PALO ALTO, Calif., Oct. 23, 2019 /PRNewswire/ --
Fourth Quarter 2019 Summary
- Oncology Systems gross orders grew 7% in dollars and 7% in
constant currency; North America
gross orders grew 10%; 17 Ethos™ orders received
in Europe and Australia
- Total company revenues grew 10% in dollars, or 11% in constant
currency, to $879 million
- GAAP operating earnings declined 3% representing 14.7% of
revenues; Non-GAAP operating earnings grew 13% representing 18.1%
of revenues
- GAAP net earnings per diluted share of $0.97; Non-GAAP net earnings per diluted share of
$1.21
- Tariff exclusions had a $21
million benefit to revenues, a $4
million benefit to cost of revenues and a $2 million expense triggered by receiving the
exclusion, with a net benefit to Non-GAAP operating earnings of
$23 million
Fiscal Year 2019 Summary
- Oncology Systems gross orders grew 9% in dollars, or 11% in
constant currency
- Total company revenues grew 10% in dollars, or 12% in constant
currency, to $3.2 billion
- Organic revenues, which excludes the year over year impact of
FX and growth from the acquisitions of CTSI, Endocare, Alicon and
the Boston Scientific bead portfolio, grew 11%
- GAAP operating earnings declined 7% representing 12.6% of
revenues; Non-GAAP operating earnings grew 6% representing 16.8% of
revenues
- GAAP net earnings per diluted share of $3.38; Non-GAAP net earnings per diluted share of
$4.63
New President of Interventional Oncology and New Chief
Financial Officer
- Effective December 1, 2019,
Gary E. Bischoping, Jr., currently
senior vice president, Finance & chief finance officer, will
take on a new role as president, Interventional Oncology Solutions;
J. Michael Bruff, currently senior
vice president, Finance and Investor Relations, will succeed
Bischoping as senior vice president, Finance & chief finance
officer
Varian (NYSE: VAR) today announced its fourth quarter and full
fiscal year 2019 results and new appointments to key leadership
roles.
"This is the second consecutive fiscal year we have reported
double-digit revenue growth and 9 percent Oncology orders growth;
our core business is strong and being powered by our continuous
innovation cycle, and our acquisitions are delivering on growth
expectations," said Dow Wilson, Chief Executive Officer of
Varian. "While we have more work to do in sharpening our
execution, our order and revenue growth has us looking forward to
the next fiscal year. We have strong momentum exiting our
fourth quarter and our long-term growth and value creation strategy
is delivering for patients, clinicians and our
shareholders."
Summary
(Dollars and shares
in millions, except per share amounts)
|
Q4
2019
|
|
Q4
2018
|
|
Y/Y
|
|
FY
2019
|
|
FY
2018
|
|
Y/Y
|
Revenues
|
$
|
878.9
|
|
|
$
|
801.6
|
|
|
10
|
%
|
|
$
|
3,225.1
|
|
|
$
|
2,919.1
|
|
|
10
|
%
|
Gross margin as a
percentage of revenues
|
43.8
|
%
|
|
42.3
|
%
|
|
150
bps
|
|
|
42.5
|
%
|
|
43.6
|
%
|
|
(110
bps)
|
|
GAAP net earnings
attributable to Varian
|
$
|
89.3
|
|
|
$
|
116.4
|
|
|
(23)
|
%
|
|
$
|
310.5
|
|
|
$
|
149.9
|
|
|
107
|
%
|
GAAP net earnings per
share - diluted
|
$
|
0.97
|
|
|
$
|
1.26
|
|
|
(23)
|
%
|
|
$
|
3.38
|
|
|
$
|
1.62
|
|
|
109
|
%
|
Net cash provided by
operating activities
|
$
|
117.8
|
|
|
$
|
108.2
|
|
|
9
|
%
|
|
$
|
371.8
|
|
|
$
|
454.9
|
|
|
(18)
|
%
|
Non-GAAP net earnings
attributable to Varian (1)
|
$
|
111.4
|
|
|
$
|
107.2
|
|
|
4
|
%
|
|
$
|
425.7
|
|
|
$
|
408.9
|
|
|
4
|
%
|
Non-GAAP net earnings
per share - diluted (1)
|
$
|
1.21
|
|
|
$
|
1.16
|
|
|
4
|
%
|
|
$
|
4.63
|
|
|
$
|
4.42
|
|
|
5
|
%
|
Shares used in
computing GAAP and non-GAAP net earnings per diluted
share
|
91.7
|
|
|
92.2
|
|
|
|
|
91.9
|
|
|
92.5
|
|
|
|
|
|
(1)
|
Non-GAAP net earnings
and Non-GAAP net earnings per diluted share are defined as GAAP net
earnings and GAAP net earnings per diluted share adjusted to
exclude the amortization of intangible assets and inventory
step-up, acquisition-related expenses and in-process research and
development, impairment charges, significant litigation charges or
benefits and legal costs, gains and losses on equity investments,
and significant non-recurring tax expense or benefit.
|
The company ended the quarter with $531
million in cash and cash equivalents and $412 million in debt. Net cash provided by
operating activities was $118
million, up 9%. Cash Flows from operations were
$372 million for the fiscal year,
down 18% due to higher working capital to support product
transition and growth. During the quarter, the company
invested $32 million to
repurchase 279,000 shares of common stock.
Oncology Systems Segment
Continued leadership in innovation and market execution drove
strong worldwide growth in 2019. Oncology revenues totaled
$820 million for the fourth quarter,
up 8%, and $3.1 billion for the full
year, up 11%. Operating earnings for the segment increased 3%
for the quarter and were flat for the full year.
Gross orders for the fourth quarter were $1.1 billion, up 7%, and $3.4 billion for the full year, up 9%.
Gross orders in the Americas were up 11% for the fourth
quarter. In EMEA, gross orders in the quarter rose 10%,
driven in part by orders for 13 TrueBeam systems as a part of the
Tata Trusts framework agreement. In APAC, gross orders
decreased 9% with a challenging quarter in Japan that was partially offset by growth in
China and South East Asia and Korea.
Proton Solutions Segment
Proton Solutions revenues totaled $42
million for the fourth quarter, down 9%, and $144 million for the full year, down 3%. We
took one new order at Ohio State
University in the fourth quarter for a total of four proton
orders in the full year.
Other Segment
Revenues for our Other segment were $17
million in the fourth quarter. The Other segment is
comprised of our interventional oncology business, including
cryoablation, embolic microspheres, and microwave ablation, as well
as our cardiac radioablation assets.
Tariff Exclusion
The company received two tariff exclusions in the fourth
quarter. The exclusions had a $21
million benefit to revenues, a $4
million benefit to cost of revenues and triggered a
$2 million expense due to receiving
the exclusion in China. The net benefit to operating earnings
was $23 million, or $0.19 on a Non-GAAP earnings per share
basis. The net benefit was mostly offset by an increase in
tax rate driven by updates to the estimated impact of the Global
Intangible Low Tax Income (GILTI) and Base Erosion and Anti-Abuse
Tax (BEAT) provisions of the Tax Cuts and Jobs Act, and expenses
related to annual discretionary contributions to US-based
foundations that independently fund research and training.
Additionally, operational spend in our core businesses came in
above expectations although this higher spend was partially offset
by early momentum in our recent acquisitions.
Incrementally, the company did not record approximately
$11 million of potential tariff
refund in the fourth quarter due to timing of recognition. We
expect to recognize this benefit in fiscal year 2020.
Guidance for Full Fiscal Year 2020
Our guidance continues to consider the projected market growth
and momentum of our products and solutions in the market.
Our fiscal year 2020 guidance considers the recently announced
tariff exclusions from both China
and the United States Trade Representative. Expecting to
continue our strong operational performance, the company plans to
invest in our growth initiatives including: driving core business
growth in China, fueling growth of
our recent acquisitions by building out global sales and
distribution capacity, and touching more patients by ramping
research and development investments in technology-enabled
services, FLASH technology, our Noona patient reported outcome
offering, and cloud-based software. Continuing to invest in
meaningful innovation, go-to-market capabilities, and scalable
infrastructure is aligned with our commitment to drive long-term
growth for shareholders.
After careful consideration of these assumptions, we expect the
following for fiscal year 2020:
$M
|
FY18 Actual
|
FY19 Actual
|
FY20 Guidance
|
|
Revenues
|
$2,919
|
$3,225
|
$3,515B to
$3,612B
|
Y/Y
%
|
11%
|
10%
|
9% to
12%
|
Organic Y/Y %
(1)
|
|
|
7% to
9%
|
Non-GAAP Operating
Earnings as a percentage of Revenues
|
17.6%
|
16.8%
|
17.5% to
18.5%
|
Non-GAAP net earnings
per share-diluted ($) (2)
|
$4.42
|
$4.63
|
$5.30 to
$5.45
|
Cash flow from
operations
|
$455
|
$372
|
$450M to
$500M
|
|
|
(1)
|
Organic growth
excludes the year over year impact of FX and growth from the
acquisitions of CTSI, Endocare, Alicon and the Boston Scientific
bead portfolio.
|
(2)
|
These values are
presented on a non-GAAP basis. We have not provided a
reconciliation of non-GAAP guidance measures to the corresponding
GAAP measures on a forward-looking basis due to potential
significant variability and limited visibility of the excluded
items.
|
The guidance assumes a Non-GAAP effective tax rate of 22.5% to
23.5% and a weighted average diluted share count of 92
million. The guidance also assumes currency rates as of the
beginning of fiscal year 2020, includes acquisitions announced to
date, and includes the expected impact of all currently enacted
tariffs.
Varian Appoints New President of Interventional Oncology; New
Chief Financial Officer
Effective Dec. 1, 2019,
Gary E. Bischoping, Jr., currently
senior vice president, Finance & chief finance officer, will
take on a new role as president, Interventional Oncology
Solutions. J. Michael Bruff,
currently senior vice president, Finance and Investor Relations,
will succeed Bischoping as senior vice president, Finance &
chief finance officer. Both executives will report directly
to Dow Wilson, Varian CEO.
Earlier this year, we combined the recently acquired businesses
of Endocare, Alicon and the microsphere and bland embolic bead
assets from Boston Scientific to create our Interventional Oncology
Solutions business under the Chief Growth Office, reporting to
Kolleen Kennedy, president, Proton
Solutions and chief growth officer. Based on the success of
the integration and the robust early performance by our
Interventional Oncology Solutions business, it is the right time to
move this new business from the incubation stage under the Chief
Growth Office, and it will now report directly to Bischoping in his
new role as president of Interventional Oncology Solutions.
Kennedy will continue in her role as president, Proton
Solutions and chief growth officer, in which capacity she will
focus on incubating emerging technologies, including FLASH therapy
and cardiac radioablation, as well as leading our acquisition
integration office.
"These moves will optimally position Varian for continued growth
and are the result of our strong succession planning process," said
Wilson. "During his tenure as CFO, Gary reset resource and
capital allocation to invest in organic and inorganic opportunities
focused on driving long-term growth and value creation. In
addition, he led a successful initiative to build and strengthen
the broader CFO organization's capabilities. Gary will
leverage his keen business expertise to further build Varian's
Interventional Oncology Solutions' go-to-market organization,
product portfolio and business management system to take advantage
of the exciting opportunities we see in the interventional oncology
space."
Mike Bruff joined Varian two
years ago with extensive finance, accounting and operational
experience. Since then, he has built a robust investor
relations strategy and enhanced the company's financial planning
and business partnership functions. Prior to joining Varian,
Bruff held a series of senior international and domestic roles,
including business segment CFO, and roles in financial planning,
accounting and internal audit at Dell Technologies. He also
held leadership positions in corporate reporting at MCI
Telecommunications and served as vice president, Services
Accounting and Finance at CA, Inc. Bruff began his career in
accounting and auditing at Deloitte and Touche in Washington, D.C.
"Mike understands the Varian processes and strategy, and he has
the right background and experience to help navigate Varian through
the next growth stages," said Wilson. "As Varian continues to
evolve and grow, our deep bench of leadership capabilities across
the organization will help propel our business to success in the
near- and long-term."
Unless otherwise stated in this release, all growth rates are
year-over-year, any references to orders are gross orders, and all
periods referred to are fiscal periods. Please refer to
"Discussion of Non-GAAP Financial Measures" below for a description
of items excluded from expected non-GAAP earnings.
Investor Conference Call
Varian Medical Systems is scheduled to conduct its fourth
quarter fiscal year 2019 conference call at 1:30 p.m. Pacific Time today. To access the
live webcast or replay of the call, visit the Investor Relations
page on our website at www.varian.com/investors. 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 conference ID
13694509. The teleconference replay will be available through
5:00 p.m. Pacific Time, Friday, October 25, 2019.
About Varian
At Varian, we envision a world without fear of cancer. For
more than 70 years, we have developed, built and delivered
innovative cancer care technologies and solutions for our clinical
partners around the globe to help them treat millions of patients
each year. With an Intelligent Cancer Care approach, we are
harnessing advanced technologies like artificial intelligence,
machine learning and data analytics to enhance cancer treatment and
expand access to care. Our 9,200 employees across 70
countries keep the patient and our clinical partners at the center
of our thinking as we power new victories in cancer care.
Because, for cancer patients everywhere, their fight is our
fight. For more information, visit http://www.varian.com and
follow @VarianMedSys 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,
operating expenses, tax rate, cash flows, earnings growth or other
financial results; and any statements using the terms "could,"
"believe," "expect," "promising," "outlook," "should,"
"well-positioned," "will" 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 our ability to
achieve expected synergies from acquisitions; risks associated with
integrating recent acquisitions; global economic conditions and
changes to trends for cancer treatment regionally; currency
exchange rates and tax rates; the impact of the Tax Cuts and Jobs
Act; 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; recent and
potential future tariffs or a global trade war; demand for and
delays in delivery of 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, regulations or procedures; changes in
regulatory environments; risks associated with the company
providing financing for the construction and start-up operations of
particle therapy centers, challenges associated with
commercializing the company's proton solutions business; challenges
to public tender awards and the loss of such awards or other
orders; the effect of adverse publicity; the company's reliance on
sole or limited-source suppliers; 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 related to entering into new business lines; 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 has not filed
its Form 10-K for the year ended September 27, 2019. As a
result, all financial results described here should be considered
preliminary, and are subject to change to reflect any necessary
adjustments, completion of purchase accounting, or changes in
accounting estimates, that are identified prior to the time the
company files the Form 10-K.
|
Varian Medical
Systems, Inc. and Subsidiaries
|
Preliminary
Condensed Consolidated Statements of Earnings
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
(Dollars and
shares in millions, except per share amounts)
|
|
Q4
2019
|
|
Q4
2018
|
|
FY
2019
|
|
FY
2018
|
|
Gross
orders
|
|
$
|
1,184.6
|
|
|
$
|
1,072.4
|
|
|
$
|
3,568.8
|
|
|
$
|
3,171.6
|
|
|
Oncology
Systems
|
|
1,136.6
|
|
|
1,066.6
|
|
|
3,397.6
|
|
|
3,113.9
|
|
|
Proton
Solutions
|
|
30.6
|
|
|
5.8
|
|
|
151.8
|
|
|
57.7
|
|
|
Other
|
|
17.4
|
|
|
—
|
|
|
19.4
|
|
|
—
|
|
|
Order
backlog
|
|
3,390.1
|
|
|
3,183.0
|
|
|
3,390.1
|
|
|
3,183.0
|
|
|
Revenues
|
|
878.9
|
|
|
801.6
|
|
|
3,225.1
|
|
|
2,919.1
|
|
|
Oncology
Systems
|
|
819.6
|
|
|
755.6
|
|
|
3,061.8
|
|
|
2,770.2
|
|
|
Proton
Solutions
|
|
41.9
|
|
|
46.0
|
|
|
143.9
|
|
|
148.9
|
|
|
Other
|
|
17.4
|
|
|
—
|
|
|
19.4
|
|
|
—
|
|
|
Cost of
revenues
|
|
494.3
|
|
|
462.9
|
|
|
1,854.8
|
|
|
1,645.5
|
|
|
Gross
margin
|
|
384.6
|
|
|
338.7
|
|
|
1,370.3
|
|
|
1,273.6
|
|
|
As a percentage of
revenues
|
|
43.8
|
%
|
|
42.3
|
%
|
|
42.5
|
%
|
|
43.6
|
%
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
65.2
|
|
|
59.6
|
|
|
247.6
|
|
|
233.9
|
|
|
Selling, general and
administrative
|
|
181.6
|
|
|
143.2
|
|
|
623.1
|
|
|
543.5
|
|
|
Impairment
charges
|
|
—
|
|
|
0.3
|
|
|
50.6
|
|
|
22.4
|
|
|
Acquisition-related
expenses and in-process research and development
|
|
8.4
|
|
|
2.5
|
|
|
44.2
|
|
|
36.4
|
|
|
Operating
earnings
|
|
129.4
|
|
|
133.1
|
|
|
404.8
|
|
|
437.4
|
|
|
As a percentage of
revenues
|
|
14.7
|
%
|
|
16.6
|
%
|
|
12.6
|
%
|
|
15.0
|
%
|
|
Interest income
(expense)
|
|
(1.3)
|
|
|
7.6
|
|
|
6.3
|
|
|
10.5
|
|
|
Other income,
net
|
|
0.9
|
|
|
1.3
|
|
|
28.3
|
|
|
4.2
|
|
|
Earnings before
taxes
|
|
129.0
|
|
|
142.0
|
|
|
439.4
|
|
|
452.1
|
|
|
Taxes on
earnings
|
|
40.0
|
|
|
25.2
|
|
|
128.6
|
|
|
301.8
|
|
|
Net
earnings
|
|
89.0
|
|
|
116.8
|
|
|
310.8
|
|
|
150.3
|
|
|
Less: Net earnings
(loss) attributable to non-controlling interests
|
|
(0.3)
|
|
|
0.4
|
|
|
0.3
|
|
|
0.4
|
|
|
Net earnings
attributable to Varian
|
|
$
|
89.3
|
|
|
$
|
116.4
|
|
|
$
|
310.5
|
|
|
$
|
149.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per
share - basic
|
|
$
|
0.98
|
|
|
$
|
1.27
|
|
|
$
|
3.41
|
|
|
$
|
1.64
|
|
|
Net earnings per
share - diluted
|
|
$
|
0.97
|
|
|
$
|
1.26
|
|
|
$
|
3.38
|
|
|
$
|
1.62
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in the
calculation of net earnings per share:
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding - basic
|
|
91.0
|
|
|
91.3
|
|
|
91.0
|
|
|
91.5
|
|
|
Weighted average
shares outstanding - diluted
|
|
91.7
|
|
|
92.2
|
|
|
91.9
|
|
|
92.5
|
|
|
Varian Medical
Systems, Inc. and Subsidiaries
|
Preliminary
Condensed Consolidated Balance Sheets
|
(Unaudited)
|
|
|
|
|
|
(In
millions)
|
|
September
27,
|
|
September 28,
|
2019
|
2018
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
531.4
|
|
|
$
|
504.8
|
|
Trade and unbilled
receivables, net
|
|
1,106.3
|
|
|
1,009.9
|
|
Inventories
|
|
551.5
|
|
|
438.1
|
|
Prepaid expenses and
other current assets
|
|
204.0
|
|
|
233.3
|
|
Current assets of
discontinued operations
|
|
—
|
|
|
2.3
|
|
Total current
assets
|
|
2,393.2
|
|
|
2,188.4
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
311.5
|
|
|
274.6
|
|
Goodwill
|
|
608.0
|
|
|
293.6
|
|
Intangible
assets
|
|
309.6
|
|
|
101.1
|
|
Deferred tax
assets
|
|
85.1
|
|
|
102.2
|
|
Other
assets
|
|
381.0
|
|
|
292.8
|
|
Total
assets
|
|
$
|
4,088.4
|
|
|
$
|
3,252.7
|
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
248.5
|
|
|
$
|
190.3
|
|
Accrued
liabilities
|
|
442.2
|
|
|
419.7
|
|
Deferred
revenues
|
|
766.0
|
|
|
729.7
|
|
Short-term
borrowings
|
|
410.0
|
|
|
—
|
|
Total current
liabilities
|
|
1,866.7
|
|
|
1,339.7
|
|
Other long-term
liabilities
|
|
426.6
|
|
|
324.3
|
|
Total
liabilities
|
|
2,293.3
|
|
|
1,664.0
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
Varian stockholders'
equity:
|
|
|
|
|
Common
stock
|
|
90.8
|
|
|
91.2
|
|
Capital in excess of
par value
|
|
845.6
|
|
|
778.1
|
|
Retained
earnings
|
|
952.6
|
|
|
780.4
|
|
Accumulated other
comprehensive loss
|
|
(105.3)
|
|
|
(65.3)
|
|
Total Varian
stockholders' equity
|
|
1,783.7
|
|
|
1,584.4
|
|
Non-controlling
interests
|
|
11.4
|
|
|
4.3
|
|
Total
equity
|
|
1,795.1
|
|
|
1,588.7
|
|
Total liabilities
and equity
|
|
$
|
4,088.4
|
|
|
$
|
3,252.7
|
|
|
|
|
|
|
Discussion of Non-GAAP Financial Measures
This press release includes the following non-GAAP financial
measures derived from our Condensed Consolidated Statements of
Earnings: non-GAAP operating earnings, non-GAAP net earnings and
non-GAAP net earnings per diluted share. We define non-GAAP
operating earnings as operating earnings excluding amortization of
intangible assets and inventory step-up, acquisition-related
expenses or benefits and in-process research and development,
impairment charges, and significant litigation charges and legal
costs. These measures are not presented in accordance with, nor are
they a substitute for U.S. generally accepted accounting
principles, or GAAP. In addition, these measures may be different
from non-GAAP measures used by other companies, limiting their
usefulness for comparison purposes. The non-GAAP financial measures
should not be considered in isolation from measures of financial
performance prepared in accordance with GAAP. Investors are
cautioned that there are material limitations associated with the
use of non-GAAP financial measures as an analytical tool. We have
provided a reconciliation of each non-GAAP financial measure used
in this earnings release to the most directly comparable GAAP
financial measure. We have not provided a reconciliation of
non-GAAP guidance measures to the corresponding GAAP measures on a
forward-looking basis due to the potential significant variability
and limited visibility of the excluded items discussed below.
We utilize a number of different financial measures, both GAAP
and non-GAAP, in analyzing and assessing the overall performance of
our business, in making operating decisions, forecasting and
planning for future periods, and determining payments under
compensation programs. We consider the use of the non-GAAP measures
to be helpful in assessing the performance of the ongoing operation
of our business. We believe that disclosing non-GAAP financial
measures provides useful supplemental data that, while not a
substitute for financial measures prepared in accordance with GAAP,
allows for greater transparency in the review of our financial and
operational performance. We also believe that disclosing non-GAAP
financial measures provides useful information to investors and
others in understanding and evaluating our operating results and
future prospects in the same manner as management and in comparing
financial results across accounting periods and to those of peer
companies. Non-GAAP operating earnings and non-GAAP net earnings
exclude the following items, except for gain and losses on equity
investments, and significant non-recurring tax expense or benefit,
which are only excluded from non-GAAP net earnings:
Amortization of intangible assets and amortization of
inventory step-up: We do not acquire businesses and
assets on a predictable cycle. The amount of purchase price
allocated to intangible assets, the step-up of inventory values,
and the term of amortization can vary significantly and are unique
to each acquisition or purchase. We believe that excluding
amortization of intangible assets and amortization of inventory
step-up allows the users of our financial statements to better
review and understand the historic and current results of our
operations, and also facilitates comparisons to peer companies.
Acquisition and integration-related expenses and
in-process research and development: We incur expenses
or benefits with respect to certain items associated with our
acquisitions, such as transaction costs, hedging gains and losses,
changes in the fair value of contingent consideration liabilities,
gain or expense on settlement of pre-existing relationships,
integration costs, breakup fees, write-off of in-process research
and development, etc. We exclude such expenses or benefits as they
are related to acquisitions and have no direct correlation to the
operation of our on-going business.
Impairment charges: We incur impairment
charges that result from events, which arise from unforeseen
circumstances and/or often occur outside of the ordinary course of
our on-going business. Although these events are reflected in our
GAAP financials, these unique transactions may limit the
comparability of our on-going operations with prior and future
periods.
Significant litigation charges or benefits and legal
costs: We may incur charges or benefits as well as legal costs
from time to time related to litigation and other contingencies. We
exclude these charges or benefits, when significant, as well as
legal costs associated with significant legal matters, because we
do not believe they are reflective of on-going business and
operating results.
Gains and losses on equity investments: We may incur
gains and losses from the sale of our equity investments in
privately-held companies. We do not trade equity investments, and
we do not plan on these investments for funding of ongoing
operations. We exclude such gains and losses because we do not
believe they are reflective of our core business.
Significant non-recurring tax expense or benefit:
We may incur significant tax expense or benefit as a result of tax
legislation and/or a change in judgment about the need for a
valuation allowance that are generally unrelated to the level of
business activity in the period in which these tax effects are
reported. We exclude such expenses or benefits from our non-GAAP
net earnings because we believe they do not accurately reflect the
underlying performance of our continuing business operations.
We apply our GAAP consolidated effective tax rate to our
non-GAAP financial measures, other than when the underlying item
has a materially different tax treatment.
The following table reconciles GAAP and non-GAAP financial
measures:
Varian Medical
Systems, Inc. and Subsidiaries
|
Reconciliation of
Preliminary GAAP and Non-GAAP Financial Measures
|
(Unaudited)
|
|
(Dollars and
shares in millions, except per share amounts)
|
|
Q4
2019
|
|
Q4
2018
|
|
FY
2019
|
|
FY
2018
|
Non-GAAP
adjustments
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets and inventory step-up (1)
|
|
$
|
20.0
|
|
|
$
|
4.8
|
|
|
$
|
37.1
|
|
|
$
|
15.5
|
|
Acquisition-related
expenses and in-process R&D (2)
|
|
8.4
|
|
|
2.5
|
|
|
44.2
|
|
|
36.4
|
|
Impairment charges
(3)
|
|
—
|
|
|
0.3
|
|
|
50.6
|
|
|
22.4
|
|
Litigation charge and
legal costs
|
|
1.2
|
|
|
—
|
|
|
3.9
|
|
|
—
|
|
Other
|
|
0.2
|
|
|
0.6
|
|
|
1.0
|
|
|
0.9
|
|
Total non-GAAP
adjustments to operating earnings
|
|
29.8
|
|
|
8.2
|
|
|
136.8
|
|
|
75.2
|
|
(Gain) on equity
investments (4)
|
|
—
|
|
|
—
|
|
|
(23.8)
|
|
|
—
|
|
Tax effects of
non-GAAP adjustments
|
|
(6.2)
|
|
|
(2.3)
|
|
|
(6.6)
|
|
|
(16.0)
|
|
Significant effects
of tax legislation (5)
|
|
(1.5)
|
|
|
(7.1)
|
|
|
6.3
|
|
|
207.8
|
|
Changes in deferred
tax related to an acquisition (6)
|
|
—
|
|
|
(8.0)
|
|
|
2.5
|
|
|
(8.0)
|
|
Total net earnings
impact from non-GAAP adjustments
|
|
$
|
22.1
|
|
|
$
|
(9.2)
|
|
|
$
|
115.2
|
|
|
$
|
259.0
|
|
Operating earnings
reconciliation
|
|
|
|
|
|
|
|
|
GAAP operating
earnings
|
|
$
|
129.4
|
|
|
$
|
133.1
|
|
|
$
|
404.8
|
|
|
$
|
437.4
|
|
Total operating
earnings impact from non-GAAP adjustments
|
|
29.8
|
|
|
8.2
|
|
|
136.8
|
|
|
75.2
|
|
Non-GAAP operating
earnings
|
|
$
|
159.2
|
|
|
$
|
141.3
|
|
|
$
|
541.6
|
|
|
$
|
512.6
|
|
Net earnings and
net earnings per diluted share reconciliation
|
|
|
|
|
|
|
|
|
GAAP net earnings
attributable to Varian
|
|
$
|
89.3
|
|
|
$
|
116.4
|
|
|
$
|
310.5
|
|
|
$
|
149.9
|
|
Total net earnings
impact from non-GAAP adjustments
|
|
22.1
|
|
|
(9.2)
|
|
|
115.2
|
|
|
259.0
|
|
Non-GAAP net earnings
attributable to Varian
|
|
$
|
111.4
|
|
|
$
|
107.2
|
|
|
$
|
425.7
|
|
|
$
|
408.9
|
|
GAAP net earnings per
share - diluted
|
|
$
|
0.97
|
|
|
$
|
1.26
|
|
|
$
|
3.38
|
|
|
$
|
1.62
|
|
Non-GAAP net earnings
per share - diluted
|
|
$
|
1.21
|
|
|
$
|
1.16
|
|
|
$
|
4.63
|
|
|
$
|
4.42
|
|
Shares used in
computing GAAP and non-GAAP net earnings per diluted
share
|
|
91.7
|
|
|
92.2
|
|
|
91.9
|
|
|
92.5
|
|
|
|
(1)
|
Includes $12.3
million, $1.9 million, $20.3 million and $6.5 million, respectively
in cost of revenues for the periods presented.
|
(2)
|
Includes a $20.8
million charge associated with the write-off of in-process research
and development acquired in the CyberHeart acquisition in fiscal
year 2019. Includes $29.7 million in hedging losses related to the
Australian dollar purchase price for the anticipated Sirtex Medical
Limited acquisition, partially offset by $9.0 million for the
Sirtex breakup fee in fiscal year 2018.
|
(3)
|
Includes a $50.5
million goodwill impairment charge related to our Proton Solutions
business in fiscal year 2019.
|
(4)
|
Primarily includes
$22.0 million gain on the sale of our investment in Augmenix in
fiscal year 2019.
|
(5)
|
Represents the tax
effect of a change in law related to the U.S. Tax Cuts and Jobs
Act. The mandatory deemed repatriation of unremitted foreign
earnings results in an estimated benefit of $1.5 million in the
fourth quarter and an estimated charge of $6.3 million in fiscal
year 2019 and a benefit of $8.5 million in the fourth quarter and
an estimated charge of $164.6 million in fiscal year 2018. The
corporate rate reduction resulted in a remeasurement of our
deferred tax assets of $1.4 million in the fourth quarter and $43.2
million in fiscal year 2018.
|
(6)
|
Represents the charge
to income tax expense due to the increase of a valuation allowance
as a result of an acquisition.
|
Investor Relations Contact
J. Michael Bruff
Senior Vice President, Investor Relations
+1 (650) 424-5163
investors@varian.com
Press Contact
Mark
Plungy
Director, Public Relations
+1 (650) 424-5630
mark.plungy@varian.com
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content:http://www.prnewswire.com/news-releases/varian-reports-results-for-fourth-quarter-and-full-fiscal-year-2019-appoints-new-president-of-interventional-oncology-solutions-and-new-chief-financial-officer-300944300.html
SOURCE Varian