PALO ALTO, Calif., Oct. 30 /PRNewswire-FirstCall/ -- Varian, Inc. (NasdaqGS: VARI) today reported fourth quarter 2007 revenues of $245.6 million, representing an increase of 11.9% over revenues of $219.6 million in the fourth quarter of fiscal year 2006. The increase was broad-based with double-digit growth in sales of products for both life science and industrial (which includes environmental, food and energy) applications.
Non-GAAP (adjusted) net earnings for the fourth quarter of fiscal year 2007 increased 16.8% to $21.2 million, or $0.69 diluted earnings per share, compared to $18.2 million, or $0.58 diluted earnings per share, in the fourth quarter of fiscal year 2006. On a GAAP basis, net earnings in the fourth quarter of fiscal year 2007 were $17.4 million, or $0.56 diluted earnings per share, compared to $14.7 million, or $0.47 diluted earnings per share, in the fourth quarter of fiscal year 2006.
Adjusted operating earnings increased 12.4% to $30.8 million in the fourth quarter of fiscal year 2007, compared to $27.4 million in the fourth quarter of fiscal year 2006. Adjusted operating profit margin was 12.6% in the fourth quarter of fiscal year 2007, compared to 12.5% in the prior-year quarter. The improvement in adjusted operating earnings was primarily the result of sales volume leverage favorably impacting SG&A expense in both the Scientific Instruments and Vacuum Technologies segments. On a GAAP basis, operating earnings were $24.9 million and operating profit margin was 10.1% in the fourth quarter of fiscal year 2007, compared to $22.3 million and 10.2%, respectively, in the same quarter a year ago.
Free cash flow, which is defined as operating cash flow less net fixed asset purchases, was $33.8 million for the fourth quarter of fiscal year 2007. For the full fiscal year 2007, free cash flow was $85.4 million, which represents 134% of GAAP net earnings.
“We are pleased to report another excellent quarter and year,” said Garry W. Rogerson, President and CEO. “Our strong financial performance is evidence that the actions we are taking under our long-term strategic initiatives continue to yield results.”
Fiscal year 2007 sales totaled $920.6 million, an increase of 10.3% compared to the $834.7 million reported in fiscal year 2006. Adjusted net earnings in fiscal year 2007 increased 21.0% to $78.6 million, compared to $65.0 million in the prior fiscal year. Adjusted diluted earnings per share were $2.54 in fiscal year 2007, representing an increase of 22.7% compared to the $2.07 adjusted diluted earnings per share reported for fiscal year 2006. On a GAAP basis, net earnings were $63.6 million, or $2.05 diluted earnings per share, in fiscal year 2007, compared to $50.1 million, or $1.59 diluted earnings per share, in fiscal year 2006.
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 2007 were $207.3 million, representing an increase of 13.3% over revenues of $183.0 million in the fourth quarter of the prior fiscal year. Adjusted operating profit margin was 12.7% in the fourth quarter of fiscal year 2007, compared to 12.3% in the prior-year quarter. On a GAAP basis, operating profit margin was 10.3% in the fourth quarters of both fiscal years 2007 and 2006.
For the full fiscal year 2007, Scientific Instruments revenues increased 11.0% to $761.5 million, compared to $686.0 million in fiscal year 2006. Adjusted operating profit margin was 12.7% in fiscal year 2007, compared to 11.3% in fiscal year 2006. On a GAAP basis, operating profit margin was 10.4% in fiscal year 2007, compared to 8.8% in the prior fiscal year.
Vacuum Technologies revenues increased 4.8% to $38.3 million in the fourth quarter of fiscal year 2007, compared to $36.6 million in the fourth quarter of fiscal year 2006. Adjusted operating profit margin was 21.4% in the fourth quarter of fiscal year 2007, compared to 20.7% in the prior-year quarter. On a GAAP basis, operating profit margin was 21.1% in the fourth quarter of fiscal year 2007, compared to 19.9% in the prior-year quarter.
For the full fiscal year 2007, Vacuum Technologies revenues totaled $159.1 million, an increase of 7.0% compared to the $148.7 million reported in fiscal year 2006. Adjusted operating profit margin was 20.8% in fiscal year 2007, compared to 20.3% in the prior fiscal year. On a GAAP basis, operating profit margin was 20.1% in fiscal year 2007, compared to 19.6% in fiscal year 2006.
For the combined segments, adjusted operating profit margin before unallocated corporate costs was 14.0% in the fourth quarter of fiscal year 2007, compared to 13.7% in the prior-year quarter. On a GAAP basis, operating profit margin before unallocated corporate costs was 12.0% in the fourth quarter of fiscal year 2007, compared to 11.9% in the prior-year quarter.
For the full fiscal year 2007, adjusted operating profit margin before unallocated corporate costs was 14.1% for the combined segments, compared to 12.9% in the prior fiscal year. On a GAAP basis, operating profit margin before unallocated corporate costs was 12.1% in fiscal year 2007, compared to 10.7% in fiscal year 2006.
Outlook
Varian, Inc. provided earnings per share guidance for fiscal year 2008. Adjusted diluted earnings per share for fiscal year 2008 are expected to be $2.84 to $2.98.
“Looking forward, we expect to continue to grow revenues and expand adjusted operating margins in fiscal year 2008,” said Rogerson. “Our strategy is working, our global infrastructure positions us well in the growth economies and we are in a strong position in applications relating to the environment, food and energy.”
On a GAAP basis, diluted earnings per share are expected to be $2.29 to $2.47 for fiscal year 2008. The company’s GAAP diluted earnings per share for fiscal year 2008 are expected to include the following items:
Varian, Inc. will be holding a conference call later today, October 30, 2007, at 2:00 p.m. Pacific time. The call may be heard via the Internet by going to www.varianinc.com, clicking on the Investors link at the top of the right side of the page, and then clicking on the Live Webcast link.
Non-GAAP (Adjusted) Financial Measures
This press release includes non-GAAP (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, 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, acquisition-related intangible and inventory write-up amortization, 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 and restructuring and other related costs (principally related to facility closures and employee terminations to improve operational efficiency) 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 and restructuring and other related costs 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, in-process research and development charges and restructuring and other related costs, 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 applications and/or stronger growth in sales for life science applications; whether we can achieve continued sales growth in Europe and Asia Pacific and/or stronger growth in sales in the U.S.; risks arising from the timing of shipments, installations and the recognition of revenue on certain magnet-based 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; 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; 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 and integrate acquisitions; the actual costs, timing and benefits of restructuring activities (such as our Northern California facility consolidation) and other efficiency improvement activities (such as our global procurement initiative); the timing and amount of discrete tax events; 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 disclaim any intent or obligation to update publicly 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 components, laboratory consumable supplies, software, training and support through its global distribution and support systems. Varian, Inc. employs approximately 3,900 people and operates manufacturing facilities in 13 locations in North America, Europe and Asia Pacific. Varian, Inc. had fiscal year 2007 sales of $921 million, 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: www.varianinc.com.
ir@varianinc.com
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (see also attached reconciliations of GAAP to Adjusted results for each of these measures):
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (see also attached reconciliations of GAAP to Adjusted results for each of these measures):
CONTACT: Investor Relations of Varian, Inc., +1-650-424-5471,
ir@varianinc.com
Web site: http://www.varianinc.com/
