VAR Varian Medical System

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

  

Date of report (Date of earliest event reported)

July 29, 2015

 

 

VARIAN MEDICAL SYSTEMS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware	1-7598	94-2359345
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer  Identification No.)

 

 

3100 Hansen Way, Palo Alto, CA	94304-1030
(Address of Principal Executive Offices)	(Zip Code)

 

 

Registrant's telephone number, including area code

(650) 493-4000

 

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On July 29, 2015, Varian Medical Systems, Inc. announced its financial results for its third quarter of fiscal year 2015. A copy of the press release entitled “Varian Medical Systems Reports Results for Third Quarter of Fiscal Year 2015” is attached as Exhibit 99.1 and incorporated by reference into this item.

 

Item 8.01. Other Information.

 

On July 29, 2015, Varian Medical Systems, Inc., through one of its European subsidiaries, entered into an agreement to acquire Claymount Investments B.V., a privately-held, Netherlands-based supplier of components and subsystems for X-ray imaging equipment manufacturers. A copy of the related press release entitled “Varian Medical Systems Acquiring Claymount to Expand Imaging Components Portfolio” is attached as Exhibit 99.2 and incorporated by reference into this item.

 

Item 9.01. Financial Statements and Exhibits.

 

(d)     Exhibits.

 

99.1     Press Release dated July 29, 2015 entitled “Varian Medical Systems Reports Results for Third Quarter of Fiscal Year 2015.”

 

99.2     Press Release dated July 29, 2015 entitled “Varian Medical Systems Acquiring Claymount to Expand Imaging Components Portfolio.”

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	Varian Medical Systems, Inc.
	By:		/s/ John W. Kuo
	Name:		John W. Kuo
	Title:		Senior Vice President, General Counsel and Corporate Secretary

 

 

Dated: July 29, 2015

 

 

 

EXHIBIT INDEX

 

 

Number		Exhibit
99.1		Press Release dated July 29, 2015 entitled “Varian Medical Systems Reports Results for Third Quarter of Fiscal Year 2015.”
99.2		Press Release dated July 29, 2015 entitled “Varian Medical Systems Acquiring Claymount to Expand Imaging Components Portfolio.”

 

 

Exhibit 99.1

 

		FOR INFORMATION CONTACT:
		Elisha Finney (650) 424-6803
		elisha.finney@varian.com
		Spencer Sias (650) 424-5782
		spencer.sias@varian.com

 

For Immediate Release:

 

Varian Medical Systems Reports Results for Third Quarter of Fiscal Year 2015

 

Third quarter net earnings per diluted share were $1.13; Revenues totaled $784 million

 

PALO ALTO, Calif., 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. 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.

 

“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.”

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Varian Medical Systems Reports Results for Third Quarter of Fiscal Year 2015

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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.

 

Investor Conference Call

Varian Medical Systems is scheduled to conduct its third quarter fiscal year 2015 conference call at 2 p.m. PT today. To hear a live webcast or replay of the call, visit the investor relations page on the company’s web site at www.varian.com/investor where it will be archived for a year. To access the call via telephone, dial 1-877-869-3847 from inside the U.S. or 1-201-689-8261 from outside the U.S. The replay can be accessed by dialing 1-877-660-6853 from inside the U.S. or 1-201-612-7415 from outside the U.S. and entering confirmation code 13613043. The telephone replay will be available through 5 p.m. PT, Friday, July 31, 2015.

 

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Varian Medical Systems Reports Results for Third Quarter of Fiscal Year 2015

Page 3

 

 

Varian Medical Systems, Inc., of Palo Alto, California, focuses energy on saving lives by equipping the world with advanced technology for fighting cancer and for X-ray imaging.  The company is the world's leading manufacturer of medical devices and software for treating cancer and other medical conditions with radiation. The company provides comprehensive solutions for radiotherapy, radiosurgery, proton therapy and brachytherapy. The company supplies informatics software for managing comprehensive cancer clinics, radiotherapy centers and medical oncology practices. Varian is also a premier supplier of X-ray imaging components, including tubes, digital detectors, and image processing software and workstations for use in medical, scientific, and industrial settings, as well as for security and non-destructive testing.  Varian Medical Systems employs approximately 6,900 people who are located at manufacturing sites in North America, Europe, and China and approximately 70 sales and support offices around the world.  For more information, visit http://www.varian.com or follow us on Twitter.  For more information, visit http://www.varian.com or follow us on Twitter.

  

Forward-Looking Statements

Except for historical information, this news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements concerning industry or market outlook, including growth drivers; the company’s future orders, revenues, or earnings growth or other financial results; and any statements using the terms “should,” “believe,” “expect,” “outlook,” “could,” or similar statements are forward-looking statements that involve risks and uncertainties that could cause the company’s actual results to differ materially from those anticipated. Such risks and uncertainties include global economic conditions; currency exchange rates and tax rates; the impact of the Affordable Health Care for America Act (including excise taxes on medical devices) and any further healthcare reforms (including changes to Medicare and Medicaid), and/or changes in third-party reimbursement levels; demand for the company’s products; the company’s ability to develop, commercialize and deploy new products; the company’s ability to meet Food and Drug Administration (FDA) and other regulatory requirements for product clearances or to comply with FDA and other regulatory regulations or procedures; changes in the regulatory environment, including with respect to FDA requirements; the company’s assessment of the goodwill associated with its particle therapy business; challenges associated with the successful commercialization of the company’s particle therapy business; the effect of adverse publicity; the company’s reliance on sole or limited-source suppliers; the impact of reduced or limited demand by purchasers of certain X-ray products; the company’s ability to maintain or increase margins; the impact of competitive products and pricing; the potential loss of key distributors or key personnel; challenges to public tender awards and the loss of such awards or other orders; and the other risks listed from time to time in the company’s filings with the Securities and Exchange Commission, which by this reference are incorporated herein. The company assumes no obligation to update or revise the forward-looking statements in this release because of new information, future events, or otherwise.

 

Varian Medical Systems Reports Results for Third Quarter of Fiscal Year 2015

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A summary of earnings and other financial information follows.

 

Varian Medical Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(Unaudited)

 

(Dollars and shares in millions, except per share amounts)		Q3 QTR 2015				Q3 QTR 2014				Q3 YTD 2015				Q3 YTD 2014
Gross orders		$	888.0				840.2				2,395.2				2,373.3
Oncology Systems			635.4				620.4				1,778.2				1,766.7
Imaging Components			121.6				162.3				440.6				488.7
Other			131.0				57.5				176.4				117.9
Order Backlog			3,138.0				2,869.4				3,138.0				2,869.4
Revenues			784.0				747.7				2,281.3				2,237.7
Oncology Systems			558.7				578.2				1,711.4				1,722.7
Imaging Components			134.7				161.8				456.2				492.0
Other			90.6				7.7				113.7				23.0
Cost of revenues			469.0				424.0				1,316.8				1,276.1
Gross margin			315.0				323.7				964.5				961.6
As a percent of revenues			40.2	%			43.3	%			42.3	%			43.0	%
Operating expenses
Research and development			60.0				57.0				176.4				175.7
Selling, general and administrative			110.8				124.2				368.4				348.8
Litigation Settlement			-				-				-				25.1
Operating earnings			144.2				142.5				419.7				412.0
As a percent of revenues			18.4	%			19.1	%			18.4	%			18.4	%
Interest income, net			1.7				1.3				3.7				2.3
Earnings before taxes			145.9				143.8				423.4				414.3
Taxes on earnings			32.3				36.7				110.5				116.5
Net earnings			113.6				107.1				312.9				297.8
Less: net earnings attributable to non-controlling interests			0.1				-				0.1				-
Net Earnings attributable to Varian		$	113.5				107.1				312.8				297.8
As a percent of revenues			14.5	%			14.3	%			13.7	%			13.3	%
Net earnings per share attributable to Varian – basic		$	1.14				1.03				3.13				2.85
Net earnings per share attributable to Varian – diluted		$	1.13				1.02				3.10				2.81
Shares used in the calculation of net earnings per share attributable to Varian:
Average shares outstanding - basic			99.7				103.6				100.1				104.6
Average shares outstanding - diluted			100.5				104.9				101.0				105.9

 

Varian Medical Systems Reports Results for Third Quarter of Fiscal Year 2015

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Varian Medical Systems, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

(In thousands)		July 3,				September 26,
		2015				2014 (1)
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	951,437			$	849,275
Short-term investment			71,699				66,176
Accounts receivable, net			673,706				731,929
Inventories			640,101				572,261
Deferred tax assets and other			311,992				274,524
Total current assets			2,648,935				2,494,165
Property, plant and equipment, net			343,417				337,999
Goodwill			241,734				240,626
Other assets			297,493				284,500
Total assets		$	3,531,579			$	3,357,290
Liabilities and Equity
Current liabilities:
Accounts payable		$	180,468			$	187,377
Accrued expenses			292,901				324,409
Deferred revenues			467,200				421,845
Advance payments from customers			161,677				170,724
Product warranty			41,949				47,299
Short-term borrowings			94,451				-
Current maturities of long-term debt			50,000				50,000
Total current liabilities			1,288,646				1,201,654
Other long-term liabilities			149,999				151,716
Long-term debt			350,000				387,500
Total liabilities			1,788,645				1,740,870
Equity:
Varian stockholders’ equity:
Common stock			99,511				100,942
Capital in excess of par value			698,991				642,848
Retained earnings and accumulated other comprehensive loss			930,064				872,630
Total Varian stockholders’ equity			1,728,566				1,616,420
Non-controlling interest			14,368				-
Total Equity			1,742,934				1,616,420
Total liabilities and equity		$	3,531,579			$	3,357,290

 

 

 

(1)

The condensed consolidated balance sheet as of September 26, 2014 was derived from audited financial statements as of that date.

 

Exhibit 99.2

 

	FOR INFORMATION CONTACT:
	Spencer Sias, Tel: 650-424-5782
	spencer.sias@varian.com

 

 

Varian Medical Systems Acquiring Claymount to Expand Imaging Components Portfolio

 

PALO ALTO, CA – July 29, 2015 – Varian Medical Systems, Inc., (NYSE:VAR) today announced it has, through one of its European subsidiaries, agreed to acquire Claymount, a privately-held, Netherlands-based supplier of components and subsystems for X-ray imaging equipment manufacturers. Varian’s subsidiary in the Netherlands will pay approximately €50 million in cash for Claymount. The transaction is expected to close early in August.

 

Claymount is one of the world’s leading suppliers of high voltage connectors, ionization chambers and solid state automatic exposure control systems for controlling dose during medical X-ray imaging. It also supplies buckies for digital radiography equipment, mammography paddles, x-ray collimators, and high-voltage generators for powering radiography equipment. Claymount is a strategic supplier to many global medical X-ray equipment manufacturers and has annual revenues of nearly €30 million.

 

“Claymount’s products complement our offerings and are a perfect fit for our Imaging Components business with great customer and channel synergies,” said Varian CEO Dow Wilson. “This acquisition will enhance our ability to support a continuing industry-wide transition from analog to digital X-ray imaging. We are excited to expand our line of components and integrated subsystems that can help X-ray OEMs get their products to market faster and more cost efficiently. This acquisition has the added benefit of being able to provide lower cost components for our Oncology Systems and Particle Therapy businesses.”

 

“We are impressed with the Claymount team,” said Sunny Sanyal, president of Imaging Components for Varian. “Claymount extends our technical expertise while giving us additional cost-efficient manufacturing capabilities. Together, we will expand our addressable market with new integrated offerings that should help us grow our share of the global imaging components market. We are excited to have them as a part of our team.”

 

“There is a great strategic fit between both companies,” said Joel Nijenhuis, managing director of Claymount. “We market a complementary product portfolio and can benefit from each other’s knowledge and strengths. With a strong team on board and support from Varian, we can accelerate product development and expand our business. We look forward to this opportunity.”

 

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Varian Medical Systems Acquiring Claymount to Expand Imaging Components Portfolio

Page 2

 

 

Claymount has about 250 employees with manufacturing sites in the Netherlands, Philippines and the United States as well as offices in Switzerland, Italy and China. The Claymount team will operate under Nijenhuis who will report to Sanyal as part of Varian Imaging Components.

 

 

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About Varian Medical Systems
Varian Medical Systems, Inc., of Palo Alto, California, focuses energy on saving lives by equipping the world with advanced technology for fighting cancer and for X-ray imaging.  The company is the world's leading manufacturer of medical devices and software for treating cancer and other medical conditions with radiation. The company provides comprehensive solutions for radiotherapy, radiosurgery, proton therapy and brachytherapy. The company supplies informatics software for managing comprehensive cancer clinics, radiotherapy centers and medical oncology practices. Varian is also a premier supplier of X-ray imaging components, including tubes, digital detectors, and image processing software and workstations for use in medical, scientific, and industrial settings, as well as for security and non-destructive testing.  Varian Medical Systems employs approximately 6,900 people who are located at manufacturing sites in North America, Europe, and China and approximately 70 sales and support offices around the world.  For more information, visit http://www.varian.com or follow us on Twitter.  For more information, visit http://www.varian.com or follow us on Twitter.

 

Forward-Looking Statements
Except for historical information, this news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements concerning industry and market outlook, including customer demand and acceptance of products or technology; growth drivers; the company's future orders, revenues or other financial performance; the ability of the company's technology and products to treat cancer; and any statements using the terms “will,” “can,” “future,” “plan,” “expect,” or similar statements are forward-looking statements that involve risks and uncertainties that could cause the company's actual results to differ materially from those anticipated. Such risks and uncertainties include the ability to consummate the transaction; the ability to effectively integrate the products and operations of Claymount into the company’s product offerings and sales, marketing and other operations; the ability to retain the services of key Claymount  personnel; demand for the company's and Claymount’s products; the company's ability to develop, commercialize, and deploy new products; the impact of competitive products and pricing; the effect of global economic conditions; the company’s ability to meet legal and regulatory requirements; changes in the legal or regulatory environment; and the other risks listed from time to time in the company's filings with the Securities and Exchange Commission, which by this reference are incorporated herein. The company assumes no obligation to update or revise the forward-looking statements in this release because of new information, future events, or otherwise.