SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
| Date of report (Date of earliest event reported) | January 28, 2015 |
| VARIAN MEDICAL SYSTEMS, INC. |
| (Exact Name of Registrant as Specified in its Charter) |
| Delaware | 1-7598 | 94-2359345 |
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 3100 Hansen Way, Palo Alto, CA | 94304-1030 |
| (Address of Principal Executive Offices) | (Zip Code) |
| Registrant's telephone number, including area code | (650) 493-4000 |
| Not Applicable |
| (Former Name or Former Address, if Changed Since Last Report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On January 28, 2015, Varian Medical Systems, Inc. announced that: “Varian Medical Systems Reports Results for First Quarter of Fiscal Year 2015.” A copy of the press release is attached as Exhibit 99.1 and incorporated by reference into this item.
Item 9.01. Financial Statements and Exhibits.
| (d) | Exhibits. |
99.1 Press Release dated January 28, 2015 entitled “Varian Medical Systems Reports Results for First Quarter of Fiscal Year 2015.”
| 2 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Varian Medical Systems, Inc. | ||
| By: | /s/ John W. Kuo | |
| Name: | John W. Kuo | |
| Title: | Senior Vice President, General Counsel and Corporate Secretary | |
Dated: January 28, 2015
| 3 |
EXHIBIT INDEX
| Number |
Exhibit
|
| 99.1 | Press Release dated January 28, 2015 entitled “Varian Medical Systems Reports Results for First Quarter of Fiscal Year 2015.” |
Exhibit 99.1
FOR INFORMATION CONTACT:
Elisha Finney (650) 424-6803
elisha.finney@varian.com
Spencer Sias (650) 424-5782
spencer.sias@varian.com
For Immediate Release:
Varian Medical Systems Reports Results for First Quarter of Fiscal Year 2015
First quarter revenues rose 4 percent to $738 million; net earnings per diluted share were $0.92, including a $0.07 per diluted share restructuring charge; company maintaining annual earnings guidance despite significant currency headwinds
PALO ALTO, Calif., Jan. 28, 2015 – Varian Medical Systems (NYSE:VAR) today is reporting net earnings of $0.92 per diluted share in the first quarter of fiscal year 2015, including an $11 million or $0.07 per diluted share restructuring charge. Varian’s company-wide revenues totaled $738 million for the first quarter of fiscal year 2015, up 4 percent from the year-ago quarter. The company ended the first quarter with a $3.1 billion backlog, up 13 percent from the end of the first quarter of fiscal year 2014.
“The company came in significantly ahead of its earnings target for the quarter with the help of favorable geographic and product mix, as well as successful cost containment initiatives that led to improved gross margins in all our businesses,” said Dow R. Wilson, CEO of Varian Medical Systems.
The company finished the first quarter of fiscal year 2015 with $904 million in cash and cash equivalents and $525 million of debt. Cash flow from operations for the first quarter was $79 million. During the first quarter of fiscal year 2015, the company spent $126 million to repurchase approximately 1.5 million shares of common stock.
Oncology Systems
Oncology Systems’ first quarter revenues totaled $563 million, up 4 percent from the same quarter of fiscal year 2014. First-quarter Oncology gross orders were $562 million, up 5 percent versus the year-ago quarter. Consistent with the recent geographic reorganization of the Oncology Systems business, the company has consolidated the “Rest of World” region into three geographic regions – the Americas, APAC and EMEA. It is now reporting results for each of these regions. Oncology gross orders rose 17 percent in APAC, gained 12 percent in EMEA and declined by 2 percent in the Americas. Gross orders in North America fell by 3 percent versus strong growth of 13 percent in the prior-year quarter. (A quarterly recast of gross orders and revenues for fiscal years 2013 and 2014 in each of the reclassified geographic regions is attached.)
“Oncology revenues and gross margins were strong with the help of good performance in North America as well as robust gains in our software and service product lines,” said Wilson. “International gross order growth in this business was driven by strong performance in emerging markets, particularly in China.”
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| Varian Medical Systems Reports Results for First Quarter of Fiscal Year 2015 | Page 2 |
Imaging Components
First quarter revenues for Imaging Components were $166 million, up 3 percent from the year-ago quarter while first quarter gross orders increased by 34 percent to $163 million versus a weak year-ago quarter when orders declined.
“Demand for our flat panels and tubes drove the strong order growth in Imaging Components and kept the business on track to achieve long-term high single-digit order growth,” said Wilson.
Other
The company’s Other category, including the Varian Particle Therapy business and the Ginzton Technology Center, recorded revenues of $9 million and gross orders of $1 million in the quarter.
Outlook
“The company got off to a good start in the first quarter of fiscal 2015 with revenues and earnings coming in ahead of expectations,” said Wilson. “Our outlook for the full fiscal year is heavily impacted by the recent dramatic swing in currency exchange rates which we believe will significantly reduce revenues and earnings in the balance of the year. We now believe that total company revenues for fiscal year 2015 could increase by about 5 percent. With the earnings momentum of the first quarter, we believe that we can maintain our prior guidance of $4.16 to $4.26 per diluted share for the fiscal year.
“Given current exchange rates and the expected timing of shipments in the year, we believe total company revenues for the second quarter should increase by about 2 percent versus the year-ago period. Net earnings per diluted share for the second quarter could be in the range of $0.98 to $1.02.”
The guidance excludes contracted proton projects that are not yet financed or booked into backlog. If these projects are booked during the fiscal year, the potential upside in revenues and profits could be significant.
Investor Conference Call
Varian Medical Systems is scheduled to conduct its first quarter fiscal year 2015 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 1-877-869-3847 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 13597116. The telephone replay will be available through 5 p.m. PT, Friday, January 30, 2015.
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| Varian Medical Systems Reports Results for First Quarter of Fiscal Year 2015 | Page 3 |
# # #
Varian Medical Systems, Inc., of Palo Alto, California, focuses energy on saving lives by equipping the world with advanced technology for fighting cancer and for X-ray imaging. The company 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 also a premier supplier of X-ray imaging components, including tubes, digital detectors, and image processing software and workstations for use in medical, scientific, and industrial settings, as well as for security and non-destructive testing. Varian Medical Systems employs approximately 6,800 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 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 or market outlook, including growth drivers; the company’s future orders, revenues, or earnings growth or other financial results; and any statements using the terms “anticipate,” “believe,” “expect,” “outlook,” “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 global economic conditions; currency exchange rates and tax rates; the impact of the Affordable Health Care for America Act (including excise taxes on medical devices) and any further healthcare reforms (including changes to Medicare and Medicaid), and/or changes in third-party reimbursement levels; demand for the company’s products; the company’s ability to develop, commercialize and deploy new products; 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; the company’s assessment of the goodwill associated with its particle therapy business; 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; 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 Reports Results for First Quarter of Fiscal Year 2015 | Page 4 |
Varian Medical Systems, Inc. and Subsidiaries
Consolidated
Statements of Earnings
(Unaudited)
| (Dollars and shares in millions, except per share amounts) |
Q1 QTR 2015 |
Q1 QTR 2014 (1) |
|||||
| Gross orders | $ | 725.8 | $ | 655.4 | |||
| Oncology Systems | 561.7 | 533.3 | |||||
| Imaging Components | 162.7 | 121.4 | |||||
| Other | 1.4 | 0.7 | |||||
| Order backlog | $ | 3,124.3 | $ | 2,766.5 | |||
| Revenues | $ | 737.9 | $ | 711.5 | |||
| Oncology Systems | 563.3 | 541.4 | |||||
| Imaging Components | 166.0 | 161.2 | |||||
| Other | 8.6 | 8.9 | |||||
| Cost of revenues | $ | 410.9 | $ | 401.9 | |||
| Gross margin | 327.0 | 309.6 | |||||
| As a percent of revenues | 44.3% | 43.5% | |||||
|
Operating expenses |
|
||||||
| Research and development | 57.1 | 58.0 | |||||
| Selling, general and administrative | 140.4 | 109.6 | |||||
| Operating earnings | 129.5 | 142.0 | |||||
| As a percent of revenues | 17.5% | 20.0% | |||||
| Interest income, net | 0.9 | 0.4 | |||||
| Earnings before taxes | 130.4 | 142.4 | |||||
| Taxes on earnings | 37.1 | 44.4 | |||||
| Net earnings | $ | 93.3 | $ | 98.0 | |||
| As a percent of revenues | 12.6% | 13.8% | |||||
| Net earnings per share – basic | $ | 0.93 | $ | 0.92 | |||
| Net earnings per share – diluted | $ | 0.92 | $ | 0.91 | |||
| Shares used in the calculation of net earnings per share: | |||||||
| Average shares outstanding - basic | 100.5 | 106.0 | |||||
| Average shares outstanding - diluted | 101.6 | 107.4 | |||||
| (1) | Prior period numbers have been recast to conform to the segment reporting change made in Q2, FY2014 |
| Varian Medical Systems Reports Results for First Quarter of Fiscal Year 2015 | Page 5 |
Varian Medical Systems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| (In thousands) | January 2, | September 26, | |||
| 2015 | 2014(1) | ||||
| (Unaudited) | |||||
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | $ | 904,359 | $ | 849,275 | |
| Short-term investment | 68,522 | 66,176 | |||
| Accounts receivable, net | 663,041 | 731,929 | |||
| Inventories | 630,872 | 572,261 | |||
| Deferred tax assets and other | 285,571 | 274,524 | |||
| Total current assets | 2,552,365 | 2,494,165 | |||
| Property, plant and equipment | 786,226 | 775,972 | |||
| Accumulated depreciation and amortization | (450,901) | (437,973) | |||
| Property, plant and equipment, net | 335,325 | 337,999 | |||
| Goodwill | 237,702 | 240,626 | |||
| Other assets | 270,910 | 284,500 | |||
| Total assets | $ | 3,396,302 | $ | 3,357,290 | |
| Liabilities and Equity | |||||
| Current liabilities: | |||||
| Accounts payable | $ | 142,804 | $ | 187,377 | |
| Accrued expenses | 304,608 | 324,409 | |||
| Deferred revenues | 433,046 | 421,845 | |||
| Advance payments from customers | 182,379 | 170,724 | |||
| Product warranty | 44,093 | 47,299 | |||
| Short-term borrowings | 100,000 | - | |||
| Current maturities of long-term debt | 50,000 | 50,000 | |||
| Total current liabilities | 1,256,930 | 1,201,654 | |||
| Other long-term liabilities | 146,470 | 151,716 | |||
| Long-term debt | 375,000 | 387,500 | |||
| Total liabilities | 1,778,400 | 1,740,870 | |||
| Equity: | |||||
| Varian shareholders’ equity: | |||||
| Common stock | 100,327 | 100,942 | |||
| Capital in excess of par value | 659,098 | 642,848 | |||
| Retained earnings and accumulated other comprehensive loss | 856,700 | 872,630 | |||
| Total Varian shareholders’ equity | 1,616,125 | 1,616,420 | |||
| Non-controlling interest | 1,777 | - | |||
| Total Equity | 1,617,902 | 1,616,420 | |||
| Total liabilities and equity | $ | 3,396,302 | $ | 3,357,290 | |
| (1) | The condensed consolidated balance sheet as of September 26, 2014 was derived from audited financial statements as of that date. |
| Varian Medical Systems Reports Results for First Quarter of Fiscal Year 2015 | Page 6 |
Varian Medical Systems, Inc. and Subsidiaries
Gross Orders and Revenues by Region Restated
(Unaudited)
| Gross Orders | FY 2014 | FY 2013 | |||||||||||||||||||
| (in Millions) | |||||||||||||||||||||
| Q114 | Q214 | Q314 | Q414 | FY 2014 | Q113 | Q213 | Q313 | Q413 | FY 2013 | ||||||||||||
| Oncology | |||||||||||||||||||||
| Americas | $ | 281.0 | 290.5 | 305.0 | 492.9 | 1,369.4 | $ | 252.1 | 271.9 | 299.1 | 422.0 | 1,245.1 | |||||||||
| EMEA | 160.8 | 194.4 | 211.7 | 259.3 | 826.2 | 157.2 | 188.6 | 206.7 | 248.6 | 801.1 | |||||||||||
| APAC | 91.5 | 128.1 | 103.7 | 165.5 | 488.8 | 99.5 | 116.4 | 121.4 | 170.6 | 507.9 | |||||||||||
| Total | $ | 533.3 | 613.0 | 620.4 | 917.7 | 2,684.4 | $ | 508.8 | 576.9 | 627.2 | 841.2 | 2,554.1 | |||||||||
| North America | $ | 258.6 | 255.9 | 285.8 | 414.1 | 1,214.4 | $ | 229.7 | 248.6 | 285.3 | 371.7 | 1,135.3 | |||||||||
| International | $ | 274.7 | 357.1 | 334.6 | 503.6 | 1,470.0 | $ | 279.1 | 328.3 | 341.9 | 469.5 | 1,418.8 | |||||||||
| Imaging Components | |||||||||||||||||||||
| Americas | $ | 35.6 | 66.1 | 59.9 | 60.5 | 222.1 | $ | 58.3 | 36.8 | 57.3 | 62.5 | 214.9 | |||||||||
| EMEA | 37.4 | 50.6 | 35.8 | 99.8 | 223.6 | 19.9 | 62.7 | 37.3 | 62.5 | 182.4 | |||||||||||
| APAC | 48.4 | 88.3 | 66.6 | 73.5 | 276.8 | 64.0 | 80.6 | 50.0 | 76.3 | 270.9 | |||||||||||
| Total | $ | 121.4 | 205.0 | 162.3 | 233.8 | 722.5 | $ | 142.2 | 180.1 | 144.6 | 201.3 | 668.2 | |||||||||
| North America | $ | 34.2 | 64.8 | 58.4 | 58.8 | 216.2 | $ | 55.7 | 35.8 | 55.2 | 61.8 | 208.5 | |||||||||
| International | $ | 87.2 | 140.2 | 103.9 | 175.0 | 506.3 | $ | 86.5 | 144.3 | 89.4 | 139.5 | 459.7 | |||||||||
| Revenues | FY 2014 | FY 2013 | |||||||||||||||||||
| (in Millions) | |||||||||||||||||||||
| Q114 | Q214 | Q314 | Q414 | FY 2014 | Q113 | Q213 | Q313 | Q413 | FY 2013 | ||||||||||||
| Oncology | |||||||||||||||||||||
| Americas | $ | 240.3 | 282.5 | 323.5 | 319.2 | 1,165.5 | $ | 255.4 | 270.1 | 275.5 | 315.9 | 1,116.9 | |||||||||
| EMEA | 189.5 | 157.9 | 163.8 | 189.9 | 701.1 | 155.3 | 177.7 | 169.2 | 160.5 | 662.7 | |||||||||||
| APAC | 111.6 | 162.7 | 90.9 | 112.4 | 477.6 | 113.6 | 134.0 | 116.6 | 108.9 | 473.1 | |||||||||||
| Total | $ | 541.4 | 603.1 | 578.2 | 621.5 | 2,344.2 | $ | 524.3 | 581.8 | 561.3 | 585.3 | 2,252.7 | |||||||||
| North America | $ | 224.9 | 263.0 | 309.0 | 291.3 | 1,088.2 | $ | 241.1 | 258.2 | 264.4 | 294.3 | 1,058.0 | |||||||||
| International | $ | 316.5 | 340.1 | 269.2 | 330.2 | 1,256.0 | $ | 283.2 | 323.6 | 296.9 | 291.0 | 1,194.7 | |||||||||
| Imaging Components | |||||||||||||||||||||
| Americas | $ | 57.0 | 54.1 | 53.5 | 65.3 | 229.9 | $ | 55.9 | 62.4 | 50.2 | 55.4 | 223.9 | |||||||||
| EMEA | 43.2 | 46.4 | 50.9 | 47.6 | 188.1 | 37.3 | 44.9 | 50.4 | 49.7 | 182.3 | |||||||||||
| APAC | 61.0 | 68.5 | 57.4 | 55.3 | 242.2 | 56.8 | 59.1 | 57.6 | 62.2 | 235.7 | |||||||||||
| Total | $ | 161.2 | 169.0 | 161.8 | 168.2 | 660.2 | $ | 150.0 | 166.4 | 158.2 | 167.3 | 641.9 | |||||||||
| North America | $ | 55.1 | 52.6 | 52.0 | 63.5 | 223.2 | $ | 54.2 | 60.3 | 48.9 | 54.3 | 217.7 | |||||||||
| International | $ | 106.1 | 116.4 | 109.8 | 104.7 | 437.0 | $ | 95.8 | 106.1 | 109.3 | 113.0 | 424.2 | |||||||||