PALO ALTO, Calif., Nov. 22, 2019 /PRNewswire/ -- Varian (NYSE:
VAR) today announced updates to its previously reported GAAP
preliminary financial results for its fourth quarter and full
fiscal year 2019. There is no impact to Non-GAAP financial
measures.
Earlier this week the Company learned new facts and determined
that the projected financial performance of its recently acquired
Endocare and Alicon businesses was better than previously expected
and the mix of revenues is different than previously expected,
resulting in an increase in the fair value of the contingent
consideration payable under earnout obligations to the sellers of
the businesses. This increase in fair value has resulted in an
$18.6 million increase in
acquisition-related expenses in the fourth quarter of fiscal year
2019 and an $18.6 million increase in
accrued liabilities as of the end of the fourth quarter of fiscal
year 2019, with corresponding impacts on the company's previously
reported GAAP financial results for the fourth quarter and full
fiscal year 2019. The fair value increase has no impact on the
company's previously reported Non-GAAP financial results for the
periods.
Updated summary financial statements reflecting the increase in
acquisition-related expenses and the increase in accrued
liabilities are included below. The updated condensed consolidated
financial statements also reflect other balance sheet closing item
adjustments, primarily related to the company's recent acquisition
activity.
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 locations 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
|
|
27.0
|
|
|
2.5
|
|
|
62.8
|
|
|
36.4
|
|
|
Operating
earnings
|
|
110.8
|
|
|
133.1
|
|
|
386.2
|
|
|
437.4
|
|
|
As a percentage of
revenues
|
|
12.6
|
%
|
|
16.6
|
%
|
|
12.0
|
%
|
|
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
|
|
110.4
|
|
|
142.0
|
|
|
420.8
|
|
|
452.1
|
|
|
Taxes on
earnings
|
|
40.0
|
|
|
25.2
|
|
|
128.6
|
|
|
301.8
|
|
|
Net
earnings
|
|
70.4
|
|
|
116.8
|
|
|
292.2
|
|
|
150.3
|
|
|
Less: Net earnings
(loss) attributable to non-controlling interests
|
|
(0.3)
|
|
|
0.4
|
|
|
0.3
|
|
|
0.4
|
|
|
Net earnings
attributable to Varian
|
|
$
|
70.7
|
|
|
$
|
116.4
|
|
|
$
|
291.9
|
|
|
$
|
149.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per
share - basic
|
|
$
|
0.78
|
|
|
$
|
1.27
|
|
|
$
|
3.21
|
|
|
$
|
1.64
|
|
|
Net earnings per
share - diluted
|
|
$
|
0.77
|
|
|
$
|
1.26
|
|
|
$
|
3.18
|
|
|
$
|
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
|
|
206.2
|
|
|
233.3
|
|
Current assets of
discontinued operations
|
|
—
|
|
|
2.3
|
|
Total current
assets
|
|
2,395.4
|
|
|
2,188.4
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
311.5
|
|
|
274.6
|
|
Goodwill
|
|
612.2
|
|
|
293.6
|
|
Intangible
assets
|
|
300.7
|
|
|
101.1
|
|
Deferred tax
assets
|
|
84.7
|
|
|
102.2
|
|
Other
assets
|
|
397.2
|
|
|
292.8
|
|
Total
assets
|
|
$
|
4,101.7
|
|
|
$
|
3,252.7
|
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
248.5
|
|
|
$
|
190.3
|
|
Accrued
liabilities
|
|
459.5
|
|
|
419.7
|
|
Deferred
revenues
|
|
766.0
|
|
|
729.7
|
|
Short-term
borrowings
|
|
410.0
|
|
|
—
|
|
Total current
liabilities
|
|
1,884.0
|
|
|
1,339.7
|
|
Other long-term
liabilities
|
|
440.1
|
|
|
324.3
|
|
Total
liabilities
|
|
2,324.1
|
|
|
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
|
|
934.0
|
|
|
780.4
|
|
Accumulated other
comprehensive loss
|
|
(102.1)
|
|
|
(65.3)
|
|
Total Varian
stockholders' equity
|
|
1,768.3
|
|
|
1,584.4
|
|
Non-controlling
interests
|
|
9.3
|
|
|
4.3
|
|
Total
equity
|
|
1,777.6
|
|
|
1,588.7
|
|
Total liabilities
and equity
|
|
$
|
4,101.7
|
|
|
$
|
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:
Updated 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)
|
|
27.0
|
|
|
2.5
|
|
|
62.8
|
|
|
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
|
|
48.4
|
|
|
8.2
|
|
|
155.4
|
|
|
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
|
|
$
|
40.7
|
|
|
$
|
(9.2)
|
|
|
$
|
133.8
|
|
|
$
|
259.0
|
|
Operating earnings
reconciliation
|
|
|
|
|
|
|
|
|
GAAP operating
earnings
|
|
$
|
110.8
|
|
|
$
|
133.1
|
|
|
$
|
386.2
|
|
|
$
|
437.4
|
|
Total operating
earnings impact from non-GAAP adjustments
|
|
48.4
|
|
|
8.2
|
|
|
155.4
|
|
|
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
|
|
$
|
70.7
|
|
|
$
|
116.4
|
|
|
$
|
291.9
|
|
|
$
|
149.9
|
|
Total net earnings
impact from non-GAAP adjustments
|
|
40.7
|
|
|
(9.2)
|
|
|
133.8
|
|
|
259.0
|
|
Non-GAAP net earnings
attributable to Varian
|
|
$
|
111.4
|
|
|
$
|
107.2
|
|
|
$
|
425.7
|
|
|
$
|
408.9
|
|
GAAP net earnings per
share - diluted
|
|
$
|
0.77
|
|
|
$
|
1.26
|
|
|
$
|
3.18
|
|
|
$
|
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 $18.6
million change in fair value of contingent consideration in the
fourth quarter fiscal year 2019 and $20.8 million charge associated
with the write-off of in-process research and development acquired
in the CyberHeart acquisition in the full 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.
|
Press Contact
Mark Plungy
Director, Global Public Relations
+1 (650) 424-5630
mark.plungy@varian.com
Investor Relations Contact
Anshul Maheshwari
Vice President, Investor Relations
+1 (650) 424-5631
investors@varian.com
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content:http://www.prnewswire.com/news-releases/varian-updates-gaap-results-for-fourth-quarter-and-full-fiscal-year-2019-300963639.html
SOURCE Varian