PALO ALTO, Calif., Oct. 29 /PRNewswire-FirstCall/ -- Varian, Inc. (NasdaqGS: VARI) today reported fourth fiscal quarter 2008 revenues of $282.5 million, representing an increase of 15% over revenues of $245.6 million in the fourth quarter of fiscal year 2007, with strong orders and excellent execution during the quarter. The increase in sales was broad-based, with good growth in sales for both industrial (which includes environmental, food and energy) and life science applications. Sales grew in all major geographic regions, with particularly strong growth in Asia Pacific and Latin America. Also, the fourth quarter of fiscal year 2008 was a 14-week quarter compared to 13 weeks for the fourth quarter of fiscal year 2007.
Non-GAAP (adjusted) net earnings for the fourth quarter of fiscal year 2008 increased 23% to $26.0 million, or $0.89 diluted earnings per share, compared to $21.2 million, or $0.69 diluted earnings per share, in the fourth quarter of fiscal year 2007. Adjusted net earnings exclude share-based compensation expense as well as other items outlined in the attached Reconciliations of GAAP to Adjusted Results. Share-based compensation expense was $2.4 million, or $0.06 per diluted share, in the fourth quarter of fiscal year 2008 and $2.0 million, or $0.04 per diluted share, in the fourth quarter of fiscal year 2007. On a GAAP basis, net earnings in the fourth quarter of fiscal year 2008 were $21.7 million, or $0.74 diluted earnings per share, compared to $17.4 million, or $0.56 diluted earnings per share, in the fourth quarter of fiscal year 2007.
Adjusted operating earnings increased 27% to $39.1 million in the fourth quarter of fiscal year 2008, compared to $30.8 million in the fourth quarter last year. Adjusted operating profit margin was a record for any quarter at 13.8% in the fourth quarter of fiscal year 2008, compared to 12.6% in the prior-year quarter. On a GAAP basis, operating earnings were $32.9 million and operating profit margin was 11.6% in the fourth quarter of fiscal year 2008, compared to $24.9 million and 10.1% in the same quarter a year ago.
"We are pleased with our execution in the fourth quarter and have substantially overcome the issues we had in the third quarter," said Garry W. Rogerson, President and Chief Executive Officer. "We saw strong orders and sales as the quarter progressed."
"While we did realize some benefit from the extra week in this year's fourth quarter, the benefit was substantially less than a proportionate amount," said G. Edward McClammy, Senior Vice President and Chief Financial Officer.
Fiscal year 2008 sales totaled $1.013 billion, an increase of 10% compared to the $920.6 million reported in fiscal year 2007. Adjusted net earnings in fiscal year 2008 increased 10% to $86.8 million, compared to $78.6 million in the prior fiscal year. Adjusted diluted earnings per share (which excludes share-based compensation expense and other adjustments) were $2.89 in fiscal year 2008, representing an increase of 14% compared to the $2.54 adjusted diluted earnings per share reported in fiscal year 2007. Share-based compensation expense was $9.3 million, or $0.23 per diluted share, in fiscal year 2008 and $9.8 million, or $0.20 per diluted share, in fiscal year 2007. On a GAAP basis, net earnings were $66.4 million, or $2.21 diluted earnings per share, in fiscal year 2008, compared to $63.6 million, or $2.05 diluted earnings per share, in fiscal year 2007. Adjusted operating profit margin was 12.6% in both fiscal years 2008 and 2007.
Free cash flow, which is defined as operating cash flow less net fixed asset purchases, was $56.8 million, which represents 85% of GAAP net earnings, in fiscal year 2008.
For a complete reconciliation of non-GAAP (adjusted) financial information used in this press release to the most directly comparable GAAP financial information, please refer to the attached Reconciliations of GAAP to Adjusted Results, Actual and Projected.
Results by Segment
Scientific Instruments revenues for the fourth quarter of fiscal year 2008 were $236.5 million, representing an increase of 14% over revenues of $207.3 million in the fourth quarter of the prior fiscal year. Adjusted operating profit margin was 13.1% in the fourth quarter of fiscal year 2008 compared to 12.7% in the fourth quarter of the prior fiscal year. On a GAAP basis, operating profit margin was 11.1% in the fourth quarter of fiscal year 2008, compared to 10.3% in the same quarter a year ago.
For the full fiscal year 2008, Scientific Instruments revenues increased 10% to $838.7 million, compared to $761.5 million in fiscal year 2007. Adjusted operating profit margin was 12.1% in fiscal year 2008, compared to 12.7% in fiscal year 2007. On a GAAP basis, operating profit margin was 9.6% in fiscal year 2008, compared to 10.4% in the prior fiscal year.
Vacuum Technologies revenues increased 20% to $46.0 million in the fourth quarter of fiscal year 2008, compared to $38.3 million in the fourth quarter of fiscal year 2007. Adjusted operating profit margin was 22.6% in the fourth quarter of fiscal year 2008, compared to 21.4% in the fourth quarter of the prior fiscal year. On a GAAP basis, operating profit margin was 22.0% in the fourth quarter of fiscal year 2008, compared to 21.1% in the prior-year quarter.
For the full fiscal year 2008, Vacuum Technologies revenues totaled $173.9 million, an increase of 9% compared to the $159.1 million reported in fiscal year 2007. Adjusted operating profit margin was 20.3% in fiscal year 2008, compared to 20.8% in the prior fiscal year. On a GAAP basis, operating profit margin was 19.8% in fiscal year 2008, compared to 20.1% in fiscal year 2007.
Outlook
Varian, Inc. provided initial earnings per share guidance for fiscal year 2009. Adjusted diluted earnings per share excluding share-based compensation expense for fiscal year 2009 are expected to be $3.10 plus or minus $0.10. Beginning with the first quarter of fiscal year 2009, the company plans to begin reporting adjusted diluted earning per share including share-based compensation expense. On that basis, adjusted earnings per share for fiscal year 2009 are expected to be $2.90 plus or minus $0.10.
"The order momentum we saw during the fourth quarter has continued into the first few weeks of October," said Rogerson. "With these strong orders, new products gaining traction and a sound backlog, we are in a good position going into fiscal year 2009. Also, the recent changes in exchange rates, if they hold, should be a significant positive to our earnings this year. Having said all this, we are being cautious in providing our initial guidance for the year given global economic uncertainties."
On a GAAP basis, diluted earnings per share are expected to be $2.60 plus or minus $0.10 for fiscal year 2009. Compared to adjusted diluted earnings per share including share-based compensation expense of approximately $0.20, the company's GAAP diluted earnings per share for fiscal year 2009 are expected to include the following items:
Webcast Conference Call
Varian, Inc. will be providing a live webcast (in listen-only mode) of its investor conference call to review its fourth quarter and full fiscal year 2008 results later today, October 29, 2008, at 2:00 p.m. Pacific time. The call may be heard via the Internet by going to http://www.varianinc.com and clicking on the "Live Webcast" link at the top of the right side of the page. In addition to the live webcast, replays will be available to the public on Varian, Inc.'s website for at least 90 days.
Non-GAAP (Adjusted) Financial Measures
This press release includes non-GAAP (which we refer to as "adjusted") financial measures for cost of sales, selling, general and administrative expenses, research and development expenses, purchased in-process research and development, operating earnings, operating profit margins, impairment of private company equity investments, income tax expense, net earnings, diluted earnings per share and free cash flow. With the exception of free cash flow, these non-GAAP financial measures exclude share-based compensation expense, impairment of private company equity investments, acquisition-related intangible and inventory write-up amortization and in-process research and development charges, and restructuring and other related costs. Free cash flow is defined as operating cash flow less net fixed asset purchases. Reconciliations of each of these non-GAAP financial measures to the most directly comparable GAAP financial measures are detailed in the Reconciliations of GAAP to Adjusted Results attached to this press release. We believe that presentation of these non-GAAP financial measures provides useful information to investors regarding our results of operations and our cash flows.
We believe that excluding acquisition-related intangible and inventory write-up amortization and in-process research and development charges provides supplemental information and an alternative presentation useful to investors' understanding of the company's core operating results and trends. In addition, investors have indicated to us that they analyze the benefits of acquisitions based on the cash return on the investment made, and thus consider financial measures excluding acquisition-related intangible and inventory write-up amortization and in-process research and development charges as important, useful information.
We similarly believe that excluding share-based compensation expense, restructuring and other related costs (principally related to facility closures and employee terminations to improve operational efficiency), and impairment of private company equity investments provides supplemental information and an alternative presentation useful to investors' understanding of the company's core operating results and trends, especially when comparing those results on a consistent basis to results for previous periods and anticipated results for future periods. Investors have indicated that they consider financial measures of our results of operations excluding share-based compensation expense, restructuring and other related costs, and impairment of private company equity investments as important supplemental information useful to their understanding of our historical results and estimating of our future results.
We also believe that, in excluding share-based compensation expense, acquisition-related intangible and inventory write-up amortization and in-process research and development charges, restructuring and other related costs, and impairment of private company equity investments, our non-GAAP financial measures provide investors with transparency into what is used by management to measure and forecast our results of operations, to compare on a consistent basis our results of operations for the current period to that of prior periods, to compare our results of operations on a more consistent basis against that of other companies, in making financial and operating decisions and to establish certain management compensation.
We believe that the presentation of free cash flow provides investors with useful information on what is used by management to measure cash management performance, in making financial and operating decisions and to establish certain management compensation.
Although we believe, for the foregoing reasons, that our presentation of non-GAAP financial measures provides useful supplemental information to investors regarding our results of operations and our cash flows, our non-GAAP financial measures should only be considered in addition to, and not as a substitute for or superior to, our financial measures prepared in accordance with GAAP.
Caution Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on management's current expectations, are not guarantees of future performance, and involve certain risks and uncertainties that could cause the company's actual results to differ materially from management's current expectations and the forward-looking statements made in this press release. Those risks and uncertainties include, but are not limited to, the following: whether we will succeed in new product development, commercialization, performance and acceptance; whether we can achieve continued growth in sales for industrial and/or life science applications; whether we can achieve continued sales growth in Europe, Asia Pacific and/or the U.S.; risks arising from the timing of shipments, installations and the recognition of revenue on certain research products, including nuclear magnetic resonance (NMR), magnetic resonance (MR) imaging and fourier-transform mass spectrometer (FTMS) systems and superconducting magnets; the impact of shifting product mix on profit margins; competitive products and pricing; economic conditions in the company's product and geographic markets, in particular given the signs of a global recession; whether we will see continued and timely delivery of key raw materials and components by suppliers; foreign currency fluctuations that could adversely impact revenue growth and earnings; whether we will see continued investment in capital equipment, in particular given the global liquidity and credit crisis; whether we will see reduced demand from customers that operate in cyclical industries; the impact of any delay or reduction in government funding for research; our ability to successfully evaluate, negotiate, complete and integrate acquisitions, in particular given the greater difficulty to borrow in the current credit environment; the actual costs, timing and benefits of restructuring activities (such as our Northern California manufacturing consolidation) and other efficiency improvement activities (such as our global procurement, lower-cost manufacturing and outsourcing initiatives); variability in our effective income tax rate (due to factors including the timing and amount of discrete tax events and changes to unrecognized tax benefits); the timing and amount of share-based compensation; and other risks detailed from time to time in the company's filings with the Securities and Exchange Commission. We undertake no special obligation to update any forward-looking statements, whether in response to new information, future events or otherwise.
About Varian, Inc.
Varian, Inc. is a leading worldwide supplier of scientific instruments and vacuum technologies for life science and industrial applications. The company provides complete solutions, including instruments, vacuum products, laboratory consumable supplies, software, training and support through its global distribution and support systems. Varian, Inc. employs approximately 3,900 people worldwide and operates manufacturing facilities in North America, Europe and Asia Pacific. Varian, Inc. had fiscal year 2008 sales of $1.0 billion, and its common stock is traded on the NASDAQ Global Select Market under the symbol "VARI." Further information is available on the company's Web site: http://www.varianinc.com.
CONTACT: Varian, Inc., Investor Relations, +1-650-424-5471,
ir@varianinc.com
Web site: http://www.varianinc.com/
