Varian Medical Systems, Inc. Reports Strong Results for Second Quarter of Fiscal 2000 | Varian

Varian Medical Systems, Inc. Reports Strong Results for Second Quarter of Fiscal 2000

PALO ALTO, Calif.--(BW HealthWire)--April 25, 2000--

Company reports net income of $0.32 per share; sales grow 14 percent to $170 million; net orders reach a second quarter record $179 million; backlog hits all-time high

Sustained North American demand for new radiotherapy systems and improved X-ray product business led Varian Medical Systems (NYSE:VAR) to strong growth in net orders and sales, and net income of $10.4 million ($0.32 per diluted share) for the second quarter of fiscal 2000. The company today announced second quarter sales of $170 million, up 14 percent from the same period last fiscal year. Net orders for the quarter were $179 million, up 16 percent from the prior-year period.

"We are continuing to see strong demand for new and upgraded radiotherapy systems in North America," said Richard M. Levy, president and chief executive officer of Varian Medical Systems. "Our marketing initiatives to raise awareness of promising new IMRT (intensity modulated radiation therapy) treatments for cancer are taking hold. We have stepped up production and made deliveries earlier than forecast in response to customer requirements. We also recorded sales gains in our X-ray tube and Ginzton Technology Center businesses. The company is hitting on all cylinders and this is reflected in our solid earnings for the quarter."

North America continued to drive the growth in sales for the company with more than 40 percent gains for both the second quarter and first half of this fiscal year over the corresponding periods of last year. Although international sales were down from the year-ago quarter and roughly flat for the first half, net orders were up in double digits for combined international markets as well as North America for the quarter and for the first half.

Oncology Systems

Oncology Systems sales of Clinac(R) accelerators, Ximatron(R) simulators and ancillary products, software, and services for advanced radiotherapy including SmartBeam IMRT totaled $131 million for the quarter, up 14 percent from the prior-year period. Second-quarter net orders in the Oncology Systems business totaled $141 million, up 13 percent from the prior year. "This business is on a solid growth track," said Levy. "Additionally, we made good progress in our new partnership with General Electric Medical Systems to sell advanced imaging equipment for radiation oncology in North America."

X-ray Products

Sales in the X-ray Products business, including tubes and amorphous silicon flat-panel digital imagers, were $35 million for the quarter, up 6 percent from the year-ago quarter. Sales of high-end CT scanning tubes helped to drive the growth. Net orders for the X-ray Products business totaled $35 million for the second quarter, up 20 percent from the unusually weak 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 $4 million for the quarter, up by $3 million over the year-ago quarter. The sales growth stemmed from the acquisition of the brachytherapy treatment planning business of Multimedia Medical Systems, Inc. in June, 1999. "We also saw revenue growth from our new VS200 afterloader for high dose rate brachytherapy," said Levy. Net orders for Ginzton Technology Center were $3 million for the quarter, up $2 million from the year-ago quarter.

Outlook

At quarter's end, the backlog for the company was at a record $438 million, up 14 percent from the second quarter of last year.

"Given our excellent first-half results, we are now projecting that fiscal 2000 sales growth could be on the high end of our previously projected range of 12-to-14 percent over fiscal 1999 levels, " said Levy. "Even with comparisons to strong third and fourth quarters last year, revenue growth for the balance of this fiscal year could be in the high single-digit range.

"We continue to expect that fully-diluted earnings per share could grow above fiscal 1999 pro forma levels of $1.28 per share at about one and half times the rate of revenue growth," he said.

Varian Medical Systems is scheduled to conduct its fiscal 2000 second quarter conference call at 7:30 a.m. PDT on Wednesday, April 26, 2000. 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; the ability of the Company to attract and retain key employees in a highly competitive employment market; the Company's ability to meet foreign and domestic regulatory requirements; 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
(In millions, except per share amounts)
(Unaudited)

Q2 QTR Q2 QTR Q2 YTD Q2 YTD
2000 1999 2000 1999

Net Orders $ 179.4 155.2 348.4 285.4
Oncology Systems 140.6 124.5 269.5 224.2
X-Ray Products 35.4 29.4 71.1 56.4
Ginzton Technology Center 3.4 1.3 7.8 4.8

Order Backlog $ 437.5 383.5 437.5 383.5

Sales $ 169.7 149.3 311.0 254.3
Oncology Systems 130.6 114.9 236.7 190.2
X-Ray Products 34.9 33.0 64.9 59.6
Ginzton Technology Center 4.2 1.4 9.4 4.5

Gross Margin 61.0 49.4 111.4 82.2
As a percent of Sales 35.9% 33.1% 35.8% 32.3%
Operating Expenses
Selling, General and
Administrative 32.0 34.1 62.2 57.7
Research and Development 11.4 11.1 21.7 20.5

Operating Earnings Before
Reorganization Expenses 17.6 4.2 27.5 4.0
As a percent of Sales 10.4% 2.8% 8.8% 1.6%

Reorganization Expenses - 27.5 - 31.0
Operating Earnings (Loss) 17.6 (23.3) 27.5 (27.0)

Interest Expense, Net 1.1 1.2 2.6 2.4

Earnings (Loss) From
Continuing Operations
Before Taxes 16.5 (24.5) 24.9 (29.4)

Taxes on Earnings 6.1 (14.3) 9.3 (17.2)

Earnings (Loss) from
Continuing Operations 10.4 (10.2) 15.6 (12.2)

Loss from Discontinued
Operations -
Net of Taxes - (30.8) - (31.2)

Net Earnings (Loss) $ 10.4 (41.0) 15.6 (43.4)

Average Shares
Outstanding - Basic 30.9 30.1 30.8 30.0
Average Shares
Outstanding - Diluted 32.5 30.1 31.8 30.0

Net Earnings (Loss) Per
Share - Basic
Continuing Operations $ 0.33 (0.34) 0.51 (0.41)
Discontinued Operations - (1.02) - (1.04)

Net Earnings (Loss)
Per Share 0.33 (1.36) 0.51 (1.45)

Net Earnings (Loss) Per
Share - Diluted
Continuing Operations 0.32 (0.34) 0.49 (0.41)
Discontinued Operations - (1.02) - (1.04)

Net Earnings (Loss)
Per Share $ 0.32 (1.36) 0.49 (1.45)

Varian Medical Systems, Inc. and Subsidiary Companies
Consolidated Balance Sheets

(Dollars in thousands, except par values)
March 31, 2000 Oct. 1, 1999
(Unaudited)

Assets
Current assets
Cash and cash equivalents $ 22,487 $ 25,126
Accounts receivable 218,729 233,785
Inventories 99,385 78,324
Other current assets 46,208 45,011

Total current assets 386,809 382,246
Property, plant, and equipment 203,704 200,386
Accumulated depreciation and amortization (121,687) (120,138)
Net property, plant, and equipment 82,017 80,248
Other assets 75,685 76,689

Total assets $ 544,511 $ 539,183

Liabilities and Stockholders' Equity
Current
Notes $ 5,512 $ 35,587
Accounts payable 39,448 40,141
Accrued expenses 118,419 121,165
Product 19,296 18,152
Advance payments from customers 65,278 54,757

Total current liabilities 247,953 269,802
Long-term accrued expenses 24,556 25,890
Long-term debt 58,500 58,500

Total liabilities 331,009 354,192

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
31,143,000 shares at March 31, 2000
and 30,563,000 shares at
October 1, 1999 31,143 30,563
Capital in excess of par value 32,539 20,185
Retained earnings 149,820 134,243

Total stockholders' equity 213,502 184,991

Total liabilities and stockholder's equity $ 544,511 $ 539,183

CONTACT: Varian Medical Systems
Elisha Finney, 650/424-6803
elisha.finney@varian.com
Spencer Sias, 650/424-5782
spencer.sias@varian.com