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Varian, Inc. Reports Strong Fourth Quarter 2008 Results
Date:10/29/2008

- Sales Up 15%

- Non-GAAP Operating Earnings Up 27%, GAAP Operating Earnings Up 32%

- Non-GAAP Diluted EPS Up 29%, GAAP Diluted EPS Up 32%

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:
-- Acquisition-related intangible amortization of approximately $0.17 to

$0.18,

-- Acquisition-related inventory write-up amortization of approximately

$0.01, and

-- Restructuring and other related costs of approximately $0.09 to $0.13.

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.

For Information Contact:

Investor Relations

Varian, Inc.

650.424.5471

ir@varianinc.com

VARIAN, INC. AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS

(In thousands, except per share amounts)

Fourth Quarter FY 2008 and Fourth Quarter FY 2007

Fiscal Quarter Ended

-------------------------

October 3, September 28,

2008 2007

----------- -----------

Sales $282,470 $245,635

Cost of sales 156,377 (1) 137,271 (8)

----------- -----------

Gross profit 126,093 108,364

----------- -----------

Operating expenses

Selling, general and administrative 75,098 (2) 66,932 (9)

Research and development 17,921 (3) 16,577 (10)

Purchased in-process research

and development 215 (4) -

----------- -----------

Total operating expenses 93,234 83,509

----------- -----------

Operating earnings 32,859 (5) 24,855 (11)

Interest income 1,042 1,893

Interest expense (382) (434)

----------- -----------

Earnings before income taxes 33,519 26,314

Income tax expense 11,811 (6) 8,886 (12)

----------- -----------

Net earnings $21,708 (7) $17,428 (13)

----------- -----------

Net earnings per diluted share $0.74 (7) $0.56 (13)

----------- -----------

Diluted shares outstanding 29,367 30,869

----------- -----------

NON-GAAP (ADJUSTED) FINANCIAL MEASURES (see also attached reconciliations

of GAAP to Adjusted results for each of these measures):

(1) $153,967 on an adjusted basis excluding $1,663 in acquisition-related

intangible amortization, $172 in acquisition-related inventory write-

up amortization, $466 in restructuring and other related costs and

$109 in share-based compensation expense.

(2) $72,067 on an adjusted basis excluding $586 in acquisition-related

intangible amortization, $273 in restructuring and other related

costs and $2,172 in share-based compensation expense.

(3) $17,324 on an adjusted basis excluding $501 in restructuring and

other related costs and $96 in share-based compensation expense.

(4) $0 on an adjusted basis excluding $215 related to an acquisition-

related in-process research and development charge.

(5) $39,112 on an adjusted basis excluding the adjustments described in

items (1) - (4) above.

(6) $13,723 on an adjusted basis excluding the tax impact of the

adjustments described in items (1) - (3) above.

(7) $26,049 and $0.89 per diluted share, respectively, on an adjusted

basis excluding the adjustments (net of related tax effects)

described in items (1) - (3) above.

(8) $134,490 on an adjusted basis excluding $1,368 in acquisition-related

intangible amortization, $835 in acquisition-related inventory write-

up amortization, $472 in restructuring and other related costs and

$106 in share-based compensation expense.

(9) $64,333 on an adjusted basis excluding $548 in acquisition-related

intangible amortization, $307 in restructuring and other related

costs and $1,744 in share-based compensation expense.

(10) $15,972 on an adjusted basis excluding $480 in restructuring and

other related costs and $125 in share-based compensation expense.

(11) $30,840 on an adjusted basis excluding the adjustments described in

items (8) - (10) above.

(12) $11,088 on an adjusted basis excluding the tax impact of the

adjustments described in items (8) - (10) above.

(13) $21,211 and $0.69 per diluted share, respectively, on an adjusted

basis excluding the adjustments (net of related tax effects)

described in items (8) - (10) above.

VARIAN, INC. AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS

(In thousands, except per share amounts)

Full Year FY 2008 and Full Year FY 2007

Fiscal Year Ended

----------------------------

October 3, September 28,

2008 2007

----------- -----------

Sales $1,012,515 $920,598

Cost of sales 560,061 (1) 505,121 (9)

----------- -----------

Gross profit 452,454 415,477

----------- -----------

Operating expenses

Selling, general and administrative 277,478 (2) 257,754 (10)

Research and development 71,810 (3) 65,169 (11)

Purchased in-process research

and development 1,703 (4) -

----------- -----------

Total operating expenses 350,991 322,923

----------- -----------

Operating earnings 101,463 (5) 92,554 (12)

Impairment of private company

equity investment (3,018)(6) -

Interest income 5,930 6,152

Interest expense (1,656) (1,878)

----------- -----------

Earnings before income taxes 102,719 96,828

Income tax expense 36,274 (7) 33,212 (13)

----------- -----------

Net earnings $66,445 (8) $63,616 (14)

----------- -----------

Net earnings per diluted share $2.21 (8) $2.05 (14)

----------- -----------

Diluted shares outstanding 30,072 31,004

----------- -----------

NON-GAAP (ADJUSTED) FINANCIAL MEASURES (see also attached reconciliations

of GAAP to Adjusted results for each of these measures):

(1) $550,063 on an adjusted basis excluding $6,547 in acquisition-related

intangible amortization, $1,408 in acquisition-related inventory

write-up amortization, $1,641 in restructuring and other related

costs and $402 in share-based compensation expense.

(2) $264,539 on an adjusted basis excluding $1,825 in acquisition-related

intangible amortization, $2,581 in restructuring and other related

costs and $8,533 in share-based compensation expense.

(3) $70,150 on an adjusted basis excluding $1,254 in restructuring and

other related costs and $406 in share-based compensation expense.

(4) $0 on an adjusted basis excluding $1,703 related to an acquisition-

related in-process research and development charge.

(5) $127,763 on an adjusted basis excluding the adjustments described in

items (1) - (4) above.

(6) $0 on an adjusted basis excluding $3,018 related to the impairment of

a private company equity investment.

(7) $45,235 on an adjusted basis excluding the tax impact of the

adjustments described in items (1) - (3) and (6) above.

(8) $86,802 and $2.89 per diluted share, respectively, on an adjusted

basis excluding the adjustments (net of related tax effects)

described in items (1) - (3) and (6) above.

(9) $496,940 on an adjusted basis excluding $5,299 in acquisition-related

intangible amortization, $1,290 in acquisition-related inventory

write-up amortization, $1,172 in restructuring and other related

costs and $420 in share-based compensation expense.

(10) $243,826 on an adjusted basis excluding $2,630 in acquisition-related

intangible amortization, $2,405 in restructuring and other related

costs and $8,893 in share-based compensation expense.

(11) $63,897 on an adjusted basis excluding $767 in restructuring and

other related costs and $505 in share-based compensation expense.

(12) $115,935 on an adjusted basis excluding the adjustments described in

items (9) - (11) above.

(13) $41,592 on an adjusted basis excluding the tax impact of the

adjustments described in items (9) - (11) above.

(14) $78,617 and $2.54 per diluted share, respectively, on an adjusted

basis excluding the adjustments (net of related tax effects)

described in items (9) - (11) above.

VARIAN, INC. AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands, except par value amounts)

October 3, September 28,

2008 2007

---------- ----------

ASSETS

Current assets

Cash and cash equivalents $103,895 $196,396

Accounts receivable, net 199,420 187,429

Inventories 161,039 140,533

Deferred taxes 33,618 38,068

Prepaid expenses and other current assets 15,663 17,332

---------- ----------

Total current assets 513,635 579,758

Property, plant and equipment, net 110,343 110,792

Goodwill 218,208 193,760

Intangible assets, net 36,972 31,572

Other assets 24,089 20,951

---------- ----------

Total assets $903,247 $936,833

---------- ----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Current portion of long-term debt $ - $ 6,250

Accounts payable 70,923 72,588

Deferred profit 10,957 13,641

Accrued liabilities 167,173 159,109

---------- ----------

Total current liabilities 249,053 251,588

Long-term debt 18,750 18,750

Deferred taxes 4,341 4,050

Other liabilities 43,431 44,358

---------- ----------

Total liabilities 315,575 318,746

---------- ----------

Stockholders' equity

Preferred stock-par value $0.01,

authorized-1,000 shares; issued-none - -

Common stock-par value $0.01,

authorized-99,000 shares; issued and

outstanding-28,917 shares at

October 3, 2008 and 30,345 shares

at September 28, 2007 356,192 351,330

Retained earnings 186,009 199,471

Accumulated other comprehensive income 45,471 67,286

---------- ----------

Total stockholders' equity 587,672 618,087

---------- ----------

Total liabilities and stockholders' equity $903,247 $936,833

---------- ----------

VARIAN, INC. AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

Fiscal Quarter Ended Fiscal Year Ended

-------------------- -----------------

Oct. 3, Sept. 28, Oct. 3, Sept. 28,

2008 2007 2008 2007

-------- -------- -------- --------

Cash flows from operating

activities

Net earnings $21,708 $17,428 $66,445 $63,616

Adjustments to reconcile net

earnings to net cash

provided by operating activities:

Depreciation and amortization 8,129 8,085 29,346 29,248

Gain on disposition of property,

plant and equipment (22) (256) (474) (452)

Impairment of private company

equity investment - - 3,018 -

Purchased in-process research

and development 215 - 1,703 -

Share-based compensation expense 2,466 2,056 9,673 9,946

Deferred taxes (2,582) (7,090) (3,122) (8,892)

Changes in assets and liabilities,

excluding effects of acquisitions:

Accounts receivable, net (22,940) (1,171) (12,205) 1,074

Inventories 11,618 10,103 (19,428) 400

Prepaid expenses and other

current assets 2,810 49 3,300 (387)

Other assets (736) (3,898) (1,462) (4,110)

Accounts payable (2,294) 1,755 (1,072) (4,733)

Deferred profit 440 3,093 (3,526) (176)

Accrued liabilities 9,959 (1,771) 13,159 (1,499)

Other liabilities (9,375) 12,209 (6,334) 15,822

-------- -------- -------- --------

Net cash provided by

operating activities 19,396 40,592 79,021 99,857

-------- -------- -------- --------

Cash flows from investing

activities

Proceeds from sale of property,

plant and equipment 470 1,773 1,735 4,966

Purchase of property, plant

and equipment (7,286) (8,517) (23,960) (19,396)

Purchase of businesses, net of

cash acquired (2,269) (2,049) (55,167) (7,115)

Private company equity investments - (3,000) (18) (3,000)

-------- -------- -------- --------

Net cash used in

investing activities (9,085) (11,793) (77,410) (24,545)

-------- -------- -------- --------

Cash flows from financing

activities

Repayments of debt - - (6,250) (2,500)

Repurchase of common stock (24,968) (17,117) (106,860) (86,699)

Issuance of common stock 2,467 5,149 18,228 31,897

Excess tax benefit from share-

based plans (2,257) 2,020 894 9,090

Transfers to Varian Medical

Systems, Inc. - (265) (600) (646)

-------- -------- -------- --------

Net cash used in

financing activities (24,758) (10,213) (94,588) (48,858)

-------- -------- -------- --------

Effects of exchange rate changes

on cash and cash equivalents (9,873) 6,470 476 15,787

-------- -------- -------- --------

Net (decrease) increase in cash

and cash equivalents (24,320) 25,056 (92,501) 42,241

Cash and cash equivalents at

beginning of period 128,215 171,340 196,396 154,155

-------- -------- -------- --------

Cash and cash equivalents at end

of period $103,895 $196,396 $103,895 $196,396

--------- --------- --------- ---------

VARIAN, INC. AND SUBSIDIARY COMPANIES

RECONCILIATION OF GAAP TO ADJUSTED RESULTS - ACTUAL

UNAUDITED RESULTS OF OPERATIONS

(In thousands)

Fourth Quarter FY 2008 and Fourth Quarter FY 2007

and

Full Year FY 2008 and Full Year FY 2007

Fiscal Quarter Ended Fiscal Year Ended

-------------------- -------------------

Oct. 3, Sept. 28, Oct. 3, Sept. 28,

2008 2007 2008 2007

-------- --------- -------- ---------

TOTAL COMPANY

-------------

Cost of Sales

U.S. GAAP as reported $156,377 $137,271 $560,061 $505,121

Adjustments:

Share-based compensation

expense (109) (106) (402) (420)

Acquisition-related

intangible amortization (1,663) (1,368) (6,547) (5,299)

Acquisition-related inventory

write-up amortization (172) (835) (1,408) (1,290)

Restructuring and other

related costs (466) (472) (1,641) (1,172)

--------- --------- --------- ---------

As adjusted $153,967 $134,490 $550,063 $496,940

--------- --------- --------- ---------

Selling, General and

Administrative

U.S. GAAP as reported $75,098 $66,932 $277,478 $257,754

Adjustments:

Share-based compensation

expense (2,172) (1,744) (8,533) (8,893)

Acquisition-related

intangible amortization (586) (548) (1,825) (2,630)

Restructuring and other

related costs (273) (307) (2,581) (2,405)

--------- --------- --------- ---------

As adjusted $72,067 $64,333 $264,539 $243,826

--------- --------- --------- ---------

Research and Development

U.S. GAAP as reported $17,921 $16,577 $71,810 $65,169

Adjustments:

Share-based compensation

expense (96) (125) (406) (505)

Restructuring and other

related costs (501) (480) (1,254) (767)

--------- --------- --------- --------

As adjusted $17,324 $15,972 $70,150 $63,897

--------- --------- --------- --------

Purchased In-Process Research

and Development

U.S. GAAP as reported $ 215 $ - $1,703 $ -

Adjustments:

Acquisition-related in-

process research and

development charge (215) - (1,703) -

--------- --------- --------- --------

As adjusted $ - $ - $ - $ -

--------- --------- --------- --------

VARIAN, INC. AND SUBSIDIARY COMPANIES

RECONCILIATION OF GAAP TO ADJUSTED RESULTS - ACTUAL

UNAUDITED RESULTS OF OPERATIONS

(In thousands, except margin data)

Fourth Quarter FY 2008 and Fourth Quarter FY 2007

and

Full Year FY 2008 and Full Year FY 2007

Fiscal Quarter Ended Fiscal Year Ended

--------------------- ---------------------

Oct. 3, Sept. 28, Oct. 3, Sept. 28,

2008 2007 2008 2007

--------- --------- -------- ----------

TOTAL COMPANY (Continued)

------------------------

Operating Earnings

U.S. GAAP as reported $32,859 $24,855 $101,463 $92,554

Adjustments:

Share-based

compensation expense 2,377 1,975 9,341 9,818

Acquisition-related in-

process research and

development charge 215 - 1,703 -

Acquisition-related

intangible amortization 2,249 1,916 8,372 7,929

Acquisition-

related inventory

write-up amortization 172 835 1,408 1,290

Restructuring and other

related costs 1,240 1,259 5,476 4,344

--------- --------- ---------- ----------

As adjusted $39,112 $30,840 $127,763 $115,935

--------- --------- ---------- ----------

Operating Margins

U.S. GAAP as reported 11.6% 10.1% 10.0% 10.1%

Adjustments:

Share-based

compensation expense 0.8 0.8 0.9 1.1

Acquisition-related in-

process research

and development charge 0.1 - 0.2 -

Acquisition-related

intangible amortization 0.8 0.9 0.9 0.8

Acquisition-related

inventory write-up

amortization 0.1 0.3 0.1 0.1

Restructuring and other

related costs 0.4 0.5 0.5 0.5

-------- -------- -------- --------

As adjusted 13.8% 12.6% 12.6% 12.6%

-------- -------- -------- --------

Impairment of Private Company

Equity Investment

U.S. GAAP as reported $ - $ - $3,018 $ -

Adjustments:

Impairment of private

company equity

investment - - (3,018) -

-------- -------- -------- --------

As adjusted $ - $ - $ - $ -

-------- -------- -------- --------

Income Tax Expense

U.S. GAAP as reported $11,811 $8,886 $36,274 $33,212

Adjustments:

Tax impact of

adjustments:

Share-based

compensation expense 637 710 2,559 3,573

Acquisition-related

intangible amortization 723 604 2,755 2,682

Acquisition-related

inventory write-up

amortization 75 298 485 455

Impairment of private

company equity

investment - - 1,147 -

Restructuring and other

related costs 477 590 2,015 1,670

-------- --------- --------- ---------

As adjusted $13,723 $11,088 $45,235 $41,592

-------- --------- --------- ---------

VARIAN, INC. AND SUBSIDIARY COMPANIES

RECONCILIATION OF GAAP TO ADJUSTED RESULTS - ACTUAL

UNAUDITED RESULTS OF OPERATIONS

(In thousands, except per share data)

Fourth Quarter FY 2008 and Fourth Quarter FY 2007

and

Full Year FY 2008 and Full Year FY 2007

Fiscal Quarter Ended Fiscal Year Ended

-------------------- -----------------

Oct. 3, Sept. 28, Oct. 3, Sept. 28,

2008 2007 2008 2007

--------- --------- -------- --------

TOTAL COMPANY (Continued)

------------------------

Net Earnings

U.S. GAAP as reported $21,708 $17,428 $66,445 $63,616

Adjustments:

Share-based

compensation expense 1,740 1,265 6,782 6,245

Acquisition-related

in-process research

and development charge 215 - 1,703 -

Acquisition-related

intangible amortization 1,526 1,312 5,617 5,247

Acquisition-related inventory

write-up amortization 97 537 923 835

Impairment of private company

equity investment - - 1,871 -

Restructuring and other

related costs 763 669 3,461 2,674

------- ------- ------- -------

As adjusted $26,049 $21,211 $86,802 $78,617

------- ------- ------- -------

Diluted Earnings Per Share

U.S. GAAP as reported $0.74 $0.56 $2.21 $2.05

Adjustments:

Acquisition-related in-process

research and development charge 0.01 - 0.06 -

Acquisition-related

intangible amortization 0.05 0.05 0.18 0.17

Acquisition-related inventory

write-up amortization - 0.02 0.03 0.03

Impairment of private company

equity investment - - 0.06 -

Restructuring and other

related costs 0.03 0.02 0.12 0.09

------- ------- ------- -------

As adjusted - including share-based

compensation expense 0.83 0.65 2.66 2.34

Share-based compensation expense 0.06 0.04 0.23 0.20

------- ------- ------- -------

As adjusted - excluding share-based

compensation expense $0.89 $0.69 $2.89 $2.54

------- ------- ------- -------

Free Cash Flow

U.S. GAAP as reported - Net cash

provided by operating activities $19,396 $40,592 $79,021 $99,857

Adjustments:

Proceeds from sale of property,

plant and equipment 470 1,773 1,735 4,966

Purchase of property, plant

and equipment (7,286) (8,517) (23,960) (19,396)

------- ------- ------- -------

As adjusted - Free Cash Flow $12,580 $33,848 $56,796 $85,427

------- ------- ------- -------

VARIAN, INC. AND SUBSIDIARY COMPANIES

RECONCILIATION OF GAAP TO ADJUSTED RESULTS - ACTUAL

UNAUDITED RESULTS OF OPERATIONS

(In thousands, except margin data)

Fourth Quarter FY 2008 and Fourth Quarter FY 2007

and

Full Year FY 2008 and Full Year FY 2007

Fiscal Quarter Ended Fiscal Year Ended

-------------------- ---------------------

Oct. 3, Sept. 28, Oct. 3, Sept. 28,

2008 2007 2008 2007

--------- -------- --------- ---------

SCIENTIFIC INSTRUMENTS SEGMENT

------------------------------

Operating Earnings

U.S. GAAP as reported $26,191 $21,424 $80,700 $79,486

Adjustments:

Share-based

compensation expense 909 806 3,495 3,367

Acquisition-related in-

process research

and development charge 215 - 1,703 -

Acquisition-related

intangible amortization 2,249 1,916 8,372 7,929

Acquisition-related

inventory write-up

amortization 172 835 1,408 1,290

Restructuring and other

related costs 1,240 1,259 5,476 4,344

--------- --------- --------- ---------

As adjusted $30,976 $26,240 $101,154 $96,416

--------- --------- --------- ---------

Operating Margins

U.S. GAAP as reported 11.1% 10.3% 9.6% 10.4%

Adjustments:

Share-based

compensation expense 0.4 0.4 0.4 0.4

Acquisition-related in-

process research and

development charge 0.1 - 0.2 -

Acquisition-related

intangible amortization 0.9 1.0 1.0 1.1

Acquisition-related

inventory write-up

amortization 0.1 0.4 0.2 0.2

Restructuring and other

related costs 0.5 0.6 0.7 0.6

--------- --------- --------- ---------

As adjusted 13.1% 12.7% 12.1% 12.7%

--------- --------- --------- ---------

VACUUM TECHNOLOGIES SEGMENT

---------------------------

Operating Earnings

U.S. GAAP as reported $10,123 $8,102 $34,384 $31,955

Adjustments:

Share-based

compensation expense 268 117 913 1,094

--------- --------- --------- ---------

As adjusted $10,391 $8,219 $35,297 $33,049

--------- --------- --------- ---------

Operating Margins

U.S. GAAP as reported 22.0% 21.1% 19.8% 20.1%

Adjustments:

Share-based

compensation expense 0.6 0.3 0.5 0.7

--------- --------- --------- ---------

As adjusted 22.6% 21.4% 20.3% 20.8%

--------- --------- --------- ---------

GENERAL (UNALLOCATED) CORPORATE

-------------------------------

Operating Earnings

U.S. GAAP as reported $(3,455) $(4,671) $(13,621) $(18,887)

Adjustments:

Share-based

compensation expense 1,200 1,052 4,933 5,357

--------- -------- --------- ---------

As adjusted $(2,255) $(3,619) $(8,688) $(13,530)

--------- -------- --------- ---------

VARIAN, INC. AND SUBSIDIARY COMPANIES

RECONCILIATION OF GAAP TO ADJUSTED RESULTS - PROJECTED

RESULTS OF OPERATIONS

(UNAUDITED)

Fiscal Year Ending October 2, 2009

Range of Projected Results

TOTAL COMPANY --------------------------

-------------

Projected Diluted Earnings Per Share

Projected U.S. GAAP $2.50 - $2.70

Adjustments:

Projected acquisition-related

intangible amortization $0.17 - $0.18

Projected acquisition-related

inventory write-up amortization $0.01

Projected restructuring and other

related costs $0.09 - $0.13

Projected as adjusted - including share-

based compensation expense $2.80 - $3.00

Projected share-based compensation expense $0.20

Projected as adjusted - excluding share-

based compensation expense $3.00 - $3.20


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SOURCE Varian, Inc.
Copyright©2008 PR Newswire.
All rights reserved


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