On January 27, 2016 Varian Medical Systems (NYSE: VAR) reported non-GAAP net earnings of $0.99 per diluted share and GAAP net earnings of $0.91 per diluted share for the first quarter of fiscal year 2016 (Press release, Varian Medical Systems, JAN 27, 2016, View Source [SID:1234508883]). Varian’s revenues totaled $757 million for the first quarter, up 3 percent from the year-ago quarter and up 7 percent in constant currency. The company ended the quarter with a $3.3 billion backlog, up 7 percent from the end of the first quarter of fiscal year 2015.

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"Company revenues and earnings came in ahead of expectations for the first quarter," said Dow Wilson, CEO of Varian Medical Systems. "Revenue growth was driven by our Oncology Systems and Particle Therapy businesses while the Imaging Components business continued to experience expected pressures on revenues. Our earnings performance was helped by our revenue growth as well as strong SG&A cost controls and an R&D tax credit."

The company finished the first quarter of fiscal year 2016 with $953 million in cash and cash equivalents and $728 million of debt. Cash flow from operations was $77 million for the first quarter. During the quarter, the company spent $192 million to repurchase about 2.4 million shares of common stock.

Oncology Systems

Oncology Systems’ first quarter revenues totaled $589 million, up 5 percent from the same quarter of fiscal year 2015 and up 9 percent in constant currency. First-quarter Oncology gross orders were $533 million, down 5 percent from the year-ago quarter and down 1 percent in constant currency. In the Americas, Oncology gross orders increased by 3 percent in dollars and in constant currency. In EMEA, gross orders were down 14 percent in dollars and down 5 percent in constant currency. In APAC, gross orders declined by 12 percent in dollars and fell 7 percent in constant currency.

"On a constant currency basis, Oncology had strong revenue growth driven by EMEA and APAC while gross orders declined in these regions, reflecting slow market activity during the quarter," Wilson said.

Imaging Components

Imaging Components revenues were $141 million for the first quarter, down 15 percent from the year-ago period. Gross orders were $127 million for the first quarter, down 22 percent from the year-ago period.

"As expected, volumes in all product lines declined in the Imaging Components business," said Wilson. "Beginning in the second half of last fiscal year, this business has been confronted with currency-related pricing pressures, weak market conditions for security and inspection products and the loss of a customer who has insourced panels. Inventory reduction at a major customer contributed to slower tube sales during the quarter. Growth from newly acquired components businesses partially offset the overall decline in Imaging Components."

Other

The company’s Other category, including the Varian Particle Therapy business and the Ginzton Technology Center, recorded revenues of $27 million for the first quarter from ongoing proton therapy installations. "The sales funnel for the Particle Therapy business continues to look promising," Wilson said.

Outlook

"Including the effects of the R&D tax credit re-enactment and the suspension of the medical device excise tax in the U.S., we now believe that for fiscal year 2016 total company non-GAAP earnings will be in the range of $4.55 to $4.65 per diluted share," said Wilson. "We continue to expect that revenues for fiscal year 2016 will increase by about 4 to 5 percent over fiscal year 2015. For the second quarter of fiscal year 2016, we expect revenues to be up one to two percent from the year-ago quarter in dollars. We expect non-GAAP earnings for the second quarter of fiscal year 2016 to be in the range of $1.06 to $1.10 per diluted share."

Please refer to "Discussion of Non-GAAP Financial Measures" below for a description of items excluded from expected non-GAAP earnings.