Varian Medical Systems Reports Results for Second Quarter of Fiscal Year 2015 | Varian

{ "pageType": "news-article", "title": "Varian Medical Systems Reports Results for Second Quarter of Fiscal Year 2015", "articleDate": "April 29, 2015", "introText": "", "category": "Corporate and Financial Releases" }

Varian Medical Systems Reports Results for Second Quarter of Fiscal Year 2015

Corporate and Financial Releases

PALO ALTO, Calif., April 29, 2015 /PRNewswire/ -- Varian Medical Systems (NYSE:VAR) today is reporting net earnings of $1.05 per diluted share in the second quarter of fiscal year 2015.  Second quarter net earnings per diluted share rose 19 percent versus the year-ago period when the company recorded a $0.16 per diluted share charge related to the settlement of patent litigation.  Varian's company-wide revenues totaled $759 million for the second quarter of fiscal year 2015, down 2 percent from the year-ago quarter and up 2 percent in constant currency.  The company ended the second quarter with a $3.1 billion backlog, up 10 percent from the end of the second quarter of fiscal year 2014.

"Our company generated strong North American Oncology gross order and revenue growth and also contended with severe currency headwinds that negatively impacted overall earnings, revenues and gross orders in both our major businesses," said Dow R. Wilson, CEO of Varian Medical Systems.  "Orders and sales were down significantly in our Imaging Components business.  Despite experiencing revenue declines, both our major businesses managed to improve their operating margins through good cost containment measures. "

The company finished the second quarter of fiscal year 2015 with $862 million in cash and cash equivalents and $513 million of debt.  Cash flow from operations for the second quarter was $53 million.  During the quarter, the company spent $76 million to repurchase about 825,000 shares of common stock.

Oncology Systems

Oncology Systems' second quarter revenues totaled $589 million, down 2 percent from the same quarter of fiscal year 2014.  Second-quarter Oncology gross orders were $581 million, down 5 percent versus the year-ago quarter and equal to the year-ago quarter on a constant currency basis.  Oncology gross orders rose 12 percent in the Americas, fell by 24 percent in EMEA and declined by 15 percent in APAC.

"Oncology Systems' gross orders grew nicely in North America with the help of demand from large clinical networks that want to standardize on Varian's fully integrated hardware and software solutions," said Wilson.  "Solid gross orders growth in China was overshadowed by overall currency-related weakness in emerging markets."

Imaging Components

Second quarter revenues for Imaging Components were $155 million, down 8 percent from the year-ago quarter while second quarter gross orders decreased by 24 percent to $156 million versus a strong year-ago quarter.

"Imaging Components' orders and revenues were negatively impacted by unfavorable currency movements that caused customers to reduce inventory levels and put pressure on pricing," said Wilson.  "Orders and revenues for our security and inspection products were down significantly from the year-ago quarter."

Other

The company's Other category, including the Varian Particle Therapy business and the Ginzton Technology Center, recorded revenues of $14 million and gross orders of $44 million.  During the quarter, the Particle Therapy business recorded the equipment portion of an order for a ProBeam installation in Denmark.

Outlook

"We believe that for fiscal year 2015 total company earnings will be in the range of $4.02 to $4.14 per diluted share and that revenues will increase by about 1 to 2 percent in dollars and by about 5 percent in constant currency," said Wilson.  "We now expect that challenges in our Imaging Components business, as well as currency headwinds, will more than offset the earnings momentum of the first half.  We estimate that Imaging Components could negatively impact earnings by $0.08 to $0.12 per diluted share.  Additionally, since our guidance last quarter, the strength of the dollar has diminished our earnings expectations by another $0.06 to $0.10 per diluted share.

"For the third quarter of fiscal 2015, we believe total company revenues should be about equal to the prior-year period in dollars and up about 4 percent in constant currency.   Net earnings per diluted share for the third quarter could be in the range of $0.90 to $0.94 per diluted share. "

The outlook for the third quarter and full fiscal year 2015 excludes any impact of proton orders not yet booked into backlog.

Investor Conference Call

Varian Medical Systems is scheduled to conduct its second quarter fiscal year 2015 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 code 13604946.  The telephone replay will be available through 5 p.m. PT, Friday, May 1, 2015.

Varian Medical Systems, Inc., of Palo Alto, California, focuses energy on saving lives by equipping the world with advanced technology for fighting cancer and for X-ray imaging.  The company is the world's leading manufacturer of medical devices and software for treating cancer and other medical conditions with radiation. The company provides comprehensive solutions for radiotherapy, radiosurgery, proton therapy and brachytherapy. The company supplies informatics software for managing comprehensive cancer clinics, radiotherapy centers and medical oncology practices. Varian is also a premier supplier of X-ray imaging components, including tubes, digital detectors, and image processing software and workstations for use in medical, scientific, and industrial settings, as well as for security and non-destructive testing.  Varian Medical Systems employs approximately 6,800 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, visit http://www.varian.com or follow us on Twitter.  For more information, visit http://www.varian.com or follow us on Twitter.

 

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 or market outlook, including growth drivers; the company's future orders, revenues, or earnings growth or other financial results; and any statements using the terms "should," "believe," "expect," "outlook," "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 global economic conditions; currency exchange rates and tax rates; the impact of  the Affordable Health Care for America Act (including excise taxes on medical devices) and any further healthcare reforms (including changes to Medicare and Medicaid), and/or changes in third-party reimbursement levels; demand for the company's products; the company's ability to develop, commercialize and deploy new products; 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; the company's assessment of the goodwill associated with its particle therapy business; 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; 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, Inc. and Subsidiaries
 Condensed Consolidated Statements of Earnings
 (Unaudited)

 
   

 

 

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

  

Q2 QTR

2015

  

Q2 QTR

2014

 

Q2 YTD

2015

  

Q2 YTD

2014

 
   

Gross orders

$

781.4

  

877.7

  

1,507.2

  

1,533.1

  
   

  Oncology Systems

  

581.1

  

613.0

  

1,142.8

  

1,146.3

  
   

  Imaging Components

  

156.3

  

205.0

  

319.0

  

326.4

  
   

  Other

 

  

44.0

  

59.7

  

45.4

  

60.4

  
   

Order Backlog

 

  

3,093.7

  

2,806.6

  

3,093.7

  

2,806.6

  
   

Revenues

  

759.4

  

778.5

  

1,497.3

  

1,490.0

  
   

  Oncology Systems

  

589.4

  

603.1

  

1,152.7

  

1,144.5

  
   

  Imaging Components

  

155.5

  

169.0

  

321.5

  

330.2

  
   

  Other

 

  

14.5

  

6.4

  

23.1

  

15.3

  
   

Cost of revenues

 

  

436.9

  

450.2

  

847.8

  

852.1

  
   

Gross margin

  

322.5

  

328.3

  

649.5

  

637.9

  
   

  As a percent of revenues

 

  

42.5%

  

42.2%

  

43.4%

  

42.8%

  
   

Operating expenses

                  
   

  Research and development 

 

59.3

  

60.7

  

116.4

  

118.7

  
   

  Selling, general and administrative 

 

117.2

  

115.0

  

257.6

  

224.6

  
   

  Litigation Settlement 

 

  

-

  

25.1

  

-

  

25.1

  
   

Operating earnings

 

146.0

  

127.5

  

275.5

  

269.5

  
   

  As a percent of revenues

 

  

19.2%

  

16.4%

  

18.4%

  

18.1%

  
   

Interest income, net

  

1.1

  

0.6

  

2.0

  

1.0

  
   

Earnings before taxes

  

147.1

  

128.1

  

277.5

  

270.5

  
   

Taxes on earnings

 

41.1

  

35.4

  

78.2

  

79.8

  
   

Net earnings

$

106.0

  

92.7

  

199.3

  

190.7

  
   

  As a percent of revenues

  

14.0%

  

11.9%

  

13.3%

  

12.8%

  
                       
   

Net earnings per share – basic

$

1.06

  

0.89

  

1.99

  

1.82

  
   

 Net earnings per share – diluted

  

1.05

  

0.88

  

1.97

  

1.79

  
   

Shares used in the calculation of net earnings per share:    

                  
   

Average shares outstanding - basic

  

100.2

  

104.2

  

100.3

  

105.0

  
   

Average shares outstanding - diluted

  

101.0

  

105.4

  

101.3

  

106.4

  
                       

 

Varian Medical Systems, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets
         

(In thousands)

  

April 3,  

  

September 26,

2015

     2014  (1)

(Unaudited)

  

Assets

        

Current assets:

        

    Cash and cash equivalents

$

862,223

$

849,275

    Short-term investment

 

70,075

  

66,176

    Accounts receivable, net

  

707,927

  

731,929

    Inventories                                       

 

651,779

  

572,261

    Deferred tax assets and other                                

 

298,347

  

274,524

Total current assets                                       

 

2,590,351

  

2,494,165
         

Property, plant and equipment, net                         

 

334,807

  

337,999

Goodwill

  

232,633

  

240,626

Other assets                                                   

 

301,745

  

284,500

Total assets                                              

$

3,459,536

$

3,357,290
         

Liabilities and Equity

        

Current liabilities:                                                      

       

    Accounts payable                                             

$

164,075

$

187,377

    Accrued expenses                                             

 

285,377

  

324,409

    Deferred revenues                                             

 

447,755

  

421,845

    Advance payments from customers                              

 

182,256

  

170,724

    Product warranty                                                        

 

41,305

  

47,299

    Short-term borrowings                              

 

100,000

  

-

  

    Current maturities of long-term debt                              

 

50,000

  

50,000

  

Total current liabilities                                  

 

1,270,768

  

1,201,654

Other long-term liabilities

  

147,945

  

151,716

Long-term debt                                                            

 

362,500

  

387,500

Total liabilities                                          

 

1,781,213

  

1,740,870
         

Equity:

        

Varian stockholders' equity:

        

    Common stock

 

100,201

  

100,942

    Capital in excess of par value

 

687,348

  

642,848

    Retained earnings and accumulated other comprehensive loss 

 

886,760

  

872,630

Total Varian stockholders' equity                                 

 

1,674,309

  

1,616,420

Noncontrolling interest

  

4,014

  

-

Total Equity

  

1,678,323

  

1,616,420

Total liabilities and equity              

$

3,459,536

$

3,357,290
   

(1)

The condensed consolidated balance sheet as of September 26, 2014 was derived from audited financial statements as of that date. 

FOR INFORMATION CONTACT:

Elisha Finney (650) 424-6803
elisha.finney@varian.com

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

 

SOURCE Varian Medical Systems