FOR INFORMATION CONTACT:
Elisha Finney (650) 424-6803
elisha.finney@varian.com
Spencer Sias (650) 424-5782
spencer.sias@varian.com
For Immediate Release:
Varian Medical Systems Reports Results for First Quarter of Fiscal Year 2013
First quarter net earnings per diluted share rise 9 percent to $0.86 including a $0.03 restructuring charge; revenues increase 8 percent to $678 million
PALO ALTO, Calif., Jan. 23, 2013 – Varian Medical Systems (NYSE:VAR) today is reporting net earnings of $0.86 per diluted share in the first quarter of fiscal year 2013, up 9 percent from $0.79 in the year-ago quarter. The results for the first quarter of fiscal year 2013 included a $4.1 million restructuring charge related to an enhanced retirement program. Varian’s company-wide revenues totaled $678 million for the first quarter of fiscal year 2013, up 8 percent from the year-ago quarter. Varian ended the first quarter of fiscal year 2013 with a $2.8 billion backlog, up 11 percent from the end of the first quarter of fiscal year 2012.
“The company’s first quarter revenues and net earnings grew in line with our expectations for both our Oncology Systems and X-Ray Products businesses,” said Dow R. Wilson, CEO of Varian Medical Systems. “Margins were also in line with our expectations. Excluding the restructuring charge in the quarter, our operating margin improved versus the year-ago quarter. Net orders rose robustly in our X-Ray Products business, but declined in our Oncology business, which experienced weaker orders in Europe and Asia versus very strong year-ago results.”
The company finished the first quarter of fiscal year 2013 with $755 million in cash and cash equivalents and $206 million of debt. Cash flow from operations for the first quarter was $72 million. During the first quarter of fiscal year 2013, the company spent $104 million to repurchase 1.5 million shares of common stock.
Oncology Systems
Oncology Systems’ first quarter revenues totaled $524 million, up 8 percent from the same period of fiscal year 2012. First-quarter net orders were $477 million, down 2 percent versus the comparable year-ago period, with a 2 percent gain in North America and a 4 percent decline outside North America. Markets outside North America represented 56 percent of Oncology net orders for the first quarter of fiscal year 2013. On a constant currency basis, Oncology Systems first quarter net orders were down 1 percent from the first quarter of fiscal year 2012 with a 2 percent decline in orders outside North America.
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| Varian Medical Systems Reports Results for First Quarter of Fiscal Year 2013 | Page2 |
“Oncology customers took delivery during the quarter as expected but order placements were slower than anticipated,” said Wilson. “We believe the order slowness is principally a timing issue and that the market fundamentals remain sound.”
X-Ray Products
First quarter revenues for the X-Ray Products business were $133 million, up 18 percent from the year-ago quarter. X-Ray Products’ first quarter net orderswere $133 million, up 21 percent from the year-ago period.
“Our X-Ray Products business had a very good first quarter with strong revenue and order growth for both our X-ray tubes and flat panel detectors,” Wilson said. “Our tube business benefitted from new products and apparent customer share gains in the CT market. Market traction among our new products helped to drive flat panel growth during the quarter.”
Other
The company’s Other category, which is comprised of the Security and Inspection Products business, the Varian Particle Therapy business, and the Ginzton Technology Center, recorded first quarter revenues of $21 million versus $25 million in the year-ago quarter. Net orders for the Other category were $9 million for the first quarter, down $2 million from the year-ago quarter.
Outlook
“We are pleased with our first quarter results in revenues and earnings, which should keep the company on track for hitting its fiscal 2013 growth targets,” said Wilson. “We remain confident in the fundamental long-term strategy for serving our markets. For the second quarter of fiscal year 2013, total company revenues could increase by about 5 to 6 percent over the prior year quarter. With the balance of restructuring charges from the enhanced retirement program, net earnings per diluted share for the second quarter should be in the range of $0.98 to $1.03. For the fiscal year, we continue to believe that total company revenues could increase by about 8 to 9 percent over the prior fiscal year. Net earnings per diluted share for the fiscal year could be in the range of $4.08 to $4.16.”
Investor Conference Call
Varian Medical Systems is scheduled to conduct its first quarter fiscal year 2013 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 1-877-869-3847 from inside the U.S. or 1-201-689-8261 from outside the U.S. The replay can be accessed by dialing 1-877-660-6853 from inside the U.S or 1-201-612-7415 from outside the U.S. and entering confirmation code406360. The telephone replay will be available through 5 p.m. PT, Friday, January 25, 2013.
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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, 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 6,200 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, visithttp://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 our Edge™ radiosurgery system, TrueBeam™ and 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 “could,” “believe,” “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 global economic conditions; the impact of the Affordable Health Care for America Act (including excise taxes on medical devices) and any further health care reforms (including changes to Medicare and Medicaid), 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 associated with the successful commercialization of the company’s particle therapy business; the effect of adverse publicity; the company’s reliance on sole or limited-source suppliers; the impact of reduced or limited demand by purchasers of certain X-ray products, including those located in Japan; the company’s ability to maintain or increase 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 Reports Results for First Quarter of Fiscal Year 2013 | Page4 |
Varian Medical Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(Unaudited)
| (Dollars and shares in millions, except per share amounts) | Q1 QTR 2013 | Q1 QTR 2012 | ||||||
| Net orders | $ | 619.2 | $ | 606.1 | ||||
| Oncology Systems | 476.8 | 484.7 | ||||||
| X-Ray Products | 133.2 | 109.8 | ||||||
| Other | 9.2 | 11.6 | ||||||
| Order backlog | $ | 2,785.2 | $ | 2,510.2 | ||||
| Revenues | $ | 678.4 | $ | 625.3 | ||||
| Oncology Systems | 524.3 | 487.6 | ||||||
| X-Ray Products | 132.9 | 113.0 | ||||||
| Other | 21.2 | 24.7 | ||||||
| Cost of revenues | $ | 387.3 | $ | 356.5 | ||||
| Gross margin | 291.1 | 268.8 | ||||||
| As a percent of revenues | 42.9 | % | 43.0 | % | ||||
| Operating expenses | ||||||||
| Research and development | 47.1 | 43.8 | ||||||
| Selling, general and administrative | 106.5 | 96.1 | ||||||
| Operating earnings | 137.5 | 128.9 | ||||||
| As a percent of revenues | 20.3 | % | 20.6 | % | ||||
| Interest income, net | 0.7 | 0.3 | ||||||
| Earnings before taxes | 138.2 | 129.2 | ||||||
| Taxes on earnings | 42.9 | 39.0 | ||||||
| Net earnings | $ | 95.3 | $ | 90.2 | ||||
| As a percent of revenues | 14.0 | % | 14.4 | % | ||||
| Net earnings per share – basic | $ | 0.87 | $ | 0.80 | ||||
| Net earnings per share – diluted | $ | 0.86 | $ | 0.79 | ||||
| Shares used in the calculation of net earnings per share: | ||||||||
| Average shares outstanding - basic | 109.3 | 112.3 | ||||||
| Average shares outstanding - diluted | 111.1 | 114.4 | ||||||
| Varian Medical Systems Reports Results for First Quarter of Fiscal Year 2013 | Page5 |
Varian Medical Systems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| (In thousands) | December 28, | September 28, | ||||||
| 2012 | 2012(1) | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 755,489 | $ | 704,570 | ||||
| Short-term investment | 51,804 | 49,709 | ||||||
| Accounts receivable, net | 637,473 | 691,806 | ||||||
| Inventories | 499,616 | 457,869 | ||||||
| Deferred tax assets and other | 283,931 | 266,561 | ||||||
| Total current assets | 2,228,313 | 2,170,515 | ||||||
| Property, plant and equipment | 669,119 | 653,424 | ||||||
| Accumulated depreciation and amortization | (370,586 | ) | (356,832 | ) | ||||
| Property, plant and equipment, net | 298,533 | 296,592 | ||||||
| Goodwill | 223,914 | 222,242 | ||||||
| Other assets | 187,804 | 189,377 | ||||||
| Total assets | $ | 2,938,564 | $ | 2,878,726 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 145,172 | $ | 180,736 | ||||
| Accrued expenses | 306,785 | 336,568 | ||||||
| Deferred revenues | 132,881 | 130,883 | ||||||
| Advance payments from customers | 396,229 | 380,545 | ||||||
| Product warranty | 50,705 | 52,799 | ||||||
| Short-term borrowings | 200,000 | 155,000 | ||||||
| Total current liabilities | 1,231,772 | 1,236,531 | ||||||
| Other long-term liabilities | 123,654 | 126,169 | ||||||
| Long-term debt | 6,250 | 6,250 | ||||||
| Total liabilities | 1,361,676 | 1,368,950 | ||||||
| Stockholders’ Equity | ||||||||
| Common stock | 109,322 | 109,407 | ||||||
| Capital in excess of par value | 609,246 | 563,875 | ||||||
| Retained earnings and accumulated other comprehensive loss | 858,320 | 836,494 | ||||||
| Total stockholders’ equity | 1,576,888 | 1,509,776 | ||||||
| Total liabilities and stockholders’ equity | $ | 2,938,564 | $ | 2,878,726 | ||||
(1) The condensed consolidated balance sheet as of September 28, 2012 was derived from audited financial statements as of that date.