Varian Medical Systems Reports Results for Third Quarter of Fiscal Year 2009 | Varian

Varian Medical Systems Reports Results for Third Quarter of Fiscal Year 2009

PALO ALTO, Calif., July 29 /PRNewswire-FirstCall/ -- Varian Medical Systems (NYSE: VAR) today reported net earnings of $0.68 per diluted share in the third quarter of fiscal year 2009 versus net earnings from continuing operations of $0.61 per diluted share in the year-ago quarter. Third quarter revenues were $510 million, about even with revenues from continuing operations in the year-ago quarter. Compared to continuing operations in the year-ago quarter, net orders declined by 4 percent to $550 million and the quarter-ending backlog rose 11 percent to $1.9 billion.

"Product mix, successful cost control measures, and some discrete tax benefits contributed to higher gross and operating margins and solid earnings growth in the period," said Tim Guertin, president and CEO of Varian Medical Systems. "However, the affects of economic recession, particularly in the U.S., hindered growth in revenues and net orders in all our businesses."

The company achieved very strong cash flow from operations in the quarter and ended the period with $472 million in cash and cash equivalents and $32 million of debt. Days sales outstanding was 83 for the quarter, up five days versus the year-ago period and an improvement of four days from the second quarter of this fiscal year. The company did not repurchase shares of its stock during the period.

Oncology Systems

Oncology Systems' revenues for the quarter totaled $428 million, up 5 percent from the third quarter of last fiscal year. This business recorded third-quarter net orders of $459 million, about even with the same period last year. Compared to the same period last fiscal year, net orders were down 9 percent in North America and up 8 percent in international markets.

"Oncology Systems' net orders were up in both Asia and Europe, but down in North America," Guertin said. "In the U.S., we experienced the combined effect of a recession and added uncertainty created by the prospects of healthcare reform and uncertainty about reimbursement rates. A mix shift toward software products, including our RapidArc tool, together with cost controls contributed to a three-point improvement in Oncology Systems' gross margins."

X-Ray Products

Revenues for the X-Ray Products business, including tubes and digital flat-panel detectors for filmless X-ray imaging, were $67 million for the third quarter, down 13 percent from the year-ago quarter. Net orders for this business were $82 million, down 3 percent from the year-ago quarter.

"X-ray Product revenues were hurt more than expected in the third quarter by steep inventory adjustments among several imaging equipment manufacturers who cut back on orders during the second quarter of this year in response to the recession and market uncertainties in the U.S.," said Guertin. "However net orders were down only modestly in the third quarter thanks to strengthening business in the latter half of the period."

Other Businesses

The company's Security and Inspection Products (SIP) business, proton therapy business, and Ginzton Technology Center reported combined fiscal 2009 third quarter revenues of $14 million, down 36 percent from the year-ago quarter. Net orders for the quarter were $8 million, down 69 percent versus the year-ago quarter due exclusively to the SIP business.

"Government delays in deployment of port and border security systems contributed to the sharp declines in net order and revenues, especially compared to a strong year-ago quarter," Guertin said.

Outlook

"For fiscal year 2009, we expect that net earnings per diluted share from continuing operations could grow to between $2.60 and $2.65 and that revenue from continuing operations could grow by about 4 to 5 percent," Guertin said.

Investor Conference Call

Varian Medical Systems is scheduled to conduct its third quarter fiscal year 2009 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 where it will be archived for a year. To access the call via telephone, dial 1-800-260-8140 from inside the U.S. or 1-617-614-3672 from outside the U.S. and enter confirmation code 31906727. 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 35168740. The telephone replay will be available through 5 p.m. PT, Friday, July 31, 2009.

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 5,100 people who are located at manufacturing sites in North America, Europe, and China and approximately 79 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 RapidArc therapy, image-guided radiation therapy (IGRT), stereotactic radiosurgery, filmless X-rays, proton therapy, and security and inspection, and any statements using the terms "expect," "could," 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 current global recession, the impact of health care reforms, and/or third-party reimbursement levels and credit availability for capital expenditures for cancer care; currency exchange rates and tax rates; demand for the company's products; the company's ability to develop and commercialize new products; 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 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 company's ability to protect the company's intellectual property; the potential loss of key distributors or key personnel; 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.

    FOR INFORMATION CONTACT:
    Elisha Finney (650) 424-6803
    elisha.finney@varian.com

    Spencer Sias (650) 424-5782
    spencer.sias@varian.com

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       Q3 QTR    Q3 QTR     Q3 YTD   Q3 YTD
      amounts)                          2009      2008       2009     2008
     ---------------------------        ----      ----       ----     ----
     Net orders                         $549.8     572.4    1,625.3  1,576.8
       Oncology Systems                  459.3     461.4    1,321.1  1,260.2
       X-Ray Products                     82.2      84.5      242.1    242.6
       Other                               8.3      26.5       62.1     74.0

     Order backlog                    $1,941.0   1,755.2    1,941.0  1,755.2
     Revenues                           $509.8     507.4    1,572.1  1,477.0
       Oncology Systems                  428.2     407.7    1,271.0  1,189.2
       X-Ray Products                     67.2      77.2      239.1    222.1
       Other                              14.4      22.5       62.0     65.7
     Cost of revenues                   $293.6     295.1      896.5    862.0
     Gross margin                        216.2     212.3      675.6    615.0
       As a percent of revenues           42.4%     41.8%      43.0%    41.6%
     Operating expenses
       Research and development           35.3      35.7      109.3     96.5
       Selling, general and
        administrative                    78.4      84.5      242.8    234.7

     Operating earnings                  102.5      92.1      323.5    283.8
       As a percent of revenues           20.1%     18.2%      20.6%    19.2%
     Interest income/(expense),
      net                                 (0.3)      1.3        0.7      4.4

     Earnings from continuing
      operations before taxes            102.2      93.4      324.2    288.2
     Taxes on earnings                    16.8      16.3       89.9     80.0
     Earnings from continuing
      operations                          85.4      77.1      234.3    208.2
       As a percent of revenues           16.7%     15.2%      14.9%    14.1%
     Loss  from
      discontinued operations -
      net of taxes(1)                        -      (2.9)     (12.3)    (7.2)
     Net earnings                        $85.4      74.2      222.0    201.0
     ------------                        -----      ----      -----    -----

     Net earnings (loss) per
      share - basic:
       Continuing operations             $0.69      0.62       1.89     1.67

       Discontinued
       operations(1)                         -     (0.02)     (0.10)   (0.06)
                                           ---    ------      -----    -----
       Net earnings per share            $0.69      0.60       1.79     1.61
     Net earnings (loss)  per
      share - diluted:
       Continuing operations             $0.68      0.61       1.88     1.63

       Discontinued
        operations(1)                        -     (0.03)     (0.10)   (0.05)
                                           ---    ------      -----    -----
       Net earnings per share            $0.68      0.58       1.78     1.58

     Shares used in the
      calculation of net
      earnings per share:
       Average shares outstanding
        - basic                          124.2     124.6      124.0    124.9
       Average shares outstanding
        - diluted                        125.0     127.1      124.9    127.6

    (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

                                        July 3,       September 26,
                                         2009             2008(2)
    (In thousands)                    (Unaudited)
    -------------                     -----------     -------------

    Assets
    Current assets
        Cash and cash
         equivalents                    $471,721        $397,306
        Restricted cash                    2,629               -
        Accounts receivable,
         net                             469,523         486,310
        Inventories                      358,151         282,980
        Deferred tax assets and
         other                           191,485         209,006
        Current assets of discontinued
         operations(1)                         -          18,799
                                             ---          ------
    Total current assets               1,493,509       1,394,401
                                       ---------       ---------

    Property, plant and
     equipment                           520,064         452,576
        Accumulated
         depreciation and
         amortization                   (259,767)       (234,393)
                                        --------        --------
    Property, plant and
     equipment, net                      260,297         218,183
                                         -------         -------

    Goodwill                             207,687         209,146
    Other assets                         166,077         150,694
    Long term assets of
     discontinued operations(1)                -           3,088
                                             ---           -----
    Total assets                      $2,127,570      $1,975,512
                                      ==========      ==========

    Liabilities and Stockholders'
     Equity
    Current liabilities
        Accounts payable                 $88,259        $105,281
        Accrued expenses                 239,775         252,915
        Deferred revenues                124,219         141,368
        Advance payments from
         customers                       249,450         201,783
        Product warranty                  46,779          51,141
        Current maturities of
         long-term debt                    9,001           7,987
        Current
        liabilities of discontinued
         operations(1)                         -          21,202
                                             ---          ------
    Total current liabilities            757,483         781,677
    Other long-term liabilities          117,561         134,251
    Long-term debt                        23,459          32,399
                                          ------          ------
    Total liabilities                    898,503         948,327
                                         -------         -------

    Stockholders' Equity
    Common stock                         125,530         125,590
    Capital in excess of
     par value                           501,588         468,384
    Retained earnings and
     accumulated other
     comprehensive loss                  601,949         433,211
                                         -------         -------
    Total stockholders' equity         1,229,067       1,027,185
                                       ---------       ---------
    Total liabilities and
     stockholders' equity             $2,127,570      $1,975,512
                                      ==========      ==========

    (1) The assets and liabilities of ACCEL research instruments are
        classified as discontinued operations.
    (2) The condensed consolidated balance sheet as of September 26, 2008 was
        derived from audited financial statements as of that date

SOURCE Varian Medical Systems, Inc.

SOURCE: Varian Medical Systems, Inc.

Web site: http://www.varian.com/