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Varian Medical Systems Reports Results for First Quarter of Fiscal Year 2009

PALO ALTO, Calif., Jan. 29 /PRNewswire-FirstCall/ -- Varian Medical Systems (NYSE: VAR) today reported net earnings from continuing operations of $0.56 per diluted share in the first quarter of fiscal year 2009 versus net earnings from continuing operations of $0.46 per diluted share in the year-ago quarter. Including the discontinued ACCEL research instruments operation, net earnings per diluted share in the same period were $0.55. Compared to continuing operations in the year-ago quarter, first quarter revenues rose 13 percent to $509 million, net orders rose 13 percent to $551 million, and the quarter-ending backlog rose 14 percent to $1.9 billion.

"Net orders and revenues increased in our Oncology Systems and X-Ray Products business segments as well as our Security and Inspection Products business," said Tim Guertin, president and CEO of Varian Medical Systems. "Our gross margin improved by more than half a percentage point and contributed to higher earnings versus the year-ago quarter."

The company ended the first quarter with $423 million in cash and cash equivalents and $65 million of debt. Days sales outstanding of 83 days in the quarter improved by 4 days versus the year-ago period. The company spent $72 million during the quarter to repurchase 1.5 million shares under its stock repurchase authorization.

Business Segments

Oncology Systems' revenues for the quarter totaled $398 million, up 11 percent from the first quarter of last fiscal year. This business recorded first-quarter net orders of $428 million, up 11 percent from the same period last year. Net orders were up 6 percent in North America and up 16 percent in international markets.

Revenues for the X-Ray Products business, including tubes and digital flat-panel detectors for filmless X-ray imaging, were $86 million for the first quarter, up 23 percent from the year-ago quarter. Net orders for this business were $91 million, up 21 percent from the year-ago quarter.

Other Businesses

The company's Security and Inspection Products business, ACCEL proton therapy unit, and Ginzton Technology Center reported combined fiscal 2009 first quarter revenues of $24 million, up 17 percent from the year-ago quarter. Net orders for the quarter were $33 million, up 15 percent versus the year-ago quarter, due primarily to the Security and Inspection Products business.


"Despite continuing turbulent financial times, we believe that fiscal year 2009 revenues could grow by about 10 to 13 percent and that net earnings per diluted share from continuing operations for the fiscal year could grow to between $2.59 and $2.64," Guertin said. "For the second quarter of fiscal year 2009, revenues could grow in the range of 9 to 10 percent with a slightly faster growth rate in operating earnings. Including a higher expected tax rate, net earnings per diluted share from continuing operations for the second quarter should be in the range of $0.59 to $0.62."

Investor Conference Call

Varian Medical Systems is scheduled to conduct its first quarter fiscal year 2009 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 1-866-271-0675 from inside the U.S. or 1-617-213- 8892 from outside the U.S. and enter confirmation code 46529406. The replay can be accessed by dialing 1-888-286-8010 from inside the U.S. or 1-617-801- 6888 from outside the U.S. and entering confirmation code 54317886. The telephone replay will be available through 5 p.m. PT, Friday, January 30, 2009.

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, proton therapy, 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 and digital detectors for X- ray imaging in medical, scientific, and industrial applications and also supplies X-ray imaging products for cargo screening and industrial inspection. Varian Medical Systems employs approximately 5,100 people who are located at manufacturing sites in North America, Europe, and China and approximately 60 sales and support offices around the world. For more information, visit

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 RapidArc therapy, image-guided radiation therapy (IGRT), stereotactic radiosurgery, filmless X-rays, proton therapy, and security and inspection, and any statements using the terms "believe," "could," 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 the effect of economic conditions, including the current global recession, currency exchange rates and tax rates; the impact of health care reforms, and/or third-party reimbursement levels and credit availability for capital expenditures for cancer care; demand for the company's products; the company's ability to develop and commercialize new products; the company's ability to complete the planned sale of instruments portion of the company's ACCEL proton therapy business; the company's reliance on sole or limited-source suppliers; the impact of reduced or limited demand by sole purchasers of certain X-ray tubes; the company's ability to maintain or increase operating margins; the impact of competitive products and pricing; the company's ability to meet Food and Drug Administration and other regulatory requirements for product clearances or to comply with Food and Drug Administration and other regulatory regulations or procedures; the ability to make strategic acquisitions and to successfully integrate the acquired operations into the company's business; the company's ability to protect the company's intellectual property; 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.

    A summary of earnings and other financial information follows.

                Varian Medical Systems, Inc. and Subsidiaries
                     Consolidated Statements of Earnings

     (Dollars and shares in millions,       Q1 QTR     Q1 QTR
      except per share amounts)              2009       2008
     Net orders                           $  551.3   $  489.0
       Oncology Systems                      427.6      385.7
       X-Ray Products                         91.1       75.1
       Other                                  32.6       28.2

     Order backlog                       $ 1,930.5  $ 1,693.3

     Revenues                             $  508.7   $  451.2
       Oncology Systems                      398.2      360.3
       X-Ray Products                         86.1       70.1
       Other                                  24.4       20.8

     Cost of revenues                     $  289.7   $  260.1

     Gross margin                            219.0      191.1
       As a percent of revenues               43.0%      42.4%

     Operating expenses
       Research and development               37.0       28.9
       Selling, general and administrative    83.3       75.1

     Operating earnings                       98.7       87.1
     As a percent of revenues                 19.4%      19.3%
     Interest income, net                      1.4        1.5

     Earnings from continuing operations
      before taxes                           100.1       88.6

     Taxes on earnings                        30.5       30.4

     Earnings from continuing operations      69.6       58.2
     As a percent of revenues                 13.7%      12.9%
     Loss from discontinued operations - net
      of taxes (1)                            (0.8)      (2.7)

     Net earnings                         $   68.8   $   55.5

     Net earnings (loss) per share - basic:
        Continuing operations             $   0.56   $   0.47
        Discontinued operations (1)       $     --   $  (0.03)
        Net earnings per share            $   0.56   $   0.44

     Net earnings (loss) per
      share - diluted:
        Continuing operations             $   0.56   $   0.46
        Discontinued operations (1)       $  (0.01)  $  (0.03)
        Net earnings per share            $   0.55   $   0.43

     Shares used in the calculation of net
      earnings per share:
     Average shares outstanding - basic      123.8      124.8
     Average shares outstanding - diluted    125.2      127.8

    1) The operating results of ACCEL research instruments are classified as
       discontinued operations for all periods presented.

                  Varian Medical Systems, Inc. and Subsidiaries
                      Condensed Consolidated Balance Sheets

     (In thousands)                                January 2, September 26,
                                                      2009         2008 (2)
    Current assets
      Cash and cash equivalents                     $422,871       $397,306
      Accounts receivable, net                       467,415        486,310
      Inventories                                    327,265        282,980
      Deferred tax assets and other                  186,391        209,006
      Current assets held for sale (1)                18,603         18,799
    Total current assets                           1,422,545      1,394,401

    Property, plant and equipment                    495,657        452,576
      Accumulated depreciation and amortization     (242,585)      (234,393)
    Property, plant and equipment, net               253,072        218,183

    Goodwill                                         206,261        209,146
    Other assets                                     152,572        150,694
    Long term assets held for sale (1)                 3,552          3,088
    Total assets                                  $2,038,002     $1,975,512

    Liabilities and Stockholders' Equity
    Current liabilities
      Accounts payable                               $89,726       $105,281
      Accrued expenses                               234,850        252,915
      Deferred revenues                              158,168        141,368
      Advance payments from customers                224,552        201,783
      Product warranty                                49,011         51,141
      Short-term borrowings                           25,000              -
      Current maturities of long-term debt             7,992          7,987
      Current liabilities held for sale (1)           21,035         21,202
    Total current liabilities                        810,334        781,677
    Other long-term liabilities                      153,065        134,251
    Long-term debt                                    32,337         32,399
    Total liabilities                                995,736        948,327

    Stockholders' Equity
    Common stock                                     124,313        125,590
    Capital in excess of par value                   468,615        468,384
    Retained earnings and accumulated other
     comprehensive loss                              449,338        433,211
    Total stockholders' equity                     1,042,266      1,027,185
    Total liabilities and stockholders' equity    $2,038,002     $1,975,512

     (1) The assets and liabilities of ACCEL research instruments are
         classified as held for sale for all periods presented.
     (2) The condensed consolidated balance sheet as of September 26, 2008 was
         derived from audited financial statements as of that date.

     Elisha Finney (650) 424-6803

     Spencer Sias (650) 424-5782

SOURCE Varian Medical Systems, Inc.
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