Varian Medical Systems Inc. (
F4Q2010 Earnings Call Transcript
October 28, 2010 5:00 pm ET
Spencer Sias – VP, Corporate Communications and IR
Tim Guertin – President and CEO
Elisha Finney – Corporate SVP, Finance, and CFO
Josh Jennings – Jefferies
Dalton Chandler – Needham & Co.
Jeff Johnson – Robert Baird
Sean Lavin – Lazard
Amit Bhalla – Citi
Amit Hazan – Gleacher
Tycho Peterson – JP Morgan
Junaid Husain – Soleil Securities
Mark Arnold – Piper Jaffray
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Good day, ladies and gentlemen, and welcome to the fourth quarter 2010 Varian Medical Systems conference call. My name is Chanel, and I will be your operator for today. At this time, all lines are in listen-only mode. Later we will conduct a question-and-answer session.
I would now like to turn the conference over to Mr. Spencer Sias, Vice President of Investor Relations and Corporate Communications. Please proceed.
Thank you. Good afternoon, and welcome to Varian Medical Systems conference call for the fourth quarter of fiscal year 2010. With me are Tim Guertin, President and CEO; Elisha Finney, CFO; and Tai Chen, our Corporate Controller. Tim and Elisha will summarize our results and will take your questions following the presentation.
To simplify our discussion, unless otherwise stated, all references to the quarter or year are fiscal quarters and fiscal years. Quarterly comparisons are for the fourth quarter of fiscal 2010 versus the fourth quarter of fiscal 2009. Annual comparisons are for fiscal 2010 versus fiscal 2009. All results are for continuing operations, with the sale of the research instruments portion of ACCEL.
Net order and backlog comparisons for the company also exclude the $62 million proton order that was booked in the fourth quarter fiscal 2009, and cancelled in the following quarter.
Please be advised that this presentation and discussion contains forward-looking statements. Our use of words and phrases such as ‘outlook,’ ‘could,’ ‘should,’ ‘believe,’ ‘opportunity,’ ‘can,’ ‘estimate,’ and similar expressions are intended to identify those statements, which represent our current judgment on future performance or other future matters. While we believe them to be reasonable based on information currently available to us, these statements are subject to risks and uncertainties that could cause actual results to differ materially.
Some of the important risks relating to our business are described in our fourth quarter earnings release and in our filings with the SEC. We assume no obligation to update or revise the forward-looking statements in this presentation and discussion because of new information, future events, or otherwise.
As a quick reminder, we’ll be holding our usual investor meeting and booth tour at the Annual ASTRO conference from 7 am to 10 am, this Tuesday, at the San Diego Marriott Hotel and Marina. Management presentations also will be webcast from 7.30 to 8.30 that morning, and details are available on our Investor Relations Web site at www.varian.com/investor. We look forward to your participation.
Now, here is Tim.
Good afternoon and welcome. Today we are reporting our results for the fourth quarter of fiscal 2010 with strong growth in orders for our Oncology Systems and X-Ray Products businesses that have set the stage for solid revenue and earnings growth in fiscal 2011.
Total net orders rose 12% for the quarter to $777 million, and increased 10% for the year to $2.6 billion. Our year ending backlog grew 10% to a record $2.2 billion. Revenues reflecting economic challenges and slower order activities in 2009 rose 2% for the quarter to $652 million, and 6% for the year to $2.4 billion.
Our operating earnings including a $2 million restructuring in our securities and inspection business, declined by 1% for the quarter, but rose 13% for the year. Earnings per diluted share increased 12% for the quarter to $0.87 and 12% for the year to $2.96.
Cash flow from operations for the quarter was a record $168 million, and we ended the quarter with $520 million in cash and cash equivalents, even after spending $255 million on stock repurchases. We’ve successfully navigated within a tough economic environment, and we’re optimistic about our prospects for continued growth.
Oncology Systems’ fourth quarter net orders totaled $657 million, up 15% with 24% growth in North America and 7% growth in international markets. Both the Far East and Europe contributed to the growth.
Oncology’s net orders for the fiscal year reached a big milestone rising 10% to cross the $2 billion mark for the first time with 16% growth in international markets and 4% growth in North America. Oncology has now had three consecutive quarters of double-digit order growth including two quarters of double-digit order growth in North America.
When we talked at this time last year, the North American market was mired in uncertainty created by economic recession, tighter financing, healthcare reform debates and reimbursement worries. Most of these issues are behind us, and our sales funnel in this region looks far healthier than what we saw last year.
The international market continued to function well, and we remain particularly excited about our prospects in emerging markets. In China, the signs are particularly encouraging. Our order performance in the quarter was equivalent to all of fiscal year 2008.
A survey of the China’s Radiotherapy Department shows that they plan to more than double the nation’s install base to some 1,200 million accelerators by 2015, and Varian is well-positioned to supply many of these machines.