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/