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Varian Medical Systems Reports Results for Fourth Quarter of Fiscal Year 2012

PALO ALTO, Calif., Oct. 25, 2012 /PRNewswire/ -- Varian Medical Systems (NYSE: VAR) today is reporting net earnings from continuing operations of $1.08 per diluted share in the fourth quarter of fiscal year 2012, up 14 percent from $0.95 in the year-ago quarter.  Net earnings per diluted share from continuing operations for fiscal year 2012 climbed to $3.76, up 9 percent from $3.44 in fiscal year 2011. 

Varian's company-wide revenues totaled $756 million for the fourth quarter of fiscal 2012, up 5 percent from the year-ago quarter.  Revenues for fiscal year 2012 were $2.8 billion, up 8 percent from the fiscal year 2011 total. Excluding proton revenues from the comparisons, fourth quarter revenues were up 9 percent from the year-ago quarter and up 8 percent for the fiscal year. The company ended fiscal year 2012 with a $2.8 billion backlog, up 12 percent from the end of fiscal year 2011. 

"Varian's core Oncology Systems and X-Ray Products businesses achieved solid growth in net orders and revenues helped by customer demand around the world for our newer products," said Dow R. Wilson, president and CEO of Varian Medical Systems.  "Margins for our core businesses came in line with our expectations for the quarter given our continued shift to international markets and the comparable strength of the U.S. dollar.  Our fourth quarter performance ends what has been a challenging year on a positive note." 

The company finished the fiscal year with $705 million in cash and cash equivalents and $161 million of debt. Cash flow from operations for the fiscal year was $493 million.  During the fourth quarter, the company spent $85 million to repurchase 1.4 million shares of common stock.  The company ended the quarter with accounts receivable days sales outstanding of 85, up 5 days from the year-ago quarter.

Oncology Systems
Oncology Systems' fourth quarter revenues totaled $590 million, up 7 percent from the same period of fiscal year 2011, and fiscal year revenues were $2.2 billion, up 8 percent from fiscal year 2011.  Fourth-quarter net orders were $789 million, up 10 percent versus the comparable year-ago period in both North America and the international markets.  Net orders for the fiscal year rose to $2.4 billion, up 7 percent from the last fiscal year, with a 5 percent gain in North America and an 8 percent increase in international markets which represented 55 percent of Oncology net orders for the fiscal year.  On a constant currency basis, Oncology Systems fourth quarter net orders were up 12 percent, with 14 percent growth in international markets led by 20 percent plus growth in demand in both Europe and Asia.

"We continued to see strong demand for Oncology services as well as our newer radiotherapy and radiosurgery products including TrueBeam and our RapidArc technology," said Wilson.  "We also saw some major wins in our software business."

X-Ray Products
Fourth quarter revenues for the X-Ray Products business were $130 million, up 9 percent from the year-ago quarter, and revenues for fiscal year 2012 were $493 million, up 5 percent from the prior fiscal year.  Compared to the corresponding periods in fiscal year 2011, X-Ray Products' fourth quarter net orders rose 15 percent to $145 million, and fiscal year net orders rose 5 percent to $506 million.

"Our X-Ray Products business had a strong fourth quarter with robust orders growth and share expansion from our panel products that offset weaker tube orders caused by ongoing softness in the global market for X-ray imaging equipment," said Wilson.  "New products introduced during the second half of the year began to contribute to the growth of this business. X-Ray Products' fourth quarter margins rose strongly due to a larger mix of panel revenues as well as successful cost containment initiatives and improved quality costs."

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 fourth quarter revenues of $36 million versus $51 million in the year-ago quarter when the company recognized a substantial amount of proton revenue. Revenues from the Other category for fiscal year 2012 totaled $125 million, up 18 percent from fiscal year 2011 levels.

Proton revenues approximating $5 million from the ongoing Scripps installation in San Diego were recognized during the quarter under contract accounting rules using the percentage of completion method.  

Net orders for the Other category were $30 million for the quarter, down from $124 million in the year ago quarter when the company booked a large proton order.
Compared to fiscal year 2011, Other category net orders for fiscal year 2012 rose 7 percent to $216 million, including two proton orders totaling over $120 million.

"Our company is positioned for growth by focusing on continuous innovation, expanding our global presence, building our software and service franchises and commercializing protons," said Wilson.  "We are also enhancing our operational performance through productivity initiatives in all parts of the company.  As part of this effort, we will be taking a restructuring charge in the first quarter of fiscal year 2013.

"For fiscal year 2013, we believe that revenues could increase by 8 to 9 percent over the fiscal 2012 total," added Wilson. "Including an estimated $0.06 to $0.08 effect from the pending medical device excise tax, fiscal year 2013 net earnings per diluted share should be in the range of $4.06 to $4.16.  For the first quarter of fiscal year 2013, total company revenues could increase by about 8 to 9 percent over the prior year quarter.  Net earnings per diluted share, including the planned restructuring charge of $0.02 to $0.03, should be in the range of $0.83 to $0.88."

Investor Conference Call
Varian Medical Systems is scheduled to conduct its fourth quarter fiscal year 2012 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 1-800-901-5217 from inside the U.S. or 1-617-786-2964 from outside the U.S. and enter confirmation code 89133899.  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 23435173.  The telephone replay will be available through 5 p.m. PT, Friday, October 26, 2012.

For automatic "e-mail alerts" regarding Varian news, events, and new investor materials on the website, investors can subscribe on the company website: For additional information, contact investor relations at 1 650 424-5834.

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 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 6,100 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

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 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.

FOR INFORMATION CONTACT:Elisha Finney (650) 424-6803

Spencer Sias (650) 424-5782

A summary of earnings and other financial information follows.Varian Medical Systems, Inc. and Subsidiaries Condensed Consolidated Statements of Earnings

 (Unaudited)(Dollars and shares in millions, except per share amounts)Q4 QTR2012Q4 QTR2011Q4 YTD2012Q4 YTD2011Net orders


963.6967.93,121.92,933.5  Oncology Systems788.6717.22,400.12,249.5  X-Ray Products145.3126.3505.6482.8  Security & Inspection Products29.035.889.9109.9  Varian Particle Therapy  0.788.6125.790.9Ginzton Technology Center--0.60.4Order backlog$



756.1719.02,807.02,596.7  Oncology Systems590.1549.12,189.52,021.9  X-Ray Products130.1119.0492.6469.2  Other35.950.9124.9105.6Cost of revenues


432.9418.71,610.71,460.8Gross margin323.2300.31,196.31,135.9  As a percent of revenues42.8%41.8%42.6%43.7%Operating expenses  Research and development  45.943.9185.7170.7  Selling, general and administrative  109.596.7416.5376.8Operating earnings 167.8159.7594.1588.4  As a percent of revenues22.2%22.2%21.2%22.7%Interest income, net0. from continuing operations before taxes168.5159.8595.9588.7Taxes on earnings 48.349.4168.9180.1Earnings from continuing operations  120.2110.4427.0408.6  As a percent of revenues15.9%15.4%15.2%15.7%Loss  from discontinued operations – net of  taxes  (1)-(9.7)-(9.7)Net earnings


120.2100.7427.0398.9Net earnings (loss) per share – basic:Continuing operations


1.090.973.833.50Discontinued operations  (1)-(0.09)-(0.08)Net earnings per share


1.090.883.833.42Net earnings (loss)  per share – diluted: Continuing operations


1.080.953.763.44Discontinued operations  (1)-(0.08)-(0.08)Net earnings per share


1.080.873.763.36Shares used in the calculation of net earnings (loss) per share: 
Average shares outstanding - basic110.0114.4111.4116.7Average shares outstanding - diluted111.6116.2113.5118.7(1) The operating results of ACCEL research instruments are classified as discontinued operations for all periods presented.Varian Medical Systems, Inc. and SubsidiariesCondensed Consolidated Balance Sheets(In thousands)September 28,  September 30,20122011 (1)(Unaudited)AssetsCurrent assetsCash and cash equivalents




564,457Short-term investment 49,70919,205Accounts receivable, net691,806635,153Inventories457,869409,962Deferred tax assets and other266,561225,840Total current assets2,170,5151,854,617Property, plant and equipment653,424601,115Accumulated depreciation and amortization(356,832)(315,221)Property, plant and equipment, net296,592285,894Goodwill222,242212,452Other assets189,377145,798Total assets$



2,498,761Liabilities and Stockholders' EquityCurrent liabilitiesAccounts payable$



154,946Accrued expenses336,568290,009Deferred revenues130,883140,173Advance payments from customers380,545299,380Product warranty52,79950,128Short-term borrowings155,000181,400Current maturities of long-term debt-9,876Total current liabilities1,236,5311,125,912Other long-term liabilities126,169122,708Long-term debt6,2506,250Total liabilities1,368,9501,254,870Stockholders' EquityCommon stock 109,407112,344Capital in excess of par value 563,875500,922Retained earnings and accumulated other comprehensive loss  836,494630,625Total stockholders' equity1,509,7761,243,891Total liabilities and stockholders' equity$



2,498,761(1)  The condensed consolidated balance sheet as of September 30, 2011 was derived from audited financial statements as of that date.

SOURCE Varian Medical Systems
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