On April 27, 2016 Varian Medical Systems (NYSE:VAR) reported non-GAAP net earnings of $1.09 per diluted share and GAAP net earnings of $1.01 per diluted share for the second quarter of fiscal year 2016 (Press release, Varian Medical Systems, APR 27, 2016, View Source [SID:1234511502]). Varian’s revenues totaled $759 million for the second quarter, equal to the year-ago quarter and up 2 percent in constant currency. The company ended the quarter with a $3.3 billion backlog, up 6 percent from the end of the second quarter of fiscal year 2015.

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 company delivered solid results for the second quarter with strong gross order growth in our Oncology business and made promising progress in our Particle Therapy business," said Dow Wilson, CEO of Varian Medical Systems. "As expected, we continued to experience weakness in our Imaging Components business."

The company finished the second quarter of fiscal year 2016 with $961 million in cash and cash equivalents and $794 million of debt. Cash flow from operations was $32 million for the second quarter, bringing the total for the first half of the fiscal year to $109 million. During the quarter, the company spent $57 million to repurchase about 725,000 shares of common stock.

Oncology Systems

Oncology Systems’ second quarter revenues totaled $584 million, down 1 percent from the same quarter of fiscal year 2015 and up 1 percent in constant currency. Second-quarter Oncology gross orders were $618 million, up 6 percent from the year-ago quarter and up 8 percent in constant currency. In the Americas, Oncology gross orders increased by 2 percent in dollars and 3 percent in constant currency with 7 percent growth in North America offsetting a decline in Latin America. In EMEA, gross orders were up 19 percent in dollars and up 23 percent in constant currency. In APAC, gross orders rose 2 percent in dollars and 3 percent in constant currency, driven by robust growth in China.

"Oncology generated gross order growth with strategic wins in all three geographies," Wilson said. "Orders rose with the help of an expanding number of treatment rooms in China and India and demand for new products, including our VitalBeam accelerator, as well as our InSightive Analytics and RapidPlan software. Overall, we saw healthy global oncology demand during the quarter."

Imaging Components

Imaging Components revenues were $144 million for the second quarter, down 8 percent from the year-ago period. Gross orders were $138 million for the second quarter, down 12 percent from the year-ago period.

"The Imaging Components business continued to experience lower shipments of flat panels and tubes during the quarter," said Wilson. "Meanwhile, our new MeVis and Claymount businesses performed well in the quarter."

Other

The company’s Other category, including the Varian Particle Therapy business and the Ginzton Technology Center, recorded second quarter revenues of $31 million, up $16 million from the year-ago quarter. "We are continuing to build momentum in this business with growing interest in our single-room ProBeam Compact proton therapy system," Wilson said.

Outlook

"Including the results of the second quarter, we continue to believe that total company non-GAAP earnings will be in the range of $4.55 to $4.65 per diluted share for fiscal year 2016," said Wilson. "With expectations of a slower than anticipated recovery in our Imaging Components business due to high inventory levels at a major customer, we now believe revenues for fiscal year 2016 will increase by about 3 percent over fiscal year 2015.

"For the third quarter of fiscal year 2016, we expect non-GAAP earnings to be in the range of $1.16 to $1.20 per diluted share. We expect third quarter revenues to be about equal to the year-ago period with growth in our core businesses offset by a decline in our proton business versus the year-ago quarter when we booked the big University of Maryland project."

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