during the quarter."

Other

The company's Other category, which is comprised of the Security and Inspection Products (SIP) business, the Varian Particle Therapy business and the Ginzton Technology Center, recorded third quarter revenues of $20 million, up 37 percent from the year-ago period.  Net orders in the Other category were also $20 million, up $11 million versus a weak year-ago quarter.

During the quarter, the company recorded a $6.4 million charge related to its discontinued research instruments business.

Outlook

"In the third quarter of fiscal year 2010, the company's net earnings benefited from a shift in timing of certain tax items, but we continue to believe that the tax rate will be 31 to 32 percent for the year. For the fourth quarter, we now expect net earnings from continuing operations to be $0.80 to $0.83 per diluted share, bringing the total for the full fiscal year to $2.90 to $2.93 per diluted share," said Guertin. "We continue to believe that total revenues for the fiscal year could grow by about 6 to 7 percent."  

Investor Conference Call

Varian Medical Systems is scheduled to conduct its third quarter fiscal year 2010 conference call at 2 p.m. PT today.  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/investor where it will be archived for a year.  To access the call via telephone, dial 1-866-271-6130 from inside the U.S. or 1-617-213-8894 from outside the U.S. and enter confirmation code 86287870.  The replay can be accessed by dialing 1-888-286-8010 from inside the U.S. or 1-617-801-6888 from outside the U.S. and entering confirmation code 54383231.  The telephone replay will be available through 5 p.m. PT, Friday, July 30, 2010.

For automatic "e-mail alerts" regarding Varian news, events, and new investor materials on the website, investors can subscribe on the company website: http://varian.investorroom.com/index.php?s=58.  For additional information, contact investor relations at 1 650 424-5834.

Varian Medical Systems, Inc., of Palo Alto, California, is the world's leading manufacturer of medical devices and software for treating cancer and other medical conditions with radiotherapy, radiosurgery, proton therapy, and brachytherapy. The company supplies informatics software for managing comprehensive cancer clinics, radiotherapy centers and medical oncology practices. Varian is a premier supplier of tubes and digital detectors for X-ray imaging in medical, scientific, and industrial applications and also supplies X-ray imaging products for cargo screening and industrial inspection. Varian Medical Systems employs approximately 5,200 people who are located at manufacturing sites in North America, Europe, and China and approximately 70 sales and support offices around the world. For more information, visit http://www.varian.com.

Forward-Looking Statements

Except for historical information, this news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements concerning industry outlook, including growth drivers; the company's future orders, revenues, backlog, or earnings growth; future financial results; market acceptance of or transition to new products or technology such as TrueBeam and our radiographic flat panel detectors, image-guided radiation therapy, stereotactic radiosurgery, filmless X-rays, proton therapy, and security and inspection, and any statements using the terms "expect," "continuing," "can," "could," "believe," "estimate," "outlook," or similar statements are forward-looking statements that involve risks and uncertainties that could cause the company's actual results to differ materially from those anticipated. Such risks and uncertainties include the effect of economic conditions, including the strength of any recovery from the global recession; the impact of recently enacted federal health care legislation and any further health care reforms, and/or changes in third-party reimbursement levels; currency exchange rates and tax rates; demand for the company's products; the company's ability to develop, commercialize, and deploy new products such as the TrueBeam platform; the company's ability to meet Food and Drug Administration (FDA) and other regulatory requirements for product clearances or to comply with FDA and other regulatory regulations or procedures; changes in the regulatory environment, including with respect to FDA requirements; challenges in reducing or eliminating ongoing commitments retained from our discontinued research instruments business; the effect of adverse publicity; the company's reliance on sole or limited-source suppliers; the impact of reduced or limited demand by sole purchasers of certain X-ray tubes; the company's ability to maintain or increase operating margins; the impact of competitive products and pricing; the potential loss of key distributors or key personnel; challenges to public tender awards and the loss of such awards or other orders; and the other risks listed from time to time in the company's filings with the Securities and Exchange Commission, which by this reference are incorporated herein. The company assumes no obligation to update or revise the forward-looking statements in this release because of new information, future events, or otherwise.

A summary of earnings and other financial information follows.

Varian Medical Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(Unaudited)





(Dollars and shares in millions, except per share amounts)


Q3 QTR
2010


Q3 QTR
2009


Q3 YTD
2010


Q3 YTD
2009



Net orders

$

629.3


549.8


1,718.1


1,625.3



Oncology Systems


506.6


459.3


1,419.3


1,321.1



X-Ray Products


103.2


82.2


306.9


242.1



Other


19.5


8.3


(8.1)


62.1














Order backlog

$

2,068.0


1,941.0


2,068.0


1,941.0














Revenues

$

578.0


509.8


1,704.5


1,572.1



Oncology Systems


455.9


428.2


1,350.5


1,271.0



X-Ray Products


102.3


67.2


295.9


239.1



Other


19.8


14.4


58.1


62.0



Cost of revenues

$

323.6


293.6


955.1


896.5



Gross margin


254.4


216.2


749.4


675.6



As a percent of revenues


44.0%


42.4%


44.0%


43.0%



Operating expenses











Research and development


38.9


35.3


116.2


109.3



Selling, general and administrative


84.7


78.4


247.8


242.8



Operating earnings


130.8


102.5


385.4


323.5



As a percent of revenues


22.6%


20.1%


22.6%


20.6%




Interest income/(expense), net


(0.9)


(0.3)


(1.5)


0.7



Earnings from continuing operations before taxes


129.9


102.2


383.9


324.2



Taxes on earnings


38.0


16.8


122.1


89.9



Earnings from continuing operations


91.9


85.4


261.8


234.3



As a percent of revenues


15.9%


16.7%


15.4%


14.9%



Loss  from discontinued operations – net of  taxes  (1)


(6.4)


-


(6.4)


(12.3)



Net earnings

$

85.5


85.4


255.4


222.0














Net earnings (loss) per share – basic:











Continuing operations

$

0.75


0.69


2.13


1.89



Discontinued operations  (1)


(0.05)


-


(0.05)


(0.10)



Net earnings per share

$

0.70


0.69


2.08


1.79



Net earnings (loss)  per share – diluted:











Continuing operations

$

0.74


0.68


2.10


1.88



Discontinued operations  (1)


(0.05)


-


(0.05)


(0.10)



Net earnings per share

$

0.69


0.68


2.05


1.78














Shares used in the calculation of net earnings per share:











Average shares outstanding - basic


122.1


124.2


122.9


124.0



Average shares outstanding - diluted


124.5


125.0


124.5


124.9



(1) The operating results of ACCEL research instruments are classified as discontinued operations for all periods presented.





Varian Medical Systems, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets






(In thousands)


July 2,


October 2,

2010

2009 (1)

(Unaudited)


Assets





Current assets





   Cash and cash equivalents

     $

587,611

$

553,529

   Accounts receivable, net


514,939


580,918

   Inventories                                        


390,188


321,861

   Deferred tax assets and other                                


205,190


216,143

Total current assets                                        


1,697,928


1,672,451






Property, plant and equipment                                            


550,180


527,135

   Accumulated depreciation and amortization                    


(288,819)


(263,075)

Property, plant and equipment, net                          


261,361


264,060






Goodwill


203,288


210,346

Other assets                                                    


156,318


161,391

Total assets                                              

     $

2,318,895

$

2,308,248






Liabilities and Stockholders' Equity





Current liabilities                                                        





   Accounts payable                                              

     $

105,823

$

116,093

   Accrued expenses                                              


227,754


304,402

   Deferred revenues                                              


125,554


130,588

   Advance payments from customers                              


280,981


226,964

   Product warranty                                                        


49,583


50,823

   Short-term borrowings


-


4,445

   Current maturities of long-term debt                              


5,520


9,005

Total current liabilities                                  


795,215


842,320

Other long-term liabilities


118,395


130,751

Long-term debt                                                            


17,939


23,394

Total liabilities                                          


931,549


996,465






Stockholders' Equity





Common stock


121,770


125,281

Capital in excess of par value


533,218


516,478

Retained earnings and accumulated other comprehensive loss  


732,358


670,024

Total stockholders' equity                                  


1,387,346


1,311,783

Total liabilities and stockholders' equity              

     $

2,318,895

$

2,308,248

(1)  The condensed consolidated balance sheet as of October 2, 2009 was derived from audited financial statements as of that date.



FOR INFORMATION CONTACT:


Elisha Finney (650) 424-6803

elisha.finney@varian.com


Spencer Sias (650) 424-5782

spencer.sias@varian.com



SOURCE Varian Medical Systems, Inc.