This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Varian Medical Systems' CEO Hosts Investor Mid-Year Review (Transcript)

I will tell you that Japan has come back and they’re on a more normal pattern now. This was only reflected in the delivery. So, again, that geographic shift had an impact on Oncology’s margin in the half.

X-Ray Products had very strong margin performance and is up about 50 basis points in the half. I should say that the Proton business dilutes the gross margin by about one full point for the total company. And, again, that’s going to hold true for the first few of these. We ultimately hope to get the Proton business up to about a 30% gross margin product.

And SG&A expenses for the first half were about flat as a percentage of sales, and that’s even with the restructuring charge that we talked about and the dilutive effect from the Calypso acquisition.

Operating earnings down 5%. Net earnings down only 1% as that shift to the geographic Emerging Markets causes the gross margin to be lower. We also get a tax benefit as we move to international markets. And so, the tax rate was down three points from the prior year period.

Backlog of $2.6 billion is up 18% if you include the Proton business. If you exclude the Proton business, the backlog is still up a very healthy 12%. So, again, that gives us, really looking into the next fiscal year, we can see ourselves returning to low double digit growth.

Balance sheet and cash flow. Conservative balance sheet $617 million of cash and equivalents, $32 million short term investments. This is the loan for the APT Scripps project, the Proton project in San Diego. And $162 million of total debt. We have subsequently been paying down that debt and as of the call, I believe the number was around $130 million.

The DSO of 83 days was up four days from the prior year period. It’s a little confusing because the Proton business actually impacted DSO by about five days in the second quarter. And that’s because we are booking revenue in advance of when the actual payment terms are due from the customer. And this is under the project accounting method that we talked about. This being our first installation, it is back-end loaded when the payments are actually due from Scripps, and that had an impact on the DSO. If I look back over the last four quarters and just take a simple average, 83 days is the average. So, collections are quite healthy.

4 of 5

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,131.97 +100.83 0.59%
S&P 500 1,998.98 +14.85 0.75%
NASDAQ 4,552.7590 +33.8570 0.75%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs