Varian Medical Systems Reports Strong Growth in Net Orders, Revenues, and Earnings for the Third Quarter of Fiscal Year 2008 | Varian

{ "pageType": "news-article", "title": "Varian Medical Systems Reports Strong Growth in Net Orders, Revenues, and Earnings for the Third Quarter of Fiscal Year 2008", "articleDate": "July 23, 2008", "introText": "", "category": "Corporate and Financial Releases" }

Varian Medical Systems Reports Strong Growth in Net Orders, Revenues, and Earnings for the Third Quarter of Fiscal Year 2008

PALO ALTO, Calif., July 23 /PRNewswire-FirstCall/ -- Varian Medical Systems (NYSE: VAR) today is reporting net earnings of $74 million ($0.58 per diluted share) for the third quarter of fiscal year 2008 versus net earnings in the year-ago quarter of $50 million ($0.39 per diluted share). Compared to the same period last fiscal year, third quarter revenues grew 21 percent to $513 million, net orders rose 15 percent to $575 million, and the quarter- ending backlog increased 13 percent to $1.8 billion.

"This was an excellent quarter for our company," said Tim Guertin, president and CEO of Varian Medical Systems. "Our Oncology Systems, X-Ray Products, and Security businesses contributed to significant growth in revenues. High shipment volumes, product mix, and faster than expected Oncology product acceptances contributed to the revenue growth, a nearly 1- point improvement in the gross margin, and 35 percent growth in operating earnings versus the year-ago quarter. Higher operating earnings together with an unusually low 18 percent tax rate stemming from discrete tax benefits led to a 49 percent increase in net earnings per diluted share versus the year ago period."

The company generated $114 million in cash flow from operations in the quarter and ended the period with $406 million in cash and cash equivalents and $107 million of debt. Compared to the year-ago quarter, days sales outstanding improved by 14 days to 79. During the quarter, the company spent $62 million to repurchase 1.2 million shares of common stock under a 12 million share repurchase authorization that extends through the end of this calendar year.

Oncology Systems

The Oncology Systems business, including radiotherapy, radiosurgery, and brachytherapy products, reported third quarter revenues of $408 million, up 21 percent from the year-ago period. This business recorded third quarter net orders of $461 million, up 12 percent from the same period last year with 12 percent growth in North America and 13 percent growth in international markets.

"We continued to experience tremendous demand for our RapidArcâ„¢ products for faster, more precise image guided IMRT during the quarter," Guertin said. "Once again, even after very strong initial demand for RapidArc, we booked about 70 orders for this capability on new high energy machines during the quarter. Clinical use has commenced at several sites." Higher unit volumes for treatment machines and accessories for image-guided radiotherapy as well as service also drove Oncology Systems' net order growth during the quarter.

X-Ray Products

Revenues for the X-Ray Products business, including X-ray tubes and flat panel detectors for filmless imaging, were $77 million for the third quarter, up 22 percent from the year-ago quarter. Net orders for the quarter were $85 million, up 45 percent from the same period last year driven by continued strong demand for flat panel detectors.

"Our flat panel business grew strongly with the help of a more than $11 million order from a large new customer with a next-generation digital imaging system for medical diagnostics," Guertin said. "On top of adding important new customers, many of our existing customers have increased their order volumes."

Other Businesses

The company's Other category, comprised of the Security and Inspection Products business, the ACCEL proton therapy business, and the Ginzton Technology Center, reported combined third quarter revenues of $28 million, up 23 percent from the same period last fiscal year due to growth in the security business.

Net orders for the Other category were $29 million, down 2 percent from the year-ago period when the company acquired Bio-Imaging Research (BIR), a supplier of detectors and software for processing and analyzing X-ray images in security and inspection systems. Excluding $3 million in acquired backlog from BIR in the year-ago quarter, net orders for this category grew by 8 percent versus the year-ago quarter with a 12 percent increase in net orders for security products.

"Our security business continued to expand with orders for high energy X-ray screening systems for ports and borders in Europe, the U.S. and the Far East," said Guertin.


"For the full fiscal year 2008, we believe that total company revenues should increase by about 17 to 18 percent above the fiscal 2007 total," Guertin said. "Net earnings per diluted share for fiscal year 2008 should grow by about 22 percent over the total for fiscal year 2007. At this early stage, we estimate that revenues for fiscal 2009 could grow by about 12 percent and that earnings per diluted share should grow at a slightly faster rate than revenues."

Investor Conference Call

Varian Medical Systems is scheduled to conduct its third quarter fiscal year 2008 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 where it will be archived for a year. To access the call via telephone, dial 1-800-329-9097 from inside the U.S. or 1-617-614-4929 from outside the U.S. and enter confirmation code 70611804. 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 79882121. The telephone replay will be available through 5 p.m. PT, Friday, July 25, 2008.

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 4,800 people who are located at manufacturing sites in North America, Europe, and China and approximately 60 sales and support offices around the world. For more information, visit

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 orders, revenues, backlog, or earnings growth; future financial results; market acceptance of or transition to new products or technology such as RapidArc therapy, image-guided radiation therapy (IGRT), stereotactic radiosurgery, filmless X-rays, proton therapy, and security and inspection, and any statements using the terms "estimate," "believe," "expect," "could," "can," "grow," "should" 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 demand for the company's products; the company's ability to develop and commercialize new products; the company's ability to meet demand for manufacturing capacity; 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 effect of economic conditions, currency exchange rates, and tax rates; the effect of changes in accounting principles; the company's ability to meet Food and Drug Administration and other regulatory requirements for product clearances or to comply with Food and Drug Administration and other regulatory regulations or procedures; the ability to make strategic acquisitions and to successfully integrate the acquired operations into the company's business; the possibility that material product liability claims could harm future revenues or require the company to pay uninsured claims; the effect of environmental claims and expenses; the company's ability to protect the company's intellectual property; the impact of managed care initiatives, other health care reforms, and/or third-party reimbursement levels and credit availability for capital expenditures for cancer care; the potential loss of key distributors or key personnel; consolidation in the X-ray tubes market; the risk of operations interruptions due to terrorism, disease or other events beyond the company's control; 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
                     Consolidated Statements of Earnings

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

                          Q3 QTR       Q3 QTR       Q3 YTD       Q3 YTD
                           2008         2007         2008         2007
  Net orders              $574.8        498.9      1,586.8      1,435.1
    Oncology Systems       461.4        410.9      1,260.2      1,113.7
    X-Ray Products          84.5         58.4        242.6        193.4
    Other                   28.9         29.6         84.0        128.0

  Order backlog         $1,786.8      1,581.6      1,786.8      1,581.6

  Revenues                $512.8        423.7      1,498.9      1,254.2
    Oncology Systems       407.7        337.7      1,189.2      1,012.6
    X-Ray Products          77.2         63.3        222.1        191.2
    Other                   27.9         22.7         87.6         50.4

  Cost of revenues (1)    $302.3        253.2        886.4        738.4

  Gross margin             210.5        170.5        612.5        515.8
    As a percent of
     revenues               41.1%        40.2%       40. 9%        41.1%

  Operating expenses
  Research and
   development (1)          36.0         29.2         97.2         84.6
  Selling, general and
   administrative (1)       85.2         75.2        238.6        208.6

  Operating earnings        89.3         66.1        276.7        222.6
    As a percent of
     revenues               17.4%        15.6%        18.5%        17.7%

  Interest income, net       1.2          1.6          4.3          6.1

  Earnings before taxes     90.5         67.7        281.0        228.7

  Taxes on earnings (1)     16.3         17.4         80.0         67.9

  Net earnings(1)          $74.2         50.3        201.0        160.8

    Net earnings per
     share - basic:(1)     $0.60         0.40         1.61         1.26

    Net earnings per
     share - diluted:(1)   $0.58         0.39         1.58         1.22

  Shares used in the
   calculation of net
   earnings per share:
    Average shares
     outstanding - basic   124.6        127.0        124.9        128.1

    Average shares
     outstanding - diluted 127.1        129.9        127.6        131.4

  (1) Includes amounts for total share-based compensation expense and its
      related tax benefits.
      (in millions, except per share amounts)

                           Q3 QTR       Q3 QTR       Q3 YTD       Q3 YTD
                            2008         2007         2008         2007
  Costs of revenues         $2.1          2.0          5.6          6.0
  Research & development     1.4          1.2          3.5          3.8
  Selling, general &
   administrative            8.0          7.6         21.0         24.0
  Total                     11.5         10.8         30.1         33.8
  Taxes on earnings
   - SFAS 123R              (3.8)        (3.7)       (10.0)       (11.5)
  Net earnings              $7.7          7.1         20.1         22.3

  Net earnings per diluted
   share - share-based
   compensation expense    $0.06         0.05         0.16         0.17

  Net earnings per diluted
   share - excluding
   compensation expense    $0.64         0.44         1.73         1.39

                Varian Medical Systems, Inc. and Subsidiaries
                    Condensed Consolidated Balance Sheets

  (In thousands)                                  June 27,    September 28,
                                                    2008          2007 (1)

  Current assets
    Cash and cash equivalents                     $405,684       $263,246
    Accounts receivable, net                       442,650        507,040
    Inventories                                    304,306        233,743
    Deferred tax assets and other                  202,538        156,200
      Total current assets                       1,355,178      1,160,229

  Property, plant and equipment                    442,835        386,531
    Accumulated depreciation and amortization    (233,813)      (214,877)
      Property, plant and equipment, net           209,022        171,654

  Goodwill                                         214,927        205,553
  Other assets                                     161,857        146,939
  Total assets                                  $1,940,984     $1,684,375

  Liabilities and Stockholders' Equity
  Current liabilities
    Accounts payable                              $103,791        $92,600
    Accrued expenses                               245,687        299,052
    Deferred revenues                              138,129        101,839
    Product warranty                                52,440         51,290
    Advance payments from customers                214,311        186,936
    Short-term borrowings                           66,884         41,000
    Current maturities of long-term debt             7,983          8,970
      Total current liabilities                    829,225        781,687
  Other long-term liabilities                      126,977         40,847
  Long-term debt                                    32,460         40,386
      Total liabilities                                           988,662

  Stockholders' Equity
  Common stock                                     124,877        125,215
  Capital in excess of par value                   391,771        311,411
  Retained earnings and accumulated other
   comprehensive loss                              435,674        384,829
      Total stockholders' equity                   952,322        821,455
  Total liabilities and
   stockholders' equity                         $1,940,984     $1,684,375

   (1)  The condensed consolidated balance sheet as of September 28, 2007
        was derived from audited financial statements as of that date.

   Elisha Finney (650) 424-6803

   Spencer Sias (650) 424-5782

SOURCE: Varian Medical Systems

CONTACT: Elisha Finney, +1-650-424-6803,, or
Spencer Sias, +1-650-424-5782,, both of Varian Medical

Web site: