PALO ALTO, Calif., Jan. 27 /PRNewswire-FirstCall/ -- Varian Medical Systems (NYSE: VAR) today is reporting net earnings of $0.63 per diluted share in the first quarter of fiscal year 2010, up 13 percent from earnings of $0.56 per diluted share from continuing operations in the year-ago quarter. Revenues for the quarter were $541 million, up 6 percent from the prior-year period and up 3 percent on a constant currency basis.
Varian's first quarter net orders, including a $62 million reversal of a previously announced proton therapy order, totaled $496 million, down 10 percent from the year-ago period and down 14 percent on a constant currency basis. Excluding the proton order reversal, net orders would have totaled $558 million, up 1 percent from the prior year period. The quarter-ending backlog was $2 billion, up 4 percent versus the year-ago quarter.
"Stronger than expected revenue growth and product mix shifts together with successful cost control initiatives contributed to healthy gains in margins and net earnings for the company during the first quarter," said Tim Guertin, president and CEO of Varian Medical Systems. "In a positive sign for the economy and our company, net orders increased in both our Oncology Systems and X-Ray Products businesses. Despite net orders declines for our particle therapy and security and inspection products businesses, we remain confident in their long-term growth prospects."
The company ended the quarter with a record $625 million in cash and cash equivalents and $37 million of debt. During the first quarter, the company spent $55 million to repurchase 1.3 million shares of common stock which helped to reduce average diluted shares outstanding by 100,000 from the prior-year quarter to 125.1 million. Compared to the same point last year, accounts receivable days sales outstanding was 84, up 1 day.
Oncology Systems' first quarter revenues from sales of products and services for radiotherapy, radiosurgery, and brachytherapy totaled $430 million, up 8 percent from the same period last fiscal year. First quarter net orders totaled $437 million, up 2 percent versus the year-ago period and down 3 percent on a constant currency basis. Reported net orders were up 19 percent in international markets, more than offsetting a 13 percent decline in North America.
"Our Oncology Systems business achieved solid double-digit orders growth in Asia and Europe," Guertin said. "Net orders for both hospital and free standing clinics in North America were down from the year-ago quarter, but we are seeing signs of renewed interest, particularly among free-standing clinics."
X-Ray Products first quarter revenues from sales of X-ray tubes and digital detectors for filmless imaging were $91 million, up 6 percent from the year-ago quarter. Compared to the same period in fiscal year 2009, X-Ray Products' first quarter net orders rose 9 percent to a record $99 million.
"Demand for our digital detectors from several new customers in Asia and Europe helped to drive the growth in our X-ray business, and detector orders topped tube orders for the first time," Guertin said. "Strong international demand offset weakness in the North American market for both tubes and detectors."
The company's Other category, which is comprised of the Security and Inspection Products (SIP) business, the Varian Particle Therapy business, and the Ginzton Technology Center, recorded first quarter revenues of $19 million, down 20 percent from the year-ago period. Net orders in the Other category were a negative $40 million, down $73 million from the year-ago period. This included the reversal of a $62 million proton order following a Swedish court directing Skandion Kliniken to commence a new public tender in response to a competitor's challenge to the bid process. First-quarter SIP orders declined $10 million from a record level in the year-ago quarter.
"We are prepared to compete in a new tender process to win back the proton therapy business at Skandion Kliniken and we are continuing to hit important milestones in the development and commercialization of this technology," Guertin said. "Our SIP business had tough comparisons with very strong revenues and orders in the year-ago quarter and we continue to see significant growth opportunities for this business."
"Given our revenue growth, improved margins, and the strength of our earnings in the first quarter, we now believe that revenues for fiscal year 2010 can grow by about
6 percent over the fiscal 2009 total and that annual net earnings per diluted share could be in the range of $2.76 to $2.83," Guertin said. "We believe that for the second quarter of fiscal year 2010 total company revenues could increase by about 4 percent over the prior year period and that net earnings per diluted share could be in the range of $0.66 to $0.68.
Investor Conference Call
Varian Medical Systems is scheduled to conduct its first quarter fiscal year 2010 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 1-800-299-7635 from inside the U.S. or 1-617-786-2901 from outside the U.S. and enter confirmation code 14117939. 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 34681127. The telephone replay will be available through 5 p.m. PT, Thursday, January 28, 2010.
For automatic "e-mail alerts" regarding Varian news, events, and new investor materials on the website, investors can subscribe on the company website:
http://varian.investorroom.com/index.php?s=58 For additional information, contact investor relations at 1 650 424-5834.
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 5,000 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.
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, image-guided radiation therapy, stereotactic radiosurgery, filmless X-rays, proton therapy, and security and inspection, and any statements using the terms "expect," "hope," "continuing," "can," "could," "believe," "estimate," "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 the effect of economic conditions, including the current global recession; the impact of health care reforms, and/or changes in third-party reimbursement levels; 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 (FDA) and other regulatory requirements for product clearances or to comply with FDA 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; 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 Consolidated Statements of Earnings (Unaudited) (Dollars and shares in millions, except per share amounts) Q1 QTR Q1 QTR 2010 2009 ---- ---- Net orders $495.6 $551.3 Oncology Systems 436.5 427.6 X-Ray Products 99.0 91.1 Other (39.9) 32.6 Order backlog $2,009.1 $1,930.5 Revenues $540.9 $508.7 Oncology Systems 430.1 398.2 X-Ray Products 91.4 86.1 Other 19.4 24.4 Cost of revenues $299.9 $289.7 Gross margin 241.0 219.0 As a percent of revenues 44.6% 43.0% Operating expenses Research and development 38.4 37.0 Selling, general and administrative 83.5 83.3 Operating earnings 119.1 98.7 As a percent of revenues 22.0% 19.4% Interest income /(expense), net (0.3) 1.4 Earnings from continuing operations before taxes 118.8 100.1 Taxes on earnings 40.0 30.5 Earnings from continuing operations 78.8 69.6 As a percent of revenues 14.6% 13.7% Loss from discontinued operations – net of taxes (1) - (0.8) Net earnings $78.8 $68.8 Net earnings per share – basic: Continuing operations $0.64 $0.56 Discontinued operations (1) $- $- --- --- Net earnings per share $0.64 $0.56 Net earnings (loss) per share – diluted: Continuing operations $0.63 $0.56 Discontinued operations (1) $- $(0.01) --- ------ Net earnings per share $0.63 $0.55 Shares used in the calculation of net earnings per share: Average shares outstanding - basic 123.7 123.8 Average shares outstanding - diluted 125.1 125.2 (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 (In thousands) January 1, October 2, 2010 2009(1) (Unaudited) -------------- ----------- Assets Current assets Cash and cash equivalents $625,495 $553,529 Accounts receivable, net 507,411 580,918 Inventories 350,845 321,861 Deferred tax assets and other 239,527 216,143 ------- ------- Total current assets 1,723,278 1,672,451 --------- --------- Property, plant and equipment 530,503 527,135 Accumulated depreciation and amortization (272,071) (263,075) -------- -------- Property, plant and equipment, net 258,432 264,060 ------- ------- Goodwill 210,563 210,346 Other assets 165,721 161,391 ------- ------- Total assets $2,357,994 $2,308,248 ========== ========== Liabilities and Stockholders' Equity Current liabilities Accounts payable $103,450 $116,093 Accrued expenses 275,427 304,402 Deferred revenues 154,795 130,588 Advance payments from customers 253,862 226,964 Product warranty 50,728 50,823 Short-term borrowings 4,296 4,445 Current maturities of long-term debt 9,010 9,005 ----- ----- Total current liabilities 851,568 842,320 Other long-term liabilities 128,874 130,751 Long-term debt 23,327 23,394 ------ ------ Total liabilities 1,003,769 996,465 --------- ------- Stockholders' Equity Common stock 124,357 125,281 Capital in excess of par value 521,208 516,478 Retained earnings and accumulated other comprehensive loss 708,660 670,024 ------- ------- Total stockholders' equity 1,354,225 1,311,783 --------- --------- Total liabilities and stockholders' equity $2,357,994 $2,308,248 ========== ========== (1) The condensed consolidated balance sheet as of October 2, 2009 was derived from audited financial statements as of that date.
SOURCE Varian Medical Systems