Varian Medical Systems reports strong growth

4 November 2005

Palo Alto, Calif., USA. Varian Medical Systems has reported a 12% growth in annual revenue to $1.4bn for fiscal year 2005. Strong demand for advanced radiation therapy products and filmless X-ray imaging components contributed to a year of strong growth in net earnings, revenues, and net orders, and another record year-ending backlog.

The company today reported net earnings of $61 million ($0.45 per diluted share) for the fourth quarter of fiscal year 2005, versus net earnings of $52 million ($0.37 per diluted share) in the year-ago fourth quarter. Net earnings for fiscal year 2005 rose 23% to $207 million ($1.50 per diluted share) versus net earnings of $168 million ($1.18 per diluted share) for fiscal year 2004.

"Demand for Varian's IGRT-enabled products for more precise forms of radiation therapy and radiosurgery has escalated," said Richard M. Levy, chairman and CEO of Varian Medical Systems. "The strong demand is exemplified by the fact that the company has booked orders for more than 275 of its On- Board Imager™ product for IGRT since we introduced it in March of 2004 and more than 110 of those installations are complete or in progress."

Fourth-quarter revenues were $386 million, up 12% from the year-ago quarter, bringing revenues for fiscal year 2005 to $1.4 billion, 12% higher than total revenues for fiscal year 2004. Net orders were $488 million for the fourth quarter, up 18% from the year-ago quarter. Total net orders for fiscal year 2005 were $1.6 billion, up 14% from the fiscal year 2004 total. The backlog at year-end stood at $1.2 billion, 21% higher than at the end of fiscal year 2004.

"We are reporting growth in net orders and revenues from all business segments for the quarter and for the full fiscal year," said Richard M. Levy, chairman and CEO of Varian Medical Systems. "We generated double-digit order growth in Europe, the Far East, and North America during the quarter; and annual orders grew in all regions of the world, with particular strength in Europe and the Far East. Our quarter-over-quarter revenue growth stemmed primarily from Europe and North America, and year-over-year revenues were up in all regions of the world.

"Gross margins for the quarter stayed essentially even with year-ago levels, while gross margins for the fiscal year reached an all-time high of 43% with contributions from all business segments," Levy added. "The company's operating earnings were 23% of revenues for the quarter and 22% of revenues for the full fiscal year."

"The company generated record operating cash flow of $93 million for the quarter," Levy said. The company ended the quarter with $382 million in cash and marketable securities after spending $46 million to repurchase 1.2 million shares of its common stock. At the end of the quarter, the company had a balance of 1.5 million shares in its existing repurchase authorization.

Oncology Systems

Oncology Systems' fourth quarter revenues for Clinac® accelerators and ancillary products as well as software and services for radiotherapy totaled $322 million, up 12% from the fourth quarter of last fiscal year. Oncology Systems revenues for the fiscal year were $1.1 billion, up 10% from fiscal year 2004. This business recorded fourth-quarter net orders of $417 million, up 19% from the same period last year, and $1.3 billion for the fiscal year, up 14% from fiscal year 2004 totals. Net orders were up 10% in North America and up 33% in international markets for the quarter.

"Orders and shipments of new products for image-guided radiotherapy (IGRT) and stereotactic treatments as well as service contracts helped to drive the growth for this business during the quarter," Levy said. "IGRT technology contributed to strengthened business in North America. As evidence of this strong demand, the company has booked orders for more than 275 On-Board Imager™ devices since introducing the product in March of 2004; and more than 110 of those IGRT installations are complete or in progress." Varian's Dynamic Targeting® IGRT technology adjusts for movements of tumors, making it possible to treat them with higher, more effective doses while protecting more of the surrounding healthy tissue.

X-Ray Products

Revenues for the X-Ray Products business, including tubes and amorphous silicon flat panel detectors for filmless X-ray imaging, were $51 million for the fourth quarter, up 14% from the year-ago quarter. For the full fiscal year 2005, revenues were a record $195 million, up 18% from fiscal year 2004.

"This business unit had an absolutely outstanding quarter and year," Levy said. "Our new line of flat panel image detectors for filmless X-ray as well as our high-end X-ray tubes for CT scanners and industrial imaging drove exceptionally strong revenue growth in this business for the quarter and for the year," Levy said. "Annual revenues from flat panel image detectors nearly doubled and contributed significantly to the 26% improvement in annual operating earnings for the X-ray Products business."


The company's Ginzton Technology Center and its BrachyTherapy unit recorded combined fourth quarter revenues of $13 million, up $1 million from the year-ago quarter. Combined fiscal year 2005 revenues for this segment were $49 million, up by $9 million from fiscal year 2004 levels. Sales of high-dose-rate brachytherapy products for accelerated partial breast treatments led the growth in this business area.

See the full report for financial details



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