Varian Medical Systems Reports Results for First Quarter of Fiscal Year 2013

Wed Jan 23, 2013 4:00pm EST

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First quarter net earnings per diluted share rise 9 percent to $0.86 including a
$0.03 restructuring charge; revenues increase 8 percent to $678 million
PALO ALTO, Calif.,  Jan. 23, 2013  /PRNewswire/ -- Varian Medical Systems
(NYSE:VAR) today is reporting net earnings of  $0.86  per diluted share in the
first quarter of fiscal year 2013, up 9 percent from  $0.79  in the year-ago
quarter.  The results for the first quarter of fiscal year 2013 included a  $4.1
million  restructuring charge related to an enhanced retirement program.
Varian's company-wide revenues totaled  $678 million  for the first quarter of
fiscal year 2013, up 8 percent from the year-ago quarter.  Varian ended the
first quarter of fiscal year 2013 with a  $2.8 billion  backlog, up 11 percent
from the end of the first quarter of fiscal year 2012.

"The company's first quarter revenues and net earnings grew in line with our
expectations for both our Oncology Systems and X-Ray Products businesses," said
Dow R. Wilson, CEO of Varian Medical Systems.  "Margins were also in line with
our expectations.  Excluding the restructuring charge in the quarter, our
operating margin improved versus the year-ago quarter.  Net orders rose robustly
in our X-Ray Products business, but declined in our Oncology business, which
experienced weaker orders in  Europe  and  Asia  versus very strong year-ago

The company finished the first quarter of fiscal year 2013 with  $755 million 
in cash and cash equivalents and  $206 million  of debt.  Cash flow from
operations for the first quarter was  $72 million.  During the first quarter of
fiscal year 2013, the company spent  $104 million  to repurchase 1.5 million
shares of common stock.

Oncology Systems
Oncology Systems' first quarter revenues totaled  $524 million, up 8 percent
from the same period of fiscal year 2012.  First-quarter net orders were  $477
million, down 2 percent versus the comparable year-ago period, with a 2 percent
gain in  North America  and a 4 percent decline outside  North America. Markets
outside  North America  represented 56 percent of Oncology net orders for the
first quarter of fiscal year 2013.  On a constant currency basis, Oncology
Systems first quarter net orders were down 1 percent from the first quarter of
fiscal year 2012 with a 2 percent decline in orders outside  North America.  

"Oncology customers took delivery during the quarter as expected but order
placements were slower than anticipated," said Wilson.  "We believe the order
slowness is principally a timing issue and that the market fundamentals remain

X-Ray Products
First quarter revenues for the X-Ray Products business were  $133 million, up 18
percent from the year-ago quarter.  X-Ray Products' first quarter net orders
were  $133 million, up 21 percent from the year-ago period.  

"Our X-Ray Products business had a very good first quarter with strong revenue
and order growth for both our X-ray tubes and flat panel detectors," Wilson
said.  "Our tube business benefited from new products and apparent customer
share gains in the CT market.  Market traction among our new products helped to
drive flat panel growth during the quarter."  

The company's Other category, which is comprised of the Security and Inspection
Products business, the Varian Particle Therapy business, and the Ginzton
Technology Center, recorded first quarter revenues of  $21 million  versus  $25
million  in the year-ago quarter.  Net orders for the Other category were  $9
million  for the first quarter, down  $2 million  from the year-ago quarter.   

"We are pleased with our first quarter results in revenues and earnings, which
should keep the company on track for hitting its fiscal 2013 growth targets,"
said Wilson.  "We remain confident in the fundamental long-term strategy for
serving our markets.  For the second quarter of fiscal year 2013, total company
revenues could increase by about 5 to 6 percent over the prior year quarter. 
With the balance of restructuring charges from the enhanced retirement program,
net earnings per diluted share for the second quarter should be in the range of 
$0.98 to $1.03.  For the fiscal year, we continue to believe that total company
revenues could increase by about 8 to 9 percent over the prior fiscal year.  Net
earnings per diluted share for the fiscal year could be in the range of  $4.08
to $4.16."

Investor Conference Call
Varian Medical Systems is scheduled to conduct its first quarter fiscal year
2013 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  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 406360.  The telephone replay will be available through  5 p.m. PT, 
Friday, January 25, 2013.  

About Varian Medical Systems
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, 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, digital detectors, and image processing workstations for
X-ray imaging in medical, scientific, and industrial applications and also
supplies high-energy X-ray devices for cargo screening and non-destructive
testing applications.  Varian Medical Systems employs approximately 6,200 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  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 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 our Edge radiosurgery system, TrueBeam and radiographic flat panel detectors,
image-guided radiation therapy, stereotactic radiosurgery, filmless X-rays,
proton therapy, and security and inspection, and any statements using the terms 
"could," "believe,"  "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 global economic conditions; the impact of  the Affordable
Health Care for America Act (including excise taxes on medical devices) and any
further health care reforms (including changes to Medicare and Medicaid), and/or
changes in third-party reimbursement levels; currency exchange rates and tax
rates; demand for the company's products; the company's ability to develop,
commercialize, and deploy new products such as the TrueBeam platform; 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; 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, including those located in  Japan; 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                                                                                       
   (Dollars and shares in millions, except per share amounts)          Q1 QTR                   Q1 QTR                               
   Net orders                                                  $       619.2            $       606.1                                
   Oncology Systems                                                    476.9                    484.7                                
   X-Ray Products                                                      133.2                    109.8                                
   Other                                                               9.1                      11.6                                 
   Order backlog                                               $       2,785.2          $       2,510.2                              
   Revenues                                                    $       678.4            $       625.3                                
   Oncology Systems                                                    524.3                    487.6                                
   X-Ray Products                                                      132.9                    113.0                                
   Other                                                               21.2                     24.7                                 
   Cost  of  revenues                                          $       387.3            $       356.5                                
   Gross margin                                                        291.1                    268.8                                
   As a percent of revenues                                            42.9%                    43.0%                                
   Operating expenses                                                                                                                
   Research and development                                            47.1                     43.8                                 
   Selling, general and administrative                                 106.5                    96.1                                 
   Operating earnings                                                  137.5                    128.9                                
   As a percent of revenues                                            20.3%                    20.6%                                
   Interest income, net                                                0.7                      0.3                                  
   Earnings before taxes                                               138.2                    129.2                                
   Taxes on earnings                                                   42.9                     39.0                                 
   Net earnings                                                $       95.3             $       90.2                                 
   As a percent of revenues                                            14.0%                    14.4%                                
   Net earnings per share - basic                              $       0.87             $       0.80                                 
   Net earnings  per share - diluted                           $       0.86             $       0.79                                 
   Shares used in the calculation of net earnings per share:                                                                         
   Average shares outstanding - basic                                  109.3                    112.3                                
   Average shares outstanding - diluted                                111.1                    114.4                                

 Varian Medical Systems, Inc. and Subsidiaries                                                              
 Condensed Consolidated Balance Sheets                                                                      
 (In thousands)                                                         December 28,     September 28,  
 2012                                                        2012  (1)  
 Current assets                                                                                         
 Cash and cash equivalents                                   $          755,489       $  704,570        
 Short-term investment                                                  51,804           49,709         
 Accounts receivable, net                                               637,473          691,806        
 Inventories                                                            499,616          457,869        
 Deferred tax assets and other                                          283,931          266,561        
 Total current assets                                                   2,228,313        2,170,515      
 Property, plant and equipment                                          669,119          653,424        
 Accumulated depreciation and amortization                              (370,586)        (356,832)      
 Property, plant and equipment, net                                     298,533          296,592        
 Goodwill                                                               223,914          222,242        
 Other assets                                                           187,804          189,377        
 Total assets                                                $          2,938,564     $  2,878,726      
 Liabilities and Stockholders' Equity                                                                   
 Current liabilities                                                                                    
 Accounts payable                                            $          145,172       $  180,736        
 Accrued expenses                                                       306,785          336,568        
 Deferred revenues                                                      132,881          130,883        
 Advance payments from customers                                        396,229          380,545        
 Product warranty                                                       50,705           52,799         
 Short-term borrowings                                                  200,000          155,000        
 Total current liabilities                                              1,231,772        1,236,531      
 Other long-term liabilities                                            123,654          126,169        
 Long-term debt                                                         6,250            6,250          
 Total liabilities                                                      1,361,676        1,368,950      
 Stockholders' Equity                                                                                   
 Common stock                                                           109,322          109,407        
 Capital in excess of par value                                         609,246          563,875        
 Retained earnings and accumulated other comprehensive loss             858,320          836,494        
 Total stockholders' equity                                             1,576,888        1,509,776      
 Total liabilities and stockholders' equity                  $          2,938,564     $  2,878,726      

 (1)  The condensed consolidated balance sheet as of September 28, 2012 was derived from audited financial statements as of that date.  


Elisha Finney  (650) 424-6803

Spencer Sias  (650) 424-5782

SOURCE  Varian Medical Systems

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