PALO ALTO, Calif., July 27, 2016 /PRNewswire/ -- Varian Medical Systems (NYSE: VAR) today is reporting GAAP net earnings of $1.04 per diluted share and non-GAAP net earnings of $1.22 per diluted share for the third quarter of fiscal year 2016. Varian’s revenues totaled $789 million for the third quarter, up 1 percent from the year-ago quarter in dollars and even with the year-ago quarter in constant currency. The company ended the quarter with a $3.3 billion backlog, up 5 percent from the end of the third quarter of fiscal year 2015.
“We generated strong gross order and revenue growth for the third quarter with substantial improvements in gross and operating margins in both our Oncology and Imaging Components businesses,” said Dow Wilson, CEO of Varian Medical Systems. “The quarter also included the booking of an order to equip a new proton therapy center in China.”
The company finished the third quarter of fiscal year 2016 with $836 million in cash and cash equivalents and $701 million of debt. Cash flow from operations was $95 million for the third quarter, bringing the year-to-date total to $204 million. The company’s GAAP results for the quarter included about $24 million of unusual expenses principally for ongoing patent litigation and the recently announced initiative to separate the Imaging Components business into a new publicly traded company. During the quarter, the company spent $126 million to repurchase about 1.5 million shares of common stock.
Oncology Systems
Oncology Systems’ third quarter revenues totaled $605 million, up 8 percent from the year-ago quarter in dollars and in constant currency. Third-quarter Oncology gross orders were $676 million, up 6 percent from the year-ago quarter in dollars and in constant currency. In the Americas, Oncology gross orders increased by 8 percent in dollars and in constant currency, with 15 percent growth in North America offsetting a sharp decline in Latin America. In EMEA, gross orders were down 3 percent in dollars and 4 percent in constant currency. In APAC, gross orders rose 19 percent in dollars and 17 percent in constant currency, driven by strong growth in China and Australia.
“Oncology generated strong gross order growth in North America, Asia, Australia and Africa that offset weakness in developed European markets and Latin America,” Wilson said. “A positive mix of hardware products and higher software revenues drove a healthy improvement in margins. We were particularly pleased to see strong demand for our TrueBeam® platform as well as our new software products including RapidPlan and InSightive Analytics for improving both the quality and speed of treatments.”
Imaging Components
Imaging Components revenues were $147 million for the third quarter, up 9 percent from the year-ago period. Gross orders were $138 million for the third quarter, up 13 percent from the year-ago period.
“As expected, we’re seeing a recovery in the Imaging Components business,” said Wilson. “We generated strong gross order growth in tubes as well as software and accessories from our recently-acquired businesses. Favorable product mix and productivity gains contributed to significant improvements in margins for this business in the quarter. We feel good about the progress we’re making towards separation.” The new company will be named Varex Imaging Corporation.
Other
The company’s Other category, including the Varian Particle Therapy business and the Ginzton Technology Center, recorded third quarter revenues of $37 million, down $53 million from the year-ago quarter when Varian booked significant revenues from its proton installation in Maryland. During the quarter, the company booked an order for a multi-room ProBeam installation at the new Hefei Ion Medical Center in China, with installation expected to begin in 2017.
Outlook
“We believe that total company non-GAAP net earnings will be in the range of $4.62 to $4.66 per diluted share for fiscal year 2016,” said Wilson. “We believe revenues for fiscal year 2016 will increase by about 3 percent over fiscal year 2015.”
Please refer to “Discussion of Non-GAAP Financial Measures” below for a description of items excluded from expected non-GAAP earnings.
Investor Conference Call
Varian Medical Systems is scheduled to conduct its third quarter fiscal year 2016 conference call at 2 p.m. PT today. To access the call via telephone in the U.S., dial 1-877-869-3847. From outside the U.S. dial 1-201-689-8261. 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. The replay also can be accessed by telephone by dialing 1-877-660-6853 in the U.S or by dialing 1-201-612-7415 from outside the U.S. The conference code for the telephone replay is 13640722. The teleconference will be rebroadcast until 8:00 p.m. ET, Friday, July 29, 2016. It will be archived on the website for a year.
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, cables and connectors as well as image processing software and workstations for use in medical and industrial settings, as well as for security and non-destructive testing. Varian Medical Systems employs approximately 7,700 people who are located at manufacturing sites in North America, Europe, and China and sales and support offices around the world. 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 “believe,” “expect,” “outlook,” “may,” “should,” “will” 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 second-party reimbursement levels; demand for and delays in delivery of 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, regulations or procedures; changes in regulatory environments; the impact of reduced or limited demand by purchasers of certain X-ray products; challenges associated with commercializing the company’s particle therapy business; challenges to public tender awards and the loss of such awards or other orders; the effect of adverse publicity; the company’s reliance on sole or limited-source suppliers; the company’s ability to maintain or increase margins; the impact of competitive products and pricing; the company’s assessment of the goodwill associated with its particle therapy business; the potential loss of key distributors or key personnel; 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.
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