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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
____________________________________________________________
FORM
10-Q
____________________________________________________________
|
|
|
|
☒
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
For the
quarterly period ended
June 28, 2019
or
|
|
|
|
☐
|
TRANSITION
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
For the
transition period from
to
Commission
File Number 1-7598
_________________________________________________
VARIAN MEDICAL
SYSTEMS, INC.
(Exact name
of registrant as specified in its charter)
____________________________________________________________
|
|
|
|
|
|
|
Delaware
|
|
|
94-2359345
|
|
(State or
other jurisdiction of incorporation or organization)
|
|
|
(I.R.S.
Employer Identification Number)
|
|
|
|
|
|
|
|
3100
Hansen Way,
|
Palo
Alto,
|
California
|
|
94304-1038
|
|
(Address of
principal executive offices)
|
|
(Zip
Code)
|
(
650 )
493-4000
(Registrant’s
telephone number, including area code)
___________________________________________________________
Securities
registered pursuant to Section 12(b) of the Act:
|
|
|
|
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
|
Common Stock, $1 par
value
|
VAR
|
New York Stock
Exchange
|
I
ndicate by check
mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes
ý
No
¨
Indicate by check
mark whether the registrant has submitted electronically every
Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was
required to submit such files).
Yes
ý
No
¨
Indicate by check
mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and "emerging growth company" in Rule 12b-2 of the
Exchange Act.
|
|
|
|
|
|
|
|
|
Large Accelerated
Filer
|
|
☒
|
|
Accelerated filer
|
|
☐
|
|
Non-Accelerated
filer
|
|
☐
|
|
Smaller reporting company
|
|
☐
|
|
Emerging growth
company
|
|
☐
|
|
|
|
|
If an emerging
growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check
mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange
Act). Yes
☐
No
☒
As of
July 26,
2019 , the
registrant had 91,060,717
shares of common
stock, par value $1 per share, outstanding.
VARIAN
MEDICAL SYSTEMS, INC.
FORM 10-Q
for the Quarter Ended June 28,
2019
INDEX
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|
Part I.
|
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|
|
Item 1.
|
|
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|
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|
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|
|
|
|
|
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|
|
|
|
|
|
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|
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|
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|
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|
|
Item 2.
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|
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|
Item 3.
|
|
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Item 4.
|
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|
Part II.
|
|
|
|
|
|
|
|
|
|
Item 1.
|
|
|
|
|
|
|
|
|
|
Item 1A.
|
|
|
|
|
|
|
|
|
|
Item 2.
|
|
|
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|
|
Item 3.
|
|
|
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|
|
|
|
|
|
Item 4.
|
|
|
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|
Item 5.
|
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|
Item 6.
|
|
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|
|
PART
I
FINANCIAL
INFORMATION
Item 1.
Unaudited Financial Statements
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
June 28,
|
|
June 29,
|
|
June 28,
|
|
June 29,
|
|
(In millions,
except per share amounts)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Product
|
$
|
461.3
|
|
|
$
|
365.0
|
|
|
$
|
1,292.0
|
|
|
$
|
1,124.4
|
|
|
Service
|
364.5
|
|
|
344.1
|
|
|
1,054.2
|
|
|
993.1
|
|
|
Total revenues
|
825.8
|
|
|
709.1
|
|
|
2,346.2
|
|
|
2,117.5
|
|
|
Cost of
revenues:
|
|
|
|
|
|
|
|
|
Product
|
298.0
|
|
|
242.5
|
|
|
859.0
|
|
|
730.6
|
|
|
Service
|
176.4
|
|
|
153.0
|
|
|
501.5
|
|
|
452.0
|
|
|
Total cost of
revenues
|
474.4
|
|
|
395.5
|
|
|
1,360.5
|
|
|
1,182.6
|
|
|
Gross
margin
|
351.4
|
|
|
313.6
|
|
|
985.7
|
|
|
934.9
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Research and
development
|
62.1
|
|
|
59.5
|
|
|
182.4
|
|
|
174.3
|
|
|
Selling, general and
administrative
|
153.6
|
|
|
140.4
|
|
|
441.5
|
|
|
400.3
|
|
|
Impairment
charges
|
50.6
|
|
|
11.0
|
|
|
50.6
|
|
|
22.1
|
|
|
Acquisition-related expenses
and in-process research and development
|
31.2
|
|
|
12.7
|
|
|
35.8
|
|
|
33.9
|
|
|
Total operating
expenses
|
297.5
|
|
|
223.6
|
|
|
710.3
|
|
|
630.6
|
|
|
Operating
earnings
|
53.9
|
|
|
90.0
|
|
|
275.4
|
|
|
304.3
|
|
|
Interest income
|
3.7
|
|
|
1.8
|
|
|
11.6
|
|
|
8.6
|
|
|
Interest expense
|
(1.8
|
)
|
|
(1.3
|
)
|
|
(4.0
|
)
|
|
(5.7
|
)
|
|
Other income,
net
|
4.2
|
|
|
1.5
|
|
|
27.4
|
|
|
2.9
|
|
|
Earnings
before taxes
|
60.0
|
|
|
92.0
|
|
|
310.4
|
|
|
310.1
|
|
|
Taxes on
earnings
|
30.5
|
|
|
19.5
|
|
|
88.6
|
|
|
276.6
|
|
|
Net
earnings
|
29.5
|
|
|
72.5
|
|
|
221.8
|
|
|
33.5
|
|
|
Less: Net earnings (loss)
attributable to noncontrolling interests
|
0.1
|
|
|
(0.1
|
)
|
|
0.6
|
|
|
—
|
|
|
Net earnings
attributable to Varian
|
$
|
29.4
|
|
|
$
|
72.6
|
|
|
$
|
221.2
|
|
|
$
|
33.5
|
|
|
Net earnings per share -
basic
|
$
|
0.32
|
|
|
$
|
0.79
|
|
|
$
|
2.43
|
|
|
$
|
0.37
|
|
|
Net earnings per share -
diluted
|
$
|
0.32
|
|
|
$
|
0.79
|
|
|
$
|
2.41
|
|
|
$
|
0.36
|
|
|
Shares used in
the calculation of net earnings per share:
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - basic
|
91.0
|
|
|
91.5
|
|
|
91.0
|
|
|
91.6
|
|
|
Weighted average shares
outstanding - diluted
|
91.8
|
|
|
92.5
|
|
|
91.9
|
|
|
92.6
|
|
See
accompanying notes to the condensed consolidated financial
statements.
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
June 28,
|
|
June 29,
|
|
June 28,
|
|
June 29,
|
|
(In
millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Net earnings
|
$
|
29.5
|
|
|
$
|
72.5
|
|
|
$
|
221.8
|
|
|
$
|
33.5
|
|
|
Other comprehensive earnings
(loss), net of tax:
|
|
|
|
|
|
|
|
|
Defined benefit pension and
post-retirement benefit plans:
|
|
|
|
|
|
|
|
|
Amortization of prior service
cost included in net periodic benefit cost, net of tax benefit of
$0.0* and $0.1, for the three and nine months ended June 28, 2019,
respectively, and $0.1 and $0.2, for the corresponding periods of
fiscal year 2018, respectively
|
(0.2
|
)
|
|
(0.1
|
)
|
|
(0.5
|
)
|
|
(0.6
|
)
|
|
Amortization of net actuarial
loss included in net periodic benefit cost, net of tax expense of
($0.1) and ($0.3), for the three and nine months ended June 28,
2019, respectively, and ($0.1) and ($0.4), for the corresponding
periods of fiscal year 2018, respectively
|
0.5
|
|
|
0.5
|
|
|
1.4
|
|
|
1.7
|
|
|
|
0.3
|
|
|
0.4
|
|
|
0.9
|
|
|
1.1
|
|
|
Derivative
instruments:
|
|
|
|
|
|
|
|
|
Change in unrealized loss,
net of tax benefit of $0.0* for both the three and nine months
ended June 28, 2019, and $0.3 for the nine months ended June 28,
2018
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
(0.6
|
)
|
|
Reclassification adjustments,
net of tax expense of ($0.3) for nine months ended June 28, 2018,
respectively
|
—
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
Currency translation
adjustment
|
2.3
|
|
|
(12.7
|
)
|
|
(4.8
|
)
|
|
(3.0
|
)
|
|
Other comprehensive earnings
(loss)
|
2.3
|
|
|
(12.3
|
)
|
|
(4.2
|
)
|
|
(1.9
|
)
|
|
Comprehensive
earnings
|
31.8
|
|
|
60.2
|
|
|
217.6
|
|
|
31.6
|
|
|
Less: Comprehensive earnings
(loss) attributable to noncontrolling interests
|
0.1
|
|
|
(0.1
|
)
|
|
0.6
|
|
|
—
|
|
|
Comprehensive earnings
attributable to Varian
|
$
|
31.7
|
|
|
$
|
60.3
|
|
|
$
|
217.0
|
|
|
$
|
31.6
|
|
* Tax expense or benefit
related to the periods presented are not material.
See
accompanying notes to the condensed consolidated financial
statements.
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
June 28,
|
|
September 28,
|
|
(In millions,
except par values)
|
2019
|
|
2018
(1)
|
|
Assets
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
520.7
|
|
|
$
|
504.8
|
|
|
Trade and
unbilled receivables, net of allowance for doubtful accounts of
$47.0 at June 28, 2019, and $41.1 at September 28,
2018
|
1,054.2
|
|
|
1,009.9
|
|
|
Inventories
|
529.3
|
|
|
438.1
|
|
|
Prepaid expenses and other
current assets
|
237.0
|
|
|
233.3
|
|
|
Current assets of
discontinued operations
|
—
|
|
|
2.3
|
|
|
Total current
assets
|
2,341.2
|
|
|
2,188.4
|
|
|
Property, plant and
equipment, net
|
307.4
|
|
|
274.6
|
|
|
Goodwill
|
566.9
|
|
|
293.6
|
|
|
Intangible
assets
|
273.1
|
|
|
101.1
|
|
|
Deferred tax
assets
|
93.9
|
|
|
102.2
|
|
|
Other assets
|
384.8
|
|
|
292.8
|
|
|
Total
assets
|
$
|
3,967.3
|
|
|
$
|
3,252.7
|
|
|
Liabilities
and Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable
|
$
|
226.1
|
|
|
$
|
190.3
|
|
|
Accrued
liabilities
|
433.1
|
|
|
419.7
|
|
|
Deferred
revenues
|
749.7
|
|
|
729.7
|
|
|
Short-term
borrowings
|
400.0
|
|
|
—
|
|
|
Current maturities of
long-term debt
|
1.0
|
|
|
—
|
|
|
Total current
liabilities
|
1,809.9
|
|
|
1,339.7
|
|
|
Other long-term
liabilities
|
400.1
|
|
|
324.3
|
|
|
Total
liabilities
|
2,210.0
|
|
|
1,664.0
|
|
|
Commitments and contingencies
(Note 8)
|
|
|
|
|
Equity:
|
|
|
|
|
Varian stockholders'
equity:
|
|
|
|
|
Preferred stock of $1 par
value: 1.0 shares authorized; none issued and
outstanding
|
—
|
|
|
—
|
|
|
Common stock of $1 par value:
189.0 shares authorized; 91.0 and 91.2 shares issued and
outstanding at June 28, 2019, and September 28, 2018,
respectively
|
91.0
|
|
|
91.2
|
|
|
Capital in excess of par
value
|
831.4
|
|
|
778.1
|
|
|
Retained
earnings
|
890.7
|
|
|
780.4
|
|
|
Accumulated other
comprehensive loss
|
(69.5
|
)
|
|
(65.3
|
)
|
|
Total Varian stockholders'
equity
|
1,743.6
|
|
|
1,584.4
|
|
|
Noncontrolling
interest
|
13.7
|
|
|
4.3
|
|
|
Total equity
|
1,757.3
|
|
|
1,588.7
|
|
|
Total
liabilities and equity
|
$
|
3,967.3
|
|
|
$
|
3,252.7
|
|
|
|
|
(1)
|
The condensed consolidated
balance sheet as of September 28, 2018, was derived from
audited financial statements as of that date, but does not include
all disclosures required by accounting principles generally
accepted in the United States of America.
|
See
accompanying notes to the condensed consolidated financial
statements.
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
|
|
|
June 28,
|
|
June 29,
|
|
(In
millions)
|
2019
|
|
2018
|
|
Cash flows
from operating activities:
|
|
|
|
|
Net earnings
|
$
|
221.8
|
|
|
$
|
33.5
|
|
|
Adjustments to reconcile net
earnings to net cash provided by operating activities:
|
|
|
|
|
|
|
Share-based compensation
expense
|
35.2
|
|
|
34.0
|
|
|
Depreciation
|
38.7
|
|
|
38.3
|
|
|
Amortization of intangible
assets
|
17.4
|
|
|
15.2
|
|
|
Deferred taxes
|
8.9
|
|
|
50.1
|
|
|
Provision for doubtful
accounts receivable
|
6.2
|
|
|
2.7
|
|
|
Gain on sale of equity
investments, net
|
(21.8
|
)
|
|
—
|
|
|
Impairment
charges
|
50.6
|
|
|
22.1
|
|
|
Write-off of in-process
research and development related to acquisition-related
activities
|
20.8
|
|
|
—
|
|
|
Loss on hedges related to
acquisition-related activities
|
—
|
|
|
5.5
|
|
|
Other, net
|
(1.2
|
)
|
|
1.3
|
|
|
Changes in assets and
liabilities, net of effects of acquisitions:
|
|
|
|
|
|
Trade and unbilled
receivables
|
(77.7
|
)
|
|
10.8
|
|
|
Inventories
|
(78.4
|
)
|
|
(48.5
|
)
|
|
Prepaid expenses and other
assets
|
(26.9
|
)
|
|
(29.8
|
)
|
|
Accounts payable
|
29.9
|
|
|
27.8
|
|
|
Accrued liabilities and other
long-term liabilities
|
(24.4
|
)
|
|
150.0
|
|
|
Deferred revenues
|
54.9
|
|
|
33.7
|
|
|
Net cash provided by operating
activities
|
254.0
|
|
|
346.7
|
|
|
Cash flows
from investing activities:
|
|
|
|
|
|
|
Purchases of property, plant
and equipment
|
(43.7
|
)
|
|
(30.8
|
)
|
|
Acquisitions, net of cash
acquired
|
(485.6
|
)
|
|
(58.7
|
)
|
|
Purchase of equity
investments
|
(29.8
|
)
|
|
(10.1
|
)
|
|
Sale of equity
investment
|
29.9
|
|
|
—
|
|
|
Principal payments on notes
receivable
|
0.1
|
|
|
6.3
|
|
|
Investment in
available-for-sale security
|
—
|
|
|
(6.0
|
)
|
|
Sale of available-for-sale
security
|
8.5
|
|
|
8.0
|
|
|
Loans to CPTC
|
(1.4
|
)
|
|
(5.3
|
)
|
|
Purchase of foreign currency
option related to acquisition-related activities
|
—
|
|
|
(5.5
|
)
|
|
Other, net
|
(1.7
|
)
|
|
(1.0
|
)
|
|
Net cash used in investing
activities
|
(523.7
|
)
|
|
(103.1
|
)
|
|
Cash flows
from financing activities:
|
|
|
|
|
|
|
Repurchases of common
stock
|
(134.2
|
)
|
|
(131.9
|
)
|
|
Proceeds from issuance of
common stock to employees
|
55.7
|
|
|
57.1
|
|
|
Tax withholdings on vesting of
equity awards
|
(14.1
|
)
|
|
(11.5
|
)
|
|
Cash received from Varex
Imaging Corporation
|
4.1
|
|
|
—
|
|
|
Borrowings under credit
facility agreement
|
430.0
|
|
|
503.3
|
|
|
Repayments under credit
facility agreement
|
(430.0
|
)
|
|
(503.3
|
)
|
|
Net proceeds (repayments)
under the credit facility agreements with maturities less than 90
days
|
400.0
|
|
|
(331.7
|
)
|
|
Repayment of acquired
debt
|
(16.8
|
)
|
|
—
|
|
|
Other
|
(0.7
|
)
|
|
(3.6
|
)
|
|
Net cash provided by (used in)
financing activities
|
294.0
|
|
|
(421.6
|
)
|
|
Effects of exchange rate
changes on cash, cash equivalents, and restricted cash
|
2.2
|
|
|
4.6
|
|
|
Net increase (decrease) in
cash, cash equivalents, and restricted cash
|
26.5
|
|
|
(173.4
|
)
|
|
Cash, cash equivalents, and
restricted cash at beginning of period
|
516.4
|
|
|
718.5
|
|
|
Cash, cash equivalents, and
restricted cash at end of period
|
$
|
542.9
|
|
|
$
|
545.1
|
|
See
accompanying notes to the condensed consolidated financial
statements.
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
|
Shares
|
|
Amount
|
|
Capital in Excess
of Par Value
|
|
Retained
Earnings
|
|
Accumulated
Other Comprehensive Loss
|
|
Total Varian
Stockholders' Equity
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
|
Balance at
September 28, 2018
|
|
91.2
|
|
|
$
|
91.2
|
|
|
$
|
778.1
|
|
|
$
|
780.4
|
|
|
$
|
(65.3
|
)
|
|
$
|
1,584.4
|
|
|
$
|
4.3
|
|
|
$
|
1,588.7
|
|
|
Net earnings
|
|
—
|
|
|
—
|
|
|
—
|
|
|
103.2
|
|
|
—
|
|
|
103.2
|
|
|
0.7
|
|
|
103.9
|
|
|
Other comprehensive
loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.7
|
)
|
|
(3.7
|
)
|
|
—
|
|
|
(3.7
|
)
|
|
Issuance of common
stock
|
|
0.3
|
|
|
0.3
|
|
|
21.7
|
|
|
—
|
|
|
—
|
|
|
22.0
|
|
|
—
|
|
|
22.0
|
|
|
Tax withholdings on vesting of
equity awards
|
|
—
|
|
|
—
|
|
|
(4.4
|
)
|
|
—
|
|
|
—
|
|
|
(4.4
|
)
|
|
—
|
|
|
(4.4
|
)
|
|
Share-based compensation
expense
|
|
—
|
|
|
—
|
|
|
10.5
|
|
|
—
|
|
|
—
|
|
|
10.5
|
|
|
—
|
|
|
10.5
|
|
|
Repurchases of common
stock
|
|
(0.3
|
)
|
|
(0.3
|
)
|
|
(6.6
|
)
|
|
(27.9
|
)
|
|
—
|
|
|
(34.8
|
)
|
|
—
|
|
|
(34.8
|
)
|
|
Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|
(0.2
|
)
|
|
Balances at
December 28, 2018
|
|
91.2
|
|
|
$
|
91.2
|
|
|
$
|
799.3
|
|
|
$
|
855.5
|
|
|
$
|
(69.0
|
)
|
|
$
|
1,677.0
|
|
|
$
|
5.0
|
|
|
$
|
1,682.0
|
|
|
Net earnings
(loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
88.6
|
|
|
—
|
|
|
88.6
|
|
|
(0.2
|
)
|
|
88.4
|
|
|
Other comprehensive
loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.8
|
)
|
|
(2.8
|
)
|
|
—
|
|
|
(2.8
|
)
|
|
Issuance of common
stock
|
|
0.5
|
|
|
0.5
|
|
|
19.8
|
|
|
—
|
|
|
—
|
|
|
20.3
|
|
|
—
|
|
|
20.3
|
|
|
Tax withholdings on vesting of
equity awards
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
(9.4
|
)
|
|
—
|
|
|
—
|
|
|
(9.5
|
)
|
|
—
|
|
|
(9.5
|
)
|
|
Share-based compensation
expense
|
|
—
|
|
|
—
|
|
|
12.5
|
|
|
—
|
|
|
—
|
|
|
12.5
|
|
|
—
|
|
|
12.5
|
|
|
Repurchases of common
stock
|
|
(0.4
|
)
|
|
(0.4
|
)
|
|
(8.6
|
)
|
|
(41.8
|
)
|
|
—
|
|
|
(50.8
|
)
|
|
—
|
|
|
(50.8
|
)
|
|
Balances at
March 29, 2019
|
|
91.2
|
|
|
$
|
91.2
|
|
|
$
|
813.6
|
|
|
$
|
902.3
|
|
|
$
|
(71.8
|
)
|
|
$
|
1,735.3
|
|
|
$
|
4.8
|
|
|
$
|
1,740.1
|
|
|
Net earnings
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29.4
|
|
|
—
|
|
|
29.4
|
|
|
0.1
|
|
|
29.5
|
|
|
Other comprehensive
earnings
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.3
|
|
|
2.3
|
|
|
—
|
|
|
2.3
|
|
|
Issuance of common
stock
|
|
0.2
|
|
|
0.2
|
|
|
13.2
|
|
|
—
|
|
|
—
|
|
|
13.4
|
|
|
—
|
|
|
13.4
|
|
|
Tax withholdings on vesting of
equity awards
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|
(0.2
|
)
|
|
Share-based compensation
expense
|
|
—
|
|
|
—
|
|
|
12.1
|
|
|
—
|
|
|
—
|
|
|
12.1
|
|
|
—
|
|
|
12.1
|
|
|
Repurchases of common
stock
|
|
(0.4
|
)
|
|
(0.4
|
)
|
|
(7.3
|
)
|
|
(41.0
|
)
|
|
—
|
|
|
(48.7
|
)
|
|
—
|
|
|
(48.7
|
)
|
|
Acquisition of Cancer
Treatment Services International
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8.8
|
|
|
8.8
|
|
|
Balances at
June 28, 2019
|
|
91.0
|
|
|
$
|
91.0
|
|
|
$
|
831.4
|
|
|
$
|
890.7
|
|
|
$
|
(69.5
|
)
|
|
$
|
1,743.6
|
|
|
$
|
13.7
|
|
|
$
|
1,757.3
|
|
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
|
Shares
|
|
Amount
|
|
Capital in Excess
of Par Value
|
|
Retained
Earnings
|
|
Accumulated
Other Comprehensive Loss
|
|
Total Varian
Stockholders' Equity
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
|
Balances at
September 29, 2017
|
|
91.7
|
|
|
$
|
91.7
|
|
|
$
|
716.1
|
|
|
$
|
778.6
|
|
|
$
|
(68.8
|
)
|
|
$
|
1,517.6
|
|
|
$
|
4.3
|
|
|
$
|
1,521.9
|
|
|
Net earnings
(loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(112.3
|
)
|
|
—
|
|
|
(112.3
|
)
|
|
0.1
|
|
|
(112.2
|
)
|
|
Other comprehensive
earnings
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.1
|
|
|
3.1
|
|
|
—
|
|
|
3.1
|
|
|
Issuance of common
stock
|
|
0.4
|
|
|
0.4
|
|
|
23.8
|
|
|
—
|
|
|
—
|
|
|
24.2
|
|
|
—
|
|
|
24.2
|
|
|
Tax withholdings on vesting of
equity awards
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
Share-based compensation
expense
|
|
—
|
|
|
—
|
|
|
10.7
|
|
|
—
|
|
|
—
|
|
|
10.7
|
|
|
—
|
|
|
10.7
|
|
|
Repurchases of common
stock
|
|
(0.5
|
)
|
|
(0.5
|
)
|
|
(10.4
|
)
|
|
(45.8
|
)
|
|
—
|
|
|
(56.7
|
)
|
|
—
|
|
|
(56.7
|
)
|
|
Other
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
(0.3
|
)
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
|
Balances at
December 29, 2017
|
|
91.6
|
|
|
$
|
91.6
|
|
|
$
|
740.5
|
|
|
$
|
620.2
|
|
|
$
|
(65.7
|
)
|
|
$
|
1,386.6
|
|
|
$
|
4.4
|
|
|
$
|
1,391.0
|
|
|
Net earnings
|
|
—
|
|
|
—
|
|
|
—
|
|
|
73.2
|
|
|
—
|
|
|
73.2
|
|
|
—
|
|
|
73.2
|
|
|
Other comprehensive
earnings
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7.3
|
|
|
7.3
|
|
|
—
|
|
|
7.3
|
|
|
Issuance of common
stock
|
|
0.5
|
|
|
0.5
|
|
|
20.9
|
|
|
—
|
|
|
—
|
|
|
21.4
|
|
|
—
|
|
|
21.4
|
|
|
Tax withholdings on vesting of
equity awards
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
(10.7
|
)
|
|
—
|
|
|
—
|
|
|
(10.8
|
)
|
|
—
|
|
|
(10.8
|
)
|
|
Share-based compensation
expense
|
|
—
|
|
|
—
|
|
|
10.5
|
|
|
—
|
|
|
—
|
|
|
10.5
|
|
|
—
|
|
|
10.5
|
|
|
Repurchases of common
stock
|
|
(0.3
|
)
|
|
(0.3
|
)
|
|
(6.5
|
)
|
|
(29.2
|
)
|
|
—
|
|
|
(36.0
|
)
|
|
—
|
|
|
(36.0
|
)
|
|
Balances at
March 30, 2018
|
|
91.7
|
|
|
$
|
91.7
|
|
|
$
|
754.7
|
|
|
$
|
664.2
|
|
|
$
|
(58.4
|
)
|
|
$
|
1,452.2
|
|
|
$
|
4.4
|
|
|
$
|
1,456.6
|
|
|
Net earnings
(loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
72.6
|
|
|
—
|
|
|
72.6
|
|
|
(0.1
|
)
|
|
72.5
|
|
|
Other comprehensive
loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12.3
|
)
|
|
(12.3
|
)
|
|
—
|
|
|
(12.3
|
)
|
|
Issuance of common
stock
|
|
0.1
|
|
|
0.1
|
|
|
11.4
|
|
|
—
|
|
|
—
|
|
|
11.5
|
|
|
—
|
|
|
11.5
|
|
|
Tax withholdings on vesting of
equity awards
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
|
—
|
|
|
(0.4
|
)
|
|
Share-based compensation
expense
|
|
—
|
|
|
—
|
|
|
12.8
|
|
|
—
|
|
|
—
|
|
|
12.8
|
|
|
—
|
|
|
12.8
|
|
|
Repurchases of common
stock
|
|
(0.3
|
)
|
|
(0.3
|
)
|
|
(6.7
|
)
|
|
(32.2
|
)
|
|
—
|
|
|
(39.2
|
)
|
|
—
|
|
|
(39.2
|
)
|
|
Balances at
June 29, 2018
|
|
91.5
|
|
|
$
|
91.5
|
|
|
$
|
771.8
|
|
|
$
|
704.6
|
|
|
$
|
(70.7
|
)
|
|
$
|
1,497.2
|
|
|
$
|
4.3
|
|
|
$
|
1,501.5
|
|
See
accompanying notes to the condensed consolidated financial
statements.
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The long-term
strategy of Varian Medical Systems, Inc. (“VMS”) and subsidiaries
(collectively, the “Company”) is to become a global leader in
multi-disciplinary, integrated cancer care solutions that enable
and accelerate access to innovative, life-saving technology
worldwide. The Company offers solutions in radiation therapy and
medical oncology, which fall within the traditional pillars of
cancer care, as well as the new pillar of interventional
oncology. The Company designs, manufactures, sells and
services hardware and software products for treating cancer with
radiotherapy, stereotactic radiosurgery, stereotactic body
radiotherapy, and brachytherapy, and offers products for minimally
invasive interventional oncology procedures and treatments,
including cryoablation, microwave ablation and embolic beads.
Software solutions include informatics software for information
management, clinical knowledge exchange, patient care management,
practice management and decision-making support for comprehensive
cancer clinics, radiotherapy centers and medical oncology
practices. The Company also develops, designs, manufactures, sells
and services proton therapy products and systems for cancer
treatment.
In addition to
providing the products and services for oncology care described
above, the Company offers treatment planning as a service and
quality assurance as a service, which allows remote support and
delivery of care in understaffed locations to utilize technology on
a per patient basis. Further, the Company operates
11
healthcare
facilities in India; comprised of one
specialty
hospital and ten
cancer
centers.
Basis of Presentation
The condensed consolidated
financial statements have been prepared by the Company pursuant to
the rules and regulations of the Securities and Exchange Commission
("SEC"). Certain information and note disclosures normally included
in annual financial statements prepared in accordance with
accounting principles generally accepted in the United States
(“GAAP”) have been condensed or omitted pursuant to such rules and
regulations. These condensed consolidated financial statements and
the accompanying notes are unaudited and should be read in
conjunction with the consolidated financial statements and the
notes thereto included in the Company’s Annual Report on Form 10-K
for the year ended September 28,
2018 (the
“ 2018 Annual Report”). In the
opinion of management, the condensed consolidated financial
statements herein include adjustments (consisting only of normal
recurring adjustments) necessary for a fair statement of the
Company’s financial position as of June 28, 2019
, and
September 28,
2018 ,
results of operations and statements of comprehensive earnings for
the three
and nine months ended
June 28,
2019 ,
and June 29, 2018
, statements of
cash flows for the nine months ended June 28,
2019 ,
and June 29, 2018
, and statements
of equity for the three and nine months ended June 28,
2019 ,
and June 29, 2018
. The results of
operations for the nine months ended June 28,
2019 , are
not necessarily indicative of the operating results to be expected
for the full fiscal year or any future period.
Reclassifications
Certain
reclassifications have been made to the amounts in the prior year
in order to conform to the current year's
presentation.
Fiscal Year
The fiscal years
of the Company as reported are the 52- or 53-week periods ending on
the Friday nearest September 30. Fiscal year
2019
is the 52-week
period ending September 27,
2019 .
Fiscal year 2018 was the 52-week period that
ended on September 28,
2018 . The
fiscal quarters ended June 28, 2019
, and
June 29,
2018 ,
were both 13-week periods.
Principles of Consolidation
The condensed
consolidated financial statements include those of VMS and its
wholly-owned and majority-owned or controlled subsidiaries.
Intercompany balances, transactions and stock holdings have been
eliminated in consolidation.
Use of Estimates
The preparation of financial
statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(CONTINUED)
(Unaudited)
statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Significant Accounting Policies
There have been
no material changes to the Company's significant accounting
policies provided in "Note 1: Summary of Significant Accounting
Policies" within the Notes to the Consolidated Financial Statements
of the Company's 2018 Annual Report.
Recently Adopted Accounting Pronouncements
In the first
quarter of fiscal year 2019, the Company adopted the Financial
Accounting Standards Board ("FASB") guidance on which changes to
the terms or conditions of a share-based payment award require an
entity to apply modification accounting. The Company adopted this
amendment prospectively, and it did not have a material impact on
the Company's condensed consolidated financial
statements.
In the first
quarter of fiscal year 2019, the Company adopted the FASB guidance
on the accounting related to defined benefit plans and other
post-retirement benefits. This amendment requires the service cost
component of net periodic pension and post-retirement benefit cost
to be presented in the same line item as other employee
compensation costs, while the other components must be presented
separately as other income, net. The adoption of this amendment did
not have a material impact on the Company's condensed consolidated
financial statements.
In the first
quarter of fiscal year 2019, the Company adopted the FASB guidance
on the classification and presentation of restricted cash in the
statement of cash flow. The amendment requires entities to include
restricted cash in cash and cash equivalents in the statement of
cash flows. The Company adopted the amendment retrospectively, and
prior period amounts on the Condensed Consolidated Statements of
Cash Flows have been recast to conform with the current period
presentation as shown in the reconciliation provided below.
See Note
3, "Other Financial Information," for a reconciliation of the
cash balances within the Condensed Consolidated Statements of Cash
Flows to the Condensed Consolidated Balance Sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended June 29, 2018
|
|
(In
millions)
|
As Previously
Reported
|
|
Adjustments
|
|
As
Adjusted
|
|
Cash used in investing
activities
|
$
|
(109.9
|
)
|
|
$
|
6.8
|
|
|
$
|
(103.1
|
)
|
|
Cash, cash equivalents, and
restricted cash at beginning of period
|
$
|
716.2
|
|
|
$
|
2.3
|
|
|
$
|
718.5
|
|
|
Cash, cash equivalents, and
restricted cash at end of period
|
$
|
536.0
|
|
|
$
|
9.1
|
|
|
$
|
545.1
|
|
In the first
quarter of fiscal year 2019, the Company adopted the FASB guidance
for tax accounting for intra-entity asset transfers. The amendment
removes the prohibition against the immediate recognition of the
current and deferred income tax effects of intra-entity transfers
of assets other than inventory. The adoption of this amendment did
not have a material impact on the Company's condensed consolidated
financial statements. See Note 10, "Income
Taxes," for more information about
the impact of the adoption.
In the first
quarter of fiscal year 2019, the Company adopted the FASB guidance
related to the classification of certain cash receipts and cash
payments. The amendment was issued to reduce the diversity in
practice in how certain transactions are classified in the
statement of cash flows. The Company adopted the amendment
retrospectively, and it did not have an impact on the Company’s
condensed consolidated financial statements.
In the first
quarter of fiscal year 2019, the Company adopted the FASB guidance
related to recognition and measurement of financial assets and
financial liabilities. The amendment addresses certain aspects of
recognition, measurement, presentation and disclosure of financial
instruments. Most prominent among the changes is the requirement
for changes in the fair value of the Company's equity investments
to be recognized through net earnings rather than other
comprehensive income. Under the amendment, equity investments that
do not have a readily determinable fair value are eligible for the
measurement alternative, which will require the Company to measure
these investments at cost, with adjustments for changes in price or
impairments reflected through net earnings. The Company adopted the
amendment prospectively for its privately-held investments for
which the measurement alternative was elected, and adopted the
amendment on a modified retrospective basis for all other financial
instruments. The adoption did not have an impact on the Company's
condensed consolidated financial statements.
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(CONTINUED)
(Unaudited)
Recent Accounting Standards or Updates Not Yet
Effective
In November 2018,
the FASB amended its guidance to clarify revenue accounting for
collaborative arrangements. The standard is effective for the
Company beginning in the first quarter of fiscal year 2020 and will
be applied retrospectively to the date of the initial application
of ASC 606. Early adoption is permitted. The Company is
evaluating the impact of adopting this amendment to its condensed
consolidated financial statements.
In October 2018,
the FASB amended its guidance which will add the Overnight
Index Swap rate based on the Secured Overnight Financing Rate as a
benchmark interest rate for hedge accounting purposes. The standard
is effective for the Company beginning in the first quarter of
fiscal year 2020. Early adoption is permitted. The Company is
evaluating the impact of adopting this amendment to its condensed
consolidated financial statements.
In August 2018,
the FASB amended its guidance for costs of implementing a cloud
computing service arrangement and aligns the requirements for
capitalizing implementation costs incurred in a hosting
arrangement that is a service contract with the requirements
for capitalizing implementation costs incurred to develop or obtain
internal-use software. This new standard also requires customers to
expense the capitalized implementation costs of a hosting
arrangement that is a service contract over the term of
the hosting arrangement. This new standard becomes
effective for the Company in the first quarter of fiscal year 2021,
with early adoption permitted. This new standard can be applied
either retrospectively or prospectively to all implementation costs
incurred after the date of adoption. The Company is evaluating the
impact of adopting this amendment to its condensed consolidated
financial statements.
In August 2018,
the FASB issued guidance
which modifies
the disclosure requirements for employers that sponsor defined
benefit pension or other post-retirement plans by removing and
adding certain disclosures for these plans. The standard is
effective for the Company beginning in the first quarter of fiscal
year 2022. Early adoption is permitted. The Company is evaluating
the impact of adopting this guidance to its condensed consolidated
financial statements.
In August 2018,
the FASB issued guidance
which changed the
disclosure requirements for fair value measurements by removing,
adding and modifying certain disclosures. The standard is effective
for the Company beginning in the first quarter of fiscal year 2021.
Early adoption is permitted. The Company is evaluating the impact
of adopting this guidance to its condensed consolidated financial
statements.
In February 2018,
the FASB amended its guidance that will allow companies to
reclassify disproportionate tax effects in accumulated other
comprehensive income caused by the Tax Cuts and Jobs Act to
retained earnings. The amendment will be effective for the Company
beginning in its first quarter of fiscal year 2020. The Company is
evaluating the impact of adopting this amendment to its condensed
consolidated financial statements.
In June 2016, the
FASB issued an amendment to its accounting guidance related to the
impairment of financial instruments. The amendment adds a new
impairment model that is based on expected losses, rather than
incurred losses. The amendment will be effective for the Company
beginning in its first quarter of fiscal year 2021 with early
adoption permitted beginning in the first quarter of fiscal year
2020. The Company is evaluating the impact of adopting this
amendment to its condensed consolidated financial
statements.
In February 2016,
the FASB issued a new standard on accounting for leases. The new
standard is intended to provide enhanced transparency and
comparability by requiring lessees to record right-of-use assets
and corresponding lease liabilities on the balance sheet. The new
standard will continue to classify leases as either finance or
operating, with classification affecting the pattern of expense
recognition in the statement of earnings. The Company intends to
adopt this standard beginning in its first quarter of fiscal year
2020, using a modified retrospective method and anticipates
applying the optional practical expedients related to the
transition. While the Company continues to assess the impact of
this standard, the Company anticipates a material impact related to
the recognition of right-of-use assets and liabilities for
previously unrecognized leases on its Condensed Consolidated
Balance Sheets. The Company will continue to monitor and evaluate
the effect the standard will have on its consolidated financial
statements, including disclosures. The Company's preliminary
assessments are subject to change.
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(CONTINUED)
(Unaudited)
2. BUSINESS
COMBINATIONS
Business Combinations in Fiscal Year 2019
Cancer
Treatment Services International
In June 2019, the
Company acquired Cancer Treatment Services International ("CTSI"),
a privately-held company that provides cancer care professional
services to health care providers worldwide and, through its
oncology care brand, American Oncology Institute, focuses on the
operation of comprehensive cancer treatment facilities in
international markets. CTSI operates AmPath, a full-service
reference laboratory and pathology provider, and CTSI Oncology
Solutions, an oncology services company that provides solutions
such as remote treatment planning services and multi-disciplinary
oncology consulting. This acquisition will increase the Company's
expertise in cancer center operations.
The Company acquired CTSI for
a purchase price of $279.3
million , consisting of
$262.8
million of cash consideration,
$8.2
million of contingent consideration,
and $8.3
million of other consideration. The
undiscounted range of the contingent consideration payments
is zero
to
$58
million and is based on actual
revenues over the 18
months following
the acquisition date. The acquisition was financed with a
combination of cash on hand and proceeds from borrowings. The
Company has included this acquisition in its Oncology Systems
business. The purchase accounting from this transaction is not yet
finalized; however, the goodwill is not expected to be deductible
for income tax purposes.
Endocare and
Alicon
In June 2019, the
Company acquired Austin, Texas-based Endocare and Hangzhou,
China-based, Alicon, to expand its portfolio of multidisciplinary
integrated cancer solutions. Endocare is a leading provider of
hardware and software solutions for cryoablation, and has a
microwave ablation product line; and Alicon is a leader in embolic
therapy for treating liver cancer in China. These acquisitions
enable the Company to develop innovations in interventional
oncology and allow it to provide patients and customers with a
wider range of cancer care solutions.
The Company
acquired Endocare and Alicon for a combined purchase price
of $209.4
million consisting of
$196.8
million of cash consideration
and $12.6
million of contingent consideration.
The undiscounted range of the contingent consideration payments
is zero
to
$40
million and is based on actual
revenues through March 2020. The acquisitions were financed with a
combination of cash on hand and proceeds from borrowings. These
acquisitions comprise the Company's Interventional Oncology
business, which is reflected in the "Other" category because the
operating segment does not meet the criteria for a reportable
operating segment. The purchase accounting from this transaction is
not yet finalized; however, the goodwill is not expected to be
deductible for income tax purposes.
The results of
operations and the provisional fair values of the assets acquired
and liabilities assumed have been included in the condensed
consolidated financial statements as of the date of acquisition.
The following table summarizes the estimated fair value of assets
acquired and liabilities assumed as a result of the CTSI, Endocare
and Alicon acquisitions:
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
CTSI
|
|
Endocare and
Alicon
|
|
Assets acquired
(1)
|
$
|
54.0
|
|
|
$
|
32.9
|
|
|
Liabilities assumed
(2)
|
(65.0
|
)
|
|
(17.7
|
)
|
|
Goodwill
|
182.1
|
|
|
122.7
|
|
|
Intangible
assets
|
117.0
|
|
|
71.5
|
|
|
Fair value of net
assets
|
288.1
|
|
|
209.4
|
|
|
Less: Non-controlling
interest (3)
|
8.8
|
|
|
—
|
|
|
Total purchase
consideration
|
$
|
279.3
|
|
|
$
|
209.4
|
|
(1)
Includes
$5.4
million and $11.5
million of cash and cash equivalents
for CTSI and Endocare / Alicon, respectively.
(2)
Includes
$33.9
million and $14.8
million of deferred tax liabilities
for CTSI and Endocare / Alicon, respectively.
(3)
The Company's
non-controlling interest is a joint venture that was determined to
be a variable interest entity. The Company has concluded that it is
the primary beneficiary of the joint venture because it has the
ability to control the significant activities of the joint venture,
has the right to significant residual returns and is exposed to
significant expected losses. The Company will consolidate the joint
venture into its operations.
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(CONTINUED)
(Unaudited)
Identifiable Intangible Assets
The following
table provides the valuation of the intangible assets acquired from
CTSI, Endocare and Alicon, along with their estimated useful
lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
|
CTSI
|
|
Endocare and
Alicon
|
|
Type
|
|
Fair
Value
|
|
Weighted
Average Estimated Useful Life (In Years)
|
|
Fair
Value
|
|
Weighted
Average Estimated Useful Life (In Years)
|
|
Technologies and trade
names
|
|
$
|
47.9
|
|
|
10.7
|
|
$
|
56.3
|
|
|
7.7
|
|
Customer contracts, supplier
relationships, and partner relationships (1)
|
|
69.1
|
|
|
26.4
|
|
4.8
|
|
|
3.0
|
|
Total intangible assets with
finite lives
|
|
117.0
|
|
|
|
|
61.1
|
|
|
|
|
In-process research and
development with indefinite lives
|
|
—
|
|
|
|
|
10.4
|
|
|
|
|
Total intangible
assets
|
|
$
|
117.0
|
|
|
|
|
$
|
71.5
|
|
|
|
|
|
|
(1)
|
CTSI has certain partner
relationships with hospitals with useful lives that range from
approximately 27
to
29
years.
|
Other
Acquisitions
In the third
quarter of fiscal year 2019, the Company purchased a privately-held
company for a cash purchase price of
$15.2 million , including a
holdback
of $3.6
million and contingent
consideration. As of the closing date, the value of the contingent
consideration is zero
because none of
the milestones were probable to be achieved. However, the Company
could potentially pay up to approximately $9
million by 2023 if
certain milestones were met plus additional payments for achieving
revenue targets through 2035. The acquisition was
classified as an asset acquisition, a nd the purchase
consideration was allocated primarily to the intellectual property
that covers the use of radiation in the heart and other forms of
radiosurgery for cardiovascular disease, resulting in a
$20.8
million of in-process research and
development ("in-process R&D") expense because of no future
alternative use, and was recorded in acquisition-related expenses
and in-process R&D in the Condensed Consolidated Statements of
Earnings.
In the first
quarter of fiscal year 2019, the Company acquired a privately-held
software company for a purchase price of $28.5
million . The acquisition primarily
consisted of $22.0
million in goodwill and
$6.5
million in finite-lived intangible
assets. The Company has integrated this acquisition into its
Oncology Systems reporting unit. The goodwill for this acquisition
is not deductible for income tax.
Measurement Period Adjustments
In the first
quarter of fiscal year 2019, the Company recorded a measurement
period adjustment of $9.6
million to the fair value of the
purchase consideration of a business combination that occurred in
the fourth quarter of fiscal year 2018. The adjustment primarily
included a
$11.9 million decrease in the fair value of
the contingent consideration liability mostly offset by a decrease
to the finite-lived intangible assets of $5.4
million , and a decrease of
$4.7
million to goodwill.
In the third
quarter of fiscal year 2019, the Company recorded a measurement
period adjustment of $2.6
million to the fair value of the
purchase consideration of a business combination that occurred in
the third quarter of fiscal year 2018. The adjustment consisted of
an additional cash payment to sellers and a corresponding increase
to goodwill.
Other Information
The excess of purchase price
over the fair value amounts assigned to the assets acquired and
liabilities assumed represents the goodwill amount. The Company
believes the factors that contributed to goodwill in its completed
acquisitions include synergies not available to market
participants, as well as the acquisition of a talented
workforce.
The fair value of assets
acquired and liabilities assumed has been determined on a
preliminary basis, and the Company will finalize these amounts as
it obtains the information necessary to complete the measurement
process. Any changes resulting from facts and circumstances that
existed as of the date of a business combination may result in
certain adjustments. The Company expects to finalize these amounts
no later than one year from the date of each business
combination.
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(CONTINUED)
(Unaudited)
Management applied
significant judgment in determining the fair value of intangible
assets, which involved the use of significant estimates and
assumptions with respect to the revenue growth rates, the economic
lives, and the discount rates. The fair value of the contingent
consideration has been estimated based on the likelihood of the
performance metrics being achieved.
The condensed
consolidated financial statements include the operating results
from the date the business was acquired. The impact of the
completed business combinations to the periods presented was not
material. Pro forma results of operations for the completed
business combination have not been presented because the effects
were not material to the Company's condensed consolidated financial
statements.
The Company
incurred acquisition-related expenses of $10.4
million and $12.7
million during the three months
ended June 28, 2019
and
June 29,
2018 ,
respectively, and $15.0
million and $33.9
million during the
nine
months
ended June 28, 2019
and
June 29,
2018 ,
respectively.
3. OTHER
FINANCIAL INFORMATION
Contracts with Customers
The following
table provides the Company's unbilled receivables and deferred
revenues from contracts with customers:
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
June 28,
2019
|
|
September 28,
2018
|
|
Unbilled receivables -
current
|
$
|
324.8
|
|
|
$
|
362.8
|
|
|
Unbilled receivables -
long-term (1)
|
63.2
|
|
|
36.3
|
|
|
Deferred revenues -
current
|
(749.7
|
)
|
|
(729.7
|
)
|
|
Deferred revenues -
long-term (2)
|
(73.5
|
)
|
|
(38.6
|
)
|
|
Total net unbilled
receivables (deferred revenues)
|
$
|
(435.2
|
)
|
|
$
|
(369.2
|
)
|
|
|
|
(1)
|
Included in other assets on
the Company's Condensed Consolidated Balance Sheets.
|
|
|
|
(2)
|
Included in other long-term
liabilities on the Company's Condensed Consolidated Balance
Sheets.
|
During the
nine
months
ended June 28, 2019
, unbilled
receivables remained flat, and deferred revenues,
decreased
primarily due to
the contractual timing of billings occurring before the revenues
were recognized.
During the three
and nine months ended
June 28,
2019 , the
Company recognized revenues of $207.2
million and $545.0
million , respectively, which were
included in the deferred revenues balance at September 28,
2018 .
During the three and nine months ended
June 29,
2018 , the
Company recognized revenues of $66.5
million and $367.0
million , which were included in the
deferred revenues balance at September 29,
2017 .
Unfulfilled Performance Obligations
The following
table represents the Company's unfulfilled performance obligations
as of June 28, 2019
, and the
estimated revenue expected to be recognized in the future related
to these unfulfilled performance obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years
of Revenue Recognition
|
|
(In
millions)
|
Remainder of
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
|
Unfulfilled Performance
Obligations
|
$
|
824.6
|
|
|
$
|
2,575.5
|
|
|
$
|
1,037.0
|
|
|
$
|
2,118.7
|
|
The table above
includes both product and service unfulfilled performance
obligations, which includes a component of service performance
obligations which have not been invoiced. The fiscal years
presented reflect management’s best estimate of when the Company
will transfer control to the customer and may change based on
timing of shipment, readiness of customers’ facilities for
installation, installation requirements, and availability of
products or customer acceptance terms.
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(CONTINUED)
(Unaudited)
Cash, Cash Equivalents, and Restricted Cash
The following
table summarizes the Company's cash, cash equivalents and
restricted cash:
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
June 28,
2019
|
|
September 28,
2018
|
|
Cash and cash
equivalents
|
$
|
520.7
|
|
|
$
|
504.8
|
|
|
Restricted cash -
current (1)
|
13.7
|
|
|
3.1
|
|
|
Restricted cash -
long-term (2)
|
8.5
|
|
|
8.5
|
|
|
Total cash, cash
equivalents, and restricted cash
|
$
|
542.9
|
|
|
$
|
516.4
|
|
|
|
|
(1)
|
Included in prepaid and other
current assets on the Company's Condensed Consolidated Balance
Sheets.
|
|
|
|
(2)
|
Included in other assets on
the Company's Condensed Consolidated Balance Sheets.
|
Inventories
The following
table summarizes the Company's inventories:
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
June 28,
2019
|
|
September 28,
2018
|
|
Raw materials and
parts
|
$
|
368.8
|
|
|
$
|
304.1
|
|
|
Work-in-process
|
72.8
|
|
|
50.6
|
|
|
Finished goods
|
87.7
|
|
|
83.4
|
|
|
Total
inventories
|
$
|
529.3
|
|
|
$
|
438.1
|
|
Short-term Borrowings
The following
table summarizes the Company's short-term borrowings:
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
June 28,
2019
|
|
2018 Revolving Credit
Facility
|
$
|
400.0
|
|
|
3.40
|
%
|
|
Total short-term
borrowings
|
$
|
400.0
|
|
|
|
Other Long-Term Liabilities
The following
table summarizes the Company's other long-term
liabilities:
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
June 28,
2019
|
|
September 28,
2018
|
|
Long-term income taxes
payable
|
$
|
183.0
|
|
|
$
|
189.1
|
|
|
Deferred income
taxes
|
78.2
|
|
|
31.4
|
|
|
Long-term deferred
revenues
|
73.5
|
|
|
38.6
|
|
|
Other
|
65.4
|
|
|
65.2
|
|
|
Total other long-term
liabilities
|
$
|
400.1
|
|
|
$
|
324.3
|
|
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(CONTINUED)
(Unaudited)
Other Income, Net
The following
table summarizes the Company's other income, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
(In
millions)
|
June 28,
2019
|
|
June 29,
2018
|
|
June 28,
2019
|
|
June 29,
2018
|
|
Gain on equity
investments
|
$
|
2.0
|
|
|
$
|
—
|
|
|
$
|
23.8
|
|
|
$
|
—
|
|
|
Net foreign currency exchange
gain
|
1.8
|
|
|
0.8
|
|
|
2.6
|
|
|
1.0
|
|
|
Other
|
0.4
|
|
|
0.7
|
|
|
1.0
|
|
|
1.9
|
|
|
Total other income,
net
|
$
|
4.2
|
|
|
$
|
1.5
|
|
|
$
|
27.4
|
|
|
$
|
2.9
|
|
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(CONTINUED)
(Unaudited)
4. FAIR
VALUE
Assets/Liabilities Measured at Fair Value on a Recurring
Basis
In the tables
below, the Company has segregated all assets and liabilities that
are measured at fair value on a recurring basis into the most
appropriate level within the fair value hierarchy based on the
inputs used to determine the fair value at the measurement
date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
Measurement Using
|
|
|
|
Quoted Prices
in
Active Markets
for Identical
Instruments
|
|
Significant
Other
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
|
Total
|
|
Type of
Instruments
|
|
(Level
1)
|
|
(Level
2)
|
|
(Level
3)
|
|
Balance
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
Assets at
June 28, 2019:
|
|
|
|
|
|
|
|
|
|
Cash
equivalents:
|
|
|
|
|
|
|
|
|
|
Money market
funds
|
|
$
|
16.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16.7
|
|
|
Available-for-sale
securities: (1)
|
|
|
|
|
|
|
|
|
|
MPTC Series B-1
Bonds
|
|
—
|
|
|
26.6
|
|
|
—
|
|
|
26.6
|
|
|
MPTC Series B-2
Bonds
|
|
—
|
|
|
24.5
|
|
|
—
|
|
|
24.5
|
|
|
APTC securities
|
|
—
|
|
|
6.4
|
|
|
—
|
|
|
6.4
|
|
|
Total assets measured at fair
value
|
|
$
|
16.7
|
|
|
$
|
57.5
|
|
|
$
|
—
|
|
|
$
|
74.2
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
at June 28, 2019:
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
$
|
—
|
|
|
$
|
(0.3
|
)
|
|
$
|
—
|
|
|
$
|
(0.3
|
)
|
|
Contingent
consideration
|
|
—
|
|
|
—
|
|
|
(38.2
|
)
|
|
(38.2
|
)
|
|
Total liabilities measured at
fair value
|
|
$
|
—
|
|
|
$
|
(0.3
|
)
|
|
$
|
(38.2
|
)
|
|
$
|
(38.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Assets at
September 28, 2018:
|
|
|
|
|
|
|
|
|
|
Cash
equivalents:
|
|
|
|
|
|
|
|
|
|
Money market
funds
|
|
$
|
44.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
44.1
|
|
|
Available-for- sale
securities:
|
|
|
|
|
|
|
|
|
|
MPTC Series B-1 Bonds
(2)
|
|
—
|
|
|
25.1
|
|
|
—
|
|
|
25.1
|
|
|
MPTC Series B-2 Bonds
(1)
|
|
—
|
|
|
23.1
|
|
|
—
|
|
|
23.1
|
|
|
APTC securities
(2)
|
|
—
|
|
|
6.4
|
|
|
—
|
|
|
6.4
|
|
|
GPTC securities
(2)
|
|
—
|
|
|
7.9
|
|
|
—
|
|
|
7.9
|
|
|
Total assets measured at fair
value
|
|
$
|
44.1
|
|
|
$
|
62.5
|
|
|
$
|
—
|
|
|
$
|
106.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
at September 28, 2018:
|
|
|
|
|
|
|
|
|
|
Contingent
consideration
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(24.4
|
)
|
|
$
|
(24.4
|
)
|
|
Total liabilities measured at
fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(24.4
|
)
|
|
$
|
(24.4
|
)
|
|
|
|
(1)
|
Included in other assets on
the Company's Condensed Consolidated Balance Sheets.
|
|
|
|
(2)
|
Included in prepaid and other
current assets on the Company's Condensed Consolidated Balance
Sheets because the Company had the ability and intent to sell this
security in the next twelve months.
|
The Company
classifies its money market funds as Level 1 because they have
daily liquidity, quoted prices for the underlying investments can
be obtained, and there are active markets for the underlying
investments. The Company's Level 2 available-for-sale securities
consist of bonds for the Maryland Proton Therapy Center ("MPTC"),
Alabama Proton Therapy Center (“APTC”), and Georgia Proton
Treatment Center ("GPTC"). The observable inputs for these
securities are comparable bond issues, broker/dealer quotations for
the same or similar investments in active markets, and other
observable inputs such as yields, credit risks, default rates, and
volatility. As of June 28, 2019
, and
September 28,
2018 , the
carrying amount of the Company's Level 1 money market funds and
Level 2 available-for-sale securities approximated their respective
fair values. See Note 14, "Proton Solutions
Loans and Investments," for further information about
the available-for-sale securities.
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(CONTINUED)
(Unaudited)
The Company has
elected to use the income approach to value its derivative
instruments using standard valuation techniques and Level 2 inputs,
such as currency spot rates, forward points and credit default swap
spreads. The Company’s derivative instruments are generally
short-term in nature, typically one month
to
thirteen
months in duration.
The Company
generally measures the fair value of its Level 3 contingent
consideration liabilities based on option pricing models through
Black-Scholes or Monte Carlo models with key assumptions that
include estimated revenues of the acquired business, the
probability of completing certain milestone targets during the
earn-out period, volatility, and estimated discount rates
corresponding to the periods of expected payments. If the estimated
revenues or probability of completing certain milestones were to
increase or decrease during the respective earn-out period, the
fair value of the contingent consideration would increase or
decrease, respectively. If the estimated discount rates were to
increase or decrease, the fair value of contingent consideration
would decrease or increase, respectively. Changes in volatility may
result in an increase or decrease in the fair value of contingent
consideration. The Company's contingent consideration is from its
business combinations and is included in accrued liabilities and
other long-term liabilities on the Condensed Consolidated Balance
Sheets.
The following
table presents the reconciliation for all assets and liabilities
measured and recorded at fair value on a recurring basis using
significant unobservable inputs (Level 3):
|
|
|
|
|
|
|
(In
millions)
|
|
Contingent
Consideration
|
|
Balance at
September 28, 2018
|
|
$
|
(24.4
|
)
|
|
Business
combinations
|
|
(26.2
|
)
|
|
Measurement period adjustment
to a business combination in prior year
|
|
11.9
|
|
|
Settlements
|
|
0.5
|
|
|
Balance at
June 28, 2019
|
|
$
|
(38.2
|
)
|
There were
no
transfers of
assets or liabilities between fair value measurement levels during
either the three and nine
months
ended June 28, 2019
, or the
three and
nine months ended
June 29,
2018 .
Transfers between fair value measurement levels are recognized at
the end of the reporting period.
Fair Value of Other Financial Instruments
The fair values
of certain of the Company’s financial instruments, including bank
deposits included in cash equivalents, trade and unbilled
receivables, net of allowance for doubtful accounts, revolving
loan to California Proton Therapy Center ("CPTC"), Rinecker Proton
Therapy Center ("RPTC") senior secured debt, accounts payable, and
short-term borrowings approximate their carrying amounts due to
their short maturities.
As of
June 28,
2019 , the
fair value of the Term Loan with CPTC approximated its carrying
value of $44.0
million . The carrying value is based
on the present value of expected future cash payments discounted at
a rate reflecting the nature and duration of the loans, risks
involved with CPTC, and its industry. As a result, the Term Loan is
categorized as Level 3 in the fair value hierarchy. See
Note 14, "Proton
Solutions Loans and Investments," for further
information.
The Company's
equity investments in privately-held companies were
$61.2
million and $37.2
million at June 28, 2019
and
September 28,
2018 ,
respectively. Equity investments without readily determinable fair
value are measured at cost and will be adjusted through net
earnings when they are deemed to be impaired or when there is an
adjustment from observable price changes. At June 28, 2019
, the Company
increased the fair value for an equity investment in a
privately-held company by $2.0
million due to observable price
changes for equity investments without readily determinable fair
value.
The fair value of
the outstanding long-term notes receivable, including accrued
interest, approximated their carrying value of $32.6
million and $29.7
million at June 28, 2019
and
September 28,
2018 ,
respectively, because they are based on terms of recent comparable
transactions and are categorized as Level 3 in the fair value
hierarchy. The fair value is based on the income approach by using
the discounted cash flow model with key assumptions that include
discount rates corresponding to the terms and risks as well as
underlying cash flow assumptions. See Note 14, "Proton Solutions
Loans and Investments," for information on the
long-term notes receivable.
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(CONTINUED)
(Unaudited)
5.
RECEIVABLES
The following table
summarizes the Company's trade and unbilled receivables, net and
notes receivable:
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
June 28,
2019
|
|
September 28,
2018
|
|
Trade and unbilled
receivables, gross
|
$
|
1,169.9
|
|
|
$
|
1,093.0
|
|
|
Allowance for doubtful
accounts
|
(47.0
|
)
|
|
(41.1
|
)
|
|
Trade and unbilled
receivables, net
|
$
|
1,122.9
|
|
|
$
|
1,051.9
|
|
|
Short-term
|
$
|
1,054.2
|
|
|
$
|
1,009.9
|
|
|
Long-term (1)
|
$
|
68.7
|
|
|
$
|
42.0
|
|
|
|
|
|
|
|
Notes receivable
|
$
|
32.6
|
|
|
$
|
29.8
|
|
|
Short-term
(2)
|
$
|
—
|
|
|
$
|
0.1
|
|
|
Long-term (1)
(3)
|
$
|
32.6
|
|
|
$
|
29.7
|
|
|
|
|
(1)
|
Included in other assets on
the Company's Condensed Consolidated Balance Sheets.
|
|
|
|
(2)
|
Included in prepaid expenses
and other current assets on the Company's Condensed Consolidated
Balance Sheets.
|
|
|
|
(3)
|
Balances include accrued
interest and are recorded in other assets on the Company's
Condensed Consolidated Balance Sheets.
|
A financing
receivable represents a financing arrangement with a contractual
right to receive money, on demand or on fixed or determinable
dates, and that is recognized as an asset on the Company’s
Condensed Consolidated Balance Sheets. The Company’s financing
receivables consist of trade receivables with contractual
maturities of more than one year and notes receivable. A small
portion of the Company's financing trade receivables are included
in short-term trade accounts receivable.
As of
June 28,
2019 ,
and September 28,
2018 , the
allowance for doubtful accounts is entirely related to short-term
trade and unbilled receivables.
See
Note 14, "Proton
Solutions Loans and Investments," for more information on the
Company's long-term notes receivable balances.
6. GOODWILL
AND INTANGIBLE ASSETS
The following table reflects
the activity of goodwill by reportable operating
segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
Oncology
Systems
|
|
Proton
Solutions
|
|
Other
|
|
Total
|
|
Balance at
September 28, 2018
|
$
|
242.1
|
|
|
$
|
51.5
|
|
|
$
|
—
|
|
|
$
|
293.6
|
|
|
Business
combinations
|
204.2
|
|
|
—
|
|
|
122.7
|
|
|
326.9
|
|
|
Impairment
charges
|
|
|
|
(50.5
|
)
|
|
—
|
|
|
(50.5
|
)
|
|
Measurement period
adjustments to business combinations in prior year
|
(2.1
|
)
|
|
—
|
|
|
—
|
|
|
(2.1
|
)
|
|
Foreign currency translation
adjustments
|
—
|
|
|
(1.0
|
)
|
|
—
|
|
|
(1.0
|
)
|
|
Balance at
June 28, 2019
|
$
|
444.2
|
|
|
$
|
—
|
|
|
$
|
122.7
|
|
|
$
|
566.9
|
|
See
Note 2, "Business
Combinations," for more information on the
business combinations and measurement period adjustments to
business combination in prior year.
During the third
quarter of fiscal year 2019, the Company recorded a goodwill
impairment charge of $50.5
million for the full value of the
Proton Solutions reporting unit goodwill. The impairment resulted
from a downward revision of the forecasted future cash flows.
Factors in the third quarter that contributed to the revised
forecast include observed continued weakness in proton therapy
markets and lower than expected results as compared to prior
forecasts. These events decreased the forecasted cash flows and the
fair value of the Proton Solutions reporting unit below its
carrying value as of the third quarter of fiscal year
2019.
VARIAN
MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(CONTINUED)
(Unaudited)
To determine the
fair value of the Proton Solutions reporting unit, the Company used
the income approach. Under the income approach, the fair value of
the Proton Solutions reporting unit was based on the present value
of the estimated future cash flows that the reporting unit is
expected to generate over its remaining life. Cash flow projections
were based on management's estimates of revenue growth rates and
operating margins, taking into consideration industry and market
conditions. The discount rate used was based on the
weighted-average cost of capital appropriate for the Proton
Solutions reporting unit.
The Company also
assessed whether the carrying amounts of the Proton Solutions
reporting unit’s long-lived assets may not be recoverable and
therefore impaired. To assess the recoverability of the reporting
unit’s long-lived assets, the undiscounted cash flows of the
reporting unit were analyzed and compared to the carrying value.
The sum of the undiscounted cash flows exceeded the carrying value
of the asset group, therefore, no impairment was
indicated.
The following
table reflects the gross carrying amount and accumulated
amortization of the Company's intangible assets:
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June 28,
2019
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September 28,
2018
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(In
millions)
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Gross
Carrying Amount
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Accumulated
Amortization
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Net Carrying
Amount
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