On July 29, 2015 Varian Medical Systems (NYSE: VAR) today is reporting net earnings of $1.13 per diluted share in the third quarter of fiscal year 2015 (Press release, Varian Medical Systems, JUL 29, 2015, View Source [SID:1234506749]). Third quarter net earnings per diluted share rose 11 percent versus the year-ago period when the company recorded a $0.06 per diluted share charge related to the impairment of a portion of the company’s investment in Augmenix. Varian’s company-wide revenues totaled $784 million for the third quarter, up 5 percent from the year-ago quarter and up 11 percent in constant currency. The company ended the third quarter with a $3.1 billion backlog, up 9 percent from the end of the third quarter of fiscal year 2014.

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

"The third quarter was mixed for Varian with double-digit constant currency gross orders growth in Oncology Systems, significant challenges in Imaging Components, and strong performance in Particle Therapy," said Dow R. Wilson, CEO of Varian Medical Systems. "The stronger U.S. dollar continued to have a big impact on our performance, contributing to lower margins. Excellent cost controls enabled us to deliver solid earnings for the period."

The company finished the third quarter of fiscal year 2015 with $951 million in cash and cash equivalents and $494 million of debt. Cash flow from operations for the third quarter was $184 million. During the quarter, the company spent $92 million to repurchase about 1 million shares of common stock.

Oncology Systems

Oncology Systems’ third quarter revenues totaled $559 million, down 3 percent from the same quarter of fiscal year 2014, but up mid-single digits on a constant currency basis. Third-quarter Oncology gross orders were $635 million, up 2 percent versus the year-ago quarter and up 10 percent in constant currency. Oncology gross orders rose 4 percent in the Americas in both U.S. dollars and constant currency. EMEA gross orders were down 2 percent, but up 13 percent in constant currency. APAC gross orders rose 8 percent and were up 21 percent in constant currency.

"Continued global demand for versatile, reliable, efficient accelerators and integrated software systems gave Varian a competitive advantage and drove solid growth in the quarter," said Wilson. "We were selected to replace several older machines and software systems from competitors as customers moved to modernize their treatment capabilities."

Imaging Components

Third quarter revenues for Imaging Components were $135 million, down 17 percent from the year-ago quarter while third quarter gross orders decreased by 25 percent to $122 million.

"Continued weak demand for security and inspection products as well as pricing pressure and product mix in flat panels were the prime factors in a challenging quarter for Imaging Components," said Wilson. "The global market for high energy border protection systems appears to have slowed significantly. Imaging product customers are actively looking for lower pricing and alternatives to dollar-based products."

Today, the company announced that it is acquiring Claymount, a Netherlands-based supplier of X-ray imaging components, for approximately €50 million (see separate press release).

Other

The company’s Other category, including the Varian Particle Therapy business and the Ginzton Technology Center, recorded revenues of $91 million and gross orders of $131 million. During the quarter, we announced that we booked orders for installations at the University of Maryland and at the HollandPTC in the Netherlands. The company recognized a substantial amount of revenues from the Maryland installation as well as revenues from several other proton projects that made the particle therapy business profitable in the quarter.

"We have generated real momentum in particle therapy," said Wilson. "We booked two orders during the third quarter and subsequently booked additional orders for three proton systems in the UK and in New York. We now have 11 systems in backlog."

Outlook

"We expect that revenues for the full fiscal year will increase by about 2 percent in dollars and by about 6 percent in constant currency," said Wilson. "We ended the second quarter with earnings guidance for fiscal 2015 in the range of $4.02 to $4.14 per diluted share. As of the end of the third quarter, with the approximately $0.22 per diluted share for the booking of the Maryland proton therapy system partially offset by ongoing challenges in our Imaging Components business, we now believe that our earnings for fiscal 2015 could be in the range of $4.20 to $4.25 per diluted share."

Given recent acquisitions, including Claymount, as well as historical one-time activities that make quarter-over-quarter comparisons difficult, the company will show non-GAAP results starting in its fiscal fourth quarter. Non-GAAP earnings for fiscal year 2015 should be higher than the GAAP range by approximately $0.16 per diluted share, comprised of restructuring charges in the first half of fiscal year 2015, acquisition related costs, and amortization of acquisition related intangibles.