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Varian Medical Systems Reports Results for Third Quarter of Fiscal Year 2012
Date:7/25/2012

PALO ALTO, Calif., July 25, 2012 /PRNewswire/ -- Varian Medical Systems (NYSE: VAR) is today reporting net earnings of $0.96 per diluted share in the third quarter of fiscal year 2012, up 16 percent from $0.83 in the year-ago quarter.  Revenues for the quarter were $705 million, up 9 percent from the year-ago quarter.

"All of our major businesses contributed to solid growth in earnings and revenues," said Tim Guertin, president and CEO of Varian Medical Systems. "Gross margins for the company improved with increases in our X-Ray Products and Oncology businesses. We continued to operate in a challenging global environment with big swings in European currency exchange rates. Net orders were even for the total company compared with the year-ago quarter and up slightly on a constant currency basis." The quarter ending backlog was $2.6 billion, up 16 percent from the year-ago period.

The company ended the quarter with $633 million in cash and cash equivalents and $175 million of debt. During the third quarter, the company spent $97 million to repurchase 1.5 million shares of common stock. The company ended the quarter with accounts receivable days sales outstanding of 80 days, an improvement of 1 day from the year-ago quarter.

Oncology Systems
Oncology Systems' third quarter revenues totaled $546 million, up 7 percent from the same period of fiscal year 2011. Third-quarter net orders were $562 million, up 2 percent, with a 4 percent increase in North America and a 1 percent decline in international markets versus the comparable year-ago period.  On a constant currency basis, Oncology Systems third quarter net orders were up 4 percent, with double-digit growth in Asia and mid-single-digit growth in Europe. Year-to-date, Oncology Systems net orders were 5 percent higher than the comparable period in fiscal year 2011, and up 6 percent on a constant currency basis.

X-Ray Products
Third quarter revenues for the X-Ray Products business were $127 million, up 5 percent from the year-ago quarter.  Compared to the corresponding period in fiscal year 2011, X-Ray Products' third quarter net orders fell 1 percent to $120 million.  The X-Ray Products business experienced the effects of a weaker economy during the quarter in the face of softer demand from major customers. Gross margins for this business rose by more than 4 points to a record 45 percent, driven mainly by a greater proportion of higher margin products and improved quality costs in the panel business.

Other
The company's Other category, which includes Security and Inspection Products and Varian Particle Therapy, recorded third quarter revenues of $32 million, double the year-ago quarter.  Revenues from Security and Inspection Products were up strongly in the quarter. Third-quarter orders for the Other category totaled $7 million, down $10 million from the year-ago quarter. Results from these businesses generally vary significantly from quarter to quarter.

Outlook
"With tremendous movements in currency exchange rates, particularly the substantial weakening of the Euro, we are adjusting our outlook for fiscal 2012," said Guertin. "Compared with fiscal 2011 totals, we now believe that for fiscal year 2012 revenues could increase by about 8 percent and net earnings per diluted share from continuing operations could grow by 8 to 9 percent." 

Investor Conference Call
Varian Medical Systems is scheduled to conduct its third 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 www.varian.com/investor where it will be archived for a year.  To access the call via telephone, dial 1-877-556-5921 from inside the U.S. or 1-617-597-5474 from outside the U.S. and enter confirmation code 19437371.  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 56507486.  The telephone replay will be available through 5 p.m. PT, Friday, July 27, 2012.

For automatic "e-mail alerts" regarding Varian news, events, and new investor materials on the website, investors can subscribe on the company website: http://varian.investorroom.com/index.php?s=58. 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 http://www.varian.com.

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 the effect of global economic conditions; the impact of  the 2010 federal health care legislation (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

 (Unaudited)(Dollars and shares in millions, except per share amounts)Q3 QTR2012Q3 QTR2011Q3 YTD2012Q3 YTD2011Net orders

$

689.4691.32,158.31,965.6  Oncology Systems562.0553.21,611.51,532.3  X-Ray Products120.1120.9360.3356.5  Security & Inspection Products6.115.760.974.1  Varian Particle Therapy  0.81.1125.02.3  Ginzton Technology Center0.40.40.60.4Order backlog

$

2,636.92,280.52,636.92,280.5Revenues

$

705.3649.42,050.91,877.7  Oncology Systems546.4512.51,599.41,472.8  X-Ray Products126.7120.8362.5350.2  Other32.216.189.054.7Cost of revenues

$

397.7369.61,177.81,042.1Gross margin307.6279.8873.1835.6  As a percent of revenues43.6%43.1%42.6%44.5%Operating expenses  Research and development  48.944.4139.8126.8  Selling, general and administrative  105.194.9307.0280.1Operating earnings 153.6140.5426.3428.7  As a percent of revenues21.8%21.6%20.8%22.8%Interest income, net0.40.11.10.2Earnings before taxes154.0140.6427.4428.9Taxes on earnings 45.242.0120.6130.7Net earnings

$

108.898.6306.8298.2  As a percent of revenues15.4%15.2%15.0%15.9%Net earnings per share – basic

$

0.980.842.742.54Net earnings per share – diluted

$

0.960.832.692.49Shares used in the calculation of net earnings per share: 
Average shares outstanding - basic111.1116.9111.9117.6Average shares outstanding - diluted112.8119.1114.0119.8Varian Medical Systems, Inc. and SubsidiariesCondensed Consolidated Balance Sheets(In thousands)June 29,  September 30,20122011 (1)(Unaudited)AssetsCurrent assetsCash and cash equivalents

$

633,386

$

564,457Short-term investment 47,15519,205Accounts receivable, net608,834635,153Inventories464,436409,962Deferred tax assets and other263,676225,840Total current assets2,017,4871,854,617Property, plant and equipment636,607601,115Accumulated depreciation and amortization(349,271)(315,221)Property, plant and equipment, net287,336285,894Goodwill224,058212,452Other assets189,072145,798Total assets$

2,717,953

$

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

147,248

$

154,946Accrued expenses284,705290,009Deferred revenues126,348140,173Advance payments from customers353,943299,380Product warranty49,32350,128Short-term borrowings168,760181,400Current maturities of long-term debt-9,876Total current liabilities1,130,3271,125,912Other long-term liabilities118,051122,708Long-term debt6,2506,250Total liabilities1,254,6281,254,870Stockholders' EquityCommon stock 110,711112,344Capital in excess of par value 568,943500,922Retained earnings and accumulated other comprehensive loss  783,671630,625Total stockholders' equity1,463,3251,243,891Total liabilities and stockholders' equity$

2,717,953

$

2,498,761(1)

The condensed consolidated balance sheet as of September 30, 2011 was derived from audited financial statements as of that date.FOR INFORMATION CONTACT:
Elisha Finney (650) 424-6803
elisha.finney@varian.com

Spencer Sias (650) 424-5782
spencer.sias@varian.com


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SOURCE Varian Medical Systems, Inc.
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