Varian Medical Systems Reports Fourth Quarter Results
Net orders rose by 12% to $777 million for the fourth quarter and increased by 10% to $2.6 billion for the fiscal year, excluding from the year-ago periods a $62 million proton therapy system order that has been cancelled. Excluding the proton order, the year-ending backlog rose 10% to $2.2 billion. Including the proton order in the year-ago periods, net orders rose 3% for the fourth quarter and 5% for the fiscal year, and the year-ending backlog rose 7%.
"Our Oncology Systems and X-Ray Products businesses each generated solid order gains and achieved double-digit increases in backlog with the help of strong demand for new products, particularly our TrueBeam system and flat panel detectors," said Tim Guertin, president and CEO of Varian Medical Systems. "Total revenues expanded modestly, reflecting the economic challenges and slower order activity that we experienced in the previous year, particularly in North America. Product and territorial mix shifts within the Oncology business, a comparatively stronger dollar, and product launch costs contributed to a decline in the company's margins for the fourth quarter, but margins were up for the year."
The company ended the fiscal year with $520 million in cash and cash equivalents and $43 million of debt. During the fourth quarter, the company spent $255 million to repurchase 4.8 million shares of common stock, including an accelerated buyback of 3.9 million shares. The company ended the quarter with accounts receivable days sales outstanding of 82, an increase of one day from the year-ago quarter.
Oncology Systems' fourth quarter revenues totaled $512 million, down 3% from the same period of fiscal year 2009. Oncology revenues for fiscal year 2010 were $1.9 billion, up 4% from fiscal year 2009. Fourth-quarter net orders were $657 million, up 15%, with a 24% gain in North America and a 7% increase in international markets. Net orders for the fiscal year rose to $2.1 billion, up 10% from the last fiscal year, with a 4% gain in North America and a 16% increase in international markets.
"Customers placed more than 60 orders for our TrueBeam radiotherapy and radiosurgery system during the quarter, bringing cumulative orders for this exciting new product to more than 125 units since its introduction in the second quarter of this year," said Guertin. "TrueBeam together with RapidArc helped to stimulate a recovery in the North American oncology market. Service added to growth for Oncology Systems and it now represents nearly 30% of annual orders and revenue for this business."
Fourth quarter revenues for the X-Ray Products business were $107 million, up 16% from the year-ago quarter, and revenues for fiscal year 2010 were $403 million, up 22% from the prior year. Compared to the corresponding periods in fiscal year 2009, X-Ray Products' fourth quarter net orders rose 15% to $112 million, and fiscal year net orders rose 24% to $419 million.
"This was a record quarter for our X-Ray Products business with strong growth in orders and sales," Guertin said. "Flat panel detectors, including our newer panels for digital radiography, led the expansion in this business. Orders for X-ray tubes grew solidly for the quarter and the year. Record sales volumes and a mix shift toward panel shipments contributed to strong gross margins and record quarterly operating earnings for this business."
The company's Other category, which is comprised of the Security and Inspection Products business, the Varian Particle Therapy business, and the Ginzton Technology Center, recorded fourth quarter revenues of $33 million, up 47% or $11 million from the year-ago period. Revenues for fiscal year 2010 totaled $91 million, up 8% from fiscal year 2009.
Excluding the cancelled proton order, fourth quarter net orders in the Other category were $8 million, down $19 million from the year-ago quarter, and net orders for fiscal year 2010 totaled $61 million, down $27 million from the prior year. "Tender award protests in the U.S. continued to hinder our security business," Guertin said. "Consequently, the company restructured this business and booked a $2 million restructuring charge in the fourth quarter to bring costs in line with actual business activity."