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PALO ALTO, Calif., April 24, 2019 /PRNewswire/ --

Second Quarter 2019 Summary

–    Oncology gross orders grew 15% in dollars, or 18% in constant currency
–    Total company revenues grew 7% in dollars, or 10% in constant currency, to $779 million
–    GAAP operating earnings grew 1% at 14.1% of revenues; Non-GAAP operating earnings declined 6% at 15.3% of revenues
–    GAAP net earnings per diluted share of $0.96; Non-GAAP net earnings per diluted share of $1.05
–    Recently enacted US/China tariffs negatively impacted revenue growth by $9 million or 120 basis points and GAAP operating earnings growth by $13 million or 160 basis points
–    Raising revenue growth range for fiscal year 2019 guidance; reaffirming Non-GAAP net earnings per diluted share range of $4.60 to $4.75

Varian (NYSE: VAR) today announced its second quarter fiscal year 2019 results.  All comparisons in this announcement are year-over-year, all quarter and year references are fiscal unless noted otherwise, and any references to orders are gross orders.

"In the second quarter, we maintained strong momentum," said Dow Wilson, chief executive officer of Varian.  "Each of our geographies delivered exceptional orders growth, including strong double-digit performance in APAC and the seventh consecutive quarter of double-digit growth in EMEA.  Based on the company's results year-to-date and our outlook for the rest of the year, we are raising our fiscal year revenue guidance to 6 to 9 percent while increasing investments in growth priorities such as groundbreaking preclinical research with our FlashForward Consortium."

The company ended the quarter with $546 million in cash and cash equivalents and no debt.  Net cash used in operating activities was $13 million, down $79 million due to the tax payments and net working capital impacts from revenue growth.  During the quarter, the company invested $51 million to repurchase 420,000 shares of common stock.

Oncology Systems Segment

In the second quarter, Oncology revenues totaled $747 million, up 7%.  Operating earnings for the segment decreased 8%, primarily driven by the impact of tariffs, currency fluctuations and costs related to the ramp of our software deployment capabilities.

In the second quarter, Oncology orders were $766 million, up 15%.  Orders in the Americas increased 7% driven by strong U.S. growth.  In EMEA, orders rose 17%, the seventh consecutive quarter of double-digit growth for the region.  In APAC, orders increased 35%, with accelerating growth in China.

Proton Solutions Segment

In the second quarter, Proton Solutions revenues totaled $33 million, up 2%.  Operating earnings were negatively impacted by $7 million in increased project costs and site delays. 

Guidance for Full Fiscal Year 2019

The company is raising revenue guidance and are otherwise reaffirming the following guidance for fiscal year 2019:

This updated guidance reflects increased project costs and site delays in our Proton Solutions business of $7 million, incremental investments in our preclinical research with the FlashForward^TM Consortium of $5 million, and costs related to the ramp of our software deployment capabilities of $2 million, partially offset by an estimated reduction in gross tariff impact of $5 million.

The guidance assumes a Non-GAAP effective tax rate of 21% to 22% and a weighted average diluted share count of 92 million, unchanged from our original assumptions.  The guidance also assumes currency rates as of the beginning of the fiscal third quarter of 2019, includes the expected net impact of all tariffs effective as of the beginning of the fiscal year, and excludes any future acquisitions.

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 second 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 13688640. The teleconference replay will be available through 5:00 p.m. Pacific Time, Friday, April 26, 2019.

About Varian

Varian is a leader in developing and delivering cancer care solutions and is focused on creating a world without fear of cancer. Headquartered in Palo Alto, California, Varian employs approximately 7,000 people around the world. 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; 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; the company's assessment of the goodwill associated with its proton solutions business, 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 company's assessment of the goodwill associated with its proton solutions business; the potential loss of key distributors or key personnel; 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-Q for the quarter ended March 29, 2019.  As a result, all financial results described here should be considered preliminary, and are subject to change to reflect any necessary adjustments, or changes in accounting estimates, that are identified prior to the time the company files the Form 10-Q.

Varian Medical Systems, Inc. and Subsidiaries
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(In millions)		March 29,				September 28,
		2019				2018
Assets
Current assets:
Cash and cash equivalents		$	546.3			$	504.8
Trade and unbilled receivables, net		1,029.2				1,009.9
Inventories		478.0				438.1
Prepaid expenses and other current assets		207.7				233.3
Current assets of discontinued operations		—				2.3
Total current assets		2,261.2				2,188.4
Property, plant and equipment, net		268.4				274.6
Goodwill		309.3				293.6
Intangible assets		90.8				101.1
Deferred tax assets		94.9				102.2
Other assets		365.6				292.8
Total assets		$	3,390.2			$	3,252.7
Liabilities and Equity
Current liabilities:
Accounts payable		$	208.7			$	190.3
Accrued liabilities		352.2				419.7
Deferred revenues		757.9				729.7
Total current liabilities		1,318.8				1,339.7
Other long-term liabilities		331.3				324.3
Total liabilities		1,650.1				1,664.0
Equity:
Varian stockholders' equity:
Common stock		91.2				91.2
Capital in excess of par value		813.6				778.1
Retained earnings		902.3				780.4
Accumulated other comprehensive loss		(71.8)				(65.3)
Total Varian stockholders' equity
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